<PAGE> 1
This registration statement has been filed with the Securities and
Exchange Commission but has not yet become effective. Information contained
herein us subject to completion or amendment.
As filed with the Securities and Exchange Commission on June 26, 1998.
-------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------------------------------
INNOVA PURE WATER, INC.
---------------------------------------------
(Exact Name of Registrant As Specified in Charter)
Florida 59-2567034
- -------------------------------- ------------------------------------
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
13130 - 56th Court, Suite 605, Clearwater, Florida 33760
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 572-1000
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
To be so registered Each class is to be registered
N/A N/A
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock ($.0001 par value)
(Title of Class)
Total Number of Pages: 181
Index to Exhibits at Page: 35
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
<S> <C>
ITEM 1. DESCRIPTION OF BUSINESS.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
ITEM 3. DESCRIPTION OF PROPERTY.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
ITEM 6. EXECUTIVE COMPENSATION.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
ITEM 8. DESCRIPTION OF SECURITIES.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
ITEM 2. LEGAL PROCEEDINGS.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
PART F/S
ITEM 1. FINANCIAL STATEMENTS.
PART III
ITEM 1. DESCRIPTION OF EXHIBITS.
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Innova Pure Water, Inc. a Florida corporation (the "Company' or
"Innova") was incorporated August 13, 1985. The Company designs, develops and
manufactures unique consumer water filtration products. These products have been
historically of the portable nature and generally consist of a container serving
as a water reservoir containing an integral highly efficient water-filtering
device. The container may be in the shape and size of a bottle, pitcher or
carafe. The Company also has and continues to investigate counter top and
in-line filtration systems.
The Company has become recognized as an innovator in the water
filtration field with numerous patent rights assigned to it from its founder,
John E. Nohren, Jr., which potentially provide the Company with competitive
advantages. It has been the Company's ability to create both new products and
develop technology that has permitted it to differentiate itself from other
competitors within the field. The Company has also demonstrated the ability to
address and open significant new markets previously overlooked or ignored.
Examples of these markets are portable personal and sport type filter bottles;
and products for the infant, children's, and teen market. On the technology
side, Innova has attracted interest from large consumer products companies. This
has led to the Company differentiating itself as a product innovator and creator
as well as product producer, thus making the Company attractive as a strategic
alliance partner to a strong multi-national marketing company such as
Rubbermaid. Such an alliance has been created under which the Company creates
and manufactures while Rubbermaid markets and distributes the products. The
elimination of the need for the Company to finance its own sales and marketing
program has allowed the Company to achieve profitability while attaining
distribution that would otherwise be impossible. However, there is no assurance
that the Company will continue to achieve profitability.
The water filtration products of the Company are designed to provide an
improved quality and much better tasting water for the average consumer at an
affordable price. The Innova filtration process has been shown under independent
taste tests to have no discernible taste or quality differences from the
expensive designer bottled waters, while costing a fraction of the price. The
products currently produced are primarily designed to treat tap water, reducing
chlorine, taste and odor. Portable highly effective filtration products will be
introduced shortly for the removal of biological contaminants including protozoa
and bacteria. Future products are under development, which are focused upon the
removal of heavy metals, such as lead, as well as arsenic, and radioactive
contaminants, which are beyond the capabilities of competitive technology. Also,
the Company has created a unique line of filters to adapt to 5 gallon water
bottles commonly used in conjunction with coolers and crocks. The products are
adaptable to the world market requirements as well as domestic market needs. A
new strategic alliance is being established for the domestic distribution of
water filters adaptable to the 1-5 gallon crock and cooler class of products.
There is no assurance that this alliance will be consummated or that the Company
will be able to commercially exploit its water purification technologies on a
profitable basis.
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CUSTOMERS, STRATEGIC ALLIANCES AND MARKETING
The Company believes that as a result of the diminishing quality of tap
water, both domestically and world wide, the opportunities for the application
of the Company's water filtration products and technology will continue to grow
for a number of years. Domestically, the current annual market for bottled water
is estimated at $4 billion, with the market penetration of bottled water at
approximately 20%. The water filter market is currently estimated to be $1.4
billion with 14% market penetration. The rate of growth of consumer water
filtration products is exceeding that of bottled water. As it is anticipated
that the penetration of water filter products will be at least that of popular
appliances, exceeding 80%, it is management's opinion that the major growth and
sales in the water filtration product category are yet to come. In addition, the
market is worldwide and estimated at more than $20 billion.
It is the Company's opinion that to the consumer, drinking tap water
has become both distasteful and suspect as a result of the use of chlorine,
which is carcinogenic and is strongly suspected by some members of the medical
community to be a cause of arterial and heart disease. In addition, the dangers
and frequency of lead in tap water, as well as the presence of Cryptosporidium,
or Giardia, harmful protozoa, have made the consumer aware of the potential
dangers associated with drinking tap water. The typical consumer of the
Company's products primarily seeks clean, fresh tasting water. A growing number
of health conscious consumers are also becoming concerned about the inherent
quality of tap water.
The retail customer base for the Company's products consists of all
major consumer product retailers. This includes the mass merchants, grocery,
drug, and department store retailers. This also constitutes the basic domestic
market universe of Rubbermaid, Innova's Strategic Alliance Partner, that
typically has distribution in more than 50,000 retail stores. While there is no
assurance that Innova's products will be purchased by Rubbermaid's customers,
extensive penetration is anticipated.
The Company's products are directly marketed using television and print
media by Goodtimes Licensing & Entertainment ("Goodtimes") with Richard Simmons
as the marketing spokesperson. Last year their infomercial incorporating the
Company's water treatment products was the top rated infomercial for an extended
period.
In order to overcome the disadvantage of being a small company, and
lack of capital to adequately support a national sales program, the Company has
created a series of strategic alliances with nationally recognized companies
referenced above and as set forth below (the "Strategic Alliance Partners"). As
a result, the Company obtains the distribution and sales of its products on a
national and international basis without the costs and burdens associated with
the sales of consumer products, and with a market penetration several magnitudes
beyond what the Company could achieve independently. The Company also benefits
by the consumer acceptance of the brand names and the reputation of the
Strategic Alliance Partners.
On July 21, 1997, the Company entered into a strategic alliance, which
includes patent licensing, manufacturing, developing, marketing, and
distributing provisions with Rubbermaid Incorporated ("Rubbermaid"). This
agreement grants Rubbermaid certain rights to the products and technology of the
Company. The agreement provides for the marketing and distribution of certain
selected products throughout the United States and internationally, on either an
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exclusive or non-exclusive basis. The exception being distribution agreements
which were in place prior to the Rubbermaid Agreement for specific niche
markets, or distribution agreements covering specific countries which are
excluded from the agreement with Rubbermaid. The agreement contains a provision
under which the Company could be compensated $1,000,000 over a period of time in
conjunction with product purchases as compensation for previous Innova product
development and research and development. Such compensation is in excess of the
normal contractual product sales price.
On January 21, 1997, the Company entered in a strategic alliance with
The Rose Group Corporation ("Rose Group") for the Company to provide exclusive
know-how, patent licensing, and the supply of water filtration products to the
Rose Group to market for use by expectant mothers, infants, and toddlers. The
products to be sold and their suitability for the intended use are the final
responsibility of the Rose Group. The initial agreement is for a period of two
years, but will be automatically extended upon each party fulfilling certain
criteria as set forth in the agreement.
On September 26, 1997 the Company entered into a supply agreement with
Bowline Family Products ("Bowline") to furnish Innova's standard water filters
for inclusion into Bowline's tote covered water bottle products. A modified
filter will also be produced for Bowline for inclusion into their new Sports
team licensed products which include three dimensional designs associated with
teams in the NFL, NHL, NBA, Major League Baseball, NASCAR, Sony and others.
Minimum sales for the first year are projected to be 200,000 units. Based upon
orders shipped and in-house, Bowline should substantially exceed their annual
sales requirements.
In October 29, 1997 the Company reached an understanding with Goodtimes
Entertainment and Licensing ("GT") to continue to use Richard Simmons for direct
media sales. In October, 1997 GT obtained 1.5 million shares of the Company's
stock in a cashless exchange for warrants to purchase 11 million shares of
company stock, for which the Company was paid $500,000 for the warrant purchase
rights in October of 1996. This agreement is a financial incentive for GT to
continue to market Innova's filtration products. See "Certain Relationships and
Related Transactions."
On December 17, 1996 the Company entered into a strategic alliance with
Fun Designs, Inc. ("Fun Designs") to supply filters and water filtration
products to market for use by children. To attract children and parents to their
products, Fun Designs uses three dimensional figure designs which may include
licensed properties from Disney or others. The initial agreement is for a period
of two years, but will be automatically extended upon each party fulfilling
certain criteria as set forth in the agreement.
CURRENT PRODUCTS
The Company currently produces products for distribution and sales
through its Strategic Alliance Partners, as well as directly to select classes
of trade on both a domestic and international basis. All products are patent
protected under one or more issued patents. Additional patents are also pending.
See "Business-Intellectual Property." The products currently in distribution
are:
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1. A 2 liter portable or refrigerator bottle with filter and pour
through sealing cap;
2. A 16 oz. standard 28 mm neck water bottle with replaceable filter
in a push-pull valve cap;
3. A 20 oz. and 30 oz. sport type bottle with integralreplacable
filter mounted to the bottle top with a push-pull valve cap;
4. Filters for installation into Rubbermaid Sport type bottles;
5. Replacement filters for sport and refrigerator bottles;
6. Baby bottles with filters for infants; and
7. Children's water filtration products.
The Company manufactures and assembles its product line In Clearwater,
Florida. It also utilizes several component vendors and contract manufacturers.
As a result of the vendor relationships established over the years, management
believes the Company is assured of reliable and available capacity to sustain
the projected significant growth. However, there is no assurance that such
vendor relationships will continue in such a successful manner.
PRODUCT DEVELOPMENT
The Company is actively engaged in additional new product development
and the application of new and emerging technology primarily for Rubbermaid and
to a lesser degree for its other Strategic Alliance Partners. It is the opinion
of management that the technology and product concepts controlled by the Company
can permit Rubbermaid to become the dominant company in the consumer water
treatment category on an international basis. The Company has a continuing major
product development program to assure, to the degree possible, that the Company
remains the principal source for water treatment products for each of its
Strategic Alliance Partners, such that its Strategic Alliance Partners maintain
competitive product advantages.
Five new products have been prototyped and are in production ready to
be tooled. The first three are similar in nature, differing primarily as to the
methodology used and the targeted contaminants to be removed. Management
anticipates that two of the three will be placed into production. The three
products are:
1. A combination protozoa and chlorine, taste and odor filter. This
filter fits within a standard bike or sports bottle. The filtration media
consists of a protozoa cyst filter combined with a high performance monolithic
carbon filter.
2. A filter as described above with an added independent bed of
iodinated biocidal resin to effectively devitalize pathogenic bacteria and
virus. This product requires the approval of the Environmental Protection Agency
due to the iodine content. It is particularly suited for use in the third world,
as a travel purifier, and for domestic emergency use, ie. floods, hurricanes,
and other natural disasters; and general use in wilderness area.
3. A similar filter, slightly smaller in size, manufactured of porous
hydrophilic ceramics. The unique aspect of this filter is that even with the
sub-micron pores, water can be readily sucked through, or forced through, with
normal hand pressure with a "squeeze" type sports bottle. This filter product
can remove both bacteria and protozoa, but is not effective in removing viruses.
It may also be integrated with a carbon element. Due to its very low sub-micron
size and the consumers' ability to clean the outer surface of the filter
element, the life of this product for anti-microbial use can be as much as one
year.
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In addition, the Company has developed a family of filters to
fit one through five gallon cooler or crock style bottles. These products will
be available with or without the types of biological treatments described in 1
and 2 above. These new Innova filtration products will permit the adaptation of
the millions of cooler bottles currently in the home or office, which are
delivered by truck, to be retrofitted with a high efficiency filtration unit
which will treat approximately 50 bottles or 250 gallons prior to replacement.
The user can refill the 5 gallon bottle with only the quantity of water easily
lifted into place, while at the same time significantly reducing costs and
freeing storage space.
New rapid filtration media adaptable to carafes and pitchers are also
being developed. The major problem with the water filtration carafes currently
being marketed is the slow filtration period required to process water before it
is available for drinking. There is also a useful volume constant as, typically
only 50% of the volume of the carafe is available for filtered water. Thus,
frequently, insufficient amounts of filtered water are available and the process
time to filter additional water to satisfy the demand is simply too long. The
new Company technology under development fills rapidly, fully processing the
water in less than four minutes, and pours freely. The process used is Static
Filtration(TM), which Innova has "stockpiled" as technology for several years.
Patents have issued and others are pending.
There is also a demand for a means to alert the consumer/user when a
water filter should be replaced. To satisfy the needs of Rubbermaid in this
regard, the Company has under development a "foolproof" counter which will alert
the user that it is time to change the filter.
The Company has also entered into a licensing agreement with
n,p(Energy) providing Innova access to a new polymer extraction technology,
labeled PEXT(TM). The basis for this technology was initially developed by The
Department of Energy at a cost of more than $10 million dollars and required
some eight years to complete the initial development cycle. Its purpose was to
develop new technology that could remove contaminants down to basically
non-detectable limits using conventional instrumentation. The Company, in
conjunction with n,p, (Energy), has succeeded in modifying the technology into
basically a solid state, non-soluble form. This technology is viable for
inclusion in most filters manufactured today. The advantages it offers are: 6-8
times the kinetics, or speed of reaction (contaminant removal), four times the
loading capacity, and less than half the cost of the best competitive
technology, as well as the ability to remove contaminants such as arsenic which
existing competitive technology does not touch. PEXT(TM) will permit the design
of a totally new class of water filters with greater capacity, larger
contaminant range, smaller size and lower cost. The first intended application
of PEXT(TM) by the Company will be to enhance the removal of lead in portable
filter applications. The cost to finalize the development of PEXT(TM) is
projected to be $300,000 and to require six months of development time. Partner
participation is being sought but no commitments have been received to date.
SALES AND BACKLOG
The sales for the fiscal year ended June 30, 1997 were $3,880,100. As
of March 31, 1998, sales for the period have amounted to $1,699,100 with an
order backlog approximating $800,000. Sales for the first six months of this
fiscal year approximated $1,000,000. Sales were lower than expected as a result
of Rubbermaid's decision to launch the Company's products within the Rubbermaid
line at the January 1998 Housewares Show as opposed to the August 1997 Hardware
Show and to commence delivering product in April of 1998 to the retail
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merchants. Delays in packaging were the primary cause of delay. Further, the new
Richard Simmons infomercial did not air until December 1997. Existing order
commitments (as differentiated from actual order backlog) through June 1998
approximates $2,000,000. As noted in Footnote 1 of the accompanying financial
statements, significant portions of the Company's sales are to limited
customers. The loss of one of these significant customers could have a
significantly disruptive effect on the normal functioning of the Company.
COMPETITION
The Company competes with many other companies that supply water
filtration products. The principal competitive product would be the "pour
through" carafe type product normally kept in the refrigerator and used in the
kitchen.
Several companies, including Brita, Discovery Engineering (Pur),
Rubbermaid and others compete in the pitcher or carafe products market segment
which, while not portable outside the home and decidedly more expensive, are
otherwise directly competitive to the Innova two liter bottle. However, the
Company has the only product in a two liter size that is a truly portable
pitcher type product with a spill proof locking cap. The leading company in the
pitcher category is Brita.
The Company also competes indirectly with other companies that supply
bottled water, including The Perrier Group of America, Inc. (which includes
Arrowhead Mountain Spring Water, Poland Spring, Ozark Spring Water, Zephyrhills
Natural Spring Water, Deer Park, Great Bear and Mountain Ice) and Great Brands
of Europe (which includes Evian Natural Spring Water and Dannon Natural Spring
Water). The Company also competes with numerous regional bottle water companies
located in the United States and Canada.
The Company is the early leader in sales of portable bike, sport and 16
oz. filter water bottles, as well as the two liter portable pitcher. The
category is new and has been promoted by Richard Simmons under contract with the
Company's Strategic Partner, Goodtimes Licensing and Entertainment, who in the
first year sold over 2,000,000 16 oz. Personal water filter bottles and
thousands of 30 oz. Sport type bottles. Since then, Aladdin Industries and
others have entered this rapidly expanding market. The Company expects that more
competitors will enter the water filtration products market, resulting in even
greater competition for the Company. Many of the companies with whom the Company
currently competes, or may compete in the future, have greater financial,
technical, marketing, and sales resources, as well as greater name recognition
than the Company. There can be no assurance that the Company will have the
resources required to respond effectively to market or technological changes or
to compete successfully in the future, although it's alliances provide certain
advantages in these regards as does the Company's patent position.
INTELLECTUAL PROPERTY
The Company has rights to numerous patents in the consumer product
water treatment field in which twelve issued patents and two pending patents are
specifically related to consumer water treatment products. In total the Company
pursuant to a royalty agreement with its founder, Mr. John E. Nohren, has
obtained more than 20 patents of which the intellectual base may be applicable
to consumer water treatment products. It also has two additional patents pending
both domestically and internationally. Further, the Company has also entered
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into a licensing agreement with n,p,(Energy), providing access to new polymer
extraction technology, PEXT(TM). The Company has the worldwide rights to the
application of this technology. See "Business - Products Development."
The Company is in a patent infringement lawsuit, entitled Innova/Pure
Water, Inc. v. Aladdin Sales & Marketing, Inc., Filtex USA, LTD., ACT Marketing,
Inc., ACT Marketing, LTD., Advanced Consumer Technologies, Inc., and Robert S.
Luzenberg, Case No. 97-924-Civ-T-25 (M.D.Fla.). The Company filed the lawsuit
against Filtex, Aladdin and associated companies and individuals claiming patent
infringement and false advertising. There are no counterclaims currently raised
by the defendants. If the case is not settled, it will proceed to trial sometime
between June 1, 1998 and August 31, 1998. The defendants contest the validity of
the Company's patent which is at issue. Though management anticipates a
meritorious outcome, the Company could suffer the adverse outcome of having
certain of its patent rights invalidated. See "Litigation."
MANUFACTURING
Operations have been centered between the Company's facility, which
historically has performed the quality assurance, inspection, testing, assembly,
packaging and shipping functions. The Company's products consist principally of:
(1) one or more water treatment media; and (2) injection molded plastic
components, blow molded or injection molded containers which hold the water to
be processed as well as to support and position the water filtration element.
In, addition, labels, bags, and a variety of boxes are also used to package
various products. The filtration media consist of proprietary monolithic filter
elements containing activated carbon and one or more other compounds depending
upon the use to which the filter is to be applied. The media compounds may
include ion-exchange resins, zeolytes, Pext(TM), iodinated resins, or embody
hydrophilic sub-micron ceramic components. Other process media employed include
both high and low-density non-wovens. The media are obtained from a variety of
sources. Typically, each is procured under the terms of a confidentiality
agreement.
In preparation for growth, additional molding capacity is being
acquired both domestically and in China. The Company has enhanced its domestic
filter element production capacity and is expanding filter capacity to over
20,000,000 filters per year. Continental Plastics ("Continental") of Sarasota,
Florida has been the Company's primary contract suppliers of molds and injected
molded components for the past ten years. While the Company enjoys a close
working relationship with Continental, several other companies are available to
furnish competitive pricing and added production capacity. There is no
assurance, that such competitive pricing and production capacity will be
available in the future.
Presently, two companies supply the injection molded components. The
bottles and pitchers are secured from various companies, each somewhat of a
specialty. Typically, the Company owns the tooling to produce the injection
molded components.
The Company has changed from principally manual assembly and packaging
operations to mechanized assembly and packaging operations. These operations
include assembling; (1) the media elements into the housings; (2) the closure to
the filter housings; (3) the top and valve components together; and (4) the
variety of components into the bottle or pitcher. Packaging consists of
semi-automatic assembly of certain filters into hermetically sealed bags, date
and lot stamping labels and shipping boxes, packaging the finished products with
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instructions in display boxes and then placing a prescribed quantity into a
shipping box which is, in-turn palletized. The Company intends to add automation
for high speed bagging equipment for filter packaging as demand requires.
Further, filter designs have been altered to adapt to automatic assembly
methods. The Company has a current minimum production capacity of 10,000,000
units a year. Management anticipates that within the next six to eight months,
capacity of over 20,000,000 units will be available.
The Company possesses considerable in-house manufacturing know-how. The
expertise spans from tool and mold design to automated dispensing and compacting
of media, through inspection, assembly, and packaging. As such the Company acts
in an advisory capacity with many of its vendors, or dictates the methodology to
be used. This internal capability also keeps the Company from becoming a
"hostage" to any supplier and permits the Company to make justified "make or
buy" decisions based upon the true economic impact. This permits the Company to
purchase high quality components at a competitive price while remaining
independent.
All Company vendors operate under secrecy agreements. No suppliers
produce similar competitive products for any third parties. Several
organizations also support the Company in its product development program on an
as needed basis. The Company has relied on a limited number of vendors to supply
the components necessary for its products. A lack of necessary components at
favorable prices would adversely affect the Company.
PRODUCT LIABILITY INSURANCE AND WARRANTIES
The Company maintains a $2,000,000 product liability insurance policy.
In the twelve years in which the Company has produced and furnished products to
the retail trade and consumers, both domestically and internationally, no
product suits have been filed, nor consumer complaints received which would lead
to litigation.
The Company warrants to Rubbermaid that the products will be produced
to mutually acceptable standards. Innova operates a formal quality control
program monitoring through AQL standards, incoming components, in process parts,
and completed units. Detail product specification sheets are in place as well as
"Physical Proofs" which have been signed off and accepted by both parties. In
case of a question, the "Proof' samples are used for comparison purposes to
determine acceptability.
EMPLOYEES
As of March 31, 1998, the Company has 20 employees, including its 4
executive officers. These employees include 2 persons in sales and marketing, 2
persons performing development, and 3 administrative and clerical persons. There
are 8 manufacturing and production personnel which are supplemented by as many
as 25 contract employees, as required.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS. THE
WORDS "ANTICIPATED," "BELIEVE," "EXPECT," "PLAN," "INTEND," "SEEK," "ESTIMATE,"
"PROJECT," "WILL," "COULD," "MAY" AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS INCLUDE, AMONG OTHERS,
INFORMATION REGARDING FUTURE OPERATIONS, FUTURE CAPITAL EXPENDITURES AND FUTURE
NET CASH FLOW. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT
TO FUTURE EVENTS AND FINANCIAL PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES,
INCLUDING, WITHOUT LIMITATION, GENERAL ECONOMIC AND BUSINESS CONDITIONS, CHANGES
IN FOREIGN, POLITICAL, SOCIAL AND ECONOMIC CONDITIONS, REGULATORY INITIATIVES
AND COMPLIANCE WITH GOVERNMENTAL REGULATIONS, THE ABILITY TO ACHIEVE FURTHER
MARKET PENETRATION AND ADDITIONAL CUSTOMERS, AND VARIOUS OTHER MATTERS, MANY OF
WHICH ARE BEYOND THE COMPANY'S CONTROL, INCLUDING, WITHOUT LIMITATION, THE RISKS
DESCRIBED UNDER THE CAPTION "BUSINESS." SHOULD ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES OCCUR, OR SHOULD UNDERLYING ASSUMPTIONS PROVE TO BE INCORRECT,
ACTUAL RESULTS MAY VARY MATERIALLY AND ADVERSELY FROM THOSE ANTICIPATED,
BELIEVED, ESTIMATED, OR OTHERWISE INDICATED. CONSEQUENTLY, ALL OF THE
FORWARD-LOOKING STATEMENTS MADE IN THIS REGISTRATION STATEMENT ARE QUALIFIED BY
THESE CAUTIONARY STATEMENTS AND THERE CAN BE NO ASSURANCE OF THE ACTUAL RESULTS
OR DEVELOPMENTS.
Innova cautions readers that in addition to important factors described
elsewhere, the following important facts, among others, sometimes have affected,
and in the future could affect, the Company's actual results, and could cause
the Company's actual results during 1998 and beyond, to differ materially from
those expressed in any forward-looking statements made by, or on behalf of,
Innova.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED JUNE 30, MARCH 31,
- ----------------------------------------------------------------------------------------------------------
1997 1996 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
- ---------------------
Total Revenue $3,880,100 $1,701,900 $1,699,100 $2,453,100
Net Income (loss) 682,000 (342,100) 6,800 392,400
Earnings (loss) per common share - .09 (.05) .00 .05
basic
Shares used in per
Share Computation $7,279,660 $7,102,395 $9,333,462 $7,140,304
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
AT JUNE 30, AT MARCH 31,
- -----------------------------------------------------------------------------------------------------------
1997 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE SHEET DATA
- ------------------
Total assets $1,683,900 $1,624,800
Working capital 1,017,700 902,700
Long-term debt 12,200 19,500
Stockholders'; equity (Deficit) $1,214,600 $1,221,400
</TABLE>
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Results of Operations
NET SALES
Net sales for the nine-month period ended March 31, 1998 were
$1,699,100, a 31% decrease over the $2,453,100 of net sales for the comparable
period in 1997. Much of the decrease is attributable to the fact that although
the Company's strategic alliance with Rubbermaid for certain exclusive marketing
rights was signed in July 1997, the new product line was not unveiled until The
International Houseware Show in Chicago in January 1998. The Company was unable
to increase existing retail distribution due to the knowledge that Rubbermaid
was entering the market. Another factor was that the new Richard Simmons
infomercial did not air until December 1997, resulting in a loss of revenue for
that product.
Net sales for the year ended June 30, 1997 were $3,880,100, a 128%
increase over the $1,701,900 of net sales for the comparable period in 1996,
primarily due to strong sales of Richard Simmons' infomercial, resulting in
significant revenue generated by the Company's strategic alliance partner
Goodtimes Entertainment and Licensing, in the introduction of the Company's
patented filter for sport type bottles.
COST OF SALES
For the nine months ended March 31, 1998, our cost of sales declined
40% to $750,600 from the $1,254,300 of costs for the nine months ended March 31,
1997. This decrease is mainly due to the decrease in revenue and lower volume of
filter and bottle sales for the period.
The 40% decrease in cost of sales, combined with only a 31% decrease in
net sales, resulted in an improvement in our gross profit margin for the nine
months ended March 31, 1998. This is principally attributable to higher
percentage sales of filters versus bottles which yield a greater profit to the
Company as well as switching from a direct sales format managed by the Company
to the use of strategic alliances and the corresponding reduction in sales
personnel and associated costs plus elimination of most marketing expenses.
Cost of sales for the year ended June 30, 1997 amounted to $1,811,800,
an increase of 110% over the $864,000 for the year ended June 30, 1996. This
increase is primarily due to the 128% increase in net sales.
As net sales grew by 128% and cost of sales grew by only 110%, the
Company's gross profit margin also grew proportionately in fiscal 1997. This is
principally attributable to improved manufacturing efficiencies brought about by
significant higher unit filter volume and the overabsorption of manufacturing
overhead as a result of higher than initially budgeted unit volumes and a shift
in product mix resulting in greater filter versus bottle sales in the
introduction of the Richard Simmons product line, which resulted in a higher
gross margin to the Company.
OPERATING EXPENSES
Operating expenses for the nine-month period ended March 31, 1998 were
$952,700, or 56% of net sales. For the comparable period in 1997, operating
costs amounted to $797,300,
12
<PAGE> 13
or 33% of net sales. The 23% increase as a percentage of sales between these
periods is attributable to the addition of a research and development department
as well as an increase in director and officer insurance, audit expense, rent,
travel and entertainment, officers' salary and royalty expenses.
For the year ended June 30, 1997, operating costs amounted to
$1,368,000, or 35% of net sales. For the year ended June 30, 1996, operating
costs were $1,158,900, or 68% of net sales. The decrease in operating costs as a
percentage of sales between these years of 33% is primarily due to an increase
in sales and a reduction of sales and marketing expense with minor changes in
fixed operating costs while sales basically doubled.
INTEREST INCOME AND EXPENSE
For the nine months ended March 31, 1998, net interest income amounted
to $11,000 as compared to net interest expense of $9,100 for the nine months
ended March 31, 1997. This change is due to the retirement of outstanding loans
and the fact that the Company was earning interest on its operating account.
For the year ended June 30, 1997, net interest expense decreased by 13%
to $18,300 from $21,100 for the year ended June 30, 1996. The decrease in
expense is due to the payment of 11 months interest in fiscal year 1997 since
the debt was converted to Common Stock during the year versus 12 months of
expense in fiscal year 1996.
NET INCOME
Net income for the nine months ended March 31, 1998 decreased by 83% to
$6,800 from $392,400 for the comparable period in 1997. This decrease is
principally attributable to the reduction in sales and increase in operating
expense and, this period involved the slow start-up of Rubbermaid and Richard
Simmons.
Net income for the year ended June 30, 1997 was $682,000 as compared to
a net loss of $342,100 for the year ended June 30, 1996. The improvement in
fiscal 1997 was primarily a result of expense reduction and cost controls
combined with approximately twice the revenue.
EARNINGS PER SHARE
For the nine months ended March 31, 1998, basic and diluted earnings
per share amounted to $.00. For the comparable period in 1997, basic and diluted
earnings per share amounted to $.05. This change is primarily the result of
decreased profits between the comparable periods.
Basic and diluted earnings per share were $.09 and $.08, respectively,
for the year ended June 30, 1997, as compared to basic and diluted loss per
share of $(.05) for the year ended June 30, 1996. The turnaround of earnings per
share in fiscal 1997 was due primarily to increased profits from the prior year.
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
For the nine-month period ended March 31, 1998, net cash provided by
operating activities amounted to $141,100, a decrease over the $314,500 of net
cash provided by operating activities for the comparable period in 1997. The
decrease is primarily a result of decreased profits during the period, as well
as the need to retool for the anticipated production requirements of Rubbermaid
and an increase in management's salary expense.
For the year ended June 30, 1997, net cash provided by operating
activities amounted to $395,500, as compared to net cash used by operating
activities of $56,300 for the year ended June 30, 1996. The improvement in
fiscal 1997 was due mainly to increased profits for the year.
INVESTMENT ACTIVITIES
The Company's investment activities include equipment, sales and
purchases, patent acquisitions, and net changes in related party advances.
Net cash used by investing activities for the nine months ended March
31, 1998 was $224,600, as compared to net cash used by investing activities of
$145,100 for the comparable period in 1997. The increase in cash expended for
investing activities is due primarily to more purchases of equipment during the
nine months ended March 31, 1997 than during the nine months ended March 31,
1998.
Net cash used by investing activities for the year ended June 30, 1997
was $180,300, an increase of 316% over net cash used of $43,300 for the year
ended June 30, 1996. The Company expended more cash in fiscal 1997 for investing
activities related to the acquisition of equipment.
FINANCING ACTIVITIES
The Company's financing activities include proceeds from borrowings,
payments on borrowings and capital leases, and proceeds from sales of common
stock and warrants.
Net cash of $29,800 was used by financing activities for the nine-month
period ended March 31, 1998, as compared to net cash provided by financing
activities of $528,500 for the nine months ended March 31, 1997. The Company
received net proceeds of $485,300 from the sale of common stock warrants during
the quarter ended December 31, 1996.
The sale of warrants during the quarter ended December 31, 1996 was the
main reason for the Company's net cash provided by financing activities of
$535,700 for the year ended June 30, 1997. For the year ended June 30, 1996, net
cash provided by financing amounted to $79,700.
14
<PAGE> 15
CAPITAL RESOURCES
At March 31, 1998, the Company does not have any material commitments
for capital expenditures other than for those expenditures incurred in the
ordinary course of business.
The Company believes that its current operations and cash balances will
be sufficient to satisfy its currently anticipated cash requirements for the
next 12 months. However, additional capital could be required in excess of the
Company's liquidity, requiring it to raise additional capital through an equity
offering, secured or unsecured debt financing. The availability of additional
capital resources will depend on prevailing market conditions, interest rates,
and the existing financial position and results of operations of the Company.
15
<PAGE> 16
ITEM 3. DESCRIPTION OF PROPERTY
The Company occupies approximately 22,000 feet of air conditioned
office, manufacturing and warehouse space located at 13130 - 56th Court, Suite
604-605, Clearwater, Florida 33760. The product development laboratory is also
located in an adjacent building. The facilities are leased and a new five year
lease commenced March 1, 1998. The monthly rent for these facilities is
approximately $10,000.
16
<PAGE> 17
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of shares of Company Common Stock owned as of March 31,
1998 beneficially by (i) each person who beneficially owns more than 5% of the
outstanding Company Common Stock, (ii) each director of the Company, (iii) the
President and Chief Executive Officer of the Company (the only executive officer
of the Company whose cash and non-cash compensation for services rendered to the
Company for the year ended June 30, 1997, exceeded $100,000) and (iv) directors
and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner (3) Beneficial Ownership (1) Percent of Class (2)
---------------------------- ------------------------ --------------------
<S> <C> <C>
John E. Nohren, Jr. and
Francis Weaver Nohren(4)(5) 2,118,216 21.2
Rose C. Smith (6) 590,350 5.9
Peter Christensen (9) 624,500 6.2
Mort Langer (10) 245,000 2.4
Frank Legnaioli (9) 591,000 5.9
C. W. McKee (9) 41,000 .5
Joe Cayre (7) 1,350,000 13.5
Andrew Greenberg (9) 167,000 1.7
All directors and executive officers
as a group (10 persons) 4,383,066 43.9
</TABLE>
(1) Represents sole voting and investment power unless otherwise
indicated.
(2) Based on approximately 9,996,371 shares of Company Common
Stock outstanding as of March 31, 1998 plus, as to each person
listed, that portion of the unissued shares of Company Common
Stock subject to outstanding options which may be exercised by
such person, and as to all directors and executive officers as
a group, unissued shares of Company Common Stock as to which
the members of such group have the right to acquire beneficial
ownership upon the exercise of stock options within the next
60 days.
(3) The address of each individual is in care of the Company.
(4) May be deemed to be a "founder" of the Company for the purpose
of the Securities Act.
(5) Represents aggregate shares held between Mr. Nohren
individually, his wife individually and shares held in joint
tenancy. Also includes options to acquire 193,750 shares of
Common Stock exercisable at $.50 held by Mr. Nohren.
(6) 54,350 of the shares of common stock as set forth above are
owned by Elliot Smith, husband of Rose C. Smith, President and
Chief Executive Officer of the Company. Also includes 175,000
shares underlying options issued to Ms. Smith with an exercise
price of $.50.
(7) Represents shares held directly and indirectly by Joe Cayre
and his family pursuant to an agreement reached between the
Company and the Good Times family of companies. See "Certain
Relationships & Related Transactions."
(8) Excludes 1,173,100 shares reserved for issuance under
outstanding options and warrants.
(9) Includes options to acquire 17,000 shares of Common Stock at
an exercise price of $.50 over a 3 year vesting term
conditioned upon continued service as an outside director.
(10) Includes options to acquire up to 115,000 shares of Common
Stock at an exercise price of $.50 per share.
17
<PAGE> 18
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to each
person who is a director or an executive officer of the Company as of March 31,
1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John E. Nohren, Jr. 66 Chairman of the Board, Director
Rose C. Smith 47 President, Chief Executive Officer, Director
James Keene 61 Chief Operating Officer
Robert Connell 42 Controller, Treasurer and Secretary
Donald G. Huggins, Jr. 50 Chief Financial Officer
Peter Christensen 46 Director
Andrew Greenberg 43 Director
Mort Langer 55 Director
Frank Legnaioli 67 Director
Clarence W. McKee 73 Director
</TABLE>
Executive officers are elected by the Board of Directors and serve
until their successors are duly elected and qualify, subject to earlier removal
by the Board of Directors. Directors are elected at the annual meeting of
shareholders to serve for their term and until their respective successors are
duly elected and qualify, or until their earlier resignation, removal from
office, or death. The remaining directors may fill any vacancy in the Board of
Directors for an unexpired term. See "Board of Directors" for a discussion of
the Directors' terms.
BUSINESS EXPERIENCE OF EXECUTIVE OFFICERS AND DIRECTORS
John E. Nohren, Jr. has been Chairman of the Board of the Company since
its inception. Effective December 1996, with Mr. Nohren's consent and approval,
he resigned as President and Rose C. Smith was appointed his successor. He
subsequently resigned as Chief Executive Officer in June of 1997 when Rose C.
Smith was appointed his successor. He was also the founder and the major
shareholder of a prior Company, Innova, Inc., founded in 1969 to service the
increasing requirement of the U.S. Department of Defense for sophisticated
automation and hazardous waste management. With government funding, Mr. Nohren
made technological advances for dealing with water contamination of various
nature. The applications included the treatment of water in a chemical,
biological, or nuclear war scenario. Also, the removal of a variety of
contaminants from the production of military products. The obvious voids, and
needs for the application of those technologies to consumers lead to the
formation of the Company in 1985. He is the named inventor on several of the
Company's patents. See "Certain Relationships and Related Transactions."
Rose C. Smith was appointed President effective December 1996 and Chief
Executive Officer effective June 30, 1997. Ms. Smith began her career in the
financial community at Bache and Co., Inc. (Prudential Securities, Inc.) and was
a financial adviser to the principals of the Moore McCormick Shipping Lines. She
functioned in a number of consulting roles relative to product acquisition,
licensing, and line extensions and has been retained by Aguecheek Ltd. in
England, which owned the licensing rights to Armani, Valentino, Ungaro, Tiffany
and others. Mrs. Smith was also a consultant regarding potential corporate
acquisitions for Marubeni in Tokyo. She
18
<PAGE> 19
became associated with the Company in 1993 as a marketing consultant, hence
became the Director of Business Development until elected President in 1996, and
Chief Executive Officer in June 1997.
James Keane, Chief Operating Officer, joined the Company in January,
1998. Prior to joining the Company, he was with Evenflo Company Inc., where he
served for eight years as Vice President of Operations and Engineering for the
Infant Feeding Division. He has over thirty years experience in the design and
manufacturing of plastic consumer products.
Robert Connell, Treasurer and Secretary, joined the Company in
September 1993. Prior to joining the Company, he held accounting positions with
E.I. DuPont de Nemours & Company and with smaller organizations.
Donald Huggins, Jr., Chief Financial Officer, has been with the Company
since 1992. During his tenure at the Company, he has previously served as
Director of Business Development and Chief Operating Officer. Prior to his
employment with the Company, Mr. Huggins organized and developed real estate
development activities for his own companies.
Peter Christensen has been a director of the Company since 1996. He is
currently the Chief Executive Officer of ComTec, Incorporated, a software
company that provides integrated art print and mail services as well as art
electronic imaging, E-mail delivery, and electronic payment services ,
integrated with credit card and personal financial software. Mr. Christensen is
also Chairman of the Board of Digital Privacy, Inc., a smart card based computer
and communications security company, securing communications across the
Internet. Prior to joining ComTec, Incorporated and Digital Privacy, Inc., he
was a managing director at Paine Webber.
Andrew Greenberg has been a director of the Company since 1997. Since
1986, he has been employed as President at GoodTimes Entertainment, a New York
based, privately held company which is a diversified international multimedia
entertainment organization.
Mort Langer has been a director of the Company since 1987. In 1993, Mr.
Langer formed Langer Partners, the management arm of Langer Capital Management,
L.L.P. where he serves as a partner. Prior to forming Langer Partners, he worked
at Bear, Stearns & Co., Inc. as a growth stock analyst and served as Research
Director for their 35 other equity analysts.
Frank Legnaioli has been a director of the Company since 1986. Mr.
Legnaioli is presently retired. Prior to his retirement, he worked for Paxton
Van Lines, Inc. in Springfield, Virginia for forty years. During his tenure at
Paxton Van Lines, Inc., it became the top grossing Atlas Van Lines agent in the
United States and abroad. He was one of the architects of the buy out of Atlas
Van Lines and turning it into a public company.
Clarence. W. ("C.W."). McKee was a founding director and remained as a
director until 1987, and again became a director of the Company in 1997. He has
been retired since 1989. Prior to his retirement Mr. McKee was employed by
Florida Progress Corporation and Florida Power Corporation where he served as
Executive Vice President and Chief Financial Officer.
19
<PAGE> 20
BOARD OF DIRECTORS
The Company's Bylaws fix the size of the Board of Directors at no fewer
than one and no more than nine members, to be elected annually by a plurality of
the votes cast by the holders of Common Stock, and to serve until the next
annual meeting of stockholders and until their successors have been elected or
until their earlier resignation or removal. Currently, there are seven directors
who were elected on February 28, 1998.
20
<PAGE> 21
ITEM 6. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table shows the compensation paid or accrued by the
Company for the fiscal years ended June 30, 1997, to or for the account of the
President, Chief Executive Officer and John E. Nohren, Jr., Chairman of the
Board. No other executive officer or director of the Company received benefits
or an annual salary and bonus in excess of $100,000 or more during the stated
period. Accordingly, the summary compensation table does not include
compensation of other executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
RESTRICTED
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME & PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
POSITION (1) YEAR ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John E. Nohren, Jr. 1997 --- --- --- --- 18,750 --- 150,000 (2)
President and CEO
</TABLE>
- ------------------------
(1) Ms. Smith replaced Mr. Nohren as the President and CEO, effective July 1,
1997.
(2) Represents payments made to Mr. Nohren pursuant to his royalty agreement.
EMPLOYMENT AND OTHER AGREEMENTS
The Company entered into an employment agreement with Rose C. Smith
effective July 1, 1997, which provides for her employment as President and Chief
Executive Officer for a five year term ending June 29, 2002. Under the agreement
Ms. Smith is to receive a base salary of $150,000 per year. Ms. Smith is also to
receive a bonus of two percent of net sales of the Company adjusted by the
annual gross margin achieved by the Company. The agreement contains a
restrictive covenant not to compete for the term of the agreement and for five
years following termination of service without cause. The agreement provides for
payment on her behalf of premiums in respect of $500,000 of life insurance on
Ms. Smith's life pursuant to a split dollar life insurance agreement. The
agreement provides for severance payments equal to 200% of the annual base
compensation due under the Agreement in the event there is a "change of control"
of the Company, as defined therein, and she is subsequently terminated without
cause.
The Company entered into a royalty agreement with John E. Nohren, Jr.,
Chairman, effective July 1, 1997, expiring on December 31, 2002. This agreement
obligates the Company to pay Mr. Nohren, in return for the assignment of his
patent rights, a minimum of $100,000 of royalties per year, with a cap of
$300,000 per year, during the term of his employment. The royalty payments will
be calculated based on five percent of net sales of products that incorporate
these assigned patents. Upon his termination, a three percent royalty shall be
paid over the residual life of his patents.
21
<PAGE> 22
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The information provided in the table below provides information with
respect to each exercise of stock options during fiscal 1997 by each of the
executive officers named in the summary compensation table and the fiscal year
end value of unexercised options.
<TABLE>
<CAPTION>
=====================================================================================================================
(a) (b) (c) (d) (e)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Value of
Unexercised
Number of In-the Money
Unexercised Options
Options at FY-End at FY-End($)
Value Exercisable Exercisable
Shares Acquired/ Realized on or after on or after
Name Exercise ($)(1) July 1, 1997 July 1, 1997(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John E. Nohren, Jr. 18,750 9,375 18,750 $9,375
=====================================================================================================================
</TABLE>
=================
(1) The aggregate dollar values in column (c) and (e) are calculated by
determining the difference between the fair market value of the Common
Stock underlying the options and the exercise price of the options at
exercise or fiscal year end, respectively. In calculating the dollar
value realized upon exercise, the value of any payment of the exercise
price is not included.
STOCK OPTIONS
The Company has in effect a stock option plan which authorizes the
grant of incentive stock options under Section 422 of the Internal Revenue Code
(the "Plan"). The Plan was adopted in 1996. A total of 750,000 shares have been
reserved under the Plan . As of March 31, 1998, options to purchase a total of
approximately 738,000 shares at $.50 a share were issued and outstanding under
the Plan. The Plan provides that (a) the exercise price of options granted under
the Plan shall not be less than the fair market value of the shares on the date
on which the option is granted unless an employee, immediately before the grant,
owns more than 10% of the total combined voting power of all classes of stock of
the Company or any subsidiaries, whereupon the exercise price shall be at least
110% of the fair market value of the shares on the date on which the option is
granted; (b) the term of the option may not exceed ten years and may not exceed
five years if the employee owns more than 10% of the total combined voting power
of all classes of stock of the Company or any subsidiaries immediately before
the grant; (c) the shares of stock may not be disposed of for a period of two
years from the date of grant of the option and for a period of one year after
the transfer of such shares to the employee; and (d) at all time from the date
of grant of the option and ending on the date three months before the date of
the exercise, the employee shall be employed by Company, or a subsidiary of the
Company, unless employment is terminated because of disability, in which cased
such disabled employee shall be employed from date of grant to a year preceding
the date of exercise, or unless such employment is terminated due to death.
22
<PAGE> 23
As of the date of this filing, the Company has outstanding options and
warrants to acquire 1,173,100 shares of Common Stock at an exercise price of
$.50 per share. Options to acquire 185,000 shares must be exercised by June 30,
1998 or forfeited. The remaining options and warrants to acquire 988,100 shares
of Common Stock vest over a 3 year period commencing with the fiscal year
beginning July 1, 1997 and ending June 30, 2000. Option holders may exercise
their option at any time following a vesting year so long as the individual
remains employed. Four years of employment are required for vesting. All options
must be exercised and payment made no later than June 30, 2000. Unexercised
options after that date shall terminate. Employees have a 60 day period after
termination of employment to exercise options. The vesting schedule is subject
to acceleration in the event of a merger, sale or a change of control of the
Company. For all options issued, the exercise price of $.50 was determined to be
the fair market value as of date of issuance
DIRECTOR COMPENSATION
A director who is an employee of the Company receives no additional
compensation for services as director or for attendance at or participation in
meetings except reimbursement of out-of-pocket expenses. An outside director is
reimbursed for out-of-pocket expenditures incurred in attending or otherwise
participating in meetings. All directors hold options to acquire up to 17,000
shares of Common Stock exercisable at $.50 per share. The Company has no other
arrangements regarding compensation for services as a director.
23
<PAGE> 24
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. John E. Nohren, Jr., Chairman of the Board, has assigned the rights
to certain patents owned by him, to the Company. The patents are used by the
Company for its products. The Company entered into a royalty agreement with John
E. Nohren, Jr. on June 30, 1997, expiring on December 31, 2002. This agreement
obligates the Company to pay Mr. Nohren in return for the assignment of his
patent rights, a minimum of $100,000 of royalties per year, with a cap of
$300,000 per year, during the term of his active involvement. The royalty
payments will be calculated based on five percent of sales of products that
incorporate these assigned patents. Upon his full retirement, a three percent
royalty shall be paid over the residual life of his patents. See "Executive
Compensation-Employment Agreements."
On October 31, 1996, the Company reached an agreement with Innova
Holdings, LLC, a Company owned by the Cayre family who also owns the Good Times
family of companies. Good Times has agreed to provide the Company with certain
sales and marketing assistance to sell via direct television, including Richard
Simmons promotions. In connection with this agreement, the Company was paid
$500,000 for warrants for the right to purchase 11,000,000 shares of common
stock. The warrants, which were non-dilutive, had the following exercise prices
and expiration dates: (1) 3,300,000 shares at an exercise price of $.40 per
share expiring one year from date of grant; (2) 3,300,000 share at an exercise
price of $.75 per share expiring two years from date of grant; and (3) 4,400,000
share at an exercise price of $ 1.00 per share expiring three years from date of
grant.
On October 30, 1997, the Company entered into a stock purchase
agreement with Innova Holdings, LLC. In connection with this agreement, the
Company issued 1,500,000 shares of its common stock to Innova Holdings, LLC in
exchange for the surrender of previously issued warrants to purchase the
11,000,000 shares of the Company's common stock as set forth above. The shares
were subsequently transferred to Joe Cayre and other family members. The
1,500,000 shares cannot be sold, transferred, assigned, or pledged until October
30, 1999.
As of year end June 30, 1997 certain officers, directors and
shareholders retired approximately $338,830.26 in Company indebtedness in
exchange for 955,310 shares issued at $.25 or $.50 per share. The individuals
are set forth below.
<TABLE>
<CAPTION>
Conversion
Loan Amount Per Share Price Shares Issued
<S> <C> <C> <C>
John E. & Frances Nohren, Jr. 88,830.26 0.25 355,310
Frank Legnaioli 25,000.00 0.25 100,000
Barbara Albin 150,000.00 0.50 300,000
Barbara Albin 50,000.00 0.50 100,000
John E. Nohren, Jr. 25,000.00 0.25 100,000
--------- -------
Total 338,830.26 955,310
========== =======
</TABLE>
24
<PAGE> 25
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The authorized common capital stock of the Company consists of
50,000,000 shares of Common Stock, $.0001 par value, of which 9,996,371 and
9,995,871 shares were issued and outstanding respectively as of March 31, 1998
(the "Common Stock").
The holders of Common Stock are entitled to one vote per share for the
selection of directors and all other purposes and do not have cumulative voting
rights. The holders of Common Stock are entitled to receive dividends when, as,
and if declared by the Board of Directors, and in the event of the liquidation
by the Company, to receive pro-rata, all assets remaining after payment of debts
and expenses and liquidation of the preferred stock. Holders of the Common Stock
do not have any pre-emptive or other rights to subscribe for or purchase
additional shares of capital stock, no conversion rights, redemption, or
sinking-fund provisions. In the event of dissolution, whether voluntary or
involuntary, of the Company, each share of the Common Stock is entitled to share
ratably in the assets available for distribution to holders of the equity
securities after satisfaction of all liabilities. All the outstanding shares of
Common Stock are fully paid non-assessable.
The transfer agent for the Company is Continental Stock Transfer &
Trust Company of New York.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Certificate of Incorporation provides that no director of
the Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director except as limited by
the FGCL. The Certificate of Incorporation also provides that no amendment or
repeal of such provision shall apply to or have any effect on the right to
indemnification permitted thereunder with respect to claims arising from acts or
omissions occurring in whole or in part before the effective date of such
amendment or repeal whether asserted before or after such amendment or repeal.
The Company's Bylaws provide that the Company shall indemnify to the
full extent authorized by law each of its directors and officers against
expenses incurred in connection with any proceeding arising by reason of the
fact that such person is or was an agent of the corporation. The Company has
entered into indemnification agreements with its directors and certain of its
officers.
Insofar as indemnification for liabilities may be invoked to disclaim
liability for damages arising under the Securities Act of 1933, as amended, or
the Securities Act of 1934, (collectively, the "Acts") as amended, it is the
position of the Securities and Exchange Commission that such indemnification is
against public policy as expressed in the Acts and are therefore, unenforceable.
25
<PAGE> 26
FLORIDA CORPORATE LAW
The Florida General Corporate Law includes the Control Share Act (the
"Act"), which contains provision regulating certain "control share
acquisitions," which are transactions causing the voting power of any person
acquiring beneficial ownership of shares of a public corporation in Florida to
meet or exceed certain threshold percentages of the total votes entitled to be
cast for the election of directors. The Act provides that a control share
acquisition may only be made if: (I) the shareholders of the corporation approve
the proposed acquisition by affirmative vote of a majority of the voting power
of such corporation represented in person or by proxy at a special meeting of
shareholders called for the purpose of voting in the proposed acquisition; and
(ii) a majority of the portion of such voting power excluding the voting power
of interested shares approve the proposed acquisition at such special meeting.
26
<PAGE> 27
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
MARKET PRICE OF THE REGISTRANT'S COMMON STOCK
The Common Stock is traded in the over-the-counter market in the so
called "pink sheets," or on the "Electronic Bulletin Board" of the National
Association of Securities Dealers, Inc. (the "NASD") under the symbol "IPUR."
The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company of New York. The following table sets forth for the
periods indicated the high and low sale prices for shares of the Common Stock as
reported on the OTC.
<TABLE>
<CAPTION>
Sales Price
-----------
High Low
---- ---
<S> <C> <C>
FISCAL YEAR ENDING JUNE 30, 1995
Fourth Quarter 0.563 0.125
Third Quarter 0.625 0.125
FISCAL YEAR ENDED JUNE 30, 1996
Fourth Quarter 1.000 0.500
Third Quarter 1.063 0.125
Second Quarter 0.500 0.125
First Quarter 0.500 0.063
FISCAL YEAR ENDED JUNE 30, 1997
Fourth Quarter 1.325 0.375
Third Quarter 1.835 0.543
Second Quarter 1.750 0.438
First Quarter 0.688 0.438
FISCAL YEAR ENDED JUNE 30, 1998
Second Quarter 1.313 1.063
First Quarter 1.938 0.531
</TABLE>
The Company's Common Stock is not listed on NASDAQ, but is traded in
the over-the-counter market in the so called "pink sheets," or on the
"Electronic Bulletin Board" of the National Association of Securities Dealers,
Inc. (the "NASD"). Accordingly, an investor may find it more difficult to
dispose of, or obtain accurate quotations as to the market value of the common
stock. Further, in the absence of a security being quoted on NASDAQ, a market
price of at least $5.00 per share or the Company having in excess of $2,000,000
in net tangible assets, trading in the Company's securities may be covered by a
Securities and Exchange Commission ("SEC") rule that imposes additional sales
practice requirements on broker-dealers who sell such securities to persons
other than established customers and accredited investors (generally
institutions with net worth in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 jointly with their spouse). For transactions covered by the
rule, the broker-dealer must make a special suitability determination for the
purchaser and receive the purchasers' written agreement to the transaction prior
to the sale. Consequently, the rule affects the ability of broker-dealers to
sell the Company's securities and also may affect the
27
<PAGE> 28
ability of purchasers in his offering to sell their securities in the secondary
market.
Previously, the SEC adopted seven rules ("Rules") under the Securities
Exchange Act of 1934 requiring broker/dealers engaging in certain recommended
transactions with their customers in specified equity securities falling within
the definition of "penny stock" (generally non-NASDAQ securities priced below
$5.00 per share) to provide to those customers certain specified information.
Unless the transaction is exempt under the Rules, broker/dealers effecting
customer transactions in such defined penny stocks are required to provide their
customers with: (1) a risk disclosure document; (2) disclosure of current bid
and ask quotations, if any; (3) disclosure of the compensation of the
broker/dealers and its sales person in the transaction; and (4) monthly account
statements showing the market value of each penny stock held in the customer's
account.
As a result of the aforesaid rules regulating penny stocks, the market
liquidity for the Company's securities could be severely adversely affected by
limiting the ability of broker-dealers to sell the Company's securities and the
ability of shareholders sell their securities in the secondary market.
DILUTION AND ABSENCE OF DIVIDENDS
The Company has not paid any cash dividends on its common or preferred
stock and does not anticipate paying any such cash dividends in the foreseeable
future. Earnings, if any, will be retained to finance future growth. The Company
may issue shares of its common stock and preferred stock in private or public
offerings to obtain financing, capital or to acquire other businesses that can
improve the performance and growth of the Company. Issuance and or sales of
substantial amounts of common stock could adversely affect prevailing market
prices in the common stock of the Company.
PREFERRED STOCK
The Board of Directors of the Company (without further action by the
shareholders) has the option to issue from time to time authorized but unissued
shares of Preferred Stock and to fix and determine the terms, limitations,
residual rights, and preferences of such shares ("Blank Check Preferred"). When
any shares of Preferred Stock are issued, certain rights of the holders of
Preferred Stock may affect the rights of the holders of Common Stock. Among
other thing, in addition to any other powers conferred in the Preferred Stock,
holders of the Preferred Stock will have, under the Florida General Corporation
Law ("FGCL"), the right to vote as a class on any increases, decreases, or
changes in the rights of the Preferred Stock. The affirmative vote of at least a
majority of the outstanding shares of Preferred Stock will be required approval
of any such increases, decreases, or change. The authority of the Board of
Directors to issues shares of Preferred Stock with characteristics which it
determines (such as preferential voting, conversion redemption and liquidation
rights) may have a deterrent effect on persons who might wish to make a takeover
bid to purchase shares of the Company at a price which might be attractive to
its shareholders. However, the Board of Directors must fulfill its fiduciary
obligation to the Company and its shareholders in evaluating any takeover bid.
SHAREHOLDERS
As of March 31, 1998, there were approximately 400 beneficial owners of
the Company's common stock with 9,996,371 and 9,995,871 shares issued and
outstanding, respectively.
28
<PAGE> 29
ITEM 2. LEGAL PROCEEDINGS
LEGAL PROCEEDINGS
The Company is the plaintiff in a patent infringement lawsuit, entitled
Innova/Pure Water, Inc. v. Aladdin Sales & Marketing, Inc., Filtex USA, LTD.,
ACT Marketing, Inc., ACT Marketing, LTD., Advanced Consumer Technologies, Inc.,
and Robert S. Luzenberg, Case No. 97-924-Civ-T-25 (M.D.Fla.). The Company filed
the lawsuit against Filtex, Aladdin and associated companies and individuals
claiming patent infringement and false advertising. There are no counterclaims
raised by the defendants. If the case is not settled, it will proceed to trial
sometime between June 1, 1998 and August 31, 1998. The defendants do contest the
validity of the Company's patent which is at issue. Though management
anticipates a meritorious outcome, the Company could suffer the adverse outcome
of having its patent invalidated.
The Company is also the defendant in a lawsuit filed by a former
employee who alleges breach of his employment contract. The case is Alan R.
Kelly v. Innova Pure Water, Inc., Pinellas County Circuit Court case no.
98-2771-CI-007. The plaintiff is claiming damages in the amount of approximately
$80,000. and 150,000 shares of Company common stock. The case is currently in
the discovery stage. While management believes meritorious defenses exists,
there is no assurance that the Company will not suffer an adverse outcome in the
lawsuit.
29
<PAGE> 30
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
30
<PAGE> 31
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On October 31, 1996, the Company reached an agreement with Innova
Holdings, LLC, a Company owned by the Cayre family who also owns the Good Times
family of companies. Good Times has agreed to provide the Company with certain
sales and marketing assistance to sell via direct television, including Richard
Simmons promotions. In connection with this agreement, the Company was paid
$500,000 for warrants for the right to purchase 11,000,000 shares of common
stock. The warrants, which are non-dilutive, have the following exercise prices
and expiration dates: (1) 3,300,000 shares at an exercise price of $0.40 per
share expiring one year from date of grant; (2) 3,300,000 share at an exercise
price of $0.75 per share expiring two years from date of grant; and (3)
4,400,000 share at an exercise price of $1.00 per share expiring three years
from date of grant.
On October 30, 1997, the Company entered into a stock purchase
agreement with Innova Holdings, LLC. In connection with this agreement, the
Company issued 1,500,000 shares of its common stock to Innova Holdings, LLC in
exchange for the surrender of previously issued warrants to purchase the
11,000,000 shares of the Company's common stock as set forth above. The
1,500,000 shares cannot be sold, transferred, assigned, or pledged for a two
year period beginning October 30, 1997.
As of year end June 30, 1997 certain officers, directors and
shareholders retired approximately $338,830.26 of Company indebtedness in
exchange for 955,310 shares issued at $.25 or $.50 per share. See "Certain
Relationships and Related Transactions."
For all above enumerated transactions, the Company relied upon Section
4(2) of the Securities Act of 1933 as an exemption available from the
registration requirements of Section 5 of the Securities Act of 1933 for
transactions by an issuer not involving a public offering. The securities were
issued to a purchaser who represented, in a manner satisfactory to the Company,
that it had acquired the securities for investment and not with the view of the
distribution thereof. The transactions described or referred to above did not
involve an underwriter, and no discount or commission was paid in connection
therewith. No advertising or general solicitation was employed by the Company in
offering the securities and no commissions were paid in connection with the
sales thereof. The securities of the Company issued to the purchasers have been
embossed with the legend restricting transfer of such securities. A stop
transfer order concerning the transfer of the certificates representing all the
common stock issued and outstanding as indicated above has been noted on the
Company's stock transfer ledger.
31
<PAGE> 32
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Florida General Corporation Law (the "FGCL")
provides in relevant part that "a corporation shall have power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, partnership, joint venture, trust
or other enterprise, against expenses (including attorneys' fees), judgments
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful." With respect to
derivative actions, Section 145(b) of the FGCL provides in relevant part that
"[a] corporation shall have power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor [by reason of his service in one of the capacities specified in the
preceding sentence against expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Circuit Court or the court in which such
action or suit was bought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Circuit Court or such other court shall deem proper." The Company's
Certificate of Incorporation provides for such indemnification to the fullest
extent provided for by the FGCL.
The Company's Certificate of Incorporation provides that no director of
the Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director except as limited by
the FGCL. The Certificate of Incorporation also provides that no amendment or
repeal of such provision shall apply to or have any effect on the right to
indemnification permitted thereunder with respect to claims arising from acts or
omissions occurring in whole or in part before the effective date of such
amendment or repeal whether asserted before or after such amendment or repeal.
The Company's Bylaws provide that the Company shall indemnify to the
full extent authorized by law each of its directors and officers against
expenses incurred in connection with any proceeding arising by reason of the
fact that such person is or was an agent of the corporation. The Company
anticipates entering into indemnification agreements with its directors and
certain of its officers.
32
<PAGE> 33
Insofar as indemnification for liabilities may be invoked to disclaim
liability for damages arising under the Securities Act of 1933, as amended, or
the Securities Act of 1934, (collectively, the "Acts") as amended, it is the
position of the Securities and Exchange Commission that such indemnification is
against public policy as expressed in the Acts and are therefore, unenforceable.
33
<PAGE> 34
PART F/S
ITEM 1. Financial Statements:
The following is a list of each financial statement filed under ITEM 13
of this Registration Statement:
1. Audited Financial Statements consisting of the Company's statements
of operations, changes in stockholders' equity, and cash flows for the year
ended June 30, 1996, as audited by Pender Newkirk & Company, Certified Public
Accountant, along with its report thereon.
2. Audited Financial Statements consisting of the Company's statements
of operations, changes in stockholders' equity, and cash flows for the year
ended June 30, 1997, as audited by Pender Newkirk & Company, Certified Public
Accountant, along with its report thereon.
3. Unaudited Interim Financial Statements consisting of a Balance Sheet
as of March 31, 1998, the last day of the Company's most recent past fiscal
quarter and related statements of operations, changes in stockholders' equity,
and cash flows for the nine months ended March 31, 1998 and March 31, 1997.
34
<PAGE> 35
PART III
ITEM 1. Index of Exhibits:
The following exhibits are included as part of this report:
ITEM 15B. EXHIBITS AND SEC REFERENCE NUMBERS
<TABLE>
<CAPTION>
Number Title of Document Location
- ------ ----------------- --------
<S> <C> <C>
3(a) Articles of Incorporation, as amended (1)
3(b) Bylaws (1)
5 Consent of Certified Public Accountants (1)
10(a) Agreement with Fun Designs, Inc. dated December 17, 1997 (1)
10(b) Agreement with Rubbermaid Incorporated dated July 21, 1997 (2)
10(c) [Reserved]
10(d) Stock Purchase/Warrant Exchange Agreement with Goodtimes
Entertainment, Inc. dated October 11, 1997 (1)
10(e) Employment Agreement with Rose C. Smith dated June 30,
1997 (1)
10(f) Royalty Agreement with John E. Nohren, Jr. dated June
30, 1997 (1)
10(g) License Agreement with A.C. International dated May 21,
1997 (1)
10(h) Supply and Distribution Agreement with Bowline Family
Products, Inc. dated September 26, 1997 (1)
10(i) Agreement with (n,p) Energy, Inc. dated November 9, 1997 (1)
10(j) Purchase and Supply Agreement with the Rose Group dated
January 22, 1997 (1)
10(k) Real Estate Lease with Corr Rubin Associates dated January 21,
1998 (1)
15 Specimen Certificate (2)
99(a) 1996 Incentive Stock Option Plan (1)
</TABLE>
(1) Filed herewith
(2) To be filed by amendment
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
INNOVA PURE WATER, INC.
<S> <C>
Dated: June 19, 1998 By: /S/ ROSE C. SMITH
-------------------------------------- -----------------------------------------
Rose C. Smith
President, Chief Executive Officer,
Director
Dated: June 19, 1998 By: /S/ JOHN E. NOHREN, JR.
-------------------------------------- -----------------------------------------
John E. Nohren, Jr.
Chairman of the Board of Directors
Dated: June 19, 1998 By: /S/ DONALD HUGGINS
-------------------------------------- -----------------------------------------
Donald Huggins
Chief Financial Officer
</TABLE>
<PAGE> 37
FINANCIAL STATEMENTS
INNOVA PURE WATER, INC.
March 31, 1998 (Unaudited) and June 30, 1997
Independent Auditors' Report
<PAGE> 38
Innova Pure Water, Inc.
Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
CONTENTS
<TABLE>
<S> <C>
Independent Auditors' Report......................................................................................1
Financial Statements:
Balance Sheets................................................................................................2
Statements of Operations......................................................................................3
Statements of Changes in Stockholders' Equity.................................................................4
Statements of Cash Flows......................................................................................5
Notes to Financial Statements..............................................................................6-17
</TABLE>
<PAGE> 39
[PNCCPA LETTERHEAD]
Independent Auditors' Report
Board of Directors
Innova Pure Water, Inc.
Clearwater, Florida
We have audited the accompanying balance sheets of Innova Pure Water, Inc. as of
June 30, 1997 and the related statements of operations, changes in stockholders'
equity, and cash flows for the years ended June 30 1997 and 1996. These
financial statements are the responsibility of the management of Innova Pure
Water, Inc. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Innova Pure Water, Inc. as of
June 30, 1997 and the results of its operations and its cash flows for the years
ended June 30, 1997 and 1996 in conformity with generally accepted accounting
principles.
/s/ PENDER NEWKIRK & COMPANY
Certified Public Accountants
Tampa, Florida
August 22, 1997
<PAGE> 40
Innova Pure Water, Inc.
Balance Sheets
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 639,400 $ 752,700
Accounts receivable, net of allowance for doubtful accounts of $5,400
and $55,000 at March 31, 1998 and June 30, 1997, respectively 232,600 344,000
Accounts receivable, related parties 80,600 54,800
Inventories 303,800 314,100
Other current assets 30,200 9,200
----------- -----------
Total current assets 1,286,600 1,474,800
Property and equipment, net 232,400 165,100
Other assets 105,800 44,000
----------- -----------
$ 1,624,800 $ 1,683,900
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade $ 196,800 $ 275,900
Other 180,700 138,700
Deferred revenue 1,000
Current portion of obligations under capital leases 5,400 8,400
Notes payable 34,100
----------- -----------
Total current liabilities 383,900 457,100
----------- -----------
Long-term liabilities:
Obligations under capital leases 11,000 12,200
Note payable 8,500
----------- -----------
Total long-term liabilities 19,500 12,200
----------- -----------
Stockholders' equity:
Preferred stock; $.001 par value; 2,000,000 shares authorized; 0 shares
issued and outstanding at March 31, 1998 and June 30, 1997
Common stock; $.0001 par value; 50,000,000 shares authorized; 9,996,371 and
8,496,371 shares issued; 9,995,871 and 8,495,871
shares outstanding at March 31, 1998 and June 30, 1997, respectively 1,000 800
Capital in excess of par value 7,904,100 7,904,300
Accumulated deficit (6,678,000) (6,684,800)
----------- -----------
1,227,100 1,220,300
Treasury stock, at cost; 500 shares at March 31, 1998 and June 30, 1997 (5,700) (5,700)
----------- -----------
Total stockholders' equity 1,221,400 1,214,600
----------- -----------
$ 1,624,800 $ 1,683,900
=========== ===========
</TABLE>
Read independent auditors' report. The accompanying
notes are an integral part of the financial statements. 2
<PAGE> 41
Innova Pure Water, Inc.
Statements of Operations
<TABLE>
<CAPTION>
Nine Months Ended March 31, Year Ended June 30,
--------------------------- ---------------------------
1998 1997 1997 1996
---------- ---------- ---------- ----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $1,699,100 $2,453,100 $3,880,100 $1,701,900
Cost of sales 750,600 1,254,300 1,811,800 864,000
---------- ---------- ---------- ----------
Gross profit 948,500 1,198,800 2,068,300 837,900
---------- ---------- ---------- ----------
Operating expenses
Selling expenses 120,700 271,800 395,000 559,500
General and administrative expenses 767,200 514,500 942,000 590,000
Research and product development 64,800 11,000 31,000 9,400
---------- ---------- ---------- ----------
952,700 797,300 1,368,000 1,158,900
---------- ---------- ---------- ----------
Net income (loss) from operations (4,200) 401,500 700,300 (321,000)
Other income (expense):
Interest, net 11,000 (9,100) (18,300) (21,100)
---------- ---------- ---------- ----------
Net income (loss) $ 6,800 $ 392,400 $ 682,000 $ (342,100)
========== ========== ========== ==========
Earnings (loss) per common share $ 0.00 $ 0.05 $ 0.09 $ (0.05)
========== ========== ========== ==========
Earnings (loss) per common share -
assuming dilution $ 0.00 $ 0.05 $ 0.08 $ (0.05)
========== ========== ========== ==========
</TABLE>
Read independent auditors' report. The accompanying
notes are an integral part of the financial statements. 3
<PAGE> 42
Innova Pure Water, Inc.
Statements of Changes in Stockholders' Equity
For the Periods Ended June 30, 1997 and 1996 and March 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
Common Stock
Common Stock Subscribed Capital In
--------------------- --------------------- Excess of Accumulated Treasury
Shares Amount Shares Amount Par Value Deficit Stock
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1995 6,953,186 $ 700 63,000 $ 6,959,600 $(7,024,700) $5,700
Stock and stock subscribed issued for
exercised options 174,375 234,000 23,800
Stock and stock subscribed for services 12,000 30,400
Stock subscriptions cancelled (63,000) (600)
Net loss (342,100)
-------------------------------------------------------------------------------------
Balance, June 30, 1996 7,127,561 700 246,000 7,013,200 (7,366,800) 5,700
Stock issued:
For stock subscriptions 246,000 (246,000)
For services and exercised options 167,500 67,100
Upon conversion of notes payable 955,310 100 338,700
Net proceeds from sale of warrants 485,300
Net income 682,000
-------------------------------------------------------------------------------------
Balance, June 30, 1997 8,496,371 800 0 7,904,300 (6,684,800) 5,700
Common stock issued in exchange for warrants 1,500,000 200 (200)
Net income (unaudited) 6,800
-------------------------------------------------------------------------------------
Balance, March 31, 1998 (unaudited) 9,996,371 $1,000 0 $ 0 $ 7,904,100 $(6,678,000) $5,700
=====================================================================================
</TABLE>
Read independent auditors' report. The accompanying
notes are an integral part of the financial statements. 4
<PAGE> 43
Innova Pure Water, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended March 31, Year Ended June 30,
--------------------------- ------------------------
1998 1997 1997 1996
--------- --------- --------- ---------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 6,800 $ 392,400 $ 682,000 $(342,100)
--------- --------- --------- ---------
Adjustments to reconcile net income (loss) to net cash and
cash equivalents provided (used) by operating activities:
Depreciation and amortization 56,700 14,900 75,300 55,700
Provision for losses on accounts receivable 5,000 24,800 17,800
Loss (gain) on disposal of equipment 11,300 (4,000)
Common stock issued or subscribed for services 22,800 67,100 53,600
(Increase) decrease in:
Accounts receivable 106,400 (8,000) (284,300) 76,600
Inventories 10,300 (98,100) (151,200) 8,400
Other current assets (19,300) 5,300 (10,900)
Increase (decrease) in:
Accounts payable and accrued expenses (37,100) (14,800) (7,300) 77,700
Deferred revenue 1,000
--------- --------- --------- ---------
Total adjustments 134,300 (77,900) (286,500) 285,800
--------- --------- --------- ---------
Net cash and cash equivalents provided (used)
by operating activities 141,100 314,500 395,500 (56,300)
--------- --------- --------- ---------
Investing activities
Proceeds from sale of property and equipment 4,000
Acquisition of property and equipment (123,300) (130,700) (156,500) (15,400)
Acquisition of patents (75,500) (16,200) (16,200)
Advances (from) to related parties (25,800) 1,800 (7,600) (31,900)
--------- --------- --------- ---------
Net cash and cash equivalents used by
investing activities (224,600) (145,100) (180,300) (43,300)
--------- --------- --------- ---------
Financing activities
Proceeds from loans 50,000 61,400 135,000
Payments on loans (25,600) (4,700) (7,700) (55,300)
Payments on capital lease obligations (4,200) (2,100) (3,300)
Proceeds from warrants sales 485,300 485,300
--------- --------- --------- ---------
Net cash and cash equivalents (used) provided
by financing activities (29,800) 528,500 535,700 79,700
--------- --------- --------- ---------
Net (decrease) increase in cash and cash equivalents (113,300) 697,900 750,900 (19,900)
Cash and cash equivalents, beginning of period 752,700 1,800 1,800 21,700
--------- --------- --------- ---------
Cash and cash equivalents, end of period $ 639,400 $ 699,700 $ 752,700 $ 1,800
========= ========= ========= =========
Supplemental disclosures of cash flow information
and noncash financing activities
Cash paid for interest $ 3,700 $ 19,800 $ 38,600 $ 21,000
========= ========= ========= =========
Common stock issued and/or subscribed for officer,
employees, and other third parties $ 0 $ 61,500 $ 67,100 $ 53,600
========= ========= ========= =========
Common stock issued upon conversion of notes payable $ 0 $ 0 $ 338,700 $ 0
========= ========= ========= =========
</TABLE>
During the period ended March 31, 1997, the Company capitalized $25,500 of
equipment under capital leases.
During the period ended March 31, 1998, the Company issued 1,500,000 shares of
common stock in exchange for 11,000,000 outstanding warrants (Note 12).
Read independent auditors' report. The accompanying
notes are an integral part of the financial statements. 5
<PAGE> 44
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
1. NATURE OF OPERATIONS
Innova Pure Water, Inc. was incorporated in Florida in 1985 for the purpose of
developing, manufacturing, and marketing proprietary, state-of-the-art effective
and economical in-the-house and portable water purification products. The
corporate headquarters is located in Clearwater, Florida. Sales are to both
wholesale and retail markets throughout the United States, primarily through
strategic alliances, two of which are billion dollar companies. Sales are also
made to distributors in several foreign countries. Significant revenues are also
generated by direct television marketing.
For the nine months ended March 31, 1998 and 1997, a related party accounted for
42 and 67 percent of net sales, respectively. For the nine months ended March 31
1998 and 1997, foreign sales accounted for 8 and 10 percent of net sales,
respectively.
For the year ended June 30, 1997, a related party accounted for 65 percent of
net sales. For the year ended June 30, 1996, four customers accounted for 59
percent of net sales. For the years ended June 30, 1997 and 1996, foreign sales
accounted for 9 percent and 22 percent of net sales, respectively.
On July 21, 1997, the Company entered into a strategic alliance which includes
manufacturing, developing, marketing, and distributing provisions with
Rubbermaid Incorporated (R) ("Rubbermaid"). This agreement grants Rubbermaid
certain rights to the products and technology of the Company as well as to
market and distribute certain products throughout the United States and specific
other countries during the term of the agreement. The Company also granted
Rubbermaid the non-exclusive right to market and distribute certain products
throughout the rest of the world with the exception of specific products and/or
markets reserved under pre-existing agreements under other strategic alliances.
The Company currently holds numerous patents in the field of water treatment and
has additional domestic and foreign patents pending. The Company pursues an
aggressive product development program with the goal to provide its strategic
partners with unique competitive advantages.
Read independent auditors' report. 6
<PAGE> 45
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
2. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed are:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
In the opinion of management, all adjustments consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the nine-month periods ended March 31, 1998 and 1997, (b)
the financial position at March 31, 1998, and (c) cash flows for the
nine-month periods ended March 31, 1998 and 1997, have been made.
Cash and cash equivalents consist of checking and operating accounts and
short-term certificates of deposit. The cash deposits are with a single
financial institution and are in excess of the Federal Deposit Insurance
Corporation's insurance coverage limit of $100,000.
Inventory is stated at the lower of cost, determined by the first-in,
first-out method, or market.
Property and equipment are recorded at cost. Depreciation is calculated by
the straight-line method over the estimated useful lives of the assets,
ranging generally from three to ten years. Additions to and major
improvements of property and equipment are capitalized. Repair and
maintenance expenditures are charged to expense as incurred. As property or
equipment is sold or retired, the applicable cost and accumulated
depreciation are eliminated from the accounts and any gain or loss is
recorded.
Read independent auditors' report. 7
<PAGE> 46
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company utilizes Statement No. 109 of the Financial Accounting
Standards Board, "Accounting for Income Taxes." This pronouncement requires
that deferred tax assets and liabilities be recognized for the estimated
future tax consequences attributable to differences between the financial
statements carrying amounts of existing assets and liabilities and their
respective income tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under Statement No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Intangible assets which are included in other assets in the accompanying
financial statements are being amortized over their estimated useful life
of five years.
Advertising costs are charged to operations as incurred. Approximately
$2,400 and $2,100 of advertising costs were charged to operations for the
nine months ended March 31, 1998 and 1997, respectively. For the years
ended June 30, 1997 and 1996, $15,000 and $25,000 of advertising costs were
charged to operations, respectively.
The Financial Accounting Standards Board issued Statement 123 (SAFS 123),
Accounting for Stock-Based Compensation, effective for fiscal years
beginning after December 15, 1995. This statement provides that expense
equal to the fair value of all stock-based awards on the date of the grant
be recognized over the vesting period. Alternatively, this statement allows
entities to continue to apply the provisions of Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, whereby
compensation expense is recorded on the date the options are granted equal
to the excess of the market price of the underlying stock over the exercise
price. The Company has elected to continue to apply the provisions of APB
Opinion No. 25 and provide pro forma disclosure of the provisions of SAFS
123.
Read independent auditors' report. 8
<PAGE> 47
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
During the period ended March 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share."
This statement requires dual presentation of basic and diluted earnings per
share (EPS) for complex capital structures on the face of the income
statement. Basic EPS is computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution from the
exercise or conversion of securities, such as stock options and warrants,
into common stock. The June 30, 1997 and 1996 earnings per share amounts
have been restated to give effect to the application of SFAS 128. The
effect of the restatement on EPS for the year ended June 30, 1997 was an
increase of $.01 per share. The restatement did not effect the net loss per
share as previously reported for the year ended June 30, 1996.
3. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1997
-------------- -------------
(Unaudited)
<S> <C> <C>
Raw materials $233,800 $209,300
Finished goods 15,500 80,200
Work in process 54,500 24,600
-------- --------
$303,800 $314,100
======== ========
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of:
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1997
-------------- -------------
(Unaudited)
<S> <C> <C>
Tooling $290,800 $192,300
Machinery and equipment 390,700 377,200
Equipment under capital lease 25,500 25,500
-------- --------
707,000 595,000
Less accumulated depreciation 474,600 429,900
-------- --------
$232,400 $165,100
======== ========
</TABLE>
Read independent auditors' report. 9
<PAGE> 48
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
5. RELATED PARTY TRANSACTIONS AND COMMITMENTS
The Company entered into an employment agreement with its President and Chief
Executive Officer effective June 30, 1997, which provides for her employment for
a five-year term ending June 29, 2002. Under the agreement, she is to receive a
base salary of $150,000 per year as well as a bonus of two percent of net sales
of the Company, adjusted by the annual gross margin achieved by the Company. The
agreement contains a restrictive covenant not to compete for the term of the
agreement and for five years following termination of service without cause. The
agreement provides for payment on her behalf of premiums in respect of $500,000
of life insurance on her life pursuant to a split dollar life insurance
agreement. The agreement provides for severance payments equal to 200 percent of
the annual base compensation due under the agreement in the event there is a
"change of control" of the Company, as defined therein, and she is subsequently
terminated without cause.
The Company has been assigned the rights to certain patents owned by the
majority stockholder of the Company. The costs of maintaining these patents are
included in other assets at March 31, 1998 and June 30, 1997 in the net amounts
of $100,800 and $37,300, respectively. These costs are being amortized on a
straight-line basis over a five-year period.
Effective June 30, 1997, the Company entered into an employment agreement with
the Chairman of the Board of Directors expiring on December 31, 2002. This
agreement obligates the Company to pay him, in lieu of any salary, in return for
the assignment of his patent rights a minimum of $100,000 of royalties per year,
with a cap of $300,000 per year, during the term of his employment. The royalty
payments will be calculated based on five percent of sales of products that
incorporate these assigned patents. Upon his termination, a three percent
royalty shall be paid over the residual life of his patents. In connection with
the assignment, the Company incurred approximately $84,000, $123,000, and
$150,000 to the stockholder for patent royalties for the nine months ended March
31, 1998 and 1997 and the year ended June 30, 1997, respectively. No amounts
were due for the year ended June 30, 1996.
The above employment agreements and assignment of rights to patents and royalty
payments are not necessarily indicative of the agreements that would have been
entered into by independent parties.
Read independent auditors' report. 10
<PAGE> 49
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
6. NOTE PAYABLE
Note payable at June 30, 1997 consists of:
<TABLE>
<S> <C>
Note payable; 8.0% interest; monthly
principal payments of $3,000 through
June 28, 1998, at which time all
unpaid interest is due; paid off
December 31, 1997 $ 34,100
Less amounts currently due (34,100)
--------
$ 0
========
</TABLE>
7. CAPITAL LEASES
The Company has capitalized rental obligations under leases of equipment. The
obligations, which mature in fiscal 1998 and 2002, represent the total present
value of future rental payments discounted at the interest rates implicit in the
leases. Future minimum lease payments under the capital leases are:
<TABLE>
<CAPTION>
Year Ending
March 31,
-----------
<S> <C>
1999 $ 7,200
2000 4,700
2001 4,700
2002 3,500
-------
Total minimum lease payments 20,100
Less amount representing interest 3,700
Less amount currently due 5,400
-------
Present value of net minimum lease payments $11,000
=======
</TABLE>
8. LEASE COMMITMENTS
The Company rents its operating facilities and various vehicles and equipment
under operating leases with terms of varying durations.
Read independent auditors' report. 11
<PAGE> 50
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
8. LEASE COMMITMENTS (CONTINUED)
The following is a schedule by year of future minimum rental payments required
under operating leases that have an initial or remaining noncancelable lease
term in excess of one year as of March 31, 1998:
<TABLE>
<CAPTION>
Year Ending
March 31,
-----------
<S> <C>
1999 $120,500
2000 123,700
2001 128,600
2002 133,600
2003 138,900
--------
$645,300
</TABLE>
Rent expense amounted to approximately $60,000 and $43,300 for the nine months
ended March 31, 1998 and 1997, respectively. For the years ended June 30, 1997
and 1996, rent expense amounted to $71,400 and $78,000, respectively.
9. INCOME TAXES
The Company has incurred significant operating losses since its inception and,
therefore, no tax liabilities have been incurred for the years presented. These
operating losses give rise to a deferred tax asset at June 30, 1997 and are as
follows:
<TABLE>
<S> <C>
Deferred tax asset $ 2,400,000
Allowance (2,400,000)
-----------
$ 0
===========
</TABLE>
The Company has available at June 30, 1997 approximately $6 million of unused
operating loss carryforwards that may be applied against future taxable income
which would reduce taxes payable by approximately $2.4 million in the future.
Income tax benefits resulting from the utilization of these carryforwards will
be recognized in the year in which they are realized for federal and state tax
purposes. For the nine months ended March 31, 1998, the Company utilized
approximately $682,000 of these loss carryforwards.
Read independent auditors' report. 12
<PAGE> 51
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
10. EARNINGS PER SHARE
The following data shows the amounts used in computing earnings per share and
the effect on income and the weighted average number of shares of dilutive
potential common stock:
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
---------------------------- -------------------------
1998 1997 1997 1996
---------------------------- -------------------------
(Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $ 6,800 $ 392,400 $ 682,000 $ (342,100)
============================ =========================
Weighted average number of
common shares used in basic
EPS 9,333,462 7,140,304 7,279,660 7,102,395
Effect of dilutive stock options
and warrants 522,064 0 1,783,823 0*
---------------------------- -------------------------
Weighted average number of
common shares and dilutive
potential common stock used
in diluted EPS 9,855,526 7,140,304 9,063,483 7,102,395
============================ =========================
</TABLE>
*Options on 238,500 shares of common stock were not included in computing
diluted EPS because their inclusion would be anti-dilutive due to the losses
incurred.
11. EQUITY
On September 25, 1996, the Company's Board of Directors approved an increase in
the number of common stock shares authorized from 10,000,000 to 50,000,000, and
decreased the par value to $.0001 per share. All references in the accompanying
financial statements to the number of shares and par value have been restated to
reflect the above transactions.
Effective October 24, 1996, the Board of Directors authorized 2,000,000 shares
of preferred stock with a par value of $.001 per share. The Board of Directors
is authorized to issue the preferred stock in series and to fix, in the manner
and to the full extent provided and permitted by law, the rights, preferences,
and limitations of each series of preferred stock. At March 31, 1998 and June
30, 1997, no preferred stock shares were issued or outstanding.
Read independent auditors' report. 13
<PAGE> 52
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
12. STOCK OPTIONS AND WARRANTS
On October 31, 1996, the Company reached an agreement with Innova Holdings, LLC,
a company owned by the Cayre family who also owns the Good Times family of
companies. Good Times has agreed to provide the Company with certain sales and
marketing assistance to sell via direct television, including certain Richard
Simmons promotions. In connection with this agreement, the Company was paid
$500,000 for warrants for the right to purchase 11,000,000 shares of common
stock. The warrants, which are non-dilutive, had the following exercise prices
and expiration dates:
3,300,000 shares at an exercise price of $.40 per share expiring one year
from date of grant;
3,300,000 shares at an exercise price of $.75 per share expiring two years
from date of grant; and
4,400,000 shares at an exercise price of $1.00 per share expiring three
years from date of grant.
On October 30, 1997, the Company entered into a stock purchase agreement with
Innova Holdings, LLC. In connection with this agreement, the Company issued
1,500,000 shares of its common stock to Innova Holdings, LLC in exchange for the
surrender of previously issued warrants to purchase 11,000,000 shares of the
Company's common stock. The 1,500,000 shares issued cannot be sold, transferred,
assigned, or pledged for a two-year period beginning October 30, 1997.
As of June 30, 1997, the Company reserved 750,000 common shares for issuance
under the Company's 1996 incentive stock plan. On November 20, 1997, 738,100
stock options were granted with an exercise price of $.50.
Additionally, the Company has an incentive stock option plan for key employees
and advisory members. The plan allowed stock options to be granted to officers,
employees, and directors and members of the technical and marketing advisory
boards of the Company.
SFAS 123 requires disclosure of pro forma net income as if the fair value based
method had been applied in measuring compensation costs for common stock options
and warrants granted. Pro forma net income (loss) and net income (loss) per
share are as follows using the Black Scholes Option Pricing Model with a
dividend yield of zero, a risk free interest rate ranging from 5.6 to 6.5
percent, volatility ranging from 141 to 145 percent, an estimate of fair market
value ranging from $.25 to $.50 and an expected life ranging from one to five
years. The June 30, 1997 and
Read independent auditors' report. 14
<PAGE> 53
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
12. STOCK OPTIONS AND WARRANTS (CONTINUED)
March 31, 1997 pro forma losses are principally the result of the recognition of
expense in connection with the 11,000,000 warrants which were subsequently
exchanged for 1,500,000 shares of common stock. The March 31, 1998 pro forma
loss is the result of the recognition of expense in connection with the 738,100
options that were granted on November 20, 1997.
<TABLE>
<CAPTION>
Nine Months Ended
March 31, Year Ended June 30,
--------------------------- ----------------------------
1998 1997 1997 1996
--------------------------- ----------------------------
(Unaudited)
<S> <C> <C> <C> <C>
As reported:
Net income (loss) $ 6,800 $ 392,400 $ 682,000 $ (342,100)
=========================== ============================
Basic earnings (loss) per
common share $ .00 $ .05 $ .09 $ (.05)
=========================== ============================
Diluted earnings (loss) per
common share $ .00 $ .05 $ .08 $ (.05)
=========================== ============================
Pro forma:
Net loss $ (287,600) $(1,714,500) $(1,424,900) $ (350,500)
=========================== ============================
Basic and diluted earnings
(loss) per common share $ (.03) $ (.24) $ (.20) $ (.05)
=========================== ============================
</TABLE>
The following table summarizes the status of options outstanding at March 31,
1998:
<TABLE>
<CAPTION>
Outstanding and Exercisable Options
Weighted
Average Weighted
Remaining Average
Contractual Exercise
Exercise Price Range Number Life Price
-------------------- ------- ----------- --------
<S> <C> <C> <C>
Employee incentive 680,600 2.5 $.50
Directors, Technical
Advisory Board,
and Marketing
Advisory Board 242,500 1.5 .50
------- ----- ----
923,100 2.2 $.50
======= ===== ====
</TABLE>
Read independent auditors' report. 15
<PAGE> 54
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
12. STOCK OPTIONS AND WARRANTS (CONTINUED)
The following is a summary of option transactions:
<TABLE>
<CAPTION>
Directors, Technical
Advisory Board, and
Employee Incentive Marketing Advisory Board
Stock Option Plan Stock Option Plan
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Shares Price Shares Price
--------- -------- ---------- --------
<S> <C> <C> <C> <C>
Options granted and outstanding,
June 30, 1996 116,000 $.50 122,500 $.50
Options granted during the year 8,000 .50
Options exercised during the year (61,500) .50
-------- ---- ------- ----
Options granted and outstanding,
June 30, 1997 62,500 .50 122,500 .50
Options granted during the period 618,100 .50 120,000 .50
-------- ---- ------- ----
Options granted and outstanding
at March 31, 1998 680,600 $.50 242,500 $.50
======== ==== ======= ====
Exercisable at March 31, 1998 62,500 122,500
======== =======
</TABLE>
Compensation expense of $67,100 and $53,600 was recorded for the years ended
June 30, 1997 and 1996, respectively, in connection with the issuance of
options. No compensation expense was recorded for the period ended March 31,
1998 since the exercise price was greater or equal to the fair market value.
As of March 31, 1998, the Company had warrants outstanding that allow the holder
to purchase up to 250,000 shares of common stock at $.50 per share. The warrants
may be exercised any time prior to the year 2003.
Read independent auditors' report. 16
<PAGE> 55
Innova Pure Water, Inc.
Notes to Financial Statements
March 31, 1998 (Unaudited) and June 30, 1997
13. CONTINGENCY
The Company is the plaintiff in a patent infringement lawsuit entitled
Innova/Pure Water, Inc. v. Aladdin Sales & Marketing, Inc., Filtex USA, LTD.,
ACT Marketing, Inc., ACT Marketing, LTD., Advanced Consumer Technologies, Inc.,
and Robert S. Luzenberg, Case No. 97-924-Civ-TG-25 (M.D.Fla.). The Company filed
the lawsuit against Filtex, Aladdin, and associated companies and individuals
claiming patent infringement and false advertising. There are no counterclaims
raised by the defendants. If the case is not settled, it will proceed to trial
sometime between June 1 1998 and August 31, 1998. The defendants do contest the
validity of the Company's patent which is at issue. Though management
anticipates a meritorious outcome, the Company could suffer the adverse outcome
of having its patent invalidated.
The Company is also the defendant in a lawsuit filed by a former employee who
alleges breach of his employment contract. The case is Alan R. Kelly v. Innova
Pure Water, Inc., Pinellas County Circuit Court case no. 98-2771-C1-007. The
plaintiff is claiming damages in the amount of approximately $80,000 and 150,000
shares of the Company's common stock. The case is currently in the discovery
stage. While management believes the plaintiff's claim is meritless, there is no
assurance that the Company will not suffer an adverse outcome in the lawsuit.
Read independent auditors' report. 17
<PAGE> 1
EXHIBIT 3(a)
ARTICLES OF INCORPORATION
<PAGE> 2
STATE OF FLORIDA
(STATE OF FLORIDA SEAL)
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on October 24, 1996, to Articles of Incorporation for INNOVA/PURE WATER,
INC., a Florida corporation, as shown by the records of this office.
The document number of this corporation is H70990.
GIVEN UNDER MY HAND AND THE
GREAT SEAL OF THE STATE OF FLORIDA,
AT TALLAHASSEE, THE CAPITAL, THIS THE
TWENTY-FOURTH DAY OF OCTOBER, 1996
(SEAL) /s/ Sandra B. Mortham
Sandra B. Mortham
Secretary of State
CR2E022(1-95)
<PAGE> 3
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
INNOVA/PURE WATER, INC.
The undersigned, being the President of INNOVA/PURE WATER, INC., a
Florida corporation (the "Corporation"), does hereby certify that the Amendment
provided for herein to increase the number of authorized shares of the Common
Stock of the Corporation was adopted unanimously by Resolutions of the Board of
Directors of the Corporation at a meeting held on September 25, 1996, and by a
majority of Shareholders of the Corporation by Special Corporate Action by
Written Consent on October 21, 1996, in accordance with the provisions of
Chapter 607 of the General Corporation Law of the State of Florida, and the
number of votes cast in favor of the Amendment was sufficient to carry the
motion.
1. The name of the Corporation is INNOVA/PURE WATER, INC., a Florida
corporation.
2. Article III of the Articles of Incorporation filed August 13,
1985, in the office of the Secretary of State of Florida as Charter Number
H70990, as amended by Articles of Amendment to the Articles of Incorporation
filed January 22, 1986, is hereby deleted and the following new Article III is
substituted in lieu thereof:
ARTICLE III
CAPITAL STOCK
The Corporation shall be authorized to issue two (2) classes of capital
stock to be designated respectively preferred stock ("Preferred Stock") and
common stock ("Common Stock"). The total number of shares of Preferred Stock
that the Corporation shall have authority to issue is 2,000,000 at $.001 par
value per share, and the total number of shares of Common Stock that the
Corporation shall have authority to issue is 50,000,000 at $.0001 par value per
share. The Preferred Stock authorized by these Articles of Amendment to Articles
of Incorporation shall be issued in series. The Board of Directors of the
Corporation is authorized to establish series of Preferred Stock and to fix, in
the manner and to the full extent provided and permitted by law, the rights,
preferences and limitations of each series of the Preferred Stock and the
relative rights, preferences and limitations between or among such series,
including:
(1) the designation of each series and the number of shares that
shall constitute the series;
<PAGE> 4
(2) the rate of dividends, if any, payable on the shares of each
series, the time and manner of payment and whether or not such
dividends shall be cumulative;
(3) whether shares of each series may be redeemed or converted, and,
if so, the redemption or conversion price and the terms and
conditions of redemption or conversion.
(4) sinking fund provisions, if any, for the redemption or purchase
of shares of each series which is redeemable;
(5) the amount, if any, payable upon shares of each series in the
event of the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, and the manner and preference
of such payment;
(6) voting rights, if any, on the shares of each series and any
conditions upon the exercisability of such rights.
The holders of Common Stock shall be entitled to one (1) vote for each
share held at all meetings of the Stockholders of the Corporation. The holders
of Preferred Stock shall be entitled to the number of votes set forth in the
Designation of Shares of Preferred Stock.
All other Articles and provisions of the Articles of Incorporation of
the Corporation, as previously amended, shall remain in full force and effect
and the same as originally filed.
2. The following resolutions, authorized 2,000,000 shares of "blank
check" Preferred Stock and providing for an increase in the number of authorized
shares of the Common Stock of the Corporation from 10,000,000 shares to
50,000,000 shares, were adopted by Special Corporate Action by Written Consent
of the holders of a majority of the outstanding shares of the Common Stock of
the Corporation, and unanimously by the Board of Directors of the Corporation.
RESOLVED, that the President of the Corporation is hereby authorized to
Amend Article III of the Articles of Incorporation of the Corporation in its
entirety to authorize 2,000,000 shares of "blank check" Preferred Stock at $.001
par value per share and to increase the number of authorized shares of Common
Stock of the Corporation from 10,000,000 to 50,000,000 at $.0001 par value per
share.
FURTHER RESOLVED, that the President of the Corporation is hereby
authorized and directed in the name of the Corporation and on its behalf to do
and perform all things and acts, and to execute and deliver or file all
instruments, amendments, certificates and documents that he shall determine to
be necessary, appropriate or desirable to carry out the foregoing Articles of
Amendment to the Articles
2
<PAGE> 5
of Incorporation of the Corporation, any such determination to be conclusively
evidenced by the doing or performing of any such acts or things or the
execution and delivery of any such instrument, amendment, certificate or
document.
FURTHER RESOLVED, that said resolutions were duly adopted in accordance with
Chapter 607, Florida Statues.
FURTHER RESOLVED, that said resolutions were duly adopted the 21st day of
October, 1996, by the majority of Shareholders of the Corporation, and the 25th
day of September, 1996, by the Board of Directors of the Corporation.
IN WITNESS WHEREOF, the President of the Corporation has executed these
Articles of Amendment to Articles of Incorporation of the Corporation the 23rd
day of October, 1996, and hereby certifies that the facts herein stated are
true and correct, and were approved by Written Consent of the majority of
Shareholders and all of the members of the Board of Directors of the
Corporation, and the vote was sufficient to carry the motion.
INNOVA/PURE WATER, INC.,
a Florida corporation
By: /s/ John E. Nohren, Jr.
------------------------------------
John E. Nohren, Jr., President
STATE OF FLORIDA )
COUNTY OF PINELLAS )
The foregoing instrument was acknowledged before me this 23rd day of October,
1996, by JOHN E. NOHREN, JR., as President of INNOVA/PURE WATER, INC., a
Florida corporation, on behalf of said corporation, who is personally known to
me or who produced a ______________________ as identification.
/s/ Susan M. Theil
------------------------------------
Notary Public
Print Name: Susan M. Theil
------------------------
My Commission Expires: 1/2/2000
PDG/111776
SUSAN M. THEIL
NOTARY PUBLIC - STATE OF FLORIDA
MY COMMISSION EXPIRES JAN 2, 2000
COMMISSION # CC522225
3
<PAGE> 6
STATE OF FLORIDA
(STATE OF FLORIDA SEAL)
DEPARTMENT OF STATE
I certify that the attached is a true and correct copy of the Articles of
Incorporation of INNOVA/PURE WATER, INC., a corporation organized under the
Laws of the State of Florida, filed on August 13, 1985, as shown by the records
of this office.
The charter number of this corporation is H70990.
GIVEN UNDER MY HAND AND THE
GREAT SEAL OF THE STATE OF FLORIDA,
AT TALLAHASSEE, THE CAPITAL, THIS THE
14TH DAY OF AUGUST, 1985.
/s/ George Firestone
-----------------------------
GEORGE FIRESTONE
SECRETARY OF STATE
(STATE OF FLORIDA SEAL)
CER-101
<PAGE> 7
ARTICLES OF INCORPORATION Filed
Aug 13 9 55 AM '85
OF
SECRETARY OF STATE
INNOVA/PURE WATER, INC. TALLAHASSEE, FLORIDA
The undersigned subscriber to these Articles of Incorporation, a natural person
competent to contract, hereby forms a corporation under the laws of the State
of Florida.
ARTICLE I. NAME
The name of the corporation shall be Innova/Pure Water, Inc. The principal
place of business of this corporation shall be 5170 126 Avenue, North,
Clearwater, Florida 33520.
ARTICLE II. NATURE OF BUSINESS
This corporation may engage or transact in any or all lawful activities or
business permitted under the laws of the United States, the State of Florida or
any other state, country, territory or nation.
ARTICLE III. CAPITAL STOCK
The maximum number of shares of stock that this corporation is authorized to
have outstanding at any one time is 50,000 shares of Class A voting stock
having a par value of $.10 per share, and 50,000 shares of Class B non-voting
common stock each at a par value of $.10 per share.
ARTICLE IV. ADDRESS
The street address of the initial registered office of the corporation shall be
5175 126th Avenue, North, Clearwater, Florida 33520, and the name of the initial
registered agent of the corporation at that address is John E. Nohren, Jr.
ARTICLE V. TERM OF EXISTENCE
This corporation is to exist perpetually.
<PAGE> 8
----------------------------
It is the intent of the incorporator that the corporation will qualify under
Section 1244 of the Internal Revenue Code and that the corporation will file as
a Subchapter S Corporation.
ARTICLE VII. DIRECTORS
This corporation shall have two directors, initially. The names and street
addresse of the initial members of the Board of Directors are:
John E. Nohren, Jr., 5170 126 Avenue, N.
Director Clearwater, Florida 33520
Frances Weaver-Nohren 5170 126 Avenue, N.
Director Clearwater, Florida 33520
ARTICLE VIII. SUBSCRIBER
The name and street address of the subscriber to these Articles of
Incorporation is:
John E. Nohren, Jr. 5170 126 Avenue, N.
Clearwater, Florida 33520
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal on this
15th day of June, 1985.
/s/ John E. Nohren, Jr. (SEAL)
------------------------------------
JOHN E. NOHREN, JR.
STATE OF FLORIDA
COUNTY OF PINELLAS
The foregoing instrument was acknowledged before me this 15 day of June, 1985,
by John E. Nohren, Jr.
/s/ Barbara R. Harbour, N.P.
- ----------------------------------------
Notary Public, State of Florida at Large
My Commission Expires: Notary Public, State of Florida at Large
My Commission Expires Jan. 15, 1987
BONDED THRU AGENTS NOTARY ????
<PAGE> 9
STATE OF FLORIDA
(STATE OF FLORIDA SEAL)
DEPARTMENT OF STATE
I CERTIFY THAT THE ATTACHED IS A TRUE AND CORRECT COPY OF THE ARTICLES OF
AMENDMENT, FILED ON JANUARY 22, 1986, TO ARTICLES OF INCORPORATION FOR
INNOVA/PURE WATER, INC., A FLORIDA CORPORATION, AS SHOWN BY THE RECORDS OF THIS
OFFICE.
THE DOCUMENT NUMBER OF THIS CORPORATION IS H70990:
GIVEN UNDER MY HAND AND THE
GREAT SEAL OF THE STATE OF FLORIDA,
AT TALLAHASSEE, THE CAPITAL, THIS THE
24TH DAY OF JANUARY, 1986.
[SEAL] /S/ GEORGE FIRESTONE
GEORGE FIRESTONE
CR2E022(1-85) SECRETARY OF STATE
<PAGE> 10
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
INNOVA/PURE WATER, INC.
--------------
Pursuant to the provisions of Section 607.181 of the Florida General
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Articles of Incorporation:
1. The name of the corporation is INNOVA/PURE WATER, INC.
2. The following amendments of the Articles of Incorporation were adopted by
the shareholders of the corporation on August 20, 1995 in the manner prescribed
by the Florida General Corporation Act:
ARTICLE III
Capital Stock
This Article is amended in its entirety to read as follows:
The maximum number of shares of stock that this corporation is authorized
to have outstanding at any one time is 10,000 shares of $.01 par value common
stock and 2,000,000 shares of $.01 par value preferred stock.
3. The number of shares of the corporation outstanding at the time of adoption
was 50,000, and the number of shares entitled to vote thereon was 50,000.
4. The designation and number of outstanding shares of each class entitled to
vote thereon as a class were as follows:
<TABLE>
<CAPTION>
Class Number of Shares
----- ----------------
<S> <C>
Class A 50,000
Class B -0-
</TABLE>
<PAGE> 11
5. The number of shares voted in favor of such amendment was 50,000, and
the number of shares voted against such amendment was 0. Of the outstanding
shares of stock 49,000 shares are owned by Frances Weaver-Nohren and 1,000
shares owned by John E. Nohren, Jr. who are also the two directors of the
corporation.
6. Statement of Exchange. The two stockholders shall exchange their
50,000 shares of $.10 par value share for 50,000 shares of $.01 par value common
stock and the $.10 par value shares shall be cancelled.
DATED August 20, 1985.
INNOVA/PURE WATER, INC.
By /s/ John E. Nohren, Jr.
-----------------------------------
Its President, John E. Nohren, Jr.
and /s/ Frances Weaver-Nohren
-----------------------------------
Its sec'y, Frances Weaver-Nohren
STATE OF FLORIDA )
COUNTY OF PINELLAS ) SS:
BEFORE ME, the undersigned authority, personally appeared JOHN E. NOHREN,
JR. and FRANCES WEAVER-NOHREN, who as to me well known to be the persons
described in and who subscribed the above Articles of Amendment to the Articles
of Incorporation, and they did freely and voluntarily acknowledge before me
according to law that they made and subscribed the same for uses and purposes
therein mentioned and set forth.
IN WITNESS WHEREOF, I have hereunto set my hand and my official seal in
said state and county this 20 day of August 1985.
/s/ Barbara R. ??????
-----------------------------------
NOTARY PUBLIC, STATE OF FLORIDA AT
LARGE
My Commission expires:
Notary Public, State of Florida at Large
My Commission Expires Jan. 16, 1987
BONDED THRU AGENT'S NOTARY BROKERAGE
-2-
<PAGE> 12
EXHIBIT 5
CORPORATE PROFILE
<PAGE> 1
EXHIBIT 3(b)
BY LAWS
<PAGE> 2
BYLAWS
OF
INNOVA PURE WATER, INC.
ARTICLE I. Meetings of Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders of
this corporation shall be held at the time and place designated by the Board of
Directors of the corporation.
The annual meeting of shareholders for any year shall be held no later
than thirteen (13) months after the last preceding annual meeting of
shareholders. Business transacted at the annual meeting shall include the
election of directors of the corporation.
Section 2. Special Meetings. Special meetings of the shareholders shall
be held when directed by the Board of Directors, or when requested in writing by
the holders of not less than ten percent (10%) of all the shares entitled to
vote at the meeting. A meeting requested by shareholders shall be called for a
date not less than ten (10) nor more than sixty (60) days after the request is
made, unless the shareholders requesting the meeting designate a later date. The
call for the meeting shall be issued by the Secretary, unless the President,
Board of Directors, or shareholders requesting the meeting designate another
person to do so.
Section 3. Place. Meetings of shareholders may be held within or
without the State of Florida.
Section 4. Notice. Written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten (10) nor more than
sixty (60) days before the meeting, either personally or by first class mail, by
or at the direction of the President, the Secretary, or the officer or persons
calling the meeting to each shareholder of record entitled to vote at such
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid.
Section 5. Notice of Adjourned Meetings. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. If, however, after the adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given as provided in this
<PAGE> 3
section to each shareholder of record on the new record date entitled to vote at
such meeting.
Section 6. Closing of Transfer Books and Fixing Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other purpose, the Board of Directors may provide that the stock transfer
books shall be closed for a stated period but not to exceed, in any case, sixty
(60) days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days immediately
preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any determination of shareholders,
such date in any case to be not more than sixty (60) days and, in case of a
meeting of shareholders, not less than ten (10) days prior to the date on which
the particular action requiring such determination of shareholders is to be
taken.
If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date for the adjourned meeting.
Section 7. Voting Record. The officers or agent having charge of the
stock transfer books for shares of the corporation shall make, at least ten (10)
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, with the address of
and the number and class and series, if any, of shares held by each. The list,
for a period of ten (10) days prior to such meeting, shall be kept on file at
the registered office of the corporation, at the principal place of business of
the corporation or at the office of the transfer agent or registrar of the
corporation and any shareholder shall be entitled to inspect the list at any
time during usual business hours. The list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any shareholder at any time during the meeting.
2
<PAGE> 4
If the requirements of this section have not been substantially complied
with, the meeting on demand of any shareholder in person or by proxy, shall be
adjourned until the requirements are complied with. If no such demand is made,
failure to comply with the requirements of this section shall not affect the
validity of any action taken at such meeting.
Section 8. Shareholder Quorum and Voting. A majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. When a specified item of business is required to
be voted on by a class or series a majority of the shares of such class or
series shall constitute a quorum for the transaction of such item of business by
that class or series.
If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders unless otherwise provided by law.
After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of
shareholders entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof.
Section 9. Voting of Shares. Each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders.
Treasury shares, shares of stock of this corporation owned by another
corporation the majority of the voting stock of which is owned or controlled by
this corporation, and shares of stock of this corporation held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
A shareholder may vote the number of shares owned by him either in
person or by proxy executed in writing by the shareholder or his duly authorized
attorney-in-fact.
Shares standing in the name of another corporation, domestic or foreign,
may be voted by the officer, agent, or proxy designated by the bylaws of the
corporate shareholder; or, in the absence of any applicable bylaw, by such
person as the Board of Directors of the corporate shareholder may designate.
Proof of such designation may be made by presentation of a certified copy of the
bylaws or other instrument of the corporate shareholder. In the absence of any
such designation, or in case of conflicting designation by the corporate
shareholder, the chairman of the board, president, any vice president, secretary
and treasurer of the corporate shareholder shall be presumed to possess, in that
order, authority to vote such shares.
3
<PAGE> 5
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such receiver,
and shares held by or under the control of a receiver may be voted by such
receiver without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee or his nominee shall be entitled to vote the shares so
transferred.
On and after the date on which written notice of redemption of
redeemable shares has been mailed to the holders thereof and a sum sufficient to
redeem such shares has been deposited with a bank or trust company with
irrevocable instruction and authority to pay the redemption price to the holders
thereof upon surrender of certificates therefor, such shares shall not be
entitled to vote on any matter and shall not be deemed to be outstanding shares.
Section 10. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting or a
shareholders' duly authorized attorney-in-fact may authorize another person or
persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven (11) months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided by
law.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate office responsible
for maintaining the list of shareholders.
If a proxy for the same shares confers authority upon two or more
persons and does not otherwise provide, a majority of them present at the
meeting, or if only one is present then that one, may exercise all the powers
conferred by the proxy; but if the proxy holders present at the meeting are
equally divided as to the right and manner of voting in any particular case, the
voting of such shares shall be prorated.
4
<PAGE> 6
If a proxy expressly provides, any proxy holder may appoint in writing a
substitute to act in his place.
Section 11. Voting Trusts. Any number of shareholders of this
corporation may create a voting trust for the purpose of conferring upon a
trustee or trustees the right to vote or otherwise represent their shares, as
provided by law. Where the counterpart of a voting trust agreement and the copy
of the record of the holders of voting trust certificates has been deposited
with the corporation as provided by law, such documents shall be subject to the
same right of examination by a shareholder of the corporation, in person or by
agent or attorney, as are the books and records of the corporation, and such
counterpart and such copy of such record shall be subject to examination by any
holder of record of voting trust certificates either in person or by agent or
attorney, at any reasonable time for any proper purpose.
Section 12. Shareholders' Agreements. Two (2) or more shareholders, of
this corporation may enter an agreement providing for the exercise of voting
rights in the manner provided in the agreement or relating to any phase of the
affairs of the corporation as provided by law. Nothing therein shall impair the
right of this corporation to treat the shareholders of record as entitled to
vote the shares standing in their names.
Section 13. Action by Shareholders Without a Meeting. Any action
required by law, these bylaws, or the articles of incorporation of this
corporation to be taken at any annual or special meeting of shareholders of the
corporation, or any action which may be taken at any annual or special meeting
of such shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. If any class of shares is entitled to vote thereon as a class, such
written consent shall be required of the holders of a majority of the shares of
each class of shares entitled to vote as a class thereon and of the total shares
entitled to vote thereon.
Within ten (10) days after obtaining such authorization by written
consent, notice shall be given to those shareholders who have not consented in
writing. The notice shall fairly summarize the material features of the
authorized action and, if the action be a merger, consolidation or sale or
exchange of assets for which dissenters rights are provided under the law, the
notice shall contain a clear statement of the right of shareholders dissenting
therefrom to be paid the fair value of their shares upon compliance with further
provisions of the law regarding the rights of dissenting shareholders.
5
<PAGE> 7
ARTICLE II. Directors
Section 1. Function. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of a corporation shall be
managed under the direction of, the Board of Directors.
Section 2. Qualification. Directors need not be residents of this state
or shareholders of this corporation.
Section 3. Compensation. The Board of Directors shall have authority to
fix the compensation of directors.
Section 4. Duties of Directors. A director shall perform his duties as a
director, including his duties as a member of any committee of the board upon
which he may serve, in good faith, in a manner he reasonably believes to be in
the best interests of the corporation, and with such care as an ordinarily
prudent person in a like position would use under similar circumstances.
In performing his duties, a director shall be entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, in each case prepared or presented by:
(a) one or more officers or employees of the corporation whom
the director reasonably believes to be reliable and competent in the matters
presented,
(b) counsel, public accountants or other persons as to matters
which the director reasonably believes to be within such person's professional
or expert competence, or
(c) a committee of the board upon which he does not serve, duly
designated in accordance with a provision of the articles of incorporation or
the bylaws, as to matters within its designated authority, which committee the
director reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted.
A person who performs his duties in compliance with this section shall
have no liability by reason of being or having been a director of the
corporation.
6
<PAGE> 8
Section 5. Presumption of Assent. A director of the corporation who is
present at a meeting of its Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless he
votes against such action or abstains from voting in respect thereto because of
an asserted conflict of interest.
Section 6. Number. This corporation shall have at least one (1)
director. The minimum number of directors may be increased or decreased from
time to time by amendment to these bylaws, but no decrease shall have the effect
of shortening the terms of any incumbent director and no amendment shall
decrease the number of directors below one (1), unless the stockholders have
voted to operate the corporation.
Section 7. Election and Term. Each person named in the articles of
incorporation as a member of the initial board of directors shall hold office
until the first annual meeting of shareholders, and until his successor shall
have been elected and qualified or until his earlier resignation, removal from
office or death.
At the first annual meeting of shareholders and at each annual meeting
thereafter the shareholders shall elect directors to hold office until the next
succeeding annual meeting. Each director shall hold office for the term for
which he is elected and until his successor shall have been elected and
qualified or until his earlier resignation, removal from office or death.
Section 8. Vacancies. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
Section 9. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director or the entire Board of Directors may be
removed, with or without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors.
Section 10. Quorum and Voting. A majority of the number of directors
fixed by these bylaws shall constitute a quorum for the transaction of business.
The act of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
Section 11. Director Conflicts of Interest. No contract or other
transaction between this corporation and one (1) or more of its directors or any
other corporation, firm, association or entity in which one or more of the
directors are directors or officers or are financially interested, shall be
either void or voidable because of such relationship or interest or because such
director or directors are present at the meeting of the Board of Directors or a
committee thereof which authorizes, approves or ratifies
7
<PAGE> 9
such contract or transaction or because his or their votes are counted for such
purpose, if:
(a) The fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes, approves or
ratifies the contract or transaction by a vote or consent sufficient for the
purpose without counting the votes or consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or
known to the shareholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable as to the
corporation at the time it is authorized by the board, a committee or the
shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
Section 12. Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, may designate
from among its members an executive committee and one or more other committees
each of which, to the extent provided in such resolution, shall have and may
exercise all the authority of the Board of Directors, except that no committee
shall have the authority to:
(a) approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders,
(b) designate candidates for the office of director, for
purposes of proxy solicitation or otherwise,
(c) fill vacancies on the Board of Directors or any committee
thereof,
(d) amend the bylaws,
(e) authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board of Directors, or
(f) authorize or approve the issuance or sale of, or any
contract to issue or sell, shares or designate the terms of a series of a class
of shares, except that the Board of Directors, having acted regarding general
authorization for the issuance or sale of shares, or any contract therefor, and,
in the case of a series, the designation thereof, may, pursuant to a general
formula or method specified by the Board of Directors, by resolution or by
adoption of a stock option or other plan, authorize a committee to fix the terms
of any contract for the sale of the shares and to fix the terms
8
<PAGE> 10
upon which such shares may be issued or sold, including, without limitation, the
price, the rate or manner of payment of dividends, provisions for redemption,
sinking fund, conversion, voting or preferential rights, and provisions for
other features of a class of shares, or a series of a class of shares, with full
power in such committee to adopt any final resolution setting forth all the
terms thereof and to authorize the statement of the terms of a series for filing
with the Department of State.
The Board of Directors, by resolution adopted in accordance with this
section, may designate one (1) or more directors as alternate members of any
such committee, who may act in the place and stead of any absent member or
members at any meeting of such committee.
Section 13. Place of Meetings. Regular and special meetings by the Board
of Directors may be held within or without the State of Florida.
Section 14. Time, Notice and Call of Meetings. Regular meetings by the
Board of Directors shall be held without notice. Written notice of the time and
place of special meetings of the Board of Directors shall be given to each
director by either personal delivery, telegram, cablegram or other form of
electronic communication at least two (2) days before the meeting or by notice
mailed to the director at least five (5) days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
A majority of the directors present, whether or not a quorum exists, may
adjourn any meeting of the Board of Directors to another time and place. Notice
of any such adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
Meetings of the Board of Directors may be called by the chairman of the
board, by the president of the corporation, or by any two (2) directors.
9
<PAGE> 11
Members of the Board of Directors may participate in a meeting of such
board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
Section 15. Action Without a Meeting. Any action required to be taken at
a meeting of the directors of a corporation, or any action which may be taken at
a meeting of the directors or a committee thereof, may be taken without a
meeting if a consent in writing, setting forth the action so to be taken, signed
by all of the directors, or all the members of the committee, as the case may
be, is filed in the minutes of the proceedings of the board or of the committee.
Such consent shall have the same effect as a unanimous vote.
ARTICLE III. Officers
Section 1. Officers. The officers of this corporation shall consist of a
president, a secretary and a treasurer, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers and agents as may
be deemed necessary may be elected or appointed by the Board of Directors from
time to time. Any two (2) or more offices may be held by the same person. The
failure to elect a president, secretary or treasurer shall not affect the
existence of this corporation.
Section 2. Duties. The officers of this corporation shall have the
following duties:
The President shall be the chief executive officer of the corporation,
shall have general and active management of the business and affairs of the
corporation subject to the directions of the Board of Directors, and shall
preside at all meetings of the stockholders and Board of Directors.
The Secretary shall have custody of, and maintain, all of the corporate
records except the financial records; shall record the minutes of all meetings
of the stockholders and Board of Directors, send all notice of meetings out, and
perform such other duties as may be prescribed by the Board of Directors or the
President.
The Treasurer shall have custody of all corporate funds and financial
records, shall keep full and accurate accounts of receipts and disbursements and
render accounts thereof at the annual meetings of stockholders and whenever else
required by the Board of Directors or the President, and shall perform such
other duties as may be prescribed by the Board of Directors or the President.
Section 3. Removal of Officers. Any officer or agent elected or
appointed by the Board of Directors may be removed by the board whenever in its
judgment the best interests of the corporation will be served thereby.
10
<PAGE> 12
Any officer or agent elected by the shareholders may be removed only by
vote of the shareholders, unless the shareholders shall have authorized the
directors to remove such officer or agent.
Any vacancy, however occurring, in any office may be filled by the Board
of Directors, unless the bylaws shall have expressly reserved such power to the
shareholders.
Removal of any officer shall be without prejudice to the contract
rights, if any, of the person so removed; however, election or appointment of an
officer or agent shall not of itself create contract rights.
ARTICLE IV. Stock Certificates
Section 1. Issuance. Every holder of shares in this corporation shall be
entitled to have a certificate, representing all shares to which he is entitled.
No certificate shall be issued for any share until such share is fully paid.
Section 2. Form. Certificates representing shares in this corporation
shall be signed by the President or Vice President and the Secretary or an
Assistant Secretary and may be sealed with the seal of this corporation or a
facsimile thereof. The signatures of the President or Vice President and the
Secretary or Assistant Secretary may be facsimiles if the certificate is
manually signed on behalf of a transfer agent or a registrar, other than the
corporation itself or an employee of the corporation. In case any officer who
signed or whose facsimile signature has been placed upon such certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the corporation with the same effect as if he were such officer at the
date of its issuance.
Every certificate representing shares which are restricted as to the
sale, disposition or other transfer of such shares shall state that such shares
are restricted as to transfer and shall set forth or fairly summarize upon the
certificate, or shall state that the corporation will furnish to any shareholder
upon request and without charge a full statement of, such restrictions.
Each certificate representing shares shall state upon the face thereof:
the name of the corporation; that the corporation is organized under the laws of
this state; the name of the person or persons to whom issued; the number and
class of shares, and the designation of the series, if any, which such
certificate represents; and the par value of each share represented by such
certificate, or a statement that the shares are without par value.
11
<PAGE> 13
Section 3. Transfer of Stock. The corporation shall register a stock
certificate presented to it for transfer if the certificate is properly endorsed
by the holder of record or by his duly authorized attorney, and upon surrender
or cancellation of a certificate or certificates for a like number of shares.
Section 4. Lost, Stolen, or Destroyed Certificates. The corporation
shall issue a new stock certificate in the place of any certificate previously
issued if the holder of record of the certificate (a) makes proof in affidavit
form that it has been lost, destroyed or wrongfully taken; (b) requests the
issue of a new certificate before the corporation has notice that the
certificate has been acquired by a purchaser for value in good faith and without
notice of any adverse claim; (c) gives bond in such form as the corporation may
direct, to indemnify the corporation, the transfer agent, and registrar against
any claim that may be made on account of the alleged loss, destruction, or theft
of a certificate; and (d) satisfies any other reasonable requirements imposed by
the corporation.
ARTICLE V. Books and Records
Section 1. Corporate Records.
(a) The corporation shall keep as permanent records minutes of
all meetings of its shareholders and Board of Directors, a record of all actions
taken by the shareholders or Board of Directors without a meeting, and a record
of all actions taken by a committee of the Board of Directors on behalf of the
corporation.
(b) The corporation shall maintain accurate accounting records
and a record of its shareholders in a form that permits preparation of a list of
the names and addresses of all shareholders in alphabetical order by class of
shares showing the number and series of shares held by each.
(c) The corporation shall keep a copy of: its articles or
restated articles of incorporation and all amendments to them currently in
effect; these Bylaws or restated Bylaws and all amendments currently in effect;
resolutions adopted by the Board of Directors creating one or more classes or
series of shares and fixing their relative rights, preferences, and limitations,
if shares issued pursuant to those resolutions are outstanding; the minutes of
all shareholders' meetings and records of all actions taken by shareholders
without a meeting for the past three years; written communications to all
shareholders generally or all shareholders of a class of series within the past
three years, including the financial statements furnished for the last three
years; a list of names and business street addresses of its current directors
and officers; and its most recent annual report delivered to the Department of
State.
(d) The corporation shall maintain its records in written form
or in another form capable of conversion into written form within a reasonable
time.
12
<PAGE> 14
Section 2. Shareholders' Inspection Rights. A shareholder is entitled to
inspect and copy, during regular business hours at the corporation's principal
office, any of the corporate records described in Section 1(c) of this Article
if the shareholder gives the corporation written notice of the demand at least
five (5) business days before the date on which he wishes to inspect and copy
the records.
A shareholder is entitled to inspect and copy, during regular business
hours at a reasonable location specified by the corporation, any of the
following records of the corporation if the shareholder gives the corporation
written notice of this demand at least five (5) business days before the date on
which he wishes to inspect and copy provided (a) the demand is made in good
faith and for a proper purpose; (b) the shareholder described with reasonable
particularity the purpose and the records he desires to inspects; and (c) the
records are directly connected with the purpose: (i) excerpts from minutes of
any meeting of the Board of Directors, records of any action of a committee of
the Board of Directors while acting in place of the Board on behalf of the
corporation; (ii) accounting records; (iii) the record of shareholders; and (iv)
any other books and records of the corporation.
This Section 2 does not affect the right of a shareholder to inspect and
copy the shareholders' list described in Section 7 of Article I, if the
shareholder is in litigation with the corporation to the same extent as any
other litigant or the power of a court to compel the production of corporate
records for examination.
The corporation may deny any demand for inspection if the demand was
made for an improper purpose, or if the demanding shareholder has within the two
(2) years preceding his demand, sold or offered for sale any list of
shareholders of the corporation or of any other corporation, has aided or
abetted any person in procuring any list of shareholders for that purpose, or
has improperly used any information secured through any prior examination of the
records of this corporation or any other corporation.
Section 3. Financial Information. Not later than four (4) months after
the close of each fiscal year, this corporation shall prepare a balance sheet
showing in reasonable detail the financial condition of the corporation as of
the close of its fiscal year, and a profit and loss statement showing the
results of the operations of the corporation during its fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to such
shareholder or holder of voting trust certificates a copy of the most recent
such balance sheet and profit and loss statement.
13
<PAGE> 15
The balance sheets and profit and loss statements shall be filed in the
registered office of the corporation in this state, shall be kept for at least
five (5) years, and shall be subject to inspection during business hours by any
shareholder or holder of voting trust certificates, in person or by agent.
ARTICLE VI. Dividends
The Board of Directors of this corporation may, from time to time,
declare, and the corporation may pay dividends on its shares in cash, property
or its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent or when the declaration or
payment thereof would be contrary to any restrictions contained in the articles
of incorporation, subject to the following provisions:
(a) Dividends in cash or property may be declared and paid,
except as otherwise provided in this section, only out of the unreserved and
unrestricted earned surplus of the corporation or out of capital surplus,
howsoever arising but each dividend paid out of capital surplus, and the amount
per share paid from such surplus shall be disclosed to the shareholders
receiving the same concurrently with the distribution.
(b) Dividends may be declared and paid in the corporation's own
treasury shares.
(c) Dividends may be declared and paid in the corporation's own
authorized but unissued shares out of any unreserved and unrestricted surplus of
the corporation upon the following conditions:
(1) If a dividend is payable in shares having a par value,
such shares shall be issued at not less than the par value thereof and there
shall be transferred to stated capital at the time such dividend is paid an
amount of surplus equal to the aggregate par value of the shares to be issued as
a dividend.
(2) If a dividend is payable in shares without par value,
such shares shall be
issued at such stated value as shall be fixed by the Board of Directors by
resolution adopted at the time such dividend is declared, and there shall be
transferred to stated capital at the time such dividend is paid an amount of
surplus equal to the aggregate stated value so fixed in respect of such shares;
and the amount per share so transferred to stated capital shall be disclosed to
the shareholders receiving such dividend concurrently with the payment thereof.
(d) No dividend payable in shares of any class shall be paid to
the holders of shares of any other class unless the articles of incorporation so
provide or such payment is authorized by the affirmative vote or the written
consent of the holders
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<PAGE> 16
of at least a majority of the outstanding shares of the class in which the
payment is to be made.
(e) A split-up or division of the issued shares of any class
into a greater number of shares of the same class without increasing the stated
capital of the corporation shall not be construed to be a share dividend within
the meaning of this section.
ARTICLE VII. Corporate Seal
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation as
it appears on page 1 of these Bylaws.
ARTICLE VIII. Amendments
These bylaws may be repealed or amended, and new bylaws may be adopted,
by the Board of Directors.
End of Bylaws adopted, by the Board of Directors.
15
<PAGE> 1
[PNCCPA LETTERHEAD]
EXHIBIT 5
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our Auditors' opinion, dated August 22, 1997, in
the March 31, 1998 Form 10-SB to be filed by Innova Pure Water, Inc.
accompanying the financial statements of Innova Pure Water, Inc. as of June 30,
1997 and the results of operations and its cash flows for the years ended June
30, 1997 and 1996.
/s/ PENDER NEWKIRK & COMPANY
Certified Public Accountants
Tampa, Florida
June 19, 1998
<PAGE> 1
EXHIBIT 10(a)
AGREEMENT WITH FUN DESIGNS, INC.
<PAGE> 2
INNOVA PURE WATER, INC.
13130 56th Court, Suite 604
Clearwater FL 33760
Strategic Alliance Agreement
BETWEEN
Innova Pure Water, Inc. Fun Designs, Inc.
Clearwater, FL Duxbury, MA
There has been an expressed desire by both parties to enter into a formal
business relationship. As a component of this relationship:
1) Innova will sell its water treatment filters to Fun Designs at its most
favorable OEM price based upon minimum annual commitments of 100,000 units
or more per filter model.
2) The type of product which FD will market Innova filter products into and
for which FD is provided an exclusive license to use Innova supplied
filters for sale with is defined as:
A) Products which shall contain a licensed or generic
three-dimensional design in a figural child's bottle format or
replacement figural filter format, excluding the newborn and
infant markets.
B) It is the responsibility of FD to obtain those licenses that
FD chooses to use. The licensed products may also be in
printed design format. Innova requires that the designs used
are in good taste and complimentary to the Innova Brand.
Innova is to approve the licensed products and the licenses
and designs to be used.
C) Distribution of products that may compete with Innova in
Innova's markets or other Innova customers outside the license
and/or three-dimensional Figural Top Design category will
require separate approval from Innova on a case-by-case basis.
Such approval will not be unnecessarily withheld.
3) Should Innova create a new filter product for the FD class of trade, it
will provide FD the first right of refusal prior to offering the new
product to another party marketing to the same class of trade.
4) With the approval of FD, Innova will attempt to incorporate FD products
into Playskool and/or Lamaze product marketing programs, but neither
Innova nor FD is required by contract to do so. If the incorporation of FD
products into the business of either one or both of the named companies is
successful, the products of FD sold to or distributed by the above will be
through Innova or FD, recognizing the subject companies are Innova
accounts.
5) Innova, with the approval of FD, may also introduce FD products to the
GoodTimes family of companies as well as Richard Simmons, QVC, and Home
Shopping. The products of FD sold to or distributed by the named above
will be through Innova or as
December 17, 19961
<PAGE> 3
may be directed by Innova which is necessary to maintain continuity of
products relative to water treatment. It is Innova's intention that while
they are FD products they are not identical to FD retail products without
the expressed approval of FD.
6) The initial agreement will be for a period of two years, based upon a
commitment by FD to purchase a minimum of $500,000 in the first year and
$1,000,000 in the second year. If both parties meet their commitments, the
agreement will automatically extend each year. In the third year, if
extended, minimum sales are to be $1,500,000; however, either party may
cancel by providing the other party with notice of its intention within
120 days of the anniversary date.
December 17, 19961
<PAGE> 4
Further, should change of control occur to either party, the agreement may be
terminated by either party at such time. Should FD fail to make its financial
commitment, there will be no financial liability although the agreement may be
terminated at the end of the specific year without 120 days notice.
7) A) Should Termination occur, FD will be provided the opportunity to
liquidate existing inventory of record within a six-month period.
Innova will be provided the opportunity to purchase or place such
inventory on terms no less favorable than offered to any third
party.
B) Similarly, FD will complete any outstanding orders being produced
for Innova and Innova will have the same terms extended to it as
have been extended to FD.
8) Innova may sell directly during the period of our agreement: baby bottles,
sippy cups and cups with straws, adult products, and toys incorporating
water filtration to any third party. Innova's newborn and baby products
may contain figural designs. Innova may also sell products with figural
designs to schools, college bookstores, the premium and incentive
business, and for private label, if requested.
9) Innova will attempt to purchase from FD its product needs for Innova's
direct sales to GoodTimes, QVC, or HSN, with the approval of FD, the
products for which will not be identical to FD's retail products. This
assumes pricing consistent with similar customer requirements and the
ability to meet Innova's volume requirements on a timely basis.
10) FD agrees to purchase its water filtration products from Innova during the
period of this agreement.
11) Both parties agree to protect each other's intellectual property and
recognize the proprietorship of each company's design(s) and property. To
the degree practical such transfer of intellectual property, designs and
ideas will be confirmed by letter or dated hard copy.
12) Any FD products incorporating an Innova filter will have, in distinct
lettering, reference to the Innova filter and corporate name, or logo as
shall be mutually agreed upon.
13) Upon request, Innova will produce any salient patent which has issued, and
general reference to pending registrations. Innova patents and
applications, when applicable, will be referenced upon the packaging if
not incorporated upon the product
14) Innova will hold FD harmless against claims for infringement or the use of
the Innova component of the product - as long as Innova has reviewed the
claims and instructions, and approved such, that are supplied with, or on,
the packaging or product
15) Innova agrees to defend FD against product claims that may arise from the
sale by FD of Innova products and/or components so long as Innova has
approved in writing of the claims made and instructions provided. Products
referencing Innova products should all contain the same language which had
been approved by Innova in writing.
16) FD will bring to Innova's attention any patent infringement of which they
become aware.
17) Termination of this agreement for cause may occur as a result of default
and the failure to remedy the default within thirty days of notice faxed
to the business of the defaulting party. Just cause is deviation from the
terms set forth, failure to make payments in a timely manner, failure to
meet annual sales commitments, failure to make deliveries on schedule that
are within the control of the parties, and excepting force majure. In
addition products are to function and perform within specifications and
quality is to be maintained within specifications and equal to samples
which may be provided for this purpose.
18) This agreement will be interpreted under the laws of the State of Florida.
December 17, 19963
<PAGE> 5
19) Any disagreements that may arise, and which cannot be resolved by the
principals, will be submitted to binding arbitration by and under the
Rules of the American Arbitration Association, the findings of which the
parties to this agreement agree to accept and abide by.
20) Innova will, at this time, furnish the:
a) "Source (13/16"0) Filter" with integral pull-push cap and valve, based
upon 100,000 units ______$1.25 bulk-packed and sealed in poly bag, shipped
in an over-box. Pricing will be Innova's best OEM price available at the
time.
b) "Source (13/16"0) Filter" without integral pull-push cap and valve,
based upon 100,000 units $1.06 bulk-packed and sealed in poly bag, shipped
in an over-box. Pricing will be Innova's best OEM price available at the
time.
c) "Choice (1 /8"0) Filter" with combination base, based upon 100,000
units $1.1 5 bulk-packed and sealed in poly bag, shipped in an over-box.
Pricing will be Innova's best OEM price available at the time.
Prices are subject to change, as are technical specifications. Any changes
will be preceded by ninety (90) days notification of pending change.
21) Terms: To be determined on an order-by-order basis.
December 17, 19963
<PAGE> 6
22) Other considerations:
A) Innova has a pending strategic alliance with the Thermos company that
may include existing youth and school products. Without expanding the
existing Thermos line, Innova has an obligation to provide filters should
Thermos so request; however, any child's product containing a filter
supplied by Innova will be in conjunction with a lunch box and be of a
double-walled nature.
B) Innova has worked with an independent representative that has presented
Innova products to Disney, using Disney Characters for sales to the theme
parks and/or stores. An adequate period of time will be required to permit
them to close the sale -- 120 days.
A) Upon entering into an agreement, Innova will terminate any
outstanding agreements which may impinge upon the "License &
Character" market of FD. Innova will terminate such agreements,
should any be in existence, but may require up to 120 days to do so.
While no agreements particularly address this class of trade,
neither do they exclude such.
B) Innova is not limited from selling, to any party, its standard
product line for marketing without 3-D figural designs.
E) Relative to sport and bike bottles, no exclusivity can be granted as
prior agreements are in place with sport and bike bottle
manufacturers and distributors. Licensing of characters will be FD's
protection. Innova, to the degree permitted by law, will attempt to
exclude the use of Innova filters by third parties in conjunction
with 3-D figural designs.
For Innova Pure Water, Inc. For Fun Designs, Inc.
- ------------------------------------ ------------------------------------
Printed Name: Printed Name
---------------------- ----------------------
Date - December 17, 1996 Date - January 9, 1996
December 17, 1996
<PAGE> 1
EXHIBIT 10(d)
STOCK PURCHASE AGREEMENT
BETWEEN
INNOVA HOLDINGS LLC
AND
INNOVA/PURE WATER, INC.
<PAGE> 2
STOCK PURCHASE AGREEMENT
BETWEEN
INNOVA HOLDINGS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY,
AND
INNOVA/PURE WATER, INC.,
A FLORIDA CORPORATION
OCTOBER [30], 1997
<PAGE> 3
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of ___ day
of October, 1997 by and between Innova Holdings, LLC, a Delaware limited
liability company ("Holdings"), with its principal office at
______________________________________, and Innova/Pure Water, Inc., a Florida
corporation (the "Company"), with its principal office at 13160 - 56th Court,
Suite 510, Clearwater, FL 33760.
WHEREAS, Holdings and the Company previously entered into a certain
Warrant Purchase Agreement dated as of October 31, 1996 pursuant to which
Holdings acquired certain Common Stock, Purchase Warrants of the Company for
$500,000;
WHEREAS, the parties desire to terminate the Warrant Purchase Agreement
and exchange the outstanding Common Stock Purchase Warrants currently held by
Holdings for 1,500,000 restrictive shares of the Company's common stock, par
value $.001.
NOW, THEREFORE, in consideration of the premises and other good and
value consideration, the receipt and sufficiency of which are hereby
acknowledge, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMMON STOCK
1.1 PURCHASE AND SALE OF COMMON STOCK. Subject to the terms and
conditions of this Agreement, Holdings agrees to purchase, and the Company
agrees to issue and sell to Holdings, 1,500,000 shares (the "Shares") of Common
Stock, [$.001] par value per share (the "Common Stock"), of the Company.
1.2 THE CLOSING. The purchase and sale of the Common Stock shall take
place at such date, time and place (which date and time may be simultaneous with
the execution and delivery of this Agreement) as Holdings and the Company shall
mutually agree (which place and time are designated as the "Closing"). At the
Closing, the Company shall deliver to Holdings a certificate (or certificates)
representing the restricted Common Stock against payment of the Purchase Price
(as defined below).
1.3 PURCHASE PRICE. As consideration for the issuance and sale of the
Common Stock, Holdings shall surrender the Common Stock Purchase Warrants issued
in connection with the Warrant Purchase Agreement in exchange for the Shares.
The Shares, upon issuance to Holdings, shall be fully paid and nonassessable.
<PAGE> 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Holdings as follows:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida, has all requisite corporate power and authority to own
and operate its properties and assets and to carry on its business as now
conducted, to execute and delivery this Agreement, to issue and sell the Common
Stock and to carry out the provisions of this Agreement. The Company is in good
standing and is qualified to transact business as a foreign corporation in all
states in which the nature of its business or the properties owned by it require
it to qualify to transact business.
2.2 AUTHORIZATION. All corporate action on the part of the Company, its
officers, directors, and stockholders necessary for the authorization, execution
and delivery of this Agreement, and the authorization, issuance, sale and
delivery of the Common Stock being sold hereunder constitutes a valid and
legally binding obligation of the Company, enforceable in accordance with its
terms except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, (b) as limited by laws relating to
the availability of specific performance, injunctive relief, or other equitable
remedies, and (c) to the extent any indemnification provisions contained in this
Agreement may be limited by applicable federal or state law.
2.3 VALID ISSUANCE OF COMMON STOCK. The Shares being purchased by
Holdings hereunder, when issued, sold and delivered in accordance with the terms
of this Agreement, will be duly and validly issued, fully paid, non-assessable,
not subject to any preemptive rights, and free and clear of all liens, claims
and encumbrances.
2.4 GOVERNMENTAL CONSENTS. To the best of the Company's knowledge, no
consent, approval, qualification, order or authorization of, or filing, with,
any local, state, or federal governmental authority is required on the part of
the Company in connection with the Company's valid execution, delivery, or
performance of this Agreement or the offer, sale or issuance of the Shares by
the Company, except for filings that shall be made at or prior to Closing and
routine securities law filings after the Closing.
2.5 FINANCIAL STATEMENTS. The Company has delivered to Holdings its
audited financial statements (balance sheet, statement of operations, statement
of stockholders' equity, and statement of cash flows) at December 31, 1996 and
for the fiscal period then ended and its unaudited financial statements at [June
30], 1997 for the quarter then ended (collectively, the "Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
period indicated. The Financial Statements fairly present the financial
condition and operating results of
2
<PAGE> 5
the Company as of the dates, and for the periods, indicated therein subject, in
the case of the unaudited financial statements, to year-end audit adjustments,
which, with respect to each individual adjustment and all of the adjustments
taken as a whole, adjustments will not have a material adverse impact on the
financial condition or operating results of the Company as reflected in the
unaudited Financial Statements provided to Holdings.
2.6 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
of default of any provision of its Certificate of Incorporation, By-laws, or of
any material provision of any mortgage, indenture, agreement, instrument, or
contract to which it is a party or by which it is bound or, to the best of its
knowledge, of any federal or state judgment, order, writ, decree, statute, rule
or regulation applicable to the Company. The execution, delivery, and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge, or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture,
or non-renewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.7. LITIGATION. Except as set forth in Schedule 2.7, there is and
within the prior twenty-four (24) months there has been, no action, suit,
proceeding, investigation, arbitration, claim or counterclaim pending against
or, to the best of the Company's knowledge, currently threatened or affecting
the Company in any court or before any arbitration panel or before or by any
federal, state or other governmental department or agency. Except as set forth
in Schedule 2.7, the Company has no knowledge of any facts which might
reasonably be believed to be a basis for any such action, suit, proceeding,
investigation, arbitration, claim, or counterclaim. Neither the Company nor its
properties is subject to or directly affected by any order, judgment, decree or
ruling in the nature of an injunctive or consent order or order for specific
performance of any court or governmental agency, other than those affecting the
public generally. There are no existing material violations of federal, state or
local laws, ordinances, rules, regulations or orders by the Company or
materially affecting the business or property of the Company or the possession,
use, occupancy or operation of the Company's facilities. Except as set forth in
Schedule 2.7, there is no action, suit, or proceeding by the Company currently
pending or that the Company currently intends to initiate.
2.8 DISCLOSURE DOCUMENTS. This Agreement, Schedules, and the other
documents, certificates, and statements delivered to Holdings in connection
herewith or with the transactions contemplated hereby, when read together as a
single disclosure, do not contain any untrue statement of a material fact and do
not omit to state a material fact necessary in order to make the statements
contained herein and therein not misleading. Having regard for the ordinary
nature of the various segments of the business of the Company, there is no
material fact known to the Company which materially adversely affects or in the
future, as a result of existing material facts whose impact has not yet been
experienced, may (so far as the Company can now reasonably foresee) materially
adversely affect the business of the Company which has not been set forth in
3
<PAGE> 6
this Agreement, the Schedules, or the other documents, certificates, and written
statements furnished or to be furnished to Holdings by the Company.
2.9 OFFERING. Subject in part to the truth and accuracy of Holdings'
representations and warranties set forth in this Agreement, the offer, sale and
issuance of the Common Stock as contemplated by this Agreement are exempt from
the registration requirements of the Securities Act, and neither the Company nor
any authorized agent acting on its behalf will take any action hereafter that
would cause the loss of such exemption.
2.10 ABSENCE OF UNDISCLOSED LIABILITIES. Except as specifically
reserved against or reflected in the Financial Statements or described in
Schedule 2.7 or another Schedule hereto, the Company is not subject to any
material liability or financial obligation (known or unknown, direct or
indirect, absolute, contingent, accrued or otherwise), other than liabilities or
financial obligations arising in the ordinary course of business since the date
of the Financial Statements. The Company is not in default with respect to any
term or condition of any indebtedness or liability (including any current or
deferred trade payable). For purposes of this Section 2.10, any individual
liability, or all such liabilities in the aggregate, should be deemed to be
material if the individual or aggregate value is greater than $50,000.
2.11 DIVIDENDS. Since December 31, 1996, the Company has not declared,
paid or set aside for payment, or agreed to declare or pay, any dividend or
other distribution in respect of its capital stock.
2.12 INSOLVENCY. The Company is not the subject of any existing,
pending or threatened insolvency or bankruptcy proceedings under the laws of any
jurisdiction.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings hereby represents and warrants to the Company as follows:
3.1 AUTHORIZATION. Holdings is a limited liability Company duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Holdings has full power and authority to enter into this Agreement and
this Agreement and the Option Agreement constitute valid and legally binding
obligations of Holdings. Holdings is the owner of the Warrants, free of any
liens, claims, or encumbrances and has the full legal authority to surrender the
Warrants for the Shares.
3.2 INVESTMENT EXPERIENCE. Holdings has sufficient knowledge and
experience in financial and business matters so as to be capable of evaluating
the merits and risks of its investment in the Shares. Holdings has the ability
to bear the economic risks of its investment and understands that an investment
in the Shares is speculative and involves a high degree of risk. Holdings is an
"accredited investor" as such term is defined in Regulation D promulgated under
the Securities Act.
4
<PAGE> 7
3.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Shares are being acquired
for investment purposes only for the account of Holdings, and not with a view to
the resale or distribution of any part thereof, neither Holdings has any present
intention of selling, granting any participation in, or otherwise distributing
the same.
3.4 RESTRICTED SECURITIES. Holdings is aware of and understands the
following:
(a) That no federal or state agency has made a finding or
determination as to the advisability or fairness of an investment in the Shares
or any recommendation or endorsement of the Shares;
(b) That the Shares have not been registered for sale under the
Securities Act or any state blue sky law; and
(c) That, unless and until the Shares are registered for sale
under the Securities Act and any applicable state blue sky law, there will be
substantial restrictions on the transferability of the Shares; there will be no
public market for the Shares in the United States; and Holdings will not be able
to avail itself of the provisions of Rule 144 adopted by the Securities and
Exchange Commission (the "SEC") under the Securities Act, unless all of the
conditions of Rule 144 are met.
(d) The Shares are subject to a two (2) year "lock-up" and may
not be sold, transferred, assigned or pledged before October ___, 1999.
3.5 LEGEND. Holdings understands and agrees that, until registered
under all applicable securities laws, all certificates evidencing any of the
Shares, whether upon initial issuance or any transfer thereof, shall bear the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO A NON-PUBLIC OFFERING UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS, AND
THEREFORE CANNOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
ASSIGNED UNLESS THEY ARE REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND UNDER ALL APPLICABLE STATE SECURITIES LAWS,
OR UNLESS AN EXEMPTION THEREFROM IS AVAILABLE. THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CERTAIN LOCK-UP
PROVISIONS SET FORTH IN THAT CERTAIN AGREEMENT OF EVEN DATE
THEREWITH BETWEEN THE ORIGINAL HOLDER HEREOF AND THE COMPANY.
5
<PAGE> 8
ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION. Holdings and the Company each hereby agrees to
indemnify the other and its representatives, subcontractors, consultants and
agents, and to hold the other and its representatives, subcontractors,
consultants and agents harmless from and against, any and all loss, damage or
liability (including but not limited to attorneys' fees and costs( due to, or
arising out of, any breach of any representation, warranty or covenant of
Holdings or the Company, as the case may be, contained in this Agreement.
4.2 INDEMNIFICATION PROCEDURES. Each party entitled to indemnification
under this Agreement (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and (if the claim is made by a third party) shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting therefrom, shall
be approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, as provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its indemnification obligations to the extent such failure is not prejudicial.
No Indemnifying Party, in the dense of any such claim or litigation, shall,
except with the consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself of the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
ARTICLE V
CONDITIONS TO CLOSING
5.1 CONDITIONS TO HOLDINGS' OBLIGATION TO CLOSE. The obligation of
Holdings to close the transaction as described in Article I of this Agreement
shall be subject to the fulfillment, on or before the Closing, of each of the
following conditions:
(a) The representations and warranties of the Company set
forth in Section 2 of this Agreement shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of the Closing except for representations and warranties
expressly limited to a specific date;
6
<PAGE> 9
(b) The Company shall have performed and complied with all
agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing;
(c) Holdings shall have received from Johnson, Blakely, Pope,
Bokor, Ruppel & Burns, P.A. counsel for the Company, an opinion or opinions,
dated the date of the Closing, in form and substance satisfactory to counsel of
Holdings, substantially to the effect that:
(i) The Company has been duly incorporated and organized
and is a validly existing corporation in good standing under the laws of the
State of Florida and has the requisite corporate power to own its property and
assets and to conduct its business as it is currently being conducted;
(ii) This Agreement has been duly and validly authorized,
executed and delivered by the Company and constitutes a legally, valid and
binding obligation of the Company, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, preferential transfer, reorganization,
moratorium and similar laws or general applicability relating to or affecting
creditors' rights and to general equity principles and to the extent any
indemnification provisions contained thereon may be limited by applicable
federal or state law;
(iii) The Common Stock to be issued pursuant to the
Agreement has been duly authorized and upon receipt of the Purchase Price will
be validly issued, fully paid and non-assessable Common Stock of the Company and
free and clear of any liens, claims and encumbrances on the party of the
Company;
(iv) The certificates representing the Common
Stock are in due and proper form and have been validly executed;
(v) Subject in part to the truth and accuracy
of the representations and warranties set forth in this Agreement, the offer and
sale of the Common Stock is exempt from the registration requirements of the
Securities Act.
5.2 CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE. The
obligation of the Company to close shall be subject to the fulfillment, on or
before the Closing, of the following condition:
(a) The representations and warranties of Holdings set forth
in Section III of this Agreement shall be true on and as of the Closing with the
same effect as though such representations and warranties had been made on and
as of the date of the Closing.
(b) Holdings shall have performed and complied with all
agreements, obligations, and conditions contained in this Agreement, including
the payment of the Purchase Price by surrendering the Warrants, that are
required to be performed or complied with by it on or before the Closing.
7
<PAGE> 10
ARTICLE VI
MISCELLANEOUS
6.1 PUBLIC ANNOUNCEMENT. Each party hereto shall furnish a copy of any
announcement to the other in advance of the issuance of any press release
relating to the matters set forth in this Agreement.
6.2 ASSIGNMENT OR TRANSFER. Neither the Company nor Holdings shall
assign its rights or transfer its obligations under this Agreement in whole or
in part without first obtaining the written consent of the other party hereto.
Notwithstanding the foregoing, Holdings may, without the consent of the Company,
and subject to the two (2) year lock-up, assign its rights hereunder, to any
affiliate of Holdings or any trust, partnership, corporation or other entity
established for the benefit of Holdings or a member of his immediate family (a
"Family Trust"). For the purpose of this Section 6.2, the term "affiliate" shall
mean any person or entity directly or indirectly controlling or controlled by or
under direct or indirect common control with Holdings.
6.3 GOVERNING LAW. This Agreement shall be construe in accordance
with and governed by the laws of the State of Florida.
6.4 BENEFIT. This Agreement shall be binding upon Holdings and the
Company, and their respective administrators, legal representatives, successors,
and permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any person, other than the parties hereto, any rights or
remedies under or by reason of this Agreement (except as provided in Section 6.2
hereof).
6.5 SPECIFIC PERFORMANCE.
(a) The parties to this Agreement hereby agree that an award
of damages alone is inadequate to remedy a breach of the terms of this Agreement
and that specific performance, injunctive relief or other equitable remedy is
the only way by which the intent of this Agreement may be adequately realized
upon breach by one or more of the parties hereto. Such remedy shall, however, be
cumulative and not exclusive, and shall be in addition to any other remedy which
the parties may have.
(b) In furtherance of and not in limitation of paragraph ___
of this Section ___, should any dispute arise concerning a sale, encumbrance,
pledge, transfer, hypothecation, assignment or other disposition of any of the
Common Stock or Option Shares which is alleged to contravene the provisions of
this Agreement, an injunction may be issued restraining any such transaction
pending the determination of such controversy.
6.6 WAIVER. Failure by either party to insist upon strict compliance
with any of the terms, covenants or conditions of this Agreement shall not be
deemed a waiver of such terms, covenants or conditions, nor shall any waiver or
relinquishment of any right or power hereunder
8
<PAGE> 11
at any one time or more times be deemed a waiver or relinquishment of such right
or power at any other time or times.
6.7 NOTICE. All notices, demands, requests, offers, acceptances,
deliveries or other communications required or permitted to be given or
delivered under this Agreement, shall be in writing and shall be deemed
delivered when served personally, via courier, via facsimile, or on the third
business day after being deposited in the United States mail, certified or
registered mail, postage prepaid, addressed as follows:
If to Company:
Innova/Pure Water, Inc.
13160 - 56th Court, Suite 510
Clearwater, FL 33760
Attention: President
With copy to:
Michael T. Cronin, Esq.
Johnson, Blakely, Pope, Bokor, Ruppel & Burns, P.A.
911 Chestnut Street
Clearwater, FL 33756
If to Holdings:
Innova Holdings LLC
16 E. 40th Street, 12th Floor
New York, NY 10016
With copy to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
Each party to this Agreement may from time to time change the address
to which notices are to be delivered or mailed by giving notice of such change
to the other party as provided herein.
6.8 SURVIVAL OF TERMS. All of the terms, conditions, warranties and
representations contained in this Agreement shall survive the execution hereof
and the Closing. This Agreement supersedes the Warrant Purchase Agreement which
shall be considered terminated upon the Closing.
9
<PAGE> 12
6.9 ENTIRE AGREEMENT. This Agreement represents the entire contract
between the parties hereto with respect to the subject matter hereof and may be
amended only by a writing executed by all of the parties hereto. This Agreement
supersedes all offers, proposals, statements, representations and agreements
with respect to the subject matter hereof, including but not limited to the
Warrant Purchase Agreement.
6.10 SEVERABILITY. The invalidity or unenforceability of any provision
of this Agreement shall in no way affect the validity or enforceability of any
other provision hereof.
6.11 HEADINGS. The headings to the sections of this Agreement are used
for reference only and are not to be construed as limiting or extending the
provisions hereof.
6.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which together shall be considered an original but all of
which shall constitute the agreement by and among the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INNOVA HOLDINGS, LLC
By: /s/ Joe ??????
------------------------
Title: Managing Member
--------------------
INNOVA/PURE WATER, INC.
By: /s/ Rose Smith
------------------------
Title: President & CEO
--------------------
10
<PAGE> 1
EXHIBIT 10(e)
EMPLOYMENT AGREEMENT WITH ROSE SMITH
<PAGE> 2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of June 30, 1997 ("Agreement"), is made by and
between INNOVA/PURE WATER, INC., a Florida corporation (the "Corporation"), and
ROSE C. SMITH ("the Executive").
WITNESSETH:
WHEREAS, the Corporation, desires to employ Rose C. Smith in accordance
with the terms and conditions of this Agreement and to ensure the availability
of her services to the Corporation; WHEREAS, Rose C. Smith desires to accept
such employment and render her services in accordance with the terms and
conditions contained in this Agreement;
WHEREAS, Rose C. Smith, (hereafter "Rose" or "Executive") and the
Corporation desire to enter into this agreement, which will fully recognize the
contributions of Rose and assure competent management of the Corporation's
affairs.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants set forth in this agreement, and intending to be legally bound, the
Corporation and Rose agree as follows:
1. Term of Employment
(a) Offer/Acceptance/Effective Date. The Corporation
hereby offers employment to the Executive and the
Executive hereby accepts employment subject to the
terms and conditions set forth under this agreement.
(b) Term. The term (the "Term") of this agreement shall
commence on June 30, 1997 and shall continue to serve
in that position, with duties and responsibilities
that are customary for such executives for a period
of five (5) years.
2. Duties.
(a) General Duties. The Executive shall serve as
President and Chief Executive Officer of the
Corporation and shall continue to serve in that
position, with duties and responsibilities that are
customary for such executives.
(b) Best Efforts. The Executive convents to use her best
efforts to perform her duties and discharge her
responsibilities pursuant to this Agreement in a
competent, careful and faithful manner.
(c) Devotion of Time. The Executive will devote
substantially all of her time, attention and energies
during normal business hours (exclusive of periods of
sickness and disability and of such normal holiday
and vacation periods as have been established by the
Corporation) to the Corporation's affairs.
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<PAGE> 3
3. Compensation and Expenses.
(a) Compensation. Compensation to Rose C. Smith will be
in a combination of salary and commission payments as
follows: $150,000 per year minimum salary, plus 2% of
Net Sales, adjusted by the annual gross margin
achieved.
The commission payment is based upon a minimum
annualized 32% gross margin to the corporation.
Should the margin fall below 32%, the commission rate
of 2% of Net Sales will be reduced by one-tenth of
one percent (0.1%) for each one percentage point (1)
under 32%. (Example at 31% annualized gross margin
the 2% commission would be reduced to 1.9%.)
However, should the gross margin exceed 44%, and
additional one-tenth of one percent (0.1%) will be
added to the 2% commission for each one percentage
point (1%) over a 44% annualized gross margin on all
sales over the first $ three million ($3,000,000).
The Executive may elect to take the commissions
earned quarterly, or to accrue as desired, including
to a December 31st or January 1st date. Annual
payment adjustments under the terms of this agreement
will be made as of June 30th, each year.
Commissions may also be deferred, as may be directed
by the executive, for a period up to five years. If
compensation is deferred for more than one year, at
the choice of the executive, interest would be earned
and accrue each year at prime rate.
(b) Expenses. In addition to any compensation received
pursuant to Section 3(a), the Corporation will
reimburse the Executive for all reasonable, ordinary
and necessary travel, educational, seminar, trade
shows, entertainment and miscellaneous expenses
incurred in connection with the performance of her
duties under this Agreement, provided that the
Executive properly accounts for such expenses to the
Corporation in accordance with the Corporation's
practices. In addition, a corporate telephone will be
installed in New York, and cellular service arranged
to permit ready access between parties.
4. Benefits.
(a) Vacation. For each fiscal year during the Term
during which the Executive is employed, the Executive
shall be entitled to vacation (which shall accrue and
vest, except as may be hereafter provided to the
contrary, on each June 30th thereof) in the amount of
thirty (30) work days.
The Executive shall take her vacation at such times
as the Executive may select and the affairs of the
Corporation may permit.
(b) Employee Benefit Programs. In addition to the
compensation to which the Executive is entitled
pursuant to the provisions of Section 3 hereof,
during the Term, the Executive will be entitled to
participate in any stock option plan, stock purchase
plan, pension or retirement plan, insurance or other
employee benefit plan that is maintained at that time
by the Corporation for its
2
<PAGE> 4
employees, Including programs of life, disability, basic
medical and dental, supplemental medical and dental insurance
should such policies be offered to the staff.
Notwithstanding the foregoing, the Corporation shall provide
the following benefits:
(i) Health insurance to the Executive and Executive's
immediate family, if such insurance is not otherwise
available.
(ii) Split dollar life insurance policy in the amount of
$500,000 payable to the Executive's beneficiary or
beneficiaries ("Life Insurance Policy"). The
Corporation shall make the premium payments on the
Life Insurance Policy through five (5) years after
the termination of the employment of the Executive.
At the termination of the company's responsibility
for payment of the premium, the employee may assume
the policy and responsibility for the continuing
payment of the policy premium.
Notwithstanding any provision of this Agreement to the
contrary, the Corporation shall not be obligated to provide
the Executive with any of the foregoing benefits contained in
this Section 4 (b) if the Executive, for whatever reason, is
or becomes uninsurable with respect to coverage relating to
any such benefit(s).
5. Termination
(a) Termination for Cause. The Corporation may terminate the
Executive's employment pursuant to this Agreement at any time
for cause upon written notice. Such termination will become
effective upon the giving of such notice. Upon any such
termination for cause, the Executive shall have no right to
compensation, or reimbursement under Section 3 or to
participate in any employee benefit programs or other
benefits to which she may be entitled under Section 4 for any
period subsequent to the effective date of termination. For
purposes of this Agreement, the term "cause" shall mean:
(i) the Executive's conviction for a felony charge;
(ii) the Executive's misappropriation of assets or otherwise
defrauding the Corporation or any of its
subsidiaries or affiliates;
(iii) material breach by the Executive of any provision of
this Agreement.
(b) Death or Disability. This agreement and the Corporation's
obligations hereunder will terminate upon the death or
disability of the Executive. For purposes of this Section
5(b), "disability" shall mean that for a period of six (6)
months in any twelve month period the Executive is incapable
of substantially fulfilling the duties set forth in this
agreement because of physical, mental or emotional incapacity
resulting from injury, sickness or disease as determined by an
independent physician mutually acceptable to the Corporation
and the Executive. Upon any such termination upon death or
disability, the Corporation will pay the Executive or her
legal representative, as the case
3
<PAGE> 5
may be, her commission (which may include any
accrued, but unused vacation time) at such time
pursuant to Section 3(a) through the date of such
termination of employment (or, if terminated as a
result of a disability, until the date upon which the
disability policy maintained pursuant to Section
4(b)(ii) begins payment of benefits) plus any other
compensation that may be due and unpaid.
(c) Voluntary Termination by Executive. Prior to the
termination of this Agreement, the Executive may, on
sixty (60) days prior written notice to the
Corporation, at any time terminate her employment.
Upon any such termination, the Corporation shall pay
the Executive the greater of either commissions
accrued through such date pursuant to Section 3(a)
(which shall include any vested and accrued, but
unused vacation time) or the expended (days worked)
percentage of her salary.
(d) Lump Sum Payment. Upon Termination Without Cause. The
Corporation may terminate Executive's employment
pursuant to this agreement, without cause upon thirty
(30) days written notice to Executive. Upon any such
termination, the Corporation shall Executive a lump
sum payment equal to the Executive's compensation set
for in Section 3 of this Agreement for the remainder
of the Term of Executive's employment as set forth in
Section 1(b) of this Agreement, in addition to any
other compensation that may be due and unpaid. Under
no circumstance shall such payment be less than
$250,000.
For the purpose of calculation, if involuntarily
terminated either the multiple of the annual salary
plus 2% of Net Sales, the total of which will not be
less than $250,000.
(a) Disability insurance will be provided for the
executive in the amount of $50,000 per year, which
shall remain in place for the length of
incapacitation, commencing six months following the
onset of the disability. A recognized disability
would be one supported by medical reports which would
show Rose to be unable to fulfill her duties as
Corporate President as a result of illness or
accident. During the first six months, normal
compensation shall be paid per this agreement.
6. Restrictive Covenants.
(a) Competition with the Corporation. The Executive
covenants and agrees that, during the Term of this
Agreement, and for a period of five (5) years after
the termination of this Agreement unless terminated
without cause, the Executive will not, without the
prior written consent of the Corporation, directly or
indirectly (whether as a sole proprietor, partner,
stockholder, director, officer, employee or in any
other capacity as principal or agent), compete with
the Corporation. Not withstanding this restriction,
Executive shall be entitled to Invest in stock of
other competing public companies so long as her
ownership is less than 5% of such company's
outstanding shares.
(b) Disclosure of Confidential Information. The Executive
acknowledges that during her employment, she will
gain and have access to confidential information
regarding the Corporation and its Alliance partners.
All records, files, materials and confidential
information (the "Trade Secrets") obtained by
4
<PAGE> 6
the Executive in the course of her employment with
the Corporation shall be hereby deemed confidential
and proprietary and shall remain the exclusive
property of the Corporation. The Executive will not,
except in connection with and as required by her
performance of her duties under this agreement, for
any reason use for her own benefit or the benefit of
any person or entity for any reason or purpose
whatsoever without the prior written consent of the
Board of Directors of the Corporation, unless such
information previously shall have become public
knowledge through no action by or omission of the
Executive.
(c) Subversion, Disruption or Interference. At no time
during the term hereof and for a period of five (5)
years beyond the termination of this agreement, shall
Executive, directly or indirectly, interfere, induce,
influence, combine or conspire with, or attempt to
induce or influence, combine or conspire with, any of
the employees or sponsors of, or consultants to, the
Corporation to terminate their relationship with or
compete or ally against the Corporation or any of its
subsidiaries or affiliates of the Corporation in the
business in which the Corporation or any one of its
subsidiaries or affiliates is presently engaged or in
which the Corporation or any one of its subsidiaries
or affiliates desires to engage in the future.
(d) Enforcement of Restrictions. The parties hereby agree
that any violation by Executive of the covenants
contained in Section 6 will cause irreparable damage
to the Corporation or any of its subsidiaries and
affiliates and may, as a matter of course, be
restrained by process issued out of a court of
competent jurisdiction, in addition to any other
remedies provided by law.
7. Chance of Control.
(a) For the purposes of this Agreement, a "Change of
Control" shall mean:
(i) The acquisition by an individual, entity, or
group (within the meaning of Section
13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended ("Exchange
Act") (a "Person") of beneficial ownership
(within the meaning of Rule 1 3(d)(3)
promulgated under the Exchange Act) of fifty
percent (50%) or more of either (i) the then
outstanding shares of common stock of the
Corporation, or (ii) the combined voting
power of the then outstanding voting
securities of the Corporation entitled to
vote generally in the election of directors,
which acquisition is effected without the
consent of at least a majority in interest
of the shareholders so the Corporation as of
the date hereof.
(ii) Any capitalization of the Corporation, which
carries with it a prerequisite that
Executive's responsibilities and authority
shall be substantially diminished, limited
or obviated. (b)The Corporation and
Executive hereby agree that, if Executive is
in the employ of the Corporation on the date
on which a Change of Control occurs (the
"Change of Control Date"), the Corporation
shall continue to employ the Executive and
the Executive will remain in the employ of
the Corporation for the period commencing on
the Change of Control Date and ending on the
expiration of the Term, to exercise such
authority and perform such executive
5
<PAGE> 7
duties as are commensurate with the authority being
exercised and duties being performed by the Executive
immediately prior to the Change of Control Date. If
after a Change Control, the Executive is requested,
and, in her sole and absolute discretion, consents to
change her principal business location, the
Corporation will reimburse the Executive for her
relocation expenses, including without limitation,
moving expenses, temporary living and travel expenses
for a time while arranging to move her residence to
the changed location, closing costs, if any,
associated with the sale of her existing residence
and the purchase of a replacement residence at the
changed location, plus an additional amount
represented a gross up of any state or federal taxes
payable by Executive as a result of any such
reimbursements. If the Executive shall not consent to
change her business location, the Executive may
continue to provide the services required of her
hereunder in Clearwater, Florida to New York, New
York and the Corporation shall continue to maintain
an office for the Executive at that location
commensurate with the Corporation's office prior to
the Change of Control Date.
(c) During the remaining Term after the Change of
Control, the Corporation will (i) continue to honor
the terms of this agreement, including as to
commissions and other compensation set forth in
Section 3 hereof, and (ii) continue employee benefits
as set forth in Section 4 hereof at levels in effect
on the Change of Control Date (but subject to such
reductions as may be required to maintain such plans
in compliance with applicable federal law regulating
employee benefits).
(d) If during the remaining Term on or after the Change
of Control Date (i) the Executive's employment is
terminated by the Corporation, or (ii) there shall
have occurred a material reduction in Executive's
compensation or employment related benefits, or a
material change in Executive's status, working
conditions or management responsibilities, or a
material change in the business objectives or
policies of the Corporation and the Executive
voluntarily terminates employment within sixty (60)
days of any such occurrence, or the last in a series
of occurrences, then the Executive shall be entitled
to receive, subject to the provisions of
subparagraphs (e) and (I) below, a lump sum payment
equal to 200% of Executive's current minimum annual
compensation (the "Lump Sum Payment") in addition to
any other compensation that may be due and owing to
the Executive under Section 3 hereof. The Lump Sum
payment shall be in addition to any stock options
that the Executive may have the right to exercise.
(e) The amounts payable to the Executive under any other
compensation agreement maintained by the Corporation
which became payable, after payment of the lump sum
provided for in paragraph (d), upon or as a result of
the exercise by Executive of rights which are
contingent on a Change of Control (and would be
considered a "parachute payment" under Internal
Revenue Code 280G and regulations thereunder), shall
be reduced to the extent necessary so that such
amounts when added to such lump sum, do not exceed
200% of the Executive's Salary (as computed in
accordance with provisions of the Internal Revenue
Code of 1986), as amended and any regulations
promulgated thereunder) for determining whether the
Executive has received an excess parachute payment.
Any such excess amount shall be deferred and paid in
the next tax year.
6
<PAGE> 8
(f) The Corporation will allow the Executive to
participate in all meetings and negotiations related
thereto.
Section 7 shall survive termination/expiration of this
Agreement.
7
<PAGE> 9
8. Assignability, The rights and obligations of the Corporation
under this agreement shall inure to the benefit and be binding
upon the successors and assigns of the Corporation, provided
that such successor or assign shall acquire all or
substantially all of the assets and business of the
Corporation. The Executive's rights and obligations hereunder
may not be assigned or alienated and any attempt to do so by
the Executive will be void and constitute a material breach
hereunder.
9. Severability. If any provision of this agreement is otherwise
deemed to be invalid or unenforceable or is prohibited by the
laws of the state or jurisdiction where it is to be performed,
this agreement shall be considered divisible as to such
provision and such provision shall be inoperative in such
state or jurisdiction and shall not be part of the
consideration moving from either of the parties to the other.
The remaining provisions of this agreement shall be valid and
binding and/or like effect as though such provision were not
included.
10. Notice. Notices given pursuant to the provisions of this
agreement shall be sent by certified mail, postage prepaid, or
by overnight courier, or telecopier to the following
addresses:
To Company: Chairman
Innova/Pure Water, Inc.
13160 56th Court Street, Suite 510
Clearwater, Florida 34620
With Copy to: Michael Cronin
Johnson Blakely, et.al.
Fax 813-441 6617
To Executive: Rose C. Smith
-------------------------------------
-------------------------------------
With Copy to:
-------------------------------------
-------------------------------------
-------------------------------------
Either party may, from time to time, designate any other address to
which any such notice to it or him shall be sent. Any such notice shall
be deemed to have been delivered upon the earlier of actual receipt or
four days after deposit in the mail, if by certified mail.
11. Miscellaneous.
(a) Governing Law. The waiver shall be governed by and
construed and enforced in accordance with the
internal, substantive laws of the State of Florida
without giving effect to the conflict of law rules
thereof.
(b) Waiver/Amendment. The waiver by any party of this
agreement of a breach of any provision hereof by any
other party shall not be construed as a waiver of any
subsequent breach by any parry No provision of this
agreement may
8
<PAGE> 10
be terminated, amended, supplemented, waived or
modified other than by an instrument in writing
signed by the party against whom the enforcement of
the termination, amendment, supplement, waiver or
modification is sought.
(c) Attorney's Fees. In the event any such action is
commenced, the prevailing party shall be entitled to
a reasonable attorney fee, costs and expenses.
(d) Entire Agreement. This agreement represents the
entire agreement between the parties.
(e) Counterparts. This Agreement may be executed in
counterparts, all of which shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the Corporation and the Executive have executed this
Agreement as of the day and year first above written.
WlTNESSES:
/s/ Elliot J. Smith
------------------------------ EXECUTIVE: /s/ Rose C. Smith
Print Name: ------------------------
----------------------- Rose C. Smith Dec 3 1997
------------------------------
Print Name:
-----------------------
WlTNESSES: CORPORATION:
Print Name: INNOVA PURE WATER, INC.
----------------------- a Florida Corporation
------------------------------ By: /s/ John J. Tohren, Jr.
Print Name: -------------------------------
-----------------------
Title: Chairman
---------------------------
[STATE OF
FLORIDA
SEAL]
/s/ Maureen P. Jamison
----------------------------------
MAUREEN P. JAMISON 12/5/97
My Comm Exp. 9/18/99
Bonded By Service In
No. CC496491
[x] Personally Known Other I. D.
Original
:smt
EmplAgr.RS
<PAGE> 1
EXHIBIT 10(f)
ROYALTY AGREEMENT WITH JOHN E. NOHREN, JR.
<PAGE> 2
ROYALTY AGREEMENT
THIS AGREEMENT, effective as of June 30, 1997 ("Agreement"), is made by and
between INNOVA/PURE WATER, INC., a Florida corporation (the "Corporation"), and
John E. Nohren, Jr. (the "Executive").
WITNESSETH:
WHEREAS, the Corporation, desires to obtain the exclusive rights to the
inventions of the Executive in accordance with the terms and conditions in this
Agreement and to ensure the availability of the Executive's services to the
Corporation;
WHEREAS, the Executive desires to accept such agreement providing his
patents and intellectual property rights and render his services to the
corporation in accordance with the terms and conditions contained in this
Agreement;
WHEREAS, the Executive and the Corporation desire to enter into this
Agreement, which will fully recognize the contributions of the Executive and
assure harmonious management of the Corporation's affairs.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
set forth in this Agreement, and intending to be legally bound, the Corporation
and the Executive agree as follows:
1. Term of Agreement
(a) Offer/Acceptance/Effective Date. The Corporation hereby offers
employment to the Executive and the Executive hereby accepts
employment subject to the terms and conditions set forth under
this Agreement, to be effective this 1st of July, 1997.
(b) Term. The term (the "Term") of this Agreement shall commence
on the date that this Agreement becomes effective, and shall
continue without interruption for a term of five (5) years.
2. Duties.
(a) General Duties. The Executive shall serve as Chairman of the
Corporation and shall continue to serve in that position, with
duties and responsibilities that are customary for such
executives.
(b) Best Efforts. The Executive convenance to use his best efforts
to perform his duties and discharge his responsibilities
pursuant to this Agreement in a competent, careful and
faithful manner.
<PAGE> 3
(c) Devotion of Time. The Executive will devote substantially all
of his time, attention and energies during normal business
hours (exclusive of periods of sickness and disability and of
such normal holiday and vacation periods as have been
established by the Corporation) to the Corporation's affairs.
3. Compensation and Expenses
(a) Compensation. Compensation to John E. Nohren, Jr., shall be
paid in the form of royalty payments for patents assigned to
the Corporation and upon which one or more corporate products
are based. These patents are described in the patent list
attached, and include current patents to be filed or which are
pending consisting of Low Density filtration products and
filters combined with valve caps commonly referred to as "sip
bottle filters" and such other patents as may be awarded in
the future and assigned or licensed to the Corporation.
Minimum royalties of $100,000 per year will be paid during the
term of employment. Royalty payments are not to exceed
$300,000 in any one year.
Royalty payments of 5% will be calculated on net sales of
products and incorporating one or more such patents.
The minimum payment will be made by month or quarter as may be
elected by the assignor/licenser.
Royalties due in excess of the stated minimum shall be paid
quarterly within thirty days of the end of each quarter.
Excess royalties may be paid in common stock or cash at the
discretion of the Corporation based upon the average per share
price over the last thirty day period, discounted by 25% if
restricted.
Upon termination, voluntary or otherwise, a 3% royalty shall
be paid over the residual life of the subject patents, as
shall be directed by the Licensor/Assignor.
(b) Minimum Royalty Adjustment. The minimum royalty may not be
decreased hereunder during the term of this Agreement, but may
be increased upon review by and within the sole discretion of
the Corporation's Board of Directors.
2
<PAGE> 4
(c) Bonus. Executive shall be entitled to receive bonus
compensation in an amount as approved by the Corporation's
Board of Directors based upon the performance criteria as may
be established by the Board of Directors from time to time.
Such bonuses may be paid in cash or issued in shares of the
Corporation's common stock on such terms as recommended and
approved by the Board of Directors.
(d) Expenses. In addition to any compensation received pursuant to
Section 3, the Corporation will reimburse the Executive for
all reasonable, ordinary and necessary travel, educational,
seminar, trade shows, entertainment and miscellaneous expenses
incurred in connection with the performance of his duties
under this Agreement, provided that the Executive properly
accounts for such expenses to the Corporation in accordance
with the Corporation's practices.
4. Benefits.
(a) Vacation. For each calendar year during the Term during which
the Executive is employed, the Executive shall be entitled to
vacation (which shall accrue and vest, except as may be
hereafter provided to the contrary, on each January 1st
thereof) in the amount of thirty (30) work days.
The Executive shall take his vacation at such times as the
Executive may select and the affairs of the Corporation may
permit.
(b) Employee Benefit Programs. In addition to the compensation to
which the Executive is entitled pursuant to the provisions of
Section 3 hereof, during the Term, the Executive will be
entitled to participate in any stock option plan, stock
purchase plan, pension or retirement plan, insurance or other
employee benefit plan that is maintained at that time by the
Corporation for its employees, including programs of life,
disability, basic medical and dental, supplemental medical and
dental insurance.
Notwithstanding the foregoing, the Corporation shall provide
the following benefits:
(i) Health insurance to the Executive and Executive's
immediate family.
(ii) Split dollar life insurance policy in the amount of
$1,000,000.00 payable to the Executive's beneficiary
or
3
<PAGE> 5
beneficiaries ("Life Insurance Policy"). The
Corporation shall make the premium payments on the
Life Insurance Policy through five (5) years) after
the termination of the employment of the Executive.
Notwithstanding any provision of this Agreement to the
contrary, the Corporation shall not be obligated to provide
the Executive with any of the foregoing benefits contained in
this Section 4 (b) if the Executive, for whatever reason, is
or becomes uninsurable with respect to coverage relating to
any such benefit(s).
(c) Automobile Allowance. The Corporations shall reimburse the
Executive for all automobile expenses incurred by Executive in
the performance of his duties on behalf of the Corporation. In
the event the Executive leases a new automobile for use in the
Executive's performance of his duties on behalf of the
Corporation, the Corporation shall reimburse the Executive the
monthly payments made by the Executive in connection with said
lease.
5. Termination.
(a) Termination for Cause. The Corporation may terminate the
Executive's services pursuant to this Agreement at any time
for cause upon written notice. Such termination will become
effective upon the giving of such notice. Upon any such
termination for cause, the Executive shall have no right to
compensation, bonus or reimbursement under Section 3 or to
participate in any employee benefit programs or other benefits
to which he may be entitled under Section 4 for any period
subsequent to the effective date of termination. For purposes
of this Agreement, the term "cause" shall mean:
(i) the Executive's conviction for a felony charge;
(ii) the Executive's misappropriation of assets or
otherwise defrauding the Corporation or any of its
subsidiaries or affiliates;
(iii) material breach by the Executive of any provision of
this Agreement.
(b) Death or Disability. This Agreement and the Corporation's
obligations hereunder will terminate upon the death or
disability of the Executive. For purposes of this Section
5(b), "disability" shall mean that for a period of six (6)
months in any twelve-month
4
<PAGE> 6
period the Executive is incapable of substantially fulfilling
the duties set forth in this Agreement because of physical,
mental or emotional incapacity resulting from injury, sickness
or disease as determined by an independent physical mutually
acceptable to the Corporation and the Executive. Upon any such
termination upon death or disability, the Corporation, will
pay the Executive or his legal representative, as the case may
be, his Royalty (which may include any accrued, but unused
vacation time) at such time pursuant to Section 3(a) through
the date of such termination of employment (or, if terminated
as a result of a disability, until the date upon which the
disability policy maintained pursuant to Section 4(b)(ii)
begins payment of benefits) plus any other compensation that
may be due and unpaid.
(c) Voluntary Termination by Executive. Prior to the termination
of this Agreement, the Executive may, on sixty (60) days prior
written notice to the Corporation, at any time terminate his
employment. Upon any such termination, the Corporation shall
pay the Executive his Base Salary at such time pursuant to
Section 3(a) through the date of such termination of
employment (which shall include any vested and accrued, but
unused vacation time).
(d) Lump Sum Payment Upon Termination Without Cause. The
Corporation may terminate Executive's employment pursuant to
this Agreement, without cause upon thirty (30) days written
notice to Executive. Upon any such termination, the
Corporation shall pay Executive a lump-sum payment equal to
the Executive's compensation set forth in Section 3 of this
Agreement for the remainder of the Term of Executive's
employment as set forth in Section 1(b) of this Agreement, in
addition to any other compensation that may be due and unpaid.
6. Restrictive Covenants.
(a) Competition with the Corporation. The Executive covenants and
agrees that, during the Term of this Agreement, and for a
period of five (5) years after the termination of this
Agreement unless terminated without cause, the Executive will
not, without the prior written consent of the Corporation,
directly or indirectly (whether as a sole proprietor, partner,
stockholder, director, officer, employee or in any other
capacity as principal or agent), compete with the Corporation.
Notwithstanding this restriction, Executive shall be entitled
to invest in stock of other competing public companies so long
as his ownership is less than 5% of such company's outstanding
shares.
5
<PAGE> 7
(b) Disclosure of Confidential Information. The Executive
acknowledges that during this agreement he will gain and have
access to confidential information regarding the Corporation.
All records, files, materials and confidential information
(the "Trade Secrets") obtained by the Executive in the course
of his employment with the Corporation shall be hereby deemed
confidential and proprietary and shall remain the exclusive
property of the Corporation. The Executive will not, except in
connection with and as required by his performance of his
duties under this Agreement, for any reason use for his own
benefit or the benefit of any person or entity with which he
may be associated, disclose any Trade Secrets to any person,
firm, corporation, association or other entity for any reason
or purpose whatsoever without the prior written consent of the
Board of Directors of the Corporation, unless such information
previously shall have become public knowledge through no
action by or omission of the Executive.
(c) Subversion, Disruption or Interference.s24 At no time during
the term hereof and for a period of five (5) years beyond the
termination of this Agreement, shall Executive, directly or
indirectly, interfere, induce, influence, combine or conspire
with, or attempt to induce, influence, combine or conspire
with, any of the employees or sponsors of, or consultants to,
the Corporation to terminate their relationship with or
compete or ally against the Corporation or any of its
subsidiaries or affiliates of the Corporation in the business
in which the Corporation or any one of its subsidiaries or
affiliates is presently engaged or in which the Corporation or
any one of its subsidiaries or affiliates desires to engage in
the future.
(d) Enforcement of Restrictions. The parties hereby agree that any
violation by Executive of the covenants contained in this
Section 6 will cause irreparable damage to the Corporation or
any of its subsidiaries and affiliates and may, as a matter of
course, be restrained by process issued out of a court of
competent jurisdiction, in addition to any other remedies
provided by law.
7. Change of Control.
(a) For the purposes of this Agreement, a "Change of Control shall
mean:
(i) the acquisition by any individual, entity, or group
(within the meaning of Section 13(d)(3) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended
("Exchange Act")(a
6
<PAGE> 8
"Person") of beneficial ownership (within the meaning
of Rule 13(d)(3) promulgated under the Exchange Act)
of fifty percent (50%) or more of either (I) the then
outstanding shares of common stock of the
Corporation, or (ii) the combined voting power of the
then outstanding voting securities of the Corporation
entitled to vote generally in the election of
directors, which acquisition is effected without the
consent of at least a majority in interest of the
shareholders so the Corporation as of the date
hereof.
(ii) any capitalization of the Corporation which carries
with it a prerequisite that Executive's
responsibilities and authority shall be substantially
diminished, limited or obviated.
(b) The Corporation and Executive hereby agree that, if Executive
is in the employ of the Corporation on the date on which a
Change of Control occurs (the "Change of Control Date:), the
Corporation will continue to employ the Executive and the
Executive will remain in the employ of the Corporation for the
period commencing on the Change of Control Date and ending on
the expiration of the Term, to exercise such authority and
perform such executive duties as are commensurate with the
authority being exercised and duties being performed by the
Executive immediately prior to the Change of Control Date. If
after a Change of Control, the Executive is requested, and, in
his sole and absolute discretion, consents to change his
principal business location, the Corporation will reimburse
the Executive for his relocation expenses, including without
limitation, moving expenses, temporary living and travel
expenses for a time while arranging to move his residence to
the changed location, closing costs, if any, associated with
the sale of his existing residence and the purchase of a
replacement residence at the changed location, plus an
additional amount representing a gross-up of any state or
federal taxes payable by Executive as a result of any such
reimbursements. If the Executive shall not consent to change
his business location, the Executive may continue to provide
the services required of him hereunder in Clearwater, Florida
and the Corporation shall continue to maintain an office for
the Executive at that location commensurate with the
Corporation's office prior to the Change of Control Date.
(c) During the remaining Term after the Change of Control, the
Corporation will (i) continue to honor the terms of this
Agreement, including as to Royalty and other compensation set
forth in Section 3 hereof, and (ii) continue employee benefits
as set forth in Section 4 hereof at levels in effect on the
Change of Control Date (but
7
<PAGE> 9
subject to such reductions as may be required to maintain such
plans in compliance with applicable federal law regulating
employee benefits).
(d) If during the remaining Term on or after the Change of Control
Date (i) the Executive's employment is terminated by the
Corporation, or (ii) there shall have occurred a material
reduction in Executive's compensation or employment related
benefits, or a material change in Executive's status, working
conditions or management responsibilities, or a material
change in the business objectives or policies of the
Corporation and the Executive voluntarily terminates
employment within sixty (60) days of any such occurrence, or
the last in a series of occurrences, then the Executive shall
be entitled to receive, subject to the provisions of
subparagraphs (e) and (f) below, a lump-sum payment equal to
200% of Executive's current Royalty (the "Lump-Sum Payment")
in addition to any other compensation that may be due and
owing to the Executive under Section 3 hereof. The Lump-Sum
Payment shall be in addition to any stock options that
Executive may exercise pursuant to Section hereof. Such
Lump-Sum Payment does not affect continuing royalties which
may come due.
(e) The amounts payable to the Executive under any other
compensation agreement maintained by the Corporation which
became payable, after payment of the lump-sum provided for in
paragraph (d), upon or as a result of the exercise by
Executive of rights which are contingent on a Change of
Control (and would be considered a "parachute payment" under
Internal Revenue Code 280G and regulations thereunder), shall
be reduced to the extent necessary so that such amounts when
added to such lump-sum, do not exceed 200% of the Executive's
Minimum Royalty (as computed in accordance with provisions of
the Internal Revenue Code of 1986, as amended and any
regulations promulgated thereunder) for determining whether
the Executive has received an excess parachute payment. Any
such excess amount shall be deferred and paid in the next tax
year.
(f) The Corporation will allow the Executive to participate in all
meetings and negotiations related thereto.
This Section 7 shall survive termination/expiration of this Agreement.
8. Assignability. The rights and obligations of the Corporation under
this Agreement shall inure to the benefit and be binding upon the
successors and assigns of the Corporation, provided that such
successor or assign
8
<PAGE> 10
shall acquire all or substantially all of the assets and business of
the Corporation. The Executive's rights and obligations hereunder may
not be assigned or alienated and any attempt to do so by the Executive
will be void and constitute a material breach hereunder.
9. Severability. If any provision of this Agreement is otherwise deemed
to be invalid or unenforceable or is prohibited by the laws of the
state or jurisdiction where it is to be performed, this Agreement
shall be considered divisible as to such provision and such
provision shall be inoperative in such state or jurisdiction and shall
not be part of the consideration moving from either of the parties to
the other. The remaining provisions of this Agreement shall be valid
and binding and/or like effect as though such provision were not
included.
10. Notice. Notices given pursuant to the provisions of this Agreement
shall be sent by certified mail, postage prepaid, or by overnight
courier, or telecopier to the following addresses:
To Company: Innova/Pure Water, Inc.
5170 126th Avenue North
Clearwater, Florida 34620
With copy to: -----------------------------------
-----------------------------------
-----------------------------------
To Executive: John E. Nohren, Jr.
-----------------------------------
-----------------------------------
With copy to: -----------------------------------
-----------------------------------
-----------------------------------
Either party may, from time to time, designate any other address to which
any such notice to it or him shall be sent. Any such notice shall be deemed
to have been delivered upon the earlier of actual receipt or four days
after deposit in the mail, if by certified mail.
11. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal,
substantive laws of the State of Florida without giving effect
to the conflict of laws rules thereof.
9
<PAGE> 11
(b) Waiver/Amendment. The waiver by any party of this Agreement of
a breach of any provision hereof by any other party shall not
be construed as a waiver of any subsequent breach by any
party. No provision of this Agreement may be terminated,
amended, supplemented, waived or modified other than by an
instrument in writing signed by the party against whom the
enforcement of the termination, amendment, supplement, waiver
or modification is sought.
(c) Attorney's Fees. In the event any such action is commenced,
the prevailing party shall be entitled to a reasonable
attorney fee, costs and expenses.
(d) Entire Agreement. This Agreement represents the entire
agreement between the parties with respect to the subject
matter of this Agreement.
(d) Counterparts. This Agreement may be executed in counterparts,
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Corporation and the Executive have executed this
Agreement as of the day and year first above written.
WITNESSES: EXECUTIVE:
- -------------------------------------- John E. Nohren, Jr.
Print Name:
---------------------------
- --------------------------------------
Print Name:
---------------------------
WITNESSES: CORPORATION:
INNOVA PURE WATER, INC.
a Florida corporation
Print Name: By:
--------------------------- -------------------------------
Title:
----------------------------
- --------------------------------------
Print Name:
---------------------------
10
<PAGE> 1
EXHIBIT 10(g)
LICENSE AGREEMENT WITH A.C. INTERNATIONAL
<PAGE> 2
Innova Pure Water, Inc. A.C. International
Clearwater, FL Santa Fe, CA
Innova Pure Water, Inc. represents and warrants that they are the sole owners of
US Patent #5,609,759, and other patents pending which include within the allowed
claims specific reference to the manner by which the A.C. International bottle
and cap accept and retain a water filtering device. Innova is willing to provide
a non-exclusive license to A.C. International to incorporate a filter
manufactured by others into their bottle and cap in return for specified royalty
payments under the general conditions and terms as are herein set forth.
1) An initial advance against first-year royalties, in the amount of $3,000,
will be paid upon the signing of this agreement.
2) One condition of maintaining this license will be for A.C. International
to make the minimum sales goals as set forth in the following schedule and remit
royalty income in accordance with the quarterly schedule agreed to. Annual
minimum sales are:
Year 1 250,000 units
Year 2 350,000 units
Year 3 500,000 units
Year 4 and after Subject to future negotiation
3) Royalty:
a) A Royalty payment equal to $0.30 per filter will be paid the
licenser on all sales through 500,000 units.
b) A Royalty payment equal to $0.275 per filter will be paid the
licenser on all sales from 500,001 through 1,000,000 units.
c) A Royalty payment equal to $0.25 per filter will be paid the
licenser on all sales over 1,000,001 units.
d) Royalties payable on O.E.M. sales to bicycle manufacturers may
be subject to adjustment at the sole discretion of Innova.
e) For the purpose of this agreement and royalty calculation,
shipments to third parties constitute sales, unless specifically
agreed to in written format by Innova.
4) The books and records of A. C. International related to the shipment of
the licensed product will be available upon due notice for inspection by any
recognized independent auditing firm. In the absence of such a confirmation,
sales and royalty information will be provided to Innova at A. C.
International's year-end by A. C. International's CPAs. Should a discrepancy be
found of 3%, or more, the cost of such audit will be born by A.C. International;
interest at 10% will be assessed and the amount due paid immediately. Should the
situation be recurring it will represent due cause for termination. In addition,
A. C. International will permit Porex, or such other filter manufacturer as may
in the future supply filters to A. C. International, to inform Innova of all
purchases.
5) Royalties due will be paid on all filter sales, as well as shipments to
third parties within 45 days of the end of each month within which royalties are
earned.
May 21, 19973
<PAGE> 3
Further, at any time the total value of royalties earned to Innova exceed
$25,000, A.C International is required to reduce the amount to, or below,
$20,000 within ten days by payment or 30-day irrevocable, assignable
Letter of Credit.
6) Should this agreement and license be terminated for any reason 1 20 days
will be provided to liquidate existing inventory; a royalty payment will be paid
to Innova on any filters remaining on hand as if shipped to a third party.
7) This specific non-exclusive license to AC. International will be for sales
to Bicycle manufacturers and bicycle specialty stores and to such other accounts
as Innova may provide written approval by way of fax transmission. Bicycle
buyers in retail chains carrying a bicycle inventory may also be sold. However,
should such sales interfere with the sales of Innova supplied products in such
chains, Innova reserves the right to rescind the license for sale into such
accounts. Under no condition are products licensed to A. C. International from
Innova to be sold into retail establishments for display and sale within
departments not carrying bicycles or bicycle accessories
8) Innova will not during the period of this agreement enter into another
license agreement with a competitive firm whose principle business is the sale
of products to the bicycle retailer. However, Innova has previously entered into
a supply agreement with Triumph which Innova is obligated to honor.
9) A. C. International is also granted a restrictive non-exclusive license to
sell under the subject Innova grant to the Premium and Incentive trade,
Advertising Specialty, and Souvenir market so long as the product does not
incorporate a child's design or three dimensional figural design and the
destination of the products has been approved by Innova.
10) A. C. International and the manufacturer are totally responsible for the
functionality of the filter, all claims made and will hold Innova harmless from
liability due to filter function, malfunction, or misrepresentation as a result
of Innova's license, patent number, or identification appearing upon the
package, and will add Innova to its product liability policy.
11) A. C. International will place the Innova brand, mark, and identification
upon the retail package as may be reasonably directed by Innova. Innova will
have the right to review package copy and withhold its identification or mark as
it may solely choose.
12) This agreement may be terminated upon 120 days notice if in Innova's sole
judgment its overall business would suffer should the license continue. Should
Innova choose to exercise such termination without other cause and A. C.
International has not met its minimum sales requirement for the year by this
date, Innova will reimburse A. C. International to a total of $10,000. No
reimbursement will be deemed due upon or subsequent to A. C. International
achieving its first year minimum sales requirement.
13) A. C. International gains no rights to any Innova trademark under this
agreement, except the right to use selected Innova marks with Innova's written
permission, as set forth in paragraph (9) above, and upon termination of this
agreement for any reason A. C. International will immediately cease use of all
Innova marks.
14) A. C. International and Innova Pure Water, Inc. are licensee and licenser
only, not joint venturers, nor having any other relationship, and neither can
legally bind the other, nor is either responsible for the negligent or
intentional acts of the other.
May 21, 19973
<PAGE> 4
15) Termination of this agreement for cause may occur as a result of default
and the failure to remedy the default within thirty days of notice faxed to the
business of the defaulting party. Just cause is deviation from the terms set
forth, failure to make payments in a timely manner, failure to meet annual sales
commitments excepting force.
Also, should A. C. International fail to control the distribution of the
licensed product to the specified trade and retail department
16) This agreement will be interpreted under the laws of the state of
Florida.
17) Any disagreements that may arise and cannot be resolved by the principals
will be submitted to binding arbitration by and under the rules of the American
Arbitration Association, the findings of which the parties to this agreement
agree to accept an abide by.
For Innova Pure Water, Inc A.C. International
Rose C. Smith
President
Date Date
MTC/ej/158829
<PAGE> 1
EXHIBIT 10(h)
SUPPLY AND DISTRIBUTION AGREEMENT WITH
BOWLINE FAMILY PRODUCTS, INC.
<PAGE> 2
[INNO LOGO]
SUPPLY AND DISTRIBUTION AGREEMENT
THIS SUPPLY AND DISTRIBUTION AGREEMENT ("Agreement") is entered into by and
between Bowline Family Products, Inc., having its principle place of business at
1564 Elmira, Aurora, CO 80010 ("Bowline") and Innova Pure Water, Inc., a Florida
corporation having its principle place of business at 13160 56th Court, Suite
510, Clearwater, Florida 33760 ("Innova")
WHEREAS, Innova has a proprietary line of existing water filtration products;
and WHEREAS. Bowline desires to utilize Innova's products;
NOW THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, the parties, intending to be legally bound hereto,
agree as follows:
1) Innova will supply to Bowline an a non-exclusive basis Innova's Model "A"
filter for sale only with Bowline's 1/2 litre, I litre arid 1 1/2 litre
28mm bottles in combination with tote bags, and provide a non-exclusive
license for the use of Innova's Model "A" filter only with Bowline's 1/2
litre, I litre and 1 1/2 litre 28mm bottles in combination with tote bags
This license is specifically for Bowline to offer the Innova filters with
Bowline's bottles in conjunction with bottle totes and not for sale in
bottles without visible offers for totes attached to bottle as seen in
Exhibits A & B except that Innova will provide Bowline with Model A filters
as replacement filters for Bowline Bottles which are offered for sale with
totes as seen in Exhibits A & B. Each product containing an Innova filter
is to be identified as a filter supplied by Innova Pure Water, Inc. Patent
#5,609,759.
This agreement excludes bottles incorporating 2 or 3 dimension figural
designs or bottle tops with figural designs.
Innova will supply their current Model "A" filter under the terms of this
agreement until such time as modified "A" filter is available. Bowline
shall pay for tool modifications for modified "A" filter.
2) The Model A filter has been tested to NSF International Standard 42, Class
II for treatment of 40 gallons of municipally supplied water.
3) Ninety days (90) days from signing of this agreement Bowline will supply
Innova with a rolling six month forecast updated on the first day of each
succeeding month and providing a specific 120 day, 90 day, and 30 day
forecast. Bowline shall place confirmed purchase orders based upon their
120 day forecast for shipment against 30 day release schedules approved by
Innova.
4) This agreement is for a term of three (3) years based upon Bowline
purchasing a minimum of 250,000 units in the first year, 500,000 units in
the second year, and 760,000 units in the third year. If purchase volume
minimums are reached per this agreement will automatically extend on a
yearly basis provided all other terms are met.
2
<PAGE> 3
Either party may cancel this agreement by providing the other party notice
within 120 days of the anniversary date.
5) This agreement is non-exclusive to allow Bowline to sell to retail
channels. Any other accounts or categories will require prior approval by
Innova in writing Bowline will not offer any of Bowline1s products which
utilize Innova filters to existing Innova customers unless agreed to in
writing by Innova. Should Bowline offer Innova products beyond the scope of
this agreement or introduce competitive products which interfere with the
sales of Innova supplied products. Innova reserves the right to cancel the
agreement in its entirety.
6) Bowline will represent the performance of Innova products only as approved
in writing by Innova. Bowline further agrees to hold Innova harmless and
indemnify Innova for any liability or damage suffered by Innova as a result
of misrepresentation or false information by Bowline or their sales
representatives. Bowline will add Innova to its product liability insurance
policy In the amount of $2,OOO.O0O and Innova will add Bowline to its
product liability insurance policy.
7) Bowline will include the Innova brand, mark, patent number and
identification with their retail package as may be reasonably directed by
Innova. Innova will have the right to review package copy and withhold its
identification or murk as it may solely choose. Bowline does not have
rights to any Innova trademark under this agreement, except the right to
use selected Innova marks with Innova's written permission, as set forth in
above. Upon termination of this agreement for any reason Bowline will
immediately cease use of all Innova marks.
8) Bowline will bring to Innova's attention any patent infringement of which
they become aware. Innova agrees to defend Bowline against any domestic
patent infringement claim that might arise through the incorporation of an
Innova supplied filtration product. However, Innova reserves the right to
determine the action to be taken.
9) The license under this agreement does not transfer any patent or
manufacturing rights other than to market the specified Innova products as
herein identified and sold in the manner described.
10) Nothing in this agreement shall be construed as creating a partnership or
joint venture between the parties, and neither can legally make commitments
to bind the other, nor is either responsible for the negligent or
intentional acts of the other.
11) Termination of this agreement for cause may occur as a result of default
and the failure to remedy the default within thirty days of notice sent to
the defaulting party. Just cause will be for:
a) Deviation from the terms set forth.
b) Failure to make payments in a timely manner.
e) Failure to meet annual sales commitments excepting force majeure.
d) Should Bowline fail to control the distribution of the licensed
product to the agreed specified trade and/or retail
establishments, and;
e) Should uncomplimentary information be transmitted from any
Bowline employee or sales representative, or should such
person(s) transmit any Innova proprietary Information to a third
party which may include information regarding Innova's pricing,
margins, products under development personnel Information, or
information relating to Innova customers, manufacturers, or
strategic alliance partners.
2
<PAGE> 4
12) Should this agreement and license be terminated for any reason, 120 days
will be provided for Bowline to liquidate existing inventory. Period may be
extended for additional 60 days provided Bowline still has existing
inventory and Bowline is liquidating through approved channels of
distribution at agreed upon price and terms. Such liquidation would be
limited to channels of distribution pursuant to this agreement unless
separately agreed to in writing by Innova. Innova will be provided the
opportunity to purchase such inventory on the same terms Bowline offers to
any third party which are accepted by said third party. In the event that
this agreement is terminated Innova will provide filters to fulfill any
existing outstanding orders that Bowline is committed to deliver.
13) Should Bowline fail to meet its minimum purchase obligations, there will be
no financial liability. except for trade accounts outstanding or materials
on order to satisfy Bowline's 120 day forecast that remains unabsorbed
within the following 120 day period.
14) This agreement will be interpreted under the laws of the state of Florida.
15) Any disagreements that may arise which cannot be resolved by the principles
will be submitted to binding arbitration by and under the rules of the
American Arbitration Association, the findings of which the parties to this
agreement agree to accept and abide by.
16) The following pricing is subject to change upon 120 days written notice.
However, Innova will honor all existing Bowline agreements/contracts and
all existing customer proposals that do not allow Bowline to increase their
price within the 120 day period/notice of Innova's price increase.
Model "A" Filter packed, F.O.B. Innova, Price
Modified "A" to be determined
Filter Payment Terms: Net 30
$1.40 bulk
For Innova Pure Water, Inc.
Rose Smith, President & CEO
Date:
For Bowline Family Products, Inc.
Date: 9/26/97
------------------
3
<PAGE> 1
EXHIBIT 10(i)
AGREEMENT WITH (n,p) ENERGY, INC.
<PAGE> 2
BASIC AGREEMENT
1. This is an agreement between (n,p) Energy, Inc. (NPE) of Albuquerque,
New Mexico, and Innova Pure Water, Inc. (IPW) of Clearwater, Florida,
for development of products and to safeguard proprietary information
which has been and will be transferred in the future between the two
parties. NPE and IPW will be responsible for the control and further
dissemination of the technology into their respective companies and to
such third parties as jointly agreed upon.
1.1. Unless otherwise provided by written consent, no information
will be transferred to a third party which has not entered
into a confidentiality agreement containing, as a minimum the
same terms in the attached Nondisclosure Agreement.
1.2. It is further agreed that the principals and/or officers who
signed the attached Nondisclosure Agreement may disseminate
the information within their companies on a need-to-know basis
following receipt of a signed copy of the attached
Nondisclosure Agreement by the second party to this agreement
from each individual receiving the information.
1.3. Unless otherwise agreed to, the information transmitted to
third parties will be in the form of application data and such
peripheral knowledge as may be required to generate confidence
in the product and/or technology to provide incentive to the
third party to fund development of marketable products
containing such technology, or to obtain financing as well as
to obtain the necessary agency or government approvals to
market products embracing the transferred technology.
2. Both parties agree that this document supersedes previous agreements
entered into between NPE and IPW.
3. IPW represents that it:
3.1. Has current patents, or patents pending, for technology
developed for water treatment for the purpose of human
consumption; and,
3.2. Will not, for the period during which collective effort is
being put forth, or products employing the transferred polymer
technology are in development and for a period of five years
thereafter, enter into any contractual relationship --
3.2.1. With the Los Alamos National Laboratory (LANL); or,
3.2.2. With any company with which NPE is currently
discussing a strategic alliance, option or agreement;
and,
<PAGE> 3
BASIC AGREEMENT
3.3. Will not directly contact, deal or communicate with an
individual or third party which has been introduced by NPE
(e.g., other strategic partners) or by associate companies of
NPE without written authorization from the President or
Chairman of the Board of NPE; and,
3.4. Shall make no attempt to circumvent the technology transferred
or to utilize the product or market knowledge brought to IPW
as a result of this agreement; and,
3.5. Will report immediately any attempts at circumvention, or
subversion of which IPW shall become aware, as well as any
license infringements to the transferred technology that may
take place.
4. NPE represents that it:
4.1. Has received, or will seek, the exclusive license for Polymer
FiltrationTM technology developed by LANL suitable for
treatment of water for human consumption at the in-feed, and
beyond, of industrial facilities, offices, municipal
buildings, and households as well as products for use by the
individual for the purpose of the removal of heavy metals
(e.g., lead, arsenic) and radioactive metals, which would
subsequently be sub-licensed to IPW under terms herein set
forth, and,
4.2. Will not for the period during which collective effort is
being put forth, or products employing the transferred
technology are in development, and for a period of five years
thereafter, enter into any contractual relationship with a
company:
4.2.1. In direct competition with IPW products in the area
of treatment of water for human consumption at the
in-feed, and beyond, of industrial facilities,
offices, municipal buildings, and households as well
as products for use by the individual for the purpose
of the removal of heavy metals (e.g., lead, arsenic)
and radioactive metals; or,
4.2.2. With whom IPW has a strategic alliance in the area of
treatment of water for human consumption at the
in-feed, and beyond, of industrial facilities,
offices, municipal buildings, and households as well
as products for use by the individual for the purpose
of the removal of heavy metals (e.g., lead, arsenic)
and radioactive metals; and,
4.3. Will not directly contact, deal or communicate with an
individual or third party which has been introduced by IPW
(e.g., IPW's other strategic partners); without written
authorization from the President or Chairman of the Board of
IPW; and,
<PAGE> 4
BASIC AGREEMENT
4.4. Shall make no attempt to circumvent the technology transferred
or to utilize the product or market knowledge brought to NPE
as a result of this agreement; and,
4.5. Will report immediately any attempts at circumvention, or
subversion of which NPE shall become aware, as well as any
patent infringements to the transferred technology that may
take place.
5. Both parties acknowledge that they will diligently pursue the testing,
development, production, and commercialization of products employing
the NPE/IPW technologies. As a minimum, agreements for product
development and commercialization will include:
5.1. NPE will issue a sub-license granting IPW rights to use
Polymer FiltrationTM technology specific to the following
field-of-use (FOU):
5.1.1. Treatment of water for human consumption at the
in-feed, and beyond, of industrial facilities,
offices, municipal buildings, and households as well
as products for use by the individual for the purpose
of the removal of heavy metals (e.g., lead, arsenic)
and radioactive metals.
5.1.2. The sub-license would be applicable to the following
countries:
5.1.2.1. United States,
5.1.2.2. Canada,
5.1.2.3. Elected countries within the European
Patent Organization (EPO), and,
5.1.2.4. Japan.
5.2. NPE will issue a license granting IPW rights to NPE know-how
for polymer technology specific to the FOU and applicable to
all countries other than the United States, Canada, EPO,
Japan, Mexico and Southeast Asia.
5.3. The products employing the subject technology may be used
within the defined FOU, either as initially conceived by the
patents licensed, with NPE know-how, or with a new patented
technology developed though the combining of technology
between NPE and IPW. If shared technology results in a new
patented technology, NPE and IPW both own rights to the
invention and both share in the revenues as delineated in
paragraph 11.1.
5.4. NPE will work in good faith with the University of California
(UC) to modify its current license to cover cost recover if
there is independent
<PAGE> 5
BASIC AGREEMENT
litigation in which UC does not participate in the prosecution
or defense of patent infringement against Polymer FiltrationTM
technology patents. The license between NPE and IPW will need
to incorporate any approved modifications. This includes:
5.4.1. Right to chose own attorney;
5.4.2. Profit sharing less reasonable costs for prosecuting
patent infringement
5.5. Based on results of discussions with UC on patent right
litigation, 50% of the reasonable costs of defense or
litigation for defending or prosecuting patent infringements
against Polymer FiltrationTM technology patents will be
credited from profit sharing due during the period of
litigation. In addition, 50 % of recovered damages will be
considered part of the total revenue stream for purposes of
profit sharing.
5.6. Should the patent for US Patent Application number 08/453,406
and US Patent Application number 08/454,451 be overturned, the
profit sharing payment will be re-negotiated.
5.7. Both NPE and IPW --
5.7.1. Retain their current protected positions for patents,
developments, applications and know-how developed in
conjunction with their respective current
technologies;
5.7.2. will have joint ownership of patentable new
inventions combining the NPE's patented polymer
technology and IPW's patented water filtration
technology; and,
5.7.3. will equally share patent costs for new patentable
inventions derived from combining NPE/IPW know-how
and technology. Either party may exercise the option
to not participate in the patent process and forego
their ownership rights for the specific invention.
5.8. NPE will make best efforts to provide IPW with polymer
information and performance information. IPW will make best
efforts to provide NPE with water treatment information and
performance information for its patented technology. Neither
party will provide indemnification to the other party for
losses resulting from any claims. Both parties agree to carry
product liability insurance.
5.9. Termination will automatically occur with the expiration of
the last relevant patent.
<PAGE> 6
BASIC AGREEMENT
5.10. Should the NPE license with UC be in jeopardy of termination for
through no fault of IPW, IPW may enter into direct negotiations with
UC to protect IPW's investment and interest.
5.11. NPE will notify UC of the sub-license agreement with IPW within 30
days after execution of the agreement.
5.12. As required, NPE will make the necessary disclosures to NSF and other
governmental agencies that may have a regulatory responsibility.
5.13. IPW will provide to NPE a business plan for the FOU which outlines:
5.13.1. Current strategic partners,
5.13.2. Authorized distribution including any geographic and/or
commercial exclusions,
5.13.3. Anticipated net sales: "net sales" defined as invoiced sales
or services less the following deductions where applicable:
a) sales returns; b) allowances; c) trade discounts; d)
sales and excise taxes; and, f) duties and tariffs from
integrated products for the first five years in the
following format:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Year Low Estimate (SM) Best Estimate (SM) High Estimate (SM)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1
- ----------------------------------------------------------------------------------------
2
- ----------------------------------------------------------------------------------------
3
- ----------------------------------------------------------------------------------------
4
- ----------------------------------------------------------------------------------------
5
- ----------------------------------------------------------------------------------------
</TABLE>
6. IPW will devote reasonable efforts to support capitalization of NPE
through assistance with business plans and introduction to investment
groups or individuals.
7. NPE has assignability option to associated NPE companies with written
approval from 19W. IPW has assignability option to associated IPW
companies with written approval from NPE.
8. The anticipated plan for development is:
8.1. Existing State of Technology
8.2. Phase 1 (estimated cost $80K, NPE)
8.2.1. Proof of principle for exit filter for the removal of
<PAGE> 7
BASIC AGREEMENT
8.2.1.1. Lead, and
8.2.1.2. Radioactive metals
8.3. Phase 2 (estimated cost $400K, NPE)
8.3.1. Development of useable product for IPW exit filter
8.3.1.1. Doesn't wash off (i.e., permanently
bound)
8.3.1.2. Shows enhanced performance over current
methodology
8.3.1.3. Performance comparisons, covalent bonding
or grafting technology, basic production
methodology
8.3.1.4. Cost effective
8.3.2. Apply to product form
8.3.2.1. Take an existing product format and dose
it to remove Pb at least 90% over 50
gallons or water.
8.3.2.2. Should include tool-up costs for pilot
scale operation.
8.4. Phase 3 (estimated cost $30K, NPE)
8.4.1. Testing
8.4.1.1. Performance Testing,
8.4.1.2. Market evaluation, and
8.4.1.3. NSF certification.
8.5. Tooling and Production
8.6. Launch Product
9. IPW will work with its strategic alliance partners to find NPE during
application development and product testing.
9.1. Direct Costs
9.2. Burdened labor rates
<PAGE> 8
BASIC AGREEMENT
10. NPE will provide polymer
10.1. Direct costs plus a
10.2. 6.67% fee.
11. Profit sharing and fees:
11.1. Profit sharing is defined as:
11.1.1. For products in the IPW/NPE markets (e.g., removal of
radioactive impurities in the Ukraine), NPE and IPW
equally share the profits.
11.1.2. For products in the IPW /Strategic Alliance
partnership markets (e.g., Rubbermaid), NPE will
receive 1.5 % of net sales with NPE incorporated
polymers.
11.1.3. For products in the IPW markets (e.g., WaterWay), NPE
will receive 3 % of total revenue of net sales with
NPE incorporated polymers.
11.2. At delivery of proof of principal results outlined in Phase
IPW will pay a $5,000 portion of the sub-licensee fee to NPE
with a balance due of $20,000 upon commitment to proceed by a
strategic alliance partner or within six months after delivery
of proof-of-principle.
11.3. In calendar year 1999, IPW will guarantee a minimum profit
share of $150,000 payable on revenue received within 30 days
of the end of each quarter or give up the exclusive rights,
thereto.
11.4. In calendar year 2000 and thereafter, IPW will guarantee a
minimum profit share of $300,000, payable on revenue received
within 30 days of the end of each quarter, or give up the
exclusive rights thereto.
12. The costs and income of both parties may be inspected on the books of
another by an independent auditor acceptable to both parties relevant
to this agreement.
13. The sub-license will include mandatory pass-down clauses from the
NPE/UC license agreements.
14. This Letter of Intent constitutes and represents the full and complete
understanding between the parties.
<PAGE> 9
BASIC AGREEMENT
15. This agreement will be governed under the Laws of the State of Florida.
Attachment:
Nondisclosure Agreement
- ----------------------------- ------------------------------
John K. Nohren, Jr. Patricia Robinson
Chairman President
Innova Pure Water, Inc. (n,p) Energy, Inc.
<PAGE> 1
EXHIBIT 10(j)
PRUCHASE AND SUPPLY AGREEMENT WITH
THE ROSE GROUP CORP.
<PAGE> 2
INNOVA PURE WATER, INC.
L3L60 56TH COURT SUITE 510
CLEARWATER FL 34620
Agreement
between
Innova Pure WATER, INC. The Rose Group Corp.
Clearwater FL New York, New York
The above named parties have agreed to enter into the following Purchase &
Supply agreement On this date, January 22, 1997. Both parties recognize that the
products called for are either in development, or to be developed by Innova for
purchase and sale by The Rose Group Corporation. As a component of this
relationship:
1) Innova will provide an exclusive know-how and patent license, and supply to
The Rose Group Corporation (The Rose Group) filters and water filtration
products to market for use by expectant mothers, new born infants, and babies.
Such products are designed only for the treatment of biologically safe
municipally supplied water. The products to be sold and their suitability for
the intended use will be the final responsibility of The Rose Group. The Rose
Group will assess that the Innova products meet such criteria as either they, or
cognoscenti regulating authorities may impose for the intended use.
Innova warrants the use of the filter supplied as meeting NSF Standard 42, Class
2, for the removal of Chlorine, Tastes, and Odors. Innova further warrants that
the filters may be boiled for bacteria sterilization purposes for a period of
one month after initial use without degrading the functional capability of the
filter. Innova further warrants that the filter was tested using a mechanical
breast pump to simulate the use of the product. With the breast pump the filter
flowed at a rate of 3 ml/sec. or better.
In addition Innova agrees to protect The Rose Group in case of patent litigation
from claims of infringement. Innova will also take what it deems adequate
measures to protect Innova's patent position. Should Innova fail to prosecute an
infringement action for any reason, The Rose Group may take on the litigation
and retain the proceeds.
2) The type of product which The Rose Group will incorporate Innova Water Filter
products into, and for which The Rose Group is provided a license to use Innova
supplied filters or products for sale, will all be identified with a brand name
suitable to Innova; and are defined as:
A) A baby bottle with filter which shall be designed to satisfy the newborn
and infant markets.
B) A Sippy Cup designed to satisfy the toddler market.
1 Version 1/22
<PAGE> 3
3) The initial agreement will be for a period of two years, based upon a
commitment by The Rose Group to purchase a minimum of 250,000 units in the first
year and 500,000 units in the second year. If both parties meet their
commitments the agreement will automatically extend each year. in the third
year, if extended, minimum sales are to be a minimum of $750,000 However, either
party may cancel by providing the other party with notice of its intention
within 120 days of the anniversary date.
Should The Rose Group fail to make its financial commitment there will be no
financial liability except for trade accounts outstanding with Innova and
materials ordered to meet The Rose Group's requirements, which had been approved
by The Rose Group.
4) Should Termination occur, The Rose Group will be provided the opportunity to
liquidate existing inventory of record within a six month period. Innova will be
provided the opportunity to purchase or place such inventory on terms no less
favorable than The Rose Group shall offer to any third party.
5) Similarly, The Rose Group will accept and pay for any outstanding orders
being produced by Innova against prior orders.
6) During the term of this agreement neither The Rose Group, nor any associated
company will independently enter the water treatment / filtration products
market using products other than acquired from Innova. The named companies will
purchase their water filtration product requirements through Innova.
7) For a period of five (5) years The Rose Group and Innova relative to
intellectual property. designs, and market data will not transmit such
information to any third party without prior formal authorization. Should this
agreement terminate for any reason, both parties agree that they will not use
the designs, know-how, or intellectual property of the other without formal
authorization within the specified period.
8) Both parties agree to protect each other's intellectual property and
recognize the proprietorship of each company's design and property. To the
degree practical such transfer of intellectual property, designs and ideas will
be by, or confirmed by letter or dated hard copy.
9) Any of The Rose Group products which incorporate an Innova Filter will have
in distinct lettering a reference to the Innova filter and Innova Corporate
name, or Innova Logo as shall be mutually agreed.
10) It will be the responsibility of The Rose Group to assess and determine that
the Innova products are suited to the purpose being applied and will hold Innova
harmless for the use of the Innova component of the product. Further it is
anticipated that no claims for performance will be made that have not been
reviewed and approved by Innova. Further, Innova will provide all reasonable
assistance requested related to claims and instructions that are supplied with
or on the packaging or product. It will remain, however, the responsibility of
The Rose Group to obtain independent third party testing, where deemed
appropriate relative to the infant, baby, and toddler market.
11) The Rose Group will bring to Innova's attention any patent infringement of
which they become aware. Innova agrees to defend The Rose Group against any
domestic patent infringement claim that might arise through the incorporation of
an Innova supplied filtration product.
<PAGE> 4
12) Termination of this agreement and Licenses for Cause may occur as a result
of default and the failure to remedy within thirty days of notice faxed to the
business of the defaulting party. Just cause is deviation from the terms set
forth, failure to make payments in a timely manner, failure to meet annual sales
commitments, failure to make deliveries on schedule that are within the control
at the parties, excepting force majeure. In addition products we to function and
perform within specifications and the quality `s to be maintained equal to
samples which will be provided for this purpose.
13) This agreement will be interpreted under the laws of the state of Florida.
14) Any disagreements that may arise and cannot be resolved by the principals
will be submitted to binding arbitration by and under the rules of the American
Arbitration Association, the findings of which the parties to this agreement
agree to accept and abide by.
15) Innova will furnish the following, per current pricing which is subject to
change
a) The Source or "D" (13/16" 0) Filter" with integral flange and
adapter flange. based upon 100,000 units.....$1 .30 bulk
packed and shipped in an over box. Pricing will be Innova's
best OEM price available at the time.
b) A Sippy Cup containing water filtration
technology.......Pricing TBD
The cost of the mold modification, which has been received and placed on order
$4600. the subject mold is an eight cavity mold producing four of each of the
two flanges per cycle. As is our policy for custom molds to be used in
conjunction with Innova components, the physical mold you are purchasing will
remain Innova property.
Prices may change to reflect changes in manufacturing costs; however, such
changes will not occur without 90 days prior notice.
16) Terms: Until proper credit is established: 50% upon order and balance within
20 days after shipment
For Pure W
S --
/s/
President
Date
2
<PAGE> 1
EXHIBIT 10(k)
REAL ESTATE LEASE WITH CARR RUBIN ASSOCIATES
<PAGE> 2
RUBIN CENTER - ULMERTON
LEASE
This lease ("Lease") is made this 21st day of January, 1998, by and between
CARR RUBIN ASSOCIATES, ("Landlord"), whose address is 15201 Roosevelt
Boulevard, Suite 112, Clearwater, Florida 33760, and INNOVA PURE WATER, INC., A
FLORIDA CORPORATION, ("Tenant"), whose address is 13160-56th Court, SUITE 510,
CLEARWATER, FLORIDA 33760.
1. TERM: Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the following property ("Premises"): APPROXIMATELY 20,789 SQUARE FEET
COMPRISED OF 5,214 SQUARE FEET OF AIR CONDITIONED OFFICE SPACE AND 15,575
SQUARE FEET OF NON-AIR CONDITIONED WAREHOUSE SPACE LOCATED AT 13130-56TH COURT,
SUITES 601, 602, 603, 604, 605, 607, 608, AND THE FRONT OFFICE PORTION ONLY OF
609 AND 610, CLEARWATER, FLORIDA 33760 for a term ("Term") of five (5) years,
commencing on the 1st day of April, 1998, ("Commencement Date") and ending on
the 31st of March, 2003 ("Expiration Date").
2. RENT: Tenant agrees to pay to Landlord without demand, deduction or offset,
together with all sales and use taxes levied upon the use and occupancy of the
Premises, at the address of Landlord hereinabove set forth or at such other
place as Landlord may in writing designate, an initial annual rent ("Rent") of
$SEE ADDENDUM TO LEASE #1, plus applicable sales tax, payable in equal monthly
installments of $SEE ADDENDUM TO LEASE #1, plus applicable sales tax. Tenant
shall pay the first monthly installment of Rent (and any pro-rated amounts) on
the 1st day of April 1998. All Rent is payable in advance, on the first day of
each month and without demand, deduction or offset. If any monthly payment of
Rent is not received by Landlord within seven (7) days from the ate it is due, a
"late charge" of six percent (6%) of each such payment shall be due Landlord as
"Additional Rent" and to compensate Landlord administratively for its having to
receive and handle monies untimely paid.
3. USE: Tenant shall use and occupy the Premises only for ADMINISTRATIVE,
MANUFACTURING, LABORATORY AND WAREHOUSE STORAGE incidental to the normal
customary conduct of its current business operation and for absolutely no other
purpose. No use considered hazardous by Landlord's insurer shall be permitted.
4. DELAY: If Landlord is unable to deliver possession of the Premises on the
anticipated date of the commencement of the term (see Paragraph 1), because the
occupant refuses to give up possession, or for any other reason whatsoever,
Landlord shall not be liable for failure to deliver possession on said date,
but the Rent payable shall be abated until Landlord tenders possession to
Tenant. The Expiration Date of the Lease shall not be extended as a result
thereof. Tenant may remain in existing premises until new premises are turned
over to them. Such delay not to exceed 45 days.
5. SECURITY DEPOSIT: Tenant has delivered to Landlord the sum of $SEE
ADDENDUM TO LEASE #1 as a security deposit for the full and faithful
performance by Tenant of the terms hereof, such security deposit to be returned,
less any sums required to enforce the terms of this Lease, to Tenant after the
Expiration Date and after Tenant has vacated the Premises and upon the full and
timely performance by Tenant of the provisions of the Lease on its part to be
performed. Tenant may not under any circumstances use the security deposit as
Rent. Landlord shall have the right to apply any part of the security deposit to
cure any non-performance by Tenant and if Landlord does so, Tenant shall upon
demand deposit with Landlord the amount so applied, in order to restore the
deposit to its original amount. The Real Estate Broker(s) involved in this
Lease transaction shall not be in receipt of the security deposit and shall not
be responsible for the care, deposit or return of same.
6. UTILITIES AND SERVICE AND TAXES: Landlord will only pay for normal water
consumption, and sewer charges for washroom facilities. Tenant shall pay for
all other utilities, including, but not limited to, all other water and sewer
charges (as Additional Rent) and electricity. Landlord shall not be liable for
damages to Tenant's business and/or inventory or for any other claim by or
through Tenant resulting from an interruption in utility services. Landlord
will pay all real property taxes and assessments.
7. ASSIGNMENT/SUBLEASE: Neither Tenant nor Tenant's legal representatives or
successors in interest, by operation of law or otherwise, may or shall assign
this Lease, or sublet or permit all or any part of the Premises to be used by
others, without the prior written consent of Landlord in each instance. Landlord
agrees that it will not unreasonably withhold or delay its consent to such a
subletting or such an assignment. Despite any such assignment or subletting,
Tenant shall continue to remain completely liable for the performance of all of
the obligations of Tenant under this Lease. Landlord, at its option, may
prescribe the substance and form of such assignment or sublease documents.
In the event of the transfer and assignment by Landlord of its interest in this
Lease and/or sale of the building containing the Premises, either of which it
may do at its sole option, Landlord shall thereby be released from any further
obligations hereunder, and Tenant agrees to look solely to Landlord's successor
in interest for performance of such obligations.
8. DEFAULT: Tenant will become in default of the Lease: (a) if Rent or
Additional Rent (which term as used heretofore and hereinafter shall mean all
monies not designated as "Rent" in the Lease but which are nevertheless payable
by Tenant to Landlord under the terms and provisions of the Lease) is not paid
within three (3) days after written notice from Landlord; or (b) if Tenant
shall have failed to cure a default in the performance of any obligation of
Tenant under the Lease (except the payment of Rent and Additional Rent) within
ten (10) days after written notice thereof from Landlord; or if a petition in
bankruptcy shall be filed by Tenant or if Tenant shall make a general
assignment for the benefit for creditors; or (d) if a petition in bankruptcy
shall be filed against Tenant and such proceeding is not vacated within thirty
(30) days; or (e) if the Premises are used for some purpose other than the
authorized use; or (f) if the Lease is in any way mortgaged or encumbered; or
1
<PAGE> 3
In the event of one or more of the foregoing happenings, Landlord may exercise
any one or more of the remedies or rights available to it under law or in
equity, to include the right to accelerate and declare the entire remaining
unpaid Rent and Additional Rent for the balance of the Lease term to be
immediately due and payable forthwith.
No re-entry or retaking possession of the Premises by Landlord shall be
construed as an election on its part to terminate the Lease, unless a written
notice of such election is given to Tenant, nor shall pursuit of any remedy
herein provided constitute a forfeiture or waiver or any Rent, Additional Rent
or other monies due to Landlord hereunder or any damages accruing to Landlord by
reason of the violations of any of the terms, provisions and covenants herein
contained. Forbearance by Landlord to enforce one or more of the remedies herein
provided upon an event of default shall not be deemed or construed to constitute
a waiver of that or any other violation or default. Legal actions to recover for
loss or damage that Landlord may suffer by reason of termination of this Lease
or the deficiency from any reletting as provided for above shall include the
expense of repossession or reletting and any repairs or remodeling undertaken by
Landlord following repossession.
THE PARTIES AGREE THAT ANY CONTROVERSY OR CLAIM RELATING TO THIS CONTRACT,
INCLUDING THE CONSTRUCTION OR APPLICATION OF THIS CONTRACT, WILL BE SETTLED BY
BINDING ARBITRATION UNDER THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION,
AND ANY JUDGMENT GRANTED BY THE ARBITRATOR(S) MAY BE ENFORCED IN ANY COURT OF
PROPER JURISDICTION.
9. CURE BY LANDLORD: If Tenant shall default in performing any obligation or
condition of this Lease, Landlord may perform the same for the account of the
Tenant, and Tenant shall reimburse Landlord for any expense incurred therefor.
10. REPAIRS, ALTERATIONS AND ADDITIONS: Except as otherwise conditioned herein
and in ADDENDUM to Lease of even date herewith (if any), Tenant accepts the
Premises in "as is" condition and Tenant shall take good care of and maintain in
a good condition the Premises and the fixtures, equipment and furnishings
therein, and at Tenant's sole cost shall make all repairs necessary to keep them
in good working order and condition. It is Tenant's sole responsibility to
maintain, repair and replace, whether interior or exterior, all glass and doors
in or on the Premises. The heating and air conditioning system shall be under
the control of Tenant and Tenant agrees that all operation, upkeep, repairs will
be at Tenant's expense, except where the repairs or replacements are covered
under a warranty running in favor of Landlord, or are due to fire or other
casualty covered by Landlord's insurance in which latter event, said repairs or
replacements shall be done at its expense. ALL EQUIPMENT DEEMED BY A LICENSED
CONTRACTOR TO BE NON-REPAIRABLE DUE TO AGE OF THE EQUIPMENT SHALL BE REPLACED AT
THE LANDLORD'S EXPENSE. LANDLORD WARRANTIES THAT ALL EQUIPMENT, FIXTURES AND
FURNISHINGS ARE IN GOOD WORKING ORDER AT THE TIME OF THE COMMENCEMENT OF THIS
LEASE. During the term of this Lease and any extension thereof, Tenant shall
enter into and maintain a service agreement with a licensed air conditioning
contractor, providing routine maintenance to the air conditioning equipment. A
copy of this maintenance agreement shall be provided to Landlord within thirty
(30) days after the commencement of the term of this Lease. Landlord shall make,
but Tenant shall reimburse Landlord therefor, repairs necessitated by the fault
or negligence of Tenant, or that of Tenant's agents, employees, contractors,
consultants or invitees. Tenant shall not make any alterations, additions or
improvements to the Premises without the prior written consent of the Landlord.
LANDLORD SHALL WARRANT THAT ANY CHANGES WITHIN THE PREMISES THAT ARE CURRENTLY
NOT TO CODE SHALL BE THE RESPONSIBILITY OF THE LANDLORD.
11. MECHANIC LIENS: Tenant agrees that Tenant will pay or cause to be paid all
costs for work done by Tenant or caused to be done by Tenant on the Premises of
a character which could, but for the prohibitions hereinafter contained, result
in liens on Landlord's interest therein, and Tenant will keep the Premises free
and clear of all mechanic's liens and other liens and account of work done for
Tenant or persons claiming under Tenant. Tenant agrees to and shall indemnify
and save Landlord free and harmless against liability, loss, damage, costs or
expenses, including attorney's fees and costs of discovery and suit, on account
of claims of liens of laborers or materialmen or others for work performed for,
or materials or supplies furnished to, Tenant or persons claiming under Tenant.
THE INTEREST OF THE Landlord SHALL NOT, UNDER ANY CIRCUMSTANCES, BE SUBJECT TO
LIENS FOR IMPROVEMENTS MADE BY THE Tenant.
A notice concerning this provision of this Lease has been executed by Landlord
and has been recorded with the Clerk of the Court of Pinellas County. This
Notice reads as follows:
2
<PAGE> 4
NOTICE REGARDING MECHANIC LIENS
Notice is hereby given of certain Lease provisions contained in the Lease
between CARR RUBIN ASSOCIATES, as Landlord, and the Tenant of the Premises on
property hereinafter described. This notice is given pursuant to 713.10,
Florida Statutes, (1989). CARR RUBIN ASSOCIATES, as Landlord, hereby gives
notice as follows:
1. The name of the Landlord is CARR RUBIN ASSOCIATES.
2. The legal description of the parcel of land to which this notice
applies is described in Exhibit "A" attached hereto and by this
reference made a part hereof.
3. MECHANIC'S LIEN. Tenant agrees that Tenant will pay or cause to be
paid all costs for work done by Tenant or caused to be done by Tenant
on the Premises of a character which could, but for the prohibitions
hereinafter contained, result in liens on Landlord's interest therein,
and Tenant will keep the Premises free and clear of all mechanic's
liens and other liens on account of work done for Tenant or persons
claiming under Tenant. Tenant agrees to and shall indemnify and save
Landlord free and harmless against liability, loss, damage, costs or
expenses, including attorney's fees and costs of discovery and suit,
on account of claims of liens of laborers or materialmen or others for
work performed for, or materials or supplies furnished to, Tenant or
persons claiming under Tenant.
THE INTEREST OF THE Landlord SHALL NOT, UNDER ANY CIRCUMSTANCES, BE
SUBJECT TO LIENS FOR IMPROVEMENTS MADE BY THE Tenant.
4. All leases entered into for space in the premises on the parcel of
land described in Exhibit "A" attached hereto contain the language
identified in Paragraph 3 above.
LANDLORD: CARR RUBIN ASSOCIATES
----------------------------------
Leslie A. Rubin, General Partner
STATE OF FLORIDA
COUNTY OF PINELLAS:
The foregoing instrument was acknowledged before me by
________________
this day of ,19
________ ________________ ____.
--------------------------------
Notary Public
My Commission Expires:
Tenant agrees that the Public Notice contained above which has been recorded in
the public records of the county where the leased Premises are located, may be
effectively discharged, released, and removed from said public records by
Landlord alone executing and recording in the public records a notice that the
leased Premises are discharged and released from the terms of this paragraph,
as well as all other provisions of this Lease.
12. SIGNS AND ADVERTISING AND PERMITS: Any signs will be at Tenant's sole
expense and will precisely conform to specifications and locations prescribed
and approved by Landlord according to the Sign Standard Agreement attached
hereto. No other signs or advertising shall be placed on the Premises or in
windows by Tenant. All required licenses and permits pertaining to Tenant's
use and occupancy of the Premises shall be obtained at Tenant's sole expense.
13. HAZARDOUS MATERIALS: Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any biologically
or chemically active or other hazardous substances, or materials. Tenant shall
not allow the storage, use or disposal of such substances or materials in any
manner not sanctioned by law or by the highest standards prevailing in the
industry for the storage, use or disposal of such substances or materials, nor
allow to be brought into the Premises or on to its grounds any such materials or
substances except to use in the ordinary course of Tenant's business, and then
only after both written notice is given to Landlord of the identity of such
substances or materials and such use is registered with, as may be required by,
the appropriate governmental agencies. Without limitation, hazardous substances
and materials shall include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Section 6901 et seq., any applicable state or local laws and regulations adopted
under these acts. If any lender or governmental agency shall ever require
testing to ascertain whether or not there has been any release of hazardous
materials, then the reasonable costs thereof shall be reimbursed by Tenant to
Landlord upon demand as additional charges if such requirement applies to the
Premises. In addition, Tenant shall execute affidavits, representations and the
like from time to time at Landlord's request concerning Tenant's best knowledge
and belief regarding the presence of hazardous substances or materials on the
Premises. Landlord shall have the right to periodically, or upon expiration or
earlier termination of this Lease, to undertake an environmental audit of the
Premises to determine Tenant's compliance with this paragraph. Tenant shall
promptly comply with all requirements of such audit and cure all matters raised
therein at Tenant's sole cost. In all events, Tenant shall indemnify Landlord
in the manner elsewhere provided in this Lease for all damages associated with
the existence, storage, use, release or disposal of hazardous materials in the
Premises occurring while Tenant is in possession, or elsewhere if caused by
Tenant
3
<PAGE> 5
or persons acting under Tenant. The covenants within shall survive the
expiration or earlier termination of the Lease Term.
14. NOTIFICATION: As required by F.S. 404.056(8), Landlord notified
Tenant as follows:
"RADON GAS - Radon is a naturally occurring radioactive gas that, when it has
accumulated in a building in sufficient quantities, may present health risks to
persons who are exposed to it over time. Levels of radon that exceed Federal
and State Guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
health unit.
15. REQUIREMENTS OF LAW: Tenant at its expense shall observe and comply
with all present and future (a) laws, rules, codes, orders, regulations, etc.,
of any governmental authority having jurisdiction with respect to the Premises
or the use or occupancy thereof; (b) requirements of the Board of Fire
Underwriters, or any other similar body affecting the Premises; and Rules and
Regulations promulgated from time to time by Landlord. Tenant shall not use
the Premises in a manner which will increase the rate of fire insurance of
Landlord over that in effect prior to the Lease.
16. SUBORDINATION: This Lease is subject and subordinate in all respects
to all matters of record and all mortgages, any of which may now or hereafter
be placed on or affect such Leases and/or real property of which the Premises
are a part, or any part of such real property, and/or Landlord's interest or
estate therein, and to each advance made and/or hereafter to be made under
such mortgages, and to all renewals, modifications, consolidations,
replacements and extensions thereof and all substitutions therefore. This
paragraph shall be self-operative and no further instrument of subordination
shall be required. In confirmation of such subordination, Tenant shall execute
and deliver promptly any estoppel agreement or certificate that Landlord and/or
any mortgagee and/or their respective successors in interest may request.
17. DAMAGE AND DESTRUCTION: If the Premises are damaged or destroyed so
that the Premises are rendered wholly untenantable, the Rent shall be
proportionally paid up to the time of the casualty and thenceforth shall cease
until the date when the Premises have been repaired or restored by Landlord. If
the Premises shall be partially damaged or partially destroyed, the damages
shall be repaired by and at the expense of the Landlord and the Rent, until such
repairs are made, shall be apportioned according to the part of the Premises
which are usable by Tenant. Landlord shall not be liable for any inconvenience
or annoyance resulting from such destruction or damage or the repair thereof,
and shall not be liable for any delay in restoring the Premises. If, anything
to the contrary above in this paragraph notwithstanding, the Premises are
damaged or destroyed as a result of the wrongful or negligent act of Tenant or
any person on the Premises with Tenant's consent, there shall be no
apportionment or abatement of Rent. Tenant shall be released from this lease if
the repairs are not accomplished within 60 days.
18. CONDEMNATION: If the whole or any substantial (more than 25%) part
of the Premises shall be condemned by eminent domain for any public or
quasi-public purpose, this Lease shall terminate on the date of the vesting of
title, and Tenant shall have no claim against Landlord for the value of any
unexpired portion of the Term of the Lease, nor shall Tenant be entitled to any
part of the condemnation award. If less than a substantial part of the
Premises is condemned, this Lease shall not terminate, but Rent shall abate in
proportion to the portion of the Premises condemned.
19. RIGHT OF ENTRY: Landlord or its agents or contractors may enter the
Premises at any reasonable time for the purposes of inspection or making such
repairs as Landlord deems necessary or desirable. Landlord may show the
Premises to prospective purchasers or mortgagees and, during the six (6) months
prior to expiration of the Lease, to prospective tenants.
20. INDEMNITY: Tenant shall indemnify, defend and save Landlord harmless
from and against any liability or expense arising from the use or occupation of
the Premises by Tenant, or anyone on or about the Premises with Tenant's
permission. Tenant shall provide on or before Commencement Date and keep in
force during the Term (and any extensions or renewals thereof) a comprehensive
liability policy of insurance insuring Tenant and Landlord against any liability
whatsoever occasioned by accident on or about the Premises. Such policy shall
be written by an insurance company authorized to do business in Florida and
having a Best's rating of "A" in the amount of One Million Dollars combined
single limit bodily injury and property damage. Evidence of such insurance
shall be delivered to Landlord by Tenant no later than thirty (30) days
following the Commencement Date of this Lease.
21. END OR TERM: At the end of the Term, Tenant shall vacate and
surrender the Premises to Landlord, broom clean, and in as good condition as
they were upon the Commencement Date, ordinary wear and tear excepted, and
Tenant shall remove all of the Tenant's moveable property therefrom. All
property, furniture, fixtures, equipment, installations and additions which
remain in or on the Premises after Tenant has vacated shall be considered
abandoned by Tenant and, at the option of Landlord, may either be retained as
Landlord's property or may be removed by Landlord at Tenant's expense. All
alterations, additions, improvements and fixtures, anything in this particular
paragraph to the contrary notwithstanding, which have been or will be installed
by either party in or upon the Premises during the Term of the Lease, and
which, in any manner are attached to the floors, walls or ceilings, shall be
and become the property of Landlord and upon the Expiration Date or any earlier
termination of this Lease shall be surrendered with the Premises as a part
thereof. Alternatively, Landlord may elect to have Tenant return the Premises
to their original condition prior to any buildout thereof by either party.
22. HOLDING OVER: Any holding over after the Expiration Date of the Term
or any extended term shall be construed to be a tenancy from month to month at a
monthly Rent equal to twice the amount of Rent applicable to the final month of
the Term of this Lease (or any previous renewal or extension of same) (pro rated
on a monthly basis) and shall otherwise be on the terms herein specified so far
as applicable.
23. NOTICES: Any notice by either party to the other shall be in writing
and mailed by registered or certified
4
<PAGE> 6
mail, return receipt requested, to the address set forth, or to such other
address as either party may hereafter designate in writing. Each notice shall
be deemed given on the next business day following the date of mailing. Any
notice by Landlord to Tenant shall be deemed given if personally delivered to
Tenant at the Premises.
24. RISK OF LOSS: All personal property placed or moved in the Premises
shall be at the sole risk of Tenant or the owner thereof.
25. FORCE MAJEURE: Whenever a period of time is herein prescribed for
action to be taken by Landlord, Landlord shall not be liable, or responsible
for, and there shall be excluded from the computation for any such period of
time, any delays due to acts of God or any other causes of any kind whatsoever
which are beyond the control of Landlord.
26. VENUE: The parties hereto agree that any and all suits for any and
every breach of this Lease shall be instituted and maintained only in those
courts of competent jurisdiction in the county or municipality in which the
Premises are located.
27. CORPORATE TENANCY: If Tenant is a corporation, the undersigned
officer of Tenant hereby warrants and certifies to Landlord that Tenant is a
corporation in good standing and is authorized to do business in the State of
Florida. The undersigned officer of Tenant hereby further warrants and
certifies to Landlord that he or she, as such officer, is authorized and
empowered to bind the corporation to the terms of this Lease by his or her
signature thereto. Landlord, before it accepts and delivers this Lease, may
require Tenant to supply a certified copy of the corporate resolution
authorizing the execution of this Lease by Tenant.
28. NO ORAL AGREEMENTS; SUCCESSOR INTERESTS: The agreements contained in
the Lease set forth the entire understanding and contract of the parties, shall
be binding upon and shall inure to the benefit of the respective heirs,
successors, assigns and legal representatives of the parties hereto and shall
and may not be changed or terminated orally.
IN WITNESS WHEREOF, the parties have executed the Lease as of the day and year
first above written.
WITNESSES FOR LANDLORD
/s/ Donna Lance
- ----------------------- LANDLORD: CARR RUBIN ASSOCIATES,
A Florida Corporation
- ----------------------- By: /s/ Leslie A. Rubin
--------------------------------
Leslie A. Rubin, General Partner
WITNESS FOR TENANT:
/s/ Rose Smith
- ------------------------ TENANT: INNOVA PURE WATER, INC.,
A Florida Corporation
- ------------------------ By: /s/ John E. Nohren
-------------------------------
ITS: Chairman
------------------------------
5
<PAGE> 7
SIGN STANDARD AGREEMENT
RUBIN CENTER - ULMERTON
Lease signage shall be at the Lessee's sole expense with the prior approval of
the Lessor. It has been designed to provide a professional and coordinated
appearance throughout the Rubin Center - Ulmerton.
Lessee shall purchase a sign base from a plexiglass distributor. The base
shall be 3/8 inch bronze plexiglass (color #2412), 2' x 6' with routed edges.
Company logo and lettering may be either painted or vinyl.
Once the sign has been fabricated, it shall be installed by the Lessor.
A mail box label with the Lessee's suite number and company name will be
provided and installed by the Lessor, at the Lessee's expense.
6
<PAGE> 8
ADDENDUM TO LEASE
#1
Attached to and forming a part of the Lease Agreement between CARR RUBIN
ASSOCIATES, Landlord, and INNOVA PURE WATER, INC., A FLORIDA CORPORATION,
Tenant, dated the 21st day of January, 1998, (the "Lease").
Landlord and Tenant hereby agree to the following:
1. The Lease relates to the following leasehold premises:
Approximately 20.789 square feet comprised of 5,214 square feet of air
conditioned office space and 15,575 square feet of non-air conditioned
warehouse space located at 13130-56th Court, Suite 601, 602, 603, 604,
605, 607, 608 and the front office portions only of 609 and 610,
Clearwater, Florida 33760.
2. Landlord and Tenant hereby agree that the following amendment will be
made to said Lease, namely:
A. The monthly rent shall be payable in accordance with the
following schedule:
April 1, 1998 thru March 31, 1999 - $ 9,102.17 per month
April 1, 1999 thru March 31, 2000 - $ 9,466.26 per month
April 1, 2000 thru March 31, 2001 - $ 9,844.91 per month
April 1, 2001 thru March 31, 2002 - $10,238.70 per month
April 1, 2002 thru March 31, 2003 - $10,648.25 per month
All rental rates are subject to applicable sales and use
taxes.
B. On March 1, 1998, Landlord shall transfer and apply Tenant's
existing Security Deposit of three thousand four hundred and
no/100 ($3,400.00) to the required Security Deposit of the
Premises of this Lease.
On March 1, 1998, Tenant shall provide Landlord with an
additional Security Deposit in the amount of five thousand
five hundred and no/100 ($5,500.00) thereby increasing
Tenant's Security Deposit to a total amount of eight thousand
nine hundred and no/100 ($8,900.00).
Landlord and Tenant mutually agree that Landlord shall be
responsible for the following improvements:
1. Construct four (4) offices in Suite 605 as per Tenant
and Landlord approved drawings.
2. Provide a finished 3 degrees 6 inch opening between
Suites 604 and 605.
3. Provide and install two (2) 3 degrees 6 inch solid
core doors in Suite 604.
4. Construct a partition wall in the NE office of Suite
604.
5. Provide one (1) 6 degrees 6 inch double door opening
between Suites 601 and 602.
6. Provide and install vinyl tile and cove base
(approximately 685 square feet) in Suite 602.
7. Clean all existing vinyl tile flooring and carpet.
8. Paint all existing office walls in Suite 604, with
the exception of the 12 x 28 square foot office, and
paint the existing break room in Suite 602.
9. Landlord shall inspect and repair as necessary, all
HVAC equipment, all overhead doors, and all plumbing
and electrical equipment.
10. General cleaning of the premises.
D. Upon availability of the warehouse portion of Suites 609,
610, and 611, Tenant shall have the first option to expand
into this warehouse space at the square footage rates
represented in the Rental Rate Schedule described in Item
2.A. above, should existing tenant not exercise it's right to
renew at the end of its lease term.
E. Upon availability of the office and warehouse space located at
13130-56th Court, Suite 606, Tenant shall have the first
option to expand into this space at the square footage rates
represented in the Rental Rate Schedule described in Item
2.A. above, should existing tenant not exercise it's right to
renew at the end of its lease term.
7
<PAGE> 9
F. After the first eighteen (18) months of the initial lease
term, Tenant will have the option to relocate within a Rubin
Center should Tenant's needs require an increase of a minimum
of fifty percent (50%). Also, should Tenant so desire, again
after the first eighteen (18) months of the initial lease
term, Tenant shall have the option to work directly with
Landlord and its representatives in an effort to secure a
Build-to-Suit opportunity thru Rubin Management and its
affiliates. Should Tenant elect to relocate, then and in such
event, upon commencement of a term within another Rubin
Center, or a Build-to-Suit location developed by and thru
Rubin Management and its affiliates, the terms, conditions and
covenants of this Lease shall contemporaneously terminate, and
neither party hereunder shall have any further rights against
the other, and the Security Deposit referred to in Paragraph 5
of the Lease shall be transferred as per the terms of the new
lease for the new premises, or shall be refunded to the Tenant
upon termination.
3. The effective date of this Addendum is 21st day of January, 1998.
4. Landlord and Tenant ratify and affirm all other provisions of the Lease
dated the 21st day of January, 1998.
IN WITNESS WHEREOF, the Landlord and Tenant executed the foregoing Addendum to
Lease #1 on the 21st day of January, 1998.
In the presence of:
/s/ Donna Lance LANDLORD: CARR RUBIN ASSOCIATES
- ------------------------------
/s/ Margie Rippy BY: /s/ Leslie A. Rubin
- ------------------------------ -------------------------------------
As to Landlord Leslie A. Rubin, General Partner
TENANT: INNOVA PURE WATER, INC.,
A Florida Corporation
/s/ Rose Smith BY: /s/
- ----------------------------- -------------------------------------
ITS: Chairman
- ----------------------------- ------------------------------------
As to tenant
8
<PAGE> 10
EXHIBIT "A"
Carr Rubin Associates
Building 6
A portion of Lot 4 in the Northwest 1/4 of Section 9, Township 30 South, Range
16 East, PINELLAS GROVES, INC. as recorded in Plat Book 1, page 55, public
records of Pinellas County, Florida, and further being described as follows:
From the North 1/4 corner of Section 9, Township 30 South, Range 16 East,
Pinellas County, Florida, as a point of reference; thence N. 89 degrees 44
minutes 57 seconds W., and along the North line of said Section, 990.70 feet;
thence leaving said line S. 00 degree 00 minutes 49 seconds W., along the South
line of Lots 3 and 4, a distance of 360.00 feet to the Point of Beginning;
thence continue N. 89 degree 50 minutes 46 seconds along said line, 244.63 feet;
thence N. 00 degrees 17 minutes 44 seconds E., 400.00 feet to the aforementioned
Point of Beginning. Said parcel containing 2.2418 acres, more or less.
9
<PAGE> 11
ADDENDUM TO LEASE
#2
Attached to and forming a part of the Lease Agreement between CARR RUBIN
ASSOCIATES, Landlord, and INNOVAPURE WATER, INC., A FLORIDA CORPORATION, Tenant,
dated the 21st day of January, 1998, and Addendum to Lease #1 of the same date,
hereafter collectively described as the "Lease."
Landlord and Tenant hereby agree to the following:
1. The Lease relates to the following leasehold premises:
Approximately 20,789 square feet comprised of 5,214 square feet of air
conditioned office space and 15,575 square feet of non-air conditioned
warehouse space located at 13130 56th Court, Suites 601, 602, 603,
604, 605, 607, 608 and the front office portions only of 609 and 610,
Clearwater, Florida 33760.
2. Landlord and Tenant hereby agree that the following amendment will be
made to said Lease, namely:
A. To accommodate additional revisions to Tenant's Construction
Scope of Work, the monthly rent shall be revised and payable
in accordance with the following schedule:
April 1, 1998 thru March 31, 1999 $ 9,269.84
April 1, 1999 thru March 31, 2000 $ 9,633.93
April 1, 2000 thru March 31, 2001 $10,012.58
April 1, 2001 thru March 31, 2002 $10,406.37
April 1, 2002 thru March 31, 2003 $10,815.92
All rental rates are subject to applicable sales and use
taxes.
3. The effective date of this Addendum is the 13th day of March, 1998.
4. Landlord and Tenant ratify and affirm all other provisions of the
Lease dated 21st day of January, 1998, and Addendum to Lease #1 of the
same date.
IN WITNESS WHEREOF, the Landlord and Tenant execute the foregoing Addendum to
Lease #2 on the 13th day of March, 1998.
In the presence of:
/s/ Donna Lance LANDLORD: CARR RUBIN ASSOCIATES
- ----------------------------------
/s/ Margie Rippy BY: /s/ Leslie A. Rubin
- ---------------------------------- -------------------------------------
As to Landlord Leslie A. Rubin, General Parner
/s/ TENANT: INNOVA PURE WATER, INC.,
- ---------------------------------- A Florida Corporation
/s/ BY: /s/
- ---------------------------------- -------------------------------------
As to Tenant
ITS: Chairman
------------------------------------
1
<PAGE> 1
EXHIBIT 99(a)
1996 STOCK OPTION PLAN
<PAGE> 2
STOCK OPTION PLAN
OF
INNOVA PURE WATER, INC.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
I. PURPOSE 1
2. ADMINISTRATION 1
2.2. The Committee 2
2.3. No Liability 2
3. STOCK 2
4. ELIGIBILITY 2
5. EFFECTIVE DATE AND TERM OF THE PLAN 3
5.1. Effective Date 3
5.2. Term 3
6. GRANT OF OPTIONS 3
7. LIMITATION ON INCENTIVE STOCK OPTIONS 3
8. OPTION AGREEMENTS 4
9. OPTION PRICE 4
10. TERM AND EXERCISE OF OPTIONS 5
10.1. Term and Exercise 5
10.2. Option Period and Limitations on Exercise 5
10.3. Method of Exercise 5
11. TRANSFERABILITY 6
11.1. Transferability of Options 6
11.2. Transferability of Shares 6
11.3. Repurchase Rights 7
11.4. Put Rights 8
11.5. Legend Describing Restrictions and Obligations 8
12. TERMINATION OF EMPLOYMENT 8
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY 9
13.1. Death 9
13.2. Disability 9
14. USE OF PROCEEDS 10
15. SECURITIES ACT OF 1933 10
16. SECURITIES EXCHANGE ACT OF 1934: RULE 16B-3 11
16.1. General 11
16.2. Stock Option Committee 11
16.3. Action by the Board 11
16.4. Additional Restriction on Transfer of Stock 11
16.5. Additional Requirement of Stockholders Approval 11
17. AMENDMENT AND TERMINATION OF THE PLAN 12
18. EFFECT OF CHANGES IN CAPITALIZATION 12
18.1. Changes in Stock 12
18.2. Reorganization With Corporation Surviving 13
18.3 Other Reorganizations; Sale of Assets/Stock 13
18.4 Adjustments 14
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
18.5 No Limitations on Corporation 14
19. DISCLAIMER OF RIGHTS 14
20. NONEXCLUSIVITY OF THE PLAN 14
</TABLE>
2
<PAGE> 5
STOCK OPTION PLAN
Innova Pure Water, Inc., a Florida corporation (the "Corporation"),
sets forth herein the terms of this Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation by
providing eligible individuals (as designated pursuant to Section 4 below) an
opportunity to acquire (or increase) a proprietary interest in the Corporation,
which thereby will create a stronger incentive to expend maximum effort for the
growth and success of the Corporation and its subsidiaries and will encourage
such eligible individuals to remain in the employ or service of the Corporation
or that of one or more of its subsidiaries. Each stock option granted under the
Plan (an "Option") is intended to be an "incentive stock option" ("Incentive
Stock Option") within the meaning of Section 422 of the Internal Revenue Code of
1986, or the corresponding provision of any subsequently enacted tax statute, as
amended from time to time (the "Code"), except to the extent that any such
Option would exceed the limitations set forth in Section 7 below and except for
Options specifically designated at the time of grant as not being "incentive
stock options."
2. ADMINISTRATION
2.1. THE BOARD
The Plan shall be administered by the Board of Directors of
the Corporation (the "Board"), which shall have the full power and authority to
take all actions and to make all determinations required or provided for under
the Plan or any Option granted or Option Agreement (as defined in Section 8
below) entered into hereunder and all such other actions and determinations not
inconsistent with the specific terms and provisions of the Plan deemed by the
Board to be necessary or appropriate to the administration of the Plan or any
Option granted or Option Agreement entered into hereunder. The interpretation
and construction by the Board of any provision of the Plan or of any Option
granted or Option Agreement entered into hereunder shall be final and
conclusive.
2.2. THE COMMITTEE
The Board may from time to time appoint a Stock Option
Committee (the "Committee"). The Board, in its sole discretion, may provide that
the role of the Committee shall be limited to making recommendations to the
Board concerning any determinations to be made and actions to be taken by the
Board pursuant to or with respect to the Plan, or the Board may delegate to the
Committee such powers and authorities related to the administration of the Plan,
as set forth in Section 2.1 above, as the Board shall determine, consistent with
the Certificate of Incorporation and By-laws of the Corporation and applicable
law. In the event that the Plan or any Option granted or Option Agreement
entered into hereunder provides for any action to be
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taken by or determination to be made by the Board, such action may be taken by
or such determination may be made by the Committee if the power and authority to
do so has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final and conclusive.
2.3. NO LIABILITY
No member of the Board or of the Committee shall be liable for
any action or determination made, or any failure to take or make an action or
determination, in good faith with respect to the Plan or any Option granted or
Option Agreement entered into hereunder.
3. STOCK
The stock that may be issued pursuant to Options granted under the Plan
shall be shares of Common Stock and/or shares of Preferred Stock of the
Corporation (such shares of Common Stock and Preferred Stock being collectively
referred to herein as the "Stock"), which shares may be treasury shares or
authorized but unissued shares. The number of shares of Stock that may be issued
pursuant to Options granted under the Plan shall not exceed in the aggregate
750,000 shares of Stock, which number of shares is subject to adjustment as
provided in Section 18 below. If any Option expires, terminates or is terminated
for any reason prior to exercise in full, the shares of Stock that were subject
to the unexercised portion of such Option shall be available for future Options
granted under the Plan.
4. ELIGIBILITY
Options may be granted under the Plan to any employee of the
Corporation or any "subsidiary corporation" thereof within the meaning of
Section 424(f) of the Code (a "Subsidiary") (including any such employee who is
an. officer or director of the Corporation or any Subsidiary) as the Board shall
determine and designate from time to time prior to expiration or termination of
the Plan. An individual may hold more than one Option, subject to such
restrictions as are provided herein. The maximum number of shares of Stock
subject to Options that may be granted under the Plan to any employee of the
Corporation or any Subsidiary is 200,000 shares in any calendar year (subject to
adjustment pursuant to Section 18. hereof).
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. EFFECTIVE DATE
The Plan shall become effective as of the date of adoption by
the Board, subject to stockholders' approval of the Plan within one year of such
effective date by a majority of the votes cast at a duly held meeting of the
stockholders of the Corporation at which a quorum representing a majority of all
outstanding stock is present, either in person or by proxy, and voting on the
matter, or by written consent in accordance with applicable state law and the
articles of
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incorporation and by-laws of the Corporation; provided, however, that upon
approval of the Plan by the stockholders of the Corporation as set forth above,
all options granted under the Plan on or after the effective date shall be fully
effective as if the stockholders of the Corporation had approved the Plan on the
effective date. If the stockholders fail to approve the Plan within one year of
such effective date, any options granted hereunder shall be null, void and of no
effect.
5.2. TERM
The Plan shall terminate on the date ten years after the
effective date.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board may, at any
time and from time to time prior to the date of termination of the Plan, grant
to such eligible individuals as the Board may determine ("Optionees") Options to
purchase such number of shares of the Stock on such terms and conditions as the
Board may determine, including any terms or conditions which may be necessary to
qualify such Options as "incentive stock options" under Section 422 of the Code.
The date on which the Board approves the grant of an Option shall be considered
the date on which such Option is granted.
7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option shah constitute an Incentive Stock Option only to the extent
that the aggregate fair market value (determined at the time the Option is
granted) of the Stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
the Plan and all other plans of the Optionee's employer corporation and its
parent and subsidiary corporations within the meaning of Section 422(d) of the
Code) does not exceed $100,000.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements ("Option Agreements") to be executed by the Corporation and by the
Optionee, in such form or forms as the Board shall from time to time determine.
Option Agreements covering Options granted from time to time or at the same time
need not contain similar provisions; provided, however, that all such Option
Agreements shall comply with all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an Option (the
"Option Price") shall be fixed by the Board and stated in each Option Agreement.
In the case of an Option that is intended to constitute an Incentive Stock
Option, the option price shall be not less than the greater of par value or 100
percent of the fair market value of a share of the Stock covered by the Option
on the date the Option is granted (as determined in good faith by the Board);
provided,
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however, that in the event the Optionee would otherwise be ineligible to receive
an Incentive Stock Option by reason of the provisions of Sections 422(b)(6) and
424(d) of the Code (relating to stock ownership of more than ten percent), the
Option Price of an Option which is intended to be an Incentive Stock Option
shall be not less than the greater of par value or 110 percent of the fair
market value of a share of the Stock covered by the Option at the time such
Option is granted. In the event that the Stock is listed on an established
national or regional stock exchange, is admitted to quotation on the National
Association of Securities Dealers Automated Quotation System, or is publicly
traded in an established securities market, in determining the fair market value
of the Stock, the Board shall use the closing price of the Stock on such
exchange or System or in such market (the highest such closing price if there is
more than one such exchange or market) on the date the Option is granted (or, if
there is no such closing price, then the Board shall use the mean between the
highest bid and lowest asked prices or between the high and low prices on such
date), or, if no sale of the Stock has been made on such day, on the next
preceding day on which any such sale shall have been made. In the case of an
Option not intended to constitute an Incentive Stock Option, the Option Price
shall be. not less than the par value of the Stock covered by the Option.
10. TERM AND EXERCISE OF OPTIONS
10.1. TERM AND EXERCISE
Each Option granted under the Plan shall terminate and all
rights to purchase shares thereunder shall cease upon the expiration of ten
years (ten years and 30 days, in the case of an Option which is not designated
as an Incentive Stock Option) from the date such Option is granted, or on such
date prior thereto as may be taxed by the Board and stated in the Option
Agreement relating to such Option; provided , however, that in the event the
Optionee would otherwise be ineligible to receive an Incentive Stock Option by
reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating
to stock ownership of more than ten percent), an Option granted to such Optionee
which is intended to be an Incentive Stock Option shall in no event be
exercisable after the expiration of five years from the date it is granted.
10.2. OPTION PERIOD AND LIMITATIONS ON EXERCISE
Each Option granted under the Plan shall be exercisable, in
whole or in part, at any time and from time to time over a period commencing on
or after the date of grant and ending upon the expiration or termination of the
Option, as the Board shall determine and set forth in the Option Agreement
relating to such Option. Without limiting the foregoing, the Board, subject to
the terms and conditions of the Plan, may in its sole discretion provide that an
Option may not be exercised in whole or in part for a stated period or periods
of time during which such Option is outstanding; provided, however, that any
such limitation on the exercise of an Option contained in any Option Agreement
may be rescinded, modified or waived by the Board, in its sole discretion, at
any time and from time to time after the date of grant of such Option, so as to
accelerate the time at which the Option may be exercised. Notwithstanding any
other provisions of the Plan, no
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Option shall be exercisable in whole or in part prior to the date the Plan is
approved by the stockholders of the Corporation as provided above.
10.3. METHOD OF EXERCISE
An Option that is exercisable hereunder may be exercised by
delivery to the Corporation on any business day, at its principal office
addressed to the attention of the President, of written notice of exercise,
which notice shall specify the number of shares with respect to which the Option
is being exercised and shall be accompanied by payment in full of the Option
Price of the shares for which the Option is being exercised. The minimum number
of shares of Stock with respect to which an Option may be exercised, in whole
or, in part, at any time shall be the lesser of 100 shares or the maximum number
of shares available for purchase under the Option at the time of exercise.
Payment of the Option Price for the shares of Stock purchased pursuant to the
exercise of an Option shall be made, as determined by the Board and set forth in
the Option Agreement pertaining to an Option, either (i) in cash or by check
payable to the order of the Corporation (which check may, in the discretion of
the Corporation, be required to be certified); (ii) through the tender to the
Corporation of shares of Stock, which shares shall be valued, for purposes of
determining the extent to which the Option Price has been paid thereby, at their
fair market value (determined in the manner described in Section 9 above) on the
date of exercise; or (iii) by a combination of the methods described in (i) and
(ii); provided, however, that the Board may in its discretion impose and set
forth in the Option Agreement pertaining to an Option such limitations or
prohibitions on the use of shares of Stock to exercise Options as it deems
appropriate. An attempt to exercise any Option granted hereunder other than as
set forth above shall be invalid and of no force and effect. Promptly after the
exercise of an Option and the payment in full of the Option Price of the shares
of Stock covered thereby, the individual exercising the Option shah be entitled
to the issuance of a Stock certificate or certificates evidencing his ownership
of such shares. A separate Stock certificate or certificates shall be issued for
any shares purchased pursuant to the exercise of an Option which is an Incentive
Stock Option, which certificate or certificates shah not include any shares
which were purchased pursuant to the exercise of an Option which is not an
Incentive Stock Option. An individual holding or exercising an Option shall have
none of the rights of a stockholder until the shares of Stock covered thereby
are fully paid and issued to him, and, except as provided in Section 18 below,
no adjustment shall be made for dividends or other rights for which the record
date is prior to the date of such issuance.
11. TRANSFERABILITY
11.1. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee, only such Optionee (or, in
the event of legal incapacity or incompetency, the Optionee's guardian or legal
representative) may exercise the Option. No Option shall be assignable or
transferable by the Optionee to whom it is granted, other than by will or the
laws of descent and distribution.
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11.2. TRANSFERABILITY OF SHARES
An Optionee (or any other person who is entitled to exercise
an Option pursuant to the terms of this Plan) shall not sell, pledge, assign,
give or otherwise transfer or dispose of any Stock acquired pursuant to an
Option without first offering such Stock to the Corporation for purchase on the
same terms and conditions as those offered to the proposed transferee. Any
individual who proposes such a transfer (the "Transferor") shall notify the
Corporation, in writing of the identity of the proposed transferee and the terms
and conditions of the proposed transfer. The Corporation may exercise its right
of first refusal under this Subsection within 30 days after receiving such
notice of the proposed transfer. The Corporation may assign its right of first
refusal under this Subsection, in whole or in part, to a Stockholder, a Plan or
an Affiliate. The Corporation shall give reasonable written notice to the
Transferor of any such assignment of its rights. If the Corporation (or its
permitted assignee) fails to exercise such right of first refusal during this
30-day period, the Transferor may proceed with the proposed transfer at any time
within the next 45 days, and such transfer is not completed within such time,
the restrictions of this Subsection shall re-apply. These restrictions also
shall re-apply to any person to whom Stock that was originally acquired pursuant
to an Option is sold, pledged, assigned, bequeathed, given or otherwise
transferred, without regard to the number of such subsequent transferees or the
manner in which they acquire the Stock. Notwithstanding the foregoing, the
restrictions of this Subsection shall not apply to a transfer of Stock that
occurs as a result of the death of the Transferor or of any subsequent
transferee, as defined in the Code or the Employee Retirement Income Security
Act of 1974, as amended, but such restrictions shall apply to the executor,
administrator or personal representative, the estate and the legatees,
beneficiaries and assigns thereof.
11.3. REPURCHASE RIGHTS
Upon the termination of employment with the Corporation of an
employee who has been granted one or more Option(s) hereunder, the Corporation
shall have the right, for a period of 60 days following such termination, to
repurchase any or all of the shares of Stock acquired by the employee pursuant
to such Option(s), at a price equal to the fair market value of such shares on
the date of termination (or at such lower price as shall have been specified by
the Board and set forth in the applicable Option Agreement(s)). Upon the
exercise of one or more Option(s) granted hereunder following termination of
employment, the Corporation shall have the right, for a period of 60 days
following such exercise, to repurchase any or all of the shares of Stock
acquired by the employee pursuant to such Option(s), at a price equal to the
fair market value of such shares on the date of exercise (or at such lower price
as shall have been specified by the Board and set forth in the applicable Option
Agreement(s)). In the event that the Corporation determines that it cannot or
will not exercise its right to purchase Stock pursuant to this Subsection, in
whole or in part, the Corporation may assign its rights hereunder, in whole or
in part, to (1) any stockholder of the Corporation who owns stock or securities
of the Corporation having more than 50% of the combined voting power of all
classes of stock of the Corporation (a "Stockholder"), (2) any employee benefit
plan (within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended) maintained by the Corporation
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for the benefit of employees of the Corporation (a "Plan"), or (3) any
corporation or other trade or business that is controlled by or under common
control with the Corporation (determined in accordance with the principles of
Section 414(b) and (c) of the Cod and the regulations thereunder) (an
"Affiliate"). The Corporation shall give reasonable written notice to the
employee of any assignment of its rights. "Fair market value," for purposes of
this Subsection, shall be determined by the Board in the same manner specified
for determining the Option Price pursuant to Section 9 above.
11.4. PUT RIGHTS
The Board, by inclusion of appropriate language in an Option
Agreement, may grant the right to put Stock acquired pursuant to an Option to
the Corporation at the fair market value of such Stock (as determined by the
Board in the same manner specified for determining the Option Price pursuant to
Section 9 above) at the time of exercise of such put, or at such other value as
shall be specified in the Option Agreement. Any such put shall be subject to
such further terms and conditions as the Board shall include in the Option
Agreement.
11.5. LEGEND DESCRIBING RESTRICTIONS AND OBLIGATIONS
The Board may cause a legend to be placed prominently on
certificates representing Stock issued pursuant to this Plan in order to give
notice of the transferability restrictions and obligations imposed by this
Section.
12. TERMINATION OF EMPLOYMENT
On the 30th day following the termination of the employment of an
Optionee with the Corporation or a Subsidiary, other than by reason of the death
or "permanent and total disability" (within the meaning of Section 22(e)(3) of
the Code) of such Optionee, any Option granted to an Optionee pursuant to the
Plan shall terminate, and such Optionee shall have no further right to purchase
shares of Stock pursuant to such Option; provided, however, that in the event
that such termination of employment is by reason of the Optionee's retirement
with the consent of the Corporation or a Subsidiary in accordance with the
normal retirement policies of the Corporation or a Subsidiary, as the case may
be, then such Optionee shall have the right (subject to the general limitations
on exercise set forth in Section 10 above), at any time within three months
after such retirement and prior to termination of the Option pursuant to Section
10 above, to exercise, in whole or in part, any Option held by such Optionee at
the date of such retirement, whether or not such Option was exercisable
immediately prior to such retirement; provide further, that the Board may
provide, by inclusion of appropriate language in any Option Agreement, that an
Optionee may (subject to the general limitations on exercise set forth in
Section 10 above), in the event of termination of employment of the Optionee
with the Corporation or a Subsidiary, exercise an Option, in whole or in part,
at any time subsequent to such termination of employment and prior to
termination of the Option pursuant to Section 10 above, either subject to or
without regard to any installment limitation on exercise imposed pursuant to
Section 10 above, as the Board, in its sole and absolute discretion, shall
determine and set forth in the Option Agreement. Whether a
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termination of employment is to be considered by reason of retirement with the
consent of the Corporation or a Subsidiary in accordance with the normal
retirement policies of the Corporation, or a Subsidiary, as the case may be, and
whether a leave of absence or leave on military or government service shall
constitute a termination of employment for purposes of the Plan, shall be
determined by the Board, which determination shall be final and conclusive. For
purposes of the Plan, a termination of employment with the Corporation or a
Subsidiary shall not be deemed to occur if the Optionee is immediately
thereafter employed with the Corporation or any other Subsidiary.
13. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
13.1. DEATH
If an Optionee dies while employed by the Corporation or a
Subsidiary, the executors or administrators or legatees or distributees of such
Optionee's estate shall have the right (subject to the general limitations on
exercise set forth in Section 10 above), at any time within one year after the
date of such Optionee's death and prior to termination of the Option pursuant to
Section 10 above, to exercise any Option held by such Optionee at the date of
such Optionee's death, whether or not such Option was exercisable immediately
prior to such Optionee's death; provided, however, that the Board may provide by
inclusion of appropriate language in any Option Agreement that, in the event of
the death of an Optionee, the executors or administrators or legatees or
distributees of such Optionee's estate may exercise an Option (subject to the
general limitations on exercise set forth in Section 10 above), in whole or in
part, at any time subsequent to such Optionee's death and prior to termination
of the Option pursuant to Section 10 above, either subject to or without regard
to any installment limitation on exercise imposed pursuant to Section 10 above,
as the Board, in its sole and absolute discretion, shall determine and set forth
in the Option Agreement.
13.2. DISABILITY
If an Optionee terminates employment with the Corporation or a
Subsidiary by reason of the "permanent and total disability" (within the meaning
of Section 22(e)(3) of the Code) of such Optionee, then such Optionee shall have
the right (subject to the general limitations on exercise set forth in Section
10 above), at any time within one year after such termination of employment and
prior to termination of the Option pursuant to Section 10 above, to exercise, in
whole or in part, any Option held by such Optionee at the date of such
termination of employment, whether or not such Option was exercisable
immediately prior to such termination of employment; provided, however, that the
Board may provide, by inclusion of appropriate language in any Option Agreement,
that an Optionee may (subject to the general limitations on exercise set forth
in Section 10 above), in the event of the termination of employment of the
Optionee with the Corporation or a Subsidiary by reason of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, exercise an Option, in whole or in part, at any time subsequent to
such termination of employment and prior to termination of the Option pursuant
to Section 10 above, either subject to or without regard to any
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installment limitation on exercise imposed pursuant to Section 10 above, as the
Board, in its sole and absolute discretion, shall determine and set forth in the
Option Agreement. Whether a termination of employment is to be considered by
reason of "permanent and total disability" for purposes of this Plan shall be
determined by the Board, which determination shall be final and conclusive.
14. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock
pursuant to Options granted under the Plan shall constitute general funds of the
Corporation
15. SECURITIES ACT OF 1933
The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute a
violation by the individual exercising the Option or the Corporation of any
provisions of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations.
Specifically in connection with the Securities Act of 1933, as amended (the
"Securities Act"), upon exercise of any Option, unless a registration statement
under such Act is in effect with respect to the shares of Stock covered by such
Option, the Corporation shall not be required to sell or issue such shares
unless the Corporation has received evidence satisfactory to it that the holder
of such Option may acquire such shares pursuant to an exemption from
registration under such Act. Any determination in this connection by the
Corporation shall be final, binding, and conclusive. The Corporation may, but
shall in no event be obligated to, register any securities covered hereby
pursuant to the Securities Act. The Corporation shall not be obligated to take
any affirmative action in order to cause the exercise of an Option or the
issuance of shares pursuant thereto to comply with any law or regulation of any
governmental authority. As to any jurisdiction that expressly imposes the
requirement that an Option shall not be exercisable unless and until the shares
of Stock covered by such Option are registered or are subject to an available
exemption from registration, the exercise of such Option (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
16. SECURITIES EXCHANGE ACT OF 1934: RULE 16B-3
16.1. GENERAL
The Plan is intended to comply with Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), from
and after the date on which the Corporation first registers a class of equity
security under Section 12 of the Exchange Act (the "Registration Date"). From
and after the Registration Date, any provision inconsistent with Rule 16b-3 (as
in effect on the Registration Date) shall, to the extent permitted by law and
determined to be advisable by the Committee (constituted in accordance with
Section 10) or the Board (acting pursuant to Section 10), be inoperative and
void. Moreover, in the event that the
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Plan does not include a provision required by Rule 16b-3 to be stated therein,
such provision (other than one relating to eligibility requirements and the
amount or timing of awards) shall be deemed automatically to be incorporated
into the Plan insofar as participants subject to Section 16 are concerned. In
addition, from and after the Registration Date the provisions set forth in
Sections 16.2 through 16.5 shall apply.
16.2. STOCK OPTION COMMITTEE
From and after the Registration Date, the Committee appointed
pursuant to Section 2.2 shall consist of not fewer than two members of the
Board, neither of whom, during the twelve months prior to service on such
Committee, shall have been granted an Option under this Plan and each of whom
shall qualify (at the time of appointment to the Committee and during all
periods of service on the Committee) in all respects as a "disinterested person"
as defined in Rule 16b-3.
16.3. ACTION BY THE BOARD
From and after the Registration Date, the Board may act under
the Plan other than by, or in accordance with the recommendations of, the
Committee, constituted as set forth in Section 2.2 above, only if all members of
the Board are "disinterested persons" as defined in Rule 16b-3.
16.4. ADDITIONAL RESTRICTION ON TRANSFER OF STOCK
From and after the Registration Date, no director, officer or
other "insider" of the Corporation subject to Section 16 of the Exchange Act
shall be permitted to sell Stock (which such "insider" had received upon
exercise of an Option) during the six months immediately following the grant of
such Option.
16.5. ADDITIONAL REQUIREMENT OF STOCKHOLDERS' APPROVAL
From and after the Registration Date, no amendment by the
Board shall, without approval by a majority of the votes cast at a duly held
meeting of the stockholders of the Corporation at which a quorum representing a
majority of all outstanding stock is present, either in person or by proxy, and
voting on the amendment, or by written consent in accordance with applicable
state law and the articles of incorporation and by-laws of the Corporation,
materially increase the benefits accruing to eligible individuals under the Plan
or take any other action that would require the approval of such stockholders
pursuant to Rule 16b-3.
17. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted; provided, however, that no amendment by the Board shall, without
approval by a majority of the votes cast at a duly held
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meeting of the stockholders of the Corporation at which a quorum representing a
majority of all outstanding stock is present, either in person or by proxy, and
voting on the amendment, or by written consent in accordance with applicable
state law and the articles of incorporation and by-laws of the Corporation,
materially change the requirements as to eligibility to receive Options or
increase the maximum number of shares of Stock in the aggregate that may be sold
pursuant to Options granted under the Plan (except as permitted under Section 18
hereof. Except as permitted under Section 18 hereof, no amendment, suspension or
termination of the Plan shall, without the consent of the holder of the Option,
alter or impair rights or obligations under any Option theretofore granted under
the Plan.
18. EFFECT OF CHANGES IN CAPITALIZATION
18.L. CHANGES IN STOCK
If the outstanding shares of Stock are increased or decreased
or changed into or exchanged for a different number or kind of shares or other
securities of the Corporation by reason of the conversion of the outstanding
shares of Preferred Stock to shares of Common Stock of the Corporation pursuant
to the terms of the Certificate of Incorporation of the Corporation, or by
reason of any recapitalization, reclassification, stock split-up, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares effected without
receipt of consideration by the Corporation, occurring after the effective date
of the Plan, the number and kinds of shares for the purchase of which Options
may be granted under the Plan shall be adjusted proportionately and accordingly
by the Corporation. In addition, the number and kind of shares for which Options
are outstanding shall be adjusted proportionately and accordingly, so that the
proportionate interest of the holder of the Option immediately following such
event shall, to the extent practicable, be the same as immediately prior to such
event. Any such adjustment in outstanding Options shall not change the aggregate
Option Price payable with respect to shares subject to the unexercised portion
of the Option outstanding shall include a corresponding proportionate adjustment
in the Option Price per share.
18.2. REORGANIZATION WITH CORPORATION SURVIVING
Subject to Section 18.3 hereof, if the Corporation shall be
the surviving corporation in any reorganization, merger or consolidation of the
Corporation with one or more other corporations, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger or consolidation.
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18.3. OTHER REORGANIZATIONS; SALE OF ASSETS/STOCK
Upon the dissolution or liquidation of the Corporation, or
upon a merger, consolidation or reorganization of the Corporation with one or
more other corporations in which the Corporation is not the surviving
corporation, or upon a sale of substantially all of the assets of the
Corporation to another corporation, or upon any transaction (including, without
limitation, a merger or reorganization in which the Corporation is the surviving
corporation) approved by the Board which results in any person or entity owning
80 percent or more of the combined voting power of all classes of stock of the
Corporation, the Plan and all Options outstanding hereunder shall terminate,
except to the extent provision is made in writing in connection with such
transaction for the continuation of the Plan and/or the assumption of the
Options theretofore granted, or for the substitution for such Options of new
options covering the stock of a successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of shares and
exercise prices, in which event the Plan and Options theretofore granted shall
continue in the manner and under the terms so provided. In the event of any such
termination of the Plan, each individual holding an Option shall have the right
(subject to the general limitations on exercise set forth in Section 10 above),
immediately prior to the occurrence of such termination and during such period
occurring prior to such termination as the Board in its sole discretion shall
designate, to exercise such Option in whole or in part, whether or not such
Option was otherwise exercisable at the time such termination occurs and without
regard to any installment limitation on exercise imposed pursuant to Section 10
above, but subject to any additional limitations that the Board may, in its sole
discretion, include in any Option Agreement. The Board shall send written notice
of an event that will result in such a termination to all individuals who hold
Options not later than the time at which the Corporation gives notice thereof to
its stockholders.
18.4. ADJUSTMENTS
Adjustments under this Section related to stock or securities
of the Corporation shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. No fractional shares of Stock or
units of other securities shall be issued pursuant to any such adjustment, and
any fractions resulting from any such adjustment shall be eliminated in each
case by rounding downward to the nearest whole share or unit.
18.5. NO LIMITATIONS ON CORPORATION
The grant of an Option pursuant to the Plan shall not affect
or limit in any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer any or an part of its business or assets.
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19. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Corporation or any
Subsidiary, or to interfere in any way with the right and authority of the
Corporation or any Subsidiary either to increase or decrease the compensation of
any individual at any time, or to terminate any employment or other relationship
between any individual and the Corporation or any Subsidiary.
20. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Corporation for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.
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INNOVA PURE WATER, INC.
INCENTIVE, STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Option Agreement") is made as of
_______________________, by and between Innova Pure Water, Inc., a Florida
corporation (the "Corporation"), and ___________________________ an employee of
the Corporation or one or more of its subsidiaries (the "Optionee").
WHEREAS, the Board of Directors of the Corporation have duly adopted
and approved the Stock Option Plan (the "Plan"), which authorizes the
Corporation to grant to eligible individuals options for the purchase of shares
of the Corporation's Common Stock (the "Stock"); and
WHEREAS, the Corporation has determined that it is desirable and in its
best interests to grant to the Optionee, pursuant to the Plan, an option to
purchase a certain number of shares of Stock, in order to provide the Optionee
with an incentive to advance the interests of the Corporation, all according to
the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto do hereby agree as follows:
1. GRANT OF OPTION
Subject to the terms of the Plan, the Corporation hereby grants
to the Optionee the right and option (the "Option") to purchase from the
Corporation, on the terms and subject to the conditions set forth in the Plan
and in this Option Agreement, shares of Stock. The date of grant of this Option
is __________________________, the date on which the grant of the Option was
approved by the Board of Directors of the Corporation (the "Board") or by the
Board's Stock Option Committee.
2. TERMS OF PLAN
The Option granted pursuant to this Option Agreement is granted subject
to the terms and conditions set forth in the Plan (a copy of which is available
from the Corporation upon request and has previously been provided to the
Optionee or is attached hereto). All terms and conditions of the Plan, as may be
amended from time to time, are hereby incorporated into this Option Agreement by
reference and shall be deemed to be part of this Option Agreement, without
regard to whether such terms and conditions (including, for example, provisions
relating to exercise or termination of the Option following the Optionee's
termination of employment, disability, death, or retirement or certain changes
in capitalization of the Corporation) are not otherwise set forth in this Option
Agreement. In the event that there is any inconsistency between the provisions
of this Option Agreement and of the Plan, the provisions of the Plan shall
govern.
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3. PRICE
The purchase price (the "Option Price") for the shares of Stock subject
to the Option granted by this Option Agreement is $_________ per share.
4. EXERCISE OF OPTION
Except as otherwise provided herein, and subject to the provisions of
the Plan (including, for example, provisions relating to exercise or termination
of the Option following the Optionee's termination of employment, disability,
death, or retirement or certain changes in capitalization of the Corporation),
the Option granted pursuant to this Option Agreement shall be subject to
exercise as follows:
4.1. TIME OF EXERCISE OF OPTION
The Optionee may exercise the Option (subject to the
limitations on exercise set forth in this Option Agreement and in the Plan), in
installments as follows: on the second anniversary of the date of grant of the
Option, as set forth in Section 1 above, the Option shall be exercisable in
respect of 50% of the number of shares specified in Section 1 above; the option
shall be exercisable in respect of an additional 25% of the number of shares
specified in Section 1 above on the third anniversary of the date of the grant;
and the option shall be exercisable in respect of the remaining 25% of the
number of shares specified in Section 1 above on the fourth anniversary of the
date of the grant. The foregoing installments, to the extent not exercised,
shall accumulate and be exercisable, in whole or in part, at any time and from
time to time, after becoming exercisable and prior to the termination of the
Option; provided, that no single exercise of the Option shall be for fewer than
100 shares, unless the number of shares purchased is the total number at the
time available for purchase under this Option.
4.2. TERMINATION OF OPTION
The Option shall terminate upon the earlier of (i) the
expiration of a period of ten years from the date of grant of the Option, as set
forth in Section 1 above, or (ii) the Optionee's termination of employment with
the Corporation or a subsidiary thereof, provided, however, that if such
termination of employment falls within the scope of one of the provisions of the
Plan providing for an extended exercise period, the Option shall terminate upon
the expiration of the period after the Optionee's termination of employment with
the Corporation or a subsidiary thereof within which the Option is exercisable
as specified in such provision.
4.3. LIMITATIONS ON EXERCISE OF OPTION
Notwithstanding the foregoing Subsections, in no event may the
Option be exercised, in whole or in part, prior to the date on which the Plan is
approved by the stockholders of the Corporation, or after ten years following
the date upon which the
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Option is granted, as set forth in Section 1 above, or after the occurrence of
an event that results in termination of the Option under the Plan. In no event
may the Option be exercised for a fractional share of Stock.
4.4. METHOD OF EXERCISE OF OPTION
Subject to the terms and conditions of this Option Agreement,
the Option may be exercised by delivering written notice of exercise to the
Corporation, at its principal office, addressed to the attention of the
President, which notice shall specify the number of shares for which the Option
is being exercised, and shall be accompanied by payment in. full of the Option
Price of the shares for which the Option is being exercised. Payment of the
Option Price for the shares of Stock purchased pursuant to the exercise of the
Option shall be made either (i) in cash or by check payable to the order of the
Corporation; (ii) through the tender to the Corporation of shares of Stock,
which shares shall be valued, for purposes of determining the extent to which
the Option Price has been paid thereby, at their fair market value (determined
in the manner specified in the Plan) on the date of exercise; or (iii) by a
combination of the methods described in (i) and (ii). If the person exercising
the Option is not the Optionee, such person shall also deliver with the notice
of exercise appropriate proof of his or her right to exercise the Option. An
attempt to exercise the Option granted hereunder other than as set forth above
shall be invalid and of no force and effect. Promptly after exercise of the
Option as provided for above, the Corporation shall deliver to the person
exercising the Option a certificate or certificates for the shares of Stock
being purchased.
4.5. PARACHUTE LIMITATION'S
Notwithstanding any other provision of this Option Agreement
or of any other agreement, contract, or understanding heretofore or hereafter
entered into by the Optionee with the Corporation (or any subsidiary or
affiliate thereof), except an agreement, contract, or understanding hereafter
entered into that expressly modifies or excludes application of this Subsection
(the "Other Agreements"), and notwithstanding any formal or informal plan or
other arrangement heretofore or hereafter adopted by the Corporation (or any
such subsidiary or affiliate) for the direct or indirect compensation of the
Optionee (including groups or classes of participants or beneficiaries of which
the Optionee is a member), whether or not such compensation is deferred, is in
cash, or is in the form of a benefit to or for the Optionee (an "Other Benefit
Plan"), the Optionee shall not have any right to exercise an Option or to
receive any payment or other benefit under this Option Agreement, any Other
Agreement, or any Other Benefit Plan if such right to exercise, payment, or
benefit, taking into account all other rights, payments, or benefits to or for
the Optionee under this Option Agreement, all Other Agreements, and all Other
Benefit Plans would cause any right, payment, or benefit to the Optionee under
this Option Agreement to be considered a "parachute payment" within the meaning
of Section 28OG(b)(2) of the Internal Revenue Code as then in effect (a
"Parachute Payment"). In the event that the receipt of any such right to
exercise or any other payment or benefit under this Option Agreement, any Other
Agreement, or any Other Benefit Plan would
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cause the Optionee to be considered to have received a Parachute Payment under
this Option Agreement, then the Optionee shall have the right, in the Optionee's
sole discretion, to designate those rights, payments, or benefits under this
Option Agreement, any Other Agreements, and/or any Other Benefit Plans, which
should be reduced or eliminated so as to avoid having the right, payment, or
benefit to the Optionee under this Option Agreement be deemed to be a Parachute
Payment.
5. TRANSFERABILITY
5.1. TRANSFERABILITY OF OPTIONS
During the lifetime of an Optionee, only such Optionee (or, in
the event of legal incapacity or incompetence, the Optionee's guardian or legal
representative) may exercise the Option. No Option shall be assignable or
transferable by the Optionee to whom it is granted, other than by will or the
laws of descent and distribution.
5.2. TRANSFERABILITY OF SHARES
An Optionee (or any other person who is entitled to exercise
an option pursuant to the terms of this Plan) shall not sell, pledge, assign,
give, or otherwise transfer or dispose of any Stock acquired pursuant to an
Option without first offering such Stock to the Corporation for purchase on the
same terms and conditions as those offered to the proposed transferee. Any
individual who proposes such a transfer (the "Transferor") shall notify the
Corporation, in writing, of the identity of the proposed transferee and the
terms and conditions of the proposed transfer. The Corporation may exercise its
right of first refusal under this Subsection within 90 days after receiving such
notice of the proposed transfer. The Corporation may assign its right of first
refusal under this Subsection, in whole or in part, to (1) any stockholder of
the Corporation who owns stock or securities of the Corporation having more than
50% of the combined voting power of all classes of stock of the Corporation (a
"Stockholder"); (2) any. employee benefit plan (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended)
maintained by the Corporation for the benefit of employees of the Corporation (a
"Plan"); or (3) any corporation or other trade or business that is controlled by
or under common control with the Corporation (determined in accordance with the
principles of Section 414(b) and (c) of the Code and the regulations thereunder)
(an "affiliate"). The Corporation shall give reasonable written notice to the
Transfer or of any such assignment of its rights. If the Corporation (or its
permitted assignee) fails to exercise such right of first refusal during this
90-day period, the Transferor may proceed with the proposed transfer at any time
within the next 45 days, and if such transfer is not completed within such time,
the restrictions of this Subsection shall re-apply. These restrictions also
shall re-apply to any person to whom Stock that was originally acquired pursuant
to an Option is sold, pledged, assigned, bequeathed, given, or otherwise
transferred, without regard to the number of such subsequent transferees or the
manner in which they acquire the Stock. Notwithstanding the foregoing, the
restrictions of this Subsection shall not apply to a transfer of Stock that
occurs as a result of the death of the Transferor or of any
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subsequent transferee, but such restrictions shall apply to the executor,
administrator, or personal representative, the estate, and the legatees,
beneficiaries, and assigns thereof.
5.3. REPURCHASE RIGHTS
Upon the termination of employment with the Corporation or a
subsidiary thereof (including without limitation termination resulting from
death or disability of the Optionee) of an employee who has been granted one or
more Option(s) hereunder, the Corporation shall have the right, for a period of
six months following such termination, to repurchase any or all of the shares of
Stock acquired by such Optionee pursuant to such Option(s), at a price equal to
the fair market value of such shares on the date of such termination (or at such
lower price as shall have been specified by the Board and set forth in this
Option Agreement(s)). Upon the exercise, pursuant to the terms of the Plan, of
one or more Option(s) granted hereunder following such termination of the
Optionee's employment (including without limitation termination resulting from
death or disability of the Optionee), the Corporation shall have the right, for
a period of six months following such termination, to repurchase any or all of
the shares of Stock acquired pursuant to such Option(s), at a price equal to the
fair market value of such shares on the date of such exercise (or at such lower
price as shall have been specified by the Board and set forth in this Option
Agreement(s)). In the event that the Corporation determines that it cannot or
will not exercise its right to purchase Stock pursuant to this Subsection, in
whole or in part, the Corporation may assign its rights hereunder, in whole or
in part, to a Stockholder, a Plan, or an Affiliate. The Corporation shall give
reasonable written notice to the Optionee of any assignment of its rights under
this Subsection. "Fair market value," for purposes of this Subsection, shall be
determined by the Board in the same manner specified for determining the Option
Price pursuant to the Plan.
5.4. PUBLICLY TRADED STOCK
If the Stock is listed on an established national or regional
stock exchange or is admitted to quotation on the Nasdaq, or is publicly traded
in an established securities market (as determined by the Board), the foregoing
restrictions of this Section 5 shall terminate as of the first date that the
Stock is so listed, quoted, or publicly traded.
5.5. INSTALLMENT PAYMENTS
In the case of any purchase of Stock pursuant to this Section
5, at the option of the Corporation or its permitted assignee or delegee, the
Corporation or its permitted assignee or delegee may pay the Optionee or other
registered owner of the Stock the purchase price in five or fewer annual
installments. Interest shall he credited on the installments at the applicable
federal rate (as determined for purposes of Section 1274 of the Code) in effect
on the date on which the purchase is made. The Corporation or its permitted
assignee or delegee shall pay at least one-fifth of the total purchase price
each year, plus interest on the unpaid balance, with the first payment being
made on or before the 60th day after the purchase.
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5.6. LEGEND DESCRIBING RESTRICTIONS AND OBLIGATIONS
The Board may cause a legend to be placed prominently on
certificates representing Stock issued pursuant to this Plan, in order to give
notice of the transferability restrictions and obligations imposed pursuant to
this Section 5 and applicable securities laws.
6. RIGHT OF SUBSTITUTION
The Corporation reserves the right to replace the Option with options,
shares, or other rights having an equivalent value at the time of exchange and a
comparable potential for appreciation based on the Corporation's future
operations.
7. RIGHTS AS STOCKHOLDER
Neither the Optionee nor any executor, administrator, distributee, or
legatee of the Optionee's estate shall be, or have any of the rights or
privileges of, a stockholder of the Corporation in respect of any shares of
Stock issuable hereunder unless and until such shares have been fully paid for
and certificates representing such shares have been endorsed, transferred, and
delivered, and the name of the Optionee (or of such other person or entity) has
been entered as the stockholder of record on the books of the Corporation.
8. WITHHOLDING OF TAXES
The parties hereto recognize that the Corporation or a subsidiary
thereof may be obligated to withhold federal and local income taxes and Social
Security taxes to the extent that the Optionee realizes ordinary income in
connection with the exercise of the Option or in connection with a disposition
of any shares of Stock acquired by exercise of the Option. The Optionee agrees
that the Corporation or a subsidiary thereof may withhold amounts needed to
cover such taxes from payments otherwise due an owing to the Optionee, and also
agrees that upon demand the Optionee will promptly pay to the Corporation or a
subsidiary thereof having such obligation any additional amounts as may be
necessary to satisfy such withholding tax obligation. Such payment shall be made
in cash or by certified check payable to the order of the Corporation or a
subsidiary thereof.
9. NOTIFICATION OF DISPOSITION
The Optionee agrees to notify the Corporation in writing within 30 days
of any disposition of shares of Stock acquired by the Optionee pursuant to the
exercise of this Option, if such disposition occurs within two years of the date
of grant, or one year of the date of exercise, of the Option.
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10. DISCLAIMER OF RIGHTS
No provision in this Option Agreement shall be construed to confer upon
the Optionee the right to be employed by the Corporation or any subsidiary
thereof, or to interfere in any way with the right and authority of the
Corporation or any subsidiary thereof either to increase or decrease the
compensation of the Optionee at any time, or to terminate any employment or
other relationship between the Optionee and the Corporation or any subsidiary
thereof.
11. INTERPRETATION OF THIS OPTION AGREEMENT
This Option shall constitute an incentive stock option within the
meaning of Section 422 of the Code. All decisions and interpretations made by
the Board or the Stock Option Committee thereof with regard to any question
arising under the Plan or this Option Agreement shall be binding and conclusive
on the Corporation and the Optionee and any other person entitled to exercise
the Option as provided for herein.
12. GOVERNING LAW
This Option Agreement shall be governed by the laws of the State of
Florida (but not including the choice of law rules thereof).
13. BINDING EFFECT
Subject to all restrictions provided for in this Option Agreement and
the Plan and by applicable law relating to assignment and transfer of this
Option Agreement and the Option provided for herein, this Option Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors, and assigns.
14. NOTICES
Any notice hereunder by the Optionee to the Corporation shall be in
writing and shall be deemed duly given if mailed or delivered to the
Corporation, at its principal office, addressed to the attention of the
President, or if so mailed or delivered to such other address as the Corporation
may hereafter designate by notice to the Optionee. Any notice hereunder by the
Corporation to the Optionee shall be in writing and shall be deemed duly given
if mailed or delivered to the Optionee at the address specified in this Option
Agreement, or if so mailed or delivered to such other address as the Optionee
may hereafter designate by written notice given to the Corporation.
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15. ENTIRE AGREEMENT
This Option Agreement and the Plan together constitute the entire
agreement and supersede all prior understandings and agreements, written or
oral, of the parties hereto with respect to the subject matter hereof. Neither
this Option Agreement nor any term - hereof may be amended, waived, discharged,
or terminated except by a written instrument signed by the Corporation and the
Optionee; provided, however, that the Corporation unilaterally may waive any
provisions hereof in writing to the extent that such waiver does not adversely
affect the interests of the Optionee hereunder or otherwise cause the Option
granted hereunder not to qualify as an "incentive stock option" within the
meaning of Section 422 of the Code, but no such waiver shall operate as or be
construed to be a subsequent waiver of the same provision or a waiver of any
other provision hereof.
IN WITNESS WHEREOF, the parties . hereto have duly executed this
Option Agreement, or caused this Option Agreement to be duly executed on their
behalf, as of the day and year first above written.
Optionee Name:
-----------------------------------------
Date of Grant:
-----------------------------------------
Number of Shares:
-----------------------------------------
Price per Share:
-----------------------------------------
INNOVA PURE WATER, INC.
By:
--------------------------------------
Title:
-----------------------------------
OPTIONEE:
By:
--------------------------------------
Title:
-----------------------------------
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OPTIONEE ADDRESS:
---------------------------------------
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