<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 3, 1998
REGISTRATION NO. 333-50721
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------------
PHYTOTECH, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW JERSEY 0343 22-3239507
(State or other jurisdiction of (Primary Standard I.R.S. Employer
incorporation or organization) Industrial Code Number) Identification No.)
</TABLE>
1 DEER PARK DRIVE, SUITE I, MONMOUTH JUNCTION, NEW JERSEY 08852
(732) 438-0900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BURT D. ENSLEY
PRESIDENT
PHYTOTECH, INC.
1 DEER PARK DRIVE, SUITE I
MONMOUTH JUNCTION, NEW JERSEY 08852
(732) 438-0900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
JAMES H. FREIS, ESQ. JOHN J. HALLE, ESQ.
SHANLEY & FISHER, P.C. STOEL RIVES LLP
131 MADISON AVENUE 900 SW 5TH AVENUE
MORRISTOWN, NEW JERSEY 07962 PORTLAND, OREGON 97204
(973) 285-1000 (503) 224-3380
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
UNITS (3) CONSISTING OF:
Common Stock.......................................... 2,300,000 $6.00 $13,800,000 $4,071
Warrants.............................................. 2,300,000 -- -- --
UNITS (4) CONSISTING OF:
Common Stock.......................................... 200,000 $7.20 $1,440,000 $425
Warrants.............................................. 200,000 -- -- --
Common Stock (5)........................................ 2,500,000 $6.00 $15,000,000 $4,425
Common Stock (6)........................................ 78,768 $9.00 $708,912 $210
TOTAL............................................. $30,948,912 $9,131(7)
</TABLE>
(1) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution provisions
of the Warrants.
(2) Estimated in accordance with Rule 457(a) and 457(g) solely for the purpose
of calculating the registration fee.
(3) Includes 300,000 shares of Common Stock and 300,000 Warrants which may be
issued upon exercise of an option granted to the Underwriters to cover
overallotments, if any. See "Underwriting."
(4) Issuable on exercise of warrants issuable to the representative of the
underwriters. See "Underwriting."
(5) Issuable on exercise of Unit Warrants.
(6) Issuable on exercise of warrants held by certain of the Company's security
holders.
(7) Includes $8,921 paid upon original filing of the Registration Statement.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES, IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED JUNE 3, 1998
2,000,000 UNITS
[LOGO]
PHYTOTECH, INC.
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE COMMON STOCK PURCHASE WARRANT
Phytotech, Inc. ("Phytotech" or the "Company") is offering 2,000,000 units
("Units"), each Unit consisting of one share (the "Shares") of the Company's
voting common stock, no par value (the "Common Stock"), and one warrant to
purchase one share of Common Stock (the "Warrants"). The Units, the Common Stock
and the Warrants will trade as separate securities thirty days after the date of
this prospectus trading of the Units will be discontinued. Each Warrant
initially entitles the holder to purchase one share of Common Stock at a price
of $ per share (110% of the initial public offering price of a Unit). The
Warrants are exercisable at any time beginning on the Separation Date unless
previously redeemed, until the fifth anniversary of this Prospectus, subject to
certain conditions. The Company may redeem the Warrants, in whole or in part, at
any time upon at least thirty days prior written notice to the registered
holders thereof, at a price of $0.25 per Warrant, provided that the closing bid
price of the Common Stock has been at least $ (200% of the initial public
offering price of a Unit) for at least 20 consecutive trading days ending on a
date within 30 days before the date of the notice of redemption. It is
anticipated that the initial public offering price of a Unit will be between
$5.00 and $6.00.
The Company has applied to have the Common Stock, Warrants and Units
approved for listing on the Nasdaq SmallCap Market under the symbols "PHYT,"
"PHYTW" and "PHYTU," respectively.
The Company's independent auditors' report as of March 30, 1998, which
reports on the Company's financial statements as of and for the two years ended
December 31, 1997, states that certain factors raise substantial doubt about the
Company's ability to continue as a going concern. See "Independent Auditors'
Report" and Note 1 of "Notes to Financial Statements." The Financial Statements
included herein have been prepared assuming that Phytotech will continue as a
going concern. As of December 31, 1997 and March 31, 1998, the stockholders'
deficit was $2,148,806 and $2,639,946, respectively. Upon consummation of this
offering, assuming the sale of 2,000,000 Units at an assumed initial offering
price of $6.00, the Company's pro forma adjusted stockholders' equity as of
March 31, 1998 would be approximately $7,127,000.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON
PAGE 7.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Unit...................................................
Total (3)..................................................
</TABLE>
(1) Excludes a non-accountable expense allowance to the Representative of the
Underwriters (the "Representative") and the value of five-year warrants (the
"Representative's Warrants") entitling the Representative to purchase up to
200,000 Units at a price of $ (120% of the initial public offering
price of the Units). The Company has agreed to indemnify the Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses payable by the Company of $ ,
including the Representative's non-accountable expense allowance.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
300,000 additional Units on the same terms as set forth above to cover
overallotments, if any. If the Underwriters exercise such option in full,
the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ , and $ respectively. See
"Underwriting."
The Units are offered by the several Underwriters subject to receipt and
acceptance by them, to prior sale and to their right to reject orders in whole
or in part. It is expected that delivery of certificates for the Shares and
Warrants will be made against payment therefor on or about , 1998.
PAULSON INVESTMENT COMPANY, INC.
MILLENNIUM FINANCIAL GROUP, INC.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
[PHOTO depicting Indian mustard plants at a contaminated industrial site]
INDIAN MUSTARD PLANTS TREATING A LEAD CONTAMINATED INDUSTRIAL SITE IN TRENTON,
NEW JERSEY.
THE PLANTS ARE READY FOR HARVESTING.
------------------------
The Company has not previously been subject to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Company intends to furnish its shareholders with annual reports containing
financial statements audited by its independent certified public accountants and
quarterly reports containing unaudited financial information for each of the
first three quarters of each fiscal year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE UNITS, COMMON
STOCK OR WARRANTS OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ
SMALLCAP MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION INCLUDING THE FINANCIAL STATEMENTS, AND NOTES THERETO, APPEARING
ELSEWHERE IN THE PROSPECTUS.
THE COMPANY
Phytotech is a biotechnology company engaged in the development and
commercialization of products and services based on the control of biochemical
processes in selected plants. Phytotech currently offers waste cleanup
("bioremediation") services using plants grown under carefully controlled
conditions to absorb and dispose of unwanted metals, such as lead or uranium,
from toxic waste sites. The Company has also developed and is beginning to
market nutritionally important minerals absorbed into plants and is beginning to
develop technology for the production of high value proteins in plants.
Phytotech's goal is to develop a portfolio of proprietary and patentable
technologies based on its expertise in plant physiology, soil science, agronomy,
molecular biology and related areas and to commercialize these technologies
internally or through licensing or joint venture relationships with other
companies.
All plants can, under appropriate conditions, absorb metals and other
minerals found in the soil or water in which they are grown. By carefully
selecting certain plants and managing the conditions in which they are
cultivated, it is possible to cause these plants to extract and accumulate
substantial amounts of target metals in the plant tissues. Phytotech has filed
patent applications and developed proprietary technologies involving metal
accumulation in plants for two commercial applications, phytoremediation and
nutritional supplements.
Phytoremediation uses plants to accumulate large amounts of targeted heavy
metals and radionuclides (radioactive elements) in soil or water that has been
contaminated by industrial, military or other processes. The plants are grown
under carefully controlled conditions that optimize their absorption of these
metals. Sequential cropping and disposal or recycling of the plants can result
in the cost effective remediation of soil and water contaminated with heavy
metals such as lead or uranium. Phytotech has demonstrated the scientific and
economic feasibility of this application of its technology, has conducted
several field studies financed by grants, including a lead contaminated site in
Trenton, New Jersey, and is working on its initial commercial projects.
Additional commercial projects for the removal of lead and uranium are in
various stages of progress, from submitted proposals to completed agreements.
Phytotech is actively seeking additional commercial contracts and is expanding
its sales and customer support group in anticipation of business growth in this
area.
Phytotech is also developing its metal accumulation technology by growing
select edible plants under proprietary conditions that cause the accumulation of
nutritionally important minerals such as selenium, chromium, iron, zinc and
manganese. Under cultivation using Phytotech's proprietary technology, the
plants concentrate these minerals to such high levels that they can be dried,
ground, encapsulated and used directly as nutritional supplements. Phytotech
believes that these new products may afford it a competitive advantage over
existing products for two reasons. First, Phytotech believes that its
nutritional supplements are the only botanical source of complete mineral
supplements currently available. Second, research performed by the Company and
others suggests that the bioavailability (the amount of the mineral that the
body can actually absorb and use) of mineral supplements is substantially
greater when delivered in Phytotech's mineral-rich plants than is the case with
most traditional alternatives. Phytotech has established a marketing
relationship with Arterio, Inc., a nutritional supplement distributor operating
under the trade names "Ecological Formulas" and "Cardiovascular Research", and
has shipped initial orders of chromium and selenium containing plants.
Phytotech has recently begun research into the production of high value
proteins and nutritional chemicals in transgenic (genetically engineered)
plants. This technology, if successfully developed, could permit the production
of commercial quantities of human and other high value proteins, such as
collagen, heparin, gelatin and insulin, using genetically engineered plants that
can be cultivated and harvested to
3
<PAGE>
produce the required protein. Phytotech believes that proteins grown in
genetically engineered plants may provide both biological and economic
advantages in comparison with currently available production methods. In
cooperation with independent consultants, Phytotech intends to develop a series
of carefully selected transgenic plant-based protein products for the consumer
market.
Phytotech's ultimate goal is to be a leader in the development and
commercialization of plant-related products and technologies. Phytotech expects
to continue to perform and commission applied research in areas where its
management believes that there is good potential for commercial products, to
develop and protect a diverse portfolio of proprietary technologies, to
demonstrate the commercial feasibility of its proprietary technologies and to
exploit those technologies either directly, where such exploitation does not
require skills or other assets outside of Phytotech's scope of business, or
through licensing, joint venture or other relationships with industry partners
having complementary services and technologies.
The Company was incorporated in New Jersey in 1993. Its executive offices
are located at 1 Deer Park Drive, Suite I, Monmouth Junction, New Jersey 08852,
and its telephone number is (732) 438-0900.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities offered........................... 2,000,000 Units, consisting of one share of
Common Stock and one Warrant to purchase one
share of Common Stock. The Common Stock and
Warrants that make up the Units will trade
only as separate securities, thirty days
after the date of this Prospectus. See
"Description of Securities."
Common Stock to be outstanding after this
offering................................... 4,556,489 Shares(1)
Use of proceeds.............................. To fund research and development, marketing
and commercialization, to repay certain
promissory notes and for working capital and
general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq SmallCap Market symbols...... Common Stock--"PHYT"
Warrants--"PHYTW"
Units--"PHYTU"
</TABLE>
- ------------------------
(1) Assumes no exercise of Warrants, Representative's Warrants or outstanding
options or warrants to purchase Common Stock. At the date of this
Prospectus, there were issued or issuable options or warrants to purchase up
to 924,424 shares of Common Stock at prices ranging from approximately $3.60
to $9.00 per share (assuming an initial public offering price of $6.00 per
Unit). Unless otherwise indicated, all information in this Prospectus
assumes that the Underwriters' overallotment option is not exercised and
gives retroactive effect to (i) the automatic conversion of all outstanding
shares of the Company's Series A Convertible Preferred Stock ("Series A
Voting Preferred Stock" or "Preferred Stock") and Non-voting Common Stock of
the Company into an aggregate of 1,646,489 shares of Common Stock, effective
upon the effectiveness of this offering (the "Conversions") and (ii) a
1-for-4.5 reverse split of the Common Stock and Non-Voting Common Stock (the
"Reverse Split") effective immediately prior to the effectiveness of this
offering. See "Description of Securities."
5
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
YEAR ENDED DECEMBER 31,
------------------------ -----------------------------
1996 1997 1997 1998
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................... $ 393,469 $ 461,452 $ 125,931 $ 190,030
---------- ---------- ----------- -----------
Operating expenses:
Research and development................. 1,768,334 2,199,590 460,117 345,226
General and administrative............... 1,157,754 1,189,560 360,239 324,857
---------- ---------- ----------- -----------
Total operating expenses................... 2,926,088 3,389,150 820,356 670,083
---------- ---------- ----------- -----------
Other income (expense)..................... 66,892 (27,443) 5,469 (30,867)
---------- ---------- ----------- -----------
Net loss................................... $(2,465,727) $(2,955,141) $ (688,956) $ (510,920)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Pro forma basic and diluted net loss per
share (1)................................ $ (1.03) $ (1.16) $ (0.27) $ (0.20)
Shares used in computing pro forma basic
and diluted net loss per share (1)....... 2,404,218 2,545,113 2,527,400 2,555,399
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
-----------------------
AS
ACTUAL ADJUSTED(2)
---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................................... $ 47,326 $7,562,326
Working capital (deficit).......................................... (1,737,763) 6,662,150
Total assets....................................................... 749,423 8,264,423
Notes payable...................................................... 2,415,800 229,000
Accumulated deficit................................................ (8,248,977) (8,422,314)
Total stockholders' equity (deficit)............................... (2,639,946) 7,126,717
</TABLE>
- ------------------------
(1) See "Pro Forma Net Loss Per Share" in Note 1 of "Notes to Financial
Statements." Reflects the shares of Series A Voting Preferred Stock which
convert into shares of Common Stock effective upon consummation of this
offering, as if converted and outstanding from their original date of
issuance.
(2) As adjusted to give effect to the sale by the Company of 2,000,000 Units at
an assumed initial public offering price of $6.00 per Unit, after deducting
the underwriting discount and estimated offering expenses and the receipt of
net proceeds therefrom, and the repayment of principal and interest of
approximately $2,425,000 pursuant to the terms of certain promissory notes.
See "Capitalization."
6
<PAGE>
RISK FACTORS
EXCEPT FOR HISTORICAL INFORMATION, STATEMENTS CONTAINED HEREIN UNDER
"PROSPECTUS SUMMARY," "RISK FACTORS," "BUSINESS," AND "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," INCLUDING
STATEMENTS CONCERNING (I) THE COMPANY'S STRATEGY, (II) THE COMPANY'S EXPANSION
PLANS, (III) THE MARKET FOR THE COMPANY'S PRODUCTS, AND (IV) THE EFFECTS OF
GOVERNMENT REGULATION OF THE COMPANY'S PRODUCTS CONTAIN FORWARD-LOOKING
STATEMENTS CONCERNING THE COMPANY'S OPERATIONS, ECONOMIC PERFORMANCE AND
FINANCIAL CONDITION. BECAUSE SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES,
ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE SUCH DIFFERENCES INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK FACTORS." IN ADDITION TO THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS, PROSPECTIVE INVESTORS IN THE
UNITS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, AMONG OTHERS, BEFORE
PURCHASING THE UNITS OFFERED HEREBY.
NEW TECHNOLOGIES
The use of plants for each of the purposes for which the Company proposes to
use them has yet to be shown to be commercially viable. Although the Company has
shown that its phytoremediation techniques can reduce unwanted metals in
contaminated soil, the effectiveness of this process over a broad spectrum of
conditions has not been established. The Company has shown that targeted
minerals can be absorbed in its plants in significant quantities but has not
completed testing with respect to the speciation and bioavailability of the
targeted minerals in that form. The Company has not yet produced proteins from
plants in commercial quantities. In addition to the remaining technological
uncertainties, the novelty of the Company's technologies creates significant
uncertainty as to market acceptance. Companies introducing novel alternatives to
existing technologies generally are required to overcome initial market
skepticism, in particular when the Company introducing the technology is not a
recognized supplier to such markets. There is no assurance that the Company will
be successful in offering a commercially viable product or service or that any
such product or service, if offered, will be accepted by a broad spectrum within
its target market. See "Business--Phytoremediation" and "Business--Nutritional
Supplements."
CONTINUING LOSSES; NEED FOR ADDITIONAL FINANCING
The Company has incurred losses since its inception and expects to continue
to incur losses at least through the end of the current fiscal year. At March
31, 1998 the Company had an accumulated deficit of $8,248,977. The independent
auditors' report expresses substantial doubt as to the Company's ability to
continue as a going concern. The timing and remaining expense associated with
bringing the Company's technologies into full commercial operation are subject
to considerable uncertainty. While the Company believes that the proceeds of
this offering will be sufficient to fund its budgeted capital requirements for
at least the next 12 months, unanticipated events could cause such proceeds to
be depleted earlier than anticipated. Management will exercise a great degree of
discretion in the application of the proceeds of this offering and a substantial
portion of the proceeds will be used to repay debt. There is no assurance that
the Company will be able to bring any of its technologies into full commercial
production with the proceeds of this offering or that additional capital
resources will be available to the Company if needed. Adequate funds to meet the
Company's working capital requirements, whether obtained through financial
markets, corporate strategic alliances, additional equity offerings or from
other sources, may not be available to the Company when required or may not be
available on terms acceptable to the Company. Any such additional financing may
result in significant dilution to existing stockholders or the issuance of
securities with rights superior to those of the Common Stock. In the event the
Company is unable to raise or borrow additional funds, the Company may be
required to curtail significantly one or more of its research and development
programs or seek additional third-party funds by relinquishing the marketing,
distribution, development or other rights to the Company's products and services
under development. See "Independent Auditors' Report," Note 1 of "Notes to
Financial Statements," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations."
7
<PAGE>
UNCERTAINTY OF MARKET ACCEPTANCE OF PHYTOREMEDIATION SERVICES
While the Company's phytoremediation services have been shown to be
effective in field trials, numerous factors may affect the commercial viability
of the service over a broad range of growing conditions. Factors such as
climate, soil conditions, local regulations or timing considerations may make
the Company's phytoremediation services unsuitable for a particular project.
Because of the limited testing of the service to date, there is no assurance
that it will be proven to be commercially viable over a wide range of
conditions. The market for bioremediation services generally is substantially
affected by the actions of the various regulatory organizations with
responsibility for environmental cleanup. Unless remediation is required by
regulatory authorities or as a condition of the sale or new use of a property,
the owner has little incentive to incur cleanup costs. Even where remediation is
required, bioremediation must compete with other technologies based on cost and
effectiveness. There is no assurance that the perceived need for bioremediation
will continue to support a vital market for such services. See
"Business--Phytoremediation."
UNCERTAINTY REGARDING CONSUMPTION OF NUTRITIONAL SUPPLEMENT PRODUCTS
Although the ingredients in the Company's nutritional supplement products
are minerals for which there is a long history of human consumption, the
Company's products contain innovative ingredients or combinations of
ingredients. Although the Company believes all of its products to be safe when
taken as directed by the Company, there is little long-term experience with
human consumption of these innovative product ingredients or combinations
thereof. Although the Company performs research and/or tests the formulation and
production of its products, it has only begun to sponsor limited nutritional
studies. See "Business--Nutritional Supplements."
MANUFACTURING CAPABILITY
The Company has only limited investments in manufacturing resources and will
depend substantially on contract manufacturers. There is no assurance that the
Company will be able to develop adequate manufacturing resources. Significant
time, expense and management resources would be required to develop internal
manufacturing capacity should the Company elect that alternative.
COMPETITION
The Company's future success will depend in part on its ability to maintain
a competitive position with respect to evolving technologies. There is no
assurance that existing approaches or those under development or developed in
the future by others will not render the Company's current or future products or
services obsolete or noncompetitive. Moreover, traditional approaches to the
Company's chosen markets can be expected to have continuing market appeal and,
accordingly, present a serious competitive threat to the Company. The Company
competes against numerous companies, most of which have substantially greater
financial, research and development, testing, marketing and production resources
than does the Company, have established name recognition in their target markets
and are better equipped than is the Company to develop, market and manufacture
competitive products and services. Several such companies have programs, or have
initiated active product development programs, in remediation or nutritional
supplements. See "Business--Phytoremediation--Competition" and
"Business--Nutritional Supplements--Competition."
GOVERNMENT REGULATION
Certain of the Company's products and services may require regulatory
approval prior to or during commercialization. There is no assurance that the
Company or its collaborative partners will be able to obtain any necessary
approvals. The effect of government regulation may be to delay marketing of new
products for a considerable or indefinite period of time, to impose costly
procedures upon the Company's activities and to provide a marketplace advantage
to companies that compete with the Company. There is no assurance any regulatory
approval for products or services developed by the Company will be granted on a
timely basis, if at all. Any delay in obtaining, or failure to obtain, maintain
or review such approvals
8
<PAGE>
could materially and adversely affect the marketing of the Company's products
and the ability to generate product revenue and earnings. See
"Business--Government Regulation."
PATENTS AND PROPRIETARY RIGHTS
The Company's success will, in part, depend on its ability to obtain patents
on its products, obtain licenses to use third party technologies, protect its
trade secrets and operate without infringing on the proprietary rights of
others. There is no assurance that the Company's pending patent applications
will issue as patents, that any issued or pending patent will provide the
Company with significant competitive advantages, or that challenges will not be
instituted against the validity or enforceability of any patent owned by the
Company or, if instituted, that such challenges will not be successful. The cost
of litigation to uphold the validity and prevent infringement of a patent is
substantial. There is no assurance that others will not independently develop
similar technologies or duplicate the Company's technology or design around the
patented aspects of the Company's technology or that the Company's proposed
technology will not infringe patents or proprietary rights owned by others,
licenses for which may not be available to the Company. Competitors of the
Company may possess or obtain patents claiming products or processes that are
necessary for or useful to the development, use or manufacture of the Company's
products. Such competitors could bring legal actions against the Company
claiming infringement by its products and processes and seeking damages and
injunctive relief. In that event the Company might be required to obtain
licenses from others to continue to develop, manufacture or market its products
or be required to cease those activities. For example, there is no assurance
that the Company will be able to obtain such licenses on commercially reasonable
terms or that the patents underlying the licenses will be valid and enforceable.
The Company also relies upon unpatented proprietary technology. There is no
assurance that the Company can adequately protect its rights in such unpatented
proprietary technology, or that others will not independently develop
substantially equivalent proprietary information or techniques, otherwise gain
access to the Company's proprietary technology, or disclose such technology. See
"Business--Patents" and "Business--Phytoremediation--Technology Development."
POTENTIAL LIABILITY
Various federal, state and local laws and regulations have been enacted
covering the handling and management of toxic substances and creating liability
for environmental contamination caused by them. The Company is likely to be
subject to extensive compliance review by federal, state and local environmental
regulatory authorities. There is no assurance that the Company's operations or
activities will not result in civil or criminal enforcement actions or private
actions, resulting in mandatory cleanup requirements, revocation of required
permits or licenses, denial of applications for future permits, or significant
fines, penalties or damages, any of which could have a material adverse effect
on the Company, its operations and financial condition. The Company is subject
to laws which regulate its procedures for waste treatment, storage, recycling,
transportation and disposal activities. So-called "toxic tort" litigation has
increased markedly in recent years as those injured by contamination seek
recovery for personal injuries or property damage. While these developments may
enhance the market for the Company's services, they also present a liability
exposure or risk should the Company be deemed to be responsible for
contamination or pollution caused or increased by the Company's normal
operations, including disposal of plant residue, roots or foliage, or by
negligence or other misconduct on the part of the Company.
The Company may also be exposed to liability based on claims that its
nutritional supplements were harmful or ineffective. Although the Company does
not intend to manufacture drugs or other products with a high potential for
adverse effects, it may be exposed to a variety of claims, including claims
associated with product tampering by others. Such claims, even if lacking in
foundation, can cause material damage to the Company's reputation, can cause the
Company material expense, for example to fund a product recall, or can result in
material litigation expense. The Company expects to maintain liability insurance
when and to the extent such insurance is available on a cost effective basis.
However, there is no assurance that such insurance
9
<PAGE>
will continue to be available to the Company on a cost effective basis or at
all. See "Business--Government Regulation."
DEPENDENCE ON, ATTRACTION AND RETENTION OF KEY PERSONNEL
Because of the specialized nature of the Company's technology, the Company
is highly dependent upon existing management and its ability to attract and
retain qualified executive officers and scientific personnel for research and
development activities conducted or sponsored by the Company. The Company does
not currently maintain key man insurance on any of its employees. Phytotech is
currently seeking to recruit additional qualified senior operating, marketing,
scientific and technical personnel. There is intense competition for qualified
personnel in the areas of the Company's activities and there is no assurance
that the Company will be able to continue to attract and retain the qualified
personnel necessary for the development and commercialization of its products.
The Company has an employment contract with its President and Chief Executive
Officer and has consultant agreements with its key consultants. Despite the
Company's limited capital resources, the President received an increase in
annual compensation in 1996. See "Business--Personnel" and "Management."
POSSIBLE VOLATILITY OF STOCK PRICE; NONPAYMENT OF DIVIDENDS
The market price of the Common Stock and Warrants may fluctuate
significantly based on variations in the Company's results of operations or
other factors. The Company's results of operations could be adversely affected
by a number of factors, some of which are beyond the Company's control,
including economic downturns, variations in demand for remediation technology or
nutritional supplements, changes in the mix of products sold, price changes in
response to competition, increases in the cost of raw materials and possible
supply shortages. In particular, the market price of the Common Stock could be
materially adversely affected by reports by official or unofficial health and
medical authorities and the general media regarding the potential health
benefits or detriments of products sold by the Company or of similar products
distributed by other companies regardless of whether such reports are
scientifically supported and regardless of whether the Company's operating
results are likely to be affected by such reports, as well as by consumer
perceptions regarding the safety and efficacy of the Company's remediation
services or nutritional supplements and consumer preferences generally. In
addition, the stock market in general has experienced wide price and volume
fluctuations in recent periods, and these fluctuations are often unrelated to
the operating performance of the specific issuers whose stock is affected. The
Company has never declared or paid dividends on its capital stock and does not
intend to declare or pay dividends in the future.
ABSENCE OF PUBLIC MARKET
Prior to this offering, there has been no public market for the Common
Stock. Although the Company has applied to list the Common Stock on the Nasdaq
SmallCap Market, there is no assurance that an active trading market for the
Common Stock will develop or be sustained. The initial public offering price of
the Units will be determined by negotiations among the Company and the
Underwriters and will bear no direct relationship to the Company's historical
performance, assets, net worth or book value, or any other generally accepted
valuation criteria.
To continue to be listed on the Nasdaq SmallCap Market, the Company must
continue to satisfy certain maintenance standards. If the Company is unable to
maintain the standards for continued quotation on the Nasdaq SmallCap Market,
the Common Stock and the Warrants could be subject to removal from the Nasdaq
SmallCap Market. Trading, if any, in the Common Stock and the Warrants could
thereafter be conducted in the over-the-counter market on an electronic bulletin
board established for securities that do not meet the Nasdaq SmallCap market
listing requirements or in what are commonly referred to as the "pink sheets."
As a result, an investor would find it more difficult to dispose of, or to
obtain accurate quotations as to the price of, the Company's securities. In
addition, depending on several factors including the future market price of the
Common Stock, the Company's securities could become
10
<PAGE>
subject to the so-called "penny stock" rules that impose additional sales
practice and market making requirements on broker-dealers who sell and/or make a
market in the Company's securities and the ability of purchasers of the
Company's securities to sell their securities in the secondary market.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, the Company will have 4,556,489 shares
of Common Stock outstanding. The 2,000,000 shares of Common Stock sold in this
offering and any shares of Common Stock issuable upon exercise of Warrants will
be freely tradeable without restriction or further registration under the
Securities Act of 1933 (the "Securities Act"), unless held by an affiliate of
the Company. The remaining 2,556,489 shares of Common Stock are "restricted
securities" as that term is defined in Rule 144 under the Securities Act, and
may not be sold unless such sale is registered under the Securities Act or is
made pursuant to an exemption from registration under the Securities Act,
including the exemption provided by Rule 144. Of such 2,556,489 shares,
1,028,889 are held by affiliates, with 1,026,667 shares held for longer than one
year. The remaining 1,527,600 shares are held by nonaffiliates, with 1,298,333
shares held longer than 2 years and 200,978 shares held longer than 1 year but
less than 2 years.
In general, under Rule 144 as currently in effect, a shareholder (or
shareholders whose shares are aggregated) who has beneficially owned any
restricted securities for at least one year (including a shareholder who may be
deemed to be an affiliate of the Company), will be entitled to sell, within any
three-month period, that number of shares that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock (45,565 shares based on
4,556,489 shares of Common Stock outstanding upon completion of this offering,
assuming the Underwriter's overallotment option is not exercised) or (ii) the
average weekly trading volume of the Common Stock during the four calendar weeks
preceeding the date on which notice of such sale is given to the Commission,
provided certain public information, manner of sale and notice requirements are
satisfied. A shareholder who is deemed to be an affiliate of the Company,
including members of the Board of Directors and senior management of the
Company, will still need to comply with the restrictions and requirements of
Rule 144, other than the one-year holding period requirement, in order to sell
shares of Common Stock that are not restricted securities, unless such sale is
registered under the Securities Act. A shareholder (or shareholders whose shares
are aggregated) who is deemed not to have been an affiliate of the Company at
any time during the 90 days preceding a sale by such shareholder, and who has
beneficially owned restricted shares for at least two years will be entitled to
sell such shares under Rule 144 without regard to the volume limitations
described above.
As of the date of this Prospectus, options to purchase a total of 253,333
shares of Common Stock were outstanding at exercise prices ranging from $.45 to
$.68 per share, of which options to purchase 56,444 shares of Common Stock are
currently exercisable. As of the date of this Prospectus, warrants to purchase
671,091 shares of Common Stock were issued or issuable at exercise prices
ranging from approximately $3.60 to $9.00 per share (assuming an initial public
offering price of $6.00 per unit), all of which are currently exercisable.
Certain security holders of the Company have the right to require the Company to
register shares of Common Stock obtainable by them as a result of the
Conversions or on exercise of warrants. See "Description of
Securities--Registration Rights." Such shares, if registered, would be
immediately tradable.
LOCK-UP AGREEMENT. The underwriters have requested that all officers,
directors and persons holding more than 5% of the Common Stock prior to this
offering, agree not to sell, offer to sell, grant any option for the sale of or
otherwise dispose of any shares of Common Stock or securities convertible into
or exchangeable or exercisable for Common Stock, without the prior written
consent of the Representative, for a period of one year after the date of this
Prospectus, except for transfers to a person's ancestor, descendants, spouse or
a trust and except for bona fide gifts or certain corporate sales or
distributions, as specified therein. No prediction can be made as to the effect,
if any, that sales of shares of Common Stock or the availability of shares of
Common Stock for sale will have on the market price of the Common Stock from
time to time. The sale of a substantial number of shares, whether pursuant to
public offerings or
11
<PAGE>
otherwise, or the perception that such sales could occur, could adversely affect
the market price of the Common Stock and could materially impair the Company's
future ability to raise capital through an offering of equity securities. There
are shares subject to lock-up agreements.
USE OF PROCEEDS
The net proceeds from the sale of the Units are estimated to be
approximately $9,940,000 (approximately $11,506,000 if the Underwriters'
overallotment option is exercised in full), assuming an initial public offering
price of $6.00 per Unit and after deducting underwriting discounts and estimated
offering expenses of approximately $ .
The Company intends to use approximately $600,000 of proceeds to fund
internal research and development activities and $900,000 to fund research by
outside consultants. Of this amount, approximately $200,000 will be paid to
Rutgers, The State University of New Jersey ("Rutgers") over the next 24 months
under the Research Agreement. See "Business--Phytoremediation." The Company also
intends to use approximately $2.4 million to repay outstanding promissory notes.
The Company plans to use approximately $2.0 million of the net proceeds to fund
its sales and marketing efforts. All of the above uses have equal priority.
The remaining net proceeds of approximately $4.0 million will be used for
working capital and general corporate purposes including the payment of
corporate salaries. Pending application of the net proceeds as set forth above,
the Company intends to invest the net proceeds in short term, investment grade
interest-bearing securities. The Company may reallocate the use of the net
proceeds to meet unanticipated technological or other changes in the Company's
business. The Company currently believes that its existing capital resources,
together with the net proceeds of this offering and interest earned thereon,
will satisfy the Company's capital requirements at least through the 12 months
following this offering.
The following table sets forth, in tabular form, the uses of gross proceeds
described above:
<TABLE>
<S> <C> <C>
Internal research and development....................... $ 600,000 5.0%
Rutger's research agreement............................. 200,000 1.7
Consultants' research................................... 700,000 5.8
Repay promissory notes.................................. 2,400,000 20.0
Sales and marketing..................................... 2,000,000 16.7
Estimated fees and expenses............................. 2,060,000 17.2
Working capital/general purposes (1).................... 4,040,000 33.6
---------- ---------
Total uses of gross proceeds........................ $12,000,000 100.0%
---------- ---------
---------- ---------
</TABLE>
- ------------------------
(1) Includes payment of salaries.
12
<PAGE>
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company intends to retain its future earnings, if any, to fund the
development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future.
DILUTION
At March 31, 1998, the Company had a net deficit in tangible book value of
$(2,639,946) or $(1.03) per share of Common Stock. Net tangible book value
represents the amount of total tangible assets less total liabilities, divided
by the number of shares of Common Stock outstanding, after giving effect to the
Conversions and the repayment of principal and interest of approximately
$2,425,000 pursuant to the terms of certain promissory notes. After giving
effect to the sale of 2,000,000 Units in this offering at an assumed initial
public offering price of $6.00 per Unit (attributing no value to the Warrants),
and after deducting the underwriting discounts and estimated offering expenses,
the pro forma net tangible book value of the Company as of March 31, 1998 is
$7,126,717 or $1.56 per share of Common Stock. This represents an immediate
dilution of $4.44 per share to new investors. The following table illustrates
the per share dilution:
<TABLE>
<CAPTION>
<S> <C> <C>
Assumed initial public offering price per share...................................... $ 6.00
Pro forma net deficit in tangible book value per share as of March 31, 1998........ $ (1.03)
Increase in net tangible book value per share attributable to this offering........ 2.59
---------
Pro forma net tangible book value per share after this offering...................... $ 1.56
---------
Dilution per share to new investors.................................................. $ 4.44
---------
---------
Percent dilution per share to new investors.......................................... 74%
</TABLE>
The following table summarizes as of March 31, 1998, the number of shares of
Common Stock purchased from the Company, the total consideration paid therefor
and the average price per share paid by the existing stockholders (giving effect
to the Conversions) and by new investors in this offering, at an assumed initial
public offering price of $6.00 per Unit (attributing no value to and no exercise
of the Warrants), before deduction of the estimated underwriting discount and
estimated offering expenses payable by the Company.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- -------------------------- PRICE PER
AMOUNT PERCENT AMOUNT PERCENT SHARE
---------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................ 2,556,489 56.1% $ 5,571,031 31.7% $ 2.18
New investors................................ 2,000,000 43.9% 12,000,000 68.3% $ 6.00
---------- ----- ------------- -----
Total.................................... 4,556,489 100.0% $ 17,571,031 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>
13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1998 (giving effect to the Reverse Split and certain redesignations of
capital stock approved by the Board of Directors to be effective immediately
prior to the effectiveness of this offering) (i) on an actual basis, (ii) on a
pro forma basis to reflect the Conversions, and (iii) on a pro forma as adjusted
basis to reflect the sale of 2,000,000 Units in this offering at an assumed
initial public offering price of $6.00, (attributing no value to the Warrants)
the receipt of the estimated net proceeds therefrom and the repayment of the
Company's outstanding promissory notes. See "Description of Securities."
<TABLE>
<CAPTION>
MARCH 31, 1998 (UNAUDITED)
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------- ------------- -------------
<S> <C> <C> <C>
Notes payable........................................................ $ 2,415,800 $ 2,415,800 $ 229,000
Stockholders' equity (deficit):
Series A Voting Preferred Stock:
Authorized 10,000,000 shares; issued and outstanding 6,364,500
shares on an actual basis; none issued and outstanding on a
pro forma and pro forma as adjusted basis.................... 5,205,654 -- --
Voting Common Stock:
Authorized 30,000,000 shares; issued and outstanding 910,000,
2,556,489 and 4,556,489 shares on an actual, pro forma and
pro forma as adjusted basis, respectively.................... 308,245 5,571,031 15,511,031
Non-Voting Common Stock:
Authorized 1,111,111 shares; issued and outstanding 232,156
shares; none issued and outstanding on a pro forma and pro
forma as adjusted basis........................................ 57,132 -- --
Additional paid-in capital........................................... 385,000 517,000 517,000
Deferred compensation................................................ (347,000) (479,000) (479,000)
Accumulated deficit.................................................. (8,248,977) (8,248,977) (8,422,314)
------------- ------------- -------------
Total stockholders' equity (deficit)................................. (2,639,946) (2,639,946) 7,126,717
------------- ------------- -------------
Total capitalization (deficit)....................................... $ (224,146) $ (224,146) $ 7,355,717
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
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<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data as of and for each of the years in the
two-year period ended December 31, 1997 have been derived from the financial
statements of the Company included elsewhere in this Prospectus, which have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
selected financial data as of March 31, 1998 and for the three months ended
March 31, 1997 and 1998 have been derived from the Company's unaudited financial
statements included elsewhere in this Prospectus. In the opinion of management
of the Company, such unaudited financial statements have been prepared on a
basis consistent with the audited financial information and include all
adjustments, consisting of normal recurring adjustments, necessary to present
fairly the information set forth herein. Operating results for the three months
ended March 31, 1998 are not necessarily indicative of the results to be
expected for the year ending December 31, 1998. The selected financial data set
forth below are qualified in their entirety and should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the other financial information included elsewhere in this
Prospectus. The selected financial data should also be read in conjunction with
the financial statements, the related notes and the independent auditors' report
appearing elsewhere in this Prospectus. The independent auditors' report
contains an explanatory paragraph which states that the Company's recurring
losses from operations and insufficient working capital raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements and the selected financial data do not include any adjustments that
might result from the outcome of that uncertainty.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- -------------------------
1996 1997 1997 1998
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Grant revenue............................ $ 325,572 $ 270,936 $ 122,431 $ 116,942
Commercial revenue....................... 67,897 190,516 3,500 73,088
---------- ---------- ----------- -----------
Total revenue.............................. 393,469 461,452 125,931 190,030
---------- ---------- ----------- -----------
Operating expenses:
Research and development................. 1,768,334 2,199,590 460,117 345,226
General and administrative............... 1,157,754 1,189,560 360,239 324,857
---------- ---------- ----------- -----------
Total operating expenses................... 2,926,088 3,389,150 820,356 670,083
---------- ---------- ----------- -----------
Other income (expense)..................... 66,892 (27,443) 5,469 (30,867)
---------- ---------- ----------- -----------
Net loss................................... $(2,465,727) $(2,955,141) $ (688,956) $ (510,920)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
Pro forma basic and diluted net loss per
share (1)................................. $ (1.03) $ (1.16) $ (0.27) $ (0.20)
Shares used in computing pro forma basic
and diluted net loss per share (1)........ 2,404,218 2,545,113 2,527,400 2,555,399
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------- MARCH 31, 1998
--------------
(UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................................... $ 5,326 $ 47,326
Working deficit............................................................... (1,372,292) (1,737,763)
Total assets.................................................................. 550,841 749,423
Notes payable................................................................. 1,762,360 2,415,800
Accumulated deficit........................................................... (7,738,057) (8,248,977)
Deficit in stockholders' equity............................................... (2,148,806) (2,639,946)
</TABLE>
- ------------------------
(1) See "Pro Forma Net Loss Per Share" in Note 1 of "Notes to Financial
Statements."
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
COMPANY'S FINANCIAL STATEMENTS AND THE NOTES THERETO. THE DISCUSSION OF RESULTS,
CAUSES AND TRENDS SHOULD NOT BE CONSTRUED TO IMPLY ANY CONCLUSION THAT SUCH
RESULTS OR TRENDS WILL NECESSARILY CONTINUE IN THE FUTURE.
OVERVIEW
Since its inception in April 1993, the Company has devoted its resources to
research and development of plant-based biotechnology approaches to
environmental, nutritional and commercial protein markets, assembling a
management team, and raising capital. As an early stage company, the Company is
subject to all the risks inherent in establishing a new business, including the
risk that full-scale operations may not occur.
The Company had revenues of approximately $461,000 in 1997 and anticipates
increased revenues in 1998. The Company has been unprofitable since inception
and anticipates that it will continue to incur significant expenses as it
transitions to full-scale commercial operations. The Company has begun to shift
its emphasis from research and development of its phytoremediation products to
focus on the commercialization of this technology. With respect to its
nutritional supplements products, the Company intends to increase its research
and development expenditures over the next 12 months to include preparation and
completion of laboratory testing, commencement of certain toxicology studies and
nutritional trials and other research and development expenses. Historic
spending levels are not indicative of anticipated future spending levels because
the Company is entering a period in which it may increase spending to exploit
its technology, broaden the introduction of its products into the market, and
expand manufacturing capacity. For these reasons, the Company expects to
continue operating at a loss through at least 1998. There is no assurance that
the Company will ever achieve profitability or if achieved, that such
profitability can be sustained.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Grant revenue for the three months ended March 31, 1998 decreased by $5,489
or 4% to $116,942 from $122,431 for the three months ended March 31, 1997.
Commercial revenue for the three months ended March 31, 1998 increased by
$69,588 to $73,088 from $3,500 for the three months ended March 31, 1997 as the
Company transitioned to material commercial operations with an increase in
commercial sales efforts and growing industry acceptance of the Company's
technology. As a result of the foregoing factors, the Company's total revenue
for the three months ended March 31, 1998 increased by $64,099 or 51% to
$190,030 from $125,931 for the three months ended March 31, 1997.
Research and development expenses for the three months ended March 31, 1998
decreased $114,891 or 25%, to $345,226 from $460,117 for the three months ended
March 31, 1997. The decrease was primarily attributable to substantial
completion of development efforts for the Company's phytoremediation products.
The Company expects research and development expenses to increase in the future
and to be funded primarily from the proceeds of this offering. See "Use of
Proceeds" and "Business--Nutritional Supplements--Future Development."
General and administrative expenses for the three months ended March 31,
1998 decreased $35,382, or 10%, to $324,857 from $360,239 for the three months
ended March 31, 1997. The decrease was primarily attributable to cost controls
implemented by the Company in the period. General and administrative expenses
are expected to increase in future periods due to the hiring of additional sales
staff, expanded marketing efforts and increases in professional fees.
16
<PAGE>
As a result of the foregoing factors, including interest expenses of
$30,867, the Company's net loss for the three months ended March 31, 1998
decreased $178,036, or 26%, to $510,920 from $688,956 for the three months ended
March 31, 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Grant revenue for the year ended December 31, 1997 decreased by $54,636 or
17% to $270,936 from $325,572 for the year ended December 31, 1996. Commercial
revenue for the year ended December 31, 1997 increased by $122,619 or 181% to
$190,516 from $67,897 for the year ended December 31, 1996 reflecting the
commencement of material commercial operations. As a result of the foregoing
factors, the Company's total revenue for the year ended December 31, 1997
increased by $67,983 or 17% to $461,452 from $393,469 for the year ended
December 31, 1996.
Research and development expenses for the year ended December 31, 1997
increased $431,256, or 24%, to $2,199,590 from $1,768,334 for the year ended
December 31, 1996. The increase was primarily attributable to increased
development efforts related to the Company's nutritional supplement products.
The Company's development efforts with respect to its nutritional supplement
products included preparation and completion of laboratory testing, preparation
for certain bioavailability studies and nutritional trials.
General and administrative expenses for the year ended December 31, 1997
increased $31,806, or 3%, to $1,189,560 from $1,157,754 for the year ended
December 31, 1996. The increase was primarily attributable to the hiring of
additional personnel.
As a result of the foregoing factors, including interest expense of $33,989,
the Company's net loss for the year ended December 31, 1997 increased $489,414,
or 20%, to $2,955,141 from $2,465,727 for the year ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through the sale of equity
securities and the issuance of promissory notes. From inception (April 15, 1993)
through March 31, 1998, the Company raised net proceeds of approximately
$5,402,000 through private sales of equity securities and $1,867,000 from the
issuance of promissory notes. The Company had cash and cash equivalents of
$47,326 at March 31, 1998.
The Company has incurred net operating losses since its inception and
expects net operating losses for at least the rest of 1998 as it continues its
commercialization efforts. The Company will incur additional net operating
losses until it can generate sufficient revenue from product sales, licenses and
other fees to fund continuing operations.
While the Company has not had any operating profits, the Company believes
that its current capital resources and the proceeds of this offering will enable
it to maintain its current and planned operations for at least the next 12
months. However, there is no assurance that there will not be a change in the
Company's operations that would consume available resources more rapidly than
anticipated. The Company will need substantial funds to support its long term
product development programs. The Company has no established bank financing
arrangement and it is unlikely that the Company will establish a bank financing
arrangement in the foreseeable future. The Company's future capital requirements
will depend on many factors, including, without limitation, the progress of the
Company's commercialization efforts, research and development programs, the
progress and results of toxicology studies and nutritional trials, the timing
and costs involved in obtaining regulatory approvals and the costs of filing,
prosecuting, defending and enforcing patents.
17
<PAGE>
NET OPERATING LOSS AND RESEARCH AND DEVELOPMENT CREDIT CARRYFORWARDS
As of December 31, 1997 the Company had net operating loss ("NOL")
carryforwards of approximately $6,875,000 for federal and state income tax
reporting purposes. These loss carryforwards will expire beginning in 2000 for
state tax purposes and 2008 for federal tax purposes, if not utilized. The
Company also has research and development ("R&D") credit carryforwards of
approximately $119,000 as of December 31, 1997, which are available to reduce
federal income taxes, if any, through 2008. Changes in ownership, as defined in
Section 382 of the Internal Revenue Code of 1986, as amended, resulting from
prior sales of the Company's equity securities and the sale of the Units, could
limit the annual deductibility of a substantial portion of the NOL and R&D
credit carryforwards. See Note 10 of "Notes to Financial Statements."
18
<PAGE>
BUSINESS
OVERVIEW
The Company's core technology has evolved out of research initially
performed at Rutgers on the ability of select plants, under certain conditions,
to absorb very high concentrations of various metals, either in the stems and
leaves ("Phytoextraction") or in the roots ("Rhizofiltration") of the plant. All
plants absorb minerals from the soil or water in which they are growing, but the
ability to absorb very high concentrations of particular heavy metals, such as
lead or uranium, presents the opportunity to use this process for commercial
purposes. The Company was formed to develop the commercial applications of this
technology.
The emerging market for Phytotech's plant-based products and services in
processing and manufacturing presents an immediate opportunity for rapid
technical and commercial growth. Phytotech is exploring the applications of
plant biotechnology to create a unique, proprietary portfolio of products and
services. Phytotech's commercialization strategy is to capitalize on its
technologies through both the licensing and sale of superior products and
services. Phytotech currently offers waste cleanup ("bioremediation") services
using plants grown under carefully controlled conditions to absorb and dispose
of unwanted metals, such as lead or uranium, from toxic waste sites. It has also
developed and is beginning to market nutritionally important minerals absorbed
in plants and is beginning to develop technology for the production of high
value proteins in plants.
Phytotech's ultimate goal is to develop a portfolio of proprietary
technologies based on its expertise in plant physiology, soil science, agronomy,
molecular biology and related areas and to commercialize these technologies
internally or through licensing or joint venture relationships with other
companies. Phytotech expects to continue to perform and commission applied
research in areas where its management believes that there is good potential to
develop commercial products. The Company intends to protect its diverse
portfolio of proprietary technologies, demonstrate their commercial feasibility
and market these technologies either directly, where such sales do not require
skills or other assets outside of Phytotech's scope of business, or through
licensing, joint venture or other relationships with industry partners having
complementary services and technologies.
PHYTOREMEDIATION
TECHNOLOGY. The term phytoremediation refers to the use of plants to treat
contaminated soil and water. The Company has demonstrated the feasibility of
phytoremediation in a number of field trials and several commercial projects
which have led to the development of two distinct approaches to cleanup:
PHYTOEXTRACTION: the use of metal-accumulating plants to transport and
concentrate metals from the soil into the leaves and stems;
RHIZOFILTRATION: the use of plant roots to absorb, concentrate and
precipitate toxic metals from polluted water.
By screening and selection procedures focused on known, well characterized
crop species, Phytotech has identified superior metal-accumulating plant lines
for phytoextraction. The Company has shown that such plants can accumulate lead,
uranium, cesium, strontium, chromium, zinc, selenium, manganese, calcium, iron
and magnesium from soils into the above-ground, harvestable shoots.
Phytotech has investigated several approaches to increasing the
phytoextraction capacity of plants. The Company screened numerous plants in
order to isolate high-performing cultivars and identified soil
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amendments and other processes that increase the efficiency of phytoextraction.
The phytoextraction process currently employed by the Company is shown below:
THE PHYTOEXTRACTION PROCESS IN THE FIELD
[CHART]
In the Company's rhizofiltration process, hydroponically cultivated plants
remove heavy metals from water and concentrate them in the roots. Once the water
has been cleaned, the plants can be easily removed, replaced with fresh plants
at low cost, and the process continued. The plants containing heavy metals can
be disposed of or treated to recycle the metal. In addition to lead, plant roots
can effectively remove uranium, strontium, cesium and zinc to concentrations
within accepted state and federal water standards. The plants accumulate lead,
uranium, strontium, cesium and zinc at a rate sufficient to reduce the soil
concentrations to below regulatory standards within one to four growing seasons,
depending on the starting constituent concentration and depth of the
contaminated zone. The plants are grown to a density of approximately one ton
per acre per cropping to reach the uptake performance.
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The plants containing the metals can be dried, baled and disposed of as
hazardous waste in a permitted hazardous waste landfill. In some circumstances,
the metal containing plants can be smelted or chemically treated to remove the
metal for recycling, and the plant residue disposed of as non-hazardous waste.
TECHNOLOGY DEVELOPMENT. The initial theoretical work on phytoremediation
was performed by scientists at Rutgers. Rutgers and the Company executed a
Research Agreement on November 19, 1993 (as amended, the "Research Agreement")
to perform certain studies and field trials for the phytotreatment of heavy
metals. The initial term of the Research Agreement was for a three year period.
As currently extended, the Research Agreement expires August 13, 2002 but may be
extended, renewed, or amended by the mutual written agreement of both parties.
The Company agreed to reimburse Rutgers for all direct and indirect costs during
the initial three-year term, and has agreed to reimburse Rutgers for certain
additional costs up to $500,000. The Research Agreement may also be terminated
by either party without further financial obligation by giving at least ninety
(90) days written notice.
Legal title to intellectual property conceived or discovered in the
performance of the Project is vested in Rutgers, subject to the terms and
conditions of the Research Agreement and the Company's license rights described
below. Rutgers must promptly notify the Company once it has identified any
potentially valuable intellectual property conceived and/or made during the term
of the Research Agreement. If the Company directs that a patent application or
application for other intellectual property protection (i.e. copyrights, Plant
Variety Protection Certificates, and plant patents) be filed, Rutgers must
promptly prepare, file and prosecute such U.S. and foreign application(s) in
Rutgers' name. The Company will bear all costs incurred in connection with the
preparation, filing, prosecution and maintenance of U.S. and foreign
application(s) directed to such intellectual property. If the Company does not
request Rutgers to file for protection of intellectual property in any country,
or decides to discontinue the financial support of any patent prosecution,
Rutgers may pursue whatever course it deems necessary to protect its
intellectual property, and Rutgers will have no further obligation to the
Company to option or to license with regard to that country. The Company and
Rutgers executed an Exclusive License Agreement in September 1997. Under the
Exclusive License Agreement, Phytotech is obligated to pay a royalty to Rutgers
equal to 2 1/2% of revenues from projects employing the licensed technology
(subject to increases to 3.5% and 5% at annual revenue rates of $250 million and
$500 million, respectively) and is entitled to the exclusive use of the licensed
technology subject to certain non-commercial exceptions. The Exclusive License
Agreement covers the life of the patents comprising the technology, subject to
earlier termination for breach of the Exclusive License Agreement.
FIELD TRIALS. Phytotech has conducted field trials over the last three
years to demonstrate metal accumulation from soil and water on selected sites.
These trials have provided the Company with the opportunity to validate the
technology, educate the public and accrue on-site experience. Current field
trials are designed to improve the performance of phytoextraction with lead and
uranium.
In 1996 and 1997, Phytotech conducted a field trial on a lead-contaminated,
abandoned industrial site in Trenton, New Jersey. Six croppings of plants over
two growing seasons on this site have, to date, reduced the lead contamination
on 75% of the treated area to within New Jersey residential standards. This site
is the location of the Superfund Innovative Technology Evaluation Program the
Company is conducting in collaboration with the United States Environmental
Protection Agency ("EPA"). Phytoextraction results of lead from soil at the
Trenton test plot is shown below. The New Jersey residential standard for lead
in soil is 400 parts per million ("ppm") or less.
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TOTAL SOIL LEAD AT TRENTON SITE
[CHART]
A 30' x 160' site in Trenton, NJ.
Grey scale at right of figure represents ppm of lead.
MARKET OPPORTUNITY. The EPA and various state environmental agencies
determine the requirements for, and standards applicable to, the clean-up and
remediation of contaminated property in the United States. Published reports
estimate that there are more than 30,000 sites in the U.S. requiring hazardous
waste treatment services. The Company believes heavy metals comprise a
particularly problematic component of this market, because no permanent, low
cost solutions exist for remediation of metal contamination. Phytotech is
applying its phytoremediation technology to the cleanup of such metal
contaminated sites, a U.S. market estimated by the EPA to be $35 billion over
the next five years. Based on these assumptions, the Company believes that the
potential U.S. market for its technology in treating heavy metals as the sole
contaminant on a site is of an order of magnitude of approximately $100 million
per year. Expansion of this technology to the treatment of sites contaminated
with a mixture of heavy metals and hazardous organic compounds could increase
the market to approximately $600 million per year. As a practical matter,
Phytotech can expect to be a serious candidate for only a small fraction of
these markets. Phytotech's approach is to penetrate the existing market by
targeting sites that can currently only be treated using very costly removal and
burial technology and that offer attractive pricing and liability
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<PAGE>
management options. Phytotech's experience leads it to believe that its
technology is appropriate in approximately one out of four projects in which a
site analysis has been completed. However, there is no assurance that any
predetermined percentage of sites meeting Phytotech's target critera will in
fact be suitable sites for Phytotech's technology.
The emerging radioactive contamination treatment market, estimated at $250
billion over the next 70 years, represents a substantial domestic and
international opportunity. Radionuclides are elements whose nuclei are unstable
and transform into other elements through radioactive decay. This process
releases ionizing radiation that can damage or destroy living cells. A variety
of health risks, particularly various forms of cancer, are associated with
exposure to radionuclides. The Company believes that conventional technology
(excavation and landfill) is significantly more expensive than a plant-based
treatment. The Company is currently field testing and exploring the commercial
application of licenses for its technology to the remediation of these sites.
TARGET CUSTOMER GROUPS. The Company is targeting its marketing efforts
toward:
- Owners of contaminated sites in the private and public sectors identified
through lists published by the EPA, state and local environmental
regulatory agencies as well as through established relationships with
industry;
- Large companies with significant environmental liabilities, including many
Fortune 500 companies;
- Companies in industries known for toxic-metal pollution problems, such as
metal smelters, primary and secondary metal manufacturers, scrap metal
recyclers, paint manufacturers, battery recycling and production
facilities, chemical and petrochemical manufacturers, automobile
manufacturers, utility companies, transportation, the mining industry and
landfill operators.
COMMERCIALIZATION STATUS. Phytotech's phytoremediation technology has been
available on a commercial scale since mid-1997. The Company has demonstrated the
effectiveness of its technology in the field in several demonstration and pilot
scale programs since 1995. Phytotech has entered into several commercial
contracts for the 1998 phytoremediation season and has initiated clean-ups under
state and federal regulated programs for private and public sector clients.
To date, the Company has been awarded nine contracts or subcontracts for
feasibility-scale studies, a full-scale remediation under the EPA Region I
voluntary corrective action program, and two full-scale treatment projects.
Additionally, a major electric utility is evaluating the technology for use as a
process application to prevent the build-up of metals in its wastewater
sprayfields. Revenues for commercial phytoextraction technology projects totaled
$190,000 in 1997. Current funding commitments for work to be performed in 1998
under grants and contracts exceeds $600,000.
The Company has entered into a Cooperative Research and Development
Agreement ("CRADA") with the EPA to evaluate the efficacy of the Company's lead
removal phytoremediation technology at a contaminated site as part of the EPA's
Superfund Innovative Technology Evaluation ("SITE") program. The EPA's review is
expected to be concluded in 1998 and a report on the outcome of the study issued
thereafter. The Company believes that approval by the EPA would enhance the use
of the technology in the Superfund program.
The Company is pursuing both domestic and international markets through
licensing arrangements with third parties. The Company believes that the
European market is equal to, and growing more rapidly than, the U.S. market.
Because phytoremediation is based on established agricultural practices and an
easily transferable applications technology, all of the necessary materials can
be manufactured at or near the treatment site. The Company is expanding its
market overseas through marketing arrangements with UI USA, Inc., a subsidiary
of Credit Agricole. UI USA, Inc. has arranged a technology evaluation agreement
for European applications of the Company's technology between Phytotech and ATE,
Inc., a subsidiary of Rhone Poulenc. Additionally, Phytotech has recently been
awarded a contract for a rhizofiltration treatability study of arsenic and
uranium contaminated groundwater from the Ammon-Zarga basin in Jordan.
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COMPETITION. The diversity of technological approaches for hazardous waste
remediation has resulted in a fragmented industry. In 1996, the top 30
remediation companies reported combined treatment revenues of $4.5 billion from
U.S. projects, approximately half of the estimated $9 billion spent annually in
the U.S. for hazardous waste treatment. Standard options for the treatment of
soils contaminated with metals includes excavation and disposal in landfills,
stabilization or capping, which consists of covering the site with an
impermeable layer, such as asphalt or concrete. Each of these options does not
eliminate the liability, is costly and requires on-going operations and
maintenance. Phytotech's technology combines cost advantages with on-site
treatment or leaving cleaned soil in place. The high concentrations of metals in
Phytotech's plant residues may permit metal recycling, which could eliminate or
reduce the need for landfilling of hazardous wastes, and could eliminate the
client's liability, rather than simply moving it to another location. However,
Phytotech's technology may not be suitable in certain soil conditions, in areas
with relatively short growing seasons, where rapid remediation is required or
under other specific circumstances.
Several research institutions or government agencies, such as the United
States Department of Energy ("DOE"), the United States Department of Defense
("DOD"), and the United States Department of Agriculture ("USDA"), have
phytoremediation programs. The Company believes it has the largest and most
advanced soil phytoremediation business in the world.
The following table sets forth certain information relating to
phytoextraction and other principal technologies used in soil remediation:
<TABLE>
<CAPTION>
TIME
ESTIMATED REQUIRED
TYPE OF TREATMENT COST/YD(3) (MONTHS)
<S> <C> <C>
Chemical Fixation $90-200 6-9
Landfilling $100-400 6-9
Soil Leaching $250-500 12
Phytoextraction $20-80 12-60
Source: Adapted from M.A. Levin and M.A. Gealt,
1993. Biotreatment of Industrial and Hazardous
Waste, McGraw-Hill, New York, p. 4.
</TABLE>
Many other factors affect the relative advantage of the various treatment
alternatives, including the particular characteristics of each site. The Company
believes that each of the above-listed treatment methods may be suitable for
certain sites and not for others.
Competitive methods of soil treatment are primarily practiced by engineering
and remediation services companies that offer excavation and off-site
landfilling of contaminated soil as hazardous waste. This approach denudes the
site of all contaminated topsoil and is cost prohibitive for large areas.
Landfills charge unloading (tipping) fees of $100-400 per ton. This work is
highly price competitive with low profit margins. The Company believes that many
heavy metals-contaminated sites are best remediated by a combination of
phytoextraction and conventional excavation and landfill. Accordingly,
Phytotech's strategy is to grant technology licenses and team with a number of
these contractors. The use of phytoremediation may provide the opportunity for
many sites to move forward that were previously thought to be cost prohibitive
and could allow municipalities to address more contaminated sites at reduced
cost.
NUTRITIONAL SUPPLEMENTS
TECHNOLOGY. Phytotech's original discoveries of the ability of selected
plants to take up high levels of target metals led the Company to evaluate
plants that would accumulate minerals that are essential trace nutrients. In
order for a plant to be a practical source of mineral supplements, it must be a
recognized, edible species and capable of accumulating large amounts of minerals
in its edible parts. Mineral and vitamin supplements have traditionally been
available as capsules or tablets. The Company has developed plants containing
targeted minerals in such concentrations that the minimum daily adult
requirements can be provided in a single tablet or capsule by reducing the plant
itself to powder form and encapsulating the powder. The plant is cultivated
under controlled conditions so that the metal uptake is specific and the
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<PAGE>
plant does not also accumulate undesirable minerals such as lead, arsenic or
cadmium. The Company and outside collaborators have identified edible plants and
cultivation conditions capable of producing the required concentrations of the
minerals iron, zinc, manganese, selenium and chromium in the edible parts of the
plants.
The following table provides certain information with respect to the mineral
content of the Company's selected plants as compared to several "mineral rich"
vegetables:
<TABLE>
<CAPTION>
MINERAL CONTENT, MG/G DRY BIOMASS
PLANT FE ZN MN SE CR
<S> <C> <C> <C> <C> <C>
Spinach 0.9 0.07 0.05 -- < .01
Romaine Lettuce 0.9 0.07 0.1 -- < .01
Red Beet 0.1 0.07 0.01 -- < .01
Beet Greens 0.3 0.05 0.1 -- < .01
Green Beans 0.1 0.03 0.02 -- < .01
Broccoli 0.1 0.04 0.02 -- < .01
PHYTOTECH'S CRUCIFERS 30 20 2 1.5 5
Recommended Daily Allowance
("RDA") or therapeutic dose:
mg/day 15 15 2 0.2 0.2
</TABLE>
BIOAVAILABILITY. Mineral supplements are available to the consumer as
organic or inorganic salts of metals manufactured primarily by the chemical
industry. Minerals in these forms are difficult for the body to absorb and use.
Some minerals, such as selenium and chromium, are also offered as a complex with
yeast, which makes them easier for the body to absorb. The bioavailability, or
amount actually absorbed by the body, of minerals in supplements has been a
long-standing concern, and forms of the minerals that are shown through testing
to be more bioavailable are highly valued by consumers. The Company believes
that its plant-based minerals may have high bioavailability because the minerals
are in a form that is biologically available to the plants and therefore may be
similarly available to other organisms. Bioavailability is an important property
since the value of the mineral is wasted if it is not taken up and absorbed by
the body. The Company has arranged for bioavailability testing with outside
laboratories and also conducted its own testing. Preliminary testing of the
Company's plants in its laboratories has indicated that its plant-based sources
of iron, zinc, chromium and selenium are among the most bioavailable forms of
these minerals when compared with other commercially available supplements.
The Company has executed a Cooperative Research and Development Agreements
(CRADA) with the USDA laboratory at Cornell University, Ithaca, New York and is
negotiating a similar agreement with the USDA nutritional lab at The Presidio,
San Francisco focused on the measurement of mineral bioavailability in the
Company's plants. The Cornell lab has proposed to evaluate bioavailability IN
VITRO using a method based on transformed human intestinal monolayer cells. The
Presidio lab plans to conduct human nutritional studies with volunteers. The
Company expects these studies to be completed in 1998.
SPECIATION. The Company believes that in order to establish a solid
scientific basis for the nutritional value of its plant-based supplements, it is
important to identify the speciation, or chemical form of the minerals in the
plants. One of the Company's scientific consultants has begun to characterize
the speciation of minerals in fresh and dried plants. The speciation of selenium
has been completed, and the results of this work are expected to be published in
1998. The speciation of chromium has been partially characterized, and the
Company anticipates its consultants will characterize all of the minerals taken
up by its plants.
FUTURE DEVELOPMENT. Selenium accumulation by plants in the crucifer family,
of which broccoli and several of the Company's plants are members, combines the
antioxidant and anticarcinogenic aspects of
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<PAGE>
selenium and organoselenium compounds with natural organic antioxidants found in
cruciferous plants. Cruciferous plants and plant extracts are currently sold as
nutritional supplements by others because these plants are said to contain
particular compounds that have been linked to improved immune functions. The
Company believes that organic antioxidants are also present in its plants and is
developing the capability to identify and measure these compounds. The Company
is planning to measure the antioxidative effect of organoselenium enriched
supplements. Phytotech has recently submitted a proposal in collaboration with
two academic research institutions to the National Cancer Institute to evaluate
the antioxidant and anticarcinogenic properties of its selenium accumulating
cruciferous plants.
MARKET OPPORTUNITY. Recent estimates by THE VITAMIN RETAILER place the
annual sales of nutritional supplements worldwide at $20 billion in 1996.
According to a 1996 industry survey, the U.S. market totaled $6.5 billion,
generated through sales at 38,000 retail outlets and with an annual growth rate
of 15%. Vitamin and mineral supplements accounted for 49% of retail sales, and
single mineral supplements comprised 10% of such sales.
The Company's approach to the development of its nutritional supplements
includes carefully controlled cultivation conditions, characterized
bioavailability and quantified chemical forms of the minerals in its plants at
consistent levels and quality standards. The Company will seek to establish the
following characteristics for its botanical mineral supplement products:
- Batch to batch consistency;
- Precise and carefully controlled quantities of active ingredients;
- Standardized quality;
- Solid scientific basis for the benefits of the supplements; and
- Patented production methods.
The Company has identified five nutritionally important minerals that can be
accumulated in its select plant cultivars at sufficient concentrations to supply
100% of the RDA or recommended daily intake of these supplements. Other mineral
and organic supplements are being evaluated by the Company as priorities allow.
The minerals under development include:
SELENIUM. Selenium is an essential trace mineral and is present in all the
tissues of the body as an activating component of the enzyme glutathione
peroxidase, which has been shown to protect cells from free radical damage.
Intake of 50-70 mg ("micrograms") per day is recommended for good health, but
even this small amount of selenium can be lacking in many diets. Recently,
selenium from a yeast source has been linked in a study by the Arizona Cancer
Center to a reduction in the incidence of and mortality from cancers of the
colon, prostate and lung. The administered dose of selenium in this study was
relatively high compared to multivitamins which typically contain 50 mg
selenium.
CHROMIUM. Chromium is primarily involved in the metabolism of glucose and
the synthesis of proteins. Because of its role in insulin production and glucose
regulation, chromium depletion has been implicated in hypercholesterolemia and
may play a role in the control of glucose levels. Chromium picolinate is
promoted by others as an important part of several weight-loss products, and
some studies support the use of dietary chromium as a weight loss aid.
IRON. Every cell in the body contains and requires iron. When its supply is
low, diverse symptoms and disorders may result. Iron is required in relatively
high doses to maintain proper nutrition. Of all the nutrient allowances, the
allowance for iron is the most difficult to obtain from dietary sources, which
is why iron is the most common single mineral deficiency in the world.
The bioavailability of iron in supplements has historically been a problem.
The most commonly prescribed iron supplements for women of child-bearing years
are poorly absorbed and can cause
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<PAGE>
gastrointestinal upset. Phytotech has preliminary data indicating that the iron
in its hyperaccumulating crucifers may be more bioavailable than other
commercially available supplements. The Company is planning a human nutritional
trial in collaboration with the USDA to document the benefits of PHYTOIRON-TM-
as a "natural" iron supplement.
ZINC. Zinc is an essential trace mineral that is required in relatively
high doses and it is among the best selling individual trace minerals in the
health food industry. Zinc is an essential component of enzymes for various
metabolic processes. Daily intake of zinc lozenges containing 13 mg of zinc has
also been reported to ameliorate the symptoms of the common cold. Despite the
essential nature of zinc, the human body does not store this mineral, so the
body is dependent upon a continual external supply.
MANGANESE. Manganese is best known as a component in various enzymes,
including those involved in the metabolism of protein, lipids and carbohydrates.
Manganese is poorly absorbed by the body and is scare in processed foods.
Manganese does not have an RDA, but is included in a number of mineral
supplement products. Manganese is promoted by nutritional supplement suppliers
as having a role as an antioxidant and in maintaining healthy bones.
COMMERCIALIZATION STATUS AND PROSPECTS. The Company has completed pilot
scale studies for iron, zinc, selenium and chromium uptake by its plants. The
Company commenced commercial scale production of selenium and chromium
containing plants in the first quarter of 1998. The Company expects to proceed
with the commercial production of iron, zinc and manganese nutritional
supplements as resources permit. The Company is also evaluating several other
nutritional minerals as candidates for a plant-based source. Phytotech has
entered into a marketing arrangement with Arterio, Inc., a distributor of
nutritional supplements that markets products under the brand names Ecological
Formulas and Cardiovascular Research, to market its selenium and chromium
supplements and antioxidant skin care cream. Phytotech contracts with an outside
greenhouse contractor to produce bulk product which is then shipped to a Food
and Drug Administration ("FDA") approved manufacturing facility for tableting,
encapsulating, packaging and labeling. Ecological Formulas provides marketing,
distribution and sales coordination of the plant material as nutritional
supplements through its own sales organization and also to other distributors
and marketers of nutritional supplements.
Phytotech may also choose to sell bulk tablets or capsules to companies
serving the nutritional supplement industry through the following established
distribution channels:
MAIL ORDER. These customers are reached through print and electronic
advertising, including through sites on the internet. Several companies
specialize in direct sales to consumers through mail order advertising.
MULTILEVEL/NETWORK MARKETING. These organizations, such as Amway, Shaklee,
Celltech and Herbalife sell products that generally cannot be obtained in retail
stores.
INDEPENDENT RETAILERS OF NUTRITIONAL SUPPLEMENTS. These retailers include
privately owned health food stores, of which approximately 7,000 existed in the
U.S. in 1996. In addition, nutritional supplements are sold widely in
pharmacies, wholesale outlets and clubs and supermarkets.
OTHER DISTRIBUTORS. These distributors could include private label
wholesalers such as General Nutrition, Nature's Sunshine Products, Weider
Nutrition, Twinlabs, Nature's Bounty, Rexall Sundown, and also fitness centers,
health practitioners and dispensing nutritionists.
COMPETITION. The nutritional supplement industry is fragmented and includes
several large manufacturers along with many smaller producers and distributors.
While a few of the distributors are vertically integrated, most distributors
contract with manufacturers for finished products.
A large number of manufacturers produce mineral supplements for all
marketing outlets. Many of these mineral supplements are inexpensive to
manufacture, but have limited mineral bioavailability, which
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<PAGE>
can reduce their effectiveness. To attempt to address this problem, advanced
formulas containing chelated or organically complexed mineral supplements have
been introduced to the market during the last few years. As far as the Company
is aware, no other company offers plant-based nutritional supplements as a
source of dietary minerals, because plants ordinarily do not contain sufficient
quantities of minerals to be effective supplements.
COMMERCIAL PROTEIN PRODUCTION
TECHNOLOGY. The Company has received funding from the USDA under a Small
Business Innovative Research grant to develop transgenic plants, which are
plants capable of making proteins based on genes that are not native to the
plant, and is expanding this effort into a core technology for the expression of
commercially useful proteins in crop plants. Phytotech and its outside
collaborators believe they can develop transgenic crop plants to produce
valuable proteins for selected niche markets at a significant cost savings over
current sources.
Recent developments in the application of plant molecular biology have made
it easier to develop transgenic plants that can inexpensively synthesize
desirable protein products. Applications of these and other methods to create
transgenic plants capable of producing valuable commercial proteins could offer
multiple, significant advantages over conventional fermentation and cell culture
techniques. These advantages could include lower production costs, easier
production scale-up and improved safety characteristics.
Historically, it has been difficult to obtain stable levels of foreign
proteins in plants. In addition, certain plant characteristics complicate
protein recovery and purification processes. Rapid, large scale clonal
propagation of many plant species is now feasible. Evidence of stable, high
level expression of a bacterial gene in the leaves, roots and tubers of
transgenic potato plants has been published by the Company's collaborators.
These results suggest that this core technology can be developed to produce
large amounts of selected proteins in targeted organs of crop plants. Further
work has also shown that foreign proteins can be stably produced and the protein
accumulated in plant seeds.
The Company believes production of proteins through transgenic plants offers
the potential for substantial cost savings, because novel genetic engineering
methods may allow the initial low cost advantage to be carried downstream
through purification, yield and recovery. Certain safety issues may also favor a
plant or plant cell culture based approach. A plant-based approach eliminates
the presence and risk of mammalian infectious agents. Proteins, such as heparin,
gelatin, collagen, insulin, as well as drug manufacturing proteins, such as
brain-heart infusion, bovine serum albumin, and fetal calf serum, all have
mammalian sources. There is a growing concern that proteins derived from
mammalian sources present the possibility of transmission of retroviruses and
other infectious agents. The tests for these infectious agents are complex and
their inactivation or removal is difficult. Phytotech and its collaborators are
presently engaged in developing plant-based proteins lacking these infectious
agents.
MARKET OPPORTUNITY. The potential market for commercial proteins from
transgenic plants is estimated by the Company to be at least $300 million
annually. Collagen is an example of a protein that may present a market
opportunity for plant-based manufacture. Collagen has both therapeutic and
cosmetic applications. Derivatized bovine collagen is the current source for
cosmetic use, plastic surgery, wound and bone healing, and wrinkle removal by
transdermal injection and had worldwide sales in 1997 in excess of $70 million.
Human collagen produced in a transgenic plant or plant organs might present
advantages over the bovine material. The stringent purification and analytical
procedures required for therapeutic use of bovine collagen could be reduced with
a plant-derived material. The absence of potential or perceived mammalian
pathogens in plant-derived collagen would simplify purification, testing and
validation procedures and could reduce manufacturing costs. Approximately 3% of
the human population is allergic to derivatized bovine collagen. A plant based
collagen source may eliminate this problem.
COMMERCIALIZATION STATUS. Phytotech has engaged in preliminary work toward
the development and commercialization of efficient, cost effective methods of
protein production using transgenic plants. The
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<PAGE>
Company is seeking to augment its internal efforts by licensing advanced
technology. Contingent on the closing of this offering, Phytotech has negotiated
an exclusive, worldwide license with an internationally recognized research
organization to use certain proprietary technology for the cost effective
production and commercialization of selected proteins in transgenic plants.
If the preliminary development work in which the Company is engaged is
successful, the Company intends to use these transgenic plants to manufacture a
series of commercial proteins at significantly reduced cost. The Company plans
to cultivate, harvest and analyze the transgenic plants. Recovery and
purification of the protein product will be performed by outside manufacturers.
Phytotech intends primarily to provide the purified proteins as a bulk product
for resale. For selected products, the Company may market directly to consumers.
Production of proteins using transgenic plants may offer manufacturing cost
advantages for products having moderate to high unit prices and markets in
quantities of tens to thousands of kilograms per year. These include proteins
that have dietary, catalytic or cosmetic applications with expired or dated
intellectual property protection. Some proteins are good potential targets
because both cost and perceived safety issues favor a plant-based approach.
CUSTOMER GROUPS. Phytotech plans to manufacture transgenic plants and
market plant-based proteins with moderate to high value that address niche
markets of $5 to $100 million in annual sales. Potential customer groups for the
Company's planned commercial protein products include:
- Cosmetics formulators for proteins such as collagen and elastin;
- Specialty food companies that use large quantities of proteins such as
rennet in cheese making, pectinases and amylases in food processing and
brewing and malting enzymes;
- Companies producing protein sweeteners;
- Grain processing companies that use enzymes for starch liquefaction and
saccharification; and
- Textile companies that use enzymes for desizing and fabric finishing.
COMPETITION. Large companies with extensive experience and research
programs in transgenic plants include Monsanto, DuPont, Novartis, DowElanco, and
Pioneer. The research programs at these companies are primarily focused on
applications associated with large markets, such as pesticide-containing and
herbicide-resistant transgenic crop plants grown for traditional uses. Mid-sized
firms such as DNA Plant Technology also focus on producing transgenic plants
that appeal to mass markets. Some small, privately held companies such as
BioSource and Prodigene have research programs involving the production of high
value proteins in transgenic plants, which may be directly competitive with
Phytotech's product development plans.
TECHNOLOGY DEVELOPMENT
Phytotech is developing new technologies using its own resources and
expertise and by entering into cooperative arrangements with other
organizations. Funding for new technology development has come both from sales
of the Company's equity securities and promissory notes and from grants received
by the Company.
RESEARCH GRANT FUNDING. Some of the Company's research and development
activity is partially or fully underwritten by outside competitive grant
funding. This support validates the quality and helps defray the costs of
research and development efforts. The Company will continue to pursue additional
grants and contracts and certain Company personnel are actively writing grant
proposals. The Company anticipates that federal and state grants will continue
to defray a portion of the development and commercialization costs. Since
inception, the Company has completed seven funded projects totaling $811,000,
has five
29
<PAGE>
ongoing projects with approximately $950,000 in total grant support and has five
proposals pending to various states and federal agencies.
CONTRACTS AND TEAMING AGREEMENTS. The Company has entered into and is
negotiating teaming and technology development agreements with public and
private organizations to further the commercial use of its products and
services. The Company has executed joint development and teaming agreements with
ATE, Inc. in France through its representative UI USA, Inc., and various
environmental consultants. The Company is negotiating similar agreements with
others to market its services.
PATENTS
Phytotech has established an aggressive patent program to protect its
technology and intellectual property. In all countries it deems appropriate, it
holds the exclusive rights to inventions disclosed in three issued United States
patents covering the metal accumulating technologies. Exclusive rights to these
patents have been assigned to the Company. The U.S. government retains certain
rights to some issued patents, including a royalty-free, non-exclusive license.
The Company does not expect the retention of these rights to impact materially
on its patent protection or exclusivity in commercialization.
The Company believes that the three issued patents will enable it to
establish an advantage position on the use of terrestrial plants for the
accumulation of metals. Phytotech continues to enhance these scientific
developments by supporting outside research and through work in the Company's
own laboratory. Three additional patent applications have been filed by Rutgers
covering improvements and new concepts arising from the supported research. A
Notification of Allowance has been issued for one of these patent applications.
The Company has rights to exclusive, worldwide licenses to the inventions
covered by these applications. Six U.S. patent applications arising from
discoveries owned solely by the Company have also been filed. Notifications of
Allowance have been issued for two of these patent applications. The Company
expects that future improvements and discoveries will be covered by additional
patent applications.
GOVERNMENT REGULATION
The Company's products and services are subject to extensive regulation by
various governmental authorities. The Company's products may be regulated by
EPA, FDA and USDA and by various state or foreign regulatory bodies. The effect
of government regulation may be to delay marketing of new products for a
considerable or indefinite period of time, to impose costly procedures upon the
Company's activities and to provide an advantage to companies that compete with
the Company.
REGULATION OF PHYTOREMEDIATION
The Company does not anticipate that it will be subject to the Resource
Conservation and Recovery Act ("RCRA"), as amended, as a "Treatment, Storage or
Disposal Facility" (a "TSD" facility). However, certain treatment systems that
the Company may elect to operate may require it or its customers to obtain a TSD
facility permit from the EPA (or a state authorized to run its own RCRA program)
before placing treatment systems into operation. Obtaining a TSD facility permit
can be a time-consuming and expensive process, requiring considerable
documentation, including process information, waste specifications and
information regarding compliance assessments, security procedures, emergency
plans and insurance. The TSD facility permitting process also requires local
public hearings. Where there is local public opposition to the siting of a
facility, obtaining a TSD facility permit can take more than a year, and in some
cases up to two to four years, if the permit is granted at all. There has been
public concern regarding the use of genetically modified plants in the
environment and there could be public opposition to the use of genetically
modified plants for toxic metal remediation. Delays in obtaining a TSD facility
permit or any other required permits could affect the ability of the Company to
receive revenues from the use or sales of its products, once developed, and such
delays could materially adversely affect the financial condition of
30
<PAGE>
the Company given its limited financial resources. The Company's products may
also be subject to other environmental regulations regarding their operation,
including mandatory removal levels and prohibitions on the release of certain
levels of hazardous wastes in the exit stream of the Company's systems.
Additionally, other permits may be required from the EPA and various state
and local agencies in connection with the use or operation of the Company's
products. The federal and state environmental laws, rules and regulations
regulating the Company's current or proposed business operation are complex,
subject to varying interpretations and are rapidly changing and evolving.
Compliance with these laws, rules and regulations by the Company is expected to
be time-consuming and expensive. Any failure by the Company to comply with the
requirements of these environmental laws regulating its activities, even if
unintentional, could give rise to liabilities, penalties or fines that could
materially adversely affect the financial condition of the Company and could
adversely affect its reputation in the industry.
REGULATION OF NUTRITIONAL SUPPLEMENTS
In the United States as well as in any foreign markets in which the Company
may sell its products, the Company will be subject to regulations regarding (i)
the formulation, manufacture, packaging, labeling, distribution, importation,
sale and storage of the Company's products, and (ii) product claims and
advertising.
The formulation, manufacture, packaging, storing, labeling, advertising,
distribution and sale of the Company's products are subject to regulation by
federal agencies, including the FDA, the Federal Trade Commission ("FTC"), the
Consumer Product Safety Commission ("CPSC"), the USDA, the EPA and the United
States Postal Service. The Company's activities are also regulated by various
agencies of the states, localities and foreign countries in which the Company's
products may be manufactured, distributed and sold. The FDA, in particular,
regulates the formulation, manufacture and labeling of weight management
products, dietary supplements, and cosmetics and skin care products, such as
those expected to be manufactured and sold by the Company. FDA regulations
require the Company and its suppliers to meet relevant regulatory good
manufacturing practices for the preparation, packaging and storage of these
products. Good manufacturing practices for dietary supplements have yet to be
promulgated but are expected to be proposed.
A portion of the Company's planned sales will come from products that are
classified as dietary supplements under the Food, Drug and Cosmetic Act
("FDCA"). The labeling requirements for dietary supplements have not been
clearly established. In December 1995, the FDA issued proposed regulations which
govern the labeling of dietary supplements, including how to declare nutritional
information, how to make permissible "statements of nutritional support" and
when additional, defined terminology may be used on dietary supplements. As a
manufacturer of products that are ingested by consumers, the Company is subject
to the risk that one or more of the ingredients in its products may become the
subject of adverse regulatory action.
In foreign markets, prior to commencing operations and prior to making or
permitting sales of its products, the Company may be required to obtain an
approval, license or certification from the country's ministry of health or
comparable agency. Prior to entering a new market in which a formal approval,
license or certificate is required, the Company will be required to work
extensively with local authorities to obtain the requisite approvals. The
approval process generally requires the Company to present each product and
product ingredient to appropriate regulators and, in some instances, arrange for
testing of products by local technicians for ingredient analysis. Such approvals
may be conditioned on reformulation of the Company's products or may be
unavailable with respect to certain products or ingredients.
The FTC and certain states regulate advertising, product claims, and other
consumer matters, including advertising of the Company's products. All
advertising, promotional and solicitation materials used by distributors must be
approved by the Company prior to use. The FTC has in the past several years
instituted enforcement actions against several dietary supplement companies for
false and misleading
31
<PAGE>
advertising of certain products. The Company also is subject to the risk of
claims by distributors and customers who may file actions on their own behalf,
as a class or otherwise, and may file complaints with the FTC or state or local
consumer affairs offices. Proceedings resulting from these complaints may result
in significant defense costs, settlement payments or judgments and could have a
material adverse effect on the Company.
REGULATION OF PLANT-BASED PROTEINS
TRANSGENIC PLANTS. The field scale cultivation of new plants constructed
with recombinant DNA techniques requires prior notification to the USDA.
Large-scale growth of transgenic plants requires prior approval by the USDA.
Unless there is some specific concern, approval is usually granted. Issues of
concern include genetic modifications that involve antibiotic resistance,
weediness or invasiveness, and the potential for genetic transfer to other
species.
The manufacture and sale of nutritional and cosmetic products from
transgenic plants are regulated as products derived from naturally occurring
plants. See "Regulation of Nutritional Supplements" in this section.
The use of products such as human collagen in an injectable form requires
approval from the FDA including Phase I, II and III clinical trials. This
approval process takes 7-12 years and for a new drug can cost in excess of $100
million. Because a form of collagen is already in pharmaceutical use, testing
and approval may be less time-consuming and costly than it would otherwise be.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
PERSONNEL
The Company currently has eighteen employees, including three administrative
employees, four marketing personnel, four scientists, one engineer and six
laboratory researchers. The Company also has several non-employee consultants.
Seven employees have advanced degrees. None of the Company's employees is
covered by collective bargaining agreements and management considers relations
with its employees to be good.
FACILITIES
The Company has a five-year lease expiring February 2000 on approximately
11,000 square feet of laboratory and office space located at 1 Deer Park Drive,
Monmouth Junction, New Jersey. This laboratory and office space is anticipated
to be sufficient to meet the Company's needs for at least the next two years.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The following table lists the executive officers, certain key employees and
directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- -----------------------------------------------------
<S> <C> <C>
Burt D. Ensley(1)......................... 49 President and CEO, Director
Cindy Orser............................... 41 Director of Scientific Affairs
Jack D. Frost............................. 41 Vice President of Business Development
Alexander Baltovski....................... 39 Chief Financial Officer
Philip J. Whitcome........................ 49 Chairman of the Board, Director
Laura R. Meagher.......................... 45 Director
Ilya Raskin............................... 42 Director
Abraham H. Nechemie(1).................... 74 Director
Schneur Z. Genack(1)...................... 57 Director
Eric K. Johnson........................... 38 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee.
BURT ENSLEY, PH.D. has served as President and Chief Executive Officer and
Director of the Company since its inception in April 1993. From 1989 through
1992, Dr. Ensley served as Director of Advanced Technology at Envirogen, Inc., a
microbial based bioremediation company. From 1981 to 1989, Dr. Ensley was the
head of the Specialty Chemicals Group at Amgen, Inc. Dr. Ensley received a B.S.
and M.S. in Biology from the University of New Mexico in 1974 and 1976,
respectively, and a Ph.D. in Microbiology from the University of Georgia in
1979. Since 1996, Dr. Ensley has served on the National Science Foundation's
Advisory Board.
CINDY ORSER, PH.D. has served as a consultant in the capacity of the
Director of Scientific Affairs of the Company since September 1996. From 1993
through 1995, Dr. Orser was Group Leader at Xenometrix, Inc., an in vitro
molecular toxicology biotechnology company in Boulder, Colorado. She received
her Ph.D. from the University of California at Berkeley in 1985 in Plant
Pathology and Genetics. Dr. Orser received her B.S. in Botany and M.S. in Plant
Pathology from Montana State University in 1978 and 1980, respectively.
JACK D. FROST has been the Vice President of Business Development since
November 1997. Mr. Frost has 16 years of scientific, business development and
management experience. He served as the Vice President of Industrial Business
Development for Blasland, Bouck & Lee, Inc. from 1993 to 1997 and Vice President
of Business Development for ICF Kaiser Engineers from 1985 to 1993. He earned
his B.S. in Soil Science in 1979 and M.S. in Agronomy in 1981 from West Virginia
University.
ALEXANDER BALTOVSKI has served as the Chief Financial Officer of the Company
since November 1997. Mr. Baltovski has nine years accounting experience. From
1993 to 1997, Mr. Baltovski served as a Financial Operations Principal and Chief
Financial Officer of several NASD member securities firms, most recently Joseph,
Dillon and Company, Inc., where he was responsible for regulatory reporting,
operations, accounting, and various underwriting and market making activities.
Mr. Baltovski received a B.S. degree in Accounting from Wagner College in 1981.
PHILIP J. WHITCOME, PH.D. has served as Chairman of the Board of Directors
since May 1994 and as a Director of the Company since October 1993. Dr. Whitcome
devotes only a portion of his time to the business of the Company. Dr. Whitcome
has served on the Board of Directors of Avigen, Inc. since December 1992 and has
served as its Chairman since April 1995. From July 1988 to December 1993, he
served as President and Chief Executive Officer of Neurogen Corporation, a
biotechnology company involved in the field of neuroscience. Dr. Whitcome holds
a Ph.D. in Molecular Biology from the
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<PAGE>
University of California at Los Angeles, an M.B.A. from the Wharton School of
the University of
Pennsylvania and a B.S. degree in Physics from Providence College. Dr. Whitcome
also currently serves on the Board of Directors of Premier Research Worldwide, a
contract research organization.
LAURA R. MEAGHER, PH.D. has served as a Director of the Company since its
inception in April 1993. Dr. Meagher has experience in biotechnology policy and
regulation, technology transfer and economic development. Dr. Meagher is
currently Associate Dean, Cook College, Rutgers. Since 1987, Dr. Meagher has
been senior partner of Technology Development Group. After receiving her Ph.D.
in Ecology from Duke University in 1979, Dr. Meagher helped to plan and develop
the North Carolina Biotechnology Center.
ILYA RASKIN, PH.D. is the scientific founder of the Company and has served
as a Director of the Company since its inception in April 1993. Dr. Raskin has
been on the faculty of the AgBiotech Center at Rutgers since 1989. From 1984 to
1989, Dr. Raskin worked at Shell Agricultural Chemical Company which merged with
DuPont Co. in 1986. Dr. Raskin received his B.S. degree from Brandeis
University. He received his Ph.D. in 1984 from Michigan State University.
ABRAHAM H. NECHEMIE has served as a Director of the Company since November
1995. Mr. Nechemie has over 40 years of experience in the financial services and
management business. He also serves on the Board of Directors of
Electro-Catheter Corporation, a publicly held New Jersey company. Mr. Nechemie
received a B.S. degree in Accounting from Rutgers in 1951 and is a retired
Certified Public Accountant.
SCHNEUR Z. GENACK has served as Director of the Company since August 1996.
Mr. Genack also currently serves on the Board of Directors of EnviroGuard, Inc.,
Industrial Services Technology, Inc., and New Options on Waste and Ponderosa
Fibres of Pennsylvania. Since 1987 Mr. Genack has been a Member of the General
Partnership of the Environmental Venture Fund, L.P., and since 1992 has been a
Member of the General Partner of Environmental Private Equity Fund II, L.P. He
is also a partner in the law firm of Felsen, Genack Associates. Mr. Genack holds
a B.S. from Yeshiva University and a J.D. from New York University School of
Law.
ERIC K. JOHNSON has served as a Director of the Company since October 1997.
Mr. Johnson is Executive Vice President, Investment Banking, of Trautman Kramer
and Company, Inc. He served as a corporate finance officer at Bank of New York.
His initial entry into investment banking was at Ladenburg, Thalmann. He has a
B.A. and an M.B.A. from New York University and additionally, he received
graduate financial education from the Graduate School of Business at Columbia
University and the Darden School of Business at the University of Virginia.
SCIENTIFIC CONSULTANTS AND ADVISORS
The scope of the Company's research and development effort is enhanced
through its scientific consultants. They represent a valuable resource which
serves as an important link between the Company's efforts and those of leading
academic laboratories. The Company has agreements with all of its consultants
which contain provisions that protect confidential information, proprietary data
and intellectual property of the Company. All rights and title to intellectual
property conceived or discovered in the performance of any research conducted by
a consultant while performing his specific duties on behalf of the Company
belongs to the Company.
DR. YORAM KAPULNIK (Head, Rhizospheric Biology Group, The Volcani Center, Bet
Dagan, Israel). One of the inventors of rhizofiltration technology, Dr. Kapulnik
has broad expertise in rhizospheric microbiology, molecular biology and root
physiology.
DR. ALAN J. M. BAKER (Lecturer, The University of Sheffield, UK). Dr. Baker is a
specialist in the biology and ecology of metal-accumulating plants with
expertise in conducting field trials on metal remediation with plants.
34
<PAGE>
DR. ILAN CHET (Vice President for Research and Development of the Hebrew
University of Jerusalem, Israel). Dr. Chet is an expert in rhizospheric biology
and a recipient of numerous international scientific awards and honors.
DR. ROBERT TUCKER (Director of the Ecopolicy Center, Cook College, Rutgers
University). Prior to joining Rutgers, he spent 18 years with the New Jersey
Department of Environmental Protection, including nine years as the Director of
the Division of Science and Research.
DR. GAD GALILI (Professor, Department of Plant Genetics, The Weizmann Institute
of Science, Rehovot, Israel). Dr. Galili is an expert in plant molecular biology
and expression systems in transgenic plants. He received the Bronfman Chair of
Plant Science in 1994.
COMMITTEES
In May 1998, the Board of Directors established an Audit Committee, and
appointed Ms. Meagher and Messrs. Genack and Nechemie as members. The function
of the Audit Committee is to review and consult periodically with the Company's
management and independent public accountants on financial matters, including
the Company's financial statements and internal financial controls and
procedures. There have been no meetings of the Audit Committee.
COMPENSATION OF DIRECTORS
Except as described below, members of the Board of Directors who are not
employees of the Company have not, to date, received any compensation. Directors
are entitled to reimbursement of reasonable expenses incurred in attending such
meetings. In addition, directors are eligible to receive stock options under the
Company's Stock Option Plan.
On November 6, 1995, Mr. Nechemie was appointed to the Board of Directors of
the Company. Mr. Nechemie received options to purchase 5,556 shares of
Non-Voting Common Stock at a purchase price of $.45 per share with the Company's
repurchase right over five years if his service on the Board is terminated.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
(exclusive of stock grants and options) paid during the Company's fiscal year
ended December 31, 1997 to the Chief Executive Officer of the Company. No other
executive officer received compensation in 1997 in excess of $100,000. Messrs.
Baltovski and Frost are currently compensated (exclusive of stock grants and
options) at an annual base salary of $110,000 each.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
------------------------------------ UNDERLYING
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS
- --------------------------------------------------- ------------- ---------- --------- -------------
<S> <C> <C> <C> <C>
Burt D. Ensley..................................... 1997 $ 120,000 -- 55,556
President and Chief Executive Officer 1996 $ 110,548(1) $ 15,000 10,000
1995 $ 90,000 -- --
</TABLE>
- ------------------------
(1) As adjusted per salary increase effective May 17, 1996.
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<PAGE>
EMPLOYMENT AGREEMENTS
On May 17, 1996, Dr. Burt D. Ensley executed a three year employment
agreement (the "Agreement") to serve as President and CEO of the Company at a
base salary of $120,000 per year. In addition, Dr. Ensley was granted a
performance bonus of $15,000 in 1996. Under the Agreement, Dr. Ensley receives
stock options for 10,000 shares of Common Stock at an exercise price of $.45 per
share vesting over a three year period. An additional amount of stock options
and/or warrants may be granted to Dr. Ensley at the discretion of the Board of
Directors of the Company. The Agreement provides that during and after his term
of employment with the Company, Dr. Ensley must keep secret and retain in
strictest confidence, all confidential matters of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning stock options
granted to Dr. Ensley during the year ended December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO
UNDERLYING EMPLOYEES IN FISCAL EXERCISE PRICE
NAME OPTIONS GRANTED(1) 1997 PER SHARE EXPIRATION DATE
- ----------------------------------- ------------------- ------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Burt D. Ensley..................... 55,556 65% $ .68 10/1/07
</TABLE>
- ------------------------
(1) Incentive stock options granted under the Company's Stock Option Plan on
October 1, 1997. The options vest in 20% increments over a five year period
beginning October 1, 1997 and each October 1 thereafter.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information with respect to Dr.
Ensley concerning option exercises and year end option values in the fiscal year
ended December 31, 1997.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES AT FY-END (#) AT FY-END ($)
ACQUIRED ON VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
- ----------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Burt D. Ensley......... -- -- 14,444/ 39,694/
51,112 139,274
</TABLE>
- ------------------------
(1) The price per share of Common Stock as of December 31, 1997 is deemed to be
$3.375, the deemed fair value for financial statement purposes.
STOCK OPTION PLAN
The Company has adopted the Phytotech Stock Option Plan (the "Plan") which
provides for the award of stock options to those employees, directors and
outside consultants of the Company who make substantial contributions to the
Company by their loyalty, industry and invention. The terms and conditions of
each award will be described in a separate agreement between the Company and the
key executive or consultant, as the case may be. The Plan is administered by the
Board of Directors (the "Board") or by a committee to whom the Board delegates
such authority. The Board or, if applicable, the committee appointed by the
Board, has full and final authority in its discretion (i) to interpret the
provisions of the Plan, (ii) to decide all questions of fact arising in the
Plan's application, (iii) to determine the individuals to
36
<PAGE>
whom stock options shall be awarded under the Plan, (iv) to determine the
amount, size and terms of each such award, (v) to determine the time when awards
shall be granted, and (vi) to make all other determinations necessary or
advisable for the administration of the Plan.
Currently only shares of Non-Voting Common Stock may be issued upon exercise
of options granted under the Plan. The total number of such shares reserved for
issuance subject to options under the Plan may not exceed in the aggregate
555,556 shares. Except as otherwise provided in the Plan, any shares subject to
an option which for any reason expires or is terminated unexercised shall again
be available under the Plan. All shares of Non-Voting Common Stock subject to
currently outstanding stock options will be automatically converted into shares
of Common Stock on a one-for-one basis upon effectiveness of this offering.
Following this offering, the Company intends to amend the Plan to provide for
the issuance of Common Stock on exercise of future options granted under the
Plan. The Company does not plan to grant options or warrants with exercise
prices of less than 85% of the Common Stock's fair market value on the date of
the grant.
In the event of any change in the outstanding stock of the Company, by
reason of a stock dividend or distribution, recapitalization, merger,
consolidation, split-up, combination, exchange of shares or the like, the Board
may, in its discretion, adjust the number of shares of Common Stock which may be
issued under the Plan. In such event the Board may make any changes it deems
equitable to outstanding stock options. As of March 31, 1998, there were
outstanding options to purchase an aggregate of 253,333 shares of Non-Voting
Common Stock, of which options to purchase 56,444 such shares were exercisable.
CERTAIN TRANSACTIONS
The Company has issued certain promissory notes to certain of its directors,
payable on demand, in the aggregate amount of $229,000. Such notes were issued
on May 26, 1997: (i) a $100,000 promissory note issued to Burt Ensley; (ii) a
$100,000 promissory note issued to Philip Whitcome; and (iii) a $25,000
promissory note issued to Abraham Nechemie ((i)-(iii), collectively, the
"Notes"). The Notes provide that the principal and interest on the unpaid
balance accruing from and after the date of issuance (the interest being the
minimum rate on the date of issuance necessary under the Code, to avoid an
imputed rate of interest under the Code) are payable on demand. An additional
note in the principal amount of $4,000 was issued to Burt Ensley on May 26,
1997. The note provides that the principal and the accrued interest in the
amount of 10% on the unpaid balance is payable on demand.
Philip Whitcome, Ilya Raskin, Laura Meagher and Abraham Nechemie, directors
of the Company, each have consulting agreements with the Company pursuant to
which such persons perform, from time to time, services to the Company unrelated
to their services as directors. The amount of compensation paid by the Company
under such consulting agreements in 1997 and 1996 was not material.
The Company has paid to Trautman, Kramer and Company, of which Eric Johnson
is an officer, warrants and cash compensation as consideration for its services
as placement agent for the Company in various private placements of the
Company's equity securities and promissory notes. Mr. Johnson received warrants
for services provided to the Company in connection with the Company's two most
recent private placements of promissory notes and warrants.
The Company's management believes that the terms of the above transactions
were no less favorable to the Company than would have been obtained from a
nonaffiliated third party. Other than as disclosed above, there are no ongoing
transactions of the Company with affiliates. All prior transactions have been
approved by at least two independent directors.
The above transactions were, and any future transactions with officers,
directors, or affiliates will be, ratified by a majority of independent outside
members of Phytotech's Board of Directors who do not have an interest in the
transactions, and on terms which are, or will be no less favorable to the
Company than those that can be obtained from unaffiliated third parties. At all
times the Company expects to maintain at least two independent directors on the
board.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of the date of this Prospectus, by (1) each
director, (2) each executive officer named in the Summary Compensation Table,
(3) all directors and executive officers as a group and (4) each person known to
the Company to be the beneficial owner of more than 5% of the shares of Common
Stock. Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
beneficially owned.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
PRIOR TO OFFERING AFTER THE OFFERING
---------------------------- ----------------------------
NAME AND ADDRESS NUMBER PERCENT NUMBER PERCENT
- ---------------------------------------------------------- --------------- ----------- --------------- -----------
<S> <C> <C> <C> <C>
Burt D. Ensley*........................................... 212,223(1) 8.24% 212,223(1) 4.64%
Ilya Raskin*.............................................. 206,668(2) 8.08% 206,668(2) 4.53%
Laura R. Meagher*......................................... 151,112(2) 5.91% 151,112(2) 3.32%
Philip J. Whitcome*....................................... 68,889(3) 2.69% 68,889(3) 1.51%
Abraham H. Nechemie*...................................... 8,889(3) ** 8,889(3) **
Schneur Genack*........................................... 280,000(4)(6) 10.38% 280,000(4)(6) 5.96%
Eric K. Johnson*.......................................... 203,269(5) 7.37% 203,269(5) 4.27%
Stanley R. Harris*........................................ 138,889 5.43% 138,889 3.05%
Nikatech, Inc............................................. 138,889 5.43% 138,889 3.05%
c/o P. Friedli
Freigustrasse 5
Zurich, Switzerland 8002
Environmental Private Equity Fund II, L.P................. 277,778(6) 10.31% 277,778(6) 5.92%
Attn: Bret R. Maxwell, General Partner
233 South Wacker Drive, Suite 9600
Chicago, IL 60606
All directors and executive officers as a group (9
persons)................................................ 888,830(7) 31.37% 888,830(7) 18.39%
</TABLE>
- ------------------------------
* May be contacted at the Company address: 1 Deer Park Drive, Suite I,
Monmouth Junction, New Jersey 08852.
** Less than 1%.
(1) Includes 17,778 shares of Common Stock acquirable upon exercise of presently
exercisable stock options.
(2) Includes 1,112 shares of Common Stock acquirable upon exercise of presently
exercisable stock options.
(3) Includes 8,889 shares of Common Stock acquirable upon exercise of presently
exercisable stock options.
(4) Includes shares owned by Environmental Private Equity Fund II, L.P., listed
below, as to which Mr. Genack disclaims beneficial ownership, and includes
2,223 shares of Common Stock acquirable upon exercise of presently
exercisable stock options. Mr. Genack is one of the general partners of
Environmental Private Equity Fund II, L.P.
(5) Includes 203,269 shares of Common Stock acquirable upon exercise of
presently exercisable warrants.
(6) Includes 138,889 shares of Common Stock acquirable upon exercise of
presently exercisable warrants.
(7) Includes 276,606 shares of Common Stock acquirable upon exercise of
presently exercisable stock options and warrants.
38
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The following description of the Company's securities is a summary and is
subject in all respects to applicable New Jersey law, provisions of the
Company's Certificate of Incorporation and By-laws, the Warrant Agreement
between the Company and Registrar and Transfer Company, as warrant agent,
pursuant to which the Warrants will be issued, the various agreements pursuant
to which other securities of the Company were issued and the Underwriting
Agreement between the Company and the Underwriter. However, the Company believes
that the material terms of its securities are described in the following
summary.
Giving effect to the Reverse Split and certain redesignations of capital
stock approved by the Board of Directors to be effective immediately prior to
this offering, the Company is authorized to issue 41,111,111 shares of its
capital stock, without par value, of which 30,000,000 shares are designated as
Voting Common Stock, 1,111,111 are designated as Non-Voting Common Stock,
10,000,000 are designated as Series A Voting Preferred Stock. The Board of
Directors has the authority to divide authorized but unissued shares of capital
stock into classes and series or both and to determine or change the designation
and the number of shares of any class or series, and to determine the number of
shares, the relative rights, preferences and limitations of shares of any class
or series. Upon conversion of the outstanding shares of Non-Voting Common Stock
and Series A Voting Preferred Stock concurrently with this offering, the Company
intends to amend its Certificate of Incorporation to cancel all shares of
Non-Voting Common Stock and Series A Voting Preferred Stock, whereupon the
Company will have designated all 30,000,000 authorized shares as Voting Common
Stock.
UNITS
Each Unit consists of one share of Common Stock and one Warrant, each
Warrant entitling the holder thereof to purchase one share of Common Stock. The
Units will separate and the Common Stock and Warrants that make up the Warrants
will trade only as separate securities, thirty days after the date of this
Prospectus.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of the holders of Common Stock, including the election of
directors. There is no right to cumulate votes for the election of directors.
Subject to the rights of outstanding preferred stock, if any, the holders of
Common Stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available for such purpose. Subject to
the rights of outstanding preferred stock, if any, holders of Common Stock are
entitled to receive, on a pro rata basis, all assets of the Company available
for distribution to the stockholders in the event of the liquidation,
dissolution or winding up of the Company. Holders of Common Stock do not have
any preemptive rights to become subscribers or purchasers of additional shares
of any class of the Company's capital stock. All of the issued Common Stock is,
and on issuance as described herein, the Common Stock issuable as a part of the
Units or on exercise of Warrants will be, fully paid and nonassessable.
NON-VOTING COMMON STOCK
Upon consummation of this offering, the outstanding shares of Non-Voting
Common Stock will be converted into 232,156 shares of Common Stock.
39
<PAGE>
SERIES A VOTING PREFERRED STOCK
Upon the consummation of this offering, the outstanding shares of Series A
Voting Preferred Stock will be converted into 1,414,333 shares of Common Stock.
WARRANTS
REPRESENTATIVE'S WARRANT
In connection with this offering, the Company has authorized the issuance of
the Representative's Warrant and has reserved 400,000 shares of Common Stock for
issuance upon exercise of such warrant (including the warrants issuable upon
exercise of the Representative's Warrant). The Representative's Warrant will
entitle the holder to acquire up to 200,000 Units at an exercise price of
$ per Unit. The Representative's Warrant will be exercisable at any time
from the first anniversary of the date of this Prospectus until the fifth
anniversary of the date of this Prospectus.
UNIT WARRANTS
Each Warrant will entitle the holder to purchase one share of Common Stock
at a price of $ per share. The Warrants will, subject to certain
conditions, be exercisable at any time after the Separation Date and until the
fifth anniversary of the date of this Prospectus, unless earlier redeemed. The
Warrants are redeemable by the Company, at $.25 per Warrant, upon thirty days
written notice, if the closing bid price (as defined in the warrant agreement
(the "Warrant Agreement") between the Company and Registrar and Transfer
Company, as Warrant Agent (the "Warrant Agent") described below) per share of
Common Stock for the twenty consecutive trading days immediately preceding the
date notice of redemption is given equals or exceeds $ . If the Company
gives notice of its intention to redeem, a holder would be forced either to
exercise his or her Warrant before the date specified in the redemption notice
or accept the redemption price.
The Warrants will be issued in registered form under the Warrant Agreement.
The shares of Common Stock underlying the Warrants, when issued upon exercise of
a Warrant will be fully paid and nonassessable, and the Company will pay any
transfer tax incurred as a result of the issuance of Common Stock to the holder
upon its exercise.
The Warrants and the Representative's Warrant contain provisions that
protect the holders against dilution by adjustment of the exercise price. Such
adjustments will occur in the event, among others, that the Company makes
certain distributions to holders of its Common Stock. The Company is not
required to issue fractional shares upon the exercise of a Warrant or the
Representative's Warrant. The holder of a Warrant or the Representative's
Warrant will not possess any rights as a shareholder of the Company until such
holder exercises the Warrant or the Representative's Warrant.
A Warrant may be exercised upon surrender of the Warrant certificate
("Warrant Certificate") on or before the expiration date of the Warrant at the
offices of the Warrant Agent, with the form of "Election To Purchase" on the
reverse side of the Warrant Certificate completed and executed as indicated,
accompanied by payment of the exercise price (by certified or bank check payable
to the order of the Company) for the number of shares with respect to which the
Warrant is being exercised.
For a holder to exercise the Warrants, there must be a current registration
statement in effect with the Commission and qualification in effect under
applicable state securities laws (or applicable exemptions from state
qualifications requirements) with respect to the issuance of shares or other
securities underlying the Warrants. The Company has agreed to use all
commercially reasonable efforts to cause a registration statement with respect
to such securities under the Securities Act to be filed and to become and remain
effective in anticipation of and prior to the exercise of the Warrants and to
take such other actions under the laws of various states may be required to
cause the sale of Common Stock (or other securities) upon exercise of Warrants
to be lawful. If a current registration statement is not in effect at the time a
Warrant is
40
<PAGE>
exercised, the Company may at its option redeem the Warrant by paying to the
holder cash equal to the difference between the market price of the Common Stock
on the exercise date and the exercise price of the Warrant. The Company will not
be required to honor the exercise of Warrants if, in the opinion of the
Company's Board of Directors upon advice of counsel, the sale of securities upon
exercise would be unlawful.
The foregoing discussion of certain terms and provisions of the Warrants and
the Representative's Warrant is qualified in its entirety by reference to the
detailed provisions of the Warrant Agreement and the Representative's Warrant
certificate (the "Representative's Warrant Certificate"), the form of each of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
For the life of the Warrants and the Representative's Warrant, the holders
thereof have the opportunity to profit from a rise in the market price of the
Common Stock without assuming the risk of ownership of the shares of Common
Stock issuable upon the exercise of the Warrants. The Warrant holders may be
expected to exercise their Warrants at a time when the Company would, in all
likelihood, be able to obtain any needed capital by an offering of Common Stock
on terms more favorable than those provided for by the Warrants. Further, the
terms on which the Company could obtain additional capital during the life of
the Warrants may be adversely affected.
OTHER WARRANTS
Warrants to purchase a total of 671,091 shares of Common Stock with exercise
prices ranging from $3.60 to approximately $9.00 per share (assuming an offering
price of $6.00 per Unit) are issued or issuable. All of said warrants are
currently exercisable, with the latest expiration date being March 2003.
All of the warrants and the Common Stock issuable upon exercise thereof are
restricted securities under the Securities Act and as such are subject to
restrictions on transfer, except for 78,768 shares of Common Stock issuable upon
exercise of warrants which are being registered concurrently with this offering.
The holders of the warrants have demand and piggyback registration rights,
subject to certain conditions, whereupon the exercise of said registration
rights the Company is obligated to register the shares of Common Stock
acquirable upon the exercise of the warrants.
The warrants have antidilution provisions which provide for appropriate
adjustment to the exercise price and the number of shares of Common Stock
acquirable upon exercise in the event of stock splits, reverse stock rights,
stock dividends, reclassifications of the Company's securities, mergers or
consolidations or other similar events. Certain of the warrants also contain
price adjustment provisions in the event the Company issues Common Stock for a
consideration per share less than the exercise price in effect immediately prior
to such issuance.
PROMISSORY NOTES
The Company has outstanding $1,225,000 principal amount of promissory notes
issued September 15, 1997 bearing simple interest at a rate of 10%. In addition,
the Company has outstanding $641,800 and $320,000 principal amount of promissory
notes issued February 27, 1998 and March 16, 1998, respectively, bearing simple
interest at a rate of 12%. In the absence of an initial public offering, the
promissory notes are repayable in 24 equal monthly installments beginning June
30, 1998 (subject to six months extension at the election of a majority in the
principal amount of all noteholders). The Company intends to repay all principal
and interest under the promissory notes with a portion of the net proceeds from
this offering. In addition, the Company has issued certain promissory notes to
certain of its directors, payable on demand in the aggregate amount of $229,000.
Repayment of all of the foregoing notes are secured equally and ratably by a
security interest in the assets of the Company.
41
<PAGE>
REGISTRATION RIGHTS
Registration rights agreements have been entered into with holders of
warrants and Preferred Stock of the Company. In general, the warrants have
piggyback registration rights, subject to the orderly distribution of the
Company's securities. In addition, both the warrants and the Preferred Stock
have single-demand registration rights, which are limited during the period one
hundred and eighty (180) days following the effective date of the registration
statement. There are a small number of warrants with double-demand registration
rights. The terms of the agreements provide that in connection with a public
offering of the Company's securities, the parties to the agreements will not
sell their shares of the Company for and during the period beginning on the date
that the Company executes an underwriting agreement with respect to such
offering and continuing to and including 180 days after the date of the
prospectus included in the registration statement under the Securities Act for
such offering, except for approximately 250,000 shares subject to outstanding
warrants which do not have such restrictions of which approximately 140,000 are
subject to lock-up agreements.
The existence and exercise of such registration rights may hinder efforts by
the Company to arrange future financing for the Company and may have an adverse
effect on the market price of the Common Stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is Registrar
and Transfer Company. Its address is 10 Commerce Drive, Cranford, New Jersey
07016-3572, and its telephone number is (800) 456-0596.
42
<PAGE>
UNDERWRITING
The Underwriters named below, acting through Paulson Investment Company,
Inc., the Representative, have agreed, severally and not jointly, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase the
2,000,000 Units offered hereby (the "Firm Units") in the amounts set forth
below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER UNITS
- --------------------------------------------------------------------------------- ----------
<S> <C>
Paulson Investment Company, Inc..................................................
Millennium Financial Group, Inc..................................................
----------
Total........................................................................ 2,000,000
----------
----------
</TABLE>
The Underwriting Agreement provides that the Underwriters are obligated to
purchase all of the Firm Units if any Units are purchased. The Company has been
advised that the Underwriters propose to offer the Units to the public initially
at the offering price shown on the cover page of this Prospectus and to selected
dealers, including Underwriters, at that price less a concession to be
determined by the Representative. After the initial public offering of the
Units, the public offering price and other offering terms may be changed. The
Underwriters do not expect to sell the Units on a discretionary basis.
The Company has granted an overallotment option, exercisable by the
Underwriters during the 45-day period after the date of this Prospectus, to
purchase up to 300,000 additional Units (the "Option Units") on the same terms
as are applicable to the Firm Units. The Underwriters may exercise this option
only to cover overallotments in the sale of the Units.
The Underwriters will purchase the Units (including the Units subject to the
Underwriters' overallotment option) at a discount equal to % of the initial
public offering price. The Representative will also receive a non-accountable
expense allowance equal to % of the aggregate initial public offering price
of the Units sold in this offering of which $35,000 has already been paid.
The Company has agreed to issue the Representative's Warrants to the
Representative. The Representative's Warrants will allow the Representative to
purchase up to 200,000 Units. The Representative's Warrants are exercisable for
a period of four years beginning one year from the date of this Prospectus, at a
price of $ per Unit (120% of the initial public offering price of the Units)
and are restricted from sale, transfer, assignment or hypothecation for a period
of one year after the date of this Prospectus except (i) to any of the
Underwriters or to individuals who are either an officer or a partner of an
Underwriter or members of the selling group or (ii) by will or the laws of
descent and distribution. The holders of the Representative's Warrants will
have, in that capacity, no voting, dividend or other shareholder rights. Any
profits realized on the sale of the securities issuable on exercise of the
Representative's Warrants may be deemed to be additional underwriting
compensation.
The sale of the shares issuable upon exercise of the Representative's
Warrants could dilute the interests of the other holders of Common Stock, and
the existence of the Representative's Warrants may make the raising of
additional capital by the Company more difficult. At any time at which exercise
of the Representative's Warrants might be expected, it is likely that the
Company could raise additional capital on terms more favorable than the terms of
the Representative's Warrants.
The Underwriters have requested that all officers, directors and
shareholders of the Company, who own five percent or more of the outstanding
shares of Common Stock (on a fully diluted basis), agree not
43
<PAGE>
to sell any Common Stock of the Company, pursuant to Rule 144 under the
Securities Act or otherwise, and the Company has agreed not to sell any Common
Stock without the prior written consent of the Representative, for a period of
one year after the date of this Prospectus.
In addition, the Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act, and to
contribute in certain events to any liabilities incurred by the Underwriters in
connection with the sale of the Units.
The Representative has advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of Common Stock on behalf
of the Underwriters to reduce a short position incurred by the Underwriters in
connection with the offering. A "penalty bid" is an arrangement permitting the
Representative to reclaim the selling concession otherwise accruing to an
Underwriter or syndicate member in connection with the offering if the Common
Stock originally sold by such Underwriter or syndicate member is purchased by
the Representative in a syndicate covering transaction and has therefore not
been effectively placed by such Underwriter or syndicate member. The
Representative has advised the Company that such transactions may be effected on
the Nasdaq Small Cap Market or otherwise and, if commenced, may be discontinued
at any time.
Prior to the offering, there has been no public market for the Company's
securities. The initial public offering price for the Units will be determined
through negotiations between the Company and the Representative and will be
based on, among other things, the Company's financial condition, the prospects
of the Company and its industry in general, the management of the Company and
the market prices of securities of companies engaged in business similar to
those of the Company.
CERTAIN LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Shanley & Fisher, P.C., Morristown, New Jersey. Stoel Rives LLP,
Portland, Oregon has acted as counsel for the Underwriters with respect to
certain legal matters in connection with this offering.
EXPERTS
The financial statements of the Company as of December 31, 1997 and for each
of the years in the two-year period ended December 31, 1997 have been included
herein and in the registration statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the December 31, 1997
financial statements contains an explanatory paragraph that states that the
Company's recurring losses from operations and insufficient working capital
raise substantial doubt about the entity's ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
ADDITIONAL INFORMATION
The Company has filed with the Commission a registration statement on Form
SB-2 (the "Registration Statement") (which term shall encompass all amendments,
exhibits and schedules thereto) under the Securities Act with respect to the
Units offered hereby. This Prospectus, which constitutes part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission, and to which reference is hereby
made. For further information with respect to the Company and the Common
44
<PAGE>
Stock, reference is hereby made to the Registration Statement. Statements made
in this Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. With respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement can be inspected and
copied at the Public Reference Section of the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at Seven World Trade Center, 13th Floor, New York, New York 10048, and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of the Registration Statement can be obtained from the Public Reference
Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other documents filed electronically with the
Commission, including the Registration Statement.
45
<PAGE>
PHYTOTECH, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Independent Auditors' Report............................................................................... F-2
Balance Sheets as of December 31, 1997 and March 31, 1998 (unaudited)...................................... F-3
Statements of Operations for the years ended December 31, 1996 and 1997, and the three months ended March
31, 1997 and 1998 (unaudited)............................................................................ F-4
Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1996 and 1997 and the three
months ended March 31, 1998 (unaudited).................................................................. F-5
Statements of Cash Flows for the years ended December 31, 1996 and 1997, and the three months ended March
31, 1997 and 1998 (unaudited)............................................................................ F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
WHEN THE TRANSACTIONS REFERRED TO IN THE LAST TWO PARAGRAPHS IN NOTE 1 OF THE
NOTES TO FINANCIAL STATEMENTS HAVE BEEN CONSUMMATED, WE WILL BE IN A POSITION TO
RENDER THE FOLLOWING REPORT.
KPMG PEAT MARWICK LLP
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Phytotech, Inc.:
We have audited the accompanying balance sheet of Phytotech, Inc. as of
December 31, 1997, and the related statements of operations, stockholders'
equity (deficit), and cash flows for each of the years in the two-year period
ended December 31, 1997. 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Phytotech, Inc. as of
December 31, 1997, and the results of its operations and its cash flows for each
of the years in the two year period then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Phytotech, Inc. will continue as a going concern. As discussed in note 1 to the
financial statements, Phytotech, Inc. has suffered recurring losses from
operations and has insufficient working capital to fund its current operating
requirements. These factors 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 1. The financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
Princeton, New Jersey
March 30, 1998, except as to the last two paragraphs of note 1,
which are as of
F-2
<PAGE>
PHYTOTECH, INC.
BALANCE SHEETS
DECEMBER 31, 1997
AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, MARCH 31, MARCH 31,
1997 1998 1998
------------ ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (NOTE 5)
Current assets:
Cash and cash equivalents............................................. $ 5,326 $ 47,326 $ 47,326
Grant and commercial receivables...................................... 172,009 237,530 237,530
------------ ----------- -----------
Total current assets.............................................. 177,335 284,856 284,856
Property and equipment, net (note 2).................................... 149,171 126,528 126,528
Deferred financing and offering costs, net (note 5)..................... 209,835 323,539 323,539
Other assets............................................................ 14,500 14,500 14,500
------------ ----------- -----------
$ 550,841 $ 749,423 $ 749,423
------------ ----------- -----------
------------ ----------- -----------
LIABILITIES AND DEFICIT IN STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................................... $ 291,292 $ 326,069 $ 326,069
Accrued expenses (note 3)............................................. 645,995 647,500 647,500
Notes payable--related parties (note 4)............................... 229,000 229,000 229,000
Notes payable--current portion (note 5)............................... 306,250 459,375 459,375
Convertible notes payable--current portion (note 5)................... 77,090 360,675 360,675
------------ ----------- -----------
Total current liabilities......................................... 1,549,627 2,022,619 2,022,619
Notes payable, less current portion (note 5)............................ 918,750 765,625 765,625
Convertible notes payable, less current portion (note 5)................ 231,270 601,125 601,125
------------ ----------- -----------
Total liabilities................................................. 2,699,647 3,389,369 3,389,369
------------ ----------- -----------
Deficit in stockholders' equity (notes 1, 5, 6, 7, 8, 9, 11 and 12):
Series A convertible preferred stock, no par value, voting:
Authorized 10,000,000 shares; issued and outstanding 6,364,500
shares at December 31, 1997 and March 31, 1998 on an actual basis
and none on a pro forma basis (note 12) (aggregate liquidation
value $5,091,600 at December 31, 1997 and March 31, 1998 on an
actual basis and none on a pro forma basis)....................... 5,205,654 5,205,654 --
Voting common stock, no par value:
Authorized 30,000,000 shares in 1997; issued and outstanding 910,000
shares at December 31, 1997 and March 31, 1998 and 2,556,489 pro
forma shares at March 31, 1998.................................... 308,245 308,245 5,571,031
Non-voting common stock, no par value:
Authorized 1,111,111 shares; issued and outstanding 230,978 shares
and 232,156 shares at December 31, 1997 and March 31, 1998,
respectively and none on a pro forma basis........................ 56,352 57,132 --
Additional paid-in capital.............................................. 385,000 517,000 517,000
Deferred compensation (note 7).......................................... (366,000) (479,000) (479,000)
Accumulated deficit..................................................... (7,738,057) (8,248,977) (8,248,977)
------------ ----------- -----------
Total deficit in stockholders' equity............................. (2,148,806) (2,639,946) (2,639,946)
Commitments (notes 5, 8, 9 and 11)
------------ ----------- -----------
$ 550,841 $ 749,423 $ 749,423
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PHYTOTECH, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997, AND THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------------ --------------------------
1996 1997 1997 1998
-------------- -------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Grant revenue....................................... $ 325,572 $ 270,936 $ 122,431 $ 116,942
Commercial revenue.................................. 67,897 190,516 3,500 73,088
-------------- -------------- ------------ ------------
393,469 461,452 125,931 190,030
-------------- -------------- ------------ ------------
Operating expenses:
Research and development (note 9)................... 1,768,334 2,199,590 460,117 345,226
General and administrative.......................... 1,157,754 1,189,560 360,239 324,857
-------------- -------------- ------------ ------------
2,926,088 3,389,150 820,356 670,083
-------------- -------------- ------------ ------------
Other income (expense):
Interest income..................................... 66,892 6,546 5,469 --
Interest expense.................................... -- (33,989) -- (30,867)
-------------- -------------- ------------ ------------
66,892 (27,443) 5,469 (30,867)
-------------- -------------- ------------ ------------
Net loss........................................ $ (2,465,727) $ (2,955,141) $ (688,956) $ (510,920)
-------------- -------------- ------------ ------------
-------------- -------------- ------------ ------------
Basic and diluted net loss per share (note 1)......... $ (2.18) $ (2.59) $ (.61) $ (.45)
-------------- -------------- ------------ ------------
-------------- -------------- ------------ ------------
Shares used in computing basic and diluted net loss
per share (note 1)................................... 1,132,733 1,140,478 1,135,289 1,141,066
-------------- -------------- ------------ ------------
-------------- -------------- ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PHYTOTECH, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------
SERIES A CONVERTIBLE
PREFERRED STOCK VOTING NON-VOTING ADDITIONAL
-------------------- -------------------- ---------------------- PAID-IN DEFERRED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION
--------- --------- --------- --------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995........ 4,812,500 $3,426,113 1,010,000 $ 342,118 118,889 $ 15,039 $ -- $ --
Stock options exercised........... -- -- -- -- 3,733 1,680 -- --
Common stock awarded for services
(note 6)........................ -- -- -- -- 1,111 500 -- --
Issuance of Series A convertible
preferred stock, net of offering
costs (note 6).................. 1,452,000 1,654,541 -- -- -- -- -- --
Net loss.......................... -- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- ----------- ----------- -------------
Balance at December 31, 1996........ 6,264,500 5,080,654 1,010,000 342,118 123,733 17,219 -- --
Stock options exercised........... -- -- -- -- 578 260 -- --
Common stock awarded for services
(note 6)........................ -- -- -- -- 6,667 5,000 -- --
Series A convertible preferred
stock issued for license (note
9).............................. 100,000 125,000 -- -- -- -- -- --
Conversion voting to non-voting
common stock.................... -- -- (100,000) (33,873) 100,000 33,873 -- --
Deferred compensation resulting
from the grant of options (note
7).............................. -- -- -- -- -- -- 385,000 (385,000)
Amortization of deferred
compensation (note 7)........... -- -- -- -- -- -- -- 19,000
Net loss.......................... -- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- ----------- ----------- -------------
Balance at December 31, 1997........ 6,364,500 5,205,654 910,000 308,245 230,978 56,352 385,000 (366,000)
Stock options exercised
(unaudited)..................... -- -- -- -- 1,178 780 -- --
Deferred compensation resulting
from the grant of options
(unaudited) (note 7)............ -- -- -- -- -- -- 132,000 (132,000)
Amortization of deferred
compensation (unaudited) (note
7).............................. -- -- -- -- -- -- -- 19,000
Net loss (unaudited).............. -- -- -- -- -- -- -- --
--------- --------- --------- --------- --------- ----------- ----------- -------------
Balance at March 31, 1998
(unaudited)....................... 6,364,500 $5,205,654 910,000 $ 308,245 232,156 $ 57,132 $ 517,000 $(479,000)
--------- --------- --------- --------- --------- ----------- ----------- -------------
--------- --------- --------- --------- --------- ----------- ----------- -------------
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
------------ ----------
<S> <C> <C>
Balance at December 31, 1995........ $(2,317,189) $1,466,081
Stock options exercised........... -- 1,680
Common stock awarded for services
(note 6)........................ -- 500
Issuance of Series A convertible
preferred stock, net of offering
costs (note 6).................. -- 1,654,541
Net loss.......................... (2,465,727) (2,465,727)
------------ ----------
Balance at December 31, 1996........ (4,782,916) 657,075
Stock options exercised........... -- 260
Common stock awarded for services
(note 6)........................ -- 5,000
Series A convertible preferred
stock issued for license (note
9).............................. -- 125,000
Conversion voting to non-voting
common stock.................... -- --
Deferred compensation resulting
from the grant of options (note
7).............................. -- --
Amortization of deferred
compensation (note 7)........... -- 19,000
Net loss.......................... (2,955,141) (2,955,141)
------------ ----------
Balance at December 31, 1997........ (7,738,057) (2,148,806)
Stock options exercised
(unaudited)..................... -- 780
Deferred compensation resulting
from the grant of options
(unaudited) (note 7)............ -- --
Amortization of deferred
compensation (unaudited) (note
7).............................. -- 19,000
Net loss (unaudited).............. (510,920) (510,920)
------------ ----------
Balance at March 31, 1998
(unaudited)....................... $(8,248,977) $(2,639,946)
------------ ----------
------------ ----------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
PHYTOTECH, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997, AND THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------------- ------------------------
1996 1997 1997 1998
------------- ------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss............................................... $ (2,465,727) $ (2,955,141) $ (688,956) $ (510,920)
Adjustments to reconcile net loss to net cash used in
operating activities:
Noncash compensation................................. 500 24,000 -- 19,000
Noncash license fee.................................. -- 125,000 -- --
Depreciation and amortization........................ 109,923 163,456 21,092 56,529
Changes in operating assets and liabilities:
(Increase) decrease in grant and commercial
receivables...................................... 26,788 (84,477) (1,089) (65,521)
(Increase) decrease in prepaid expenses............ 4,978 -- (12,842) --
(Increase) decrease in other assets................ (4,933) 5,573 5,573 --
Increase (decrease) in accounts payable and accrued
expenses......................................... (139,322) 709,217 157,303 36,282
------------- ------------- ----------- -----------
Net cash used in operating activities............ (2,467,793) (2,012,372) (518,919) (464,630)
------------- ------------- ----------- -----------
Cash flows from investing activities--purchase of
property and equipment.................................. (116,922) (15,664) (4,404) (5,386)
------------- ------------- ----------- -----------
Cash flows from financing activities:
Proceeds from notes payable............................ -- 1,762,360 -- 653,440
Deferred financing and offering costs.................. -- (250,835) -- (142,204)
Proceeds from sale of Series A convertible preferred
stock and warrants, net.............................. 1,654,541 -- -- --
Proceeds from exercise of stock options................ 1,680 260 -- 780
------------- ------------- ----------- -----------
Net cash provided by financing activities........ 1,656,221 1,511,785 -- 512,016
------------- ------------- ----------- -----------
Net increase (decrease) in cash and cash equivalents..... (928,494) (516,251) (523,323) 42,000
Cash and cash equivalents at beginning of the period..... 1,450,071 521,577 521,577 5,326
------------- ------------- ----------- -----------
Cash and cash equivalents at end of the period........... $ 521,577 $ 5,326 $ (1,746) $ 47,326
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Supplemental schedule of noncash financing activities:
Conversion of voting common stock to nonvoting common
stock................................................ $ -- $ 33,873 $ -- $ --
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Series A convertible preferred stock exchanged for
technology license................................... $ -- $ 125,000 $ -- $ --
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
Deferred compensation.................................. $ -- $ 385,000 $ -- $ 132,000
------------- ------------- ----------- -----------
------------- ------------- ----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(INFORMATION AS OF MARCH 31, 1998 AND WITH RESPECT TO THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Phytotech, Inc. (the "Company") was organized under the laws of the State of
New Jersey on April 15, 1993. Phytotech currently offers waste cleanup services
using plants grown under carefully controlled conditions to absorb and dispose
of unwanted metals, such as lead or uranium, from toxic waste sites. The Company
has also developed and is beginning to market nutritionally important minerals
absorbed into plants and is beginning to develop technology for the production
of high value proteins in plants.
Since inception, the Company has been engaged in organizational activities,
including raising capital and research and development activities, and in
completing certain studies utilizing its technology. There is no assurance that
the Company will be able to expand the market for its products in the future.
The Company has not yet achieved profitable operations, nor has it ever
generated positive cash flows from operations and there is no assurance that
profitable operations, if achieved, could be sustained on a continuing basis.
Further, the Company's future operations are dependent on the success of the
Company's efforts to raise additional capital, such as the initial public
offering of voting common stock and warrants contemplated herein (the
"Offering"), its research and commercialization efforts, and ultimately, the
market acceptance of the Company's products.
The accompanying financial statements have been prepared on a going-concern
basis which contemplates the continuation of operations, realization of assets
and liquidation of liabilities in the ordinary course of business. The Company
incurred net losses of $2,465,727 and $2,955,141 for the years ended December
31, 1996 and 1997, respectively, and $510,920 (unaudited) for the three months
ended March 31, 1998 and has an accumulated deficit of $8,248,977 (unaudited) at
March 31, 1998. The net losses incurred by the Company have consumed working
capital and weakened the Company's financial position. The Company's ability to
continue in business is dependent upon its success in generating sufficient cash
flow from operations or obtaining additional financing. The Company is currently
attempting to complete an equity financing to raise additional capital through
the Offering. The Company's ability to continue as a going concern is dependent
upon the financing efforts being successful. There can be no assurance that
these efforts will be successful. The financial statements do not include any
adjustments relating to the recoverability and classifications of reported asset
amounts or the amounts of liabilities that might result from the outcome of that
uncertainty.
USE OF ESTIMATES
Management of the Company has made certain estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes
in conformity with generally accepted accounting principles. Actual results
could differ from these estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and are so near their maturity
(three months or less) that they present insignificant
F-7
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
risk of changes in value because of changes in interest rates. Cash equivalents
are recorded at cost, which approximates market, and include certain
money-market funds.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization of
property and equipment is computed using the straight-line method over the
estimated useful lives of the respective assets (ranging from three to ten
years), or the lease term, whichever is less. Maintenance and repairs are
charged to operations as incurred.
The Company reviews long-lived assets for impairment whenever events or
changes in business circumstances occur that indicate that the carrying amount
of the assets may not be recoverable. The Company assesses the recoverability of
long-lived assets held and to be used based on undiscounted cash flows, and
measures the impairment, if any, using discounted cash flows.
DEFERRED FINANCING AND OFFERING COSTS
Debt offering costs are deferred and amortized based on a straight-line
method over the life of the related notes payable. Cost associated with the
Offering of approximately $70,000 (unaudited) have been deferred at March 31,
1998 and have not been amortized. These costs will be reclassified to equity
upon the successful completion of the Offering or expensed if the Offering is
unsuccessful.
REVENUE RECOGNITION
Payments due under research grants and commercial revenue agreements are
recognized as revenue when the related research expenses are incurred and the
Company's specific performance obligations under the terms of the respective
contracts are satisfied. Revenue recognized in the accompanying financial
statements is not subject to repayment. Payments, if any, received in advance of
performance under the agreements are deferred and recognized as revenue when
earned. Future losses, if any, on contracts are recognized in the period when
identified by the Company.
RESEARCH AND DEVELOPMENT COSTS
All research and development costs are expensed as incurred.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method
of accounting. 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 and the benefits
arising from operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates and laws that will be in
effect for the years in which those differences are expected to reverse. The
measurement of deferred tax assets is reduced, if necessary, by a valuation
allowance for any tax benefits which are not expected to be realized. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
the period that such tax rate changes are enacted.
F-8
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
The Company accounts for its stock option issuances in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees," and related interpretations. As such, deferred
compensation is recorded to the extent that the current market value of the
underlying stock exceeds the exercise price on the date both the number of
shares and the price per share are known (measurement date). Such deferred
compensation is amortized over the respective vesting periods of such option
grants. On January 1, 1996, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," which permits entities to continue to apply the
provisions of APB Opinion No. 25 for financial statement reporting purposes and
provide pro forma net loss and net loss per share disclosures for employee
(including director) stock option grants as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has elected to continue to
apply the provisions of APB Opinion No. 25 for financial statement reporting
purposes and to provide the pro forma disclosures required by SFAS No. 123.
Transactions with non-employees, in which goods or services are the
consideration received for the issuance of equity instruments, are accounted for
under the fair-value based method defined in SFAS No. 123.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of its receivables. The Company's grant and
commercial receivables are due from the U.S. Department of Defense and various
academic and private institutions. As of December 31, 1997, the Company believes
it has no significant concentration of credit risk with its receivables.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's short-term financial instruments
approximates their carrying value due to the short maturity of those
instruments. The fair value of notes payable approximates their carrying value
due to the short period since their issuance.
EQUITY SECURITY TRANSACTIONS
Since inception, the Company's Board of Directors (the "Board") has
established the fair value of common stock, Series A convertible preferred
stock, stock options and warrants based upon facts and circumstances existing at
the dates such equity transactions occurred, including the price at which equity
instruments were sold to independent third parties.
NET LOSS PER SHARE
Net loss per share is computed in accordance with SFAS No. 128, "Earnings
Per Share." Weighted average common shares outstanding includes both the voting
and non-voting shares of common stock. Outstanding convertible preferred stock,
convertible notes payable, stock options and warrants (see notes 5, 6, 7 and 8)
have not been used in computing diluted net loss per share because to do so
would be anti-dilutive. As such the numerator (net loss) and the denominator
(weighted average shares outstanding), used in computing both basic and diluted
net loss per share are equal. During the periods presented herein, the Company
did not make any nominal issuances of equity securities as discussed in
Securities and Exchange Commission (SEC) Staff Accounting Bulletin No. 98.
F-9
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
The following pro forma basic and diluted loss per share and the pro forma
weighted average number of shares outstanding has been presented reflecting
conversion of the Series A convertible preferred stock into 1,414,333 shares of
voting common stock (see notes 6 and 12) using the if converted method from
their respective dates of issuance:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1997 1998
------------ -------------
<S> <C> <C>
Pro forma basic and diluted net loss per share.................. $ (1.16) $ (0.20)
------------ -------------
------------ -------------
Shares used in computing pro forma basic and diluted net loss
per share..................................................... 2,545,113 2,555,399
------------ -------------
------------ -------------
</TABLE>
PRO FORMA BALANCE SHEET (UNAUDITED)
Upon the effectiveness of the Offering, all of the outstanding shares of
non-voting common stock convert into 232,156 shares of voting common stock and
all outstanding shares of Series A convertible preferred stock convert into
1,414,333 shares of voting common stock (see notes 6 and 12). The unaudited pro
forma presentation of the March 31, 1998 balance sheet has been prepared
assuming the conversion of the Series A convertible preferred stock and the
non-voting common stock into voting common stock as of March 31, 1998, the most
recent balance sheet included in the accompanying financial statements.
UNAUDITED FINANCIAL STATEMENTS
The balance sheet at March 31, 1998, the statements of operations and cash
flows for the three months ended March 31, 1997 and 1998 and the statement of
stockholders' equity (deficit) for the three months ended March 31, 1998 are
unaudited. In the opinion of management of the Company, such unaudited financial
statements include all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of financial results for these periods. The
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of results to be expected for the entire fiscal year.
REVERSE STOCK SPLIT
On , 1998, the Company effected a 1:4.5 reverse stock split of its
voting and non-voting common stock. All voting and non-voting common shares and
per share amounts in the accompanying financial statements (except as to noted)
have been retroactively adjusted to reflect this reverse stock split. Preferred
stock amounts have not been retroactively adjusted to reflect the reverse stock
split.
AUTHORIZED SHARES
As a result of the reverse stock split and certain actions approved by the
Board, effective on , 1998, the Company's authorized capital stock
consists of 30,000,000 shares of voting common stock, 10,000,000 shares of
Series A convertible preferred stock and 1,111,111 non-voting common stock.
Given the interrelated nature of these actions, these authorized shares have
been reflected on the balance sheet.
F-10
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
1998
DECEMBER 31, ------------
1997
------------ (UNAUDITED)
<S> <C> <C>
Leasehold improvements........................................... $ 169,575 $ 169,575
Lab equipment.................................................... 176,482 179,450
Computers........................................................ 57,561 59,979
Furniture and fixtures........................................... 42,617 42,617
------------ ------------
446,235 451,621
Less accumulated depreciation and amortization................... 297,064 325,093
------------ ------------
$ 149,171 $ 126,528
------------ ------------
------------ ------------
</TABLE>
(3) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
1998
DECEMBER 31, ------------
1997
------------ (UNAUDITED)
<S> <C> <C>
Research expenditures (note 9)................................... $ 349,000 $ 330,500
Interest......................................................... 33,989 64,863
Professional fees................................................ 263,006 252,137
------------ ------------
$ 645,995 $ 647,500
------------ ------------
------------ ------------
</TABLE>
(4) RELATED PARTIES
During 1997, the Company executed promissory notes with certain directors
and an officer aggregating $229,000 payable on demand. Interest on these notes
is approximately 5%.
During 1997, in connection with both private note offerings (see note 5),
the Company paid fees of approximately $200,000 (approximately $260,000 in total
upon completion of the second private note offering on March 16, 1998) and is
obligated to issue warrants (see note 5) to the placement agent who employs one
of the Company's directors.
(5) NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE
In 1997, the Company through a private offering and issued promissory notes
aggregating $1,225,000 and warrants to purchase 54,444 shares of voting common
stock. The Company received net proceeds after offering costs of $1,017,000. The
notes bear total interest of 10% regardless of the period the principal is
outstanding. The notes are secured by the assets of the Company and are
repayable starting at the earlier of (i) seven days after receipt of proceeds
from an initial public offering or (ii) June 30, 1998 in equal payments over a
24 month period (subject to extension for a period of six months at the option
of the majority in principal amount of all note holders). The warrants are
exercisable at $2.50 (pre-reverse-split) (to be subsequently adjusted upon the
effectiveness of the offering based upon a formula contained in the
F-11
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(5) NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE (CONTINUED)
warrant agreements) from the date of offering to five years after the offering
date. No value was ascribed to the warrants based on the fair value as
determined by a Black Scholes option pricing model calculation.
In December 1997, the Company began a private offering of convertible
promissory notes and warrants to purchase shares of voting common stock. As of
December 31, 1997, the private offering was ongoing. The Company received gross
proceeds of $308,360 and net proceeds after offering costs of $277,525 in 1997.
The Company completed the private offering on March 16, 1998 for $961,800 of
cumulative gross proceeds and net cumulative proceeds after offering costs of
approximately $850,000.
The notes bear total interest of 12% regardless of the period the principal
is outstanding. The notes are secured by the assets of the Company and are
repayable at the earlier of (i) seven days after receipt of proceeds from an
initial public offering or (ii) June 30, 1998 (subject to extension for a period
of six months at the option of the majority in principal amount of all note
holders) in equal payments over a 24 month period. The notes are convertible
into voting common stock at the holders' option upon stated written notice prior
to the time the Company's voting common stock becomes publicly traded. No
beneficial conversion feature existed on the date of issuance of the notes,
however, if the Company's voting common stock becomes publicly traded and a
holder elects conversion (with the appropriate prior written notice), the holder
would receive the greater number of voting common shares computed by dividing
the note principal and interest by either (i) 60% of the market price of the
common stock or (ii) $2.50. Any beneficial conversion feature will be recorded
as additional interest expense at the time the Company's voting common stock
becomes publicly traded.
In addition, the Company is obligated to issue 20,578 warrants at December
31, 1997 (64,120 total warrants upon completion of the private offering, which
were issued during the three months ended March 31, 1998) to investors. The
warrants are exercisable at $2.50 (pre-reverse-split) (to be subsequently
adjusted upon the effectiveness of the Offering based upon a formula contained
in the warrant agreements) from the offering date to five years after the
offering date. No value was ascribed to the warrants based on the fair value as
determined by a Black Scholes option pricing model calculation.
The Company has agreed to issue 269,658 warrants to purchase voting common
stock to the placement agent as total warrant consideration in connection with
both private offerings. The exercise price of the warrants will be 150% of the
price in an initial public offering of the Company's common stock and will have
a five year term.
(6) CAPITAL STOCK
In the event of any liquidation, dissolution, or winding up of the Company,
the holders of preferred stock are entitled to receive out of assets of the
Company available for distribution to stockholders, after satisfaction of
indebtedness but before any distribution of assets is made to holders of common
stock, liquidating distributions in the amount of $.80 per share, plus declared
and unpaid dividends, if any.
Subject to the dividend rights of holders of the preferred stock, holders of
common stock are entitled to any dividend declared by the Board out of funds
legally available for such purpose, and, after the payment of the $.80 per share
liquidation preference to holders of preferred stock ($5,091,600 in the
aggregate), holders of common stock are entitled to receive on a pro rata basis
all remaining assets of the
F-12
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(6) CAPITAL STOCK (CONTINUED)
Company available for distribution to the stockholders in the event of the
liquidation, dissolution, or winding up of the Company. Holders of common stock
do not have any preemptive right to become subscribers or purchasers of
additional shares of any class of the Company's capital stock.
There is no optional conversion of preferred stock into common stock. On the
fifth anniversary of the closing date of the first private placement of
preferred stock which closed in November 1994 (the First Offering), shares of
preferred stock then outstanding will automatically be converted into shares of
common stock at a rate of one (pre-reverse split) share of common stock for each
share of preferred stock, subject to adjustment, (the Conversion Rate).
Outstanding shares of preferred stock will also be automatically converted into
shares of common stock at the Conversion Rate (a) upon the effectiveness of an
underwritten public offering of common stock of the Company pursuant to which
common stock is offered to the public at a price of at least $3.00 per share
(pre-reverse-split), or (b) immediately prior to the effectiveness of a
consolidation or merger of the Company with or into another corporation or any
sale or transfer of all or substantially all of the assets of the Company,
pursuant to which holders of common stock (assuming the conversion of all
outstanding preferred stock into common stock at the Conversion Rate) will
receive cash, securities or property having a value (as determined by the
Company's Board) of at least $3.00 per share of common stock (pre-reverse-split)
(see note 12). The holder of any shares of preferred stock converted into common
stock in connection with such a public offering or other transaction will be
entitled to payment of all declared but unpaid dividends, if any, payable with
respect to such shares up to and including the date of the closing of such
public offering or other transaction.
Holders of preferred stock will not be entitled to receive dividends on the
preferred stock unless and until dividends are paid and declared on the common
stock. If dividends are paid on the common stock, holders of preferred stock
shall be entitled to receive dividends on the preferred stock at the same time
and at the rate per share of preferred stock based upon the shares of common
stock to which the holders of preferred stock would be entitled, if they had
converted the preferred stock and been holders of common stock on the record
date for such dividend on the common stock.
Each share of preferred stock will be entitled to one vote and will vote
together with the common stock.
The non-voting common stock is convertible into voting common stock at a 1:1
ratio in the event of a public offering of registered securities.
In 1996, the Company sold, in a confidential private offering, 1,452,000
shares of the Company's Series A convertible preferred stock for an aggregate
price of $1,815,000. Expenses relating to the private offering amounted to
$160,459 in agent fees and legal, accounting and printing costs.
In 1996 and 1997, employees exercised stock options for 3,733 and 578
shares, respectively, of non-voting common stock at exercise prices of $.45 per
share. For the three months ended March 31, 1998, employees exercised stock
options for 1,178 shares of non-voting common stock at an average exercise price
of $.66 per share (unaudited).
In 1996, a shareholder was awarded 1,111 shares of non-voting common stock
for services performed. Compensation expense of $500 was recorded which
represented the deemed fair value of the stock as determined by the Board. In
1997, an employee and consultant were awarded 6,667 shares of non-voting common
stock for services performed. Compensation expense totaling $5,000 was recorded
which represented the deemed fair value of the stock as determined by the Board.
F-13
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) STOCK OPTIONS
On July 15, 1994, the Board adopted the Phytotech, Inc. Stock Option Plan
(the "Plan") which provides for the award of stock options to certain employees,
directors and outside consultants of the Company. The terms and conditions of
each award will be described in a separate agreement between the Company and the
individual recipient. The Plan is to be administered by the Board or by a
committee to whom they delegate such authority.
The shares of non-voting common stock that may be issued under the Plan
shall not exceed in the aggregate a maximum of 222,222 shares (on March 3, 1998,
the Board approved, subject to shareholder approval (see note 12) an increase in
the maximum number of shares to 555,556). Such shares shall be issued from
authorized and unissued shares or treasury stock. Except as otherwise provided
in the Plan, any shares subject to an option, which for any reason expires or is
terminated unexercised, shall again be available under the Plan. Unless
terminated earlier, the Plan shall terminate on July 15, 2004. No stock options
or rights under the Plan shall be granted thereafter. The Board, without
approval of the Company's stockholders, may at any time before that date
terminate the Plan.
The Company had outstanding 37,333 stock options at an exercise price of
$.45 as of December 31, 1995. In 1996, 26,067 options were granted at a $.45 per
share exercise price and 3,733 options were exercised at a $.45 per share
exercise price. In 1997, 174,333 options were granted at an exercise price of
$.68 per share, 578 options were exercised at $.45 per share and 13,578 options
were canceled. The outstanding options at December 31, 1997 were 219,844 with a
weighted average exercise price of $.63. Shares available for grant at December
31, 1997 were 2,378. The options vest at various times over the next five-year
period and expire 10 years from date of grant. At December 31, 1997, 31,422
options were exercisable with a $.68 exercise price and 22,356 options were
exercisable with a $.45 exercise price.
On October 1, 1997, the Company granted 142,222 options primarily to certain
officers and Board members. These options vest ratably on an annual basis over
five years and have an exercise price of $.68 per option. The difference between
the deemed fair value for financial reporting purposes as determined by the
Board based on facts and circumstances which existed on that date, including
technology developments, agreements/transactions entered into by the Company,
the Company's financial condition and the price at which equity securities were
previously sold to independent third parties, and the $.68 exercise price at the
grant date has been recorded as deferred compensation ($385,000) and is being
amortized over the aforementioned vesting period. For other option grants in
1996 and 1997, the exercise price approximated the deemed fair value of the
common stock at the date of grant as determined by the Board. In accordance with
APB Opinion No. 25, no compensation cost has been recognized for these employee
stock options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its stock
options under SFAS No. 123, the Company's net loss would have been increased to
the pro forma amounts as follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Net loss:
As reported......................................... $ (2,465,727) $ (2,955,141)
------------- -------------
------------- -------------
Pro forma........................................... $ (2,467,071) $ (2,968,141)
------------- -------------
------------- -------------
</TABLE>
The pro forma additional expense related to the 1996 and 1997 options is
being spread ratably over the five-year option vesting period.
F-14
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(7) STOCK OPTIONS (CONTINUED)
The per-share, weighted-average fair value of stock options granted during
1996 and 1997 was approximately $.18 and $.32, respectively, on the date of
grant using the Black Scholes option-pricing model with the following
weighted-average assumptions: no expected dividend yield, risk free interest
rate of approximately 6.5%, expected life of ten years and no volatility as the
stock is not publicly traded.
On March 3, 1998, the Board granted, subject to shareholder approval to
increase the number of shares available under the Plan, 34,667 stock options to
certain employees. These options have an exercise price of $.68 per share and
vest over five years. The difference between the deemed fair value for financial
reporting purposes as determined by the Board based on facts and circumstances
which existed on that date, including technology developments,
agreements/transactions entered into by the Company, the Company's financial
condition and the price at which equity securities were previously sold to
independent third parties, and the $.68 exercise price at grant date has been
recorded as deferred compensation ($132,000) and is being amortized over the
aforementioned vesting period.
(8) WARRANTS
As of December 31, 1997, the Company has outstanding warrants to purchase
shares of voting common stock totaling 326,202 (all of which are exercisable) at
prices ranging from $.80 to $2.50 (pre-reverse split, some of which will
subsequently adjust upon effectiveness of the Offering based upon a formula
contained in the warrant agreements). These warrants were issued in connection
with the Series A convertible preferred stock sales (see note 6) and the
issuance of notes payable (see note 5). All warrants expire within the next five
years. As of March 31, 1998, outstanding warrants to purchase shares of voting
common stock totaled 401,433 (all of which are exercisable) with exercise prices
ranging from $.80 to $2.50 (unaudited) (subject to adjustments as above).
(9) RESEARCH AND LICENSE AGREEMENTS
During 1994, the Company entered into an initial three-year research
agreement with an academic institution (the "Institution") to perform certain
studies and field trials for the phytotreatment of heavy metals. Under the
research agreement the Company was to reimburse the Institution for all direct
and indirect costs, a total amount not to exceed approximately $1,100,000 over a
three-year period ending in 1997. In 1997, the agreement was extended for an
additional five years under which the Company has agreed to reimburse the
Institution for certain costs up to but not exceeding $500,000 in the aggregate.
The research agreement may be terminated by either party without any further
financial obligation by giving written notice to the other party of at least 90
days. Each of the studies has specific terms and conditions covering the
ownership of intellectual property conceived or discovered during the
performance of the work. Through December 31, 1997, $1,100,000 of research and
development expense under the initial agreement was incurred ($290,000 in 1996,
$250,000 in 1997 and $100,000 (unaudited) in the three months ended March 31,
1997). Under the 1997 extension, $49,000 of research and development expense was
incurred in 1997 and $21,000 (unaudited) was incurred for the three months ended
March 31, 1998. The Company is remitting payments to the Institution at certain
agreed-upon dates during the term of the agreement; $86,000 is scheduled to be
remitted in 1998.
In 1997, the Company entered into a license agreement with the same
Institution for certain technology previously discovered as well as newly
discovered technology under the extended research agreement. The license period
is through the individual patent expiration date. In exchange for the license,
the Company granted the Institution 100,000 shares of Series A convertible
preferred stock. The deemed
F-15
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(9) RESEARCH AND LICENSE AGREEMENTS (CONTINUED)
fair value of this stock as determined by the Board was $125,000 which has been
expensed in the accompanying statement of operations. The Company is also
obligated to pay royalties on future net sales.
(10) INCOME TAXES
The tax effects of temporary differences that give rise to significant
portions of the Company's deferred tax assets as of December 31, 1997 are as
follows:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards.............. $2,750,000
Research and development credit
carryforward................................ 119,000
Other......................................... 230,000
----------
Total deferred tax assets................. 3,099,000
Less valuation allowance...................... (3,099,000)
----------
Net deferred tax asset...................... $ --
----------
----------
</TABLE>
The valuation allowance previously noted offsets the deferred tax assets to
recognize the uncertainty of realizing such tax benefits. The net change in the
valuation allowance for the year ended December 31, 1997 was an increase of
$1,176,000, primarily related to additional net operating losses incurred by the
Company which are not currently deductible.
At December 31, 1997, the Company has available net operating loss
carryforwards (NOL) of approximately $6,875,000 for Federal and state income tax
reporting purposes which are available to offset future Federal and state
taxable income, if any. These carryforwards expire beginning in 2000 for state
tax purposes and 2008 for Federal tax purposes. The Company also has research
and development credit carryforwards of approximately $119,000 for Federal
income tax reporting purposes which are available to reduce Federal income
taxes, if any, through 2008. The Company made no payments of Federal or state
income taxes, other than minimum state tax payments, since inception.
The Tax Reform Act of 1986 (the Act) provides for a limitation on the annual
use of NOL and research and development tax credit carryforwards (following
certain ownership changes, as defined by the Act) which could significantly
limit the Company's ability to utilize these carryforwards. The Company has
experienced various ownership changes, as defined by the Act, as a result of
past financings and may experience others in connection with future financing.
Accordingly, the Company's ability to utilize the aforementioned carryforwards
may be limited. Additionally, because U.S. tax laws limit the time during which
these carryforwards may be applied against future taxes, the Company may not be
able to take full advantage of these attributes for Federal income tax purposes.
(11) COMMITMENTS
In December 1997, the Company entered into an agreement with a consultant
whereby he was granted 11,111 warrants during the three months ended March 31,
1998, which were issued during the three months ended March 31, 1998, to
purchase voting common stock at $2.00 (pre-reverse split) (subsequently adjusted
upon the effectiveness of Offering based upon a formula in the warrant
agreement). The warrants have a five year term. No value was ascribed to the
warrants based on the fair value as determined by a Black Scholes option pricing
model calculation. An additional warrant to purchase 44,444 voting common shares
will be issued if certain performance criteria is met. The Company will also pay
$2,000 per month for 5 months in connection with this agreement.
F-16
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(11) COMMITMENTS (CONTINUED)
On May 17, 1996, the Company's president and chief executive officer
executed a three year employment agreement at a base salary of $120,000 per
year. A performance bonus of $15,000 was paid to him in 1996 (none in 1997). In
addition, under the agreement he received stock options for 10,000 shares of
non-voting common stock at an exercise price of $.45 per share vesting over a
three year period.
The Company has entered into various other consulting agreements with
individuals to perform consulting services on behalf of the Company. Forms of
compensation vary between the payment of cash and granting of stock of the
Company, as approved by the Board. All consulting agreements contain provisions
that protect confidential information, proprietary data and intellectual
property of the Company. In the event that the consultant is deemed the sole
inventor of any intellectual property conceived during the terms of the
consulting agreement which is assigned to the Company, and the Company, at its
sole discretion and expense, obtains issued patents for the intellectual
property, the consultant shall receive a royalty from the Company during the
life of the patent equal to 5% of the portion of the gross revenues earned
attributable to the patented product, process or method invented by the
consultant, or a royalty of 2% in the event the consultant is deemed a
co-inventor of the patented technology (or a percentage mutually agreed upon by
the parties as a royalty if there are more than two co-inventors). Each
consultant has agreed that he will not be entitled to any additional
compensation by law or otherwise beyond that to which he is entitled under the
consulting agreement for any intellectual property.
In 1997, the Company entered into a cooperative research agreement whereby
the Company is obligated to perform certain services valued in the aggregate at
$150,000 in 1998 and 1999.
The Company rents certain equipment and leases, laboratory and office space
under various noncancelable operating lease agreements. Future minimum lease
payments under noncancelable leases as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998.............................................. $ 102,675
1999.............................................. 98,938
2000.............................................. 16,538
---------
$ 218,151
---------
---------
</TABLE>
Rental expense for all operating leases amounted to approximately $182,000
for the year ended December 31, 1997.
(12) SUBSEQUENT EVENTS (UNAUDITED)
INITIAL PUBLIC OFFERING
On April 21, 1998, the Board authorized the filing of a registration
statement for the Offering with the SEC for the sale of up to 2,300,000 units
(including 300,000 for the underwriter's overallotment option) consisting of one
share of common stock and a warrant to purchase one share of common stock. All
shares of Series A convertible preferred stock and the non-voting common stock,
assuming effectiveness of the Offering, outstanding as of the closing date of
the Offering will convert into shares of voting common stock on a 1:.22 basis
and 1:1 basis, respectively.
AUTOMATIC CONVERSION
In April 1998, the Board and stockholders approved the removal of a
provision of the Series A convertible preferred stock requiring that the
offering price be above $3.00 (pre-reverse split) (subject to adjustment for
stock splits, combinations and similar events) to automatically convert into
voting common stock in an underwritten public offering.
F-17
<PAGE>
PHYTOTECH, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(12) SUBSEQUENT EVENTS (UNAUDITED) (CONTINUED)
AUTHORIZED SHARES--STOCK OPTION PLAN
In April 1998, the Board and stockholders approved an increase in the number
of shares of stock reserved for issuance under the Plan to 555,556.
F-18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THIS DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
Use of Proceeds................................ 12
Dividend Policy................................ 13
Dilution....................................... 13
Capitalization................................. 14
Selected Financial Data........................ 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 16
Business....................................... 19
Management..................................... 33
Certain Transactions........................... 37
Principal Shareholders......................... 38
Description of Securities...................... 39
Underwriting................................... 43
Certain Legal Matters.......................... 44
Experts........................................ 44
Additional Information......................... 44
Financial Statements........................... F-1
</TABLE>
--------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
2,000,000 UNITS
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK AND ONE COMMON STOCK PURCHASE
WARRANT
[LOGO]
PHYTOTECH, INC.
---------------------
PROSPECTUS
---------------------
PAULSON INVESTMENT COMPANY, INC.
MILLENNIUM FINANCIAL GROUP, INC.
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Phytotech is organized under the laws of the State of New Jersey. The New
Jersey Business Corporation Act, as amended (the "Act"), provides that a New
Jersey corporation has the power generally to indemnify its directors, officers,
employees and other agents against expenses and liabilities in connection with
any proceeding involving such person by reason of his being a corporate agent,
other than a proceeding by or in the right of the corporation, if such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal proceeding, such person had no reasonable cause to believe his conduct
was unlawful. In the case of an action brought by or in the right of the
corporation, indemnification of directors, officers, employees and other agents
against expenses permitted if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation; however, no indemnification is permitted in respect to any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation, unless and only to the extent that the New Jersey Superior
Court, or the court in which such proceeding was brought, shall determine upon
application that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to such
indemnification. Expenses incurred by a director, officer, employee or other
agent in connection with a proceeding as authorized by the board of directors.
The power to indemnify and advance expenses under the Act does not exclude other
rights to which a director, officer, employee or other agent of the corporation
may be entitled to under the certificate of incorporation, by-laws, agreement,
vote of shareholders, or otherwise provided that no indemnification is permitted
to be made to or on behalf of such person if a judgment or other final
adjudication adverse to such person establishes that his acts or omissions were
in breach of his duty of loyalty to the corporation, were not in good faith or
involved a violation of the law, or resulted in the receipt by such person of an
improper personal benefit.
Under the Act, a New Jersey corporation has the power to purchase and
maintain insurance on behalf of any director, officer, employee or other agent
against any expenses incurred in any proceeding and any liabilities asserted
against him by reason of his being or having been a corporate agent, whether or
not the corporation has the power to indemnify him against such expenses and
liabilities under the Act. All powers granted to a New Jersey corporation
discussed above may be exercised by such corporation notwithstanding the absence
of any provision in its certificate of incorporation or by-laws authorizing the
exercise of such powers. However, a New Jersey corporation may, with certain
limitations, provide in its certificate of incorporation that a director or
officer shall not be personally liable, or shall be liable only to the extent
therein provided, to the corporation or its shareholders for damages for breach
of any duty owed to the corporation or its shareholders.
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") provides in Article SIXTH, a director or officer
of Phytotech shall not be personally liable to the Company or its shareholders
for damages for breach of duty as director or officer, except to the extent and
for the duration of any period of time such personal liability may not be
eliminated or limited under the Act as the same exists, or may hereafter be
amended.
The Certificate of Incorporation further provides in Article SEVENTH all
corporate officers, directors, employees and agents shall be indemnified to the
full extent permitted by law. Such indemnification may be funded through
insurance or otherwise as authorized by the Board of Directors.
Section 7 of the Company's Amended and Restated By-Laws provides that the
Company shall indemnify to the full extent permitted by law any person made, or
threatened to be made, a party to an action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that
II-1
<PAGE>
he, his testator or intestate administrator is or was a director, officer,
employee or as such at the request of the Company.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration fee-Securities and Exchange Commission..................... $ 9,131
Representative's non-accountable expense allowance......................
National Association of Securities Dealers, Inc. fee.................... 3,595
Printing and engraving expenses......................................... 40,605
Accounting fees and expenses............................................ 125,000
Legal fees and expenses................................................. 150,000
Blue Sky fees and expenses.............................................. 46,000
Transfer agent fees and expenses........................................ 3,000
Miscellaneous expenses (1).............................................. 110,000
---------
TOTAL............................................................... $
---------
---------
</TABLE>
- ------------------------
(1) Includes expenses related to road shows, conferences, meetings, promotions,
etc.
All of the foregoing estimated expenses are being borne by Phytotech, Inc.
(the "Registrant").
ITEM 26. RECENT SALE OF UNREGISTERED SECURITIES.
(a) On December 14, 1995, the Company concluded a private offering of an
aggregate of 10 units to the accredited investors named below at an offering
price of $110,000 per unit, for an aggregate consideration of $1,100,000. Each
unit consists of 100,000 shares of Series A Voting Preferred Stock, no par value
(the "Preferred Stock"). A total of 1,000,000 shares (pre-reverse split) of
Preferred Stock were issued.
<TABLE>
<CAPTION>
# OF UNITS
NAME ISSUED CONSIDERATION
- ----------------------------------------------------------------------------- ---------------- -------------
<S> <C> <C>
James W. Scott and Gwendolyn B. Scott, Joint Tenants......................... 1.00 $ 110,000
Allen C. Weiss, M.D.......................................................... 1.25 $ 137,500
Anthony D. Finocchio and Wynette A. Finocchio, Joint Tenants................. 1.00 $ 110,000
Calvin T. Simmons, II........................................................ .50 $ 55,000
John A. Joh, III............................................................. .50 $ 55,000
Ross Graham Walker, III...................................................... .50 $ 55,000
Jack L. LaBonte and Bernice L. LaBonte, Joint Tenants........................ 1.00 $ 110,000
Harold E. Anderson, Trustee of the Harold E. Anderson Revocable Trust
Agreement dated 02/27/91................................................... .50 $ 55,000
Walter P. Cwynar, Sr. and Joanne Cwynar, Joint Tenants....................... .75 $ 82,500
Dr. Bradley Neubert.......................................................... .50 $ 55,000
Michael A. Novio............................................................. .50 $ 55,000
Tom Richardson............................................................... .50 $ 55,000
Metropolitan Ear, Nose & Throat Associates Pension Plan FBO
Robert W. Clevenger, M.D................................................... .50 $ 55,000
Charles Waters............................................................... .50 $ 55,000
Edward W. LaCroix, Jr........................................................ .50 $ 55,000
</TABLE>
II-2
<PAGE>
(b) On June 20, 1996, the Company concluded a private offering of an
aggregate of 18.15 units to the accredited investors named below at an offering
price of $100,000 per unit, for an aggregate consideration of $1,815,000. Each
unit consists of 80,000 shares of Preferred Stock. A total of 1,452,000 shares
(pre-reverse split) of Preferred Stock were issued.
<TABLE>
<CAPTION>
# OF UNITS
NAME ISSUED CONSIDERATION
- ----------------------------------------------------------------------------- ---------------- -------------
<S> <C> <C>
Peter Ernest Walter Adam..................................................... .50 $ 50,000
Daniel T. Allen.............................................................. .50 $ 50,000
Mark Anderson................................................................ .25 $ 25,000
George W. Baker, Jr.......................................................... .25 $ 25,000
Ron Barshop.................................................................. .25 $ 25,000
Peter W. Bedford............................................................. .50 $ 50,000
Mark W. Corrigan............................................................. 1.00 $ 100,000
James B. Douglas............................................................. .50 $ 50,000
Armando Fernandez............................................................ .50 $ 50,000
IMS Global Investments X Ltd................................................. 2.00 $ 200,000
Roy H. Miyamoto.............................................................. 2.00 $ 200,000
Graham Noakes................................................................ .25 $ 25,000
John P. Owen................................................................. .125 $ 12,500
Jonathan Rothschild.......................................................... .50 $ 50,000
Robert H. Grossman........................................................... .50 $ 50,000
Venturtek, L.P............................................................... 1.00 $ 100,000
Randall M. Tuggle M.D.
LTD Money Purchase
Pension Plan FBO
R. Marcus Vennart Acct..................................................... .25 $ 25,000
Randall M. Tuggle M.D.
LTD Money Purchase
Pension Plan FBO
Randall M. Tuggle Acct..................................................... .25 $ 25,000
Robert H. Grossman DDS
LTD Profit Sharing Plan and Trust.......................................... .50 $ 50,000
Gary Spiegel BS Master
Def Cont M/P
Pension Plan
Oppenheimer & Co. Custodian................................................ 1.00 $ 100,000
DLJSC as Custodian FBO
David L. Spence Sep/IRA.................................................... .25 $ 25,000
VCM Venture Capital Management
and Beteiligungsgesellschaft m.b.H......................................... .65 $ 65,000
Aries Domestic Fund, L.P..................................................... .30 $ 30,000
The Aries Trust.............................................................. .70 $ 70,000
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
# OF UNITS
NAME ISSUED CONSIDERATION
- ----------------------------------------------------------------------------- ---------------- -------------
<S> <C> <C>
Baidek & Co.................................................................. 1.25 $ 125,000
Bank Gutmann A.G............................................................. .75 $ 75,000
Howard Bernstein............................................................. .75 $ 75,000
Graham C. Conklin............................................................ .125 $ 12,500
James A. Foley and Frances B. Foley, Joint Tenants........................... .125 $ 12,500
Paul M. Gavin................................................................ .25 $ 25,000
Steven Grau.................................................................. .25 $ 25,000
David P. Leonardi............................................................ .25 $ 25,000
William Maier................................................................ .125 $ 12,500
Alexander Sparkuhl........................................................... .25 $ 25,000
</TABLE>
(c) On September 15, 1997, the Company completed a private offering of an
aggregate 12.25 units to the accredited investors named below for an aggregate
consideration of $1,225,000, each unit consisting of (1) a non-negotiable
secured promissory note in the original amount of $100,000 bearing interest at
10% irrespective of the period of time principal is outstanding, due and payable
by the Company on June 30, 1998, (subject to extension at the option of the
majority in principal amount of all of the noteholders for a period of six (6)
months) and (2) warrants to purchase 20,000 shares (pre-reverse split) of Common
Stock of the Company, which warrants are exercisable any time, in whole or in
part, during the period from and after September 15, 1997 through to and
including September 15, 2002.
<TABLE>
<CAPTION>
# OF UNITS
NAME ISSUED CONSIDERATION
- ----------------------------------------------------------------------------- ---------------- -------------
<S> <C> <C>
Harold E. Anderson........................................................... .50 $ 50,000
Charles Beals................................................................ .50 $ 50,000
H. Richard Butker and Judith M. Butker, Joint Tenants........................ .25 $ 25,000
James B. Douglas............................................................. .25 $ 25,000
William C. Gates............................................................. .50 $ 50,000
Arthur and Claire Gaucher, Joint Tenants..................................... .50 $ 50,000
Arthur Lang.................................................................. .25 $ 25,000
William Lightbody............................................................ 1.00 $ 100,000
Jon R. Lind.................................................................. 1.00 $ 100,000
John K. Lingo, M.D........................................................... .50 $ 50,000
John R. Manis, M.D........................................................... 2.00 $ 200,000
Frank J. Martusciello........................................................ .50 $ 50,000
Dave Pollak.................................................................. .25 $ 25,000
Carl M. Smith................................................................ .25 $ 25,000
Michael G. and Gerard C. Smith, Joint Tenants................................ .50 $ 50,000
David L. Spence.............................................................. .25 $ 25,000
Ron and Joy Tepner, Joint Tenants............................................ 1.00 $ 100,000
Christina Tranberg........................................................... .25 $ 25,000
Seymour Wasserstrum.......................................................... .50 $ 50,000
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
# OF UNITS
NAME ISSUED CONSIDERATION
- ----------------------------------------------------------------------------- ---------------- -------------
<S> <C> <C>
Charles Waters............................................................... .25 $ 25,000
Watts Investments, Inc....................................................... .25 $ 25,000
Samuel P. Willits............................................................ 1.00 $ 100,000
</TABLE>
(d) The Company completed on February 27, 1998 (with an extension to March
16, 1998) a private offering of an aggregate 9.618 units to the accredited
investors named below for an aggregate consideration of $961,800, each unit
consisting of (1) a non-negotiable secured promissory note in the original
amount of $100,000 bearing interest at 12% irrespective of the period of time
principal is outstanding, due and payable by the Company on June 30, 1998
(subject to extension at the option of the majority in principal amount of all
of the noteholders for a period of six (6) months), and (2) warrants to purchase
30,000 shares (pre-reverse split) of Common Stock of the Company, which warrants
are exercisable, in whole or in part, at any time during the period from and
after February 27, 1998 (with respect to certain warrants) and March 16, 1998
(with respect to certain warrants) through to and including February 27, 2003
and March 16, 2003, respectively.
<TABLE>
<CAPTION>
# OF UNITS
NAME ISSUED CONSIDERATION
- ----------------------------------------------------------------------------- ---------------- -------------
<S> <C> <C>
Milton C. Dunsey and Donna Dunsey, Joint Tenants............................. .245 $ 24,500
Anthony D. Finocchio and Wynette A. Finocchio, Joint Tenants................. .873 $ 87,300
Joseph Gery and Karen M. Gery, Joint Tenants................................. .50 $ 50,000
William Toshio Matsuyama..................................................... .50 $ 50,000
James W. Scott and Gwendolyn B. Scott, Joint Tenants......................... 2.405 $ 240,500
Teruko Terry Miyamoto Trust.................................................. 1.00 $ 100,000
Allen C. Weiss............................................................... .895 $ 89,500
Allison Gushee Molkenthin and Steven Mark Molkenthin, Joint Tenants.......... .20 $ 20,000
Union D'Etudes et D'Investissments........................................... 3.00 $ 300,000
</TABLE>
The issuance described in paragraphs (a), (b), (c) and (d) above are exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) thereof as transactions not involving a public offering.
II-5
<PAGE>
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
1.2 Form of Purchase Warrant Issued to Paulson Investment Company, Inc. by the
Registrant.*
3.1 Amended and Restated Certificate of Incorporation of the Registrant, as
amended.*
3.2 Amended and Restated By-Laws of the Registrant.*
3.3 Fifth Amendment to the Amended and Restated Certificate of Incorporation.
4.1 Specimen of Common Stock Certificate of Registrant.
4.2 Form of Warrant Agreement between Registrant and Registrar And Transfer Company,
as Warrant Agent.*
4.3 Specimen Warrant Certificate of Registrant.
5.1 Opinion of Shanley & Fisher, P.C.
10.1 Employment Agreement, Effective May 17, 1996, between Registrant and Dr. Burt D.
Ensley.*
10.2 Exclusive License Agreement, Effective May 15, 1997, between the Registrant and
Rutgers.*
10.3 Research Agreement, Effective November 19, 1993, as modified September 9, 1997,
between the Registrant and Rutgers.
10.4 Agreement for Services, Effective February 1, 1998, between the Registrant and
Florida State University.
10.5 Contract, Dated August 15, 1997, as amended March 3, 1998, between the
Registrant and the Department of Defense, U.S. Army.
10.6 Subcontract Agreement, Effective August 15, 1997, between the Registrant and
Parsons Engineering Science, Inc.
10.7 Lease Agreement, dated January 2, 1995, between Aspen Associates and the
Registrant.
10.8 Stock Option Plan.*
10.9 Amendment to Stock Option Plan.
10.10 Promissory Note of $100,000, Dated May 26, 1997, from the Registrant to Dr. Burt
D. Ensley.*
10.11 Promissory Note of $4,000, Dated May 26, 1997, from the Registrant to Dr. Burt
D. Ensley.*
10.12 Promissory Note of $100,000, Dated May 26, 1997, from the Registrant to Dr.
Philip J. Whitcome.*
10.13 Promissory Note of $25,000, Dated May 26, 1997, from the Registrant to Abraham
H. Nechemie.*
23.1 Consent of KPMG Peat Marwick LLP.**
23.2 Consent of Shanley & Fisher, P.C. (included in Exhibit 5.1).
24.1 Powers of Attorney.*
27 Financial Data Schedule for period ended March 31, 1998.*
27.1 Financial Data Schedule for period ended December 31, 1997.*
99.1 Form of Confidentiality Agreement.*
99.2 Form of Non-Statutory Stock Option Agreement.*
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <S>
99.3 Form of Incentive Stock Option Agreement.*
</TABLE>
- ------------------------
* Filed with initial Registration Statement on April 22, 1998.
** To be filed by Amendment.
ITEM 28. UNDERTAKINGS.
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act.
(ii) To reflect in the prospectus any fact or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriters to permit prompt delivery to each
purchaser.
(3) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(4) To remove from the registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act, and is therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(6) For determining any liability under the Securities Act, to treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 403A and contained in a form of
prospectus filed by the issuer under Rule 424(b)(1) or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
(7) For determining any liability under the Securities Act, to treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Township of
Monmouth Junction, State of New Jersey, on June 3, 1998.
<TABLE>
<S> <C> <C>
PHYTOTECH, INC.
By: /s/ BURT D. ENSLEY
------------------------------------------
Burt D. Ensley, PRESIDENT
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities indicated on June 3, 1998.
SIGNATURE TITLE
- ------------------------------ --------------------------
/s/ BURT D. ENSLEY President and Chief
- ------------------------------ Executive Officer and
Burt D. Ensley Director
(Principal Executive
Officer)
/s/ ALEXANDER BALTOVSKI Chief Financial Officer
- ------------------------------ (Principal Accounting
Alexander Baltovski Officer)
* Director
- ------------------------------
Philip J. Whitcome
* Director
- ------------------------------
Laura R. Meagher
* Director
- ------------------------------
Ilya Raskin
* Director
- ------------------------------
Abraham H. Nechemie
* Director
- ------------------------------
Schneur Z. Genack
Director
- ------------------------------
Eric K. Johnson
* Burt D. Ensley hereby signs this Amendment No. 1 to the Registration
Statement on Form SB-2 on behalf of each of the indicated persons for whom he is
attorney-in-fact on June 3, 1998 pursuant to a power of attorney.
By: /s/ BURT D. ENSLEY
-------------------------
Burt D. Ensley
ATTORNEY-IN-FACT
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.*
1.2 Form of Purchase Warrant Issued to Paulson Investment Company, Inc. by the
Registrant.*
3.1 Amended and Restated Certificate of Incorporation of the Registrant, as
amended.*
3.2 Amended and Restated By-Laws of the Registrant.*
3.3 Fifth Amendment to the Amended and Restated Certificate of Incorporation.
4.1 Specimen of Common Stock Certificate of Registrant.
4.2 Form of Warrant Agreement between Registrant and Registrar And Transfer Company,
as Warrant Agent.*
4.3 Specimen Warrant Certificate of Registrant.
5.1 Opinion of Shanley & Fisher, P.C.
10.1 Employment Agreement, Effective May 17, 1996, between Registrant and Dr. Burt D.
Ensley.*
10.2 Exclusive License Agreement, Effective May 15, 1997, between the Registrant and
Rutgers.*
10.3 Research Agreement, Effective November 19, 1993, as modified September 9, 1997,
between the Registrant and Rutgers.
10.4 Agreement for Services, Effective February 1, 1998, between the Registrant and
Florida State University.
10.5 Contract, Dated August 15, 1997, as amended March 3, 1998, between the
Registrant and the Department of Defense, U.S. Army.
10.6 Subcontract Agreement, Effective August 15, 1997, between the Registrant and
Parsons Engineering Science, Inc.
10.7 Lease Agreement, dated January 2, 1995, between Aspen Associates and the
Registrant.
10.8 Stock Option Plan.*
10.9 Amendment to Stock Option Plan.
10.10 Promissory Note of $100,000, Dated May 26, 1997, from the Registrant to Dr. Burt
D. Ensley.*
10.11 Promissory Note of $4,000, Dated May 26, 1997, from the Registrant to Dr. Burt
D. Ensley.*
10.12 Promissory Note of $100,000, Dated May 26, 1997, from the Registrant to Dr.
Philip J. Whitcome.*
10.13 Promissory Note of $25,000, Dated May 26, 1997, from the Registrant to Abraham
H. Nechemie.*
23.1 Consent of KPMG Peat Marwick LLP.**
23.2 Consent of Shanley & Fisher, P.C. (included in Exhibit 5.1).
24.1 Powers of Attorney.*
27 Financial Data Schedule for period ended March 31, 1998.*
27.1 Financial Data Schedule for period ended December 31, 1997.*
99.1 Form of Confidentiality Agreement.*
99.2 Form of Non-Statutory Stock Option Agreement.*
99.3 Form of Incentive Stock Option Agreement.*
</TABLE>
- ------------------------
* Filed with initial Registration Statement on April 22, 1998.
** To be filed by Amendment.
<PAGE>
FIFTH CERTIFICATE OF AMENDMENT TO THE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PHYTOTECH, INC.
To: Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:9-2(4) and Section 14A:9-4(3),
Corporations, General, of the New Jersey Statutes, the undersigned corporation,
PHYTOTECH, INC. (the "Corporation"), organized under the laws of the State of
New Jersey, does hereby execute the following Fifth Certificate of Amendment to
the Amended and Restated Certificate of Incorporation for the purpose of
amending its Amended and Restated Certificate of Incorporation:
FIRST: The name of the Corporation is PHYTOTECH, INC.
SECOND: Article THIRD, Section (i) of the Amended and Restated
Certificate of Incorporation is amended to read as follows:
"(i) On the fifth anniversary of the closing of the initial private
placement effected pursuant to Regulation D under the Act, each share
of Preferred Stock then outstanding will automatically be converted
into one share of Common Stock (the "Conversion Rate"). All
outstanding shares of Preferred Stock shall also be automatically
converted into shares of Common Stock at the Conversion Rate (a) upon
the consummation of an underwritten public offering registered with
the SEC under the Act by the Corporation of its Common Stock, pursuant
to which Common Stock is offered to the public or (b) immediately
prior to the consummation of a consolidation or merger of the
Corporation with or into another corporation, or any sale or transfer
of all or substantially all of the assets of the Corporation, pursuant
to which the holders of Common Stock (assuming the conversion of all
outstanding Preferred Stock into Common Stock at the Conversion Rate)
will receive cash or securities or property having a value (as
determined by the Corporation's Board of Directors) of at least $3.00
per share of Common Stock. The holder of any shares of Preferred
Stock converted into Common Stock in connection with such a
<PAGE>
public offering or other transaction shall be entitled to payment of
all declared but unpaid dividends, if any, payable with respect to
such shares up to and including the date of the closing of such public
offering or other transaction."
THIRD: The adoption of the above amendment to the Amended and Restated
Certificate of Incorporation was approved by the shareholders of the Corporation
by written consent in accordance with Section 14A:5-6.
FOURTH: The number of shares of Common Stock outstanding and entitled to
vote on the aforesaid amendment to the Amended and Restated Certificate of
Incorporation was 2,305,360. The number of shares of Series A Voting Preferred
Stock outstanding and entitled to vote on the aforesaid amendment to the Amended
and Restated Certificate of Incorporation was 6,364,500.
FIFTH: The number of shares of Common Stock voting in favor of the
adoption of the amendment to Article Third of the Amended and Restated
Certificate of Incorporation was 1,305,360 shares and no shares voted against
the adoption of said Amendment.
The number of shares of Series A Voting Preferred Stock voting in favor of
the adoption of the amendment to Article Third of the Amended and Restated
Certificate of Incorporation was 4,358,000 shares and no shares voted against
the adoption of said Amendment.
IN WITNESS WHEREOF, the President of the Corporation has executed this
Fifth Certificate of Amendment to the Amended and Restated Certificate of
Incorporation this 29th day of May, 1998.
PHYTOTECH, INC.
BURT D. ENSLEY
------------------------------
BURT D. ENSLEY, PRESIDENT
2
<PAGE>
PHYTOTECH
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
NUMBER SHARES
P
CUSIP 718954 10 0
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, NO PAR VALUE, OF
PHYTOTECH, INC. TRANSFERABLE ON THE BOOKS OF THE CORPORATION BY THE HOLDER
HEREOF IN PERSON OR BY DULY AUTHORIZED ATTORNEY UPON THE SURRENDER OF THIS
CERTIFICATE PROPERLY ENDORSED. THIS CERTIFICATE IS NOT VALID UNLESS
COUNTERSIGNED BY THE TRANSFER AGENT AND REGISTERED BY THE REGISTRAR.
WITNESS THE FACSIMILE SEAL OF THE CORPORATION AND THE FACSIMILE SIGNATURES
OF ITS DULY AUTHORIZED OFFICERS.
DATED:
Ilya Raskin [SEAL] Burt D. Ensley
Secretary President and Chief Executive Officer
Countersigned and Registered
REGISTRAR AND TRANSFER COMPANY
Transfer Agent and Registrar
by
Authorized Signature
<PAGE>
PHYTOTECH, INC.
The Corporation will, upon request and without charge, furnish any
stockholder information as to the powers, designations, preferences and
relative participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions
of such preferences and/or rights.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM - as tenants in common UNIF GIFT MIN ACT-_____ Custodian_____
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of Under Uniform Gifts to Minors
survivorship and not as tenants
in common Act_______________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(NAME AND ADDRESS OF ASSIGNEE SHOULD BE PRINTED OR TYPEWRITTEN)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------SHARES
OF THE COMMON STOCK REPRESENTED BY THE WITHIN CERTIFICATE AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
_______________________________________________________________________ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN-NAMED CORPORATION, WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED___________________________
[Illegible] MEDALLION SIGNATURE
GUARANTEE IMPRINT BELOW ----------------------------------------------
----------------------------------------------
ABOVE SIGNATURE(S) TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY
CHANGE WHATEVER.
THE SIGNATURE(S) MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION SUCH AS A
SECURITIES BROKER/DEALER, COMMERCIAL BANK,
TRUST COMPANY, SAVINGS ASSOCIATION OR A CREDIT
UNION PARTICIPATING IN A MEDALLION PROGRAM
APPROVED BY THE SECURITIES TRANSFER
ASSOCIATION, INC.
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
<PAGE>
NO. [PHYTOTECH LOGO] WARRANTS
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
THIS CERTIFIES THAT, FOR VALUE RECEIVED CUSIP 718954 11 8
or registered assigns, is the registered holder of the number of Warrants
("Warrants") set forth above. Each Warrant entitles the holder thereof to
purchase from Phytotech, Inc. a corporation incorporated under the laws of the
State of New Jersey ("Company"), subject to the terms and conditions set forth
hereinafter and in the Warrant Agreement hereinafter more fully described (the
"Warrant Agreement") referred to, one fully paid and non-assessable share of
Common Stock, no par value, of the Company ("Common Stock") upon presentation
and surrender of this Warrant Certificate with the instructions for the
registration and delivery of Common Stock filed in, at any time on or after
__________, 1998 and at or before the close of business on __________, 2003
or, if such Warrant is redeemed as provided in the Warrant Agreement, at any
time prior to the effective time of such redemption, at the stock transfer
office in Cranford, New Jersey, of Registrar and Transfer Company, Warrant
Agent of the Company ("Warrant Agent") or of its successor warrant agent or,
if there be no successor warrant agent, at the corporate offices of the
Company, and upon payment of the Exercise Price (as defined in the Warrant
Agreement) and any applicable taxes paid either in cash, or by certified or
official bank check, payable in lawful money of the United States of America
to the order of the Company. Each Warrant initially entitles the holder to
purchase one share of Common Stock for $_____. The number and kind of
securities or other property for which the Warrants are exercisable are
subject to further adjustment in certain events, such as mergers, splits,
stock dividends, recapitalizations and the like, to prevent dilution. The
Company may redeem any or all outstanding and unexercised Warrants at any time
if the Daily Price has exceeded $_____ for twenty (20) consecutive trading
days immediately preceding the date of notice of such redemption, upon thirty
(30) days notice, at a price equal to $0.25 per Warrant. For the purpose of
the foregoing sentence, the term "Daily Price" shall mean, for any relevant
day, the closing bid price on that day as reported by the principal exchange
or quotation system on which prices for the Common Stock are reported. All
Warrants not theretofore exercised or redeemed will expire on __________, 2003.
This Warrant Certificate is subject to all of the terms, provisions and
conditions of the Warrant Agreement, dated as of __________, 1998 ("Warrant
Agreement"), between the Company and the Warrant Agent, to all of which terms,
provisions and conditions the registered holder of this Warrant Certificate
consents by acceptance hereof. The Warrant Agreement is incorporated herein by
reference and made a part hereof and reference is made to the Warrant
Agreement for a full description of the rights, limitation of rights,
obligations, duties and immunities of the Warrant Agent, the Company and the
holders of the Warrant Certificates. Copies of the Warrant Agreement are
available for inspection at the stock transfer office of the Warrant Agent or
may be obtained upon written request addressed to the Company at 1 Deer Park
Drive, Suite l, Monmouth Junction, New Jersey 06852, Attention: Controller.
The Company shall not be required upon the exercise of the Warrants
evidenced by this Warrant Certificate to issue fractions of Warrants, Common
Stock or other securities, but shall make adjustment therefor in cash on the
basis of the current market value of any fractional interest as provided in the
Warrant Agreement.
In certain cases, the sale of securities by the Company upon exercise of
Warrants would violate the securities laws of the United States, certain
states thereof or other jurisdictions. The Company has agreed to use its best
efforts to cause a registration statement to continue to be effective during
the term of the Warrants with respect to such sales under the Securities Act
of 1933, and to take such action under the laws of various states as may be
required to cause the sale of securities upon exercise to be lawful. However,
the Company will not be required to honor the exercise of Warrants if, in the
opinion of the Board of Directors, upon advice of counsel, the sale of
securities upon such exercise would be unlawful. In certain cases, the Company
may, but is not required to, purchase Warrants submitted for exercise for a
cash price equal to the difference between the market price of the securities
obtainable upon such exercise and the exercise price of such Warrants.
This Warrant Certificate, with or without other Certificates, upon
surrender to the Warrant Agent, any successor warrant agent or, in the absence
of any successor warrant agent, at the corporate offices of the Company, may
be exchanged for another Warrant Certificate or Certificates evidencing in the
aggregate the same number of Warrants as the Warrant Certificate or
Certificates so surrendered. If the Warrants evidenced by this Warrant
Certificate shall be exercised in part, the holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Certificates
evidencing the number of Warrants not so exercised.
No holder of this Warrant Certificate, as such, shall be entitled to
vote, receive dividends or be deemed the holder of Common Stock or any other
securities of the Company which may at any time be issuable on the exerciser
hereof for any purpose whatsoever, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder of this Warrant
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof or give or withhold consent to any
corporate action (whether upon any matter submitted to stockholders at any
meeting thereof, or give or withhold consent to any merger, recapitalization,
issuance of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, conveyance or otherwise) or to receive
notice of meetings or other actions affecting stockholders (except as provided
in the Warrant Agreement) or to receive dividends or subscription rights or
otherwise until the Warrants evidenced by this Warrant Certificate shall have
been exercised and the Common Stock purchasable upon the exercise thereof
shall have become deliverable as provided in the Warrant Agreement.
Dated:
Countersigned and Registered:
REGISTRAR AND TRANSFER COMPANY
Transfer Agent
and Registrar
By
Authorized Signature
[PHYTOTECH, INC. CORPORATE SEAL]
PHYTOTECH, INC.
By /s/ Ilya Raskin By /s/ Burt D. Ensley
Secretary President and Chief Executive Officer
<PAGE>
If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Company's Common Stock or other
class of stock purchasable upon the exercise of the Warrants evidenced by this
Warrant Certificate are closed for any purpose, the Company shall not be
required to make delivery of certificates for shares purchasable upon such
transfer until the date of the reopening of said transfer books.
Every holder of this Warrant Certificate by accepting the same consents
and agrees with the Company, the Warrant Agent, and with every other holder
of a Warrant Certificate that:
(a) this Warrant Certificate is transferable on the registry books
of the Warrant Agent only upon the terms and conditions set forth in the
Warrant Agreement; and
(b) the Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the absolute owner
hereof (notwithstanding any notation of ownership or other writing thereon
made by anyone other than the Company or the Warrant Agent) for all purposes
whatsoever and neither the Company nor the Warrant Agent shall be affected by
any notice to the contrary.
The Company shall not be required to issue or deliver any certificate for
shares of Common Stock or other securities upon the exercise of Warrants
evidenced by this Warrant Certificate until any tax which may be payable in
respect thereof by the holder of this Warrant Certificate pursuant to the
Warrant Agreement shall have been paid, such tax being payable by the holder
of this Warrant Certificate at the time of surrender.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration received from
the Assignee(s) named below, the undersigned registered Holder of this Warrant
Certificate hereby sells, assigns, and transfers unto the Assignee(s) named
below (including the undersigned with respect to any Warrants constituting a
part of the Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate,
with respect to the number of Warrants set forth below:
Name(s) of Assignee(s): _______________________________________________________
Address: ______________________________________________________________________
No. of Warrants: ______________________________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ____________________________
the undersigned's attorney to make such transfer on the books of ______________
_______________________ maintained for the purposes, with full power of
substitution in the premises.
Dated:
________________________________________
(Signature of Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
________________________________________
(To be executed only upon exercise of Warrant)
To: Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016
The undersigned irrevocably exercises __________________ of the Warrants
represented by this Warrant Certificate and herewith makes payment of $________
(such payment being by wire transfer or by certified or official bank or bank
cashier's check payable to the order or at the direction of Phytotech, Inc.),
all at the exercise price and on the terms and conditions specified in this
Warrant Certificate and in the Warrant Agreement referred to herein and
surrenders this Warrant Certificate and all right, title and interest therein
to and directs that the common shares, of Phytotech, Inc. deliverable upon the
exercise of such Warrants to be registered or placed in the name and at the
address specified below and delivered thereto.
Dated:
________________________________________
(Signature of Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
________________________________________
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
<PAGE>
Shanley & Fisher, P.C.
131 Madison Avenue
Morristown, New Jersey 07962
(973) 285-1000
EXHIBIT 5.1
June 3, 1998
Securities and Exchange Commissions
450 Fifth Street N.W.
Washington, D.C. 20549
Re: Phytotech, Inc.
Registration No. 333-50721
Ladies and Gentlemen:
We refer to the above-referenced registration statement on Form SB-2 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Act"), filed by Phytotech, Inc., a New Jersey corporation (the "Company"),
with the Securities and Exchange Commission.
For purposes of this opinion, we have examined the originals, photocopies,
certified copies or other evidence of such records of the Company,
certificates of officers of the Company and public officials, and other
documents as we have deemed relevant and necessary as a basis for the opinion
hereinafter expressed. In such examination, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
certified copies or photocopies and the authenticity of the originals of such
latter documents.
Based upon the foregoing, we are of the opinion that the securities being
registered to be sold pursuant to the Registration Statement are duly
authorized and will be, when sold in the manner described in the Registration
Statement and upon receipt of the full consideration described therein,
legally and validly issued, and, in the case of shares of the Company's common
stock, no par value, covered by the Registration Statement, fully paid and
nonassessable.
<PAGE>
SHANLEY & FISHER
Phytotech, Inc.
June 3, 1998
Page 2
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to this firm under "Legal
Matters" in the related Prospectus. In giving the foregoing consent, we do
not hereby admit that we are in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission.
Very truly yours,
SHANLEY & FISHER
<PAGE>
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
OFFICE OF CORPORATE LIAISON AND TECHNOLOGY TRANSFER
STANDARD RESEARCH AGREEMENT
This RESEARCH AGREEMENT is entered into as of 19 November, 1993 by and
between Phytotech, Inc., a corporation organized under the laws of the State of
New Jersey, having a business office at 131 Madison Avenue, Morristown, New
Jersey 07962-1979 (hereafter "SPONSOR") and RUTGERS, The State University, a
specially chartered New Jersey Educational Institution, having its principal
offices in New Brunswick, New Jersey 08903 (hereafter "RUTGERS").
WHEREAS, the research program contemplated by this AGREEMENT is of mutual
interest and benefit to RUTGERS and to SPONSOR, will further the instructional
and research objectives of RUTGERS in a manner consistent with its status as a
non-profit, tax-exempt, public, educational institution, and may derive benefits
for both SPONSOR and RUTGERS by advancing knowledge through discovery and by
creating new technologies through invention:
NOW, THEREFORE, the parties mutually agree as follows:
1. DEFINITIONS
As used herein, the following terms shall have the following meanings:
a. "Intellectual Property" shall include, but not be limited to, ideas,
processes, principles, designs, methods, techniques, software,
inventions, improvements and/or discoveries which are conceived and/or
reduced to practice by one or more employees of RUTGERS.
b. "Proprietary Information" shall mean any and all knowledge, know-how,
practices, process, or other information disclosed to one party by the
other party which the disclosing party considers proprietary and which
it identifies in writing as "Proprietary Information."
c. "Protection" shall mean all legal means of establishing rights to
Intellectual Property, including but not limited to patents,
copyrights, Plant Variety Protection Certificates, and plant patents.
2. STATEMENT OF WORK
SPONSOR wishes to have RUTGERS undertake a research project entitled
"Development of Phytoremediation Technology" in accordance with the scope of
work described in the attached Exhibit A (hereafter "RESEARCH PROJECT") .
RUTGERS shall use reasonable efforts to perform the RESEARCH PROJECT as
described in Exhibit A substantially in accordance with the terms and conditions
of this AGREEMENT.
3. PRINCIPAL INVESTIGATOR
RUTGERS will conduct the RESEARCH PROJECT under the direction and
supervision of Dr. Ilya Raskin, the PRINCIPAL INVESTIGATOR (PI). If for any
reason the PI is unable to continue the research project, and a SPONSOR
acceptable substitute is not available, SPONSOR may terminate this AGREEMENT
according to the terms of Article 18.
<PAGE>
4. PERIOD OF PERFORMANCE
The period during which the RESEARCH PROJECT is to be performed shall run
from September 1, 1993 to June 30, 1994, and may be extended, renewed, or
amended by the mutual written agreement of both parties.
5. REIMBURSEMENT OF COSTS
SPONSOR shall reimburse RUTGERS for all direct and indirect costs incurred
in connection with the RESEARCH PROJECT an amount not to exceed $159,363. Any
costs in excess of the amount specified must be authorized as an amendment to
this AGREEMENT by SPONSOR. RUTGERS shall retain title to equipment and supplies
purchased with funds provided by SPONSOR under this AGREEMENT.
6. PAYMENT SCHEDULE
a. Payments shall be made to RUTGERS by SPONSOR as follows:
(1) First payment of $59,363 on or about the date of signing this
AGREEMENT.
(2) The balance due on:
Date: February 19, 1994 Amount: $50,000
Date: May 19, 1994 Amount: $50,000
b. Checks should be made payable to Rutgers, The State University and
sent to Associate Controller, Rutgers University, Division of Grant
and Contract Accounting, P.O. Box 1089, Piscataway, New Jersey
08855-1089.
c. For identification purposes, each payment should include the name of
the PI and the title of the RESEARCH PROJECT.
7. REPORTS
The PRINCIPAL INVESTIGATOR shall report periodically to SPONSOR on progress
of the RESEARCH PROJECT. A final report shall be provided by the PRINCIPAL
INVESTIGATOR on behalf of RUTGERS within sixty (60) days of the expiration of
this AGREEMENT.
8. PROPRIETARY DATA
During the term of the RESEARCH PROJECT, it may be necessary or desirable
for SPONSOR to divulge to RUTGERS certain information which SPONSOR considers to
be proprietary. Such Proprietary Information will be plainly marked in writing
before delivery, where possible. RUTGERS agrees to make a good faith effort to
hold such information in confidence during the term of this AGREEMENT and for
three years beyond the termination of this AGREEMENT. The standards observed by
RUTGERS in its good faith effort are to be the same as would apply to the
security of its own confidential records. RUTGERS reserves the right to refuse
to accept Proprietary Information which it does not consider essential to the
completion of the RESEARCH PROJECT. Furthermore, RUTGERS is not obliged to
treat as proprietary any information which is (i) public information, (ii)
already known to RUTGERS or its personnel, in their capacity as RUTGERS
employees (iii) independently developed at a later time by RUTGERS personnel
without knowledge of SPONSOR's Proprietary Information, (iv) provided to RUTGERS
by a third party without breaching any obligation to SPONSOR, or (v) required to
be disclosed by court order. RUTGERS further agrees to destroy or return any
such Proprietary Information and any and all copies thereof to SPONSOR upon
request.
9. PUBLICATIONS
Publication of research results is one of the primary missions of RUTGERS
and SPONSOR agrees that researchers engaged in the RESEARCH PROJECT shall be
permitted to present at symposia, national or regional professional meetings,
and to publish in journals, theses or dissertations, or otherwise of their own
choosing, methods and results of the project. However, SPONSOR will be
furnished copies of any proposed publication or presentation for review and
comment at least thirty (30) days in advance of the submission of such proposed
publication or presentation to a journal editor, or other third party. During
this 30 day period, SPONSOR may
<PAGE>
request: a) that RUTGERS delay publication to allow time for SPONSOR to file a
United States patent applications on RUTGERS' behalf, such period not to exceed
twelve (12) months; and b) that RUTGERS delete from the proposed publication
Proprietary Information obtained from SPONSOR by RUTGERS personnel during the
course of the RESEARCH PROJECT. The submission and cataloging of any thesis or
dissertation prepared by a graduate student in fulfillment of an academic degree
requirement shall be delayed only in accord with procedures approved by RUTGERS.
10. INTELLECTUAL PROPERTY
a. All rights and title to Intellectual Property conceived or discovered
in the performance of this RESEARCH PROJECT shall belong to RUTGERS
and shall be subject to the terms and conditions of this AGREEMENT.
b. RUTGERS will promptly notify SPONSOR once it has identified any
potentially valuable Intellectual Property conceived and/or made
during the term of this AGREEMENT. If SPONSOR directs that a patent
application or application for other Intellectual Property Protection
be filed, RUTGERS shall promptly prepare, file, and prosecute such
U.S. and foreign applications in RUTGERS' name using a firm or
attorney that is chosen by RUTGERS, or at SPONSOR's option, an
attorney selected by SPONSOR subject to RUTGERS approval. SPONSOR
shall bear all costs incurred in connection with such preparation,
filing, prosecution, and maintenance of U.S. and foreign applications
directed to such RUTGERS Intellectual Property. SPONSOR shall be
given the opportunity to review and provide input to such applications
to assure that SPONSOR's interests are covered. RUTGERS shall keep
SPONSOR advised as to all developments with respect to such
applications and shall promptly supply SPONSOR copies of all papers
received and filed in connection with the prosecution.
c. If SPONSOR does not request RUTGERS to file for Protection of
Intellectual Property in a particular country, or decides to
discontinue the financial support of the prosecution or maintenance of
the Protection in that country, RUTGERS may pursue whatever course it
deems necessary to protect its Intellectual Property, and RUTGERS
shall have no further obligation to SPONSOR to option or to license
with regard to that country.
11. GRANT OF RIGHTS
SPONSOR will promptly decide whether to pay for all costs of filing
applications for Protection. If SPONSOR agrees to pay preparation fees and
filing costs, RUTGERS hereby grants SPONSOR an option to a license on
Intellectual Property resulting from the performance of research under this
AGREEMENT. This option will expire six (6) months from disclosure of the
Intellectual Property, evidenced by a dated receipt. Upon exercise of this
option, RUTGERS shall grant to SPONSOR, under a separate agreement, a license
which will include provisions for:
a. An exclusive or nonexclusive worldwide license, with a right to
sublicense, for the duration of the protection afforded by U.S. and
foreign law, in the field(s) of use for which the SPONSOR can
demonstrate commercial intent.
b. A reasonable royalty paid to RUTGERS on the gross sales of any
product, apparatus, or process commercially introduced as a result of
the research work performed, including minimum royalty and due
diligence clause(s).
c. Agreement by RUTGERS and SPONSOR to negotiate in good faith the terms
and conditions of a license agreement which are satisfactory to both
parties. However, in the event of disagreement, the disputed matters
will be submitted for arbitration under the rules and procedures of
the American Arbitration Association.
<PAGE>
12. INDEPENDENT CONTRACTOR
a. In the performance of all services hereunder, RUTGERS shall be deemed
an independent contractor and, as such, RUTGERS and its faculty,
students, and staff shall not be construed to be employees or agents
of SPONSOR and shall not be entitled to any benefits applicable to
employees of SPONSOR.
b. Neither party is authorized or empowered to act as agent for the other
for any purpose and shall not on behalf of the other enter into any
contract, warranty, or representation as to any matter. Neither shall
be bound by the acts or conduct of the other.
13. PUBLICITY
Neither party shall use the name of the other party, nor of any member of
the other party's staff, in connection with any publicity without the prior
written approval of the other party. This shall not include RUTGERS internal
documents, annual reports and databases which are available to the public and
which identify the existence of the RESEARCH PROJECT by title, PRINCIPAL
INVESTIGATOR, SPONSOR, period of funding, amount of award, and an abstract of
project.
14. WARRANTIES
RUTGERS makes no warranties, expressed or implied, as to any matter
whatsoever, including, without limitation, the condition of the research or any
invention (s) or product (s) , whether tangible or intangible, conceived,
discovered, or developed under this AGREEMENT; or the ownership,
merchantability, or fitness for a particular purpose of the research or any such
invention or product. RUTGERS shall not be liable for any direct,
consequential, or other damages suffered by any licensee or any others resulting
from the use of the research or any such invention or product.
RUTGERS makes no representation or warranty regarding actual or potential
infringement of patents or copyrights of third parties, and SPONSOR acknowledges
that the avoidance of such infringement in the design, use, and sale of products
and processes related to this RESEARCH PROJECT shall remain the responsibility
of SPONSOR.
15. INDEMNIFICATION
SPONSOR agrees to indemnify and hold harmless RUTGERS, its employees and
agents against any liability, damages, loss or expense (including reasonable
attorney fees and expenses of litigation) arising out of the actions of the
SPONSOR, its employees or any Third Party acting on behalf of or under
authorization from SPONSOR in the performance of this AGREEMENT, except for the
sole negligent acts of RUTGERS, its employees and agents.
Without limiting the foregoing, SPONSOR agrees to hold harmless, indemnify
and defend RUTGERS from all liabilities, demands, damages, expenses and losses
(including reasonable attorney fees and expenses of litigation) arising out of
the use by SPONSOR, or by any party acting on behalf of or under authorization
from SPONSOR, of RUTGERS technical development or out of any use, sale or other
disposition by SPONSOR, or by any party acting on behalf of or under
authorization from SPONSOR, of products made or developed as a result of
information or materials received from RUTGERS. The provisions of this
paragraph shall survive termination of this AGREEMENT.
16. COMPLIANCE
RUTGERS and SPONSOR agree that they will comply with all applicable
federal, state and local laws, codes, regulations, rules and orders. This
AGREEMENT shall be governed by the laws of the State of New Jersey.
17. ASSIGNMENT
Neither party shall assign or transfer any interest in this AGREEMENT
without the prior written consent of the other party, except for claims for
money due or to become due under this AGREEMENT.
<PAGE>
18. TERMINATION
This AGREEMENT may be terminated by either party by giving written notice
to the other party at least ninety (90) days in advance of the specified date of
termination. By such termination, neither party may nullify the rights and
obligations of the parties accrued prior to the effective date of termination of
this AGREEMENT. Upon termination, RUTGERS will be reimbursed for all costs and
noncancelable commitments incurred in the performance of the research and not
yet paid for, such reimbursement together with other payments not to exceed the
total estimated project cost specified in Article 5.
19. AGREEMENT MODIFICATION
Unless otherwise specified, this AGREEMENT embodies the entire
understanding between RUTGERS and the SPONSOR for this RESEARCH PROJECT and
supersedes any prior and/or contemporaneous discussions, representations, or
agreements, written or oral, regarding this matter. Any changes to the terms of
this AGREEMENT shall be valid only if the change is made in writing and approved
by mutual written agreement of authorized representatives of both parties.
20. NOTICES
Notices and communications hereunder shall be deemed made if given by
registered or certified envelope, postage prepaid, and addressed to the party to
receive such notice, invoice, or communication at the address given below, or
such other address as may hereafter be designated by notice in writing:
If to SPONSOR: Phytotech, Inc.
131 Madison Avenue
Morristown, New Jersey 07962-1979
ATTENTION: Burt D. Ensley
If to RUTGERS: Office of Corporate Liaison
and Technology Transfer
Rutgers, The State University
P.O. Box 1179
Piscataway, New Jersey 08855-1179
Attention: Director
If Technical Matter: Dr. Ilya Raskin
Center for Agricultural Molecular
Biology
Environmental and Natural Resources
Bldg.
Rutgers, The State University
Cook College, P.O. Box 231
New Brunswick, New Jersey 08903-0231
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this AGREEMENT through
their duly authorized representatives as of the day and year written above.
RUTGERS, The State University Phytotech, Inc.
By: Andrew B. Rudczynski By: Burt D. Ensley
-------------------------- --------------------------
Name: Andrew B. Rudczynski Name: Burt D. Ensley
------------------------ ------------------------
Title: Associate Vice President Title: President
------------------------ -----------------------
for Research Policy and
------------------------
Administration
------------------------
Date: 11/19/93 Date: November 19, 1993
------------------------ -----------------
<PAGE>
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
OFFICE OF CORPORATE LIAISON AND TECHNOLOGY TRANSFER
RESEARCH AGREEMENT
Modification No. 1
Research Agreement dated November 19, 1993 between Phytotech, Inc. and Rutgers,
The State University of New Jersey related to the work of Dr. Ilya Raskin on the
Development of Phytoremediation Technology.
DELETE: Maximum Allowable Cost: $159,363
SUBSTITUTE: Maximum Allowable Cost: $159,973
DELETE: Payment due February 19, 1994: $50,000
SUBSTITUTE: Payment due February 19, 1994: $50,610
DELETE: Contract Period: September 1, 1993 to June 30, 1994
SUBSTITUTE: Contract Period: October 15, 1993 to August 14, 1994
The purpose of this modification is to revise the Agreement to include
adjustments to the period of performance, cost reimbursement and payment
schedule as mutually agreed to by Rutgers and Phytotech.
All other terms and conditions remain as originally stated.
RUTGERS, The State University PHYTOTECH, INC.
of New Jersey
By: Andrew B. Rudczynski By: Burt D. Ensley
--------------------------- ---------------------------
Andrew B. Rudczynski
Associate Vice President
for Research Policy and
Administration
Date: 12/16/93 Date: 1/13/93
------------------------- -------------------------
<PAGE>
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
OFFICE OF CORPORATE LIAISON AND TECHNOLOGY TRANSFER
RESEARCH AGREEMENT
Modification No. 2
Research Agreement dated November 19, 1993 between Phytotech, Inc. and
Rutgers, The State University of New Jersey related to the work of Dr. Ilya
Raskin on the Development of Phytoremediation Technology.
The purpose of this modification is to continue the Research Agreement for
three (3) years in accordance with the changes shown below and are referenced to
the corresponding paragraph number in the Agreement:
4. PERIOD OF PERFORMANCE
The period during which the RESEARCH PROJECT is to be performed shall run
from October 15, 1993 to August 14, 1994 and shall be extended from August 15,
1994 to August 14, 1997, and may be extended, renewed, or amended by the mutual
written agreement of both parties.
5. REIMBURSEMENT OF COSTS
SPONSOR shall reimburse RUTGERS for all direct and indirect costs incurred
in connection with the RESEARCH PROJECT each year pursuant to the costs shown in
the attached three (3) year budget (Attachment A), a total amount not to exceed
$1,100,000. Any costs in excess of the yearly amounts specified must be
authorized as an amendment to this AGREEMENT by SPONSOR. RUTGERS shall retain
title to equipment and supplies purchased with funds provided by SPONSOR under
this AGREEMENT.
6. PAYMENT SCHEDULE
Payments shall be made each year to RUTGERS by SPONSOR as follows:
(1) First payment representing 40% of the total yearly amount on or about
the date of signing this Modification No. 2 and by August 15 of each
year thereafter.
(2) Second payment representing 30% of the total yearly amount by December
15.
(3) Third payment representing 30% of the total yearly amount by April 15.
10. INTELLECTUAL PROPERTY
a. All rights and title to Intellectual Property conceived and reduced to
practice in the performance of this RESEARCH PROJECT shall belong to
RUTGERS and shall be subject to the terms and conditions of this
AGREEMENT.
b. RUTGERS will promptly notify SPONSOR once it has identified any
potentially valuable Intellectual Property conceived and/or made or
reduced to practice during the term of this AGREEMENT. If SPONSOR
requests in writing within ninety (90) days of such notification that
a patent application or application for other Intellectual Property
Protection be filed in the United States, RUTGERS shall promptly
prepare, file, and prosecute such applications in RUTGERS' name using
a firm or attorney that is chosen by RUTGERS, or at SPONSOR's option,
an attorney selected by SPONSOR subject to RUTGERS approval. SPONSOR
shall bear all costs incurred in connection with such preparation,
filing, prosecution, and maintenance of such applications.
<PAGE>
SPONSOR shall be given the opportunity to review and provide input on
such applications to assure that SPONSOR's interests are covered.
RUTGERS shall keep SPONSOR advised as to all developments with respect
to such applications and shall promptly supply SPONSOR copies of all
papers received and filed in connection with the prosecution.
c. If SPONSOR does not request RUTGERS to file a patent application in
the United States within said ninety (90) day period, or decides to
discontinue the financial support of any patent prosecution, or fails
to pay or agree to pay all patent costs in any country in a reasonable
period of time before a bar date occurs for that country, RUTGERS may
pursue whatever course it deems necessary to protect its Intellectual
Property and RUTGERS shall have no further obligations to SPONSOR with
regard to such Intellectual Property in such country. In such event,
such Intellectual Property shall not be subject to the terms of this
AGREEMENT; provided, however, that if SPONSOR has made a timely
request to file in the United States, but does not make such a request
with respect to one or more other countries, and if RUTGERS decides to
file a patent application in such other countries, RUTGERS shall
provide written notice within a reasonable amount of time of such
election to SPONSOR and a reasonable period of time thereafter in
which to reconsider its support of Intellectual Property Protection.
11. GRANT OF RIGHTS
a. If SPONSOR requests that a patent application be filed pursuant to
section 10.b and 10.c., and if SPONSOR requests a license relating to
such patent application within six (6) months of such request, RUTGERS
hereby grants SPONSOR, to the extent it has the legal right to do so
and commencing on the date of such request, subject to the provisions
of section 11.b., a license relating to such Intellectual Property
providing it does not unreasonably impair RUTGERS' rights to use and
publish as set forth in Article 9.
b. During such six (6) month period, RUTGERS and SPONSOR agree to
negotiate in good faith the terms and conditions of a license
agreement which are satisfactory to both parties. Such license
agreement shall include a provision granting SPONSOR an exclusive or
nonexclusive worldwide license, with a right to sublicense, for the
duration of the protection afforded by United States and foreign law,
in the field(s) of use for which the SPONSOR can demonstrate
commercial intent. However, in the event of disagreement, the
disputed matters will be submitted for arbitration under the rules and
procedures of the American Arbitration Association.
18. TERMINATION
This AGREEMENT may be terminated by either party by giving written notice
to the other party at least ninety (90) days in advance of the anniversary date
of each year which shall be August 15 of each year. By such termination,
neither party may nullify the rights and obligations of the parties accrued
prior to the effective date of termination of this AGREEMENT. Upon termination,
RUTGERS will be reimbursed for all costs and noncancelable commitments incurred
in the performance of the research and not yet paid for, such reimbursement
together with other payments not to exceed the total estimated project cost
specified in Article 5.
All other terms and conditions remain as originally stated.
RUTGERS, The State University PHYTOTECH, INC.
of New Jersey
By: William T. Adams By: Burt D. Ensley
----------------------------- -------------------
William T. Adams Burt D. Ensley
Director President
DATE: 12/6/94 DATE: 12/7/94
----------------------- --------------------
<PAGE>
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
OFFICE OF CORPORATE LIAISON AND TECHNOLOGY TRANSFER
RESEARCH AGREEMENT
Modification No. 3
Research Agreement dated November 19, 1993 between Phytotech, Inc. and
Rutgers, The State University of New Jersey related to the work of Dr. Ilya
Raskin on the Development of Phytoremediation Technology.
The purpose of this modification is to continue the Research Agreement for
an additional period and increased funding in accordance with the changes shown
below and are referenced to the corresponding paragraph number in the Agreement:
2. STATEMENT OF WORK
The RESEARCH PROJECT under this Modification Number 3 shall be an extension
of the work described in Exhibit A of the original Agreement dated November 19,
1993, except as otherwise agreed by the parties in writing from time to time.
4. PERIOD OF PERFORMANCE
The period during which the RESEARCH PROJECT is to be performed shall run
from October 15, 1993 to August 14, 1997 as agreed upon in the original
contractual document and subsequent Modification Numbers 1 and 2; extended
through August 13, 2002 by this Modification Number 3; and upon completing an
annual review, may be extended, renewed, or amended for an additional five (5)
year period by the written agreement of both parties.
5. REIMBURSEMENT OF COSTS
SPONSOR shall reimburse RUTGERS for all additional costs incurred in
connection with the RESEARCH PROJECT each year, a total amount not less than
$499,133, pursuant to the costs shown in the five (5) year budget incorporated
into this Modification No. 3 as Exhibit A and in accordance with RUTGERS' Dr.
Andrew B. Rudczynski's memorandum dated July 25, 1997 incorporated herein as
Exhibit B. Any costs in excess of the yearly amounts specified in Exhibits A
and B must be authorized as a subsequent modification to this AGREEMENT by
SPONSOR and the parties agree to review these costs annually for possible
funding increase(s). RUTGERS shall retain title to equipment and supplies
purchased with funds provided by SPONSOR under this AGREEMENT.
6. PAYMENT SCHEDULE
Payments shall be made each year to RUTGERS by SPONSOR as follows:
(1) First payment representing 40% of the total yearly amount on or about
the date of signing this Modification No. 3 and by August 15 of each
year thereafter.
(2) Second payment representing 30% of the total yearly amount by December
5.
(3) Third payment representing 30% of the total yearly amount by April 15.
11. GRANT OF RIGHTS
(a) If SPONSOR requests that a patent application be filed pursuant
to section 10.b. and 10.c. of the revised terms as agreed upon in
Modification Number 2., and if SPONSOR requests a license relating to
such patent application within six (6) months of such request, the
terms of the license will be identical to those in the License
Agreement between the parties made as of March 1, 1997.
<PAGE>
(b) Delete this section entirely as a result of the License Agreement
in 11.a. above.
All other terms and conditions remain as originally stated.
RUTGERS, The State University PHYTOTECH, INC.
of New Jersey
By: William T. Adams By: Burt D. Ensley
-------------------------- ---------------------------
William T. Adams
Director
Date: 9/8/97 Date: 9/9/97
---------------------- -----------------------
<PAGE>
Exhibit A
Rutgers University/AgBiotech Center PHYTOTECH PROPOSAL BUDGET
Raskin, Phytotech - 8/97
<TABLE>
<CAPTION>
DIRECT COSTS YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 CUMULATIVE
<S> <C> <C> <C> <C> <C> <C> <C>
Personnel % time
PI-I.Raskin 11.11% 8,173 8,418 8,671 8,931 9,199 43,392
Postdoctoral Assoc. 100% 28,000 28,840 29,705 30,596 31,514 148,655
Technician 70% 18,746 19,308 19,887 7,377 7,598 35,840
Graduate Assist 50% 6,750 6,953 7,162 20,484 21,099 99,524
----- ----- ----- ------ ------ ------
Total Salaries & 61,669 63,519 65,425 67,388 69,410 327,471
Wages
Fringe Benefits 9,396 10,780 11,108 11,437 11,780 54,496
----- ------ ------ ------ ------ ------
Total Salaries & 71,065 74,299 76,528 78,825 81,190 381,907
Wages & Fringes
Equipment 0 0 0 0 0 0
Travel 2,000 2,000 2,000 2,000 2,000 10,000
Other Direct Costs
Materials and 14,000 14,000 14,000 14,000 14,000 70,000
Supplies
Publication 500 500 500 500 500 2,500
Tuition 0.5 3,000 3,180 4,255 4,510 4,781 19,726
Other-Lab Services 0 0 0 0 0 0
Other-Equipment 1,000 1,000 1,000 1,000 1,000 5,000
Maintenance
Other-Greenhouse/Growth Chamber 2,000 2,000 2,000 2,000 2,000 10,000
----- ----- ----- ----- ----- ------
Subtotal Other 20,500 20,680 21,755 22,010 22,281 107,226
Direct Costs
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
TOTAL DIRECT COSTS* 93,565 96,979 100,283 102,835 105,471 499,133
</TABLE>
* Subject to charging and paying Indirect Costs in
accordance with Rutgers' Dr. Andrew B.
Rudczynski's memorandum dated July 25, 1997
(Exhibit B)
<PAGE>
----------------------------------
THE STATE UNIVERSITY OF NEW JERSEY
RUTGERS
----------------------------------
Associate Vice President for Research Policy and Administration
July 25, 1997
TO: Peter Day
FROM: Andrew B. Rudczynski
SUBJECT: Special Indirect Cost Return for Phytotech Agreement
- -----------------------------------------------------------------
I am pleased to inform you that the University will return generated
indirect costs on the second 5-year contract from Phytotech, Inc. These special
returns will be distributed as follows. In consonance with the University's
current plan to provide the Advanced Technology Centers with transition support
during the NJCST's phase out of support, 100% of generated indirect costs will
be returned during years FY 98 and 99, corresponding to years 1 and 2 of the
Phytotech agreement. You have indicated that you will use all available funds in
the Phytotech agreement to support that program of research in project years one
and two.
In FY 2000, FY 2001 and FY 2002, indirect costs will be charged against the
research contract, however, the University will return 2/3 of the generated IDC
to the project. If Phytotech chooses to increase the annual amount of the
research agreement, this will result in no reduction of the research effort.
Otherwise, the direct costs available to the project for Project years 3-5 will
be reduced by an amount equivalent to 1/3 of the generated indirect costs.
Phytotech may provide the additional funds necessary to pay indirect costs in
project years 3-5.
In either case, all indirect costs not paid in years 3-5 will be due in
equal amounts over the 3 years corresponding to "project years 6, 7 and 8,"
independent of any other agreements the University has with Phytotech at the
time. If at any time during project years 3-5 products sales occur such that
they trigger royalty payments to the University under the licensing agreement
dated _____________, then all unpaid indirect cost amounts will be due
immediately.
The attached table outlines the IDC payment schedule.
Agreed and accepted,
Burt Ensley
----------------------------
Burt Ensley
President
Phytotech, Inc.
cc: Joseph J. Seneca
Ronald Thompson
Bill T. Adams
<PAGE>
RUTGERS, THE STATE UNIVERSITY OF NEW JERSEY
ASSOCIATE VICE PRESIDENT FOR RESEARCH POLICY & ADMINISTRATION
<TABLE>
<CAPTION>
IDC Payment Schedule
- ----------------------------------------------------------------------------------------------------------------------------------
OPTION 1 (PHYTOTECH INCREASES FUNDING TO MAINTAIN RESEARCH EFFORT:
Project Year Cumulative
1 2 3 4 5 1-5 6-8
<S> <C> <C> <C> <C> <C> <C>
Direct Cost $ 83,565 $96,979 $100,283 $102,835 $105,471 $499,133
*IDC return to project (Note 1) -- -- 37,439 38,392 39,376 115,207
*IDC to RU -- -- 16,719 19,196 19,688 57,803
----------------------------------------------------------------------------------------------
Total Project Cost to Phytotech $ 93,585 $96,979 $156,441 $160,423 $164,535 $671,943
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
NOTE 1 - A portion of these funds will need to be set aside for incremental operation
and maintenance costs.
Funds Owed by Phytotech to RU as deferred IDC: $38,402/YEAR
OPTION 2 (No increase in gross funds available):
Project Year Cumulative
1 2 3 4 5 1-5 6-8
<S> <C> <C> <C> <C> <C> <C>
Direct Cost $93,585 $96,979 $64,283 $65,920 $67,610 $388,357
*IDC return to project - - 24,000 24,610 25,241 73,851
----------------------------------------------------------------------------------------------
Total Project Funds Avail. $93,585 $96,979 $88,283 $90,530 $92,851 $462,208
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
*IDC to RU - - 12,000 12,305 12,620 36,925
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Funds Owed by Phytotech to RU as deferred IDC: $24,617/YEAR
</TABLE>
*IDC calculated @ 56% of MTDC. Actual amounts will vary according to MTDC
base and actual Federal negotiated IDC rate.
<PAGE> Exhibit 10.4
AGREEMENT FOR SERVICES NO. FSU/PHTO-2
BETWEEN
THE FLORIDA STATE UNIVERSITY
AND
PHYTOTECH, INC.
THIS AGREEMENT is made and entered into by and between the Florida State
University, for and on behalf of the Florida Board of Regents, a public
corporation of the State of Florida (hereinafter University) and Phytotech, Inc.
(hereinafter Contractor). For and in consideration of the mutual promises,
covenants, and obligations contained herein, the parties do agree as follows:
1. SCOPE OF SERVICES
The University hereby retains the Contractor to undertake certain
activities in connection with U.S. Department of Energy Contract Number
DE-FC21-95EW55101 (hereinafter Agency) to the University, which activities are
set forth in Attachment A.
2. CONTRACTOR RESPONSIBILITIES
The Contractor is responsible for the professional quality, technical
accuracy, timely completion, and coordination of all services and reports
furnished by the Contractor under this Agreement. The Contractor shall, without
additional compensation, correct or revise any errors, omissions, or other
deficiencies in its services and reports.
3. INDEPENDENT CONTRACTORS
By this Agreement the parties intend to establish between them the
relationship of mutually independent contractors. Each party and the officers,
employees, agents, subcontractors, or other contractors thereof shall not be
deemed by virtue of this Agreement to be the officers, employees, or agents of
the other party nor in privity of contract therewith.
4. DESIGNATION OF REPRESENTATIVES
The Contractor agrees that all activities under this Agreement will be
directed by Dr. Slavik Dushenkov and will be conducted in accordance with
Attachment A. The principal contact for the University for all technical
matters relating to this
<PAGE>
Agreement will be Dr. Roy C. Herndon who is the Director of the Institute for
Central and Eastern European Cooperative Environmental Research. The Contract
Manager will be John E. Moertins.
5. KEY PERSONNEL
It is understood and agreed that Contractor's key technical personnel
identified above are essential to the work being performed under this Agreement
and shall not be reassigned or replaced without prior written approval by the
University.
6. EXECUTION, PERFORMANCE, AND EXTENSIONS
The Contractor shall perform its obligations in a manner which satisfies
the criteria specified in this Agreement including all exhibits, proposals, or
other materials incorporated into this Agreement by reference. This Agreement
will take effect on February 1, 1998 when it is signed by a person authorized to
bind the Contractor hereto, and by the authorized representative of the
University. The Contractor shall complete its obligations for this Agreement by
November 30, 1998. Agreement extensions shall be pursuant to a written document
which specifies the period of the extension and the criteria remaining to be met
by the Contractor, which document shall be properly executed prior to the
expiration of the Agreement period or any previous extension period.
7. FORCE MAJEURE
If the Contractor's performance under this Agreement or any obligation
hereunder is prevented, restricted or interfered with by reason of FORCE
MAJEURE, i.e., any act or condition totally beyond the Contractor's control and
without its fault or negligence, the Contractor, upon giving prompt notice to
the University, shall be excused from such performance to the extent of such
prevention, restriction, or interference; provided, however, that the Contractor
shall take all reasonable steps to avoid or remove such causes of nonperformance
and shall continue performance hereunder with dispatch whenever such causes are
removed; provided further, that if it appears that the time of delivery or
performance will be extended past the terms set forth herein, a written
extension of time will be negotiated by the parties.
8. AVAILABILITY OF FUNDS AND COMPENSATION
The State of Florida and the University's performance and obligation to pay
under this Agreement is contingent upon an annual appropriation by the
Legislature and funding by the
2
<PAGE>
Agency. The University shall be the final authority as to availability of funds
for this Agreement. Subject to availability of funds and to satisfactory
performance by the Contractor the University agrees to compensate the Contractor
on a fixed price basis in the amount of $53,696 (U.S. dollars).
Payments will be made to the Contractor upon receipt and acceptance by the
University of the deliverables listed in the Schedule of Deliverables and
Payments in Attachment A. To receive payments, the Contractor shall submit
invoices (in U.S. dollars) to the address stated on the purchase order in
accordance with the Schedule of Deliverables and Payments in Attachment A and in
sufficient detail for a proper preaudit and postaudit thereof. The Contractor
shall certify on each invoice that all deliverables covered by the invoice have
been accomplished. The certification statement shall carry an original
signature of an authorized, knowledgeable official of the Contractor.
The University agrees to pay the Contractor through electronic funds
transfer. The Contractor agrees that in the event the electronic address
provided to the University is incorrect, the University will not be held liable
for any funds lost in transit.
9. FINAL PAYMENT
Without exception, the Contractor must submit the final invoice to the
University within sixty (60) days from the expiration date of this Agreement.
If the Contractor fails to do so, all rights to payment shall be forfeited after
the deadline and the University will not honor any request submitted after the
aforementioned deadline, unless through no fault of the Contractor.
10. TRAVEL
Whenever travel costs are included in the Agreement or attachments to the
Agreement, the provisions of Section 112.061 and 240.241(13). FLORIDA STATUTES,
shall govern as to reimbursement of cost.
11. VALIDITY OF PRICING
The Contractor certifies that to the best of its knowledge and belief the
pricing data provided for this Agreement is based on accurate, complete and
current cost or pricing data. If it is determined that such data are not
accurate, complete or current, the affected price or cost shall be reduced
accordingly and the Agreement shall be modified to reflect the reduction.
3
<PAGE>
12. RETURN OF FUNDS
The Contractor agrees to return to the University any overpayments due to
unearned funds or funds disallowed pursuant to the terms of this Agreement or by
the Agency that were disbursed to the Contractor by the University. Such funds
shall be considered University funds and shall be refunded to the University
within 45 days following the time the overpayment and/or disallowance is
discovered unless otherwise authorized by the University in writing. In
addition the Contractor agrees to exclude from its billings any amounts
disallowed by the Agency or the University per the terms of the Agreement.
13. ASSIGNMENTS AND SUBCONTRACTS
The Contractor shall not assign the responsibility of this Agreement to
another party nor subcontract for any of the work contemplated under this
Agreement without prior written approval of the University, subject to the
approval of the Agency. No such approval by the University of any assignment or
subcontract shall be deemed in any event or in any manner to provide for the
incurrence of any obligation of the University in addition to the total dollar
amount agreed upon in this Agreement. All such assignments or subcontracts
shall be subject to the conditions of this Agreement and to any additional
conditions of approval which the University shall deem necessary.
15. INDEMNIFICATION
The Contractor shall be liable, and agrees to be liable for and shall
indemnify, defend and hold the University harmless for all claims, suits,
judgments or damages, including court costs and attorney fees, arising out of
negligence or omissions by the Contractor in the course of operations of this
Agreement.
16. INSURANCE
The responsibility for providing adequate iability insurance coverage on a
comprehensive basis for all operations undertaken by the Contractor under this
Agreement shall be that of the Contractor and shall be provided at all times
during the existence of this Agreement. Upon the execution of this Agreement,
the Contractor shall furnish the University with written verification of the
existence of such coverage upon the request of the University.
4
<PAGE>
17. CHANGES AND MODIFICATIONS
Modifications of provisions of this Agreement shall be valid when they have
been reduced to writing and duly signed by authorized parties. The parties
agree to renegotiate this Agreement if revisions of any applicable provisions or
budget allocations of the prime contract with the Agency make changes in this
Agreement necessary. The University shall be the final authority as to the
availability of funds for this Agreement due to Federal and/or State revisions
of any applicable laws, regulations, or budget allocations.
18. TERMINATION OF AGREEMENT
This Agreement may be terminated by the University upon no less than thirty
(30) days written notice, with or without cause; notice shall be delivered by
certified mail, return receipt requested, or in person with proof of delivery.
In the event of early termination by the University, the University shall pay
all costs accrued for services satisfactorily performed by the Contractor as of
the date of termination, but in no event shall the aforesaid payment exceed the
Agreement amount. All work in process will become the property of the
University and will be turned over promptly by the Contractor. Notices required
to be given in writing under this Agreement shall be addressed to:
<TABLE>
<CAPTION>
For the University For the Contractor
------------------ ------------------
<S> <C>
Susan D. Allen Dr. Slavik Dushankov
Vice President for Research Research Scientist
Florida State University Phytotech
109 HMB, Innovation Park 1 Deer Park Drive, Suite 1
Tallahassee, FL 32306-2820 Monmouth Junction, NJ 08852
TEL: (850) 644-5260 TEL: (908) 438-0900
FAX: (850) 644-1464 FAX: (908) 438-1209
</TABLE>
19. SEVERABILITY AND NON-WAIVER
In the event one or more provisions of this Agreement are declared invalid,
the balance of this Agreement shall remain in full force and effect. Failure of
either party to enforce any provision of this Agreement does not waive that
party's right to full performance of the provisions of the Agreement.
20. CONTINGENT FEES
The Contractor certifies that no person or agency has been employed or
retained to solicit or secure this Agreement upon an agreement or understanding
or a commission, percentage, brokerage, or contingent fee except bona fide
employees or
5
<PAGE>
agencies maintained by the Contractor for the purpose of securing business.
21. PUBLICATIONS
The Contractor shall not publish any materials funded by this Agreement
without the prior written approval of the University. All publications shall
acknowledge that the support was provided by the funds from the Agency and the
University.
22. GOVERNING LAWS AND TAXATION
This Agreement shall be governed by the laws of the State of Florida and
interpretations thereof. Additionally, the University, as an agency of the
State of Florida (USA), is entitled to the benefits of sovereign immunity
including immunity from taxation.
23. ATTORNEYS' FEES AND COST FOR ENFORCEMENT
In the event the University brings action against the Contractor at any
time during the term of this Agreement or thereafter to enforce any obligation
arising under this Agreement, and a court of competent jurisdiction determines
this Agreement or any valid portion thereof to have been breached by the
Contractor, the Contractor shall be obligated to pay the University's entire
attorneys' fees and cost of such action in addition to any damages or other
award to the University.
24. TITLE/HEADINGS
The title of this Agreement and the paragraph headings thereof are for
convenience of reference only and form no part of the terms of this Agreement.
25. OTHER TERMS AND CONDITIONS
Attachment B - Special Terms and Conditions
U.S. Dept. of Energy Assistance Regulations 10 CFR 600 are hereby
incorporated by reference. A copy of these regulations will be provided upon
request.
26. ENTIRE AGREEMENT
It is hereby understood and agreed that this Agreement and its referenced
attachments state the entire Agreement and that the parties are not bound by any
stipulations, representations,
6
<PAGE>
agreements, or promises, oral or otherwise, not printed in this Agreement.
IN WITNESS WHEREOF, the parties thereto have caused this Contract to be
executed by their undersigned officials as duly authorized.
FOR THE FLORIDA STATE UNIVERSITY FOR PHYTOTECH, INC.
for and on behalf of the Florida
Board of Regents a public
corporation of the State of
Florida
BURT D. ENSLEY
- ----------------------------- ----------------------------------
Susan D. Allen Burt Ensley
Vice President for Research President
2/18/98
- ----------------------------- ----------------------------------
Date Date
7
<PAGE>
Exhibit 10.5
<TABLE>
<CAPTION>
<S><C>
- -----------------------------------------------------------------------------------------------------------------
AWARD/CONTRACT 1. THIS CONTRACT IS A RATED ORDER RATING PAGE OF PAGES
UNDER DPAS(15 CFR 700) doe9e 1 2
- -----------------------------------------------------------------------------------------------------------------
2. CONTRACT (Proc. Inst. Ident.) NO. 3. EFFECTIVE DATE 4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
DAAE30-97-C-1081 15 AUG 1997 LA7A7F-CR1A-NGO1 /DIS
- -----------------------------------------------------------------------------------------------------------------
5. ISSUED BY CODE W15QKN11 6. ADMINISTERED BY (if other than Item 5) CODE 93101A
US ARMY TACOM-ARDEC DGMC, SPRINGFIELD
AMSTA-AR-PC-G, BLDG 9 B/1, ARDEC DCMDE-GXOH
PICATINNY ARSENAL NJ 07806-5000 PICATINNY ARSENAL NJ
07806-5000
Karen Carmean SC1
(973) 724-3968
- -------------------------------------------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR (No., street, Vendor ID: 00007200 8. DELIVERY
city, county, State and ZIP Code)
/ / FOB ORIGIN /X/ OTHER (See below)
PHYTOTECH TIN 223239507 ----------------------------------------
1 DEER PARK DRIVE 9. DISCOUNT FOR PROMPT PAYMENT
MONMOUTH JUNCTION NJ 08852
00.000% 000 Net 030
----------------------------------------
10. SUBMIT INVOICES ITEM
(4 copies unless other-
wise specified) TO THE 12
ADDRESS SHOWN IN:
- -------------------------------------------------------------------------------------------------------------------
CODE 0A8M0 FACILITY CODE
- -------------------------------------------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE empty 12. PAYMENT WILL BE MADE BY CODE SC1010
DFAS-COLUMBUS CENTER
DFAS-CO-JND/INDEPENDENCE DIVISION
P.O. BOX 182362
COLUMBUS OH 43218-2362 EFT: T
- -------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION: 14. ACCOUNTING AND APPROPRIATION DATA
AA:
/X/ 10 U.S.C. 2304(c)( ) / / 41 U.S.C.(c)( ) 2172040000076D6D03665502-M40552581FK10007FCRT1028017
Award Oblig Amt US$ 186,660.00
- -------------------------------------------------------------------------------------------------------------------
15A. ITEM NO. 15B. SUPPLIES/SERVICES 15C. QUANTITY 15D. UNIT 15E. UNIT PRICE 15F. AMOUNT
See attached Schedule(s)
- -------------------------------------------------------------------------------------------------------------------
15G. TOTAL AMOUNT OF CONTRACT $ 186,660.00
- -------------------------------------------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- -------------------------------------------------------------------------------------------------------------------
(X) SEC. DESCRIPTION PAGE(S) (X) SEC. DESCRIPTION PAGE(S)
- -------------------------------------------------------------------------------------------------------------------
PART I - THE SCHEDULE PART II - CONTRACT CLAUSES
- -------------------------------------------------------------------------------------------------------------------
X A SOLICITATION/CONTRACT FORM 1 X I CONTRACT CLAUSES 13
- -------------------------------------------------------------------------------------------------------------------
X B SUPPLIES OR SERVICES AND PRICES/COSTS 3 PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
- -------------------------------------------------------------------------------------------------------------------
X C DESCRIPTION/SPECS./WORK STATEMENT 4 X J LIST OF ATTACHMENTS 24
- -------------------------------------------------------------------------------------------------------------------
X D PACKAGING AND MARKING 5 PART IV - REPRESENTATION AND INSTRUCTIONS
- -------------------------------------------------------------------------------------------------------------------
X E INSPECTION AND ACCEPTANCE 6 X K REPRESENTATION, CERTIFICATIONS AND
- ---------------------------------------------------------- OTHER STATEMENTS OF ERRORS 27
X F DELIVERIES OR PERFORMANCE 7
- -------------------------------------------------------------------------------------------------------------------
X G CONTRACT ADMINISTRATION DATA 9 X L INSTRS., CONDS., AND NOTICES TO
OFFERORS 43
- -------------------------------------------------------------------------------------------------------------------
H SPECIAL CONTRACT REQUIREMENTS 10 M EVALUATION FACTORS FOR AWARD
- -------------------------------------------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- -------------------------------------------------------------------------------------------------------------------
17. /X/ CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is 18. / / AWARD (Contractor is not required to
required to sign this document and return 2 copies to sign this document.) Your offer on Solicitation
issuing office.) Contractor agrees to furnish and deliver Number ___________________________, including the
all items or perform all the services set forth or otherwise additions or changes made by you which additions
identified above and on any continuation sheets for the or changes are set forth in full above, is
consideration stated herein. The rights and obligations hereby accepted as to the items listed above and
of the parties to this contract shall be subject to and on any continuation sheets. This award
governed by the following documents: (a) this award/contract, consummates the contract which consists of the
(b) the solicitation, if any, and (c) such provisions, following documents: (a) the Government's
representations, certifications, and specifications, as solicitation and your offer, and (b) this
are attached or incorporated by reference herein. award/contract. No further contractual
(Attachments are listed herein.) document is necessary.
- -------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print) 20A. NAME OF CONTRACTING OFFICER
Burt D. Ensley Edward A. Cuda K48 (973) 724-2186
- -------------------------------------------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR 19C. DATE SIGNED 20B. UNITED STATES OF AMERICA 20C. DATE SIGNED
/s/ Burt D. Ensley 15 Aug '97 BY /s/ Edward A. Cuda 8/15/97
------------------------------ ----------------------------
(Signature of person authorized to sign) (Signature of Contracting Officer)
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Contract No. DAAE30-97-C-1081
NOTE: Contractor, should cause the following certificate to be executed
under its corporate seal, provided that the same officer shall not execute both
the certificate and the instrument (contract/modification).
CERTIFICATE
I, /s/ [ILLEGIBLE] certify that I am the Secretary of the corporation named as
contractor herein; that Burt Ensley who signed this instrument on behalf of the
Contractor, was then CEO of said corporation, that said instrument was duly
signed for and in behalf of said corporation by authority of its government
body, and is within the scope of its corporate powers.
/s/ [ILLEGIBLE] (CORPORATE SEAL)
- -------------------------
Signature
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 1 of
A.1 CONTRACTOR PERFORMANCE CERTIFICATION PROGRAM (CP)2
The U. S. Army Tank-automotive and Armaments Command-Armament, Research
Development and Engineering Center (TACOM-ARDEC) actively participates in the
Contractor Performance Certification Program (CP)2.
(CP)2 is a U. S. Army Materiel Command (AMC) initiative recognizing suppliers
who demonstrate dynamic efforts toward improved quality and productivity in
their design and development and production processes.
(CP)2 is a customer (2nd-party) assessment using all the elements of the
ANSI/ASQC Q9000 quality system model, supplemented by additional criteria in
such areas as; management commitment, customer satisfaction, continuous
improvement, warranty performance, business planning, safety and environmental
compliance.
Any supplier who has, or anticipates having, contracts with any AMC buying
activity may volunteer to participate in the (CP)2 partnership. For additional
information, visit the TACOM-ARDEC (CP)2 web site at:
http://qa.pica.army.mil/cp2/ or contact the TACOM-ARDEC (CP)2 coordinator at
(201) 724-3557.
A.2 NOTICE TO OFFERORS - USE OF MILITARY SPECIFICATIONS AND STANDARDS
This solicitation has been prepared consistent with DOD policy regarding the use
of military specifications and standards, the Blueprint for Change: Toward a
National Production Base and the Army's implementation of this policy by
promoting the use of commercial, in lieu of military unique, specifications and
standards.
To comply with this policy, the Government has eliminated from this solicitation
the requirement to use military specifications and standards in those cases
where it has been determined that a suitable commercial and/or performance
specification/standard is reasonably available. However, this solicitation does
require the use of some military specifications/standards in those cases where a
suitable replacement was not found to be available.
If offerors are award of any commercial substitutes for the cited military
specifications and standards, request you provide such information to the
Contracting Officer for consideration. To preclude any delay to this
procurement, request offerors provide any information as soon as possible and
prior to submission of
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 2 of
offers. It should be understood that there is no obligation on any offeror to
comply with this request and that no compensation can be provided for doing so.
<PAGE>
SECTION B
SUPPLIES OR SERVICES AND PRICES/COSTS
DAAE30-97-C-1081
SERVICES FOR PHYTOREMEDIATION OF URANIUM
CONTAMINATED SOILS (PHASE II) IN ACCORDANCE WITH
CONTRACTOR'S STATEMENT OF WORK.
<TABLE>
<CAPTION>
UNIT PRICE AMOUNT
--------- ------
<S> <C> <C>
0001 FY98 0 0
0001AA Progress Report 60,000.00 60,000.00
0001AB Progress Report 60,000.00 60,000.00
0001AC Progress Report 60,000.00 60,000.00
0001AD Progress Report 100,000.00 100,000.000
TOTAL FY98 - $280,000.00
0002 FY99 0 0
0002AA Progress Report 60,000.00 60,000.00
0002AB Progress Report 60,000.00 60,000.00
0002AC Progress Report 60,000.00 60,000.00
0002AD Progress Report 100,000.00 100,000.00
TOTAL FY99 - $280,000.00
</TABLE>
0003 Data As Required By DD1423,
Contract Data Requirements List,
Exhibit A, Not Separately Priced
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 3 of
SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
B.1 INCREMENTAL FUNDING
a. This contract shall be incrementally funded. Subject to the availability
of funds, the Government contemplates that funds for this contract shall be
allotted to the Contractor for the planned Fiscal Years (FY) in the amounts set
forth in Column II of the Funding Plan set forth below. It is further
contemplated that each total planned FY allotment may be allotted incrementally
within each FY.
<TABLE>
<CAPTION>
I II III
DATE OF APPLICATION OF
FISCAL TOTAL PLANNED INITIAL INCREMENT OF
YEAR FY ALLOTMENT FY ALLOTMENT
<S> <C> <C>
1997 $186,660.00 Contract Award
1998 $ 93,340.00 FY98
1999 $280,000.00 FY99
</TABLE>
b. Notwithstanding the incremental funding of this contract, the Contractor is
required to comply with the notification requirements of the Limitation of Funds
Clause or Limitation of Governments Obligation Clause, whichever is included in
this contract.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 4 of
SECTION C - DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
STATEMENT OF WORK
The contractor's proposal entitled "Phytoremediation of Uranium Contaminated
Soils" dated April 11, 1997, is the scope of work for this contract. Because of
proprietary information contained within this proposal, it is attached by
reference only.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 5 of
SECTION D - PACKAGING AND MARKING
PRESERVATION, PACKAGING, PACKING AND MARKING (WRITTEN IN PLAIN ENGLISH)
You shall prepare all items for shipment as detailed in ASTM D3951.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 6 of
SECTION E - INSPECTION AND ACCEPTANCE
E.1 52.252-2 CLAUSES INCORPORATED BY REFERENCE. (JUN 1988)
This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
officer will make their full text available.
52.246-7 INSPECTION OF RESEARCH AND AUG 1996
DEVELOPMENT - FIXED-PRICE
E.2 ACCEPTANCE
[ ] Acceptance will be at the Contractor's plant.
[ X] Acceptance will be at destination.
E.3 GOVERNMENT PROCUREMENT QUALITY ASSURANCE ACTIONS
Government Procurement Quality Assurance (PQA) actions will be accomplished by
the Governments authorized Quality Assurance Representative (QAR) at:
[ ] Contractors Plant
[ X] Destination
[ ] Other: The Contractor's plant except for tests conducted at a Government
Facility or Proving Ground
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 7 of
SECTION F - DELIVERIES OR PERFORMANCE
F.1 52.252-2 CLAUSES INCORPORATED BY REFERENCE. (JUN 1988)
This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available.
52.247-34 F.O.B. DESTINATION NOV 1991
F.2 52.242-15 STOP-WORK ORDER. (AUG 1989)
(a) The Contracting Officer may, at any time, by written order to the
Contractor, require the Contractor to stop all, or any part, of the work called
for by this contract for a period of 90 days after the order is delivered to the
Contractor, and for any further period to which the parties may agree. The
order shall be specifically identified as a stop-work order issued under this
clause. Upon receipt of the order, the Contractor shall immediately comply with
its terms and take all reasonable steps to minimize the incurrence of costs
allocable to the work covered by the order during the period of work stoppage.
Within a period of 90 days after a stop-work order is delivered to the
Contractor, or within any extension of that period to which the parties shall
have agreed, the Contracting Officer shall either:
(1) Cancel the stop-work order; or
(2) Terminate the work covered by the order as provided in the
Default, or the Termination for Convenience of the Government, clause of this
contract.
(b) If a stop-work order issued under this clause is canceled or the period of
the order or any extension thereof expires, the Contractor shall resume work.
The Contracting Officer shall make an equitable adjustment in the delivery
schedule or contract price, or both, and the contract shall be modified, in
writing, accordingly, if:
(1) The stop-work order results in an increase in the time required for, or in
the Contractor's cost properly allocable to, the performance of any part of this
contract; and
(2) The Contractor asserts its right to the adjustment within 30 days after the
end of the period of work stoppage; provided, that, if the Contracting Officer
decides the facts justify the
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 8 of
action, the Contracting Officer may receive and act upon a proposal submitted at
any time before final payment under this contract.
(c) If a stop-work order is not canceled and the work covered by the order is
terminated for the convenience of the Government, the Contracting Officer shall
allow reasonable costs resulting from the stop-work order in arriving at the
termination settlement.
(d) If a stop-work order is not canceled and the work covered by the order is
terminated for default, the Contracting Officer shall allow, by equitable
adjustment or otherwise, reasonable costs resulting from the stop-work order.
F.3 HOLIDAY BASE CLOSURE (WRITTEN IN PLAIN ENGLISH)
Picatinny Arsenal will close the day after Thanksgiving and the period between
Christmas and New Year's Day, (observed). Therefore, contractors must plan and
price their work and deliveries to ARDEC.
F.4 CONTRACT PERFORMANCE PERIOD
<TABLE>
<CAPTION>
<S> <C> <C>
0001AA Progress Report 15 November 1997
0001AB Progress Report 15 February 1998
0001AC Progress Report 15 May 1998
0001AD Progress Report 15 August 1998
0002AA Progress Report 15 November 1998
0002AB Progress Report 15 February 1999
0002AC Progress Report 15 May 1999
0002AD Progress Report 15 August 1999
</TABLE>
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 9 of
SECTION G - CONTRACT ADMINISTRATION DATA
G.1 CONTRACT ADMINISTRATION DATA
COMMANDER
US ARMY TACOM-ARDEC
ATTN: AMSTA-AR-PC-G/KAREN CARMEAN/BLDG. 9
PICATINNY ARSENAL, NJ 07806-5000
TELEPHONE (973) 724-3968
FAX (973) 724-6864
G.2 CONTRACTORS INVOICE
Payment shall be made to the remit-to address shown on the
invoice as authorized by the contractor.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 10 of
SECTION H - SPECIAL CONTRACT REQUIREMENTS
H.1 252.201-7000 CONTRACTING OFFICER'S REPRESENTATIVE. (DEC 1991)
(a) "Definition. Contracting officer's representative" means an individual
designated in accordance with subsection 201.602-2 of the Defense Federal
Acquisition Regulation Supplement and authorized in writing by the contracting
officer to perform specific technical or administrative functions.
(b) If the Contracting Officer designates a contracting officer's
representative (COR), the Contractor will receive a copy of the written
designation. It will specify the extent of the COR's authority to act on behalf
of the contracting officer. The COR is not authorized to make any commitments
or changes that will affect price, quality, quantity, delivery, or any other
term or condition of the contract.
H.2 RELEASE OF INFORMATION (WRITTEN IN PLAIN ENGLISH)
1. Unclassified Contracts - Obtain the Contracting Officer's approval before
releasing information received during this contract or generated for this
contract.
2. Classified Contracts - The DOD Security Agreement (DD Form 441) and DOD
Contract Security Classification Specification (DD Form 254) apply.
NOTE: Section J provides instructions for clearing technical material for
release to the public and a sample clearance form (SMCAR Form 3002).
H.3 GOVERNMENT CONTRACTOR RELATIONSHIPS (WRITTEN IN PLAIN ENGLISH)
The Government and the Contractor agree that:
a. The Contractor will not perform or be paid for any personal services.
b. The Contractor or its employees will notify the Contracting Officer of
any suspected personal services prior to performance.
c. No employer-employee relationships will exist between the Government
and the Contractor or its employees.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 18 of
(4) 52.247-64, Preference for Privately Owned U.S.-Flagged Commercial Vessels
(46 U.S.C. 1241) (flow down not required for subcontracts awarded beginning May
1, 1996).
(d) The Contractor shall include the terms of this clause, including this
paragraph (d), in subcontracts awarded under this contract.
I.4 252.232-7007 LIMITATION OF GOVERNMENT'S OBLIGATION. (AUG 1993)
(a) Contract line item 0001 is incrementally funded. For this item, the sum of
$186,660.00 of the total price is presently available for payment and allotted
to this contract. An allotment schedule is set forth in paragraph (i) of this
clause.
(b) For item(s) identified in paragraph (a) of this clause, the Contractor
agrees to perform up to the point at which the total amount payable by the
Government, including reimbursement in the event of termination of those item(s)
for the Government's convenience, approximates the total amount currently
allotted to the contract. The Contractor will not be obligated to continue work
on those item(s) beyond that point. The Government will not be obligated in any
event to reimburse the Contractor in excess of the amount allotted to the
contract for those item(s) regardless of anything to the contrary in the clause
entitled "Termination for Convenience of the Government." As used in this
clause, the total amount payable by the Government in the event of termination
of applicable contract line item(s) for convenience includes cost, profit, and
estimated termination settlement costs for those items(s).
(c) Notwithstanding the dates specified in the allotment schedule in paragraph
(i) of this clause, the Contractor will notify the Contracting Officer in
writing at least ninety days prior to the date when, in the Contractor's best
judgment, the work will reach the point at which the total amount payable by the
Government, including any cost for termination for convenience, will approximate
85 percent of the total amount then allotted to the contract for performance of
the applicable item(s). The notification will state (1) the estimated date when
that point will be reached and (2) an estimate of additional funding, if any,
needed to continue performance of applicable line items up to the next scheduled
date for allotment of funds identified in paragraph (i) of this clause, or to a
mutually agreed upon substitute date. The notification will also advise the
Contracting Officer of the estimated amount of additional funds that will be
required for the timely performance of the item(s) funded pursuant to this
clause, for subsequent period as may be
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 19 of
specified in the allotment schedule in paragraph (i) of this clause, or
otherwise agreed to by the parties. If after such notification additional funds
are not allotted by the date identified in the Contractor's notification, or by
an agreed substitute date, the Contracting Officer will terminate any item(s)
for which additional funds have not be allotted, pursuant to the clause of this
contract entitled "Termination for Convenience of the Government."
(d) When additional funds are allotted for continued performance of the
contract line item(s) identified in paragraph (a) of this clause the parties
will agree as to the period of contract performance which will be covered by the
funds. The provisions of paragraph (b) through (d) of this clause will apply in
like manner to the additional allotted funds and agreed substitute date, and the
contract will be modified accordingly.
(e) If, solely by reason of failure of the Government to allot additional
funds, by the dates indicated below, in amounts sufficient for timely
performance of the contract line item(s) identified in paragraph (a) of this
clause, the Contractor incurs additional costs or is delayed in the performance
of the work under this contract and if additional funds are allotted, an
equitable adjustment will be made in the price or prices (including appropriate
target, billing, and ceiling prices where applicable) of the item(s), or in the
time of delivery, or both. Failure to agree to any such equitable adjustment
hereunder will be a dispute concerning a question of fact within the meaning of
the clause entitled "Disputes."
(f) The Government may at any time prior to termination allot additional funds
for the performance of the contract line item(s) identified in paragraph (a) of
this clause.
(g) The termination provisions of this clause do not limit the rights of the
Government under the clause entitled "Default." The provisions of this clause
are limited to the work and allotment of funds for the contract line item(s) set
forth in paragraph (a) of this clause. This clause no longer applies once the
contract is fully funded except with regard to the rights or obligations of the
parties concerning equitable adjustments negotiated under paragraphs (d) or (e)
of this clause.
(h) Nothing in this clause affects the right of the Government to terminate
this contract pursuant to the clause of this contract entitled "Termination for
Convenience of the Government."
(i) The parties contemplate that the Government will allot funds to the
contract in accordance with the following schedule:
<TABLE>
<CAPTION>
<S> <C>
On execution of contract.................. $186,660.00
FY98...................................... $ 93,340.00
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 20 of
FY99 ................... $280,000.00
</TABLE>
I.5 252.247-7023 TRANSPORTATION OF SUPPLIES BY SEA. (NOV 1995)
(a) Definitions. As used in this clause --
(1) "Components" means articles, materials, and supplies incorporated directly
into end products at any level of manufacture, fabrication, or assembly by the
Contractor or any subcontractor.
(2) "Department of Defense" (DoD) means the Army, Navy, Air Force, Marine
Corps, and defense agencies.
(3) "Foreign flag vessel" means any vessel that is not a U.S.-flag vessel.
(4) "Ocean transportation" means any transportation aboard a ship, vessel,
boat, barge, or ferry through international waters.
(5) "Subcontractor" means a supplier, materialman, distributor, or vendor at
any level below the prime contractor whose contractual obligation to perform
results from, or is conditioned upon, award of the prime contract and who is
performing any part of the work or other requirement of the prime contract.
However, effective May 1, 1996, the term does not include a supplier,
materialman, distributor, or vendor of commercial items or commercial
components.
(6) "Supplies" means all property, except land and interests in land, that is
clearly identifiable for eventual use by or owned by the DoD at the time of
transportation by sea.
(i) An item is clearly identifiable for eventual use by the DoD if, for
example, the contract documentation contains a reference to a DoD contract
number or a military destination.
(ii) "Supplies" includes (but is not limited to) public works; buildings and
facilities; ships; floating equipment and vessels of every character, type, and
description, with parts subassemblies, accessories, and equipment; machine
tools; material; equipment; stores of all kinds; end items; construction
materials; and components of the foregoing.
(7) "U.S.-flag vessel" means a vessel of the United States or belonging to the
United States, including any vessel registered or having national status under
the laws of the United States.
(b) The Contractor shall employ U.S.-flag vessels in the
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 21 of
transportation by sea of any supplies to be furnished in the performance of this
contract. The Contractor and its subcontractors may request that the
Contracting Officer authorize shipment in foreign-flag vessels, or designate
available U.S.-flag vessels, if the Contractor or a subcontractor believes that
- --
(1) U.S.-flag vessels are not available for timely shipment;
(2) The freight charges are inordinately excessive or unreasonable; or
(3) Freight charges are higher than charges to private persons for
transportation of like goods.
(c) The Contractor must submit any request for use of other than U.S.-flag
vessels in writing to the Contracting Officer at least 45 days prior to the
sailing date necessary to meet its delivery schedules. The Contracting Officer
will process requests submitted after such date(s) as expeditiously as possible,
but the Contracting Officer's failure to grant approvals to meet the shipper's
sailing date will not of itself constitute a compensable delay under this or any
other clause of this contract. Requests shall contain at minimum --
(1) Type, weight, and cube of cargo;
(2) Required shipping date;
(3) Special handling and discharge requirements;
(4) Loading and discharge points;
(5) Name of shipper and consignee;
(6) Prime contract number; and
(7) A documented description of efforts made to secure U.S.-flag vessels,
including points of contact (with names and telephone numbers) with at least two
U.S.-flag carriers contacted. Copies of telephone notes, telegraphic and
facsimile message or letters will be sufficient for this purpose.
(d) The Contractor shall, within 30 days after each shipment covered by this
clause, provide the Contracting Officer and the Division of National Cargo,
Office of Market Development, Maritime Administration, U.S. Department of
Transportation Washington, DC 20590, one copy of the rated on board vessel
operating carrier's ocean bill of lading, which shall contain the following
information --
(1) Prime contract number;
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 22 of
(2) Name of vessel;
(3) Vessel flag of registry;
(4) Date of loading;
(5) Port of loading;
(6) Port of final discharge;
(7) Description of commodity;
(8) Gross weight in pounds and cubic feet if available;
(9) Total ocean freight in U.S. dollars; and
(10) Name of the steamship company.
(e) The Contractor agrees to provide with its final invoice under this contract
a representation that to the best of its knowledge and belief --
(1) No ocean transportation was used in the performance of this contract;
(2) Ocean transportation was used and only U.S.-flag vessels were used for all
ocean shipments under the contract;
(3) Ocean transportation was used, and the Contractor had the written consent
of the Contracting Officer for all non-U.S.-flag ocean transportation; or
(4) Ocean transportation was used and some or all of the shipments were made on
non-U.S.-flag vessels without the written consent of the Contracting Officer.
The Contractor shall describe these shipments in the following format:
ITEM CONTRACT QUANTITY
DESCRIPTION LINE ITEMS
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
TOTAL
----------------------------------------------------------------------
(f) If the final invoice does not include the required representation, the
Government will reject and return it to the Contractor as an improper invoice
for the purposes of the Prompt Payment clause of this contract. In the event
there has been unauthorized use of non-U.S. flag vessels in the performance of
this contract, the Contracting Officer is entitled to equitably
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 23 of
adjust the contract, based on the unauthorized use.
(g) The Contractor shall include this clause, including this paragraph (g) in
all subcontracts under this contract, which exceed the small purchase limitation
of section 13.000 of the Federal Acquisition Regulation.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 24 of
SECTION J - LIST OF ATTACHMENTS
J.1 LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
<TABLE>
<CAPTION>
TITLE DATE NO. OF PAGES
<S> <C> <C> <C>
SF33 Award/Contract (Rev 85) 47
Sections A thru L
Exhibit A Contract Data Requirements 13AUG97 3
List, DD1423
AMSTA Clearance Technical 1JUL96 2
Form 3002 Information for
Public Release
SF Form Disclosure of Lobbying Undated 3
LLL Activities
</TABLE>
J.2 GUIDANCE ON DOCUMENTATION OF DATA REQUIREMENTS
The following information is furnished to provide guidance with respect to the
abbreviations and codes utilized in various blocks of DD Form 1423, Contract
Data Requirements List.
1. Block 7, DD Form 250 Requirement. This block designates the location
(Contractor's facility or destination) for performance of Government inspection
and acceptance. The applicable codes for inspection and acceptance are cited
below. The Government activity to perform the destination acceptance task is
entered in Block 14 as the first addressee.
Code Inspection Acceptance
SS *Source (DD Form 250) *Source (DD Form 250)
DD Destination (DD Form 250) Destination (DD Form 250)
SD *Source (DD Form 250) Destination (DD Form 250)
DS Destination (DD Form 250) *Source (DD Form 250)
LT** Letter of Transmittal only
NO No inspection or acceptance required
XX Inspection/Acceptance requirements
specified elsewhere in contract
*Source indicates Contractor's facility.
**Use of these symbols is not authorized for engineering data such as drawings
and specifications.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 25 of
2. Block 8, Approval Code. Item of critical data requiring specific advanced
written approval, such as test plans, are identified by an "A" in this field.
Most of these data require submission of a preliminary draft prior to
publication of a final document. When advanced approval is not required, this
field is a blank.
3. Block 10, Frequency. The codes used in this block are cited below:
DAILY Daily SEMIA Each 6 months
WEEKLY Weekly 2TIME 2 separate submittals
BI-WE Each 2 weeks OTIME One time MTHLY
Monthly ONE/R One time & revision
ASREQ As required (see Notes A/B) R/ASR Revision as required
BI-MO Each 2 months DFDEL Deferred delivery
QRTLY Quarterly ONE/P One time preliminary
ANNLY Annually draft
CHG P AS REQ Change pages as required
NOTE A: Block 13 is used for further explanation.
NOTE B: When data is of recurring type, it will be submitted at end of reporting
period established in field unless otherwise indicated in Data Preparation
Instruction or in Blocks 12 or 13 of DD Form 1423.
4. Block 11, As of Date (AOD). When data is submitted only once, this block
indicates the number of days the data is to be submitted prior to the end of the
reporting period; e.g., "15" would place the AOD for this report at 15 days
before the end of each month, quarter, or year depending on the frequency
established in Block 10; "0" places the AOD at the end of the month, quarter, or
year. Further guidance is shown in Block 13 or 16, as required.
5. Block 12, Date of First Submission. This block indicates the initial data
submission date (Year/Month/Day). When data has already been submitted and will
be resubmitted, the date of the next submission is entered. When the contract
start date has not been established, this block indicates the number of days
after the contract start date that the data is due; e.g., 30 DAC. Further
information, if required, is contained in Block 13. Classified dates are cited
in this form. "DFDEL" indicates deferred delivery.
6. Block 13, Date of Subsequent Submission/Event Identification. When data is
submitted more than once, the date(s) of subsequent submission(s) is indicated
in this block. When submission of data is based on the initiation of a specific
event or milestone, this information is cited in this block (when such
information classifies the form, this block is left blank). Example: "NLT
<PAGE>
<TABLE>
<CAPTION>
<S><C>
- --------------------------------------------------------------------------------------------------------------
CONTRACT DATA REQUIREMENTS LIST FORM APPROVED
(2 DATA ITEMS) OMB NO. 0704-0188
- --------------------------------------------------------------------------------------------------------------
Public reporting burden for the collection of information is estimated to average 220 hours per
response, including the time for reviewing instructions, searching existing data sources,
gathering and maintaining the data needed, and completing and reviewing the collection of
information. Send comments regarding this burden estimate or any other aspect of this collection
of information, including suggestions for reducing this burden, to Department of Defense,
Washington Headquarters Services, Directorate for Information Operations and Reports, 1215
Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management
and Budget, Paperwork Reduction Project (0704-0188), Washington, DC 20603. Please DO NOT RETURN
your form to either of these addresses. Send completed form to the Government Issuing
Contracting Officer for the Contract/PR No. listed in Block E.
- --------------------------------------------------------------------------------------------------------------
A. CONTRACT LINE ITEM NO. B. EXHIBIT C. CATEGORY:
A TOP T[ILLEGIBLE] OTHER General Data
------ -------- ------------------
- --------------------------------------------------------------------------------------------------------------
D. SYSTEM/ITEM E. CONTRACT/PR NO. F. CONTRACTOR
Phytoremediation of U. Cont. Soil
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE 17. PRICE GROUP
A001 Contractor's Progress, Status and Management Report
- -------------------------------------------------------------------------------------------------------------- 18. ESTIMATED
4. AUTHORITY (DATA ACQUISITION DOCUMENT NO.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE TOTAL PRICE
DI-MGMT-80227 *Tailored Sec C AMSTA-AR-WEA
- --------------------------------------------------------------------------------------------------------------
7. DO 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12. DATE OF FIRST SUBMISSION 14. DISTRIBUTION
LT REQUIRED Quarterly 90 DAC ------------------------------
- ------------- --------------------------------------------- b. COPIES
8. APP CODE A 11. AS OF DATE 13. DATE OF SUBSEQUENT ----------------
SUBMISSION a. ADDRESSEE
Draft Final
----------
Reg Repro
- --------------------------------------------------------------------------------------------------------------
16. REMARKS AMSTA-AR-WEA 0 1 0
------------------------------
* Do not address f-g-h-i-j-k-l-m-n-o AMSTA-AR-ET 0 1
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
15. TOTAL 0 1 1
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
1. DATA ITEM NO. 2. TITLE OF DATA ITEM 3. SUBTITLE 17. PRICE GROUP
A002 Contract Summary Report
- -------------------------------------------------------------------------------------------------------------- 18. ESTIMATED
4. AUTHORITY (DATA ACQUISITION DOCUMENT NO.) 5. CONTRACT REFERENCE 6. REQUIRING OFFICE TOTAL PRICE
DI-MGMT-80447 Sec C AMSTA-AR-WEA
- --------------------------------------------------------------------------------------------------------------
7. DO 250 REQ 9. DIST STATEMENT 10. FREQUENCY 12. DATE OF FIRST SUBMISSION 14. DISTRIBUTION
LT REQUIRED OTIME End of Task ------------------------------
- ------------- --------------------------------------------- b. COPIES
8. APP CODE A 11. AS OF DATE 13. DATE OF SUBSEQUENT ----------------
SUBMISSION a. ADDRESSEE
Draft Final
----------
Reg Repro
- --------------------------------------------------------------------------------------------------------------
16. REMARKS AMSTA-AR-WEA 0 1 0
------------------------------
AMSTA-AR-ET 0 1
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
------------------------------
15. TOTAL 0 1 1
- --------------------------------------------------------------------------------------------------------------
G. PREPARED BY H. DATE I. APPROVED BY J. DATE
/s/ [ILLEGIBLE] 8/13/97 /s/ [ILLEGIBLE] 8/13/97
- --------------------------------------------------------------------------------------------------------------
Page 1 of 1 Pages
</TABLE>
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 26 of
15 days before start of production"; "45 days before first article"; etc.
7. Block 14, Distribution and Addresses. Addresses and number of copies
(regular/reproducible) to be forwarded to each addressee that is cited in this
block; e.g., DTIC-20/0. Addressees are indicated by office symbol (i.e.,
SMCAR-XYZ), Contractor initials, DOD Handbook H-4 codes, and Command initials. A
list explaining these symbols, etc., is attached to the form. When reproducible
copies are required (second number), the type of copies required will be cited
in this block or Block 16.
NOTE: Unless otherwise cited in Block 10, entries in Blocks 3 through 9 on DD
Form 1664, Data Item Descriptions, are for informational purposes only and are
not contractually binding.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 27 of
SECTION K - REPRESENTATIONS, CERTIFICATIONS, AND OTHER STATEMENTS OF OFFERORS OR
QUOTERS
K.1 52.252-2 CLAUSES INCORPORATED BY REFERENCE. (JUN 1988)
This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available.
K.2 52.203-2 CERTIFICATE OF INDEPENDENT PRICE DETERMINATION. (APR 1985)
(a) The offeror certifies that -
(1) The prices in this offer have been arrived at independently, without, for
the purpose of restricting competition, any consultation, communication, or
agreement with any other offeror or competitor relating to (i) those prices,
(ii) the intention to submit an offer, or (iii) the methods or factors used to
calculate the prices offered;
(2) The prices in this offer have not been and will not be knowingly disclosed
by the offeror, directly or indirectly, to any other offeror or competitor
before bid opening (in the case of a sealed bid solicitation) or contract award
(in the case of a negotiated solicitation) unless otherwise required by law; and
(3) No attempt has been made or will be made by the offeror to induce any other
concern to submit or not to submit an offer for the purpose of restricting
competition.
(b) Each signature on the offer is considered to be a certification by the
signatory that the signatory -
(1) Is the person in the offeror's organization responsible for determining the
prices being offered in this bid or proposal, and that the signatory has not
participated and will not participate in any action contrary to subparagraphs
(a)(1) through (a)(3) above; or
(2) (i) Has been authorized, in writing, to act as agent for the following
principals in certifying that those principals have not participated, and will
not participate in any action contrary to subparagraphs (a)(1) through (a)(3)
above
- -----------------------------------------------------------------
(insert full name of person(s) in the offeror's organization
<PAGE>
DAAE30-97-C-1081
INSTRUCTIONS FOR COMPLETION OF SF-LLL, DISCLOSURE OF LOBBYING ACTIVITIES
This disclosure form shall be completed by the reporting entity, whether
subawardee or prime Federal recipient, at the initiation or receipt of a
covered Federal action, or a material change to a previous filing, pursuant
to title 31 U.S.C. section 1352. The filing of a form is required for each
payment or agreement to make payment to any lobbying entity for influencing
or attempting to influence an officer or employee of any agency, a Member of
Congress, an officer or employee of Congress, an employee of a Member of
Congress in connection with a covered Federal action. Use the SF-LLL-A
Continuation Sheet for additional information if the space on the form is
inadequate. Complete all items that apply for both the initial filing and
material change report. Refer to the implementing guidance published by the
Office of Management and Budget for additional information.
1. Identify the type of covered Federal action for which lobbying
activity is and/or has been secured to influence the outcome of a
covered Federal action.
2. Identify the status of the covered Federal action.
3. Identify the appropriate classification of this report. If this is a
followup report caused by a material change to the information
previously reported, enter the year and quarter in which the change
occurred. Enter the date of the last previously submitted report by
this reporting entity for this covered Federal action.
4. Enter the full name, address, city, state and zip code of the
reporting entity. Include Congressional District, if known. Check
the appropriate classification of the reporting entity that designates
if it is, or expects to be, a prime or subaward recipient. Identify
the tier of the subawardee e.g., the first subawardee of the prime is
the 1st tier. Subawards include but are not limited to subcontracts,
subgrants and contract awards under grants.
5. If the organization filing the report in item 4 checks "Subawardee",
then enter the full name, address, city, state and zip code of the
prime Federal recipient. Include Congressional District, if known.
6. Enter the name of the Federal agency making the award or loan
commitment. Include at least one organizational level below agency
name, if known. For example, Department of Transportation, United
States Coast Guard.
7. Enter the Federal program name or description for the covered Federal
action (item 1). If known, enter the full Catalog of Federal Domestic
Assistance (CFDA) number for grants, cooperative agreements, loans,
and loan commitments.
8. Enter the most appropriate Federal identifying number available for
the Federal action identified in item 1 (e.g., Request for
Proposal (RFP) number, Invitation for Bid (IFB) number, grant
announcement number; the contract, grant, or loan award number; the
application/proposal control number assigned by the Federal agency).
Include prefixes, e.g., "RFP-DE-90-001."
9. For a covered Federal action where there has been an award or loan
commitment by the Federal agency, enter the Federal amount of the
award/loan commitment for the prime entity identified in item 4 or 5.
10. (a) Enter the full name, address, city, state and zip code of the
lobbying entity engaged by the reporting entity identified in item 4
to influence the covered Federal action.
(b) Enter the full names of the individual(s) performing services,
and include full address if different from 10(a). Enter Last Name,
First Name, and Middle Initial (MI).
11. Enter the amount of compensation paid or reasonably expected to be
paid by the reporting entity (item 4) to the lobbying entity
(item 10). Indicate whether the payment has been made (actual) or
will be made (planned). Check all boxes that apply. If this is a
material change report, enter the cumulative amount of payment made
or planned to be made.
12. Check the appropriate box(es). Check all boxes that apply. If
payment is made through an in-kind contribution, specify the nature
and value of the in-kind payment.
13. Check the appropriate box(es). Check all boxes that apply. If other,
specify nature.
14. Provide a specific and detailed description of the services that the
lobbyist has performed, or will be expected to perform, and the
date(s) of any services rendered. Include all preparatory and related
activity, not just time spent in actual contact with Federal
officials. Identify the Federal official(s) or employee(s) contacted
or the officer(s), employee(s), or Member(s) of Congress that were
contacted.
15. Check whether or not a SF-LLL-A Continuation Sheet(s) is attached.
16. The certifying official shall sign and date the form, print his/her
name, title, and telephone number.
- --------------------------------------------------------------------------------
Public reporting burden for this collection of information is estimated to
average 30 minutes per response, including time for reviewing instructions,
searching existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments regarding
the burden estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to the Office of Management and
Budget, Paperwork Reduction Project (0348-0046), Washington, D.C. 20503
- --------------------------------------------------------------------------------
<PAGE>
DAAE30-97-C-1081 EXHIBIT A
- --------------------------------------------------------------------------------
FORM APPROVED
DATA ITEM DESCRIPTION OMB No. 0704-0188
- --------------------------------------------------------------------------------
2. TITLE 1. IDENTIFICATION NUMBER
CONTRACT SUMMARY REPORT DI-ADMN-80447
- --------------------------------------------------------------------------------
3. DESCRIPTION/PURPOSE
This report summarizes all work performed under the contract.
- --------------------------------------------------------------------------------
4. APPROVAL DATE 5. OFFICE OF PRIMARY 6a. DTIC REQUIRED 6b. GIDEP REQUIRED
(YYMMDD) RESPONSIBILITY (OPR)
870928 G/T2 13
- --------------------------------------------------------------------------------
7. APPLICATION/INTERRELATIONSHIP
7.1 This Data Item Description contains the format and content preparation
instructions for the data product generated by the specific and discrete
task requirement as delineated in the contract.
7.2. This DID supersedes DI-A-5030B.
- --------------------------------------------------------------------------------
8. APPROVAL LIMITATION 9a. APPLICABLE FORMS 9b. AMSC NUMBER
G4223
- --------------------------------------------------------------------------------
1O. PREPARATION INSTRUCTIONS
10.1. FORMAT. The report shall be prepared in contractor's format.
10.1.1. It shall be typewritten and is to be duplicated in non-fading
ink.
10.1.2. The data indicated below shall be contained on the title page:
10.1.2.1. Type of Report, Final.
10.1.2.2. Purchase Description Title.
10.1.2.3. Contract Number.
10.1.2.4. Dates of the Reporting Period.
10.1.3. Security classification and distribution limitation markings
shall be included on all pages.
10.2. CONTENT.
10.2.1. Table of Contents.
(Continued on Page 2)
- --------------------------------------------------------------------------------
11. DISTRIBUTION STATEMENT
DISTRIBUTION STATEMENT A: Approved for public release; distribution is
unlimited.
- --------------------------------------------------------------------------------
PAGE 1 of 2 PAGES
<PAGE>
DAAE30-97-C-1081 EXHIBIT A
DI-ADMN- 80447
10. Preparation Instructions (cont'd)
10.2.2. Brief summary of all work accomplished, to include both negative and
positive results. All information shall be referenced to the appropriate
Progress Report, or section of the Final Report, where the subject is discussed
in detail.
10.2.3. The body of the report shall describe all work accomplished, including
as applicable, theoretical studies, experimental work, mechanical design, theory
of operation, test procedures, test results, and those drawings, charts, graphs,
illustrations, or other material needed to clarify the presentation.
10.2.4. When test equipment has been designed and constructed for use on this
contract, a listing of all such equipment is to be included. This listing shall
include all related drawings and associated lists. It shall be referenced in
the report and included as an appendix.
10.2.5. Conclusions, recommendations, and proposals.
10.2.6. Appendixes for any necessary tables, references, photographs, charts,
and illustrations.
Page 2 of 2
<PAGE>
DAAE30-97-C-1081 EXHIBIT A
- --------------------------------------------------------------------------------
FORM APPROVED
DATA ITEM DESCRIPTION OMB No. 0704-0188
EXP. DATE: JUN 30, 1986
- --------------------------------------------------------------------------------
1. TITLE 2. IDENTIFICATION NUMBER
Contractor's Progress, Status and
Management Report DI-MGMT-80227
- --------------------------------------------------------------------------------
3. DESCRIPTION/PURPOSE
3.1 The Contractor's Progress, Status and Management Report indicates the
progress of work and the status of the program and of the assigned
tasks, reports costs, and informs of existing or potential problem
areas.
- --------------------------------------------------------------------------------
4. APPROVAL DATE 5. OFFICE OF PRIMARY 6a. DTIC REQUIRED 6b. GIDEP REQUIRED
(YYMMDD) RESPONSIBILITY (OPR)
860905 N/SPAWAR
- --------------------------------------------------------------------------------
7. APPLICATION/INTERRELATIONSHIP
7.1 This Data Item Description (DID) contains the format and content
preparation instructions for the data product generated by the
specific and discrete task requirement for this data included in the
contract.
7.2 This DID may be applied in any contract and during any program phase.
7.3 This DID supersedes DI-A-2090A, DI-A-3025A, UDI-A-2205OB.
UDI-A-22052A, UDI-A-23960, DI-A-30024, and DI-A-30606. (cont. on page
2)
- --------------------------------------------------------------------------------
8. APPROVAL LIMITATION 9a. APPLICABLE FORMS 9b. AMSC NUMBER
N3947
- --------------------------------------------------------------------------------
10. PREPARATION INSTRUCTIONS
10.1 CONTRACT - This data item is generated by the contract which contains a
specific and discrete work task to develop this data product.
10.2 FORMAT - This report shall be typewritten on standard size (e.g. 8 1/2" by
11") white paper, and securely stapled. Pages shall be sequentially
numbered. All attachments shall be identified and referenced in the text
of the report. The report shall be prepared in the contractor's format and
shall be legible and suitable for reproduction.
10.3 CONTENT - The report shall include:
a. A front cover sheet which includes the contractor's name and address,
the contract number, the nomenclature of the system or program, the
date of the report, the period covered by the report, the title of the
report, either the serial number of the report or the Contract Data
Requirements List (CDRL) sequence number, the security classification,
and the name of the issuing Government activity;
b. Description of the progress made against milestones during the
reporting period;
c. Results, positive or negative, obtained related to
previously-identified problem areas, with conclusions and
recommendations;
d. Any significant changes to the contractor's organization or method of
operation, to the project management network, or to the milestone
chart;
e. Problem areas affecting technical or scheduling elements,
with background and any recommendations for solutions beyond the
scope of the contract;
f. Problem areas affecting cost elements, with background and any
recommendations for solutions beyond the scope of the contract;
g. Cost curves showing actual and projected conditions throughout the
contract;
h. Any cost incurred for the reporting period and total
contractual expenditures as of reporting date;
i. Person-hours expended for the reporting period and cumulatively for
the contract;
j. Any trips and significant results; (cont. on page 2)
- --------------------------------------------------------------------------------
PAGE 1 OF 2 PAGES
<PAGE>
DAAE30-97-C-1081 EXHIBIT A
DI-MGMT- 80227
7. APPLICATION/INTERRELATIONSHIP (Cont'd)
7.4 Paragraphs 10.3.f, 10.3.g, and 10.3.h herein should be tailored on DD
Form 1423 when such cost data is already submitted through a sophisticated
cost reporting system under the contract.
- --------------------------------------------------------------------------------
10. PREPARATION INSTRUCTIONS (Cont'd)
k. Record of all significant telephone calls and any commitments made by
telephone;
l. Summary of Engineering Change Proposal (ECP) status, including
identification of proposed ECPs, approved ECPs, and implemented ECPs;
m. Contract schedule status;
n. Plans for activities during the following reporting period;
o. Name and telephone number of preparer of the report;
p. Appendixes for any necessary tables, references, photographs,
illustrations, and charts.
*U.S. GOVERNMENT PRINTING OFFICE: 1986-704-037/50176
Page 2 of 2 Pages
<PAGE>
<TABLE>
<S><C>
- --------------------------------------------------------------------------------------------------------------------------
CLEARANCE OF TECHNICAL INFORMATION FOR PUBLIC RELEASE
- --------------------------------------------------------------------------------------------------------------------------
TITLE: PAO Log #
- --------------------------------------------------------------------------------------------------------------------------
PICATINNY
- --------
AUTHOR/PRODUCER(S): ADDRESS (IF APPLICABLE):
OFFICE SYMBOL:
PHONE/BLDG #:
- --------------------------------------------------------------------------------------------------------------------------
CONTRACTOR
- ----------
AUTHOR/PRODUCER(S): COMPANY ADDRESS:
CONTRACT NUMBER:
NAME OF PICATINNY SPONSOR:
SPONSOR OFFICE SYMBOL:
----------------------------------------------------
SPONSOR PHONE/BLDG #: COMPANY PHONE:
- --------------------------------------------------------------------------------------------------------------------------
PURPOSE OF RELEASE: / / Presentation / / Publication / / Abstract / / News Release / / Other
- --------------------------------------------------------------------------------------------------------------------------
MEETING TITLE (If presentation, speech or conference paper):
PLACE: DATE(S): DoD Sponsored: / / Yes / / No
- --------------------------------------------------------------------------------------------------------------------------
PUBLICATION (Magazine, journal, newspaper, proceeding): Solicited / / Yes / / No
- --------------------------------------------------------------------------------------------------------------------------
CERTIFICATION: I certify that this material has not been copied substantially
without written permission from the author/producer and DOES NOT contain
any sensitive, potentially controversial, FOUO or classified information.
Author's/Producer's Signature
- --------------------------------------------------------------------------------------------------------------------------
REQUIRED APPROVALS: Signatures below certify that this material was reviewed for technical accuracy, classified
information, security implications, proprietary information, competition-sensitive information and policy guidelines;
that inventions have been previously submitted for patent review, and that the subject matter does not fall under the
Militarily Critical Technology List.
- --------------------------------------------------------------------------------------------------------------------------
SIGNATURE (Division level) Approve / / Yes / / No Date:
Remarks: -------------------------------------
TYPED NAME: Recommend Distribution: / / A / / B / / C / / D / / E / / F
- --------------------------------------------------------------------------------------------------------------------------
SIGNATURE (Center/Directorate/PM level) Approve / / Yes / / No Date:
Remarks: -------------------------------------
TYPED NAME: Recommend Distribution: / / A / / B / / C / / D / / E / / F
- --------------------------------------------------------------------------------------------------------------------------
SIGNATURE (OPSEC) Approve / / Yes / / No Date:
Remarks: -------------------------------------
Recommend Distribution: / / A / / B / / C / / D / / E / / F
- --------------------------------------------------------------------------------------------------------------------------
SIGNATURE (Patent/Legal) Approve / / Yes / / No Date:
Remarks: -------------------------------------
Recommend Distribution: / / A / / B / / C / / D / / E / / F
- --------------------------------------------------------------------------------------------------------------------------
SIGNATURE (Contracting Officer, if appropriate) Approve / / Yes / / No Date:
Remarks: -------------------------------------
Recommend Distribution: / / A / / B / / C / / D / / E / / F
- --------------------------------------------------------------------------------------------------------------------------
[LOGO] DISPOSITION: BASED ON RECOMMENDATIONS PROVIDED ABOVE, CLEARANCE IS GRANTED FOR
PUBLIC RELEASE BASED ON THE APPROVED DISTRIBUTION CIRCLED BELOW
U.S. ARMY
ARMAMENT MUNITIONS ------------------------------------------------ -------------
& CHEMICAL COMMAND Picatinny Arsenal Public Affairs Office Date
ARMAMENT RDE CENTER ------------------------------------------------------------------------------------------------------
- ------------------- A / / (Unlimited) D / / (DoD & DoD Contractors only)
APPROVED B / / (U.S. Gov't only) E / / (DoD Components only)
DISTRIBUTION: C / / (U.S. Gov't & Contractor only) F / / (Only as directed by __________ or higher authority)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
DAAE30-97-C-1081
CLEARANCE OF TECHNICAL INFORMATION FOR PUBLIC RELEASE
INSTRUCTIONS
IF AUTHOR/PRODUCER IS PICATINNY-BASED:
Picatinny-based authors/producers are responsible for initiating the
clearance process and ensuring that their material is approved for public
release. This is accomplished by attaching one copy of the material
(manuscript, photos, videotapes and any other material that requires clearance)
to this form and obtaining the necessary signatures. When clearance is granted,
the Picatinny Public Affairs Office (the last office in the clearance process)
will forward one copy of this form along with the attached material to the ARDEC
Technical Library for archival purposes and provide another copy of this form to
the author/producer. It is the author/producer's responsibility to notify all
interested parties of the release approval and to make subsequent distribution.
IF AUTHOR/PRODUCER IS A CONTRACTOR:
A contractor initiates the clearance process by forwarding the material
to a Picatinny sponsor, who in turn begins the clearance process in the same
manner as a Picatinny-based request. When clearance is granted, the
Picatinny Public Affairs Office (the last office in the clearance process)
will forward one copy of this form along with the attached material to the
ARDEC Technical Library for archival purposes, and provide another copy of
the form to the Picatinny sponsor. It is the Picatinny sponsor's
responsibility to notify the contractor and any other interested parties of
the release approval and to coordinate subsequent distribution with the
contractor. Because contractor-submitted videotape material requires
clearance at the Defense Department level, recommend that these submissions
be made at least 90 days prior to the projected public release date. Only
Picatinny-related portions of multi-topic videotapes will be reviewed here.
RECOMMENDED DISTRIBUTION:
Each signator in the REQUIRED APPROVALS section recommends distribution
based on the categories listed at the bottom of the form. The approved
distribution is circled at the bottom of the form and will equal the most
stringent distribution category selected by the signators.
- --------------------------------------------------------------------------------
COMMENTS
(Use this space, and additional pages as necessary, to make additional
remarks or written changes to the submitted material. If changes are made
directly on the material, a note to that effect in the REQUIRED APPROVALS
section under "Remarks" is all that's necessary.)
- --------------------------------------------------------------------------------
FOR MORE INFORMATION ON THE CLEARANCE PROCESS OR THIS FORM, PLEASE CONTACT THE
PICATINNY ARSENAL PUBLIC AFFAIRS OFFICE; DSN 880-6365, (201) 724-6365.
Page 2 of 2
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 28 of
responsible for determining the prices offered in this bid or proposal, and the
title of his or her position in the offeror's organization);
(ii) As an authorized agent, does certify that the principals named in
subdivision (b)(2)(i) above have not participated, and will not participate, in
any action contrary to subparagraphs (a)(1) through (a)(3) above; and
(iii) As an agent, has not personally participated, and will not
participate, in any action contrary to subparagraphs (a)(1) through (a)(3)
above.
(c) If the offeror deletes or modifies subparagraph (a)(2) above, the offeror
must furnish with its offer a signed statement setting forth in detail the
circumstances of the disclosure.
K.3 52.203-11 CERTIFICATION AND DISCLOSURE REGARDING PAYMENTS TO INFLUENCE
CERTAIN FEDERAL TRANSACTIONS. (APR 1991)
(a) The definitions and prohibitions contained in the clause, at FAR 52.203-12,
Limitation on Payments to Influence Certain Federal Transactions, included in
this solicitation, are hereby incorporated by reference in paragraph (b) of this
certification.
(b) The offeror, by signing its offer, hereby certifies to the best of his or
her knowledge and belief that on or after December 23, 1989:
(1) No Federal appropriated funds have been paid or will be paid to any person
for influencing or attempting to influence an officer or employee of any agency,
a Member of Congress, an officer or employee of Congress, or an employee of a
Member of Congress on his or her behalf in connection with the awarding of any
Federal contract, the making of any Federal grant, the making of any Federal
loan, the entering into of any cooperative agreement, and the extension,
continuation, renewal, amendment or modification of any Federal contract, grant,
loan, or cooperative agreement;
(2) If any funds other than Federal appropriated funds (including profit or fee
received under a covered Federal transaction) have been paid, or will be paid,
to any person for influencing or attempting to influence an officer or employee
of any agency, a Member of Congress, an officer or employee of Congress, or an
employee of a Member of Congress on his or her behalf in connection with this
solicitation, the offeror shall complete and submit, with its offer, OMB
standard form LLL, Disclosure of Lobbying Activities, to the Contracting
Officer; and
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 29 of
(3) He or she will include the language of this certification in all
subcontract awards at any tier and require that all recipients of subcontract
awards in excess of $100,000 shall certify and disclose accordingly.
(c) Submission of this certification and disclosure is a prerequisite for
making or entering into this contract imposed by section 1352, title 31, United
States Code. Any person who makes an expenditure prohibited under this
provision or who fails to file or amend the disclosure form to be filed or
amended by this provision, shall be subject to a civil penalty of not less than
$10,000, and not more than $100,000, for each such failure.
K.4 52.204-3 TAXPAYER IDENTIFICATION. (MAR 1994)
(a) Definitions.
"Common parent," as used in this solicitation provision, means that corporate
entity that owns or controls an affiliated group of corporations that files its
Federal income tax returns on a consolidated basis, and of which the offeror is
a member.
"Corporate status," as used in this solicitation provision, means a designation
as to whether the offeror is a corporate entity, an unincorporated entity (e.g.,
sole proprietorship or partnership), or a corporation providing medical and
health care services.
"Taxpayer Identification Number (TIN)," as used in this solicitation provision,
means the number required by the IRS to be used by the offeror in reporting
income tax and other returns.
(b) All offerors are required to submit the information required in paragraphs
(c) through (e) of this solicitation provision in order to comply with reporting
requirements of 26 U.S.C. 6041, 6041A, and 6050M and implementing regulations
issued by the Internal Revenue Service (IRS). If the resulting contract is
subject to reporting requirements described in FAR 4.903, the failure or refusal
by the offeror to furnish the information may result in a 31 percent reduction
of payments otherwise due under the contract.
(c) Taxpayer Identification Number (TIN).
TIN: 22-3239507.
- ----- ----------
TIN: has been applied for.
- -----
TIN is not required because:
- -----
Offeror is a nonresident alien, foreign corporation, or
- -----
<PAGE>
<TABLE>
<CAPTION>
<S><C>
DISCLOSURE OF LOBBYING ACTIVITIES Approved by OMB
Complete this form to disclose lobbying activities pursuant to 31 U.S.C. 1352 0348-0046
(See reverse for public burden disclosure.)
- ---------------------------------------------------------------------------------------------------------------------------
1. Type of Federal Action: 2. Status of Federal Action: 3. Report Type:
/ / a. contract / / a. bid/offer/application / / a. initial filing
b. grant b. initial award b. material change
c. cooperative agreement c. post-award c. post-award
d. loan
e. loan guarantee For Material Change Only:
f. loan insurance year__________ quarter __________
date of last report________________
- ---------------------------------------------------------------------------------------------------------------------------
4. Name and Address of Reporting Entity: 5. If Reporting Entity in No. 4 is Subawardee, Enter Name
/ / Prime / / Subawardee and Address of Prime:
Tier ________, if known
Congressional District, IF KNOWN: Congressional District, IF KNOWN:
- ---------------------------------------------------------------------------------------------------------------------------
6. Federal Department/Agency: 7. Federal Program Name/Description:
CFDA Number, IF APPLICABLE: _______________________
- ---------------------------------------------------------------------------------------------------------------------------
8. Federal Action Number, IF KNOWN: 9. Award Amount, IF KNOWN:
________________
- ---------------------------------------------------------------------------------------------------------------------------
10.a. Name and Address of Lobbying Entity b. Individuals Performing Services (INCLUDING ADDRESS IF DIFFERENT
(IF INDIVIDUAL, last name, first name, MI): FROM NO. 10A) (last name, first name, MI):
(ATTACH CONTINUATION SHEET(S) SF-LLL-A, IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------------------
11. Amount of Payment (CHECK ALL THAT APPLY): 13. Type of Payment (CHECK ALL THAT APPLY):
______________________ / / actual / / planned / / a. retainer
- ------------------------------------------------------ / / b. one-time fee
12. Form of Payment (CHECK ALL THAT APPLY): / / c. commission
/ / a. cash / / d. contingent fee
/ / b. in-kind; specify: nature _______________ / / e. deferred
value ________________ / / f. other, specify: ___________________
- ---------------------------------------------------------------------------------------------------------------------------
14. Brief Description of Services Performed or to be Performed and Date(s) of Service, including officer(s),
employee(s), or Member(s) contacted, for Payment indicated in item 11:
(ATTACH CONTINUATION SHEET(S) SF-LLL-A, IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------------------
15. Continuation Sheet(s) SF-LLL-A attached: / / Yes / / No
- ---------------------------------------------------------------------------------------------------------------------------
16. Information requested through this form is authorized by title Signature:____________________________________
31 U.S.C. section 1352. This disclosure of lobbying activities Print Name: __________________________________
is a material representation of fact upon which reliance was Title: _______________________________________
placed by the tier above when this transaction was made or Telephone No:_________________Date:___________
entered into. This disclosure is required pursuant to
31 U.S.C. 1352. This information will be reported to the Congress
semi-annually and will be available for public inspection. Any
person who fails to file the required disclosure shall be subject
to a civil penalty of not less than $10,000 and not more than
$100,000 for each such failure.
- ---------------------------------------------------------------------------------------------------------------------------
Authorized for Local Reproduction
FEDERAL USE ONLY Standard Form - LLL
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
DISCLOSURE OF LOBBYING ACTIVITIES Approved by OMB
CONTINUATION SHEET 0348-0046
- --------------------------------------------------------------------------------
Reporting Entity: ________________________________________ _____ _____ Page of
- --------------------------------------------------------------------------------
</TABLE>
Authorized for Local Reproduction
Standard Form - LLL-A
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 30 of
foreign partnership that does not have income effectively connected with the
conduct of a trade or business in the U.S. and does not have an office or place
of business or a fiscal paying agent in the U.S.;
___ Offeror is an agency or instrumentality of a foreign government;
___ Offeror is an agency or instrumentality of a Federal, state or local
government;
___ Other. State basis. _________________________
(d) Corporate Status.
___ Corporation providing medical and health care services, or
engaged in the billing and collecting of payments for such services;
___ Other corporate entity;
___ Not a corporate entity;
___ Sole proprietorship
___ Partnership
___ Hospital or extended care facility described in 26 CFR 501(c)(3) that is
exempt from taxation under 26 CFR 501(a).
(e) Common Parent.
___ Offeror is not owned or controlled by a common parent as
defined in paragraph (a) of this clause.
___ Name and TIN of common parent:
Name ____________________________________
TIN ____________________________________
K.5 52.204-5 WOMEN-OWNED BUSINESS, (OCT 1995)
(a) Representation. The offeror represents that it ( ) is, ( ) is not a
women-owned business concern.
(b) Definition. "Women-owned business concern," as used in this provision,
means a concern which is at least 51 percent owned by one or more women; or in
the case of any publicly owned business, at least 51 percent of the stock of
which is owned by one or more
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 31 of
women; and whose management and daily business operations are controlled by one
or more women.
K.6 52.209-5 CERTIFICATION REGARDING DEBARMENT, SUSPENSION, PROPOSED
DEBARMENT, AND OTHER RESPONSIBILITY MATTERS, (MAR 1996)
(a) The Offeror certifies:
(1) to the best of its knowledge and belief, that:
(i) The Offeror and/or any of its Principals:
(A) Are ( ) are not (X) presently debarred, suspended, proposed
for debarment, or declared ineligible for the award of contracts by any Federal
agency;
(B) Have ( ) have not (X), within a 3-year period preceding this
offer, been convicted of or had a civil judgment rendered against them for:
commission of fraud or a criminal offense in connection with obtaining,
attempting to obtain, or performing a public (Federal, state, or local)
contract or subcontract; violation of Federal or state antitrust statutes
relating to the submission of offers; or commission of embezzlement, theft,
forgery, bribery, falsification or destruction of records, making false
statements, tax evasion, or receiving stolen property; and
(C) Are ( ) are not (X) presently indicted for, or otherwise
criminally or civilly charged by a governmental entity with, commission of any
of the offenses enumerated in subdivision (a)(1)(i)(B) of this provision.
(ii) The Offeror has ( ) has not (X), within a 3-year period preceding
this offer, had one or more contracts terminated for default by any Federal
agency.
(2) "Principals," for the purposes of this certification, means officers;
directors; owners; partners; and, persons having primary management or
supervisory responsibilities within a business entity (e.g., general manager;
plant manager; head of a subsidiary, division, or business segment, and similar
positions).
This certification concerns a matter within the jurisdiction of an agency of
the United States and the making of a false, fictitious, or fraudulent
certification may render the maker subject to prosecution under section 1001,
title 18, United States Code.
(b) The Offeror shall provide immediate written notice to the Contracting
Officer if, at any time prior to contract award, the
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 32 of
Offeror learns that its certification was erroneous when submitted or has
become erroneous by reason of changed circumstances.
(c) A certification that any of the items in paragraph (a) of this provision
exists will not necessarily result in withholding of an award under this
solicitation. However, the certification will be considered in connection with
a determination of the Offeror's responsibility. Failure of the Offeror to
furnish a certification or provide such additional information as requested by
the Contracting Officer may render the Offeror nonresponsible.
(d) Nothing contained in the foregoing shall be construed to require
establishment of a system of records in order to render, in good faith, the
certification required by paragraph (a) of this provision. The knowledge and
information of an Offeror is not required to exceed that which is normally
possessed by a prudent person in the ordinary course of business dealings.
(e) The certification in paragraph (a) of this provision is a material
representation of fact upon which reliance was placed when making award. If it
is later determined that the Offeror knowingly rendered an erroneous
certification, in addition to other remedies available to the Government, the
Contracting Officer may terminate the contract resulting from this solicitation
for default.
K.7 52.215-6 TYPE OF BUSINESS ORGANIZATION. (JUL 1987)
The offeror or quoter, by checking the applicable box, represents that -
(a) It operates as /X/ a corporation incorporated under the laws of
the State of New Jersey, an individual, ___ a partnership, ____ a nonprofit
organization, or ___ a joint venture; or
(b) If the offeror or quoter is a foreign entity, it operates as
___ an individual, ___ a partnership, ___ a nonprofit
organization, ___ a joint venture, or ___ a corporation, registered
for business in __________________ (country).
K.8 52.215-11 AUTHORIZED NEGOTIATORS. (APR 1984)
The offeror or quoter represents that the following persons are authorized to
negotiate on its behalf with the Government in connection with this request for
proposals or quotations:
Burt D. Ensley, CEO, 908-438-0900
- ------------------------------------------------------------
Cindy S. Onser, Director Scientific Affairs 303-499-9215
- ----------------------------------------------------------------------
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 33 of
(list names, titles, and telephone numbers of the authorized negotiators).
K.9 52.215-20 PLACE OF PERFORMANCE. (APR 1984)
(a) The offeror or quoter, in the performance of any contract resulting from
this solicitation, ___ intends, /X/ does not intend (check applicable
block) to use one or more plants or facilities located at a different address
from the address of the offeror or quoter as indicated in this proposal or
quotation.
(b) If the offeror or quoter checks intends in paragraph (a) above, it shall
insert in the spaces provided below the required information:
Place of Performance Name and address of Owner
(Street Address, City, and Operator of the Plant or
County, State, Zip Code) Facility if Other than
Offeror or Quoter
- ------------------------- --------------------------------
- ------------------------- --------------------------------
- ------------------------- --------------------------------
K.10 52.215-30 FACILITIES CAPITAL COST OF MONEY. (SEP 1987)
(a) Facilities capital cost of money will be an allowable cost under the
contemplated contract, if the criteria for allowability in subparagraph
31.205-10(a)(2) of the Federal Acquisition Regulation are met. One of the
allowability criteria requires the prospective contractor to propose facilities
capital cost of money in its offer.
(b) If the prospective Contractor does not propose this cost, the resulting
contract will include the clause Waiver of Facilities Capital Cost of Money.
K.11 52.219-1 SMALL BUSINESS PROGRAM REPRESENTATIONS. (JAN 1997)
(a)(1) The standard industrial classification (SIC) code for this acquisition
is 8731.
(2) The small business size standard is 500 employees.
(3) The small business size standard for a concern which submits an offer in
its own name, other than on a construction or service contract, but which
proposes to furnish a product which it did not itself manufacture, is 500
employees.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 34 of
(b) Representations.
(1) The offeror represents as part of its offer that it (X) is, ( )
is not a small business concern.
(2) (Complete only if offeror represented itself as a small business concern
in block (b)(1) of this section.) The offeror represents as part of its offer
that it ( ) is, (X) is not a small disadvantaged business concern.
(3) (Complete only if offeror represented itself as a small business concern
in block (b)(1) of this section.) The offeror represents as part of its offer
that it ( ) is, (X) is not a women-owned small business concern.
(c) Definitions.
Joint venture, for purposes of a small disadvantaged business (SDB) set-aside
or price evaluation preference (as prescribed at 13 CFR 124.321), is a concern
that is owned and controlled by one or more socially and economically.
Small business concern, as used in this provision, means a concern, including
its affiliates, that is independently owned and operated, not dominant in the
field of operation in which it is bidding on Government contracts, and
qualified as a small business under the criteria in 13 CFR Part 121 and the
size standard in paragraph (a) of this provision.
Small disadvantaged business concern, as used in this provision, means a small
business concern that (1) is at least 51 percent unconditionally owned by one
or more individuals who are both socially and economically disadvantaged, or a
publicly owned business having at least 51 percent of its stock unconditionally
owned by one or more socially and economically disadvantaged individuals, and
(2) has its management and daily business controlled by one or more such
individuals. This term also means a small business concern that is at least 51
percent unconditionally owned by an economically disadvantaged Indian tribe or
Native Hawaiian Organization, or a publicly owned business having at least 51
percent of its stock unconditionally owned by one or more of these entities,
which has its management and daily business controlled by members of an
economically disadvantaged Indian tribe or Native Hawaiian Organization, and
which meets the requirements of 13 CFR Part 124.
Women-owned small business concern, as used in this provision, means a small
business concern--
(1) Which is at least 51 percent owned by one or more women or, in the case of
any publicly owned business, at least 51 percent
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 35 of
of the stock of which is owned by one or more women; and
(2) Whose management and daily business operations are controlled by one or
more women.
(d) Notice. (1) If this solicitation is for supplies and has been set aside,
in whole or in part, for small business concerns, then the clause in this
solicitation providing notice of the set-aside contains restrictions on the
source of the end items to be furnished.
(2) Under 15 U.S.C. 645(d), any person who misrepresents a firm's status as a
small or small disadvantaged business concern in order to obtain a contract to
be awarded under the preference programs established pursuant to sections 8(a),
8(d), 9, or 15 of the Small Business Act or any other provision of Federal law
that specifically references section 8(d) for a definition of program
eligibility, shall--
(i) Be punished by imposition of fine, imprisonment, or both;
(ii) Be subject to administrative remedies, including suspension
and debarment; and
(iii) Be ineligible for participation in programs conducted under the
authority of the Act.
K.12 52.219-19 SMALL BUSINESS CONCERN REPRESENTATION FOR THE SMALL BUSINESS
COMPETITIVENESS DEMONSTRATION PROGRAM. (JAN 1297)
(a) Definition.
"Emerging small business" as used in this solicitation, means a small business
concern whose size is no greater than 50 percent of the numerical size standard
applicable to the standard industrial classification code assigned to a
contracting opportunity.
(b) [Complete only if the Offeror has certified itself under the provision at
52.219-1 as a small business concern under the size standards of this
solicitation.]
The Offeror ___ is, ___ is not an emerging small business.
(c) (Complete only if the Offeror is a small business or an emerging small
business, indicating its size range.)
Offeror's number of employees for the past 12 months (check this column if size
standard stated in solicitation is expressed in terms of number of employees)
or Offeror's average annual gross
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 36 of
revenue for the last 3 fiscal years (check this column if size standard stated
in solicitation is expressed in terms of annual receipts). (Check one of the
following.)
<TABLE>
<CAPTION>
NO. OF EMPLOYEES AVG. ANNUAL GROSS REVENUES
<S> <C>
____50 or fewer ______$1 million or less
____51 - 100 ______$1,000,001 - $2 million
____101 - 250 ______$2,000,001 - $3.5 million
____251 - 500 ______$3,500,001 - $5 million
____501 - 750 ______$5,000,001 - $10 million
____751 - 1,000 ______$10,000,001 - $17 million
____ Over 1,000 ______ Over $17 million
</TABLE>
K.13 52.222-21 CERTIFICATION OF NONSEGREGATED FACILITIES. (APR 1984)
(a) "Segregated facilities," as used in this provision, means any waiting
rooms, work areas, rest rooms and wash rooms, restaurants and other eating
areas, time clocks, locker rooms and other storage or dressing areas, parking
lots, drinking fountains, recreation or entertainment areas, transportation,
and housing facilities provided for employees, that are segregated by explicit
directive or are in fact segregated on the basis of race, color, religion, or
national origin because of habit, local custom, or otherwise.
(b) By the submission of this offer, the offeror certifies that it does not
and will not maintain or provide for its employees any segregated facilities at
any of its establishments, and that it does not and will not permit its
employees to perform their services at any location under its control where
segregated facilities are maintained. The offeror agrees that a breach of this
certification is a violation of the Equal Opportunity clause in the contract.
(c) The offeror further agrees that (except where it has obtained identical
certifications from proposed subcontractors for specific time periods) it
will -
(1) Obtain identical certifications from proposed subcontractors before the
award of subcontracts under which the subcontractor will be subject to the
Equal Opportunity clause;
(2) Retain the certifications in the files; and
(3) Forward the following notice to the proposed subcontractors (except if the
proposed subcontractors have submitted identical certifications for specific
time periods):
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 37 of
NOTICE TO PROSPECTIVE SUBCONTRACTORS OF REQUIREMENT FOR CERTIFICATIONS OF
NONSEGREGATED FACILITIES
A Certification of Nonsegregated Facilities must be submitted before the award
of a subcontract under which the subcontractor will be subject to the Equal
Opportunity clause. The certification may be submitted either for each
subcontract or for all subcontracts during a period (i.e., quarterly,
semiannually, or annually).
NOTE: The penalty for making false statements in offers is prescribed in 18
U.S.C. 1001.
K.14 52.222-22 PREVIOUS CONTRACTS AND COMPLIANCE REPORTS. (APR 1984)
The offeror represents that -
(a) It __ has, (X) has not participated in a previous contract or
subcontract subject either to the Equal Opportunity clause of this
solicitation, the clause originally contained in Section 310 of Executive Order
No. 10925, or the clause contained in Section 201 of Executive Order No. 11114;
(b) It __ has, __ has not, filed all required compliance reports; and
(c) Representations indicating submission of required compliance reports,
signed by proposed subcontractors, will be obtained before subcontract awards.
K.15 52.222-25 AFFIRMATIVE ACTION COMPLIANCE. (APR 1984)
The offeror represents that (a) it ___ has developed and has on file, ___ has
not developed and does not have on file, at each establishment, affirmative
action programs required by the rules and regulations of the Secretary of Labor
(41 CFR 60-1 and 60-2), or (b) it (X) has not previously had contracts
subject to the written affirmative action programs requirement of the rules and
regulations of the Secretary of Labor.
K.16 52.223-1 CLEAN AIR AND WATER CERTIFICATION. (APR 1984)
The Offeror certifies that -
(a) Any facility to be used in the performance of this proposed contract
is ___, is not (X) listed on the Environmental Protection Agency (EPA) List
of Violating Facilities;
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 38 of
(b) The Offeror will immediately notify the Contracting Officer, before award,
of the receipt of any communication from the Administrator, or a designee, of
the EPA, indicating that any facility that the Offeror proposes to use for the
performance of the contract is under consideration to be listed on the EPA List
of Violating Facilities; and
(c) The Offeror will include a certification substantially the same as this
certification, including this paragraph (c), in every nonexempt subcontract.
K.17 252.209-7001 DISCLOSURE OF OWNERSHIP OR CONTROL BY THE GOVERNMENT OF A
TERRORIST COUNTRY. (SEP 1994)
(a) "Definitions."
As used in this provision --
(a) "Government of a terrorist country" includes the state and the government
of a terrorist country, as well as any political subdivision, agency, or
instrumentality thereof.
(2) "Terrorist country" means a country determined by the Secretary of State,
under section 6(j)(1)(A) of the Export Administration Act of 1979 (50 U.S.C.
App. 2405(j)(i)(A)), to be a country the government of which has repeatedly
provided support for such acts of international terrorism. As of the date of
this provision, terrorist countries include: Cuba, Iran, Iraq, Libya, North
Korea, Sudan, and Syria.
(3) "Significant interest" means --
(i) Ownership of or beneficial interest in 5 percent or more of the firm's
or subsidiary's securities. Beneficial interest includes holding 5 percent
or more of any class of the firm's securities in "nominee shares," "street
names," or some other method of holding securities that does not disclose the
beneficial owner;
(ii) Holding a management position in the firm, such as a director or officer;
(iii) Ability to control or influence the election, appointment, or tenure of
directors or officers in the firm;
(iv) Ownership of 10 percent or more of the assets of a firm such as
equipment, buildings, real estate, or other tangible assets of the firm; or
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 39 of
(v) Holding 50 percent or more of the indebtness of a firm.
(b) "Prohibition on award."
In accordance with 10 U.S.C. 2327, no contract may be awarded to a firm or a
subsidiary of a firm if the government of a terrorist country has a significant
interest in the firm or subsidiary, unless a waiver is granted by the Secretary
of Defense.
(c) "Disclosure."
If the government of a terrorist country has a significant interest in the
Offeror or a subsidiary of the Offeror, the Offeror shall disclosure such
interest in an attachment to its offer. If the Offeror is a subsidiary, it
shall also disclose any significant interest the government of a terrorist
country has in any firm that owns or controls the subsidiary. The disclosure
shall include --
(1) Identification of each government holding a significant interest; and
(2) A description of the significant interest held by each government.
K.18 252.219-700 SMALL DISADVANTAGED BUSINESS CONCERN REPRESENTATION (DOD
CONTRACTS). (JAN 1997)
(a) Definition. "Small disadvantaged business concern", as used in this
provision, means a small business concern, owned and controlled by individuals
who are both socially and economically disadvantaged, as defined by the Small
Business Administration at 13 CFR part 124, the majority of earnings of which
directly accrue to such individuals. This term also means a small business
concern owned and controlled by an economically disadvantaged Indian tribe or
Native Hawaiian organization which meets the requirements of 13 CFR 124.112 or
13 CFR 124.113, respectively. In general, 13 CFR part 124 describes a small
disadvantaged business concern as a small business concern --
(1) Which is at least 51 percent unconditionally owned by one or more socially
and economically disadvantaged individuals; or
(2) In the case of any publicly owned business, at least 51 percent of the
voting stock is unconditionally owned by one or more socially and economically
disadvantaged individuals; and
(3) Whose management and daily business operations are controlled by one or
more such individuals.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 40 of
(b) "Representations." Check the category in which your ownership falls --
___ Subcontinent Asian (Asian-Indian) American (U.S. citizen with origins from
India, Pakistan, Bangladesh, Sri Lanka, Bhutan, or Nepal)
___ Asian-Pacific American (U.S. citizen with origins from Japan, China, the
Philippines, Vietnam, Korea, Samoa, Guam, U.S. Trust Territory of the Pacific
Islands (Republic of Palau), the Northern Mariana Islands, Laos, Kampuchea
(Cambodia), Taiwan, Burma, Thailand, Malaysia, Indonesia, Singapore, Brunei,
Republic of the Marshall Islands, or the Federated States of Micronesia)
___ Black American (U.S. citizen)
___ Hispanic American (U.S. citizen with origins from South
America, Central America, Mexico, Cuba, the Dominican Republic,
Puerto Rico, Spain, or Portugal)
___ Native American (American Indians, Eskimos, Aleuts, or Native Hawaiians,
including Indian tribes or Native Hawaiian organizations)
___ Individual/concern, other than one of the preceding, currently certified
for participation in the Minority Small Business and Capital Ownership
Development Program under Section 8(a) of the Small Business Act
___ Other
(c) Complete the following --
(1) The offeror is __. is not [check mark] a small disadvantaged business
concern.
(2) The Small Business Administration (SBA) has _____________ has not ________
made a determination concerning the offeror's status as a small disadvantaged
business concern. If the SBA has made a determination, the date of the
determination was __________ and the offeror --
___ Was found by SBA to be socially and economically disadvantaged and no
circumstances have changed to vary that determination.
___ Was found by SBA not to be socially and economically disadvantaged but
circumstances which caused the determination have changed.
(d) "Penalties and Remedies." Anyone who misrepresents the status of a concern
as a small disadvantaged business for the
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 41 of
purpose of securing a contract or subcontract shall --
(1) Be punished by imposition of a fine, imprisonment, or both;
(2) Be subject to administrative remedies, including suspension and debarment;
and
(3) Be ineligible for participation in programs conducted under authority of
the Small Business Act.
K.19 252.225-7000 BUY AMERICAN ACT - BALANCE OF PAYMENTS PROGRAM CERTIFICATE.
(DEC 1991)
(a) "Definitions. Domestic end product, qualifying country, qualifying
country end product, and qualifying country end product" have the meanings
given in the Buy American Act and Balance of Payments Program clause of this
solicitation.
(b) "Evaluation." Offers will be evaluated by giving preference to domestic
end products and qualifying country end products over nonqualifying country end
products.
(c) "Certifications." (1) The Offeror certifies that --
(i) Each end product, except those listed in paragraphs (c) (2) or (3) of this
clause, is a domestic end product; and
(ii) Components of unknown origin are considered to have been mined, produced,
or manufactured outside the United States or a qualifying country.
(2) The Offeror certifies that the following end products are qualifying
country end products:
Qualifying Country End Products
- ------------------------------------------------
Line item No. Country of origin
- ------------- -----------------
_____________ _________________
- ------------------ -----------------------------
(List only qualifying country end products.)
(3) The Offeror certifies that the following end products are nonqualifying
country end products:
Nonqualifying Country End Products
- -----------------------------------------------------
Line item No. Country of origin (If known)
- ---------------------------------------------------------
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 42 of
- ---------------- -----------------------------
- ---------------------------------------------------------
K.20 252.227-7028 TECHNICAL DATA OR COMPUTER SOFTWARE PREVIOUSLY DELIVERED TO
THE GOVERNMENT. (JUN 1995)
The Offeror shall attach to its offer an identification of all documents or
other media incorporating technical data or computer software it intends to
deliver under this contract with other than unlimited rights that are identical
or substantially similar to documents or other media that the Offeror has
produced for, delivered to, or is obligated to deliver to the Government under
any contract or subcontract. The attachment shall identify --
(a) The contract number under which the data or software were produced;
(b) The contract number under which, and the name and address of the
organization to whom, the data or software were most recently delivered or will
be delivered; and
(c) Any limitations on the Government's rights to use or disclose the data or
software, including, when applicable, identification of the earliest date the
limitations expire.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 43 of
SECTION L - INSTRUCTIONS, CONDITIONS, AND NOTICES TO OFFERORS OR QUOTERS
L.1 52.252-2 CLAUSES INCORPORATED BY REFERENCE. (JUN 1988)
This contract incorporates one or more clauses by reference, with the same
force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available.
52.215-5 SOLICITATION DEFINITIONS JUL 1987
52.215-7 UNNECESSARILY ELABORATE PROPOSALS APR 1984
OR QUOTATIONS
52.215-8 AMENDMENTS TO SOLICITATIONS DEC 1989
52.215-9 SUBMISSION OF OFFERS MAR 1997
52.215-10 LATE SUBMISSIONS, MODIFICATIONS, MAY 1997
AND WITHDRAWALS OF PROPOSALS
52.215-13 PREPARATION OF OFFERS APR 1984
52.215-14 EXPLANATION TO PROSPECTIVE OFFERORS APR 1984
52.215-15 FAILURE TO SUBMIT OFFER MAY 1997
252.227-7019 VALIDATION OF ASSERTED JUN 1995
RESTRICTIONS--COMPUTER SOFTWARE
L.2 52.204-6 CONTRACTOR IDENTIFICATION NUMBER--DATA UNIVERSAL NUMBERING SYSTEM
(DUNS) NUMBER. (DEC 1996)
(a) Contractor Identification Number, as used in this provision, means "Data
Universal Numbering System (DUNS) number," which is a nine-digit number
assigned by Dun and Bradstreet Information Services.
(b) Contractor identification is essential for complying with statutory
contract reporting requirements. Therefore, the offeror is requested to enter,
in the block with its name and address on the Standard Form 33 or similar
document, the annotation "DUNS" followed by the DUNS number which identifies
the offeror's name and address exactly as stated in the offer.
(c) If the offeror does not have a DUNS number, it should contact Dun and
Bradstreet directly to obtain one. A DUNS number will be provided immediately
by telephone at no charge to the offeror.
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 44 of
For information on obtaining a DUNS number, the offeror should call Dun and
Bradstreet at 1-800-333-0505. The offeror should be prepared to provide the
following information:
(1) Company name.
(2) Company address.
(3) Company telephone number.
(4) Line of business.
(5) Chief executive officer/key manager.
(6) Date the company was started.
(7) Number of people employed by the company.
(8) Company affiliation.
(d) Offerors located outside the United States may obtain the location and
phone number of the local Dun and Bradstreet Information Services office from
the Internet Home Page at http://www.dbisna.com/dbis/customer/custlist.htm. If
an offeror is unable to locate a local service center, it may send an e-mail to
Dun and Bradstreet at [email protected].
L.3 52.211-14 NOTICE OF PRIORITY RATING FOR NATIONAL DEFENSE USE. (SEP 1990)
Any contract awarded as a result of this solicitation will be a [ ] DX rated
order; [X] DO rated order certified for national defense use under the Defense
Priorities and Allocations System (DPAS) (15 CFR part 700), and the Contractor
will be required to follow all of the requirements of this regulation.
L.4 52.215-12 RESTRICTION ON DISCLOSURE AND USE OF DATA. (APR 1984)
Offerors or quoters who include in their proposals or quotations data that they
do not want disclosed to the public for any purpose or used by the Government
except for evaluation purposes, shall -
(a) Mark the title page with the following legend:
"This proposal or quotation includes data that shall not be disclosed outside
the Government and shall not be duplicated, used, or disclosed - in whole or in
part - for any purpose other
<PAGE>
CONTINUATION SHEET DAAE30-97-C-1081 PAGE 45 of
than to evaluate this proposal or quotation. If, however, a contract is
awarded to this offeror or quoter as a result of - or in connection with - the
submission of this data, the Government shall have the right to duplicate, use,
or disclose the data to the extent provided in the resulting contract. This
restriction does not limit the Government's right to use information contained
in this data if it is obtained from another source without restriction. The
data subject to this restriction are contained in sheets __3____ (insert
numbers or other identification of sheets)"; and
(b) Mark each sheet of data it wishes to restrict with the following legend:
"Use or disclosure of data contained on this sheet is subject to the
restriction on the title page of this proposal or quotation."
<PAGE>
---------------------------
PLEASE INCLUDE THE
FOLLOWING SUBCONTRACT
NUMBER ON ALL
CORRESPONDENCE AND INVOICES
------------------------------------------------------------------------------
SUBCONTRACTOR NUMBER:
ST94004-S-041
------------------------------------------------------------------------------
CONTRACTOR: CLIENT: EFFECTIVE DATE:
PARSONS ENGINEERING AMC 15 AUGUST 1997
SCIENCE, INC.
------------------------------------------------------------------------------
SUBCONTRACTOR (NAME AND PRIME CONTRACT NO.: F11623-94-D0024
ADDRESS):
PHYTOTECH, INC. SUBCONTRACT TYPE: FIXED UR DPAS RATING: N/A
1 DEER PARK DRIVE, TOTAL AMOUNT OF SUBCONTRACT: $15,600.00
SUITE 1 WORK SHALL BE STARTED: 15 AUG 1997
MONMOUTH JUNCTION, NJ WORK SHALL BE COMPLETED: 31 JAN 1998
08852 THIS IS THE DEFINITE SUBCONTRACT
ATTN: MS PATTI DAVIS CONTEMPLATED BY THE NOTICE TO PROCEED
TELEPHONE: 908/438-0900 DATED THIS SERVES AS THE NTP
FAX:908/438-1209
BUSINESS SIZE:
( ) (X) SMALL ( )
SDB ( ) WOSB
------------------------------------------------------------------------------
THIS SUBCONTRACT IS ENTERED INTO BY AND BETWEEN PARSONS ENGINEERING SCIENCE,
INC. (HEREINAFTER CALLED THE "CONTRACTOR"), A CORPORATION ORGANIZED AND
EXISTING UNDER THE LAWS OF THE STATE OF CALIFORNIA AND THE INDIVIDUAL,
PARTNERSHIP, OR CORPORATION (HEREINAFTER CALLED THE "SUBCONTRACTOR"). THE
PARTIES HEREBY AGREE AS FOLLOWS: THE SUBCONTRACTOR SHALL FURNISH ALL LABOR,
EQUIPMENT, AND MATERIAL AND PERFORM ALL SERVICES SET FORTH IN THE STATEMENT OF
WORK AND ALL OTHER SECTIONS DESIGNATED IN THE TABLE OF CONTENTS BELOW.
------------------------------------------------------------------------------
TABLE OF CONTENTS
THIS SUBCONTRACT CONTAINS THE FOLLOWING SECTIONS:
------------------------------------------------------------------------------
NO. REV. NO. DESCRIPTION OF NO. REV. NO DESCRIPTION OF
CONTENTS SECTION
------------------------------------------------------------------------------
I STATEMENT OF WORK
II COMPENSATION AND PAYMENT
III SPECIAL PROVISIONS
IV GENERAL PROVISIONS -
STANDARD
SUBCONTRACT
------------------------------------------------------------------------------
REFER ALL QUESTIONS AND CORRESPONDENCE TO: INVOICING INSTRUCTIONS:
PARSONS ENGINEERING SCIENCE, INC. MAIL INVOICES TO:
400 WOODS MILL ROAD SOUTH, SUITE 330
CHESTERFIELD, MISSOURI 63017-3427 PARSONS ENGINEERING SCIENCE,
PROJECT NO.: RL33 LOCATION: ST. LOUIS INC.
ATTENTION: ROXANNE M. POWERS 400 WOODS MILL ROAD SOUTH,
SUITE 330
CHESTERFIELD, MISSOURI 63017-
3427
ATTENTION: ROXANNE M. POWERS
------------------------------------------------------------------------------
CHECK NOTE: IF SUBCONTRACTOR IS A CORPORATION, THE FOLLOWING
APPROPRIATE BOX: CERTIFICATION MUST BE COMPLETED IN FULL: I _________________,
CERTIFY THAT I AM SECRETARY OF THE CORPORATION
/ / INDIVIDUAL NAMED AS THE SUBCONTRACTOR HEREIN, THAT
____________ WHO SIGNED THIS SUBCONTRACT ON BEHALF OF THE
/ / PARTNERSHIP SUBCONTRACTOR WAS THEN __________________ OF SAID
CORPORATION, THAT SAID SUBCONTRACT WAS DULY SIGNED FOR AND
/ / INCORPORATED ON BEHALF OF SAID CORPORATION BY AUTHORITY OF ITS GOVERNING
(STATE:______) BODY, AND IS WITHIN THE SCOPE OF ITS CORPORATE POWERS.
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS SUBCONTRACT AS OF THE DATE
SHOWN BELOW. THE EFFECTIVE DATE OF THIS SUBCONTRACT REMAINS AS ENTERED ABOVE.
CONTRACTOR SUBCONTRACTOR
PARSONS ENGINEERING SCIENCE, INC. PHTYOTECH, INC.
SIGNATURE_________________________ SIGNATURE__________________________
TITLE SENIOR VICE PRESIDENT TITLE______________________________
DATE_____________________________ DATE______________________________
<PAGE>
SECTION 1
SUBCONTRACT NO. ST94004-S-041
STATEMENT OF WORK
FOR
B-20 PHTYOREMEDIATION TREATABILITY STUDY
AT CAMP STANLEY STORAGE ACTIVITY, BOERNE, TEXAS
1.1 GENERAL DESCRIPTION
Parsons Engineering Science, Inc. (Parsons ES), CONTRACTOR, is under
contract to Air Mobility Command (AMC), CLIENT, to perform remedial treatability
study services at the CSSA oxidation pond (SWMU 0-1). All work must meet the
requirements established in this statement of work.
The CSSA site is a 4,000-acre tract located in northwestern Bexar
County less than 19 miles northwest of San Antonio, Texas, and 10 miles south of
Boerne. CSSA began operations in the early 1900s as a military installation and
weapons storage and refurbishing facility. The site operations consisted of an
open burn/open detonation (OB/OD) disposal area known as solid waste management
unit B-20 (SWMU B-20). During the active life of the facility, there were no
recorded releases from the area. The B-20 site (shown in Figure 1) was
investigated beginning in 1992. A brief discussion of site investigation
results is included as an attachment to this statement of work.
1.2 SCOPE OF WORK
The B-20 area has been identified with contamination exceeding cleanup
levels in surface soils. This scope of work (SOW) includes requests for costs
associated with a laboratory benchscale treatability test of phytoremediation.
The purpose of the studies is to provide data for the feasibility of
phytoremediation at the B-20 site.
2
<PAGE>
Map of Texas titled
"CAMP STANLEY STORAGE ACTIVITY".
3
<PAGE>
1.2.1 DELIVERABLES
Within 14 days of the execution of the subcontract between
SUBCONTRACTOR and CONTRACTOR. SUBCONTRACTOR shall provide CONTRACTOR with a
work plan and proposed schedule for conducting the work described herein.
The work plan shall include a step-by-step description of the tasks to be
performed, the method and/or equipment to be used, quality assurance and
quality control procedures, and the key personnel responsible for carrying
out the work.
Upon completion of the study efforts, a final data report to include,
at a minimum, data reduction and results of the study(s), system design(s), and
any graphs/tables that are necessary for conclusions. The SUBCONTRACTOR shall
not have exclusive rights to any or all data generated through this treatability
study effort. The requirements for the SUBCONTRACTOR described in the following
sections may not include all items which the SUBCONTRACTOR may need to conduct
in accordance with SUBCONTRACTOR's work plan. Any additional requirements or
modification of specified requirements must be identified in the assumptions for
costing efforts. CONTRACTOR intends to perform all chemical analyses required
for the studies. SUBCONTRACTOR shall estimate the required number of sampling
events required to provide necessary chemical analyses data in support of the
treatability study goals.
1.2.2 PERIOD OF PERFORMANCE
SUBCONTRACTOR shall start work for the first phase on August 15, 1997.
Work is expected to be conducted over a period of 2-3 months. A schedule of
work efforts to be performed by the SUBCONTRACTOR was provided with their
response to the RFP. The exact start and ending date shall be determined by
CONTRACTOR's Project Manager. SUBCONTRACTOR shall pursue the work diligently
and provide sufficient manpower, materials, tools, and equipment to complete the
work in a timely fashion.
1.3 LABORATORY BENCHSCALE PHYTOREMEDIATION KINETIC REMEDIATION PROCEDURE
REQUIREMENTS.
The basic scope of work for the laboratory benchscale phytoremediation
treatability study of B-20 soils involves the following tasks. These tasks are
listed in the likely chronological order of occurrence.
1. SUBCONTRACTOR's work plan including a bar graph schedule is
completed.
2. CONTRACTOR will collect soil samples from the initial chosen site
location. The location will be specified by CONTRACTOR's field
representative. Soil samples will be shipped to the appropriate
laboratory, as designated by the SUBCONTRACTOR. The
SUBCONTRACTOR shall be responsible for all analytical costs
associated with providing the
4
<PAGE>
necessary data to properly design a phytoremediation system. The
CONTRACTOR shall provide all chemical contaminant
characterization data necessary to effectively characterize (for
baseline conditions) the sample used in the laboratory benchscale
treatability study.
3. Provide and set-up of laboratory benchscale phtoremediation
equipment, and perform the necessary benchscale treatability
study activities.
4. Soil analysis results will be evaluated by SUBCONTRACTOR.
1.4.1 ITEMS FURNISHED BY SUBCONTRACTOR FOR BENCHSCALE STUDY
The items to be furnished by SUBCONTRACTOR described in this Section
may not include all items which SUBCONTRACTOR may need to conduct these
activities in accordance with SUBCONTRACTOR's work plan. The SUBCONTRACTOR will
provide all equipment, materials, utilities, labor, tests, and supervision
required to complete the work herein that is not specifically stated as being
supplied by others. It is anticipated that two "harvests" will be required to
evaluate the efficacy of phytoremediation for uptaking metal contamination.
1.4.2 ITEMS FURNISHED BY CONTRACTOR FOR BENCHSCALE STUDY
The CONTRACTOR shall collect necessary soils from the B-20 area to
provide SUBCONTRACTOR for the laboratory benchscale treatability study. In
addition, the CONTRACTOR will provide analytical services and data on all
samples collected for chemical analysis including initial and final chemical
characterization to the SUBCONTRACTOR.
5
<PAGE>
SECTION II
COMPENSATION AND PAYMENT
SUBCONTRACT NO. ST94004-S-041
1. COMPENSATION
As full and complete payment to SUBCONTRACTOR for all of SUBCONTRACTOR's
services and the full performance and observance by SUBCONTRACTOR of all its
duties, obligations, liabilities, and responsibilities hereunder, CONTRACTOR
shall pay SUBCONTRACTOR a not-to-exceed sum of Fifteen Thousand Six Hundred
Dollars and no Cents ($15,600.00). Compensation and payment shall be in
accordance with the following:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------
ESTIMATED UNIT ESTIMATED
TASK QUANTITY UNIT RATE TOTAL COST
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Work plan 1 Lump sum $1,200 $ 1,200
2. Laboratory 1 EX SITU $5,500 $ 5,500
benchscale study
3. Soil chemical 1 Sampling $1,750 $ 1,750
analyses event
4. Soil physical 1 Sampling $1,750 $ 1,750
analyses event
5. Progress reports 3 Monthly $ 600 $ 1,800
6. Final laboratory 1 Lump sum $3,600 $ 3,600
benchscale treatability
study report
------------------------------------------------------------------------------
TOTAL: $15,600
------------------------------------------------------------------------------
</TABLE>
* SUBCONTRACTOR to estimate number of chemical contaminant analytical sampling
events required for a laboratory benchscale test.
2. INVOICES
A. CONTRACTOR shall pay SUBCONTRACTOR within thirty (30) days after receipt of
invoice from SUBCONTRACTOR for services rendered hereunder. Such invoices
shall be approved by the CONTRACTOR before payment. SUBCONTRACTOR shall
submit invoices showing tasks performed by SUBCONTRACTOR, or any of
SUBCONTRACTOR's employees, and the cost of such services. Supporting
documentation substantiating incurred expenses shall accompany invoices
rendered. Payments made on such
6
<PAGE>
invoices shall relieve CONTRACTOR of all further obligations for such
payments.
B. SUBCONTRACTOR SHALL MAIL INVOICES IN DUPLICATE TO:
PARSONS ENGINEERING SCIENCE, INC.
400 WOODS MILL ROAD SOUTH, SUITE 330
CHESTERFIELD, MO 63017-3427
ATTN: ROXANNE M. POWERS
REFERENCE: SUBCONTRACT NUMBER ST94004-S-041
3. LIMITATION OF FUNDS
If at any time SUBCONTRACTOR has reason to believe that the total cost that
it expects to incur in the performance of the work will exceed seventy-five
percent (75%) of the total not-to-exceed amount set forth in item 1,
Compensation, above, SUBCONTRACTOR shall notify the CONTRACTOR's
Subcontract Administrator in writing to that effect, giving its revised
estimated to complete the work under this Subcontract.
SUBCONTRACTOR shall not be obligated to perform and the CONTRACTOR shall
not be obligated to pay costs in excess of the total not-to-exceed amount
specified; unless the SUBCONTRACTOR is notified in writing that such amount
has been increased.
4. FINAL PAYMENT
The acceptance by SUBCONTRACTOR of final payment under this subcontract
shall operate as a full release of CONTRACTOR from any and all claims of
SUBCONTRACTOR and its agents for all services performed hereunder.
5. AUDIT
CONTRACTOR's duly authorized representatives shall have access at all
reasonable times to all records, documents, files, and personnel necessary
to audit and verify SUBCONTRACTOR's charges to CONTRACTOR for work
performed. SUBCONTRACTOR shall retain records, documents and files related
to such charges for a period of three (3) years following the date of final
payment to SUBCONTRACTOR for all work performed. CONTRACTOR's
representatives shall have the right to reproduce any of the aforesaid
documents.
7
<PAGE>
If, as the result of an audit hereunder, SUBCONTRACTOR is determined to
have charged CONTRACTOR for amounts that are not allocable or
nonverifiable, SUBCONTRACTOR shall promptly reimburse CONTRACTOR for said
amounts.
8
<PAGE>
SECTION III
SPECIAL PROVISIONS
FAR/DFARS CLAUSES
APPLICABLE TO ORDERS PLACED UNDER
DEPARTMENT OF DEFENSE PRIME CONTRACTS
The following clauses from the Federal Acquisition Regulations (FAR)
and the Defense Federal Acquisition Regulation Supplement (DFARS) are cited by
reference and by this reference are incorporated herein to the same extent as
though set forth in full text. A copy of the clauses will be made available
upon request.
In the following clauses, the term "CONTRACTOR" shall be substituted
for the terms "GOVERNMENT" and "CONTRACTING OFFICER" wherever they occur. The
term "SUBCONTRACTOR" shall be substituted for the term "CONTRACTOR".
The substitutions shall be made wherever they occur except in the
"Examination of Records by Comptroller General" and "Government Property"
clauses where the terms "GOVERNMENT" and "CONTRACTING OFFICER" remain unchanged
and "SUBCONTRACTOR" is substituted for "CONTRACTOR".
<TABLE>
<CAPTION>
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FAR CLAUSE NUMBER CLAUSE TITLE DATE
-----------------------------------------------------------------------------
<S> <C> <C>
52.203-1 Reserved
52.203-3 Gratuities APR 1984
52.203-5 Covenant Against Contingent Fees APR 1984
52.203-7 Anti-kickback Procedures JUL 1995
52.203-9 Requirement for Certificate of SEP 1995
Procurement Integrity - Modification
52.203-10 Price or Fee Adjustment for illegal or SEP 1990
improper activity
52.203-12 Limitation on Payments to Influence JAN 1990
Certain Federal Transactions
52.204-2 Security Requirements (APR 1984) APR 1984
Alternate II
52.209-6 Protecting the Government's Interest when SEP 1995
Subcontracting with Contractor's
Debarred, Suspended, or Proposed for
Debarment
52.215-1 Reserved
52.215-2 Audit and Records - Negotiation OCT 1995
52.215-22 Price Reduction for Defective Cost or OCT 1995
Pricing Data
52.215-24 Subcontractor Cost or Pricing Data OCT 1995
52.215-26 Integrity of Unit Prices OCT 1995
52.215-27 Termination of Defined Benefit Pension SEP 1989
Plans
52.215-30 Facilities Capital Cost of Money SEP 1987
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FAR CLAUSE NUMBER CLAUSE TITLE DATE
- ------------------------------------------------------------------------------
<S> <C> <C>
52.215-39 Reversion or Adjustment of Plans for Post JUL 1991
Retirement Benefits other than Pensions
Allowable Cost and Payment
52.219-8 Utilization of Small Business and Small OCT 1995
Disadvantaged Business Concerns
52.219-9 Small Business and Small Disadvantaged OCT 1995
Business Subcontracting Plan
52.219-13 Reserved
52.219-16 Liquidated Damages - Subcontracting Plan OCT 1995
52.220-3 Reserved
52.220-4 Reserved
52.222-2 Payment for Overtime Premiums JUL 1990
52.222-3 Convict Labor APR 1984
52.222-4 Contract Work Hours and Safety Standards JUL 1995
Act - Overtime Compensation
52.222-26 Equal Opportunity APR 1984
52.222-28 Equal Opportunity Preaward Clearance of APR 1984
Subcontracts
52.222-35 Affirmative Action for Special Disabled APR 1984
and Vietnam Era Veterans
52.222-36 Affirmative Action for Handicapped APR 1984
Workers
52.222-37 Employment Reports on Special Disabled JAN 1988
Veterans and Veterans of the Vietnam Era
52.223-2 Clean Air and Water APR 1984
52.223-3 Hazardous Material Identification and NOV 1991
Material Safety Data
52.223-6 Drug-Free Workplace JUL 1990
52.224-1 Privacy Act Notification APR 1984
52.224-2 Privacy Act APR 1984
52.225-11 Restriction on Certain Foreign Purchases MAY 1992
52.226-1 Utilization of Indian Organizations and AUG 1991
Indian-Owned Economic Enterprises
52.227-1 Authorization and Consent JUL 1995
52.227-2 Notice and Assistance Regarding Patent APR 1984
and Copyright Infringements
52.228-5 Insurance - Work on a Government SEP 1989
Installation
52.229-4 Federal, State, and Local Taxes (Non- JAN 1991
Competitive Contract)
52.229-5 Taxes-Contracts Performed in U.S. APR 1984
Possessions and Puerto Rico
52.230-2 Cost Accounting Standards AUG 1992
52.230-5 Administration of Cost Accounting FEB 1995
Standards
52.232-7 Payments Under Time-And-Materials and APR 1984
Labor-Hour Contracts
52.232-10 Payments under Fixed-Price Architect AUG 1987
Engineer Contracts
52.232-17 Interest JAN 1991
52.232.20 Limitation of Cost APR 1984
52.236-22 Design within Funding Limitations APR 1984
52.236-23 Responsibility of the Architect-Engineer APR 1984
Contractor
52.236-23 Work Oversight in Architect-Engineer APR 1984
Contracts
52.236-25 Requirements for Registration of APR 1984
Designers
52.237-2 Protection of Government Buildings, APR 1984
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
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FAR CLAUSE NUMBER CLAUSE TITLE DATE
-----------------------------------------------------------------------------
<S> <C> <C>
Equipment and Vegetation
52.242-1 Notice of Intent to Disallow Costs APR 1984
52.242-13 Bankruptcy JUL 1995
52.243-1 Changes-Fixed Price (AUG 1987) Alternate APR 1984
III
52.243-2 Changes-Cost Reimbursement (AUG 1987) APR 1984
Alternate I
52.243-3 Changes-Time-Materials or Labor-Hours AUG 1987
52.243-6 Change Order Accounting APR 1984
52.244-1 Subcontracts (Fixed-Price Contracts) FEB 1995
52.244-2 Subcontracts (Cost-Reimbursement and FEB 1995
Letter Contracts)
Alternate I JUL 1995
52.244-3 Subcontracts (Time and Materials Labor- APR 1985
Hour Contracts)
52.244-4 Subcontractors and Outside Associates an APR 1984
Consultants
52-245-1 Property Records APR 1984
52.245-2 Government Property (Fixed Price DEC 1989
Contracts)
52.245-5 Government Property (Cost-Reimbursement, JAN 1986
Time and Materials or Labor-Hour
Contracts)
52.247-1 Commercial Bill of Lading Notations APR 1984
52.247-34 F.O.B. Destination NOV 1991
52.247-55 F.O.B. Point for Delivery of Government APR 1984
Furnished Property
52.249-6 Termination (Cost-Reimbursement) MAY 1986 APR 1984
Alternate IV
52.249-7 Termination (Fixed-Price Architect- APR 1984
Engineer)
52.249-14 Excusable Delays APR 1984
52.252-6 Authorized Deviations in Clauses APR 1984
52.253-1 Computer Generated Forms JAN 1991
252.203-7000 Statutory Prohibition on Compensation to NOV 1995
Former Department of Defense Employees
252.203-7001 Special Prohibition on Employment NOV 1995
252.203-7002 Display of DOD Hotline Poster DEC 1991
252.204-7000 Disclosure of Information DEC 1991
252.215-7000 Pricing Adjustments DEC 1991
252.25-7002 Cost Estimating System Requirements DEC 1991
252.219-7003 Small, Small Disadvantaged and Women- NOV 1995
Owned Small Business Subcontracting Plan
(DOD Contracts)
252.223-7001 Hazard Warning Labels DEC 1991
252.223-7004 Drug-Free Work Force SEP 1988
252.223-7006 Prohibition on Storage and Disposal of APR 1993
Toxic and Hazardous Materials
252.225-7012 Preference for Certain Domestic NOV 1995
Commodities
252.225-7025 Foreign Source Restrictions APR 1993
252.225-7026 Reporting of Contract Performance Outside NOV 1995
the U.S.
252.227-7022 Government Rights (Unlimited) MAR 1979
252.231-7000 Supplemental Cost Principles DEC 1991
252.232-7006 Reduction or Suspension of Contract AUG 1992
Payments Upon Finding of Fraud
252.242-7001 Reserved
252.242-7004 Material Management and Accounting System DEC 1991
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
FAR CLAUSE NUMBER CLAUSE TITLE DATE
- ------------------------------------------------------------------------------
<S> <C> <C>
252.242-7005 Cost/Schedule Status report DEC 1991
252.243-7001 Pricing of Contract Modifications DEC 1991
252.247-7023 Transportation of Supplies by Sea NOV 1995
252.247-7024 Notification of Transportation of NOV 1995
Supplies by Sea
252.249-7001 Notification of Substantial Impact on DEC 1991
Employment
252.249-7002 Notification of Proposed Program MAY 1995
Termination or Reduction
</TABLE>
12
<PAGE>
SECTION IV
GENERAL PROVISIONS
STANDARD SUBCONTRACT
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
1 DEFINITIONS 1
2 GOVERNING LAW 1
3 INDEPENDENT CONTRACTOR 1
4 TAXES, DUTIES, PERMITS,
AND FEES 1
5 UNEMPLOYMENT INSURANCE AND
TAXES 1
6 INSURANCE 2
7 LAWS AND REGULATIONS 3
8 TIME OF PERFORMANCE 3
9 PERFORMANCE REQUIREMENTS 3
10 WARRANTIES 3
11 CHANGES AND EXTRA WORK 3
12 OVERTIME 4
13 LIENS, ENCUMBRANCES AND
CLAIMS 4
14 PATENTS AND ROYALTIES 4
15 INDEMNIFICATION 4
16 SUBCONTRACTOR'S FINAL
RELEASE CERTIFICATE AND
INDEMNIFICATION 4
17 TERMINATION 4
18 SUSPENSION OF WORK 5
19 NOTICE OF THIRD PARTY
CLAIMS AGAINST THE
SUBCONTRACTOR 5
20 NOTICES AND CORRESPONDENCE 5
21 DISPUTES 5
22 ASSIGNMENT 6
23 CONFIDENTIALITY OF ALL
DRAWINGS, SPECIFICATIONS,
AND PLANS 6
24 RELEASE OF NEWS
INFORMATION 6
25 GRATUITIES 6
26 RIGHTS, REMEDIES AND
WAIVER 6
27 ORDER OF PRECEDENCE 6
28 EFFECT OF INVALIDITY 6
29 ENTIRE AGREEMENT 6
</TABLE>
1 DEFINITIONS
As used throughout this Subcontract, the following terms and expressions have
the meanings and interpretation set forth below:
A. "Subcontract" means this written contract executed between Contractor and
Subcontractor.
B. "Services" and/or "Work" mean all services, labor, material and actions
necessary for the performance of this Subcontract.
C. "Prime Contract" means the contract between Contractor and Contractor's
Client in support of which this Subcontract is issued, including any
amendments thereto.
D. "Contractor" means the entity identified as such on the face page of this
Subcontract.
E. "Subcontractor" means the entity, and all of its lower tier subcontractors,
identified as such on the face page of this Subcontract.
F. The terms "Client" and/or "Owner" refers to the entity identified as Client
on the face page of this Subcontract.
G. The term "Subcontract Administrator" refers to Contractor's Procurement
Department representative assigned to administer this Subcontract.
H. The term "Subcontract Price" refers to the total price as set forth in
Paragraph 1, Section II, Compensation and Payment.
I. The terms "Site", "Worksite" and/or "Jobsite" refer to Client's premises
associated with the Prime Contract.
2 GOVERNING LAW
This Subcontract shall be interpreted and enforced in accordance with the laws
of the State of California, including statutes of limitations.
3 INDEPENDENT CONTRACTOR
Subcontractor shall be an independent contractor in all its operations and
activities hereunder, and all employees furnished by Subcontractor to perform
the Services shall be deemed to be Subcontractor's employees exclusively; and
shall be paid by Subcontractor for all services in this connection.
Subcontractor is not authorized to represent Contractor or otherwise bind
Contractor in any dealings between Subcontractor and any third parties.
13
<PAGE>
4 TAXES, DUTIES, PERMITS AND FEES
Subcontractor shall be responsible for all taxes, duties, permits, or fees
necessary for the performance of the Services.
5 UNEMPLOYMENT INSURANCE AND TAXES
Subcontractor shall have full and exclusive liability for the reporting and
payment of any and all taxes and contributions for unemployment insurance, old
age retirement benefits and similar pensions, and annuities that may now or
hereafter be imposed by the United States, any state, or any local governmental
authority, whether measured by the wages, salaries, or remuneration paid to
persons employed by Subcontractor or otherwise, for the Services. Subcontractor
shall comply with all federal and state laws on such subjects, including all
rules and regulations and shall maintain suitable forms, books, and records, and
save Contractor free and harmless from, and hereby indemnifies Contractor
against, liability for the payment of any and all such taxes, excises,
assessments, or other charges levied by any governmental authority on or because
of the Services, including, without limitation, the use of any equipment,
supplies, or materials pursuant to this Subcontract.
6 INSURANCE
Subcontractor from the time of start of the Services hereunder until completion
of the Services and removal of all remaining materials, supplies, and personnel
from the premises shall provide at its own expense and maintain in effect the
following types and amounts of insurance with terms and with insurance companies
satisfactory to the Contractor:
A. Workers' Compensation Insurance and Employer's Liability Insurance
including occupational disease in accordance with the laws of States or
Provinces where the Services are to be performed. Employer's Liability
Insurance will have a limit of $250,000 per person per accident.
If the performance of this Subcontract requires the use of watercraft or is
performed over water, Subcontractor shall also provide coverage for
liability under U.S. Longshoremen's and Harbor Workers' Compensation Act
and liability for admiralty benefits and damages under the Jones Act and
further provide that a claim "in rem" shall be treated as a claim against
the employer.
B. Comprehensive General Liability Insurance, including contractual liability
and Products Completed Operations coverage with limits of not less than
$1,000,000 combined single limits.
C. Automobile Liability Insurance covering owned, non-owned and hired vehicles
used by Subcontractor with limits of not less than $1,000,000 combined
single limit.
If Subcontractor's Comprehensive General Liability Insurance and Auto
Liability Insurance are combined forming one policy and one limit of
liability, the limits shall not be less than $1,000,000 combined single
limit.
D. Professional Liability Insurance with a limit of at least $1,000,000 each
occurrence with annual aggregate for all claims of $1,000,000 subject to a
deductible each occurrence of not more than $50,000.
E. If the performance of this Subcontract requires the use of watercraft,
Subcontractor shall carry, or require the owners of such watercraft to
carry:
1. Hull and Machinery (including Collision Liability) Insurance in an
amount not less than the market value of the watercraft (Charterer's
and/or Owner's Limitation Clause to be deleted) and,
2. Protection Indemnity Insurance in an amount not less than the market
value of the watercraft or $1,000,000, whichever is greater
(Charterer's and/or Owner's Limitation Clause to be deleted).
F. If the performance of this Subcontract requires the use of aircraft,
Subcontractor shall carry, or require the owners of such aircraft to
carry:
1. All Risks Hull Insurance in an amount equal to the replacement value
of the aircraft, and
14
<PAGE>
2. Bodily Injury Liability, including Passenger Liability of not less
than $1,000,000 applicable to any one person and $1,000,000 for more
than one person in any occurrence and $1,000,000 for loss of or damage
to property in any one occurrence.
G. Other Requirements
1. Additional Insured: As to insurance set out in Paragraphs B, C, E.1,
E.2, F.1, and F.2, Contractor and Owner shall be included as an
additional insured.
2. Waiver of Subrogation: All policies shall be endorsed to provide that
underwriters and insurance companies of Subcontractor shall not have
any right of subrogation against Contractor or Owner or any of its
parents, subsidiaries, agents, employees, invitees, servants,
subcontractors, insurers, underwriters, and such other parties as they
may designate.
3. Primary Insurance: All policies shall be endorsed to provide that,
with respect to Subcontractor's Services, Subcontractor's insurance
shall always be primary coverage with respect to any insurance that
may be maintained by Contractor or Owner.
4. Notice of Cancellation: All policies shall be endorsed to provide
that thirty (30) days prior written notice shall be given to
Contractor in the event of cancellation or material change in the
policies.
5. Subcontractor and its subcontractors at all times shall waive any
right of recovery against Contractor or Owner or any of their parents,
subsidiaries, affiliates, agents, employees, invitees, servants,
subcontractors, insurers, underwriters, and such other parties as they
may designate for loss or damage covered by insurance of the types
specified in paragraphs B, C, D, E and F above and the Excess
Employers Liability Insurance.
6. Certificates: Subcontractor shall furnish Certificates of Insurance
evidencing insurance required hereunder before the start of any
Services and upon request, shall furnish copies of the actual
policies.
Certificates of Insurance shall include specific reference to
compliance with Paragraphs G.1, G.2, G.3, and G.4.
Subcontractor shall require its lower tier subcontractors to provide the same
insurance coverages and requirements as described herein.
7 LAWS AND REGULATIONS
A. Subcontractor, its employees, and representatives, shall at all times
comply with any and all applicable laws, ordinances, statutes, rules, and
regulations, of the federal, state, or local government, including but
expressly not limited to those relating to wages, hours, and working
conditions. Subcontractor shall procure and pay for all permits and
inspections required by any governmental authority for any part of the
Services and shall furnish any bonds, security, or deposits required for
performance of the Services.
B. Subcontractor shall comply with all applicable laws, executive orders,
and regulations concerning nondiscrimination in employment (including the
Equal Opportunity Clause of Section 202, Executive Order 11246, dated
September 24, 1965) 38 USC 2012, as amended by Section 402 of the Vietnam
Veterans Readjustment Assistance Act of 1974 and Section 503 of the
Rehabilitation Act of 1973, where are hereby incorporated herein by
reference.
8 TIME OF PERFORMANCE
Time is of the essence in the performance of Subcontractor's obligations under
this Subcontract. Subcontractor shall reimburse Contractor for the amount of
any liability incurred by Contractor or Owner and the amount of any increase in
the cost or expense to Contractor in performing Contractor's Services under the
Prime Contract as a
15
<PAGE>
result of Subcontractor's failure to perform the Services within the time
specified in this Subcontract.
9 PERFORMANCE REQUIREMENTS
Anything that may be called for in the specifications and not shown on the
drawings, or shown on the drawings and not called for by the specifications,
shall be of like effect as if called for and shown in both. In the event of a
conflict between the drawings and the specifications, the specifications shall
govern. If Subcontractor discovers any ambiguities or discrepancies,
Subcontractor shall immediately submit the matter to Contractor for
determination.
10 WARRANTIES
Subcontractor warrants that the Services to be performed pursuant to this
Subcontract shall be performed in accordance with the standards customarily
provided by an experienced and competent organization rendering the same or
similar services. Subcontractor shall reperform any of said services that were
not performed in accordance with this standard at no cost to Contractor.
11 CHANGES AND EXTRA WORK
A. Contractor may at any time, by written order to Subcontractor, and without
notice to or consent of any sureties, make changes in or additions to the
specifications or drawings, require additional work or services, or delete
Services covered by this Subcontract (collectively "Change"). If any such
Change causes any increase or decrease in the cost of, or the time required
for performance of this Subcontract, an equitable adjustment shall be made
in the Subcontract Price or performance schedule, or both, and this
Subcontract shall be modified in writing accordingly. Any claim by
Subcontractor for adjustment under this clause must be asserted within
thirty (30) days from the date of receipt by Subcontractor of a written
order from Contractor; provided, however, that Contractor may, in its
discretion, receive and act upon any such claim at any time before final
payment under this Subcontract. The claim shall be submitted to
Contractor's designated Subcontract Administrator. Subcontractor shall make
no additions, changes, alterations, or omissions except upon the prior
written order of Contractor.
B. No change shall be binding on either Subcontractor or Contractor unless
issued in writing and signed by Contractor.
12 OVERTIME
Subcontractor shall operate on a straight time forty (40) hour work week.
Overtime incurred by Subcontractor to maintain the Subcontract delivery or
completion schedule shall not be reimbursed by Contractor.
13 LIENS, ENCUMBRANCES AND CLAIMS
With respect to all Services provided by Subcontractor pursuant to this
Subcontract: (1) no liens or other encumbrances shall be filed by
Subcontractor; (2) Subcontractor expressly waives and relinquishes any and all
rights to such liens or encumbrances; (3) the waiver stated in (2) is an
independent covenant supported by separate consideration included within the
Subcontract Price; and (4) Subcontractor shall ensure that a clause
substantially similar to this clause 13 is included in all lower tier
subcontracts issued hereunder.
Contractor may as a condition precedent to any payment require Subcontractor to
furnish complete waivers or releases of any and all such liens, charges,
encumbrances and claims. Waivers or releases must be furnished by Subcontractor
covering all liens, charges encumbrances and claims as a condition to final
payment.
14 PATENTS AND ROYALTIES
Subcontractor shall defend all suits and claims against Owner or Contractor and
shall hold each of them free and harmless, and hereby indemnifies Owner and
Contractor from all liability, damages, costs, and royalties, including without
limitation reasonable attorney fees, from: (a) any infringement or alleged
infringement of any patent or for the misuse of any patented article, by
Subcontractor in the performance of the Services, or (b) the infringement or
alleged infringement of any patent by Owner's use or operation of the Services
following the completion thereof by Subcontractor, or (c) the use or misuse by
Subcontractor during the performance of the Services of any confidential
information or secret processes, or (d) any use or misuse of
16
<PAGE>
confidential information or secret processes by Owner in the use or operation of
the Services following acceptance.
15 INDEMNIFICATION
To the fullest extent permitted by law, Subcontractor shall defend,
indemnify and hold harmless Contractor, its parent and affiliates (and the
officers, directors, employees, agents and invitees of any of them), its
subcontractors and suppliers of any tier (subcontractors) and Client from and
against any and all liabilities, claims, demands, damages, or costs, including,
without limitation, settlement sums, attorney fees, consultant and expert fees
(liabilities), alleged or incurred in connection with (1) personal injury and/or
property damage, (2) workers' compensation claims involving employees of
Subcontractor and/or its subcontractors, (3) environmental and/or natural
resource damages, (4) breach by Subcontractor of this Subcontract, (5) violation
by Subcontractor of any applicable law pursuant to clause 7, and/or (6) any
other liabilities arising from Subcontractor's and/or its subcontractors
performance of the Services, unless caused by the sole negligence of contractor.
16 SUBCONTRACTOR'S FINAL RELEASE CERTIFICATE AND INDEMNIFICATION
After completion and acceptance of all Services, Subcontractor shall complete
the "Subcontractor's Final Release Certificate or Indemnity" attached hereto and
incorporated into this Subcontract by reference. This Certificate shall be
submitted to the Subcontract Administrator along with Subcontractor's final
invoice as prescribed in the Compensation and Payment section of this
Subcontract.
17 TERMINATION
A. Default: Should Subcontractor at any time refuse or neglect to supply
sufficient and properly skilled workers, or fail in any respect to prosecute
the Services or any separable portion, with promptness and diligence, or
fail in the performance of any portion of this Subcontract required for the
satisfactory completion of the Services, or become insolvent, Contractor may
terminate this Subcontract for default, after forty-eight (48) hours written
notice to Subcontractor to correct the deficiency. Contractor may also
terminate Subcontractor's right to proceed with the Services or such part of
the Services where defaults have occurred.
B. Convenience: Should the Prime Contract be terminated or canceled pursuant
to the terms thereof, or upon ten (10) days advance notice, Contractor may
terminate this Subcontract by written notice to Subcontractor. Such
termination shall be effective in the manner specified in the notice and
shall be without prejudice to any claims that Contractor or Owner may have
against Subcontractor.
C. Upon receipt of a termination notice pursuant to paragraphs A or B, above,
Subcontractor shall, unless the notice directs otherwise, immediately
discontinue the Services.
D. In the event of a termination for default, Subcontractor shall not be
entitled to receive any further payment, if any may then be due, until the
Service is completed. Contractor may acquire, in the manner Contractor
considers appropriate, services similar to the Services terminated for
default. Subcontractor shall be liable for, and pay to, Contractor any
reasonable cost, including the cost for additional managerial and
administrative services, in excess of the Subcontract Price for the
Services.
E. In the event this Subcontract is terminated for convenience, the obligations
of this Subcontract shall continue as to Services already performed, as to
obligations entered into by Subcontractor, before the date of termination
and as to obligations not reasonably terminable thereafter. Subcontractor
shall be entitled to relative proportions of the agreed Subcontract Price
for the portions of the Services done before the effective date of
termination. Subcontractor shall not be entitled to any profit or fee on
unperformed Services.
F. Subcontractor shall incorporate a termination clause substantially the same
as set forth in this clause, in all purchase orders and subtier
subcontracts.
17
<PAGE>
18 SUSPENSION OF WORK
A. Contractor may at any time suspend performance of all or any part of the
Services by giving not less than five (5) working days written notice to
Subcontractor. The suspension may be continued by Contractor for up to
sixty (60) days during which period Contractor may at any time, by written
notice, require Subcontractor to resume performance of the Services. If at
the end of the sixty (60) day period of suspension, Contractor has not
required a resumption of the Service, that portion of the Service that has
been suspended may be terminated by either party pursuant of the provisions
of this paragraph. Subcontractor shall be compensated in accordance with,
and shall follow the procedures specified in Clause 17, paragraphs C and E
above.
B. Contractor, shall not be liable for any damages, anticipated profits, or
costs incurred with respect to suspended Services during any period of
suspension.
19 NOTICE OF THIRD PARTY CLAIMS AGAINST THE SUBCONTRACTOR
Subcontractor shall give Contractor immediate notice of any suit or action
filed, or any claims made, against Subcontractor arising out of the performance
of this Subcontract or any lower-tier subcontracts. Subcontractor shall furnish
immediately to Contractor copies of all documents received by Subcontractor
pertinent to such actions, suits, or claims.
20 NOTICES AND CORRESPONDENCE
Any notice or communication shall be considered as having been given to
Contractor, if mailed by registered mail, postage prepaid to:
Attention:
Address:
Procurement Department
Reference: Subcontract No.
21 DISPUTES
The parties shall use the following procedures as a condition precedent to
either party pursuing other available remedies:
A. The parties agree to make a good faith effort to mutually resolve any
dispute as quickly as practicable.
B. If, however, the parties have not so resolved the dispute, the parties'
representatives shall submit the dispute to one of their senior-level
executives (including Presidents, Executive Vice Presidents, Senior Vice
Presidents, and Chief Financial Officers) for review and simultaneously
notify the other party in writing thereof. A meeting shall be held within
ten (10) business days after such notice of submission attended by such
senior-level executives of the parties and any necessary representatives to
attempt in good faith to negotiate a resolution of the dispute.
C. If, within ten (10) business days after such meeting, the parties have not
succeeded in negotiating a resolution of the dispute, either party may
institute suit in the Superior Court of the State of California for the
County of Los Angeles, or, if mutually agreed to by the parties, the dispute
shall be settled by arbitration in Pasadena, California, in accordance with
the Construction Industry Arbitration Rules of the American Arbitration
Association and shall be conducted by a single arbitrator, licensed to
practice law within the State of California and established to be a member
of the American Bar Association's Forum Committee on the Construction
Industry.
1. If the dispute is arbitrated, the award of the sole arbitrator shall
be conclusive and binding upon the parties, subject to the provisions
of the California Code of Civil Procedure relating to arbitration, as
the code now exists, or may be amended during the term of this
Subcontract. The arbitrator may fix and assess expenses of the
arbitration against either or both parties.
2. Judgment upon the arbitration award rendered by the arbitrator, may be
entered in a court of competent jurisdiction.
3. The final judgment of the Court (after all appeals have been finally
determined or the time for appeal has expired, without an appeal
having been made) or in absence thereof the decision of the arbitrator
with respect to any dispute shall be binding on Contractor and
Subcontractor.
18
<PAGE>
4. During the pendency and conduct of any litigation or arbitration, or
litigation to enforce the award of an arbitrator, at Contractor's
direction, Subcontractor shall continue to perform the Services.
However, nothing in this paragraph shall limit the right of Contractor
to complete the Services.
D. The rights and obligations of the parties under this provision shall survive
completion or termination of this Subcontract.
22 ASSIGNMENT
Subcontractor shall not subcontract, sublet, or assign the Services, or any part
thereof, and shall not assign any monies to become due, without first obtaining
the written consent of Contractor in each and every instance.
23 CONFIDENTIALITY OF ALL DRAWINGS, SPECIFICATIONS, AND PLANS
All drawings, specifications, plans, and all other information furnished to
Subcontractor by Contractor or obtained by Subcontractor pursuant to its
performance of the Services under this Subcontract shall be held in confidence
by Subcontractor and shall not be used by Subcontractor for any purpose other
than for the performance of the Services or as authorized in writing by
Contractor or Owner. Subcontractor acknowledges that all such plans, drawings,
specifications, and all information gathered by Subcontractor in the performance
of the Services under this Subcontract is the property of the Contractor or
Owner and shall be returned to Contractor with any copies made at the completion
of the Services, save one confidential record copy.
24 RELEASE OF NEWS INFORMATION
No news release, including photographs and films, public announcement, denial,
or confirmation shall be made by Subcontractor concerning the subject matter of
this Subcontract, or any phase of any program hereunder, without the prior
written approval of Contractor.
25 GRATUITIES
Subcontractor warrants that neither it nor any of its agents or representatives
has offered or given any gratuities to Contractor's or Owner's employees, agents
or representatives with a view toward securing this Subcontract or securing
favorable treatment with respect thereto.
26 RIGHTS, REMEDIES AND WAIVER
The rights and remedies provided in this Subcontract to Contractor shall be
cumulative with and in addition to the rights and remedies otherwise available
at law or elsewhere provided for herein. No failure to exercise or delay in
exercising on the part of Contractor of any right provided by this Subcontract
or at law shall operate as a waiver thereof.
27 ORDER OF PRECEDENCE
In the event of an inconsistency between provisions of this Subcontract, the
inconsistency shall be resolved in the following order:
(1) Section III, Special Provisions
(2) Section IV, General Provisions
(3) Section I, Statement of Work
(4) Section II, Compensation and
Payment
28 EFFECT OF INVALIDITY
If any provision in this Subcontract is determined to be void or unenforceable,
such determination shall not affect the validity of any other provision.
29 ENTIRE AGREEMENT
This Subcontract, together with all documents, specifications, and drawings
incorporated herein by reference, constitutes the entire agreement between
Contractor and Subcontractor, and there are no terms, conditions, or provisions,
either oral or written, between the parties other than those herein contained,
and this Subcontract supersedes any and all oral or written representations,
inducements, or understandings of any kind or nature between the parties
relating to the Services.
19
<PAGE>
SUBCONTRACTOR'S FINAL RELEASE CERTIFICATE AND INDEMNITY
Project No. Subcontract No.
- -------------------------------------------------------------------------------
This Release and Certificate is made in accordance with the provisions of
Subcontract No. _______ including any and all Amendments thereto, executed by
_____________ hereinafter referred to as the "SUBCONTRACTOR" and PARSONS
ENGINEERING SCIENCE hereinafter referred to as the "CONTRACTOR". The "OWNER",
hereinafter referred to, is __________________________________________________.
In consideration of payments made heretofore, or to be made, by the CONTRACTOR
to the SUBCONTRACTOR for labor, materials, and services furnished by the
SUBCONTRACTOR in the performance of said Subcontract, the SUBCONTRACTOR hereby
unconditionally releases the CONTRACTOR and OWNER, their Officers, Agents,
Employees, Assigns, or Heirs from any and all liens and claims whatsoever
arising out of or during the performance of said Subcontract other than such
claims, if any, that may with the consent of the CONTRACTOR and the OWNER, be
specifically excepted from the terms of this Release and Certificate stated on
Sheet 1, attached hereto (or, if none, so state):
____________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______ and in further consideration of the aforesaid payments as SUBCONTRACTOR
being first duly sworn, further affirms and certifies under penalty of perjury
that all labor, materials, and services of every nature by whomsoever furnished
in connection with the performance of said Subcontract and all applicable state
and federal payroll taxes and payroll insurances have been paid and
SUBCONTRACTOR hereby agrees to indemnify CONTRACTOR and OWNER, respectively,
against, and hold them harmless of and from, all liens, claims, demands,
penalties, losses, costs, damages, and liability in any manner whatsoever
heretofore or hereafter arising out of or in respect of any claim by any person
or governmental agency for payment for work, labor, services, or materials
heretofore or hereafter performed, furnished, or rendered under or pursuant to
or in respect of the performance of said SUBCONTRACTOR or the aforesaid
applicable taxes and insurances.
Executed this _______________________ day of _________________________ 19_____
(Corporate Seal)
_____________________________________________
SUBCONTRACTOR
By___________________________________________
_____________________________________________
OFFICIAL TITLE
(If the SUBCONTRACTOR is a corporation, the following Certificate will be
executed.)
I, _____________________________________, certify that I am the
____________________ of the Corporation executing this Release and Certificate;
that ________________ who signed this Release and Certificate on behalf of the
SUBCONTRACTOR was then ___________________________ of said Corporation: that
said Release and Certificate was duly signed for and on behalf of said
Corporation by authority of its governing body, and is within the scope of its
corporate powers.
STATE OF _________________________)
ss.
COUNTY OF ________________________)
Subscribed and sworn to before me this _________ day of ___________ 19_______
____________________________________________________
NOTARY PUBLIC IN AND FOR SAID STATE
20
<PAGE>
[LETTERHEAD]
SUBCONTRACT AGREEMENT
IN AGREEMENT WITH
RUTGERS, THE STATE UNIVERSITY
and
Phytotech, Inc.
Subcontract number: 812
Subcontractor: Phytotech, Inc.
Address: 1 Deer Park Drive, Suite 1
Monmouth Junction, NJ 08852
For: Performance of certain work and services in
connection with Rutgers account number: 4-23368
Project Sponsor: New Jersey Department of Environmental Protection
Project Title: Phytoextraction of Heavy Metals From Contaminated
Soil
Rutgers Project Director/ Dr. Ilya Raskin
Principal Investigator:
Department: Center for Agricultural Molecular Biology
Type of Contract: Cost Reimbursement
Period of Performance: June 1, 1996 to April 30, 1997
Maximum Allowable Price: $52,541
Issued by: Rutgers, The State University
Office of Research and Sponsored Programs
PO Box 1179 - ASB Annex II, Busch Campus
Piscataway, New Jersey 08855-1179
Invoice to: Rutgers, The State University
Center for Agricultural Molecular Biology
Foran Hall
Dudley Road
PO Box 231
New Brunswick, NJ 08903-0231
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
- ------------------------------------------------------------------- ----
PREAMBLE 3
TERMS AND CONDITIONS
ARTICLE 1 SCOPE OF WORK 3
ARTICLE 2 KEY PERSONNEL 3
ARTICLE 3 PERIOD OF PERFORMANCE 3
ARTICLE 4 COMPENSATION AND METHOD OF PAYMENT 3
ARTICLE 5 REPORTING REQUIREMENTS 4
ARTICLE 6 AUDIT 4
ARTICLE 7 EQUIPMENT 5
ARTICLE 8 RIGHTS IN DATA AND COPYRIGHTS 5
ARTICLE 9 TERMINATION 5
ARTICLE 10 PROVISIONS OF PRIME AGREEMENT 6
ARTICLE 11 PUBLICITY 6
ARTICLE 12 DISPUTES 6
ARTICLE 13 PHS ATTESTATION 6
ARTICLE 14 DEBARMENT AND SUSPENSION 6
ARTICLE 15 EQUAL OPPORTUNITY/AFFIRMATIVE ACTION 7
ARTICLE 16 INDEMNIFICATION 7
ARTICLE 17 ASSIGNMENT 7
ARTICLE 18 ENTIRE AGREEMENT 7
ARTICLE 19 SITUS 8
EXHIBIT A STATEMENT OF WORK
EXHIBIT B BUDGET
EXHIBIT C SUBCONTRACTOR CERTIFICATION
2
<PAGE>
Exhibit 10.9
AMENDMENTS TO PHYTOTECH, INC.
STOCK OPTION PLAN
RESOLVED, that Section 2 of Phytotech, Inc. Stock Option Plan (the
"Plan") be amended as follows:
" 'Common Stock means no par voting and non-voting Common Stock of the
Corporation' "; and be it
FURTHER RESOLVED, that Section 6.01 of the Plan be amended as follows:
"6.01. Subject to adjustment pursuant to Section 6.02 and Section 10.05, the
aggregate number of shares of Common Stock available for grant under the Plan
is 2,500,000 consisting of 750,000 shares of voting Common Stock and 1,750,000
shares of non-voting Common Stock. Of such amount, the aggregate number of
shares of Common Stock available for grant as an Incentive Stock Option under
the Plan is 2,500,000 of which 750,000 shares may be voting Common Stock and
1,750,000 shares may be non-voting Common Stock."
