June 10, 1996
By EDGAR
- --------
United States Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Medizone International, Inc.
CIK: 0000753772
----------------------------
Dear Sir or Madam:
Transmitted with this letter is Medizone International, Inc.'s Proxy
Statement for its 1996 annual meeting, to be held on July 10, 1996.
Very truly yours,
Andrew E. Goldstein
Enclosures
AEG/an
<PAGE>
Form of Proxy Card
SIDE ONE
--------
PROXY
MEDIZONE INTERNATIONAL, INC.
Annual Meeting of Stockholders - July 10, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND UNLESS OTHERWISE
PROPERLY MARKED AND EXECUTED BY THE UNDERSIGNED STOCKHOLDER, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4 and 5 AS RECOMMENDED BY THE BOARD OF DIRECTORS.
The undersigned hereby appoints each of Joseph S. Latino and Arthur P. Bergeron,
each with full power to act without the other, and with full power of
substitution, as the attorneys and proxies of the undersigned and hereby
authorizes them to represent and vote all the shares of Common Stock of Medizone
International, Inc. (the "Company") that the undersigned would be entitled to
vote if personally present at the Annual Meeting of Stockholders, to be held on
Wednesday, July 10, 1996, at 10:00 o'clock a.m. (Eastern Daylight Savings Time)
at The Loews New York Hotel, Lexington Avenue and East 51st Street, New York,
New York 10022, or at any adjournment thereof, upon such business as may
properly come before the meeting, including the items set forth below.
1. ELECTION OF DIRECTORS
[ ] For all nominees below [ ] Withhold authority
-- --
(except as marked to to vote for all
the contrary below) nominees below
NOMINEES: Joseph S. Latino, George Handel, John D. Pealer, Kenneth
Gropper and Richard G. Solomon
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
2. TO APPROVE AN AMENDMENT TO THE BY-LAWS TO PROVIDE THAT NOTICE OF THE
ANNUAL OR A SPECIAL MEETING OF SHAREHOLDERS MAY BE DELIVERED UP TO 60
DAYS PRIOR TO THE DATE OF SUCH MEETING.
[ ] For [ ] Against [ ] Abstain
--- --- ---
<PAGE>
SIDE TWO
3. TO APPROVE AN AMENDMENT TO THE ARTICLES OF INCORPORATION
TO ELIMINATE THE PERSONAL LIABILITY OF DIRECTORS TO THE
EXTENT PERMITTED BY LAW.
[ ] For [ ] Against [ ] Abstain
--- --- ---
4. TO APPROVE (I) AN AMENDMENT TO THE BY-LAWS TO AUTHORIZE INDEMNIFICATION
AGREEMENTS BETWEEN THE COMPANY AND ITS OFFICERS AND DIRECTORS, AND (II)
A PROPOSAL THAT THE COMPANY ENTER INTO INDEMNIFICATION AGREEMENTS WITH
ITS PRESENT OFFICERS AND DIRECTORS WITH EACH FUTURE OFFICER AND
DIRECTOR WHEN AND AS THE BOARD OF DIRECTORS DEEMS IT APPROPRIATE.
[ ] For [ ] Against [ ] Abstain
--- --- ---
5. TO RATIFY THE APPOINTMENT OF ANDERSEN ANDERSEN & STRONG,
L.C., AS CERTIFIED INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
1996 CALENDAR YEAR.
[ ] For [ ] Against [ ] Abstain
--- --- ---
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Date: June 10, 1996
---------------------------
Signature
---------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSING
ENVELOPE.
<PAGE>
MEDIZONE INTERNATIONAL, INC.
123 East 54th Street
Suite 7B
New York, New York 10022
DEAR FELLOW STOCKHOLDER:
On behalf of the Board of Directors, I cordially invite you to attend
the Annual Meeting of Stockholders of Medizone International, Inc. (the
"Company") to be held on Wednesday, July 10, 1996, at 10:00 o'clock a.m.
(Eastern Daylight Savings Time) at The Loews New York Hotel, Lexington Avenue
and East 51st Street, New York, New York 10022.
For the reasons set forth in the accompanying proxy statement, your
Board of Directors unanimously recommends that you vote for (i) Management's
nominees for directors; (ii) the amendment of the Company's By-Laws to provide
that notice of the annual or a special meeting of shareholders may be delivered
up to 60 days prior to the date of such meeting; (iii) the amendment of the
Company's Certificate of Incorporation to eliminate the personal liability of
directors of the Company to the extent permitted by law; (iv) (a) the amendment
of the Company's By-Laws to authorize indemnification agreements between the
Company and its officers and directors; and (b) a proposal that the Company
enter into indemnification agreements with its present officers and directors
and with future officers and directors when and as the Board of Directors deems
appropriate; and (v) the ratification of the appointment of Andersen Andersen &
Strong, P.C. as the Company's independent auditors; and (vi) such other business
as may properly come before the meeting.
In order to ensure that your shares are represented at the meeting, I
urge you to promptly date, sign and mail the enclosed proxy using the enclosed
addressed envelope, which needs no postage if mailed in the United States. Your
proxy may be withdrawn or revoked by the person who executed it at any time
prior to the Annual Meeting.
Very truly yours,
Joseph S. Latino, Ph.D.
Director, President and
Chief Executive Officer
Dated: June 10, 1996
<PAGE>
MEDIZONE INTERNATIONAL, INC.
123 East 54th Street
Suite 7B
New York, New York 10022
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 10, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Medizone International, Inc. (the "Company") will be held on Wednesday, July 10,
1996, at 10:00 o'clock a.m. (Eastern Daylight Savings Time) at The Loews New
York Hotel, Lexington Avenue and East 51st Street, New York, New York 10022, for
the purpose of considering and voting upon the following proposals:
1. To elect five directors to serve as the Board of Directors of the
Company until the next Annual Meeting of Stockholders;
2. To amend the Company's By-Laws to provide that notice of the
annual or a special meeting of shareholders may be delivered up
to 60 days prior to the date of such meeting;
3. To amend the Company's Articles of Incorporation to eliminate the
personal liability of directors of the Company to the extent
permitted by law;
4. To amend the Company's By-laws to authorize indemnification
agreements between the Company and its officers and directors and
to approve a proposal that the Company enter into indemnification
agreements with present officers and directors, and with each
future officer and director when and as the Board of Directors
deems it appropriate.
5. To ratify the appointment of Andersen Andersen & Strong, L.C. as
the Company's independent auditors for the calendar year ending
December 31, 1996; and
6. Such other business as may properly come before the meeting.
The close of business on May 28, 1996, has been fixed as the record
date for determining the stockholders entitled to notice of and to vote at the
meeting and any adjournment thereof, and only stockholders of record on such
date shall be entitled to notice of and to vote at the meeting.
Please promptly date, sign and mail the enclosed proxy using the
enclosed addressed envelope, which needs no postage if mailed within the United
States.
By Order of the Board of Directors
Joseph S. Latino, Ph.D.
Director, President and
Chief Executive Officer
Dated: June 10, 1996
<PAGE>
PROXY STATEMENT
MEDIZONE INTERNATIONAL, INC.
123 East 54th Street
Suite 7B
New York, New York 10022
ANNUAL MEETING OF STOCKHOLDERS
This proxy statement is furnished to stockholders in connection with
the solicitation by the Board of Directors of Medizone International, Inc. (the
"Company") of proxies to be voted at the Annual Meeting of Stockholders of the
Company to be held on Wednesday, July 10, 1996, at 10:00 o'clock a.m. (Eastern
Daylight Savings Time) at The Loews New York Hotel, Lexington Avenue and East
51st Street, New York, New York 10022, and at any adjournment thereof. This
proxy statement and the proxies solicited hereby are first being sent or
delivered to stockholders on or about June 10, 1996.
Voting
The proxy may be revoked by the stockholder at any time prior to its
use by the Company by voting in person at the Annual Meeting, by executing a
later proxy, or by submitting a written notice of revocation to the Secretary of
the Company at the Company's office or at the Annual Meeting. If the proxy is
signed properly by the stockholder and is not revoked, it will be voted at the
meeting. If a stockholder specifies how the proxy is to be voted, the proxy will
be voted in accordance with such specification. Otherwise the proxy will be
voted in the manner specified on the proxy.
At the close of business on May 28, 1996, 128,808,889 shares of the
Company's common stock, $.001 par value ("Common Stock"), were outstanding and
eligible for voting at the meeting. Each stockholder of record is entitled to
one vote for each share held on all matters to come before the meeting. Only
stockholders of record at the close of business on May 28, 1996, are entitled to
notice of and to vote at the meeting.
Presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares as of the record date shall constitute a
quorum. Votes cast at the Annual Meeting will be tabulated by inspectors of
election appointed by the Company. Shares of stock represented by a properly
signed and returned proxy will be treated as present at the Annual Meeting for
purposes of determining a quorum, without regard as to whether the proxy is
marked as casting a vote or abstaining. Likewise, where the record holder has
indicated on the proxy card or has otherwise notified the Company that it does
not have power to vote shares represented by the proxy ("a broker non-vote"),
the shares will be treated as present at the Annual Meeting for purposes of
determining a quorum.
1
<PAGE>
Other than with respect to the election of Directors, all other
matters that are scheduled to come before the Annual Meeting require an approval
either of the majority of the shares of stock present and entitled to vote
thereon or a majority of the shares of the Company's stock which are issued and
outstanding. Therefore, abstentions as to particular proposals will have the
same effect as votes against such proposals. Broker non-votes will be treated as
shares not entitled to vote and will not be included in the calculation of the
number of votes constituting a majority.
Security Ownership of Certain Beneficial Owners
The following table set forth certain information as of May 28, 1996,
pertaining to the beneficial ownership of Common Stock, by (i) persons known to
the Company to own 5% or more of the outstanding Common Stock, (ii) each
director and nominee for director of the Company, (iii) each executive officer
named in the Summary Compensation Table below and (iv) directors and executive
officers of the Company as a group. This information has been obtained from the
Company's records, or from information furnished directly by the individual or
entity to the Company.
Number of Shares Percentage of
Name and Address Beneficially Owned Total Outstanding
- ---------------- ------------------ -----------------
Joseph S. Latino, Ph.D. 5,003,750(1) 3.85%
690 East 19th Street
Brooklyn, NY 11230
George Handel 3,253,856(2) 2.53%
1408 Melrose Avenue
Melrose Park, PA 19126
John D. Pealer 4,856,977(3) 3.76%
355 N. 21st Street
Camp Hill, PA 17011
- --------
(1) Excludes 15,200 shares registered in the name of various family members, as
to which Dr. Latino disclaims beneficial ownership, but includes 1,000,000
shares obtainable upon the exercise of the option granted in Dr. Latino's
employment agreement, which vested on January 1, 1996.
(2) Includes 50,000 shares beneficially owned by his wife, but excludes
1,615,833 shares registered in the name of certain other family members as
to which Mr. Handel has disclaimed beneficial ownership.
(3) Includes shares beneficially owned by his wife and 508,333 shares
obtainable upon the exercise of options granted to Mr. Handel in connection
with his employment as the Company's Secretary.
2
<PAGE>
Arthur P. Bergeron 2,733,334(4) 2.11%
40 Grove Street
Wellesley, MA 02181
Richard G. Solomon 4,500,000(5) 3.49%
77 Seaview Road
Remuera, Auckland 5
New Zealand
Kenneth Gropper 160,000 0.12%
129 Eagle's Nest Road
Lincoln, NH 03251
Philip J. Watrous 11,250,000 8.73%
685 Fifth Avenue
New York, NY 10022
All present directors 20,507,917 15.61%
and executive officers
as a group (4 persons)
(Remainder of Page Intentionally Left Blank)
- --------
(4) Includes (i) 544,167 shares held through the Bergeron Profit Sharing Plan;
(ii) 500,000 shares issued by the Company as additional compensation for
services rendered to the Company through December 31, 1994; and (iii)
500,000 shares obtainable upon exercise of the option granted in Mr.
Bergeron's employment agreement which vested on January 1, 1996.
(5) Includes 2,500,000 shares owned by Solwin Investments Limited, a
corporation wholly owned by Mr. Solomon.
3
<PAGE>
ELECTION OF DIRECTORS
Pursuant to the Company's By-Laws, a Board of Directors is to be
elected at the Annual Meeting. The nominees to the Company's Board of Directors
are the present directors of the Company and have served, variously, since
November 1992, September 1993, September 1995 and January 1996.
The proxy will be voted as specified thereon and, in the absence of
contrary instructions, will be voted for the re-election of Joseph S. Latino,
George Handel, John D. Pealer, Kenneth Gropper and Richard G. Solomon to serve
as directors until the 1997 annual meeting of stockholders and until their
respective successors shall have been elected and shall have qualified. If any
nominee is unable or unwilling to serve, which the Board of Directors does not
anticipate, the persons named in the proxy will vote for another person in
accordance with their judgment. To be elected, a nominee must receive the
affirmative vote of a plurality of the votes cast by the shares present and
entitled to vote, in person or by proxy, at the Annual Meeting. Accordingly,
abstentions or broker non-votes as to the election of directors will not effect
the election of the candidates receiving the plurality of the votes.
The Board of Directors has nominated and management recommends the
election of the persons listed below as directors.
<TABLE>
<CAPTION>
Has Served as
Name Age Occupation Director Since
<S> <C> <C> <C>
Joseph S. Latino 38 President, Director and 1993
Chief Executive Officer
of the Company
John D. Pealer 76 President and Chief Executive 1992
Officer of Pealer's Inc.,
a real estate development
company
George Handel 68 President, Hantex Mills, a 1992
dry goods firm, and Vice
President, Handel & Co., a
wholesale dry goods firm
Kenneth Gropper 53 President and Chief Executive 1995
Officer of Management Casualty
Group, Inc., a consultant to
the health care industry
Richard G. Solomon 53 President, Medizone New 1996
Zealand Limited
</TABLE>
4
<PAGE>
Biographies of Nominees
Joseph S. Latino, Ph.D., was appointed President and Chief Operating
Officer of the Company in November 1992 and was elected to the Board of
Directors on September 21, 1993. He was named Chief Executive Officer of the
Company in January 1995. He is President, Chief Operating Officer and Director
of the Company's majority owned subsidiary, Medizone Canada Limited ("MCL"). His
affiliation with the Company dates from 1986, when he was named its Director of
Research. Dr. Latino received a Bachelor of Science degree in 1978 from Brooklyn
College of the City University of New York in Biology and Chemistry. He received
his Doctor of Philosophy in Biochemistry in 1984 from the City University of New
York. Dr. Latino became Director of Special Hematology/Oncology Laboratory at
The Brooklyn Hospital Center, Brooklyn, New York in 1984, where he was employed
until he went on sabbatical in December 1994. In 1994, Dr. Latino was designated
as the Basic Science Research Coordinator for The Brooklyn Hospital Center and
was a member in Investigational/Institutional Review Board of that institution.
In 1986, Dr. Latino became an Assistant Professor of Medicine, Division of
Hematology at the Health Science Center at Brooklyn, State University of New
York, as well as Ad Hoc Research Advisor for The Brooklyn Hospital Center. In
1987 he became a Research Educator for The Hematology/Oncology Fellowship
Program at the Brooklyn Hospital Center. Dr. Latino currently devotes
substantially his full time to the operations of the Company.
George Handel became a director of the Company in November 1992 and
has served as the Company's Secretary since November 24, 1993. He holds the same
positions with MCL. Mr. Handel, who attended Temple University, is President of
Hantex Mills, a dry goods firm established in 1975, and Vice-President of Handel
& Co., a wholesale dry goods firm established in 1923.
John D. Pealer became a director of the Company in November 1992. He
is also a director of MCL. Mr. Pealer has been the President and Chief Executive
Officer of Pealer's Inc., a family-owned corporation engaged in the business of
real estate development since 1949.
Kenneth Gropper became a director of the Company in September 1995.
Mr. Gropper is the President and Chief Executive Officer of Management
Consulting Group, Inc. of Woburn, Massachusetts, which serves as a consultant to
physician group practices, medical centers, pharmaceutical companies and medical
device manufacturers on regulatory, legislative, administrative, sales,
marketing and other management issues. Mr. Gropper joined Management Consulting
Group, Inc. in 1977. Mr. Gropper was a member of the Board of Trustees of the
Massachusetts Eye and Ear Infirmary from 1989 to 1994. Mr. Gropper received a
Bachelor of Arts degree in Biology from Long Island University in 1964 and a
Masters' Degree in Business Administration from Columbia University in 1966.
5
<PAGE>
Richard G. Solomon became a director of the Company in January 1996.
He is also a director of the Company's subsidiary, Medizone New Zealand Limited
(" NZ"), and the owner of Solwin Investments Limited, the 50% owner of MNZ. Mr.
Solomon is a New Zealand citizen and lives in Auckland, New Zealand. He
co-founded Havencare Hospitals, a three-hospital elder care facility in 1978 and
occupied an executive position with that entity until 1996. Mr. Solomon was
President of the New Zealand Private Hospitals Association from 1989 to 1993 and
founded the New Zealand Council Health Care Standards, on whose council he sat
until 1995. Prior to entering the health care industry, Mr. Solomon administered
the New Zealand subsidiary of a British merchant bank and its investment,
finance and development activities in New Zealand.
Committees and Meetings of the Board of Directors
The Board of Directors does not have an audit, nominating or
compensation committee.
During 1995, there were six meetings of the Board of Directors.
(Remainder of page intentionally left blank)
6
<PAGE>
EXECUTIVE COMPENSATION
The table below sets forth cash and non-cash compensation earned by or
paid to each executive officer of the Company for services rendered in all
capacities to the Company during the fiscal years ended December 31, 1995, 1994
and 1993.
Summary Compensation Table
Annual Compensation
--------------------------
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Other
Name and Principal Annual Options
Position Year Salary(1) Bonus Compensation #
- -------- ---- -------- ----- ------------ -------
<S> <C> <C> <C> <C> <C>
Joseph S. Latino, Ph.D, 1995 $ 180,000 - 0 - 3 3,000,000
President and Chief 1994 $ 72,000 $17,800 (3)
Operating Officer 1993 61,200(2) - 0 - (3)
Arthur P. Bergeron, 1995 $ 72,000 - 0 - 5 1,500,000
Vice President, 1994 $ 36,000(4) - 0 - - 0 -
Treasurer and Chief 1993 $ 36,000 - 0 - - 0 -
Financial Officer
</TABLE>
- ----------------
(1) From 1992 through 1994, Dr. Latino and Mr. Bergeron were not paid on a
salaried basis, but were paid as consultants.
(2) In June 1993, Dr. Latino received 4,5000,000 shares of the Company's common
stock, par value $.001, as compensation for services rendered to the
Company in 1992 and 1993.
(3) In 1993, 1994 and 1995 Dr. Latino was reimbursed for certain
automobile expenses and other business expenses, in the amounts of $10,800,
$21,324 and $33,222, respectively.
(4) From July 1, 1993 through December 31, 1994, Arthur P. Bergeron & Co.,
P.C., the accounting firm of which Mr. Bergeron is the sole shareholder,
received an aggregate of $64,825 as professional fees for support services
rendered in connection with the Company's 1992 audit, the engagement of
Coopers & Lybrand and for investigative services rendered in connection
with certain litigation engaged in by the Company. He is also to receive
500,000 shares of the Company's common stock for his services through
December 31, 1994.
(5) In 1995, the Company provided Mr. Bergeron with health insurance, paying
premiums in the amount of $9,438.
7
<PAGE>
George Handel 1993 - 0 - - 0 - - 0 - 250,000(6)
Secretary 1994 - 0 - - 0 - - 0 - 250,000(6)
1993 - 0 - - 0 - - 0 - 8,333(6)
Employment Agreements
The Company entered into an employment agreement with Joseph S.
Latino, effective January 1, 1995, pursuant to which Dr. Latino is employed as
the Company's Chief Executive Officer and Director of Research, at a salary of
$180,000 per annum. This agreement provides for a one year term, with the
proviso that this agreement shall remain in effect until terminated by either of
the parties in accordance with its terms. Dr. Latino's salary may be increased
in the discretion of the Board of Directors. Pursuant to this agreement, Dr.
Latino is to devote substantially all of his time and efforts to the Company's
affairs and is to serve as President of the Company's subsidiary, Medizone
Canada Limited without additional compensation. Dr. Latino is to receive certain
fringe benefits, including the use of an automobile and health and life
insurance and has been granted an option to purchase 3,000,000 shares of the
Company's common stock, par value $.001, at a per share price of $.20. This
option may be exercised in annual increments of 1,000,000 shares, on and after
January 1 of each of 1996, 1997 and 1998, provided that Dr. Latino is still
employed by the Company at the time. The agreement also provides for certain
bonus payments, which are dependent on the Company's achieving certain financial
results.
The Company entered into an employment agreement with Arthur P.
Bergeron, effective January 1, 1995, pursuant to which Mr. Bergeron is employed
as the Company's Chief Financial Officer, at a salary of $72,000 per annum. This
agreement provides for a term of one year, with the proviso that this agreement
shall remain in effect until terminated by either party in accordance with its
terms. Mr. Bergeron's salary may be increased in the discretion of the Board of
Directors. Mr. Bergeron is also to serve as the Chief Financial Officer of
Medizone Canada Limited without additional compensation. Pursuant to this
agreement, Mr. Bergeron is permitted to continue his private accounting
practice. Mr. Bergeron will also receive health insurance from the Company and
has been granted an option to purchase 1,500,000 shares of the Company's common
stock, par value $.001, at a per share price of $.20. This option may be
exercised in annual increments of 500,000 shares on and after January 1 of each
of 1996, 1997 and 1998, provided that Mr. Bergeron is still employed by the
Company at that time. The agreement also provides for certain bonuses to be paid
if the Company achieves certain financial results.
Compensation Report
In light of its status as a development stage company, the Company has
monitored its costs very carefully, over the years, including compensation and
consulting expenses. As a consequence of this policy, the Board believes that
the amount paid to the Company's
- --------
(6) In May 1995, the Company determined to grant Mr. Handel an option to
purchase 250,000 shares of the Company's common stock for a three-year
period at an exercise price of $.20 for each year that he has served as the
Company's secretary, with a pro rated grant for partial years. The options
granted in 1996 cover service for November 1993 through December 1995 and
will expire in 1999.
8
<PAGE>
executive officers has been modest compared to executives employed by the
Company's competitors.
Compensation Committee Interlocks and Insider Participation
The Company does not have a compensation committee. Matters concerning
the compensation of executive officers are determined by the Company's Board of
Directors. Dr. Latino, who is an executive officer of the Company, is also a
member of the Company's Board of Directors and will participate in deliberations
concerning executive officer compensation, but will not vote on his own
individual compensation. However, his participation in such deliberations gives
rise to a conflict of interest which could affect his compensation.
Open Grants in Last Year Pursuant to Employment Agreement
---------------------------------------------------------
The following table sets forth information as of December 31, 1995
regarding the outstanding options under the Company's employment agreements with
its executive officers.
<TABLE>
<CAPTION>
Potential realizable value at Assumed
Annual Rates of Stock Price
Appreciation for Option.
Percent of
Total Options
Number of granted under
Securities Employment Exercise Expir-
Name Under Option Agreements Price ($/sh) ation Date 5%($) 10%($)
- ---- ------------ ---------- ------------ ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Joseph S.
Latino 3,000,000 66.66% $.20 (1) (1) (1)
Arthur P.
Bergeron 1,500,000 33.33% $.20 (1) (1) (1)
</TABLE>
(1) The options were granted on January 1, 1995 pursuant to the Company's
employment agreements with each of Dr. Latino and Mr. Bergeron. They vest
fully on January 1, 1998 over the following vesting schedule, 33% on
January 1, 1996, 33% in January 1997 and 33% on January 1, 1998. They may
be exercised for as long as Dr. Latino and Mr. Bergeron remain employed by
the Company and for one year after the termination of Dr. Latino's and/or
Mr. Bergeron's termination of employment with the Company. As of January 1,
1995 (the date of grant), the average of the high and low bid price for the
Company's common stock was approximately $.14.
9
<PAGE>
Aggregate Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
---------------------------------
The following table provides information on the value of the Company's
named executive officers' unexercised options to purchase shares of the
Company's common stock as of December 31, 1995.
Value of
Number of Unexercised Unexercised in-the-
Options at December 31, money option at
1995 (#) December 31, 1995
($) (1)
Shares Unex-
Acquired on Value Exer- Unexer- Exerci- erci-
Name Exercise (#) Realized cisable cisable sable sable
- ---- ------------ -------- ------- ------- ----- -----
Joseph S.
Latino -0- -0- -0- 3,000,000 -0- -0-
Arthur P.
Bergeron -0- -0- -0- 1,500,000 -0- -0-
(1) Fiscal year ended December 31, 1995. The average high and low bid of
the Company's common stock at December 31, 1995 was $.0975.
BOARD OF DIRECTORS
Dr. Joseph S. Latino
George Handel
John Pealer
Kenneth Gropper
Richard G. Solomon
Dr. Latino, an executive officer is a member of the Board of Directors
and participates in deliberations concerning executive officer compensation, but
does not vote on his own individual compensation. However, his participation in
these deliberations may give rise to a conflict of interest.
10
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans from Affiliates
On August 22, 1994, the Company borrowed $18,000 from George Handel and
$10,000 from John Peeler, two of the Company's directors, and $9,000 from Samuel
Handel, the brother of George Handel. Each of these loans was payable on August
23, 1995 and bears interest at an annual rate of 8%, payable on the maturity of
the loans. The maturity date of these loans was extended to August 23, 1996.
Each lender has the right to require that payment of principal and interest due
on his loan be made in shares of the Company's common stock, at a per share
price equal to that charged by the Company in the most recent private
transaction prior to the maturity of these loans.
On June 4 and June 8, 1995, the Company borrowed $25,000 from George
Handel and $25,000 from Samuel Handel, respectively, payable in one year. These
loans bear interest at an annual rate of 9% and have the same conversion terms
as the 1994 loans from these individuals.
On or about March 15, 1996, the Company borrowed $25,000 from Richard
G. Solomon, $12,000 from George Handel and $10,000 from John Pealer, three of
the Company's directors. These loans are payable on June 15, 1996 and bear
interest at an annual rate of 9%, payable on the maturity of the loan. The
Company has the right to make payments of principal and interest on these loans
in shares of the Company's common stock, at a per share price equal to that
charged by the Company in its most recent private transaction prior to the
maturity of the loan.
Formation of Subsidiary
On June 22, 1995, the Company entered into a series of contracts
(collectively the "Transaction Documents") which resulted in the formation of a
joint venture subsidiary incorporated in New Zealand, Medizone New Zealand
Limited ("MNZ"). MNZ, a privately held corporation equally owned by the Company
and Solwin Investments Limited ("Solwin"), a New Zealand corporation which is an
affiliate of Richard G. Solomon ("Solomon"), who became a director of the
Company on January 16, 1996, was organized on June 22, 1995 and is a research
and development stage company whose objective is to obtain regulatory approval
for the distribution of the Company's patented technology in New Zealand,
Australia, South East Asia and the South Pacific Islands.
Pursuant to the Transaction Documents, the Company purchased one
hundred percent of MNZ from Solomon, who had caused the formation of MNZ on June
22, 1995. Contemporaneously with this transaction, the Company sold fifty
percent of MNZ to Solwin, a corporation owned by Solomon, for U.S. $150,000, of
which $50,000 was thereupon loaned by the Company to MNZ on a demand basis,
which was repaid on October 2, 1995. On October 26, 1995, the Company loaned MNZ
$50,000 on a demand basis, which has not been repaid as of the date of this
report. The Directors of MNZ are Solomon and Dr. Joseph L. Latino, the Company's
President and Chief Executive Officer.
11
<PAGE>
Contemporaneous with the creation of the above share structure, the
Company and MNZ entered into a Licensing Agreement (the "Licensing Agreement")
and a Managing Agent Agreement (the "Managing Agent Agreement") with MNZ.
Pursuant to the Licensing Agreement, the Company granted an exclusive
license to MNZ for its process and equipment patents and trademark in New
Zealand. MNZ has agreed to apply for corresponding patent protection for these
patents in New Zealand and to use its best effort to exploit the rights granted
in the agreement. The License Agreement shall terminate on the date of the
expiration of the last to expire of any patent obtained in New Zealand, or, if
no such patents are obtained, on June 22, 2010. The Company is to receive a
guaranteed minimum royalty (the "Guaranteed Minimum Royalty"), in an amount to
be agreed to by the Company and MNZ, commencing in the third year after all
necessary regulatory approvals requisite to the license, use or distribution of
the Company's proprietary technology have been obtained in New Zealand. If the
Company and MNZ are unable to agree upon the amount of the Guaranteed Minimum
Royalty, the Company may terminate the license on thirty days' notice.
Commencing on the first sale to a user by MNZ, the Company shall receive a sales
royalty in an amount equal to ten percent of MNZ's gross annual sales under the
License Agreement.
Pursuant to the Managing Agent Agreement, MNZ will act as the Company's
agent in the finding of other licensees of the Company's patents and trademark
in the following countries: Australia (including Australia and New Zealand), the
South Pacific Islands and South East Asia (including the Philippines, Indonesia
and Vietnam). Licensing fees obtained as a result of the Managing Agent
Agreement shall be divided between the Company and MNZ on a sliding scale as set
forth below:
The Company MNZ
----------- ---
Initial license 50% 50%
Subsequent license
fees up to $500,000 50% 50%
Subsequent license
fees between $500,000
and $750,000 75% 25%
Subsequent license
fees in excess of
$750,000 85% 15%
MNZ and the Company will also divide any net royalties paid to the Company
pursuant to any license obtained pursuant to the Managing Agent Agreement, with
MNZ being paid 10% of the net royalties and the Company receiving 90% of the net
royalties.
The Managing Agent Agreement shall expire on the termination or
expiration of the last of the licenses obtained pursuant thereto, subject to
earlier termination by the Company upon an occurrence of certain events.
12
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No licensing fees have been earned pursuant to either of the Licensing
Agreement or the Managing Agent Agreement as of the date of these materials.
INCREASING THE TIME THAT NOTICE OF AN ANNUAL OR SPECIAL MEETING OF
SHAREHOLDERS MAY BE GIVEN TO 60 DAYS PRIOR TO THE DATE OF SUCH
MEETING.
The Board of Directors has unanimously approved an amendment to the
Company's By-Laws to provide that the notice of the Company's annual meeting may
be provided to shareholders up to 60 days prior to the date of such annual
meeting. The Board of Directors recommends adoption of the resolution set forth
below.
"Resolved, that the first sentence of Section 4 of Article II
of the By-Laws of the Company be amended to read as follows:
Written or printed notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose
or purposes for which the meeting is called, shall be
delivered not less than ten (10) days nor more than sixty
(60) days before the date of the meeting; either personally
or by mail, by or at the direction of the president, or the
secretary, or the officer or persons calling the meting, and
each stockholder of record entered to vote at such meeting."
The Board of Directors recommends a vote for the resolution. A
majority vote of the shares of the Company is required to approve this
resolution.
The By-Laws currently provide for a maximum of 30 days' notice. The
Company currently has approximately 3,800 shareholders of record, many of whom
are streetname holders. Accordingly, the actual number of beneficial owners of
the Company's shares is greatly in excess of the number of shareholders of
record and the Company is required to engage in a massive second mailing in
order to ensure that the beneficial owners of the Company's shares receive
timely notice of a shareholders' meeting. The Company has experienced great
difficulties in complying with the short time frame currently set forth in its
By-Laws. The Board believes that lengthening the time allocated in which to
provide timely notice to shareholders to 60 days, as allowed under Nevada law
(the Company's state of incorporation), will allow the Company to effect
delivery of notices of shareholder meetings in a more orderly fashion.
13
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS AND
LIMITATION OF DIRECTOR LIABILITY
Introduction
- ------------
The Board recommends that the Company's shareholders authorize the
Board to take within described action which is designed to assure the directors
of the Company that their exposure to claims for monetary damages for their
services as directors is reduced to the maximum extent permitted by law and to
assure the officers and directors of the Company that they will be indemnified
by the Company from personal liability if they become defendants in a civil or
criminal proceeding involving actions taken in their capacities as officers or
directors of the Company The Board's action is in response to (i) the increasing
hazard of unfounded litigation against officers and directors and its related
expense; (ii) the current limits on the Company's directors and officers
liability insurance; (iii) the potentially dramatic increase in premiums
required to increase such insurance coverage, if available; and (iv) the
difficulty in attracting and retaining qualified officers and directors in light
of these circumstances. The Board recommends the (i) authorization of an
amendment to the Company's Articles of Incorporation (the "Articles") to
eliminate the personal liability of directors of the Company in certain
circumstances; (ii) an amendment of the Company's Bylaws to permit the Company
to enter into indemnification agreements with its officers and directors; and
(iii) authorization of indemnification agreements between the Company and each
of its current officers and directors and approval of a form of indemnification
agreement which may be entered into between the Company and future officers and
directors of the Company when and as the Board deems appropriate.
The Board is recommending below that the Company's shareholders (i)
approve the amendment to the Articles eliminating personal liability of
directors in certain circumstances; (ii) approve the amendment to the By-laws
authorizing indemnification agreements; and (iii) authorize the Company to enter
into indemnification agreements with its present officers and directors and with
future officers and directors as and when the Board deems appropriate.
The amendments to the Articles and to the By-laws and the
indemnification agreements do not limit an officer's or director's liability for
violations of federal securities laws. The indemnification agreement provides
that indemnification will not be available if it would be a violation of law or
public policy. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to officers and
directors pursuant to the indemnification agreements, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by an officer or director in the successful defense of any
action, suit or proceeding) is asserted by such officer or director, the Company
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it
14
<PAGE>
is against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
Existing Protection for Officers and Directors
Under Nevada law, a director of a corporation owes a duty to the
corporation to serve in good faith and with that degree of care which an
ordinarily prudent person in a like position would use under similar
circumstances. The breach by a director of a duty owed to a corporation could
result, among other things, in monetary liability of such director to the
corporation or its shareholders. Nevada law permits a corporation to indemnify a
director against such monetary liability in certain circumstances.
The proposed amendment to the Bylaws provides that the Company shall
indemnify any and all persons whom it shall have power to indemnify to the
fullest extent permitted under the Nevada General Corporation Law (the "NGCL").
Section 78.751 of the NGCL permits broad indemnification of officers
and directors as well as employees and agents. The NGCL provides that an
officer, director, employee or agent:
(i) must be indemnified for all expenses of litigation where such
person is successful on the merits;
(ii) may be indemnified for reasonable expenses, judgments, fines and
amounts paid in settlement of a third party claim (other than a
derivative suit), even if he is not successful on the merits, if he
acted in good faith and for a purpose which he reasonably believed to
be in or in the case of service to a related entity not opposed to the
best interests of the corporation (and, in the case of a criminal
proceeding, had no reason to believe his conduct was unlawful);
(iii) may be indemnified for reasonable expenses and amounts paid in
defense or settlement of a derivative suit, even if he is not
successful on the merits, if he acted in good faith and for a purpose
which he reasonably believed to be in or in the case of service to a
related entity not opposed to the best interests of the corporation,
except that when (a) he has been adjudged liable to the corporation in
such suit or (b) any threatened or pending action against him has been
settled or otherwise disposed of, then he may be indemnified only if a
court determines that he is fairly and reasonably entitled to
indemnification in view of all the circumstances; and
(iv) may be advanced expenses of litigation (including attorneys'
fees) upon agreeing to repay such expenses if it is ultimately
determined that he is not entitled to be indemnified.
15
<PAGE>
The indemnification described in clauses (ii) and (iii) above, unless
ordered by a court, is to be provided only as authorized in the specific case
upon a determination made by (a) a majority of a quorum of the entire Board
consisting of disinterested directors, (b) by the Board based upon the opinion
of independent legal counsel, if such quorum is not obtainable or such a quorum
so directs, or (c) the shareholders, that the applicable standard of conduct
prescribed by statute, as set forth in clauses (ii) and (iii) above, has been
met. The advances described in Clause (iv) above, require the determinations set
forth in (a), (b) and/or (c) above.
The indemnification provided by or granted pursuant to the NGCL is not
exclusive of any other rights to indemnification and advancement of expenses
which an officer or director may have under a corporation's articles of
incorporation or by-laws, or if authorized by such articles of incorporation or
by-laws, under an agreement, a shareholders' resolution or directors'
resolution. The extent to which such non-exclusivity permits a corporation to
indemnify its officers and directors beyond the limits of the indemnification
specifically authorized by the NGCL has not been fully adjudicated, but the
Board believes that some further indemnification is permissible and desirable.
The Board believes that the current indemnification provisions under
Nevada law have two major limitations: (i) a corporation is under no obligation
to advance litigation expenses to an officer or director and, (ii) except in the
case of litigation in which an officer or director is successful on the merits,
indemnification or judgments, fines, amounts paid in settlement and reasonable
expenses of an officer or director who has acted in good faith and in a manner
he reasonably believed to be in the best interest of the corporation (and, in
the case of a derivative suit, who has also received court approval) is
discretionary rather than mandatory. In some cases the decision of whether a
corporation should advance expenses or provide indemnification rests with a
board of directors which may be hostile to the party seeking indemnification,
particularly if there has been a change in control of such corporation. Thus,
there is substantial uncertainty as to the degree of protection that a
corporation will provide. The above-mentioned limitations leave an officer or
director open to risks of no protection in many situations, including, for
example, settlement of a derivative suit in order to avoid protracted
litigation.
Many corporations, including the Company, rely on directors' and
officers' liability insurance as a means of providing indemnification to their
officers and directors. However, insurance is not a totally efficient means of
providing indemnification because it provides many exclusions from coverage and,
in the Company's case, a substantial deductible (i.e., $100,000).
Indemnification for claims and expenses, where permitted, would, in excess of
the limits, of such insurance, be paid from Company funds, thus putting the
Company's assets and equity at risk and affecting a shareholder's investment in
the Company. The form of indemnification agreement to be entered into by the
Company is attached to these materials as Exhibit A.
16
<PAGE>
Officers and directors of publicly-held companies are refusing to
serve without the protections traditionally available to them from personal
liability for claims arising out of their services and entrepreneurial
decision-making. This situation, which has received substantial attention in
newspapers and magazines, hampers the ability of companies to attract and retain
qualified persons as officers and directors, which threatens the quality and
stability of corporate governance. This situation is particularly applicable to
a development stage company like the Company.
The NGCL permits corporations to eliminate the personal liability of
directors to the corporation or its shareholders for damages for any breach of
duty in such capacity except for acts or omissions which involve intentional
misconduct, fraud or knowing violations of law or the payment of an illegal
distribution to shareholders.
Many corporations are examining alternative approaches to
indemnification through charter and by-law provisions and the entry into
separate agreements with officers and directors which address the limitations of
the statutory scheme. The program which the Board has recommended to meet the
problem is set forth below:
The Board of Directors has unanimously approved an amendment to the
Company's Articles of Incorporation and recommends the adoption of the
resolution set forth below:
"Resolved, that the Articles of Incorporation of the Company be
amended by adding the following as Article XII thereof:
Article XII Indemnification
The personal liability of the directors of the Corporation
to the Corporation or its stockholders for damages for any
breach of fiduciary duty as director is hereby eliminated to
the fullest extent permitted by the Nevada General
Corporation Law, as the same may be amended or
supplemented."
The Board of Directors has unanimously approved an amendment to the
Corporation's By-Laws and recommends adoption of the resolution set forth below:
"Resolved, that the By-Law of the Company be amended to add
Article XII to read as follows:
Article XII Indemnification
The Corporation shall, to the fullest extent permitted
by the Nevada General Corporation law, as amended or
supplemented, indemnify any and all persons whom it shall
have power to
17
<PAGE>
indemnify under said law from and against any and all of the
expenses, liabilities or other matters referred to in or
covered by said law.
The Corporation may enter into indemnification
agreements with any officers, directors or other persons
whom it shall have power to indemnify, when and as
determined by the Board of Directors."
The vote of a majority of the shares of the Corporation's issued and
outstanding common stock is required to pass each of the foregoing resolutions.
Without protection from the growing risk of unfounded litigation
against officers and directors, individuals may be unwilling to serve or
continue to serve the Company in either capacity. The Board believes that the
proposals it is presenting for shareholder approval with respect to limiting the
personal liability of directors and entering into indemnity agreements will
serve the best interests of the Company and its shareholders by strengthening
the Company's ability to attract and retain the services of knowledgeable and
experienced persons to serve as officers and directors who, through their
efforts and expertise, can make significant contributions to the success of the
Company. Moreover, as a matter of fairness, the Board believes that the Company
should provide the maximum possible protection to its officers and directors.
No present director of the Company or nominee has indicated that he
will not serve if the proposals are not approved. The Board has not determined
what action the Company would take if these proposals are not adopted. It is
important to note that it can be said that officers and directors have a
personal interest in the proposals which is in conflict with the interests of
the other shareholders of the Company who may assert claims in the future.
Shareholders should recognize that the principal effect of the proposed
amendment of the Articles of Incorporation to the liability of directors will be
that shareholders may not in the future pursue a cause of action for monetary
damages against a director for certain breaches of such director's fiduciary
duties to the Company. The adoption of the proposed amendment to the Articles of
Incorporation reduce the likelihood of derivative litigation against directors
and may discourage or deter shareholders or management from bringing a lawsuit
against directors for breach of their duty even though such action, if
successful, might otherwise have benefitted the Company and its shareholders.
Shareholders should also recognize that the Board's decision to have the Company
enter into indemnification agreements with each officer and director may be
adverse to the interests of the shareholders inasmuch as the shareholders may
prefer that the Company have the flexibility to decide in each instance whether
indemnification should be provided. As described above, however, failure of the
Company to provide assurance to directors that they will be indemnified to the
fullest extent permitted by law may result in directors of the Company refusing
to continue in that capacity and may inhibit the Company's ability to attract
qualified persons to serve as directors.
18
<PAGE>
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Andersen Andersen & Strong, L.C. have been the principal accountants
of the Company during 1995 and have been selected as the Company's principal
accountants for the current calendar year. Representatives of Andersen Andersen
& Strong, L.C. are not expected to be present at the Annual Meeting.
If, prior to the next annual meeting of stockholders, such firm shall
decline to act or otherwise becomes incapable of acting, or if its engagement
shall be otherwise discontinued by the Board of Directors, the Board of
Directors will appoint other independent auditors whose appointment for any
period subsequent to the next annual meeting will be subject to stockholder
approval at such meeting.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the next
meeting of stockholders which the stockholder desires to be presented in the
Company's Proxy Statement with respect to such meeting should submit such
proposal to the Company at its principal place of business no later than April
30, 1997.
OTHER MATTERS
The Board of Directors did not know, within a reasonable time before
the commencement of this solicitation, of any other business to be presented at
the Annual Meeting, constituting a proper subject for action by the
stockholders, other than as set forth in this Proxy Statement. However, if any
such matter should properly come before the meeting, the persons named in the
enclosed proxy intend to vote such proxy in accordance with their best judgment.
The proxies named in the enclosed form of proxy and their substitutes,
if any, will vote the shares represented by the enclosed form of proxy, if the
proxy appears to be valid on its face and, where a choice is specified on the
form of proxy, the shares will be voted in accordance with each specification so
made.
A list of stockholders of record of the Company as of May 28, 1996
will be available for inspection by stockholders prior to the Annual Meeting
during normal business hours at the offices of the Company at 123 East 54th
Street, Suite 7B, New York, New York 10022, and at the Annual Meeting.
In addition to soliciting proxies by mail, the Company may make
requests for proxies by telephone, telegraph or messenger or by personal
solicitation by officers, directors, or employees of the Company, or by any one
or more of the foregoing means. The Company
19
<PAGE>
will also reimburse brokerage firms and other nominees for their actual
out-of-pocket expenses in forwarding proxy material to beneficial owners of the
Company's shares. All expenses in connection with such solicitation are to be
paid by the Company.
THE COMPANY'S 1995 FORM 10-K ANNUAL REPORT TO THE SECURITIES AND
EXCHANGE COMMISSION, EXCLUSIVE OF EXHIBITS, WILL BE MAILED WITHOUT CHARGE TO ANY
STOCKHOLDER ENTITLED TO VOTE AT THE MEETING, UPON WRITTEN REQUEST TO: MEDIZONE
INTERNATIONAL, INC., 123 EAST 54TH STREET, SUITE 7B, NEW YORK, NEW YORK 10022,
ATTENTION: SECRETARY.
By Order of the Board of Directors
Joseph S. Latino, Ph.D.
Director
Dated: June 10, 1996
20
<PAGE>
EXHIBIT A
FORM OF INDEMNITY AGREEMENT
MEDIZONE INTERNATIONAL INC.
123 East 54th Street, Suite 7B
New York, New York 10022
, 199
----------------
[NAME AND ADDRESS OF OFFICE OR DIRECTOR]
Dear :
-------------------
In consideration of your continued service as an officer or director
of Medizone International, Inc. (the "Company"), the Company will, to the extent
provided herein, indemnify you and hold you harmless from and against any and
all "Losses" (as defined below) which you may incur by reason of your election
or service as an officer, director, employee, agent, fiduciary or representative
of the Company or any "Related Entity" (as defined below) to the fullest extent
permitted by law.
1. (a) "Losses" mean all liabilities, "Costs and Expenses" (as defined
below), amounts of judgments, fines or penalties and amounts paid in settlement
of or incurred in defense of any settlement in connection with any threatened,
pending or completed claim, action, suit or proceeding whether civil, criminal,
administrative or investigative, and whether brought by or in the right of the
Company or otherwise, and appeals in which you may become involved, as a party
or otherwise, by reason of acts or omissions in your capacity as and while
serving as an officer, director, employee, agent, fiduciary or representative of
the Company or any Related Entity.
(b) A "Related Entity" means any corporation, partnership, joint
venture, trust or other entity or enterprise in which the Company is in any way
interested, or in or as to which you are serving at the Company's request or on
its behalf, as an officer, director, employee, agent, fiduciary or
representative including, but not limited to, any employee benefit plan or any
corporation of which the Company or any Related Entity is, directly or
indirectly, a stockholder or creditor.
(c) "Costs and Expenses" means all reasonable costs and expenses
incurred by you in investigating, defending or appealing any threatened, pending
or completed claim, action, suit or proceeding including, without limitation,
counsel fees and disbursements.
A-1
<PAGE>
2. Costs and Expenses will be paid promptly by the Company, as they
are incurred or, at your request, advanced on your behalf against delivery of
invoices therefor (prior to an ultimate determination as to whether you are
entitled to be indemnified by the Company on account thereof); provided,
however, that if it shall ultimately be determined by final decision of a court
of competent jurisdiction that you are not entitled to be indemnified on account
of any Costs or Expenses for which you are theretofore received payment or
reimbursement, you shall promptly repay such amount to the company.
3. The Company shall indemnify you and hold you harmless from and
against any and all Losses which you may incur if you are a party to or
threatened to be made a party to or otherwise involved in any proceeding or
action (other than a proceeding or action by or in the right of the Company to
procure a judgment in its favor), unless it is determined that you did not act
in good faith and for a purpose reasonably believed by you to be in, or, in the
case of service to a Related Entity, not opposed to, the best interest of the
Company and, in the case of a criminal proceeding or action, in addition, that
you had reasonable cause to believe that you conduct was unlawful.
4. The Company shall indemnify you and hold you harmless from and
against any and all Losses which you may incur if you are a party to or
threatened to be made a party to any proceeding or action by or in the right of
the Company to procure a judgment in its favor, unless it is determined that you
did not act in good faith and for a purpose reasonably believed by you to be in,
or, in the case of service to a Related Entity, not opposed to, the best
interest of the Company, except that no indemnification for Losses shall be made
this Paragraph 4 in respect of (a) any claim, issue or matter as to which you
shall have been adjudged to be liable to the Company or (b) any threatened or
pending action to which you are a party or are threatened to be made a party
which is settled or otherwise disposed of, unless and only to the extent that
any court in which such action or proceeding was brought, or, if no such action
was brought, any court of competent jurisdiction, shall determine upon
application that, in view of all the circumstances of the matter, you are fairly
and reasonably entitled to indemnity for such expenses as such court shall deem
proper.
5. Anything hereinabove to the contrary notwithstanding, "Losses"
shall not include, and you shall not be entitled to indemnification under this
agreement for (i) amounts payable by you to the Company or any Related Entity in
satisfaction of any judgment or settlement in the Company's or such Related
Entity's favor (except amounts for which you shall be entitled to
indemnification pursuant to Paragraph 4), (ii) any amount payable on account of
profits realized by you in purchase or sale of securities of the Company or any
Related Entity in violation of an provision of Federal or State Securities laws,
(iii) Losses in connection with which you are not entitled to indemnification as
a matter of law of public policy; or (iv) Losses to the extent you are
indemnified by the Company otherwise than pursuant to this agreement, including
any Losses for which payment is made to you under an insurance policy.
A-2
<PAGE>
6. Termination of any action, suit or proceeding by judgment, order,
settlement or conviction or upon a plea of nolo contendere or its equivalent
will not, of itself, create any presumption that you did not act in good faith
and in a manner which you reasonably believed to be in or not opposed to the
best interest of the Company or a Related Entity and, with respect to any
criminal action or proceeding, had reasonable cause to believe that your conduct
was unlawful.
7. The determination on behalf of the Company that you are not
entitled to be indemnified for Losses hereunder by reason of the provisions of
Paragraphs 3 or 4 or clause (iii) of Paragraph 5 may be made either (a) by the
Company's Board of Directors by majority vote of a quorum of the entire Board of
Directors, which quorum shall consist of directors who are not parties to or the
subject of the same or any similar claim, action, suit or proceeding or, (b) if
such a quorum is not obtainable or, even if obtainable, if a quorum of
disinterested directors so directs, by the Company's Board of Directors based
upon the opinion in writing of independent legal counsel ( who may be the
outside counsel regularly employed by the Company), as the Company's Board of
Directors shall determine. Notwithstanding such determination, the right to
indemnification or advances of Costs and Expenses as provided in this agreement
shall be enforceable by you in any court of competent jurisdiction. The burden
of proving that indemnification is not appropriate shall be on the Company.
Neither the failure of the Company (including its Board of Directors or
independent legal counsel) that you have not met such applicable standard of
conduct shall be a defense to the action or create a presumption that you have
not met the applicable standard of conduct. Costs and expenses, including
counsel fees, reasonably incurred by you in connection with successfully
establishing your right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Company.
8. You agree to give prompt notice to the Company of any claim with
respect to which you seek indemnification and, unless a conflict of interest
shall exist between you and the Company with respect to such claim, you will
permit the Company to assume the defense of such claim with counsel of its
choice. Whether or not such defense is assumed by the Company will be the
Company's choice. Whether or not such defense is assumed by the Company, the
Company will not be subject to any liability for any settlement made without its
consent. The Company will not consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to you of a release from all liability with respect to
such claim or litigation. If the Company is not entitled to, or does not elect
to, assume the defense of a claim, the Company will not be obligated to pay the
fees and expenses of more than one counsel for you and any other directors or
officers of the Company who are indemnified pursuant to similar indemnity
agreements with respect to such claim, unless a conflict of interest shall exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the Company will be obligated to pay the
fees and expenses of an additional counsel for each indemnified party or group
of indemnified parties with whom a conflict of interest exists.
A-3
<PAGE>
9. The Company's obligation to indemnify you under this agreement is
in addition to any other rights to which you may otherwise be entitled by
operation of law, vote of the Company's shareholders or directors or otherwise
and will be available to you whether or not the claim asserted against you is
based upon matters which occurred before the date of this agreement.
10. The obligation of the Company to indemnify you with respect to
Losses which you may incur by reason of your service as an officer, director,
employee, agent, fiduciary or representative of the Company or a Related Entity,
as provided under this agreement, shall survive the termination of your service
in such capacities and shall inure to the benefit of your heirs, executors and
administrators.
11. The Company agrees that, so long as you shall serve as an officer,
director, employee, agent, fiduciary or representative of the Company or any
Related Entity and thereafter so long as you shall be subject to any possible
claim or threatened, pending or completed action or proceeding by reason of your
service as an officer, director, employee, agent, fiduciary or representative of
the Company or any Related Entity, the Company shall purchase and maintain in
effect for your benefit valid, binding and enforceable policies of directors and
officers liability insurance ("D & O Insurance"), covering Losses; provided,
however, that the Company shall not be required to maintain D & O Insurance in
effect if such insurance is not reasonably available or, if reasonably
available, in the reasonable business judgment of the directors of the Company,
either (i) the premium cost for such insurance is substantially disproportionate
to the amount of coverage or (ii) the coverage provided by such insurance is so
limited by exclusions that there is insufficient benefit from such insurance.
12. If you are entitled under this agreement or otherwise to
indemnification by the Company for some or a portion of the Losses actually and
reasonably incurred by you but not, however, for the total amount thereof, the
Company shall nevertheless indemnify you for the portion of the Losses to which
you are entitled.
13. It is the intention of the parties to this agreement to provide
for indemnification in all cases and under all circumstances where to do so
would not violate applicable law (and notwithstanding any limitations permitted,
but not required by statute) and the terms and provisions of this agreement
shall be interpreted or any indemnification made under this agreement shall for
any reason be determined by any court of competent jurisdiction to be invalid,
unlawful or unenforceable under current or future laws, such provision shall be
fully severable and, the remaining provisions of this agreement shall not
otherwise be affected thereby, but will remain in full force and effect and, to
the fullest extent possible, shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal unenforceable.
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14. This agreement shall be governed by and interpreted and construed
in accordance with the laws of the State of New York applicable to contracts
executed and to be performed entirely within that State.
15. No amendment, modification, termination or cancellation of this
agreement shall be effective unless in writing signed by both the Company and
you.
Your signature below will evidence your agreement and acceptance with
respect to the foregoing.
Very truly yours
MEDIZONE INTERNATIONAL, INC.
BY:
AGREED TO AND ACCEPTED:
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