<PAGE> 1
Conformed Copy
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30,
1995, or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ or ____
Commission file number 0-13865
ICC TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2368845
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
441 North 5th Street, Suite 102
Philadelphia, Pennsylvania 19123
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 625-0700
--------------
Former name, former address and former fiscal year if
changed since last report: not applicable
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods 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
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, par value $.01 per share
--------------------------------------
14,677,542 shares outstanding as of October 25, 1995.
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<PAGE> 2
INDEX TO FORM 10-Q REPORT
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at September 30, 1995 3
and December 31, 1994
Consolidated Statements of Operations for the three and nine
months ended September 30, 1995 and 1994 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 11
PART II OTHER INFORMATION
Item 1. Legal proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
2
<PAGE> 3
ICC TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- --------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,855,335 $ 1,114,335
Receivables -
Employees 28,667 28,667
Engelhard/ICC 157,543 124,095
Inventories, net 2,000 16,960
Prepaid expenses and other 187,284 65,210
------------ ------------
Total current assets 4,230,829 1,349,267
RESTRICTED BANK CERTIFICATE OF DEPOSIT 2,500,000 0
INVESTMENTS IN ENGELHARD/ICC 0 1,048,255
PROPERTY AND EQUIPMENT, net 3,944 0
OTHER ASSETS 3,414 0
------------ ------------
Total assets $ 6,738,187 $ 2,397,522
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -
Trade $ 15,059 $ 93,838
Current portion of notes payable to stockholders 150,000 0
Accrued liabilities 165,058 182,944
------------ ------------
Total current liabilities 330,117 276,782
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LOSSES OF ENGELHARD/ICC IN EXCESS OF INVESTMENTS 2,904,804 0
------------ ------------
NOTES PAYABLE TO STOCKHOLDERS 0 150,000
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -
Series F, authorized, issued and outstanding 135 shares
at September 30, 1995, and 6,885 shares at December 31,
1994 (liquidation value $241,764 at September 30, 1995
and $11,632,063 at December 31, 1994 1 69
Series G Convertible, authorized and issued 400 shares;
350 shares outstanding (liquidation value $626,797
at September 30, 1995 and $591,318 at
December 31, 1994) 4 4
Series H Convertible, authorized, issued
and outstanding 1,500 shares at September 30, 1995 and
December 31, 1994 15 15
Series I, authorized, issued and outstanding 500 shares
at September 30, 1995 and December 31, 1994 5 5
Series J, authorized, issued and outstanding 225 shares
at September 30, 1995 and December 31, 1994 2 2
Common stock, $.01 par value, authorized 50,000,000 shares,
issued 14,592,540 shares at September 30, 1995 and
12,288,632 shares at December 31, 1994 145,925 122,887
Additional paid-in capital 34,907,976 29,241,534
Accumulated deficit (31,379,232) (27,222,346)
Less: Treasury common stock, at cost, 66,227 shares (171,430) (171,430)
------------ ------------
Total stockholders' equity 3,503,266 1,970,740
------------ ------------
Total liabilities and stockholders' equity $ 6,738,187 $ 2,397,522
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
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ICC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
-------------------------------- ----------------------------------
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
--------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
REVENUES 0 $ 0 $ 6,500 $ 88,360
COST OF GOODS SOLD 0 0 5,961 80,335
Gross Profit 0 0 539 8,025
OPERATING EXPENSES:
Marketing 0 0 0 155,283
Engineering and development 0 0 0 150,523
General and administrative 343,283 446,266 1,026,768 933,435
Total operating costs 343,283 446,266 1,026,768 1,239,241
Loss from operations (343,283) (446,266) (1,026,229) (1,231,216)
INTEREST:
Interest income 72,251 54,207 275,312 71,447
Interest expense on stockholders'
loans (4,031) (2,750) (12,219) (10,736)
68,220 51,457 263,093 60,711
EQUITY INTEREST IN NET LOSS OF
ENGELHARD/ICC (1,320,262) 0 (3,393,750) 0
NET LOSS $(1,595,325) (394,809) $(4,156,886) $(1,170,505)
PREFERRED STOCK
DIVIDEND REQUIREMENTS (84,446) (45,125) (215,339) (175,875)
NET LOSS APPLICABLE TO COMMON
STOCKHOLDERS $(1,679,771) $ (439,934) $ (4,372,225) $ (1,346,380)
NET LOSS PER COMMON SHARE $ (0.12) $ (0.04) $ (0.34) $ (0.12)
WEIGHTED AVERAGE COMMON SHARES 13,785,330 12,083,108 12,955,334 11,081,990
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 5
ICC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------
1995 1994
----------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(4,156,886) $(1,170,505)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 826 49,181
Equity interest in net loss of
Engelhard/ICC 3,393,750 0
Warrants issued for services rendered 25,000
Increase in bad debt and inventory reserve 9,000 111,112
(Increase) decrease in:
Receivables (33,448) 45,035
Inventories 5,960 (67,664)
Prepaid expenses and other (97,074) (20,341)
Increase (decrease) in:
Accounts payable (78,779) (21,361)
Accrued expenses 41,423 (62,825)
----------- -----------
Net cash used in operating activities (890,228) (1,137,368)
----------- -----------
Cash Flows from Investing Activities:
Capital contribution to Engelhard\ICC (1,000,000) 0
Repayments of loans from Engelhard\ICC 1,500,000 0
Purchase of restricted certificate of
deposit (2,500,000) 0
Purchases of property and equipment, net (8,184) (9,300)
----------- -----------
Net cash used in investing activities (2,008,184) (9,300)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock
and warrants, net 5,639,412 5,062,303
Repayments of borrowings from stockholders 0 (185,272)
Borrowings from Engelhard Corporation 0 400,000
----------- -----------
Net cash provided by financing
activities 5,639,412 5,277,031
----------- -----------
Net increase in cash and cash equivalents 2,741,000 4,130,363
Cash and Cash Equivalents, Beginning of Period 1,114,335 1,142,674
----------- -----------
Cash and Cash Equivalents, End of Period $ 3,855,335 $ 5,273,037
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
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<PAGE> 6
ICC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been reflected herein. For further information, refer to the
financial statements and footnotes thereto for the year ended
December 31, 1994 included in the Company's Annual Report on Form
10-K for the year then ended. Results of operations for the nine
months ended September 30, 1995 are not necessarily indicative of
results of operations expected for the full year.
(2) BUSINESS AND GOING CONCERN CONSIDERATIONS
Business
ICC Technologies, Inc. ("ICC" or the "Company") is a Delaware
Corporation. On February 7, 1994, pursuant to the terms and
conditions of a Joint Venture Asset Transfer Agreement ("Transfer
Agreement"), by and among ICC, its newly formed wholly-owned
subsidiary, ICC Desiccant Technologies, Inc. ("I Partner"), and
Engelhard Corporation ("Engelhard") and its newly formed wholly-owned
subsidiary, Engelhard DT, Inc. ("E Partner"), ICC and Engelhard,
through their respective subsidiaries, formed a Pennsylvania general
partnership named "Engelhard/ICC" (the "Partnership"). In exchange
for a 50% interest in the Partnership, ICC transferred to the
Partnership through its wholly-owned subsidiary, I Partner,
substantially all of its assets, with the exception of cash and
certain other assets not related to the desiccant air conditioning
business, subject to certain liabilities, and Engelhard, in exchange
for a 50% interest in the Partnership, (a) contributed to the
Partnership through its wholly-owned subsidiary, E Partner,
approximately $8,600,000 in cash, (b) entered into a Supply Agreement
pursuant to which it agreed to supply desiccants to the Partnership,
(c) entered into a Technology License Agreement pursuant to which
Engelhard and the Partnership licensed to each other certain
technology rights, and (d) agreed to provide credit support to the
Partnership in the amount of $3,000,000.
The Partnership was formed to engage in the business of designing,
manufacturing and selling desiccant wheel components and desiccant
air conditioners for the dehumidification cooling markets, industrial
drying/dehumidification market and the air conditioning and microbe
reduction market for health care facilities ("Partnership Business"),
and succeed to the desiccant air conditioning business conducted by
ICC prior to the formation of the Partnership and the activities of
ICC and Engelhard under the Joint Development Agreement dated May 26,
1992. As a result of the consummation of the Transfer Agreement,
ICC has become principally a holding company, owning a 50% interest
in the Partnership through ICC's wholly-owned subsidiary, I Partner,
which is a co-general partner of the Partnership. Although ICC is
not permitted to engage directly or indirectly in any activities that
would conflict with the Partnership Business as long as the
Partnership is in effect, ICC is not precluded from engaging in other
activities.
6
<PAGE> 7
(2) BUSINESS AND GOING CONCERN CONSIDERATIONS, Continued
Prior to consummation of the Transfer Agreement, ICC was engaged in
the business of designing, manufacturing and marketing
environmentally beneficial and energy efficient, desiccant cooling
systems for climate control for commercial buildings. The Partnership
has and the Company expects the Partnership to continue to conduct
such business and to market its products to such potential users.
Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
Revenues and the Company's share of results of operations of
Engelhard/ICC have been insufficient to cover costs of operations for
the nine months ended September 30, 1995. The Company has incurred
cumulative losses since inception of $31,379,232 through September
30, 1995. In order to continue operations, the Company has had to
raise additional capital to offset cash consumed in operations and
support of the Partnership. Until the Partnership generates positive
cash flows from operations, it will be primarily dependent upon the
partners to provide any required working capital. The Company's
continuation as a going concern is dependent on its ability to: (i)
generate sufficient cash flows to meet its obligations on a timely
basis, (ii) obtain additional financing as may be required, and (iii)
ultimately attain profitable operations and positive cash flows from
operations and its investment in the Partnership. The accompanying
financial statements do not include any adjustments that may result
from the Company's inability to continue as a going concern.
Management intends to raise additional capital as required to
continue operations and to support the Partnership; however, there
can be no assurance that the Company will be able to raise
additional capital. See Note 4 Stock Transactions.
7
<PAGE> 8
(3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP
The following are the summarized unaudited financial results of the
Partnership:
<TABLE>
<CAPTION>
Quarter ended Quarter ended Nine months ended Period February
September 30, 1995 September 30, 1994 September 30, 1995 7 to September
30, 1994
------------------ ------------------ ------------------ ---------------
<S> <C> <C> <C> <C>
RESULTS OF OPERATIONS:
Revenues $ 2,009,538 $ 379,912 $ 7,171,504 $ 997,156
Cost of goods sold 2,283,118 328,282 7,175,429 876,872
--------- ------- --------- -------
Gross profit(loss) (273,580) 51,630 (3,925) 120,284
Operating expenses:
Marketing 862,851 659,882 2,524,468 1,373,024
Engineering 280,470 290,897 694,747 750,357
Research and development 257,556 231,904 898,135 540,999
General and administrative 847,423 466,093 2,084,030 1,000,461
------- ------- --------- ---------
Loss from operations (2,521,880) (1,597,146) (6,205,305) (3,544,557)
Interest expense(income) 118,643 (24,947) 582,194 (102,093)
------- -------- ------- ---------
Net loss $(2,640,523) $ (1,572,199) $(6,787,499) $ (3,442,464)
============ ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET INFORMATION: September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Cash $ 40,998 $ 648,451
Receivables 1,497,441 663,551
Inventory 4,358,148 2,439,509
Other current assets 47,181 75,836
Cash held in escrow 1,060,865 0
Property, plant and equipment 7,988,625 7,946,511
Other noncurrent assets 1,792,549 1,612,497
--------- ---------
Total Assets $16,785,807 $13,386,355
=========== ===========
Current liabilities $ 1,628,157 $ 1,730,732
Short term loan 2,750,000 0
Long term debt 8,714,570 175,044
Notes payable to general partners 0 8,000,000
Partners' capital 3,693,080 3,480,579
--------- ---------
Total Liabilities and capital $16,785,807 $13,386,355
=========== ===========
</TABLE>
The Company's investment in the Partnership is owned by a wholly-owned
subsidiary, ICC Desiccant Technologies, Inc., whose principal asset is
the Partnership investment. The investment in the Partnership is
accounted for under the equity method of accounting. On February 7,
1994, date of formation, the Company's investment in the Partnership
was approximately $0. The investment remained at $0 through September
30, 1994 because the Company had no obligation to provide additional
financial support to the Partnership. In December 1994, each general
partner provided additional financing in the amount of $4,000,000 to
the Partnership ("General Partners' Bridge Loan") in connection with
the acquisition of the real property and substantially all other
assets of an existing manufacturing facility located in Miami,
Florida. The General Partners' Bridge Loan resulted in the Company
increasing its investment in the Partnership as well as recording
its proportionate share of previously unrecognized accumulated losses
at that time. In May 1995, $1,500,000 of the aforementioned bridge
loan was repaid to each general partner. The remaining amount,
$2,500,000, for each general partner, was converted into an investment
in the Partnership.
8
<PAGE> 9
(3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP, Continued
In April 1995, the Partnership obtained financing from the issuance of
$8,500,000 of industrial development revenue bonds. The proceeds of
these bonds were used to repay $3,000,000 of the General Partners'
Bridge Loan, $1,500,000 to each general partner, and provide for
improvements and capital equipment at the Miami facility. As of
September 30, 1995, $1,060,865 of proceeds were held in escrow and
will be released upon the Partnership's incurring of qualified
expenditures.
In May 1995, the Company guaranteed 50% of the Partnership's
indebtedness associated with the industrial development revenue bonds.
The Company has established an irrevocable letter of credit for
$2,500,000 to support its portion of the guarantee. The Company's
letter of credit is collateralized by a certificate of deposit in the
amount of $2,500,000.
The general partners are guarantors of the Partnership's long-term
debt which totals approximately, $8,700,000 as of September 30, 1995.
Subsequent to September 30, 1995, each general partner contributed an
additional $1,000,000 to the Partnership.
The Company's proportionate share of losses in the Partnership are
$1,320,262 and $3,393,750 for the three and nine months ended
September 30, 1995. The Partnership has incurred cumulative losses of
approximately $12,400,000 since inception. The Company's share of the
cumulative losses have resulted in recognition of losses in excess of
the Company's investment and advances in the amount of $2,904,809.
This amount has been reflected as a liability in the September 30,
1995 balance sheet.
Receivables from the Partnership were $157,543 at September 30, 1995.
Interest income earned by the Company in connection with the
aforementioned General Partners' Bridge Loan amounted to approximately
$164,000 in 1995. The Partnership charged the Company approximately
$24,000 and $64,000 for the three and nine months ended September 30,
1995, respectively, in various administrative office support services
which were provided.
(4) STOCK TRANSACTIONS:
Equity Investments
On March 31, 1995, pursuant to a private placement, the Company issued
300,000 shares of Common Stock for gross proceeds of $3,300,000. At
closing, cash of $1,100,000 was received along with a $2,200,000
promissory note. In August 1995, the $2,200,000 owed on the
promissory note was collected. The Company granted warrants to
purchase 375,000 shares of Common Stock at $9 per share to the
placement agents in connection with the private placement.
The Company received proceeds of approximately $932,000 from the
exercise of stock options to purchase approximately 476,000 shares of
Common Stock granted under its option plans for the three month period
ended September 30, 1995. The Company received proceeds of
approximately $1,683,000 from the exercise of stock options to
purchase approximately 794,000 shares of Common Stock granted under
its option plans for the nine month period ended September 30, 1995.
The Company received proceeds of approximately $946,000 from the
exercise of warrants to purchase approximately 265,000 shares of
Common Stock for the nine month period ended September 30, 1995.
9
<PAGE> 10
(4) STOCK TRANSACTIONS, Continued:
Preferred Stock
The shares of Series G and H Convertible Preferred Stock may be
converted into Common Stock at the demand of the holder of such
shares. The conversion rates are 8170.56 shares of Common Stock for
each Series G share and 500 shares of Common Stock for each Series H
share.
In April 1995, the Series F and G Preferred Stock began to accrue a
cash dividend at a rate equal to 15% of the respective accrued
liquidation preference. Cumulative accrued undeclared and unpaid
dividends as of September 30, 1995 for Preferred Stock amounted to
approximately $908,000. In August 1995, the holders of 6,750 shares
of Series F Preferred Stock converted their shares into 925,000 shares
of Common Stock.
(5) NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, Accounting
for Stock-Based Compensation. SFAS No. 123 establishes a fair value
based method of accounting for stock-based compensation plans. It
encourages entities to adopt that method in place of the intrinsic
value method currently in place under the provisions of Opinion No. 25
of the Accounting Principles Board (APB). Under the fair value method
accounting, all arrangements under which employees receive shares of
stock or other equity instruments or under which employers incur
liabilities to employees in amounts based on the price of its stock
result in the measurement of compensation cost at the grant date of
the award which is recognized over the service period, usually the
vesting period. Under the intrinsic value method, compensation cost
is measured by the excess of the quoted market price of the stock, if
any, over the amount the employee must pay to acquire the stock. For
example, granting immediately exercisable stock options to an employee
at an exercise price equal to the quoted market price of the stock
results in the recognition of compensation expense at the date of
grant under the fair value method of SFAS No. 123; under the intrinsic
value method of APB No. 25, no compensation expense is recognized.
However, SFAS No. 123 allows the Company to elect to continue its
current method of accounting under APB No. 25 for employee
stock-based compensation arrangements. The Company expects to continue
its current method of accounting under APB No. 25 for employee
stock-based compensation arrangements. If the Company continues its
current method of accounting, pro forma disclosures of net income and
earnings per share must be disclosed, as if the Company had adopted
the recognition provisions of SFAS No. 123.
Although the Company is permitted to continue accounting for employee
stock-based compensation arrangements under APB No. 25, SFAS No. 123
requires the Company to utilize the fair value method of accounting
for transactions involving stock options or other equity instruments
issued to nonemployees as consideration for goods or services.
Presently, those transactions are accounted for by the Company under
the intrinsic value principles of APB No. 25.
The accounting and disclosure requirements of SFAS No. 123 are
effective for the Company in 1996. The Company has not yet determined
the impact of SFAS No. 123.
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
General Overview
Pursuant to the Transfer Agreement, on February 7, 1994, the Company
transferred, through its subsidiary, substantially all of its assets, subject
to certain liabilities, to the Partnership in exchange for a 50% interest in
the Partnership. The Partnership was formed with Engelhard, which, through its
subsidiary, also owns a 50% interest in the Partnership, and has an option to
purchase the Company's 50% interest upon certain terms and conditions.
Accordingly, the desiccant air conditioning business that was conducted by ICC
prior to the formation of the Partnership is now being conducted by the
Partnership, and ICC has become principally a holding company. Further,
substantially all of the employees of ICC have become employees of the
Partnership and the leases for the space occupied by, and certain other
obligations of, ICC have been assumed by the Partnership.
After the consummation of the Transfer Agreement, the remaining assets of the
Company, other than the investment in the Partnership, consisted of cash, a
note receivable from the Company's Chairman and assets related to the
cogeneration line of business, including accounts receivable, inventory,
property and equipment, and other assets. These assets have been evaluated for
impairment and are carried at their net realizable value. Revenues following
consummation of the Transfer Agreement consist of sales of remaining spare
parts related to the cogeneration line of business. The cogeneration line of
business was not part of the Transfer Agreement because Engelhard was not
interested in the activities of the cogeneration business.
Although ICC is not permitted to engage directly or indirectly in any
activities which would conflict with the Partnership's business as long as the
Partnership is in effect, ICC is not precluded from engaging in other
activities.
Review of Losses from Operations
As described above, upon formation of the Partnership and the transfer of
substantially all of the Company's assets to the Partnership, the Company
became principally a holding company. Since formation of the Partnership, the
Company's activities have related to its limited cogeneration operations and
oversight of its investment in the Partnership. The Company currently is not
engaged in any activities that would generate any significant revenues,
although it does have continuing expenses.
At February 7, 1994, date of formation, the Company's investment in the
Partnership was approximately $0, the Company had no obligation to provide
additional financing to the Partnership and losses of the Partnership were not
recognized through the period ended September 30, 1994. In the fourth quarter
of 1994, the Company and Engelhard each loaned the Partnership $4,000,000 to
acquire a manufacturing facility in Miami, Florida. The Company recognized its
share of the accumulated losses of the Partnership in the fourth quarter of
1994 and has continued to recognize its share of Partnership's losses.
The Company's net loss for the three months ended September 30, 1995 was
$1,595,325 compared with the net loss of $394,809 for the same period in 1994.
The Company's net loss for the nine months ended September 30, 1995 was
$4,156,886 compared with the net loss of $1,170,505 for the same period in
1994. This increase in the net loss is attributable to the Company's equity
interest in the Partnership's losses of $1,320,262 and $3,393,750 for the three
and nine months ended September 30, 1995 as compared to none recognized for
the same period ended in 1994. In May 1995, the Company guaranteed 50% of the
Partnership's indebtedness associated with the industrial development revenue
bonds.
11
<PAGE> 12
The Company's general and administrative expenses decreased $102,983 or 23% for
the three month period ended September 30, 1995 compared to the same period in
1994 primarily as the result of a decrease in professional fees. The Company's
general and administrative expenses increased $93,333 or 9.9% for the nine
month period ended September 30, 1995 compared to the same period in 1994
primarily as the result of increased payroll expenses and other administration
costs offset by a reduction in professional fees. The Company provided $30,000
for the nine months ended September 30, 1995 for services rendered in 1993 by
an investor relations vendor. Pursuant to an agreement with the vendor, the
obligation was satisfied by the issuance of 20,000 shares of common stock. The
Company's expenses related to marketing, engineering and development decreased
or were eliminated in 1995 as compared to 1994 primarily as a result of the
transfer of substantially all operations to the Partnership on February 7,
1994. In connection with the private placement of 300,000 shares of Common
Stock in March 1995, the Company entered into a consulting arrangement expiring
in March 1996, with the placement agents; consulting expenses of $25,000 were
recognized in the three and nine months ended September 30,1995.
The Partnership losses from operations for the three and nine month periods
ended September 30, 1995 were $2,521,880 and $6,205,305 compared with losses of
$1,597,146 for the three month period ended September 30, 1994 and $3,544,557
for the period from inception, February 7, 1994 to September 30, 1994.
The Partnership's revenue for the three months ended September 30, 1995
increased to $2,009,538 compared to $379,912 for the same period in 1994. The
Partnership's revenue for the nine months ended September 30, 1995 increased to
$7,171,504 compared to $997,156 for the period February 7, 1994 to September
30, 1994. The increase in revenue is attributable to sales of substrate from
the Miami plant to Ciba Geigy pursuant to a supply contract, increased
equipment sales and licensing fees. Sales of substrate from the Miami plant
amounted to approximately $1,500,000 and $4,800,000 for the three and nine
months ended September 30, 1995, respectively. Equipment sales amount to
approximately $500,000 and $1,800,000 for the three and nine months ended
September 30, 1995 respectively. Licensing fees of $500,000 were earned in the
nine months ended September 31, 1995 compared to none in 1994. Sales of
substrate was insignificant in 1994.
The Partnership's gross loss for equipment sales was approximately
$370,000 and $770,000 for the three and nine months ended September 30, 1995.
The gross loss was attributable to increased production expenses and
production inefficiencies.
The increase in the Partnership's losses from operations for the three and nine
month periods ended September 30, 1995 compared to the same periods in 1994 is
attributable primarily to higher marketing and general and administrative
operating costs. Marketing expenses have increased as a result of the
Partnership's increased sales and marketing staff and its related activities.
General and administrative expenses have increased as a result of an increased
administrative staff and related payroll along with higher costs associated
with operating the Miami plant acquired in December 1994.
The Partnership's expenses related to product development, marketing, and
administration increased by $599,524 for the three months ended September 30,
1995 and $2,536,539 for the nine months ended September 30, 1995 as compared to
the similar periods in 1994. Marketing expenses increased $202,969 for the
three months ended September 30, 1995 compared to the same period in 1994 and
increased $1,151,444 for the nine months ended September 30, 1995 compared to
the period from inception, February 7, 1994 to September 30, 1994. The
increase in marketing expenses is the result of the Partnership's increased
marketing efforts and increased sales and marketing staff. General and
administrative expenses increased $381,330 and $1,083,569 for the three and
nine months ended September 30, 1995, respectively, compared to the same
periods in 1994 as the result of increased staff and related payroll along with
higher costs associated with the Miami plant acquired in December 1994.
The Partnership's backlog for equipment amounted to approximately
$1,500,000 at September 30, 1995 versus approximately $350,000 at September 30,
1994.
12
<PAGE> 13
Liquidity and Capital Resources
General Overview
The independent accountants report on the audit of the Company's 1994 financial
statements includes an explanatory paragraph regarding substantial doubts about
the Company's ability to continue as a going concern. The Company's financial
statements have been prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has suffered recurring losses accumulating to
$31,379,232 as of September 30, 1995. The Company's continuation as a going
concern is dependent upon its ability to: (i) generate sufficient cash flows
to meet its obligations on a timely basis, (ii) obtain additional financing or
refinancing as may be required and (iii) ultimately, attain profitable
operations and positive cash flow from its operations and its investment in the
Partnership.
The independent accountants report on the audit of the Partnership's 1994
financial statements also includes an explanatory paragraph regarding
substantial doubts about the Partnership's ability to continue as a going
concern. The Partnership's continuation as a going concern will remain
dependent upon its ability to: (i) generate sufficient cash flows to meet its
obligations on a timely basis, (ii) obtain additional financing or refinancing
as may be required and (iii) ultimately, attain profitable operations and
positive cash flow from operations.
Although the Company is currently considering financing arrangements, no
assurance can be made that capital will be obtained on a timely basis.
Management believes that the Company currently has sufficient resources to
support its operations through 1996. The capital needs of the Company have
been satisfied primarily through proceeds from the issuance of Common Stock and
exercise of stock options and warrants. A capital contribution of $1 million
to the Partnership was made by each partner in October 1995. Management
believes the Partnership will require additional capital contributions during
1996. The minimum capital requirement of the Partnership is expected to be
$1 million for 1996. The Partnership may require additional capital in order to
take advantage of growth opportunities. To the extent additional significant
capital contributions are required, the Company would expect to satisfy the
requirements by seeking equity financing. The Company's ability to successfully
obtain equity financing in the future is dependent in part on market conditions
and the performance of the Partnership. There can be no assurance that the
Company will be able to obtain equity financing in the future.
The Company received net cash proceeds of approximately $2.6 million from the
issuance of approximately 1,060,000 shares of common stock through the exercise
of stock options and warrants and approximately $3.1 million from the issuance
of Common Stock through a private placement for the nine months ended
September 30, 1995. On March 31, 1995, pursuant to the private placement, the
Company issued 300,000 shares of Common Stock for gross proceeds of $3,300,000.
At closing, cash of $1,100,000 was received along with a $2,200,000 promissory
note. The promissory note was paid in August 1995. The Company granted
warrants to purchase 375,000 shares of Common Stock at $9 per share to the
placement agents in connection with the private placement.
13
<PAGE> 14
In December 1994, the general partners each loaned $4,000,000 to the
Partnership in connection with the acquisition of the real property and
substantially all other assets of an existing manufacturing facility located in
Miami, Florida. In May 1995, each general partner was repaid $1,500,000 of the
aforementioned loan, and the remaining amount, $2,500,000 for each general
partner, was converted into an investment in the Partnership. In April 1995,
the Partnership obtained financing from the issuance of $8.5 million in
industrial development revenue bonds. The proceeds of these bonds were utilized
to repay a portion of the loan provided by the general partners and provide
for improvements and capital equipment at the Miami facility. In May 1995, the
Company guaranteed 50% of the Partnership's indebtedness associated with the
industrial development revenue bonds. The Company has established an
irrevocable letter of credit for $2.5 million to support its portion of the
guarantee. The Company's letter of credit is collaterialized by a certificate
of deposit of $2.5 million.
In August 1995, the Partnership entered into a joint development agreement with
an Israeli corporation related to the development of a residential desiccant
unit. In connection with the joint development agreement, the Company agreed
in October 1995 to loan up to $250,000 to the Israeli corporation related to
its funding of the program.
The Company received proceeds of approximately $1,683,000 from the exercise of
stock options to purchase approximately 794,000 shares of Common Stock granted
under its option plans and $946,000 from the exercise of warrants to purchase
approximately 265,000 shares of Common Stock for the nine month period ended
September 30, 1995.
The Company had negative cash flow from operating activities of $890,228 for
the nine months ended September 30, 1995. The reason for the operating
deficit was attributable to continued general and administrative costs and
negligible revenue.
Review of Working Capital
As of September 30, 1995, ICC had $4,230,829 in total current assets and
$330,117 in current liabilities, resulting in working capital of $3,900,712.
The Company's cash position at September 30, 1995 was $3,855,335.
ICC has not declared any dividends on its preferred or common stock and does not
expect to declare dividends on common stock in the foreseeable future. Payment
of future dividends will rest within the discretion of the Board of Directors
and will depend, among other things, on ICC's earnings, capital requirements and
financial condition. In addition, under the terms of the Company's note payable
to stockholders, the Company is prohibited from paying or declaring any
dividends, and under the provisions of the Company's series of Preferred Stock
all accrued dividends must be paid on Preferred Stock prior to the payment of
any dividends on Common Stock.
14
<PAGE> 15
New Accounting Standard
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. SFAS No. 123 establishes a fair value based method of accounting
for stock-based compensation plans. It encourages entities to adopt that
method in place of the intrinsic value method currently in place under the
provisions of Opinion No. 25 of the Accounting Principles Board (APB). Under
the fair value method accounting, all arrangements under which employees
receive shares of stock or other equity instruments or under which employers
incur liabilities to employees in amounts based on the price of its stock
result in the measurement of compensation cost at the grant date of the award
which is recognized over the service period, usually the vesting period. Under
the intrinsic value method, compensation cost is measured by the excess of the
quoted market price of the stock, if any, over the amount the employee must pay
to acquire the stock. For example, granting immediately exercisable stock
options to an employee at an exercise price equal to the quoted market price of
the stock results in the recognition of compensation expense at the date of
grant under the fair value method of SFAS No. 123; under the intrinsic value
method of APB No. 25, no compensation expense is recognized. However, SFAS
No. 123 allows the Company to elect to continue its current method of
accounting under APB No. 25 for employee stock-based compensation
arrangements. The Company expects to continue its current method of accounting
under APB No. 25 for employee stock-based compensation arrangements. If the
Company continues its current method of accounting, pro forma disclosures of
net income and earnings per share must be disclosed, as if the Company had
adopted the recognition provisions of SFAS No. 123.
Although the Company is permitted to continue accounting for employee
stock-based compensation arrangements under APB No. 25, SFAS No. 123 requires
the Company to utilize the fair value method of accounting for transactions
involving stock options or other equity instruments issued to nonemployees as
consideration for goods or services. Presently, those transactions are
accounted for by the Company under the intrinsic value principles of APB No.
25.
The accounting and disclosure requirements of SFAS No. 123 are effective for
the Company in 1996. The Company has not yet determined the impact of SFAS
No. 123.
15
<PAGE> 16
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
No legal proceedings by, or against, the Company were
initiated in the quarter ended September 30, 1995.
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 License Agreement by and between Engelhard/ICC and
Ciba Composites Anaheim, a business unit of Ciba
Composites, a Division of Ciba-Geigy Corporation,
dated November 29, 1994.
10.2 Manufacturing and Supply Agreement by and between
Engelhard/ICC and Ciba Composites Anaheim, a business
unit of Ciba Composites, a Division of Ciba- Geigy
Corporation, dated November 29, 1994.
10.3 Technical Information, Trademark and Patent License
Agreement by and between Engelhard/ICC and Chung-Hsin
Electric & Machinery Manufacturing Corporation, dated
March 27, 1995.
10.4 Supply Agreement by and between Engelhard/ICC and
Chung-Hsin electric & Machinery Manufacturing
Corporation, dated March 27, 1995.
10.5 Agreement by and among Engelhard Corporation, ICC
Technologies, Inc. and Engelhard/ICC, dated April 1,
1995 relating to the Dade County Industrial
Development Revenue Bonds.
10.6 Memorandum of Understanding by and between
Engelhard/ICC and Samsung Corporation, dated June 30,
1995.
10.7 Form of Amendment dated August 9, 1995 to Agreement
of October 6, 1992 Regarding Formation of ICC
International by and between Engelhard/ICC and A B
Avir Technologies, Ltd.
(b) Reports on Form 8-K: None
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: November 13, 1995 BY: /s/ Irwin L. Gross
------------------------- ------------------------------
Irwin L. Gross, Chairman
and President
DATE: November 13, 1995 BY: /s/Manfred Hanuschek
------------------------- ------------------------------
Manfred Hanuschek
Chief Financial Officer
17
<PAGE> 1
EXHIBIT 10.1
LICENSE AGREEMENT
This Agreement, dated November 29, 1994, by and between Ciba
Composites, a division of Ciba-Geigy Corporation, a corporation organized and
existing under the laws of the State of New York, with offices at 5115 East La
Palma Avenue, Anaheim California 92807 (hereinafter "Ciba" and Engelhard/ICC, a
general partnership formed under the laws of the Commonwealth of Pennsylvania,
with offices at 441 North Fifth Street, Philadelphia, PA 19123 (hereinafter
"Licensee").
WITNESSETH THAT:
WHEREAS, pursuant to an Asset Purchase Agreement, dated November 29,
1994 (hereinafter referred to as the "Purchase Agreement"), between Ciba and
Engelhard/ICC, Engelhard/ICC will purchase, on the same date as the Effective
Date hereof, certain assets of the composites business of Ciba; and
WHEREAS, this License Agreement is being entered into in connection
with the Purchase Agreement; and
WHEREAS, Ciba is the owner of all right, title and interest in certain
application and technical data which constitute valuable confidential
information and trade secrets directed to honeycomb core technology;
<PAGE> 2
WHEREAS Licensee desires to obtain a license under said rights; and
WHEREAS Ciba is willing to grant Licensee such a license.
NOW, THEREFORE, in consideration of the premises and covenants
hereinafter set forth, the parties agree as follows:
ARTICLE I - DEFINITIONS
As used herein, the words and phrases set forth below shall have the
meaning respectively ascribed thereto, on the understanding that words in the
singular include words in the plural and vice-versa:
1.1 "Effective Date" shall mean the date first written above.
1.2 "Licensed Technology" shall mean all the technology and
know-how pertaining to Licensed Product produced or developed by Ciba at the
Facility on or prior to the Effective Date, including but not limited to the
Sheeter Stacker technology and equipment, but shall not include the following
technology: (a) Manufacturing of thermoplastic honeycomb core; (b) silicate
treated honeycomb
(2)
<PAGE> 3
structures (Cibabarrier); (c) honeycomb manufactured with a water based
phenolic thermosetting resin; and (d) honeycomb made from glass substrates.
1.3 "Affiliate" shall mean a corporation, company or other entity
which controls a party as a Subsidiary, which is a Subsidiary of a party, which
is a Subsidiary of a corporation, company or other entity which controls a
party as a Subsidiary, and shall include but not be limited to Engelhard
Corporation and ICC Technologies, Inc.
1.4 "Subsidiary" shall mean a corporation, company or other
entity, fifty percent (50%) or more of whose outstanding shares or securities
representing the right, other than as affected by events of default, to elect
directors or other managing authority) are, now or hereafter, owned or
controlled directly or indirectly by a party, but such corporation, company or
other entity shall be deemed to be a Subsidiary only so long as its ownership
or control exists.
1.5 "Licensed Product" shall mean honeycomb core with a cell size
smaller than 1/8" (0.125 cm), wherein for a symmetrical cell said cell size is
defined as the diameter of a circumscribed circle within the honeycomb cell and
for a non-symmetrical cell,
(3)
<PAGE> 4
the cell size is defined as the diameter of a circumscribed circle within an
equivalently symmetrically shaped cell.
1.6 "Field" shall mean an application or system useful for the
filtration, purification, clarification, refining or catalytic treatment of
any: 1) gas or vapor, 2) mixture of gases or mixture of vapors; or 3) mixture
of gases and vapors including the separation, isolation or segregation of any
component of such gas, vapor or mixture. This definition specifically includes
gas/air, pollution abatement/cooling/conditioning/dehumidification
applications.
1.7 "New Technology" shall mean all improvements, modifications,
changes or developments made to Licensed Technology by Licensee or Ciba
following the Effective Date.
1.8 "Product" shall mean honeycomb core.
1.9 "Net Sales Price" shall mean with respect to a Licensed
Product which is sold by Licensee, the price charged for said product and not
returned as defective, less such quantity, trade and cash discounts, shipping,
installation and packaging charges or allowances, and taxes and other
governmental charges as are specified and separately stated and charged on the
invoices of Licensee.
(4)
<PAGE> 5
1.10 "Facility" shall mean the Miami Facility and the Leased
Premises as defined in the Agreement of Purchase and Sale of Assets.
ARTICLE II - LICENSE GRANT
2.1 Ciba shall grant and hereby does grant to Licensee an
irrevocable, exclusive, worldwide, royalty-free right and license, without the
right to sublicense except to Licensee's Affiliates and Subsidiaries, under
Licensed Technology, to make and/or have made Licensed Product for use and sale
in the Field. Ciba shall not nor shall it license a third party to make and/or
have made Licensed Product using Licensed Technology for use and sale in the
Field. Ciba reserves all rights to make and/or have made Licensed Product
using Licensed Technology for use and sale outside the Field.
2.2 In the event Licensee identifies a new potential non-aerospace
opportunity outside the Field for Licensed Product, which opportunity has not
previously been identified by Ciba and Ciba substantiates its knowledge of the
opportunity, Ciba shall grant and hereby does grant to Licensee a nonexclusive,
worldwide, royalty-bearing right and license, without the right to sublicense
except to Licensee's Affiliates and Subsidiaries, under Licensed
(5)
<PAGE> 6
Technology, to make and/or have made Licensed Product for use and sale in said
non-aerospace opportunity.
2.3 Should Ciba enter into an agreement granting a License under
the provisions of Section 2.2, on terms more favorable than those contained
herein, then Ciba shall notify Licensee within sixty (60) days of the grant of
such more favorable License, of the terms of such other Agreement. Licensee
shall be entitled to the benefit of such terms as of the date and so long as
such terms are effective under such other Agreement, provided Licensee makes
written demand upon Ciba for all such terms, including those less favorable,
within six (6) months after the receipt by Licensee of the aforesaid notice
from Ciba.
2.4 Except as provided in Section 2.2, in the event Licensee
identifies a new potential non-aerospace opportunity for honeycomb core Ciba
shall give consideration to granting Licensee a further license but Ciba may
determine not to do so and any such license shall be subject to mutually agreed
to terms and conditions.
2.5 Ciba shall grant and hereby does grant to Licensee an
exclusive, worldwide, royalty-free and license, without the right to sublicense
except to Licensee's Affiliates and Subsidiaries, under New Technology to make
and/or have made Licensed Product for use and sale in the Field arising within
(i)
(6)
<PAGE> 7
three (3) years of the Effective Date of this Agreement or (ii) the termination
of the Supply Agreement or (iii) the termination of the Transitional Services
Agreement, whichever is longer.
2.6 Licensee shall grant and hereby does grant to Ciba an
exclusive, worldwide, royalty-free right and license, with the right to
sublicense, under New Technology to make and/or have made Product for use and
sale outside the Field arising within (i) three (3) years of the Effective Date
of this Agreement, (ii) the termination of the Supply Agreement or (iii) the
termination of the Transitional Services Agreement, whichever is longer.
ARTICLE III - RUNNING ROYALTIES
In consideration of the license granted in Section 2.2 herein,
Licensee agrees to pay to Ciba a royalty of five percent (5%) of the Net Sales
Price of honeycomb core licensed pursuant to said Section 2.2 for a period of
fifteen (15) years beginning on the date of first commercial sale into each
such new application.
ARTICLE IV - ROYALTY PAYMENTS AND REPORTING
4.1 Licensee shall make all payments to Ciba in performance of the
obligation of Licensee defined in this Agreement
(7)
<PAGE> 8
in United States Dollars at such location in the United States as Ciba shall
designate.
4.2 Licensee shall make running royalty payments within thirty
(30) days after the end of the calendar quarter in which any Licensed Product
was sold by Licensee. Uncollectables shall be credited against royalties due.
The parties shall agree to an appropriate exchange rate at the time of the
grant of a license under Section 2.2.
4.3 The Net Sales Price for sales between Licensee, its Affiliates
and Subsidiaries shall be the market price charged to third parties at the time
of the transfer.
4.4 Licensee shall keep and shall cause its Affiliates and
Subsidiaries to keep accurate records showing the quantity, Net Sales Price and
date of sale of all Licensed Product sales subject to royalty hereunder and
sold by Licensee, its Affiliates and Subsidiaries and the royalty payable
thereon. Licensee shall furnish Ciba within thirty (30) days after the end of
each calendar quarter a report of royalties payable for such calendar quarter
showing the quantity, Net Sales Price and Date of sale of all Licensed Product
sales subject to royalty hereunder and sold in such calendar quarter by
Licensee, its Affiliates and Subsidiaries and the royalty payable thereon.
Upon written request by Ciba,
(8)
<PAGE> 9
Licensee shall make and cause its Affiliates and Subsidiaries to make said
records available for audit at the place of business of Licensee, its
Affiliates and Subsidiaries, as the case may be, during normal business hours
and on a confidential basis, for inspection, by a certified public accountant
designated and paid by Ciba and reasonably acceptable to Licensee who shall
report to Ciba only the amount of royalties due for the period examined, and in
the absence of fraud such report shall be conclusive. In the event that no
request for inspection of records for any particular calendar quarter shall be
made by Ciba within two (2) years subsequent to such calendar quarter, the
right to make an inspection of the records for such calendar quarter shall be
deemed to have been waived by Ciba.
ARTICLE V - CONFIDENTIALITY
5.1 Licensee shall not disclose to any third party, except
Licensee's Affiliates and Subsidiaries which have agreed in writing to be bound
by the obligations of this Agreement, the Licensed Technology or any portion
thereof, except with the prior written consent of Ciba, which consent shall not
be unreasonably withheld. Disclosure may be made, to the extent necessary to
further the commercial purposes of this Agreement to third parties who have
entered into an appropriate agreement containing confidentiality provisions at
least as stringent as the provisions
(9)
<PAGE> 10
hereof with Licensee for retention of the confidentiality of such Licensed
Technology.
5.2 In the event part or all of the Licensed Technology is or
becomes part of the public domain through no fault of Licensee or is disclosed
to Licensee by a third party who is under no obligation of confidentiality to
Ciba, Licensee shall continue to comply with the obligations of Section 5.1
only with regard to specific information which is not in the public domain and
which is embraced by more general information which is or may become public
knowledge.
5.3 Both parties (the "receiving party") shall not disclose to any
third party, except Affiliates and Subsidiaries which have agreed in writing to
be bound by the obligations of this Agreement, New Technology and other
confidential information received from the other party (the "disclosing party")
except with the prior written consent of the disclosing party, which consent
shall not be unreasonably withheld. Disclosure may be made, to the extent
necessary to further the commercial purposes of the receiving party to third
parties who have entered into an appropriate agreement containing
confidentiality provisions at least as stringent as the provisions hereof with
receiving party for retention of the confidentiality of such New Technology and
other confidential information.
(10)
<PAGE> 11
5.4 In the event part or all of the New Technology or other
confidential information is or becomes part of the public domain through no
fault of the receiving party or is disclosed to receiving party by a third
party who is under no obligation of confidentiality to the disclosing party,
the receiving party shall continue to comply with the obligations of Section
6.1 only with regard to specific information which is not in the public domain
and which is embraced by more general information which is or may become public
knowledge.
ARTICLE VI - SECOND SOURCE SUPPLIER
6.1 For a period of two (2) years from the Effective Date hereof,
in the event that Licensee, its Affiliates and/or Subsidiaries require a second
source supply for the production of Licensed Product, Ciba shall have an option
for the right of first refusal to become the second source supplier for
Licensee, its Affiliates and/or Subsidiaries.
6.2 For a period of two (2) years from the Effective Date hereof,
in the event that Ciba requires a non-Ciba second source for Licensed Product,
Licensee shall have an option for the right of first refusal to become the
second source supplier for Ciba.
(11)
<PAGE> 12
ARTICLE VII - TERMINATION
7.1 Either party may terminate any and all licenses granted
pursuant to Section 2.2 of this License Agreement in the event of a material
breach of the other party which is not corrected within thirty (30) days of
written notice from the party not in breach. Failure to exercise the right of
termination granted in this paragraph for any one such breach shall not be
deemed a waiver of such right in the event such breach persists or in the event
of subsequent such breaches.
7.2 Licensee shall have the right, on at least ninety (90) days
prior written notice, to unilaterally terminate any and all licenses granted
pursuant to Section 2.2; however, Licensee's obligations hereunder, with
respect to royalties shall continue up to the effective date of such
termination. Following termination pursuant to Section 7.1 or Section 7.2
Licensee and its sublicensees shall not have the right to continue to use the
Licensed Patents and/or Licensed Technology licensed hereunder.
7.3 Notwithstanding any termination of this License Agreement
under the provisions of Section 7.1 or Section 7.2, Licensee shall pay all
royalties accrued prior to the effective date of such termination.
(12)
<PAGE> 13
7.4 The provisions of Articles II, V - VII and X shall remain in
effect beyond the termination of this Agreement in accordance with the terms
thereof.
7.5 (a) In the event of a change of control of the ownership
of Licensee as permitted pursuant to subsection (b) hereof, Licensee shall
notify Ciba at least thirty (30) days prior to such change or if an involuntary
change then Licensee shall notify Ciba ten (10) days prior thereto.
(b) In the event of a change of control of the ownership
of Licensee other than (i) the present parties including Affiliates and
Subsidiaries and (ii) third parties which do not compete with Ciba Composite's
product line set forth in Exhibit A, this Agreement shall automatically
terminate.
ARTICLE VIII - NOTICES
All communications under this Agreement shall be in writing and shall
be deemed given when delivered personally or when mailed by registered mail,
return receipt requested or when sent electronically by an international cable
or telex (provided such telex or cable is confirmed by registered mail on the
day the telex or cable is dispatched), to the party at the address set forth
(13)
<PAGE> 14
below (or such address as may be specified by a party in a notice given
hereunder).
Engelhard/ICC
441 North Fifth Street
Philadelphia, PA 19123
Attn:
------------------------
Ciba-Geigy Corporation
5115 East La Palma Avenue
Anaheim, California 92807
Attn:
------------------------
ARTICLE IX - GOVERNING LAW
9.1 This Agreement shall be interpreted in accordance with and
governed by the laws of the State of New York.
9.2 This Agreement is subject to all applicable laws, rules,
regulations and ordinances of the United States of America, or any political
subdivision thereof, including, but not limited to, the Regulations of the
United States Department of Commerce relating to the Export of Technical Data
or the direct product related thereto.
(14)
<PAGE> 15
ARTICLE X - ASSIGNMENT
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, provided that
neither party shall assign any of its rights or privileges hereunder without
the prior written consent of the other party, except for the right of either
party to assign any of its rights or privileges hereunder to an Affiliate. Any
attempted assignment in derogation of the above shall be null and void.
ARTICLE XI - ENTIRE AGREEMENT
This document contains the entire agreement of the parties with
respect to its contents and there are no representations, promises, or
understanding pertaining to this Agreement, except as are contained in this
document. Furthermore, this document cannot be amended or performance
thereunder modified, except by a document in writing signed by duly authorized
representatives of the parties.
Headings included in this Agreement are for convenience only and are
not to be used to interpret the agreement between the parties.
(15)
<PAGE> 16
The provisions of this Agreement shall be deemed separable and if any
provisions is rendered void, invalid or unenforceable, such rendering shall not
affect the validity or enforceability of the remainder of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement.
Engelhard/ICC Ciba-Geigy Corporation
By: ICC Desicant Technologies, Inc.
By: /s/ Irwin L. Gross By: /s/ James A. Koshak
---------------------------- ----------------------------
Name: Irwin L. Gross Name: James A. Koshak
-------------------------- --------------------------
Title: CEO Title: V.P./GEN MGR.
------------------------- -------------------------
Date: 11/24/94 Date: NOV. 24, 1994
-------------------------- --------------------------
(16)
<PAGE> 1
EXHIBIT 10.2
MANUFACTURING AND SUPPLY AGREEMENT
This Agreement, dated as of November 29, 1994, is by and between Ciba
Composites Anaheim, a business unit of Ciba Composites, a Division of
Ciba-Geigy Corporation, a corporation organized under the laws of the State of
New York, with offices at 5115 East La Palma Avenue, Anaheim, California
92807-2018 ("Ciba") and Engelhard/ICC, a general partnership formed under the
laws of the Commonwealth of Pennsylvania, with offices at 441 North Fifth
Street, Philadelphia, Pennsylvania 19123 ("Manufacturer").
WITNESSETH
WHEREAS, Ciba and Manufacturer are parties to the Asset Purchase
Agreement and various ancillary agreements dated as of the date hereof,
relating, among other things, to the acquisition by Manufacturer of certain
assets associated with the operation of Ciba's honeycomb core production plant
located in Miami, Florida and Ciba's licensing of certain honeycomb technology
to Manufacturer (hereinafter collectively referred to as the "Asset Purchase
Agreement"); and
WHEREAS, in connection with the transactions in the Asset Purchase
Agreement Ciba is unable to obtain a source for its Product requirements and
wishes to have Manufacturer supply Ciba with its Product requirements until
such time as Ciba can complete the qualification of a facility to produce
Product and have such facility fully operational;
WHEREAS, Ciba further wishes to have Manufacturer conduct developmental
production trials at the Facility; and
WHEREAS, Manufacturer wishes to manufacture Product and to conduct
certain developmental production trials for Ciba subject to the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties agree as follows:
1. Definitions. Where used in this Agreement and identified with initial
capital letters, the following items have the meanings set forth below:
a. "Agreement" means this Agreement between Ciba and Manufacturer,
including the exhibits attached hereto and made a part hereof.
b. "Asset Purchase Agreement" means the agreement for the purchase and
sale of certain assets of Ciba's manufacturing facility located at 3550 N.W.
49th Street, Miami, Florida, made as
<PAGE> 2
of the date hereof, and the License Agreement, Technical Assistance Agreement
and Operational Services Agreement entered into simultaneously thereof.
c. "Contract Year" means a twelve (12) month period beginning on the
Closing Date or any anniversary thereof during the term of this Agreement.
d. "Closing Date" means the date on which the transactions contemplated
in the Asset Purchase Agreement close.
e. "Ciba Supplied Materials" or Supplied Materials means those
materials which are authorized to be purchased by the Manufacturer from a
Designated Supplier under an established Ciba Supply Agreement and/or Ciba
Purchase Order. A list of Ciba Supplied Materials as set forth in Exhibit 1e
and f.
f. "Designated Suppliers" means those suppliers qualified to provide
Ciba Supplied Materials to manufacture the Products, as set forth in Exhibit
1e and f.
g. "Dispose or disposal" means any discharge, deposit, injection,
dumping, spilling, leaking, or placing of any Waste into or on any land or
water and the arrangement of any of the foregoing, and shall include any
storage, pretreatment, treatment (including incineration), any other actual
disposal, use, sale, sampling or other transfer or application of Waste of any
kind or nature whatsoever.
h. "Facility" means the manufacturing plant located at 3550 N.W. 49th
Street, Miami, Florida.
i. "Facility Capacity" means the production capacity of the Facility
when operated five (5) days a week on a twenty-four (24) hour per day basis.
j. "Hazardous Waste" means (a) any material or substance defined as or
containing materials defined as a "hazardous substance" or "hazardous waste"
pursuant to Laws and Regulations including the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, the Resource
Conservation and Recovery Act, as amended, and any similar successor or
supplementary legislation, and the regulations promulgated thereunder or (b)
any material or substance that is radioactive.
k. "Honeycomb Core" means a manufactured product made from aramid paper
paper, resin impregnated glass fabric, or any other substrate which is formed
into cells usually of a hexagonal shape, or other shapes as configured.
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l. "laws and Regulation" means all applicable federal, state,
territorial and local and foreign laws, regulations, orders, ordinances, and
rules.
m. "Permits" means all licenses, permits and similar authorizations
required for the manufacture, processing, packaging, sale and delivery of the
Products and the conduct of Manufacturer's business.
n. "Product(s)" means the Honeycomb Core products described in The
Specifications/Qualified Product List in Exhibit 1n. Ciba shall be able to
add new products that are substantially similar to Products to Exhibit 1n from
time to time. The parties agree that the Manufacturing Fee for any such new
products shall be computed in accordance with Exhibits 4.5 and 5.1. Without
prejudice to Ciba's rights, if Manufacturer chronically fails to deliver any
Product within the time specified in this Agreement, and shows no progress
toward cure, Ciba shall be able to delete such Product from the scope of this
Agreement, to the extent Ciba is negatively impacted by this chronic failure
or deletion of Product, Ciba shall be entitled to recover from the
Manufacturer the direct damages suffered by Ciba. For the purposes of this
provision, the parties agree lost profits shall be considered a direct damage.
o. "Waste" means all materials that are produced or generated in
connection with the manufacturer of any Product or reworked Product sold to
Ciba, including but not limited to materials that are Hazardous Waste (as
hereinafter defined), co-product, by-product, Product that fails to conform to
the specifications, wastewaters, residues, wastes, bottoms and other
remainders and materials, packaging of components of any Product, and
components of any Product that are not used in the manufacture of any Product.
2. Term. The term of this Agreement shall commence on the Closing Date of
the Asset Purchase Agreement and shall continue for a period of five (5) years
(the "Term"); provided, however, that Ciba shall have the option to terminate
this Agreement on the giving of six (6) months written notice, which notice
can be given at any time after eighteen (18) months from the Closing Date.
3. Quantity.
3.1 Minimum Quantities. During each Contract Year, Ciba shall purchase
from Manufacturer its requirements for Products or products substantially
similar to Products for its internal use or sale in Mexico, Canada and the
United States in the minimum percentages set forth in Exhibit 3.1. For the
purpose of computing requirements hereunder, new products not added pursuant
to 1n above on the basis that they were not substantially similar to Products,
shall not be considered.
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3.2 Available Facility Capacity. During each Contract Year,
Manufacturer shall make available to Ciba the percentages of the Facility
Capacity set forth in Exhibit 3.2 ("Ciba's Share"). Notwithstanding this
availability, Ciba shall be responsible only for ordering the minimum
quantities set forth in Section 3.1.
Beginning two months prior to the second anniversary of the Closing Date, Ciba
shall use its reasonable efforts to give Manufacturer two (2) months written
notice of any projected decrease in its need to utilize Ciba's Share for a
month for which such notice was given. During the first Contract Year, Ciba
shall not be allowed to require Manufacturer to produce for Ciba, in any
calendar month, Products requiring more than 1/12 of Ciba's Share. During
each subsequent Contract Year, Ciba shall not be allowed to require
Manufacturer to produce for Ciba, in any calendar month, Products requiring
more than 1/12 of 110% of Ciba's Share. For periods of less than a calendar
month, these determinations will be made on a pro rata basis.
3.3 Conflict. In the event Ciba's requirements in Section 3.1 exceed
Ciba's share and Manufacturer fails to accommodate Ciba's requirements three
times in any 6 month period, upon Ciba's written request, Manufacturer shall
have the option, exercisable upon five (5) working days written notice, of
dedicating other existing capacity, or committing to provide Ciba with a plan,
reasonably acceptable to Ciba, to add new capacity to meet Ciba's
requirements, each at no additional cost to Ciba over the existing fees set
out in Exhibit 4.5. If Manufacturer fails to exercise this option, Ciba can
either elect to add additional capacity at the Facility, at Ciba's sole cost
and expense or be released from its obligation to order that portion of the
minimum quantities which exceed Ciba's Share for the following 12 month
period.
3.4 Lead Time and Minimum Order Quantities. Lead times and minimum
order quantities shall be as set forth in Exhibit 3.4 as such Exhibit may be
amended by mutual consent of the parties. The parties shall work together in
good faith to resolve any problems associated with the implementation of this
Exhibit.
3.5 Damages. In the event Ciba fails to order the minimum quantities
set forth in Section 3.1, as it may be amended by Section 3.3 herein, or
Manufacturer fails to make available to Ciba Ciba's Share, the party
negatively impacted by such failure shall use diligent efforts to mitigate the
damages. To the extent either party is negatively impacted by the failure of
the other party, the damaged party shall be entitled to recover from the other
party the direct damages suffered by it. For the purposes of this provision,
the parties agree lost profits shall be considered a direct damage.
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4. Manufacture of Product.
4.1 Manufacturing Services. Manufacturer agrees to manufacture
Product(s) in conformance with the specifications set forth in Exhibit 1n
("Conforming Product"), utilizing, in part, Ciba Supplied Materials and
Designated Suppliers, as set forth in Exhibit 1e and f. Notwithstanding
anything in this Agreement to the contrary, in no event shall Manufacturer be
responsible and/or liable for defects in Products to the extent such defect is
the result of Supplied Materials defective at the time of receipt.
THE FOREGOING EXPRESS WARRANTY IS IN LIEU OF ANY AND ALL OTHER WARRANTIES
ARISING BY LAW AND/OR CUSTOM, INCLUDING, WITHOUT LIMITATION, THE IMPLIED
WARRANTY OF MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE.
4.2 Quantities of Supplied Materials. During the Term, Ciba will make
available Supplied Materials from its Designated Supplier. Manufacturer is
responsible for placing orders for Supplied Materials in such quantities and
for delivery at such times as Manufacturer deems necessary to meet its
requirements pursuant to Section 6. Ciba will be responsible for payment for
the Supplied Materials supplied by Designated Suppliers. Manufacturer shall
use Supplied Materials only for the manufacture of Products supplied under
this Agreement.
4.3 Inventory. Manufacturer will conduct a physical inventory of
Supplied Materials during the fourth quarter of each calendar year and at the
termination of this Agreement. Manufacturer shall reimburse Ciba for any
inventory shortages, adjusted for any differences that Manufacturer can
demonstrate to Ciba's satisfaction is traceable to reporting differences that
were reflected and credited to Ciba as favorable material usage variances in
accordance with the provisions of Section 5.2.
4.4 R600 Consumption. Manufacturer shall report consumption of R600
used in production of Manufacturer's product on a monthly basis (showing
calculation of consumption in gallons). This report will be accompanied by a
credit memo to Ciba at Ciba's average selling price per gallon.
4.5 Other Materials and Inputs. Manufacturer shall be responsible, at
its sole cost and expense, for providing all materials (except Supplied
Materials), labor, disposal activities and other inputs necessary to produce
the Product ordered by Ciba pursuant to this Agreement. Manufacturer agrees
that the sole compensation due to Manufacturer for supplying the Products is
the manufacturing fee provided in Exhibit 4.5.
4.6 Developmental Production Trials. At Ciba's option, Manufacturer
will conduct production trials for Ciba on Honeycomb Core which is not
Product. Such trials shall be produced in
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accordance with the terms of the Agreement, and quantities so produced shall
be included in calculating the Products ordered by Ciba for the purpose of
meeting its minimum ordering obligations hereunder. Facility Capacity used
therefor shall be charged against Ciba's Share. The manufacturing fees set
forth in Section 7.1 shall be applicable to, and paid by Ciba to Manufacturer
for, any and all products produced during such production trials.
5. Consumption Issues
5.1 Optimum Yield Ratios. Manufacturer shall manufacturer Product in
accordance with yields included in the 1995 Ciba budgeted standard product
costs, attached hereto as Exhibit 5.1. Any changes to the standard products
costs by Manufacturer must be preapproved in writing by Ciba.
5.2 Material Usage Variances. The Manufacturer shall credit Ciba for
favorable material usage variances to a maximum of two percent (2%) of
standard material costs. Manufacturer shall charge Ciba with unfavorable
variances up to a maximum of two percent (2%) of standard material costs.
Variances, whether favorable or unfavorable, in excess of two (2) percent
shall be credited or charged to Manufacturer, as the case may be.
Manufacturer shall report to Ciba on a monthly basis, material usage
variances by Product. Such variances shall be reported to Ciba within three
(3) days after the end of each monthly accounting period and credited or
charged to Ciba within thirty (30) days after the end of each monthly
accounting period.
6. Inventory Control. The parties recognize sound inventory management is
an important aspect of Manufacturer's performance under this Agreement.
Manufacturer agrees to utilize Ciba's existing inventory management system.
Manufacturer agrees to prepare and submit to Ciba, no later than three (3)
months before the expiration of the Operation Services Agreement, an inventory
management system suitable for the negotiation of inventory targets for the
Supplied Materials to be met during the then remaining Term of this Agreement.
Such system shall be agreeable to both parties.
Manufacturer will maintain a safety stock of Supplied Materials as set
forth in Exhibit 6. The parties will communicate on an ongoing basis as to
amended stock levels based on Ciba's needs and the pricing and availability of
supplies of Supplied Materials. If inventories exceed 2.8 months coverage, as
that level may be changed by agreement of the parties in writing, based on the
average monthly cost of goods to be shipped over the next three (3) months, in
any month, or any future month, Manufacturer will pay Ciba an excess inventory
charge calculated as follows: The value of inventory, in excess of 2.8 months
coverage, times the Prime Rate, divided by twelve (12). The Prime Rate shall
be the
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prime rate as published in the Wall Street Journal, as of the last business
day of the month for the inclusion of excess inventory.
7. Manufacturing Fees: Additional Costs: Disposal Costs:
Invoicing: Payment.
7.1 Manufacturing Fees. Ciba shall pay to the Manufacturer, for
Products produced and supplied to Ciba during the Term, a fixed price based on
the 1995 full absorption Product costs based on the applicable rate set forth
in Exhibit 4.5. The labor escalation clause for the Term is set forth in
Exhibit 7.1.
7.1.1 The first billing of Manufacturing Costs (material, labor and
overhead) shall be adjusted to give Ciba a credit for these costs in Work In
Process Inventory as at the Closing Date. The Cost value of E204 Nomex Paper
(item number 0109) as at the Closing Date will be paid to Ciba. Finished
Goods and Work In Process Inventory of Engelhard/ICC products (material,
labor, and overheads) as at the Closing Date will be paid to Ciba. The
process for determining the number of each of the units of the foregoing items
shall be to have a joint physical inventory conducted by the parties within
five (5) working days of the Closing Date. The cost of each unit shall be the
cost as determined in accordance with Exhibit 5.1 or the open order report
currently used by Ciba, as appropriate. Ciba shall provide a full summary of
these calculations to Manufacturer, and the amounts due Ciba shall be deducted
from Manufacturer's first invoice to Ciba.
7.2 Certain Disposal and Return Costs. Manufacturer shall be
responsible for the cost of Waste disposal. In the event that Waste arises
solely from Ciba developmental activities, Ciba shall be responsible for the
cost of Waste disposal.
7.3 Governmental Regulations. Prior to making any investments to comply
with new environmental regulations, Manufacturer shall confer with Ciba as to
the appropriateness of any such investment, and shall obtain Ciba's consent to
any such investment for which Manufacturer will be allowed to such
reimbursement from Ciba pursuant to this provision. Such consent shall not be
unreasonably withheld. Any increased capital expenditures for the Facility
due to new environmental regulations shall be paid for by the party whose
particular processes necessitated the capital expenditure. In the event that
both parties processes necessitate any such capital expenditures, the
Manufacturer shall pay the cost for such capital expenditure. Ciba shall
reimburse Manufacturer for its share of operation and/or maintenance required
by capital expenditure paid for by the Manufacturer through the overhead
charges paid by Ciba to Manufacturer for the production of Product.
Depreciation on capital expenditures paid for by Manufacturer shall be
calculated on a straight line basis over a ten (10) year period and reimbursed
by Ciba to Manufacturer. Ciba shall have the option
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at its sole cost and expense, to remove any improvements or equipment for
which it has paid hereunder.
7.4 Invoices. Manufacturer shall invoice Ciba for the Products at the
end of every month. Payment will be made by Ciba net thirty (30) days after
receipt of invoice. Each invoice shall set forth the quantity of Product
shipped, unit price and the applicable manufacturing fee therefor. The
original and one copy of all invoices shall be mailed to Ciba to the attention
of Controller (Stuart Wolf).
7.5 Taxes. Ciba shall be liable only for those new taxes imposed on a
buyer by operation of law and shall include sales and use taxes. Ciba may
require Manufacturer to provide Ciba with documentation reasonably
satisfactory to Ciba establishing Ciba's liability for such taxes; provided,
however, that Manufacturer shall not be required to provide such documentation
in connection with sales or use taxes unless Ciba questions the applicability
of such taxes. Ciba's Resale Number is SS OHB 30-607079.
8. Quality Control Issues.
8.1 Facility Requirements. Manufacturer will manufacture the Product
only at the Facility. Manufacturer agrees to maintain the Facility and
quality system in compliance with MIL-I-45208A, Boeing Document D1-9000 and
any other current applicable customer specifications, and to operate in
compliance therewith at all times. Manufacturer shall not deviate from such
procedures without Ciba's prior written approval, Manufacturer is fully
responsible for performance of all inspections required to ensure Products
comply with Purchase Order and contract requirements, and is further required
to maintain documentation of all such inspections for the duration of this
Agreement. Manufacturer shall provide copies of such documentation upon
request. At the completion of the Term of this Agreement, Manufacturer shall
transfer to Ciba all such quality control records.
8.2 Right of Entry. Ciba's employees shall have full access to the
Facility at all reasonable times to satisfy Ciba's needs in furtherance of
this Agreement, provided, however, that such access shall not unreasonably
interfere with the orderly operation, production and/or maintenance of the
Facility; Ciba's production runs under this Agreement for developmental
efforts at the Facility shall not constitute an interference with the orderly
operation, production and/or maintenance of the Facility. Upon Manufacturer's
consent, which shall not be unreasonably withheld, Ciba's customers shall also
have access to the Facility, provided, however, the Manufacturer shall have
the right to prohibit access to areas pertaining primarily to its own
proprietary products.
8.3 Certification. A certification that Purchase Order requirements and
applicable specifications and that records are on
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file subject to Ciba's examination shall be included on or with the packing
sheet accompanying shipments.
8.4 Nonconforming Materials. When supplies of raw materials,
intermediates or finished Products are found not to be in compliance with the
specifications applicable to such materials, they shall be identified as
nonconforming and segregated from normal production channels. Manufacturer
shall initiate and maintain records for each such action to correct the
condition. Records shall also reflect the disposition action taken,
signatures of authorizing personnel, and evidence of compliance with the
disposition. Suitable withholding areas and other necessary controls shall be
utilized to preclude the use of nonconforming supplies in the end Product and
their unauthorized delivery to Ciba or other designated destinations.
Discrepant materials must be put in a locked cage and physically separated
from conforming materials. Disposition of nonconforming materials and
Products shall be in accordance with Military Specification MIL-STD-1520C and
Ciba's instructions. All costs of handling and/or disposing of Ciba Supplied
Materials which are defective at the time of receipt shall be paid for by
Ciba, and accordingly Ciba shall reimburse Manufacturer for any of such costs
which Manufacturer may have incurred.
8.5 SPC. Manufacturer agrees to utilize Ciba's existing statistical
process control plan for dimensions and processes for the Products delivered
under this Agreement. Manufacturer agrees not to make any changes to the
statistical process control plan without the express written consent of Ciba's
Quality Assurance representative, which consent shall not be reasonably
withheld.
9. Inspection.
9.1 Goods. All goods (which includes raw materials, intermediate
products and finished Products) shall be subject to inspection and test by
Ciba and its customers to the extent practicable at all times and places
including the period of manufacture and in any event prior to final acceptance
by Ciba and its customers, but within a reasonable time after receipt by Ciba
and its Customers.
9.2 Products. Products shall be subject to final inspection and
acceptance by Ciba at destination, notwithstanding any payment or prior
inspection. Ciba may reject any or all of the Products which do not strictly
conform to the requirements of the applicable Purchase Order. Ciba shall by
notice, rejection tag or other communication notify Manufacturer of such
rejection. At Manufacturer's risk and expense, all such Products will be
returned to Manufacturer for prompt replacement or other correction and
redelivery to Ciba; provided, however, that with respect to any or all such
Products and at Ciba's election and at Manufacturer's risk, Ciba may: (a)
hold, retain or return such Products without
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permitting any replacement or other correction by Manufacturer; (b) Hold or
retain such Products until conforming replacements are obtained from a third
party; or (c) return such Products with instructions to Manufacturer as to
whether the Products shall be replaced and as to the manner of redelivery.
All replacement and other corrections and redelivery shall be completed within
such time as Ciba may reasonably require. All costs and expenses, and any
other damages incurred as a result of or in connection with nonconformance and
replacement or other correction may be recovered from Manufacturer by an
equitable price reduction, set-off or credit against any amounts that may be
owed to Ciba under this Agreement. If it is determined that Products rejected
by Ciba were in strict conformance to the requirements of the applicable
Purchase Order, Manufacturer shall not be liable for any of the foregoing
costs, and Ciba shall reimburse Manufacturer for any excess costs incurred by
Manufacturer thereby. With respect to Sales Agreements entered into by Ciba
after the Closing Date, unless otherwise agreed by the parties in writing, the
costs and expenses to be borne hereunder by Manufacturer shall be limited to
repair, replacement and freight expenses, or if required, premium freight
expenses.
Final acceptance or rejection of the Products shall be made within ninety
(90) days following receipt of Product. Ciba may revoke its acceptance of any
Product and have the same rights with regard to the Product involved as if it
had originally rejected them.
10. Process. Manufacturer shall manufacture Products exclusively by use of
Ciba's manufacturing process, techNology, and know-how (the "Process")
applicable to the Product. The Process is described in Exhibit 10 (Index to
Standard Manufacturing Procedures) and hereby incorporated by this reference.
Manufacturer shall not change the Process without the express prior written
consent of an authorized Ciba quality representative. Ciba hereby licenses
Manufacturer to use the Process only for the purpose of meeting its
obligations pursuant to this Agreement.
11. Forecasting. Every quarter during each Contract Year hereof, Ciba shall
give Manufacturer a forecast of its requirements for the following four (4)
contract quarters. Ciba and Manufacturer agree that any forecast (i) is for
Ciba's administrative purposes only, and (ii) does not constitute either an
upper or lower limit on Ciba's obligation to purchase from Manufacturer.
12. Purchase Orders.
12.1 Standard Forms. The parties recognize that during the term of this
Agreement, a Purchase Order, acknowledgment form, or similar routine document
(collectively, "Purchase Orders") may be used to implement or administer
provisions of this Agreement. Therefore, the parties agree that any
provisions of such Purchase
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Orders which purport to add to, vary, modify or are in conflict with the
provisions of this Agreement shall be deemed deleted and shall have no force
or effect on either party's rights or obligations under this Agreement or
otherwise with respect to the Products sold during the Term.
12.2 Issuance of Purchase orders. Ciba may issue Purchase orders to
Manufacturer from time to time. Each Purchase Order shall contain a
description of the Products ordered, a reference to the applicable
specifications, the quantities and prices, the terms and place of delivery,
and any special conditions. Each such Purchase Order shall be governed by and
be deemed to include the provisions of this Agreement.
12.3 Acceptance of Orders. Manufacturer's commencement of performance or
acceptance of the Purchase Order by acknowledgment shall conclusively evidence
Manufacturer's acceptance of the Purchase Order as written, except for its
general terms and conditions, which are superceded by the terms of this
Agreement. Ciba may revoke any Purchase Order prior to Ciba's receipt of
Manufacturer's written acceptance or Manufacturer's commencement of
performance. Manufacturer will be required to acknowledge all Purchase Orders
by the end of the next business day after receipt of the order.
13. Packing and Shipping Instructions. Manufacturer shall (a) prepare for
shipment and suitably pack all Products to prevent damage or deterioration,
(b) where applicable, attempt to secure lowest transportation rates, (c)
comply with the appropriate carrier tariff for the mode of transportation
specified by Ciba, and (d) comply with any special instructions stated in the
applicable Purchase Order.
Ciba shall pay no charges for standard preparation, packing, crating, or
cartage, unless stated in the applicable Purchase Order. All shipments
forwarded on one day, via one route, must be consolidated. Each container
must be consecutively numbered and marked with the applicable Purchase Order
and part number. Container and Purchase Order numbers must be indicated on
the applicable bill of lading. Products sold FOB place of shipment must be
forwarded collect. Ciba reserves the right to specify the carrier(s) used to
ship the Products hereunder. Manufacturer will notify Ciba, attention:
Neville Lewis, by fax or E-Mail, of the following information prior to each
shipment of Product: (i) Product type; Purchase Order Number; Batch Number;
and Quantity (net weight). Manufacturer will also provide required
certifications for such shipment, in such form as the parties may agree.
The parties will mutually agree to the arrangements for the shipment of
Products from Ciba's developmental work.
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14. Changes. Ciba may, at any time, by written change order make changes
within the general scope of an Order in any one or more of the following: (a
drawing, designs, or specifications; (b) shipping or packing; or (c) place of
inspection, delivery or acceptance; and (d) the amount of Ciba Supplied
Material.
Manufacturer shall immediately implement the Change Order. If any such
change causes an increase or decrease in the cost of or the time required for
the performance of any part of the work, whether changed or not changed by the
change order, an equitable adjustment shall be made in the price of or the
delivery schedule for those Products affected. Any claim by Manufacturer for
adjustment under this article must be received by Ciba in writing within
thirty (30) days from the date of receipt by Manufacturer of the written
change order or engineering drawing requirement, whichever is later.
Otherwise, any such claim shall be deemed waived. Nothing in this article
shall excuse Manufacturer from proceeding with an Order as changed, including
failure of the parties to agree on any adjustment to be made under this
Article.
If Manufacturer considers that the conduct of any of Ciba's employees has
constituted a change hereunder, Manufacturer shall immediately notify Ciba in
writing as to the nature of such conduct and its effect on Manufacturer's
performance. Pending direction from Ciba, Manufacturer shall take no action
to implement any such change.
15. On-Site Review and Management Assistance.
15.1 Review. At either party's request, the parties shall meet to
review any outstanding issues. Nothing herein may be construed as a waiver of
either party's rights to proceed against the other because of any issues
raised during such review.
15.2 Management Assistance. Without prejudice to Ciba's rights pursuant
to the termination articles in this Agreement, if Ciba reasonably believes
Manufacturer will not successfully complete any given Order, and if
Manufacturer fails to remedy the situation to Ciba's reasonable satisfaction
within thirty (30) days from written notice from Ciba to do so, Ciba may elect
to intervene in the management of this Agreement to ensure successful
completion of the Order. Such intervention may take the form of management
assistance, loan of manpower, equipment, or any other reasonable means agreed
to by the parties. Manufacturer shall reimburse to Ciba all reasonable costs
incurred by Ciba in the course of said intervention. Rates for manpower shall
be based upon the rates established in the Transitional Services Agreement.
If such intervention is subsequently determined to have been of no value,
Manufacturer shall have no obligation to reimburse Ciba for its services.
Manufacturer, however, remains fully responsible for performing in accordance
with each Order.
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16. Reports. Manufacturer will maintain and supply to Ciba the following
monthly reports:
(a) Material and labor variance/work in progress reports (CST 271);
(b) Inventory reports (to be defined); and
(c) Gross margin reports for Ciba Products (SAL 410, SAL 420, SAL 430).
17. Dedication of Facility. Subject to the terms of this Agreement,
Manufacturer shall give first priority to the production of Ciba's supply of
Product, including the conduct of developmental production runs for Ciba at
the Facility. Manufacturer will not sell, pledge, hypothecate, transfer any
interest in or otherwise encumber any asset necessary to produce Product
without the prior written permission from Ciba, except as otherwise
specifically provided in the Asset Purchase Agreement.
18. Time is of the Essence. Time is of the essence in Manufacturer's
performance of this Agreement and Purchase Orders. Deliveries shall be
strictly in accordance with the quantities and schedule specified in the
Purchase Orders, subject to the terms of this Agreement.
19. Delay. Manufacturer shall notify Ciba immediately of any circumstances
that may cause a delay in delivery, state the estimated period of delay and
the reasons therefor. At Ciba's request, Manufacturer shall make every effort
to avoid or minimize the delay to the maximum extent possible, including the
expenditure of premium time and shipping via air or other expedite routing to
avoid or minimize delays to the maximum extent possible. Any additional cost
caused by these requirements shall be borne by the party causing the delay to
the extent of such culpability. Nothing herein may be construed to prejudice
any of the rights or remedies provided to either party in this Agreement or by
law.
20. Termination. Ciba may, by written notice of default and without
prejudice to any other rights and remedies that Ciba may have at law or in
equity, terminate this Agreement in the event:
(a) of Manufacturer's insolvency, reorganization, debt arrangement,
assignment for the benefit of creditors or any other granting of
relief from creditors;
(b) that any process is issued against a substantial part of
Manufacturer's property;
(c) (i) of the institution of dissolution, liquidation or bankruptcy
proceedings by Manufacturer or (ii) of the institution of
dissolution, liquidation or bankruptcy
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proceedings against Manufacturer and the failure of Manufacturer to
obtain dismissal thereof within ninety (90) days after such
institution.
(d) in the event of any material breach of this Agreement by
Manufacturer which remains uncured within ten (10) days after
receipt of written notice from Ciba.
If Ciba terminates this Agreement, it may acquire, under the terms and in
the manner Ciba considers appropriate, Products similar to those terminated,
and Manufacturer will be liable for any excess costs for those Products.
If this Agreement is terminated for default, Ciba may require
Manufacturer to transfer title and deliver to Ciba any completed Products
and/or partially completed Products and materials that Manufacturer has
specifically produced or acquired for the terminated portion of the Agreement.
Ciba shall pay the agreed upon price for completed supplies delivered and
accepted. Manufacturer shall take all reasonable necessary actions to protect
and preserve Ciba property in its possession until such time as acceptance has
been effected, but Manufacturer shall not be so obligated for longer than
ninety (90) days following the effective date of termination.
21. Compliance with Laws and Regulations and Permits. Manufacturer has and
will maintain during the Term all Permits for the manufacture, processing,
packaging, sale and delivery of the Products. Manufacturer warrants that all
Products furnished under this Agreement and its operations will be
manufactured, processed, packaged, sold and delivered in accordance with all
applicable Laws and Regulations and Permits. Manufacturer further warrants
that it will dispose of wall Waste in compliance with all applicable Laws and
Regulations. Ciba will provide Manufacturer with Material Safety Data Sheets
and any revisions, additions or updates thereof, to assist Manufacturer in
handling such Products safely and in compliance with the aforesaid Laws and
Regulations. The affirmative action and non-discrimination requirements of 41
C.F.R. Section 60-1.4(a)(7) (issued pursuant to Executive Order 11246), 41
C.F.R. Section 60-250.4 (issued pursuant to the Vietnam Era Veterans
Readjustment Assistance Act of 1974) and 41 C.F.R. Section 41.4 (issued
pursuant to Section 503 of the Rehabilitation Act of 1973) are hereby
incorporated by this reference.
22. Disposal of Waste. Manufacturer will dispose of Waste, or arrange for
the Disposal of Waste, only at the facilities consent to in writing by Ciba,
in advance of disposal, whose consent shall not be unreasonably withheld.
Manufacturer will be solely responsible for the proper Disposal of Waste.
UNDER NO CIRCUMSTANCES SHALL CIBA BE LIABLE FOR DIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES RESULTING FROM THE USE, HANDLING, STORAGE OR DISPOSAL OF
SUPPLIED MATERIALS, PRODUCT, WASTE OR ANY OTHER CHEMICALS, RAW
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<PAGE> 15
MATERIALS OR INPUTS BY ANY EMPLOYEE, AGENT, CONTRACTOR, SUBCONTRACTOR OR OTHER
SERVANT OF MANUFACTURER OR ANY INVITEE OF MANUFACTURER.
If as a result of the change of any Laws or Regulations covering the Disposal
of Wastes by Manufacturer, the cost of Disposal of Wastes shall increase by
more than 75% over the costs in effect on the Closing Date, then in such case
an equitable adjustment in the manufacturing fee shall be made by mutual
agreement of the parties.
23. Insurance Requirements. During the term of this Agreement, Manufacturer
shall obtain, and maintain, at is sole cost, the following insurance coverage
set forth below with companies satisfactory to Ciba with full policy limits
applying, but not less than, as stated: (a) Workers' Compensation Insurance
as required by laws and regulations applicable to and covering employees of
Manufacturer engaged in the performance of the manufacturing services under
this Agreement. (b) Employers' Liability Insurance protecting Manufacturer
against common law liability, in the absence of statutory liability, for
employee injury arising out of the master-servant relationship with a limit of
not less than Five Hundred Thousand Dollars ($500,000) per occurrence. (c)
Commercial General Liability Insurance including products completed operations
(excluding aviation products) with limits of liability of not less than:
personal Injury - One Million Dollars ($1,000,000) each occurrence/aggregate;
Property Damage - One Million Dollars ($1,000,000) each occurrence/aggregate.
(d) Automobile Liability Insurance including non-owned and hired vehicle
coverage with limits of liability of not less than: Bodily Injury - Two
Million Five Hundred Thousand Dollars ($2,500,000) each occurrence;
Property Damage - Two Million Five Hundred Dollars ($2,500,000) each
occurrence and in the aggregate; (e) Excess Liability Insurance over
Commercial General Liability and Comprehensive Automobile Liability coverages
afforded by the primary policies described above, with the aggregate of at
least Ten Million Dollars ($10,000,000). Aviation Products Liability
Insurance - with limits of liability not less than Five Million ($5,000,000)
each occurrence/aggregate will be maintained by Ciba and Manufacturer will be
added as an additional insured on Ciba's corporate program at no cost to
Manufacturer.
Manufacturer shall promptly furnish Ciba with certificates of insurance
or true copies of policies, showing the above coverages and providing for at
least thirty (30) days' prior written notice to Ciba of cancellation or
modification. Such certificates or policies shall be in a form and
underwritten by a carrier and/or placed through a broker designated by or
satisfactory to Ciba.
A certificate naming Ciba as additional-insured and evidencing the
Comprehensive General Liability and Excess Liability coverages shall be
promptly delivered to Ciba. The policy or certificate of Commercial General
Liability and Excess Liability
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<PAGE> 16
coverages shall show that it is primary coverage and not concurrent or excess
over other valid insurance which may be available to Ciba, and shall certify
as to Contractor's Comprehensive General Liability Insurance (a) that
restrictive clauses, such as the care, custody and control exclusion in the
property damage section have been eliminated from the policy and no similar
restrictive clauses included; and (b) that all liability assumed by
Manufacturer under this Agreement is insured. Acceptance by Ciba of
Manufacturer's Certificate of Insurance evidencing coverage provided by the
Manufacturer will be deemed compliance by Manufacturer with the provisions of
this paragraph.
If so required by Ciba, Manufacturer shall alter the lines of Insurance
and/or increase the limits thereof, from those set forth in this Section, and
any such change shall be at the expense of Ciba, but only to the extent that
such expense is applicable to this Agreement. In the event Manufacturer so
desires, it may carry out or take additional lines of insurance or increased
limits over those set forth in this Agreement, but in any such case at its own
expense.
Insurance coverage, or lack thereof, shall not be deemed to constitute a
limitation on any liability of Manufacturer to Ciba under this Agreement, and
Manufacturer shall remain liable for all such losses or expenses.
24. Indemnification. Manufacturer will indemnify, defend and hold Ciba, its
officers, directors, agents, contractors and employees harmless against any
and all claims, damages, losses, liabilities and related costs and expenses
(including reasonable attorneys' fees and disbursements) arising directly or
indirectly from: (a) Manufacturer's noncompliance with applicable Laws and
Regulations and Permits; and (b) the conduct of Manufacturer's business at the
Facility including but not limited to the manufacture, use, handling, storage,
release, transportation or disposal of chemicals, raw materials, Ciba Supplied
Materials, Product, Waste or any other substance by any employee, agent,
independent contractor or subcontractor of Manufacturer or by any invitee of
Manufacturer other than Ciba. Such duty of indemnification shall include, but
not be limited to, any claim pursuant to any laws and Regulations and Permits
now or hereinafter in effect relating to the regulation and protection of
human health, safety, welfare, the environment or natural resources. The
obligations set forth in this Section shall not be limited by any other term
or condition in this Agreement.
25. Safe Storage. Manufacturer represents, warrants and agrees that the
areas where the Supplied Materials, work in progress, and Products are
physically placed or held are, and shall be, at all times during the term of
this Agreement, safe, secure and protected from adverse conditions. Such
areas shall be equipped with appropriate containment systems for the safe and
secure storage of
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<PAGE> 17
Supplied Materials, work in progress, and Products. Manufacturer shall take
all reasonable precautions necessary to prevent contamination of, and any
tampering with, the Supplied Materials, work in progress and Products, and
shall take all reasonable precautions necessary to prevent contamination by
the Supplied Materials, work in progress or products of other goods stored
with Supplied Materials, work in progress and Products.
26. Title and Risk of Loss. Title to Supplied Materials, work in progress
and Product shall at all times be with Ciba. Risk of loss of Supplied
Materials and Products shall also be with Ciba except when any of same are in
Manufacturer's possession, on its premises or under its control, during which
time risk of loss shall be with Manufacturer. Title to, and risk of loss of,
Waste will at all times remain in Manufacturer. Manufacturer shall not sell,
pledge, hypothecate or otherwise transfer to any third party any interest in
the Supplied Materials or Product. Manufacturer shall fully cooperate with
Ciba in taking such steps as Ciba may reasonably require in order to protect
its interest in Supplied Materials or Product against the claims or competing
interests of third parties, including any creditors of Manufacturer.
27. Inspections and Auditing. During the term of this Agreement and for two
(2) years thereafter: (a) Manufacturer shall make available to Ciba for its
review, during normal business hours and upon reasonable prior notice, all
records and reports relating to the manufacturing, processing, quality
control, storage, packaging, transportation and disposal of Product, Waste and
other materials used in the manufacture of Products, and Ciba shall have the
right to copy these documents as required; (b) to send its representatives to
audit, inspect and observe the manufacture, processing, packaging, storage,
transportation and disposal of Products, Waste and other materials used in the
manufacture of Product, and to conduct other types of audits reasonably
required for its internal control or to ensure compliance with legal or other
requirements relating to Ciba's or Manufacturer's activities under this
Agreement; in each case at any time during normal business hours and with
reasonable notice. Ciba's representatives shall have no responsibility for,
or right of, supervision of Manufacturer's employees who are performing the
manufacturing, processing, packaging, storage, transportation or disposal
operations or for the operations themselves. Each party shall bear its own
costs hereunder.
28. Independent Contractor. Nether party assumes, nor authorizes any
representative or other person to assume for it, any obligation or liability
other than such as is expressly set forth herein. Manufacturer shall be an
independent contractor with respect o its obligations hereunder. Neither
party nor their employees shall be deemed servants, joint venturers, employees
or agents of the other.
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<PAGE> 18
29. Force Majeure. A party shall be excused from performance hereunder if
its failure to perform arises from events beyond its reasonable control and
occurring without its fault or negligence and which were not reasonably
foreseen or foreseeable at the time of execution of this Agreement (each, an
"Event of Force Majeure"). Possible examples of such Events of Force Majeure
are war, fire, flood, strike, accident, riot, acts of governmental authority
(whether or not valid) or acts of God. The party whose performance will be
delayed by such events shall provide prompt notice to the other party and
shall indicate the estimated duration of such Event of Force Majeure, and
shall use all reasonable efforts to mitigate the effects of such Events of
Force Majeure.
If, by reason of any such Event of Force Majeure, Manufacturer is excused
from performance then, to the extent Products are not delivered to Ciba, in
the quantities or at the times required hereunder, Ciba may purchase the same
or similar services from other sources without liability or obligation to
Manufacturer. In the event Ciba purchases services from another source, then
Ciba may to the full extent of such purchases, reduce its commitment for
services, if any, hereunder. All quantities of Product purchased from such
other sources by Ciba shall be considered Product purchased from Manufacturer
for purposes of calculating discounts based on volume allowed under this
Agreement, if any. During any period of shortage due to any of said Events of
Force Majeure, Manufacturer shall allocate its supply of raw materials on a
first priority basis to Ciba's production of Product. In addition, Ciba may,
at its option, extend the term of this Agreement to permit partial or total
delivery of Products not delivered, and not secured elsewhere, because of any
such Event of Force Majeure. If such Event of Force Majeure continues for
more than sixty (60) days, Ciba has the option, at any time thereafter during
which the Event of Force Majeure is continuing, to terminate this Agreement
without liability to Manufacturer, except to pay for Products already
accepted.
30. Liquidated Damages. The parties agree that in the event the work is not
completed on or before a grace period of two weeks after the delivery dates,
damages will be sustained by Ciba, and that it is and will be impractical to
determine the actual damage which Ciba will sustain in the event of and by
reason of such delay. It is therefore agreed that Manufacturer will pay to
Ciba the sum of one percent (1%) of the Total Value of the Shipment per day
beyond the grace period, as liquidated damages and not as a penalty. It is
further agreed that such amount per day is a reasonable estimate of such
damages, that said amount per day is a reasonable relationship to the damage
that would be sustained by Ciba, and Manufacturer agrees to pay such
liquidated damages as herein provided. Manufacturer agrees that Ciba may
deduct the amount to be paid for such liquidated damages from any money due or
that may become due under this Agreement. The amount so deducted
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<PAGE> 19
shall not be a limitation on the amount to be paid as liquidated damages.
Manufacturer shall not be deemed in default of this Agreement and
Manufacturer shall not be charged liquidated damages because of any delays in
the completion of work due to an event of Force Majeure. Notwithstanding the
foregoing, Manufacturer's liability to Ciba hereunder shall not exceed the
Total Value of the Shipment. For purposes of this Section 30 Total Value of
the Shipment means the sum of the payment for the particular Products in
question by Ciba to Manufacturer, the cost to Ciba of the Supplied Materials,
and any costs for freight.
31. Confidentiality. The parties acknowledge that in the course of
performance of this Agreement, they may have access to or acquire information
concerning Manufacturer or Ciba and their respective affiliates, as the case
may be, that is confidential and proprietary. To the extent possible,
information disclosed in tangible form shall be marked "PROPRIETARY" or
"CONFIDENTIAL" but the failure to so mark such information shall not nullify
the confidential nature of the information; and in the case of disclosures
made orally or by visual inspection, such information shall be reduced to
writing within a reasonable period of time after such disclosure and marked as
stated above. The parties agree to hold such information in strict
confidence, not to disclose such information to third parties and not to use
such information for any purpose other than in connection with this Agreement.
32. Notices. Notices and other communications made with respect to this
Agreement shall be given in writing and addressed to the parties at the
addresses set forth below or such other addresses as may be designated in
writing by either party to the other. Notices shall be delivered by hand, by
facsimile, by first class mail or by a nationally recognized overnight courier
service. Unless otherwise indicated herein, all notices shall become
effective upon receipt, when delivered by hand or by facsimile; or three (3)
days after deposit in the United States mail when sent by first class mail
with proper postage prepaid; or on the next business day when sent by a
nationally recognized overnight courier service, with proper postage prepaid.
Notices shall be addressed to the attention the signatures or such other
person as may be designated in writing by either party to the other.
Ciba Composites Engelhard/ICC
5115 East La Palma Avenue 441 North Fifth Street
Anaheim, CA 92807 Philadelphia, PA 19123
Attention: Vice President Fax No.: 215-592-8299
General Manager, Composites
Fax No.: 714-779-5810
33. Subcontracting. Manufacturer may not procure any Product, as defined in
the applicable Purchase Order, from a third party in a
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<PAGE> 20
completed or a substantially completed form without Ciba's prior written
consent.
34. Assignment. This Agreement shall not be assigned or transferred by
Manufacturer (whether in connection with a sale of stock; sale, transfer or
lease of all or substantially all of the assets of a Manufacturer; merger; or
otherwise by operation of law) without the prior written consent of Ciba.
This Agreement shall bind the permitted successors and assigns of the parties
hereto. Any assignment or transfer of this Agreement by Manufacturer in
violation of this provision shall be void and ineffective for all purposes and
shall be a material breach of this Agreement.
35. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of laws.
36. Waivers; Modifications. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must
be in writing and signed by the party making the waiver. Modifications hereof
or additions thereto are not effective unless in a writing which specifies
that it is a modification to this Agreement and is signed by duly authorized
representatives of the parties.
37. Severability. If any provision of this Agreement is held to be invalid
or unenforceable by a court having competent jurisdiction, such court shall
have the power to modify such provision so that it will be valid and
enforceable, and in any such case the balance of this Agreement will be in
full force and effect.
38. Headings. The Section titles in this Agreement are for convenience only
and shall not define or limit any of the provisions of this Agreement.
39. Survival. The obligations set forth in Sections 24, 27, 31 and 43 and
this Section 39 shall survive any termination or expiration of this Agreement.
40. Entire Agreement. This Agreement, and any exhibits, schedules, addenda
and attachments hereto comprise the entire agreement between the parties with
respect to the manufacturing and supply of the Products and merge and
supersede all prior and contemporaneous agreements or understandings, oral or
written, with respect thereto.
41. Disputes. Any dispute arising under this agreement that is not settled
by agreement of the parties may be resolved by appropriate legal proceedings.
Pending any decision, appeal, or Judgment, or settlement of any dispute
arising under, out of, or in
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<PAGE> 21
connection with this Agreement, both parties shall proceed diligently with the
performance of this Agreement and Orders.
42. Mitigation and Cap. Both parties shall take all reasonable actions to
mitigate their respective damages under this Agreement. Notwithstanding
anything herein to the contrary, in no event shall the aggregate of all
liabilities of either party to the other arising out of this Agreement exceed
($1,000,000) one million dollars.
43. Non Competition.
(a) Manufacturer agrees that for a period of ten (10) years after the
Closing Date it will not, directly or indirectly, engage, undertake or
participate in (as a principal, agent, partner, stockholder, consultant,
representative or otherwise) worldwide in the business of developing, making,
manufacturing, selling, marketing, distributing, delivering, commercializing
or otherwise disposing of, whether for profit or non-profit, honeycomb core
outside of the Field, as Field is defined in the Asset Purchase Agreement,
provided, however, that nothing herein contained shall prohibit (i) the
ownership by Manufacturer of not more than five percent (5%) of the stock of
any corporation whose stock is listed on a national securities exchange or
traded on NASDAQ; or (ii) the ownership by any employee benefit plan or fund
of Manufacturer of any amount of the stock of any corporation whose stock is
listed on a national securities exchange or traded on NASDAQ.
(b) Remedy. Manufacturer and Ciba each acknowledge and agree that it
will be impossible to measure in money the damages to Ciba if Manufacturer
fails to comply with any of the provisions of this paragraph 43 and agrees
that in any such event Ciba will not have an adequate remedy at law.
Moreover, Manufacturer and Ciba each affirms and recognizes that the rights of
Ciba under the aforesaid instances is special, unique and of any extraordinary
character, it is therefore agreed that: (i) Ciba in addition to any other
rights and remedies which it may have, shall be entitled to injunctive relief
to enforce any of the aforesaid restrictions and obligations herein imposed
upon the Manufacturer and that in the event that any action or actions shall
be brought in equity to enforce any such restrictions and obligations, the
Manufacturer will Not urge the defense that there is an adequate remedy at
law: (ii) The period of time set forth in this paragraph shall be tolled for
any periods during which Manufacturer is in breach of any of its obligations
thereunder.
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<PAGE> 22
IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement as of the date first above written.
Ciba-Geigy Corporation,
Composites Division
By: /s/ JAMES A. KOSHAK Title: V.P./Gen Mgr.
------------------------------- ----------------------
Engelhard/ICC
By: ICC DESICCANT TECHNOLOGIES, INC.
By: /s/ IRWIN L. GROSS Title: CEO
----------------------- ----------------------
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<PAGE> 1
EXHIBIT 10.3
TECHNICAL INFORMATION, TRADEMARK
AND PATENT LICENSE AGREEMENT
Technical Information, Trademark and Patent License Agreement dated March
27, 1995 ("Effective Date") by and between Engelhard/ICC, a partnership
organized and existing under the laws of the Commonwealth of Pennsylvania,
United States of America, (hereinafter referred to as "E/ICC") and Chung-Hsin
Electric & Machinery Manufacturing Corporation, a corporation organized and
existing under the laws of the Republic of China (hereinafter referred to as
"CHEM").
WITNESSETH:
WHEREAS, E/ICC owns certain patents, and technical information and
know-how associated with the design, manufacture and application of the System
(defined below);
WHEREAS, CHEM desires to obtain licenses under such patents and technical
information and know-how of E/ICC to manufacture and market the System and to
design, manufacture and market the CHEM System (defined below) in the Republic
of China and other areas as provided in this Agreement under license from
E/ICC, and with technological assistance extended by E/ICC; and
WHEREAS, E/ICC is willing to license such patents and technical
information and know-how and provide such technical assistance, all in
accordance with the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained and other good and valuable
consideration, the parties hereby agree as follows:
Article 1. Definitions
1.1 As used in this Agreement, the following terms shall have the
meanings as set forth herein:
(a) "E/ICC's System Patents" shall mean System related patents now
in the possession of E/ICC or those acquired during the term of this Agreement
which rely on E/ICC's System Technical Information and Know-How. E/ICC's
System Patents now in existence are listed in Schedule "A" attached hereto.
(b) "E/ICC's System Technical Information and Know-How" shall mean
System related technology developed by and belonging to E/ICC or such
technology that may be developed during the term of this Agreement. The
contents of E/ICC's System Technical Information and Know-How which is now in
existence as of the Effective
<PAGE> 2
Date shall be set forth separately by E/ICC in Schedule "B" attached hereto.
(c) "Sales Price" shall mean ninety-two percent (92%) of CHEM's
gross invoice price for Systems produced under this Agreement.
(d) "Supply Agreement" shall mean the Agreement dated March 27,
1995 between the parties hereto which relates to the purchase by CHEM of
certain products from E/ICC, as the same may be amended from time to time
pursuant to the terms thereof.
(e) "Rotor Products" shall mean any and all rotors or cassettes
which include a desiccant or drying material or agent or that is capable of
use for heat exchange or any other purpose that is used or to be used in any
heating/air-conditioning/treatment system.
(f) "Ancillary Products" shall mean additional ancillary
components, full systems or sub-systems that may also be purchased at the
request of CHEM.
(g) "E/ICC's Sales Price" shall mean ninety-two percent (92%) of
E/ICC's gross invoice price for Systems or CHEM Systems produced under this
Agreement;
(h) "System" shall mean a desiccant air-conditioning product
designed and developed solely by E/ICC which may include a Window Product
(defined below) which incorporates E/ICC components, including Rotor Products
and Ancillary Products and technology or know-how for which E/ICC is free to
grant licenses without accounting to any third party.
(i) "Window Products" shall mean air-conditioning,
dehumidification, heat exchange or air treatment products which incorporate
Rotor Products that can be installed in a window size opening or are of a size
rating of three (3) refrigerated tons (U.S.) or smaller.
(j) "CHEM Systems" shall mean any product which utilizes E/ICC's
System Patents and E/ICC's System Technical Information and Know-How or which
contains Rotor Products which is first designed and developed solely by CHEM,
which may include a Window Product.
(k) "Territory shall mean all of the countries of the world except
for Israel, Turkey, Greece, Egypt and Cyprus.
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<PAGE> 3
Article 2. Disclosure and Technical Assistance
2.1 Subject to the provisions of Paragraph 4.1, E/ICC agrees that on the
Effective Date or as soon thereafter as is reasonable under the circumstances,
E/ICC shall disclose to CHEM E/ICC's System Technical Information and Know-How
and E/ICC's System Patents in existence on the Effective Date.
2.2 From time to time during the term of this Agreement, E/ICC and CHEM
shall have a regular exchange of experience and information and E/ICC shall
disclose to CHEM E/ICC's System Technical Information and Know-How and E/ICC's
System Patents owned, developed or acquired by E/ICC after the Effective Date.
2.3 E/ICC shall make available to CHEM technically qualified trained
employee(s) familiar with E/ICC's System Technical Information and Know-How
whose purpose and obligation shall be to advise CHEM's personnel in the
design, manufacture, application, use and sale of Systems which employ E/ICC's
System Technical Information and Know-How. For the first year following the
Effective Date, E/ICC will provide up to one thousand (1000) hours of
technically qualified trained employee(s), and for the second year following
the Effective Date, up to five hundred (500) hours of technically qualified
trained employee(s), to make available to CHEM at mutually agreeable times and
places, which may include the Republic of China when requested in writing by
CHEM, and will also include Philadelphia, Pennsylvania, U.S.A. and by phone
conference and video conference with CHEM, when available. Payment for
salaries and expenses for E/ICC technically trained employees up to the above
hourly limits, will be borne by E/ICC. In the event that CHEM personnel visit
the U.S., all salaries and expenses for CHEM personnel will be borne by CHEM.
In each case, the hosting party will assist the visiting party in making
economical travel arrangements.
2.4 Any information which E/ICC shall disclose to CHEM shall be in
English.
Article 3. Licenses
3.1 (a) Subject to the provisions of Article 4, E/ICC hereby grants and
agrees to grant to CHEM:
(i) an exclusive [as limited in paragraph 3.1(b)],
non-transferable license without the right to sublicense under
E/ICC's System Patents and E/ICC's System Technical Information
and Know-How to manufacture and sell Systems and to design,
manufacture and sell CHEM Systems in the Republic of China;
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<PAGE> 4
(ii) a non-exclusive, non-transferable license without the
right to sublicense under E/ICC's System Patents and E/ICC's
System Technical Information and Know-How to manufacture and
sell Systems and to design, manufacture and sell CHEM Systems
in the People's Republic of China.
(b) CHEM's initial period of exclusivity under Paragraph 3.1(a)(i)
is for three (3) years commencing with the Effective Date. For the first three
(3) years, the parties agree to establish a yearly business process to review
actual performance against performance guidelines shown in Schedule "C." The
parties will work together in this process to make recommendations for both
manufacturing, marketing and pricing to ensure the performance of the
desiccant business. At the end of year three (3), E/ICC and CHEM will meet and
mutually determine firm performance targets for years four (4) and five (5).
After year four (4), if CHEM has not achieved the firm performance targets,
except as caused by force majeure, E/ICC shall have the right to convert
CHEM's license from exclusive to non-exclusive based on the running royalty
described in Article 4.
(c) It is understood that the license-granted or to be granted
pursuant to Paragraphs 3.1(a) will not include or imply: (1) any license to
manufacture Systems outside of Republic of China or The People's Republic of
China; or (2) any authorization on the part of E/ICC for CHEM to communicate,
use, transfer or deliver any of E/ICC's System Technical Information and
Know-How outside of Republic of China or The People's Republic of China except
as provided in Article 10.
(d) Within the Territory, except for the Republic of China and the
People's Republic of China, E/ICC has the right to establish exclusive
distribution arrangements with other parties. If CHEM identifies a business
opportunity in the Territory outside the Republic of China and the People's
Republic of China, E/ICC will work together with CHEM to seek a business
arrangement to take advantage of the business opportunity, including
negotiating with third parties. In addition, as part of the business review
process established in Paragraph 3.1(b), CHEM shall have the right to nominate
countries within the Territory for non-exclusive distribution by CHEM, (so
long as exclusive arrangements have not been previously established by E/ICC).
Article 4. Compensation
4.1 Subject to: (i) obtaining the approval of CHEM's Board of Directors
which CHEM agrees to request at the first Board of Director's meeting which
follows the Effective Date, (ii) the performance bond in Schedule "D" of Two
Hundred Fifty Thousand
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<PAGE> 5
Dollars (U.S. $250,000.00), and (iii) the Testing Specification in Schedule
"E"; CHEM agrees to pay to E/ICC the sum of Five Hundred Thousand Dollars
(U.S. $500,000.00) within twenty (20) days of the Effective Date. Such fee
shall be non-refundable and not applicable to any future royalty payments.
4.2 In consideration of the licenses granted by E/ICC to CHEM pursuant
to Paragraph 3.1(a) hereof, CHEM agrees to pay to E/ICC a running royalty of
two and one-half percent (2.5%) of CHEM's Sales Price, for all Systems which
are manufactured and sold by CHEM. CHEM shall not pay any running royalty for
Systems which are produced by CHEM at the written request of E/ICC which are
for delivery to E/ICC or to a customer of E/ICC.
4.3 CHEM agrees to pay to E/ICC a running royalty of five percent (5%)
of the Rotor Products Base price (as defined in the Supply Agreement) listed
in Schedule "C" of the Supply Agreement for all desiccant and thermal cassette
rotors that are utilized in CHEM Systems which are sold by CHEM. CHEM shall
not pay any running royalty for CHEM Systems which are produced by CHEM at the
written request of E/ICC which are for delivery to E/ICC or to a customer of
E/ICC.
4.4 E/ICC agrees to purchase and CHEM agrees to fabricate and sell
Systems and CHEM Systems as an original equipment supplier to E/ICC, on a
non-exclusive basis, as defined herein before. E/ICC agrees to work
cooperatively with CHEM to expand the manufacturing and sales opportunities in
the marketplace, based on CHEM's product competitiveness and market demand. In
the Southeast Asian countries, where practical, E/ICC agrees to present CHEM
with the opportunity to supply manufactured product for itself and E/ICC will
also request that its distributor(s) or agent(s), (exclusive or non-exclusive)
give CHEM the opportunity to supply manufactured product, based on CHEM's
product competitiveness including cost, quality, reliability and other
factors. As part of the yearly business review process established in
Paragraph 3.1(b), E/ICC will meet on a yearly basis with CHEM to review the
business performance. The parties agree to establish mutually the initial OEM
price, quantity, warranty, and other terms as required when the first such
System or CHEM System is completed. CHEM shall not pay any running royalty for
Systems or CHEM Systems which are produced by CHEM at the written request of
E/ICC which are for delivery to E/ICC or to a customer of E/ICC.
E/ICC will purchase systems on an FOB Keelung port basis based on a
Letter of Credit from E/ICC with payment terms within thirty (30) days of
invoice.
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<PAGE> 6
Article 5. Improvements in Technology
5.1 CHEM shall promptly disclose to E/ICC any improvements and/or
developments relating to Systems (e.g., fan, control system, housing etc.)
developed by it during the term of this Agreement, together with the patents,
patent applications and technical information and know-how of CHEM relating
thereto, and shall grant and hereby agrees to grant to E/ICC a non-exclusive
royalty-free, non-transferable worldwide license outside of the Republic of
China and the People's Republic of China to make, have made, use and sell such
improvements and/or developments under its patents patent applications and
technical information and know-how. E/ICC shall have the right to convert its
non-exclusive license to an exclusive license; the royalty rate for the
exclusive license shall be five percent (5%) of E/ICC's Sales Price of each
such improved System sold by E/ICC.
5.2 In the event that CHEM develops a CHEM System, CHEM shall grant and
hereby agrees to grant to E/ICC a non-exclusive, non-transferable, worldwide
license under its patents, patent applications, technical information and
know-how for use outside of the Republic of China and the People's Republic of
China to make, have made, use and sell such CHEM System. For said license,
E/ICC agrees to pay to CHEM a royalty of five percent (5%) of E/ICC's Sales
Price for each such CHEM System sold by E/ICC.
Article 6. Manufacture and Quality Control
6.1 CHEM shall with reasonable assistance from E/ICC:
(a) obtain all necessary manufacturing and product licenses as well
as any other governmental permissions and registrations necessary for the
design, manufacture, packaging, sale and distribution of Systems;
(b) manufacture the Systems strictly in accordance with E/ICC's
specifications and directions;
(c) follow such quality control procedures as E/ICC shall from time
to time specify to assure that the Systems sold by CHEM under E/ICC's
trademarks and trade names meet E/ICC's quality standards and customer
specifications;
(d) ship to E/ICC at E/ICC's expense, if available if requested by
E/ICC a representative System produced by CHEM for test and approval of
quality by E/ICC; and
(e) permit the duly authorized representatives of E/ICC to inspect
during normal working hours each of CHEM's plants, the process of manufacture
and packaging of the Systems by CHEM, and
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<PAGE> 7
cause to be inspected by them the plant of any contract manufacturer producing
any components used in production of the Systems when reasonably practicable.
6.2 The decision of E/ICC made after consultation with CHEM and taking
into consideration the views of CHEM shall be final as to whether the
provisions of Paragraph 6.1 are being properly met. If E/ICC's decision is
that a provision of Paragraph 6.1 is not being properly met by CHEM, then
E/ICC agrees to work with CHEM, at no charge to CHEM, to help to correct the
problem.
6.3 Systems which do not meet E/ICC's quality standards shall not be
sold or distributed by CHEM, unless all defects are corrected to the
satisfaction of E/ICC.
6.4 Despite any approval by E/ICC of Systems provided pursuant to this
Article, CHEM shall remain solely responsible for the quality of the System
which it produces, and CHEM agrees to exercise all due care and diligence in
the manufacture, processing, packaging, sale and distribution of the System.
Article 7. Records and Reports
7.1 Within thirty (30) days after the end of every six-month calendar
period (June 30 and December 31) (the "Period") during the term of this
Agreement, CHEM shall furnish to E/ICC a written report ("Report") duly
certified by an officer of CHEM setting forth, as of the end of such Period,
the total number of Systems and CHEM Systems sold-by or for CHEM during the
preceding Period, together with the Sales Price for each such System, and CHEM
Systems and the amount of-royalties payable hereunder for such Period.
Within fifteen (15) days after receipt of a Report, E/ICC shall issue an
invoice to CHEM for the royalties due and CHEM shall pay the invoice within
fifteen (15) days after receipt of an invoice. The first such Report shall be
submitted as herein set forth for the Period that covers from the Effective
Date of this Agreement up to either June 30, 1995 or December 31, 1995
whichever occurs first. A final report shall be rendered within sixty (60)
days after, and as of, the date of sale of the last System or CHEM System
manufactured under this Agreement with respect to all such Systems or CHEM
Systems sold up to the date of termination, but which was not covered by prior
reports. All payments to be made under this Agreement by CHEM to E/ICC shall
be made in United States Dollars and shall be made by wire funds transfer.
7.2 CHEM shall keep and maintain accurate and complete records and books
of account containing all information required for the computation and
verification of the amounts to be paid under this Agreement and such records
shall be made available by CHEM at such times as E/ICC shall reasonably
request.
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<PAGE> 8
7.3 With respect to any payments to be made to E/ICC pursuant to the
terms of this Agreement, CHEM shall have the obligation to deduct any taxes,
fees, assessments or other charges of any kind imposed by the government of
Republic of China and the People's Republic of China any subdivision thereof,
or any other governmental unit within its territory (hereinafter referred to
as "Charges"). Such Charges shall be deducted by CHEM from payments due to
E/ICC and remitted to the appropriate governmental authority. CHEM shall
furnish documentation regarding the payment of any Charges so deducted to
E/ICC in sufficient detail to show the amount of the charge, the nature of the
charge and proof of payment of the charge. Notwithstanding the foregoing, CHEM
shall be responsible for payment of any value-added tax that may be imposed on
payments to E/ICC.
7.4 Where the provisions of this Agreement require the conversion into
United States Dollars of an amount initially computed in any other currency,
the amount of United States Dollars payable under this Agreement shall be
determined on the basis of the Exchange Rate in effect in the Republic of
China on the date such payment is made. In the event that payment is made
after the due date, the other currency obligation of CHEM shall be increased
to account for Exchange Rate fluctuations to the extent necessary, if any, to
produce the same United States Dollar payment to E/ICC which would have been
made if such payment had been made on the due date. Exchange Rate shall mean
the telegraphic transfer price charged by a Class A foreign exchange bank in
the Republic of China for purchases of United States Dollars by CHEM with New
Taiwan Dollars for payment abroad.
7.5 Any and all royalties or other sums that may become due and owing
from CHEM hereunder shall bear interest from and after the respective due
dates thereof at a rate of one percent (1%) per month.
Article 8. Markings and Descriptive Literature
8.1 E/ICC may require CHEM to utilize an E/ICC trade name or trademark
on all Systems, System Components and CHEM Systems (herein collectively
referred to as "SYSTEMS') sold by CHEM which are or contain any E/ICC
components.
8.2 In selling or promoting the sale of any SYSTEMS, CHEM shall obtain
the prior written consent of E/ICC directly to use any trademarks or trade
names of E/ICC or any trademarks or trade names similar thereto other than for
those trademarks and trade names that are specifically provided for herein.
8.3 CHEM shall insure that all labels, name tags, markings, cartons,
containers, package inserts and other promotional mate-
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<PAGE> 9
rials relating to the SYSTEMS will comply with all relevant laws and
regulations of the countries where SYSTEMS are to be sold and also with
E/ICC's requirements.
8.4 Before any labels, name tags, markings, cartons, containers, package
inserts or other packaging material (hereinafter collectively referred to as,
"Packaging Materials) are used with SYSTEMS, CHEM shall submit to E/ICC an
original copy of the exact Packaging Materials to be used, and no such
Packaging Materials may be used until E/ICC has given its prior written
approval for its use. In the event that E/ICC shall fail to respond within
thirty (30) days of receipt of such submission, approval shall be deemed to
have been given.
8.5 CHEM may not distribute any descriptive literature, advertising or
any material concerning the SYSTEMS without first furnishing E/ICC with drafts
thereof and requesting and securing E/ICC's written approval for such
material. In the event that E/ICC shall fail to respond within thirty (30)
days of receipt of such request, consent will be deemed to have been given.
Article 9. Trademarks
9.1 Subject to the terms and conditions of this Agreement and in further
consideration of the fees received hereunder, E/ICC hereby grants to CHEM the
non-exclusive right to use E/ICC; unregistered trade names and registered
trademarks, when obtained, for example, Desert Cool, DESI/AIR and other E/ICC
trademarks ("Licensed Marks") in connection with Systems or CHEM Systems for
distribution and sale in the Territory.
9.2 The Licensed Marks shall be used by CHEM only with respect to
Systems and CHEM Systems as shall be approved in advance in writing by E/ICC.
9.3 CHEM agrees to maintain such quality standards as shall be
prescribed by E/ICC in the conduct of the business operations with which the
Licensed Marks are used and for the goods on which the Licensed Marks are
used. CHEM agrees to manufacture or have manufactured Systems in accordance
with such specifications as may be prescribed by E/ICC from time to time.
9.4 CHEM agrees that it will display the Licensed Marks only in such
form or manner as shall be specifically approved in writing in advance by
E/ICC. CHEM also shall cause to appear on all materials on or in connection
with which the Licensed Marks are used, such legends, markings and notices as
E/ICC may request in order to give appropriate notice of any trademark rights
therein.
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<PAGE> 10
9.5 Upon reasonable notice and during normal business hours, E/ICC shall
have the right to inspect CHEM's business operations conducted under the
Licensed Marks in order to assure E/ICC that the provisions of this Agreement
are being observed. Such inspection shall include quality control data
related to the Systems and including samples for testing by E/ICC when so
requested. E/ICC will attempt not to disturb normal business operations during
such inspections.
9.6 CHEM acknowledges E/ICC's ownership of the Licensed Marks and CHEM
agrees that all use by CHEM of the Licensed Marks shall be in accordance with
the directions of E/ICC for their use and that all use of the Licensed Marks
by CHEM shall inure to E/ICC's benefit.
9.7 As of the Effective Date, E/ICC is not aware of any third party
trademark rights that would be infringed by CHEM's use of the Licensed Marks
as contemplated hereunder.
Article 10. Confidentiality
10.1 Except as specified in this Paragraph and except to the extent that
such E/ICC System Technical Information and Know-How ("INFORMATION") is or
becomes public knowledge otherwise than by any act or omission of CHEM, all
INFORMATION disclosed under this Agreement, and all samples and materials
embodying such INFORMATION shall be treated by CHEM as confidential and shall
not be disclosed or made available to any third party. CHEM shall have the
right to disclose such INFORMATION and samples and materials embodying such
INFORMATION to a potential purchaser of Systems but only to the extent
necessary for the use of such Systems by such purchaser; provided, however,
that prior to any such disclosures, and as a condition thereto, such purchaser
shall have entered into with CHEM a confidentiality agreement to hold such
INFORMATION and samples and materials in confidence; not to disclose such
INFORMATION or make available such samples and materials to any other third
party; not to analyze such samples or materials; and not to use same except in
connection with the commercial use of System purchased from CHEM; such
obligations will continue for a period of fifteen (15) years after the date
the INFORMATION is disclosed or samples and materials are made available,
except to the extent such INFORMATION is or becomes public knowledge otherwise
than by any act or omission of such purchaser. CHEM shall have the right to
disclose such INFORMATION and make available samples and materials embodying
same to those of its management and technical or production employees who
shall have a need to know same for the purposes provided by this Agreement and
who shall have entered into a confidentiality agreement with E/ICC in the form
shown in Appendix "A" hereof. CHEM shall be liable to E/ICC for any disclosure
of INFORMATION and sample materials by such employee or purchaser
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<PAGE> 11
unless such disclosure was authorized in advance in writing by E/ICC. CHEM
shall use the INFORMATION disclosed under Article 2 only in performing under
the licenses granted pursuant to Article 3. If a license granted pursuant to
Paragraph 3.1(a) is terminated, CHEM agrees to refrain from using for any
purpose such of the INFORMATION as is related to the terminated license.
Article 11. Patent, Technical Information
And Know-how and Assistance
11.1 E/ICC shall have the right to review CHEM's Systemrelated
improvements and developments and to recommend the filing of one or more
patent applications in one or more countries thereon. If CHEM has not filed
patent applications thereon and/or does not wish to follow E/ICC's
recommendation with respect to any particular country, then E/ICC shall, after
consultation with CHEM, have the right to file such patent applications. CHEM
agrees to fully cooperate and cause its employees to fully cooperate with
E/ICC to effect the filing and prosecution of said patent applications. The
parties shall jointly own such patent applications and any resulting patents
and they agree to share equally all expenses related thereto.
11.2 All information of United States origin made available directly or
indirectly under this Agreement by E/ICC to CHEM for use outside the United
States shall be used by CHEM subject to and in accordance with the regulations
of any department or agency of the United States Government. Such information
or the direct product thereof shall not be exported or shipped by CHEM to any
destination which requires the approval of the United States Government for
such exportation or shipment until a request to do so has been submitted to
and approved by the United States Government and E/ICC. To the extent such
information or the direct product thereof may be offered in a country where
such approval for the export of technology would be required, CHEM shall
assist E/ICC in providing sufficient information in a timely manner so that
requisite approvals may be obtained.
11.3 In the event that E/ICC determines that a third party is infringing
a E/ICC System patent licensed hereunder, E/ICC shall either take appropriate
action at its own expense against the third party infringer, or give CHEM
authority to take such appropriate action against the third party infringer at
CHEM's expense or E/ICC expense as authorized, in either case, the parties
agree to assist each other to the extent reasonably necessary.
Article 12. Warranties
12.1 E/ICC represents that E/ICC's System Technical Information and
Know-How disclosed to CHEM will be the same technology
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<PAGE> 12
used by or being developed for use by E/ICC in the commercial production of
Systems, will be prepared with reasonable care, and will, if properly applied
by CHEM enable CHEM to manufacture products substantially equal in quality to
Systems produced by E/ICC using such technology. E/ICC also represents that it
has no knowledge as of the Effective Date that would indicate that
manufacturing of Systems using E/ICC System Technical Information and Know-How
would infringe any patent, technical information or know-how owned by a third
party. Other than the above representations, E/ICC hereby disclaims any
warranty or representation regarding the above matters.
12.2 If E/ICC's System Technical Information and Know-How which-is
disclosed hereunder is not the same technology which, at the time of transfer,
was used by or was being developed for use by E/ICC, or is defective, then
E/ICC's sole responsibility shall be to replace such Technical Information and
Know-How with technology that E/ICC was using or had developed. In no event
shall E/ICC be liable for incidental, consequential or special damages
incurred by CHEM arising out of or relating to the use of E/ICC's System
Technical Information and Know-How.
Article 13. Term
13.1 This Agreement shall come into effect on the Effective Date and
shall continue in effect for a period of five (5) years and shall be renewed
automatically from year to year thereafter, subject to the receipt of
necessary government approvals; provided, however, that after the expiration
of the initial term of the Agreement either E/ICC or-CHEM may terminate this
Agreement on December 31 of any year by giving to the other at least six (6)
months prior written notice.
Article 14. Termination
14.1 Notwithstanding the foregoing Article 13, this Agreement may be
terminable forthwith upon the sending of notice in writing upon the occurrence
of one or more of the following events:
(a) by either party hereto, if all necessary government approvals
for this Agreement as well as all related agreements have not been received in
form and substance acceptable to such party within nine (9) months from the
Effective Date provided that all necessary documents have been timely provided
by the responsible party;
(b) by the other party hereto, if a party hereto shall commit a
breach of any of its obligations under this Agreement which it shall fail to
remedy within forty-five (45) days from written notice being given requiring
that breach to be remedied;
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<PAGE> 13
(c) by the other party hereto, if a party hereto shall be or become
incapable for a period of six (6) months of performing any of its said
obligations under this Agreement because of any event covered by Article 18
hereof;
(d) by the other party hereto, if a party hereto or its creditors
or any other eligible party shall file for that parties dissolution,
liquidation, bankruptcy, reorganization, compulsory composition or if that
party is unable to pay any debts as they become due, has explicitly or
implicitly suspended payment of any debts as they became due, or if the
creditors of that party have taken over its management, or if the relevant
financial institutions have suspended that party's clearing house privileges,
or if any material or significant part of that party's undertaking, party or
assets shall be totally expropriated or confiscated by action of any
government.
Article 15. Consequences of Termination
15.1 Upon termination of this Agreement, all licenses and rights granted
pursuant to Article 3 and obligations undertaken hereunder shall forthwith
terminate except (i) the obligations of CHEM under Article 7 to report and pay
to E/ICC all royalties due to the date of termination shall continue, (ii) the
obligations of CHEM to maintain the books and records and E/ICC's rights to
examine the books and records of CHEM shall continue as specified in Article
7, (iii) the obligation of confidentiality of CHEM under Article 10 shall
survive such termination, and (iv) such termination shall not relieve either
party from any obligations accrued to the date of termination or relieve the
party in default or breach from liability and damages to the other for default
or breach of this Agreement.
15.2 Upon any termination of this Agreement, CHEM shall take all actions
necessary to cancel any and all rights CHEM may have to use the E/ICC System
Patents and to provide E/ICC with suitable evidence of such cancellations if
E/ICC exercises its option to demand it. Notwithstanding the above, CHEM shall
be permitted, for a period of one (1) year after any termination, to dispose
of stocks on hand at such date subject to payment to E/ICC of royalties
thereon in accordance with Article 4.
Article 16. Non-Waiver/Other Remedies
16.1 Failure of either party to insist upon the strict and punctual
performance of any provision hereof shall not constitute waiver of, or
estoppel against asserting the right to require such performance, nor shall a
waiver or estoppel in one case constitute a waiver or estoppel with respect to
a later breach whether of similar nature or otherwise.
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<PAGE> 14
16.2 Nothing in this Agreement shall prevent a party from enforcing its
rights by such remedies as may be available in lieu of or in addition to
termination.
Article 17. Unenforceable Terms
17.1 In any event any term or provision of this Agreement shall for any
reason be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not effect the validity of any remaining
portion which shall remain in full force and effect as if the invalid portion
was never a part of this Agreement when it was executed. Should the severance
of any such part of this Agreement materially affect any other rights and
obligations of the parties hereunder, the parties hereto will negotiate in
good faith to amend this Agreement in a manner satisfactory to the parties.
Failing agreement on such amendment, either party may by notice in writing
terminate this Agreement forthwith subject to the provisions of this Agreement
relating to consequences of termination.
Article 18. Force Majeure
18.1 The failure or delay of any party hereto to perform any obligation
under this Agreement solely by reason of acts of God, acts of government
(except as otherwise enumerated herein), riots, wars, strikes, lockouts,
accidents in transportation or other causes beyond its control shall not be
deemed to be a breach of this Agreement; provided, however, that the party
so prevented from complying herewith shall continue to take all actions within
its power to comply as fully as possible herewith.
18.2 Except where the nature of the event shall prevent it from doing
so, the party suffering such force majeure shall notify the other party in
writing within fourteen (14) days after the occurrence of such force majeure
and shall in every instance, to the extent it is capable of doing so, use its
best efforts to remove or remedy such cause with all reasonable dispatch.
Article 19. Disclaimer of Agency
19.1 This Agreement shall not be deemed to constitute either party
hereto the agent of the other party hereto.
Article 20. Assignability
20.1 Neither party shall have the right to transfer or assign its
interest or rights in this Agreement or delegate its obligations under this
Agreement without the prior written consent of the other party.
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<PAGE> 15
20.2 The provisions of Paragraph 20.1 notwithstanding, either party may
freely assign its interest, rights and obligations in this Agreement to an
entity that acquires substantially all of the business assets of the assigning
party to which this Agreement applies.
Article 21. Notices
21.1 Any notice required or permitted hereunder shall be sufficiently
given if delivered personally or if sent by air mail, registered, postage
prepaid, or by cable, telex or telefax if confirmed on the same day in writing
by registered air mail, to such address as the party may have designated in
writing for receipt of notices and other documents. Any notice shall be
deemed to have been given, if sent by registered air mail, as of the tenth
(10) day following the date of deposit thereof in the U.S. Mails or the
Republic of China post, postage prepaid, or if absent by telex, cable or
telefax seventy-two (72) hours after dispatched (except that a notice of a
change of address shall not be deemed to have been given until received by the
addressee).
Engelhard/ICC
441 North 5th Street
Philadelphia, PA 19123
Attn: Chief Financial Officer
Fax No. 1-215-592-8299
Chung-Hsin Electric & Machinery Manufacturing Corp.
25, Wen-T Rd., Lo Shan Tsun,
Kwei Shan Shiang,
Taoyuan Hsien, Taiwan, ROC
Attn: Division General Manager
Air-Conditioning Products Division
Fax No. 886-3-318-4157
Article 22. Language
22.1 This Agreement is written in the English language and executed in
two (2) counterparts, each of which shall be deemed an original. The English
language text of the Agreement shall prevail over any translation thereof.
Article 23. Governing Law
23.1 The construction, validity and performance of this Agreement shall
be governed in all respects by the laws of Singapore (excluding any such laws
that may direct the application of the laws of another jurisdiction). The
parties hereby submit to the exclusive jurisdiction of the Singapore Courts
for all purposes
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<PAGE> 16
in relation to this Agreement and waive any objections to such jurisdiction on
the grounds of venue or forum non conveniens or similar grounds.
Article 24. Effective Date
24.1 This Agreement shall come into effect on the date that is first
above-written.
24.2 Notwithstanding Paragraph 24.1 hereof, Articles 2 through 9 of this
Agreement shall remain wholly executory until all necessary government
approvals and validations for this Agreement as well as all related agreements
are obtained in form and substance acceptable to both parties hereto.
Article 25. Entire Agreement
25.1 This Agreement supersedes all previous representations,
understandings or agreements, oral or written, between the parties with
respect to the licensing of Systems, CHEM Systems, E/ICC's Systems Patents and
E/ICC Technical Information and Know-How, and together with the exhibits
hereto and the agreements and documents contemplated hereby contains the
entire understanding of the parties as to the terms and conditions of their
relationship.
25.2 Terms included herein may not be contradicted by evidence of any
prior oral or written agreement or of a contemporaneous oral or written
agreement.
25.3 No changes, alterations or modifications hereto shall be effective
unless in writing and signed by authorized representatives of all parties
hereto and if required, upon approval by the competent authorities of Republic
of China, and the United States of America.
25.4 Heading of Articles in this Agreement are for convenience only and
do not substantially affect the terms of this Agreement.
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IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have set their hands or their names and seals, the day and year first above
written.
ENGELHARD/ICC
By: /s/ ROBERT J. SCHAFFHAUSER
--------------------------
Name: Robert J. Schaffhauser
Title: Co-Chairman
CHUNG-HSIN ELECTRIC AND MACHINERY
MANUFACTURING CORPORATION
By: /s/ PAO-SHAN KU
------------------------
Name: Pao-Shan Ku
Title: President
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EXHIBIT 10.4
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT dated as of March 27, 1995 by and between
Engelhard/ICC, a Pennsylvania General Partnership (hereinafter referred to as
the "Supplier") and Chung-Hsin Electric and Machinery Manufacturing
Corporation, a corporation duly incorporated under the laws of the Republic of
China (hereinafter referred to as "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer desires to purchase from Supplier, and Supplier
desires to sell to the Buyer, Buyer's Requirements (as hereinafter defined)
for Rotor Products (as hereinafter defined); and
WHEREAS, the Buyer may purchase from Supplier, and Supplier may sell to
the Buyer, certain Ancillary Products (as hereinafter defined);
NOW, THEREFORE, for and in consideration of the mutual premises and the
terms and conditions hereinafter set forth, the Buyer and Supplier, with the
intent to be bound thereby, agree to the following.
ARTICLE I - DEFINITIONS
As used herein, the following terms have the meanings ascribed to them in
this Article (except as otherwise expressly provided) and include the plural
as well as the singular:
1.1 "Agreement" or "Supply Agreement": This agreement as of the date
first above written, as the same may be amended from time to time pursuant to
the terms hereof, including Schedules A, B. C, and D.
1.2 "Order": A written request by the Buyer to Supplier to supply a
specific quantity and type of Product on a requested delivery date or an oral
request by the Buyer to Supplier to supply a specific quantity and type of
Product on a requested delivery date provided however that any oral request is
confirmed by facsimile sent by the Buyer to Supplier within five (5) days of
the date of the oral request followed with mail confirmation.
1.3 "Products": Ancillary Products and Rotor Products.
"Rotor Products": Any and all rotors or cassettes which include a
desiccant or drying material or agent or that is capable of use for heat
exchange or any other purpose, that is used or to be used in any
heating/air conditioning/treatment system. It is the intent of the
parties that Buyer
<PAGE> 2
purchases its requirements of the main components (i.e., Rotor Products)
from the Supplier.
"Ancillary Products": Additional ancillary components, full systems or
Rub-systems that may also be purchased at the request of Buyer.
Initially, the Products supplied by Supplier will meet the specifications set
forth in Schedule A. Schedule A will be amended from time to time to reflect
additional, improved or changed Product specifications.
1.4 "Requirements": All Rotor Products that the Buyer may require in
connection with the conduct of its business or that is used in any manner in
connection with any activities under the Technology License Agreement (as
hereinafter defined), including but not limited to Rotor Products sold,
purchased, leased, loaned, conveyed or transferred, directly or indirectly, by
or to the Buyer, and whether separately or in combination with other
materials.
1.5 "Technology License Agreement": The Technical Information, Trademark
and Patent License Agreement dated March 27, 1995, between the parties
hereto, as the same may be amended from time to time pursuant to the terms
thereof.
ARTICLE II - SUPPLY OF PRODUCTS
2.1 Supply. Subject to the terms of this Agreement, the Buyer will
purchase exclusively from Supplier all of the Buyer's total Requirements for
Rotor Products available from the Supplier. Subject to the terms of this
Agreement, Supplier will sell to the Buyer the Buyer's total Requirements for
Rotor Products. If Supplier ceases to manufacture Rotor Products, Buyer may
purchase Rotor Products elsewhere. Supplier shall accept and fill Orders for
replacement parts or workable substitutions for Rotor Products manufactured
under the terms of this Agreement for a period of seven (7) years from the
date of last manufacture of each such Rotor Product at pricing in accordance
with Section 2.4. In addition, the Buyer may purchase from supplier such
Ancillary Products as the Buyer chooses. However, the Buyer is not required to
place any Orders and the Supplier is not required to supply any Orders for
Ancillary Products, except as each party chooses. Each month during the term
of this Agreement the Buyer will provide Supplier in writing with its best
preliminary estimate of the Buyer's Requirements for Rotor Products for each
of the next three (3) to six (6) months as well as an indication of its
anticipated Ancillary Products purchases for the next three (3) to six (6)
months. All such estimates will be non-binding. However, in no event will
Supplier be obligated to fill Orders or deliver
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<PAGE> 3
quantities of Rotor Products in any month in excess of One Hundred Fifty
Percent (150%) of the estimated Requirements for that month provided at least
three months earlier. Each month during the term of this Agreement Supplier
will provide the Buyer in writing with its best preliminary estimate of
Supplier's production capacity and lead time for Rotor Products for each of
the next three (3) to six (6) months. All such figures will be nonbinding, to
be used only for general planning purposes and as set forth in the last two
sentences of Section 2.2 below. Supplier's present intention is to supply
Buyer's anticipated needs of Rotor Products. To this end, such practices and
procedures as are set forth in Schedule B will be maintained during the term
of this Agreement.
2.2 Orders. The Buyer will place with Supplier all Orders at least sixty
(60) days prior to the requested delivery date for Rotor Products. Each Order
constitutes an irrevocable obligation of the Buyer to purchase from Supplier
the quantity and type of Rotor Product set forth in such Order on the terms
and conditions set forth in this Agreement. Supplier will not be required to
fill any Order to the extent it exceeds Supplier's capacity or lead times
communicated pursuant to Section 2.1 above. However, Supplier will exercise
reasonable efforts to meet urgent or emergency Orders.
2.3 Price: Payment. (a) The pricing for Rotor Products is set forth in
Schedule C. The price may be adjusted at any time upon mutual agreement
between Supplier and Buyer. Supplier understands that Buyer is very interested
in cost-competitiveness with other Suppliers. Supplier agrees to continue to
work to control the price of Rotor Products and to achieve cost efficiencies,
whether through volume, re-engineering, different manufacturing techniques and
other methods. From time to time, in the event there is a major change in the
market, Supplier and Buyer will meet to discuss price issues and attempt to
resolve any differences.
(b) Each invoice for Supplier issued under this Agreement will be paid
by the Buyer within thirty (30) days of the date of such invoice. Buyer will
establish and/or maintain a Letter of Credit for payments to Seller. The price
does not include freight, insurance or sales, use, excise or other taxes or
duties, assessments, levies or other governmental charges (except as set forth
in Section 2.5 below) and, accordingly, in addition to the price specified
herein, the amount of any freight, insurance or sales, use, excise or other
taxes or any duties, assessments, levies or other governmental charges (except
as set forth in Section 2.5 below) applicable to the transaction herein shall
be paid by the Buyer.
2.4 Warranty. (a) Supplier's warranty is set forth in Schedule D.
Supplier's liability for breach of warranty shall be limited to, as agreed by
both parties (i) replacing such non-
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<PAGE> 4
conforming Product or (ii) refunding the sales price received by Supplier for
such non-conforming Product. All claims for breach of warranty must be made by
Buyer in writing to Supplier within sixty (60) days of Buyer's knowledge.
Where the non-conforming Product is replaced by Supplier or where Supplier
refunds the sales price received from Buyer for such Product, Buyer shall
return the non-conforming Product to Supplier at Supplier's cost strictly in
accordance with Supplier's written instructions concerning handling, shipping,
insurance, mode of transportation, and other matters as to which Supplier
issues instructions. In no event shall Supplier be liable for: (1) Products
damaged in shipment or otherwise without fault of Supplier; (2) defects in
Products due to negligence (other than that of Supplier), accident, abuse,
improper care or storage, abnormal condition of temperature or moisture; (3)
damage to Products which have been tampered with or altered in any way other
than by Supplier; or (4) expenses incurred by the Buyer in attempting to
correct any defects in Products.
(b) Supplier warrants to the Buyer that any Product sold by Supplier to
Buyer hereunder will not infringe the claim of any U.S. or Republic of China
patent owned by a third party covering the Product itself and agrees to
indemnify the Buyer against liability for any alleged infringement, provided,
however, that the Buyer shall notify Supplier within ten (10) days after
receipt by the Buyer of any such claim of alleged infringement or any notice
of commencement of any suit based on such alleged infringement, and provided
further, that Supplier shall control and remain in control of any and all
proceedings taken in defending such suit, including without limitation
utilization solely of counsel of Supplier's own selection to defend such suit.
Supplier does not warrant against infringement by reason of use of any Product
by the Buyer, except to the extent stated in the Technology License Agreement.
Supplier also represents that it has no knowledge at the date hereof that
would indicate that Products would infringe any patent owned by a third party.
(c) Recommendations by Supplier, if any, covering the utilization,
properties or qualities of Products delivered hereunder or with respect to
services performed are believed reliable but Supplier makes no warranty
whatever with respect thereto. Use or application of the Products sold by
Supplier to the Buyer hereunder is at the discretion of the Buyer without any
liability or obligation on the part of Supplier, except to the extent stated
in the Technology License Agreement.
(d) THESE WARRANTIES ARE EXCLUSIVE AND ARE IN LIEU OF ANY AND ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, ARISING BY LAW OR CUSTOM, INCLUDING BUT NOT BY
WAY OF LIMITATION, THE IMPLIED WARRANTY OF MERCHANTABILITY AND THE IMPLIED
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
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<PAGE> 5
2.5 Delivery. All Products supplied hereunder will be delivered and all
risk of loss and damage and title to Products will pass to the Buyer FOB port
of departure (Incoterms l990) which is currently anticipated to be
Philadelphia, Pennsylvania, Miami, Florida or any other location specified by
Supplier. Buyer will be responsible for all freight, insurance and import into
the Republic of China and the payment of all costs, duties and taxes related
thereto.
ARTICLE III - GENERAL
3.1 Notifications. Any notice which either party may be required or
desires to give to the other party hereunder, except when otherwise provided
for, shall be deemed to be duly given: (i) when received if sent by mail or
other delivery service to the other party at the following addresses or any
other address of addressee subsequently designated in writing by the duly
authorized representative of the party or (ii) when sent by facsimile and
receipt is acknowledged to the other party at the following telephone numbers
or to any other telephone number subsequently designated in writing by the
respective duly authorized representative of the party:
To the Supplier: Engelhard/ICC
441 North 5th Street
Philadelphia, Pennsylvania 19123
Attention: Chief Executive Officer
Fax No: (215) 592-8299
with a copy to:
To Buyer: Chung-Hsin Electric & Machinery
Manufacturing Corporation
25, Wen-Te Rd., Lo Shan Tsun,
Kwei Shan Shiang,
Taoyuan Hsien, Taiwan, ROC
Attention: Division General Manager
Air Conditioning Products Division
Fax No. 886-3-3284157
with a copy to:
3.2 Term. This Agreement shall become effective as of the date hereof
and shall continue thereafter for an initial term of five (X) years and shall
be renewed automatically from year to year thereafter; provided, however, that
after the initial term of this
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<PAGE> 6
Agreement, either Supplier or Buyer may terminate this Agreement on December
31 of any year by giving to the other at least six (6) months prior written
notice.
3.3 Termination for Breach. If either party is in material breach of
this Agreement, then the other party may, upon at least ninety (90) days'
prior written notice, terminate this Agreement, unless within such notice
period for breach is cured, in which event the notice of termination becomes
ineffective.
3.4 Limitation of Liability. Notwithstanding anything to the contrary in
this Agreement or otherwise, in no event shall Supplier be liable for
indirect, incidental, consequential or special damages incurred by the Buyer
arising out of or relating to this Agreement or any transactions hereunder
even if Supplier has been apprised of or is aware of the possibility of such
damages. In no event shall the aggregate liability of Supplier to the Buyer
arising out of or relating to any supply of Products or the transactions
contemplated hereunder exceed the purchase price paid by the Buyer with
respect to the Products in respect of which such claim is made. It is
understood by the Supplier that applicable laws may prohibit attempted
limitations on Supplier's liability to certain consumers who are not parties
to this Agreement.
3.5 Force Majeure. The failure or delay of any party hereto to perform
any obligation under this Agreement solely by reason of acts of God, acts of
government (except as otherwise enumerated herein), riots, wars, strikes,
lockouts, accidents in transportation or other causes beyond its control shall
not be deemed to be a breach of this Agreement; provided, however, that the
party so prevented from complying herewith shall continue to take all actions
within its power to comply as fully as possible herewith. Except where the
nature of the event shall prevent it from doing so, the party suffering such
force majeure shall notify the other party in writing within fourteen (14)
days after the occurrence of such force majeure and shall in every instance,
to the extent it is capable of doing so, use its best efforts to remove or
remedy such cause with all reasonable dispatch.
3.6 Assignment. (a) Neither party shall have the right to transfer or
assign its interest or rights in this Agreement or delegate its obligations
under this Agreement without the prior written consent of the other party.
(b) The provisions of Section 3.6(a) above notwithstanding, either party
may freely assign its interest and rights in this Agreement to an entity that
acquires substantially all of the business assets of the assigning party to
which this Agreement applies.
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3.7 Unenforceable Terms. Buyer and Supplier each warrant to the other
that it is not aware of any term or provision of this Agreement that is
invalid, illegal or unenforceable. In any event any term or provision of this
Agreement shall for any reason be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not effect the
validity of any remaining portion which shall remain in full force and effect
as if the invalid portion was never a part of this Agreement when it was
executed. Should the severance of any such part of this Agreement materially
affect any other rights and obligations of the parties hereunder, the parties
hereto will negotiate in good faith to amend this Agreement in a manner
satisfactory to the parties. Failing agreement on such amendment, either party
may by notice in writing terminate this Agreement forthwith subject to the
provisions of this Agreement relating to consequence of termination.
3.8 Construction. Article and Section headings are for convenience of
reference only and shall not affect the interpretation of any of the
provisions of this Agreement. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any third party.
3.9 Entire Agreement. This Agreement contains the entire understanding
between the parties with respect to the within subject matter and shall be
controlling to the exclusion of all terms and conditions on any purchase
order, acknowledgment form or any other documents which may be issued by the
parties hereto on or after the date hereof. This Agreement may not by modified
or amended except in a writing signed by the parties hereto. No waiver or
indulgence of any breach or default hereunder shall be construed as a waiver
of any subsequent breach of the same or any other provision of this Agreement.
3.10 Prior Agreements. This agreement cancels and supersedes all other
written or verbal agreements which may have been in effect prior to this
Agreement relating to the within subject matter.
3.11 Jurisdiction. The construction, validity, and performance of this
Agreement shall be governed in all respects by the laws of Singapore
(excluding any such laws that may direct the application of the laws of
another jurisdiction). The parties hereby submit to the exclusive jurisdiction
of the Singapore Courts for all purposes in relation to this Agreement and
waive any objections to such jurisdiction on the grounds of venue or forum non
conveniens or similar grounds.
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<PAGE> 8
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized representatives, as of the date first above
written.
ENGELHARD/ICC CHUNG-HSIN ELECTRIC AND MACHINERY
MANUFACTURING CORPORATION
By: /s/ ROBERT J. SCHAFFHAUSER By: /s/ PAO-SHAN KU
---------------------------- --------------------------
Robert J. Schaffhauser Pao-Shan Ku
Title: Co-Chairman Title: President
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<PAGE> 1
EXHIBIT 10.5
AGREEMENT
This Agreement is entered into as of April 1, 1995, by and among
Engelhard Corporation, a Delaware corporation ("Engelhard"), ICC Technologies,
Inc., a Delaware corporation ("ICC"), and Engelhard/ICC, a Pennsylvania general
partnership ("Engelhard/ICC").
WITNESSETH:
WHEREAS, arrangements have been made for the sale by the Dade County
Industrial Development Authority, a body corporate and politic duly organized
and existing under the laws of the State of Florida (the "Authority"), of its
Industrial Development Revenue Bonds, Series 1995 (Engelhard/ICC Project) in
the aggregate principal amount of $8,500,000 (the "Bonds"); and
WHEREAS, the Bonds are to be issued under and pursuant to a Trust
Indenture dated as of April 1, 1995, by and between the Authority and First
Fidelity Bank, National Association, as Trustee (the "Trustee") (such Trust
Indenture, as the same may be amended or supplemented from time to time, the
"Indenture"); and
WHEREAS, the proceeds of the sale of the Bonds will be loaned to
Engelhard/ICC under a Loan Agreement dated as of April 1, 1995 by and between
the Authority and Engelhard/ICC (as the same may be amended or supplemented
from time to time, the "Loan Agreement") to finance the Project Costs (as
defined in the Loan Agreement) of the Project (as defined in the Indenture);
and
WHEREAS, Engelhard DT, Inc., a wholly owned subsidiary of Engelhard,
and ICC Desiccant Technologies, Inc., a wholly owned subsidiary of ICC, are
equal general partners of Engelhard/ICC, which was formed to develop and
commercialize air conditioning and air treatment systems based on the then
existing technologies of Engelhard and ICC; and
WHEREAS, as an inducement to the Authority to issue the Bonds and loan
the proceeds to Engelhard/ICC and as an inducement to the purchase of the Bonds
by all who may at any time become holders thereof, Engelhard is entering into a
Guaranty Agreement with the Trustee and the Authority pursuant to which
Engelhard (i) guarantees to the Trustee the full and prompt payment of the Loan
Payments and the Purchase Price Payments (as such terms are defined in the Loan
Agreement) on the Bonds when and as the same shall become due and payable by
Engelhard/ICC under the Loan Agreement and (11) agrees to make such payments in
the event of any failure of Engelhard/ICC to make such payments, and
WHEREAS, as a condition of entering into the aforesaid Guaranty
Agreement, Engelhard requires that Engelhard and ICC enter into this Agreement
to set forth the rights and obligations of Engelhard/ICC and ICC, and their
respective wholly owned subsidiaries as general partners of Engelhard/ICC, with
regard to the performance of Engelhard/ICC under the Loan Agreement and the
performance of Engelhard under the Guaranty Agreement;
NOW, therefore, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
(a) The following terms have the meanings set forth in the recitals
hereto:
Engelhard ICC
Engelhard/ICC Authority
Bonds Indenture
Loan Agreement Trustee
Loan Payments Purchase Price Payments
(b) In addition to the forgoing terms, the following terms shall have
the following respective meanings:
"Guaranty Agreement" shall mean the Guaranty Agreement dated as of
April 1, 1995 by and among Engelhard, the Trustee and the Authority.
"Payment Deficiency" shall mean such term as defined in Section 2.3.
"Letter of Credit" shall mean the letter of credit described in
Section 4.1.
"Event of Default" shall mean such term as defined in Section 5.1.
ARTICLE II
PERFORMANCE OF ENGELHARD/ICC OBLIGATIONS
<PAGE> 2
2.1 Engelhard and ICC each acknowledge and agree that Engelhard/ICC is
required to make payments and perform obligations under the Loan Agreement at
such times and/or in such manner as set forth therein, and that Engelhard and
ICC are equally responsible and liable for any failure of Engelhard/ICC to make
such payments and/or perform such obligations. For its part, Engelhard agrees
to and will take such corporate action, in its capacity as the sole stockholder
of Engelhard DT, Inc., as may be necessary to cause Engelhard DT, Inc., as a
general partner of Engelhard/ICC, to take such actions as are required of it to
ensure that Engelhard/ICC meets its obligations under the Loan Agreement, and
for its part, ICC agrees to and will take such corporate action, in its
capacity as the sole stockholder of ICC Desiccant Technologies, Inc., as may be
necessary to cause ICC Desiccant Technologies, Inc., as a general partner of
Engelhard/ICC, to take such actions as are required of it to ensure that
Engelhard/ICC meets its obligations under the Loan Agreement.
2.2 Engelhard/ICC and ICC each agrees that they will send to
Engelhard, and Engelhard agrees that it will send to ICC and to Engelhard/ICC,
by facsimile, any and all notices, messages and other communications which
either receives from the Trustee, Authority, Remarketing Agent and/or any other
party acting in their behalf.
2.3 Prior to the date any payment is due from Engelhard/ICC under the
Loan Agreement, Engelhard shall determine the amount of such payment so due,
the date same is to be paid, without interest or penalty, and the party to whom
such payment is to be made as aforesaid. At such time Engelhard shall also
determine, in consultation with Engelhard/ICC, whether Engelhard/ICC has
sufficient funds available to make such payment in full on the date same is to
be paid. If Engelhard should determine that Engelhard/ICC has and/or will have
sufficient funds to make such payment in full as aforesaid, then in such case
Engelhard/ICC shall render the payment due no later than the date on which same
is due. If Engelhard should determine that Engelhard/ICC does not have and will
not have sufficient funds to make such payment in full as aforesaid, then in
such case Engelhard shall determine the amount of the deficiency between the
amount of such payment due and the amount of funds Engelhard determines that
Engelhard/ICC has and/or will have to remit against such payment (herein
referred to, as to any particular payment due as aforesaid, as the "Payment
Deficiency"). Engelhard shall immediately advise ICC of any Payment
Deficiency.
2.4 It is understood and agreed that ICC and Engelhard shall each be
liable and responsible for one-half of any and all Payment Deficiencies.
Whenever a Payment Deficiency should occur, Engelhard shall deliver or cause to
be delivered to the Trustee, on behalf of Engelhard/ICC, immediately available
funds in an amount equal to the Payment Deficiency no later than 10:00 a.m.,
New York
<PAGE> 3
City time, on the date on which the payment as to which the Payment Deficiency
relates is required to be made by Engelhard/ICC. In the event of payment of a
Payment Deficiency by Engelhard to the Trustee, Engelhard shall reimburse
itself for one-half of the amount so paid by Engelhard by making a draw under
the Letter of Credit pursuant to Section 4.2 hereof, provided that if the
amount payable by ICC to Engelhard as its fifty percent (50%) share of the
Payment Deficiency payment made by Engelhard shall exceed the amount still
available for draw under the Letter of Credit, ICC shall, promptly after notice
from Engelhard that the amount available for draw under the Letter of Credit is
insufficient to pay ICC's fifty percent (50%) share as aforesaid, pay to
Engelhard by wire transfer of funds, no later than 2:00 p.m. on the second
business day following receipt by ICC of such notice from Engelhard
(accompanied by a certificate of the Treasurer or Assistant Treasurer of
Engelhard to the effect that such payment has been made), to Engelhard's
Account Number 126-3494 at Mellon Bank, Pittsburgh, Pennsylvania, the amount
payable by ICC to Engelhard as its fifty percent (50%) share of the Payment
Deficiency payment made by Engelhard, less the amount available to be drawn by
Engelhard under the Letter of Credit. Engelhard/ICC shall render to the Trustee
the payment due, less the amount of the Payment Deficiency, no later then the
time and date on which same is due utilizing, if applicable, the funds
previously determined by Engelhard to be available to Engelhard/ICC to remit
against such payment. Each and every amount paid by Engelhard and ICC to cover
a Payment Deficiency shall be considered to be a loan by the remitting party to
Engelhard/ICC and shall be evidenced by promissory note in the form of, and
subject to the terms and conditions set forth in, the promissory note attached
hereto as Exhibit A; provided, however, that Engelhard and ICC may agree to
treat any one or more, and/or all, of such payments as contributions to the
capital of Engelhard/ICC.
ARTICLE III
GUARANTY
3.1 Subject to and upon the condition that ICC shall have executed
this Agreement, and as an inducement to the Authority to issue the Bonds and
loan the proceeds to Engelhard/ICC and as an inducement to the purchase of the
Bonds by all who may at any time become holders thereof, Engelhard shall
execute and deliver to the Trustee the Guaranty Agreement.
3.2 It is understood and agreed that ICC shall be liable and
responsible for onehalf of any and all payments which Engelhard is required to
make and makes under the Guaranty Agreement. Accordingly, if Engelhard should
at any time receive notice from the Trustee to the effect that Engelhard is
being called upon to
<PAGE> 4
render payment under the Guaranty Agreement and Engelhard renders such payment
under the Guaranty Agreement, Engelhard shall reimburse itself for one-half of
the amount so paid by Engelhard by making a draw under the Letter of Credit
pursuant to Section 4.2 hereof, provided that if the amount payable by ICC to
Engelhard as its fifty percent (50%) share of the payment so made by Engelhard
under the Guaranty Agreement shall exceed the amount still available for draw
under the Letter of Credit, ICC shall, promptly after notice from Engelhard
that the amount available for draw under the Letter of Credit is insufficient
to pay ICC's fifty percent (50%) share as aforesaid, pay to Engelhard by wire
transfer of funds, no later than 2:00 p.m. on the second business day following
receipt by ICC of such notice from Engelhard (accompanied by a certificate of
the Treasurer or Assistant Treasurer of Engelhard to the effect that such
payment has been made), to Engelhard's Account Number 126-3494 at Mellon Bank,
Pittsburgh, Pennsylvania, one-half of such payment, less the amount available
to be drawn by Engelhard under the Letter of Credit.
3.3 Each and every amount paid by Engelhard under the Guaranty
Agreement, net of the amount reimbursed by ICC to Engelhard in connection
therewith, shall be deemed to be a loan by Engelhard to Engelhard/ICC and shall
be evidenced by promissory note in the form of, and subject to the terms and
conditions set forth in, the promissory note attached hereto as Exhibit A, and
each and every amount paid to Engelhard by ICC under Section 3.2 shall be
deemed to be a loan by ICC to Engelhard/ICC and shall be evidenced by
promissory note in the form of, and subject to the terms and conditions set
forth in, the promissory note attached hereto as Exhibit A; provided, however,
that Engelhard and ICC may agree to treat any one or more, and/or all, of such
payments as contributions to the capital of Engelhard/ICC.
ARTICLE IV
LETTER OF CREDIT
4.1 In order to secure ICC's obligations under Sections 2.4 and 3.2 of
this Agreement and to ensure timely delivery of any and all payments due from
ICC thereunder, ICC shall establish with Mellon Bank, N.A. (the "Bank"), no
later than April 19, 1995, and maintain with said Bank (or any other bank
acceptable to Engelhard should the Bank not extend the then existing letter of
credit) during the period the Loan Agreement is effective, a clean and
irrevocable letter of credit in favor of Engelhard in the form attached hereto
as Exhibit B in the principal amount of $2,500,000. ICC shall be responsible
and liable for, and shall pay, any and all costs and expenses incurred in
establishing and/or maintaining the Letter of Credit provided hereunder and
Engelhard shall have no responsibility and/or liability therefor.
4.2 Every draw by Engelhard under the Letter of Credit pursuant to
Section 2.4 and/or 3.2 shall be made by Engelhard by
<PAGE> 5
right and without notice to ICC, by presentation to the Bank, at any time after
the time on which Engelhard paid any Payment Deficiency in the case of Section
2.4 or at any time after the time on which Engelhard rendered payment under the
Guaranty in the case of Section 3.2, of a sight draft under the Letter of
Credit provided hereunder for all or any part of the amount which ICC was
required to remit as aforesaid, accompanied by a certificate of the Treasurer
or Assistant Treasurer of Engelhard to the effect that such payment has been
made in the form attached hereto as Annex A to Exhibit B. Promptly after the
giving of such certificate to the Bank, Engelhard shall send a copy of such
certificate to ICC by facsimile transmission.
4.3 If from time to time during the term of this Agreement Engelhard
should determine that ICC's share, through ICC Desiccant Technologies, Inc., of
the total liability of Engelhard/ICC and Engelhard under the Loan Agreement and
the Guaranty Agreement, respectively, is less than the then total principal
amount of the then existing Letters of Credit and, if applicable, the security
instruments and/or other arrangements provided under Section 4.1, then in such
case Engelhard shall so notify ICC and shall direct the Bank to reduce the
total principal amount of the Letters of Credit to ICC's share of the total
liability then determined by Engelhard to be applicable under the Loan
Agreement and the Guaranty Agreement. Promptly after the giving of such notice
to the Bank, Engelhard shall send a copy of such notice to ICC by facsimile
transmission.
ARTICLE V
EVENTS OF DEFAULT
5.1 (a) If ICC shall fail to observe or perform any covenant or
agreement contained in Section 2.4, Section 3.2 and Section 4.1 and such
failure shall not have been remedied by Engelhard drawing against the Letter of
Credit, such occurrence shall constitute an "Event of Default" hereunder.
(b) Each and every default in payment by ICC of any amounts due from
ICC under this Agreement shall give rise to a separate cause of action
hereunder, and separate suits may be brought hereunder as each cause of action
arises.
5.2 Upon the occurrence of an Event of Default hereunder, Engelhard
may exercise any or any combination of the remedies afforded under this
Agreement or applicable law, as may be chosen at Engelhard's sole discretion.
ARTICLE VI
ICC'S OBLIGATIONS
6.1 The obligations of ICC under this Agreement shall be absolute and
unconditional, and shall remain in full force and
<PAGE> 6
effect for the full term of this Agreement and such obligations shall not be
affected, modified or impaired upon the happening from time to time of any
event, including without limitation any of the following, whether or not with
notice to, or the consent of, ICC:
(a) the waiver, compromise, settlement, release or termination of any
or all of the obligations, covenants or agreements of the Authority contained
in the Indenture or the Bonds or of the payment, performance or observance
thereof;
(b) the failure of Engelhard/ICC and/or ICC to receive notice of the
occurrence of an Event of Default under the terms and provisions of the Loan
Agreement or the Indenture or the Guaranty Agreement;
(c) the extension of the time for payment of the amount of any
principal of, premium, if any, or any interest owing or payable on the Bonds or
of the time for performance of any obligations, covenants or agreements under
or arising out of the Loan Agreement or the Indenture or the Guaranty
Agreement, or the extension or the renewal of the Loan Agreement or the
Indenture or the Guaranty Agreement;
(d) the modification or amendment (whether material or otherwise) of
any obligation, covenant or agreement set forth in the Loan Agreement or the
Indenture or the Guaranty Agreement;
(e) the taking or the omission of any of the actions referred to in
the Loan Agreement or the Indenture or the Guaranty Agreement or of any actions
under this Agreement;
(f) any failure, omission or delay on the part of Engelhard to
enforce, assert or exercise any right, power or remedy conferred on Engelhard
in this Agreement or any other act or acts on the part of Engelhard relating to
the foregoing, if any;
(g) any failure, omission or delay on the part of the Authority or
Trustee to enforce, assert or exercise any right, power or remedy conferred on
the Authority or on the Trustee in the Loan Agreement or the Indenture or the
Guaranty Agreement or any other act or acts on the part of the Authority or the
Trustee relating to the foregoing, if any;
(h) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of all or substantially all the assets, marshalling of assets
and liabilities, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition with creditors
or readjustment or other similar proceedings affecting Engelhard/ICC, ICC or
the Authority or the Trustee or the assets of any of them, or any contest of
the validity of this Agreement, the Bonds, the Loan Agreement, the Indenture or
the Guaranty Agreement; or the
<PAGE> 7
disaffirmance of the Loan Agreement, the Indenture, the Guaranty Agreement, the
Bonds, or this Agreement in any such proceeding;
(i) to the extent permitted by law, any event or action that would, in
the absence of this clause, result in the release or discharge by operation of
law of ICC from the performance or observance of any obligation, covenant or
agreement contained in this Agreement;
(j) to the extent permitted by law, any event or action that would, in
the absence of this clause, result in the release or discharge by operation of
law of Engelhard/ICC from the performance or observance of any obligation,
covenant or agreement contained in the Loan Agreement;
(k) to the extent permitted by law, any event or action that would, in
the absence of this clause, result in the release or discharge by operation of
law of Engelhard from the performance or observance of any obligation, covenant
or agreement contained in the Guaranty Agreement; provided, however, that ICC
shall not be obligated hereunder for an amount in excess of one-half of the
amount for which Engelhard is obligated under the Guaranty Agreement and, in
fact, makes payment pursuant to the Guaranty Agreement;
(I) the default or failure of ICC fully to perform any of the
obligations set forth in this Agreement;
(m) the default or failure of Engelhard/ICC fully to perform any of
the obligations set forth in the Loan Agreement;
(n) the default or failure of Engelhard fully to perform any of the
obligations set forth in the Guaranty Agreement; provided, however, that ICC
shall not be obligated hereunder for an amount in excess of one-half of the
amount for which Engelhard is obligated under the Guaranty Agreement and, in
fact, makes payment pursuant to the Guaranty Agreement;
(o) the substitution, exchange or release of any collateral securing
payment of the Bonds or performance of the Loan Agreement; or
(p) the invalidity, illegality or unenforceability of the Bonds or any
provision of the Loan Agreement, the Indenture, the Guaranty Agreement or any
other document or agreement delivered in connection with the issuance of the
Bonds; provided, however, that ICC shall not be obligated hereunder for an
amount in excess of one-half of the amount for which Engelhard is obligated
under the Guaranty Agreement and, in fact, makes payment pursuant to the
Guaranty Agreement.
<PAGE> 8
6 2 No setoff, counterclaim, reduction, or diminution of an
obligation, or any defense of any kind or nature (other than performance by ICC
of its obligations hereunder and other than performance by Engelhard/ICC of its
obligations under the Loan Agreement) which ICC has or may have against
Engelhard/ICC, Engelhard, the Authority or the Trustee shall be available
hereunder to ICC against Engelhard. No invalidity, irregularity or
unenforceability of all or any part of the obligations hereunder or of any
security therefor shall affect, impair or constitute a defense to ICC's
obligations under this Agreement. Notwithstanding anything contained in this
Agreement to the contrary, nothing contained in this Article VI or elsewhere in
this Agreement shall be deemed to prevent ICC, after payment in full of its
obligations hereunder, from asserting in a separate action any setoff, claim,
counterclaim, diminution of obligation or any other right which ICC has or may
have against Engelhard/ICC, Engelhard, the Authority or the Trustee, and in any
such action by ICC Engelhard/ICC, Engelhard, the Authority or the Trustee may
not raise as a defense the failure by ICC to assert such claim in any prior
suit by Engelhard/ICC, Engelhard, the Authority or the Trustee, as the case may
be.
6.3 ICC hereby expressly waives notice from Engelhard of its
acceptance and reliance on this Agreement and waives presentment, demand,
protest, and any other notice of any other kind with respect to this Agreement
except as may be expressly provided for in this Agreement. ICC also waives
Engelhard's promptness or diligence in making any demand or claim hereunder.
ICC and Engelhard each agrees to pay all costs, expenses and fees, including
all reasonable attorneys' fees, which may be incurred by the other party in
enforcing this Agreement or protecting the rights of such party hereunder,
whether the same shall be enforced by suit or otherwise.
6.4 This Agreement shall not be deemed to create any right in, or to
be in whole or in part for the benefit of, any person other than Engelhard and
its successors and permitted assigns. This Agreement is entered into by ICC for
the benefit of Engelhard and may be enforced solely by Engelhard.
6.5 ICC's obligation under this Agreement shall survive the payment of
the Bonds, and shall be reinstated, if at any time any payment to Engelhard
and/or the Trustee is voided or is required to be returned or restored.
6.6 This Agreement shall terminate only upon the termination of the
Loan Agreement. Notwithstanding anything contained herein to the contrary, this
Agreement shall survive the termination of any other agreement, including,
without limitation, the Guaranty Agreement and/or the Indenture.
ARTICLE VII
<PAGE> 9
NOTICES
Any notice, request, consent, waiver or other communication given,
made or withdrawn pursuant to this Agreement to be effective shall be in
writing or by telegram, telex, facsimile or other electronic written
communication and shall be effective (a) when delivered at the address provided
for below by hand, telegram or courier service, receipt obtained (b) three
business days after deposit in the mail, sent certified, return receipt
requested, postage prepaid, or (c) when sent by telex, facsimile or other
electronic written communication, answerback or other acknowledgment of receipt
received, addressed as provided below, or to such other address as may be
designated by any party hereto giving or changing its address:
(i) if to ICC, to:
ICC Technologies, Inc.
441 North Fifth Street
Philadelphia, PA 19123
Attention: Chief Financial Officer
Telephone: 215-625-7200, Ext. 154
Facsimile: 215-592-7951
with copies to:
Richard P. Jaffe, Esq.
Mesirov Gelman Gaffe Cramer & Jamieson
1735 Market Street, 38th Floor
Philadelphia, PA 19103
Telephone: 215-994-1046
Facsimile: 215-994-1111
(ii) if to Engelhard, to:
Engelhard Corporation
101 Wood Avenue
Iselin, New Jersey 08830
Attention: Treasurer
Telephone: 908-205-5000
Facsimile: 908-205-6525
with copies to:
Engelhard Corporation
101 Wood Avenue
Iselin, New Jersey 08830
Attention: Vice President and General Counsel
<PAGE> 10
Telephone: 908-205-5527
Facsimile: 908-906-0337
(i) if to Engelhard/ICC, to:
Engelhard/ICC
441 North Fifth Street
Philadelphia, PA 19123
Attention: Chief Financial Officer
Telephone: 215-625-0700, Ext. 154
Facsimile: 215-592-8299
ARTICLE VIII
AMENDMENTS
8.1 This Agreement may not be amended, modified, changed or terminated
except by an instrument in writing executed by the duly authorized officers of
the parties hereto.
8.2 No amendment, modification, change or termination shall be
established by conduct, custom or course of dealing, but solely by an
instrument in writing as aforesaid.
ARTICLE IX
MISCELLANEOUS
9.1 This Agreement and the rights of any party hereunder may not be
assigned to or succeeded to by any person except upon, and then only in
accordance with, the written consent of the other parties to this Agreement.
9.2 No right or remedy herein conferred upon or reserved to Engelhard
is intended to be exclusive of any other available right or remedy, but each
and every such right and remedy shall be cumulative and shall be in addition to
every other remedy given under this Agreement or now or hereafter existing at
law or in equity. No delay or omission to exercise any right or power accruing
upon any default, omission or failure of performance hereunder shall impair any
such right or power or shall be construed to be a waiver thereof, but any such
right and power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle Engelhard to exercise any remedy reserved
to it in this Agreement, it shall not be necessary to give any notice, other
than such notice as may be expressly required herein. In the event any
provision contained in this Agreement should be breached by any party and
thereafter duly waived by the other party so empowered to act, such waiver
shall be limited to the particular breach so waived and shall not be deemed to
waive any other breach hereunder. No waiver or release of
<PAGE> 11
this Agreement or of any provision hereof shall be established by conduct,
custom or course of dealing, but solely by an instrument in writing duly
executed by the parties to this Agreement.
9.3 ICC agrees to pay or cause to be paid all present and future taxes
or other charges, if any, imposed by any government or any department, agency,
political subdivision or taxing authority thereof on or in connection with the
Letter of Credit or the execution, delivery or registration of this Agreement
or the payment of any amounts required to be paid by ICC under this Agreement.
If any such tax or other charge is deducted or withheld from any such payment,
ICC agrees to remit promptly to Engelhard an additional amount equivalent to
the amount deducted or withheld.
9.4 This Agreement, with respect to the obligations referred to
herein, constitutes the entire agreement and understanding between the parties
hereto, and supersedes any and all prior and contemporaneous agreements,
understandings or arrangements, both written and oral, between the parties with
respect to the subject matter hereof and may be executed in several
counterparts, each of which shall be deemed an original, and all of which
together shall constitute but one and the same instrument.
9.5 The invalidity or unenforceability of any one or more phrases,
sentences, clauses or sections in this Agreement contained, shall not affect
the validity or enforceability of the remaining portions of this Agreement, or
any part thereof.
9.6 This Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of New Jersey without giving effect
to the principles of the conflict of laws thereof.
9.7 This Agreement shall bind ICC and its successors and permitted
assigns, if any, and shall inure to the benefit of Engelhard, and its
successors and assigns.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
by their respective officers thereunto duly authorized, as of the date first
above written.
Engelhard Corporation
Attest:
By: /s/ LESTER FLIEGEL By: /s/ MICHAEL SPERDUTO
---------------------- -----------------------
Assistant Secretary Treasurer
ICC Technologies, Inc.
Attest:
By: /s/ ALBERT RESNICK By: /s/ MANFRED HANUSCHEK
---------------------- ------------------------
CFO
Engelhard/ICC
By: /s/ MICHAEL SPERDUTO
------------------------
CFO
<PAGE> 1
EXHIBIT 10.6
MEMORANDUM OF UNDERSTANDING
This Memorandum of Understanding is entered into this 30th day of
June, 1995 by and between Engelhard/ICC, a partnership established and existing
under the laws of the state of Pennsylvania, U.S.A., and having its principal
place of business at 441 North Fifth Street, Philadelphia, PA 19123 U.S.A.
(hereinafter referred to as "E/I") and Samsung Corporation, a company
established and existing under the law of the Republic of Korea and having its
principal place of business at 250, 2-Ga, Taepyung-Ro, Chung-Gu, Seoul, Korea
(hereinafter referred to as "Samsung").
This Memorandum of Understanding is the outcome of successful Korean
market development activities conducted in cooperation by both parties and
discussions held between the parties. This confirms the intentions of the
parties hereto to proceed towards further mutual cooperation in a strategic
alliance for desiccant/air conditioning systems (hereinafter referred to as
"systems"), which shall be substantiated as definite contracts (hereinafter
called the "definite contracts");
E/I and Samsung will negotiate two contracts, a technology
license/distribution agreement, and a desiccant component (hereinafter referred
to as "rotor products") supply agreement, based on the following principles:
The technology license/distribution agreement would include a
technology and distribution license for production and sale of Systems
in Korea. There would be an up-front fee plus a running royalty on
Samsung equipment sales, related to the market size and value of
technology in Korea as determined by both parties.
Samsung and E/ICC will negotiate mutually acceptable contract term,
exclusivity provisions and performance targets.
E/I and Samsung will negotiate a mutually acceptable long-term supply
agreement for E/I rotor products.
In recognition of Samsung's market development efforts to date, E/I
agrees to pursue its interest in the Korean market exclusively through Samsung
through December 15, 1995, during which both parties hereto shall negotiate
with each other to conclude the definite contracts. The parties will make best
efforts to complete a contract signing by September 15, 1995, but in no case
will the contract signing date go beyond December 15, 1995.
<PAGE> 2
During this period, Samsung will make its best efforts to facilitate
and promote the System and achieve Systems sales in the Korean market. In
addition, Samsung will provide E/I relevant and available up-to-date Korean
market information prior to the conclusion of the definite contracts.
Either party shall maintain the confidentiality of any information
exchanged between the parties.
Unless the definite contracts are executed by December 15, 1995, this
Memorandum of Understanding shall be automatically terminated without incurring
any obligations or liabilities to either parties hereto.
For and on behalf of E/I: For and on behalf of Samsung:
By:/s/ KIRK J. JACOBS By:/s/ DAE WON HAM
------------------------- ---------------------------
Name: Kirk J. Jacobs Name: Dae Won Ham
Title: Director - International Title: General Manager/Machinery
Business Development Div. 1
Date: June 30, 1995 Date: July 3, 1995
<PAGE> 1
EXHIBIT 10.7
AMENDMENT TO
AGREEMENT OF OCTOBER 6, 1992
REGARDING FORMATION OF ICC INTERNATIONAL
(ENCLOSED AS APPENDIX I)
(The Agreement)
Between
ENGELHARD/ICC (ACQUIRER OF THE BUSINESS OF ICC TECHNOLOGIES, INC.)
and
AB AVIR TECHNOLOGIES, LTD. (AB Air)
August 9, 1995
WHEREAS
Both parties desire to amend the intention to form the joint venture
corporation to be known as "ICC International, Inc., " and
WHEREAS:
Engelhard/ICC and AB Air desire that AB Air assume solely the rights to
manufacture and sell only in Israel and "the Territories" the systems as
defined in the Agreement, either by itself or with others in Israel and in the
Territories within the terms and conditions set forth in the Agreement,
THEREFORE:
Engelhard/ICC and AB Air will proceed with the Agreement with the above
mentioned alterations.
In consideration for the above, AB Air will pay to Engelhard/ICC an additional
premium over the price of the rotor/cassette set amounting to 10% (ten
percent) of the normal price, as defined below, of the rotor/cassette set to
AB Air from Engelhard/ICC. This will be applicable to the System as currently
identified in the original Agreement. The premium, which substitutes for a
royalty for technology licensing, will be applied and calculated on the same
or equivalent basis, regardless of variations in the actual purchase.
Engelhard/ICC declares its obligation and preparedness to supply to AB Air for
the purpose of execution of the Agreement and this Amendment, the
rotor/cassette sets that constitute the principal components of the System ex
factory within 60 days ARO. Such rotor/cassette sets will be supplied by
Engelhard/ICC on the basis of terms and conditions granted by it to the most
favored
<PAGE> 2
customer," excluding demonstration or other special or promotional pricing in
limited quantifies.
Rotors and rotor cassette sets, as customarily offered by Engelhard/ICC, may
be purchased according to Section 5(F) of the Exclusive Distributor and
Representative Agreement by AB Air from any source other than Engelhard/ICC
only if Engelhard/ICC can not supply them within a reasonable and customary
period of time following an order by AB Air. Such period of time will have to
be discussed and mutually agreed upon by both parties.
The "Territories" will be redefined per this Amendment to mean:
"The territories as defined in the exclusive distribution and representation
agreement for Israel and other designated countries as of September, 1992,
plus its amendments from time to time, if any, and if expressly agreed upon in
writing by both parties."
IN ADDITION, THE FOLLOWING ADJUSTMENTS ARE MADE IN REFERENCE TO THE ORIGINAL
AGREEMENT, AND, WHEREVER NOT NOTED BELOW, THE REMAINING REFERENCE TO THE
CORPORATION (ICC INTERNATIONAL) WILL BE ASSUMED TO APPLY TO AB AIR AND THE
REFERENCES TO THE COMPANY WILL APPLY TO ENGELHARD/ICC (ACQUIRER OF THE
BUSINESS OF ICC TECHNOLOGIES):
(1) Delete Sections 9, 10 and 11, and delete from Section 12 "Upon
incorporation of the corporation" and "and/or the Israeli Company."
(2) Delete Section 13, 14 and 15
(3) Delete Sections 17, 18, 19, 20, 21, 22, 23, 24, 25, and 26
(4) 28. Replace as follows: "In the event that AB Air decides to
divest itself of the rights to manufacture (provided that it is now
allowed to divest to a competitor of Engelhard/ICC or any entity
that Engelhard/ICC has a reasonable commercial objection to)
Engelhard/ICC will have the right of first refusal to buy that right
at a fair market value, or as determined by the highest legitimate
offer (supported by a 5% security deposit or a bank guarantee or a
certified check), whichever is the higher. Excluded from this are
the consequences of a public stock offering."
(5) Delete Section 28.
(6) Modify Section 29 to delete "and know-how with respect to
management, operation, financing, and promotion," and "purchasing
and billing control methods, merchandising,
(2)
<PAGE> 3
advertising, sales, and promotional technique," and to replace
"personal" with "personnel."
(7) 39. The Company shall allow the Corporation to ... alter and modify
the System ... Add to Section 39, "The Company shall provide
reasonable technical support to ensure that the Corporation can
accomplish the objectives mentioned above.
(8) Section 40. Delete "from the Engelhard/ICC joint venture (or
others)" and replace with "from others." Add "if needed for the
manufacture of the System."
(9) Section 41. Delete "the Engelhard/ICC joint venture (or others)"
and replace with "others."
(10) 44 ... the Company will not grant to nor will the Corporation accept
from ...
(11) 45. Neither the Company nor the Corporation shall employ, or seek
to employ any person who is at the time employed by the other party
or by any person who is at the time operating a similar
establishment under license from either party, and shall not,
directly or indirectly, induce any such person to leave his or her
employment as aforesaid.
(12) Modify Section 49 as follows: Add "Any variations to the design
which are not the result of efforts of the Company are excluded from
this defense."
(13) 52. The Corporation (now AB Air) shall grant to the Company (now
ENGELHARD/ICC) a royalty-free world-wide license outside of the
Territory to any improvements in the System made by employees or
agents of the Corporation and for which the Corporation will hold
rights, unless such improvement is the subject of another agreement
such as the Agreement regarding Joint Development Program.
(14) Delete Sections 55, 56, 57, 58, 59, 60, 61, 62, 63 and 64.
(15) Section 65. Delete "valid trademarks" and "and/or copyrights."
Add "This Section applies only in territories wherein Engelhard/ICC
claims patent protection, and only for those designs for which
Engelhard/ICC claims patent protection."
(3)
<PAGE> 4
(16) 69. Delete second "... at no charge to the Corporation" which
refers to the Corporation (AB Air) sending its employees to the
Company (Engelhard/ICC).
(17) Delete 73
(18) AB Air shall manufacture units only for sale in the territory,
unless otherwise authorize in writing by Engelhard/ICC.
AB Air shall assure that, to the best of its knowledge, such units
are not installed outside of the Territory. AB Air will take all
necessary legal action, at its own expense, to remedy the situation.
(19) Engelhard/ICC shall assure that, to the best of its knowledge, the
System shall not be sold, manufactured, assembled, or installed by
itself, and/or by any third party, within the Territory.
Engelhard/ICC will take all necessary legal action, at its own
expense, to remedy the situation.
This will become an integral part of the Agreement.
By: /s/ IRWIN L. GROSS By: /s/
--------------------------- ----------------------------
Engelhard/ICC AB Air
By: /s/ IRWIN L. GROSS
---------------------------
ICC Technologies
(4)
<PAGE> 5
A G R E E M E N T
This agreement entered into at PHILADELPHIA, PA., U.S.A, this __th day of
September, 1992, by and between ICC TECHNOLOGIES, INC., a DELAWARE
corporation, with principal office at 441 N. Fifth Street, Philadelphia, PA
19123 (The "Company") and A.B. AVIR TECHNOLOGIES LTD., an Israeli corporation
with principal office at 42 Hamelachim st., Ramat Hasharon, Israel, or its'
assignee (the "Israeli Company") is made on the basis of the following
understandings and recitals and in consideration of the following promises,
and the parties hereto, intending to be legally bound, agree as follows :
STATUS OF THE PARTIES
1. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the state of Delaware, with corporate
power to carry on its business as it is now being conducted. The Company
has its principal place of business at Philadelphia.
2. The Israeli Company is a corporate duly organized, validly existing, and
in good standing under the laws of the state of Israel with corporate
power to carry on its business.
The Israeli Company has its principal place of business at Ramat
Hasharon.
DEVELOPMENT OF SYSTEM
3. The Company has developed and is engaged in marketing, manufacturing and
sale, and is providing to business firms, a unique and successful
Desiccant based air conditioning, air drying and air quality improving
systems and derivatives, similiars and parts thereof (The "System") of a
distinctive nature, of high quality and of other distinguishing
characteristics, placed in operation by the Company and provided mainly
under the name of Desi/Air.
4. The Company manufactures the System under certain patents, certain
patents applied for and licenses, in the United States of America and
other countries and sells them under certain trade names and bearing
certain trade marks throughout the world.
5. Patents of the United States and other countries, certain Patents applied
for and licenses are as contained in exhibit A.
<PAGE> 6
EXCLUSIVE RIGHT TO USE NAME, TRADEMARKS AND LOGOS
6. The Company claims to exclusive right and power to use the tradenames
Desi Air and certain service marks and logos and other insignia used in
conjunction therewith (the "Trademarks").
7. The Company claims it is the owner of the trademarks registered in the
United States Patent and Trademark Office as contained in exhibit A.
CONFLICTS WITH OTHER AGREEMENTS
8. Neither the execution and delivery of this Agreement nor the consummation
of the transactions contemplated hereby will violate or constitute a
default under any Agreement or instrument to which the company is a party
or by which its System may be affected.
NEW BUSINESS
9. The Israeli Company and the Company desire to form a corporation in the
state Of Delaware for the purpose of engaging in the business of
manufacturing in Israel, importing and exporting of components and
materials, and to have the System manufactured, have made, by itself
and/or by others, upon the terms and conditions hereinafter set forth.
10. The Company and the Israeli Company shall cause a new corporation (the
"Corporation") to be duly organized under the laws of the state of
Delaware in accordance with the terms of this Agreement and with
(appropriate documents equivalent under the laws of the jurisdiction to
articles and by-laws) which in the English translation shall read in
substantially the form of Exhibit B attached hereto. If any of the
provisions contained in Exhibit B should not be approved by the
appropriate authority for inclusion in the documents of incorporation of
the corporation, the parties agree to make such amendments thereto as
shall be acceptable to the said appropriate authority without altering
their purpose or intention, or failing such amendments, to take all such
other steps and do such other things, including the execution of any
other agreements as may be necessary, to achieve the interest and purpose
of such of the provisions as may not have been found acceptable by the
said appropriate authority. The cost of incorporating the Corporation
shall be borne equally by the Company and the Israeli Company.
11. The Corporation shall be formed and organized in the State of Delaware,
unless the Israeli Company shall not be able to obtain
(2)
<PAGE> 7
an authorization from the Controller of the Foreign Currency of the State
of Israel, to form and organize the Corporation in Delaware and in which
case, the Corporation shall be formed and organized, as mentioned
hereunder, in the State of Israel.
LICENSE FROM THE COMPANY
12. Upon the incorporation of the Corporation, the Company, at no extra cost
to the Corporation and/or the Israeli Company, shall license and grant to
the Corporation all rights in the Company's exclusive systems as
contained in schedule A, patents, technology, know-how, trademarks and
trade names necessary to permit the Corporation to manufacture,
assemble,use, have it made by itself or by others, within the Territory
as hereunder defined, according to the terms and condition of this
Agreement.
NAME OF THE CORPORATION
13. The name of the corporation shall be ICC INTERNATIONAL INC.
SUBSCRIPTION TO CAPITAL OF THE CORPORATION
14. The parties hereto hereby subscribe to such capital stock of the
corporation in equal amounts and each party will be required to pay 50%
of the sums required for start-up and working capital of the Corporation.
PRE INCORPORATION EXPENSES
15. The parties agree to advance on behalf of the Corporation the sums
necessary to carry out the intents and purpose of this Agreement.
PURPOSE OF CORPORATION
16. The purpose of the corporation shall be the manufacture, assemble, use,
import, export and sale of the System and similar or allied products
under the terms and conditions hereafter set forth, by itself and/or by
others.
(3)
<PAGE> 8
PERSONS DESIGNATED TO ACT AS INCORPORATORS
17. The parties of this Agreement will designate at the time of incorporation
persons to act as incorporators of the corporation to be organized
hereunder and authorize and empower them to have prepared, execute and
filed articles (or a certificate) of incorporation in such form and
containing such provisions as they deem advisable, so long as such
provisions are not inconsistent with this agreement.
PROVISION FOR PERPETUAL DURATION UNLESS TERMINATED SOONER
18. The duration of the Corporation shall be perpetual unless its existence
shall be terminated as hereinafter provided.
MANAGEMENT OF THE CORPORATION
19. The affairs of the Corporation shall be managed by a Board of
Directors,two of whom shall be nominated by the Company and two of whom
shall be nominated by the Israeli Company. The Company and the Israeli
Company shall each vote all shares of the capital stock of the
Corporation owned or controlled by them for the election and maintenance
in office of the persons so nominated.
20. In the event that between annual shareholders' meetings of the
Corporation, either the Company or the Israeli Company wishes to replace
any or all of its nominees on the Board of Directors of the Corporation,
the other shall join in all necessary acts, steps and proceedings, and
shall cause the shares of the Corporation to which it is beneficially
entitled to be voted in favour of the removal of such nominee or
nominees, of the transfer of the qualifying share or shares of such
nominees to the person or persons selected by the Company or the Israeli
Company, as the case may be, and the election in his or their place of a
qualified person or of qualified persons selected by the party hereto
whose nominee shall have been so removed.
21. Nothing contained in this Agreement is intended or shall be construed to
bind the parties hereto or their nominees on the Board of Directors of
the Corporation as to the method or manner of the exercise of the
discretion vested in them as directors of the Corporation concerning
their management of the affairs thereof.
22. All decisions of the Board of Directors shall require an affirmative vote
of at least three directors.
(4)
<PAGE> 9
23. Prior written notice of all directors' meetings shall be sent to all
directors at least twenty days before the meeting, specifying the time
and place of the meeting and indicating all matters to be considered
there at, and including copies of any reports or studies relating
thereto. Notice may be waived by the unanimous written consent of all
directors.
24. A quorum of a meeting of the directors shall consist of three directors.
In lieu of a validly constituted meeting as described herein, and
directors' resolution shall be considered to have been validly passed if
consented to in writing by all the directors.
25. The board shall elect a chairman and the chairman will decide about
setting the meetings of the board and inviting the directors to the
meetings as mentioned above. In no case, however, meeting shall not take
place less than once per quarter.
Special meetings of the board may take place upon proper notification.
Notice of a special meeting of Directors or of any Committee of the Board
of Directors shall be delivered at least one day prior to such meeting by
oral, telegraphic or written notice. If mailed, such notice shall be
deemed to be delivered on the second day following the day deposited in
the United States mail, addressed to the Director at his business
address, with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered on the day the telegram is
delivered prepaid to the telegraph company, addressed to the Director at
his business office. Notice of a meeting need only state the place, day
and hour of the said meeting.
OFFICERS OF THE CORPORATION
26. The Chief Executive Officer of the Corporation shall be designated the
President (hereafter "The President") and shall be agreed to by both
parties. The duties and responsibilities of the President, without
enlarging or restricting the duties and responsibilities devolving upon
him by the law of Israel, shall be to administer all the affairs of the
Corporation.
BOOKS
27. Proper books of account shall be kept by the Corporation and shall be
freely accessible to representatives of both parties hereto at all
reasonable times. The auditors of the Corporation
(5)
<PAGE> 10
shall be appointed at the annual meeting of shareholders by unanimous
vote.
TRANSFER AND ASSIGNMENT OF SHARES
28. Restrictions on Transfer and Issuance.
(a) The Parties to this agreement shall not sell, assign, transfer,
give, bequeath, devise, donate or otherwise dispose of, or pledge,
deposit or otherwise encumber, in any way or manner whatsoever, any
of the Shares now or hereafter held by it except as expressly
provided in this Agreement and in accordance with its terms and
conditions.
(b) Restrictions on the Corporation.
Except in accordance with the terms and conditions of this Agreement
the Corporation shall not, without the consent of each of the
Parties, (1) cause or permit the transfer of any Shares to be made
on its books, (2) issue any Shares, whether by original issue or in
connection with the sale of Shares now or hereafter held in the
Corporate's treasury, (3) create any securities, instruments or
rights convertible into capital stock of the Corporation, or (4)
purchase, redeem or otherwise acquire any Shares.
(f) Option of Offeree Shareholders.
In the event that the Corporation does not exercise its option with
respect to all of the Shares subject to the offer in accordance with
Paragraph (c) hereof, the Selling Shareholder shall, upon notice
from the Corporation of the Corporation's decision not to accept the
Selling Shareholder's Offer as to all of its Shares subject to the
offer (or upon expiration of the thirty-day option period referred
to in Paragraph (28e) if the Corporation fails to give notice as
aforesaid, be deemed to have offered in writing to sell any or all
of its remaining Shares subject to the offer (those not to be sold
to the Corporation) to the other Party at the price and upon the
terms set forth in Paragraph (a) hereof. For a period of thirty (30)
days after such Offer by the Selling Shareholder to the other party,
the other party shall have the option, exercisable by written notice
to the Selling Shareholder, with a copy to the Corporation, to
accept the Selling Shareholder's
(6)
<PAGE> 11
Offer as to any or all of the Selling Shareholder's remaining Shares
subject to the offer.
(g) Acceptance of the Bona Fide Offer.
Subject to the terms hereof if, at the end of the option periods
described hereof, options have not been exercised by the Corporation
and/or the Offeree Shareholder to purchase all of the Selling
Shareholder's Shares subject to the offer, the Selling Shareholder
shall be free for a period of forty (40) days thereafter to (i) sell
its remaining Shares subject to the offer to the prospective
purchaser under the Offer, and to no one else, at the price and upon
the terms and conditions set forth in the offer; or, (ii) dispose of
such Shares to the entity attempting to obtain ownership thereof by
foreclosure or similar action as more specifically provided herein.
If such Shares are not so sold or disposed of within the aforesaid
forty-day period, the Selling Shareholder shall not be permitted to
sell or dispose of such Shares without again complying with
Paragraph "28".
(h) Permitted Transfers.
Subject to the terms hereof, notwithstanding anything to the
contrary contained herein, the Parties shall be entitled to transfer
the Shares to any Affiliate, provided, however, that such transferee
Affiliate shall comply with the conditions of this agreement and
undertake upon himself the assigners' commitments.
GRANTING THE SYSTEM AND RELATED SERVICES
29. The Company grants the Corporation the right to conduct business
utilizing the System, and makes available to the Corporation, in order to
assist it to get started in business and to achieve maximum results,
guidance, and know-how with respect to management, operation, financing,
and promotion, including site selection, equipment selection and
installation, supply selection, purchasing and billing control methods,
merchandising, advertising, sales and promotional technique, personal
training, and other matters relating to the efficient and successful
operation of a business, and the maintenance of high standards of
quality. At times mutually agreeable between the parties hereto, the
Company shall, at no charge to the Corporation (except for out of pocket
expenses), send its' representatives to Corporation facilities or
principal offices for the purpose of providing such assistance.
(7)
<PAGE> 12
30. In consideration for the execution and delivery of this Agreement, the
Company hereby grants the Corporation and appoints the Corporation as the
companies exclusive systems' manufacturer and distributor for the
Territory, upon the terms and subject to the conditions set forth herein.
For so long as this Agreement remains in effect, the Company shall not
authorize any other party to act as its representative, to manufacture,
to assemble or otherwise deal with the offer or sale of the System within
the Territory or otherwise.
31. The exclusive rights herein granted shall include all inventions,
improvements, Patent applications, or Patents which the Company now owns
or controls or may hereafter own or control in the System contained in
exhibit A.
32. The Company grants to the Corporation an exclusive right for the term of
this Agreement of all of its Letters Patent hereunder mentioned to
manufacture, assemble and sell in the Territory, machines embodying
mechanisms covered by any and all of the said Letters Patent and Patent
rights or by any applications now prepared and unfiled or filed and for
which no number has been issued, or covered by any modifications, changes
or improvements to any machines, tools, or accessories, now owned or
hereafter acquired by Company or covered by any drawings, designs or
specifications, relating to the machines and the System, whether or not
the subject of Letters Patent.
33. For the purpose of this Agreement, the term "System" shall mean those
products or product lines described and defined in exhibit A and its'
derivatives and as the parties may mutually agree in writing from time to
time during the term hereof.
TERRITORY
34. For the purpose of this Agreement, the term "Territory" shall mean the
geographic area described in Exhibit C, which is attached hereto and
incorporated herein by reference.
DESIRE TO USE NAMES
35. The Company desires the Corporation to use the trademarks and the System
and to derive the benefits of the advertising, promotion and reputation
of the System and the Company's information, experience, advice, guidance
and know-how.
(8)
<PAGE> 13
REGISTERED USER APPLICATIONS
36. If the law permit, the Company shall make application to register the
Corporation as a Permitted User or Registered User of the Trademark and
if necessary, or if required by the Company or its duly authorized
representative, the Israeli Company undertakes to join in such
application under the conditions of this agreement and to execute any
such documents as may be necessary to implement such applications.
REGISTRATION OR TRADEMARK
37. The Company will use its best efforts to register and maintain, or cause
to be registered and maintained, the Trademark in the Territory to enable
the System to be distributed and sold in the Territory under the
Trademark as provided herein. The Company will not permit any other
person to use the Trademark in the Territory in connection with the
System.
TRANSFER OF GOOD WILL IN CONNECTION WITH ASSIGNMENT OF TRADEMARK
38. In addition to the trademark, the Company will allow the Corporation to
take advantage of any good will by way of product, name or other.
ACCOMMODATION OF THE SYSTEM
39. The Company shall, upon the formation of the Corporation, by supplements,
addenda, improvements, amendments or otherwise, alter and modify the
System and its methods, procedures and technology hereunder granted, in
order to accommodate it and render it desirable and suitable for
operation within the Territory, in the best possible manner.
LIST PRICES, DETERMINATION OF PRICES
40. The System parts, and the similar or allied parts of the System shall be
sold to the Corporation by the Company, at the transfer price of the
components to the Company from the Engelhard/ICC joint venture (or
others) plus a small handling charge.
41. The payments terms to the Corporation for the above will be the same as
those that the Company has with the Engelhard/ICC joint venture (or
others).
(9)
<PAGE> 14
RESALE PRICE OF THE SYSTEM
42. The Corporation shall at its own discretion establish the prices at which
it sells the System.
SUB-DISTRIBUTORS
43. The Corporation may appoint sub-distributors or agents for the sale or
otherwise, as hereunder mentioned, of the System. A.B. Avir Technologies
Ltd. will be the exclusive distributor for the Territory.
EXCLUSIVITY
44. During the effective terms hereunder this Agreement, the Company will not
grant to any individual, association, firm or Corporation, directly or
indirectly, any franchise, license rights and privileges to conduct,
maintain or operate a similar establishment and/or to adopt or use the
aforementioned trade names and/or trademarks in the Territory. During the
effective terms of this Agreement, the Company shall not, except with the
consent of the Corporation and of the Israeli Company, engage in any
business the same as or similar to the business covered by this Agreement
in the Territory.
45. The Company shall not employ, nor seek to employ any person who is at the
time employed by the Corporation and/or the Israeli Company or by any
other person who is at the same time operating a similar establishment
under license from the Israeli Company and/or the Corporation, and shall
not, directly or indirectly, induce any such person to leave his or her
employment as aforesaid.
46. The rights hereby granted shall be exclusive with the Corporation. The
Company covenants and agrees that it will not, during the term of this
Agreement, grant any or other rights in the Patents mentioned hereunder
and all patents therefore or thereafter referring to the System to any
other person, firm or corporation, within the Territory.
TRADENAMES, SERVICE MARKS AND TRADE SECRETS
47. The Israeli Company and/or the Corporation shall not, at any time during
the terms of this Agreement, copy or duplicate, or permit the copying or
duplication, nor publish, disclose or in any manner reveal, or permit the
publications, disclosure or
(10)
<PAGE> 15
revelation in any manner, to any person or entity, except employees of
the Corporation and/or the Israeli Company approved by the Company, any
information or material supplied by the Company to the Corporation and/or
the Israeli Company, and designated by the Company as confidential
information. Corporation and the Israeli Company hereby recognizing and
agreeing that all such information and materials are confidential
information and trade secrets of the Company and will be disclosed to the
Israeli Company and/or the Corporation in strict confidence.
WARRANTY OF PATENT RIGHTS
48. The Company warrants that the Patents mentioned hereunder are
genuine and valid, that it has sole title to it, that it has full
right, authority and power to enter into this Agreement, and that it
shall indemnify and save harmless the Corporation against any and
all rights that may be held or claimed by others.
PATENTS
49. The Company agrees to defend any suit or proceeding brought against
the Corporation and/or the Israeli Company based on a claim that any
equipment furnished hereunder constitutes an infringement of any
existing patent in the Territory, provided the Company is notified
promptly in writing and is given authority and the Corporation
and/or the Israeli Company cooperates with the Company to the extent
of furnishing information required for the defense of same; and the
Company shall pay all damages and costs awarded therein against the
Corporation and/or the Israeli Company.
50. In the event the System furnished hereunder becomes the subject of
an actual or prospective suit or claim for patent infringement, the
Company shall at its option and expense, either (1) procure for the
Corporation the right to continue using the System or (2) modify it
to become non-infringing or (3) replace the System with a
non-infringing System. Any modified or replacement System shall
perform in a like manner to the System being modified or replaced.
IMPROVEMENT IN SYSTEM
51. The Company may, by Supplement, addenda or amendments to the manual
or other communications, supplement, improve or otherwise alter the
System and the methods, procedures and technology which the
Corporation is authorized and required hereunder to utilize in
operation of its business, and the
(11)
<PAGE> 16
Company understands and acknowledges that it will at all times
maintain and update accordingly the conduct of the Corporation and
the character and quality of the System hereunder granted.
52. In the event employees of the Corporation shall make any
improvements in the System, the Company shall be licensed to use
said improvements and any applications and Patents thereof subject
to payment of Royalties to the Corporation on a basis to be decided
upon between the parties at a later date.
53. If during the continuance of this Agreement the Company makes any
further improvements in the System or the mode of using it, or
become the owners of any such improvements either through Patents or
otherwise, then it shall communicate such improvements to the
Corporation and give the Corporation full information regarding the
mode of using them and the Corporation shall be entitled to use the
same with all rights which are hereby granted to the Corporation in
respect to the System, without paying any additional money with
respect thereto.
ARBITRATION OF DISPUTES
54. In the event that differences should arise between the Company and
the Israeli Company as to the meaning or application of provisionsof
this Agreement, such differences shall be settled by arbitration.
Both parties agree to submit the matter to arbitration and accept
the decision of the majority of an arbitration board consisting of
one member selected by the Company, one member selected by the
Israeli Company, and a third selected by the two arbitrators
nominated as above. In the event that the two arbitrators selected
by the parties fail to agree on the selection of the third
arbitrator, thereupon application of either party, any judge of the
Court of Tel-aviv, shall appoint the third arbitrator, who shall act
under this Agreement with the same effect as if he had been
specifically named. Site of arbitration shall be at an appointed
time and place located in Tel-aviv, Israel. Such arbitration may be
demanded by either party to this Agreement by notice in writing. It
shall be encumbent upon both parties to nominate an arbitrator. The
expenses of the arbitrator selected by the Company shall be borne by
the Company; the expenses of the arbitrator selected by the Israeli
Company shall be borne by the Israeli Company; the expense of the
third arbitrator shall be borne equally by both parties.
(12)
<PAGE> 17
PAYMENT OF EXPENSES
55. All expenses of the bossiness and Operations of the Corporation
shall be paid out of the amount invested as herein provided for
and/or out of any earnings of the Corporation.
DIVISION OF PROFITS
56. The profits of the Corporation, if divided, shall be shared among
the parties in proportion to their respective subscriptions.
LIABILITY OF THE PARTIES HEREUNDER
57. In no event shall any party hereunder be called upon to pay any
amount beyond the liability arising against it on account of the
amount of its subscription. The failure of any party hereunder to
perform any of its undertakings hereunder shall not affect or
release any other party.
PAYMENT OF LOSSES
58. In the event that losses result from the operations of the
Corporation, such losses shall be paid from the amounts invested and
advanced by the parties hereunder and from the capital of the
Corporation and its reserve accounts.
LIQUIDATION OF CORPORATION
59. Upon the dissolution or other termination of the Corporation,
whether pursuant to the provisions of this Agreement or otherwise,
the President shall at once proceed to liquidate the business being
conducted hereunder. In such liquidation he shall dispose of all
property of the Corporation, shall collect all sums owed to it and
turn into cash all of its assets. From the money so received, he
shall then pay all debts and obligations of the Corporation. Out of
the balance he shall retain any amount to which he may be entitled,
pursuant to this Agreement. The money then remaining in
the Corporate account shall be distributed and paid to the
parties hereunder in proportion to the amount which each has
invested hereunder.
TRANSFER-OF-INTEREST
60. Any subscriber shall have limited power and authority to transfer
and assign any interest in the Corporation, except as hereby
limited. Such assignment, however, shall provide
(13)
<PAGE> 18
that the assignee must perform and fulfill all obligations of the
assignor under the provisions of this Agreement, the assignor or the
assignee shall at once inform the President thereof and the assignee
shall before obtaining any rights under the Agreement, execute an
agreement in a form supplied by the President binding himself to
fulfill all of the duties and obligations of the assignor hereunder.
In the event that the assignee fails to execute such agreement, he
shall not be recognized as a member of the Corporation and the other
parties hereunder may hold such assignor to any duties and liability
that he may otherwise have been bound to perform or have incurred
under this Agreement and had such assignment not been made.
DEPOSIT OF CAPITAL CONTRIBUTIONS
61. The funds so subscribed and paid to the Corporation shall be
deposited in a bank, as agreed by the parties and shall be disbursed
by the President in carrying on the business of the Corporation.
TIME TO BE DEVOTED BY PARTIES TO CORPORATION
62. It is understood that the parties hereunder have other interests,
and shall not be required to devote full time to the conduct and
management to the Corporation. Each of the parties hereunder shall
devote to the Corporation such time as shall be necessary to the
efficient operation of the business, at no charge to the Corporation
other than as provided hereunder. Each of the parties hereunder
acknowledge that they occupy a fiduciary relationship with one
another and each agrees to use the utmost good faith in dealing with
the other.
ACCOUNTS AND RECORDS
63. The Corporation Shall keep full and accurate accounts, and shall
follow the accounting methods and practices customarily employed in
business of like character. All dealings and transactions relating
to the business shall be duly entered in the accounts in the usual
and ordinary custom of business and each of the parties hereunder
shall have full and free access to the books and may inspect them at
any and all reasonable times, and without the consent of the other
party.
STATEMENTS
(14)
<PAGE> 19
64. Operating statements showing itemized expenses shall be prepared not
later than the 15th day of January, April, July and October for the
preceding three months' operations and the remaining net profits,
after deduction of all salaries (including any salaries authorized
by mutual agreement for one or more of the parties hereunder) shall
be divided and allocated to the parties hereunder. The profit shall
be distributed or retained in the business as shall be determined by
the President. Losses, if any, shall be borne by the parties
hereunder in the same proportion as the profits. The fiscal year of
the Corporation shall be from January 1st to December 31st, and an
annual accounting shall be made upon the close of business on
December 31st of each year. In addition to the quarterly operating
statements, each party shall be given within 90 days after the close
of each fiscal year a copy of any unaudited balance sheet and
operating statement together with a copy of the partnership tax
returns for the Corporation. Any party may, upon written demand upon
the President made within 20 days of receipt of the annual report,
cause the Corporation to have the annual report audited in
accordance with generally accepted auditing standards by independent
public accountants selected by the general meeting . The cost of the
audit shall be borne by the Corporation and considered an expense of
doing business.
WARRANTY AGAINST INFRINGEMENT INDEMNIFICATION
65. The Company warrants that the distribution, marketing and sale of
the System by the Corporation, as provided for in this Agreement,
shall not violate or infringe any valid trademarks, patents and/or
copyrights held by third parties and undertakes that it shall
defend, indemnify and save harmless Corporation, its agents,
sub-distributors, officers, directors, employees, shareholders,
successors and assignees, and each of them, from and against any and
all claims, actions and suits, whether groundless or otherwise, find
from and against any and all liabilities, judgments, losses,
damages, costs, charges, attorney's fees, and other expenses of
every nature and character by reason of such violation or
infringement.
SALES LITERATURE
66. The Company shall prepare technical literature, specifications and
drawings required for the manufacture and maintenance of the System
and provide them to the Corporation free of charge.
TECHNICAL TRAINING BY THE COMPANY
(15)
<PAGE> 20
69. At times mutually agreeable between the parties hereto, the Company
shall, at no charge to the Corporation except for out of pocket
expenses), send its representatives to Corporation facilities or
principal offices for the purposes of providing technical assistance
and training to the Corporation. In addition, at a time mutually
agreeable between the parties hereto, Corporation may, at no charge
to the Corporation, send its' employees or representatives; to the
Company's facilities or principal offices for the purpose of
receiving training by the Company.
TECHNICAL ASSISTANCE
70. The Company shall, at no charge, furnish to the Corporation the
services of technicians of such skills and in such number as may be
required to discharge properly its responsibilities under this
Agreement. During the time such technicians are in the Territory,
the Company will assume their salaries and the Corporation will
assume their reasonable living and travelling expenses. Details
regarding the selection of personnel and their period of residence
in the Territory will be determined by mutual consent.
WAIVER AND DELAY
71. No waiver by either party of any breach or series of breaches or
defaults in performance by the other party, and no failure, refusal
or neglect of either party to exercise any right, power or option
given to it hereunder or to insist upon strict compliance with or
performance of either party's obligations under this Agreement,
shall constitute a waiver of the provisions of this Agreement with
respect to any subsequent breach thereof or a waiver by either party
of its right at any time thereafter to require exact and strict
compliance with the provisions thereof.
GENERAL TERMS AND CONDITIONS
72. The subject headings of the paragraphs of this Agreement are
included for purposes of convenience only, and shall not affect the
construction or interpretation of any of its provisions.
73. If any legal action, 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 successful or prevailing
party or parties shall be entitled to recover reasonable attorneys'
fees and other
(16)
<PAGE> 21
costs incurred in connection with that action, arbitration or
proceeding, in addition to any other relief to which such party or
parties may be entitled.
74. 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 fourth day after mailing if
mailed to the party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid, and properly
addressed to their addresses as mentioned in the preamble to this
agreement.
Any party may change its address for purposes of this
paragraph by giving the other party written notice of the new
address in the manner set forth above.
75. Should any term, condition or provision of this Agreement be found
to be invalid or unenforceable, such finding shall in no way affect
the validity or enforceability of all other terms, conditions and
provisions hereof, and such terms, conditions and provisions shall
be valid and enforceable as if the invalid or unenforceable term,
condition or provision was never a part hereof.
76. This Agreement shall be constructed in accordance with and governed
by the laws of the State of Israel. No claim, demand action,
proceeding, arbitration, litigation, hearing, motion or lawsuit
arising herefrom or with respect hereto shall be commenced or
prosecuted in any jurisdiction other than the State of Israel, and
any judgment, determination, finding or conclusion reached or
rendered in any other jurisdiction shall be null and void between .
the parties hereto.
GENDER AND NUMBER
76. All terms used in any one number of gender shall extend to mean and
include any other number and gender as the facts, context, or sense
of this Agreement or any paragraph or section hereof may require.
SEVERABILITY OF PROVISIONS
77. The paragraphs of this Agreement are severable and in the event any
paragraph or option of the Agreement is declared illegal or
unenforceable, the remainder of the Agreement shall be effective and
binding on the parties.
(17)
<PAGE> 22
RELATIONSHIP OF PARTIES
78. The parties hereto are independent and neither party is the agent,
partner or employee of the other, except as expressly provided.
INTEGRATION OF ALL AGREEMENTS
79. Without prejudice to the exclusive distribution and representation
agreement signed between the parties, this agreement, the documents
referred to herein, and the attached Exhibits and Addenda constitute
the entire and complete agreement among the parties concerning the
subject matter of this Agreement. There are no representations,
inducements, promises, or agreements, oral or otherwise, among the
parties not embodied in this Agreement or in the Offering Circular,
which are of any force or effect with reference to this Agreement.
No amendment, change, or variance from this Agreement shall be
binding on any party unless executed in writing the Company, the
Israeli Company and the Corporation.
BINDING AGREEMENT
78. This Agreement shall be binding upon the parties, their respective
heirs, successors, legal representatives, and assigns.
INTENDING TO BE LEGALLY BOUND, the parties have executed this
Agreement in duplicate the day and year first written above.
SIGNATURE OF THE PARTIES
ICC TECHNOLOGIES, INC. A.B. AVIR TECHNOLOGIES LTD.
(18)
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