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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
X Annual report under Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934. For the fiscal year ended December 31, 1999.
OR
Transition report under Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934 for the transition period from to .
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Commission File Number: 0-23897
TOUPS TECHNOLOGY LICENSING, INCORPORATED
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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Florida 59-3462501
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
7887 Bryan Dairy Road
Suite 105
Largo, Florida 33777
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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Registrant's telephone number, including area code: (727) 548-0918
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
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Name of Each Exchange
Title of Each Class: on which Registered:
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Common Stock, $0.001 par value None
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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ___ No X
Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were $1,100,528.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of May 2, 2000, is $.625.
The number of shares of common stock outstanding as of May 2, 2000 was
38,362,117.
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PART I
The information set forth in this Report on Form 10-KSB including,
without limitation, that contained in Item 6, Management's Discussion and
Analysis and Plan of Operation, contains "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Actual results may
materially differ from those projected in the forward-looking statements as a
result of certain risks and uncertainties set forth in this report. Although
management believes that the assumptions made and expectations reflected in the
forward-looking statements are reasonable, there is no assurance that the
underlying assumptions will, in fact, prove to be correct or that actual future
results will not be different from the expectations expressed in this report.
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Toups Technology Licensing, Incorporated is a corporation primarily
engaged in the commercialization of late-stage technologies primarily in the
energy, environmental, natural resources and healthcare markets. Historically,
we have acquired the rights to the technologies we utilize by purchasing them or
through licensing arrangements. Our operations are organized into three
divisions: Environmental Solutions, Manufactured Products and Health Care. See
"Our Business". Our objective is to enhance shareholder value through an asset
management and acquisition strategy that targets companies and technologies
where our management and resources can be successfully leveraged to enhance
strategic market position and to initiate, maintain and increase sales. The
principal sources of our revenues in 1999 were in our Manufactured Products and
Health Care divisions.
The terms "we" and the "Company" in this document refer to Toups
Technology Licensing, Incorporated.
RECENT DEVELOPMENTS
RESTATEMENT OF FINANCIAL RESULTS
We are revising our 1999 interim and 1998 annual financial statements
to reverse the revenue derived from the sale of certain quantities of the
Balanced Oil Recovery System ("BORS") Lift units. See "Our Business." During the
fourth quarter of fiscal 1998, we recorded $1,515,720 of revenue associated with
the sale of 102 of our then newly-developed BORS units. Prior to the sale of
these units, we had performed extensive product development and field testing
and believed that all significant product and design problems had been
satisfactorily resolved. However, subsequent to delivery and installation of
certain units, we became aware of certain performance concerns with the BORS
units sold in 1998. Upon further investigation, we determined that certain
modifications of the BORS units would be required. However, since we had limited
operating history with this equipment, we were unable at that time to determine
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magnitude of the required modifications or the cost thereof. Accordingly, we
were not able to reasonably estimate the amount of any accrued warranty
obligation that might have been required at December 31, 1998. Since the range
of possible loss was not determinable at the date of the issuance of the
financial statements for fiscal 1998, we determined that recognition of these
sales was not warranted until a reasonable estimate of the warranty obligation
could be determined. In light of this, the financial statements for fiscal 1998
have been adjusted to reverse the $1,515,720 of sales and $1,002,874 cost of
sales, accrued commissions and accrued royalties. These adjustments reduced
gross profits by $595,689, reduced selling, general and administrative expenses
by $82,843 and increased net loss by $512,846. We agreed to accept the return of
most of the BORS units sold in 1998 and have identified the related problems
with the BORS product so that it is able to function in its intended manner. We
modified and sold 33 units during 1999, the remainder of which are included in
inventory at December 31, 1999 at their net realizable value.
We are also revising our 1999 interim financial statements to address
the following significant adjustments:
(i) to reverse $4,125,000 of net license fee revenue payable to us by
Rancho La Regina Agropecuaria, S.A., Calle Monte Cristi, Dominican Republic for
the exclusive rights to our technologies throughout South and Central America.
Payment of the license fee is secured by a limited-use title to a planned urban
development consisting of 2,500 home sites. We originally realized 100% of the
net licensing fee as revenue in the second quarter ended June 30, 1999. Upon
further consideration, we believe that revenue should be recognized pro rata as
each of the 2,500 home sites are sold and as the proceeds are received. We have
not received any payments under this agreement.
(ii) to properly reflect stock-based compensation for services and
license fees. We issued stock in the first, second and third quarters. The
valuation of these shares was not properly recorded during these periods. We
made a $2,502,411 adjustment in the fourth quarter of 1999 to recognize all
stock-based compensation at the fair value of the stock issued.
(iii) to reflect the issuance of 500,000 shares of common stock issued
pursuant to a joint venture agreement in the second quarter of 1999 and the
subsequent write-off of that investment when it was determined that the pending
joint venture interest had no value.
SEC ENFORCEMENT INQUIRY
By letter dated November 19, 1999, we were notified that the United
States Securities and Exchange Commission was conducting an informal inquiry in
connection with matters relating to our financial statements and periodic
reports, including matters addressed by our restatement of financial results.
The Commission has requested that we provide it with certain documents,
including documents concerning our accounting policies and practices, our
financial statements and our periodic reports. The Commission indicated that its
inquiry should not be construed as any indication by the Commission or its staff
that any violation of law has occurred, nor as an adverse reflection upon any
person, entity or security. We are cooperating with the Commission in connection
with this inquiry, and its outcome cannot be determined at this time.
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BACKGROUND
We were incorporated in Florida on July 28, 1997. Following our
formation, we acquired all of the assets of Advanced Micro Welding, Inc., a
Florida corporation engaged in micro-welding and metal fabrication, in exchange
for 500,000 restricted shares of our common stock. The operations of Advanced
Micro Welding have been merged with those of the Company, and Advanced Micro
Welding, as a corporate entity, is inactive. This acquisition enabled us to
develop our Manufactured Products division, discussed below.
In October 1998, we acquired all of the capital stock of Brounley
Associates, Inc., a Florida corporation engaged in the design, manufacture and
sale of radio-frequency generators throughout the United States and abroad in
exchange for 900,000 restricted shares of our common stock. Brounley's
activities were discontinued in August 1999.
In November 1998, we acquired all of the capital stock of InterSource
Health Care, Inc., a Florida corporation engaged in (i) the acquisition and
refurbishing of used medical equipment, (ii) the sale of pharmaceutical products
and (iii) the providing of services for medical facility development in exchange
for 1,203,241 restricted shares of our common stock. We now operate InterSource
as a wholly-owned subsidiary.
OUR BUSINESS
We were previously comprised of nine separate divisions. During the
second quarter of 1999, we consolidated our business activities into three
divisions: Environmental Solutions, Manufactured Products and Health Care.
ENVIRONMENTAL SOLUTIONS DIVISION
Our Environmental Solutions division is organized into two discrete
sectors. The first sector is responsible for creating, licensing and packaging
technologies that convert solid and liquid waste products into useable
alternative energy and other usable materials discussed herein. To date, we have
developed and licensed technologies that create a number of clean-burning
alternative fuels, including a collection of gases we refer to as Santilli
MagneGases. MagneGas is presently the focus of this sector. We have derived no
revenues to date from MagneGas. The second sector is responsible for the
creation of proprietary waste-to-energy equipment designed to treat
hydrocarbon-based waste in a closed, non-polluting environment. This equipment
includes our PlasmaArcFlow (TM) Reactor for liquid wastes and Starved Air
Combustor (TM) and Green Waste to Energy Processor (TM) for solid wastes. The
Starved Air Combustor and the Green Waste to Energy Processor are currently in
the development stage. Once designed and created by our Environmental Solutions
division, this equipment will be manufactured and assembled by our Manufactured
Products division.
ENERGY
MagneGas is derived through the operation of our PlasmaArcFlow Reactor.
It is a gas that we believe possesses superior combustion and exhaust properties
because it emits less than
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half of the carbon dioxide of natural gas and virtually no carbon monoxide (as
measured by percentage of emissions) or unburned hydrocarbons (as measured by
parts per million). In addition, MagneGas is lighter than air and has a distinct
odor, both of which are important safety features.
We believe that MagneGas is one of the cleanest, most efficient and
safest renewable alternative fuel sources available. It has significantly fewer
pollutants, can be easily and safely produced, transported and stored and has
significant commercial potential.
MagneGas can be made in a number of different formulations, depending
on the needs of the user. For example, MagneGas can be formulated to run
electric generators, for metal cutting and for automobile fuel. The selection of
the specific type of MagneGas is made on the basis of a customer's specific
needs regarding costs, energy content and combustion exhausts. For instance, for
indoor use, we can supply a filtered MagneGas that is rich in oxygen with no
toxic substances or carbon monoxide in the exhausts and a low CO2 content.
The three main types of MagneGas have differing applications, but all
possess similar chemical structure, energy content and combustion exhaust
characteristics:
- MagneGases produced from water with small percentages
of mineral or organic contaminants, a minimum of 500 BTU/cf,
high octane values and extremely clean exhaust. This type of
MagneGas may be used for a variety of indoor uses including
cooking, heating and other applications.
- MagneGases produced from highly contaminated organic
liquids, such as automotive antifreeze and oil waste or heavy
farm waste are similar to natural gas for energy content, have
about 150 octane and produce large percentages of oxygen in
the exhausts (measured up to 14%) and may be used as a
replacement for virtually any solid, liquid or gaseous fossil
fuel.
- MagneGases produced from liquid wastes with large
toxic content, such as industrial wastes, have a very high BTU
per cf but require significant processing time in order to
become ecologically acceptable fuels.
Continuing internal and third party tests indicate that MagneGas makes
a better alternative to gaseous fuels as compared to acetylene, LPG, MAPP and
other gases used for metal cutting, to propane and to natural gas used for
everything from cooking to automobile fuel. We engineered two versions of the
process in 1999: (i) a closed system that produces MagneGas while consuming
liquid wastes such as oils, antifreeze, solvents and similar materials and (ii)
a flow-through system designed to treat liquid wastes such as sewage,
contaminated water and other similar high-volume waste streams while producing
MagneGas.
MagneGas's first commercial application, which is its use in metal
cutting, was introduced for market testing in the first quarter of 2000.
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EQUIPMENT
Santilli's PlasmaArcFlow Reactor(TM). There are two configurations of
an underwater arc process called PlasmaArcFlow that force liquid waste through
an electrically generated plasma field: the MG Series, which is a closed system,
and the WR series, which is a flow-through system.
Our MG Series PlasmaArcFlow Reactor treats contaminated liquid waste,
such as used motor oil, radiator anti-freeze and other consumer, commercial and
industrial non-radioactive liquid wastes, in a closed system without releasing
harmful emissions. The PlasmaArcFlow Reactor consists of an all-encompassing
metal chamber. Using a recirculation pump, the liquid waste is forced to flow
through an electric arc created by submerged electrodes. The electric arc,
created by a conventional electric generator, consumes the liquid waste by
decomposing its molecules and producing:
- MagneGas;
- solid precipitates useful as fertilizers or other
applications;
- carbon black, which can be used for the production of
electrodes; and
- heat which is usable as another source of energy.
The flow-through, or linear configuration, is designed to treat larger
volumes of liquid waste such as municipal sewage, animal waste, biologically
contaminated fresh and salt water and similar liquids while producing:
- MagneGas;
- solid precipitates useful as fertilizers or other
applications; and
- water for irrigation.
We believe that the PlasmaArcFlow Reactor process has numerous
advantages over conventional contaminated liquid waste treatment processes.
Because it does not produce emissions or landfill waste, it is environmentally
safe and clean. The solids that are a result of the waste conversion process
have commercial uses and, accordingly, afford additional revenue stream
opportunities. In addition, costs for operation make the process economically
viable and, in certain configurations and applications, economically superior.
Starved Air Combustor. Our Starved Air Combustor is an advanced system
based on technology designed by Boeing Corporation to process large quantities
of solid waste in a continuous stream, including municipal waste, bark, tires,
automotive shredder residuals and coal. Through an innovative method using our
variable-pitch auger, which feeds waste into a starved-air combustion chamber,
the Starved Air Combustor heats waste to its gasification temperature producing
a combustible and usable gas that is employed in the process. Heat generated by
the process can be used for a number of purposes including electrical
generation, heat, steam and hot water.
We believe that this process offers both mechanical and environmental
advantages over competing processes. Nitrogen and sulfur oxides in the primary
combustion chamber create a
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fuel gas by-product which is used for self-fueling operation. Thus, the unit is
efficient operationally and minimizes the release of nitrogen and sulfur oxides
into the environment. In addition, because flame and gas temperatures are
limited to approximately 2200o F, the life of the waste disposal equipment is
extended.
Green Waste to Energy pyrolysis processor. Our Green Waste to Energy
pyrolysis processor, or GWE, is a promising development project to process solid
hydrocarbon-based waste and produces a multi-use fuel in the form of a
combustible gas. The by-products we obtain through our GWE process may then be
sold commercially. We believe that, because this process runs on its own
by-products, there are no emissions and, therefore, no residue from combustion.
In addition, the GWE is modular in its design and can handle a number of
different waste streams simultaneously.
MANUFACTURED PRODUCTS DIVISION
Our Manufactured Products division is the manufacturing source for the
Balanced Oil Recovery System Lift, prototyping and certain equipment developed
by our Environmental Solutions division. Our Outsource Solutions sector meets
the manufacturing production needs of third parties for various types of goods.
BALANCED OIL RECOVERY SYSTEM LIFT
Our Balanced Oil Recovery System Lift, or BORS Lift, is a device that
extracts oil from shallow, low-volume "stripper" wells, which are defined as
those wells which produce up to 10 barrels per day. By lifting oil rather than
pumping, the BORS Lift eliminates conventional rods, tubing, downhole pumps or
pumping units and related maintenance costs typically associated with
conventional methods. The operating concept is based on a balanced technology of
extracting oil at the same rate as its recovery through a collection tube and
discharging it into a collection tank without collecting water. Using the BORS
Lift, wells that have historically produced 25 barrels or more of salt water in
a day are now collecting only oil. This eliminates the need for salt water
disposal. Based on independent tests, we believe that the BORS Lift can increase
oil production in shallow, low-volume "stripper" wells by up to 400 percent,
while significantly decreasing operating costs.
TUNNEL BAT CULVERT RECLAMATION VEHICLE
Our Tunnel Bat Culvert Reclamation Vehicle is currently in the research
and development stage and is undergoing testing. It is a mobile vehicle
specifically designed to remove silt, debris, vegetation, soil, rock and other
types of blockage from inside a box culvert. A box culvert is the part of a
storm sewer or drain that runs under a road or embankment. The Tunnel Bat
represents an efficient solution to removing blockage from box culverts as
opposed to customary methods. The unit is driven by a person, moves both forward
and backward at low speeds and is equipped with front and rear attachments. The
Tunnel Bat is designed to turn an expensive and time consuming job into an
easier and more efficient task.
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OUTSOURCE SOLUTIONS
Our Manufactured Products division provides outsource solutions to
third parties with a wide range of industrial and business needs by allowing
them to utilize our state of the art custom metal fabrication, specialty welding
and machining facilities to meet their production needs. With our in-house
equipment, we can fabricate stainless and carbon steel, aluminum, copper,
titanium, incanel and other materials. Our machine shop is staffed and equipped
to do prototype, custom or production work. Our equipment includes vertical
mills, tooling lathes, drill presses and welding equipment offering a wide range
of welding capabilities, including inert gas or CO2, plasma, laser and electron
beam welding.
By operating this manufacturing facility, we are able to maintain
quality control and manage timing of projects. New inventions often require
one-of-a-kind specialty parts. Given the unique nature of many manufactured
products, exact attention to specifications is assured while retaining
flexibility mindful of changing designs and invention. This flexibility coupled
with our ability to meet significant production demands makes us an attractive
choice as an outsource manufacturing solution for many third-parties while
serving to offset overhead costs.
HEALTH CARE DIVISION
Our wholly-owned subsidiary, InterSource Health Care, Inc., has a core
business that seeks to match purchasers and sellers of new and refurbished
medical equipment and consumables. Commencing in 2000, sales will also be
generated through our Internet site located at www.isourcenet.com, which is
currently under development. This Internet model will include a wide range of
complementary services aimed at health care providers and consumers through a
secure Internet site with an in-house support staff. For the buyer or seller of
medical equipment and/or consumables, InterSource offers a one-stop means to
shop comparatively on the Internet.
A planned feature will also allow patients to purchase both traditional
and alternative elective (typically non-insured) medical services from a network
of participating, certified providers through an auction format (by bidding for
available services).
InterSource is also concentrating on building a much broader network of
health care providers and patients. In addition to offering equipment and
products through a secure Internet home page and through an in-house, buying
services program, we are building a network of suppliers and partners to deliver
a wide range of services and products that include staffing and recruitment,
arranging health care services in the United States for international clients,
pharmacy procurement and delivery services, health and wellness products and
other services. A licensed physician executive and former executive at two of
the nations' largest health care insurers leads InterSource's new program with
health care professionals in support.
DISTRIBUTION OF OUR PRODUCTS
Current distribution is achieved through both direct sales and
distributors. We contemplate replacing the current distribution system with
licensing agreements to more
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experienced sales and marketing groups that have superior financial and
management resources. We will continue to seek such arrangements for all of our
products and applications.
COMPETITION
BORS LIFT
Because oil wells typically begin to produce salt water as the natural
drive mechanism in the reservoir is depleted, oil producers have long sought to
eliminate the production of salt water from oil wells. The BORS Lift is designed
to take advantage of the natural separation of oil and water in the well bore
and extracts only oil while leaving the salt water in place. Traditional pump
jacks, sucker rod methods and other above-ground pump systems are designed to
lift any fluid in the well bore without being able to separate the oil from the
water. We believe that the BORS Lift system is a very effective method of
eliminating salt water from oil production in low volume wells. We believe that
this system offers significant economic and environmental benefits over
traditional methods used to produce oil from shallow, low volume wells.
Management believes that if properly marketed, the BORS Lift system has the
potential to gain significant market share in this segment of the oil producing
market, which represents 26% of the domestic oil production according to the
United States Department of Energy. However, since we are competing with
traditional, established oil pump manufacturers that have greater financial and
operating resources than we do, our ability to gain market share is not assured.
SPECIALTY MANUFACTURING
There are many small shops in the geographical area providing
substantially the same services that the Specialty Manufacturing division
offers. We believe that our equipment is state of the art and is at least
comparable to manufacturing resources with which we compete. We also believe
that we are able to offer our customers a wide range of services at rates that
are very competitive. However, the barriers to entry in this area are relatively
low, and there can be no assurances that our competitors will not offer
comparable services at lower costs.
MAGNEGAS
The alternative fuel industry is a very competitive industry consisting
of potential competitors who may have superior financing, experienced
management, advantageous strategic relationships and more mature technologies
than our products in development. Despite the formidable competition in the
alternative fuel industry, we intend to continue to develop and market MagneGas,
which we believe is among the cleanest, most efficient and safest of the
alternative fuel sources available. We also believe that, because MagneGas is
the product of a versatile waste treatment process that can support or be the
primary income source, MagneGas may have significant inherent economic
advantages over competitive products. It has significantly fewer pollutants than
many traditional fuel sources and certain alternative fuel sources and can be
easily and safely produced, transported and stored. In addition, we have
identified numerous potential commercial applications for MagneGas and its
primary process, PlasmaArcFlow, which treats a wide variety of liquid wastes.
There can be no assurances that MagneGas will prove profitable when introduced
to the marketplace, if ever, and we
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acknowledge that more economical and/or more environmentally efficient
alternative fuels or waste treatment processes could be developed by other
players in the industry.
INTERSOURCE HEALTH CARE
Providing services to health care providers is highly competitive. We
are aware of other entities engaged in a business purpose similar to that of
InterSource. Given the size and scope of the medical industry, we expect to
encounter competition from companies with greater financial and marketing
resources than us and plan to concentrate business activities in underserved
areas and to partner or network with larger organizations.
INTELLECTUAL PROPERTY
We have obtained the majority of the intellectual property rights to
our technologies either through license agreements or assignments, the most
significant of which are described below.
BORS LIFT TECHNOLOGY
Pursuant to a license agreement dated June 19, 1998, we have a
world-wide exclusive license with Lift-Pump LLC to undertake a joint effort at
designing, manufacturing, selling or otherwise commercializing the BORS Lift
technology. Pursuant to the license agreement, we pay Lift-Pump a royalty of six
percent (6%) of the gross proceeds we receive from selling, commercializing or
sub-licensing the BORS Lift technology.
GREEN WASTE TO ENERGY
Pursuant to the terms of a license agreement between John Rivera,
Tomorrows Innovative Technology Today and us dated December 15, 1999, we hold an
exclusive worldwide license to certain pyrolytic carbon extraction technology,
which is a technology used to convert solid hydrocarbon-based waste into a
multi-use fuel in the form of a combustible gas while significantly reducing the
waste volume. Pursuant to this license agreement, we pay the licensors 50% of
all profits derived from the technology (with a minimum annual royalty fee of
$150,000) plus 50% of all sublicense fees received by us.
ASSIGNMENT OF PATENTS AND PATENT APPLICATIONS
Pursuant to an Exclusive Assignment and Royalty Agreement dated as of
February 3, 2000, Dr. Ruggero Maria Santilli assigned to us (i) a patent
relating to new chemical species for gases and their new technologies and (ii)
three related U.S. patent applications. The patent applications that have been
assigned to us are for the following products and processes:
- new method for recycling contaminated waters via the
plasma-arc-flow process;
- durable and efficient equipment for the production of
a combustible and non-pollutant gas from underwater
arcs and methods; and
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- MagneGas.
Pursuant to this agreement, we were granted worldwide exclusive rights to the
technologies in exchange for a royalty fee equal to three percent (3%) of the
gross proceeds we receive from exploitation of these technologies. In addition
to the royalty payment, Dr. Santilli received 75,000 shares of our common stock,
plus options to purchase an additional 150,000 shares of our common stock at an
exercise price of $0.375 per share.
We believe that we have taken appropriate steps to protect our
intellectual property rights. However, the steps we have taken may not prove
sufficient to prevent misappropriation of our technology or to deter independent
third-party development of similar technologies. The laws of certain foreign
countries may not protect our services or intellectual property rights to the
same extent as do the laws of the United States. We rely, in part, on certain
technologies that we license from third parties, including data feeds and
related software. These third-party technology licenses may not continue to be
available to us on commercially attractive terms. The loss of the ability to use
such technology could require us to obtain the rights to use substitute
technology, which could be more expensive or offer lower quality or performance,
and therefore have a material adverse effect on our business, financial
condition or results of operations.
Third parties could claim infringement by us with respect to current or
future uses. As the number of entrants into our market increases, the
possibility of an infringement claim against us may increase, and the
possibility exists that we could, either now or in the future, inadvertently
infringe on a third-party's patent. In addition, because patent applications can
take many years to issue, it is possible that we could, now or in the future,
infringe upon a third-party's patent application now pending of which we are
unaware. Any infringement claim, whether meritorious or not, could consume a
significant amount of management's time and attention, could result in costly
litigation, cause service delays or require us to enter into royalty or
licensing agreements which may or may not be available on commercially
acceptable terms, if at all. As a result, any claim of infringement against us
could have a material adverse effect upon our business, financial condition or
results of operations.
RESEARCH AND DEVELOPMENT
We license many of the technologies we exploit from the developers of
such technologies. Additional research and development of these technologies are
then funded internally. Notwithstanding our efforts in this regard, we are
uncertain whether any of the technologies will ever develop to the point of
commercial viability.
Research and development costs incurred in 1999 and 1998 aggregated
$2,457,825 and $1,184,848, respectively, and centered around the following
technologies:
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MAGNEGAS
We are actively developing certain applications and seeking outside
development and marketing partners for new applications for this process,
including salt water desalination and sewage treatment.
GREEN WASTE TO ENERGY
Green Waste to Energy technology is a solid waste treatment technology
using pyrolysis, or the process of burning without air. We are working with the
inventor of this technology toward testing and proving the process to achieve a
commercially salable product.
OTHER RESEARCH AND DEVELOPMENT PROJECTS
During 1998 and 1999, we performed research and development on AquaFuel
and Pyrolytic Carbon Extraction, or "PCE", liquid and solid waste treatment
processes, respectively, that produce combustible gases. As to AquaFuel and PCE,
we declined to renew the licenses under which we utilized the technology because
we believed that our resources were better spent pursuing the commercialization
of other technologies, primarily MagneGas.
EMPLOYEES
As of December 31, 1999, we had 80 full-time employees and one
part-time employee. Approximately 8 employees are engaged in the Environmental
Solutions division, 62 employees are engaged in the Manufactured Products
division and 3 employees comprise our Health Care division. In addition, eight
employees are engaged in administrative and clerical activities. Management
considers its relations with its employees to be satisfactory. None of our
employees are represented by a union.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference rooms in Washington,
D.C., New York, New York and Chicago, Illinois. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.
ITEM 2. DESCRIPTION OF PROPERTIES
We operate out of three separate locations. On December 1, 1997 we
entered into a five (5) year lease at the 96-acre Pinellas Science Technology
and Research Center ("STAR Center") located at 7887 Bryan Dairy Road, Largo,
Florida. The 30,000 square feet of space serves as our headquarters and primary
manufacturing facility and contains laboratories, production area and office
space. The annual base rental is approximately $267,000, which includes
utilities.
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We also maintain a 10,000 square-foot facility in Largo, Florida from
which our MagneGas operations are run. We entered into a lease for this facility
beginning in November 1998 for two consecutive one-year terms. The annual base
rent is approximately $42,000.
In addition, we maintain an engineering, installation and field service
office in Claremore, Oklahoma for which we pay a monthly rent of $400.
We believe that our present space is adequate for current purposes and
offers the potential for moderate expansion should the need arise.
INVESTMENT POLICIES
We do not have any limitations on the amounts which we may invest in
any one investment or type of investment. We have no holdings in real estate or
real estate mortgages and similar securities or publicly traded securities. We
do not have any investments in persons or companies primarily devoted to such
investments, and it is not our policy to make investments for the purpose of
capital gain or passive income. Presently, all available monies are being used
for day-to-day operations.
ITEM 3. LEGAL PROCEEDINGS
SEC ENFORCEMENT INQUIRY
By letter dated November 19, 1999, we were notified that the Securities
and Exchange Commission was conducting an informal inquiry in connection with
matters relating to our financial statements and periodic reports, including
matters addressed by our restatement of financial results. The Commission has
requested that we provide it with certain documents, including documents
concerning our accounting policies and practices, our financial statements and
periodic reports. The Commission indicated that its inquiry should not be
construed as any indication by the Commission or its staff that any violation of
law has occurred, nor as an adverse reflection upon any person, entity or
security. We are cooperating with the Commission in connection with this inquiry
and its outcome cannot be determined at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our shares trade on The National Association of Securities Dealers
("NASD") OTC Bulletin Board (the "Bulletin Board") under the trading symbol
"TOUP". Our shares commenced trading in June 1998, prior to which time there was
no public market for our securities. The following table sets forth, for the
periods indicated, the range of high and low closing bid quotations as reported
by the Bulletin Board for each quarter during the last two
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<PAGE> 14
fiscal years. The bid quotations set forth below reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
Fiscal Year Ended December 31, 1998
From June 16 to end of Second Quarter.................. $2.625 $2.00
Third Quarter.......................................... 3.00 1.875
Fourth Quarter......................................... 3.00 1.375
Fiscal Year Ended December 31, 1999
First Quarter.......................................... $2.437 $1.375
Second Quarter......................................... 2.437 .906
Third Quarter.......................................... 1.187 .375
Fourth Quarter......................................... .687 .35
</TABLE>
On May 2, 2000, the last reported sales price for our shares on the
Bulletin Board was $0.64 per share. At April 28, 2000, we had 417 stockholders
of record. We estimate that there are approximately 2,430 beneficial owners of
our common stock.
We have never paid cash dividends on our common stock and do not expect
to pay such dividends in the foreseeable future. We currently intend to retain
any future earnings for use in our business. The payment of any future dividends
on our common stock will be determined by our Board in light of the conditions
then existing, including our financial condition and requirements, future
prospects, restrictions in future financing agreements, business conditions and
other factors deemed relevant by the Board.
RECENT SALES OF UNREGISTERED SECURITIES
The securities described below were issued by us during the period
covered by this report and were not registered under the Securities Act of 1933,
as amended. Each of the transactions is claimed to be exempt from registration
pursuant to Section 4(2) of the Securities Act as transactions not involving a
public offering. All of such securities are deemed to be restricted securities
for the purposes of the Securities Act. All certificates representing such
issued and outstanding restricted securities have been properly legended, and we
have issued "stop transfer" instructions to its transfer agent with respect to
such securities. Except as noted, no commissions were paid in connection with
any of these issuances.
STOCK ISSUANCES FOR CASH
In fiscal 1999, we issued an aggregate of 5,865,303 shares of our
common stock in various capital raising transactions. The aggregate amount of
funds raised by these issuances totaled $2,527,400. Included among these
transactions is the private placement we conducted from November 1998 through
March 1999, in which we offered and sold an aggregate of
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<PAGE> 15
1,747,500 shares of our common stock to 43 accredited investors at a per share
price of $1.00. As part of the transaction, we agreed to register the shares
purchased.
In February 1999, we issued and sold $750,000 of Series 1999-A 8%
convertible notes due January 2002 to an accredited investor. Under the
securities purchase agreement, the investor was to purchase another $750,000 in
convertible notes within 30 days after we filed a Registration Statement or at
such time as the parties mutually agree. The notes are convertible into common
stock at a conversion price equal to the lesser of (1) 100% of the lowest
closing bid prices for our common stock for the five (5) trading days
immediately preceding the closing date; or (2) eighty percent (80%) of the
lowest of the closing bid prices for our common stock for the five (5) trading
days immediately preceding the conversion date as reported on the Bulletin
Board. Additionally, the investor was issued a warrant to purchase 75,000 shares
of common stock at an exercise price of $2.3375 per share through February 2002.
Subsequent to December 31, 1999, the investor completed the purchase of the
second installment ($700,000) of notes. During January and March 2000, the
investor converted an aggregate of $517,956 of notes, plus accrued interest,
into 1,037,784 shares of common stock.
In March 1999, we raised $750,000 in connection with the sale and
issuance of 750 shares of our Series A 7% Preferred Stock to an accredited
investor in a transaction exempt under Section 4(2) of the Securities Act. The
Series A Preferred Stock is convertible into our common stock at 75% of the
common stock closing price anytime through March 30, 2004. Accordingly, we
recorded a dividend of $250,000 during fiscal 1999 to account for this
beneficial conversion feature. Dividends are cumulative and payable quarterly at
a per annum rate of 7% of the Series A Preferred Stock's liquidation value.
Additionally, the investor was issued a warrant to purchase 93,750 shares of
common stock at an exercise price of $2.40 per share, and we also issued a
warrant to purchase 50,000 shares of common stock at an exercise price of $2.40
per share through March 2004 as a finders fee. During April 2000, the holder of
the Series A Preferred Stock converted 100 shares into 357,143 shares of common
stock.
Holders of the 8% convertible notes and the Series A Preferred Stock have
demand registration rights with respect to the common stock issuable upon
conversion of the notes and Series A Preferred Stock and with respect to the
common stock underlying the warrants.
STOCK ISSUANCES FOR SERVICES
In fiscal 1999, we issued an aggregate of 4,066,675 shares of our common
stock in consideration for various services provided to us, including (i)
pursuant to various license arrangements, (ii) issuances to employees and
consultants, and (iii) as payment for certain equipment purchases. This amount
includes an aggregate of 2,500,000 shares of our common stock issued in
connection with our arrangement with Compania Deluz Y Fuerza De Las Terrenas, C.
por A., a Dominican Republic utility company, to form the joint venture "Aqua
Fuel (a)-Dominicana, SA" and a finders fee in connection with that joint
venture. The utility failed to perform under the terms of the proposed joint
venture agreement, and the joint venture did not proceed. We wrote off the joint
venture investment in 1999. The cost of the 2,000,000 shares issued as a finders
fee was applied to the cost of acquiring a subsequently obtained license.
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<PAGE> 16
In addition to the foregoing, we entered into a Warrant Agreement dated
October 29, 1999 with Sands Brothers & Co., Ltd. pursuant to which we issued to
each of Sands Brothers and Mark G. Hollo, its managing director, warrants to
purchase up to 1,800,000 shares of our common stock at an exercise price of $.40
per share. These warrants were issued in consideration of certain financial
advisory services provided to us. We granted the warrant holders demand
registration rights with respect to the common stock underlying the warrants.
The warrants also include anti-dilution provisions and dividend rights if
dividends are paid to other stockholders.
In consideration for certain financial consulting services provided to
us in connection with the Sands Brothers transaction, we issued to Allen Lewin a
warrant to purchase 200,000 shares of common stock on terms substantially
similar to those contained in the warrants issued in the Sands Brothers
transaction.
DEBT CONVERSIONS OF SHAREHOLDER ADVANCES
In the third and fourth quarters of 1999, three individuals converted
an aggregate of $423,750 of shareholder advances into an aggregate of 1,141,581
shares of our common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of our
results of operations and financial condition. The discussion should be read in
conjunction with our audited consolidated financial statements and notes
thereto.
During the fiscal year ended December 31, 1999 revenues were
principally generated by sales of the BORS Lift system ($305,000), sales of our
Manufactured Products division ($471,035) and InterSource ($324,493). We are in
end-stage commercialization of our MagneGas product and are continuing to
develop our Starved Air Combustor, GWE and Tunnel Bat products. No revenues were
derived from these products during fiscal 1999. Although we believe that sales
of MagneGas will contribute to our revenues in the future, there can be no
assurances that revenues will be generated during fiscal 2000 without further
development.
During the next 12 to 24 months, we plan to continue our expansion
goals by way of licensing our technologies through proven sales channels and
strategic alliances. This strategy allows us to expand our global presence by
entering rapidly industrializing and emerging markets. We will focus on the
continued development of commercializing market applications while exploring new
opportunities to license and acquire complementary technologies or companies
that provide important synergies with our existing operations. Present
operations are being streamlined in order to reduce costs while improving
product quality and productivity.
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<PAGE> 17
FISCAL 1999 COMPARED TO FISCAL 1998
Net sales increased during the fiscal year ended December 31, 1999 to
over $1.1 million, up approximately 116% from $508,538 in the fiscal year ended
December 31, 1998. The increase in net sales reflects the inclusion of
InterSource results of operations for a full year and the recognition of BORS
Lift revenues during 1999.
The cost of sales for fiscal 1999 represented 136% of net sales, or
$1,493,433, compared to 47% of net sales, or $239,151, in fiscal 1998. The
increase is attributable to the inventory retrofit and design modification work
associated with the sale of BORS Lift units which was required in 1999. The 1999
cost of sales includes a $561,684 inventory valuation write-down to net
realizable value since the historical BORS inventory costs, including the cost
of retrofit, exceeded the historical and expected future selling price of the
units.
Operating, general and administrative expenses increased in fiscal 1999
to $7,749,386, or 704% of sales, compared to $4,468,369, or 879% of sales, in
fiscal 1998. The increased expense is attributable to significantly higher
operating costs to support our technology development, new product introductions
and future business expansion. These costs include higher salaries and related
costs, legal and accounting fees, bad debt write-offs and rent than we incurred
in fiscal 1998. Our direct research and development expenses increased 107% from
$1,184,848 in fiscal 1998 to $2,457,835 in fiscal 1999. We attribute $930,000 of
the $1,272,987 increase in research and development expenses during fiscal 1999
to increases in non-cash charges relating to research-related stock-based
compensation and licensing agreements.
We experienced a net loss of $12,062,668 or ($0.43) per share for the
fiscal year ended December 31, 1999, a 112% increase over our net loss in fiscal
1998. Due to the increase in the weighted shares outstanding at the end of
fiscal 1999, however, the net loss per share was 12% lower than the net loss per
share in fiscal 1998. Total non-cash charges to us were $4,980,247 or 42% of the
net loss for fiscal 1999.
Interest expense was up from $21,234 during fiscal 1998 to $290,618
during fiscal 1999 due to higher levels of borrowing during the year, primarily
from the convertible notes issued in February 1999.
We wrote-off $375,706 of our investment in a joint venture in the
Domincian Republic. The joint venture was formed with a Dominican Republic
private utility to construct and operate an alternative fuel production
facility. Subsequently, the utility failed to perform under the terms of the
proposed joint venture agreement, and the joint venture did not proceed.
We had a $772,019 loss from discontinued operations and loss on
disposal of our Brounley subsidiary during fiscal 1999. As a result of
significant declines in Brounley's sales during fiscal 1999 relative to (a)
prior year sales and (b) budget expectations, we discontinued this business unit
in August 1999 and transferred its equipment to our contract manufacturing
segment.
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<PAGE> 18
FISCAL 1998 COMPARED TO FISCAL 1997
Net sales increased during fiscal 1998 to $508,538, up approximately
48% from $344,149 in fiscal 1997. The increase in sales reflects both the
inclusion of InterSource and the sale of alternative fuel demonstration
equipment and engineering services during the fourth quarter of fiscal 1998. We
experienced a net loss of $5,686,877 or ($0.49) per share for the fiscal year
ended December 31, 1998, a 102% decrease per share when compared to our net
income of $15,372 or $0.01 in fiscal 1997. Fiscal 1997 results primarily
consisted of the results of operations generated by Advanced Micro Welding since
we did not commence operations until November 1997. Among the significant items
impacting fiscal 1998 results were increased operating and development expenses,
including total stock-based compensation of $3,580,123, which did not occur in
fiscal 1997.
The cost of sales for fiscal 1998 represented 47% of net sales, or
$239,151, a 26% decrease compared to 59% of net sales, or $202,689, in fiscal
1997. The decrease is attributable to the increased sales of higher margin
products and longer production runs for customers.
Operating, general and administrative expenses increased in fiscal 1998
to $4,468,369, or 879% of sales, compared to $126,631, or approximately 37% of
sales, in fiscal 1997. The increased expense is attributable to significantly
higher operating costs to support our technology development, new product
introductions and future business expansion. We also incurred $1,184,848 in
connection with research and development activities in fiscal 1998, which were
not conducted in fiscal 1997. Approximately $920,000 of these costs were related
to non-cash stock-based compensation arrangements. We attribute 63%, or
$3,580,123, of total operating expenses during fiscal 1998 to non-cash charges
relating to stock-based compensation and licensing agreements. Total non-cash
charges were $3,752,654 or 69% of the net loss for fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have experienced recurring net losses since our inception and, as
such, have experienced negative operating cash flows in both fiscal 1999
($5,747,271) and fiscal 1998 ($2,418,348). We have continued to experience
negative operating cash flows during the first quarter ended March 31, 2000. We
have historically funded these negative operating cash flows with proceeds from
sales of common and preferred stock, notes and convertible debentures payable
and equipment sale/leaseback transactions. Total amount received from these
sources approximated $5,500,000 during fiscal 1999 and $1,250,000 from January 1
through May 5, 2000. Notwithstanding the proceeds of these financing sources, we
have negative working capital of approximately ($2,200,000) at both December 31,
1999 and March 31, 2000 (unaudited).
We are also delinquent with respect to payment of certain 1999 payroll
taxes (approximately $611,000, including interest and penalties). We expect to
enter into a payment stipulation agreement with the Internal Revenue Service to
pay this liability on a monthly basis over an extended period of time. During
2000, we made a $50,000 good faith deposit toward
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<PAGE> 19
this liability, but an agreement has not yet been finalized. The Internal
Revenue Service has certain collateral rights, including the seizure of our bank
accounts and other property, if a satisfactory agreement is not reached.
We are actively exploring various options to improve our working
capital position, including licensing and/or selling certain of our technology
rights and obtaining research and development contracts to develop commercially
marketable products subject to potentially licensed or sold technologies.
However, there can be no assurance that we will be successful in implementing
any of these plans. We also plan to implement cost reductions throughout the
balance of 2000.
Notwithstanding the potential cash flow benefits contemplated by these
plans, we will continue to require additional equity or debt financing in order
to cover our cash requirements and continue as a going concern, and those
financing requirements are in the very near term if the plans discussed in the
preceding paragraph are not implemented. We believe that we will be successful
in these financing efforts, but there can be no assurance to that effect.
INCOME TAXES
We currently have a net operating loss carryforward for federal income
tax purposes of approximately $9,300,000 which is available to offset federal
taxable income through fiscal 2019. We have provided a 100% valuation allowance
on deferred tax assets substantially resulting from the net operating loss
carryforwards discussed above.
EFFECTS OF INFLATION
We do not believe that inflation has had a significant impact on our
financial position or results of operations in the past three years.
YEAR 2000 ISSUES
In 1999, we undertook an assessment of our information technology
systems relating to Year 2000 issues which resulted in the development of a plan
to prepare us for Year 2000 readiness. The cost of implementation of our plan
was not material. Such costs were capitalized or expensed as appropriate. As of
the date of this filing, we have not experienced any disruption of our operation
due to the Year 2000 issues. No additional costs relating to Year 2000 readiness
are anticipated.
ITEM 7. FINANCIAL STATEMENTS
Our consolidated 1999 financial statements, including the notes
thereto, together with the report thereon of Aidman, Piser & Company, P.A. is
presented beginning at page F-1.
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<PAGE> 20
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On January 5, 2000, Harper, Van Scoik & Company, LLP, the independent
accountant who was previously engaged as the principal accountant to audit our
financial statements, resigned. Harper's reports on the financial statements for
the past two years did not contain an adverse opinion or a disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principles. The decision to accept Harper's resignation was approved by our
Board of Directors. During our two most recent fiscal years and the subsequent
interim period preceding such resignation, there were disagreements with Harper
on (a) the amount and method of valuing certain unregistered and restricted
shares of our stock that were issued to attract and retain key employees, to
acquire various license agreements and to make acquisitions and for development
needs and (b) the appropriateness of the method of revenue recognition employed
with respect to a transaction involving related parties. Our Board of Directors
discussed the subject matter of these disagreements with Harper, and both
matters were subsequently resolved to the satisfaction of Harper in connection
with its audit of our financial statements for the fiscal year ended December
31, 1998. There were no other disagreements with Harper on any matter of
accounting principle or practice, financial statement disclosure or auditing
scope or procedure, which disagreement(s), if not resolved to the satisfaction
of Harper, would have caused it to make reference to the subject matter of the
disagreement(s) in connection with its report prior to its filing. We provided
Harper with a copy of the disclosures made in the Form 8-K we filed on February
15, 2000. We have since retained the services of Aidman, Piser & Company, P.A.
to audit our financial statements and have authorized Harper to respond fully to
any inquiries of Aidman, Piser & Company, P.A. concerning the subject matter of
the disagreements discussed herein.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
Our executive officers, directors and other significant employees and
their ages and positions are as follows:
<TABLE>
<CAPTION>
Name of Individual Age Position
- ------------------ --- --------
<S> <C> <C>
Leon Toups 61 President, Chief Executive Officer, Chairman of the Board of
Directors
Mark Clancy 44 Secretary, Executive Vice President and Director
Michael P. Toups 34 Vice President of Finance, Chief Financial Officer and Director
Phillip Rappa 52 Vice President of Operations, General Manager and
Director
</TABLE>
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<PAGE> 21
<TABLE>
<S> <C> <C>
Errol J. Lasseigne (1) 58 Director
Leslie D. Reagin III(1) 56 Director
</TABLE>
- -----------------------------
(1) Member of Audit Committee
The following is a brief description of the professional experience and
background of our directors and executive officers.
Leon H. Toups has been our Chairman of the Board of Directors,
President and Chief Executive Officer since inception in November 1997. From
1980 to present, Mr. Toups has served as President and Chairman of the Board of
Directors of DMV, Inc., Clearwater, Florida, a real estate holding company. From
1973 to 1980, Mr. Toups served as President and Chief Operating Officer, as a
member of the Board of Directors and as a member of the Executive Committee of
Chromalloy American Corporation, a New York Stock Exchange traded company
located in St. Louis, Missouri, and as President of Chromalloy Natural Resources
Company, in Houma, Louisiana. Mr. Toups' other past associations include Boeing
Corporation from 1970 through 1973 and NASA from 1965 to 1970 as a test
conductor for the Mercury through Apollo space programs. Mr. Toups holds the
following degrees: M.S. Aerospace Engineering, University of Florida; M.S.
Mechanical Engineering, Georgia Tech; B.S. Mechanical Engineering, Georgia Tech
and E.A.A. from Massachusetts Institute of Technology. From 1968 to 1969 Mr.
Toups attended M.I.T. on a NASA Hugh Dryden Fellowship.
Mark Clancy has been our Secretary, Executive Vice President and a
director since our inception in November 1997. From 1993 to 1997, Mr. Clancy
served as a Compliance Officer for DMV, Inc. From 1996 to present, he has been
President of Total Kids, Incorporated, located in Tampa, Florida. Prior thereto,
Mr. Clancy served as General Sales Manager of WRCC FM Radio, Cape Coral,
Florida, and as Sales Consultant to WIZD FM Radio, West Palm Beach, Florida. Mr.
Clancy served in the United States Marine Corps until 1982 and holds an AA
degree from Hillsborough Community College,Tampa, Florida.
Michael P. Toups has been our Chief Financial Officer, Vice President of
Finance and a director since our inception in November 1997. From 1996 to
present, Mr. Toups has been a director and Vice-President of Finance for
InterSource Health Care, Inc., located in Clearwater, Florida. From 1992 to
present, he has been the Vice President of Finance and Operations at DMV, Inc.,
Clearwater, Florida. From 1989 to 1991, he served as a financial analyst and
lending officer in the Corporate Banking group of Bank of America in St.
Petersburg, Florida. Mr. Toups holds an MBA from University of Notre Dame with
concentrations in finance and marketing and a BA in business administration from
Texas Christian University. Michael P. Toups is the son of Leon H. Toups, our
Chairman, President and Chief Executive Officer.
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<PAGE> 22
Phillip Rappa has served as Vice President of Operations, General
Manager and a director since September 1999. Prior to joining us, Mr. Rappa was
the President and Chief Executive Officer of SuperPower, Inc. located in St.
Paul, Minnesota from 1993 to 1996. He served as Vice President of
national/international sales and marketing of ABB CEAG Power Supplies, Inc., of
Palm Coast, Florida. In addition, Mr. Rappa served as manufacturing/test manager
at Applied Digital Data Systems in Hauppauge, New York and director of
manufacturing for Siemens Corporation, also in Hauppauge. Mr. Rappa has 26 years
of experience in the design, manufacture and marketing of high- and low-voltage
systems for the computer, industrial and telecommunication industries. He earned
a BA in Business from the University of Texas El Paso, an MBA from Central
Florida University and a BSEE from the New York Institute of Technology.
Errol J. Lasseigne has served as a director since May 1999 and has
served as a consultant to us with respect to InterSource. He has over 25 years
of experience in the pharmaceutical industry, including serving for 24 years in
various retail and institutional pharmaceutical divisions with Eckerd
Corporation. Mr. Lasseigne is and has been an officer and part owner of Senior
Life Management, a New York company that provides psychological services since
1993. He also is and has been an officer and part owner of L&G Management, a
Florida company that provides health care consulting and management services
since 1995. Mr. Lasseigne is and has been an officer and part owner of Garden
State Hospice, a New Jersey company that provides hospice services and family
counseling. Mr. Lasseigne is currently affiliated with the American Society of
Consultant Pharmacist, American Pharmaceutical Association and the Florida State
Chapter. He is a licensed pharmacist.
Leslie D. Reagin III has served as a director since May 1999. Mr.
Reagin is President and owner of the L.D.R. Group, an investment management
company established in 1993. Mr. Reagin was engaged by the Eckerd Corporation
for 32 years and served in various executive positions with Eckerd for 22 years.
Mr. Reagin currently serves on the boards of the following organizations: Webber
College, Career Options Inc., Abilities of Florida, Inc., the Florida Chamber
Foundation, the Morton Plant Mease Foundation and the YMCA of Clearwater,
Florida. Mr. Reagin's previous affiliations include serving as a board member of
the Florida Chamber of Commerce, vice president of finance and chairman of the
Chamber Management Corporation, member of the board of overseers for the
Southern College of Pharmaceutical Sciences of Miami, Florida, past board
chairman of the Pinellas Private Industry Council, and member of the National
Association of Chain Drug Stores.
The directors serve for one year terms until the next annual meeting of
stockholders and until their respective successors are elected and qualified.
Officers serve at the discretion of the Board of Directors.
AUDIT COMMITTEE
Our Audit Committee is comprised of Messrs. Lasseigne and Reagin. The
Audit Committee recommends the independent accountants appointed by the Board to
audit our the financial statements, which includes an inspection of our books
and accounts, and reviews with
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<PAGE> 23
such accountants the scope of their audit and their report thereon, including
any questions and recommendations that may arise relating to such audit and
report or our internal accounting and auditing system procedures.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires a
company's officers, directors and persons who own more than ten percent of a
registered class of such company's equity securities to file reports of
ownership and changes in ownership with the SEC. Officers, directors and ten
percent stockholders are required by regulation to furnish us with copies of all
Section 16(a) forms they file. Based on our records, we believe that during
fiscal 1999, our officers, directors and ten percent beneficial owners complied
with all applicable filing requirements.
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth information for each of the fiscal years
ended December 31, 1999, 1998 and 1997 concerning the compensation paid and
awarded to our Chief Executive Officer. There were no other executive officers
or key employees whose total annual salary and bonus exceeded $100,000 for these
periods:
<TABLE>
<CAPTION>
Annual compensation Long-term
Compensation
Restricted Securities
Stock underlying Total
Name and principal position Year Salary Bonus Award ($) options (#) Compensation
<S> <C> <C> <C> <C> <C> <C>
Leon H. Toups 1999 $112,000 $ 0 $ 0 650,000(1) $112,000
President and Chief 1998 $ 63,666 $ 0 $415,350(1) $ 479,016
Executive Officer 1997 $6,000 $ 0 $ 3,200(2) $ 9,200
</TABLE>
1) Represents shares of restricted stock issued to Mr. Toups during 1998,
valued at $.638 per share, which was the average price of stock
issuances during the period. These shares were rescinded in 1999 and in
lieu thereof, Mr. Toups was granted an option to purchase a like number
of shares at an exercise price of $1.10 per share.
2) Represents stock issued pursuant to Mr. Toups' employment agreement
valued at $.001 per share at inception.
The following table sets forth, for the individual named in the Summary
Compensation Table above, certain information concerning stock options granted
to him during 1999. We have never issued stock appreciation rights. Options were
granted at an exercise price above the fair
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<PAGE> 24
market value of the common stock at the date of grant. The term of the option is
three years from the date of grant.
<TABLE>
<CAPTION>
Potential realizable
% of total Exercise Market value at assumed rates
options or base price on of stock price for
Options granted in price per date of Expiration Appreciation for option
Name Granted 1999 share grant Date term (1)
---- ------- ---- ($/Sh) ----- ---- 5% 10%
------ -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Leon H. Toups 650,000 33.33% $1.10 $1.03 Dec. 2002 $ 112,702 $ 236,665
</TABLE>
(1) The dollar amounts under this column are the result of calculations at
the 5% and 10% rates set by the Commission and therefore are not
intended to forecast possible future appreciation, if any, of the stock
price of our common stock. If the price of our common stock were in
fact to appreciate at the assumed 5% or 10% annual rate for the
three-year term of this option, a $1,000 investment in the Common Stock
would be worth $1,158 and $1,331, respectively, at the end of the term.
The following table sets forth, for the individual named in the Summary
Compensation Table, certain information concerning options exercised during
fiscal 1999 and the number of shares subject to exercisable and unexercisable
stock options as of December 31, 1999. The values for "in-the-money" options are
calculated by determining the difference between the fair market value of the
securities underlying the options as of December 31, 1999 ($.406 per share) and
the exercise price of the options.
<TABLE>
<CAPTION>
Number of securities underlying Value of unexercised "in the
Number of unexercised options at December money" options
shares 31, 1999 at December 31, 1999
acquired Value -------- --------------------
Name on exercise realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
(1)
Leon H. Toups None $0 650,000 None N/A N/A
</TABLE>
(1) Options granted during 1999 were not "in the money" at December 31,
1999.
DIRECTORS' COMPENSATION
We do not pay compensation to directors for serving on the Board, but we
reimburse directors for out-of-pocket expenses incurred by them in connection
with attending meetings of the Board.
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<PAGE> 25
EMPLOYMENT AGREEMENTS
We are party to employment agreements with Leon H. Toups, Mark Clancy
and Michael P. Toups. Except as noted, each of the employment agreements
contains substantially identical terms. Each agreement is dated as of July 28,
1997 and is for a term of five (5) years. Pursuant to the terms of these
agreements, each of the employees received a fixed monthly salary during the
calendar years 1997, 1998 and 1999, after which time each individual's salary
would be determined by the Board of Directors. Under the agreements, Leon H.
Toups received a salary of $10,000 per month during 1999, and Michael P. Toups
and Mark Clancy each received a salary of $8,333 per month during 1999. In
addition, Leon H. Toups received 3,200,000 shares of common stock at the
inception of the agreement and 650,000 shares of common stock during 1998. Mr.
Clancy and Michael P. Toups each received 1,600,000 shares of common stock at
the inception of the agreement and 650,000 shares of common stock during 1998.
The shares issued in 1998 were rescinded in 1999, and, in lieu thereof, each
employee was granted an option to purchase a like number of shares at $1.10 per
share. For all years remaining under the agreements after 1998, the employees
are entitled to receive stock compensation as determined by the Board of
Directors at terms no less favorable than options to purchase common stock at
80% of the then market value. During 1999, Leon H. Toups took a 20% decrease in
salary, and Michael P. Toups and Mark Clancy each took a 10% decrease in salary.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding ownership
of our common stock as of May 2, 2000 by each person known to us to own
beneficially more than 5% of our outstanding common stock, by each person who is
a director, by each person listed in the Summary Compensation Table and by all
directors and officers as a group.
The information contained in the table was furnished by the persons
listed therein. The calculations of the percent of shares beneficially owned are
based on 38,362,117 shares of common stock outstanding on May 2, 2000 plus with
respect to each such person the number of additional shares that will be
outstanding upon exercise of the warrants and options exercisable within sixty
(60) days set forth herein.
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Beneficial Ownership Percent of Class
<S> <C> <C>
Leon H. Toups 4,006,680(1) 10.3%
418 Harbor View Lane
Largo, Florida 33770
Mark Clancy 2,383,340(1) 6.1%
417 Barrett Court
Tampa, Florida 33617
</TABLE>
-23-
<PAGE> 26
<TABLE>
<CAPTION>
Name and Address of
Beneficial Owner Beneficial Ownership Percent of Class
<S> <C> <C>
Michael P. Toups 2,383,340(1) 6.1%
400 Palm Drive
Largo, Florida 33770
Errol J. Lasseigne 271,877 0.7%
2364 Violet Place
Palm Harbor, Florida 34685
Leslie D. Reagin, III 1,917,901(2) 5.0%
720 Bluffview Drive
Belleair, Florida 34640
Phillip Rappa 1,475,000 (3) 3.7%
5333 Wellfield Road
Newport Richey, Florida 34655
John Rivera
4521 S.W. 133rd Avenue 2,000,000 5.2%
Ft. Lauderdale, Florida
33330
All Officers and Directors 12,438,138 29.8%
(six persons)
</TABLE>
(1) Includes options to purchase 650,000 shares of Common Stock at an
exercise price of $1.10 per share.
(2) Includes options to purchase 25,000 shares of Common Stock at an
exercise price of $.70 per share, granted in connection with a loan to
the Company in the principal amount of $334,000, which was converted
into Common Stock in April 2000. See "Certain Relationships and Related
Transactions."
(3) Includes options to purchase 1,400,000 shares of Common Stock at an
exercise price of $.34 per share granted in January 2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In June 1999, we borrowed $65,000 from DMV, Inc., a company 100% owned
by Leon H. Toups, our Chairman, President and Chief Executive Officer. This
indebtedness is evidenced
-24-
<PAGE> 27
by a promissory note which bears interest at a rate of 12% per annum, is for a
term of two years and requires that we make 24 monthly principal and interest
payments of $3,060. The note is secured by our accounts receivable, inventory
and equipment. We have made all payments due under this note, and as of December
31, 1999, the remaining balance due was $55,215.
In July 1999, we borrowed $75,000 from Leon H. Toups. This indebtedness
is evidenced by a promissory note which bears interest at a rate of 12% per
annum, is for a term of two years and requires that we make 24 monthly principal
and interest payments of $3,530.51. The note is secured by our accounts
receivable, inventory and equipment. We have made all payments due under this
note, and as of December 31, 1999, the remaining balance due was $66,575.
In August 1999, we borrowed $282,000 from Leslie D. Reagin, one of our
directors. This indebtedness was evidenced by a promissory note which bears
interest at a rate of 12% per annum and was due and payable in full, with all
interest accrued thereon, on January 15, 2000. The note was secured by real
property in the Dominican Republic. In March 2000, we borrowed an additional
$52,000 from Mr. Reagin. This indebtedness was evidenced by an unsecured
promissory note which bears interest at a rate of 12% per annum. In April 2000,
all amounts due under these notes were converted into 1,336,000 shares of our
common stock at a conversion price of $.25 per share. In connection with the
August 1999 note, Mr. Reagin also received an option to purchase 25,000 shares
of common stock at an exercise price of $0.70 per share. This option expires in
August 2002.
In December 1999, we borrowed $250,000 from Daniel Doyle, one of our
shareholders. This indebtedness is evidenced by a promissory note which bears
interest at a rate of 12% per annum and is due in September 2000. The note is
secured by substantially all of our assets.
In August 1999, we borrowed $70,000 from Richard Hornstrom, one of our
shareholders. In October 1999, we borrowed an additional $12,500 from Leon H.
Toups. In November 1999, we borrowed $25,000 from Joseph Cerbone, one of our
shareholders. All of the foregoing advances are unsecured and are not evidenced
by promissory notes. Each advance bears interest at the rate of 12% per annum
and is payable upon demand. The purpose of these advances was to provide us with
needed working capital.
The transactions described above are on terms no less favorable to us
than those that could have been obtained from independent third parties in
arms-length negotiations.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 10-KSB.
(a) Exhibits
3.1* Certificate of Incorporation of the Company.
3.2* By-Laws of the Company.
3.3+ Articles of Amendment to Articles of Incorporation filed with the
Florida Secretary of State on March 30, 1999.
-25-
<PAGE> 28
3.4+ Articles of Amendment to Articles of Incorporation filed with the
Florida Secretary of State on November 24, 1998.
4.1+ Warrant to Purchase Common Stock granted to The Augustine Fund, L.P.
dated February 17, 1999.
4.2+ Series 1999-A Eight Percent (8%) Convertible Note Due January 1, 2002
given to The Augustine Fund, L.P. by the Company, dated February 17,
1999.
4.3+ Registration Rights Agreement by and between The Augustine Fund, L.P.
and the Company, dated February 17, 1999.
4.4+ Warrant Agreement by and between Sands Brothers & Co., Ltd. and the
Company, dated October 29, 1999.
10.1* License Agreement by and between Robert Alan Jaeger (BPV) and the
Company, dated November 3, 1997 (BP Valves).
10.2* WAFT Agreement by and between Wm. H. Richardson, Jr. (WAFT Partners)
and the Company, dated November 8, 1997 (AquaFuel).
10.3* Manufacturing License Agreement by and between Gerold Allen and the
Company, dated January 1, 1998.
10.4** Sale of Corporation's Assets in Exchange for Stock of Purchasing
Company by and between A.M.W. Metal Fabricators, Corporation and the
Company, dated April 29, 1998.
10.5*** The Balanced Oil Recovery System Lift License Agreement by and between
Lift-Pump, L.L.C. and the Company, dated July 29, 1998.
10.5(a)+ First Amendment to The Balanced Oil Recovery System Lift License
Agreement by and between Lift-Pump, L.L.C. and the Company, dated July
29, 1999.
10.5(b)+ Second Amendment to The Balanced Oil Recovery System Lift License
Agreement by and between Lift-Pump, L.L.C. and the Company, dated March
30, 2000.
10.6+ Electromagnetion Aquafuel Enhancement License Agreement by and among
Lawrence Perovetz, Ruggero Maria Santilli and the Company, dated June
8, 1998.
10.7+ Tunnel Bat License Agreement by and between David Richardson and the
Company, dated July 1, 1998.
10.8+ Share Exchange Agreement by and among InterSource Health Care, Inc.,
certain other persons listed therein and the Company, dated November
30, 1998.
-26-
<PAGE> 29
10.9+ Share Exchange Agreement by and among Brounley Associates, Inc.,
certain other persons listed therein and the Company, dated November
30, 1998.
10.10/\ Contract by and between the Company and Company De Luz Y Fuerza De
Terrenas dated November 30, 1998.
10.11+ Exclusive Representative Agreement by and between the Company and
Rancha La Regina Agropecuaria dated June 15, 1999.
10.12+ Exclusive License Agreement by and between Tomorrows Innovative
Technology Today and the Company dated December 15, 1999.
10.13+ Santilli Technology Exclusive Assignment and Royalty Agreement by and
among Hadronic Press, The Institute for Basic Research, Ruggero Maria
Santilli and the Company, dated February 3, 2000.
10.14+ Scientific Consulting Agreement by and between Ruggero Maria Santilli
and the Company, dated January 1999.
10.15+ Employment Agreement between Leon H. Toups and the Company dated July
28, 1997.
10.16+ Employment Agreement between Michael P. Toups and the Company dated
July 28, 1997.
10.17+ Employment Agreement between Mark Clancy and the Company dated July 28,
1997.
21 List of Subsidiaries
23.1 Consent of Aidman, Piser & Company, P.A. (included herein)
23.2 Consent of Harper, Van Scoik & Company, LLP (included herein)
24 Power of Attorney (included in the signature page to this report).
27 Financial Data Schedule.
- ---------------
* Previously filed as Exhibits to, and incorporated by reference from,
the Company's Form 10-SB, on March 11, 1998.
** Previously filed as Exhibits to, and incorporated by reference from,
the Company's Form 10-SB on May 19, 1998.
*** Previously filed as an Exhibit to, and incorporated by reference from,
the Company's Form SB-2 on October 7, 1998.
-27-
<PAGE> 30
/\ Previously filed as an Exhibit to, and incorporated by reference from,
the Company's Form 8-K on December 28, 1998.
+ Filed herewith.
(b) The following reports on Form 8-K were filed during fiscal 1999:
(i) On June 23, 1999, we filed a Form 8-K/A for the purpose of filing
the audited balance sheets of Brounley Associates, Inc. as of December
31, 1997 and 1996 together with the related statements of income,
stockholders' equity and cash flows for the years then ended.
(ii) On June 25, 1999, we filed a Form 8-K/A for the purpose of filing
the independent auditors' report and accompanying balance sheet of
InterSource Health Care, Inc. as of December 31, 1997 and the related
statements of operations, stockholders' deficit, and cash flows for the
year then ended.
(iii) On July 13, 1999, we filed a Form 8-K/A for the purpose of filing
the independent auditors' report and accompanying balance sheet of
InterSource Health Care, Inc. as of December 31, 1997 and the related
statements of operations, stockholders' deficit, and cash flows for the
year then ended. This Form 8-K/A was filed in order to correct the Form
8-K/A filed on June 25, 1999.
(iv) On July 22, 1999, we filed a Form 8-K/A for the purpose of filing
the audited balance sheet of Brounley as of December 31, 1997 and the
related statements of income, stockholders' equity and cash flows for
the year then ended.
(v) On July 28, 1999, we filed a Form 8-K/A for the purpose of filing
(1) our pro forma condensed consolidated balance sheet as of September
30, 1998 and the pro forma condensed consolidated statements of
operations for the nine month period ended September 30, 1998 and the
period ended December 31, 1997, which give effect to the business
combination with Brounley; (2) the unaudited balance sheet of Brounley
and the accompanying statements of operations, stockholders' equity and
cash-flows and notes thereto for the interim period ended September 30,
1998; and (3) the independent auditors' report related to the audited
balance sheet of Brounley as of December 31, 1997 and accompanying
statements of operations, stockholders' equity and cash flows and notes
thereto as of December 31, 1997, together with the related statements
of earnings, stockholders' equity and cash flows for the year then
ended.
(vi) On August 27, 1999, we filed a Form 8-K/A for the purpose of
filing (1) our pro forma condensed consolidated balance sheet at
September 30, 1998 and the pro forma condensed consolidated statements
of operations for the nine month period ended September 30, 1998 and
the period ended December 31, 1997, which give effect to our business
combination with Brounley; (2) the unaudited balance sheet of Brounley
and the accompanying statements of operations, stockholders' equity and
cash-flows and notes thereto for the interim period ended September 30,
1998; and (3) the independent
-28-
<PAGE> 31
auditors' report related to the audited balance sheet of Brounley and
accompanying statements of operations, stockholders' equity and
cash-flows and notes thereto as of December 31, 1997, together with the
related statements of earnings, stockholders' equity and cash flows for
the year then ended. This Form 8-K/A was filed in order to correct the
Form 8-K/A filed on July 28, 1999.
-29-
<PAGE> 32
Independent Auditors' Report
Board of Directors
Toups Technology Licensing, Incorporated
Largo, Florida
We have audited the accompanying consolidated balance sheet of Toups Technology
Licensing, Incorporated and Subsidiaries (the "Company"), as of December 31,
1999, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the consolidated financial position of Toups
Technology Licensing, Incorporated and Subsidiaries, as of December 31, 1999,
and the consolidated results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital and net capital deficiency which raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 3. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ AIDMAN, PISER & COMPANY, P.A.
April 20, 2000, except for Notes 3 and 20 for which the date is May 5, 2000
Tampa, Florida
F-1
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND STOCKHOLDERS
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
LARGO, FLORIDA
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Toups Technology Licensing, Incorporated
and subsidiaries (the Company) for the year ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated results of operations and
cash flows of Toups Technology Licensing, Incorporated and subsidiaries for the
year ended December 31, 1998 in conformity with generally accepted accounting
principles.
As described in Note 2 to the financial statements, we recently became aware of
facts that existed prior to the issuance of our previous audit report which
would have affected our report had we been aware of such facts.
HARPER, VAN SCOIK & COMPANY, LLP
February 2, 1999, except for Note
2 as to which the date is May 12, 2000
F-1-A
<PAGE> 34
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current assets:
Cash $ 72,224
Accounts receivable 19,501
Inventories 1,072,280
Prepaid royalties 63,166
------------
Total current assets 1,227,171
Property and equipment, net 1,970,334
Deferred charge, net of $31,041
accumulated amortization 279,367
Other assets 80,668
------------
$ 3,557,540
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable, bank $ 184,063
Current maturities of notes payable, related parties 719,803
Current maturities of capital lease obligations 250,733
Accounts payable 1,149,356
Accrued expenses 803,988
Customer deposits 288,148
Dividends payable 39,375
------------
Total current liabilities 3,435,466
Notes payable, related parties, less current maturities 41,487
Capital lease obligations, less current maturities 622,538
Convertible debentures 750,000
------------
Total liabilities 4,849,491
------------
Commitments and contingencies --
Stockholders' deficit:
Series A preferred stock, par value $1, 10,000,000
shares authorized, 750 shares issued and outstanding 750
Common stock, par value $.001, 50,000,000
shares authorized, 33,290,948 shares issued and outstanding
Additional paid-in capital 17,988,553
Accumulated deficit (18,046,485)
------------
(23,891)
Less treasury stock (1,950,000 shares at cost) (1,268,060)
------------
Total stockholders' deficit (1,291,951)
------------
$ 3,557,540
============
See notes to consolidated financial statements.
F-2
<PAGE> 35
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1998-Restated
1999 (Note 2)
------------ ------------
<S> <C> <C>
Revenue $ 1,100,528 $ 508,538
Cost of sales, including inventory valuation
allowances and write-downs of $561,684 in 1999 1,493,433 239,151
------------ ------------
Gross profit (loss) (392,905) 269,387
Selling, general and administrative expenses 7,749,386 4,468,369
Research and development expenses 2,457,835 1,184,848
------------ ------------
Loss from continuing operations before income taxes and other items (10,600,126) (5,383,830)
------------ ------------
Other income (expenses):
Interest expense (290,618) (21,234)
Loss on sale of property and equipment (41,826) --
Write-off of investment in joint venture (375,706) --
Other income 17,627 6,621
------------ ------------
(690,523) (14,613)
------------ ------------
Loss from continuing operations before
income taxes (11,290,649) (5,398,443)
Income taxes -- --
------------ ------------
Loss from continuing operations (11,290,649) (5,398,443)
Discontinued operations:
Loss from discontinued operations (no applicable
income taxes) (468,816) (288,434)
Loss on disposal of discontinued business segment
(no applicable income taxes) (303,203) --
------------ ------------
Net loss (12,062,668) (5,686,877)
Preferred stock dividends (289,375) --
------------ ------------
Net loss attributable to common stockholders ($12,352,043) ($ 5,686,877)
============ ============
Loss per common share attributable to common stockholders:
Continuing operations ($ .40) ($ .47)
Discontinued operations ( .3) ( .2)
Net loss ($ .43) ($ .49)
------------ ------------
Weighted average shares outstanding 28,935,217 11,492,162
============ ============
</TABLE>
See notes to consolidated financial
F-3
<PAGE> 36
TOUPS TECHNOLOGY LICENSING, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Retained
Common Stock Preferred Stock Additional Earnings
--------------------- ----------------- Paid-in (Accumulated Treasury
Shares Amount Shares Amount Capital Deficit) Stock Total
--------- -------- -------- --------- ------------ ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances,
January 1, 1998 9,130,000 $ 9,130 $ $ 146,537 $ 27 $ 155,694
Common stock issued
for cash 5,381,361 5,381 3,844,897 3,850,278
Common stock issued
for services 5,602,697 5,603 3,574,520 3,580,123
Common stock issued
for acquisitions 2,103,241 2,103 1,326,568 1,328,671
Distributions to
stockholders (7,592) (7,592)
Net loss for the year
(restated-Note2) (5,686,877) (5,686,877)
---------- -------- -------- --------- ------------ ----------- ---------- ----------
Balances, December 31,
1998 (restated-Note 2) 22,217,299 $ 22,217 $ $ 8,892,522 ($5,694,442) $ 3,220,297
========== ======== ======== ========= ============ =========== ========== ===========
</TABLE>
(Continued)
F-4
<PAGE> 37
TOUPS TECHNOLOGY LICENSING, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Retained
Common Stock Preferred Stock Additional Earnings
-------------------- ------------------ Paid-In (Accumulated Treasury
Shares Amount Shares Amount Capital Deficit) Stock Total
---------- -------- ------ -------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1,
1999 22,217,299 $22,217 $ $ 8,892,522 ($ 5,694,442) $ $ 3,220,297
Preferred stock issued
for cash 750 750 749,250 750,000
Common stock issued
for cash 5,865,303 5,865 2,521,535 2,527,400
Common stock issued
for services asset
purchases:
Employees and
consultants 1,466,765 1,467 850,773 852,240
Equipment purchases 25,000 25 9,913 9,938
License fees 2,075,000 2,075 1,512,866 1,514,941
Investment in joint venture 500,000 500 375,206 375,706
Warrants issued in
connection with:
Preferred stock 45,885 45,885
Less stock issuance
costs (45,885) (45,885)
Financial advisory
services 877,420 877,420
Loan costs 70,900 70,900
Conversion of debt
to equity 1,141,581 1,142 422,608 423,750
Stock recission 1,268,060 (1,268,060)
Preferred stock
dividends (39,375) (39,375)
Preferred stock
beneficial conversion
feature (dividend) 250,000 (250,000)
Convertible debenture
beneficial conversion
feature (interest expense) 187,500 187,500
Net loss for the year (12,062,668) (12,062,668)
---------- ------- --- -------- ----------- ------------ ------------ -----------
Balances,
December 31, 1999 33,290,948 $33,291 750 $ 750 $17,988,553 ($18,046,485) ($ 1,268,060) ($1,291,951)
========== ======= === ======== =========== ============ ============ ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 38
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1998-Restated
1999 (Note 2)
----------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($ 12,062,668) ($ 5,686,877)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 577,316 76,622
Amortization of goodwill 59,142 19,597
Amortization of deferred loss on sale-leaseback 31,041 --
Amortization of loan costs 28,300 --
Stock based compensation 3,244,601 3,580,123
Beneficial conversion feature of convertible debenture 187,500 --
Loss on sale of property and equipment 41,826 --
Write-off of investment in joint venture 375,706 --
Write-off of goodwill 313,203 --
Increase (decrease) in cash due to changes in:
Accounts receivable 255,498 77,419
Inventories 240,406 (1,135,178)
Prepaid royalties 65,834 (118,000)
Other assets (3,360) (23,813)
Accounts payable (92,470) 570,102
Accrued expenses 763,426 200,218
Customer deposits 227,428 60,720
Other liabilities -- (39,281)
----------- -----------
Net cash used in operating activities (5,747,271) (2,418,348)
----------- -----------
Cash flows from investing activities:
Cash received in business acquisition -- 14,610
Repayments from (loans to) related parties 87,485 (18,428)
Loans to subsidiary prior to acquisition -- (164,297)
Acquisition of property and equipment (453,598) (498,794)
----------- -----------
Net cash used in investing activities (366,113) (666,909)
----------- -----------
Cash flows from financing activities:
Proceeds from sale/leaseback of property and equipment 250,000 --
Distributions to stockholders -- (7,592)
Proceeds from (repayments of) notes payable bank 134,489 (4,600)
Proceeds from sale of capital stock 3,277,400 3,850,278
Principal repayments on capital lease obligations (183,401) (55,385)
Proceeds from convertible debentures 750,000 --
Proceeds from related party notes payable 1,208,250 --
Repayments on related party notes payable (23,210) --
----------- -----------
Net cash provided by financing activities 5,413,528 3,782,701
----------- -----------
Increase (decrease) in cash (699,856) 697,444
Cash, beginning of year 772,080 74,636
----------- -----------
Cash, end of year $ 72,224 $ 772,080
=========== ===========
</TABLE>
(Continued)
F-6
<PAGE> 39
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
Supplemental schedule of cash flow information
Cash paid during the year for:
1999 1998
------- -------
Interest $31,769 $21,234
======= =======
Income taxes $ -- $ 3,198
======= =======
Supplemental schedule of non-cash financing and investing activities
During 1999, the Company:
o Converted $423,750 of related party debt to equity through the issuance of
1,141,581 shares of common stock
o Incurred $70,900 of loan costs through the issuance of common stock
warrants
o Acquired equipment with a cost of $668,435 and $9,938 through capital
lease obligations and the issuance of 25,000 shares of common stock,
respectively
o Incurred joint venture investment costs of $375,706 through the issuance
of 500,000 shares of common stock
In 1998, the Company acquired assets of $369,846 under capital lease agreements.
In 1998, the Company issued 1,203,241 shares of unregistered common stock for
the acquisition of InterSource Health Care, Inc.
Assets acquired $ 1,301,521
Liabilities assumed 611,850
In 1998, the Company issued 900,000 shares of unregistered common stock for the
acquisition of Brounley Associates, Inc.
Assets acquired $ 764,304
Liabilities assumed 125,304
In 1998, the Company issued 500,000 shares of unregistered common stock for the
acquisition of Advanced Micro Welding, Inc.
Assets acquired $ 301,834
Liabilities assumed 214,544
See notes to consolidated financial statements.
F-7
<PAGE> 40
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1. Nature of business, basis of presentation and summary of significant
accounting policies:
Nature of business:
Toups Technology Licensing, Incorporated (the "Company"), a Florida
corporation, was formed on July 28, 1997, and activated its startup
operations on November 1, 1997 to facilitate market applications through
the licensing of late-stage technologies primarily in the energy and
natural resources, environmental and health care market. The consolidated
financial statements include the accounts of the Company and its
wholly-owned subsidiaries, Brounley Associates, Inc. (Brounley), Advanced
Micro Welding, Inc. (AMW) and InterSource Health Care, Inc. (InterSource).
All material intercompany balances and transactions have been eliminated.
The Company's reportable operating segments are strategic business units
that offer different products and have separate management teams. During
1999, these segments were 1) Contract Manufacturing, 2) manufacture and
sale of the Balanced Oil Recovery System (BORS) Lift 3) sale of medical
equipment (Health Care market) and 4) Technology Development for
Environmental Solutions. During 1999, the Company also had the Brounley
operating segment which was discontinued during the third quarter of 1999
(see Note 5).
Contract Manufacturing provides production, metal fabrication, machining
and precision welding services for the Company's in-house needs such as
BORS Lift production and prototyping for its applied technology
development. The cost of this business activity is partially recovered by
contract manufacturing services provided to outside customers.
The BORS Lift is an oil extraction device that increases oil production
while decreasing operating costs and virtually eliminating salt-water
separation from depleted, relatively shallow "stripper" oil wells.
The Health Care segment is operated by InterSource Health Care, Inc., a
distributor of various medical equipment during 1999. The Company expects
this segment will expand its operations during 2000 to become a medical
sales and support services provider for capital equipment, health care
products, medical and surgical supplies and nutritional products through
the internet.
F-8
<PAGE> 41
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1. Nature of business, basis of presentation and summary of significant
accounting policies (continued):
Nature of business (continued):
The Technology Development for Environmental Solutions operating segment
finalizes the development of late-stage technologies and applies the
proven technology to market applications.
Revenue recognition:
Revenues are recognized as follows:
BORS Lift -- sales of this equipment are recognized when units are
shipped, the equipment functions substantially as intended, warranty
obligations can be reasonably estimated and collection of receivables is
reasonably assured.
Contract manufacturing and medical equipment sales -- sales are recognized
as manufactured items and equipment are shipped and collection of
receivables is reasonably assured.
Licensing Fee -- On June 15, 1999, the Company, entered into an Exclusive
Representative Agreement with a corporation in the Dominican Republic in
which the Company granted an exclusive license to commercialize and/or
sell products associated with all of the Company's then owned intellectual
property rights throughout Central and South American, Puerto Rico and the
Dominican Republic. The Company is to receive a one-time $5,500,000
license fee for these rights, and the payment of the fee was secured with
a limited use title to a planned urban development consisting of a planned
2,500 home site located in the Dominican Republic. The Company was to
receive 10% of the sales price of each home as they were sold. The Company
originally recognized the $5,500,000 licensing fee as revenue and a
$1,375,000 allowance for potential undeveloped home sites as selling,
general and administrative expenses during the quarter ended June 30,
1999.
Upon further consideration, the Company believes revenue should be
recognized on the cash basis. Accordingly, the revenue and allowance for
potential undeveloped home sites discussed in the preceding paragraph have
been reversed in the fourth quarter of 1999 and no revenue was recorded
relating to this license in the accompanying 1999 financial statements. As
of April 20, 2000, the licensee has not paid any of the consideration due
under the license agreement, and there can be no assurances that any
amounts pursuant to the agreement will be received.
F-9
<PAGE> 42
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1. Nature of business, basis of presentation and summary of significant
accounting policies (continued):
Inventories:
Inventories are stated at the lower of cost or market. Cost is determined
generally on a first-in, first-out method. As discussed in Note 2, the
Company has inventory of its BORS Lifts, some of which require further
modifications in order to bring the Lifts to a salable condition. This
inventory is classified as work-in-progress inventory and has been written
down to market (estimated sales price), less the estimated cost to modify
and deliver the units.
Property and equipment:
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method over (1) the estimated useful lives of the assets,
which range from 3 to 4 years for certain leasehold improvements, 5-7
years for computers, office equipment and furniture and 20-30 years for
other leasehold improvements or (2) the lease term for assets subject to
capital lease if the lease term is shorter than the assets' estimated
useful life.
License fees:
The Company has charged costs incurred for the acquisition of license
rights (primarily resulting from the issuance of common stock) to
operations as incurred (research and development expense) since the
commercialization of the technologies is still in the development stage
and such technologies have been purchased for a particular development
project and have no current known alternative uses.
Deferred charge:
Deferred charge, consisting of the deferred loss on a sale/leaseback
transaction, is being amortized in proportion to the amortization of the
leased-back assets.
Advertising costs:
The costs associated with producing and communicating advertising are
expensed in the period incurred. Advertising costs were approximately
$35,000 and $67,000 during 1999 and 1998, respectively.
F-10
<PAGE> 43
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1. Nature of business, basis of presentation and summary of significant
accounting policies (continued):
Use of estimates:
Preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
Product Warranty:
The Company provides warranties on the sales of its BORS units. The
Company recognized an estimate of these warranty costs at December 31,
1999 based on the performance history of this equipment and an estimate of
the level of future claims.
In connection with the Company's distribution of medical equipment, the
original manufacturer's warranty is provided to the customer, and the
Company does not otherwise warrant the equipment. Similarly, the Company
does not provide a warranty on its contract manufactured items (such items
consist primarily of fabricated metal items).
Stock-based compensation:
The Company accounts for compensation costs associated with stock options
issued to employees under the provisions of Accounting Principles Board
Opinion No. 25 ("APB 25") whereby compensation is recognized to the extent
the market price of the underlying stock at the date of grant exceeds the
exercise price of the option granted. The Company has adopted the
disclosure provisions of Financial Accounting Standard No. 123 -
Accounting for Stock-Based Compensation ("FAS 123"), which requires
disclosure of compensation expense that would have been recognized if the
fair-value based method of determining compensation had been used for all
arrangements under which employees receive shares of stock or equity
instruments. Stock-based compensation to non-employees is accounted for
using the fair-value based method prescribed by FAS 123.
F-11
<PAGE> 44
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
The Company accounts for unregistered common stock issued for services or asset
acquisitions at the estimated fair value of the stock issued. Fair value is
determined based substantially on the average cash price of recent sales of the
Company's unregistered common stock.
F-12
<PAGE> 45
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1. Nature of business, basis of presentation and summary of significant
accounting policies (continued):
Income taxes:
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases.
This method also requires the recognition of future tax benefits such as
net operating loss carryforwards, to the extent that realization of such
benefits is more likely than not. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The deferred tax assets are reviewed periodically
for recoverability and valuation allowances are provided, as necessary.
Net loss per share:
Net loss per share was computed based on the weighted average number of
shares outstanding during the periods presented.
Diluted earnings per share is considered to be the same as basic earnings
per share since the effect of common stock options and warrants and
convertible debentures and preferred stock is anti-dilutive.
New accounting pronouncements:
During 1999, the Company adopted Statement of Financial Accounting
Standards Number 131, "Disclosures about Segments of an Enterprise and
Related Information." Statement No. 131 establishes standards for
reporting information about operating segments in annual financial
statements. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
on a regular basis by the chief operating decision maker or
decision-making group, in deciding how to allocate resources to an
individual segment and in assessing performance of the segment. The
Company has identified these segments based on the nature of business
conducted by each. In management's opinion other recently issued
pronouncements would have no significant impact on the Company's financial
statements.
F-13
<PAGE> 46
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1. Nature of business, basis of presentation and summary of significant
accounting policies (continued):
Reclassifications:
Research and development expenses in 1998 have been classified from
selling, general and administrative expenses to conform with the 1999
presentation.
2. Restatement of 1998 financial statements:
During the fourth quarter of 1998 the Company recorded $1,515,720 of
revenue associated with the sale of 102 of the Company's then newly
developed BORS Lift. Prior to the sale of these units the Company had
performed extensive product development and field testing and believed
that all significant product and design problems had been satisfactorily
resolved. However, subsequent to delivery and installation of certain
units, management became aware of certain performance problems with the
BORS units sold in 1998. Upon further investigation, management determined
that certain repairs or modifications of the BORS units would be required.
However, since the Company had limited operating history with this
equipment, it was unable at that time to determine the magnitude of the
required repairs or modifications or the cost thereof. Accordingly, the
Company was not able to reasonably estimate the amount of any accrued
warranty obligation that might have been required at December 31, 1998.
Since the range of possible loss was not determinable at the date of the
issuance of the 1998 financial statements, the Company has determined that
recognition of these sales was not warranted until a reasonable estimate
of the warranty obligation could be determined. The accompanying 1998
financial statements have been adjusted to reverse the $1,515,720 of sales
and $1,002,874 cost of sales, accrued commissions and accrued royalties
associated therewith. The net effect of these adjustments on the 1998
financial statements was to reduce gross profit by $595,689 and selling,
general and administrative expenses by $82,843 (no applicable income
taxes) and increase net loss and net loss per share by $512,846 and $.04,
respectively.
During the third quarter of 1999, the Company made the final determination
of the BORS product and design modifications and/or repairs necessary for
the equipment to reliably function as it was intended. Also, during 1999,
the Company agreed to accept the return of most of the BORS units sold in
1998. Modifications of many of the units were made in both 1999 and 2000,
and 33 modified units were sold to other customers (recognized as revenue
in 1999) without further performance problems. The balance of the returned
units are included in inventory at December 31, 1999 at their estimated
net realizable value.
F-14
<PAGE> 47
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
3. Management plans regarding liquidity and capital resources:
The Company has experienced recurring net losses since its inception and,
as such, has experienced negative operating cash flows in both 1999
($5,747,271) and 1998 ($2,418,348) and continued to experience negative
operating cash flows during the first quarter ended March 31, 2000. The
Company has historically funded these negative operating cash flows with
proceeds from sales of common and preferred stock, notes and convertible
debentures payable and equipment sale/leaseback transactions. The total
amount received from these sources approximated $5,500,000 during 1999 and
$1,250,000 from January 1 through May 5, 2000. Notwithstanding the
proceeds of these financing sources, the Company has negative working
capital of approximately ($2,200,000) at both December 31, 1999 and March
31, 2000 (unaudited) and, at December 31, 1999, was delinquent with
respect to payment of approximately $611,000 of 1999 payroll taxes,
including interest and penalties (see Note 10).
The Company is actively exploring various options to improve its working
capital position, including licensing and/or selling certain of its
technology rights and obtaining research and development contracts to
develop commercially marketable products subject to potentially licensed
or sold technologies. However, there can be no assurance that the Company
will be successful in implementing any of these plans. The Company also
plans to implement cost reductions throughout the balance of 2000.
Notwithstanding the potential cash flow benefits contemplated by these
plans, the Company will continue to require additional equity or debt
financing in order to cover its cash requirements and continue as a going
concern, and those financing requirements are in the very near term if the
plans discussed in the preceding paragraph are not implemented. Management
believes it will be successful in these financing efforts, but there can
be no assurance to that effect.
F-15
<PAGE> 48
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
4. Business combinations:
Advanced Micro Welding, Inc.
On April 1, 1998, the Company acquired all the common stock of Advanced
Micro Welding, Inc. (AMW) in exchange for 500,000 shares of the Company's
unregistered common stock. AMW is engaged in micro welding and custom
metal fabricating. The transaction has been accounted for as a pooling of
interests and, accordingly, the consolidated financial statements for 1998
include all accounts and operations of AMW as if the acquisition had
occurred at the beginning of 1998.
Unaudited net sales and net income of the separate companies for the
period prior to the acquisition were:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1998
------------------
<S> <C>
Net sales:
Toups Technology Licensing, Incorporated $ --
AMW 109,154
-----------
$ 109,154
===========
Net income (loss):
Toups Technology Licensing, Incorporated ($ 215,096)
AMW 7,246
-----------
($ 207,850)
===========
</TABLE>
In 1999, AMW's manufacturing operations were merged with those of the Company.
F-16
<PAGE> 49
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
4. Business combinations (continued):
Brounley Associates, Inc.:
On October 1, 1998, the Company acquired all the common stock of Brounley
Associates, Inc. (Brounley) in exchange for 900,000 shares of the
Company's unregistered common stock. Brounley is engaged in the design,
manufacture and sale of radio frequency generators throughout the United
States and abroad. The transaction has been accounted for using the
purchase method of accounting. Accordingly, the purchase price was
allocated to the assets acquired and liabilities assumed based upon their
estimated fair values, and the Company's consolidated 1998 results of
operations include those of Brounley from the date of acquisition.
The following is a summary of the assets purchased and liabilities assumed
in the acquisition of Brounley:
<TABLE>
<S> <C>
Assets acquired:
Cash $ 10,895
Accounts receivable 168,602
Inventory 163,577
Property and equipment 28,588
Other 700
Goodwill 391,942
--------
764,304
--------
Liabilities assumed:
Accounts payable and accrued expenses 58,887
Notes payable 4,600
Customer deposits 18,057
Income taxes payable 43,760
--------
125,304
--------
Purchase price $639,000
========
</TABLE>
The Company determined that there was no material difference between the
carrying values (on Brounley's financial records) and the fair value of the
assets acquired and liabilities assumed, except for equipment which was valued
at $28,588, or an increase from its carrying value of $13,500. The increase in
value was based on the Company's review of the equipment's age, condition,
replacement cost and remaining useful life. The excess of the purchase price
($639,000 fair market value of stock issued) over the historical cost of the net
assets acquired has been recorded as goodwill. The Company was amortizing
F-17
<PAGE> 50
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
the goodwill on a straight-line basis over 5 years through the third quarter of
1999. See Note 5 for information regarding the discontinuance of this business.
F-18
<PAGE> 51
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
4. Business combinations (continued):
InterSource Health Care, Inc.:
On November 30, 1998, the Company purchased 100% of the stock of
InterSource Health Care, Inc. (InterSource) by issuing 1,203,241 shares of
unregistered common stock. InterSource acquires and refurbishes used
medical equipment for resale, sells pharmaceutical products and provides
services for medical facility development.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based upon their estimated fair market values, and the
Company's 1998 consolidated results of operations include those of
InterSource from the date of acquisition.
The following is a summary of the assets purchased and the liabilities
assumed in the InterSource acquisition:
<TABLE>
<S> <C>
Assets acquired:
Cash $ 3,715
Accounts receivable 100,876
Inventory 13,931
Property and equipment 1,113,941
Other assets 69,058
----------
1,301,521
----------
Liabilities assumed:
Accounts payable and accrued expenses 366,479
Notes payable 213,871
Customer deposits 31,500
----------
611,850
----------
Purchase price $ 689,671
</TABLE>
The excess of the purchase price ($689,671 fair market value of stock issued)
over the historical cost of the net assets acquired has been recorded as
additional property and equipment based upon an independent valuation of the
property and equipment.
F-19
<PAGE> 52
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
4. Business combinations (continued):
Pro-forma information:
The following unaudited pro-forma summary combines the consolidated
results of operations of the Company, InterSource and Brounley as if the
acquisitions had occurred at the beginning of 1998, after giving effect to
certain pro-forma adjustments, including, among other things, additional
depreciation and amortization based on the fair value of equipment and
goodwill acquired and the estimated related income tax effect:
<TABLE>
<CAPTION>
1998
----------
<S> <C>
Net sales $4,134,161
Net loss ($5,408,294)
</TABLE>
This pro forma financial information is presented for informational
purposes only and may not be indicative of the results of operations as
they would have been if the Company, InterSource and Brounley had been a
single entity during 1998.
Joint Venture:
Effective December 15, 1998, the Company entered into an agreement with
Compania Deluz Y Fuerza De Las Terrenas, C. por A. (Utility), a Dominican
Republic utility company, to form the joint venture "AquaFuel
(a)-Dominicana, SA". The ownership of AquaFuel Dominicana was to be 49% to
the Company and 51% to the Utility.
The purpose of AquaFuel Dominicana was the construction and operation of
an Aqua Fuel production facility which would be able to generate at least
1,653 gigawatts of electric power during a twenty-year period.
F-20
<PAGE> 53
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
4. Business combinations (continued):
Joint Venture (continued):
The Company's capital contribution to AquaFuel Dominicana was to be the
delivery of the AquaFuel technology and the equipment as required by the
agreement. The Utility was required to fund all other capital needs of the
joint venture. Additionally, the Utility was to find investors who were to
invest at least $500,000 in the Company. The Company was to issue
1,000,000 shares of its common stock to the Utility and 2,000,000 shares
to an individual who introduced the parties to the joint venture and was
also to serve as the President of AquaFuel-Dominicana. During 1999, the
Company issued 500,000 shares of unregistered common stock to an
individual on behalf of the Utility and recorded the fair value of these
shares ($375,705) as an investment in the joint venture. Subsequently, the
Utility failed to perform under the terms of the proposed joint venture
agreement, and the joint venture did not proceed. Since the Company was
not able to recover the 500,000 shares of stock issued and the proposed
joint venture interest had no value, the Company subsequently (during
1999) wrote off the investment. The Company also had advanced the
2,000,000 shares in connection with the joint venture. These shares were
subsequently applied toward the payment of GWE licensing rights discussed
in Note 19.
5. Discontinued operations:
As discussed in Note 4 to the financial statements, the Company acquired
its Brounley business segment (design, manufacture and sale of radio
frequency generators) in 1998. The Company experienced declines in
Brounley's sales during 1999 relative to prior year annual sales and
budget expectations, principally due to the loss of expected orders from
one customer in early 1999. On August 30, 1999, after an evaluation of
this business unit's performance, management elected to discontinue
further Brounley operations. Certain key sales, design and engineering
personnel associated with this segment were terminated, the remainder were
assigned to other business segments and its equipment was transferred to
the Company's contract manufacturing segment. There were no liabilities
with regard to the Brounley business segment at December 31, 1999. Results
of operations of the discontinued business segment have been classified as
discontinued operations for the year ended December 31, 1999 and from the
date of acquisition on October 1, 1998 through December 31, 1998.
F-21
<PAGE> 54
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
5. Discontinued operations (continued):
Components of loss from discontinued operations are as follows:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Revenues $ 184,273 $ 197,451
Costs and expenses (653,089) 485,885
--------- ---------
Operating losses (468,816) (288,434)
Income taxes -- --
--------- ---------
Loss from discontinued operations ($468,816) ($288,434)
========= =========
</TABLE>
Unamortized goodwill of $303,203 associated with the acquisition of
Brounley was evaluated, deemed to have no continuing value and, therefore,
written-off and recognized as loss on disposal of discontinued operations
in the accompanying 1999 statement operations.
6. Major customer information, fair value of financial instruments and
concentrations of credit risk:
Major customer information:
During the year ended December 31, 1999 the Company derived revenues from
two customers which individually exceeded 10% of total revenues (12% and
11%, respectively).
Fair value of financial instruments:
All financial instruments are held or issued for purposes other than
trading. The carrying amount of cash, accounts receivable, accounts
payable and other current liabilities approximates fair value because of
their short maturity. The carrying amount of notes payable, related party
notes payable, convertible debentures and capital lease obligations
approximates their fair value based on current market interest rates
offered to the Company.
F-22
<PAGE> 55
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
6. Major customer information, fair value of financial instruments and
concentrations of credit risk (continued):
Concentrations of credit risk:
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts
receivable.
The Company sells its products principally to companies in the United
States. Management assesses the financial stability of each of its major
customers prior to contract negotiations and establishes credit limits for
smaller customers to limit its risk. The Company does not require
collateral or other security to support customer receivables. Because the
Company sells a significant portion of its products and maintains
individually significant receivables balances with major customers, if the
financial condition and operations of these customers deteriorate below
critical levels, the Company's operating results could be adversely
affected.
F-23
<PAGE> 56
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
7. Segment reporting:
As discussed in Note 1, the Company adopted FAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance based on gross profit.
The following summarizes key segment information for 1999:
<TABLE>
<CAPTION>
Manufactured Products Technology
------------------------------ Development/
Contract Environmental Intersegment
BORS Manufacturing Health Care Solutions Corporate Eliminations Consolidated
------------- ------------- ----------- --------- --------- ------------ ------------
1999
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue from
external
customers $ 305,000 $ 471,035 $ 324,493 $ $ $ $ 1,100,528
Intersegment
revenues 433,110 (433,110)
Cost of sales 597,630 953,138 375,775 (433,110) 1,493,433
Gross profit (192,630) 51,007 (51,282) (192,905)
Research and
development:
Stock based 1,854,711 1,854,711
Other 603,124 603,124
2,457,835
Depreciation (net
of discontinued
operations
depreciation of
$11,815) 6,269 419,984 48,946 62,747 27,555 -- 565,501
Segment Assets 1,058,387 1,696,910 158,688 330,140 313,415 -- 3,557,540
</TABLE>
F-24
<PAGE> 57
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
7. Segment reporting (continued):
The following summarizes key segment information for 1998:
<TABLE>
<CAPTION>
Manufactured Products Technology
------------------------------ Development/
Contract Environmental Intersegment
BORS Manufacturing Health Care Solutions Corporate Eliminations Consolidated
------------- ------------- ----------- --------- --------- ------------ ------------
1998
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue from
external
customers $ $ 457,073 $ 51,465 $ $ $ $ 508,538
Intersegment
revenues 920,031 (920,031)
Cost of sales 1,116,695 42,487 (920,031) 239,151
Gross profit 260,409 8,978 269,387
Research and
development:
Stock based 920,605 920,605
Other 264,243 264,243
-----------
1,184,848
-----------
Depreciation (net
of discontinued
operations
depreciation of
$6,683) 61,046 3,626 4,128 1,139 69,939
</TABLE>
The Company accounts for intersegment sales at cost.
F-25
<PAGE> 58
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
8. Inventories:
Inventories at December 31, 1999 consist of the following:
<TABLE>
<S> <C>
Raw materials $ 281,803
Work-in-progress 382,452
Finished goods 768,025
Inventory valuation allowance (360,000)
----------
$1,072,280
==========
</TABLE>
9. Property and equipment:
Property and equipment at December 31, 1999 consists of the following:
<TABLE>
<S> <C>
Machinery and equipment $1,083,890
Office furniture and equipment 183,912
Equipment under capital lease 1,116,524
Leasehold improvements 169,108
-----------
2,553,434
Accumulated depreciation (583,100)
-----------
$1,970,334
==========
</TABLE>
10. Payroll tax liabilities:
The Company is delinquent with respect to payment of certain 1999 payroll
taxes (approximately $611,000, including interest and penalties, which are
included in accrued expenses at December 31, 1999). Management expects to
enter into a payment stipulation agreement with the Internal Revenue
Service (IRS) whereby the Company would agree to pay this liability on a
monthly basis over a yet-to-be determined period. During 2000, the Company
made a $50,000 good-faith deposit toward this liability but, at April 20,
2000, no agreement had been finalized. The IRS has certain collateral
rights, including the seizure of the Company's bank accounts and other
property, should a satisfactory payment stipulation agreement not be
reached.
F-26
<PAGE> 59
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
11. Notes payable, bank:
Notes payable, bank consists of borrowings under a demand $50,000 line of
credit and a short-term note payable due on demand. The outstanding
principal balance on the line of credit was $49,574 at December 31, 1999
which bears interest at prime plus 2%. The line of credit is secured by
inventory, accounts receivable, equipment and intangibles and the personal
guarantee of certain stockholders. The short-term note payable is
unsecured and non-interest bearing. The outstanding balance on this
borrowing was $134,489 at December 31, 1999.
12. Notes payable, related parties:
Notes payable, related parties consists of the following:
<TABLE>
<S> <C>
Note payable, stockholder/director, interest at 6.6%; in
connection with this note, warrants to acquire 25,000
shares of common stock exercisable at $.70 per share
(market price at date of grant) through August 2002;
Converted to equity subsequent to December 31, 1999 (see
Note 20) $ 282,000
Note payable, stockholder, maturing September 2000
including any unpaid interest at 12%; secured by a security
interest in substantially all assets. 250,000
Unsecured stockholder advances, bearing interest at 12%;
due on demand 107,500
Note payable to an officer and principal stockholder, due
in monthly installments of $3,531, including interest at
12%, through July 2001; secured by accounts receivable,
inventory and equipment 66,575
</TABLE>
F-27
<PAGE> 60
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
12. Notes payable, related parties (continued):
<TABLE>
<S> <C>
Note payable to an entity owned by an officer and principal
stockholder, due in monthly installments of $3,060,
including interest at 12%, through June 2001; secured by
accounts receivable, inventory and equipment 55,215
--------
761,290
Less current maturities 719,803
--------
$ 41,487
========
</TABLE>
The annual maturities of notes payable, related parties are
as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
2000 $719,803
2001 41,487
--------
$761,290
========
</TABLE>
13. Convertible debentures:
In February 1999, the Company sold $750,000 of Series 1999-A 8%
convertible notes due January 2002. Under the securities purchase
agreement, the investor was to purchase a second installment of $750,000
in convertible notes within 30 days after the Company filed a Registration
Statement or at such time as the parties mutually agree.
The notes can be converted to common stock of the Company at the
conversion price for each share of common stock equal to the lesser of (1)
the lowest closing bid prices for the common stock for the five trading
days immediately preceding the Closing Date; or (2) 80% of the lowest
closing bid prices for the common stock for the five trading days
immediately preceding the Conversion Date.
Additionally, the investor was issued a warrant to purchase 75,000 shares
of the Company's common stock exercisable at $2.3375 per share through
February 2002.
The agreements contain demand registration rights with respect to the
warrants and the stock subject to conversion and underlying the warrants.
Since the investor did not convert the notes on the day of the Closing,
the Company is required to recognize as interest expense the beneficial
conversion terms of the notes. This additional interest of $187,500 was
amortized over the period between the Closing Date (February 1999) and the
first date (May 1999) on which the notes could be converted.
F-28
<PAGE> 61
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
Subsequent to December 31, 1999, the investor completed the purchase of the
second installment ($700,000) of the 8% convertible notes (see Note 20).
F-29
<PAGE> 62
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
14. Stockholders' deficit:
Common stock sold for cash:
Of the 5,865,303 unregistered shares of common stock sold for cash in
1999, approximately 992,300 shares were sold subject to registration
rights.
Series A preferred stock:
On March 30, 1999, the Company executed a series of agreements and amended
its articles of incorporation in order to complete the placement of
$750,000 of its Series A 7% Preferred Stock ($1 par value; $1,000 stated
value) with an investor. Under the terms of the Series A Preferred Stock,
at December 31, 1999 the holder may convert the preferred stock into
common stock at 75% of the common stock closing price anytime through
March 30, 2004. In that regard, the Company recorded a dividend of
$250,000 during 1999 to account for this beneficial conversion feature.
The Company also issued 93,750 warrants exercisable at $2.40 per share to
the investor in connection with the sale of the Preferred Stock. The
Company also issued 50,000 warrants as a finders fee exercisable at $2.40
per share through March 30, 2004.
The agreements contain demand registration rights with respect the
warrants and the stock subject to conversion and underlying the warrants.
Holders of common stock are entitled to one vote per share. To the extent
that holders of the Series A Preferred Stock are entitled under the
Florida Business Corporation Act to vote on a matter with holders of
common stock, voting together as one class, each share of Series A
Preferred Stock shall be entitled to a number of votes equal to the number
of shares of common stock into which it is then convertible.
The Series A Preferred Stock has a liquidation preference of $1,300 per
share plus accrued and unpaid dividends. Accrued and unpaid dividends were
$39,375 (or $52.50 per share) at December 31, 1999.
Recission of stock and stock option:
During June 1999, certain officers of the Company offered to rescind the
receipt of 1,950,000 shares of stock previously issued to them in 1998 as
compensation. The Company has accepted the recission offer. Under the
F-30
<PAGE> 63
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
terms of the recission, the officers were to receive three year stock options to
purchase
F-31
<PAGE> 64
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
14. Stockholders' deficit (continued):
Recission of stock and stock option (continued):
1,950,000 shares of the Company's stock at the 5-day trailing average of
the market price at the date of grant. The Company completed the recission
and option transactions in December 1999.
The Company treated the reacquired (returned) shares as treasury stock,
and recorded the shares at a cost of $1,246,050, the compensation cost
attributed and recorded for the original issuance of the shares in 1998,
as an increase in Paid-in Capital. The options were granted at an exercise
price of $1.10 per share, (the 5-day trailing average high of the market
price at the date the transaction was initially considered by the Board in
June 1999), representing an exercise price considerably higher than the
market price of the Company's common stock on the date the option was
granted in December 1999 and were fully vested at December 31, 1999.
Accordingly, no compensation expense was recognized in the financial
statements for these options (the only options issued or outstanding at
December 31, 1999 and the year then ended). Had the accounting provisions
of FAS 123 been adopted, compensation of approximately $832,000 would have
been recorded in 1999 based on the Black-Scholes option pricing model, and
1999 net loss and net loss per share would have been ($12,694,668) and
($.44), respectively.
Common stock warrants:
The following table summarizes information for stock warrants outstanding
and exercisable at December 31, 1999, all of which were granted in 1999.
<TABLE>
<CAPTION>
Warrants Outstanding and Exercisable
----------------------------------------------------------
Range of Weighted Avg. Weighted Avg.
Prices Number Remaining Life Exercise Price
----------- ---------- -------------- --------------
<S> <C> <C> <C>
$ 2.34-2.40 218,750 42 months $ 2.38
$ .70 25,000 31 months .70
3,800,000 58 months .40
----------- ---------- ---------- -------------
4,043,750 57 months $ .51
========== ========== =============
</TABLE>
F-32
<PAGE> 65
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
14. Stockholders' deficit (continued):
Common stock warrants (continued):
The weighted average grant-date fair value of warrants granted during 1999
was $.53 per share.
The fair value of these warrants, exclusive of 93,750 warrants which were
issued with the Series A Preferred Stock, has been recorded at fair value
in the 1999 financial statements as follows:
<TABLE>
<S> <C> <C>
Loan costs (capitalized and amortized
over life of loan) $ 70,900
Financial advisory service compensation (1) 877,420
Stock issuance costs 45,885
-------
$994,205
========
</TABLE>
(1) This warrant agreement contains demand registration rights with
respect to the warrants and the common stock underlying the
warrants.
The fair value of the option and the warrants granted in 1999 were
estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions:
<TABLE>
<S> <C>
Expected life of options 3-5 years
Risk free interest rate 5.458%
Expected volatility 50%
Expected dividend yield 0%
</TABLE>
Stock issuances:
During 1999 and 1998, the Company issued 4,066,765 and 5,602,697 shares of
unregistered common stock to attract and retain key employees and for
other business purposes. These shares have been valued at prices which
approximate prices for cash sales of similar stock to others during the
same periods. Cost recognized in 1999 and 1998 in connection with these
stock issuances is as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Employee compensation $ 316,570 $1,756,419
Consultant compensation 535,670 524,175
Licenses fees (expensed) 1,514,941 571,178
Equipment purchases 9,938 --
Investment in joint venture 375,706 --
---------- ----------
</TABLE>
F-33
<PAGE> 66
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<S> <C> <C>
$ 2,752,825 2,851,772
=========== =========
</TABLE>
F-34
<PAGE> 67
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
15. Income taxes:
Deferred tax assets consist of the following at
December 31, 1999:
<TABLE>
<S> <C>
Net operating loss carryover $3,700,000
Inventory valuation allowance 64,000
Deferred tax asset valuation allowance (3,764,000)
----------
$ --
==========
</TABLE>
Income tax (expense) benefit consists of the following:
<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
Current:
Federal $ -- $ --
---------- --------
Deferred:
Deferred 64,000 --
Benefit of net operating loss carryover 2,918,000 782,000
Change in deferred tax asset valuation
allowance (2,982,000) (782,000)
---------- --------
-- --
---------- --------
$ -- $ --
========== ========
</TABLE>
The expected income tax benefit at the statutory tax rate differed from
income taxes in the accompanying statements of operations as follows:
<TABLE>
<CAPTION>
Percentage of loss before
income taxes
--------------------------
1999 1998
----------- --------
<S> <C> <C>
Statutory tax rate 34.0% 34.0%
State tax, net of federal benefit 3.5% 3.5%
Change in deferred tax asset
valuation allowance (37.5%) (37.5%)
----- -----
Effective tax rate in accompanying
statement of operations 0% 0%
===== =====
</TABLE>
The Company has net operating loss carryovers of approximately $9,300,000
at December 31, 1999. The net operating loss carryover principally expires
from 2018-2019.
F-35
<PAGE> 68
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
16. Related party transactions:
During 1999, the Company obtained short-term, non-interest bearing loans
from four existing minority shareholders aggregating $423,750, which were
converted into 1,141,581 shares of common stock, principally in the third
quarter.
During 1998, prior to its acquisition of InterSource (see Note 4), the
Company paid to InterSource $22,000 for payroll leasing, $102,000 for rent
and $21,000 for consulting fees.
17. Fourth quarter adjustments:
During the fourth quarter of 1999, the Company made certain adjustments.
These adjustments and a brief description of their impact on fourth
quarter operations are as follows:
<TABLE>
<CAPTION>
Effect of
adjustment
on fourth quarter
1999 operations-
(Increase) Decrease
net loss
-------------------
<S> <C>
Record stock based compensation for services and
license fees, some of which occurred in first,
second and third quarters ($2,502,411)
Write-off receivables and prepaid royalties (530,000)
Write-off investment in joint venture (375,706)
Reverse license fee revenue recorded in second
quarter 1999 (4,125,000)
Inventory valuation allowances (561,684)
-----------
Effect of adjustments on fourth quarter loss
from continuing operations (8,094,801)
Write-off goodwill associated with discontinued
operations (313,203)
-----------
Effect of adjustments on fourth quarter net loss ($8,408,004)
===========
</TABLE>
F-36
<PAGE> 69
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
17. Fourth quarter adjustments (continued):
Net loss attributable to common stockholders and net loss per share as
previously reported for the nine months ended September 30, 1999
(unaudited) would have increased by approximately $5,700,000 and $.22,
respectively, had the effect of the aforementioned fourth quarter
adjustments, insofar as they related to the first through third quarters
of 1999, been made in the proper quarter.
18. Leases:
Operating lease obligations:
The Company leases its office and warehouse facilities under a five-year,
non-cancelable operating lease for approximately $22,000 per month.
Additionally, the Company leases other office space and other equipment
under various non-cancelable operating leases for one to four year terms.
Rent expense under all operating leases approximated $321,000 and $117,000
for 1999 and 1998, respectively.
Obligations under the non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year ending September 30,
-------------------------
<S> <C>
2000 $ 339,814
2001 302,014
2002 269,210
-----------
$ 911,038
===========
</TABLE>
Capital lease obligations:
The Company leases certain equipment, machinery and computer software
under various capital lease agreements. The agreements provide for monthly
payments of approximately $28,000, expiring through 2004, and are
collateralized by the leased equipment.
The capitalized asset cost and accumulated amortization at December
31, 1999 was:
<TABLE>
<S> <C>
Capitalized cost $1,116,524
Accumulated amortization (251,230)
----------
Net book value $ 865,294
==========
</TABLE>
F-37
<PAGE> 70
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
F-38
<PAGE> 71
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
18. Leases (continued):
Capital lease obligations (continued):
Total amortization of assets under capital leases was $198,227 and $50,753
in 1999 and 1998, respectively.
One of the Company's 1999 capital leases resulted from a sale/leaseback
transaction in which the Company incurred a loss of $310,408 (asset net
book value of $560,408 net of $250,000 proceeds). Since the fair value of
the assets exceeded the net book value and since the Company retained
substantially all of the remaining use of the property sold, this loss has
been deferred and is being amortized in proportion to the amortization of
the leased assets.
Future minimum lease payments under capital leases are as follows:
<TABLE>
<CAPTION>
Year ending December 31,
------------------------
<S> <C>
2000 $339,249
2001 328,121
2002 223,373
2003 159,275
2004 12,210
Imputed interest (188,957)
--------
$873,271
========
</TABLE>
19. Commitments and contingencies:
License agreements and royalties:
The Company has entered into the following licensing agreements granting
the Company the use of certain proprietary information, technology and
patents:
o License of electromagnetion(TM) technology, (liquid waste-to-energy
technology). The agreement is effective through December 31, 2002,
is renewable for one or more 3-year renewal periods and obligates
the Company to pay a royalty of 6% of revenues generated involving
the electromagnetion technology. There was no royalty expense
resulting from this agreement in 1999 or 1998. The Company paid
105,263 shares of its common stock in 1998 to acquire this license
and
F-39
<PAGE> 72
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
recognized the estimated fair value of these shares of $67,263 as a charge to
operations in 1998.
F-40
<PAGE> 73
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
19. Commitments and contingencies (continued):
License agreements and royalties (continued):
o License of GWE technology (solid waste-to-energy technology). The
agreement is effective from December 1999 for 20 years and obligates
the Company to pay royalties equal to 50% of the profits associated
with sublicenses of, or other revenues associated with, the
technology, with minimum annual royalties of $150,000 commencing at
the later of 2000 or the date on which the first product subject to
the technology is first commercialized. There was no royalty expense
associated with this agreement in 1999. The Company applied
2,000,000 shares of previously issued common stock as payment for
the license (see Note 4-- Joint Venture). The Company has recognized
the estimated fair value of these shares ($1,502,820) as a charge to
1999 operations.
o License of Tunnel Bat Vehicle (wheeled vehicle in development stage
to clear box culverts under roadways); the agreement was effective
July 1998, is renewable on an annual basis, and obligates the
Company to pay royalties of 6% of sales of the Tunnel Bat Vehicle.
There was no royalty expense incurred in 1999 or 1998. The Company
paid 150,000 shares of the Company's common stock in 1998 for the
license and recognized the estimated fair value of the shares
($95,850) as a charge to operations in 1998.
o License of BORS Lift commencing July 1998 and renewable annually
through 2004; royalties of 6% of sales of BORS units are required
($18,300 in 1999 and $0 in 1998). The Company issued 500,000 shares
of its common stock at contract inception in 1998 as a first year
guaranteed performance payment. The fair market value of the shares
at that date ($319,500) has been recorded as a license fee and
charged to 1998 operations.
Employment agreements:
The Company has employment agreements with three executive officers. The
agreements expire July 28, 2002 and provide for base salaries as
established by the Board of Directors for 2000 through 2002 (ranging from
approximately $100,000 to $120,000 each as of December 31, 1999). The
agreements also permit the Company to grant the officers stock awards
based on performance.
F-41
<PAGE> 74
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
19. Commitments and contingencies (continued):
Legal proceedings:
Litigation:
The Company is involved in routine litigation incident to its business.
The Company has accrued minimum estimated losses ($32,000) in connection
with pending litigation at December 31, 1999. In the Company's opinion,
none of these proceedings will have a material adverse effect on the
Company's financial position or results of operations.
SEC Enforcement Inquiry:
On November 19, 1999, the Company was notified that the Securities and
Exchange Commission was conducting an informal inquiry in connection with
matters relating to the Company's restatement of financial results. The
Securities and Exchange Commission has requested that the Company provide
them with certain documents concerning the previous revision of its
financial results and financial reporting documents. The Securities and
Exchange Commission indicated that its inquiry should not be construed as
any indication that any violation of law has occurred, nor as an adverse
reflection upon any person, entity or security. The Company is cooperating
with the Securities and Exchange Commission in connection with this
inquiry and its outcome cannot be determined at this time.
F-42
<PAGE> 75
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
20. Subsequent events:
License agreement:
During January 2000, the Company acquired a license of certain
patent-pending technologies (water-to-energy conversion technologies or
"Santilli Technology"). The term of the agreement will coincide with the
related patent periods, if ultimately granted. This agreement requires the
payment of royalties equal to 3% of sales derived from licensed technology
products and various percentages of any proceeds received from the
sublicensing of the technology. The Company issued 75,000 shares of stock
to the licensor in 1999 in contemplation of this agreement (recorded as a
$12,121 charge to 1999 operations) and also, in 2000, granted a five year
option to purchase 150,000 shares of common stock at $.375 per share, the
fair market value at the date of grant. The Company is further obligated
to grant options to acquire 50,000 shares of stock in the future as each
new product subject to the technology becomes ready for commercialization.
Finally, in connection with this agreement, the Company extended an
existing consulting agreement with the licensor for a one year period
expiring December 2000 (renewable annually). Compensation under the
agreement is $72,000 for 2000 and a grant of a two year option to acquire
100,000 shares of common stock (expires December 2002) at an exercise
price of $1.00 per share (in excess of the fair market value of the stock
at date of grant).
Conversion of convertible debentures to equity/additional convertible
debt:
During January and March 2000, the investor in the Company's $750,000
Series 1999-A 8% convertible notes (see Note 13) elected to convert an
aggregate of $517,956 of the notes and accrued interest, into 1,037,781
shares of the Company's common stock. Additionally, during March 2000, the
investor loaned the Company an additional $700,000 through the purchase of
the second installment of the 8% convertible notes. In connection
therewith the Company granted the investor additional warrants to purchase
75,000 shares of common stock under terms similar to those granted in 1999
as discussed in Note 13.
Conversion of preferred stock:
F-43
<PAGE> 76
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
During April 2000, the holder the Company's Series A Preferred Stock converted
100 shares of the preferred stock ($100,000 stated value) into 357,143 shares of
common stock.
F-44
<PAGE> 77
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
20. Subsequent events (continued):
Sales of common stock, proceeds from related party notes payable and
conversion of related party debt to equity:
From January 1 through May 5, 2000, the Company generated net proceeds of
approximately $1,075,000 from the sale of common stock (private placements
of unregistered stock at an average of $.33 per share) and $177,000 from
short-term related party notes payable bearing interest at 12%.
Furthermore, on April 24, 2000 related party debt aggregating $282,000 at
December 31, 1999 (see Note 12) was converted into 1,128,000 shares of
common stock, and $52,000 of the aforementioned 2000 short-term borrowings
was converted to 208,000 shares of common stock.
Stock options and stock grants:
In January 2000, the Company granted 700,000 common stock options to key
employees and 1,400,000 common stock options to an officer/employee. These
three-year options are exercisable at $.34 per share (the stock price at
the grant date) and vest immediately. Additionally, 60,000 shares of the
Company's common stock were issued to an officer/employee as additional
compensation.
F-45
<PAGE> 78
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TOUPS TECHNOLOGY LICENSING, INC.
By /s/ Leon H. Toups
-------------------------------------------
Leon H. Toups,
President and Chief Executive Officer
Each person whose signature appears below hereby constitutes and
appoints Leon H. Toups his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this report,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying all
that said attorney-in-fact and agent or his substitute or substitutes, or any of
them, may lawfully do or cause to be done by virtue hereof. In accordance with
the requirements of the Exchange Act, this report has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/Leon H. Toups President, Chief Executive Officer
- --------------------------- (Principal Executive Officer) and Chairman of
Leon H. Toups the Board of Directors May 12, 2000
/s/ Michael P. Toups Chief Financial Officer (Principal Financial
- --------------------------- Officer) and Director May 12, 2000
Michael P. Toups
/s/ Mark Clancy Executive Vice President, Secretary and
- --------------------------- Director May 12, 2000
Mark Clancy
/s/ Phillip Rappa Vice President of Operations, General Manager
- --------------------------- and Director May 12, 2000
Phillip Rappa
/s/ Errol J. Lasseigne Director May 12, 2000
- ---------------------------
Errol J. Lasseigne
/s/ Leslie D. Reagin III Director May 12, 2000
- ---------------------------
Leslie D. Reagin III
</TABLE>
-31-
<PAGE> 1
Exhibit 3.3
FILED
99 MAR 30 PM 1:59
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
TOUPS TECHNOLOGY LICENSING,INCORPORATED
- --------------------------------------------------------------------------------
Pursuant to Section 607.1006 of the
Florida Business Corporation Act
- --------------------------------------------------------------------------------
Toups Technology Licensing,Incorporated, a corporation organized and
existing under the Florida Business Corporation Act (the "Corporation"), hereby
certifies that the following amendment was adopted by the Board of Directors of
the Corporation on March 29, 1999 pursuant to authority of the Board of
Directors as required by Section 607.0602 of the Florida Business Corporation
Act, and accordingly, pursuant to Section 607.1006 of the Florida Business
Corporation Act, the Corporation adopts the following articles of amendment to
articles of incorporation:
FIRST: pursuant to the authority granted to and vested in the Board
of Directors of this Corporation (the "Board of Directors" or the "Board") in
accordance with the provisions of its Articles of Incorporation and Section
607.0602 of the Florida Business Corporation Act, the Board of Directors hereby
authorizes a series of the Corporation's previously authorized Preferred Stock,
par value $1.00 per share (the "Preferred Stock"), and hereby states the
designation and number of shares, and fixes the relative rights, preferences,
privileges, powers and restrictions thereof by amending "Article III-Capital
Stock" of the Corporation's Articles of Incorporation by appending the following
(the "Designation Articles"):
Series A 7% Convertible Preferred Stock:
ARTICLE 1
DEFINITIONS
The terms defined in this Article whenever used in these Designation
Articles have the following respective meanings:
(a) "Additional Capital Shares" has the meaning set forth in Section
6.1(c).
(b) "Affiliate" has the meaning ascribed to such term in Rule 12b-2
tinder the Securities Exchange Act of 1934, as amended.
(c) "Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
(d) "Capital Shares" means the Common Shares and any other shares of
any other class or series of common stock, whether now or hereafter authorized
and however designated, which have the right to participate in the distribution
of earnings and assets (upon dissolution, liquidation or winding up) of the
Corporation.
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(a) "Closing Date" means March 30, 1999.
(1) "Common Shares" or "Common Stock" means shares of Common Stock,
par value $0.001 per share, of the Corporation.
(g) "Common Stock Issued at Conversion" when used with reference to
the securities issuable upon conversion of the Series A Preferred Stock, means
all Common Shares now or hereafter Outstanding and securities of any other class
or series into which the Series A Preferred Stock hereafter shall have been
changed or substituted, whether now or hereafter created and however designated.
(h) "Conversion Date" means any day on which all or any portion of
shares of the Series A Preferred Stock is converted in accordance with the
provisions hereof.
(i) "Conversion Notice" has the meaning set forth in Section 6.2.
(j) "Conversion Price" means on any date of determination the
applicable price for the conversion of shares of Series A Preferred Stock into
Common Shares on such day as set forth in Section 6.1.
(k) "Conversion Ratio" means on any date of determination the
applicable percentage of the Market Price for conversion of shares of Series A
Preferred Stock into Common Shares on such day as set forth in Section 6.1.
(l) "Corporation" means Toups Technology Licensing Incorporated, a
Florida corporation, and any successor or resulting corporation by way of
merger, consolidation, sale or exchange of all or substantially all of the
Corporation's assets, or otherwise.
(m) "Current Market Price" means on any date of determination the
closing bid price of a Common Share on such day as reported on the OTC Bulletin
Board service of the National Association of Security Dealers, Inc. ("OTCBB").
(n) "Default Dividend Rate" shall be equal to the Preferred Stock
Dividend Rate plus an additional 10% per annum.
(o) "Holder" means The Shaar Fund Ltd, any successor thereto, or any
Person or Persons to whom the Series A Preferred Stock is subsequently
transferred in accordance with the provisions hereof.
(p) "Market Disruption Event" means any event that results in a
material suspension or limitation of trading of the Common Shares on OTCBB or
generally on the OTCBB SmallCap Market.
(q) "Market Price" per Common Share means the arithmetic mean of any
two closing bid prices of the Common Shares as reported on OTCBB for two Trading
Days during any Valuation Period, it being understood that such two Trading Days
during any Valuation Period need not be consecutive.
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(r) "Outstanding" when used with reference to Common Shares or
Capital Shares (collectively, "Shares"), means, on any date of determination,
all issued and outstanding Shares, and includes all such Shares issuable in
respect of outstanding scrip or any certificates representing fractional
interests in such Shares; provided, however, that any such Shares directly or
indirectly owned or held by or for the account of the Corporation or any
Subsidiary of the Corporation shall not be deemed "Outstanding" for purposes
hereof.
(s) "Person" means an individual, a corporation, partnership, an
association, a limited liability company, unincorporated business organization,
a trust or other entity or organization, and any government or political
subdivision or any agency or instrumentality thereof.
(t) "Registration Rights Agreement" means that certain Registration
Rights Agreement dated a date even herewith between the Corporation and The
Shaar Fund Ltd.
(u) "SEC" means the United States Securities and Exchange
Commission.
(v) "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder, all as in effect at the
time.
(w) "Securities Purchase Agreement" means that certain Securities
Purchase Agreement dated a date even herewith between the Corporation and The
Shaar Fund Ltd.
(x) "Series A Preferred Shares" or "Series A Preferred Stock" means
shares of the Series A 7% Convertible Preferred Stock of the Corporation or such
other convertible Preferred Stock exchanged therefor.
(y) "Stated Value" has the meaning set forth in Article 2.
(z) "Subsidiary" means any entity of which securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are owned
directly or indirectly by the Corporation.
(aa) "Trading Day" means any day on which purchases and sales of
securities authorized for quotation on OTCBB are reported thereon and on which
no Market Disruption Event has occurred.
(bb) "Valuation Event" has the meaning set forth in Section 6.1.
(cc) "Valuation Period" means the twenty Trading Day period
immediately preceding the Conversion Date.
All references to "cash" or "$" herein means currency of the United
States of America.
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<PAGE> 4
ARTICLE 2
DESIGNATION AND AMOUNT
The designation of this series, which consists of 1,000 shares of
Preferred Stock, is Series A 7% Convertible Preferred Stock (the "Series A
Preferred Stock") and the stated value shall be $1,000 per share (the "Stated
Value").
ARTICLE 3
RANK
The Series A Preferred Stock shall rank: (i) prior to the Common
Stock; (ii) prior to any class or series of capital stock of the Corporation
hereafter created other than "Pari Passu Securities" (collectively, with the
Common Stock, "Junior Securities"); and (iii) pari passu with any class or
series of capital stock of the Corporation hereafter created specifically
ranking on parity with the Series A Preferred Stock ("Pari Passu Securities").
ARTICLE 4
DIVIDENDS
(a) (i) The Holder shall be entitled to receive, when, as and
if declared by the Board of Directors, out of funds legally available for
the payment of dividends, dividends (subject to Article 4(a)(ii) hereof)
at the rate of 7% per annum (computed on the basis of a 360-day year) (the
"Dividend Rate") on the Liquidation Value (as defined below) of each share
of Series A Preferred Stock on and as of the most recent Dividend Payment
Due Date (as defined below) with respect to each Dividend Period (as
defined below). Dividends on the Series A Preferred Stock shall be
cumulative from the date of issue, whether or not declared for any reason,
including if such declaration is prohibited under any outstanding
indebtedness or borrowings of the Corporation or any of its Subsidiaries,
or any other contractual provision binding on the Corporation or any of
its Subsidiaries, and whether or not there shall be funds legally
available for the payment thereof.
(ii) Each dividend shall be payable in equal quarterly amounts
on each March 31, June 30, September 30 and December 31 of each year
(each, a "Dividend Payment Due Date"), commencing June 30, 1999, to the
holders of record of shares of the Series A Preferred Stock, as they
appear on the stock records of the Corporation at the close of business on
any record date, not more than 60 days or less than 10 days preceding the
payment dates thereof, as shall be fixed by the Board of Directors. For
the purposes hereof, "Dividend Period" means the quarterly period
commencing on and including the Issue Date (as defined below) or, if a
dividend has previously been paid, the day after the immediately preceding
Dividend Payment Due Date and ending on and including the immediately
subsequent Dividend Payment Due Date. Accrued and unpaid dividends for any
past Dividend Period may be declared and paid at any time, without
reference to any Dividend Payment Due Date, to holders of record on such
date, not more than 15 days preceding the payment date thereof, as may be
fixed by the Board of Directors.
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(iii) At the option of the Corporation, the dividend shall be
paid in cash or through the issuance of duly and validly authorized and
issued, fully paid and nonassessable, freely tradeable shares of the
Common Stock valued at the Market Price. The Common Stock to be issued in
lieu of cash payments shall be registered for resale in the Registration
Statement (as defined in the Registration Rights Agreement) to be filed by
the Corporation to register the Common Stock issuable upon conversion of
the shares of Series A Preferred Stock and exercise of the Warrants as set
forth in the Registration Rights Agreement. Notwithstanding the foregoing,
until such Registration Statement (as defined in the Registration Rights
Agreement) has been declared effective under the Securities Act by the
SEC, payment of dividends on the Series A Preferred Stock shall be in
cash.
(b) The Holder shall not be entitled to any dividends in excess of
the cumulative dividends, as herein provided, on the Series A Preferred Stock.
Except as provided in this Article 4, no interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on the
Series A Preferred Stock that may be in arrears.
(c) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment on Pari Passu Securities for
any period unless full cumulative dividends required to be paid in cash have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series A Preferred
Stock for all Dividend Periods terminating on or prior to the date of payment of
the dividend on such class or series of Pari Passu Securities. When dividends
are not paid in full or a sum sufficient for such payment is not set apart, as
aforesaid, all dividends declared upon shares of the Series A Preferred Stock
and all dividends declared upon any other class or series of Pari Passu
Securities shall be declared ratably in proportion to the respective amounts of
dividends accumulated and unpaid on the Series A Preferred Stock and accumulated
and unpaid on such Pari Passu Securities.
(d) So long as any shares of the Series A Preferred Stock are
outstanding, no dividends shall be declared or paid or set apart for payment or
other distribution declared or made upon Junior Securities, nor shall any Junior
Securities be redeemed, purchased or otherwise acquired (other than a
redemption, purchase or other acquisition of shares of Common Stock made for
purposes of an employee incentive or benefit plan (including a stock option
plan) of the Corporation or any subsidiary), (all such dividends, distributions,
redemptions or purchases being hereinafter referred to as a "Junior Securities
Distribution") for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such stock) by the
Corporation, directly or indirectly, unless in each case (i) the full cumulative
dividends required to be paid in cash on all outstanding shares of the Series A
Preferred Stock and any other Pari Passu Securities shall have been paid or set
apart for payment for all past Dividend Periods with respect to the Series A
Preferred Stock and all past dividend periods with respect to such Pari Passu
Securities, and (ii) sufficient funds shall have been paid or set apart for the
payment of the dividend for the current Dividend Period with respect to the
Series A Preferred Stock and the current dividend period with respect to such
Pari Passu Securities.
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<PAGE> 6
ARTICLE 5
LIQUIDATION PREFERENCE
(a) If the Corporation shall commence a voluntary case under the
Federal bankruptcy laws or any other applicable Federal or State bankruptcy,
insolvency or similar law, or consent to the entry of an order for relief in an
involuntary case under any law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Corporation or of any substantial part of its property, or make an assignment
for the benefit of its creditors, or admit in writing its inability to pay its
debts generally as they become due, or if a decree or order for relief in
respect of the Corporation shall be entered by a court having jurisdiction in
the premises in an involuntary case under the Federal bankruptcy laws or any
other applicable Federal or State bankruptcy, insolvency or similar law
resulting in the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and any such decree or order shall be unstayed and in effect for a
period of 30 consecutive days and, on account of any such event, the Corporation
shall liquidate, dissolve or wind up, or if the Corporation shall otherwise
liquidate, dissolve or wind up (each such event being considered a "Liquidation
Event"), no distribution shall be made to the holders of any shares of capital
stock of the Corporation upon liquidation, dissolution or winding up unless
prior thereto, the holders of shares of Series A Preferred Stock, subject to
this Article 5, shall have received the Liquidation Preference (as defined in
Article 5(c)) with respect to each share. If upon the occurrence of a
Liquidation Event, the assets and funds available for distribution among the
holders of the Series A Preferred Stock and holders of Pari Passu Securities
shall be insufficient to permit the payment to such holders of the preferential
amounts payable thereon, then the entire assets and funds of the Corporation
legally available for distribution to the Series A Preferred Stock and the Pari
Passu Securities shall be distributed ratably among such shares in proportion to
the ratio that the Liquidation Preference payable on each such share bears to
the aggregate Liquidation Preference payable on all such shares.
(b) At the option of each Holder, the sale, conveyance of
disposition of all or substantially all of the assets of the Corporation, the
effectuation by the Corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the Corporation is
disposed of, or the consolidation, merger or other business combination of the
Corporation with or into any other Person or Persons when the Corporation is not
the survivor shall either: (i) be deemed to be a liquidation, dissolution or
winding up of the Corporation pursuant to which the Corporation shall be
required to distribute, upon consummation of and as a condition to, such
transaction an amount equal to 120% of the Liquidation Preference with respect
to each outstanding share of Series A Preferred Stock in accordance with and
subject to the terms of this Article 5 or (ii) be treated pursuant to Article
5(c)(iii) hereof; provided, that all holders of Series A Preferred Stock shall
be deemed to elect the option set forth in clause (i) hereof if at least a
majority in interest of such holders elect such option.
(c) For purposes hereof, the "Liquidation Preference" with respect
to a share of the Series A Preferred Stock shall mean an amount equal to the sum
of (i) the Stated Value thereof, plus (ii) an amount equal to 30% of such Stated
Value, plus (iii) the aggregate of all accrued and unpaid dividends on such
share of Series A Preferred Stock until the most recent
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Dividend Payment Due Date; provided that, in the event of an actual liquidation,
dissolution or winding up of the Corporation, the amount referred to in clause
(iii) above shall be calculated by including accrued and unpaid dividends to the
actual date of such liquidation, dissolution or winding up, rather than the
Dividend Payment Due Date referred to above.
ARTICLE 6
CONVERSION OF PREFERRED STOCK
Section 6.1 Conversion; Conversion Price.
At the option of the Holder, the shares of Preferred Stock may be
converted, either in whole or in part, into Common Shares (calculated as to each
such conversion to the nearest 1/100th of a share), at any time, and from time
to time following the date of issuance of the Series A Preferred Stock (the
"Issue Date") at a Conversion Price per share of Common Stock equal to $2.10;
provided that any unconverted Series A Preferred Stock remaining 91 days after
the Closing Date may be converted, at the sole option of the Holder, at a
Conversion Price per share of Common Stock equal to the lesser of $2.10 and 85%
of the Market Price; provided, further, that any unconverted Series A Preferred
Stock remaining 120 days after the Closing Date may be converted, at the sole
option of the Holder, at a Conversion Price per share of Common Stock equal to
the lesser of $2.10 and 80% of the Market Price; provided, further, that any
unconverted Series A Preferred Stock remaining 150 days after the Closing Date
may be converted, at the sole option of the Holder, at a Conversion Price per
share of Common Stock equal to the lesser of $2.10 and 75% of the Market Price;
provided, further, that if the Corporation's Common Stock becomes ineligible for
trading on OTCBB, for any reason, then any remaining unconverted Series A
Preferred Stock may be converted, at the sole option of the Holder, at a
Conversion Price per share of Common Stock equal to 65% of the Market Price. At
the Corporation's option, the amount of accrued and unpaid dividends as of the
Conversion Date shall not be subject to conversion but instead may be paid in
cash as of the Conversion Date; if the Corporation elects to convert the amount
of accrued and unpaid dividends at the Conversion Date into Common Stock, the
Common Stock issued to the Holder shall be valued at the applicable Conversion
Price.
The number of shares of Common Stock due upon conversion of Series A
Preferred Stock shall be (i) the number of shares of Series A Preferred Stock to
be converted, multiplied by (ii) the Stated Value and divided by (iii) the
applicable Conversion Price; provided, however, that, if on the Conversion Date,
the Current Market Price per Common Share is greater than $2.00, the number of
shares of Common Stock due upon conversion at the applicable Conversion Price
may, at the sole option of the Holder, be increased by an additional number of
shares up to the number of shares of Common Stock due upon conversion as
calculated in accordance with clauses (i), (ii) and (iii) above.
Within two Business Days of the occurrence of a Valuation Event, the
Corporation shall send notice (the "Valuation Event Notice") of such occurrence
to the Holder. Notwithstanding anything to the contrary contained herein, if a
Valuation Event occurs during any Valuation Period, a new Valuation Period shall
begin on the Trading Day immediately following the occurrence of such Valuation
Event and end on the Conversion Date; provided that, if a Valuation Event occurs
on the fifth day of any Valuation Period, then the Conversion
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Price shall be the Current Market Price of the Common Shares on such day; and
provided, further, that the Holder may, in its discretion, postpone such
Conversion Date to a Trading Day which is no more than five Trading Days after
the occurrence of the latest Valuation Event by delivering a notification to the
Corporation within two Business Days of the receipt of the Valuation Event
Notice. In the event that the Holder deems the Valuation Period to be other than
the five Trading Days immediately prior to the Conversion Date, the Holder shall
give written notice of such fact to the Corporation in the related Conversion
Notice at the time of conversion.
For purposes of this Section 6.1, a "Valuation Event" shall mean an
event in which the Corporation at any time during a Valuation Period takes any
of the following actions:
(a) subdivides or combines its Capital Shares;
(b) makes any distribution on its Capital Shares;
(c) issues any additional Capital Shares (the "Additional Capital
Shares"), otherwise than as provided in the foregoing Sections 6.1(a) and 6.1(b)
above, at a price per share less, or for other consideration lower, than the
Current Market Price in effect immediately prior to such issuances, or without
consideration, except for issuances under employee benefit plans consistent with
those presently in effect and issuances under presently outstanding warrants,
options or convertible securities;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Current Market
Price in effect immediately prior to such issuance;
(e) issues any securities convertible into or exchangeable or
exercisable for Additional Capital Shares and the consideration per share for
which Additional Capital Shares may at any time thereafter be issuable pursuant
to the terms of such convertible, exchangeable or exercisable securities shall
be less than the Current Market Price in effect immediately prior to such
issuance;
(f) makes a distribution of its assets or evidences of indebtedness
to the holders of its Capital Shares as a dividend in liquidation or by way of
return of capital or other than as a dividend payable out of earnings or surplus
legally available for the payment of dividends under applicable law or any
distribution to such holders made in respect of the sale of all or substantially
all of the Corporation's assets (other than under the circumstances provided for
in the foregoing Sections 6.1(a) through 6.1(e)); or
(g) takes any action affecting the number of Outstanding Capital
Shares, other than an action described in any of the foregoing Sections 6.1(a)
through 6.1(f) hereof, inclusive, which in the opinion of the Corporation's
Board of Directors, determined in good faith, would have a material adverse
effect upon the rights of the Holder at the time of a conversion of the
Preferred Stock.
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Section 6.2 Exercise of Conversion Privilege.
(a) Conversion of the Series A Preferred Stock may be exercised, in
whole or in part, by the Holder by telecopying an executed and completed notice
of conversion in the form annexed hereto as Annex I (the "Conversion Notice") to
the Corporation. Each date on which a Conversion Notice is telecopied to the
Corporation in accordance with the provisions of this Section 6.2 shall
constitute a Conversion Date. The Corporation shall convert the Preferred Stock
and issue the Common Stock Issued at Conversion, and all voting and other rights
associated with the beneficial ownership of the Common Stock Issued at
Conversion shall vest with the Holder, effective as of the Conversion Date at
the time specified in the Conversion Notice. The Conversion Notice also shall
state the name or names (with addresses) of the persons who are to become the
holders of the Common Stock Issued at Conversion in connection with such
conversion. The Holder shall deliver the shares of Series A Preferred Stock to
the Corporation by express courier within 30 days following the date on which
the telecopied Conversion Notice has been transmitted to the Corporation. Upon
surrender for conversion, the Preferred Stock shall be accompanied by a proper
assignment thereof to the Corporation or be endorsed in blank. As promptly as
practicable after the receipt of the Conversion Notice as aforesaid, but in any
event not more than five Business Days after the Corporation's receipt of such
Conversion Notice, the Corporation shall (i) issue the Common Stock issued at
Conversion in accordance with the provisions of this Article 6, and (ii) cause
to be mailed for delivery by overnight courier to the Holder (x) a certificate
or certificate(s) representing the number of Common Shares to which the Holder
is entitled by virtue of such conversion, (y) cash, as provided in Section 6.3
in respect of any fraction of a Common Share issuable upon such conversion and
(z) cash in the amount of accrued and unpaid dividends as of the Conversion
Date. Such conversion shall be deemed to have been effected at the time at which
the Conversion Notice indicates so long as the Series A Preferred Stock shall
have been surrendered as aforesaid at such time, and at such time the rights of
the Holder of the Series A Preferred Stock, as such, shall cease and the Person
or Persons in whose name or names the Common Stock Issued at Conversion shall be
issuable shall be deemed to have become the holder or holders of record of the
Common Shares represented thereby and all voting and other rights associated
with the beneficial ownership of such Common Shares shall at such time vest with
such Person or Persons. The Conversion Notice shall constitute a contract
between the Holder and the Corporation, whereby the Holder shall be deemed to
subscribe for the number of Common Shares which it will be entitled to receive
upon such conversion and, in payment and satisfaction of such subscription (and
for any cash adjustment to which it is entitled pursuant to Section 6.4), to
surrender the Series A Preferred Stock and to release the Corporation from all
liability thereon. No cash payment aggregating less than $1.00 shall be required
to be given unless specifically requested by the Holder.
(b) If, at any time (i) the Corporation challenges, disputes or
denies the right of the Holder to effect the conversion of the Series A
Preferred Stock into Common Shares or otherwise dishonors or rejects any
Conversion Notice delivered in accordance with this Section 6.2 or (ii) any
third party who is not and has never been an Affiliate of the Holder commences
any lawsuit or proceeding or otherwise asserts any claim before any court or
public or governmental authority which seeks to challenge, deny, enjoin, limit,
modify, delay or dispute the right of the Holder hereof to effect the conversion
of the Series A Preferred Stock into Common Shares, then the Holder shall have
the right, by written notice to the Corporation, to
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require the Corporation to promptly redeem the Series A Preferred Stock for cash
at a redemption price equal to 125% of the Stated Value thereof together with
all accrued and unpaid dividends thereon (the "Mandatory Purchase Amount").
Under any of the circumstances set forth above, the Corporation shall be
responsible for the payment of all costs and expenses of the Holder, including
reasonable legal fees and expenses, as and when incurred in disputing any such
action or pursuing its rights hereunder (in addition to any other rights of the
Holder).
Section 6.3 Fractional Shares.
No fractional Common Shares or scrip representing fractional Common
Shares shall be issued upon conversion of the Series A Preferred Stock. Instead
of any fractional Common Shares which otherwise would be issuable upon
conversion of the Series A Preferred Stock, the Corporation shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction.
No cash payment of less than $1.00 shall be required to be given unless
specifically requested by the Holder.
Section 6.4 Reclassification, Consolidation, Merger or Mandatory
Share Exchange.
At any time while the Series A Preferred Stock remains outstanding
and any shares thereof have not been converted, in case of any reclassification
or change of Outstanding Common Shares issuable upon conversion of the Series A
Preferred Stock (other than a change in par value, or from par value to no par
value per share, or from no par value per share to par value or as a result of a
subdivision or combination of outstanding securities issuable upon conversion of
the Series A Preferred Stock) or in case of any consolidation, merger or
mandatory share exchange of the Corporation with or into another corporation
(other than a merger or mandatory share exchange with another corporation in
which the Corporation is a continuing corporation and which does not result in
any reclassification or change, other than a change in par value, or from par
value to no par value per share, or from no par value per share to par value, or
as a result of a subdivision or combination of Outstanding Common Shares upon
conversion of the Series A Preferred Stock), or in the case of any sale or
transfer to another corporation of the property of the Corporation as an
entirety or substantially as an entirety, the Corporation, or such successor,
resulting or purchasing corporation, as the case may be, shall, without benefit
of any additional consideration therefor, execute a new Preferred Stock
providing that the Holder shall have the right to convert such new Preferred
Stock (upon terms and conditions not less favorable to the Holder than those in
effect pursuant to the Series A Preferred Stock) and to receive upon such
exercise, in lieu of each Common Share theretofore issuable upon conversion of
the Series A Preferred Stock, the kind and amount of shares of stock, other
securities, money or property receivable upon such reclassification, change,
consolidation, merger, mandatory share exchange, sale or transfer by the holder
of one Common Share issuable upon conversion of the Series A Preferred Stock had
the Series A Preferred Stock been converted immediately prior to such
reclassification, change, consolidation, merger, mandatory share exchange or
sale or transfer. The provisions of this Section 6.4 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, mandatory share
exchanges and sales and transfers.
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Section 6.5 Adjustments to Conversion Ratio.
For so long as any shares of the Series A Preferred Stock are
outstanding, if the Corporation: (i) issues and sells pursuant to an exemption
from registration under the Securities Act (A) Common Shares at a purchase price
on the date of issuance thereof that is lower than the Conversion Price, (B)
warrants or options with an exercise price representing a percentage of the
Current Market Price with an exercise price on the date of issuance of the
warrants or options that is lower than the agreed upon exercise price for the
Holder, except for employee stock option agreements or stock incentive
agreements of the Corporation, or (C) convertible, exchangeable or exercisable
securities with a right to exchange at lower than the Current Market Price on
the date of issuance or conversion, as applicable, of such convertible,
exchangeable or exercisable securities, except for stock option agreements or
stock incentive agreements; and (ii) grants the right to the purchaser(s)
thereof to demand that the Corporation register under the Securities Act such
Common Shares issued or the Common Shares for which such warrants or options may
be exercised or such convertible, exchangeable or exercisable securities may be
converted, exchanged or exercised, then the Conversion Ratio shall be reduced to
equal the lowest of any such lower rates.
Section 6.6 Optional Redemption Under Certain Circumstances.
At anytime after the date of issuance of the Series A Preferred
Stock until the Mandatory Conversion Date (as defined below), the Corporation,
upon notice delivered to the Holder as provided in Section 6.7, may redeem, in
cash, the Series A Preferred Stock (but only with respect to such shares as to
which the Holder has not theretofore furnished a Conversion Notice in compliance
with Section 6.2), at 125% of the Stated Value thereof (the "Optional Redemption
Price"), together with all accrued and unpaid dividends thereon to the date of
redemption (the "Redemption Date"); provided, however, that the Corporation may
only redeem the Series A Preferred Stock under this Section 6.6 if the Current
Market Price is less than the Current Market Price on the Closing Date. Except
as set forth in this Section 6.6, the Corporation shall not have the right to
prepay or redeem the Series A Preferred Stock.
Section 6.7 Notice of Redemption.
Notice of redemption pursuant to Section 6.6 shall be provided by
the Corporation to the Holder in writing (by registered mail or overnight
courier at the Holder's last address appearing in the Corporation's security
registry) not less than 10 nor more than 15 days prior to the Redemption Date,
which notice shall specify the Redemption Date and refer to Section 6.6
(including a statement of the Market Price per Common Share) and this Section
6.7.
Section 6.8 Surrender of Preferred Stock.
Upon any redemption of the Series A Preferred Stock pursuant to
Sections 6.6 or 6.7, the Holder shall either deliver the Series A Preferred
Stock by hand to the Corporation at its principal executive offices or surrender
the same to the Corporation at such address by express courier. Payment of the
optional Redemption Price specified in Section 6.6 shall be made by the
Corporation to the Holder against receipt of the Series A Preferred Stock (as
provided in this Section 6.8) by wire transfer of immediately available funds to
such account(s) as the Holder
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<PAGE> 12
shall specify to the Corporation. If payment of such redemption price is not
made in full by the Mandatory Redemption Date or the Redemption Date, as the
case may be, the Holder shall again have the right to convert the Series A
Preferred Stock as provided in Article 6 hereof.
Section 6.9 Mandatory Conversion.
On the third anniversary of the date of this Agreement (the
"Mandatory Conversion Date"), the Corporation shall convert all Series A
Preferred Stock outstanding at the Conversion Price.
Section 6.10 Certain Conversion Limitations.
(a) Notwithstanding anything herein to the contrary, the Holder
shall not have the right, and the Corporation shall not have the obligation, to
convert all or any portion of the Series A Preferred Stock (and the Corporation
shall not have the right to pay dividends on the Series A Preferred Stock in
shares of Common Stock) if and to the extent that the issuance to the Holder of
shares of Common Stock upon such conversion (or payment of dividends) would
result in the Holder being deemed the "beneficial owner" of more than 5% of the
then outstanding shares of Common Stock within the meaning of Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder. If any court of competent jurisdiction shall determine that the
foregoing limitation is ineffective to prevent a Holder from being deemed the
beneficial owner of more than 5% of the then outstanding shares of Common Stock,
then the Corporation shall redeem so many of such Holder's shares (the
"Redemption Shares") of Series A Preferred Stock as are necessary to cause such
Holder to be deemed the beneficial owner of not more than 5% of the then
outstanding shares of Common Stock. Upon such determination by a court of
competent jurisdiction, the Redemption Shares shall immediately and without
further action be deemed returned to the status of authorized but unissued
shares of Series A Preferred Stock and the Holder shall have no interest in or
rights under such Redemption Shares. Any and all dividends paid on or prior to
the date of such determination shall be deemed dividends paid on the remaining
shares of Series A Preferred Stock held by the Holder. Such redemption shall be
for cash at a redemption price equal to the sum of (i) the Stated Value of the
Redemption Shares and (ii) any accrued and unpaid dividends to the date of such
redemption; provided, however, if the redemption is a result of the mandatory
conversion pursuant to Section 6.9, the Corporation may either (i) make such
redemption in cash at a redemption price equal to the sum of (x) 135% of the
Stated Value of such shares and (y) any accrued and unpaid dividends to the date
of such redemption or (ii) extend the Mandatory Conversion Date for a period of
one year.
(b) Unless the Corporation shall have obtained the approval of its
voting stockholders to such issuance in accordance with the rules of the OTCBB
or such other stock market with which the Corporation shall be required to
comply, but only to the extent required thereby, the Corporation shall not issue
shares of Common Stock (i) upon conversion of any shares of Series A Preferred
Stock or (ii) as a dividend on the Series A Preferred Stock, if such issuance of
Common Stock, when added to the number of shares of Common Stock previously
issued by the Corporation (i) upon conversion of shares of the Series A
Preferred Stock, (ii) upon exercise of the Warrants issued pursuant to the terms
of the Securities Purchase Agreement and (iii) in payment of dividends on the
Series A Preferred Stock, would equal or exceed 20% of the
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<PAGE> 13
number of shares of the Corporation's Common Stock which were issued and
outstanding on the Closing Date (the "Maximum Issuance Amount"). In the event
that a properly executed Conversion Notice is received by the Corporation which
would require the Corporation to issue shares of Common Stock equal to or in
excess of the Maximum Issuance Amount, the Corporation shall honor such
conversion request by (i) converting the number of shares of Series A Preferred
Stock stated in the Conversion Notice not in excess of the Maximum Issuance
Amount and (ii) redeeming the number of shares of Series A Preferred Stock
stated in the Conversion Notice equal to or in excess of the Maximum Issuance
Amount in cash at a price equal to 125% of the Stated Value of the shares of
Series A Preferred Stock to be so redeemed, together with all accrued and unpaid
dividends thereon. In the event that the Corporation shall elect to pay a
dividend in shares of Common Stock which would require the Corporation to issue
shares of Common Stock equal to or in excess of the Maximum Issuance Amount, the
Corporation shall pay (i) a dividend in shares of Common Stock equal to one less
than an amount which would result in the Corporation issuing shares equal to the
Maximum Issuance Amount and (ii) the balance of the dividend in cash.
ARTICLE 7
VOTING RIGHTS
The holders of the Series A Preferred Stock have no voting power,
except as otherwise provided by the Florida Business Corporation Act ("FBCA"),
in this Article 7, and in Article 8 below.
Notwithstanding the above, the Corporation shall provide each Holder
of Series A Preferred Stock with prior notification of any meeting of the
shareholders (and copies of proxy materials and other information sent to
shareholders). In the event of any taking by the Corporation of a record of its
shareholders for the purpose of determining shareholders who are entitled to
receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire (including by way of consolidation or
recapitalization) any share of any class or any other securities or property, or
to receive any other right, or for the purpose of determining shareholders who
are entitled to vote in connection with any proposed liquidation, dissolution or
winding up of the Corporation, the Corporation shall mail a notice to each
Holder, at least 30 days prior to the consummation of the transaction or event,
whichever is earlier), of the date on which any such action is to be taken for
the purpose of such dividend, distribution, right or other event, and a brief
statement regarding, the amount and character of such dividend, distribution,
right or other event to the extent known at such time.
To the extent that under the FBCA the vote of the Holders of the
Series A Preferred Stock, voting separately as a class or series as applicable,
is required to authorize a given action of the Corporation, the affirmative vote
or consent of the Holders of at least a majority of the outstanding shares of
the Series A Preferred Stock represented at a duly held meeting at which a
quorum is present or by written consent of a majority of the outstanding shares
of Series A Preferred Stock (except as otherwise may be required under the FBCA)
shall constitute the approval of such action by the class. To the extent that
under the FBCA holders of the Series A Preferred Stock are entitled to vote on a
matter with holders of Common Stock, voting together as one class, each share of
Series A Preferred Stock shall be entitled to a number of votes equal to the
number of shares of Common Stock into which it is then convertible using
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<PAGE> 14
the record date for the taking of such vote of shareholders as the date as of
which the Conversion Price is calculated. Holders of the Series A Preferred
Stock shall be entitled to notice of all shareholder meetings or written
consents (and copies of proxy materials and other information sent to
shareholders) with respect to which they would be entitled to vote, which notice
would be provided pursuant to the Corporation's bylaws and the FBCA.
ARTICLE 8
PROTECTIVE PROVISIONS
So long as shares of Series A Preferred Stock are outstanding, the
Corporation shall not, without first obtaining the approval (by vote or written
consent, as provided by the FBCA) of the Holders of at least a majority of the
then outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or privileges of the
Series A Preferred Stock;
(b) create any new class or series of capital stock having a
preference over the Series A Preferred Stock as to distribution of assets upon
liquidation, dissolution or winding up of the Corporation ("Senior Securities")
or alter or change the rights, preferences or privileges of any Senior
Securities so as to affect adversely the Series A Preferred Stock;
(c) increase the authorized number of shares of Series A Preferred
Stock; or
(d) do any act or thing not authorized or contemplated by these
Designation Articles which would result in taxation of the holders of shares of
the Series A Preferred Stock under Section 305 of the Internal Revenue Code of
1986, as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
In the event Holder's of least a majority of the then outstanding
shares of Series A Preferred Stock agree to allow the Corporation to alter or
change the rights, preferences or privileges of the shares of Series A Preferred
Stock, pursuant to subsection (a) above, so as to affect the Series A Preferred
Stock, then the Corporation will deliver notice of such approved change to the
Holders of the Series A Preferred Stock that did not agree to such alteration or
change (the "Dissenting Holders") and Dissenting Holders shall have the right
for a period of 30 days to convert pursuant to the terms of these Designation
Articles as they exist prior to such alteration or change or continue to hold
their shares of Series A Preferred Stock.
ARTICLE 9
MISCELLANEOUS
Section 9.1 Loss, Theft, Destruction of Property Preferred Stock.
Upon receipt of evidence satisfactory to the Corporation of the
loss, theft, destruction or mutilation of shares of Series A Preferred Stock
and, in the case of any such loss, theft or destruction, upon receipt of
indemnity or security reasonably satisfactory to the Corporation, or, in the
case of any such mutilation, upon surrender and cancellation of the Series
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<PAGE> 15
A Preferred Stock, the Corporation shall make, issue and deliver, in lieu of
such lost, stolen, destroyed or mutilated shares of Series A Preferred Stock,
new shares of Series A Preferred Stock of like tenor. The Series A Preferred
Stock shall be held and owned upon the express condition that the provisions of
this Section 9.1 are exclusive with respect to the replacement of mutilated,
destroyed, lost or stolen shares of Series A Preferred Stock and shall preclude
any and all other rights and remedies notwithstanding any law or statute
existing or hereafter enacted to the contrary with respect to the replacement of
negotiable instruments or other securities without the surrender thereof.
Section 9.2 Who Deemed Absolute Owner.
The Corporation may deem the Person in whose name the Series A
Preferred Stock shall be registered upon the registry books of the Corporation
to be, and may treat it as, the absolute owner of the Series A Preferred Stock
for the purpose of receiving payment of dividends on the Series A Preferred
Stock, for the conversion of the Series A Preferred Stock and for other
purposes, and the Corporation shall not be affected by any notice to the
contrary. All such payments and such conversion shall be valid and effectual to
satisfy and discharge the liability upon the Series A Preferred Stock to the
extent of the sum or sums so paid or the conversion so made.
Section 9.3 Notice of Certain Events.
In the case of the occurrence of any event described in Sections
6.1, 6.6 or 6.7 of these Designation Articles, the Corporation shall cause to be
mailed to the Holder of the Series A Preferred Stock at its last address as it
appears in the Corporation's security registry, at least 20 days prior to the
applicable record, effective or expiration date hereinafter specified (or, if
such 20-days notice is not possible, at the earliest possible date prior to any
such record, effective or expiration date), a notice stating (x) the date on
which a record is to be taken for the purpose of such dividend, distribution,
issuance or granting of rights, options or warrants, or if a record is not to be
taken, the date as of which the Holders of record of Series A Preferred Stock to
be entitled to such dividend, distribution, issuance or granting of rights,
options or warrants are to be determination or the date on which such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and (y) the date as
of which it is expected that Holders of record of Series A Preferred Stock will
be entitled to exchange their shares for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale transfer,
dissolution, liquidation or winding up.
Section 9.4 Register.
The Corporation shall keep at its principal office a register in
which the Corporation shall provide for the distribution of the Series A
Preferred Stock. Upon any transfer of the Series A Preferred Stock in accordance
with the provisions hereof, the Corporation shall register such transfer on the
Series A Preferred Stock register.
Section 9.5 Withholding.
To the extent required by applicable law, the Corporation may
withhold amounts for or on account of any taxes imposed or levied by or on
behalf of any taxing authority in the
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<PAGE> 16
United States having jurisdiction over the Corporation from any payments made
pursuant to the Series A Preferred Stock.
Section 9.6 Headings.
The Headings of the Articles and Sections of these Designation
Articles are inserted for convenience only and do not constitute a part of these
Designation Articles.
SECOND The date of the foregoing amendment's adoption was March 29,
1999.
THIRD: The foregoing amendment was adopted by the Board of Directors
without shareholder approval and shareholder action was not required.
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<PAGE> 17
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be signed by its duly authorized officers on _______________, 1999.
TOUPS TECHNOLOGY LICENSING, Incorporated
By: /s/ Mark Clancy
-------------------------------------
Name: Mark Clancy
Title: Director
Executive Vice President
Corporate Secretary
17
<PAGE> 1
Exhibit 3.4
FILED
08 NOV 23 AM 10:01
SECRETARY OF STATE
TALLAHASSEE, FLORIDA
AMENDMENT TO THE ARTICLES OF INCORPORATION
OF TOUPS TECHNOLOGY LICENSING INCORPORATED
Pursuant to Florida ss.607.1001 and ss.607.1004, the Shareholders now
amend Articles of Incorporation of TOUPS TECHNOLOGY LICENSING INCORPORATED as
follows:
"Article III - Capital Stock is replaced in its entirety by the following:
ARTICLE III - CAPITAL STOCK
This Corporation is authorized to issue 50,000,000 (fifty-million) shares
of Common Stock having a par value of $0.001 (one, one-thousandth dollar) per
share which shares shall be and hereby are designated as "Common Shares".
Without action by the stockholders, any or all of the authorized shares may be
issued by the Corporation from time to time for such consideration as may be
fixed by the Board of Directors of this Corporation.
This Corporation is authorized to issue 10,000,000 (ten-million) shares of
Preferred Stock having a par value of $1.00 (one dollar) per share which shares
shall be and hereby are designated as "Preferred Shares." Without action by the
shareholders, any or all of the authorized Preferred Shares may be issued by the
Corporation from time to time for such consideration as may be fixed by the
Board of Directors of this Corporation.
Each of the Common Shares shall have one vote on all matters coming before
any meeting of the Shareholders or otherwise to be acted upon by Shareholders.
No holder of any shares or shares of any class of capital stock of the
Corporation shall have any preemptive right to subscribe for any shares of
capital stock of any class of the Corporation now or hereafter authorized or for
any security convertible into or carrying any optional rights to purchase or
subscribe for any shares of capital stock of any class of the Corporation now or
hereafter authorized.
No provision of these Articles of Incorporation shall be deemed to deny to
the Board of Directors the right, in its sole discretion, to grant to the holder
of shares of any class of capital stock or any other securities of the
Corporation now or hereafter authorized, at such prices and upon such other
terms and conditions as the Board of Directors, in its sole discretion, may fix.
Dividends respecting any shares of the Corporation's capital stock shall
be payable only out of earnings or assets of the Corporation legally available
for the payment of such dividends and only as and when declared by the Board of
Directors.
All remaining Articles of Incorporation of TOUPS TECHNOLOGY LICENSING
INCORPORATED remain unchanged."
Adopted at a Meeting of Shareholders held October 20, 1998.
--
/s/ Mark C. Clancy
- -----------------------------------
Mark C. Clancy, Corporate Secretary Corporate Seal
<PAGE> 1
Exhibit 4.1
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
TOUPS TECHNOLOGY LICENSING, INC.
WARRANT TO PURCHASE COMMON STOCK
Warrant No. 01 Number of Shares: 75,000
Date of Issuance: February 17, 1999
Toups Technology Licensing, Inc., a Florida corporation (the "Company"),
hereby certifies that, for value received, The Augustine Fund, L.P., and
permitted assigns, the registered holder hereof ("Holder"), is entitled, subject
to the terms set forth below, to purchase from the Company upon surrender of
this Warrant, at any time after the date hereof, but not after 5:00 P.M. New
York time on the Expiration Date (as defined herein) Seventy Five Thousand
(75,000) fully paid and nonassessable shares of Common Stock (as defined herein)
of the Company (each a "Warrant Share" and collectively the "Warrant Shares") at
a purchase price of U.S.$2.3375 per share (the "Exercise Price") in lawful money
of the United States. The number of Warrant Shares purchasable hereunder and the
Exercise Price are subject to adjustment as provided in Section 9 below.
Section 1.
(a) Definitions. The following words and terms used in this Warrant shall
have the following meanings:
"Common Stock" means (a) the Company's common stock and (b) any capital
stock into which such Common Stock shall have been changed or any capital stock
resulting from a reclassification of such Common Stock.
"Convertible Securities" mean any securities issued by the Company which
are convertible into or exchangeable for, directly or indirectly, shares of
Common Stock.
<PAGE> 2
"Expiration Date" means the date which is three (3) years from the date of
this Warrant or, if such date falls on a Saturday, Sunday or other day on which
banks are required or authorized to be closed in the City of New York or the
State of New York (a "Holiday"), the next preceding date that is not a Holiday.
"Market Price" means the closing bid price on the day prior to the date on
which the Exercise Form is delivered to the Company, as quoted on the National
Association of Securities Dealers' OTC Bulletin Board Market or such other
national securities exchange or market on which the Common Stock may then be
listed.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" shall mean the Securities Purchase
Agreement between the holder hereof (or its predecessor in interest) and the
Company for the purchase of this Warrant and the other Securities (as defined in
the Securities Purchase Agreement).
"Transfer" shall include any disposition of this Warrant or any Warrant
Shares, or of any interest in either thereof which would constitute a sale
thereof within the meaning of the Securities Act of 1933, as amended, or
applicable state securities laws.
"Warrant" shall mean this Warrant and all Warrants issued in exchange,
transfer or replacement of any thereof.
"Warrant Exercise Price" shall be U.S.$2.3375 per share.
(b) Other Definitional Provisions.
(i) Except as otherwise specified herein, all references herein (A) to the
Company shall be deemed to include the Company's successors; and (B) to any
applicable law defined or referred to herein, shall be deemed references to such
applicable law as the same may have been or may be amended or supplemented from
time to time.
(ii) When used in this Warrant, unless the otherwise specified in a
particular instance, the words "herein," "hereof," and "hereunder," and words of
similar import, shall refer to this Warrant as a whole and not to any provision
of this Warrant, and the words "Section," "Schedule," and "Exhibit" shall refer
to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise
specified.
(iii) Whenever the context so requires the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the Holder, as a whole or in part, at any time prior to 5:00 P.M.
New York Time on the Expiration Date. The rights represented by this Warrant may
be exercised by the Holder, as a whole or from time to time in part (except that
this Warrant shall not be exercisable as to a fractional share) by (i) delivery
of a written
2
<PAGE> 3
notice, in the form of the exercise form attached as Exhibit I hereto (an
"Exercise Form"), of the Holder's election to exercise this Warrant, which
notice shall specify the number of Warrant Shares to be purchased, (ii) payment
to the Company of an amount equal to the Warrant Exercise Price multiplied by
the number of Warrant Shares as to which the Warrant is being exercised (plus
any applicable issue or transfer taxes) in immediately available funds (either
by wire transfer or a certified or cashier's check drawn on a United States
bank), for the number of Warrant Shares as to which this Warrant shall have been
exercised, and (iii) the surrender of this Warrant, properly endorsed, at the
principal office of the Company (or at such other agency or office of the
Company as the Company may designate by notice to the Holder).
In addition, and notwithstanding anything to the contrary contained in
this Warrant, this Warrant may be exercised by presentation and surrender of
this Warrant to the Company in a cashless exercise, including a written
calculation of the number of Warrant Shares to be issued upon such exercise in
accordance with the terms hereof (a "Cashless Exercise"). In the event of a
Cashless Exercise, in lieu of paying the Exercise Price, the Holder shall
surrender this Warrant for, and the Company shall issue in respect thereof, the
number of Warrant Shares determined by multiplying the number of Warrant Shares
to which the Holder would otherwise be entitled by a fraction, the numerator of
which shall be the difference between the then current Market Price per share of
the Common Stock and the Exercise Price, and the denominator of which shall be
the then current Market Price per share of Common Stock.
The Warrant Shares so purchased shall be deemed to be issued to the Holder
or Holder's designees, as the record owner of such Warrant Shares, as of the
date on which this Warrant shall have been surrendered, the completed Exercise
Agreement shall have been delivered, and payment (or notice of an election to
effect a Cashless Exercise) shall have been made for such Warrant Shares as set
forth above.
In the event of any exercise of the rights represented by this Warrant in
compliance with this Section 2(a), a certificate or certificates for the Warrant
Shares so purchased, registered in the name of, or as directed by, the Holder,
shall be delivered to, or as directed by, the Holder within three (3) business
days after such rights shall have been so exercised.
(b) Unless this Warrant shall have expired or shall have been fully
exercised, the Company shall issue a new Warrant identical in all respects to
the Warrant exercised except (i) it shall represent rights to purchase the
number of Warrant Shares purchasable immediately prior to such exercise under
the Warrant exercised, less the number of Warrant Shares with respect to which
such Warrant is exercised, and (ii) the holder thereof shall be deemed to have
become the holder of record of such Warrant Shares immediately prior to the
close of business on the date on which the Warrant is surrendered and payment of
the amount due in respect of such exercise and any applicable taxes is made,
irrespective of the date of delivery of such share certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are properly closed, such person shall be deemed to have become
the holder of such Warrant Shares at the opening of business on the next
succeeding date on which the stock transfer books are open.
(c) In the case of any dispute with respect to an exercise, the Company
shall promptly issue such number of Warrant Shares as are not disputed in
accordance with this Section. If such dispute
3
<PAGE> 4
only involves the number of Warrant Shares receivable by the Holder under a
Cashless Exercise, the Company shall submit the disputed calculations to an
independent accounting firm of national standing via facsimile within two (2)
business days of receipt of the Exercise Form. The accountant shall audit the
calculations and notify the Company and the Holder of the results no later than
two (2) business days from the date it receives the disputed calculations. The
accountant's calculation shall be deemed conclusive absent manifest error. The
Company shall then issue the appropriate number of shares of Common Stock in
accordance with this Section.
Section 3. Covenants as to Common Stock. The Company covenants and agrees
that all Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable. The Company further covenants and agrees that during the
period within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized and reserved a sufficient number of
shares of Common Stock to provide for the exercise of the rights then
represented by this Warrant and that the par value of said shares will at all
times be less than or equal to the applicable Warrant Exercise Price.
Section 4. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any
permitted transfer involved in the issue or delivery of any certificates for
Warrant Shares in a name other than that of the registered holder hereof or upon
any permitted transfer of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder. No holder, as such, of
this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he or she is then entitled to receive upon the due exercise of this
Warrant. Notwithstanding the foregoing, the Company will provide the holder of
this Warrant with copies of the same notices and other information given to the
stockholders of the Company generally, contemporaneously with the giving thereof
to the stockholders.
Section 6. No Limitation on Corporate Action. No provisions of this
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 7. Representations of Holder. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment and not with a view to, or for sale in
connection with, any distribution hereof or of any of the shares of Common Stock
or other securities issuable upon the exercise thereof, and not with any present
intention of distributing any of the same. Upon exercise of this Warrant, the
holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the Warrant Shares so purchased are being
acquired solely for the holder's own account and not as a nominee for any other
4
<PAGE> 5
party, for investment, and not with a view toward distribution or resale. If
such holder cannot make such representations because they would be factually
incorrect, it shall be a condition to such holder's exercise of the Warrant that
the Company receive such other representations as the Company considers
reasonably necessary to assure the Company that the issuance of its securities
upon exercise of the Warrant shall not violate any United States or state
securities laws.
Section 8. Transfer; Opinions of Counsel; Restrictive Legends.
(a) The holder of this Warrant understands that (i) this Warrant and the
Warrant Shares have not been and are not being registered under the Securities
Act or any state securities laws (other than as described in the Securities
Purchase Agreement and the Registration Rights Agreement), and may not be
offered for sale, sold, assigned or transferred unless (a) subsequently
registered thereunder, or (b) pursuant to an exemption from such registration;
(ii) any sale of such securities made in reliance on Rule 144 promulgated under
the Securities Act may be made only in accordance with the terms of said Rule
and further, if said Rule is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the Securities
Act) may require compliance with some other exemption under the Securities Act
or the rules and regulations of the Securities and Exchange Commission
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities (other than as described in the
Securities Purchase Agreement and the Registration Rights Agreement) under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder.
Section 9. Adjustments.
(a) Reclassification and Reorganization. In case of any reclassification,
capital reorganization or other change of outstanding shares of the Common
Stock, or in case of any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock),
the Company shall cause effective provision to be made so that the Holder shall
have the right thereafter, by exercising this Warrant, to purchase the kind and
number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that
could have been purchased upon exercise of the Warrant immediately prior to such
reclassification, capital reorganization or other change, consolidation or
merger. Any such provision shall include provision for adjustments that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Section 9. The foregoing provisions shall similarly apply to successive
reclassifications, capital reorganizations and other changes of outstanding
shares of Common Stock and to successive consolidations or mergers. If the
consideration received by the holders of Common Stock is other than cash, the
value shall be as determined by the Board of Directors of the Company acting in
good faith.
(b) Dividends and Stock Splits. If and whenever the Company shall effect a
stock dividend, a stock split, a stock combination, or a reverse stock split of
the Common Stock, the number of Warrant Shares purchasable hereunder and the
Warrant Exercise Price shall be proportionately adjusted in the manner
determined by the Company's Board of Directors acting in good faith. The number
of shares,
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<PAGE> 6
as so adjusted, shall be rounded down to the nearest whole number and the
Warrant Exercise Price shall be rounded to the nearest cent.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen or destroyed, the Company shall, on receipt of an
indemnification undertaking reasonably satisfactory to the Company, issue a new
Warrant of like denomination and tenor as the Warrant so lost, stolen or
destroyed. In the event the holder hereof asserts such loss, theft or
destruction of this Warrant, the Company may require such holder to post a bond
issued by a surety reasonably satisfactory to the Company with respect to the
issuance of such new Warrant.
Section 11. Notice. Any notices required or permitted to be given under
the terms of this Warrant shall be sent by mail or delivered personally or by
courier and shall be effective five days after being placed in the mail, if
mailed, certified or registered, return receipt requested, or upon receipt, if
delivered personally or by courier or by facsimile, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:
If to the Company: Toups Technology Licensing, Inc.
7887 Bryan Dairy Road, Suite 105
Largo, Florida 33777
Telephone: 727.548.0918
Facsimile: 727.549.8138
Attention: Mr. Mark Clancy, Vice President
If to Holder, to it at the address set forth below Holder's signature on the
signature page of the Securities Purchase Agreement (Holder is defined therein
as the "Buyer"). Each party shall provide notice to the other party of any
change in address.
Section 12. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. This Warrant shall be governed by and interpreted under the laws
of the State of Delaware. Headings are for convenience only and shall not affect
the meaning or construction of any of the provisions hereof. This Warrant shall
be binding upon the Company and its successors and assigns and shall inure to
the benefit of the Holder and its successors and assigns. The Holder may not
assign this Warrant except in accordance with applicable federal and state
securities laws. The Holder shall immediately notify the Company with respect to
any permitted assignment of this Warrant.
Section 13. Date. The date of this Warrant is February 17, 1999. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 8 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.
[SIGNATURE PAGE FOLLOWS]
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<PAGE> 7
[SIGNATURE PAGE TO WARRANT #01 DATED FEBRUARY 17,1999
TOUPS TECHNOLOGY LICENSING, INC.
By: /s/ Mark Clancy
------------------------------------
Mr. Mark Clancy, Executive Vice
President
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<PAGE> 8
EXHIBIT I TO WARRANT
EXERCISE FORM TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS
WARRANT
TOUPS TECHNOLOGY LICENSING, INC.
The undersigned hereby exercises the right to purchase the number of
Warrant Shares covered by the Warrant attached hereto as specified below
according to the conditions thereof and herewith makes payment of U.S.
$___________ (unless effected by a Cashless Exercise in accordance with the
terms of the Warrant), the aggregate Warrant Exercise Price of such Warrant
Shares in full pursuant to the terms and conditions of the Warrant.
(i) The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained upon exercise of the Warrant, except under
circumstances that will not result in a violation of the 1933 Act or applicable
state securities laws.
(ii) The undersigned requests that the stock certificates for the Warrant
Shares be issued, and a Warrant representing any unexercised portion hereof be
issued, pursuant to the terms of the Warrant in the name of the Holder (or such
other person(s) indicated below) and delivered to the undersigned (or
designee(s)) at the address or addresses set forth below.
Dated:_____________, ________
HOLDER:_________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
Address:________________________________
________________________________
________________________________
Number of Warrant Shares
Being Purchased: ________________________
8
<PAGE> 1
Exhibit 4.2
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
DATE: FEBRUARY 17,1999
NOTE # A-01 U.S.$750,000.O0
TOUPS TECHNOLOGY LICENSING, INC.
SERIES 1999-A EIGHT PERCENT (8%) CONVERTIBLE NOTE DUE JANUARY 1,2002
THIS NOTE is one of a duly authorized issue of Notes (a "Note" or the
"Notes") of Toups Technology Licensing, Inc., a corporation duly organized and
validly existing under the laws of the State of Florida, U.S.A. (the "Company")
designated as its Series 1999-A Eight Percent (8%) Convertible Notes Due January
1, 2002, in an aggregate principal face value for all Notes of this Series
1999-A of One Million Five Hundred Thousand and no/100 United States Dollars
(US$1,500,000.00).
FOR VALUE RECEIVED, the Company promises to pay to THE AUGUSTINE FUND,
L.P., the registered holder hereof and its successors and assigns (the
"Holder"), the principal sum of Seven Hundred Fifty Thousan and no/l00 United
States Dollars ($750,000.00) on January 1, 2002 (the "Maturity Date"), and to
pay interest on the principal sum outstanding, at the rate of eight percent (8%)
per annum due and payable in quarterly installments in arrears, on March 31,
June 30, September 30, and December 31 of each year during the term of this
Note, with the first such payment to be made on June 30, 1999. Accrual of
interest on the outstanding principal amount, payable in cash or common stock of
the Company at the Company's option, shall commence on the date hereof and shall
continue until payment in full of the outstanding principal amount has been made
or duly provided for. The interest so payable will be paid to the person in
whose name this Note (or one or more predecessor Notes) is registered on the
records of the Company regarding registration and transfers of the Note (the
"Note Register"); provided, however, that the Company's
<PAGE> 2
obligation to a transferee of this Note arises only if such transfer, sale or
other disposition is made in accordance with the terms and conditions of that
Securities Purchase Agreement of even date herewith between the Company and The
Augustine Fund, L.P. (the "Securities Purchase Agreement").
The principal of, and interest on, this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts, at the address last appearing on
the Note Register of the Company as designated in writing by the Holder hereof
from time to time. The Company will pay the outstanding principal of and any and
all accrued and unpaid interest due upon this Note on the Maturity Date, less
any amounts required by law to be deducted or withheld, to the record Holder of
this Note as of the fifth business day (as defined in the Securities Purchase
Agreement) prior to the Maturity Date and addressed to such Holder at the last
address appearing on the Note Register. The forwarding of such funds shall
constitute a payment of outstanding principal and interest hereunder and shall
satisfy and discharge the liability for principal and interest on this Note to
the extent of the sum represented by such payment plus any amounts so deducted
or withheld. Except as herein provided, this Note may not be prepaid without the
prior written consent of the Holder.
This Note is subject to the following additional provisions:
1. Note Exchangeable. The Note is exchangeable commencing thirty (30) days
from the date hereof for an equal aggregate principal amount of Notes of
different authorized denominations, as requested by the Holder surrendering the
same, but not of denominations of less than Fifty Thousand United States Dollars
(US$50,000.00) without the Company's written consent. No service charge will be
made for such registration or transfer or exchange.
2. Withholding. The Company shall be entitled to withhold from all
payments of principal or interest pursuant to this Note any amounts required to
be withheld under the applicable provisions of the United States income tax or
other applicable laws at the time of such payments.
3. Transfer/Exchange of Note; Registered Holder; Opinion of Counsel;
Legend. This Note has been issued subject to investment representations of the
original purchaser hereof and may be transferred or exchanged only in compliance
with the Securities Act of 1933, as amended (the "1933 Act") and applicable
state securities laws. Prior to due presentment for transfer of this Note, the
Company and any agent of the Company may treat the person in whose name this
Note is duly registered on the Company's Note Register as the owner hereof for
the purpose of receiving payment as herein provided and for all other purposes,
whether or not his Note be overdue, and neither the Company nor any such agent
shall be affected or bound by notice to the contrary.
The Holder understands and acknowledges by its acceptance hereof that (i)
except as provided in the Securities Purchase Agreement and in that Registration
Rights Agreement attached as Exhibit C to the Securities Purchase Agreement (the
"Registration Rights Agreement"), both
2
<PAGE> 3
such documents incorporated herein by reference, this Note and the shares of
common stock in the Company issuable upon conversion thereof as herein provided
("Conversion Shares") have not been and are not being registered under the 1933
Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (a) subsequently registered thereunder, or (b)
the Holder shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, substance and scope to the Company, to the effect that the
securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration; (ii) any sale of
such securities made in reliance on Rule 144 promulgated under the 1933 Act may
be made only in accordance with the terms of said Rule and further, if said Rule
is not applicable, any resale of such securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 1933 Act) may require compliance
with some other regulation and/or exemption under the 1933 Act or the rules and
regulations of the United States Securities and Exchange Commission (the "SEC")
thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws (other than pursuant to the terms of the Securities Purchase
Agreement and the Registration Rights Agreement) or to comply with the terms and
conditions of any exemption thereunder.
Any Conversion Shares issued upon conversion of this Note, and if
applicable, any common stock of the Company issued in payment of interest as
herein provided, shall, if and only to the extent required by law, bear legends
in similar form to the legends set forth on the first page of this Note.
4. Conversion of Note into Common Stock; Redemption by the Company.
(a) The Holder of this Note is entitled, at its option, at any time
commencing the earlier of (i) the date on which the Registration Statement (as
defined in the Securities Purchase Agreement) is declared effective by the SEC;
or (ii) the date which is ninety (90) days after the date first written at the
top of this Note, to convert all or a portion of the original principal face
amount of this Note into shares of common stock in the Company, $.001 par value
per share (defined hereinafter as the "Common Stock"), at a conversion price
(the "Conversion Price") for each share of Common Stock equal to the lesser of
(x) one hundred percent (100%) of the lowest of the closing bid prices for the
Common Stock for the five (5) trading days immediately preceding the Closing
Date (defined as the date of this Note); or (y) eighty percent (80%) of the
lowest of the closing bid prices for the Common Stock for the five (5) trading
days immediately preceding the Conversion Date (as hereinafter defined), as
reported on the National Association of Securities Dealers QTC Bulletin Board
Market (or on such other national securities exchange or market as the Common
Stock may trade at such time). Such conversion shall be achieved by submitting
to the Company the fully completed form of conversion notice attached hereto as
Exhibit I (a "Notice of Conversion"), executed by the Holder of this Note
evidencing such Holder's intention to convert this Note or the specified portion
(as herein provided) hereof. A Notice of Conversion may be submitted via
facsimile to the Company at the telecopier number for the Company provided in
the Securities Purchase Agreement (or at such other number as requested in
advance of such
3
<PAGE> 4
conversion in writing by the Company), and if so submitted the original Notice
of Conversion shall be delivered to the Company within two (2) business days.
The Company and the Holder shall each keep records with respect to the portion
of this Note then being converted and all portions previously converted; upon
receipt by the Holder of the requisite Conversion Shares, the outstanding
principal amount of the Note shall be reduced by the amount specified in the
Notice of Conversion resulting in such Conversion Shares. The Company may from
time to time, but is not required to, instruct the Holder and the Holder shall
surrender this Note along with the Notice of Conversion for the purposes of
making a notation thereon as to the amount of principal being converted, or of
canceling this Note and issuing a new Note in the same form with the principal
amount of such Note reduced by the amount converted. Such new or notated Note
shall be delivered to the Holder within three (3) business days after such
Holder's surrender to the Company. No fractional shares or scrip representing
fractions of shares will be issued on conversion, but the number of shares
issuable shall be rounded to the nearest whole share. Accrued interest on the
converted portion of the Note shall be payable upon conversion thereof, in cash
or Common Stock at the Conversion Price, at the Company's option. The date on
which a notice of conversion is given (the "Conversion Date") shall be deemed to
be either the date on which the Company receives from the Holder an original
Notice of Conversion duly executed, or, if earlier, the date set forth in such
Notice of Conversion if the original Notice of Conversion is received by the
Company within two (2) business days thereafter.
In all cases, the Company shall deliver the Conversion Shares to the
Holder within five (5) business days after the Conversion Date with respect to
such Conversion Shares being delivered, and at the address specified in the
Notice of Conversion. The Company acknowledges that the Securities Purchase
Agreement requires that the Company pay liquidated damages for late or
non-delivery of Conversion Shares.
Subject to the provisions of Paragraph 4(b) hereof, at the Maturity Date,
the remaining portion of this Note which remains unconverted, if any, plus
accrued interest shall be automatically converted into shares of Common Stock as
of the Maturity Date, as if the Holder had converted the remaining portion of
this Note according to the provisions of this Section 4, with the Conversion
Date being equivalent in such event to the Maturity Date, as if the Holder had
provided the Company with a Notice of Conversion with respect to the outstanding
principal amount of this Note on the Maturity Date. Other than a conversion made
on the Maturity Date in accordance with this paragraph, conversions of this Note
must be effected in increments of at least Ten Thousand U.S. Dollars ($10,000)
of principal amount of this Note (or such lesser outstanding principal amount of
this Note).
(b) Notwithstanding anything herein to the contrary, the Company shall
have the right (but not the obligation) to redeem all or any portion of this
Note, provided the Company is not then in violation of any of its obligations
under this Note or under the Securities Purchase Agreement or any addenda
thereto, under the following conditions. At any time prior to delivery of any
Notice of Conversion (in this Section 4(b), a "Notice") to the Company by the
Holder in accordance with the terms of this Note, the Company may give to the
Holder notice (a "Redemption Notice") that it
4
<PAGE> 5
intends to pay the Holder the Cash Redemption Amount (as hereinafter defined)
with respect to all or such portion of the Note referred to in the Redemption
Notice. The "Cash Redemption Amount" shall be equal to one hundred twenty-five
percent (125%) of the face amount of the portion of the Note to be redeemed
pursuant to the Redemption Notice, and shall be paid to the Holder according to
the Holder's written instructions to the Company within three (3) business days
after delivery of the Redemption Notice with respect to such Note or portion
thereof to be redeemed. If the Company does not redeem within the time limits
herein specified and according to the terms of this Section 4(b), then unless
waived by the Holder, the Redemption Notice shall be null and void, and the
Holder may convert all or such portion of this Note as the Holder in its
discretion determines.
5. Obligations of the Company Herein are Unconditional. No provision of
this Note shall alter or impair the obligation of the Company, which obligation
is absolute and unconditional, to repay the principal amount of this Note at the
time place, rate, and in the coin currency, hereinabove stated. This Note and
all other Notes now or hereafter issued in replacement of this Note on the same
or similar terms are direct obligations of the Company. This Note ranks at least
equally with all other Notes now or hereafter issued under the terms set forth
herein. The Conversion Price and number of shares of Common Stock issuable upon
conversion shall be subject to adjustment from time to time as provided in
Section 6 below.
6. Adjustments.
(a) In the event the Company should at any time or from time to time,
alter the date of this Note, fix a record date for the effectuation of a split
or subdivision of the outstanding shares of Common Stock or the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock (equal to at least ten percent
(10%) or more of the Company's then issued and outstanding shares of Common
Stock) or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of any
consideration by such holder for the additional shares of Common Stock or the
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date (or
the date of such dividend, distribution, split or subdivision if no record date
is fixed), the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of this Note shall be
increased in proportion to such increase in the aggregate number of shares of
Common Stock outstanding and those issuable with respect to such Common Stock
Equivalents.
(b) If the number of shares of Common Stock outstanding at any time alter
the date of this Note is decreased by a combination of the outstanding shares of
Common Stock, then, following the record date of such combination, the
Conversion Price shall be appropriately Increased so that the number of shares
of Common Stock issuable upon conversion of this Note shall be decreased in
proportion to such decrease in outstanding shares.
5
<PAGE> 6
(c) In the event the Company, at any time while all or any portion of this
Note is outstanding, shall be consolidated with or merged into any other
corporation or corporations or shall sell or lease all or substantially all of
its property and business as an entirety, then lawful provisions shall be made
as part of the terms of such consolidation, merger, sale or lease so that the
holder of this Note may thereafter receive in lieu of such Common Stock
otherwise issuable to such holder upon conversion of this Note, but at the
conversion rate which would otherwise be in effect at the time of conversion, as
hereinbefore provided, the same kind and amount of securities or assets as may
be issuable, distributable or payable upon such consolidation, merger, sale or
lease with respect to Common Stock of the Company.
7. Reservation of Shares. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of this Note, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all of the outstanding principal amount, and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of this Note, in addition to such other remedies as
shall be available to Holder, the Company will take such corporate action as
may, in the opinion of its counsel, be necessary to increase the number of
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purposes, including without limitation, using its best
efforts to obtain the requisite stockholder approval necessary to increase the
number of authorized shares of the Company's Common Stock.
8. Note Holder Not Deemed a Stockholder. No Holder, as such, of this Note
shall be entitled (prior to conversion of this Note into Common Stock, and only
then to the extent of such conversion) to vote or receive dividends or be deemed
the holder of shares of the Company for any purpose, nor shall anything
contained in this Note be construed to confer upon the Holder hereof, as such,
any of the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action (whether any reorganization, issue of
stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings, receive dividends or subscription
rights, or otherwise, prior to the issuance to the holder of this Note of the
Conversion Shares which he or she is then entitled to receive upon the due
conversion of all or a portion of this Note. Notwithstanding the foregoing, the
Company will provide the Holder with copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.
9. No Limitation on Corporate Action. No provisions of this Note and no
right or option granted or conferred hereunder shall in any way limit, affect or
abridge the exercise by the Company of any of its corporate rights or powers to
recapitalize, amend its Certificate of Incorporation, reorganize, consolidate or
merge with or into another corporation, or to transfer all or any part of its
property or assets, or the exercise of any other of its corporate rights and
powers.
10. Representations of Holder. Upon conversion of all or a portion of this
Note, the Holder shall confirm in writing, in a form reasonably satisfactory to
the Company, that the
6
<PAGE> 7
Conversion Shares so purchased are being acquired solely for the Holder's own
account and not as a nominee for any other party, and that such Holder is an
Accredited Investor (as defined in Rule 501(a) of Regulation D promulgated under
the 1933 Act). The Company acknowledges that Holder's duly executed
certification on the Notice of Conversion is satisfactory confirmation of the
facts set forth in the immediately preceding sentence. If such Holder cannot
make such representations because they would be factually incorrect, it shall be
a condition to such Holder's conversion of all or a portion of the Note that the
Company receive such other representations as the Company considers reasonably
necessary to assure the Company that the issuance of its securities upon
conversion of the Note shall not violate any United States or state securities
laws.
11. Waiver of Demand, Presentment, Etc. The Company hereby expressly
waives demand and presentment for payment, notice of nonpayment, protest, notice
of protest, notice of dishonor, notice of acceleration or intent to accelerate,
bringing of suit and diligence in taking any action to collect amounts called
for hereunder and shall be directly and primarily liable for the payment of all
sums owing and to be owing hereunder, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of any amount
called for hereunder.
12. Attorney's Fees. The Company agrees to pay all costs and expenses,
including without limitation reasonable attorney's fees, which may be incurred
by the Holder in collecting any amount due under this Note or in enforcing any
of Holder's conversion rights as described herein.
13. Default. If one or more of the following described "Events of Default"
shall occur:
(a) The Company shall continue in default in the payment of principal or
interest on this Note for a period of ten (10) days after a notice of default is
received by the Company with respect to any such payment; or
(b) Any of the representations or warranties made by the Company herein,
in the Securities Purchase Agreement, the Registration Rights Agreement, or in
any certificate or financial or other written statement heretofore or hereafter
furnished by or on behalf of the Company in connection with the execution and
delivery of this Note or the Securities Purchase Agreement or the Registration
Rights Agreement shall be false or misleading in any material respect at the
time made and the Holder shall have provided seven (7) days prior written notice
to the Company of the alleged misrepresentation or breach of warranty and the
same shall continue uncured for a period of seven (7) days after such written
notice from the Holder; or
(c) The Company shall fail to perform or observe, in any material respect,
any other covenant, term, provision, condition, agreement or obligation of the
Company under this Note or the Securities Purchase Agreement and such failure
shall continue uncured for a period of seven (7) days after written notice from
the Holder of such failure; or
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<PAGE> 8
(d) The Company shall either: (i) become insolvent; (ii) admit in writing
its inability to pay its debts generally or as they become due; (iii) make an
assignment for the benefit of creditors or commence proceedings for its
dissolution; or (iv) apply for, or consent to the appointment of, a trustee,
liquidator, or receiver for its or for a substantial part of its property or
business; or
(e) A trustee, liquidator or receiver shall be appointed for the Company
or for a substantial part of its property or business without the Company's
consent and such appointment is not discharged within sixty (60) days after such
appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency shall assume custody or control of the whole
or any substantial portion of the properties or assets of the Company and shall
not be dismissed within sixty (60) days thereafter; or
(g) Any money judgment, writ or Note of attachment, or similar process in
excess of Two Hundred Thousand United States Dollars (US$200,000.00) in the
aggregate shall be entered or filed against the Company or any of its properties
or assets and shall remain unpaid, unvacated, unbonded or unstayed for a period
of fifteen (15) days or in any event later than five (5) days prior to the date
of any proposed sale thereunder; or
(h) Bankruptcy, reorganization, insolvency or liquidation proceedings or
other proceedings for relief under any bankruptcy law or any law for the relief
of debtors shall be instituted by or against the Company and, if instituted
against the Company, shall not be dismissed within sixty days after such
institution or the Company shall by any action or answer approve of, consent to,
or acquiesce in any such proceedings or admit the material allegations of, or
default in answering a petition filed in, any such proceeding; or
(i) The Company shall have its Common Stock delisted from the OTC Bulletin
Board Market or suspended from trading thereon, and shall not have its Common
Stock relisted on the same or another national securities exchange, or have such
suspension lifted, as the case may be, within ten (10) business days; or
(j) The Company shall have received a notice of default on the payment of
any debt(s) aggregating in excess of Two Hundred Thousand United States Dollars
(US$200,000.00) beyond any applicable grace period;
then, or at any time thereafter, and in any and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
in one instance shall not be deemed to be a waiver in another instance or for
any other prior or subsequent Event of Default) at the option of the Holder and
in the Holder's sole discretion, the Holder may immediately accelerate the
maturity hereof; whereupon all principal and interest hereunder shall be
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly
8
<PAGE> 9
waived by the Company, anything herein or in any Note or other instrument
contained to the contrary notwithstanding, and the Holder may immediately, and
upon the expiration of any period of grace, enforce any and all of the Holder's
rights and remedies provided herein or any other rights or remedies afforded by
law or equity.
14. Note a General Unsecured Obligation of the Company. This Note
represents a general unsecured obligation of the Company. No recourse shall be
had for the payment of the principal of, or the interest on, this Note, or for
any claim based thereon, or otherwise in respect hereof, against any
incorporator, shareholder, officer, director, or agent of the Company or any
successor corporation, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.
15. Enforceability. In case any provision of this Note is held by a court
of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Note will not in any way be
affected or impaired thereby.
16. Entire Agreement. This Note and Exhibit I attached hereto, the
Securities Purchase Agreement and the Exhibits attached thereto and the
Registration Rights Agreement and the Exhibits attached thereto (if any)
constitute the full and entire understanding between the Company and the Holder
with respect to the subject matter hereof and thereof. Neither this Note nor any
term hereof may be amended, waived, discharged or terminated other than by a
written instrument signed by the Company and the Holder.
17. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the state of Delaware without giving effect to
applicable principles of conflict of law.
18. Headings in this Note are for convenience only, and shall not be used
m the construction of this Note.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an officer thereunto duly authorized, all as of the date first
hereinabove written
TOUPS TECHNOLOGY LICENSING, INC.
By:/s/ Mark Clancy
-------------------------------------
Mr. Mark Clancy, Executive Vice
President
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<PAGE> 10
EXHIBIT I
NOTICE OF CONVERSION
(To Be Executed by the Registered Holder in Order to Convert the Note)
The Undersigned hereby irrevocably elects to convert $_______________ of
the Series 1999-A Eight Percent (8%) Convertible Note Due January 1, 2002, No.
___, into shares of Common Stock of Toups Technology Licensing, Inc. (the
"Company"), according to the terms and conditions set forth in such Note, as of
the date written below. If securities are to be issued to a person other than
the Undersigned, the Undersigned agrees to pay all applicable transfer taxes
with respect thereto.
The Undersigned represents that it, as of this date, is an "accredited
investor" as such term is defined in Rule 501(a) of Regulation D promulgated by
the SEC under the 1933 Act.
The Undersigned also represents that the Conversion Shares are being
acquired for the Holder's own account and not as a nominee for any other party.
The Undersigned represents and warrants that all offers and sales by the
Undersigned of the Conversion Shares shall be made pursuant to registration of
the same under the 1933 Act, or pursuant to an exemption from registration under
the 1933 Act. The Undersigned acknowledges that the Conversion Shares shall if
(and only if) required by law contain the legend contained on page 1 of the
Note.
Conversion Date:* ________________
Applicable Conversion Price: _____________
Holder (Print True Legal Name):____________________________
______________________________________________________
(Signature of Duly Authorized Representative of Holder)
Address of Holder: _______________________________________
_______________________________________
_______________________________________
*This original Notice of Conversion must be received by the Company by the
second business day following the Conversion Date.
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<PAGE> 1
Exhibit 4.3
EXHIBIT C
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
February 16, 1999, by and between Toups Technology Licensing, Inc., a
corporation organized under the laws of the State of Florida, U.S.A., with
headquarters located at 7887 Bryan Dairy Road, Suite 105, Largo, Florida 33777
(the "Company"), and the buyer set forth on the execution page hereof (the
"Buyer").
RECITALS
A. In connection with the Securities Purchase Agreement by and between the
parties of even date herewith (the "Securities Purchase Agreement"), the Company
has agreed, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to issue and sell to the Buyer (i) a number of the Company's
Series 1999-A Eight Percent (8%) Convertible Notes Due January 1, 2002 (the
"Notes") and (ii) a number of Warrants (as defined in the Securities Purchase
Agreement). The Notes are convertible in accordance with their respective terms
into common stock of the Company, $.001 par value per share ("Common Stock").
The Warrants are exercisable in accordance with their terms into Common Stock.
The Common Stock into which the Notes are convertible may be referred to herein
as the "Conversion Shares." The Common Stock into which the Warrants are
exercisable may be referred to herein as the "Warrant Shares." In accordance
with the terms of the Notes, shares of Common Stock may be issued in payment of
interest ("Interest Shares").
B. The Buyer has agreed to purchase and pay for the Notes and the Warrants
as provided in the Securities Purchase Agreement. Upon each such purchase, the
Company will issue and deliver the Notes and the Warrants to the Buyer.
C. To induce the Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.
AGREEMENTS
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by all parties hereto, the Company
and the Buyer hereby agree as follows:
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the following
meanings:
i. "Investor" or "Investors" means the Buyer and any permitted
transferee(s) or assignee(s) thereof to whom the Buyer assigns this Agreement
and who agrees to become bound by the provisions of this Agreement in accordance
with Section 9 hereof.
<PAGE> 2
ii. "Register," "registered," and "registration" refer to a registration
effected by preparing and filing a Registration Statement or Statements in
compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any
successor rule providing for offering securities on a continuous basis ("Rule
415"), and the declaration or ordering of effectiveness of such Registration
Statement by the United States Securities and Exchange Commission (the "SEC").
iii. "Registrable Securities" means the Conversion Shares and the Interest
Shares (if any) underlying or issued in accordance with or upon conversion of
the Notes, the Warrants, the Warrant Shares, and any shares of capital stock
issued or issuable from time to time (with any adjustments) on or in exchange
for or otherwise with respect to either of the foregoing (including without
limitation any shares issued pursuant to Section 2(b) hereinafter).
iv. "Registration Statement" or "Registration Statements" means a
registration statement or statements of the Company filed under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings set forth in the Securities Purchase Agreement.
2. REGISTRATION.
a. Mandatory Registration. (i) The Company shall use its best efforts to
prepare, and, on or before the date that is ten (10) days after the date of the
First Closing, file with the SEC a Registration Statement or Registration
Statements (as necessary) on Form SB-2 (or, if such form is unavailable for such
a registration, on such other form as is available for such a registration of
all of the Registrable Securities) (any of which may contain a combined
prospectus with other registrations by the Company), covering the resale of all
of the Registrable Securities, which Registration Statement(s), to the extent
allowable under the 1933 Act and the rules promulgated thereunder (including
without limitation Rule 416), shall state that such Registration Statement(s)
also covers such indeterminate number of additional shares (the "Indeterminate
Shares") of Common Stock as may become issuable upon conversion of the Notes to
prevent dilution resulting from stock splits, stock dividends or similar
transactions.
(ii) To the extent the Indeterminate Shares for any reason can not be
registered under the Registration Statement(s) required under Section 2(a)(i)
above, then with respect to such Indeterminate Shares, the Company shall use its
best efforts to prepare, and, on or before the date that is fifteen (15) days
after the Indeterminate Shares become issuable, file with the SEC a Registration
Statement or Registration Statements (as necessary) on Form SB-2 (or, if such
form is unavailable for such a registration, on such other form as is available
for such a registration of all of the Indeterminate Shares) (any of which may
contain a combined prospectus with other registrations by the Company), covering
the resale of all of the Indeterminate Shares.
(iii) Notwithstanding anything herein to the contrary, the Company
represents and warrants that it has filed with the SEC a registration statement
on Form SB-2, which was filed in final form on October 7, 1998 and was declared
effective by the SEC on October 7, 1998 (the "Effective Registration
Statement"). The Company shall use its best efforts to amend the Effective
Registration Statement to include the Buyer's resale of the Registrable
Securities, such that all of the Registrable Securities will be registered with
the SEC pursuant to the Effective Registration Statement. If the Company is able
to amend the Effective Registration Statement to include Buyer's resale of all
of the Registrable Securities therein, such that all of the Registrable
Securities will be registered for
2
<PAGE> 3
resale by the Buyer with the SEC pursuant thereto, then the Company shall not be
obligated to file another separate Registration Statement pursuant to this
Agreement. The Company also covenants and warrants that it will use its best
efforts to amend the Effective Registration Statement in order to convert the
Effective Registration Statement from an SB-2 registration statement to an S-3
registration statement, on or before March 5,1999. As used in this Agreement,
where applicable, the term "Registration Statement" shall include also the
Effective Registration Statement.
A copy of the Registration Statement(s) (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to (and subject to the approval of the Buyer, which approval shall not
be unreasonably withheld or denied) the Buyer and its counsel prior to its
filing or other submission.
b. Liquidated Damages. The Company shall use its best efforts to obtain
effectiveness of the Registration Statement as soon as practicable. If (i) the
Registration Statement(s) covering the Registrable Securities required to be
filed by the Company pursuant to Section 2(a) hereof is not declared effective
by the SEC within ninety (90) days after the date of the First Closing (other
than by reason of any act or failure to act in a timely manner by the Investor
or its counsel) (the "Registration Deadline") or if, after the Registration
Statement has been declared effective by the SEC, sales cannot be made pursuant
to the Registration Statement (by reason of a suspension, a stop order, the
Company's failure to update the Registration Statement, or any other reason
outside the control of the Investor), or (ii) the Common Stock is not listed or
included for quotation on the OTC Bulletin Board Market, the National
Association of Securities Dealers Automated Quotation system Small Cap Market
("NASDAQ Small Cap"), or another United States national securities exchange or
market; then in either case (in either case, a "Delay") the Company will make
payments to the Investors, as liquidated damages and in such amounts and at such
times as shall be determined pursuant to this Section 2(b) as relief and as the
sole remedy for the damages to the Investor by reason of any such delay in or
reduction of its ability to sell the Registrable Securities (which remedy shall
be exclusive of any other remedies available at law or in equity), an amount to
be determined as follows. The Company shall pay to the Investor an amount equal
to the purchase price for the Notes purchased at the First Closing and, if
applicable, the Second Closing (including, without limitation, any Notes that
have been convened into Conversion Shares then held by such Investors) (the
"Aggregate Share Price") multiplied by one and one-half hundredths (.0 15) times
the sum of (i) the number of months (prorated for partial months) beginning the
day after the Registration Deadline and ending on the date the Registration
Statement is declared effective by the SEC, provided, however, that there shall
be excluded from such period any delays which are reasonably attributable to
changes required by the Investor in the Registration Statement with respect to
information relating to the Investor, including, without limitation, changes to
the plan of distribution, or to the failure of the Investor to conduct its
review of the registration statement pursuant to Section 2(a) above in a
reasonably prompt manner; (ii) the number of months (prorated for partial
months) that sales cannot be made pursuant to the Registration Statement after
the Registration Statement has been declared effective by the SEC; and (iii) the
number of months (prorated for partial months) that the Common Stock is not
listed or included for quotation on the NASDAQ Small Cap or another United
States national exchange after the Registration Statement has been declared
effective.
By way of illustration, if the Registration Statement were to become
effective two months after the end of the Registration Deadline, the Company
would pay US$15,000 for the first month,
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<PAGE> 4
and $15,000 for the second month, based upon an assumed (for purposes of this
illustration) aggregate sale of US$1,000,000 worth of Notes (and thereafter
would continue to pay US$15,000 per month until the Registration Statement
becomes effective).
Such amounts shall be paid in cash or, at the Investor's option such
amounts may be convertible into Common Stock at the "Conversion Price" for the
Notes, as defined in the Notes. Any shares of Common Stock issued upon
conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities it
shall so notify the Company in writing within two (2) business days of the date
on which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth in the Securities Purchase
Agreement and/or the Notes), beginning on the last day upon which the cash
amount would otherwise be due in accordance with the following sentence.
Payments of cash pursuant hereto shall be made within five (5) days after the
end of each period that gives rise to such obligation, provided that, if any
such period extends for more than thirty (30) days, interim payments shall be
made for the full amount owed up to the date of such interim payment at the end
of each thirty (30) day period.
Notwithstanding anything in this Section 2(b) to the contrary, the Company
shall not be subject to the penalties specified in this Section 2(b) with
respect to a delay in registering the Registrable Securities past the
Registration Deadline, provided that such delay is solely attributable to the
SEC or its examiners.
c. Piggy-Back Registrations. If at any time prior to the expiration of the
Registration Period (as hereinafter defined) the Company shall file with the SEC
a Registration Statement relating to an offering for its own account or the
account of others under the 1933 Act of any of its equity securities (other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans) the Company shall send to the Investor written notice of such
determination and, if within twenty (20) days after receipt of such notice, such
Investor shall so request in writing, the Company, to the extent permitted by
law, shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' reasonable good faith judgment,
marketing or other factors dictate such limitation is necessary to facilitate
public distribution, then only such limited portion of the Registrable
Securities with respect to which such Investor has requested inclusion hereunder
will be included in the Registration Statement; provided that no portion of the
equity securities which the Company is offering for its own account shall be
excluded; provided, further that the Company shall be entitled to exclude
Registrable Securities to the extent necessary to avoid breaching obligations
existing prior to the date hereof to other stockholders of the Company.
Any exclusion of Registrable Securities shall be made pro rata among the
Investors seeking to include Registrable Securities, in proportion to the number
of Registrable Securities sought to be included by such Investors; provided,
however, that the Company shall not exclude any Registrable Securities unless
the Company has first excluded all outstanding securities, the holders of which
are not entitled to inclusion of such securities in such Registration Statement
or are not entitled to pro rata inclusion with the Registrable Securities; and
provided, further, however, that, after giving effect to the immediately
preceding proviso, any exclusion of Registrable Securities shall be made pro
rata
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<PAGE> 5
with holders of other securities having the right to include such securities in
the Registration Statement other than holders of securities entitled to
inclusion of their securities in such Registration Statement by reason of demand
registration rights or whose registration rights existed prior to the date
hereof. No right of the Investor to registration of Registrable Securities under
this Section 2(c) shall be construed to limit any registration required under
Section 2(a) hereof. If an offering in connection with which an Investor is
entitled to registration under this Section 2(c) is an underwritten offering,
then each Investor whose Registrable Securities are included in such
Registration Statement shall, unless otherwise agreed by the Company, offer and
sell such Registrable Securities in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement, on
the same terms and conditions as other shares of Common Stock included in such
underwritten offering.
d. Eligibility for Form SB-2. The Company represents and warrants that it
meets the requirements for the use of Form SB-2 for registration of the resale
by the Buyer of the Registrable Securities and the Company shall file all
reports required to be filed by the Company with the SEC in a timely manner so
as to maintain such eligibility for the use of Form SB-2. In the event that Form
SB-2 is not available for registration of the Registrable Securities, the
Company shall register the securities on another appropriate form. On or before
March 1, 1999, the Company will be eligible to use Form S-3 for registration of
the resale by the Buyer of the Registrable Securities.
3. RELATED OBLIGATIONS. In connection with the registration of the
Registrable Securities, the Company shall have the following obligations:
a. The Company shall use its best efforts to cause such Registration
Statement(s) relating to Registrable Securities to become effective as soon as
possible after such filing, but in no event later than the Registration
Deadline, and keep the Registration Statement(s) effective pursuant to Rule 415
at all times until the earlier of (i) the date on which all of the Registrable
Securities have been sold (and no further Registrable Securities may be issued
in the future), (ii) the date as of which the Investors may immediately sell all
of the Registrable Securities without restriction pursuant to Rule 144
promulgated under the 1933 Act (or successor thereto) or otherwise, or (iii) the
date on which none of the Notes is outstanding (the "Registration Period"),
which Registration Statement(s) (including any amendments or supplements thereto
and prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the 1933 Act with respect to the disposition of all Registrable
Securities of the Company covered by the Registration Statement. In the event
the number of shares available under a Registration Statement filed pursuant to
this Agreement is insufficient to cover all of the Registrable Securities issued
or issuable upon conversion of the Notes, the Company shall amend the
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of the
Registrable Securities, in each case, as soon as practicable, but in any event
within fifteen (15) days after the need therefor arises (based on the market
price of the Common Stock and other relevant factors on which the Company
reasonably
5
<PAGE> 6
elects to rely). The Company shall use its best efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof.
c. The Company shall furnish to each Investor whose Registrable Securities
are included in the Registration Statement(s) promptly after the same is
prepared and publicly distributed, filed with the SEC, or received by the
Company, (i) one copy of the Registration Statement and any amendment thereto,
each preliminary prospectus and prospectus and each amendment or supplement
thereto in each case relating to such Registration Statement (other than any
portion thereof which contains information for which the Company has sought
confidential treatment) and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement; and (ii)
such number of copies of a prospectus, including a preliminary prospectus, and
all amendments and supplements thereto and such other documents as such Investor
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned (or to be owned) by such Investor.
d. The Company shall use reasonable efforts to (i) register and qualify
the Registrable Securities covered by the Registration Statement(s) under such
other securities or "blue sky" laws of such jurisdictions in the United States
as each Investor who holds (or has the right to hold) Registrable Securities
being offered reasonably requests (but in no event greater than three states in
the Unites States), (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary to
maintain such registrations and qualifications in effect at all times during the
Registration Period, and (iv) take all other actions reasonably necessary or
advisable to qualify the Registrable Securities for sale in such jurisdictions;
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (a) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (b) subject itself to general taxation in any such jurisdiction,
(c) file a general consent to service of process in any such jurisdiction, (d)
provide any undertakings that cause more than nominal expense or burden to the
Company, or (e) make any change in its charter or bylaws, which in each case the
Board of Directors of the Company determines to be contrary to the best
interests of the Company and its stockholders.
e. As promptly as practicable after becoming aware of such event, the
Company shall notify each Investor of the happening of any event, of which the
Company has knowledge, as a result of which the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement to correct such
untrue statement or omission, and deliver such number of copies of such
supplement or amendment to each Investor as such Investor may reasonably
request.
f. The Company shall use its best efforts to prevent the issuance of any
stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest possible moment and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof.
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<PAGE> 7
g. The Company is subject to the reporting requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"). For
so long as the Buyer beneficially owns any of the Securities, the Company shall
file all reports required to be filed with the SEC pursuant to the 1934 Act, and
the Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations hereunder
would permit such termination.
h. At the request of the Investor, but no more than three (3) times in any
one ninety (90) day period, the Company shall furnish, on the date of
effectiveness of the Registration Statement and thereafter from time to time on
such dates as the Investor may reasonably request an opinion, dated as of such
requested date, of counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the Company's transfer agent
and/or to the Investors. Such opinion shall be substantially as set forth in
Exhibit I attached hereto.
i. The Company shall make available for inspection by (i) any Investor,
(ii) any underwriter participating in any disposition pursuant to a Registration
Statement, (iii) one firm of attorneys and one firm of accountants or other
agents retained by the Investors, and (iv) one firm of attorneys retained by all
such underwriters (collectively, the "Inspectors") all pertinent financial and
other records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector to enable each Inspector to exercise its due diligence responsibility,
and cause the Company's officers, directors and employees to supply all
information which any Inspector may reasonably request for purposes of such due
diligence; provided, however, that each Inspector shall hold in strict
confidence and shall not make any disclosure (except to an Investor) or use of
any Record or other information which the Company determines in good faith to be
confidential, and of which determination the Inspectors are so notified, unless
(a) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company shall not be
required to disclose any confidential information in such Records to any
Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance reasonably satisfactory to the
Company) with the Company with respect thereto, substantially in the form of
this Section 3(i). Each Investor agrees that it shall, upon learning that
disclosure of such Records is sought in or by a court or governmental body of
competent jurisdiction or through other means, give prompt notice to the Company
and allow the Company, at its expense, to undertake appropriate action to
prevent disclosure of, or to obtain a protective order for, the Records deemed
confidential.
j. The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been
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<PAGE> 8
made generally available to the public other than by disclosure in violation of
this or any other agreement. The Company agrees that it shall, upon learning
that disclosure of such information concerning an Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt notice to such Investor and allow such Investor, at the Investor's
expense, to undertake appropriate action to prevent disclosure of, or to obtain
a protective order for, such information.
k. The Company shall cooperate with the Investors who hold Registrable
Securities being offered to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legend) representing the Registrable
Securities to be offered pursuant to a Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, the
Investors may reasonably request and registered in such names as the Investors
may request. Not later than the date on which any Registration Statement
registering the resale of Registrable Securities is declared effective, the
Company shall deliver (at its expense) to its transfer agent instructions,
accompanied by any required opinion of counsel, that permit sales of unlegended
securities in a timely fashion that complies with then mandated securities
settlement procedures for regular way market transactions.
l. Upon the First Closing and upon the Second Closing, the Company shall
promptly secure the listing of the Registrable Securities then underlying the
Notes then purchased by the Buyer upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of shares of
Registrable Securities from time to time issued under the terms of this
Agreement and the Registration Rights Agreement. The Company shall at all times
comply in all respects with the Company's reporting, filing and other
obligations under the by-laws or rules of the National Association of Securities
Dealers and the OTC Bulletin Board Market (and such other national exchange on
which the Common Stock may be listed, as applicable).
m. The Company shall provide a transfer agent and registrar, which may be
a single entity, for the Registrable Securities not later than the effective
date of the Registration Statement.
n. The Company shall comply with all applicable laws relating to a
Registration Statement and offering and sale of securities and all applicable
rules and regulations of governmental authorities in connection therewith
(including without limitation the 1933 Act and the Securities Exchange Act of
1934, as amended, and all the rules and regulations promulgated by the SEC).
o. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investors of Registrable Securities
pursuant to a Registration Statement.
4. OTHER OBLIGATIONS. In connection with the registration of the
Registrable Securities, the Investors shall have the following obligations:
a. At least fifteen (15) days prior to the first anticipated filing date
of the Registration Statement, the Company shall notify each Investor of the
information the Company requires from each such Investor if such Investor elects
to have any of such Investor's Registrable Securities included in the
Registration Statement. It shall be a condition precedent to the obligations of
the Company to complete the registration pursuant to this Agreement with respect
to the Registrable
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<PAGE> 9
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself, the Registrable Securities held by it
and the intended method of disposition of the Registrable Securities held by it
as shall be reasonably required to effect the registration of such Registrable
Securities and shall execute such documents in connection with such registration
as the Company may reasonably request.
b. Each Investor by such Investor's acceptance of the Registrable
Securities agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement(s) hereunder, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority of the Registrable Securities
being registered determine to engage the services of an underwriter, each
Investor agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor notifies the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement(s).
d. Each Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(e) or 3(f),
such Investor will immediately discontinue disposition of Registrable Securities
pursuant to the Registration Statement(s) covering such Registrable Securities
until such Investor's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(e) or 3(f) and, if so directed by the
Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration hereunder
unless such Investor (i) agrees to sell such Investor's Registrable Securities
on the basis provided in any underwriting arrangements approved by the Investors
entitled hereunder to approve such arrangements, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses incurred by the Company pursuant to
Section 5 below.
5. EXPENSES OF REGISTRATION. The Company agrees to pay all reasonable
expenses, other than underwriting discounts and commissions, incurred in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company. If Investors who hold a majority of Registrable
Securities undertake to resell the Registrable Securities in an underwritten
public offering, the Company will reasonably cooperate as is customarily
required in an underwritten public offering. The Investors who participate in
such a public offering shall pay all expenses incurred in connection with such
registration, whether incurred by them or the Company, including without
limitation, underwriting discounts and commissions, all registration, listing
and qualification fees, printing charges, and fees and disbursements of
accountants and counsel for the Company.
9
<PAGE> 10
6. INDEMNIFICATION In the event any Registrable Securities are included in
a Registration Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend each Investor who holds such Registrable Securities, the
directors, officers and each person who controls any Investor within the meaning
of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), if any, and any underwriter (as defined in the 1933 Act) for the
Investors, and the directors and the officers of, and each person, if any, who
controls, any such underwriter within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities or expenses (joint or several) (collectively, together with actions,
proceedings or inquiries by any regulatory or self regulatory organization,
whether commenced or threatened, in respect thereof, "Claims") to which any of
them may become subject insofar as such Claims (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon: (i) any untrue statement or alleged untrue statement of a material fact in
a Registration Statement or the omission or alleged omission to state a material
fact therein required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, or (iii) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement (the
matters in the foregoing clauses (i) through (iii) being, collectively,
"Violations"). Subject to the restrictions set forth in Section 6(d) with
respect to the number of legal counsel, the Company shall reimburse the
Investors and each such underwriter or controlling person, promptly as such
expenses are incurred and are due and payable, for any legal fees or other
expenses reasonably incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (i) shall
not apply to a Claim arising out of or based upon a Violation which occurs in
reliance upon and in conformity with information furnished in writing to the
Company by any Indemnified Person or underwriter for such Indemnified Person
expressly for use in connection with the preparation of the Registration
Statement or any such amendment thereof or supplement thereto, if such
prospectus was timely made available by the Company pursuant to Section 3(c)
hereof; (ii) with respect to any preliminary prospectus, shall not inure to the
benefit of any such person from whom the person asserting any such Claim
purchased the Registrable Securities that are the subject thereof (or to the
benefit of any person controlling such person) if the untrue statement or
omission of the material fact contained in the preliminary prospectus was
corrected in the prospectus, as then amended or supplemented, if such prospectus
was timely made available by the Company pursuant to Section 3(c) hereof; (iii)
shall not be available to the extent such Claim is based on a failure of the
Investor to deliver or to cause to be delivered the prospectus made available by
the Company or the failure of the Investor to comply with federal or state law
relating to the offering or sale of the Registrable Securities; and (iv) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the
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<PAGE> 11
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an Investor is
participating, each such Investor agrees to indemnify, hold harmless and defend,
to the same extent and in the same manner as is set forth in Section 6(a), the
Company, each of its directors, each of its officers who signs the Registration
Statement, each person, if any, who controls the Company within the meaning of
the 1933 Act or the 1934 Act, any underwriter and any other stockholder selling
securities pursuant to the Registration Statement or any of its directors or
officers or any person who controls such stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act (collectively and together with an
Indemnified Person, an "Indemnified Party"), against any Claim to which any of
them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar
as such Claim arises out of or is based upon any Violation, in each case to the
extent (and only to the extent) that such violation occurs in reliance upon and
in conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement or to the
extent such Claim is based upon any violation or alleged violation by the
Investor of the 1933 Act, 1934 Act or any other law; and such Investor will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
c. The Company shall be entitled to receive indemnities from underwriters,
selling brokers, dealer managers and similar securities industry professionals
participating in any distribution, to the same extent as provided above, with
respect to information such persons so furnished in writing by such persons
expressly for inclusion in the Registration Statement.
d. Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 6 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 6, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any
11
<PAGE> 12
other party represented by such counsel in such proceeding. The Company shall
pay reasonable fees for only one separate legal counsel for the Investors, and
such legal counsel shall be selected by the Investors holding a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates; provided, that the Company shall have the right to
approve the selection of counsel and legal fees and expenses of such firm shall
be reasonable. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action shall not
relieve such indemnifying party of any liability to the Indemnified Person or
Indemnified Party under this Section 6, except to the extent that the
indemnifying party is prejudiced in its ability to defend such action. The
indemnification required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as such
expense, loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION. To the extent any indemnification by an indemnifying
party is prohibited or limited by law, the indemnifying party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise be
liable under Section 6 to the fullest extent permitted by law; provided,
however, that (i) no contribution shall be made under circumstances where the
maker would not have been liable for indemnification under the fault standards
set forth in Section 6, (ii) no seller of Registrable Securities guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any seller of Registrable Securities
who was not guilty of fraudulent misrepresentation, and (iii) contribution by
any seller of Registrable Securities shall be limited in amount to the net
amount of proceeds received by such seller from the sale of such Registrable
Securities.
8. REPORTS UNDER THE 1934 ACT. With a view to making available to the
Investors the benefits of Rule 144 promulgated under the 1933 Act or any other
similar rule or regulation of the SEC that may at any time permit the investors
to sell securities of the Company to the public without registration ("Rule
144"), the Company agrees to:
a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents
required of the Company under the 1933 Act and the 1934 Act so long as the
Company remains subject to such requirements (it being understood that nothing
herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS. The rights to have the Company
register Registrable Securities pursuant to this Agreement shall be
automatically assignable by the Investors to any transferee of all or any
portion of Registrable Securities if (i) the Investor agrees in writing with the
transferee or assignee to assign such rights, and a copy of such agreement is
12
<PAGE> 13
furnished to the Company within a reasonable time after such assignment, (ii)
the Company is, within a reasonable time after such transfer or assignment,
furnished with written notice of (a) the name and address of such transferee or
assignee, and (b) the securities with respect to which such registration rights
are being transferred or assigned, (iii) immediately following such transfer or
assignment the further disposition of such securities by the transferee or
assignee is restricted under the 1933 Act and applicable state securities laws,
(iv) at or before the time the Company receives the written notice contemplated
by clause (ii) of this sentence the transferee or assignee agrees in writing
with the Company to be bound by all of the provisions contained herein, (v) such
transfer shall have been made in accordance with the applicable requirements of
the Securities Purchase Agreement, (vi) such transferee shall submit evidence
reasonably satisfactory to the Company that the Transferee is an "accredited
investor" as that term is defined in Rule 501 of Regulation D promulgated under
the 1933 Act; and (vii) in the event the assignment occurs subsequent to the
date of effectiveness of the Registration Statement required to be filed
pursuant to Section 2(a), the transferee agrees to pay all reasonable expenses
of amending or supplementing such Registration Statement to reflect such
assignment. Notwithstanding anything herein to the contrary, no assignment of
the rights represented by this Agreement shall be effective unless in compliance
with any applicable securities laws of any applicable jurisdiction.
10. AMENDMENT OF REGISTRATION RIGHTS. Provisions of this Agreement may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and Investors who hold a majority of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable Securities
whenever such person or entity owns of record such Registrable Securities. If
the Company receives conflicting instructions, notices or elections from two or
more persons or entities with respect to the same Registrable Securities, the
Company shall act upon the basis of instructions, notice or election received
from the registered owner of such Registrable Securities.
b. Any notices required or permitted to be given under the terms of this
Agreement shall be sent by registered or certified mail, return receipt
requested, or delivered personally or by courier and shall be effective five
days after being placed in the mail, if mailed, or upon receipt, if delivered
personally or by courier or facsimile, in each case properly addressed to the
party to receive such notice. The addresses for such communications shall be:
If to the Company: Toups Technology Licensing, Inc.
7887 Bryan Dairy Road, Suite 105
Largo, Florida 33777
Telephone: (727)-548-0918
Facsimile: (727)-549-3138
Attention: Mr. Mark Clancy, Executive Vice President
If to the Buyer, at the address on the signature page of the Securities
Purchase Agreement. Each party shall provide written notice to the other party
of any change in address.
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<PAGE> 14
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and interpreted in accordance with
the laws of the state of Delaware without regard to the principles of conflict
of laws. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. The Company irrevocably consents to the
jurisdiction of the state and federal courts of the state of Delaware in any
suit or proceeding arising out of or based on this Agreement and irrevocably
agrees that all claims in respect of such suit or proceeding may be determined
in such courts. The Company irrevocably waives the defense of inconvenient forum
to the maintenance of such suit or proceeding. Service of process in any civil
action relating to or arising out of this Agreement (including also all Exhibits
or Addenda hereto) or the transaction(s) contemplated herein may be accomplished
in any manner provided by law.
e. This Agreement, the Escrow Agreement, the Notes, the Warrants, and the
Securities Purchase Agreement (including all exhibits and addenda thereto)
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein and
therein. This Agreement and the other agreements previously identified supersede
all prior agreements and understandings among the parties hereto with respect to
the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.
g. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more identical counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of the signature
page of this Agreement bearing the signature of the party so delivering this
Agreement to the Escrow Agent, with the original executed Agreement to be
delivered to the Escrow Agent via overnight delivery.
i. Each party shall do and perform, or cause to be done and performed, all
such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as the other party may
reasonably request in order to carry out the intent and accomplish the purposes
of this Agreement and the consummation of the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.
[SIGNATURE PAGE FOLLOWS]
14
<PAGE> 15
EXHIBIT I TO REGISTRATION RIGHTS AGREEMENT
[DATE]
[NAME AND ADDRESS OF BUYER]
[NAME AND ADDRESS OF COMPANY'S TRANSFER AGENT]
Re:Registration of Certain Securities of Toups Technology Licensing, Inc.
Ladies and Gentlemen:
We are counsel to Toups Technology Licensing, Inc., a Florida Corporation
(the "Company"), whose stock is listed for trading on the OTC Bulletin Board
Market utilizing the symbol "TOUP." We understand that The Augustine Fund, L.P.
(the "Holder") has purchased from the Company (a) a number of shares of the
Company's Series 1999-A Eight Percent (8%) Convertible Notes Due January 1, 2002
(the "Notes"), and (b) a number of warrants (the "Warrants") to purchase common
stock of the Company, $.001 par value per share ("Common Stock"). The Notes are
convertible in accordance with their terms and the terms of the Securities
Purchase Agreement (as hereinafter defined) into Common Stock. The Notes and the
Warrants were purchased pursuant to a Securities Purchase Agreement between the
Company and the Holder dated as of February 16, 1999 (including all Exhibits and
Addenda thereto, the "Securities Purchase Agreement").
Pursuant to a Registration Rights Agreement between the Company and the
Holder dated as of February 16, 1999, the Company agreed with the Holder, among
other things, to register the Common Stock into which the Notes (and, as
applicable, Common Stock issued (i) in payment of interest on the Notes and/or
(ii) in payment of certain penalties for late or non-registration of the said
Common Stock) are convertible and into which the Warrants are exercisable
(collectively, the "Registrable Securities") under the Securities Act of 1933,
as amended (the "1933 Act"), upon the terms provided in the Registration Rights
Agreement. In connection with the Company's obligations under the Securities
Purchase Agreement and the Registration Rights Agreement, the Company is a
reporting issuer under the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and has filed a registration statement on Form SB-2, No. _________,
on [DATE SB-2 WAS FILED OR AMENDED TO INCLUDE THE REGISTRABLE SECURITIES] (the
"Registration Statement") with the United States Securities and Exchange
Commission relating to the Registrable Securities, which names the Holder as a
selling stockholder thereunder.
[OTHER INTRODUCTORY AND SCOPE OF EXAMINATION LANGUAGE TO BE INSERTED, AS
IS USUAL AND CUSTOMARY FOR SUCH OPINION LETTERS.]
Based upon the foregoing, we are of the opinion that the Registrable
Securities have been registered under the 1933 Act and may thus be resold by you
pursuant to the Registration Statement.
Very truly yours,
[NAME OF LAWYER/FIRM]
16
<PAGE> 16
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT DATED
FEBRUARY 16,1999]
COMPANY:
TOUPS TECHNOLOGY LICENSING, INC.
By:
-------------------------------------------
Mr. Mark Clancy, Executive Vice President
BUYER:
THE AUGUSTINE FUND, L.P.
By: Augustine Capital Management, Inc., a General Partner
By: /s/ Tom Duszynski
-------------------------------------------
Mr. Tom Duszynski, Chief Operating Officer
BUYER'S ADDRESS:
141 West Jackson Blvd
Suite 2182
Chicago, Illinois 60604
Telephone: 312.427.5461
Telecopier: 312.427.5396
15
<PAGE> 17
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT DATED
FEBRUARY 16,1999]
COMPANY:
TOUPS TECHNOLOGY LICENSING, INC.
By:
-------------------------------------------
Mr. Mark Clancy, Executive Vice President
BUYER:
THE AUGUSTINE FUND, L.P.
By: Augustine Capital Management, Inc., a General Partner
By: /s/ Tom Duszynski
-------------------------------------------
Mr. Tom Duszynski, Chief Operating Officer
BUYER'S ADDRESS:
141 West Jackson Blvd
Suite 2182
Chicago, Illinois 60604
Telephone: 312.427.5461
Telecopier: 312.427.5396
15
<PAGE> 1
Exhibit 4.4
WARRANT AGREEMENT dated as of October 29, 1999 between Toups
Technology Licensing, Inc., a Florida corporation (the "Company") and Sands
Brothers & Co., Ltd., a Delaware corporation (hereinafter referred to variously
as the "Holder" or "Sands Brothers").
WITNESSETH:
WHEREAS, the Company and Sands Brothers have entered into a certain
financial advisory agreement of even date herewith (hereinafter the "Advisory
Agreement"), pursuant to which Sands Brothers and its designees are entitled to
receive warrants ("Warrants") to purchase 3,600,000 shares of the Company's
common stock, $.001 par value per share ("Common Stock").
NOW, THEREFORE, in consideration of the premises, the payment by the
Holder to the Company of TWENTY FIVE ($25.00) DOLLARS, the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agrees as follows:
1. Grant. The Holder and its designees are hereby granted the right
to purchase, at any time from October 29, 1999, until 5:30 p.m., New York time,
on October 29, 2004, up to an aggregate of 3,600,000 shares of Common Stock at
the initial exercise price per share (subject to adjustment as provided in
Section 8 hereof) as provided in Section 6 hereof.
2. Warrant Certificates. The warrant certificates (the "Warrant
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A
<PAGE> 2
attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions, and other variations as required or permitted by this
Agreement.
3. Exercise of Warrant.
3.1 Method of Exercise. The Warrants initially are exercisable at an
initial exercise price (subject to adjustment as provided in Section 8 hereof)
per share of Common Stock set forth in Section 6 hereof payable by certified or
official bank check in New York Clearing House funds, subject to adjustment as
provided in Section 8 hereof. Upon surrender of a Warrant Certificate with the
annexed Form of Election to Purchase duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the shares of Common Stock purchased
at the Company's principal offices in Florida (presently located at 7887 Bryan
Dairy Road, Largo, Florida 33777) the registered holder of a Warrant Certificate
("Holder" or "Holders") shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. The purchase rights
represented by each Warrant Certificate are exercisable at the option of the
Holder thereof, in whole or in part (but not as to fractional shares of the
Common Stock underlying the Warrants). Warrants may be exercised to purchase all
or part of the shares of Common Stock represented thereby. In the case of the
purchase of less than all the shares of Common Stock purchasable under any
Warrant Certificate, the Company shall cancel said Warrant Certificate upon the
surrender thereof and shall execute and deliver a new Warrant Certificate of
like tenor for the balance of the shares of Common Stock.
2
<PAGE> 3
3.2 Exercise by Surrender of Warrant.
(a) In addition to the method of payment set forth in Section 3.1
and in lieu of any cash payment required thereunder, the Holder(s) of the
Warrants shall have the right at any time and from time to time exercise the
Warrants in full or in part by surrendering the Warrant Certificate in the
manner specified in Section 3.1 in exchange for the number of shares of Common
Stock equal to the product of (x) the number of shares to which the Warrants are
being exercised multiplied by (y) a fraction, the numerator of which is the
Market Price (as defined in Section 8.1 (vi) hereof) of the Common Stock less
the Exercise Price and the denominator of which is such Market Price.
(b) Solely for the purposes of this Section 3.2, Market Price shall
be calculated either (i) on the date on which the form of election attached
hereto is deemed to have been sent to the Company pursuant to Section 13 hereof
("Notice Date") or (ii) as the average of the Market Price for each of the five
trading days preceding the Notice Date, whichever of (i) or (ii) is greater.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
issuance of certificates for shares of Common Stock or other securities,
properties or rights underlying such Warrants, shall be made forthwith (and in
any event such issuance shall be made within five (5) business days thereafter)
without charge to the Holder thereof including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall (subject to the provisions of Sections 5 and 7 hereof) be issued in the
name of, or in such names as may be directed by, the Holder thereof; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such
3
<PAGE> 4
certificates in a name other than that of the Holder and the Company shall not
be required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid.
The Warrant Certificates and the certificates representing the
shares of Common Stock (and/or other securities, property or rights issuable
upon exercise of the Warrants) shall be executed on behalf of the Company by the
manual or facsimile signature of the then present Chairman or Vice Chairman of
the Board of Directors or President or Vice President of the Company under its
corporate seal reproduced thereon, attested to by the manual or facsimile
signature of the then present Secretary or Assistant Secretary of the Company.
Warrant Certificates shall be dated the date of execution by the Company upon
initial issuance, division, exchange, substitution or transfer.
5. Restriction On Transfer of Warrants. The Holder of a Warrant
Certificate, by its acceptance thereof, covenants and agrees that the Warrants
are being acquired as an investment and not with a view to the distribution
thereof.
6. Exercise Price.
6.1 Initial and Adjusted Exercise Price. Except as otherwise
provided in Section 8 hereof, the initial exercise price of each Warrant shall
be $0.40 per share of Common Stock. The adjusted exercise price shall be the
price which shall result from time to time from any and all adjustments of the
initial exercise price in accordance with the provisions of Section 8 hereof.
4
<PAGE> 5
6.2 Exercise Price. The term "Exercise Price" herein shall mean the
initial exercise price or the adjusted exercise price, depending upon the
context.
7. Registration Rights.
7.1 Registration Under the Securities Act of 1933. The Warrants and
the shares of Common Stock issuable upon exercise of the Warrants and any of the
other securities issuable upon exercise of the Warrants have not been registered
under the Securities Act of 1933, as amended (the "Act") for public resale. Upon
exercise, in part or in whole, of the Warrants, certificates representing the
shares of Common Stock and any other securities issuable upon exercise of the
Warrants (collectively, the "Warrant Securities") shall bear the following
legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act")
for public resale, and may not be offered or sold except pursuant
to (i) an effective registration statement under the Act, (ii) to
the extent applicable, Rule 144 under the Act (or any similar
rule under such Act relating to the disposition of securities),
or (iii) an opinion of counsel, if such opinion shall be
reasonably satisfactory to counsel to the issuer, that an
exemption from registration under such Act is available.
7.2 Piggyback Registration.
(a) If, at any time during the five year period commencing after the
date hereof, the Company proposes to register any of its securities under the
Act (other than in connection with a merger or pursuant to Form S-8, S-4 or
comparable registration statement) it will give written notice by registered
mail, at least thirty (30) days prior to the filing of each registration
statement, to Sands Brothers and to all other Holders of the Warrants and/or the
Warrant Securities of its intention to do so. If Sands Brothers or other Holders
of the Warrants and/or Warrant Securities notify the Company within twenty (20)
days after receipt of any such notice of its or their desire to include any such
securities in such proposed registration statement, the Company shall afford
Sands
5
<PAGE> 6
Brothers and such Holders of the Warrants and/or Warrant Securities the
opportunity to have any such Warrant Securities registered under such
registration statement.
(b) In the event that the Company fails to comply with the
provisions of Section 7.2(a), the Company agrees that upon the written notice of
election of a Majority of the Holders of the Warrants and/or Warrant Securities
it shall repurchase (i) any and all Warrant Securities at the highest Market
Price (as defined in Section 8.1(vi)) per share of Common Stock between the date
on which notice was required to have been sent by the Company pursuant to
Section 7.2(a) and the closing of such repurchase, and (ii) any and all Warrants
at such Market Price less the exercise price of such Warrant. Such repurchase
shall be in immediately available funds and shall close within two (2) days
after the delivery of the written notice of election specified in this Section
7.2(b).
7.3 Demand Registration.
(a) At any time during the term of this Warrant, the Holders of the
Warrants and/or Warrant Securities representing a "Majority" (as hereinafter
defined) of such securities (assuming the exercise of all of the Warrants) shall
have the right (which right is in addition to the registration rights under
Section 7.2 hereof), exercisable by written notice to the Company, to have the
Company prepare and file with the Commission, on one occasion, a registration
statement and such other documents, including a prospectus, as may be necessary
in the opinion of both counsel for the Company and counsel for Sands Brothers
and Holders, in order to comply with the provisions of the Act, so as to permit
a public offering and sale of their respective Warrant Securities for nine (9)
consecutive months by such Holders and any other Holders of the Warrants and/or
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Warrant Securities who notify the Company within ten (10) days after receiving
notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within (10)
days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein, if
the Company shall not have filed a registration statement for the Warrant
Securities within the time period specified in Section 7.4(a) hereof pursuant to
the written notice specified in Section 7.3(a) of a Majority of the Holders of
the Warrants and/or Warrant Securities, the Company agrees that upon the written
notice of election of a Majority of the Holders of the Warrants and/or Warrant
Securities it shall repurchase (i) any and all Warrant Securities at the highest
Market Price (as defined in Section 8.1(vi)) per share of Common Stock between
the date of the notice sent pursuant to Section 7.3(a) and the closing of such
repurchase and (ii) any and all Warrants at such Market Price less the exercise
price of such Warrant. Such repurchase shall be in immediately available funds
and shall close within two (2) days after the later of (i) the expiration of the
period specified in Section 7.4(a) or (ii) the delivery of the written notice of
election specified in this Section 7.3(c).
7.4 Covenants of the Company With Respect to Registration. In
connection with any registration under Section 7.2 or 7.3 hereof, the Company
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within sixty (60) days of receipt of any demand therefor, shall use
its best efforts to have any registration
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<PAGE> 8
statements declared effective at the earliest possible time, and shall furnish
the Holder desiring to sell Warrant Securities such number of prospectuses as
shall reasonably be requested.
(b) The Company shall pay all costs (excluding any underwriting or
selling commissions or other charges of any broker-dealer acting on behalf of
Holders), fees and expenses in connection with all registration statements filed
pursuant to Sections 7.2 and 7.3(a) hereof including, without limitation, the
Company's legal and accounting fees, printing expenses, blue sky fees and
expenses. If the Company shall fail to comply with the provisions of Section
7.4(a), the Company shall, in addition to any other equitable or other relief
available to the Holder(s),be liable for any or all damages due to loss of
profit sustained by the Holder(s) requesting registration of its Warrant
Securities, it being understood that any delays resulting solely from any action
taken, or inaction, on the part of the Commission unrelated to Company conduct
shall not be considered a failure to comply with Section 7.4(a).
(c) The Company will take all necessary action which may be required
in qualifying or registering the Warrant Securities included in a registration
statement for offering and sale under the securities or blue sky laws of the
state requested by the Holder.
(d) The Company shall indemnify the Holder(s) of the Warrant
Securities to be sold pursuant to any registration statement and each person, if
any, who controls such Holder within the meaning of Section 15 of the Act or
Section 20(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), against all loss, claim, damage, expense or liability (including all
expenses reasonably incurred in investigating, preparing or defending against
any claim whatsoever) to which
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<PAGE> 9
any of them may become subject under the Act, the Exchange Act or otherwise,
arising from such registration statement.
(e) Noting contained in this Agreement shall be construed as
requiring the Holder(s) to exercise their Warrants prior to the initial filing
of any registration statement or the effectiveness thereof.
(f) The Company shall not permit the inclusion of any securities
other than the Warrant Securities to be included in any registration statement
filed pursuant to Section 7.3 hereof, without the prior written consent of the
Holders of the Warrants and Warrant Securities representing a Majority of such
securities (assuming an exercise of all of the Warrants).
(g) The Company shall furnish to each Holder participating in the
offering and to each underwriter, if any, a signed counterpart, addressed to
such Holder or underwriter, of (i) an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under the underwriting agreement), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering; a letter dated the date
of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to agents subsequent to the date of such financial statements, are
as customarily
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covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offering of securities.
(h) The Company shall as soon as practicable after the effective
date of the registration statement, and in any event within 15 months
thereafter, make "generally available to its security holders" (within the
meaning of Rule 158 under the Act) an earnings statement (which need not be
audited) complying with Section 11(a) of the Act and covering a period of at
least 12 consecutive months beginning after the effective date of the
registration agreement.
(i) The Company shall deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below and
the managing underwriter copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement and
permit the Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request
as it deems necessary to comply with applicable securities laws or NASD rules.
Nothing contained in this Section 7.4(i) shall, in the opinion of Company
counsel, operate as a waiver of Company attorney-client privilege.
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(j) In addition to the Warrant Securities, upon the written request
therefor by any Holder(s), the Company shall include in the registration
statement any other securities of the Company held by such Holder(s) as of the
date of filing of such registration statement, including without limitation,
restricted shares of Common Stock, options, warrants or any other securities
convertible into shares of Common Stock.
(k) For purposes of this Agreement, the term "Majority" in reference
to the Holders of Warrants or Warrant Securities, shall mean in excess of fifty
percent (50%) of the then outstanding Warrants or Warrant Securities that (i)
are not held by the Company, an affiliate, officer, creditor, employee or agent
thereof or any of their respective affiliates, members of their family, persons
acting as nominees or in conjunction therewith or (ii) have not been resold to
the public pursuant to a registration statement filed with the Commission under
the Act.
8. Adjustment to Exercise and Number of Securities.
8.1 Computation of Adjusted Exercise Price. Except as hereinafter
provided, in case the Company shall at any time after the date hereof issue or
sell any shares of Common Stock (other than the issuances or sales referred to
in Section 8.7 hereof), including shares held in the Company's treasury and
shares of Common Stock issued upon the exercise of any options, rights or
warrants, to subscribe for shares of Common Stock and shares of Common Stock
issued upon the direct or indirect conversion or exchange of securities for
shares of Common Stock, for a consideration per share less than the Exercise
Price in effect immediately prior to the issuance or sale of such shares or the
"Market Price" (as defined in Section 8.1(vi) hereof) per share of Common Stock
on the date immediately prior to the issuance or sale of such shares, or without
consideration,
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then forthwith upon such issuance or sale, the Exercise Price shall (until
another such issuance or sale) be reduced to the price (calculated to the
nearest full cent) equal to the quotient derived by dividing (A) an amount equal
to the sum of (X) the product of (a) the lower of (i) the Exercise Price in
effect immediately prior to such issuance or sale and (ii) the Market Price per
share of Common Stock on the date immediately prior to the issuance or sale of
such shares, in either event, reduced, but not to a number which is below .001,
by the positive difference, if any, between the (u) Market Price per share of
Common Stock on the date immediately prior to the issuance or sale and (v) the
amount per share received in connection with such issuance or sale, multiplied
by (b) the total number of shares of Common Stock outstanding immediately prior
to such issuance or sale, plus (Y) the aggregate of the amount of all
consideration, if any, received by the Company upon such issuance or sale, by
(B) the total number of shares of Common Stock outstanding immediately after
such issuance or sale; provided, however, that in no event shall the Exercise
Price be adjusted pursuant to this computation to an amount in excess of the
Exercise Price in effect immediately prior to such computation, except in the
case of a combination of outstanding shares of Common Stock, as provided by
Section 8.3 thereof.
For the purposes of this Section 8 the term Exercise Price shall
mean the Exercise Price per share of Common Stock set forth in Section 6 hereof,
as adjusted from time to time pursuant to the provisions of this Section 8.
For the purposes of any computation to be made in accordance with
this Section 8.1, the following provisions shall be applicable:
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(i) In case of the issuance or sale or shares of Common Stock for a
consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if either of such
securities shall be sold to underwriters or dealers for public offering without
a subscription offering, the initial public offering price) before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting or
purchase thereof by underwriters or dealers or others performing similar
services, or any expenses incurred in connection therewith and less any amounts
payable to security holders or any affiliate thereof, including without
limitation, any employment agreement, royalty, consulting agreement, covenant
not to compete, earned or contingent payment right or similar arrangement,
agreement or understanding, whether oral or written; all such amounts shall be
valued at the aggregate amount payable thereunder whether such payments are
absolute or contingent and irrespective of the period or uncertainty of payment,
the rate of interest, if any, or the contingent nature thereof.
(ii) In case of the issuance or sale (otherwise then as a dividend
or other distribution on any stock of the Company) of shares of Common Stock for
a consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the value of such
consideration as determined in good faith by the Board of Directors of the
Company.
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of
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business on the day following the record date for the determination of
stockholders entitled to receive such dividend or other distribution and shall
be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Company other than
shares of Common Stock shall be deemed to involve the issuance of such shares of
Common Stock for a consideration other than cash immediately prior to the close
of business on the date fixed for the determination of security holders entitled
to receive such shares, and the value of the consideration allocable to such
shares of Common Stock shall be determined as provided in subsection (ii) of
this Section 8.1.
(v) The number of shares of Common Stock at any one time outstanding
shall include the aggregate number of shares issued or issuable (subject to
readjustment upon the actual issuance thereof) upon the exercise of options,
rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
(vi) As used herein, the phase "Market Price" at any date shall be
deemed to be the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading, or, if the Common Stock is not listed or admitted to trading on any
national securities exchange, the average closing bid price as furnished by the
NASD through NASDAQ or similar organization if NASDAQ is no longer reporting
such information, or if the Common stock is not quoted on NASDAQ, as determined
in good faith by resolution of the Board of Directors of the Company, based on
the best information available to it.
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8.2 Options, Rights, Warrants and Convertible and Exchangeable
Securities. In case the Company shall at any time after the date hereof issue
options, rights or warrants to subscribe for shares of Common Stock, or issue
any securities convertible into or exchangeable for shares of Common Stock, for
a consideration per share less than the Exercise Price in effect or the Market
Price immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, or without consideration, the
exercise Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 8.1 hereof, provided that:
(l) The aggregate maximum number of shares of Common Stock, as the
case may be, issuable under such options, rights or warrants shall be deemed to
be issued and outstanding at the time such options, rights or warrants were
issued, and for a consideration equal to the minimum purchase price per share
provided for in such options, rights or warrants at the time of issuance, plus
the consideration (determined in the same manner as consideration received on
the issue or sale of shares in accordance with the terms of the Warrants), if
any, received by the Company for such options, rights or warrants.
(m) The aggregate maximum number of shares of Common Stock issuable
upon conversion or exchange of any convertible or exchangeable securities shall
be deemed to be issued and outstanding at the time of issuance of such
securities, and for a consideration equal to the consideration (determined in
the same manner as consideration received on the issue or sale of shares of
Common Stock in accordance with the terms of the Warrants) received by the
Company for such
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<PAGE> 16
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof
(n) If any change shall occur in the price per share provided for in
any of the options, rights or warrants referred to in subsection (a) of this
Section 8.2, or in the price per share at which the securities referred to in
subsection (b) of this Section 8.2 are convertible or exchangeable, such
options, rights or warrants or conversion or exchange rights, as the case may
be, shall be deemed to have expired or terminated on the date when such price
change became effective in respect of shares not theretofore issued pursuant to
the exercise or conversion or exchange thereof, and the Company shall be deemed
to have issued upon such date new options, rights or warrants or convertible or
exchangeable securities at the new price in respect of the number shares
issuable upon the exercise of such options, rights or warrants or the conversion
or exchange of such convertible or exchangeable securities.
8.3 Subdivision and Combination. In case the Company shall at any
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
8.4 Adjustment in Number of Securities. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Section 8, the number of
Securities issuable upon the exercise of each Warrant shall be adjusted to the
nearest full amount by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Warrant Securities
issuable upon exercise of the Warrants immediately prior to such adjustment and
dividing the product so obtained by the adjusted Exercise Price.
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8.5 Definition of Common Stock. For the purpose of this Agreement,
the term "Common Stock" shall mean (i) the class of stock designated as Common
Stock in the Certificate of incorporation of the Company as may be amended as of
the date hereof, or (ii) any other class of stock resulting from successive
changes or reclassifications of such Common Stock consisting solely of changes
in par value, or from par value to no par value, or from no par value to par
value. In the event that the Company shall after the date hereof issue
securities with greater or superior voting rights than the shares of Common
Stock outstanding as of the date hereof, the Holder, at its option, may receive
upon exercise of any Warrant either shares of Common Stock or a like number of
such securities with greater or superior voting rights.
8.6 Merger or Consolidation. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and deliver to
the Holder a supplemental warrant agreement providing that the holder of each
Warrant then outstanding or to be outstanding shall have the right thereafter
(until the expiration of such Warrant) to receive, upon exercise of such
warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
Subsection shall similarly apply to successive consolidations or mergers.
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8.7 No Adjustment of Exercise Price in Certain Cases. No adjustment
of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Warrants or the shares of
Common Stock issuable upon the exercise of the Warrants; or
(b) If the amount of said adjustment shall be less than 2 cents
($.02) per Security, provided, however, that in such case any adjustment that
would otherwise be required then to be made shall be carried forward and shall
be made at the time of and together with the next subsequent adjustment which,
together with any adjustment so carried forward, shall amount to at least 2
cents ($.02) per Security.
8.8 Dividends and Other Distributions. In the event that the
Company shall at any time prior to the exercise of all Warrants declare a
dividend (other than a dividend consisting solely of shares of Common Stock) or
otherwise distribute to its stockholders any assets, property, rights, evidences
of indebtedness, securities (other than shares of Common Stock), whether issued
by the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this Subsection 8.8.
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9. Exchange and Replacement of Warrant Certificates. Each Warrant
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Securities in such denominations as shall
be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of any Warrant Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, ii
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. Reservation and Listing of Securities. The Company shall at all
times reserve and keep available out of its authorized shares of Common Stock,
solely for the purpose of issuance upon the exercise of the Warrants, such
number of shares of Common Stock or other securities, properties or rights as
shall be issuable upon the exercise thereof. The Company covenants and agrees
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all shares of Common Stock and other securities issuable upon such exercise
shall be duly and validly issued, fully
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paid, non-assessable and not subject to the preemptive rights of any
stockholder. As long as the Warrants shall be outstanding, the Company shall use
its best efforts to cause all shares of Common Stock issuable upon the exercise
of the Warrants to be listed (subject to official notice of issuance) on all
securities exchanges on which the Common Stock issued to the public in
connection herewith may then be listed and/or quoted NASDAQ.
12. Notice to Warrant Holders. Nothing contained in this Agreement
shall be construed as conferring upon the Holders the right to vote or to
consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other manner, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common Stock
any additional shares of capital stock of the Company or securities convertible
into or exchange for shares of capital stock of the Company, or any option,
right or warrant to subscribe therefor; or
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(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed;
then, in any one or more of said events, the Company shall give notice of such
event at least fifteen (15) days prior to the date fixed as a record date or the
date of the closing the transfer books for the determination of the stockholders
entitled to such dividend, distribution, convertible or exchangeable securities
or subscription rights, or entitled to vote on such proposed dissolution,
liquidation, winding up or sale. Such notice shall specify such record date or
the date of closing the transfer books, as the case may be. Failure to give such
notice or any defect therein shall not affect the validity of any action taken
in connection with the declaration or payment of any such dividend, or the
issuance of any convertible or exchangeable securities, or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
13. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
duly made when delivered, or mailed by registered or certified mail, return
receipt requested:
(a) If to the Holders, Sands Brothers & Co., Ltd., 90 Park Avenue,
39th Floor, New York, New York 10016 as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 hereof
or to such other address as the Company may designate by notice to the Holders.
14. Supplements and Amendments. Except as otherwise expressly
provided herein, the provisions of this Agreement may be amended or waived at
any time only by the written
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agreement of the parties hereto. Any waiver, permit, consent or approval of kind
or character on the part of each Company or the Holder of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing.
15. Successors. All the covenants and provisions of this Agreement
shall be binding upon and inure to the benefit of the Company, the Holder and
their respective successors and assigns hereunder.
16. Governing Law; Submission to Jurisdiction. This Agreement and
each Warrant Certificate issued hereunder shall be deemed to be a contract made
under the laws of the State of New York and for all the purposes shall be
construed in accordance with the laws of said State without giving effect to the
rules of said State governing the conflicts of laws.
The Company and the Holder hereby agree that any action, proceeding
or claim against it arising out of, or relating in any way to, this Agreement
shall be brought and enforced in the courts of the State of New York or of the
United States of America for the Southern District of New York, and irrevocably
submits to such jurisdiction, which jurisdiction shall be exclusive. The
Company, and the Holder hereby irrevocably waive any objection to such exclusive
jurisdiction or inconvenient forum. Any such process or summons to be served
upon any of the Company and the Holder (at the option of the party bringing such
action, proceeding or claim) may be served by transmitting a copy thereof, by
registered or certified mail, return receipt requested, postage prepaid,
addressed to it at the address as set forth in Section 13 hereof. Such mailing
shall be deemed personal service and shall be legal and binding upon the party
so served in any action, proceeding or claim. The Company and the Holder agree
that the prevailing party(ies) in any such action or proceeding
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shall be entitled to recover from the other party(ies) all of its/their
reasonable legal costs and expenses relating to such action or proceeding and/or
incurred in connection with the preparation therefor.
17. Entire Agreement; Modification. This Agreement and the Purchase
Agreement (to the extent portions thereof are referred to herein) contain the
entire understanding between the parties hereto with respect to the subject
matter hereof and may not be modified or amended except by a writing duly signed
by the party against whom enforcement of the modification or amendment is sought
18. Severability. If any provision of this Agreement shall be held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provision of this Agreement.
19. Captions. The caption headings of the Sections of this Agreement
are for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
20. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Holder any legal or equitable right, remedy or claim under this Agreement; and
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holder.
21. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL]
TOUPS TECHNOLOGY LICENSING, INC.
By: /s/ [ILLEGIBLE]
--------------------------------
Title:
Attest: /s/ [ILLEGIBLE]
Secretary
SANDS BROTHERS & CO., LTD
By:
--------------------------------
Authorized Officer
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EXHIBIT A-1
FORM OF WARRANT CERTIFICATE
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, October 29, 2004
No. SB-1 3,600,000 Warrants
WARRANTS CERTIFICATE
This Warrant Certificate certifies that _______________________, or
registered assigns, is the registered holder of 3,600,000 Warrants to purchase
initially, at any time from October 29, 1999, until 5:30 p.m. New York time on
October 29, 2004 ("Expiration Date"), up to 3,600,000 fully-paid and
non-assessable shares of common stock, $.001 par value per share ("Common
Stock") of TOUPS TECHNOLOGY LICENSING, INC., a Florida corporation (the
"Company"), at an initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $0.40 per share of Common Stock, upon
surrender of this Warrant Certificate and payment of the Exercise Price at an
office or agency of the Company, or by surrender of this Warrant Certificate in
lieu of cash payment, but subject to the conditions set forth herein and in the
warrant agreement dated as of October 29, 1999 between the Company and Sands
Brothers & Co., Ltd. (the "Warrant Agreement"). Payment of the Exercise Price
shall be made by certified or official bank check in New York Clearing House
funds payable to the order of the Company.
-A-1-
<PAGE> 27
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants issued pursuant to the Warrant Agreement,
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
obligations, duties and immunities thereunder of the Company and the holders
(the words "holders" or "holder" meaning the registered holders or registered
holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the type and/or number of the Company's securities
issuable thereupon may, subject to certain conditions, be adjusted. In such
event, the Company will, at the request of the holder, issue a new Warrant
Certificate evidencing the adjustment in the Exercise Price and the number
and/or type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter, or otherwise impair, the rights of the
holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement without any charge except for any tax in other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as
the absolute owner(s) of this Warrant Certificate (notwithstanding any notation
of ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings to them in the Warrant Agreement.
-A-2-
<PAGE> 28
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be duly executed under its corporate seal.
Dated as of October 29, 1999.
TOUPS TECHNOLOGY LICENSING, INC.
[SEAL] By:
------------------------------------
Title:
Attest:
Secretary
-A-3-
<PAGE> 29
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ shares of Common
Stock at an exercise price of $_______ per share and herewith tenders in payment
for such Securities a certified or official bank check payable in New York
Clearing House Funds to the order of _______________ in the amount of $____,all
in accordance with the terms hereof. The undersigned requests that a certificate
for such Securities be registered in the name of______________ whose address is
______________ and that such Certificate be delivered to _____________________
whose address is
Signature ___________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
_____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
-A-4-
<PAGE> 30
[FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.2]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase shares of Common Stock
in accordance with the terms of Section 3.2 of that certain Warrant Agreement
dated as of October 29, 1999 between TOUPS TECHNOLOGY LICENSING, INC. and SANDS
BROTHERS & CO., LTD. The Undersigned requests that a certificate for such
Securities be registered in the name of _______________ whose address is
______________ and that such Certificate be delivered to ______________ whose
address is _____________________________________
Signature ___________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
_____________________________________
(Insert Social Security or Other
Identifying Number of Holder)
-A-5-
<PAGE> 31
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED ________________ here sells, assigns and
transfers
unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _________________ Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: Signature:
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate.)
(Insert Social Security or other Identifying
Number of Assignee)
-A-6-
<PAGE> 32
ACTUAL WARRANT FOLLOWS:
-A-7-
<PAGE> 1
Exhibit 10.5(a)
FIRST AMENDMENT TO
THE BALANCED OIL RECOVERY SYSTEM LIFT LICENSE
AGREEMENT DATED JUNE 19, 1998
THIS FIRST AMENDMENT to The Balanced Oil Recovery Lift License Agreement
is made and entered into this 29 day of July, 1999, by and between Lift-Pump,
L.L.C., as Oklahoma Limited Liability Company located at 104 South Missouri,
Suite 200, Claremore, Rogers County, Oklahoma, 74017 ("LLC") by its Manager Maok
Groover;
And
Toups Technology Licensing Incorporated, Suite 105, 7887 Bryan Dalry Road,
Largo, Florida 33777, ("TTL"), by its President and Chief Executive Officer,
Leon R. Toups;
RECITALS
WHEREAS LLC and TTL on the 19th day of June, 1998, entered into The
Balanced Oil Recovery System Lift License Agreement ("License Agreement") for
the purpose of undertaking a joint effort at designing, manufacturing, selling
or otherwise commercializing a pumping device for all wells that is referred to
in the License Agreement as the Balanced Oil Recovery System Lift ("BORS Lift")
to complement the production process developed by the LLC; AND
WHEREAS during the course of the improvement and development of the BORS
Lift, LLC and TTL have determine that the BORS lift can be used for a
multiplicity of purposes including, but not limited to, oil wells that are not
candidates for the balancing process developed by the LLC; AND
WHEREAS LLC and TTL recognize and agree that TTL would not be
manufacturing BORS Lifts for any use or purpose but for the efforts of LLC to
develop a pumping unit for oil wells that utilize the balancing process
developed by the LLC; AND
WHEREAS by this First Amendment The Balanced Oil Recovery System Lift
License Agreement dated June 19, 1998 ("First Amendment"), LLC and TTL agree and
intend that the term "BORS Lift" as defined and used in the License Agreement
shall include any and all pumping units or devices developed or manufactured by
TTL for the lifting from the earth or otherwise of hydrocarbons, water or any
other liquids, fluids or slurries of any kind or nature whether or not
containing hydrocarbon.
NOW, THEREFORE, LLC and TTL, intending to be legally bound, agree that the
License Agreement is amended as follows:
1. The recital set forth above are incorporated into and made a part of
this First Amendment.
2. LLC and TTL intend and agree that the License Agreement applies to and
encompasses any and all pumping units or devices and any and all improvements
thereto
<PAGE> 2
developed by TTL and LLC and manufactured by TTL as provided in the License
Agreement. The parties hereto further agree that the term "BORS Lift" as defined
and used in the License Agreement shall include any and all pumping units or
devices developed by TTL or LLC and manufactured by TTL as provided in the
Licensed Agreement for the lifting from the earth or otherwise of hydrocarbons,
water or any other liquids, fluids or slurries of any kind or nature whether or
not containing hydrocarbons.
3. Other than as amended herein, all of the remaining terms and conditions
of the License Agreement remain in full force and effect.
4. This First Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns subject to the
restriction upon assignment set forth in the License Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed,
sealed, and altered by persons duly authorized so to do, as of the date first
stated hereinabove.
LLC: TTL:
Lift-Pump, LLC. Toups Technology Licensing
Incorporated
By: /s/ Mack Greever By: /s/ Leon H. Toupes, Pres.
---------------------------- -----------------------------------
Mack Greever, Manager Leon H. Toupes, President
ATTEST: ATTEST:
/s/ Gerold Allen /s/ Mark Clancy
- ------------------------------- --------------------------------------
Gerold Allen, Member Mark Clancy, Vice President
<PAGE> 1
Exhibit 10.5(b)
SECOND AMENDMENT TO
THE BALANCED OIL RECOVERY SYSTEM LIFT LICENSE
AGREEMENT DATED JUNE 19, 1998
THIS SECOND AMENDMENT to The Balanced Oil Recovery System Lift License
Agreement dared June 19, 1998 is made and entered into this 30th day of March,
2000, by and between Lift-Pump. L.L.C., an Oklahoma Limited Liability Company
located at 104 South Missouri, Suite 200, Claremore, Rogers County, Oklahoma
("LLC") by its Manager, Mack Greever;
And
Toups Technology Licensing, Incorporated, Suite 105, 7887 Bryan Dairy
Road, Largo, Florida 33777, ("TTL") by its President and Chief Executive
Officer, Leon H. Toups;
RECITALS
WHEREAS, LLC and TTL on the 19th day of June, 1998, entered into The
Balanced Oil Recovery System Lift License Agreement ("License Agreement") for
the purpose of undertaking a joint effort at designing, manufacturing, selling
or otherwise commercializing a pumping device for oil wells that is referred to
in the License Agreement as the Balanced Oil Recovery System Lift ("BORS Lift")
to complement the production process developed by the LLC; and
WHEREAS, LLC and TTL on the 29th day of July, 1999, entered into a First
Amendment To the Balanced Oil Recovery System Lift License Agreement which
amended the License Agreement ("First Amendment") as more particularly set forth
therein; and
WHEREAS, by this Second Amendment to The Balanced Oil Recovery System Lift
License Agreement dated March 30, 2000, ("Second Amendment"), LLC and TTL agree
and intend to further define and clarify the applicability of the License
Agreement and the First Amendment to any and all pumping units or devices
developed by the LLC and TTL pursuant to the License Agreement and First
Amendment and to further supplement the method of obtaining patents pursuant to
the License Agreement.
NOW, THEREFORE, LLC and TTL, intending to be legally bound, agree that the
License Agreement is amended as follows:
<PAGE> 2
1. The recitals set forth above are incorporated into and made a part of
this Second Amendment.
2. LLC and TTL intend and agree that the BORS Lift as defined in the First
Amendment and any and all improvements thereto shall be included within the
terms "Licensed Know-how", "Licensed Patent", "Licensed Product", "Licensed
Service", "Licensed Specification, "Licensed System", "Licensed Trademark" and
"Improvement" is such terms are defined in paragraphs 1.a through 1.h, inclusive
of the License Agreement. The parties hereto further agree that any proprietary
knowledge or information that is obtained, created or developed by either the
LLC or TTL at any time during the License Term or any extension thereof and
used in a BORS Lift or any adaptation of or Improvement to the BORS Lift shall
be subject to the License Agreement, as amended.
3. Paragraph 8.c. of the License Agreement is hereby amended as follows:
c. In the Event TTL is the originating party of an improvement that
appears possibly patentable after a competent prior art search, TTL will
disclose such Improvement to the LLC and the LLC prosecute a patent application
thereon in the name of the LLC as the inventor and originating party, and may
discontinue prosecuting it or maintaining any resulting patent. If the LLC
elects to apply for a patent for The BORS Lift and/or the Licensed Know How
and/or the process of producing oil with minimal water production and/or a
process that utilizes both The BORS Lift and the process of producing oil with
minimal water production or any Improvement(s) thereto and included under this
Agreement, the LLC will file and prosecute a patent application thereon in the
name of the LLC as the inventor and originating party, and may discontinue
prosecuting it or maintaining any resulting patent. TTL shall advance such funds
to the LLC as the LLC may request from time to time, as are reasonably necessary
in the opinion of the LLC's Patent Counsel, to diligently prosecute patent
applications for The BORS Lift and the process of producing oil with minimal
water production and any Improvement thereto. TTL shall offset any funds
advanced to the LLC from Running Royalties as such Running Royalties (nor
including any Running Royalties advanced pursuant to paragraph 6.a. of the
License Agreement) may become due and payable. Any and all patents obtained
pursuant to this Agreement, including but not limited to any patents obtained as
a result of the LLC compliance with paragraph 8.d., as amended, shall become the
property of the LLC free and clear of any and all claim, of any kind or nature
of TTL other than as set forth in the License Agreement and any amendment
thereto.
4. Paragraph 8.d. of the License Agreement is amended as follows:
<PAGE> 3
d. If the LLC elects to have an Improvement included under this
Agreement, the LLC will pay the expense of undertaking to patent it within the
Licensed Territory subject, however, to the agreement of TTL to advance such
funds and the LLC to repay such advance as set forth in paragraph 8.c. above.
TTL and the LLC intend and agree that all patents obtained pursuant to this
Agreement shall become and remain the property of the LLC.
5. Paragraph 13.g. is hereby amended as follows:
g. All notices, requests and other communications hereunder shall be
in writing and shall be deemed to have been given if delivered by courier or
other means of personal service, or if sent by telex or telecopy, or mailed
first class, postage prepaid, by certified mail, return receipt requested,
addressed to the parties at the addresses herein set forth above. All notices,
requests and other communications shall be deemed received on the date of actual
receipt. Any party may change its address for notices by notice to the other
party as provided in this paragraph 13.g.
6. Paragraph 13 is hereby amended as follows:
i. On or before January 31 of each calendar year during the License
Term, TTL shall deliver to the LLC the business plan adopted by TTL for the
ensuing calendar year setting forth at a minimum, (i) projected sales of
Licensed Product and Licensed Services, (ii) projected prices for sales of
Licensed Product and Licensed Services and the method of determining the pricing
structure for Licensed Product and Licensed Services; (iii) the method planned
to achieve the projected sales and the amount of the resources to be devoted to
and the amount and source of the cash to be expended in achieving the projected
sales and implementing the business plan; and (iv) such other information as is
normally included in a business plan by a prudent manufacturer.
7. Other than as amended herein and in the First Amendment, all of the
remaining terms and conditions of the License Agreement shall remain in full
force and effect.
8. This Second Amendment shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns subject to the
restrictions upon assignment set forth in the License Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed,
scaled, and attested by persons duly authorized so to do, as of the date firs
stated hereinabove.
LLC: TTL:
<PAGE> 4
Lift-Pump, L.L.C., Toups Technology Licensing
Incorporated
By: /s/ Mack Greever By: /s/ Leon H. Toupes, Pres.
---------------------------- -----------------------------------
Mack Greever, Manager Leon H. Toupes, President
ATTEST: ATTEST:
/s/ Gerold Allen /s/ Mark Clancy
- ------------------------------- --------------------------------------
Gerold Allen, Member Mark Clancy, Vice President
<PAGE> 1
Exhibit 10.6
THE ELECTROMAGNETION(TM)
AQUAFUEL(TM) ENHANCE
LICENSE AGREEMENT
THIS AGREEMENT, effective this 8th day of [ILLEGIBLE]
Lawrence Perovetz 50% owner of the Electro[ILLEGIBLE] Ruggero Maria
Santilli 50% owner of the Elec [ILLEGIBLE] collectively "ElectroMagnetion(TM)
Owners");
and
Toups Technology Licensing Incorporated, S[ILLEGIBLE] Road, Largo, Florida
33777, ("TTL"), by its Pre[ILLEGIBLE] Officer, Leon H, Toups;
WITNESSETH THAT
WHEREAS the ElectroMagnetion(TM) Owners have filed a patent application on
ElectroMagnetion(TM) and are developing the related technology, here defined as
new bonds among molecules, caused by suitable electric and/or magnetic fields
(collectively "ElectroMagnetion(TM) Technology"); AND
WHEREAS TTL is engaged in the business of developing market-ready
technological products and services protected by intellectual property rights,
especially patents, by application of a systems approach to identifying,
funding, developing, and marketing technological products and services; AND
WHEREAS TTL is the world-wide exclusive sub-licensee for the AquaFuel(TM)
Technology, a nonfossil combustible gas produced via an electric discharge on
carbon rods in water, AND
WHEREAS in so far as the ElectroMagnetion(TM) Owners portray the
ElectroMagnetion(TM) Technology as that effecting the structure as well as
certain new industrial practical applications of AquaFuel(TM); AND
WHEREAS ElectroMagnetion(TM) Owners and TTL are jointly interested in
commercializing ElectroMagnetion(TM) Technology as same is deemed an enhancement
to AquaFuel(TM), as by a License Agreement that provides for the
ElectroMagnetion(TM) Owners to introduce TTL to the technology and to authorize
TTL to make and to commercialize ElectroMagnetion(TM) Technology as same is
deemed an enhancement to AquaFuel(TM) at an agreed royalty, so long as both
parties perform in accordance with this ElectroMagnetion(TM)-AquaFuel(TM)
License;
For TTL: LM ElectroMagnetion(TM) Owners: Initials
---- -------
Page 1 of 15 Pages
<PAGE> 2
NOW, THEREFORE, intending to be legally bound the ElectroMagnetion(TM)
Owners permit and TTL, agrees to undertake designing, manufacturing, and selling
or otherwise commercializing The ElectroMagnetion(TM) Technology as same is
deemed an enhancement to AquaFuel(TM) upon the following terms and conditions
(the "ElectroMagnetion(TM)-AquaFuel(TM) License")
1. Definitions
a. "Licensed Know-how" means unpatented proprietary technical,
professional, or commercial information as it applied to
AquaFuel(TM) disclosed to TTL by ElectroMagnetion(TM) Owners, and
useful in designing, making, or using Licensed Products or
performing Licensed Services.
b. "Licensed Patent" means any patent (or disclosed patent
application) according to the limitations of this license to TTL
herein and containing a claim defining the composition, design,
machine, process, product by process, manufacturing, structure,
operation, or use of the ElectroMagnetion(TM) Technology as deemed
an enhancement to AquaFuel(TM), insofar as owned or licensable by
ElectroMagnetion(TM) Owners and so licensed to TTL in or for the
License Territory.
c. "Licensed Product(TM) means by-product or related composition whose
production, structure, or use embodies any Licensed Know-how, is
defined by a claim of a Licensed Patent or disclosed patent
application and/or would infringe a Licensed Patent in the absence
of this ElectroMagnetion(TM)-AquaFuel(TM) License.
d. "Licensed Service" means any designing, making, specifying, or any
instruction, leasing, or performance of other services relating to
any Licensed Product for, to, or with a customer or other party.
e. "Licensed Specification" means any requirement or standard
identified by ElectroMagnetion(TM) Owners to TTL relating to
composition, design, manufacturing method, structure, workmanship
and/or resulting appearance, form, identity, quality, or
presentation of a Licensed Product or a Licensed System,
f "Licensed System" means any apparatus, assembly, device, or
structure for producing or using a Licensed Product, with or for use
with (or without) other accessories.
For TTL: LM ElectroMagnetion(TM) Owners: Initials
---- -------
Page 2 of 15 Pages
<PAGE> 3
g. "Licensed Trademark "Eletion(TM), Magnetion(TM) or
ElectroMagnetion(TM) Technology or other word and/or design, used
with or without any other word and/or design, in or as a brand name
for Licensed Products or Licensed Services or Licensed Systems.
h. "Improvement" means any substantial change in any foregoing
defined item (a to g) during this ElectroMagnetion(TM)-AquaFuel(TM)
License, whether made by ElectroMagnetion(TM) Owners or by TTL, or
both, or otherwise owned and/or licensable by either of them to the
other, as more fully considered below.
i. "License Term" means the duration of this
ElectroMagnetion(TM)-AquaFuel(TM) License, as follows: (i) an
Initial Period, beginning on the aforesaid effective date with a
Startup Time ending on exactly December 31, 1998, and continuing, if
TTL so elects, to the end of the year 2002; and (ii) further
continuing (at TTL's advance notice of election to do so) for one or
more successive Renewal Periods of three (3) calendar years.
j. "License Territory" means worldwide.
k. "Common Shares" means the $.001 par value Common Stock of Toups
Technology Licensing, Inc..
l. "Registration Rights" means those actions necessary to register the
Common Stock described herein with federal and/or state authorities
as is required to allow the issuance of non-legend Common Shares of
TTL.
m. "ElectroMagnetion(TM) Technology" for the purposes of this
ElectroMagnetion(TM)-AquaFuel(TM) License, means the patent pending,
technology owned by the ElectroMagnetion(TM) Owners and of which is
specifically found to enhance the commercialization of the
AquaFuel(TM) technology.
n. "ElectroMagnetion(TM) Owners" means Lawrence Perovetz and Ruggero
Maria Santilli, and any and all other persons, entities or others
who are now and who may become co-owners or co-patent owners when
ElectroMagnetion(TM) Technology patent(s) are granted.
o. "TTL" shall means Toups Technology Licensing, Inc., a Florida
Corporation.
For TTL: LM ElectroMagnetion(TM) Owners: Initials
---- -------
Page 3 of 15 Pages
<PAGE> 4
p. "Cash Equivalent" shall mean the Common Shares of TTL provided
such Common Shares are traded through a recognized quotation service
and/or exchange including the over-the-counter bulletin board, the
NasDaq market system or any United States registered securities
exchange. The value of the Common Shares shall be fixed at the "ask"
price of the Common Shares as offered through such quotation service
or exchange as of the day of any transaction relating to this
ElectroMagnetion(TM)-AquaFuel(TM) License.
2. License and Sublicenses
a. ElectroMagnetion(TM) Owners hereby grants to TTL, for the License
Term only, an indivisible, non-assignable right and license to make,
use, lease, sell, and otherwise practice commercially the defined
Licensed subject matter as defined in items 1a-1g hereonabove.
b. So long as TTL is in good standing under this ElectroMagnetion(TM)-
AquaFuel(TM) License, this grant is to be exclusive, meaning that
ElectroMagnetion(TM) Owners will not grant any third party a similar
license in the License Territory.
c. TTL shall have the right to apply any Licensed Trademark to Licensed
Products and other components sold by TTL for construction of
Licensed Systems, but TTL shall use Licensed Trademarks only in
accordance with acceptable trademark practice and subject to the
provisions of this ElectroMagnetion(TM)-AquaFuel(TM) License.
d. TTL customers will have an implied sublicense to assemble Licensed
Products into Licensed Systems, with or without other components.
TTL shall not enter into sub-license agreements relating to any use
of ElectroMagnetion(TM) which are under terms less favorable than or
in contradiction to those which are specified throughout this
agreement.
e. TTL may grant sublicenses under this ElectroMagnetion(TM)-
AquaFuel(TM) License. Both Parties hereto shall cause any third
parties whether vendor, consultant or otherwise, to enter
Confidentiality Agreements relating to the matters hereon.
3. License Term
a. The Initial Period begins on the effective date of this
ElectroMagnetion(TM)-AquaFuel(TM) License and will extend at least
to December 31, 1998, when it will terminate if TTL fails to notify
For TTL: LM ElectroMagnetion(TM) Owners: Initials
---- -------
Page 4 of 15 Pages
<PAGE> 5
ElectroMagnetion(TM) Owners in writing at least thirty (30) days
theretofore that TTL elects to continue for the rest of the Initial
Period. Such notice would extend the Initial Period to December 31, 2002.
b. Unless sooner terminated, the License Term may continue for a
succeeding Renewal Period, from the end of the Initial Period or of
any Renewal Period, at the election of TTL if then in good standing;
such election to be made by TTL giving written notice to
ElectroMagnetion(TM) Owners anytime during the last calendar quarter
of any Period, of intention to continue this
ElectroMagnetion(TM)-AquaFuel(TM) License for a succeeding Renewal
Period, beginning on the first day of January of the next year and
continuing for three (3) more years.
c. The License Term shall continue from Period to Period so long as TTL
timely renews, or until ElectroMagnetion(TM) Owners gives TTL notice
that TTL is no longer in good standing because of a specified breach
or default of one or more of TTL's obligations under this
ElectroMagnetion(TM)-AquaFuel(TM) License; TTL shall have the right
to remedy any such breach or default within forty-five (45) days
thereafter or by the due date of the next quarterly report by TTL
(whichever is later) to return to good standing as to such breach or
default, unless such breach shall be in connection with TTL'S
failure to pay or report Royalty in which case this license shall be
terminated 45 days after non-payment of amounts due. Likewise, if
ElectroMagnetion(TM) Owners should be in breach or default of one or
more of ElectroMagnetion(TM) Owner's obligations under this
ElectroMagnetion(TM)-AquaFuel(TM) License, ElectroMagnetion(TM)
Owners shall have the right to remedy any such breach or default
within forty-five (45) days thereafter or by the due date of the
next quarterly report by TTL (whichever is later) to return to good
standing as to such breach or default.
d. Obligations of this ElectroMagnetion(TM)-AquaFuel(TM) License that
are indicated as surviving beyond the end of a Period or of the
License Term shall continue for such time period as may be lawful,
despite notice by either party to the other of an election to
discontinue either party's participation in or under this
ElectroMagnetion(TM)-AquaFuel(TM) License.
e. The Term of this ElectroMagnetion(TM)-AquaFuel(TM) License, if not
sooner ended by the act of a party or the operation of law, shall
end upon expiration of the last to expire of the Licensed Patents,
if any,
For TTL: LM ElectroMagnetion(TM) Owners: Initials
---- -------
Page 5 of 15 Pages
<PAGE> 6
except as TTL is using the ElectroMagnetion(TM) Technology trademark, or
otherwise as noted below.
4. Confidentiality
a. To the extent that TTL receives Licensed Know-how, or either party
becomes aware of other proprietary information from the other party
via their relationship pursuant to this ElectroMagnetion(TM)-
AquaFuel(TM) License, each recipient of such information will hold
it in confidence so long as the other party effectively treats it as
confidential, except as specific information becomes public
knowledge otherwise than by or from TTL.
b. The foregoing obligation to keep proprietary information
confidential and to safeguard it within the organization of a party
will survive any termination of this ElectroMagnetion(TM)-
AquaFuel(TM) License to the extent that such information is not
common trade knowledge. To the extent permitted by law, TTL shall
cause all third party participants to execute and adhere to the same
or similar agreements of confidentiality, as defined in 2e.
5. Startup Time
a. TTL shall make available at its own expense, facilities, equipment,
and resources for the ElectroMagnetion(TM) Technology design,
development, and marketing purposes during the Startup Time in order
to enable the equipment and resultant products to be analyzed,
tested, and (as soon as feasible) to be demonstrated to prospective
customers, investors, and other interested persons. Any use of TTL's
facilities by the ElectroMagnetion(TM) Owners for applications other
than for AquaFuel(TM) shall be the subject of a separate agreement.
b. ElectroMagnetion(TM) Owners will provide a continual supply of
information relating to the ElectroMagnetion(TM) Technology Licensed
Know-how to TTL from time to time as may be appropriate.
ElectroMagnetion(TM) Owners acknowledge that due to the development
stage of the ElectroMagnetion(TM) technology, TTL would not enter
this agreement without their assurances of continued informational
guidance and any withholding of such information or lack of
willingness to provide such information shall be grounds for default
of this agreement.
6. Royalties
For TTL: LM ElectroMagnetion(TM) Owners: Initials
---- -------
Page 6 of 15 Pages
<PAGE> 7
a. The Running Royalty rate for Licensed Patent, Licensed Know-how,
Licensed Trademarks, Licensed Product, Licensed Services, and
Licensed Systems is Six Percent (6%) of all that TTL receives in
money or other things of value for leasing, servicing, selling, or
otherwise commercializing the same.
b. Running Royalty accrues upon invoice, lease, sale, or service by TTL
but shall not be payable until TTL's receipt of payment thereof and
shall be without any deduction from TTL's actual total revenue
therefrom, except for customers' related costs (such as insurance,
shipping, or taxes) and then only if so itemized on TTL's invoices
to them. TTL undertakes to use all legal means in the collection of
any customer's outstanding payments.
c. Running Royalty payable for any given month becomes due at the end
of the then current calendar quarter, and shall be paid, according
to item 6b hereinabove, during the first month of the next calendar
quarter, or will become overdue on the first day of the second
month.
d. In addition to the Running Royalties which may become due, upon
signing this ElectroMagnetion(TM)-AquaFuel(TM) License, TTL shall
deliver to ElectroMagnetion(TM) Owners Cash Equivalents equal to
$250,000 (two hundred and fifty thousand dollars) in the form of
unregistered Common Shares. Said Shares shall be fully vested upon
receipt. At July 8, 1998, the "bid" price for TTL's Common Shares as
displayed through the over-the-counter, bulletin board marketplace
was $2.375. Therefore, TTL shall issue 105,263 unregistered Common
Shares in fulfillment of this item 6d. TTL undertakes to bear all
expenses to cause for the registration of such Cash Equivalents
according to applicable federal and state securities registration
requirements within a reasonable time following the execution of
this ElectroMagnetion(TM)-AquaFuel(TM) License but in no event shall
such registration commence later than 90 days after the effective
date of this ElectroMagnetion(TM)-AquaFuel(TM) License.
7. Payments and Reports
a. TTL will report to ElectroMagnetion(TM) Owners, all Running
Royalties for each calendar quarter of the License Term during the
first month of the next ensuing calendar quarter and will include
with each such report full payment of royalty due for (and reported
for) the preceding quarter's operations. Each report shall include a
listing of all current ElectroMagnetion(TM) sub-licensees.
For TTL: LM ElectroMagnetion(TM) Owners: Initials
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Page 7 of 15 Pages
<PAGE> 8
b. Quarterly and annual royalty reports will be signed and be certified
as accurate and complete by an authorized officer of TTL.
c. TTL will keep accurate and complete records of all business done
pursuant to this ElectroMagnetion(TM)-AquaFuel(TM) License and will
make such records available to ElectroMagnetion(TM) Owners, no more
than two (2) persons at once-for inspection during regular business
hours, upon at least three (3) business days' advance notice, to
determine Royalties accrued and paid or unpaid, and any other
information due hereunder.
d. ElectroMagnetion(TM) Owners may cause an audit to be made of the
applicable records in order to verify statement for Running
Royalties made hereunder. Any audits shall be conducted by an
independent certified public accountant, acceptable to both parties,
and shall be conducted during regular business hours at TTL's
offices.
e. ElectroMagnetion(TM) Owners shall bear the expenses of any such
audit unless such audit reveals that the Royalties paid by TTL under
this ElectroMagnetion(TM)-AquaFuel(TM) License for the Period
subject to the audit are less than ninety-five percent (95%) of the
amount owed by TTL for such period. In such event, the costs of the
audit shall be borne by TTL in addition and without limitation to
any right of remedy ElectroMagnetion(TM) Owners may have, TTL agrees
to pay the balance of such royalties due ElectroMagnetion(TM)
Owners within forty-five (45) days after written notice from
ElectroMagnetion(TM) Owners of TTL's understatement of Royalties
due. Furthermore, TTL shall pay interest on all understated
Royalties at a rate of 1.5% per month or lesser amount as mandated
by law, computed from the day on which said Royalties were due and
owing to ElectroMagnetion(TM) Owners.
f. Failure by TTL to report or to pay Royalty, or to maintain or make
available records of business done hereunder, will terminate this
ElectroMagnetion(TM)-AquaFuel(TM) License, if not remedied within
thirty (30) days, unless limited to nonpayment of money, which may
be remedied within forty-five (45) days.
8. Improvements
a. Any new composition, design, product, or service which improves a
Licensed Product or Licensed Services or Licensed Systems, invented
or otherwise coming under the control of either party during the
License Term, is deemed an "Improvement" and such
For TTL: LM ElectroMagnetion(TM) Owners: Initials
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Page 8 of 15 Pages
<PAGE> 9
party will disclose the same to the other party promptly and in
enough detail to enable the other party to elect whether to have
such Improvement included hereunder.
b. As to any such Improvement by either party, either party may elect
to have such Improvement included hereunder, within three (3) months
after first knowledge thereof, without change in Royalty, by
promptly notifying the other party of an election to do so; and the
party that made or acquired such Improvement need do no more if the
other party fails to elect to include the Improvement.
c. Any Improvement shall become a part of this agreement unless such
Improvement is deemed patentable in its own right. Any Improvement
which is deemed patentable and which is found to be a part of this
agreement, i.e., an enhancement to AquaFuel(TM), may be the subject
of a separate agreement.
d. Nothing within this Agreement shall preclude TTL from independently
filing patents on AquaFuel(TM) technology or inclusive of any aspect
contained in the existing patent application for
ElectroMagnetion(TM) for liquids as well as a continuation patent
without any further compensation. However, nothing within this
agreement shall authorize TTL to bind ElctroMagnetion(TM) Owners to
any patent to which they do not want to participate.
9. Infringement Rights
a. The ElectroMagnetion(TM) Owners state that the ElectroMagnetion(TM)
Technology is a new bond among molecules caused by suitable electric
and/or magnetic fields and that ElectroMagnetion(TM) is an
independent invention eligible for patent(s) or similar devices
separate from the AquaFuel(TM) Technology. Therefore, in so far as
the ElectroMagnetion(TM) Technology is found to be not eligible for
patent(s) or is found to infringe on any pre-existing patent(s)
including those patent(s) underlying the AquaFuel(TM) Technology,
then TTL shall have no further obligation of any kind under this
ElectroMagnetion(TM)-AquaFuel(TM) License. The ElectroMagnetion(TM)
Owners shall notify TTL in writing at such time as any
ElectroMagnetion(TM) Technology patent is issued or denied according
to any action, final or otherwise, by the US Patent Office.
b. In the event that TTL's commercialization of any Licensed Product,
Licensed Service, or Licensed System is accused of-infringing a
proprietary right of any third party, the parties will cooperate in
attempting to avoid such infringement or to prove lack of
For TTL: LM ElectroMagnetion(TM) Owners: Initials
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Page 9 of 15 Pages
<PAGE> 10
infringement, and so long as TTL's license hereunder is exclusive to the
extent set forth above, TTL will have a right, but not an obligation, to
defend or assist in defending against any infringement action brought by a
third party, subject to paying all the costs of doing so other than such
costs or expenses as ElectroMagnetion(TM) Owners may voluntarily pay
incidental thereto or to participation therein. Any moneys recovered as a
result of litigation or however will be retained by the parties, pro-rated
to their expenditures.
c. Neither party will be liable to the other party if unable or
unwilling to continue this ElectroMagnetion(TM)-AquaFuel(TM) License
because of such infringement of third-party rights, and in that
event TTL will cease commercializing Licensed Products, Licensed
Services, and Licensed Systems, and TTL will relinquish its rights
hereunder in that event, and thereby terminate its Royalty and
attendant obligations to ElectroMagnetion(TM) Owners.
d. In the event that the activities of any third party are asserted (or
other-wise appear) to infringe an intellectual property right
licensed to TTL hereunder, the parties will cooperate in attempting
to ascertain and to abate such infringement. So long as TTL's
license hereunder is exclusive to the extent set forth above, TTL
will have a prior right, but not an obligation, to abate such
infringement, whether by litigation or otherwise, subject to paying
all the costs of doing so other than such costs or expenses as
ElectroMagnetion(TM) Owners may voluntarily pay incidental thereto
or to participation therein. Any moneys recovered from a third-party
infringer will be retained by the parties, pro-rated to their
expenditures after determining what portion of moneys recovered are
due ElectroMagnetion(TM) Owners as part of their Running Royalty.
e. If third-party infringement is not abated, TTL may elect to continue
as a non-exclusive licensee under this ElectroMagnetion(TM)-
AquaFuel(TM) License as its sole remedy, or alternatively TTL may
discontinue its license and cease royalty payments as its sole
remedy.
10. Assurances
a. ElectroMagnetion(TM) Owners assures TTL of its origination of the
inventions and ElectroMagnetion(TM) Owners guarantee TTL of
ElectroMagnetion(TM) Owner's invention priority.
b. ElectroMagnetion(TM) Owners warrants ownership of the Licensed
Products and Licensed Services, in the specific sense that
For TTL: LM ElectroMagnetion(TM) Owners: Initials
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Page 10 of 15 Pages
<PAGE> 11
ElectroMagnetion(TM) Owners have no reason to believe that any third party
has any right to prevent either ElectroMagnetion(TM) Owners or TTL from
practicing any Licensed Invention, or from using any Licensed Trademark,
as provided in this ElectroMagnetion(TM)-AquaFuel(TM) License, and
ElectroMagnetion(TM) Owners warrant in good faith such practice or usage
as non-infringing of third-party rights.
c. ElectroMagnetion(TM) Owners will have no liability whatever to ML
for TTL's actions or inactions under this ElectroMagnetion(TM)-
AquaFuel(TM) License, and TTL will save ElectroMagnetion(TM) Owners
harmless against any liability to third parties whether based upon
agency, contract, negligence, product liability, or other basis-for
any claim based on action or inaction of TTL relating to Licensed
Products, Services, or Systems.
11. Product Marking
a. TTL will mark on Licensed Products (or containers) each patent
number applicable thereto upon being advised thereof by
ElectroMagnetion(TM) Owners. During the patent application period,
TTL shall mark on Licensed Products "patent pending."
b. TTL will display a Licensed Trademark (if elected) on all Licensed
Product and in advertising copy, brochures, and publications by or
for TTL about Licensed Product. TTL will not use any Licensed
Trademark in or as a trade name (i) if not elected by either party,
or (ii) if elected, after TTL discontinues (or other termination of)
TTL's license under this ElectroMagnetion(TM)-AquaFuel(TM) License.
c. TTL will not make any material change in materials, production
methods, or otherwise that might affect the nature or quality of any
the ElectroMagnetion(TM) Technology products or services, without
approval of ElectroMagnetion(TM) Owners.
d. If TTL elects to use one or more Licensed Trademark(s), TTL will
display one thereof on each container of Licensed Product made by or
for it, and in all Licensed Product advertising copy, product
brochures, press releases, and publications by or for TTL about
Licensed Product plus the generic name of the goods, together with
occasional notice that such Trademark is the property of
ElectroMagnetion(TM) Owners.
12. Termination
For TTL: LM ElectroMagnetion(TM) Owners: Initials
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Page 11 of 15 Pages
<PAGE> 12
a. Anytime during the last calendar quarter of the Initial or any
Period, TTL may notify ElectroMagnetion(TM) Owners of TTL's election
to continue the ElectroMagnetion(TM)-AquaFuel(TM) License for a
Period, to begin at the end of the then current Period; or, by
failing to do so, TTL will terminate its rights under this
EIectroMagnetion(TM)-AquaFuel(TM) License, whereupon TTL will be
obligated to discontinue its participation in licensed activities by
the end of the existing Period, except as the parties otherwise
agree in a separate signed written ElectroMagnetion(TM)-AquaFuel(TM)
License.
b. Upon termination, TTL will refrain from exercising thereafter any
right it had by license hereunder, such as practicing the invention
of any previously Licensed Patent, or using a Licensed Trademark or
confusingly similar expression.
c. Whenever TTL is not in good standing hereunder, ElectroMagnetion(TM)
Owners may render TTL's license wholly non-exclusive, or if it is
already non-exclusive for a prior breach or default
ElectroMagnetion(TM) Owners may terminate TTL's rights hereunder, in
the absence of specific curative provisions for TTL's breach or
default, or if TTL has had an opportunity to comply such a curative
provisions and failed or refused to do so.
d. If either party becomes, or would become, disabled-as by the other
party's choosing, or being subjected to, an act or a procedure for
relief of debtors from enforcing compliance with a given executory
obligation of the other party hereunder (e.g., compliance with
standards, action with regard to infringers, offer of Improvements)
the thus disabled party may deem this ElectroMagnetion(TM)-
AquaFuel(TM) License and the license and other rights under this
ElectroMagnetion(TM)-AquaFuel(TM) License terminated.
e. No inaction or overlooking by ElectroMagnetion(TM) Owners of any
condition or provision of this ElectroMagnetion(TM)-AquaFuel(TM)
License or of any breach or default thereof by TTL shall be deemed
to imply or to constitute a future waiver of any similar breach or
default of the same or other condition/provision.
f. The ElectroMagnetion(TM) Owners are currently engaged in effecting
patent(s) relating to the ElectroMagnetion(TM) Technology. Should
the ElectroMagnetion(TM) Owners not be successful in acquiring
patent(s) relating to the ElectroMagnetion(TM) Technology within a
reasonable period of time, this ElectroMagnetion(TM)-AquaFuel(TM)
License shall terminate. For the purposes of this item 12f,
"reasonable period of time" shall mean that ElectroMagnetion(TM)
For TTL: LM ElectroMagnetion(TM) Owners: Initials
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Page 12 of 15 Pages
<PAGE> 13
Owners shall continually take all steps and perform all work necessary to
effect the final ElectroMagnetion(TM) Patent and shall report in writing
such progress to TTL on a quarterly basis beginning with the calendar
quarter on the aforesaid effective date of this agreement. Failure by
ElectroMagnetion(TM) Owners to pursue an ElectroMagnetion(TM) patent on a
reasonable basis shall be grounds for default of this agreement.
13. Notices
a. If to ElectroMagnetion(TM) Owners
Lawrence Perovetz
1950 East Adams Drive
Maitland, Florida 32751
Ruggero Santilli
90 East Winds Court
Tarpon Springs, Fl 34683
b. If to TTL
Toups Technology Licensing, Inc.
7887 Bryan Dairy Road
Largo, Florida 33777
14. Miscellaneous
a. If any one or more provision(s) or effect(s) of this
ElectroMagnetion(TM)-AquaFuel(TM) License should prove to be invalid
or unenforceable, and the ElectroMagnetion(TM)-AquaFuel(TM) License
be otherwise valid and enforceable, the invalid or unenforceable
provision or portion thereof will be severed, and the remainder of
the ElectroMagnetion(TM)-AquaFuel(TM) License be and remain valid
and enforceable to the fullest extent permitted by applicable law.
b. This ElectroMagnetion(TM)-AquaFueI(TM) License is made for the
benefit of the parties, their heirs, successors or any other person
or legal entity named in any provision hereof, and not made to give
any unnamed person or legal entity any right of action whatever.
c. Each statement made in this ElectroMagnetion(TM)-AquaFuel(TM)
License is deemed material, and each party is entitled to rely, and
deemed to have relied, upon the truth and correctness thereof in
entering into this ElectroMagnetion(TM)-AquaFuel(TM) License.
For TTL: LM ElectroMagnetion(TM) Owners: Initials
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Page 13 of 15 Pages
<PAGE> 14
d. Each party acknowledges that he has received advice of independent
counsel of choice as to the inducements, provisions, and terms of
this ElectroMagnetion(TM)-AquaFuel(TM) License, and their effect,
whereupon entering into this ElectroMagnetion(TM)-AquaFuel(TM)
License is each party's free and independent act.
e. This ElectroMagnetion(TM)-AquaFuel(TM) License is to be governed by
Federal law to whatever extent a proprietary right granted by the
United States is involved, and otherwise by Florida law, except as
activities of a party in any other State render that other State's
law applicable.
f. In the event that any action or proceeding is brought to enforce any
of the terms and conditions of this ElectroMagnetion(TM)-
AquaFuel(TM) License, then the party in whose favor relief is
granted and/or judgment is entered shall be entitled to have and
recover from the other party or parties all costs, prejudgement
interest, and reasonable attorney's fees incurred in connection with
the enforcement action.
g. Notice to be given under this ElectroMagnetion(TM)-AquaFuel(TM)
License will be in writing and be addressed to the other party at
the address of such party hereinabove, unless such address has been
superseded by like notice, whereupon the latest noticed address
thereof is to be used. Notice will be effective when delivered to
the addressee, or-if not a change of address-when sent by Express or
Registered Mail so addressed.
h. This ElectroMagnetion(TM)-AquaFuel(TM) License sets forth the entire
intent and understanding of the parties with regard to the subject
matter hereof, and merges any prior negotiations or
ElectroMagnetion(TM)-AquaFuel(TM) Licenses by the parties as to such
subject matter, and no addition, deletion, or other modification of
the wording hereof may be made except in writing subsequent hereto
and signed by the party or parties to be bound thereby.
i. The parties hereon acknowledge that TTL enters this agreement as the
world-wide, exclusive sub-licensee of the AquaFuel(TM) technology
and that as such, this agreement is not binding on any other party
including the AquaFuel(TM) Partnership nor any principal thereof.
The ElectroMagnetion(TM) Owners therefore acknowledge that the
AquaFuel(TM) Partnership is not bound by the terms of this
agreement and further agree to hold the AquaFuel(TM) Partnership
harmless for all matters pertaining to this agreement.
For TTL: LM ElectroMagnetion(TM) Owners: Initials
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Page 14 of 15 Pages
<PAGE> 15
IN WITNESS WHEREOF the parties have caused this
ElectroMagnetion(TM)-AquaFuel(TM) License to be signed, sealed, and attested by
persons duly authorized so to do, as of the date first stated hereinabove.
For ElectroMagnetion(TM) Owners
/s/ Lawrence Perovetz /s/ Ruggero Maria Santilli
- ------------------------------- ------------------------------------
Lawrence Perovetz 50% owner Ruggero Maria Santilli 50% owner
For TTL
/s/ Leon H. Toups Attest: /s/ Mark Clancy
- ------------------------------- -----------------------------
Leon H. Toups, President Mark Clancy, Vice President
For TTL: LM ElectroMagnetion(TM) Owners: Initials
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Page 15 of 15 Pages
<PAGE> 1
Exhibit 10.7
TUNNEL BAT LICENSE AGREEMENT
THIS AGREEMENT, effective this 1st day of July 1998, made between:
David Richardson 48 Valencia Drive, Dunedin, Florida 34698 holder of his
pertinent patent-pending rights ("Mr. Richardson");
and
Toups Technology Licensing Incorporated, Suite 105, 7887 Bryan Diary Road,
Largo, Florida 33777, (" TTL"), by its President and Chief Executive Officer,
Leon H, Toups;
WITNESSETH THAT
WHEREAS Mr. Richardson for some years past has been developing and disclosing in
patents pending and technical papers, what he calls Tunnel Bat Technology; of
which he has applied for U.S. Patent(s) "Tunnel Bat" and Mr. Richardson
currently operates a Tunnel Bat vehicle AND
WHEREAS TTL is engaged in the business of developing market-ready
technological products and services protected by intellectual property rights,
especially patents, by application of a systems approach to identifying,
funding, developing, and marketing technological products and services; AND
WHEREAS Mr. Richardson and TTL are interested in undertaking together a
joint effort at designing, manufacturing, selling, or otherwise commercializing
Tunnel Bat, as by a License Agreement that provides for Mr. Richardson to
introduce TTL to the technology and to authorize TTL to make and to
commercialize Tunnel Bat, at an agreed royalty, so long as both Parties perform
in accordance with this Agreement;
NOW, THEREFORE, Mr. Richardson and TTL, intending to be legally bound,
agree to undertake designing, manufacturing, and selling or otherwise
commercializing Tunnel Bat upon the following terms and conditions:
1. Definitions
a. "Licensed Know-how" means unpatented proprietary technical,
professional, or commercial information disclosed to TTL by Mr.
Richardson, and useful in designing, making, or using Licensed
Products or performing Licensed Services.
b. "Licensed Patent" means any patent (or disclosed patent application)
licensed to TTL herein and containing a claim defining the
composition, design, machine, process, product by
For TTL LM 1 For Tunnel Bats: Initials
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<PAGE> 2
process, manufacturing, structure, operation, or use Tunnel Bat
subject matter, insofar as owned or licensable by Mr. Richardson and
so licensed to TTL in or for the License Territory.
c. "Licensed Product" means by-product or related composition whose
production, structure, or use embodies any Licensed Know-how, is
defined by a claim of a Licensed Patent or disclosed patent
application and/or would infringe a Licensed Patent in the absence
of this License Agreement, or displays or is commercialized by a
Licensed Trademark.
d. "Licensed Service" means any designing, making, specifying, or any
instruction, leasing, or performance of other services relating to
any License Product for, to, or with a customer or other party,
whether for compensation or not.
e. "Licensed Specification" means any requirement or standard
identified by Mr. Richardson to TTL relating to composition, design,
manufacturing method, structure, workmanship and/or resulting
appearance, form, identity, quality, or presentation of a Licensed
Product or a Licensed System,
f "Licensed System" means any apparatus, assembly, device, or
structure for producing or using a Licensed Product, with or for use
with (or without) other accessories
g. "Licensed Trademark" "Tunnel Bat" or other word and/or design, used
with or without any other word and/or design, in or as a brand name
for Licensed Products or Licensed Services or Licensed Systems.
h. "Improvement" means any substantial change in any foregoing defined
item (a to g) during this Agreement, whether made by Mr. Richardson
or by TTL, or both, or otherwise owned and/or licensable by either
of them to the other, as more fully considered below.
i. "License Term" means the duration of this Agreement, as follows: (i)
an Initial Period, beginning on the aforesaid effective date with a
Startup Time ending on exactly twelve months thereafter, and
continuing, if TTL so elects, to the end of the year 2001: and (ii)
further continuing (at TTL's advance notice of election to do so)
for one or more successive Renewal Periods of three (3) calendar
years, noted further below.
j. "License Territory" means worldwide.
For TTL LM 2 For Tunnel Bats: Initials
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<PAGE> 3
k. "Startup Time" means the time period from the beginning of the
Initial Period of this Agreement on the identified effective date,
to end exactly twelve months thereafter.
2. License and Sublicenses
a. Mr. Richardson hereby grants to TTL, for the License Term only. an
indivisible, non-assignable right and license to make, use, lease,
sell, and otherwise practice commercially the defined Licensed
subject matter.
b. So long as TTL is in good standing under this Agreement, this grant
is to be exclusive, meaning that Mr. Richardson will not grant any
third party a similar license in the License Territory.
c. TTL shall have the right to apply any Licensed Trademark to Licensed
Products and other components approved by Mr. Richardson and sold by
TTL for construction of Licensed Systems, but TTL, shall use
Licensed Trademarks only in accordance with acceptable trademark
practice and subject to the provisions of this Agreement
d. TTL customers will have an implied sublicense to assemble Licensed
Products into Licensed Systems, with or without other components.
e. Having elected to continue hereunder until at least the end of the
Startup Time, TTL may grant sublicenses, contingent upon TTL's
retention of its license under this Agreement.
f. Each such sublicense granted by TTL shall be upon terms and
conditions of Running Royalty not significantly more favorable to
the sublicensee than the terms and conditions of the present License
Agreement are to TTL.
g. Each sublicense granted by TTL under this Agreement will provide
expressly that it is so granted and that in the event that TTL
should discontinue its License hereunder or its license otherwise
become terminated the sublicensee will become a licensee of Mr.
Richardson by substitution for TTL, unless prohibited by law.
3. Development Schedule/Existing Equipment
TTL shall support Mr. Richardson in the development of Tunnel Bat
model three which shall include the technology used in the prior Tunnel
Bat vehicles and shall include all modifications thereon according to the
following schedule:
For TTL LM 3 For Tunnel Bats: Initials
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<PAGE> 4
a. Each month wherein the existing Tunnel Bat vehicle earns an amount
equal to or greater than $20,000, TTL shall dedicate a minimum of
50% of said amount toward the purchase of materials and other costs
associated with the constuction of Tunnel Bat model 3. However, TTL
at its sole discretion, may apply more than 50% of revenues earned
toward the purchase of materials and other costs association with
the construction of Tunnel Bat model 3.
b. During the first month of this Agreement TTL shall engage at least
two national selling agents for the purpose of presenting for sale
Tunnel Bat vehicle model 3 throughout the continental United States
and during this period Mr. Richardson shall make available all
specifications, drawings, diagrams, selling material or other
information or documentation as is necessary to market the Tunnel
Bat vehicle model 3.
c. As a part of this Agreement, TTL shall become the sole owner of the
existing Tunnel Bat vehicle and. shall be entitled to all privileges
thereunto pertaining except that it TTL shall decide to sell the
existing Tunnel Bat vehicle, Mr. Richardson shall recieve a minimum
of $30,000 regardless of the sale price received by TTL.
4. License Term
a. The Initial Period begins on the effective date of this Agreement
and will extend at least to the end of the Startup Time, when it
will terminate if TTL fails to notify Mr. Richardson in writing at
least thirty (30) days theretofore that TTL elects to continue for
the rest of the Initial Period. Such notice would extend the
Initial Period to end on the anniversary of the License Agreement in
the year 2001.
b. Unless sooner terminated, the License Term may continue for a
succeeding Renewal Period, from the end of the Initial Period or of
any Renewal Period, at the election of TTL if then in good standing;
such election to be made by TTL giving written notice to Mr.
Richardson within the last calendar quarter of any Period, of
intention to continue this Agreement for a succeeding Renewal
Period, beginning on the first day of January of the next year and
continuing for three (3) more years.
c. The License Term shall continue from Period to Period so long as TTL
timely renews, or until Mr. Rchardson gives TTL notice that TTL is
no longer in good standing because of a specified breach or default
of one or more of TTL's obligations under this Agreement; TTL shall
have the right to remedy any such breach or default within
forty-five (45) days thereafter or by the due
For TTL LM 4 For Tunnel Bats: Initials
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<PAGE> 5
date of the next quarterly report by TTL (whichever is later) to
return to good standing as to such breach or default Likewise, if
Mr. Richardson should be in breach or default of one or more of Mr.
Richardson's obligations under this Agreement, Mr. Richardson shall
have the right to remedy any such breach or default within
forty-five (45) days thereafter or by the due date of the next
quarterly report by TTL (whichever is later) to return to good
standing as to such breach or default.
d. Obligations of this Agreement that are indicated as surviving beyond
the end of a Period or of the License Term shall continue for such
time period as may be lawful, despite notice by either party to the
other of an election to discontinue either party's participation in
or under this Agreement.
e. The Term of this Agreement, if not sooner ended by the act of a
party or the operation of law, shall end upon expiration of the last
to expire of the Licensed Patents, except as TTL is using a TUNNEL
BAT trademark, or otherwise as noted below.
5. Confidentiality
a. To the extent that TTL receives Licensed Know-how, or either party
becomes aware of other proprietary information from the other party
via their relationship pursuant to this Agreement, each recipient of
such information will hold it in confidence so long as the other
party effectively treats it as confidential, except as specific
information becomes public knowledge otherwise than by or from TTL.
b. The foregoing obligation to keep proprietary information
confidential and to safeguard it within the organization of a party
will survive any termination of this Agreement to the extent that
such information is not common trade knowledge.
6. Startup Time
a. TTL will provide facilities, equipment, and resources for TUNNEL BAT
design, development, and marketing purposes during the Startup Time
in order to enable the equipment and resultant products to be
analyzed, tested, and (as soon as feasible) to be demonstrated to
prospective customers, investors, and other interested persons.
b. Mr. Richardson will provide TUNNEL BAT Licensed Know-how to TTL
from time to time as may be appropriate and will participate
regularly as a technical consultant upon TUNNEL BAT design,
development, testing, and marketing, as TTL deems desirable.
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7. Royalties
a. The Running Royalty rate for Licensed Product, Licensed Services,
and Licensed Systems is Six Percent (6%) of gross remuneration of
all that TTL receives in money or other thing of value for leasing,
servicing, selling, or otherwise commercializing the same.
b. Running Royalty accrues upon invoice, lease, sale, or service by TTL
but shall not be payable until thirty (30) days thereafter or upon
TTL's receipt of payment therefor (whichever occurs first), and
shall be without any deduction from TTL's actual total revenue
therefrom, except for customers' related costs (such as insurance,
shipping, or taxes) and then only if so itemized on TTL's invoices
to them.
c. Running Royalty payable for any given month becomes due at the end
of the then current calendar quarter, and shall be paid during the
first month of the next calendar quarter, or will become overdue on
the first day of the next month.
d. As a part of Mr. Richardson's Royalties hereunder, upon signing this
Agreement, TTL shall issue to Mr. Richardson 150,000 of its
restricted $.001 par value Common Shares. Said Shares shall be fully
vested upon receipt. These Shares shall be considered to be a
guaranteed perforformance amount for the Startup Period (1989-1999),
but shall not be applied against the Running Royalty. TTL shall
further cause for the registration of at least 50,000 of the
foresaid Shares exactly six months after June 15, 1998, unless TTL,
in its sole discretion, registers such Shares at an earlier time,
such that the Shares may thereafter be issued without restrictions
on resale.
8. Payments and Reports
a. TTL will report to Mr. Richardson (insert mailing address), all
Running Royalty for each calendar quarter of the License Term during
the first month of the next ensuing calendar quarter and may include
with each such report full payment of royalty due for (and reported
for) the preceding quarter's operations.
b. Quarterly and annual royalty reports will be signed and be certified
as accurate and complete by an authorized officer of TTL.
c. TTL will keep accurate and complete records of all business done
pursuant to this Agreement and will make such records available to
Mr. Richardson, no more than two (2) persons at
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once-for inspection during regular business hours, upon at least
three (3) business days' advance notice, to determine Royalties
accrued and paid or unpaid, and any other information due hereunder.
d. Mr. Richardson may cause an audit to be made of the applicable
records in order to verify statement for Running Royalties made
hereunder. Any audits shall be conducted by an independent certified
public accountant, acceptable to both parties, and shall be
conducted during regular business hours at TTL's offices.
e. Mr. Richardson shall bear the expenses of any such audit unless such
audit reveals that the Royalties paid by TTL under this Agreement
for the Period subject to the audit are less than ninety-five
percent (95%) of the amount owed by TTL for such period. In such
event, the costs of the audit shall be borne by TTL, in addition
and without limitation to any right of remedy Mr. Richardson may
have. TTL agrees to pay the balance of such royalties due Mr.
Richardson within forty-five (45) days after written notice from Mr.
Richardson of TTL's understatement of Royalties due. Furthermore,
TTL shall pay interest on all understated Royalties at a rate of
1.5% per month or lesser amount as mandated by law, computed from
the day on which said Royalties were due and owing to Mr.
Richardson.
f. Refusal by TTL to report or to pay Royalty, or to maintain or make
available records of business done hereunder, will forfeit TTL's
good standing under this Agreement, if not remedied within thirty
(30) days, unless limited to nonpayment of money, which may be
remedied within forty-five (45) days, or by the due date of the next
quarterly report, whichever is later.
9. Improvements
a. Any new composition, design, product, or service conducive to third
party competition with Licensed Product or Licensed Services or
Licensed Systems, invented or otherwise coming under the control of
either party during the License Term, is deemed an "Improvement" and
such party will disclose the same to the other party promptly and in
enough detail to enable the other party to elect whether to have
such Improvement included hereunder.
b. As to any such Improvement by either party, either party may elect
to have such Improvement included hereunder, within three (3) months
after first knowledge thereof, without change in Royalty, by
promptly notifying the other party of an election to so; and the
party that made or acquired such Improvement
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need do no more if both parties fail to elect to include the
Improvement.
c. The originating party of an elected Improvement that appears
possibly patentable after a competent prior art search, will file
and prosecute a patent application thereon, and may discontinue
prosecuting it or maintaining any resulting patent but only after
giving the other party notice of such intention plus ample
opportunity to take such (or equivalent) action at its own sole
future discretion and expense.
d. If either party so elects to have any given Improvement included
under this Agreement, the electing party in doing so will become
obligated to pay one-half (1/2) the expense of undertaking to patent
it within the License Territory, whereas the other one-half (1/2) of
any such patent expense will be the obligation of the originating
party, whether or not the electing and originating parties are the
same, except that if TTL elects not to participate in the payment of
an Improvement made by Mr. Richardson to be included, TTL shall not
be obligated to do so.
e. If the parties have joint inventorship/ownership patent rights in an
issued Improvement patent, the parties will share equally the
related ownership rights and expenses including any official patent
maintenance fees, up to a limit of $10,000 for Mr. Richardson's
share for any one Improvement patent. The parties need not exercise
improvement patent rights, except as this Agreement may provide, nor
need either party account to the other party for any lawful activity
regarding such patent rights outside this Agreement.
f. The parties recognize that well-based differences may arise with
regard to origination of any given Improvement and that as to U.S.
patents the determination of inventorship and of patentability is
exclusively within the jurisdiction of the U.S. Patent and Trademark
Office and the Federal Courts. Unless the parties are/have joint
inventors or successor(s) thereto and hence are joint owners, they
specifically agree that for any Improvement patent application and
for any resulting patent for an Improvement elected by either party
to be included hereunder, regardless of inventorship, the
Improvement originating or otherwise acquiring party will grant to
the other party (if that other party so elects) an unrestricted
paid-up (free) license to practice the Improvement for the License
Term, if such practice of it would not violate any non-elected prior
patent of the grantor-licensor.
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g. Each party's foregoing Improvement rights are executory in nature,
including the right to be informed of any Improvement by the other
party, and to elect an Improvement for inclusion hereunder (or not),
and including rights to ongoing prosecution of patent applications
and maintenance of patents by an originating party of an elected
Improvement, and receipt of license or ownership rights thereunder.
10. Infringement Rights
a. As of the effective date of this Agreement, TTL acknowledges that
the exclusive ownership of the initially Licensed Know-how, the
Licensed Patents, and the Licensed Trademarks is in Mr. Richardson,
and not at all in TTL.
b. In the event that TTL's commercialization of any Licensed Product,
Licensed Service, or Licensed System is accused of infringing a
proprietary right of any third party, the parties will cooperate in
attempting to avoid such infringement or to prove lack of
infringement, and so long as TTL's license hereunder is exclusive to
the extent set forth above, TTL will have a right, but not an
obligation, to defend or assist in defending against any
infringement action brought by a third party, and shall have also
the obligation to pay one-half (1/2) of the costs of doing so,
except as either party may voluntarily pay more thereof incidental
to participation therein.
c. Neither party will be liable to the other party if unable or
unwilling to continue this Agreement because of such infringement of
third-party rights, and in that event TTL will cease commercializing
Licensed Products, Licensed Services, and Licensed Systems, and TTL
will relinquish its rights hereunder in that event, and thereby
terminate its Royalty and attendant obligations to Mr. Richardson.
d. In the event that the activities of any third party are asserted (or
other-wise appear) to infringe an intellectual property right
licensed to TTL hereunder, the parties will cooperate in attempting
to ascertain and to abate such infringement. So long as TTL's
license hereunder is exclusive to the extent set forth above, TTL
will have a prior right, but not an obligation, to abate such
infringement, whether by litigation or otherwise, subject to paying
all the costs of doing so other than such costs or expenses as Mr.
Richardson may voluntarily pay incidental thereto or to
participation therein. Any moneys recovered from a third-party
infringer will be retained by the parties, pro-rated to their
expenditures after determining what portion of moneys recovered are
due Mr. Richardson as part of his Running Royalty, whose action(s)
had such result.
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e. If third-party infringement is not abated, TTL may elect to continue
as a non-exclusive licensee under this Agreement as its sole remedy,
or alternatively TTL may discontinue its license and cease royalty
payments as its sole remedy.
11. Assurances
a. Mr. Richardson assures TTL of his origination of the inventions in
his Licensed patent-pending, but Mr. Richardson cannot guarantee TTL
of Mr. Richardson's invention priority or patent validity.
b. Mr. Richardson warrants ownership of the Licensed Patents and
Licensed Trademarks, in the specific sense that Mr. Richardson has
no reason to believe that any third party has any right to prevent
either Mr. Richardson or TTL from practicing any Licensed Invention,
or from using any Licensed Trademark, as provided in this Agreement,
but Mr. Richardson cannot and does not warrant such practice or
usage as non-infringing of third-party rights.
c. Mr. Richardson will instruct and/or assist TTL's personnel in
design, manufacturing, quality standards, testing, distribution,
marketing, and sale, as well as proper marking, of Licensed Product
and Licensed Systems, and Mr. Richardson will provide Licensed
know-how in doing so, as may be applicable.
d Mr. Richardson will have no liability whatever to TTL for TTL's
actions or inactions under this Agreement, and TTL will save Mr.
Richardson harmless against any liability to third parties whether
based upon agency, contract, negligence, product liability, or other
basis-for any claim based on action or inaction of TTL relating to
Licensed Products, Services, or Systems.
12. Product Marking
a. TTL will mark on Licensed Products. (or containers) each patent
number applicable thereto upon being advised thereof by Mr.
Richardson.
b. TTL will display a Licensed Trademark (if elected) on all Licensed
Product and in advertising copy, brochures, and publications by or
for TTL about Licensed Product. TTL will not use any Licensed
Trademark in or as a trade name (i) if not elected, or (ii) if
elected, after TTL discontinues (or other termination of) TTL's
license under this Agreement.
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c. TTL will provide access for Mr. Richardson, at agreed times, to all
Licensed Product to enable Mr. Richardson to ascertain that the
nature and quality thereof meet standards required by trademark law
of products bearing a Licensed Trademark.
d. TTL will not make any material change in materials, production
methods, or otherwise that might affect the nature or quality of
any TUNNEL BAT product or service, without advance notice to Mr.
Richardson and ample opportunity for Mr. Richardson to confirm
compliance of such product or service with applicable quality
standards or not.
e. TTL will provide representative specimens of each Licensed Product
or Licensed Service or Licensed System label and advertising copy,
and of each product or service brochure, before publication thereof,
to enable Mr. Richardson to assure that they meet accepted trademark
usage standards.
f. TTL will not manufacture, sell, or distribute any Licensed Product
that does not meet Mr. Richardson's quality standards, nor
distribute any product literature that does not meet accepted
trademark usage standards.
g. If TTL elects to use one or more Licensed Trademark(s), TTL will
display one thereof on each container of Licensed Product made by or
for it, and in all Licensed Product advertising copy, product
brochures, press releases, and publications by or for TTL about
Licensed Product plus the generic name of the goods, together with
occasional notice that such Trademark is the property of Mr.
Richardson.
13. Termination
a. During the last calendar quarter of the Initial or any Renewal
Period, TTL may notify Mr. Richardson of TTL's election to continue
the Agreement for a Renewal Period, to begin at the end of the then
current Period; or, by failing to do so, TTL will terminate its
rights under this Agreement, whereupon TTL will be obligated to
discontinue its participation in licensed activities by the end of
the existing Period, except as the parties otherwise agree in a
signed written agreement.
b. Upon termination, TTL will refrain from exercising thereafter any
right it had by license hereunder, such as practicing the invention
of any previously Licensed Patent, or using a Licensed Trademark or
confusingly similar expression.
c. Whenever TTL is not in good standing hereunder, MR. RICHARDSON may
render TTL's license wholly non-exclusive,
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or if it is already non-exclusive for a prior breach or default MR.
RICHARDSON may terminate TTL's rights hereunder, in the absence of
specific curative provisions for TTL's breach or default, or if TTL
has had art opportunity to comply such a curative provisions and
failed or refused to do so.
d. If either party becomes, or would become, disabled-as by the other
party's choosing, or being subjected to, an act or a procedure for
relief of debtors from enforcing compliance with a given executory
obligation of the other party hereunder (eg., compliance with
standards, action with regard to infringers, offer of Improvements)
the thus disabled party may deem this Agreement and the license and
other rights under this Agreement terminated.
e. No inaction or overlooking by Mr. Richardson of any condition or
provision of this Agreement or of any breach or default thereof by
TTL shall be deemed to imply or to constitute a future waiver of any
similar breach or default of the same or other condition/provision.
14. Miscellaneous
a. If any one or more provision(s) or effect(s) of this Agreement
should prove to be invalid or unenforceable, and the Agreement be
otherwise valid and enforceable, the invalid or unenforceable
provision or portion thereof will be severed, and the remainder of
the Agreement be and remain valid and enforceable to the fullest
extent permitted by applicable law.
b. This License Agreement is made for the benefit of the parties, their
heirs, successors, and assigns, and any other person or legal entity
named in any provision hereof, and not made to give any unnamed
person or legal entity any right of action whatever.
c. Each statement made in this Agreement is deemed material, and each
party is entitled to rely, and deemed to have relied, upon the truth
and correctness thereof in entering into this Agreement.
d. Each party acknowledges that he has received advice of independent
counsel of choice as to the inducements, provisions, and terms of
this Agreement, and their effect, whereupon entering into this
License Agreement is each party's free and independent act.
e. This Agreement is to be governed by Federal law to whatever extent a
proprietary right granted by the United States is
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involved, and otherwise by Florida law, except as activities of a
party in any other State render that other State's law applicable
f. In the event that any action or proceeding is brought to enforce
any of the terms and conditions of this Agreement, then the party
in whose favor relief is granted and/or judgment is entered shall be
entitled to have and recover from the other party or parties all
costs, prejudgement interest, and reasonable attorney's fees
incurred in connection with the enforcement action.
g. Notice to be given under this Agreement will be in writing and be
addressed to the other party at the address of such party
hereinabove, unless such address has been superseded by like notice,
whereupon the latest noticed address thereof is to be used. Notice
will be effective when delivered to the addressee, or-if not a
change of address-when sent by Express or Registered Mail so
addressed.
n. This Agreement sets forth the entire intent and understanding of the
parties with regard to the subject matter hereof, and merges any
prior negotiations or agreements by the parties as to such subject
matter, and no addition, deletion, or other modification of the
wording hereof may be made except in writing subsequent hereto and
signed by the party or parties to be bound thereby.
IN WITNESS WHEREOF the parties have caused this Agreement to be signed,
sealed, and attested by persons duty authorized so to do, as of the date first
stated hereinabove.
Tunnel Bat TTL
/s/ David Richardson /s/ Leon H. Toups, Pres
- ------------------------------- ----------------------------------
David Richardson Leon H. Toups, President
Attest: /s/ Jerry Kammarr Attest: /s/ Mark Clancy
- ------------------------------- ---------------------------
Jerry Kammarr Mark Clancy, Vice President
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Exhibit 10.8
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is made this 30th of November,
1998, by and among TOUPS TECHNOLOGY LICENSING, INC., a Florida corporation
("TTL"); INTERSOURCE HEALTH CARE, INC., a Florida ("IHC"); and the persons
listed in Exhibit "A-1" hereof who are the owners of record of all the issued
and outstanding stock of IHC who execute and deliver the Agreement ("IHC
Stockholders"), based on the following:
Recitals
TTL wishes to acquire all the issued and outstanding stock of IHC in
exchange for stock of TTL in a transaction intended to qualify as a tax-free
exchange pursuant to section 368(a)(l)(B) of the Internal Revenue Code of 1986,
as amended. The parties intend for this Agreement to represent the terms and
conditions of such tax-free transaction, which Agreement the parties hereby
adopt.
Agreement
Based on the stated premises, which are incorporated herein by reference,
and for and in consideration of the mutual covenants and agreements hereinafter
set forth, the mutual benefits to the parties to be derived herefrom, and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, it is hereby agreed as follows:
DEFINITIONS
1. InterSource Health Care, Inc., incorporated in Florida, USA on November 4,
1996 with offices at 7887 Bryan Dairy Road, Suite 105, Largo, Florida
33777 USA ("IHC").
2. Toups Technology Licensing, Inc. incorporated in Florida, USA on August
29, 1997 with offices at 7887 Bryan Diary Road, Suite 105, Largo, Florida,
33777 USA ("TTL").
ARTICLE I - EXCHANGE OF STOCK
1.01 Exchange of Shares and Rights to Shares. On the terms and subject to the
conditions set forth in this Agreement; on the Closing Date, the IHC
Stockholders shall assign, transfer, and deliver to TTL, free and clear of
all liens, pledges, encumbrances, charges, restrictions, or claims of any
kind, nature, or description, all issued and outstanding shares of common
stock and any rights, warrants, programs or agreements for the purchase of
common and/or preferred stock of IHC (the "IHC Share Rights") held by
IHC's existing Stockholders or in light of any rights, warrants, programs
or agreement for the purchase of common and/or preferred stock, proposed
IHC shareholders, which shares, rights, warrants, programs and/or
agreements to purchase IHC stock shall represent all issued and
outstanding shares of IHC and any and all rights to acquire or obligations
to sell IHC stock and TTL agrees to acquire such shares and share rights
on
JD IHC Initials 1 TTL Initials LHT
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<PAGE> 2
such date by issuing and delivering in exchange therefore aggregate of
1,203,241 one million, two hundred and three thousand, two hundred and
forty-one) unregistered shares of TTL common stock, par value $.0.001 per
share, (the "TTL Common Stock"). Such shares of TTL unregistered Common
Stock shall be issued according to the number of IHC Share Rights held and
as set forth opposite the IHC Stockholder's respective names in Exhibit
"A-1".
1.02 Delivery of Certificates or Rights to acquire by IHC Stockholders. The
transfer of IHC Share Rights by the IHC Stockholders shall be effected by
the delivery to TTL at the Closing (as set forth in Section 1.05 hereof)
of a certificate issued to TTL representing all of the issued and
outstanding shares of IHC. The transfer of any rights to acquire or
obligations to sell IHC stock shall be effected in the form of a statement
provided by IHC setting forth all such rights and/or obligations including
a statement that there are no other rights to acquire nor obligations to
sell IHC common and/or preferred stock which are not contained in the
statement required in fulfillment of this Article 1.02.
1.03 Operation as Wholly-Owned Subsidiary. After giving effect to the
transaction contemplated hereby, TTL will own all the issued and
outstanding shares of IHC and IHC shall be merged with TTL.
1.04 Further Assurances . At the Closing and from time to time thereafter, the
IHC Stockholders shall execute such additional instruments and take such
other action as TTL may reasonably request without undue cost to the IHC
Stockholders in order to more effectively sell, transfer, and assign clear
title and ownership in the IHC Shares to TTL.
1.05 Closing and Parties. The Closing contemplated hereby shall be held at the
principal office of TTL at Suite 105, 7887 Bryan Dairy Road, Largo,
Florida on 10:00 a.m. November 30, 1998, or on another date to be agreed
to in writing by the parties (the "Closing Date"). The Agreement may be
closed at any time following approval by a majority of the stockholders of
TTL Common Stock as set forth in Section 4.02 hereof and the IHC
Stockholders as set forth in Section 5.02. The Closing may be accomplished
by wire, express mail, overnight courier conference telephone call or as
otherwise agreed to by the respective parties or their duly authorized
representatives.
1.06 Closing Events.
(a) TTL Deliveries. Subject to fulfillment or waiver of the conditions
set forth in Article IV, TTL shall deliver to IHC at Closing all the
following:
(i) A certificate of good standing from the secretary of State of
Florida, certifying that TTL is in good standing as a
corporation in the State of Florida;
JD IHC Initials 2 TTL Initials LHT
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<PAGE> 3
(ii) Incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of TTL executing
this Agreement and any other document delivered pursuant
hereto on behalf of TTL;
(iii) Copies of the resolutions of TTL's board of directors and
shareholder minutes or consents authorizing the execution and
performance of this Agreement and the contemplated
transactions, certified by the secretary or an assistant
secretary of TTL as of the Closing Date;
(iv) Instructions to TTL's Transfer Agent for the issuance of
certificates for 1,203,241 shares of TTL unregistered Common
Stock in the names of the IHC Stockholders and in the amounts
set forth in Exhibit "A-1" which shall be issued by TTL's
transfer agent immediately following Closing or as
expeditiously as possible thereafter; and
(v) The certificate contemplated by Section 4.03, executed by the
chief operating officer of IHC: and
(vi) The certificate contemplated by Section 4.04, dated the
Closing Date, signed by the chief operating officer of IHC.
In addition to the above deliveries, TTL shall take all steps and
actions as IHC and IHC Stockholders may reasonably request or as may
otherwise be reasonably necessary to consummate the transactions
contemplated hereby.
(b) IHC Deliveries. Subject to fulfillment or waiver of the conditions
set forth in Article V, IHC and/or IHC Stockholder's shall deliver
to TTL at Closing all the following:
(i) A certificate of good standing from the secretary of state of
Florida certifying that IHC is in good standing as a
corporation in the State of Florida;
(ii) Incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of IHC executing
this Agreement and any other document delivered pursuant
hereto on behalf of IHC;
(iii) Copies of resolutions of the board of directors and of the
stockholders of IHC authorizing the execution and performance
of this Agreement and the contemplated transactions, certified
by the secretary or an assistant secretary of IHC as of the
Closing Date;
(iv) The certificate contemplated by Section 5.03, executed by the
chief operating officer of IHC; and
JD IHC Initials 3 TTL Initials LHT
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<PAGE> 4
(v) The certificate contemplated by Section 5.04, dated the
Closing Date, signed by the chief operating officer of IHC.
In addition to the above deliveries, IHC shall take all steps and
actions as TTL may reasonably request or as may otherwise be reasonably
necessary to consummate the transactions contemplated hereby.
1.07 Termination.
(a) This Agreement may be terminated by the board of directors of either
TTL or IHC at any time prior to the Closing Date if:
(i) There shall be any actual or threatened action or proceeding
before any court or any governmental body which shall seek to
restrain, prohibit or invalidate the transactions contemplated
by this Agreement and which, in the reasonable judgment of
such board of directors, made in good faith and based upon the
advice of its' legal counsel, makes it inadvisable to proceed
with the transactions contemplated by this Agreement;
(ii) Any of the transactions contemplated hereby are disapproved by
any regulatory authority whose approval is required to
consummate such transactions or in the reasonable judgment of
such board of directors made in good faith and based on the
advice of counsel, there is substantial likelihood that any
such approval will not be obtained or will be obtained only on
a condition or conditions which would be unduly burdensome,
making it inadvisable to proceed with the exchange;
In the event of termination pursuant to this paragraph (a) of
Section 1.07, no obligation, right, or liability shall arise hereunder,
and each party shall bear all of the expenses incurred by it in connection
with the negotiation, preparation, and execution of this Agreement and the
transactions contemplated hereby.
(b) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of TTL if
(i) IHC shall fail to comply in any material respect with any of
its covenants or agreement contained in this Agreement or if
any of the representations or warranties of IHC contained
herein shall be inaccurate in any material respect or
(ii) TTL determines that there has been or is likely to be any
material adverse change in the financial or legal condition of
IHC.
In the event of termination pursuant to this paragraph (b) of
this Section 1.07, no obligation, right, remedy, or liability shall
arise hereunder. All parties shall
JD IHC Initials 4 TTL Initials LHT
- --- ---
<PAGE> 5
bear their own costs incurred in connection with the negotiation,
preparation, and execution of this Agreement and the transactions
contemplated hereby.
(c) This Agreement may be terminated at any time prior to the Closing
Date by action of the board of directors of IHC if:
(i) TTL shall fail to comply in any material respect with any of
its covenants or agreement contained in this Agreement or if
any of the representations or warranties of TTL contained
herein shall be inaccurate in any material respect, or
(ii) IHC determines that there has been or is likely to be any
adverse change in the financial or legal condition of TTL.
In the event of termination pursuant to this paragraph (c) of
this Section 1.07. no obligation, right, remedy, or liability shall
arise hereunder. All parties shall each bear their own costs
incurred in connection with the negotiation, preparation, and
execution of this Agreement and the transactions contemplated
hereby.
1.08 Restriction on TTL Common Stock. The unregistered TTL Common Stock will,
when so issued, be validly issued and outstanding, fully paid and
non-assessable. Said Common Stock shall be issued as "restricted shares"
as that term is defined in Rule 144, as amended, and shall bear a legend
in the following manner:
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY
ANY HOLDER TO ANY OTHER PERSON OR ENTITY UNLESS SUBSEQUENTLY REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND UNDER APPLICABLE LAW OF
THE STATE OR STATES WHERE SOLD, TRANSFERRED OR DISPOSED OF UNLESS SUCH
SALE, TRANSFER OR DISPOSITION SHALL QUALIFY UNDER AN ALLOWED EXEMPTION TO
SUCH REGISTRATION. ANY REQUEST FOR THE SALE, TRANSFER OR OTHER DISPOSITION
OF THESE SHARES SHALL BE ACCOMPANIED BY AN OPINION OF COUNSEL ACCEPTABLE
TO THIS CORPORATION.
ARTICLE II- REPRESENTATIONS, COVENANTS, AND WARRANTIES OF TTL
As an inducement to, and to obtain the reliance of IHC, TTL represents and
warrants as follows:
2.01 Organization. TTL is, and will be on the Closing Date, a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Florida and has the corporate power and is and will be duly
authorized, qualified, franchised, and licensed under all applicable laws,
regulations, ordinances, and orders of public authorities to own all of
its properties and assets and to carry on its business in all material
respects as it is
JD IHC Initials 5 TTL Initials LHT
- --- ---
<PAGE> 6
now being conducted, and there are no other jurisdictions in which it is
not so qualified in which the character and location of the assets owned
by it or the nature of the material business transacted by it requires
qualification, except where failure to do so would not have a material
adverse effect on its business, operations, properties, assets or
condition. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement in
accordance with the terms hereof will not, violate any provision of TTL's
articles of incorporation or bylaws, or other agreement to which it is a
party or by which it is bound.
2.02 Approval of Agreement. TTL has full power, authority, and legal right and
has taken, or will taken all action required by law, its articles of
incorporation, bylaws, and otherwise to execute and deliver this Agreement
and to consummate the transactions herein contemplated. The board of
directors of TTL has authorized and approved the execution, delivery, and
performance of this Agreement and the transactions contemplated hereby;
subject to the approval of the TTL stockholders and compliance with state
and federal corporate and securities laws.
2.03 Capitalization The authorized capitalization of TTL consists of 50,000,000
shares of common stock, $0.001 par value, of which 18,064,383 shares are
issued and outstanding. All issued and outstanding shares of TTL are
legally issued, fully paid, and non-assessable and are not issued in
violation of the preemptive or other right of any person. There are no
dividends or other amounts due or payable with respect to any of the
shares of capital stock of TTL.
2.04 Financial Statements.
(a) Included in Schedule 2.04 are the financial statements which were
filed by TTL in connection with TTL's Form 10-SB, as well as
quarterly audited financial statements for the periods ending March
31, 1998, June 30, 1998 and September 30, 1998 (collectively
"10Qs"), which financial statements have been duly filed with the
Securities and Exchange Commission ("SEC") as required by the 1934
Act.
(b) The financial statements of TTL delivered pursuant to Section
2.04(a) have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved as explained in the notes to such financial statements. The
TLL financial statements present fairly, in all material respects as
of their respective dates, the financial position of TTL. TTL did
not have, as of the date of any such financial statements, except as
and to the extent reflected or reserved against therein, any
liabilities or obligations (absolute or contingent) which should be
reflected therein in accordance with generally accepted accounting
principles, and all assets reflected therein present fairly the
assets of TTL in accordance with generally accepted accounting
principles.
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(c) TTL has filed or will file as of the Closing Date all tax returns
required to be filed by it from inception to the Closing Date. All
such returns and reports are accurate and correct in all material
respect. TTL has no material liabilities with respect to the payment
of any federal, state, county, local, or other taxes (including any
deficiencies, interest, or penalties) accrued for or applicable to
the period ended on the date of the most recent balance sheet of
TTL, except to the extent reflected on such balance sheet and all
such dates and years and periods prior thereto and for which TTL may
at said date have been liable in its own right or as transferee of
the assets of, or as successor to, any other corporation or entity,
except for taxes accrued but not yet due and payable, and to the
best knowledge of TTL, no deficiency assessment or proposed
adjustment of any such tax return is pending, proposed or
contemplated. To the best knowledge of TTL, none of such income tax
returns has been examined or is currently being examined by the
Internal Revenue Service and no deficiency assessment or proposed
adjustment of any such return is pending, proposed or contemplated.
TTL has not made any election pursuant to the provisions of any
applicable tax laws (other than elections that relate solely to
methods of accounting, depreciation, or amortization) that would
have a material adverse affect on its financial condition, its
business as presently conducted or proposed to be conducted, or any
of its respective properties or material assets. There are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of TTL.
2.05 Outstanding Warrants and Options. TTL has no existing warrants or options,
calls, or commitments of any nature relating to the authorized and
unissued TTL Common Stock, except as disclosed in documents which are
publicly filed or otherwise by TTL.
2.06 Information. The information concerning TTL set forth in this Agreement is
complete and accurate in all material respects and does not contain any
untrue statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under
which they were made, not misleading.
2.07 Absence of Certain Changes or Events. Except as set forth in this
Agreement or the schedules hereto: since the date of the most recent TTL
balance sheet described in Section 2.04 and included in the information
referred to in Section 2.06:
(a) There has not been (i) any material adverse change in the business,
operations, properties, level of inventory, assets, or financial
condition of TTL or (ii) any damage, destruction, or loss to TTL
(whether or not covered by insurance) materially and adversely
affecting the business, operations, properties, assets, or
conditions or;
(b) To the best knowledge of TTL, it has not become subject to any law
or regulation which materially and adversely affects, or in the
future would be reasonably expected to adversely affect, the
business, operations,. properties, assets, or condition of TTL.
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2.08 Litigation and Proceedings. . There are no material actions, suits, or
administrative or other proceedings pending or, to the knowledge of TTL,
threatened by or against TTL or adversely affecting TTL or its properties,
at law or in equity, before any court or other governmental agency or
instrumentality, domestic or foreign, or before an arbitrator of any kind.
TTL does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, award, rule, or regulation
of any court, arbitrator, or governmental agency or instrumentality.
2.09 Compliance With Laws and Regulations. TTL has complied with all applicable
statutes and regulations of any federal, state, or other governmental
entity or agency thereof, except to the extent that noncompliance (i)
could not materially and adversely affect the business, operations,
properties, assets, or condition of TTL or (ii) could not result in the
occurrence of any material liability for TTL. To the best knowledge of
TTL, the consummation of this transaction will comply with all applicable
statutes and regulations, subject to the preparation and filing of any
form required by state and federal securities laws.
2.10 Compliance with Securities Laws. TTL has complied with all applicable
security statutes and regulations. of any federal, state or other
governmental entity or agency thereof, including the filing of any
required documents in regards to all sales of TTL Stock. TTL makes the
additional following securities disclosures as a material inducements to
IHC to enter into this transaction:
(a) TTL's common stock is currently traded on the OTC Bulletin Board
("OTC" or "Over-the Counter") and TTL is in compliance with all
applicable securities rules and regulations regarding the OTC
trading of its securities; and
(b) TTL voluntarily became a reporting company pursuant to section 12(g)
of the Securities Exchange Act o 1934 by virtue of filing a Form
10-SB registration statement which was approved by the SEC and is
currently effective; and
(c) TTL has filed for and been approved for a manual filing exemption
with Standard & Poor's (S&P) for 1998 and to the best of TTL's
knowledge, its securities have been and are currently trading in
compliance with applicable federal and state blue sky securities
laws; and
(d) TTL, through its approved market maker(s), has filed a current Form
211 with the N.A.S.D. pursuant to Rule 15c-211, and has otherwise
maintained and updated the Form 211 as required by applicable
securities laws and;
(e) TTL has met all current reporting requirements of Rule 12(g) and any
other applicable securities law and regulation applicable to TTL's
trading market.
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2.11 Material Contract Defaults. TTL is not in default in any material respect
under the terms of any outstanding contract, agreement, lease, or other
commitment which is material to the business, operations, properties,
assets, or condition of TTL, and there is no event of default or other
event which, with notice or lapse of time or both, would constitute a
default in any material respect under any such contract, agreement, lease,
or other commitment in, respect of which TTL has not taken adequate steps
to prevent such a default from occurring.
2.12 No Conflict With Other Instruments. The execution of this Agreement and
the consummation of the, transactions contemplated by this Agreement will
not result in the breach of any term or provision of, or constitute an
event of default under, any material indenture, mortgage, deed of trust,
or other material contract, agreement, or instrument to which TTL is a
party or to which any of its properties or operations are subject.
2.13 TTL Schedules. TTL has delivered to IHC the following schedules, which are
collectively referred to as the "TTL Schedules" and which consist of the
following separate schedules dated as of the date of execution of this
Agreement, all certified by a duly authorized officer of TTL as complete,
true, and accurate of the date of this Agreement;
(a) A schedule including copies of the articles of incorporation and
bylaws of TTL in effect as of the date of this agreement;
(b) A schedule containing copies of resolutions adopted by the board of
directors of TTL approving this Agreement and the transactions
herein contemplated.
(c) A schedule setting forth the financial statements required pursuant
to Section 2.04(a) hereof,
(d) A schedule setting forth any other information, together with any
required copies of documents, required to be disclosed within the
TTL Schedules by Sections 2.01 through 2.13.
ARTICLE IV - REPRESENTATIONS, COVENANTS, AND WARRANTIES OF IHC
As an inducement to, and to obtain the reliance of, TTL, IHC represents
and warrants as follows:
3.01 Organization. IHC is, and will be on the Closing Date, a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Florida and has the corporate power and is and will be duly
authorized, qualified, franchised, and licensed under all applicable laws,
regulations, ordinances, and orders of public authorities to own all of
its properties and assets and to carry on its business in all material
respects as it is now being conducted, and there are no other
jurisdictions in which it is not so qualified in which the character and
location of the assets owned by it or the nature of the material
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business transacted by it requires qualification, except where failure to
do so would not have a material adverse effect on its business,
operations, properties, assets or condition of IHC the execution and
delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of IHC's articles of incorporation
or bylaws, or other material agreement to which it is a party or by which
it is bound.
3.02 Approval of Agreement. IHC has full power, authority, and legal right and
has taken, or will take, all action required by law, its articles of
incorporation, bylaws, or otherwise to execute and deliver this Agreement
and to consummate the transactions herein contemplated. The board of
directors of IHC have authorized and approved the execution, delivery, and
performance of this Agreement and the transactions contemplated hereby;
subject to the approval of the IHC Stockholders and compliance with state
and federal corporate and securities laws.
3.03 Capitalization. The authorized capitalization of IHC consists of
100,000,000 shares of common stock $0.000l par value, of which as of the
date hereof 8,882,000 shares are issued and outstanding. All issued and
outstanding shares of IHC are legally issued, fully paid, and
nonassessable and not issued in violation of the preemptive or other right
of any person. There are no dividends or other amounts due or payable with
respect to any of the shares of capital stock of IHC.
3.04 Financial Statements.
(a) Included in Schedule 3.04 are the unaudited Balance Sheets of IHC as
of November 30, 1998 and Statements of Income for the period then
ended.
(b) The financial statements of IHC present fairly, as of their
respective dates, the financial position of IHC. IHC did not have,
as of the date of any such balance sheets, except as and to the
extent reflected or reserved against therein, any liabilities or
obligations (absolute or contingent) which should be reflected in
any financial statements or the notes thereto and all assets
reflected therein present fairly the assets of IHC.
(c) IHC has filed or will have filed as of the Closing Date all tax
returns required to be filed by it from inception to the Closing
Date. All such returns and reports are accurate and correct in all
material respect IHC has no material liabilities with respect to the
payment of any federal, state, county, local, or other taxes
(including any deficiencies, interest, or penalties) accrued for or
applicable to the period ended on the date of the most recent
unaudited balance sheet of IHC, except to the extent reflected on
such balance sheet and adequately provide for, and all such dates
and years and periods prior thereto and for which IHC may at said
date have been liable, its own right or as transferee of the assets
of, or as successor to, any other corporation or entity, except for
taxes accrued but not yet due and payable, and to IHC's knowledge no
deficiency assessment or proposed
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adjustment of any such tax return is pending, proposed or
contemplated. Proper and accurate amounts of taxes have been
withheld by or on behalf of IHC with respect to all material
compensation paid to employees of IHC for all periods ending on or
before the date hereof, and all deposits required with respect to
compensation paid to such employees have been made in complete
compliance with the provisions of all applicable federal, state, and
local tax and other laws. To the best of IHC's knowledge, none of
such income tax returns has been examined or is currently being
examined by the Internal Revenue Service, and no deficiency
assessment or proposed adjustment of any such return is pending,
proposed or contemplated. IHC has not made any election pursuant to
the provisions of any applicable tax laws (other the elections that
relate solely to methods of accounting, depreciation, or
amortization) that would have a material adverse affect on IHC, its
financial condition, its business as presently conducted or proposed
to be conducted, or any of its properties or material assets. There
are no tax liens upon any of the assets of IHC. There are no
outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of IHC.
3.05 Outstanding Warrants and Options. IHC has no issued warrants or options,
calls, or commitments of any nature relating to the authorized and
unissued IHC Common Stock which have not been disclosed herein as a part
of Article I, item 1.01 hereinabove.
3.06 Information. The information concerning IHC set forth in this Agreement
and in the schedules delivered by IHC pursuant hereto is complete and
accurate in all material respects and does not contain any statement of a
material fact or omit to state a material fact required to make the
statements made, in light of the circumstances under which they were made,
not misleading. IHC shall cause the schedules delivered by IHC pursuant
hereto to TTL hereunder to be updated after the date hereof up to and
including the Closing Date.
3.07 Absence of Certain Changes or Events. Except as set forth in this
Agreement since the date of the most recent IHC balance sheet described in
Section 3.04 and included in the information referred to in Section 3.OC:
(a) There has not been (i) any material adverse change in the business,
operations, properties level of inventory, assets, or condition of
IHC or (ii) any damage, destruction, or loss to IHC materially
adversely affecting the business, operations, properties, assets, or
conditions of IHC; and
(b) IHC has not
(i) amended its articles of incorporation or bylaws;
(ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind
whatsoever to stockholders or
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purchased or redeemed, or agreed to purchase or redeem, any of
its capital stock;
(iii) waived any rights of value which in the aggregate are
extraordinary and material considering the business of IHC;
(iv) made any material change in its method of accounting;
(v) entered into any other material transactions other than those
contemplated by this Agreement;
(vi) made any material accrual or material arrangement for or
payment of bonuses or special compensation of any kind or any
severance or termination pay to any present or former officer
or employee; or
(vii) made any material increase in any profit-sharing, bonus,
deferred compensation, insurance, pension, retirement, or
other employee benefit plan, payment, or arrangement made to,
for, or with their officers, directors, or employees; and
(c) IHC has not
(i) granted or agreed to grant any options, warrants, or other
rights for its stocks, bonds, or other corporate securities
calling for the issuance thereof,
(ii) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or
contingent) except liabilities incurred in the ordinary course
of business;
(iii) paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or
shown on the most recent IHC balance sheet and current
liabilities incurred since that date in the ordinary course of
business;
(iv) sold or transferred, or agreed to sell or transfer, any of its
material assets, properties, or rights, or agreed to cancel,
any material debts or claims;
(v) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such
amendment or termination is material, considering the business
of IHC; or
(vi) issued, delivered, or agreed to issue or deliver any stock,
bonds, or other corporate securities including debentures
(whether authorized and unissued or held as treasury stock);
and
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(d) To the best knowledge of IHC, it has not become subject to any law
or regulation which materially and adversely affects, or in the
future would be reasonably expected to adversely affect, the
business, operations, properties, assets, or condition of IHC.
3.08 Title and Related Matters. Except as provided herein or disclosed in the
most recent IHC balance sheet of its properties, inventory, interests in
properties, technology, whether patented or unpatented and assets, which
are reflected in the most recent IHC balance sheet or acquired after that
date (except properties, interests in properties, and assets sold or
otherwise disposed of since such date in the ordinary course of business),
free and clear of all mortgages, liens, pledges, charges, or encumbrances,
except (i) statutory liens or claims not yet delinquent, and (ii) such
imperfections of title and easements as do not, and will not, materially
detract from or interfere with, the present or proposed use of the
properties subject thereto or affected thereby or otherwise materially
impair present business e operations on such properties. To the best
knowledge of IHC, its technology does not infringe on the copyright,
patent, trade secret, know-how, or other proprietary right of any other
person or entity and comprises all such rights necessary to permit the
operation of the business of IHC as now being conducted or as
contemplated.
3.09 Litigation and Proceedings. There are no material actions, suits, or
proceedings pending or, to the knowledge of IHC, threatened by or against
IHC or adversely affecting IHC, at law or in equity, before any court or
other governmental agency or instrumentality domestic or foreign, or
before any arbitrator of any kind IHC does not have any knowledge of any
default on its part with respect to any judgment, order, writ, injunction
decree, award, rule, or regulation of any court, arbitrator, or
governmental agency or instrumentality.
3.10 Material Contract Defaults. IHC is not in default in any material respect
under the terms of outstanding contract, agreement, lease, or other
commitment which is material to the business, operations, assets, or
condition of IHC, and there is no event of default or other event which,
with notice or lapse of time or both, would constitute a default in any
material respect under any such contract, agreement, lease, or other
commitment in respect of which IHC has not taken adequate steps to prevent
such a default from occurring.
3.11 No Conflict with other Instruments. The execution of this Agreement and
the consummation of the transactions contemplated by this Agreement will
not result in the breach of any term or provision or, or constitute an
event of default under, any material indenture, mortgage, deed of trust,
or other material contract, agreement, or instrument to which IHC is a
party or to which any of its properties or operations are subject.
3.12 Governmental Authorizations. IHC has all licenses, franchises, permits,
and other governmental authorizations that are legally required to enable
it to conduct its business in all material respects as conducted on the
date of this Agreement. Except for compliance with federal and state
securities and corporation laws, as hereinafter
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provided, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by IHC of
this Agreement and the consummation by IHC of the transactions
contemplated hereby.
3.13 Compliance With Laws and Regulations. IHC has complied with all applicable
statutes and regulations of any federal, state, or other governmental
entity or agency thereof, except to the extent that noncompliance would
not materially and adversely affect the business, operations, properties,
assets, or condition of IHC or except to the extent that noncompliance
would not result in the occurrence of any material liability for IHC. To
the best knowledge of IHC, the consummation of this transaction will
comply with all applicable statutes and regulations, subject to the
preparation and filing of any forms required by state and federal security
laws.
3.14 Subsidiary. IHC does not own, beneficially or of record, any equity
securities in any other entity.
3.15 IHC Schedules. IHC has delivered to TTL the following schedules, which are
collectively referred to as the "IHC Schedules" and which consist of the
following separate schedules dated as of the date of execution of this
Agreement, and instruments as of such date, all certified by the chief
executive officer of IHC as complete, true, and accurate:
(a) A schedule including copies of the articles of incorporation and
bylaws of IHC and all amendments thereto in effect as of the date of
this Agreement;
(b) A schedule containing copies of resolutions adopted by the board of
directors of IHC approving this Agreement and the transactions
herein contemplated as referred to in Section 3.02:
(c) A Schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or
condition of IHC since the most recent IHC balance sheet, required
to be provided pursuant to Section 3.04 hereof,
(d) A schedule setting forth the financial statements required pursuant
to Section 3.01al hereof,
(e) A schedule setting forth any other information, together with any
required copies of documents, required to be disclosed in the IHC
Schedules by Sections 3.01 through 3.14.
IHC shall cause the IHC Schedules and the instruments delivered
to TTL hereunder to be updated after the date hereof up to and including a
specified date not more than three business days prior to the Closing
Date. Such updated IHC Schedules, certified in
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the same manner as the original IHC Schedules, shall be delivered prior to
and as a condition precedent to the obligation of TTL to close.
ARTICLE IV - CONDITIONS PRECEDENT TO OBLIGATIONS OF IHC
The obligations of IHC under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions.
4.01 Shareholder Approval. TTL shall obtain the written consent of a majority
of its stockholders to approve the transactions contemplated by this
Agreement, including the acquisition of IHC through the issuance of TTL
common stock for all of the issued and outstanding Shares. Said written
consent shall be provided to IHC at closing.
4.02 Accuracy of Representations. The representations and warranties made by
TTL in this Agreement were true when made and shall be true at the Closing
Date with the same force and affect as if such representations and
warranties were made at and as of the Closing Date (except for changes
therein permitted by this Agreement), and TTL shall have performed or
complied with all covenants and conditions required by this Agreement to
be performed or complied with by TTL prior to or at the Closing. IHC shall
be furnished with certificates, signed by duly authorized officers of TTL
and dated the Closing Date, to the foregoing effect.
4.03 Officer's Certificates. IHC shall have been furnished with certificates
dated the Closing Date and signed by the duly authorized chief executive
officer of TTL to the effect that to such officers best knowledge no
litigation, proceeding, investigation, or inquiry is pending or, to the
best knowledge of TTL threatened, which might result in an action to
enjoin or prevent the consummation of the transactions contemplated by
this Agreement Furthermore, based on certificates of good standing,
representations of government agencies, and TTL's own documents and
information, the certificate shall represent, to the best knowledge of the
officer, that:
(a) This Agreement has been duly approved by TTL's board of directors
and stockholders and has been duly executed and delivered in the
name and on behalf of and by its duly authorized officers pursuant
to, and in compliance with, authority granted by the board of
directors of TTL pursuant to a unanimous consent;
(b) There have been no material adverse changes in TTL up to and
including the date of the certificate;
(c) All conditions required by this Agreement have been met, satisfied,
or performed by TTL;
(d) All authorizations, consents, approvals, registrations, and/or
filings with any governmental body agency, or court required in
connection with the execution
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and delivery of the documents by TTL have been obtained and are in
full force and effect or, if not required to have been obtained,
will be in full force and effect by such time as may be required;
and
(e) There is no material action, suit, proceeding, inquiry, or
investigation at law or in equity by any public board or body
pending or threatened against TTL, wherein an unfavorable decision,
ruling, or finding could have an adverse effect on the financial
condition of TTL, the operation of TTL, or the acquisition and
reorganization contemplated herein, or any agreement or instrument
by which TTL is bound or in any way contests the existence of TTL.
4.04 No Material Adverse Change. Prior to the Closing Date. There shall not
have occurred any material adverse change in the financial condition,
business, or operations of TTL, nor shall any event have occurred which,
with the lapse of time or the giving of notice, may' cause or create any
material adverse change in the financial condition, business, or
operations of TTL.
4.05 Good Standing. IHC shall have received a certificate of good standing from
the secretary of the State of Florida, certifying that TTL is in good
standing as a corporation in the State of Florida.
4.06 Other Items. IHC shall have received such further documents, certificates,
or instruments relating to the transactions contemplated hereby as IHC may
reasonably request.
ARTICLE V - CONDITIONS PRECEDENT TO OBLIGATIONS OF TTL
The obligations of TTL under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions.
5.01 Shareholder Approval. IHC shall obtain through a majority written consent
of its stockholders authorization and approval for this Agreement and the
transactions contemplated hereby.
5.02 IHC Stockholders. Holders of all of the issued and outstanding IHC Shares
or rights to acquire IHC Shares shall agree to this Agreement and the
exchange of shares contemplated by this Agreement.
5.03 Accuracy of Representations. The representations and warranties made by
IHC and the IHC Stockholders in this Agreement were correct when made and
shall be true at the Closing Date with the same force and affect as if
such representations and warranties were made at and as of the Closing
Date (except for changes therein permitted by this Agreement), and IHC
shall have performed or compiled with all covenants and conditions
required by this Agreement to be performed or complied with by IHC prior
to
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or at the Closing. TTL shall be furnished with a certificate, signed by a
duly authorized officer of IHC and dated the Closing Date, to the
foregoing effect.
5.04 Officer's Certificates. TTL shall have been furnished with certificates
dated the Closing Date and signed by the duly authorized chief operating
officer of IHC to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of IHC,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
Furthermore, based on certificates of good standing, representations of
government agencies, and IHC's own documents, the certificate shall
represent, to the best knowledge of the officer, that:
(a) This Agreement has been duly approved by IHC's board of directors
and stockholders and has been duly executed and delivered in the
name and on behalf of IHC by its duly authorized officers pursuant
to, and in compliance with, authority granted by the board of
directors of IHC pursuant to a unanimous consent of its board of
directors and a majority consent of its stockholders or any holders
of rights to acquire IHC stock;
(b) Except as provided or permitted herein, there have been no material
adverse changes in IHC up to and including the date of the
certificate;
(c) All authorizations, consents, approvals, registrations, and/or
filing with any governmental, body, agency, or court required in
connection with the execution and delivery of the documents by IHC
have been obtained and are in full force and effect or, if not
required to have been obtained will be in full force and effect by
such time as may be required; and
(d) There is no material action, suit, proceeding, inquiry, or
investigation at law or in equity by any public board or body
pending or threatened against IHC, wherein an unfavorable decision,
ruling, or finding would have an adverse affect on the financial
condition of IHC, the operation of IHC, or the acquisition
contemplated herein, or any material agreement or instrument by
which IHC is bound or would in any way contest the existence of IHC.
5.05 No Material Adverse Change. Prior to the Closing Date, there shall not
have occurred any material adverse change in the financial condition,
business or operations of IHC, nor shall any event have occurred which,
with the lapse of time or the giving of notice, may cause of create any
material adverse change in the financial condition business, or operations
of IHC.
5.06 Good Standing. TTL shall have received a certificate of good standing from
the appropriate authority in the State of Florida certifying that IHC is
in good standing as a corporation in the State of Florida.
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5.07 Other Items. TTL shall have received such further documents certificates
or instruments relating to the transactions contemplated hereby as TTL,
may reasonably request.
ARTICLE VI - SPECIAL COVENANTS
6.01 Indemnification by IHC. IHC will indemnify and hold harmless TTL and its
directors and Officers, and each person, if any, who controls within the
meaning of the Securities Act, from and against any' and all losses,
claims, damages, expenses, liabilities, or actions to which any of them
may become subject under applicable law (including the Securities Act and
the Securities Exchange Act) and will reimburse them for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any claims or actions, whether or not resulting
in liability, insofar as such losses, claims, damages, expenses,
liabilities, or actions arise out of or are based upon any untrue
statement or alleged untrue statement of material fact contained in any
application or statement file with a governmental body or arising out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary in order to make
the statements therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing by IHC expressly for use therein. The
indemnity agreement shall remain in full force and effect, regardless of
any investigation made by or on behalf of TTL and shall survive
consummation of the transactions contemplated by this Agreement for a
period of one year.
6.02 Indemnification by TTL. TTL will indemnify and hold harmless IHC and the
directors and Officers, and each person, if any, of IHC who controls
within the meaning of the Securities Act, from and against any and all
losses, claims, damages, expenses, liabilities, or actions to which any of
them may become subject under applicable law (including the Securities Act
and the Securities Exchange Act) and will reimburse them for any legal or
other expenses reasonably incurred by them in connection with
investigating or defending any claims or actions, whether or not resulting
in liability, insofar as such losses, claims, damages, expenses,
liabilities, or actions arise out of or are based upon any untrue
statement or alleged untrue statement of material fact contained in any
application or statement file with a governmental body or arising out of
or are based upon the omission or alleged omission to state therein a
material: fact required to be stated therein, or necessary in order to
make the statements therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing by TTL expressly for use therein. The
indemnity agreement shall remain in full force and effect, regardless of
any investigation made by or on behalf of IHC and shall survive
consummation of the transactions contemplated by this Agreement for a
period of one year.
6.03 The Acquisition of TTL Common Stock. TTL and IHC understand and agree that
the consummation of this Agreement including the issuance of the TTL
Common Stock to IHC in exchange for the IHC Shares as contemplated hereby,
constitutes the offer and sale of securities under the Securities Act and
applicable state statutes. TTL and IHC
JD IHC Initials 18 TTL Initials LHT
- --- ---
<PAGE> 19
agree that such transactions shall be consummated in reliance on
exemptions from the registration and prospectus delivery requirements of
such statutes which depend, among other items, on the circumstances under
which such securities are acquired.
(a) In order to provide documentation for reliance upon exemptions from
the registration and prospectus delivery requirements for such
transactions, the signing of this Agreement and the delivery of
appropriate separate representations shall constitute the parties
acceptance of, and concurrence in, the following representations in
that
(i) The IHC Stockholders acknowledge that neither the SEC nor the
securities commission of any state or other federal agency has
made any determination as to the merits of acquiring TTL
Common Stock, and that this transaction involves certain
risks.
(ii) IHC Shareholders have such knowledge and experience in
business and financial matters that they are capable of
evaluating such business risks.
(iii) All information which the IHC Stockholders have provided to
TTL or the representatives concerning their suitability and
intent to hold shares in TTL following the transactions
contemplated hereby is complete accurate and correct.
(iv) The IHC Stockholders understand that the TTL Common Stock has
not been registered but is being acquired by reason of a
specific exemption under the Securities Act as well as under
certain state statutes for transactions not involving any
public offering and that any disposition of the subject TTL
Common Stock: may, under certain circumstances, be
inconsistent with this exemption and may make IHC or TTL an
underwriter within the meaning of the Securities Act. It is
understood that the definition of "underwriter" focuses upon
the concept of "distribution" and that any subsequent
disposition of the subject TTL Common Stock can only be
effected in transactions which are not considered
distributions. Generally, the term "distribution" is
considered synonymous with "public offering" or any other
offer or sale involving general solicitation or general
advertising. Under present law, in determining whether a
distribution occurs when securities are sold into the public
market, under certain circumstances one must consider the
availability of public information regarding the issuer, a
holding period for the securities sufficient to assure that
the persons desiring to sell the securities without
registration first bear the economic risk of their investment,
and a limitation on the number of securities which the
stockholder is permitted to sell and on the manner of sale,
thereby reducing the potential impact of the sale on the
trading markets. These criteria are set forth specifically in
rule 144 promulgated under the Securities Act, and, one year
after the date
JD IHC Initials 19 TTL Initials LHT
- --- ---
<PAGE> 20
the TTL Common Stock or IHC Shares are fully paid for, as
calculated in accordance with rule 144(d) sales of securities
in reliance upon rule 144 can only be made in limited amounts
in accordance with the terms and conditions of that Rule and
after two years from the date the securities are fully paid
for, as calculated in accordance with rule 144(d) may
generally be sold without meeting those conditions, provided
the holder is not (and has not been for the preceding three
months) an affiliate of the issuer.;
(v) The IHC Stockholders acknowledge that the shares of TTL Common
Stock must be held and may not be sold, transferred, or
otherwise disposed of for value unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available. TTL is not under any obligation to
register the TTL Common Stock under the Securities Act. If
rule 144 is available after one year and prior to two years
following the date the shares are fully paid for, only routine
sales of such TTL Common Stock in limited amounts can be made
in reliance upon rule 144 in accordance with the terms and
conditions of that rule TTL is not under any obligation to
make rule 144 available except as set forth in this Agreement
and in the event rule 144 is not available, compliance with
Regulation A or some other disclosure exemption may be
required before IHC Stockholders can sell, transfer, or
otherwise dispose of such TTL Common Stock without
registration under the Securities Act. Subject to compliance
with federal and state securities laws, TTL's registrar and
transfer agent will maintain a stop transfer order against the
registration or transfer of the TTL Common Stock held by IHC;
Stockholders and the certificates representing the TTL Common
Stock will bear a legend in substantially the form hereinabove
set forth so restricting the sale of such securities:
(vi) TTL. will require IHC Stockholder to provide an opinion of
counsel reasonably acceptable to TTL stating that the transfer
is proper. TTL agrees to provide IHC with assistance and
cooperation in good faith when IHC seeks to sell any shares
which are free from restrictions or exempt therefrom
(b) In connection with the transactions contemplated by this Agreement,
TTL shall file with the assistance of its legal counsel, such
notices, applications, reports, or other instruments as may be
deemed by it to be necessary or appropriate in an effort to document
reliance on such exemptions, and with the appropriate regulatory
authority in the states where the IHC Stockholders reside unless an
exemption requiring no filing is available in such jurisdictions,
all to the extent and in the manner as may' be deemed by TTL to be
appropriate.
(c) The IHC Stockholders acknowledge that the basis for relying on
exemptions from registration or qualifications are factual,
depending on the conduct of the various
JD IHC Initials 20 TTL Initials LHT
- --- ---
<PAGE> 21
parties, and that no legal opinion or other assurance will be
required or given to the effect that the transactions contemplated
hereby are in fact exempt from registration or qualification.
6.04 Securities Filings. TTL shall be responsible for the preparation and
filing of any required forms, or documents, deemed necessary by TTL and
its legal counsel, with the Securities and Exchange Commission and in
jurisdictions which would require a filing with a governmental agency as a
result of the transactions contemplated in this Agreement.
6.05 Sales of Securities Under Rule 144 if Applicable.
(a) TTL will use its best efforts to at all times satisfy the current
public information requirements of rule 144 promulgated under the
Securities Act so that its stockholders can sell restricted
securities that have been held for one year or more or such other
restricted period as required by rule 144 as it is from time to time
amended.
(b) Upon being informed in writing by any person holding restricted
stock of TTL as of the date of this Agreement that such person
intends to sell any shares under rule 144 promulgated under the
Securities Act (including any rule adopted in substitution or
replacement thereof), TTL will certify in writing to such person
that it is in compliance with rule 144 current public information
requirements to enable such person to sell such person's restricted
stock under rule 144, as may be applicable under the circumstances.
(c) If any certificate representing any such restricted stock is
presented to TTL's transfer agent for registration or transfer in
connection with any sales theretofore made under rule 144, provided
such certificate is duly endorsed for transfer by the appropriate
person(s) or accompanied by a separate stock power duly executed by
the appropriate person(s) in each case with reasonable assurances
that such endorsements are genuine and effective, and is accompanied
by an opinion of counsel satisfactory to TTL and its counsel that
such transfer has complied with the requirements of rule 144, as the
case may be, TTL will use its best efforts to cooperate with the
shareholder and/or transfer agent with the registration or transfer
in connection with any sales made under rule 144.
ARTICLE VII - MISCELLANEOUS
The covenants set forth in this section shall survive the Closing Date and
the consummation of the transactions herein contemplated.
7.01 Brokers. TTL and IHC agree that there were no finders or brokers involved
in bringing the parties together or who were instrumental in the
negotiation, execution, or consummation of this Agreement. Further, TTL
and IHC each agree to indemnify the other against any claim by any third
person for any commission, brokerage, or finder's
JD IHC Initials 21 TTL Initials LHT
- --- ---
<PAGE> 22
fee or other payment with respect to this Agreement or the transactions
contemplated hereby based on any alleged agreement or understanding
between such party and such third person whether express or implied, from
the actions of such party.
7.02 No Representation Regarding Tax Treatment. No representation or warranty
is being made by any party to any other regarding the treatment of this
transaction for federal or state income taxation. Each party has relied
exclusively on its own legal, accounting, and other tax adviser regarding
the treatment of this transaction for federal and state income taxes and
on no representation warranty, or assurance from any other party or such
other party's legal, accounting, or other adviser.
7.03 Governing Law. This Agreement shall be governed by, enforced and construed
under and in accordance with the laws of the State of Florida.
7.04 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if personally delivered, if sent by
facsimile or telecopy transmission or other electronic communication
confirmed by registered or certified mail, postage prepaid, or if sent by
prepaid overnight courier addressed as follows:
If to TTL at 7887 Bryan Dairy Road, Suite 105, Largo, Florida 33777
If to IHC at 7887 Bryan Dairy Road, Suite 105, Largo, Florida 33777
or such other addresses as shall be furnished in writing by any
party any such notice or communication shall be deemed to have been given
as of the date so delivered or sent by facsimile or telecopy transmission
or other electronic communication, or one day after the date so sent by
overnight courier.
7.05 Attorney Fees. In the event that any party institutes any action or suit
to enforce this Agreement or to secure relief from any default hereunder
or breach hereof, the breaching party or parties shall reimburse the
nonbreaching party or parties for all costs, including reasonable
attorneys' fees, incurred in connection therewith and in enforcing or
collecting any judgment rendered therein.
7.06 Schedules Knowledge. Whenever in any section of this Agreement reference
is made to information set forth in the schedules provided by TTL or IHC,
such reference is to information specifically set forth in such schedules
and clearly marked to identify the section of this Agreement to which the
information relates. Whenever any, representation is made to the
"knowledge" of any party, it shall be deemed to be a representation that
no officer or director of such party, after reasonable investigation, has
any knowledge of such matters.
7.07 Entire Agreement. This Agreement represents the entire agreement between
the parties relating to the subject matter hereof. All previous agreements
between the parties, whether written or oral, have been merged into this
Agreement. This Agreement alone
JD IHC Initials 22 TTL Initials LHT
- --- ---
<PAGE> 23
fully and completely expresses the agreement of the parties relating to
the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations, or warranties, written or
oral, except as set forth herein.
7.08 Survival of Termination. The representations, warranties, and covenants of
the respective parties shall survive the Closing Date and the consummation
of the transactions herein contemplated for a period of six months from
the Closing Date, unless otherwise provided herein.
7.09 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which taken together
shall be but a single instrument.
7.10 Amendment or Waiver. Every right and remedy provided herein shall be
cumulative with every other right and remedy, whether conferred herein, at
law, or in equity, and such remedies may be enforced concurrently, and no
waiver by any party of the performance of any obligation by the other
shall be construed as a waiver of the same or any other default then,
theretofore, or thereafter occurring or existing. At any time prior to the
Closing Date, this Agreement may be amended by a writing signed by all
parties hereto, with respect to any of the terms contained herein and any
term or condition of this Agreement may be waived or the time for
performance thereof may be extended by a writing signed by the party or
parties for whose benefit the provision is intended.
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly authorized,
as of the date first above written.
TOUPS TECHNOLOGY INTERSOURCE HEALTHCARE, INC.
LICENSING, INC.
By: /s/ Leon H. Toups By: /s/ James Doulgeris
------------------------------- --------------------------------
Leon H. Toups James Doulgeris
Chief Executive Officer Chief Executive Officer
Chairman of the Board Director
Executed November 30, 1998
JD IHC Initials 23 TTL Initials LHT
- --- ---
<PAGE> 24
Exhibit A
InterSource Health Care, Inc.
Shareholder Register
.113:1 1:1
Shareholder IHC Shares PPM Shares TTL Shares
James Doulgeris 2,440,000 275,720
Leon H. Toups 2,360,000 266,680
Michael P. Toups 1,180,000 133,340
Mark Clancy 1,180,000 133,340
Kirk Cianciolo 400,000 45,200
Chunyang Jiang 250,000 28,250
John Sliwoski 212,000 23,956
Nicholas J. Sears 200,000 22,600
Robert Barnes 100,000 11,300
Greg Jewell 50,000 5,650
Leslie D. Reagin, III 50,000 5,650
Errol J. & Stella W. Lasseigne Living Trust 50,000 5,650
George J. Doulgeris 40,000 4,520
John N. Doulgeris 25,000 2,825
Steven Levin 25,000 2,825
Lester Sturtridge 25,000 2,825
Jeffrey Weatherbee 20,000 2,260
Michele Goldstein 20,000 2,260
Patricia Grove 20,000 2,260
Mary Slaughter 10,000 1,130
Stephen R. Wood and Diane M. Wood 30,000 30,000
Michael W. Cianciolo 30,000 30,000
Virgil Todd & Theresa Todd, Joint Tenant with
Right of Survivorship 30,000 30,000
Mark S. & Ellen Stern as Tenants by the Entirety 30,000 30,000
Mark S. and Ellen Stern Irrevocable Childrens
Trust for: (1/3) Elliot Benjamin Stern, (1/3)
Lennie Beth Stern, (1/3) Zachary Adam Stern 15,000 15,000
Robert Kudelko 15,000 15,000
Revocable Living Trust of Todd & Katherine Sider 15,000 15,000
Gregory S. Ayers 15,000 15,000
Carla J. Patteri, Trustee, U.T.A., DTD. 3-3-98 15,000 15,000
George T. Fritze & Carole J. Fritze 15,000 15,000
Kevin S. Rowe 15,000 15,000
Total 8,657,000 225,000
Total InterSource 8,882,000 Total TTL 1,203,241
<PAGE> 25
Exhibit A
InterSource Health Care, Inc.
Shareholder Register
.113:1 1:1
Shareholder IHC Shares PPM Shares TTL Shares
James Doulgeris 2,440,000 275,720
Leon H. Toups 2,360,000 266,680
Michael P. Toups 1,180,000 133,340
Mark Clancy 1,180,000 133,340
Kirk Cianciolo 400,000 45,200
Chunyang Jiang 250,000 28,250
John Sliwoski 212,000 23,956
Nicholas J. Sears 200,000 22,600
Robert Barnes 100,000 11,300
Greg Jewell 50,000 5,650
Leslie D. Reagin, III 50,000 5,650
Errol J. & Stella W. Lasseigne Living Trust 50,000 5,650
George J. Doulgeris 40,000 4,520
John N. Doulgeris 25,000 2,825
Steven Levin 25,000 2,825
Lester Sturtridge 25,000 2,825
Jeffrey Weatherbee 20,000 2,260
Michele Goldstein 20,000 2,260
Patricia Grove 20,000 2,260
Mary Slaughter 10,000 1,130
Stephen R. Wood and Diane M. Wood 30,000 30,000
Michael W. Cianciolo 30,000 30,000
Virgil Todd & Theresa Todd, Joint Tenant with
Right of Survivorship 30,000 30,000
Mark S. & Ellen Stern as Tenants by the Entirety 30,000 30,000
Mark S. and Ellen Stern Irrevocable Childrens
Trust for: (1/3) Elliot Benjamin Stern, (1/3)
Lennie Beth Stern, (1/3) Zachary Adam Stern 15,000 15,000
Robert Kudelko 15,000 15,000
Revocable Living Trust of Todd & Katherine Sider 15,000 15,000
Gregory S. Ayers 15,000 15,000
Carla J. Patteri, Trustee, U.T.A., DTD. 3-3-98 15,000 15,000
George T. Fritze & Carole J. Fritze 15,000 15,000
Kevin S. Rowe 15,000 15,000
Total 8,657,000 225,000
Total InterSource 8,882,000 Total TTL 1,203,241
<PAGE> 26
Exhibit A to the
Exchange of Share Agreement by and between
Toups Technology Licensing, Inc. and InterSource Health Care, Inc.
InterSource Health Care, Inc.
Shareholder Register
.113:1 1:1
Shareholder IHC Shares PPM Shares TTL Shares
James Doulgeris 2,440,000 275,720
Leon H. Toups 2,360,000 266,680
Michael P. Toups 1,180,000 133,340
Mark Clancy 1,180,000 133,340
Kirk Cianciolo 400,000 45,200
Chunyang Jiang 250,000 28,250
John Sliwoski 212,000 23,956
Nicholas J. Sears 200,000 22,600
Robert Barnes 100,000 11,300
Greg Jewell 50,000 5,650
Leslie D. Reagin, III 50,000 5,650
Errol J. & Stella W. Lasseigne Living 50,000 5,650
Trust
George J. Doulgeris 40,000 4,520
John N. Doulgeris 25,000 2,825
Steven Levin 25,000 2,825
Lester Sturtridge 25,000 2,825
Jeffrey Weatherbee 20,000 2,260
Michele Goldstein 20,000 2,260
Patricia Grove 20,000 2,260
Mary Slaughter 10,000 1,130
Stephen R. Wood and Diane M. Wood 30,000 30,000
Michael W. Cianciolo 30,000 30,000
Virgil Todd & Theresa Todd, Joint
Tenant with
Right of Survivorship 30,000 30,000
Mark S. & Ellen Stern as Tenants by 30,000 30,000
the Entirety
Mark S. and Ellen Stern Irrevocable
Children's
Trust for: (1/3) Elliot Benjamin Stern,
(1/3) Lennie Beth
Stern, (1/3) Zachary Adam Stern 15,000 15,000
Robert Kudelko 15,000 15,000
Revocable Living Trust of Todd & 15,000 15,000
Katherine Sider
Gregory S. Ayers 15,000 15,000
<PAGE> 27
Carla J. Patteri, Trustee, U.T.A., DTD. 15,000 15,000
3-3-98
George T. Fritze & Carole J. Fritze 15,000 15,000
Kevin S. Rowe 15,000 15,000
Total 8,657,000 225,000
Total InterSource 8,882,000 Total TTL 1,203,241
<PAGE> 28
INTERSOURCE HEALTH CARE, INC.
STATEMENTS OF OPERATIONS
For the eleven-month period ended November 30, 1998 (Unaudited)
(Unaudited)
Eleven-Month
Period ended
November
1998
----------
Sales $2,438,158
Cost of Goods Sold 658,778
----------
Gross Income from Operations 1,779,380
----------
Expenses:
Salaries 434,149
Consulting Fees 61,392
Other Operating Costs 191,208
----------
Total Expenses 686,749
----------
Net income (loss) from operations 1,092,631
----------
Other Income:
Other Income 128,712
Interest Income 165
----------
128,877
Other Expenses:
Interest Expense 7,447
----------
Net Income (Loss) $1,214,061
==========
Weighted average number of
shares outstanding 8,882,000
Net income per share $ 0.1367
==========
<PAGE> 29
INTERSOURCE HEALTH CARE, INC.
BALANCE SHEET
November 30, 1998 (Unaudited)
(Unaudited)
November 30
1998
-----------
Assets:
Cash $ 3,247
Accounts Receivable, net of allowance
for doubtful accounts of $5000 1,576,201
Inventory, at cost 37,923
Prepaid royalty expenses 0
Deferred Charges 0
Property and Equipment, net of
accumulated depreciation of $4,750 15,122
Other Assets 67,741
-----------
Total Assets $ 1,700,234
===========
Current Liabilities:
Current portion long-term liabilities 0
Accounts payable and accrued liabilities 379,374
Notes payable 0
Customer deposits 0
Capital Lease Obligation 0
Other Current Liabilities 0
-----------
Total Current Liabilities 379,374
-----------
Long-Term Liabilities, less current portion 0
Total Liabilities $ 379,374
-----------
Stockholders' equity:
Common Stock 888
Additional paid-in capital 224,812
Retained Earnings (118,901)
Net Income 1,214,061
-----------
Total Stockholders' equity $ 1,320,860
-----------
-----------
Total liabilities and stockholders' equity $ 1,700,234
===========
<PAGE> 1
Exhibit 10.9
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (this "Agreement") is made this 30th of
September, 1998, by and among TOUPES TECHNOLOGY LICENSING, INC., Florida
corporation ("TTL"); BROUNLEY ASSOCIATES, INC., a Florida corporation
("Brounley"); and the persons listed in Exhibit "A-1" hereof who are the owners
of record of all the issued and outstanding stock of Brounley who execute and
deliver the Agreement ("Brounley Stockholders"), based on the following:
Recitals
TTL wishes to acquire all the issued and outstanding stock of Brounley in
exchange for stock of TTL in a transaction intended to qualify as a tax-free
exchange pursuant to section 368(a)(l)(B) of the Internal Revenue Code of 1986,
as amended. The parties intend for this Agreement to represent the terms and
conditions of such tax-free reorganization, which Agreement the parties hereby
adopt.
Agreement
Based on the stated premises, which are incorporated herein by reference,
and for and in consideration of the mutual covenants and agreements hereinafter
set forth, the mutual benefits to the parties to be derived herefrom, and other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, it is hereby agreed as follows:
ARTICLE I
EXCHANGE OF STOCK
1.01 Exchange of Shares. On the terms and subject to the conditions set
forth in this Agreement, on the Closing Date (as defined in Section 1.05
hereof), the Brounley Stockholders shall assign, transfer, and deliver to TTL,
free and clear of all liens, pledges, encumbrances, charges, restrictions, or
claims of any kind, nature, or description, all issued and outstanding shares of
common stock of Brounley (the "Brounley Shares") held by Brounley Stockholders
which shares shall represent all issued and outstanding shares of Brounley
common stock which total 22,222 shares, and TTL agrees to acquire such shares on
such date by issuing and delivering in exchange therefor an aggregate of 900,000
unregistered shares of TTL common stock, par value $0.001 per share, (the "TTL
Common Stock"). Such shares TTL Common Stock shall be issued pro rata based on
the number of Brounley Shares held and as set forth opposite the Brounley
Stockholder's respective names in Exhibit "A-l". All 900,000 shares of TTL
Common Stock to be issued and delivered pursuant to this Agreement shall be
appropriately adjusted to take into account any stock split, stock dividend,
reverse stock split, recapitalization, or similar change in the TTL Common Stock
which may occur between the date of the execution of this Agreement and the
Closing Date.
1.02 Delivery of Certificates by Brounley Stockholders. The transfer of
Brounley Shares by the Brounley Stockholders shall be effected by the delivery
to TTL at the Closing (as set forth in Section 1.05 hereof) of a certificate
issued to TTL representing all of the issued and outstanding shares of Brounley.
1.03 Operation as Wholly-Owned Subsidiary. After giving effect to the
transaction contemplated hereby, TTL will own all the issued and outstanding
shares of Brounley and Brounley shall be merged with TTL.
1.04 Further Assurances. At the Closing and from time to time thereafter,
the Brounley Stockholders shall execute such additional instruments and take
such other action as TTL may reasonably request, without undue cost to the
Brounley Stockholders in order to more effectively sell, transfer, and assign
clear title and ownership in the Brounley Shares to TTL.
<PAGE> 2
1.05 Closing and Parties. The Closing contemplated hereby shall be held at
the principal office of TTL in Largo, Florida on or before 9:00 am. September
30, 1998, or on another date to be agreed to in writing by the parties (the
"Closing Date"). The Agreement may be closed at any time following approval by a
majority of the stockholders of TTL Common Stock as set forth in Section 4.02
hereof and the Brounley Stockholders as set forth in Section 5.02. The Closing
may be accomplished by wire, express mail, overnight courier conference
telephone call or as otherwise agreed to by the respective parties or their duly
authorized representatives.
1.06 Closing Events.
(a) TTL Deliveries. Subject to fulfillment or waiver of the conditions set
forth in Article IV, TTL shall deliver to Brounley at Closing all the following:
(i) A certificate of good standing from the secretary of State of
Florida, certifying that TTL is in good standing as a corporation in the State
of Florida;
(ii) Incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of TTL executing this Agreement and
any other document delivered pursuant hereto on behalf of TTL;
(iii) Copies of the resolutions of TTL's board of directors and
shareholder minutes or consents authorizing the execution and performance of
this Agreement and the contemplated transactions, certified by the secretary or
an assistant secretary of TTL as of the Closing Date;
(iv) The certificate contemplated by Section 4.03, duly executed by
the chief executive officer of TTL;
(v) The certificate contemplated by Section 4.04, dated the Closing
Date, signed by the chief executive officer of TTL;
(vi) Certificates for 900,000 shares of TTL Common Stock in the
names of the Brounley Stockholders and in the amounts set forth in Exhibit "A-1"
which shall be issued by TTL's transfer agent immediately following Closing or
as expeditiously as possible thereafter; and
In addition to the above deliveries, TTL shall take all steps and actions
as Brounley and Brounley Stockholders may reasonably request or as may otherwise
be reasonably necessary to consummate the transactions contemplated herebv.
(b) Brounley Deliveries. Subject to fulfillment or waiver of the
conditions set forth in Article V, Brounley and/or Brounley Stockholder's shall
deliver to TTL at Closing all the following:
(i) A certificate of good standing from the secretary of state of
Florida, issued as of a date within five days prior to the Closing Date
certifying that Brounley is in good standing as a corporation in the State of
Florida;
(ii) Incumbency and specimen signature certificates dated the
Closing Date with respect to the officers of Brounley executing this Agreement
and any other document delivered pursuant hereto on behalf of Brounley;
(iii) Copies of resolutions of the board of directors and of the
stockholders of Brounley authorizing the execution and performance of this
Agreement and the contemplated transactions, certified by the secretary or an
assistant secretary of Brounley as of the Closing Date;
(iv) The certificate contemplated by Section 5.03, executed by the
chief operating officer of Brounley; and
2
<PAGE> 3
(v) The certificate contemplated by Section 5.04, dated the Closing
Date, signed by the chief operating officer of Brounley.
In addition to the above deliveries, Brounley shall take all steps and
actions as TTL may reasonably request or as may otherwise be reasonably
necessary to consummate the transactions contemplated hereby.
1.07. Termination.
(a) This Agreement may be terminated by the board of directors of either
TTL or Brounley at any time prior to the Closing Date if:
(i) There shall be any actual or threatened action or proceeding
before any court or any governmental body which shall seek to restrain,
prohibit, or invalidate the transactions contemplated by this Agreement and
which, in the reasonable judgment of such board of directors, made in good faith
and based upon the advice of its legal counsel, makes it inadvisable to proceed
with the transactions contemplated by this Agreement;
(ii) Any of the transactions contemplated hereby are disapproved by
any regulatory authority whose approval is required to consummate such
transactions or in the reasonable judgment of such board of directors, made in
good faith and based on the advice of counsel, there is substantial likelihood
that any such approval will not be obtained or will be obtained only on a
condition or conditions which would be unduly burdensome, making it inadvisable
to proceed with the exchange;
In the event of termination pursuant to this paragraph (a) of Section
1.07, no obligation, right, or liability shall arise hereunder, and each party
shall bear all of the expenses incurred by it in connection with the
negotiation, preparation, and execution of this Agreement and the transactions
contemplated hereby.
(b) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of TTL if (i) Brounley shall
fail to comply in any material respect with any of its covenants or agreements
contained in this Agreement or if any of the representations or warranties of
Brounley contained herein shall be inaccurate in any material respect or (ii)
TTL determines that there has been or is likely to be any material adverse
change in the financial or legal condition of Brounley. In the event of
termination pursuant to this paragraph (b) of this Section 1.07, no obligation,
right, remedy, or liability shall arise hereunder. All parties shall bear their
own costs incurred in connection with the negotiation, preparation, and
execution of this Agreement and the transactions contemplated hereby.
(c) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of Brounley if (i) TTL shall
fail to comply in any material respect with any of its covenants or agreements
contained in this Agreement or if any of the representations or warranties of
TTL contained herein shall be inaccurate in any material respect, or (ii)
Brounley determines that there has been or is likely to be any adverse change in
the financial or legal condition of TTL. In the event of termination pursuant to
this paragraph (c) of this Section 1.07. no obligation, right, remedy, or
liability shall arise hereunder. All parties shall each bear their own costs
incurred in connection with the negotiation, preparation, and execution of this
Agreement and the transactions contemplated hereby.
1.08 Registration of TTL Shares. Concurrent with the Closing of this
Agreement, or immediately thereafter, TTL shall file a form SB-2 registration
statement to register certain of its equity securities with the Securities and
Exchange Commission ("SEC") pursuant to the Securities Act of 1933, as amended
("the 1933 Act") and shall use its best efforts to have said registration
statement approved by the S.E.C. Out of the total shares being registered by
TTL, 105,000 of those shares shall be the TTL Common Stock being transferred to
the Brounley Stockholders pursuant to this Agreement. Thus, TTL shall submit
for registration 105,000 out of the 900,000 ITT shares in total being
transferred to Brounley Stockholders (hereinafter "Registered Shares"). The
Registered Shares shall be issued and held as set forth in Exhibit A-1 opposite
the respective Brounley Stockholders' names.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF TTL
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As an inducement to, and to obtain the reliance of Brounley, TTL
represents and warrants as follows:
2.01 Organization. TTL is, and will be on the Closing Date, a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Florida and has the corporate power and is and will be duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business in all material respects as it is now being
conducted, and there are no other jurisdictions in which it is not so qualified
in which the character and location of the assets owned by it or the nature of
the material business transacted by it requires qualification, except where
failure to do so would not have a material adverse effect on its business,
operations, properties, assets or condition. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not, violate any
provision of TTL's articles of incorporation or bylaws, or other agreement to
which it is a party or by which it is bound.
2.02 Approval of Agreement. TTL has full power, authority, and legal right
and has taken, or will take, all action required by law, its articles of
incorporation, bylaws, and otherwise to execute and deliver this Agreement and
to consummate the transactions herein contemplated. The board of directors of
TTL has authorized and approved the execution, delivery, and performance of this
Agreement and the transactions contemplated hereby; subject to the approval of
the TTL stockholders and compliance with state and federal corporate and
securities laws.
2.03 Capitalization. The authorized capitalization of TTL consists of
20,000,000 shares of common stock, $0.001 par value, of which 15,595,454 shares
are issued and outstanding. All issued and outstanding shares of TTL are legally
issued, fully paid, and nonassessable and not issued in violation of the
preemptive or other right of any person. There are no dividends or other amounts
due or payable with respect to any of the shares of capital stock of TTL.
2.04 Financial Statements.
(a) Included in Schedule 2.04 are the financial statements which
were filed by TTL in connection with TTL's Form 10-SB, as well as quarterly
audited financial statements for the periods ending March 31, 1998 and June 30,
1998 (collectively "l0Qs"), which financial statements have been duly filed with
the Securities and Exchange Commission ("SEC") as required by the 1934 Act.
(b) The financial statements of TTL delivered pursuant to Section
2.04(a) have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved as explained in
the notes to such financial statements. The TTL financial statements present
fairly, in all material respects, as of their respective dates, the financial
position of TTL. TTL did not have, as of the date of any such financial
statements, except as and to the extent reflected or reserved against therein,
any liabilities or obligations (absolute or contingent) which should be
reflected therein in accordance with generally accepted accounting principles,
and all assets reflected therein present fairly the assets of TTL in accordance
with generally accepted accounting principles.
(c) TTL has filed or will file as of the Closing Date all tax
returns required to be filed by it from inception to the Closing Date. All such
returns and reports are accurate and correct in all material respect. TTL has no
material liabilities with respect to the payment of any federal, state, county,
local, or other taxes (including any deficiencies, interest, or penalties)
accrued for or applicable to the period ended on the date of the most recent
balance sheet of TTL, except to the extent reflected on such balance sheet and
all such dates and years and periods prior thereto and for which TTL may at said
date have been liable in its own right or as transferee of the assets of, or as
successor to, any other corporation or entity, except for taxes accrued but not
yet due and payable, and to the best knowledge of TTL, no deficiency assessment
or proposed adjustment of any such tax return is pending, proposed or
contemplated. To the best knowledge of TTL, none of such income tax returns has
been examined or is currently being examined by the Internal Revenue Service and
no deficiency assessment or proposed adjustment of any such return is pending,
proposed or contemplated. TTL has not made any election pursuant to the
provisions of any applicable tax laws (other than elections that relate solely
to methods of accounting, depreciation, or amortization) that would have a
material adverse affect on TTL, its financial condition, its business as
presently conducted or proposed to be conducted, or any of its respective
properties or material assets. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any tax return of
TTL.
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2.05 Outstanding Warrants and Options. TTL has no existing warrants or
options, calls, or commitments of any nature relating to the authorized and
unissued TTL Common Stock, except as disclosed in documents which are publicly
filed by TTL.
2.06 Information. The information concerning TTL set forth in this
Agreement is complete and accurate in all material respects and does not contain
any untrue statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under which
they were made, not misleading. TTL shall cause the schedules delivered by it
pursuant hereto and the instruments delivered to Brounley hereunder to be
updated after the date hereof up to and including the Closing Date.
2.07 Absence of Certain Changes or Events. Except as set forth in this
Agreement or the schedules hereto, since the date of the most recent TTL balance
sheet described in Section 2.04 and included in the information referred to in
Section 2.06:
(a) There has not been (i) any material adverse change in the
business, operations, properties, level of inventory, assets, or financial
condition of TTL or (ii) any damage, destruction, or loss to TTL (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets, or conditions of TTL;
(b) To the best knowledge of TTL, it has not become subject to any
law or regulation which materially and adversely affects, or in the future would
be reasonably expected to adversely affect, the business, operations,
properties, assets, or condition of TTL.
2.08 Litigation and Proceeding. There are no material actions, suits, or
administrative or other proceedings pending or, to the knowledge of TTL,
threatened by or against TTL or adversely affecting TTL or its properties, at
law or in equity, before any court or other governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind. TTL
does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, award, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality.
2.09 Compliance With Laws and Regulations. TTL has complied with all
applicable statutes and regulations of any federal, state, or other governmental
entity or agency thereof, except to the extent that noncompliance (i) could not
materially and adversely affect the business, operations, properties, assets, or
condition of TTL or (ii) could not result in the occurrence of any material
liability for TTL. To the best knowledge of TTL, the consummation of this
transaction will comply with all applicable statutes and regulations, subject to
the preparation and filing of any forms required by state and federal securities
laws.
2.10 Compliance with Security Laws. TTL has complied with all applicable
security statutes and regulation of any federal, state or other governmental
entity or agency thereof, including the filing of any required documents in
regards to all sales of TTL Stock. TTL makes the additional following securities
disclosures as a material inducement to Brounley to enter into this transaction:
a) TTL's common stock is currently traded on the OTC Bulletin Board ("OTC"
or "Over-the Counter") and TTL is in compliance with all applicable securities
rules and regulations regarding the OTC trading of its securities; and
b) TTL voluntarily became a reporting company pursuant to section 12(g) of
the Securities Exchange Act of 1934 by virtue of filing a Form 10-SB
registration statement which was approved by the SEC and is currently effective;
and
c) TTL has filed for and been approved for a manual filing exemption with
Standard & Poor's (S&P) for 1998, and to the best of TTL's knowledge, its
securities have been and are currently trading in compliance with applicable
federal and state blue sky securities laws; and
d) TTL, through its approved market maker(s), has filed a current Form 211
with the N.A.S.D.R. pursuant to Rule 15(c)-211, and has otherwise maintained
and updated the Form 211 as required by applicable securities laws and
regulations; and
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e) TTL has met all current reporting requirements of Rule 12(g) and any
other applicable securities law or regulation applicable to TTL's trading
market.
2.11 Material Contract Defaults. TTL is not in default in any material
respect under the terms of any outstanding contract, agreement, lease, or other
commitment which is material to the business, operations, properties, assets, or
condition of TTL, and there is no event of default or other event which, with
notice or lapse of time or both, would constitute a default in any material
respect under any such contract, agreement, lease, or other commitment in
respect of which TTL has not taken adequate steps to prevent such a default from
occurring.
2.12 No Conflict With Other Instruments. The execution of this Agreement
and the consummation of the transactions contemplated by this Agreement will not
result in the breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust, or other
material contract, agreement, or instrument to which TTL is a party or to which
any of its properties or operations are subject.
2.13 TTL Schedules. TTL has delivered to Brounley the following schedules,
which are collectively referred to as the "TTL Schedules" and which consist of
the following separate schedules dated as of the date of execution of this
Agreement, all certified by a duly authorized officer of TTL as complete, true,
and accurate:
(a) A schedule including copies of the articles of incorporation and
bylaws of TTL in effect as of the date of this Agreement;
(b) A schedule containing copies of resolutions adopted by the board
of directors of TTL approving this Agreement and the transactions herein
contemplated;
(c) A schedule setting forth the financial statements required
pursuant to Section 2.04(a) hereof, and
(d) A schedule setting forth any other information, together with
any required copies of documents, required to be disclosed the TTL Schedules by
Sections 2.01 through 2 13. TTL shall cause the TTL Schedules and the
instruments delivered to Brounley hereunder to be updated after the date hereof
up to and including a specified date not more than three business days prior to
the Closing Date. Such updated TTL Schedules, certified in the same manner as
the original TTL Schedules, shall be delivered prior to and as a condition
precedent to the obligation of Brounley to close.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF
BROUNLEY
As an inducement to, and to obtain the reliance of, TTL, Brounley
represents and warrants as follows:
3.01 Organization. Brounley is, and will be on the Closing Date, a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Florida and has the corporate power and is and will be duly
authorized, qualified, franchised, and licensed under all applicable laws,
regulations, ordinances, and orders of public authorities to own all of its
properties and assets and to carry on its business in all material respects as
it is now being conducted, and there are no other jurisdictions in which it is
not so qualified in which the character and location of the assets owned by it
or the nature of the material business transacted by it requires qualification,
except where failure to do so would not have a material adverse effect on its
business, operations, properties, assets or condition of Brounley. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement in accordance with the terms hereof
will not, violate any provision of Brounley's articles of incorporation or
bylaws, or other material agreement to which it is a party or by which it is
bound.
3.02 Approval of Agreement. Brounley has full power, authority, and legal
right and has taken, or will take, all action required by law, its articles of
incorporation, bylaws, or otherwise to execute and deliver this Agreement and to
consummate the transactions herein contemplated. The board of directors of
Brounley have authorized and
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approved the execution, delivery, and performance of this Agreement and the
transactions contemplated hereby; subject to the approval of the Brounley
Stockholders and compliance with state and federal corporate and securities
laws.
3.03 Capitalization. The authorized capitalization of Brounley consists of
100,000 shares of common stock, $1.00 par value, of which as of the date hereof
22,222 shares are issued and outstanding. All issued and outstanding shares of
Brounley are legally issued, fully paid, and nonassessable and not issued in
violation of the preemptive or other right of any person. There are no dividends
or other amounts due or payable with respect to any of the shares of capital
stock of Brounley.
3.04 Financial Statements.
(a) Included in Schedule 3.04 are the federal and state corporate
tax returns of Brounley for the fiscal years ended 1996 and 1997 as well as the
unaudited balance sheet and income statement prepared by management of Brounley
for the period ending August 31,1998.
(b) The financial statements of Brounley present fairly, as of their
respective dates, the financial position of Brounley. Brounley did not have, as
of the date of any such balance sheets, except as and to the extent reflected or
reserved against therein, any liabilities or obligations (absolute or
contingent) which should be reflected in any financial statements or the notes
thereto and all assets reflected therein present fairly the assets of Brounley.
(c) Brounley has filed or will have filed as of the Closing Date all
tax returns required to be filed by it from inception to the Closing Date. All
such returns and reports are accurate and correct in all material respects.
Brounley has no material liabilities with respect to the payment of any federal,
state, county, local, or other taxes (including any deficiencies, interest, or
penalties) accrued for or applicable to the period ended on the date of the most
recent unaudited balance sheet of Brounley, except to the extent reflected on
such balance sheet and adequately provided for, and all such dates and years and
periods prior thereto and for which Brounley may at said date have been liable
in its own right or as transferee of the assets of, or as successor to, any
other corporation or entity, except for taxes accrued but not yet due and
payable, and to Brounley's knowledge no deficiency assessment or proposed
adjustment of any such tax return is pending, proposed or contemplated. Proper
and accurate amounts of taxes have been withheld by or on behalf of Brounley
with respect to all material compensation paid to employees of Brounley for all
periods ending on or before the date hereof, and all deposits required with
respect to compensation paid to such employees have been made, in complete
compliance with the provisions of all applicable federal, state, and local tax
and other laws. To Brounley's knowledge, none of such income tax returns has
been examined or is currently being examined by the Internal Revenue Service,
and no deficiency assessment or proposed adjustment of any such return is
pending, proposed, or contemplated. Brounley has not made any election pursuant
to the provisions of any applicable tax laws (other than elections that relate
solely to methods of accounting, depreciation, or amortization) that would have
a material adverse affect on Brounley, its financial condition, its business as
presently conducted or proposed to be conducted, or any of its properties or
material assets. There are no tax liens upon any of the assets of Brounley.
There are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any tax return of Brounley.
3.05 Outstanding Warrants and Options. Brounley has no issued warrants or
options, calls, or commitments of any nature relating to the authorized and
unissued Brounley Common Stock.
3.06 Information. The information concerning Brounley set forth in this
Agreement and in the schedules delivered by Brounley pursuant hereto is complete
and accurate in all material respects and does not contain any untrue statement
of a material fact or omit to state a material fact required to make the
statements made, in light of the circumstances under which they were made, not
misleading. Brounley shall cause the schedules delivered by Brounley pursuant
hereto to TTL hereunder to be updated after the date hereof up to and including
the Closing Date.
3.07 Absence of Certain Changes or Events. Except as set forth in this
Agreement since the date of the most recent Brounley balance sheet described in
Section 3.04 and included in the information referred to in Section 3.06:
(a) There has not been (i) any material adverse change in the
business, operations, properties, level of inventory, assets, or condition of
Brounley or (ii) any damage, destruction, or loss to Brounley materially and
adversely affecting the business, operations, properties, assets, or conditions
of Brounley; and
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(b) Brounley has not (i) amended its articles of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are extraordinary
and material considering the business of Brounley; (iv) made any material change
in its method of accounting; (v) entered into any other material transactions
other than those contemplated by this Agreement; (vi) made any material accrual
or material arrangement for or payment of bonuses or special compensation of any
kind or any severance or termination pay to any present or former officer or
employee; or (vii) made any material increase in any profit-sharing, bonus,
deferred compensation, insurance, pension, retirement, or other employee benefit
plan, payment, or arrangement made to, for, or with their officers, directors,
or employees; and
(c) Brounley has not (i) granted or agreed to grant any options,
warrants, or other rights for its stocks, bonds, or other corporate securities
calling for the issuance thereof, (ii) borrowed or agreed to borrow any funds or
incurred, or become subject to, any material obligation or liability (absolute
or contingent) except liabilities incurred in the ordinary course of business;
(iii) paid any material obligation or liability (absolute or contingent) other
than current liabilities reflected in or shown on the most recent Brounley
balance sheet and current liabilities incurred since that date in the ordinary
course of business; (iv) sold or transferred, or agreed to sell or transfer, any
of its material assets, properties, or rights, or agreed to cancel, any material
debts or claims; (v) made or permitted any amendment or termination of any
contract, agreement, or license to which it is a party if such amendment or
termination is material, considering the business of Brounley; or (vi) issued,
delivered, or agreed to issue or deliver any stock, bonds, or other corporate
securities including debentures (whether authorized and unissued or held as
treasury stock); and
(d) To the best knowledge of Brounley, it has not become subject to
any law or regulation which materially and adversely affects, or in the future
would be reasonably expected to adversely affect, the business, operations,
properties, assets, or condition of Brounley.
3.08 Title and Related Matters. Except as provided herein or disclosed in
the most recent Brounley balance sheet of its properties, inventory, interests
in properties, technology, whether patented or unpatented and assets, which are
reflected in the most recent Brounley balance sheet or acquired after that date
(except properties, interests in properties, and assets sold or otherwise
disposed of since such date in the ordinary course of business), free and clear
of all mortgages, liens, pledges, charges, or encumbrances, except (i) statutory
liens or claims not yet delinquent, and (ii) such imperfections of title and
easements as do not, and will not, materially detract from or interfere with,
the present or proposed use of the properties subject thereto or affected
thereby or otherwise materially impair present business operations on such
properties. To the best knowledge of Brounley, its technology does not infringe
on the copyright, patent, trade secret, know-how, or other proprietary right of
any other person or entity and comprises all such fights necessary to permit the
operation of the business of Brounley as now being conducted or as contemplated.
3.09 Litigation and Proceedings. There are no material actions, suits, or
proceedings pending or, to the knowledge of Brounley, threatened by or against
Brounley or adversely affecting Brounley, at law or in equity, before any court
or other governmental agency or instrumentality domestic or foreign, or before
any arbitrator of any kind. Brounley does not have any knowledge of any default
on its part with respect to any judgment, order, writ, injunction, decree,
award, rule, or regulation of any court, arbitrator, or governmental agency or
instrumentality.
3.10 Material Contract Defaults. Brounley is not in default in any
material respect under the terms of any outstanding contract, agreement, lease,
or other commitment which is material to the business, operations, properties,
assets, or condition of Brounley, and there is no event of default or other
event which, with notice or lapse of time or both, would constitute a default in
any material respect under any such contract, agreement, lease, or other
commitment in respect of which Brounley has not taken adequate steps to prevent
such a default from occurring.
3.11 No Conflict With Other Instruments. The execution of this Agreement
and the consummation of the transactions contemplated by this Agreement will not
result in the breach of any term or provision of, or constitute an event of
default under, any material indenture, mortgage, deed of trust, or other
material contract, agreement, or instrument to which Brounley is a party or to
which any of its properties or operations are subject.
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3.12 Governmental Authorizations. Brounley has all licenses, franchises,
permits, and other governmental authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date of this Agreement. Except for compliance with federal and state securities
and corporation laws, as hereinafter provided, no authorization, approval,
consent, or order of or registration, declaration, or filing with, any court or
other governmental body is required in connection with the execution and
delivery by Brounley of this Agreement and the consummation by Brounley of the
transactions contemplated hereby.
3.13 Compliance With Laws and Regulations. Brounley has complied with all
applicable statutes and regulations of any federal, state, or other governmental
entity or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets, or
condition of Brounley or except to the extent that noncompliance would not
result in the occurrence of any material liability for Brounley. To the best
knowledge of Brounley, the consummation of this transaction will comply with all
applicable statutes and regulations, subject to the preparation and filing of
any forms required by state and federal security laws.
3.14 Subsidiary. Brounley does not own, beneficially or of record, any
equity securities in any other entity.
3.15 Brounley Schedules. Brounley has delivered to TTL the following
schedules, which are collectively referred to as the "Brounley Schedules" and
which consist of the following separate schedules dated as of the date of
execution of this Agreement, and instruments and TTL as of such date, all
certified by the chief executive officer of Brounley as complete, true, and
accurate:
(a) A schedule including copies of the articles of incorporation and
bylaws of Brounley and all amendments thereto in effect as of the date of this
Agreement;
(b) A schedule containing copies of resolutions adopted by the board
of directors of Brounley approving this Agreement and the transactions herein
contemplated as referred to in Section 3.02;
(c) A schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or condition of
Brounley since the most recent Brounley balance sheet, required to be provided
pursuant to Section 3.04 hereof,
(d) A schedule setting forth the financial statements required
pursuant to Section 3.0(a) hereof, and
(e) A schedule setting forth any other information, together with
any required copies of documents, required to be disclosed in the Brounley
Schedules by Sections 3.01 through 3.14.
Brounley shall cause the Brounley Schedules and the instruments delivered
to TTL hereunder to be updated after the date hereof up to and including a
specified date not more than three business days prior to the Closing Date. Such
updated Brounley Schedules, certified in the same manner as the original
Brounley Schedules, shall be delivered prior to and as a condition precedent to
the obligation of TTL to close.
ARTICLE IV
CONDITIONS PRECEDENT TO OBLIGATIONS OF
BROUNLEY
The obligations of Brounley under this Agreement are subject to the
satisfaction of Brounley, at or before the Closing Date, of the following
conditions:
4.01 Shareholder Approval. TTL shall obtain the written consent of a
majority of its stockholders to approve the transactions contemplated by this
Agreement, including the acquisition of Brounley through the issuance of TTL
common stock for all of the issued and outstanding Shares. Said written consent
shall be provided to Brounley at closing.
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4.02 Accuracy of Representations. The representations and warranties made
by TTL in this Agreement were true when made and shall be true at the Closing
Date with the same force and affect as if such representations and warranties
were made at and as of the Closing Date (except for changes therein permitted by
this Agreement), and TTL shall have performed or complied with all covenants and
conditions required by this Agreement to be performed or complied with by TTL
prior to or at the Closing. Brounley shall be furnished with certificates,
signed by duly authorized officers of TTL and dated the Closing Date, to the
foregoing effect.
4.03 Officer's Certificates. Brounley shall have been furnished with
certificates dated the Closing Date and signed by the duly authorized chief
executive officer of TTL to the effect that to such officers best knowledge no
litigation, proceeding, investigation, or inquiry is pending or, to the best
knowledge of TTL threatened, which might result in an action to enjoin or
prevent the consummation of the transactions contemplated by this Agreement.
Furthermore, based on certificates of good standing, representations of
government agencies, and TTL's own documents and information, the certificate
shall represent, to the best knowledge of the officer, that:
(a) This Agreement has been duly approved by TTL's board of
directors and stockholders and has been duly executed and delivered in the name
and on behalf of TTL by its duly authorized officers pursuant to, and in
compliance with, authority granted by the board of directors of TTL pursuant to
a unanimous consent;
(b) There have been no material adverse changes in TTL up to and
including the date of the certificate;
(c) All conditions required by this Agreement have been met,
satisfied, or performed by TTL;
(d) All authorizations, consents, approvals, registrations, and/or
filings with any governmental body, agency, or court required in connection with
the execution and delivery of the documents by TTL have been obtained and are in
full force and effect or, if not required to have been obtained, will be in full
force and effect by such tine as may be required; and
(e) There is no material action, suit, proceeding, inquiry, or
investigation at law or in equity by any public board or body pending or
threatened against TTL, wherein an unfavorable decision, ruling, or finding
could have an adverse effect on the financial condition of TTL, the operation of
TTL, or the acquisition and reorganization contemplated herein, or any agreement
or instrument by which TTL is bound or in any way contests the existence of TTL.
4.04 No Material Adverse Change. Prior to the Closing Date, there shall
not have occurred any material adverse change in the financial condition,
business, or operations of TTL, nor shall any event have occurred which, with
the lapse of time or the giving of notice, may cause or create any material
adverse change in the financial condition, business, or operations of TTL.
4.05 Good Standings. Brounley shall have received a certificate of good
standing from the secretary of State of Florida, certifying that TTL is in good
standing as a corporation in the State of Florida.
4.06 Other Items. Brounley shall have received such further documents,
certificates, or instruments relating to the transactions contemplated hereby as
Brounley may reasonably request.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS OF
TTL
The obligations of TTL under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
5.01 Shareholder Approval. TTL shall obtain through a majority written
consent of its stockholders, authorization and approval for this Agreement and
the transactions contemplated hereby.
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5.02 Brounley Stockholders. Holders of all of the issued and outstanding
Brounley Shares shall agree to this Agreement and the exchange of shares
contemplated by this Agreement.
5.03 Accuracy of Representations. The representations and warranties made
by Brounley and the Brounley Stockholders in this Agreement were true when made
and shall be true at the Closing Date with the same force and affect as if such
representations and warranties were made at and as of the Closing Date (except
for changes therein permitted by this Agreement), and Brounley shall have
performed or compiled with all covenants and conditions required by this
Agreement to be performed or complied with by Brounley prior to or at the
Closing. TTL shall be furnished with a certificate, signed by a duly authorized
officer of Brounley and dated the Closing Date, to the foregoing effect.
5.04 Officer's Certificates. TTL shall have been furnished with
certificates dated the Closing Date and signed by the duly authorized chief
operating officer of Brounley to the effect that no litigation, proceeding,
investigation, or inquiry is pending or, to the best knowledge of Brounley,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement. Furthermore,
based on certificates of good standing, representations of government agencies,
and Brounley's own documents, the certificate shall represent, to the best
knowledge of the officer, that:
(a) This Agreement has been duly approved by Brounley's board of
directors and stockholders and has been duly executed and delivered in the name
and on behalf of Brounley by its duly authorized officers pursuant to, and in
compliance with, authority granted by the board of directors of Brounley
pursuant to a unanimous consent of its board of directors and a majority vote of
its stockholders;
(b) Except as provided or permitted herein, there have been no
material adverse changes in Brounley up to and including the date of the
certificate;
(c) All authorizations, consents, approvals, registrations, and/or
filing with any governmental body, agency, or court required in connection with
the execution and delivery of the documents by Brounley have been obtained and
are in full force and effect or, if not required to have been obtained will be
in full force and effect by such time as may be required; and
(d) There is no material action, suit, proceeding, inquiry, or
investigation at law or in equity by any public board or body pending or
threatened against Brounley, wherein an unfavorable decision, ruling, or finding
would have an adverse affect on the financial condition of Brounley, the
operation of Brounley, or the acquisition and reorganization contemplated
herein, or any material agreement or instrument by which Brounley is bound or
would in any way contest the existence of Brounley.
5.05 No Material Adverse Change. Prior to the Closing Date, there shall
not have occurred any material adverse change in the financial condition,
business or operations of Brounley, nor shall any event have occurred which,
with the lapse of time or the giving of notice, may cause of create any material
adverse change in the financial condition, business, or operations of Brounley.
5.06 Good Standing. TTL shall have received a certificate of good standing
from the appropriate authority in the State of Florida, dated as of a date with
five days prior to the Closing Date, certifying that the Brounley is in good
standing as a corporation in the State of Florida.
5.07 Other Items. TTL shall have received such further documents
certificates or instruments relating to the transactions contemplated hereby as
TTL may reasonably request.
ARTICLE VI
SPECIAL COVENANTS
6.01 Activities of TTL and Brounley.
11
<PAGE> 12
(a) From and after the date of this Agreement until the Closing Date
and except as set forth in the respective schedules to be delivered by TTL and
Brounley pursuant hereto or as permitted or contemplated by this Agreement, TTL
and Brounley will each:
(i) Carry on its business in substantially the same manner as
it has heretofore;
(ii) Maintain in full force and effect insurance comparable in
amount and in scope of coverage to that now maintained by it;
(iii) Perform in all material respects all of its obligations
under material contracts, leases, and instruments relating to or affecting its
assets, properties, and business;
(iv) Use its best efforts to maintain and preserve it business
Organization intact, to retain its key employees, and to maintain its
relationships with its material suppliers and customers;
(v) Duly and timely file for all taxable periods ending on or
prior to the Closing Date all federal, state, county, and local tax returns
required to be filed by or on behalf of such entity or for which such entity may
be held responsible and shall pay, or cause to pay, all taxes required to be
shown as due and payable on such returns, as well as all installments of tax due
and payable during the period commencing on the date of this Agreement and
ending on the Closing Date; and
(vi) Fully comply with and perform in all material respects
all obligations and duties imposed on it by all federal and state laws and all
rules, regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement and except as provided
herein until the Closing Date, TTL and Brounley will not:
(i) Make any change in its articles of incorporation or
bylaws;
(ii) Enter into or amend any material contract, agreement, or
other instrument of any of the types described in such party's schedules, except
that a party may enter into or amend any contract, agreement, or other
instrument in the ordinary course of business; and
(iii) Enter into any agreement for the sale of Brounley
securities without the prior approval of the other party.
6.02 Access to Properties and Records. Until the Closing Date, Brounley
and TTL will afford to the other party's officers and authorized representatives
full access to the properties, books, and records of the other party in order
that each party may have full opportunity to make such reasonable investigation
as it shall desire to make of the affairs of Brounley or TTL and will furnish
the other party with such additional financial and other information as to the
business and properties of Brounley or TTL as each party shall from time to time
reasonably request.
6.03 Indemnification by Brounley. Brounley will indemnify and hold
harmless TTL and its directors and officers, and each person, if any, who
controls TTL within the meaning of the Securities Act, from and against any and
all losses, claims, damages, expenses, liabilities, or actions to which any of
them may become subject under applicable law (including the Securities Act and
the Securities Exchange Act) and will reimburse them for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any claims or actions, whether or not resulting in liability, insofar
as such losses, claims, damages, expenses, liabilities, or actions arise out of
or are based upon any untrue statement or alleged untrue statement of material
fact contained in any application or statement filed with a governmental body or
arising out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary in order to
make the statements therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing by Brounley expressly for use therein. The
indemnity agreement contained in this Section 6.03 shall remain operative
12
<PAGE> 13
and in full force and effect, regardless of any investigation made by or on
behalf of TTL and shall survive the consummation of the transactions
contemplated by this Agreement for a period of one year.
6.04 Indemnification by TTL. TTL will indemnify and hold harmless
Brounley, the Brounley Stockholders, Brounley's directors and officers, and each
person, if any, who controls Brounley within the meaning of the Securities Act,
from and against any and all losses, claims, damages, expenses, liabilities, or
actions to which any of them may become subject under applicable law (including
the Securities Act and the Securities Exchange Act) and will reimburse them for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any claims or actions, whether or not resulting in
liability, insofar as such losses, claims, damages, expenses, liabilities, or
actions arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in any application or statement filed
with a governmental body or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary in order to make the statements therein not misleading, but only
insofar as any such statement or omission was made in reliance upon and in
conformity with information furnished in writing by TTL expressly for use
therein. The indemnity agreement contained in this Section 6.04 shall remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of Brounley and shall survive the consummation of the transactions
contemplated by this Agreement for a period of one year.
6.05 The Acquisition of TTL Common Stock. TTL and Brounley understand and
agree that the consummation of this Agreement including the issuance of the TTL
Common Stock to Brounley in exchange for the Brounley Shares as contemplated
hereby, constitutes the offer and sale of securities under the Securities Act
and applicable state statutes. TTL and Brounley agree that such transactions
shall be consummated in reliance on exemptions from the registration and
prospectus delivery requirements of such statutes which depend, among other
items, on the circumstances under which such securities are acquired.
(a) In order to provide documentation for reliance upon exemptions
from the registration and prospectus delivery requirements for such
transactions, the signing of this Agreement and the delivery of appropriate
separate representations shall constitute the parties acceptance of, and
concurrence in, the following representations and warranties:
(i) The Brounley Stockholders acknowledge that neither the SEC
nor the securities commission of any state or other federal agency has made any
determination as to the merits of acquiring TTL Common Stock, and that this
transaction involves certain risks.
(ii) Brounley Stockholders have such knowledge and experience
in business and financial matters that they are capable of evaluating such
business risks.
(iii) All information which the Brounley Stockholders have
provided to TTL or their representatives concerning their suitability and intent
to hold shares in TTL following the transactions contemplated hereby is
complete, accurate, and correct.
(iv) The Brounley Stockholders understand that the TTL Common
Stock has not been registered, but is being acquired by reason of a specific
exemption under the Securities Act as well as under certain state statutes for
transactions not involving any public offering and that any disposition of the
subject TTL Common Stock may, under certain circumstances, be inconsistent with
this exemption and may make Brounley or TTL an "underwriter", within the meaning
of the Securities Act. It is understood that the definition of "underwriter"
focuses upon the concept of "distribution" and that any subsequent disposition
of the subject TTL Common Stock can only be effected in transactions which are
not considered distributions. Generally, the term "distribution" is considered
synonymous with "public offering" or any other offer or sale involving general
solicitation or general advertising. Under present law, in determining whether a
distribution occurs when securities are sold into the public market, under
certain circumstances one must consider the availability of public information
regarding the issuer, a holding period for the securities sufficient to assure
that the persons desiring to sell the securities without registration first bear
the economic risk of their investment, and a limitation on the number of
securities which the stockholder is permitted to sell and on the manner of sale,
thereby reducing the potential impact of the sale on the trading markets. These
criteria are set forth specifically
13
<PAGE> 14
in rule 144 promulgated under the Securities Act, and, after one year after the
date the TTL Common Stock or Brounley Shares is fully paid for, as calculated in
accordance with rule 144(d) sales of securities in reliance upon rule 144 can
only be made in limited amounts in accordance with the terms and conditions of
that rule. After two years from the date the securities are fully paid for, as
calculated in accordance with rule 144(d) they can generally be sold without
meeting those conditions, provided the holder is not (and has not been for the
preceding three months) an affiliate of the issuer.
(v) The Brounley Stockholders acknowledge that the shares of
TTL Common Stock must be held and may not be sold, transferred, or otherwise
disposed of for value unless they are subsequently registered under the
Securities Act or an exemption from such registration is available. TTL is not
under any obligation to register the TTL Common Stock under the Securities Act
except as stated in this Agreement. If rule 144 is available after one year and
prior to two years following the date the shares are fully paid for, only
routine sales of such TTL Common Stock in limited amounts can be made in
reliance upon rule 144 in accordance with the terms and conditions of that rule.
TTL is not under any obligation to make rule 144 available except as set forth
in this Agreement and in the event rule 144 is not available, compliance with
Regulation A or some other disclosure exemption may be required before Brounley
Stockholders can sell, transfer, or otherwise dispose of such TTL Common Stock
without registration under the Securities Act. Subject to compliance with
federal and state securities laws, TTL's registrar and transfer agent will
maintain a stop transfer order against the registration of transfer of the TTL
Common Stock held by Brounley Stockholders and the certificates representing the
TTL Common Stock will bear a legend in substantially the following form so
restricting the sale of such securities:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") AND ARE "RESTRICTED SECURITIES" WITHIN THE MEANING
OF RULE 144 PROMULGATED UNDER THE SECURITIES ACT. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED
WITHOUT COMPLYING WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION OR OTHER COMPLIANCE UNDER THE SECURITIES ACT.
(vi) TTL will require Brounley Stockholders to provide an
opinion of counsel reasonably acceptable to TTL stating that the transfer is
proper. TTL agrees to provide Brounley with assistance and cooperation in good
faith when Brounley seeks to sell any shares which are free from restrictions or
exempt therefrom.
(b) In connection with the transaction contemplated by this
Agreement, TTL shall file, with the assistance of its legal counsel, such
notices, applications, reports, or other instruments as may be deemed by it to
be necessary or appropriate in an effort to document reliance on such
exemptions, and with the appropriate regulatory authority in the states where
the Brounley Stockholders reside unless an exemption requiring no filing is
available in such jurisdictions, all to the extent and in the manner as may be
deemed by TTL to be appropriate.
(c) The Brounley Stockholders acknowledge that the basis for relying
on exemptions from registration or qualifications are factual, depending on the
conduct of the various parties, and that no legal opinion or other assurance
will be required or given to the effect that the transactions contemplated
hereby are in fact exempt from registration or qualification.
6.06 Securities Filings. TTL shall be responsible for the preparation and
filing of any required forms, or documents, deemed necessary by TTL and its
legal counsel, with the Securities and Exchange Commission and in any
jurisdiction which would require a filing with a governmental agency as a result
of the transactions contemplated in this Agreement.
6.07 Sales of Securities Under Rule 144, If Applicable.
(a) TTL will use its best efforts to at all times satisfy the
current public information requirements of rule 144 promulgated under the
Securities Act so that its stockholders can sell restricted securities that have
been held for one year or more or such other restricted period as required by
rule 144 as it is from time to time amended.
14
<PAGE> 15
(b) Upon being informed in writing by any person holding restricted
stock of TTL as of the date of this Agreement that such person intends to sell
any shares under rule 144 promulgated under the Securities Act (including any
rule adopted in substitution or replacement thereof), TTL will certify in
writing to such person that it is in compliance with rule 144 current public
information requirements to enable such person to sell such person's restricted
stock under rule 144, as may be applicable under the circumstances.
(c) If any certificate representing any such restricted stock is
presented to TTL's transfer agent for registration or transfer in connection
with any sales theretofore made under rule 144, provided such certificate is
duly endorsed for transfer by the appropriate person(s) or accompanied by a
separate stock power duly executed by the appropriate person(s) in each case
with reasonable assurances that such endorsements are genuine and effective, and
is accompanied by an opinion of counsel satisfactory to TTL and its counsel that
such transfer has complied with the requirements of rule 144, as the case may
be, TTL will use its best efforts to cooperate with the shareholder and/or
transfer agent with the registration or transfer in connection with any sales
made under rule 144.
ARTICLE VII
MISCELLANEOUS
7.01 Brokers. The Brounley Stockholders have agreed to issue 45,000 shares
of their TTL Common Stock to certain finders in this transaction. Except as
provided herein, TTL and Brounley agree that there were no other finders or
brokers involved in bringing the parties together or who were instrumental in
the negotiation, execution, or consummation of this Agreement. Further, TTL and
Brounley each agree to indemnify the other against any claim by any third person
for any commission, brokerage, or finder's fee or other payment with respect to
this Agreement or the transactions contemplated hereby based on any alleged
agreement or understanding between such party and such third person, whether
express or implied, from the actions of such party.
The covenants set forth in this section shall survive the Closing
Date and the consummation of the transactions herein contemplated.
7.02 No Representation Regarding Tax Treatment. No representation or
warranty is being made by any party to any other regarding the treatment of this
transaction for federal or state income taxation. Each party has relied
exclusively on its own legal, accounting, and other tax adviser regarding the
treatment of this transaction for federal and state income taxes and on no
representation, warranty, or assurance from any other party or such other
party's legal, accounting, or other adviser.
7.03 Governing Law. This Agreement shall be governed by, enforced and
construed under and in accordance with the laws of the State of Florida.
7.04 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if personally delivered, if sent by
facsimile or telecopy transmission or other electronic communication confirmed
by registered or certified mail, postage prepaid, or if sent by prepaid
overnight courier addressed as follows:
If to TTL, to: 7887 Bryan Dairy Road, Suite 105
Largo, Florida 33777
If to Brounley, to: 7381 114th Avenue North, Suite 410
Largo, Florida 33773
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices, hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered or sent by facsimile or
telecopy transmission or other electronic communication, or one day after the
date so sent by overnight courier.
15
<PAGE> 16
7.05 Attorney's Fees. In the event that any party institutes any action or
suit to enforce this Agreement or to secure relief from any default hereunder or
breach hereof, the breaching party or parties shall reimburse the nonbreaching
party or parties for all costs, including reasonable attorneys' fees, incurred
in connection therewith and in enforcing or collecting any judgment rendered
therein.
7.06 Schedules, Knowledge. Whenever in any section of this Agreement
reference is made to information set forth in the schedules provided by TTL or
Brounley such reference is to information specifically set forth in such
schedules and clearly marked to identify the section of this Agreement to which
the information relates. Whenever any representation is made to the "knowledge"
of any party, it shall be deemed to be a representation that no officer or
director of such party, after reasonable investigation, has any knowledge of
such matters.
7.07 Entire Agreement. This Agreement represents the entire agreement
between the parties relating to the subject matter hereof All previous
agreements between the parties, whether written or oral, have been merged into
this Agreement. This Agreement alone fully and completely expresses the
agreement of the parties relating to the subject matter hereof. There are no
other courses of dealing, understandings, agreements, representations, or
warranties, written or oral, except as set forth herein.
7.08 Survival; Termination. The representations, warranties, and covenants
of the respective parties shall survive the Closing Date and the consummation of
the transactions herein contemplated for a period of six months from the Closing
Date, unless otherwise provided herein.
7.09 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
7.10 Amendment or Waiver. Every right and remedy provided herein shall be
cumulative with every other right and remedy, whether conferred herein, at law,
or in equity, and such remedies may be enforced concurrently, and no waiver by
any party of the performance of any obligation by the other shall be construed
as a waiver of the same or any other default then, theretofore, or thereafter
occurring or existing. At any time prior to the Closing Date, this Agreement may
be amended by a writing signed by all parties hereto, with respect to any of the
terms contained herein, and any term or condition of this Agreement may be
waived or the time for performance thereof may be extended by a writing signed
by the party or parties for whose benefit the provision is intended.
IN WITNESS WHEREOF, the corporate parties hereto have caused this
Agreement to be executed by their respective officers, hereunto duly authorized,
as of the date first above written.
TOUPS TECHNOLOGY LICENSING, INC., BROUNLEY ASSOCIATES, INC.,
a Florida corporation a Florida corporation
By: /s/ [ILLEGIBLE] By: /s/ Robert W. Brounley
------------------------------ ------------------------------
Name: Name: Robert W. Brounley
---------------------------- ----------------------------
As: President As: Vice-President
------------------------------ ------------------------------
STATE OF FLORIDA
COUNTY OF PINELLAS
On this 30th day of September, 1998, personally appeared before me Robert W.
Brounley, whose identity is personally known to me and who by me duly sworn, did
say that he is the ________________________ of Toups Technology Licensing, Inc.
and that said document was signed by him of behalf of said corporation by
authority of its bylaws, and said _________________ acknowledged to me that said
corporation executed the same.
/s/ MICHELE L. GOLDSTEIN
[NOTARY PUBLIC SEAL ------------------------
OF MICHELE L. GOLDSTEIN]
16
<PAGE> 17
NOTARY PUBLIC
STATE OF FLORIDA
COUNTY OF PINELLAS
On this 30th day of September, 1998, personally appeared before me Leon H.
Toups, whose identity is personally known to me and who by me duly sworn, did
say that he is the __________________________ of Brounley Associates, Inc. and
that said document was signed by him of behalf of said corporation by authority
of its bylaws, and said __________________ acknowledged to me that said
corporation executed the same.
/s/ MICHELE L. GOLDSTEIN
[NOTARY PUBLIC SEAL ------------------------
OF MICHELE L. GOLDSTEIN]
17
<PAGE> 18
Exhibit A-l
Brounley Associates, Inc.
List of Stockholders
and Designees
<TABLE>
<CAPTION>
No. of TTL Shares
to be Received Number of Shares
Name of Shareholder in Exchange to be Registered Signature
- ------------------- ----------- ---------------- ---------
<S> <C> <C> <C>
Gary R. Eschenroeder 461,700 20,000 /s/ Gary R. Eschenroeder
------------------------
Richard W. Brounley 222,300 20,000 /s/ Richard W. Brounley
------------------------
Robert W. Brounley 85,500 10,000 /s/ Robert W. Brounley
------------------------
Lynn M. Dort 85,500 10,000
--------------------
Chuck D. Herold 45,000 45,000 /s/ Chuck D. Herold
------ ------ ------------------------
TOTAL SHARES 900,000 105,000
</TABLE>
18
<PAGE> 19
Exhibit A-l
Brounley Associates, Inc.
List of Stockholders
and Designees
<TABLE>
<CAPTION>
No. of TTL Shares
to be Received Number of Shares
Name of Shareholder in Exchange to be Registered Signature
- ------------------- ----------- ---------------- ---------
<S> <C> <C> <C>
Gary R. Eschenroeder 461,700 20,000
------------------------
Richard W. Brounley 222,300 20,000
------------------------
Robert W. Brounley 85,500 10,000
------------------------
Lynn M. Dort 85,500 10,000 /s/ Lynn M. Dort
------------------------
Chuck D. Herold 45,000 45,000
------ ------ ------------------------
TOTAL SHARES 900,000 105,000
</TABLE>
19
<PAGE> 20
SECRETARY'S CERTIFICATE
AND
CERTIFICATE OF INCUMBENCY
OF
BROUNLEY ASSOCIATES, INC.
I, Gary R. Eschenroeder, hereby certify that I am now, and at all times
mentioned herein have been, the duly elected, qualified, and acting Secretary of
BROUNLEY ASSOCIATES, INC. ("Brounley" or the "Corporation"), a corporation duly
organized and validly existing under the laws of the State of Florida, and as
such officer, I have access to the records of Brounley, which records reflect
that:
1. Resolutions. Attached hereto as Annex I and incorporated herein by
reference is a true and correct copy of resolutions which have been duly adopted
by the unanimous written consent of the members of the Board of Directors and
Shareholders of the Corporation; none of such resolutions have been amended,
modified, or repealed in any respect, and all of such resolutions are in full
force and effect on the date hereof.
2. Incumbency. The following named individuals are duly elected, qualified
and acting officers of the Corporation holding the offices set forth opposite
their respective names as of the date hereof, and the signatures set opposite
the respective names and titles of said officers are their true, authentic and
genuine signatures.
Name Title Specimen Signature
Gary R. Eschenroeder Vice /s/ Gary R. Eschenroeder
President/ --------------------------------
Secretary
Robert W. Brounley Vice President /s/ Robert W. Brounley
--------------------------------
3. Articles and Bylaws. True and complete copies of the articles of
incorporation and the bylaws of the Corporation, as amended to date and which
are presently in full force and effect, are attached hereto as Annex 2 and Annex
3, respectively, and incorporated herein by reference.
4. No resolution has been adopted by the Board of Directors nor has action
been taken by the Corporation, its officers, directors, or shareholders in
contemplation of the dissolution of the Corporation.
{The balance of this page was intentionally left blank.}
<PAGE> 21
IN WITNESS WHEREOF, I have duly executed this Certificate effective this
30th day of September, 1998.
/s/ Gary R. Eschenroeder
------------------------
Gary R. Eschenroeder
Secretary
<PAGE> 22
ANNEX I
Resolutions of Board of Directors
and Shareholders of BROUNLEY ASSOCIATES, INC.
The undersigned, being the entire Board of Directors and Shareholders of
BROUNLEY ASSOCIATES, INC., a Florida corporation ("Brounley" or the
"Corporation"), hereby consent to and unanimously adopt the following
resolutions by written action, acting without meeting pursuant to the Florida
Business Corporation Act and the Corporation's Bylaws.
WHEREAS, the Shareholders of Brounley desire to enter into that certain
Share Exchange Agreement ("Share Exchange") with Toups Technology Licensing,
Inc. ("TTL"), whereby TTL will acquire all of the issued and outstanding stock
of Brounley totaling 22,222 shares, in exchange for 900,000 unregistered shares
of stock of TTL in a transaction intended to qualify as a tax-free exchange
pursuant to ss. 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
WHEREAS, in connection with the Share Exchange, the Board of Directors and
Shareholders have reviewed all of the documentation encompassing the transaction
which includes the Agreement and the Exhibits and Schedules to the Agreement
(the "Transaction Documents"); and
WHEREAS, the Board of Directors and Shareholders deem it to be in the best
interest of the Corporation to enter into the Transaction Documents on behalf of
the Corporation and to consummate the Share Exchange contemplated between the
parties.
NOW THEREFORE, it is
RESOLVED, that the Board of Directors hereby approves, adopts and ratifies
the Transaction Documents and all of their terms and conditions and shall cause
the Transaction Documents to be executed together with all necessary consents;
and
RESOLVED, that the Shareholders hereby approve, adopt and ratify the
Transaction Documents and all of their terms and conditions and shall cause the
Transaction Documents to be executed together with all necessary consents; and
RESOLVED, that Gary R. Eschenroeder or Robert W. Brounley, the Vice
Presidents of Brounley is hereby authorized and directed to execute and deliver
the Transaction Documents for and on behalf and in the name of the Corporation,
with such changes in the terms and provisions thereof as the officer executing
the same shall, in such officer's sole discretion, deem necessary or desirable
and in the best interest of the Corporation, such officer's signature being
conclusive evidence that such officer did so deem any such changes to be
necessary or desirable and in the best interest of the Corporation; and
FURTHER RESOLVED, that the Vice President of the Corporation is hereby
authorized, empowered and directed to perform all acts and do all things which
such officer may deem necessary
<PAGE> 23
or desirable to consummate the Share Exchange contemplated by the Transaction
Documents; and
FURTHER RESOLVED, that the Secretary of the Corporation is hereby
authorized, empowered and directed to certify and attest any documents which the
Secretary may deem necessary or appropriate to consummate the Reorganization
contemplated by the Transaction Documents on behalf of the Corporation; and
FURTHER RESOLVED, that the Secretary of the Corporation is directed to
certify this written consent and the contents of these resolutions and deliver
such certification in support of the authority of the above officers to act on
behalf of the Corporation; and
FURTHER RESOLVED, that the Directors and Shareholders are hereby
authorized to execute this Written Action and that upon such execution, this
Written Action is approved, adopted and ratified as the act and deed of the
Directors and Shareholders of the Corporation.
DATED this 30th day of September, 1998.
/s/ Gary R. Eschenroeder
-----------------------------------
Gary R. Eschenroeder
Director, Vice President, Secretary
Shareholder
/s/ Robert W. Brounley
-----------------------------------
Robert W. Brounley
Director, Vice President, Shareholder
/s/ Richard W. Brounley
-----------------------------------
Richard W. Brounley
Director, Shareholder
-----------------------------------
Lynn M. Dort
Shareholder
<PAGE> 24
or desirable to consummate the Share Exchange contemplated by the Transaction
Documents; and
FURTHER RESOLVED, that the Secretary of the Corporation is hereby
authorized, empowered and directed to certify and attest any documents which the
Secretary may deem necessary or appropriate to consummate the Reorganization
contemplated by the Transaction Documents on behalf of the Corporation; and
FURTHER RESOLVED, that the Secretary of the Corporation is directed to
certify this written consent and the consents of these resolutions and deliver
such certification in support of the authority of the above officers to act on
behalf of the Corporation; and
FURTHER RESOLVED, that the Directors and Shareho1ders are hereby
authorized to execute this Written Action that upon such execution, this Written
Action is approved, adopted and ratified as the act and deed of the Directors
and Shareholders of the Corporation.
DATED this 27th day of September, 1998.
-----------------------------------
Gary R. Eschenroeder
Director, Vice President, Secretary
Shareholder
-----------------------------------
Robert W. Brounley
Director, Vice President, Shareholder
-----------------------------------
Richard W. Brounley
Director, Shareholder
/s/ Lynn M. Dort
-----------------------------------
Lynn M. Dort
Shareholder
<PAGE> 25
OFFICER'S CERTIFICATE
I, Gary R. Eschenroeder, the Vice President of BROUNLEY ASSOCIATES, INC.,
a Florida corporation ("Brounley"), hereby certify, pursuant to that certain
Share Exchange Agreement by and between Brounley and TOUPS TECHNOLOGY LICENSING,
a Florida corporation, dated the 30th day of September, 1998 (the "Agreement")
as follows:
The representations and warranties made by Brounley in this Agreement were
true when made and shall be true at the Closing Date with the same force and
effect as if such representations were made at and as of the Closing Date
(except for changes therein permitted by this Agreement or by mutual consent of
the parties), and Brounley shall have performed or complied with all covenants
and conditions required by this Agreement to be performed or complied with by
Brounley prior to or at the Closing.
Dated this 30th day of September, 1998.
/s/ Gary R. Eschenroeder
------------------------
Gary R. Eschenroeder
Secretary
<PAGE> 1
Exhibit 10.11
Exclusive Representative Agreement
THIS AGREEMENT, Effective This 15th Day of June 1999, Made Between:
Toups Technology Licensing Inc., a publicly-traded Florida corporation which has
its principal offices at 7887 Bryan Dairy Road, Suite 105, Largo, Florida 33617
Untied States by its President Leon H. Toups (hereinafter "TTL", "Licensor" or
the "Company");
and
Ranch La Regina Agropecuaria, S.A Calle Monte Cristi casi Esq. 27 de Febrero
Edificio Professional, Apto No. 25 Ciudad, Dominican Republic by its Presidente
C. Isaias Arbaje (hereinafter "Licensee")
WITNESSETH THAT
WHEREAS LICENSOR is the owner of various Technologies and commercializes same in
the form of products and services as that term is defined herein, AND
WHEREAS Licensee was formed to develop a Public Urban Development (PUD) within
the Dominican Republic consisting of at least 2,500 home units and to provide
all necessary utilities associated with the PUD, AND;
WHEREAS Licensor desires to grant an exclusive license under the terms and
conditions contained herein, AND;
WHEREAS Licensee desires to acquire an exclusive license under the terms and
conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
contained herein and for other good and valuable consideration, the Parties
agree as follows:
1. Definitions
a. "Licensed Technology" means any patent and/or patent-pending technologies
commercialized by the Licensor in the form of products, equipment,
services or otherwise including the Pyrolytic Carbon Extraction(TM),
Balanced Oil Recovery System Lift(TM), Tunnel Bat Reclamation Vehicle(TM)
and any other item offered as a result of intellectual rights held by TTL.
However, TTL's "AquaFuel(TM)" is excluded from this license agreement and
nothing herein contained should infer that TTL is granting a sub-license
for the use of AquaFuel(TM) in any form. The Company's rights to license
its technologies is further done in light of those limitation imposed by
that certain joint-venture agreement known as AquaFuel-Dominicana, a copy
of which is attached hereto.
[NOTARY PUBLIC SEAL OF
M. CHIRINSKY]
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b. "Licensed Product" means any use or related composition whose production,
structure, or use embodies any Licensed Technology or disclosed patent
application and/or would infringe a Licensed Technology in the absence of
this License Agreement, or displays or is commercialized by a Licensed
Trademark.
c. "Licensed Service" means any designing, making, specifying, or any
instruction, leasing, or performance of other services relating to any
License Product for, to, or with a customer or other party, whether for
compensation or not.
d. "Licensed System" means any apparatus, assembly, device, or structure for
producing or using a Licensed Product, with or for use with (or without)
other accessories.
e. "Licensed Trademark" means any US registered mark relating to the Licensed
Technology or Licensed Patent.
f. "Improvement" means any substantial change in any foregoing defined item
(a to e) during this Agreement, whether made by Licensor, Licensee or
both, or otherwise owned and/or licensable by either of them to the other.
g. "License Territory" means South and Central America such as the Dominican
Republic, Puerto Rico, Venezuela, Colombia, Ecuador, Brazil, Peru,
Bolivia, Paraguay, Argentina, Uruguay, Chile, Costa Rica, Mexico
2. License and Sublicenses
a. LICENSOR hereby grants to LICENSEE an indivisible, non-assignable right
and license to make, use, lease, sell, and otherwise practice commercially
the defined Licensed subject matter within the Licensed Territory.
b. So long as LICENSEE is in good standing under this Agreement, this grant
is to be exclusive, meaning that LICENSOR will not grant any third party a
similar license in the License Territory, except to parties with whom
LICENSOR has or may have an ongoing obligation, as noted in the Appendix
hereto.
c. LICENSEE shall have the right to apply any Licensed Trademark to Licensed
Products and other components approved by LICENSOR and sold by LICENSEE
for construction of Licensed Systems, but LICENSEE. shall use Licensed
Trademarks only in accordance with acceptable trademark practice and
subject to the provisions of this Agreement.
d. LICENSEE may grant sublicenses, contingent upon LICENSEE's retention of
its license under this Agreement, whereupon LICENSEE will become and
remain obligated to share equally (50/50) with LICENSOR all royalties
accruing from each such sub-Licensee and to report and pay the same to
Licensor.
[NOTARY PUBLIC SEAL OF
M. CHIRINSKY]
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<PAGE> 3
e. Each such sublicense granted by LICENSEE shall be upon terms and
conditions not significantly more favorable to the subLicensee than the
terms and conditions of the present License Agreement are to LICENSEE,
excepting only if LICENSEE shall have disclosed the proposed sublicense to
Licensor in advance and to have received Licensor's express written
approval of such more favorable terms/conditions.
f. Each sublicense granted by LICENSEE under this Agreement will provide
expressly that it is so granted and that--in the event that LICENSEE
should discontinue its license hereunder or its license otherwise become
terminated-the subLicensee will become a Licensee of the Licensor by
substitution for LICENSEE, unless prohibited by law.
3. License Term
The Term of this Agreement, if not sooner ended by the act of a party or
the operation of law, shall end upon expiration of the last to expire of any
license, patent or other similar device relating to any of the Licensed subject
matter.
4. Confidentiality
a. To the extent that LICENSEE receives Licensed Know-bow, or either party
becomes aware of other proprietary information from the other party via
their relationship pursuant to this Agreement, each recipient of such
information will hold it in confidence so long as the other party
effectively treats it as confidential, except as specific information
becomes public knowledge otherwise than by or from LICENSEE.
b. The parties will ensure that their personnel sign Confidentiality and/or
Non-Competition Agreements in customary form or otherwise as may
reasonably be required by either party.
c. The foregoing obligation to keep proprietary information confidential and
to safeguard it within the organization of a party will survive any
termination of this Agreement to the extent that such information is not
common trade knowledge.
5. Payment and Royalties
a. Licensee shall pay the sum of $5,500,000 (five-million, five-hundred
thousand dollars, US currency) to Licensor upon execution of this
Agreement as per the terms of this agreement.
b. Payment required in item 5a hereinabove shall be made in the form of real
property provided:
i. That such payment is accompanied by the following:
(a) The subject property consists of 750,000 square-meters located
in the Dominican Republic which has been reserved for the
Pre-Planned Use as that term is defined below;
[NOTARY PUBLIC SEAL OF
M. CHIRINSKY]
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<PAGE> 4
(b) That the subject property be accompanied by a Banco Nacional
De La Vivienda which serves as the Government of the
Dominican Republic Federal Housing Authority ("DR-FHA")
valuation issued by the DR-FHA which appraisal values the
property at 250 Dominican Republic pesos per square-meter or a
total appraised value of $187,500,000 (one-hundred and
eighty-seven million, five-hundred thousand Dominica Republic
pesos) which, on the date this Agreement is executed, is
convertible into United States dollars equal to $16.12 per
square meter or a total appraisal of $12,090,000
(twelve-million, ninety-thousand, US Currency). The appraisal
required by this item 5bi(b) shall be included hereon as
Exhibit 1 and made a part hereof.
(c) That the authority issuing the subject appraisal is verified
by opinion issued by an independent certified public
accountant provided such firm is licensed to practice in the
United States and operates under the provisions of United
States Generally Accepted Accounting Principals. The
independent certified public accountant verification shall be
included hereon as Exhibit 2 and made a part hereof.
ii. Limited Use of Real Property:
(a) Licensee shall grant full title to the real property described
in this Agreement provided:
(i) Licensee acknowledges that the property being given
over as payment for this Agreement is to be used
exclusively as that certain Public Urban Development
which, among other things, envisions the 750,000
square-meters shall be divided into 2,500 lots as
reflected in the plot map provided by Teodulo
Blanchard Paulino, Dominican Republic-based
architects for the PUD.
(ii) Licensee intends that each of the 2,500 home-sites is
to be sold at the rate of $22,000 per home site and
that upon each sale, title to a particular plot shall
transfer from PUD LHT to the individual buyer.
(iii) Licensee and Licensor further agree that TTL shall
receive a cash payment at the rate of 10% of the cash
payment per unit sold or $2,200 for a total cash
payment of $5,500,000 and that such cash payment
shall represent full payment for the rights granted
under this Agreement. Such payments to TTL shall be
made simultanenous with the closing of each of the
2,500 homes by wire transfer or certified check.
c. The Licensee shall require such purchaser of Licensed subject matter to
enter a separate agreement relating to an on-going royalty for the use of
materials resulting from the operation of said Licensed subject matter.
The Company reserves the right to charge or
[NOTARY PUBLIC SEAL OF
M. CHIRINSKY]
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<PAGE> 5
waive any such royalty payments on a case by case basis. Any such separate
agreement, if made, shall further include a schedule of reports and
payments relating to any royalty payments due the Licensor.
6. Improvements
a. As of the effective date of this Agreement, LICENSEE acknowledges that the
exclusive ownership of the initially Licensed subject matter is in
LICENSOR and not at all in LICENSEE.
b. Any new composition, design, product, or service conducive to third party
competition with Licensed Product or Licensed Services or Licensed
Systems, invented or otherwise coming under the control of either party
during the License Term, is deemed an "Improvement"--and such party will
disclose the same to the other party promptly and in enough detail to
enable the other party to elect whether to have such Improvement included
hereunder.
c. The Licensee acknowledges that all Licensed subject matter is the property
the Licensor and not at all the Licensee. As to any such Improvement by
either party, such Improvement shall also become the property of the
Licensee and shall be subject to the terms and conditions herein as if
such improvement were part of the original Licensed subject matter.
7. Assurances
a. LICENSOR warrants ownership or legal rights to the Licensed subject matter
in the specific sense that LICENSOR has no reason to believe that any
third party has any right to prevent either LICENSOR or LICENSEE from
practicing any of the Licensed subject matter as provided in this
Agreement, but LICENSOR cannot and does not warrant such practice or usage
as non-infringing of third-party rights.
b. LICENSOR will have no liability whatever to LICENSEE for LICENSEE's
actions or inactions under this Agreement, and LICENSEE will save LICENSOR
harmless against any liability to third parties whether based upon agency,
contract, negligence, product liability, or other basis-for any claim
based on action or inaction of LICENSEE relating to Licensed subject
matter.
c. Licensor has disclosed to Licensee prior contractual relations concerning
the joint venture between the Company and Arbaje Agroindustrial S.A. to
construct and operate AquaFuel production plants and AquaFuel electric
power generation facilities in the Dominican Republic. Licensee
acknowledges they have read and fully understand the rights, limitations
and nature of the AquaFuel-Dominicana joint-venture and that nothing
contained herein shall impede or obviate the rights granted such
joint-venture.
[NOTARY PUBLIC SEAL OF
M. CHIRINSKY]
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<PAGE> 6
a. This Agreement may only be cancelled for cause in the event Licensee is
found derelict in the performance of this Agreement through gross
negligence or other similar factors.
b. Upon termination, LICENSEE will refrain from exercising thereafter any
right it had by license hereunder.
c. Whenever LICENSEE is not in good standing hereunder such as failure to
remit payments arising from separate royalty agreements, if any, as
described herein before, LICENSOR may render LICENSEE's license wholly
non-exclusive, or if it is already non-exclusive for a prior breach or
default LICENSOR may terminate LICENSEE's rights hereunder, in the absence
of specific curative provisions for LICENSEE's breach or default, or if
LICENSEE has had an opportunity to comply such a curative provisions and
failed or refused to do so.
d. If either party becomes, or would become, disabled-as by the other party's
choosing, or being subjected to, an act or a procedure for relief of
debtors from enforcing compliance with a given executory obligation of the
other party hereunder (e.g., compliance with standards, action with regard
to infringers, offer of Improvements) the thus disabled party may deem
this Agreement and the license and other rights under this Agreement
terminated.
e. No inaction or overlooking by LICENSOR of any condition or provision of
this Agreement or of any breach or default thereof by LICENSEE shall be
deemed to imply or to constitute a future waiver of any similar breach or
default of the same or other condition/provision.
9. Miscellaneous
a. If any one or more provision(s) or effect(s) of this Agreement should
prove to be invalid or unenforceable, and the Agreement be otherwise valid
and enforceable, the invalid or unenforceable provision or portion thereof
will be severed, and the remainder of the Agreement be and remain valid
and enforceable to the fullest extent permitted by applicable law.
b. This License Agreement is made for the benefit of the parties, their
heirs, successors, and assigns, and any other person or legal entity named
in any provision hereof, and not made to give any unnamed person or legal
entity any right of action whatever.
c. Each statement made in this Agreement is deemed material, and each party
is entitled to rely, and deemed to have relied, upon the truth and
correctness thereof in entering into this Agreement.
[NOTARY PUBLIC SEAL OF
M. CHIRINSKY]
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<PAGE> 7
d. Each party acknowledges that he(it) has received advice of independent
counsel of choice as to the inducements, provisions, and terms of this
Agreement, and their effect, whereupon entering into this License
Agreement is each party's free and independent act.
e. This Agreement is to be governed by United States Federal law to whatever
extent a proprietary right granted by the United States is involved, and
otherwise by Florida law, except as activities of a party in any other
State render that other State's law applicable.
f. Notice to be given under this Agreement will be in writing and be
addressed to the other party at the address of such party hereinabove,
unless such address has been superseded by like notice, whereupon the
latest noticed address thereof is to be used. Notice will be effective
when delivered to the addressee, or-if not a change of address-when sent
by Express or Registered Mail so addressed.
g. This Agreement sets forth the entire intent and understanding of the
parties with regard to the subject matter hereof, and merges any prior
negotiations or agreements by the parties as to such subject matter, and
no addition, deletion, or other modification of the wording hereof may be
made except in writing subsequent hereto and signed by the party or
parties to be bound thereby.
IN WITNESS WHEREOF the parties have caused this Agreement to be signed,
sealed, and attested by persons duly authorized so to do, as of the date first
stated hereinabove.
LICENSOR LICENSEE
/s/ Leon Toups /s/ C. Isaias Arbaje
- --------------------- ----------------------------
Leon Toups, President C. Isaias Arbaje, Presidente
[NOTARY PUBLIC SEAL OF
M. CHIRINSKY]
7
<PAGE> 1
Exhibit 10.12
EXCLUSIVE LICENSE AGREEMENT
AGREEMENT made as of the 15th day of December, 1999, By and between Toups
Technology Licensing, Inc, a Florida Corporation headquartered at 7887 Bryan
Diary Rd suite 105 Largo, Florida 33777 ("TTL", the "Company" or "Licensee") and
John Rivera (Inventor) and Tomorrows Innovative Technology Today headquartered
at 4521 SW 133 Aye, Ft Lauderdale FL. 33330 (collectively "TTL" or "Licensor").
WHEREAS Licensee is a technology development company which for the past
twelve months has been developing a pyrolytic carbon extraction ("PCE")
technology for which there are now two patents pending and that the inventor of
such devices has suffered a nervous breakdown making his continued involvement
impossible. That the Licensee successfully demonstrated the PCE technology to
include a 5 to 10-ton per day prototype PCE device and that the nervous
breakdown of the inventor has mandated the Company complete the development of
the PCE technology separate and apart from such patents pending, and;
WHEREAS, Licensor is the possessor of rights and information related to
PCE and other pyrolosys and carbon processing devices and other processes or
systems, including, but not limited to, patent applications, inventions,
inventive concepts, improvements, modifications, trade secrets, and/or know-how
related to pyrolosys devices, processes or systems (all of the aforesaid being
hereinafter jointly referred to as the "PCE and/or GWE Technology"), and
WHEREAS, Licensee desires to acquire all of Licensor's rights in the PCE
and/or GWE Technology through the granting of an exclusive world-wide license as
hereinafter described, the parties hereto intent to be legally bound and it is
therefore agreed:
1. Exclusive License.
(a) The Licensor hereby grants to the Licensee the exclusive world-wide
right and license to use, commercialize, and exploit the PCE and/or
GWE Technology, including, but not limited to: (i) all rights which
Licensor has to use, commercialize or exploit PCE and/or GWE
devices, processes or systems; (ii) all rights which Licensor has to
use, commercialize or exploit patents pending related to PCE and/or
GEE devices, processes or systems: (iii) all rights which Licensor
has to use, commercialize or exploit PCE and/or
/s/ [ILLEGIBLE] TTL Inventor /s/ [ILLEGIBLE]
- --------------- ---------------
1
<PAGE> 2
GWE, processes processes or systems based in whole or in part on
patents pending all rights Licensor may have to use, commercialize
or exploit PCE and/or GWE devices, processes or systems based on
other patents, patent applications, inventive concepts,
improvements, modifications, inventions, trade secrets, and/or
know-how owned or possessed by TITT; and (v) all rights Licensor may
have to make, assemble, and use apparatus, machinery, auxiliaries,
and devices necessary to put the PCE and/or GWE Technology into use,
and to make, use, sell, or dispose of said apparatus, machinery,
auxiliaries, and devices necessary to the use of the PCE and/or GWE
Technology.
(b) The Licensor further grants to the Licensee the right to grant
sublicenses on such terms as the Licensee may deem advisable
provided any such sublicenses are not granted on terms less
favorable to TITT than the terms and conditions herein set forth.
2. Licensor Assistance, Ownership of Patents Pending
(a) Licensor shall make available to Licensee all reports, notes,
specifications, drawings, vendor contracts, and other items
possessed by Licensor related to the PCE and/or GWE Technology.
(b) Licensor shall provide, as necessary, upon terms mutually agreeable
to the parties, consultation related to the engineering,
fabrication, construction, maintenance and operation of devices,
processes and systems based on the PCE and/or GWE Technology.
(c) All patents pending and any resultant patents on the PCE and/or GWE
Technology shall be the exclusive property of the Licensor, subject
to the exclusive license hereby granted. The Licensor shall, upon
demand, execute and deliver to Licensee such documents as may be
reasonably necessary to evidence the license hereby given.
3. PCE and/or GWE development As an inducement to Licensee to enter this
Exclusive Agreement, Licensor represents and warrants:
(a) Licensor has, prior to the execution of this Exclusive Agreement, at
TTL's Largo, Florida facilities, assembled and operated a PCE and/or
GWE device which efficiently reduced the mass of approximately two
pounds of swine manure into approximately one-half ounce. This
successful testing of a prototype PCE and/or GWE device was
paramount to the Licensee entering this exclusive agreement.
/s/ [ILLEGIBLE] TTL Inventor /s/ [ILLEGIBLE]
- --------------- ---------------
2
<PAGE> 3
(b) Licensor shall now undertake, as a pertinent incentive for the
Licensee to enter this agreement, the design of a commercial PCE
and/or GWE device including all required engineering drawings, parts
lists, operating manuals and any and all other items necessary to
fabricate and successfully commercialize a PCE and/or GWE device no
later than three months following the execution of this agreement,
and;
(c) All engineering and other resources required to comply with items
3(b) are at the expense of the Licensee.
(d) Licensor shall take all steps necessary to file pertinent patent,
trademark, copyright and any and all other intellectual filings
necessary, in the opinion of Licensee, to provide commercial
protection so as to ensure the exclusivity of the rights granted
Licensee in this Exclusive Agreement. Such actions shall be at the
expense of the Licensee. Licensor shall take all steps necessary to
initiate such filings with three months following the execution of
this agreement.
(e) Licensor shall now undertake to write a developmental plan which
plan shall include but not be limited to (i) a commercial unit
developmental time-line commencing on the date of this agreement and
ending on such date at the first commercial unit is ready to be
sold; (ii) shall prepare a complete list of parts, components, and
any and all costs and expenses anticipated to occur in the course of
item 3(d)(i) hereinabove; (iii) shall prepare a summary of all
technical and or engineering support estimated to be used in the
course of item 3(d)(i) hereinabove and; (iv) shall attach such
schedules, lists and other necessary parts of such developmental
plans hereto as Exhibit A no later than 60 days following the
execution of this exclusive agreement. Such Exhibit A, when
attached, shall become a part hereof and shall be binding on the
parties hereto as if it were a part of this Exclusive Agreement on
such date as this agreement is executed.
4. Limitations to Licensor. The Licensor agrees that as a part of this
Exclusive License agreement, it shall:
(a) operate within the frame work of the Licensee's existing company and
shall serve as the Project Manager for the PCE and/or GWE
technology;
(b) not under any circumstance submit bids, quotes or any binding
agreement related to
/s/ [ILLEGIBLE] TTL Inventor /s/ [ILLEGIBLE]
- --------------- ---------------
3
<PAGE> 4
the PCE and/or GWE technology to any party without the express
written consent of the Licensee;
(c) not approve any expenditure whatsoever in connection with this
License Agreement and/or the development of the PCE and/or GWE
technology without the express written consent of the Licensee
5. Licensee Commercialization Licensee shall use its best efforts to
commercialize the PCE and/or GWE Technology world-wide, including, but not
limited to:
(a) providing for all support engineering required to make current shop
specifications and shop drawings related to the PCE and/or GWE
Technology as required to commercialize the PCE and/or GWE
technology world-wide.
(b) providing for all metal fabrication, construction, assembly or any
other requirement necessary to construct, ship, install and operate
a plant using PCE and/or GWE Technology (reserving the right to TTL
to fabricate and assemble PCE and/or GWE Technology related items at
its facilities in Largo, Florida, or from an outsourcing supplier
qualified for such purposes) as mutually agreed upon.
(c) causing an evaluation of the current pending patents, trademarks,
copyrights and other intellectual property to be filed or registered
on the PCE and/or GWE Technology so as to ascertain any additional
protective measures available and to recommend additional filings or
registration which may extend the life of protection currently
enjoyed by any PCE and/or GWE Technology.
(d) providing for the marketing of the PCE and/or GWE Technology,
including but not limited to, prospective client solicitation,
education and presentation of all pertinent aspects of the PCE
and/or GWE Technology.
6. Royalties. Licensee shall pay Licensor:
(a) A minimum annual royalty of one Hundred and Fifty Thousand Dollars
per Year with the first such payment made upon receipt of payment
for any G.W.E. related device or service on a 50/50 division of
profits received from such initial sale. Thereafter, TTL shall pay
the $150,000 annual fee on the first day of January during each year
this License
/s/ [ILLEGIBLE] TTL Inventor /s/ [ILLEGIBLE]
- --------------- ---------------
4
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Agreement remains in force. TTL shall pay the minimum royalty as a
part of the fees indicated in item 4(2) and (3) and the minimum
royalty shall not be additive thereto.
(b) 50% of all initial sub-license fees when a G.W.E. sublicense is
sold.
(c) 50% of all royalties and profits, derived from the sale of G.W.E.
(d) As part of this License Agreement, T.T.L. and T.I.T.T. herein amend
that certain Finder's Agreement by and between T.T.L. and John
Rivera such that Mr. Rivera shall earn the 2,000,000 T.T.L. common
shares in full upon the execution of this agreement.
7. Payment of Royalties. The Licensee shall at all times keep, and shall
require all sublicenses to keep and to forward copies thereof to Licensee,
accurate accounts of the operations corning under the scope of this
license and shall render a full statement of the same in writing to the
Licensor within fifteen(15) days after each quarterly period of each
calendar year during the life of this agreement, and at the same time
shall pay the Licensor the amount of earned royalties accrued during the
corresponding quarterly period as provided in paragraph 4, hereof, with
the understanding that the Licensor shall have the right, at his own
expense and not more often than twice in each calendar year, to have a
certified public accountant examine the books of the Licensee for the sole
purpose of verifying royalty statements of the operations corning under
the scope of this agreement. All such records shall be made fully
available to the Licensor for such inspection.
8. Term This agreement shall continue for a term of twenty (20) years from
this date, subject to the following:
(a) If Licensee is adjudged bankrupt, this agreement shall forthwith
terminate, and in the event Licensee is adjudged insolvent, or a
receiver is appointed therefor, Licensor may, at Licensor's
election, terminate this agreement upon written notice to Licensee.
(b) The Licensor or the Licensee may terminate this Agreement upon
thirty(30) days notice in writing to the other of cause for
termination. Cause for termination shall be limited to the breach by
such other party of any material provision of this Agreement,
unless such breach is remedied or cured by the appropriate party
within said notice period. Any failure of a Party to exercise this
option to terminate for cause shall not be deemed to be a waiver of
the right to exercise such option at any other time because of the
same or any other cause
/s/ [ILLEGIBLE] TTL Inventor /s/ [ILLEGIBLE]
- --------------- ---------------
5
<PAGE> 6
for termination. The foregoing right to terminate for cause is
without prejudice, however, to any cause of action or claim accrued
on account of any such breach or to any royalties due or to become
due to the Licensor.
(c) Upon termination of this agreement, the Licensee shall duly account
to the Licensor and transfer to it all rights which it may have to
patents, inventions, processes, and apparatus acquired hereunder,
and shall further provide Licensor copies of all records relevant to
the operations of TTL under this agreement, including but not
limited to, customer lists, account information and engineering
data.
9. Infringement Unless this agreement is terminated, or the parties agree
otherwise in writing, the Licensee shall defend all infringement suits
that may be brought against it or the Licensor on account of the
manufacture, use, or sale of any item covered by this agreement, and when
information is brought to its attention indicating that others without
license are unlawfully infringing on the rights granted by Paragraph 1
hereof, it shall prosecute diligently such infringes. If the Licensee
finds it necessary or desirable in any suit which the Licensee may
institute, the Licensee may join the Licensor as party-plaintiff. In
connection with such suits, the Licensor shall execute all papers
necessary or desirable and the Licensor shall testify in any suit whenever
requested so to do by the Licensee. In such event, the Licensor shall not
be chargeable for any costs or expenses other than those set forth above.
10. New Developments (a) If during the continuance of this license the
Licensor makes any further improvements in the PCE and/or GWE Technology,
or becomes the owner of any such improvements either through patents or
otherwise, it shall communicate such improvements to the Licensee and give
the Licensee full information regarding the mode of using them and the
Licensee shall be entitled, subject to the terms of this agreement, to use
the same with all rights which are hereby granted to the Licensee as
though such improvements had been included in this license when said
license was made and entered into by the parties.
11. Arbitration, Jurisdiction and Venue
(a) Any dispute between Licensor and Licensee under or related to this
agreement shall, subject to paragraph (b), below, be resolved by
binding arbitration in Jacksonville, Florida, pursuant to the rules,
then obtaining, of the American Arbitration Association. Upon the
request of either party upon initiation of arbitration on any issue,
or upon request of either party made within 10 days after receiving
demand for arbitration as to
/s/ [ILLEGIBLE] TTL Inventor /s/ [ILLEGIBLE]
- --------------- ---------------
6
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such issue, three arbitrators rather than a single arbitrator shall
serve jointly as an arbitration panel in the disposition of said
arbitration. If three arbitrators are chosen, each party shall choose
a single arbitrator from the list of available arbitrators provided
by the American Arbitration Association and these two arbitrators
shall choose a third from the list of available arbitrators provided
by the American Arbitration Association. Arbitration shall be
initiated by either party giving notice to the other of demand for
arbitration in accordance with paragraph 10, below.
(b) Initiation of arbitration pursuant to this paragraph shall be
without prejudice to any right a party may have to terminate this
agreement pursuant to paragraph 6, above. However, such termination
shall not terminate or conclude any arbitration initiated prior to
the effective date of termination. Any such arbitration shall remain
binding and valid as to any issues on which such arbitration has
been demanded.
12. Notice. Any notice required under this agreement shall be addressed as
follows:
If to Licensee:
Toups Technology Licensing, Inc,
attn: Leon Toups, Chief Executive Officer
7887 Bryan Diary Rd suite 105
Largo, Florida 33777
If to Licensor
Tomorrows Innovative Technology Today
attn: Inventor John Rivera
4521 SW 133 Ave,
Ft. Lauderdale, FL 33330
13. Benefit. This agreement shall be binding upon and inure to the benefit of
the heirs, legal representatives successors, and assigns of the parties
hereto; provided, however, that no assignment of this agreement shall be
made without the express written consent of Licensor.
14. Interpretation. (a) This agreement has been entered into by the parties
with advice of counsel. or after independently waiving such advice, and
represents the best efforts of both
/s/ [ILLEGIBLE] TTL Inventor /s/ [ILLEGIBLE]
- --------------- ---------------
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parties to arrive at a document expressing their mutual agreements and
covenants. Its terms shall not, therefore, be strictly construed against
either party as the drafter or preparer thereof.
(b) This agreement shall be interpreted and construed in accordance with
the laws of the State of Florida.
15. Representations (a) Licensee represents that nothing in this License
Agreement conflicts with any existing agreement or with Licensee's bylaws
or Articles or Incorporation. It further represents that the person
executing this License Agreement on behalf of Licensee has been fully
empowered to do so on behalf of TTL by its Board of Directors.
(b) Licensor represents that it has unencumbered ownership of the PCE
and/or GWE Technology and is legally empowered to enter into this
License Agreement. Licensor further represents that the execution
and fulfillment of the terms of this License Agreement is not and
will not be in conflict with any existing similar agreements or
understandings.
IN WITNESS WHEREOF the Parties have executed this agreement in duplicate
as of the day and year first above written.
For Licensee For Licensor
/s/ Leon H. Toups, Pres. John Rivera
- ------------------------------------ ------------------------------------
Leon H. Toups, President John Rivera, Inventor
/s/ Marilyn Chirinsky, Pres. & CEO
------------------------------------
Marilyn Chirinsky, President
/s/ [ILLEGIBLE] TTL Inventor
- --------------- ---------------
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Exhibit 10.13
THE SANTILLI TECHNOLOGY EXCLUSIVE ASSIGNMENT AND ROYALTY
AGREEMENT
THIS AGREEMENT, effective this ____ day of January, 2000, made between:
Hadronic Press, Inc., 35246 US 19 No., PBM 115, Largo, Florida 34684 and The
Institute for Basic Research 90 Eastwinds Court, Palm Harbor, Florida 34683 and
Ruggero Maria Santilli 90 Eastwinds Court, Palm Harbor, Florida 34683
(collectively "Assignor")
and
Toups Technology Licensing Incorporated, Suite 105, 7887 Bryan Dairy Road,
Largo, Florida 33777, (" Assignee").
WITNESSETH THAT
WHEREAS, on October 26, 1999, Assignor and Assignee signed a Letter of Intent
substantially containing all terms and conditions of this Agreement;
WHEREAS, R. M. Santilli, a U. S. physicist, initiated basic research on new,
clean, fuels and energies in 1978, as presented in a general 314 pages survey
recently published in the special issue of the JOURNAL OF NEW ENERGY, Vol. 4,
issue no. 1, 1999.
WHEREAS, HPI provided financial, logistic, and publication support for
Santilli's research from 1978 to present, as per an Agreement signed in
Cambridge, MA, on Jan. 5, 1984, which includes the assignment by Dr. Santilli to
HPI of all patents resulting from said research.
WHEREAS, Santilli has been scientific consultant to TTL since January 1998,
according to a consulting agreement renewed in January, 1999, which excludes new
patents, the latter to be the subject of separate agreements.
WHEREAS, Santilli has applied the results of his research as identified above to
the development at TTL of those technologies herein defined as "Santilli's
Technology" which includes a new process using an electric arc within a
water-base, carbon rich liquid, is over-unity in the energy efficiency of its
production, and possesses a new chemical structure with enhanced energy release
known as "Santilli's Magnecules".
WHEREAS, the aforenoted scientific background has primary importance for the
industrial development of "Santilli's Magnegas", inasmuch as it provides
knowledge essential for: 1) the
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improvement of the efficiency in the production of the gas; 2) the optimization
of the liquid needed for the production of said gas; 3) the improvement of the
combustion exhausts of said gas; 4) the recycling of liquid wastes; 5) the
selection of the embodiment for the optimal realization of the underlying
physical and chemical laws; and other important features.
WHEREAS, said research resulted in the following four patent applications, among
others, Patent Application #1:
NEW CHEMICAL SPECIES FOR GASES AND THEIR NEW TECHNOLOGIES,
by R. M. Santilli
Serial Number 09/133,348
Filed 08/13/98
dealing with the new chemical structure of all gases produced under an electric
arc, known as "Santilli's Magnecules", which is inclusive of, but not limited to
"Santilli's Magnegas".
Patent Application #2:
DURABLE AND EFFICIENT EQUIPMENT FOR THE PRODUCTION OF A COMBUSTIBLE AND
NON-POLLUTANT GAS FROM UNDERWATER ARCS AND METHODS THEREOF
by R. M. Santilli
Serial number 09/372.277
Filed on 08/11/99
dealing with all possible means for the production of "Santilli's Magnegas" by
keeping the liquid stationary, and moving the electrodes;
Patent Application #3:
MAGNEGAS, A novel, HIGHLY EFFICIENT, NONPOLLUTANT, OXYGEN RICH AND COST
COMPETITIVE, COMBUSTIBLE GAS, AND ASSOCIATED METHOD
by R. M. Santilli
Serial Number 09/372,278
Filed on 08/11/99
dealing with all possible means of producing
"Santilli's Magnegas" by keeping the electrodes
stationary, and letting instead the liquid
to flow through the arc.
WHEREAS, Patent Application #1, with related scientific background and technical
know-how were assigned by Santilli to TTL on August 12, 1998.
WHEREAS, as communicated to TTL with a letter dated September 30, 1999, Patent
Applications #2 and #3 were assigned in their entirety to HPI, in conformity
with the aforequoted Agreement between Dr. Santilli and HPI dated January 5,
1984.
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WHEREAS, the following, additional patent application is important for
"Santilli's Magnegas"
Patent Application #4
ELECROMAGNETION,
by Lawrence Perovetz and Ruggero Maria Santilli
Serial Number 09/106.170
Filed on 06/29/98
which deals with the new chemical species of "Santilli's Magnecules" for liquids
used in the production of "Santilli's Magnegas".
WHEREAS, years before initiating his scientific consultantlhip with TTL, and as
part of his research, Santilli conducted research and development on the
so-called "hadronic reactors", which are new processes for the over-unity
production of heat without the production of a combustible gas. As such, these
studies are not in conflict with "Santilli's Magnegas", nor they were ever part
of TTL research and development, as a result of which they are not part of this
Agreement. The only technology granted a license hereby are those defined as
"Santilli's Technology" or "Assigned Technology."
WHEREAS, all parties herein involved wish TTL to be empowered with the
exclusive, worldwide rights on "Santilli's Technology", its underlying
scientific knowledge, and its technicaL know-how;
WHEREAS TTL is engaged in the business of commercializing technologies primarily
within the environmental marketplace;
WHEREAS the Assignor and Assignee are interested in undertaking together a joint
effort at designing, manufacturing, selling or otherwise commercializing the
Santilli Technology as that term is hereinafter defined as by an Exclusive
Assignment and Royalty Agreement that provides for the Assignor to introduce TTL
to the technology and to authorize TTL to make and to commercialize Santilli
Technology at an agreed royalty, so long as both parties perform in accordance
with this Agreement;
NOW, THEREFORE, the Assignor and Assignee, intending to be legally bound, agree
to undertake designing, manufacturing, and selling or otherwise commercializing
the Santilli Technology upon the following terms and conditions:
1. Definitions
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a. "Assigned Scientific Knowledge" means unpatented proprietary scientific
information disclosed to Assignee by the Assignor, and useful in identifying and
optimizing the basic physical and chemical effects underlying the Assigned
Products or performing Assigned Services.
b. "Assigned Know-how" means unpatented proprietary technical, professional, or
commercial information disclosed to Assignee by the Assignor, and useful in
designing, making or using Assigned Products or performing Assigned Services.
c. "Assigned Patent" means any patent or patent application Assigned to TTL
herein and containing a claim defining the composition, design, machine,
process, product by process, manufacturing, structure, operation, or use of the
Santilli Technology subject matter, insofar as owned or licensable by Assignor
and so Assigned to TTL in or for the Assigned Territory.
d. "Assigned Product" means product or related composition whose production,
structure, or use embodies any Assigned Scientific Knowledge and Know-how, is
defined by a claim of a Assigned Patent or disclosed patent application and/or
would infringe a Assigned Patent in the absence of this Agreement, or displays
or is commercialized by a Assigned Trademark.
e. "Assigned Service" means any designing, making, specifying, or any
instruction, leasing, or performance of other services relating to any Assigned
Product for, to, or with a customer or other party, whether for compensation or
not.
f. "Assigned Specification" means any requirement or standard identified by the
Assignor to Assignee relating to composition, design, manufacturing method,
structure, workmanship and/or resulting appearance, form, identity, quality, or
presentation of an Assigned Product or a Assigned System,
g. "Assigned System" means any apparatus, assembly, device, or structure for
producing or using an Assigned Product, with or for use with (or without) other
accessories.
h. "Assigned Trademark" Santilli's Magnetiona, Santilli's MagneGasa, Santilli's
PlasmaArcFlowa Technology, Santilli's Magneculesa, Santilli's Magneliquidsa,
or other word and/or design, used with or without any other word and/or design,
in or as a brand name for Assigned Products or Assigned Services or Assigned
Systems.
i. "Improvement" means any substantial change in any foregoing defined item (a
to h) during this Agreement, whether made by the Assignor or by TTL, or both, or
otherwise owned and/or assignable by either of them to the other.
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j. "Assignment Term" means the duration of this Agreement which shall be: the
same as the duration of all patents, trademarks or other similar devices plus a
period of five years following the expiration of Assigned Patents; or a period
of then years following the final denial of a in a given country, as more
appropriatedly specified below.
k. "Assigned Territory" means worldwide.
l. "Common Shares" means the $.001 par value Common Stock of Toups Technology
Licensing, Inc. as may be legally issued.
m. "Santilli Technology" or "Assigned Technology" means US Patents pending:
(i) number 09/133,348 filed 8/13/98 New Chemical Species for Gases and Their New
Technologies by R. M. Santilli;
(ii) number 09/372,277 filed 8/11/99 Durable and Efficient Equipment for the
Production of a Combustible and Non-Pollutant Gas From Underwater Arcs and
Methods Thereof by R. M. Santilli;
(iii) number 09/372,278 filed 8/11/99 MagneGas, a Novel, Highly Efficient,
Nonpollutant, Oxygen Rich and Cost Competitive Combustible Gas and Associated
Method by R. M. Santilli; and
(iv) A new method for the recycling contaminated waters via the PlasmaArcFlow
technology, unsder preparation, by R. M. Santilli.
n. "Assignor" means Dr. Ruggero Maria Santilli, Hadronic Press, Inc., and The
Institute for Basic Research, Inc., and any and all other persons, entities or
others who are now and who may become co-patent owners, either through invention
or assignment or otherwise, of the Santilli Technology.
o. "Assignee" shall means Toups Technology Licensing, Inc., a Florida
Corporation which may also be abbreviated as "TTL."
2. License and Sublicenses
a. The Assignor hereby grants to the Assignee, for the Assignment Term only, an
indivisible, right and assignment to make, use, lease, sell, and otherwise
practice commercially the defined Assigned subject matter.
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<PAGE> 6
b. So long as Assignee is in good standing under this Agreement, this grant is
to be exclusive on a world-wide basis, meaning that the Assignor will not grant
any third party a similar assignment in the Assignment Territory.
c. TTL shall have the right to apply any Assigned Trademark to Assigned Products
and other components sold by TTL for construction of Assigned Systems, but TTL.
shall use Assigned Trademarks only in accordance with acceptable trademark
practice and subject to the provisions of this Agreement.
d. TTL customers will have an implied sublicense to assemble Assigned Products
into Assigned Systems, with or without other components.
e. TTL may grant sublicenses under this Agreement. In the event the Assignee
shall grant any sublicenses under this Exclusive Agreement anywhere in the
world.
3. License Term
a. Unless sooner terminated as provided herein, this Assignment Agreement will
continue for a period equal to the expiration date of any and all patents or
other devices enumerated heretofore as a part of the Assigned subject matter.
b. The Assignment Term shall be until the Assignor gives TTL notice that TTL is
no longer in good standing because of a specified breach or default of one or
more of TTL's obligations under this Agreement; TTL shall have the right to
remedy any such breach or default within forty-five (45) days thereafter to
return to good standing as to such breach or default. Likewise, if the Assignor
should be in breach or default of one or more of Assignor's obligations under
this Agreement, the Assignor shall have the right to remedy any such breach or
default within forty-five (45) days thereafter to return to good standing as to
such breach or default.
c. Obligations of this Agreement that are indicated as surviving beyond the end
of this Assignment Agreement shall continue for such time period as may be
lawful, despite notice by either party to the other of an election to
discontinue either party's participation in or under this Agreement.
d. The Term of this Agreement, if not sooner ended by the act of a party or the
operation of law, shall end upon expiration of the last to expire of the
Assigned Patents, if any, except as TTL is using a Santilli Technology
trademark, or otherwise as noted below.
4. Confidentiality
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a. To the extent that TTL receives Assigned Scientific Knowledge and Know-how,
or either party becomes aware of other proprietary information from the other
party via their relationship pursuant to this Agreement, each recipient of such
information will hold it in confidence so long as the other party effectively
treats it as confidential, except as specific information becomes public
knowledge otherwise than by or from TTL.
b. The foregoing obligation to keep proprietary information confidential and to
safeguard it within the organization of a party will survive any termination of
this Agreement to the extent that such information is not common trade
knowledge.
5. Assignment Activation
a. TTL shall make available facilities, equipment, and resources for the
Santilli Technology design, development, and marketing purposes during the term
of this Agreement in order to enable the equipment and resultant products to be
analyzed, tested, and (as soon as feasible) to be demonstrated to prospective
customers, investors, and other interested persons.
b. The Assignor will provide the Santilli Technology Assigned Scientific
Knowledge and Know-how to TTL from time to time as may be appropriate and will
participate regularly as a technical consultant relating to the Santilli
Technology design, development, testing, and marketing, as TTL deems desirable.
6. Royalties
a. The Royalty rate for Assigned Product, Assigned Services, and Assigned
Systems is three percent (3%) of the gross proceeds of all that TTL receives in
money or other things of value for leasing, servicing, selling, or otherwise
commercializing the same, said royalty to be payable on a quaterly calendar
basis.
b. Royalty accrues upon invoice, lease, sale, or service by TTL but shall not be
payable until TTL's receipt of payment therefor and shall be without any
deduction from TTL's actual total revenue therefrom, except for customers'
related costs (such as insurance, shipping, or taxes) and then only if so
itemized on TTL's invoices to them.
c. Royalty payable for any given month becomes due at the end of the then
current calendar quarter, and shall be paid, according to item 6b hereinabove,
during the first month of the next calendar quarter, or will become overdue on
the first day of the next month.
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d. As a part of Assignor's Royalties hereunder, upon signing this Agreement, TTL
shall cause to issue 75,000 shares of the Company's Common Shares Said Shares
shall be fully vested upon receipL Thereafter, TTL undertakes to bear all
expenses to cause for the registration of such Common Shares according to
applicable federal and state securities registration requirements within a
reasonable time following the execution of this Agreement.
e. As a part of the Assignor's Royalty, TTL shall grant an option for the
purchase of 150,000 Common Shares at $ 0.375 per share.
f. In the event one or all Patent Applications #1, #2 and #3 are not granted by
the U.S. Patent Office following due diligence by TTL patent attorneys and
representatives, TTL agrees to keep paying to HPI three percent (3%) of gross
revenues on sales and services on "Santilli's Magnegas" as set forth in
Paragraph 2.1, for the duration of ten years following the final denial of a
patent by the U. S. Patent Office, such payments in the absence of patents being
due in view of the aforementioned crucial importance of the scientific
background antechnical know-how acquired by TTL for the industrial development
of "Santilli's Magnegas", which scientific background and technical know-how are
independent from the granting of patents by the U. S. Patent Office on Patent
Applications #1, #2, and #3.
g. This License Agreement anticipates that a series of products shall be
developed such as desalinization of seawater, sewage recycling, liquid recycling
and other pieces of equipment designed for a specific purpose. As each such
mechanical device is deemed ready for commercialization, and independently from
the initiation of sales, the Company shall issue to the Assignor an option for
the purchase of 50,000 of its Common Shares at the "fair market value" defined
as the average of the closing "bid" price of the Company's Common Shares for the
five day period preceding the day in which said mechanical devices are declared
ready for commercialization. New product ready for commercialization shall mean
the first-time sale of a device with a particular application and shall not
include subsequent improvements or models of equipment designed for essentially
the same purpose as any equipment which shall meet the definition of "new
product ready for commercialization" as that term is herein defined.
h. All licenses granted by TTL anywhere in the world are conditioned upon TTL
paying to HPI: 1) Fifteen percent (15%) of all down payments in cash originating
from the granted of said licenses; 2) The equivalent in cash or in stock of five
percent (5%) of all TTL stock purchased by said licensees as direct part of said
license agreements; and 3) three percent (3%) of gross revenues on all sales, or
leases, or services for products manufactured and sold by said TTL licensee on
"Santilli's Magnegas" said gross percentage referring to all sales, or leases,
or services based in all or in part on the aforementioned rights on "Santilli's
MagneGas", related patent applications #1, #2, and #3, scientific
background, and technical know-how. Finally,
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TTL has the obligation to provide HPI with a copy of all licenses granted
anywhere in the world on "Santilli's Magnegas", or on the related technology and
know-how, immediately following their signature, and as part of the closing
procedures themselves.
i. In the event, following due diligence by TTL patent attorneys, one or all
Patent Applications #1, #2 and #3 are not granted by the Patent Office of any
given foreign countries in which TTL has a license on "Santilli's Magnegas", TTL
licensees agrees to keep paying to HPI one and one-half percent (1-1/2%) of
gross revenues on sales, leases and services on "Santilli's Magnegas" as set
forth in Paragraph 2.3, for the duration of ten years following the final denial
of a patent by the Patent Office in the country under license, such payments in
the absence of patents being due in view of the aforementioned crucial
importance of the scientific background and technical know-how acquired by TTL
licensees for the industrial development of "Santilli's Magnegas", which
scientific background and technical know-how are independent from the granting
of patents by the Patent Office of the country under license on Patent
Applications #1, #2, and #3.
j. TTL shall reimburse to Assignor on or before December 31 2000, all
documented expenses sustained by Assignor for the partial payment of the
automatic feeder and/or other equipment, which amount is $4,800 and which is
currently used by TTL in demonstrations, developments and other uses of
"Santilli Magnegas", and various miscellaneous purchases of parts related to the
same.
k. TTL and all its licensees, assignees, or nominees shall acknowledge the
scientific paternity of Magnegas by Santilli, and use the terms "Santilli's
Magnegas" in: , in production labels of all equipment and related manuals;
headings of official communications, press releases, Web Sites; and other
documents, whenever appropriate.
j. TTL acknowledges that Santilli is free to conduct research and development on
technologies and products not competitive to, or in conflict with those under
development, or already developed by TTL. New patent applications, scientific
backgrounds, and technical knowledge in developments, technologies and
applications other than those pertaining to "Santilli's MagneGas" which may
arise under the Scientific Consultant Agreement renewed on December 24, 1999,
are not part of said Scientific Consultant Agreement and its related
compensations.
7. Payments and Reports
a. TTL will report to Assignor, all Royalty for each calendar quarter of the
Assignment Term during the first month of the next ensuing calendar quarter and
may include with each such report full payment of royalty due for (and reported
for) the preceding quarter's operations.
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b. Quarterly and annual royalty reports will be signed and be certified as
accurate and complete by an authorized officer of TTL.
c. TTL will keep accurate and complete records of all business done pursuant to
this Agreement and will make such records available to Assignor, no more than
two (2) persons at once-for inspection during regular business hours, upon at
least three (3) business days' advance notice, to determine Royalties accrued
and paid or unpaid, and any other information due hereunder.
d. The Assignor may cause an audit to be made of the applicable records in order
to verify statement for Royalties made hereunder. Any audits shall be conducted
by an independent certified public accountant, acceptable to both parties, and
shall be conducted during regular business hours at TTL's offices.
e. The Assignor shall bear the expenses of any such audit unless such audit
reveals that the Royalties paid by TTL under this Agreement for the Period
subject to the audit are less than ninety-five percent (95%) of the amount owed
by TTL for such period. In such event, the costs of the audit shall be borne by
TTL, in addition and without limitation to any right of remedy Assignor may
have, TTL agrees to pay the balance of such royalties due the Assignor within
forty-five (45) days after written notice is delivered of TTL's understatement
of Royalties due. Furthermore, TTL shall pay interest on all understated
Royalties at a rate of 1.5% per month or lesser amount as mandated by law,
computed from the day on which said Royalties were due and owing to the
Assignor.
f. Refusal by TTL to report or to pay Royalty, or to maintain or make available
records of business done hereunder, will forfeit TTL's good standing under this
Agreement, if not remedied within forty-five (45) days.
8. Processing Patents and Trademarks
a. TTL shall provide due diligence and best efforts to secure the granting of
patents from the U. S. Patent Office from the Patent Applications currently on
record on the Santilli Technology as identified above.
b. On or before June 12, 2000, Assignor shall prepare, and TTL shall file at
least the following three patent applications,
(i) the new chemical species of Magnecules for gases;
(ii) the new PlasmaArcFlow methods for the production of Magnegas; and
(iii) the new PlasmaArcFlow method for the recycling of contaminated water;
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in the following foreign countries:
1) European Common Market;
2) Japan;
3) Australia;
4) Canada;
5) Mexico;
6) Venezuela;
7) Brasil;
8) Argentina;
9) So. Africa;
10) Taiwan;
11) India;
12) Russia
13) China.
c. All costs for the filing and securing of patents on the Santilli Technology
in the U.S.A. and in foreign countries shall be paid by TTL.
d. On or before December 31, 2000, TTL shall file at the Trademark and Patent
office in the US and in representative foreign countries for the following
Trademarks:
1) PlasmaArcFlow:
2) Magnegas;
3) Magneliquid;
e. All costs for the securing of trademarks on the Santilli Technology in the
U.S.A. and Abroad shall be paid by TTL.
f. It is the intention of TTL to eventually file foreign patents in all
countries throughout the world.
g. In the event TTL is unable to file for any or all of of the aforesaid three
patents (i), (ii) and (iii) in any or all of the above listed foreign countries
1) to 13), TTL shall so notify Assignor in writing on or before May 12, 2000;
Assignor has then the option to file said foreign patent application(s) at his
own costs and such costs shall be fully reimbursed by TTL.
h. In the event TTL elects not to apply for the aforesaid Trademarks 1), 2) and
3) on the Santilli Technology, TTL should so notify the Assignor on or before
November 31, 2000; TTL will then forfeit the use of the Trademark(s) not applied
for; and Assignor has then the option to apply for the aforesaid Trademarks.
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9. Improvements
a. Any new composition, design, product, or service conducive to third party
competition with Assigned Product or Assigned Services or Assigned Systems,
invented or otherwise coming under the control of either party during the
Assignment Term, is deemed an "Improvement" and such party will disclose the
same to the other party promptly and in enough detail to enable the other party
to elect whether to have such Improvement included hereunder.
b. As to any such Improvement by either party, either party may elect to have
such Improvement included hereunder, within three (3) months after first
knowledge thereof, without change in Royalty, by promptly notifying the other
party of an election to do so; and the party that made or acquired such
Improvement need do no more if both parties fail to elect to include the
Improvement.
c. The originating party of an elected Improvement that appears possibly
patentable after a competent prior art search, will file and prosecute a patent
application thereon, and may discontinue prosecuting it or maintaining any
resulting patent, but only after giving the other party notice of such intention
plus ample opportunity to take such (or equivalent) action at its own sole
future discretion and expense.
d. If either party so elects to have any given Improvement included under this
Agreement, the electing party in doing so will become obligated to pay one-half
(1/2) the expense of undertaking to patent it within the Assigned Territory,
whereas the other one-half (1/2) of any such patent expense will be the
obligation of the originating party, whether or not the electing and originating
parties are the same, except that if TTL elects not to participate in the
payment of an Improvement made by the Assignor to be included, TTL shall not be
obligated to do so.
e. If the parties have joint inventorship/ownership patent rights in an issued
Improvement patent, the parties will share equally the related ownership rights
and expenses including any official patent maintenance fees for any one
Improvement patent. The parties need not exercise Improvement patent rights,
except as this Agreement may provide, nor need either party account to the other
party for any lawful activity regarding such patent rights outside this
Agreement.
f. The parties recognize that well-based differences may arise with regard to
origination of any given Improvement and that as to U.S. patents the
determination of inventorship and of patentability is exclusively within the
jurisdiction of the U.S. Patent and Trademark Office and the Federal Courts.
Unless the parties are/have joint inventors or successor(s) thereto and hence
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are joint owners, they specifically agree that for any Improvement patent
application and for any resulting patent for an Improvement elected by either
party to be included hereunder, regardless of inventorship, the Improvement
originating or otherwise acquiring party will grant to the other party (if that
other party so elects) an unrestricted paid-up (free) license to practice the
Improvement for the Assignment Term, if such practice of it would not violate
any non-elected prior patent of the grantor-Assignor.
g. Each party's foregoing Improvement rights are executory in nature, including
the right to be informed of any Improvement by the other party, and to elect an
Improvement for inclusion hereunder (or not), and including rights to ongoing
prosecution of patent applications and maintenance of patents by an originating
party of an elected Improvement, and receipt of license or ownership rights
thereunder.
10. Infringement Rights
a. In the event one or all patents pending set forth under the definition
"Santilli Technology" are not granted by the US Patent Office, TTL agrees to be
bound by the terms of this License Agreement, including the payment of all
Royalties and granting of all new product Common Stock Options for a period of
ten years following notification of such patent-pending denial. Each party shall
notify the other in writing at such time as any Santilli Technology patent is
issued or denied.
b. In the event that TTL's commercialization of any Assigned Product, Assigned
Service, or Assigned System is accused of infringing a proprietary right of any
third party, the parties will cooperate in attempting to avoid such infringement
or to prove lack of infringement, and so long as TTL's license hereunder is
exclusive to the extent set forth above, TTL will have a right, but not an
obligation, to defend or assist in defending against any infringement action
brought by a third party, and shall have also the obligation to pay one-half
(1/2) of the costs of doing so, except as either party may voluntarily pay more
thereof incidental to participation therein.
c. Neither party will be liable to the other paty if unable or unwilling to
continue this Agreement because of such infringement of third-party rights, and
in that event TTL will cease commercializing Assigned Products, Assigned
Services, and Assigned Systems, and TTL will relinquish its rights hereunder in
that event, and thereby terminate its Royalty and attendant obligations to the
Assignor.
d. In the event that the activities of any third party are asserted (or
otherwise appear) to infringe an intellectual property right Assigned to TTL
hereunder, the parties will cooperate in attempting
13
<PAGE> 14
to ascertain and to abate such infringement. So long as TTL's Assignment
hereunder is exclusive to the extent set forth above, TTL will have a prior
right, but not an obligation, to abate such infringement, whether by litigation
or otherwise, subject to paying all the costs of doing so other than such costs
or expenses as the Assignor may voluntarily pay incidental thereto or to
participation therein. Any moneys recovered from a third-party infringer will be
retained by the parties, prorated to their expenditures after determining what
portion of moneys recovered are due the Assignor as part of any Royalty, whose
action(s) had such result.
e. If third-party infringement is not abated, TTL may elect to continue as a
non-exclusive Assignee under this Agreement as its sole remedy, or alternatively
TTL may discontinue its license and cease royalty payments as its sole remedy.
11. Assurances
a. The Assignor assures TTL of its origination of the inventions and guarantee
TTL of the Assignor's invention priority to their best knowledge.
b. The Assignor warrants ownership to their best knowledge of the Assigned
Products and Assigned Services, in the specific sense that the Assignor has no
reason to believe that any third party has any right to prevent either the
Assignor or Assignee from practicing any Assigned Invention, or from using any
Assigned Trademark, as provided in this Agreement, and Assignor warrant such
practice or usage as noninfringing of third-party rights.
c The Assignor will instruct and/or assist TTL's personnel in design,
manufacturing, quality standards, testing, distribution, marketing, and sale, as
well as proper marking, of Assigned Product and Assigned Systems, and Assignor
will provide Assigned Know-how in doing so, as may be applicable.
d. The Assignor will have no liability whatever to TTL for TTL's actions or
inactions under this Agreement, and TTL will save the Assignor harmless against
any liability to third parties whether based upon agency, contract, negligence,
product liability, or other basis-for any claim based on action or inaction of
TTL relating to Assigned Products, Services, or Systems.
12. Product Marking
a. TTL will mark on Assigned Products (or containers) each patent number
applicable thereto upon being advised thereof by the Assignor. In the absence of
patents, TTL shall be under no product marking obligations relating to any use
of the Santilli Technology, except for the identification of paternity as per
paragraph 6.j.
14
<PAGE> 15
b. TTL will display a Assigned Trademark (if elected) on all Assigned Products
and in advertising copy, brochures, and publications by or for TTL about
Assigned Product. TTL will not use any Assigned Trademark in or as a trade name
(i) if not elected, or (ii) if elected, after TTL discontinues (or other
termination of) TTL's license under thisAgreement.
c. TTL will not make any material change in materials, production methods, or
otherwise that might affect the nature or quality of any the Santilli Technology
product or service, without advance notice to the Assignor
g. If TTL elects to use one or more Assigned Trademark(s), TTL will display one
thereof on each container of Assigned Product made by or for it, and in all
Assigned Product advertising copy, product brochures, press releases, and
publications by or for TTL about Assigned Product plus the generic name of the
goods, together with occasional notice that such Trademark is the property of
the Assignor.
13. Termination
a. This Agreement may only be terminated according to law or in the event of a
specific breach of the terms and conditions herein set forth including but not
limited to the payment of royalties. Any breach of this Agreement shall require
the party which assets such breach to notify the other party and allow for a
period of forty-five days to effect a cure of any such breach.
b. Upon termination, TTL will refrain from exercising thereafter any right it
had by license hereunder, such as practicing the invention of any previously
Assigned Patent, or using a Assigned Trademark or confusingly similar
expression.
c. Whenever TTL is not in good standing hereunder, the Assignor may render TTL's
Assignment wholly non-exclusive, or if it is already non-exclusive for a prior
breach or default the Assignor may terminate TTL's rights hereunder, in the
absence of specific curative provisions for TTL's breach or default, or if TTL
has had an opportunity to comply such a curative provisions and failed or
refused to do so.
d. If either party becomes, or would become, disabled as by the other party's
choosing, or being subjected to, an act or a procedure for relief of debtors
from enforcing compliance with a given executory obligation of the other party
hereunder (e.g., compliance with standards, action with regard to infringers,
offer of Improvements) the thus disabled party may deem this Agreement and the
license and other rights under this Agreement terminated.
15
<PAGE> 16
e. No inaction or overlooking by the Assignor or Assignee of any condition or
provision of this Agreement or of any breach or default thereof either party
shall be deemed to imply or to constitute a future waiver of any similar breach
or default of the same or other condition/provision.
f. This Agreement is automatically terminated in the event of TTL financial
insolvency and banktuptcy, in which case Assignor re-acquires the complete
rights granted hereinunder.
g. This Agreement is also automatically terminated in the event TTL has no sales
for the continuous duration of two years, in which case Assignor re-acquires
the entire rights granted hereinunder.
14. Notices
a. If to Assignor
The Institute for Basic Research
90 Eastwinds Court
Palm Harbor, Florida 34683
Hadronic Press, Inc.
35246 US 19 No.
PMB 115
Largo, Florida 34684
Dr. Ruggero Santilli
90 Eastwinds Court
Palm Harbor, Florida 34683
b. If to Assignee
Toups Technology Licensing, Inc.
7887 Bryan Diary Road
Largo, Florida 33777
15. Miscellaneous
a. If any one or more provision(s) or effect(s) of this Agreement should prove
to be invalid or unenforceable, and the Agreement be otherwise valid and
enforceable, the invalid or
16
<PAGE> 17
unenforceable provision or portion thereof will be severed, and the remainder of
the Agreement be and remain valid and enforceable to the fullest extent
permitted by applicable law.
b. This Agreement is made for the benefit of the parties, their heirs,
successors, and assigns, and any other person or legal entity named in any
provision hereof, and not made to give any unnamed person or legal entity any
right of action whatever.
c. Each statement made in this Agreement is deemed material, and each party is
entitled to rely, and deemed to have relied, upon the truth and correctness
thereof in entering into this Agreement.
d. Each party acknowledges that he has received advice of independent counsel of
choice as to the inducements, provisions, and terms of this Agreement, and their
effect, whereupon entering into this Agreement is each party's free and
independent act.
e. This Agreement is to be governed by Federal law to whatever extent a
proprietary right granted by the United States is involved, and otherwise by
Florida law, except as activities of a party in any other State render that
other State's law applicable.
f. In the event that any action or proceeding is brought to enforce any of the
terms and conditions of this Agreement, then the party in whose favor relief is
granted and/or judgment is entered shall be entitled to have and recover from
the other party or parties all costs, prejudgement interest, and reasonable
attorney's fees incurred in connection with the enforcement action.
g. Notice to be given under this Agreement will be in writing and be addressed
to the other party at the address of such party hereinabove, unless such address
has been superseded by like notice, whereupon the latest noticed address thereof
is to be used. Notice will be effective when delivered to the addressee, or-if
not a change of address-when sent by Express or Registered Mail so addressed.
h. This Agreement sets forth the entire intent and understanding of the parties
with regard to the subject matter hereof, and merges any prior negotiations or
agreements by the parties as to such subject matter, and no addition, deletion,
or other modification of the wording hereof may be made except in writing
subsequent hereto and signed by the party or parties to be bound thereby.
i. This Agreement supersedes the Letter of Intent dated October 26, 1999, on and
between the Assignor and the Assignee, which Letter of Intent is, therefore,
null and void.
17
<PAGE> 18
IN WITNESS WHEREOF the parties have caused this Agreement to be signed, sealed,
and attested by persons duly authorized so to do, as of the date first stated
hereinabove.
<TABLE>
<S> <C>
For Hadronic Press, Inc. For Dr. Ruggero Santilli
/s/ Carla Santilli, President Feb 3, 2000 /s/ Ruggero Maria Santilli Feb 3, 2000
- ------------------------------------------ ---------------------------------------
Carla Santilli, Date Ruggero Maria Santilli Date
President and CEO
For The Institute for For Toups Technology
Basic Research Licensing, Inc.
/s/ Ruggero Maria Santilli Feb 3, 2000 /s/ Leon H. Toups 2-3-00
- ------------------------------------------ ---------------------------------------
Ruggero Maria Santilli, Date Leon H. Toups,
President and CEO President and CEO
</TABLE>
18
<PAGE> 1
Exhibit 10.14
Scientific Consulting Agreement
This Agreement is made this January 1st, 2000 by and between Ruggero Maria
Santilil acting for himself and as President of The Institute for Basic
Research 90 Eastwinds Court, Palm Harbor, Florida 34683 ("Dr. Santilli") and
Toups Technology Licensing, Inc.) 7887 Bryan Diary Road, Suite 105, Largo,
Florida 33777 ("TTL" or the "Company")
WHEREAS Toups Technology Licensing Incorporated, a Florida corporation is
engaged in the business of developing market-ready application(s) of processes
and technologies derived from patents or similarly protected intellectual
properties, and;
WHEREAS, Dr. Santilli has served as the Company's Scientific Advisor for the
prior two years and has separately entered agreements relating to Santilli's
MagneGas and that family of technologies. Further, Dr. Santilil, is a U.S.
Citizen with permanent residence in Pinellas County, Florida, is among other
associations, the current Professor of Theoretical Physics and President, The
Institute for Basic Research, a Florida non-profit organization.
WHEREAS Toups Technology now desires to enter a renew its agreement to continue
the services of Dr. Santilli as the Company's Scientific Advisor and Dr.
Santilli desires to agree to extend his continued services as the Company's
Scientific Advisor.
THEREFORE, Toups Technology agrees to retain Dr. Santilli as Scientific Advisor
and Dr. Santilli agrees to be engaged as the Company's Scientific Advisor
according to the terms and conditions and for such compensation as set forth
herein.
The parties hereby agree as follows:
1. Position. The Company engages Dr. Santilli as TTL's Scientific Advisor.
During the term of this Agreement, Dr. Santilli shall devote his 50% of
his time and attention to the business of Toups Technology as it relates
to the relative matters on a regular, "best efforts," and professional
basis and at all times such efforts shall be under the direction of the
Board of Directors and Dr. Santilli shall be immediately responsible to
the Company's President.
2. Duties. The development stage nature of Santilli's collective MagneGas(TM)
technology precludes an ability to foresee all the areas to which Dr.
Santilli's expertise will prove essential as it relates thereto.
Therefore, at a minimum, Dr. Santilli shall make his expertise available:
a. In the following areas:
(i) Test Support
(a) Theoretician responsible for collaboration in
coordinatlon of all testing and research
(b) Test results documentation to include test data and
methods, mathematical formulas and assumption and
formal letters from test originators.
(c) Problem solution support;
(d) Computer support as required.
(ii) Sale and Marketing Support
(a) Identification of applications
(b) identification of first markets
(iii) Financial Support
Page 1 of 5
<PAGE> 2
(a) Work within budgets and schedules.
3. Noncompetition: During the term of this-Agreement, Dr Santilli shall not
directly or indirectly, engage in any business, commercial or professional
activity which the Company deems to interfere with the business of Toups
Technology, or with the performance of duties by Dr. Santilli hereunder.
Dr. Santilli further agrees not to provide any services for any other
entity on a formal or informal basis which may compete, directly or
indirectiy, with any of the services Toups Technology currently provides
or may provide during the term of this Agreement or which may result,
directly or indirectly, in the diversion of customers from Toups
Technology. The Company agrees that Dr. Santilli may continue to provide
consulting or other services to his clients or associates existing on the
date of this Agreement provided that such services do not, in the opinion
of the Company, substantially interfere with Dr. Santilli's performance of
his duties as set forth in this Agreement. Accordingly, as a condition of
engagement by TTL, Dr. Santilli agrees that, in the event that his
consultant agreement terminates for any reason, for a one year period he
will not, directly or indirectly, either for himself or through any kind
of ownership as a director, agent, employee or consultant, for any other
person, firm or corporation, call on, solicit, take away, or cause the
loss of clients of the Company on whom he called or with whom he became
acquainted during his Period of Engagement. It is expressly agreed and
understood that the remedy at law for breach of covenant is inadequate and
that injunctive relief shall be available to prevent the breach thereof.
4. Nondisclosure of Confidential Information: Dr. Santilli agrees that he
will not, at any time during or after the termination of this consultant
Agreement, use for his own benefits, either directly or indirectly, or
disclose or communicate in any manner to any indIvidual, corporation, or
other entity, other than Toups Technology, any confidential information
acqulred by him during his Period of Engagement, regarding any actual or
intended business activity, product, service, plan or strategy of T oups
Technology. As used in this Agreement, confidential information shall
include all information disclosed to or known by Dr. Santlilli as a
consequence of or developed through or during his Period of Engagement by
Toups Technology including all knowledge, information and materials
regarding the Company's products, services, processes, know-how,
customers, suppliers, product and/or service development, business plans,
and research, as well as confidential information about financial,
marketing, pricing, cost, compensation or any other proprietary matters
relating to Toups Technology whether or not subject to other protection
(except that such knowledge known to Dr. Santilli prior to Dr. Santilli's
Period of Engagement by Toups Technology that is publicly disclosed wIth
the Company's permission. Any breach of this paragraph shall constitute
grounds for immediate termInation for cause and such other relief as may
be afforded by applicable law.
5. Period of Engagement: The Company engages Dr. Santilli as a consultant and
Dr. Santilli accepts engagement as a consultant for the period beginning
on January 1, 2000 ending December 31, 2000. Thereafter, this Agreement
can be renewed upon the mutual consent of both parties for successive
twelve-month periods.
6. Compensation:
a. Sa1ary As compensation for the services rendered by Dr. Santilli
under this Agreement during the Period of Engagement shall be
$6,000.00 (six thousand dollars) per month payable in two parts
($3,000 per payment) twice each month.
Page 2 of 5
<PAGE> 3
b. Stock Purchase Options. As a part of this Agreement. The Institute
for Basic Research or its designee may acquire up to 100,000 of the
Company's $.001 par value Common Stock at the option price of $1.00
per share. This Option shall remain available to The Institute for
Basic Research at anytime beginning upon January 1, 2000 and ending
three years later on December 31, 2002.
7. Benefits:
a. Vacation: Dr. Santilli shall receive three weeks paid vacation
during his Period of Engagement
b. Purchase of Computer. At a point in time prior to February 28, 2000,
the Company shall provide Dr. Santilli a new Macintosh Laptop
Computer.
8. Termination of Agreement: The Board of Directors may terminate Dr.
Santilli's consultant agreement at any time, with or without cause.
a. Termination Without Cause by the Company: If Dr. Santilli's
consultant agreement is terminated without cause by the Company
prior to the expiration of this Agreement, Dr. Santilli shall be
paid a lump sum severance payment in lieu of any other compensation
or benefits otherwise payable thereafter under this Agreement. Such
payment shall be computed at the rate of $1,500 per month for any
monthly period remaining under this Agreement.
b. Termination Without Cause by Dr. Santilli: If Dr. Santilli
terminates this Consultant Agreement without cause, Dr. Santilli
shall forfeit all compensation which would otherwise become due
under this Agreement.
c. Termination WIth Cause by the Company; If, in the opinion of Toups
Technology or its designated agent Dr. Santilli willfully breaches
or habitually neglects the duties which he is required to perform
under the terms of this Agreement, the Company may immediately
terminate Dr. Santilli and Dr. Santilli shall forfeit all
compensation which would otherwise become due under this Agreement.
9. Notices. Notices under thIs Agreement shall be considered delivered within
five business days after deposit in the U. S. Mail, return receipt
included.
10. Amendments. Neither this Agreement nor any provisions hereof shall be
waived, modified, discharged, or terminated except by an instrument in
writing signed by both parties.
11. Entire Agreement. This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof, and there are no
representations, warranties, coven ants or other agreements except as
stated or referred toh erein.
12. Severability. Each provision of this Agreement is intended to be severable
from every other provision and the validity or legality of the remainder
hereof shall remain valid and binding and this Agreement is not
transferable or assignable by either party.
13. Governing Law. This Agreement and all rights hereunder shall be governed
by and interpreted in accordance with the laws of the State of Florida.
14. Benefit of Agreement. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective legal
representatives, administrators executors successors, subsidiaries and
affiliates.
Page 3 of 5
<PAGE> 4
Executed this January 1st, 2000
Acceptance by Ruggero Maria Santilli
/s/ [ILLEGIBLE]
- -------------------------------------
Dr. Santilli
Acceptance by the Company
/s/ Leon H. Toups
- -------------------------------------
Leon H. Toups
President and Chief Executive Officer
Page 4 of 5
<PAGE> 1
Exhibit 10.15
EMPLOYMENT AGREEMENT
This Agreement made and effective the 28th day of July 1997, by and between
those persons who shall form a corporation named Toups Technology Licensing,
Inc., of 801 West Bay Drive, Suite 707, Largo, Florida 34640 ("TTL" or the
"Company"), hereinafter referred to as "Employer", and Leon H. Toups, of 418
Harbor View Lane, Largo, Florida 33770 hereinafter referred to as "Employee".
The parties recite that:
A. Employer intend to be engaged in technology development and maintains
business premises at 801 West Bay Drive, Suite 707, Largo, Florida 34640.
B. Employee is willing to be employed by Employer, and Employer is willing to
employ Employee, on the terms and conditions hereinafter set forth.
For the reasons set forth above, and in consideration of the mutual covenants
and promises of the parties hereto, Employer and Employee covenant and agree as
follows:
1. AGREEMENT TO EMPLOY AND BE EMPLOYED
Employer hereby employs Employee as President and Chief Executive Officer at the
above-mentioned premises, and Employee hereby accepts and agrees to such
employment.
2. DESCRIPTION OF EMPLOYEE'S DUTIES
Subject to the supervision and pursuant to the orders, advice, and direction of
Employer, Employee shall perform such duties as are customarily performed by one
holding such position in other businesses or enterprises of the same or similar
nature as that engaged in by Employer. Employee shall additionally render such
other and unrelated services and duties as may be assigned to him from time to
time by Employer.
3. MANNER OF PERFORMANCE QF EMPLOYEE'S DUTIES
Employee shall at all times faithfully, industriously, and to the best of his
ability, experience, and talent, perform all duties that may be required of and
from him pursuant to the express and implicit terms hereof, to the reasonable
satisfaction of Employer. Such duties shall be rendered at the above mentioned
premises and at such other place or places as Employer shall in good faith
require or as the interests, needs, business, and opportunities of Employer
shall require or make advisable.
4. DURATION OF EMPLOYMENT
Page 1 at 5 Pages
<PAGE> 2
The term of employment shall be five years, commencing on July 28, 1997, and
terminating on that same date exactly five years following or July 28, 2002
subject, however, to prior termination as provided in Sections 8 and 9 hereof.
5. COMPENSATION; REIMBURSEMENT
Employee acknowledges that TTL is a start-up, development stage enterprise. Upon
incorporation of TTL Employee agrees that for a period of twenty-four months,
compensation shall be
Cash: Employer shall pay Employee and Employee agrees to accept from Employer,
in partial payment for Employee's services hereunder, compensation at the rate
of $3,000 Dollars (three-thousand)) per month during 1997, $5,000 Dollars
(five-thousand) per month during 1998 and $1O,000 (ten thousand) per month
during 1999. During December 1999, Employee shall be paid according to a
compensation program approved by the-then Board of Directors. In addition to the
foregoing, Employer will reimburse Employee for any and all necessary,
customary, and usual expenses incurred by him while traveling for and on behalf
of the Employer pursuant to Employer's directions.
Stock: Upon incorporation, Employer shall issue 3,200,000 (three-million,
two-hundred thousand) unregistered common shares and shall issue 650,000
(six-hundred and fifty-thousand) unregistered common shares on January 1, 1998.
For 1999, Employee shall receive such shares as shall be determined by the Board
of Directors commensurate with performance and such award shall be made on
December 1, 1999. Thereafter, employee shall receive such amounts as shall be
affixed by the Board of Directors at January 1, 2000, 2001 and 2002. Stock
compensation for the remaining term of this Agreement (2000, 2001 and 2002)
shall be established by the Board of Directors but of which shall, at a minimum,
provide for options to acquire additional shares of TTL at a rate of no less
than 80% of the-then market value of the Company's unregistered common shares.
The "market value" of any shares shall be determined by the-then Board of
Directors. In the event of liquidation of TTL for any reason whatsoever and
regardless of the number of stock shares held by Employee at such time, Employee
shall not be entitled to participate in any liquidation proceeds unless and
until all other shareholders shall bave been fully repaid for any monies
invested.
Employee acknowledges there are no registration rights afforded any shares
issued hereunder and that further, Employee shall be restricted in the transfer
of any shares issued hereunder for a period of at least twenty-four months. This
Agreement contemplates that Employee shall serve as an Officer and as a Director
of TTL and as such, any shares issued bereunder may be subject to limitations on
resale not set forth in this Agreement but of which may, in essence, preclude
any sale of shares issued hereunder for the entire term of this Agreement.
Employee acknowledges and agrees that such limitations on resale shall not be
grounds for resignation of position or termination of this Agreement. Sbould
Employee terminate this Agreement due to lack of liquidity in any shares issued
hereunder, Employee shall immediately rescind all such Shares issued as a part
of this Agreement.
Page 2 of 5 Pages
<PAGE> 3
6. EMPLOYEE'S LOYALTY TO EMPLOYER'S INTERESTS
Employee shall devote all of his time, attention, knowledge, and skill solely
and exclusively to the business and interests of Employer, and Employer shall be
entitled to all benefits, emoluments, profits, or other issues arising from or
incident to any and all work, services, and advice of Employee. Employee
expressly agrees that during the term hereof he will not be interested, directly
or indirectly, in any form, fashion, or manner, as partner, officer, director,
stockholder, advisor, Employee, or in any other form or capacity, in any other
business similar to Employer's business or any allied trade, except that nothing
herein contained shall be deemed to prevent or limit the right of Employee to
invest any of his surplus funds in the capital stock or other securities of any
corporation whose stock or securities are publicly owned or are regularly traded
on public exchange, nor shall anything herein contained be deemed to prevent
Employee from investing or limit Employee's right to invest his surplus funds in
real estate.
7. NONDISCLOSURE OF INFORMATION CONCERNING BUSINESS
Employee will not at any time, in any fashion, form, or manner, either directly
or indirectly divulge, disclose, or communicate to any person, firm, or
corporation in any manner whatsoever any information of any kind, nature, or
description concerning any matters affecting or relating to the business of the
Employer, including, without limitation, the names of any its customers, the
prices it obtains or has obtained, or at which it sells or has sold its
products, or any other information concerning the business of Employer, its
manner of operation, or its plans, processes, or other date of any kind, nature,
or description without regard to whether any or all of the foregoing matters
would be deemed confidential, material, or important. The parties hereby
stipulate that, as between them, the foregoing matters are important, material,
and confidential, and gravely affect the effective and successful conduct of the
business of Employer, and its good will, and that any breach of the terms of
this section is a material breach of this agreement.
8. OPTION TO TERMINATE ON PERMANENT DISABILITY OF EMPLOYEE
Notwithstanding anything in this agreement to the contrary, Employer is hereby
given the option to terminate this agreement in the event that during the term
hereof Employee shall become permanently disabled, as the term "permanently
disabled" is hereinafter fixed and defined. Such option sha1l be exercised by
Employer giving notice to Employee by registered mail, addressed to him in care
of Employer at the above stated address, or at such other address as Employee
shall designate in writing, of its intention to terminate this agreement on the
last day of the month during which such notice is mailed. On the giving of such
notice this agreement and the term hereof shall cease and come to an end on the
last day of the month in which the notice is mailed, with the same force and
effect as if such last day of the month were the date originally set forth as
the termination date. For purposes of tbis agreement, Employee shall be deemed
to have become permanently disabled if, during any year of the term hereof,
because of ill health, physical or mental disability, or for other causes beyond
his control, he shall have been continuously unable or unwilling or have failed
to perform his duties hereunder for thirty (30) consecutive days, or if, during
any year of the term hereof, he shall have been unable or
Page 3 of 5 Pages
<PAGE> 4
unwilling or have failed to perform his duties for a total period of thirty (30)
days, whether consecutive or not.
9. DISCONTINUANCE OF BUSINESS AS TERMINATION OF EMPLOYMENT
Anything herein contained to the contrary notwithstanding, in the event that
Employer shall discontinue operations at the premises mentioned above or any
subsequent address, then this agreement shall cease and terminate as of the last
day of the month in which operations cease with the same force and effect as if
such last day of the month were originally set forth as the termination date
hereof.
10. CONTRACT TERMS TO BE EXCLUSIVE
This written agreement contains the sole and entire agreement between the
parties, and supersedes any and all other agreements between them. The parties
acknowledge and agree that neither of them has made any representation with
respect to the subject matter of this agreement or any representations inducing
the execution and delivery hereof except such representations as are
specifically set forth herein, and each party acknowledges that he or it has
relied on his or its own judgment in entering into the agreement. The parties
further acknowledge that any statements or representations that may have
heretofore been made by either of them to the other are void and of no effect
and that neither of them has relied thereon in connection with his or its
dealings with the other.
11. WAIVER OR MODIFICATION INEFFECTIVE UNLESS IN WRITING
No waiver or modification of this agreement or of any covenant, condition, or
limitation herein contained shall be valid unless in writing and duly executed
by the party to be charged therewith. Furthermore, no evidence of any waiver or
modification shall be offered or received in evidence in any proceeding,
arbitration, or litigation between the parties arising out of or affecting this
agreement, or the rights or obligations of any party hereunder, unless such
waiver or modification is in writing, duly executed as aforesaid. The
provisions of this paragraph may not be waived except as herein set forth.
12. CONTRACT GOVERNED BY LAW
This agreement and performance hereunder and all suits and special proceedings
hereunder shall be construed in accordance with the laws of the State of
Florida.
Page 4 of 5 Pages
<PAGE> 5
13. BINDING EFFECT OF AGREEMENT
This agreement shall be binding on and inure to the benefit of the respective
parties and their respective heirs, successors, and assigns.
Executed on the date first above written.
"Employee"
/s/ Leon H. Toups
- ---------------------
Leon H. Toups
Incorporator/Employer
/s/ Leon H. Toups
- ---------------------
Leon H. Toups
Incorporator/Employer
/s/ Mark C. Clancy
- ---------------------
Mark C. Clancy
Page 5 of 5 Pages
<PAGE> 1
Exhibit 10.16
EMPLOYMENT AGREEMENT
This Agreement made and effective the 28th day of July 1997; by and between
those persons who shall form a corporation named Toups Technology Licensing,
Inc. of 801 West Bay Drive, Suite 707 Largo, Flonda 34640 ("TTL" or the
"Company"), hereinafter referred to as "Employer", and Mark C. Clancv, of 4706
Barret Court. Tampa, Florida 33617 hereinafter referred to as "Employee".
The parties recite that:
A. Employer intend to be engaged in technology development and maintains
business premises at 801 West Bay Drive, suite 707, Largo, Florida 34640.
B. Employee is willing to be employed by Employer, and Employer is willing to
employ Employees on the terms and conditions hereinafter set forth.
For the reasons set forth above, and in consideration of the mutual covenants
and promises of the parties hereto. Employer and Employee covenant and agree as
follows:
1. AGREEMENT TO EMPLOY AND BE EMPLOYED
Employer hereby employs Employee as Vice President, Sales and Marketing.
Corporate Secretary and as a Director at the above-mentioned premises. and
Employee hereby accepts and agrees to such employment.
2. DESCRIPTION OF EMPLOYEE'S DUTIES
Subject to the supervision and pursuant to the orders, advice, and direction of
Employer, Employee shall perform such duties as are customarily performed by one
holding such position in other businesses or enterprises of the same or similar
nature as that engaged in by Employer. Employee shall additionally render such
other and unrelated services and duties as may be assigned to him from time to
time by Employer.
3. MANNER OF PERFORMANCE OF EMPLOYEE'S DUTIES
Employee shall at all times faithfully, industriously, and to the best of his
ability, experience, and talent perform all duties that may be required of and
from him pursuant to the express and implicit terms hereof, to the reasonable
satisfaction of Employer. Such duties shall be rendered at the above mentioned
premises and at such other place or places as Employer shall in good faith
require or as the interests, needs, business, and opportunities of Employer
shall require or make advisable.
4. DURATION OF EMPLOYMENT
Page 1 of 5 Pages
<PAGE> 2
The term of employment shall be five years, commencing on July 28, 1997, and
terminating on that same date exactly five years following, or July 28, 2002
subject, however, to prior termination as provided in Sections 8 and 9 hereof.
5. COMPENSATION; REIMBURSEMENT
Employee acknowledges that TTL is a start-up, development stage enterprise. Upon
incorporation of TTL Employee agrees that for a period of twenty-four months.
compensation shall be
Cash: Employer shall pay Employee and Employee agrees to accept from Employer,
in partial payment for Employee's services hereunder compensation at the rate
of $3,000 Dollars (three-thousand)) per month during 1997, $5,000 D0llars
(five-thousand) per month during 1998 and $8,333 (eight thousand three-hundred
and thirty-three) during 1999. During December 1999, Employee shall be paid
according to a compensation program approved by the-then Board of Directors. In
addition to the foregoing, Employer will reimburse Employee for any and all
necessary, customary, and usual expenses incurred by him while traveling for and
on behalf of the Employer pursuant to Employer's directions.
Stock: Upon incorporation, Employer shall issue 1,600,000 (one-million,
six-hundred thousand) unregistered common shares and shall issue 650,000
(six-hundred and fifty-thousand) unregistered common shares on January 1, 1998.
For 1999. Employee shall receive such shares as shall be determined by the Board
of Directors commensurate with performance and such award shall be made on
December 1, 1999. Thereafter, employee shall receive such amounts as shall be
affixed by the Board of Directors at January 1. 2000, 2001 and 2002. Stock
compensation for the remaining term of this Agreement (2000, 2001 and 2002)
shall be established by the Board of Directors but of which shall, at a minimum,
provided for options to acquire additional shares of TTL at a rate of no less
than 80% of the-then market value of the Company's unregistered common shares.
The "market value" of any shares shall be determined by the-then Board of
Directors. In the event of liquidation of TTL for any reason whatsoever and
regardless of the number of stock shares held by Employee at such time,
Employee shall not be entitled to participate in any liquidation proceeds
unless and until all other shareholders shall have been fully repaid for any
monies invested.
Employee acknowledges there are no registration rights afforded any shares
issued hereunder and that further, Employee shall be restricted in the transfer
of any shares issued hereunder for a period of at least twenty-four months. This
Agreement contemplates that Employee shall serve as an Officer and as a Director
of TTL and as such, any shares issued hereunder may be subject to limitations on
resale not set forth in this Agreement but of which may in essence, preclude any
sale of shares issued hereunder for the entire term of this Agreement Employee
acknowledges and agrees that such limitations on resale shall not be grounds for
resignation of position or termination of this Agreement. Should Employee
terminate this Agreement due to lack of liquidity in any shares issued
hereunder, Employee shall immediately rescind all such Shares issued as a part
of this Agreement.
Page 2 of 5 Pages
<PAGE> 3
6. EMPLOYEE'S LOYALTY TO EMPLOYER'S INTERESTS
Employee shall devote all of his time, attention, knowledge, and skill solely
and exclusively to the business and interests of Employer, and Employer shall be
entitled to all benefits, emoluments, profits, or other issues arising from or
incident to any and all work, services, and advice of Employee. Employee
expressly agrees that during the term hereof he will not be interested, directly
or indirectly, in any form, fashion, or manner, as partner, officer, director,
stockholder, advisor, Employee, or in any other form or capacity, in any other
business similar to Employer's business or any allied trade, except that nothing
herein contained shall be deemed to prevent or limit the right of Employee to
invest any of his surplus funds in the capital stock or other securities of any
corporation whose stock or securities are publicly owned or are regularly traded
on any public exchange, nor shall anything herein contained be deemed to prevent
Employee from investing or limit Employee's right to invest his surplus funds in
real estate.
7. NONDISCLOSURE OF INFORMATION CONCERNING BUSINESS
Employee will not at any time, in any fashion, form, or manner, either directly
or indirectly divulge, disclose, or communicate to any person, firm, or
corporation in any manner whatsoever any information of any kind, nature, or
description concerning any matters affecting or relating to the business of
Employer, including, without limitation, the names of any its customers, the
prices it obtains or has obtained, or at which it sells or has sold its
products, or any other information concerning the business of Employer, its
manner of operation, or its plans, processes, or other date of any kind, nature,
or description without regard to whether any or all of the foregoing matters
would be deemed confidential, material, or important. The parties hereby
stipulate that, as between them, the foregoing matters are important, material,
and confidential, and gravely affect the effective and successful conduct of the
business of Employer, and its good will, and that any breach of the terms of
this section is a material breach of this agreement.
8. OPTION TO TERMINATE ON PERMANENT DISABiLITY OF EMPLOYEE
Notwithstanding anything in this agreement to the contrary, Employer is hereby
given the option to terminate this agreement in the event that during the term
hereof Employee shall become permanently disabled, as the term "permanently
disabled" is hereinafter fixed and defined. Such option shall be exercised by
Employer giving notice to Employee by registered mail, addressed to him in care
of Employer at the above stated address, or at such other address as Employee
shall designate in writing, of its intention to terminate this agreement on the
last day of the month during which such notice is mailed, On the giving of such
notice this agreement and the term hereof shall cease and come to an end on the
last day of the month in which the notice is mailed, with the same force and
effect as if such last day of the month were the date originally set forth as
the termination date. For purposes of this agreement, Employee shall be deemed
to have become permanently disabled if, during any year of the term hereof,
because of ill health, physical or mental disability, or for other causes beyond
his control, he shall have been continuously unable or unwilling or have failed
to perform his duties hereunder for thirty (30) consecutive days, or if, during
any year of the term hereof, he shall have been unable or
Page 3 of 5 Pages
<PAGE> 4
unwilling or have failed to perform his duties for a total period of thirty (30)
days, whether consecutive or not.
9. DISCONTINUANCE OF BUSINESS AS TERMINATION OF EMPLOYMENT
Anything herein contained to the contrary notwithstanding, in the event that
Employer shall discontinue operations at the premises mentioned above or any
subsequent address, then this agreement shall cease and terminate as of the last
day of the month in which operations cease with the same force and effect as if
such last day of the month were originally set forth as the termination date
hereof.
10. CONTRACT TERMS TO BE EXCLUSIVE
This written agreement contains the sole and entire agreement between the
parties, and supersedes any and all other agreements between them. The parties
acknowledge and agree that neither of them has made any representation with
respect to the subject matter of this agreement or any representations inducing
the execution and delivery hereof except such representations as are
specifically set forth herein, and each party acknowledges that he or it has
relied on his or its own judgment in entering into the agreement. The parties
further acknowledge that any statements or representations that may have
heretofore been made by either of them to the other are void and of no effect
and that neither of them has relied thereon in connection with his or its
dealings with the other.
11. WAIVER OR MODIFICATION INEFFECFIVE UNLESS IN WRITING
No waiver or modification of this agreement or of any covenant, condition, or
limitation herein contained shall be valid unless in writing and duly executed
by the party to be charged therewith. Furthermore, no evidence of any waiver or
modification shall be offered or received in evidence in any proceeding,
arbitration, or litigation between the parties arising out of or affecting this
agreement, or the rights or obligations of any party hereunder, unless such
waiver or modification is in writing, duly executed as aforesaid. The provisions
of this paragraph may not be waived except as herein set forth.
12. CONTRACT GOVERNED BY LAW
This agreement and performance hereunder and all suits and special proceedings
hereunder shall be construed in accordance with the laws of the State of
Florida.
Page 4 of 5 Pages
20
<PAGE> 5
13. BINDING EFFECT OF AGREEMENT
This agreement shall be binding on and inure to the benefit of the respective
parties and their respective heirs, legal representatives, successors, and
assigns.
Executed on the date first above written.
"Employees"
/s/ Mark C. Clancy
- ----------------------
Mark C. Clancy
Incorporator/Employer
/s/ Leon H. Toups
- ----------------------
Leon H. Toups
Incorporator/Employer
/s/ Mark C. Clancy
- ----------------------
Mark C. Clancy
Page 5 of 5 Pages
<PAGE> 1
Exhibit 10.17
EMPLOYMENT AGREEMENT
This Agreement made and effective the 28th day of July 1997, by and between
those persons who shall form a corporation named Toups Technology Licensing,
Inc., of 801 West Bay Drive, Suite 707, Largo, Florida 34640 ("TTL" or the
"Company"), hereinafter referred to as "Employer", and Michael P. Toups, of 400
Palm Drive, Largo, Florida 33770 hereinafter referred to as "Employee".
The parties recite that:
A. Employer intend to be engaged in technology development and maintains
business premises at 801 West Bay Drive, Suite 707, Largo, Florida 34640.
B. Employee is willing to be employed by Employer, and Employer is willing to
employ Employee, on the terms and conditions hereinafter set forth.
For the reasons set forth above, and in consideration of the mutual covenants
and promises of the parties hereto, Employer and Employee covenant and agree as
follows:
1. AGREEMENT TO EMPLOY AND BE EMPLOYED
Employer hereby employs Employee as Vice President, Chief Financial Qificer and
as a Director at the above-mentioned premises, and Employee hereby accepts and
agrees to such employment.
2. DESCRIPTION OF EMPLOYEE'S DUTIES
Subject to the supervision and pursuant to the orders, advice, and direction of
Employer. Employee shall perform such duties as are customarily performed by one
holding such position in other businesses or enterprises of the same or similar
nature as that engaged in by Employer. Employee shall additionally render such
other and unrelated services and duties as may be assigned to him from time to
time by Employer.
3. MANNER OF PERFORMANCE OF EMPLOYEE'S DUTIES
Employee shall at all times faithfully, industriously, and to the best of his
ability, experience, and talent, perform all duties that may be required of and
from him pursuant to the express and implicit terms hereof, to the reasonable
satisfaction of Employer. Such duties shall be rendered at the above mentioned
premises and at such other place or places as Employer shall in good faith
require or as the interests, needs, business, and opportunities of Employer
shall require or make advisable.
4. DURATION OF EMPLOYMENT
Page 1 of 5 Pages
<PAGE> 2
The term of employment shall be five years, commencing on July 28, 1997, and
terminating on that same date exactly five years following or July 28, 2002
subject, however, to prior termination as provided in Sections 8 and 9 hereof.
5. COMPENSATION; REIMBURSEMENT
Employee acknowledges that TTL is a start-up, development stage enterprise. Upon
incorporation of TTL, Employee agrees that for a period of twenty-four months,
compensation shall be
Cash: Employer shall pay Employee and Employee agrees to accept from Employer,
in partial payment for Employee's services hereunder, compensation at the rate
of $3,000 Dollars (three-thousand)) per month during 1997, $5,000 Dollars
(five-thousand) per month during 1998 and $8,333 (eight thousand, three hundred
and thirty-three) during 1999. Duing December 1999, Employee shall be paid
according to a compensation program approved by the-then Board of Directors. In
addition to the foregoing, Employer will reimburse Employee for any and all
necessary, customary, and usual expenses incurred by him while traveling for and
on behalf of the Employer pursuant to Emp1oyer's directions.
Stock: Upon incorporation, Employer shall issue 1,600,000 (one-million,
six-hundred thousand) unregistered common shares and shall issue 650,000
(six-hundred and fifty-thousand) unregistered common shares on January 1, 1998.
For 1999, Employee shall receive such shares as shall be determined by the Board
of Directors commensurate with performance and such award shall be made on
December 1, 1999. Thereafter, employee shall receive such amounts as shall be
affixed by the Board of Directors at January 1, 2000, 2001 and 2002. Stock
compensation for the remaining term of this Agreement ( 2000, 2001 and 2002)
shall be established by the Board of Directors but of which shall, at a minimum,
provide for options to acquire additional shares of TTL at a rate of no less
than 80% of the-then market value of the Company's unregistered common shares.
The "market value" of any shares shall be determined by the-then Board of
Directors. In the event of liquidation of TTL for any reason whatsoever and
regardless of the number of stock shares held by Employee at such time, Employee
shall not be entitled to participate in any liquidation proceeds unless and
until all other shareholders shall have been fully repaid for any monies
invested.
Employee acknowledges there are no registration rights afforded any shares
issued hereunder and that further, Employee shall be restricted in the transfer
of any shares issued hereunder for a penod of at least twenty-four months. This
Agreement contemplates that Employee shall serve as an Officer and as a Director
of TTL and as such, any shares issued hereunder may be subject to limitations on
resale not set forth in this Agreement but of which may, in essence, preclude
any sale of shares issued hereunder for the entire term of this Agreement.
Employee acknowledges and agrees that such limitations on resale shall not be
grounds for resignation of position or termination of this Agreement. Should
Employee terminate this Agreement due to lack of liquidity in any shares issued
hereunder, Employee shall immediately rescind all such Shares issued as a part
of this Agreement.
Page 2 of 5 Pages
<PAGE> 3
6. EMPLOYEE'S LOYALTY TO EMPLOYER'S INTERESTS
Employee shall devote all of his time, attention, knowledge, and skill solely
and exclusively to the business and interests of Employer, and Employer shall be
entitled to all benefits, emoluments, profits, or other issues arising from or
incident to any and all work, services, and advice of Employee. Employee
expressly agrees that during the term hereof he will not be interested, directly
or indirectly, in any form, fashion, or manner, as partner, officer, director,
stockholder, advisor, Employee, or in any other form or capacity, in any other
business similar to Employer's business or any allied trade, except that nothing
herein contained shall be deemed to prevent or limit the right of Employee to
invest any of his surplus funds in the capital stock or other securities of any
corporation whose stock or securities are publicly owned or are regularly traded
on any public exchange, nor shall anything herein contained be deemed to prevent
Employee from investing or limit Employee's right to invest his surplus funds in
real estate.
7. NONDISCLOSURE OF INFORMATION CONCERNING BUSINESS
Employee will not at any time, in any fashion, form, or manner, either directly
or indirectly divulge, disclose, or communicate to any person, firm, or
corporation in any manner whatsoever any information of any kind, nature, or
description concerning any matters affecting or relating to the business of
Employer, including, without limitation, the names of any its customers, the
prices it obtains or has obtained, or at which it sells or has sold its
products, or any other information concerning the business of Employer, its
manner of operation, or its plans, processes, or other date of any kind, nature,
or description without regard to whether any or all of the foregoing matters
would be deemed confidential, material, or important The parties hereby
stipulate that, as between them, the foregoing matters are important, material,
and confidential, and gravely affect the effective and successful conduct of the
business of Employer, and its good will, and that any breach of the terms of
this section is a material breach of this agreement.
8. OPTION TO TERMINATE ON PERMANENT DISABILITY OF EMPLOYEE
Notwithstanding anything in this agreement to the contrary, Employer is hereby
given the option to terminate this agreement in the event that during the term
hereof Employee shall become permanently disabled, as the term "permanently
disabled" is hereinafter fixed and defined. Such option shall be exercised by
Employer giving notice to Employee by registered mail, addressed to him in care
of Employer at the above stated address, or at such other address as Employee
shall designate in writing, of its intention to terminate this agreement on the
last day of the month during which such notice is mailed. On the giving of such
notice this agreement and the term hereof shall cease and come to an end on the
last day of the month in which the notice is mailed, with the same force and
effect as if such last day of the month were the date originally set forth as
the termination date. For purposes of this agreement, Employee shall be deemed
to have become permanently disabled if, during any year of the term hereof,
because of ill health, physical or mental disability, or for other causes beyond
his control, he shall have been continuously unable or unwilling or have failed
to perform his duties hereunder for thirty (30) consecutive days, or if, during
any year of the term hereof, he shall have been unable or
Page 3 of 5 Pages
<PAGE> 4
unwilling or have failed to perform his duties for a total period of thirty (30)
days, whether consecutive or not.
9. DISCONTINUANCE OF BUSINESS AS TERMINATION OF EMPLOYMENT
Anything herein contained to the contrary notwithstanding, in the event that
Employer shall discontinue operations at the premises mentioned above or any
subsequent address, then this agreement shall cease and terminate as of the last
day of the month in which operations cease with the same force and effect as if
such last day of the month were originally set forth as the termination date
hereof.
10. CONTRACT TERMS TO BE EXCLUSIVE
This written agreement contains the sole and entire agreement between the
parties, and supersedes any and all other agreement between them. The parties
acknowledge and agree that neither of them has made any representation with
respect to the subject matter of this agreement or any representations inducing
the execution and delivery hereof except such representations as are
specifically set forth herein, and each party acknowledges that he or it has
relied on his or its own judgment in entering into the agreement. The parties
further acknowledge that any statements or representations that may have
heretofore been made by either of them to the other are void and of no effect
and that neither of them has relied thereon in connection with his or its
dealings with the other.
11. WAIVER OR MODIFICATION INEFFECTIVE UNLESS IN WRITING
No waiver or modification of this agreement or of any covenant, condition, or
limitation herein contained shall be valid unless in writing and duly executed
by the party to be charged therewith. Furthermore, no evidence of any waiver or
modification shall be offered or received in evidence in any proceeding
arbitration, or litigation between the parties arising out of or affecting this
agreement, or the rights or obligations of any party hereunder, unless such
waiver or modification is in writing, duly executed as aforesaid. The
provisions of this paragraph may not be waived except as herein set forth.
12. CONTRACT GOVERNED BY LAW
This agreement and performance hereunder and all suits and special proceedings
hereunder shall be construed in accordance with the laws of the State of
Florida.
Page 4 of 5 Pages
<PAGE> 5
13. BINDING EFFECT OF AGREEMENT
This agreement shall be binding on and inure to the benefit of the respective
parties and their respective heirs, legal representatives, successors, and
assigns.
Executed on the date first above written.
"Employee"
/s/ Michael P. Toups
- ---------------------
Michael P. Toups
Incorporator/Employer
/s/ Leon H. Toups
- ---------------------
Leon H. Toups
Incorporator/Employer
/s/ Mark C. Clancy
- ---------------------
Mark C. Clancy
Page 5 of 5 Pages
<PAGE> 1
Exhibit 21
Subsidiaries
1. InterSource Health Care, Inc., a Florida corporation
2. AMW Mico Welding, Inc., a Florida corporation
3. Brounley Associates, Inc., a Florida corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
FINANCIAL STATEMENTS, DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 72,224
<SECURITIES> 0
<RECEIVABLES> 19,501
<ALLOWANCES> 0
<INVENTORY> 1,072,280
<CURRENT-ASSETS> 1,227,171
<PP&E> 2,553,434
<DEPRECIATION> (583,100)
<TOTAL-ASSETS> 3,557,540
<CURRENT-LIABILITIES> 3,435,466
<BONDS> 750,000
0
750
<COMMON> (33,291)
<OTHER-SE> 925,992
<TOTAL-LIABILITY-AND-EQUITY> 3,557,540
<SALES> 1,100,528
<TOTAL-REVENUES> 1,100,528
<CGS> 1,493,433
<TOTAL-COSTS> 1,493,433
<OTHER-EXPENSES> 9,339,847
<LOSS-PROVISION> 867,374
<INTEREST-EXPENSE> 290,618
<INCOME-PRETAX> (11,290,649)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,290,649)
<DISCONTINUED> (772,019)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,352,043)
<EPS-BASIC> (.43)
<EPS-DILUTED> (.43)
</TABLE>
