SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers
Under Section 12(b) or (g) of
The Securities Exchange Act of 1934
ACCORD ADVANCED TECHNOLOGIES, INC.
(Formally known as Investment Book Publishers, Inc)
(Name of Small Business Issuer)
NEVADA 88-0361127
- ------------------------ ----------------------------------------
(State of Incorporation) (I.R.S. Employer Identification Number.)
5002 South Ash Avenue, Tempe, Arizona 85282
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(Address of Principal Executive Offices Including Zip Code)
(480) 820 1400
--------------------------
(Issuers Telephone Number)
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act: COMMON
STOCK $.0001
PAR VALUE
----------------
(Title of Class)
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PART I
ITEM 1. BUSINESS
The company originally known as Investment Book Publishers, Inc., was
incorporated in Nevada on May 22, 1996. On August 1997, Investment Book
Publishers, Inc. exchanged shares with Accord Semiconductor Equipment Group,
Inc. whereby Accord Semiconductor Equipment Group, Inc. became a wholly owned
subsidiary. Effective November 18, 1997, Investment Book Publishers changed its
name to ACCORD ADVANCED TECHNOLOGIES, INC. The company trades over the counter
on the Electronic Bulletin Board under the symbol "AVTI."
There have been no bankruptcy, receivership or similar proceeding in the
company's history.
BUSINESS DESCRIPTION
ACCORD ADVANCED TECHNOLOGIES, INC. (AVTI) is in the business of providing
refurbishing services and engineering consulting to semiconductor manufacturers.
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC., the wholly owned subsidiary of
Accord Advanced Technologies, Inc. was formed in 1993 under the name Integrated
Semiconductor Service. It is the only operating company of Accord Advanced
Technologies, Inc. This company recognized an opportunity for full-service
re-manufacturing and support of advanced semiconductor manufacturing systems and
components.
Accord Semiconductor Equipment Group, Inc (SEG) specializes in
re-manufacturing and modifying multi-chamber systems for chemical vapor
deposition (CVD), physical vapor deposition (PVD) and Etch processes. These
precision systems are responsible for transforming individual silicon wafers
into integrated-circuit (IC) products such as computer chips. Refurbishing
provides Accord SEG's customers an equally high quality alternative to new OEM
equipment and enables the customer to immediately produce its IC products at a
reduced cost due to lower manufacturing equipment costs. The company also
provides system decommissioning, commissioning, after-sales service and supplies
parts and process technology as needed by the customer Accord SEG is unique
among equipment re-manufacturers because of its ability to custom-engineer
modifications to customers' systems. The company primarily re-manufactures the
equipment of Applied Materials, the largest original equipment manufacturer
(OEM) of semiconductor manufacturing equipment in the world. The market serviced
by the company consists of all facilities in North America (approximately 378)
manufacturing integrated circuits. The issuer has an internal marketing and
sales force as well as a highly skilled technical staff. It also has very
experienced outside sales representatives. The company utilizes trade shows,
trade journal advertising and its web site along with its technical, marketing
and sales force to distribute and market its services. The market size as
identified by the issuer is approximately $250,000,000.00.
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The issuer believes it is either the only public company, or one of very
few, that concentrates solely on re manufacturing semiconductor equipment.
Applied Materials, the OEM, has the ability to refurbish but at this time does
not sell custom upgrades which is the growth area of the issuer. GE Capital has
recently built a refurbishing facility. In the past GE has out sourced its
refurbishing work and it is not clear what type of equipment it will refurbish
in their new facility. Comdisco is a leasing company as is GE Capital. It leases
the equipment and sometimes has it refurbished when it comes off lease, usually
through the utilization of outside sources. B.E.S.T. is a privately held company
that refurbishes equipment, which is a generation older than those the issuer
handles. It is not a serious competitor in the future of the issuer.
The issuer is much smaller than GE and Comdisco, which places the issuer in
a distant third position on this type of equipment. The issuer has the ability
to remanufacture and deliver equipment in one-third the time it takes an OEM to
manufacture and deliver a new machine. The issuer also has the same warranty and
service as the OEM and its price is some 20% lower.
The issuer does not purchase raw material. It purchases parts and used
machinery from numerous sources.
Accord SEG has completed work for such well-known companies as American
Microsystems, Honeywell, Rockwell International, Integrated Solutions, Motorola,
Intel, MRC (Sony), California Micro Devices, Eastman Kodak, National
Semiconductor, Siemens Semiconductor Group, Lockheed, IDT and Texas Instruments.
In that there are numerous other prospective customers, the issuer feels that it
has been dependent on a few customers and is changing that dependency.
PATENTS
The issuers operating subsidiary has received two patents and is awaiting a
third.
The first patent was issued on April 28, 1998 (US Patent #5,744,400) for an
ion beam process that has advantages over the existing Chemical Mechanical
Planarization.
Traditional Chemical/Mechanical Planarization employs a combination of
mechanical pressure, abrasive slurry and chemical etchant to grind flat the thin
film layers of an IC. There is potential for damage to the IC if the layers are
ground too thin or if any residue from the CMP process remains. Accord's
planarization process yields greater consistency at a lower cost than does CMP.
The Company expects to complete a prototype incorporating its new technology
during 1999 or early 2000. The process is dry, slurry-free, environmentally
safe, adaptable to standard cluster deposition/etch tools and is cost effective
with rapid planarization rates.
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CVD WAFER HANDLING SYSTEM
Every semiconductor processing system uses spare parts that are affected by
the gases and other materials within a process chamber. These "consumable parts"
must be replaced regularly; creating a potentially lucrative market to those
companies that can design and manufacture replacement parts. All Chemical Vapor
Deposition chambers in a multi-chamber processing tool use a handling system to
support and heat the wafer inside the chamber. Through a combination of thermal
stress and exposure to corrosive gases over time, these wafer handlers fail
during production and need to be replaced. The issuer's subsidiary has developed
and on September 1, 1998 received a patent on a wafer-handling system, or
susceptor (US Patent # 5,800,623). It incorporates distinctive metallurgy to
offer greater reliability and longer durability at a significantly reduced cost.
ENVIROCLEAN' CHAMBER KIT
The company through its subsidiary has a patent-pending (docket #
08/730849) product known as EnviroClean(TM) chamber upgrade kit. This product
offers a solution to concerns about GREENHOUSE GAS production in the
semiconductor industry. Greenhouse gases are believed to have a detrimental
effect on the earth's atmosphere through global warming. Semiconductor
manufacturing is currently responsible for producing a significant volume of
these gases each year. Consequently, pending legislation to curtail the
production of greenhouse gases will likely require semiconductor manufacturers
in the near future to install relatively expensive abatement systems that meet
strict emission specifications.
The company's EnviroClean kit enables semiconductor manufacturers to retool
existing multi-chamber equipment less expensively. Its technology replaces
harmful greenhouse gases with relatively benign process-gas. The issuer may need
local government approval for the use of certain gases used in the testing of
the equipment re-manufactured on its premises. To date, the company has all the
approvals necessary.
The issuer is unaware of any effect existing governmental regulations has
on its business. The issuer is also unaware of any probable regulation. The
issuer has not expended any funds for Research and Development during the past
two years.
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The company complies with all environmental laws. The costs to meet these
requirements were expended when the private company moved into its present
rented facility in 1994. There has been no need for further expenditures since
that time.
The issuer has fifteen (15) full time employees; three (3) contracted
employees and two (2) independent sales representative groups. The company will
send an annual report to its security holders, which shall contain audited
financial statements. The issuer is electronically filing this Registration
Statement with the Securities Exchange Commission for the benefit of its
shareholders and to comply with the reporting requirements as promulgated by the
commission. As such, the company will advise the shareholders that the SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov . The issuer will also advise the
shareholders of its Internet site (http://www.accord-seg.com) and address
([email protected]).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The 1997 consolidated financial statements include the accounts and results
of operations of the Company and its wholly owned subsidiary for the period from
December 11, 1997 (date of acquisition) through December 31, 1997. The Company's
acquisition of Accord Semiconductor Equipment Group, Inc. ("Accord SEG") was
effected through the exchange of common stock that resulted in 100% of the
common stock of Accord SEG being held by the Company and the shareholders of
Accord SEG owning approximately 95% of the Company.
RESULTS OF OPERATIONS
1998 to 1997
Sales increased from $1,358,000 for the year ended December 31, 1997 to
$3,940,000 for the year ended December 31, 1998. Sales on a pro forma basis for
the year ended December 31, 1997 were $3,829,000 assuming the acquisition of
Accord SEG occurred at the beginning of the year. The increase in revenue from
the pro forma sales in 1997 was approximately 3%.
The consolidated gross profit increased from $334,000 in 1997 to $1,075,000
in 1998. Gross profit on a pro forma basis for the year ended December 31, 1997
was $1,483,000 assuming the acquisition of Accord SEG occurred at the beginning
of the year. The gross margin variance is due to the price of the equipment
purchased for certain contracts being higher in 1998.
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On a pro forma basis, general and administrative expenses increased from
$872,000 in 1997 to $1,225,000 in 1998. The Company wrote off approximately
$200,000 of old and slow moving inventory parts in 1998. Additionally, there was
an increase in professional fees in from $11,000 in 1997 to $98,000 in 1998. The
Company was involved in numerous legal actions in 1998.
The Company recorded an impairment loss of $250,000 in 1998 related to a
piece of equipment that is idle and for which the ability of the Company to
liquidate is uncertain. The Company also recorded a $350,000 expense in 1998
related to the settlement of a lawsuit.
Interest expense increase from $326,000 in 1997 on a pro forma basis to
$442,000 in 1998. The Company had greater balances outstanding on its purchase
order financing during 1998.
The Company recognized $45,000, net of income taxes, in debt forgiveness
income in 1998 related to trade payable debt that was restructured under a long
term note payable that was later forgiven by the note holder.
JUNE 30, 1999 (UNAUDITED) TO 1998
Revenue for the six months ended June 30, 1999 was $ 3,052,000. The
Company's revenue for the full 1999 fiscal year is expected to increase from
that of 1998. The Company has increased and focused its marketing efforts
resulting in sales gains.
The gross profit margin for the six months ended June 30, 1999 increased to
45% compared to 27% for the year ended December 31, 1998. As discussed above,
the prices for materials and equipment can vary significantly. The cost of the
basic tool is largest cost component of cost of sales and the purchase price can
vary depending on availability.
Interest expense decreased in the six-month period ended June 30, 1999
because the Company has secured less expensive financing for its purchase
orders.
The Company obtained new financing that allowed it to purchase certain
assets it held under capital leases. The Company entered into agreements with
the lessors that resulted in debt pay-off less than the outstanding principal
and accrued interest on the capital leases. The Company recognized an
extraordinary gain of $634,880 after income taxes as a result of these
transactions.
The Company had a net deferred income tax provision of $455,000 for the six
months ended June 30, 1999. The Company had net operating loss carry forwards
recorded as net deferred income tax assets that are to be utilized. In addition,
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the valuation allowance of $134,000 that was recorded at December 31, 1998 was
eliminated resulting in a deferred income tax benefit for the same amount.
LIQUIDITY AND CAPITAL RESOURCES
The Company historically has had a working capital deficiency. The Company
had a net working capital deficit of $143,000 at June 30, 1999 as compared to a
deficiency of $248,000 and $1,883,000 at December 31, 1998 and 1997
respectively. The Company has attempted to get cash deposits from customers at
the time purchase orders are submitted to assist in much of the up front costs
that are incurred in completing customer orders. The largest component of cost
of sales is the cost of acquiring the primary tool or machine. The Company has
borrowed funds from certain purchase order lenders. The Company believes that at
its current operating levels it can continue to require customer deposits and
that it has several sources to obtain financing upon obtaining a customer
purchase order.
The Company has not experienced material losses on receivables from its
customers. Its customers generally are large companies with significant
resources. The Company requires final payment upon delivery, installation and
completion of testing.
The Company is attempting to raise additional debt or equity capital to
allow it to expand the current level of operations. The Company raised
approximately $900,000 in new equity in the year ended December 31, 1998. The
Company also refinanced and restructured capital leases in the six months ended
June 30, 1999. The new financing is for $1,000,000 payable over a ten year term.
The Company may require additional capital to continue a trend of greater
volume, which would require higher levels of inventory, accounts receivable and
higher operating expenses for marketing. There can be no assurances that the
Company will be successful in obtaining such capital.
YEAR 2000
The Company is currently updating its computer hardware and software. The
Company does not believe that it will encounter significant internal year 2000
problems. The cost of the new hardware and software is expected to be
approximately $75,000.
The Company does not anticipate difficulties with customers or vendors
relative to the year 2000 issue. The Company's relationship with its customers
and vendors is such that it is not materially dependent upon their information
technology systems.
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The Company discloses to its customers that the equipment it sells has not
been analyzed for year 2000 issues and that any year 2000 issues are matters
that should be addressed with the original equipment manufacturer.
FORWARD LOOKING INFORMATION
The issuer has and will continue to market all the prospective customers in
North America rather than relying on only those customers with whom it has
historically done business. The company plans to increase its sales and
marketing presence through the use of its web site, more advertising and adding
more sales and technical personnel. The company will also continue the
development of its patents.
ITEM 3. DESCRIPTION OF PROPERTY
The issuer currently leases a 14,000 square foot building at 5002 S Ash Ave
Tempe, Arizona 85282. The monthly triple net rent is $9,372. At this time, the
company is planning on renewing the lease for an additional five-year period.
The company owns no real property and has no plans to acquire real property.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth each person known by the company to be the
beneficial owner of more than 5% of the Common Shares (the only class of voting
securities) of the company all directors individually and all directors and
officers of the company as a group. Each person has sole voting and investment
power with respect to the shares as indicated.
Name and Address Amount of Beneficial Percentage
of Beneficial Owner Ownership of Class
- ------------------- --------- --------
Travis Wilson 20,325,000 50.92%
5002 S. Ash Ave.
Tempe, AZ 85282
The Wilson Trust (1) 6,000,000 15.02%
5002 S. Ash Ave.
Tempe, AZ 85282
All Executive Officers and 28,125,000 70.43%
Directors as a Group (3 persons)
(1) Mr. Wilson and his family are the beneficiaries of the Wilson Trust. Mr.
Wilson therefore, is the beneficial owner of 65.94% of the common stock of
the issuer and is the only control shareholder.
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ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following is a list of the Directors, Officers and Significant
Employees of the issuer.
Name Age Positions and Offices Held
---- --- --------------------------
Travis Wilson 42 President and Director
Carl P. Ranno 59 Secretary and Director
Gerald Flanagan 60 Director
Donald Fuller 51 Director of Marketing and Sales
Rochelle Witharana, CPA 35 Controller
Dr. Balu Pathangey 43 Senior Application Process Engineer
All three Directors have been in office since November of 1997 and will
remain in office until the next annual meeting of the Shareholders or unless
they resign. There are no agreements that a Director will resign at the request
of another person and the above named Directors are not acting on behalf of
another person.
The following is a brief summary of each of the Directors, Officers and
Significant Employees including their business experience for the past five
years.
TRAVIS WILSON founded the subsidiary company Accord SEG in 1993.
Accordingly, his business experience for the past five years has been with the
issuer's subsidiary, which is the operating company. Prior to starting Accord
SEG Mr. Wilson was a Project Engineer with Prototech Research, Inc. where he
partnered in the design and implementation of various experimental process
platforms including a revolutionary CVD platform used for depositing a thin film
of copper on silicon substrates and the development of hardware used in CVD
Titanium Nitride process applications.
Mr. Wilson served as tactical marketing product manager of Applied
Materials, Inc., where he managed the introduction and post-sale support of the
highly successful Precision 5000(TM), a revolutionary modularized production
semiconductor processing tool. He attended the University of California at
Hayward. His education is in electrical engineering, business administration and
marketing. He is also pursuing a graduate degree in Marketing at the University
of Phoenix.
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CARL P. RANNO received a degree in Economics from Xavier University in
Cincinnati, OH and his Juris Doctor from the University of Detroit School of
Law. Mr. Ranno spent many years in the practice of law, which included the
fields of litigation as well as mergers and acquisitions. He maintains his
license to practice law in the State of Michigan and is admitted to practice in
the federal courts located in Michigan, the Sixth Circuit Court of Appeals, the
US Tax Court and the US Supreme Court. Mr. Ranno advises companies as to legal
issues and as well as strategic planning and mergers and acquisitions.
From 1992-1996 he was the president of Pollution Controls International
Corp. which marketed and manufactured a patented after market automotive
environmental product. The operating subsidiary was voluntarily placed in
Bankruptcy in 1996. Ultimately, the parent merged with another company and Mr.
Ranno has no further contact with it.
GERALD L. FLANAGAN has spent 30 years in different facets of investment
banking. He was Vice President of Peacock, Hislop, Staley and Givens, a regional
investment-banking firm until 1995. Mr. Flanagan was involved with corporate
business development specializing in mergers and acquisitions, private
placements and venture capital transactions. He was on the original board and
still sits on the executive committee of the Arizona Venture Capital Conference
where he also served as its Chairman in 1994. For the past four years, Mr.
Flanagan has been very active in business consultations in the areas of finance
and mergers and acquisitions.
Mr. Flanagan holds a degree in finance from the University of Southern
California and studied marketing on a post graduate level at the University of
California, Los Angeles.
DONALD FULLER, the issuers marketing and sales director, has a successful
career of P&L assignments with extensive technical marketing and sales
management supported with strong engineering and physics backgrounds. His twenty
years in the industry have included global sales and marketing for major
equipment companies in Silicon Valley. His background includes award-winning
advertising, computerized sales tools and models, sales training, recruiting and
managing sales representatives, collateral production and presentations to
companies worldwide. Mr. Fuller has also presented to the Electronics Committee
of the Peoples Congress of China in 1997, the only westerner to be invited. At
that time he was the Vice President of Marketing and Sales for I C Engineering.
His responsibility included the development of a global marketing and sales
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force, which he successfully completed. Prior to his position with ICE he was
the product manager for Mattson Technology and from 1991 through 1995 he was the
Global Marketing Manager for Applied Materials, the world leader in the semi
conductor equipment manufacturing industry
Mr. Fuller has a Bachelor degree in Aerospace Engineering from San Diego
State. After returning from the army, he returned to his alma mater where he
received a second degree in Marketing and Finance.
ROCHELLE WITHARANA CPA has successfully performed a broad range of
financial and management functions. After leaving Deloitte & Touche in 1990,
where she served in the audit and small business development departments, Ms.
Witharana. joined Gespac Inc. an international organization as its controller.
She assumed the hands-on responsibility for accounting, human resources and
other operational functions. Ms Witharana has secured credit lines, introduced
new credit policies, integrated new computer systems and other benefit programs.
She is continuing those responsibilities in her present capacity at the issuer.
Ms. Witharana is a CPA and holds a Bachelor of Science degree (Cum Laude)
from California State at Northridge.
DR. BALU PATHANGEY received his M.E. and Ph. D. degrees in Chemical
Engineering in 1982 and 1987, respectively, from Stevens Institute of
Technology, Hoboken, NJ. Since 1990, he has been with Microfabritech, an
interdisciplinary center at the University of Florida.
During his 8 years as a research engineer at the University, he has
designed and developed several research scale CVD, RF/DC/Ion-beam sputter
deposition, and HDP etch systems for processing thin film semiconductor,
insulator and interconnect materials. In addition, he has worked as a technical
consultant to start-up companies for design and development of prototype
environmental air/water cleaning systems using photo-oxidation technology and in
the pilot plant processing of fluorine and fluoro compounds for semiconductor
manufacturing. He is a member of AICHE, AVS, and SID and authored or co-authored
over 40 technical papers and one patent.
Dr. Pathangy is responsible for all the technical aspects of the company.
There are no family relationships among the Directors, Officers and
Significant employees. Additionally, none of the Directors, Officers and
Significant Employees have been convicted or are subject to a pending criminal
proceeding, nor have they been subjected to any type of order barring,
suspending or otherwise limiting their involvement in any type of business,
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securities or banking activities. Furthermore, none of the Directors, Officers
and Significant Employees have been found by a court of competent jurisdiction,
the Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law.
ITEM 6. EXECUTIVE COMPENSATION
The President of the company received $118,191 in compensation during
fiscal year 1998. His salary was paid through the subsidiary company. No other
employee received more than $100,000. The Board of Directors grant, from time to
time, options to key employees.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The subsidiary company billed and received $344,302 in the fiscal year
ended December 31, 1997, for services provided to an entity with ownership that
includes the issuer's president and single largest shareholder. The subsidiary
company also paid $4,000 to this entity for services provided to the subsidiary
by the related entity's personnel. These transactions occurred within the
subsidiary prior to the merger.
The issuer paid fees totally $18,000 in the form of common stock
(restricted pursuant to R144) for the benefit Carl P. Ranno and Gerald L.
Flanagan, both Directors, for services rendered in connection with the Accord
SEG acquisition in the year ended December 31,1997. The issuer also agreed to
pay these Directors fees for assistance in raising debt or equity capital. The
fees are 3% for debt and 10% for equity raised and are payable only upon
success. As of December 31, 1997 the total amount due these Directors was
$24,700 and they had been paid $5,000 during that fiscal year. As of December
31, 1998 the total amount due was $52,704 and they had been paid $20,296. The
issuer has also agreed to remit to Mr. Ranno fees for legal services rendered
during the last half of 1999.
There are no parents of this small business issuer.
Transactions with promoters consist of work performed on behalf of the
company by Jordan Richards Associates. The issuer remitted $18,000 to them for
worked performed in terms of a company profile, press releases and mailings. The
consideration was cash only.
There were no material underwriting discounts and commissions upon the sale
of securities by the issuer where any of the specified persons was or is to be a
principal underwriter or is a controlling person or member of a firm that was or
is to be a principal underwriter.
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There were no transactions involving the purchase or sale of assets other
than in the ordinary course of business.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the issuer consists of 47,000,000 shares of
Common Stock, par value $.0001 per share and 3,000,000 shares of Preferred
Stock, par value $.0001 per share. The material terms of the capital stock of
the issuer are set forth in the following statements. However, reference is made
to the more detailed statements as found in the company's Articles of
Incorporation with amendments and the company Bylaws all of which are attached
to this registration statement as exhibits.
COMMON STOCK
Holders of common stock are entitled to one vote per each share standing in
his/her name on the books of the company as to those matters properly before the
shareholders. There are no cumulative voting rights and a simple majority
controls. The holders of common stock will share ratably in dividends, if any,
as declared by the Board of Directors in its discretion from funds or stock
legally available. Common stock holders are entitled to share pro-rata on all
net assets, in the event of dissolution. All of the shares of common stock are
fully paid and non-assessable.
PREFERRED STOCK
The shareholders have amended the Articles of Incorporation authorizing
3,000,000 shares of preferred stock, $.0001 par value. No shares have been
issued. Any shares of preferred issued would have priority over the common stock
with respect to dividend or liquidation rights.
The issuer is not offering preferred stock with this registration statement
nor is it offering debt securities.
There are no provisions in the Articles of Incorporation or the Bylaws that
would delay, defer or prevent a change of control. However, any future issuance
of preferred stock could have the effect of delaying or preventing a change in
control of the company without further action by the shareholders and could
adversely affect the voting or other rights of the holders of common stock.
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PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) Market information. The company's common equity is traded on the Over the
Counter Market (OTC BB).
The high and low sales prices for each quarter are as follows:
Quarter High Low Close
------- ---- --- -----
9/30/96 .06 .03 .03
12/31/97 5 1/4 4 3/4 5.00
3/31/98 4 3/8 3 5/16 4 1/8
6/30/98 5 1/8 2 5/8 2 7/8
9/30/98 15.00 6.35 9 3/8
12/31/98 1 7/16 1/2 3/4
3/31/99 1/2 1/8 1/8
6/30/99 3/8 1/16 .11
There was no information that the issuer could retrieve as to the high and
low sale prices for the quarters from 9/30/96 to 12/31/97.
There is an established trading market for the common equity being
presented in a registration statement.
(b) Holders. There are approximately 105 holders of the common equity of the
company.
(c) Dividends. There have been no cash dividends declared for the past two
fiscal years. There are no restrictions that limit the ability to pay dividends
on common equity other than the dependency on the company's revenues and
earnings and financial condition.
ITEM 2. LEGAL PROCEEDINGS
The issuer is not a party to any pending legal proceeding nor is its
property the subject of any legal proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The company has had no disagreements with its accountants nor has the
company changed accountants.
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ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The company has sold the following securities, which were not registered
during the past three years.
Date Name Number of Shares Consideration
- ---- ---- ---------------- -------------
October 31, 1997 Tantayl Inv. Grp 1,250,000 $ 37,500
October 1,1998 Tantayl Inv. Grp. 63,636 $175,000
October 9, 1998 Nismic Sales Corp. 250,000 $250,000
November 22, 1998(1) Gem Management Ltd. 1,220,000 $380,000
November 22, 1998(2) Gem Management Ltd 200,000 $ 2,000
November 22,1998(3) Turbo International, Inc. 160,000 $ 50,000
November 22,1998(4) Successways Holding Ltd 320,000 $100,000
All of the above securities were issued pursuant to Rule 504 of Regulation
D promulgated under the Securities Act. All Form Ds and amendments are
incorporated by reference.
The transactions noted as (1), (3) and (4) constitute a convertible
debenture and the shares were issued in support thereof. The entire Convertible
Debenture Purchase Agreement with the Escrow Agreement more fully set forth the
terms and conditions and are attached as exhibits.
The transaction noted as (2) constitutes a Warrant to Purchase Common Stock
of the issuer in favor of Gem Management Ltd. The warrant was exercised and the
underlying shares were issued pursuant to Rule 504 of Regulation D promulgated
under the Securities Act. A copy of the Warrant more fully sets forth the terms
and is attached as an exhibit.
The company also issued 300,000 common shares each (restricted pursuant to
R 144) for the benefit of two Directors in lieu of consulting fees. The
cumulative value was $18,000 as set forth in Item 7 of this registration. The
company also issued 600,000 shares of common stock (restricted pursuant to R
144) as finders/consulting fees as previously agreed before the merger to Chase
Investments. The value of said transaction was $18,000.
There have been no underwriting undertaken by the issuer.
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ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to the Nevada Revised Statutes sec. 78.751, a Nevada Corporation
has the power to indemnify its Directors, Officers, Employees and Agents.
Pursuant to section 12 of the issuers Articles of Incorporation, the Company
shall indemnify its Officers, Directors, Employees and Agents. Section IX of the
issuer's Bylaws specifically sets forth the Indemnification of those above
stated. Pursuant to the above the Directors and Officers liability is affected.
A copy of the Articles and Bylaws are attached as exhibits and by reference
incorporated herein.
PART F/S
Attached are the audited financial statements of the issuer for year end
December 31, 1997 including the wholly owned subsidiary and year end December
31,1998 consolidated audited statements for the issuer. Also find enclosed the
unaudited financial statements for the period ending June 30, 1999.
1) Table of contents - Issuer and Subsidiary Financial Statements
year-end 1997.
a) Independent Auditors' Reports
b) Balance Sheets as of December 31, 1997
c) Notes to Financial Statements as December 31, 1997
2) Table of contents - Financial Statements year-end 1998
a) Independent Auditors' Report
b) Balance Sheet as of December 31, 1998
c) Notes to Financial Statements
3) Unaudited Financial Statements Through June 30, 1999
16
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
2 Agreement for Exchange of Stock and Plan of Reorganization
3(i) Articles of Incorporation with Amendments
(ii) By-Laws
4(ii) Long term loan Union Bank (SBA)
10 Material Contracts
10.1 Subscription Agreements for the Sale of Stock
10.2 Contract Between Two Directors and the Issuer
10.3 Lease on premises of Issuer
10.4 Convertible Debenture Purchase Agreement
10.5 Convertible Debenture
10.6 Escrow Agreement
10.7 Warrant to Purchase Common Stock
11 Computation per share earnings - In financial statements
21 Subsidiary
Accord SEG, Incorporated in Arizona
23 Consent of King, Weber & Associates, P.C., Independent Accountants
27 Financial Data Schedule
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Accord Advanced Technologies, Inc.
August 25, 1999 By: /s/ Travis Wilson
----------------------------------
Travis Wilson, Director and President
By: /s/ Carl P. Ranno
----------------------------------
Carl P. Ranno, Director and
Secretary
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1998 AND 1997
AND INDEPENDENT AUDITORS' REPORT
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997:
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' (Deficit) Equity 4
Consolidated Statements of Cash Flows 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Accord Advanced Technologies, Inc.:
Tempe, Arizona
We have audited the accompanying consolidated balance sheets of Accord Advanced
Technologies, Inc. (the "Company"), as of December 31, 1998 and 1997, and the
related statements of operations, stockholders' (deficit) equity and cash flows
for each of the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 consolidated 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 our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Accord
Advanced Technologies, Inc. at December 31, 1998 and 1997, and the consolidated
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
KING, WEBER & ASSOCIATES, P.C.
Tempe, Arizona
May 14, 1999
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1999 DEC. 31, 1998 DEC. 31, 1997
------------- ------------- -------------
ASSETS (Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 665,262 $ 157,078 $ 58,258
Accounts receivable 300,090 6,347 964,233
Inventories 1,300,078 1,056,732 718,212
Prepaid expenses and other assets 28,623 22,134 14,915
Income tax refund receivable 6,032 6,032 --
Deferred income taxes 0 457,045 37,213
----------- ----------- -----------
Total current assets 2,300,085 1,705,368 1,792,831
PROPERTY, MACHINERY AND EQUIPMENT, net 1,968,596 1,998,302 2,291,066
DEFERRED INCOME TAXES 84,700 83,200 --
OTHER ASSETS 55,219 36,184 221,348
----------- ----------- -----------
TOTAL ASSETS $ 4,408,600 $ 3,823,054 $ 4,305,245
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Short-term note payable $ -- $ -- $ 881,592
Accounts payable 405,402 639,141 211,605
Accrued liabilities 149,805 387,079 428,716
Accrued warranty and installation expense -- -- 67,215
Customer deposits 1,629,638 777,602 708,233
Capital lease obligations - current portion -- 46,430 1,291,339
Note payable - current portion 258,339 102,693 87,478
----------- ----------- -----------
Total current liabilites 2,443,184 1,952,945 3,676,178
CAPITAL LEASE OBLIGATIONS - long-term portion -- 1,757,285 512,376
NOTE PAYABLE - long-term portion 1,040,572 205,703 34,543
DEFERRED INCOME TAXES -- -- 21,035
----------- ----------- -----------
Total liabilities 3,483,756 3,915,933 4,244,132
----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.0001 par value, 3,000,000
shares authorized, none issued
Common stock, $.0001 par value, 47,000,000
share authorized, 39,548,638, and 12,455,000
issued and outstanding 3,955 3,955 1,245
Paid in capital 963,390 963,390 73,701
Accumulated deficit (42,501) (1,060,224) (13,833)
----------- ----------- -----------
Total stockholders' equity (deficit) 924,844 (92,879) 61,113
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 4,408,600 $ 3,823,054 $ 4,305,245
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
2
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED YEAR ENDED
JUNE 30, 1999 DEC. 31, 1998 DEC. 31, 1997
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
SALES $ 3,052,531 $ 3,940,234 $ 1,358,004
COST OF SALES 1,684,746 2,865,641 1,024,068
------------ ------------ -----------
Gross profit 1,367,785 1,074,593 333,936
------------ ------------ -----------
OTHER (INCOME) AND EXPENSES
General and administrative expense 590,735 1,224,661 124,175
Selling and marketing expense 338,681 480,736 57,162
Interest expense 30,672 442,431 61,352
Impairment loss -- 250,000 --
Settlement expense -- 320,000 --
Other income (7,487) (7,444) --
------------ ------------ -----------
Total other expense 952,601 2,710,384 242,689
------------ ------------ -----------
(LOSS) INCOME BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 415,184 (1,635,791) 91,247
INCOME TAX BENEFIT (PROVISION) (32,595) 544,080 (36,736)
------------ ------------ -----------
NET (LOSS) INCOME BEFORE EXTRAORDINARY ITEM 382,589 (1,091,711) 54,511
EXTRAORDINARY ITEM - DEBT FORGIVENESS INCOME
(net of income taxes of $423,000 and $12,047) 635,134 45,320 --
------------ ------------ -----------
NET (LOSS) INCOME $ 1,017,723 $ (1,046,391) $ 54,511
============ ============ ===========
NET (LOSS) INCOME PER COMMON SHARE
Basic:
Before extraordinary item $ 0.01 $ (0.03) $ 0.02
Extraordinary item 0.02 -- --
------------ ------------ -----------
Total $ 0.03 $ (0.03) $ 0.02
============ ============ ===========
Diluted:
Before extraordinary item $ 0.01 $ (0.03) $ 0.02
Extraordinary item $ 0.02
------------ ------------ -----------
Total $ 0.03 $ (0.03) $ 0.02
============ ============ ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 39,548,638 33,584,038 3,445,389
============ ============ ===========
Diluted 39,600,592 33,584,038 3,445,389
============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE
JANUARY 1, 1997 4,943,000 $ 494 $ 44,256 $ (12,664) $ 32,086
Stock issued for services at $0.19 7,000 1 1,315 1,316
Reverse stock split (1 for 10) (4,455,000) (445) 446 1
Issued in business combination 9,500,000 950 (45,571) (55,680) (100,301)
Stock issued for cash at $0.03 1,250,000 125 37,375 37,500
Stock issued to consultants
for services rendered 1,200,000 120 35,880 36,000
Net income 54,511 54,511
---------- ------- --------- ----------- -----------
BALANCE
DECEMBER 31, 1997 12,445,000 1,245 73,701 (13,833) 61,113
Stock split (3 for 1) 24,890,000 2,489 (2,489) 0
Stock issued for cash at $1.32 313,638 31 414,968 414,999
Stock issued for cash at $0.25 1,900,000 190 477,210 477,400
Net loss (1,046,391) (1,046,391)
---------- ------- --------- ----------- -----------
BALANCE
DECEMBER 31, 1998 39,548,638 $ 3,955 $ 963,390 $(1,060,224) (92,879)
Net Income (UNAUDITED) 1,017,723
BALANCE
JUNE 30, 1999 (UNAUDITED) 39,548,638 $ 3,955 $ 963,390 $ (42,501) $ (92,879)
========== ======= ========= =========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
4
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED YEAR ENDED
JUNE 30,1999 DEC. 31, 1998 DEC. 31, 1997
------------ ------------- -------------
(Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,017,723 $(1,046,391) $ 54,511
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 29,999 58,211 3,530
Loss on disposal of equipment 4,122
Deferred income taxes 455,545 (526,001) 32,732
Issuance of stock for compensation and services
rendered 37,316
Impairment expense on equipment 250,000
Litigation settlement expense 320,000
Forgiveness of long-term debt (1,058,134) (57,367)
Changes in assets and liabilities:
Accounts receivable (293,743) 957,886 (18,591)
Inventory (243,346) (142,520) 898,107
Refundable deposits (19,035) (2,990) 2,690
Other current assets (6,489) (11,317) (12,290)
Accounts payable (233,739) 427,536 (395,211)
Accrued liabilities 62,145 (41,637) 65,933
Accrued warranty and installation expense (67,215) 13,051
Customer deposits 852,036 69,369 (775,651)
----------- ----------- ---------
Net cash provided (used in) by operating
activities 562,962 191,686 (93,873)
----------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash acquired in purchase of subsidiary 9,600
Loan to officer (7,846)
Purchase of property, machinery and equipment (293) (19,569)
----------- ----------- ---------
Net cash (used in) provided by investing
activities (293) (27,415) 9,600
----------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on short-term debt 78,353
Repayment of short-term debt (881,592)
Proceeds from sale of common stock 892,399 37,500
Principal payments on capital lease obligations (995,000)
Borrowings on long-term debt 965,000
Principal payments on long-term debt (24,485) (76,258)
----------- ----------- ---------
Net cash (used in) provided by financing
activities (54,485) (65,451) 115,853
----------- ----------- ---------
INCREASE IN CASH 508,184 98,820 31,580
CASH, BEGINNING OF YEAR 157,078 58,258 26,678
----------- ----------- ---------
CASH, END OF YEAR $ 665,262 $ 157,078 $ 58,258
=========== =========== =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
5
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED YEAR ENDED
JUNE 30,1999 DEC. 31, 1998 DEC. 31, 1997
------------ ------------- -------------
(Unaudited)
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 36,968 $ 346,442 $ 57,393
=========== =========== =========
Income taxes paid $ -0- $ 6,032 $ -0-
=========== =========== =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Value of common stock issued in connection with the
acquisition of wholly owned subsidiary $ 100,301
=========
Debt for legal settlement $ 330,000
==========
</TABLE>
The accompanying notes are an integral part
of these consolidated financialstatements.
6
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997 AND JUNE 30, 1999 (UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Accord Advanced Technologies, Inc. (the "Company"), formally known as
Investment Book Publishing, Inc. ("IBP") was formed in 1996 and was a
development stage enterprise and had no significant operations until its
acquisition of Accord Semiconductor Equipment Group, Inc. ("Accord SEG") on
December 11, 1997. Accord SEG services, reconditions and modifies
multi-chamber semiconductor equipment. The Company's customers include many
of the major silicon wafer manufacturers in the United States and overseas.
Accord SEG became a wholly-owned subsidiary of Accord Advanced
Technologies, Inc., by the Company exchanging 9,500,000 shares of its
common stock for 100% of the common stock of Accord SEG resulting in the
shareholders of Accord SEG owning approximately 95% of Accord Advanced
Technologies, Inc. The accompanying financial statements represent the
consolidated financial position and results of operations of Accord
Advanced Technologies, Inc. and includes the accounts and results of
operations of the Company and its wholly owned subsidiary for the year
ended December 31, 1998 and the period from December 11, 1997 through
December 31, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH includes all short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three
months or less.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary, Accord SEG.
The results of operations and cash flows include that of Accord SEG for the
year ended December 31, 1998 and the period December 11, 1997 (date of
acquisition) through December 31, 1997. All significant intercompany
accounts and transactions are eliminated.
INVENTORIES consist primarily of used equipment and wafer chambers and are
stated at the lower of cost (specific identification) or market.
Work-in-process is stated at raw materials cost, direct labor and
allocations of overhead. Inventory items that have expected turnover rates
of greater than a one year operating cycle are classified as long term.
PROPERTY, MACHINERY AND EQUIPMENT is recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of the assets ranging
from 3 to 10 years. Depreciation expense is not recorded for equipment
acquired but that has yet to be placed in service.
7
<PAGE>
REVENUE RECOGNITION - The Company recognizes revenue when the product is
shipped. No significant obligations remain upon shipment. Costs for
installation, warranty and commissions are accrued when the corresponding
sales revenues are recognized. Payments from customers prior to shipment
are recorded as customer deposits. Revenues for service contracts are
recognized evenly over the term of the contracts.
INCOME TAXES - The Company provides for income taxes based on the
provisions of Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES, which among other things, requires that
recognition of deferred income taxes be measured by the provisions of
enacted tax laws in effect at the date of financial statements.
FINANCIAL INSTRUMENTS - Financial instruments consist primarily of cash,
accounts receivable, and obligations under accounts payable, accrued
expenses, short-term debt and capital lease instruments. The carrying
amounts of cash, accounts receivable, accounts payable, accrued expenses
and short-term debt approximate fair value because of the short maturity of
those instruments. The carrying value of the Company's capital lease
arrangements approximates fair value because the instruments were valued at
the retail cost of the equipment at the time the Company entered into the
arrangements.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
3. INVENTORIES
Inventories consist of the following:
JUNE 30, 1999 DEC. 31, 1998 DEC. 31, 1997
(Unaudited)
Raw materials $ 516,122 $ 290,122 $565,297
Work in process 783,956 591,610 152,915
Finished goods -0- 175,000 -0-
Current inventory 1,300,078 1,056,732 718,212
Slow-moving inventory -0- -0- 196,000
---------- ---------- --------
Total inventory $1,300,078 $1,056,732 $914,212
========== ========== ========
Slow-moving inventories consist primarily of parts removed from larger
pieces of equipment and stored until needed for future jobs. Costs are
allocated to these items as components of the larger piece of equipment
from which they were removed. Much of this inventory has been allocated
minimum costs and management believes market value exceeds recorded costs.
Approximately $193,000 in inventories were written off in the year ended
December 31, 1998 because of uncertainties about the ability of the Company
to utilize or liquidate the related items.
8
<PAGE>
4. PROPERTY, MACHINERY AND EQUIPMENT
Property, machinery and equipment consists of the following:
<TABLE>
<CAPTION>
JUNE 30, 1999 DEC. 31, 1998 DEC. 31, 1997
------------- ------------- -------------
(Unaudited)
<S> <C> <C> <C>
Test, research and demonstration equipment $1,566,354 $1,566,354 $2,066,354
Equipment held for sale 250,000 250,000 --
Shop equipment and tools 104,900 104,900 98,228
Computer hardware and software 81,613 81,320 68,423
Furniture, office equipment and vehicles 34,129 34,129 49,046
Leasehold improvements 114,433 114,433 114,433
---------- ---------- ----------
Total 2,151,429 2,151,136 2,396,484
Less accumulated depreciation and
amortization 182,833 152,834 105,418
---------- ---------- ----------
Property, machinery and equipment - net $1,968,596 $1,998,302 $2,291,066
========== ========== ==========
</TABLE>
Depreciation expense for the years ended December 31, 1998 and 1997 was
$58,211 and $3,530, respectively. Depreciation expense for the six months
ended June 30, 1999 was $29,999.
Certain equipment under a lease has been capitalized at approximately
$1,566,000, representing the estimated fair value of the asset at the
inception date of the lease. Management had intended to use the equipment
for a separate product line that has not yet commenced. The equipment has
not yet been placed in service. As discussed in Note 7, subsequent to
December 31, 1998, the Company entered into an agreement with the lessor to
purchase the equipment under lease and intends to either place the asset in
service or sell the equipment. The obligation under the capital lease was
restructured, reduced and refinanced with another financial institution.
The Company incurred an impairment loss of $250,000 related to one piece of
equipment under a second capital lease. The equipment has never been used in
operations and the Company intends to dispose of the equipment and is
seeking a buyer. The equipment was written down from its original cost of
$500,000 to its estimated net realizable value of $250,000. The fair value
was estimated on the basis of comparable sales less costs to put the
equipment in working condition and discounted for liquidity issues.
9
<PAGE>
5. SHORT-TERM DEBT
Short-term debt at December 31, 1997 consisted of advances from a finance
company associated with certain customer purchase orders. Advances were
arranged on a specific purchase order basis. The advances were
collateralized by the related inventory and customer accounts receivable
and payments received for the order. Advances were fully repaid upon
receipt of payment from customer. Financing fees were charged based on the
total value of the purchase order and period of time in which the advances
were outstanding. The effective rate on financing fees charged in 1997 was
243% which was based on actual amounts advanced. Financing fees under this
arrangement for the year ended December 31, 1998 and the period December
11, 1997 to December 31, 1997 were $275,090 and $9,023, respectively. Total
fees paid under this arrangement by Accord SEG for the period January 1,
1997 to December 10, 1997 were $155,319.
6. INCOME TAXES
The Company recognizes deferred income taxes for the differences between
financial accounting and tax bases of assets and liabilities. Income taxes
consisted of the following:
<TABLE>
<CAPTION>
Six months ended Year ended Year ended
June 30, 1999 Dec. 31, 1998 Dec. 31,1997
------------- ------------- ------------
(unaudited)
<S> <C> <C> <C>
Current tax (benefit) provision $ -0- $ (6,032) $ 4,004
--------- --------- --------
Deferred tax (benefit) provision
Before extraordinary item 32,595 (538,048) 32,732
Extraordinary item 423,000 12,047 --
--------- --------- --------
Total deferred (benefit) provision 455,595 (526,001) 4,004
--------- --------- --------
Total income tax (benefit) provision $455,595 $(532,033) $ 36,736
======== ========= ========
</TABLE>
A deferred tax liability of $ $21,035 at December 31, 1997, relates
primarily to the difference in the financial accounting and tax bases of
property and equipment. Deferred tax assets of $674,000 less a valuation
allowance of $134,000, and $37,213 at December 31, 1998 and 1997
respectively, relate to net operating loss carryforwards of $1,356,015 at
December 31, 1998 and $167,000 at December 31, 1998. State net operating
loss carryforwards of $167,000 expire in 2001. The balance of the net
operating loss carryforwards expire from 2003 through 2018. Approximately
$83,000 and $30,000 of the net deferred tax asset at December 31, 1998
relate to equipment book and tax bases differences and accrued compensation
respectively.
Deferred income taxes for the year ended December 31, 1998 relate to
temporary differences for the net operating loss carryforward, net of the
establishment of a valuation allowance of $134,000, and book and tax
differences for the impairment loss. For the year ended December 31, 1997
deferred income taxes relate primarily to depreciation differences.
10
<PAGE>
The differences between the statutory and effective tax rates is as
follows:
<TABLE>
<CAPTION>
1998 1997
------------------- ------------------
<S> <C> <C> <C> <C>
Federal statutory rates $(556,169) (34)% $ 19,274 21%
State income taxes (130,863) (8)% 7,300 8%
Valuation allowance for operating loss carryforwards 134,000 8%
Difference due to filing of unconsolidated returns 15,860 17%
Other 20,999 1% (5,698) (6)%
--- -------- ---
Effective rate $(532,033) (33)% $ 36,736 40%
========= === ======== ===
</TABLE>
The valuation allowance of $134,000 was eliminated in the six months ended
June30, 1999. The Company believes it will have adequate taxable income to
utilize all of the net operating loss carryforwards. The primary difference
between the effective and statutory income tax rates relates to the
elimination of the remaining valuation allowance.
7. LEASES
OPERATING LEASES
The Company leases its facilities and certain office equipment under
long-term operating leases that expire in 1999. Rent expense under these
leases was approximately $97,544 and $5,880 for the year ended December 31,
1998 and the period December 11, 1997 through December 31, 1997. Minimum
annual lease payments under these agreements are $60,987 for the year ended
December 31, 1999.
CAPITAL LEASES
Accord SEG entered into two capital leases for equipment in 1996. In March,
1999, the Company purchased the leased assets and was released from all
related encumbrances. This transaction resulted in a forgiveness of lease
debt of $803,715 plus accrued interest of approximately $250,000. The
purchase was financed with a 10-year bank loan for $1,000,000 guaranteed by
the Small Business Administration and personally guaranteed by the majority
stockholder and spouse.
11
<PAGE>
The following represents principal payments due on the bank loan obtained
to refinance these leased assets (see Note 15):
Year ended December 31:
1999 $ 46,430
2000 66,183
2001 73,078
2002 80,691
2003 89,098
thereafter 644,520
Total principal payments on bank loan 1,000,000
Add: amount of lease principal forgiven 803,715
Present value of minimum lease payments $1,803,715
Current portion 46,430
----------
Long-term portion $1,757,285
==========
The loan is collateralized by the equipment and virtually all assets of the
Company. The interest rate on the bank loan is prime plus 2%.
Assets capitalized under the capital leases total approximately $2,066,000.
A $1,566,000 asset is held as property and equipment as the intent of
management is to use it to produce a certain product line. No depreciation
has yet been recognized on this asset as it has been idle since
acquisition. One of the assets, capitalized at $500,000 less a $250,000
impairment loss, was reclassified as property, machinery and equipment held
for sale in the year ended December 31, 1998. The Company intends to market
and sell the asset (see Note 4).
8. BUSINESS COMBINATION
On December 11, 1997, the Company acquired 100% of the issued and
outstanding common stock of Accord SEG. The Company issued 9,500,000 shares
of its common stock in the transaction resulting in the shareholders of
Accord SEG then owning approximately 95% of the Company. The acquisition
was accounted for under the purchase method of accounting. Due to the
controlling ownership of Accord SEG effectively remaining with the same
shareholders after the acquisition, the purchase is recorded at the net
deficit book value of Accord SEG at the time of the purchase. The deficit
value of Accord SEG's assets less liabilities was $(100,301) at December
11, 1997. The operating results of Accord SEG are included in the
accompanying consolidated financial statements for the period December 11,
1997 through December 31, 1997. The following summarizes unaudited pro
forma financial information assuming that the acquisition of Accord SEG
occurred on January 1, 1997:
Net Sales $3,828,945
Net Earnings $ 48,125
Earnings per Share Less than $0.01 per share
12
<PAGE>
The pro forma financial information is presented for informational purposes
only and may not necessarily reflect the results had Accord SEG actually
been acquired on January 1, 1997, nor is this information indicative of the
future consolidated results.
9. NOTES PAYABLE
Notes payable at December 31 are comprised of the following:
1998 1997
---- ----
Note payable to equipment vendor,
uncollateralized, monthly principal payments
of $8,314 plus interest at 10% per annum. $122,021
Settlement of legal claim. Legal settlement
requires the full award of $320,000 to be
paid at $10,000 per month plus interest at
10% per annum. $ 308,396
--------- --------
Totals 308,396 122,021
Less current portion (102,693) (87,478)
--------- --------
Long-term portion $ 205,703 $ 34,543
========= ========
The equipment vendor loan was converted from trade accounts payable. The
Company settled with the vendor for a $65,000 cash payment in the year
ended December 31, 1998. The balance of $57,021 was recorded as debt
forgiveness income and is classified as an extraordinary item.
Principal payments due in years ended December 31:
1998 $ 102,693
1999 120,000
2001 85,703
---------
Total $ 308,396
=========
10. EARNINGS PER SHARE
Net income per share is calculated using the weighted average number of
shares of common stock outstanding during the year. The Company has adopted
SFAS No. 128 Earnings Per Share. The effect of the extraordinary item for
the year ended December 31, 1998 on the loss per share was less than $0.01
per share.
13
<PAGE>
<TABLE>
<CAPTION>
Per
Income/Loss Shares Share
---------------- ----------------- ---------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net (Loss) Income ($1,046,391) $54,511
BASIC (LOSS) EARNINGS PER SHARE:
Income available to Common
Shareholders ($1,046,391) $54,511 33,584,038 3,445,389 $ (0.03) $ 0.02
EFFECT OF DILUTIVE SECURITIES N/A N/A
DILUTED (LOSS) EARNINGS PER SHARE ($1,046,391) $54,511 33,584,038 3,445,389 $ (0.03) $ 0.02
</TABLE>
There were no dilutive securities outstanding at December 31, 1998 and
1997.
There were unvested stock grants for 24,000 shares of common stock in the
six month period ended June 30, 1999. There were also options exercisable
for 80,000 granted in the six month period ended June 30, 1999. The
dilutive effect of these securities on income per share for the six month
period ended June 30, 1999 was less than $0.01 per share. The effect of
other options outstanding at June 30, 1999, were excluded from the
calculation because the effect would be anti-dilutive.
11. COMMON STOCK ISSUED FOR SERVICES RENDERED
During 1997, the Company issued shares of restricted common stock as
payment for professional services rendered. The Company issued 1,207,000
shares as payment for professional services rendered, valued at $37,316.
The transactions were valued at the accrued and unpaid amounts of
consulting fees payable.
12. RELATED PARTY TRANSACTIONS
The Company paid fees of $18,000 in the form of common stock to an entity
owned by two members of its board of directors as compensation for services
rendered in connection with the Accord SEG acquisition in the year ended
December 31, 1997. The Company also has entered into an agreement with
these individuals to provide fees for assistance in raising debt or equity
capital. The fees are 3% of debt and 10% of the equity amounts raised and
payable only upon success. Fees paid or accrued to these individuals were
$73,000 and $5,000 for the years ended December 31, 1998 and 1997
respectively. Balances due to these individuals were $52,704 and $24,700 at
December 31, 1998 and 1997 respectively.
The Company billed and received $344,302 in the year ended December 31,
1997, for services provided to an entity with ownership that includes the
Company's president and single largest shareholder. The Company also paid
$4,000 to this entity for services provided to the Company by the related
entity's personnel. These transactions occurred within Accord SEG prior to
the acquisition.
14
<PAGE>
13. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily accounts receivable. The total
accounts receivable balance at December 31, 1997 is due from one customer.
Full payment was received subsequent to December 31, 1997.
14. EMPLOYEE BENEFIT PLAN
The Company provides benefits through 401(k) and SEP profit sharing plans
for all full time employees who have completed six months of service and
are at least 21 years of age. Contributions to SEP plan are at the
discretion of the Board of Directors. The Company contributes 25% of
elective employee contributions up to 6% of the individual's compensation.
The Company has accrued plan contributions of $34,500 and $16,668 at
December 31, 1998 and 1997, respectively. Contributions of $1,553 were
expensed for the period December 11, 1997 through December 31, 1997.
15. SUBSEQUENT EVENTS
As discussed in Note 7, subsequent to December 31, 1998, the Company
restructured two capital leases through the acquisition of $1,000,000 in
bank financing and settlements with the lessor. As a result of this
restructuring, debt forgiveness income of $1,058,000 was recognized in the
six month period ended June 30, 1999.
15
<PAGE>
16. EMPLOYEE STOCK OPTIONS
The Company issues stock options from time to time to executives and key
employees. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," and continues to account for stock based
compensation using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". Accordingly, no compensation cost has been recognized for the
stock options granted. Had compensation cost for the Company's stock
options been determined based on the fair value at the grant date for
awards in 1998 and 1997, consistent with the provisions of SFAS No. 123,
the Company's net loss and loss per share would have been increased to the
pro forma amounts indicated below:
<TABLE>
<CAPTION>
June 30, 1999 1998 1997
------------- ---- ----
<S> <C> <C> <C>
Net (Loss) Income - as reported $ 1,017,723 $(1,046,391) $54,511
Net (Loss) Income - pro forma $ 1,012,763 $(1,101,791) $54,511
(Loss) Income per share - as reported $ 0.03 $ (0.03) $ 0.02
(Loss) Income per share - pro forma $ 0.03 $ (0.03) $ 0.02
</TABLE>
Under the provisions of SFAS No. 123, there were no fully vested options
and 20,000 proportionately vested options for the year ended December 31,
1998, used to determine net earnings and earnings per share under a pro
forma basis. There were no options to consider for the year ended December
31, 1997.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions for
year ended December 31, 1998 and the six months ended June 30, 1999:
Dividend yield None
Volatility 2.042
Risk free interest rate 5.25%
Expected asset life 3 years
The summary of activity for the Company's stock options at December 31,
1998 and June 30, 1999 is presented below:
<TABLE>
<CAPTION>
1998 1999
--------------------- ---------------
Weighted Weighted
Average Average
Exercise Exercise
Price Price
----- -----
<S> <C> <C> <C>
Options outstanding at beginning of period 60,000 $4.00 0 N/A
Granted 80,000 $0.14 60,000 $ 4.00
Exercised 0 N/A 0 N/A
Terminated/Expired 0 N/A 0 N/A
Options outstanding at end of period 140,000 $1.79 60,000 $ 4.00
Options exercisable at end of period 0 N/A 0 N/A
Options available for grant at end of year N/A N/A
Price per share of options outstanding $0.12 - $4.00 $ 4.00
Weighted average remaining contractual lives 3 years 3 years
Weighted Average fair value of options granted
during the period $ 0.04 $2.77
</TABLE>
The 60,000 options were granted to a single employee and are not
exercisable until 1999 when the employee completes six months of service.
The 80,000 options issued in the six month period ended June 30, 1999 vest
at one third per year for three years. There were no vested options at
June 30, 1999.
17
<PAGE>
17. MAJOR CUSTOMERS
Due the nature of the Company's business being associated with few but
large sales transactions, significant concentrations exist. The
concentration is more pronounced in the consolidated results for 1997 due
to the short period of time in which the results of Accord SEG are
included. Approximately 69% and 16% of the Company's revenues were
generated from two customers in 1998. Approximately 82% of the Company's
revenues were generated from three different customers in 1997, including
45% from one customer.
18. SETTLEMENT EXPENSE
On August 19, 1997, Comdisco, Inc. ("Comdisco") filed a complaint with the
Court attempting to enforce a Purchase and Remarketing Agreement with the
Company. The complaint also attempts to enforce a Sale Agreement for the
purchase of certain chambers. Comdisco was claiming principal due of
$260,000 plus interest of approximately $51,000 as of December 31, 1997.The
Company filed an Answer and Counterclaim claiming that it paid the amounts
due under the agreements. The Company's counterclaim alleges interference
with certain contractual arrangements and claims damages in an amount
exceeding $500,000. The Company settled the claim in the year ended
December 31, 1998 for $320,000 that is to be paid over 32 months.
* * * * * *
18
<PAGE>
ACCORD SEMICONDUCTOR
EQUIPMENT GROUP, INC.
FINANCIAL STATEMENTS AS OF
DECEMBER 31, 1997
AND INDEPENDENT AUDITORS' REPORT
<PAGE>
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC.
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT 1
BALANCE SHEET AT DECEMBER 31, 1997 3
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 4
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR
THE YEARS ENDED DECEMBER 31, 1997 AND 1996 5
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1997 AND 1996 6
NOTES TO FINANCIAL STATEMENTS 8
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Accord Semiconductor Equipment Group, Inc.:
Tempe, Arizona
We have audited the accompanying balance sheet of Accord Semiconductor Equipment
Group, Inc. (the "Company"), a wholly owned subsidiary of Accord Advanced
Technologies, Inc., as of December 31, 1997 and the related statements of
operations, changes in stockholders' equity and cash flows for each of the two
years in the period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our 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 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 Accord Semiconductor Equipment
Group, Inc. at December 31, 1997, and the results of its operations and its cash
flows for each of the two years in the period then ended in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, on December 11, 1997, the
Company became a wholly-owned subsidiary of Accord Advanced Technologies, Inc.
These financial statements present the financial position and results of
operations and cash flows of Accord Semiconductor Equipment Group, Inc. only.
<PAGE>
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has a working capital
deficit of $1,932,988 at December 31, 1997 and significant long-term obligations
with uncertain cash flow to service the monthly debt obligations. Management
believes the Company will require substantial additional financing to fully
implement its plan of operations and there is no assurance that the Company will
be able to raise such financing. These factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans with regard
to these matters are discussed in Note 1. The financial statements do not
include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
KING, WEBER & ASSOCIATES, P.C.
Tempe, Arizona
April 10, 1998 (except for Note 7, for which the
the date is July 17, 1998)
2
<PAGE>
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC.
BALANCE SHEET
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash $ 32,133
Accounts receivable 964,233
Inventories - current portion 718,212
Prepaid expenses and other assets 14,915
Deferred income taxes 13,697
-----------
Total current assets 1,743,190
INVENTORIES - LONG-TERM PORTION 196,000
PROPERTY, MACHINERY AND EQUIPMENT, net 2,291,066
OTHER ASSETS 25,348
TOTAL ASSETS $ 4,255,604
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Short-term note payable $ 881,592
Accounts payable 211,605
Accrued liabilities 428,716
Accrued warranty and installation expense 67,215
Customer deposits 708,233
Capital lease obligations - current portion 1,291,339
Note payable - current portion 87,478
-----------
Total current liabilities 3,676,178
CAPITAL LEASE OBLIGATIONS - LONG-TERM PORTION 512,376
NOTE PAYABLE - LONG-TERM PORTION 34,543
DEFERRED INCOME TAXES 21,035
Total liabilities 4,244,132
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 25,000,000 shares
authorized, 18,846,000 issued and outstanding 188,460
Paid in capital 70,687
Accumulated deficit (247,675)
-----------
Total stockholders' equity 11,472
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,255,604
===========
The accompanying notes are an integral part of these financial statements
3
<PAGE>
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
SALES $ 3,825,869 $ 4,991,295
COST OF SALES 2,342,384 4,110,306
----------- -----------
Gross profit 1,483,485 880,989
----------- -----------
OTHER (INCOME) AND EXPENSES
General and administrative expense 871,585 803,741
Selling and marketing expense 130,648 407,795
Interest expense 326,954 119,730
Other income (5,090) (9,124)
----------- -----------
Total other expense 1,324,097 1,322,142
----------- -----------
INCOME (LOSS) BEFORE INCOME TAX
BENEFIT 159,388 (441,153)
INCOME TAX (PROVISION) BENEFIT (59,320) 89,806
----------- -----------
NET INCOME (LOSS) $ 100,068 $ (351,347)
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1996 1,000 $ 10 $ 990 $ 167,564 $ 168,564
Stock issued for cash 100 1 9,999 10,000
Stock split (15,905 for 1) 17,494,900 174,949 (10,989) (163,960) 0
Net loss (351,347) (351,347)
---------- -------- -------- --------- ---------
BALANCE DECEMBER 31, 1996 17,496,000 174,960 0 (347,743) (172,783)
Stock issued as employee
compensation 650,000 6,500 47,687 54,187
Stock issued to consultants
for services rendered 700,000 7,000 23,000 30,000
Net income 100,068 100,068
---------- -------- -------- --------- ---------
BALANCE DECEMBER 31, 1997 18,846,000 $188,460 $ 70,687 $(247,675) $ 11,472
========== ======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 100,068 ($351,347)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 42,358 44,651
Loss on disposal of equipment 3,124
Deferred income taxes 55,317 (47,979)
Issuance of stock for compensation and services rendered 84,187
Changes in assets and liabilities:
Accounts receivable (783,659) 7,044
Inventory (632,176) 317,356
Refundable deposits 2,722
Other current assets 112,512 (127,427)
Accounts payable 33,715 (50,995)
Accrued liabilities 272,709 207,762
Accrued warranty and installation expense 3,227 63,988
Customer deposits (780,517) 733,341
----------- ---------
Net cash (used in) provided by operating activities (1,489,135) 799,116
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, machinery and equipment (3,594) (236,950)
Proceeds from disposal of property, machinery and equipment 20,302
----------- ---------
Net cash provided by (used in) investing activities 16,708 (236,950)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on short-term debt 1,273,092
Repayment of short-term debt (391,500)
Proceeds from shareholder loan 27,783
Repayment of shareholder loan (156,339)
Proceeds from sale of common stock 10,000
Principal payments on capital leases (201,769)
----------- ---------
Net cash provided by (used in) financing activities 881,592 (320,325)
----------- ---------
(DECREASE) INCREASE IN CASH (590,835) 241,841
CASH, BEGINNING OF YEAR 622,968 381,127
----------- ---------
CASH, END OF YEAR $ 32,133 $ 622,968
=========== =========
</TABLE>
6
<PAGE>
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 250,519 $ 48,896
=========== =========
Income taxes (refunded) paid $ (51,163) $ 17,577
=========== =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of equipment under capital leases $2,000,000
==========
Inventory transferred in settlement of debt $ 446,251
===========
Conversion of liability for equipment purchase to
note payable $ 122,021
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1. ORGANIZATION AND BASIS OF PRESENTATION
Accord Semiconductor Equipment Group, Inc. (the "Company") was formed in
1993 for the purpose of servicing, reconditioning and modifying
multi-chamber semiconductor equipment. The Company's customers include many
of the major silicon wafer manufacturers in the United States and overseas.
On December 11, 1997, the Company became a wholly-owned subsidiary of
Accord Advanced Technologies, Inc., a shell entity with no other operating
entities. In that transaction, the shareholders of the Company exchanged
100% of Accord Semiconductor Equipment Group, Inc. common stock for shares
of Accord Advanced Technologies, Inc. resulting in the shareholders of
Accord Semiconductor Equipment Group, Inc. owning approximately 95% of
Accord Advanced Technologies, Inc. The accompanying financial statements
represent the financial position and results of operations of Accord
Semiconductor Equipment Group, Inc. only on an unconsolidated basis. Under
generally accepted accounting principles, the accounts and results of
operations of the Company are to be included in the consolidated financial
statements of Accord Advanced Technologies, Inc. as of December 11, 1997.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As reflected in the
accompanying balance sheet, the Company had negative working capital of
$1,932,988 at December 31, 1997. The Company has past due payments of
approximately $669,000 on two capital leases with total principal balances
of $1,803,715 at December 31, 1997. The Company is also dependent upon
financing provided by a third party that is advanced only on approved
customer purchase orders. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a
going concern is dependent upon its ability to generate sufficient cash
flow or raise adequate capital to meet its obligations on a timely basis.
Management is attempting to restructure the lease agreements and locate
purchasers for the underlying equipment. The Company is also seeking
alternative sources of capital. Management believes if the leases can be
restructured in connection with the disposal of the underlying equipment,
adequate cash flow can be generated by operations. However, there can be no
assurances the Company can restructure the leases, sell the equipment and
locate alternative sources of financing.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH includes all short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three
months or less.
8
<PAGE>
INVENTORIES consist primarily of used equipment and wafer chambers and are
stated at the lower of cost (specific identification) or market.
Work-in-process is stated at raw materials cost, direct labor and
allocations of overhead. Inventory items that have expected turnover rates
of greater than a one year operating cycle are classified as long term.
PROPERTY, MACHINERY AND EQUIPMENT is recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of the assets ranging
from 3 to 10 years. Depreciation expense is not recorded for equipment
acquired but that has yet to be placed in service.
REVENUE RECOGNITION - The Company recognizes revenue when the product is
shipped. No significant obligations remain upon shipment. Costs for
installation, warranty and commissions are accrued when the corresponding
sales revenues are recognized. Payments from customers prior to shipment
are recorded as customer deposits. Revenues for service contracts are
recognized evenly over the term of the contracts.
INCOME TAXES - The Company provides for income taxes based on the
provisions of Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES, which among other things, requires that
recognition of deferred income taxes be measured by the provisions of
enacted tax laws in effect at the date of financial statements.
FINANCIAL INSTRUMENTS - Financial instruments consist primarily of cash,
accounts receivable, and obligations under accounts payable, accrued
expenses, short-term debt, and capital lease instruments. The carrying
amounts of cash, accounts receivable, accounts payable, accrued expenses
and short-term debt approximate fair value because of the short maturity of
those instruments. The carrying value of the Company's capital lease
arrangements approximates fair value because the instruments were valued at
the retail cost of the equipment at the time the Company entered into the
arrangements.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
3. INVENTORIES
Inventories consisted of the following at December 31, 1997:
Raw materials $ 565,297
Work in process 152,915
---------
Current inventory 718,212
Slow-moving inventory 196,000
---------
Total inventory $ 914,212
=========
9
<PAGE>
Slow-moving inventories consist primarily of parts removed from larger
pieces of equipment and stored until needed for future jobs. Costs are
allocated to these items as components of the larger piece of equipment
from which they were removed. Much of this inventory has been allocated
minimum costs and management believes market value exceeds recorded costs.
4. PROPERTY, MACHINERY AND EQUIPMENT
Property, machinery and equipment consisted of the following at December
31, 1997:
Test, research and demonstration equipment $ 2,066,354
Shop equipment and tools 98,228
Computer hardware and software 68,423
Furniture, office equipment and vehicles 49,046
Leasehold improvements 114,433
-----------
Total 2,396,484
Less accumulated depreciation and amortization 105,418
-----------
Property, machinery and equipment - net $ 2,291,066
===========
Depreciation expense for the years ended December 31, 1997 and 1996 was
$42,358 and $44,651, respectively.
Certain equipment under two leases have been capitalized at $2,000,000,
representing the estimated fair value of those assets at the inception
dates of the leases. Management had intended to use the equipment for a
separate product line that has not yet commenced. The assets have not yet
been placed in service. As discussed in Note 7, the Company has
restructured the leases and is intending to either place the assets in
service or is seeking buyers for the equipment. See Note 7 regarding
agreements entered into with the lessors.
5. SHORT-TERM DEBT
Short-term debt at December 31, 1997 consisted of advances from a finance
company associated with certain customer purchase orders. Advances are
arranged on a specific purchase order basis. The advances are
collateralized by the related inventory and customer accounts receivable
and payments received for the order. Advances are fully repaid upon receipt
of payment from customer. Financing fees are charged based on the total
value of the purchase order and period of time in which the advances are
outstanding. The effective rate on financing fees charged in 1997 was 243%
which was based on actual amounts advanced. Financing fees under this
arrangement for the year ended December 31, 1997 were $164,342.
10
<PAGE>
6. INCOME TAXES
The Company recognizes deferred income taxes for the differences between
financial accounting and tax bases of assets and liabilities. Income taxes
for the years ended December 31, consisted of the following:
1997 1996
---- ----
Current tax provision (benefit) $ 4,003 $(41,827)
Deferred tax provision (benefit) 55,317 (47,979)
-------- --------
Total income tax provision (benefit) $ 59,320 $(89,806)
======== ========
The deferred tax liability of $ 21,035 relates primarily to the difference
in the financial accounting and tax bases of property and equipment. The
deferred tax asset of $ 13,697 relates to state net operating loss
carryforwards at December 31, 1997 of $167,000. The carryforwards expire in
2001.
Deferred income taxes for the year ended December 31, 1996, relate to
temporary differences for the recognition of a deferred income tax asset
for the net operating loss carryforward. Deferred income taxes for the year
ended December 31, 1997, relate to temporary differences for the
utilization of the deferred income tax asset for the net operating loss
carryforward and depreciation differences.
The effective tax rate for the year ended December 31, 1996 varies from the
statutory rate mainly because of the benefit recognized for net operating
loss carryforwards at tax rates expected for utilization being different
than the statutory rates for the tax loss incurred for the year. There was
no significant difference for the year ended December 31, 1997.
7. LEASES
OPERATING LEASES
The Company leases its facilities and certain office equipment under
long-term operating leases that expire in 1999. Rent expense under these
leases was approximately $75,000 and $74,000 for the years ended December
31, 1997 and 1996. Minimum annual lease payments under these agreements are
as follows:
Years ended December 31:
1998 $ 78,392
1999 60,987
---------
Total $ 139,379
=========
11
<PAGE>
CAPITAL LEASES
The Company entered into two capital leases for equipment in 1996. The
payment streams are discounted at rates of 7.5% and 8.4%. The following
presents future minimum lease payments under capital leases by year and the
present value of minimum lease payments as of December 31, 1997:
Year ended December 31:
1998 $ 1,442,959
1999 483,000
2000 48,000
-----------
Total minimum lease payments 1,973,959
Less amount representing interest 170,244
Present value of minimum lease payments 1,803,715
Current portion 1,291,339
------------
Long-term portion $ 512,376
============
These leases are collateralized by virtually all assets of the Company and
are personally guaranteed by the majority stock owner and spouse. The
Company has significant past due payments on these leases. The Company is
attempting to restructure the leases and is seeking buyers for the
equipment. Past due payments under these leases were approximately $669,000
as of December 31, 1997.
Subsequent to December 31, 1997, the Company agreed to make a $25,000
payment to the lessor under one of the leases which had a principal balance
of $512,000 at December 31, 1997. Under an arrangement with the lessor, the
lessor agreed not to pursue further collection through January 1, 1999. The
Company will continue to attempt to locate a buyer for this piece of
equipment.
Also, subsequent to December 31, 1997 the Company entered into an agreement
with the lessor of another piece of equipment whereby the Company will
purchase the equipment for $750,000. The agreement will release the Company
of all related encumbrances but the Company must provide full cash payment
for the purchase by September 20, 1998. The Company is attempting to
arrange the financing for the purchase. However, there can be no assurances
that financing will be obtained and that the Company will be released of
its related liabilities. Upon purchasing this equipment, the Company
intends to utilize the equipment in its operations. The lease had a
principal balance of $1,291,271 at December 31, 1997.
Assets capitalized under the capital leases total approximately $2,000,000.
No depreciation has yet been recognized on these assets as they have been
idle since acquisition.
12
<PAGE>
8. NOTE PAYABLE
On March 20, 1998, the Company converted a liability associated with an
equipment purchase into a promissory note for the balance due at December
31, 1997 of $122,021. The terms are $30,566 due in May, 1998 and the
remaining balance due in 11 equal monthly payments of $8,314 plus interest
at 10 %. The liability is presented in the accompanying December 31, 1997
balance sheet under the restructured terms.
9. COMMON STOCK ISSUED FOR SERVICES RENDERED
During 1997, the Company issued shares of restricted common stock as
payment for compensation and for legal and professional services rendered.
The Company issued 650,000 shares as payment for compensation, valued at
$54,187. The Company issued 700,000 shares for legal and professional
services rendered, valued at $30,000. The transactions were valued at the
accrued and unpaid amounts of employee payroll, legal and consulting fees.
10. RELATED PARTY TRANSACTIONS
The Company billed and received $344,302 in the year ended December 31,
1997, for services provided to an entity with ownership that includes the
Company's president and single largest shareholder. The Company also paid
$4,000 to this entity for services provided to the Company by the related
entity's personnel.
11. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk are primarily accounts receivable. The total
accounts receivable balance at December 31, 1997 is due from one customer.
Full payment was received subsequent to December 31, 1997.
12. EMPLOYEE BENEFIT PLAN
The Company provides benefits through 401(k) and SEP profit sharing plans
for all full time employees who have completed six months of service and
are at least 21 years of age. Contributions to SEP plan are at the
discretion of the Board of Directors. The Company contributes 25% of
elective employee contributions up to 6% of the individual's compensation.
The Company has accrued plan contributions of $16,668 at December 31, 1997.
Contributions of $18,633 and $3,612 were expensed for the years ended
December 31, 1997 and 1996 respectively.
13
<PAGE>
13. SUBSEQUENT EVENTS
On April 10, 1998, Materials Research Corporation ("MRC") and the Company
entered into a Settlement Agreement on a previously disputed matter wherein
the Company is required to sell and ship certain inventory (for which the
Company has a deposit from MRC), repay MRC $35,000 of its deposit in four
installments concluding in July, 1998, and provide MRC a one-year service
contract. The MRC deposits are included as customer deposits in the
accompanying balance sheet at December 31, 1997.
14. COMMITMENTS AND CONTINGENCIES
On August 19, 1997, Comdisco, Inc. ("Comdisco") filed a complaint with the
Superior Court of Maricopa County, Arizona attempting to enforce a Purchase
and Remarketing Agreement between the Company and Comdisco dated in August,
1995. The Complaint also attempts to enforce a Sale Agreement between the
Company and Comdisco, dated in May, 1996, for the purchase of certain
chambers. Comdisco is claiming principal due of $260,000 plus interest of
approximately $51,000 as of December 31, 1997.
On September 10, 1997, the Company filed an Answer and Counterclaim
claiming that it paid the amounts due and owing under the Purchase and
Remarketing Agreement and Sale Agreement. The Company's counterclaim also
alleges that Comdisco interfered with certain contractual arrangements
between the Company and others and that the Company had been damaged in an
amount exceeding $500,000. The Company's attorneys are beginning initial
discovery on this matter; therefore, management and the Company's counsel
believe it is not yet possible to determine the likelihood or extent of any
unfavorable outcome.
15. MAJOR CUSTOMERS
Due the nature of the Company's business being associated with few but
large sales transactions, approximately 82% of the Company's revenue was
generated from three customers in 1997, including 45% from one customer.
Approximately 87% of the Company's revenue was generated from four
different customers in 1996.
* * * * * *
14
AGREEMENT FOR EXCHANGE OF STOCK
AND
PLAN OF REORGANIZATION
THIS AGREEMENT, made this _________ day of September 1997, between
INVESTMENT BOOK PUBLISHERS, INC., a publicly traded Nevada Corporation,
hereinafter referred to as "IBP" and ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC.,
an Arizona Corporation, hereinafter referred to as "SEG."
1. PLAN OF REORGANIZATION: It is the intention of the parties hereto
that all of the issued and outstanding capital stock of SEG be acquired by IBP
in exchange for its capital stock, as hereinafter set forth.
2. IBP CAPITALIZATION: The authorized capital stock of IBP consists of
fifty million (50,000,000) shares of common stock, with a par value of one
ten-thousandth of a dollar ($.0001) per share and three million (3,000,000) no
par preferred stock, of which, as of the date hereof, and as of the closing
date, four million nine hundred and fifty thousand (4,950,000) common shares are
issued and outstanding and owned of record by stockholders as appears in the
records of ________________ of ______________ (Transfer Agent), and no other
shares of IBP have been issued or are outstanding.
On or before fifteen (15) days prior to the closing date as hereinafter
set forth, a stockholder list, certified as accurate by the Transfer Agent,
shall be furnished to SEG and STOCKHOLDER.
All issued and outstanding shares of the capital stock of IBP have been
duly authorized, validly issued and are fully paid and non-assessable. At the
closing date, there will exist no pre-emptive rights on the part of any holder
of any class of securities of IBP and no options, warrants, conversions or other
rights, agreements or commitments of any kind obligating IBP, or its
stockholders, contingently or otherwise, to issue or sell any shares of IBP
stock of any class or any securities convertible into or exchangeable for any
such shares OTHER THAN WHAT IS COVERED IN PARAGRAPH 9 (B). All issued and
outstanding shares shall contain no liens, claims or encumbrances of any kind.
The shares of IBP are trading in the "over the counter" market and the
bid and ask price on the date of this Agreement as quoted by NASD BULLETIN BOARD
is $ .125; ask, $.43 bid. It is the representation of IBP that IBP is a
publicly-traded company and that all filings required by state and federal
agencies have been complied with and are current. This matter is further
addressed in Paragraph 7 (1) hereof.
- --------------------------------------------------------------------------------
Agreement for Exchange of Stock and Plan of Reorganization 1
<PAGE>
3. EXCHANGE OF SHARES AND ACQUISITION OF SEG: As set forth above, IBP
capitalization consists of fifty million (50,000,000) shares of common stock and
three million (3,000,000) non par preffered stock with four million nine hundred
and fifty thousand (4,950,000) common shares issued and outstanding. It is a
specific representation by IBP that the officers, directors and shareholders of
IBP shall forthwith do such things as are necessary to cause a ten to one (10:
1) reverse stock split, which will result in four hundred ninety five thousand
(495,000) new shares being exchanged for the four million nine hundred and fifty
thousand (4,950,000) shares presently outstanding. In this connection, the
officers and directors will be instructed to do all things necessary to
accomplish this end, including, but not limited to the following:
(a) adopt appropriate reorganization resolutions in compliance
with the Articles of Incorporation and the appropriate Bylaw provisions
which will amend the Articles of Incorporation in a manner necessary to
accommodate the Plan of Reorganization as set forth herein including a
name change to ACCORD ADVANCED TECHNOLOGIES, INC. (if available), and
the reverse split of ten to one (10: 1);
(b) call for the consent of shareholders, in compliance with
all Articles of Incorporation and Bylaw provisions, to present the Plan
of Reorganization contemplated herein which will include all necessary
authority for the reverse split provisions, including an amendment to
the Articles of Incorporation in a form and manner necessary and
provide for the acquisition of SEG by the issuance of nine million five
hundred thousand (9,500,000) post-rollback (10:1) shares to SEG
(c) thereafter provide the Transfer Agent with appropriate
notices to be sent to all shareholders and to otherwise ensure that
proper notice and information filings be done to comply with any and
all state and federal regulatory agencies to ensure the continuity of
the publicly tradable share characterization, including but not limited
to the maintenance of the original stock issue date and to cause a
notice of this action to be communicated to any IBP market maker and
published in a securities publication in a manner that will provide due
diligence notice to the securities industry as needed.
(d) the nine million five hundred thousand (9,500,000) post-
rollback (10:1) shares mentioned herein, which shall be issued to
STOCKHOLDERS at the closing as hereinafter defined, shall be delivered
to STOCKHOLDERS in such denominations as STOCKHOLDERS may instruct,
solely in exchange for STOCKHOLDER'S __________ ( ) shares of _____ par
stock value in SEG as set forth herein. Such shares shall be issued and
certificates delivered in such denomination amount(s) and name(s) as
may be requested by STOCKHOLDERS. STOCKHOLDERS represents and warrants
that the shares will be held for investment and not for resale, and
- --------------------------------------------------------------------------------
Agreement for Exchange of Stock and Plan of Reorganization 2
<PAGE>
in this connection STOCKHOLDERS if required will execute an Investment
Letter prepared by IBP's attorney and made a part hereof. The
certificates shall contain the transfer restriction legend prepared by
IBP'S attorney.
4. DELIVERY OF SEG SHARES: On the closing date, STOCKHOLDERS will
deliver, at its expense, certificates for the ________ ( ) common shares of no
par stock value of SEG duly endorsed with signature(s) guaranteed and, if IBP's
counsel requires, document stamps will be affixed thereto so as to make ISP the
sole owner thereof, free and clear of all claims and encumbrances. On such
closing date, delivery of the duly endorsed nine million five hundred thousand
(9,500,000) post-rollback (10: 1) IBP shares on which documentary stamp taxes,
if the opinion of counsel requires, WILL have been paid by IBP. Delivery of
these shares will be made to STOCKHOLDERS as above set forth.
5. REPRESENTATIONS OF STOCKHOLDERS: STOCKHOLDERS represent and warrants
as follows:
(a) At this date and on the closing date, STOCKHOLDERS will be
the sole owners of all outstanding shares of SEG. Such shares will be
free from claims, liens or other encumbrances and STOCKHOLDERS will
have unqualified rights to transfer such shares.
(b) The shares constitute validly issued shares of SEG, fully
paid and non-assessable. There is attached hereto, marked Exhibit "B"
and made a part hereof, a Financial Statement of ACCORD SEMICONDUCTOR
EQUIPMENT GROUP, INC. These Financial Statements have been prepared in
compliance with and in accordance with generally accepted accounting
practices and procedures in the state of Arizona.
(c) Since the date of Exhibit "B" there have not been, and
prior to the closing date there will not be, any material changes in
the financial position of SEG except changes arising in the ordinary
course of business. The Financial Statement as above set forth shall
reasonably reflect the statement (Exhibit "B") delivered herewith.
(d) SEG is not involved in any pending litigation or
governmental investigation or proceeding not reflected in such
Financial Statement or otherwise disclosed in writing to IBP and to the
knowledge of SEG or, STOCKHOLDERS, no litigation or government
investigation or proceeding is threatened against SEG.
(e) As of the closing date, SEG will be in good corporate
standing and a closing document will reflect this status.
- --------------------------------------------------------------------------------
Agreement for Exchange of Stock and Plan of Reorganization 3
<PAGE>
6. OPINION OF COUNSEL: At closing, SEG shall deliver an attorney's
opinion reflecting that ACCORD SEMICONDUCTOR EQUIPMENT GROUP, Inc. is an Arizona
Corporation in good standing and the person executing this document and any
other document(s) necessary to complete this transaction has been duly
authorized by the board of directors and STOCKHOLDERS to do so and that such
action is taken in compliance with all of the terms and conditions of the
Articles of Incorporation and Bylaws of SEG.
7. REPRESENTATIONS OF IBP: IBP represents and warrants as follows:
(a) IBP will deliver to STOCKHOLDERS and SEG an audited
statement prepared by ___________________ Certified public accountants.
(b) IBP's board of directors will adopt resolutions as set
forth in Paragraph Three (3) hereof and will thereafter secure the
consent of its shareholders pursuant to the Articles of Incorporation
and Bylaws of IBP. In addition to the matters set forth in said
Paragraph Three (3) above, a resolution shall be presented ratifying
and confirming all actions taken by the officers and directors of IBP
in the furtherance of this Agreement.
(c) As of the closing date, IBP's shires to be delivered to
STOCKHOLDERS will constitute the valid and legally issued shares of
IBP, fully and non-assessable, and will be legally equivalent in all
respects to the common stock of IBP issued and outstanding as of the
date hereof, except as reflected in the reverse split provision.
(d) The officers of IBID. are duly authorized to execute this
Agreement pursuant to authorization of its shareholders.
(e) IBP's Financial Statements are true and complete
statements of its financial condition as of those dates. There are no
substantial liabilities, either fixed or contingent, not reflected in
such Financial Statements and the corporation will have done nothing
that will after its financial condition as reflected in such Financial
Statements.
(f) IBP is not involved in any pending litigation or
governmental investigation or proceeding not reflected in such
Financial Statement or otherwise disclosed in writing to STOCKHOLDER
and SEG and to the knowledge of IBP, no litigation or governmental
investigation or proceeding is threatened against IBP.
(g) As of the closing date,, IBP will be in good standing as a
Nevada corporation and as a closing document, a Certificate of Good
Standing will be delivered.
- --------------------------------------------------------------------------------
Agreement for Exchange of Stock and Plan of Reorganization 4
<PAGE>
(h) The shares of SEG are being acquired by IBP as an
investment and there is no present intention on the part of IBP to
dispose of such shares.
(i) The company attorney representing IBP shall deliver to
STOCKHOLDERS and SEG at closing an opinion acceptable to STOCKHOLDERS
and SEG that all actions taken by IBP in connection with the Plan of
Reorganization, including shareholders approval and ratification and
confirmation of such plan; its standing as a publicly-traded company is
in good standing (with all filings current); and that all actions taken
in connection with complying with the provisions of this Agreement,
including but not limited to the Plan of Reorganization, the issuance
of the nine million five hundred thousand (9,500,000) post-rollback
(10:1) shares to STOCKHOLDERS, the compliance with the Bylaws and
Articles of Incorporation in the adoption of the Plan of
Reorganization, the amendment to the Articles of Incorporation and any
other action taken incidental to this Agreement, have complied with the
laws of Nevada, CONFORM TO THE RULES AND REGULATIONS OF THE SECURITIES
AND EXCHANGE COMMISSION, and are in compliance with the terms,
conditions and provisions of the Articles of Incorporation and the
Bylaws of IBP and that the person(s) executing the documents have the
legal authority to do so. Copies of all reorganization documents will
be available at closing.
8. CONDITIONS AND CLOSING DATE: The closing date hereof and referred to
variously herein shall be a date not later than, _________________ unless
extended by written mutual consent of the parties. All representations and
covenants herein shall survive the closing. At the closing, STOCKHOLDERS and SEG
hereby designate, nominate, constitute and appoint Travis Wilson as agent and
attorney-in-fact to accept delivery of the certificate of IBP's stock, to be
issued in such manner as said attorney-in-fact may designate, to acknowledge
compliance with the closing provisions contained herein, to give a good and
sufficient receipt for the same, and in connection' therewith, to make delivery
of stock to IBP and to do such other things as may be incidental or necessary in
the closing of this transaction. This Power of Attorney shall cease and be of no
further force and effect in the event STOCKHOLDERS shall be available at
closing.
9. PROHIBITED ACTS: IBP AND SEG agree not to do any of the following
things prior to the closing date and STOCKHOLDERS agrees that prior to the
closing date STOCKHOLDERS will not request or permit SEG to do any of the
following THINGS:
(a) Declare or pay any dividends or other distribution on its
stock or purchase or redeem any of its stock.
- --------------------------------------------------------------------------------
Agreement for Exchange of Stock and Plan of Reorganization 5
<PAGE>
(b) Issue any stock or other securities, including any right
or option to purchase or otherwise acquire any of its stock or issue
any notes or other evidence of indebtedness not in the usual course of
business. OTHER THEN IBP ISSUING 1,250,000 POST-ROLLBACK SHARES OF 504D
TO A GROUP OF FOREIGN INVESTORS AND 1,200,000 POST-ROLL BACK RESTRICTED
UNDER RULE 144 TO COVER CONSULTING FEE.
10. DELIVERY OF RECORDS: STOCKHOLDERS and SEG agree that on or before
the closing date they will cause to be -delivered to IBP such corporate records
or other documents as IBP may request. IBP shall deliver to STOCKHOLDERS and SEG
a certified shareholder list prepared by the Transfer Agent. The Transfer
Agent's certification must reflect any restrictions of any kind or nature placed
on the transferability or otherwise with respect to any of the shares of IBP
outstanding.
11. NOTICES: Any notice which any of the parties hereto may desire to
serve upon any of the other parties hereto shall be in writing and shall be
conclusively deemed to have been received by the party to whom addressed if
mailed, postage prepaid, United States certified mail, to the following
addresses:
IBP 6411 South Aver Street
Spokane, WA 99223
SEG 5002 South Ash Avenue
Tempe, AZ 85282
12. CONSTRUCTION: This Agreement shall be construed under the laws of
the State of Arizona and any action taken by any party shall be brought in the
State of Arizona and the execution hereof confers jurisdiction in Arizona to all
of the parties to this Agreement.
13. BINDING NATURE: This Agreement shall be binding upon and inure to
the benefit of the heirs, personal representatives, successors and assigns of
the parties.
14. CONFIDENTIAL: All matters contained in this Agreement are to be
held confidential except as is necessary to accomplish the purposes of this
Agreement. There shall be no news releases or announcements of any kind until
such time as IBP and SEG's counsel advises the. parties that such publication
and notice is in compliance with security trading rules generally relating to
the contents, execution and culmination of the terms of this Agreement. Provided
further that any release of any kind by either party prior to closing must be
approved by all parties to this Agreement.
15. FAX TRANSMISSIONS: Fax transmissions of executed documents with
hard copies mailed per this Agreement shall be considered as binding on the
parties from the time of such fax transmission.
- --------------------------------------------------------------------------------
Agreement for Exchange of Stock and Plan of Reorganization 6
<PAGE>
16. MULTIPLE ORIGINALS: This Agreement shall be executed in multiple
counterparts, each of which shall be deemed duplicate originals as of the date
first above written.
17. EXPENSES: Each party hereto shall pay its own expenses incurred in
connection with this Agreement.
18. BROKERS: The parties certify and agree that there were no brokers
involved in this transaction and there are no fees payable to brokers. as a
result of this transaction.
19. NON-ASSIGNABILITY: Each party agrees that it will not assign, sell,
transfer, delegate or otherwise dispose of any right or obligation under this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
BOOK PUBLISHERS, INC. ACCORD SEMICONDUCTOR
EQUIPMENT GROUP, INC
By BY /s/ Travis Wilson
------------------------------ -----------------------------
PRESIDENT PRESIDENT
STOCKHOLDERS
By /s/ Travis Wilson
-----------------------------
By
-----------------------------
By
-----------------------------
By
-----------------------------
By
-----------------------------
By
-----------------------------
By
-----------------------------
By
-----------------------------
- --------------------------------------------------------------------------------
Agreement for Exchange of Stock and Plan of Reorganization 7
*****
ARTICLES OF INCORPORATION
OF
INVESTMENT BOOK PUBLISHERS, INC.
*****
FIRST
The NAME OF THE corporation is INVESTMENT B00K PUBLISHERS, INC.
SECOND
ITS PRINCIPAL OFFICE IN THE STATE OF NEVADA IS LOCATED AT One
East First Street, Reno Nevada 89501. The name and address of its resident agent
is THE, CORPORATION TRUST COMPANY or Nevada, One East First Street, Reno, Nevada
89501.
THIRD
The purpose Or purposes for which the corporation is
organized:
To engage in and carry on my lawful business activity or
trade, and to engage In the business of publishing books.
FOURTH
The amount of THE total AUTHORIZED CAPITAL STOCK OF THE
CORPORATION IS FIVE Thousand Dollars ($5,000.00) Consisting or Fifty Million
(50,000,000), shares of stock of the Paz VALUE OF $0.0001 each.
RECEIVED
MAY 22
<PAGE>
FIFTH
The governing board of this corporation shall be known as
directors, and the directors may, from time to time, be Increased or decreased
in such manner as shall be provided by the bylaws of this corporation.
The names and addresses of die members of the first board of
directors, which shall be two in number, are as follows
NAME POST-OFFICE ADDRESS
---- -------------------
Gregory Ruff 6411 Auer
Spokane, Washington 99223
Doris M. Ruff 731 Sorensen Street
Whittier, California 90606
The aforementioned individuals will be the initial directors
of this corporation and its initial officers as well. The number of members of
the Board of Directors shall not be less than two, nor more than seven,
Additional officers way be appointed by the Board of Directors.
SIXTH
The capital Stock, After the amount of the subscription price,
or par value, has, been paid in shall not be subject to assessment to pay the
debts of the. corporation.
SEVENTH
The name and addresses of the incorporated signing the
Ariticles of Incorporation is as follows:
NAME POST-OFFICE ADDRESS
---- -------------------
Gregory RUFF South 6411 Auer
Spokane, Washington 99223
EIGHTH
The corporation is to have perpetual existence
<PAGE>
NINTH
In furthermore, and not in limitation of the powers conferred
by statute, the board of directors is expressly authorized;
Subject to the- bylaws, If any, adopted by the stockholders,
to make, alter or amend the bylaws or The corporation.
To fix the amount to be reserved as working capital over and
above the capital stock paid in. to authorize and cause to be executed mortgages
and liens upon the real and personal property of this corporation.
By resolution passed by a majority Of the whole board, to
designate one (1) or more committees, each committee to consist of one (1) or
more of the directors of the corporation, which, to the extent provided in the
resolution or in the- bylaws of the corporation shall have and may exercise the
powers of the board of directors in the management of the business and affairs
of the corporation, and may authorize the seal of the corporation to be affixed
to all papers which may require it. Such committee or committees shall have,
such name or names as way be stated In the bylaws, of the corporation or as may
be determined from time to time by resolution adopted by the board of directors.
When and as authorized by the affirmative vote of stockholders
holding stock entitling them to exercise, at least a majority Of the voting
power given at a stockholders' meeting called for that purpose, or when
authorized by written consent of the holders of at least a majority of the
voting stock issued and outstanding, the board of directors shall have power and
authority at any meeting to sell, lease or exchange all of the property and
assets of the corporation, including its good will and its corporate franchises,
upon such terms and conditions as its board of directors deem expedient and for
the best interests of the corporation.
TENTH
Meeting of stockholders may be held outside of the State of
Nevada, if the bylaws so provide. The books of the corporation may be kept
(subject to any provision contained in the statutes) outside the State of Nevada
at such place or places as may be designated from time to time by the board of
directors or in the bylaws of the corporation.
<PAGE>
ELEVENTH
This corporation reserves the right to amend, alter, change or
repeal any provision contained in the Articles of Incorporation, in the manner
now or hereafter prescribed by statute, or by the Articles of Incorporation, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
TWELFTH
The corporation shall indemnify its officers, directors,
employees and agents to the full extent permitted by the laws of the State of
Nevada.
I , THE UNDERSIGNED, being the incorporator herein before
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Nevada, do make and file these Articles of
Incorporation, hereby declaring and certifying that the facts herein stated are
true, and accordingly has hereunto set my hands this 20th day of May, 1996.
/s/ Gregory Ruff
--------------------------------
GREGORY RUFF
STATE OF WASHINGTON )
)ss.
County of Spokane )
On this 20th day of May, 1996, before me, a Notary Public,
personally appeared Gregory Ruff, who severally acknowledged that he executed
the above instrument
/s/ Elisa Gulson
--------------------------------
Notary Public residing in the State
of Washington, in Spokane,
My Commission Expires:
October 9, 1998
<PAGE>
Receipt No. FY9800028440
ACCORD SEMICONDUCTOR GROUP
11/18/1997
135.00
REC'D By TN
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
OF
INVESTMENT BOOK PUBLISHERS, INC.
We, the undersigned President and Secretary of INVESTMENT BOOK
PUBLISHERS, INC. do hereby certify as follows:
That the Board of Directors of said corporation at a meeting duly
convened, held on November 6, 1997, adopted a resolution to amend the Amended
Articles of Incorporation filed on May 22, 1996, as follows:
ARTICLE 1 is hereby amended to read as follows:
That the name of the corporation is: ACCORD ADVANCED TECHNOLOGIES, INC.
ARTICLE 4 is hereby amended to read as follows:
The amount of the total authorized capital stock of the corporation is
Five Thousand Dollars ($5,000.00) consisting of Forty-seven Million
(47,000,000) shares of Common stock and Three Million (3,000,000)
shares of Preferred stock all having the par value of $.0001 each.
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 4,950,000, that said
amendment has been consented to and approved by a majority vote of the
stockholders holding at least a majority of each class of stock outstanding and
entitled to vote thereon pursuant to an Action by Written Consent of the
Shareholder of Investment Book Publishers, Inc.
/s/ Gregory Paul Ruff
--------------------------------
GREGORY PAUL RUFF,
President
/s/ Doris M. Ruff
--------------------------------
DORIS M. RUFF Secretary
Page 1 of 2
<PAGE>
STATE OF WASHINGTON )
)ss.
COUNTY OF SPOKANE )
On November 10 , 1997, personally appeared before me, a Notary Public,
GREGORY PAUL RUFF, known to me to be the person whose name is subscribed to the
foregoing Certificate of Amendment of Articles of Incorporation and acknowledged
that he executed the same:
/s/ Jackie Braten/Jackie Braten
--------------------------------
Notary Public
Commission Expires 12/29/99
STATE OF CALIFORNIA )
)ss.
COUNTY OF LOS ANGELES )
On November 11, 1997, personally appeared before me, a Notary Public,
DORIS M. RUFF, known to me to be the person whose name is subscribed to the
foregoing Certificate of Amendment of Articles of Incorporation and acknowledged
that she executed the same:
/s/ Signature Illegible
--------------------------------
Notary Public
Page 2 of 2
BYLAWS
OF
INVESTMENT BOOK PUBLISHERS, INC.
I. SHAREHOLDER'S MEETING.
.01 ANNUAL MEETINGS.
The annual meeting of the shareholders of this Corporation, for the
purpose of election of Directors and for such other business as may
come before it, shall be held at the registered office of the
Corporation, or such other places, either within or without the State
of Nevada, as may be designated by the notice of the meeting, on the
fourth week in February of each and every year, at 1:00 p.m.,
commencing in 1997, but in case such day shall be a legal holiday, the
meeting shall be held at the same hour and place on the next succeeding
day not a holiday.
.02 SPECIAL MEETING.
Special meetings of the shareholders of this Corporation may be called
at any time by the holders of ten percent (10%) of the voting shares of
the Corporation, or by the president, or by the Board of Directors or a
majority thereof. No business shall be transacted at any special
meeting of shareholders except as is specified in the notice caning for
said meeting. The Board of Directors may designate any place, either
within or without the State of Nevada, as the place of any special
meeting called by the president or the Board of Directors, and special
meetings called at the request of shareholders shall be held at such
place in the State of Nevada, as may be determined by the Board of
Directors and placed in the notice of such meeting.
.03 Notice of Meeting.
Written notice of annual or special meetings of shareholders stating
the place, day, and hour of the meeting and, in the case of a special
meeting, the purpose or purposes for which the meeting is called shall
be given by the secretary or persons authorized to call the meeting to
each shareholder of record entitled to vote at the meeting. Such notice
shall be given not less than ten (10) nor more than fifty (50) days
prior to the date of the meeting, and such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the
shareholder at his/her address as it appears on the stock transfer
books of the Corporation.
1
<PAGE>
.04 WAIVER OF NOTICE.
Notice of the time, place, and purpose of any meeting may be waived in
writing and will be waived by any shareholder by his/her attendance
thereat in person or by proxy. Any shareholder so waiving shall be
bound by the proceedings of any such meeting in all respects as if due
notice thereof had been given.
.05 QUORUM AND ADJOURNED MEETINGS.
A majority of the outstanding shares of the Corporation entitled to
vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. A majority of the shares represented at a
meeting, even if less than a quorum, may adjourn the meeting from time
to time without further notice. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified.
The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum.
.06 PROXIES.
At all meetings of shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or by his/her duly authorized
attorney in fact. Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting. No proxy shall be
valid after eleven (11) months from the date of its execution, unless
otherwise provided in the proxy.
.07 VOTING OF SHARES.
Except as otherwise provided in the Articles of Incorporation or in
these Bylaws, every shareholder of record shall have the right at every
shareholder's meeting to one (1) vote for every share standing in
his/her name on the books of the Corporation, and the affirmative vote
of a majority of the shares represented at a meeting and entitled to
vote thereat shall be necessary for the adoption of a motion or for the
determination of all questions and business which shall come before the
meeting.
II. DIRECTORS.
.01 GENERAL POWERS.
The business and affairs of the Corporation shall be managed by its
Board of Directors.
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.02 NUMBER, TENURE AND QUALIFICATIONS.
The number of Directors of the Corporation shall be not less than one
nor more than five. Each Director shall hold office until the next
annual meeting of shareholders and until his/her successor shall have
been elected and qualified. Directors need not be residents of the
State of Nevada or shareholders of the Corporation.
.03 ELECTION.
The Directors shall be elected by the shareholders at their annual
meeting each year; and if, for any cause the Directors shall not have
been elected at an annual meeting, they may be elected at a special
meeting of shareholders called for that purpose in the manner provided
by these Bylaws.
.04 VACANCIES.
In case of any vacancy in the Board of Directors, the remaining
Director, whether constituting a quorum or not, may elect a successor
to hold office for the unexpired portion of the terms of the Director
whose place shall be vacant, and until his/her successor shall have
been duly elected and qualified.
.05 RESIGNATION.
Any Director may resign at any time by delivering written notice to the
secretary of the Corporation.
.06 Meetings.
At any annual, special or regular meeting of the Board of Directors,
any business may be transacted, and the Board may exercise all of its
powers. Any such annual, special or regular meeting of the Board of
Directors of the Corporation may be held outside of the State of
Nevada, and any member or members of the Board of Directors of the
Corporation may participate in any such meeting by means of a
conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at
the same time; the participation by such means shall constitute
presence in person at such meeting.
A. ANNUAL MEETING OF DIRECTORS.
Annual meetings of the Board of Directors shall be held
immediately after the annual shareholders' meeting or at such
time and place as may be determined by the Directors. No
notice of the annual meeting of the Board of Directors shall
be necessary.
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B. Special Meetings.
Special meetings of the Directors shall be called at any time
and place upon the call of the president or any Director.
Notice of the time and place of each special meeting shall be
given by the secretary, or the persons calling the meeting, by
mail, radio, telegram, or by personal communication by
telephone or otherwise at least one (1) day in advance of the
time of the meeting. The purpose of the meeting need not be
given in the notice. Notice of any special meeting may be
waived in writing or by telegram (either before or after such
meeting) and will be waived by any Director in attendance at
such meeting.
C. Regular Meetings of Directors.
Regular meetings of the Board of Directors shall be held at
such place and on such day and hour as shall from time to time
be fixed by resolution of the Board of Directors. No notice of
regular meetings of the Board of Directors shall be necessary.
.07 Quorum and Voting.
At majority of the Directors presently in office shall constitute a
quorum for all purposes, but a lesser number may adjourn any meeting,
and the meeting may be held as adjourned without further notice. At
each meeting of the Board at which a quorum is present, the act of a
majority of the Directors present at the meeting shall be the act of
the Board of Directors. The Directors present at a duly organized
meeting may continue to transact business until adjournment, not
withstanding the withdrawal of enough Directors to leave less than a
quorum.
.08 Compensation.
By resolution of the Board of Directors, the Directors may be paid
their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of
the Board of Directors or a stated salary as Director. No such payment
shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
.09 Presumption of Assent.
A Director of the Corporation who is present at a meeting of the Board
of Directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his/her dissent
shall be entered in the minutes of the meeting or unless he/she shall
file his/her written dissent to such action with the person acting as
the
4
<PAGE>
secretary of the meeting before the adjournment thereof or shall
forward such dissent by registered mail to the secretary of the
Corporation immediately after the adjournment of the meeting. Such
right to dissent shall not apply to a Director who voted in favor of
such action.
.10 EXECUTIVE AND OTHER COMMITTEES.
The Board of Directors, by resolution adopted by a majority of the full
Board of DIRECTORS, may designate from among its members an executive
committee and one of more other committees, each of which, to the
extent provided in such resolution, shall have and may exercise all the
authority of the Board of Directors, but no such committee shall have
the authority of the Board of Directors, in reference to amending the
Articles of Incorporation, adoption a plan of merger or consolidation,
recommending to the SHAREHOLDERS the sale, lease, exchange, or other
disposition of all of substantially all the property and assets of the
dissolution of the Corporation or a revocation thereof, designation of
any such committee and the delegation thereto of authority shall not
operate to relieve any member of the Board of Directors of any
responsibility imposed by law.
.11 Chairman of Board of Directors.
The Board of Directors may, in its discretion, elect a chairman of the
Board of Directors from its members; and, if a chairman has been
elected, he/she shall, when present, preside at all meetings of the
Board of Directors and the shareholders and shall have such other
powers as the Board may prescribe.
.12 Removal.
Directors may be removed from office with or without cause by a vote of
shareholders holding a majority of the shares entitled to vote at an
election of Directors.
III. ACTIONS BY WRITTEN CONSENT.
Any corporate action required by the Articles of Incorporation, Bylaws, or the
laws under which this Corporation is formed, to be voted upon or approved at a
duly called meeting of the Directors or shareholders may be accomplished without
a meeting if a written memorandum of the respective Directors or shareholders,
setting forth the action so taken, shall be signed by all the Directors or
shareholders, as the case may be.
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<PAGE>
IV. OFFICERS.
.01 Officers Designated.
The Officers of the Corporation shall be a president, one or more vice
presidents (the number thereof to be determined by the Board of
Directors), a secretary and a treasurer, each of whom shall be elected
by the Board of Directors. Such other Officers and assistant officers
as may be deemed necessary may be elected or appointed by the Board of
Directors. Any Officer may be held by the same person, except that in
the event that the Corporation shall have more than one director, the
offices of president and secretary shall be held by different persons.
.02 ELECTION, QUALIFICATION AND TERM OF OFFICE.
Each of the Officers shall be elected by the Board of Directors. None
of said Officers except the president need be a Director, but a vice
president who is not a Director cannot succeed to or fill the office of
president. The Officers shall be elected by the Board of Directors.
Except as hereinafter provide, each of said Officers shall hold office
from the date of his/her election until the next annual meeting of the
Board of Directors and until his/her successor shall have been duly
elected and qualified.
.03 POWERS AND DUTIES.
The powers and duties of the respective corporate Officers shall be as
follows:
A. PRESIDENT.
The president shall be the chief executive Officer of the
Corporation and, subject to the direction and control of the
Board of Directors, shall have general charge and supervision
over its property, business, and affairs. He/she shall, unless
a Chairman of the Board of Directors has been elected and is
present, preside at meetings of the shareholders and the Board
of Directors.
B. VICE PRESIDENT.
In the absence of the president or his/her inability to act,
the senior vice president shall act in his place and stead and
shall have all the powers and authority of the president,
except as limited by resolution of the Board of Directors.
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C. SECRETARY.
The secretary shall:
1. Keep the minutes of the shareholder's and of the
Board of Directors meetings in one or more books
provided for that purpose;
2. See that all notices are duly given in accordance
with the provisions of these Bylaws or as required by
law;
3. Be custodian of the corporate records and of the seal
of the Corporation and affix the seal of the
Corporation to all documents as may be required;
4. Keep a register of the post office address of each
shareholder which shall be furnished to the secretary
by such shareholder;
5. Sign with the president, or a vice president,
certificates for shares of the Corporation, the
issuance of which shall have been authorized by
resolution of the Board of Directors;
6. Have general charge of the stock transfer books of
the corporation; and,
7. In general perform all duties incident to the office
of secretary and such other duties as from time to
time may be assigned to him/her by the president or
by the Board of Directors.
D. TREASURER.
Subject to the direction and control of the Board of Directors, the
treasurer shall have the custody, control and disposition of the funds
and securities of the Corporation and shall account for the same; and,
at the expiration of his/her term of office, he/she shall turn over to
his/her successor all property of the Corporation in his/her
possession.
E. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.
The assistant secretaries, when authorized by the Board of Directors,
may sign with the president or a vice president certificates for shares
of the Corporation the issuance of which shall have been authorized by
a resolution of the Board of Directors. The assistant treasurers shall,
respectively, if required by the Board of Directors, give bonds for the
faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine. The assistant
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<PAGE>
secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the Board of Directors.
.04 REMOVAL.
The Board of Directors shall have the right to remove any Officer
whenever in its judgment the best interest of the Corporation will be
served thereby.
.05 Vacancies.
The Board of Directors shall fill any office which becomes vacant with
a successor who shall hold office for the unexpired term and until
his/her successor shall have been duly elected and qualified. Salaries.
The salaries of all Officers of the Corporation shall be fixed by the
Board of Directors.
V. SHARE CERTIFICATES
.01 FORM AND EXECUTION OF CERTIFICATES.
Certificates for shares of the Corporation shall be in such form as is
consistent with the provisions of the Corporation laws of the State of
Nevada. They shall be signed by the president and by the secretary, and
the seal of the Corporation shall be affixed thereto. Certificates may
be issued for fractional shares.
.02 Transfers.
Shares may be transferred by delivery of the certificates therefor,
accompanied either by an assignment in writing on the back of the
certificates or by a written power of attorney to assign and transfer
the same signed by the record holder of the certificate. Except as
otherwise specifically provided in these Bylaws, no shares shall be
transferred on the books of the Corporation until the outstanding
certificate therefor has been surrendered to the Corporation.
.03 LOSS OR DESTRUCTION OF CERTIFICATES.
In case of loss or destruction of any certificate of shares, another
may be issued in its place upon proof of such loss or destruction and
upon the giving of a satisfactory bond of indemnity to the Corporation.
A new certificate may be issued without requiring any bond, when in the
judgment of the Board of Directors it is proper to do so.
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<PAGE>
VI. BOOKS AND RECORDS.
.01 Books of ACCOUNTS, MINUTES AND SHARE REGISTER.
The Corporation shall keep complete books and records of accounts and
minutes of the proceedings of the Board of Directors and shareholders
and shall keep at its registered office, principal place of business,
or at the office of its transfer agent or registrar a share register
giving the names of the shareholders in alphabetical order and showing
their respective addresses and the number of shares held by each.
.02 COPIES OF RESOLUTIONS.
Any person dealing with the Corporation may rely upon a copy of any of
the records of the proceedings, resolutions, or votes of the Board of
Directors or shareholders, when certified by the president or
secretary.
VII. CORPORATE SEAL.
The following is an impression of the corporate seal of this
Corporation:
VIII. LOANS.
Generally, no loans shall be made by the Corporation to its Officers or
Directors, unless first approved by the holder of two-third of the
voting shares, and no loans shall be made by the Corporation secured by
its shares. Loans shall be permitted to be made to Officers, Directors
and employees of the Company for moving expenses, including the cost of
procuring housing. Such loans shall be limited to $25,000.00 per
individual upon unanimous consent of the Board of Directors.
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<PAGE>
IX. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
.01 INDEMNIFICATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding, whether civil,
criminal, administrative or investigative (other than an action by or
in the right of the Corporation) by reason of the fact that such person
is or was a Director, Trustee, Officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a Director, Trustee, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgment, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in
good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith
and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect to
any criminal action proceeding, had reasonable cause to believe that
such person's conduct was unlawful.
.02 DERIVATIVE ACTION
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a
judgment in the Corporation's favor by reason of the fact that such
person is or was a Director, Trustee, Officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as
a Director, Trustee, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorney's fees) and amount paid in settlement actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to amounts
paid in settlement, the settlement of the suit or action was in the
best interests of the Corporation; provided, however, that no
indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable for gross
negligence or willful misconduct in the performance of such person's
duty to the Corporation unless and only to the extent that, the court
in which such action or suit was brought shall determine upon
application that, despite circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as such
court shall deem proper. The termination of any action or suit by
judgment or settlement shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of
the Corporation.
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.03 Successful Defense.
To the extent that a Director, Trustee, Officer, employee or Agent of
the Corporation has been successful on the merits or otherwise, in
whole or in part in defense of any action, suit or proceeding referred
to in Paragraphs .0 1 and .02 above, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
.04 AUTHORIZATION.
Any indemnification under Paragraphs .01 and .02 above (unless ordered
by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the
Director, Trustee, Officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of
conduct set forth in Paragraphs .01 and .02 above. Such determination
shall be made (a) by the Board of Directors of the Corporation by a
majority vote of a quorum consisting of Directors who were not parties
to such action, suit or proceeding, or (b) is such a quorum is not
obtainable, by a majority vote of the Directors who were not parties to
such action, suit or proceeding, or (c) by independent legal counsel
(selected by one or more of the Directors, whether or not a quorum and
whether or not disinterested) in a written opinion, or (d) by the
Shareholders. Anyone making such a determination under this Paragraph
.04 may determine that a person has met the standards therein set forth
as to some claims, issues or matters but not as to others, and may
reasonably prorate amounts to be paid as indemnification.
.05 ADVANCES.
Expenses incurred in defending civil or criminal action, suit or
proceeding shall be paid by the Corporation, at any time or from time
to time in advance of the final disposition of such action, suit or
proceeding as authorized in the manner provided in Paragraph .04 above
upon receipt of an undertaking by or on behalf of the Director,
Trustee, Officer, employee or agent to repay such amount unless it
shall ultimately be by the Corporation is authorized in this Section.
.06 NONEXCLUSIVITY.
The indemnification provided in this Section shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled under any law, bylaw, agreement, vote of shareholders or
disinterested Directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased
to be a Director, Trustee, Officer, employee or agent and shall inure
to the benefit of the heirs, executors, and administrators of such a
person.
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<PAGE>
.07 INSURANCE.
The Corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a Director, Trustee, Officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, Trustee, Officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability assessed against such person in
any such capacity or arising out of such person's status as such,
whether or not the corporation would have the power to indemnify such
person against such liability.
.08 "CORPORATION" DEFINED.
For purposes of this Section, references to the "Corporation" shall
include, in addition to the Corporation, an constituent corporation
(including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had the power and authority to indemnify its Directors,
Trustees, Officers, employees or agents, so that any person who is or
was a Director, Trustee, Officer, employee or agent of such constituent
corporation or of any entity a majority of the voting stock of which is
owned by such constituent corporation or is or was serving at the
request of such constituent corporation as a Director, Trustee,
Officer, employee or agent of the corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position
under the provisions of this Section with respect to the resulting or
surviving Corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
X. AMENDMENT OF BYLAWS.
.01 BY THE SHAREHOLDERS.
These Bylaws may be amended, altered, or repealed at any regular or
special meeting of the shareholders if notice of the proposed
alteration or amendment is contained in the notice of the meeting.
.02 BY THE BOARD OF DIRECTORS.
These Bylaws may be amended, altered, or repealed by the affirmative
vote of a majority of the entire Board of Directors at any regular or
special meeting of the Board.
XI. FISCAL YEAR.
The fiscal year of the Corporation shall be set by resolution of the
Board of Directors.
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XII. RULES OF ORDER.
The rules contained in the most recent edition of Robert's Rules or
Order, Newly Revised, shall govern all meetings of shareholders and
Directors where those rules are not inconsistent with the Articles of
Incorporation, Bylaws, or special rules or order of the Corporation.
XIII. REIMBURSEMENT OF DISALLOWED EXPENSES.
If any salary, payment, reimbursement, employee fringe benefit, expense
allowance payment, or other expense incurred by the Corporation for the
benefit of an employee is disallowed in whole or in part as a
deductible expense of the Corporation for Federal Income Tax purposes,
the employee shall reimburse the Corporation, upon notice and demand,
to the full extent of the disallowance. This legally enforceable
obligation is in accordance with the provisions of Revenue Ruling
69-115, 1969-1 C.B. 50, and is for the purpose of entitling such
employee to a business expense deduction for the taxable year in which
the repayment is made to the Corporation. In this manner, the
Corporation shall be protected from having to bear the entire burden of
disallowed expense items.
13
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
==============================================================================================================
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C>
$1,000,000.00 03-19-1999 03-19-2009 2000917 40 3,4,9 10006 BF
- --------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this
document to any particular loan item.
- --------------------------------------------------------------------------------------------------------------
Borrower: ACCORD SEMICONDUCTOR EQUIPMENT, GROUP, Inc. Lender: UNION BANK OF ARIZONA, N.A.
(TIN: 86-07451M PO BOX 230
6002 S. ASH STREET Gilbert, AZ 85299
TEMPE, AZ 85282
==============================================================================================================
</TABLE>
THIS BUSINESS LOAN AGREEMENT DATED March 19, 1999, Is made and executed between
Accord Semiconductor Equipment, Group, Inc. ("Borrower") and Union Bank of
Arizona, N.A. ("Lender") on the following terms and conditions. Borrower has
received prior commercial loans from Lender or has applied to Lender for a
commercial loan or loans or other financial accommodations, Including those
which may be described on any exhibit or schedule attached to this Agreement
("Loan"). Borrower understands and agrees that: (A) In granting, renewing, or
extending any Loan, Lender Is relying upon Borrower's representations,
warranties, and agreements as set forth in this Agreement, and (8) all such
Loans shall be and remain subject to the terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of March 19, 1999, and shall continue
in full force and effect until such time as all of Borrower's Loans in favor of
Lender have been paid in full, in principal, interest, costs, expenses,
attorneys' fees, and other fees and charges, or until March 19, 2009.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions set forth in this
Agreement and in the Related Documents.
LOAN DOCUMENTS. Borrower shall provide to Lender the following 'documents
for the Loan: (1) the Note; (2) Security Agreements granting to Lender
security interests in the Collateral; (3) financing statement perfecting
Lender's Security Interests; (4) evidence of insurance as required below;
(5) guaranties; (6) together with all such Related Documents as Lender may
require for the Loan; all in form and substance satisfactory to Lender and
Lender's counsel.
BORROWER'S AUTHORIZATION. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents. In addition, Borrower shall have provided such other
resolutions, authorizations, documents and instruments as Lender or its
counsel, may require.
PAYMENT OF FEES AND EXPENSES. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
REPRESENTATIONS AND WARRANTIES. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement a true and correct.
NO EVENT OF DEFAULT. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement
or under any Related Document,
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
ORGANIZATION. Borrower is a corporation for profit which is, and at all
times shall be, duly organized, validly existing, and in good standing
under and by virtue of the laws of the State of Arizona. Borrower is duly
authorized to transact business in all other states in which Borrower is
doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which Borrower is doing business.
Specifically, Borrower Is, and at all times shall be, duly qualified as a
foreign corporation in all states in which the failure to so quality would
have a material adverse effect on its business or financial condition.
Borrower has the full power and authority to own its properties and to
transact the business in which it is presently engaged or presently
proposes to engage. Borrower maintains an office at 5D02 S. Ash Street,
Tempe, AZ 85282. Unless Borrower has designated otherwise in writing, the
principal office is the office at which Borrower keeps its books and
records including its records concerning the Collateral. Borrower will
notify Lender of any change in the location of Borrower's principal office.
Borrower shall do all things necessary to preserve and to keep in full
force and effect its existence, rights and privileges, and shall comply
with all regulations, rules, ordinances, statutes, orders and decrees of
any governmental or quasi-govern mental authority or court applicable to
Borrower and Borrower's business activities.
ASSUMED BUSINESS NAMES. Borrower has filed or recorded all documents or
filings required by law relating to all assumed business names used by
Borrower. Excluding the name of Borrower, the following is a complete list
of all assumed business names under which Borrower does business: None.
AUTHORIZATION. Borrower's execution, delivery, and performance of his
Agreement and all the Related Documents have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (1) any provision of Borrower's
articles of incorporation or organization, or bylaws, or any agreement or
other instrument binding upon Borrower or (2) any law, governmental
regulation, court decree, or order applicable to Borrower or to Borrower's
properties.
FINANCIAL INFORMATION. Each of Borrower's financial statements supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
Borrower Is required to give under this Agreement when delivered will
constitute, legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.
HAZARDOUS SUBSTANCES. Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (1) During the period of
borrower's ownership of borrower's collateral, there has been no use,
generation, manufacture, storage, treatment, disposal, release or
threatened release of any hazardous substance by any person on, under,
about or from any of the Collateral. (2) Borrower has no knowledge of, or
reason to believe that there has been (a) any breach or violation of any
Environmental Laws; (b) any use, generation, manufacture, storage,
treatment, disposal, release, or threatened release of any Hazardous
Substance on, under, about or from the Collateral by any prior owners or
occupants of any of the Collateral; or (c) any actual or threatened
litigation or claims of any kind by any person relating to such matters.
(3) Neither Borrower nor any tenant, contractor, agent or other authorized
user of any of the Collateral shall use, generate, manufacture, store,
treat, dispose of, or release any Hazardous Substance on, under, about or
from any of the Collateral; and any such activity shall be conducted in
compliance with all applicable federal, state, and local laws, regulations,
and ordinances, including without limitation all Environmental Laws,
Borrower authorizes Lender and its agents to enter upon the Collateral to
make such inspections and tests as Lender may deem appropriate to determine
compliance of the Collateral with this section of the Agreement. Any
inspections or tests made by Lender SHALL be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are based
on Borrower's due diligence in investigating the Collateral for hazardous
waste and hazardous substances. Borrower hereby (1) releases and waives any
future claims against Lender for indemnity or contribution in the event
Borrower becomes liable for cleanup or other costs under any such laws, and
(2) agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which Lender
may directly or indirectly sustain or suffer resulting from a breach of
this section of the agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release of a
hazardous waste or substance onhe properties. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the indebtedness and the termination, expiration or
satisfaction of this Agreement and shall not be affected by Lender's
acquisition of any interest in any of the Collateral, whether by
foreclosure or otherwise.
LITIGATION AND CLAIMS. No litigation, claim investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all of Borrower's tax returns
and reports that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid! in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided,
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
Information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to make
such information not misleading.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
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BUSINESS LOAN AGREEMENT Page 2
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BINDING EFFECT. This Agreement, the Note, all SECURITY AGREEMENTS (I! any),
and all Related Documents are binding upon the signers thereof, as well as
upon their successors, representatives and assigns, and are legally
enforceable in accordance with their respective terms.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:
NOTICES OF CLAIMS AND LITIGATION. Promptly inform Lender in writing of (1)
all material adverse changes in Borrower's financial condition, and (2) all
existing and all threatened litigation, claims, Investigations,
administrative proceedings or similar actions affecting Borrower or any
Guarantor which could materially affect the financial condition of Borrower
or the financial condition of any Guarantor.
FINANCIAL RECORDS. Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit
Borrower's books and records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with such financial statements and
other related information at such frequencies and in such detail as Lender
may reasonably request.
ADDITIONAL INFORMATION. Furnish such additional Information and statements,
as Lender may request from time to time.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies acceptable to Lender. Borrower, upon request of Lender,
will deliver to Lender from time to time the policies or certificates of
Insurance in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at least ton (10)
days prior written notice to Lender. Each insurance policy also shall
include an endorsement providing that coverage in favor of Lender will not
be impaired in any way by any act, omission or default of Borrower or any
other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest for the Loans, Borrower will
provide Lender with such lender's loss payable or other endorsements as
Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (1) the
name of the insurer; (2) the risks insured; (3) the amount of the policy;
(4) the properties Insured; (5) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (6) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine. as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately In writing of any default in
connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for the following specific
purposes: Loan Proceeds are to be disbursed by two-party cashier's check or
wire transfer only.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, Income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits.
PERFORMANCE. Perform and comply, In a timely manner, with all terns,
conditions, and provisions set forth in this Agreement, in the Related
Documents, and In all other Instruments and agreements between Borrower and
Lender. Borrower shall notify Lender immediately in writing of any default
In connection with any agreement.
OPERATIONS. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner.
COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. Comply with at laws, ordinances,
and regulations, now or hereafter in effect, of all governmental
authorities applicable to the conduct of Borrower's properties, businesses
and operations, and to the use or occupancy of the Collateral, including
without limitation, the Americans with Disabilities Act. Borrower may
contest in good faith any such law, ordinance, or regulation and withhold
compliance during any proceeding, including appropriate appeals, so long as
Borrower has notified Lender in writing prior to doing so and so long as,
in Lender's sole opinion, Lender's interest! in the Collateral are not
jeopardized. Lender may require Borrower to post adequate security or a
surety bond, reasonably satisfactory to Lender, to protect Lender's
interest.
INSPECTION. Permit employees or agents of Lender at any reasonable time to
Inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records It may request, all at Borrower's
expense.
COMPLIANCE CERTIFICATES. Unless waived in writing by Lender, provide Lender
within thirty (30) after the end of each fiscal quarter and at the time of
each disbursement of Loan proceeds, with a certificate executed by
Borrower's chief financial officer, or other officer or person acceptable
to Lender, certifying that the representations and warranties set forth in
this Agreement are true and correct as of the date of the certificate and
further certifying that, as of the date of the certificate, no Event of
Default exist; under this Agreement.
ENVIRONMENTAL COMPLIANCE AND REPORTS. Borrower shall comply in all respects
with any and all Environmental Laws; not cause or permit to exist, as a
result of an intentional or unintentional action or omission or Borrower's
part or on the part of any third party, on property owned and/or occupied
by Borrower, any environmental activity where damage may result to the
environment, unless such environmental activity Is pursuant to AND IN
COMPLIANCE with the conditions of a permit issued by the appropriate
federal, state or local governmental authorities; shall furnish to Borrower
promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality concerning
any Intentional or unintentional action or omission on Borrowers part in
connection with any environmental activity whether or not there Is damage
to the environment and/or other natural resources.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as Lender
or its attorneys may reasonably request to evidence and secure the Loans
and to perfect all Security Interests.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Borrower under this Agreement or any Related Document
including without limitation 911 taxes, liens, security interests, encumbrances,
and other claims, at any time levied or placed on any Collateral. Lender also
may (but shall not be obligated to) pay all costs for insuring, maintaining and
preserving any Collateral. All such expenditures incurred or paid by Lender for
such purposes will then bear interest at the rate charged under the Note from
the date incurred or paid by Lender to the date of repayment by Borrower. All
such expenses will become a part of the Indebtedness and, at Lender's option
will (A) be payable on demand, (B) will be added to the balance of the Note, (C)
and be apportioned among and be payable with any installment payments to become
due during either (1) the term of any applicable insurance policy, (2) the
remaining term of the Note, or (3) be treated as a balloon payment which will be
due and payable at the Note's maturity. Any Collateral also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall riot, without the prior written consent
of Lender:
INDEBTEDNESS AND LIENS. (1) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money
including capital leases, (2) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets
(except as allowed as Permitted Liens), or (3) sell with recourse any of
Borrower's accounts, except to Lender.
TRANSFER AND LIENS. Fail to continue to own all of Borrower's assets,
except for routine transfers, use or depletion in the ordinary course of
Borrower's business. Borrower agrees not to create or grant to any person,
except Lender, any lien, security interest, encumbrance, cloud on title,
mortgage, pledge or similar interest in any of Borrower's property, even in
the ordinary course of Borrower's business, Borrower agrees not to sell,
convey, grant, lease, give, contribute, assign, or otherwise transfer an),
of Borrower's assets, except for sales of inventory or leases of goods in
the ordinary course of Borrower's business.
CONTINUITY OF OPERATIONS. (1) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(2) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, or (3) pay any dividends
on Borrower's stock (other than dividends payable in its stock), provided,
however that notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the payment of
dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
on its stock to its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make
<PAGE>
BUSINESS LOAN AGREEMENT Page 3
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estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of Borrower's
stock, or purchase or retire any of Borrower's outstanding shares or alter
or amend Borrower's capital structure.
LOANS, ACQUISITIONS AND GUARANTIES. (1) Loan, invest in or advance money or
assets, (2) purchase, create or acquire any interest in any other
enterprise or entity, or (3) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan
to Borrower, whether under this Agreement or under any other agreement,
Lender shall have no obligation to make Loan Advances or to disburse Loan
proceeds if: (1) Borrower or any Guarantor is in default under the terms of
this Agreement or any of the Related Documents or any other agreement that
Borrower or any Guarantor has with Lender; (2) Borrower or any Guarantor
dies, becomes incompetent or becomes insolvent, files a petition in
bankruptcy or similar proceedings, or is adjudged a bankrupt; (3) there
occurs a material adverse change in Borrower's financial condition, in the
financial condition of any Guarantor, or in the value of any Collateral
securing any Loan; or (4) any Guarantor seeks, claims or otherwise attempts
to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender; or (5) Lender in good faith deems itself insecure,
even though no Event of Default shall have occurred.
RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest
in, and hereby assigns, conveys, delivers, pledges and transfers to Lender,
all Borrower's right, title and interest in and to all Borrower's accounts
with Lender (whether checking, savings, or some other account). This
includes all accounts Borrower holds jointly with someone else and all
accounts Borrower may open in the future. However, this does not include
any IRA or Keogh accounts, or any trust accounts for which the grant of a
security interest would be prohibited by law, Borrower authorizes Lender,
to the extent permitted by applicable law, to charge or setoff all sums
owing on the indebtedness against any and all such accounts, and, at
Lender's option, to administratively freeze all such accounts to allow
Lender to protect Lender's charge and setoff rights provided in this
paragraph. DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
PAYMENT DEFAULT. Borrower fails to make any payment when due under the
Loan.
OTHER DEFAULTS. Borrower fails to comply with or to perform any 0ther term,
obligation, covenant or condition contained in this Agreement or in any of
the Related Documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
FALSE STATEMENTS. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower's behalf under this
Agreement, the Note, or the Related Documents is false or misleading in any
material respect, either now or at the time made or furnished or becomes
false or misleading at any time thereafter. I
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
DEFECTIVE COLLATERALIZATION. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any
time and for any reason.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against the Collateral or any other collateral securing
the Loan. This includes a garnishment of any of Borrower's accounts,
including deposit accounts, with Lender. However, this Event of Default
shall not apply if there is a good faith dispute by Borrower as; to the
validity or reasonableness of the claim which is the basis of the creditor
or forfeiture proceeding and if Borrower gives Lender written notice of the
creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount
'determined by Lender, in its sole discretion, as being an adequate reserve
or bond for the dispute,
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability
under, any Guaranty of the Indebtedness. In the event of a death, Lender,
at its option, may, but shall not be required to, permit the Guarantor's
estate to assume unconditionally the obligations arising under the guaranty
in a manner satisfactory to Lender, and, in doing so, cure any Event of
Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
ADVERSE CHANGE. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Loan is impaired.
INSECURITY. Lender in good faith believes itself insecure.
RIGHT TO CURE. if any default, other than a default on Indebtedness, is
curable and if Borrower or Grantor, as the case may be, has not been given
a notice of a similar default within the preceding twelve, (12) months', it
may be cured (and no Event of Default will have occurred) if Borrower or
Grantor, as the case may be, after receiving written notice from lender
demanding cure of such default: (1) cure the default within twenty (20)
days; or (2) if the cure requires more than twenty (20) days, immediately
initiate steps which Lender deems in Lender's sole discretion to be
sufficient to cure the default and thereafter continue and complete all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately WILL terminate (including any obligation to make
further Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Borrower shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's rights
and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies,
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
ATTORNEYS' FEES; EXPENSES. Borrower agrees to pay upon demand all of
Lender's costs and expenses, including Lender's attorneys' fees and
Lender's legal expenses, incurred in connection with the enforcement of
this Agreement. Lender may hire or pay someone else to help enforce this
Agreement, and Borrower shall pay the costs and expenses of such
enforcement. Costs and expenses include Lender's attorneys' fees and legal
expenses whether or not there is a lawsuit, including attorneys' fees and
legal expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services, Borrower also shall pay all court costs
and such additional fees as may be directed by the court.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to 'Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter relating
to the Loan, and Borrower hereby waives any rights to privacy Borrower may
have with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loan and will have all the rignts
granted under the participation agreement or agreements governing the sale
of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and unconditionally
agrees that either Lender or such purchaser may enforce Borrower's
obligation under the Loan irrespective of the failure or insolvency of any
holder of any interest in the Loan. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
GOVERNING LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED BY
LENDER IN THE STATE OF ARIZONA. IF THERE IS A LAWSUIT, BORROWER AGREES UPON
LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF MARLCOPA
COUNTY, STATE OF ARIZONA. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ARIZONA.
NO WAIVER BY LENDER. Lender shall not be deemed to have waive any rights
under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising any right
shall operate as a waiver of such right or any other right, A waiver by
Lender of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict
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BUSINESS LOAN AGREEMENT Page 4
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compliance with that provision or any other provision of this Agreement. No
prior waiver by Lender, nor any course of dealing between Lender and
Borrower, or between Lender and any Grantor, shall constitute a waiver of
any of Lender's rights or of any of Borrower's or any Grantor's,
obligations as to any future transactions. Whenever the consent of Lender
is required under this Agreement, the granting of such consent by Lender in
any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may
be granted or withheld In THE SOLE DISCRETION of Lender.
NOTICES. Any notice required to be given under this Agreement she II be
given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law), when
deposited with a nationally recognized overnight courier, or, if mailed,
when deposited in the United States mail, as first class certified or
registered mail postage prepaid, directed to the addresses shown near the
beginning of this Agreement. Any party may change its address for notices
under this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's address.
For notice purposes, Borrower agrees to keep Lender informed at all times
of Borrower's current address. Unless otherwise provide (or required by
law, if there is more than one Borrower, any notice given by Lender to any
Borrower is deemed to be notice given to all Borrowers
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be illegal, invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes le gal,
valid and enforceable. If the offending provision cannot be so modified, it
shall be considered deleted from this Agreement. Unless otherwise required
by law, the illegality, invalidity, or unenforceability of any provision of
this Agreement shall not affect the legality, validity or enforceability of
any other provision of this Agreement.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used in this Agreement shall include all of Borrower's subsidiaries and
affiliates. Notwithstanding the foregoing however, under no circumstances
shall this Agreement be construed to require Lender to make any Loan or
other financial accomodation to any of Borrower's subsidiaries or
affiliates.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind Borrower's successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower shall
not, however, have the right to assign Borrower's rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower understands and agrees
that in making the Loan, Lender is relying on all representations,
warranties, and covenants made by Borrower in this Agreement or in any
certificate or other instrument delivered by Borrower to Lender under this
Agreement or the Related Documents. Borrower further agrees that regardless
of any investigation made by Lender, all such representations, warranties
and covenants will survive the making of the Loan and delivery to Lender of
the Related Documents, shall be continuing in nature, and shall remain in
full force and effect until such time as Borrower's Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the Iast to occur.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money of
the United States of America. Words and terms used in the singular shall include
the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms In the Uniform Commercial Code. Accounting
words and terms not otherwise defined in this Agreement shall have the meanings
assigned to them in accordance with generally accepted accounting principles as
in effect on the date of this Agreement:
ADVANCE. The word "Advance" means a disbursement of Loan funds made, or to
be made, to Borrower or on Borrower's behalf on a tine of credit or
multiple advance basis under the terms and conditions of this Agreement.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower" means Accord Semiconductor Equipment, Group,
Inc., and all other persons and entities signing the Note in whatever
capacity.
COLLATERAL. The word "Collateral" means all property and assets granted as
collateral security for a Loan, whether real or personal property, whether
granted directly or indirectly, whether granted now or In the future, and
whether granted in the form of a security interest, mortgage, collateral
mortgage, dead of trust, assignment, pledge, chattel mortgage, crop pledge,
chattel mortgage, collateral chattel mortgage, chattel trust, factor's
lien, equipment trust, conditional sale, trust receipt, lien, charge, lien
or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created
by law, contract, or otherwise.
ENVIRONMENTAL LAWS. The words "Environmental Laws" mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, Including without Imitation
the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the
Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
("SARA"), the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, at seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, at seq., or other applicable state or federal laws, rules, or
regulations adopted pursuant thereto.
EVENT OF DEFAULT. The words "Event of Default" mean any of the Events of
Default set forth in this Agreement in the section titled "Default".
GAAP. The word "GAAP" means generally accepted accounting principles.
GRANTOR. The word "Grantor" means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, including
without limitation all Borrowers granting such a Security Interest.
GUARANTOR. The word "Guarantor" means any guarantor, surety, or
accommodation party of any or all of the Loan.
GUARANTY. The word "Guaranty" means the guaranty from Guarantor I. Lender,
INCLUDING WITHOUT LIMITATION A GUARANTY OF ALL or part of the Note.
INDEBTEDNESS. The word "Indebtedness" means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents.
LENDER. The word "Lender" means Union Bank of Arizona, N.A., its successors and
assigns.
LOAN. The word "Loan" means any and all loans and financial accommodations from
Lender to Borrower whether now or hereafter existing, and however evidenced,
including without limitation 'hose loans and financial accommodations described
herein or described on any exhibit or schedule attached to this Agreement from
time to time.
NOTE. The word "Note" means the Note executed by Borrower in the principal
amount of $1,000,000.00 dated March 19, 1999, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.
PERMITTED LIENS. The words "Permitted Liens" mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for taxes,
assessments, or similar charges either not yet due or being contested in good
faith; (3) liens of materialmen, mechanics, warehousemen, or carriers, or other
like liens arising in the ordinary course of business and securing obligations
which are not yet delinquent; (4) purchase money liens or purchase money
security interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the date of
this Agreement or permitted to be incurred under the paragraph of this Agreement
titled "Indebtedness and Liens"; (5) liens and security interests which as of
the date of this Agreement, have been disclosed to and approved by the Lender in
writing; and (6) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrower's assets.
RELATED DOCUMENTS. The words "Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Loan.
SECURITY AGREEMENT. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract or otherwise, evidencing,
governing, representing, or creating a Security Interest.
SECURITY INTEREST. The words "Security Interest" mean, without limitation, any
and all types of collateral security, present and future, whether in the form of
a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment,
pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment Intended as a security device, or
any other security or lien interest whatsoever whether created by law, contract,
or otherwise.
<PAGE>
BUSINESS LOAN AGREEMENT Page 5
(Continued)
================================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED MARCH 19, 1999.
BORROWER:
ACCORD SEMICONDUCTOR EQUIPMENT GROUP, INC.
By: /s/ Travis Wilson By: /s/ Terrie C. Wilson
----------------------------------- -------------------------------------
Travis Wilson, President of Accord Terrie C. Wilson, Secretary of Accord
Semiconductor Equipment, Group, Inc. Semiconductor Equipment, Group, Inc.
LENDER.
UNION BANK OF ARIZONA, N.A.
X /s/ Signature Illegible
-------------------------------------
Authorized Signer
================================================================================
SUBSCRIPTION AGREEMENT AND INVESTMENT
REPRESENTATION OF INVESTORS
Accord Advanced Technologies, Inc.
5002 S. Ash Avenue
Tempe, AZ 85282
Gentlemen:
1) Subject to the terms and conditions hereof, the undersigned, intending to
be legally bound, hereby irrevocably subscribers for and agrees to accept
and subscribe to 83,333 shares of Regulation D. Section 504 Common Stock of
Accord Advanced Technologies, Inc., a Nevada corporation (the "Company"),
for a total consideration of $250,000, the receipt and sufficiency of which
is hereby acknowledged. The 83,333 shares shall be adjusted for the 3-1
stock split announced by the Company, i.e., the adjusted number of shares
will be 250,000.
2) In order to induce the company to accept the subscription made hereby, the
undersigned hereby represents and warrants to the Company, and each other
person who acquires or has acquired the Common Stock, as follows:
a) The undersigned, if an individual (i) has reached the age of majority
in the state in which he resides, and ii) is a bona fide resident and
domiciliary (not a temporary or transient resident) of the state set
forth beneath his signature below.
b) The undersigned has the financial ability to bear the economic risk of
an investment in the Common Stock and has adequate means of providing
for his current needs and personal contingencies, has no need for
liquidity in such investment, and could afford a complete loss of such
investment. The undersigned's overall commitment to investments that
are not readily marketable is not disproportionate to his net worth,
and investment in the Company will not cause such overall commitment to
become excessive.
c) The undersigned meets at least one of the following criteria:
(i) the undersigned is a natural person whose individual net worth
or joint net worth with his spouse, at the time of the
purchase of the Common Stock, exceeds one million dollars
($1,000,000); or
(ii) the undersigned is a natural person and has an individual
income in excess of two hundred thousand ($200,000) in each of
the two most recent years, or jointly with his spouse in
excess of three hundred thousand ($300,000) in each of the two
most recent years, and who reasonably expects to achieve at
least the same level of income in the current year; or
(iii) qualifies as an "accredited investor" under Regulation D of
the Securities Act of 1933 (the "Act").
d) The investment is one in which the undersigned is purchasing for
himself and not for others.
e) The investment amount does not exceed ten percent (10%) of the net
worth of the undersigned, and the undersigned has the capability to
understand the investment and the risk of such investment.
<PAGE>
f) The undersigned has been given full opportunity to ask questions of and
to receive answers from the Company concerning the terms and conditions
of the offering and the business of the Company, and to obtain
additional information necessary to verify the accuracy of the
information provided him or to obtain such other information as is
desired in order to the full satisfaction of the undersigned.
g) In making his decision to purchase the Common Stock herein subscribed
for, the undersigned has relied solely upon independent investigation,
and is not subscribing pursuant hereto for any Common Stock as a result
of or subsequent to: (i) any advertisement, article, notice or other
communication published in any newspaper, magazine, or similar media or
broadcast over television or radio, or (ii) any seminar or meeting
whose attendee, including the undersigned, has been invited as a result
of, subsequent to , or pursuant to any of the foregoing.
h) The undersigned understands that the Common Stock has not been
registered under the Act, in reliance upon specific exemptions from
registration thereunder, and agrees that his Common Stock may not be
sold, offered for sale, transferred, pledged, hypothecated, or
otherwise disposed of except in compliance with the Act and applicable
state securities laws. The undersigned has been advised that the
Company has no obligation to cause the Common Stock to be registered
under the Act or to comply with any exemption under the Act, which
would permit the Common Stock to be sold by the undersigned.
3) To the extent the undersigned has the right to rescind his purchase of the
Common Stock, which right of recession is hereby offered, the undersigned
waives and relinquishes such rights and agrees to accept certificate(s)
evidencing such Common Stock.
4) This Agreement and the rights and obligations of the parties hereto shall
be governed by, and construed and enforced in accordance with, the laws of
the state of Nevada.
5) All pronouns contained herein and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the
identity of the parties hereto may require.
6) The Common Stock referred to herein may be sold to the subscriber in a
transaction exempt under the New York Securities Act. The Common Stock has
not been registered under said act in the state of New York. The offering
described herein has not been reviewed by the Attorney General of the State
of New York, and the Attorney General of the State of New York has not
passed on or endorsed the merits of this offering. Any representation to
the contrary is unlawful.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed and agrees to be bound by this
Subscription Agreement and Investment Representation on the date written below
as the Date of Subscription.
(TO BE USED FOR INDIVIDUALS)
- ---------------------------------- -----------------------------------
First Name of Individual Signature of Individual
- ---------------------------------- -----------------------------------
State of Residence Date of Subscription
(TO BE USED FOR PARTNERSHIPS, CORPORATIONS
TRUSTS OR OTHER ENTITIES)
Nismic
- ---------------------------------- -----------------------------------
Print Name of Entity Signature of Authorized Representative
President Michael Manis
- ---------------------------------- -----------------------------------
Capacity of Authorized Print Name of Authorized Representative
Representative
New York 10-6-98
- ---------------------------------- -----------------------------------
Print Jurisdiction of Date of Subscription
Incorporation or Organization
<PAGE>
SUBSCRIPTION AGREEMENT
PRIVATE PLACEMENT OF STOCK
Gentlemen:
This Subscription Agreement has been executed by the undersigned In connection
with the private placement of shares consisting of shares of Common Stock (the
"Shares") of ACCORD ADVANCED TECHNOLOGIES, INC. (AVTI), a Nevada corporation
(the "Company"). The undersigned (sometimes herein referred to as the
"Investor") hereby represents and warrants to, and agrees with, the Company as
follows:
1. AGREEMENT TO SUBSCRIBE; PAYMENT: SUBSCRIPTION IRREVOCABLE.
The undersigned hereby subscribes for 127,272 post split Common Shares at a
price of $2.75 per Share payable to the Company.
Terms of the Subscription
a. Enclosed herewith is the undersigned's wire verifications in the amount
of $350,000 pursuant to the following terms: $100,000 to be wired by
October 2,1998. $75,000 per week commencing October 12, 1998 until the
entire $350,000 is fully paid. Furthermore, the Investor shall have the
right to match any competitive bid proffered to AVTI during the next 12
month period through a 504 D offering.
Note:
Company will issue 127,272 Common Shares on receipt of the $350,000.
The undersigned understands that, except as provided, as expressly provided
herein, this subscription may not be revoked by the undersigned for six months
from the date hereof, and that the execution and delivery of this Agreement will
not constitute an agreement between the undersigned and the Company until this
Agreement has been accepted by the Company, and then subject to the terms and
conditions of this Agreement.
THE UNDERSIGNED UNDERSTANDS THAT THIS INVESTMENT IN THE COMPANY IS ILLIQUID AND
INVOLVES A HIGH DEGREE OF SPECULATIVE RISK.
2. QUALIFICATIONS OF INVESTOR.
<PAGE>
(a) Accredited Investor Status. The undersigned hereby represents and
warrants to the Company that the Investor is an accredited investor
inasmuch as the Investor is:
(Please check all applicable descriptions)
( ) A bank or savings and loan association, as defined in the Securities
Act, whether acting in its individual or fiduciary capacity.
( ) A broker or dealer registered pursuant to the Securities Exchange Act
Of 1934.
( ) An insurance company, as defined in the Securities Act, as amended.
( ) An investment company registered under the Investment Company Act of
1940.
( ) A business development company, as defined in the Investment Company
Act of 1940.
( ) A Small Business Investment Company licensed by the U.S. Small Business
Administration.
( ) A plan established and maintained by a state, its political
subdivisions or an agency or instrumentality of a state or its
political subdivisions for the benefit of its employees, if such plan
has total assets in excess of $5,000,000.
( ) An employee benefit plan within the meaning of Title I of the
Employment Retirement Income Security Act of 1974 (ERISA), if the
investment decision with respect to this investment is made by a plan
fiduciary, as defined in ERISA, which is either a bank, insurance
company, or registered investment advisor, if the employee benefit plan
has total assets in excess of $5,000,000.
( ) A private business development company, as defined in the Investment
Advisors Act of 1940.
( ) A tax exempt organization defined in Section 501(c)(3) of the Internal
Revenue Code, or a corporation, Massachusetts or similar business
trust, or partnership, not formed for the specific purpose of acquiring
the Shares, With total assets in excess OF $5,000,000.
( ) A director or executive officer of the Company.
( ) A natural person whose individual net worth (or joint net worth with
that person's spouse) exceeds $1,000,000.
<PAGE>
( ) A natural person who had an individual income in excess of $200,000 or
with his spouse $300,000 in each of the two most recent years and who
reasonably expects an income of at least the same level in the current
year.
( ) A trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as described in Rule 506(b)(2)(ii)
under the Securities Act.
( ) An entity all the equity owners of which may respond affirmatively to
any of the preceding paragraphs.
(x) None of the above.
(please check if applicable)
(x) Alone, or with his purchaser representative, if any, the
Investor has such knowledge and experience in financial and
business matters that he is capable if evaluating the merits
and risks of this transaction and of an investment in the
Corporation as provided for in the Memorandum.
(c) Investor Suitability; Illiquidity; Ability to Bear Loss. The Investor
has a net worth of at LEAST $650,000 (exclusive of home, furnishings
and automobiles), or during the past taxable year, the Investor had,
and during the present taxable year, the Investor will have, an annual
gross income of at least $200,000 and a net worth of at least $650,000
(exclusive of home, furnishings and automobiles).
(x) The overall commitment of the undersigned to securities which
are not readily marketable is not disproportionate to the
Investor's net worth, and his investment in the Shares will
not cause his overall commitment to become excessive.
(x) The undersigned has adequate means of providing for his
current needs and personal contingencies, has no need for
liquidity in his investment in the Shares, and can sustain a
complete loss of his investment in the Shares.
(d) Entity Investors. If the undersigned is other than a natural person,
the undersigned represents and warrants that:
<PAGE>
(i) The undersigned has not been formed, reformed or recapitalized
for the specific purpose of purchasing the Shares;
(ii) The undersigned has been duly formed and is validly existing-
in good standing under the laws of the jurisdiction of its
formation, WITH FILL power and authority to enter into the
transactions contemplated by this Agreement; and
(iii) This Agreement has been duly and validly authorized, executed
and delivered by the undersigned and when executed and
delivered by the Company, will constitute the valid, binding
and enforceable agreement of the undersigned.
3. ACCESS TO INFORMATION-, INDEPENDENT INVESTIGATION.
(a) Private Placement Memorandum. The undersigned has not received Private
Placement Memorandum dated _______________ but has instead made an
independent investigation of the company, its management, its business
plan and other related investment information it deems appropriate.
(b) Independent Investigation; Access. The undersigned, in making the
decision to purchase the Shares subscribed for, has relied upon
independent investigations made by him and his purchaser
representatives (if any), and the undersigned and such representatives
(if any) have, prior to any sale to him, been given access and the
opportunity to examine all material' books and records of the
Corporation, all material contracts and document; relating to this
offering and an opportunity to ask questions of, and to receive answers
from, the Corporation or any person acting on its behalf CONCERNING the
terms and conditions of this offering and to obtain any additional
information to the extent the Corporation possesses such information or
can acquire it without unreasonable effort or expense, necessary to
verify the accuracy of the information set forth in the Memorandum.
The undersigned and the undersigned's advisors, if any, have been
furnished with all materials relating to (i) the business, finances and
operation of the Company and materials relating to the offer and sale
of the Shares. The undersigned and the undersigned's advisors, if any,
have received complete and satisfactory answers to any such inquiries.
(c) No Other Representations. No representations have been made to
undersigned or such purchaser representative, if any, concerning the
Shares, the Corporation, its business or prospects, or other matters.
<PAGE>
(d) Adequacy of Investigation. The undersigned acknowledges that the
undersigned is subscribing for the Shares after what the undersigned
deems to be adequate investigation of the business, finances and
prospects of the Company by the undersigned and the undersigned's
advisors, if any.
(e) No Governmental Recommendation or Approval. The undersigned understands
that no federal, state or other United States agency has passed on or
made any recommendation or endorsement of the Shares.
4. INVESTMENT REPRESENTATIONS.
(a) Shares Not Registered; Indefinite Holding. The undersigned has been
advised by the Company, and understands, that the undersigned must bear
the economic risk of an investment in the Shares for an indefinite
period of time because the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act") and the
Company is under no obligation to register the Shares. Therefore, the
Shares must be held by the undersigned unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available for the transfer of the Shares.
(b) Purchase for own Account. The ;undersigned represents that the Shares
are being acquired solely for the undersigned's own account for
investment and not with a view toward, or for resale in connection
with, any "distribution" (as that term is used in the Securities Act
and the Rules and Regulations thereunder) of all or any portion
thereof.
(c) No Disposition of Shares Without Securities Law Compliance. The
undersigned agrees not to subdivide the Shares or to offer, sell,
pledge, hypothecate or otherwise transfer or dispose of any of the
Shares in the absence of an effective registration statement under the
Securities Act covering such disposition, or an opinion of counsel,
satisfactory to the Company and its counsel, to the effect that
registration under the Securities Act is not required in respect to
such transfer or disposition.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, OR AN AVAILABLE
EXEMPTION UNDER FEDERAL AND, OR STATE SECURITIES LAWS.
<PAGE>
5. INDEMNIFICATION.
The undersigned agrees to indemnify and hold the Company, its officers,
directors and stockholders or any other person who may be deemed to control the
Company harmless from any loss, liability, claim, damage or expense, arising out
of the inaccuracy of any of the above representations, warranties or statements
or the breach of any of the agreements contained herein, and this
indemnification shall survive the purchase and sale of the Shares subscribed for
herein.
6. BLUE SKY NOTICES.
Exempt in the State of Nevada
US Company incorporated in Nevada
7. CLOSING DATE.
The date of the dosing of the sale of the Shares (the "Closing") shall
be the date specified in written notice from the Company to the
undersigned, which date shall be no later than 5 days after the date of
such notice. The Closing shall take place at the offices of the Company
located at 5002 South Ash Avenue, Tempe, Arizona 85282, or at such
other place as may be designated by the Company in the above notice and
shall be at such time specified in such notice.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
Investor understands that the Company's obligation to sell the Stock is
conditioned upon:
(a) the receipt and acceptance by the Company of satisfactory Subscription
Agreements for all of the Shares to be offered;
(b) the simultaneous or substantially simultaneous sale of at least 60% of
the Shares;
(c) an Opinion of Counsel that the collective subscribers are unaffiliated
and not control by one or more affiliated or related persons;
(d) the offering not being sooner terminated by the Company pursuant to
Section 10 hereof.
9. CONDITIONS TO INVESTOR'S OBLIGATION TO PURCHASE.
Investor's obligation to purchase the Stock in accordance with the terms of this
Subscription Agreement is conditioned upon:
(i) the simultaneous or substantially simultaneous sale of all the Shares
offered.
10. TERMINATION OF THE OFFERING
Investor and company acknowledge that the offering of the Stock can not be
terminated after money has changed hands. Prior to this, Investor acknowledges
that the offering of the stock can be terminated at any time by the company
prior to the closing regardless of whether this Subscription Agreement had
theretofore been accepted by the company. In the event of such termination this
Subscription Agreement, and the parties' obligations hereunder, shall terminate.
11. GOVERNING LAW.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Nevada.
IN WITNESS WHEREOF, this Subscription Agreement was duly executed on the 1st
day of October, 1998.
INVESTOR ACCORD ADVANCED TECHNOLOGIES, INC.
By: /s/ /s/ Travis Wilson
- -------------------------------- -----------------------------------
Title: Travis Wilson
For ECB International .... Title: President/CEO
<PAGE>
ESCROW AGREEMENT
This agreement entered into this 1st day of October, 1998 by and between Accord
Advanced Technologies, Inc. (AVTI) Davis, McKee & Forshey P.C. Attorneys At Law
(Escrow Agent) and Tantay/Investor. The Investor has purchased common shares of
AVTI pursuant to Regulation D Section 504 under terms and conditions set forth
in a certain Subscription Agreement dated October 1, 1998. The Escrow Agent has
agreed to hold said certificates evidencing the above mentioned sale in
safekeeping at its office located at 5338 North Seventh Street, Suite A201,
Phoenix, AZ 85014 for a period of one year or until further written instructions
mutually agreed upon from both the Investor and AVTI. The Investor hereby agrees
to place said certificates in the custody of the Escrow Agent and agrees not to
attempt to sell or make any representations that said shares can be sold during
this lock-up period of time.
This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Arizona.
IN WITNESS WHEREOF, this Escrow Agreement was duly executed on the 1st day of
October, 1998.
INVESTOR ACCORD ADVANCED TECHNOLOGIES, INC.
By: /s/ /s/ Travis Wilson
- -------------------------------- -----------------------------------
Title: Travis Wilson
For ECB International .... Title: President/CEO
ESCROW AGENT
DAVIS, MCKEE & FOREHEY
By: /s/
- --------------------------------
AGREEMENT
1. R&F ADVISORS (RF), with its principal place of business in Phoenix, AZ, is an
advisory group consisting of Gerald Flanagan and Carol Ranno. It is engaged in
the business of advising and assisting companies as well as arranging financing.
The financing may be in the form of loans, merger, an equity investment by one
or more investors, or other transactions wherein the company receives funding
through a combination of the above ACCORD ADVANCED TECHNOLOGIES, INC. (AVTI),
with its principal place of business in Tempe, AZ, desires to retain RF as its
Advisor to assist in Mergers and Acquisitions, Business Planning, Due Diligence
Strategic Plan and to arrange financing to meet present and future needs. The
primary capital raise is to secure a $6 million private placement to be used for
the continuous expansion and operation of the subsidiary company Accord SEG.
2. RF agrees to respect the confidentiality of all financial, operational, and
product information which it may receive from time to time from AVTI, and agrees
not to disseminate any such information to any candidate without securing the
prior written consent of AVTI and without securing the prior written agreement
of confidentiality, if needed, from a designated candidate. RF will, on a
monthly basis, advise AVTI as to the name and progress on each funding
candidate.
3. This Agreement shall remain in effect from the date of execution for a period
of six months unless canceled by either party with 30 days written notice. Upon
the termination of this Agreement. RF agrees to provide AVTI a list of all
parties contacted on behalf of AVTI by RF and the status of any negotiations,
which may have commenced. RF shall continue to assist AVTI in the negotiation
and completion of any pending transaction begun during the term of this
Agreement and shall receive the full success fee as hereinafter set forth.
4. Should, within a period of twelve months, subsequent to the termination of
this Agreement, AVTI completes a transaction with a party introduced by RF to
AVTI a fee of 10% of the total value of the amount raised shall be the maximum
amount remitted to RF, or another advisor, or a combination of advisors who
assist AVTI to close said transaction with a party introduced by RF.
5. For the purpose of this Agreement, the term "financing" includes, but is not
limited to, any loans made to or for the benefit of AVTI or its affiliate,
proceeds or consideration paid to or on behalf of or for the benefit of AVTI or
its affiliate, for any stock or securities warrants, options or rights to
acquire stock or securities or to make loans to or its affiliate, and any other
sums of money, proceeds or other consideration paid to or received by or on
behalf of or for the benefit of AVTI or its affiliate.
6. RF's fee for services shall be a contingent fee of 10% of the value of the
funding for any funding sources introduced to AVTI by RF, payable upon the
successful closing of the transaction. The contingent fee will be based upon the
total transaction value even if the funding is staggered, which is defined to
include cash, notes, cancellation or the express assumption of debt in
connection with a purchase of assets, and the then-current US dollar value of
any other consideration. The fee shall be paid in cash or a combination of cash
and stock as agreed to by RF and shall be paid by AVTI to RF upon receipt of the
funding by AVTI. Furthermore, RF shall be granted an Option to purchase a
mutually agreed upon number of common shares of AVTI at a price not to exceed
the price per share paid by the investor introduced to AVTI by RF.
7. RF, upon request, shall also assist in the arrangement of debt financing, as
needed by AVTI. RF shall receive a fee of 3% of any funds received by AVTI,
which shall be payable at the time said debt financing is received. A fee of 3%
of the total value of the debt amount raised shall be the maximum remitted to
RF, or another advisor, or a combination of advisors who assist AVTI to close
said transaction with a party introduced by RF.
8. AVTI agrees to indemnify and hold RF and its affiliates harmless from and
against all losses, claims, damages, liabilities, costs or expenses, including
those resulting from any threatened or pending investigation, action, proceeding
or dispute whether or not RF is a party to said activity, arising out of RF's
entering into or performing services under this Agreement, or arising out of any
matter referred to in this Agreement. The indemnity herein set forth SHALL NOT
APPLY WHERE A COURT OF COMPETENT JURISDICTION HAS MADE A FINAL DETERMINATION
THAT RF ACTED IN A GROSSLY NEGLIGENT MANNER OR ENGAGED IN WILLFUL MISCONDUCT IN
THE PERFORMANCE OF ITS SERVICES WHICH GAVE RISE TO THE LOSS, CLAIM, DAMAGE,
LIABILITY, COST OR EXPENSE SOUGHT TO BE RECOVERED.
9. Any controversy arising from the terms of this Agreement shall be submitted
to and settled by arbitration in accordance with the American Arbitration
Association-Commercial Arbitration, which shall be binding and conclusive upon
the parties to such arbitration and judgment thereon may be entered in any court
of competent jurisdiction.
10. This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have executed this agreement, consisting
of three pages and ten paragraphs as of the date written below.
Date 3/1/98 R&F ADVISORS
By: /s/ Carl P. Ranno
-------------------------------
Carl P. Ranno
Date 3/1/98 ACCORD ADVANCED TECHNOLOGIES, INC.
By: /s/ Travis Wilson
-------------------------------
Travis Wilson, President
STANDARD INDUSTRIAL LEASE - NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. PARTIES. This lease, dated, for reference purposes only, August 18, 1994 is
made by and between Robert Colman Trust (heroin called "Lessor") and. Accord
Semiconductor Equipment Group, Inc. and Travis Wilson, Individually and Terrie
Wilson, Individually (herein called "Lessee"),
2. PROMISES. Lessor hereby losses to Lessee and Lessee leases from Lessor for
the term, at the rental, and upon all of the conditions set forth herein, that
certain real property situated in the county of- Maricopa State of Arizona
commonly known as 5002 South Ash, Tempe, Arizona and described as approximately
14,000 square foot building said real properly including the land and all
improvements therein, is heroin called "the promises".
3. TERM.
3.1 TERM. THE TERM OF THIS LEASE SHALL BE FOR FIVE (5) YEARS COMMENCING ON
October 1, 1994 AND ENDING ON SEPTEMBER 30, 1999 UNLESS SOONER TERMINATED
PURSUANT TO ANY PROVISION HEREOF.,
3.2 DELAY IN POSSESSION, NOTWITHSTANDING SAID COMMENCEMENT DATE, It (Of ANY
REASON LESSOR CANNOT DELIVER POSSESSION OF THE PROMISES 10 LESSEE ON SAID DATE.
LESSOR SHALL NOT BE SUBJECT TO ANY LIABILITY THEREFOR, NOR SHALL SUCH FAILURE
AFFECT THE VALIDITY OF THIS LEASE OR THE OBLIGATIONS OF LESSEE HEREUNDER OR
EXTEND THE TERM HEREOF, BUT IN SUCH CASE, LESSEE SHALL NOT BE OBLIGATED TO PAY
RENT UNTIL POSSESSION OF THE PROMISES IS TENDERED TO LOSSES, PROVIDED, HOWEVER,
THAT It LESSOR SHALL NOT HAVE DELIVERED POSSESSION OF THE PROMISES WITHIN SIXTY
(60) DAYS FROM SAID COMMENCEMENT DATE. LESSEE MAY, AT LESSEE'S OPTION. BY NOTICE
IN WRITING TO LESSOR WITHIN TON (10) DAYS THEREAFTER, CANCEL THIS LEASE, IN
WHICH EVENT THE PARTIES SHALL BE DISCHARGED FROM ALL OBLIGATIONS HEREUNDER;
PROVIDED FURTHER, HOWEVER. THAT IF SUCH WRITTEN NOTICE OF LESSEE IS NOT RECEIVED
BY LESSOR WITHIN SAID TON (10) DAY PERIOD. LESSEE 3 RIGHT TO CANCEL THIS LEASE
HEREUNDER SHALL TERMINATE AND BE OF NO FURTHER FORCE OR EFFECT.
3.3 EARLY POSSESSION, IT LESSEE OCCUPIES THE PROMISES PRIOR TO SAID
COMMENCEMENT DATE, SUCH OCCUPANCY SHALL BE SUBJECT TO ALL PROVISIONS HEREOF,
SUCH OCCUPANCY SHALL NOT ADVANCE THE TERMINATION DATE, AND LESSEE SHALL PAY RENT
FOR SUCH PERIOD AT THE INITIAL MONTHLY RATES SET FORTH BELOW.
4. RENT. LESSEE SHALL PAY TO LESSOR AS RENT FOR THE PROMISES, MONTHLY PAYMENTS
OF $ see paragraph 48, IN ADVANCE, ON THE first DAY OF EACH MONTH OF THE TERM
HEREOF. LESSEE SHALL PAY LESSOR UPON THE EXECUTION HEREOF $*5,880.00 AS RENT FOR
amount does not include NNN charges nor rental tax.
RENT FOR ANY PERIOD DURING THE TERM HEREOF WHICH IS FOR LESS THAN ONE MONTH
SHALL BE A PRO RATE PORTION OF THE MONTHLY INSTALLMENT RENT SHALL BE PAYABLE IN
LAWFUL MONEY OF THE UNITED STATES TO LESSOR AT THE ADDRESS STATED HEREIN OR TO
SUCH OTHER PERSONS Of AT SUCH OTHER PLACES AS LESSOR MAY DESIGNATE IN WRITING.
5. SECURITY DEPOSIT LESSEE SHALL DEPOSIT WITH LESSOR UPON EXECUTION HEREOF
$25,000.00 AS SECURITY FOR LESSEE'S FAITHFUL PERFORMANCE OF LESSEE'S OBLIGATIONS
HEREUNDER. 11 LOSSES FALLS TO PAY RENT OR OTHER CHARGES DUO HEREUNDER. OR
OTHERWISE DEFAULTS WITH RESPECT TO ANY PROVISION OF THIS LEASE. LESSOR MAY USE.
APPLY OR RETAIN ALL OR ANY PORTION OF SAID DEPOSIT FOR THE PAYMENT OF ANY RENT
OR OTHER CHARGE IN DEFAULT OR FOR THE PAYMENT OF ANY OTHER SUM TO WHICH LESSOR
MAY BECOME OBLIGATED BY REASON OF LESSEE'S DEFAULT OR TO COMPENSATE LESSOR FOR
ANY LOSS OR DAMAGE WHICH LESSOR MAY SUFFER THEREBY. 11 LESSOR SO USES OR APPLIES
ALL of ANY PORTION OF SAID DEPOSIT. LESSEE SHALL WITHIN TAN (10) DAYS ALTER
WRITTEN DEMAND THEREFOR DEPOSIT CASH WITH LESSOR IN AN AMOUNT SUFFICIENT TO
RESTORE SAID DEPOSIT TO THE FULL AMOUNT HEREINABOVE STATED AND LESSEE'S FAILURE
TO DO SO SHALL BE A MALARIAL BREACH OF THIS LEASE. LESSOR SHALL NOT BE REQUIRED
TO KEEP SAID DEPOSIT SEPARATE FROM ITS GENERAL ACCOUNTS. IT LESSEE PERFORMS ALL
OF LESSEE'S OBLIGATIONS HEREUNDER. SAID DEPOSIT, OF SO MUCH THEREOF AS HAS NOT
THERETOFORE BEEN APPLIED BY LESSOR, SHALL BE RETURNED, WITHOUT PAYMENT OF
INTEREST OR OTHER INCREMENT FOR ITS USE. TO LASSOS FOR LESSOR'S OPTION, TO THE
LAST ASSIGNEE, IF ANY, OF LESSEE'S INTEREST HEREUNDER) AT THE EXPIRATION OF THE
TERM HEREOF. AND SLIER LESSEE HAS VACATED PREMISES. NO TRUST RELATIONSHIP IS
CREATED HEREIN BETWEEN LESSOR AND LESSEE WITH RESPECT TO SAID SECURITY DEPOSIT.
office and warehouse for semi conductor equipment
6. Use.
6.1 Use. The Promises shall be used and Occupied only for And RELATED
business or any other use which Is reasonably comparable and for no other
purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Losses that the Premises, In its state existing
on the DATE THAT THE LEASE form commences. but without regard to the use for
which Lessee will use the Promises, does not violate any covenants or
restrictions of record. or any applicable building code. regulation or ordinance
In effect on such Lease term commencement date. In the event It Is determined
that this warranty has been violated. then It shall be the Obligation of the
Lessor. after written notice from Lessee. to promptly, at Lessor's sole cost and
expense. tacitly any such violation. In the event Lessee does not give to Lessor
written notice of the violation of this warranty within six months from the date
that the Lease term commences. the correction of same shall be the obligation of
the Losses at Lessee's sole cost. The warranty contained In this paragraph 6.2
(a) shall be of no force of effect it, prior to the date of this Lease, Lessee
was the owner or occupant of the Promises. and. In such event. Lessee shall
correct any such violation of Lessee's sole cost.
(b) Except as provided In paragraph 6.2(a). Lessee shall. at Lessee's
expense. comply promptly with all applicable statutes, ordinances. rules.
regulations. orders, covenants and restrictions of record. and requirements in
effect during the term or any part of the term hereof. regulating the use by
L03SOO 01 Ins Promises. Lessee shall not use nor permit the use of the Promises
In any manner that will tend to create Waste or a nuisance of. it there shall be
more than one tenant In the building containing the Promises. shall land to
disturb such other tenants.
6.3 Condition of Promises.
(a) Lessor shall deliver the Promises to Lessee clean and free of
debris on Lease commencement date (unless Lessee is already in possession) and
Lessor further warrants to Lessee that the plumbing, lighting, air conditioning
hosting, and loading doors in the Promises shall be in good operating condition
on the Lease commencement date. In the event that It Is determined that this
warranty has bean violated, then it shall be the obligation of Lessor, after
receipt of written notice from Losses setting forth with specificity the nature
of the violation, to promptly, at Lessor's sole cost. rectify such violation.
Lessee's failure to give such written notice to Lessor within thirty (30) days
after the Lease commencement date shall cause the conclusive presumption that
Lessor has complied with all of Lessor's obligations hereunder. The warranty
contained In this paragraph 6.3(a) shall be of no force or effect It prior to
the date of this Lease, Lessee was the owner or occupant of the Premises.
(b) Except as otherwise provided in this Lease. Losses hereby accepts
the Promises In their condition existing as of the Lease commencement date or
the date that Lessee takes Possession of the Promises. whichever is earlier.
subject to all applicable zoning. municipal. county and state laws. ordinances
and regulations governing and regulating the Us* Of the Premises, and any
covenants or restrictions of me" And accepts this Lease subject thereto and to
all matters disclosed thereby and by any exhibits attached hereto. Losses
acknowledges that neither Lessor nor Lessor's agent has made any representation
of warranty as to the present or future suitability of the Promises for the
conduct of Lessee's business.
7. Maintenance, Repairs and Alterations
7.1 Lessee's Obligations. Lessee shall keep in good order. condition and
repair the Promises and every part thereof. structural and non structural.
(whether or not such portion of the Promises requiring repair. or the means of
repairing the same are reasonably or readily accessible to Lessee. and whether
or not the need for such repairs occurs as a result of Lessee's use. any prior
use. the elements or the age of such portion of the Premises) INCLUDING, WITHOUT
limiting the generality of the foregoing. all plumbing. heating. air
conditioning (Lessee shall procure and maintain. at Lessee's expense, an air
conditioning system maintenance contract) ventilating. electrical. lighting
facilities and equipment within the Promises. fixtures, walls (interior and
exterior), foundations, callings, roots (interior and exterior), floors,
windows, doors, late glass and skylights LOCATED within the Promises. and all
landscaping. driveways. parking lots, fences and signs located on the Premises
and sidewalks and parkways adjacent to the Promises.
7.2 Surrender. On the last day of the term hereof, or on any sooner
termination. LOS308 shall surrender the Promises to Lessor in the same condition
as when received, ordinary west and teat excepted, clean and free of debris.
Lessee shall repair any damage to the Promises
<PAGE>
by the installation or removal of Lessee's trade fixtures, furnishings and
equipment. Notwithstanding anything to the contrary otherwise stated in this
Lease, Lessee shall leave the air lines, power panels, electrical distribution
systems. lighting fixtures, space heaters, air conditioning, plumbing and
fencing on the premises in good operating condition.
7.3 Lessor's Rights. It Lessee fails to perform Lessee's obligations under
this Paragraph 7, or under any other paragraph of this Lease. Lessor may at its
option (but shall not be required to) enter upon the Promises alter ton (10)
days' prior written notice to Lessee (except in the case of an emergency, in
which case no notice shall be required). perform such obligations on Lessee's
behalf and put the same in good order, condition and repair, and the cost
thereof together with Interest thereon at the rate of 15% shall become due and
payable as additional rental to Lessor together with Lessee's next rental
Installment.
7.4 Lessor's Obligations. Except for the obligations of Lessor under
Paragraph 6.2(a) and 6.3(a) (relating to Lessor's warranty). Paragraph 9
(relating to destruction of the Promises) and under paragraph 14 (relating to
condemnation of the Promises), it is intended by the parties hereto that Lessor
have no obligation, In any manner whatsoever, to repair and maintain the
Premises nor the building located thereon not the equipment therein, whether
structural or non structural, all of which obligations are intended to be that
of the Lessee under Paragraph 7.1 hereof. Los a expressly waives the benefit of
any statute now or 'hereinafter in effect which would otherwise afford Lessee
the right to make repairs at Less see expense of 10 terminate this Lease because
of Lessor's failure to keep the promises in good order, condition and repair.
7.5 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written consent make any
alterations. improvements, additions. or Utility Installations in. on of whether
or not in excess of $2,500 in cumulative cost. Lessee shall make no change or
alteration 10 the exterior of the Premises no a about the Premises, except for
nonstructural alterations not exceeding $2,500 in cumulative costs during the
term of this Leas In any event, the building(s) on the Premises without Lessor's
prior written consent. As used in this Paragraph 7.5 the term "Utility
Installation*' shall mean carpeting, window coverings, air lines, power panels,
electrical distribution Systems. lighting fixtures. space heaters, air
conditioning. plumbing. and fencing. Lessor may require that Lessee remove any
or all of said alterations, improvements, additions or Utility Installations at
the expiration of the term, and restore the Premises to their prior condition.
Lasso( may require Lessee to provide Lessor, at Lessee's sole cost and expense,
a lien and Completion bond in an amount equal to one and one-hall times the
estimated cost of such improvements, to insure Lessor against any liability lot
mechanic's and materialmen's lions and to insure Completion of the work. Should
Lessee make any alterations. improvements. Additions of Utility Installations
Without the prior approval of Lessor. Lessor may require that Lessee remove any
or all of the same.
(b) Any alterations, improvements, additions or Utility Installations
in, or about the Premises that Lessee shall desire to make and which requires
the consent of the Lessor shall be presented to Lessor in written form, with
Proposed detailed plans. It Lessor shall give its consent. the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies. the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all conditions of said
permit in a prompt and expeditious Manner.
(c) Lessee shall pay, when due. all claims for labor or materials
furnished or alleged to have been furnished to or for Lessee at or for use in
the premises, which claims are or may be secured by any mechanics' or
materialmen's lien against the premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as as Provided by law, If Lessee shall,
In good faith, contest the validity of any such lien. claim Or as Provided by
law, If Lessee shall, In good faith, contest the validity of any such lien.
claim Or at its sole expense defend itself and Lessor against the same and shall
pay and satisfy any, such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Promises, upon the condition
that if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
Indemnifying Lessor against liability for the same and holding the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee 10
pay Lessor's attorneys lees and costs in participating In such action it Lessor
shall decide It Is to Its best Interest to do so.
(d) Unless Lessor requires their removal, as sot forth in Paragraph
7.5(a), all alterations. improvements, additions and Utility Installations
(whether or not such Utility Installations constitute trade fixtures of Lessee).
which may be made on the Premises, shall become the property of Lessor and
remain upon and be surrendered with the Promises at the expiration of the term.
Notwithstanding the provisions of this paragraph 7.5 (d), Lessee's machinery and
equipment, of her than that which is affixed to the Premises so that it cannot
be removed without material damage to the Premises, shall remain the property of
Lessee and may be removed by Lessee subject to the provisions of the Paragraph
7.2.
8.1 Insuring Party. As used In this Paragraph 8, the term "insuring -party"
shall mean the party who has the obligation to obtain the Properly Insurance
(squired hereunder. The insuring patty shall be designated in Paragraph 46
hereof. In the event Lessor Is the insuring party. Lessor shall also maintain
the liability insurance described in paragraph 8.2 hereof, In addition to, and
not In lieu of, the insurance required to be maintained by Losses under said
paragraph 8.2, but Lessor shall not be (squired to name Lessee as an additional
Insured on such policy. Whether the insuring pelf Is the Lessor or the Lessee,
Lessee shall, as additional rent for the Promises, pay the cost of all Insurance
required hereunder, except lot that portion of the cost attributable to Lessor's
liability Insurance coverage In excess of $1,000,000 per occurrence. It Lessor
is the Insuring party LOSSES shall, within ton (10) days following demand by
Lessor, reimburse Lessor for the cost of the Insurance so obtained.
8.2 Liability Insurance. Lessee shall, at Lessee's expense obtain and keep
In force during the term of this Lease a policy of Combined Single Limit, Bodily
Injury and Properly Damage insurance Insuring Lessor and Losses against any
liability arising out of the ownership, use, occupancy or maintenance of the
Promises and all areas appurtenant therein. Such Insurance shall be a combined
single limit policy In an amount not less than $500.000 pat occurrence. The
policy shall insure performance by Lessee of the indemnity provisions of this
Paragraph 8. The limits of said insurance shall not. however, limit the
liability of Lessee hereunder.
8.3 Properly Insurance,
(a) The insuring party shall obtain and keep in force during the form
of this Lease a policy or policies of insurance covering loss or damage to the
Promises, in the amount of the full replacement value thereof, as the same may
exist from time to time, which replacement value is now $750,000.00 but In no
event less than the total amount required by lenders having lions on the
Promises. against all perils included within the classification of lire,
extended coverage, vandalism, malicious mischief, flood (In the event same is
required by a lender having a lion on the Premises), and special extended perils
("all risk" as such term Is used in the insurance industry). Said Insurance
shall provide for payment of loss thereunder to Lessor or to (he holders of
mortgages or deeds of trust on the Premises. The insuring party shall, in
addition. obtain And keep in force during the term of this Lease a policy of
rental value Insurance covering a period of one year. with loss payable to
Lessor, which insurance shall also cover all real estate taxes and insurance
costs for said period. A stipulated value or agreed amount endorsement deleting
the coinsurance provision of the policy shall be procured with said insurance as
well as an automatic Increase in insurance endorsement causing the increase in
annual properly insurance coverage by 2% per quarter. If the Insuring party
shall fail to procure and maintain said Insurance the other party may, but shall
not be required to, procure and maintain the same, but at the expense of Lessee.
It such insurance coverage has a deductible clause, the deductible amount shall
not exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount.
(b) If the Premises are part of a larger building, or if the Premises
are part of a group of buildings owned by Lessor which are adjacent to the
Promises, then Lessee shall pay for any Increase in the property insurance of
such other building or buildings it said Increase if, caused by Lessee's Acts,
omissions, use or occupancy of the Promises.
(c) 11 the Lessor is the insuring party the Lessor will not Insure
Lessee's fixtures, equipment or tenant improvements unless [he tenant
improvements have become a part of the Promises under paragraph 7, hereof. But
if Lessee is the Insuring party the Lessee shall insure its fixtures, equipment
and tenant improvements.
8.4 Insurance Policies. Insurance required hereunder shall be in companies
holding a "General Policyholders Rating" of at least 8 plus. or such other
rating as may be required by a lender having a lien on the Premises, as set
forth in the most current issue of "Best's Insurance Guide". The insuring patty
shall deliver to the other party copies of policies of such insurance of
certificates evidencing the existence and amounts of such insurance with loss
payable clauses as required by this paragraph 8. No such policy shall be
cancelable or subject to reduction of coverage or other modification except
after thirty (30) days' prior written notice to Lessor. It Lessee is the
insuring party Lessee shall, at least thirty (30) days prior to the expiration
of such policies, furnish Lessor with renewals or "binders" thereof, or Lessor
may order such insurance and charge the cost thereof to Lessee, which amount
shall be payable by Lessee upon demand. Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in Paragraph
8.3. 11 Lessee does or permits to be done anything which shall increase the cost
of the insurance policies retorted to in Paragraph 8,3, then Lessee shall
forthwith upon Lessor's demand reimburse Lessor for any additional premiums
attributable to any act or omission or operation of Lessee causing such increase
In the cost of insurance. If Lessor Is the Insuring party, and it the insurance
policies maintained hereunder cover other improvements in addition to the
Promises, Lessor shall deliver to Lessee a written statement setting forth the
amount of any such insurance coal Increase and showing in reasonable detail the
manner In which It has been computed.
8.5 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other and waive their entire right of recovery against the other for
loss or damage arising out of or incident to the perils insured against under
paragraph 8.3, which perils occur in. on or about the Promises. whether due to
the negligence of Lessor or Lessee or their agents, employees, contractors
and/or invitees. Lessee and Lessor shall. upon obtaining the policies of
Insurance required hereunder, give notice to the insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained In THIS LEASE.
8.6 Indemnity. Lessee shall Indemnity and hold harmless Lessor from and
against any and all claims arising from Lessee's use of the Premises, or from
the conduct of Lessee's business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises Or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach of default in the performance of any obligation on
Lessee's part to be performed under the terms of this Lease, or arising from any
negligence of the Lessee. of any of Lessee's agents, contractors, of employees,
and from and against all costs, attorney's fees, expenses and liabilities
incurred in the defense of any such Claim or any action or PROCEEDING BROUGHT
THEREON; AND IN CASE ANY ACTION OR PROCEEDING be BROUGHT AGAINST LESSOR BY
REASON OF ANY SUCH CLAIM, LESSEE upon notice from Lessor shall defend the SAME
AT LESSEE'S EXPENSE by COUNSEL SATISFACTORY TO LESSOR. LESSEE, as A MATERIAL
PART of the consideration to Lessor, hereby assumes all risk of damage to
properly or injury to persons, In, upon or ABOUT THE PREMISES ARISING FROM ANY
CAUSE AND LESSEE hereby waives all claims In respect thereof against Lessor.
8.7 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that Lessor
shall not be liable for Injury to Lessee's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other properly of
Lessee, Lessee's employees. invitees. customers. or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury Is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction of other detects of pipes, sprinklers, wires,
appliances, plumbing. air conditioning or lighting fixtures, or from any other
cause. whether the said damage or injury results from conditions arising upon
the Premises of upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage of Injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable lot any damages arising from any act or
neglect of any other tenant. if any. of the building in which the Premises are
located.
<PAGE>
9 Damage or Destruction.
9.1 Definitions.
(a) "Promises Partial Damage" shall herein mean damage or destruction
to the Promises to the extent that the cost of repair Is less than 50% Of the
then replacement cost of the Premises. "Promises Building Partial Damage" shall
herein mean damage or destruction to the building of which the Premises are a
part to the extent that the cost of repair is less than 50% of the then
replacement cost of such building as a whole.
(b) "Promises Total Destruction" shall herein mean damage or
destruction to the Promises to the extent that the cost of repair is 50% or more
of the then replacement cost of the Premises. "Premises Building. Total
Destruction" shall herein mean damage of destruction to the building of which
the Promises are a part to the extent that the cost of repair is 60% or more of
the than replacement cost of such building as a whole.
(c) "Insured Loss" shall herein mean damage or destruction which was
caused by an event required to be covered by the insurance described in
paragraph 8,
9.2 Partial Damage -Insured Loss. Subject to the provisions of paragraphs
9.4, 9.5 and 9.6, If at anytime during the term of this Lease there is damage
which is an Insured Loss and which falls into the classification of Premises
Partial Damage or Premises Building Partial Damage, then Lessor shall, at
Lessor's expense, repair such damage, but not Lessee's fixtures, equipment or
tenant improvements unless the same have become a part of the Premises pursuant
to Paragraph 7.5 hereof as soon as reasonably possible and this Lease shall
continue In lull force and Affect. Notwithstanding the above, It the Lessee Is
the Insuring party, and It the Insurance proceeds received by Lessor are not
sufficient to effect such repair, Lessor shall give notice to Lessee of the
amount required In addition to the Insurance proceeds to effect such repair.
Lessee shall contribute the required amount to Lessor within ten days after
Lessee has received notice from Lessor of the shortage In the Insurance. When
Lessee shall contribute such amount to Lessor, Lessor shall make such repairs as
soon as reasonably possible and this Lease shall continue in full force and
effect. Lessee shall In no event have any right to reimbursement for any such
amounts so contributed.
9.3 Partial Damage Uninsured Loss. Subject to the provisions of Paragraphs
9.4, 9.5 and 9.6, It at any time during the term of this Lease there is damage
which Is not an Insured Loss and which falls within the classification of
Premises Partial Damage or Premises Building Partial Damage, unless caused by a
negligent or willful act of Lessee (In which event Lessee shall make the repairs
at Lessee's expense), Lessor may at Lessor's option either (1) repair such
damage as soon as reasonably possible at Lessor's expense, In which event this
Lease shall continue In full force and effect, or (11) give written notice to
Lessee within thirty (30) days after the date of the occurrence of such damage
of Lessor's Intention to cancel and terminate this Lease, as of the date of the
occurrence of such damage. In the event Lessor elects to give such notice of
Lessor's intentions to cancel and terminate this Lease, Lessee shall have the
right within ton (10) days after the receipt of such notice to give written
notice to Lessor of Lessee's intention to repair such damage at Lessee's
expense, without reimbursement from Lessor, In which event this Lease shall
continue In full force and effect, and Lessee shall proceed to make such repairs
as soon as reasonably possible. If Lessee does not give such notice within such
10-day period this Lease shall be cancelled and terminated as of the date of the
occurrence of such damage.
9.4 Total Destruction, If at any time during the term of this Lease there
Is damage, whether or not an Insured Loss. (including destruction required by
any authorized public authority), which falls into the classification of
Promises Total Destruction or Promises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction.
9.5 Damage Near End of Term.
(a) 11 at anytime during the last six months of the term of this Lease
there Is damage, whether or not an Insured Loss, which falls within the
classification of Promises Partial Damage, Lessor may at Lessor's option cancel
and terminate this Lease as of the date of occurrence of such damage by giving
written notice to Lessee of Lessor's election to do so within 30 days after the
date of occurrence of such damage.
(b) Notwithstanding paragraph 9.5(a), In the event that Lessee has an
option to EXTEND OR RENEW THIS LEASE, AND the time within which said option may
be exercised has not yet expired, Lassos shall exercise such option, It it Is to
be exercised at all, no later than 20 days after the occurrence of an Insured
Loss falling within the classification of Promises Partial Damage during the
last six months of the term of this Lease. It Lessee duly exercise such option
during said 20 day period, Lessor shall. at Lessor's expense. repair such damage
as soon AS reasonably possible and this Lease shall continue in lull force and
effect, 11 Lessee falls to exercise such option during said 20 day period, then
Lessor may at Lessor's option terminate and cancel this Lease as of the
expiration of said 20 day period by giving written notice to Lessee of Lessor's
election to do so within 10 days after the expiration of said 20 day period,
notwithstanding any term or provision In the grant of option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described In paragraphs 9.2 or 9.3, and
Lessor or Lessee repairs or restores the Premises pursuant to the provisions of
this Paragraph 9, the tent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated proportion to the degree
to which Lessee's use of the Premises Is Impaired.. Except for abatement of
tent, It any. Lessee shall have no claim make against Lessor lot any damage
suffered by reason of any such damage, destruction, repair or restoration.
(b) 11 Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence such repair or
restoration within 90 days after such obligations shall accrue, Lessee may at
Lessee's option cancel and terminate this Lea so b giving Lessor written notice
of Lessee's election to do so at anytime prior to the commencement of such
repair or restoration. In such event this ease shall terminate as of the dole of
such notice.
9.7 Termination -Advance Payments. Upon termination of this Lease pursuant
to this Paragraph 9, an equitable adjustment shall be made concerning advance
tent and any advance payments made by Lessee to Lessor. Lessor shall, In
addition, return to Lessee so much of Lessee's security deposit as has not
theretofore been applied by Lessor.
9.8 Waiver. Lessor and Lessee waive the provisions Of any statutes which
relate to termination Of LEASES when leased properly is destroyed and agree that
such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessee shall pay the real property tax, as defined
In paragraph 10.2, Lease. All such payments shall be made at least ten (10) days
prior to the delinquency date of such payment Lessee shall promptly furnish
Lessor with satisfactory evidence that such taxes have been paid. 11 any such
taxes paid by Lessee shall cover any period of time prior to or alter the
expiration of the term hereof, Lessee's share of such taxes shall be equitably
prorated to cover only the period of time within the tax fiscal year during
which this Lease shall be In effect, and Lessor shall reimburse Lessee to the
extent required. If Lessee shall fail to pay any such taxes, Lessor shall have
the right to pay the same, In which case Lessee shall repay such amount to
Lessor with Lessee's next rent installment together with Interest at the rate of
15%
10.2 Definition of "Real Properly Tax". As used herein, the term "real
property tax" shall Include any form of real estate tax or assessment, general,
special, ordinary of extraordinary, and any license fee, commercial rental tax.
Improvement bond or bonds, levy or lax (other than inheritance, personal income
or estate taxes) Imposed on the Promises by any authority having the direct or
indirect power to tax, including any city, slate or federal government, or any
school, agricultural, sanitary, fire, street, drainage or other improvement
district thereof, as against any legal or equitable interest of Lessor In the
Premises or In the real property of which the Promises are 'a part, as against
Lessor's right to rent of other income therefrom, and as against Lessor's
business of leasing the Promises. The term "real property tax" shall also
include any tax, fee, levy, assessment or charge (I) in substitution of,
partially or totally, any tax, fee, levy, assessment or charge hereinabove
included within the definition of " real property tax," or (ii) the nature of
which was hereinbefore Included within the definition of "real property tax," or
(III) which Is imposed for a service of fight not charged prior to June 1, 1978,
or, 11 previously charged, has been Increased since June 1, 1978, or (iv) which
is imposed as a result of a transfer, either partial or total, of Lessor's
Interest in the Premises or which Is added to a tax or charge hereinbefore
Included within the definition of real property tax by reason of such transfer,
or (v) which Is Imposed by reason of this transaction, any modifications or
changes hereto, of any transfers hereof
10.3 Joint Assessment. it the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
lot all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in [he assessor's work shoots Of such other Information as may-be
reasonably available. Lessor's reasonable determination thereof, in good faith,
shall be conclusive.
10.4 PERSONAL PROPERTY TAXES.
(a) Lessee shall pay prior to delinquency all taxes assessed against
and levied upon trade fixtures, furnishings. equipment and all other personal
property of Lessee contained In the Promises or elsewhere. When possible, Lessee
shall cause said trade fixtures. furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
(b) 11 any of LESSEE'S said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee
within 10 days alter receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. Utilities. Lessee shall pay lot all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Promises. together
with any taxes thereon. If any such services are not separately metered to
Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor of
all charges jointly metered with other promises.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest In this Lease or in the Promises,
without Lessor's prior written consent, which Lessor shall not unreasonably
withhold. Lessor shall respond to Lessee's request for consent hereunder in a
timely manner and any attempted assignment. transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease.
12.2 LEASES AFFILIATE. Notwithstanding the provisions of paragraph 12.1
hereof, Lessee may assign or sublet the Promises. of any portion thereof without
Lessor's Consent, to any corporation which controls, Is controlled by or It
UNDER COMMON CONTROL WITH Lessee, or to any corporation resulting from the
merger or consolidation with Lessee, or to any person or entity which acquires
all the assets of Lessee as a going concern of the business that is being
conducted on the Promises, provided that said assignee assumes. In full, the
obligations of Lessee under this Lease. Any such assignment shall not in any
way, affect or limit the liability of Lessee under the terms of this Lease even
it alter such assignment or subletting the terms of this Lease are materially
changed or altered without the consent of Lessee, the consent of whom shall not
be necessary.
12.3 No Release of Lessee. Regardless of Lessor's consent, no subletting or
assignment shall release Lessee of Lessee's obligation or alter the primary
liability of Lessee to pay the ten; and to perform all other obligations to be
performed by Lessee hereunder. The acceptance of rent by Lessor from any other
person shall not be deemed to be a waiver by Lessor of any provision hereof.
Consent to one assignment or subletting shall not be deemed consent to any
subsequent assignment or subletting. In the event of default by any assignee of
Lessee or any successor of Lessee, In the performance of any of the terms
hereof, Lessor may proceed directly against Lessee without the necessity, of
exhausting remedies against said assignee. Lessor may consent to subsequent
assignments or subletting of this Lease or amendments of modifications to this
Lease with assignees.
<PAGE>
of Lessee, without notifying Lessee, or any successor of Lessee, and without
obtaining Its or their consent thereto and such action shall not relieve Lessee
of liability under this Lease,
12.4 Attorney's Fees. In the event Lessee shall assignor sublet the
Premises or request the consent of Lessor to any assignment or subletting or it
Lessee shall request the consent of Lessor lot any act Lessee proposes to do
then Lessee shall pay Lessor's reasonable attorneys 1003 Incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.
13. Defaults; Remedies.
13.1 Defaults The occurrence of any one or more of the following events
shall constitute a material default and breach of this Lease by Lessee:
(a) The vacating or abandonment of the Promises by Lessee.
(b) The failure by Lessee to make any payment of rent or any other
payment required lobe made by Lessee hereunder. as and when due, where such
failure shall continue lot a period of three days after written notice [hereof
from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to
Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice
to Pay Rent or Quit shall also constitute the notice requited by this
subparagraph.
(c) The failure by Lessee to observe or perform any of the covenants,
conditions or provisions of this Lease so to be observed or performed by Lessee,
other than described in paragraph (b) above. where such failure shall continue
for a period of 30 days after written notice thereof from Lessor to Lessee;
provided, however, that It the nature of Lessee's default Is such that more than
30 days ate reasonably required for its cure. then Lessee shall not be deemed to
be in default It Lessee commenced such cure within said 30-day period and
thereafter diligently prosecutes such cure to completion.
(d) (i) The making by Lessee of any general arrangement or assignment
for the benefit of creditors: (ii) Lessee becomes a "debtor" as defined in 11
U.S.C. ss. 101 of any successor statute thereto (unless, In the case of a
petition filed against Lessee, the same Is dismissed within 60 days): (iii) [he
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
where possession Is not restored to Lessee within 30 days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Lessee's
assets located at the Premises or of Lessee's Interest In this Lease, where such
seizure is not discharged within 30 days Provided, however. in the event that
any provision of this paragraph 13.1 (D) IS contrary to any applicable law. such
provision shall be of no force or effect.
(a) The discovery by Lessor that any financial statement given to
Lessor by Lessee, any assignee of Lessee. any subtenant of LESSEE. any successor
in interest of Lessee or any guarantor of Lessee's obligation hereunder, and any
of them, was materially false.
13.2 Remedies. In the event of any such material default or breach by
Lessee, Lessor may at any time thereafter, with or without notice or demand and
without limiting Lessor in the exercise of any right or remedy which Lessor may
have by reason of such default or breach:
(a) Terminate Lessee's fight to possession of the Premises by any
lawful means, In which case this Lease shall terminate and Lessee shall
immediately surrender tender possession of the Premises to Lessor, In such event
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Premises; expenses of retailing, including
necessary renovation and alteration of the Premises, reasonable attorney's fees,
and any real estate commission actually paid; the worth at the time of award by
the court having jurisdiction thereof of the amount by which the unpaid rent for
the balance of the term alter the time of such award exceeds the amount of such
rental loss for the same period the Lessee proves could be reasonably avoided;
that portion of the leasing commission paid by Lessor pursuant to Paragraph 15
applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession In which case this Lease
shall continue In effect whether or not Lessee shall have abandoned the
Promises, In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease. Including the right to recover the font as
it becomes due hereunder,
(c) Pursue any other remedy now or hereafter available to Lessor under
the laws or judicial decisions of the slate wherein the Promises are located.
Unpaid installments of rent and other unpaid monetary obligations of LESSEE
under the terms of this Lease shall bear Interest from the date due at the
maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be In default unless Lessor (site
to perform obligations required of Lessor within a reasonable time, but in no
event later than thirty (30) days after written notice by Lessee to Lessor and
to the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have theretofore been furnished to Lessee In writing,
specifying wherein Lessor has failed to perform such obligation provided I
however, that If the mature of Lessor's obligation Is such that more than thirty
(30) days are required for performance than Lessor shall not be in default If
Lessor commences performance within such 30-day period and thereafter diligently
prosecutes the same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited 10, processing
and accounting charges, and late charges which may be Imposed on Lessor by the
terms of any mortgage or trust dead covering the Promises. Accordingly, it any
installment of rent or any other sum due from Lessee shall not be received by
Lessor's designee within ten (10) days after such amount shall be due, then,
without any requirement for notice to Lessee. Lessee shall pay to Lessor a late
charge equal to 6% of such overdue amount, The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Lessor WILL
incur by reason of late payment by Lessee. Acceptance of such late charge by
Lessor shall In no event constitute a waiver of Lessee's default with respect to
such overdue amount, nor prevent Lessor from exercising any of the other fights
and remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive Installments of
rent, then tent shall automatically become due .and payable quarterly in
advance, rather than monthly, notwithstanding paragraph 4 or any other provision
of this Lease to the contrary.
13.5 Impounds. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) installments of sent of any other
monetary obligation of Lessee under the terms of this Lease, Lessee shall pay to
Lessor, it Lessor shall so request, in addition to any other payments required
under this Lease, a monthly advance installment, payable at the same time as the
monthly rent as estimated by Lessor, FOR REAL PROPERTY Tax and insurance
expenses on the Premises which are payable by Lessee under the terms of this
Lease. SUCH FUND SHALL BE ESTABLISHED to insure a payment when due, before
delinquency, of any or all such real property taxes and insurance premiums. If
the amounts paid to Lessor by Lessee under the provisions of this paragraph are
Insufficient to discharge the obligations of Lessee to pay such real property
taxes and insurance premiums as the same become due, Lessee shall pay to Lessor
upon Lessor's demand, such additional sums necessary to pay such obligations.
All moneys paid to Lessor under this paragraph MAY be intermingled with other
moneys of Lessor and shall not bear Interest. In the event of a default In the
obligations of Lessee to perform under this Lease, then any balance remaining
from funds paid to Lessor under the provisions of this paragraph MAY, AT THE
OPTION OF LESSOR, BE APPLIED TO THE PAYMENT OF ANY MONETARY DEFAULT OF LESSEE IN
LIEU OF BEING APPLIED TO THE PAYMENT OF REAL PROPERTY TAX AND INSURANCE
PREMIUMS.
14. Condemnation. I (the Promises or any portion thereof are taken under the
power of eminent domain, or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the dale the condemning authority lakes title or
possession, whichever first occurs, 11 more than 10% of the floor area of the
building on the Premises, or more than 25% of the land area of the Premises
which is no( occupied by any building, is taken by condemnation, Lessee may, at
Lessee's option, to be exercised in writing only within Ion (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice, within ten (10) days allot the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease In accordance
with the foregoing. this Lease shall remain In full force and effect as to the
portion of the Premises remaining, except that the rent shall be reduced In the
proportion that the floor area of the building taken bears to the total floor
area of the building situated on the Promises. No reduction of rent shall occur
If the only Area taken Is that which does not have a building located thereon.
Any award for the taking of all or any part of the Promises under the power of
eminent domain or any payment made under threat of the exorcise of such power
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages: provided, however. that Lessee shall be entitled
to any award for loss of or damage to Lessee's trade fixtures and removable
personal property. In the event that this Lease Is not terminated by reason of
such condemnation. Lessor shall to the extent of severance damages received by
Lessor in connection with such condemnation, repair any damage to the Promises
caused by such condemnation except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall pay any amount In EXCESS of
such severance damages required to complete such repair,
15. Broker's Fee.
(a) Upon execution of this Lease by both parties. Lessor shall pay to J
& J Commercial Properties, Inc. Licensed real estate broker(s). a fee as set
forth in a separate agreement between Lessor and said broker(s) or in the event
there is no separate agreement between Lessor and said broker(s) the sum of $
separate agreement for brokerage services rendered by said broker(s) to Lessor
in this transaction.
(b) Lessor further agrees that if Lessee exercises any Option as
defined in paragraph 39.1 of this Lease, which Is granted to Lessee under this
Lease, or any subsequently granted option which is substantially similar to an
Option granted to Lessee under this Lease, or if Lessee acquires any rights to
the Premises or other premises described in this Lease which are substantially
similar to what Lessee would have acquired had an Option herein granted to
Lessee been exercised, or if Lessee remains in possession of the Premises alter
the expiration of the form of this Lease after having failed to exercise an
Option, or It said broker(s) are the procuring cause of any other lease or sale
entered into between the parties pertaining to the Premises and/or any adjacent
property In which Lessor has an Interest, then as to any of said transactions,
Lessor shall pay said broker(s) a fee In accordance with the schedule of said
broker(s) In effect at the time of execution of this Lease.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but also
on behalf of any person, corporation, association, or other entity having an
ownership interest In said (eat property of any part thereof, when such lee Is
due hereunder, Any transferee of Lessor's interest in this Least, whether such
transfer Is by agreement or by operation of law, shall be deemed to have assumed
Lessor's obligation under this Paragraph 15. Said broker shall be a third party
beneficiary of [he provisions of this Paragraph 15.
16. Estoppel Certificate.
(a) Lessee shall at any time upon not less than ten (10) days' prior
written notice from Lessor execute, acknowledge and deliver to Lessor a
statement in writing (1) certifying that this Lease Is unmodified and In full
force and effect (or, It modified stating the nature of such modification and
certifying that this Lease, as so modified, Is in full force and effect) and the
date to which the rent and other charges are paid In advance, if any, and (ii)
acknowledging that there are not, to Lessee's knowledge, any uncured defaults on
the part of Lessor hereunder, or specifying such defaults If any are claimed.
Any such statement may be conclusively relied upon by any prospective purchaser
or encumbrancer of the Premises.
(b) At Lessor's option, Lessee's failure to deliver such statement
within such time shall be a material breach of this Lease or shall by -Wag
<PAGE>
conclusive upon Lessee (I) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (it) that there a no
uncured defaults In Lessor's performance, and (ill) that not more than one
month's (ant has been paid In advance or such failure may I considered by Lessor
as a default by Lessee under this Lease.
(c) If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessee hereby agrees to deliver to any lender purchaser
designated by Lessor such financial statements of Lessee as may be reasonably
required by such lender or purchaser. Such statement shall include the Past
111180 years' financial statements of Lessee. All such financial statements
shall be received by Lessor and such lender purchaser in confidence and shall be
used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners at the time In question of the fee title or a lessee Interest in
a ground lease of the Promises, and except as expressly provided In Paragraph
15, In the event of any transfer of such title or interest Lessor herein named
(and in case of any subsequent transfers then the grantor) shall be relieved
from and after the dais of such transfer of a LIABILITY AS respects Lessor's
obligations thereafter to be performed, provided a fund In the hands of Lessor
or the then grantor at the time such transfer, in which Lessee has an Interest,
shall be delivered to the grantee. The obligations contained In this Lease to be
performed by Lessee shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of ownership.
18. SeverabilIity, The Invalidity of any provision of this Lease as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof,
19. Interest on Past-due Obligations. Except as expressly herein provided, any
amount due to Lessor not paid when due shall bear interest at the rate of 15%
from the date due. Payment of such Interest shall not excuse or cure any default
by Lessee under this Lease provided, however, that interest shall not be payable
on late charges incurred by Lessee nor on any amounts upon which late charges
are paid by Lessee.
20. Time of Essence. Time is of the essence.
21. Additional Rant. Any monetary obligations of Lessee to Lessor under the
terms of this Lease shall be deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. NO prior
agreement or understanding pertaining to any such matter shall be effective.
This Lease maybe modified In writing only, signed by the parties in Interest at
the time of the modification, Except as otherwise stated In this Lease, Lessee
hereby acknowledges that neither the (as estate broker listed In Paragraph 15
hereof nor any cooperating broker on this transaction not the Lessor or any
employees or agents of any of said persons has made any oral or written
warranties or representations to Lessee relative 19 the condition or use by
Lessee of said Premises and Lessee acknowledges that Losses assumes all
responsibility regarding the Occupational Safety Health Act. the legal use and
adaptability of the Premises and the compliance thereof with all applicable laws
and regulations In effect DURING THE TERM OF THIS LEASE EXCEPT AS OTHERWISE
SPECIFICALLY STATED in this Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be In
writing and me be given by personal delivery or by certified mail, and it given
personally or by mail, shall be deemed sufficiently given If addressed to Lessee
or to Lessor at the address noted below the signature of the respective parties,
as the case may be. Either party may by notice to the other specify a different
address for notice purposes except that upon Lessee's taking possession of the
Promises, the Premises shall constitute Lessee's address for notice purposes. A
copy of all notices required or permitted to be given to Lessor hereunder shall
be concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by notice to Lessee.
24. Waivers. NO waiver by Lessor or any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent to
or approval of any, subsequent act by Lessee. The acceptance of rent hereunder
by Lessor shall not boa waiver of any preceding breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular rent so
accepted, regardless of Lessor's knowledge It such preceding breach at the lime
of acceptance of such rent,
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a "short form" memorandum of this
Lease for recording purposes.
26. Holding Over. It Lessee, with Lessor's consent, remains In possession of the
Premises or any part thereof after the expiration of the term hereof, such
occupancy shall be a tenancy from month to month upon all the provisions of this
Lease pertaining to the obligations of Lessee, but all options and rights of
first refusal, it any, granted under the terms of this Lease shall be deemed
terminated and be of no further effect during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law at in equity.
28. Covenants and Conditions. Each provision of this Lease per formable by
Lessee shall be deemed both a covenant and a condition.
29. Binding Effect,, Choice of Low. Subject to any provisions hereof restricting
assignment or subletting by Lessee and subject to the provisions of Paragraph
17, this Lease shall bind the par ties, their personal representatives,
successors and assigns. This Lease shall be governed by the laws of the Slate
wherein the Promises are located.
<PAGE>
30. SUBORDINATION.
(a) This Lease. at Lessor's option, shall be subordinate to any ground
lease, mortgage, dead of trust, or any other hypothecation or security now or
hereafter placed upon the real properly of which the Premises are a part and to
any and all advances made on the security thereof and to all renewals,
modifications, consolidations. replacements and extensions thereof.
Notwithstanding such subordination. Lessee's fight to quiet possession of the
Promises shall not be disturbed if Lessee Is not in default and so long as
Lessee shelf pay the tent and observe and perform all of the provisions of this
Lease, unless this Lease Is otherwise terminated pursuant to its terms. 11 any
mortgagee, trustee or ground lessor shall elect to have this Lease prior to the
lion of its mortgage, dead of trust or ground lease. and shall give written
notice thereof to Lessee. this Lease shall be deemed prior to such mortgage,
dead of trust, or ground lease, whether this Lease is dated prior or subsequent
to the date of said mortgage, deed of trust or ground lease or the date of
recording thereof.
(b) Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be, Lessee's failure to
execute such documents within 10 days after written demand shall constitute a
material default by Lessee hereunder, or, at Lessor's option, Lessor shall
execute such documents on behalf of Lessee as Lessee's attorney-in- fact. Lessee
does hereby make, constitute and Irrevocably appoint Lessor as Lessee's
attorney-In-fact and In Lessee's name. place and $lead, to execute such
documents in accordance with this paragraph 30(b),
31. Attorney's Fees. If either party or the broker named herein brings an action
to enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the court. The
provisions of this paragraph shall Inure to the benefit of the broker named
herein who seeks to enforce a right hereunder.
32. Lassoes Access. Lessor and Lessor's agents shall have the right to enter the
Promises at reasonable times for the purpose of inspecting the same showing the
same to prospective purchasers, lenders, or lessees, and making such
alterations, repairs, Improvements or additions to the Premises or to the
building of which they are a part as Lessor may deem necessary or desirable.
Lessor may at any time place on or about the Premises any ordinary "For Sale"
signs and Lessor may at any time during the last 120 days of the term hereof
place on or about the Premises any ordinary "For Lease" signs, all without
rebate of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct. nor permit to be conducted, either
voluntarily or Involuntarily, any auction upon the Promises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary In this Lease, Lessor shall riot be obligated to exercise any standard
of reasonableness In determining whether to grant such consent.
34. Signs. Lessee shall not place any sign upon the Promises without Lessor's
prior written consent except that Lessee shall have the right, without the prior
permission of Lessor to place ordinary and usual for rent of sublet signs
thereon.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to Lessor
Of Any or all of such subtenancies.
36. Consents. Except for paragraph 33 hereof, wherever In this Lease the consent
of one party Is required to an act of the other party such consent shall not be
unreasonably withheld.
37, Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38 Quiet Possession, Upon Lessee paying the rent for the Premises and observing
and performing all of the covenants, conditions and PROVISIONS ON LESSEE'S part
to be observed and PERFORMED HEREUNDER, LESSEE SHALL HAVE quiet possession of
the Promises for the entire term hereof subject to all of the provisions of this
Lease. The Individuals executing this Lease on behalf of Lessor represent and
warrant to Lessee that they are fully authorized and legally capable of
executing this Lease on behalf of Lessor And that such execution is binding upon
all parties holding an ownership Interest in the Premises.
39. Options.
39.1 Definition, As used In this paragraph the word "Options" has the
following meaning: (1) the right or option to extend the term of this Lease of
to renew this Lease or to extend or renew any lease that Lessee has On other
properly of Lessor (2) the option or tight 01 first refusal 10 lease the
Premises or the right of first offer to lease the Premises or the right (it
first refusal to lease other property of Lessor or the right of first offer to
lease other property of Lessor; (3) the right or option to purchase the
Promises, or the tight of first refusal to purchase the Promises, or the right
of first offer to purchase the Premises or the right of option to purchase other
properly of Lessor, or the fight of first refusal 10 purchase other property of
Lessor of the right of first offer to purchase other properly of Lessor.
<PAGE>
39.2 Options Personal. Each Option granted to Lessee in this Lease are
personal to Lessee and may not be exercised or be assigned voluntarily or
Involuntarily. by or to any person or entity other than Lessee, provided,
however, the Option maybe exercised by or assigned loan) Losses Affiliate as
defined In paragraph 12.2 of this Lease, The Options herein granted to Lessee
are not assignable separate and apart from this Lease,
39.3 Multiple Options. In the event that Lessee has any multiple options to
extend or renew this Lease a later option cannot be exercised unless the prior
option 10 extend or renew this Lease has been so exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option, notwithstanding
any provision In the grant of Option to the contrary. (I) during the time
commencing from the date Lessor gives to Lessee a notice of default pursuant to
paragraph 13. 1 (b) or 13. 1 (c) and continuing until the default alleged In
said notice of default Is cured, or (11) during the period of lime commencing on
the day after a monetary obligation to Lessor Is due from Lessee and unpaid
(without any necessity for notice thereof to Lessee) continuing until the
obligation Is paid, or (III) at any lime after in event of default described In
paragraphs 13.1 (a), 13. 1 (d), or 13.1 (e) (without any necessity of Lessor to
give notice of such default to Lessee). or (iv) in the event that Lessor has
given to Losses three or more notices of default under paragraph 13. 1 (b),
where a Into charge has become payable undo paragraph 13.4 for each of such
defaults, or paragraph 13.1 (c), whether or not the defaults ore cured, during
the 12 month period prior to the time that Losses Intends to exercise the
subject Option.
(b) The period of lime within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's Inability to exercise an
Option because of the provisions of paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect. notwithstanding Lessee's due and
timely exercise of the Option, If, after such exercise and during the term of
this Lease. (1) Losses tails to pay to Lessor a monetary obligation of Losses
for a period of 30 days after such obligation becomes due (without any necessity
of Lessor to give notice thereof to Lessee), or (ii) Lessee fails to commence to
cure a default specified In paragraph 13.1 (c) within 30 days after the dale
that Lessor gives notice to Lessee of such default and/or Lessee falls
thereafter to diligently prosecute said cure to completion. or (III) Lessee
commits a default described In paragraph 13. 1 (a). default or 13. 1 (a)
(without any necessity of Lessor to give notice of such default to Losses). or
(iv) Lessor gives to Lessee three or more notices of de suit under paragraph 13.
1 (b), where a late charge becomes payable under paragraph 13.4 for each such
default, or paragraph 13. 1 (c). whether or not the defaults are cured.
40. Multiple Tenant Building In the event that the Premises are part of a larger
building or group of buildings then Lessee agrees that 11 will abide by. keep
and observe all reasonable rules and regulations which Lessor may make from lime
to lime for the management, safety. cafe. and cleanliness of the building and
grounds, the parking of vehicles and the preservation of good order therein as
well as for the convenience of other occupants and tenants of the building. The
violations of any such rules and regulations shall be deemed a malarial breach
of this Lease by Losses.
41. Security Measures. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not Include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of Lessee, its agents and
invitees from acts of third parties. 1
42. Easements. Lessor reserves to Itself (he right, from time I of time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so long
so such easements, rights, dedications, Maps and restrictions do not
unreasonably Interfere with the use of the Promises by Lessee. Losses shall sign
any of the aforementioned documents upon request of Lessor and failure to do so
shall constitute a material breach of this Lease.
43. Performance Under Protest. It at any time a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the provisions
hereof, the party against whom the obligation to pay the money Is asserted shelf
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment, and there shall survive the right on the part
of said party to Institute suit for recovery of such sum. 11 It shall be
adjudged that there was no legal obligation on the a part of said party to pay
such sum or any part thereof. said party shall be entitled to recover such sum
or so much thereof as It was not legally required to pay under the provisions of
this Lease.
44, Authority. It Losses Is a corporation. trust. or general or limited
partnership. each Individual executing this Lease on behalf of such entity
represents and warrants that he or she Is duly authorized to execute and deliver
THIS LEASE on behalf of said entity. It Lessee is a corporation, trust of
partnership, Losses shall. within thirty (30) DAYS AFTER EXECUTION OF THIS
LEASE. deliver to Lessor evidence of such authority satisfactory to Lessor.
45. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. Insuring Partly. The Insuring party under this lease shall be the Lessor
47. Addendum. Attached hereto Is an addendum or addenda containing paragraphs 48
through 58 which constitutes a part of this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND
EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION 08 BY THE REAL
ESTATE BROKER 08 ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY.
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO: THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE.
THE PARTIES HERETO HAVE EXECUTED THIS LEASE, AT THE PLACE ON THE DALES SPECIFIED
IMMEDIATELY ADJACENT I* their respective signatures.
Executed at ROBERT COLMAN TRUST
--------------------------- -----------------------------------
on By
------------------------------------ --------------------------------
Address By Robert Colman, Trustee
-------------------------------- --------------------------------
"LESSOR" (Corporate seal)
--------------------------------
Executed at ACCORD SEMICONDUCTOR EQUIPMENT
---------------------------- --------------------------------
GROUP- INC.
TRAVIS WILSON, INDIVIDUALLY
on TERRIE WILSON INDIVIDUALLY
------------------------------------
By /s/ Travis Wilson 8/19/94
--------------------------------
Travis Wilson, President
By /s/ Travis Wilson 8/19/94
--------------------------------
Travis Wilson, Individually
By /s/ Terrie Wilson 8/19/94
--------------------------------
Terrie Wilson, Individually
<PAGE>
GUARANTEE OF LEASE
THEREAS a certain Lease of even date herewith has been, or will be,
executed by and between ROBERT COLMAN TRUST therein and herein referred to as
"Landlord", and TRAVIS WILSON INDIVIDUALLY AND AS HUSBAND AND WIFE therein
referred to as "Tenant", covering certain premises in the City of Tempe, County
of _Maricopa State of Arizona; and
WHEREAS, (lie Landlord under said Lease requires as a condition to its
execution or said Lease that the undersigned guarantee the [TILL performance of
the obligations of Tenant (hereunder; and
WHEREAS, the undersigned is desirous THAT LANDLORD ENTER SAID LEASE
WITH TENANT.
NOW, THEREFORE in consideration of (lie execution of said Lease by
Landlord, the undersigned hereby unconditionally g the [TILL performance of
cacti and all of the terms, covenants and conditions of said Lease to be kept
and performed by said Tenant, including the payment of all rentals and other
charges to accrue thereunder. The undersigned further agrees as follows:
1. THIS covenant and agreement on its part shall continue in favor of
the Landlord notwithstanding any extension, modification or alteration of said
Lease entered into by and between the parties thereto, or their successors or
assigns, or notwithstanding any assignment of said Lease, with or without the
consent of the Landlord, and no extension, modification, alteration of (lie
above referred to Lease shall in any manner release or discharge the undersigned
and it does hereby consent thereto.
2. This Guarantee will continue unchanged by any bankruptcy,
reorganization or insolvency of Tenant or any successor or assignee thereof or
by any disaffirmance or abandonment by a trustee of Tenant.
3. Landlord may, without notice, assign this GUARANTEE OF LEASE IN
WHOLE OR IN PART, AND no assignment or transfer of the Lease shall operate to
extinguish or diminish the liability of the undersigned hereunder,
4. The liability of (lie undersigned under this Guarantee of Lease
shall be primary; and III all), right of action which shall accrue to Landlord
under the Lease, Landlord may, at its Option, proceed against the undersigned
without having commenced any action, or having obtained against the
5. The undersigned shall pay Landlord's reasonable attorneys' fees and
all costs and other expenses incurred in any collection or attempted collection
or in any negotiations relative to (lie obligations hereby granted, or in
enforcing this Guarantee of Lease against the undersigned, individually and
jointly.
6. The undersigned dues hereby waive notice of any demand by the
Landlord, as well as any notice of default in the payment of rent or any other
amount contained or reserved in (lie Lease.
7. The use of the singular herein shall include the plural. The
obligation of two or more parties shall be joint and several. The terms and
provisions of this Guarantee shall be binding upon and inure to the benefit of
the respective successors and assigns of the parties herein named. I
WITNESS WHEREOF, the undersigned has caused this Guarantee to be
executed this day of August , 1994
GUARANTOR:
TRAVIS WILSON AND TERRIE WILSON
SON
By /s/ Travis Wilson
--------------------------------
Travis Wilson,
By /s/ Terrie Wilson
--------------------------------
Terrie Wilson,
Address:
3834 Winsong Drive
Phoenix, AZ 85044
(602) 759-7147
<PAGE>
ADDENDUM "A"
This Addendum, including paragraphs 48 through 58, is made to that certain Lease
Agreement dated August 18, 1994 by and between Robert Colman Trust ("Lessor")
and Accord Semiconductor Equipment Group, Inc., and Arizona corporation and
Travis Wilson and Terrie Wilson, Individually ("Lessee"), and is made an
integral part thereof. In the event of a conflict between the Lease Agreement
and this Addendum, this Addendum shall prevail.
48. RENTAL SCHEDULE
Months 1 -36 = $5,880.00/month + net charges + tax
Months 37 -48 = $3,160.00/month + net charges + tax
Months 49 -60 = $6,440.00/month + net charges + tax
49. EARLY OCCUPANCY.
It is understood and agreed by both parties that it is the intent of the
Landlord to allow the Tenant occupancy of the leased premises on August 19,
1994. From the date of occupancy until September 30, 1994, no rent shall be paid
by Tenant. From October 1, 1994, rental shall be paid as provided for in the
Lease Agreement. All of the covenants and conditions of the Lease shall be
binding upon both parties from the actual date of occupancy.
50. TENANT IMPROVEMENTS.
Lessor will, at Lessor's sole cost and expense, clean the offices, windows,
restrooms and sweep the warehouse floor.
51. PARKING.
Lessee shall be entitled to park in common with other Lessees. Lessee agrees not
to overburden the parking facilities and agrees to cooperate with Lessor and
other Lessees in the use of parking facilities. Lessee shall be assigned 50
parking spaces, including 12 covered spaces. Lessee agrees to cooperate with
Lessor in the use of parking facilities. There shall be no overnight storage of
vehicles or trailers in the parking areas or outside of premises. Lessor may
remove vehicle from property after a three (3) day notice to do so has been
posted on vehicle. lessee shall bear the cost of such removal.
52. OTHER.
1. Lessor will warrant all electrical, plumbing, mechanical and HVAC
equipment for the first 45 days of this lease term.
2. Lessee agrees to obey all rules and regulations of the Association,
including but not limited to all assessments and any other charges that
may be imposed on Lessee by the Association.
<PAGE>
53. TAXES AND INSURANCE
Notwithstanding the above, lessor and Lessee agree that Lessor shall pay for
property taxes when due for fire and liability insurance, when due, and monthly
landscaping costs. Lessee agrees to reimburse Lessor by paying Lessor an
additional $1,526.5 per month plus applicable taxes during the term of this
Lease. Lessor agrees that within sixty (60) days after each anniversary date of
this Lease, to give an accounting of the above expenses, and, if the above
monthly payment is in excess of the actual amount, reimburse Lessee. Lessee
agrees that if said amount is less than the actual costs, to reimburse Lessor
the balance due within fifteen (15) days of receipt of said accounting. At this
time, estimated annual taxes are $12,735. , estimated annual insurance is
$2,583.00 and annual landscaping cost is $3,000.00, thus monthly payments
beginning October 1, 1994 for the above expenses shall be $1,526.5 plus
applicable taxes.
Lessor gives Lessee the right, at Lessee's expense, to protest property taxes.
In the event Lessee fails to PERFORM any of the above provisions, such failure
will constitute a material breach of the Lease and-in addition to Lessor's other
remedies Lessor may use said security deposit of $25,000.411 to compensate for
any damages which Lessor may suffer by reason of Lessee's default.
Insurance policies purchased be, Lessor under this paragraph 53 must be
reasonably acceptable to Lessee. In the event Lessee gives notice to Lessor in
writing stating that an insurance policy is unacceptable and the reasons
therefore, Lessee shall have the right to obtain a replacement insurance policy
in accordance with paragraph 6. Lessor shall continue to make the payments on
the replacement insurance policy and the amount of the insurance payments due
under this paragraph 53 shall be modified accordingly. In the event the services
provided by the landscaping contractor hired be, Lessor are not reasonably
acceptable to Lessee, Lessor, after notice from Lessee, will, as soon as
practicable, replace the landscaping contractor.
55. STRUCTURAL INTEGRITY OF BUILDING.
Lessor warrants that the Premises have no material structural defect which would
have a material adverse effect on Lessee's ability to occupy the Premises for
the duration of the Lease and any option period thereto; provided, however, that
any structural defect caused by action of Lessee shall not be included in this
Warranty.
56. INDEMNITY.
In the event that the Premises are determined by inspection of the City of Tempe
to be structurally unsound or to materially violate building code, regulation or
ordinance, Lessee shall have the right to terminate the Lease and Lessor will
indemnify Lessee for all move-in and move-out costs. This indemnity shall
terminate and be of no force and effect- after two months from the occupancy
date of the lease. Lease.
<PAGE>
57. OPTION TO EXTEND LEASE.
Lessee shall have an Option to extend this Lease for one additional five year
period at the then market rate by giving written notice of its intention to
exercise its Option at least 180 days prior to the termination of the Lease
term.
58. MISCELLANEOUS.
a. Paragraph 7.5(b) of the Lease shall be modified by adding the
following language at the end of the existing paragraph:
Lessor shall not unreasonably withhold consent to alterations.
Lessor acknowledges that it is the intent of Lessee to
materially alter the interior of the Premises including,
without limitation, moving interior walls, wiring and
plumbing. Lessee agrees to make such alterations according to
building codes and to use Arizona licensed contractors. lessee
further agrees not to mater5ially alter the currently existing
offices without prior approval of Lessor, which consent will
not be unreasonably withheld.
Agreed:
Lessor: Lessee:
Robert Colman Trust Accord Semiconductor Equipment Group,
Inc. and Travis Wilson and Terrie
Wilson, Individually
By: By: /s/ Travis Wilson 8/19/94
----------------------------- -----------------------------------
Robert Colman, Trustee Travis Wilson, President
By /s/ Travis Wilson 8/19/94
-----------------------------------
Travis Wilson, Individually
By /s/ Terrie Wilson 8/19/94
-----------------------------------
Terrie Wilson, Individually
<PAGE>
EXHIBIT "A"
DECLARATIONS PAGE
STATE FARM FIRE AND CASUALTY COMPANY
1665 WEST ALAMEDA DRIVE, TEMPE AZ 85289-001
A STOCK COMPANY WITH HOME OFFICES IN BLOOMINTON, ILLINIOS
- --------------------------------------------------------------------------------
NAMED INSURED AND MAILING ADDRESS MORTGAGEE
COLMAN, ROBERT ALLEN & M & I THUNDERBIRD BANK
ROBERT COLMAN TRUST REAL ESTATE DEPT (91)
610 SANTA MONICA BLVD C/O COLLATERAL CONTROL DEPT
SANTA MONICA CA 90401-1632 ONE EAST CAMELBACK
PHOENIX AZ 85012
COV A - INFLATION COVERAGE INDEX: 113.8
BUSINESS POLICY - SPECIAL FORM 3 COV B - CONSUMER PRICE INDEX: N/A
- --------------------------------------------------------------------------------
AUTOMATIC RENEWAL IF THE POLICY PERIOD IS SHOWN AS 12 MONTHS, THIS POLICY WILL
BE RENEWED AUTOMATICALLY SUBJECT THE PREMIUMS, RULES AND FORMS IN EFFECT FOR
each SUCCEEDING POLICY PERIOD. IF THIS policy is terminated, we will HAVE YOU
AND THE MORTGAGEE/LIENHOLDER WRITTEN NOTICE IN COMPLIANCE WITH the policy
provisions or as required by law.
POLICY PERIOD: 12 MONTHS THE POLICY PERIOD BEGINS AND ENDS AT 12:01 AM
EFFECTIVE DATE 12/29/93 STANDARD TIME AT THE PREMISES LOCATION.
EXPIRATION DATE: 12/29/94
- --------------------------------------------------------------------------------
CLAIMED INSURED: INDIVIDUAL
LOCATION OF COVERED
PREMISES:
6002 S ASH
TEMPE AZ 85282-6830
- --------------------------------------------------------------------------------
COVERAGE AND PROPERTY LIMITS OF
INSURANCE
SECTION I
BUILDINGS S $ 727,000
BUSINESS PERSONAL PROPERTY EXCLUDER
LOS OF INCOME $ ACTUAL LOS
SECTION II
BUSINESS LIABILITY $1,000,000
MEDICAL PAYMENTS $5,000
PRODUCTS-COMPLETED OPERATIONS
$2,000,000
(PCO) AGGREGATE
GENERAL AGGREGATE (OTHER THAN PCO)
$2,000,000
OCCUPANCY:
MERCANTILE
DEDUCTIBLES-SECTION
I
$ 1,000 BASIC
IN CASE OF LOSS UNDER THIS POLICY, THE DEDUCTIBLE WILL BE APPLIED TO EACH
OCCURRENCE AND WILL BE DEDUCTED FROM THE AMOUNT OF THE LOSS. OTHER DEDUCTIBLES
MAY APPLY-REFER TO POLICY.
FORMS OPTIONS AND ENDORSEMENTS
SPECIAL FORM 3 FP-6103
AMENDATORY ENDORSEMENT FE-
6203.1
TREE DEBRIS REMOVAL END FE-6451
POLICY ENDORSEMENT - BUSINESS FE-
6464
PROTECTIVE SAFEGUARD 0 FE-
6303
POLICY PREMIUM
$ 2158 .00
CREDIT
APPLIED:
SPRINKLER
- --------------------------------------------------------------------------------
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
By and Among
Successways Holdings Ltd.
Turbo International, Inc.
GEM Management Ltd.,
(the "Purchasers")
and
ACCORD ADVANCED TECHNOLOGIES, INC.
----------------------------------
Dated as of November 22, 1998
----------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CERTAIN DEFINITIONS .................................1
ARTICLE 11 PURCHASE OF DEBENTURES ..............................3
ARTICLE III REPRESENTATIONS AND WARRANTIES ......................4
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES .....................8
ARTICLE V CONDITIONS PRECEDENT TO CLOSING ....................12
ARTICLE VI TERMINATION ........................................14
ARTICLE VII MISCELLANEOUS ......................................15
Exhibit A Convertible Debenture
Exhibit B Conversion Procedures
Exhibit C Warrant
Exhibit D Opinion Letter
Exhibit E Escrow Agreement
Exhibit F Power of Attorney
Schedule 1 List of Purchasers and Warrant Holders
Schedule 3. 1 (a) Subsidiaries
Schedule 3. 1 (c) Capitalization
Schedule 3. 1 (f) Required Consents and Approvals
Schedule 3. 1 (g) Litigation
<PAGE>
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT, dated as of November
___________ 1998 (this "Agreement"), by and among Accord Advanced Technologies,
Inc., a Nevada corporation (the "Company"), and the purchasers listed on
Schedule I attached hereto (each individually, the "Purchaser" and collectively,
the "Purchasers").
WHEREAS, the Company desires to issue and sell to the
Purchaser and the Purchaser desire to acquire certain of the Company's 2%
Convertible Debentures, due November ___, 2003 (the "Convertible Debentures").
IN CONSIDERATION of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1. 1. Certain Definitions. As used in this Agreement, and
unless the context requires a different meaning, the following terms have the
meanings indicated:
"Affiliate" means, with respect to any Person, any Person
that, directly or 'indirectly, controls, is controlled by or is under common
control with such Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Business Day" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking institutions in the
state of New York are authorized or required by law or other government actions
to close.
"Closing" shall have the meaning set forth in Section 2. 1(b).
"Closing Date" shall have the meaning set forth in Section 2.
1 (b).
"Code" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder as in effect on the date hereof
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Company's common stock, par value
$.001 per share.
2
<PAGE>
"Debentures" means the 2% Convertible Debentures of the
Company, due November 2003, an example of which is attached hereto as Exhibit A.
"Disclosure Documents" means the disclosure package, including
but not limited to the Company's audited financial statements for the years
ended December 31, 1996 and 1997, the Company's unaudited financial statements
for the 10 months ended October 31, 1998, the Company's business plan and press
releases, delivered to the Purchaser in connection with the offering by the
Company of the Debentures and the Schedules to this Agreement furnished by or on
behalf of the Company pursuant to Section 3. 1.
"Escrow Agent" means the firm which holds the common shares in
escrow, herein the firm of Kaplan, Gottbetter & Levenson, LLP, 630 Third Avenue,
5' Floor, New York, NY 10017; Tel: 212-983-0532; Fax: 212-983-9210.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GEM" means GEM Advisors, Inc., with its registered address at
712 51 Avenue, 7' Floor, New York, NY 10019; Phone: 212-582-3400; Fax:
212-265-4035.
"GEM Ltd." means GEM Management Limited, with its registered
address at P.O. Box 860, 11 Bath Street, St. Heller, Jersey, Channel Islands JE4
OYZ.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, encumbrance, charge or security 'interest of any kind in or on such
asset or the revenues or income thereon or therefrom.
"Material Adverse Effect" shall have the meaning set forth in
Section 3. 1 (a).
"NASD" means the National Association of Securities Dealers,
Inc.
"Per Share Consideration" shall have the meaning set forth in
Section 2. 1(a)
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or political
subdivision thereof) or other entity of any kind.
"Purchase Price" shall have the meaning set forth in Section
2. 1 (a).
"Required Approvals" shall have the meaning set forth in
Section 3.
"Securities Act" means the Securities Act of 1933, as amended.
11126/112.14
2
<PAGE>
"Subsidiaries" shall have the meaning set forth in Section
3.1(a).
"Underlying Shares" means the shares of Common Stock into
which the Debentures are convertible in accordance with the terms hereof and the
Debenture, and the shares of Common Stock for which the Warrants can be
exercised in accordance with the terms hereof and the Warrant.
"Warrants" means the common stock purchase warrants issued to
GEM Ltd. and/or its assigns as part of its compensation, an example of which is
attached hereto as Exhibit C.
ARTICLE II
PURCHASE OF DEBENTURES
Section 2.1. Purchase of Debentures; Closing
(a) Subject to the terms and conditions herein set forth, the Company
shall issue and sell to the Purchasers, and the Purchasers shall purchase from
the Company on the Closing Date the number of Debentures listed opposite the
Purchaser's name on Schedule 1, which shall have the respective rights,
preferences and privileges set forth in Exhibit A (the "Debenture"), at a price
per Debenture of US$1,000.00 (the "Per Debenture Consideration"). The Per
Debenture Consideration multiplied by the number of Debentures to be purchased
by the Purchaser hereunder is hereinafter referred to as the "Purchase Price."
The Total principal amount of Debentures to be purchased by the Purchasers and
the total Purchase Price shall be $530,000.
(b) The closing of the purchase and sale of the Debentures (the
"Closing") shall take place at the offices of the Escrow agent, Kaplan,
Gottbetter & Levenson, LLP, immediately following the execution hereof, or at
such other time and/or place as the Purchaser and the Company may agree,
provided, however, in no case shall the Closing take place later than the fifth
day after the last of the conditions listed in Article V is satisfied or waived
by the appropriate party. The date of the Closing is hereinafter referred to as
the "Closing Date".
(c) At the Closing (i) the Company shall deliver to the Purchaser (A)
one or more Debentures purchased hereunder, registered in the name of the
Purchaser, (B) all documents, instruments and writings required to have been
delivered at or prior to Closing by the Company pursuant to this Agreement, and
(ii) the Purchaser shall deliver to the Company (A) the Purchase Price as
determined pursuant to this Article I in United States dollars in immediately
available funds by wire transfer to an account designated in writing by the
Company prior to the Closing and (B) all documents, instruments and writings
required to have been delivered at or prior to Closing by the Purchaser pursuant
to this Agreement. At this time, the Company shall also deliver to: (i) GEM
Ltd., or is assigns, the Warrants pursuant to the term sheet (the "Term Sheet")
dated November 4, 1998
3
<PAGE>
between GEM and the Company; and (ii) GEM, six percent (6%) of the gross
proceeds from the sale of the Debentures held by the Escrow Agent, representing
the management fee.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3. 1. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Purchaser as follows:
(a) Organization and Qualification. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the requisite corporate
power and authority to own and use its properties and assets and to carry on its
business as currently conducted. The Company has no subsidiaries other than
asset forth in Schedule 3.1(a) (collectively, the "Subsidiaries"). Each of the
Subsidiaries is a corporation, duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with the full
corporate power and authority to own and use its properties and assets and to
carry on its business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not reasonably be expected to have, individually or in the aggregate, a
material adverse effect on (a) the results of operations, assets, prospects, or
financial condition of the Company and the Subsidiaries, or (b) the Purchaser's
rights under this Agreement, the Debenture and the Warrants (a "Material Adverse
Effect").
(b) Authorization, Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated hereby and otherwise to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement by the Company and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of the Company. Each of this
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company and each of the Subsidiaries is set forth in
Schedule 3. 1 (c). No shares of Common Stock are entitled to preemptive or
similar rights. Except as specifically disclosed in the Disclosure Documents,
there are no outstanding options, warrants, script rights to subscribe to, calls
or
4
<PAGE>
commitments of any character whatsoever relating to, or, except as a result of
the purchase and sale of the Debentures hereunder, securities, rights or
obligations convertible into or exchangeable for, or giving any person any right
to subscribe for or acquire any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
Neither the Company nor any Subsidiary is in violation of any of the provisions
of its respective certificate of incorporation, bylaws or other charter
documents.
(d) Issuance of Debentures. The Debentures have been duly and
validly authorized for issuance, offer and sale pursuant to this Agreement and,
when issued and delivered as provided hereunder against payment in accordance
with the terms hereof, shall be valid and binding obligations of the Company
enforceable in accordance with their terms. The Company has and at all times
while the Debentures are outstanding will maintain an adequate reserve of shares
of Common Stock to enable it to perform its obligations under this Agreement and
the Debentures. When issued in accordance with the terms hereof and the
Debentures, the Underlying Shares will be duly authorized, validly issued, fully
paid and nonassessable.
(e) No Conflicts The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby do not and will not (1) conflict
with or violate any provision of its certificate of incorporation or bylaws or
(11) subject to obtaining the consents referred to *in Section 3. 1 (f),
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which the Company is a party, or (iii) to the
knowledge of the Company result in a violation of any law, rule, regulation,
order, judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including Federal and
state securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each of clauses (ii) and
(iii), such conflicts, defaults, terminations, amendments, accelerations,
cancellations and violations as would not, individually or in the aggregate,
have a Material Adverse Effect. The business of the Company is not being
conducted 'in violation of any law, ordinance or regulation of any governmental
authority, except for violations which, individually or in the aggregate, do not
have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth
in the Schedule 3.1(f), neither the Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of this Agreement, other than the making
of the applicable blue-sky filings under state securities laws, and other than,
in all cases, where the failure to obtain such consent waiver, authorization or
order, or to give or make such notice or filing, would not materially
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impair or delay the ability of the Company to effect the Closing and deliver to
the Purchaser the Debentures free and clear of all Liens (collectively, the
"Required Approvals").
(g) Litigation, Proceedings. Except as specifically disclosed
in the Schedule 3. 1 (g), there is no action, suit, notice of violation,
proceeding or investigation pending or, to the best knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
their respective properties before or by any court, governmental or
administrative agency or regulatory authority (Federal, State, county, local or
foreign) which (i) relates to or challenges the legality, validity or
enforceability of this Agreement or the Debentures (ii) could, individually or
in the aggregate, have a Material Adverse Effect or (111) could, individually or
in the aggregate, materially impair the ability of the Company to perform fully
on a timely basis its obligations under this Agreement.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of any indenture, loan or
credit agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, except such conflicts or defaults
as do not have a Material Adverse Effect, (ii) is in violation of any order of
any court, arbitrator or governmental body, except for such violations as do not
have a Material Adverse Effect, or (iii) is in violation of any statute, rule or
regulation of any governmental authority which could (individually or in the
aggregate) (x) adversely affect the legality, validity or enforceability of this
Agreement, (y) have a Material Adverse Effect or (z) adversely impair the
Company's ability or obligation to perform fully on a timely basis its
obligations under this Agreement.
(i) Certain Fees. No fees or commission will be payable by the
Company to any investment banker or bank with respect to the consummation of the
transactions contemplated hereby except for six percent (6%) of the gross
proceeds from the sale of the Debentures held in escrow to GEM for the
management fee. GEM will indemnify the Company against all third party claims
for management and brokerage fees;
(j) Disclosure Documents. The Disclosure Documents do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(k) Private Offering. Neither the Company nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require the integration of such offering with the offering of the
Debentures under the Securities Act) which might subject the offering, issuance
or sale of the Debentures to the registration requirements of Section 5 of the
Securities Act.
(1) Not a Reporting Company, Eligibility to use Exemption
under 504(b). The Company is not subject to the reporting requirements of
Section 13 or Section 15(d) of the Exchange Act. The Company has not sold any
securities under 504(b) in the last twelve months, except for
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$425,000 raised pursuant to Rule 504 in October 1998. The Company is eligible to
issue securities exempt from registration pursuant to Rule 504 of Regulation D
promulgated under the Securities Act.
Section 3.2. Representations and Warranties of the Purchaser The
Purchaser hereby represents and warrants to the Company as follows:
(a) Organization; Authority. The Purchaser is a corporation
duly and validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Purchaser has the requisite power and
authority to enter into and to consummate the transactions contemplated hereby
and otherwise to carry out its obligations hereunder and thereunder. The
purchase of the Debentures by the Purchaser hereunder has been duly authorized
by all necessary action on the part of the Purchaser. Each of this Agreement has
been duly executed and delivered by the Purchaser or on its behalf and
constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity.
(b) Investment Intent. The Purchaser is acquiring the
Debentures and the Underlying Shares for its own account for investment purposes
only and not with a view to or for distributing or reselling such Debentures or
Underlying Shares or any part thereof or interest therein, without prejudice,
however, to the Purchaser's right, subject to the provisions of this Agreement,
at all times to sell or otherwise dispose of all or any part of such Debentures
or Underlying Shares in compliance with applicable State securities laws and
under an exemption from registration under Rule 504 of the Securities Act.
(c) Purchaser Status. At the time the Purchaser was offered
the Debentures, it was, and at the date hereof, it is, and at the Closing Date,
it will be, an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
(d) Experience of Purchaser. The Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Debentures, and has so
evaluated the merits and risks of such investment.
(e) Ability of Purchaser to Bear Risk of Investment. The
Purchaser is able to bear the economic risk of an investment in the Debentures
and, at the present time, is able to afford a complete loss of such investment.
(f) Prohibited Transactions. The Debentures to be purchased by
the Purchaser are not being acquired, directly or indirectly, with the assets of
any "employee benefit plan", within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended.
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(g) Access to Information. The Purchaser acknowledges receipt
of the Disclosure Documents and further acknowledges that it has been afforded
(i) the opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Debentures and the merits and risks of
investing in the Debentures; (ii) access to information about the Company and
the Company's financial condition, results of operations, business, properties,
management and prospects sufficient to enable it to evaluate its investment in
the Common Stock; and (iii) the opportunity to obtain such additional
information which the Company possesses or can acquire without unreasonable
effort or expense that is necessary to make an informed investment decision with
respect to the Debentures and to verify the accuracy and completeness of the
information contained in the Disclosure Documents.
(h) Reliance. The Purchaser understands and acknowledges that
(i) the Debentures are being offered and sold, and the Underlying Shares are
being offered, to it without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption, depends in part on, and that the
Company will rely upon the accuracy and truthfulness of, the foregoing
representations and the Purchaser hereby consents to such reliance.
The Company acknowledges and agrees that the Purchaser makes
no representation or warranty with respect to the transactgions contemplated
hereby other than those specifically set forth in Article III herein.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
Section 4.1. Manner of Offering The Debentures and Warrants are being
issued pursuant to Rule 504(b) of Regulation D of the Securities Act of 1933.
The Debentures, Warrants and the Underlying Shares will be exempt from
restrictions on transfer, and will carry no restrictive legend. The Company will
use its best efforts to insure that no actions are taken that would jeopardize
the availability of the exemption from registration under Rule 504(b) for the
Debentures, the Warrants and the Underlying Shares.
Section 4.2. Furnishing of Information. As long as the Purchaser owns
Debentures, the Warrants or Underlying Shares, the Company will promptly furnish
to it all annual and quarterly reports comparable to those required by Section
13(a) or 15(d) of the Exchange Act.
Section 4.3. Notice of Certain Events. The Company shall (i) advise the
Purchaser promptly after obtaining knowledge thereof, and, if requested by the
Purchaser, confirm such advice in writing, of (A) the issuance by any state
securities commission of any stop order suspending the
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qualification or exemption from qualification of the Debentures or the Common
Stock for offering or sale in any jurisdiction, or the initiation of any
proceeding for such purpose by any state securities commission or other
regulatory authority, or (B) any event that makes any statement of a material
fact made in the Disclosure Documents untrue or that requires the making of any
additions to or changes in the Disclosure Documents in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading, (11) use its best efforts to prevent the issuance of any stop
order or order suspending the qualification or exemption from qualification of
the Debentures or the Common Stock under any state securities or Blue Sky laws,
and (iii) if at any time any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Debentures or the Common Stock under any such laws, use its
best efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.
Section 4.4. Copies and Use of Disclosure Documents. The Company shall
furnish the Purchaser, without charge, as many copies of the Disclosure
Documents, and any amendments or supplements thereto, as the Purchaser may
reasonably request. The Company consents to the use of the Disclosure Documents,
and any amendments and supplements thereto, by the Purchaser in connection with
resales of the Debentures or the Underlying Shares other than pursuant to an
effective registration statement.
Section 4.5. Modification to Disclosure Documents. If any event shall
occur as a result of which, in the reasonable judgment of the Company or the
Purchaser, it becomes necessary or advisable to amend or supplement the
Disclosure Documents in order to make the statements therein, in the light of
the circumstances at the time the Disclosure Documents were delivered to the
Purchaser, not misleading, or if it is necessary to amend or supplement the
Disclosure Documents to comply with applicable law, the Company shall promptly
prepare an appropriate amendment or supplement to the Disclosure Documents ('in
form and substance reasonably satisfactory to both the Purchaser and Company) so
that (i) as so amended or supplemented the Disclosure Documents will not include
an untrue statement of material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances
existing at the time it is delivered to Purchaser, not misleading and (11) the
Disclosure Documents will comply with applicable law.
Section 4.6. Blue Sky Laws. The Company shall cooperate with the
Purchaser in connection with the qualification of the Debentures, the Warrants
and the Underlying Shares under the securities or Blue Sky laws of such
jurisdictions as the Purchaser may request and to continue such qualification at
all times through the fifth anniversary of the Closing Date; provided, however,
that neither the Company nor its Subsidiaries shall be required in connection
therewith to qualify as a foreign corporation where they are not now so
qualified.
Section 4.7 Integration. The Company shall not and shall use its best
efforts to ensure that no Affiliate shall sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined. in Section
2 of the Securities Act) that would be integrated with the offer or sale
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of the Debentures, the Warrants or the Underlying Shares in a manner that would
require the registration under the Securities Act of the sale of the Debentures,
the Warrants or Underlying Shares to the Purchaser.
Section 4.8 Furnishing of Rule 144A Materials. The Company shall, for
so long as any of the Debentures, the Warrants or Underlying Shares remain
outstanding and during any period in which it is not subject to Section 13 or
15(d) of the Exchange Act, make available to any registered holder of
Debentures, the Warrants or Underlying Shares in connection with any sale
thereof and any prospective purchaser of such Debentures, Warrants or Underlying
Shares from such Person, the following information in accordance with Rule
144A(d)(4) under the Securities Act: a brief statement of the nature of the
business of the Company and the products and services it offers and the
Company's most recent audited balance sheet and profit and loss and retained
earnings statements, and similar audited financial statements for such part of
the two preceding fiscal years as the Company has been in operation.
Section 4.9 Solicitation Materials. The Company shall not (1)
distribute any offering materials in connection with the offering and sale of
the Debentures, the Warrants or Underlying Shares other than the Disclosure
Documents and any amendments and supplements thereto prepared in compliance
herewith or (it) solicit any offer to buy or sell the Debentures, the Warrants
or Underlying Shares by means of any form of general solicitation or
advertising.
Section 4.10 Subsequent Financial Statements. The Company shall furnish
to the Purchaser, promptly after they are filed with the Commission, a copy of
all financial statements for any period subsequent to the period covered by the
financial statements included in the Disclosure Documents.
Section 4.11. Prohibition on Certain Actions. From the date hereof
through the Closing Date, the Company shall not and shall cause the Subsidiaries
not to, without the consent of the Purchaser, (1) amend its Certificate of
Incorporation, bylaws or other character documents so as to adversely affect any
rights of the Purchaser; (ii) split, combine or reclassify its outstanding
capital stock; (ill) declare, authorize, set aside or pay any dividend or other
distribution with respect to the Common Stock; (iv) redeem, repurchase or offer
to repurchase or otherwise acquire shares of its Common Stock; or (v) enter into
any agreement with respect to any of the foregoing.
Section 4.12. Listing of Underlying Shares The Company shall use its
best efforts to maintain the listing for its common stock on the NASD Electronic
Bulletin Board (or other national securities exchange or market on which the
Common Stock is listed) during the period that the Debentures may be converted
hereunder by the Purchaser or the Warrants may be exercised, and shall provide
to the Purchaser evidence of such listing.
Section 4.13. Conversion Procedures:- Exhibit B attached hereto sets
forth the procedures with respect to the conversion of the Debentures, including
the forms of conversion notice to be provided upon conversion, instructions as
to the procedures for conversion, the form of legal
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opinion, if necessary, that shall be rendered to the Company and such other
information and instructions as may be reasonably necessary to enable the
Purchaser to exercise its right of conversion smoothly and expeditiously.
Section 4.14 Registration of Underlying Shares. So long as any
War-rants remain unexercised or Debentures remain outstanding, the Company
agrees not to file a registration statement with the Commission, without first
having registered the Underlying Shares for resale with the SEC and for resale
in such states of the United States as the Holders thereof (or the Holders of
the Debentures) shall reasonably request. If the Company shall propose to file
with the SEC any registration statement other than a Form 10 which would cause,
or have the effect of causing, the Company to become subject to the reporting
requirements of Section 13 or 15 (d) of the Exchange Act (a "Reporting Issuer")
or to take any other action the effect of which would be to cause the Underlying
Shares to be issued upon conversion of any then outstanding Debentures to be
restricted securities or cause the Underlying Shares to be issued upon exercise
of any then outstanding Warrants to be restricted securities (as such term
defined in Rule 144 promulgated under the Securities Act), the Company agrees to
give written notification of such to the Holders of the Debentures or the
Warrants then outstanding at least two weeks prior to such filing or taking of
the proposed action. If any Debentures or Warrants are outstanding at the end of
such notice period, the Company agrees to file a registration statement on Form
S-1 or SB-2, or such other form of registration statement in which the
Underlying Shares may be included, and to include in such registration statement
the Underlying Shares issuable upon conversion of any then outstanding
Debentures or the exercise of any then outstanding Warrants so as to pen-nit the
public resale thereof. All costs and expenses of registration shall be borne by
the Company.
Notwithstanding the foregoing, if the Company for any reason shall
become a Reporting Issuer, or shall have taken any action the effect of which
would be to cause the Underlying Shares to be issued upon conversion of any then
outstanding Debentures or the exercise of any then outstanding Warrants to be
restricted securities (as such term is defined in Rule 144 promulgated under the
Securities Act), the Company agrees to immediately file with the SEC and cause
to become effective a registration statement which would permit the public
resale of such Underlying Shares in such states of the United States as the
Holders thereof shall reasonably request. All costs and expenses of such
registration and related Blue Sky filings shall be borne by the Company.
Section 4.15 Escrow. The Company agrees to enter into the escrow
agreement attached hereto as Exhibit E (the "Escrow Agreement"), and to issue
into said Escrow certificates to be held by the Escrow Agent (as defined in the
Escrow Agreement), registered in the names of the Purchasers and without any
restrictive legend of any kind, pursuant to the terms of such Escrow Agreement,
rounded up to the nearest even 25,000 shares. Such certificates shall be in
denominations of 25,000 shares.
Section 4.16 Attorney-in-Fact. To effectuate the terms and provisions
of this Agreement, the Escrow Agreement, the Debenture and the Warrants, the
Company hereby designates and
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appoints the Escrow Agent and each of its designees or agents as
attorney-in-fact of the Company, irrevocably and with power of substitution,
with authority to carry out any acts and things necessary or advisable in the
sole discretion of the Escrow Agent to carry out and enforce this Agreement, the
Escrow Agreement, the Debenture and the Warrants, pursuant to Exhibit F attached
hereto. All acts done under the foregoing authorization are hereby ratified and
approved and neither the Escrow Agent nor any designee or agent thereof shall be
liable for any acts of commission or omission, for any error of judgment or for
any mistake of fact or law. This power of attorney being coupled with an
interest is irrevocable while any amount of the Debenture remains unpaid, any
amount of the Warrants remain unexercised or any portion of this Agreement or
the Escrow Agreement remains unsatisfied.
Section 4.17 Short Selling. Purchasers and their Affiliates agree not
to engage in any short sales, swaps, purchase of puts, or other hedging
activities involving the Common STOCK OR other securities of the Company.
Section 4.18 Changes to Rule 504. If any shares of Common Stock
required to be reserved for purposes of conversion of the Debenture or exercise
of the War-rants hereunder require registration with or approval of any
governmental authority under any federal (including but not limited to the Act
or similar federal statute than in force) or state law, or listing on any
national securities exchange, before such shares may be issued upon conversion
or exercise, for reasons including but not limited to a material change in Rule
504 of Regulation D promulgated under the Act, the Company will, at its expense,
as expeditiously as possible cause such shares to be duly registered or approved
or listed on the relevant national securities exchange, as the case may be.
Shares of Common Stock issued upon conversion of the Debenture or exercise of
the Wan-ants shall be registered by the Company under the Act if required by
Section 4.14 and subject to the conditions stated therein.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
Section 5. 1. Conditions Precedent to Obligations of the Purchaser. The
obligation of the Purchaser to purchase the Debentures is subject to the
satisfaction or waiver by the Purchaser, at or prior to the Closing, of each of
the following conditions:
(a) Legal Opinion Exhibit D. The Purchaser shall have received
the legal opinion, addressed to it and dated the Closing Date of the Counsel for
the Company. Such legal opinion shall address the Company's authority to enter
into this Agreement and the applicability of Rule 504 to the offer and sale of
the Debentures, the Warrants and the Underlying Shares;
(b) Accuracy of the Company's Representations and Warranties.
The representations and warranties of the Company contained herein shall be.
true and correct in all
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material respects as of the date when made and as of the Closing Date as though
made at that time (except that representations and warranties that are made as
of a specific date need be true in all material respects only as of such date);
(c) Performance by the Company. The Company shall have
performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing;
(d) No Material Adverse Effect. Since the date of the
financial statements included in the Company's Disclosure Documents, no event
which had a Material Adverse Effect shall have occurred which is not disclosed
in the Disclosure Documents;
(e) No Prohibitions. The purchase of and payment for the
Debentures (and upon conversion thereof, the Underlying Shares) hereunder (i)
shall not be prohibited or enjoined (temporarily or permanently) by any
applicable law or governmental regulation and (ii) shall not subject the
Purchaser to any penalty, or in its reasonable judgment, other onerous condition
under or pursuant to any applicable law or governmental regulation that would
materially reduce the benefits to the Purchaser of the purchase of the
Debentures or the Underlying Shares (provided, however, that such regulation,
law or onerous condition was not in effect in such form at the date of this
Agreement);
(f) Company Certificates. The Purchaser shall have received a
certificate, dated the Closing Date, signed by the Secretary or an Assistant
Secretary of the Company and certifying (i) that attached thereto is a true,
correct and complete copy of (A) the Company's Certificate of Incorporation, as
amended to the date thereof, (B) the Company's By-Laws, as amended to the date
thereof, (C) resolutions duly adopted by the Board of Directors of the Company
authorizing the execution and delivery of this Agreement, the issuance and sale
of the Debentures, Warrants and the Underlying Shares and the appointment of the
Attorney-in-Fact pursuant to Section 4.16, and (D) a certificate of good
standing from the Secretary of State of Nevada and (ii) the incumbency of
officers executing this Agreement;
(g) No Suspensions of Trading in Common Stock Trading in the
Common Stock shall not have been suspended by the Commission or the NASD or
other exchange or market on which the Common Stock is listed or quoted (except
for any suspension of trading of limited duration solely to permit dissemination
of material information regarding the Company);
(h) Required Approvals All Required Approvals shall have been
obtained;
(i) Delivery of Debentures The Company shall have delivered to
the Escrow Agent the certificate(s) representing the Debentures, registered in
the name of the Purchaser, each in form satisfactory to the Purchaser.
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(j) Power of Attorney Exhibit F The Escrow Agent shall have
received a power of attorney executed on behalf of the Company pursuant to
Section 4.16.
Section 5.2. Conditions Precedent to Obligations of the Company The
obligation of the Company to issue and sell the Debentures hereunder is subject
to the satisfaction or waiver by the Company, at or to the Closing, of each of
the following conditions:
(a) Accuracy- of the Purchaser's Representations and
Warranties. The representations and warranties of the Purchaser shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except that representations and
warranties that are made as of a specific date need be true in all material
respects only as of such date);
(b) Performance by the Purchaser. The Purchaser shall have
performed satisfied and complied in all material respects with all covenants,
agreements and CONDITIONS required by this Agreement to be performed, satisfied
or complied with by it at or prior to the Closing; and
(c) No Prohibitions. The sale of the Debentures (and upon
conversion thereof, the Underlying Shares) hereunder (1) shall not be prohibited
or enjoined (temporarily or permanently) by any applicable law or governmental
regulation and (ii) shall not subject the Company to any penalty, or in its
reasonable judgment, any other onerous condition under or pursuant to any
applicable law or governmental regulation that would materially reduce the
benefits to the Company of the sale of Debentures or the Underlying Shares to
the Purchaser (provided, however, that such regulation, law or onerous condition
was not in effect in such form at the date of this Agreement).
ARTICLE VI
TERMINATION
Section 6. 1. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to Closing by the mutual consent of the Company and
the Purchaser.
Section 6.2. Termination by the Company or the Purchaser. This
Agreement may be terminated prior to Closing by either the Company or the
Purchaser, by giving written notice of such termination to the other party, if-.
(a) the Closing shall not have occurred by November 20, 1998;
provided that the terminating party is not then in material breach of its
obligations under this Agreement in any manner that shall have caused the
failure referred to in this paragraph (a);
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(b) there shall be in effect any statute, rule, law or
regulation that prohibits the consummation of the Closing or if the consummation
of the Closing would violate any nonappealable final judgment, order, decree,
ruling or injunction of any court of or governmental authority having competent
jurisdiction; or
(c) there shall have been an amendment to Regulation D or an
interpretive release promulgated or issued thereunder, which, in the reasonable
judgment of the terminating party, would materially adversely affect the
transactions contemplated hereby.
Section 6.3. Termination by the Company. This Agreement may be
terminated prior to Closing by the Company, by giving written notice of such
termination to the Purchaser, if the Purchaser has materially breached any
representation, warranty, covenant or agreement contained in this Agreement and
such breach is not cured within five business days following receipt by the
Purchaser of notice of such breach.
Section 6.4. Termination by the Purchaser. This Agreement may be
terminated prior to Closing by the Purchaser, by giving written notice of such
termination to the Company., if
(a) the Company has breached any representation, warranty,
covenant or agreement contained in this Agreement and such breach is not cured
within five business days following receipt by the Company of notice of such
breach;
(b) there has occurred an event since the date of the
financial statements included in the Company's disclosure documents which could
reasonably be expected to have a Material Adverse Effect and which is not
disclosed in the Disclosure Documents; or
(c) trading in the Common Stock has been suspended by the
Commission or the NASD or other exchange or market on which the Common Stock is
listed or quoted (except for any suspension of trading of limited duration
solely to permit dissemination of material information regarding the Company).
ARTICLE VII
MISCELLANEOUS
Section 7. 1. Fees and Expenses Each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay the fees of the Escrow Agent and all stamp and other taxes and duties
levied in connection with the issuance of the Debentures (and upon conversion
thereof, the Underlying Shares) pursuant hereto. The Purchaser shall be
responsible for its own tax liability that may arise
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as a result of the investment hereunder or the transactions contemplated by this
Agreement. Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Company shall pay (1) all
costs, expenses, fees and all taxes incident to and in connection with: (A) the
preparation, printing and distribution of the Disclosure Documents and all
amendments and supplements thereto (including, without limitation, financial
statements and exhibits), and all preliminary and final Blue Sky memoranda and
all other agreements, memoranda, correspondence and other documents prepared and
delivered in connection herewith (B) the issuance and delivery of the Debentures
and, upon conversion thereof, the Underlying Shares, (C) the qualification of
the Debentures and, upon conversion thereof, the Underlying Shares for offer and
sale under the securities or Blue Sky laws of the several states (including,
without limitation, the fees and disbursements of the Purchasers' counsel
relating to such registration or qualification), (D) furnishing such copies of
the Disclosure Documents and all amendments and supplements thereto, as may
reasonably be requested for use in connection, with resales of the Debentures
and, upon conversion thereof, the Underlying Shares, and (E) the preparation of
certificates for the Debentures and, upon conversion thereof, the Underlying
Shares (including, without limitation, printing and engraving thereof, (11) all
fees and expenses of the counsel and accountants of the Company and (iii) all
expenses and listing fees on Securities Exchanges, if any.
Section 7.2. Entire Agreement; Amendments. This Agreement, together
with the Exhibits, Annexes and Schedules hereto, contain the entire
understanding of the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, oral or written, with respect
to such matters.
Section 7.3. Notices Any notice or other communication required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been received (a) upon hand delivery (receipt acknowledged) or delivery by telex
(with correct answer back received), telecopy or facsimile (with transmission
confirmation report) at the address or number designated below (if delivered on
a business day during normal business hours where such notice is to be
received), or the first business day following such delivery (if delivered other
than on a business day during normal business hours where such notice is to be
received) or (b) on the second business day following the date of mailing by
express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be:
If to the Company: Mr. Travis Wilson
President
Accord Advanced Technologies, Inc.
5002 South Ash Avenue
Tempe, AZ 85282
Tel.- (602) 820-1400
Fax: (602) 820-2319
16
<PAGE>
With copies to: Gregory Frost, Esq.
Tanner, Propp, Esq.
99 Park Avenue, 25" Floor
New York, NY 100 16
Tel: (212) 986-7714
Fax: (212) 687-0056
If to the Purchaser:
See Schedule I - Schedule of Purchaser (attached hereto)
With copies to: Adam S. Gottbetter
Kaplan Gottbetter & Levenson, LLP
630 Third Avenue
New York, NY 100 17
Tel: 212-983-0532
Fax: 212-983-9210
or such other address as may be designated in writing hereafter, in the same
manner, by such person.
Section 7.4 Amendments, Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and the Purchaser, or, 'in the case of a waiver,
by the party against whom enforcement of any such waiver is sought. No waiver of
any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter.
Section 7.5. Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 7.6. Successors and Assigns This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and permitted
assigns. Neither the Company nor the Purchaser may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other.
The assignment by a party of this Agreement or any rights hereunder shall not
affect the obligations of such party under this Agreement.
Section 7.7. No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
17
<PAGE>
Section 7.8. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to the principles of conflicts of law thereof.
Section 7.9. Survival. The representations and warranties of the
Company and the Purchaser contained in Article 11 and the agreements and
covenants of the parties contained in Article IV and this Article VII shall
survive the Closing (or any earlier termination of this Agreement) and any
conversion of Debentures hereunder for a period of five (5) years.
Section 7.10. Counterpart Signatures. This Agreement maybe executed in
two or more counterparts, all-of which when taken together shall be considered
one and the same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof
Section 7.11. Publicity. The Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and neither
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other, which consent shall
not be unreasonably withheld or delayed.
Section 7.12. Severability In case anyone or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement shall
not in any way be affecting or impaired thereby and the parties will attempt to
agree upon a valid and enforceable provision which shall be a reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Agreement.
Section 7.13. Remedies In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, the
Purchaser will be entitled to specific performance of the obligations of the
Company under this Agreement and the Company will be entitled to specific
performance of the obligations of the Purchaser hereunder with respect to the
subsequent transfer of Debentures and the Underlying Shares. Each of the Company
and the Purchaser agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of any breach of its obligations
described in the foregoing sentence and hereby agrees to waive in any action for
specific performance of any such obligation the defense that a remedy at law
would be adequate.
[SIGNATURE PAGE FOLLOWS]
18
<PAGE>
IN WITNESS WHEREOF, the par-ties hereto have caused this
Agreement to be duly executed as of the date first indicated above.
Company:
ACCORD ADVANCED TECHNOLOGIES, INC.
By: /s/ Travis Wilson
---------------------------------
Name: Travis Wilson
Title:President
Purchaser:
By:
---------------------------------
Name:
Title:
19
<PAGE>
Exhibit B
---------
CONVERSION PROCEDURES
1. Holder shall execute Holder Conversion Notice in the form attached to
the Debenture as Exhibit A.
2. Holder shall send by fax the Holder Conversion Notice to the Company
and to the Escrow Agent.
3. Holder shall send the original Debenture and Holder Conversion Notice
to the Escrow Agent, along with a fee of $350, with instructions
regarding names and amount of certificates for the issuance of the
Underlying Shares, and instructions as to the reissuance of the balance
of the Debentures, if conversion is not in full.
4. Company will issue the new Debentures (if any) and will send such new
Debentures by overnight courier within five (5) business days to the
Escrow Agent. The Escrow Agent shall send the new Debenture (if any)
and the Common Shares to the Holder per his instructions. If the Escrow
Agent has not received the new Debenture (if any) and the Common Shares
from the Company within two business days of his receipt of the
Conversion Notice, he shall issue the Common Shares to the Holder from
the Escrow Shares.
20
<PAGE>
SCHEDULE 1
----------
PURCHASER FULL AMOUNT OF NUMBER OF SHARES
Name & Address Debenture In Escrow
- -------------- --------- ----------
Gem Management Limited $380,000 1,220,000
P.O. Box 860
11 Bath Street
St. Helier
Jersey
JE4 OYZ
Phone: 44-1534-872-111
Fax: 44-1534-873-111
- --------------------------------------------------------------------------------
Turbo International, Inc. $50,000 160,000
50 Shirley Street
P.O. Box N755
Nassau, Bahamas
Phone: 242-326-5528
Fax: 242-328-2935
- --------------------------------------------------------------------------------
Successways Holding Limited $100,000 320,000
39 F Shun Tak Centre West Tower
200 Connaught Road Central
Hong Kong
Phone: 852-2859-3482
================================================================================
WARRANT HOLDER FULL NUMBER NUMBER OF SHARES
Name & Address of Warrants in Escrow
- -------------- ----------- ---------
Gem Management Limited 200,000 200,000
P.O. Box 860
11 Bath Street
St. Helier
Jersey
JE4 OYZ
Phone: 44-1534-872-111
Fax: 44-1534-873-111
21
<PAGE>
CERTIFICATE
Pursuant to Article V Section 5.1(f)
Convertible Debenture Purchase Agreement
1, Carl P. Ran no, Secretary of Accord Advanced Technologies, Inc.,
hereby certifies that as of November 22, 1998 the attached is a true, correct
and complete copy of (A) the Company's Certificate of Incorporation, as amended
to the date thereof, (B) the Company's By-Laws, as amended to the date hereof,
and (C) resolutions duly adopted by the Board of Directors of the Company
authorizing the execution and delivery of this Agreement, the issuance and sale
of the Debentures, Warrants and the Underlying Shares and the appointment of the
Attorney-in-Fact pursuant to Section 4.16.
I further certify that Travis Wilson is the duly elected President of
Accord Advanced Technologies, Inc. and in said capacity has been authorized to
execute this Agreement.
Date: 11/22/98
-----------
/s/ Carl P. Ranno
- ------------------
Carl P. Ranno
Secretary
<PAGE>
SCHEDULE 3.1(a)
Subsidiaries
Accord Semiconductor Equipment Group, Inc. an Arizona Corporation located in
Tempe AZ is a wholly owned subsidiary of the Company.
<PAGE>
SCHEDULE 3.1(c)
CAPITALIZATION
Authorized Shares
Common 47,000,000
Preferred 3,000,000
---------
Total 50,000,000
Issued and Outstanding
Common 37,648,000
(which includes 30,618,000 restricted shares held by Officers,
Directors, employees and others)
Preferred 0
Options Employees 190,000
<PAGE>
SCHEDULE 3.1 (f)
Required Consents and Approvals
None
<PAGE>
SCHEDULE 3.1(G)
LITIGATION
NAME CLAIM Status
Nismic Sales Release of Stock Co-Defendant to settle
v. Accord et al their responsibility
Control Systems Past due amount Settlement in effect
v. Accord SEG
Scott Mason/EASE Broker fees past due Amount is being
v. Accord SEG. negotiated
Linder/ Sun West Commissions Due Amount is in dispute
v. Accord SEG
Accord SEG is the subsidiary of Accord Advanced Technologies, Inc. There is one
case pending against the parent company as indicated above. None of the above
matters, individually or in the aggregate, will have a Materially Adverse Effect
or could materially impair the ability of the Company to perform fully on a
timely basis its obligations under this Agreement.
2% CONVERTIBLE DEBENTURE DUE NOVEMBER 21, 2003
THIS DEBENTURE- is one of a duly authorized issue of Debentures of
Accord Advanced Technologies, Inc., a Nevada Corporation (the "Company"),
designated as its 2% Convertible Debentures, due November 212003 (the
"Debentures"), in an aggregate principal amount of up to US $530,000.
FOR VALUE RECEIVED, the Company promises to pay to Turbo)
International, Inc. or registered assigns (the "Holder"), the principal sum of
Fifty Thousand (US$ 50,000 on or prior to November 2l 2003 (the "Maturity Date")
and to pay interest to the Holder on the principal sum, at the rate of 2% per
annum. Interest shall accrue daily commencing on the Original Issue Date (as
defined in Section 6) until payment in full of the principal sum, together with
all accrued and unpaid interest, has been made or duly provided for. All accrued
and unpaid interest shall bear interest at the rate of 2% per annum from
Maturity Date or earlier date on which this Debenture is accelerated, through
and including the date of payment. Interest due payable hereunder shall be paid
to the person in whose name this Debenture (or one or more predecessor
Debentures) is registered on the records of the Company regarding registration
and transfers of the Debentures (the "Debenture Register"); provided, however,
that the Company's obligation to a transferee of this Debenture arises only if
such transfer, sale or other disposition is made in accordance with the terms
and conditions hereof and of the Convertible Debenture Purchase Agreement, dated
as of November 21, 1998, as amended from time to time (the "Purchase
Agreement"), executed by the original Holder. The principal of this Debenture is
payable in shares of common stock of the Company, at the time of conversion of
part or all of the Debenture in accordance with Section 3 hereof, at the address
of the Holder last appearing on the Debenture Register, and that if there is an
Event of Default or redemption pursuant to the terms hereof, accrued and unpaid
interest shall become due and payable as PROVIDED HEREIN. Interest on this
Debenture may be paid in shares of common stock of the Company or in cash, at
the time of conversion, at the option of the Holder. A transfer of the right to
receive principal and interest under this Debenture shall be transferable only
through an appropriate entry in the Debenture Register as provided herein.
This Debenture is subject to the following additional provisions:
Section 1. The Debentures are issuable in denominations of one
thousand Dollars (US $1,000.00) and integral multiples of one thousand Dollars
(US $1,000.00) in excess thereof The Debentures are exchangeable for an equal
aggregate principal amount of Debentures of different authorized denominations,
as requested by the Holder surrendering the same but shall not be issuable
<PAGE>
in denominations of less than integral multiplies of one thousand Dollars (US$
1,000.00). No service charge will be made for such registration of transfer or
exchange.
Section 2.Events of Default and Remedies.
1. "Event of Default", wherever used herein, means any one of the
following events (whatever the reason and whether it shall be voluntary or
involuntary or effected by operation of law or pursuant to any judgment, decree
or order of any court, or any order, rule or regulation of any administrative or
governmental body):
(a) any default in the payment of the principal of or interest
on this Debenture as and when the same shall become due and payable
either at the Maturity Date, by acceleration or otherwise;
(b) the Company shall fail to observe or perform any other
covenant, agreement or warranty contained in, or otherwise commit any
breach of, this Debenture, and such failure or breach shall not have
been remedied within 30 days after the date on which written notice of
such failure or breach shall have been given;
(c) the occurrence of any event or breach or default by the
Company under the Purchase Agreement and such failure or breach shall
not have been remedied within 10 days after the date on which written
notice of such failure or breach shall have been given by the
Purchaser;
(d) the Company or any of its subsidiaries shall commence a
voluntary case under the United States Bankruptcy Code as now or
hereafter in effect or any successor thereto (the "Bankruptcy Code");
or an involuntary case is commenced against the Company under the
Bankruptcy Code and the petition is not controverted within 30 days, or
is not dismissed within 60 days, after commencement of the case; or a
"custodian" (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or any substantial part of the property of the
Company or the Company commences any other proceeding under any
reorganization, arrangement adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company
or there is commenced against the Company any such proceeding which
remains undismissed for a period of 60 days; or the Company is
adjudicated insolvent or bankrupt; or any order of relief or other
order approving any such case or proceeding is entered; or the Company
suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or
unstayed for a period of 60 days; or the Company makes a general
assignment for the benefit of creditors; or the Company shall fail to
pay, or shall state that it is unable to pay, or shall be unable to
pay, its debts generally as they become due; or the Company shall call
a meeting of its creditors with a view to arranging a composition or
adjustment of its debts; or the Company shall by any
2
<PAGE>
act or failure to act indicate its consent to, approval of or
acquiescence in any of the foregoing; or any corporate or other action
is taken by the Company for the purpose of effecting any of the
foregoing;
(e) the Company shall default in any of its obligations under
any mortgage, indenture or instrument under which there may be issued,
or by which there may be secured or evidenced, any indebtedness of the
Company in an amount exceeding two hundred thousand dollars
($200,000.00), whether such indebtedness now exists or shall hereafter
be created and such default shall result in such indebtedness becoming
or being declared due and payable prior to the date on which it would
otherwise become due and payable;
(f) the Company shall have its Common Stock (as defined in
Section 6) delisted from the OTCBB or other national securities
exchange or market on which such Common Stock is listed for trading or
suspended from trading thereon, and shall not have its Common Stock
relisted or have such suspension lifted, as the case may be, within
five days;
(g) the Company shall fail to deliver to the Holder or to the
Escrow Agent share certificates representing the Common Shares to be
issued upon conversion of the Debentures within 10 calendar days of the
Conversion Date pursuant to written notice by the Purchaser to the
Company that additional Shares are required in escrow pursuant to
Section 2(g) of the Escrow Agreement;
(h) the Company shall issue a Press Release, or otherwise make
publicly known, that it was not honoring properly executed Holder
Conversion Notices for any reason whatsoever.
II. (a) If any Event of Default occurs and is continuing, and 'in
every such case, then so long as such Event of Default shall then be continuing
the Holder may, by notice to the Company, accelerate all of the payments due
under this Debenture by declaring all amounts of this Debenture, to be,
whereupon the same shall become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
waived by the Company, notwithstanding anything herein contained to the
contrary, and the Holder may immediately and without expiration of any grace
period enforce any and all of its rights and remedies hereunder and all other
remedies available to it under applicable law. Such declaration may be rescinded
and annulled by Holder at any time prior to payment hereunder. No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
(b) Holder may thereupon proceed to protect and enforce its
rights either by suit in equity, or by action at law, or by other appropriate
proceedings whether for the specific performance (to the extent permitted by
law) of any covenant or agreement contained in this Debenture or in aid of the
exercise of any power granted in this Debenture, and proceed to enforce the
payment of any of the Note held by it, and to enforce any other legal or
equitable right of such holder.
3
<PAGE>
(c) Except or expressly provided for herein, the Company
specifically waives all rights it may have (i) to notice of nonpayment, demand,
presentment, protest and notice of protest with respect to any of the
obligations hereunder or the shares; (ii) notice of acceptance hereof or of any
other action taken in reliance hereon, notice and opportunity to be heard before
the exercise by Holder of the remedies of self-help, set-off, or other summary
procedures and all other demands and notices of any description except for cure
periods; and (111) releases Holder, its officers, directors, agents, employees
and attorneys from all claims for loss, damage caused by any act or failure to
act on the part of Holder, its officers, attorneys, agents, directors and
employees except for gross negligence or WILLFUL misconduct.
111. To effectuate the terms and provision of this Debenture, the
Holder may send notice of any default to the Company's Attorney-in-Fact (the
Attorney-in-Fact and send a copy of such notice to the Company and its counsel,
simultaneously, and request the Attorney-in-Fact, to comply with the terms of
this Debenture and Purchase Agreement and all agreements entered into pursuant
to the Purchase Agreement, on behalf of the Company.
Section 3. Conversion
(a) This Debenture shall be convertible into shares of Common
Stock at the Conversion Ratio, at the option of the Holder in whole or in part,
at any time, commencing on the Original Issue Date. Any conversion under this
Section 3(a) shall be of a minimum principal amount of $10,000.00 of Debentures
and the interest due on such amount. The Holder shall effect conversions by
surrendering the Debentures (or such portions thereof) to be converted to the
Company, together with the form of conversion notice attached hereto as Exhibit
A (the "Holder Conversion Notice") in the manner set forth in Section 30). Each
Holder Conversion Notice shall specify the PRINCIPAL amount of Debentures and
related Interest to be converted, and the date on which such conversion is to be
effected (the "Holder Conversion Date"). Subject to Section 3, each Holder
Conversion Notice, once given, shall be irrevocable. If the Holder is converting
less than all of the principal amount represented by the Debenture(s) tendered
by the Holder with the Holder Conversion Notice, the Company shall promptly
deliver to the Holder a new Debenture for such principal amount as has not been
converted.
(b) Not later than two Business Days after the Conversion
Date, the Escrow Agent will deliver to the Holder (1) a certificate or
certificates which shall be free of restrictive legends and trading restrictions
(other than those then required by law), representing the number of shares of
Common Stock being acquired upon the conversion of Debentures and (ii)
Debentures in principal amount equal to the principal amount of Debentures not
converted; provided, however that the Company shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon conversion of
any Debentures, until Debentures are either delivered for conversion to the
Company or any transfer agent for the Debentures or Common Stock, or the Holder
notifies the Company that such Debentures have been lost, stolen or destroyed
and provides a bond (or other adequate security reasonably acceptable to the
Company) satisfactory to the Company to indemnify
4
<PAGE>
the Company from any loss incurred by it in connection therewith. In the case of
a conversion pursuant to a Holder Conversion Notice, if such certificate or
certificates are not delivered by the date required under this Section 3(b), the
Holder shall be entitled by written notice to the Company at any time on or
before its receipt of such certificate or certificates thereafter, to rescind
such conversion, in which event the Company shall immediately return the
Debentures tendered for conversion.
(c) (1) The Conversion Price for each Debenture in effect on
any Conversion Date shall be the lesser (X) $3.00 ("Fixed Conversion Price") or
(Y) 65% (sixty-five) of the average closing bid price or the shares of the
Company's common stock for the five (5) Trading Days immediately preceding the
Conversion Date ("Floating Conversion Price").
(ii) If the Company, at any time while any Debentures
are outstanding, (a) shall pay a stock dividend or otherwise make a distribution
or distributions on shares of its Junior Securities payable in shares of its
capital stock (whether payable in shares of its Common Stock or of capital stock
of any class), (b) subdivide outstanding shares of Common Stock INTO A LARGER
number of shares, (c) combine outstanding shares of Common Stock into a smaller
number of shares, or (d) issue by reclassification of shares of Common Stock any
shares of capital STOCK of the Company, the Adjusted Conversion Price designated
in Section 3(c)(i) shall be multiplied by a fraction of which the numerator
shall be the number of shares of Common Stock of the Company outstanding before
such event and of which the denominator shall be the number of shares of Common
Stock outstanding after such event. Any adjustment made pursuant to this Section
3(c)(ii) shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a
subdivision, combination or re-classification.
(111) If the Company, at any time while any
Debentures are outstanding, shall issue rights or warrants to all holders of
Common Stock entitling them to subscribe for or purchase shares of Common Stock
at a price per share less than the Per Share Market Value of Common Stock at the
record date mentioned below, the Adjusted Conversion Price of the record date
designated in Section 3(c)(i) shall be multiplied by a fraction, of which the
denominator shall be the number of shares of Common Stock (excluding treasury
shares, if any) outstanding on the date of issuance of such rights or wan-ants
plus the number of additional shares of Common STOCK OFFERED for subscription or
purchase, and of which the numerator shall be the number of shares of Common
Stock (excluding treasury shares, if any) outstanding on the date of issuance of
such rights or warrants plus the number of shares which the aggregate offering
price of the total number of shares so offered would purchase at such Per Share
Market Value. Such adjustment shall be made whenever such rights or warrants are
issued, and shall become effective immediately after the record date for the
determination of stockholders entitled to receive such rights or warrants.
However, upon the expiration of any night or warrant to purchase Common Stock
the issuance of which resulted in an adjustment in the Conversion Price
designated in Section 3(c)(i) pursuant to this Section 3(c)(iii), if any such
right or warrant shall expire and shall not have been exercised, the Adjusted
Conversion Price designated in Section 3(c)(i) shall immediately upon such
expiration be recomputed and
5
<PAGE>
effective immediately upon such expiration be increased to the price which it
would have been (but reflecting any other adjustments in the Conversion Price
made pursuant to the provisions of this Section 3 after the issuance of such
rights or warrants) had the adjustment of the Conversion Price made upon the
issuance of such rights or warrants been made on the basis of offering for
subscription or purchase only that number of shares of Common Stock actually
purchased upon the exercise of such rights or warrants actually exercised.
(iv) If the Company, at any time while Debentures are
outstanding, shall distribute to all holders of Common Stock (and not to holders
of Debentures) evidences of its indebtedness or assets or rights or warrants to
subscribe for or purchase any security (excluding those referred to in Section
3(c)(iii) above) then in each such case the Conversion Price at which each
Debenture shall thereafter be convertible shall be determined by multiplying the
Adjusted Conversion Price in effect immediately prior to the record date fixed
for determination of in stockholders entitled to receive such distribution by a
fraction of which the denominator shall be the Per Share Market Value of Common
Stock determined as of the record date mentioned above, and of which the
numerator shall be such Per Share Market Value of the Common Stock on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so DISTRIBUTED APPLICABLE TO ONE
OUTSTANDING share of Common Stock as determined by the Board of Directors in
good faith; provided, however that in the event of a distribution exceeding ten
percent (10%) of the net assets of the Company, such fair market value shall be
determined by a nationally recognized or major regional investment banking firm
or firm of independent certified public accountants of recognized standing
(which may be the firm that regularly examines the financial statements of the
Company) (an "Appraiser") selected in good faith by the holders of a majority of
the principal amount of the Debentures then outstanding; and provided, further
that the Company, after receipt of the determination by such Appraiser shall
have the night to select an additional Appraiser, in which case the fair market
value shall be equal to the average of the determinations by each such
Appraiser. In either case the adjustments shall be described in a statement
provided to the Holder and all other holders of Debentures of the portion of
assets or evidences of indebtedness so distributed or such subscription rights
applicable to one share of Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective immediately after the
record date mentioned above.
(v) All calculations under this Section 3 shall be
made to the nearest cent or the nearest 1/100th of a share, as the case may be.
(vi) In the event the Conversion Price is not
adjusted pursuant to Section 3(c)(ii), (iii), (iv), or (v), the Company shall
promptly redeem tile Debentures at 135% of the Purchase Price of the Debentures
and pay such amount and all accrued interest and dividends to the Holder.
(vii) Whenever the Conversion Price is adjusted
pursuant to Section 3(c)(ii),(iii), (iv) or (v), or redeemed pursuant to Section
3(c)(vi), the Company shall promptly mail
6
<PAGE>
to the Holder and to each other holder of Debentures, a notice setting forth the
Conversion Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.
(viii) In case of any reclassification of the Common
Stock, any consolidation or merger of the Company with or into another person,
the sale or transfer of all or substantially all of the assets of the Company or
any compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property, then each holder of Debentures then
outstanding shall have the right thereafter to convert such Debentures only into
the shares of stock and other securities and property receivable upon or deemed
to be held by holders of Common Stock following such reclassification,
consolidation, merger, sale, transfer or share exchange, and the Holder shall be
entitled upon such event to receive such amount of securities or property as the
shares of the Common Stock into which such Debentures could have been converted
immediately prior to such reclassification, consolidation, merger, sale,
transfer or share exchange would have been entitled. The terms of any such
consolidation, merger, sale, transfer or share exchange shall include such terms
so as to continue to give to the Holder the night to receive the securities or
property set forth in this Section 3(c)(viii) upon any conversion following such
consolidation, merger, sale, transfer or share exchange. This provision shall
similarly apply to successive reclassifications, consolidations, mergers, sales,
transfers or share exchanges.
(ix) If:
(A) the Company shall declare a dividend (or
any other distribution) on its Common
Stock; or
(B) the Company shall declare a special
nonrecurring cash dividend on or a
redemption of its Common Stock; or
(C) the Company shall authorize the granting to
all holders of the Common Stock rights or
warrants to subscribe for or purchase any
shares of capital stock of any class or of
any rights; or
(D) the approval of any stockholders of the
Company shall be required in connection
with any reclassification of the Common
Stock of the Company (other than a
subdivision or combination of the
outstanding shares of Common Stock), any
consolidation or merger to which the
Company is a party, any sale or transfer of
all or substantially all of the assets of
the Company, or any compulsory share
exchange whereby the Common Stock is
converted into other securities, cash or
property; or
7
<PAGE>
(E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or
winding-up of the affairs of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures, and shall cause to be mailed to the
Holder and each other holder of Debentures at their last addresses as it shall
appear upon the Debenture Register, at least 30 calendar days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distributions, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation or winding-up
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, share exchange,
dissolution, liquidation or winding-up; provided, however, that the failure to
mail such notice or any defect therein or in the mailing thereof shall not
affect the validity of the corporate action required to be specified in such
notice.
(x) Nothing in this agreement shall preclude the
Company from. issuing employee/director/officer stock options, and any such
issuance shall not cause a recalculation of the Conversion Price.
(d) If at any time conditions shall arise by reason of action
taken by the Company which in the opinion of the Board of Directors are not
adequately covered by the other provisions hereof and which might materially and
adversely affect the rights of the Holder and all other holders of Debentures
(different than or distinguished from the effect generally on rights of holders
of any class of the Company's capital stock) or if at any time any such
conditions are expected to arise by reason of any action contemplated by the
Company, the Company shall, at least 30 calendar days prior to the effective
date of such action, mail a written notice to each holder of Debentures briefly
describing the action contemplated and the material adverse effects of such
action on the rights of such holders and an Appraiser selected by the holders of
majority in principal amount of the outstanding Debentures shall give its
opinion as to the adjustment, if any (not inconsistent with the standards
established in this Section 3), of the Conversion Price (including, if
necessary, any adjustment as to the securities into which Debentures may
thereafter be convertible) and any distribution which is or would be required to
preserve without diluting the rights of the holders of Debentures; provided,
however, that the Company, after receipt of the determination by such Appraiser,
shall have the right to select an additional Appraiser, in which case the
adjustment shall be equal to the average of the adjustments recommended by each
such Appraiser. The Board of Directors shall make the adjustment recommended
forthwith upon the receipt of such opinion or opinions or the taking of any such
action contemplated, as the case may be; provided, however, that no such
adjustment of the Conversion Price shall be made which in the opinion of the
Appraiser(s)
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<PAGE>
giving the aforesaid opinion or opinions would result in an increase of the
Conversion Price to more than the Conversion Price then in effect.
(e) The Company covenants that it will at all times reserve
and keep available out of its authorized and unissued Common Stock solely for
the purpose of issuance upon conversion of Debentures as herein provided, free
from preemptive rights or any other actual contingent purchase rights of persons
other than the holders of Debentures, such number of shares of Common Stock as
shall be issuable (taking into account the adjustments and restrictions of
Section 3(b) and Section 3(c) hereof) upon the conversion of the aggregate
principal amount of all outstanding Debentures. The Company covenants that all
shares of Common Stock that shall be so issuable shall, upon issue, be duly and
validly authorized, issued and fully paid and nonassessable.
(f) No fractional shares of Common Stock shall be issuable
upon a conversion hereunder and the number of shares to be issued shall be
rounded up to the nearest whole share. If a fractional share interest arises
upon any conversion hereunder, the Company shall eliminate such fractional share
interest by issuing Holder an additional full share of Common Stock.
(g) The issuance of certificates for shares of Common Stock on
conversion of Debentures shall be made without charge to the Holder for any
documentary stamp or similar taxes that may be payable in respect of the issue
or delivery of such certificate, provided that the Company shall not be required
to pay any tax that may be payable in respect of any transfer 'involved in the
issuance and delivery of any such certificate upon conversion in a name other
than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
(h) Debentures converted into Common Stock shall be canceled.
(i) On the Maturity Date, the Debentures and all interest due
thereon shall convert automatically into shares of Common Stock at the lesser of
the Fixed Conversion Price or the Floating Conversion Price set forth in Section
3 (c)(i).
(j) Each Holder Conversion Notice shall be given by facsimile
and by mail, postage prepaid, addressed to the Treasurer of the Company at the
facsimile telephone number and address of the principal place of business of the
Company. Each Company Conversion Notice shall be given by facsimile and by mail,
postage prepaid, addressed to each holder of Debentures at the facsimile
telephone number and address of such holder appearing on the books of the
Company or provided to the Company by such holder for the purpose of such
Company Conversion Notice, or if no such facsimile telephone number or address
appears or is so provided, at the principal place of business of the holder. Any
such notice shall be deemed given and effective upon the earliest to occur of
(i) receipt of such facsimile at the facsimile telephone number specified in
this Section 30), (ii) five days after deposit in the United States mails or
(iii) upon actual receipt by the party to whom such notice is required to be
given.
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<PAGE>
Section 4. Redemption. At any time after the Closing, the
Company shall have the option to redeem any unconverted amount of the Debenture,
upon three (3) days notice to the Holder. The redemption price shall be 135% of
the unconverted amount of the Debenture and related interest.
Section 5. Definitions. For the purposes hereof, the following
terms shall have the following meanings:
"Adjusted Conversion Price" means the lesser of the Fixed
Conversion Price or the Floating Conversion Price one day prior to the record
date set for the determination of stockholders entitled to receive dividends,
distributions, rights, warrants as provided for in Sections 3(c)(ii), (iii) and
(iv).
"Attorney-in-Fact" shall have the same meaning as used in the
Purchase Agreement.
"Business Day" means any day of the year on which commercial
banks are not required or authorized to be closed in New York City.
"Common Stock" means shares now or hereafter authorized of the
class of Common Stock, $0.001 par value, of the Company and stock of any other
class into which such shares may hereafter have been reclassified or changed.
"Conversion Date" means the date on which a Conversion Notice
is dated.
"Conversion Ratio" means, at any time, a fraction, of which
the numerator is the principal amount represented by any Debenture plus accrued
but unpaid interest, and of which the denominator is the Conversion Price at
such time.
"Escrow Agent" means the Escrow Agent as defined in the
Purchase Agreement.
"Junior Securities" means the Common Stock, all other equity
securities of the Company and all other debt that is subordinated to the Debtors
by its terms.
"Original Issue Date" shall mean the date of the first
issuance of this Debenture regardless of the number transfers hereof I
"Per Share Market Value" means on any particular date (a) the
closing bid price per share of the Common Stock on such date on The
Over-The-Counter Bulletin Board ("OTCBB") or other stock exchange on which the
Common Stock has been listed or if there is no such price on such date, then the
last bid price on such exchange on the date nearest preceding such date, or (b)
if the Common Stock is not listed on OTCBB or any stock exchange, the closing
bid price for a share of Common Stock in the over-the-counter market, as
reported by the NASD at the close of business on
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<PAGE>
such date, or (c) if the Common Stock is not quoted by the NASD, the closing bid
price for a share of Common Stock in the over-the-counter market as reported by
the National Quotation Bureau Incorporated (or similar organization or agency
succeeding to its functions of reporting prices), or (d) if the Common Stock is
no longer publicly traded the fair market value of a share of Common Stock as
determined by an Appraiser (as defined in Section 3(c)(iv) above) selected in
good faith by the holders of a majority of principal amount of outstanding
Debentures; provided, however, that the Company, after receipt of the
determination by such Appraiser, shall have the night to select an additional
Appraiser, in which case, the fair market value shall be equal to the average of
the determinations by each such Appraiser.
"Person" means a corporation, an association, a partnership,
organization, a business, an individual, a government or political subdivision
thereof or a governmental agency.
"Trading Day" means (a) a day on which the Common Stock is
traded on the OTCBB or principal stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not listed on the OTCBB or any stock
exchange, a day on which the Common Stock is traded in the over-the-counter
market, as reported by the NASD, or (c) if the Common Stock is not quoted on the
NASD, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices).
Section 6. Except as expressly provided herein, no provision
of this Debenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, and 'interest on, this
Debenture at the time, place, and rate, and in the coin or currency, herein
prescribed. This Debenture is a direct obligation of the Company. This Debenture
ranks pan passu with all other Debentures now or hereafter issued under the
terms set forth herein. The Company may not prepay any portion of the
outstanding principal amount on the Debentures except in accordance with the
redemption provision under Section 4 herein.
Section 7. This Debenture shall not entitle the Holder to any
of the rights of a stockholder of the Company, including without limitation, the
night to vote, to receive dividends and other distributions, or to receive any
notice of, or to attend, meetings of stockholders or any other proceedings of
the Company, unless and to the extent converted into shares of Common Stock in
accordance with the terms hereof
Section 8. If this Debenture shall be mutilated, lost, stolen
or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Debenture, or in lieu of
or in substitution for a lost, stolen or destroyed debenture, a new Debenture
FOR THE PRINCIPAL AMOUNT OF THIS DEBENTURE so mutilated, lost, stolen or
destroyed but only upon receipt of evidence of such loss, theft or destruction
of such Debenture, and of the ownership hereof, and indemnity, if requested, all
reasonably satisfactory to the Company.
Section 9. This Debenture shall be governed by and construed
in accordance with the laws of the State of New York, without giving effect to
conflicts of laws thereof.
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<PAGE>
Section 10. All notices or other communications hereunder
shall be given, and shall be deemed duly given and received, if given, in the
manner set forth in Section 30).
Section 11. Any waiver by the Company or the Holder a breach
of any provision of this Debenture shall not operate as or be construed to be a
waiver of any other breach of such provision or of any breach of any other
provision of this Debenture. The failure of the Company or the Holder to insist
upon strict adherence to any term of this Debenture on one or more occasions
shall not be considered a waiver or deprive that party of the night thereafter
to insist upon strict adherence to that term or any other term of this
Debenture. Any waiver must be in writing.
Section 12. If any provision of this Debenture is invalid,
illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
Section 13. Whenever any payment or other obligation hereunder
shall be due on a day other than a Business Day, such payment shall be made on
the next succeeding Business Day.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed by an officer thereunto duly authorized as of the date first
above indicated.
ACCORD ADVANCED TECHNOLOGIES, INC.
Attest: /s/ Carl P. Ronne /s/ Travis Wilson
----------------------- ------------------------------------
Name: Travis Wilson
Title: President
13
ESCROW AGREEMENT
ESCROW AGREEMENT (this "Agreement"), dated as of November 22,
1998, by and among Accord Advanced Technologies, Inc., a Nevada corporation (the
"Company"), Kaplan Gottbetter & Levenson, LLP (the "Escrow Agent") and the
parties who have executed this Agreement as the Purchaser (individually, the
"Purchaser" and collectively, the "Purchasers").
RECITALS
A. Simultaneously with the execution of this Agreement, the
Purchasers have entered into a Convertible Debenture Purchase Agreement, dated
as of the date hereof (the "Purchase Agreement"), pursuant to which the
Purchasers have agreed to purchase certain debentures (the "Debentures") of the
Company.
B. The Escrow Agent is willing to act as escrow agent pursuant
to the terms of this Agreement with respect to the Purchase Price (as defined in
the Purchase Agreement) to be paid for the Debentures and the delivery of one or
more debentures representing the Debentures registered in the names of the
Purchasers as set forth in the Purchase Agreement (the "Debentures" and,
together with the Ancillary Closing Documents (as defined below), of one or more
warrants representing the Warrants registered in the name of GEM Management Ltd.
or its assigns as set forth in the Purchase Agreement (the "Warrants") and with
respect to shares to be issued by the Company in respect of conversion of the
Debentures or the exercise of the Warrants, (collectively, the "Consideration")
C. Upon the closing of the transaction contemplated by the
Purchase Agreement (the "Closing") and the occurrence of an event described in
Section 2 below, the Escrow Agent shall cause the distribution of the Purchase
Price, Ancillary Closing Documents, the Debentures and the Warrants in
accordance with the terms of this Agreement.
D. All capitalized terms used but not defined herein shall
have the meanings ascribed thereto in the Purchase Agreement.
NOW, THEREFORE, IT IS AGREED:
1. DEPOSIT OF CONSIDERATION. (a) The Purchasers shall deposit with the Escrow
Agent a copy of the Purchase Agreement, and this Escrow Agreement or a
counterpart thereof, each executed by the Purchasers, and the Purchase Price.
The Company shall deliver to the Escrow Agent (i) the Purchase Agreement or a
counterpart thereof signed by the Company, (ii) this Escrow Agreement or a
counterpart thereof signed by the Company, (iii) certificates (in denominations
of no more than 25,000 and free of any restrictive legends) registered in the
names of the Purchasers representing a number of common shares of the Company
equal to 1,700,000, held for the purpose of honoring conversions by the
Purchasers of the Debentures (the "Debenture Escrow Shares"), rounded up to
<PAGE>
the nearest 25,000 shares, (iv) the Debentures, registered in the names of the
Purchasers, (v) Common Stock Purchase Warrants, for the purchase of 200,000
shares, registered in the name of GEM Management, Ltd. or its assigns, (vi)
stock certificates (in denominations of no more than 25,000, free of any
restrictive legends) registered in the name of Gem Management, Ltd. or its
assigns representing a number of common shares of the Company equal to 200,000
held for the purpose of honoring the exercise of the Common Stock Purchase
Warrants, upon the completion of the purchase of $530,000 of Debentures (the
Warrant Escrow Shares") (the Debenture Escrow Shares and the Warrant Escrow
Shares collectively, the "Escrow Shares"), and (vii) wiring instructions for
transfer of the Purchase Price by the Escrow Agent into an account specified by
the Company for such purpose. In addition, the Company shall deposit or cause to
be deposited with the Escrow Agent an opinion of the Company's counsel addressed
to the Purchasers in the form of Exhibit D attached to the Purchase Agreement,
the executed power of attorney in the form of Exhibit F attached to the Purchase
Agreement and the schedules to the Purchase Agreement (such opinion and
schedules being hereinafter referred to as the "Ancillary Closing Documents").
(i) The Purchase Price shall be delivered by the
Purchasers to the Escrow Agent by wire transfer to the following account:
Bank of New York
100 East 42nd Street
New York, NY 100 17
ABABA 021000018
Kaplan Gottbetter & Levenson, LLP
Acct# 6300584649
Reference: AVTI
(11) The Debentures, Warrants and Escrow Shares and
Ancillary Closing Documents shall be delivered by the Company to the Escrow
Agent at its address for notice indicated in Section 6(a)(ii).
(b) Until termination of this Agreement as set forth in
Section 2, all additional amounts of the Purchase Price paid by or which becomes
payable between the Company and the Purchasers shall be deposited with the
Escrow Agent.
(c) The Escrow Agent agrees to hold the Consideration received
by it in accordance with the terms and conditions set forth herein until it has
received all of the consideration;
(d) The Purchasers and the Company understand that the
Purchase Price delivered to the Escrow Agent pursuant to Section I (a) shall be
held in escrow in a non-interest bearing IOLA account until the Closing. The
Purchase Price will be returned promptly to the Purchasers if all of the
Consideration is not received on or before November 30, 1998. After all of
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<PAGE>
the Consideration has been received by the Escrow Agent, the parties hereto
hereby authorize and instruct the Escrow Agent to promptly effect the Closing.
2. TERMS OF ESCROW.
(a) The Escrow Agent shall hold the Consideration in escrow
until the earlier to occur of (1) the receipt by the Escrow Agent of the total
amount of the Purchase Price from the Purchaser or (ii) the receipt by the
Escrow Agent of a notice, executed by each of the Company and the Purchaser,
stating that the Purchase Agreement has been terminated or otherwise directing
the disposition of the Consideration.
(b) If the Escrow Agent receives the items referenced in
clause (i) of Section 2(a) prior to its receipt of the notice referenced in
clause (ii) of Section 2(a), then, the Escrow Agent shall deliver as soon as
practicable, but in no event later than three (3) business days, the Debentures,
Warrants and the Ancillary Closing Documents executed by the Company to the
Purchasers or the holders of the Warrants (the "Warrant Holders") and shall
deliver immediately to the Company the Purchase Price.
(c) If the Escrow Agent receives the notice referenced in
clause (11) of Section 2(a) prior to its receipt of the items referenced in
clause (1) of Section 2(a), then the Escrow Agent shall promptly deliver the
Purchase Price, Debentures, Warrants and Ancillary Closing Documents as
specified in such notice. The parties agree that if such notice is silent as to
the delivery of such items, the Escrow Agent shall promptly upon receipt of such
notice return (i) the Purchase Price to the Purchasers, (ii) the Debentures and
Warrants to the Company and (ill) the Ancillary Closing Documents to the party
that delivered the same.
(d) If the Escrow Agent, prior to delivering or causing to be
delivered the Consideration in accordance herewith, receives notice of
objection, dispute, or other assertion in accordance with any of the provisions
of this Agreement, the Escrow Agent shall continue to hold the Consideration
until such time as the Escrow Agent shall receive (1) written instructions
jointly executed by the Purchasers and the Company, directing distribution of
such Consideration, or (11) a certified copy of a judgment, order or decree of a
court of competent jurisdiction, final beyond the right of appeal, directing the
Escrow Agent to distribute said Consideration to any party hereto or as such
judgment, order or decree shall otherwise specify (including any such order
directing the Escrow Agent to deposit the Consideration into the court rendering
such order, pending determination of any dispute between any of the parties). In
addition, the Escrow Agent shall have the right to deposit any of the
Consideration with a court of competent jurisdiction without liability to any
party if said dispute is not resolved within 30 days of receipt of any such
notice of objection, dispute or otherwise.
(e) At any time, and from time to time during the term of this
Agreement, the Purchasers and/or the Warrant Holders may deliver to the Escrow
Agent written notice (a "Conversion Notice" or the "Notice of Exercise") that it
has elected to convert the Debentures
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<PAGE>
registered in the names of such Purchasers, in whole or in part, in accordance
with the terms of the Debentures (including, without limitation; giving the
required notice to the Company and tendering to the Company the Debenture(s) to
be converted), or that it has elected to exercise the Warrants registered in the
names of such Warrant Holder, in whole or in part, in accordance with the terms
of the Warrants (including, without limitation; giving the required notice to
the Company and tendering to the Company the Warrant(s) to be exercised), and
the Conversion Notice to be in the form annexed as Exhibit A hereto and the
Notice of Exercise to be in the form annexed as Exhibit B hereto. A fee of $350
shall accompany every Conversion Notice or Notice of Exercise delivered to the
Escrow Agent. A copy of the Conversion Notice or Notice of Exercise shall be
delivered by the Purchasers or the Warrant Holders, as the case may be, to the
Company and its counsel simultaneously, and evidence of such delivery to the
Company shall be provided to the Escrow Agent. The Conversion Notice or Exercise
Notice shall specify the number of Escrow Shares to be released by the Escrow
Agent. The Company shall confirm or object to the Escrow Agent the number of
Escrow Shares to be released, within two business day of the receipt of the
Conversion Notice or Notice of Exercise. If the Company falls to confirm or
object to the number of Escrow Shares to be released within the said time, then
the Company shall be deemed to have confirmed the number of Escrow Shares set
forth in the Purchasers' or Warrant Holders' Notice. In the event of a dispute,
the Parties agree that the Escrow Agent shall determine the number of Escrow
Shares to be released. The Escrow Agent shall be entitled but not obligated, at
his sole discretion, to verify the computation of the number of Escrow Shares to
be released through information provided by Bloomberg Information Service or
similar stock price quotation service. Within two business days, the Escrow
Agent will release from escrow and deliver to the Purchasers unlegended
certificates or instruments representing the number of Escrow Shares issuable to
the Purchasers or the Warrant Holders in accordance with such conversion or
exercise. In the event that the certificates evidencing the Escrow Shares held
by the Escrow Agent are not in denominations appropriate for such delivery to
the Purchasers or the Warrant Holders, the Escrow Agent shall request the
Company to cause its transfer agent and registrar to reissue certificates in
smaller denominations. The Escrow Agent shall, however, immediately release to
the Purchasers or the Warrant Holders certificates representing such lesser
number of shares as the denominations in his possession will allow that is
closest to but no more than the actual number to be released to the Purchasers
or the Warrant Holders. Upon his receipt of the reissued shares in lesser
denominations from the Company's transfer agent, the Escrow Agent shall release
to the Purchasers or the Warrant Holders, the balance of the shares due to the
Purchasers or the Warrant Holders.
(f) The Escrow Agent agrees to notify in writing the Company
and its counsel each time it releases Escrow Shares to the Purchasers (including
the certificate numbers) or the Warrant Holders. Until any such release and
notification to the Company, the Escrow Shares shall not be deemed to be validly
issued and outstanding shares of capital stock of the Company.
(g) The Company agrees that, at any time the conversion price
of the Debentures is such that the number of Debenture Escrow Shares is less
than 200% of the number that would be needed to satisfy full conversion of all
of the Debentures given the then current conversion price (the "Full Conversion
Shares") and upon five days written notice of such to the
4
<PAGE>
Company by the Purchasers, it will issue additional share certificates, without
legend and in the names of the Purchasers, and deliver same to the Escrow Agent,
such that the new number of Debenture Escrow Shares is equal to 200% of the Full
Conversion Shares.
3. DUTIES AND OBLIGATIONS OF THE ESCROW AGENT.
(a) The parties hereto agree that the duties and obligations
of the Escrow Agent are only such as are herein specifically provided and no
other. The Escrow Agent's duties are as a depositary only, and the Escrow Agent
shall incur no liability whatsoever, except as a direct result of its willful
misconduct or gross negligence.
(b) The Escrow Agent may consult with counsel of its choice,
and shall not be liable for any action taken, suffered or omitted by it in
accordance with the advice of such counsel.
(c) The Escrow Agent shall not be bound in any way by the
terms of any other agreement to which the Purchasers and the Company are
parties, whether or not it has knowledge thereof, and the Escrow Agent shall not
in any way be required to determine whether or not any other agreement has been
complied with by the Purchasers and the Company, or any other party thereto. The
Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, rescission or supersession of this Agreement unless the same shall
be in writing and signed jointly by each of the Purchasers and the Company, and
agreed to in writing by the Escrow Agent.
(d) If the Escrow Agent shall be uncertain as to its duties or
rights hereunder or shall receive instructions, claims or demands which, in its
opinion, are in conflict with any of the provisions of this Agreement, it shall
be entitled to refrain from taking any action, other than to keep safely all
property held in escrow, until it shall jointly be directed otherwise in writing
by the Purchasers and the Company or by a final judgment of a court of competent
jurisdiction.
(e) The Escrow Agent shall be fully protected in relying upon
any written notice, demand, certificate or document which it, in good faith,
believes to be genuine. The Escrow Agent shall not be responsible for the
sufficiency or accuracy of the form, execution, validity or genuineness of
documents or securities now or hereafter deposited hereunder, or of any
endorsement thereon, or for any lack of endorsement thereon, or for any
description therein; nor shall the Escrow Agent be responsible or liable in any
respect on account of the identity, authority or rights of the persons executing
or delivering or purporting to execute or deliver any such document, security or
endorsement.
(f) The Escrow Agent shall not be required to institute legal
proceedings of any kind and shall not be required to defend any legal
proceedings which may be instituted against it or in respect of the
Consideration.
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<PAGE>
(g)If the Escrow Agent at any time, in its sole discretion,
deems it necessary or advisable to relinquish custody of the Consideration, it
may do so by delivering the same to any other escrow agent mutually agreeable to
the Purchasers and the Company and, if no such escrow agent shall be selected
within three days of the Escrow Agent's notification to the Purchasers and the
Company of its desire to so relinquish custody of the consideration, then the
Escrow Agent may do so by delivering the Consideration to the clerk or other
proper officer of a court of competent jurisdiction as may be permitted by law.
The fee of any court officer shall be borne by the Company. Upon such delivery,
the Escrow Agent shall be discharged from any and all responsibility or
liability with respect to the Consideration and the Company and the Purchasers
shall promptly pay to the Escrow Agent all monies which may be owed it for its
services hereunder, including, but not limited to, reimbursement of its
out-of-pocket expenses pursuant to paragraph (i) below.
(h) This Agreement shall not create any fiduciary duty on the
Escrow Agent's part to the Purchasers or the Company, nor disqualify the Escrow
Agent from representing either party hereto in any dispute with the other,
including any dispute wiht respect to the Consideration. The parties understand
that the Escrow Agent has acted and will continue to act as counsel to the
Company.
(i) The Escrow Agent represents that it is counsel to at least
on of the Purchasers. The parties agree that the Escrow Agent's engagement as
provided for herein is not and shall not be objectionable for any reason.
(j) Upon the performance of this Agreement, the Escrow Agent
shall be deemed released and discharged of any further obligations hereunder.
4. FEES, EXPENSES AND COMMISSIONS
(a) The Escrow Agent fee of $5,000, and all reasonable
out-of-pocket expenses paid or incurred by the Escrow Agent in the
administration of its duties hereunder, including, but not limited to, postage,
all outside counsel to the Escrow Agent and advisors' and agents' fees and all
taxes or other governmental charges, if any, shall be paid from the gross
proceeds from the sale of the Debentures held in escrow. The Escrow Agent shall
retain the sum of $300 from the gross proceeds from the sale of the Debentures
for out-of-pocket expenses, and the Company agrees to pay the Escrow Agent any
out-of-pocket expenses in excess of the $300, upon receipt of an invoice from
the Escrow Agent for such excess amount. The Escrow Agent is directed to pay
itself such Escrow Agent fee and out-of-pocket expenses in the amount of $300
from the escrow, at Closing. The Company is to receive prior written notice in
the event the Escrow Agent engages outside counsel.
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<PAGE>
(b) A management fee of an aggregate of six percent (6%) of
the gross proceeds from the sale of the Debentures, will be paid to GEM
Advisors, Inc. from the funds held in escrow.
(c) The document production fee of $5,000 pursuant to the
terms of the retainer agreement dated November 5, 1998 among Kaplan Gottbetter &
Levenson, LLP ("KGL"), the Company and GEM Advisors, Inc., will be paid to KGL
from the funds held in escrow.
5. INDEMNIFICATION.
(a) The Purchasers hereby indemnify and hold free and harmless
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amounts paid in
settlement) resulting from claims asserted by the Company against Escrow Agent
with respect to the performance of any of the provisions of this Agreement.
(b) The Company hereby indemnifies and holds free and harmless
Escrow Agent from any and all losses, expenses, liabilities and damages
(including but not limited to reasonable attorney's fees, and amount paid in
settlement) resulting from claims asserted by the Purchasers against Escrow
Agent with respect to the performance of any of the provisions of this
Agreement.
(c) The Purchasers and the Company, Jointly and severally,
hereby indemnify and hold the Escrow Agent harmless from and against any and all
losses, damages, taxes, liabilities and expenses that may be incurred by the
Escrow Agent, arising out of or in connection with its acceptance of appointment
as the Escrow Agent hereunder and/or the performance of its duties pursuant to
this Agreement, the Purchase Agreement, the Debentures and the Warrants,
including, but not limited to, all legal costs and expenses of the Escrow Agent
incurred defending itself against any claim or liability in connection with its
performance hereunder, provided that the Escrow Agent shall not be entitled to
any indemnity for any losses, damages, taxes, liabilities or expenses that
directly result from its willful misconduct or gross negligence.
6. MISCELLANEOUS.
(a) All notices, requests, demands and other communications
hereunder shall be in writing, with copies to all the other parties hereto, and
shall be deemed to have been duly given when (i) if delivered by hand, upon
receipt, (ii) if sent by telecopier, upon receipt of proof of sending thereof,
(111) if sent by Express Mail, Federal Express or other express delivery service
(receipt requested), the next business day or (iv) if mailed by first-class
registered or certified mail, return receipt requested, postage prepaid, upon
receipt, in each case if delivered to the following addresses:
7
<PAGE>
(i) If to the Company: with a copy to:
Travis Wilson Gregory Frost, Esq.
President Tanner Propp LLP
Accord Advanced 99 Park Avenue
Technologies, Inc. 25th Floor
5002 South Ash Avenue New York, NY 10016
Tempe, AZ 85282 Tel:(212) 986-7714
Tel:(602) 820-1400 Fax:(212) 687-0056
Fax:(602) 820-2319
(ii) If to the Purchaser:
At the address set forth in the Purchase Agreement
(iii) If to the Escrow Agent:
Kaplan Gottbetter & Levenson, LLP
630 Third Avenue, 5th Floor
New York, NY 10017
Tel: 212-983-0532
Fax: 212-983-9210
or at such other address as any of the parties to this Agreement may hereafter
designate in the manner set forth above to the others.
(b) This Agreement shall be construed and enforced in
accordance with the law of the State of New York applicable to contracts entered
into and performed entirely within New York.
(c) This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
8
<PAGE>
7. TERMINATION OF ESCROW.
This Escrow Agreement shall begin upon the date hereof and
shall terminate either pursuant to Section 2(a) or (d) or upon the earlier of
(1) the conversion of the full amount of the Debentures and the exercise of the
total number of Warrants; or (11) the Maturity Date of the Debentures. Upon the
termination of the Escrow Agreement, the Escrow Agent shall return any
unconverted Debenture Escrow Shares or unexercised Warrant Escrow Shares to the
Company.
[ SIGNATURE PAGE FOLLOWS ]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed the day and year first above written.
Escrow Agent: The Company:
Kaplan Gottbetter & Levenson, LLP ACCORD ADVANCED TECHNOLOGIES, INC.
By: /s/ Travis Wilson
- -------------------------------- --------------------------------
Name: Travis Wilson
Title: President
Purchasers:
By:
--------------------------------
Name:
Title:
10
<PAGE>
EXHIBIT A
NOTICE OF CONVERSION
AT THE ELECTION OF HOLDER
(To be Executed by the Registered Holder
in order to Convert the Debenture)
The undersigned hereby irrevocably elects to convert the above Debenture No.
into shares of Common Stock, $.001 per share (the "Common Stock"), of Accord
Advanced Technologies, Inc. (the "Company") according to the conditions hereof,
as of the date written below. If shares are to be issued in the name of a person
other than undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith. A fee of $350 will
be charged to the Holder for any conversion by the Escrow Agent. No other fees
will be charged to the Holder, except for such transfer taxes, if any.
Conversion calculations:
-----------------------------------------------------
Date to Effect Conversion
-----------------------------------------------------
Principal Amount of Debentures to be Converted
-----------------------------------------------------
Interest to be Converted or Paid (indicate Shares of
Cash)
-----------------------------------------------------
Applicable Conversion Price (to the nearest hundredth
-----------------------------------------------------
Signature
-----------------------------------------------------
Name
-----------------------------------------------------
Address
<PAGE>
EXHIBIT B
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the
Common Stock $_ per value, of Accord Advanced Technologies, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name as is specified
below:
3. The undersigned represents it is acquiring the shares
solely for its own account and not with a view toward the resale or distribution
thereof except in compliance with applicable securities laws.
----------------------
(Signature)
- ---------------------
(Date)
ESCROW AGREEMENT
This Escrow Agreement is entered into this 7 day of October, 1998, by and
between Accord Advanced Technologies, Inc., a Nevada corporation, (the
"Company"), Davis, McKee & Forshey, P.C., Attorneys at Law ("Escrow Agent") and
Nismic Sales Corp., a New York corporation, ("Investor").
WHEREAS on October 6, 1998, Investor entered into a Subscription Agreement and
Investment Representation of Investors ("Subscription Agreement") wherein it
agreed to purchase 250,000 shares of common stock of Company represented in the
form of certificates ("Certificates") pursuant to Regulation D, Section 504; and
NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein, together with other valuable consideration for the purchase of the
common stock, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Escrow Agent agrees to hold the Certificates representing the
250,000 shares purchased by Investor, at its offices located at 5333 North
Seventh Street, Suite A201, Phoenix, Arizona, 85014 until twelve (12) months
from the date of issuance of the Certificates, or until it received further
written instructions regarding the disposition of the certificates. Any written
instructions to Escrow Agent to deliver or transfer the certificates shall not
be valid unless it is in writing and signed by an authorized representative of
Company and Investor.
2. Investor agrees to place the Certificates in the custody of the
Escrow Agent and further agrees not to sell, make any attempt to sell, or make
any representations that said shares can be sold until the Certificates are
released to the Investor as provided for in this Agreement.
3. Upon the expiration of this Agreement Escrow Agent shall deliver the
shares to the investor, or its agent as directed by the Investor.
4. Amendment. This Agreement may be modified or amended only by a
written instrument executed by the parties hereto.
5.Term. This Agreement shall be effective until the expiration of
twelve (12) months from the date of issuance of the Certificates unless Company
and Investor advise Escrow Agent in writing 30 days prior to the expiration of
the Agreement to renew the Agreement.
6. Modification. If any term or provision contained in this Agreement
is hereafter found to be invalid or unenforceable under any rule, law,
regulation or order, this
<PAGE>
Agreement shall be deemed modified accordingly and the remaining terms
and provisions of this Agreement shall not be affected thereby and shall
continue in full force and effect.
7. Applicable Law and Venue. This Agreement shall be construed in
accordance with the laws of the State of Arizona, and it is stipulated that
venue shall be proper in Maricopa County, Arizona.
8. Survival of Obligations. Except as otherwise provided, any
obligations and duties which by their nature extend beyond the expiration or
termination of this Agreement shall survive the expiration or termination of
this Agreement.
9. Entire Agreement. This Agreement supersedes all other discussions,
representations and agreements, whether written or oral, between Company and
Investor relating to its subject matter. This Agreement constitutes and
expresses the whole agreement between the parties and there are not other
understandings or agreements, written or oral, which modify or purport to modify
this Agreement.
10. Non-Waiver. No delay or failure by either party to exercise any
right under this Agreement, and no partial or single exercises of that right,
shall constitute a waiver of that or any other right.
11.Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of each of the parties to this Agreement and their
respective successors and assigns.
12. Severability. In the event any provision of this Agreement shall be
deemed to be invalid, illegal, or unenforceable, the validity, legality, and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
13. Assignment. Assignment of this Agreement is prohibited without the
express written consent of the parties.
14. Headings and Titles. Headings and titles are for reference purposes
only.
15. Attorney fees and costs. In the event either party is required to
hire an attorney to enforce any provision of this Agreement, the prevailing
party shall be entitled to its reasonable attorneys, fees and cost, which shall
include the cost and attorney's fees associated with any settlement or
arbitration, as well as any formal litigation.
<PAGE>
IN WITNESS WHEREOF, this Escrow Agreement was duly executed on the day
first written above.
Nismic Sales Corp. Accord Advanced Technologies, Inc.
By: /s/ Signature Illegible By: /s/ Travis Wilson
--------------------------- -------------------------
Title: President Travis Wilson
Title: President
Escrow Agent
Davis, McKee & Forshey
By: /s/ Signature Illegible
----------------------------
VOID AFTER 5:00 P.M., NEW YORK TIME ON NOVEMBER _, 2001
WARRANT TO PURCHASE 200,000 SHARES OF COMMON STOCK
--------------------------------
WARRANT TO PURCHASE COMMON STOCK
OF
ACCORD ADVANCED TECHNOLOGIES, INC.
--------------------------------
THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND ARE BEING
ISSUED PURSUANT TO RULE 504 OF REGULATION D.
FOR VALUE RECEIVED, Accord Advanced Technologies, Inc., a
Nevada corporation (the "Company"), grants the following rights to GEM
Management, Ltd. P. 0. Box 860, 11 Bath Street, St. Helier, Jersey, Channel
Islands JE4 OYZ and/or its assigns ("Holder"):
ARTICLE 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings, unless
the context shall otherwise require:
(a) "Common Stock" shall mean the common stock, par
value $.001 per share, of the Company.
(b) "Corporate Office" shall mean the office of the
Company (or its successor) at which at any particular time its principal
business shall be administered.
(c) "Closing" shall have the same meaning as defined
in the Convertible Debenture Purchase Agreement.
(d) "Exercise Date" shall mean any date upon which
the Holder shall give the Company a Notice of Exercise.
(e) "Exercise Price" shall mean the price to be paid
to the Company for each share of Common Stock to be purchased upon exercise of
this Warrant in accordance with the terms hereof which, Exercise Price shall be
$.01 per share of Common Stock.
1
<PAGE>
(f) "Expiration Date" shall mean 5:00 p.m. (New York
time) on November 3 0, 200 1. Commission.
(g) "SEC" shall mean the United States Securities and
Exchange
(h) "Escrow Agent" shall mean Kaplan, Gottbetter &
Levenson, LLP, 630 Third Avenue, 5th Floor, New York, NY 10017, as the Company's
escrow agent, or its authorized successor, as such.
(i) "Underlying Shares" shall mean the shares of the
Common Stock issuable upon exercise of the Warrant.
ARTICLE 2. EXERCISE AND AGREEMENTS.
2.1 Exercise of Warrant. This Warrant shall entitle Holder to
purchase up to 200,000 (two hundred thousand) shares of Common Stock (the
"Shares") at the Exercise Price. This Warrant shall be exercisable at any time
and from time to time prior to the Expiration Date (the "Exercise Period"). This
Wan-ant and the right to purchase Shares hereunder shall expire and become void
at the Expiration Date.
2.2 Manner of Exercise.
(a) Holder may exercise this Warrant at any time,
starting at the time of Closing and from time to time during the Exercise
Period, in whole or in part (but not in denominations of fewer than 1,000
Shares, except upon an exercise of this Wan-ant with respect to the remaining
balance of Shares purchasable hereunder at the time of exercise), by delivering
to the Escrow Agent (as defined in an escrow agreement dated of the same date
between the Company and the Holder) (i) a duly executed Notice of Exercise in
substantially the form attached as Appendix 1 hereto, (ii) a bank cashier's or
certified check for the aggregate Exercise Price of the Shares being purchased,
and (iii) a bank cashier's, certified check or wire transfer of $350 to the
Escrow Agent for an exercise fee. At the option of the Holder, the exercise
price and exercise fee may be paid directly by the Escrow Agent to the Company
and to the Escrow Agent, respectively, out of the fees of the transaction as per
the term sheet dated November 4, 1998.
(b) From time to time upon exercise of this Warrant,
in whole or part, in accordance with its terms, the Escrow Agent will deliver
stock certificates to the Holder representing the number of Shares being
purchased pursuant to such exercise, subject to adjustment as described herein.
(c) Promptly following any exercise of this Wan-ant,
if the Wan-ant has not been fully exercised and has not expired, the Company
will deliver to the Holder a new Warrant for the balance of the Shares covered
hereby.
2
<PAGE>
2.3 Termination. All rights of the Holder in this Warrant, to
the extent they have not been exercised, shall terminate on the Expiration Date.
2.4 No Rights Prior to Exercise. Prior to its exercise
pursuant to Section 2.2 above, this Warrant shall not entitle the Holder to any
voting or other rights as holder of Shares.
2.5 Adjustments. In case of any reclassification, capital
reorganization, stock dividend or other change of outstanding shares of Common
Stock, or in case of any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the continuing corporation and which does not result in any reclassification,
capital reorganization, stock dividend or other change of outstanding shares or
Common Stock), or in case of any sale or conveyance to another corporation of
the property of the Company as, or substantially as, an entirety (other than a
sale/leaseback, mortgage or other financing transaction), the Company shall
cause effective provision to be made so that the Holder shall have the right
thereafter, by exercising this Warrant, to purchase the kind and number of
shares of stock or other securities or property (including cash) receivable upon
such reclassification, capital reorganization, stock dividend or other change,
consolidation, merger, sale or conveyance as the Holder would have been entitled
to receive had the Holder exercised this Warrant in full immediately before such
reclassification, capital reorganization, stock dividend or other change,
consolidation, merger, sale or conveyance. Any such provision shall include
provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 2.5. The foregoing
provisions shall similarly apply to successive reclassifications, capital
reorganizations, stock dividends and other changes of outstanding shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
2.6 Fractional Shares. No fractional Shares shall be issuable
upon exercise of this Warrant and the number of Shares to be issued shall be
rounded up to the nearest whole Share. If a fractional Share interest arises
upon any exercise of the Warrant, the Company shall eliminate such fractional
Share interest by issuing Holder an additional full Share.
2.7 Escrow. The Company agrees to enter into the escrow
agreement attached hereto as Exhibit A (the "Escrow Agreement"), and to issue
into said Escrow certificates to be held by the Escrow Agent (as defined in the
Escrow Agreement), registered in the name of the Purchaser, free of any
restrictive legends, representing a number of shares of Common Stock (in 10,000
share certificates) equal to the number of shares of this Warrant.
2.8 Account with Broker-Dealer. Upon the exercise of the
Warrants and the receipt of the Underlying Shares, the Holder shall deposit such
Shares into an account with the NASD registered broker-dealer, which
broker-dealer has been chosen by the Company.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3
<PAGE>
3.1 Representations and Warranties. The Company hereby
represents and warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise
of the purchase right represented by this Warrant shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws, and not subject to any
pre-emptive rights.
(b) The Company is a corporation duly organized and
validly existing under the laws of the State of Nevada, and has the full power
and authority to issue this Warrant and to comply with the terms hereof The
execution, delivery and performance by the Company of its obligations under this
Warrant, including, without limitation, the issuance of the Shares upon any
exercise of the Warrant have been duly authorized by all necessary corporate
action. This Warrant has been duly executed and delivered by the Company and is
a valid and binding obligation of the Company, enforceable in accordance with
its terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or similar laws affecting enforceability of
creditors' rights generally and except as the availability of the remedy of
specific enforcement, injunctive relief or other equitable relief is subject to
the discretion of the court before which any proceeding therefor may be brought.
(c) The Company is not subject to or bound by any
provision of any certificate or articles of incorporation or by-laws, mortgage,
deed of trust, lease, note, bond, indenture, other instrument or agreement,
license, permit, trust, custodianship, other restriction or any applicable
provision of any law, statute, rule, regulation, judgment, order, writ,
injunction or decree of any court, governmental body, administrative agency or
arbitrator which could prevent or be violated by or under which there would be a
default (or right of termination) as a result of the execution, delivery and
performance by the Company of this Warrant.
(d) The Company is not subject to the reporting
requirements of Section 13 or Section 15d of the Securities Exchange Act of
1934, as amended. The Company is eligible to issue the Warrants and the
Underlying Shares pursuant to Rule 504 of Regulation D promulgated under the
Securities Act. There are no restrictions on the resale or transfer of the
Warrants and Underlying Shares.
ARTICLE 4. SHELF REGISTRATION
If the Company shall propose to file with the SEC any registration
statement other than a Form 10 which would cause, or have the effect of causing,
the Company to become subject to the reporting requirements of Section 13 or 15
(d) of the Exchange Act (a "Reporting Issuer") or to take any other action the
effect of which would be to cause the Underlying Shares to be issued upon
exercise of any then outstanding Warrants to be restricted securities (as such
term is defined in Rule 144 promulgated under the Securities Act), the Company
agrees to give written notification of such to the Holders of the Warrants then
outstanding at least two weeks prior to
4
<PAGE>
such filing or taking of the proposed action. If any Warrants are outstanding at
the end of such notice period, the Company agrees to file a registration
statement on Form S-1 or SB-2, or such other form of registration statement in
which the Underlying Shares may be included, and to include in such registration
statement the Underlying Shares issuable upon exercise of any then outstanding
Warrants so as to permit the public resale thereof. All costs and expenses of
registration shall be borne by the Company.
Notwithstanding the foregoing, if the Company for any reason shall
become a Reporting Issuer, or shall have taken any action the effect of which
would be to cause the Underlying Shares to be issued upon exercise of any then
outstanding Warrants to be restricted securities (as such term is defined in
Rule 144 promulgated under the Securities Act), the Company agrees to
immediately file with the SEC and cause to become effective a registration
statement which would permit the public resale of such Underlying Shares in such
states of the United States as the Holders thereof shall reasonably request. All
costs and expenses of such registration shall be borne by the Company.
ARTICLE 5. LOSS OF EXEMPTION UNDER RULE 504
If any of the shares of Common Stock required to be reserved for
purposes of exercise of the Warrant hereunder require registration with approval
of any governmental authority under any federal (including but not limited to
the Act or similar federal statute than in force) or state law, or listing on
any national securities exchange, before such shares may be issued upon
exercise; for reasons including but not limited to a material change in Rule 504
of Regulation D of the Act, the Company will, at its expense as expeditiously as
possible to cause such shares to be duly registered or approved or listed on the
relevant national securities exchange, as the case may be. Shares of Common
Stock issued upon exercise of the Warrant shall be registered by the Company
under the Act if required by Article 4 of the Warrant and subject to the
conditions stated therein.
ARTICLE 6. MISCELLANEOUS.
6.1 Transfer. This Warrant may not be transferred or assigned,
in whole or in part, at any time, except in compliance with applicable federal
and state securities laws by the transferor and the transferee (including,
without limitation, the delivery of an investment representation letter and a
legal opinion reasonably satisfactory to the Company), provided that this
Warrant may not be transferred or assigned such that either the Holder or any
transferee will, following such transfer or assignment, hold a Warrant for the
night to purchase fewer than 1,000 Shares.
6.2 Transfer Procedure. Subject to the provisions of Section
6. 1, Holder may transfer or assign this Warrant by giving the Company notice
setting forth the name, address and taxpayer identification number of the
transferee or assignee, if applicable (the "Transferee") and surrendering this
Warrant to the Company for reissuance to the Transferee (and the Holder, in the
5
<PAGE>
event of a transfer or assignment of this Warrant in part). (Each of the persons
or entities in whose name any such new Warrant shall be issued are herein
referred to as a Holder").
6.3 Loss, Theft, Destruction or Mutilation. If this Warrant
shall become mutilated or defaced or be destroyed, lost or stolen, the Company
shall execute and deliver a new Warrant in exchange for and upon surrender and
cancellation of such mutilated or defaced Warrant or, in lieu of and in
substitution for such Warrant so destroyed, lost or stolen, upon the Holder
filing with the Company evidence satisfactory to it that such Warrant has been
so mutilated, defaced, destroyed, lost or stolen. However, the Company shall be
entitled, as a condition to the execution and delivery of such new Warrant, to
demand indemnity satisfactory to it and payment of the expenses and charges
incurred in connection with the delivery of such new Warrant. Any Warrant so
surrendered to the Company shall be canceled.
6.4 Notices. All notices and other communications from the
Company to the Holder or vice versa shall be deemed delivered and effective when
given personally, by facsimile transmission and confirmed in writing or mailed
by first-class registered or certified mail, postage prepaid at such address
and/or facsimile number as may have been furnished to the Company or the Holder,
as the case may be, in writing by the Company or the Holder from time to time.
6.5 Waiver. This Warrant and any term hereof may be changed,
waived, or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
6.6 Governing Law. This Warrant shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to its principles regarding conflicts of law.
Dated: 11/22/98
ACCORD ADVANCED TECHNOLOGIES, INC.
Attest: /s/ Carl P. Ranno By: /s/ Travis Wilson
Name: Travis Wilson
Title: President
6
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the
Common Stock per value, of Accord Advanced Technologies, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name as is specified
below:
3. The undersigned represents it is acquiring the shares
solely for its own account and not with a view toward the resale or distribution
thereof except in compliance with applicable securities laws.
------------------------------
(Signature)
- ------------------------
(Date)
7
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use in the General Form for Registration of Securities of
Small Business Issuers on Form 10-SB of our report dated May 14, 1999, on our
audits of the consolidated financial statements of Accord Advanced Technologies,
Inc. as of December 31, 1998 and 1997 and for the years then ended.
We also consent to the use in the General Form for Registration of Securities of
Small Business Issuers on Form 10-SB of our report dated April 10, 1998, on our
audit of the financial statements of Accord Semiconductor Equipment Group, Inc.
as of the year ended December 31, 1997 and for the year then ended.
KING, WEBER & ASSOCIATES, P.C.
Tempe, Arizona
August 27, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTSAND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1999 DEC-31-1998 DEC-31-1997
<CASH> 665,262 157,078 58,258
<SECURITIES> 0 0 0
<RECEIVABLES> 300,090 6,347 964,233
<ALLOWANCES> 0 0 0
<INVENTORY> 1,300,078 1,056,732 718,212
<CURRENT-ASSETS> 2,300,085 1,705,368 1,792,831
<PP&E> 2,151,429 2,151,136 2,396,484
<DEPRECIATION> 182,833 152,834 105,418
<TOTAL-ASSETS> 4,408,600 3,823,054 4,305,245
<CURRENT-LIABILITIES> 2,443,184 1,952,945 3,676,178
<BONDS> 1,040,572 205,703 34,543
0 0 0
0 0 0
<COMMON> 3,955 3,955 1,245
<OTHER-SE> 920,889 (96,834) 59,868
<TOTAL-LIABILITY-AND-EQUITY> 4,408,600 3,823,054 3,676,178
<SALES> 3,052,531 3,940,234 1,358,004
<TOTAL-REVENUES> 3,052,531 3,940,234 1,358,004
<CGS> 1,684,746 2,865,641 1,024,068
<TOTAL-COSTS> 1,684,746 2,865,641 1,024,068
<OTHER-EXPENSES> 621,929 2,267,953 181,337
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 30,672 442,431 61,352
<INCOME-PRETAX> 415,184 (1,635,791) 91,247
<INCOME-TAX> (32,595) 544,080 (36,736)
<INCOME-CONTINUING> 382,589 (1,091,711) 54,511
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 635,134 45,320 0
<CHANGES> 0 0 0
<NET-INCOME> 1,017,723 (1,046,391) 54,511
<EPS-BASIC> 0.03 (0.03) 0.02
<EPS-DILUTED> 0.03 (0.03) 0.02
</TABLE>
