U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
UNDER SECTION 12 (b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Far West Group, Inc., A Nevada Corporation
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Nevada 86-0867960
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or
organization)
1665 East 18th Street, Suite 113
Tucson, Arizona 85719
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(Address of principal (zip code)
executive offices)
520-740-1119
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Issuer's telephone number
Securities to be registered under section 12 (g) of the Act:
Title of each class Name of each exchange on which
to be so registered: each class is to be registered:
Common Stock None
Securities to be registered under section 12(g) of the Act:
80 million shares of Common Stock, Par Value $.0001 per share
-------------------------------------------------------------
(Title of Class)
<PAGE>
PART I
Form 10-SB Item Location
Item Number Caption Page
Information
1. Description of Business 2
2. Management's Discussion And
Analysis or Plan of Operations 6
3. Description of Property 9
4. Security Ownership of Certain
Beneficial Owners and Management 9
5. Directors, Executive Officers,
Promoters and Control Persons 10
6. Executive Compensation 11
7. Certain Relationships and Related
Transactions 12
8. Description of Securities 12
PART II
1. Market Price and Dividends on
the Registrant's Common Equity
and Other Shareholders Matters 13
2. Legal Proceedings 14
3. Changes in and Disagreements
With Accountants 14
4. Recent Sales of Unregistered
Securities 14
5. Indemnification of Directors
and Officers 14
PART III
1. Index to Exhibits 15
2
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PART I
Item 1. Business
General
Far West Group, Inc. (The "Company" or "FarWest") was
organized under the laws of the State of Nevada in July 1996 to
serve as a water technology company dedicated to advanced water
filtration and purification. The company merged with Pro Vantage
Corporation, an inactive public company which was incorporated in
the State of Florida in 1992 with FarWest as the surviving
company of the merger. Concurrently, the FarWest Pump Company
("Pump Company"), an Arizona Corporation, was merged into FarWest
and became a wholly owned subsidiary of the Company.
In January 1997 the Company entered into a manufacturing and
marketing license agreement with Lawrence Livermore National
Laboratories ("Lawrence Livermore") whereby the Company obtained
the rights to Lawrence Livermore's patented Capacitive
Deionization Technology (CDT). The manufacturing and marketing
license is effective for the life of the patents (up to 17
years). To maintain the license the Company must make contracted
annual royalty payments to Lawrence Livermore.
In March of 1999 the Company's Board of Directors agreed to
accept an offer from Pump Company management to acquire the
outstanding shares of the Pump Company, effective January 1, 1999.
The stock sales agreement was completed in May of 1999. FarWest,
in July 1999, expanded its facilities to include general
administration offices and a pilot manufacturing facility.
The Technology
FarWest has evolved from the development-stage company status
with no historic revenues and has now completed development of
its first CDT unit. The Company plans to commence in-house prototype
manufacture of demonstration and pilot water treatment plants for
clients in the first quarter of 2000.
In 1997 the Company obtained a license to develop and
manufacture a carbon aerogel CDT product, covered by Lawrence
Livermore patents, for commercial use in the desalination,
filtration, and purification of water.
The Lawrence Livermore license authorized FarWest to
manufacture, market and enhance the CDT, specifically in the
fields of:
Desalination and Brackish Water
Groundwater remediation
Pure water for Boiler Applications
Ultrapure water for manufacturing
Nuclear Waste remediation
Medical Applications
Bottled water for drinking
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The aerogel product licensed from Lawrence Livermore
Laboratories in January 1997 operated at low voltage levels
(compatible with solar energy sources) with resulting favorable
operating economics, but the cost of manufacture with the original
technology was too high to be commercially competitive.
Therefore, initial Company efforts were focused on cost reduction
programs.
Since 1997 with expenditures of over $800,000, FarWest has
increased the cost-effectiveness of the original aerogel product
by approximately 15 times. The Company believes that its current
version of the CDT product is competitive with other water
remediation methods, particularly for brackish water (up to
10,000 parts total dissolved solids per million parts), due to
its low power and other operating cost advantages. CDT, as
developed by the Company, has been favorably reviewed by Lawrence
Livermore, foreign governments and several multi-national companies
familiar with Reverse Osmosis and other existing water treatment
systems. The Company believes that CDT is the only available
economically viable alternative to Reverse Osmosis, which is the
most widely used system, for a broad spectrum of large-scale
brackish and other water purification applications.
While the basic carbon aerogel patent is owned by the U.S.
Government, through Lawrence Livermore, there are a number of
patentable improvements in other materials and processing which
have been developed by, and are proprietary to FarWest, and need
not be licensed back to Lawrence Livermore. The improvements
account for the significant improvement in cost effectiveness of
CDT. It is expected that one or more of these proprietary
improvements will be patented by FarWest and certain others may
be maintained as trade secrets to avoid disclosing them in
patent filings.
The Business
In 1998 the Company began a marketing effort to bring its
carbon aerogel technology to the attention of the water treatment
market. This effort has occurred in the context of the pervasive
world-wide search for water safe to drink and water suitable for
agriculture, industry, and other applications. CDT is capable of
treating a wide range of water inputs and can provide a range of
outputs, geared to the ultimate use of purified water, that is,
human consumption, agriculture, or ultra-pure water for
industrial and medicinal use. CDT is thus not confined to a
particular niche in the water treatment industry. The industry
as a whole has become a focus of interest among the sources of
international grant and loan financing due to the belief that a
global water crisis may be imminent.
4
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The Company shifted its emphasis in 1999 to bring its
prototype manufacturing capability on-line to satisfy the three
demonstrations and one pilot plant for which it has received
contracts as follows:
- Arizona Public Service Corp - a pilot system for
industrial boiler water testing and solar powered compatibility
testing, to be installed January 2000.
- Carlsbad California - a pilot system for filtration of
brackish water with output compliant with drinking water
requirements, to be installed beginning in February 2000.
- Beatrix Mines, South Africa - a pilot plant for
testing effluent waste water from gold mines, to be installed
beginning April 2000.
- Kingdom of Jordan, Amman, Jordan - a pilot system for
converting brackish water with an output volume of 400 cubic
meters per day, scheduled to begin installation in June 2000.
With a successful pilot system, a 100,000 cubic meters per day
system would be scheduled for 2002 installation.
To manufacture the large quantities of carbon aerogel
expected to be required to meet future industrial demands, beyond
the limited requirements of demonstration and pilot plant
facilities, FarWest must arrange major plant financing perhaps,
in part, against delivery contracts, or as joint venture
operations. The Company is currently exploring strategic
corporate partnerships as well as evaluating suitable out-
sourcing manufacturing partnerships for short-term requirements.
Sales and Marketing
FarWest expects to operate primarily as a supplier of CDT
units and the related electronic control systems to builders of
new water treatment plants or as replacement technology for other
water treatment equipment as it becomes obsolete or too costly to
operate and maintain. The CDT units could represent a
substantial part of the cost of new or renovated water treatment
facilities.
The Company does not expect to develop its own capability to
act as prime contractor for engineering, constructing, operating,
and owning treatment plants. It will engineer and construct
pilot plants, and will support the planning, proposing, training,
and maintenance activities of prime contractors who contract to
install CDT-based plants. The Company expects to sell
purchasers, both private and governmental, on the merits of using
CDT, either alone or in conjunction with prime contractors where
it has entered into selling or strategic relationships.
For some countries, FarWest is negotiating with potential
partners, local or international, capable of engineering and
executing major water treatment plant construction and subsequent
operations. The Company's marketing efforts will continue to be
focused in developing strategic partners on geographic or
application relationships.
5
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Discontinued Operations Well Drilling and Pump Services
FarWest Pump Company was formed to provide drilling and pump
services in Arizona and Western New Mexico. It included an
operating division, Arizona Well Services, which provided
wholesale parts services to FarWest Pump and other clients. In
the fourth quarter of 1998 discussions were initiated with Pump
Company management for the purchase of Pump Company. In March
1999, the Company s Board of Directors agreed to sell FarWest
Pump to its management team effective January 1, 1999. In order
to induce Pump Company management to assume the net liabilities of
Pump Company, FarWest agreed to pay Pump Company $70,000 upon
financing. In addition, FarWest upon financing will pay $200,000
to Pump Company to satisfy a FarWest payable to a stockholder who
has assigned the receivable to Pump Company.
The Company has accounted for the Pump Company in the
accompanying financial statements as a discontinued operation.
Because the Pump Company has net liabilities, the Company will
record a gain on the transaction at closing. The sale was closed
in November 1999.
Item 2. Management s Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition and Results of Operations
The Company has recently completed its development stage
operation. Plans are to begin pilot operations in quarter one (Q1)
of 2000. From execution of the Lawrence Livermore licenses in
January 1997 through the current period, the Company has
concentrated its efforts primarily on improving the cost performance
basis of the CDT technology.
During 1997, 1998, and for the first three quarters of 1999,
the Company did not generate revenues although pilot contracts
were received during the period. The Company currently is
negotiating additional pilot contracts and alliances; however,
revenue recognition will not occur prior to FY 2000.
The Company was funded initially through the merger of the
Pump Company and an investment by the principal shareholder.
Since 1998 funding has been through private placements, which
totaled approximately $800,000 and additional financing by the
principal shareholder. Private placement opportunities combined
with management funding are expected to continue through the
fourth quarter of 1999. The Company is also discussing
convertible debt transactions to support immediate cash
requirements.
Operations for the Next Twelve Months
Business opportunities for the next twelve months include
international CDT systems sales to governments, major multi-
national industrial corporations and U.S. pilot sales. Several
opportunities are now being discussed including: governments,
humanitarian trust funds, industrial joint ventures, market
sectors, and geographic distribution agreements.
6
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The Company recognizes the financial investment required to
support the potential business opportunities which are being
discussed. There is no guarantee that the Company can obtain the
funding necessary to develop the manufacturing and engineering
infrastructure to complete the potential CDT orders. The Company
is currently discussing financing options which include:
- a Corporate Partnership for Manufacturing which could be
expanded to include marketing services;
- Joint ventures with an international investment group;
- a European government-sponsored program.
- a join development contract with a multi-national
corporation.
- a humanitarian fund is evaluating an equity investment,
plus several CDT system installations in the Mid-East.
Management believes that there is a probability of obtaining
the required financing for the next twelve months through one of
the above, however, there is no assurance that such funding will
be obtained in the time cycle required to support ongoing company
operations.
Limited Operating History
The Company although having completed it development stage
has had limited operating history upon which an evaluation ofits
future performance and prospects could be made. The Company's
prospects must be considered in light of the risks, expenses,
delays, problems, and difficulties frequently encountered in the
establishment of a new business in an emerging and evolving
industry. Since inception, the Company has generated no revenues
and has incurred operating losses resulting in a working capital
deficit. Inasmuch as the Company will have an increasing level
of operating expenses and will be required to make significant
up-front expenditures in connection with the proposed development
of its business, the Company anticipates that losses will
continue for at least the next twelve months or until such time
as the Company is able to generate sufficient revenues to finance
its operations and the costs of continuing expansion. There can
be no assurance that the Company will be able to generate
significant revenues or achieve profitable operations.
Need for Additional Financing
The Company is dependent upon the proceeds of proposed
offerings of the Company s securities to implement its business
plan and to finance its working capital requirements. Should the
Company's plans or its assumptions change or prove to be
inaccurate or offering proceeds be insufficient to fund the
Company's operations, the Company would be required to seek
additional financing sooner than anticipated. Management
believes it will be able to continue raising funds in the balance
of 1999 as it has in the early part of 1999, principally through
private placements, or convertible debt transactions.
There can be no assurances given that the Company will be
successful in generating sufficient revenues from its planned
activities or in raising sufficient capital to allow it to
continue as a going concern which contemplates increased
operating expenses, acquisition of assets and the disposition of
liabilities in the normal course of business. These factors can
affect the ability of the Company to implement its general
business plan including the completion of the required
manufacturing facilities and continued proprietary CDT product
improvements.
7
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Technology
Capacitive Deionization Technology which was licensed from
Lawrence Livermore has been and remains the foundation of the
Company's future. The Company has concentrated its efforts on
adding proprietary enhancements to CDT to provide insulation from
not only other technologies but as protection if Lawrence
Livermore decided to consider other licensees. Any other
licensee would have to license Lawrence Livermore's 1996 CDT
Technology and avoid FarWest's patents pending and trade secrets
to enter the market. FarWest has discussed a protected window of
time exclusive option period with Lawrence Livermore; however,
until the Company corrects its current delinquent payment status
this will not be granted. A proven product with installed pilot
systems and a stronger financial position may help the Company
achieve this goal.
Other Business Matters
Government Approvals and Regulations. The Company understands
that governmental approvals will continue to be necessary for
certain of its operations, products and services. Further, the
Company believes that compliance with Federal, State and Local
laws or regulations which have been enacted or adopted to
regulate the environment has not had, nor is expected to have a
material effect upon the Company's operations, product
development, capital expenditures, earnings, competition or
financial position.
Year 2000. The Company does not have any CDT systems installed
as of the date of this registration statement. All systems are
under current development and are year 2000 compliant. All
internal systems (Accounting) utilized by the Company incorporate
technology that is year 2000 compliant. There are no third party
vendors nor service providers to the Company that are either not
considered year 2000 compliant or are there others who are
critical to the ongoing operations and development of the Company
and its product.
Inflation. The Company does not expect the current rate of
inflation to have any effect on its operations in the foreseeable
future.
Information regarding and factors affecting forward-looking
statements. Forward-looking statements include statements
concerning plans, objectives, goals, strategies, future events or
performances and underlying assumption, and other statements
which are other than statements of historical facts. Certain
statements contained herein are forward-looking statements and,
accordingly, involve risks and uncertainties which could cause
actual results or outcomes to differ materially from those
expressed in the forward-looking statements. The Company's
expectations, beliefs and projections are expressed in good faith
and are believed by the Company to have a reasonable basis,
including without limitations, management's examination of
historical operating trends, data contained in the Company's
records and other data available from third parties, but there
can be no assurance that management's expectations, beliefs, or
projections will result, or be achieved, or accomplished.
8
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Item 3. Properties
The Company maintains administrative offices at 1665 East
18th Street, Suite 113, Tucson, Arizona 85719. There is
approximately 1,500 square feet of administrative space. At the
same location the company has completed a prototype system
assembly facility of approximately 3,000 square feet. This is
leased space which offers expansion capability as needed.
The company is in discussions with an investment group in
Livermore, California to build a Research and Development Center
at Lawrence Livermore which could be operational within the next
year. To complete this facility the Company must complete the
funding negotiations with the developer and investment group.
The Corporate Headquarters may also be relocated to this
Livermore, California location within the next year.
Item 4. Security Ownership of Certain Beneficial Owners and
Management
Item 5 sets forth the number of shares of common stock of
holders of the Company known to the Company and to beneficial
owners of more than five (5%) percent of its Common Stock at
September 30, 1999.
Item 5. Directors and Officers of Registrant
(a) As of September 30, 1999, the following persons
served as directors of the Registrant.
Shares % of
Director Beneficially
Outstanding
Name and Age Position Since owned Stock
Clark Vaught (49) Chairman of 1996 2,675,000 39.43%
The Board
CEO and Director
Dallas Talley (66) President 1998 575,000 8.48%
Financial Officer
and Director
Chris Sheppard (41) Vice President 1997 365,000 5.38%
Director
Thomas Friezen (40) Director 1996 252,000 3.72%
Dr. Nicholas Yensen (53) Director 1997 100,000 1.48%
All Officers and Directors as a Group 3,967,000 58.47%
(as of September 30, 1999)
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(b) Executive Officers
The executive officers of Registrant are: See (a) above.
Management
The FarWest Management team has extensive experience in the
establishment and management of entrepreneurial and publicly-held
technology companies.
Clark Vaught, Chairman, CEO, and principal shareholder, founded
FarWest Pump and served as its President since 1988 and developed
it into today's FarWest Group. His background with Westinghouse
Hanford Systems aptly prepares him for the technology driven CDT
market. Management experience includes large aquifer development
projects; water management for White Sands Missile Range, and
several Arizona City programs.
Dallas Talley, President, joined FarWest in January 1998 and also
is currently serving as its Financial Officer. He has over
twenty years of high tech senior executive experience. He has
been CEO of Qantel Business Computers, a New York Stock Exchange
listed company, and of two NASDAQ technology companies. He has
also been a founder/director of several emerging companies, was
executive partner in an International Technology Marketing and
Licensing partnership for the three years prior to joining the
Company. He has served as a director of the American Electronics
Association from 1984 to 1990 and as Chairman of its Silicon
Valley Chapter.
Chris Sheppard, Vice President, has had management experience in
several high technology fields. This includes the "Star Wars"
SDI program where he consulted for Lockheed and Martin Marietta
for the two years prior to joining the Company. He has been
employed at Lawrence Livermore National Laboratories and other
National Laboratories. His background also includes experience
as Chief Mechanical Engineer for Kaman Aerospace.
Don L. Hexamer, Director of Operations, has over twenty years of
engineering experience. This includes over ten years of
semiconductor design and manufacturing management experience. He
was responsible for manufacturing, process engineering, equipment
design, maintenance and repair for Mostek Inc. s $300 million per
year semiconductor operation. He has been a partner in a high
technology design group since 1992.
At September 30, 1999, the Company employed five people full
time and six consultants on a part-time basis.
The future success of the Company depends to a significant
extent upon certain senior management, technical personnel, and
development personnel. The Company also believes that its future
success will depend in large part on its ability to hire and
retain highly skilled technical, managerial, and marketing
personnel, as well as to attract and retain replacements for or
additions to such personnel in the future. Demand for new,
specially trained and experienced personnel has increased
worldwide. The loss of certain key employees or the Company s
inability to attract and retain other qualified employees could
have a material adverse effect on the Company s business.
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Board of Directors.
Employees who serve on the FarWest Board of Directors include Mr.
Vaught, Mr. Talley, and Mr. Sheppard, who are identified above in
"Management": all Directors currently serve one year terms. A
multi-year Directors' term plan will be submitted for shareholder
approval in May 2000.
Other Directors are:
Tom Friezen is CFO of a $150 million Food Processing Cooperative.
He manages the financial operations and oversees the legal
activities of the company.
Dr. Nick Yensen has served as a director and consultant to the
company. Dr. Yensen is a recognized expert in saltwater
technology. He is president of NyPa International, with
subsidiaries and projects throughout the world.
Mr. Takeshi Ogata may join the FarWest Board of Directors on
completion of corporate financing. Mr. Ogata has been a senior
executive with Itochu Corporation, Tokyo, Japan. Within Itochu
he has served as Senior Managing Director as well as President of
Itochu Construction and President of Itochu Electronics and
Aerospace. He is currently Chairman of Itochu's Inno Micro
Corporation.
FarWest is in discussion with other experienced executives and
professionals to join the Board of Directors on completion of
corporate financing, and plans to expand the Board of Directors
to seven Members.
Item 6. Executive Compensation
Summary Compensation Table
Annual Compensation
Other
Name and Principal Position Year Salary Bonus Annual
Compensation
Clark Vaught 1998 $96,000 $ - $ -
Dallas Talley 1998 $72,000 $ - $ -
Chris Sheppard 1998 $72,000 $ - $ -
Clark Vaught 1997 $72,000 $ - $ -
Chris Sheppard 1997 $60,000 $ - $ -
Clark Vaught - Chairman of the Board, Chief Executive Officer.
Dallas Talley President, Financial Officer, and Director.
Chris Sheppard - Vice President Development and Director.
There are currently no Long-Term Compensation programs in
effect for officers or directors.
1998-1999 Stock Option Grants
NONE
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Item 7. Certain Relationships and Related Transactions
As part of the transaction in which Pump Company management
acquired the outstanding shares of the Pump Company, FarWest
provided total payables of $270,000 of which $200,000 had previously
been recorded as a payable to shareholder. As of September 30, 1999,
the chairman and CEO had advance the Company a total of $207,000
which had been recorded as accounts payable shareholder.
Item 8. Description of Securities
(a)Common Stock
The Company is authorized to issue 80,000,000 shares of
Common Stock with a par value of $0.0001 per share. As of
September 30, 1999, there were 6,784,912 shares of Common Stock
outstanding on a fullly diluted basis including options and
warrants to purchase 670,000 shares of Common stock at prices
from $0.50 to $1.70 per share. The holders of Common Stock are
entitled to one vote for each share held of record on each matter
submitted to a vote of stockholders. There is no cumulative
voting for election of directors. Subject to the prior rights of
any series of Preferred Stock, which may from time to time be
outstanding in the future, the holders of Common Stock are
entitled to receive ratably such dividends as may be declared by
the Board of Directors out of funds legally available therefor,
and, upon the liquidation, dissolution or winding up of the
Company, are entitled to share ratably in all assets remaining
after payment of liabilities and payment of accrued dividends and
liquidation preference on the Preferred Stock, if any. Holders
of Common Stock have no preemptive rights and have no rights to
convert their Common Stock into any other securities.
(b) Preferred Stock
The Company is authorized to issue up to 20,000,000 shares
of Preferred Stock with a par value of $0.01 per share. The
Preferred Stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of
Directors, without further action by stockholders, and may
include voting rights (including the right to vote as a series on
particular matters), preferences as to dividends and liquidation,
conversion, redemption rights, and sinking fund provisions.
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PART II
Item 1. Market for Registrant's Common Stock and Related
Stockholder Matters
(a) Stock Prices and Dividend Information
The Common Shares of the Company are traded on the NASDAQ
Over-the-Counter market under the trading symbol "FWST" since
July 1996. The following NASDAQ supplied table sets forth for
the period indicated the high and low bid prices. The quotations
below reflect inter-dealer prices, without retail markup,
markdown or commission and may not represent actual transactions.
For current price information, FWST shareholders are encouraged
to consult publicly available sources.
1999 High Low
First Quarter 1 1/8 1/4
Second Quarter 5 1/4 2 1/32
Third Quarter 3 1/8 1 1/2
1998
First Quarter 1 1/4 5/16
Second Quarter 3/4 5/16
Third Quarter 3/4 1/2
Fourth Quarter 9/16 1/4
1997
First Quarter 1 3/8 1/8
Second Quarter 1/2 1/4
Third Quarter 1 1/4
Fourth Quarter 1 3/16 1/4
At September 30, 1999, the Company has 6,114,912 Common
Shares issued and 6,844,912 outstanding on a fully diluted basis
and had approximately ninety (90) shareholders of record.
It appears that the Company may not trade on the Over The
Counter Bulletin Board after December 2, 1999 until final SEC
approval is received by the Company. However, those market makers
that file Form 15C211 exemption will continue to market the
securities.
The Company has no fixed dividend policy. The Company has
paid no dividends at any time. For the foreseeable future, it is
anticipated that the Company will use all available cash flows to
finance its growth and that dividends will not be paid to
shareholders.
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(b) Reports to Security Holders
The public may read and copy any material files with the
SEC at the SEC's Public Relations Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549 and/or obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. In addition, the Company is an electronic filer
and as such, all items filed by the Company with the SEC which
contain reports, information statements, and other information
regarding issuers that file electronically with the SEC, which
site is available at http://www.sec.gov. The Company also
maintains an Internet site which contains information about the
Company.
The site is available at http//www.farwestgroup.com.
Item 2. Legal Proceedings
The Registrant is not a party to any pending legal
proceeding nor is its property the subject of any pending legal
proceeding of any material consequence.
Item 3. Changes in and Disagreements with Accountants
There have been no disagreements on accounting and financial
disclosures from the inception of the Company through to the date
of this Registration Statement.
Item 4. Recent Sales of Unregistered Securities
(a) In April 1999, the Company issued 626,500 shares of
Common Stock of the Company to a group of investors under Rule
504 of Regulation D as additional capital for the Company. The
Company received $283,250 for those shares. The market price of
the company shares of the Company when this private placement was
subscribed ranged from $0.25 to $0.75 during the months of March
and April 1999, prior to the transaction. The pricing of the
placement ($0.32 to $0.50) was determined with reference to the
mid-range of prices during the prior month with a discount to
reflect the restrictive nature of these securities.
(b) In March of 1999, the Company issued 1,643,000
shares to a group including directors, officers, employees,
consultants, and providers as compensation for service previously
furnished the Company. These shares, which have a two year
restriction, were issued at a rate of $0.18 per share bid based
on the discounted average bid price of the common stock at the
closing quarter s prices.
Item 5. Indemnification of Directors and Officers
The Company has adopted the standard indemnification
provisions for officers and directors as provided by Nevada law
in its Articles, which the Company generally indemnifies officers
and directors from liability for good faith errors or omissions
committed in the ordinary discharge of their duties. The Company
is generally aware that it is the position of the SEC that any
claims of indemnification as may relate to violations of U. S.
Securities laws and regulations are deemed to be of no force,
effect or application.
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PART III
Item 1. Index to Exhibits
The Company attaches the following material exhibits to this
registration statement.
1. Financial Statements
Consolidated financial statements of FarWest Group, Inc.
Page
(a) Reports of Independent Certified Accountants. 17
(b) Consolidated Balance Sheets for the years
ended December 31, 1997 and December 31, 1998
and the nine months ended September 30, 1998
and September 30, 1999. 18
(c) Consolidated Statements of Operations for the
years ended December 31, 1997 and December 31,
1998 and the nine months ended September 30,
1998 and September 30, 1999. 19
(d) Consolidated Statements of Changes in
Stockholders' Equity for the two years ended
December 31, 1997 and December 31, 1998 and
the nine months ended September 30, 1999. 20
(e) Consolidated Statements of Cash Flows for the
years ended December 31, 1997 and December 31,
1998 and the nine months ended September 30,
1999. 21
2. Exhibits Regulation
S-K Designated
Number:
(a) Stock Purchase Agreement between
FarWest Group, Inc. and New Pumpco dated
May 24, 1999 for the acquisition of 100% of
FarWest Pump Co. (2)
(b) The Articles of Merger of
Pro Vantage, Inc. into FarWest Group, Inc.
dated July 2, 1996. (2)
(c) Articles of Incorporation of
Registrant. 3(i)
(d) By-laws of Registrant. 3(ii)
(e) Option and Warrant Agreements
and Text of Warrant. (10)
(f) Lawrence Livermore License Agreement (10)
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
By: [s] Dallas Talley
Dallas Talley, President
and Financial Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of Registrant and in the capacity and on e date
set forth following their name.
Signature Capacity Date
[s] Clark Vaught Chairman and CEO November 29, 1999
Clark Vaught
[s] Dallas Talley President and November 29, 1999
Dallas Talley Financial Officer
[s] Chris Sheppard Vice President November 29, 1999
Chris Sheppard
[s] Tom Friezen Director November 29, 1999
Tom Friezen
[s] Nicholas Yensen Director November 29, 1999
Dr. Nicholas Yensen
16
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
FarWest Group, Inc.
We have audited the accompanying consolidated balance sheets
of FarWest Group, Inc. and subsidiary as of December 31, 1998 and
1997, and the related consolidated statements of operations,
stockholders equity (deficit) and cash flows for the years then
ended. These consolidated financial statements are the
responsibility of the Company s management. Our responsibility is
to express an opinion on these consolidated financial statements
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audits 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
consolidated financial position of FarWest Group, Inc. as of
December 31, 1998 and 1997, and the results of their operations
and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in Note 1 to the financial statements, the Company's significant
operating losses and its working capital deficit and
stockholders deficit raise substantial doubt about its ability
to continue as a going concern. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty.
Jackson & Rhodes P.C.
Dallas, Texas
November 19, 1999
17
<PAGE>
FARWEST GROUP, INC.
BALANCE SHEETS
Assets
September 30, December 31,
1999 1998 1997
Current assets: (Unaudited)
Cash $ 30,199 $ - $ 3,211
Accounts receivable 25,000 28,704 3,143
Total current assets 55,199 28,704 6,354
Furniture and equipment 5,435 2,952 2,952
Less accumulated depreciation (3,218) (1,968) (984)
2,217 984 1,968
Total Assets $ 57,416 $ 29,688 $ 8,322
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 406,917 $ 597,959 $137,000
Accounts payable to shareholder
(Note 3) 207,059 127,809 32,448
Net liabilities of discontinued
operations (Note 2) 658,401 620,075 581,928
Total current liabilities 1,272,377 1,345,843 751,376
Convertible debt (Note 5) 100,000 200,000 100,000
Commitments and contingencies
(Note 6) - - -
Stockholders' equity:
Preferred stock, $.0001 par value,
20,000,000 shares authorized;
60,000 issued and outstanding
at September 30, 1999 and
December 31, 1998 6 6 -
Common stock, $.0001 par value,
80,000,000 shares authorized;
6,114,912, 3,591,480 and
3,191,480 shares issued and
outstanding 611 359 319
Additional paid-in capital 2,149,687 699,525 527,289
Accumulated deficit (3,465,265) (2,216,045)(1,370,662)
Total stockholders' equity (1,314,961) (1,516,155) (843,054)
Total Liabilities and
Stockholdedrs' Equity $ 57,416 $ 29,688 8,322
See accompanying notes to financial statements.
18
<PAGE>
FARWEST GROUP, INC.
STATEMENTS OF OPERATIONS
Nine Months Ended Years
September 30, Ended December 31,
1999 1998 1998 1997
(Unaudited)(Unaudited)
Revenues $ - $ - $ - $ -
Operating expenses:
Common stock and options
issued for services 822,272 - - 227,500
General and administrative 407,520 541,170 478,183 245,114
1,229,792 541,170 478,183 472,614
Loss from operations (1,229,792) (541,170) (478,183) (472,614)
Other income (expense):
Interest expense (3,500) (51,512) (56,539) (7,000)
Total other expense (3,500) (51,512) (56,539) (7,000)
Loss from continuing
operations (1,233,292) (592,682) (534,722) (479,614)
Discontinued operations (Note 2):
Loss from disontinued
operations (15,928) (240,051) (310,661) (347,491)
Net loss $(1,249,220) $(832,733) $(845,383) $(827,105)
Loss per common share:
From continuing
operations $(0.22) $(0.18) $(0.16) $(0.33)
Net loss $(0.23) $(0.25) $(0.25) $(0.58)
Weighted average common
shares outstanding 5,502,316 3,347,036 3,408,147 1,433,147
See accompanying notes to financial statements.
19
<PAGE>
FARWEST GROUP, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended December 31, 1998 and 1997 and the Nine Months
Ended September 30, 1999 (Unaudited)
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Preferred Stock Common Stock Additional
Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit Total
Balance, December 31, 1996 - $ - 1,081,480 $108 $ - $(543,557) $ (543,449)
Common shares issued for services - - 910,000 91 227,409 - 227,500
Common shares issued for accounts
payable to shareholder - - 1,200,000 120 299,880 - 300,000
Net loss - - - - - (827,105) (827,105)
Balance, December 31, 1997 - - 3,191,480 319 527,289 (1,370,662) (843,054)
Shares issued for cash 60,000 6 400,000 40 172,236 - 172,282
Net loss - - - - - (845,383) (845,383)
Balance, December 31, 1998 60,000 6 3,591,480 359 699,525 (2,216,045) (1,516,155)
Shares issued for cash - - 626,500 63 283,188 - 283,251
Shares issued to convert debt - - 253,332 25 126,641 - 126,666
Shares issued for services
rendered in 1999 and 1998 - - 1,643,600 164 287,466 - 287,630
Stock options issued as
compensation - - - - 752,867 - 752,867
Net loss - - - - - (1,249,220) (1,249,220)
Balance, September 30, 1999
(unaudited) 60,000 $ 6 6,114,912 611 $2,149,687 $(3,465,265) $(1,314,961)
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
FARWEST GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<S> <C> <C> <C> <C>
Nine Months Ended September 30, Years Ended December 31,
1999 1998 1998 1997
Cash flows from operating activities:
Net loss $(1,249,220) $(832,733) $(845,383) $(827,105)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 1,250 494 984 984
Shares issued for services 69,405 - - 227,500
Stock options issued as compensation 752,867 - - -
Changes in operating assets and liabilities:
Accounts receivable 3,704 (1,857) (25,561) (2,574)
Accounts payable and accrued liabilities 53,849 489,979 460,959 62,000
Net assets of discontinued operations 38,326 (67,026) 38,147 430,079
Net cash used in operating activities (329,819) (411,143) (370,854) (109,116)
Cash flows from investing activities:
Purchase of furniture and equipment (2,483) - - (2,952)
Cash flows from financing activities:
Net advances from shareholder (Note 3) 79,250 135,650 95,361 15,279
Sale of common and preferred shares 283,251 172,282 172,282 -
Proceeds from convertible debt - 100,000 100,000 100,000
Net cash provided by financing activities 362,501 407,932 367,643 115,279
Net increase (decrease) in cash and cash
equivalents 30,199 3,211) (3,211) 3,211
Cash at beginning of year - 3,211 3,211 -
Cash at end of year $30,199 $ - $ - $ 3,211
Supplemental disclosure:
Total interest paid $ - $ - $ - $ -
</TABLE>
Non-cash transactions:
During 1997, the Company issued 1,200,000 common shares for
$300,000 in accounts payable to a shareholder.
During 1999, the Company issued 1,643,600 common shares for
services rendered in 1999 and 1998, of which $218,225 had been
accrued in 1998.
During 1999, the Company issued 253,332 common shares to convert
$100,000 in convertible debt and $26,666 in accrued interest.
See accompanying notes to financial statements.
21
<PAGE>
1. Summary of Significant Accounting Policies
Description of Business
FarWest Group, Inc. (the Company or FarWest ) was
organized under the laws of the state of Nevada in July 1996 to
serve as a water technology company dedicated to advanced water
filtration and purification. The Company was formed through a
merger with Pro Vantage Corporation, an inactive public company
which was incorporated in the state of Florida in 1992.
Concurrently, the FarWest Pump Company ( Pump Company ), an
Arizona Corporation, was merged into FarWest and became a wholly
owned subsidiary of the Company.
In January 1997 the Company entered into a manufacturing and
marketing license agreement with Lawrence Livermore National
Laboratories ( Lawrence Livermore ) whereby the Company obtained
the rights to Lawrence Livermore's patented Capacitive
Deionization Technology ( CDT ). The company has the rights to
develop and manufacture a carbon aerogel CDT product for
commercial use in the desalination, filtration and purification
of water. The manufacturing and marketing license is effective
for the life of the patents (up to 17 years). To maintain the
license the Company must make contracted annual royalty payments
to Lawrence Livermore beginning with $30,000 per year, then
becoming a percentage of revenue. The Company has completed
development of its first release CDT unit and expects to commence
in-house prototype manufacture and construction of demonstration
and pilot water treatment plants for clients in the first quarter
of 2000.
See Note 2 regarding the Company's sale of Pump Company to
Pump Company management.
Going Concern
The Company's financial statements have been presented on
the basis that it is a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The financial statements do not
include any adjustments that might result from the outcome of
this uncertainty. The Company is reporting cumulative net losses
from continuing operations since January 1, 1997 of $1,494,761 as
of September 30, 1999 and has utilized $479,970 in cash from
operations during the same period. The following is a summary of
management's plan to raise capital and generate additional
operating funds.
The Company was funded initially through investment by the
principal shareholder. Since 1998 funding has been principally
through private placements. Private placement opportunities
combined with management funding are expected to continue through
the fourth quarter of 1999.
22
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
Going Concern (Continued)
The Company is dependent upon the proceeds of proposed
offerings of the Company's securities to implement its business
plan and to finance its working capital requirements. Should the
Company's plans or its assumptions change or prove to be
inaccurate or offering proceeds are insufficient to fund the
Company's operations, the Company would be required to seek
additional financing sooner than anticipated. Management is
confident it will be able to continue raising funds in the
balance of 1999 as it has in the early part of 1999, principally
through private placements. With the filing of a Form 10-SB in
the fourth quarter of 1999 and becoming a Securities and Exchange
Commission fully reporting Company, management anticipates that
additional funding may be more likely in 2000.
There can be no assurances given that the Company will be
successful in generating sufficient revenues from its planned
activities or in raising sufficient capital to allow it to
continue as a going concern which contemplates increased
operating expenses, acquisition of assets and the disposition of
liabilities in the normal course of business. These factors can
affect the ability of the Company to implement its general
business plan including the completion of the required
manufacturing facilities and continued proprietary CDT product
improvements.
Business opportunities for the next twelve months include
international CDT systems sales to governments and major multi-
national industrial corporations and U.S. pilot sales. Several
opportunities are now being discussed including: governments,
humanitarian trust funds, industrial joint ventures, market
sectors and geographic distribution agreements.
The Company recognizes the financial investment required to
support the potential business opportunities which are being
discussed. There is no guarantee that the Company can complete
the funding necessary to develop the manufacturing and
engineering structure to manufacture and install the potential
CDT orders. The company is currently discussing financing
options which include: a Corporate Partnership for Manufacturing
which could be expanded to include marketing services; joint
ventures with an international investment group; and a European
government-sponsored program. In addition, a religious
humanitarian fund is evaluating equity investment and CDT
installation opportunities in the Mid-East. Management believes
that there is a probability of obtaining the required financing
for the next twelve months through one of the above.
23
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
Principles of Consolidation
The consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant
intercompany balances and transactions are eliminated in
consolidation.
Use of Estimates and Assumptions
Preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Cash and Cash Equivalents
The Company considers all liquid investments, with an
original maturity of three months or less when purchased, to be
cash equivalents.
Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation is
computed principally by the straight-line method based on the
estimated useful lives of five to seven years.
Net Loss Per Common Share
In March 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("SFAS 128"). SFAS 128 provides a different
method of calculating earnings per share than was formerly used
in APB Opinion 15. SFAS 128 provides for the calculation of
basic and diluted earnings per share. Basic earnings per share
includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number
of common shares outstanding for the period. Dilutive earnings
per share reflects the potential dilution of securities that
could share in the earnings of the Company. The Company
24
<PAGE>
1. Summary of Significant Accounting Policies (Continued)
Net Loss Per Common Share (Continued)
was required to adopt this standard in the fourth quarter of
calendar 1997. Because the Company's potential dilutive
securities are antidilutive, the accompanying presentation is
only of basic loss per share.
Stock-Based Compensation
The Company has issued stock options. Compensation costs
arising from such options will be recorded as an expense. The
measurement date for determining compensation costs is the date
of the grant. Compensation cost is the excess, if any, of the
market value of the stock at date of grant over the amount the
employee must pay to acquire the stock. The Company measures
compensation costs using the intrinsic value based method of
accounting for stock issued to employees.
Income taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). The objective of the asset and
liability method is to establish deferred tax assets and
liabilities for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and
liabilities at enacted tax rates expected to be in effect when
such amounts are realized or settled. Under SFAS 109, the effect
on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment
date.
Research and Development
Research and development expenditures are expensed when
incurred. Research and development expenses amounted to
$192,559, $35,657, $81,129 and $81,635 for the nine months ended
September 30, 1999 and 1998 and the years ended December 31, 1998
and 1997, respectively.
2. Discontinued Operations
Pump Company was formed to provide drilling and pump
services in Arizona and Western New Mexico. It includes an
operating division, Arizona Well Services, which provided
wholesale parts services to Pump and other companies.
In the fourth quarter of 1998 discussions were initiated
with Pump Company management for the purchase of the Pump
Company. In March 1999 the Company's
25
<PAGE>
Board of Directors agreed to sell Pump Company to its management,
effective January 1, 1999. In order to induce Pump Company
management to assume the net liabilities of Pump Company, FarWest
agreed to pay Pump Company $70,000 upon additional financing.
In addition, FarWest, upon additional financing, will pay $200,000
to Pump Company to satisfy a FarWest payable to a stockholder who
has assigned the receivable to Pump Company.
The Company has accounted for the Pump Company in the
accompanying financial statements as a discontinued operation.
Because the Pump Company has net liabilities, the Company will
record a gain on the transaction when the sale closes. The sale
was closed in November 1999.
Pump Company had revenues of approximately $3,000,000,
$1,665,000, $2,250,000 and $3,180,000 for the periods ended
September 30, 1999 and 1998 and December 31, 1998 and 1997,
respectively.
3. Related Party Transactions
A principal shareholder has loaned the Company funds at
various times. While the funds were not loaned under a note
agreement, the Company has accrued interest at 8% on the balances
payable.
4. Income Taxes
There were no significant temporary differences between the
Company s tax and financial bases, except for the Company's net
operating loss carryforwards amounting to approximately
$1,840,000, $1,350,000 and $830,000 at September 30, 1999 and
December 31, 1998 and 1997, respectively. These carryforwards
will expire, if not utilized, in 2012-2014.
The Company has deferred tax assets amounting to
approximately $625,000, $450,000 and 280,000 at September 30,
1999, and December 31, 1998 and 1997, respectively, related to
the net operating loss carryovers. The realization of the
benefits from these deferred tax assets appears uncertain due to
recurring net losses. Accordingly, a valuation allowance has
been recorded which offsets the deferred tax assets at the end of
each period.
5. Convertible Debt
During December 1997 and January 1998, the Company issued
$200,000 in 7% convertible debt. The debt is convertible into
shares of the Company s common stock at $.50 per share until
January 15, 2001. During 1999, the holder of the debt converted
$100,000 of principal and $26,666 of accrued interest into
253,332 shares of common stock. The note is collateralized by
750,000 shares of Company common stock.
26
<PAGE>
6. Capital Stock
During 1998, the Company issued 60,000 shares of preferred
stock for cash of $30,000. The shares pay no dividends and each
share is convertible into one share of common stock.
The Company has issued stock options to nonemployees. A
summary of the status of stock options is set forth below:
Peroid Ended
September 30, 1999
Weighted Average
Stock Options Shares Exercise Price
Outstanding, beginning or period - $ -
Granted 410,000 $0.82
Exercised - $ -
Forfeited/expired - $ -
Outstanding, end of period 410,000 $0.82
Options exercisable, end of period 336,667 $0.63
Fair value for the stock underlying stock options was
determined using information available from other stock sale
transactions at or near the grant date. In management s opinion,
these transactions between willing parties included the best
information available at the time of grant to estimate the market
value of the common stock of the Company. These fair values were
used to determine the compensatory components of the stock
options granted.
Compensation costs for employee options are recognized as an
expense in an amount equal to the excess of the fair market value
of the stock at the date of measurement over the amount the
employee must pay. The measurement date is generally the grant
date. There were no options issued to employees as of September
30, 1999. The Company recorded $752,867 in compensation expense
during the nine months ended September 30, 1999 under FASB
Statement 123 for options issued to non-employees. There is
future compensation expense to be recorded in subsequent periods
amounting to $77,733 as of September 30, 1999. Using the fair
value method, the fair value of each option grant is estimated on
the date of grant using the Black-Scholes option pricing model
with the following weighted-average assumptions used for grants
in 1999: dividend yield of 0.0 percent; expected volatility of
783 percent; risk free interest rates of 4.5 percent; expected
lives of two years.
27
<PAGE>
6. Commitments and Contingencies
Lease Commitments
The Company leases office space under an operating lease
which expires in May 2000. Future minimum rental commitments
amount to $12,650.
Rent expense for the nine months ended September 30, 1999 and
1998 and the years ended December 31, 1998 and 1997 amounted to
$8,409, $34,501, $38,056 and $11,020, respectively.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of
financial instruments is made in accordance with the requirements
of SFAS No. 107, Disclosures about Fair Value of Financial
Instruments. The estimated fair value amounts have been
determined by the Company, using available market information and
appropriate valuation methodologies.
The fair value of financial instruments classified as current
assets or liabilities including cash and cash equivalents and
notes and accounts payable approximate carrying value due to the
short-term maturity of the instruments.
Concentration of Credit Risk
The Company invests its cash and certificates of deposit
primarily in deposits with major banks. Certain deposits, at
times, are in excess of federally insured limits. The Company
has not incurred losses related to its cash.
Uncertainty Due to the Year 2000 Issue
The Year 2000 issue arises because many computerized systems
use two digits rather than four to identify a year. Date-
sensitive systems may recognize the year 2000 as 1900 or some
other date, resulting in errors when information using year 2000
dates is processed. In addition, similar problems may arise in
some systems which use certain dates in 1999 to represent
something other than a date. The effects of the Year 2000 issue
may be experienced before, on, or after January 1, 2000 and, if
not addressed, the impact on operations and financial reporting
may range from minor errors to significant systems failure which
could impact the Company s ability to conduct normal business
operations. It is not possible to be certain that all aspects of
the Year 2000 issue affecting the Company will be fully resolved.
28
<PAGE>
7. New Accounting Pronouncements
SFAS 129
Statement of Financial Accounting Standards No. 129,
Disclosure of Information about Capital Structure ("SFAS 129"),
effective for periods ending after December 15, 1997, establishes
standards for disclosing information about an entity's capital
structure. SFAS 129 requires disclosure of the pertinent rights
and privileges of various securities outstanding (stock, options,
warrants, preferred stock, debt and participating rights)
including dividend and liquidation preferences, participant
rights, call prices and dates, conversion or exercise prices and
redemption requirements. Adoption of SFAS 129 has had no effect
on the Company as it currently discloses the information
specified.
SFAS 130
Statement of Financial Accounting Standards (SFAS) 130,
"Reporting Comprehensive Income", establishes standards for
reporting and display of comprehensive income, its components and
accumulated balances. Comprehensive income is defined to include
all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures,
SFAS 130 requires that all items that are required to be
recognized under current accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements.
The Company has reflected its foreign currency translation
adjustment as other comprehensive income in the accompanying
consolidated statement of changes in stockholders equity.
SFAS 131
SFAS 131, "Disclosure about Segments of a Business
Enterprise", establishes standards for the way that public
enterprises report information about operating segments in annual
financial statements and requires reporting of selected
information about operating segments in interim financial
statements issued to the public. It also establishes standards
for disclosures regarding products and services, geographic areas
and major customers. SFAS 131 defines operating segments as
components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources
29
<PAGE>
7. New Accounting Pronouncements (Continued)
SFAS 131 (Continued)
and in assessing performance. This accounting pronouncement has
had no effect on the Company's financial statements for the
periods presented. The Company will consider its effect on the
consolidated financial statements in the future as a result of
the acquisitions described in Note 7.
SFAS 132
Statement of Financial Accounting Standards (SFAS) 132,
"Employers' Disclosure about Pensions and Other Postretirement
Benefits," revises standards for disclosures regarding pensions
and other postretirement benefits. It also requires additional
information on changes in the benefit obligations and fair values
of plan assets that will facilitate financial analysis. This
statement does not change the measurement or recognition of the
pension and other postretirement plans. The financial statements
are unaffected by implementation of this new standard.
SFAS 133
Statement of Financial Accounting Standards (SFAS) 133,
"Accounting for Derivative Instruments and Hedging Activities,"
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and
for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value.
If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of the exposure to variable cash flows of
a forecasted transaction, or (c) a hedge of the foreign currency
exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for sale security, or
a foreign-currency-denominated forecasted transaction. Because
the Company has no derivatives, this accounting pronouncement has
no effect on the Company's financial statements.
40
<PAGE>
EXHIBIT EX-2.1
ARTICLES OF MERGER OF
PROVANTAGE, INC.
INTO
FAR WEST GROUP, INC.
These Articles of Merger (the "Articles") are entered into
by Provantange, Inc., a Florida corporation (the "Merging
Corporation") and Far West Group, Inc. (the "Surviving
Corporation"), a Nevada corporation, pursuant to #78,458 of the
Nevada General Law (the "Nevada Act") and #607,224 of the Florida
General Corporation Act (the "Florida Act").
1. The Merging Corporation shall be merged into the
Surviving Corporation (the "Merger").
2. A Plan of Merger, a copy of which is attached hereto
as Exhibit A, dated July 2, 1996, has been approved, adopted,
certified, executed and acknowledged by the Board of Directors of
each of the Merging Corporation and the Surviving Corporation in
accordance with the provisions of #78,451 of the Nevada Act and
#607,214 of the Florida Act.
3. The holders of all of the outstanding shares of
capital stock of each of the Merging Corporation and the
Surviving Corporation approved these Articles of Merger by
unanimous written consents dated July 2, 1996 and July 2, 1996,
respectively.
4. The shareholders of the Merging Corporation and the
shareholders of the Surviving Corporation: unanimously waive
publication of the notice of the merger.
5. An executed copy of the Plan of Merger is on file at
the principle place of business of the Surviving Corporation,
which is:
2610 West Verbena Avenue
Tucson, AZ. 85705
6. A copy of the Plan of Merger will be furnished by the
Surviving Corporation on request and without cost to any
stockholder of any constituent corporation.
7. The shares of common stock of the Merging Corporation
shall become shares of common stock of the Surviving Corporation
upon effectiveness of the Merger. Each share of common Stock of
the Merging Corporation shall be converted into one share of
common stock of the Surviving Corporation upon effectiveness of
the Merger.
1
<PAGE>
8. The Merging Corporation shall from time to time, as
and when requested by the Surviving Corporation, executed and
deliver all such documents and instruments and take all such
action necessary or desirableto evidence or carry outthis Merger.
9. The effect of the Merger and the effective date
thereof are prescribed by law.
IN WITNESS WHEREOF, the parties hereto have caused these
Articles to be executed by their duty authorized officers, as an
instrument under seal, as of this 2 of day of July, 1996.
ATTEST: FAR WEST GROUP, INC.,
A Nevada Corporation
By Jerry L Poore By /s/ Jerry L. Poore (SEAL)
Jerry L. Poore
PROVANTAGE INC.
A Florida Corporation
By Jerry L. Poore By /s/ Jerry L. Poore (SEAL)
Jerry L. Poore
2
<PAGE>
EXHIBIT EX-2.2
AGREEMENT AND
CERTIFIED BOARD RESOLUTION OF
BOARD OF DIRECTORS
OF PROVANTAGE, INC.
RESOLVED:
I. That Manhattan Transfer Registrar Co. of New York, N.Y.
be and hereby is appointed Transfer Agent and Registrar of the
common stock of this Corporation.
II. That the Transfer Agent and Registrar be and hereby is
authorized to issue, register and counter-sign certificates of
said stock of this Corporation in such names and for such numbers
of shares up to the full amount of such stock which is authorized
and unissued, and deliver such certificates as may be directed by
resolution of the Board of Directors or by written order of the
President or a Vice-president or Assistant Secretary or Treasurer
and an opinion of counsel in form and substance satisfactory to
it and such other documentation as it may require.
III. That the Transfer Agent and Registrar be and hereby is
authorized to accept for transfer and registration any
outstanding certificates of said stock of the Corporation
properly endorsed and stamped as required by law, and to issue,
register and countersign new certificates for a like number of
the same class of stock in place thereof and to deliver such new
certificates.
IV. That the said Transfer Agent and Registrar may use its own
judgment on matters affecting its shares hereunder and shall be
liable only for its own willful default or negligence, and that
this Corporation indemnifies and holds harmless the said Transfer
Agent and Registrar for each act done by it in good faith in
reliance upon any instrument or stock certificate believed by it
to be genuine and to be signed, countersigned or executed by any
person or persons authorized to sign, countersign or execute the
same.
V. That any certificates of the said stock issued, registered
and countersigned by the Transfer Agent and Registrar shall bear
the actual or facsimile signature of the present or any future
President or Vice-president and Secretary or Assistant Secretary
and the actual or facsimile seal of this Corporation. Should any
officer die, resign or be removed from office prior to the
issuance of any certificates of stock which bear his signature,
the Transfer Agent and Registrar may continue, until written
notice to the contrary is received, to issue and register such
certificates and for the stock certificates of this Corporation
notwithstanding such death, resignation or removal and such
certificates when issued and registered shall continue to be and
to constitute valid certificates of stock of the Corporation.
VI. The Transfer Agent and Registrar shall issue and register a
new certificate or certificates of said stock in lieu of lost,
destroyed or stolen certificate or certificates of such stock
upon the order of the Corporation, evidenced by a certified copy
of a resolution of the Board of Directors, or written direction
of the President or a Vice-president or Secretary or Treasurer,
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and upon the giving of a bond satisfactory to the Transfer Agent
and Registrar, protecting it from any loss.
VII. That the Transfer Agent and Registrar is authorized and
directed to open and maintain such ledgers and other books and to
keep such records as may be required or deemed advisable in the
performance of its agency.
VIII. That this appointment and the authorizations in these
resolutions contained shall cover and include and additional
shares of said class of stock which may hereafter be authorized
by this Corporation.
IX. That when certificates of this Corporation's stock shall be
presented to it for transfer and registration, the Transfer Agent
and Registrar is hereby authorized to refuse to transfer and
register the same until it is satisfied that the requested
transfer is legally in order, and that this Corporation shall
indemnify and hold harmless the Transfer Agent and Registrar and
the Transfer Agent and Registrar shall incur no liability for the
refusal, in good faith, to make transfer which it, in its
judgment, deems improper or unauthorized. The Transfer Agent and
Registrar may rely upon the Uniform Commercial Code and generally
accepted industry practice in effecting transfers, or delaying or
refusing to effect transfers.
X. That when the said Transfer Agent and Registrar deems it
expedient it may apply to this Corporation, or the counsel for
the Corporation, or to its own counsel for instructions and
advice, that this Corporation will promptly furnish or will cause
its counsel to furnish such instructions and advice, and for any
action taken in accordance with such instruction or advice, or in
case such instructions and advice shall not be promptly furnished
as required by this resolution, this Corporation will indemnify
and hold harmless said Transfer Agent and Registrar from any and
all liability, including attorneys fees and court costs. The
Transfer Agent and Registrar may, at its discretion, but shall
have no duty to prosecute or defend any action or suit arising
out of authorizations hereby granted unless this Corporation
shall, when requested, furnish it with funds or the equivalent to
defray the costs of such prosecution or defense.
XI. That the said Transfer Agent and Registrar may deliver from
time to time at its discretion, to this Corporation, for
safekeeping or disposition by the Corporation in accordance with
law, such records accumulated in the performance of its duties as
it may deem expedient, and this Corporation assumes all
responsibility for any failure thereafter to produce any paper,
record or document so returned if, and when, required.
XII. That the Corporation shall indemnify and hold harmless said
Transfer Agent and Registrar from any and all liability,
including attorneys fees and court costs, for any action taken by
the Transfer Agent and Registrar in connection with its
appointment and conduct as Transfer Agent and Registrar, except
for said agent s own willful misconduct or negligence, and shall
at the request of said Registrar and Transfer Agent, defend any
action brought against the agent hereunder.
XIII. That the Transfer Agent and Registrar is authorized to
forward certificates of Stock, Script and Warrants of this
Corporation issued on transfer or otherwise by first class mail
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under a blanket bond of indemnity covering the non-receipt of
such Stock, Script and Warrants by any of the stockholders of
this Corporation, in which bond this Corporation and the Transfer
Agent and Registrar are directly or indirectly named as obliges.
That in the event of non-receipt by any stockholder of this
Corporation of Certificates of Stock, Script and Warrants so
mailed, the Transfer Agent and Registrar is authorized to issue
and register new certificates of said Stock, Script and Warrants
for a like amount in place thereof, upon receipt from the
stockholders of an affidavit and proof of loss provided for under
said blanket bond and the issuance by the Surety Company of an
assumption of the loss under said blanket bond, all without
further action or approval of the Board of Directors or the
officers of this Corporation.
XIV. That the proper officers of this Corporation be and they
hereby are authorized and directed to deliver to the Transfer
Agent and Registrar a sufficient supply of blank stock
certificates and to renew such supply from time to time upon
request of the Transfer Agent and Registrar and to pay the
Transfer Agent and Registrar its prevailing fees and reimburse it
for disbursements incurred by it when and as the same are billed
to this Corporation which, to the event such fees and
disbursements remain unpaid, hereby grants to eh Transfer Agent
and Registrar a lien on the books, records and other property of
this Corporation in the custody or possession of the Transfer
Agent and Registrar.
XV. That the Transfer Agent and Registrar is hereby authorized
without any further action on the part of this Corporation to
appoint a successor Transfer Agent and Registrar any corporation
or company which may succeed to the business of the Transfer
Agent or Registrar by merger, consolidation or otherwise (such
corporation or company being hereafter called the Successor the
Successor to have the same authority and appointment contained in
this resolution as if this Corporation itself had appointed it
Transfer Agent and Registrar. The Successor shall, when
appointed, be the Agent of this Corporation and not an Agent of
Manhattan Transfer Registrar Co.
XVI. That the Secretary or Assistant Secretary be and hereby are
instructed to certify a copy of these resolutions under the seal
of this Corporation and lodge the same with Manhattan Transfer
Registrar Co., together with such certified documents, opinions
of counsel, certificates, specimen signatures of officers and
information as the Manhattan Transfer Registrar Co. may require,
it being understood and agreed that Manhattan Transfer Registrar
Co. shall be fully protected and held harmless for the failure of
this Corporation to give proper and sufficient notice of such
change.
XVII. That this document, when executed by the Corporation,
shall constitute the full agreement between it and Manhattan
Transfer Registrar Co. and shall not be amended or modified
except in writing signed by both parties.
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XVIII. This agreement shall be interpreted under the laws of the
State of New York.
Certificate of Secretary
I, Jerry Poore, Secretary of ProVantage, Inc. a corporation duly
and validly existing under the laws of the State of Florida do
hereby certify:
A. That the foregoing is a true copy of a certain Resolution
duly adopted, in accordance with the By-Laws, by the Board of
Directors of the said Corporation, at and recorded in the minutes
of a meeting of the said Board duly held on June 11, 1996, and of
the whole of the said Resolution, and that the said Resolution
has not been recorded or modified.
B. That, accompanying this Certificate are:
1. A copy of the Charter or Certificate of
Incorporation of the said Corporation, with all amendments to
date, duly certified under official seal by the State Officer
having custody of the original thereof;
2. A true and complete copy of the By-laws of the said
Corporation, as at present in force;
3. A signature card bearing the name and specimen
signatures of all the officers of the said Corporation;
4. Specimens of certificates of each denomination and
class of stock of the said Corporation in the form adopted by the
said Corporation and;
5. An opinion by counsel for the Corporation covering
validity of the outstanding shares referred to in the
aforementioned Resolution and their resolution or exemption from
registration under the Securities Act of 1933 as amended.
C. That the total authorized stock of the said Corporation is:
100,000,000 shares, divided into 80,000,000 Common and
20,000,000 Preferred.
That of the said authorized stock, there are now issued:
380,000 Shares of Common Stock of .0001 par Value each and zero
Shares of Preferred Stock of .0001 par Value that such issue has
been duly authorized and that all of the said shares are fully
paid.
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D. That the following data are true and correct with respect
to the said Corporation:
Names of Officers Addresses
President Clark Vaught 2610 W. Verbena Ave., Tucson, AZ 85705
Vice-President N/A
Secretary Jerry Poore 4951 E. Grant Rd. Tucson, AZ 85712
Treasurer Jerry Poore (above)
Counsel David Levinson/
Venable B.H.&C. 1201 New York Ave., Suite 1000,
Washington, D.C. 20005
Address of the Corporation 2610 W. Verbena Ave., Tucson, AZ
85705
In Witness Whereof, I have hereunto set my hand, and affixed
the seal of the said Corporation, this 11th Day of June 1996.
(Corporate Seal)___________________________________
Agreed To and Accepted Manhattan Transfer Registrar Company
(Corporate Seal)By Hector Cruz
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EHIBIT EX-2.3
STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 24th day of May
1999, by and between Far West Group, ("Seller") and New Pumpco,
("Purchaser");
WHEREAS, the Seller is the record owner and holder of the issued
and outstanding shares of the capital stock of Far West Pump Co,
("Corporation"), a Arizona corporation, which Corporation has
issued capital stock of 1,000 shares of $.01 par value common
stock, and
WHEREAS, the Purchaser desires to purchase 100.0% (one hundred
percent) or 1,000 shares of said stock and the Seller desires to
sell 100.0% of said stock, upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, and in order to
consummate the purchase and the sale of the Corporation's Stock
aforementioned, it is hereby agreed as follows:
1. PURCHASE AND SALE:
Subject to the terms and conditions hereinafter set forth, at the
closing of the transaction contemplated hereby, the Seller shall
sell, convey, transfer, and deliver to the Purchaser certificates
representing such stock; and the Purchaser shall purchase from
the Seller the Corporation's Stock in consideration of the
purchase price set forth in this Agreement. The certificates
representing the Corporation's Stock shall be duly endorsed for
transfer or accompanied by appropriate stock transfer powers duly
executed in blank, in either case with signatures guaranteed in
the customary fashion. The closing of the transactions
contemplated by this Agreement ("Closing"), shall be held at
10:00 AM, on May 24, 1999, at Seller s offices, or such other
place, date and time as the parties hereto may otherwise agree.
2. AMOUNT AND PAYMENT OF PURCHASE PRICE.
Purchaser will assume a $200,000 Note Payable to Clark Vaught
currently owed by the Company and The Company will make an
additional payment of $70,000 in cash at financing to the Seller.
Such debt assumption and payment of additional consideration will
be in full satisfaction of 100% transfer of the former subsidiary
of the Company.
3. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller hereby warrants and represents:
(a) Organization and Standing.
Corporation is a Nevada corporation duly organized, validly
existing and in good standing under the laws of Nevada and has
the corporate power and authority to carry on its business as it
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is now being conducted. A copy of said Corporate Charter and
good standing certificate is hereby attached as exhibit "A".
(b) Restrictions on Stock.
The Seller is not a party to any agreement, written or oral,
creating rights in respect to the Corporation's Stock in any
third person or relating to the voting of the Corporation's
Stock.
Seller is the lawful owner of the Stock.
There are no existing warrants, options, stock purchase
agreements, redemption agreements, restrictions of any nature,
calls or rights to subscribe of any character relating to the
stock, nor are there any securities convertible into such stock.
The stock issued is in accordance with existing rules and
regulation and exemptions to the S.E.C. rules.
4. REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER.
Seller and Purchaser hereby represent and warrant that there has
been no act or omission by Seller, Purchaser or the Corporation
which would give rise to any valid claim against any of the
parties hereto for a brokerage commission, finder's fee, or other
like payment in connection with the transactions contemplated
hereby.
5. TITLE TO PROPERTIES AND ASSETS.
The Corporation has good, absolute and marketable title to all
its properties and assets.
To the best of the Seller s knowledge and belief, the Corporation
owns, possesses, and has good title to all copyrights,
trademarks, trademarks rights, patents, patent rights, and
licenses necessary in the conduct of its' business. To the best
of the Seller s knowledge and belief, the Corporation has the
unrestricted right to use all trade secrets, customer lists,
manufacturing and other processes incident to the manufacture,
use or sale of any and all products presently sold by it.
6. FINANCIAL STATEMENTS.
Attached hereto as exhibit "B" is a current financial statement
of the Corporation prepared by the Seller.
7. GENERAL PROVISIONS
(a) Entire Agreement. This Agreement (including the exhibits
hereto and any written amendments hereof executed by the parties)
constitutes the entire Agreement and supersedes all prior
agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof.
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(b) Sections and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.
(c) Governing Law. This agreement, and all transactions
contemplated hereby, shall be governed by, construed and enforced
in accordance with the laws of the State of Arizona.
IN WITNESS WHEREOF, this Agreement has been executed by each of
the individual parties hereto on the date first above written.
Signed, sealed and delivered in the presence of:
PURCHASER SELLER
New Pumpco Far West Group
By: /s/ C. Crews By: /s/ Dallas Talley
C. Crews Dallas Talley
President
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EXHIBIT EX-3.(I)
ARTICLE OF INCORPORATION
(Pursuant to NRS 78)
OF
FAR WEST GROUP, INC.
* * * * * *
FIRST. The name of the corporation is Far West Group,
Inc.
SECOND. The name and address of the Resident Agent is: The
Corporate Trust Company of Nevada, One East First Street, Reno,
Nevada 89501.
THIRD. The corporation is authorized to issue 80,000,000
shares of common stock with a par value of $.0001, and 20,000,000
shares of preferred stock with a par value of $.0001.
The board of directors is hereby authorized to
prescribe by resolution the voting powers, designations,
preferences, limitations, restrictions, relative rights and
distinguishing designations of each of the above class or series
of stock.
FOURTH. The governing board of this corporation shall be
known as directors, and the number of directors may from time to
time be increased or decreased in such manner as shall be
provided by the bylaws of this corporation.
The names and addresses of the first board of
directors, which shall be three (3) in number, are as follows:
Clark P. Vaught 2610 West Verbena Avenue
Tucson, Arizona 85705
Jerry L. Poors 2610 West Verbena Avenue
Tucson, Arizona 85705
Jerry Weiss 2610 West Verbena Avenue
Tucson, Arizona 85705
FIFTH. The name and address of each of the incorporators
signing the articles of incorporation are as follows:
Dinah Castellano 1025 Vermont Avenue NW
Washington, DC 20005
Judy Argao 1025 Vermont Avenue NW
Washington, DC 20005
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WE, THE UNDERSIGNED, being each of the incorporators
hereinbefore remand, for the purpose of forming a corporation
pursuant to the General Corporation Law of the State of Nevada,
do make and file these articles of incorporation, hereby
declaring and certifying that the facts herein stated are true,
and accordingly have hereunto set our hands this 2nd day of July,
1996.
/s/ Dinah Castellano
Dinal Castellano
/s/ Judy Argo
Judy Argao
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EXHIBIT EX-3.(II)
BYLAWS
OF
FARWEST GROUP, INC.
ARTICLE 1. OFFICERS
The principle office of the corporation in the State of
Nevada shall be located in Tucson, Arizona, county of Pima. The
Corporation may have such offices, either within or without the
State of Arizona, as the Board of Directors may designate or as
the business of the Corporation may require from time to time.
ARTICLE II: SHAREHOLDERS
SECTON 1. Annual Meeting. The date of the annual meeting of the
shareholders, for all future meetimngs beginning in the year 2000
will be held on the second Thursday of May, at the hour of 10:00
am, for the purpose of electing Directors and for the transaction
of such other business as may come before the meeting. If the
day fixed for the annual meeting shall be a legal holiday in the
State of Arizona, such meeting shall be held on the next
succeeding business day. If the election of Directors shall not
be held on the day designated herein for any annual meeting of
the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special
meeting of the shareholders as soon thereafter as conveniently
may be.
SECTION 2. Special Meetings. Special meetings of the
shareholders, for any purpose, unless otherwise prescribed by
statute, may be called by the President of the Board of
Directors, and shall be called by the President at the request of
the holders of not less than twenty percent (20%) of all
outstanding shares of the Corporation entitled to vote at the
meeting.
SECTION 3. Place of the Meeting. The Board of directors may
designate any place, either within or without the State of
Arizona, unless otherwise prescribed by statute, as the place of
meeting for any annual meeting or for any special meeting. A
waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the
state of Arizona, unless otherwise prescribed by statute, as the
place for the holding of such meeting. If no designation is
made, the place of the meeting shall be the principal office of
the Corporation.
SECTION 4. Notice of the Meeting. Written notice state the
place, day and hour of which the meeting is called, shall unless
otherwise prescribed by state, be delivered not less than ten
(10) nor more than fifteen (15) days before the date of the
meeting, to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock transfer
book of the Corporation, with postage thereon prepaid.
SECTION 5. Closing of Transfer Books or Fixing of Record. For
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the purpose of determining shareholders entitle to notice or to
vote at any meeting of shareholders of any adjournment thereof,
of shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other
proper purpose, the Board of Directors of the Corporation may
provide that the stock transfer books shall be closed for a
stated period, but not to exceed in any case five (5) days. If
the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of, or to vote at, a
meeting of shareholders, such books shall be closed for at least
five (5) days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix
in advance a date as the record date for any such determination
of shareholders, such date in any case to be not more than ten
(10) days and, in case of a meeting of shareholders, not less
than ten (10) days, prior to the date on which the particular
action requiring such determination of shareholders is taken. If
the stock transfer books are not closed and no record date is
fixed for the determination of shareholders entitled to notice
of, or to vote at, at meeting of shareholders, or shareholders
entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed, of the date on which the
resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has
been made as provided in this section, such determination shall
apply to any adjournment thereof.
SECTION 6. Voting List. The officer or agent having charge of
the stock transfer books for shares of the corporation shall make
a complete list of the shareholders entitled to vote at each
meeting of shareholders or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares
held by each. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the
meeting for the purpose thereof.
SECTION 7. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders. If less
than a majority of the outstanding shares are represented at a
meeting, a majority of the shares so represented may adjourn the
meeting from time to time without further notice. At such
adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
SECTION 8. Proxies. At all meetings of shareholders, a
shareholder may vote in person or by proxy executed in writing by
the shareholder or by his or her duly authorized attorney-in-
fact. Such proxy shall be filed with the secretary of the
Corporation before or at the time of the meeting. A meeting of
the Board of Directors may be had by means of a telephone
conference or similar communication equipment by which all
persons participating in the meeting can hear each other, and
participation in a meeting under such circumstances shall
constitute presence at the meeting.
SECTION 9. Voting of Shares. Each outstanding share entitled to
vote shall be entitled to one vote upon each matter submitted to
a vote at a meeting of shareholders.
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SECTION 10. Voting of Shares by Certain Holders. Shares
standing in the name of another corporation may be voted by such
officer, agent or proxy as the bylaws of such Corporation may
prescribe or, in the absence of such provision, as the Board of
Directors of such Corporation may determine.
Shares held by an administrator, executor, guardian or
conservator may be voted by him either in person or by proxy,
without a transfer of such shares into his name. Shares standing
in the name of a trustee may be voted by him, either in person or
by proxy, but no trustee shall be entitled to vote share held by
him without a transfer o such shares into his name.
Shares standing in the name of a receiver maybe voted by
such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer
thereof into his name, if authority to do so be contained in an
appropriate order of the court by which receiver was appointed.
A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled
to vote the shares so transferred.
Shares of its own stock belonging to the Corporation shall
not be voted directly or indirectly, at any meeting, and shall
not be counted in determining the total number of outstanding
shares at any given time.
SECTION 11. Informal Action by Shareholders. Unless otherwise
provided by law, any action required to be taken at a meeting of
the shareholders, or any other action which may be taken at a
meeting of the shareholders, may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect
to the subject matter thereof.
ARTICLE III. BOARD OF DIRECTORS
SECTION 1. General Powers. The business and affairs of the
Corporation shall be managed by its Board of Directors.
SECTION 2. Number, Tenure and Qualifications. The number of
directors of the Corporation shall be fixed by the Board of
Directors, but in no event shall be less than two (2). Each
Director shall hold office until the next annual meeting of
shareholders and until his successor shall have been elected and
qualified.
SECTION 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this Bylaw
immediately after, and at the same place as, the annual meeting
of shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional
regular meetings without notice other than such resolution.
SECTION 4. Special Meetings. Special meetings of the Board of
Directors may be called by, or at the request of, the President
or any two Directors. The person or persons authorized to call
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special meetings of the Board of Directors may fix the place for
holding any special meeting of the Board of Directors called by
them.
SECTION 5. Notice. Notice of any special meeting shall be given
at least one (1) day previous thereto by written notice delivered
personally or mailed to each director at his business address, or
by telegram. If mailed, such notice shall be deemed to be
delivered when deposited in the United States Mail so addressed,
with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any Directors may waive
notice of any meeting. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where
a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 6. Quorum. A majority of the number directors fixed by
Section 2 of this Article iii shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors,
but if less than such majority is present at a meeting, a
majority of the Directors present may adjourn the meeting from
time to time without further notice.
SECTION 7. Manner of Acting. The act of the majority of the
directors present at a meeting at which a quorum is present shall
be the act of the Board of Directors.
SECTION 8. Action Without a Meeting. Any action that may be
taken by the Board of Directors at a meeting may be taken without
a meeting if consent in writing, setting for the action so to be
taken, shall be signed before such action by all of the
directors.
SECTION 9. Vacancies. Any vacancies occurring in the Board of
Directors may be filled by the affirmative vote of a majority of
the remaining directors though less than a quorum of the Board of
Directors, unless otherwise provided by law. A director elected
to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Any directorship to be filled by reason
of an increase in the number of directors may be filled by
election by the Board of Directors for a term of office
continuing only until the next election by the Board of Directors
for a term of office continuing only until the next election of
directors by the shareholders.
SECTION 10. Compensation. By resolution of the Board of
Directors, each director may be paid his expenses, if any of
attendance at each meeting of the Board of Directors, and may be
paid a stated salary as director, a fixed sum for attendance each
meeting of the Board of Directors or both. No such payment shall
preclude any director from serving the Corporation in any other
capacity and receiving compensation thereof.
SECTION 11. Presumption of Assent. A director of the
Corporation who is present at a meeting of the Board of Directors
at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as
the Secretary of the meeting before the adjournment thereof, or
shall forward such dissent by registered mail to the Secretary of
the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in
favor of such action.
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ARTICLE IV: OFFICERS
SECTION 1. Number. The Officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary and a
Treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be
deemed necessary may be elected or appointed by the Board of
Directors, including a Chairman of the Board. In its discretion,
the Board of Directors may leave unfilled for any such period as
it may determine, any office except those of President and
Secretary. Any two or more offices may be held by the same
person, except for the offices of President and Secretary which
may not be held by the same person. Officers may be directors or
shareholders of the Corporation.
SECTION 2. Election and Term of Office. The officers of the
Corporation to be elected by the Board of Directors shall be
elected annually by the Board of Directors at first meeting of
the Board of Directors held after each annual meeting of the
shareholders. If the election of officers shall not be held at
such meeting, such election shall be held as soon thereafter as
conveniently may be. Each office shall hold office until his
successor shall have been duly elected and shall have qualified,
or until his death, or until he shall resign or shall have been
removed in the manner hereinafter provided.
SECTION 3. Removal. any officer or agent may be removed by the
Board of Directors whenever, in its judgment, the best interests
of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or
agent shall not of itself create contract rights, and such
appointment shall be terminable at will.
SECTION 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be
filled by the Board of Directors for the unexpired portion of the
term.
SECTION 5. President. The President shall be the principal
executive officer of the Corporation and, subject to the control
of the Board of Directors, shall in general supervise and control
all of the business and affairs of the Corporation. He shall,
when present, preside at all meetings of the shareholders and of
the Board of Directors, unless there is a Chairman of the Board,
in which case the Chairman shall preside. He may sign, with the
Secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, certificates for
shares of the Corporation, any deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of
Directors or by these bylaws to some other officer or agent of
the Corporation, or shall be required by law to be otherwise
signed or executed; and in general shall perform all duties
incident to the office of the President and such other duties as
may be prescribed by the Board of Directors from time to time.
SECTION 6. The Vice President. In the absence of the President
or in event of his death, inability or refusal to act, the Vice
President shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the
5
<PAGE>
restrictions upon the President. The Vice President shall
perform such other duties as from time to time may be assigned to
him by the President of the Board of Directors. If there is more
than one vice President, each Vice President shall succeed to the
duties of the President in order of rank as determined by the
Board of Directors. If no rank has been determined, then each
Vice President shall succeed to the duties of the President in
order of date of election, the earliest date having the first
rank.
SECTION 7. Secretary. The Secretary shall: (a) keep the minutes
of the proceedings of the shareholders and of the Board of
Directors in one or more minute books provided for that purpose;
(b) see that all notices are duly given in accordance with the
provisions of the Bylaws or required by law; (c) be custodian of
the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the
execution of which on behalf of the Corporation under its seal is
duly authorized; (d) keep a register of the post office address
of each shareholder which shall be furnished to the Secretary by
such shareholder; (e) sign with the President certificates for
shares of the Corporation, the issuance of which shall have been
authorized by resolution of the Board of Directors; (f) have
general charge of the stock transfer books of the Corporation;
and (g) in general perform all duties incident to the office of
the Secretary and such other duties as from time to time may be
assigned him by the President or by the Board of Directors.
SECTION 8. Treasurer. The Treasurer shall: (a) have charge and
custody of and be responsible for all funds and securities of the
Corporation; (b) receive and give receipts for money due and
payable to the Corporation from any source whatsoever, and
deposit all such moneys in the name of the Corporation in such
banks, trust companies or other depositories as shall be selected
in accordance with the provisions of Article VI of these Bylaws;
and (c) in general perform all of the duties as from time to time
may be assigned to him by the President or by the Board of
Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in
such sum and with such sureties as the Board of Directors shall
determine.
SECTION 9. The salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that
he is also a director of the Corporation.
ARTICLE V: INDEMNITY
The Corporation shall indemnify its directors, officers and
employees as follows:
(A) Every director, officer, or employee of the
Corporation shall be indemnified by the Corporation against all
expenses and liabilities, including counsel fees, reasonably
incurred by or imposed upon him in connection with any proceeding
to which he may become involved, by reason of his being or having
been a director, officer, employee or agent of the Corporation or
is or was serving at the request of the Corporation as director,
officer, employee or agent of the corporation, partnership, joint
venture, trust, or enterprise, or any settlement thereof, whether
or not he is a director, officer, employee or agent at the time
such expenses are incurred, except in such cases wherein the
director, officer, employee is adjudged guilty of willful
misfeasance or malfeasance in the herein shall apply only when
the Board of Directors approves such settlement and reimbursement
as being for the best interest of the Corporation.
6
<PAGE>
(B) The Corporation shall provide to any person
who is or was a director, officer, employee, or agent of the
Corporation or is or was serving at the request of the
Corporation as a director, officer, employee, or agent of the
corporation, partnership, joint venture, trust or enterprise, the
indemnity against expenses of suit, litigation or other
proceedings which is specifically permissible under applicable
law.
(C) The Board of Directors may, in its discretion,
direct the purchase of liability insurance by way of implementing
the provision of the Article V.
ARTICLE VI: CONTRACTS, LOANS, CHECKS AND
DEPOSITS
SECTION 1. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract
or execute and deliver any instrument in the name of and on
behalf of the Corporation, and such authority may be general or
confined to specific instances.
SECTION 2. Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in
its name unless authorized by a resolution of the Board of
Directors. Such authority may be general or confined to
specific instances.
SECTION 3. Checks, Drafts,, etc. All checks, drafts or other
orders for the payment of money, notes, of other evidences of
indebtedness issued in the name of the Corporation, shall be
signed by such officers of officers, agent or agents of the
Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of
the Corporation in such banks, trust companies or other
depositories as the Board of Directors may select.
ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. Certificates for Shares. Certificates representing
shares of the Corporation shall be in form as shall be determined
by the Board of Directors. Such certificates shall be signed by
the President and by the Secretary or by such other officers
authorized by law and by the Board of Directors so to do, and
sealed with the corporate seal. All certificates for shares
shall be consecutively numbered or otherwise indemnified. The
name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation.
All certificates surrendered to the Corporation for transfer
shall be canceled and no new certificates shall be issued until
the former certificates for a like number of shares shall have
been surrendered and canceled, except that in case of a lost,
destroyed or mutilated certificate a new one may issued therefore
upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
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<PAGE>
SECTOIN 2. Transfer of Shares. Transfer of shares of the
Corporation shall be made only on the stock transfer books of the
Corporation by the holder of record thereof or by his legal
representative, who shall furnish proper evidence of authority to
transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the
Corporation, and on surrender for cancellation of the certificate
for such shares. The person on whose name shares stand on the
books of the Corporation shall be deemed by the Corporation to be
the owner there of for all purposes. Provided, however, that
upon any action undertaken by the shareholders to elect S
Corporation Status pursuant to Section 1362 of the Internal
Revenue Code and upon any shareholders agreement thereto
restricting the transfer of said shares so as to disqualify said
S Corporation status, said restriction on transfer shall be made
a part of the Bylaws so long as said agreement is in force and
effect.
ARTICLE VIII: FISCAL YEAR
The fiscal year of the Corporation shall begin on the 1st
day of January and end on the 31st day of December of each year.
ARTICLE IX: DIVIDENDS
The Board of Directors may from time to time declare, and
the Corporation may pay, dividends on its outstanding shares in
the manner and upon the terms and conditions provided by law and
its Articles of Incorporation.
ARTICLE X: CORPORATE SEAL
The Board of Directors shall provide a corporate seal which
shall be circular in form and shall have inscribed thereon the
name of the Corporation and the State of the incorporation and
the words. Corporate Seal.
ARTICLE XI: WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is
required to be given to any shareholder of director of the
Corporation under the provisions of these Bylaws or under the
provisions of the Articles of Incorporation or under the
provisions of the applicable Business Corporation Act, a waiver
thereof in writing, signed by the person or persons entitled to
such notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice.
ARTICLE XII: AMENDMENTS
These Bylaws may be altered, amended or repealed and new
Bylaws may be adopted by the Board of Directors at any regular of
special meeting of the Board of Directors.
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The above Bylaws are certified to have been adopted by the
Board of Directors of the Corporation on the 20th day of August
1996.
/s/ Jerry L. Poore
Secretary
Jerry L. Poore
9
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EXBIBIT EX-5.1
LAW OFFICES
LINDQUIST & VENNUM P.L.L.P
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402-2205
612-371-3211
November 24, 1999
Board of Directors, Far West Group, Inc.
1665 East 18th Street, Suite 113
Tucson, Arizona 85719
RE: Opinion Letter as to corporate status and filing: Far
West Group, Inc.
Dear Sirs:
This letter will affirm that our office represents Far West
Group, Inc. as special securities counsel related to certain
filings with the Securities & Exchange Commission (SEC) and
related state securities regulatory agencies. In this capacity,
we affirm than it is our opinion that Far West Group, Inc. is a
Nevada Corporation in good standing and that the Board of
Directors has full and complete legal authority, as previously
indicated to our office, to prepare and file a Form 10-SB
Registration Statement. We are further of the opinion that this
letter constitutes a sufficient attorney's opinion letter for
such filing purposes. Should you need any further information or
opinion from our office related to this filing, please contact
the undersigned at your convenience.
This letter will be filed as an Exhibit to your Form 10-SB
filing.
Sincerely,
/s/ Ronald D. McFall
Ronald D. McFall
Attorney at Law
EXHIBIT EX-10.1
LIMITED NONEXCLUSIVE PATENT AND COPYRIGHT
LICENSE AGREEMENT
For
CAPACITIVE DEIONIZATION
For
Brackish Water/Sea Water Desalination
and
Treatment of Heat Exchanger and Boiler Water, Industrial and
Commercial Process Water, and Ultrapure Industrial Water
Between
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
and
FAR WEST GROUP, INC.
LLNL Case No. TL-1387-97
Lawrence Livermore National Laboratory
University of California
P.O. Box 808, L-795, Livermore, CA 94551
Industrial Partnerships and Commercialization
January 1997
1
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TABLE OF CONTENTS
1. BACKGROUND 1
2. DEFINITIONS 2
3. LICENSE GRANT 5
4. FEES, ROYALTIES AND PAYMENT 5
5. PERFORMANCE OBLIGATIONS 6
6. PROGRESS AND ROYALTY REPORTS 7
7. BOOKS AND RECORDS 10
8. TERM 11
9. TERMINATION 11
10. PATENT PROSECUTION AND MAINTENANCE 12
11. PATENT AND COPYRIGHT INFRINGEMENT 13
12. USE OF NAMES AND TRADEMARKS 14
13. LIMITED WARRANTY 14
14. INDEMNIFICATION AND INSURANCE 15
15. NOTICE REQUIREMENT FOR LICENSED PRODUCTS 17
16. WAIVER 19
17. ASSIGNABILITY 19
18. LATE PAYMENTS 19
19. NOTICES 19
20. DISPUTES AND GOVERNING LAWS 21
21. PATENT MARKING 21
22. GOVERNMENT APPROVAL OR REGISTRATION 21
23. EXPORT CONTROL LAWS 22
24. FORCE MAJEURE 22
25. UNITED STATES PREFERENCE 22
26. MISCELLANEOUS 22
EXHIBIT A - INTELLECTUAL PROPERTY 25
EXHIBIT B - LICENSED RIGHTS 29
EXHIBIT C - LICENSE ISSUE FEE, ROYALTIES
AND PAYMENTS 32
EXHIBIT D - MUTUAL NONDISCLOSURE AGREEMENT 35
2
<PAGE>
LIMITED NONEXCLUSIVE
PATENT AND COPYRIGHT LICENSE AGREEMENT
For
CAPACITIVE DEIONIZATION TECHNOLOGY
For
Brackish Water/Sea Water Desalination
and
Treatment of Heat Exchanger and Boiler Water, Industrial and
Commercial Process Water, and Ultrapure Industrial Water
This Agreement is between THE REGENTS of the University of
California ("THE REGENTS"), under its U.S. Department of Energy
Contract No. W-7405-ENG-48 to manage and operate Lawrence
Livermore National Laboratory ("LLNL"), and FAR WEST GROUP, INC.,
an Arizona corporation having its principal place of business at
2610 W. Verbena Avenue, Tucson, AZ 85705 ("LICENSEE"). THE
REGENTS is a corporation organized and existing under the laws of
the State of California, with its principal office at 300
Lakeside Drive, Oakland, CA 94612-3550. THE REGENTS and
LICENSEE are referred to jointly as "Parties".
1. BACKGROUND
1.1 Certain copyrightable works and inventions, characterized
as capacitive deionization process using carbon aerogel
electrodes and software to automate the deionization and
regeneration process, were made at Lawrence Livermore National
Laboratory and are covered by "THE REGENTS Intellectual Property
Rights" as defined in Article 2.
1.2 The U.S. Department of Energy ("DOE") entirely or in part
sponsored development of the copyrightable works and inventions.
Consequently, this Agreement and the resulting license is subject
to overriding obligations to the U.S. Government.
1.3 LICENSEE has requested certain rights from THE REGENTS for
commercial development of capacitive deionization, and THE
REGENTS is willing to grant such rights so that the benefit of
the process may be enjoyed by the general public.
1.4 LICENSEE is a small business and has provided
certification.
1.5 BothParties recognize that royalties due under this
Agreement will be paid on licensed copyrights, invention
disclosures, patent applications, and issued patents.
THEREFORE the Parties agree as follows:
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<PAGE>
2. DEFINITIONS
In addition to terms otherwise defined herein, the following
terms will have the meaning ascribed to them in this Article 2:
2.1 "LICENSEE" shall mean FAR WEST GROUP, INC., its Affiliates
and Joint Ventures.
2.2 "Affiliate" of a Party means any entity that, directly or
indirectly, controls that Party, is controlled by that Party or
is under common control with that Party; "control" for these
purposes means the actual, present capacity to elect a majority
of the directors or other managing authority of such entity.
2.3 "Joint Venture" means any separate entity established
pursuant to an agreement between a third party and LICENSEE to
constitute a vehicle for a joint venture, in which the separate
entity manufactures, uses, purchases, sells, or acquires Licensed
Products from LICENSEE.
2.4 "Effective Date" means the date of execution by the last
signing Party.
2.5 "Fields of Use" are the applications or uses defined in
Exhibit B.
2.6 "THE REGENTS' Intellectual Property Rights" are THE
REGENTS' rights in Licensed Copyright and Licensed Patents under
applicable laws.
2.7 "Licensed Patents" are:
(a) the U.S. patents, U.S. patent applications, and
invention disclosures
specified in Exhibit A, and resulting patents;
(b) reissues and continuations of (a) above; and
(c) foreign patent applications listed in Exhibit A, and
resulting patents.
2.8 "Licensed Method" is any method, procedure, process, or
other subject matter whose use or practice would constitute an
infringement of THE REGENTS' Patent Rights but for the license
granted to LICENSEE under this Agreement.
2.9 "Licensed Copyright" means THE REGENTS' copyright rights
in software specified in Exhibit A, in the form that the software
is maintained by LLNL as of the Effective Date of this Agreement.
4
<PAGE>
2.10 "Licensed Software" means software specified in Exhibit A.
2.11 "Licensed Products" are products whose manufacture, use,
sale, export, or offer for sale, or whose reproduction,
preparation of derivative works, distribution or display, would
constitute an infringement of THE REGENTS' Intellectual Property
Rights but for the license granted to LICENSEE under this
Agreement. Licensed Products include (i) products that employ or
incorporate Licensed Software, (ii) products that incorporate or
are produced by the practice of subject matter of Licensed
Patents, and (iii) services performed using Licensed Products or
Licensed Methods.
2.12 "Lease Price," as used in this Agreement to compute
royalties, means gross income from leasing after deducting
outbound transportation prepaid or allowed. The term lease
means a contract by which one conveys equipment and/or facilities
for a specified term and for a specified fee.
2.13 "Net Sales," as used in this Agreement to compute
royalties, means the total of (a) the aggregate Net Selling Price
for all Licensed Products sold or otherwise transferred by
LICENSEE for value during the relevant period other than by
lease, and (b) the aggregate Lease Price for all Licensed
Products that are leased by or for the benefit of LICENSEE as
lessor during the relevant period. Net Sales will not include
sales or leases to the U.S. Government.
2.14 "Net Selling Price," as used in this Agreement to compute
royalties, is the gross invoice selling price or lease price of
Licensed Products by LICENSEE to independent third parties for
cash or other forms of consideration, f.o.b. factory, after
deducting:
(a) Discounts allowed in amounts customary in the trade;
and
(b) Sales, tariff duties and/or use taxes directly
imposed and with reference to
particular sales; and
(c) Outbound transportation prepaid or allowed; and
(d) Amounts allowed or credited on returns.
No deductions will be made from Net Selling Price for
commissions paid to individuals whether they be with independent
sales agencies or regularly employed by LICENSEE and on its
payroll, or for cost of collections.
5
<PAGE>
The Net Selling Price of Licensed Products that are not
sold or leased, but are otherwise disposed of, is the selling
price at which LICENSEE is currently offering for sale products
of similar kind and quality, sold in similar quantities. If
LICENSEE is not currently offering comparable products for sale,
then the Net Selling Price is the average selling price at which
products of similar kind and quality, sold in similar quantities,
are currently offered for sale by other manufacturers. If
comparable products are not currently sold or offered for sale by
others, then the Net Selling Price will be LICENSEE's cost of
manufacture determined by LICENSEE's customary accounting
procedures, plus LICENSEE's standard markup.
3. LICENSE GRANT
3.1 The license granted to LICENSEE by THE REGENTS is set
forth in Exhibit B.
3.2 The U.S. Government retains a paid-up, royalty-free,
nontransferable, worldwide, irrevocable license to practice or
have practiced all Licensed Patents, and to reproduce, prepare
derivative works, distribute copies to the public, and display
publicly Licensed Copyright for or on behalf of the U.S.
Government. The U.S. Government has certain other rights under
35 U.S.C. 200-212 and applicable regulations.
3.3 THE REGENTS reserves the right to use THE REGENTS'
Intellectual Property Rights for noncommercial, educational, and
research purposes.
4. FEES, ROYALTIES AND PAYMENT
4.1 LICENSEE will pay to THE REGENTS a non-refundable license
issue fee, earned royalties on the commercial sale and use of
Licensed Products and Licensed Methods, and minimum royalties, as
set forth in Exhibit C.
4.2 LICENSEE will pay all fees and royalties in U.S. dollars
collectible at par in San Francisco, California. When Licensed
Products are sold for currencies other than U.S. dollars, earned
royalties will first be determined in the foreign currency of the
country in which the Licensed Products were sold and then
converted into equivalent U.S. dollars. The exchange rate is
that rate quoted in the Wall Street Journal on the last business
day of the reporting period and is quoted as local currency per
U.S. dollar. LICENSEE will be responsible for all bank transfer
charges.
6
<PAGE>
4.3 If legal restrictions prevent LICENSEE from making prompt
payment of part or all of any royalties on sales of Licensed
Products in any country outside the U.S. from LICENSEE's source
of funds outside the U.S., LICENSEE will convert the amount owed
to THE REGENTS into U.S. funds and pay THE REGENTS directly from
LICENSEE's U.S. source of funds.
4.4 THE REGENTS will not collect royalties on Sales of
Licensed Products to the U.S. Government. LICENSEE will reduce
the amount charged for such sale by an amount equal to the
royalty otherwise due THE REGENTS hereunder.
5. PERFORMANCE OBLIGATIONS
5.1 LICENSEE, upon execution of this Agreement, shall (i)
diligently proceed with the development, manufacture and sale of
Licensed Product(s) and use of Licensed Methods and earnestly and
diligently endeavor to market the same within a reasonable time
after execution of this Agreement as specified in Exhibit B
Paragraph C (Performance Obligations) to this Agreement; and (ii)
comply with the minimum royalty requirements specified in Exhibit
C.
5.2 The commercialization conditions specified in this
Agreement may by mutual written consent of LICENSEE and THE
REGENTS be amended and/or extended, at the written request of
LICENSEE to THE REGENTS, based upon legitimate business reasons
specified in reasonable detail in such written request.
5.3 If LICENSEE fails to perform the commercialization
conditions specified in this Agreement, THE REGENTS may at its
sole option upon at least sixty (60) days prior written notice to
LICENSEE: (i) negotiate a new schedule and conditions; or (ii)
terminate this Agreement.
5.4 During the term of this Agreement, LICENSEE will conduct
normal, continuous business operations. If LICENSEE seeks
protection under any United States bankruptcy proceedings during
the term of this Agreement, LICENSEE will notify THE REGENTS in
writing no later than seventy-two (72) hours before the
bankruptcy filing. A bankruptcy filing by the LICENSEE will be
grounds for termination of this Agreement by THE REGENTS.
7
<PAGE>
6. PROGRESS AND ROYALTY REPORTS
6.1 Until the first commercial sale of a Licensed Product,
LICENSEE will submit to THE REGENTS a semi-annual progress report
covering LICENSEE activities in meeting the performance
obligations set forth in Article 5 and Exhibit B of this
Agreement. The report will include at a minimum the following
information:
License Number
Name of Licensee
Date of Report
Reporting period
Description of Licensed Products or Licensed Methods
Status of Commercialization Milestones
The report will be due to THE REGENTS on August 31 of each
calendar year for the period January through June of that year
and on February 28 of each calendar year for the period July
through December of the preceding calendar year. The first
report will be due August 31, 1997 for commercialization
activities during the period January 1, 1997 through June 30,
1997.
6.2 LICENSEE will report to THE REGENTS the first commercial
sale of each type of Licensed Product, and the first commercial
use of Licensed Methods, in the U.S. and in each country outside
the U.S. Such report will include at a minimum, the following
information.
License Number
Name of Licensee
Date of Report
Date of First Commercial Sale/Lease/Use
Place of First Commercial Sale/Lease/Use
Description of Licensed Product(s)/Method(s)
sold/leased/used
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<PAGE>
6.3 After the first commercial sale of a Licensed Product
anywhere in the world, LICENSEE will submit semi-annual written
royalty reports to THE REGENTS on August 31 of each calendar year
for the period January through June of that year and on February
28 of each calendar year for the period July through December of
the preceding calendar year. The royalty report will include at
a minimum the following information:
License Number
Name of Licensee
Date of Report
Reporting period
Company's fiscal year
Earned royalties or minimum royalties
Domestic sales:
Description of Licensed Product(s)/Method(s)
Unit price of Licensed Product(s)/Method(s) (sale,
lease, and/or use)
Units of Licensed Product(s)/Method(s) sold in US
Units of Licensed Product(s)/Method(s) leased in US
Gross sales in US
Net Sales in US
Royalties due THE REGENTS in $US
Foreign sales:
Country of sales
Description of Licensed Product(s)/Method(s)
Unit price of Licensed Product(s)/Method(s) (sale,
lease, and/or use)
Units of Licensed Product(s)/Method(s) sold in each
country
Units of Licensed Product(s)/Method(s) leased in each
country
Gross sales in each country
Net Sales in each country
9
<PAGE>
Monetary exchange rate
Royalties due THE REGENTS in $US
US Government Sales:
Description of Licensed Product(s)/Method(s)
Unit price of Licensed Product(s)/Method(s) (sale,
lease, and/or use)
Units of Licensed Product(s)/Method(s) sold
Units of Licensed Product(s)/Method(s) leased
Gross sales
Net Sales
LICENSEE will also report the name and business address of
each purchaser of a capacitive deionization unit.
6.4 If LICENSEE has not sold any Licensed Products or used
Licensed Methods during any reporting period, LICENSEE will so
state in the royalty report filed for such period.
6.5 LICENSEE will provide THE REGENTS with an annual statement
of royalty accounts, either audited or certified by LICENSEE's
Chief Financial Officer, for each calendar year during the term
of this Agreement. All such statements will be due to THE
REGENTS on February 28 of the calendar year after the year to
which such statement relates.
6.6 LICENSEE will file all reports in accordance with the
provisions of Article 19 (NOTICES).
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<PAGE>
7. BOOKS AND RECORDS
7.1 LICENSEE will keep books and records accurately showing
all Licensed Products/Licensed Methods manufactured, used, or
sold under this Agreement. LICENSEE will preserve such books and
records for at least five (5) years after the date of the royalty
payment to which they apply. Such books and records will be open
for inspection by representatives or agents of THE REGENTS at all
reasonable times, with reasonable notice given, and will be
considered to be business sensitive information of LICENSEE.
7.2 THE REGENTS will pay the costs incurred by its
representatives or agents to examine LICENSEE's books and
records. If there is an error adverse to THE REGENTS in
LICENSEE's royalty accounting of more than five percent (5%) of
the total royalties due for any year, then LICENSEE will pay THE
REGENTS within ten (10) days the amount necessary to correct such
error and will pay the reasonable costs incurred by THE REGENTS'
representatives and agents for such examination.
7.3 LICENSEE will provide THE REGENTS with an annual audited
or certified financial statement of LICENSEE, including at a
minimum a balance sheet and operating statement. Such statement
will be due to THE REGENTS within one hundred twenty (120) days
following the close of LICENSEE's fiscal year to which such
statement relates. Such audited statements will be deemed
business sensitive information of LICENSEE.
8. TERM
8.1 The term of the license to Licensed Patents will commence
on the Effective Date and, unless terminated by operation of law
or by acts of the Parties under this Agreement, will extend until
the expiration of all Licensed Patents.
8.2 The term of the license to Licensed Software will commence
on the date that DOE grants THE REGENTS request for permission
to assert copyright and, unless terminated by operation of law or
by acts of the Parties under this Agreement, will extend until
five (5) years after that date. The term may be renewed for two
additional five-year periods upon written mutual agreement of the
Parties.
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<PAGE>
9. TERMINATION
9.1 If LICENSEE fails to perform any material term or covenant
of this Agreement, THE REGENTS may give written notice to
LICENSEE that if LICENSEE has not cured such failure within sixty
(60) days after the effective date of receipt of the notice, this
Agreement will terminate at the end of such sixty-(60)-day period
or at the end of such longer period as may be set forth in THE
REGENTS' notice.
9.2 Termination of this Agreement will not relieve LICENSEE of
any obligation or liability accrued hereunder prior to such
termination, nor rescind any payments due or paid to THE REGENTS
hereunder prior to the time such termination becomes effective.
Such termination will not affect, in any manner, any rights of
THE REGENTS arising under this Agreement prior to such
termination.
9.3 LICENSEE may terminate this Agreement by giving at least
thirty (30) days' prior written notice thereof to THE REGENTS and
by making payment of all amounts due THE REGENTS hereunder
through the date of such termination.
9.4 Within thirty (30) days after termination of this
Agreement by either Party, LICENSEE will provide THE REGENTS with
a written inventory of all Licensed Products in process of
manufacture or in stock on the date of termination. LICENSEE may
complete Licensed Products in the process of manufacture at the
time of termination, and may dispose of Licensed Products for 120
days after the date of termination provided that LICENSEE pays
royalties to THE REGENTS on such dispositions.
9.5 LICENSEE may not practice Licensed Methods after the date
of termination of this Agreement except as necessary to complete
the manufacture of Licensed Products as permitted under Article
9.4 above.
9.6 The provisions of Articles 4, 6, 7, 9, 11, 12, 13, 14, 15,
18, 19, 20, 21, 23, 25 and 26 will survive any termination or
expiration of this Agreement.
10. PATENT PROSECUTION AND MAINTENANCE
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<PAGE>
10.1 THE REGENTS will file and prosecute patent applications
and maintain the U.S. patents licensed under this Agreement at
THE REGENTS expense.
10.2 LICENSEE may request foreign filing of patents and patent
applications licensed under this Agreement for which national or
regional filing has not been initiated on the Effective Date of
this Agreement. THE REGENTS will file foreign applications if
rights are available.
10.3 LICENSEE shall pay for preparing, filing, and prosecuting
all foreign patent applications filed at LICENSEE s request and
will pay for maintenance of resulting patents. Foreign patents
will be held in the name of THE REGENTS and obtained using
counsel selected by THE REGENTS.
10.4 If more than one licensee is granted foreign rights in the
same country, the cost of LICENSEE under Article 10.2 above, as
well as the maintenance of resulting patents, shall be shared by
all royalty paying licensees with rights in that country. THE
REGENTS shall invoice LICENSEE for its share of the costs. If
payment is not received, THE REGENTS shall amend this Agreement
to exclude the foreign rights for which payment is not received.
10.5 LICENSEE may terminate its license to a foreign patent
application or foreign patent effective ninety days after written
notice to THE REGENTS. LICENSEE thereby surrenders its rights in
such application or patent, and THE REGENTS shall amend this
Agreement to exclude such rights.
13
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11. PATENT AND COPYRIGHT INFRINGEMENT
11.1 If LICENSEE learns of the infringement or potential
infringement by a third party with respect to any Licensed Patent
or Licensed Copyright, LICENSEE will inform THE REGENTS in
writing within thirty (30) days and provide all known evidence of
the infringement or potential infringement. LICENSEE will not
contact such third party concerning the infringement without
prior written approval of THE REGENTS, which will not be
unreasonably withheld. The Parties will use their best efforts
to terminate such infringement or potential infringement without
litigation.
11.2 LICENSEE may request in writing that THE REGENTS take
legal action against an infringer of a Licensed Patent, Licensed
Method, or Licensed Copyright, which request must include
reasonable evidence of the infringement and of potential damages
to LICENSEE. Within one hundred (100) days after the date of
receipt by THE REGENTS of LICENSEE's request, if the infringement
continues, THE REGENTS will notify LICENSEE in writing of THE
REGENTS decision whether or not to commence suit.
11.3 LICENSEE will cooperate with THE REGENTS in legal and
equitable proceedings instituted hereunder against an infringing
third party. Such legal or equitable action will be controlled
by THE REGENTS.
12. USE OF NAMES AND TRADEMARKS
12.1 Neither Party has any right to use any name, trade name,
trademark, or other designation of the other Party (including any
contraction, abbreviation, or simulation) in advertising,
publicity, or other promotional activities. The use of the name
"LLNL," or "The Regents of the University of California," or the
name of any University of California campus by LICENSEE is
expressly prohibited.
13. LIMITED WARRANTY
13.1 THE REGENTS has the right to grant the license granted in
this Agreement.
14
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13.2 THIS LICENSE AND THE ASSOCIATED INVENTIONS AND SOFTWARE
ARE PROVIDED WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED.
THE REGENTS AND DOE MAKE NO REPRESENTATION OR WARRANTY THAT
LICENSED PRODUCTS OR LICENSED METHODS WILL NOT INFRINGE ANY
PATENT, COPYRIGHT, OR OTHER PROPRIETARY RIGHT.
13.3 IN NO EVENT WILL THE REGENTS OR DOE BE LIABLE FOR ANY
INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES RESULTING FROM
EXERCISE OF THIS LICENSE OR THE USE OF THE INVENTION, SOFTWARE,
LICENSED METHOD, OR LICENSED PRODUCTS.
13.4 Nothing in this Agreement will be interpreted as:
(a) A warranty or representation by THE REGENTS as to the
validity or scope of any of THE REGENTS' rights in Licensed
Patents or Licensed Copyright; or
(b) A warranty or representation that anything made,
used, sold, or otherwise disposed of under any license granted in
this Agreement is or will be free from infringement of patents or
copyrights of third parties; or
(c) Any obligation to bring suit against a third party
for patent or copyright infringement; or
(d) Conferring by implication, estoppel, or otherwise any
license or rights under any patents or copyrights of THE REGENTS
other than Licensed Patents and Licensed Copyright as defined in
this Agreement, regardless of whether such patents are dominant
or subordinate to Licensed Patents; or
(e) An obligation to furnish to LICENSEE or any third
party any know-how or improvements.
15
<PAGE>
14. INDEMNIFICATION AND INSURANCE
14.1 LICENSEE must indemnify, hold harmless, and defend THE
REGENTS, its officers, employees, and agents; the sponsors of the
research that led to the Inventions and copyrightable works; and
the inventors/authors against any claims, suits, losses, damages,
costs, fees, and expenses resulting from or arising out of
exercise of any license granted under this Agreement. LICENSEE
shall pay any and all costs, including reasonable attorney fees,
incurred by THE REGENTS in enforcing this indemnification.
14.2 LICENSEE will insure its activities relating to this
Agreement at its own cost with an insurance company acceptable to
THE REGENTS, which acceptance will not be unreasonably withheld.
LICENSEE will obtain, keep in force, and maintain Comprehensive
or Commercial Form General Liability Insurance, including
contractual liability and product liability and will maintain
coverage as follows:
14.2.1 Each occurrence coverage of not less than One
Million Dollars ($1,000,000.00); and
14.2.2 Product Liability Insurance: Completed operations
aggregate coverage of not less than Five Million Dollars
($5,000,000.00); and
14.2.3 Personal and Advertising Injury: Coverage of not
less than One Million Dollars ($1,000,000.00); and
14.2.4 General Aggregate (Commercial Form Only):
Coverage of not less than Five Million Dollars ($5,000,000.00).
These coverages will not limit the liability of LICENSEE
to THE REGENTS in any way. LICENSEE will provide THE REGENTS,
upon request, with certificates of insurance, including renewals,
that show compliance with these requirements. LICENSEE's failure
to maintain such required insurance will be considered a material
breach of this Agreement.
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<PAGE>
14.3 If such required insurance is written on a claims-made
form, coverage must provide a retroactive date of placement
before or coinciding with the Effective Date of this Agreement.
14.4 LICENSEE will maintain the general liability insurance
specified in this Article 14 during the period that the Licensed
Patents and Licensed Copyright of THE REGENTS are being used,
Licensed Products are being commercially distributed, or Licensed
Methods being used by LICENSEE, and for a period of not less than
five (5) years thereafter.
14.5 Insurance coverage required under this Article 14 must:
(a)Provide for at least thirty (30) days advance written
notice to THE REGENTS of cancellation or any modification; and
(b)Indicate that DOE, THE REGENTS, and their respective
officers, employees, students, and agents, are endorsed on the
policy as additional named insureds; and
(c)Include a provision that the coverage is primary and
does not participate with or is in excess of any valid and
collectible insurance, program, or self-insurance carried or
maintained by THE REGENTS.
15. NOTICE REQUIREMENT FOR LICENSED PRODUCTS
15.1 The following notice must appear in any catalog or product
list containing Licensed Products, and must accompany any
Licensed Product which could be sold or used for capacitive
deionization:
"The product being supplied is produced and sold under a
License Agreement between The Regents of the University of
California (UC) and Far West Group, Inc. The product is covered
by claims of pending and issued U.S. patents held by The Regents
of the University of California. Use of this product for
Capacitive Deionization (CDI) is limited to CDI licensees of The
Regents of the University of California. You must obtain a
license from THE REGENTS for any commercial use of this product
other than your internal evaluation."
17
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15.2 Licensed Products must have the following copyright notice
on all copies of Licensed Software:
1996. The Regents of the University of California. All
rights reserved. This work was produced at the University of
California, Lawrence Livermore National Laboratory (UC LLNL)
under contract no. W-7405-ENG-48 (Contract 48) between the U.S.
Department of Energy (DOE) and The Regents of the University of
California (University) for the operation of UC LLNL The
Government is granted for itself and others acting on its behalf
a paid-up, nonexclusive, irrevocable worldwide license in this
data to reproduce, prepare derivative works, and perform publicly
and display publicly. Beginning five (5) years after [the date
DOE grants THE REGENTS request for permission to assert
copyright], subject to two possible five-year renewals, the
Government is granted for itself and others acting on its behalf
a paid-up, nonexclusive, irrevocable worldwide license in this
data to reproduce, prepare derivative works, distribute copies to
the public, perform publicly and display publicly, and to permit
others to do so.
DISCLAIMER
This software was prepared as an account of work sponsored
by an agency of the United States Government. NEITHER THE UNITED
STATES GOVERNMENT NOR THE UNIVERSITY OF CALIFORNIA NOR ANY OF
THEIR EMPLOYEES, MAKES ANY WARRANTY EXPRESS OR IMPLIED, OR
ASSUMES ANY LIABILITY OR RESPONSIBILITY FOR THE ACCURACY,
COMPLETENESS, OR USEFULNESS OF ANY INFORMATION, APPARATUS,
PRODUCT, OR PROCESS DISCLOSED, OR REPRESENTS THAT ITS USE WOULD
NOT INFRINGE PRIVATELY OWNED RIGHTS.
16. WAIVER
16.1 No provision of this Agreement is deemed waived and no
breach excused unless such waiver or consent is made in writing
and signed by the Party to have waived or consented.
16.2 Failure on the part of either Party to exercise or
enforce any right of such Party under this Agreement will not be
a waiver by such Party of any right, or operate to bar the
enforcement or exercise of the right at any time thereafter.
17. ASSIGNABILITY
17.1 This Agreement is binding on and inures to the benefit of
THE REGENTS, its successors and assigns, but is personal to
LICENSEE. This Agreement is not assignable by the LICENSEE
without the prior written consent of THE REGENTS.
18
<PAGE>
18. LATE PAYMENTS
18.1 If THE REGENTS does not receive payments or fees due from
LICENSEE hereunder when due, LICENSEE will pay interest charges
at the rate of ten percent (10%) simple interest per annum from
the date on which the payment was originally due.
19. NOTICES
19.1 Any report, payment, notice, or other communication that
either Party receives must be in writing and will be properly
given and effective on:
(a) the date of delivery if delivered in person
(including delivery by courier service), or
(b) the fifth (5th) day after mailing if mailed by
first-class certified mail, postage paid, to the addresses given
below (or to an address designated by written notice to the other
Party), or
(c) the date of facsimile with confirmed receipt.
In the case of LICENSEE: FAR WEST GROUP, INC.
2610 W. Verbena Avenue
Tucson, AZ 85705
Phone: (520) 293-9778
Fax: (520) 293-4709
Attention: President
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In the case of THE REGENTS:
All correspondence and reports:
Lawrence Livermore National Laboratory
Industrial Partnerships & Commercialization
7000 East Ave.
P.O. Box 808, L-795
Livermore, CA 94550
Attention: Director, IPAC
Facsimile: (510) 423-8988
Payments and corresponding copies of royalty reports:
Lawrence Livermore National Laboratory
Industrial Partnerships & Commercialization
7000 East Ave.
P.O. Box 5517
Livermore, CA 94550
20. DISPUTES AND GOVERNING LAWS
20.1 The Parties will attempt to jointly and promptly resolve
any disputes arising from this Agreement. Such joint resolution
may include non-binding arbitration. If the Parties are unable
to resolve a dispute within a reasonable time not to exceed sixty
(60) days from one Party's written notice to the other that
dispute resolution has begun, then either Party may commence
proceedings in a court of competent jurisdiction. United States
federal law will govern this Agreement to the extent that there
is such law. To the extent there is no applicable and preemptive
U.S. federal law, this Agreement will be governed by the laws of
the State of California, U.S.A., without regard to such State s
conflict of laws provisions.
20
<PAGE>
21. PATENT MARKING
21.1 LICENSEE will mark all Licensed Products and their
containers that are made, used, sold, or otherwise disposed of
under this Agreement in accordance with applicable patent and
copyright marking laws.
22. GOVERNMENT APPROVAL OR REGISTRATION
22.1 If this Agreement or any associated transaction is
required by the law of any jurisdiction to be approved,
permitted, or registered with any governmental agency, LICENSEE
assumes all obligations to do so. LICENSEE will notify THE
REGENTS if LICENSEE becomes aware that this Agreement is subject
to a United States or foreign government reporting, permitting,
or approval requirement. LICENSEE will make all necessary
findings and pay all costs including fees, penalties, and all
other out-of-pocket costs associated with such reporting,
permitting, or approval process.
23. EXPORT CONTROL LAWS
23.1 LICENSEE will comply with all applicable United States
and foreign laws and regulations concerning the transfer of
Licensed Products and related technical data, and use of Licensed
Methods, including but not limited to International Traffic in
Arms Regulations (ITAR) and Export Administration Regulations.
24. FORCE MAJEURE
21
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24.1 This Agreement is not breached and no liability is
created when THE REGENTS or LICENSEE fails to perform such
Party's obligation under this Agreement if such failure or
omission arises from a cause beyond the control of such Party,
including but not limited to Acts of God; acts or omissions of
any government or governmental agency; compliance with
requirements, rules, regulations, or order of any governmental
authority or any office, department, agency, or instrumentality
thereof; fire, storm, flood, earthquake; accident; acts of the
public enemy, war, rebellion, insurrection, riot, sabotage,
invasion; quarantine, restriction; transportation embargoes; or
failures or delays in transportation.\
25. UNITED STATES PREFERENCE
25.1 LICENSEE agrees that any Licensed Product(s) shall be
manufactured substantially in the United States.
26. MISCELLANEOUS
26.1 The headings of the Articles of this Agreement are for
reference only and do not affect the interpretation of this
Agreement.
26.2 Any amendment or modification of this Agreement must be
in writing and signed by each Party.
26.3 This Agreement and the attached Exhibits A through D
embody the entire understanding of the Parties with respect to
the subject matter of this Agreement, and supersedes all earlier
communications, representations, or understandings, either oral
or written, between the Parties with respect to such subject
matter.
26.4 If any provision of this Agreement is held to be invalid,
illegal, or unenforceable in any respect, such provision will be
enforced to the extent legally permissible and such invalidity,
illegality, or unenforceability will not affect any other
provisions of the Agreement, and this Agreement will be construed
as if the invalid, illegal, or unenforceable provision, or
relevant portion thereof, were never in this Agreement.
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<PAGE>
26.5 Neither Party is an agent of the other and neither will
have any power to contract for or bind the other Party for any
purpose.
26.6 THE REGENTS will release information concerning this
Agreement only to the extent required by law, and in each such
case with reasonable advance notice to LICENSEE.
26.7 The exchange of information between the Parties is
governed by an existing Mutual Nondisclosure Agreement, Exhibit
D, which is hereby incorporated herein by reference and the term
of which is hereby extended for the term of this Agreement.
THE REGENTS and LICENSEE hereby execute and deliver this
Agreement, in duplicate originals, by their respective duly
authorized officers.
FAR WEST GROUP THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA
By:/s/ Clark Vaught By:/s/ Jeffery Wadsworth
(Signature) (Signature)
Name: Clark Vaught Name: Jeffery Wadsworth
Title: Chief Executive Officer Title: Deputy Director for
Science and Technology
Date: Jan. 7, 1997 Date: Jan. 7, 1997
23
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EXHIBIT A - INTELLECTUAL PROPERTY
The Licensed Patents are as follows:
I. Capacitive Deionization Method and Apparatus
UNITED STATES PATENTS GRANTED
5,425,858 Method and Apparatus Issue Date Joseph C. Farmer
for Capacitive
IL-9104 Deionization, Electrochemical 6/20/95
Purification, and Regeneration
of Electrodes
UNITED STATES PATENT APPLICATIONS
NONE
FOREIGN PATENTS GRANTED
NONE
FOREIGN PATENT APPLICATIONS
National and Regional patents applications filed in the following
countries:
European Patent; Saudi Arabia; Egypt; South Africa; United Arab
Emirates; India; Indonesia; Israel; Malaysia; Japan; Canada; and
Mexico.
24
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II. Carbon Aerogel Electrodes for Capacitive Deionization
UNITED STATES PATENTS GRANTED
5,260,855 Supercapacitors Based Issue Date J.L. Kaschmitter
IL-8818A on Carbon Foams 11/9/93 S.T. Mayer
R.W. Pekala
5,420,168 Method of Low Pressure 5/30/95 S.T. Mayer
IL-9181 and/or Evaporative Drying J.L. Kaschmitter
of Aerogel R.W. Pekala
5,529,971 Carbon Foams for Energy 6/25/96 J.L. Kaschmitter
IL-8818B Storage Devices S.T. Mayer
R.W. Pekala
UNITED STATES PATENT APPLICATIONS
08/110,003 Method for Making Thin 8/23/93 R.W. Pekala
IL-9260 Carbon Foam Electrodes S.T. Mayer
J.L. Kaschmitter
R.L. Morrison
08/393,588 Composite Carbon Foam 2/21/95 S.T. Mayer
IL-9385 Electrode, Claims 16-19 R.W. Pekala
J.L. Kaschmitter
08/440,168 Fabricating Solid Carbon 5/12/95 J.L. Kaschmitter
IL-9546 Porous Electrodes from T.D. Tran
Powders J.H. Freikert
S.T. Mayer
25
<PAGE>
FOREIGN PATENTS GRANTED
NONE
FOREIGN PATENT APPLICATIONS
IL-9181 Method of Low Pressure Foreign Filing S.T. Mayer
and/or Evaporative Japan J.L. Kaschmitter
Drying of Aerogel R.W. Pekala
III. Carbon Aerogel Material for Capacitive Deionization
UNITED STATES PATENTS GRANTED
4,873,218 Low Density Resorcinol- Issue Date R.W. Pekala
IL-8059A Formaldehyde Aerogels 10/10/89
4,997,804 Low Density Resorcinol- 3/5/91 R.W. Pekala
IL-8059B Formaldehyde Aerogels
5,358,802 Doping of Carbon Foams for 10/25/94 J.L. Kaschmitter
IL-9060 Use in Energy Storage S.T. Mayer
Devices, R.W. Pekala
Claims 7-26 and 33-35
5,420,168 Method of Low Pressure and/ 5/30/95 S.T. Mayer
IL-9181 or Evaporative Drying J.L. Kaschmitter
of Aerogel R.W. Pekala
5,529,971 Carbon Foams for Energy 6/25/96 J.L. Kaschmitter
IL-8818B Storage Devices S.T. Mayer
R.W. Pekala
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5,508,341 Organic Aerogel 4/16/96 S.T. Mayer
IL-9184A Microspheres F.M. Kong
and Fabrication Method R.W. Pekala
Therefor J.L. Kaschmitter
5,476,878 Organic Aerogels from the 12/19/95 R.W. Pekala
IL-9388 Sol-Gel Polymerization of S.T. Mayer
Phenolic-Furfural Mixtures J.L. Kaschmitter
UNITED STATES PATENT APPLICATIONS
08/110,003 Method for Making Thin 8/23/93 R.W. Pekala
IL-9260 Carbon Foam Electrodes, S.T. Mayer
Claims 1-19, 29 J.L. Kaschmitter
R.L. Morrison
08/393,588 Composite Carbon Foam 2/21/95 S.T. Mayer
IL-9385 Electrode, Claims 16-19 R.W. Pekala
J.L. Kaschmitter
FOREIGN PATENTS GRANTED
NONE
FOREIGN PATENT APPLICATIONS
IL-9181 Method of Low Pressure Foreign Filing S.T. Mayer
and/or Evaporative Japan J.L. Kaschmitter
Drying of Aerogel R.W. Pekala
The Licensed Copyrights are as follows:
CDI CONTROL (grant of copyright rights in this software will be
effective on the date that DOE grants THE REGENTS request for
permission to assert copyright)
27
<PAGE>
EXHIBIT B - LICENSED RIGHTS
NOTICE
This Exhibit B contains financial and commercial information
deemed Business Sensitive. The Parties agree not to use or to
disclose the terms of this Exhibit to any third party without the
express written consent of the other Party, except as necessary
to enable the Parties to perform under this Agreement or as may
be required by THE REGENTS' contract with the U.S. Department of
Energy under the same restrictions.
A. Rights Granted
A.1 Subject to the terms and conditions of this
Agreement, THE REGENTS hereby grants to LICENSEE a nonexclusive,
nontransferable, royalty-bearing license in the United States and
any other jurisdiction in which THE REGENTS have patent rights
for the following:
a) to use Licensed Patents and Licensed Methods in
the Fields
of Use specified in Subparagraph 2 below;
b) to make and sell Licensed Products as follows:
(i)capacitive deionization units for any
application;
(ii)carbon aerogel electrodes and carbon aerogel
material only
for lectrodes in capacitive deionization units;
and
c) to reproduce, prepare derivative works,
distribute copies to
the public, and display publicly Licensed Software
for any
application, such grant to be effective on the date
that DOE grants
THE REGENTS' request for permission to assert
copyright in that
software. Any reproduction or preparation of a
derivative work may
only be for the purpose of incorporating Licensed
Software into a
Licensed Product. LICENSEE may not distribute
Licensed Software
except as control software for a capacitive
deionization unit.
A.2 "Fields of Use" means:
a)Brackish Water/Sea Water Desalination, and
b)Treatment of Heat Exchanger and Boiler Water,
Industrial
and ommercial Process Water, and Ultrapure Industrial
Water
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<PAGE>
A.3 LICENSEE has the option to negotiate up to two (2)
additional fields of use, each for an additional issue fee. The
term of this option is three years from the Effective Date of
this Agreement.
B. Rights Excluded
Rights that are not specifically granted in Paragraph
A above are excluded from the License.
This License grant does not include any sublicensing
rights.
C. Performance Obligations
C.1 LICENSEE will proceed diligently to
develop,
manufacture, market and sell Licensed Products
and use
Licensed Methods. LICENSEE's diligence will be
characterized
by the following:
(a) September 30, 1997: Manufacture of
carbon aerogel
material of suitable quality for use as
electrode
material in a commercial capacitive
deionization unit.
(b)December 31, 1998: First commercial
sale of capacitive
deionization unit containing at least
100 aerial square feet
of carbon aerogel electrode material.
(c)December 31, 1999: Cumulative Gross
Sales of Licensed
Products of at least $150,000.
C.2 LICENSEE will demonstrate a continuing
effort to
commercialize and sell Licensed Products
and use Licensed
Methods during the term of this
Agreement. This continuing
effort will be characterized by gross
sales of Licensed Products
of at least $500,000 in calendar year
2000 and $1,000,000
per calendar year beginning in 2001 and
continuing for the
remainder of the term of this Agreement.
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<PAGE>
EXHIBIT C - LICENSE ISSUE FEE, ROYALTIES AND PAYMENTS
NOTICE
This Exhibit C contains financial and commercial information
deemed Business Sensitive. The Parties agree not to use or to
disclose the terms of this Exhibit to any third party without the
express written consent of the other Party, except as necessary
to enable the Parties to perform under this Agreement or as may
be required by THE REGENTS' contract with the U.S. Department of
Energy under the same restrictions.
A. License Issue Fee
As partial consideration for this Agreement, LICENSEE will
pay to THE
REGENTS a nonrefundable License Issue Fee of $100,000
payable as follows:
$15,000 upon execution of this Agreement;
$30,000 12 months after the Effective Date of this
Agreement;
$30,000 24 months after the Effective Date of this
Agreement; and
$25,000 36 months after the Effective Date of this
Agreement.
LICENSEE will pay any remaining issue fee in full with the
first report due to THE REGENTS after LICENSEE has cumulative
gross sales of Licensed Products of $150,000.
The License Issue Fee will not be credited against any other
royalty or fee due from LICENSEE to THE REGENTS hereunder.
If LICENSEE exercises its option under Exhibit B Paragraph
A.3 to negotiate additional Fields of Use, LICENSEE must pay the
full issue fee of $100,000 before a license is granted for any
additional Field(s) of Use.
B. Earned Royalties
1. Royalties on Sales of Licensed Products
In addition to the license issue fee, LICENSEE will pay THE
REGENTS a royalty on Net Sales of Licensed Products as follows:
a. Net Sales of Licensed Products related to Capacitive
Deionization Method and Apparatus:
First $5,000,000 of Net Sales in a calendar year 5%
Net Sales over $5,000,000 in a calendar year 4%
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<PAGE>
b. Net Sales of Licensed Products related to Carbon Aerogel
Electrodes for Capacitive Deionization: 2%
c. Net Sales of Licensed Products related to Carbon Aerogel
Material for Capacitive Deionization: 1%
d. No royalty is due to THE REGENTS on samples of carbon
aerogel material distributed free to prospective purchasers.
Samples are defined as material distributed to provide the
recipient with the opportunity to inspect, evaluate, and judge
the quality of the material for a particular purpose.
2. Royalty on Commercial Use of Capacitive Deionization Method
and Apparatus
LICENSEE will pay THE REGENTS a royalty on its commercial
use of the capacitive deionization method using carbon aerogel
electrodes in countries in which THE REGENTS has filed for patent
protection as follows:
Calendar year 1999 $10,000
2000 $15,000
2001 and succeeding calendar years $20,000
If during any reporting period LICENSEE has not used the
capacitive deionization method in any country in which THE
REGENTS has filed for patent protection, LICENSEE will so state
in the earned royalty report for that reporting period.
Earned royalties will accrue commencing with the first sale
of Licensed Products or first commercial use of capacitive
deionization method.
In each calendar year, payments of earned royalties for the
period January through June will be due on August 31 of the same
year, and earned royalties for the period July through December
will be due on February 28 of the following calendar year.
C. Minimum Royalties
LICENSEE will pay to THE REGENTS a minimum annual royalty as
follows:
Calendar Year (CY) Minimum Annual Royalty Date Due
1999 $12,500 February 28, 1999
2000 $20,000 February 28, 2000
2001 $25,000 February 28, 2001
Subsequent calendar years $25,000 February 28 of CY
Minimum annual royalties will be due on February 28 of the
calendar year. Earned royalties will be credited against the
minimum annual royalty up to the amount of the minimum annual
royalty.
EXHIBIT D - MUTUAL NONDISCLOSURE AGREEMENT
N/A
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EXHIBIT EX-10.2
Void After September 21, 2000 Warrant To Purchase
FarWest Group, Inc.
Warrant to Purchase Common Stock 300,000.00
Shares of Common
Stock
This Warrant Certifies that United Managed Investments, Inc.
2 Alhambra Plaza
Coral Gables, Florida 33134
or registered assigns, ** THREE HUNDRED THOUSAND WARRANTS **
is the registered holder of a Warrant (the Warrant ) of
FarWest Group, Inc. (the Company ), to purchase the number of
shares (the Shares ) of Common Stock (the Common Stock ), of
the Company set forth above. This Warrant expires at 5 PM
Eastern Time, on September 21, 2002 (the Close of Business ),
and entitles the holder to purchase from the Company the number
of fully paid and non assessable Shares set forth above at a
purchase price of $.50 per share (the Exercise Price ), payable
in lawful money of the United States of America, payable to the
order of the Company in the form of cash, certified check, or
money order.
Subject to the terms and conditions set forth herein, this
Warrant may be exercised upon surrender of this Warrant
Certificate and payment of the aggregate Exercise Price and any
applicable taxes at the principal office of the Company at 5225
W. Massingale Road, Tucson, Arizona 85743 or other applicable
address of the Company.
No Warrant may be exercised prior to September 21, 1999 or
after the Close of Business on September 21, 2002. After the
Close of Business on September 21, 2002, the Warrants will become
wholly void and of no value.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS
WARRANT CERTIFICATE SET FORTH AND/OR INCORPORATED BY REFERENCE ON
THE PAGES ATTACHED HERETO, SUCH FURTHER PROVISIONS SHALL APPLY
FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH
AT THIS PLACE.
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IN WITNESS WHEREOF, the Company has caused this Certificate
to be executed by its duly authorized officers, and the corporate
seal hereunto affixed.
Dated 9/21/99
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1993, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF,
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH
ACT AND SUCH LAWS WHICH IN THE OPINIONNI OF COUNSEL FOR THE
HOLDER, PROVIDED THAT COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO HE COMPANY, IF AVAILABLE.
FARWEST GROUP, INC.
By:/s/ Dallas Talley
Dallas Talley
President
2
<PAGE>
FARWEST GROUP, INC.
The Warrant evidenced by this Warrant Certificate to
purchase up to three hundred thousand (300,000) Shares of Common
Stock issued pursuant to that certain Mutual Release and
Settlement Agreement dated September 11, 1999 (the Agreement )
duly executed by United Managed Investments, Inc. by Charles
Childers and FarWest Group, Inc. by Clark Vaught. The Agreement
is hereby incorporated by reference in and made part of this
instrument and is hereby referred to for a description of the
rights, limitations of rights, obligations and duties thereunder.
A copy of the Agreement may be inspected and is available upon
written request addressed to the Company. All terms used herein
that are defined in the Agreement have the meanings assigned to
them herein.
Warrants may be exercised to purchase Shares from the
Company at the Exercise Price set forth on the face hereof prior
to the Close of Business on September 21, 2002. The holder of
the Warrant evidenced by this Warrant Certificate may exercise
such Warrant by surrendering the Warrant Certificate, with the
form of Election to Exercise set forth hereon properly completed
and executed, together with payment of the aggregate Exercise
Price, in lawful money of the United States of America, and any
applicable taxes, at the office of the Company.
In the event that upon any exercise of the Warrant evidenced
hereby the number of Shares actually purchased shall be less than
the total number of Shares purchasable upon the exercise of the
Warrant evidenced hereby, there shall be issued to the holder
hereof, a new Warrant Certificate evidencing a Warrant to
purchase the Shares not so purchased. After the close of
business on September 21, 2002, unexercised Warrants shall become
wholly void and of no value.
3
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Any shares received by any conversions of Warrants evidenced
hereby shall carry piggyback registration rights whereby they
shall be registered together with future registrations of FarWest
Group, Inc. securities as follows: (a) as part of FarWest Group,
Inc. s first registered offering of securities following the
reissuance of these Warrants evidenced hereby, subject only to
the consent of the managing underwriter for said offering; and/or
(b) as part of FarWest Group, Inc. s second registered offering
following the issuance of the Warrants evidenced hereby,
unconditionally, except that sales may be subject to potential
restrictions that may be imposed by the managing underwriter for
said offering to refrain from selling shares of FarWest Group,
Inc. securities for a period of up to 180 days.
ELECTION TO EXERCISE
Dated: , 19
The undersigned hereby irrevocably exercises this Warrant to
purchase the number of shares of Common Stock as specified below
and herewith makes payment of the Exercise Price thereof on the
terms and conditions specified in this Warrant Certificate,
surrenders this Warrant Certificate and all right, title, and
interest herein to the Company and directs that the Shares
deliverable upon the exercise of such Warrants be registered in
the name(s), in the per share denominations and at the
address(es) specified below and delivered hereto.
4
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1999 DEC-31-1998 DEC-31-1997
<CASH> 30,199 0 3,211
<SECURITIES> 0 0 0
<RECEIVABLES> 25,000 28,704 3,143
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 55,199 28,704 6,354
<PP&E> 5,435 2,952 2,952
<DEPRECIATION> 3,218 1,968 984
<TOTAL-ASSETS> 57,416 29,688 8,322
<CURRENT-LIABILITIES> 1,272,377 1,345,843 751,376
<BONDS> 0 0 0
0 0 0
6 6 0
<COMMON> 611 359 319
<OTHER-SE> (1,315,578) (1,516,520) (843,373)
<TOTAL-LIABILITY-AND-EQUITY> 57,416 29,688 8,322
<SALES> 0 0 0
<TOTAL-REVENUES> 0 0 0
<CGS> 0 0 0
<TOTAL-COSTS> 1,229,792 478,183 472,614
<OTHER-EXPENSES> 3,500 56,539 7,000
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 3,500 56,539 7,000
<INCOME-PRETAX> (1,233,292) (534,722) (479,614)
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> (1,233,292) (534,722) (479,614)
<DISCONTINUED> (15,928) (310,611) (347,491)
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (1,249,220) (845,383) (827,105)
<EPS-BASIC> (.23) (.25) (.58)
<EPS-DILUTED> (.23) (.25) (.58)
</TABLE>