As filed with the
Securities and Exchange Commission on October 8, 1999.
REGISTRATION NO. 333-72405
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM S-1
POST EFFECTIVE AMENDMENT
NO. 1
TO
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
R-Tec Technologies, Inc.
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 2851 22-3615979
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Classification Code Identification No.)
Incorporation or Number)
Organization)
61 Mallard Dr.
P.O. Box 282
Allamuchy, New Jersey, 07820
(888) 299-7832
(Address and Telephone Number of Registrant's Principal Place of Business)
Marc M. Scola
61 Mallard Drive
Allamuchy, New Jersey 07820
(888) 299-7832
(Name, Address and Telephone Number of Agent for Service)
Copies to:
Bruce Brashear, Esq.
Brashear & Associates, P.L.
Gainesville, FL 32601
(352) 336-0800
Approximate Date of Proposed Sale to the Public: As soon as practicable from
time to time after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each
Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Aggregate Offering Amount of
Registered Registered Per Share 1 Price Registration Fee
<S> <C> <C> <C> <C>
common stock 3,750,000 Shares $8.00 $30,000,000.00 $8,340.00
($.00001 par value)
</TABLE>
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
1 Estimated solely for the purpose of calculating the amount of the registration
fee in accordance with Rule 457 under the Securities Act.
<PAGE>
R-Tec Technologies, Inc.
CROSS-REFERENCE SHEET
Item Number and Heading Heading in Prospectus
1. Front of the Registration
Statement and Outside Front
Cover Page of Prospectus ...............Facing pages; Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus ..............Inside Front and Outside Back
Cover Pages of Prospectus
3. Summary Information and Risk
Factors ................................Prospectus Summary; Risk Factors
4. Use of Proceeds.........................Prospectus Summary; Use of
Proceeds; Description of Business
5. Determination of
Offering Price .........................Cover Page; Prospectus Summary;
Risk Factors; Determination of
Offering Price
6. Dilution................................Dilution; Comparative Data
7. Selling Security Holders................Not Applicable
8. Plan of Distribution....................Front Cover Page; Plan of
Distribution
9. Description of the Securities...........Description of Securities
10. Interest of Named Experts and
Counsel ................................Not Applicable
11(a). Description of Business ................Description of Business
11(b). Description of Property ................Management - Facilities
11(c). Legal Proceedings .....................Legal Matters
11(d). Market for Common Equity and
Related Stockholder Matters ............Front Cover Page; Risk Factors;
Shares Eligible For Future Sale
11(e)(f)(g). Financial Statements .............Financial Statements
<PAGE>
11(h). Management's Discussion and
Analysis or Plan of Operation.......... Plan of Operations
11(i). Changes In and Disagreements
with Accountants on Accounting
and Financial Disclosure ..............Change in Independent Accountants
11(j). Directors, Executive Officers,
Promoters and Control Persons .........Directors, Executive Officers,
Promoters and Control Persons
11(k). Executive Compensation ................Executive Compensation
11(l). Security Ownership of Certain
Beneficial Owners and Management ..... Security Ownership of Certain
Beneficial Owners and Management
11(m). Certain Relationships and
Related Transactions ..................Related Transactions
12. Disclosure of Commission
Position on Indemnification for
Securities Act Liabilities ............Disclosure of Commission Position
on Indemnification for Securities
Act Liabilities
<PAGE>
The information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated October 8, 1999
PROSPECTUS
R-TEC Technologies, Inc.
1,250,000 Shares Common Stock
$8.00 per share
-----------------------------------------------------------------------------
R-Tec owns patented paints The proceeds of stock sales will be held in
and other coating technologies escrow by the Bank of New York and paid to
which detect leaks from freon R-Tec only if:
and other gases by changing o at least 125,000 shares are sold,
color. We intend to sell the o within three (3) months after the effective
paints and to develop new date of this prospectus or six months after
products to detect other the effective date of the prospectus, if
types of gas leaks. extended by R-Tec.
This is our initial public Otherwise all subscriptions will be returned
offering. There is currently to you with interest.
no public market for the
common stock.
The Offering
Commissions
Public Price Total to R-Tec
Per Share...................... $ 8.00 $ .80 $ 7.20
Proceeds to R-Tec from
Minimum Offering............. $ 1,000,000 $ 100,000 $ 900,000
Proceeds to R-Tec from
Maximum Offering............. $10,000,000 $1,000,000 $9,000,000
This investment involves a high degree of risk. You should purchase shares
only if you can afford a complete loss. See "Risk Factors" beginning on page 5
for specific risks involved in this offering.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Thornhill Group, Inc.
1900 Corporate Blvd., Suite 305 West
Boca Raton, Florida 33431
(561) 241 9921
The date of this prospectus is October 8, 1999
<PAGE>
Table of Contents
Prospectus Summary..........................................................3
Risks Factors ..............................................................5
Recent Developments.........................................................7
Where You Can Find
Additional Information.....................................................7
Dilution ...................................................................8
Use of Proceeds.............................................................8
Selected Financial Data ...................................................11
Management's Discussion and
Analysis or Plan of Operation.............................................11
Business...................................................................12
Management and Affiliates..................................................18
Principal Shareholders ....................................................21
Certain Relationships and
Related Transactions......................................................22
Description of Securities..................................................23
Plan of Distribution ......................................................24
Legal Matters..............................................................25
Experts....................................................................25
Change in Independent Accountants..........................................25
How to Invest in R-Tec.....................................................26
Financial Statements......................................................F-1
2
<PAGE>
Prospectus Summary
This summary highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully, including the "Risk
Factors" section and the financial statements and the notes to those statements.
R-Tec Technologies, Inc.
R-Tec Technologies, Inc. was formed in October, 1998 for the purpose
of developing, manufacturing, selling and licensing our proprietary technology
for detecting gas leaks. R-Tec has not yet commenced commercial operations. We
presently do not own our own facilities to produce our products, although we
have a contract with a manufacturer, Anscott Chemical Corp. We do not have
commercial quantities of our products. The efficacy of our product, R-Tect 22,
has been confirmed by an independent third-party, Motors & Armatures Corp. which
tested the product and its formulations and found that they meet Motors &
Armatures' standards for commercial leak testing of critical charge
refrigeration and air conditioning systems. Motors & Armatures' standards for
leak testing might not be the same as testing standards used by other
third-parties and potential customers. To date, R-Tec has devoted all of its
energies to its initial organization, product research and development,
developing a business plan, fund raising efforts and to primarily preparing the
documentation related to this offering.
R-Tec's proprietary technology is protected by a patent which is
owned by R-Tec. An additional U.S. patent expanding the scope of the issued
patent and foreign patent applications are pending. The original patent was
purchased by R-Tec's issuance of 100,000 common shares and a note payable in the
amount of $450,000. The patent is collateral for the note.
We have developed three gas detecting paints. The paints change
color when gas escapes through the coated junction allowing for rapid detection
of gas leaks. We believe our existing products have broad application in areas
such as the manufacture and installation of air conditioning and refrigeration
systems.
We plan to use these technologies to develop more gas detecting
paints and other products that will be used in a variety of industrial and
manufacturing settings to coat pipe junctions. Examples of such products are a
carbon dioxide reactive paint product which exists in prototype form, designed
to detect carbon dioxide leaks, a natural gas detection reactive paint which
exists in prototype form and a propane leak detection reactive paint product
which has not been developed. In addition to the propane leak detection reactive
paint product, we hope to develop leak detection systems for other gases, such
as ammonia, butane, using our patented technology. R-Tec's detection technology
potentially could be used to measure blood gases, to measure the freshness of
packaged poultry, and to detect gas leaks in electrical transformers. At
present, we have not taken steps to determine feasibility of other potential
applications of our technology. Sale of the minimum number of shares offered
would reduce the number of products which R-Tec can develop and produce.
3
<PAGE>
The Offering
Common Stock Offered............................Minimum - 125,000 shares
Maximum - 1,250,000 shares
Offering Price..................................$8.00 per share
Total Number of
Shares Outstanding
After the Offering
(assuming all offered
shares are sold)................................4,266,666 shares
Total Number of
Shares Outstanding
After the Offering
(assuming the minimum
number of shares offered
are sold).......................................3,041,666 shares
Estimated Net Proceeds
(assuming the minimum
number of shares offered
are sold).......................................$790,000
Estimated Net Proceeds
(assuming all offered
shares are sold)................................$8,620,000
Use of Proceeds.................................We intend to use the net
proceeds of this offering to
o conduct product research
and development
o fund initial business
operations
o pay salaries
o develop production and
marketing plans
o pay for the patent assigned
to R-Tec
o provide working capital
and for general corporate
purposes.
Dividend Policy.................................We do not intend to pay any
cash dividends for the
foreseeable future.
4
<PAGE>
Risk Factors
Investing in our common stock involves a high degree of risk. In
addition to the other information in this document, you should carefully
consider the following risk factors in evaluating an investment in our common
stock.
If We Sell Only 125,000 Shares, We Might Not Be Able to Operate After 12 Months
Due To Our Cash Shortage And You Might Lose Your Entire Investment.
If only 125,000 shares are sold and R-Tec does not make significant
sales during its first year of operation, R-Tec may not have sufficient capital
to fund operations after 12 months, without revenues. In addition, R-Tec may be
unable to find additional suitable financing sources on acceptable terms.
Therefore, if the minimum number of shares are sold, R-Tec may not have
sufficient funds to operate after12 months and we may not be able to undertake
additional projects or operations described in this prospectus. This could
result in your losing all of your investment.
R-Tec Is A Start-Up Company With Limited Operating History.
There is absolutely no assurance that we will be able, upon
completion of this offering, to successfully implement our proposed business
plan or that R-Tec will ever operate profitably. R-Tec was only recently
incorporated, has no significant assets other than a patent. R-Tec has no
current substantial business operations nor any history of operations and is
considered to be a development stage enterprise.
All Of Our Products Are New And May Not Be Commercially Feasible.
R-Tec may also experience difficulties that could delay or prevent
the development, introduction and marketing of its products. R-Tec will be
dependent upon products that will be developed in commercial quantities in the
future. If we are unable on a timely basis to develop new products or
enhancements to existing products, or if our products do not achieve market
acceptance or commercial success, our business, operational results and
financial condition will be materially adversely affected and investors could
lose their entire investment. Since our products have never been produced in
commercial quantities, there can be no assurance that commercial production will
be feasible. Even if feasible, there can be no assurance that our products will
perform as intended.
If Our Products Fail To Operate Properly, We Will Be Subject To Significant
Liability.
Our products are designed to avoid significant dangers, such as
natural gas leaks. If our products do not function properly and property or
personal injury occurs as a result of gas leaks which should have been detected
by our products, R-Tec may incur significant liability which R-Tec may be unable
to pay.
We Do Not Have Our Own Production Facilities At This Time To Produce Our
Products And Our Office Space Is Inadequate For Future Needs.
At the present time we do not have our own facility to produce the
paints which are our principal products. In addition, our present office space
is inadequate for future needs.
Shareholders May Be Unable To Sell Stock Since There Is No Active Market At
Present.
No public market exists for R-Tec's common stock. You may not be
able to sell your shares promptly or at all, or sell your shares at a price
equal to or above the price you paid for the shares due to the lack of an active
market at present. There can be no assurance that any market will develop for
the securities or that if a market does develop, that it will continue. If we
are unable to qualify for the NASDAQ Small Cap Market listing, we believe that
our stock will trade on over-the-counter market on the OTC Bulletin Board.
Consequently, selling your common stock would be more difficult, transactions
could be delayed, and security analysts' and news media's coverage of R-Tec may
be reduced. These factors could result in lower stock prices.
R-Tec's Business Is Dependent On Patent Protection Which Cannot Be Assured.
R-Tec holds a patent and has pending U.S. and foreign patent
applications on its technology. There can be no assurance that patent, trade
secret or copyright laws will protect our technologies or that we will not be
vulnerable to competitors who attempt to copy or use our products or processes.
5
<PAGE>
There Is A Risk That Our Products Will Not Work As Intended.
We have never produced any commercial quantities of our products and
they have never been tested by consumers. There is no assurance that our
products will work for consumers as intended and no assurance can be given that
our products will not cause damage which will result in liability for R-Tec. If
our products are not commercially viable, we could have insufficient funds to
operate which could result in our terminating operations.
Management Has Broad Discretion In The Use of Proceeds Of This Offering.
Management has broad discretion in the use of proceeds and the
allocations set forth are only estimates, subject to adjustment in the opinion
of management based on events which may arise in the future.
Present Stockholders Will Derive Greater Benefits If We Are Successful And Have
Less Risk.
Present stockholders will benefit from a disproportionately greater
share of R-Tec, if successful, while investors in this offering risk a
disproportional greater loss of cash invested if R-Tec is not successful. Three
of our officers and directors collectively have given total consideration of
$569,150 for the 2,916,666 presently outstanding shares of R-Tec's common stock.
Additionally Muriel Kaiser received 100,000 shares in partial payment for
R-Tec's patent. Investors in this offering will pay a total purchase price of
$10,000,000, assuming all 1,250,000 shares are sold. The present shareholders
will own 70.70% of the outstanding shares and investors in this offering will
own 29.30% of the outstanding shares.
Offering Proceeds to Benefit Officers, Directors and Related Parties.
A portion of the proceeds from this offering may be used to pay
debt to our officers, directors and related parties rather than to fund
operations or implement our business plan. R-Tec Technologies, Inc. issued four
Promissory Notes to its officers, directors and related parties On May 26, 1999,
sums due pursuant to the notes to Mr. Lacqua, Ms. Vitolo and Mr. Scola were
reduced or reclassified as equity. As of June 30, 1999, $22,036 was owed to
shareholders for reimbursement of expenses incurred since May 26, 1999.
Some of R-Tec's Competitors May Be Larger And Better Financed.
R-Tec's products will compete with electronic and other devices
which are designed to detect gas leaks. Some of these competitors have greater
financial, marketing and manufacturing resources. This, together with the
limited capital available to R-Tec which will limit its marketing efforts,
creates a significant competitive disadvantage. If we are not able to compete
successfully, regardless of the quality of our products and the success of this
offering, we will have little chance of succeeding and it is likely investors
will lose their entire investment.
Investors In This Offering Will Experience Immediate and Substantial Dilution.
Investors will experience immediate and substantial dilution between
the initial public offering price of $8.00 and the pro forma net tangible book
value per share of common stock after the offering. Such dilution will amount to
$6.12 or 33% if all shares are sold; $6.09 or 13% if 625,000 shares are sold;
$7.94 or .01% if 125,000 shares are sold.
Due To Our Lack Of An Independent Compensation Committee, Salaries May Be Set By
The Majority Stockholders.
The majority shareholders may set the salaries or other compensation
of officers and employees without the objective opinion of an independent
compensation committee. The officers of the company are still bound by their
fiduciary duties to act in the best interest of the company but there is no
assurance that they will act as impartially as an independent compensation
committee would.
6
<PAGE>
If R-Tec's Common Stock Becomes Subject To The Penny Stock Rules, Investors May
Find It More Difficult To Sell Their Securities.
If the trading price, if any, of the common stock were to fall below
$5.00 per share, trading in the common stock would be subject to rules
promulgated under the Exchange Act of 1934. This could severely limit the
liquidity of the common stock and the ability of investors in this offering to
sell the common stock in the secondary market. Those rules require additional
disclosure by broker-dealers in connection with any trades involving a stock
market price of less than $5.00 per share. These rules require the delivery of a
disclosure schedule explaining the penny stock market and the risks associated
therewith. Delivery must occur prior to any transaction. Additional sales
practice requirements are imposed on broker-dealers who sell penny stocks to
persons other than established customers and accredited investors. For these
types of transactions, the broker-dealer must make a special suitability
determination for the investor and must have received the investor's written
consent to the transaction prior to sale. The broker-dealer also must disclose
the commissions payable to the broker-dealer, and current bid and offer
quotations for the penny stock. If the broker-dealer is the sole market-maker,
the broker-dealer must disclose this fact and the broker-dealer's presumed
control over the market. This information must be provided to the customer
orally or in writing prior to effecting the transaction and in writing before or
with the customer confirmation. Monthly statements must be sent disclosing
recent price information for the penny stock held in the account and information
on the limited market in penny stocks. The additional burdens imposed upon
broker-dealers by these requirements may discourage them from effecting
transactions in the common stock.
Our Offering Price Has Been Arbitrarily Determined
We have unilaterally and arbitrarily determined the offering price.
The value of the common stock as determined by any subsequent market for the
common stock may be may much less than the price paid by you.
Recent Developments
On February 24, 1999, a press release was issued by R-Tec for
distribution on the Internet which contained several inaccurate statements or
statements which require clarification. The press release stated inaccurately
that R-Tec obtained worldwide recognition with its global patent which was filed
in 104 countries. In fact, the recognition referred to was R-Tec's patent
application which was filed in 96 countries. The press release statement that
R-Tec's products were "revolutionary" and its technology instrumental in
reducing CFC emissions and global warming were based on the opinions of Shawn P.
Walsh, a consultant to R-Tec and a director. However, R-Tec's products are not
yet in consumer use and have never been instrumental in reducing CFC emissions
or global warming. The press release also stated inaccurately that Underwriters
Laboratories were unable to produce a standard for R-Tec's technology because it
is so advanced. In fact, Underwriters Laboratories stated that it did not have a
published standard with which to evaluate R-Tec's R-Tect 22 product due to the
uniqueness of this product. Finally, the reference in the press release to a
contact by Deputy Commissioner of New York City Environmental Protection Agency
failed to indicate that his evaluation of R-Tec's products was based on
statements made to him by R-Tec concerning the product's performance and
efficacy.
Where You Can Find Additional Information
In connection with the offering of the common stock, R-Tec has filed
a registration statement with the Securities and Exchange Commission. There is
additional information concerning R-Tec contained in the registration statement
that is not contained in this prospectus. In addition, beginning with the
effective date of this prospectus, we will be required to file annual quarterly
and special reports and proxy statements with the SEC. You may read and copy any
document we file at the SEC's- Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or may view them on the SEC worldwide web site at
http://www.sec.gov\edgar. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the Public Reference Room. You may request a
copy of our SEC filings, at no cost, by writing R-Tec Technologies, Inc., 61
Mallard Drive, P.O. Box 282, Allamuchy, New Jersey 07820.
7
<PAGE>
Dilution
As of June 30, 1999, R-Tec's common stock had a deficit in net
tangible book value of $(590,805) or approximately $(.20) per share. The
following table sets forth the difference between the price to be paid by new
shareholders and the negative net tangible book value per share at June 30,
1999, as adjusted to give effect to this offering.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1,250,000 shares 625,000 shares 125,000 shares
sold sold sold
Assuming a public offering price of $8.00 $8.00 $8.00
Net proceeds to R-Tec $8,620,000.00 $4,275,000.00 $790,000.00
Net tangible book deficit per share ($0.20) ($0.20) ($0.20)
for existing shareholders before offering
Increase per share attributable to $2.08 $1.21 $0.26
payment of shares purchased by new investors
Pro forma net tangible book value $1.88 $1.01 $0.06
after offering
Dilution per share to new investors $6.12 $6.99 $7.94
</TABLE>
The following chart illustrates the pro-forma proportionate
ownership in R-Tec, upon completion of the offering of present stockholders and
of investors in this offering, compared to the relative amounts paid and
contributed to capital of R-Tec by present stockholders and by investors in this
offering, assuming no changes in net tangible book value other than those
resulting from the offering.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Shares Issued Total Consideration Average Price
Number Percent Amount Percent Per Share
Present Stockholders 3,016,666 70.70% $569,000 5.38% $ 0.19
New Investors Maximum 1,250,000 29.30% $10,000,000 94.62% $ 8.00
Present Stockholders 3,016,666 96.02% $569,000 85.05% $ 0.19
New Investors Minimum 125,000 3.98% $1,000,000 14.95% $ 8.00
</TABLE>
Use of Proceeds
The proceeds of this offering will be used to pay:
o Research and development expenses, which consist of the salaries of our
scientists, the cost of equipment, supplies, leasing laboratory space
and purchase or construction of a laboratory.
o Office expenses which consist of expenses for executive offices, purchase or
construction of a building, and lease of warehouse space.
o Parts and supplies expenses which consist of the cost of raw materials and
inventory.
o Salary expenses, which consist of the salaries of R-Tec's officers and
directors, internal accounting, administrative and other personnel.
8
<PAGE>
o Sales and marketing expenses, which consists of advertising and public
relations costs.
o Patent expenses, which consists of the payment due for the patent.
o Insurance expense consists of the cost of general liability, officers and
directors liability, life, health, workers' unemployment compensation and
automobile insurance.
o Existing Debt of approximately $60,000.
The chart below represents the use of proceeds if $10,000,000 of common
stock is sold. Sale of 1,250,000 of the shares offered would provide sufficient
funds for R-Tec to operate 36 to 48 months without revenue.
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
Research and Development Activities $2,371,080.00 27.51%
Salary Expense 2,135,000.00 24.77%
Parts and Supplies Expense 800,000.00 9.28%
Office Expense 1,853,920.00 21.51%
Patent Expense 450,000.00 5.22%
Sales and Marketing Expense 500,000.00 5.80%
Travel Expense 100,000.00 1.16%
Insurance Expense 350,000.00 4.06%
Existing Debt 60,000.00 .70%
TOTAL $8,620,000.00 100%
Offering Expenses 380,000.00
Commissions 1,000,000.00
The chart below represents the use of proceeds if the 625,000 shares
offered are sold. In the event the minimum number of shares offered were sold,
Mr. Scola, Mr. Lacqua and Ms. Vitolo would defer a portion of their salaries
until sufficient funds were available. Sale of the 625,000 shares offered would
provide sufficient funds for R-Tec to operate 24 to 36 months without revenue.
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
Research and Development Activities 1,679,920.00 39.41%
Salaries Expense 1,100,000.00 25.73%
Parts and Supplies Expense 226,160.00 5.29%
Office Expense 353,920.00 8.28%
Sales and Marketing Expense 200,000.00 4.68%
Patent Expense 450,000.00 10.53%
Travel Expense 50,000.00 1.17%
Insurance Expense 150,000.00 3.51%
Existing Debt 60,000.00 1.40%
Total $4,270,000.00 100.00%
Offering Expenses 230,000.00
Possible Commissions 500,000.00
9
<PAGE>
The chart below represents the use of proceeds if the Minimum number
of shares offered are sold. In the event the minimum number of shares offered
were sold, Mr. Scola, Mr. Lacqua and Ms. Vitolo would defer a portion of their
salaries until sufficient funds were available. Sale of the 125,000 shares
offered would provide sufficient funds for R-Tec to operate 12 months without
revenue.
ESTIMATED
PERCENT OF
PURPOSE AMOUNT PROCEEDS
Research and Development Activities 150,000.00 18.99%
Salaries Expense 232,500.00 29.43%
Parts and Supplies Expense 80,000.00 10.13%
Office Expense 150,000.00 18.99%
Sales and Marketing Expense 90,000.00 11.39%
Patent Expense 27,500.00 3.48%
Travel Expense 20,000.00 2.53%
Insurance Expense 40,000.00 5.06%
Existing Debt 0 0.00%
Total $790,000.00 100.00%
Offering Expenses 110,000.00
Commissions 100,000.00
The foregoing represents management's current estimate of how the
proceeds of this offering will be used and is subject to change based on
changing circumstances and differing needs of R-Tec as they may exist in the
future. R-Tec may reallocate the proceeds in the above described categories or
to other purposes in response to changes in its plans, industry conditions, and
R-Tec's future revenues and expenditures.
We believe that the net proceeds from the sale of the common stock
offered assuming that all shares offered are sold, will provide R-Tec sufficient
capital to fund initial operations, development and expansion of business for
approximately the first 36 to 48 months following completion of this offering.
If only the minimum is sold, R-Tec believes it will be able to operate for12
months if no revenue is generated from its operations. Many factors may affect
R-Tec's cash needs, including the possible failure to develop sufficient
revenues from the sale of its products. R-Tec may not have sufficient capital
for its funding requirements and may be unable to find suitable financing on
acceptable terms. If R-Tec is unable to obtain such additional financing, our
ability to maintain our level of operations could be materially adversely
affected and R-Tec may not succeed. This event would significantly increase the
risk of loss to those persons who invest in this offering.
A portion of the proceeds will be used to pay a promissory note
executed in payment for the patent which underlies our patented technology.
$450,000 payable in full thirty (30) days from the date R-Tec sells $2,000,000
of common stock; or if $2,000,000 of common shares is not sold before May 1,
2000, beginning May 1, 2000, accrued interest payable quarterly for two (2)
years until May 1, 2002, at which time the R-Tec will make quarterly payments of
$22,500 in principal and accrued interest until paid in full. The note bears
interest at the rate of 6% per annum.
A portion of the proceeds will be used to repay a promissory note to
an unrelated third party in the principal amount of $60,000 bearing interest at
8.5% per annum. Under the terms of the note accrued interest is due monthly with
the entire principal amount is due at such time as R-Tec sells $2,000,00 of
shares in this offering or November 15, 2000, which ever occurs first.
Any portion of the net proceeds not required for immediate
expenditure will be deposited in R-Tec's corporate checking account,
interest-bearing accounts or invested in short-term government notes, treasury
bills, or short-term obligations of financial institutions.
We reserve the right to change the use of proceeds in the event that
we determine based on our marketing efforts and research and testing of our
products that an adjustment in the proceeds of this offering is warranted in the
opinion of management. However, there will be no adjustment in any amounts
utilized to pay promissory note and patent expense.
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Selected Financial Data
R-Tec is a development stage company and has no revenues or earnings
from operations.
June 30, 1999 December 31, 1998
(unaudited)
Total Assets $1,060,904 $904,500
Total Liabilities 619,722 821,147
Stockholders Equity 441,182 83,353
Net Tangible Book Value (590,805) (776,647)
Net Tangible Book Value per share $ (0.20) $(0.27)
Management's Discussion and Analysis or Plan of Operation
The following discussion and analysis should be read in conjunction
with R-Tec's financial statements and the Notes associated with them contained
elsewhere in this prospectus. This prospectus contains forward-looking
statements that involve risks and uncertainties. R-Tec's actual results may
differ significantly from the result discussed in the forward looking
statements. Factors that might cause such a difference are discussed in "Risk
Factors."
Overview
R-Tec has patented technology for coatings such as paint and other
products which may be used to detect leaks of various gases from pipes. We
believe that our R-Tect 12 reactive paint, R-Tect 22 reactive paint and R-Tect
carbon dioxide reactive paint products are ready for commercial production and
we have an order for R-Tect 22 reactive paint.
From its inception in 1998, R-Tec has been engaged primarily in
activities devoted towards obtaining the patent rights to the technology,
general business operations, negotiating license agreements and obtaining
financing for this offering. There have been no revenues to date.
Results of Operations
It is difficult for R-Tec to forecast its revenue or earnings
accurately. We believe that period-to-period comparisons of our operating
results may not be meaningful.
As a result of our extremely limited operating history, we do not
have historical financial data for a significant number of periods on which to
base planned operating expenses. Our expense levels are based upon our
expectations concerning future revenue. Thus, quarterly revenue and results of
operation are difficult to project.
Liquidity and Capital Resources
R-Tec has incurred negative cash flows from operation since its
inception. We expect to continue to expend substantial sums to complete product
development, to create inventory and to begin marketing and sales.
Our future capital requirements and the adequacy of available funds
will depend on numerous factors, including the successful commercialization of
the R-Tect 22, R-Tect 12 and R-Tect carbon dioxide reactive paint products,
progress in its product development efforts, the magnitude and scope of such
efforts, the cost of contract manufacturing, cost of filing, prosecuting,
defending and enforcing patent claims and other intellectual property rights,
competing technological and market developments, and the development of
strategic alliances for the development and marketing of our products. R-Tec
requires the minimum proceeds of this offering to meet its planned operating
requirements through December, 2000. In the event R-Tec's plans change or its
assumptions change or prove to be inaccurate or the proceeds of the offering
prove to be insufficient to fund operations at the planned level (due to further
unanticipated expenses, delays, problems or otherwise), R-Tec could be required
to obtain additional funds in any event through equity or debt financing,
strategic alliances with corporate partners and others, or through other sources
in order to bring its products through regulatory approval to commercialization.
The terms and prices of any equity or debt financing may be significantly more
favorable than those of the shares sold in the offering. R-Tec does not have any
material committed sources of additional financing, and there can be no
assurance that additional funding, if necessary, will be available on acceptable
terms, if at all. If adequate funds are not available, we may be required to
further delay, scale-back, or eliminate certain aspects of our operations or
attempt to obtain funds through arrangements with collaborative partners or
others
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that may require us to relinquish rights to certain of our technologies,
product candidates, products, or potential markets. If adequate funds are not
available, R-Tec's business, financial condition, and results of operations will
be materially and adversely affected.
The actual research and development and related activities of R-Tec
may vary significantly from current plans depending on numerous factors,
including changes in the costs of such activities from current estimates, the
results of R-Tec's research and development programs, the results of clinical
studies, the timing of regulatory submissions, technological advances,
determinations as to commercial potential, the status of competitive products.
The focus and direction of R-Tec's operations will also be dependent upon the
establishment of collaborative arrangements with other companies, and other
factors.
Until required for operations, R-Tec's policy is to invest its cash
reserves in bank deposits, certificates of deposit, commercial paper, corporate
notes, U.S. government instruments and other investment-grade quality
instruments.
There can be no assurance that R-Tec will be able to commercialize
its technologies, or that profitability will ever be achieved. R-Tec expects
that its operating results will fluctuate significantly from quarter to quarter
in the future and will depend on a number of factors, most of which are outside
R-Tec's control.
Business
History of Our Company
R-Tec, was recently incorporated under the laws of the State of New
Jersey on October 22, 1998. R-Tec has no significant assets with the exception
of its patents. To date, activities have been limited to organizational matters,
product research, developing a corporate business plan, patent filings,
negotiating license agreements and the preparation and filing of the
registration statement of which this prospectus is a part.
Background
Presently, there are three major methods used to detect gas freon
leaks. The oldest method is to coat suspected leak sites with a liquid, such as
soap bubbles. Pressure from the escaping gas causes bubbles to form which
confirms a leak at the site. Although inexpensive and generally applicable, this
method lacks the ability to locate small leaks which over time can allow large
volumes of gas to escape. The second major method is the use of electronic
ionization detectors. Although more expensive than the pressure based detection
method, false results have been noted due to interaction with metallic pipes.
Moreover, their effectiveness diminishes with the amount of escaping gas. As a
result, such detectors have a limited ability to find small leaks. The third,
and perhaps most effective currently available detection method, is the internal
injection of liquid based dyes. The dye leaks through the opening and can be
seen on the outside of the pipe. This method necessitates purchasing expensive
equipment, hiring trained technicians, and purchasing costly dyes for each
application. Recently, some hardware manufacturers have declared due to the
invasive nature of these dyes, that their use may void the manufacturer's
warranty. Our products are designed as an external coating which is
non-corrosive and will not interfere with the operation of the pipe or equipment
and we believe the manufacturer's warranties will not be affected. Moreover,
none of the competitive methods provide any form of passive leak detection.
The benefits that would result from early detection of leaks in gas
lines may be substantial. By specifically identifying the source of a gas leak
and permitting the early detection of the escaping gas, our products may reduce
environmental damage caused by leaks of gases, which are believed to cause ozone
depletion and other environmental problems. In addition, by specifically
indicating the location of a leak, our products may enable owners or operators
to promptly and cost effectively repair the leak and reduce the gas replacement
cost incurred as a result of leakage.
Our Proposed Business
R-Tec was formed to develop and manufacture reactive paints and
other products to coat pipe junctions. Once sealed with the paint, gas escaping
through the painted junction, causes a chemical reaction resulting in a visible
color change of the paint.
For example, during the manufacture and installation of air
conditioning and refrigeration systems, the manufacturer or installer may apply
R-Tect 22 to the joints of the system. R-Tect 22 placed externally on the
system, waits for leaking gas to pass through it. When a leak occurs at a coated
joint, the blue paint should change to a bright florescent yellow, identifying a
leak from the inside out. R-Tect 22 does not react with gases in the air
surrounding the pipe. Thus, the exact location of the leak is identified. R-Tect
22 not only detects gas leaks from a system, but also we believe, based on the
tests we have performed, neutralizes limited amounts of some of the
chloroflurocarbons passing through the paint by removing the chlorine and
fluoride
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from the gas, making the gas inert and possibly harmless to the ozone
layer. Freon gas is trapped in our paint as it escapes from the leaking pipe. A
chemical which reacts with the freon causes it to change its structure through a
polymer which traps the chemical and prevents the release of harmful gases into
the air.
In addition, R-Tect 22 may react to the leak before significant
refrigerant gas escapes from the system and the owner of the equipment
experiences any failure or need to replace the gas, thereby reducing the need
for further production of chloroflurocarbons. Although there are calls for
reducing the amount of chloroflurocarbon production, due to the overwhelming use
of this product worldwide, these gases will be produced overseas and
domestically until the year 2040.
The first products we plan to make available for sale are:
o R-Tect 22 reactive paint. R-Tect 22 is an external application paint designed
to detect R-22 freon gas leaks in air conditioning units.
o R-Tect 12 reactive paint, developed for automotive application to detect R-12
freon gas,
o R-Tect carbon dioxide reactive paint developed as an external
application paint designed to detect carbon dioxide leaks in pipe systems
which contain gaseous or liquid carbon dioxide, and
o R-Tect Natural Gas reactive paint developed as an external application paint
which is designed to detect natural gas leaks in a variety of systems.
Other products nearing the end of development are R-Tect 134A
reactive paint, developed to detect R-134A, a gas in air conditioning
applications. We expect R-Tect natural gas reactive paint, R-Tect carbon dioxide
reactive paint and R-Tect 22 reactive paint to be available for commercial
production in October 1999. R-Tect 12 reactive paint should be available in
November 1999, along with R-Tect 134A reactive paint. However, no assurance can
be given that commercial production will, in fact, occur on this timetable.
Two-Phase Business Plan
Our business plan is based on implementing our strategy in two phases:
o Phase 1 - Establish Manufacturing and Distribution Relationships and
Begin Distribution of Three Initial Products, and
o Phase 2 - Expand Product Lines.
The key elements of each phase of our strategy are described below:
Phase 1 - Establish Manufacturing and Distribution Relationships and Begin
Distribution of the Three Initial Products
R-Tec's primary strategic goals for Phase 1 are:
o The selection of appropriate manufacturing and distribution partners;
and
o The commencement of commercial distribution of our reactive paint
products:
o R-Tect 22 freon leak detecting coating. Development of this
product is complete.
o R-Tect 12 freon leak detecting coating. Development of this
product is complete.
o R-Tect carbon reactive paint. Development of this product is
expected to be complete by January, 2000 at an additional cost
of $50,000.
During Phase 1, we will incur significant operating expenses.
$450,000 due for patent acquisition at such time as R-Tec raises at least
$2,000,000 in this offering may be payable during this period. We do not expect
to generate significant operating revenues for a period of at least six months
after the completion of this offering.
During Phase 1 R-Tec will require manufacturing facilities, office
space and warehouse space. These facilities may be purchased or leased.
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Manufacturing and Distribution Relationships.
One of R-Tec's Phase 1 goals is to establish beneficial
relationships with strategic manufacturing and distribution partners. With this
strategy, we hope to eliminate the need to build a large and costly production
and sales infrastructure and to benefit from the inclusion of our products in
our partners' marketing efforts.
R-Tec has entered into a manufacturing contract with Anscott
Chemical Industries, Inc., a nationally recognized manufacturer of chemical
products located in Wayne, New Jersey.
Anscott will be the exclusive manufacturer of our leak detection
products; R-Tect 12, R-Tect 22, and R-Tect carbon dioxide reactive paints. The
agreement is for five years. The rights granted to Anscott under the agreement
are limited to these three specified products and to the United States.
Anscott's exclusivity rights with respect to R-Tect carbon dioxide reactive
paint is further limited to the dry cleaning industry. Anscott will manufacture
our products based on purchase orders received from R-Tec. R-Tec intends to
locate a quality control technician employed by us at Anscott's offices, but
there is no provision in our contract with Anscott which requires Anscott to
accept such supervision.
We reached a oral distribution agreement with Motors & Armatures on
March 26, 1999. Motors & Armatures is believed to be one of the largest
distributors of air conditioning, refrigeration, and heating parts and supplies
to wholesalers and original equipment manufacturing accounts in the U.S. It
sells primarily to North America.
Motors & Armatures has placed an initial order for 5,000 kits of
R-Tect 22 reactive paint at $44.00 per kit. We believe that Motors & Armatures
will distribute R-Tect kits (R-Tect 12, R-Tect 22, and later R-Tect 134A)
reactive paints, primarily to organizations that will in turn sell them to air
conditioning or refrigeration contractors. We expect to deliver R-Tect 22 to
Motors & Armatures by October 31, 1999. Motors & Armatures has advised us that
it intends to create artwork for our products which it will be distributing and
intends to hire an exclusive representative to work on the R-Tect product line.
This specialist will travel with Motors & Armatures' sales representatives to
train and educate its clients in the use of our products. Motors & Armatures has
orally represented to us that it has allocated $156,000 for advertising in the
first year for R-Tec's products and that it will also provide a direct mail
campaign to reinforce the advertising program.
Motors & Armatures has proposed a six month test marketing program
to determine the volume level of sales. It intends to promote R-Tec's products
as both, leak detectors, and as preventative maintenance products.
R-Tec's Efforts To Expand Commercial Use of Initial Products.
During Phase 1 R-Tec also intends to pursue direct sales to
end-users and the original equipment manufacturing market. We will also complete
research and development of our remaining initial products and will pursue
marketing of these products. Potential users include public utility companies,
automotive, marine, aviation, aerospace companies, and commercial real estate
owners and developers. We have met with one utility company, Brooklyn Union Gas
Utility. No sales have resulted from that meeting. Other utility companies have
expressed an interest in the product. We plan to meet with Public Service
Electric & Gas and Con Edison Public Utilities. We have also identified
government agencies and municipalities where our products can reduce
maintenance, overhead and provide another means to detect harmful gases. We also
intend to pursue licensing arrangements with select end-users.
We believe a marketing opportunity will also develop from insurance
companies that underwrite risk associated with gas explosions. R-Tec will
introduce its products to these insurance companies and will attempt to persuade
them either to mandate the use of R-Tec's reactive paint products or to provide
financial incentives, such as discounted insurance rates, to companies that
utilize R-Tec's detection products.
We believe that a marketing opportunity will develop for the use of
R-Tec's reactive paint products to detect natural gas and propane leaks.
Specifically, during the installation of a gas pipe, the installer could apply
our paint to pipe joints. Property owners could also apply our reactive paint to
pipe joints in existing structures. If natural gas or propane leaks through a
stress crack, the paint is designed to change colors, indicating a leak, and
warning anyone who examines the pipe joint.
We also believe a market may exist for our reactive paint products
in chemical plants. Chemical plants utilizing our reactive paint products could
reduce the chance of significant damage caused by a toxic chemical or gas leak
by applying our products to pipe joints in their manufacturing facilities.
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We also believe our reactive paint products could be used in the
aerospace and aviation markets. We believe that aircraft utilizing our reactive
paint products could possibly avert disasters caused by gas and fluid leaks if,
during a routine inspection, a mechanic notes a change in color of the paints
applied to pipe joints aboard the aircraft. Should there be a leak, it could be
detected and repaired prior to the aircraft taking off.
It is possible, though unlikely, that our paint could be caused to
change color due to exposure to some other substances or gas from another
source. A false positive reading due to ambient gases is minimized by the use of
a clear polymer coating, which encases each of the R-Tec paints. When properly
applied, the paint's impermeable coating serves to ensure that only gas leaking
from the protected source can contact the reactive paint and therefore cause a
positive reading. None of the testing conducted to date has indicated any
variance of responsiveness of R-Tec's products to geographic area or weather
conditions, such as humidity, air pressure or smog level.
Phase 2-Expand Product Lines and Expand Internal Sales
R-Tec anticipates that it will add product lines in Phase 2 which
will be marketed to the users identified in Phase 1. R-Tec will continue to
pursue new business with public utilities by developing new products which
address specific needs with the industry.
The speed with which we can develop, introduce, test market and
expand sales of the additions to the R-Tec product line will determine the
timing of the realization of our Phase 2 goals. This phase will be characterized
by new product introductions, test marketing, expanded sales efforts, and
industry driven mandates for the use of R-Tec products.
During Phase 2, in addition to manufacturing facilities, office
space and warehouse space required during Phase 1, R-Tec will require laboratory
facilities for product development.
During Phase 2, R-Tec will develop additional gas detection coating
products.
o R-Tect ethylene detector. The estimated development time is 90
days at an approximate cost of $70,000.
o R-Tect propane reactive paint. The estimated development time
is 90 days at a cost of approximately $100,000.
o R-Tect natural gas reactive paint. The estimated development
time is 90 days at an estimated development cost of
approximately $200,000.
o R-Tect SF6 detector. The estimated development time is 90 days
at an estimated development cost of approximately $200,000.
o R-Tect 134A, a freon detecting coating designed for the
automotive, air conditioning and refrigerator contractors
market. The estimated development time is 180 days at an
approximate cost of $55,000.
o R-Tect 410, a freon detecting coating designed for the
residential and commercial air conditioning and refrigerator
contractors market. The estimated development time is 180 days
at an approximate cost of $55,000.
In the event the minimum number of shares offered are sold, R-Tec
would only develop R-Tect propane reactive paint.
Other Potential Applications Of R-Tec's Detection Technology.
Following the development of the products discussed above, R-Tec
intends to develop coatings which detect the following gases. The development
time and cost for each project has not been estimated by R-Tec. R-Tec's ability
to develop additional gas detection products will be dependent upon the proceeds
from this offering and the amount of funds available, if any, from operations.
Ammonia Chlorine Methane
Butane Ethane Methyl Mercaptan
Carbon Monoxide Isobutane Sulphur Hexaflouride
Acetylene Carbon Sulfide 2-Methylpropene
Acetyl Fluoride Carbon Tetrafluoride Nitric Oxide
Allene Hexafluoropropane Nitrogen
Arsine Hydrogen Nitrous Oxide
Boron Trichloride Hydrogen Chloride Other Refrigerants
Boron Trifluoride Isobutylene Phosgene
Bromotrifluoromethane Methyl Ether Propene
1,3-Butadiene Methanethiol Sulphur Dioxide
2-Methylpropane Trimthylamines
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We also intend to research the feasibility of using a small strip
across the top of wrapped chicken parts and meat as a means of measuring
freshness. This fine lined strip would be the color green, indicating the
chicken is fresh. If this strip turns red, this would indicate that the chicken
is diseased or tainted with salmonella. This would alert both the retailer and
the consumer to the presence of a disease that might not have been detected
without this safety strip.
We intend to work with utility companies on the detection of SF6
gas. This gas is used as an insulator in transformers and takes the place of
harmful PCBs. When these gases leak out of a transformer, they may cause the
electricity passing through the gas to spark and cause an explosion. Currently,
the only way the utility company can detect a leak is when the transformer
explodes and it must be replaced at great cost to utility companies and the
consumer. R-Tec proposes that when a transformer is assembled, the utility
company place a strip of our paint around the top of the transformer so that
utility workers will be able to easily detect a change in the color of a
transformer hanging on a utility pole, if a leak occurs.
Blood Gases
R-Tec believes there may be an interest in the use of our
technology in the field of blood gases. Blood travels from the heart to the
lungs, liver, kidneys and other major organs. During this trip it is carrying a
percentage of oxygen, carbon dioxide and certain other metabolic gases. However,
when there is a restriction in this flow, possibly due to coronary artery
disease, the heart and lungs are unable to supply the proper amount of oxygen to
the blood. Therefore, the oxygen level begins to decrease and the carbon dioxide
level will increase.
R-Tec believes that by detecting gas on a molecular basis at the
rate of -10 to the 64th power, the medical field may have the ability to detect
a change in the amount of carbon dioxide in the blood. This may help patients
with a family history or high risk of heart attacks or strokes to possibly know
if they have a serious medical condition. For example, a person might be able to
rub some gel on their wrist once a month. This gel would consist of a form of
R-Tec's product and dimethyl sulfoxide, a substance that carries medicine into
the body. If the blood flowing through the arterial arteries has a higher than
normal level of carbon dioxide, which is indicative of a restriction of blood
flow and oxygen, the gel would turn from one color to another, possibly warning
the individual that they may be within weeks of suffering a stroke or heart
attack. This pre-warning system will allow a person to seek medical attention
and relieve the arterial restriction before suffering the damage caused by a
heart attack or stroke. Since smog does not affect a person's arterial blood gas
level because the level of these gases is maintained internally, there is little
likelihood of external factors affecting the potential product. The feasibility
of this potential product cannot be assured.
Los Alamos National Laboratory
Los Alamos National Laboratory, (developers of the atomic weapons
program), has requested a sample of our leak detection products. R-Tec intends
to explore the possibility of using its technology for the carbon dioxide
experimental facility at Los Alamos.
Employees
R-Tec currently has four full-time employees. Three full time
employees are officers and directors, and one is clerical. Additionally, R-Tec
has retained the services of the following on a part-time basis: two scientists,
five clerical, secretarial or accounting personnel and one consultant and
director. Upon successful completion of this offering, assuming all the shares
are sold, we plan to hire approximately 20-30 additional full-time employees. If
the minimum is sold, we expect to hire three additional employees, for a total
of seven full-time employees.
Facilities
R-Tec's executive offices are located at 61 Mallard Drive, P.O. Box
282, Allamuchy, New Jersey 07820. Our rent is $2,000 per month under a lease
which expires on October 30, 2000. We also have an office and warehouse at 499
Van Brunt Street, Suite 4B, Brooklyn, New York 11231. Our rent for that space is
$1,000 a month under a lease which expires on October 23, 1999.
Management believes that R-Tec's existing offices are unsuitable and
inadequate for their future needs. However, in the event R-Tec raises only the
minimum offered, its will continue to occupy its present facilities. Upon the
successful completion of this offering, we plan to purchase or lease a building
which will contain our offices, warehouse, research and development laboratory,
and manufacturing operation at one location. We expect we will need a 50,000 to
75,000 square-foot facility. If we purchased a building, the cost may be
estimated to be between $2.5 million and $3.75 million. If we leased such a
facility, the expected annual lease cost may be estimated at $125,000-$200,000.
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Patent
R-Tec's gas detecting coating technology is the invention of Robert
J. Verdicchio, Stewart R. Kaiser, and Shawn Walsh. Their invention is protected
by U.S. patent #5783110, issued July 21, 1998, entitled, Composition for the
Detection of Electrophilic Gases and Methods of Use Thereof. The patent
describes a coating which detects gases, such as chlorodifluoromethane or carbon
dioxide, which are attracted to electrons. Upon contact with such gases, protons
are exchanged between the gas and the paint. The loss or gain of protons causes
a dye incorporated in the paint to change color, indicating the presence of gas.
R-Tec also has two pending U.S. patent applications which, if granted would
expand the scope of present patent. R-Tec has foreign patent applications
pending for 32 countries.
On March 28, 1997, Mr. Verdicchio, Mr. Kaiser and Mr. Walsh assigned
all of their interest in the patent to Muriel Kaiser. On November 2, 1998 Muriel
Kaiser assigned all right, title and interest together with all rights of
priority in U.S. patent #5783110 to R-Tec. This assignment has been filed with
the U.S. Patent and Trademark Office.
On May 10, 1999, R-Tec executed a promissory note in favor of Muriel
Kaiser in the principal amount of $850,000 to pay for the transfer of the patent
to R-Tec. The note bears interest at the rate of 6% per annum is to be paid in
full within 30 days following the completion of this offering. By letter
agreement dated July 2, 1999, Mrs. Kaiser has agreed that in the event 625,000
shares are not sold by January 10, 2000, payment will be made by R-Tec's
execution of a promissory note for $850,000 due and payable in equal quarterly
payments over a five-year period at 6% interest. On September 28, 1999, the note
was further modified by providing for payment of $400,000 of the total due by
the issuance of 100,000 R-Tec shares with the remaining $450,000 being due
within thirty days of R-Tec selling $2,000,000 of its shares in this offering.
In the event $2,000,000 of common shares are not sold before May 1, 2000, the
patent note will be paid beginning May 1, 2000 by the payment of accrued
interest payable quarterly for two (2) years until May 1, 2002, at which time
the R-Tec will make quarterly payments of $22,500 in principal and accrued
interest until paid in full.
There can be no assurance that any of our future patent applications
will be granted, that any current or future patent or patent application will
provide significant protection for our products or technology, be of commercial
benefit or that the validity of such patents or patent applications will not be
challenged. Moreover, there can be no assurances that foreign patent, trade
secret or copyright laws will protect our technologies or that we will not be
vulnerable to competitors who attempt to copy or use our products or processes.
Patent Valuation
The original patent has been appraised by Intellectual Property
Valuators of Sandown, South Africa. The appraiser concluded that the patent has
a value of $31,977,000.
Governmental Regulations And Industrial Standards
We believe based on the opinion of our consultant who is also a
director, that our products presently comply with any applicable material
governmental health and safety regulations and standards. However, there can be
no assurance that our products will comply with all applicable regulations and
standards in the future. Because the future scope of these and other regulations
and standards cannot be predicted, there can be no assurance that we will be
able to comply with all future regulations or industry standards.
Year 2000 Issues
We do not expect any Year 2000 issues to affect the development of
our products. All software used by R-Tec has been represented to be Year 2000
compliant by the vendor. Motors & Armatures has provided assurances that it is
Year 2000 compliant. R-Tec has taken steps to ascertain whether Anscott is Year
2000 compliant. In the event Anscott is not Year 2000 compliant, we will explore
engaging another company to provide raw materials. R-Tec is working to identify
alternative sources for manufacturing. R-Tec cannot give any assurances that
other suppliers, distributors and manufacturers of our products would be able to
resolve any Year 2000 issues that may adversely affect their operations. If this
were the case, it could cause delays in the development, production and sale of
our products, which would have a material adverse effect on the continued
development and growth of our business.
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Management And Affiliates
Directors, Executive Officers And Key Employees
The names, addresses, ages and respective positions of the current
directors and officers of R-Tec are as follows:
Name Age Position
Philip Lacqua 51 President, Treasurer and
1127 83rd Street Director
Brooklyn, New York 11228
Nancy Vitolo 36 Vice President, Secretary
290 Green Road and Director
Sparta, New Jersey 07871
Marc M. Scola 33 Vice President, General
61 Mallard Drive Counsel and Director
Allamuchy, New Jersey 07820
Damon E. Palmer 35 Director
8380 SW 39 Court
Davie, Florida 33328
Shawn P. Walsh 24 Director
538 Wren Way
Branchburg, New Jersey 08876
Each director is elected for a period of one year and serves until
his successor is elected by our shareholders. We have no independent
compensation committee.
Philip Lacqua, age 51, will serve as the President, Treasurer and as a
Director of R-Tec. His duties will include responsibility for the overall
management of R-Tec and sales. Mr. Lacqua was awarded a Bachelor of Science
degree from Central College of Iowa in 1970 with a major in Political Science.
Since 1970, Mr. Lacqua has served as President and Vice President
for various companies. In 1971, Mr. Lacqua started Container Maintenance Corp.,
which was in the business of repairing ocean-going containers, trailers and
chassis. At the same time he started CMC Haulage, Inc., which provided for
interstate and intrastate trucking. In 1973, Mr. Lacqua merged his companies
with others and formed Marine Repair Services, Inc. He assumed the title of Vice
President of Sales. Marine Repair was primarily in the business of repairing
containers, trailers and chassis in the New York area. In December, 1977, Mr.
Lacqua sold his interests in CMC Haulage and Marine Repair.
In February, 1978, Mr. Lacqua formed Eastern Industrial Supply Corp.,
a ship supply company. Mr. Lacqua then formed Marine Technical Service, Inc.,
and served as a Director and President, overseeing all aspects of that company.
Marine Technical specialized in sales to the Far East, the Middle East and
Europe. In June, 1998, Mr. Lacqua resigned as an officer and director of Marine
Technical Service, Inc. to devote all of his attention to R-Tec. Mr. Lacqua
commenced work for R-Tec in May 1996, prior to its incorporation.
Nancy Vitolo, age 36, will serve as a Vice President, Secretary and as
a Director of R-Tec. As such her duties will include public relations. Ms.
Vitolo owned and was employed by Garden State Heating and Air Conditioning
Corporation as a secretary from 1991 until February, 1998. Garden State became
one of the top 50 Bryant/Carrier Dealers in gross sales in the continental U.S.
and Canada. Beginning in March 1998, Ms. Vitolo worked with R-Tec as a
consultant until she became an employee in April, 1999. Ms. Vitolo was a sales
representative for Yves Saint Laurent for the ten years prior to her association
with Garden State.
In 1995, Ms. Vitolo and Mrs. Kaiser began the research project which
resulted in the development of the reactive paint technology now owned by R-Tec.
Ms. Vitolo and Mrs. Kaiser opened a laboratory and engaged scientists to
research the feasibility of creating a better method for detecting minute gas
leaks. A laboratory was leased in Warren County, New Jersey and chemists and
other scientists were engaged to perform research in this area and conduct
experiments. Ms. Vitolo later withdrew from active participation in the project,
but continued to assist Mrs. Kaiser in the funding of the patent. Ms. Vitolo
personally
18
<PAGE>
loaned Mrs. Kaiser approximately $425,000 to fund the development of
the patent.
Marc M. Scola, age 33, will serve as a Vice President, General
Counsel and a Director of R-Tec. His duties will include preparing and
negotiating R-Tec's license agreements, contracts, and various other legal and
corporate matters. Mr. Scola was an attorney in private law practice for six (6)
years.
Mr. Scola was awarded a Bachelor of Arts degree from Seton Hall University
in South Orange, New Jersey in 1988. He then was awarded his Juris Doctorate (
J.D.) degree by Texas Southern University School of Law in Houston, Texas in
1992. Mr. Scola obtained a Graduate Law Degree (L.L.M.) in Taxation from Temple
University School of Law in Philadelphia, Pennsylvania in 1996.
Mr. Scola began his law practice as a solo practitioner in 1993 with the
Law Firm of Marc M. Scola, Esq., P.C. located in Florham Park, New Jersey. In
January of 1996, Mr. Scola formed the Law Firm of Scola & Walterschied, P.C.,
a two-attorney firm, located in Roseland, New Jersey, as a partner. In 1997,
Mr. Scola continued in solo practice as Marc M. Scola, Esq., P.C., in
Allamuchy, New Jersey. Mr. Scola has been working on the R-Tec project since
May 1996.
Mr. Scola, served as counsel to a wide variety of businesses, including
construction companies, physician practices, manufacturing operations,
and computer consulting firms. Mr. Scola has been involved in the review,
negotiation, financing, employment issues, and restructuring of the business
entities. He also had experience in the preparation of shareholder, partnership
and limited liability company, stock option, employment, leasing and other types
of commercial agreements.
Damon E. Palmer, age 35, was elected to serve as a director of R-Tec on
April 14, 1999, and is also a member of the Compensation and Audit Committees
of the Board. Mr. Palmer is Vice President and Chief Financial Officer of
Trinity Industrial Services, a computer consulting company, since 1998. From
1996 until 1998 he was Controller of Marine Technical Services, which was formed
by Mr. Lacqua. Between 1994 and 1996 he was an office administrator for Edward
Jones, C.P.A. From 1989 until 1994 he was a manager of a branch of the Glidden
Company, which engaged in the business of manufacturing and selling paint
products.
Shawn P. Walsh, age 24, was elected to serve as a director on April 14,
1999. He graduated from Johns Hopkins University in Baltimore, Maryland in 1996
with a Bachelor of Science degree in Chemistry. He worked for R.W. Johnson
Pharmaceutical Research Institute in Raritan, New Jersey from December 1996 to
March 1999 as a scientist.
R-Tec has a one year consulting Agreement with Mr. Walsh which terminates
on January 1, 2000. Mr. Walsh has been engaged to perform consulting services
regarding scientific experiments and research on reactive paints. R-Tec is to
pay Mr. Walsh $1,000 per month for a total of $12,000 plus all reasonable out of
pocket expenses. Mr. Walsh has no ownership rights to the patent by virtue of
his assignment of all of his rights to Mrs. Kaiser.
Key Employees And Consultants
The following biographical information relates to our consultants:
Name Position
Stewart R. Kaiser Consultant
Shawn P. Walsh Scientific Consultant, Director
Robert J. Verdicchio Scientific Consultant
Stewart R. Kaiser, age 33, is a graduate of Union County Technical College
in Scotch Plains, New Jersey, receiving a degree in the Heating, Ventilation and
Air Conditioning Mechanical Program. Mr. Kaiser was employed by Garden State Air
Conditioning and Heating from 1991 until February 1998 as a Mechanical
Contracting Supervisor. From March, 1998 until the present Mr. Kaiser worked as
a consultant for R-Tec. Mr. Kaiser was one of three inventors of the patented
proprietary technology which has been assigned to R-Tec. Mr. Kaiser has no
ownership rights to the patent by virtue of his assignment of all of his rights
to Mrs. Kaiser. Mr. Kaiser is the husband of Nancy Vitolo, and the son of Muriel
Kaiser. Mr. Kaiser has no ownership rights to the patent. On November 4, 1998,
Mr. Kaiser filed for Chapter 7 Bankruptcy protection in the United States
Bankruptcy Court, District of New Jersey. On December 16, 1998, he voluntarily
withdrew his Bankruptcy Petition.
R-Tec has a one year Consulting Agreement with Stewart R. Kaiser,
which terminates on January 1, 2000. Mr. Kaiser has been engaged to perform
consulting services regarding scientific experiments and research on reactive
paints. R-Tec is to pay Mr. Kaiser $1,000 per month for a total of $12,000 plus
all reasonable out of pocket expenses.
19
<PAGE>
Robert J. Verdicchio, age 65, has been employed by Verdi
Enterprises, Inc., a chemical consulting company of Succasunna, New Jersey, of
which he is the principal owner since January, 1996. He was employed by Johnson
and Johnson Consumer Products in Skillman, New Jersey ,from 1973 until his
retirement in 1995. He has been engaged in the development of the patented
technology since 1996 and has worked for R-Tec as a consultant since July 1996.
He received a Ph.D. in Metaphysical Science in 1994 from the University of
Metaphysics in Los Angeles, California, a Master of Science degree in 1990 from
Fairleigh Dickinson University, and a Bachelor of Science degree in Organic
Chemistry in 1962 from Rutgers University. He was one of three inventors of the
patented proprietary technology which has been assigned to R-Tec. Dr. Verdicchio
has no ownership rights to the patent by virtue of his assignment of all of his
rights to Mrs. Kaiser. Dr. Verdicchio has agreed to consult for R-Tec on an as
needed basis.
Executive Compensation
R-Tec was only recently incorporated, and has not paid any compensation to
its executive officers and directors. We have no independent compensation
committee. R-Tec has entered into employment agreements dated September 23, 1999
with Marc M. Scola, Nancy Vitolo and Philip Lacqua, who are officers and
directors of R-Tec. The agreement with Mr. Scola provides for the payment of
$50,000 plus bonus per year for a two-year term and will commence upon the sale
of the minimum number of shares. Mr. Scola is employed as Vice President,
director and General Counsel of R-Tec. Mr. Scola has waived his salary due under
the agreement through September 23, 1999.
The employment agreement with Ms. Vitolo provides for the payment of
$50,000 plus bonus per year for a two-year term and will also commence upon the
sale of the minimum number of shares. Ms. Vitolo is employed as Vice President,
Secretary and director of R-Tec. Ms. Vitolo has waived her salary due under the
agreement through September 23, 1999.
The employment agreement with Mr. Lacqua provides for the payment of
$50,000 plus bonus per year for a five year term and will commence upon sale of
the minimum number of shares. Mr. Lacqua is employed as President, Treasurer and
director of R-Tec. Mr. Lacqua has waived his salary due under the agreement
through September 23, 1999.
In the event the minimum number of shares offered were sold, Mr.
Scola, Mr. Lacqua and Ms. Vitolo would defer their salaries until sufficient
funds were available. Sale of the minimum number of shares offered would provide
sufficient funds for R-Tec to operate for 12 months without revenue.
In addition, R-Tec established a Stock Option Plan on April 15, 1999
which provides that all regular full-time employees and key executives may be
issued options to purchase a total of up to one million shares of our common
stock at a price not less than 100% of the fair market value of the shares on
the date the option is granted. The plan is to be administrated by the Stock
Option and Compensation Committee of the Board of Directors, consisting of at
least two disinterested directors. On April 14, 1999 the Board formed a
Compensation Committee which consists of a total of three directors with two
disinterested directors. We also intend to implement a Pension Plan in the near
future.
All of our officers are also directors of R-Tec and are, therefore,
not independent. No independent person has reviewed the employment agreements.
However, since April 14, 1999 the Board of R-Tec includes two disinterested
directors who are members of the Compensation and Audit Committees.
If R-Tec sells the maximum amount of shares, $2,135,000 represents
an estimate of the total employee compensation for 36 to 48 months, including
salaries for its officers and staff. The consulting agreements in effect do not
cover full-time employment by these consultants, which must be negotiated at the
appropriate time in the future.
20
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Name Other Securities
and Annual Restricted Underlying LTIP All Other
Principal Compen- Stock Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) Awards ($) SARs ($) sation($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip Lacqua 1997 --- --- ---- ---- ---- ---- ----
President, Treasurer 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Nancy Vitolo 1997 --- --- ---- ---- ---- ---- ----
Secretary 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Marc M. Scola 1997 --- --- ---- ---- ---- ---- ----
General Counsel 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Damon E. Palmer 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Shawn P. Walsh 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
</TABLE>
Principal Shareholders
The following table presents the shares of common stock of R-Tec
owned of record or beneficially by each person known to own more than 5% of
R-Tec's common stock, and the name and shareholdings of each officer and
director and all officers and directors as a group:
<TABLE>
<CAPTION>
<C>
Percent After Percent After
Principal Stockholder's Number of Percent Prior Minimum Maximum
Name and Addresses Shares Owned to Offering Offering Offering Office(s) Held
Office(s) Held
<S> <C> <C> <C> <C> <C>
Philip Lacqua 972,222 32.23% 30.95% 22.79% Director,
1127 83rd Street President
Brooklyn, New York 11228 Treasurer
Nancy Vitolo 972,222 32.23% 30.95% 22.79% Director
290 Green Road Vice President
Sparta, New Jersey 07871 Secretary
Marc M. Scola 972,222 32.23% 30.95% 22.79% Director
61 Mallard Drive Vice President
Allamuchy, New Jersey 07820 General Counsel
Damon E. Palmer -0- 0% 0% 0% Director
8380 SW 39 Court
Davie, Florida 33328
Shawn P. Walsh -0- 0% 0% 0% Director
538 Wren Way
Branchburg, New Jersey 08876
All Officers and
Directors as a Group 2,916,666 96.69% 92.84% 68.36%
</TABLE>
21
<PAGE>
Certain Relationships and Related Transactions
Mr. Lacqua, Ms. Vitolo and Mr. Scola own 2,916,666 shares. The contributed
$569,150 in capital through June 30, 1999. As of June 30, 1999, $61,807 of this
amount is due pursuant to a promissory note from Ms. Vitolo bearing interest at
6.0% per annum.
The patent covering R-Tec's proprietary technology was assigned to us by
Muriel Kaiser. Mrs. Kaiser is the mother of Stewart Kaiser and Nancy Vitolo's
mother-in-law. Ms. Vitolo is the wife of Stewart Kaiser. In consideration for
the patent, we executed a promissory note in favor of Mrs. Kaiser. Pursuant to
the promissory note, R-Tec was obligated to pay $850,000 payable in full within
thirty (30) days of the completion of this offering. By letter agreement dated
July 2, 1999, Mrs. Kaiser agreed that in the event 625,000shares were not sold
by January 10, 2000, payment would be made by R-Tec's execution of a promissory
note for $850,000 due and payable in equal quarterly payments over a five-year
period at 6% interest. On September 28, 1999, the note was further modified by
providing for payment of $400,000 of the total due by the issuance of 100,000
R-Tec shares with the remaining $450,000 being due within thirty days of R-Tec
selling $2,000,000 of its shares in this offering. In the event $2,000,000 of
common shares are not sold before May 1, 2000, the patent note will be paid
beginning May 1, 2000 by the payment of accrued interest payable quarterly for
two (2) years until May 1, 2002, at which time the R-Tec will make quarterly
payments of $22,500 in principal and accrued interest until paid in full.
R-Tec had previously executed an agreement in favor of Philip Lacqua, Nancy
Vitolo and Marc M. Scola under which R-Tec agreed to reimburse Mr. Lacqua, Ms.
Vitolo and Mr. Scola for all expenses advanced by such individuals prior to and
after the date of R-Tec's incorporation. Such expenses include, but are not
limited to, attorneys' fees, accountant fees, office leases, advertising,
travel, and general expenses of this offering. On May 26, 1999, sums due Mr.
Lacqua, Ms. Vitolo and Mr. Scola were reduced or reclassified as equity. As of
June 30, 1999, $22,036 was owed to shareholders for reimbursement of expenses
incurred since May 26, 1999.
On September 21, 1999, R-Tec entered into a consulting agreement
with Stenton Leigh Capital Corp. of Boca Raton, Florida to provide financial
consulting services. The consulting agreement provides that Stenton Leigh will
be paid $5,000 per month until September 20, 2000 beginning at such time as
R-Tec has raised $2,000,000 in this offering.
On September 25, 1999, our executive officers, Mr. Lacqua, Mr. Scola and
Ms. Vitolo transferred 12,083,334 common shares to the Company, reducing the
total number of shares held be them as a group to 2,916,666.
R-Tec presently has two independent directors. The transactions
noted above were ratified by these independent directors who do not have an
interest in the transactions. Any future transactions undertaken by R-Tec with
its officers, directors or 5% shareholders will be on terms no less favorable to
R-Tec than could be obtained from unaffiliated parties.
Indemnification
R-Tec's Articles of Incorporation, as amended, provide that, to the
extent not inconsistent with applicable law, R-Tec shall indemnify and hold
harmless its officers, directors, employees and agents from liability and
reasonable expense from actions in which he or she may become involved by reason
of the fact that he or she was an officer, director, employee or agent. We
expect to obtain an insurance liability policy for this purpose at a cost of
approximately $25,000 - $80,000 per year.
Disclosure Of Commission Position On Indemnification For Securities Act
Liabilities
Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers and controlling persons of R-Tec
pursuant to the foregoing provisions, or otherwise, R-Tec has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that any claim for indemnification against such
liabilities, (other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the small
business issuer in the defense of any action, suit or proceeding), is asserted
by such director, officer or controlling person in connection with the
securities being registered, R-Tec will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of the Court of such issue.
Organization Within Last Five Years
22
<PAGE>
As soon as the money from this offering is made available, R-Tec
expects to make all arrangements necessary so that it can commence commercial
operations in 1999.
Description of Securities
The following statements summarize detailed provisions of R-Tec's
Articles of Incorporation and Bylaws, copies of which will be furnished to an
investor upon written request.
Authorized Capital
Our authorized capital stock consists of 50,000,000 shares of $.00001 par
value common stock. We have outstanding 3,016,666 shares of common stock, all of
which are validly issued, fully paid and non-assessable.
Common Stock
The shares being offered are shares of common stock. Currently there
are no markets for the common stock and there can be no assurances there will
ever be a public market in the future.
R-Tec is presently authorized to issue 50,000,000 shares of $.00001
par value common stock. There are 3,016,666 shares issued and outstanding, and a
maximum of 1,250,000 shares are for sale in this offering. The shares of common
stock being sold will be, when issued in accordance with the terms of the
offering, fully paid and non-assessable.
The holders of common stock, are entitled to equal dividends and
distributions per share with respect to the common stock when and if declared by
the Board of Directors from funds which are legally available. R-Tec has not
paid any dividends on common stock to date and does not anticipate paying
dividends on common stock in the foreseeable future. No holder of common stock
has a pre-emptive right to subscribe for any securities nor are any common
shares subject to redemption or convertible into other securities of R-Tec.
Upon liquidation, dissolution or winding up of R-Tec, and after payment of
creditors and preferred stockholders, if any, the remaining assets will be
divided pro-rata on a share-for-share basis among the holders of the shares of
common stock. All shares of common stock now outstanding are fully paid,
validly issued and non-assessable. Each share of common stock is entitled to
one vote with respect to the election of any director or any other matter upon
which stockholders are required or permitted to vote. Holders of common stock
do not have cumulative voting rights so that the holders of more than 50% of
the combined shares voting for the election of directors may elect all of the
directors, if they choose to do so and, in that event, the holders of the
remaining shares will not be able to elect any alternate members to the Board
of Directors.
Preferred Stock
R-Tec is currently authorized to issue shares of Preferred Stock.
Accordingly, the Board of Directors could authorize the issuance of shares of
Preferred Stock. Preferred Stock may, if and when issued, have rights superior
to those of the common stock offered hereby. The Board of Directors may approve
the issuance of Preferred Stock without a vote by shareholders and conversion
rights may adversely affect the voting power of holders of common stock.
Transfer Agent
The Bank of New York, Inc., One Wall Street, New York, New York
10286, is the Transfer Agent and Registrar for common stock.
Escrow Agent
The Bank of New York, Inc., One Wall Street, New York, New York 10286 is
the Escrow Agent for subscriptions until the minimum number of shares is sold.
Dividend Policy
We have not paid any dividends on common stock to date and we do not
anticipate paying dividends on common stock in the foreseeable future. We intend
for the foreseeable future to follow a policy of retaining all of its earnings
to finance the development and expansion of our business.
Shares Eligible for Future Sale.
Upon the consummation of this offering at the maximum, we will have
4,266,666 shares of common stock outstanding.
23
<PAGE>
Of these shares, the 1,250,000 shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act,
except for any shares purchased by an affiliate of R-Tec, in general, a person
who has a control relationship with R-Tec, which will be subject to limitations
of Rule 144 promulgated by the Commission under the Securities Act. All of the
remaining 3,016,666 shares are deemed to be restricted securities, as that term
is defined under Rule 144 promulgated under the Securities Act, in that such
shares were issued in private transactions not involving a public offering. All
of such shares are not eligible for sale under Rule 144 until December 1, 1999
at which time they will have been held longer than one year.
Plan of Distribution
R-Tec, is offering a minimum of 125,000 shares and a maximum of 1,250,000 shares
of common stock through it officers and directors and placement agent on a
best-efforts basis. The factors we considered in determining the offering price
of the common stock were our capital requirements, our negative book value, the
percentage of ownership to be held by investors following the offering, the
prospects for our business, the stage of our product development, the lack of
revenue and the prospects for future revenues, and the current state of economy
in the United States. From August 5, 1999 until September 24, 1999, the terms
of the escrow agreement provided that funds would not be released from escrow
until $5,000,000 were raised. $511,536. was held in escrow on September 24,
1999. On September 25, 1999, our executive officers, Mr. Lacqua, Mr. Scola and
Ms. Vitolo transferred 12,083,334 common shares to the Company. Simultaneously,
we reduced the number of shares offered from 3,750,000 to 1,250,000 common
shares. Investors who purchased prior to the date of this prospectus may elect
to receive a complete refund of their investment or to invest in the present
offering. Investors who purchased prior to the date of this prospectus who do
not return an executed subscription agreement within twenty-one days following
the date of this prospectus, will automatically receive a refund of their
original investment.
Until the minimum number of shares are subscribed, all subscription
payments will be deposited into an escrow account at the Bank of New York. If
less than the minimum number of shares are subscribed within three months after
the effective date of this prospectus or within six months after the effective
date if we elect to exercise the option to obtain an extension of the offering
period, all proceeds will be promptly refunded in full, with interest, and
without any deduction of expenses. Upon sale of the minimum number of shares,
the escrow will be terminated and subscriptions will go directly to R-Tec. This
offering will end on the earlier of the following:
(1) three months from the effective date of this prospectus if
the minimum number of shares are not sold and fully paid for, or within six
months from the effective date if we elect to exercise the option to obtain
this extension,
(2) the sale of the 1,250,000 shares,
(3) twelve months after the effective date of this prospectus or
the date on which R-Tec decides to close the offering, which will not exceed
twelve months from the effective date of this prospectus.
On September 21, 1999, R-Tec entered into a best efforts agency
agreement with Thornhill Group, Inc. of Boca Raton, Florida, under which
Thornhill agreed to act as exclusive placement agent for this offering. The
agreement provides that Thornhill will be paid:
o 10% of the gross proceeds of the offering as commission
o 3% of the gross proceeds of the offering as a non-allocable expense
allowance
o Warrants to purchase 12,500 shares for $8.00 per share for every
$1,000,000 in gross proceeds raised by the Company.
Additionally, the agency agreement grants Thornhill the right to act
as the Company's non-exclusive placement agent for a period of two years
following the conclusion of this offering and to appoint one member to R-Tec's
board.
Under Rule 3a4-1 of the Exchange Act, none of the employees of R-Tec
will be a "broker" as defined in the Exchange Act, solely by reason of
participation in this offering, because:
(1) none is subject to a statutory disqualification, as that term is defined in
Section 3(a)(39) of the Act, at the time of his participation; and
(2) none will receive, directly or indirectly, any commissions or other
remuneration based either directly or indirectly on transactions in securities,
(3) none is an associated person (partner, officer, director, or employee) of a
broker dealer, and
(4) each meets all of the following conditions: (a) primarily performs, or
is intended primarily to perform at the end of the offering, substantial duties
for the issuer otherwise than in connection with transactions in securities; (b)
none was not a broker or dealer, or an associated person of a broker dealer,
within the preceding 12 months; and (c) none will not participate in selling an
offering of securities for any issuer more than once every 12 months.
24
<PAGE>
Residents of California purchasing units must meet one of the
following suitability requirements: an investor must (1) be an "accredited
investor" within the meaning of Regulation D under the Securities Act of 1933;
or (2) a person who (1) has an income of $65,000 and a net worth of $250,000 or
(b) has a net worth of $500,000 (in each case excluding home, home furnishings,
and personal automobiles); or (3) a bank, savings and loan association, trust
company registered under the investment company act of 1940, pension or
profit-sharing trust, corporation, or to the entity which, together with the
corporation's or other entity's affiliates, have a net worth on a consolidated
basis according to the most recent regularly prepared financial statement (which
shall have been reviewed but not necessarily audited, by outside accountants) of
net less than $14,000,000 and subsidiaries of the foregoing; or (4) a person
(other than a person formed for the sole purpose of purchasing the units offered
hereby) who is purchasing at least $1,000,000 in aggregate amount of the units.
Residents of Virginia purchasing units must have a net worth of at
least $225,000 or a net worth of at least $60,000 and an annual income of at
least $60,000. Net worth in all cases is calculated exclusive of home,
furnishings and automobiles. Virginia residents may not invest more than 10% of
their readily marketable assets in the offering.
Penny Stock Rules
Broker/dealer practices in connection with transactions in penny
stocks are regulated by certain penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks generally are equity securities with a price
of less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system, provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system). The penny stock rules require a
broker/dealer, prior to a transaction in a penny stock to deliver a standardized
risk disclosure document that provides information about penny stocks and the
risks in the penny stock market. The broker/dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker/dealer and its salesperson in the transaction, and
monthly account statements showing the market value of each penny stock held in
the customer's account. In addition, the penny stock rules generally require
that prior to a transaction in a penny stock, the broker/dealer make a special
written determination that the penny stock is a suitable investment for the
purchaser and receive the purchaser's written agreement to the transaction.
These disclosure requirements may have the effect of reducing the level of
trading activity in the secondary market for a stock that becomes subject to the
penny stock rules.
The offering price has not been determined by negotiation with an
underwriter, as is customary in most offerings, and instead the offering price
has been set arbitrarily by R-Tec.
Legal Matters
To the knowledge of management there is no material litigation
pending or threatened against R-Tec. Legal counsel for R-Tec in connection with
this offering is Brashear & Associates, P.L., 926 N.W. 13th Street, Gainesville,
FL 32601.
Experts
The financial statements of R-Tec as of December 31, 1998, included
in this prospectus have been audited by James Moore & Co. P.L., independent
certified public accountants, as indicated in their report with respect thereto,
and are included herein in reliance on such report given upon the authority of
that firm as experts in accounting and auditing.
Change In Independent Accountants
On May 21, 1999, R-Tec engaged James Moore & Co., P.L. as its
independent auditors for the year ending December 31, 1998 to replace the firm
of Jurewicz & Duca, Certified Public Accountants, P.C., who were dismissed as
our auditors effective May 20, 1999. James Moore & Co., P.L. reaudited the
financial statements for the year ended December 31, 1998; no reliance should be
placed on previous financial statements for the same period. R-Tec's Board of
Directors approved the decision to change auditors.
The reports of Jurewicz & Duca, P.C., on the financial statements of
R-Tec from October 29, 1998 (inception) to December 31, 1998 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principles. Subsequent to the issuance
of the audit report of Jurewicz & Duca, P.C., information came to the attention
of Jurewicz & Duca, P.C. which they have concluded materially impacts the
fairness and reliability of their audit report and the underlying financial
statements. Due to the dismissal of Jurewicz & Duca, P.C., they have not
addressed these issues and therefore have withdrawn their audit report dated
January 7, 1999. No reliance should be placed on
25
<PAGE>
this audit report or the underlying financial statements.
In connection with the audits of R-Tec's financial statements for
the period ended December 31, 1998, and for the interim period preceding their
dismissal, there were no disagreements with Jurewicz & Duca, P.C. on any matters
of accounting principles or practices, financial statement disclosure or
auditing scope and procedures. In a letter dated June 15, 1999, Jurewicz & Duca,
P.C. have confirmed this understanding.
How To Invest In R-Tec
If you want to purchase shares of R-Tec Technologies, Inc. in this
offering please fill in the information requested below and return with a check
payable to "Bank of New York, Escrow, R-Tec Technologies, Inc. #301472" If you
wish to have the shares issued in street name, in the name of the brokerage firm
where you have an account, please complete the bottom portion of the form. If
you are a resident of a state where we are not authorized to sell stock, your
subscription will be rejected and returned to you in full, without interest or
deduction.
26
<PAGE>
COMMON STOCK PURCHASE AGREEMENT
TO: R-Tec Technologies, Inc., Escrow, P.O. Box 282, 61 Mallard Drive,
Allamuchy, New Jersey 07820.
Telephone: (908) 850-8593
Please issue shares of R-Tec Technologies, Inc.'s common stock in
the amount(s) and name(s) shown below. My signature acknowledges that I have
received the prospectus by which the shares are offered.
Signature:______________________________ Date:__________________
Enclosed is payment for ______________ shares, at $8.00 per share, totaling
$______________________. Please make checks payable to "Bank of N.Y., Escrow,
R-Tec," and indicate account #301472 in legend of check.
Name:_________________________________________________________________
Mailing Address:______________________________________________________
City:___________________ State:_____________ Zip Code:_______________
Telephone No.,________________ Business,_______________ Home
Social Security or Taxpayer ID Number:________________________________
Please check one of the following:
____ My income has exceeded $200,000 for the last 2 years and I expect my
income to exceed $200,000 this year
____ My income has not exceeded $200,000 for the last 2 years.
Minimum Investment is $504.00 (U.S. Dollars) (63 shares)
Register the shares in the following name(s) and amount(s):
Name Number of Shares
A)______________________________________ ________________
B)______________________________________ ________________
C)______________________________________ ________________
As (Circle One Below):
Individual Joint Tenants Trust
Tenants in Common Corporation Other
If you would like your stock to be transferred to your Brokerage Account
complete this section. (Complete only if shares will be in the name of the
Brokerage Firm)
Name on Account:______________________________________________________
Name of Brokerage Firm:_______________________________________________
Mailing Address of Brokerage Firm:____________________________________
City:____________________ State:_____________ Zip Code:______________
Telephone Number of Broker:___________________________________________
Social Security Number or Taxpayer I.D. Number:____________________________
Broker Account Number:_____________________________________________________
27
<PAGE>
WIRE INSTRUCTIONS
Routing No. (ABA) 021000018 (Bank of New York)
Beneficiary: GLA-111/565
Account No. 301472
Date Wired:______________________________________
Amount Wired:____________________________________
Confirm Bank Wire with R-TEC at (888) 299-7832
Please make checks payable to "Bank of N.Y., Escrow, R-Tec," and
indicate account #301472 in legend of check.
Please attach any special mailing instructions other than shown above. You will
be mailed a signed copy of this agreement to retain for your records.
-----------------------------------------------------------------
SUBSCRIPTION ACCEPTED BY R-TEC TECHNOLOGIES, INC.:
______________________________ Dated___________________
Marc M. Scola, Esq.
V.P. & General Counsel
INVESTORS WHO PURCHASED COMMON SHARES
PRIOR TO THE DATE OF THIS PROSPECTUS
I have received the prospectus dated October 8, 1999. I understand that I will
receive a complete refund of my entire investment without any action on my part.
I instruct the Bank of New York to retain the payment which I previously made in
escrow for the purchase of common shares.
Signature:______________________________ Date:__________________
VIRGINIA SUBSCRIBERS
Virginia subscribers must meet the following suitability requirement:
I certify that I am (initial blank) ________ a person who (a) has an annual
income of $60,000 and a net worth of at least $60,000 or (b) has a net worth of
at least $225,000 (in each case excluding home, home furnishings, and personal
automobiles) and that I am not investing more than 10% of my readily marketable
assets in this offering.
MAIL TO:
R-Tec Technologies, Inc., Escrow, P.O. Box 282, 61 Mallard Drive,
Allamuchy, New Jersey 07820
1(888) 299-7832
Incomplete Forms will be returned to Sender.
28
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors,
R-Tec Technologies, Inc.:
We have audited the accompanying balance sheet of R-Tec Technologies, Inc. (a
development stage company), as of December 31, 1998, and the related statements
of operations, stockholders' equity and cash flows for the period from inception
(October 22, 1998) through December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of R-Tec Technologies, Inc. as of
December 31, 1998, and the results of its operations and its cash flows for the
period from inception (October 22, 1998) through December 31, 1998 in conformity
with generally accepted accounting principles.
As more fully described in Note 9 to the financial statements, subsequent to the
issuance of the Company's 1998 financial statements and an audit report thereon
dated January 7, 1999, certain errors were discovered by management. These
errors resulted in an overstatement of previously reported organizational costs
and an understatement of previously reported deferred offering costs as of
December 31, 1998. In addition, an agreement to acquire a patent and agreements
to repay stockholders for certain organizational expenses were subsequently
significantly modified by management of the Company. Accordingly, the 1998
financial statements have been restated to correct these errors and significant
modifications.
Gainesville, Florida
May 25, 1999, except for Note 10,
as to which the date is September 29, 1999
F-1
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
ASSETS
------
June 30, December 31,
1999 1998
-------- ------------
(Unaudited)
Current assets
Cash and cash equivalents $ 16,834 $ 43,500
---------- --------
Equipment 10,083 -
---------- --------
Other assets
Patent 826,945 815,000
Deferred offering costs 205,042 45,000
Deposits 2,000 1,000
-------- --------
Total other assets 1,033,987 861,000
========== ========
Total Assets $1,060,904 $904,500
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 99,686 $ 7,147
Due to stockholder 22,036 -
Notes payable 498,000 414,000
---------- --------
Total current liabilities 619,722 421,147
Commitments and contingencies (Note 3)
Stockholders' equity
Common stock, par value $.00001 per
share, 50,000,000 shares authorized,
2,916,666 shares issued and outstanding 29 29
Due from stockholders (61,807) (96,160)
Common stock payable 400,000 400,000
Additional paid-in capital 569,121 419,971
Deficit accumulated during the development (466,161) (240,487)
stage ---------- --------
Total stockholders' equity 441,182 483,353
---------- --------
Total Liabilities and Stockholders' Equity $1,060,904 $904,500
========== ========
F-2
The accompanying notes to financial statements
are an integral part of these statements
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Inception
(October 22, Inception
1998) (October 22,
Six-Month Through 1998)
Period Ended December 31, Through
June 30, 1999 1998 June 30, 1999
--------------- --------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues $ - $ - $ -
-------------- --------------- --------------
Expenses
Administrative fees to stockholders 34,000 231,000 265,000
Administrative and start-up 167,674 5,487 173,161
Interest expense 24,000 4,000 28,000
-------------- --------------- --------------
Total expenses 225,674 240,487 466,161
============== =============== ==============
Net loss $ (225,674) $ (240,487) $ (466,161)
============== =============== ==============
Net loss per common share $ (.08) $ (.08) $ (.16)
============== =============== ==============
Weighted average common shares outstanding 2,916,666 2,916,666 2,916,666
============== =============== ==============
</TABLE>
The accompanying notes financial statements
are an integral part of these statements
F-3
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the Total
Common Stock Paid-In Due from Common Stock Development Stockholders'
Shares Par Value Capital Stockholders Payable Stage Equity
------------------- ---------- ------------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Initial capitalization, October 1998 2,916,666 $ - $ - $ - $ - $ - $ -
Additional capital contributed by
stockholders, October 1998
through December 1998 - 29 419,971 (96,160) - - 323,840
Purchase of patent - - - - 400,000 - 400,000
Net loss - - - - - (240,487) (240,487)
--------- -------- ----------- ----------- ----------- ---------- -------------
Balance, December 31, 1998 2,916,666 29 419,971 (96,160) 400,000 (240,487) 483,353
Additional capital
contributed by stockholders
January 1999 through March
1999 (Unaudited) - - - - - - -
--------- -------- ----------- ----------- ----------- ----------- -----------
Additional capital contributed
by stockholders April through
June 1999 (Unaudited) - - 29,150 14,050 - - 43,200
Net loss (Unaudited) - - - - - (225,674) 225,674)
Balance, June 30, 1999 ========= ======== =========== ============ ========== ============ =============
(Unaudited) 2,916,666 $ 29 $ 569,121 $ (61,807) $ 400,000 $ (466,161) $ 441,182
========= ======== =========== ============ ========== ============ =============
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
F-4
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash and Cash Equivalents
<TABLE>
<CAPTION>
Inception
(October 22, Inception
1998) (October 22,
Six-Month Through 1998)
Period Ended December 31, Through
June 30, 1999 1998 June 30, 1999
------------------ ----------------- -----------------
(Unaudited (Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities $ (225,674) $ (240,487) $ (466,161)
Net loss ------------------ ----------------- -----------------
Adjustments to reconcile net loss to
net cash used in operating activities:
Unreimbursed expenses contributed to
capital by shareholders 14,500 231,000 245,500
Interest expense - amortization of
discount on note payable 24,000 4,000 28,000
Increase in deposits (1,000) (1,000) (2,000)
Increase in accounts payable 52,539 147 52,686
Increase in due to stockholders 22,036 - 22,036
------------------ ----------------- -----------------
Total adjustments 112,075 234,147 346,222
------------------ ----------------- -----------------
Net cash used in operating activities (113,599) (6,340) (119,939)
Cash flows from investing activities ------------------ ----------------- -----------------
Patent costs (5,945) (5,000) (10,945)
Purchase of equipment (10,083) - (10,083)
Net cash used in investing activities (16,028) (5,000) (21,028)
----------------- ----------------- -----------------
Cash flows from financing activities
Increase in deferred offering costs (126,042) (38,000) (164,042)
Proceeds from note payable 60,000 - 60,000
Capital contributed by stockholders 169,003 92,840 261,843
Net cash provided by financing activities 102,961 54,840 157,801
Net increase (decrease) in cash ----------------- ----------------- ----------------
and cash equivalents (26,666) 43,500 16,834
Cash and cash equivalents, beginning of period 43,500 - -
----------------- ----------------- ----------------
Cash and cash equivalents, end of period $ 16,834 $ 43,500 $ 16,834
================= ================= ================
Supplemental disclosures of noncash
investing and financing activities
Purchase of patent with common stock and note payable $ - $ 810,000 $ 810,000
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
F-5
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) Summary of Significant Accounting Policies:
The following is a summary of the more significant accounting policies and
practices of R-Tec Technologies, Inc. (the Company) which affect the
accompanying financial statements.
(a) Organization and operations--The Company was incorporated on
October 22, 1998, to commercialize and advance the technology of a
recently obtained patent on a type of paint that can detect certain
gases. The Company plans to pursue other applications of this
technology.
(b) Presentation--The Company has devoted substantially all its efforts
to date to raising capital to commercialize its technology and has no
revenues. Therefore, these financial statements have been prepared in
accordance with Statement of Financial Accounting Standards No. 7
Accounting and Reporting by Development Stage Enterprises.
(c) Unaudited information--In the opinion of management, all
adjustments consisting only of normal recurring adjustments necessary
for a fair presentation of the financial position at June 30, 1999; the
results of operations and cash flows for the six months then ended; and
the results of operations and cash flows for the period from inception
though June 30, 1999, have been made. Operating results for the six
month period ended June 30, 1999, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
(d) Use of estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect certain
reported amounts and disclosures. Accordingly, actual results could
differ from those estimates.
(e) Cash and cash equivalents--For the purposes of reporting cash
flows, the Company considers all highly liquid investments with an
original maturity of three months or less to be cash equivalents.
(f) Equipment--Equipment is recorded at cost. No depreciation has been
recorded in the accompanying financial statements since the equipment
has not been placed in service.
(g) Deferred offering costs--Costs directly attributable to the
proposed stock offering as described in Note 2 are deferred and offset
against the proceeds from the offering if successful or expensed if the
offering is not successful.
(h) Patent--Patents are recorded at the cost of acquisition if
purchased or if developed internally, the accumulation of the direct
costs incurred to obtain the patent. No amortization has been recorded
in the accompanying financial statements since the patent has not been
placed in service.
(i) Deferred income taxes--Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective income tax bases.
Deferred tax assets and liabilities are measured using enacted rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled.
F-6
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) Summary of Significant Accounting Policies: (Continued)
(j) Loss per common share--Loss per common share is computed using the
weighted average of shares outstanding during each period presented in
accordance with Statement of Financial Accounting Standards No. 128
Earnings Per Share.
(k) Start-up costs--The initial costs incurred to organize the Company
are expensed when incurred.
(l) Advertising--Advertising costs are expensed when incurred.
(2) Proposed Public Offering of Common Stock:
The Company is offering up to 3,750,000 shares of its common stock for sale at
$8.00 per share, which is expected to raise between $5 to $30 million. The
Company subsequently amended its offering (see Note 11). There is no assurance
the offering will be successful.
(3) Commitments and Contingencies:
The Company has entered into a five year exclusive manufacturing agreement with
a specialty chemical manufacturer for certain of the Company's initial products
expiring in October 2003.
On April 14, 1999, the Company entered into five year employment contracts with
its three principal officers for total annual salaries of $990,000 beginning on
January 1, 1999. The terms of these agreements were modified in September 1999
(see Note 11).
On April 14, 1999, the Company adopted a stock bonus plan for certain classes of
employees and reserved 1,000,000 shares of its authorized but unissued common
stock under this plan. No stock options have been granted.
The Company has one year service contracts with two consultants beginning
January 1, 1999. The contracts specify a minimum payment of $1,000 per month.
The contracts can be cancelled with thirty days written notice by either party.
The Company expensed $3,500 and the consultants waived $8,500 in payments under
the contracts for the six months ended June 30, 1999.
The Company leases an office facility under a one year operating lease with a
monthly rent of $1,000. A second office is leased from a stockholder under a two
year lease at $2,000 per month. Rent expense was $10,000 for 1998 and $18,000
for the six months ended June 30, 1999.
F-7
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(4) Patent Acquisition and Notes Payable:
The Company purchased a patent from a related party (see Note 6) on December 1,
1998, the terms which were substantially modified in May 1999 and September 1999
(see Notes 9 and 10). The Company is obligated to issue 100,000 shares of the
Company's common stock valued at $400,000 (see Note 11) and issued a promissory
note in the amount of $450,000. The stock payable obligation is recorded at a
value of $4.00 per share which is 50% of the public offering price (see Note 2)
because the stock is under various trading restrictions. The promissory note is
initially non interest bearing and is due in full within thirty days of $2
million being raised in the proposed stock offering described in Note 2; or if
$2 million is not raised by May 1, 2000, then interest at 6% is payable
quarterly from May 1, 2000 until May 1, 2002 at which time quarterly payments of
$22,500 plus accrued interest are due until paid in full. As of the date of the
agreement, the patent, stock payable obligation and note payable have been
recorded at $810,000 which represents the net present value of the stock payable
obligation and note payable. The accompanying financial statements reflect the
new terms of this transaction.
In June 1999, the Company received $60,000 under a note payable. The promissory
note is due in full within thirty days of $2 million being raised in the
proposed stock offering described in Note 2; or if $2 million is not raised the
note is due in full on or before November 15, 2000. Interest at 8.5% is due
monthly.
(5) Income Taxes:
The Company has a deferred tax asset of approximately $75,000 at December 31,
1998, due to the net loss incurred since inception. Temporary differences giving
rise to deferred tax assets consist primarily of the deferral of substantially
all start-up expenses for income tax purposes. Management has provided a
valuation allowance equal to the amount of the deferred tax assets at December
31, 1998, due to the uncertainty of realization of the future benefit of these
future deductions. Therefore, no income tax provision or benefit is provided in
the accompanying statements of operations.
(6) Related Party Transactions:
Certain unreimbursed administrative expenses of the Company were incurred by two
shareholders, both before and after the Companys' incorporation on October 22,
1998. The Company recorded $14,500 and $231,000 as administrative fees to
stockholders and as an increase in additional paid in capital for the six months
ended June 30, 1999 and for the period ended December 31, 1998, respectively, in
the accompanying financial statements. The Company also expensed an additional
$19,500 as administrative fees to stockholders and an increase in due to
stockholders for the six months ended June 30, 1999.
The Company is owed $61,807 and $96,160 from stockholders for amounts due for
additional paid-in capital as of June 30, 1999 and December 31, 1998,
respectfully. These amounts have been reflected as a reduction in stockholders'
equity in the accompanying financial statements.
The Company purchased a patent under terms described in Note 4 from a relative
of a shareholder/officer of the Company. The Company owes this related party
100,000 shares of common stock and $450,000 at June 30, 1999.
F-8
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(7) Concentrations of Credit Risk:
Significant concentrations of credit risk for all financial instruments owned by
the Company are as follows:
(a) Demand deposits--The Company has demand deposits in one bank, which
are insured by the Federal Deposit Insurance Corporation (FDIC) up to
$100,000. The bank balance was $17,771 and $48,500 at June 30, 1999 and
December 31, 1998, respectively. The Company has no policy of requiring
collateral or other security to support its deposits.
(b) Due from stockholders--The Company is owed $61,807 from one
stockholder at June 30, 1999, and $96,160 from two stockholders at
December 31, 1998. The Company has no policy of requiring collateral or
other security to support these amounts.
(8) Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107 Disclosures about Fair
Values of Financial Instruments requires disclosure of fair value to the extent
practicable for financial instruments which are recognized or unrecognized in
the balance sheet. The fair value disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.
The following table summarizes financial instruments by individual balance sheet
account as of December 31, 1998:
Carring
Amount Fair Amount
----------- ---------------
Financial Assets
Cash and cash equivalents $ 43,500 $ 43,500
Due from stockholders 96,160 96,160
----------- ---------------
Total financial assets $ 139,660 $ 139,660
=========== ===============
Financial Liabilities
Accounts payable $ 7,147 $ 7,147
Notes payable 414,000 450,000
Common stock payable 400,000 400,000
----------- ---------------
Total financial liabilities $ 821,147 $ 857,147
=========== ===============
The fair value of financial instruments approximates carrying value due to the
short-term maturity of the instruments.
F-9
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(9) May 1999 Restatement of Previously Issued Audited Financial Statements:
-----------------------------------------------------------------------
Subsequent to the issuance of the Company's 1998 financial statements and an
audit report thereon dated January 7, 1999, certain errors were discovered by
management. These errors resulted in an overstatement of previously reported
organizational costs and an understatement of previously reported deferred
offering costs as of December 31, 1998. In addition, an agreement to acquire a
patent and agreements to repay stockholders for certain organizational expenses
were subsequently significantly modified by management of the Company.
Accordingly, the 1998 financial statements have been restated to correct these
errors and significant modifications. The effect of these errors and changes was
to increase the net loss and deficit accumulated during the development stage by
$227,065, decrease total assets by $456,854, decrease total liabilities by
$553,626 and increase paid-in capital by $323,837. Components of these errors
and changes and their effect on net income and earnings (loss) per share are as
follows:
<TABLE>
<CAPTION>
Earnings
Income (Loss Per-
Amounts (Loss) Effect share Effect
--------- -------------- ------------
<S> <C> <C> <C>
Organization costs previously
capitalized - expensed in restatement $ 228,065 $ (228,065) $ (.08)
Organization costs previously
capitalized - reclassified as
deferred offering costs in restatement 45,000 - -
Patent costs previously expensed -
capitalized in restatement 5,000 5,000 -
Modification of patent acquisition agreement,
previously capitalized at $1- recorded at net
present value and corresponding obligation was
recorded in restatement 814,999 - -
Imputation of interest expense on patent
acquisition recorded in restatement 4,000 (4,000) (-)
Organization costs due to stockholders
under notes payable previously recorded -
eliminated in restatement 1,050,936 - -
Loans from stockholders previously recorded -
reclassified as paid-in capital in
restatement 323,840 - -
Additional capital due from stockholders
was recorded in restatement 96,160 - -
========= ============== ===========
Totals $ (227,065) $ (.08)
</TABLE>
F-10
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
The Company has restated its previously issued audited financial statements,
which were audited by other auditors and whose opinion was dated January 7,
1999. Any previously issued financial statements of the Company should not be
relied upon for any purpose.
(10) September 1999 Restatement of Previously Issued Financial Statements:
Subsequent to the issuance of the Company's 1998 financial statements and audit
report thereon dated May 25, 1999, certain agreements were modified that affect
the 1998 financial statements. The number of total shares outstanding has been
reduced from 15,000,000 to 2,916,666. In addition, the Company's $850,000
obligation under the note payable for patent acquisition was restructured and
replaced with an obligation to issue 100,000 shares of the Company's common
stock valued at $400,000 and a non interest bearing note payable in the amount
of $450,000. Accordingly, the 1998 financial statements have been restated to
reflect these modifications. The effect of this change was to increase the loss
per share by $(.06) for the period from inception (October 22, 1998) through
December 31, 1998.
(11) Subsequent Events (Unaudited):
The Company is currently amending its public offering as described in Note 2
to raise between $1 and $10 million by offering up to 1,250,000 shares of its
common stock for sale at $8.00 per share.
In connection with the proposed public offering as described in Note 2, the
Company entered into an agreement with a placement agent contingent on the
Company raising at least $1 million. The Company agreed to pay the placement
agent 13% of the amount raised and issued warrants to purchase 12,500 shares at
$8.00 per share on a pro rata basis for each $1 million raised. The warrants
expire in five years. The Company can cancel the agreement subject to a $100,000
breakup fee.
In connection with the proposed public offering as described in Note 2, the
Company entered into an agreement with a financial consultant contingent on the
Company raising at least $2 million in capital. The consultant will be paid
$5,000 per month plus expenses during the first twelve months following the
Company raising $2 million in capital. The agreement renews for an additional
year unless canceled at the end of the initial year.
The Company cancelled the April 1999 employment agreements with its three
principal officers as described in Note 3 and entered into three new five-year
agreements on September 23, 1999 for total annual salaries of $150,000 beginning
on the date of the agreement. The officers have waived all salaries through
September 29, 1999. No amounts have been reflected in the accompanying financial
statements because the Company is in the earliest phases of development.
F-11
<PAGE>
TABLE OF CONTENTS
Prospectus Summary 3
Risks Factors 5
Recent Developments 7
Where You Can Find
Additional Information 7
Dilution 8
Use of Proceeds 8
Selected Financial
Data 11
Management's Discussion
and Analysis or Plan of
Operation 11
Business 12
Management and Affiliates 18
Principal Shareholders 21
Certain Relationships
and Related Transactions 22
Description of Securities 23
Plan of Distribution 24
Legal Matters 25
Experts 25
Change in Independent
Accountants 25
How to Invest in R-Tec 26
Financial Statements F-1
R-Tec Technologies, Inc.
1,250,000 Shares Common Stock
$8.00 per share
-------------------------
Until January __, 2000, all dealers effecting transactions in
the registered securities, whether or not participating in this distribution,
may be required to deliver a prospectus. This is in addition to the obligation
of dealers to deliver a prospectus when acting as underwriters with respect to
their unsold allotments or subscriptions. This prospectus should be read in its
entirety by any prospective investor prior to his or her investment.
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution*
The following table sets forth the estimated costs and expenses to
be paid by R-Tec in connection with the offering described in the registration
statement. **Fix this section***
SEC registration fee $ 8,340.00
Blue sky fees and expenses $ 25,000.00
Printing and shipping expenses $ 20,000.00
Legal fees and expenses $200,000.00
Accounting fees and expenses $ 50,000.00
Transfer and escrow expenses $ 45,000.00
Advertising expenses and miscellaneous $151,660.00
Total $500,000.00
* All expenses except SEC registration fee are estimated.
ITEM 14. Indemnification of Directors and Officers.
The Registrant's Articles of Incorporation, Article Eight, provide
that R-Tec shall indemnify and hold harmless its directors, employees and agents
from liability and reasonable expenses from actions in which he or she may
become involved by reason of the fact that he or she was an officer, director,
employee or agent.
Insofar as indemnification for liabilities arising under the
Securities Act, indemnification may be provided to directors, officers or
persons controlling the Registrant pursuant to the foregoing section. The
Registrant has been informed that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
ITEM 15. Recent Sales of Unregistered Securities.
On November 26, 1998, Mr. Lacqua, Ms. Vitolo and Mr. Scola received a total
of 15,000,000 shares in conjunction with formation of R-Tec Technologies, Inc.
They made capital contributions of $540,000 through March 31, 1999.
ITEM 16. Exhibits and Financial Statement Schedules
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
3.0* Certificate of Incorporation dated October 21, 1998.
3.1* Amended and Restated Articles of Incorporation, dated November 24, 1998.
3.2* Amended and Restated Articles of Incorporation, dated December 18, 1998.
3.3* Certificate of Amendment to the Certification of Incorporation of
R-Tec Technologies, Inc., dated April 18, 1999.
3.4* By-laws, dated November 4, 1998.
3.4a Amended Bylaws dated October 8, 1999.
3.5* R-Tec Technologies, Inc. Policy Against Insider Trading.
3.6* Form of common stock certificate.
5.0* Opinion and consent of Brashear & Associates, P.L.
10.0*Patent Assignment dated November 2, 1998 between Muriel Kaiser and R-Tec
Technologies, Inc.
II-1
<PAGE>
10.1* Patent Assignment dated March 30, 1999 between Muriel Kaiser and R-Tec
Technologies, Inc.
10.2* Promissory Note dated April 15, 1999 between Nancy Vitolo, Muriel
Kaiser and R-Tec Technologies, Inc.
10.4* Promissory Note dated April 15, 1999 between Nancy Vitolo and R-Tec
Technologies, Inc. for reimbursement of start up costs.
10.5* Promissory Note dated April 22, 1999 between Marc M. Scola and R-Tec
Technologies, Inc. for reimbursement of start up costs.
10.6* Promissory Note dated April 22, 1999 between Columbia Trading, Inc. and
R-Tec Technologies, Inc. for reimbursement of consulting fees and
start up costs.
10.7* Promissory Note dated April 22, 1999 between R-Tec Technologies,
Inc. and Marc M. Scola for reimbursement of office lease,
secretaries, postage, and other cost incurred, prior to
incorporation.
10.8* Expense Reimbursement Agreement between Marc M. Scola, Philip Lacqua and
Nancy Vitolo and R-Tec Technologies, Inc. dated October 24, 1998
regarding start up costs.
10.9* Employment Agreement between R-Tec Technologies, Inc. and Marc M. Scola.
10.10*Employment Agreement between R-Tec Technologies, Inc. and Nancy Vitolo.
10.11*Employment Agreement between R-Tec Technologies, Inc. and Philip Lacqua.
10.12*Consultant Agreement dated January 5, 1999 between Stewart Kaiser
and R-Tec Technologies, Inc.
10.13*Consultant Agreement dated January 11, 1999 between Shawn Walsh and
R-Tec Technologies, Inc.
10.14*Exclusive Manufacturer's Agreement dated October 21, 1998 between
Anscott Chemical Industries and R-Tec Technologies, Inc.
10.15*Distribution Agreement between R-Tec Technologies, Inc. and Motors &
Armatures Corp.
10.16*Stock Transfer Agency Agreement between R-Tec Technologies, Inc. and
Bank of New York dated as of January, 1999.
10.17*Subscription Escrow Agreement between R-Tec Technologies, Inc. and Bank
of New York dated as of January 26, 1999.
10.18*Stock Option Plan adopted April 15, 1999.
10.19* Intellectual Property Evaluation dated May 31, 1999 by Intellectual
Property Valuators.
10.20* Promissory Note executed by Nancy Vitolo in favor of R-Tec
Technologies, Inc. in the original principal amount of $75,857 dated
May 10, 1999.
10.21* Promissory Note executed by R-Tec Technologies, Inc. in favor of
Muriel Kaiser in the original principal amount of $850,000 dated May
10, 1999.
10.22* Release regarding Patent dated May 10, 1999 between R-Tec Technologies,
Inc. and Muriel Kaiser.
10.23* R-Tec Resolution dated June 1, 1999.
10.24* Letter agreement with Muriel Kaiser dated July 2, 1999.
10.25* Letter dated July 6, 1999 waiving officers salaries in the event
minimum shares are sold.
10.26 Consulting Contract with Stenton Leigh Capital Corp. dated
September 21, 1999.
10.27 Proposed Agreement with Thornhill Group, Inc. dated September 21, 1999.
10.28 Employment Agreement of Marc Scola dated September 23, 1999.
10.29 Employment Agreement of Nancy C. Vitolo dated September 23, 1999.
10.30 Employment Agreement of Phillip Lacqua dated September 23, 1999.
10.31+ Revised Escrow Agreement with Bank of New York.
10.32 Addendum to Patent Agreement of Muriel Kaiser dated May 10, 1999.
10.33 Promissory Note dated September 28, 1999 between Michael Selitto
and R-Tec Technologies, Inc.
16.00* Jurewicz and Duca's letter regarding change in independent
accountants dated June 15, 1999.
16.01* Jurewicz and Duca's letter regarding change in independent
accountants dated July 23, 1999.
23.0 Consent of James Moore & Co., L.P.
23.1* Consent of Property Valuations.
23.2* Consent of Property Valuations date July 22, 1999.
23.3* Consent of Motors and Armatures.
27.0* Financial Data Schedule.
* Previously filed
+ To be provided by Amendment
II-2
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULE
The Financial Statement Schedule as of June 30, 1999 and the Report of
Independent Public Accountants on such schedule are included in this
Registration Statement. All other schedules are omitted because they are not
applicable or are not required under Regulation S-X.
ITEM 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424 (b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section
do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs in contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That for the purpose of determining liability under the Securities Act
of 1933 each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) If the registrant is a foreign private issuer, to file a post-effective
amendment to the registration statement to include any financial statements
required by Section 210.3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements and information required by Section 10 (a)(3) of the Act
or Section 210.3-19 of this chapter if such financial statements and information
are contained in periodic reports filed with or furnished to the Commission by
the registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Form F-3.
(f) The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-3
<PAGE>
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
(i) the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 42A (b)(1) or (4) or
497(h)under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determing any liability under the Securities Act of 1933,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Post Effective Amendment No. 1 to Form S-1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Allamuchy, State of New Jersey, on Ocotber 1, 1999.
R-Tec Technologies, Inc.
By: /s/ PHILLIP LACQUA
------------------------
Philip Lacqua
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS FIFTH
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED:
Signatures Title Date
/s/ PHILLIP LACQUA
__________________ President and October 1, 1999
Philip Lacqua Chief Executive Officer
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Director
/s/ NANCY VITOLO
________________ Director October 1, 1999
Nancy Vitolo
/s/ MARC M. SCOLA
_________________ Director October 1, 1999
Marc M. Scola
________________ Director October , 1999
Damon E. Palmer
________________ Director October , 1999
Shawn P. Walsh
<PAGE>
BY-LAWS
OF
R-TEC TECHNOLOGIES, INC.
- ------------------------------------------------------------------------
Adopted
ARTICLE I
OFFICES
1. Registered Office and Agent. - - The Registered office of
the Corporation in the State of New Jersey is at
14A:4-1 290 Green Road
Sparta, New Jersey 07871
The registered agent of the Corporation at such office is
Nancy Vitolo
2. Principal Place of Business. - - The principal place of
business of the Corporation is
61 Mallard Drive
Allamuchy, New Jersey 07820
3. Other Place of Business. - - Branch or subordinate
places of business or offices may be established at any time by
the Board at any place or places where the Corporation is
qualified to do business.
<PAGE>
ARTICLE II
SHAREHOLDERS
14A: 5-2
14A: 5-4 (1) 1. Annual Meeting. -- The annual meeting of shareholders
shall be held upon not less than ten nor more than sixty days
written notice of the time, place, and purposes of the meeting
at 11:30 oclock a.m. on the 4th day of the month of November of
each year at
61 Mallard Drive
Allamuchy, New Jersey 07820
14A: 5-1 or at such other time and place as shall be specified in the
notice of meeting, in order to elect directors and transact
such other business as shall come before the meeting. If that
date is a legal holiday, this meeting shall be held at the same
hour on the next succeeding business day.
14A: 5-3 2. Special Meetings -- A special meeting of shareholders may be
called for any purpose by the President or the Board. Special
meetings may also be called by twenty percent (20%) of the
outstanding shareholders of the Company. A special meeting
shall be held upon not less than one nor more than sixty days
written notice of the time, place, and purposes of the meeting.
<PAGE>
14A: 5-6 3. Action Without Meeting. - - The shareholders may act
without a meeting by written consent in accordance with N.J.S.A.
14A:5-6. Such consents may be executed together, or in counterparts, and
shall be filed in the Minute Book. Special rules apply to the
annual election of directors, mergers, consolidation,
acquisitions of shares or the sales of assets.
14A:5-9(1) 4. Quorum. - - The presence at a meeting in person or by proxy
of the holders of shares entitled to cast (51%) fifty one percent
of the vote shall constitute a quorum.
ARTICLE III
BOARD OF DIRECTORS
14A:6-2 1. Number and Term of Office. - - The Board shall consist of
no more that five and no less than three members. The precise
14A:6-3 number shall be set by the directors or by the shareholders at
each annual meeting before the election of directors. Each
director shall be elected by the shareholders at each annual
meeting and shall hold office until that director's successor
shall have been elected and qualified.
<PAGE>
14A:6-10(2) 2. Regular Meetings. - - A regular meeting of the Board shall be
held without notice immediately following and at the same place
as the annual shareholders' meeting for the purposes of electing
officers and conducting such other business as may come before
the meeting. The Board, by resolution, may provide for additional
regular meetings which may be held without notice, except to
members not present at the time of the adoption of the
resolution.
14A:6-10(2) 3. Special Meetings. - - A special meeting of the Board may be
called at any time by the president or by directors for any
purpose. Such meetings shall be held upon one (1) days notice if
given orally (either by telephone or in person,) or by telegraph,
or by 10 days notice if given by depositing the notice in the
United States mails, postage prepaid. Such notice shall specify
the time and place of the meeting.
14A:6-7.1(5) 4. Action Without Meeting. - - The Board may act without a
meeting if, prior or subsequent to such action, each member of
the Board shall consent in writing to such action. Such written
consent or consents shall be filed in the minute book.
14A:6-7.1(3) 5. Quorum. - - Three members of the entire Board shall
constitute a quorum for the transaction of business.
<PAGE>
14A:6-5 6. Vacancies in Board of Directors. - - Any vacancy in the
Board may be filled by the affirmative vote of a majority of the
remaining directors, even though less than a quorum of the
Board, or by a sole remaining director.
14A:6-6 7. Removal of Directors. - - Any director may be removed for
cause, or without cause unless otherwise provided in the
certificate of incorporation, by a majority vote of shareholders.
14A:6-10(3) 8. Presence at Meeting. - - Where appropriate communication
facilities are reasonably available, any or all directors shall
have the right to participate in all or any part of a meeting of
the board or a committee of the board by means of conference
telephone or any means of communication by which all persons
participating in the meeting are able to hear each other.
9. Committees. - - The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more
committees, each committee to consist of three (3) directors of
the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any
absent or disqualified member of any such committee or
committees. In the absence or disqualification of any member of
any such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether
or not he or she may constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting
in the place of any such absent or disqualified member to that
committee.
<PAGE>
ARTICLE IV
WAIVERS OF NOTICE
14A:55(1)
14A:6-10(2) Any notice required by these by-laws, by the certificate of
incorporation, or by the New Jersey Business Corporation Act may
be waived in writing by any person entitled to notice. The
waiver or waivers may be executed either before or after the
event with respect to which notice is waived. Each director or
shareholder attending a meeting without protesting, prior to its
conclusion, the lack of proper notice shall be deemed
conclusively to have waived notice of the meeting.
ARTICLE V
OFFICERS
14A:6-15(1) 1. Election. - - At its regular meeting following the annual
meeting of shareholders, the Board shall elect a president, a
treasurer, a secretary, and it may elect such other officers,
14A:6-15(2) including one or more vice presidents, as it shall deem
necessary. One person may hold two or more officers.
14A:6-15(4) 2. Duties and Authority of President. - - The president shall be
chief executive officer of the Corporation. Subject only to the
authority of the Board, he shall have general charge and
supervision over, and
<PAGE>
responsibility for, the business and affairs of the Corporation.
Unless otherwise directed by the Board, all other officers shall
be subject to the authority and supervision of the President. The
President may enter into and execute in the name of the
Corporation contracts or other instruments in the regular course
of business or contracts or other instruments not in generally or
specifically, by the Board upon approval of the Board of
Directors. He shall have the general powers and duties of
management usually vested in the office of president or a
corporation.
14A:6-15(4) 3. Duties and Authority of Vice President. - - The vice
president shall perform such duties and have such authority as
from time to time may be delegated to him by the president or by
the Board. In the absence of the president or in the event of
his death, inability, or refusal to act, the vice president
shall perform the duties and be voted with the authority of the
president.
14A:6-15(4) 4. Duties and Authority of Treasurer. - - The treasurer shall
have the custody of the funds and securities of the Corporation
and shall keep or cause to be kept regular books of account for
the Corporation. The treasurer shall perform such other duties
and possess such powers as are incident to that office or as
shall be assigned by the president or the Board.
14A:6-15(4) 5. Duties and Authority of Secretary. - - The secretary shall
cause notices of all meetings to be served as prescribed in
these by-laws and shall keep or cause to be kept the minutes of
all meetings of the shareholders and the Board. The secretary
shall have charge of the seal of the Corporation. The secretary
shall perform such other duties and posses such other powers as
are incident to that office or as are assigned by the president
of the Board.
<PAGE>
14A:6-16 6. Removal and Resignation of Officers; Filling of Vacancies.
A. Any officer elected by the board may be removed by the
board with or without cause. An officer elected by the
shareholders may be removed, with or without cause, only by vote
of the shareholders but his authority to act as an officer may
be suspended by the board for cause. The removal of an officer
shall be without prejudice to his contract rights, if any.
Election of an officer shall not of itself create contract
rights.
B. An officer may resign by written notice to the corporation.
The resignation shall be effective upon receipt thereof by the
corporation or at such subsequent time as shall be specified in
the notice of resignation.
C. Any vacancy occurring among the officers, however caused,
shall be filled by the board.
<PAGE>
ARTICLE VI
AMENDMENTS TO AN EFFECT OF BY-LAWS;
FISCAL YEAR
1. Force and Effect of By-Laws. - - These by-laws are
subject to the provisions of the New Jersey Business Corporation
Act and the Corporation's certificate of incorporation, as it
may be amended from time to time. If any provision in these
by-laws is inconsistent with a provision in the Act or the
certificate of incorporation, the provision of that Act or the
certificate of incorporation shall govern.
2. Wherever in these by-laws reference are made to more
than one incorporator, director, or shareholder, they shall, if
this is a sole incorporator, director, shareholder corporation,
be construed to mean the solitary person; and all provisions
dealing with the quantum of majorities of quorums shall be
deemed to mean the action by the one person constituting the
corporation.
14A:2-9(1) 3. Amendments to By-Laws. - - These by-laws may be altered,
amended, or repealed by the shareholders or the board. Any
by-law adopted, amended, or repealed by the shareholders may be
amended or repealed by the Board, unless the resolution of the
shareholder adopting such by-law expressly reserves to the
shareholders the right to amend or repeal it.
4. Fiscal Year. - - The fiscal year of the corporation shall
begin on the first day of October of each year.
INITIALS ______ _______
CONSULTING CONTRACT
THIS CONTRACT, made as of this 21st day of September, 1999, by and between R-TEC
TECHNOLOGIES, INC., a New Jersey corporation, 61 Mallard Drive, P.O. Box 282
Allamuchy, New Jersey 07820 ( the "Company"), and STENTON LEIGH CAPITAL
CORP.("STENTON LEIGH"), a Florida corporation, having offices at 1900 Corporate
Boulevard, Suite 305 West, Boca Raton, Florida 33431.
WHEREAS, the Company desires to secure the services of STENTON LEIGH as a
consultant and STENTON LEIGH desires to provide such services to the Company;
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
parties hereto agree as follows:
1. Engagement of Consultant. The Company hereby engages STENTON
LEIGH to perform, and STENTON LEIGH hereby agrees that it will render the
financial consulting, business consulting, investor relations and strategic
planning services described in paragraph 3 below during the Term of this
Contract. If the Company should merge into, be acquired by another corporation,
or transfer its business to another corporate entity, this contract shall be
assumed by such successor corporation and the term "the Company" when used
herein includes any such successor corporation, and its successors.
2. Term of Contract. The Term of this Contract shall be effective as
of September 21, 1999, and shall continue, unless sooner terminated by the
Company or STENTON LEIGH in accordance with Paragraph 10 hereof, until September
20, 2000. This contract will renew at the end of September 20, 2000 for an
additional twelve-(12) month period automatically unless a written termination
notice is sent to STENTON LEIGH within thirty (30) days of the end of the
initial contract term.
3. Services of Consultant. During the Term of this Contract,
STENTON LEIGH will provide the following services pursuant to directions
received from the Board of Directors of the Company:
(a). STENTON LEIGH will assist the Company management in
developing strategic business goals and specific strategies to achieve those
goals.
(b). STENTON LEIGH will assist the Company's senior management
in developing a corporate financing plan to satisfy the capital requirements
contemplated in the business plan.
(c). STENTON LEIGH will act as liaison between the Company and
the financial community, in particular, STENTON LEIGH will assist the Company
with investment bankers, broker/dealers, other intermediaries, fund managers,
venture capitalists, institutional lenders and other potential funding sources.
(d). In connection with any financing transaction, STENTON LEIGH
will assist senior Company management in coordinating the activities of the
Company personnel and professionals engaged by the Company related to the
financing, as well as in the selection of professionals if requested.
(e). STENTON LEIGH will advise and assist the Company, as
requested by its Board of Directors, in maintaining satisfactory relations with
its investors, and promoting the good name and business of the Company with
investor groups and members of the financial community.
(f). STENTON LEIGH will consult with Company senior management
on business issues related to actions required to meet interim objectives and
to properly position the Company to successfully pursue its business plan.
4. Compensation for Services.
(a). In consideration of the services to be rendered and
performed by STENTON LEIGH during the term of this Contract, the Company will
pay STENTON LEIGH a fee of $5,000 per month during the first Twelve (12) months
of the Term. STENTON LEIGH agrees to begin its monthly fee until such time as
the Company has raised a minimum of $2,000,000 in the S-1 Registration
Statement.
(b). STENTON LEIGH shall also be reimbursed for all
out-of-pocket expenses incurred in the performance of its duties, including but
not limited to, attorney's and other professional fees and expenses, travel,
meals, lodging, long distance telephone, photocopies, printing, couriers,
facsimiles, and other expenses incurred by STENTON LEIGH and by any professional
from time to time in connection with any of the aforementioned activities, upon
approval of the Company. The Company agrees to pay such fees and expenses and
to reimburse STENTON LEIGH within 10 days upon presentation of monthly invoice.
STENTON LEIGH agrees that no single expense item from time to time sought to be
reimbursed shall exceed $500, without the prior approval or request of the
Company and collectively not to exceed $1,500 per month, and not to be paid
until after the closing of $2,000,000 in the S-1 Registration Statement, upon
the approval of the Company.
5. Best Efforts Commitment. STENTON LEIGH will use its best efforts
to perform these services for the Company consistent with and specifically
recognizing STENTON LEIGH commitments and obligation to other businesses for
which it performs services.
6. Confidentiality of Information. STENTON LEIGH agrees that neither
it nor its employees or agents will, during the Term of this Contract, or at any
time thereafter, disclose or divulge or use, directly or indirectly, for its own
benefit, any confidential information, data, trade secrets, etc. in relation to
the business of the Company learned in connection with its work for the Company.
The provisions of this paragraph shall survive the termination of the Contract,
and shall continue until such information; data, trade secrets, etc. become
public knowledge through no fault of STENTON LEIGH or any of its employees or
agents.
7. Reliance of Information Furnished; Indemnification by the
Company. As a consultant for the Company, STENTON LEIGH must at all times rely
upon the information supplied to STENTON LEIGH by the Company's authorized
officers, directors, agents and employees as to accuracy and completeness.
Therefore, the Company agrees to indemnify, hold harmless and defend STENTON
LEIGH, its directors, officers, employees and agents from and against any and
all claims, actions, proceeds, losses, liabilities, costs and expenses
(including, without limitation, reasonable attorney's fees) incurred by any of
them in connection with or as a result of any material inaccuracy,
incompleteness or omission of information given to STENTON LEIGH by such officer
and/or director of the Company.
8. Indemnification. If, in connection with the services or matters
that are the subject of this Agreement, STENTON LEIGH becomes involved in any
capacity in any action or legal proceeding, due to the actions, information,
position, assertions, and/or affirmations put forth by STENTON LEIGH at the
direction of, or in reliance upon material or information furnished by the
Company, the Company agrees to reimburse STENTON LEIGH, as the case may be, for
the reasonable legal fees, disbursements of counsel, and other expenses
(including the costs of investigation and preparation) incurred. The Company
also agrees to hold harmless STENTON LEIGH against any losses, claims, damages
or liabilities, joint services or matters which are the subject of this
Agreement; provided, however, that the Company shall not be liable in respect of
any loss, claim, damage or liability to the extent, and only to the extent, that
such loss, claim, damage, or liability resulted from the gross negligence or
willful misconduct of STENTON LEIGH or no material act or omission of the
Company. The provisions of this paragraph shall survive the expiration of the
period of this Agreement, including any extensions thereof set forth herein.
9. Termination. STENTON LEIGH's services may be terminated at any
time upon written notice. If STENTON LEIGH's services are terminated, STENTON
LEIGH will be entitled to receive and retain the portion of any compensation
payable pursuant to Paragraph 4 and 5 above, including any accrued but unpaid
fees, to the end of such required payment term.
The termination of this Agreement shall be without liability or continuing
obligation to the Company or to STENTON LEIGH, except as provided in this
Agreement including specifically any indemnity and related expense reimbursement
provisions contained herein which shall remain operative and in full force and
effect regardless of any termination.
10. Non-Circumvention. The Company agrees not to contact persons or
entities introduced by STENTON LEIGH or persons or entities resulting directly
from introductions made from STENTON LEIGH without the prior consent of STENTON
LEIGH and that contact with any such parties would result in the compensation to
STENTON LEIGH contemplated herein. The spirit of mutual trust and confidence
shall be the underlying principle of this undertaking and the parties agree to
adhere thereto.
11. Illegality/Unenforceability. In the event that any provision of
this Letter of Agreement is declared illegal or unenforceable in any respect
under applicable law, rule, or court decision, or self regulatory ruling, (i)
the validity, legality, and enforceability of the remaining provisions hereof
shall not in any way be affected or impaired, and (ii) this Letter of Agreement
shall be construed so as to effectuate as nearly as possible the intent of said
provision and the intent of the parties.
12. Notices. All notices, requests, payments or other communication
hereunder shall be in writing and shall be deemed to have been given when
delivered personally or three days after being sent by registered or certified
mail, postage prepaid or facsimile with confirmation, to the following address
or addresses or such other address as the parties may designate in writing in
accordance with this paragraph:
If to the Company: R-TEC TECHNOLOGIES, INC.
61 Mallard Drive, P.O. Box 282
Allamuchy, New Jersey 07820
ATTN: Marc M. Scola, Executive Vice President
If to STENTON LEIGH. Stenton Leigh Capital Corp.
1900 Corporate Boulevard, Suite 305 West
Boca Raton, FL 33431
ATTN: Milton H. Barbarosh, President
13. Disclosure. Any advice rendered by STENTON LEIGH pursuant to
this Agreement may not be disclosed publicly in any manner without the prior
written approval of STENTON LEIGH.
STENTON LEIGH is not registered as a broker or dealer under The Securities Act
of 1934, and certain transactions contemplated herein may require the retention
of same to consummate such transactions.
14. Governing Laws and Jurisdiction. The Company hereof hereby
waives all pleas of lack of jurisdiction, improper venue and forum
non-conveniens as not being a resident of any County in Florida where suit is
instituted and hereby specifically authorizes any action brought in connection
with the enforcement of this Agreement to be instituted and prosecuted in either
the Circuit Court of Palm Beach County, in the State of Florida, at the election
of STENTON LEIGH. This Agreement and all rights and obligations of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Florida and applicable United States federal law. Any signature on
a facsimile copy of this Agreement shall be binding and valid as if made on the
original copy of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this contract on the date
above written.
STENTON LEIGH CAPITAL CORP. R-TEC TECHNOLOGIES, INC.,
By:_____________________________ By: ______________________________
Milton H. Barbarosh, as President Philip P. Lacqua, President and CEO
Initials ______ ______
R-TEC TECHNOLOGIES, INC.
61 MALLARD DRIVE
ALLAMUCHY, NEW JERSEY 07820
(908) 850-4466
PERSONAL AND CONFIDENTIAL
September 21, 1999
Mr. Laurence S. Isaacson, President and CEO
Thornhill Group, Inc.
1900 Corporate Blvd., Suite 305 West
Boca Raton, Florida 33431
Re: Agency Agreement
Dear Mr. Isaacson:
R-TEC TECHNOLOGIES, INC. ("R-TEC", formed under the laws of the State of New
Jersey (the 'Company'), desires to offer and sell in an offering (the
"Offering") to be made exclusively through Thornhill Group, Inc. ("TGI" or the
"Placement Agent"), and pursuant to an S-1 Registration Statement ("Registration
Statement") by the Company as provided by the Securities Act of 1933, as amended
(the "Securities Act"), as set forth below, the Company's Common Stock (The
"Common Stock"). The Offering shall consist of the sale of Common Stock at a
price of $8.00 per share.
The Common Stock is to be sold at the prices and in the amounts set forth in
Section 2 below. The Offering will be limited to maximum gross proceeds of
$10,000,000 with a minimum of $1,000,000. The Offering period shall end
according to the Registration Statement, unless extended by the Company. It is
understood that the Offering will be conducted on a "professional best efforts"
basis with TGI acting as exclusive Placement Agent for the Company, and which
offering shall be conducted under the following terms and conditions:
SECTION 1. Type of Offering: Exemptions:
The Offering will be conducted as a self-underwritten S-1 registration as
required by the Securities Act, pursuant to the provisions of the Securities and
Exchange Commission ("SEC"). Investors will be required to subscribe
("Subscribers") for the Common Stock by executing the appropriate subscription
agreement (the "Subscription Agreement") in the forms set forth in a
Registration Statement to be completed by the Company and exhibits thereto, as
the same may be supplemented or amended from time to time.
SECTION 2. Appointment: Basic Terms:
On the basis of the representations and warranties and covenants herein
contained, but subject to the terms and conditions herein set forth:
(a) TGI is hereby appointed as the exclusive Placement Agent for the Company
during the period herein specified for the purpose of finding Subscribers for
the Common Stock.
(b) The Offering shall commence on the date hereof and shall continue according
to the Registration Statement, unless extended by the Company (the "Offering
Period").
(c) Subject to the performance by the Company of all of its obligations to be
performed hereunder and to the completeness and accuracy of all material
representations and warranties of the Company, TGI agrees, on the terms and
conditions herein set forth, to use its professional best efforts during the
Offering Period to find Subscribers for the Common Stock. TGI's agency hereunder
is coupled with an interest, is not terminable by the Company prior the
expiration of the Registration Statement, without TGI's consent and payment of
the break-up fee as described in SECTION 8 ( f ), and shall continue until the
termination of the Offering Period except as may be otherwise provided herein.
TGI shall have the right to appoint one or more additional agents and/or
selected dealers (who shall be members of the National Association of Securities
Dealers, Inc.) to assist in finding Subscribers for the Common Stock and any
such additional agents or selected dealers may rely upon the representations,
warranties and covenants of the Company along with the Due Diligence of TGI as
set forth in this Agreement.
(d) The minimum price of a Common Stock Unit to be sold to each Subscriber in
the Offering shall be $ 504.00 ( 63 shares of Common Stock times $8.00 per
share).
(e) Funds received from Subscribers in the Offering shall be deposited in an
escrow account with The Bank of New York, Inc. One Wall Street, New York, New
York 10286.
SECTION 3. Representations and Warranties of the Company:
The Company represents and warrants to TGI, for TGI's benefit and for the
benefit of the Subscribers of the Common Stock that, except as otherwise set
forth in the offering materials (copies of which shall be provided to each
Subscriber):
(a) The Common Stock to be sold in the Offering will be, when issued, duly
registered, delivered and paid for in accordance with the terms of the Offering,
duly and validly issued, fully paid and non-assessable; all presently
outstanding shares of Common Stock of the Company have been duly authorized,
validly issued and are fully paid and non-assessable; the holders of the shares
of Common Stock offered herein are not and will not be subject to personal
liability by reason of being such holders; the shares of Common Stock being sold
in the Offering are not being issued in violation of the preemptive rights of
any of the Company's security holders; all action required to be taken by the
Company to authorize thc issuance and sale of the Common Stock to qualified
Subscribers has been or, prior to the sale thereof, will have been taken.
(b) The capitalization of the Company, including the outstanding shares of the
Company's Capital Stock and any warrants, options or other rights to subscribe
to or purchase shares of capital stock is as represented to subscribers of the
Common Stock.
(c) The Company is duly incorporated, validly existing and in good standing as
a corporation under the laws of its jurisdiction of incorporation
(d) The Company is duly qualified to do business as a corporation and is in
good standing in each jurisdiction in which its activities or its ownership or
leasing of property requires such qualification, other than those jurisdictions
in which failure to so qualify would not have a material adverse effect on the
business, operations or prospects or condition (financial or otherwise) of the
Company.
(e) This Agreement has been duly and validly authorized and executed and
delivered by and on behalf of the Company and constitutes a valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms subject to any applicable bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium and similar laws of general applicability
relating to or effecting creditor's rights generally and to general principles
of equity and the enforceability of the indemnity and contribution provisions
contained in Section 10 of this Agreement.
(f) The Company is not in violation of (i) any term or provision of its
charter or by-laws or (ii) any material term or provision of any indenture,
mortgage, deed of trust, note, agreement, or other material agreement or
instrument to which the Company is a party or by which it is or may be bound or
to which any or its material assets, property or business is or may be subject,
or (iii) any material term of any significant indebtedness, or (iv) of any
statute or (v) to the best of the Company's knowledge any material judgment,
decree order rule or regulation applicable to the Company of any court,
regulatory body or administrative agency or other federal, state or other
governmental body, domestic or foreign having jurisdiction over it or its
material assets, property or business, which violation or violations, either in
any case or in the aggregate, might result in any material adverse change,
financial or otherwise, in the assets, properties, condition, business, earnings
or prospects of the Company and to the best of the Company's knowledge, the
execution and delivery by the Company of this Agreement, the consummation by the
Company of the transactions herein contemplated, and the compliance by the
Company with the terms of this Agreement will not result in any such material
violation or violations. All material licenses, approvals or permits from the
federal or any state, local or foreign government or agency thereof having
jurisdiction over the Company reasonably required for the conduct of the
business or operations of the Company have been obtained and are outstanding;
and there are no proceedings pending or to the Company's knowledge threatened
seeking to cancel, terminate or limit such licenses, approvals or permits.
(g) Other than reported on Form S-1, there are no actions, investigations,
statutes, rules or regulations or other proceedings of any nature in effect or
pending or to the Company's knowledge threatened, as the case may be, which,
either in any case or in the aggregate, if decided adversely, might reasonably
be expected to result in any material adverse change, financial or otherwise, in
the assets, properties, condition, business, prospects of the Company or which
question the validity of the capital stock of the Company, this Agreement or any
action taken or to be taken by the Company pursuant to or in connection with
this Agreement. The Company has filed all of the required financial statements
with the Securities and Exchange Commission in the Form S-1. The audited
financial statements provided to TGI present fairly the financial position of
the Company as of the respective dates thereof and the results of operations and
cash flows for the respective periods covered thereby. Since the dates of the
financial statements, there has been no material adverse change, financial or
otherwise, in the assets, properties, condition, business, earnings or prospects
of the Company. The Company has not incurred any liability for any finder's fees
or similar payments in connection with the transactions herein contemplated
accept as described in this Agreement or in the Company's SEC filings.
(h) The Company has filed each federal, state, local and foreign tax return
which is required to be filed, or has requested an extension therefor and has
paid or otherwise provided for all taxes shown on such return and all related
assessments to the extent that the same have become due.
(i) All information contained in the written material concerning the Company
which has been or is being provided by the Company to TGI or to subscribers to
the Offering and all information from the Company which is included in the
Subscription Agreement (collectively, the "Offering Material") is accurate and
complete in the best of the Company's knowledge, does not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(j) The Company has not made and will not make, any offers or sales of the
Company's capital stock or any warrants, options or other rights to subscribe to
or purchase shares of the Company's common stock in contravention at the
requirements for this Offering.
(k) The representations and warranties made in this Agreement shall be deemed
repeated, and shall be true at the time of any closing provided for in this
Agreement
SECTION 3A. Representations and Warranties of the Placement Agent:
The Placement Agent represents and warrants to the Company for the Company's
benefit, that:
(a) The Placement Agent has not been the subject of any investigation by any
Federal, State or local government agency during any time within five (5) years
prior to the date Agreement, or as of the date hereof, and to its knowledge, no
such investigation is currently threatened and
(b) The Placement Agent is in compliance with all laws, rules and regulations
applicable to broker- dealers in the jurisdictions in which it conducts business
and with all applicable requirements and rules of the National Association of
Securities Dealers, Inc. ("NASD") and is a member in good standing with the
NASD.
SECTION 4. Closing:
A minimum of $1,000,000, upon SEC approval (the "Minimum") of Common Stock is
required to be sold under this Agreement according to the Registration
Statement. A closing ("Closing") for the sale of Common Stock subscribed for in
the Offering may be held on one or more occasions prior to the end of the
Offering Period, provided the Minimum in gross proceeds is reached and provided
that such Subscriptions are accepted by the Company. At each such closing,
payment of the proceeds of the Offering shall be made by certified or bank
check(s) or by wire transfer to the order of the Company pursuant to the escrow
agreement, against delivery of certificates for Common Stock, for transmittal to
the Subscribers of the Common Stock. The Company will instruct the escrow agent
to promptly remit to TGI any and all commissions, expense allowance and any
other amounts payable to TGI from the net proceeds delivered to the Company.
SECTION 5. Covenants of the Company:
The Company covenants with the Placement Agent that:
(a) From the commencement of the Offering Period through any Closing pursuant
to Section 4 hereof, any Offering Materials will not contain any untrue
statement of a material fact or omit to state a material fact, to the extent
known to the Company, necessary in order to make the statements therein in light
of the circumstances under which they were made, not misleading.
(b) Either directly or through TGI the Company shall offer to each Subscriber,
at a reasonable time prior to his purchase of Common Stock, the opportunity to
ask questions and receive answers concerning the terms and conditions of the
Offering and to obtain any additional information, which the Company possesses
or can acquire without unreasonable effort or expense.
(c) During the Offering Period, the parties hereto will keep each other
generally informed of offers for sale and solicitations of offers to buy Common
Stock being made
(d) The Company shall use its best efforts, through counsel performing
services on behalf of the Company in connection with the Offering, to qualify
and register, or perfect the exemption of the Common Stock for offer and sale
under the state or foreign securities laws of the jurisdictions in which offers
and sales are proposed to be made, and shall assist TGI and such counsel in
connection with the foregoing, provided that in no event shall the Company be
obligated to qualify to do business in any jurisdiction where it is not now
qualified or to take any action which would subject it to general service of
process in any jurisdiction where it is not now required.
(e) The Company shall, in a timely manner and as required, prepare and file an
amended Form S-1 and any required amendments thereto with the SEC. The Company
will use its best efforts to take all steps necessary to ensure that any and all
reports which may be required to be filed with the SEC under federal securities
laws are timely filed by the Company.
(f) For the period of time that Placement Agent's clients are holders of
Common Stock of the Company, not to exceed two (2) years, the Company will
provide TGI with copies of any stock reports of the Company's stock transfer
agent if so requested, but only while TGI's customers continue to hold stock or
Common Stock in the Company.
(g) The Company shall utilize the services of its current certified public
accounting firm or another firm acceptable to TGI.
(h) For the period of time that Placement Agent's clients are holders of
Common Stock of the Company, or at least a period of two (2) years after the
Closing, the Company will furnish TGI with copies of its annual and quarterly
financial statement and reports to shareholders. In addition, during the
Offering and for a period of two (2) years after the Closing, the Company will
provide TGI with all information and documentation with respect to the Company's
business and financial condition, as reasonably requested by TGI, and will
provide to TGI during the Offering regular access to the Company's officers,
directors, auditors and counsel to discuss any aspect of the Company's business
as reasonably requested by TGI. This paragraph shall cease to be operative if,
at any time, TGI ceases to have customers who hold Common Stock in the Company.
(i) Unless TGI shall otherwise agree in writing, the Company will not issue
any securities during the period from the date of this Agreement until the
expiration of the Offering Period, except for securities issued pursuant to this
Agreement and pre-existing option, warrant and loan commitments, or in the
ordinary course of business in which cast the shares issued, shall be subject to
the same restrictions as provided for in SECTION 8 e.
(j) To the extent the Company is duly authorized to do so, the Company will
reserve and set aside, out of its registered capital stock, the number of shares
of Additional Common Stock (as hereinafter described) issuable to TGI under this
Agreement, if any such shares, when issued, paid for and delivered upon exercise
of such warrants or options, will be duly and validly issued, fully paid and
non-assessable, and will not violate any preemptive rights of Company
shareholders.
(k) The Company will keep confidential the identity of TGI's clients and
customers involved in this offering, except as may be otherwise required by law.
The Company will not solicit such persons directly for the sale of securities or
for other financing proposals without the express written consent of TGI, which
consent may be given on the condition that the Company agrees to compensate TGI
on the terms set forth in this Agreement for any sales made to such persons for
a period of five years after the closing.
(l) Satisfactory employment agreements must be in place with key management
personnel, who have passed a satisfactory 10-year background check, prior to
commencement of the Offering, which shall include among other things,
performance based compensation and performance based incentives, satisfactory to
TGI. Compensation to approved incoming key employees, who are also existing
shareholders, shall be limited to the terms of the approved employment
agreements, which agreements shall also contain, among other things,
confidentially, non-competition, non-circumvention and other provisions
acceptable to TGI.
(m) TGI shall have the option to receive, at TGI's expense, appropriate and
satisfactory valuations of the Common Stock being offered.
(n) The Company shall enter into a consulting contract for a term of not less
than (2) two years, satisfactory to TGI.
SECTION 6. The Placement Agents Covenants:
The Placement Agent covenants with the Company that:
(a) In offering the Common Stock, the Placement Agent will advise the Company
to deliver to each potential Subscriber contacted by it, prior to accepting any
subscription from such subscriber, the appropriate form of Registration
Statement and approved Company information.
(b) The Placement Agent will make offers to sell Common Stock to, or solicit
offers to subscribe for any Common Stock from, persons in only those
jurisdictions where the Offering and the Common Stock have been qualified or
where it has been determined that an exemption from such qualification is, or
may reasonably be anticipated to he available, under applicable securities
statutes.
(c) TGI shall maintain a record of all information obtained by TGI indicating
that subscribers for Common Stock sold through TGI meet the criteria referred to
in subsection (6) above. At the Closing, TGI shall have no reason to believe
that the information with respect to, and the representations to each purchaser
of Common Stock as set forth in the appropriate Subscription Agreement are not
accurate.
SECTION 7 Compensation:
TGI will require, immediately prior to the commencement of the Proposed
Offering, to have the Company enter into a exclusive Placement Agent Agreement
(the "Placement Agreement") which shall contain such terms and conditions as are
customarily contained in agreements of such character and, among other things,
provide for the following:
(a) The Company shall pay to the Placement Agent a commission of ten percent
(10%) of all the gross proceeds of the Proposed Offering, which shall be payable
to the Placement Agent at the initial Closing and each subsequent closing with
respect to the amounts raised as of such closing date;
(b) In order to reimburse the Placement Agent for those costs, fees and
expenses customarily incurred by a placement agent in connection with the
offering process, the Company will pay to the Placement Agent three percent (3%)
of the gross proceeds of the amounts raised, non-accountable expense allowance
at Closing and each subsequent closing with respect to the amounts raised as of
such closing dates.
(c) In addition to the foregoing, the Company shall bear all the Company's
fees, disbursements, Internet listing services and direct out of pocket expenses
in connection with the Proposed Offering, including, without limitation, the
Company's legal and accounting fees and disbursements. The cost of background
checks on all key management personal that TGI deems necessary, not to exceed
$3,000 and shall be paid by the Company out of the proceeds at closing, if
necessary, however, if this Agreement is terminated, then the Company shall pay
TGI upon termination.
(d) The Placement Agent shall require the Company and Subscriber and its
principal officers and its directors to provide certain warranties and
representations against shorting or hedging of the Company's stock satisfactory
to the Placement Agent.
(e) In addition to the compensation set forth herein,, the Company shall issue
to the Placement Agent 12,500 warrants for Common Stock, under the same terms as
the Offering, on a pro rata basis for every $1,000,000 in gross proceeds raised
by the Placement Agent exercisable at $8.00 per share for a period of five (5)
years.
(f) Commencing with the date hereof and for a period of two years thereafter,
regardless of whether this Agreement is sooner terminated, the Company hereby
agrees to afford to Placement Agent the right to act as the Company's
non-exclusive Placement Agent, as the case may be, in any public offering(s) and
private placement(s) to be effectuated by or on behalf of the Company and for
which the Company proposes to utilize the services of an underwriter,
broker-dealer, or Placement Agent, and with such compensation to be determined
on a deal-by-deal basis. Accordingly, if during such period the Company intends
to effectuate a public offering or private placement of the Company's securities
for its benefit, the Company shall promptly notify Placement Agent in writing of
such intention along with the proposed terms of such offering or placement. The
Company shall thereafter promptly furnish Placement Agent with such information
concerning the business, condition and prospects of the Company as Placement
Agent may reasonably request. If within thirty (30) business days of receipt of
such notice of intention, statement of terms and information, TGI finds
comparable financing with the same or better terms and a comparable underwriter,
the Company agrees to utilize TGI as the Placement Agent for such offering.
However, nothing hereunder shall obligate the placement Agent to participate in
any such financing. If TGI brings any private placement financing or secondary
offering to the Company and the terms are acceptable to the company, the Company
will agree to utilize the services of TGI as the Placement Agent for such
transaction and TGI's fees for such will be negotiated on a case by case basis
at that time.
(g) In the event TGI effectuates a merger, acquisition, joint venture, or
other similar business relationship or business transaction ("Transaction") for
the Company subsequent to the date hereof and or prior to two years from the
date of termination of this Agreement, irrespective of any reason for such
termination, and such Transaction is effectuated as a result or consequence of
any introduction made directly or indirectly by TGI through any third party
introduced by TGI to the Company, or by a person whose introduction to the
Company can be traced back to TGI, during the term of this Agreement, or which
Transaction was initiated, directly or indirectly through any person introduced
by TGI to the Company during the term of this Agreement, then the Company hereby
agrees to pay TGI the following consideration, which payment shall be due and
payable on the date of any such closing with respect thereto:
10% of the first $2,000,000 of total
consideration paid in the transaction,
plus 8% of the next $2,000,000 of total
consideration paid in the transaction,
plus 6% of the next $2,000,000 of total
consideration paid in the transaction,
plus 4% of the next $2,000,000 of total
consideration paid in the transaction,
plus 2% of the balance of total
consideration paid in the transaction.
For purposes of this Agreement, "consideration" shall mean the aggregate
consideration paid by the acquirer in connection with the merger, joint venture,
acquisition or divestiture, described herein and shall include all cash, the
principal of any notes executed as part of the purchase price for such
transaction, the value, as determined in good faith by the parties hereto, of
any securities paid or exchanged in connection with the merger, joint venture,
acquisition or divestiture and the amounts of any long-term liabilities, capital
leases, or bank financing of the acquired entity and which are paid or assumed
by the acquiring entity as part of the purchase price for the acquisition. In
the event the Company requests that TGI assists the Company in raising capital
which is not as a result of an introduction made directly or indirectly by TGI
and/or not initiated by TGI, the parties hereto agree that the compensation to
be paid to TGI for said assistance shall be 50% of the above compensation as
incorporated into this agreement.
SECTION 8. Conditions of TGI's Obligations:
TGI's obligation to offer and sell the Common Stock is subject to the accuracy
of and compliance with the representations and warranties of the Company made in
Section 3 hereof, to the performance by the Company of its obligations under
this Agreement and to the following further conditions;
(a) At such Closing, TGI's counsel shall have been furnished with such
documents upon request, as TGI may reasonably require in order to evidence the
accuracy or completeness of each of the representations or warranties and the
compliance with each of the covenants or satisfaction of any of the conditions
herein contained; and all actions taken by the Company in connection with the
sale of the Common Stock as herein contemplated shall be reasonably satisfactory
in form and substance to TGI and TGI's counsel.
(b) At such Closing, TGI shall receive an opinion from counsel to the Company
in form and substance reasonably satisfactory to TGI's counsel, with respect
to the matters set forth in Section 3 and 5 above.
(c) As soon as practicable after the date hereof and immediately prior to such
Closing and with respect to any sale of Common Stock pursuant to the
Registration Statement, TGI shall receive a blue sky survey or memorandum and a
supplement thereto addressed to TGI and the Company as prepared by the Company's
counsel satisfactory to TGI and relating to the securities laws of certain
jurisdictions designated by the Company and TGI, indicating the conditions under
which offers and sale of the Common Stock may be made in the Offering in
compliance with such securities laws and advising that the appropriate action,
if any, was taken in each such jurisdiction.
(d) The representations and warranties of the Company set forth in Section 3
hereof shall be true and correct as of the Closing, to the best knowledge of the
Company, and the Company shall have complied with all applicable terms and
conditions of this Agreement.
(e) The Company will, prior to the completion of the initial closing of the
Offering, cause each officer and director of the Company who holds 5% or more
shares ("Insiders") of Common Stock (either individually or together with
members of his or her family or together with any affiliate) to enter into an
agreement under which each such Insider agrees to abide by Rule 144 and/or any
State escrow requirements.
(f) If any of the conditions specified in Section 8 of this Agreement shall
not have been fulfilled when and as required by this Agreement, then this
Agreement and all of TGI's obligations hereunder may be canceled by TGI by
notifying the Company of such cancellation in writing at any time at or prior to
the subject Closing and any such cancellation will not in any way relieve the
Company of its obligation to TGI as described in Section 7, herein, except by
payment to TGI of an additional $100,000 as a break up fee.
(g) At its option, TGI shall receive one board seat. If acceptable director
and officer insurance is available, TGI may elect to designate person(s) to sit
on the Board. If there is no acceptable director and officer insurance, at its
option TGI will be an advisor to the Board. In any event, TGI shall receive
notice of all board, shareholder and committee meetings and have the right to
receive all meeting materials, financial data and other data and the right to
participate in all discussions.
SECTION 9. Conditions of the Obligations of the Company:
The obligations of the Company hereunder are subject to the accuracy of and
compliance with TGI's representations and warranties and any other firm that
participates in the Offering, to the performance by TGI of TGI's obligations
hereunder, and to the following further conditions:
(a) At the Closing, the Company shall receive a certificate from TGI as to the
number and identity of persons from whom subscriptions for Shares shall have
been received and accepted, which certificate shall farther be to the effect
that:
(i) Executed Subscription Agreements have been received and accepted
only from persons who, to the best of TGI's knowledge and belief meet the
requirements for Subscribers referred to in Section 6(b,) hereof and are
acting for themselves and not on behalf of any other person; and
(ii) TGI has complied with all applicable broker-dealer registration
requirements with respect to the Offering (but no reference need be made as to
other agents or dealers involved in the Offering)
(iii) The representations and warranties of the Placement Agent
shall be true and correct as of the Closing, to the best knowledge of the
Placement Agent, and the Placement Agent shall have complied with all applicable
terms and conditions of this Agreement.
(b) If any of the conditions specified in this Section 9 shall not have been
fulfilled when and as required by this Agreement, or if the Minimum of Common
Stock is not sold by the completion of the Offering Period, then this Agreement
may be canceled by the Company by notifying TGI of such cancellation in writing
at any time at or prior to the subject Closing.
(c) Notwithstanding anything to the contrary in this Agreement, the Company
will not be required to sell and issue any securities to the extent that the
issuance of any shares underlying such securities would prevent the Company from
complying with NASDAQ or equivalent requirements (as they apply to the Company)
and the Company's charter and by-laws.
SECTION 10. Indemnification:
(a) Indemnification by the Company. The Company agrees to indemnify and hold
harmless the Placement Agent and each person, if any, who controls the Placement
Agent within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which the Placement Agent or such
controlling person may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
the omission or alleged omission to state therein a material fact required to be
stated regarding the Company or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading or (ii) the Offering; and will reimburse the Placement Agent and each
such controlling person for any legal or other expenses reasonably incurred by
the Placement Agent or such controlling person in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in reliance upon and in conformity with written information furnished to
the Company by the Placement Agent for use in the preparation of the
Registration Statement.
(b) Indemnification by the Placement Agent. The Placement Agent agrees to
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act against any losses, claims,
damages or liabilities, joint or several, to which the Company or such
controlling person may become subject, under the Securities Act or otherwise
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; in each
case to the extent but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in conformity with
information furnished in writing to the Company by the Placement Agent for use
in the preparation of the Registration Statement.
(c) Procedure. Promptly after receipt by an indemnified party under this
Section 10 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 10, notify in writing the indemnifying party of the
commencement thereof; and the omission so to notify the indemnifying party will
relieve it from any liability under this Section 10 as to the particular item
for which indemnification is then being sought, but not from any other liability
which it may have to any indemnified party; provided, however, that any failure
by the Placement Agent to notify the Company shall not relieve the Company from
its obligations hereunder, unless the Company is materially prejudiced by such
failure. In case any such action is brought against any indemnified party, and
it notifies an indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and to the extent that it may
wish, jointly with any other indemnifying party, similarly notified, to assume
the defense thereof, with counsel who shall be to the reasonable satisfaction of
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 10 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. Any such indemnifying party shall not be liable to any
such indemnified party on account of any settlement of any claim or action
effected without the consent of such indemnifying party.
(d) Contribution. To provide for just and equitable contribution, if: (i) an
indemnified party makes a claim for indemnification pursuant to Section 10(a) or
10(b) but it is found in a final judicial determination, not subject to further
appeal, that such indemnification may not be enforced in such case, even though
this Agreement expressly provides for indemnification in such case, or (ii) any
indemnified or indemnifying party seeks contribution under the Securities Act,
the Exchange Act, or otherwise, then the Company, on the one hand, and the
Placement Agent, on the other hand, shall contribute to the losses, liabilities,
claims, damages, and expenses whatsoever to which any Placement Agent indemnitee
or Company indemnitee, respectively, may be subject, in such proportions as are
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Placement Agent, on the other hand; provided, however, that if
applicable law does not permit such allocation, then other relevant equitable
considerations such as the relative fault of the Company and the Placement Agent
in connection with the facts which resulted in such losses, liabilities, claims,
damages, and expenses shall also be considered. The relative benefits received
by the Company, on the one hand, and the Placement Agent, on the other hand,
shall be deemed to be in the same proportion as (x) the total proceeds from the
Offering (net of compensation payable to the Placement Agent pursuant to Section
7 hereof but before deducting expenses) received by the Company, and (y) the
compensation received by the Placement Agent pursuant to Section 7 hereof.
The relative fault, in the case of an untrue statement, alleged untrue
statement, omission, or alleged omission, shall be determined by, among other
things, whether such statement, alleged statement, omission, or alleged omission
relates to information supplied by the Company or by the Placement Agent, and
the parties, relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement, alleged statement, omission, or alleged
omission. The Company and the Placement Agent agree that it would be unjust and
inequitable if the respective obligations of the Company and the Placement Agent
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses or by any other
method of allocation that does not reflect the equitable considerations referred
to in this Section. In no case (except fraud) shall the Placement Agent by
responsible for a portion of the contribution obligation in excess of the
compensation received by it pursuant to Section 7 hereof. No person guilty of a
fraudulent misrepresentation shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation. For purposes of this
Section, each person, if any, who controls the Placement Agent within the
meaning of Section 15 of the Securities Act and each officer, director,
partners, employee, agent, and counsel of the Placement Agent, shall have the
same rights to contribution as the Placement Agent, and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act and
each officer, director, employee, agent, and counsel of the Company, shall have
the same rights to contribution as the Company, subject in each case to the
provisions of this Section. Anything in this Section to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section is intended to supersede any right to contribution under the Securities
Act, the Exchange Act, or otherwise
SECTION 11. Registration Rights for Placement Agent's Stock:
The Company shall include in any registration, at its own expense, all of the
underlying Common Stock for the Warrants issued to TGI as compensation as set
forth herein in Section 7(e) provided that if the registration statement
pertains to an underwritten offering, the inclusion of any such shares shall be
subject to an underwriter's cutback if the underwriter determines, in good
faith, that the inclusion of such shares will adversely affect the offering by
the Company with such cutback to be accomplished on a pro-rata basis among all
selling shareholders or as shall be otherwise required by such underwriter.
SECTION 12. Representations and Agreements to Survive Sale and Payment:
Except as the context otherwise requires, all representations, warranties and
agreements contained in this Agreement shall be deemed to be representations,
warranties and agreements at a Closing; and such representations, warranties and
agreements of the Placement Agent and the Company, including the indemnity
agreements contained in Section 10 hereof, shall remain operative and in full
force and effect regardless of any investigation made by you or on your behalf,
or any controlling person, or by or on behalf of the Company, and shall survive
the sale of, and payment for the Shares.
SECTION 13.Notices:
All notices provided for by this Agreement shall be made in writing either (a)
by actual delivery of the notice into the hands of the parties thereto entitled,
or (b) by the mailing of the notice in the United States mails to the address,
as stated below (or at such other address as may have been designated by written
notice), of the party entitled thereto, by certified or registered mail, return
receipt requested, postage prepaid or faxed with confirmation. The notice shall
be deemed to be received in the case of (a) above, on the date of its actual
receipt by the party entitled thereto, and in the case of (b) above, three days
after the date of deposit in the United States mails. All communications
hereunder, except as herein otherwise specifically provided, shall be in writing
and, if sent to the Placement Agent, shall be mailed or delivered to the
Placement Agent at the address set forth on page 1 hereof, and if sent to the
Company shall be mailed or delivered to Mr. Philip P. Lacqua, President and CEO,
R-TEC TECHNOLOGIES, INC., 61 Mallard Drive, P.O. Box 282, Allamuchy, New Jersey
07820.
SECTION 14. Governing Law:
This Agreement shall be governed by, subject to and construed in accordance with
the laws of the State of Florida and proper venue will be Palm Beach County,
Florida.
SECTION 15. Severability:
If any portion of this Agreement shall be held invalid or inoperative, then, so
far as is reasonable and possible (a) the remainder of this Agreement shall be
considered valid and operative; and (b) effect shall be given to the intent
manifested by the portion held invalid or inoperative.
SECTION 16. Counterparts:
This Agreement may be executed in a number of identical counterparts, including
facsimile signatures, each of which shall be deemed to be an original, but all
of which constitute, collectively, one and the same Agreement; but in making
proof of this Agreement, it shall not be necessary to produce or account for
more than one such counterpart.
SECTION 17. Modification or Amendment:
This Agreement may not be modified or amended except by written agreement
executed by all the parties hereto.
SECTION 18. Other Instruments:
The parties hereto covenant and agree that they will execute such other and
further instruments and documents as are or may become necessary or convenient
to effectuate and carry out this Agreement.
SECTION 19. Captions:
The captions used in this Agreement are for convenience only and shall not be
construed in interpreting this Agreement.
SECTION 20. Parties:
This Agreement shall be binding upon and inure solely for the benefit of the
parties hereto, the controlling persons and indemnified parties referred to in
Section 10 hereof and their respective successors, legal representatives, heirs
and assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Agreement or any provision herein contained.
SECTION 21.Entire Agreement:
This Agreement contains the entire understandings between the parties and
supersedes any prior understandings or written or oral agreements between them
respecting the subject matter hereof.
If the foregoing correctly sets forth the understanding between the Placement
Agent and the Company, please so indicate in the space provided below for that
purpose, whereupon this letter shall constitute a binding Agreement between us.
Sincerely,
R-TEC TECHNOLOGIES, INC.
By: _____________________________
Name: Mr. Philip P. Lacqua
Title: President and CEO
ACCEPTED as of the _______ day of September, 1999:
THORNHILL GROUP, INC.
By: __________________________
Name: Mr. Laurence S. Isaacson
Title: President and CEO
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is made as of this 23rd day of September,
1999, by and among MARC M. SCOLA, having an address at 61 Mallard Drive,
Allamuchy, New Jersey 07820 hereinafter referred to as the ("Employee") and
R-TEC TECHNOLOGIES, INC., a New Jersey Corporation with a business address at 61
Mallard Drive, Allamuchy, New Jersey 07820 (hereinafter collectively referred to
as "Employer").
RECITALS
WHEREAS, Employee is licensed to practice law in the State of New
Jersey; and
WHEREAS, Employer desires to employ the Employee as Vice President
and General Counsel for the Employer corporation, and Employee desires to be so
employed upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual
obligations and undertakings contained herein, the parties agree as follows:
STATEMENT OF AGREEMENT
SECTION 1. EMPLOYMENT
a. Position. Employer wishes to employ and Employee hereby accepts
the position of Vice President and General Counsel of the Employer corporation
for the term of this Agreement. Since Employee will serve as an officer and
director of Employer, his duties in those capacities shall be as determined from
time to time by Employer's Board of Directors or as set forth in any applicable
corporate documents, including without limitation Employer's Code of Regulations
and Bylaws, as they may be amended from time to time.
<PAGE>
b. Employee's Commitment. Employee shall consider his employment by
Employer as his principal employment when employed on a full-time basis as
described herein, shall devote the necessary time and attention to duties and
responsibilities under this Agreement, and shall perform them to the best of his
abilities. While subject to any provision of this Agreement, Employee shall
maintain loyalty to Employer, and shall take no action that would directly or
indirectly promote any competitor to injure Employer's interests. Subject to the
foregoing, Employee may engage in other charitable or business activities to the
extent that they do not interfere with his obligations under this Agreement;
provided that employee first discloses any such activities to Employer, and
Employee's continued participation in those activities shall not be detrimental
to Employer's interests.
c. Duties. Employee's primary duties and responsibilities as Vice
President and General Counsel shall be to:
(1) Act as General Counsel to each of the Employer corporation by
rendering legal advice on matters Employer; (2) Review, prepare and
negotiate contracts and other legal documents affecting each of such
corporations.
(3) Attend to all litigation and regulatory matters affecting each
of such corporation, including the retention of outside counsel to handle any
such matters, all within the discretion of the Employee;
(4) Take any and all further actions as Employee may deem necessary
and proper in his position as General Counsel and which actions will be for the
benefit of each of such corporation.
SECTION 2. TERMINATION OF EMPLOYMENT
a. Initial Term. Unless terminated earlier in accordance with this
Agreement, the initial term of Employee's employment shall be for a term of five
(5) years commencing on September 23, 1999, and terminating on September 22,
2003, unless terminated sooner as provided herein.
b. Termination. Notwithstanding any other provision of this
Agreement, Employee's employment shall terminate at any time before the
expiration of the term specified in the preceding subsection, as follows:
(1) The Employee party may terminate Employee's employment for any
or no reason, with or without cause, upon 60 days' written notice to
the other party; (2) Employee's employment shall terminate without
notice upon Employee's date of death; (3) This Agreement shall
terminate without notice upon the sale of substantially all of
Employer's assets, or the cessation of its existence by dissolution,
merger, consolidation, or otherwise;
(4) This Agreement shall terminate without notice if Employer
becomes subject to voluntary or involuntary bankruptcy, insolvency,
receivership, assignment for the benefit of creditors, or any other type of
federal or state law debtor's proceedings which are not dismissed or removed
within 60 days of their initiation.
<PAGE>
c. Termination for "Reasonable Cause". Employee's employment may
also be terminated by Employer at any time without prior notice upon a showing
of "reasonable cause." Should Employee be terminated by Employer for "reasonable
cause", no severance pay will be paid to Employee nor will his health insurance
benefits be continued by Employer at its expense for any period of time as
addressed in Section 4 of this Agreement.
(1) "Reasonable cause" shall be defined for the purposes of this
Agreement as being:
(a) Any act of omission which reasonably constitutes dishonesty,
disloyalty, fraud, deceit, gross negligence, willful misconduct or recklessness,
including, but not limited to the willful violation of Employer's bylaws or code
of regulations, and which is directly or indirectly detrimental to Employer's
best interests;
(b) The limitation, suspension or revocation of Employee's license
to practice law;
(c) Inattention to, neglect of, or any other failure to competently
perform any assigned duties after receiving notice and a reasonable opportunity
to cure;
(d) Any act that constitutes a felony under the laws of the state of
New Jersey or the United States; or
(e) Breach of any material portion of this Agreement.
d. Death or Disability
(1) The terms of this Agreement shall expire upon the death or
disability of the Employee.
(2) Employee shall be deemed to be disabled if he is unable to
perform, on a full-time basis the regular activities of his employment for a
period of:
(a) Six (6) consecutive months or
(b) A total of 26 weeks during any 12 month period; provided that
authorized vacations or other leaves of absence shall not be counted.
(3) The date of disability shall be the date on which the earlier
of the requirements stated in (a) or (b) of this section are satisfied.
(4) Upon disability or death of Employee during the term of this
Agreement, Employer shall continue to provide for 90 days, at its own expense,
the same level of health insurance, and if applicable, life insurance, as was in
effect at the time of the permanent disability or death of Employee.
e. Termination Without Cause - Exception
<PAGE>
(1) Notwithstanding anything herein to the contrary, in the event
that Employee's employment is terminated by Employer upon sixty (60) days
written notice and without cause as defined in Section 2(b)(1), then and in such
event, Employer shall be obligated to pay to Employee the balance of the salary
to which employee would have been entitled had this Agreement run for the full
Initial Term. Employer recognized and acknowledges that reasonableness of this
provision given the fact that Employee terminated his law practice in reliance
upon his Employment Agreement and the provisions contained therein.
f. Termination Upon Sale - Exception
(1) Notwithstanding anything herein to the contrary, in the event
that this Agreement shall terminate upon the sale of substantially all of
Employer's assets, or the cessation of its existence by dissolution, merger,
consolidation, or otherwise, then and in such event, Employer agrees that the
balance of the Initial Term of the Employee's employment under this Agreement
shall be made part of any included in any such sale, dissolution, merger,
consolidation or otherwise, and the purchaser or surviving entity must agree to
be responsible for the balance of the Initial Term of such contract by paying to
the Employee all amounts to which he would have been entitled has this Agreement
run for the complete Initial Term. In the event that the Employer is unable to
have any such purchaser or succeeding or surviving entity agree to such a
provision, then the responsibility for the payment to be made to the Employee
for the balance of the Initial Term is hereby specifically assumed by Employer
and all payments due and owing to Employee in connection with the balance of the
Initial Term shall be made to Employee by Employer prior to the completion of
any sale, dissolution, merger, consolidation or otherwise as may occur.
SECTION 3. COMPENSATION, BENEFITS AND EXPENSES
a. Salary. Subject to Subsection 3b, Employer shall pay employee
an annual base salary based upon full time employment of $50,000.00 plus bonus.
Employee's Bonus shall be decided by the Board of Directors.
b. Salary - When Paid. The salary to be paid to employee under
subsection a or b herein shall be payable in accordance with employer's payroll
practices in effect from time to time.
c. Benefits. Employee shall be entitled to all the rights, benefits,
and privileges (including vacation, health insurance, pension or other fringe
benefits, and compensation programs as are set forth on Exhibit A attached
hereto).
<PAGE>
d. Withholdings. Employer shall withhold from any amounts payable as
compensation all federal, state, municipal, or other taxes as are required by
any law, regulation, or ruling. Notwithstanding the foregoing provision of this
Section 3, Employee shall be liable for the payment, if any, of any federal,
state or local taxes incurred by him as a result of Employer's provision of
benefits hereunder.
e. Effect of Termination on Salary and Benefits. Employee's salary
and benefits under Subsection 3 shall terminate effective immediately on the
date of any termination of Employee's employment or this Agreement, and from
that date Employee shall be entitled to severance benefits under Section 4 if
and only to the extent they are then payable and subject to the provisions of
Section 2(e) and (f) herein and any other provisions of this Agreement which
provide for the continuation of salary and/or benefits beyond termination.
g. Effect of Termination on Other Provisions. This Agreement shall
continue in effect upon and after the termination of Employee's employment for
any reason necessary to enforce the provisions of this Agreement which apply
subsequent to any such termination, including any provisions relating to
confidentiality, non-competition, release, or indemnification.
h. Professional Development. Employer agrees that employee shall be
permitted to continue to attend professional development training at Employer's
expense up to an aggregate annual amount of no more than two (2) percent of
Employee's annual salary.
SECTION 4. SEVERANCE
a. Severance Payments and Benefits. Subject to Subsection 4b, if
Employee's employment under this Agreement is terminated by employer without a
showing of reasonable cause, as defined under Subsection 2.c(1), employee shall
be entitled to receive the following Severance Payments and Benefits from
Employer:
(1) A continuation of Employee's wages equal to the amount of his
regular salary as of the date of his termination for the balance of the Initial
Term as set forth in Section 2(e) and (f) above, or if such termination occurs
beyond the Initial Term of employment, for a period of eighteen (18) months
following such termination.
(2) Payment of health insurance premiums under COBRA for twelve
(12) months.
(3) Outplacement services selected by the Employer up to the sum of
Five Thousand Dollars ($5,000.00).
<PAGE>
b. Execution of Release. Employer's obligation to pay severance
benefits under Subsection 4.a is expressly conditioned upon Employee's execution
and delivery to Employer a Release and Agreement, as drafted at the time of
Employee's termination of employment, including, but not limited to:
(1) An unconditional release of all rights to any claims, charges,
complaints, grievances, known or unknown to Employee, against employer, its
affiliates or assigns, through the date of Employee's termination from
employment;
(2) A representation and warranty that Employee has not filed or
assigned any claims, charges, complaints, or grievance against Employer, its
affiliates, or assigns;
(3) An Agreement not to use, disclose or make copies of any
confidential information of Employer, as well as to return any such confidential
information and property to Employer upon execution of release;
(4)An Agreement to maintain the confidentiality of the release; and
(5) An Agreement to indemnify Employer, or its affiliates or
assigns, in the event that Employee breaches any portion of the Agreement or
Release.
c. No Admission. Employee acknowledges such an Agreement and Release
shall not be construed as an admission by Employer or any other release of
wrongdoing whatsoever against Employee, and all of the releases specifically
deny any such wrongdoing.
d. Payments Upon employee's Death or Disability. If severance
benefits are payable because of Employee's death or disability, they shall be
deemed to be made as compensation for Employee's past services to Employer.
e. Termination of Employer's Severance Obligation. Employer's
obligation to provide Employee with severance pay shall cease upon the earlier
of the expiration of the Severance Pay Period or when Employee obtains a
position comparable to that which he held with Employer. Similarly, Employer's
obligation to provide Employee with the health insurance continuation premium
shall cease upon the earlier of the expiration of the Severance Pay Period or
when Employee is eligible to participate in a comparable health insurance plan.
SECTION 5. CONFIDENTIALITY
<PAGE>
a. Confidential Information. "Confidential Information" mans
information in whatever form, including information that is written,
electronically stored, orally transmitted, or memorized, that is of commercial
value to Employer and that was created, discovered, developed, or otherwise
becomes known to Employee, or in which property rights are held, assigned to, or
otherwise acquired by or conveyed to Employer, including any Employee
Invention(as subsequently defined) or idea, knowledge, know how, process,
system, method, technique, research and development, technology, software,
technical information, trade secret, trademark, copyrighted material, reports,
records, documentation, data, customer or supplier list, tax or financial
information, business or marketing plan, strategy, or forecast. Confidential
Information does not include information that is or becomes generally known
within Employer's industry through no act or omission by Employee; provided,
however, that the compilation, manipulation, or other exploitation of generally
known information may constitute Confidential Information.
b. Employee Invention. "Employee Invention" means any idea,
invention, software, technique, modification, process, improvement, or similar
item, whether or not reduced to writing or stored electronically or otherwise,
and whether or not protectible by patent, trademark, copyright, or other
intellectual property law, that is created, conceived, or developed by Employee
or under his direction, whether solely or with others, during or after his
employment by Employer, that relates in any way to, or is useful in any manner
in, the business now or then conducted or proposed to be conducted by Employer
or which is based upon or otherwise derives from or makes use of the
Confidential Information.
c. Ownership; Disclosure. Any Confidential Information, whether nor
not developed by employee, shall at all times be Employer's exclusive property.
Employee shall promptly disclose any employee Invention to Employer in writing.
d. Restrictions. During the term of this Agreement, and for as long
after its termination as any confidential Information is subject to protection
under applicable law, Employee shall not, without Employer's prior written
consent specifically referring to this covenant.
(1) Use any Confidential Information for the benefit of himself or
any other party other than Employer or disclose it to any other person or
entity;
(2) Remove any Confidential Information or other documentation,
device, plan, or other record or evidence pertaining to Employer's business form
Employer's premises, except when specifically authorized to do so in pursuit of
Employer's business; or
(3) Retain copies of other records of any such items.
<PAGE>
e. Purpose. The parties acknowledge and agree that the confidential
Information is a valuable business asset, and that this Section is necessary to
protect employer's legitimate business interests.
SECTION 6. ADDITIONAL REPRESENTATIONS AND WARRANTIES
In addition to his other representations and warranties set forth in
this Agreement, Employee further represents and warrants as follows:
a. Employee's performance of this Agreement shall not breach any
agreement to which he is or was a party that requires him to hold any
information in confidence or in trust;
b. Employee has not and shall not breach any such Agreement;
c. Employee shall not bring to Employer or use in connection with
his employment any confidential or proprietary information belonging to another
entity without first delivering a written release of that information to
Employer.
SECTION 7. REMEDIES
a. Irreparable Harm. The parties acknowledge and agree that
irreparable harm would result in the event of a breach or threat of a breach by
Employee of Section 5 or the making of any untrue representation or warranty by
Employee in this Agreement. Therefore, in such an event, and notwithstanding any
other provision of this Agreement.
(1) Employer shall be entitled to a restraining order, order of
specific performance, or other injunctive relief, without showing actual damage
and without bond or other security; and
(2) Employer's obligation to make any payment or provide any benefit
under this Agreement, including without limitation any severance benefits,
shall immediately cease.
b. Remedies Not Exclusive. Employer's remedies under this Section
are not exclusive, and shall not prejudice or prohibit any other rights or
remedies under this Agreement or otherwise. To the extent required to be
enforceable by applicable law, the cessation of Employer's obligation to make
payments or continue benefits under this Section shall be deemed to be in the
nature of liquidated damages and not a penalty.
c. Cessation of Payments. In the event Employer obtains relief as
provided in this Section, or in the event of Employee's breach of Section 5 or
the making of any untrue representation or warranty by Employee in this
Agreement, Employer's obligation to make any payment or provide any benefit
under this Agreement, including any severance benefits, shall immediately cease.
<PAGE>
SECTION 8. INDEMNIFICATION
a. Either Party. Each party shall indemnify and hold the other
harmless from and against any and all liability and expense of any kind,
including legal costs and reasonable attorney's fees, arising from the
indemnifying party's fraud, deceit, gross negligence, or willful misconduct with
respect to the performance of this Agreement, or breach of any provisions of
this Agreement.
SECTION 9. RETURN OF COMPANY PROPERTY
a. Immediately upon termination of his employment or upon Employer's
earlier request, Employee shall return to Employer all Confidential Information
and other items described in Section 5 and all originals and copies of any other
property or information owned by Employer or relating to its business, that
Employee has in his possession or under his control, including all credit cards,
papers, books, equipment, files and samples.
SECTION 10. LEGAL COUNSEL
a. Understanding, Voluntary Agreement. Employee and Employer
represent and warrant that each party has been afforded a reasonable opportunity
to review this Agreement, to understand its terms, and to discuss it with any
attorney of their choice, and that each party knowingly and voluntarily enters
this Agreement.
b. Waiver of Separate Representation. To the extent Employer has not
engaged separate legal counsel to represent it in connection with this
agreement, the parties acknowledge and agree that their respective interests in
this Agreement are in conflict, that they have the right to retain independent
counsel, that they have been fully informed about this right and the conflicts
of interest that arise from retaining the same legal counsel to represent both
of them, and that this Section constitutes written disclosure of these
conflicts. The parties further affirm that they are waiving separate
representation freely, voluntarily, and with full knowledge of the effects of
this waiver. No party shall at any time claim that this Agreement is void or
unenforceable in any respect because of the lack of use of independent counsel,
or that the legal counsel who prepared this Agreement acted improperly in doing
so.
SECTION 11. CONFIDENTIAL AGREEMENT
<PAGE>
This Agreement is confidential. Employee shall keep its provisions
confidential and shall not disclose them to anyone, including any past, present,
or prospective employee of Employer; provided, that this Section shall not
prohibit Employee from discussing this Agreement in confidential communications
with his family members, attorneys, accountants, or other professional advisors,
provided that the provisions of Section 5 shall at all times apply to
communications with any such persons.
SECTION 12. MISCELLANEOUS PROVISIONS
a. Notes. Unless otherwise agreed in writing by a party entitled to
notice, all notices required by this Agreement shall be in writing and shall be
deemed given when physically delivered to and acknowledged by receipt by a party
or its duly authorized attorney or legal representative, or when deposited
postage paid, registered or certified mail, addressed to the party at its
principal business or residence as set forth above.
b. Waivers. No assent, express or implied, by any party to any
breach or default under this Agreement shall constitute a waiver of or assent to
any breach or default of any other provision of this Agreement or any breach or
default of the same provision of any other occasion.
c. Entire Agreement, Modification. This Agreement constitutes the
entire agreement of the parties concerning its subject matter and supersedes all
other oral or written understandings, discussions, and agreement, and may be
modified only in writing signed by both parties.
d. Binding Effect; No Third Party Beneficiaries. This Agreement
shall bind and benefit the parties and their respective heirs, devisees,
beneficiaries, grantees, donees, legal representatives, successors, and assigns.
Nothing in this Agreement shall be construed to confer any rights or benefits on
third party beneficiaries.
e. Assignment. Neither Party may assign its interest in this
Agreement without the other's prior written consent; provided that Employer may
assign its interest to another entity which it controls, is controlled by, or is
under common control with.
f. Captions. Titles or captions contained in this Agreement are
for convenience and are not intended to affect the substantive meaning of any
provision.
g. Severability. If any provision of this Agreement shall be
declared invalid or illegal for any reason whatsoever, then notwithstanding such
invalidity or illegality, the remaining terms and provisions of this Agreement
shall remain in full force and effect in the same manner as if the invalid or
illegal provision shad not been contained herein.
h. Counterparts. This Agreement may be executed in one or more
counterpart, each of which shall be deemed and original, but all of which
together shall constitute one and same instrument.
<PAGE>
j. Effect of Termination. This Agreement shall continue in effect
upon and after the termination of Employee's employment for any reason to the
extent necessary for the enforcement of any of its provision that apply
subsequent any such termination.
j. Governing Law. This Agreement shall be governed by and
construed under the laws of the United States and the State of New Jersey.
k. The parties acknowledge that they have read and fully understand
the contents of this Agreement and execute it after having an opportunity to
consult with legal counsel.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as specified above.
WITNESS: EMPLOYEE:
- ----------------------- -----------------------------
MARC M. SCOLA
ATTEST: EMPLOYER:
R-TEC TECHNOLOGIES, INC.
- ----------------------- -----------------------------
PHILIP LACQUA, President
<PAGE>
EXHIBIT A
BENEFITS
A. Health Insurance.
B. Life Insurance - $500,000.00 policy.
C. Disability Insurance.
D. Vacation - Not less than five (5) weeks per year.
E. Pension Plan.
F. 401(K) Retirement Plan or Comparable Plan.
G. Expense Allowance.
H. Company Car - All insurance and related expenses of the automobile will be a
cost payable by Employer.
I. Continuation of Legal Malpractice/Liability Insurance Policy of at least
$1,000,000.00.
All of the above referenced benefits shall be provided by Employer to
Employee at no cost to Employee.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is made as of this 23rd day of September,
1999, by and among NANCY C. VITOLO, having an address at 290 Green Road, Sparta,
New Jersey 07871 hereinafter referred to as the ("Employee") and R-TEC
TECHNOLOGIES, INC., a New Jersey Corporation with a business address at 61
Mallard Drive, Allamuchy, New Jersey 07820 (hereinafter collectively referred to
as "Employer").
RECITALS
WHEREAS, Employer desires to employ the Employee as an Officer of
the Employer corporation, and Employee desires to be so employed upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual
obligations and undertakings contained herein, the parties agree as follows:
STATEMENT OF AGREEMENT
SECTION 1. EMPLOYMENT
a. Position. Employer wishes to employ and Employee hereby accepts
the position of Officer of the Employer corporation for the term of this
Agreement. Since Employee will serve as an officer and director of Employer, his
duties in those capacities shall be as determined from time to time by
Employer's Board of Directors or as set forth in any applicable corporate
documents, including without limitation Employer's Code of Regulations and
Bylaws, as they may be amended from time to time.
b. Employee's Commitment. Employee shall consider his employment by
Employer as his principal employment when employed on a full-time basis as
described herein, shall devote the necessary time and attention to duties and
responsibilities under this Agreement, and shall perform them to the best of his
abilities. While subject to any provision of this Agreement, Employee shall
maintain loyalty to Employer, and shall take no action that would directly or
indirectly promote any competitor to injure Employer's interests. Subject to the
foregoing, Employee may engage in other charitable or business activities to the
extent that they do not interfere with his obligations under this Agreement;
provided that employee first discloses any such activities to Employer, and
Employee's continued participation in those activities shall not be detrimental
to Employer's interests.
c. Duties. Employee's primary duties and responsibilities as Officer
shall be to:
<PAGE>
(1) Act as to the Director of Customer Service for the corporation
by rendering advice on matters affecting Sales and Marketing; (2)
Review and negotiate customer service and other such documents
affecting Employer. (3) Take any and all further actions as Employee
may deem necessary and proper in his position as an Officer and
which actions will be for the benefit of the corporation.
SECTION 2. TERMINATION OF EMPLOYMENT
a. Initial Term. Unless terminated earlier in accordance with this
Agreement, the initial term of Employee's employment shall be for a term of five
(5) years commencing on September 23, 1999, and terminating on September 22,
2003, unless terminated sooner as provided herein.
b. Termination. Notwithstanding any other provision of this
Agreement, Employee's employment shall terminate at any time before the
expiration of the term specified in the preceding subsection, as follows:
(1) The Employee may terminate Employee's employment for any or no
reason, with or without cause, upon 60 days' written notice to the other party;
(2) Employee's employment shall terminate without notice upon
Employee's date of death;
(3) This Agreement shall terminate without notice upon the sale of
substantially all of Employer's assets, or the cessation of its existence by
dissolution, merger, consolidation, or otherwise;
(4) This Agreement shall terminate without notice if Employer
becomes subject to voluntary or involuntary bankruptcy, insolvency,
receivership, assignment for the benefit of creditors, or any other type of
federal or state law debtor's proceedings which are not dismissed or removed
within 60 days of their initiation.
c. Termination for "Reasonable Cause". Employee's employment may
also be terminated by Employer at any time without prior notice upon a showing
of "reasonable cause." Should Employee be terminated by Employer for "reasonable
cause", no severance pay will be paid to Employee nor will his health insurance
benefits be continued by Employer at its expense for any period of time as
addressed in Section 4 of this Agreement.
(1) "Reasonable cause" shall be defined for the purposes of this
Agreement as being:
<PAGE>
(a) Any act of omission which reasonably constitutes dishonesty,
disloyalty, fraud, deceit, gross negligence, willful misconduct or recklessness,
including, but not limited to the willful violation of Employer's bylaws or code
of regulations, and which is directly or indirectly detrimental to Employer's
best interests;
(b) Inattention to, neglect of, or any other failure to competently
perform any assigned duties after receiving notice and a reasonable opportunity
to cure;
(c) Any act that constitutes a felony under the laws of the state of
New Jersey or the United States; or
(d) Breach of any material portion of this Agreement.
d. Death or Disability
(1) The terms of this Agreement shall expire upon the death or
disability of the Employee.
(2) Employee shall be deemed to be disabled if he is unable to
perform, on a full-time basis the regular activities of his employment for a
period of:
(a) Six (6) consecutive months or
(b) A total of 26 weeks during any 12 month period; provided that
authorized vacations or other leaves of absence shall not be counted.
(3) The date of disability shall be the date on which the earlier
of the requirements stated in (a) or (b) of this section are satisfied.
(4) Upon disability or death of Employee during the term of this
Agreement, Employer shall continue to provide for 90 days, at its own expense,
the same level of health insurance, and if applicable, life insurance, as was in
effect at the time of the permanent disability or death of Employee.
e. Termination Without Cause - Exception
(1) Notwithstanding anything herein to the contrary, in the event
that Employee's employment is terminated by Employer upon sixty (60) days
written notice and without cause as defined in Section 2(b)(1), then and in such
event, Employer shall be obligated to pay to Employee the balance of the salary
to which employee would have been entitled had this Agreement run for the full
Initial Term. Employer recognized and acknowledges that reasonableness of this
provision given the fact that Employee terminated his law practice in reliance
upon his Employment Agreement and the provisions contained therein.
<PAGE>
f. Termination Upon Sale - Exception
(1) Notwithstanding anything herein to the contrary, in the event
that this Agreement shall terminate upon the sale of substantially all of
Employer's assets, or the cessation of its existence by dissolution, merger,
consolidation, or otherwise, then and in such event, Employer agrees that the
balance of the Initial Term of the Employee's employment under this Agreement
shall be made part of any included in any such sale, dissolution, merger,
consolidation or otherwise, and the purchaser or surviving entity must agree to
be responsible for the balance of the Initial Term of such contract by paying to
the Employee all amounts to which he would have been entitled has this Agreement
run for the complete Initial Term. In the event that the Employer is unable to
have any such purchaser or succeeding or surviving entity agree to such a
provision, then the responsibility for the payment to be made to the Employee
for the balance of the Initial Term is hereby specifically assumed by Employer
and all payments due and owing to Employee in connection with the balance of the
Initial Term shall be made to Employee by Employer prior to the completion of
any sale, dissolution, merger, consolidation or otherwise as may occur.
SECTION 3. COMPENSATION, BENEFITS AND EXPENSES
a. Salary. Subject to Subsection 3b, Employer shall pay employee an
annual base salary based upon full time employment of $50,000.00 plus bonus.
Employee's Bonus shall be decided by the Board of Directors.
b. Salary - When Paid. The salary to be paid to employee under
subsection a or b herein shall be payable in accordance with employer's payroll
practices in effect from time to time.
c. Benefits. Employee shall be entitled to all the rights, benefits,
and privileges (including vacation, health insurance, pension or other fringe
benefits, and compensation programs as are set forth on Exhibit A attached
hereto).
d. Withholdings. Employer shall withhold from any amounts payable as
compensation all federal, state, municipal, or other taxes as are required by
any law, regulation, or ruling. Notwithstanding the foregoing provision of this
Section 3, Employee shall be liable for the payment, if any, of any federal,
state or local taxes incurred by him as a result of Employer's provision of
benefits hereunder.
<PAGE>
e. Effect of Termination on Salary and Benefits. Employee's salary
and benefits under Subsection 3 shall terminate effective immediately on the
date of any termination of Employee's employment or this Agreement, and from
that date Employee shall be entitled to severance benefits under Section 4 if
and only to the extent they are then payable and subject to the provisions of
Section 2(e) and (f) herein and any other provisions of this Agreement which
provide for the continuation of salary and/or benefits beyond termination.
g. Effect of Termination on Other Provisions. This Agreement shall
continue in effect upon and after the termination of Employee's employment for
any reason necessary to enforce the provisions of this Agreement which apply
subsequent to any such termination, including any provisions relating to
confidentiality, non-competition, release, or indemnification.
SECTION 4. SEVERANCE
a. Severance Payments and Benefits. Subject to Subsection 4b, if
Employee's employment under this Agreement is terminated by employer without a
showing of reasonable cause, as defined under Subsection 2.c(1), employee shall
be entitled to receive the following Severance Payments and Benefits from
Employer:
(1) A continuation of Employee's wages equal to the amount of his
regular salary as of the date of his termination for the balance of the Initial
Term as set forth in Section 2(e) and (f) above, or if such termination occurs
beyond the Initial Term of employment, for a period of eighteen (18) months
following such termination.
(2) Payment of health insurance premiums under COBRA for twelve
(12) months.
(3) Outplacement services selected by the Employer up to the sum of
Five Thousand Dollars ($5,000.00).
b. Execution of Release. Employer's obligation to pay severance
benefits under Subsection 4.a is expressly conditioned upon Employee's execution
and delivery to Employer a Release and Agreement, as drafted at the time of
Employee's termination of employment, including, but not limited to:
(1) An unconditional release of all rights to any claims, charges,
complaints, grievances, known or unknown to Employee, against employer, its
affiliates or assigns, through the date of Employee's termination from
employment;
(2) A representation and warranty that Employee has not filed or
assigned any claims, charges, complaints, or grievance against Employer, its
affiliates, or assigns;
<PAGE>
(3) An Agreement not to use, disclose or make copies of any
confidential information of Employer, as well as to return any such confidential
information and property to Employer upon execution of release;
(4) An Agreement to maintain the confidentiality of the release;
and
(5) An Agreement to indemnify Employer, or its affiliates or
assigns, in the event that Employee breaches any portion of the Agreement or
Release.
c. No Admission. Employee acknowledges such an Agreement and Release
shall not be construed as an admission by Employer or any other release of
wrongdoing whatsoever against Employee, and all of the releases specifically
deny any such wrongdoing.
d. Payments Upon employee's Death or Disability. If severance
benefits are payable because of Employee's death or disability, they shall be
deemed to be made as compensation for Employee's past services to Employer.
e. Termination of Employer's Severance Obligation. Employer's
obligation to provide Employee with severance pay shall cease upon the earlier
of the expiration of the Severance Pay Period or when Employee obtains a
position comparable to that which he held with Employer. Similarly, Employer's
obligation to provide Employee with the health insurance continuation premium
shall cease upon the earlier of the expiration of the Severance Pay Period or
when Employee is eligible to participate in a comparable health insurance plan.
SECTION 5. CONFIDENTIALITY
a. Confidential Information. "Confidential Information" mans
information in whatever form, including information that is written,
electronically stored, orally transmitted, or memorized, that is of commercial
value to Employer and that was created, discovered, developed, or otherwise
becomes known to Employee, or in which property rights are held, assigned to, or
otherwise acquired by or conveyed to Employer, including any Employee
Invention(as subsequently defined) or idea, knowledge, know how, process,
system, method, technique, research and development, technology, software,
technical information, trade secret, trademark, copyrighted material, reports,
records, documentation, data, customer or supplier list, tax or financial
information, business or marketing plan, strategy, or forecast. Confidential
Information does not include information that is or becomes generally known
within Employer's industry through no act or omission by Employee; provided,
however, that the compilation, manipulation, or other exploitation of generally
known information may constitute Confidential Information.
<PAGE>
b. Employee Invention. "Employee Invention" means any idea,
invention, software, technique, modification, process, improvement, or similar
item, whether or not reduced to writing or stored electronically or otherwise,
and whether or not protectible by patent, trademark, copyright, or other
intellectual property law, that is created, conceived, or developed by Employee
or under his direction, whether solely or with others, during or after his
employment by Employer, that relates in any way to, or is useful in any manner
in, the business now or then conducted or proposed to be conducted by Employer
or which is based upon or otherwise derives from or makes use of the
Confidential Information.
c. Ownership; Disclosure. Any Confidential Information, whether nor
not developed by employee, shall at all times be Employer's exclusive property.
Employee shall promptly disclose any employee Invention to Employer in writing.
d. Restrictions. During the term of this Agreement, and for as long
after its termination as any confidential Information is subject to protection
under applicable law, Employee shall not, without Employer's prior written
consent specifically referring to this covenant.
(1) Use any Confidential Information for the benefit of himself or
any other party other than Employer or disclose it to any other person or
entity;
(2) Remove any Confidential Information or other documentation,
device, plan, or other record or evidence pertaining to Employer's business form
Employer's premises, except when specifically authorized to do so in pursuit of
Employer's business; or
(3) Retain copies of other records of any such items.
e. Purpose. The parties acknowledge and agree that the confidential
Information is a valuable business asset, and that this Section is necessary to
protect employer's legitimate business interests.
SECTION 6. ADDITIONAL REPRESENTATIONS AND WARRANTIES
In addition to his other representations and warranties set forth in
this Agreement, Employee further represents and warrants as follows:
a. Employee's performance of this Agreement shall not breach any
agreement to which he is or was a party that requires him to hold any
information in confidence or in trust;
<PAGE>
b. Employee has not and shall not breach any such Agreement;
c. Employee shall not bring to Employer or use in connection with
his employment any confidential or proprietary information belonging to another
entity without first delivering a written release of that information to
Employer.
SECTION 7. REMEDIES
a. Irreparable Harm. The parties acknowledge and agree that
irreparable harm would result in the event of a breach or threat of a breach by
Employee of Section 5 or the making of any untrue representation or warranty by
Employee in this Agreement. Therefore, in such an event, and notwithstanding any
other provision of this Agreement.
(1) Employer shall be entitled to a restraining order, order of
specific performance, or other injunctive relief, without showing actual damage
and without bond or other security; and
(2) Employer's obligation to make any payment or provide any benefit
under this Agreement, including without limitation any severance benefits, shall
immediately cease.
b. Remedies Not Exclusive. Employer's remedies under this Section
are not exclusive, and shall not prejudice or prohibit any other rights or
remedies under this Agreement or otherwise. To the extent required to be
enforceable by applicable law, the cessation of Employer's obligation to make
payments or continue benefits under this Section shall be deemed to be in the
nature of liquidated damages and not a penalty.
c. Cessation of Payments. In the event Employer obtains relief as
provided in this Section, or in the event of Employee's breach of Section 5 or
the making of any untrue representation or warranty by Employee in this
Agreement, Employer's obligation to make any payment or provide any benefit
under this Agreement, including any severance benefits, shall immediately cease.
SECTION 8. INDEMNIFICATION
a. Either Party. Each party shall indemnify and hold the other
harmless from and against any and all liability and expense of any kind,
including legal costs and reasonable attorney's fees, arising from the
indemnifying party's fraud, deceit, gross negligence, or willful misconduct with
respect to the performance of this Agreement, or breach of any provisions of
this Agreement.
SECTION 9. RETURN OF COMPANY PROPERTY
<PAGE>
a. Immediately upon termination of his employment or upon Employer's
earlier request, Employee shall return to Employer all Confidential Information
and other items described in Section 5 and all originals and copies of any other
property or information owned by Employer or relating to its business, that
Employee has in his possession or under his control, including all credit cards,
papers, books, equipment, files and samples.
SECTION 10. LEGAL COUNSEL
a. Understanding, Voluntary Agreement. Employee and Employer
represent and warrant that each party has been afforded a reasonable opportunity
to review this Agreement, to understand its terms, and to discuss it with any
attorney of their choice, and that each party knowingly and voluntarily enters
this Agreement.
b. Waiver of Separate Representation. To the extent Employer has not
engaged separate legal counsel to represent it in connection with this
agreement, the parties acknowledge and agree that their respective interests in
this Agreement are in conflict, that they have the right to retain independent
counsel, that they have been fully informed about this right and the conflicts
of interest that arise from retaining the same legal counsel to represent both
of them, and that this Section constitutes written disclosure of these
conflicts. The parties further affirm that they are waiving separate
representation freely, voluntarily, and with full knowledge of the effects of
this waiver. No party shall at any time claim that this Agreement is void or
unenforceable in any respect because of the lack of use of independent counsel,
or that the legal counsel who prepared this Agreement acted improperly in doing
so.
SECTION 11. CONFIDENTIAL AGREEMENT
This Agreement is confidential. Employee shall keep its provisions
confidential and shall not disclose them to anyone, including any past, present,
or prospective employee of Employer; provided, that this Section shall not
prohibit Employee from discussing this Agreement in confidential communications
with his family members, attorneys, accountants, or other professional advisors,
provided that the provisions of Section 5 shall at all times apply to
communications with any such persons.
SECTION 12. MISCELLANEOUS PROVISIONS
<PAGE>
a. Notes. Unless otherwise agreed in writing by a party entitled to
notice, all notices required by this Agreement shall be in writing and shall be
deemed given when physically delivered to and acknowledged by receipt by a party
or its duly authorized attorney or legal representative, or when deposited
postage paid, registered or certified mail, addressed to the party at its
principal business or residence as set forth above.
b. Waivers. No assent, express or implied, by any party to any
breach or default under this Agreement shall constitute a waiver of or assent to
any breach or default of any other provision of this Agreement or any breach or
default of the same provision of any other occasion.
c. Entire Agreement, Modification. This Agreement constitutes the
entire agreement of the parties concerning its subject matter and supersedes all
other oral or written understandings, discussions, and agreement, and may be
modified only in writing signed by both parties.
d. Binding Effect; No Third Party Beneficiaries. This Agreement
shall bind and benefit the parties and their respective heirs, devisees,
beneficiaries, grantees, donees, legal representatives, successors, and assigns.
Nothing in this Agreement shall be construed to confer any rights or benefits on
third party beneficiaries.
e. Assignment. Neither Party may assign its interest in this
Agreement without the other's prior written consent; provided that Employer may
assign its interest to another entity which it controls, is controlled by, or is
under common control with.
f. Captions. Titles or captions contained in this Agreement are for
convenience and are not intended to affect the substantive meaning of any
provision.
g. Severability. If any provision of this Agreement shall be
declared invalid or illegal for any reason whatsoever, then notwithstanding such
invalidity or illegality, the remaining terms and provisions of this Agreement
shall remain in full force and effect in the same manner as if the invalid or
illegal provision shad not been contained herein.
h. Counterparts. This Agreement may be executed in one or more
counterpart, each of which shall be deemed and original, but all of which
together shall constitute one and same instrument.
j. Effect of Termination. This Agreement shall continue in effect
upon and after the termination of Employee's employment for any reason to the
extent necessary for the enforcement of any of its provision that apply
subsequent any such termination.
j.Governing Law. This Agreement shall be governed by and construed
under the laws of the United States and the State of New Jersey.
<PAGE>
k. The parties acknowledge that they have read and fully understand
the contents of this Agreement and execute it after having an opportunity to
consult with legal counsel.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as specified above.
WITNESS: EMPLOYEE:
- ----------------------- -----------------------------
NANCY C. VITOLO
ATTEST: EMPLOYER:
R-TEC TECHNOLOGIES, INC.
- ----------------------- -----------------------------
PHILIP LACQUA, President
<PAGE>
EXHIBIT A
BENEFITS
A. Health Insurance.
B. Life Insurance.
C. Disability Insurance.
D. Vacation - Not less than five (5) weeks per year.
E. Pension Plan.
F. 401(K) Retirement Plan or Comparable Plan.
G. Expense Allowance.
H. Company Car - All insurance and related expenses of the automobile will be a
cost payable by Employer.
All of the above referenced benefits shall be provided by Employer
to Employee at no cost to Employee.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, is made as of this 23rd day of September,
1999, by and among PHILIP LACQUA, having an address at 1127 83rd Street,
Brooklyn, New York 11228 hereinafter referred to as the ("Employee") and R-TEC
TECHNOLOGIES, INC., a New Jersey Corporation with a business address at 61
Mallard Drive, Allamuchy, New Jersey 07820 (hereinafter collectively referred to
as "Employer").
RECITALS
WHEREAS, Employer desires to employ the Employee as an Officer of
the Employer corporation, and Employee desires to be so employed upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and mutual
obligations and undertakings contained herein, the parties agree as follows:
STATEMENT OF AGREEMENT
SECTION 1. EMPLOYMENT
a. Position. Employer wishes to employ and Employee hereby accepts
the position of Officer of the Employer corporation for the term of this
Agreement. Since Employee will serve as an officer and director of Employer, his
duties in those capacities shall be as determined from time to time by
Employer's Board of Directors or as set forth in any applicable corporate
documents, including without limitation Employer's Code of Regulations and
Bylaws, as they may be amended from time to time.
b. Employee's Commitment. Employee shall consider his employment by
Employer as his principal employment when employed on a full-time basis as
described herein, shall devote the necessary time and attention to duties and
responsibilities under this Agreement, and shall perform them to the best of his
abilities. While subject to any provision of this Agreement, Employee shall
maintain loyalty to Employer, and shall take no action that would directly or
indirectly promote any competitor to injure Employer's interests. Subject to the
foregoing, Employee may engage in other charitable or business activities to the
extent that they do not interfere with his obligations under this Agreement;
provided that employee first discloses any such activities to Employer, and
Employee's continued participation in those activities shall not be detrimental
to Employer's interests.
c. Duties. Employee's primary duties and responsibilities as Officer
shall be to:
<PAGE>
(1) Act as Sales Director to the Employer corporation by rendering
advice on matters affecting Sales and Marketing; (2) Review, prepare
and negotiate sales agreements and manufacturing documents affecting
Employer. (3) Take any and all further actions as Employee may deem
necessary and proper in his position as an Officer and which actions
will be
for the benefit of the corporation.
SECTION 2. TERMINATION OF EMPLOYMENT
a. Initial Term. Unless terminated earlier in accordance with this
Agreement, the initial term of Employee's employment shall be for a term of five
(5) years commencing on September 23, 1999, and terminating on September 22,
2003, unless terminated sooner as provided herein.
b. Termination. Notwithstanding any other provision of this
Agreement, Employee's employment shall terminate at any time before the
expiration of the term specified in the preceding subsection, as follows:
(1) The Employee may terminate Employee's employment for any or no
reason, with or without cause, upon 60 days' written notice to the other party;
(2) Employee's employment shall terminate without notice upon
Employee's date of death;
(3) This Agreement shall terminate without notice upon the sale of
substantially all of Employer's assets, or the cessation of its existence by
dissolution, merger, consolidation, or otherwise;
(4) This Agreement shall terminate without notice if Employer
becomes subject to voluntary or involuntary bankruptcy, insolvency,
receivership, assignment for the benefit of creditors, or any other type of
federal or state law debtor's proceedings which are not dismissed or removed
within 60 days of their initiation.
c. Termination for "Reasonable Cause". Employee's employment may
also be terminated by Employer at any time without prior notice upon a showing
of "reasonable cause." Should Employee be terminated by Employer for "reasonable
cause", no severance pay will be paid to Employee nor will his health insurance
benefits be continued by Employer at its expense for any period of time as
addressed in Section 4 of this Agreement.
(1) "Reasonable cause" shall be defined for the purposes of this
Agreement as being:
<PAGE>
(a) Any act of omission which reasonably constitutes dishonesty,
disloyalty, fraud, deceit, gross negligence, willful misconduct or recklessness,
including, but not limited to the willful violation of Employer's bylaws or code
of regulations, and which is directly or indirectly detrimental to Employer's
best interests;
(b) Inattention to, neglect of, or any other failure to competently
perform any assigned duties after receiving notice and a reasonable opportunity
to cure;
(c) Any act that constitutes a felony under the laws of the state of
New Jersey or the United States; or
(d) Breach of any material portion of this Agreement.
d. Death or Disability
(1) The terms of this Agreement shall expire upon the death or
disability of the Employee.
(2) Employee shall be deemed to be disabled if he is unable to
perform, on a full-time basis the regular activities of his employment for a
period of:
(a) Six (6) consecutive months or
(b) A total of 26 weeks during any 12 month period; provided that
authorized vacations or other leaves of absence shall not be counted.
(3) The date of disability shall be the date on which the earlier
of the requirements stated in (a) or (b) of this section are satisfied.
(4) Upon disability or death of Employee during the term of this
Agreement, Employer shall continue to provide for 90 days, at its own expense,
the same level of health insurance, and if applicable, life insurance, as was in
effect at the time of the permanent disability or death of Employee.
e. Termination Without Cause - Exception
(1) Notwithstanding anything herein to the contrary, in the event
that Employee's employment is terminated by Employer upon sixty (60) days
written notice and without cause as defined in Section 2(b)(1), then and in such
event, Employer shall be obligated to pay to Employee the balance of the salary
to which employee would have been entitled had this Agreement run for the full
Initial Term. Employer recognized and acknowledges that reasonableness of this
provision given the fact that Employee terminated his law practice in reliance
upon his Employment Agreement and the provisions contained therein.
f. Termination Upon Sale - Exception
<PAGE>
(1) Notwithstanding anything herein to the contrary, in the event
that this Agreement shall terminate upon the sale of substantially all of
Employer's assets, or the cessation of its existence by dissolution, merger,
consolidation, or otherwise, then and in such event, Employer agrees that the
balance of the Initial Term of the Employee's employment under this Agreement
shall be made part of any included in any such sale, dissolution, merger,
consolidation or otherwise, and the purchaser or surviving entity must agree to
be responsible for the balance of the Initial Term of such contract by paying to
the Employee all amounts to which he would have been entitled has this Agreement
run for the complete Initial Term. In the event that the Employer is unable to
have any such purchaser or succeeding or surviving entity agree to such a
provision, then the responsibility for the payment to be made to the Employee
for the balance of the Initial Term is hereby specifically assumed by Employer
and all payments due and owing to Employee in connection with the balance of the
Initial Term shall be made to Employee by Employer prior to the completion of
any sale, dissolution, merger, consolidation or otherwise as may occur.
SECTION 3. COMPENSATION, BENEFITS AND EXPENSES
a. Salary. Subject to Subsection 3b, Employer shall pay employee an
annual base salary based upon full time employment of $50,000.00 plus bonus.
Employee's Bonus shall be decided by the Board of Directors.
b. Salary - When Paid. The salary to be paid to employee under
subsection a or b herein shall be payable in accordance with employer's payroll
practices in effect from time to time.
c. Benefits. Employee shall be entitled to all the rights, benefits,
and privileges (including vacation, health insurance, pension or other fringe
benefits, and compensation programs as are set forth on Exhibit A attached
hereto).
d. Withholdings. Employer shall withhold from any amounts payable as
compensation all federal, state, municipal, or other taxes as are required by
any law, regulation, or ruling. Notwithstanding the foregoing provision of this
Section 3, Employee shall be liable for the payment, if any, of any federal,
state or local taxes incurred by him as a result of Employer's provision of
benefits hereunder.
<PAGE>
e. Effect of Termination on Salary and Benefits. Employee's salary
and benefits under Subsection 3 shall terminate effective immediately on the
date of any termination of Employee's employment or this Agreement, and from
that date Employee shall be entitled to severance benefits under Section 4 if
and only to the extent they are then payable and subject to the provisions of
Section 2(e) and (f) herein and any other provisions of this Agreement which
provide for the continuation of salary and/or benefits beyond termination.
g. Effect of Termination on Other Provisions. This Agreement shall
continue in effect upon and after the termination of Employee's employment for
any reason necessary to enforce the provisions of this Agreement which apply
subsequent to any such termination, including any provisions relating to
confidentiality, non-competition, release, or indemnification.
SECTION 4. SEVERANCE
a. Severance Payments and Benefits. Subject to Subsection 4b, if
Employee's employment under this Agreement is terminated by employer without a
showing of reasonable cause, as defined under Subsection 2.c(1), employee shall
be entitled to receive the following Severance Payments and Benefits from
Employer:
(1) A continuation of Employee's wages equal to the amount of his
regular salary as of the date of his termination for the balance of the Initial
Term as set forth in Section 2(e) and (f) above, or if such termination occurs
beyond the Initial Term of employment, for a period of eighteen (18) months
following such termination.
(2) Payment of health insurance premiums under COBRA for twelve
(12) months.
(3) Outplacement services selected by the Employer up to the sum of
Five Thousand Dollars ($5,000.00).
b. Execution of Release. Employer's obligation to pay severance
benefits under Subsection 4.a is expressly conditioned upon Employee's execution
and delivery to Employer a Release and Agreement, as drafted at the time of
Employee's termination of employment, including, but not limited to:
(1) An unconditional release of all rights to any claims, charges,
complaints, grievances, known or unknown to Employee, against employer, its
affiliates or assigns, through the date of Employee's termination from
employment;
(2) A representation and warranty that Employee has not filed or
assigned any claims, charges, complaints, or grievance against Employer, its
affiliates, or assigns;
(3) An Agreement not to use, disclose or make copies of any
confidential information of Employer, as well as to return any such confidential
information and property to Employer upon execution of release;
<PAGE>
(4) An Agreement to maintain the confidentiality of the release;
and
(5) An Agreement to indemnify Employer, or its affiliates or
assigns, in the event that Employee breaches any portion of the Agreement
or Release.
c. No Admission. Employee acknowledges such an Agreement and Release
shall not be construed as an admission by Employer or any other release of
wrongdoing whatsoever against Employee, and all of the releases specifically
deny any such wrongdoing.
d. Payments Upon employee's Death or Disability. If severance
benefits are payable because of Employee's death or disability, they shall be
deemed to be made as compensation for Employee's past services to Employer.
e. Termination of Employer's Severance Obligation. Employer's
obligation to provide Employee with severance pay shall cease upon the earlier
of the expiration of the Severance Pay Period or when Employee obtains a
position comparable to that which he held with Employer. Similarly, Employer's
obligation to provide Employee with the health insurance continuation premium
shall cease upon the earlier of the expiration of the Severance Pay Period or
when Employee is eligible to participate in a comparable health insurance plan.
SECTION 5. CONFIDENTIALITY
a. Confidential Information. "Confidential Information" mans
information in whatever form, including information that is written,
electronically stored, orally transmitted, or memorized, that is of commercial
value to Employer and that was created, discovered, developed, or otherwise
becomes known to Employee, or in which property rights are held, assigned to, or
otherwise acquired by or conveyed to Employer, including any Employee
Invention(as subsequently defined) or idea, knowledge, know how, process,
system, method, technique, research and development, technology, software,
technical information, trade secret, trademark, copyrighted material, reports,
records, documentation, data, customer or supplier list, tax or financial
information, business or marketing plan, strategy, or forecast. Confidential
Information does not include information that is or becomes generally known
within Employer's industry through no act or omission by Employee; provided,
however, that the compilation, manipulation, or other exploitation of generally
known information may constitute Confidential Information.
<PAGE>
b. Employee Invention. "Employee Invention" means any idea,
invention, software, technique, modification, process, improvement, or similar
item, whether or not reduced to writing or stored electronically or otherwise,
and whether or not protectible by patent, trademark, copyright, or other
intellectual property law, that is created, conceived, or developed by Employee
or under his direction, whether solely or with others, during or after his
employment by Employer, that relates in any way to, or is useful in any manner
in, the business now or then conducted or proposed to be conducted by Employer
or which is based upon or otherwise derives from or makes use of the
Confidential Information.
c. Ownership; Disclosure. Any Confidential Information, whether nor
not developed by employee, shall at all times be Employer's exclusive property.
Employee shall promptly disclose any employee Invention to Employer in writing.
d. Restrictions. During the term of this Agreement, and for as long
after its termination as any confidential Information is subject to protection
under applicable law, Employee shall not, without Employer's prior written
consent specifically referring to this covenant.
(1) Use any Confidential Information for the benefit of himself or
any other party other than Employer or disclose it to any other person or
entity;
(2) Remove any Confidential Information or other documentation,
device, plan, or other record or evidence pertaining to Employer's business form
Employer's premises, except when specifically authorized to do so in pursuit of
Employer's business; or
(3) Retain copies of other records of any such items.
e. Purpose. The parties acknowledge and agree that the confidential
Information is a valuable business asset, and that this Section is necessary to
protect employer's legitimate business interests.
SECTION 6. ADDITIONAL REPRESENTATIONS AND WARRANTIES
In addition to his other representations and warranties set forth in
this Agreement, Employee further represents and warrants as follows:
a. Employee's performance of this Agreement shall not breach any
agreement to which he is or was a party that requires him to hold any
information in confidence or in trust;
b. Employee has not and shall not breach any such Agreement;
<PAGE>
c. Employee shall not bring to Employer or use in connection with
his employment any confidential or proprietary information belonging to another
entity without first delivering a written release of that information to
Employer.
SECTION 7. REMEDIES
a. Irreparable Harm. The parties acknowledge and agree that
irreparable harm would result in the event of a breach or threat of a breach by
Employee of Section 5 or the making of any untrue representation or warranty by
Employee in this Agreement. Therefore, in such an event, and notwithstanding any
other provision of this Agreement.
(1) Employer shall be entitled to a restraining order, order of
specific performance, or other injunctive relief, without showing actual damage
and without bond or other security; and
(2) Employer's obligation to make any payment or provide any benefit
under this Agreement, including without limitation any severance benefits, shall
immediately cease.
b. Remedies Not Exclusive. Employer's remedies under this Section
are not exclusive, and shall not prejudice or prohibit any other rights or
remedies under this Agreement or otherwise. To the extent required to be
enforceable by applicable law, the cessation of Employer's obligation to make
payments or continue benefits under this Section shall be deemed to be in the
nature of liquidated damages and not a penalty.
c. Cessation of Payments. In the event Employer obtains relief as
provided in this Section, or in the event of Employee's breach of Section 5 or
the making of any untrue representation or warranty by Employee in this
Agreement, Employer's obligation to make any payment or provide any benefit
under this Agreement, including any severance benefits, shall immediately cease.
SECTION 8. INDEMNIFICATION
a. Either Party. Each party shall indemnify and hold the other
harmless from and against any and all liability and expense of any kind,
including legal costs and reasonable attorney's fees, arising from the
indemnifying party's fraud, deceit, gross negligence, or willful misconduct with
respect to the performance of this Agreement, or breach of any provisions of
this Agreement.
SECTION 9. RETURN OF COMPANY PROPERTY
<PAGE>
a. Immediately upon termination of his employment or upon Employer's
earlier request, Employee shall return to Employer all Confidential Information
and other items described in Section 5 and all originals and copies of any other
property or information owned by Employer or relating to its business, that
Employee has in his possession or under his control, including all credit cards,
papers, books, equipment, files and samples.
SECTION 10. LEGAL COUNSEL
a. Understanding, Voluntary Agreement. Employee and Employer
represent and warrant that each party has been afforded a reasonable opportunity
to review this Agreement, to understand its terms, and to discuss it with any
attorney of their choice, and that each party knowingly and voluntarily enters
this Agreement.
b. Waiver of Separate Representation. To the extent Employer has not
engaged separate legal counsel to represent it in connection with this
agreement, the parties acknowledge and agree that their respective interests in
this Agreement are in conflict, that they have the right to retain independent
counsel, that they have been fully informed about this right and the conflicts
of interest that arise from retaining the same legal counsel to represent both
of them, and that this Section constitutes written disclosure of these
conflicts. The parties further affirm that they are waiving separate
representation freely, voluntarily, and with full knowledge of the effects of
this waiver. No party shall at any time claim that this Agreement is void or
unenforceable in any respect because of the lack of use of independent counsel,
or that the legal counsel who prepared this Agreement acted improperly in doing
so.
SECTION 11. CONFIDENTIAL AGREEMENT
This Agreement is confidential. Employee shall keep its provisions
confidential and shall not disclose them to anyone, including any past, present,
or prospective employee of Employer; provided, that this Section shall not
prohibit Employee from discussing this Agreement in confidential communications
with his family members, attorneys, accountants, or other professional advisors,
provided that the provisions of Section 5 shall at all times apply to
communications with any such persons.
SECTION 12. MISCELLANEOUS PROVISIONS
a. Notes. Unless otherwise agreed in writing by a party entitled to
notice, all notices required by this Agreement shall be in writing and shall be
deemed given when physically delivered to and acknowledged by receipt by a party
or its duly authorized attorney or legal representative, or when deposited
postage paid, registered or certified mail, addressed to the party at its
principal business or residence as set forth above.
<PAGE>
b. Waivers. No assent, express or implied, by any party to any
breach or default under this Agreement shall constitute a waiver of or assent to
any breach or default of any other provision of this Agreement or any breach or
default of the same provision of any other occasion.
c. Entire Agreement, Modification. This Agreement constitutes the
entire agreement of the parties concerning its subject matter and supersedes all
other oral or written understandings, discussions, and agreement, and may be
modified only in writing signed by both parties.
d. Binding Effect; No Third Party Beneficiaries. This Agreement
shall bind and benefit the parties and their respective heirs, devisees,
beneficiaries, grantees, donees, legal representatives, successors, and assigns.
Nothing in this Agreement shall be construed to confer any rights or benefits on
third party beneficiaries.
e. Assignment. Neither Party may assign its interest in this
Agreement without the other's prior written consent; provided that Employer may
assign its interest to another entity which it controls, is controlled by, or is
under common control with.
f. Captions. Titles or captions contained in this Agreement are for
convenience and are not intended to affect the substantive meaning of any
provision.
g. Severability. If any provision of this Agreement shall be
declared invalid or illegal for any reason whatsoever, then notwithstanding such
invalidity or illegality, the remaining terms and provisions of this Agreement
shall remain in full force and effect in the same manner as if the invalid or
illegal provision shad not been contained herein.
h. Counterparts. This Agreement may be executed in one or more
counterpart, each of which shall be deemed and original, but all of which
together shall constitute one and same instrument.
j. Effect of Termination. This Agreement shall continue in effect
upon and after the termination of Employee's employment for any reason to the
extent necessary for the enforcement of any of its provision that apply
subsequent any such termination.
j.Governing Law. This Agreement shall be governed by and construed
under the laws of the United States and the State of New Jersey.
k. The parties acknowledge that they have read and fully understand
the contents of this Agreement and execute it after having an opportunity to
consult with legal counsel.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as specified above.
<PAGE>
WITNESS: EMPLOYEE:
- ----------------------- -----------------------------
PHILIP LACQUA
ATTEST: EMPLOYER:
R-TEC TECHNOLOGIES, INC.
- ----------------------- -----------------------------
MARC M. SCOLA, V.P. and
General Counsel
<PAGE>
EXHIBIT A
BENEFITS
A. Health Insurance.
B. Life Insurance.
C. Disability Insurance.
D. Vacation - Not less than five (5) weeks per year.
E. Pension Plan.
F. 401(K) Retirement Plan or Comparable Plan.
G. Expense Allowance.
H. Company Car - All insurance and related expenses of the automobile will be a
cost payable by Employer.
All of the above referenced benefits shall be provided by Employer
to Employee at no cost to Employee.
ADDENDUM TO PATENT AGREEMENT
The Patent Agreement dated May 10, 1999 and Promissory Note dated
May 10, 1999 by and between R-TEC TECHNOLOGIES, INC. and MURIEL KAISER and
between the same parties are hereby amended to the following:
WHEREAS, MURIEL KAISER previously agreed to accept $850,000.00 in
cash for the Patent entitled "Composition for the Detection of Electrophlic
Gases and Methods of Use Thereof" GSEN 3.0-001, Serial No. 08/837355, MURIEL
KAISER now agrees to receive $450,000.00 proceeds in cash and 100,000 shares of
restricted (Rule 144) common stock.
The 100,000 shares shall be issued immediately by the Company.
MURIEL KAISER agrees not to sell such shares during the same period as any of
the current officers and directors shall have their shares restricted or
escrowed and further in accordance with Rule 144 of the Securities Act.
The $450,000.00 shall be payable in full thirty (30) days from the
date the Company sells $2,000,000.00 of common stock in its public offering; or
if $2,000,000.00 of common shares are not sold before May 1, 2000, beginning May
1, 2000, accrued interest payable quarterly for two (2) years until May 1, 2000,
at which time the Company will make its first quarterly payment of $22,500.00 in
principal and accrued interest, and thereafter on August 1, November 1, February
1, and May 1 until all principal and accrued interest is paid in full. All
payments to be applied first to accrued interest and then to principal.
The terms of this Agreement shall supersede the terms of the Patent
Agreement and Promissory Note stated above.
----------------------------
MURIEL KAISER
Dated: September 28, 1999
R-TEC TECHNOLOGIES, INC.
By:__________________________
MARC M. SCOLA
V.P. & General Counsel
Dated: September 28, 1999
PROMISSORY NOTE
$ 60,000.00 Warren County, New Jersey
Eight and One Half Percent (8.5%) September 28, 1999
FOR VALUE RECEIVED, the maker of this Note, R-TEC TECHNOLOGIES, INC.
(the "Maker") promises to PAY TO THE ORDER OF MICHAEL C. SELITTO at the address
of 22 Sunset Drive, Whippany, New Jersey 07981 (the "Holder") the sum of Sixty
Thousand Dollars ($60,000.00) at Eight and One Half Percent (8.5%) per annum
payable in full within thirty (30) days of the completion of the funding at
least $2,000,000.00. If the Maker of the Note does not obtain funding of at
least $2,000,000.00 from its Initial Public Offering, the principle due under
this Note will be paid on or before November 15, 2000.
Interest payments will be paid monthly.
ADDRESS OF MAKER: The undersigned represents and warrants that the
undersigned is located at 61 Mallard Drive, Allamuchy, New Jersey, and agrees to
notify the holder of any change of residence within 10 days of such change.
WAIVERS: The undersigned hereby waives (1) presentment, demand,
protest, notice of dishonor and/or protest and notice of nonpayment; (2) the
right, if any, to the benefit of, or to direct the application of, any security
hypothecated to the holder until all indebtedness of the undersigned to the
holder, howsoever arising, shall have been paid; and (3) the right to require
the holder to proceed against or to pursue any remedy against any party other
than the undersigned.
INSOLVENCY: It is agreed that if the undersigned, at any time fail
in business or become insolvent, or commit an act of bankruptcy, or if any
deposit account or other property of the undersigned be attempted to be obtained
or held by writ of execution, garnishment, attachment or other legal process, or
if any assessment for taxes against the undersigned other than taxes on real
property, is made by the federal or state government, or any department thereof,
or if the undersigned fails to notify the holder of any material change in its
financial condition, then in such case all of the obligations of the undersigned
shall, at the option of the holder, become due and payable immediately without
demand or notice.
WARRANTY OF RECEIPT OF VALUE: The undersigned does hereby expressly
represent and warrant to the holder with the intent that the holder rely on such
representation and warranty as a specific inducement to the making of this
instrument, that the undersigned have received full value for this note.
<PAGE>
ASSIGNABILITY: This note shall be assignable only by the holder
provided that such assignment shall not impair or enlarge the obligations of the
undersigned. The undersigned shall not assign obligations under this note to any
third party without the written consent of the holder.
LAW GOVERNING: This Promissory Note shall be governed by the laws of
the State of New Jersey and the undersigned do hereby voluntarily submit
generally to the jurisdiction of the courts of New Jersey should it become
necessary for the holder hereof to enforce any of his rights under the terms
hereof.
DEFAULT: The maker also agrees to pay all costs and expenses
incurred by the holder hereof, including all reasonable attorneys' fees for the
collection of this Note and the indebtedness evidenced hereby, or the
enforcement of the holder's rights hereunder or under any other instruments
creating any collateral security now or hereinafter given to secure this loan.
The maker acknowledges that the $60,000.00 of this Note represents
reimbursement of a Loan made to R-Tec Technologies, Inc.
ACCELERATION: The maker further agrees that if the Corporation is
subsequently sold or transferred, all payments due and owing under this Note
will become due at the time of the subsequent sale.
R-TEC TECHNOLOGIES, INC.
By:__________________________L.S.
MARC M. SCOLA
V.P. & General Counsel
Maker of the Note
Dated: September 28, 1999
Agreed to and Consented
by Holder of the Note
- ------------------------
MICHAEL C. SELITTO
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No.) of our report dated May 25, 1999, except for Note 10 as to which
the date is September 29, 1999, on our audit of the financial statements of
R-Tec Technologies, Inc. We also consent to the reference to our firm under the
caption "Experts."
JAMES MOORE & CO., P.L.
Gainesville, Florida
October 1, 1999
