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UNITED STATES
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 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
NUPRO INNOVATIONS INC.
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(Name of Small Business Issuer in its Charter)
Delaware 86-0893269
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
5151 E. Broadway Blvd., Suite 730, Tucson, Arizona 85711
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(Address of principal executive offices) (Zip Code)
(520) 571-0900
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(Issuer's Telephone Number)
Securities to be registered under Section 12(b) of the Act:
None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $.001 per share
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EXPLANATORY NOTE
The Company is filing this Form 10-SB Registration Statement on a
voluntary basis in order to comply with recently enacted rules of the National
Association of Securities Dealers, Inc., which require, among other things, the
Company to become a reporting company with the Securities and Exchange
Commission ("SEC") under Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in order for the Company to remain
eligible for listing on the Over-the-Counter Bulletin Board.
NuPro(TM) and NuPro Innovations(TM) are trademarks or trade names of the
Company.
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, this Form 10-SB
contains express or implied statements that the Company believes are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the Exchange
Act and the Company intends that such forward-looking statements be subject to
the safe harbors created thereby, which do not apply to initial public
offerings. Additional written or oral forward-looking statements may be made by
the Company from time to time in filings with the Securities and Exchange
Commission, in its press releases, quarterly conference calls or otherwise. The
words "believes," "expects," "anticipates," "intends," "forecasts," "projects,"
"plans," "estimates" and similar expressions identify forward-looking
statements. Such statements reflect the Company's current views with respect to
future events and financial performance or operations and speak only as of the
date the statements are made. Such forward-looking statements involve risks and
uncertainties and readers are cautioned not to place undue reliance on
forward-looking statements. The Company's actual results may differ materially
from such statements. Factors that cause or contribute to such differences
include, but are not limited to, the Company's limited operating history, lack
of product diversification, the risks of rapid growth, the Company's dependence
on key personnel, uncertainty of acceptance of the NuPro Material, changes in
economic conditions and an inability to obtain financing, as well as those
discussed elsewhere in this Form 10-SB. Although the Company believes that the
assumptions underlying its forward-looking statements are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in such forward-looking statements will be
realized. The inclusion of such forward-looking information should not be
regarded as a representation by the Company or any other person that the future
events, plans or expectations contemplated by the Company will be achieved. The
Company undertakes no obligation to publicly update, review, or revise any
forward-looking statements to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions, or circumstances on
which any such statements are based.
ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
NuPro Innovations Inc. was incorporated in the Canadian Province of
Ontario on November 27, 1996 as TracTop Distributing Inc. On August 7, 1997,
TracTop Distributing Inc. was domesticated in the State of Delaware in the
United States under the name "NuPro Innovations Inc." When used in this
registration statement, unless the context requires otherwise, the term
"Company" refers to NuPro Innovations Inc., a Delaware corporation (formerly
known as TracTop Distributing Inc., an Ontario, Canada corporation), and NuPro
Innovation Mexico S.A. de C.V., which is a majority owned subsidiary of NuPro
Innovations Inc. The Company is a development stage corporation with its
principal offices located at 5151 East Broadway Blvd., Suite 730, Tucson,
Arizona, 85711. The Company's telephone number is (520) 790-2100 and its web
site is www.nuproinnovations.com. Information on the Company's web site does not
constitute part of this registration statement.
On December 1, 1998, the Company acquired the use of and the right to
commercialize a composite industrial engineering material (the "NuPro Material")
with the acquisition (the "TrucTech Acquisition") of substantially all of the
assets and liabilities of TrucTech, Inc., a Georgia corporation ("TrucTech").
Under the terms of the TrucTech Acquisition, the Company acquired TrucTech's
assets and assumed TrucTech's liabilities in exchange for $5,500,000 of the
Company's common stock, par value $0.001 per share ("Common Stock"), valued at
$0.75 per share, or an aggregate of 7,333,333 shares. Certain directors,
officers, employees, and stockholders of the
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Company were also directors, officers, employees and stockholders of TrucTech.
See "Certain Relationships and Related Transactions."
NUPRO MATERIAL
The NuPro Material is a polyester/epoxy hybrid created by the reactions of
several primary chemical compounds facilitated by chemical inhibitors,
accelerators, catalysts, and promoters. The NuPro Material can be made in a
variety of formulations to generate differing properties, which enables it to be
used in a number of different product applications. The Company believes that
the NuPro Material represents an advancement in polyurea technology because the
processing of the hybrid composite material does not require either external
heat or a high-pressure environment.
The NuPro Material, a blend of ring opened cyclic esters and polyamides
combined with polyisocyannate formulation, is characterized by certain high
performance mechanical properties that allow it to compete with steel, alloys,
wood, plastic, fiberglass, and plastic foam in many product applications. The
Company believes that a significant cost advantage of the NuPro Material may
result from the elimination of a standard plastics manufacturing step the
interim process of compounding the raw feeds of petrochemical derivatives into
raw plastics, and continuing the process by reheating, pressing, and reforming
the compounds into a finished product. With the NuPro Material, the finished
products are derived directly from the chemical reaction of certain raw liquid
feedstocks. As a result, the Company believes that the production process for
product applications with the NuPro Material is more simple and inexpensive than
the manufacturing process of product applications with many of the competing
industrial materials.
BUSINESS STRATEGY
The focus of the Company will be to provide unique platform technology and
solutions for the challenges faced by manufacturers with respect to the
materials used for various industrial applications. The Company believes that
customers that manufacture products with the NuPro Material may realize certain
competitive advantages with respect to product performance and costs of
production.
The Company's business strategy includes (i) identifying large-scale
manufacturing, industrial, and commercial market segments in which the
substitution of the NuPro Material for existing conventional materials will
provide the user with a higher quality product at a lower price, (ii) furnishing
the Company's customers with turnkey manufacturing packages, including, without
limitation, training with respect to the manufacturing process, for a particular
product application of the NuPro Material, and (iii) supplying its proprietary
materials, which are the chemicals necessary for creating the NuPro Material,
for the manufacturing process. The Company anticipates that the proprietary
materials necessary to create the NuPro Material will initially be manufactured
in Mexico.
In implementing its business strategy, the Company has identified the
following areas of emphasis:
- Develop and Introduce New Product Applications. The Company believes
that it must continue to develop and offer manufacturers new product
applications for the NuPro Material.
- Evaluate Acquisition or Strategic Alliance Opportunities. The
Company evaluates acquisition opportunities and potential strategic
alliances on an on-going basis and at any given time may be engaged
in discussions with respect to possible acquisitions or strategic
alliances. The Company may seek strategic acquisitions or create
strategic alliances that could complement the Company's current or
planned business activities.
- Integrate Acquisitions and Strategic Alliances. The Company must
integrate the entities or assets that it has acquired into its
business and coordinate its operations with other entities as part
of any strategic alliance.
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MANUFACTURING PROCESS OF NUPRO MATERIAL
The NuPro Material is a polyurethane/epoxy or polyester/epoxy hybrid
created by the chemical reactions of several primary compounds facilitated by
chemical inhibitors, accelerators, catalysts, and promoters. The NuPro Material
is produced directly from its chemical constituents without the need to create
an intermediate plastic medium as is required for most conventional plastics. By
varying the proportions of the primary compounds, the Company is able to
determine the nature of the composite material produced. By controlling the rate
at which the chemical reactions occur and the points at which they are stopped
with certain chemical facilitators, the Company may define the physical and
performance characteristics of the material, which allows the Company to tailor
the properties of the NuPro Material to the specific product application for
which it will be used.
The NuPro Material is produced by mixing various chemical components in a
multi-step process. The Company anticipates that the production process will be
performed at different facilities. First, the Company will pre-mix the
proprietary component of the NuPro Material at its facilities. During this
pre-mixing process, the chemical combination and inhibitors produce and release
heat. With the manipulation of the free radicals in the chemical components, the
Company can create different formulations of the NuPro Material with differing
properties for different product applications. Second, various generic chemical
components will be mixed at the manufacturing facility where the manufacture of
the final product containing the NuPro Material will occur. Certain chemical
components will serve as catalysts, promoters, and accelerators and will cause a
reaction to produce the NuPro Material. At the manufacturing facility, the
liquid components of the NuPro Material will be stored in separate conventional
storage tanks. Conventional low-pressure liquid pumps will be used to pump the
liquid components through hoses to a mixing head and nozzle at the site of the
molds to be filled.
Products made with NuPro Material may be formed by casting in a closed
mold or by spraying the chemicals into an open mold. The molds may be
constructed with a wide range of materials depending on the product application.
The casting is known as a low-pressure cold molding process because neither high
pressure nor heat is applied to effectuate the chemical reactions that form the
NuPro Material. High clamping forces are not required for the molds because the
injection process of the liquid components of the NuPro Material into the molds
occurs at a low pressure. Even after the initial curing process, the NuPro
Material is still soft and pliable. Final curing occurs after the product is
removed from the mold and placed on a curing buck, which is identical in shape
to the mold. During the final curing, the chemical reaction of the chemical
components locks the molecular structure of the product into final form. Any
required trimming or finishing of the product can be completed during the final
curing. Because of this process, molds for the NuPro Material may be light,
compact, and low in cost relative to molds required for the conventional plastic
injection molding processes.
PRODUCT APPLICATIONS
The Company is in the process of establishing customer relationships for
the development of several product applications for the NuPro Material. Such
development will include feasibility studies, product design and engineering,
prototype model and mold fabrication, prototype manufacture, testing, and
customer approval. To date, prospective customers for pallets, deck boards, golf
drivers, and food processing trays have funded all or a portion of the
development process for their respective product applications. In addition, the
Company is developing applications for the NuPro Material for a truck bed
enclosure ("TracTop") and a pallet top.
TRACTOP. TracTop is a permanently installed retractable, self-storing
truck-bed enclosure that enables its users to make fast and easy conversion
between covered and open-bed operation. The Company plans to offer TracTop in
different sizes and designs to allow for the use of TracTop in all different
makes, models, and sizes of trucks. TracTop's key features include accessibility
to truck-bed, security and protection of cargo, ease of operation, and
attractiveness of design.
The Company intends to develop a distribution network for TracTop, either
directly or through a strategic alliance. The TracTop product is currently
manufactured by a strategic partner in Mexico.
Through the product development of TracTop, the NuPro Material has been
tested over a nine-year period under real world conditions. As part of such
testing process, TracTop and its inherent production material have been
evaluated under severe cold, hot, and humid conditions. To date, the NuPro
Material has provided satisfactory
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results in its TracTop application in road testing over the course of an
extended performance period. The manufacturing process for the TracTop product
application for the NuPro Material has also been tested on a full production
scale and has achieved satisfactory results to date.
PALLETS. The first pallet prototype made with the NuPro Material (the
"NuPro Pallet") has been completed and internal testing has begun achieving
favorable results to date. Based on the results of testing to date, the Company
believes the established performance, weight, and price standards of the NuPro
Pallet makes it competitive in the industry. As testing continues, certain
engineering and design modifications may be made to enhance the performance of
the NuPro Pallet.
In August 1997, Canada Pallet Corp. of Campbellford, Canada ("Canada
Pallet") contributed $25,000 towards the cost of designing and prototyping the
NuPro Pallet. Canada Pallet and the Company have agreed to suspend Canada
Pallet's arrangement to purchase a turnkey manufacturing line for the NuPro
Pallet until pallet production with the NuPro Material begins. In addition,
negotiations are currently in progress with several other parties for the
purchase of turnkey manufacturing lines with respect to the pallet product
application for the NuPro Material. The Company believes that it could realize
significant annual revenues from the sale of its proprietary materials to each
pallet turnkey manufacturing line that uses the NuPro Material. The Company
anticipates that it will begin providing turnkey manufacturing lines and the
NuPro Material to manufacturers for the production of pallets with the NuPro
Material by the fourth quarter of fiscal year 2000.
DECK BOARDS. In February 1998, the Company entered into an agreement with
Erwin Industries Inc. ("Erwin Industries") of Atlanta, Georgia, for the design,
feasibility study, engineering, and prototyping of an innovative design for a
deck board at a cost of $30,000. The Company is negotiating a contract with
Erwin Industries relating to the manufacture of deck boards with the NuPro
Material, which the Company believes may consist of approximately $2,200,000 for
two turnkey manufacturing lines and up to $15,000,000 annually for the supply of
chemicals to such manufacturing lines operating at full production levels after
start-up phase-in. Certain production scale manufacturing tests with a full-size
production mold must be completed prior to contract finalization. Pricing of
this production mold design, engineering, and manufacturing is being completed
for submission to Erwin Industries for approval and payment. The Company
anticipates that it will begin providing turnkey manufacturing lines and the
NuPro Material to manufacturers for the production of deck boards with the NuPro
Material by the fourth quarter of fiscal year 2000.
NUPRO GOLF DRIVER. The Company entered into an agreement with Strategic
Machinery Solutions of Atlanta, Georgia in June 1998 (the "Strategic Machinery
Agreement") for the prototyping of a golf driver with the head to be
manufactured with the NuPro Material. The Company has delivered first and second
prototypes to the developer and are currently undergoing field testing and
evaluation. Initial performance of the NuPro Material and the driver technology
appears to be meeting the requirements for this application. The Strategic
Machinery Agreement provides for the golf driver to be manufactured by NuPro in
its Mexico plant as a joint venture with Strategic Machinery Solutions, on terms
to be determined, and also for the product to be marketed under the name of the
NuPro Driver.
PALLET TOP. The Company is finalizing an agreement with NRPP Inc. of
Atlanta, Georgia, a material handling sales and consulting organization, for
the development of a pallet top product application of the NuPro Material.
To date, initial design and market evaluation have been completed.
FOOD PROCESSING TRAYS. A project for the manufacture of food
processing trays has been prototyped and field tested. To date, the Company
has been satisfied with the performance of such food processing trays.
Production molds have been produced and product manufacturing of a small
initial order for Nautico S.A. de C.V. of Guaymas, Mexico, a shrimp and
seafood processing plant, has commenced.
CUSTOMERS; SALES AND MARKETING
The Company anticipates that its customers will be manufacturers of
different products developed with composite industrial materials. The Company
expects that products developed with the NuPro Material will be distributed by
such manufacturers to consumers. The Company plans to market the NuPro Material
and its turnkey
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manufacturing packages to both existing manufacturers with established
manufacturing operations and new manufacturers in need of a turnkey approach to
the production process.
To date, the Company has not incurred any expenses relating to the direct
marketing and advertising of the NuPro Material and the Company's turnkey
manufacturing packages. Instead, the Company's marketing strategy is to focus on
establishing customer relationships and strategic partnerships with
manufacturers at the outset of the Company's development of a specific product
application of the NuPro Material. In some cases, the Company will seek funding
from its strategic partner for the development process, which includes
feasibility studies, product design and engineering, prototype model and mold
fabrication, prototype manufacture, testing and customer approval. After the
development process is complete, the Company will provide the turnkey
manufacturing process and proprietary chemicals for the manufacture of the
product application with the NuPro Material. In certain cases in which the
Company has received funding for the development costs of a particular product
application from a strategic partner, the Company may provide exclusive rights
to such partner for the use of the NuPro Material with respect to such
particular product application.
Although the Company has established several strategic relationships to
develop certain product applications with the NuPro Material, the Company has no
sales to date. The Company anticipates that all sales by the Company will be on
a negotiated price basis. The Company does not expect to experience seasonable
fluctuations in operations because sales of industrial materials are not
seasonal in nature.
SUPPLIERS
The production of the NuPro Material requires the supply of several
primary chemical compounds, primarily raw petro-chemical feedstocks, that the
Company believes are available from a number of suppliers in adequate supplies
to meet the Company's expected needs. The Company has identified sources from
Mexico, Venezuela, and Romania that it anticipates will be the primary suppliers
for the Company, however, the Company currently has no supply contracts for the
purchase of such chemical compounds. The Company will require high-grade
chemicals with specific properties for the NuPro Material. Accordingly, the
Company expects to monitor shipments of chemicals closely for compliance with
the Company's standards. Although the Company has had no difficulty in obtaining
adequate supplies of chemicals to date, the Company anticipates that its needs
for such chemicals will increase significantly when it begins to supply
manufacturers with the proprietary chemicals necessary for the Company's turnkey
manufacturing packages. The Company's inability to obtain high-grade chemicals
would have a material adverse effect on the Company's business, financial
condition, and results of operations.
COMPETITION
The Company competes with other manufacturers of composite industrial
materials such as steel, plastics, fiberglass, and wood. While some of the
Company's competitors compete only on a regional basis due to the significant
relative impact of freight costs, the Company anticipates that it will initially
attempt to market and sell the NuPro Material to manufacturers throughout the
United States and Mexico. While many of the Company's competitors limit their
services to one or more of the following: (i) design and prototype; (ii)
producing machinery and tooling; or (iii) providing raw materials, the Company
expects to provide all such services. The Company believes that it will compete
with companies that serve existing manufacturers with established manufacturing
operations seeking a less expensive manufacturing process or higher quality
product, or new manufacturers in need of a turnkey manufacturing package for
production.
The Company's success requires its continued development of product
applications and its sales and marketing of the NuPro Material to manufacturers.
Many of the Company's competitors in the steel, plastics, fiberglass, and wood
businesses, among others, are more established and have greater name recognition
and marketing resources than the Company. In addition, while many of the
competing industrial materials have achieved market acceptance, the NuPro
Material is still being commercialized and there is no assurance that it will be
able to achieve and maintain market acceptance. See "Management's Discussion and
Analysis or Plan of Operation -- Factors that May Affect Future Operating
Results Uncertainty of Acceptance of the NuPro Material." Many of the Company's
competitors also have greater financial resources than those available to the
Company and certain competitors spend substantially greater amounts for
advertising and promotion.
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The Company anticipates that it will compete principally through product
quality and price. The Company believes that the NuPro Material's principal
competitive strengths are (a) its variety of formulations that allow it to
generate differing properties to address the different needs of varying product
applications, and (b) its cold molding production process that allows it to be
manufactured in a more inexpensive manner than the standard plastics
manufacturing process.
REGULATION AND ENVIRONMENTAL CONSIDERATIONS
The Company is currently not subject to any environmental proceedings.
During the year ended November 30, 1998, the Company did not make any material
expenditures for environmental control facilities, nor does it currently
anticipate any such future expenditures. Actions by international, federal,
state, and local governments concerning environmental matters could result in
laws or regulations that could increase the cost of producing the NuPro Material
or otherwise adversely affect the demand for the Company's product applications.
At present, during the Company's early stage of development, environmental laws
and regulations do not have a material adverse effect upon the demand for the
products made with the NuPro Material. However, certain of the Company's
operations are subject to international, federal, state, and local environmental
laws and regulations that impose limitations on the discharge of pollutants into
the air and water and establish standards for the treatment, storage, and
disposal of solid and hazardous wastes. While the Company has not had to make
significant capital expenditures for environmental compliance, it cannot predict
with any certainty its future capital expenditure requirements relating to
environmental compliance because of continually changing compliance standards
and technology. The Company does not have insurance coverage for environmental
liabilities and does not anticipate obtaining such coverage in the future. See
"Management's Discussion and Analysis or Plan of Operation -- Factors that May
Affect Future Operating Results Environmental Liabilities."
The Company is also subject to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state
laws which impose liability without regard to fault or to the legality of the
original action, on certain classes of persons (referred to as potentially
responsible parties or "PRPs") associated with the release or threat of release
of certain hazardous substances into the environment. Generally, liability of
PRPs to the government under CERCLA is joint and several. Financial
responsibility for the remediation of contaminated property or for natural
resources damage can extend to properties owned by third parties. The Company
believes that it is in substantial compliance with all environmental laws
applicable to its business.
RESEARCH AND DEVELOPMENT
The Company maintains a continuing development program devoted to the
NuPro Material and its product applications. Development activities include
designing new and improved products and product applications, testing and
enhancing chemical formulations to generate differing properties in the NuPro
Material and prototype model and mold fabrications. The Company's development,
pre-production, and administration expenditures were approximately $671,157 and
$476,927 for fiscal year 1998 and the nine months ended August 31, 1999,
respectively. The Company anticipates that it will incur approximately $500,000
in additional development expenses by the end of the first quarter of fiscal
year 2000 on product testing and capital expenditures for research and
development equipment.
INTELLECTUAL PROPERTY
The Company's success depends, in part, upon its intellectual property
rights relating to its production process and other operations. The Company
anticipates that it will rely on a combination of trade secret, nondisclosure,
and other contractual arrangements, confidentiality procedures, and patent,
copyright, and trademark laws, to protect its proprietary rights. The Company
has filed applications for the federal registration of its NuPro(TM) and NuPro
Innovations(TM) marks.
The Company uses proprietary technology for manufacturing the NuPro
Material. The Company believes that the non-patented proprietary NuPro Material
will be protected under trade secret, contractual, and other intellectual
property rights that do not afford the statutory exclusivity possible for
patented products and processes.
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To protect its proprietary technology, the Company mixes the proprietary
component of the NuPro Material in a secure environment at one of its
facilities. The production processes to manufacture products from the NuPro
Material are not proprietary; however, there is a certain amount of "know-how"
that the Company has gained which would hinder a person taking the NuPro
Material and introducing it into the conventional manufacturing environment.
EMPLOYEES
As of November 30, 1999, the Company had nine full-time employees, of whom
four had executive or managerial responsibilities. None of the Company's
employees are represented by a union. The Company considers its relations with
its employees to be good.
The Company's growth continues to place significant demands on its
managerial resources. The success of the Company's business is substantially
dependent on the services of its senior management team, and the services of Mr.
Luba Veselinovic and Ms. Elke Veselinovic. The Company does not currently have
employment agreements with any of its executive officers or other key personnel.
The loss of the services of its executive officers or other key personnel could
have a material adverse effect on the Company. To address these risks, the
Company must, among other things, continue to attract, retain and motivate
qualified personnel. While the Company has been successful in attracting
qualified personnel to date, there can be no assurance that the Company will be
successful in attracting and retaining qualified personnel in the future.
INSURANCE
The Company maintains general liability, automobile liability, and
umbrella coverage insurance in amounts that it believes are customary for a
company of its size engaged in a comparable industry. The Company is in the
process of obtaining worker's compensation and directors and officers liability
insurance. There is no assurance that the Company will not be subject to claims
in the future that its insurance may not cover or as to which its coverage
limits may be inadequate.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Except for historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include, but are not limited to,
statements regarding future events and the Company's plans and expectations. The
Company's actual results could differ materially from those discussed herein.
Readers are cautioned not to place undue reliance on the forward-looking
statements that relate to the Company's future performance. See "Special Note on
Forward-Looking Statements."
PLAN OF OPERATION
The Company has not had any revenues from operations since its inception.
The Company believes that it has sufficient funds to satisfy its cash
requirements for the next 12 months. In any event, the Company anticipates that
it may raise additional funds by way of equity or debt financing in the third or
fourth quarter of fiscal year 2000.
RESEARCH AND DEVELOPMENT
The Company anticipates that it will continue research and development to
enhance the technology of the NuPro Material and create additional product
applications for the NuPro Material over the next 12 months. The Company expects
to incur approximately $500,000 in additional development expenses by the end of
the first quarter of fiscal year 2000 on product testing and capital
expenditures for research and development equipment, including, without
limitation, testing equipment. The Company currently anticipates that it will
begin production of pallets and deck boards with the NuPro Material by the
fourth quarter of fiscal year 2000. See "Factors That May Affect Future
Operating Results."
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PLANT AND EQUIPMENT
The Company is currently in the process of constructing two manufacturing
facilities in Guaymas, Sonora, Mexico, consisting of approximately 186,000
square feet and new administrative and research and development offices in
Tucson, Arizona, consisting of approximately 12,000 square feet. The Company
anticipates that the construction of the first phase of its manufacturing
facilities, which includes approximately 32,000 square feet, and its
administrative and research and development offices will be completed by the
second quarter of fiscal year 2000. The Company believes that it has reserved
sufficient funds to complete the construction of the first phase of its
manufacturing facilities and its administrative and research and development
offices. The Company considers its current and planned facilities to be
sufficient for its current and anticipated operations.
The Company expects to purchase and install its production equipment
during the second and third quarters of fiscal year 2000. Such production
equipment will be for initial set up of production and the testing of product
applications for the NuPro Material. The Company anticipates that it will incur
costs of approximately $1,815,000, in connection with such purchase and
installation. The Company believes that it has reserved sufficient funds to
complete the purchase and installation of such production equipment.
EMPLOYEES
The Company anticipates that it will retain approximately 25 additional
employees during fiscal year 2000. The Company believes that such additional
employees will primarily perform engineering, management, production, and
administrative functions for the Company.
YEAR 2000 COMPLIANCE
The inability of computers, software and other equipment utilizing
microprocessors to recognize and properly process data fields containing a two
digit calendar year is commonly referred to as the "Year 2000 Compliance" issue.
As the calendar year 2000 approaches, such systems may be unable to accurately
process some date-based information.
In an effort to be Year 2000 compliant, the Company has:
- investigated new production equipment to be purchased to
determine which equipment is Year 2000 compliant and would be
suitable for the Company;
- assessed the Company's limited number of personal computers and
computer software to determine whether the Company has any Year
2000 compliance issues with respect to its limited internal
operating systems; and
- examined the extent to which the Company depends on third parties
whose systems may not be Year 2000 compliant.
However, there may be a number of unforeseen circumstances or unknown factors
that the Company has not yet identified or anticipated regarding the Year 2000
compliance issue, and such circumstances or factors could have a material
adverse effect on the Company's business, financial condition, and results of
operations. Because the Company is currently at a developmental stage, the most
reasonably likely worst case scenario would involve an interruption in the
Company's telephone services, a malfunction of the limited number of personal
computers used by the Company or disruption or cancellation of services being
provided to the Company by third parties that could delay the Company's
commencement of manufacturing operations. For example, if Year 2000 Compliance
issues cause the builders of the Company's manufacturing facilities in Guaymas,
Sonora, Mexico or the Company's new administrative and research and development
offices in Tucson, Arizona to suspend building activities, the Company's plan of
operations may be delayed and thereby allow competitors and other companies
developing similar industrial materials a greater opportunity to gain market
share prior to the Company's entry into the marketplace. Such a delay could have
a material adverse effect on the Company's business, financial condition, and
results of operations. The Company does not have Year 2000 contingency plans in
place and does not intend to develop such plans.
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FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
This Form 10-SB contains "forward-looking statements" relating to, without
limitation, future economic performance, plans, and objectives of the Company
for future operations and projections of revenue and other financial items, that
are based on the beliefs or assumptions made by and information currently
available to the Company. The words "expect," "estimate," "anticipate,"
"believe," "intend," "plan," and similar expressions and variations thereof are
intended to identify forward-looking statements. The cautionary statements in
this "Factors that May Affect Future Operating Results" section and elsewhere in
this Form 10-SB identify important factors with respect to such forward-looking
statements, including risks and uncertainties, that could cause actual results
to differ materially from those expressed in or implied by such forward-looking
statements.
NO SALES
The Company is attempting to commercialize a new technology, an industrial
composite material called NuPro, and has no invoiced sales to date. Although the
Company has received funding from potential customers towards the development
and prototyping of a deck board product application, a shipping pallet product
application, and a golf driver product application, and has completed
prototyping of a food processing tray product application, the Company has not
executed any product orders to date. The Company's results of operations may be
unpredictable from quarter to quarter as a result of numerous factors, including
fluctuations in the development and design of the Company's current and future
product applications for the NuPro Material, market acceptance of the Company's
current or future product applications for the NuPro Material, the timing of
orders and shipments of the NuPro Material, or the introduction or the
announcement of competitive composite materials or products. There can be no
assurance that the Company will be able to achieve significant revenue from
sales of products in the future.
LIMITED OPERATING HISTORY
The Company is a development stage company that was incorporated in the
Canadian Province of Ontario on November 27, 1996, as TracTop Distributing Inc.
and domesticated in the state of Delaware in the United States under the name
"NuPro Innovations, Inc." on August 7, 1997. As a result, the Company has a
short operating history to review in evaluating the Company's business. The
Company has limited financial and operating data upon which the Company's
business and prospects may be evaluated. The Company has not generated operating
revenue to date.
LACK OF PRODUCT DIVERSIFICATION
The Company anticipates that all of its sales will be derived from the
NuPro Material. Although the Company has developed multiple product applications
for the NuPro Material, and intends to continue such development, the Company's
product line will be based exclusively on the composite formula for the NuPro
Material. The Company has obtained the exclusive right to use and develop the
technology relating to the NuPro Material and to market and sell the NuPro
Material pursuant to a Technology License Agreement (the "Krida License")
between the Company and Krida Overseas Investment Trading Limited, an entity
incorporated in Cyprus ("Krida Overseas"). If the Company should experience any
problems, real or perceived, with product quality or acceptance of the NuPro
Material, or loses all or a portion of its exclusive right to use, develop, and
market the NuPro Material under the Krida License, the Company's lack of product
diversification would have a material adverse effect of the Company's business,
financial condition, and results of operations.
DEPENDENCE ON SINGLE MANUFACTURING FACILITY
The Company anticipates that the key proprietary chemicals that comprise
the NuPro Material will be mixed solely at one of the Company's facilities. Any
interruption in the operations or decrease in the capacity of this facility,
whether because of equipment failure, natural disaster, or otherwise, may limit
the Company's ability to meet future customer demand for the NuPro Material and
would have a material adverse effect on the Company's business, financial
condition, and results of operations.
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<PAGE> 11
RELIANCE ON SUPPLY OF RAW MATERIALS
The NuPro Material is a polyester/epoxy hybrid that requires a substantial
amount of certain chemical constituents, primarily raw petro-chemical
feedstocks. Although the Company believes that such chemical components are
available from a number of suppliers, the Company anticipates that it will
purchase such chemical constituents from a relatively small number of suppliers
located in Mexico, Venezuela, and Romania. The Company's ability to obtain
adequate supplies of chemical compounds for the NuPro Material depends on its
success in entering into long-term arrangements with suppliers and managing the
collection of supplies from geographically dispersed suppliers. The termination
or interruption of the Company's significant supplier relationships could
subject the Company to the risks that it would be unable to purchase sufficient
quantities of raw materials to meet its production requirements or would have to
pay higher prices for replacement supplies. The termination of significant
sources of raw materials or payment of higher prices for raw materials could
have a material adverse effect on the Company's business, financial condition,
and results of operations. See "Description of Business -- Suppliers."
MANAGEMENT OF GROWTH
The Company recently has experienced growth in product application
development and prototyping and expects to begin production of pallets and deck
boards with the NuPro Material by the fourth quarter of fiscal year 2000 and to
commence production on a small initial order of its food processing tray product
application in the near future. This growth in the Company's business has
resulted in an increase in the responsibilities of the Company's management and
is expected to place added pressures on the Company's operating and financial
systems. The Company's ability to assimilate new personnel will be critical to
its performance, and there can be no assurance that the management and systems
currently in place will be adequate if its operations continue to expand or that
the Company will be able to implement additional systems successfully and in a
timely manner as required.
RISKS IN DEVELOPING AND COMMERCIALIZING THE NUPRO MATERIAL TECHNOLOGY AND
PRODUCT APPLICATIONS
The Company has developed a number of product applications for the NuPro
Material. The commercialization and sale of these new product applications are
relatively new ventures with high costs, expenses, difficulties, and delays
associated with commercialization of new products. Such new product application
development necessitates the development of new production processes for cost
effective manufacture in commercial quantities. The Company has developed a
distribution plan for each product application, either through an internal sales
and marketing organization or through establishing relationships with companies
with existing distribution networks. This development process typically spans
over a period of years. Although the Company in the last few years has expended
substantial sums on accomplishing development of new product applications which
has taxed the Company's resources, significant additional funds must be expended
for the new product and process development and marketing activities to
continue.
Although the Company may develop applications for the NuPro Material that
have been previously created with steel, alloys, wood, plastic, fiberglass,
plastic foam, or other materials, the market for products created with the NuPro
Material is in an early stage of development. Because this market is only
beginning to develop, it is difficult to assess the size of this market and the
product features and prices, the optimal distribution and manufacture strategy,
and the competitive environment that will develop in this market.
UNCERTAINTY OF ACCEPTANCE OF THE NUPRO MATERIAL
The NuPro Material and its applications are still being developed and
commercialized. There can be no assurance that the Company will be able to
continue to develop applications for the NuPro Material or that any product
applications for the NuPro Material will achieve market acceptance. The failure
of the product applications of the NuPro Material to achieve market acceptance,
or maintain such acceptance, if achieved, could have a material adverse effect
on the Company's business, financial condition, and results of operations.
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<PAGE> 12
DEPENDENCE ON NON-PATENTED PROPRIETARY RIGHTS AND KNOW-HOW
The Company's success depends, in part, upon its intellectual property
rights relating to its production process and other operations. The Company
anticipates that it will rely on a combination of trade secret, nondisclosure,
and other contractual arrangements, confidentiality procedures, and patent,
copyright, and trademark laws, to protect its proprietary rights. The Company
has filed applications for the federal registration of its NuPro(TM) and NuPro
Innovations(TM) marks.
The Company uses non-patented proprietary technology for manufacturing the
NuPro Material. The Company believes that the non-patented proprietary NuPro
Material will be protected under trade secret, contractual, and other
intellectual property rights that do not afford the statutory exclusivity
possible for patented products and processes. To protect its proprietary
technology, the Company mixes the proprietary component of the NuPro Material in
a secure environment at one of its facilities. The production processes to
manufacture products from the NuPro Material are not proprietary; however, there
is a certain amount of "know-how" that the Company has gained which would hinder
a person taking the NuPro Material and introducing it into the conventional
manufacturing environment.
There can be no assurance that the steps taken by the Company with respect
to its proprietary technology and technical know-how will be adequate to deter
misappropriation of its proprietary information or that the Company will be able
to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights. The Company's proprietary information may also
become known to or independently developed by, competitors, or the Company's
non-patented proprietary rights may be challenged. Such events could have a
material adverse effect on the Company's business, financial condition, and
results of operations.
COMPETITION
Competition in the markets for industrial materials, which includes, among
other things, steel, plastics, wood, and fiberglass, is largely based upon
quality and price. Many of the Company's competitors have greater financial
resources than those available to the Company and certain competitors spend
substantially greater amounts for advertising and promotion. In addition, many
of the Company's competitors are more established and have greater name
recognition.
INTRODUCTION OF NEW PRODUCT APPLICATIONS
The Company's success will primarily depend upon its ability to introduce
new product applications that achieve market acceptance. To meet these
challenges, the Company invests and expects to continue to invest in the
development of new product applications and production processes. There can be
no assurance that the Company will be able to respond effectively to the needs
of emerging markets or that markets will develop for any product applications
introduced or under development by the Company.
ENVIRONMENTAL LIABILITIES
Actions by Federal, state and local governments concerning environmental
matters could result in environmental laws or regulations that could increase
the cost of producing the NuPro Material and the product applications developed
by the Company, or otherwise adversely affect the demand for the NuPro Material.
At present, during the Company's early stage of development, environmental laws
and regulations do not have a material adverse effect upon the demand for the
NuPro Material. In addition, certain of the Company's operations are subject to
Federal, state and local environmental laws and regulations that impose
limitations on the discharge of pollutants into the air and water and establish
standards for the treatment, storage and disposal of solid and hazardous wastes.
While the Company has not had to make significant capital expenditures for
environmental compliance, the Company cannot predict with any certainty its
future capital expenditure requirements relating to environmental compliance
because of continually changing compliance standards and technology. The Company
does not have insurance coverage for environmental liabilities and does not
anticipate obtaining such coverage in the future. See "Business Regulation and
Environmental Considerations."
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<PAGE> 13
The Company is also subject to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), and similar state
laws which impose liability without regard to fault or to the legality of the
original action, on certain classes of persons (referred to as potentially
responsible parties or "PRPs") associated with the release or threat of release
of certain hazardous substances into the environment. Generally, liability of
PRPs to the government under CERCLA is joint and several. Financial
responsibility for the remediation of contaminated property or for natural
resources damage can extend to properties owned by third parties. The Company
believes that it is in substantial compliance with all environmental laws
applicable to its business. There can be no assurance that the Company will
respond effectively to changes in CERCLA and similar state laws, if necessary,
relating to the release or threat of release of certain hazardous substances
into the environment.
PRODUCT LIABILITY CLAIMS
The manufacture of the NuPro Material could expose the Company to the risk
of product liability claims. While the Company has had no material liability
with respect to product liability claims to date, the Company is still in its
development stages. After the Company begins production and achieves sales,
product liability claims could have a material adverse effect on the Company's
business, financial condition, and results of operations. While the Company
maintains product liability insurance against the possibility of defective
product claims there can be no assurance that such insurance would be sufficient
to protect the Company against liability from such claims.
DEPENDENCE ON KEY PERSONNEL
The activities of the Company, including exploitation and development of
innovative polymer composite formulations, and, as a result, the Company's
future success, will depend to a significant extent on its senior management and
other key employees. Certain officers of the Company have engaged in related
activities in Germany, Canada, and the United States for approximately 35 years.
The Company's Chief Executive Officer and President, Luba Veselinovic, is not an
employee of the Company but is serving in such capacities pursuant to a
Secondment Agreement between the Company and Krida Overseas, which is controlled
by Mr. Veselinovic and employs Mr. Veselinovic. Any interruption of or default
by the Company under the Secondment Agreement may result in the Company losing
the services of Mr. Veselinovic, which could have a material adverse effect on
the Company's business, financial condition, and results of operations. See
"Certain Relationships and Related Transactions."
The Company also believes that its future success will depend in a large
part on its ability to attract and retain additional key employees. Competition
for such personnel is intense, and there can be no assurance that the Company
will be successful in attracting and retaining such personnel. The Company's
inability to attract and retain additional key employees or the loss of one or
more of its current key employees could have a material adverse effect on the
Company's business, financial condition, and results of operations.
CONFLICTS RELATING TO THE MANAGEMENT OF THE COMPANY
On June 18, 1999, the Company acquired (the "TrucTech Asset Acquisition")
substantially all of the assets and liabilities of TrucTech, Inc., a Georgia
corporation ("TrucTech"), pursuant to an Asset Purchase Agreement between the
Company and TrucTech effective as of December 1, 1998 (the "TrucTech Asset
Purchase Agreement"). The TrucTech Asset Acquisition was approved by the Board
of Directors and stockholders of TrucTech and by the Board of Directors of the
Company. The total consideration for the TrucTech Asset Acquisition was US
$5,500,000, which was satisfied by the issuance of 7,333,333 shares of Common
Stock (the "Shares"), valued at US $0.75 per share. Certain directors, officers,
employees, and stockholders of the Company were also directors, officers,
employees, and stockholders of TrucTech. As a result, certain conflicts of
interest existed with respect to the TrucTech Asset Acquisition, and the
subsequent distribution of the Shares to the TrucTech Stockholders pursuant to a
proposed Plan of Voluntary Dissolution of TrucTech.
Krida Overseas, which is controlled by Luba Veselinovic, President and
Chief Executive Officer of the Company, owns the technology relating to the
NuPro Material and licenses to the Company the right to use and market the NuPro
Material in its operations pursuant to the Krida License. Any interruption of or
default by the Company under the license agreement may result in the Company
losing all or a portion of its exclusive right to use,
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<PAGE> 14
develop, and market the NuPro Material, which would have a material adverse
effect on the Company's business, financial condition, and results of
operations. As an officer of the Company, Mr. Veselinovic has fiduciary
obligations to the Company's stockholders, which may conflict with his own
interests as an affiliate of the owner of the NuPro Material. See "Certain
Relationships And Related Transactions."
POLITICAL FACTORS
Certain critical functions and operations of the Company are carried out
in Mexico in accordance with the North American Free Trade Agreement ("NAFTA").
Any political unrest in Mexico could have a material adverse effect on the
Company and its business activities. Direct foreign investment is often subject
to specific local political risks, including but not limited to, change of laws,
lack of enforcement or discriminatory enforcement of laws, acts of violence, or
other unforeseen events. Occurrence of any one or more of these events could
have a material adverse effect on the Company's business, financial condition,
and results of operations.
ECONOMIC FACTORS
Direct foreign investment in other countries involves potential economic
factors such as currency devaluation, inflation, interest rate fluctuations,
exchange controls, restrictions on currency repatriation, unidentified adverse
changes in internal or international policies, and changes in world economic
conditions. Occurrence of any one or more of these or similar factors may have a
material adverse effect on the Company's business, financial condition, and
results of operations.
CURRENCY FLUCTUATION
The Company has significant operations located in Mexico. Currently, the
Mexican pesos may be readily exchanged for U.S. currency in Mexican banks, and
the exchange rate relating to Mexican pesos has been generally stable for the
past five years in comparison to the exchange rate fluctuations relating to the
currencies of certain other countries. The current exchange rate for Mexican
pesos could change at any time by the direction of the government or economic
developments and such changes could have a material adverse effect on the
Company's business, financial condition, and results of operations.
The Company anticipates that it will acquire a substantial portion of its
chemical supplies from sources in Mexico, Venezuela, and Romania. To the extent
the exchange rate for currencies in any of such countries fluctuates
significantly, such fluctuations could make the Company's chemical supplies more
expensive to acquire and, as a result, could have a material adverse effect on
the Company's business, financial condition, and results of operations.
LABOR MATTERS
The operating activities that the Company is establishing in Mexico
require the engagement and expertise of local labor. Various issues with
employees could be raised, such as wages, working conditions, security, housing,
hours of work, advancement, and medical plans. Any difficulties in relationships
with the employees of the Company could have a material adverse effect on the
Company's business, financial condition, and results of operations.
PROJECTIONS
Projected financial results and cash flow of the Company's operations are
speculative for the following reasons, among others: comparative historical
results do not exist; the Company is at an early stage of development of its
operations and business plans; and the Company has not confirmed the feasibility
of product and technology applications. Projections are only examples of what
could occur if the underlying assumptions actually occur. Because of the various
risks involved in the proposed activities, the Company's projections could prove
to be inaccurate in material respects for any operating activities.
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<PAGE> 15
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS.
The Company's Certificate of Incorporation authorizes the Board of
Directors to issue, without stockholder approval, one or more series of
preferred stock having such preferences, powers and relative, participating,
optional and other rights (including preferences over the Common Stock
respecting dividends and distributions and voting rights) as the Board of
Directors may determine. The issuance of this "blank-check" preferred stock
could render more difficult or discourage an attempt to obtain control of the
Company by means of a tender offer, merger, proxy contest, or otherwise.
ISSUANCE OF ADDITIONAL SECURITIES; DILUTIVE EFFECT
The Company will have authority to offer shares of preferred stock,
additional shares of Common Stock or other equity or debt securities for cash,
in exchange for property or otherwise. Stockholders will have no preemptive
right to acquire any such securities, and any such issuance of equity securities
could result in dilution of an existing stockholder's investment in the Company.
In addition, the Board of Directors has the authority to issue shares of
preferred stock having preferences and other rights superior to Common Stock.
LIMITED MARKET FOR COMMON STOCK
The Company's common stock is covered by Securities and Exchange
Commission rules that impose additional sales practice requirements on
broker-dealers who sell securities priced at under $5.00 (so-called "penny
stocks") to persons other than established customers and accredited investors
(generally institutions with assets in excess of $5 million or individuals with
net worth in excess of $1 million or annual income exceeding $200,000 or
$300,000 jointly with their spouse). For transactions covered by such rules, the
broker-dealer must make a special suitability determination for the purchaser
and receive the purchaser's written agreement to the transaction prior to the
sale. Moreover, such rules also require that brokers engaged in secondary sales
of penny stocks provide customers written disclosure documents, monthly
statements of the market value of penny stocks, disclosure of the bid and ask
prices, disclosure of the compensation to the broker-dealer, and disclosure of
the salesperson working for the broker-dealer. Consequently, the rules may
affect the ability of broker-dealers to sell the Company's Common Stock and also
may affect the ability of persons receiving such Common Stock to sell their
Common Stock in the secondary market. These trading limitations tend to reduce
broker-dealer and investor interest in "penny stocks" and could operate to
inhibit the ability of the Company's Common Stock to reach a $3 per share
trading price that would make it eligible for quotation on NASDAQ, even if the
Company otherwise qualifies for quotation on NASDAQ.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's principal administrative offices are located in
approximately 1,272 square feet of space in Tucson, Arizona. The Company
occupies these premises under a lease agreement expiring on March 31, 2000, and
providing for rent at a rate of $2,014 per month. The Company also leases
prototyping, tool modeling, and administrative facilities in Guaymas, Sonora,
Mexico consisting of 1,015 square feet at a rate of $1,015.50 per month. The
Company is in the process of constructing two manufacturing facilities in
Guaymas, Sonora, Mexico, consisting of approximately 186,000 square feet and new
administrative and research and development offices in Tucson, Arizona,
consisting of approximately 12,000 square feet. The Company anticipates that the
land and construction costs of (i) the first phase of the manufacturing
facilities will be approximately $1,235,600 and (ii) the administrative and
research and development offices will be approximately $1,122,094. The Company
anticipates that the construction of the first phase of its manufacturing
facilities, which includes approximately 32,000 square feet, and its
administrative and research and development offices will be completed in
February 2000. The Company considers its current and planned facilities to be
sufficient for its current and anticipated operations.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the numbers of shares and percentage of all
shares of the Company's Common Stock outstanding as of November 15, 1999 held by
(i) any person known to the Company to be the beneficial owner of 5% or more of
the Company's outstanding Common Stock, (ii) each director and executive officer
of the Company, and (iii) all directors and executive officers as a group.
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<PAGE> 16
<TABLE>
<CAPTION>
AMOUNT & NATURE
NAME AND ADDRESS OF PERCENT OF
OF BENEFICIAL OWNER (1) BENEFICIAL OWNER CLASS (2)
- - ------------------------- ----------------- ----------
<S> <C> <C>
Luba Veselinovic 2,799,213(3) 22.16%
Ernesto Zaragoza de Cima 108,948(4) *
Lawrence J. McEvoy Jr. 126,805(5) 1.00%
Elke Veselinovic 440,970(6) 3.49%
David G. Schmidt 26,407(7) *
All Executive Officers and 3,502,343 27.51%
Directors as a Group (5
Persons)
</TABLE>
- - ----------------------
*Represents beneficial ownership of less than 1%.
(1) Except as otherwise indicated, each holder may be reached through the
Company at 5151 E. Broadway Blvd., Suite 730, Tucson, Arizona 85711.
(2) The percentages shown are calculated based upon 12,617,217 shares of Common
Stock outstanding on November 15, 1999. The numbers and percentages shown
include the shares of Common Stock actually owned as of November 15, 1999,
and the shares of Common Stock that the identified person or group had the
right to acquire within 60 days of such date. In calculating the percentage
of ownership, all shares of Common Stock that the identified person or
group had the right to acquire within 60 days of November 15, 1999, upon
the exercise of options or warrants are deemed to be outstanding for the
purpose of computing the percentage of the shares of Common Stock owned by
such person or group, but are not deemed to be outstanding for the purpose
of computing the percentage of the shares of Common Stock owned by any
other person.
(3) Consists of 2,784,213 shares owned by Krida Overseas, which is controlled
by Mr. Veselinovic. Includes 15,000 shares of Common Stock subject to
options exercisable within 60 days of November 15, 1999.
(4) Includes 25,000 shares of Common Stock subject to options exercisable
within 60 days of November 15, 1999.
(5) Consists of 4,286 shares owned by the McEvoy Family Trust and 97,519 shares
owned directly by Mr. McEvoy. Includes 25,000 shares of Common Stock
subject to options exercisable within 60 days of November 15, 1999.
(6) Consists of 415,970 shares owned by the Veselinovic Children's Trust.
Includes 25,000 shares of Common Stock subject to options exercisable
within 60 days of November 15, 1999.
(7) Includes 25,000 shares of Common Stock subject to options exercisable
within 60 days of November 15, 1999.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following table sets forth information concerning the Company's
executive officers and directors. Except as otherwise noted, none of the
executive officers are directors or officers of any publicly owned corporation
or entity.
<TABLE>
<CAPTION>
Name Age Position
- - ----------------------- ---- -------------------------------------
<S> <C> <C>
Luba Veselinovic 61 President and Chief Executive Officer
Ernesto Zaragoza de Cima 45 Vice President, Director
Lawrence J. McEvoy Jr., JD 67 Secretary, Director
Elke Veselinovic 58 Treasurer, Director
</TABLE>
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<PAGE> 17
<TABLE>
<CAPTION>
Name Age Position
- - ----------------------- ---- -------------------------------------
<S> <C> <C>
David G. Schmidt 36 Director
</TABLE>
The term of office of each director of the Company is for one year and
until his or her successor is elected at the annual stockholders' meeting and is
qualified, subject to removal by the stockholders. All officers serve at the
discretion of the Company's Board of Directors and until his or her successor is
elected at the annual meeting of the Board of Directors and is qualified.
LUBA VESELINOVIC was elected President and Chief Executive Officer of the
Company effective June 1, 1999. Mr. Veselinovic serves as President and Chief
Executive Officer of the Company pursuant to a Secondment Agreement between the
Company and Krida Overseas. Mr. Veselinovic has been employed by Krida Overseas
as a consultant since 1989. Mr. Veselinovic has been engaged by the Company
since June 1998 as Chairman of the Advisory Council and, through NAFTA
Technology, Trading and Consulting, was retained in the position of Director of
Technology and Manufacturing for the Company from June 1998 to June 1999. He was
previously retained in a similar position by TrucTech. NAFTA Technology, Trading
and Consulting is owned by Mr. Veselinovic's spouse, Elke Veselinovic, who is
the Treasurer and a director of the Company.
From 1972 to 1988, Mr. Veselinovic founded and was the President of
Plastics Group Technologies Inc., which was an OEM integrated manufacturer
specializing in the automotive and computer industries with approximately 750
employees. Mr. Veselinovic has developed several technologies including the
NuPro Material. Mr. Veselinovic received his Bachelor Degree in
Electro-Chemistry from the College for Electro-Chemistry in Belgrade,
Yugoslavia in 1959.
ERNESTO ZARAGOZA DE CIMA has served as a director of the Company since
June 1998 and was recently elected Vice President of the Company effective June
1, 1999. Mr. Zaragoza de Cima has also served as the President of NuPro
Innovation de Mexico, S.A. de C.V., a majority owned subsidiary of the Company,
since 1998. He is also a director of a number of family-owned businesses in
diverse industries in the State of Sonora, Mexico. Mr. Zaragoza received a
Bachelor's of Business Administration Degree from Instituto Tecnologico de
Estudios Superiores de Monterrey in Mexico in 1977.
LAWRENCE MCEVOY JR. has served as Secretary and a director of the
Company since June 1998. Mr. McEvoy has practiced law in private practice
since 1965 as a member of the Georgia bar. Mr. McEvoy received his Juris
Doctorate degree from the University of Virginia in 1965.
ELKE VESELINOVIC has served as Treasurer and a director of the Company
since June 1998. From 1989 to 1998, Ms. Veselinovic served as President of
TrucTech, Inc., a Georgia corporation that was a research and development
company for the NuPro Material. Ms. Veselinovic is Luba Veselinovic's wife.
Ms. Veselinovic received a Degree from the Business College in Bad Segeberg,
Germany in 1959.
DAVID SCHMIDT has served as a director of the Company since February 1998.
He has served as a Vice-President of Power Enhancement Systems, Inc., a
technology product development company located in Georgia, since August 1989.
From August 1998 to September 1998, Mr. Schmidt served in sales and management
capacities for API Atlanta, Inc., a computer sales and marketing firm. Mr.
Schmidt received a Bachelor's of Business Administration Degree from Pace
University.
ADVISORY COUNCIL
The Company formed an advisory council (the "Advisory Council") on March
1, 1998, which serves as a group that provides advisory services to the Company
and the Company's Board of Directors. The Company believes that members of the
Advisory Council represent a diverse range of professional, management,
technical, and geographic perspectives. The Advisory Council meets twice a year
and at various other times as necessary. Each member of the Advisory Council is
paid a fixed fee of $500 per quarter and receives $1000 plus out-of-pocket
travel expenses for each Advisory Council meeting attended. In addition, during
fiscal year 1998, each
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<PAGE> 18
member of the Advisory Council received an option to purchase 15,000 shares of
Common Stock at an exercise price of $4.00 per share. Each member of the
Advisory Council has also entered into an indemnification agreement with the
Company which provides for the Company to indemnify each member of the Advisory
Council against expenses, including attorneys' fees, reasonably incurred in
connection with actions against or threatened against such member by reason of
the fact that such member was a member of the Advisory Council or by reason of
any action or inaction taken by such member while acting in the capacity of a
member of the Advisory Council. The members of the Company's Advisory Council as
of November 15, 1999 were:
LUBA VESELINOVIC - CHAIRMAN Tucson
Mr. Veselinovic is the President and Chief Executive Officer of the
Company. Mr. Veselinovic has experience in electro-chemistry, advanced
materials and plastics, and manufacturing technology. Mr. Veselinovic
was involved in the introduction of chrome-plated plastics components
to the North American automotive industry in the 1960s. Mr.
Veselinovic received awards for his technological achievement in May
1997 and 1998 from the International Technology Hall of Fame for his
technological achievement.
CHARLES GREEN Atlanta
Mr. Green is a vice-president with Commerce Bank's SBA Division, with a
background in banking, corporate finance, and investment banking. He is
author of The Comprehensive Handbook for SBA Loans, and a contributor to
several written materials on corporate finance.
M. GERRY MALLOY Canada
Mr. Malloy was formerly Director of Cold Weather Testing for General
Motors, and is now an independent consultant to international
automotive-related OEMs and supplier companies on product development,
engineering, and testing. He is an author on automotive industry
performance and products in several international publications.
ALEXANDER MARINACCIO Atlanta
Mr. Marinaccio is a prominent figure in the fields of science and
technology. His early training was in chemical engineering. In 1935,
Mr. Marinaccio founded The Inventors Clubs of America and subsequently
the International Hall of Fame sponsored by The Inventors Clubs of
America. Mr. Marinaccio is currently the active Chairman of both
organizations and a mentor to many inventors and entrepreneurs.
PATRICK OLIVE Canada
As Commissioner of Economic Development for the Durham Region of Canada,
Mr. Olive has an extensive background in industrial and real estate
development, tourism, business development, and strategic alliances. In
1996, he was recognized by his colleagues in Canada as the Economic
Developer of the Year, and was the inaugural recipient of the Province of
Ontario's "Economic Development Achievement Award" in 1997.
CHARLES PETTIS Tucson
After a lengthy career in marketing as an independent real estate broker,
Mr. Pettis is currently engaged as the real estate consultant to the
University of Arizona Foundation and as an advisor to many organizations.
INVOLVEMENT IN LEGAL PROCEEDINGS
To the best of management's knowledge, during the past five years, none of
the following occurred with respect to a present or former director or executive
officer of the Company:
(1) Any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time;
(2) Any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
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<PAGE> 19
(3) Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of any competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise limiting
his involvement in any type of business, securities or banking activities; and
(4) Being found by a court of competent jurisdiction (in a civil action),
the commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION.
The following table sets forth the compensation received for services
rendered to the Company or its subsidiaries in all capacities during the fiscal
year ended November 30, 1998 by the Company's Chief Executive Officer and each
of the Company's other executive officers who received compensation in excess of
$100,000 (the "Named Executive Officers"), which includes salary and bonus
earned during the fiscal year ended November 30, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
------------------------------- -----------------------------------------------
PAYOUTS
OTHER SECURITIES ---------------------
NAME AND ANNUAL RESTRICTED UNDERLYING
PRINCIPAL SALARY COMPEN- STOCK OPTIONS/SARS LTIP ALL OTHER
POSITION YEAR ($) BONUS SATION AWARD (#) PAYOUTS COMPENSATION
- - ------------------- ---- ------ ----- ------- ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Luba 1998 0 0 0 0 15,000(2) 0 0
Veselinovic (1)
President and Chief
Executive Officer
Gary A. Fitchett (3) 1998 115,000 0 0 0 25,000(4) 0 0
</TABLE>
- - ----------------------
(1) Mr. Veselinovic was elected President and Chief Executive Officer of the
Company effective June 1, 1999. Mr. Veselinovic serves as President and
Chief Executive Officer pursuant to a Secondment Agreement between the
Company and Krida Overseas, which is Mr. Veselinovic's employer. Pursuant
to the Secondment Agreement, the Company pays Krida Overseas $150,000 per
year for the services of one or more employees of Krida Overseas,
including Mr. Veselinovic.
(2) Mr. Veselinovic was granted options to purchase 15,000 shares of Common
Stock for $4.00 per share as compensation for his service on the Company's
Advisory Council. These options will expire on December 31, 2000.
(3) Mr. Fitchett resigned as President and Chief Executive Officer of the
Company effective June 1, 1999.
(4) Mr. Fitchett was granted options to purchase 25,000 shares of Common Stock
for $4.00 per share as compensation for his service on the Company's Board
of Directors. These options will expire on December 31, 2002.
OPTION GRANTS
The following table sets forth certain information regarding option grants
to the Named Executive Officers during the fiscal year ended November 30, 1998.
-18-
<PAGE> 20
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE
UNDERLYING EMPLOYEES IN PRICE
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) EXPIRATION DATE
- - ---------------- --------------- ------------- -------- -----------------
<S> <C> <C> <C> <C>
Luba Veselinovic 15,000 5.5% $4.00 December 31, 2000
Gary A. Fitchett 25,000 9.1% $4.00 December 31, 2002
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED IN-
NUMBER OF SECURITIES THE-MONEY
UNDERLYING OPTIONS/SAR'S
UNEXERCISED OPTIONS/ AT
SHARES SARS AT FY-END (#) FY-END ($)
ACQUIRED ON VALUE
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- - ---------------- ----------- -------- -------------------- ----------------
<S> <C> <C> <C> <C>
Luba Veselinovic 0 - 15,000/0 None
Gary A. Fitchett 0 - 25,000/0 None
</TABLE>
COMPENSATION OF DIRECTORS
Directors of the Company may be paid such compensation for their services
and such reimbursements for expenses of attendance at board meetings as the
Board of Director may from time to time determine. During fiscal year 1998, each
member of the Company's Board of Directors received options to acquire 25,000
shares of the Company's Common Stock at $4.00 per share as director
compensation. In addition, each member of the Advisory Council received options
during fiscal year 1998 to acquire 15,000 shares of the Company's Common Stock
at $4.00 per share as advisory council compensation.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company is not a party to any employment contracts, however, the
Company is a party to a Secondment Agreement with Krida Overseas under which the
Company has retained the services of Luba Veselinovic as President and Chief
Executive Officer. Pursuant to the Secondment Agreement, the Company pays Krida
Overseas $150,000 per year for the services of one or more employees of Krida
Overseas, including Mr. Veselinovic. The initial term of the Secondment
Agreement is five years, which is automatically renewable for additional
five-year periods.
Additionally, the Company has entered into a perpetual license agreement
with Krida Overseas for the exclusive right to use, develop, and market the
NuPro Material world-wide. The license agreement contains a limitation on the
exclusiveness of the license after December 31, 2002, if Mr. Veselinovic does
not have a major influence, directly or indirectly, on the Company's
decision-making process and the Company does not meet certain sales expectations
set forth in the Company's business plan. As a result, after December 31, 2002,
the Company's exclusive right to use, develop, and market the NuPro Material may
terminate if Mr. Veselinovic is no longer serving as the Company's President and
Chief Executive Officer and the Company does not meet certain sales performance
levels set forth in the Company's business plan.
-19-
<PAGE> 21
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company's Board of Directors has adopted a policy that any
transactions between the Company and any of its executive officers and directors
will be on terms believed to be no less favorable to the Company than could be
obtained from unaffiliated third parties and will be in connection with bona
fide business purposes of the Company.
During fiscal year 1998, each member of the Company's Board of Directors
received options to purchase 25,000 shares of Common Stock at an exercise price
of $4.00 per share. In addition, each of the members of the Company's Advisory
Council received options to purchase 15,000 shares of Common Stock at an
exercise price of $4.00 per share.
On August 24, 1999, NuPro Innovation Mexico S.A. de C.V., a majority-owned
subsidiary of the Company ("NuPro Mexico"), entered into a Buy-Sell Agreement
with Ernesto Zaragoza de Cima, a Vice President and director of the Company, to
acquire approximately 6,176 square meters of land in Guaymas, Sonora, Mexico.
The land was acquired for approximately $100,000 and will be used for the
construction of the Company's new manufacturing facilities in Mexico.
On June 18, 1999, the Company acquired (the "TrucTech Asset Acquisition")
substantially all of the assets and liabilities of TrucTech, Inc., a Georgia
corporation ("TrucTech"), pursuant to an Asset Purchase Agreement between the
Company and TrucTech effective as of December 1, 1998 (the "TrucTech Asset
Purchase Agreement"). The TrucTech Asset Acquisition was approved by the Board
of Directors and stockholders of TrucTech and by the Board of Directors of the
Company. The total consideration for the TrucTech Asset Acquisition was US
$5,500,000, which was satisfied by the issuance of 7,333,333 shares of Common
Stock (the "Shares"), valued at US $0.75 per share. Certain directors, officers,
and stockholders of the Company were also directors, officers and stockholders
of TrucTech. As a result, certain conflicts of interest existed with respect to
the TrucTech Asset Acquisition, and the subsequent distribution of the Shares to
the TrucTech Stockholders pursuant to a proposed Plan of Voluntary Dissolution
of TrucTech.
Krida Overseas, which is controlled by Luba Veselinovic, President and
Chief Executive Officer of the Company, owns the technology relating to the
NuPro Material. The Company has entered into a Technology License Agreement with
Krida, dated as of June 1, 1999 (the "Krida License"), which provides the
Company with the perpetual, exclusive right to use, develop, and market the
NuPro Material worldwide. The Krida License provides for a license fee of 1.5%
of the gross revenues of the Company up to $5,000,000 and 2.0% thereafter. In
the event Mr. Veselinovic no longer has a major influence in the decision-making
process of the Company and the Company's sales are not meeting forecasts in the
Company's business plan, the rights granted under the Krida License will become
non-exclusive 60 days following December 31, 2002. As an officer of the Company,
Mr. Veselinovic will have fiduciary obligations to the Company's stockholders
which may conflict with his own interests as an affiliate of the owner of the
NuPro Material.
Mr. Veselinovic serves as President and Chief Executive Officer of the
Company pursuant to a Secondment Agreement by and between the Company and Krida
Overseas, effective as of December 1, 1998 (the "Secondment Agreement"). The
Secondment Agreement provides for employees of Krida Overseas to perform
services for the Company while remaining an employee of Krida Overseas. The
Secondment Agreement currently provides for a $150,000 fee payable by the
Company to Krida Overseas in exchange for the services of Mr. Veselinovic and
other persons from time to time. The initial term of the Secondment Agreement is
five years, which is automatically renewable for additional five-year periods.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is a Delaware corporation and its affairs are governed by its
Certificate of Incorporation and By-laws and Delaware General Corporation Law.
The following description of the Company's capital stock, which is complete in
all material respects, is qualified in its entirety by reference to the
provisions of the Company's Certificate of Incorporation and Bylaws, copies of
which have been filed as exhibits to this Form 10-SB.
The Company's authorized capital stock consists of 20,000,000 shares of
Common Stock, par value $.001 per share, and 1,000,000 shares of preferred
stock, par value $.001 per share ("Preferred Stock"). As of November 15, 1999,
12,617,217 shares of Common Stock and no shares of Preferred Stock were issued
and outstanding and an additional 1,525,000 and 190,000 shares of Common Stock
may be issued upon exercise of outstanding warrants and options, respectively.
-20-
<PAGE> 22
COMMON STOCK
Holders of shares of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. The holders of Common Stock will be entitled to
receive such dividends, if any, as may be declared by the Board of Directors
from time to time out of legally available funds. In the event of liquidation,
dissolution, or winding up of the Company, the holders of Common Stock will be
entitled to share ratably in all assets of the Company that are legally
available for distribution, after payment of all debts and other liabilities and
after provision has been made for each class of stock, if any, having preference
over the Common Stock. The holders of Common Stock have no preemptive,
subscription, redemption, or conversion rights.
PREFERRED STOCK
The Board of Directors is authorized to issue Preferred Stock in one or
more series and denominations and to fix the rights, preferences, privileges,
and restrictions, including dividend, conversion, voting, redemption,
liquidation rights or preferences, and the number of shares constituting any
series or the designation of such series, without any further vote or action by
the stockholders. The issuance of Preferred Stock may have the effect of
delaying, deferring, or preventing a change of control of the Company without
further action by the stockholders. The issuance of Preferred Stock with voting
and conversion rights may adversely affect the voting power of the holders of
Common Stock.
DEBENTURES
GENERAL
As part of its offering pursuant to Regulation S promulgated under the
Securities Act in July 1999 (the "Regulation S Offering"), the Company issued
$50,000 Unsecured Convertible Debentures ("Debentures") for an aggregate total
of $3,000,000 in Debentures, of which $1,050,000 is currently outstanding after
several investors converted their Debentures into shares of Common Stock
immediately following the Regulation S Offering. The Debentures bear interest at
the rate of ten (10) percent per annum payable semi-annually on June 30 and
December 31, beginning June 30, 2000, and will mature on December 31, 2004. The
Debentures are unsecured obligations of the Company.
CONVERSION PRIVILEGE:
The Debentures are convertible at the holder's option into fully paid
shares of Common Stock at any time prior to the close of business in each
calendar year listed below at the following conversion prices:
<TABLE>
<CAPTION>
YEAR CONVERSION PRICE
---- ----------------
<S> <C>
2000 $2.00
2001 3.00
2002 4.00
2003 5.00
2004 6.00
</TABLE>
If the Company shall obtain a commitment for a planned public offering of
shares of at least $5,000,000, within 60 days prior to the contemplated closing
thereof, the Company shall provide written notice to each holder of a Debenture
(a "Debentureholder") and within 30 days the Debentureholder shall have the
option to: (i) elect to convert the Debentures into shares of Common Stock held
at the applicable conversion price as set forth above; (ii) continue to hold the
Debenture to its maturity date; or (iii) have the Company prepay the Debentures
at 100% of the principal amount of the Debenture plus accrued interest from the
proceeds of the public offering of shares, without further notice or bonus.
No adjustment will be made for dividends on shares of Common Stock
issuable upon conversion of a Debenture. Interest accrued on the Debentures
surrendered for conversion will be paid to the date of conversion.
-21-
<PAGE> 23
ADJUSTMENT OF CONVERSION PRICE
Subject to the provisions hereof, the Debentures provide for the
adjustment of the conversion price in certain events including:
1. the subdivision or consolidation of the outstanding shares of the
Common Stock;
2. the distribution of shares of the Common Stock to stockholders by
way of a stock dividend or otherwise other than an issue of shares
of the Common Stock to stockholders who have elected to receive
dividends in stock in lieu of receiving cash dividends paid in the
ordinary course;
3. the issuance of options, rights, or warrants to holders of shares of
Common Stock entitling them to acquire shares of Common Stock or
other securities convertible into shares of Common Stock at less
than 95% of the then current market price (as defined in the
Debentures) of the shares of Common Stock; and
4. the distribution to all holders of shares of Common Stock of any
securities or assets, other than cash dividends and equivalent
dividends in stock paid in lieu of cash dividends in the ordinary
course.
There will be no adjustment of the conversion price in respect of any
event described in 2, 3, or 4 above if the holders of Debentures are allowed to
participate as though they had converted their Debentures prior to the
applicable record date or effective date. In the case of any reclassification or
change (other than a change resulting only from consolidation or subdivision) of
the shares of Common Stock or in case of any amalgamation, consolidation or
merger of the Company with or into any other corporation, or in the case of any
sale, transfer or other disposition of the properties and assets of the Company
as or substantially as an entirety to any other corporation, the conversion
price shall be adjusted so that each Debenture shall, after such
reclassification, change, amalgamation, consolidation, merger or sale, be
exercisable for the kind and amount of shares and other securities or property
of the Company, or such continuing, successor, or purchaser corporation, as the
case may be, which the holder thereof would have been entitled to receive as a
result of such reclassification, change, amalgamation, consolidation, merger or
sale if on the effective date thereof he had been the holder of the number of
shares of Common Stock into which the Debentures were convertible prior to the
effective date of such reclassification, change, amalgamation, consolidation,
merger or sale. Notwithstanding the foregoing, a holder of Debentures shall be
entitled to receive only shares that constitute prescribed securities in the
event any reclassification, change, amalgamation, consolidation, merger or sale
occurs on or prior to the date which is five years from the issue of the
Debentures and the Debentures become convertible on or prior to that date. No
adjustment will be made in the conversion price on account of the exercise of
options under the Company's stock option plans from time to time.
No fractional shares of Common Stock will be issued on any conversion of a
Debenture, but in lieu thereof the Company shall satisfy such fractional
interest by a cash payment equal to the market price of such fractional
interest.
CANCELLATION
All Debentures converted or paid on maturity will be cancelled forthwith
and may not be reissued or resold.
WARRANTS
GENERAL WARRANTS
GENERAL
On May 31, 1999, the Company issued warrants to its legal counsel, Squire,
Sanders & Dempsey L.L.P., in exchange for services rendered to acquire 25,000
shares of Common Stock at an exercise price of $1.00 per share
-22-
<PAGE> 24
("SSD Warrants"). The SSD Warrants may be exercised at any time from the date of
issuance through December 31, 2002.
The shares of Common Stock underlying the SSD Warrants have certain
piggyback registration rights in the event the Company makes a public offering
of its Common Stock, subject to certain limitations.
ADJUSTMENT OF EXERCISE PRICE
In the event of a merger, consolidation, or sale of substantially all of
the assets of the Company, the SSD Warrants shall apply to the securities of the
successor entity such that the holder shall receive an equivalent amount of
stock of the successor entity as it would have immediately preceding such
transaction.
In the event of any stock split, reverse stock split, stock dividend,
combination, or reclassification of shares of Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock, the number
or shares of Common Stock and the exercise price per share will be
proportionately and appropriately adjusted without any change in the aggregate
price to be paid upon the exercise of all of the SSD Warrants.
REGULATION S WARRANTS
GENERAL
As part of its Regulation S Offering in July 1999, the Company issued
warrants ("Regulation S Warrants") to acquire 1,500,000 shares of Common Stock.
Each Regulation S Warrant comprises the right to purchase, at the holder's
option, one fully paid share of the Company's Common Stock at $2.50 per share.
Although certain holders of Regulation S Warrants exercisable into 200,000
shares have indicated their desire to exercise, no Regulation S Warrants have
been exercised to date. Regulation S Warrants are exercisable only prior to
December 31, 2000 and only if the holder has converted all of such holder's
Debentures also acquired in the Regulation S Offering.
ADJUSTMENT OF EXERCISE PRICE
Subject to the provisions hereof, the Regulation S Warrants provide for
the adjustment of the exercise price in certain events including:
1. the subdivision or consolidation of the outstanding shares of
Common Stock of the Company;
2. the distribution of shares of Common Stock to stockholders by way of
a stock dividend or otherwise, other than an issue of shares of
Common Stock to stockholders who have elected to receive dividends
in stock in lieu of receiving cash dividends paid in the ordinary
course;
3. the issuance of options, rights, or warrants to holders of shares of
Common Stock entitling them to acquire shares of Common Stock or
other securities convertible into shares of Common Stock at less
than 95% of the then current market price (as defined in the
Warrants) of the shares of Common Stock; and
4. the distribution to all holders of shares of Common Stock of any
securities or assets, other than cash dividends and equivalent
dividends in stock paid in lieu of cash dividends in the ordinary
course.
There will be no adjustment of the conversion price in respect of any
event described in 2, 3, or 4 above if the holders of Regulation S Warrants are
allowed to participate as though they had exercised their Regulation S Warrants
prior to the applicable record date or effective date. In the case of any
reclassification or change (other than a change resulting only from
consolidation or subdivision) of the shares of Common Stock or in case of any
amalgamation, consolidation or merger of the Company with or into any other
corporation, or in the case of any sale, transfer or other disposition of the
properties and assets of the Company as or substantially as an entirety to any
other corporation, the conversion price shall be adjusted so that each
Regulation S Warrant shall, after such
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<PAGE> 25
reclassification, change, amalgamation, consolidation, merger or sale, be
exercisable for the kind and amount of shares and other securities or property
of the Company, or such continuing, successor, or purchaser corporation, as the
case may be, which the holder thereof would have been entitled to receive as a
result of such reclassification, change, amalgamation, consolidation, merger or
sale if on the effective date thereof he had been the holder of the number of
shares of Common Stock into which the Regulation S Warrants were exercisable
prior to the effective date of such reclassification, change, amalgamation,
consolidation, merger or sale. Notwithstanding the foregoing, a holder of
Regulation S Warrants shall be entitled to receive only shares that constitute
prescribed securities in the event any reclassification, change, amalgamation,
consolidation, merger or sale occurs on or prior to the date which is five years
from the issue of the Regulation S Warrants and the Regulation S Warrants become
exercisable on or prior to that date. No adjustment will be made in the exercise
price on account of the exercise of options under the Company's stock option
plans from time to time.
No fractional shares of Common Stock will be issued on any exercise of
Regulation S Warrants, but in lieu thereof the Company shall satisfy such
fractional interest by a cash payment equal to the market price of such
fractional interest.
DIVIDENDS
The Company has never paid any cash dividends on its capital stock. For
the foreseeable future, the Company intends to retain all of its future earnings
to finance its operations and does not anticipate paying cash dividends.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS.
The Company's Common Stock has been quoted on the OTC Bulletin Board under
the symbol NUPP since August 21, 1998. The following sets forth the range of
high and low bid quotations for the periods indicated as reported by National
Quotation Bureau, Inc. Such quotations reflect prices between dealers, without
retail mark-up, markdown or commission and may not represent actual
transactions.
<TABLE>
<CAPTION>
HIGH BID LOW BID
-------- -------
<S> <C> <C>
July 1, 1999 through September 30, 1999 $2.1250 $1.2500
April 1, 1999 through June 30, 1999 $2.0000 $0.2500
January 1, 1999 through March 31, 1999 $1.1250 $0.2500
October 1, 1998 through December 31, 1998 $1.0625 $0.6250
September 17, 1998 through September 30, 1998 $1.1250 $0.6250
</TABLE>
As of November 15, 1999, there were approximately 182 holders of record of
the Company's Common Stock.
PENNY STOCK
The Company's Common Stock will be subject to the provisions of Section
15(g) and Rule 15g-9 of the Exchange Act, commonly referred to as the "penny
stock rule." Section 15(g) sets forth certain requirements for transactions in
penny stocks and Rule 15g-9 (d) (1) incorporates the definition of penny stock
that is found in Rule 3a51-1 of the Exchange Act.
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<PAGE> 26
The SEC generally defines penny stock to be any equity security that has a
market price less than $5.00 per share, subject to certain exceptions. If the
Company's Common Stock is deemed to be a penny stock, trading in the shares will
be subject to additional sales practice requirements on broker-dealers who sell
penny stocks to persons other than established customers and accredited
investors. Accredited investors are persons with assets in excess of $1,000,000
or annual income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a
special suitability determination for the purchase of such security and must
have the purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the first transaction, of a risk disclosure
document relating to the penny stock. A broker-dealer also must disclose the
commissions payable to both the broker-dealer and the registered representative,
and current quotations for the securities. Finally, monthly statements must be
sent disclosing recent price information for the penny stocks held in account
and information on the limited market in penny stocks. Consequently, these rules
may restrict the ability of broker-dealers to trade and/or maintain a market in
the Company's Common Stock and may affect the ability of stockholders to sell
their shares.
OTC BULLETIN BOARD ELIGIBILITY RULES
In January of 1999, the SEC granted approval of amendments to the NASD OTC
Bulletin Board Eligibility Rules 6530 and 6540. These amendments now require a
company listed on the OTC Bulletin Board to be a reporting company and current
in its reports filed with the SEC. As a result of this rule change, the Company
has voluntarily filed this registration statement in order to become a fully
reporting company and maintain the listing of the Company's Common Stock on the
OTC Bulletin Board. The NASD eligibility rule requires that the SEC come to a
position of no further comment regarding any Form 10 registration statement
before the NASD considers a company compliant. The Company cannot assure that
the SEC will come to such a position in regards to this registration statement
prior to the Company's phase-in date of February 24, 2000. According to the
eligibility rule, if the Company is not in compliance at its phase-in date the
Company's Common Stock will be removed from the OTC Bulletin Board. In that
event, the Company intends to move its listing to the National Quotation
Bureau's Pink Sheets. This delisting may adversely affect the market, if any, in
the Company's Common Stock.
SHARES AVAILABLE FOR FUTURE SALE
Of the 12,617,217 shares of Common Stock outstanding, 959,255 shares of
Common Stock are freely tradable without restriction in the public market unless
the shares are held by "affiliates," as that term is defined in Rule 144(a)
under the Securities Act. For purposes of Rule 144 under Securities Act ("Rule
144"), an "affiliate" of an issuer is a person that, directly or indirectly
through one or more intermediaries, controls, or is controlled by or is under
common control with, the issuer. Such shares are unrestricted as a result of
being issued pursuant to rule 504 of Regulation D promulgated under the
Securities Act ("Rule 504") prior to recent amendments to such rule that now
make shares issued under Rule 504 restricted securities. The remaining shares of
Common Stock outstanding are "restricted securities" under the Securities Act
and may be sold in the public market upon the expiration of the holding periods
under Rule 144, described below, subject to the volume, manner of sale, and
other limitations of Rule 144.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares for at least one year, including an "affiliate," is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of:
- 1% of the then outstanding shares of the Company's Common Stock
(approximately 126,172 shares); or
- the average weekly trading volume during the four calendar weeks
preceding filing of notice of the sale of shares of Common Stock.
Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. A stockholder who is deemed not to have been an
"affiliate" of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned restricted shares
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<PAGE> 27
for at least two years, would be entitled to sell shares under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, or public
information requirements.
In addition, as of November 15, 1999, there were outstanding warrants to
purchase 1,525,000 shares of Common Stock and options to purchase 190,000 shares
of Common Stock, all of which were fully vested. Sales of substantial amounts of
the Company's Common Stock (including shares issued upon the exercise of
outstanding warrants and options) in the public market in the future could
adversely effect the market price of the Company's Common Stock. These sales may
also make it more difficult for the Company to sell equity or equity related
securities in the future at a time and price that the Company believes is
appropriate.
ITEM 2. LEGAL PROCEEDINGS.
All legal proceedings and actions involving the Company are of an ordinary
and routine nature incidental to the operations of the Company. Management
believes that such proceedings should not, individually or in the aggregate,
have a material adverse affect on the Company's business, financial condition,
or results of operations. None of the Company's officers, directors or
beneficial owners of 5% or more of the Company's outstanding securities is a
party adverse to the Company nor do any of the foregoing individuals have a
material interest adverse to the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The following provides information concerning all sales of securities by
the Company within the last three years that were not registered under the
Securities Act.
From August 7, 1997 to May 31, 1998, the Company issued an aggregate of
2,277,096 shares of Common Stock to 158 investors at a price ranging from $0.366
to $0.533 per share. Such shares were issued without registration pursuant to an
exemption from registration under Rule 504.
From August 1997 to May 1998, the Company issued an aggregate of 455,028
shares of Common Stock worth a total of $180,890 to certain insiders of the
Company in connection with remuneration for services rendered and the conversion
of certain indebtedness owed to such insiders. Of the total $180,890, (i)
$43,000 in Common Stock was issued as payment for consulting fees and management
services, (ii) $103,600 in Common Stock was issued as payment of certain loans
to the Company from affiliates of Gary Fitchett, former president and chief
executive officer of the Company, the proceeds of which were used for various
capital expenditures of the Company, and (iii) $34,300 in Common Stock resulted
from the exercise of a warrant received as part of the loan described in (ii)
above. All such shares were issued without registration pursuant to an exemption
from registration under Section 4(2) of the Securities Act as private
transactions not involving a public distribution.
During the period from June 1, 1998 to August 6, 1998, the Company issued
an aggregate of 61,761 shares of Common Stock to 18 investors for a total of
$58,300. Such shares were issued without registration pursuant to an exemption
from registration under Rule 504.
From June 1, 1998 to August 6, 1998, the Company issued an aggregate of
15,000 shares of Common Stock worth a total of $15,000 to Ernesto Zavagoza de
Cima, a Vice President and director of the Company, in connection with rent
owned by the Company. Such shares were issued without registration pursuant to
an exemption from registration under Section 4(2) of the Securities Act as a
private transaction not involving a public distribution.
On May 31, 1999, the Company issued warrants to purchase an aggregate of
25,000 shares of Common Stock to the Company's legal counsel in consideration of
services rendered. Such shares were issued without registration under Section 4
(2) of the Securities Act as a private transaction not involving a public
distribution.
-26-
<PAGE> 28
In May 1999, the Company issued units priced at $100,000 per unit, or a
total of $6,000,000. Each unit consisted of (i) 25,000 shares of Common Stock
valued at $2.00 per share, (ii) a $50,000 unsecured convertible debenture
bearing interest at ten (10) percent per annum and maturing on December 31,
2004, and (iii) warrants to acquire 25,000 shares of Common Stock at a price of
$2.50 per share exercisable at any time prior to December 31, 2000. Several
investors chose to convert their debentures into shares of Common Stock
immediately following the Regulation S Offering. As a result, the Company issued
775,000 shares upon such conversions. In the aggregate, the Company issued
1,500,000 shares of Common Stock at $2.00 per share, $3,000,000 of convertible
debentures of which $1,050,000 remain outstanding, and warrants to purchase
$1,500,000 of additional shares at $2.50 per share. The units were sold to 17
investors in Germany, New Zealand, and Switzerland and were issued without
registration pursuant to an exemption from registration under Regulation S
promulgated under the Securities Act.
On June 18, 1999, the Company acquired (the "TrucTech Asset Acquisition")
substantially all of the assets and liabilities of TrucTech, Inc., a Georgia
corporation ("TrucTech"), pursuant to an Asset Purchase Agreement between the
Company and TrucTech effective as of December 1, 1998 (the "TrucTech Asset
Purchase Agreement"). The total consideration for the TrucTech Asset Acquisition
was US $5,500,000, which was satisfied by the issuance of 7,333,333 shares of
Common Stock, valued at US $0.75 per share. Such shares were issued without
registration under Section 4(2) of the Securities Act and Rule 506 of Regulation
D promulgated under the Securities Act.
On July 30, 1999, the Company completed a supplemental offering of common
stock in connection with the Company's issuance of stock under Rule 504. After
the Company determined that certain investors paid more than the intended stock
price for shares in the Rule 504 offerings, the Company made the supplemental
offering with shares, which were originally issued in the Rule 504 offerings but
subsequently transferred to the Company's treasury, to reflect the Company's
original intention to sell shares of stock at a price ranging from $0.366 to
$0.533 per share in its Rule 504 offerings. As a result, the Company issued an
aggregate of 460,887 additional shares of Common Stock to approximately 59
investors who participated in the Company's Rule 504 offerings. Such shares were
issued without registration under Rule 504.
From August 7, 1998 to July 1, 1999, the Company issued an aggregate of
289,113 shares of common stock worth a total of $289,113 to certain insiders of
the Company. Of the $289,113, $85,305 worth of common stock was issued to four
creditors for conversion of loans to the Company, and $203,808 worth of stock
was issued to three persons for services rendered to the Company. Such shares
were issued without registration pursuant to an exemption from registration
under Section 4(2) of the Securities Act as private transactions not involving a
public distribution.
In each of the private transactions above, the Company believes that each
purchaser (i) had access to or was provided information regarding the Company;
(ii) was aware that the securities had not been registered under federal
securities laws; (iii) acquired the securities for his/her/its own account for
investment purposes; (iv) understood that the securities would need to be
indefinitely held unless registered or an exemption from registration applied to
a proposed disposition; and (v) was aware that the certificate representing the
securities would bear a legend restricting its transfer. The Company believes
that, in light of the foregoing, the sale of the Company's securities to the
respective acquirers did not constitute a sale of an unregistered security in
violation of the federal securities laws and regulations by reason of the
exemptions provided under Section 4(2) of the Securities Act, and the rules and
regulations promulgated thereunder.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation provides that the personal
liability of a director to the Company or its stockholders for monetary damages
for breach of a fiduciary duty as director shall be limited to the fullest
extent permitted by Delaware General Corporation Law ("DGCL"). Under the DGCL,
the directors have a fiduciary duty to the Company which is not eliminated by
this provision of the Certificate of Incorporation and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to the Company, for acts or omissions which are found by a court
of competent jurisdiction to be not in good faith or which involve intentional
misconduct, or knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by the DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the federal securities laws or state or federal environmental laws.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation of its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv)
for any transaction
-27-
<PAGE> 29
from which the director derived an improper personal benefit. The DGCL provides
further that the indemnification permitted thereunder shall not be deemed
exclusive of any other rights to which the directors and officers may be
entitled under the corporation's bylaws, any agreement, a vote of stockholders
or otherwise. The Certificate of Incorporation provides that the Company shall,
to the fullest extent permitted by the DGCL, indemnify any person whom it may
indemnify pursuant to the DGCL. The Company's Bylaws provide that the Company
shall indemnify any person who was or is a party to any threatened, pending, or
completed action, suit or proceeding (whether civil, criminal, administrative,
or investigative), other than an action by or in the right of the Company, by
reason of the fact that such person is or was a director of the Company, or is
or was serving at the request of the Company as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against expenses (including attorneys' fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit, or proceeding if such person acted in good
faith and in a manner that such person reasonably believed to be in or not
opposed to the best interest of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The Bylaws also provide for certain indemnification rights for a party
to any threatened, pending, or completed action or suit by or in the right of
the Company.
The Company has also entered into an indemnification agreement with each of
the members of its Board of Directors and Advisory Council. Subject to certain
limitations, such indemnification agreements provide for the Company to
indemnify each member of the Board and Advisory Council against any expenses,
including attorney's fees, reasonably incurred by the director or Advisory
Council Member, as the case may be, in connection with any threatened, pending
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (including an action by or in the right of the
Company) to which such director or member is, was or at anytime becomes a party,
or is threatened to be made a party, by reason of the fact that such director or
member is, was or at any time becomes an employee serving as a member of the
Board or Advisory Council, or by reason of any action taken by him or any
inaction on his part while acting in any such capacity.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted.
PART F/S
The following financial statements are included herein:
NuPro Innovations Inc.
Financial Statements
Years Ended November 30, 1998 and 1997
Nine Months Ended August 31, 1999 and 1998
Independent Auditor's Report.............................................. F-1
Audited Combined Financial Statements of NuPro Innovations Inc.
and TrucTech, Inc. for periods ended November 30, 1998 and 1997:
Combined Balance Sheets as of November 30, 1998 and 1997............ F-2
Balance Sheets as of November 30, 1998.............................. F-3
Balance Sheets as of November 30 and December 31, 1997.............. F-4
Statements of Shareholder's Equity - NuPro Innovations Inc.......... F-5
Statements of Shareholder's Equity - TrucTech, Inc.................. F-6
Statements of Loss and Deficit for Years ended November 30 (December
31), 1997; Statements of Loss and Deficit for Periods ended November
30, 1998; and Statement of Loss Cumulative during the Development
Period ............................................................. F-7
Statements of Cash Flow - NuPro Innovations Inc..................... F-8
Statements of Cash Flow - TrucTech, Inc............................. F-9
-28-
<PAGE> 30
Notes to Financial Statements...................................... F-10
Unaudited Combined Financial Statements of NuPro Innovations Inc.
and TrucTech, Inc. for the nine months ended August 31, 1999 and 1998:
Balance Sheets..................................................... F-21
Statements of Shareholders' Equity................................. F-22
Statements of Loss and Deficit..................................... F-23
Statements of Cash Flow............................................ F-24
Notes to Interim Financial Statements.............................. F-25
-29-
<PAGE> 31
S.E.CLARK & COMPANY, P.C.
Member: S.E.C. Practice Section of
the American Institute of Certified Public Accountants
Shareholders and
Board of Directors
NuPro Innovations Inc.
Tucson, Arizona
We have audited the balance sheet of NuPro Innovations Inc. as of November 30,
1998, and the related statements of shareholders' equity, loss and deficit, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit. The prior period
financial statements of NuPro Innovations Inc. were audited by other auditors
whose report dated January 16, 1998, expressed an unqualified opinion on those
statements. Our opinion, insofar as it relates to the cumulative balances
forward, is based solely on the report of other auditors.
We have also audited the balance sheets of TrucTech, Inc. as of November 30,
1998 and December 31, 1997, and the related statements of shareholders' equity,
loss and deficit, and cash flows for the periods then ended. Those financial
statements are the responsibility of that Company's management. Our
responsibility is to express an opinion on those financial statements based on
our audits.
The financial statements of those companies are presented on a combined basis to
give effect to the subsequently transacted business combination between these
companies under common control.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. 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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the combined financial position of NuPro Innovations, Inc. and TrucTech, Inc. as
of November 30, 1998 and 1997, and the results of their operations and cash
flows for the periods then ended in conformity with generally accepted
accounting principles.
/s/ S.E.Clark & Company, P.C.
Tucson, Arizona
February 26, 1999
F-1
<PAGE> 32
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
COMBINED BALANCE SHEETS AS AT NOVEMBER 30
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
ASSETS
CURRENT
Cash $ 2,458 $ 2,936
Accounts Receivable 3,902 3,505
Inventory 2,633 2,633
Prepaid 12,892 10,028
--------- ---------
Total Current Assets 21,885 19,102
PROPERTY AND EQUIPMENT (Note 5) 421,117 439,575
--------- ---------
OTHER
Unutilized Pre-production Plant (Notes 5 and 14) 297,955 297,955
Accounts Receivable - TopTrac, S.A. de C.V. (Note 4) 100,189 112,869
--------- ---------
398,144 410,824
------- -------
$ 841,146 $ 869,501
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT
Bank indebtedness (Note 6) $ 81,240 $ 72,721
Accounts Payable 83,551 102,020
Accrued Liabilities 51,785 79,449
Accrued Management Fees and Salaries 107,253 -
Customer Deposits - 30,523
Current portion of long-term liabilities 46,532 39,099
--------- ---------
Total Current Liabilities 370,361 323,812
LONG-TERM LIABILITIES (Note 6 and 14) 539,283 489,124
OTHER LIABILITIES
Production Tooling - 95,611
Accrued Management Fees 320,000 149,715
COMMITMENTS AND CONTINGENCIES (Note 11) - -
SHAREHOLDERS' EQUITY (DEFICIENCY) (Note 8) (388,498) (188,761)
--------- ---------
$ 841,146 $ 869,501
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-2
<PAGE> 33
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
BALANCE SHEETS AS OF NOVEMBER 30, 1998
<TABLE>
<CAPTION>
NUPRO TRUCTECH COMBINED
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT
Cash $ - $ 2,458 $ 2,458
Accounts Receivable 3,902 - 3,902
Inventory - 2,633 2,633
Prepaid 2,573 10,319 12,892
--------- --------- ---------
Total Current Assets 6,475 15,410 21,885
PROPERTY AND EQUIPMENT 51,696 369,421 421,117
OTHER
Advances to TrucTech, Inc. 574,856 - -
Accounts Receivable - TopTrac, S.A. de C.V. - 100,189 100,189
Unutilized Pre-production Plant - 297,955 297,955
--------- --------- ---------
574,856 398,144 398,144
--------- --------- ---------
$ 633,027 $ 782,975 $ 841,146
--------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT
Bank indebtedness $ 45,241 $ 35,999 $ 81,240
Accounts Payable 57,701 77,635 135,336
Accrued Management Fees and Salaries 107,253 - 107,253
Current portion of long-term liabilities - 46,532 46,532
--------- --------- ---------
Total Current Liabilities 210,195 160,166 370,361
LONG-TERM LIABILITIES 64,098 475,185 539,283
OTHER LIABILITIES
Advances from NuPro Innovations Inc. - 574,856 -
Accrued Management Fees 163,247 156,753 320,000
SHAREHOLDERS' EQUITY (DEFICIENCY) 195,487 (583,985) (388,498)
--------- --------- ---------
$ 633,027 $ 782,975 $ 841,146
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE> 34
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
BALANCE SHEETS
<TABLE>
<CAPTION>
(RESTATED)
AS OF AS OF
11/30/97 12/31/97
NUPRO TRUCTECH COMBINED
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT
Cash $ 71 $ 2,865 $ 2,936
Accounts Receivable 3,505 - 3,505
Inventory 2,633 2,633
Prepaid 73 9,955 10,028
--------- --------- ---------
Total Current Assets 3,649 15,453 19,102
PROPERTY AND EQUIPMENT 63,020 376,555 439,575
OTHER
Advances to TrucTech, Inc. 602,813 - -
Advances on behalf of NuPro Innovations Inc. - 194,995 -
Accounts Receivable - TopTrac, S.A. de C.V. - 112,869 112,869
Unutilized Pre-production Plant - 297,955 297,955
--------- --------- ---------
602,813 605,819 410,824
--------- --------- ---------
$ 669,482 $ 997,827 $ 869,501
--------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT
Bank indebtedness $ 35,643 $ 37,078 $ 72,721
Accounts Payable 41,215 60,805 102,020
Accrued Liabilities - 79,449 79,449
Customer Deposits 25,000 5,523 30,523
Current portion of long-term liabilities - 39,099 39,099
--------- --------- ---------
Total Current Liabilities 101,858 221,954 323,812
LONG-TERM LIABILITIES 489,124 489,124
OTHER LIABILITIES
Due to NuPro Innovations Inc. - 602,813 -
Due to TrucTech, Inc. 194,995 - -
Production Tooling - 95,611 95,611
Accrued Management Fees 47,962 101,753 149,715
SHAREHOLDERS' EQUITY (DEFICIENCY) 324,667 (513,428) (188,761)
--------- --------- ---------
$ 669,482 $ 997,827 $ 869,501
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE> 35
NUPRO INNOVATIONS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON ADDITIONAL DURING
SHARES SHARE CAPITAL PAID IN DEVELOPMENT
(NOTE 8) AMOUNT CAPITAL STAGE TOTAL
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issued for cash 750,002 $ 5,571 $ - $ - $ 5,571
Net loss for the period - - - (1,365) (1,365)
--------------------------------------------------------------------------------
BALANCE, NOVEMBER 30, 1996 750,002 5,571 - (1,365) 4,206
Issued for cash 542,672 200,975 - - 200,975
Issued for services 75,660 27,268 - - 27,268
Issued for settlement of debts
of TrucTech, Inc. 535,806 270,348 - - 270,348
Net loss for the period - - - (73,535) (73,535)
--------------------------------------------------------------------------------
BALANCE UPON REDOMESTICATION,
AUGUST 7, 1997 (Note 2(a)) 1,904,140 504,162 - (74,900) 429,262
Adjustment to par value - (502,258) 502,258 - -
Issued for cash 200,933 201 119,664 - 119,865
Issued for services 38,273 38 22,652 - 22,690
Net loss for the period (restated) - - - (247,150) (247,150)
--------------------------------------------------------------------------------
BALANCE, NOVEMBER 30, 1997 2,143,346 2,143 644,574 (322,050) 324,667
Issued for cash 545,389 546 419,770 - 420,316
Issued for services 5,150 5 5,145 - 5,150
Issued for settlement of debts
of TrucTech, Inc. 100,000 100 99,900 - 100,000
Issued for short-term rent 15,000 15 14,985 - 15,000
Net loss for the period (restated) - - - (669,646) (669,646)
--------------------------------------------------------------------------------
BALANCE, NOVEMBER 30, 1998 2,808,885 2,809 1,184,374 (991,696) 195,487
--------------------------------------------------------------------------------
To be issued for acquisition of
net assets of TrucTech, Inc. 7,333,333 7,333 5,492,667 - 5,500,000
Adjustment to TrucTech cost
basis of accounting - - (476,585) (5,607,400) (6,083,985)
--------------------------------------------------------------------------------
PRO FORMA SHAREHOLDERS' EQUITY 10,142,218 $10,142 $6,200,456 $(6,599,096) $(388,498)
============================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE> 36
TRUCTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SHARES (NOTE 8) SHARE CAPITAL AMOUNT ADDITIONAL
CLASS B CLASS B PAID IN
COMMON PREFERRED COMMON PREFERRED CAPITAL
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31 1996 6,653 116,857 $ 6,653 $ 1,168,559 $ 513,103
Net loss for the year - - - - -
-----------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 6,653 116,857 6,653 1,168,559 513,103
Issued as stock dividend to recapitalize company:
On common shares 56,280 - 56,280 - (56,280)
On class B preferred - 74,360 - 455,436 (455,436)
Issued for protection
of investment 837,067 - 837,067 - 2,415,533
Net loss for the period - - - - -
-----------------------------------------------------------------------
BALANCE, NOVEMBER 30 1998 900,000 191,217 $ 900,000 $ 1,623,995 $2,416,920
==========================================================================================================================
</TABLE>
TRUCTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING
DONATED DEVELOPMENT
CAPITAL STAGE TOTAL
-------------------------------------------
<S> <C> <C> <C>
BALANCE, DECEMBER 31 1996 $ 82,500 $ (1,972,026) $ (201,211)
Net loss for the year - (312,217) (312,217)
-------------------------------------------
BALANCE, DECEMBER 31, 1997 82,500 (2,284,243) (513,428)
Issued as stock dividend to recapitalize company:
On common shares - - -
On class B preferred - - -
Issued for protection
of investment - - 3,252,600
Net loss for the period - (3,323,157) (3,323,157)
-------------------------------------------
BALANCE, NOVEMBER 30 1998 $ 82,500 $ (5,607,400) $ (583,985)
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE> 37
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
STATEMENTS OF LOSS AND DEFICIT
<TABLE>
<CAPTION>
NUPRO (12/31/97)
COMBINED INNOVATIONS TRUCTECH, INC.
-------------- --------------- ---------------
YEAR ENDED NOVEMBER 30, 1997 (Restated) (Restated)
<S> <C> <C> <C>
Revenues $ - $ - $ -
------------ ---------- ------------
Costs and expenses:
Development, Pre-production and Administration 369,820 313,877 55,943
Financial, primarily interest 73,331 6,808 66,523
Loss on property dispositions 189,751 - 189,751
------------ ---------- ------------
Net loss $ (632,902) $ (320,685) $ (312,217)
=====================================================================================================================
Net loss per share (Note 13) $ (0.062) $ (0.472) na
=====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
PERIODS ENDED NOVEMBER 30, 1998 (Restated) (Restated)
<S> <C> <C> <C>
Revenues $ - $ - $ -
------------ ---------- ------------
Costs and expenses:
Development, Pre-production and Administration 671,157 658,411 12,746
Financial, primarily interest 69,046 11,235 57,811
Stock Issued for Protection of Investment 3,252,600 - 3,252,600
------------ ---------- ------------
Total expenses 3,992,803 669,646 3,323,157
------------ ---------- ------------
Net loss $ (3,992,803) $ (669,646) $ (3,323,157)
=====================================================================================================================
Net loss per share (Note 13) $ (0.394) $ (0.261) na
=====================================================================================================================
CUMULATIVE DURING THE DEVELOPMENT PERIOD
Revenues $ - $ - $ -
-------------- --------------- ---------------
Costs and expenses:
Development, Pre-production and Administration 2,470,527 973,653 1,496,874
Financial, primarily interest 626,016 18,043 607,973
Loss on property dispositions 249,953 - 249,953
Stock Issued for Protection of Investment 3,252,600 - 3,252,600
-------------- --------------- ---------------
Total expenses 6,599,096 991,696 5,607,400
-------------- --------------- ---------------
Net cumulative losses $ (6,599,096) $ (991,696) $ (5,607,400)
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-7
<PAGE> 38
NUPRO INNOVATIONS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
CUMULATIVE FOR THE YEAR FOR THE YEAR
DURING ENDED ENDED
DEVELOPMENT NOVEMBER 30, NOVEMBER 30,
STAGE 1998 1997
---------- ---------- ----------
CASH PROVIDED BY (USED IN) (Restated) (Restated)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss for the period $ (991,696) $ (669,646) $ (320,685)
Adjustments to reconcile net loss
to net cash
Depreciation 16,587 13,453 3,134
Rent and Services paid for
by issuance of shares (Note 9) 70,108 20,150 49,958
---------- ---------- ----------
(905,001) (636,043) (267,593)
Changes in assets and liabilities
Accounts receivable (3,902) (397) (2,754)
Prepaid (2,573) (2,500) (73)
Bank indebtedness 45,241 9,598 35,643
Accounts payable 57,701 16,486 40,001
Customer deposits - (25,000) 24,629
Accrued management fees 270,500 270,500 -
---------- ---------- ----------
(538,034) (367,356) (170,147)
---------- ---------- ----------
INVESTING ACTIVITIES
Purchase of capital assets (68,283) (2,129) (52,747)
Advances to TrucTech, Inc. (Note 9) (204,508) (67,038) (137,470)
(272,791) (69,167) (190,217)
---------- ---------- ----------
FINANCING ACTIVITIES
Issuance of shares 746,727 420,316 320,840
Advances from shareholders 64,098 16,136 38,636
---------- ---------- ----------
810,825 436,452 359,476
---------- ---------- ----------
INCREASE (DECREASE) IN CASH FOR THE PERIOD - (71) (888)
CASH, BEGINNING OF PERIOD - 71 959
---------- ---------- ----------
CASH, END OF PERIOD $ - $ - $ 71
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
F-8
<PAGE> 39
TRUCTECH, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
CUMULATIVE FOR THE PERIOD FOR THE YEAR
DURING ENDED ENDED
DEVELOPMENT NOVEMBER 30, DECEMBER 31,
STAGE 1998 1997
----------------- ---------------- ------------------
CASH PROVIDED BY (USED IN)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss for the period $ (5,607,400) $ (3,323,157) $ (312,217)
Adjustments to reconcile net loss
to net cash
Depreciation 102,368 8,225 8,225
Obsolete Tooling and Equipment 130,141 - 69,939
Loss on writeoff of joint venture investment 119,812 - 119,812
Stock issued for protection of investment 3,252,600 3,252,600 -
------------ ------------ ------------
(2,002,479) (62,332) (114,241)
Changes in assets and liabilities
Accounts receivable (100,189) 12,680 (62,368)
Inventory (2,633) - -
Prepaid (10,319) (364) (1,731)
Bank indebtedness 35,999 (1,079) (78,246)
Accounts payable and accruals 77,635 (68,142) (107,058)
Payables and accruals paid with NuPro stock 370,348 100,000 270,348
Accrued management fees 156,753 55,000 61,000
------------ ------------ ------------
(1,474,885) 35,763 (32,296)
------------ ------------ ------------
INVESTING ACTIVITIES
Purchase of Property and equipment (817,385) (1,091) 37,751
Investment in Joint Ventures (119,812) - -
------------ ------------ ------------
(937,197) (1,091) 37,751
------------ ------------ ------------
FINANCING ACTIVITIES
Receipt (Repayment) of long term debt 401,871 (143,239) (141,105)
Advances from NuPro 204,508 67,038 137,470
Advances from shareholders 119,846 41,122 (8,928)
Share capital 1,688,315 - -
------------ ------------ ------------
2,414,540 (35,079) (12,563)
------------ ------------ ------------
INCREASE (DECREASE) IN CASH FOR THE PERIOD 2,458 (407) (7,108)
CASH, BEGINNING OF PERIOD - 2,865 9,973
------------ ------------ ------------
CASH, END OF PERIOD $ 2,458 $ 2,458 $ 2,865
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-9
<PAGE> 40
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
- - -------------------------------------------------------------------------------
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
NuPro Innovations Inc. ("NuPro") (A Development Stage Company) was formed
to further develop and commercialize an innovative industrial engineering
hybrid composite material technology, which it acquired through exercise
of the option disclosed in Note 3.
TrucTech, Inc. ("TrucTech") (A Development Stage Company) was formed to
develop and manufacture a unique telescoping pickup truck cover and other
prospective products.
The financial statements of NuPro are for the fiscal years ended November
30, 1998 and 1997 and TrucTech are for the eleven months ended November
30, 1998 and year ended December 31, 1997.
The Combined Balance Sheets and Statements of Shareholders' Equity reflect
the combined assets, liabilities and shareholders' equity, of NuPro and
TrucTech based on completion of the acquisition by NuPro of the net assets
of TrucTech, see Note 3.
NuPro and TrucTech are under common control as defined by U.S. GAAP, and
accordingly the purchase method of accounting is used to record the
combination of the Companies. To reflect the continuity of interest of the
principal shareholders in the business, all assets, liabilities, and
shareholders' equity have been recorded in the Combined Balance Sheet at
the book values of the predecessor companies' accounts. Research and
development expenditures are charged to expenses in the period incurred.
Cumulative expenses during the development stage, which represented the
development costs of the TracTop telescoping pickup cover and other
products and material were as follows:
<TABLE>
<CAPTION>
<S> <C>
TrucTech $ 2,354,800
NuPro 991,696
-----------
Cash and Accrual Expenses 3,346,496
TrucTech stock issued for
protection of investment 3,252,600
-----------
Total Expense $ 6,599,096
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Companies follow the generally accepted accounting principles of the
United States ("U.S. GAAP").
(a) Nature of Business
NuPro was incorporated in Canada on November 27, 1996, and has been
in the development stage since its formation. As of August 7, 1997,
the Company was redomesticated and continued in the State of
Delaware, U.S.A. and its name changed to NuPro Innovations Inc. from
TracTop Distributing Inc.
F-10
<PAGE> 41
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
- - -------------------------------------------------------------------------------
A majority-owned subsidiary has been incorporated as of November 12,
1998 as NuPro Innovation Mexico S.A. de C.V. At November 30, 1998
its organization was incomplete and it had no assets, liabilities,
revenues or expenses.
TrucTech was incorporated on May 31, 1989 in the State of Georgia,
U.S.A. and has been in the development stage since its formation.
(b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect assets and liabilities at the date of
financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ
from those estimates.
(c) Property and Equipment
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is recorded on a straight-line basis
during commercial production at the following rates:
Building - 3%
Production Equipment - 10%
Automotive Equipment - 20%
Office Equipment - 10 and 20%
(d) Foreign Currency Translation
At transaction date, if applicable, each asset, liability, revenue
or expense is translated from Canadian or Mexican currency into U.S.
dollars by the use of the exchange rate in effect at that date. At
the year end date, monetary assets and liabilities are translated
into U.S. dollars by using the exchange rate at that date and the
resulting foreign exchange gains and losses are included in income
in the current period.
(e) Fair Value of Financial Instruments
The carrying amount of the Companies' financial instruments,
consisting of cash, accounts receivable, bank indebtedness, accounts
payable and customer deposits, approximates their fair value. Due to
their terms it was not practical to determine the fair value of the
advances. Unless otherwise noted, it is management's opinion that
the Companies are not exposed to significant interest rate, currency
and credit risks arising from these financial instruments.
(f) Principles of Combination
The following assumptions were made in the preparation of the
combined statements:
(a) Corporate approval of the purchase of the net assets of
TrucTech as required by NuPro on April 9, 1999 and completion
of the transaction immediately thereafter. See Note 3.
(b) Accounting for the acquisition of net assets using the
purchase method.
(c) Elimination of the inter-company loan accounts.
F-11
<PAGE> 42
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
- - --------------------------------------------------------------------------------
3. ADVANCES TO TRUCTECH, INC.
By agreement dated December 5, 1996, as amended, NuPro had an option to
acquire the net assets of TrucTech, including technology rights, at their
fair value, by exchanging NuPro stock for all of the net assets and
liabilities of TrucTech. Since the TrucTech shareholders would retain
control after the combination, the combination is considered a reverse
acquisition. Accounting rules of the U.S. Securities and Exchange
Commission require that the historic cost basis of the control parties be
carried over. Thus, the transaction is required to be recorded at historic
costs which may be substantially less than the current fair value of the
assets exchanged.
The prospective completion of this option agreement has now been approved
by the shareholders of TrucTech and has been scheduled for approval by
NuPro Innovations Inc. at the annual meeting to be held on April 9, 1999.
The following net assets (assets less liabilities) are to be acquired on
that date:
<TABLE>
<S> <C>
Cash $ 2,458
Accounts receivable 100,189
Inventory 2,633
Prepaid 10,319
Property and equipment 369,421
Net equity in unutilized plant subsequently sold 67,256
Technology rights (unaudited) 6,083,985
----------
6,636,261
----------
Bank indebtedness 35,999
Accounts payable 77,635
Accrued management fees 156,753
Long-term liabilities 291,018
561,405
-----------
Net assets $ 6,074,856
===========
Settled by:
Cancellation of inter-company advances from NuPro $ 574,856
Issuance of 7,333,333 shares of NuPro at $0.75 5,500,000
-----------
$ 6,074,856
===========
</TABLE>
The advance balance includes cash advances of $204,508 and NuPro stock
issued to settle TrucTech liabilities in the amount of approximately
$370,000.
Both the stockholders and directors of TrucTech have acknowledged that the
technology to the plastic that is a major component of the TracTop product
is an unpatented technology that is owned by, and known only to, Luba
Veselinovic, spouse of the TrucTech president, Elke.
F-12
<PAGE> 43
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
- - --------------------------------------------------------------------------------
TrucTech has entered into a licensing and royalty agreement for the patent
rights to certain technologies used in the TracTop product. The agreement
required payment of $150,000 from profits and $3 per unit sold.
Additionally, TrucTech has developed other technologies, which are
unpatented, pertaining to the development and production of the TracTop
units.
The technology rights to be acquired by the NuPro shareholders from
TrucTech are the learned and licensed technologies that apply to the
TracTop product. They do not include the plastic technology that is the
acknowledged property of Mr. Veselinovic.
Pursuant to an oral agreement between the Company and Mr. Veselinovic, Mr.
Veselinovic will grant an exclusive manufacturing and distribution license
to NuPro for a new composite industrial engineering material (the "NuPro
Technology") under the terms of a Royalty Agreement that will include,
among other provisions, the following or similar terms:
a) NuPro achieves 75% of the forecast outlined in the Business Plan,
dated February 1999, and NuPro is capable of manufacturing and
marketing additional products to be developed by the licenser.
b) NuPro pays Mr. Veselinovic quarterly payments of 1.5% of sales
derived from products based on NuPro Technology for the first
$5,000,000 and 2% of sales thereafter.
c) NuPro follows strict confidentiality directions satisfactory to Mr.
Veselinovic.
As a result of the option agreement to acquire the net assets of TrucTech,
and the anticipated completion thereof, NuPro commenced organizational
activities and prototyping and market development efforts in early 1997.
However, certain related expenses, totaling $144,651, continued to be paid
by TrucTech until November 30, 1997.
In 1998 it was recognized that these 1997 amounts should be born by NuPro.
They were transferred to NuPro by a credit to Advances - TrucTech. The
amount is reflected as a prior period adjustment in the Statement of Loss
and Deficit for NuPro.
4. ACCOUNTS RECEIVABLE - TOPTRAC, S.A. DE C.V.
This amount represents unsecured advances to TopTrac, S.A. de C.V.
("TopTrac"), a Mexican manufacturing company, owned by a director of
NuPro, which manufactures the TracTop product for direct sales in Mexico
and for sales to NuPro. The amount is comprised as follows:
<TABLE>
<S> <C>
Sales of inventory of TracTop components $ 78,051
Miscellaneous charges paid on behalf of TopTrac 12,138
Cash advance 10,000
----------
$ 100,189
==========
</TABLE>
The balance is to be repaid, without interest, at the rate of $100 per
TracTop unit sold. Since TrucTech is the sole source of TopTrac's cash
flows and there are no TracTop sales, it is unlikely this account will be
repaid in full within the next year.
F-13
<PAGE> 44
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
5. PROPERTY AND EQUIPMENT (NOTE 14)
NUPRO TRUCTECH COMBINED
========== ========== ==========
<S> <C> <C> <C>
Plant Equipment $ 31,952 $ 366,688 $ 398,640
Automotive Equipment 14,291 68,986 83,277
Office Equipment 22,040 - 22,040
---------- ---------- ----------
68,283 435,674 503,957
Less: Accumulated depreciation 16,587 66,253 82,840
---------- ---------- ----------
NET BOOK VALUE $ 51,696 $ 369,421 $ 421,117
========== ========== ==========
</TABLE>
All of the TrucTech plant equipment is located at the TopTrac, S.A. de
C.V. plant in Guaymas, Mexico. NuPro has entered into a lease for
contiguous space. Under terms of the lease, equipment and inventory is
subject to possession and sale by the landlord to satisfy lease
delinquencies.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
INVESTMENT IN UNUTILIZED PRE-PRODUCTION PLANT (NOTE 14)
<S> <C> <C> <C>
Land $ - $ 82,500 $ 82,500
Building - 225,795 225,795
Less: Accumulated depreciation - 10,340 $10,340
--------- ---------- ----------
Net book value $ - $ 297,955 $ 297,955
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
6. BANK INDEBTEDNESS
Included in NuPro bank indebtedness is bank line of credit in the amount
of $29,250 (Cdn $45,000) with an outstanding balance at November 30, 1998
of $29,217 (Cdn $44,949). The bank line of credit is due on demand and
bears interest at prime plus 4% and is secured by a general security
agreement over all assets of the Company and the guarantee of a director.
TrucTech has a bank note outstanding in the amount of $35,999, due
December 1998. $33,171 of this amount has been extended until July 12,
1999. Unsecured.
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
7. LONG-TERM LIABILITIES
NUPRO TRUCTECH COMBINED
========= =========== ===========
<S> <C> <C> <C>
Mortgage Payable (Note 14)
Montgomery County Bank - 9% payable in monthly
installments of $2,575, including principal and interest,
due May 1999, secured by Company real estate. $ - $ 230,699 $ 230,699
Notes Payable
Montgomery County Bank - prime plus 2.5%, payable in
monthly installments of $4,224, including principal
and interest, due August 2001. Secured by a general
security agreement over all assets, and insured by the
Small Business Administration. - 149,355 149,355
Chrysler Corporation
12.5%, payable in monthly installments of $630,
including principal and interest, due July 2000.
Secured by a vehicle and the guarantee of a director. - 12,764 12,764
- - ----------------------------------------------------------------------------------------------------------------
</TABLE>
F-14
<PAGE> 45
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Colonial Pacific Leasing Corporation
19.1% capital lease, payable in monthly installments
of $439, including principal and interest, due
September 2000. Secured by a trailer and the
guarantee of a director. - 9,053 9,053
---------- ---------- ----------
- 401,871 401,871
Related Party Loans
Loans from various shareholders of the Companies,
interest at 10 - 12%, with no specific terms of
repayment or maturity dates. Unsecured. 64,098 119,846 183,944
---------- ---------- ----------
64,098 521,717 585,815
Less: Current portion of principal - 46,532 46,532
---------- ---------- ----------
$ 64,098 $ 475,185 $ 539,283
</TABLE>
- - --------------------------------------------------------------------------------
Future minimum principal payments due on long-term liabilities for years
ended November 30 are as follows:
<TABLE>
<S> <C> <C> <C>
1999 - Regular $ - $ 46,532 $ 46,532
- Discharge of mortgage on
sale of property - 228,868 228,868
2000 - 59,338 59,338
2001 - 53,005 53,005
2002 - 14,128 14,128
Unscheduled shareholder loans 64,098 119,846 183,944
---------- ---------- ----------
$ 64,098 $ 521,717 $ 585,815
========== ========== ==========
</TABLE>
Included in NuPro related party loans are the following loans from
shareholders: Pinecrest Consultants, Inc. (Gary Fitchett) $22,489, NAFTA
(Elke Veselinovic) $16,259, and Robert Moore $25,350.
- - --------------------------------------------------------------------------------
8. SHARE CAPITAL
Under the State of Delaware Certificate of Incorporation, NuPro's capital
stock is as follows:
(a) Authorized
20,000,000 shares of common stock, par value of $0.001 1,000,000
shares of preference stock, par value of $0.001, issuable in
series, with powers, preferences and relative, participating,
optional or other special rights, and qualifications, limitations,
or restrictions as fixed by resolution by the Board of Directors.
(b) Issued
2,808,885 shares of common stock.
(c) Restricted Shares
As at November 30, 1998, 750,000 of the issued shares are held in
escrow. The shares are issued to Gary A. Fitchett as trustee and
were to be released under certain conditions per Board of
Directors' resolution. It will be recommended to the Board of
Directors' that approximately 460,000 shares be issued to
approximately 60 shareholders in order to compensate them for the
lost opportunity of exercising their warrants. This transfer will
not dilute existing shareholders. The balance of approximately
290,000 shares will be used to settle other company commitments.
(d) Share Purchase Options
Options to purchase 275,000 common shares are outstanding, and may
be exercised on the following basis:
- - --------------------------------------------------------------------------------
F-15
<PAGE> 46
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Exercise Expiration Date
Shares Price
--------- -------- ---------------
<S> <C> <C> <C>
Directors 125,000 $4.00 December 31, 2002
Advisory Council 90,000 $4.00 December 31, 2000
Consultant 60,000 $1.00 December 31, 2002
</TABLE>
Under the State of Georgia Certificate of Incorporation, the TrucTech
capital stock is as follows:
(a) Authorized
10,000,000 shares of common stock, par value of $1.00
500,000 shares of Series A preferred stock, no par value
500,000 shares of Series B preferred stock, no par value
(b) Issued
900,000 shares of common stock, 191,217 shares of Series B
preferred stock
- - --------------------------------------------------------------------------------
9. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
In the year ended November 30, 1997, 113,933 shares of NuPro, valued at
$49,958, were issued for services and 535,806 shares of NuPro, valued at
$270,348 were issued to settle debts of TrucTech.
In the year ended November 30, 1998, 5,150 shares of NuPro, valued at
$5,150, were issued for services, 15,000 shares of NuPro, valued at
$15,000, were issued for rent, and 100,000 shares of NuPro, valued at
$100,000, were issued to settle debts of TrucTech.
The value of the shares issued in settlement of debt and services rendered
was at the fair value of the shares at the date of issuance.
- - --------------------------------------------------------------------------------
10. INCOME TAXES
NuPro has losses for income tax purposes available to reduce taxable
income of approximately $915,000. The potential benefit of these losses
has not been reflected in the financial statements since there is no
assurance that the losses will be utilized. Additionally, the limitations
on these losses resulting from the business combination has not been
determined.
TrucTech has losses for income tax purposes available to reduce taxable
income of approximately $5,600,000. The potential benefit of these losses
has not been reflected in the financial statements since there is no
assurance that the losses will be utilized. Additionally, the limitations
on these losses resulting from the business combination has not been
determined.
- - --------------------------------------------------------------------------------
11. COMMITMENTS AND CONTINGENCIES
NuPro has lease commitments outstanding as follows:
<TABLE>
<CAPTION>
Monthly Annual Maturity
------- ------ --------
<S> <C> <C> <C>
Office - Tucson, Arizona $1,961 $25,332 March 31,1999
Factory - Guaymas, Mexico 1,015 12,180 October 31,2002
</TABLE>
- - --------------------------------------------------------------------------------
F-16
<PAGE> 47
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
NuPro contemplates extending the Tucson office lease for a further term of
one year until March 31, 2000, based on an offer to lease received from
the landlord at the same monthly rent.
Future minimum lease payments due on leases for years ended November 30
are as follows:
<TABLE>
<S> <C>
1999 $ 12,180
2000 12,180
2001 12,180
2002 11,165
----------
$ 47,705
==========
</TABLE>
See above discussion regarding lessors contingent rights to inventory and
equipment of NuPro.
On February 15, 1998 TrucTech and NuPro entered into an agreement with
Tooling Technology, canceling their option to acquire 3% of the issued and
outstanding TrucTech shares and settling in full the approximate $100,000
liability for production tooling in exchange for 100,000 shares of NuPro
stock and warrants to acquire an additional 100,000 shares at $1.25 per
share. Those warrants expired on June 30, 1998 without exercise.
CONTINGENCIES
TrucTech has issued common shares to certain stockholders, officers and
directors to protect their investment in contemplation of the NuPro
merger. The calculated amount was based in part on services performed by
these individuals during the development stage of TrucTech and other
pro-rata amounts. It has not been determined if these shares will be
considered capital distributions or compensation to the recipients. The
tax consequences of this determination to the recipients and to TrucTech
have not been determined, but could be substantial.
YEAR 2000 COMPLIANCE
The year 2000 issue relates to misstatements that may result in computer
systems that use only two digits to record a year. The misstatements,
which may occur before, on, or after January 1, 2000, result when dates
are used in computations and comparisons. Company management believes it
is compliant with the SEC's requirement to evaluate and disclose the cost
of compliance. NuPro utilizes only popular retail software which asserts
that it is Y2K compliant. Additionally, management believes it is not
currently dependent on vendors or suppliers whose systems, if not
compliant, would cause any material financial misstatements to NuPro.
12. RELATED PARTY TRANSACTIONS
During the periods, the following financial transactions were completed
with shareholders, directors, managers or employees who are deemed to be
related parties to each Company:
NuPro
During 1997, the Company paid management fees of $42,978 to Management
Synergistics, a division of Pinecrest Consultants, Inc. The fee was paid
by the issuance of 70,000 shares at $.36 per share and the exercise of
33,333 warrants at $.53 per share.
In June 1998, options to purchase 25,000 common shares at $ 4.00 per
share until December 31, 2002 were issued to each of five directors.
F-17
<PAGE> 48
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
In June 1998, options to purchase 15,000 common shares at $4.00 per
share until December 31, 2000 were issued to each of six members of the
advisory council.
During 1998 rent was paid to a director for factory space in Guaymas,
Mexico of $12,180.
During 1998, management fees were accrued to two members of management
covering the period of April 1997 to November 1998 in the amount of
$270,000.
During 1998, management salaries were accrued to one member of
management covering the period of January 1997 to November 1998 in the
amount of $75,125.
During 1998, various unsecured loans bearing interest at 12% per annum
were made to the Company by shareholders. The balance outstanding at
November 30, 1998 totaled $64,098.
During 1998, wages were paid to children of one director in the amount
of $16,436.
Accrued management fees, due to related parties, are not expected to
be paid until cash is available from operations or public offering
to allow their payment.
During 1998, common shares were issued as follows:
<TABLE>
<CAPTION>
Relation Number Consideration Valuation
-------- ------ ------------- ---------
<S> <C> <C> <C>
Director and officer 60,000 45,000 cash Exercise of warrants
Director and officer 64,000 33,600 cash Exercise of warrants
Director and officer 23,000 17,250 cash Exercise of warrants
Children of a director 5,600 2,938 cash Fair market value
Member of advisory council 3,000 3,000 cash Fair market value
Member of advisory council 375 375 services Fair market value
Director 15,000 15,000 rent Fair market value
TrucTech creditor 100,000 100,000 debt settlement Fair market value
</TABLE>
The 1997 debt of $95,611 has been classified as long-term due to its
conversion common stock.
TrucTech
During 1998 an unsecured loan bearing interest at 10% was made to the
Company by a director. The balance outstanding at November 30, 1998 was
$119,846.
On July 27, 1998, the TrucTech shareholders approved the issuance of the
following shares to related parties to protect their investment in
contemplation of the merger with NuPro:
<TABLE>
<CAPTION>
Common B Preferred NuPro Shares
Shares Shares on Merger
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Related to Luba and Elke Veselinovic:
Krida Overseas Trading and Investments 294,743 12,593 2,072,577
Edda Schaecke (536) 8,000 207,375
Veselinovic Children's Trust 128,718 12,341 1,104,912
NAFTA Technology, Trading and Consulting 80,327 - 473,960
</TABLE>
F-18
<PAGE> 49
NUPRO INNOVATIONS INC.
TRUCTECH, INC.
(DEVELOPMENT STAGE COMPANIES)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------
Common B Preferred NuPro Shares
Shares Shares on Merger
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Related to Gary Fitchett:
Pinecrest Consultants, Inc. and
Fitchett Family Trust 110,918 23,369 1,261,868
Richard Fitchett 2,160 306 21,815
616,330 56,609 5,142,507
</TABLE>
13. NET LOSS PER SHARE
Restricted shares and warrants are not included in the computation of the
weighted average number of shares outstanding during the period as the
effect would be antidilutive. Net loss per common share is based on the
weighted average number of NuPro shares outstanding during the periods:
2,562,051 for 1998 and 680,089 for 1997.
The pro-forma loss per share is calculated by dividing the combined losses
by the 10,142,218 shares outstanding after the business combination.
14. SUBSEQUENT EVENT
In January 1999 the Company sold the land and building which has a book
value of $297,955 for net proceeds after adjustments and selling expenses
of $225,254. The mortgage payable thereon was discharged from the proceeds
of sale.
F-19
<PAGE> 50
The following interim financial statements are the UNAUDITED
representations of the management of NuPro Innovations Inc. They are
abbreviated presentations and should only be read in conjunction with the
audited financial statements for the preceding periods which are presented
elsewhere in this document.
F-20
<PAGE> 51
NUPRO INNOVATIONS INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------
(UNAUDITED) COMBINED
AS OF AS OF
ASSETS AUGUST 31, 1999 NOVEMBER 30, 1998
<S> <C> <C>
CURRENT
Cash $ 5,378,438 $ 2,458
Accounts Receivable - 3,902
Inventory 2,633 2,633
Prepaid 10,604 12,892
------------ ----------
Total Current Assets 5,391,675 21,885
PROPERTY AND EQUIPMENT 652,549 421,117
OTHER
Accounts Receivable - TopTrac, S.A. de C.V. 100,189 100,189
Unutilized Pre-production Plant - 297,955
Cash Advances for Construction
to NuPro Innovation Mexico, S.A. de C.V. 301,050 -
Deposits 17,253 -
------------ ----------
418,492 398,144
------------ ----------
$ 6,462,716 $ 841,146
==================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT
Bank indebtedness $ 172,827 $ 81,240
Accounts Payable and Accruals 243,705 135,336
Accrued Management Fees and Salaries 297,813 107,253
Current portion of long-term liabilities 64,038 46,532
------------ ----------
Total Current Liabilities 778,383 370,361
LONG-TERM LIABILITIES 288,027 539,283
CONVERTIBLE DEBENTURES (NOTE 3) 1,050,000 -
OTHER LIABILITIES
Accrued Management Fees (Note 4) 320,000 320,000
SHAREHOLDERS' EQUITY (DEFICIENCY) 4,026,306 (388,498)
------------ ----------
$ 6,462,716 $ 841,146
==================================================================================================================
</TABLE>
Comparative 1998 amounts present the combined financial position, development
stage losses and cash flows of NuPro Innovations Inc. and TrucTech, Inc., which
were merged effective December 1, 1998. The accompanying notes and the audited
financial statements for the periods ended November 30, 1998 and 1997 should be
read with these financial presentations.
F-21
<PAGE> 52
NUPRO INNOVATIONS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING
COMMON SHARE CAPITAL PAID IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
---------- -------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Issued for cash 750,002 $5,571 $ - $ - $ 5,571
Net loss for the period (1,365) (1,365)
BALANCE, NOVEMBER 30, 1996 750,002 5,571 - (1,365) 4,206
Issued for cash 743,605 201,176 119,664 - 320,840
Issued for services 113,933 27,306 22,652 - 49,958
Issued for settlement of debts -
of TrucTech, Inc. 535,806 270,348 270,348
Adjustment to par value (502,258) 502,258 -
Net loss for the period (320,685) (320,685)
BALANCE, NOVEMBER 30, 1997 2,143,346 2,143 644,574 (322,050) 324,667
Issued for cash 545,389 546 419,770 - 420,316
Issued for services 5,150 5 5,145 - 5,150
Issued for settlement of debts
of TrucTech, Inc. 100,000 100 99,900 - 100,000
Issued for short-term rent 15,000 15 14,985 - 15,000
Net loss for the period - - - (669,646) (669,646)
---------- -------- ------------ ------------ -----------
BALANCE, NOVEMBER 30, 1998 2,808,885 2,809 1,184,374 (991,696) 195,487
---------- -------- ------------ ------------ -----------
To be issued for acquisition of
net assets of TrucTech, Inc. 7,333,333 7,333 5,492,667 - 5,500,000
Adjustment for cost basis
of accounting - - (476,585) (5,607,400) (6,083,985)
---------- -------- ------------ ------------ -----------
COMBINED, NOVEMBER 30, 1998 10,142,218 10,142 6,200,456 (6,599,096) (388,498)
Regulation-S subscribed, paid
but unissued 2,475,000 2,475 4,947,525 - 4,950,000
Costs of raising capital - - (53,902) - (53,902)
Escrowed shares issued
in conversion of debt - - 76,734 - 76,734
Net loss for the period - - - (558,028) (558,028)
---------- -------- ------------ ------------ -----------
BALANCE, AUGUST 31, 1999 12,617,218 $ 12,617 $ 11,170,813 $ (7,157,124) $ 4,026,306
===========================================================================================================================
</TABLE>
The accompanying notes and the audited financial statements for the periods
ended November 30, 1998 and 1997 should be read with these financial
presentations.
F-22
<PAGE> 53
NUPRO INNOVATIONS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF LOSS AND DEFICIT
NINE MONTHS ENDED AUGUST 31,1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMBINED
THREE MONTHS ENDED AUGUST 31: 1999 1998
--------------- ---------------
<S> <C> <C>
Revenue - Interest Earned $ 55,868 $ -
--------------- ---------------
Costs and expenses:
Development, pre-production, and administration 166,463 155,836
Financial, primarily interest 17,316 15,919
Depreciation and amortization 4,719 9,856
--------------- ---------------
188,498 181,611
--------------- ---------------
Income (loss) before income taxes (132,630) (181,611)
Income taxes - -
--------------- ---------------
Net income (loss) for period $ (132,630) $ (181,611)
=============== ===============
Net income (loss) per common share $ (0.011) $ (0.018)
=============== ===============
Weighted average shares outstanding 12,397,109 10,142,218
=============== ===============
</TABLE>
<TABLE>
<CAPTION>
COMBINED
ACCUMULATED
DURING THE
COMBINED DEVELOPMENT
NINE MONTHS ENDED AUGUST 31: 1999 1998 STAGE
--------------- --------------- -----------------
<S> <C> <C> <C>
Revenue - Interest Earned $ 56,443 $ - $ 56,443
--------------- --------------- -----------------
Costs and expenses:
Development, pre-production, and administration 476,927 610,006 2,828,499
Stock issued for protection of investment - - 3,252,600
Loss on disposition of properties 71,841 - 321,794
Financial, primarily interest 51,552 47,760 677,568
Depreciation and amortization 14,151 15,041 133,106
--------------- --------------- -----------------
614,471 672,807 7,213,567
--------------- --------------- -----------------
Income (loss) before income taxes (558,028) (672,807) (7,157,124)
Income taxes - - -
--------------- --------------- -----------------
Net income (loss) for period $ (558,028) $ (672,807) $ (7,157,124)
=============== =============== =================
Net income (loss) per common share $ (0.050) $ (0.066)
=============== ===============
Weighted average shares outstanding 11,097,327 10,142,218
=============== ===============
</TABLE>
The accompanying notes and the audited financial statements for the periods
ended November 30, 1998 and 1997 should be read with these financial
presentations.
F-23
<PAGE> 54
NUPRO INNOVATIONS INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOW
NINE MONTHS ENDED AUGUST 31, 1999 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
COMBINED
ACCUMULATED
DURING THE
COMBINED DEVELOPMENT
NINE MONTHS ENDED AUGUST 31: 1999 1998 STAGE
- - - - - - -- - - - - - - - - - - - - - - - - --
<S> <C> <C> <C>
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net loss for the period $(558,028) $(672,807) $(7,157,124)
Adjustments to reconcile net loss
to net cash
Depreciation 14,151 15,041 133,106
Loss on Disposal of obsolete equipment - - 130,141
Stock issued for protection of investment - - 3,252,600
Stock issued for rent and services - - 70,108
Loss on writeoff of joint venture investment - - 119,812
Loss on sale of unutilized
preproduction plant 71,841 - 71,841
- - - - - - - - -- - - - - -
(472,036) (657,766) (3,379,516)
Changes in assets and liabilities
Accounts receivable 3,902 14,489 (100,189)
Inventories (2,633)
Prepaid 2,288 (24,892) (10,604)
Accounts payable 108,369 (52,190) 243,705
Bank indebtedness 91,587 (5,242) 172,827
Customer deposits - (30,523) -
Payables and accruals paid with NuPro stock - 100,000 370,348
Accrued management fees 190,560 145,538 617,813
- - - - - - - - -- - - - - -
(75,330) (510,586) (2,088,249)
- - - - - - - - -- - - - - -
INVESTING ACTIVITIES
Purchase of capital assets (245,583) 1,747 (1,131,251)
Cash advances for construction to
NuPro Innovation Mexico, S.A. de C.V. (301,050) - (301,050)
Investment in Joint Ventures - - (119,812)
Deposits (17,253) (538) (17,253)
- - - - - - - - -- - - - - -
(563,886) 1,209 (1,569,366)
- - - - - - - - -- - - - - -
FINANCING ACTIVITIES
Increase in (repayment of) long-term liabilities 77,717 (29,230) 479,588
Advances from (repayments to) shareholders (8,619) 29,575 175,325
Increase in convertible debentures 1,050,000 - 1,050,000
Common stock subscribed and paid 4,896,098 574,399 7,331,140
- - - - - - - - -- - - - - -
6,015,196 574,744 9,036,053
- - - - - - - - -- - - - - -
INCREASE (DECREASE) IN CASH FOR THE PERIOD 5,375,980 65,367 5,378,438
CASH, BEGINNING OF PERIOD 2,458 2,936 -
- - - - - - - - -- - - - - -
CASH, END OF PERIOD $5,378,438 $ 68,303 $5,378,438
=================================================================================================================
</TABLE>
The accompanying notes and the audited financial statements for the periods
ended November 30, 1998 and 1997 should be read with these financial
presentations.
F-24
<PAGE> 55
NUPRO INNOVATIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
NINE MONTHS ENDED AUGUST 31,1999 AND 1998 (UNAUDITED)
- - --------------------------------------------------------------------------------
1. In the opinion of management, all adjustments, consisting of normal
recurring accruals have been made which are necessary for a fair
presentation of the financial position of the Company as of August 31,
1999, and the results of operations and cash flows for the nine months
ended August 31, 1999. Interim results are not necessarily indicative of
the results for the entire fiscal year. The disclosures in the audited
financial statements for the year ended November 30, 1998 should be read
in conjunction with these interim financial statements.
2. NuPro Innovations Inc. continues as a development stage company. The
acquisition of the net assets of TrucTech, Inc. (a development stage
company) has been approved by the shareholders of Trutech and by the board
of directors of NuPro. The purchase transaction is recorded in these
financial statements effective December 1, 1998, and operations are
combined subsequent to that date.
3. In May 1999, the Company entered into subscription agreements under
Regulation S of the Securities Act. The issue, totaling $6,000,000,
consists of 1,500,000 shares of common stock at $2.00 per share,
$3,000,000 in debentures also convertible at a minimum of $2.00 per share,
and warrants to purchase 1,500,000 additional shares of common stock at
$2.50 per share, exerciseable only after the debentures have been
converted. As of August 31, 1999, $3,500,000 of the units subscribed had
been paid with shareholders opting to receive common shares directly in
lieu of convertible debentures. The remaining $2,500,000 has also been
collected which resulted in the issuance of an additional 725,000 common
shares and convertible debentures totaling $1,050,000. Interest will begin
accruing on the debentures at 10% per annum one year after their issue
date with maturity six years after issuance. Warrants for 200,000 shares
are subscribed but unpaid at $2.50 per share leaving remaining
unsubscribed or exercised warrants for 1,300,000 shares.
4. In May 1999, Luba Veselinovic entered into an agreement with Gary
Fitchett, personally and on behalf of the Fitchett Family Trust, Pinecrest
Consultants, Inc. and Management Synergistics to purchase 1,000,000 shares
of the Fitchett NuPro shares for the aggregate price of $500,000. The
agreement was reached with shares of the Fitchett NuPro shares for the
aggregate price of $500,000. The agreement was reached with an
understanding to provide an orderly transfer of Company affairs. $250,000
of the purchase price is payable on closing. Closing has not yet occurred
because certain conditions precedent to closing have not yet been
satisfied. The remaining $250,000 balance is payable by a note co-signed
by Luba Veselinovic and NuPro Innovations Inc. and is payable according to
the following schedule:
<TABLE>
<CAPTION>
MONTHLY ANNUAL
------- ------
<S> <C> <C>
Year one $2,500 $30,000
Year two 5,000 60,000
Year three 7,500 90,000
Year four 10,000 70,000
--------
$250,000
========
</TABLE>
F-25
<PAGE> 56
NUPRO INNOVATIONS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
NINE MONTHS ENDED AUGUST 31,1999 AND 1998 (UNAUDITED)
- - -------------------------------------------------------------------------------
If the note is not paid by August 31, 2004, 500,000 shares will be
returned to Fitchett by Veselinovic prorata to the amount unpaid on the
note.
While NuPro is not the principle signer of the note, it is expected that
the cash flows will come from NuPro as payment of compensation or accrued
management fees to Luba Veselinovic or one of his affiliated entities.
Existing accrued management fees due to Fitchett of approximately $175,000
will be paid upon the earlier of (1) completion of a public offering of
NuPro shares or (2) profits earned in excess of required capital
expenditures and dividends. $175,000 of the management fees due to Luba
Veselinovic are also "frozen" and payable under the above mentioned terms.
Management fees in excess of $175,000 accruing to Luba Veselinovic or his
affiliates are payable out of available funds. The "frozen" fees may
otherwise be paid to make the note payments or personal obligations to
Fitchett. An additional 200,000 shares were provided by Fitchett to
Veselinovic to use for special consideration at no charge. Pursuant to the
transition plan certain actions undertaken by Fitchett on behalf of NuPro
are being resolved by current management and may result in some reduction
of the funds otherwise due him. The effect on these financial statements
is not measurable but is not believed to be materially adverse.
5. In June, 1999 the oral technology license agreement referred to in Note 3
to the audited financial statements for the year ended November 30, 1998
was documented in a written agreement between Krida Overseas Investments
Trading Limited, a Cyprus company ("Krida") and NuPro. The agreement
grants NuPro an exclusive world wide license to the NuPro technology owned
by Krida through December 31, 2002. The license fee is 1.5% of the gross
revenues up to $5,000,000 and 2% thereafter resulting from the NuPro
technology and products sold by NuPro. The exclusivity after December 31,
2002 is dependent on the continuing involvement of Luba Veselinovic or
achievement of at least 50% of the forecasted sales in the business plan
and annual sales increase of at least 10%.
6. In August, 1999 the escrowed shares referred to in Note 8 to the audited
financial statements were distributed to the certain shareholders in
accordance with the plan previously authorized by the board of directors.
460,886 shares were distributed to approximately 60 shareholders to
compensate them for the lost opportunity to exercise their warrants and
289,114 were distributed to 7 shareholders to settle various NuPro
commitments.
F-26
<PAGE> 57
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
2.1 Certificate of Domestication of the Company, dated August 7,
1997
2.2 Certificate of Incorporation of the Company
2.3 Bylaws of the Company
3.1 Warrant to Purchase Shares of Common Stock of the Company
3.2 Form of 10.00% Unsecured Convertible Debenture
6.1 Technology License Agreement by and between Krida Overseas
Investments Trading Limited and the Company dated as of
June 1, 1999
6.2 Asset Purchase Agreement by and between TrucTech, Inc., and
the Company effective as of December 1, 1998.
6.3 Form of Indemnification Agreement for Members of the Board of
Directors
6.4 Form of Indemnification Agreement for Members of the
Advisory Council
6.5 Secondment Agreement by and between the Company and Krida
Overseas Investments Trading Limited dated as of December 1,
1998
6.6 Form of Stock Option Agreement for Members of the Company's
Board of Directors
6.7 Form of Stock Option Agreement for Members of the Company's
Advisory Council
6.8 Office Building Lease between East Broadway 5151 Limited
Partnership and Luba Veselinovic and Elke Veselinovic, H & W,
DBA NuPro Innovations Inc. dated as of the 17th day of
December, 1996.
6.9 First Amendment to Lease made the 17th day of April, 1998, by
and between East Broadway 5151 Limited Partnership and NuPro
Innovations Inc., formerly Luba Veselinovic and Elke
Veselinovic, Husband & Wife, dba, NuPro Innovations Inc.
6.10 Second Amendment to Lease made the 22nd day of March, 1999,
by and between East Broadway 5151 Limited Partnership and
NuPro Innovations Inc., formerly Luba Veselinovic and Elke
Veselinovic, Husband & Wife, dba, NuPro Innovations Inc.
6.11 Buy-Sell Agreement dated August 24, 1999 between Ernesto
Zaragoza de Cima and NuPro Innovation Mexico S.A de C.V.*
12.1 Subsidiaries of the Company
12.2 Consent of S.E. Clark & Company, P.C. Independent Auditors
27.1 Financial Data Schedule (Year Ended November 30, 1998)
27.2 Financial Data Schedule (Nine Months Ended August 31, 1999)
* To be filed by amendment
-30-
<PAGE> 58
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
NUPRO INNOVATIONS INC.
By: /s/ Luba Veselinovic
-----------------------------------------
Luba Veselinovic, Chief Executive Officer
December 9, 1999
-31-
<PAGE> 59
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1 Certificate of Domestication of the Company, dated August 7,
1997
2.2 Certificate of Incorporation of the Company
2.3 Bylaws of the Company
3.1 Warrant to Purchase Shares of Common Stock of the Company
3.2 Form of 10.00% Unsecured Convertible Debenture
6.1 Technology License Agreement by and between Krida Overseas
Investments Trading Limited and the Company dated as of
June 1, 1999
6.2 Asset Purchase Agreement by and between TrucTech, Inc., and
the Company effective as of December 1, 1998.
6.3 Form of Indemnification Agreement for Members of the Board of
Directors
6.4 Form of Indemnification Agreement for Members of the
Advisory Council
6.5 Secondment Agreement by and between the Company and Krida
Overseas Investments Trading Limited dated as of December 1,
1998
6.6 Form of Stock Option Agreement for Members of the Company's
Board of Directors
6.7 Form of Stock Option Agreement for Members of the Company's
Advisory Council
6.8 Office Building Lease between East Broadway 5151 Limited
Partnership and Luba Veselinovic and Elke Veselinovic, H & W,
DBA NuPro Innovations Inc. dated as of the 17th day of
December, 1996.
6.9 First Amendment to Lease made the 17th day of April, 1998, by
and between East Broadway 5151 Limited Partnership and NuPro
Innovations Inc., formerly Luba Veselinovic and Elke
Veselinovic, Husband & Wife, dba, NuPro Innovations Inc.
6.10 Second Amendment to Lease made the 22nd day of March, 1999,
by and between East Broadway 5151 Limited Partnership and
NuPro Innovations Inc., formerly Luba Veselinovic and Elke
Veselinovic, Husband & Wife, dba, NuPro Innovations Inc.
6.11 Buy-Sell Agreement dated August 24, 1999 between Ernesto
Zaragoza de Cima and NuPro Innovation Mexico S.A. de C.V.*
12.1 Subsidiaries of the Company
12.2 Consent of S.E. Clark & Company, P.C. Independent Auditors
27.1 Financial Data Schedule (Year Ended November 30, 1998)
27.2 Financial Data Schedule (Nine Months Ended August 31, 1999)
* To be filed by amendment
<PAGE> 1
EXHIBIT 2.1
CERTIFICATE OF DOMESTICATION
OF
NUPRO INNOVATIONS INC.
The undersigned, the President of TracTop Distributing Inc., hereby
certifies the following:
1. The non-United States corporation to be domesticated in the State of
Delaware, TracTop Distributing Inc., was first incorporated on November 27, 1996
in the jurisdiction of the Province of Ontario, Canada.
2. The name of the corporation immediately prior to the filing of this
Certificate of Domestication is: "TracTop Distributing Inc."
3. The name of the corporation as set forth in the Certificate of
Incorporation filed in the State of Delaware pursuant to subsection (b) of
Section 388 of the Delaware General Corporation Law is: "NuPro Innovations Inc."
4. The jurisdiction that constituted the seat and principal place of
business of the corporation immediately prior to the filing of this Certificate
of Domestication is the Province of Ontario, Canada.
Dated effective this 7th day of August, 1997.
/s/ Gary Fitchett
- - ---------------------------------------
By: Gary Fitchett, President
TracTop Distributing Inc.
Address: 110 Ambleside Drive
Port Perry, Ontario
L9L1B4 Canada
<PAGE> 1
EXHIBIT 2.2
CERTIFICATE OF INCORPORATION
OF
NUPRO INNOVATIONS INC.
The undersigned incorporator hereby executes this Certificate of
Incorporation for the purposes of forming a corporation for profit in accordance
with the laws of the State of Delaware.
ARTICLE 1
Name
The name of the corporation shall be:
NuPro Innovations Inc.
ARTICLE 2
Registered Office and Agent
The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, Wilmington, New Castle county, Delaware 19801.
The name of the registered agent at such address is The Corporation Trust
Company.
ARTICLE 3
Purpose
The nature of the business or purposes to be conducted or promoted by
the corporation is to engage in any lawful activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
ARTICLE 4
Capital Stock
1. Authorized Capitalization. The total number of shares of all classes
of stock which the corporation shall have authority to issue is 21,000,000
shares, $.001 par value, divided into the following: (i) 1,000,000 shares of
Preferred Stock ("Preferred Stock") and (ii) 20,000,000 shares of Common Stock
("Common Stock").
1
<PAGE> 2
2. Preferred Stock. Shares of Preferred Stock may be issued from time to
time in one or more series. The Board of Directors is hereby vested with
authority to fix by resolution or resolutions the designations and the powers,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations, or restrictions thereof, including, without
limitation, the dividend rate, conversion rights, redemption price and
liquidation preference, or any series of shares of Preferred Stock, and to fix
the number of shares constituting any such series, and to increase or decrease
the number of shares of any such series (but not below the number of shares
thereof outstanding). If the number of shares of any such series is so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution or resolutions originally
fixing the number of shares of such series.
3. Voting Rights. The holders of shares of Common Stock shall be
entitled to one vote per share at each meeting of the stockholders of the
corporation on all matters coming before the stockholders of the corporation,
except as otherwise provided by law.
ARTICLE 5
Incorporator
The incorporator of the corporation is:
Gary Fitchett
110 Ambleside Drive
Port Perry, Ontario
L9L 1B4
Canada
ARTICLE 6
Board of Directors
The business and affairs of the corporation shall be managed by the
Board of Directors, which may exercise all powers of the corporation and do all
lawful acts and things as are not by law directed or required to be exercised or
done only by the stockholders. The manner of establishing the number of
directors (other than the number of the initial directors) to constitute the
Board of Directors and the procedures for electing directors shall be as set
forth in the Bylaws of the corporation. There shall be no cumulative voting in
the election of directors.
ARTICLE 7
Initial Board of Directors
The initial Board of Directors of the corporation shall consist of three
directors as set forth below. Such members of the initial Board of Directors
shall serve until the first annual meeting of stockholders or until their
successors are elected and qualified.
John D. Alton
2
<PAGE> 3
Gary Fitchett
Paul G. Fitchett
ARTICLE 8
By-Laws
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the corporation is expressly authorized to make, alter
or repeal the Bylaws of the corporation.
ARTICLE 9
Meetings of Stockholders
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the Board of Directors or in the Bylaws
of the corporation. The stockholders of the corporation may not act by written
consent, unless such written consent constitutes the unanimous consent of all
stockholders.
ARTICLE 10
Amendment of Certificate of Incorporation
The corporation reserves the right to amend, alter, change, or repeal
any provisions contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by the laws of the State of Delaware, and all rights
conferred upon the stockholders herein are subject to this reservation.
ARTICLE 11
Indemnification and Limitation of Liability
The corporation shall indemnify, to the fullest extent permitted by the
General Corporation Law of the State of Delaware, as amended from time to time,
all persons whom it may indemnify pursuant thereto. The personal liability of a
director of the corporation to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director shall be limited to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as it now exists or may hereafter be amended. Any repeal or
modification of this Article by the stockholders of the corporation shall not
adversely affect any right or protection of a director of the corporation or
otherwise affected person existing at the time of such repeal or modification.
3
<PAGE> 4
I, THE UNDERSIGNED, being the sole incorporated hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, do make this certificate hereby declaring and certifying
that this is my act and deed and the facts stated herein are true, and
accordingly have hereunto set my hand on this 7th day of August, 1997.
/s/ Gary Fitchett
------------------------------------
GARY FITCHETT
Sole Incorporator
4
<PAGE> 1
EXHIBIT 2.3
BYLAWS
OF
NUPRO INNOVATIONS INC.
- - --------------------------------------------------------------------------------
ARTICLE I
OFFICES AND AGENT
1. Principal Office. The principal office of NuPro Innovations Inc. (the
"Corporation") may be located within or without the State of Delaware, as
designated by the board of directors. The Corporation may have other offices and
places of business at such places within or without the State of Delaware as
shall be determined by the directors.
2. Registered Office and Agent. The Corporation shall have and maintain
at all times (a) a registered office in the State of Delaware, which office
shall initially be located at 1209 Orange Street, Wilmington, Delaware 19801,
and (b) a registered agent located at such address whose name is CT Corporation
System, until changed from time to time as provided by the General Corporation
Law of the State of Delaware ("Delaware Corporation Law").
ARTICLE II
STOCKHOLDERS MEETINGS
1. Annual Meeting. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on such date and at such time as
determined by resolution of the board of directors.
2. Special Meetings. Special meetings of the stockholders of the
Corporation may be called for any purpose at any time by the president, shall be
called by the secretary if directed by the board of directors and shall be
called by the president upon the written request of holders of shares entitled
to cast not less than ten percent of the votes entitled to notice of and to vote
at such special meeting. Such written request shall specify the purpose or
purposes of the meeting and shall be delivered to the president. Upon receipt of
such written request, the president shall fix a date and time for such meeting,
which date shall be within thirty business days of the proposed date specified
in the written request.
3. Place of Meetings. All meetings of stockholders of the Corporation
shall be held within or without the State of Delaware as may be designated by
the board of directors or the president, or, if not designated, at the
registered office of the Corporation.
1
<PAGE> 2
4. Notice of Meeting. Except as otherwise provided in these Bylaws or
the Delaware Corporation Law, written notice of any meeting of stockholders
stating the place, date and hour of the meeting and, in the case of a special
meeting, the purpose for which the meeting is called, shall be delivered either
personally or by mail to each stockholder of record entitled to vote at such
meeting not less than ten (10) nor more than sixty (60) days before the date of
the meeting, by or at the direction of the board of directors, the president or
the secretary. If mailed, such notice shall be deemed to be delivered as to any
stockholder of record when deposited in the United States mail addressed to the
stockholder at his or her address as it appears on the stock transfer books of
the Corporation, with postage prepaid. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the Corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
5. Waiver of Notice. Any stockholder, either before or after any
stockholders' meeting, may waive in writing notice of the meeting, and his
waiver shall be deemed the equivalent of giving notice. Attendance at a meeting
by a stockholder shall constitute a waiver of notice, except when the
stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
6. Fixing of Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors of the Corporation may fix, in
advance, a record date which shall be not more than sixty (60) days nor less
than ten (10) days prior to the date of such meeting, nor more than sixty (60)
days prior to any other action. If no record date is fixed, the record date for
determining the stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. The record date for
determining the stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action by the board of directors is
necessary, shall be the day on which the first written consent is expressed. The
record date for determining stockholders for any other purpose shall be at the
close of business on the day on which the board of directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
7. Stockholders List. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of
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each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, at a place within the
city where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present.
8. Proxies. A stockholder entitled to vote at a meeting of stockholders
or to express consent or dissent to corporate action in writing without a
meeting may authorize another person or persons to act for him by proxy. No
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period.
9. Voting Rights. Each stockholder shall have one vote for each share of
stock entitled to vote held of record by such stockholder and a proportionate
vote for each fractional share so held, unless otherwise provided in the
Certificate of Incorporation.
Persons holding stock in a fiduciary capacity shall be entitled to vote
the shares so held. Persons whose stock is pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the Corporation he or she
has expressly empowered the pledgee to vote thereon, in which case only the
pledgee, or his or her proxy, may represent such stock and vote thereon.
If shares having voting power stand of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety, or otherwise, or if two or more
persons have the same fiduciary relationship respecting the same shares, unless
the secretary of the Corporation is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect: (i) if only one votes, his act binds all; (ii) if
more than one vote, the act of the majority so voting binds all; and (iii) if
more than one vote, but the vote is evenly split on any particular matter, each
fraction may vote the securities in question proportionately, or any person
voting the shares or a beneficiary, if any, may apply to the Court of Chancery
or any court of competent jurisdiction in the State of Delaware to appoint an
additional person to act with the persons so voting the shares. The shares shall
then be voted as determined by a majority of such persons and the person
appointed by the Court. If a tenancy is held in unequal interests, a majority or
even-split for the purpose of this subsection shall be a majority or even-split
in interest.
10. Quorum and Required Vote. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, the holders of a majority of the
shares entitled to vote at the meeting, present in person or by proxy, shall
constitute a quorum for the transaction of business. If a quorum is present, the
affirmative vote of a majority of the shares present or represented by proxy at
the meeting and entitled to vote on the subject matter shall be the act of the
stockholders, and, if there are two or more classes of stock entitled to vote as
separate classes, then, in the case of each such class, the affirmative vote of
a majority of the shares of that class present or represented by proxy at the
meeting shall be the vote of such class unless a different vote is required by
an express provision of law, the Certificate of Incorporation or these Bylaws.
11. Information Action By Stockholders. Except as otherwise provided in
the Certificate of Incorporation, any action required by the provisions of
Delaware Corporation Law
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to be taken or any action which may be taken at a stockholders' meeting may be
taken without a meeting without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous consent, if
permissible hereunder, shall be given to those stockholders who have not
consented in writing. Any action taken pursuant to such written consent of the
stockholders shall have the same force and effect as if taken by the
stockholders at a meeting thereof.
ARTICLE III
BOARD OF DIRECTORS
1. Number, Qualifications and Term of Office. Except as otherwise
provided in the Certificate of Incorporation or the Delaware Corporation Law,
the business and affairs of the Corporation shall be managed by or under the
direction of a board of directors consisting of one or more members. Directors
need not be stockholders of the Corporation. The board of directors, by
resolution, may increase or decrease the number of directors from time to time.
Except as otherwise provided in these Bylaws, each director shall be elected at
each annual meeting of stockholders and shall hold such office until the next
annual meeting of stockholders and until his successor shall be elected and
shall qualify. No decrease in the number of directors shall have the effect of
shortening the term of any incumbent director.
2. Vacancies. Unless and until filled by the stockholders of the
Corporation, any vacancy in the board of directors, however occurring, including
a vacancy resulting from an enlargement of the board, may be filled by vote of a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy shall be elected
for the unexpired term of his predecessor in office, and a director chosen to
fill a position resulting from an increase in the number of directors shall hold
office until the next annual meeting of stockholders and until his successor is
elected and qualified, or until his earlier death, resignation or removal.
3. Resignation. Any director may resign by delivering his written
resignation to the Corporation at its principal office addressed to the
president or secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
4. Removal. Except as otherwise provided in the Certificate of
Incorporation or the Delaware Corporation Law, any director or the entire board
of directors may be removed with or without cause by the holders of a majority
of the shares then entitled to vote at an election of directors.
5. Compensation. Directors may be paid such compensation for their
services and such reimbursements for expenses of attendance at meetings as the
Board of Directors may from
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time to time determine. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
MEETINGS OF THE BOARD
1. Place of Meetings. The regular or special meetings of the board of
directors or any committee designated by the board shall be held at the
principal office of the Corporation or at any other place within or without the
State of Delaware that a majority of the board of directors or any such
committee, as the case may be, may designate from time to time by resolution.
2. Regular Meetings. The board of directors shall meet each year
immediately after and at the same place as the annual meeting of the
stockholders for the purpose of electing officers and transacting such other
business as may come before the meeting. The board of directors or any committee
designated by the board may provide, by resolution, for the holding of
additional regular meetings within or without the State of Delaware without
notice of the time and place of such meeting other than such resolution;
provided that any director who is absent when such resolution is made shall be
given notice of such resolution.
3. Special Meetings. Special meetings of the board of directors or any
committee designated by the board may be held at any time and place, within or
without the State of Delaware, designated in a call by the chairman of the
board, if any, by the president or by a majority of the members of the board of
directors or any such committee, as the case may be.
4. Notice of Special Meetings. Except as otherwise provided by these
Bylaws or the laws of Delaware Corporation Law, written notice of each special
meeting of the board of directors or any committee thereof setting forth the
time and place of the meeting shall be given to each director by the secretary
or by the officer or director calling the meeting not less than twenty-four (24)
hours prior to the time fixed for the meeting. Notice of special meetings may be
either given personally, by telephone, or by sending a copy of the notice
through the United States mail or by telegram, telex or telecopy, charges
prepaid, to the address of each director appearing on the books of the
Corporation. If such notice is given by mail or telegram, such notice shall be
deemed to be delivered when received by the intended recipient. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the board of directors need be specified in the notice or waiver of notice of
such meeting.
5. Waiver of Notice. A director may waive, in writing, notice of any
special meeting of the board of directors or any committee thereof, either
before, at, or after the meeting; and his waiver shall be deemed the equivalent
of giving notice. By attending or participating in a regular or special meeting,
a director waives any required notice of such meeting unless the director, at
the beginning of the meeting, objects to the holding of the meeting or the
transacting of business at the meeting.
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6. Quorum and Action at Meeting. At meetings of the board of directors
or any committee designated by the board, a majority of the total number of
directors, or a majority of the members of any such committee, as the case may
be, shall constitute a quorum for the transaction of business. In the event one
or more of the directors shall be disqualified to vote at any meeting, then the
required quorum shall be reduced by one for each such director so disqualified;
provided, however, that in no case shall less than one-third (1/3) of the number
so fixed constitute a quorum. If a quorum is present, the act of the majority of
directors in attendance shall be the act of the board of directors or any
committee thereof, as the case may be, unless the act of a greater number is
required by these Bylaws, the Certificate of Incorporation or Delaware
Corporation Law. If a quorum shall not be present at any meeting of the board of
directors, the directors present thereat may adjourn that meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
7. Presumption of Assent. A director who is present at a meeting of the
board or a committee thereof when action is taken is deemed to have assented to
the action taken unless: (i) he objects at the beginning of such meeting to the
holding of the meeting or the transaction of business at the meeting; (ii) he
contemporaneously requests that his dissent from the action taken be entered in
the minutes of such meeting; or (iii) he gives written notice of his dissent to
the presiding officer of such meeting before its adjournment or to the secretary
of the corporation immediately after adjournment of such meeting. The right of
dissent as to a specific action taken at a meeting of a board or a committee
thereof is not available to a director who votes in favor of such action.
8. Committees. The board of directors may, by a resolution passed by a
majority of the whole board of directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members of the committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of the absent or disqualified member. Any such committee, to the extent
provided in the resolution of the board of directors and subject to the
provisions of Delaware Corporation Law, shall have and may exercise all the
powers and authority of the board of directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all such papers which may require it. Each such committee shall
keep minutes and make such reports as the board of directors may from time to
time request. Except as the board of directors may otherwise determine, any
committee may make rules for the conduct of its business, but, unless otherwise
provided by the directors or in such rules, its business shall be conducted as
nearly as possible in the same manner as is provided in these Bylaws for the
board of directors.
9. Information Action by Directors. Except as otherwise provided in the
Certificate of Incorporation, any action required or permitted by the Delaware
Corporation Law to be taken at any meeting of the board of directors or any
committee thereof may be taken without a meeting if all members of the board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the board or committee.
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10. Telephonic Meetings. Directors or any members of any committee
designated by the board may participate in a meeting of the board or committee
by means of a telephone conference or similar communications equipment by which
all persons participating in the meeting can hear and speak to each other at the
same time. Such participation shall constitute presence in person at the
meeting.
ARTICLE V
OFFICERS AND AGENTS
1. Enumeration, Election and Term. The officers of the Corporation shall
consist of a president, a secretary, a treasurer and such other officers with
such other titles as may be deemed necessary or desirable by the board of
directors, including one or more vice presidents, assistant treasurers and
assistant secretaries and a chairman of the board. Any number of offices may be
held by the same person and no officer need be a stockholder of the Corporation
or a resident of the State of Delaware. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, each officer shall hold office
until his successor is elected and qualified or until his earlier death,
resignation or removal. The officers of the Corporation shall be elected
annually by the board of directors at the first meeting of the board held after
each annual meeting of the stockholders.
2. General Duties. All officers and agents of the Corporation, as
between themselves and the Corporation, shall have such authority and shall
perform such duties in the management of the Corporation as may be provided in
these Bylaws or as may be determined by resolution of the board of directors not
inconsistent with these Bylaws. In all cases where the duties of any officer,
agent or employee are not prescribed by the Bylaws or by the board of directors,
such officer, agent or employee shall follow the orders and instructions of the
president.
3. Vacancies. The board of directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave any vacancy unfilled
for such period as it may determine other than a vacancy in the office of
president or secretary. The officer so selected to fill any vacancy shall hold
office until his successor is elected and qualified or until his earlier death,
resignation or removal.
4. Compensation. The board of directors from time to time shall fix the
compensation of the officers of the Corporation. The compensation of other
agents and employees of the Corporation may be fixed by the board of directors,
or by any committee designated by the board or by an officer to whom that
function has been delegated by the board.
5. Resignation and Removal. Any officer may resign by delivering his
written resignation to the Corporation at its principal office addressed to the
president or secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event. Any officer or agent of the Corporation may be removed, with or
without cause, by a vote of the majority of the members of the board of
directors whenever in its judgment the best interests of the Corporation may be
served thereby,
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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 an agent shall
not of itself create contract rights.
6. Chairman of the Board. The chairman of the board, if any, shall
preside as chairman at meetings of the stockholders and the board of directors.
He shall, in addition, have such other duties as the board may prescribe that he
or she perform. At the request of the president, the chairman of the board may,
in the case of the president's absence or inability to act, temporarily act in
his place. In the case of death of the president or in the case of his absence
or inability to act without having designated the chairman of the board to act
temporarily in his place, the chairman of the board shall perform the duties of
the president, unless the board of directors, by resolution, provides otherwise.
If the chairman of the board shall be unable to act in place of the president,
any vice president may exercise such powers and perform such duties as provided
in Section 8 below.
7. President. The president shall be the chief executive officer of the
Corporation and shall have general supervision of the business of the
Corporation. If the position of chairman of the board is not occupied or the
chairman is absent or otherwise unable to act, the president shall preside at
meetings of the stockholders and directors and shall discharge the duties of the
presiding officer. At each annual meeting of the stockholders, the president
shall give a report of the business of the Corporation for the preceding fiscal
year and shall perform whatever other duties the board of directors may from
time to time prescribe.
8. Vice Presidents. Each vice president shall have such powers and
perform such duties as the board of directors may from time to time prescribe or
as the president may from time to time delegate to him. At the request of the
president, in the case of the president's absence or inability to act, any vice
president may temporarily act in his place. In the case of the death of the
president, or in the case of his absence or inability to act without having
designated a vice president or vice presidents to act temporarily in his place,
the board of directors, by resolution, may designate a vice president or vice
presidents to perform the duties of the president. If no such designation is
made, the chairman of the board of directors, if any, shall exercise such powers
and perform such duties, as provided in Section 7 above, but if the Corporation
has no chairman of the board of directors, or if the chairman is unable to act
in place of the president, all of the vice presidents may exercise such powers
and perform such duties.
9. Secretary. The secretary shall keep or cause to be kept in books
provided for that purpose, the minutes of the meetings of the stockholders,
executive committee, if any, and any other committees, and of the board of
directors; shall see that all notices are duly given in accordance with the
provisions of these Bylaws and as required by law; shall be custodian of the
records and of the seal of the Corporation and see that the seal is affixed to
all documents, the execution of which on behalf of the Corporation under its
seal is duly authorized and in accordance with the provisions of these Bylaws;
and, in general, shall perform all duties incident to the office of secretary
and such other duties as may, from time to time, be assigned to him or her by
the board of directors or by the president. In the absence of the secretary or
his or her inability to act, the assistant secretaries, if any, shall act with
the same power and shall be subject to the same restrictions as are applicable
to the secretary.
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10. Treasurer. The treasurer shall have custody of corporate funds and
securities. He or she shall keep full and accurate accounts of receipts and
disbursements and shall deposit all corporate monies and other valuable effects
in the name and to the credit of the Corporation in the depository or
depositories of the Corporation, and shall render an account of his transactions
as treasurer and of the financial condition of the Corporation to the president
and/or the board of directors upon request. Such power given to the treasurer to
deposit and disburse funds shall not, however, preclude any other officer or
employee of the Corporation from also depositing and disbursing funds when
authorized to do so by the board of directors. The treasurer shall, if required
by the board of directors, give the Corporation a bond in such amount and with
such surety or sureties as may be ordered by the board of directors for the
faithful performance of the duties of his office. The treasurer shall have such
other powers and perform such other duties as may be from time to time
prescribed by the board of directors or the president. In the absence of the
treasurer or his or her inability to act, the assistant treasurers, if any,
shall act with the same authority and shall be subject to the same restrictions
as are applicable to the treasurer.
11. Delegation of Duties. Whenever an officer is absent, or whenever,
for any reason, the board of directors may deem it desirable, the board may
delegate the powers and duties of an officer to any other officer or officers or
to any director or directors.
ARTICLE VI
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
1. Indemnification: Third-Party Actions. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he or she 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
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interest of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
or she reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his or her conduct was unlawful.
2. Indemnification: Derivative Actions. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the
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corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection with the defense or
settlement of such action or suit if he or she acted in good faith and in the
manner he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnify for such
expenses which the court shall deem proper.
3. Mandatory Indemnification. To the extent that a director or officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Sections 1
and 2 of this Article VI or in defense of any claim, issue or matter therein, he
or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
4. Advance Payment of Expenses. Expenses (including attorneys' fees)
incurred in defending a civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount if it is ultimately
determined that he or she is not entitled to be indemnified by the Corporation
as authorized in this Article VI. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
5. Non-exclusive. The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of this Article VI
shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office, and shall continue, unless otherwise provided when
authorized or ratified, as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
6. Insurance. The corporation shall have power to purchase and maintain
insurance on behalf of 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 another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify him or her against such liability under the provisions of this
Article VI.
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7. Definitions. For purposes of this Article VI, the following terms
shall have the following meanings:
(a) references to "the Corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents so that any person who is
or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise shall stand in the same position under the
provisions of this Article VI with respect to the resulting or surviving
corporation as he or she would have with respect to such constituent corporation
if its separate existence had continued;
(b) references to "other enterprises" shall include employee
benefit plans;
(c) references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan;
(d) references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or relates to services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and
(e) a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the interests of the Corporation" as referred to in this Article VI.
ARTICLE VII
CAPITAL STOCK
1. Certificates of Stock. The shares of the Corporation shall be
represented by certificates; provided however, that the board of directors of
the Corporation may, by resolution, provide that some or all of any or all
classes or series of its stock shall be issued as uncertificated shares. Any
such resolution shall not apply to shares represented by a certificate until
such certificate is surrendered to the Corporation. Notwithstanding the adoption
of such a resolution by the board of directors, every holder of stock
represented by certificates and upon request, every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in the name of the
Corporation by the chairman or vice chairman of the board of directors, or the
president or vice president, and by the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the Corporation representing the
number of shares registered in certificate form. Any or all the signatures on
the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may
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be issued by the Corporation with the same effect as if the officer, transfer
agent or registrar were such officer, transfer agent or registrar at the date of
issue.
2. Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the Corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the Corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by resolution of the board of directors in such manner,
for such consideration and on such terms as the board of directors may
determine. Consideration for such shares of capital stock shall be expressed in
dollars, and shall not be less than the par value or stated value therefor, as
the case may be. The par value for shares, if any, shall be stated in the
Certificate of Incorporation, and the stated value for shares, if any, shall be
fixed from time to time by the board of directors.
3. Lost Certificates. The board of directors may direct a new
certificate to be issued in place of any previously issued certificate alleged
to have been destroyed or lost if the owner makes an affidavit or affirmation of
that fact and produces such evidence of loss or destruction as the board may
require. The board, in its discretion, may as a condition precedent to the
issuance of a new certificate, require the owner to give the Corporation a bond
as indemnity against any claim that may be made against the Corporation relating
to the allegedly destroyed or lost certificate.
4. Transfer of Shares. Subject to applicable law, shares of stock of the
Corporation may be transferred on its books upon the surrender to the
Corporation or its transfer agent of the certificates representing such shares,
if any, duly endorsed or accompanied by a written assignment or power of
attorney duly executed and with such proof of authority or authenticity of
signature as the Corporation or its transfer agent may reasonably require. In
that event, the surrendered certificates shall be canceled, new certificates
issued to the persons entitled to them, if any, and the transaction recorded on
the books of the Corporation.
5. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of the other person, whether or not
it has express or other notice thereof, except as otherwise provided by the laws
of the State of Delaware.
6. Stock Ledger. An appropriate stock journal and ledger shall be kept
by the secretary or such registrars or transfer agents as the directors by
resolution may appoint in which all transactions in the shares of stock of the
Corporation shall be recorded.
12
<PAGE> 13
7. Restriction on Transfer of Shares. Notice of any restriction on the
transfer of the stock of the Corporation shall be placed on each certificate of
stock issued or in the case of uncertificated shares contained in the notice
sent to the registered owner of such shares in accordance with the provisions of
the Delaware Corporation Law.
ARTICLE VIII
SEAL AND FISCAL YEAR
1. Seal. The Corporation shall have a seal in the form impressed to the
left of this paragraph of the Bylaws.
2. Fiscal Year. The fiscal year of the Corporation shall be determined
by the board of directors and set forth in the minutes of a directors' meeting.
Such fiscal year may be changed from time to time by the board of directors in
its discretion.
ARTICLE IX
DIVIDENDS
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
board of directors at any regular or special meeting, or otherwise pursuant to
law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation. Before
payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or maintaining
any property of the Corporation, or for such other purpose as the directors
shall think in the best interest of the Corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
AMENDMENTS
Subject to repeal or change by action of the stockholders, the board of
directors may amend, supplement or repeal these Bylaws or adopt new Bylaws, and
all such changes shall affect and be binding upon the holders of all shares
heretofore as well as hereafter authorized, subscribed for or offered.
13
<PAGE> 14
ARTICLE XI
MISCELLANEOUS
1. Gender. Whenever required by the context, the singular shall include
the plural, the plural the singular, and one gender shall include all genders.
2. Invalid Provision. The invalidity or unenforceability of any
particular provision of these Bylaws shall not affect the other provisions
herein, and these Bylaws shall be construed in all respects as if such invalid
or unenforceable provision was omitted.
3. Governing Law. These Bylaws shall be governed by and construed in
accordance with the laws of the State of Delaware.
I, Gary Fitchett, as President of NuPro Innovations, Inc., hereby
certify that the foregoing Bylaws were adopted by the Board of Directors of the
Corporation effective as of _________________, 1997.
____________________________________
Gary Fitchett, President
14
<PAGE> 1
EXHIBIT 3.1
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
NUPRO INNOVATIONS INC.
( $0.001 Par Value Common Stock )
---------------------------------------------
Subscriber
April 30, 1999
---------------------------------------------
Warrant to Purchase Number of Shares
<PAGE> 2
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), BUT ARE BEING OFFERED AND SOLD IN RELIANCE UPON REGULATION
S UNDER THE ACT. THIS WARRANT MAY NOT BE EXERCISED BY OR ON BEHALF OF ANY U.S.
PERSON (AS DEFINED IN REGULATION S) UNLESS REGISTERED UNDER THE ACT OR AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. NEITHER THE WARRANT NOR THE
SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE. THIS WARRANT MAY NOT BE ASSIGNED, HYPOTHECATED,
SOLD OR OTHERWISE TRANSFERRED UNDER ANY CIRCUMSTANCE.
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
THIS CERTIFIES THAT, for value received, subject to the terms and conditions set
forth herein,
Name:
-----------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
is entitled to subscribe for and purchase from NuPro Innovations Inc., a
Delaware corporation (the "Company"),
duly authorized, validly issued, fully paid and non-assessable shares, subject
to adjustment as set forth herein (the "Shares"), of the Company's common stock,
$0.001 par value per share (the "Common Stock"), at the price per share of U.S.
$2.50 (the "Exercise Price"). As used herein, the term "Common Stock" shall mean
the Company's presently authorized Common Stock, and any stock into or for which
such Common Stock may hereafter be converted or exchanged.
1. Term. This Warrant is exercisable, in whole or in part, at any time and from
time to from and after the date hereof and on or prior to December 31, 2000 (the
"Exercise Date") or at such later date as the Company, in its sole discretion,
shall determine after giving written notice to the holder hereof (the "Holder").
This Warrant is only exercisable if the Holder has converted all Debentures held
by him pursuant to Holder's purchase of a Unit under the Company's Confidential
Offering Memorandum dated March 31, 1999
2. Method of Exercise; Payment; Issuance of New Warrant. This Warrant may be
exercised by the holder hereof by the surrender of this Warrant (with the Notice
of Exercise from attached hereto as Exhibit A duly executed) at the principal
office of the Company and by the payment to the Company, by cash, check or
cancellation of indebtedness, of an amount equal to the Exercise Price per share
multiplied by the number of shares of Common Stock then being purchased. The
person or persons in whose name(s) any certificate(s) representing shares of
Common Stock shall be issuable upon exercise of this Warrant shall be deemed to
become the holder(s) of the shares of Common Stock represented thereby (and such
shares of Common Stock shall be deemed to have been issued) immediately prior to
the close of business on the date or dates upon which this Warrant is exercised.
In the event of any exercise of this Warrant, certificates for the shares of
Common Stock so purchased shall be delivered to the holder hereof as soon as
possible and, unless this Warrant has been fully exercised or expired, a new
Warrant
<PAGE> 3
representing a portion of the shares of Common Stock, if any, with respect to
which this Warrant shall not then have been exercised shall also be issued to
the holder hereof as soon as possible thereafter.
THE HOLDER HEREBY ACKNOWLEDGES THAT THIS WARRANT MAY NOT BE EXERCISED
WITHIN THE UNITED STATES (INCLUDING ITS TERRITORIES AND POSSESSIONS), AND THAT
THE SHARES OF COMMON STOCK ISSUABLE UNDER THIS WARRANT MAY NOT BE DELIVERED
WITHIN THE UNITED STATES UPON EXERCISE, OTHER THAN IN OFFERINGS DEEMED TO MEET
THE DEFINITION OF "OFFSHORE TRANSACTION" PURSUANT TO RULE 902(h) OF REGULATION
S, UNLESS REGISTERED UNDER THE ACT OR AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
3. Stock Fully Paid; Reservation of Shares of Common Stock. All shares of Common
Stock that may be issued upon the exercise of this Warrant shall, upon issuance,
be duly authorized, validly issued, fully paid and non-assessable, and free from
all taxes, liens and charges with respect to the issue thereof. During the
period with which this Warrant may be exercised, the Company will at all times
have duly authorized and reserved, for the purpose of issuance upon exercise of
this Warrant, a sufficient number of shares of Common Stock.
4. Adjustments to Exercise Price and Number of Shares of Common Stock. The
number and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as set forth in
Exhibit B attached hereto upon the occurrence of certain events described
herein. The provisions of Exhibit B are incorporated by reference herein with
the same effect as if set forth in full herein. In addition, any dates that
correspond to a particular Exercise Price may be extended to a later date as the
Company, in its sole discretion, shall determine after giving written notice to
the holder hereof.
5. Notices of Record Date. In the event of any taking by the Company of a record
of its stockholders for the purpose of determining stockholders who are entitled
to receive payment of any dividend or other distribution, any right to subscribe
for, purchase or otherwise acquire any share of any class or any other
securities or property, or to receive any other right, or for the purpose of
determining stockholders who are entitled to vote in connection with each such
event, the Company shall mail to the holder of this Warrant at least ten (10)
days prior to such record being taken, written notice of such action. Each such
notice shall specify the amount and character of any such dividend, distribution
or right(s), and shall set forth, in reasonable detail, the matter requiring any
such vote of the stockholders.
6. Nontransferability. This Warrant may not be assigned, hypothecated, sold or
otherwise transferred under any circumstance.
7. Rights as Stockholders. Except as set forth herein, no holder of this
Warrant, as such, shall be entitled to vote upon any matter submitted to
stockholders at any meeting thereof, or to receive notice of meetings, or be
deemed the holder of Common Stock until this Warrant shall have been exercised
and the shares of Common Stock purchasable upon such exercise shall have become
deliverable, as provided herein.
8. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
9. Notices. Any notice, request or other document required or permitted to be
given or delivered to the holder hereof or the Company shall be delivered or
sent to each such holder at its address as shown on the books of the Company or
to the Company at the address indicated above on this Warrant and shall be
deemed received by the holder upon the earlier of actual receipt or, if sent by
certified mail (postage pre-paid), five (5) days after deposit in the U.S. mail.
2
<PAGE> 4
10. Governing Law. This Warrant shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the United
States of America and the State of Delaware.
Date: , 1999 NuPro Innovations Inc.
--------------- 5151 East Broadway Blvd
Tucson, Arizona, USA
85711
By:
--------------------------------
Gary A. Fitchett, President
3
<PAGE> 5
EXHIBIT A
NOTICE OF EXERCISE
TO: NUPRO INNOVATIONS INC.
1. The undersigned hereby elects to purchase ________________________ shares of
Common Stock of the Company pursuant to the terms of the attached Warrant, at
the price per share of U.S. $ 2.50, and tenders herewith payment of the purchase
price of such shares in full, being U.S. $ _______________________ .
2. The undersigned represents and warrants that the undersigned is not a U.S.
Person (as defined in Regulation S promulgated under the Act) and this Warrant
is not being exercised on behalf of a U.S. Person.
Date: _____________________________________
____________________________________________________
(SIGNATURE)
____________________________________________________
(NAME - PLEASE PRINT)
____________________________________________________
____________________________________________________
(ADDRESS)
4
<PAGE> 6
EXHIBIT B
ADJUSTMENT PROVISIONS
1. Capitalized Terms. Capitalized terms used in this Exhibit B that are not
otherwise defined herein shall have the respective meanings assigned to them in
the attached Warrant if therein defined.
2. Reclassification or Merge. In case of any reclassification, change or
conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or in
any case of any Merger of the Company with or into another corporation or entity
(other than a merger with another corporation in which the Company is a
continuing corporation and which does not result in any reclassification of
outstanding securities issuable upon exercise of this Warrant), or in any case
of any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation or entity, as the case may
be, shall execute a new Warrant providing that the holder of this Warrant shall
have the right to exercise such new Warrant and upon such exercise, in lieu of
each share of Common Stock therefore issuable upon exercise of this Warrant, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change or merger by a holder of one share
of Common Stock. Such new Warrant shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Exhibit B. The provisions of this Section 2 shall similarly apply to successive
reclassifications, changes, mergers and transfers.
3. Subdivision or Combination of Shares. If the Company at any time while this
Warrant remains outstanding and unexpired shall subdivide or combine its Common
Stock, the Exercise Price and the number of Shares issuable upon exercise hereof
shall be proportionately adjusted.
4. Stock Dividends. If the Company at any time while this Warrant is outstanding
and unexpired shall pay a dividend in shares of Common Stock, then the Exercise
Price shall be adjusted, from and after the date of determination of
stockholders entitled to receive such dividend or distribution, to that price
determined by multiplying the Exercise Price in effect immediately prior to such
date of determination by a fraction (a) the numerator of which shall be the
total # of shares of Common Stock outstanding immediately after such dividend or
distribution, and (b) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after such dividend or
distribution, and the number of Shares subject to this Warrant.
5. Other Distributions. In the event the Company shall declare a dividend or
distribution payable in cash, securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets or options or rights
not referred to in Sections 2, 3 or 4 of this Exhibit B, then, in each such
case, provision shall be made by the Company such that the holder of this
Warrant shall receive upon exercise of this Warrant a proportionate share of any
dividend or distribution as though it were the holder of the Shares as of the
record date fixed for the determination of the stockholders of the Company
entitled to receive such dividend or distribution.
6. No Impairment. The Company will not by amendment of its Articles or Bylaws or
through any reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Exhibit B and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.
7. Notice of Adjustments. Whenever the Exercise Price shall be adjusted pursuant
to the provisions hereof, the Company shall within thirty (30) days of such
adjustment deliver a certificate signed by its chief financial officer to the
holder hereof setting forth, in reasonable detail, the event requiring the
adjustment the amount of the adjustment the method by which such adjustment was
calculated, and the Exercise Price after giving effect to such adjustment.
2
<PAGE> 1
EXHIBIT 3.2
NEITHER THIS DEBENTURE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("1933
ACT"), AND THIS DEBENTURE HAS NOT BEEN ISSUED PURSUANT TO AN INDENTURE QUALIFIED
UNDER THE TRUST INDENTURE ACT OF 1939, AS AMENDED, BUT IS BEING OFFERED AND SOLD
IN RELIANCE UPON REGULATION S UNDER THE 1933 ACT. THIS DEBENTURE MAY NOT BE
TRANSFERRED TO OR CONVERTED BY OR ON BEHALF OF ANY U.S. PERSON (AS DEFINED IN
REGULATION S) UNLESS REGISTERED UNDER THE 1933 ACT OR AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. THIS DEBENTURE MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, EXCEPT IN COMPLIANCE
WITH THE RESTRICTIONS ON TRANSFERABILITY CONTAINED IN THE INDENTURE AND THE
UNITED STATES FEDERAL SECURITIES LAWS.
NUPRO INNOVATIONS INC.
Incorporated Under the Laws of Delaware
10.00% UNSECURED CONVERTIBLE DEBENTURE
<TABLE>
<S> <C>
REGISTERED PRINCIPAL AMOUNT: $50,000.00 ORIGINAL INTEREST ACCRUAL DATE: ______________
</TABLE>
NuPro Innovations Inc., a corporation incorporated under the laws of the State
of Delaware (herein called the "Company" which term includes any successor
corporation under the Indenture hereinafter referred to), for value received,
hereby promises to pay to _____________________________________________________
or registered assigns, the principal sum of Fifty Thousand Dollars ($50,000.00)
on December 31, 2004, subject to prepayment and conversion rights as set forth
in the Indenture (as defined on the reverse hereof) (the "Maturity Date"), and
to pay interest hereon from the Original Interest Accrual Date set forth above
until the Maturity Date as set forth in the Indenture. The interest rate of this
Debenture is 10.00% per annum. The principal hereof is not subject to
redemption. The interest so payable and punctually paid or duly provided for on
any Interest Payment Date, as provided in the Indenture, will be paid to the
Person in whose name this Debenture is registered (the "Holder") at the close of
business on the Regular Record Date for such interest, which shall be the
fifteenth day (whether or not a Business Day) of the calendar month next
preceding such Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the Holder on such
Regular Record Date and may either be paid to the Person in whose name this
Debenture is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Company, notice
whereof shall be given to Debentureholders not less than ten days prior to such
Special Record Date, or be paid at any time in any other lawful manner and upon
such notice as provided in the Indenture. Payment of the principal of and
interest (and premium, if any) on this Debenture will be made at the office or
agency maintained by the Company for such purpose in Tucson, Arizona, or in such
other office or agency as may be selected by the Company in accordance with the
Indenture, in currency of the United States of America, provided, however, that
at the option of the Company, payment of the principal of and interest (and
premium, if any) on this Debenture may be made in United States Dollars by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Debenture Register. The Holder must present this Debenture to
collect principal, and when fully paid, the Debenture shall be surrendered and
cancelled.
Reference is hereby made to the further provisions of this Debenture set forth
on the reverse hereof. As more fully described in the Indenture, a director,
officer, employee, partner, affiliate, beneficiary, stockholder or incorporator,
as such, of the Company shall not have any liability for any obligations of the
Company under the Debenture or the Indenture or for any claim based on, in
respect or by reason of, such obligations or their creation. The Holder of this
Debenture by accepting this Debenture waives and releases all such liability.
The waiver and release are part of the consideration for the issuance of this
Debenture.
IN WITNESS WHEREOF, the Company has caused this 10.00% Unsecured Convertible
Debenture to be signed in its name by the manual or facsimile signature of its
President and attested to by the manual or facsimile signature of its Secretary.
Dated:___________________________ NUPRO INNOVATIONS INC.
By: __________________________________
President
Attest: ______________________________
Secretary
<PAGE> 2
REVERSE SIDE OF DEBENTURE
This Debenture is one of a duly authorized issue of 10.00% Unsecured Convertible
Debentures of the Company designated as its 10.00% Unsecured Convertible
Debentures (the "Debentures") in the aggregate principal amount of up to
$50,000,000, issued and to be issued under an Indenture, dated as of
____________, 1999 (the "Indenture"), among the Company, _____________ ("Agent")
and the Debentureholders (the "Debentureholders", which term includes any
successor Debentureholders under the Indenture). Reference is hereby made to the
Indenture and all indentures supplemental thereto for a statement of the
respective rights, limitation of rights, duties and immunities thereunder of the
Company, the Agent and the Debentureholders, and for a statement of the terms
upon which the Debentures are, and are to be, delivered. Capitalized and certain
other terms used herein and not otherwise defined have the meanings set forth in
the Indenture.
THE DEBENTURES ARE UNSECURED OBLIGATIONS OF THE COMPANY.
At any time following December 31, 1999, this Debenture is convertible, in whole
or in part, into shares of the Company's common stock, $.001 par value per share
("Common Stock") at the option of the Holders upon not less than 30 days' prior
written notice at the following Conversion Prices (expressed on a per share
basis) if converted in each calendar year listed below:
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CONVERSION PRICE: $2.00 $3.00 $4.00 $5.00 $6.00
</TABLE>
Interest accrued on a Debenture surrendered for conversion will be paid to the
Debentureholder through the Conversion Date of such Debenture.
The Conversion Prices may be adjusted from time to time in the event any of the
following occur: (i) the subdivision or consolidation of the outstanding shares
of Common Stock; (ii) the distribution of shares of Common Stock to stockholders
by way of a stock dividend or otherwise other than an issue of shares of the
Common Stock to stockholders who have elected to receive dividends in stock in
lieu of receiving cash dividends paid in the ordinary course; (iii) the issuance
of options, rights, or warrants to holders of shares of Common Stock entitling
them to acquire shares of Common Stock or other securities convertible into
shares of Common Stock at less than 95% of the then current market price of the
shares of Common Stock; and (iv) the distribution to all holders of shares of
Common Stock of any securities or assets, other than cash dividends and
equivalent dividends in stock paid in lieu of cash dividends in the ordinary
course.
There will be no adjustment of the conversion price in respect of any event
described in (ii), (iii), or (iv) above if the holders of Debentures are allowed
to participate as though they had converted their Debentures prior to the
applicable record date or effective date. In the case of any reclassification or
change (other than a change resulting only from consolidation or subdivision) of
the shares of Common Stock or in case of any amalgamation, consolidation or
merger of the Company with or into any other corporation, or in the case of any
sale, transfer or other disposition of all or substantially all of the
properties and assets of the Company to any other corporation, the conversion
price shall be adjusted so that each Debenture shall, after such
reclassification, change, amalgamation, consolidation, merger or sale, be
exercisable for the kind and amount of shares and other securities or property
of the Company, or such continuing, successor, or purchaser corporation, as the
case may be, which the holder thereof would have been entitled to receive as a
result of such reclassification, change, amalgamation, consolidation, merger or
sale if on the effective date thereof he had been the holder of the number of
shares of Common Stock into which the Debentures were convertible prior to the
effective date of such reclassification, change, amalgamation, consolidation,
merger or sale. Notwithstanding the foregoing, a holder of Debentures shall be
entitled to receive only shares that constitute prescribed securities in the
event any reclassification, change, amalgamation, consolidation, merger or sale
occurs on or prior to the date which is five years from the issue of the
Debentures and the Debentures become convertible on or prior to that date. No
adjustment will be made in the conversion price on account of (i) the purchase
of Common Stock pursuant to the Company's employee stock purchase plans, (ii)
the exercise of options under the Company's stock option plans or (iii) the
issuance of cash dividends to holders of Common Stock.
In the event the Company obtains a commitment for a public offering of shares of
Common Stock in the aggregate amount of $5,000,000 or greater, the Company shall
provide written notice within 60 days prior to the date on which the company
files a registration statement with the Securities and Exchange Commission in
connection with such offering to the Debentureholders and within 30 days of such
notice the Debentureholder shall have the option to: (i) elect to convert the
Debentures into shares of Common Stock at the applicable conversion price as set
forth above; (ii) continue to hold the Debenture to its maturity date; or (iii)
have the Company prepay the Debentures at 100% of the principal amount of the
Debenture plus accrued interest through the date of such repayment, without
further notice or bonus.
If an Event of Default shall occur and be continuing, the outstanding principal
of all the Debentures may be declared due and payable in the manner and with the
effect provided in the Indenture. The Company shall pay all costs of collection,
whether or not judicial proceedings are instituted, in the manner provided in
the Indenture. The Indenture provides that such declaration and its consequences
may, in certain events, be annulled by the Holders of a majority in aggregate
principal amount of the Outstanding Debentures.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Debentureholders under the Indenture at any time
by the Company and the Debentureholders with the consent of the Holders of a
majority in aggregate principal amount of the Outstanding Debentures. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Outstanding Debentures, on
behalf of the Holders of all of the Debentures, to waive compliance by the
Company with respect to certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Debenture shall be conclusive and binding upon such Holder
and upon all future Holders of this Debenture and of any Debenture issued upon
the registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Debenture.
In the event of a consolidation or merger of the Company with and into another
Person, or the transfer of all or substantially all of the Company's assets to
another Person in accordance with the Indenture, such successor corporation
shall assume payment of the Debentures and the performance of every covenant of
the Indenture on the part of the Company, and in the event of any such transfer,
the predecessor corporation shall be discharged from all obligations and
covenants in respect of the Debentures and the Indenture, all as more fully set
forth in the Indenture.
The Debentures are issuable only in registered form without coupons in
denominations of $50,000 or any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, the Debentures
are exchangeable for a like aggregate principal amount of Debentures of a
different authorized denomination, as requested by the Holder surrendering the
same; and, the transfer of this Debenture is registerable in the Debenture
Register, upon surrender of this Debenture for registration of transfer at the
office or agency of the Company in any place where the principal of and interest
on this Debenture are payable, duly endorsed by or accompanied by a written
instrument of transfer in the form printed on this Debenture or in another form
satisfactory to the Company and the Debenture Registrar duly executed by the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Debentures, of authorized denominations and for the
same aggregate principal amount, will be issued to the designated transferee or
transferees. No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Debenture for registration of transfer, the
Company and any agent of the Company may treat the Person in whose name this
Debenture is registered as the owner hereof for all purposes, whether or not
this Debenture be overdue, and neither the Company nor any such agent shall be
affected by notice to the contrary.
This Debenture shall be governed by and construed in accordance with the laws of
the State of Arizona.
<PAGE> 3
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer
this Debenture)
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
- - -----------------------------------
Name
- - -----------------------------------
Address
(Please Print name and address of transferee)
this Debenture, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint , as
Attorney, to transfer the within Debenture on the book kept for registration
thereof, with full power of substitution.
Dated:
--------------------------------------
Signature:
---------------------------------
(signature must conform in all
respects to name of holder as
specified on the face of the
Debenture)
Social Security
or Other Identifying
Number of Transferee:
----------------------
<PAGE> 1
EXHIBIT 6.1
TECHNOLOGY LICENSE AGREEMENT
This TECHNOLOGY LICENSE AGREEMENT (the "Agreement") is entered into as
of this 1st day of June, 1999, between Krida Overseas Investments Trading
Limited, a Cyprus company, ("Krida") and NuPro Innovations Inc., a Delaware
corporation ("NII").
RECITALS
WHEREAS, Krida possesses proprietary trade secrets, know-how, and
technical information and trademarks related to "NuPro" (defined below);
WHEREAS, Krida entered into a license agreement with TrucTech, Inc., a
Georgia corporation ("TrucTech"), pursuant to which Krida granted to TrucTech
the non-exclusive right to manufacture NuPro, develop products using NuPro, and
market, sell and distribute those products (the "Products") world-wide
("TrucTech License Agreement");
WHEREAS, NII and TrucTech have entered into an Asset Purchase Agreement,
effective the date hereof, for the sale of all of the assets of TrucTech to
NuPro, including TrucTech's rights under the TrucTech License Agreement;
WHEREAS, Krida entered into an oral license agreement with NII on
December 1, 1998 (the "NII Initial License Agreement") pursuant to which Krida
granted to NII and indefinite and exclusive right to manufacture, market, sell
and distribute NuPro, and develop, market, sell and distribute Products
world-wide subject to the achievement of certain agreed targets to preserve the
exclusive right under the NII Initial License Agreement;
WHEREAS, NII has entered into negotiations with a group of German
investors represented by Dr. Wilfried Boelke (the "German Investors") for
additional financing to NII and, as a result of such negotiations, NII has
agreed to modifications to the NII Initial License Agreement regarding to the
limitations to the exclusive right to NuPro and the Products; and
WHEREAS, Krida desires to grant to NII and NII desires to receive a
grant from Krida an indefinite and exclusive right to manufacture, market, sell
and distribute NuPro, and develop, market, sell and distribute Products
world-wide considering the negotiations with the German Investors.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Krida and NII do each hereby agree as
follows:
<PAGE> 2
AGREEMENT
1. DEFINITIONS
In addition to the terms defined elsewhere throughout this Agreement,
the parties agree that the following terms shall have the following meanings
throughout:
1.1. "Business Plan" shall mean NII's Business Plan, dated February
1999, as updated from time to time, attached as Exhibit A to this Agreement.
1.2. "Confidential Information" shall mean the Technical Information,
Trade Secrets, and all other information, oral and written, about each party,
each party's business, NuPro, or the Products that either party has disclosed to
the other party in confidence in connection with this Agreement. Information
shall not be considered "Confidential Information" to the extent that the
disclosing party can clearly demonstrate the information (i) is publicly and
openly known and in the public domain through no fault of the receiving party
and without a breach of this Agreement, (ii) was already in the possession of
the receiving party prior to any disclosure by the receiving party and without
any restriction on the use or disclosure of the information, (iii) is or has
lawfully been disclosed to the receiving party by a third party without any
obligation of confidentiality, or (iv) is required to be disclosed by law.
1.3. "Know How" shall mean the information, data, and experience of each
party relating to the development, design, and manufacture of NuPro, and the
promotion, marketing and sale of NuPro and the Products.
1.4. "Licensed Material" shall mean the Know How, Patents (if any
granted now or during the term of this Agreement), Technical Information,
Trademarks and Trade Secrets defined herein.
1.5. "NuPro" shall mean the industrial engineering hybrid polyurea
composite material formulation (previously known under the names "Veselka" and
"Lubalite") developed by Luba Veselinovic. NuPro is a blend of ring opened
cyclic esters and polyamines combined with polyisocyanate formulations that is
bonded via an exothermic process using low-pressure machinery without the need
to supply thermal energy.
1.6. "Patents" shall mean the patents owned by Krida now or at any time
during the term hereof relating to NuPro or the Products and any extensions or
improvements thereto.
1.7. "Technical Information" shall mean any information of either party
including Know How, whether or not patented, which relates to the design,
engineering, manufacture or use of NuPro or the Products as well as quality
control and cost accounting data relating thereto, which is now owned or
acquired or has been developed or discovered, or is hereinafter owned, acquired,
developed, or discovered by either party and which is in a form that is able to
be transferred.
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1.8. "Trademarks" shall mean any proprietary right in and to the names
"Lubalite" and "NuPro," whether registered with the federal Patent and Trademark
Office, and state authority, foreign authority, common law right or otherwise.
1.9. "Trade Secrets" shall mean Technical Information which is treated
as secret and confidential by either party which derives independent or actual
value from not being generally known to other persons.
2. LICENSE GRANT
2.1. Scope of Use. In consideration of the payment of the applicable
fees set forth in Section 4, Krida grants to NII, during the term of this
Agreement, a personal and exclusive right to use the Licensed Material and to
market and sell NuPro and the Products anywhere in the world.
2.2. Restrictions on Use. The limited rights to the Licensed Materials
herein include the following use restrictions:
2.2.1 No title in or to the Licensed Materials is transferred to
NII in granting this license under this Agreement; and
2.2.2 NII will not copy, modify, adapt, assign, or transfer the
Licensed Materials, in whole or in part, except as expressly provided for in
this Agreement.
2.3. Improvements. The license provided in this Agreement includes any
improvements or inventions relating to NuPro, the Products or the Licensed
Materials that occur after the date hereof and during the term of this
Agreement.
2.4. Limitations on Exclusiveness of License. The license granted under
this Agreement will remain exclusive until and through December 31, 2002. After
December 31, 2002, the license granted under this Agreement will continue to
remain exclusive so long as Luba Veselinovic has a major influence, directly or
indirectly, on the decision-making process of NII for at least six (6) months of
any calendar year.
2.5. Effect of Luba Veselinovic's Departure. If Luba Veselinovic leaves
NII after December 31, 2002 for any reason, including, but not limited to death,
or an illness or legal impairment that lasts for a consecutive six (6) month
period (a "Departure"), the license granted under this Agreement will continue
to remain exclusive if (i) NII's aggregate annual sales volume for any complete
calendar year following Mr. Veselinovic's Departure is 50% or more of NII's
sales forecasts for such calendar year set forth in the Business Plan, and (ii)
NII's aggregate annual increase in sales is equal to or greater than 10% with
respect to the previous calendar year for each successive calendar year
following December 31, 2002.
2.6. Effect of Failing to Satisfy Conditions of Sections 2.4 and 2.5. If
NII fails to satisfy the conditions of Sections 2.4 and 2.5 above, the license
granted under this Agreement will become non-exclusive on the sixtieth day
following the end of the calendar year in which NII failed to satisfy the
conditions of Sections 2.4 and 2.5 above.
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3. TERM
3.1. Term of Agreement. The term of this Agreement is for an indefinite
amount of time. The term shall commence on the date hereof, and shall continue
until this Agreement is terminated in accordance with the provisions of Section
8.
4. FEES AND PAYMENT
4.1. Fees. In consideration of the license granted by Krida under this
Agreement, NII agrees to pay to Krida one and one-half percent (1.5%) of the
gross revenues for the first $5,000,000 of NuPro and Products sold by NII, and
two percent (2%) of the gross revenues for sales of NuPro and Products in excess
of $5,000,000, during the term of this Agreement (the "Fees"). For purposes of
this Section 4.1, "gross revenues" means the total revenues received by NII from
the sale of NuPro and the Products not including any sales, use, excise, value
added, utility or personal property tax or other similar charge.
4.2. Payment. Within ten (10) days after the end of each three-month
period beginning March 1, 2000, NII agrees to provide to Krida (i) quarterly
reports of sales of NuPro and Products, (ii) a true and updated copy of the
backlog of orders of NuPro and Products, and (iii) payment of any Fees then due
under Section 4.1 above.
4.3. Payment Method. NII shall make payments for the Fees to Krida by
delivering a check to Krida to the address set forth in Section 9.6 of this
Agreement, or as agreed by the parties in writing from time to time and notified
to the parties according to the notice procedures set forth in Section 9.6 of
this Agreement.
5. ADDITIONAL OBLIGATIONS OF NII
5.1. No Agent Relationship. NII agrees that it will not at any time,
including after termination or expiration of this Agreement, incur or purport to
incur any liability on behalf of Krida or in any way pledge or purport to pledge
Krida's credit or purport to make any contract binding upon Krida.
5.2. Access to NII Facilities. NII agrees that it will permit any duly
authorized representative of Krida to enter, during normal business hours, into
its manufacturing and administrative facilities or where any production or
records relating to NuPro or the Products are located for the purpose of
ascertaining that the provisions of this Agreement are being complied with by
NII.
5.3. Records. NII agrees to at all times, including for a period of one
year after termination of this Agreement, keep full and accurate books of
account and records relating to NuPro and the Products and related invoices,
inventory, purchase orders, backlog, accounts receivable, and any other related
documents and will allow any duly authorized representative of
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Krida to have reasonable access to, and to audit, such books and records, and
make copies at Krida's expense as such representative may reasonably require.
6. REPRESENTATION AND WARRANTIES. Krida represents and warrants that it is
the sole owner of any and all rights in and to the Licensed Materials and that
the Licensed Materials do not infringe, misappropriate, or otherwise conflict
with any proprietary rights of any third party. No written or oral claim by any
third party contesting Krida's rights in and to the Licensed Materials has been
made, is currently outstanding or, to the knowledge of Krida, is threatened.
7. CONFIDENTIALITY. The parties agree not to disclose any Confidential
Information to any third party except as provided in this Agreement and subject
to a Confidentiality Agreement in substantially the same form attached hereto as
Exhibit B, duly executed by such third party. The parties further agree that
they shall not disclose any Confidential Information to any employees, agents,
or consultants, except for those for whom disclosure is necessary for the
effective performance of their responsibilities in connection with this
Agreement, and only to the extent required for such effective performance. In
addition, the parties hereby agree to take all reasonable and necessary steps to
ensure that all principals, officers, agents, employees, representatives,
consultants, or any other persons affiliated in any manner do not use, modify,
disclose, make public, or authorize any disclosure or publication of any
Confidential Information, except as permitted herein. Additionally, each party
agrees to return all of the other party's Confidential Information and all
copies of any written materials delivered to it at any time throughout the term
of this Agreement upon the termination of this Agreement.
8. TERMINATION.
8.1. Termination For Cause. Either party shall have the right to
terminate this Agreement for good cause upon thirty (30) days written notice to
the other party, if such other party fails to comply with a term of this
Agreement and such failure to comply causes a material negative effect to the
non-breaching party and is not corrected within such thirty (30) day period to
the absolute satisfaction of the non-breaching party. Without limiting the
interpretation of the foregoing, the failure by NII to pay the Fees set forth in
Section 4 hereof constitutes good cause to terminate this Agreement.
8.2. Termination Without Cause. Krida may not terminate this Agreement
without cause.
8.3. Termination by Krida - Bankruptcy Proceeding. Krida shall have the
right to terminate this Agreement in the event NII files a voluntary petition
commencing a bankruptcy proceeding under the United States Bankruptcy Code,
Title 11, U.S.C. (the "Code"), or under a similar statute in another country or
jurisdiction, or has a petition filed against it commencing an involuntary
bankruptcy proceeding under the Code, or under a similar statute in another
country or jurisdiction, or otherwise becomes insolvent, has a receiver
appointed, or makes an assignment for the benefit of creditors (an "Event of
Bankruptcy"). In addition, NII acknowledges that this Agreement creates licenses
constituting "intellectual property" as defined
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<PAGE> 6
in the Code and that its rights and obligations shall be governed by Section
365(n) of the Code, or its equivalent, in the event NII suffers an Event of
Bankruptcy.
8.4. Termination by Mutual Written Consent. This Agreement may be
terminated by the mutual written consent of both parties.
8.5. Survivability. Sections 6 and 7 of this Agreement shall survive
termination of this Agreement.
9. MISCELLANEOUS
9.1. Assignment. This Agreement may not be assigned to any party, other
than without the prior written consent of the other party.
9.2. Severability. The provisions of this Agreement are severable.
Invalidity or unenforceability of any provision, or portion thereof, shall not
affect the enforceability of the remaining provisions hereof which are valid and
enforceable.
9.3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the United States and the State of Delaware, without
regard to conflicts of law.
9.4. Official Language. This Agreement is in the English language only.
No translation of this Agreement into any other language shall be of any force
or effect in the interpretation of any of the provisions of this Agreement.
9.5. Jurisdiction and Venue. The parties consent and submit to the
exclusive jurisdiction and venue of the State and Federal Courts for the
District of Arizona. The parties hereby expressly submit and consent to such
jurisdiction and waive any claim that such is an inconvenient or improper forum.
Furthermore, the parties agree that any judgment obtained pursuant to this
Section should be enforceable in any court of competent jurisdiction in the
United States or elsewhere, as applicable.
9.6. Notices. All notices under this Agreement, given by any party to
the others, shall be in writing and shall, until notice of any change is
delivered in accordance herewith, be sent by hand-delivery or recorded
electronic communication to each respective party, with a copy thereof sent the
same day by regular mail, postage prepaid, as follows:
If to Krida, to:
Krida Overseas Investments Trading Limited
c/o BDO Binder
P.O. Box 2283
Nicosia, Cyprus
Attn: President
(___) ________________________
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If to NII, to:
NuPro Innovations Inc.
5151 East Broadway Boulevard, Suite 730
Tucson, Arizona U.S.A. 85711
Attn: President
Facsimile: (520) 790-0400
with a copy to:
Squire, Sanders & Dempsey L.L.P.
40 North Central Avenue, Suite 2700
Phoenix, Arizona U.S.A. 85004
Attn: Benjamin Aguilera, Esq.
(602) 253-8129
9.7. Independent Contractors. It is expressly understood and agreed that
NII is and shall be deemed to be an independent contractor with respect to the
terms and conditions of this Agreement and that NII is not in any respect acting
as an agent or employee of Krida. This Agreement is not intended and shall not
be construed to constitute either party as the joint venturer, partner, agent or
legal representative of the other, and neither party shall have any authority,
express, implied or apparent to assume or create any obligations on behalf of or
in the name of the other party hereto.
9.8. Indemnification. Each party agrees to indemnify and save harmless
the other party and its subsidiaries, officers, directors, agents, employees,
contractors and legal representatives, from and against any and all claims,
demands, actions, causes of action, losses or liabilities, including attorney
fees and costs, which are hereafter made or brought against them or any of them,
by any third party, for the recovery of damages, which have as their basis the
actual or alleged violation by each party of any of the covenants herein or
which arise from each party's performance, failure to perform, or failure to
perform properly any term of this Agreement. Krida agrees to indemnify and save
harmless NII and its subsidiaries, officers, directors, agents, employees,
contractors, and legal representatives from and against any and all claims,
demands, actions, causes of actions, losses, or liabilities, including attorney
fees and costs, which are hereafter made or brought against them or any of them
for the recovery of damages, which have as their basis the actual or alleged
infringement, by Krida or NII, of any third party's patents, copyrights,
trademarks, or trade secrets or other intellectual property rights arising out
of NII's use of the Patents, Trademarks, Know How, Trade Secrets, or Technical
Information provided by Krida. Notwithstanding the foregoing, Krida shall not be
liable for any claim of patent, copyright or trade secret infringement which is
based on any modifications to such technology prepared or developed by NII, with
respect to any other products manufactured by NII.
9.9. Cumulative Remedies. Every right or remedy conferred upon or
reserved to the parties by this Agreement shall be cumulative and shall be in
addition to every right or remedy now or hereafter existing at law or in equity
and the pursuit of any right or remedy shall not be construed as an election.
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9.10. No Waiver. The failure of a party to insist upon the performance
of any provision of this Agreement or to exercise any right or privilege granted
that party hereunder shall not be construed as waiving any such provision and
the same shall continue in force.
9.11. Force Majeure. No party shall be liable to the other by reason of
any failure in performance of this Agreement in accordance with its terms if
such failure arises out of causes beyond the reasonable control of such party,
including but not limited to, acts of God, acts of the public enemy, acts of
civil or military authority, unavailability of communications facilities, fires,
strikes, unavailability of energy sources, riots, or wars. The affected party
will have an extension of time to perform its obligations in proportion to the
time of duration of the above circumstances without penalty, but will make all
reasonable efforts to rectify the problem in a timely fashion.
9.12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.13. Headings. The titles, captions or headings of the Articles,
Sections and subsections herein are inserted for convenience of reference only
and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement.
9.14. Amendments and Waivers. No amendment, supplement, modification or
waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
9.15. Alternative Dispute Resolution.
9.15.1 Mediation. NII and Krida agree that they shall attempt to
settle any claim or controversy arising out of this Agreement through
consultation and negotiation in the spirit of mutual friendship and cooperation.
If any such attempt should fail, then the dispute shall first be submitted to a
mutually acceptable neutral advisor for initial fact finding and mediation.
Neither party shall unreasonably withhold acceptance of such an advisor, and
selection of such an advisor shall be made within 45 days after written notice
by one of the parties for such fact finding and mediation. The cost of such fact
finding and mediation, and of any other subsequent alternative dispute
resolution agreed upon by the parties shall be shared equally by NII and Krida.
The mandatory mediation set forth in this paragraph shall not be required for
disputes involving use or misuse of the license or Licensed Property.
9.15.2 Arbitration. Any dispute, controversy or claim arising
out of or relating to this Agreement or its formation, breach, performance,
validity, invalidity or termination, not settled by mediation under Section
9.15.1 above, shall be submitted to and be settled by arbitration. The final
award of the arbitrators shall be final and binding, and shall not be subject to
judicial review. Interim awards issued during the proceedings by the arbitration
tribunal shall
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not be subject to any judicial review, except after issuance of the final
arbitration award. In the event that the party against which the final award is
made attempts to challenge it before a competent judicial authority, that party
may be required by such judicial authority to post adequate security on behalf
of the party who received the award, to insure the payment of such award, if the
final award is confirmed judicially. The mandatory arbitration set forth in this
paragraph shall not be required for disputes involving use or misuse of the
license or Licensed Property.
9.15.3 Rules. The arbitration and arbitration proceedings
related to this Agreement shall be conducted by the American Arbitration
Association (the "AAA") in accordance with its Rules in effect at the
commencement of such proceedings. In the event of any conflict between the
foregoing Rules of the AAA with the dispute resolution provisions in this
Agreement regarding the solution of controversies, the provisions of this
Agreement shall govern.
9.15.4 Panel. The arbitration tribunal shall be made up of one
Arbitrator, who shall be selected by the parties. Should the parties not agree
in the selection of the Arbitrator, the Arbitrator shall be chosen in accordance
with the applicable Rules of the AAA.
9.15.5 Venue and Fees. All proceedings and hearings related to
this process shall be conducted in Phoenix, Arizona, U.S.A. The arbitrator's
fees and facility expenses shall be shared equally. The prevailing party shall
be entitled to recover from the other party, as part of the prevailing party's
costs, reasonable attorney's fees. The parties agree that the arbitrator shall
have the authority to fix such attorney's fees and they shall be made part of
any judgment rendered.
9.15.6 Litigation. Any dispute which the parties cannot so
resolve between themselves in good faith within six (6) months of the date of
the initial demand may proceed to litigation through a court of competent
jurisdiction pursuant to the terms of this Agreement.
9.16. Public Announcements. Neither party shall make any public
announcement or issue any press releases relating to the subject matter of this
Agreement or its terms, without the prior written consent of the other party or
as required by law.
9.17. Entire Agreement. This Agreement constitutes the entire agreement
between Krida and NII with regard to the subject matter, superseding all
previous communications and negotiations, whether written or oral. The terms and
conditions of the Agreement shall prevail over any additional or conflicting
terms of any advertising literature or memorandum submitted by one party to the
others.
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IN WITNESS WHEREOF, the parties hereto, by their respective duly
authorized officers or representatives, have each executed this Agreement on the
date and year first above written.
KRIDA OVERSEAS TRADING LIMITED, NuPro Innovations Inc,
a Cyprus corporation a Delaware corporation
By:_______________________________ By:_______________________________
Its: Its:
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EXHIBIT 6.2
ASSET PURCHASE AGREEMENT
by and among
TrucTech, Inc.
as "Seller"
and
NuPro Innovations Inc.
as "Buyer"
December 1, 1998
<PAGE> 2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I DEFINITIONS ................................................. 1
1.1 Defined Terms .............................................. 1
1.2 Other Defined Terms ........................................ 4
Article II PURCHASE AND SALE OF ASSETS ................................ 5
2.1 Transfer of Assets ......................................... 5
2.2 Assumption of Liabilities .................................. 5
2.3 Excluded Liabilities ....................................... 5
2.4 Purchase Price ............................................. 6
Article III Closing; LIQUIDATION OF SELLER ............................ 6
3.1 Closing .................................................... 6
3.2 Conveyances at Closing ..................................... 6
3.3 Liquidation of Seller ...................................... 7
Article IV REPRESENTATIONS AND WARRANTIES OF SELLER ................... 7
4.1 Organization of Seller ..................................... 7
4.2 Authorization .............................................. 7
4.3 No Changes to the Assets ................................... 8
4.4 Assets ..................................................... 8
4.5 Facilities ................................................. 8
4.6 Contracts and Commitments .................................. 9
4.7 Permits and Consents ....................................... 10
4.8 No Conflict or Violation ................................... 10
4.9 Financial Statements ....................................... 10
4.10 Books and Records .......................................... 10
4.11 Litigation ................................................. 10
4.12 Labor Matters .............................................. 10
4.13 Compliance with Law ........................................ 10
4.14 No Brokers ................................................. 10
4.15 No Other Agreements to Sell the Assets ..................... 10
4.16 Proprietary Rights ......................................... 10
4.17 Tax Matters ................................................ 10
4.18 Inventory .................................................. 10
4.19 Employees .................................................. 10
4.20 Compliance With Environmental Laws ......................... 10
4.21 Liabilities ................................................ 10
Article V REPRESENTATIONS AND WARRANTIES OF BUYER ..................... 10
5.1 Organization of Buyer ...................................... 10
5.2 Authorization .............................................. 10
5.3 No Conflict or Violation ................................... 10
5.4 Consents and Approvals ..................................... 10
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C>
Article VI COVENANTS OF SELLER AND BUYER .............................. 10
6.1 Further Assurances ......................................... 10
6.2 No Solicitation ............................................ 10
6.3 Notification of Certain Matters ............................ 10
6.4 Access to Information ...................................... 10
6.5 Conduct of Business ........................................ 10
6.6 Employee Matters ........................................... 10
Article VII CONDITIONS TO SELLER'S OBLIGATIONS ........................ 10
7.1 Representations, Warranties and Covenants .................. 10
7.2 No Proceedings, Litigation or Laws ......................... 10
Article VIII CONDITIONS TO BUYER'S OBLIGATIONS ........................ 10
8.1 Representations, Warranties and Covenants .................. 10
8.2 Consents ................................................... 10
8.3 No Proceedings or Litigation ............................... 10
8.4 Certificates ............................................... 10
8.5 Conveyancing Documents; Release of Encumbrances ............ 10
8.6 Material Changes ........................................... 10
8.7 Corporate Documents ........................................ 10
8.8 Due Diligence Review ....................................... 10
8.9 Permits .................................................... 10
Article IX CONSENTS TO ASSIGNMENT ..................................... 10
9.1 Consents to Assignment ..................................... 10
Article X ACTIONS BY SELLER AND BUYER AFTER THE CLOSING ............... 10
10.1 Books and Records; Payment of Liabilities .................. 10
10.2 Survival of Representations, Etc ........................... 10
10.3 Indemnifications ........................................... 10
10.4 Taxes ...................................................... 10
10.5 Further Action ............................................. 10
Article XI MISCELLANEOUS .............................................. 10
11.1 Termination ................................................ 10
11.2 Assignment ................................................. 10
11.3 Notices .................................................... 10
11.4 Choice of Law .............................................. 10
11.5 Entire Agreement; Amendments and Waivers ................... 10
11.6 Multiple Counterparts ...................................... 10
11.7 Expenses ................................................... 10
11.8 Invalidity ................................................. 10
11.9 Titles ..................................................... 10
11.10 Publicity; Confidentiality ................................. 10
11.11 Cumulative Remedies ........................................ 10
11.12 Arbitration ................................................ 10
</TABLE>
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EXHIBITS
<TABLE>
<CAPTION>
Exhibit
- - -------
<S> <C>
1.1 Financial Statements
2.1 Asset Listing
2.4 Allocation of Purchase Price
2.4.1 Offering Memorandum
3.2.1.1 Bill of Sale
3.2.1.2 Assignment of Contract Rights
3.2.1.3 Assignment of Proprietary Rights
</TABLE>
SCHEDULES
Schedule 4.2 - Authorization
Schedule 4.6 - Contracts
Schedule 4.6.1 - Assumed Contracts
Schedule 4.7 - Permits and Consents
Schedule 4.16 - Proprietary Rights
Schedule 4.17 - Taxes
Schedule 4.18 - Inventory
Schedule 4.19 - Employees
Schedule 4.19.1 - Liability Assumed for Accrued Vacation Due Certain
Employees
Schedule 4.20 - Environmental Issues
Schedule 5.4 - Buyer's Consents
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") executed on June ___, 1999,
and made effective as of December 1, 1998, is by and among NuPro Innovations
Inc., a Delaware corporation ("Buyer"), and TrucTech, Inc., a Georgia
corporation ("Seller").
RECITALS
WHEREAS, Seller owns certain assets which it uses in its conduct of the
Business (as defined below).
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, such assets upon the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree, subject to
the adoption by the stockholders of Seller of a plan of complete liquidation and
dissolution of Seller in compliance with Georgia law, as provided in Section 3.3
of this Agreement, as follows:
AGREEMENT
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
"Assets" shall mean all of the right, title and interest of Seller in and
to the business, properties, assets and rights of any kind, whether tangible or
intangible, and constituting, or used or useful in connection with, or related
to, the Business, including without limitation all of Seller's right, title and
interest in the following:
(a) all rights of Seller under the Assumed Contracts listed on
Schedule 4.6.1;
(b) all Equipment related to the Business as listed on Exhibit 2.1;
(c) all Inventory related to the Business;
(d) all Books and Records related to the Business;
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(e) all Proprietary Rights related to the Business;
(f) to the extent transferable, all Permits related to the Business;
(g) all computers and, to the extent transferable, software used in
the Business;
(h) all available supplies, sales literature, promotional
literature, customer, supplier and distributor lists, display units,
telephone and facsimile numbers and purchasing records related to
the Business;
(i) all rights under or pursuant to all warranties, representations
and guarantees made by suppliers in connection with the Assets or
services furnished to Seller pertaining to the Business or affecting
the Assets, to the extent such warranties, representations and
guarantees (i) are not required by Seller to fulfill its obligations
under this Agreement and (ii) are assignable;
(j) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind, against any person or
entity, including without limitation any liens, security interests,
pledges or other rights to payment or to enforce payment in
connection with products delivered by Seller on or prior to the
Closing Date;
(k) all accounts receivable as adjusted at the Closing; and
(l) all cash and bank accounts.
"Asset Listing" shall mean the asset listing provided to Buyer by Seller
and attached as Exhibit 2.1 hereto, listing all assets as of November 30, 1998,
but not including any Excluded Assets listed therein.
"Balance Sheet" shall mean the balance sheet of Seller as of November 30,
1998, together with the notes thereon, audited by an independent certified
public accountant.
"Books and Records" shall mean (a) all records and lists of Seller
pertaining to the Assets, (b) all records and lists pertaining to the Business,
customers, suppliers or personnel of Seller, (c) all product, business and
marketing plans of Seller and (d) all books, ledgers, sub-ledgers, trial
balances, files, reports, plans, drawings and operating records of every kind
maintained by Seller, but excluding the originals of Seller's minute books,
stock books, tax returns and accounting ledgers (provided that Buyer will be
provided copies of tax returns and accounting records if it so requests).
"Business" shall mean Seller's business, operating under the "TrucTech"
and "TracTop" names or otherwise.
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"Closing Date" shall mean such date no later than June 30, 1999, in which
all the obligations by the parties to this Agreement are fulfilled to the
complete satisfaction of each of the parties; [provided that either party may
elect to change the Closing Date to a date after or prior to June 30, 1999
(which date shall be a date which is reasonably satisfactory to both parties) if
necessary to complete] the Closing.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder.
"Contract" shall mean any agreement, contract, note, loan, evidence of
indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license, instrument,
obligation or commitment to which Seller is a party or is bound and which
relates to the Business or the Assets, whether oral or written.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Equipment" shall mean all of the furniture, fixtures, furnishings,
machinery, automobiles, trucks, spare parts, tools, supplies, equipment and
other tangible personal property owned by Seller and used in connection with the
Business, including without limitation all items listed on the Asset Listing
(but not including any Excluded Assets listed thereon).
"Facilities" shall mean the stores, offices, maintenance and storage
facilities, warehouses, improvements, other structures, and all real property
and related facilities which are used (or will be used) in the conduct of the
Business, and which are located at 1416 Harris Industrial Boulevard, in the city
of Vidalia, Georgia.
"Financial Statements" shall mean the Balance Sheet of Seller dated as of
November 30, 1998, and the Statement of Operations for the year ended November
30, 1998, together with the notes thereon, which Financial Statements are
included in Exhibit 1 hereto.
"Inventory" shall mean all of Seller's inventory held for resale and all
of Seller's new repair or replacement parts, supplies and packaging items and
similar items with respect to the Business, in each case wherever the same may
be located.
"Material Adverse Effect" or "Material Adverse Change" shall mean with
respect to the Business or the Assets any significant and substantial adverse
effect or change in the condition (financial or other), business, results of
operations, prospects, assets, liabilities or operations of the Business and/or
the Assets or on the ability of Seller to consummate the transactions
contemplated hereby, or any event or condition which would, with the passage of
time, constitute a "Material Adverse Effect" or "Material Adverse Change."
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"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the past, present or anticipated conduct of, or
relating to the operation of, the Business.
"Representative" shall mean any officer, director, principal, attorney,
agent, employee or other representative.
"Tax" shall mean any federal, state, local, foreign or other tax, levy,
impost, fee, assessment or other government charge, including without limitation
income, estimated income, business, occupation, franchise, property, payroll,
personal property, sales, transfer, use, employment, commercial rent, occupancy,
franchise or withholding taxes, and any premium, including without limitation
interest, penalties and additions in connection therewith.
1.2 Other Defined Terms. The following terms shall have the meanings
defined for such terms in the Sections set forth below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Action 4.11
Assumed Contracts 4.6
Assumed Liabilities 2.2
Assumption Document 3.2.2
CERCLA 4.20.2
Claim 10.3.4
Claim Notice 10.3.4
Closing 3.1
Damages 10.3.1
Employee Plans 4.19
Environmental Conditions 4.20.11
Environmental Laws 4.20.2
Excluded Liabilities 2.3
Hazardous Substance 4.20.1.3
Proposed Acquisition Transaction 6.2.1
Proprietary Rights 4.16.1
Purchase Price 2.4.1
RCRA 4.20.2
Release 4.20.1.2
Retained Employees 6.6
</TABLE>
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ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Transfer of Assets. Upon the terms and subject to the conditions
contained herein, at the Closing, Seller will sell, convey, transfer, assign and
deliver to Buyer, and Buyer will acquire from Seller, the Assets listed in the
Asset Listing attached hereto in Exhibit 2.1.
2.2 Assumption of Liabilities. Upon the terms and subject to the
conditions contained herein, at the Closing, Buyer shall assume all obligations
and liabilities reflected in the Balance Sheet and all those obligations and
liabilities accruing, arising out of, or relating to events or occurrences
happening after the Closing Date, but not including any obligation or liability
for any breach of any Contract occurring on or prior to the Closing Date (the
"Assumed Liabilities").
2.3 Excluded Liabilities. Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities expressly specified in Section
2.2, Buyer shall not assume, or otherwise be responsible for, any of Seller's
liabilities or obligations, whether actual or contingent, matured or unmatured,
liquidated or unliquidated, known or unknown, or related or unrelated to the
Business or the Assets, whether arising out of occurrences prior to, at or after
the date hereof (collectively, "Excluded Liabilities"), which Excluded
Liabilities include, without limitation:
2.3.1 Any liability or obligation to or in respect of any employees
or former employees of Seller including without limitation (i) any employment
agreement, whether or not written, between Seller and any person, (ii) any
liability under any Employee Plan at any time maintained, contributed to or
required to be contributed to by or with respect to Seller or under which Seller
may incur liability, or any contributions, benefits or liabilities therefor, or
any liability with respect to Seller's withdrawal or partial withdrawal from or
termination of any Employee Plan and (iii) any claim of an unfair labor
practice, or any claim under any state unemployment compensation or worker's
compensation law or regulation or under any federal or state employment
discrimination law or regulation, which shall have been asserted on or prior to
the Closing Date or is based on acts or omissions which occurred on or prior to
the Closing Date;
2.3.2 Any liability or obligation of Seller in respect of any Tax;
2.3.3 Any liability arising from any injury to or death of any
person or damage to or destruction of any property, whether based on negligence,
breach of warranty, strict liability, enterprise liability or any other legal or
equitable theory arising from defects in products sold or services performed by
or on behalf of Seller or any other person or entity on or prior to the Closing
Date, or arising from any other cause, including without limitation any
liabilities arising (on a date of occurrence basis or otherwise) on or prior to
the Closing Date relating to the use or misuse of Equipment or to traffic
accidents;
2.3.4 Any liability or obligation of Seller arising out of or
related to any Action against Seller or any Action which adversely affects the
Assets and which shall have been
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asserted on or prior to the Closing Date or to the extent the basis of which
shall have arisen on or prior to the Closing Date;
2.3.5 Any liability or obligation of Seller resulting from entering
into, performing its obligations pursuant to or consummating the transactions
contemplated by, this Agreement (including without limitation any liability or
obligation of Seller pursuant to Article X hereof); and
2.3.6 Any liability or obligation arising out of CERCLA, any
equivalent state statute, or any other Environmental Law.
2.4 Purchase Price.
2.4.1 Purchase Price. At the Closing, upon the terms and subject to
the conditions set forth herein, Buyer shall pay to Seller in consideration for
the Assets and subject to the Assumed Liabilities, by issuing 7,333,333 shares
of Buyer's common stock, $.001 par value ("Buyer's Stock"), valued $0.75 per
share, for an aggregate amount of Five Million Five Hundred Thousand Dollars
($5,500,000) (the "Purchase Price"). The Purchase Price shall be allocated among
the Assets in the manner required by Section 1060 of the Code and regulations
thereunder. Exhibit 2.4 attached hereto sets FORTH THE AMOUNT OF THE PURCHASE
PRICE allocable to the various Assets. Buyer and Seller agree to each prepare
and file on a timely basis with the Internal Revenue Service substantially
identical initial and supplemental Internal Revenue Service Forms 8594 "Asset
Acquisition Statements Under Section 1060" consistent with Exhibit 2.4. The
offering and issuance of the Buyer's Stock is being made pursuant to an offering
memorandum and ancillary documents ("Offering Memorandum") in compliance with
Rule 506 of Regulation D under the Securities Act of 1933 in substantially the
same form as the Offering Memorandum attached hereto as Exhibit 2.4.1.
ARTICLE III
CLOSING; LIQUIDATION OF SELLER
3.1 Closing. The closing of the transactions contemplated herein (the
"Closing") shall be held at the Buyer's address on the Closing Date at 10:00
a.m. or at a time and place as the parties shall mutually agree.
3.2 Conveyances at Closing.
3.2.1 Instruments and Possession. To effect the sale and transfer
referred to in Section 2.1 hereof, Seller will, at the Closing, execute and
deliver to Buyer:
3.2.1.1 one or more bills of sale, each in the form of Exhibit
3.2.1.1 attached hereto, conveying in the aggregate all of Seller's owned
personal property included in the Assets, free and clear of all Encumbrances,
except the Assumed Liabilities;
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3.2.1.2 subject to Section 9.1, Assignments of Contract
Rights, each in the form of Exhibit 3.2.1.2 attached hereto, with respect to the
Assumed Contracts;
3.2.1.3 assignments of patents, trademarks, service marks and
other Proprietary Rights, each in the form of Exhibit 3.2.1.3 attached hereto,
in recordable form to the extent necessary to assign such rights; and
3.2.1.4 such other instruments as shall be requested by Buyer
to vest in Buyer title in and to the Assets in accordance with the provisions
hereof.
3.2.2 Form of Instruments. To the extent that a form of any document
to be delivered hereunder is not attached as an Exhibit hereto, such documents
shall be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to the recipient.
3.2.3 Certificates; Opinions. Seller shall deliver to Buyer the
certificates, and other documents described in Article VIII.
3.2.4 Consents. Subject to Section 9.2, Seller shall deliver all
Permits and any other third party consents required for the valid transfer of
the Assets as contemplated by this Agreement.
3.3 Liquidation of Seller. As soon as practicable after the Closing Date
Seller will take such steps as may be required under the laws of Georgia to
dissolve and terminate its corporate existence, except to the extent that under
the laws of Georgia such corporate existence continues for the purpose of
settling and winding up their affairs, and, prior to June 30, 1999, shall
distribute to its shareholders, against surrender of its stock certificates, the
Buyer's Common Stock on a pro rata basis.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct:
4.1 Organization of Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia.
Copies of the Articles of Incorporation and Bylaws of Seller, and all amendments
thereto, heretofore delivered to Buyer are accurate and complete as of the date
hereof. Seller has no direct or indirect stock or other equity or ownership
interest (whether controlling or not) in any corporation, association,
partnership, joint venture or other entity which engages in the manufacturing of
plastic composite products business.
4.2 Authorization. Seller has all requisite corporate power and authority,
and has taken all corporate action necessary, to own, lease and operate the
Assets, to conduct the
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Business as it is presently being conducted, to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. A copy of the resolutions of
Seller's board of directors and shareholders authorizing this Agreement and the
related transactions is attached hereto as Schedule 4.2. This Agreement has been
duly executed and delivered by Seller and is a legal, valid and binding
obligation of Seller enforceable against it in accordance with its terms.
4.3 No Changes to the Assets. Since the Balance Sheet Date:
4.3.1 Except for the loss of $71,841, on January 28, 1999, in
connection with the sale of the facilities there has been no actual or
threatened adverse change in the financial condition or results of operation,
the Business or the Assets or any event, condition or state of facts, in either
case that is, or would result in a Material Adverse Change in the Assets or the
Business or the prospects for the Business, including without limitation the
loss of any material customers;
4.3.2 Except with respect to the sale of the Facilities, there has
not been any sale or other disposition, except in the ordinary course of
Seller's business, of any of the Assets, or any Encumbrance placed on the
Assets;
4.3.3 Seller has operated the Business in the ordinary course
consistent with Seller's past practice so as to preserve the Business intact, to
keep available to the Business the services of Seller's employees, and to
preserve the Business and the goodwill of Seller's suppliers, customers,
distributors and others having business relations with it; and
4.4 Assets. Seller has and will transfer good and marketable fee simple
title to the Assets and upon the consummation of the transactions contemplated
hereby, Buyer will acquire good title to all of the Assets, free and clear of
any Encumbrances, except for any Encumbrance that Buyer, in its sole discretion,
specifically accepts in writing. The Assets reflected in the Balance Sheet and
all of the Assets acquired after such date are or will be valued at the lower of
actual cost or market less an adequate and proper depreciation charge. The
Assets include without limitation all assets necessary for the conduct of the
Business as presently conducted.
4.5 Facilities. The Seller Stockholders enjoy peaceful and undisturbed
possession of the Facilities. There are no leases, subleases, licenses,
occupancy agreements, options, rights, concessions or other agreements or
arrangements, written or oral, granting to any person the right to purchase, use
or occupy the Facilities or any portion thereof.
4.5.1 Improvements, Fixtures and Equipment. The Facilities and the
improvements thereon, including without limitation all Equipment (including all
fixtures) and other tangible assets owned, leased or used by Seller at the
Facilities are in conformity, in all material respects, with all applicable
laws, ordinances, orders, regulations and other requirements relating thereto
currently in effect.
4.5.2 Conformity. All Facilities have received all required
approvals of governmental authorities required in connection with the operation
thereof. To the best of
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Seller's knowledge, the Facilities are (and have been) operated and maintained
in accordance with applicable laws, rules, regulations and state, county,
municipal or other local ordinances, and conform to all other conditions
necessary for the lawful conduct of the Business as currently conducted at each
such Facility.
4.6 Contracts and Commitments.
4.6.1 Contracts. Schedule 4.6 sets forth a complete and accurate
list of all Contracts of the following categories:
4.6.1.1 Contracts not made in the ordinary course of Seller's
conduct of the Business;
4.6.1.2 Employment contracts and severance agreements;
4.6.1.3 Distribution, franchise, license, technology
licensing, sales or commission contracts related to the Assets or the Business;
4.6.1.4 Contracts involving expenditures or liabilities,
actual or potential, in excess of $1,000 or otherwise material to the Business
or the Assets, and not cancelable (without liability) within 30 calendar days;
4.6.1.5 Contracts or commitments relating to commission
arrangements with others;
4.6.1.6 Promissory notes, loans, agreements, evidences of
indebtedness, letters of credit, guarantees, or other instruments relating to an
obligation to pay money, whether Seller shall be the borrower, lender or
guarantor thereunder or whereby any Assets are pledged (excluding credit
provided by Seller in the ordinary course of the Business to its customers);
4.6.1.7 Leases of personal property not cancelable (without
liability) within 30 calendar days; and
4.6.1.8 Contracts containing covenants limiting the freedom of
Seller or any officer, director or shareholder of Seller to engage in any line
of business or compete with any person.
For purposes of this Agreement, the "Assumed Contracts" are the Contracts listed
as such on Schedule 4.6.1. Seller has delivered to Buyer true, correct and
complete copies of all of the Contracts listed on Schedule 4.6.1, including all
amendments and supplements thereto, whether or not such Contracts are Assumed
Contracts.
4.6.2 Absence of Breaches or Defaults. All of the Contracts are
valid and in full force and effect. Seller has duly performed all of its
obligations under the Contracts to the extent those obligations to perform have
accrued, and no violation of, or default or breach under
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any Contracts by Seller or any other party has occurred and neither Seller nor
any other party has repudiated any provisions thereof.
4.7 Permits and Consents. Seller has all Permits required to conduct the
Business, except where the failure to obtain such Permits would not have a
Material Adverse Effect on the Assets or the Business. All Permits of Seller
related to the Business are valid and in full force and effect and are listed on
Schedule 4.7. Except as disclosed on Schedule 4.7, no notice to, declaration,
filing or registration with, or authorization, or consent or approval of, or
Permit from, any governmental or regulatory body or authority (including without
limitation the U.S. Small Business Administration), or any other person or
entity, is required to be made or obtained by Seller in connection with the
execution, delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby and thereby. Schedule 4.7 sets forth all
consents required for the assignment by Seller to Buyer of the Assumed
Contracts. All of the Assumed Contracts will be enforceable by Buyer after the
Closing to the same extent as if the transactions contemplated by this Agreement
had not been consummated.
4.8 No Conflict or Violation. After giving effect to consents and lien
releases that have been obtained from third parties or will be so obtained prior
to the Closing Date, neither the execution and delivery of this Agreement by
Seller, nor the consummation of the transactions contemplated hereby or thereby,
nor compliance by Seller with any of the provisions hereof or thereof, will (a)
violate or conflict with any provision of the Articles of Incorporation or
Bylaws of Seller, (b) violate, conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or result in a right of
termination or acceleration under, or result in the creation of any Encumbrance
upon any of the Assets under, any of the terms, conditions or provisions of any
Contract, Permit, agreement, or other instrument or obligation (i) to which
Seller is a party or (ii) by which the Assets are bound, (c) violate any
statute, rule, regulation, ordinance, code, order, judgment, ruling, writ,
injunction, decree or award or (d) impose any Encumbrance, restriction or charge
on the Assets, the Facilities or the Business.
4.9 Financial Statements. Seller has heretofore delivered to Buyer the
Financial Statements. The Financial Statements (a) are in accordance with the
underlying books and records of Seller, (b) have been prepared in accordance
with generally accepted accounting principles consistently applied throughout
the periods covered thereby and (c) fairly and accurately present the assets,
liabilities (including all reserves) and financial position of the Business as
of the respective dates thereof and the results of operations and changes in
cash flows for the periods then ended (subject, in the case of the Interim
Financial Statements, to normal year-end adjustments). At the respective dates
of the Financial Statements, there were no liabilities of Seller, which, in
accordance with generally accepted accounting principles, should have been shown
or reflected in the Financial Statements or the notes thereto, which are not
shown or reflected in the Financial Statements or the notes thereto.
4.10 Books and Records. Seller has made and kept (and given Buyer access
to) Books and Records and accounts, which, in reasonable detail, fairly reflect
the activities of Seller. The minute books of Seller previously delivered to
Buyer fairly reflect all action previously taken by
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the shareholders, board of directors and committees of the board of directors of
Seller. The copies of the stock book records of Seller previously delivered to
Buyer are true, correct and complete, and accurately reflect all transactions
effected in Seller's stock through and including the date hereof.
4.11 Litigation. There is no action, order, writ, injunction, judgment or
decree outstanding or any claim, suit, litigation, proceeding, labor dispute,
arbitral action, governmental audit or investigation (collectively, "Actions")
pending, or to the best of Seller's knowledge, threatened or anticipated (a)
against, related to or affecting Seller, the Business or the Assets or (b)
seeking to delay, limit or enjoin the transactions contemplated by this
Agreement. Seller is not in default with respect to or subject to any judgment,
order, writ, injunction or decree of any court or governmental agency, and there
are no unsatisfied judgments against Seller, the Business or the Assets.
4.12 Labor Matters. Seller is not a party to any labor agreement with
respect to its employees with any labor organization, union, group or
association and there are no employee unions (nor any other similar labor or
employee organizations) under local statutes, custom or practice. Seller has not
experienced any attempt by organized labor or its representatives to make Seller
conform to demands of organized labor relating to its employees or to enter into
a binding agreement with organized labor that would cover the employees of
Seller.
4.13 Compliance with Law. Seller, the conduct of the Business and the
operation of the Facilities have not violated and are in compliance with all
laws, statutes, ordinances, regulations, rules and orders of any foreign,
federal, state or local government and any other governmental department or
agency, and any judgment, decision, decree or order of any court or governmental
agency, department or authority, including without limitation Environmental
Laws, relating to the Assets, Facilities or Business or operations of Seller,
except where the violation or failure to comply, individually or in the
aggregate, would not have a Material Adverse Effect on the Facilities, the
Assets or the Business. Seller and the conduct of the Business and the operation
of the Facilities are in conformity with all energy, public utility, zoning,
building and health codes, regulations and ordinances, OSHA and Environmental
Laws and all other foreign, federal, state, and local governmental and
regulatory requirements, except where any nonconformity would not have a
Material Adverse Effect on the Facilities, the Assets or the Business. Seller
has not received any notice to the effect that, or otherwise been advised that,
it is not in compliance with any such statutes, regulations, rules, judgments,
decrees, orders, ordinances or other laws, and Seller has no reason to
anticipate that any existing circumstances are likely to result in violations of
any of the foregoing, which non-compliance or violation could, in any one case
or in the aggregate, have a Material Adverse Effect on the Facilities, the
Assets or the Business.
4.14 No Brokers. Neither Seller nor any of its respective officers,
directors, employees, shareholders or Affiliates has employed or made any
agreement with any broker, finder or similar agent or any person or firm which
will result in an obligation to pay any finder's fee, brokerage fees or
commission or similar payment in connection with the transactions contemplated
hereby.
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4.15 No Other Agreements to Sell the Assets. Neither Seller nor any of its
respective officers, directors, shareholders or Affiliates have any commitment
or legal obligation, absolute or contingent, to any other person or firm other
than the Buyer to sell, assign, transfer or effect a sale of any of the Assets
(other than inventory in the ordinary course of business), to sell or effect a
sale of a majority of the capital stock of Seller or to effect any merger,
consolidation, liquidation, dissolution or other reorganization of Seller.
4.16 Proprietary Rights.
4.16.1 Proprietary Rights. Schedule 4.16 lists all of Seller's
federal, state and foreign registrations of trademarks, service marks and other
marks, trade names or other trade rights, patents and all pending applications
for any such registrations, all other trademarks and other marks, trade names,
patents and other trade rights in which Seller has any interest whatsoever, and
all other trade secrets and other proprietary rights, whether or not registered,
created or used by or on behalf of Seller, in each case relating to the Business
(collectively, "Proprietary Rights"). The Proprietary Rights listed in Schedule
4.16 are all those used by Seller in connection with the Business.
4.16.2 Royalties and Licenses. Except as set forth in Schedule 4.16,
no person has a right to receive a royalty or similar payment in respect of any
Proprietary Rights. Seller has no licenses granted, sold or otherwise
transferred by or to it or other agreements to which it is a party, relating in
whole or in part to any of the Proprietary Rights.
4.16.3 Ownership and Protection of Proprietary Rights. Seller owns
and has the sole right to use each of the Proprietary Rights. None of the
Proprietary Rights is involved in any pending or threatened litigation. Seller
has not received any notice of invalidity or infringement of any rights of
others with respect to such Proprietary Rights. Seller has taken all reasonable
and prudent steps to protect the Proprietary Rights from infringement by any
other firm, corporation, association or person. Seller's use of the Proprietary
Rights is not infringing upon or otherwise violating the rights of any third
party in or to such Proprietary Rights, nor has such infringement been alleged
by any third party. All of the Proprietary Rights are valid and enforceable
rights of Seller, will be quit-claimed to Buyer and will not cease to be valid
and in full force and effect by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated by this Agreement.
4.17 Tax Matters.
4.17.1 Filing of Tax Returns. Seller has filed with the appropriate
taxing authorities all returns (including without limitation information returns
and other material information) in respect of Taxes required to be filed through
the date hereof and will file any such returns required to be filed on or prior
to the Closing Date. The returns and other information filed are complete and
accurate in all material respects. Neither Seller, nor any group of which Seller
is now or was a member, has requested any extension of time within which to file
returns (including without limitation information returns) in respect of any
taxes.
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4.17.2 Payment of Taxes. All Taxes, in respect of periods beginning
before the Closing Date, have been timely paid, or will be timely paid, or an
adequate reserve has been established therefor, as set forth in the Financial
Statements, and Seller does not have any material liability for Taxes in excess
of the amounts so paid or reserves so established.
4.17.3 Audits, Investigations or Claims. There are no pending or, to
the best of Seller's knowledge, threatened audits, investigations or claims for
or relating to any material additional liability in respect of Taxes, and there
are no matters under discussion with any governmental authorities with respect
to Taxes that in the reasonable judgment of Seller, or its counsel, is likely to
result in a material additional liability for Taxes. Seller has not been
notified that any taxing authority intends to audit a return for any period. No
extension of a statute of limitations relating to Taxes is in effect with
respect to Seller.
4.17.4 Lien. There are no liens for Taxes (other than as could be
asserted for current Taxes not yet due and payable) on the Assets.
4.17.5 No Withholding. The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
4.17.6 Tax-Exempt Use Property. None of the Assets is a "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
4.18 Inventory. All the Inventory is located at Buyer's facilities. The
values at which the Inventory is shown on the Balance Sheet have been determined
at lower of cost or market in accordance with generally accepted accounting
principles, each consistently applied throughout the periods covered by the
Financial Statements, with adequate provisions or adjustments for excess
Inventory, slow-moving Inventory and Inventory obsolescence and shrinkage.
Schedule 4.18 sets forth a complete and accurate list of all Inventory as of the
date hereof.
4.19 Employees. Schedule 4.19 (i) contains a list of all employees of
Seller, and their wage rates or salaries, as of the date of this Agreement, (ii)
sets forth the dates of employment for such employees, and (iii) contains a list
of each contract, plan, arrangement, policy, program or commitment, whether oral
or written, providing for insurance coverage (including without limitation any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health, disability or accident benefits or for deferred compensation,
pension, profit-sharing, bonuses, stock options, stock appreciation rights,
stock purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits (collectively, "Employee Plans ").
4.19.1 Liability Assumed for Accrued Vacation Due Certain Employees.
Schedule 4.19.1 (i) contains a list of those employees of Seller for which Buyer
is assuming liability for accrued vacation due, (ii) sets forth the dates of
employment for such employees and (iii) provides the amount of accrued vacation
due.
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4.20 Compliance With Environmental Laws.
4.20.1 Definitions. The following terms, when used in this Section
4.20, shall have the following meanings. Unless the context otherwise requires,
any of these terms may be used in the singular or the plural depending on the
reference.
4.20.1.1 "Seller". For purposes of this Section 4.20 only, the
term "Seller" shall include (i) all Affiliates of Seller, including without
limitation the Seller Stockholders, (ii) all partnerships, joint ventures and
other entities or organizations in which Seller was at any time or is a partner,
joint venturer, member or participant and (iii) all predecessor or former
corporations, partnerships, joint ventures, organizations, businesses or other
entities, whether in existence as of the date hereof or at any time prior to the
date hereof, the assets or obligations of which have been acquired or assumed by
Seller or to which Seller has succeeded.
4.20.1.2 "Release" shall mean and include any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
migrating, leaching, dumping or disposing into the environment or the workplace
of any Hazardous Substance, and otherwise as defined in any Environmental Law.
4.20.1.3 "Hazardous Substance" shall mean any quantity of
asbestos in any form, urea formaldehyde, PCBs, radon gas, crude oil or any
fraction thereof, all forms of natural gas, petroleum products or by-products,
any radioactive substance, any toxic, infectious, reactive, corrosive, ignitable
or flammable chemical or chemical compound and any other hazardous substance,
material or waste (as defined in or for purposes of any Environmental Law),
whether solid, liquid or gas.
4.20.2 Compliance With Environmental Laws. Except as set forth on
Schedule 4.20, the Facilities have been owned, leased, operated and maintained
in compliance with all federal, state, local or foreign laws, statutes,
ordinances, regulations, rules, judgments, orders, notice requirements, court
decisions, agency guidelines or principles of law, restrictions or licenses,
which (i) regulate or relate to the protection or clean-up of the environment,
the use, treatment, storage, transportation, handling or disposal of hazardous,
toxic or otherwise dangerous substances, wastes or materials (whether gas,
liquid or solid), the preservation or protection of waterways, groundwater,
drinking water, air, wildlife, plants or other natural resources, or the health
and safety of persons or property, including without limitation protection of
the health and safety of employees or (ii) impose liability with respect to any
of the foregoing, including without limitation the Federal Water Pollution
Control Act (33 U.S.C. Section 1251 et seq.), Resource Conservation & Recovery
Act (42 U.S.C. Section 6901 et seq.) ("RCRA"), Safe Drinking Water Act (21
U.S.C. Section 349, 42 U.S.C. Sections 201, 300f), Toxic Substances
Control Act (15 U.S.C. Section 2601 et seq.), Clean Air Act (42 U.S.C. Section
7401 et seq.), the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), or any other similar
federal, state or local law of similar effect, each as amended (collectively,
"Environmental Laws").
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4.20.3 Facilities. The Facilities are, and at all times have been,
owned, leased and operated in compliance with all Environmental Laws and in a
manner that will not give rise to any liability under any Environmental Laws.
4.20.4 Permits. Seller has, and at all times has had, all Permits
required under any Environmental Law and the Facilities are, and at all times
have been, in compliance with all such Permits.
4.20.5 Permits Required. The consummation of any of the transactions
contemplated by this Agreement will not require an application for issuance,
renewal, transfer or extension of, or any other administrative action regarding,
any Permit required under any Environmental Law.
4.20.6 Notice of Violation. Seller has not received any notice at
any time that it or the Facilities is or were claimed to be in violation of the
provisions of any Environmental Law or in noncompliance with the conditions of
any Permit, and there is no pending or threatened lawsuit, governmental or other
legal action to that effect.
4.20.7 Pending Actions. There is not now pending or threatened, nor
any basis for, nor has there ever been, any Action against Seller, nor any basis
for any Action, under any Environmental Law or otherwise with respect to any
Release or mishandling of any Hazardous Substance.
4.20.8 Judgments. There are no consent decrees, judgments, judicial
or administrative orders or agreements with, or liens by, any governmental
authority or quasi-governmental entity relating to any Environmental Law which
regulate, obligate, bind or in any way affect Seller or the Facilities.
4.20.9 Hazardous Substances. There is not and has not been any
Hazardous Substance used, generated, treated, stored, transported, disposed of,
handled or otherwise existing on, under, about or from any Facility, except for
quantities of any such Hazardous Substances stored or otherwise held on, under
or about any such Facility in full compliance with all Environmental Laws and
necessary for the operation of the Business.
4.20.10 Handling of Hazardous Substances. Seller has at all times
used, generated, treated, stored, transported, disposed of or otherwise handled
its Hazardous Substances in compliance with all Environmental Laws and in a
manner that will not result in liability of Seller or Buyer under any
Environmental Law. Schedule 4.20 sets forth a complete list of all contractors
and other third parties who at any time have hauled, handled, stored,
transported or disposed of any Hazardous Substance (i) on behalf of Seller or
the Business, or (ii) generated by Seller or the Business, together with a
complete list of all dumpsites; and other off-site locations at which such
Hazardous Substances have been disposed of.
4.20.11 Environmental Conditions. There are no present or past
Environmental Conditions (as defined below) in any way relating to the Business
or Facilities. "Environmental Conditions" means the introduction into the soil,
groundwater or environment of
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the Facilities (through leak, spill, release, discharge, escape, emission,
dumping, disposal or otherwise) of any pollution, including without limitation
any contaminant, irritant or pollutant or Hazardous Substance (whether or not
upon the property of the Business and whether or not such pollution constituted
at the time thereof a violation of any Environmental Law) as a result of which
either Seller or, after the Closing, Buyer has or may become liable to any
person or by reason of which any of the Assets may suffer or be subjected to any
lien.
4.20.12 CERCLA or RCRA. No current or past use, generation,
treatment, transportation, storage, disposal or handling practice of Seller with
respect to any Hazardous Substance has or will result in any liability under the
CERCLA or RCRA or any state or local law of similar effect.
4.20.13 Storage Tank or Pipeline. Except as set forth on Schedule
4.20, there is not now and has not been at any time in the past any underground
or above-ground storage tank or pipeline at any Facility where the installation,
use, maintenance, repair, testing, closure or removal of such tank or pipeline
was not in compliance with all Environmental Laws and there has been no Release
from or rupture of any such tank or pipeline, including without limitation any
Release from or in connection with the filling or emptying of such tank.
4.20.14 Environmental Audits or Assessments. True, complete and
correct copies of the written reports, and all parts thereof, including any
drafts of such reports if such drafts are in the possession or control of
Seller, of all environmental audits or assessments which have been conducted at
any Facility within the past five years, either by Seller or any attorney,
environmental consultant or engineer engaged for such purpose, have been
delivered to Buyer and a list of all such reports, audits and assessments and
any other similar report, audit or assessment of which Seller has knowledge is
included on Schedule 4.20.
4.20.15 Indemnification Agreements. Seller is not a party, whether
as a direct signatory or as successor, assign or third party beneficiary, or
otherwise bound, to any lease or other Contract under which Seller is obligated
by or entitled to the benefits of, directly or indirectly, any representation,
warranty, indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions.
4.20.16 Releases or Waivers. Seller has not released any other
person from any claim under any Environmental Law or waived any rights
concerning any Environmental Condition.
4.20.17 Notices, Warnings and Records. Seller has given all notices
and warnings, made all reports, and has kept and maintained all records required
by and in compliance with all Environmental Laws.
4.21 Liabilities. Seller has no liabilities or obligations (absolute,
accrued, contingent or otherwise) except (i) liabilities which are reflected on
the Balance Sheet or which are not required under generally accepted accounting
principles to be reflected on the Balance Sheet, (ii) liabilities incurred in
the ordinary course of the Business and consistent with past practice
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since the Balance Sheet Date, and (iii) liabilities arising under Contracts
identified in Schedule 4.6 to which Seller is a party.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct:
5.1 Organization of Buyer. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.2 Authorization. Buyer has all requisite corporate power and authority,
and has taken all corporate action necessary, to execute and deliver this
Agreement, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. This Agreement has been duly
executed and delivered by Buyer and is (and following their execution and
delivery by Buyer and Seller, as applicable, will be) a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
5.3 No Conflict or Violation. Neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions hereof,
will (a) violate or conflict with any provision of the Certificate of
Incorporation or Bylaws of Buyer, or (b) violate any statute, rule, regulation,
ordinance, code, order, judgment, ruling, writ, injunction, decree or award
binding upon Buyer.
5.4 Consents and Approvals. No notice to, declaration, filing or
registration with, or authorization, consent or approval of, or permit from, any
governmental or regulatory body or authority, or any other person or entity, is
required to be made or obtained by Buyer in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, except (a) as may be required by Buyer to
operate the Business after the Closing, (b) as has been obtained on or prior to
the date hereof or (c) as set forth in Schedule 5.4.
ARTICLE VI
COVENANTS OF SELLER AND BUYER
Buyer and Seller each covenant with the others as follows:
6.1 Further Assurances. Upon the terms and subject to the conditions
contained herein, each of the parties hereto agrees, both before and after the
Closing, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions
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contemplated hereunder, and (iii) to cooperate with each other in connection
with the foregoing, including using their respective best efforts (A) to obtain
all necessary waivers, consents and approvals from other parties to the
Contracts to be assumed by Buyer; provided, however, that Buyer shall not be
required to make any payments, commence litigation or agree to modifications of
the terms thereof in order to obtain any such waivers, consents or approvals,
(B) to obtain all necessary Permits as are required to be obtained under any
federal, state, local or foreign law or regulations, (C) to effect all necessary
registrations and filings, including without limitation submissions of
information requested by governmental authorities, and (D) to fulfill all
conditions to this Agreement.
6.2 No Solicitation. From the date hereof through the Closing or the
earlier termination of this Agreement, Seller shall not, and shall cause its
Representatives (including without limitation investment bankers, attorneys and
accountants) not to, directly or indirectly, enter into, solicit, initiate or
continue any discussions or negotiations with, or encourage or respond to any
inquiries or proposals by, or participate in any negotiations with, or provide
any information to, or otherwise cooperate in any other way with, any
corporation, partnership, person or other entity or group, other than Buyer and
its Representatives concerning any sale of all or a portion of the Assets or the
Business, or of any shares of capital stock of Seller, or any merger,
consolidation, liquidation, dissolution or similar transaction involving Seller
(each such transaction collectively being referred to herein as a "Proposed
Acquisition Transaction"). Seller shall not, directly or indirectly, through any
Representative or otherwise, solicit, initiate or encourage the submission of
any proposal or offer from any person or entity relating to any Proposed
Acquisition Transaction or participate in any negotiations regarding, or furnish
to any other person any information with respect to the other party for the
purposes of, or otherwise cooperate in any way with, or assist or participate
in, facilitate or encourage, any effort or attempt by any other person to seek
or effect a Proposed Acquisition Transaction. Seller hereby represents that it
is not now engaged in discussions or negotiations with any party (other than
Buyer) with respect to any of the foregoing. Seller shall promptly notify Buyer
(orally and in writing) of any offer, inquiry or contact with any person with
respect to a Proposed Acquisition Transaction, including the terms thereof and
the identity of the prospective purchaser or soliciting party.
6.3 Notification of Certain Matters. From the date hereof through the
Closing, Seller shall give prompt notice to Buyer of (a) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty contained in this Agreement or in any
exhibit or schedule hereto to be untrue or inaccurate in any material respect
and (b) any failure of Seller, or any of its Affiliates, shareholders or
Representatives, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it under this Agreement or any exhibit or
schedule hereto; provided, however, that such disclosure shall not be deemed to
cure any breach of a representation, warranty, covenant or agreement or to
satisfy any condition.
6.4 Access to Information. From the date hereof through the Closing,
Seller shall, and shall cause its Representatives to, afford the Representatives
of Buyer and its Affiliates complete access at all reasonable times to the
Assets and the Facilities for the purpose of inspecting and conducting
appropriate tests upon the same, and to the officers, employees,
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agents, attorneys, accountants, properties, Books and Records and Contracts of
Seller, and shall furnish Buyer and its Representatives all financial, operating
and other data and information as Buyer or its Affiliates, through their
respective Representatives, may reasonably request, including but not limited to
data relating to operating procedures, workers' compensation history, legal, tax
and environmental, zoning and other legal compliance.
6.5 Conduct of Business. From the date hereof through the Closing, Seller
shall, except as contemplated by this Agreement or as consented to by Buyer in
writing, operate the Business in the ordinary course of the Business and
substantially in accordance with past practice and will not take any action
inconsistent with this Agreement or with the consummation of the Closing.
Without limiting the generality of the foregoing, Seller shall not, except as
specifically contemplated by this Agreement:
6.5.1 enter into, extend, materially modify, terminate or renew any
Contract, except in the ordinary course of the Business;
6.5.2 sell, assign, transfer, convey, lease, mortgage, pledge or
otherwise dispose of or encumber any of the Assets, or any interests therein,
except in the ordinary course of the Business; or
6.5.3 fail to pay its accounts payable and any debts owed or
obligations due by it, or pay or discharge when due any liabilities, in the
ordinary course of the Business.
6.6 Employee Matters. Buyer shall hire all employees of the Business who
meet Buyer's customary criteria for employment, and Seller shall reasonably
cooperate with Buyer in retaining all such employees (the "Retained Employees").
Buyer agrees to give Retained Employees credit for their time of employment with
Seller with respect to their seniority as an employee of Buyer. Seller shall be
and remain solely responsible for the payment of all benefits due to its
employees at any time under its Employee Plans, including without limitation all
severance, accrued vacation, health care continuation coverage and other
benefits to which its employees may be entitled as a result of the transactions
contemplated hereby, whether or not such employees are hired by Buyer. All
Retained Employees will be at-will employees of Buyer and may be terminated by
Buyer in its sole discretion, subject to the requirements of applicable laws
governing employers and employees.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided for
hereby are subject, in the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following conditions, any of which may
be waived by Seller:
7.1 Representations, Warranties and Covenants. All representations and
warranties of Buyer contained in this Agreement shall be true and correct in all
material respects at and as of the date of this Agreement and at and as of the
Closing Date, except as and to the extent that the
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facts and conditions upon which such representations and warranties are based
are expressly required or permitted to be changed by the terms hereof, and Buyer
shall have performed and satisfied all agreements and covenants required hereby
to be performed by it prior to or on the Closing Date.
7.2 No Proceedings, Litigation or Laws. No Action by any governmental
authority or other person shall have been instituted or threatened which
questions the validity or legality of the transactions contemplated hereby and
which could reasonably be expected to materially damage Seller if the
transactions contemplated hereunder are consummated.
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for
hereby are subject, in the discretion of Buyer, to the satisfaction, on or prior
to the Closing Date, of each of the following conditions, any of which may be
waived by Buyer:
8.1 Representations, Warranties and Covenants. All representations and
warranties of Seller contained in this Agreement shall be true and correct in
all material respects at and as of the date of this Agreement and at and as of
the Closing Date, except as and to the extent that the facts and conditions upon
which such representations and warranties are based are expressly required or
permitted to be changed by the terms hereof, and Seller shall have performed and
satisfied all agreements and covenants required hereby to be performed by it
prior to or on the Closing Date.
8.2 Consents. All Permits and waivers necessary to the consummation of the
transactions contemplated hereby and for the operation of the Business by Buyer
shall have been obtained.
8.3 No Proceedings or Litigation. No Action by any governmental authority
or other person shall have been instituted or threatened which questions the
validity or legality of the transactions contemplated hereby and which could
reasonably be expected to damage Buyer materially if the transactions
contemplated hereby are consummated, including without limitation any Material
Adverse Effect on the right or ability of Buyer to own, operate, possess or
transfer the Assets after the Closing. There shall not be any statute, rule or
regulation that makes the purchase and sale of the Business or the Assets
contemplated hereby illegal or otherwise prohibited.
8.4 Certificates. Seller shall furnish Buyer with such certificates of its
officers and others to evidence compliance with the conditions set forth in this
Article VIII as may be reasonably requested by Buyer.
8.5 Conyeyancing Documents; Release of Encumbrances. Seller shall have
executed and delivered each of documents described in Section 3.2 hereof so as
to effect the transfer and assignment to Buyer of all right, title and interest
in and to the Assets and Seller shall have filed
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(where necessary) and delivered to Buyer all documents necessary to release the
Assets from all Encumbrances (except for Encumbrances specifically accepted by
Buyer under Section 4.4), which documents shall be in a form reasonably
satisfactory to Buyer's counsel.
8.6 Material Changes. Since the Balance Sheet Date, there shall not have
been any Material Adverse Change with respect to the Business or the Assets.
8.7 Corporate Documents. Buyer shall have received from Seller resolutions
adopted by its board of directors and shareholders approving the subject matter
of this Agreement, and the transactions contemplated hereby.
8.8 Due Diligence Review. Buyer and its Representatives shall have
conducted a due diligence review of Seller's Books and Records, Financial
Statements, and other records and accounts of the Business, and in the sole
discretion of Buyer, Buyer shall be satisfied on the basis of such review that
there has been no breach of the representations and Warranties or the
pre-closing covenants of Seller made pursuant to this Agreement. Such review
shall have no effect whatsoever on the liability of Seller to Buyer under this
Agreement or otherwise for breach of any representations, warranties, or
covenants of Seller or hereunder.
8.9 Permits. Buyer shall have obtained or been granted the right to use
all Permits necessary to its operation of the Business.
ARTICLE IX
CONSENTS TO ASSIGNMENT
9.1 Consents to Assignment. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Contract, lease, license, sales order, purchase order or any claim or right or
any benefit arising thereunder or resulting therefrom if an attempted assignment
thereof, without the consent of a third party thereto, would constitute a breach
thereof or in any way adversely affect the rights of Buyer thereunder. If such
consent is not obtained, or if an attempted assignment thereof would be
ineffective or would affect the rights thereunder so that Buyer would not
receive all such rights, Seller will cooperate with Buyer, in all reasonable
respects, to provide to Buyer the benefits under any such Contract, lease,
license, sales order, purchase order, claim or right including without
limitation enforcement for the benefit of Buyer of any and all rights of Seller
against a third party thereto arising out of the breach or cancellation by such
third party or otherwise.
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ARTICLE X
ACTIONS BY SELLER AND BUYER
AFTER THE CLOSING
10.1 Books and Records; Payment of Liabilities.
10.1.1 Books and Records. Each party agrees that it will cooperate
with and make available to the other party, during normal business hours, all
Books and Records, information and employees (without substantial disruption of
employment) retained and remaining in existence after the Closing which are
necessary or useful in connection with any tax inquiry, audit, investigation or
dispute, any litigation or investigation or any other matter requiring any such
Books and Records, information or employees for any reasonable business purpose.
10.1.2 Cooperation and Records Retention. Seller and Buyer shall (i)
each provide the other with such assistance as may reasonably be requested by
any of them in connection with the preparation of any return, audit, or other
examination by any taxing authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain and provide the other with any
records or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other with
any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return of
the other for any period. Without limiting the generality of the foregoing,
Buyer and Seller shall each retain, until the applicable statutes of limitations
(including any extensions) have expired, copies of all tax returns, supporting
work schedules, and other records or information that may be relevant to such
returns for all tax periods or portions thereof ending on or before the Closing
Date and shall not destroy or otherwise dispose of any -such records without
first providing the other party with a reasonable opportunity to review and copy
the same.
10.1.3 Payment of Liabilities. Following the Closing Date, Seller
shall pay promptly when due all of the debts and liabilities of Seller relating
to the Business, other than Assumed Liabilities, including without limitation
any accounts payable not assumed by Buyer and any liability of Seller for Taxes;
provided, however, this covenant shall not apply to that portion (or all) of any
debt that Seller is disputing in good faith and gives prompt notice to Buyer of
such dispute.
10.2 Survival of Representations, Etc. All statements contained in any
certificate, schedule, exhibit, instrument or conveyance delivered by or on
behalf of the parties pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the parties hereunder. The representations, warranties, covenants
and agreements of Seller and Buyer contained herein shall survive the
consummation of the transactions contemplated hereby and the Closing Date,
without regard to any investigation made by any of the parties hereto. Except as
provided in this sentence, all such representations and warranties and all
claims and causes of
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action with respect thereto (other than the provisions of Sections 4.17, 4.20
and this Section 10.2, and all claims and causes of action with respect thereto)
shall terminate upon expiration of two years after the Closing Date. The
representations and warranties in Sections 4.17 and 4.20 shall survive until the
expiration of the applicable statute of limitations (with extensions) with
respect to the matters addressed in such sections. The termination of the
representations and warranties provided herein shall not affect the rights of a
party in respect of any Claim made by such party in a writing received by the
other party prior to the expiration of the applicable survival period provided
herein.
10.3 Indemnifications.
10.3.1 By Seller. Regardless of Seller's knowledge of the existence
of an Indemnifiable Event, as defined below, Seller shall indemnify, defend,
save and hold harmless Buyer, its Affiliates and subsidiaries, and its
respective Representatives, from and against any and all claims, damages, costs,
losses (including without limitation diminution in value), Taxes, liabilities,
judgments, penalties, fines, obligations, lawsuits, deficiencies, demands and
expenses (whether or not arising out of third-party claims), including without
limitation interest, penalties, costs of mitigation, losses in connection with
any Environmental Law (including without limitation any clean-up or remedial
action), lost profits and other losses resulting from any shutdown or
curtailment of operations, damages to the environment, attorneys' fees, experts'
fees and all amounts paid in investigation, defense or settlement of any of the
foregoing (herein, "Damages"), incurred in connection with, arising out of,
resulting from or incident to (i) any breach of any representation or warranty,
or the inaccuracy of any representation or warranty, made by Seller in or
pursuant to this Agreement; (ii) any breach of any covenant or agreement made by
Seller in or pursuant to this Agreement; (iii) any Excluded Liability; (iv) any
liability imposed upon Buyer by reason of Buyer's status as transferee of the
Business or the Assets; (v) any liability arising under any Environmental Law on
account of the conduct of Seller or prior owners or users of the Facilities or
other persons, or on account of the operation of the Business or the Facilities,
or related to any Environmental Condition existing, in each case on or at any
time prior to the Closing Date; or (vi) any Post-Closing Environmental Liability
(collectively, the "Indemnifiable Events"). Without limiting the generality of
the foregoing, the indemnification provided herein, insofar as it relates to any
Environmental Law or Environmental Condition, shall specifically cover costs
incurred in connection with any investigation of site conditions (excepting the
cost of the Environmental Assessments) or any clean-up, remedial, removal or
restoration work required by any federal, state or local governmental agency or
political subdivision.
10.3.2 By Buyer. Buyer shall indemnify and save and hold harmless
Seller, its Affiliates and its Representatives from and against any and all
Damages incurred in connection with, arising out of, resulting from or incident
to (i) any breach of any representation or warranty, or the inaccuracy of any
representation or warranty, made by Buyer in or pursuant to this Agreement; (ii)
any breach of any covenant or agreement made by Buyer in or pursuant to this
Agreement; or (iii) any Assumed Liability insofar as such Assumed Liability
arises from and after the Closing.
10.3.3 Cooperation. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and such attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the indemnified
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party may, at its own cost, participate in the investigation, trial and defense
of such lawsuit or action and any appeal arising therefrom. The parties shall
cooperate with each other in any notifications to insurers.
10.3.4 Defense of Claims. If a claim for Damages (a "Claim") is to
be made by a party entitled to indemnification hereunder against the
indemnifying party, the party claiming such indemnification shall, subject to
Section 10.2, give written notice (a "Claim Notice") to the indemnifying party
as soon as practicable after the party entitled to indemnification becomes aware
of any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 10.3. If any lawsuit or
enforcement action is filed against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the indemnifying
party as promptly as practicable (and in any event within fifteen (15) calendar
days after the service of the citation or summons). The failure of any
indemnified party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the indemnifying party
demonstrates actual damage caused by such failure. After such notice, if the
indemnifying party shall acknowledge in writing to the indemnified party that
the indemnifying party shall be obligated under the terms of its indemnity
hereunder in connection with such lawsuit or action, then the indemnifying party
shall be entitled, if it so elects, (i) to take control of the defense and
investigation of such lawsuit or action, (ii) to employ and engage attorneys of
its own choice (which shall be reasonably acceptable to the indemnified party)
to handle and defend the same, at the indemnifying party's cost, risk and
expense unless the named parties to such action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party has been
advised in writing by counsel that there may be one or more legal defenses
available to such indemnified party that are different from or additional to
those available to the indemnifying party, and (iii) to compromise or settle
such claim, which compromise or settlement shall be made only with the written
consent of the indemnified party, such consent not to be unreasonably withheld;
provided, however, if the remediation or resolution of any such Claim will occur
on or at any Facility or is reasonably expected to have a Material Adverse
Effect on the indemnified party's business operations, then, notwithstanding the
foregoing, the indemnified party shall be entitled to control such remediation
or resolution, including without limitation to take control of the defense and
investigation of such lawsuit or action, to employ and engage attorneys of its
own choice to handle and defend the same, at the indemnifying party's cost, risk
and expense, and to compromise or settle such Claim. If the indemnifying party
fails to assume the defense of such claim within fifteen (15) calendar days
after receipt of the Claim Notice, the indemnified party against which such
claim has been asserted will (upon delivering notice to such effect to the
indemnifying party) have the right to undertake, at the indemnifying party's
cost and expense, the defense, compromise or settlement of such claim on behalf
of and for the account and risk of the indemnifying party. In the event the
indemnified party assumes the defense of the claim, the indemnified party will
keep the indemnifying party reasonably informed of the progress of any such
defense, compromise or settlement. The indemnifying party shall be liable for
any settlement of any action effected pursuant to and in accordance with this
Section 10.3 and for any final judgment (subject to any right of appeal), and
the indemnifying party agrees to indemnify and hold harmless an indemnified
party from and against any Damages by reason of such settlement or judgment.
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10.3.5 Limitations. Neither Buyer nor Seller shall be liable to the
other under this Section 10.3 for any Damages until the amount otherwise due the
party being indemnified exceeds $20,000 in the aggregate, in which case such
indemnifying party will be liable to the indemnified party for all such amounts,
including the first $20,000. Notwithstanding the preceding sentence, this
limitation shall not apply with respect to Damages arising out of a breach of a
representation or warranty contained in Sections 4.17 or 4.20 or the covenants
contained in Section 10.1.3. Buyer shall give Seller prompt notice of any
Damages that might apply toward the first $20,000.
10.3.6 Liability and Remedies, etc. Except as set forth below, no
individual Representative of any party shall be personally liable for any
Damages under the provisions contained in this Section 10.3. Nothing herein
shall relieve either party of any liability to make any payment expressly
required to be made by such party pursuant to this Agreement. The term "Damages"
as used in this Section 10.3 is not limited to matters asserted by third parties
against Seller or Buyer, but includes Damages incurred or sustained by Seller or
Buyer in the absence of third party claims. Payments by Buyer of amounts for
which Buyer is indemnified hereunder, and payments by Seller of amounts for
which Seller is indemnified, shall not be a condition precedent to recovery.
Seller's obligation to indemnify Buyer, and Buyer's obligation to indemnify
Seller, shall not limit any other rights, including without limitation rights of
contribution which either party may have under statute or common law. The Seller
Stockholders shall be jointly and severally liable with Seller with respect to
all indemnification obligations of Seller under this Section 10.3.
10.4 Taxes. Subject to Section 2.7, Seller shall pay, or cause to be paid,
when due all Taxes for which Seller is or may be liable or that are or may
become payable with respect to all taxable periods ending on or prior to the
Closing Date.
10.5 Further Action. After the Closing, Seller shall take all actions
reasonably necessary to effect the conveyance of the Assets to Buyer free and
clear of all Encumbrances (except for Encumbrances specifically accepted by
Buyer under Section 4.4) and otherwise required by Buyer's lenders.
ARTICLE XI
MISCELLANEOUS
11.1 Termination.
11.1.1 Termination. This Agreement may be terminated at any time
prior to Closing:
11.1.1.1 By mutual written consent of Buyer and Seller;
11.1.1.2 By Buyer if there is a material breach of any
representation or warranty set forth in Article IV hereof or any covenant or
agreement to be complied with or performed by Seller pursuant to the terms of
this Agreement or the failure of a condition set forth
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in Article VIII to be satisfied (and such condition is not waived in writing by
Buyer) on or prior to the Closing Date, or the occurrence of any event which
results or would result in the failure of a condition set forth in Article VIII
to be satisfied on or prior to the Closing Date, provided that Buyer may not
terminate this Agreement prior to the Closing if Seller has not had an adequate
opportunity to cure such failure; or
11.1.1.3 By Seller if there is a material breach of any
representation or warranty set forth in Article V hereof or of any covenant or
agreement to be complied with or performed by Buyer pursuant to the terms of
this Agreement or the failure of a condition set forth in Article VII to be
satisfied (and such condition is not waived in writing by Seller) on or prior to
the Closing Date, or the occurrence of any event which results or would result
in the failure of a condition set forth in Article VII to be satisfied on or
prior to the Closing Date; provided that Seller may not terminate this Agreement
prior to the Closing Date if Buyer has not had an adequate opportunity to cure
such failure.
11.1.2 In the Event of Termination. In the event of termination of
this Agreement:
11.1.2.1 Each party will redeliver all documents, work papers
and other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same; and
11.1.2.2 No party hereto shall have any liability or further
obligation to any other party to this Agreement, except as stated in Sections
11.7, 11.10, 11.1.2.1 or this Section 11.1.2.2, and except for any willful
breach of this Agreement occurring prior to the proper termination of this
Agreement. The foregoing provisions shall not limit or restrict the availability
of specific performance or other injunctive relief to the extent that specific
performance or such other relief would otherwise be available to a party
hereunder.
11.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; except that Buyer may, without such consent,
assign all such rights to any lender as collateral security and assign all such
rights and obligations to a wholly-owned subsidiary (or a partnership controlled
by Buyer) or subsidiaries of Buyer or to a successor in interest to Buyer which
shall assume all obligations and liabilities of Buyer under this Agreement.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, and no other person shall have any right, benefit or obligation under
this Agreement as a third party beneficiary or otherwise.
11.3 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (e.g., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
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<PAGE> 31
If to Seller, addressed to:
TrucTech, Inc.
5151 East Broadway Boulevard
Suite 730
Tucson, Arizona U.S.A. 85711
Attention: President
If to Buyer, addressed to:
NuPro Innovations Inc.
5151 East Broadway Boulevard
Suite 730
Tucson, Arizona 85711
Attention: President
with a copy to:
Squire, Sanders & Dempsey L.L.P.
40 North Central Avenue
Suite 2700
Two Renaissance Square
Phoenix, Arizona 85004
Attention: Benjamin D. Aguilera, Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
11.4 Choice of Law. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
Delaware (without reference to the choice of law provisions thereof), except
with respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
11.5 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. No
amendment, supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
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<PAGE> 32
11.6 Multiple Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.7 Expenses. Except as otherwise specified in this Agreement, each party
hereto shall pay its own legal, accounting, out-of-pocket and other expenses
incident to this Agreement and to any action taken by such party in preparation
for carrying this Agreement into effect.
11.8 Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
11.9 Titles. The titles, captions or headings of the Articles, Sections
and subsections herein are inserted for convenience of reference only and are
not intended to be a part of or to affect the meaning or interpretation of this
Agreement.
11.10 Publicity; Confidentiality. Neither Buyer nor Seller shall issue any
press release or make any public statement regarding, or disclose to any third
party (except as required by law or legal process, and except to each party's
lenders if such lenders so require) any of the terms of, the transactions
contemplated hereby, without prior written approval of the other party, provided
that Buyer and Seller may, if they mutually agree, issue or make an appropriate
press release or public announcement after the Closing Date. In the event that
this Agreement is terminated prior to Closing, Buyer agrees to return to Seller
all correspondence and documents furnished by Seller or its Representatives, and
agrees not to disclose or use for its own purposes any confidential or
proprietary information of Seller that has been furnished to it by Seller or its
Representatives.
11.11 Cumulative Remedies. All rights and remedies of either party hereto
are cumulative of each other and of every other right or remedy such party may
otherwise have at law or in equity, and the exercise of one or more rights or
remedies shall not prejudice or impair the concurrent or subsequent exercise of
other rights or remedies.
11.12 Arbitration. Any controversy arising after the Closing out of or
relating to this Agreement (including, without limitation, pursuant to Section
2.5 or 10.3, but excluding for purposes of this Section 11.12, the leases,
employment and non-competition agreements attached as Exhibits hereto), or
relating to the breach hereof, shall be settled by arbitration conducted in
Phoenix, Arizona in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect (except as otherwise expressly
provided in this Agreement). The award rendered by the arbitrator(s) shall be
final and judgment upon the award rendered by the arbitrator(s) may be entered
upon it in any court having jurisdiction thereof. The arbitrator(s) shall
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration. The expenses of the arbitration shall be borne
by the losing party unless otherwise allocated by the arbitrator(s). The
agreement to arbitrate shall be
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specifically enforceable under the prevailing arbitration law. During the
continuance of any arbitration proceedings, the parties shall continue to
perform their respective obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed on their respective behalf, by their respective
officers thereunto duly authorized, all as of the day and year first above
written.
NUPRO INNOVATIONS INC.,
a Delaware corporation
By___________________________________
Name: Luba Veselinovic
Its: President
TRUCTECH, INC.,
a Georgia corporation
By___________________________________
Name: Elke Veselinovic
Its: President
29
<PAGE> 1
EXHIBIT 6.3
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of ____________,
_____, between NuPro Innovations Inc., a Delaware corporation ("CORPORATION"),
and___________, a Director of the Corporation ("DIRECTOR").
RECITALS:
WHEREAS, Director is an advisor and consultant of the Corporation,
serving as a member of the Corporation's Board of Directors (the "BOARD"), and
performs a valuable service in such capacity for the Corporation;
WHEREAS, the Corporation, as authorized by the Bylaws of the
Corporation and by specific action of its Board of Directors and by this
contract, has elected to provide for the indemnification of the members of the
Corporation's Board; and
WHEREAS, in order to induce Director to serve as a member of the
Board, the Corporation has determined and agreed to enter into this contract
with Director;
NOW, THEREFORE, in consideration of Director's service as a
participating member of the Board, and intending to be legally bound thereby,
the Corporation and the Director hereby agree as follows:
1. Indemnification. Except as otherwise provided below, the Corporation
hereby agrees to hold harmless and indemnify Director against any and all
expenses, including attorney's fees, witness fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by Director in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including an action by or in
the right of the Corporation) to which Director is, was or at any time becomes a
party, or is threatened to be made a party, by reason of the fact that Director
is, was or at any time becomes an employee serving as a member of the Board, or
by reason of any action taken by him or any inaction on his part while acting in
any such capacity.
2. Limitations on Indemnity. The Corporation shall not indemnify
Director for the following:
(A) The Corporation will not indemnify the Director to the extent
that he is reimbursed from insurance proceeds or from any other party, except to
the extent the aggregate of the expenses incurred by Director exceeds the sum of
such compensation;
(B) In respect to remuneration paid to Director, if it shall be
determined by a final adjudication that such remuneration was in violation of
the law; pro rata allocation or any other method of allocation which does not
take account of the foregoing equitable considerations.
(C) On account of any suit in which judgment is rendered against
Director for an accounting of profits made from the purchase or sale by Director
of securities of the
<PAGE> 2
Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or similar provisions of any federal, state or
local statutory law, or on account of any suit in which a final judgment is
rendered against the Director for violation of Section 10(b) or Rule 10b(5) of
the Securities and Exchange Act of 1934, as amended, or similar provisions of
any federal, state or local law;
(D) On account of Director's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(E) On account of Director's conduct which is the subject of an
action, suit or proceeding described in Section 6(C)(ii) hereof;
(F) On account of any action, claim or proceeding (other than a
proceeding referred to in Section 7(B) hereof) initiated by the Director unless
such action, claim or proceeding was authorized in the specific case by action
of the Board of Directors of the Corporation; or
(G) If a final decision by a court having jurisdiction in the matter
shall determine that such indemnification is now lawful (and, in this respect,
both Corporation and Advisor have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
3. Contribution. If the indemnification provided in Section 1 hereof is
unavailable by reason of a court decision described in Section 2(G) hereof based
on grounds other than any of those set forth in paragraphs (B) through (F) of
Section 2 hereof, then in respect of any threatened, pending or completed
action, suit or proceeding in which the Corporation is jointly liable with
Director (or would be if joined in such action, suit or proceeding), the
Corporation shall contribute to the amount of expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred and paid or payable by Director in such proportion as is appropriate to
reflect (i) the relative benefits received by the Corporation on the one hand
and Director on the other hand from the transaction from which such action, suit
or proceeding arose, and (ii) the relative fault of the Corporation on the one
hand and of Director on the other in connection with the events which resulted
in such expenses, judgments, fines or settlement amounts, as well as any other
relevant equitable considerations. The relative fault of the Corporation on the
one hand and of Director on the other shall be determined by reference to, among
other things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such expenses,
judgments, fines or settlement amounts. Corporation agrees that it would not be
just and equitable if contribution pursuant to this Section 3 were determined by
pro rata allocation or any other method of allocation which does not take
account of the foregoing equitable considerations.
4. Continuation of Obligations. All agreements and obligations of the
Corporation, its successors and assigns, contained herein shall continue during
the period Director is serving as a member of the Board of the Corporation and
shall continue thereafter so long as Director shall be subject to any possible
claim or threatened, pending or completed action, suit or
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<PAGE> 3
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that Director was serving as a member of the Board of the
Corporation.
5. Notification and Defense of Claim. The Director, as a condition
precedent to his right to be indemnified under this Agreement, shall give the
Corporation prompt notice in writing of any claim for which indemnity will or
could be sought under this agreement, not later than thirty (30) days after
receipt by Director of notice of the commencement of any action, suit or
proceeding. Notice to the Corporation for this or any other purpose under this
Agreement shall be directed to Gary A. Fitchett, NuPro Innovations Inc., 5151 E.
Broadway Blvd., Suite 730, Tucson, Arizona USA 85711. With respect to any such
action, suit or proceeding as to which Advisor notifies the Corporation of the
commencement thereof:
(A) The Corporation will be entitled to participate therein at its
own expense;
(B) Except as otherwise provided below, to the extent that it may
wish, the Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from the Corporation to Director of its
election so as to assume the defense thereof, the Corporation will not be liable
to Director under this Agreement for any legal or other expenses subsequently
incurred by Director in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Director shall
have the right to employ its counsel in such action, suit or proceeding but the
fees and expenses of such counsel incurred after notice from the Corporation of
its assumption of the defense thereof shall be at the expense of Director unless
(i) the employment of counsel by Director has been authorized by the
Corporation, (ii) Director shall have reasonably concluded that there may be a
conflict of interest between the Corporation and Director in the conduct of the
defense of such action or (iii) the Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Director's separate counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of the Corporation or as to
which Director shall have made the conclusion provided for in (ii) above; and
(C) The Corporation shall not be liable to indemnify Advisor under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Corporation shall be permitted to
settle any action except that it shall not settle any action or claim in any
manner which would impose any penalty or limitation on Director without
Director's written consent. Neither the Corporation nor Director will
unreasonably withhold its consent to any proposed settlement.
(D) The Director shall give the Corporation such information and
cooperation as he may reasonably require and as shall be within the Director's
power.
6. Advancement and Repayment of Expenses.
(A) In the event that Director employs his own counsel pursuant to
Section 5(B)(i) through (iii) above, the Corporation shall advance to Director,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal,
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<PAGE> 4
administrative or investigative, any and all reasonable expenses (including
legal fees and expenses) incurred in investigating or defending any such action,
suit or proceeding within ten (10) days after receiving copies of invoices
presented to Director for such expenses.
(B) Director agrees that Director will reimburse Corporation for all
reasonable expenses paid by the Corporation in defending any civil or criminal
action, suit or proceeding against Director in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Director is not entitled, under the provisions of
the Act, this Agreement or otherwise, to be indemnified by the Corporation for
such expenses.
(C) Notwithstanding the foregoing, the Corporation shall not be
required to advance such expenses to Director if Director (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by the Corporation and approved by a majority
of the Board which alleges willful misappropriation of corporate assets by
Director, disclosure of confidential information in violation of Director's
fiduciary or contractual obligations to the Corporation, or any other willful
and deliberate breach in bad faith of Director's duty to the Corporation or its
stockholders.
7. Enforcement.
(A) The Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligation imposed on the
Corporation hereby in order to induce Director to serve on the Board of the
Corporation, and acknowledges that Director is relying upon this Agreement in
continuing in such capacity.
(B) In the event Director is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Corporation shall reimburse Director for all Director's reasonable
fees and expenses in bringing and pursuing such action.
8. Subrogation. In the event of payment to the Director under this
Agreement, the Corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of Director, who shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.
9. Non-Exclusivity of Rights. The rights conferred on Director by this
Agreement shall not be exclusive of any other rights which Director may have or
hereafter acquire under any statute, provision of the Corporation's Articles of
Incorporation or Bylaws, agreement vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
10. Survival of Rights. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director of the
Corporation and shall inure to the benefit of Director's heirs, executors and
administrators.
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<PAGE> 5
11. Separability. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any or
all of the provisions hereof shall be held to be invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof or the obligation of the
Corporation to indemnify the Director to the full extent provided by the Act.
12. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
13. Binding Effect. This Agreement shall be binding upon Director and
upon the Corporation, its successors and assigns, and shall inure to the benefit
of Director, his heirs, personal representative and assigns and to the benefit
of the Corporation, its successors and assigns.
14. Effective Date. The Corporation's indemnity obligations hereunder
shall be applicable to any and all claims made after the effective date of this
Agreement, regardless of when the facts upon which such claims are based
occurred.
15. Gender. The use of the masculine gender in this Agreement is for
convenience only and shall be deemed to include the feminine.
16. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Director and the Corporation. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement on and as of the day first above written.
NUPRO INNOVATIONS INC., a Delaware corporation
By:
-------------------------------------------
Title: President and CEO
Director
-----------------------------------------------
6
<PAGE> 1
EXHIBIT 6.4
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this ____ day of ________,
____, between NuPro Innovations Inc., a Delaware corporation ("Corporation"),
and _____________, an advisor and consultant to the Corporation ("Advisor").
RECITALS:
WHEREAS, Advisor is an advisor and consultant of the Corporation,
serving as a member of the Corporation's Advisory Committee (the "Advisory
Committee"), and performs a valuable service in such capacity for the
Corporation;
WHEREAS, the Corporation, as authorized by the Bylaws of the
Corporation and by specific action of its Board of Directors and by this
contract, has elected to provide for the indemnification of the members of the
Corporation's Advisory Committee, and
WHEREAS, in order to induce Advisor to serve as a member of the
Advisory Committee, the Corporation has determined and agreed to enter into this
contract with Advisor;
NOW, THEREFORE, in consideration of Advisor's service as a
participating member of the Advisory Committee, and intending to be legally
bound thereby, the Corporation and the Advisor hereby agree as follows:
1. Indemnification. Except as otherwise provided below, the Corporation
hereby agrees to hold harmless and indemnify Advisor against any and all
expenses, including attorney's fees, witness fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by Advisor in connection
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (including an action by or in
the right of the Corporation) to which Advisor is, was or at any time becomes a
party, or is threatened to be made a party, by reason of the fact that Advisor
is, was or at any time becomes an employee serving as a member of the Advisory
Committee, or by reason of any action taken by him or any inaction on his part
while Acting in any such capacity.
2. Limitations on Indemnity. The Corporation shall not indemnify
Advisor for the following:
(A) The Corporation will not indemnify the Advisor to the
extent that he is reimbursed from insurance proceeds or from any other party,
except to the extent the aggregate of the expenses incurred by Advisor exceeds
the sum of such compensation;
(B) In respect to remuneration paid to Advisor, if it shall be
determined by a final adjudication that such remuneration was in violation of
the law;
<PAGE> 2
(C) On account of any suit in which judgment is rendered
against Advisor for an accounting of profits made from the purchase or sale by
Advisor of securities of the Corporation pursuant to the provisions of Section
16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions
of any federal, state or local statutory law, or on account of any suit in which
a final judgment is rendered against the Advisor for violation of Section 10(b)
or Rule 10b(5) of the Securities and Exchange Act of 1934, as amended, or
similar provisions of any federal, state or local law;
(D) On account of Advisor's conduct which is finally adjudged
to have been knowingly fraudulent or deliberately dishonest or to constitute
willful misconduct;
(E) On account of Advisor's conduct which is the subject of an
action, suit or proceeding described in Section 6(C)(ii) hereof;
(F) On account of any action, claim or proceeding (other than
a proceeding referred to in Section 7(B) hereof) initiated by the Advisor unless
such action, claim or proceeding was authorized in the specific case by action
of the Board of Directors of the Corporation; or
(G) If a final decision by a court having jurisdiction in the
matter shall determine that such indemnification is not lawful (and, in this
respect, both Corporation and Advisor have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
3. Contribution. If the indemnification provided in Section 1 hereof is
unavailable by reason of a court decision described in Section 2(G) hereof based
on grounds other than any of those set forth in paragraphs (B) through (F) of
Section 2 hereof, then in respect of any threatened, pending or completed
action, suit or proceeding in which the Corporation is jointly liable with
Advisor (or would be if joined in such action, suit or proceeding), the
Corporation shall contribute to the amount of expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred and paid or payable by Advisor in such proportion as is appropriate to
reflect (i) the relative benefits received by the Corporation on the one hand
and Advisor on the other hand from the transaction from which such action, suit
or proceeding arose, and (ii) the relative fault of the Corporation on the one
hand and of Advisor on the other in connection with the events which resulted in
such expenses, judgments, fines or settlement amounts, as well as any other
relevant equitable considerations. The relative fault of the Corporation on the
one hand and of Advisor on the other shall be determined by reference to, among
other things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such expenses,
judgments, fines or settlement amounts. Corporation agrees that it would not be
just and equitable if contribution pursuant to this Section 3 were determined by
pro rata allocation or any other method of allocation which does not take
account of the foregoing equitable considerations.
2
<PAGE> 3
4. Continuation of Obligations. All agreements and obligations of the
Corporation, its successors and assigns, contained herein shall continue during
the period Advisor is a consultant serving as a member of the Advisory Committee
of the Corporation and shall continue thereafter so long as Advisor shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that Advisor was serving as a member of the Advisory
Committee of the Corporation.
5. Notification and Defense of Claim. The Advisor, as a condition
precedent to his right to be indemnified under this Agreement, shall give the
Corporation prompt notice in writing of any claim for which indemnity will or
could be sought under this agreement, not later than thirty (30) days after
receipt by Advisor of notice of the commencement of any action, suit or
proceeding. Notice to the Corporation for this or any other purpose under this
Agreement shall be directed to Gary A. Fitchett, NuPro Innovations Inc., 110
Ambleside Drive, Port Perry, Ontario, Canada, L9L 1B4. With respect to any such
action, suit or proceeding as to which Advisor notifies the Corporation of the
commencement thereof:
(A) The Corporation will be entitled to participate therein at
its own expense;
(B) Except as otherwise provided below, to the extent that it
may wish, the Corporation jointly with arty other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Advisor. After notice from the Corporation to Advisor of its
election so as to assume the defense thereof, the Corporation will not be liable
to Advisor under this Agreement for arty legal or other expenses subsequently
incurred by Advisor in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Advisor shall have the
right to employ its counsel in such action, suit or proceeding but the fees and
expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Advisor unless (i)
the employment of counsel by Advisor has been authorized by the Corporation,
(ii) Advisor shall have reasonably concluded that there may be a conflict of
interest between the Corporation and Advisor in the conduct of the defense of
such action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of Advisor's separate counsel shall be at the expense of the Corporation. The
Corporation shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Corporation or as to which Advisor
shall have made the conclusion provided for in (ii) above; and
(C) The Corporation shall not be liable to indemnify Advisor
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Corporation shall be permitted to
settle any action except that it shall not settle any action or claim in any
manner which would impose any penalty or limitation on Advisor without Advisor's
written consent. Neither the Corporation nor Advisor will unreasonably withhold
its consent to any proposed settlement.
(D) The Advisor shall give the Corporation such information
and cooperation as he may reasonably require and as shall be within the
Advisor's power.
3
<PAGE> 4
6. Advancement and Repayment of Expenses.
(A) In the event that Advisor employs his own counsel pursuant
to Section 5(B)(i) through (ii) above, the Corporation shall advance to Advisor,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal administrative or investigative, any and all
reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Advisor for such expenses.
(B) Advisor agrees that Advisor will reimburse Corporation for
all reasonable expenses paid by the Corporation in defending any civil or
criminal action, suit or proceeding against Advisor in the event and only to the
extent it shall be ultimately determined by it final judicial decision (from
which there is no right of appeal) that Advisor is not entitled, under the
provisions of the Act, this Agreement or otherwise, to be indemnified by the
Corporation for such expenses.
(C) Notwithstanding the foregoing, the Corporation shall not
be required to advance such expenses to Advisor if Advisor (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by the Corporation and approved by a majority
of the Board which alleges willful misappropriation of corporate assets by
Advisor, disclosure of confidential information in violation of Advisor's
fiduciary or contractual obligations to the Corporation, or any other willful
and deliberate breach in bad faith of Advisor's duty to the Corporation or its
stockholders.
7. Enforcement.
(A) The Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligation imposed on the
Corporation hereby in order to induce Advisor to serve on the Advisory Committee
of the Corporation, and acknowledges that Advisor is relying upon this Agreement
in continuing in such capacity.
(B) In the event Advisor is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is successful
in such action, the Corporation shall reimburse Advisor for all Advisor's
reasonable fees and expenses in bringing and pursuing such action.
8. Subrogation. In the event of payment to the Advisor under this
Agreement, the Corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of Advisor, who shall execute all documents
required and shall do all acts that may be necessary to secure such rights and
to enable the Corporation effectively to bring suit to enforce such rights.
9. Non-Exclusivity of Rights. The rights conferred on Advisor by this
Agreement shall not be exclusive of any other rights which Advisor may have or
hereafter acquire under any statute, provision of the Corporation's Articles of
Incorporation or Bylaws, agreement, vote of
4
<PAGE> 5
stockholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office.
10. Survival of Rights. The rights conferred on Advisor by this
Agreement shall continue after Advisor has ceased to be an advisor or consultant
of the Corporation and shall inure to the benefit of Advisor's heirs, executors
and administrators.
11. Separability. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any or
all of the provisions hereof shall be held to be invalid or unenforceable for
any reason, such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof or the obligation of the
Corporation to indemnify the Advisor to the full extent provided by the Act.
12. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
13. Binding Effect. This Agreement shall be binding upon Advisor and
upon the Corporation, its successors and assigns, and shall insure to the
benefit of Advisor, his heirs, personal representative and assigns and to the
benefit of the Corporation, its successors and assigns.
14. Effective Date. The Corporation's indemnity obligations hereunder
shall be applicable to any and all claims made after the effective date of this
Agreement, regardless of when the facts upon which such claims are based
occurred.
15. Gender: The use of the masculine gender in this Agreement is for
convenience only and shall be deemed to include the feminine.
16. Miscellaneous. No provision of this Agreement may be modified,
waived, or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Advisor and the Corporation. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement on and as of the day first above written.
NUPRO INNOVATIONS INC.
a Delaware corporation
By:_____________________________________
Print Name: Gary A. Fitchett
Title: President and CEO
ADVISOR
________________________________________
6
<PAGE> 1
EXHIBIT 6.5
SECONDMENT AGREEMENT
THIS SECONDMENT AGREEMENT (the "Agreement") is made as of the 1st day of
December, 1998, by and between KRIDA OVERSEAS INVESTMENTS TRADING LIMITED, an
entity formed under the laws of Cyprus whose registered office is at c/o BDO
International, 36 Ayias Elenis Street, Suite 403, Nicosia, Cyprus CY - 1519
(the "EMPLOYING COMPANY"), and NUPRO INNOVATIONS, INC., a Delaware corporation
whose registered office is at 5151 East Broadway Boulevard, Suite 730, Tucson,
Arizona 85711 (the "SECONDEE COMPANY").
RECITAL
WHEREAS, to assist the Secondee Company in the conduct of its business,
the Employing Company is prepared to provide the services of one or more
employees from time to time (individually, an "EMPLOYEE" and collectively, the
"EMPLOYEES") to the Secondee Company on the terms set out below.
NOW, THEREFORE, in consideration of the mutual promises and obligations
of the parties contained herein and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties agree
as follows:
AGREEMENT
1. INTERPRETATION. In this Agreement:
1.1 "SECONDMENT" means the secondment established by this Agreement.
1.2 The headings are for convenience only and shall not affect the
interpretation hereof.
1.3 Unless the content otherwise requires, words importing the singular
only shall import the plural and vice versa.
2. DURATION. Subject to the terms hereof, the term of this Agreement shall
commence on the date first written above and shall continue until the fifth
anniversary of the date of this Agreement ("Initial Term"). Thereafter, the term
of this Agreement shall automatically be extended for successive five (5) year
periods unless (i) either the Employing Company or the Secondee Company gives
ninety (90) days written notice to the other of its intention to terminate this
Agreement at any time following the Initial Term or (ii) pursuant to Section 7
of this Agreement. Notwithstanding anything in this Agreement to the contrary,
in no event shall the Secondee Company be entitled to terminate this Agreement
during the Initial Term.
3. SERVICES.
3.1 The Employing Company shall cause the Employees to perform all such
services and duties as are agreed upon between Employing Company and Secondee
Company.
3.2 The Employing Company shall cause the Employees during the term of
each of their Secondments to act or serve as an officer, authorized signatory,
nominee or in any other
<PAGE> 2
personal capacity on behalf of the Secondee Company or its subsidiaries, as may
be required by Secondee Company or as any authorized representative thereof may
designate from time to time on its behalf and the Employing Company shall cause
each such Employee to resign all or any such appointments upon the termination
of his Secondment.
3.3 The Employing Company will second the Employees on the terms under
which each of them is from time to time employed by the Employing Company, as
set forth in the Employment Contract between the Employing Company and each
Employee. From time to time, the Employing Company will notify the Secondee
Company of any changes which are made to the same during the continuance of this
Agreement.
3.4 In the event of a conflict between the terms under which any
Employee is employed by the Employing Company and the terms of this Agreement,
the former shall prevail unless agreed otherwise by the relevant Employee.
4. DUTIES OF THE SECONDEE COMPANY. Subject to Sections 3.3 and 3.4 above,
the Secondee Company shall observe all the terms under which the Employees are
employed by the Employing Company as if it were the actual employer of the
Employees and it will not do or omit to do anything which would cause the
Employing Company to breach any of its obligations to the Employees.
5. NO EMPLOYMENT. Nothing in this Agreement will create the relationship
of Employer and Employee between the Secondee Company and the Employee, who
shall remain at all times the Employee of the Employing Company, nor will it
create the relationship of Employer and Employee between the Secondee Company
and the Employing Company, who shall be considered for all purposes an
independent contractor.
6. PAYMENT FOR SERVICES.
6.1 The Secondee Company shall pay the Employing Company for the
Employees services to the Secondee Company in accordance with the amounts and
the terms set forth in Schedule 6.1, which may be amended from time to time by
the parties and which by this reference is made part of this Agreement (the
"Service Fees").
6.2 The Employing Company shall submit invoices to the Secondee Company
in respect of the amount due each month and shall show separately all Service
Fees each month payable with respect to each such Employee.
6.3 In addition to the Service Fee payable to the Employing Company
pursuant to Section 6.1 above, the Secondee Company shall pay, discharge,
indemnify and keep the Employing Company indemnified against all expenses and
disbursements which the Secondee Company considers to have been reasonably and
properly incurred by the Employees in connection with the performance and
discharge of their duties on behalf of the Secondee Company and accompanied by
the supporting invoices and receipts in respect of such expenses and
disbursements.
2
<PAGE> 3
7. EARLY TERMINATION
7.1 If at any time during the effectiveness of this Agreement
following the Initial Term:
7.1.1 the Employee commits any act or makes any omission (whether
or not in connection with the Secondment) which would entitle the Secondee
Company to dismiss him summarily if he were employed by the Secondee Company on
the terms and conditions under which he is employed by the Employing Company; or
7.1.2 the Employee's employment with the Employing Company shall
have terminated, including but without limitation, by voluntary resignation from
his employment with the Employing Company; or
7.1.3 the Employee shall neglect or fail or refuse to carry out his
duties in accordance with the Secondment;
then either party hereto shall be entitled to terminate this Agreement with
respect to such Employee by giving summary notice in writing to the other party.
7.2 The Employing Company shall be entitled to terminate this Agreement
without notice and without payment in lieu of notice if at any time following
the Initial Term:
7.2.1 the Secondee Company shall become insolvent or be dissolved
or go into liquidation or enter into or make any arrangement or composition with
its creditors or any of them or suffer any distress or execution to be levied on
its goods or if any receiver or liquidator (or the equivalent) be appointed over
any of its assets or undertakings; or
7.2.2 there is any change in the ownership or control of the
Secondee Company; or
7.2.3 any law, or regulation is enacted or promulgated whereby the
Secondee Company and/or the Employee is restricted or prohibited from carrying
out its duties under this Agreement.
7.3 Notwithstanding anything in this Section 7 to the contrary, in no
event shall the Secondee Company be entitled to terminate this Agreement during
the Initial Term.
8. TERMINATION. Any termination hereunder shall be without prejudice to
either party's rights against the other for any prior breach by such party of
any of its obligations under this Agreement.
9. ASSIGNMENT. Neither party shall assign or delegate any of the duties of
the parties or the Employee hereunder, without the prior written consent of the
other party.
10. DISCIPLINARY MATTERS. If any disciplinary grievance or problem (a
"DISCIPLINARY ISSUE") arises with respect to the Employee during the Secondment,
the Secondee Company will notify the Employing Company of the Disciplinary Issue
and the Employing Company shall then deal with such Disciplinary Issue in
accordance with the Employer's disciplinary procedure.
3
<PAGE> 4
11. NOTICES. All notices and other communications hereunder shall be in
writing and shall be given to the other party in person, transmitted by
facsimile, or mailed by registered or certified mail (return receipt requested)
at the address for such party first set forth above or to such other address as
either party shall have furnished to the other in writing in accordance
herewith. Notices and communications shall be effective on the earlier of (a)
the date actually received, (b) the date that is five (5) days after their
mailing as provided herein, or (c) the date of their transmission via facsimile.
12. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arizona without regard to its
principles of conflicts of laws and each of the parties hereto submits to the
non-exclusive jurisdiction of the Arizona Courts as regards any claim or matter
arising under this Agreement.
13. NO WAIVER. The failure of a party to enforce at any time any of the
provisions of this Agreement or to exercise any right or option provided herein
or to require at any time performance by a party of any of the provisions of
this Agreement, shall not be construed to be a present or future waiver of such
provision. Any such failure shall not effect the validity of this Agreement or
any provision thereof, or the right of a party thereafter to enforce any
provision.
14. MODIFICATION. No waiver, modification, amendment, or discharge of this
Agreement or of any of its provisions shall be valid unless the same is in
writing and signed by both parties.
15. ENTIRE AGREEMENT. This Agreement forms the entire agreement between the
parties and may not be modified or varied except with the consent in writing of
the parties.
[Remainder of Page Intentionally Left Blank]
4
<PAGE> 5
IN WITNESS WHEREOF, this Agreement was entered into the day and year
first above written.
"EMPLOYING COMPANY"
KRIDA OVERSEAS INVESTMENTS
TRADING LIMITED, A CYPRUS ENTITY
By: _____________________________________
Name: ___________________________________
Its: ___________________________________
"SECONDEE COMPANY"
NUPRO INNOVATIONS, INC., A DELAWARE CORPORATION
By: _____________________________________
Name: ___________________________________
Its: ___________________________________
5
<PAGE> 6
SCHEDULE 6.1
To
SECONDMENT AGREEMENT
Between
KRIDA OVERSEAS INVESTMENT TRADING LIMITED
And
NUPRO INNOVATIONS, INC.
<TABLE>
<CAPTION>
Employee's Name Service Fee Payment Term
--------------- ----------- ------------
<S> <C> <C>
Luba Veselinovic $150,000 per year $12,500 per month
</TABLE>
"Employing Company"
KRIDA OVERSEAS INVESTMENTS TRADING
LIMITED, a Cyprus entity
Date: By:
------------- ------------------------------
Name:
------------------------------
Its:
------------------------------
"Secondee Company"
NUPRO INNOVATIONS, INC.,
a Delaware corporation
Date: By:
------------- ------------------------------
Name:
------------------------------
Its:
------------------------------
6
<PAGE> 1
EXHIBIT 6.6
NEITHER THIS OPTION NOR THE COMMON STOCK TO BE ISSUED UPON EXERCISE HEREOF, HAS
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
QUALIFIED UNDER ANY STATE SECURITIES LAW (THE "LAW"), AND THIS OPTION HAS BEEN,
AND THE COMMON STOCK TO BE ISSUED UPON EXERCISE HEREOF WILL BE, ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF. NO SUCH SALE OR OTHER DISPOSITION MAY BE MADE WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND QUALIFICATION UNDER THE LAW
RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO NUPRO
INNOVATIONS INC. AND ITS COUNSEL, THAT SAID REGISTRATION AND QUALIFICATIONS ARE
NOT REQUIRED UNDER THE ACT AND LAW, RESPECTIVELY.
NUPRO INNOVATIONS INC.
STOCK OPTION AGREEMENT
This stock option is being granted pursuant to a resolution of the Board of
Directors of NuPro Innovations Inc. dated June 29, 1998.
1. NOTICE OF STOCK OPTION GRANT
Optionee:
You have been granted an option to purchase Common Stock (the "SHARES") of NuPro
Innovations Inc. (the "COMPANY"), subject to the terms and conditions of this
Option Agreement, as follows:
<TABLE>
<S> <C>
Date of Grant June 29, 1998
Exercise Price Per Share $4.00
Total Number of Shares Granted 25,000
Total Exercise Price $100,000.00
Type of Option Non-qualified Stock Option
Term/Expiration Date December 31, 2002
</TABLE>
Vesting Schedule:
This Option may be exercised, in whole or in part, subject to the terms of this
Agreement, at any time after the Date of Grant and prior to the Expiration Date.
Termination Period:
This Option may be exercised for three months after termination of the
directorship, or such longer period as may be applicable upon death or
disability of Optionee as provided herein, but in no event later than the
Term/Expiration Date as provided above.
<PAGE> 2
2. AGREEMENT
(a) Grant of Option. The Company hereby grants to the Optionee
named in Section 1 (the "OPTIONEE"), an option (the "OPTION")
to purchase a total number of shares of Common Stock (the
"SHARES") set forth in Section 1, at the exercise price per
share set forth in Section 1 (the "EXERCISE PRICE") subject to
the terms of this Stock Option Agreement (the "AGREEMENT").
(b) Exercise of Option. This Option shall be exercisable during
its term in accordance with the Exercise Schedule set out in
the Notice of Grant as follows:
(c) Right to Exercise.
(i) This Option may not be exercise for a fraction of a
share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the
Option is governed by Sections 6, 7 and 8 below.
(iii) In no event may this Option be exercised after the
date of expiration of the term of this Option as set
forth in the Notice of Grant.
(d) Method of Exercise. This Option shall be exercisable by
written notice (in the form attached as Exhibit A) which shall
state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and
such other representations and agreements as to the holder's
investment intent with respect to such shares of Common Stock
as may be required by the Company. Such written notice shall
be signed by the Optionee and shall be delivered in person or
by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price.
This Option shall be deemed to be exercised upon receipt by
the Company of such written notice accompanied by the Exercise
Price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all
relevant provisions of law and the requirements of any stock
exchange upon which the Shares may then be listed. Assuming
such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under
the Securities Act of 1933, as amended ("1933 ACT"), at the time this
Option is exercised, Optionee shall, if required by the Company,
concurrently with the exercise of all or any portion of this Option,
deliver to the Company his Investment Representation Statement in the
form attached hereto as Exhibit B.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
(a) cash; or
2
<PAGE> 3
(b) check, or
(c) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of
a Company option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (B) have a
fair market value on the date of surrender equal to the
Exercise Price of the Shares as to which the Option is being
exercised; or
(d) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker,
if applicable, shall require to effect an exercise of the
Option and delivery to the Company of the sale or loan
proceeds required to pay the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation. As a
condition to the exercise of this Option, the Company may require
Optionee to make any representation and warranty to the Company as may
be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event the Optionee's continuous
status as a Director terminates, Optionee may, to the extent otherwise
so entitled at the date of such termination (the "TERMINATION DATE"),
exercise this Option for a period of three months after the Termination
Date. To the extent that Optionee was not entitled to exercise this
Option at the Termination Date or if Optionee does not exercise this
Option within the three-month period after the Termination Date, the
Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, in the event of termination of an Optionee's consulting
relationship or continuous status as a Director as a result of his or
her disability, Optionee may, but only within 180 days from the date of
such termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of
such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
8. DEATH OF OPTIONEE. In the event of termination of Optionee's continuous
status as a Director or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within 180 days
following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 10
below), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent
the Optionee could exercise the Option at the date of death.
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only
by him or her. The terms of this Option
3
<PAGE> 4
shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term set
out in Section 1, and may be exercised during such term only in
accordance with the terms of this Option.
11. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercising a Non-qualified Option, he or she will recognize income for
tax purposes in an amount equal to the excess of the then fair market
value of the Shares over the exercise price. However, the timing of
this income recognition may be deferred for up to six months if
Optionee is subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"). If the Optionee is an employee,
the Company will be required to withhold from Optionee's compensation,
or collect from Optionee and pay to the applicable taxing authorities
an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition
of an Incentive Stock Option. The Optionee shall satisfy his or her tax
withholding obligation arising upon the exercise of this Option out of
Optionee's compensation or by payment to the Company.
12. "MARKET STAND-OFF" AGREEMENT. Optionee hereby agrees, if requested by
the Company and an underwriter of Common Stock (or other equity
securities) of the Company, not to sell or otherwise transfer or
dispose of any Common Stock (or other equity securities) of the Company
held by the Optionee during the 180 day period following the date of
the final prospectus of the Company, filed under the 1993 Act; provided
that such agreement will only apply to the first registration statement
of the Company, including any such registration statement registering
shares to be sold on Optionee's behalf to the public in an underwritten
offering. The Company may impose "stop transfer" instructions with
respect to any shares held by Optionee subject to the foregoing
restriction until the end of such 180 day period.
NUPRO INNOVATIONS, INC., a Delaware corporation
By:
Its:
Optionee has reviewed this Option in its entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Company
upon any questions arising under this Option.
Dated:
Optionee
4
<PAGE> 5
EXHIBIT A
NUPRO INNOVATIONS INC.
5151 East Broadway Boulevard, Suite 730
Tucson, Arizona 85711
EXERCISE NOTICE
1. EXERCISE OF OPTION. Effective as of today, ___________, 19__, the
undersigned ("OPTIONEE") hereby elects to exercise Optionee's option to
purchase _________ shares of the Common Stock (the "SHARES") of NuPro
Innovations Inc. (the "COMPANY") under and pursuant to the Stock Option
Agreement dated June 29, 1998 (the "OPTION AGREEMENT").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and agrees to abide
by and be bound by its terms and conditions.
3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no
right to vote or receive dividends or any other rights as a shareholder
shall exist with respect to the optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued)
such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued.
Optionee shall enjoy rights as a shareholder until such time as
Optionee disposed of the Shares. Upon such exercise, Optionee shall
have no further rights as a holder of the Shares so purchased except
the right to receive payment for the Shares so purchased in accordance
with the provisions of this Agreement, and Optionee shall forthwith
cause the certificate(s) evidencing the Shares so purchased to be
surrendered to the Company for transfer or cancellation.
4. TAX CONSULTATION. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any
tax consultants Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying
on the Company for any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) Legends. Optionee understands and agrees that the Company
shall cause the legends set forth below or legends
substantially equivalent thereto, to be placed
5
<PAGE> 6
upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by state
or federal securities laws.
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"1933 ACT") OR ANY STATE SECURITIES LAWS AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE
1933 ACT OR SUCH APPLICABLE STATE SECURITIES LAWS,
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
IN COMPLIANCE THEREWITH.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
ensure compliance with the restrictions referred to herein,
the Company may issue appropriate "STOP TRANSFER" instructions
to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of
this Agreement or (ii) to treat as owner of such Shares or to
accord the right to vote or pay dividends to any purchaser or
other transferee to whom such Shares shall have been so
transferred.
6. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this
Agreement shall be binding upon Optionee and his or her heirs,
executors, administrators, successors and assigns.
7. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to
the Company's Board of Directors, which shall review such dispute at
its next regular meeting. The resolution of such a dispute by the Board
or committee shall be final and binding on the Company and on Optionee.
8. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
excluding that body of law pertaining to conflicts of law. Should any
provision of this Agreement be determined by a court of law to be
illegal or unenforceable, the other provisions shall nevertheless
remain effective and shall remain enforceable.
6
<PAGE> 7
9. NOTICES. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States mail by certified mail, with postage
and fees prepaid, addressed to the other party at its address as shown
below beneath its signature, or to such other address as such party may
designate in writing from time to time to the other party.
10. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
11. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
12. ENTIRE AGREEMENT. The Stock Option Agreement is incorporated herein by
reference. This Agreement, the Stock Option Agreement and the
Investment Representation Statement constitute the entire agreement of
the parties and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject
matter hereof, and is governed by Delaware law except for that body of
law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: NUPRO INNOVATIONS INC.
By:
Its:
Signature
Address:
7
<PAGE> 8
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : NuPro Innovations Inc.
SECURITY : Common Stock
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Optionee is acquiring these securities for investment for Optionee's
own account only and not with a view to, or for resale in connection
with, any "DISTRIBUTION" thereof within the meaning of the Securities
Act of 1933, as amended (the "1933 ACT").
(b) Optionee acknowledges and understands that the securities constitute
"RESTRICTED SECURITIES" under the 1933 Act and have not been registered
under the 1933 Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature
of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities
and Exchange Commission, the statutory basis for such exemption may be
unavailable if Optionee's representation was predicated solely upon a
present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or
until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future.
Optionee further understands that the Securities must be held
indefinitely unless they are subsequently registered under the 1933 Act
or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to
register the securities. Optionee understands that the certificate
evidencing the securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or
such registration is not required under federal and applicable state
securities laws, in the opinion of counsel satisfactory to the Company.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the 1933 Act, which, in substance, permit limited
public resale of "RESTRICTED SECURITIES" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to
the satisfaction of certain conditions. Rule 701 provides that if the
8
<PAGE> 9
issuer qualifies under Rule 701 at the time of the grant of the Option
to the Optionee, the exercise will be exempt from registration under
the 1933 Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, ninety (90) days thereafter (or such longer period as any market
stand-off agreement may require) the securities exempt under Rule 701
may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including: (1) the resale being made through a
broker in an unsolicited "BROKER'S TRANSACTION" or in transactions
directly with a market marker (as said term is defined under the
Securities Exchange Act of 1934); and, in the case of an affiliate, (2)
the availability of certain public information about the Company, (3)
the amount of securities being sold during any three month period not
exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the securities may be resold in
certain limited circumstances subject to the provisions of Rule 144,
which requires the resale to occur not less than two years after the
party has purchased, and made full payment for, within the meaning of
Rule 144, the securities to be sold; and, in the case of an affiliate,
or of a non-affiliate who has held the securities less than three
years, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under
the 1933 Act, compliance with Regulation A, or some other registration
exemption will be required, and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and
Exchange Commission has expressed its opinion that persons proposing to
sell private placement securities other than in a registered offering
and otherwise than pursuant to Rules 144 or 701 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their
own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee
Date: ____________, 19__
9
<PAGE> 1
EXHIBIT 6.7
Neither this Option nor the Common Stock to be issued upon exercise hereof, has
been registered under the Securities Act of 1933, as amended (the "Act"), or
qualified under any state securities law (the "Law"'), and this Option has been,
and the Common Stock to be issued upon exercise hereof will be, acquired for
investment and not with a view to, or for resale in connection with, any
distribution thereof. No such sale or other disposition may be made without an
effective registration statement under the Act and qualification under the law
related thereto or an opinion of counsel reasonably satisfactory to NuPro
Innovations Inc. and its counsel that said registration and qualifications are
not required under the Act and Law, respectively.
NUPRO INNOVATIONS INC.
STOCK OPTION AGREEMENT
This stock option is being granted pursuant to a resolution of the Board of
Directors of NuPro Innovations Inc. dated June 29, 1998.
1. NOTICE OF STOCK OPTION GRANT
Optionee:
You have been granted an option to purchase Common Stock (the "SHARES") of NuPro
Innovations Inc. (the "COMPANY"), subject to the terms and conditions of this
Option Agreement, as follows:
<TABLE>
<S> <C>
Date of Grant: June 29, 1998
Exercise Price per Share: $4.00
Total Number of Shares Granted: 15,000
Total Exercise Price $60,000.00
Type of Option: Non-qualified Stock Option
Term/Expiration Date: December 31, 2000
</TABLE>
Vesting Schedule:
This Option may be exercised, in whole or in part, subject to the terms of this
Agreement, at any time after the Date of Grant and prior to the Expiration Date.
Termination Period:
This Option may be exercised for three months after termination of the advisory
relationship, or such longer period as may be applicable upon death or
disability of Optionee as provided herein, but in no event later than the
Term/Expiration Date as provided above.
2. AGREEMENT
(a) Grant of Option. The Company hereby grants to the Optionee named in
Section 1 (the "OPTIONEE"), an option (the "OPTION") to purchase a
total number of shares of Common
<PAGE> 2
Stock (the "SHARES") set forth in Section 1, at the exercise price per
share set forth in Section 1 (the "EXERCISE PRICE") subject to the
terms of this Stock Option Agreement (the "AGREEMENT").
(b) Exercise of Option. This Option shall be exercisable during its term in
accordance with the Exercise Schedule set out in the Notice of Grant as
follows:
(c) Right to Exercise.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is
governed by Sections 6, 7 and 8 below.
(iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the
Notice of Grant.
(d) Method of Exercise. This Option shall be exercisable by written notice
(in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such
shares of Common Stock as may be required by the Company. Such written
notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written
notice shall be accompanied by payment of the Exercise Price. This
Option shall be deemed to be exercised upon receipt by the Company of
such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which
the Shares may then be listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to the Optionee on
the date on which the Option is exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable pursuant to
the exercise of this Option have not been registered under the Securities Act of
1933, as amended ("1933 ACT"), at the time this Option is exercised, Optionee
shall, if required by the Company, concurrently with the exercise of all or any
portion of this Option, deliver to the Company his Investment Representation
Statement in the form attached hereto as Exhibit B.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee.
(a) cash, or
(b) check; or
(c) surrender of other shares of Common Stock of the Company which (A) in
the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on
the date of surrender, and (B) have a fair market value on the date of
surrender equal to the Exercise Price of the Shares as to which the
Option is being exercised, or
2
<PAGE> 3
(d) delivery of a properly executed exercise notice together with such
other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the
Company of the sale or loan proceeds required to pay the exercise
price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of
such Shares upon such exercise or the method of payment of consideration for
such shares would constitute a violation of any applicable federal or state
securities or other law or regulation, As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event the Optionee's continuous status as
an Advisor terminates, Optionee may, to the extent otherwise so entitled at the
date of such termination (the "TERMINATION DATE"), exercise this Option for a
period of three months after the Termination Date. To the extent that Optionee
was not entitled to exercise this Option at the Termination Date or if Optionee
does not exercise this Option within the three-month period after the
Termination Date, the Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6 above, in
the event of termination of an Optionee's consulting relationship or continuous
status as an Advisor as a result of his or her disability, Optionee may, but
only within 180 days from the date of such termination (and in no event later
than the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
8. DEATH OF OPTIONEE. In the event of termination of Optionee's continuous
status as an Advisor or Consultant as a result of the death of Optionee, the
Option may be exercised at any time within 180 days following the date of death
(but in no event later than the date of expiration of the term of this Option as
set forth in Section 10 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent the Optionee could exercise the Option at the date of death.
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by him or her. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term set out in
Section 1, and may be exercised during such term only in accordance with the
terms of this Option.
11. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon exercising
a Non-qualified Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then fair market value of the Shares over the
exercise price.
3
<PAGE> 4
However, the timing of this income recognition may be deferred for up to six
months if Optionee is subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). If the Optionee is an employee, the
Company will be required to withhold from Optionee's compensation, or collect
from Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income. Additionally, the Optionee may at some
point be required to satisfy tax withholding obligations with respect to the
disqualifying disposition of an Incentive Stock Option. The Optionee shall
satisfy his or her tax withholding obligation arising upon the exercise of this
Option out of Optionee's compensation or by payment to the Company.
12. "MARKET STAND-OFF" AGREEMENT. Optionee hereby agrees, if requested by the
Company and an underwriter of Common Stock (or other equity securities) of the
Company not to sell or otherwise transfer or dispose of any Common Stock (or
other equity securities) of the Company held by the Optionee during the 180 day
period following the date of the final prospectus of the Company, filed under
the 1993 Act; provided that such agreement will only apply to the first
registration statement of the Company, including any such registration statement
registering shares to be sold on Optionee's behalf to the pubic in an
underwritten offering. The Company may impose "stop-transfer" instructions with
respect to any shares held by Optionee subject to the foregoing restriction
until the end of such 180 day period.
NUPRO INNOVATIONS INC.,
a Delaware corporation
By:
Its:
Optionee has reviewed this Option in its entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option, Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Company
upon any questions arising under this Option.
Dated: ____________________
Optionee
4
<PAGE> 5
EXHIBIT A
NUPRO INNOVATIONS INC.
5151 East Broadway Blvd., Suite 730
Tucson, Arizona 85711
EXERCISE NOTICE
1. EXERCISE OF OPTION. Effective as of today, _______________, 19___, the
undersigned ("OPTIONEE") hereby elects to exercise Optionee's option to purchase
shares of the Common Stock (the "SHARES") of NuPro Innovations Inc. (the
"COMPANY") under and pursuant to the Stock Option Agreement dated June 29, 1998
(the "OPTION AGREEMENT").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Option Agreement and agrees to abide by and be
bound by its terms and conditions.
3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing such Shares is
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly after the Option
is exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued.
Optionee shall enjoy rights as a shareholder until such time as Optionee
disposes of the Shares or the Company and/or its assignee(s) exercises the Right
of First Refusal hereunder. Upon such exercise, Optionee shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the
Shares so purchased to be surrendered to the Company for transfer or
cancellation.
4. TAX CONSULTATION. Optionee understands that Optionee may suffer adverse tax
consequences as a result of Optionee's purchase or disposition of the Shares.
Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) Legends. Optionee understands and agrees that the Company shall cause
the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of
the Shares together with any other legends that may be required by
state or federal securities laws:
A-1
<PAGE> 6
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT") OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE 1933 ACT OR SUCH APPLICABLE STATE
SECURITIES LAWS, OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may
issue appropriate "stop-transfer" instructions to its transfer agent,
if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to transfer
on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat
as owner of such Shares or to accord the right to vote or pay dividends
to any purchaser or other transferee to whom such Shares shall have
been so transferred.
6. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under this
Agreement to single or multiple assignees, and this Agreement shall inure to the
benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
7. INTERPRETATION. Any dispute regarding the interpretation of this Agreement
shall be submitted by Optionee or by the Company forthwith to the Company's
Board of Directors, which shall review such dispute at its next regular meeting.
The resolution of such a dispute by the Board or committee, shall be final and
binding on the Company and on Optionee.
8. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
9. NOTICES. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States mail by certified mail, with postage and fees prepaid,
addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
A-2
<PAGE> 7
10. FURTHER INSTRUMENTS. The parties agree to execute such further instruments
and to take such further action as may be reasonably necessary to carry out the
purposes and intent of this Agreement,
11. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
12. ENTIRE AGREEMENT. The Stock Option Agreement is incorporated herein by
reference. This Agreement, the Stock Option Agreement and the Investment
Representation Statement constitute the entire agreement of the parties and
supersede in their entirety all prior undertakings and agreements of the Company
and Optionee with respect to the subject matter hereof, and is governed by
Delaware law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: NUPRO INNOVATIONS INC.
By:
(Signature) Its:
Address:
A-3
<PAGE> 8
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : NuPro Innovations Inc.
SECURITY : Common Stock
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Optionee is acquiring these securities for investment for Optionee's
own account only and not with a view to, or for resale in connection
with, any "DISTRIBUTION" thereof within the meaning of the Securities
Act of 1933, as amended (the "1933 ACT").
(b) Optionee acknowledges and understands that the securities constitute
"RESTRICTED SECURITIES" under the 1933 Act and have not been registered
under the 1933 Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature
of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities
and Exchange Commission, the statutory basis for such exemption may be
unavailable if Optionee's representation was predicated solely upon a
present intention to hold these Securities for the minimum capital
gains period specified under tax statutes, for a deferred sale, for or
until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future.
Optionee further understands that the Securities must be held
indefinitely unless they are subsequently registered under the 1933 Act
or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to
register the securities. Optionee understands that the certificate
evidencing the securities will be imprinted with a legend which
prohibits the transfer of the Securities unless they are registered or
such registration is not required under federal and applicable state
securities laws, in the opinion of counsel satisfactory to the Company.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the 1933 Act, which, in substance, permit limited
public resale of "RESTRICTED SECURITIES" acquired, directly or
indirectly from the issuer thereof, in a non-public
B-1
<PAGE> 9
offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of the
grant of the Option to the Optionee, the exercise will be exempt from
registration under the 1933 Act. In the event the Company becomes
subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter (or such
longer period as any market stand-off agreement may require) the
securities exempt under Rule 701 may be resold, subject to the
satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"BROKER'S TRANSACTION" or in transactions directly with a market maker
(as said term is defined under the Securities Exchange Act of 1934);
and, in the case of an affiliate, (2) the availability of certain
public information about the Company, (3) the amount of securities
being sold during any three-month period not exceeding the limitations
specified in Rule 144(e), and (4) the timely filing of a Form 144, if
applicable.
In the event that the Company does not qualify under Rule 701 at the
time of, grant of the Option, then the securities may be resold in
certain limited circumstances subject to the provisions of Rule 144,
which requires the resale to occur not less than two years after the
party has purchased, and made full payment for, within the meaning of
Rule 144, the securities to be sold, and, in the case of an affiliate,
or of a non-affiliate who has held the securities less than three
years, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under
the 1933 Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and
Exchange Commission has expressed its opinion that persons proposing to
sell private placement securities other than in a registered offering
and otherwise than pursuant to Rules 144 or 701 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their
own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee
Date: _________________, ______
B-2
<PAGE> 1
5151 E. Broadway Building
S&D DRAFT: 12/14/96
EXHIBIT 6.8
OFFICE BUILDING LEASE
Between
EAST BROADWAY 5151 LIMITED PARTNERSHIP, Landlord
And
LUBA VESELINOVIC AND ELKE VESELINOVIC, H&W,
DBA, NUPRO INNOVATIONS INC., Tenant
Premises:
Suite 730
5151 E. Broadway Boulevard
Tucson, Arizona
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OFFICE BUILDING LEASE
5151 E. Broadway Boulevard
Tucson, Arizona
THIS OFFICE BUILDING LEASE (this "Lease") is made as of this 17th day of
December, 1996 by and between Broadway 5151 Associates Limited Partnership
("Landlord"), a Delaware Limited Partnership, having an office c/o Feldman
Equities, 120 West 45th Street, 24th Floor, New York, New York 10036 and Luba
Veselinovic and Elke Veselinovic, Husband & Wife, dba NuPro Innovations Inc.
("Tenant"), having a principal place of business at 5151 E. Broadway Blvd.,
Suite 730, Tucson, Arizona 85711.
WITNESSETH:
The parties hereto, for themselves, their heirs, distributees, executors,
administrators, legal representatives, successors and assigns, hereby covenant
and agree as follows:
ARTICLE 1
DEFINITIONS, DEMISE, PREMISES, TERM, RENT
SECTION 1.01 DEFINITIONS. The following terms shall have the meanings
hereinafter set forth throughout this Lease.
(A) "Base Expenses" shall mean the calendar year 1997 operating
expenses.
(B) "Base Rent" shall mean the base rent payable by Tenant during the
Term, as follows:
<TABLE>
<CAPTION>
ANNUAL SQUARE PAYMENTS
DATES FOOT RATE ANNUAL MONTHLY
<S> <C> <C> <C>
January 1, 1997 - December 31, $16.50 $20,988.00 $1,749.00
1997
January 1, 1998 - December 31, $17.16 $21,827.52 $1,818.96
1998
January 1, 1999 - December 31, $17.85 $22,705.20 $1,892.10
1999
</TABLE>
(C) "Broker" shall mean TERCO, Scott Jensen.
(D) "Building" shall mean, collectively, the Office Building (as
defined in Section 1.01(H) hereof), the Property (as defined in Section 1.01(L)
hereof), and any other building or improvements now or hereafter constructed on
the Property.
(E) "Commencement Date" shall mean January 1, 1997.
(F) "Expiration Date" shall mean December 31, 1999.
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(G) "Landlord's Notice Address" shall mean Broadway 5151 Associates
Limited Partnership, 5151 E. Broadway Blvd., Suite 125, Tucson, Arizona 85711,
Attention: Property Manager for 5151 E. Broadway Building, with a copy of each
Notice (as defined in Section 8.04 hereof) to Landlord to be sent to (i)
Broadway 5151 Associates Limited Partnership, c/o Feldman Equities, 120 West
45th Street, 24th Floor, New York, New York 10036, Attention: Asset Manager for
5151 E. Broadway Building and (ii) only as to notices commencing or relating to
any action, suit or proceeding against Landlord arising hereunder, also to Van
Waganer & Erhart, 649 N. 3rd Avenue, Phoenix, Arizona 85004 Attention: Jeff
Erhart, Esq.
(H) "Office Building" shall mean that certain building and other
improvements having a street address of 5151 E. Broadway Boulevard, Tucson,
Arizona 85711.
(I) "Parking Spaces" shall mean two (2) parking spaces in the parking
facility, if any, from time to time associated with the Building which shall be
designated spaces in the enclosed portion of the parking facility. One (1) space
shall be free of charge during the first year of the lease term and thereafter
at $25.00 per space per month, plus applicable rental taxes.
(J) "Permitted Uses" shall mean general office use in keeping with the
class and character of the Office Complex.
(K) "Premises" shall mean that space shown cross-hatched on the floor
plan(s) annexed hereto as EXHIBIT A, known as Suite 730, located on the seventh
(7th) floor of the Office Building, containing approximately 1,272 rentable
square feet.
(L) "Property" shall mean that certain real property on which the
Office Building is situated, located in the City of Tucson, County of Pima and
State of Arizona.
(M) "Rent Payment Address" shall mean Broadway 5151 Associates Limited
Partnership, c/o Feldman Equities, 120 West 45th Street, 24th Floor, New York,
New York 10036.
(N) "Security Deposit" shall mean One Thousand Seven Hundred Forty-Nine
and 00/100 Dollars ($1,749.00).
(O) "Tenant's Notice Address" shall mean 5151 E. Broadway Blvd., Suite
730, Tucson, Arizona 85711 Attention: Luba & Elke Veselinovic.
(P) "Term" shall mean the period commencing on the Commencement Date
and ending on the Expiration Date, being approximately three (3) years.
SECTION 1.02 DEMISE; USE. Subject to and upon the terms and conditions
set forth herein, Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the Premises located in the Office Building for the period commencing
on the Commencement Date and ending on the Expiration Date. The Premises shall
be used and occupied by Tenant solely for the Permitted Uses, and for no other
purpose without the prior written consent of Landlord, which consent may be
withheld for any or for no reason.
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SECTION 1.03 COMMENCEMENT DATE; CERTAIN OBLIGATIONS EFFECTIVE PRIOR TO
THE COMMENCEMENT DATE.
(A) If the Commencement Date occurs on a date other than the first day
of a calendar month or if the Term expires or is terminated on a day other than
the last day of a calendar month, the Commencement Date of the term of this
Lease shall be the first day of the next succeeding calendar month and the
expiration date shall be extended accordingly, Base Rent and any Additional Rent
(as defined in Section 1.05 hereof) payable hereunder shall be prorated for such
partial month on the basis of a thirty (30) day month. Within ten (10) days
after the Commencement Date, Tenant shall execute an acceptance letter
substantially in the form of EXHIBIT C annexed hereto (the "Acceptance Letter")
setting forth the Commencement Date and other information required therein, but
the failure by Tenant to execute the Acceptance Letter shall not affect the
Commencement Date.
(B) In the event Landlord shall not deliver possession of all or any
portion of the Premises to Tenant on or before the anticipated commencement date
for any reason whatsoever, this Lease shall not be void or voidable and Landlord
shall not be deemed in default or otherwise liable to Tenant for any claims,
damages, or liabilities in connection therewith or by reason thereof. If any
delay in delivery of possession of the Premises is caused by or attributable to
Tenant, its servants, employees, agents or independent contractors, the
Substantial Completion Date shall nonetheless be deemed to have occurred as
determined in accordance with the provisions of Section 2.01(F) and Tenant's
obligations under this Lease to pay Base Rent, the Operating Payment (as defined
in Section 3.01 hereof) and, unless otherwise specified to the contrary herein,
any other Additional Rent, shall commence on the date that Landlord would have
delivered possession of the Premises to Tenant.
(C) If the Commencement Date is a date certain and/or if Tenant takes
possession or enters into occupancy of the Premises prior to the Commencement
Date for any reason, such possession or occupancy shall be pursuant to all of
the terms, covenants and conditions of this Lease, excluding the obligation to
pay Base Rent, the Operating Payment and, unless otherwise specified to the
contrary herein, any other Additional Rent.
SECTION 1.04 BASE RENT. Tenant shall pay Landlord at the Rent Payment
Address set forth in Section 1.01(M) hereof or at such other address as may be
designated by Landlord, monthly, in advance, on the first day of each calendar
month during the Term, monthly installments of Base Rent, without notice or
demand and without any setoff, offset, abatement or deduction whatsoever.
Notwithstanding the foregoing, upon the execution of this Lease, Tenant shall
pay Landlord the first installment of Base Rent for the first full calendar
month after the Commencement Date and Landlord hereby acknowledges receipt of
such payment, subject to collection.
SECTION 1.05 ADDITIONAL RENT. All sums other than Base Rent payable by
Tenant under this Lease shall be deemed additional rent ("Additional Rent"),
regardless of whether any such sum is expressly characterized as Additional Rent
herein, and shall be payable on demand unless other payment dates are set forth
herein. Landlord shall have the same rights and remedies with respect to the
failure by Tenant to pay Additional Rent as Landlord has with respect to the
failure by Tenant to pay Base Rent.
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ARTICLE 2
ALTERATIONS AND ADDITIONS
SECTION 2.01 LANDLORD'S WORK. None - Tenant accepts the Premises in its
"as-is" condition with Landlord to professionally clean all carpets, touch-up
wall paint as necessary and deliver all mechanical, electrical and plumbing
systems in a good working condition.
(A) Landlord shall undertake and complete the improvements shown in the
construction documents annexed hereto as EXHIBIT B (the "Drawings") in
accordance with the standards for the Building set forth in EXHIBIT D annexed
hereto ("Landlord's Building Standards"), excepting only minor variations as
Landlord may deem advisable ("Landlord's Work").
(B) If the Drawings and/or Landlord's Building Standards are not
annexed hereto, Tenant shall submit to Landlord within ten (10) days after the
date hereof all information necessary to prepare and complete the Drawings. The
Drawings and Landlord's Building Standards shall be prepared by Landlord as soon
as reasonably practicable after submission by Tenant of all information
necessary to prepare the same and shall be approved and signed by Tenant within
five (5) business days after submission by Landlord. If Tenant fails to deliver
to Landlord its signed approval of the Drawings and Landlord's Building
Standards within five (5) business days after the same are submitted to Tenant,
the date upon which Landlord's Work shall be deemed substantially completed for
purposes of determining the Commencement Date shall be accelerated by one day
for each day beyond such five (5) day period by which Tenant so delays. If
Tenant fails to (i) deliver to Landlord the information necessary to prepare and
complete the Drawings within thirty (30) days after the date hereof or (ii) sign
and approve the Drawings and Landlord's Building Standards within thirty (30)
days after Landlord has delivered the same to Tenant, then Landlord, at its sole
option, may terminate this Lease. In such event, Tenant shall be liable for
damages to the extent set forth in Section 7.02(C)(1) hereof (with, for the
purposes of computing such damages, the Commencement Date to be deemed to have
occurred on the anticipated commencement date referred to in Section 1.01(E))
and Landlord may apply the Security Deposit and any prepaid rent in satisfaction
of such damages. No material changes or modifications to the approved Drawings
and Landlord's Building Standards shall be made unless by written change order
signed by Landlord and Tenant. All costs attributable to change orders requested
or approved by Tenant shall be borne by Tenant with no credit to Tenant for
items contained in Landlord's Building Standards which are omitted or not
installed.
(C) Landlord shall pay for the work depicted on the Drawings to the
extent of the actual cost for the carpet cleaning, touch-up painting as required
and delivery of mechanical and electrical systems in good working condition
("Landlord's Contribution"). Tenant shall pay all costs in excess of Landlord's
Contribution ("Tenant's Contribution") within ten (10) days after submission by
Landlord to Tenant of an invoice for the amount(s) then due and payable.
(D) If Landlord shall be delayed in substantially completing Landlord's
Work as a result of any act, neglect, failure or omission of Tenant, its agents,
servants, employees,
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contractors, or sub-contractors such delay shall be deemed a "Tenant Delay". If
the Substantial Completion Date shall be delayed by reason of a Tenant Delay,
the Premises shall be deemed substantially completed for the purposes of
determining the Commencement Date as of the date that the Premises would have
been substantially completed but for such Tenant Delay as determined by
Landlord.
(E) Tenant shall pay to Landlord a sum equal to any additional cost to
Landlord in completing Landlord's Work resulting from any Tenant Delay if, as a
result thereof, the aggregate cost to complete Landlord's Work would exceed
Landlord's Contribution. Any such sums shall be in addition to any sums payable
pursuant to any other Subsection of this Section 2.01 and shall be paid to
Landlord within ten (10) days after Landlord submits an invoice to Tenant
therefor, whether or not the Term of this Lease shall have commenced. If Tenant
defaults in the payment thereof, Landlord shall (in addition to all other
remedies) have the same rights as in the event of default by Tenant in the
payment of Base Rent and Landlord shall have no obligation to continue the
performance of Landlord's Work until Tenant shall have cured such default.
(F) Landlord shall notify Tenant of the anticipated date of substantial
completion of Landlord's Work (the "Substantial Completion Date") in a notice
given at least five (5) days prior to the Substantial Completion Date stated
therein. The phrase "substantial completion" shall mean that, with the exception
of punch-list items which would not prevent the use or occupancy of the Premises
for the Permitted Uses, Landlord's Work shall have been completed in accordance
with the Drawings and all mechanical systems serving or affecting the Premises
shall then be in working order. Landlord and Tenant shall thereupon set a
mutually convenient time for Tenant's architect and engineer, and Landlord and
Landlord's contractor to inspect the Premises and Landlord's Work, at which time
Tenant's architects and engineers shall prepare and submit to Landlord a
punch-list of items to be completed. Upon completion of the inspection, Tenant
shall acknowledge in writing that substantial completion of Landlord's Work has
occurred, subject to any punch-list items to be completed. Landlord shall
endeavor to complete the punch list items within thirty (30) days thereafter. In
the event Tenant shall fail to confer with Landlord with respect to the
substantial completion of Landlord's Work within five (5) days after Landlord's
notice setting forth the Substantial Completion Date, Landlord's Work shall be
deemed completed and satisfactory in all respects and the Commencement Date
shall be deemed to have occurred on the date set forth in Landlord's notice as
the Substantial Completion Date. In the event of any dispute, a certificate of
Landlord's architect or engineer to the effect that the Premises are
substantially complete and in the condition required by this Lease shall be
conclusive.
(G) By execution of the Acceptance Letter, Tenant shall be deemed
conclusively to have accepted the Premises and to have acknowledged that the
Premises are in the condition required by the Drawings and Landlord's Building
Standards, except as to incomplete items of Landlord's Work then specified in
the Acceptance Letter. As to any such items, Landlord shall have a reasonable
time following receipt of the Acceptance Letter within which to correct same,
but in no event shall Landlord be obligated to repair latent defects beyond a
period of six (6) months after the Commencement Date.
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SECTION 2.02 ALTERATIONS; LIENS.
(A) Except for Landlord's Work, if any, Tenant shall accept the
Premises in its present "AS IS" condition.
(B) Tenant shall not make or allow to be made any alterations,
additions or improvements (collectively, "Alterations") to the Premises or any
part thereof without the prior written consent of Landlord. If Landlord shall
consent to any Alterations to the Premises, such Alterations shall be subject to
any terms, covenants, conditions and agreements which Landlord may prescribe and
shall be at Tenant's expense. Upon the Expiration Date or sooner termination of
the Term, any Alterations to the Premises, excepting movable furniture and trade
fixtures, shall become the property of Landlord and shall be surrendered with
the Premises, unless Landlord shall direct Tenant to remove any such
Alterations, in which event Tenant shall remove same at its expense and restore
the Premises to the condition existing prior to such Alterations, normal wear
and tear excepted.
(C) Tenant shall keep the Premises and the Building free from any liens
arising out of any work performed, materials furnished, or obligations incurred
on behalf of Tenant. At Landlord's option, Tenant shall provide, at Tenant's
expense, a payment and performance and/or completion bond in an amount equal to
one and one-half (1-1/2) times the estimated cost of any improvements, additions
or alterations to the Premises to be made by Tenant. Tenant shall cause all
liens filed against the Premises or the Building by reason of any acts or
omissions performed by or on behalf of the same to be canceled and discharged of
record by bond or otherwise within ten (10) days after the filing thereof.
Should Tenant fail to discharge such lien within such ten (10) day period,
Landlord may cure same, in which event Tenant shall reimburse Landlord, on
demand, as Additional Rent, for the amount of the lien or the amount of the
bond, plus all administrative costs incurred by Landlord in connection
therewith. Tenant and any subtenants shall have no power to do any act or make
any contract which may create or be the foundation of any lien, mortgage or
other encumbrance upon the reversionary or other estate of Landlord, or any
interest of Landlord in the Premises. NOTICE IS HEREBY GIVEN THAT LANDLORD IS
NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED TO
TENANT OR ANYONE HOLDING THE PREMISES, AND THAT NO MECHANICS' OR OTHER LIENS FOR
ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF
LANDLORD IN AND TO THE PREMISES OR THE BUILDING.
ARTICLE 3
OPERATING EXPENSES
SECTION 3.01 EXPENSE STOP. The term "Base Operating Year" shall mean the
calendar year 1997. In the event that Operating Expenses (as defined in Section
3.04(A) hereof) for any calendar year during the Term or any renewal or
extension thereof on a per rentable square foot basis exceed the Base Operating
Year, Tenant shall pay to Landlord, as Additional Rent, the product of (i) the
amount by which Operating Expenses for the Building on a per rentable square
foot basis exceed Base Expenses and (ii) the number of rentable square feet in
the Premises as
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specified in Section 1.01(K) hereof (the "Operating Payment"). The Operating
Payment shall be made pursuant to the provisions of Section 3.02 hereof.
SECTION 3.02 ESTIMATES AND PAYMENTS. Tenant agrees to pay monthly, as
Additional Rent, one-twelfth (1/12) of Landlord's estimate of Tenant's Operating
Payment for the then current calendar year. Landlord will give Tenant written
notice from time to time of such estimated amounts, and Tenant shall pay such
amounts monthly to Landlord in the same manner and at the same time as Base
Rent. As soon as is reasonably practicable following the end of each calendar
year, Landlord will submit to Tenant a statement showing in reasonable detail
Operating Expenses on a per rentable square foot basis for the preceding
calendar year along with a reconciliation of estimated payments made by Tenant
as compared to Tenant's actual Operating Payment for such calendar year (each,
an "Operating Statement"). Within thirty (30) days after receipt of an Operating
Statement, Tenant shall pay to Landlord any additional amounts owed to Landlord
as shown on the Operating Statement. Any payments due under this Article 3 shall
be prorated for any partial calendar year occurring during the Term. Tenant's
obligation to pay any amounts due under this Article 3 shall survive the
Expiration Date or earlier termination of this Lease.
SECTION 3.03 RENT TAXES AND EXTRA CHARGES. In addition, Tenant shall pay, as
Additional Rent, contemporaneously with each payment of Base Rent, the amount of
any transaction privilege tax, rent tax, sales tax, gross proceeds tax, use tax,
occupancy tax or like tax (excluding income taxes) levied, assessed or imposed
by any federal, state, county or municipal governmental authority, or any
subdivision thereof, upon or measured by any rent or other charge payable under
this Lease. Tenant shall also pay, as Additional Rent, all expenses paid or
incurred by Landlord which are incurred pursuant to Tenant's request for
additional or overtime services; including, but not limited to, overtime HVAC or
heating expenses; overtime electric charges; charges for keys; or special tenant
requests. Unless such extra charges are included in any monthly invoice for Base
Rent or other payment dates are otherwise specifically set forth herein, any
extra charges shall be due and payable by Tenant within ten (10) days after
receipt of an invoice for same.
SECTION 3.04 OPERATING EXPENSES DEFINED.
(A) The term "Operating Expenses" shall mean the aggregate of those
costs and expenses paid or incurred by or on behalf of Landlord (whether
directly or through independent contractors) relating to the ownership,
maintenance and operation of the Building or the sidewalks or areas adjacent
thereto or for any other areas for which Landlord shall have any obligation for
repair or maintenance. Without limiting the generality of the foregoing,
Operating Expenses shall include the following:
(1) Taxes - The term "Taxes" shall mean all taxes, fees and
assessments and governmental charges levied, whether by federal, state, county,
municipal, or other taxing districts or authorities presently or hereafter
created, taxing the Building and any other taxes, fees, charges or assessments
attributable to the Building or its operation. In addition, "Taxes" shall mean
all real estate taxes and assessments or substitutes therefor or supplements
thereto upon all or any portion of the Building or any improvement thereon, for
any whole or partial tax year or period occurring during the Term hereof. If and
to the extent that due to a
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change in the method of taxation or assessment, any franchise, capital stock,
capital, rent, income, profit or other tax or charge shall be a substitute for
or supplement to any of the foregoing, then all such items shall be included
within the term Taxes for the purposes of this Lease. All expenses, including
attorneys' fees and disbursements, experts' and other witnesses' fees, incurred
in contesting the validity or amount of any Taxes or in obtaining a refund of
Taxes shall be considered as part of the Taxes for the year in which paid.
Without the prior written consent of Landlord, Tenant may not contest Taxes.
(2) Insurance - The term "Insurance" shall mean all insurance of
any type that Landlord, in its sole discretion, shall deem necessary or
advisable to carry, including, but not limited to, that necessary in order to
protect itself, its affiliates, agents and employees, the Building, all personal
property used in connection therewith, or its interests therein. Landlord shall
have the right, but not the obligation, to change, cancel, decrease or increase
any insurance coverages in respect of the Building, or add additional forms of
insurance as Landlord shall deem necessary or desirable; and/or to obtain
umbrella or other policies covering both the Building and other assets owned by
or associated with Landlord or its affiliates, in which event the cost thereof
shall be equitably allocated. For the purposes of this subsection, the term
"affiliate" shall mean any entity which controls, is controlled by or is under
common control with Landlord.
(3) Maintenance Costs - The term "Maintenance Costs" shall mean
all costs paid or incurred in connection with the operation or maintenance of
the Building including, without limitation, all parking areas (whether temporary
or permanent), access roads, driveways, curbs, truckways, loading areas and
docks, retaining walls, lighting facilities, service corridors, comfort
stations, pedestrian sidewalks, stairways, plazas, malls, foundations, exterior
and demising walls, roofs over the entire Building including the Premises,
escalators, elevators, courts and ramps, decorative walls, vacant areas,
landscaped and planting areas and facilities, service lines or conduits for gas,
water, electric, sewage, heating, ventilating and air conditioning services,
music and intercom equipment, fire suppression and warning systems, conduits and
appurtenances for use by Tenant in common with other tenants, and other areas
and facilities related to the Building, whether within or outside the Building.
Maintenance Costs shall include, but are not limited to, the following:
(a) All expenses incurred in connection with making the
parking facilities for the Building, if any, available for use by Tenant and
others including, but not limited to, any rent, additional rent or management
fees that Landlord may be required to pay for such use, and all costs incurred
for sweeping, cleaning, litter control, resurfacing, repainting, restripping,
removal and replacement of pavement, curbs and car stops, and snow and ice
removal;
(b) Wages and salaries for all employees engaged in operating,
maintaining, or providing security for the Building, and personnel who may
provide traffic control relating to ingress and egress to and from the parking
facilities, if any, to the adjacent public streets. All taxes, insurance and
fringe benefits relating to such employees shall be included;
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(c) All expenses incurred for supplies and materials used in
the operation and maintenance of the Building including, but not limited to,
uniforms, paper products, decorations, painting and replacement of worn out
mechanical or damaged equipment;
(d) The cost of all utilities, including, but not limited to,
the cost of water, electrical service, heating, lighting, air conditioning and
ventilation, excepting those utilities supplied to tenants of the Building at
their respective premises to the extent paid for by such tenants;
(e) The cost of all maintenance and service agreements for the
Building and equipment therein, including, but not limited to, alarm service,
cleaning, janitorial service, security and/or guard service, window cleaning,
fire protection, sprinklers, elevator and mechanical systems maintenance,
exterminating and landscape maintenance;
(f) Amortization, together with Interest, on the cost of
installation of capital improvement items which result in, or are intended to
result in, a reduction in Maintenance Costs or which are required to be
installed under any governmental law, regulation or authority. "Interest" shall
be calculated at the lesser of (i) the annual rate of "Alternate Base Rate II"
(as set by Citibank, N.A. from time to time) plus two percent (2%) per annum or
(ii) the maximum legal rate of interest allowed by the state in which the
Building is located. All such costs shall be amortized over the reasonable life
of the capital improvement items, with the reasonable life and amortization
schedule being determined in accordance with generally accepted accounting
principles, but in no event to extend beyond the reasonable life of the
Building;
(g) Management fees in the amount of 5% of gross revenues
(including, without limitation, salaries and fringe benefits of Building
employees and employees of the Building's managing agent to the extent
chargeable to the Building), legal fees, accounting costs and disbursements, and
other professional services associated with the operation and maintenance of the
Building;
(h) The cost of maintenance and repair of ceilings and
exterior walls, gutters, glass, plate glass, show windows, plumbing, pipes and
fixtures and other equipment; and
(i) The cost of all licenses, dues, permits and other
governmental charges.
(B) In determining the amount of Operating Expenses for any calendar
year during the Term, including the Base Operating Year, if less than
ninety-five percent (95%) of the rentable area of the Building shall have been
occupied by tenant(s) at any time during any such calendar year, Operating
Expenses shall be determined for such calendar year to be an amount equal to the
expenses which would normally be expected to be incurred had such occupancy been
ninety-five percent (95 %) throughout such calendar year.
SECTION 3.05 PRO RATA SHARE. Tenant's pro rata share ("Pro Rata Share") of
Operating Expenses and other amounts payable pursuant to the terms of this Lease
shall be computed by multiplying such expenses or amount by a fraction, the
numerator of which shall be the number
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of rentable square feet in the Premises as set forth in Section 1.01(K), and the
denominator of which shall be the total number of square feet in the Office
Building as determined by Landlord, which is approximately 235,000 rentable
square feet (subject to remeasurement under Section 8.13 below)
ARTICLE 4
TENANT'S COVENANTS AND RIGHTS
SECTION 4.01 PARKING. Tenant shall be entitled to the use of the Parking
Spaces during the Term. All parking facilities furnished by Landlord shall be
subject to Landlord's control and management. Landlord further reserves the
right to change, reconfigure, or rearrange the parking areas, to construct or
repair any portion thereof, and to restrict or eliminate the use of any parking
areas and do such other acts in and to such areas as Landlord deems necessary or
desirable without such actions being deemed an eviction of Tenant or a
disturbance of Tenant's use of the Premises and without Landlord being deemed in
default hereunder. Landlord may convert the under deck parking facilities to a
reserved and/or controlled parking facility, in which event Tenant shall pay a
monthly fee, as established by Landlord during the Term, for the use of the
Parking Spaces which shall be due and payable on the first day of each month
during the Term, together with the payment of monthly Base Rent. Landlord shall
not be liable for any damage of any nature to, or any theft of, vehicles, or
contents thereof, in or about such parking facility. Tenant shall be entitled to
the use of surface parking areas without charge during the lease term.
SECTION 4.02 ASSIGNMENT AND SUBLETTING.
(A) Tenant covenants that it shall not, by operation of law or
otherwise, assign, sublet, encumber or mortgage this Lease, or any part thereof,
or permit the Premises to be used by others without the prior written consent of
Landlord in each instance. The consent by Landlord to any assignment, mortgage,
encumbrance, subletting or use of the Premises by others shall not constitute a
waiver of Landlord's right to withhold its consent to any other assignment,
subletting, mortgage, encumbrance or use by others of the Premises. Whether or
not Landlord's consent shall be granted to any proposed assignment or
subletting, Tenant shall reimburse Landlord for the reasonable expenses,
including attorneys' fees and disbursements, incurred by Landlord in connection
with Tenant's request for such consent. In addition, Tenant shall pay to
Landlord, as Additional Rent, all reasonable direct and indirect expenses
incurred by Landlord due to any such assignee or sublessee taking possession of
the Premises. The absolute and unconditional prohibitions set forth in this
Section 4.02 and Tenant's agreement thereto are material inducements to Landlord
to enter into this Lease with Tenant, and any breach or attempted breach thereof
shall constitute an Event of Default (as defined in Section 7.01 hereof) for
which no notice or opportunity to cure need be given. For the purposes of this
Section 4.02, (i) the transfer or issuance of a majority of the issued and
outstanding capital stock of any corporate tenant, or of a corporate subtenant,
or the transfer or issuance of a majority of the total interest in any
partnership tenant or subtenant, however accomplished, whether in a single
transaction or in a series of related or unrelated transactions, shall be deemed
an assignment of this Lease, or of such sublease, as the case may be, except
that the transfer of the outstanding capital stock of any corporate tenant, or
subtenant, shall not be deemed to include the sale of
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such stock by persons or parties through the "over-the-counter market" or
through any recognized stock exchange, other than by those deemed to be a
"control person" within the meaning of the Securities Exchange Act of 1934, as
amended, (ii) a takeover agreement or similar agreement whereby the obligations
of Tenant under this Lease are assumed by another party shall be deemed a
transfer of this Lease, (iii) any person or legal representative of Tenant, to
whom Tenant's interest under this Lease passes by operation of law, or
otherwise, shall be bound by the provisions of this Section 4.02, (iv) a
modification, amendment or extension of a sublease shall be deemed a sublease
and (v) if Tenant consists of more than one person, a purported assignment,
voluntary, involuntary, or by operation of law by any of the persons executing
this Lease shall be deemed a voluntary assignment of this Lease by Tenant.
Notwithstanding anything to the contrary contained herein, any rights and/or
options of first offer, refusal, or extension granted to Tenant shall be
personal to the Tenant named herein and shall be deemed null and void in the
event of any assignment of this Lease or sublease of all or substantially all of
the Premises.
(B) No consent by Landlord to an assignment of this Lease shall be
effective until Tenant shall deliver to Landlord an agreement in form and
substance satisfactory to Landlord pursuant to which such assignee assumes and
agrees to be bound by all of the terms, covenants, conditions, provisions and
agreements of this Lease. In no event shall Tenant be released from its
obligations hereunder as a result of any assignment of this Lease, and the
Tenant named herein and any assignee of such Tenant who assumes the obligations
of the named Tenant under this Lease, from and after such assignment, shall be
jointly and severally liable for performance of all obligations of Tenant under
this Lease.
(C) If the rent and other sums payable to Tenant by an assignee or
sublessee for or in connection with an assignment of this Lease or the sublease
of all or any part of the Premises shall be in excess (the "Excess") of the Base
Rent and any Additional Rent provided for in this Lease (allocated on a per
square foot basis in the event of a sublease of less than all of the Premises),
Tenant shall so notify Landlord and shall pay Landlord the Excess as and when
received by Tenant.
SECTION 4.03 CARE OF PREMISES. Subject to the provisions of Sections 6.01
and 6.02 hereof, Tenant shall maintain and repair the Premises during the Term
and preserve same in the condition delivered to Tenant on the Commencement Date,
normal wear and tear excepted. Tenant shall be responsible for repainting and
redecorating the Premises, and making repairs, replacements and alterations as
needed, in a good and workmanlike manner in accordance with the terms and
provisions of this Lease. Landlord shall repair or replace, at Tenant's expense,
any damage done to the Building or any part thereof caused by Tenant or Tenant's
agents, employees, contractors, invitees or visitors. Tenant agrees to give
Landlord or its managing agent prior written notice of the necessity for any
repairs to the Premises and shall not proceed to perform same until Landlord or
its managing agent has consented thereto. Upon the expiration of the Term or
other termination of this Lease, Tenant shall peaceably surrender to Landlord
the Premises, broom clean, in the same condition as existed on the Commencement
Date, excepting only ordinary wear and tear.
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SECTION 4.04 COMPLIANCE WITH LAW.
(A) Tenant, at its expense, shall comply with all laws, orders and
regulations of any governmental authorities and with any directive of any public
officer which shall impose any violation, order or duty upon Landlord or Tenant
with respect to the Premises or the use or occupation thereof including, without
limitation, any governmental law or statute, rule, regulation, ordinance, code,
policy or rule of common law now or hereafter in effect relating to the
environment, health, safety or any substances, materials or wastes regulated by
any governmental authority or deemed or defined as a "hazardous substance",
"hazardous material", "toxic substance", "toxic pollutant", "contaminant",
"pollutant", "solid waste", "hazardous waste" or words of similar import under
applicable laws and regulations of the United States, the state in which the
Building is located and the political subdivisions thereof having jurisdiction
over the Building, including, without limitation, oil and petroleum products,
natural or synthetic gas, asbestos in any form, urea formaldehyde and radon gas
(collectively, "Hazardous Materials"). In addition, Tenant shall comply with,
and shall cause compliance with the rules and regulations set forth in EXHIBIT E
annexed hereto, as amended from time to time (the "Rules and Regulations"),
which have been adopted by Landlord for the Building.
(B) Tenant shall provide Landlord with copies of all communications and
related materials regarding the Premises with any (i) governmental agency
relating to any law, statute, rule, regulation, article, code, policy or rule of
common law and any judicial interpretation thereof relating to Hazardous
Materials (collectively, "Environmental Laws") or (ii) person with respect to
any claim relating in any way to any Environmental Law (each, an "Environmental
Claim"). Landlord or its agents may perform an environmental inspection of the
Premises at Tenant's expense at any time during the Term.
(C) Tenant agrees to defend, indemnify and hold harmless the
Indemnitees (as defined in Section 4.06 hereof) from and against all obligations
(including removal and remedial actions), losses, claims, suits, judgments,
liabilities, penalties, damages (including consequential and punitive damages),
costs and expenses (including attorneys' and consultants' fees and expenses) of
any kind or nature whatsoever that may at any time be incurred by, imposed on or
asserted against such Indemnitees directly or indirectly based on, or arising or
resulting from (a) the actual or alleged presence of Hazardous Materials on the
Premises or in the Building which is caused or permitted by Tenant and (b) any
Environmental Claim relating in any way to Tenant's operation or use of the
Premises or the Building. The provisions of this Subsection (C) shall survive
the expiration or sooner termination of this Lease.
(D) Tenant shall not do or permit to be done any act or thing in, on or
about the Premises or store anything therein which will in any way increase the
existing rate of, or adversely affect, or cause a cancellation of, any fire or
other insurance policies covering the Building or any of its contents. In
addition, Tenant shall pay or cause to be paid before delinquency, any and all
taxes levied or assessed and payable during the Term upon all of Tenant's
leasehold improvements, equipment, furniture, fixtures, and other personal
property located in the Premises.
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SECTION 4.05 TENANT'S INSURANCE.
(A) Tenant shall procure and maintain throughout the Term of this
Lease, at its expense, comprehensive general liability insurance providing
coverage for bodily injury (including death) and property damage and products
liability insurance, as necessary. This policy shall contain a broad form
contractual liability endorsement insuring Tenant's obligations under Section
4.06(A) hereof with a combined single limit of at least One Million Dollars
($1,000,000) per occurrence and Three Million Dollars ($3,000,000) in the
aggregate for all occurrences within each policy year, or such greater amounts
as Landlord may require. Tenant shall also procure fire and extended coverage
insurance covering Tenant's personal property, fixtures, equipment and
improvements, in an amount equal to the replacement value of the same and
containing the waiver of subrogation required in Section 6.03 of this Lease,
state worker's compensation and employers liability insurance with limits of at
least Five Hundred Thousand Dollars ($500,000) and such other insurance as
Landlord may reasonably require from time to time.
(B) All of the foregoing insurance policies (with the exception of
worker's compensation insurance to the extent not available under statutory law)
shall name Landlord, any holder of a Mortgage (as defined in Section 5.01
hereof), any managing agent for the Building and such other parties as Landlord
shall designate as an additional insured as their respective interests may
appear, and shall provide that any loss shall be payable to Landlord and any
other additional insured parties as their respective interests may appear. All
insurance required hereunder shall be placed with companies which are rated A:XI
or better by Best's Insurance Guide and licensed to do business in the state in
which the Building is located and written as primary policies, with any other
policies, including Landlord's policy, serving as excess coverage. Tenant shall
deliver duplicate original copies of all such policies and all endorsements
thereto, prior to the Commencement Date, or, in the case of renewals thereto,
fifteen (15) days prior to the expiration of the prior insurance policy,
together with evidence that such policies are fully paid for, and that no change
or non-renewal thereof shall be effective except upon thirty (30) days' prior
written notice from the insurer to Landlord. If Tenant shall fail at any time to
procure and/or maintain the insurance required herein, Landlord may procure such
insurance on Tenant's behalf and the cost thereof shall be payable, upon demand,
as Additional Rent.
SECTION 4.06 TENANT'S INDEMNIFICATION.
(A) Tenant shall indemnify, defend and hold harmless Landlord and its
officers, directors, employees, attorneys and agents (collectively, the
"Indemnitees") from and against any and all claims, demands, causes of action,
judgments, costs, expenses, and all losses and damages (including consequential
and punitive damages) arising from Tenant's use of the Premises or from the
conduct of its business or from any acts permitted or suffered by Tenant in or
about the Premises, and shall further indemnify, defend and hold harmless the
Indemnitees from and against any and all claims arising from any breach in
Tenant's performance under this Lease, or arising from any act, omission or
negligence or willful or criminal misconduct of Tenant, or any officer, agent,
employee, independent contractor, guest, or invitee thereof, and from all costs,
attorneys' fees and disbursements, and liabilities incurred in the defense of
any such claim or any action or proceeding in any way related to this Lease.
Upon notice from Landlord, Tenant shall defend any such claim, demand, cause of
action or suit at Tenant's
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expense by counsel satisfactory to Landlord. As a material part of the
consideration to Landlord for this Lease, Tenant hereby assumes all risk of
damage to property or injury to persons in, upon or about the Premises from any
cause, and Tenant hereby waives all claims with respect thereto against
Landlord. Tenant shall give immediate notice to Landlord in case of casualty or
accidents in the Premises. The provisions of this Section 4.06(A) shall survive
the expiration or sooner termination of this Lease.
(B) Landlord or its agents shall not be liable for any loss or damage
to persons or property resulting from fire, explosion, falling plaster, steam,
gas, electricity, water or rain which may leak from any part of the Building or
from the pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other places resulting from dampness or any other cause
whatsoever, or from the act or negligence of any other tenant or any officer,
agent, employee, contractor or guest of any such tenant, except personal injury
caused by or due to the gross negligence or willful or criminal misconduct of
Landlord. In addition, Landlord or its agents shall not be liable for (i)
interference with the electrical service, ventilation, or for any latent defect
in the Premises, except as provided in Section 2.01 hereof, (ii) any loss or
damage for which Tenant is required to insure or (iii) any loss or damage
resulting from any construction, Alterations or repair required or permitted to
be performed by Tenant under this Lease.
SECTION 4.07 UTILITIES. Tenant shall not install any equipment in the
Premises without Landlord's prior written consent if such equipment requires an
electrical current other than 120 volt, single phase, special circuits or
grounding or singularly consumes more than 0.5 kilowatts at rated capacity. All
costs of the installation and maintenance of special electrical facilities
approved by Landlord shall be paid by Tenant, as Additional Rent, upon demand.
All costs for extraordinary, unusual or excessive demand by Tenant for
electrical or other utility service and all costs of submetering or monitoring
such use shall be borne by Tenant. Landlord reserves the right to install, at
Tenant's expense, submeters and related equipment, relating to Tenant's use of
electrical or other utility services for the purposes of monitoring and billing
any excessive use of electricity by Tenant. Tenant shall separately arrange
with, and pay directly to, the applicable local public authorities or utilities,
as the case may be, for the furnishing, installation and maintenance of all
telephone services and equipment required by Tenant in the use of the Premises.
SECTION 4.08 SECURITY DEPOSIT. Concurrently with the execution of this
Lease, Tenant has deposited with Landlord the Security Deposit as security for
the payment by Tenant of all Base Rent and any Additional Rent and for the
faithful performance of all the terms, covenants and conditions hereof. Landlord
shall not be required to segregate the Security Deposit from other funds of
Landlord or pay interest thereon, unless required by applicable law. If, at any
time during the Term, Tenant does not fulfill any of its obligations under this
Lease, Landlord shall have the right to use all or part of the Security Deposit
to satisfy such obligations. If any portion of the Security Deposit is used,
applied, or retained by Landlord as herein permitted, then within five (5) days
after written demand therefor, Tenant shall deposit with Landlord an amount
sufficient to restore the Security Deposit to its original or adjusted amount.
If Tenant fully performs every term, covenant, condition and obligation of this
Lease during the Term, the Security Deposit (or any balance thereof), without
interest, shall be returned to Tenant after the expiration of the Term. Landlord
may deliver the Security Deposit to any purchaser of Landlord's interest in the
Premises if such interest is sold, in which event Landlord shall be
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discharged from any further liability with respect to the Security Deposit. The
Security Deposit shall not be deemed an advance payment of rent or be construed
as liquidated damages, and if Landlord's claims hereunder exceed the Security
Deposit, Tenant shall remain liable for the balance of such claims.
SECTION 4.09 SIGNS. Tenant shall not, without the prior written consent of
Landlord erect or install any type of exterior or interior window or door signs,
or any other type of sign or placard, whether within or without the Building.
All signs and placards must comply with the sign criteria promulgated by
Landlord for the Building and all applicable laws. Landlord shall pay all costs
of fabrication, installation and maintenance of all permitted signs or placards.
Prior to vacating the Premises, Tenant shall, at its expense, promptly remove
its sign(s) and placards, and upon the removal or alteration of any of its
sign(s) and placards for any reason, Tenant shall restore the surface beneath
such signs or placards damaged by such removal.
ARTICLE 5
LANDLORD'S COVENANTS AND RIGHTS
SECTION 5.01 QUIET ENJOYMENT AND SUBORDINATION.
(A) Landlord covenants and agrees that, upon performance by Tenant of
all of the terms, covenants, obligations, conditions and provisions hereof on
Tenant's part to be kept and performed, Tenant shall have, hold and enjoy the
Premises, subject and subordinate to the terms and conditions of this Lease.
(B) This Lease is subject and subordinate to any reciprocal easement
agreements or any other easements (each, an "Easement"); all ground or
underlying leases (each, a "Superior Lease"); any mortgage, deed of trust or
deed to secure debt (each, a "Mortgage"); and to any renewals, modifications,
increases, extensions, replacements, and substitutions of any thereof now or
hereafter affecting the Premises and/or the Building. This provision shall be
self-operative and no further instrument of subordination shall be required;
provided, however, that Tenant shall execute and deliver, upon request, such
further instrument(s) in recordable form confirming this subordination as may be
requested by Landlord, or the holder of any Mortgage or the lessor under any
Superior Lease. Notwithstanding anything to the contrary contained herein, at
the option of the holder of any Mortgage, this Lease shall be made superior to
such Mortgage by the insertion therein of a declaration that this Lease is
superior.
(C) Tenant agrees that Landlord may assign the rents and its interest
in this Lease to the holder of any Mortgage. In the event of such an assignment,
Tenant shall give the holder of such Mortgage a copy of any request for
performance by Landlord or any notice of default by Landlord, and, in the event
Landlord fails to cure any such default, Tenant shall give such holder a
reasonable period, commencing on the last day on which Landlord could cure such
default, in which to cure same.
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SECTION 5.02 LANDLORD'S SERVICES.
(A) During the Term, Landlord shall operate and maintain the Building
in accordance with all applicable laws and regulations. Subject to the payment
by Tenant of Base Rent and any Additional Rent, Landlord shall provide the
following services:
(1) Landlord shall provide the following services to the Premises:
(a) Heating and air conditioning in season at such
temperatures and in such amounts as shall be considered by Landlord to be
building standard. Usual and customary business hours shall be defined at 7:00
a.m. to 6:00 p.m. Mondays through Fridays and 8:00 a.m. to 1:00 p.m. Saturdays,
Sundays, legal holidays, union holidays and any hours other than those
determined by Landlord to be building standard shall not be deemed usual and
customary business hours, and such service will be provided at these times only
if Tenant shall request same within a reasonable period of time prior to the
need for such services. Tenant shall pay for such services, as Additional Rent,
within ten (10) days after rendition of a bill therefor, at the rate for such
services at the Building as determined by Landlord, subject to a minimum usage
fee based upon the minimum overtime labor for the Building. Whenever equipment
that generates abnormal heat which affects the temperature otherwise maintained
by the air conditioning system is used in the Premises, Landlord shall have the
right to install supplemental air conditioning equipment in the Premises, and
the cost thereof, including the cost of installation, operation, electrical use,
maintenance and metering, shall be paid by Tenant to Landlord, as Additional
Rent, on demand.
(b) Electrical energy (not exceeding the present electrical
capacity of the Premises) upon the following terms and conditions: (i) Landlord
shall be responsible for replacing all light bulbs, fluorescent lamps, and all
ballasts used by the Tenant in the Premises, except that Tenant shall be
responsible for replacing the same in non-building standard fixtures; (ii) all
equipment required to obtain additional electrical energy for Tenant from the
public utility company shall be installed and maintained by Landlord at Tenant's
expense; and (iii) Landlord shall not be liable for damages or consequential
damages or in any other way in the event of loss, damage, failure, interruption,
defect or change in the quantity or character or supply of electricity furnished
to the Premises or of any other utility and Tenant agrees that such supply may
be interrupted for inspection, repairs, replacement or in case of emergency.
(c) Janitor service five (5) days per week (excluding legal
and union holidays); provided, however, if Tenant's floor covering or other
improvements are not building standard, Tenant shall pay, as Additional Rent,
upon rendition of a bill therefor, the additional cleaning cost, if any,
attributable thereto.
(2) Landlord shall provide the following services in the Office
Building:
(a) Hot and cold water;
(b) Elevator service in common with other tenants; and
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(c) Heat, ventilation, cooling, lighting, electrical service
and domestic running water, in those areas of the Office Building designated by
Landlord for use during normal business hours by Tenant in common with other
tenants and persons in the Office Building.
(3) Landlord shall maintain and repair the foundations, structure
and roof of the Office Building and shall operate, maintain, repair and replace
the systems, facilities and equipment directly necessary to provide the services
described in this Section 5.02 (unless same are installed by or are the property
of Tenant); provided that:
(a) Landlord shall use reasonable diligence in carrying out
its obligations under this Section 5.02, but shall not be liable under any
circumstances for any damages (including consequential damages) for any failure
to do so;
(b) No reduction or discontinuance of the services described
in this Section 5.02 shall be construed as an eviction of Tenant or release
Tenant from any of its obligations under this Lease;
(c) Landlord shall have no liability to Tenant, its employees,
agents, invitees or licensees for damages or consequential damages or in any
other way for losses due to any criminal act or for damage done by unauthorized
persons on the Premises or in the Building; and
(d) Tenant shall reimburse Landlord for the cost of any
repairs or maintenance performed by Landlord if the need for same arose as a
result of the negligence or criminal or willful misconduct of Tenant or its
agents, employees, contractors, invitees and licensees.
SECTION 5.03 ALTERATIONS AND ENTRY BY LANDLORD.
(A) Landlord may from time to time: (i) make repairs, replacements,
changes or additions to the structure, systems, facilities and equipment in the
Premises where necessary to service the Premises or other parts of the Building;
(ii) make changes in or additions to any part of the Building not in or forming
part of the Premises; and (iii) change or alter the location of any areas of the
Building which may be designated by Landlord for use during normal business
hours by Tenant in common with other tenants and persons in the Office Building
but under the exclusive control of Landlord. Landlord, its agents and
representatives shall have the right to enter the Premises by any and all means
at any time in case of an emergency, and at all reasonable times for any purpose
permitted hereunder, including, but not limited to, showing the Premises to
prospective tenants, purchasers or mortgagees. Tenant shall give Landlord a key
for all of the doors of the Premises.
(B) In performing its covenants under this Article 5, Landlord shall
use reasonable efforts to minimize interference with the conduct of Tenant's
business in connection with the performance by Landlord of any work or the
provision of any services required or permitted hereunder, but Landlord shall
not be required to use overtime or premium time labor.
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SECTION 5.04 LANDLORD'S RIGHT TO CURE. All agreements, covenants and
conditions to be performed by Tenant under this Lease shall be at Tenant's
expense and without any abatement of Base Rent or any Additional Rent. If Tenant
shall fail to perform any act or to pay any sum of money (other than Base Rent)
required of Tenant hereunder, then Landlord may, without waiving or releasing
Tenant from any of its obligations hereunder, make such payment or perform such
act on behalf of Tenant. All sums paid and all costs incurred by Landlord in
taking such action shall be deemed Additional Rent and shall be paid to Landlord
on demand.
ARTICLE 6
EMINENT DOMAIN, CASUALTY
SECTION 6.01 EMINENT DOMAIN.
(A) If, during the Term, all of the Premises shall be taken (or
temporarily taken for a period of one (1) year or more) by a public authority
under any statute or by right of eminent domain, or purchased under threat of
such taking, this Lease shall automatically terminate on the date on which the
condemning authority takes possession of the Premises ("Date of Such Taking").
Notwithstanding the foregoing, if more than one-third (1/3) of the number of
rentable square feet in the Premises is so taken or purchased, Tenant shall have
the right to terminate this Lease by giving Landlord notice no later than thirty
(30) days after the Date of Such Taking, and thereupon this Lease shall
terminate on the last day of the month following the month in which notice is
given. In both of such events, Tenant shall have no claim for the value of any
unexpired Term of this Lease.
(B) If, during the Term, part of the Building is so taken or purchased,
and if, in Landlord's opinion, substantial alteration of the Building is
necessary or desirable as a result thereof, whether or not the Premises are
affected, Landlord shall have the right to terminate this Lease by giving Tenant
at least thirty (30) days' written notice of such termination, and thereupon
this Lease shall terminate on the date set forth in such notice.
(C) If a portion of the Premises is so taken, and no rights of
termination herein conferred are timely exercised, the Term of this Lease shall
expire with respect to the portion so taken on the Date of Such Taking and
Landlord shall adjust Base Rent and Additional Rent to account for the reduced
number of rentable square feet in the Premises. Landlord shall restore and
redemise the Premises to the extent required to exclude from the Premises that
portion so taken; provided, however, that Landlord's obligation to restore and
redemise the remainder of the Premises shall be limited to the funds available
to Landlord from the condemnation award or other consideration paid for the
affected portion of the Premises. In no event shall Landlord be obligated to
replace or restore any improvements to the Premises or alterations thereof
installed therein by or on behalf of Tenant, nor shall Landlord be obligated to
replace, repair or restore Tenant's leasehold improvements, personal property,
furniture, fixtures, equipment or the like. Upon any such taking or purchase,
Landlord shall be entitled to receive and retain the entire award or
consideration for the affected portion of the Building, and Tenant shall not
have any claim against Landlord for the value of its property or its leasehold
estate or the unexpired Term of the Lease, or for costs of removal or
relocation, or business interruption expense or any other damages arising out of
such taking or purchase.
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(D) If all or any portion of the Premises shall be condemned or taken
for governmental occupancy for a period of less than one year, this Lease shall
continue in full force and effect and Tenant shall continue to pay in full all
Base Rent and any Additional Rent herein reserved, without reduction or
abatement.
SECTION 6.02 DAMAGE BY FIRE OR OTHER CASUALTY.
(A) If the Premises shall be partially damaged by fire or other
casualty, then the damage shall be repaired by Landlord, except as otherwise
provided in this Section 6.02, from the insurance proceeds actually paid to
Landlord. In such event, the Base Rent and Additional Rent due hereunder shall
be equitably abated in the proportion which the part of the Premises not usable
by Tenant bears to the entire Premises until the damage is repaired by Landlord
as required hereunder. Tenant shall give immediate written notice to Landlord of
any damage caused to the Premises by fire or other casualty.
(B) If the Premises are totally damaged or rendered wholly untenantable
by fire or other casualty, or if Landlord's architect certifies that it cannot
be repaired within one hundred eighty (180) days after the casualty, or if all
or any portion of the proceeds of any insurance policy are retained by the
lessor under any Superior Lease or the holder of any Mortgage, or if Landlord
shall decide not to repair the Building, then Landlord may, within one hundred
eighty (180) days after such fire or other casualty, give Tenant notice of
termination of this Lease, and thereupon the Term shall expire ten (10) days
after such notice is given.
(C) Landlord's obligations in connection with such restoration work
shall be strictly limited to the replacement of the basic building area and in
no event shall Landlord be obligated to replace or restore any improvements to
the Premises or any alterations thereof which were installed therein by or on
behalf of Tenant, or Tenant's leasehold improvements, personal property,
furniture, fixtures, equipment or the like.
SECTION 6.03 SUBROGATION. Notwithstanding anything to the contrary contained
herein, Landlord and Tenant hereby mutually waive and release their respective
rights of recovery against one another and their officers, agents and employees
for any damage to real or personal property, including resulting loss of use,
interruption of business, and other expenses occurring as a result of the use or
occupancy of the Premises or the Building to the extent of insurance coverage
which would be included in a standard "all-risk" or special form policy of
property insurance. Landlord and Tenant agree that all policies of insurance
shall contain provisions or endorsements thereto waiving the insurer's rights of
subrogation with respect to claims against the other, and, unless the policies
permit waiver of subrogation without notice to the insurer, each shall notify
its insurance companies of the existence of the waiver and indemnity provisions
set forth in this Lease.
ARTICLE 7
EVENTS OF DEFAULT, REMEDIES
SECTION 7.01 EVENTS OF DEFAULT. In addition to any other event specified in
this Lease as an event of default, the occurrence of any one or more of the
following events during the
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Term (each, individually, an "Event of Default" and collectively, "Events of
Default") shall constitute a breach of this Lease by Tenant and Landlord may
exercise the rights set forth in Section 7.02 of this Lease or as otherwise
provided at law or in equity: (1) Tenant shall fail to pay any sum (including
Base Rent or Additional Rent) payable to Landlord hereunder within five (5) days
after the same shall become due and payable (although no legal or formal demand
has been made therefor); or (2) Tenant fails to perform any of the other
covenants, agreements, terms or conditions of this Lease to be performed by
Tenant (other than any default curable by the payment of money), and, unless
expressly provided elsewhere in this Lease that no notice and/or opportunity to
cure such default is to be afforded Tenant, such default shall continue for a
period of fifteen (15) days after written notice thereof from Landlord to
Tenant, or, in the case of a default which cannot with due diligence be cured
within fifteen (15) days, Tenant fails to commence such cure promptly within
such fifteen (15) day period and thereafter diligently prosecute such cure to
completion; or (3) Tenant or any guarantor of Tenant's obligations hereunder
("Guarantor") shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent within the meaning of the United States
Bankruptcy Code, as amended (the "Code"), or shall file any petition or answer
seeking any reorganization, composition, readjustment or similar relief under
any present or future bankruptcy or other applicable law, or shall seek or
consent to or acquiesce in the appointment of any trustee, receiver, liquidator
or other custodian for any substantial part of Tenant's properties or any part
of the Premises; or (4) any Guarantor of this Lease shall default beyond any
applicable notice and/or grace period under such guaranty; or (5) the Premises
shall be effectively abandoned by Tenant for a period of ten (10) days. If an
Event of Default occurs more than two (2) times within any period of twelve (12)
months, then, notwithstanding that each such Event of Default shall have been
cured, any further default shall be deemed an Event of Default for which no
notice or cure period shall apply.
SECTION 7.02 REMEDIES UPON DEFAULT.
(A) Upon the occurrence of any Event of Default, Landlord shall have
the option to pursue any one or more of the following remedies without notice or
demand whatsoever, in addition to, or in lieu of, any and all remedies available
to Landlord under the laws of the state in which the Building is located:
(1) Landlord may give Tenant written notice of its election to
terminate this Lease, effective on the date specified therein, whereupon
Tenant's right to possession of the Premises shall cease and this Lease, except
as to Tenant's liability determined in accordance with Section 7.02(C)
hereinbelow, shall be terminated.
(2) Landlord and its agents may immediately re-enter and take
possession of the Premises, remove all persons and property therefrom (such
property as may be removed may be stored in a public warehouse or elsewhere at
the cost of and for the account of Tenant), lock the doors of the Premises and
exclude Tenant therefrom, all without notice or legal process and without being
deemed guilty of trespass, or liable for any loss or damage occasioned thereby
and without any prejudice to any remedies for arrears of rent or Tenant's breach
of covenants or conditions.
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(3) Landlord and its agents may immediately re-enter and take
possession of the Premises, or any part thereof, by summary proceedings or by
any other applicable action or proceeding (without being liable for indictment,
prosecution or damages therefor) and may repossess same as Landlord's former
estate and expel Tenant and those claiming through or under Tenant, and remove
the effects of both or either (such property as may be removed may be stored in
a public warehouse or elsewhere at the cost of and for the account of Tenant),
without being deemed guilty in any manner of trespass, and without prejudice to
any remedies for arrears of rent or Tenant's breach of covenants or conditions.
(4) Landlord may bring an action against Tenant for any damages
sustained by Landlord.
(5) Should Landlord elect to re-enter as provided hereinabove or
should Landlord take possession pursuant to legal proceedings or pursuant to any
notice provided by law, Landlord may, from time to time, without terminating
this Lease, relet the Premises or any part thereof in Landlord's or Tenant's
name, but for the account of Tenant (subject to the provisions of Section
7.02(B) hereof), for such term or terms (which may be greater or less than the
period which would otherwise have constituted the balance of the Term) and on
such terms and conditions as Landlord, in its sole discretion, may determine,
and Landlord may collect and receive the rents therefor without affecting any
liability of Tenant under this Lease. Landlord shall have no obligation to relet
the Premises and shall in no event be liable for failure to relet the Premises
or, in the event of any such reletting, for refusal or failure to collect any
rent due upon such reletting, and no such refusal or failure shall affect any
liability of Tenant under this Lease. No such re-entry or taking possession of
the Premises by Landlord shall be construed as an election on Landlord's part to
terminate this Lease unless a written notice of such intention be given to
Tenant. No notice from Landlord hereunder or under a forcible entry and detainer
statute or similar law shall constitute an election by Landlord to terminate
this Lease unless such notice specifically so states. If Tenant shall, after
default, voluntarily give up possession to Landlord, deliver to Landlord or its
agents the keys to the Premises, or both, such actions shall be deemed to be in
compliance with Landlord's rights and the acceptance thereof by Landlord or its
agents shall not be deemed to constitute a termination of the Lease. Landlord
reserves the right following any such re-entry and/or reletting to exercise its
right to terminate this Lease by giving Tenant written notice thereof.
(B) Tenant hereby waives the service of any notice of intention to
re-enter or to institute legal proceedings to that end which may otherwise be
required to be given under any law. Tenant, on its own behalf and on behalf of
all persons claiming through or under Tenant, including all creditors, does
further hereby waive any and all rights which Tenant and all such persons might
otherwise have under any present or future law to redeem the Premises, or to
re-enter or repossess the Premises, or to restore the operation of this Lease,
after (i) Tenant shall have been dispossessed by a judgment or by warrant of any
court or judge, or (ii) any re-entry by Landlord, or (iii) any expiration or
termination of this Lease and the Term, whether such dispossess, re-entry,
expiration or termination shall be by operation of law or pursuant to the
provisions of this Lease. The words "re-enter", "re-entry" and "reentered" as
used in this Lease shall not be deemed to be restricted to their technical legal
meanings. In the event of a breach or threatened breach by Tenant, or any
persons claiming through or under Tenant, of any term, covenant or condition of
this Lease on Tenant's part to be observed or performed, Landlord shall
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have the right to enjoin such breach and the right to invoke any other remedy
allowed by law or in equity as if re-entry, summary proceedings and other
special remedies were not provided in this Lease for such breach.
(C) (1) If this Lease is terminated in accordance with the provisions
of Section 7.02(A)(1), Tenant shall remain liable to Landlord for damages in an
amount equal to the Base Rent and any Additional Rent due hereunder as of the
date of termination of this Lease plus the Base Rent and any Additional Rent
which would have been owing by Tenant hereunder for the balance of the Term
(collectively, the "Aggregate Gross Rent") had this Lease not been terminated,
less the net proceeds, if any, received as a result of any reletting of the
Premises by Landlord subsequent to such termination, after deducting all of
Landlord's expenses including, without limitation, all repossession costs,
brokerage commissions, legal expenses, attorneys' fees, expenses of employees,
alteration and repair costs and expenses of preparation for such reletting
(collectively, the "Reletting Costs"). Landlord shall be entitled to collect
Base Rent, any Additional Rent and all other damages from Tenant monthly on the
days on which Base Rent and any Additional Rent would have been payable
hereunder if this Lease had not been terminated. Alternatively, at the option of
Landlord, in the event this Lease is so terminated, Landlord shall be entitled
to recover forthwith against Tenant, as liquidated damages and not as a penalty,
the then value of the Aggregate Gross Rent and Reletting Costs less the
aggregate rental value of the Premises for what otherwise would have been the
unexpired balance of the Term. If Landlord shall relet the Premises for the
period which otherwise would have constituted the unexpired portion of the Term
(or any part thereof), the amount of rent and other sums payable by the tenant
thereunder shall be deemed prima facie to be the rental value for the Premises
(or the portion thereof so relet) for the term of such reletting. Tenant shall
in no event be entitled to any rents collected or payable in respect of any
reletting, whether or not such rents shall exceed the Base Rent and any
Additional Rent reserved in this Lease.
(2) In the event Landlord does not elect to terminate this
Lease, but takes possession as provided in Section 7.02(A)(2) or Section
7.02(A)(3), Tenant shall pay to Landlord the Base Rent and any Additional Rent
which would be payable hereunder if such repossession had not occurred, less the
net proceeds received by Landlord, if any, of any reletting of the Premises by
Landlord after deducting the Reletting Costs to the extent not paid to Landlord
pursuant to the following sentence. Tenant shall pay rent and all other sums due
to Landlord, monthly, on the days on which Base Rent would have been payable
hereunder if possession had not been retaken. In addition, Tenant shall pay
re-entry expenses of Landlord, including, without limitation, attorney fees and
costs, court costs, locksmith charges, and shipping and storage expenses
immediately upon the taking of possession of the Premises by Landlord.
(D) This Lease shall continue in effect for so long as Landlord does
not terminate Tenant's right to possession, and Landlord may enforce all its
rights and remedies under this Lease, including the right to recover the Base
Rent and any Additional Rent, as the same become due under this Lease.
(E) Finally, Landlord and Tenant acknowledge that to induce Tenant to
enter into this Lease, Landlord has incurred significant costs, including,
without limitation, the following: (i) expenditures incurred to prepare the
Premises for Tenant's occupancy, including,
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without limitation, any amounts paid to or on behalf of Tenant by Landlord in
respect thereof, and/or (ii) rent abatements or concessions (collectively, the
"Inducements"). Landlord and Tenant further acknowledge that Landlord would not
have granted the Inducements to Tenant but for Tenant's agreement to perform all
of the terms, covenants, conditions and agreements to be performed by it under
this Lease for the entire Term. Accordingly, if an Event of Default shall occur
hereunder, Tenant shall pay as liquidated damages for granting the Inducements
and not as a penalty, with the next monthly installment of Base Rent ensuing
after the occurrence of the Event of Default, as Additional Rent, the
unamortized portion of those Inducements incurred or granted prior to the date
of the Event of Default (the "Pre-Default Inducements"). For the purposes
hereof, the unamortized portion of the Pre-Default Inducements shall be the
product of (i) the Pre-Default Inducements and (ii) a fraction, the numerator of
which shall be the number of months and/or portions thereof from the date of the
occurrence of the Event of Default to the Expiration Date, not to exceed the
number of months in which Tenant is obligated to pay rent hereunder without any
abatement or concession, and the denominator of which shall be the number of
months and/or portions thereof in the Term less the number of months in the Term
in which rent concessions and/or abatements are granted to Tenant. Landlord may
or, at Tenant's request, shall, after the occurrence of an Event of Default,
forward a statement to Tenant setting forth the unamortized portion of the
Pre-Default Inducements, but the failure to deliver such a statement shall not
be or be deemed to be a waiver of the right to collect the unamortized
Pre-Default Inducements or extend the date upon which such obligation shall be
due and payable.
SECTION 7.03 LANDLORD'S LIEN AND SECURITY INTEREST.
(A) In addition to the statutory "Landlord's Lien" provided in Arizona
Revised Statutes ("ARS") Sections 33-361 and 33-362, or any successor statutes
thereto, to secure payment of all rentals and other sums of money becoming due
hereunder from Tenant and to secure payment of any damages or loss which
Landlord may suffer by reason of a breach by Tenant hereunder, Tenant hereby
grants to Landlord a valid security interest in all property of Tenant presently
or hereafter situated in or about the Premises, and all proceeds therefrom, and
such property shall not be removed therefrom without the consent of Landlord
until all arrearages in Base Rent and any Additional Rent then due to Landlord
hereunder shall first have been paid and discharged and all the terms,
covenants, and conditions hereof have been fully performed by Tenant. The
provisions of this Section 7.03 shall constitute a "Security Agreement" as such
term is used in ARS Sections 47-901 et seq., or any successor statute thereto
(the "UCC"), and Tenant agrees to execute as debtor such financing statement or
statements as Landlord may now or hereafter reasonably request in order that
such security interest(s) may be protected pursuant to the UCC.
(B) Upon an Event of Default by Tenant, Landlord may, in addition to
any other remedies provided herein, enter the Premises and take possession of
any and all goods, wares, equipment, fixtures, furniture, or other personal
property in the Premises, and sell the same at a public or private sale. The
proceeds from any such disposition, less all expenses connected with the taking
of possession, holding and selling of the property (including reasonable
attorneys' fees, disbursements and legal expenses), shall be applied as a credit
against the indebtedness secured by the security interest granted under this
Section 7.03. Any surplus
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shall be paid to Tenant or as otherwise required by law and Tenant shall pay any
deficiencies forthwith.
SECTION 7.04 BANKRUPTCY.
(A) Landlord and Tenant understand that, notwithstanding certain
provisions to the contrary contained herein, a trustee or debtor in possession
under the Code may have certain rights to assume or assign this Lease. Landlord
and Tenant further understand that, in any event, Landlord is entitled under the
Code to adequate assurances of future performance of the terms and provisions of
this Lease. The parties hereto agree that, with respect to any such assumption
or assignment, the term "adequate assurance" shall include at least the
following:
(1) In order to assure Landlord that the proposed assignee will
have the resources with which to pay all Base Rent and any Additional Rent
payable pursuant to the terms hereof, any proposed assignee must have, as
demonstrated to Landlord's satisfaction, a net worth (as defined in accordance
with generally accepted accounting principles consistently applied) of not less
than the net worth of Tenant on the date this Lease became effective, increased
by seven percent (7%), compounded annually, for each year from the Commencement
Date through the date of the proposed assignment. The financial condition and
resources of Tenant were a material inducement to Landlord in entering into this
Lease.
(2) Any proposed assignee must have been engaged in the conduct of
business for the five (5) years prior to any such proposed assignment, which
business does not violate the Permitted Uses, and such proposed assignee shall
continue to engage in the Permitted Uses. Landlord's asset will be substantially
impaired if the trustee in bankruptcy or any assignee of this Lease makes any
use of the Premises other than the Permitted Uses.
(3) Any proposed assignee of the Lease must assume and agree to be
personally bound by the terms, covenants and provisions of this Lease.
ARTICLE 8
MISCELLANEOUS PROVISIONS
SECTION 8.01 ADMINISTRATIVE SERVICE CHARGES. Tenant acknowledges that any
failure by it to timely pay any of its obligations hereunder will result in and
cause monetary loss to Landlord, the exact amount of such costs being extremely
difficult and impracticable to fix. Therefore, in addition to any other rights
and remedies provided Landlord, any and all payments which remain unpaid for
five (5) days after the respective due date, will be subject to an
administrative service charge of five percent (5%) of the total overdue amount.
The parties agree that this charge represents a fair and reasonable estimate of
the costs Landlord will incur by reason of such late payment by Tenant.
SECTION 8.02 LATE CHARGES. In addition to the administrative service charge
described in Section 8.01, all amounts which shall remain unpaid for five (5)
days after their respective due dates shall bear interest from the date that the
same became due and payable to and including the date of payment, whether or not
demand is made therefor, at the lesser of (i) the rate of eighteen
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percent (18%) per annum or (ii) the maximum legal rate of interest allowed by
the state in which the Building is located.
SECTION 8.03 HOLDING OVER. If Tenant remains in possession of the Premises
after the expiration or other termination of the Term, then, at Landlord's
option, Tenant shall be deemed to be occupying the Premises as a month-to-month
tenant only, at a monthly rental equal to two (2) times the sum of the Base Rent
and any Additional Rent payable hereunder during the last month of the Term.
Tenant shall defend, indemnify and hold Landlord harmless from and against any
and all claims, losses and liabilities for damages resulting from failure to
surrender possession upon the Expiration Date or sooner termination of the Term,
and such obligations shall survive the expiration or sooner termination of this
Lease.
SECTION 8.04 NOTICES. Any and all notices required or which either party
herein may desire to give to the other (each, a "Notice") shall be made in
writing and shall be given by certified or registered mail, postage prepaid,
return receipt requested, or by a nationally recognized overnight courier, and
shall be deemed to be given on the third (3rd) business day after the date of
posting in a United States Post Office or one day after delivery to the
overnight courier, and shall be delivered to Landlord's Notice Address or
Tenant's Notice Address, as appropriate. The parties agree that copies of all
Notices to be delivered to Landlord and Tenant hereunder shall be simultaneously
delivered to the specified addresses for copies set forth in Section 1.01(G) and
Section 1.01(O), respectively, if any. Copies of any Notices commencing or
relating to any action, suit or proceeding against Landlord arising hereunder
shall also be sent to Pryor, Cashman, Sherman and Flynn, 410 Park Avenue, New
York, New York 10022, Attention: Bradley A. Kaufman, Esq. Either party may
designate a different address or addresses for communications intended for it.
Anything contained herein to the contrary notwithstanding, any bills or invoices
for Base Rent, any Additional Rent or any Landlord's Operating Statement may be
given by hand or by mail (which need not be registered or certified) and, if so
given, shall be deemed given on the date of delivery or refusal, if by hand, or
on the third (3rd) business day following the date of posting, if mailed.
Landlord may act through its managing agent for the Building or through any
other person who may from time to time be designated by Landlord in writing.
SECTION 8.05 AUTHORITY OF TENANT.
(A) If Tenant is a corporation, partnership, joint venture or
unincorporated association, each individual executing this Lease on behalf of
such entity represents and warrants that he or she is duly authorized to execute
and deliver this Lease on behalf of such entity and that this Lease is binding
upon such entity in accordance with its terms. If this Lease is executed by more
than one tenant, Tenant's obligations hereunder shall be the joint and several
obligations of each tenant executing this Lease.
(B) Nothing contained in this Lease shall create any relationship
between the parties hereto other than that of Landlord and Tenant, and Landlord
shall not be deemed to be a partner of Tenant in the conduct of its business, or
a joint venturer or a member of a joint or common enterprise with Tenant.
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SECTION 8.06 FINANCIAL STATEMENTS. Tenant shall, when requested by Landlord
from time to time, furnish a true and accurate audited statement of its
financial condition prepared in conformity with recognized accounting principles
and in a form reasonably satisfactory to Landlord.
SECTION 8.07 BROKERAGE. Tenant represents and warrants that it has dealt
only with Broker and/or with Landlord and its direct employees, and no other
broker or agent, in connection with the negotiation or execution of this Lease.
Tenant agrees to indemnify and hold Landlord harmless from and against any and
all damage, loss, cost or expense including, without limitation, all attorneys'
fees and disbursements incurred by reason of any claim of or liability to any
other broker or other person for commissions or other compensation or charges
with respect to the negotiation, execution and delivery of this Lease, and such
obligations shall survive the expiration or sooner termination of this Lease.
SECTION 8.08 DEFINITION OF LANDLORD. The term "Landlord" as used in this
Lease shall mean only the owner of the Building, or the tenant under a Superior
Lease. In the event of any transfer of title to or lease of the Building, the
transferor shall be entirely freed and relieved of all covenants and obligations
of Landlord hereunder (whether express or implied) without further agreement
between the parties or their successors in interest and Tenant shall look solely
to the successor in interest of the transferor as Landlord under this Lease.
This Lease shall not be affected by such transfer or lease, and Tenant agrees to
attorn to the transferee or assignee, such attornment to be effective and
self-operative without the execution of any further instrument by the parties to
this Lease.
SECTION 8.09 ENTIRE AGREEMENT.
(A) Tenant acknowledges and agrees that it has not relied upon any
statements, representations, agreements or warranties except those expressed in
this Lease, and that this Lease contains the entire agreement of the parties. No
amendment or modification of this Lease shall be binding or valid unless
expressed in writing and executed and delivered by Landlord and Tenant. Except
as otherwise specifically provided herein, the terms, covenants and conditions
contained in this Lease shall bind and inure to the benefit of the respective
heirs, successors, executors, administrators and assigns of each of the parties
hereto.
(B) The submission of this document for examination and review does not
constitute an option, an offer to lease space, or an agreement to lease space.
This document shall have no binding effect on the parties hereto unless and
until executed and delivered by both Landlord and Tenant and will be effective
only upon Landlord's execution and delivery of same. Except as expressly
contained herein, (i) neither Landlord nor Landlord's agent or attorneys have
made representations, warranties or promises with respect to the Premises, the
Building or this Lease; (ii) Tenant has inspected the Premises and agrees to
take same in its "as-is" condition; and (iii) Landlord shall have no obligation
to do any work in and to the Premises in order to prepare the Premises for
occupancy and use by Tenant.
SECTION 8.10 FORCE MAJEURE. Any obligation of Landlord which is delayed or
not performed due to acts of God, strike, riot, shortages of labor or materials,
war, governmental laws or action, or lack thereof, or any other causes of any
kind whatsoever which are beyond
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Landlord's reasonable control, shall not constitute a default hereunder and
shall be performed within a reasonable time after the end of such cause for
delay or nonperformance.
SECTION 8.11 NO SETOFF. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent, and Tenant shall
not be entitled to any setoff, offset, abatement or deduction of rent or other
amounts due Landlord hereunder if Landlord fails to perform its obligations
hereunder. In no event shall Landlord, any holder of a Mortgage and/or lessor
under a Superior Lease be responsible for any consequential damages incurred by
Tenant as a result of any default by Landlord.
SECTION 8.12 INTERPRETATION.
(A) Any remedy or election given pursuant to any provision in this
Lease shall be cumulative with all other remedies at law or in equity unless
otherwise specifically provided herein.
(B) This Lease shall be construed in accordance with the laws of the
state in which the Building is located. Unless herein waived, Landlord and
Tenant acknowledge that all of the applicable statutes of such state are
superimposed on the rights, duties and obligations of Landlord and Tenant
hereunder.
(C) Landlord and Tenant each acknowledge and warrant that each has been
represented by independent counsel and has executed this Lease after being fully
advised by said counsel as to its effect and significance. This Lease is the
result of negotiations between the parties and their respective attorneys and
shall be construed in an even and fair manner, regardless of the party who
drafted this Lease.
(D) In all instances where Tenant is required by the terms and
provisions of this Lease to pay any sum of money or to do any act at a
particular indicated time or within any indicated period, it is understood and
agreed that time is of the essence.
(E) If any term or provision of this Lease or the application thereof
to any person or circumstances shall, to any extent, be illegal, invalid or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be affected thereby, and all other terms and
provisions of this Lease shall be valid and enforced to the fullest extent
permitted by law.
SECTION 8.13 ENLARGING THE OFFICE BUILDING. Landlord hereby reserves the
right to enlarge the Building by constructing additions to the improvements or
other buildings on portions of the Property with or without any new parking or
common areas, and by including within the Property other properties now or
hereafter owned by Landlord adjacent to the Property. In such event, all new
buildings, properties, common areas and parking areas shall be treated as though
they are part of the Building and, at Landlord's election, all operating
expenses, real property taxes and other pro rata payments required of Tenant
pursuant to the terms of this Lease shall be applicable to such enlarged area
and all improvements now or hereafter located
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thereon. In addition, upon notice to Tenant, Landlord shall have the right to
designate, or to change, the name or numbers of the Building without liability
to Tenant.
SECTION 8.14 LIMITATION OF LANDLORD LIABILITY. In no event shall Landlord be
liable to Tenant for any failure of other tenants in the Building to operate
their businesses, or for any loss or damage that may be occasioned by or through
the acts or omissions of other tenants. Notwithstanding anything to the contrary
provided in this Lease, neither Landlord, nor any general or limited partner in
or of Landlord, whether direct or indirect, nor any direct or indirect partners
in such partners, nor any disclosed or undisclosed officers, shareholders,
principals, directors, employees, partners, servants or agents of Landlord, nor
any of the foregoing, nor any investment adviser or other holder of any equity
interest in Landlord, their successors, assigns, agents, or any mortgagee in
possession shall have any personal liability with respect to any provisions of
this Lease and, if Landlord is in breach or default with respect to its
obligations or otherwise, Tenant shall look solely to Landlord's interest in the
Building for the satisfaction of Tenant's remedies.
SECTION 8.15 SHORT FORM LEASE. Tenant shall not record this Lease or a
memorandum hereof without the prior written consent of Landlord. Upon Landlord's
request, Tenant agrees to execute and acknowledge a short form lease in
recordable form which is satisfactory to Landlord.
SECTION 8.16 RELOCATION. Landlord shall have the right, upon at least sixty
(60) days' written notice to Tenant, to relocate Tenant from the Premises to
other space in the Building containing at least as much rentable square footage
as the original Premises. Such substitute Premises shall be improved by Landlord
at its expense, with improvements at least equal in quantity and quality to
those in the original Premises and Landlord shall pay the out-of-pocket expenses
reasonably incurred by Tenant in connection with such substitution of premises.
Landlord shall have no liability to Tenant for any loss incurred by Tenant as a
result of the interruption of the conduct of Tenant's business in connection
with such relocation. Upon such relocation, this Lease shall continue in full
force and effect without any change in the terms or other conditions contained
herein, but with the new location, rentable square footage and pro rata share,
if any, substituted for that set forth in this Lease.
SECTION 8.17 MORTGAGEE REQUIREMENTS AND ESTOPPEL.
(A) If any present or prospective holder of a Mortgage shall require a
change or changes in this Lease as a condition of its approval of this Lease,
and if within thirty (30) days after notice from Landlord Tenant fails or
refuses to execute the amendment or amendments of this Lease effecting such
change or changes as are stated by Landlord to be necessary to secure the
approval of such present or prospective holder of a Mortgage, Landlord shall
have the right to cancel this Lease at any time prior to the Commencement Date.
(B) At any time and from time to time upon written request by Landlord,
Tenant hereby agrees to deliver within ten (10) days after request, a
certificate to Landlord or to any present or proposed mortgagee, lessor under a
Superior Lease or purchaser, in the form supplied, certifying that this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that the same is in full force and effect as modified, and stating the
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modification), that there are no defenses or offsets thereto (or stating those
claimed by Tenant), the dates to which Base Rent and Additional Rent have been
paid and as to any other information reasonably requested by the same.
SECTION 8.18 NO WAIVER. The failure of Landlord to exercise its rights in
connection with this Lease or any breach or violation of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained.
SECTION 8.19 NO MERGER. The voluntary or other surrender of possession of
the Premises by Tenant, or a mutual cancellation of this Lease, shall not result
in a merger of Landlord's and Tenant's estates, and shall, at the option of
Landlord, either terminate any or all existing subleases or subtenancies, or
operate as an assignment to Landlord of any or all of such subleases or
subtenancies.
SECTION 8.20 ATTORNEYS' FEES. In the event of any action or proceeding
brought by Landlord against Tenant under this Lease, Landlord shall be entitled
to recover court costs and the fees and disbursements of its attorneys in such
action or proceeding (whether at the administrative, trial or appellate levels)
in such amount as the court or administrative body may judge reasonable.
SECTION 8.21 NAME OF BUILDING. Upon notice to Tenant, Landlord shall have
the right to designate, or to change, the name or numbers of the Building
without liability to Tenant.
SECTION 8.22 JURY TRIAL AND COUNTERCLAIM WAIVER. LANDLORD AND TENANT HEREBY
WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
OF THE PARTIES HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY
MATTER ARISING OUT OF OR IN CONNECTION WITH THIS LEASE, THE RELATIONSHIP OF
LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM
FOR INJURY OR DAMAGE, OR ANY EMERGENCY OR STATUTORY REMEDY. IN THE EVENT
LANDLORD COMMENCES ANY SUMMARY PROCEEDINGS OR ACTION FOR NONPAYMENT OF BASE RENT
OR ANY ADDITIONAL RENT, TENANT SHALL NOT INTERPOSE ANY COUNTERCLAIM OF ANY
NATURE OR DESCRIPTION (UNLESS SUCH COUNTERCLAIM SHALL BE MANDATORY) IN ANY SUCH
PROCEEDING OR ACTION, BUT SHALL BE RELEGATED TO AN INDEPENDENT ACTION AT LAW.
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IN WITNESS WHEREOF, Landlord and Tenant have respectively executed this
Lease as of the day and year first above written.
TENANT: LANDLORD:
Luba Veselinovic and Elke Veselinovic, East Broadway 5151 Limited
Husband & Wife, dba, NuPro Innovations Partnership
Inc.
By:___________________________
By:_______________________ Name:_________________________
Name:_____________________ Title:________________________
Title:____________________ Date:_________________________
__________________________
Federal Tax I.D. Number or
Social Security Number
Date:_____________________
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EXHIBIT 6.9
FIRST AMENDMENT TO LEASE
THIS FIRST AMENDMENT is made and entered into this 17th Day of April,
1998, by and between East Broadway 5151 Limited Partnership, a Delaware limited
partnership, hereinafter referred to as "Landlord" and NuPro Innovations Inc.,
an Arizona corporation, formerly Luba Veselinovic and Elke Veselinovic, Husband
& Wife, dba, NuPro Innovations Inc., hereinafter referred to as "Tenant."
WITNESSETH:
WHEREAS, the parties hereto have entered into a Lease dated December
17, 1996 (the "Lease") for those certain premises located at 5151 East Broadway
Boulevard, Suite 730, City of Tucson, County of Pima, State of Arizona; and
WHEREAS, the parties hereto desire to amend, modify or change certain
portions of said Lease;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties do hereby agree as follows:
TERM: The lease term for the Premises shall be extended for fifteen
(15) months and shall commence January 1, 1998 and expire March 31, 1999 (the
"Extension Term").
BASE RENT: The Base Rent for Extension term shall be as follows:
January 1, 1998 - March 31, 1998 $17.50/RSF $1,855.00 per month*
April 1, 1998 - March 31, 1999 $18.50/RSF $1,961.00 per month*
* plus applicable rental taxes.
PARKING: Tenant shall retain the use of two (2) reserved covered
parking spaces, one (1) which shall be free for the Extension Term. The
remaining space shall be at the prevailing market rate, currently $25.00 per
month, plus tax.
EXCEPT as herein modified by this Amendment, all the terms and
conditions of said Lease shall continue in full force and effect and are hereby
in all respects ratified and confirmed and shall apply to Tenant's occupancy of
the Premises outlined in this Amendment.
EXCEPT as otherwise provided in the Lease as hereby modified, the
covenants, agreements, terms and conditions contained in this Amendment shall
bind and inure to the benefit of the parties hereto and their respective
successors and respective permitted assigns. This Amendment may not be changed
orally, but only by an agreement in writing executed by Landlord and Tenant.
1
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Amendment to Lease
as of the day and year first above written.
"LANDLORD" "TENANT"
East Broadway 5151 Limited Partnership, A NuPro Innovations Inc., an Arizona
Delaware limited partnership corporation, formerly Luba
Veselinovic and Elke Veselinovic,
Husband & Wife, dba, NuPro
Innovations Inc.
BY: BY:
-------------------------------------- -------------------------------
TITLE: TITLE:
----------------------------------- -----------------------------
2
<PAGE> 1
EXHIBIT 6.10
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT is made and entered into this 22nd Day of March,
1999, by and between East Broadway 5151 Limited Partnership, a Delaware limited
partnership, hereinafter referred to as "Landlord" and NuPro Innovations Inc., a
Delaware corporation, formerly Luba Veselinovic and Elke Veselinovic, Husband &
Wife, dba, NuPro Innovations Inc., hereinafter referred to as "Tenant."
WITNESSETH:
WHEREAS, the parties hereto have entered into a Lease dated December
17, 1996 and that certain First Amendment to Lease dated April 17, 1998
(collectively, the "Lease") for those certain premises located at 5151 East
Broadway Boulevard, Suite 730, City of Tucson, County of Pima, State of Arizona;
and
WHEREAS, the parties hereto desire to amend, modify or change certain
portions of said Lease;
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties do hereby agree as follows:
TERM: The lease term for the Premises shall be extended for twelve (12)
months and shall commence April 1, 1999 and expire March 31, 2000 (the
"Extension Term").
BASE RENT: The Base Rent for Extension term shall be as follows:
April 1, 1999 - March 31, 2000 $19.00/RSF $2,014.00 per month*
* plus applicable rental taxes.
PARKING: Tenant shall retain the use of two (2) reserved covered
parking spaces, one (1) which shall be free for the Extension Term. The
remaining space shall be at the prevailing market rate, currently $25.00 per
month, plus tax.
EXCEPT as herein modified by this Second Amendment, all the terms and
conditions of said Lease shall continue in full force and effect and are hereby
in all respects ratified and confirmed and shall apply to Tenant's occupancy of
the Premises outlined in this Second Amendment.
EXCEPT as otherwise provided in the Lease as hereby modified, the
covenants, agreements, terms and conditions contained in this Second Amendment
shall bind and inure to the benefit of the parties hereto and their respective
successors and respective permitted assigns. This Second Amendment may not be
changed orally, but only by an agreement in writing executed by Landlord and
Tenant.
1
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Lease as of the day and year first above written.
"LANDLORD" "TENANT"
East Broadway 5151 Limited Partnership, a NuPro Inovations Inc., a Delaware
Delaware limited partnership corporation, formerly Luba
Veselinovic and Elke Veselinovic,
Husband & Wife, dba, NuPro
Innovations Inc.
BY: BY:
------------------------------------- -------------------------------
TITLE: TITLE:
----------------------------------- -------------------------------
2
<PAGE> 1
EXHIBIT 12.1
SUBSIDIARIES OF THE COMPANY
Jurisdiction of Incorporation
-----------------------------
Subsidiary or Organization
---------- ---------------
NuPro Innovation Mexico S.A. de C.V. Mexico
<PAGE> 1
EXHIBIT 12.2
S.E.CLARK & COMPANY, P.C.
- - --------------------------------------------------------------------------------
Member: S.E.C. Practice Section of
the American Institute of Certified Public Accountants
Consent of Independent Auditors
As independent auditors, we hereby consent to the inclusion of our report dated
February 26, 1999, in the Form 10-SB for NuPro Innovations, Inc. which includes
the financial statements of NuPro Innovations, Inc. for the years ended November
30, 1998 and 1997 and TrucTech, Inc. for the periods ended November 30, 1998 and
December 31, 1997.
/s/ S.E.Clark & Company, P.C.
-----------------------------------
Tucson, Arizona
November 19, 1999
Member: National Association of Certified Valuation Analysts
744 N. Country Club Road, Tucson, AZ 85716
(520) 323-7774 Fax (520) 323-8174
[email protected] www.seclarkco.com
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<CASH> 2,456
<SECURITIES> 0
<RECEIVABLES> 3,902
<ALLOWANCES> 0
<INVENTORY> 2,633
<CURRENT-ASSETS> 2,885
<PP&E> 503,957
<DEPRECIATION> 82,840
<TOTAL-ASSETS> 841,146
<CURRENT-LIABILITIES> 370,361
<BONDS> 0
0
0
<COMMON> 10,142
<OTHER-SE> (398,640)
<TOTAL-LIABILITY-AND-EQUITY> 841,146
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,923,757
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,046
<INCOME-PRETAX> (3,992,803)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,992,803)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,992,803)
<EPS-BASIC> (.394)
<EPS-DILUTED> (.394)
<FN>
THE AMOUNTS RESULT FROM THE COMBINED FINANCIAL STATEMENTS OF NUPRO INNOVATIONS
INC. AND TRUCTECH, INC. TO GIVE EFFECT TO THE SUBSEQUENT BUSINESS COMBINATION
OF ENTITIES UNDER COMMON CONTROL.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> AUG-31-1999
<CASH> 5,378,438
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,633
<CURRENT-ASSETS> 5,391,675
<PP&E> 749,537
<DEPRECIATION> 96,988
<TOTAL-ASSETS> 6,452,716
<CURRENT-LIABILITIES> 778,383
<BONDS> 1,050,000
0
0
<COMMON> 12,617
<OTHER-SE> 4,013,689
<TOTAL-LIABILITY-AND-EQUITY> 6,452,716
<SALES> 0
<TOTAL-REVENUES> 55,443
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 562,919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,552
<INCOME-PRETAX> (558,028)
<INCOME-TAX> 0
<INCOME-CONTINUING> (558,028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (558,028)
<EPS-BASIC> (.050)
<EPS-DILUTED> (.050)
</TABLE>
