U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under section 13 or 15 (D) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1999
[ ] Transition report under section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the transition period from _____ to _____
R-TEC TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
New Jersey 22-3615979
(State or other jurisdiction of (I.R.S. Employer Identi-
incorporation or organization) fication No.)
37 Ironica Road, Flanders, NJ 07836
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (973) 252-5233
Securities registered under
Section 12(b) of the Exchange Act: Name of exchange on which registered
None N. A.
Securities registered under
Section 12(g) of the Exchange Act:
None
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB._____________
The issuer had no revenue for the most recent fiscal year, ending December 31,
1999.
The aggregate market value of the voting common equity held by non-affiliates
computed by reference to the price at which the common equity was sold, or the
average bid and asked price of such common equity, as of April 10, 2000, was
approximately $1,315,840.
The number of shares of the Company's common stock, par value $.0001 per share,
outstanding as of April 10, 2000, was 3,197,410.
Transitional Small Business Disclosure
Format (Check One)
Yes____ No X
<PAGE>
Part I
Item 1. Description of Business
History of Our Company
R-Tec was 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. Its 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
and sales of its own securities.
Our 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
our product, 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
the chloroflurocarbons passing through the paint by removing the chlorine and
fluoride from the gas, making the gas inert and possibly harmless to the ozone
layer. Freon gas is also 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, we anticipate that 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-Tec 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 2000. R-Tect 12 reactive paint should be available in November 2000,
along with R-Tect 134A reactive paint. However, no assurance can be given that
commercial production will, in fact, occur on this timetable.
Item 2. Description of Property
Facilities
R-Tec's executive offices are located at 37 Ironica Road, Flanders, NJ
07836. Our rent is $2,175.25 per month plus utilities under a lease which
expires on March 20, 2002. 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 month to month lease.
Management believes that R-Tec's existing offices may be unsuitable and
inadequate for their future needs. In the future, we will continue to occupy
present facilities. Later, we may purchase or lease a building which will
contain our offices, warehouse, research and development laboratory, and
manufacturing operation at one location or may outsource these functions. If we
purchase our own facilities, we expect we will need a 50,000 to 75,000
square-foot facility. If we purchased a building, the cost is estimated to
be between $2.5 million and $3.75 million. If we leased such a facility, the
expected annual lease cost is estimated at $125,000-$200,000.
Item 3. Legal Proceedings
We are both a defendant and counterclaimant to a lawsuit filed in the Superior
Court of Morris County, New Jersey. The Complaint was filed on January 13, 2000
and the answer and counterclaim on February 22, 2000. On March 9th an amendmed
complaint was filed. IBS Interactive, Inc., is the plaintiff. The complaint is
for unjust enrichment and breach of contract for non-payment of services
regarding the Company's web site in the amount of $120,129. The counterclaim is
for business disruption, economic loss, breach of contract and the Unfair Debt
Collection Practices Act.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of R-Tec's security holders during the
fourth quarter of R-Tec's fiscal year.
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
Our registration statement went effective with the SEC on November 12, 1999.
Sales began on January 7, 2000. R-Tec's initial public offering is ongoing.
There is no public market for our stock.
The approximate number of holders of record of common stock is 299. No
dividends have been declared to date. The future dividend policy will depend
upon R-Tec's earnings, capital requirements, financial condition and other
factors considered relevant by the Company's Board of Directors.
Special Note Regarding Forward Looking Statements
This annual report on Form 10-KSB of R-Tec Technologies, Inc. for the year ended
December 31, 1999 contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. To the extent that such statements are not
recitations of historical fact, such statements constitute forward-looking
statements, which, by definition, involve risks and uncertainties. In
particular, statements under the Sections; Description of Business,and
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward-looking statements. Where, in any forward-looking
statement, R-Tec expresses an expectation or belief as to future results or
events, such expectation or belief is expressed in good faith and believed to
have a reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished.
The following are factors that could cause actual results or events to differ
materially from those anticipated, and include but are not limited to: general
economic, financial and business conditions; labor difficulties; competition for
customers in the research and development industry; the performance of our
products; the demand for our products; the successful commercialization of the
R-Tect 22, R-Tect 12 and R-Tect carbon dioxide reactive paint products, progress
in our 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; changes in and
compliance with governmental regulations; changes in tax laws; and the costs and
effects of legal proceedings.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with the
financial statements and the related notes thereto included elsewhere in this
report. This report contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference includes, but are not limited to, those discussed in "Special
Note Regarding Forward-Looking Statements".
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Overview
During 1999, R-Tec was a development stage company engaged in the
acquisition and development of patented technology, the development of a
business plan, arranging for potential suppliers and distribution channels and
raising capital. From inception through December 31, 1999, the Company issued
2,916,666 shares of stock to its founders. The Company's registration statement
was effective November 12, 1999, and sales commenced on January 7, 2000. R-Tec's
initial public ofering is for 1,250,000 shares of common stock to raise a
maximum of $10,000,000. Since sales commenced, we have sold 164,480 shares and
raised $1,315,840. We intend to close our offering soon and apply to trade on
the over-the-counter bulletin board. As of April 7, 2000, we have not commenced
operations and have been focusing our efforts on our initial public offering.
Once we close our initial public offering, we will focus on our business plan
set forth below
In order to achieve profitable operations, we will have to successfully
manufacture, distribute and commercialize our initial products. We will also
have to secure all intellectual property rights. For these reasons it is
difficult for R-Tec to forecast our 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.
Plan of Operation
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.
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 December, 2000 at an additional cost of $50,000.
During Phase 1, we will incur significant operating expenses. We do not
expect to generate significant operating revenues for a period of at least six
months after the completion of our offering.
During Phase 1 R-Tec will require manufacturing facilities, office
space and warehouse space. These facilities may be purchased or leased and the
manufacturing may be outsourced. We anticipate that we will remain in our
existing office space for the coming year but will be required to expend
additional funds on manufacturing and on warehouse space.
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 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 for 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. The original anticipated delivery
date of R-Tect 22 to Motors & Armatures of October 31, 1999, was extended to
February, 2000. That date has been extended again until after we commence
operations. 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 once we close our offering. 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 with 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.
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 does not anticipate entering Phase 2 in our first year of
operations. 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.
R-Tec intends to initially develop only R-Tect propane reactive paint
during this Phase. Further funding will be necessary to develop additional
products.
<PAGE>
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 it 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
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 plan 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 would 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.
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 three full-time employees. Two 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. We expect to hire two or three additional employees, for a total of
six full-time employees.
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 in 32 countries.
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.
Our Wholly Owned Subsidiary, Ripefully Yours, Inc.
Ripefully Yours, Inc., was incorporated on July 26, 1999. On February 22,
2000, the Certificate of Incorporation for Ripefully Yours, Inc., was amended
to issue all of the outstanding stock to R-Tec.
Ripefully Yours, Inc., was formed to produce and market a product that
would remove odors and Ethyelene gas that is naturally produced in your
refrigerator by the combination of fruits and vegetables. The product was tested
by SGS U.S. Testing Laboratories in New Jersey and found to be effective.
Ripefully Yours, Inc., has entered into an agreement with Pac-Rite in Passaic,
New Jersey to manufacture and distribute the product. The product has been
offered to 50 super market chains in the Northeast. Based upon discussion with
those chains, we believe that the product will be sold in over 1,000 stores in
the next six months.
Capital Resources
We will increase our expenditures in the coming year with the continued
development and commercialization of our products. In 2000 we will begin
implementation of Phase 1 of our business plan. Additional costs will be added
for outsourcing manufacturing operations or for leasing or purchasing
manufacturing facilities. In addition, we will incur costs for the distribution
and marketing of our three initial products. Our subsidiary will incur similar
expenses for the manufacture and distribution of its initial product.
Additional resources of R-Tec have been allocated to provide salaries for
our officers. We are currently committed to two, five year employment contracts
which provide for salaries of $50,000 plus a bonus payment. The agreements
commenced in September 23, 1999 when we sold the minimum number of units in our
public offering.
On December 7, 1999, we 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 our offering. The agreement provides
that Thornhill will be paid:
o 9% of the gross proceeds of the public offering as commission.
o 2.25% of the gross proceeds of the public offering as a non-allocable
expense allowance.
o Warrants to purchase 12,500 shares for $13.20 per share for every
$1,000,000 in gross proceeds raised by the Company. The warrants will be
restricted from sale, transfer, assignment or hypothecation for one year
from January 7,2000, except to officers or partners (but not directors) of
Thornhill and members of any selling group or their officers or partners.
R-Tec believes that it has reached a subsequent agreement with Thornhill
Group, Inc., pursuant to which Thornhill will be paid $50,000 in satisfaction of
all compensation due in connection with R-Tec's public offering.
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 its offering. By letter agreement dated
July 2, 1999, Mrs. Kaiser agreed that in the event 625,000 shares 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 its offering. On or around March 16, 2000,
100,000 shares were issued and $450,000 was paid in full satisfaction of the
purchase obligation.
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 its offering. On May 26, 1999, sums due Mr.
Lacqua, Ms. Vitolo and Mr. Scola were reduced or reclassified as equity.
<PAGE>
Item 7. Financial Statements
INDEPENDENT AUDITORS' REPORT
To the Board of Directors,
R-Tec Technologies, Inc.:
We have audited the accompanying consolidated balance sheet of R-Tec
Technologies, Inc. (a development stage company) as of December 31, 1999, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1999 and for the period from inception
(October 22, 1998) through December 31, 1998 and for the period from inception
(October 22, 1998) through December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of R-Tec Technologies,
Inc. as of December 31, 1999, and the results of its operations and its cash
flows for the year ended December 31, 1999 and for the period from inception
(October 22, 1998) through December 31, 1998 and for the period from inception
(October 22, 1998) through December 31, 1999 in conformity with generally
accepted accounting principles.
/s/ James Moore & Co., P.L.
Gainesville, Florida
March 29, 2000
F - 1
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
ASSETS
December 31,
1999
------------
Current assets
Cash and cash equivalents $ 448
-----------
Office equipment, net of accumulated
depreciation of $2,524 6,860
-----------
Other assets
Patent, net of accumulated amortization of $49,841 829,744
Deferred offering costs 365,888
Deposits 2,000
-----------
Total other assets 1,197,632
------------
Total Assets $ 1,204,940
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 135,308
Due to stockholders 284,491
Notes payable 505,250
Convertible note payable 20,000
-----------
Total current liabilities 945,049
-----------
Common stock payable 428,000
-----------
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
Additional paid-in capital 574,726
Deficit accumulated during the development stage (742,864)
------------
Total stockholders' equity (168,109)
------------
Total Liabilities and Stockholders' Equity $ 1,204,940
============
The accompanying notes to consolidated financial statements
are an integral part of this statement.
F - 2
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Inception Inception
(Oct. 22, (Oct. 22,
Year Ended 1998) 1998)
Dec. 31, Through Through
1999 Dec. 31, Dec. 31
1998 1999
------------ --------- --------
Revenues $ - $ - $ -
----------- --------- --------
Expenses
Administrative fees to stockholders 174,212 231,000 405,212
Administrative and start-up 242,504 5,487 247,991
Interest expense 33,296 4,000 37,296
Amortization and depreciation 52,365 - 52,365
------------ --------- --------
Total expenses 502,377 240,487 742,864
------------ --------- --------
Net loss $ (502,377) $ (240,487) $ (742,864)
============ ========= ========
Net loss per common share $ (.17) $ (.08) $ (.25)
============ ========= ========
Weighted average common shares 2,916,666 2,916,666 2,916,666
outstanding ============ ========== =========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-3
<PAGE>
<TABLE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<CAPTION>
Deficit
Accumulated
Additional During the Total
Common Stock Paid-In Due from Development tockholders'
Shares Par Value Capital Stockholders Stage Equity
------ ---------- ---------- ------------ ----------- -----------
<S> <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
Net loss - - - - (240,487) (240,487)
---------- ----------- ---------- ----------- ---------- --------
Balance, December 31, 1998 2,916,666 29 419,971 (96,160) (240,487) 83,353
Additional capital contributed by
stockholders January 1999 through
December 1999 - - 154,755 96,160 - 250,915
Net loss - - - - (502,377) (502,377)
---------- ---------- ---------- ----------- ------------ -----------
Balance, December 31, 1999 2,916,666 $ 29 $ 574,726 $ - $ (742,864) $ (168,109)
========== =========== ========== =========== =========== =========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of this statement.
F - 4
<PAGE>
<TABLE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) In Cash and Cash Equivalents
<CAPTION>
Inception Inception
(October 22, (October 22,
1998) 1998
Year Ended Through Through
December 31, December 31, December 31,
1999 1998 1999
------------------ ----------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $(502,377) $ (240,487) $ (742,864)
---------- ------------ ---------
Adjustments to reconcile net loss to
net cash used in operating activities:
Unreimbursed expenses contributed to
capital by shareholders 117,462 231,000 348,462
Common stock payable for services 28,000 - 28,000
Depreciation and amortization 52,365 - 52,365
Interest expense - amortization of
discount on note payable 31,250 4,000 35,250
Increase in deposits (1,000) (1,000) (2,000)
Increase in accounts payable and
accrued expenses 128,161 147 128,308
---------- ---------- ---------
Total adjustments 356,238 234,147 590,385
---------- ---------- ---------
Net cash used in operating activities (146,139) (6,340) (152,479)
Cash flows from investing activities ---------- ---------- --------
Patent costs (64,585) (5,000) (69,585)
Purchase of equipment (9,384) - (9,384)
---------- --------- --------
Net cash used in investing activities (73,969) (5,000) (78,969)
Cash flows from financing activities ---------- --------- --------
Increase in deferred offering costs (320,888) (38,000) (358,888)
Proceeds from notes payable 80,000 - 80,000
Increase in due to stockholders 284,491 - 284,491
Capital contributed by stockholders 133,453 92,840 226,293
--------- --------- -------
Net cash provided by financing activities 177,056 54,840 231,896
Net increase (decrease) in cash --------- --------- -------
and cash equivalents (43,052) 43,500 448
Cash and cash equivalents, beginning of period 43,500 - -
--------- --------- -------
Cash and cash equivalents, end of period $ 448 $ 43,500 $ 448
========= ========= ========
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 consolidated financial statements
are an integral part of these statements.
F - 5
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 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. and subsidiary (the Company) which affect
the accompanying consolidated 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 and its subsidiary have devoted substantially all
their efforts to date to raising capital to commercialize their technology and
have no revenues. Therefore, these consolidated financial statements have been
prepared in accordance with Statement of Financial Accounting Standards No. 7
Accounting and Reporting by Development Stage Enterprises. The consolidated
financial statements include the Company and its wholly owned subsidiary. All
intercompany accounts and transactions have been eliminated.
(c) 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.
(d) 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.
(e) Office equipment-Office equipment is recorded at cost. Depreciation is
calculated using the straight-line method over the useful lives of the assets,
ranging from 3 to 7 years. The Company recorded depreciation expense of $2,524
in 1999.
(f) 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.
(g) 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. These assets are being amortized using the straight-line method over
their estimated useful life of seventeen years. The Company recorded $49,841 in
amortization expense in 1999.
(h) 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 CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) Summary of Significant Accounting Policies: (Continued)
(i) Loss per common share-Loss per common share is computed using the
weighted average number of shares outstanding during each period
presented in accordance with Statement of Financial Accounting
Standards No. 128 Earnings Per Share.
(j) Start-up costs-The initial costs incurred to organize the Company are
expensed when incurred.
(k) Advertising-Advertising costs are expensed when incurred.
(2) Public Offering of Common Stock:
The Company is offering up to 1,250,000 shares of its common stock for sale at
$8.00 per share, which is expected to raise between $1 to $10 million. No
proceeds were received in 1999. There is no assurance the offering will be
successful (see Note 9).
(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 $150,000 beginning
September 30, 1999.
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 were granted in 1999 (see Note 9).
An office is leased from a stockholder under a two year lease at $2,000 per
month. Rent expense for this and other operating leases was $24,000 for 1999 and
$10,000 for 1998, respectively.
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 9% of the amount raised plus 2.25% of the amount raised for nonaccountable
expenses and issued warrants to purchase 12,500 shares at $13.20 per share on a
pro rata basis for each $1 million raised. The warrants expire in five years.
Amounts due under this agreement are currently in dispute, however, no amounts
were due as of December 31, 1999.
F - 7
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(3) Commitments and Contingencies: (Continued)
In connection with the 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
$2,000 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 has recorded an expense and an obligation to issue 7,000 shares of
unregistered common stock in the amount of $28,000 at December 31, 1999, for
amounts due to consultants. 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 and because there is no
active market for the stock.
The Company is the defendant and plaintiff in a lawsuit with a vendor. The
vendor alleges unpaid amounts due by the Company for services rendered. The
Company has countersued for breech of contract and damages. The Company believes
the vendor's suit is without merit and is vigorously defending its position,
however there is no guarantee of a favorable outcome. The Company has not
recorded any potential liability from this matter in the accompanying financial
statements.
(4) Patent Acquisition and Notes Payable:
The Company purchased a patent from a related party (see Note 6) on December 1,
1998, the terms of which were substantially modified in May 1999 and September
1999. The Company is obligated to issue 100,000 shares of the Company's common
stock valued at $400,000 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 (see Note 9).
In June 1999, the Company received $80,000 under two notes payable. The $60,000
promissory note is due in full within thirty days of $2 million being raised in
the 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.
The $20,000 promissory note plus interest at 8.5% is due in full within thirty
days of the completion of the stock offering described in Note 2 or is
convertible into unregistered common stock at $4.00 per share at the option of
the holder (see Note 9).
F-8
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(5) Income Taxes:
No provision of income taxes has been recorded for 1999 or 1998 due to net
losses incurred.
The Company has a deferred tax asset of approximately $273,000
at December 31, 1999, 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, 1999 and 1998, due to the uncertainty of realization of the future
benefit of these future deductions. Therefore, no income tax benefit is provided
in the accompanying statements of operations for 1999 or 1998.
(6) Related Party Transactions:
Certain unreimbursed administrative expenses of the Company were incurred by the
founding shareholders. The Company recorded $174,212 as administrative fees to
stockholders expense; a liability due to stockholders in the amount of $284,491;
and $65,111 as an increase in additional paid in capital for the year ended
December 31, 1999. The Company recorded $231,000 as administrative fees to
stockholders and as an increase in additional paid in capital for the period
ended December 31, 1998.
The Company was owed $96,160 from stockholders for amounts due for additional
paid-in capital as of December 31, 1998. This amount was reflected as a
reduction in stockholder' 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 December 31, 1999 (see Note 9).
(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 $398 at December 31, 1999. The Company has no policy of
requiring collateral or other security to support its deposits.
F-9
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(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, 1999:
Carrying
Amount Fair Value
--------- ----------
Financial Assets
Cash and cash equivalents $ 448 $ 448
----------- -------------
Total financial assets $ 448 $ 448
========== =============
Financial Liabilities
Accounts payable and accrued expenses $ 135,308 $ 135,308
Due to stockholders 284,491 284,491
Notes payable 505,250 510,000
Convertible note payable 20,000 20,000
Common stock payable 428,000 428,000
--------- ----------
Total financial liabilities $ 1,373,049 $ 1,377,799
========= =========
The fair value of financial instruments approximates carrying value due to the
short-term maturity of the instruments.
(9) Subsequent Events:
In February 2000, the Company received approximately $1,327,000 in proceeds from
the stock offering described in Note 2.
In February 2000, the Company repaid $284,491 in amounts due to stockholders or
to companies controlled by stockholders.
In February 2000, the Company paid $450,000 on a note payable.
In February 2000, the Company paid $20,000 and entered into a promotional
contract related to its subsidiary.
In March 2000, the Company issued 100,000 unregistered shares to satisfy its
obligation under the patent acquisition as described in Note 4.
In March 2000, the Company issued 7,000 unregistered shares to consultants for
work performed in 1999.
In March 2000, the Company issued stock options for 190,000 shares at $8.00 per
share to various employees and consultants.
In March 2000, the Company entered into a two year building lease with monthly
payments of $2,171.
F-10
<PAGE>
R-TEC TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(10) Subsidiary:
In July 1999, the Company's founding shareholders incorporated Ripefully Yours,
Inc. On February 22, 2000, these shareholders amended the articles of
incorporation of Ripefully Yours, Inc. to reflect all the outstanding common
stock of Ripefully Yours, Inc. as owned by the Company. No value was assigned to
this transaction as Ripefully Yours, Inc. has no assets and no operations. The
accompanying financial statements reflect this subsidiary of the Company from
the date of its inception.
F-11
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
The Company has not had any disagreement with its independent auditor on any
matter of accounting principles or practices or financial statement disclosure.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
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
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 loaned Mrs. Kaiser approximately $425,000 to fund the development of
the patent.
As of April 4, 2000, Marc M. Scola has resigned as an officer and director
of R-Tec.
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.
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.
No voting arrangements exist between the officers and directors. The above
persons were selected pursuant to provisions in Article IV of the Company's
By-Laws, all holding office for a period of one year or until their successors
are elected and qualified. None of the officers or directors of the Company have
been involved in legal proceedings during the past five years which are material
to an evaluation of the ability or integrity of any director, person nominated
to become a director, or executive officer of the issuer, including any state or
Federal criminal and bankruptcy proceedings.
Beneficial Owner Reporting Compliance
None
Item 10. Executive Compensation
R-Tec has not paid any compensation since its incorporation 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 was 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. Mr. Scola resigned on April 4, 2000 as
vice president, director and General Counsel of R-Tec.
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
$50,000 plus bonus per year for a five year term and will commence upon sale of
the minimum number of shares. Mr. Lacqua is employed as President, Treasurer and
director of R-Tec. Mr. Lacqua has waived his salary due under the agreement
through September 23, 1999.
In addition, R-Tec established a Stock Option Plan on April 15, 1999
which provides that all regular full-time employees and key executives may be
issued options to purchase a total of up to one million shares of our common
stock at a price not less than 100% of the fair market value of the shares on
the date the option is granted. The plan is to be administrated by the Stock
Option and Compensation Committee of the Board of Directors, consisting of at
least two disinterested directors. On April 14, 1999 the Board formed a
Compensation Committee which consists of a total of three directors with two
disinterested directors. We also intend to implement a Pension Plan in the
future.
All of our officers are also directors of R-Tec and are, therefore, not
independent. No independent person has reviewed the employment agreements.
However, since April 14, 1999 the Board of R-Tec includes two disinterested
directors who are members of the Compensation and Audit Committees.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Name Other Securities
and Annual Restricted Underlying LTIP All Other
Principal Compen- Stock Options/ Payouts Compen-
Position Year Salary($) Bonus($) sation($) Awards ($) SARs ($) sation($)
- ----------------------------------------------------------------------------------------------------------------------
Philip Lacqua 1997 --- --- ---- ---- ---- ---- ----
President, Treasurer 1998 --- --- ---- ---- ---- ---- ----
1999 $12,500 --- ---- ---- ---- ---- ----
Nancy Vitolo 1997 --- --- ---- ---- ---- ---- ----
Secretary 1998 --- --- ---- ---- ---- ---- ----
1999 $12,500 --- ---- ---- ---- ---- ----
Marc M. Scola 1997 --- --- ---- ---- ---- ---- ----
General Counsel 1998 --- --- ---- ---- ---- ---- ----
1999 $12,500 --- ---- ---- ---- ---- ----
Damon E. Palmer 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
Shawn P. Walsh 1997 --- --- ---- ---- ---- ---- ----
Director 1998 --- --- ---- ---- ---- ---- ----
1999 --- --- ---- ---- ---- ---- ----
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
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>
<S> <C> <C> <C>
Title Name and Amt and Percent
of Address Nature of of
Class Beneficial Owner Beneficial Ownership Class
Common Philip Lacqua, 972,222 4.52%
Stock 1127 83rd Street
Brooklyn, New York 11228
Director,
President
Treasurer
Common Nancy Vitolo 972,222 4.52%
Stock 290 Green Road
Sparta, New Jersey 07871
Director
Vice President
Secretary
Common Marc M. Scola 972,222 4.52%
Stock 61 Mallard Drive,
Allamuchy, New Jersey 07820
General Counsel
Vice President
Director
Common Damon E. Palmer 0 0%
Stock 8380 SW 39 Court
Davie, Florida 33328
Director
Common Shawn P. Walsh
Stock 538 Wren Way
Branchburg, New Jersey 08876 0 0%
Director
All Officers and
Directors as a Group 2,916,666
</TABLE>
Item 12. Certain Relationships and Related Transactions
Mr. Lacqua, Ms. Vitolo and Mr. Scola own 2,916,666 shares. They contributed
$574,726 in capital through December 31 1999. As of April 1, 2000, $96,160 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 625,000 shares 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. A payment of 100,000 shares
and $450,000 has been made in total satisfaction of this debt.
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 Februry 10, 2000, $254,491 was
paid to Mr. Scola, Mr. Lacqua, and Mr. Kaiser in repayment of sums lent to R-Tec
since July, 1999.
On September 21, 1999, R-Tec entered into a consulting agreement with
Stenton Leigh Captial 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.
Item 13. Exhibits and Reports on Form 8-K
Exhibits marked by asterisk(s) have not been included with this Annual Report on
Form 10-KSB, but instead have been incorporated by reference to other documents
filed by the Company with the Commission.
Exhibit Description Number
(2)Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession.................................None
(3)Articles of Incorporation and By-Laws...................................
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.
(4)Instruments Defining the Rights of Security Holders
*(a)Subscription Agreement.............................................None
*(b)Warrant Agreement..................................................None
(9)Voting Trust Agreements.................................................None
(10)Material Contracts......................................................
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.
10.17a* November 9, 1999 Addendum to the Subscription Escrow Agreement
Between R-Tec Technologies, Inc. and the Bank of New York.
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 Philip 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.
10.34 R-Tec office lease with Haas Laser Technologies
10.35 Amended Consulting Contract with Stanton Leigh Corp.
10.36 Thornhill Contract
10.37 Amended Thornhill Contract
(11)Statement re: computation of per share earnings................... Note 1
Financial
Statements
(13)Annual or quarterly reports: Form 10-Q................................None
(16)Letter regarding Changes in Certifying Accountant......................
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.
(18)Letter on change in accounting principles.............................None
(21)Subsidiaries of the Registrant.........................................
(23) Consents of experts and counsel
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.
(22)Published report regarding matters submitted to vote..................None
(24)Power of Attorney.....................................................None
(27)Financial Data Schedule................................................
(99)Additional Exhibits...................................................None
* Previously filed with Form S-1
**Previously filed WITH Form S-1 on June 11, 1999
***Previously filed with From S-1 on July 12, 1999
**** Previously filed with Form S-1 on July 26, 1999
*****Previously filed with Form S-1 on October 11, 1999
Filings on Form 8-K
We filed a report on Form 8-K on April 7, 2000 regarding the resignation of Marc
M. Scola as an officer and director of the Company.
<PAGE>
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
R-Tec Technologies, Inc.
Date: April 14, 2000
By:/s/ Philip Lacqua
-----------------------
Philip Lacqua, President,
CEO, CFO, Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date:April 14,2000 By:/s/Philip Lacqua
-----------------------
Philip Lacqua, President,
CEO, CFO, Director
Date: April 14, 2000 By:/s/Nancy Vitolo
-----------------------
Nancy Vitolo,
Secretary, Director,
Date:April 14, 2000 By:/s/Damon Palmer
----------------------
Damon E. Palmer, Director
Date:April __, 2000 By:
----------------------
Shawn P. Walsh,
Director
THIS LEASE, dated the 21st day of March, 2000 between Haas Laser Technologies,
Inc., 37 Ironia Rd., Flanders, .J. 07836, hereinafter referred to as the
Landlord, and R-Tec Technologies, Inc., 37 Ironia Rd., Flanders, N.J. 07836,
hereinafter referred to as the Tenant,
WITNESSETH: That the Landlord hereby demises and leases unto the Tenant, and the
Tenant hereby hires and takes from the Landlord for the term and upon the
rentals hereinafter specified, the premises described as follows, situated in
the Township of Mt. Olive, County of Morris and State of New Jersey Portion of
premises as indicated by the highlighted area in the floor plan attached to this
lease and marked as "Exhibit A", containing a gross floor space of 1930 square
feet located at 37 Ironia Road, Flanders, New Jersey, 07836.
The term of this demise shall be for Two (2) years, with option at the end
of lease beginning March 21, 2000 and ending March 20, 2002.
The rent for the demised term shall be Fifty two thousand one hundred and
ten and 00/100 dollars ($52,110.00).
The said rent is to be payable monthly in advance on the first day of each
calendar month for the term hereof, in installments as follows:
$2,171.25/month during the term at the office of Haas Laser Technologies, Inc.,
or as may be otherwise directed by the Landlord in writing.
THE ABOVE LETTING IS UPON THE FOLLOWING CONDITIONS:
First.-The Landlord covenants that the Tenant, on paying the said rental
and performing the covenants and conditions in this Lease contained, shall and
may peaceably and quietly have, hold and enjoy the demised premises for the term
aforesaid.
Second.-The Tenant covenants and agrees to use the demised premises as a
Office space. Tenant represents that it's Standard Industrial Classification
Code (S.I.C.) is ________, and that its principal business is office and product
testing.
and agrees not to use or permit the premises to be used for any other purpose
without the prior written consent of the Landlord endorsed hereon.
Third.-The Tenant shall, without any previous demand therefor, pay to the
Landlord, or its agent, the said rent at the times and in the manner above
provided. In the event of the non-payment of said rent, or any installment
thereof, at the times and in the manner above provided, and if the same shall
remain in default for ten days after becoming due, or if the Tenant shall be
dispossessed for non-payment of rent, or if the leased premises shall be
deserted or vacated, the Landlord or its agents shall have the right to and may
enter the said premises as the agent of the Tenant, either by force or
otherwise, without being liable for any prosecution or damages therefor, and may
relet the premises as the agent of the Tenant, and receive the rent therefor,
upon such terms as shall be satisfactory to the Landlord, and all rights of the
Tenant to repossess the premises under this lease shall be forfeited. Such
re-entry by the Landlord shall not operate to release the Tenant from any rent
to be paid or covenants to be performed hereunder during the full term of this
lease. For the purpose of reletting, the Landlord shall be authorized to make
such repairs or alterations in or to the leased premises as may be necessary to
place the same in good order and condition. The Tenant shall be liable to the
Landlord for the cost of such repairs or alterations, and all expenses of such
reletting. If the sum realized or to be realized from the reletting is
insufficient to satisfy the monthly or term rent provided in this lease, the
Landlord, at its option, may require the Tenant to pay such deficiency month by
month, or may hold the Tenant in advance for the entire deficiency to be
realized during the term of the reletting. The Tenant shall not be entitled to
any surplus accruing as a result of the reletting. The Landlord is hereby
granted a lien, in addition to any statutory lien or right to distrain that may
exist, on all personal property of the Tenant in or upon the demised premises,
to secure payment of the rent and performance of the covenants and conditions of
this lease. The Landlord shall have the right, as agent of the Tenant, to take
possession of any furniture, fixtures, or other personal property of the Tenant
found in or about the premises, and sell the same at public or private sale and
to apply the proceeds thereof to the payment of any monies becoming due under
this lease, the Tenant hereby waiving the benefit of all laws exempting property
from execution, levy and sale on distress or judgment. The Tenant agrees to pay,
as additional rent, all attorney's fees and other expenses incurred by the
landlord in enforcing any of the obligations under this lease.
Fourth.-The Tenant shall not sub-let the demised premises nor any portion
thereof, nor shall this lease be assigned by the Tenant without the prior
written consent of the Landlord endorsed hereon.
Fifth.-The Tenant has examined the demised premises, and accepts them in
their present condition (except as otherwise expressly provided herein) and
without any representations on the part of the Landlord or its agents as to the
present or future condition of the said premises. The Tenant shall keep the
demised premises in good condition, and shall redecorate, paint and renovate the
said premises as may be necessary to keep them in repair and good appearance.
The Tenant shall quit and surrender the premises at the end of the demised term
in as good condition as the reasonable use thereof will permit. The Tenant shall
not make any alternations, additions, or improvements to said premises without
the prior written consent of the Landlord. All erections, alterations, additions
and improvements, whether temporary or permanent in character, which may be made
upon the premises either by the Landlord or the Tenant, except furniture or
movable fixtures installed at the expense of the Tenant, shall be the property
of the Landlord and shall remain upon and be surrendered with the premises as a
part thereof at the termination of this Lease, without compensation to the
Tenant. The Tenant further agrees to keep said premises and all parts thereof in
a clean and satisfactory condition and free from trash, inflammable material and
other objectionable matter. If this lease covers premiums, all or part of which
are on the ground floor, the Tenant further agrees to keep the sidewalks in
front of such ground floor portion of the demised premises clean and free of
obstructions, snow and ice.
Sixth.-In the event that any mechanics' lien is filed against the premises
as a result of alterations, additions or improvements made by the Tenant, the
Landlord, at its option , after thirty days notice to the Tenant, may terminate
this Lease and may pay the said lien, without inquiring into the validity
thereof, and the Tenant shall forthwith reimburse the Landlord the total expense
incurred by the Landlord in discharging the said lien, as additional rent
hereunder.
Seventh.-The Tenant agrees to replace at the Tenant's expense any and all
glass which may become broken in and on the demised premises. Plate glass and
mirrors, if any, shall be insured by the Tenant at their full insurable value in
a company satisfactory to the Landlord. Said policy shall be of the full premium
type, and shall be deposited with the Landlord or its agent.
Eighth-The Landlord shall not be responsible for the loss of or damage to
property, or injury to persons, occurring in or about the demised premises by
reason of any existing or future condition, defect, matter or thing in said
demised premises or the property of which the premises are a part, or for the
acts, omissions or negligence of other persons or tenants in and about the said
property. The Tenant agrees to indemnify and save the Landlord harmless from all
claims and liability for losses of or damage to property, or injuries to persons
occurring in or about the demised premises.
Ninth-Utilities and services furnished to the demised premises for the
benefit of the Tenant shall be provided and paid for as follows: water by the
Landlord; gas by the Tenant; electricity by the Tenant; heat by the Tenant;
refrigeration by the Tenant; hot water by the Landlord.
The Landlord shall not be liable for any interruption or delay in any of
the above services for any reason.
Tenth-The Landlord, or its agents, shall have the right to enter the
demised premises at reasonable hours in the day or night to examine the same or
to run telephone or other wires, or to make such repairs, additions or
alterations as it shall deem necessary for the safety, preservation or
restoration of the improvements, or for the safety or convenience of the
occupants or users thereof (there being no obligation, however, on the part of
the Landlord to make any such repairs, additions or alterations), or to exhibit
the same to prospective purchasers and put upon the premises a suitable "For
Sale" sign. For three months prior to the expiration of the demised term, the
Landlord, or its agents, may similarly exhibit the premises to prospective
tenants, and may place the usual "To Let" signs thereof.
Eleventh-In the event of the destruction of the demised premises of the
building containing the said premises by fire, explosion, the elements or
otherwise during the term hereby granted, or previous thereto, or such partial
destruction thereof as to render the premises wholly untentable or unfit for
occupancy, or should the demised premises be so badly injured that the same
cannot be repaired within ninety days from the happening of such injury, then
and in such case the term hereby granted shall, at the option of the Landlord,
cease and become null and void from the date of such damage or destruction, and
the Tenant shall immediately surrender said premises and all the Tenant's
interest therein to the Landlord, and shall pay rent only to the time of such
surrender, in which event the Landlord may re-enter and repossess the premises
thus discharged from this lease and may remove all parties therefrom. Should the
demised premises be rendered untentable and unfit for occupancy, but yet be
repairable within ninety days from the happening of said injury, the Landlord
may enter and repair the same with reasonable speed, and the rent shall not
accrue after said injury or while repairs are being made, but shall recommence
immediately after said repairs shall be completed. But if the premises shall be
so slightly injured as not to be rendered untentable and null for occupancy,
then the Landlord agrees to repair the same with reasonable promptness and in
that case the rent accrued and accruing shall not cease or determine. The Tenant
shall immediately notify the landlord in case of fire or other damage to the
premises.
Twelfth-The Tenant agrees to observe and comply with all laws, ordinances,
rules and regulations of the Federal, State, County and Municipal authorities
applicable to the business to be conducted by the Tenant in the demised
premises. The Tenant agrees not to do or permit anything to be done in said
premises, or keep anything therein, which will increase the rate of fire
insurance premiums on the improvements or any part thereof, or on property kept
therein, of which will obstruct or interfere with the right of other tenants, or
conflict with the regulations of the Fire Department or with any insurance
policy upon said improvements or any part thereof, in the event of any increase
in insurance premiums resulting from the Tenant's occupancy of the premises, or
from any act or omission on the part of the Tenant, the Tenant agrees to pay
said increase in insurance premiums on the improvements or contents thereof as
additional rent.
Thirteenth-No sign, advertisement or notice shall be affixed to or placed
upon any part of the demised premises by the Tenant, except in such manner, and
of such size, design and color as shall be approved in advance in writing by the
Landlord.
Fourteenth-This lease is subject and is hereby subordinated to all present
and future mortgages, deeds of trust and other encumbrances affecting the
demised premises or the property of which said premises are a part, the Tenant
agrees to execute, at no expense to the Landlord, any instrument which may be
deemed necessary or desirable by the Landlord to further effect the
subordination of this lease to any such mortgage, deed of trust or encumbrance.
Fifteenth-In the event of the sale by the Landlord of the demised premises,
or the property of which said premises are a part, the Landlord or the purchaser
may terminate this lease on the thirtieth day of April in any year upon giving
the Tenant notice of such termination prior to the first day of January in the
same year.
Sixteenth-The rules and regulations regarding the demised premises, affixed
to this lease, if any, as well as any other and further reasonable rules and
regulations which shall be made by the Landlord, shall be observed by the Tenant
and by the Tenant's employees, agents and customers. The Landlord reserves the
right to rescind any presently existing rules applicable to the demised
premises, and to make such other and further reasonable rules and regulations
as, in its judgment, may from time to time be desirable for the safety, care and
cleanliness of the premises, and for the preservation of good order therein,
which rules, when so made and notice thereof given to the Tenant, shall have the
same force and effect as if originally made a part of this lease. Such other and
further rules shall not, however, be inconsistent with the proper and rightful
enjoyment by the Tenant of the demised premises.
Seventeenth-In case of violation by the Tenant of any of the covenants,
agreements, and conditions of this lease, or of the rules and regulations now or
hereafter to be reasonably established by the Landlord, and upon failure to
discontinue such violation within ten days after notice thereof given to the
Tenant, this lease shall thenceforth, at the option of the Landlord, become null
and void, and the Landlord may re-enter without further notice or demand. The
rent in such case shall become due, be apportioned and paid on and up to the day
of such re-entry, and the Tenant shall be liable for all loss or damage
resulting from such violation as aforesaid. No waiver by the Landlord of any
violation or breach of condition by the Tenant shall constitute or be construed
as a waiver of any other violation or breach of condition, nor shall lapse of
time after breach of condition by the Tenant before the Landlord shall exercise
its option under this paragraph operate to defeat the right of the Landlord to
declare this lease null and void and to re-enter upon the demised premises after
the said breach or violation.
Eighteenth.-All notices and demands, legal or otherwise, incidental to this
lease, or the occupation of the demised premises, shall be in writing. If the
Landlord or its agent desires to give or serve upon the Tenant any notice or
demand, it shall be sufficient to send a copy thereof by registered mail,
addressed to the Tenant at the demised premises, or to leave a copy thereof with
a person of suitable age found on the premises, or to post a copy thereof upon
the door to said premises. Notices from the Tenant to the Landlord shall be sent
by registered mail or delivered to the Landlord at the place hereinbefore
designated for the payment of rent, or to such party or place as the Landlord
may from time to time designate in writing.
Nineteenth.-It is further agreed that if at any time during the term of this
lease the Tenant shall make any assignment for the benefit of creditors, or be
decreed insolvent or bankrupt according to law, or if a receiver shall be
appointed for the Tenant, then the landlord may, at its option, terminate this
lease, exercise of such option to be evidenced by notice to that effect severed
upon the assignee, receiver, trustee or other person in charge of the
liquidation of the property of the Tenant or the Tenant's estate, but such
termination shall not release or discharge any payment of rent payable hereunder
and then accrued, or any liability then accrued by reason of any agreement or
covenant herein contained on the part of the Tenant, or the Tenant's legal
representative.
Twentieth.-In the event that the Tenant shall remain in the demised premises
after the expiration of the term of this lease without having executed a new
written lease with the Landlord, such holding over shall not constitute a
renewal or extension of this lease. The Landlord may, at its option, elect to
treat the Tenant as one who has not removed at the end of his terms, and
thereupon be entitled to all the remedies against the Tenant provided by law in
that situation, or the Landlord may elect at its option, to construe such
holding over on a tenancy from month to month, subject to all the terms and
conditions of this lease, except as to duration thereof, and in that event the
Tenant shall pay monthly rent in advance at the rate provided herein as
effective during the last month of the demised term.
Twenty-first.-If the property or any part thereof wherein the demised
premises are located shall be taken by public or quasi-public authority under
any power of eminent domain or condemnation, this lease, at the option of the
Landlord, shall forthwith terminate and the Tenant shall have no claim or
interest in or to any award of damages for such taking.
Twenty-second.-The Tenant has this day deposited with the Landlord the sum
of $4,342.50 as security for the full and faithful performance by the Tenant of
all the terms, covenants and conditions of this lease upon the Tenant's part to
be performed, which said sum shall be returned to the Tenant after the time
fixed as the expiration of the term herein provided the Tenant has fully and
faithfully carried out all of said terms, covenants and conditions on Tenant's
part to be performed. In the event of a bona fide sale, subject to this Lease,
the Landlord shall have the right to transfer the security to the vendee for the
benefit of the Tenant and the Landlord shall be considered released by the
Tenant from all liability for the return of such security; and the Tenant agrees
to look to the new Landlord solely for the return of the said security, and it
is agreed that this shall apply to every transfer or assignment made of the
security to a new Landlord. The security deposited under this lease shall not be
mortgaged, assigned or encumbered by the Tenant without the written consent of
the Landlord.
Twenty-third.-Any dispute arising under this Lease shall be settled by
arbitration. The Landlord and Tenant shall each choose an arbitrator, and the
two arbitrators thus chosen shall select a third arbitrator. The findings and
award of the three arbitrators thus chosen shall be final and binding on the
parties hereto.
Twenty-fourth.-No rights are to be conferred upon the Tenant until this
lease has been signed by the Landlord, and an executed copy of the lease has
been delivered to the Tenant.
Twenty-fifth.-The foregoing rights and remedies are not intended to be
exclusive but as additional to all rights and remedies the Landlord would
otherwise have by law.
Twenty-sixth.-All of the terms, covenants and conditions of this lease shall
inure to the benefit of and be binding upon the respective heirs, executors,
administrators, successors and assigns of the parties hereto. However, in the
event of the death of the Tenant, if an individual, the Landlord may, at its
option, terminate this lease by notifying the executor or administrator of the
Tenant at the demised premises.
Twenty-seventh.-This lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in nowise be affected , impaired or excused
because Landlord is unable to supply or is delayed in supplying any service
expressly or impliedly to be supplied or is unable to make, or is delayed in
making any repairs, additions, alterations or decorations or is unable to supply
or is delayed in supplying any equipment or fixtures if Landlord is prevented or
delayed from so doing by reason of governmental preemption in connection with
the national Emergency declared by the President of the United States or in
connection with any rule, order or regulation of any department or subdivision
thereof of any governmental agency or by reason of the conditions of supply and
demand which have been or are affected by the way.
Twenty-eight.-This instrument may not be changed orally.
IN WITNESS WHEREOF, the said parties have hereunto set their hands and
seals the day and year first above written.
Witness Haas Laser Technologies, Inc. (SEAL)
Landlord
/s/
- --------------------------------- R. Tec Technologies, Inc.
/s/ Marc M. Scola, By: /s/ Philip Lacqua,Pres. (SEAL)
- --------------------------------
Marc M. Scola, Vice President --------------------------------------
Philip Lacqua, President
<PAGE>
GUARANTY
In consideration of the execution of the within lease by the Landlord, at
the request of the undersigned and in reliance of this guaranty, the undersigned
hereby guarantees unto the Landlord, its successors and assigns, the prompt
payment of all rent and the performance of all of the terms, covenants and
conditions provided in said lease, hereby waiving all notice of default, and
consenting to any extensions of time or changes in the manner of payment or
performance of any of the terms and conditions of the said lease the Landlord
may grant the Tenant and further consenting to the assignment and the successive
assignments of the said lease, and any indemnification thereof, including the
sub-letting and changing of the use of the demised premises, all without notice
to the undersigned. The undersigned agrees to pay the Landlord all expenses
incurred in enforcing the obligations of the Tenant under the within lease and
in enforcing this guaranty.
Witness:--------------------------- ------------------------(SEAL)
--------------------------- Philip Lacqua (SEAL)
Date: ---------------------------- ------------------------------
LEASE
================================
Haas Laser Technologies, Inc., Landlord
to
R-Tec Technologies, Inc., Tenant
================================
Premises leased:
Approximately 1930 S.F. of office space
at 37 Ironia Rd.,
Flanders, N.J. 07836
From: March 21, 2000
To: March 20, 2002
ASSIGNMENT AND ACCEPTANCE OF ASSIGNMENT
For value received the undersigned Tenant hereby assigns all of said
Tenant's right, title and interest in and to the within lease from and after
________________ unto ______________ heirs, successors, and assigns, the demised
premises to be used and occupied for
________________________________________________________ and for no other
purpose, it being expressly agreed that this assignment shall not in any manner
relieve the undersigned assignor from liability upon any of the covenants of
this lease.
Witness: ---------------------- --------------------------------(SEAL)
Witness: ---------------------- --------------------------------(SEAL)
Date: -------------------------
In consideration of the above assignment and the written consent of the
Landlord thereto, the undersigned assignee, __________________________________
hereby assumes and agrees from and after _________________ to make all payments
and to perform all covenants and conditions provided in the within lease by the
Tenant therein to be made and performed.
Witness: -------------------- ------------------------------(SEAL)
Witness: -------------------- ------------------------------(SEAL)
Date: ----------------- -----
CONSENT TO ASSIGNMENT
The undersigned Landlord hereby consents to the assignment of the within
lease to _____________________________ on the express conditions that the
original Tenant ________________________________, the assignor, herein, shall
remain liable for the prompt payment of the rent and the performance of the
covenants provided in the said lease by the Tenant to be made and performed, and
that no further assignment of said lease or sub-letting of any part of the
premises thereby demised shall be made without the prior written consent of the
undersigned Landlord.
---------------------------------
Landlord
Date: ------------------ By: -----------------------------
<PAGE>
LEASE BETWEEN
HAAS LASER TECHNOLOGIES, INC.
AND
R-TEC TECHNOLOGIES, INC.
The following terms and conditions are incorporated as part of the attached
lease between Haas Laser Technologies, Inc. and FLM Asset Brokerage Service. To
the extent that the Terms of this addendum are in conflict with or inconsistent
with the printed lease, the terms of the addendum shall control.
1: During the term of this lease, the tenant shall maintain General Public
Liability Insurance insuring the interests of the Tenant and the Landlord as an
additional party insured with respect to claims in or about the leased premises
and property in amounts of not less than one million and 00/100 ($1,000,000.00)
dollars combined single limit bodily injury and property damage, including fire
legal liability. If the General Public Liability Insurance carrier shall for any
reason cancel any contract of insurance covering property damage, bodily injury,
or fire legal liability, the tenant will immediately notify the Landlord of such
effect. Tenant shall furnish to Landlord a certificate of such liability
insurance and renewal certificates.
It is expressly understood and agreed that all policies of insurance
shall contain a clause that the same shall not be canceled except on ten (10)
days written notice to any and all parties in interest, of such an endorsement
is available.
In the event the rate of fire insurance carried by the Landlord shall
be increased because of any change in occupancy or use of leased premises by the
tenant then such increase in cost of fire insurance shall be paid by Tenant to
Landlord after notice and demand in writing within ten (10) days of such notice.
2. Tenant expressly covenants and agrees to fully comply with the provisions of
the New Jersey Environmental Clean Up Responsibility Act (N.J.S.A. 13: 1K-6, Et.
Seq.) hereinafter referred to as "ECRA", and all regulations promulgated thereto
prior to the termination of the lease, or at any time that any action of the
Tenant triggers the applicability of ECRA. In particular, the Tenant agrees that
it shall comply with the provisions of ECRA in the event of any "Closing,
Terminating or Transferring" of Tenant's operations, as defined by and in
accordance with the regulations, which have been promulgated pursuant to ECRA.
In the event evidence of such compliance is not delivered to the Landlord prior
to surrender of the leased premises by the Tenant to the Landlord, it is
understood and agreed that the Tenant shall be liable to pay to the Landlord an
amount equal to two times the base rent then in effect. Together with all
applicable additional rent from the date of such surrender until such time as
evidence of compliance with ECRA has been delivered to the Landlord, and
together with any costs and expenses incurred by landlord in enforcing Tenant's
obligations under this paragraph, evidence of compliance, as used herein, shall
mean a "Letter of Non-Applicability" issued by the New Jersey Department of
Environmental Protection ("NJDEP"). An approved "Negative Declaration" or
Completion of a clean-up plan approved by NJDEP. Evidence of compliance shall be
delivered to the Landlord, together with copies of all submissions made to the
NJDEP, including all environmental reports, test results and other supporting
documentation. In addition to the above, Tenant agrees that it shall cooperate
with Landlord in the event ECRA is applicable to any portion of the property of
which the leased premises are a part. In such case, Tenant agrees that it shall
fully cooperate with Landlord in connection with any information or
documentation, which may be requested by the NJDEP. In the event that a cleanup
of the property is required in connection with the conduct by Tenant of its
business at the leased premises, Tenant expressly covenants and agrees that it
shall be responsible for that portion of the cleanup which is attributable to
the Tenant's operation. Tenant hereby represents and warrants that it's standard
industrial classification No. is ________, and that Tenant shall not generate,
manufacture, refine, transport, treat, store, handle or dispose of "hazardous
substances" as the same are defined under ECRA and the regulations promulgated
pursuant thereto, except in strict compliance with all governmental rule,
regulations and procedures. Tenant hereby agrees that it shall promptly inform
Landlord of any change in its SIC number or the nature of the business to be
conducted in the leased premises. The within covenants shall survive the
expiration or earlier termination of the lease term.
3. Payment of rent, common charges, maintenance charges and electricity usage
charges shall be due and payable on the first of each month. Any payments
received after the fifth of the month shall be subject to a 5% late fee on all
monies due.
4. Non-Disturbance: Tenant covenant and agrees that the noise and odor from its
operations will not, at any time during the term of the lease exceed reasonable
levels, so as to disturb other tenants in the building.
5. Provided that the Tenant is not then in default, the Tenant is granted an
option to renew this lease for one two (2) year term by providing written notice
to the Landlord no alter than two (2) months prior to the termination of the
lease.
Haas Laser Technologies, Inc.
Landlord
By: /s/_____________________
R-Tec Technologies, Inc.
Tenant
By: /s/ Philip Lacqua, President
--------------------------------
Philip Lacqua, President
CONSULTING CONTRACT
THIS CONTRACT, made as of this 6th day of January, 2000, 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 $2,000 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.
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.
Initials /s/ /s/
<PAGE>
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
Initials /s/ /s/
<PAGE>
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: /s/ Milton H. Barbarosh By: /s/Philip P. Lacqua
________________________________ ____________________________
Milton H. Barbarosh, as President Philip P. Lacqua, President and CEO
Initials /s/ /s/
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.
/s/ Philip Lacqua
By: _____________________________
Name: Mr. Philip P. Lacqua
Title: President and CEO
ACCEPTED as of the __21_____ day of September, 1999:
THORNHILL GROUP, INC.
/s/ Laurence Isaacson
By: __________________________
Name: Mr. Laurence S. Isaacson
Title: President and CEO
R-TEC TECHNOLOGIES, INC.
61 MALLARD DRIVE
ALLAMUCHY, NEW JERSEY 07820
(908) 850-4466
PERSONAL AND CONFIDENTIAL
December 6, 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 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).
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( e ) Subscription checks will be made payable to "Bank of New York, Escrow,
R-Tec Technologies, Inc. #301472." 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. The escrow account shall be an
interest-bearing bank account with the Bank of New York.
( f ) All checks received by TGI and its Selling Group or R-Tec will be
transmitted to the escrow agent by Noon on the next business day following
receipt. TGI and the Selling Group shall strictly comply with Rule 15c2-4
promulgated by the Securities and Exchange Commission and NASD Notices to
Members 84-7 and 84-64.
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,
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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.
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( 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 case 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.
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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 nine percent
(9%) 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 two and
twenty-five one-hundredths percent (2.25%) 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 $13.20 per share for a period of five (5)
years (the "Warrants"). The Warrants shall be restricted from sale, transfer,
assignment or hypothecation for a period of one (1) year from the Offering's
effective date (which the parties agree shall be January 7, 2000) /s/ /s/
1/7/00, except to officers and partners (but not directors) of TGI or members of
the Selling Group and their officers and partners (but not directors).
( f ) 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:
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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 obligations to TGI as described in Section 7, herein.
( 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
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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
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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
Initials /s/ /s/
<PAGE>
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.
Initials /s/ /s/
<PAGE>
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:/s/Philip P. Lacqua
_____________________________
Name: Mr. Philip P. Lacqua
Title: President and CEO
ACCEPTED as of the 7th day of December, 1999:
THORNHILL GROUP, INC.
By: /s/ Laurence Isaacson
________________________________
Name: Mr. Laurence S. Isaacson
Title: President and CEO
R-Tec has the following wholly owned subsidiary:
Ripefully Yours,Inc.
Flanders, New Jersey
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Financial
Statements for the year ended December 31, 1999, and is qualified in its
entirety by reference to such form 10KSB for annual period ended December 31,
1999.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> year
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 448
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 448
<PP&E> 9,384
<DEPRECIATION> (2,524)
<TOTAL-ASSETS> 1,204,940
<CURRENT-LIABILITIES> 945,049
<BONDS> 0
<COMMON> 29
0
0
<OTHER-SE> (168,138)
<TOTAL-LIABILITY-AND-EQUITY> 1,204,940
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 469,081
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,296
<INCOME-PRETAX> (502,377)
<INCOME-TAX> 0
<INCOME-CONTINUING> (502,377)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (502,377)
<EPS-BASIC> (.17)
<EPS-DILUTED> (.17)
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