SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended November 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from 12/1/95 to 11/30/96
Commission File Number 2-92261
WESTBRIDGE RESEARCH GROUP
(Name of Small Business Issuer in its Charter)
California 95-3769474
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1150 Joshua Way, Vista, California 92083
(Address of principal executive office and zip code)
(619) 599-8855
(Issuer's Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statement incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenue for its most recent fiscal year: $866,972.
The aggregate market value of the Common Stock held by nonaffiliates of the
registrant as of November 30, 1996, (computed by reference to the price at which
the Common Stock was most recently sold) was approximately $1,433,943. This
computation excludes a total of 1,244,035 shares held by certain executive
officers and directors of Issuer who may be deemed to be affiliates of Issuer
under applicable rules of the Securities and Exchange Commission.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date.
As of November 30, 1996, there were 8,413,753 shares of Issuer's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure
Format Yes No X
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Westbridge Research Group was incorporated in California in 1982. From
inception, Westbridge Research Group and its wholly-owned subsidiary
(hereinafter referred to collectively as the "Company") have been engaged in the
development, manufacture and marketing of environmentally compatible products
for the agriculture industry. The Company expanded its product line in 1991 to
include products which are used in the bioremediation of hazardous waste.
AGRICULTURE PRODUCTS
The Company's environmentally sensitive products include proprietary
formulations based primarily on the use of microbial fermentations and plant
extracts, micronutrient blends containing primary and complex secondary
nutrients, as well as additional natural humates and natural substances with
growth promoting activity. In addition, the Company manufactures and markets
environmental products for bioremediation in both soil and water, animal feed
additives, and pH acidifiers for agriculture.
Plant Growth Regulators
TRIGGRR formulations are registered with the Environmental Protection Agency
(EPA) as plant growth regulators. The active components of TRIGGRR are
"cytokinins" that affect rates of cell division and growth. TRIGGRR is available
in several product formulations including:
- Soil TRIGGRR, a liquid product that is applied to the soil at the time
of planting or as a side dress to stimulate early seedling vigor,
improve root development, and improve stand.
- Foliar TRIGGRR, which is applied as a liquid directly to plant
foliage. The product has its primary use in stimulating root growth,
promoting earlier and fuller flowering, and increasing seed set.
- Liquid Seed TRIGGRR, a product that is applied directly to seeds prior
to planting and enhances germination and seedling emergence.
TRIGGRR products may be used with conventional farming practices and in
combination with other agricultural chemicals, rendering them easy to apply and
facilitating distribution. These products are inexpensive to use and, when
applied correctly, produce yield increases sufficient to provide substantial
increases in profits to the user.
The Company also manufactures and markets a nematode suppressant called
SUPPRESS. SUPPRESS does not kill the parasitic nematode directly; instead, it
interferes with the ability of the nematode to penetrate the plant roots.
SUPPRESS is composed of safe, nontoxic naturally occurring plant growth
regulators which activate the plant's natural defenses.
<PAGE>
Fertilizers
Foliar SUNBURST and Soil SUNBURST are specialty micronutrient fertilizers
manufactured and marketed by Westbridge. These products contain a non-plant
growth regulator organic base and humic acids. The products are formulated for
use on crops which benefit from foliar micronutrient sprays, where a particular
crop is not included on the current TRIGGRR label, or in cases where the use of
TRIGGRR is not appropriate. In addition, Westbridge has developed and markets a
line of organic fertilizers under the name Biolink. These products meet current
guidelines for fertilizers used in organic food and fiber production.
BIOREMEDIATION PRODUCTS
Westbridge environmental products include Sewage Treatment (ST-12) designed to
suppress biological oxygen demand by reducing dissolved solids and increasing
settleable solids, Bioremediation Nutrient Blends (the BNB product line) for
contaminated soil and water, and Cellulose Digester TRIGGRR which is designed to
accelerate breakdown of stubble in low- or no- till farming operations.
FEED ADDITIVES
Animal feed additives include products derived from microbial fermentation and
proteinated and chelated trace minerals that stimulate beneficial
gastrointestinal microorganisms, thereby improving the animal's digestion and
conversion of feed to weight gain.
PRODUCT DEVELOPMENT
The Company uses an intern program and contracts with universities and private
government laboratories to conduct the majority of its research and development
work in environmentally sensitive agriculture products. These programs and
contacts generate the field trials and data necessary to obtain the requisite
government approvals and establish efficacy under commercial conditions.
The Company concentrates its product development efforts on formulation
modifications designed to further increase the efficacy of the Company's
agricultural products and on studies to develop precise application rates and
timing for additional crops.
The Company has developed environmentally sensitive products for the home lawn
and garden industry. One such product, an all purpose organic fertilizer
licensed under the name Loren's Organic Harvest, is currently in regional
distribution.
Only a small portion of Company resources are currently being devoted to these
projects, but, as funds become available, these and other applications will be
pursued.
Research and development expenses for continuing operations for fiscal years
1996 and 1995, respectively, were $141,585 and $163,113.
GOVERNMENT REGULATIONS
The Company's activities are, or may be, subject to regulation under various
laws and regulations including, among others, the Occupational Safety and Health
Act, the Toxic Substances Control Act, the National Environmental Policy Act,
other water, air and environmental quality statutes, and export control
legislation. The Company believes it has met its current obligations under the
aforementioned regulations.
In addition to the foregoing requirements, the Company's agricultural products
must be approved by state authorities before distribution in a state. In some
cases, this necessitates having to conduct field tests in the particular state
to accumulate the necessary test data for registration. Soil TRIGGRR and Foliar
TRIGGRR have been federally registered with the EPA. In addition, the Company
has registered its products with certain appropriate state agencies and is
pursuing registration in other states.
<PAGE>
MARKETING
The Company uses a small number of key regional and national distributors for
its U.S. market. Internationally, the Company has executed distribution
agreements with in-place ag-chemical distributors to represent the Company's
products in specified regions or countries. The Company is dependent on three
domestic customers whose purchases amounted to 49% of the Company's agricultural
product sales in fiscal 1996. These domestic customers represented 48% of the
Company's agricultural product sales in 1995.
MANUFACTURING
All of the Company's proprietary formulations and finished products are
manufactured at its Vista, CA facility.
The Company has improved its production capabilities which has allowed it to
seek new opportunities in manufacturing liquid specialty and fertilizer products
for other companies.
LICENSES
The Company has a license agreement with Westbridge Biosystems Ltd., a
California limited partnership (the "Partnership"), for the base technology used
in many of its products. Refer to Exhibit 10(o), the Biosystems License
Agreement, incorporated by reference to Exhibit 10(s) to the Company's Annual
Report on Form 10-K for the fiscal year ended November 30, 1989. On September
30, 1996, the Company and the Partnership amended the terms of the agreement.
Under the terms of the amended agreement, the Company forgave its entire
remaining note receivable balance of $195,942 from the Partnership in exchange
for a restructuring of royalty fees and the term over which royalties are due
the Partnership. Accordingly, the forgiven note balance has been recorded as
prepaid royalties and is being amortized on a straight line basis over the term
of the amended licensing agreement, through December 31, 2006. Under the amended
licensing agreement, the Company is required to pay the Partnership royalties
equal to $1,000 per month plus 2.5% of Gross Sales. The Amended Biosystems
License Agreement has been filed with this Report on Exhibit 10(u).
SEASONALITY
Agricultural product sales are typically seasonal in nature with heavier sales
in the spring months. The Company is seeking to temper the seasonality of its
agronomic sales by marketing its products in Latin American countries which
produces sales in January, February and March.
COMPETITION
The Company's agricultural products compete with chemicals of major specialty
suppliers to the agricultural industry. Some of the advantages these companies
have in supplying chemical products to the agricultural industry include
well-established distribution networks, well-known products, experience in
satisfying the needs of farmers and extensive capital resources. A number of
other existing companies are engaged in research in the area of biotechnology
relating to agriculture. The Company expects the biotechnology industry in
agriculture to be very competitive in the future. Unlike chemical products,
biotechnology products do not cause soil erosion, do not adversely affect the
environment, are not dependent on petroleum products and do not present safety
hazards to humans. Most of the Company's existing and potential competitors in
agri-chemicals and biotechnology have more experience in operations, more
extensive facilities and greater financial and other resources.
<PAGE>
EMPLOYEES
At November 30, 1996, the Company had 7 employees all of whom are full-time
employees. None of these employees are covered by a collective bargaining
agreement. The Company believes that its employee relations are satisfactory.
ITEM 2. PROPERTIES
The Company's principal executive office is located at 1150 Joshua Way, Vista,
California 92083. This facility consists of 9,515 square feet and is used for
offices, a laboratory and the production and storage of agricultural products
and materials. The Company leases these facilities under a lease which expires
in March 1999. Rent is being expensed on a straight-line basis over the term of
the lease.
Rent expense for the years ending November 30, 1996 and 1995, net of sub-lease
income, was $77,011 and $143,749, respectively.
The Company believes that its current facilities are adequate for its operations
for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
During June 1994, a lawsuit was filed against the Company for commissions
allegedly due on the anticipated merger of the Company with another company,
which transaction did not occur. During 1995, a $20,000 judgement against the
Company was entered as to one of the plaintiffs. The other plaintiff settled
with the Company for $10,000 in products or cash. At November 30, 1996, the
Company had paid all fees and costs related to these proceedings.
Related to this litigation, the court entered a judgement for approximately
$19,000 against the Company for legal fees paid by the plaintiff. This amount is
being paid in monthly installments of $1,500, and is expected to be paid in full
on February 15, 1997. At November 30, 1996, $3,176 of this judgment remained
outstanding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) Principal Market. There is no established public trading market for
the Company's single class of common equity outstanding.
(b) Approximate Number of Holders for Common Stock. The approximate number
of record holders of the Company's Common Stock, as of November 30,
1996, was 843.
(c) Dividends. The Company has paid no dividends. There are no contractual
restrictions which materially limit the Company's present or future
ability to pay dividends. The Company does not expect to pay dividends
in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
Fiscal Year 1996 Compared to Fiscal Year 1995
Total product sales were $866,972 in fiscal 1996 compared with $693,982 in
fiscal 1995, an increase of 25%. The increase is attributable to the Company's
focus in selecting and providing good technical support to distributors who are
innovative and well placed in the industry. In addition, the Company expanded
sales of its products on two new crops. Prices for the Company's existing
products remained stable during fiscal 1996. Production by gallons were 42,166
in 1996 and 51,802 in 1995, a decrease of 19%. The decrease in production by 19%
versus a 25% increase in sales was due to an increase in sales of the Company's
higher priced products, whereas in 1995 production included a large volume of
toll manufactured products.
Cost of sales as a percentage of total product sales amounted to 31.3% or
$271,305 in fiscal 1996, as compared with 45.1% or $312,809 in fiscal 1995. The
decrease was the result of an increase in the sales mix of products with higher
gross margins and reduced overhead costs.
Research and development expenses decreased by $21,528, or 13.2%, in fiscal 1996
over $163,113 in fiscal 1995. The decrease is due to a decrease in contract
research and overhead costs.
Selling expenses decreased in relation to product sales for fiscal year 1996;
representing 18.6% of product sales in fiscal 1996 versus 35.6% of product sales
in fiscal 1995. The decreased expenditures are a result of reduced rent expense
attributable to the sales function, reduced sales commissions, and a decline in
consulting fees.
General and administrative expenses decreased by 36.5% to $276,307 in fiscal
1996 from $435,133 in fiscal 1995, and decreased as a percentage of total
product sales to 31.9% from 62.7% in fiscal 1995. The decrease was due primarily
to the reduction of legal fees from litigation settled in 1995, a reduction in
rent attributable to the general and administrative function and a decline in
consulting fees.
Royalty expenses represent royalties owed to Westbridge Biosystems, Ltd. from
which the Company has licensed certain technology. This amount remained
relatively the same in fiscal 1996 at $574,821 compared with $569,484 in fiscal
1995.
<PAGE>
Interest expense was $21,834 in fiscal 1996, a decrease of 57.3% over fiscal
1995, during which it was $51,128. The decrease was due primarily to the
reduction in outstanding indebtedness.
The net loss for fiscal 1996 was $915,169 compared with net income of $2,228,858
in fiscal 1995. Approximately $3,424,000 is related to the Company recognizing a
gain in 1995 on notes receivable from Westbridge Biosystems Ltd. In addition, in
fiscal 1996 the Company recorded a provision for bad debt associated with a long
term receivable due from a foreign distributor. The account was collateralized
by real property in Baja California, Mexico which is pending a foreclosure sale
by a Mexican court.
Fiscal Year 1995 Compared to Fiscal Year 1994
Total product sales were $693,982 in fiscal 1995 compared to $1,025,029 in
fiscal 1994, a decrease of 32.3%. The decrease is attributable to poor
performance by the corporation which had contracted to do the agricultural sales
and marketing for the Company and the loss of one significant customer. The
sales and marketing agreement was terminated in December 1995 and the Company
has internalized its sales and marketing efforts. Prices for the Company's
existing products remained stable during fiscal 1995. Production by gallons were
51,802 in 1995 and 71,304 in 1994, a decrease of 27.4%. The decrease in
production by 27.4% vs. a 32.3% decrease in sales was due to increased sales of
higher margin products in comparison to a smaller profit margin on certain toll
manufactured products.
During 1995, gain on recognition of notes receivable of $4,229,676 was the
result of the recognition of the note receivable from the Westbridge Biosystems
Limited partnership. Interest accrued on outstanding Notes held by former
Directors was re-negotiated to a lower interest rate from the date of inception.
The difference in interest accrued was forgiven by the former Directors.
Prior to December 31, 1994, research and development revenues represented
revenues recognized pursuant to a research and development contract (the
Contract) with Westbridge Biosystems, Ltd. Research and development revenue
recognized during fiscal 1994 and 1995 were $1,506,830 and $23,047,
respectively. During 1994 the Company determined that certain newly developed
products which were subject to the contract had not been included in the R&D
revenue. Consequently, the Company retroactively included these amounts during
fiscal 1994. (See discussion of 12 year note below.)
Cost of sales as a percentage of total product sales amounted to 45.1% or
$312,809 in fiscal 1995, as compared with 33.7% or $344,952 in fiscal 1994. The
increase was due to overhead remaining the same while sales were lower.
Research and development expenses decreased by $15,922, a decrease of 8.9% in
fiscal 1995 over $179,035 in fiscal 1994. The decrease is due to a decrease in
contract research.
Selling expenses increased against product sales for fiscal year 1995;
representing 22.6% of product sales in fiscal 1994 versus 35.5% of product sales
in fiscal 1995. The increased expenditures are a direct result of allocating a
portion of rent to selling expenses. The increase was also attributable to a
decrease in sales.
General and administrative expenses increased by 40% to $437,533 in fiscal 1995
from $313,117 in fiscal 1994 and increased as a percentage of total product
sales to 63%. The increase was due primarily to litigation expense and
settlement costs as well as a decrease in sales.
<PAGE>
Royalty expenses represent royalties owed to Westbridge Biosystems, Ltd. from
which the Company has licensed certain technology. This amount decreased by 64%
in fiscal 1995 to $569,484 compared to $1,586,138 in fiscal 1994. This decrease
is due to the retroactive application during 1994 of products deemed to carry
the royalty obligation which had not been included in prior years.
Interest expense was $51,128 in fiscal 1995, a decrease of 277% over fiscal 1994
which was $141,602. The decrease was due to the maturity in December 1994 of
certain promissory notes issued pursuant to a private placement offering in
1991.
The net income for fiscal 1995 was $2,282,386 compared with a net loss of
$345,528 in fiscal 1994. This increase in income was primarily due to the gain
on recognition of notes receivable, as previously discussed. Approximately
$546,000 of additional expenses is attributable to the Company not recognizing
research and development revenues (deferred revenue), on a monthly basis,
subsequent to December 31, 1994. In prior years, royalty expense was almost
completely offset by research and development revenue. Additionally, the Company
recognized approximately $100,000 in conjunction with the valuation adjustment
of certain limited partnership units which the Company obtained during fiscal
1995.
Liquidity and Capital Resources
Net working capital decreased to $189,030 at November 30, 1996, due primarily to
the forgiveness of the principal balance of the Note Receivable (12 year note)
from Westbridge Biosystems Ltd.
Based on current cash flow projections management expects that the Company can
continue operations for the current year without infusions of additional cash.
Although the Company has reduced its staff over the past two years and the loss
of any single person would affect the efficiency of operations, such a loss
would not hinder the Company's existence.
Litigation matters affecting the Company is described in Item 3. LEGAL
PROCEEDINGS.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
November 30, 1996 and 1995
<TABLE>
ASSETS
1996 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 115,719 $ 120,672
Accounts receivable, net of allowance for doubtful
accounts of $4,473 and $26,824 in 1996 and 1995 128,442 71,470
Inventories 74,369 76,535
Prepaid expenses and other current assets 10,237 13,503
Current portion of notes receivable -- 623,785
Total current assets 328,767 905,965
Property and equipment, at cost:
Machinery and equipment 119.135 158,712
Office furniture and fixtures 244,340 240,904
Leasehold improvements -- 27,011
363,475 426,627
Less accumulated depreciation (323,408) (373,140)
Net equipment and improvements 40,067 53,487
Long-term account receivable, net 130,000 326,270
Notes receivable, net of current portion -- 324,292
Intangibles, net 400,294 287,876
$ 899,128 $1,897,890
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Continued)
November 30, 1996 and 1995
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
1996 1995
<S> <C> <C>
Current liabilities:
Accounts payable $ 17,844 $ 34,891
Accrued expenses 78,467 120,776
Current portion of long term debt 39,239 26,926
Current portion of capital lease obligations 4,187 4,187
Notes payable to related parties -- 231,998
Total current liabilities 139,737 418,778
Long-term debt 80,619 97,580
Notes payable to related parties 220,423 --
Deferred rent 5,137 --
Capital lease obligations, net of current portion 3,428 7,615
Total liabilities 449,344 523,973
Commitments -- --
Shareholders' equity:
Common stock, no par value, 37,500,000 authorized,
8,413,753 shares issued and outstanding in 1996
and 1995 8,479,854 8,479,854
Paid-in capital - warrants 95,000 95,000
Accumulated deficit (8,125,070) (7,200,937)
Total shareholders' equity 449,784 1,373,917
$ 899,128 $1,897,890
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended November 30, 1996 and 1995
<TABLE>
1996 1995
<S> <C> <C>
Revenues:
Agricultural product sales $ 866,972 $ 693,982
Research and development fees - related party -- 23,047
Gain on recognition of notes receivable -- 3,424,430
Other revenue -- 48,268
866,972 4,189,727
Costs and expenses:
Cost of sales 271,305 312,809
Research and development 141,585 163,113
Selling 160,573 246,439
General and administrative 276,307 435,133
Royalties 574,815 569,484
Amortization of processes and formulas 80,338 80,338
Provision for bad debt, long-term account receivable 196,270 --
Forgiveness of notes receivable 80,948 100,025
Operating expenses 1,782,141 1,907,341
Income (loss) from operations (915,169) 2,282,386
Other income(expense):
Interest expense (21,834) (51,128)
Interest income 11,892 --
Other income 3,378 --
Net income (loss) before provision for
income taxes (921,733) 2,231,258
Provision for income taxes 2,400 2,400
Net income (loss) $ (924,133) $2,228,858
Net income (loss) per common share $ (.11) $ .22
Weighted average common and common equivalent
shares outstanding 8,413,753 9,968,236
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For The Years Ended November 30, 1996 and 1995
<TABLE>
Paid-in
Common Stock Capital Accumulated
Shares Amount Warrants Deficit Total
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1994 8,413,753 $8,479,854 $95,000 $(9,429,795) $(854,941)
Net income -- -- -- 2,228,858 2,228,858
Balance, November 30, 1995 8,413,753 8,479,854 95,000 (7,200,937) 1,373,917
Net loss -- -- -- (924,133) (924,133)
Balance, November 30, 1996 8,413,753 $8,479,854 $95,000 $(8,125,070) $ 449,784
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended November 30, 1996 and 1995
<TABLE>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(924,133) $2,228,858
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Notes receivable forgiven as payment for royalties 571,635 515,692
Bad debt recoveries (22,351) --
Depreciation and amortization 100,986 103,993
Loss on disposal of assets -- 18,749
Gain on recognition of notes receivable -- (3,424,430)
Forgiveness of notes receivable 80,948 100,025
Provision for bad debt, long-term
account receivable 196,270 --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (34,621) 7,150
Decrease in inventories 2,166 6,092
Decrease in prepaid expenses and other
current assets 3,266 2,346
Decrease in other receivable -- 16,948
(Decrease) increase in accounts payable (17,047) 7,468
(Decrease) increase in accrued expenses (42,309) 1,806
Increase (decrease) in deferred rent 5,137 (28,770)
Net cash flows used in operating activities (80,053) (444,073)
Cash flows from investing activities:
Purchase of property and equipment (4,042) (219)
Proceeds from sale of investments -- 253,994
Proceeds from notes receivable 99,552 372,940
Net cash flows provided by
investing activities 95,510 626,715
Cash flows from financing activities:
Borrowings on notes payable to related parties 15,833 32,524
Payments on notes payable to related parties -- (58,113)
Borrowings of long-term debt -- 2,072
Payments on long-term debt (32,056) (20,546)
Payments on capital lease obligations (4,187) (4,761)
Net cash flows used in
financing activities (20,410) (48,824)
Net (decrease) increase in cash and cash equivalents (4,953) 133,818
Cash and cash equivalents at beginning of year 120,672 (13,146)
Cash and cash equivalents at end of year $ 115,719 $ 120,672
</TABLE>
See accompanying notes to the financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended November 30, 1996 and 1995
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
1996 1995
Cash paid during the year for:
Interest $ 12,183 $ 30,959
Income taxes $ 2,400 $ 2,400
Supplemental disclosure of noncash investing and financing activities:
Prepayment of royalties through forgiveness of notes
receivable $195,942 $ --
Note payable to related party assigned to non-related
party $ 27,408 $ --
See accompanying notes to the financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Westbridge Research Group (the "Company") was incorporated in California on
April 12, 1982 for the acquisition, research, development, manufacturing and
marketing of biotechnological products for use in the agricultural and energy
industries.
Liquidity
The Company has historically experienced significant losses and negative cash
flows from operations. At November 30, 1996 the Company's working capital is
approximately $189,000 which includes approximately $115,000 in cash and cash
equivalents. The Company has curtailed expenditures for research and development
and has restructured the royalty fee required under the Licensing Agreement
(Note 2). Management believes that the Company has licensed marketable products
and that future sales of these products will provide positive cash flows
sufficient to fund future operations. However, there can be no assurances that
the Company will achieve profitability or positive cash flow.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary Westbridge Agricultural Products. All
significant intercompany transactions have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times, may
exceed the federally insured limits. The Company has not experienced any losses
in such accounts and management believes it places its cash on deposit with
financial institutions which are financially stable.
Inventories
Inventory, consisting of agricultural products, is stated at the lower of cost
(determined on a first-in, first-out basis) or market.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Processes and Formulas
Processes and formulas are recorded at amortized cost, and amortized on a
straight-line basis over the lesser of ten years or their estimated useful
lives.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the depreciable assets,
or related lease life, if shorter, which range from three to ten years.
Revenue Recognition
Revenues are recognized when a product is shipped or a service is performed.
Sales to Major Customers
Sales to major agricultural domestic customers were 42% and 48% of fiscal 1996
and 1995 net agricultural product sales, respectively. There were no significant
aggregate foreign sales during fiscal 1996 or 1995. A majority of the Companys
sales are concentrated in Washington, California, Arizona and Texas.
Net Income (Loss) Per Share
Net loss per common share is based on the weighted average number of common
shares outstanding during each period adjusted for the assumed conversion of
dilutive stock options and warrants using the treasury stock method. In 1996 the
effects of warrants and stock options are not considered in the calculation as
they are anti-dilutive.
Research and Development
It is the Company's policy to expense research and development costs when
incurred.
Income Taxes
The Company accounts for income taxes using the asset and liability method.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Reclassifications
Certain reclassifications have been made to 1995 financial statement amounts in
order to conform to current year presentation.
Stock-Based Compensation
The Financial Accounting Standards Board (FASB) recently issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." This new standard encourages, but does not require, companies to
recognize compensation expense for grants of stock, stock options, and other
equity instruments based on a fair-value method of accounting.
Companies that do not choose to adopt new expense recognition rules of SFAS No.
123 will continue to apply the existing accounting rules contained in Accounting
Principles Board Opinion (APBO) No. 25, but will be required to provide pro
forma disclosures of the compensation expense determined under the fair-value
provisions of SFAS No. 123, if material. APBO No. 25 requires no recognition of
compensation expense for most of the stock-based compensation arrangements
provided by the Company, namely, broad-based employee stock purchase plans and
option grants where the exercise price is equal to the market price at the date
of grant.
The Company is required to adopt either the recognition or the disclosure
provisions of SFAS No. 123 by no later than December 1, 1997. The Company
expects to continue to follow the accounting provisions of APBO No. 25 for
stock-based compensation and to furnish the pro forma disclosures required under
SFAS No. 123, if material.
Long-Lived Assets
In March 1995, the FASB issued Statement No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement 121
in the first quarter of fiscal 1997 and, based on current circumstances, does
not believe the effect of adoption will be material.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 -- RESEARCH AND DEVELOPMENT AGREEMENTS
In December 1982, the Company entered into a research and development agreement
(the "Development Agreement") with Westbridge Biosystems, Ltd. (the
"Partnership") to develop biologically compatible products to decrease the cost
of crop production, increase crop yields and improve soil quality through the
use of naturally occurring microorganisms and synthesized and extracted organic
polymers. In addition, the Company was to develop a family of drilling and
completion fluids based on synthesized and extracted organic polymers.
Under the terms of the agreement the partnership was required to fund research
and development costs as follows:
Cash $ 2,444,625
1 year note, collected in prior years 2,423,375
12 year note, due December 31, 1994 11,826,515
$16,694,515
The 12 year note is full recourse to the Partnership and to the general and
limited partners on a pro rata basis.
In exchange for funding the research and development, the partnership obtained
title to all technologies developed under the agreement.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 -- RESEARCH AND DEVELOPMENT AGREEMENTS (Continued)
Concurrent with the execution of the Development Agreement, the Company and the
Partnership entered into a technology transfer agreement (the "Technology
Agreement") under which the Company obtained the right to acquire an option to
license the developed technology, on a non-exclusive basis for a thirteen month
period, in order to review the technology and, upon such review, to have the
option to acquire a license on an exclusive, world-wide basis to such
technology.
In October of 1985 the Company and the Partnership entered into a licensing
agreement (the "Licensing Agreement") under which the Company acquired, on an
exclusive world-wide basis, licensing of certain technologies in exchange for
royalties as follows:
- -- An amount equal to ninety percent (90%) of applicable gross sales generated
by the Company until all principal and interest has been paid by the
Partnership on the 12-year note.
- -- Thereafter, an amount equal to ten percent (10%) of applicable gross sales
generated by the Company until the aggregate of such payments is equal to
the total of the limited partners' cash contributions during the two year
period ended December 31, 1984. Subsequently, the Partnership will be
entitled to a five percent (5%) royalty on applicable gross sales generated
by the Company. This royalty obligation will remain in force as long as
there remains a patent covering the formula or, if no patent is in effect,
for 17 years.
The balance of the 12 year note was entirely offset by deferred revenue until
its maturity at December 31, 1994 at which time the Company recognized revenue
of $3,424,430 representing the unpaid balance of $4,229,676 net of forgiven
receivables of $805,246. Prior to that time revenue was recognized concurrent
with cash collections or the payment of royalties under the License Agreement.
At November 30, 1995 the Partnership was in default on the note balance which
totalled $948,077.
During 1996 the Company applied royalties due the Partnership totalling $571,635
to the note. Additionally, the Company received payments on the note totalling
$99,552 and forgave $80,948 of the remaining balance. On September 30, 1996 the
Company and the Partnership amended the terms of the Development Agreement and
the Licensing Agreement. Under the terms of the amended agreements the Company
forgave the entire remaining note receivable balance of $195,942 in exchange for
a restructuring of the royalty fees and terms. Accordingly, the forgiven note
balance has been recorded as prepaid royalties and is being amortized straight
line over the term of the amended licensing agreement, through December 31,
2006. Under the amended licensing agreement the Company is required to pay the
Partnership royalties equal to $1,000 per month plus 2.5% of Gross Sales of
products utilizing the licensed technologies.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 -- INVENTORIES
Inventories consist of the following at November 30:
1996 1995
Raw materials $ 42,826 $ 41,816
Finished goods 31,543 34,719
$ 74,369 $ 76,535
Certain of the Company's raw materials are obtained from a limited number of
suppliers.
NOTE 4 -- LONG-TERM ACCOUNT RECEIVABLE
At November 30, 1989, the Company had an account receivable totalling $451,270
due from a foreign distributor. The account was collateralized by a perfected
security interest in unimproved real property in Baja, Mexico. The Company was
unsuccessful in its efforts to collect the amounts due on this account and,
accordingly, during fiscal 1993, retained Mexican legal counsel to initiate
foreclosure proceedings. At November 30, 1996, the land is being held by a
Mexican court pending foreclosure sale.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 -- LONG-TERM ACCOUNT RECEIVABLE (Continued)
At November 30, 1996, the Company estimated the cash proceeds on any foreclosure
sale and determined that its share of such proceeds would be insufficient to
settle the account, net of allowance. Accordingly, the Company has recorded an
additional valuation allowance of $196,270. The long term account receivable and
related allowance for bad debt at November 30 is as follows:
1996 1995
Long-term account receivable $ 451,270 $ 451,270
Allowance for doubtful long-term account (321,270) (125,000)
$ 130,000 $ 326,270
NOTE 5 - INTANGIBLE ASSETS
Intangible assets are as follows as of November 30:
1996 1995
Purchased processes and formulas $3,097,369 $3,097,369
Prepaid royalties 195,942 --
3,293,311 3,097,369
Accumulated amortization (2,893,017) (2,809,493)
$ 400,294 $ 287,876
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - ACCRUED EXPENSES
Accrued expenses consist of the following at November 30:
1996 1995
Royalties - related party $ 1,055 $ 30,745
Accounting fees 19,000 22,694
Accrued vacation 18,711 19,576
Accrued legal settlement 3,176 19,176
Warranty 18,705 18,706
Sales commissions 6,289 6,743
Cooperator and scientific advisory fees 2,500 2,500
Deferred rent, current portion 3,852 --
Other 5,179 636
$ 78,467 $120,776
NOTE 7 -- LONG-TERM DEBT
1996 1995
Note payable to SBA bearing interest at 10%,
principal and interest payable monthly at
$3,400 for 60 months, maturing April 1, 1999.
This note is collateralized by a security interest
in all assets of the Company. In August 1995,
the Company interrupted regular payments.
During fiscal 1996, the SBA accepted new
payment terms whereby the Company is
required to make monthly payments of $4,550
through April 1997. After April 1997, the
Company will resume monthly payments of
$3,400. The note matures in April 1999. $ 92,450 $ 124,506
Notes payable to an individual, with simple interest
at 8%. Principal and accrued interest due at
maturity in February 1998. Amount includes
accrued interest through November 30, 1996
of $6,180. 27,408 --
Total long term debt 119,858 124,506
Less: Current portion 39,239 26,926
Long term debt $ 80,619 $ 97,580
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 -- LONG-TERM DEBT (Continued)
Aggregate maturities of long term debt at November 30 are as follows:
Year Ended Amount
1997 $ 39,239
1998 64,559
1999 16,060
$ 119,858
NOTE 8 -- NOTES PAYABLE TO RELATED PARTIES
At November 30 notes payable to related parties were as follows:
1996 1995
Notes payable to various related parties with simple
interest at 8% collateralized by a subordinated
security interest in substantially all assets of the
Company. Principal and accrued interest originally
due at maturity in June 1995. Maturity extended to
February 1998. Amounts include accrued interest
of $29,788 and $27,603 at November 30 1996 and
1995, respectively. $132,873 $151,918
Note payable to related party with simple interest
compounded annually at prime plus 1% which
at November 30, 1996 was 9.25%. Collateralized
by a subordinated security interest in substantially
all assets of the Company. Principal and accrued
interest due at maturity in June 1995. Maturity
extended to February 1998. Amounts include
accrued interest of $37,550 and $30,079 at
November 30, 1996 and 1995, respectively. 87,550 80,080
Total notes payable to related parties 220,423 231,998
Less: current portion -- 231,998
Notes payable to related parties, long-term $220,423 $ --
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 -- CAPITAL LEASE OBLIGATIONS
At November 30, 1995, future minimum lease payments under capitalized
obligations were as follows:
Fiscal Year Amount
1997 $ 5,400
1998 3,600
1999 --
2000 --
Total minimum lease payments 9,000
Less: Amount representing interest (1,385)
Present value of net minimum lease payments 7,615
Less: Current portion (4,187)
Long-term portion $ 3,428
NOTE 10 -- STOCK OPTIONS AND WARRANTS
During fiscal 1983 the Company established an employee incentive stock option
plan (the "1983 Plan") under which options to purchase a total of 400,000 common
shares may be granted to key employees of the Company. Stock options granted
under the plan expire at the earlier of ten years from the date of grant or
termination of employment. During 1994 the 1983 Plan was terminated and,
accordingly, no further stock options can be granted under this plan. Stock
options for the purchase of 115,000 shares at an exercise price of $1.50 per
share remain outstanding and exercisable at November 30, 1996. These stock
options expire if not exercised on or before November 5, 2000.
During fiscal 1994 the Company established an employee incentive stock option
plan (the "1994 Plan") under which options to purchase a total of 400,000 shares
of the Company's common stock may be granted to key employees and officers of
the Company. Under the 1994 Plan, stock options may be granted at an exercise
price greater than or equal to the market value at the date of grant. Options
vest 40% upon grant and 12% each grant date anniversary until fully vested and
expire at the earlier of ten years from the date of grant or 90 days after
termination of employment.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 -- STOCK OPTIONS AND WARRANTS (Continued)
A summary of the stock option activity under the 1983 and 1994 Plans is as
follows:
Exercise
Stock Price Per
Options Share
Outstanding at November 30, 1994 115,000 $ 1.50
Granted 190,000 .20
Expired or Cancelled 75,000 .20
Exercised -- --
Outstanding at November 30, 1995 230,000 .20-1.50
Granted 115,000 .125
Expired or Cancelled 115,000 .20
Exercised -- --
Outstanding at November 30, 1996 230,000 $ 125-1.50
At November 30, 1996, a total of 210,000 shares remain reserved and available
for future stock option grants under the 1994 Plan.
During fiscal 1986 the Company granted certain non-qualified stock options to
acquire 1,666,113 of its shares to officers, directors and key employees. At
November 30, 1996 all of these options had expired unexercised.
During fiscal 1995 the Company granted non-qualified stock options to acquire
200,000 shares at $.125 per share to its president. The options immediately vest
upon grant and expire in September 2000. All of these options remain outstanding
and exercisable at November 30, 1996.
During fiscal 1996 the Company granted non-qualified stock options to acquire
96,000 shares at $.125 per share to a consultant. The options immediately vest
upon grant and are outstanding and exercisable at November 30, 1996. A summary
of these stock options is as follows:
Stock Exercise Price Expiration
Options Per Share Date
32,000 $ .125 March 31, 2001
32,000 .125 June 30, 2001
32,000 .125 September 30, 2001
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 -- STOCK OPTIONS AND WARRANTS (Continued)
At November 30, 1996 the Company has warrants outstanding to purchase shares of
its stock as follows:
Number of Exercise Price Expiration
Shares per Share Date
380,000 $ 2.25 December 1996
300,000 .10 January 2001
40,000 .10 May 1996
150,000 1.50 April 1999
At November 30, 1996 all of the warrants are fully vested and exercisable.
NOTE 11 -- COMMITMENTS
The Company leases its facilities under a non-cancelable operating lease. The
lease agreement contains provisions for two months free rent as well as
specified annual increases in the monthly rent. Rent is being expensed on a
straight line basis over the term of the lease.
Minimum future obligations for non-cancelable operating leases as of November
30, 1996 are as follows:
1997 $74,800
1998 77,020
1999 25,800
Rent expense for the years ending November 30, 1996 and 1995, net of sub-lease
income, was $77,011 and $143,749, respectively.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 -- INCOME TAXES
At November 30, 1996 the Company has a federal income tax net operating loss
carryforward of approximately $4,723,000 and a California tax net operating loss
carryforward of approximately $422,000. The net operating loss carryforwards
expire through the year 2011.
At November 30, 1996, the Company has investment and research and development
tax credit carryforwards of approximately $72,100 for federal income tax and
financial reporting purposes. These credits expire through the year 2000.
Pursuant to the Tax Reform Act of 1986, use of the Company's net operating loss
carryforwards may be limited if a cumulative change in ownership of more than
50% occurs within any three year period. Management has not completed an
analysis in order to determine whether a cumulative change in ownership of more
than 50% has occurred within any three year period.
NOTE 13 -- LITIGATION
During June 1994, a lawsuit was filed against the Company for a commission due
based on the anticipated merger of the Company and another company, which never
took place. During 1995, a judgement was awarded one of the plaintiffs for
$20,000 and the other plaintiff settled with the Company for $10,000. The
Company is also obligated to pay approximately $19,000 for legal fees and court
fees paid by the plaintiff. At November 30, 1996, $3,176 relating to this
settlement is included in accrued expenses.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Westbridge Research Group and Subsidiary
Carlsbad, California
We have audited the consolidated balance sheets of Westbridge Research Group and
Subsidiary as of November 30, 1996 and 1995 and the related consolidated
statements of operations, shareholders' equity, and cash flows for the years
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Westbridge Research Group and Subsidiary at November 30, 1996 and 1995, and the
consolidated results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
PETERSON & CO.
San Diego, California
January 10, 1997
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
The executive officers and directors of the Company, as of November 30, 1996,
were as follows:
Principal Occupation and Business Year First
Experience During the Past Became
Name Age Five Years Director
Christine Koenemann 43 Christine Koenemann was elected President 1995
and appointed as a Director of the Company
on March 2, 1995. She has worked for the
Company for the past 12 years in varying
positions including Operations Manager,
Shareholder Relations Liaison, Director of
Administration, and Assistant Treasurer. She
attended Indiana University School of Business
and worked in retail management for five years.
William J. Dale 63 Mr. Dale, appointed a director of the Company 1995
in March 1995, is President of Silverado
Capital,Inc., a San Diego based company
engaged in international Licensing and
merchant banking activities. Since 1990
Silverado has been engaged in international
marketing of products for the Company.
Prior to that, from 1980-1989, he was a
partner in a San Diego law firm where his
area of practice emphasized corporate and
securities law matters. Prior to that he
had been a sole practitioner for two years,
and for the eightyears prior to that he was
general counsel for an agricultural management
company with cattle, ranches and orchards
under management. Mr. Dale received a B.A.
degree in Economics from Allegheny College
in 1955 and a LL.B. degree from the
University of Pennsylvania in 1962.
From 1955 to 1959 he was a U.S. Naval
Aviator.
William M. Witherspoon 55 Mr. Witherspoon was appointed to the Board of 1995
Directors in August 1995, and he was elected
Chairman at that time. Mr. Witherspoon was a
founder of Westbridge Research Group. From
1982 until 1989 he served as Chairman of the
Board of Directors. Prior to and after
founding Westbridge, he was a principal of
Witherspoon and Town, a firm that engaged in
starting and providing capital for real
estate, agricultural and marketing businesses.
For the past nine years, he worked as the
owner of Firstlight Productions, an art
production and marketing company. Mr.
Witherspoon holds a B.A. degree from Reed
College and a M.A. from MERU.
Directors are elected to serve until the next annual meeting of shareholders and
until their successors have been elected and have qualified. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of shareholders and until their successors have been elected
and qualified.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate remuneration paid in fiscal 1996:
Name of Individual Capacities in which Aggregate
or Identity of Group Remuneration is Received Remuneration
All Executive Officers President $45,000
(1 person)
Directors receive no compensation for their services as directors.
Employee Incentive Stock Option Plan
On April 25, 1983, the Company adopted an employee incentive stock option plan
(the "Option Plan") to provide to participating employees added incentive to
achieve high levels of performance for the Company. The Option Plan was approved
by the Company's stockholders on May 31, 1984. The Option Plan terminated May
31, 1994 and options granted under this plan will expire if not exercised on or
before November 5, 2000.
The Option Plan provided for the granting of options to full-time salaried
officers and employees to purchase shares of Common Stock at prices per share
which must not be less than 100% of the fair market value of the Common Stock
subject thereto at the time each option is granted. Options granted under the
Option Plan expire not later than five (5) years from the date of grant. The
selection of individuals and the setting of the terms and provisions of the
options received by them are determined by the Board of Directors (the "Board")
or the Executive Committee. No option can be granted to an individual who will,
immediately prior or immediately after the option is granted, own directly or
indirectly more than 10% of the Company's outstanding Common Stock. Options are
non-transferable by the optionee. Under this plan, an aggregate of 400,000
shares of Common Stock may be issued. As of November 30, 1996, 700 shares have
been issued under the plan, and 115,000 options are outstanding at $1.50 per
share.
During 1994, the Company established an employee incentive stock option plan
("the 1994 Plan") under which options to purchase an aggregate of 400,000 common
shares may be granted at fair market value. At November 30, 1996, no shares had
been issued under the 1994 Plan and 115,000 options at an exercise price of
$0.125 per share were outstanding, of which 73,600 were exercisable. No options
were exercised during the fiscal year ended November 30, 1996. These options
expire through the fiscal year ended November 30, 2004.
During 1995, the Company granted nonqualified stock options to acquire 200,000
shares at $.125 per share to its current President. The options expire September
2000. These options are currently exercisable.
During fiscal 1996 the Company granted non-qualified stock options to acquire
96,000 shares at $.125 per share to a consultant. The options immediately vest
upon grant and expire as follows:
Stock Option Exercise Price Expiration Date
32,000 $ .125 March 31, 2001
32,000 .125 June 30, 20 01
32,000 .125 September 30, 2001
All of these options remain outstanding and exercisable at November 30, 1996.
<PAGE>
Unrestricted Nonqualified Stock Options and Warrants
During the fiscal year ended November 30, 1991, the Company granted warrants to
purchase 300,000 shares of Common Stock to Jack E. Dahl at an exercise price of
$0.10 per share. Such warrants are vested 60,000 shares per year commencing
January 10, 1992 through January 10, 1996 and expire five years after date of
vesting. Subsequently, Mr. Dahl entered into an agreement with Warren Currier,
who was then President of the Company, which was approved by the Board of
Directors of the Company, whereby 240,000 of the warrants issued to Mr. Dahl,
were transferred to Mr. Currier, and the books and records of the Company have
been adjusted to reflect the following allocation of said warrants:
Warrant Holder Amount
The Estate of Warren Currier 240,000
Jack E. Dahl 60,000
During the fiscal year ended November 30, 1991, the Company granted warrants to
purchase 100,000 shares of Common Stock to Kenneth P. Miles at an exercise price
of $0.10 per share. During fiscal 1995 60,000 of those warrants expired and
during fiscal 1996 the balance of 40,000 also expired.
On October 12, 1984, the Company approved the issuance of 1,566,113
unrestricted, non- qualified stock options to former employees of the Company.
These options had an exercise price of $1.50 per share. None of the recipients
are currently employed by the Company. 1,562,779 of these options expired during
fiscal 1995. The remaining 3,334 of these options expired during fiscal 1996.
In May, 1991, the Company initiated a private placement memorandum offering
("Offering") to Westbridge Biosystems Ltd.s limited partners. Participating
limited partners, representing 47.5 limited partnership units, purchased units
at $15,000 each. The units included a note payable described in long term debt
above. Each unit also included 8,000 warrants valued at $2,000, or $.25 each.
All warrants are currently exercisable, at $2.25 per common share, and expire
December 31, 1996. Aggregate warrants issued with the Offering were 380,000.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of November 30, 1996, with
respect to the beneficial ownership of the Company's Common Stock (a) by each
person who is known to the Company to own beneficially or of record more than 5%
of the outstanding shares of Common Stock, (b) each present director and nominee
for election as a director of the Company, and (c) all officers and directors of
the Company as a group.
Amount and Nature W/O Exercise
of Beneficial Percent of Percent of
Name of Beneficial Owner Ownership Class(2) Class (3)
Christine Koenemann 252,700(1) * 2.9
1150 Joshua Way
Vista, CA 92083
Albert L. Good 729,200 8.7 8.7
14550 Castle Rock Road
Salinas, CA 93908
Kenneth P. Miles 471,469 5.6 5.6
10790 Magdalena Road
Los Altos Hills, CA 94022
William M. Witherspoon 717,188 8.5 8.5
PO Box 1735
Fairfield, IA 52556
Peter L. Salk 316,667 3.8 3.8
7459 High Avenue
La Jolla, CA 92037
William J. Dale 37,500 * *
1150 Joshua Way
Vista, CA 92083
All Directors & Officers 1,007,388 9.0 12.0
as a Group (3 persons)
*Less than 1%
(1) Consists of exercisable options to purchase 25,000 shares at $1.50 per
share, 25,000 shares at $.125 per share, and 200,000 at $ .125 per
share.
(2) Calculated as if no options were exercised and 8,413,753 shares
outstanding.
(3) Calculated as if only that (those) shareholder's(s') options/warrants
exercisable within 60 days were exercised and no other
options/warrants were exercised.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) 1. The following financial statements of the Company are included in
Item 7:
Consolidated Balance Sheets at November 30, 1996 and 1995
Consolidated Statements of Operations for the
two years in the period ended November 30, 1996
Consolidated Statements of Shareholders' Deficit for the
two years in the period ended November 30, 1996
Consolidated Statements of Cash Flows for the
two years in the period ended November 30, 1996
Notes to Consolidated Financial Statements.
(b) No Form 8-K was filed during the last quarter of the period covered by
this report.
(c) Exhibits filed herewith:
3(a) Articles of Incorporation and amendments thereto,
incorporated by reference to Exhibit 3(a) to Registration
Statement number 2-92261 on Form S-18 filed July 18, 1984.
3(b) Bylaws, incorporated by reference to Exhibit 3(b) to
Registration Statement number 2-92261 on Form S-18 filed
July 18, 1984
10(a) Biosystems R & D Agreement, incorporated by reference to
Exhibit 10(a) to Registration Statement number 2-92261 on
Form S-18 filed July 18, 1984.
10(b) Biosystems Technology Transfer Agreement, incorporated by
reference to Exhibit 10(b) to Registration Statement number
2-92261 on Form S-18 filed July 18, 1984.
10(c) Biolink Acquisition Agreement, incorporated by reference to
Exhibit 10(c) to Registration Statement number 2-92261 on
Form S-18 filed July 18, 1984.
10(d) Employee Incentive Stock Option Plan, incorporated by
reference to Exhibit 10(d) to Registration Statement number
2-92261 on Form S-18 filed July 18, 1984.
10(e) Employee Stock Purchase Plan, incorporated by reference to
Exhibit 10(e) to Registration Statement number 2-92261 on
Form S-18 filed July 18, 1984.
10(f) Nonqualified Stock Option of Dr. Jonas Salk, incorporated by
reference to Exhibit 10(f) filed with Form 8-K dated
November 10, 1987.
10(g) Nonqualified Stock Option of Stephen C. Hall, incorporated
by reference to Exhibit 10(g) filed with Form 8-K dated
November 10, 1987.
10(h) Nonqualified Stock Option of Michael A. Spivak, incorporated
by reference to Exhibit 10(h) filed with Form 8-K dated
November 10, 1987.
<PAGE>
10(i) Nonqualified Stock Option of Dr. Peter L. Salk, incorporated
by reference to Exhibit 10(i) filed with Form 8-K dated
November 10, 1987.
10(j) Nonqualified Stock Option of Gerald R. Haddock, incorporated
by reference to Exhibit 10(j) filed with Form 8-K dated
November 10, 1987.
10(k) Nonqualified Stock Option of Peter Dine, incorporated by
reference to Exhibit 10(m) filed with the Annual Report on
Form 10-K for the fiscal year ended November 30, 1988.
10(l) Nonqualified Stock Option of Stanley L. Woodward,
incorporated by reference to Exhibit 10(n) filed with the
Annual Report on Form 10-K for the fiscal year ended
November 30, 1988.
10(m) Westbridge Agrosystems Limited Exchange Agreement,
incorporated by reference to Exhibit 10(o) filed with Post
Effective Amendment Number 1 to the Registration Statement
number 2-92261 on Form S-18 filed December 26, 1989.
10(n) Nonqualified Stock Option of Noel R. Schaefer incorporated
by reference to Exhibit 10(q) to the Company's Annual Report
on Form 10-K for the fiscal year ended November 30, 1989.
10(o) Biosystems License Agreement incorporated by reference to
Exhibit 10(s) to the Company's Annual Report on Form 10-K
for the fiscal year ended November 30, 1989.
10(p) Warrant Agency Agreement, incorporated by reference to
Exhibit 4(b) to Registration Statement number 2-92261 on
Form S-18 filed July 18, 1984.
10(q) Agriculture Products Marketing, Sales, License and
Distribution Agreement by and between Haddock & Schaefer and
the Company, dated November 15, 1991, incorporated by
reference to Exhibit 10(q) filed with The Annual Report on
Form 10-KSB for the fiscal year ended November 30, 1992.
10(r) Oil Products Marketing, Sales, License and Distribution
Agreement by and between Haddock & Schaefer and the Company,
dated November 15, 1991, incorporated by reference to
Exhibit 10(r) filed with The Annual Report on Form 10-KSB
for the fiscal year ended November 30, 1992.
10(s) Employment Agreement by and between Company and Warren
Currier III, dated December 1, 1991, by reference to Exhibit
10(s) filed with 10-KSB for the fiscal year ended November
30, 1992.
10(t) Westbridge Research Group 1994 Incentive Stock Option Plan.
10(u) Agreement, dated as of October 1, 1996, by and between
Westbridge Research Group and Westbridge Biosystems
Limited.
10(v) Westbride Research Group 1994 Incentive Stock Optpipon Plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Issuer has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on March 13, 1997.
Westbridge Research Group
By: /s/Christine Koenemnn
Christine Koenemann, President
Principal Executive Officer
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Issuer and in
the capacities and on the dates indicated:
Signature Title Date
/s/William M. Witherspoon Director March 13, 1997
William M. Witherspoon
/s/Christine Koenemann Director March 13, 1997
Christine Koenemann
/s/William J. Dale Director March 13, 1997
William J. Dale
Supplemental information to be furnished with reports filed pursuant to Section
15(d) of the Act by Issuers which have not registered Securities pursuant to
Section 12 of the Act.
No annual report covering the Issuer's last fiscal year or proxy material has
been sent to security holders. An annual report is to be furnished to security
holders subsequent to the filing of the annual report of this form.
<PAGE>
WESTBRIDGE RESEARCH GROUP
1994 INCENTIVE STOCK OPTION PLAN
1. PURPOSE. This Incentive Stock Option Plan (the "Plan") is intended to
serve as an incentive to, and to encourage stock ownership by, certain employees
of Westbridge Research Group, a California corporation (the "Corporation"), so
that they may acquire or increase their proprietary interest in the Corporation
and to encourage them to remain in the service of the Corporation. Options
granted pursuant to this Plan are intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. ADMINISTRATION.
2.1 Committee. The Plan shall be administered by the Board of
Directors or a committee of two members appointed by the Board of Directors of
the Corporation who are not employees of the Corporation (the "Committee"). The
Committee shall select one of its members as Chairman and shall appoint a
Secretary, who need not be a member of the Committee. The Committee shall hold
meetings at such times and places as it may determine and minutes of such
meetings shall be recorded. Acts by a majority of the Committee in a meeting at
which a quorum is present and acts approved in writing by a majority of the
members of the Committee shall be valid acts of the Committee. No member of the
Committee shall vote on any matter concerning his or her own participation in
the Plan.
2.2 Term. If the Board of Directors selects a Committee, the members
of the Committee shall serve on the Committee for the period of time determined
by the Board of Directors and shall be subject to removal by the Board of
Directors at any time. The Board of Directors may terminate the function of the
Committee at any time and resume all powers and authority previously delegated
to the Committee.
2.3 Authority. The Committee shall have sole discretion and authority
to grant options under the Plan to such employees of the Corporation or any
"parent" or "subsidiary" of the Corporation, as defined in Section 424 of the
Code ("Parent or Subsidiary"), at such times, under such terms and in such
amounts as it may decide. For purposes of this Plan and any Stock Option
Agreement (as defined below), the term "Corporation" shall include any Parent or
Subsidiary, if applicable. Subject to the express provisions of the Plan, the
Committee shall have complete authority to interpret the Plan, to describe,
amend and rescind the rules and regulations relating to it, to determine the
details and provisions of any Stock Option Agreement, to accelerate any options
and to make all other determinations necessary or advisable for the
administration of the Plan.
2.4 Interpretation. The interpretation and construction by the
Committee of any provisions of the Plan or of any option granted under the Plan
shall be final and binding on all parties having an interest in this Plan or any
option granted hereunder. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under the Plan.
<PAGE>
3. ELIGIBILITY.
3.1 General. All employees of the Corporation relative to the
Corporation's management, operation or development shall be eligible to receive
options under the Plan. The selection of recipients of options shall be within
the sole and absolute discretion of the Committee. No person shall be granted an
option under this Plan unless such person is an employee of the Corporation on
the date of grant and has executed the grant representation letter set forth on
Exhibit "A," as such Exhibit may be amended by the Committee from time to time.
3.2 Death of Optionee and Transfer of Option. If the optionee shall
die while eligible to participate in the Plan, an option may be exercised
(subject to the condition that no option shall be exercisable after its
expiration and only to extent that the optionee's right to exercise such option
had accrued at the time of the optionee's death and had not previously been
exercised) at any time within six months after the optionee's death by the
executors or administrators of the optionee or by any person or persons who
shall have acquired the option directly from the optionee by bequest or
inheritance. Any option that has not vested in the optionee as of the date of
death or termination of employment, whichever is earlier, shall immediately
expire and shall be null and void. Any option that has vested must be exercised
within 90 days from the date of termination of employment. No option shall be
transferable by the optionee other than by will or the laws of intestate
succession.
3.3 Limitation on Options. No person shall be granted any Incentive
Option to the extent that the aggregate fair market value of the Stock (as
defined below) to which such options are exercisable for the first time by the
optionee during any calendar year (under all plans of the Corporation) exceeds
$100,000.
3.4 Exercise of Option. Each Optionee must remain in the employ of the
Corporation for five years from the date the Option is granted before he or she
can exercise the Option in full. Forty percent (40%) of each Option shall be
exercisable on the date the Option is granted and an additional twelve percent
(12%) of the remaining Option shall be exercisable on each anniversary date of
the date of grant until the option is fully vested.
4. IDENTIFICATION OF STOCK. The Stock, as defined herein, subject to the
options shall be shares of the Corporation's authorized but unissued or acquired
or reacquired common stock (the "Stock"). The aggregate number of shares subject
to outstanding options shall not exceed 400,000 shares of Stock (subject to
adjustment as provided in Section 6). If any option granted hereunder shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall again be available for purposes of this
Plan.
<PAGE>
5. TERMS AND CONDITIONS OF OPTIONS. Any option granted pursuant to the Plan
shall be evidenced by an agreement ("Stock Option Agreement") in such form as
the Committee shall from time to time determine, which agreement shall comply
with and be subject to the following terms and conditions:
5.1 Number of Shares. Each option shall state the number of shares of
Stock to which it pertains.
5.2 Option Exercise Price. Each option shall state the option exercise
price, which shall be determined by the Committee; provided, however, that (i)
the exercise price of any option shall be not less than the fair market value of
the Stock, as determined by the Committee, on the date of grant of such option
and (ii) the exercise price of any Incentive Option granted to an employee who
owns more than 10% of the total combined voting power of all classes of the
Corporation's stock shall not be less than 110% of the fair market value of the
Stock, as determined by the Committee, on the date of grant of such option.
5.3 Term of Option. The term of an option granted hereunder shall be
determined by the Committee at the time of grant, but shall not exceed ten years
from the day of the grant. The term of an option granted to an employee who owns
more than 10% of the total combined voting power of all classes of the
Corporation's stock as determined for purposes of Section 422 of the Code, shall
in no event exceed five years from the date of grant. All options shall be
subject to early termination as set forth in this Plan. In no event shall any
option be exercisable after the expiration of its term.
5.4 Method of Exercise. An option shall be exercised by written notice
to the Corporation by the optionee (or successor in the event of death) and
execution by the optionee of an exercise representation letter in the Form set
forth on Exhibit B, as such Exhibit may be amended by the Committee from time to
time. The written notice shall state the number of shares with respect to which
the option is being exercised and designate a time, during normal business hours
of the Corporation, for the delivery thereof ("Exercise Date"), which time shall
be at least 30 days after the giving of such notice unless an earlier date shall
have been mutually agreed upon. At the time specified in the written notice, the
Corporation shall deliver to the optionee at the principal office of the
Corporation, or such other appropriate place as may be determined by the
Committee, a certificate or certificates for such shares of previously
authorized but unissued shares or acquired or reacquired shares of Stock as the
Corporation may elect. Notwithstanding the foregoing, the Corporation may
postpone delivery of any certificate or certificates after notice of exercise
for such reasonable period as may be required to comply with any applicable
listing requirements of any securities exchange. In the event an option shall be
exercisable by any person other than the optionee, the required notice under
this Section shall be accompanied by appropriate proof of the right of such
person to exercise the option.
<PAGE>
5.5 Medium and Time of Payment. The option exercise price shall be
payable in full on or before the option Exercise Date by certified or bank
cashier's check.
5.5 Medium and Time of Payment. The option exercise price shall be
payable in full on or before the option Exercise Date in any one of the
following alternative forms:
5.5.1 Full payment in cash or certified bank or cashier's check;
5.5.2 A Promissory Note (as defined below);
5.5.3 Full payment in shares of Stock having a fair market value
on the Exercise Date in the amount equal to the option exercise price;
5.5.4 A combination of the consideration set forth in Sections
5.5.1, 5.5.2 and 5.5.3, in the aggregate, equal to the option exercise price; or
5.5.5 Any other method of payment complying with the provisions
of Section 422 of the Code, provided the terms of payment are established by the
Committee at the time of grant.
5.6 Fair Market Value. The fair market value of a share of Stock on
any relevant date shall be determined in accordance with the following
provisions:
5.6.1 If the Stock at the time is neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market, then
the fair market value shall be determined by the Committee after taking into
account such factors as the Committee shall deem appropriate. 5.6.2 If the Stock
is not at the time listed or admitted to trading on any stock exchange but is
traded in the over-the-counter market, the fair market value shall be the mean
between the highest bid and lowest asked prices (or, if such information is
available, the closing selling price) of one share of Stock on the date in
question in the over-the-counter market, as such prices are reported by the
National Association of Securities Dealers through its NASDAQ system or any
successor system. If there are no reported bid and asked prices (or closing
selling price) for the Stock on the date in question, then the mean between the
highest bid price and lowest asked price (or the closing selling price) on the
last preceding date for which such quotations exist shall be determinative of
fair market value.
5.6.3 If the Stock is at the time listed or admitted to trading
on any stock exchange, then the fair market value shall be the closing selling
price of one share of Stock on the date in question on the stock exchange
determined by the Committee to be the primary market for the Stock, as such
price is officially quoted in the composite tape of transactions on such
exchange. If there is no reported sale of Stock on such exchange on the date in
question, then the fair market value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
<PAGE>
5.7 Promissory Note. Subject to the requirements of applicable state
law and margin and if provided in the Stock Option Agreement payment of all or
part of the purchase price of the Stock may be made by delivery of a full
recourse promissory note ("Promissory Note"). The Promissory Note shall be
executed by the optionee, made payable to the Corporation and bear interest at
such rate as the Committee shall determine, but in no case less than the minimum
rate which will not cause, under the Code, (i) interest to be imputed, (ii)
original issue discount to exist, or (iii) any other similar results to occur.
Unless otherwise determined by the Committee, interest on the Note shall be
payable in quarterly installments on March 31, June 30, September 30 and
December 31 of each year. A Promissory Note shall contain such other terms and
conditions as may be determined by the Committee; provided, however, that the
full principal amount of the Promissory Note and all unpaid interest accrued
thereon shall be due not later than five years from the date of exercise. The
Corporation may obtain from the optionee a security interest in all shares of
Stock issued to the optionee under the Plan for the purpose of securing payment
under the Promissory Note and may retain possession of the stock certificates
representing such shares in order to perfect its security interest.
5.8 Rights as a Shareholder. An optionee or successor shall have no
rights as a shareholder with respect to any Stock underlying any option until
the date of the issuance to such optionee of a certificate for such Stock. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such Stock certificate is issued, except as
provided in Section 6.
5.9 Modification, Extension and Renewal of Options. Subject to the
terms and conditions of the Plan, the Committee may modify, extend or renew
outstanding options granted under the Plan, or accept the surrender of
outstanding options (to the extent not exercised) and authorize the granting of
new options in substitution therefor.
5.10 Other Provisions. The Stock Option Agreements shall contain such
other provisions, including without limitation, restrictions upon the exercise
of options, as the Committee shall deem advisable. Thus, for example, the
Committee may require that all or any portion of an option not be exercisable
until a specified period of time has passed or some other event has occurred.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
6.1 Subdivision or Consolidation. Subject to any required action by
shareholders of the Corporation, the number of shares of Stock covered by each
outstanding option, and the exercise price thereof, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock of
the Corporation resulting from a subdivision or consolidation of shares or the
payment of a stock dividend (but only on the Stock) or any other increase or
decrease in the number of such shares effected without receipt of consideration
by the Corporation. Any fraction of a share subject to option that would
otherwise result from an adjustment pursuant to this Section shall be rounded
downward to the next full number of shares without other compensation or
consideration to the holder of such option.
<PAGE>
6.2 Capital Transactions. Upon a sale or exchange of all or
substantially all of the assets of the Corporation, a merger or consolidation in
which the Corporation is not the surviving corporation, a merger, reorganization
or consolidation in which the Corporation is the surviving corporation and
shareholders of the Corporation exchange their stock for securities or property,
a liquidation of the Corporation or similar transaction ("Capital Transaction"),
this Plan and each option issued under this Plan, whether vested or unvested,
shall terminate, unless such options are assumed by a successor corporation in a
merger or consolidation or otherwise determined by the Committee, 15 days prior
to such Capital Transaction; provided, however, that unless the outstanding
options are assumed by a successor corporation in a merger or consolidation,
subject to terms approved by the Committee or the options are repurchased
pursuant to section 8, all optionees will have the right, until 15 days prior to
such Capital Transaction, to exercise all vested options. Notwithstanding the
foregoing, in the event there is a merger or consolidation where the Corpora
tion is not the surviving corporation, all options granted under this Plan shall
vest 30 days prior to such merger or consolida tion unless such options are
assumed by the successor corporation in such merger or consolidation. The
Committee may (but shall not be obligated to) (i) accelerate the vesting of any
option or (ii) apply the foregoing provisions, including but not limited to
termination of this Plan and options granted pursuant to the Plan, in the event
there is a sale of 50% or more of the stock of the Corporation in any one-year
period or a transaction similar to a Capital Transaction.
6.3 Adjustments. To the extent that the foregoing adjustments relate
to stock or securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive.
6.4 Ability to Adjust. The grant of an option pursuant to the Plan
shall not affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.
6.5 Notice of Adjustment. Whenever the Corporation shall take any
action resulting in any adjustment provided for in this Section, the Corporation
shall forthwith deliver notice of such action to each optionee, which notice
shall set forth the number of shares subject to the option and the exercise
price thereof resulting from such adjustment.
7. NONASSIGNABILITY. Options granted under the Plan may not be sold,
pledged, assigned or transferred in any manner other than by will or by the laws
of intestate succession, and may be exercised during the lifetime of an optionee
only by such optionee. Any transfer in violation of this provision shall void
such option and any Stock Option Agreement entered into by the optionee and the
Corporation regarding such option shall be void and have no further force or
effect. No option shall be pledged or hypothecated in any way, nor shall any
option be subject to execution, attachment or similar process.
<PAGE>
8. REPURCHASE OPTION.
8.1 The Corporation shall have the right to purchase all Stock held by
an optionee or any unexercised option held by an optionee which has been
obtained pursuant to the grant of any employee option or pursuant to any
employee compensation arrangement, agreement or plan together with any rights,
securities or additional stock that has been received pursuant to a stock
dividend, stock split, reorganization or other similar transaction that has been
received as a result of an employee option or Stock acquired pursuant thereto in
the event (i) an optionee terminates his or her services with the Corporation,
or any Parent or Subsidiary thereof, or (ii) the Corporation so elects, in the
event of a Capital Transaction. The price paid for any unexercised option or
Stock shall be the fair market value of such option or Stock as determined
herein. The fair market value assigned to any option shall be the fair market
value of the Stock as to which it is exercisable reduced by the exercise price.
The parties shall first negotiate in good faith to reach an agreement as to the
value of the option or Stock. Absent an agreement within 30 days, the parties
shall select one appraiser to determine the value of the Stock. In the event the
parties cannot agree as to an appraiser, then each party shall appoint one
appraiser and the two appraisers shall jointly determine a third appraiser. In
the event the two appraisers cannot determine a third appraiser, such third
appraiser shall be appointed by a Judge of the Superior Court of the County of
San Diego, California. Such appraisers shall make their determina tion of the
fair market value of the Stock, and the average of the two appraisers whose
valuations are closest to each other shall control. Any appraiser selected by
any party shall be an appraiser experienced in the area of valuing similar
stock. The Corporation and the optionee, or successor, shall each pay for
one-half of the cost of any such appraisal. If the Corporation desires to
purchase the Stock or options held by an employee as set forth in this Section,
then the Corporation shall provide written notice to such optionee at such
optionee's last known address within 120 days after the termination of such
optionee's employment, or at least 30 days prior to a Capital Transaction.
8.2 The Committee may assign the Corporation's repurchase option under
this Section to any person selected by the Committee including one or more of
the shareholders of the Corporation.
9. RIGHT OF FIRST REFUSAL.
9.1 Stock issued pursuant to this Plan together with any rights,
securities or additional stock that have been received pursuant to a stock
dividend, stock split, reorganization or other transaction that has been
received as a result of an employee option or stock acquired pursuant thereto
shall be subject to a right of first refusal by the Corporation in the event the
holder of such shares proposes to sell, pledge or otherwise transfer said shares
or any interest in said shares to any person or entity. Any holder of shares of
Stock acquired under the Plan desiring to transfer such Stock or any interest
therein shall give written notice to the Corporation describing the proposed
transfer, including the price of shares proposed to be transferred, the proposed
transfer price and terms, and the name and address of the proposed transferee.
Unless otherwise agreed by the Corporation and the holder of such shares,
repurchases by the Corporation under this Section shall be at the proposed price
and terms specified in the notice to the Corporation. The Corporation's rights
under this Section shall be freely assignable.
<PAGE>
9.2 If the Corporation fails to exercise its right of first refusal
within 30 days from the date upon which the Corporation received the
shareholder's written notice, the shareholder may, within the next 90 days,
conclude a transfer of the exact number of shares covered by said notice on
terms not more favorable to the transferee than those described in the notice.
Any subsequent proposed transfer by such transferee shall again be subject to
the Corporation's right of first refusal. If the Corporation exercises its right
of first refusal, the shareholder shall endorse and deliver to the Corporation
the stock certificates representing the shares being repurchased, and the
Corporation shall promptly pay the shareholder the total repurchase price as set
forth in the terms of the agreement. The holders of shares being repurchased
pursuant to this Section shall cease to have any rights with respect to such
shares immediately upon repurchase.
9.3 No written notice of a proposed transfer shall be required under
this Section and no right of first refusal shall exist with respect to transfers
by: (1) will; (2) the laws of intestate succession; or (3) the establishment of
a trading market as a result of the NASD quotation system.
9.4 The right of first refusal set forth in this Section shall
terminate upon the consummation of an underwritten public offering of the
Corporation's Stock registered under the Act.
9.5 Any attempted transfer of any Stock or securities subject to this
right of first refusal which is not made in compliance with this Section shall
be null and void.
9.6 The Committee may assign the Corporation's repurchase option under
this Section to any person selected by the Committee including one or more or
the shareholders of the Corporation.
10. NO RIGHT OF EMPLOYMENT. Neither the grant nor exercise of any option
nor anything in this Plan shall impose upon the Corporation or any other
corporation any obligation to employ or continue to employ any optionee. The
right of the Corporation and any other corporation to terminate any employee
shall not be diminished or affected because an option has been granted to such
employee.
11. TERM OF PLAN. This Plan is effective on the date the Plan is adopted by
the Board of Directors and options may be granted pursuant to the Plan from time
to time within a period of ten (10) years from such date, or the date of any
required shareholder approval required under the Plan, if earlier. Termination
of the Plan shall not affect any option theretofore granted.
12. AMENDMENT OF THE PLAN. The Board of Directors of the Corporation may,
subject to any required shareholder approval, suspend, discontinue or terminate
the Plan, or revise or amend it in any respect whatsoever with respect to any
shares of Stock at that time not subject to options.
13. APPLICATION OF FUNDS. The proceeds received by the Corporation from the
sale of Stock pursuant to options may be used for general corporate purposes.
14. RESERVATION OF SHARES. The Corporation, during the term of this Plan,
shall at all times reserve and keep available such number of shares of Stock as
shall be sufficient to satisfy the requirements of the Plan.
<PAGE>
15. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall not
impose any obligation upon the optionee to exercise such option.
16. APPROVAL OF BOARD OF DIRECTORS AND SHAREHOLDERS. The Plan shall not
take effect until approved by the Board of Directors of the Corporation. This
Plan shall be approved by a vote of the shareholders within 12 months from the
date of approval by the Board of Directors. In the event such shareholder vote
is not obtained, all options granted hereunder, whether vested or unvested,
shall be null and void.
17. WITHHOLDING TAXES. Notwithstanding anything else to the contrary in the
Plan or any Stock Option Agreement, the exercise of any option shall be
conditioned upon payment by such optionee in cash, or other provisions
satisfactory to the Committee, by the optionee to the Corporation of all local,
state, federal or other withholding taxes applicable, in the Committee's
judgment, to the exercise or to later disposition of shares acquired upon
exercise of an option (including any repurchase of an option or Stock.
18. PARACHUTE PAYMENTS. Any outstanding option under the Plan may not be
accelerated to the extent any such acceleration of such option would, when added
to the present value of other payments in the nature of compensation which
becomes due and payable to the optionee, result in the payment to such optionee
of an excess parachute payment under Section 280G of the Code, except to the
extent such acceleration is required in a merger or consolidation under Section
6.2 as a result of the acquiring corporation's failure to assume options under
this Plan. The existence of any such excess parachute payment shall be
determined in the sole and absolute discretion of the Committee.
19. SECURITIES LAWS COMPLIANCE. Notwithstanding anything contained herein,
the Corporation shall not be obligated to grant any option under this Plan or to
sell, issue or effect any transfer of any Stock unless such grant, sale,
issuance or transfer is at such time effectively (i) registered or exempt from
registration under the Securities Act of 1933, as amended (the "Act"), and (ii)
qualified or exempt from qualification under the California Corporate Securities
Law of 1968 and any other applicable state securities laws. Each optionee shall
be required to make such representations, as may be deemed appropriate by
counsel to the Corporation for the Corporation to use any available exemption
from registration under the Act or qualification under any applicable state
securities law.
20. RESTRICTIVE LEGENDS. The certificates representing the Stock issued
upon exercise of options granted pursuant to this Plan will bear the following
legends giving notice of restrictions on transfer under the Act and this Plan,
as follows:
(a) THE SALE, TRANSFER, HYPOTHECATION, OR ENCUMBRANCE OF THE SHARES
REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY THE PROVISIONS OF AN INCENTIVE
STOCK OPTION AGREEMENT DATED _______________ AND AN INCENTIVE STOCK OPTION PLAN
DATED _______________, 1994, A COPY OF WHICH MAY BE INSPECTED AT THE
CORPORATION'S PRINCIPAL OFFICE.
(b) Any other legends required by applicable state securities laws as
determined by the Committee.
21. NOTICES. Any notice to be given under the terms of the Plan shall be
addressed to the Corporation in care of its Secretary at its principal office,
and any notice to be given to an optionee shall be addressed to such optionee at
the address maintained by the Corporation for such person or at such other
address as the optionee may specify in writing to the Corporation.
<PAGE>
As adopted by the Board of Directors on ___________________, 1994.
WESTBRIDGE RESEARCH GROUP, INC., a
California corporation
By:________________________________
Its:____________________________
<PAGE>
EXHIBIT A
____________, 1994
_______________________
Re: 1994 Incentive Stock Option Plan
To Whom It May Concern:
This letter is delivered to Westbridge Financial Group, Inc., a California
corporation (the "Corporation"), in connection with the grant to
_______________________ (the "Optionee") of an option (the "Option") to purchase
______ shares of common stock of the Corporation (the "Stock") pursuant to the
Westbridge Financial Group 1994 Incentive Stock Option Plan dated (the "Plan").
The Optionee understands that the Corporation's receipt of this letter executed
by the Optionee is a condition to the Corporation's willingness to grant the
Option to the Optionee.
The Optionee acknowledges that the grant of the Option by the Corporation
is in lieu of any and all other promises of the Corporation to the Optionee,
whether written or oral, express or implied, regarding the grant of options or
other rights to acquire Stock. Accordingly, in anticipation of the grant of the
Option, the Optionee hereby relinquishes all rights to such other rights, if
any, to acquire stock of the Corporation.
In addition, the Optionee makes the following represen tations and
warranties with the understanding that the Corporation will rely upon them in
the Corporation's determination of whether the grant of the Option meets the
requirements of the "private offering" exemption provided in Section 25102(f) of
the California Corporations Code and certain exemptions provided under the
Securities Act of 1933, as amended.
1. The Option and the Stock will be acquired by the Optionee for investment
only, for the Optionee's own account, and not with a view to or for sale in
connection with any distribution of the Option or the Stock. The Optionee will
not take, or cause to be taken, any action which would cause the Optionee, or
any entity or person affiliated with the Optionee, to be deemed an underwriter
with respect to the Option or the Stock. This restriction is void when there is
a market for the shares under Section 9.3 of the Agreement.
2. The Optionee either:
a. has a preexisting personal or business relationship with the
Corporation or any of its officers, directors or controlling persons of a nature
and duration as would allow the Optionee to be aware of the character, business
acumen, general business and financial circumstances of the Corporation or of
the person with whom such relationship exists; or
b. by reason of the Optionee's business or financial experience, or
the business or financial experience of the Optionee's professional advisor who
is unaffiliated with and is not compensated by the Corporation or any affiliate
or selling agent of the Corporation, directly or indirectly, the Optionee has
the capacity to protect the Optionee's interests in connection with the grant of
the Option and the purchase of the Stock.
<PAGE>
3. The Optionee acknowledges that an investment in the Corporation
represents a speculative investment and a high degree of risk. The Optionee
acknowledges that the Optionee has had the opportunity to obtain and review all
information from the Corporation necessary to make a reasonably informed
investment decision and that the Optionee has had all questions asked of the
Corporation answered to the reasonable satisfaction of the Optionee. The
Optionee is able to bear the economic risk of an investment in the Option and
the Stock.
4. The grant of the Option has not been accompanied by the publication of
any advertisement.
5. The Optionee understands and acknowledges that the Stock has not been,
and will not be, registered under the Securities Act of 1933, as amended, or
qualified under the California Corporate Securities Law of 1968. The Optionee
understands and acknowledges that the Stock may not be sold without compliance
with the registration requirements of federal and applicable state securities
laws unless an exemption from such laws is available. The Optionee understands
that the Certificate representing the Stock shall bear the legends set forth in
the Plan.
6. The Optionee understands and acknowledges that the Option and the Stock
are subject to the terms and conditions of the Plan.
7. The Optionee understands and agrees that, at the time of exercise of any
part of the Option for Stock, the Optionee may be required to provide the
Corporation with additional representations, warranties and/or covenants similar
to those contained in this letter.
8. The Optionee is a resident of the State of California.
9. The Optionee will notify the Corporation immediately of any change in
the above information which occurs before the Option is exercised in full by the
Optionee.
The foregoing representations and warranties are given on ______________,
1994 at ____________________.
OPTIONEE:
______________________________
<PAGE>
[EXHIBIT B]
____________, 1994
________________________
Re: 1994 Incentive Stock Option Plan
To Whom It May Concern:
I (the "Optionee") hereby exercise my right to purchase _____ shares of
common stock (the "Stock") of Westbridge Financial Group, a California
corporation (the "Corporation"), pursuant to, and in accordance with, the
Westbridge Financial Group 1994 Incentive Stock Option Plan dated , 1994 (the
"Plan") and the Incentive Stock Option Agreement (the "Agreement") dated
____________, 1994. As provided in such Agreement, I deliver herewith payment as
set forth in the Agreement in the amount of the aggregate option exercise price.
Please deliver to me at my address as set forth above stock certificates
representing the subject shares registered in my name (and (spouse) , as (style
of vesting)).
The Optionee hereby represents as follows:
1. The Optionee acknowledges receipt of a copy of the Plan and Agreement.
The Optionee has carefully reviewed the Plan and Agreement.
2. The Optionee either:
(a) has a preexisting personal or business relationship with the
Corporation or any of its officers, directors or controlling persons of a nature
and duration as would allow the undersigned to be aware of the character,
business acumen, general business and financial circumstances of the Corporation
or of the person with whom such relationship exists; or
(b) by reason of the Optionee's business or financial experience or
the business or financial experience of the Optionee's professional advisor(s)
who is (are) unaffiliated with and is (are) not compensated by the Corporation
or any affiliate or selling agent of the Corporation, directly or indirectly,
has the capacity to protect the Optionee's interests in connection with the
acquisition of stock options of the Corporation and Stock issuable upon the
exercise thereof.
3. The Optionee is able to bear the economic risk of the Optionee's
investment in the stock options of the Corporation and the Stock issuable upon
exercise thereof.
4. The Optionee acknowledges that an investment in the Corporation
represents a speculative investment and a high degree of risk. The Optionee
acknowledges that the Optionee has had the opportunity to obtain and review all
information from the Corporation necessary to make a reasonably informed
investment decision and that the Optionee has had all questions asked of the
Corporation answered to the reasonable satisfaction of the Optionee. The
Optionee is able to bear the economic risk of an investment in the Stock.
5. The grant of Options for Stock and the exercise of the Options has not
been accompanied by the publication of any advertisement.
<PAGE>
6. The Optionee understands and acknowledges that the Stock has not, and
will not, be registered under the Securities Act of 1933, as amended, or
qualified under the California Securities Law of 1968. The Optionee understands
and acknowledges that the Stock may not be sold without compliance with the
registration and qualification requirements of federal and applicable state
securities laws unless exemptions from such laws are available. The Optionee
understands that the Certificate representing the Stock shall bear the legends
set forth in the Plan.
7. The Optionee is a resident of the State of California.
8. The Optionee hereby is purchasing for the Optionee's own account and not
with a view to or for sale in connection with any distribution of the stock
options of the Corporation or any Stock issuable upon exercise thereof.
The foregoing representations and warranties are given on ______________,
1994 at ____________________.
Very truly yours,
AGREEMENT
This Agreement (the "Agreement") is entered into and is effective as of the 1st
day of October, 1996, by and between Westbridge Research Group, a California
corporation (the "Company") and Westbridge Biosystems Limited, a limited
partnership organized under the laws of the State of California (the
"Partnership") with reference to the following facts:
A. The Company and the Partnership have entered into that certain Research and
Development Agreement, dated as of December 31, 1982 (the "R&D Agreement");
the Company and the Partnership have entered into that certain Technology
Transfer Agreement, dated as of December 31, 1982 (the "Technology Transfer
Agreement"); and the Company and the Partnership have entered into that
certain License Agreement, dated as of October 17, 1995 (the "License
Agreement").
B. Pursuant to the R&D Agreement, the Partnership retained the Company to
perform certain research and development activities and, in that regard and
as partial payment therefor, delivered to the Company its 12-year
promissory note (the "R&D Note").
C. The R&D Note was amended in 1991 to provide that, following its due date,
the Company would not foreclose upon the assets of the Partnership securing
the R&D Note but would instead rely only upon 95% of royalty payments made
by the Company to the Partnership pursuant to the Technology Transfer
Agreement for repayment of the R&D Note.
D. As of the date of this Agreement, $195,941.73 of principal indebtedness and
$9,980,482 of accrued interest remained due and payable under the R&D Note.
E. As of the date of this Agreement, the Company owed the Partnership
$52,128.78 in unpaid royalties (the "Accrued Royalty Obligation").
F. The Company and the Partnership now wish to change their relationship to
change the amount of the royalty payable by the Company to the Partnership
under the License Agreement and to extend the period during which that
royalty is due, to provide for the forgiveness of the Accrued Royalty
Obligation and all amounts remaining due and payable under the R&D Note,
and to provide for an option on the part of the Company to purchase the
technology which is the subject of the License Agreement (the
"Technology").
NOW, THEREFORE, in consideration of their respective promises contained in this
Agreement, the Partnership and the Company hereby agree as follows:
1. Amendment of License Agreement. As of the date of this Agreement, the
License Agreement is amended to provide as follows:
a. Section 3.1 of the License Agreement is amended to read in full as
follows:
3.1 Calculation of Royalty. Licensee shall pay Licensor royalties
equal to $1,000 per month plus 2-1/2% of Gross Sales for the
balance of the term of this License.
<PAGE>
b. Section 3.2 of the License Agreement is amended to read in full as
follows:
3.2 Payment of Royalty. Royalties earned with respect to a month
shall be due and payable on the last business day of the
immediately following month. Royalty payments shall be
accompanied by a written report showing the Products sold or
otherwise disposed of by Licensee or its Affiliates during the
month covered by the report and, as to each Product (i) its
product number, name, or other description, (ii) Gross Sales,
(iii) the total number sold, (iv) the selling price, (v) the
amount of returns and allowances as deductions against Gross
Sales, and (vi) the Royalty due. If a royalty payment is not made
within fifteen business days of its due date, then Licensee shall
also pay a late fee equal to three percent (3%) of the amount due
and interest on such amount until paid at a simple annual rate of
ten percent (10%).
c. Section 5 of the License Agreement is hereby amended to provide that
the term of the License Agreement shall automatically expire, and
ownership of the technology which is the subject of the License
Agreement automatically transfer to Licensee, on December 31, 2006, or
upon the acquisition of the Technology pursuant to Section 6 below,
whichever shall first occur.
2. Cancellation of R&D Note. Effective as of the date of this Agreement, the
R&D Note is cancelled and all amounts of principal and interest remaining
due and payable thereunder are forgiven.
3. Amendment of Technology Transfer Agreement. Effective as of the date of
this Agreement, Sections 3.1 and 3.2 of the Technology Transfer Agreement
are amended to read in full as follows:
3.1 Subject to paragraph 3.3 below, COMPANY shall pay to PARTNERSHIP
royalties equal to $1,000 per month plus 2-1/2% of Gross Sales.
3.2 Royalties on applicable Gross Sales calculated pursuant to paragraph
3.1 above shall be due and payable to PARTNERSHIP as to a calendar
month on the last business day of the immediately following month.
Concurrent with this payment, COMPANY shall provide PARTNERSHIP with a
written report as to the Product(s) covered under this Agreement as
defined in paragraph 4.2 hereof. Such report shall be certified by an
officer or authorized agent of COMPANY, and shall specify total
applicable Gross Sales for the calendar month, the total number of
Products sold or otherwise disposed of by COMPANY and its subsidiaries
and affiliates during that month, the model number or other
description of such Product(s), the selling price therefor, the amount
of returns and allowances as a deduction against such sales, and the
net royalty on applicable Gross Sales payable to PARTNERSHIP with
respect to such sales; and COMPANY shall tender to PARTNERSHIP the
royalty payment then due. If a royalty payment is not made within
fifteen business days of its due date, then COMPANY shall also pay a
late fee equal to three percent (3%) of the amount due and interest on
such amount until paid at a simple annual rate of ten percent (10%).
<PAGE>
4. Payment of Accrued Obligation. The Accrued Royalty Obligation shall be
forgiven as of the date of this Agreement.
5. Reaffirmation of Agreements. Except as provided above, the Technology
Transfer Agreement and License Agreement shall remain in full force and
effect.
6. Option to Purchase Technology. The Partnership hereby grants to the Company
an option to purchase the Technology. The term of the option shall be ten
years, expiring on July 31, 2006. The exercise price of the option shall
initially be $180,000 and shall decline by $20,000 on each annual
anniversary date hereof. Once the option is exercised, ownership of the
technology which is the subject of the License Agreement shall
automatically transfer to the Company and the Royalty obligation of the
Company shall terminate.
7. Miscellaneous.
a. Parties Not Partners. Nothing contained in this Agreement shall be
construed so as to make the parties hereto partners or joint venturers
or to permit either party to bind the other party to any agreement or
purport to act on behalf of the other party in any respect.
b. Waiver. No waiver or modification of any of the terms of this
Agreement shall be valid unless in writing, signed by both parties.
Failure by either party to enforce any rights under this Agreement
shall not be construed as a waiver of such rights, and a waiver by
either party of a default hereunder is one or more instances shall not
be construed as constituting a continuing waiver or as a waiver in
other instances.
c. Partial Invalidity. If any term of provision of this Agreement shall
for any reason be held to be invalid, such invalidity shall not affect
any other term or provision hereof, and this Agreement shall be
interpreted and construed as if such term or provision had never been
contained herein.
d. Section Headings. The section headings of this Agreement are inserted
only for convenience and shall not be construed as part of this
Agreement.
e. Entire Agreement. This Agreement compromises the entire understanding
of the parties with respect to the subject matter herein contained and
supersedes all prior negotiations and agreements between the parties
concerning the subject matter hereof.
f. Choice of Law. This Agreement shall be construed and governed in
accordance with the laws of the State of California, regardless of the
place or places of its physical execution and performance.
g. Recovery of Litigation Costs. If any legal action or any arbitration
or other proceeding is brought for the enforcement of this Agreement,
or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this
Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be
entitled.
<PAGE>
h. Notices. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have been
duly given on the date of service if served personally on the party to
whom notice is to be given, or on the third day after mailing if
mailed to the party to whom notice is to be given, by United States
Postal Service first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
To Partnership at: Westbridge Biosystems Limited,
a California Limited Partnership
c/o Greg Howard
Polaris Pool Systems, Inc.
P.O. Box 1149
San Marco, CA 92079-1149
To Company at: Westbridge Research Group,
a California corporation
1150 Joshua Way
Vista, CA 92083
Any party may change its address for purposes of this Agreement by
giving the other party written notice of the new address in the manner
set forth above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PARTNERSHIP: COMPANY:
Westbridge Biosystems Limited Westbridge Research Group
By: Agricado Partners, Inc.,
General Partner
By: /s/Greg Howard By: /s/Tina Koenemann
Greg Howard, President Tina Koenemann, President
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID
ACT AND SUCH LAWS. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY
AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID
ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
WESTBRIDGE RESEARCH GROUP
NONQUALIFIED STOCK OPTION AGREEMENT
DATE OF GRANT: September 1, 1995
EXPIRATION DATE: September 1, 2000
FOR VALUE RECEIVED, Westbridge Research Group, a California corporation
(the "Corporation"), hereby grants to Tina Koenemann ("Optionee") an option
("Option") to purchase a total of 200,000 shares of the Corporation's Common
Stock at the price of $0.125 per share.
1. EXERCISABILITY OF OPTIONS.
Optionee may exercise her Options as to all or part of the shares at any
time after September 1, 1995 and prior to midnight on the Expiration Date.
2. METHOD OF EXERCISE.
Subject to Section 3, the Option shall be exercised by delivery of written
notice of exercise to the Corporation in the form attached to this Agreement as
Exhibit A at the Corporation's principal offices within the time specified in
Section 3 of this Agreement, together with payment in full for the shares with
respect to which the Option is exercised. Payment shall be by Optionee's
personal check. Until Optionee becomes a shareholder of record of the
Corporation, no right to vote or to receive dividends, or any other rights as a
shareholder, shall exist with respect to shares purchased upon the exercise of
the Option. No adjustment shall be made for dividend or other rights as to which
the record date precedes the date Optionee becomes a shareholder of record,
except as provided in Section 5 of this Agreement. The Option may not be
exercised as to fractional shares. As soon as reasonably practicable after
receipt by the Corporation of a notice of exercise, the Corporation shall
deliver to Optionee at the Corporation's principal offices, or at such other
appropriate place as may be determined by the Corporation, a certificate or
certificates for shares of stock with respect to which the Option was exercised.
Notwithstanding the foregoing, the Corporation may postpone delivery of any
certificate or certificates after notice of exercise for such reasonable period
as may be required to comply with any applicable listing requirements of any
national or other securities exchange. In the event an Option shall be
exercisable by any person other than Optionee, the required notice of exercise
under this Section 2 shall be accompanied by appropriate proof of the right of
such person to exercise the Option.
<PAGE>
3. TERMINATION OF OPTION.
To the extent it is not exercised, the Option shall terminate and expire at
the earlier of (i) midnight on the Expiration Date or (ii) one year from the
date on which the Optionee ceases to be an employee of the Company for any
reason other than death, or (iii) one year from the date of death of Optionee.
In the event of Optionee's death, her personal representatives, or any person or
persons to whom the rights of Optionee under the Option pass by will or by the
applicable laws of descent and distribution shall be entitled to exercise all
Options not exercised, for the period set forth herein.
4. REPRESENTATIONS OF OPTIONEE.
Optionee warrants, represents and agrees that unless a registration under
the Securi ties Act of 1933, as amended (the "Act"), and a valid qualification
under the California Corporate Securities Law of 1968, as amended, are in effect
with respect to the Option and/or the shares of the Corporation's Common Stock
issuable upon exercise of the Option, Optionee has acquired the Option and will
acquire any shares of the Corporation's Common Stock issuable upon exercise of
the Option for her own account and not with a view to any distribution thereof,
and that she will not make any distribution thereof other than pursuant to an
exemption from registration under the Securities Act of 1933, as amended. The
Corporation shall have the right to place upon any certificate evidencing shares
issuable upon the exercise of the Option such legends as the Board of Directors
may prescribe restricting the transferability of such shares, including any
legend and restriction imposed pursuant to any applicable state, federal or
foreign securities laws.
Optionee has engaged heretofore in transactions similar to that
contemplated herein and has such knowledge and experience in financial and
business matters that she is capable of evaluating the merits and risks of an
investment in the Corporation's Common Stock. Optionee is aware that an
investment in the Corporation's Common Stock is highly speculative and is
subject to substantial risks. Optionee is able to bear the high degree of
economic risk of an investment in the Corporation's Common Stock. The commitment
of Optionee to investments which are not readily marketable or transferable is
not disproportionate to her net worth, and her investment in the Corporation's
Common Stock will not cause such commitment to become excessive. Optionee has
adequate means to provide for her current needs and personal contingencies, has
no need for liquidity in her investment in the shares, and has the ability to
bear the economic risk of this investment. Optionee confirm that all documents
and information requested by him concerning the Corporation have been supplied.
Optionee also confirms that she is knowledgeable about the Corporation, its
business and prospects.
Optionee has been informed of and understands the following:
a. Optionee acknowledges that the transferability of the Corporation's
Common Stock is severely limited and that the Optionee must continue to bear the
economic risk of this investment for an indefinite period as the Corporation's
Common Stock has not been registered under the Act or any state securities laws
and therefore cannot be offered or sold unless the Corporation's Common Stock is
subsequently registered under such laws or an exemption from such registration
is available satisfactory to the Corporation.
<PAGE>
b. Optionee understands that she has no right to require the Corporation to
register the Corporation's Common Stock under federal or state securities laws.
c. That the certificates representing the Corporation's Common Stock will
contain a legend setting forth that the Corporation's Common Stock has not been
registered under federal and state securities laws, and setting forth or
referring to the restrictions on transfer and sale of the Corporation's Common
Stock.
d. No federal or state agency has made any determination or finding as to
the fairness for investment nor any recommendation nor endorsement of the
Corporation's Common Stock.
No commission or remuneration is being paid or given by Optionee on account
of subscription for the Common Stock.
5. RECAPITALIZATION.
The number of shares of the Corporation's Common Stock which may be
purchased upon the exercise of the Option, and the exercise price per share set
forth in this Agreement, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock of the Corporation
resulting from any subdivision or consolidation of shares or the payment of a
stock dividend. Any fraction of a share subject to the Option that would
otherwise result from an adjustment pursuant to this Section 5 shall be rounded
downward to the next full number of shares and the Corporation shall pay
Optionee in cash the fair market value of such fraction of a share.
6. MERGERS OR DISSOLUTION.
Subject to any required action by the Corporation's shareholders, and only
after any such action by the Corporation's shareholders has been taken, if the
Corporation shall be the surviving corporation in any merger or consolidation,
the Option shall pertain to and apply to the securities to which a holder of the
number of shares of the Corporations's Common Stock subject to the Option would
have been entitled in such merger or consolidation and the Option shall become
immediately exercisable. Unless the obligations under the Option are assumed by
the surviving corporation, a dissolution or liquidation of the Corporation or a
merger or consolidation in which the Corporation is not the surviving
corporation shall cause the Option to terminate; provided, however that if the
Corporation's obligations under the Option are not assumed by the surviving
corporation, Optionee shall have the right immediately prior to such dissolution
or liquidation, or merger or consolidation in which the Corporation is not the
surviving corporation, to exercise the Option in whole or in part, whether or
not the Option is then exercisable under the terms of this Agreement. If the
Corporation should be consolidated with, or merge into, any other corporation,
or if the Corporation should sell or transfer substantially all of its assets,
or if any other similar event affecting shares of the Corporation's Common Stock
should occur, and if the acquiring corporation assumes the Corporation's
obligations under this Agreement, then Optionee shall be entitled thereafter to
purchase shares of stock and other securities and property in the kind and
amount, and at the price, to which Optionee would have been entitled had the
Option (including parts of the Option not then exercisable) been exercised prior
to such event.
<PAGE>
7. ADJUSTMENTS.
The grant of the Option shall not affect in any way the right or power of
the Corporation to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business of assets. To the
extent that the adjustments set forth in Sections 5 and 6 relate to stock or
securities of the Corporation, such adjustments shall be made by the
Corporation. The determination of the Corporation as to such adjustments, and
the interpretation and construction of the Plan and this Agreement, including
any inconsistencies between such documents, shall be made by the Corporation in
good faith. All disputes as to such adjustments, interpretation and construction
shall be determined by arbitration in accordance with Section 13 hereof.
8. WITHHOLDING TAXES.
Upon and after the exercise of the Option, the Corporation shall be
entitled (but not required) to withhold such amounts from any wages or other
sums due Optionee necessary in order for the Corporation to satisfy any
withholding requirements in respect of any applicable federal, state or foreign
income, employment or other taxes.
9. EXPENSES.
The Corporation shall pay all original issue and transfer taxes with
respect to the issuance and transfer of shares of its Common Stock pursuant to
this Agreement and all other fees and expenses necessarily incurred by the
Corporation in connection with such issuance. As used in the preceding sentence,
the term "original issue taxes" shall not be construed so as to mean any
"original issue discount" included in the gross income of Optionee pursuant to
Section 1271 et seq. of the Internal Revenue Code of 1986, as amended. Optionee
shall be responsible for the payment of all federal, state and other personal
income taxes payable by Optionee by virtue of the grant or exercise of the
Option, the issuance of any shares of the Corporation's Common Stock upon
exercise of the Option, or any subsequent disposition of such shares.
10. NON-ASSIGNABILITY OF OPTION.
No part of the Option, or any interest therein may be sold, pledged,
assigned or transferred in any manner otherwise than by Will or by the laws of
descent and distribution. The Option may be exercised during the lifetime of
Optionee only by Optionee.
11. RESERVATION OF STOCK.
The Corporation, during the term of this Agreement, shall at all times
reserve and keep available, and shall seek or obtain from any regulatory body
having jurisdiction any requisite authority in order to issue and sell such
number of shares of its Common Stock as shall be sufficient to satisfy the
requirements of the Option. The Corporation shall not be obligated to issue any
shares of its Common Stock upon exercise of the Option unless such issuance is
effectively registered or exempt from registration under all applicable federal
and state securities laws.
<PAGE>
12. NOTICES.
Notices given or required pursuant to this Agreement may be effected by
either personal delivery in writing or by mail, registered or certified, postage
prepaid, with return receipt requested. Mailed notices shall be addressed to the
parties at the addresses set forth beneath their signatures on this Agreement,
or at such other addresses as may be specified by written notice in accordance
with this Section 12. Notices delivered personally shall be deemed received as
of actual receipt. Mailed notices shall be deemed received three days after the
date of postmark.
13. ARBITRATION.
Any controversy arising under this Agreement shall be settled by
arbitration only in San Diego, California, before a single arbitrator in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association. Judgment upon the award rendered by the arbitrator may be entered
in any court having jurisdiction over this Agreement. Each party shall be
entitled to prehearing discovery as provided in California Code of Civil
Procedure Section 1283.05. The prevailing party in any such arbitration shall be
entitled to recover from the other party their reasonable attorneys' fees and
costs as set by the arbitrator.
14. SEVERABILITY.
If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remaining provisions
shall nevertheless continue in full force and effect without being impaired or
invalidated in any way.
15. GOVERNING LAW.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of California.
16. REPORTS TO OPTIONEE.
The Corporation shall provide financial and other information regarding the
Corporation to Optionee at least annually while the Option is outstanding. Such
financial and other information shall be the information regularly provided by
the Corporation to each of its shareholders, and shall be provided to Optionee
when and substantially in the manner provided to the Corporation's shareholders.
17. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, this Agreement is executed on behalf of the Corporation
and Optionee effective as of September 1, 1995.
OPTIONEE WESTBRIDGE RESEARCH GROUP, a
California corporation
________________________________ By:_________________________________
Tina Koenemann _________________, Secretary
Address: _______________________ Address: 1150 Joshua Way
_______________________ Vista, CA 92083
<PAGE>
NOTICE OF EXERCISE
(Name)
(Address)
(City, State & Zip Code)
(Date)
Westbridge Research Group
1150 Joshua Way
Vista, California 92083
Attention: Corporate Secretary
Dear Sir or Madam:
I hereby exercise my right to purchase _______________________shares of
Common Stock of Westbridge Research Group, a California corporation (the
"Corporation"), pursuant to, and in accordance with, that Non-Qualified Stock
Option Agreement ("Agreement") dated September 1, 1995. As provided in that
Agreement, I deliver herewith a certified or bank cashier's check (or such other
form of payment as may be specified in the Agreement) in the amount of the
aggregate option price. Please deliver to me stock certificates representing the
subject shares registered as follows:
________________
________________
________________
I represent to you that the shares of Common Stock I propose to purchase
are being acquired for investment and not with a view to, or for resale in
connection with, any distribution of such securities. By such representation, I
mean that I intend to hold such securities for investment in my own account and
that I have no present intention of disposing of all or any part of such
securities.
I further represent to you that:
1. Nature of Risk. I understand the nature of the investment, and I am able
to bear the economic risk thereof. I now have and have had access to such
information as to the Corporation's financial condition, operations, products,
marketing, sales and management as I have deemed appropriate in evaluating the
merits and risks of my prospective investment.
Very truly yours,
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference into the Westbridge Research
Group and Subsidiary (the "Company") registration statement on Form 10-KSB of
our report dated January 10, 1997 on the financial statements of the Company for
the years ended November 30, 1996 and 1995.
Peterson & Co.
San Diego, California
March 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
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