<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 29, 1995
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 0-16217 33-0041789
<S> <C> <C>
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
</TABLE>
4710 Bellaire Blvd., Suite 301, Bellaire, Texas 77401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 662-2699
................................................................................
(Former name or former address, if changed since last report.)
1
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
None.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On December 29, 1995, Gaia Technologies, Inc., a Texas corporation ("Sub")
and wholly-owned subsidiary of the issuer (North American Technologies Group,
Inc., which is sometimes referred to herein as "NATK"), acquired substantially
all of the assets of GAIA Holdings, Inc., a Delaware corporation formerly known
as GAIA Technologies, Inc. ("Gaia Holdings"), and two of its affiliates, Thor
Ventures, L.C., a Texas limited liability company ("Thor Ventures"), and Thor
Industries, Inc., a Texas corporation ("Thor Industries;" together with Gaia
Holdings and Thor Ventures, the "Seller"). The acquired assets (the "Assets")
consist of a number of patented and proprietary technologies and other business
assets (including among others certain equipment, inventory and raw materials)
relating to the use of recycled rubber and plastics for the manufacture and
distribution of porous pipe, synthetic construction materials and certain other
products with advanced structural properties, together with substantially all
other business assets of the Seller relating thereto. NATK currently intends to
continue to use the Assets in the same business as did the Seller.
The consideration paid for the Assets included (i) the issuance of
1,666,667 shares (the "Shares") of common stock, par value $.001 per share
("NATK Common Stock"), of NATK, (ii) the payment of $305,500 in cash, (iii) the
issuance of a 90-day promissory note (the "90-Day Note") by NATK and Sub in the
principal amount of $1,050,000.00 and (iv) the forgiveness of certain debt
obligations (together with all interest owed thereon) owed by Seller to NATK of
approximately $1,881,400. A portion of the cash payment described in (ii) above
was applied from the proceeds of a recent sale of shares of NATK's Series D
Convertible Preferred Stock.
The 90-Day Note bears interest at an annual rate of twelve percent (12%),
and is secured by a lien on and security interest in all of the Assets.
Interest payments on the 90-Day Note are due and payable monthly, and the entire
principal thereof and all accrued and unpaid interest thereon is due and payable
in full on March 28, 1996.
In connection with the purchase of the Assets, NATK also agreed to pay,
during a 15-year period, certain royalty payments and license fees based on the
gross margin (defined as the difference between revenues and cost of goods sold,
as calculated pursuant to the terms of a written royalty agreement) from sales
of certain products manufactured using the technologies included in the Assets
and sublicenses of such technologies.
Sub also entered into written employment agreements with each of Henry W.
Sullivan, formerly of Gaia Holdings, and William Aldrich, formerly of Thor
Ventures. Under such agreements, Mr. Sullivan will serve as President of Sub,
and Mr. Aldrich will serve as an executive officer of Sub, in exchange for
certain salary payments and other benefits, including among others the issuance
by NATK of options to each such person to acquire up to 200,000
2
<PAGE>
shares of NATK Common Stock (an aggregate of 400,000 shares of NATK Common
Stock) at an exercise price of $2.50 per share, 25% of which options vest each
year over a four-year period. NATK also agreed to cause Mr. Aldrich to be
appointed to the Board of Directors of NATK in the first half of 1996.
In addition, NATK entered into a Crosstie Purchase Option and Loan
Agreement pursuant to which it acquired an option (the "Crosstie Purchase
Option") to purchase all of the capital stock of TIETEK, INC., a Texas
corporation ("TieTek") which is an affiliate of Seller. NATK may exercise the
Crosstie Purchase Option during a two-year period (which period may be extended
for an additional year under certain circumstances) by forgiving all then-
outstanding indebtedness under the Crosstie Loan referred to below, and paying
certain royalty payments based on products to be sold by TieTek after the
exercise of the Crosstie Purchase Option. In connection with the sale of the
Assets, TieTek received the right to use certain of the patented and proprietary
technologies included in the Assets to produce railroad crossties and certain
other related products.
NATK also agreed in the Crosstie Purchase Option and Loan Agreement to lend
up to $1,500,000 (the "Crosstie Loan") to TieTek, the proceeds of which loan are
to be used in connection with developing TieTek's business. To date, NATK has
lent to TieTek an aggregate of approximately $220,000 of such Crosstie Loan
amount. The Crosstie Loan is secured by a pledge of, and lien on, all of
TieTek's assets and capital stock, and 666,667 of the Shares.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
None.
ITEM 5. OTHER EVENTS.
Effective December 31, 1994, NATK and Euro Scotia Funding Limited ("ESF")
renegotiated certain outstanding obligations owed by each party to the other, as
a result of which, a new note agreement, which included a promissory note (the
"ESF Note"), was entered into that provided for repayment (after certain
offsets) by ESF in favor of NATK of a net amount of approximately $2,801,000 as
of December 31, 1994. In connection therewith, U.S. Treasury Bills were
required to have been placed in an account with a brokerage firm, which
brokerage firm agreed to hold such collateral for the benefit of NATK until the
ESF Note was paid in full. The first cash repayment under such ESF Note was due
to be paid in early January 1996, in the principal amount of approximately
$178,000, plus accrued and unpaid interest. Principal payments of approximately
$328,000, plus accrued interest, are due each six months thereafter until the
ESF Note is paid in full.
3
<PAGE>
The January 1996 payment on the ESF Note was not paid in whole or in part
as required by the terms of the ESF Note. NATK is currently in the process of
making demand for payment on the ESF Note in accordance with the terms of such
ESF Note and applicable law. In addition, NATK's management is exploring its
other options against ESF and the brokerage firm charged with holding the
collateral for the ESF Note.
NATK recently learned that, in the last quarter of 1995, the brokerage firm
that holds the collateral for the ESF Note and an affiliate of ESF were named as
defendants in a lawsuit filed by the Florida Department of Insurance in which it
is alleged among other things that such brokerage firm issued false account
confirmations. NATK has also learned that such brokerage firm has applied for a
withdrawal as a registered broker/dealer in a number of states, including the
state in which such securities were to have been held.
In early 1996, the Company also learned that the United States Securities
and Exchange Commission sought and was granted in late December 1995, a
temporary restraining order against certain affiliates of ESF in the United
States District Court for the District of Colorado that, among other things,
froze investor funds of the defendants and certain of their affiliates, and
required each such party to prevent the disposition, transfer or other disposal
of any of their funds or other assets then held by them, under their control or
over which they exercise investment or other authority.
After learning of the Florida lawsuit, NATK has unsuccessfully attempted to
gain reliable confirmations of the existence and value of the securities that
were to have been held for NATK's benefit in connection with the ESF Note. NATK
is uncertain at this time what effect, if any, the failure of the January 1996
payment to have been made, the results of the litigation and other matters
described above may have upon the ESF Note and such securities. If satisfactory
alternative collateral arrangements cannot be obtained, NATK may be required to
write off all or a portion of the ESF Note.
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
None.
4
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Note: GAIA Holdings, Inc., a Delaware corporation, was formerly known
as GAIA Technologies, Inc. As used in Items 7(a) and 7(b) below, the
term, "GAIA Technologies, Inc." refers to GAIA Holdings, Inc., a
Delaware corporation.
(a) Financial statements of business acquired (Exhibit F)
<TABLE>
<CAPTION>
Page
Number Description
<C> <S>
F-1 Report of Independent Certified Public Accountants
F-2 GAIA Technologies, Inc. Balance Sheets for the years
ended December 31, 1994, 1993, and 1992
F-4 GAIA Technologies, Inc. Statements of Loss for the
years ended December 31, 1994, 1993, and 1992
F-5 GAIA Technologies, Inc. Statements of Capital Deficit
for the years ended December 31, 1994, 1993, and 1992
F-6 GAIA Technologies, Inc. Statements of Cash Flows for
the years ended December 31, 1994, 1993, and 1992
F-8 GAIA Technologies, Inc. Summary of Significant
Accounting Policies
F-10 GAIA Technologies, Inc. Notes to Financial Statements
</TABLE>
The interim financial information required by Item 7(a) of Form
8-K is not being filed herewith inasmuch as such information is
currently being prepared. NATK contemplates that such financial
information will be available in a reasonable amount of time
following the filing of this Form 8-K and will endeavor to file
such information promptly upon its availability.
(b) Pro forma financial information
The pro forma financial information required by Item 7(b) of Form
8-K is not being filed herewith inasmuch as such information is
currently being prepared. NATK contemplates that such financial
information will be available in a reasonable amount of time
following the filing of this Form 8-K and will endeavor to file
such information promptly upon its availability.
5
<PAGE>
(c) Exhibits
<TABLE>
<CAPTION>
Number Description
<C> <S>
2.0 Asset Purchase Agreement, entered into as of December
29, 1995, by and among North American Technologies
Group, Inc., Gaia Technologies, Inc., Gaia Holdings,
Inc., Thor Ventures, L.C. and Thor Industries, Inc.
10.1 Promissory Note, Security Agreement and Pledge, in the
principal amount of $1,050,000, issued by North
American Technologies Group, Inc. and Gaia
Technologies, Inc. in favor of Gaia Holdings, Inc.,
dated December 29, 1995
10.2 Gaia/Thor Royalty Agreement, entered into as of
December 29, 1995, by and among Gaia Technologies,
Inc., North American Technologies Group, Inc., Gaia
Holdings, Inc. and Thor Ventures, L.C.
10.3 Gaia-TieTek License Agreement, entered into as of
December 29, 1995, by and between Gaia Technologies,
Inc. and TieTek, Inc.
10.4 Employment Agreement, entered into as of December 29,
1995, between Gaia Technologies, Inc. and Henry W.
Sullivan
10.5 Employment Agreement, entered into as of December 29,
1995, between Gaia Technologies, Inc. and William T.
Aldrich
10.6 Stock Option Agreement, dated as of December 29, 1995,
between North American Technologies Group, Inc. and
Henry W. Sullivan
10.7 Stock Option Agreement, dated as of December 29, 1995,
between North American Technologies Group, Inc. and
William T. Aldrich
10.8 Crosstie Purchase Option and Loan Agreement, dated
December 29, 1995, by and among North American
Technologies Group, Inc., TieTek, Inc., William T.
Aldrich, J. Denny Bartell and Henry W. Sullivan
10.9 Promissory Note, Security Agreement and Pledge, dated
December 29, 1995, in the principal amount of
$1,500,000, issued by TieTek, Inc. in favor of NATK
</TABLE>
6
<PAGE>
ITEM 8. CHANGE IN FISCAL YEAR.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunder duly authorized.
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
Date: January 12, 1996 /s/ Tim B. Tarrillion
_____________________________________
Tim B. Tarrillion
President and Chief Executive Officer
7
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND EXHIBITS
Note: GAIA Holdings, Inc., a Delaware corporation, was formerly known
as GAIA Technologies, Inc. As used in (a) and (b) below, the term,
"GAIA Technologies, Inc." refers to GAIA Holdings, Inc., a Delaware
corporation.
(a) Financial statements of business acquired (Exhibit F)
<TABLE>
<CAPTION>
Page
Number Description
<C> <S>
F-1 Report of Independent Certified Public Accountants
F-2 GAIA Technologies, Inc. Balance Sheets for the years
ended December 31, 1994, 1993, and 1992
F-4 GAIA Technologies, Inc. Statements of Loss for the
years ended December 31, 1994, 1993, and 1992
F-5 GAIA Technologies, Inc. Statements of Capital Deficit for
the years ended December 31, 1994, 1993, and 1992
F-6 GAIA Technologies, Inc. Statements of Cash Flows for the
years ended December 31, 1994, 1993, and 1992
F-8 GAIA Technologies, Inc. Summary of Significant
Accounting Policies
F-10 GAIA Technologies, Inc. Notes to Financial Statements
</TABLE>
The interim financial information required by Item 7(a) of Form
8-K is not being filed herewith inasmuch as such information is
currently being prepared. NATK contemplates that such financial
information will be available in a reasonable amount of time
following the filing of this Form 8-K and will endeavor to file
such information promptly upon its availability.
(b) Pro forma financial information
The pro forma financial information required by Item 7(b) of Form
8-K is not being filed herewith inasmuch as such information is
currently being prepared. NATK contemplates that such financial
information will be available in a reasonable amount of time
following the filing of this Form 8-K and will endeavor to file
such information promptly upon its availability.
8
<PAGE>
(c) Exhibits
<TABLE>
<CAPTION>
Number Description
<C> <S>
2.0 Asset Purchase Agreement, entered into as of December
29, 1995, by and among North American Technologies
Group, Inc., Gaia Technologies, Inc., Gaia Holdings,
Inc., Thor Ventures, L.C. and Thor Industries, Inc.
10.1 Promissory Note, Security Agreement and Pledge, in the
principal amount of $1,050,000, issued by North
American Technologies Group, Inc. and Gaia
Technologies, Inc. in favor of Gaia Holdings, Inc.,
dated December 29, 1995
10.2 Gaia/Thor Royalty Agreement, entered into as of
December 29, 1995, by and among Gaia Technologies,
Inc., North American Technologies Group, Inc., Gaia
Holdings, Inc. and Thor Ventures, L.C.
10.3 Gaia-TieTek License Agreement, entered into as of
December 29, 1995, by and between Gaia Technologies,
Inc. and TieTek, Inc.
10.4 Employment Agreement, entered into as of December 29,
1995, between Gaia Technologies, Inc. and Henry W.
Sullivan
10.5 Employment Agreement, entered into as of December 29,
1995, between Gaia Technologies, Inc. and William T.
Aldrich
10.6 Stock Option Agreement, dated as of December 29, 1995,
between North American Technologies Group, Inc. and
Henry W. Sullivan
10.7 Stock Option Agreement, dated as of December 29, 1995,
between North American Technologies Group, Inc. and
William T. Aldrich
10.8 Crosstie Purchase Option and Loan Agreement, dated
December 29, 1995, by and among North American
Technologies Group, Inc., TieTek, Inc., William T.
Aldrich, J. Denny Bartell and Henry W. Sullivan
10.9 Promissory Note, Security Agreement and Pledge, dated
December 29, 1995, in the principal amount of
$1,500,000, issued by TieTek, Inc. in favor of NATK
</TABLE>
9
<PAGE>
Independent Certified Public Accountants' Report
GAIA Technologies, Inc.
Houston, Texas
We have audited the accompanying balance sheets of GAIA Technologies, Inc.
as of December 31, 1994 and 1993, and the related statements of loss,
capital deficit, and cash flows for each of the years in the three year
period ending December 31, 1994. These financial statements are the
responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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.
As discussed in Notes 4 and 5, the company had significant transactions
with related parties for each of the years in the three year period ending
December 31, 1994. Also, as discussed in Note 11, subsequent to December
31, 1994 the company signed a letter of intent to sell substantially all
assets of the company.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GAIA Technologies, Inc.
as of December 31, 1994 and 1993, and the results of its operations and its
cash flows for each of the years in the three year period ending December
31, 1994 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 1 to the
financial statements, the company has incurred operating losses since
inception and at December 31, 1994, the company had a negative working
capital position and a capital deficit. This situation raises substantial
doubt about the company's ability to continue as a going concern.
Subsequent to December 31, 1994, the company has entered into a letter of
intent to sell substantially all assets of the company. The company's
ability to continue as a going concern is dependent upon the successful
completion of the sale. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
BDO Seidman, LLP
Certified Public Accountants
October 2, 1995
Houston, Texas
F-1
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets (Notes 4 and 11)
Current
Cash $ 21,272 $ 30,513
Accounts receivable, less allowance for doubtful
accounts of $49,541 at 1994 11,317 62,236
Inventories (Note 2) 99,056 212,057
Prepaid expenses and other 2,000 35,261
- -------------------------------------------------------------------------------
Total current assets 133,645 340,067
Note receivable, less allowance for doubtful
collection of $12,603 at 1994 12,602 25,205
Property and equipment, less accumulated
depreciation (Note 3) 233,572 371,445
Organization costs, less accumulated
amortization of $44,186 and $30,438 24,564 38,312
Patents and trademarks, less accumulated
amortization of $21,406 and $10,707 29,464 40,163
- --------------------------------------------------------------------------------
$433,847 $815,192
================================================================================
</TABLE>
F-2
<PAGE>
GAIA Technologies, Inc.
Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
December 31, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Capital Deficit
Current Liabilities
Notes payable (Note 4) $1,335,979 $1,107,086
Accounts payable:
Trade 227,287 150,617
Stockholders (Note 4) 54,220 9,733
Accrued expenses:
Payroll taxes (Note 6) 386,642 222,612
Other (Note 4) 177,167 91,790
- --------------------------------------------------------------------------------
Total current liabilities 2,181,295 1,581,838
Long-term Debt (Note 4) 500,000 480,000
Investment in joint venture (Note 5) 132,262 -
- --------------------------------------------------------------------------------
Total liabilities 2,813,557 2,061,838
- --------------------------------------------------------------------------------
Redeemable Preferred Stock (Note 7) 349,981 1,000,000
- --------------------------------------------------------------------------------
Commitments and Contingencies (Notes 7 and 11)
- --------------------------------------------------------------------------------
Capital Deficit
Common stock (Note 7) 2,195,245 1,495,226
Deficit (4,924,936) (3,741,872)
- --------------------------------------------------------------------------------
Total capital deficit (2,729,691) (2,246,646)
- --------------------------------------------------------------------------------
$ 433,847 $815,192
================================================================================
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-3
<PAGE>
GAIA Technologies, Inc.
Statements of Loss
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales (Note 8) $416,262 $731,134 $1,156,409
Cost of Sales 408,293 673,101 1,080,908
- --------------------------------------------------------------------------------
Gross Profit 7,969 58,033 75,501
Operating Expenses 1,015,197 1,648,084 1,350,493
- --------------------------------------------------------------------------------
Operating Loss (1,007,228) (1,590,051) (1,274,992)
- --------------------------------------------------------------------------------
Other Income (Expense):
Loss in equity investment (Note 5) (132,262) - -
Loss on sale of property and
equipment (25,417) (10,646) -
Interest expense (Note 4) (157,243) (110,073) (85,710)
Other (Note 9) 148,414 102,702 12,834
- --------------------------------------------------------------------------------
Total Other Expense, net (166,508) (18,017) (72,876)
- --------------------------------------------------------------------------------
Net Loss (1,173,736) (1,608,068) (1,347,868)
- --------------------------------------------------------------------------------
Weighted Average Number of
Common Shares Outstanding 73,533 70,044 66,230
================================================================================
Loss Per Share $(15.96) $(22.96) $(20.35)
================================================================================
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-4
<PAGE>
GAIA Technologies, Inc.
Statements of Capital Deficit
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock (1)
----------------------
Shares Amount Deficit Total
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, at January
1, 1992 66,230 $1,145,247 $ (785,936) $359,311
Net loss - - (1,347,868) (1,347,868)
- ------------------------------------------------------------------------------------
BALANCE, at December
31, 1992 66,230 1,145,247 (2,133,804) (988,557)
Common stock issued
for cash 6,538 349,979 - 349,979
Net loss - - (1,608,068) (1,608,068)
- ------------------------------------------------------------------------------------
BALANCE, at December
31, 1993 72,768 1,495,226 (3,741,872) (2,246,646)
Conversion of preferred
stock to common stock 12,143 650,019 - 650,019
Common stock issued
for cash 778 50,000 - 50,000
Dividends on preferred stock - - (9,328) (9,328)
Net loss - - (1,173,736) (1,173,736)
- ------------------------------------------------------------------------------------
BALANCE, at December
31, 1994 85,689 $2,195,245 $(4,924,936) $(2,729,691)
====================================================================================
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
__________________
(1) No stated par, 1,000,000 shares authorized
F-5
<PAGE>
GAIA Technologies, Inc.
Statements of Cash Flows
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,173,736) $(1,608,068) $(1,347,868)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Loss in equity investment 132,262 - -
Depreciation and amortization 81,865 97,881 89,724
Bad debt expense 105,564 234,559 104,911
Loss on sale of property and equipment 25,417 10,646 -
Changes in assets and liabilities:
Accounts receivable (42,042) (158,347) (116,415)
Inventories 113,001 69,839 (99,182)
Prepaid expenses and others 33,261 13,968 (29,127)
Accounts payable 121,157 (100,261) 254,410
Accrued expenses 240,079 246,490 39,228
- -----------------------------------------------------------------------------------------
Net cash used in operating activities (363,172) (1,193,293) (1,104,319)
- -----------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Capital expenditures - (30,647) (149,600)
Proceeds from sale of fixed assets 55,038 - -
Advances on note receivable - - (25,205)
- -----------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 55,038 (30,647) (174,805)
- -----------------------------------------------------------------------------------------
</TABLE>
F-6
<PAGE>
GAIA Technologies, Inc.
Statements of Cash Flows
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Year ended December 31, 1994 1993 1992
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Financing Activities:
Repayment of notes payable - (2,205) (450,240)
Proceeds from notes payable and long-term debt 248,893 900,086 701,162
Proceeds from sale of common stock 50,000 349,979 -
Proceeds from sale of preferred stock - - 1,000,000
- -----------------------------------------------------------------------------------------
Net cash provided by financing activities 298,893 1,247,860 1,250,922
- -----------------------------------------------------------------------------------------
Net increase (decrease) in cash (9,241) 23,920 (28,202)
Cash, at beginning of year 30,513 6,593 34,795
- -----------------------------------------------------------------------------------------
Cash, at end of year of year $ 21,272 $ 30,513 $ 6,593
=========================================================================================
</TABLE>
See accompanying summary of significant accounting policies
and notes to financial statements.
F-7
<PAGE>
GAIA Technologies, Inc.
Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
Nature of GAIA Technologies, Inc. (the
Business company), was incorporated on July
10, 1991, in the State of Delaware.
The company is a manufacturer of
porous pipe made from recycled rubber
and thermoplastic. Also, the company
has certain patented and unpatented
proprietary technology pertaining to
the manufacturing of wood
substitution and alternative building
materials (hard goods) which are to
be made from recycled rubber and
thermoplastic. As of October 2,
1995, the company has not integrated
this material substitution technology
into its manufacturing process.
However, the company is currently
building a manufacturing line to
produce hard goods and porous pipe
with production scheduled to begin in
December 1995.
Inventories Inventories consist of raw materials
and finished goods and are valued at
the lower of cost (first-in,
first-out) or market. Costs for
finished goods include raw materials,
direct labor and allocation of
manufacturing overhead costs.
Property, Property and equipment are stated at
Equipment and cost. Depreciation is computed using
Depreciation the straight-line method for both
financial and tax reporting purposes.
Investment in The company's investment in its 50%
Joint Venture owned joint venture is accounted for
using the equity method of
accounting, whereby, the investment
is carried at cost and adjusted for
the company's proportionate share of
undistributed earnings or losses.
Intangible Organization costs are being
Assets amortized by the straight-line method
over a five year period. Purchased
patents and trademarks are being
amortized by the straight-line method
over their remaining lives of five
years.
Revenue The company recognizes revenues when
Recognition the products are shipped.
Income Taxes Deferred income taxes result from the
temporary differences between the
financial statement and income tax
basis of assets and liabilities (see
Note 6).
F-8
<PAGE>
GAIA Technologies, Inc.
Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
Loss Per Loss per share amounts are based on
Share the weighted average number of common
shares outstanding for all periods
presented. Common stock equivalents
were not included in the loss per
share calculation for all years
presented because they are
anti-dilutive.
Concentration As of October 1994, the company had
of Credit cancelled all insurance coverage.
Risk
F-9
<PAGE>
GAIA Technologies, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. Financial Since the inception of the company,
Condition the company has incurred operating
and Going losses and at December 31, 1994, the
Concern company had a negative working
capital position of $2,047,650 and a
capital deficit of $2,729,691. Also,
during 1995 because of the working
capital position the company has had
limited manufacturing operations.
This situation raises substantial
doubt about the company's ability to
continue as a going concern.
Subsequent to December 31, 1994, the
company has entered into a letter of
intent to sell substantially all
assets of the company (see Note 11).
Absent of any additional debt or
equity financing, the company's
ability to continue as a going
concern is dependent on the
successful completion of the sale.
The financial statements do not
include any adjustments that might
result from the outcome of this
uncertainty.
2. Inventories At December 31, 1994 and 1993,
inventories consisted of the following:
1994 1993
-------------------------------------
Finished goods $ 94,142 $ 210,986
Raw material 4,914 1,071
-------------------------------------
Total $ 99,056 $ 212,057
=====================================
F-10
<PAGE>
GAIA Technologies, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
3. Property and At December 31, 1994 and 1993, property and equipment
Equipment consisted of the following:
following:
Estimated
Useful
Lives (Years) 1994 1993
----------------------------------------------------
Equipment and
machinery 7 $ 377,023 $ 481,356
Furniture and
fixtures 5-7 35,967 47,227
Vehicles 5 5,000 9,238
----------------------------------------------------
417,990 537,821
Less accumulated
depreciation (184,418) (166,376)
----------------------------------------------------
$ 233,572 $ 371,445
----------------------------------------------------
4. Related Party At December 31, 1994 and 1993, the company had accounts
Transactions payable to various stockholders totalling $54,220 and
$9,733, respectively, for various administrative expenses
incurred on behalf of the company.
At December 31, 1994, the company had dividends payable to
preferred stockholders totalling $9,328.
F-11
<PAGE>
GAIA Technologies, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
At December 31, 1994 and 1993, the company had various
notes payable primarily with related parties as follows:
1994 1993
-----------------------------------------------------------
Note payable to a stockholder due
on October 21,1995, interest payable
monthly at prime plus 2% (10.5% at
December 31, 1994), collateralized
by substantially all assets of the
company $ 778,000 $ 778,000
Unsecured note payable to a stock-
holder, due on demand, interest
payable at 8.5% 285,784 161,022
Unsecured note payable to a stock-
holder, due on demand, interest
at prime plus 1% (10% at December
31, 1994) 100,000 100,000
Unsecured convertible note payable
to a stock option holder, due on
demand, interest payable at 8.5%,
convertible into common stock at
approximately $60 per share 50,000 50,000
Note payable to a stockholder due on
demand, interest payable at 10%,
collateralized by the lawsuit
proceeds from the settlement
discussed in Note 11 75,000 -
Other, non-related 47,195 18,064
-----------------------------------------------------------
$1,335,979 $1,107,086
===========================================================
At December 31, 1994 and 1993, the company had long-term
debt agreements with a stockholder totalling $500,000 and
$480,000, respectively. The notes bear interest at 8.5%,
payable quarterly, with principal due September 13, 1998
and December 13, 1998. The notes are collateralized by
common stock warrants issued in association with the debt.
F-12
<PAGE>
GAIA Technologies, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
For the years ended December 31, 1994, 1993 and 1992, the
company incurred interest expense on these related party
notes totalling approximately $153,000, $102,000 and
$64,000, respectively, of which approximately $135,000 and
$49,000 remained unpaid at December 31, 1994 and 1993,
respectively.
5. Investment in Effective January 1, 1994, the company entered into a
Joint Venture joint venture agreement with a company that is a
stockholder of the company. The company has a 50% ownership
interest in the joint venture which is accounted for using
the equity method of accounting. The original purpose of
the joint venture was to sublicense the hard goods and
porous pipe technology on a national and international
basis. However, the primarily activity of the joint venture
to date has been the pursuit of a patent infringement case
in which the company is the plaintiff (see Note 11). The
company contributed the porous pipe licenses as their
initial contribution to the joint venture, which had no
book value at the time of contribution. The company's share
of net loss from the joint venture for the year ended
December 31, 1994 was $232,262, however, the company was
limited to recording a loss of $132,262 which represents
the net amount the company is potentially liable for as of
December 31, 1994.
The following is a summary of financial position at
December 31, 1994 and results of operations of the joint
venture for the year ended December 31, 1994:
Amount
---------------------------------------
Assets:
License agreements, net $ 187,614
Other 3,107
---------------------------------------
$190,721
---------------------------------------
F-13
<PAGE>
GAIA Technologies, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
Amount
----------------------------------------
Liabilities and deficit:
Note payable to venturer $ 200,000
Accounts payable, legal fees 255,245
Deficit (264,524)
----------------------------------------
$ 190,721
========================================
Revenues $ -
Expenses, primarily legal fees 464,524
----------------------------------------
Net loss $(464,524)
========================================
6. Income and Deferred taxes are determined based on the temporary
Payroll differences between the financial statement and income tax
Taxes basis of assets and liabilities as measured by the enacted tax
rates which will be in effect when these differences reverse.
The components of deferred income tax assets at December 31,
consist of the following:
1994 1993
---------------------------------------------------------
Deferred tax assets:
Allowance for doubtful accounts $ 21,000 $ -
Net operating loss carryforward 1,619,000 1,265,000
---------------------------------------------------------
Net deferred tax asset 1,640,000 1,265,000
Valuation allowance (1,640,000) (1,265,000)
---------------------------------------------------------
Total $ - $ -
=========================================================
At December 31, 1994 and 1993, the company provided a 100%
deferred tax asset valuation allowance because it is unlikely
that the company will recognize the deferred tax asset unless
the asset sale as described in Note 11 is completed.
At December 31, 1994, the company had net operating loss
carryfowards of approximately $4,763,000 available to reduce
taxable income through the year 2009. The net operating loss
carryforwards expire as follows:
F-14
<PAGE>
GAIA Technologies, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
Year ended December 31, Amount
2006 $ 794,000
2007 1,348,000
2008 1,579,000
2009 1,042,000
-------------------------------------
$4,763,000
=====================================
At December 31, 1994 and 1993, the company had past due
payroll taxes totalling $386,642 and $222,612,
respectively. The internal revenue service has a lien
filed on all assets of the company until these liabilities
have been satisfied.
7. Capital Stock, The company has 18,680 shares of authorized cumulative
Options And convertible redeemable preferred stock of which 18,680 and
Warrants 6,538 shares were outstanding at December 31, 1994 and
1993, respectively.
The redeemable preferred stock earns dividends at an
annual rate of 8% beginning September 1, 1994 payable
annually on August 31, of each year. The preferred
stockholders have voting rights and are entitled to
participate in dividends declared and paid to common
stockholders as if their preferred stock had been
converted into common stock.
The preferred stock has a liquidation preference of $53.53
per share plus all unpaid dividends, and is convertible at
the option of the holder into common stock, as determined
by dividing $53.53 by the conversion price, as computed in
accordance with the agreement.
The company is required, in accordance with the mandatory
redemption clause, to redeem 20% of the outstanding
preferred stock as of August 31, 1995 at a redemption
price of $53.53 plus all unpaid dividends, and 25% of the
remaining outstanding preferred stock at $53.53 plus all
unpaid dividends on August 31, of each year thereafter
through August 31, 1999. At any time after August 31,
1996, the company, at its option, may redeem any or all
outstanding preferred stock at $53.53 per share plus all
unpaid dividends.
As of October 2, 1995, the company did not have the
funds available to comply with the 20% mandatory
redemption as discussed above.
F-15
<PAGE>
GAIA Technologies, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
During the years ended December 31, 1994 and 1993, the
company issued common stock warrants totalling 3,822 and
7,786, respectively, in association with certain debt
financing. Each warrant allows the holder to purchase one
share of common stock at an exercise price of $19.62 and
$64.22, respectively, per share and expire on January 13,
2004 and September 13, 2003, respectively.
During 1993, the company issued common stock options
totalling 1,019 in association with certain debt
financing. Each option allows the holder to purchase one
share of common stock at an exercise price ranging from
$60.15 to $72.20 per share. The stock options have no
expiration date. No common stock options or warrants were
exercised during the years ended December 31, 1994, 1993
and 1992. Also, the company did not issue any stock
options or warrants during the year ended December 31,
1992.
At December 31, common stock was reserved for future
issuance as follows:
1994 1993
(Shares) (Shares)
---------------------------------------------------
Conversion of preferred stock to
common stock 6,538 18,681
Stock options outstanding 1,019 1,019
Stock Warrants outstanding 11,608 7,786
---------------------------------------------------
19,165 27,486
===================================================
8. Major For the years ended December 31, 1994, 1993 and 1992, the
Customers company had sales from four customers representing the
following percentage of total sales:
1994 1993 1992
---------------------------------------
Customer A 1% 31% 22%
Customer B 1% 16% 12%
Customer C 23% 7% 6%
Customer D 1% 17% 12%
=======================================
F-16
<PAGE>
GAIA Technologies, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
9. Miscellaneous During the years ended December 31, 1994 and 1993, the
Income company sold certain licensing rights for approximately
$119,000 and $100,000, respectively, and recorded it as
miscellaneous income.
10. Supplemental For the years ended December 31, 1994, 1993 and 1992, the
Cash Flow company paid interest totalling $66,350, $73,085 and
Information $48,803, respectively.
During the year ended December 31, 1994, 12,143 shares of
preferred stock were converted into 12,143 shares of
common stock at $53.53 per share.
At December 31,1 994, the company had dividends payable to
preferred stockholders totalling $9,328.
11. Subsequent On June 9, 1995, the company entered into a letter of
Events intent to sell substantially all of the assets of the
company to a publicly traded company for $2,500,000 in
cash and 1,666,667 shares of common stock of the publicly
traded company, which was trading at $.94 a share at
October 2, 1995. The company plans to use the proceeds to
retire existing debts of the company. In association with
the letter of intent, the company entered into debt
agreements, whereby the purchaser will loan the company up
to $1,100,000. The debt bears interest at 10%, is due July
1, 1998 and is collateralized by certain assets of the
company. On closing of the sale, the purchaser is expected
to forgive the amounts advanced under the loan agreements
as part of the cash portion of the purchase price. As of
October 2, 1995, the company had borrowed $1,020,000 in
accordance with these debt agreements.
In addition to the debt agreements discussed above, the
letter of intent allowed the company to enter into a third
debt agreement with the purchaser, whereby the purchaser
will loan the company up to $1,000,000 to be used
exclusively for the purchase of equipment and working
capital needs for the company's hard goods business. The
debt bears interest at 10%, is due July 1, 1998 and is
collateralized by assets purchased with the proceeds. On
closing of the sale, the purchaser is expected to forgive
the balance advanced to the company under this debt
agreement in consideration for the assets received by the
purchaser that were purchased with the proceeds. As of
October 2, 1995, the company had borrowed $318,592 in
accordance with this agreement.
F-17
<PAGE>
GAIA Technologies, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
In accordance with the letter of intent, the company will
receive a 10% licensing fee, as defined by the agreement
for a period of five years after the closing. Also, the
company will receive a 5% royalty on all revenues as
defined by the agreement for a period of fifteen years.
Additionally, at closing the company will grant the
purchaser an exclusive right and option exercisable at any
time during a two year period following the closing to
acquire the railroad crosstie business assets, as defined
by the agreement, with a one year extension at the option
of the purchaser. In exchange for the grant of the option,
the purchaser agrees to loan up to $1,500,000 to the
company to be used exclusively for the development of the
railroad crosstie technology. The loan will bear interest
at 10% and is due two years after the earlier of (1) the
date the purchaser provides notice that they will not
exercise their option or (2) the expiration of the option
period. The loan will be secured by 666,667 shares of the
common stock of the publicly traded company received from
the sale.
On March 16, 1995, the company won its patent infringement
case in which the company was the plaintiff and a final
judgment was entered on behalf of the company for
approximately $22,000,000. As of October 2, 1995, the case
and final judgment were under appeal. Subsequent to March
16, 1995, the main corporate defendant filed for
bankruptcy and the amount and timing of any collection is
uncertain. Accordingly, any receivable or gain resulting
from the judgment had not been recorded in the company's
financial statements as of December 31, 1994. The sale of
the assets discussed above does not entitle the purchaser
to any amounts or assets that the company may recover in
the future as a result of this judgment.
F-18
<PAGE>
EXHIBIT 2.0
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement"), is made and entered into
as of December 29, 1995, by and among NORTH AMERICAN TECHNOLOGIES GROUP, INC., a
Delaware corporation ("NATK"), GAIA TECHNOLOGIES, INC., a Texas corporation and
wholly-owned subsidiary of NATK ("Sub"), GAIA HOLDINGS, INC., a Delaware
corporation ("Gaia Holdings") formerly known as GAIA Technologies, Inc., THOR
VENTURES, L.C., a Texas limited liability company ("Thor Ventures"), and THOR
INDUSTRIES, INC., a Texas corporation ("Thor Industries;" collectively with Thor
Ventures and Gaia Holdings, the "Seller").
RECITALS
The parties hereto wish to provide for the purchase by Sub and sale by
Seller of substantially all of the assets and business of Seller (other than
certain "Excluded Assets," as defined herein), such that subsequent to such
purchase and sale, Sub will have acquired and can operate such assets and
businesses as a going concern, on the terms and conditions set forth in this
Agreement, and certain other matters as described herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS; CERTAIN RELATED MATTERS
1.1 PURCHASE AND SALE OF PURCHASED ASSETS. Subject to the terms and
conditions of this Agreement, and on the basis and in reliance on the
representations, warranties, covenants and agreements set forth in this
Agreement, at the Closing (as defined below), Seller shall sell, transfer,
convey, assign and deliver to Sub, and Sub shall purchase from Seller, as a
going concern, all of the "Purchased Assets," as such term is defined in Section
1.3 hereof.
1.2. PURCHASE PRICE. In exchange for Seller's sale, transfer, conveyance,
assignment and delivery of the Purchased Assets, and subject to the terms and
conditions of this Agreement, and on the basis and in reliance on the
representations, warranties, covenants and agreements set forth in this
Agreement, at the Closing, Sub shall:
(a) pay or cause to be paid to Seller an aggregate amount equal to
$2,450,000 (the "Cash/Note Portion of the Purchase Price"), of which:
(i) an amount equal to approximately $500,000 will be paid in the
form of forgiving the principal amount of the $500,000 Loan (the "$500,000
Loan"), an additional amount will be paid in the form of forgiving the
principal amount drawn down as of the Closing on the $600,000 Loan (the
"$600,000 Loan") (and no deductions from the Cash/Note Portion of the
Purchase Price shall be made to reflect a forgiveness of any interest that
may be due on either the $500,000 Loan, the $600,000 Loan or otherwise), as
such terms are defined in that certain
1
<PAGE>
Promissory Note, Security Agreement and First Option to Purchase Certain
Assets (the "$2,100,000 Note"), dated as of September 29, 1995, in the
principal amount of $2,100,000 issued by Seller in favor of NATK, and an
additional $24,500 shall be deducted therefrom to represent Seller's
portion of the Audit Fees (as defined in Section 4.1), and
(ii) the remaining balance of the Cash/Note Portion of the Purchase
Price will be paid at the Closing (the "Closing Payment"), at the option of
NATK, either (x) wholly in cash or (y) partially in cash and the remainder
thereof by the issuance at the Closing of a 90-day promissory note (the "90
Day Note") issued jointly and severally by Sub and NATK, in the principal
amount equal to the non-cash portion of the Closing Payment. Such 90 Day
Note shall be in the form of EXHIBIT E, attached hereto and made a part
hereof.
(b) cause to be issued and delivered to Seller an aggregate of 1,666,667
shares (the "NATK Shares") of common stock, par value $.001 per share, of NATK
("NATK Common Stock"), which shares shall be issued in the names and
denominations set out in Section 2.2(b)(ii) hereof, subject to the escrow
provisions set out in Escrow Agreement (as defined below);
(c) grant to those parties named therein those rights set forth in that
certain Gaia/Thor Royalty Agreement, substantially in the form of EXHIBIT A,
attached hereto and made a part hereof (the "Gaia/Thor Royalty Agreement");
(d) grant to those parties named therein those rights set forth in that
certain Gaia-TieTek License Agreement, substantially in the form of EXHIBIT B,
attached hereto and made a part hereof (the "Gaia-TieTek License Agreement");
and
(e) forgive, or otherwise assume and discharge Seller (to the satisfaction
of Seller) from any liability (including without limitation any liability for
payments of principal or interest) under or with respect to, the $500,000 Loan,
the $600,000 Loan and the $1,000,000 Loan (as defined below in the $2,100,000
Note, the "$1,000,000 Loan"), if any, such forgiveness, assumption and/or
discharge to be evidenced in a writing mutually acceptable to the parties;
provided, however, that if any interest or other payments shall have been made
with respect to any of the $500,000 Loan, the $600,000 Loan or the $1,000,000
Loan prior to the Closing, then at the Closing the aggregate amount of such
payments shall be repaid to Seller, or otherwise accounted for in a manner
mutually acceptable to the parties.
1.3 THE PURCHASED ASSETS AND THE EXCLUDED ASSETS.
(a) Purchased Assets. The assets to be purchased and sold at the Closing
(the "Purchased Assets") shall consist of all of the assets and business (other
than the Excluded Assets specified in Section 1.3(b) below) owned by Seller of
every kind, character and description, whether tangible, real, personal or
mixed, and wheresoever
2
<PAGE>
located, whether carried on the books of Seller or not carried in such books due
to having been expensed, fully depreciated or otherwise. The Purchased Assets
shall include without limitation the following (except in each such case, as are
expressly included in the Excluded Assets):
(i) all technologies, know-how, patents, service marks, copyrights,
trademarks, tradenames and similar intellectual property rights and assets
including without limitation those identified or referred to on SCHEDULE
1.3(A) attached hereto and made a part hereof;
(ii) all accounts receivable and or other rights to receive payment owing
to Seller ("Accounts Receivable") on the Closing Date (as defined below),
including without limitation those listed on SCHEDULE 1.3(A);
(iii) all of the inventories of products, work-in-progress, supplies and
materials owned by Seller on the Closing Date ("Inventory"), including
without limitation the Inventory listed on SCHEDULE 1.3(A), which Schedule
classifies the Inventory by category, quantity and item description;
(iv) all tangible personal property owned by Seller, including without
limitation furniture, fixtures, tools, machinery and equipment, computers,
computer software, data bases, computer disks, drives and other data
storage equipment and information, telephone systems, file cabinets and
desks (collectively, "Tangible Personal Property");
(v) all of Seller's rights in, to and under all contracts of Seller,
including without limitation those identified on SCHEDULE 1.3(A);
(vi) all of Seller's rights in, to and under all leases of tools,
furniture, machinery, equipment and other items of tangible personal
property entered into prior to the date hereof, all of which leases are
listed on SCHEDULE 1.3(A);
(vii) to the extent transferable or assignable by their express terms or
the terms of any law relating thereto, all franchises, licenses, permits,
certificates, approvals and other government authorizations necessary or
appropriate to own and operate the Purchased Assets, including without
limitation the exclusive right to use any and all trade marks, tradenames,
service marks, copyrights and similar rights relating to the business of
Seller, including among others the names, "GAIA Technologies," "Hard
Goods," and "Leaky Pipe;"
(viii) all of the Company's rights in, to and under all warranties and
service contract commitments;
3
<PAGE>
(ix) all rights in, to and under each contract, agreement, purchase order,
work order and commitment involving Seller, including without limitation
those listed on SCHEDULE 1.3(A) attached hereto and made a part hereof;
(x) all cash and cash equivalents on hand and in banks;
(xi) all prepaid expenses, prepaid insurance, deposits and other similar
items;
(xii) all books and records owned by Seller, including without limitation
all customer lists, credit records, computer records, contracts, leases,
sales representation agreements, sales agency agreements, marketing and
advertising materials, operating manuals, rental or lease payment record,
purchase orders, schedules of assets correspondence with vendors, books of
account, files, papers, books, and all other public and confidential
business records (collectively, the "Business Records"), whether in hard
copy form or electronically or magnetically stored;
(xiii) all rights, claims, lawsuits and choses in action against third
parties relating to the Purchased Assets arising out of transactions
occurring prior to the Closing Date (excluding the Retek Judgment, as
referred to on Schedule 1.3(b) hereto);
(xiv) all rights in, to and under all representations, warranties,
covenants and guaranties made or provided by third parties with respect to
the Purchased Assets; and
(xv) all goodwill of the business of Seller and the items identified in
this Section 1.3(a);
provided, however, that to the extent the assignment of any lease, claim, right,
benefit, warranty, service contract, commitment, or other contract, agreement,
purchase order, work order or other commitment referred to in this Section
1.3(a) shall require the consent of another party other than Seller or an
affiliate of a Seller, this Agreement shall not constitute an assignment thereof
if an attempted assignment would constitute a breach thereof, and in lieu
thereof Seller shall cooperate with Sub, and shall use its best efforts to cause
the affiliates of Seller to cooperate, as appropriate, in any reasonable
arrangement designed to provide to Sub the benefits thereunder.
Except as specifically listed on any Schedule referred to in this Section
1.3(a), all of such Purchased Assets shall be delivered free and clear of any
liens, claims, pledges, security interests or encumbrances of any kind, except
(i) liens for current taxes not yet due or payable and (ii) claims and liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers and materialmen.
4
<PAGE>
(b) Excluded Assets. Seller shall not sell, convey, assign, transfer or
deliver to Sub at the Closing, and Sub shall not be obligated to purchase (or
make any payments or otherwise discharge any liability or obligation of Seller
with respect to), those assets owned by Seller or any of them that are
identified on SCHEDULE 1.3(B), attached hereto and made a part hereof (the
"Excluded Assets"). As used herein, the term, "Purchased Assets" shall not
include any of the Excluded Assets, and to the extent that any item or asset is
identified both in Section 1.3(a) as a Purchased Asset and in this Section
1.3(b) as an Excluded Asset, such item shall constitute an Excluded Asset for
all purposes.
1.4 ASSUMED LIABILITIES. At the Closing, Sub shall assume and agree to
pay or perform only those obligations and liabilities of Seller expressly set
forth in this Section 1.4 (the "Assumed Liabilities"). Except for the Assumed
Liabilities, Sub shall not assume or be deemed to have assumed and shall not be
responsible for any other obligation or liability of Seller, direct or indirect,
known or unknown, choate or inchoate, absolute or continent, including without
limitation any and all obligations regarding any foreign, Federal, state or
local income, sales, use, franchise or other tax liabilities, and Seller shall
indemnify and hold Sub harmless from all such liabilities and costs incurred by
Sub and arising out of or attributable to any such liabilities, all in
accordance with Article VI hereof. The Assumed Liabilities are:
(a) The accounts payable of Seller arising in the ordinary course of
business (and not incurred in violation of any law or in breach of any duty)
that are listed on SCHEDULE 1.4 hereto, but only in the amounts set forth on
such Schedule ("Accounts Payable") and excluding all reserves for contingent
liabilities;
(b) The capitalized lease obligations listed on SCHEDULE 1.4, if any,
arising on or after the Closing (and not incurred in violation of any law or in
breach of any duty) (collectively, the "Lease Obligations"), but excluding all
reserves for contingent liabilities;
(c) All other liabilities and claims against Seller incurred by Seller in
the ordinary course of business as of the Closing Date that both relate
exclusively to the Purchased Assets and are listed on SCHEDULE 1.4 but only in
the amounts set forth on such Schedule and excluding all reserves for contingent
liabilities;
(d) The obligations or liabilities of Seller that relate to the Purchased
Assets and exclusively to periods, events or circumstances after the Closing
Date (and not to events or circumstances occurring prior to the Closing Date,
except as described in SECTION 1.4) with respect to such Purchased Assets;
provided, however, that: (i) each of such obligations or liabilities shall be
on the same terms and conditions as are in effect prior to and on the Closing
Date; (ii) Sub shall assume no obligation or liability in, to or under any
contract, agreement, purchase order or lease that is not specifically referenced
on any Schedule referred to in Section 1.3 and (iii) Sub assumes no obligation
or liability in, to or under any illegal agreement, illegal lease or illegal
purchase order, or any obligation or liability, the performance of which would
be illegal.
5
<PAGE>
1.5 ALLOCATION OF PURCHASE PRICE. Seller and Sub agree that for Federal
income tax purposes the values of the Purchased Assets and the Assumed
Liabilities shall be the Purchase Price ("Tax Purchase Price"). The allocation
of such values shall be based on a joint determination, made in good faith, of
the fair market values of the Purchased Assets and Assumed Liabilities, and such
allocation is intended by the parties to comply with Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder. Such allocation will be determined by Sub, insofar as possible, in
accordance with generally accepted accounting principles.
Notwithstanding anything provision of this Agreement or any document to be
executed in connection herewith that may suggest otherwise, the parties
acknowledge and agree that substantially all of the value of the Purchased
Assets and Assumed Liabilities rests with those Purchased Assets and Assumed
Liabilities acquired or to be acquired by Sub from Gaia Holdings. In connection
therewith, any portion of the Cash/Note Portion of the Purchase Price, the NATK
Shares or the other consideration provided in connection with the purchase of
the Purchased Assets that is being paid or delivered to any party other than
Gaia Holdings is being so paid at the request and instruction of Gaia Holdings.
Seller and Sub shall prepare within two weeks of the Closing Date and
timely file the applicable Form 8594 with their respective Federal income tax
returns for the taxable year that includes the Closing Date. The parties agree
to use the allocation set forth on the agreed-to allocation in all returns and
reports filed with the taxing authorities. Each party shall take no action
inconsistent with the allocation reported on the Form 8594. If the Internal
Revenue Service, or any other taxing authority, challenges the allocation of the
Purchase Price, the party whose return is being examined shall promptly notify
the other party and shall promptly keep the other party fully informed regarding
all developments with respect to the allocation of the Tax Purchase Price.
ARTICLE II
THE CLOSING
2.1 CLOSING AND CLOSING DATE. The closing ("Closing") of the purchase and
sale of the Purchased Assets and the related transactions shall take place at
the offices of counsel for Seller, Crain, Caton & James, 909 Fannin Street, 33rd
Floor, Houston, Texas 77010-1079, at 10:00 a.m., local time, on December 29,
1995, or at such other time and place and on such other date as the parties
hereto shall agree, but in no event shall such date be later than January 31,
1996, unless such date is extended by the mutual written agreement of the
parties hereto. The date of the Closing is referred to herein as the "Closing
Date."
6
<PAGE>
2.2 CLOSING TRANSACTIONS. At the Closing:
(a) General
(i) Bills of Sale. Each of the parties thereto shall execute and deliver
to the other party thereto a Bill of Sale and Assignment, substantially in
the forms of EXHIBITS C-1, C-2 and C-3, attached hereto and made a part
hereof (the "Bills of Sale"); and
(ii) Assignment of Patents. Seller shall execute and deliver that certain
Assignment of Patents, substantially in the form of EXHIBIT D, attached
hereto and made a part hereof (the "Assignment of Patents");
(b) Purchase Price
(i) The Closing Payment. Sub shall issue and deliver by certified check or
wire transfer an amount equal to cash portion of the Closing Payment, if
any, to the party or parties as Gaia Holdings shall instruct it. If the
Closing Payment is not paid in full in cash, as contemplated by the
provisions of Section 1.2(a) hereof, NATK and Sub shall issue the 90 Day
Note as contemplated by Section 1.2 (a) hereof. The remainder of the
Cash/Note Portion of the Purchase Price shall be applied as contemplated by
Section 1.2(a) hereof;
(ii) NATK Stock. NATK shall issue four certificates representing the NATK
Shares, in the names and number of shares as set forth below:
NUMBER
NAME OF SHARES
GAIA Holdings, Inc. 222,223 (Pledged Shares)
333,333
Thor Ventures, L.C. 444,444 (Pledged Shares)
666,667
The 222,223 NATK Shares and the 444,444 NATK Shares identified above as the
"Pledged Shares" are sometimes collectively referred to herein as the
Pledged Shares." At the Closing, NATK shall deliver to the Escrow Agent the
certificates representing the Pledged Shares pursuant to the Escrow
Agreement, and shall deliver to Gaia Holdings, the certificate representing
the 333,333 Shares and to Thor Ventures, the certificate representing the
666,667 Shares; and
(iii) Re-delivery of Promissory Notes. NATK shall re-deliver to Seller
the $2,100,000 Note marked "CANCELED;"
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(c) Crosstie Business Related Matters.
(i) NATK, TieTek (as defined below), each of Messrs. Aldrich and Sullivan,
and J. Denny Bartell shall execute and deliver that certain Crosstie
Purchase Option and Loan Agreement, dated as of December 29, 1995 (the
"Crosstie Purchase Option Agreement"), and the Crosstie Note (as defined in
the Crosstie Purchase Option Agreement);
(ii) Seller shall cause to be delivered to the Escrow Agent named in the
Escrow Agreement the certificates representing shares of capital stock of
TIETEK, Inc., a Texas corporation ("TieTek"), then held by NATK, as pledgee
of such shares, pursuant to the provisions of the Escrow Agreement; and
(iii) NATK, Sub, Seller, TieTek, the owners of all of the outstanding
shares of capital stock of TieTek, and the party named therein as the
Escrow Agent (the "Escrow Agent") shall execute and deliver that certain
Escrow Agreement, substantially in the form of EXHIBIT G, attached hereto
and made a part hereof (the "Escrow Agreement"), relating to the Pledged
Shares and the TieTek Shares as described or referred to in the Escrow
Agreement;
(d) Other License and Royalty Related Matters. Sub shall execute and
deliver the Gaia/Thor Royalty Agreement and the Gaia-TieTek License Agreement;
and
(e) Employment Agreements, Retek Equipment Purchase Option Matters and
Other Matters
(i) Each of Sub and William Aldrich ("Aldrich") shall execute and deliver
that certain Employment Agreement substantially in the form of EXHIBIT H,
attached hereto and made a part hereof (the "Aldrich Employment
Agreement"), and each of NATK and Aldrich shall execute and deliver the
Stock Option Agreement attached as an exhibit thereto;
(ii) Each of Sub and Dr. Henry W. Sullivan ("Sullivan") shall execute and
deliver that certain Employment Agreement substantially in the form of
EXHIBIT I, attached hereto and made a part hereof (the "Sullivan Employment
Agreement"), and each of NATK and Sullivan shall execute and deliver the
Stock Option Agreement attached as an exhibit thereto; and
(iii) Gaia Holdings and Sub shall execute and deliver that certain Option
Agreement, substantially in the form of EXHIBIT J, attached hereto and made
a part hereof (the "Retek Equipment Purchase Option").
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF NATK AND THE SUB. NATK and Sub
represent and warrant, jointly and severally, to Seller those matters set forth
on EXHIBIT K, attached hereto and made a part hereof.
3.2 REPRESENTATIONS AND WARRANTIES OF SELLER. Each of the Sellers
represent and warrant, jointly and severally, to NATK and the Sub those matters
set forth on EXHIBIT L, attached hereto and made a part hereof.
ARTICLE IV
COVENANTS
Each of the covenants of NATK and Sub or either of them contained in this
Article IV shall be deemed joint and several covenants and agreements of NATK
and Sub. Each of the covenants of Seller or any of them contained in this
Article IV shall be deemed joint and several covenants and agreements of all of
the Sellers.
4.1 AUDIT. The approximately $49,000 of fees and expenses ("Audit Fees")
incurred in connection with the preparation of certain audited financial
statements of Seller (or one or more of them) by NATK's independent auditors
shall be divided and paid 50% by NATK and 50% by Seller; provided, however, that
Seller's portion thereof shall be paid by the deduction of the Cash/Note Portion
of the Purchase Price (with such amount first being deducted from the principal
amount of the 90-day Note, if any), as provided in Section 1.2(a) hereof.
4.2 [Intentionally Omitted]
4.3 CORPORATE ACTION. At or before the Closing, Seller shall cause to
occur all corporate action necessary on behalf of any of them to effect the
purchase and sale of the Purchased Assets and the other transactions
contemplated by this Agreement to occur at or before the Closing. At or before
the Closing, NATK and Sub shall cause to occur all corporate action necessary on
behalf of any of them to effect the purchase and sale of the Purchased Assets
and the other transactions contemplated by this Agreement to occur at or before
the Closing.
4.4 CONFIDENTIALITY.
(a) Confidentiality of NATK-Related Information. With respect to
information concerning NATK, Sub or any transaction proposed by this Agreement
that is or has been made available to Seller, whether before or after the date
hereof, Seller agrees that it shall hold such information in strict confidence,
shall not use such information except for the sole purpose of evaluating the
transactions proposed hereby and shall not
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disseminate or disclose any of such information other than to its directors,
officers, employees, shareholders, affiliates, agents and representatives who
need to know such information for the sole purpose of evaluating the
transactions proposed hereby (each of whom shall be informed by Seller of the
confidential nature of such information and directed by Seller in writing to
treat such information confidentially) and shall not use (or permit any of its
directors, officers, employees, shareholders, affiliates, agents or
representatives to use) such information to the detriment (detriment to be
determined by NATK) of NATK, its directors, officers, employees or shareholders.
If the obligations of the parties under this Agreement are terminated pursuant
to the provisions of this Agreement, Seller shall immediately return all such
information, all copies thereof and all information prepared by Seller based
upon the same, upon NATK's request. The above limitations on use, dissemination
and disclosure shall not apply to information that (i) is learned by Seller from
a third party entitled to disclose it; (ii) becomes known publicly other than
through Seller or any party who received the same through Seller; (iii) is
required by law or court order to be disclosed by Seller; or (iv) is disclosed
with the express prior written consent thereto of NATK. Seller shall undertake
all reasonable steps to ensure that the secrecy and confidentiality of such
information will be maintained in accordance with the provisions of this Section
4.4(a).
(b) Confidentiality of Seller-Related Information. With respect to
information concerning Seller or any transaction proposed by this Agreement that
is made available to NATK, whether before or after the date hereof, NATK agrees
that it shall hold such information in strict confidence, shall not use such
information except for the sole purpose of evaluating the transactions proposed
hereby and shall not disseminate or disclose any of such information other than
to its directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the transaction proposed hereby (each of whom shall be informed by
NATK of the confidential nature of such information and directed by NATK in
writing to treat such information confidentially) and shall not use (or permit
any of its directors, officers, employees, shareholders, affiliates, agents or
representatives to use) such information to the detriment (detriment to be
determined by Seller) of Seller, its directors, officers, employees or
shareholders. If the obligations of the parties under this Agreement are
terminated pursuant to provisions of this Agreement, NATK shall immediately
return all such information, all copies thereof and all information prepared by
NATK based upon the same, upon Seller's request. The above limitations on use,
dissemination and disclosure shall not apply to information that (i) is learned
by NATK from a third party entitled to disclose it; (ii) becomes known publicly
other than through NATK or any party who received the same through NATK; (iii)
is required by law or court order to be disclosed by NATK; or (iv) is disclosed
with the express prior written consent thereto of Seller. NATK shall undertake
all reasonable steps to ensure that the secrecy and confidentiality of such
information will be maintained in accordance with the provisions of this Section
4.4(b).
(c) Nondisclosure. Neither of the parties hereto shall disclose to the
public or to any third party the existence of this Agreement or the transactions
proposed hereby
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as described herein or any other material non-public information concerning or
relating to the other party hereto, other than with the express prior written
consent of the other party hereto, except as may be required by law or court
order or to enforce the rights of such disclosing party under this Agreement, in
which event the contents of any proposed disclosure shall be discussed with the
other party before release; provided, however, that notwithstanding anything to
the contrary contained in this letter, either party may disclose this letter to
any of its directors, officers, employees, shareholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the transactions proposed hereby, and to any party whose consent is
required in connection with any such proposed transaction. The parties
anticipate issuing a mutually acceptable, joint press release announcing the
Closing of the purchase and sale of the Purchased Assets and the related
transactions.
4.5 [Intentionally Omitted]
4.6 CONSENTS. NATK, Sub and each Seller shall cooperate and use their
best efforts to obtain, prior to the Closing, all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with any Seller as are necessary for the consummation
of the transactions contemplated by this Agreement; provided, however, that the
parties shall not be required to seek the consent, approval or authorization of
the landlords under, or otherwise amend the written agreements relating to, the
lease agreements pursuant to which any Seller leases any real or personal
property.
4.7 FILINGS. NATK, Sub and each Seller shall, as promptly as practicable,
make any required filings and any other required submissions, under any law,
statute, order rule or regulation with respect to the transactions contemplated
by this Agreement and shall cooperate with each other with respect to the
foregoing.
4.8 ALL REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement and to the fiduciary duties and obligations of the board of directors
or similar group governing NATK, Sub and each Seller, each of the parties to
this Agreement shall use all reasonable efforts to take, or cause to be taken,
all action and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations, or to remove any injunctions or
other impediments or delays, legal or otherwise, as soon as reasonably
practicable, to consummate the transactions contemplated by this Agreement.
4.9 PUBLIC ANNOUNCEMENTS. NATK and Seller shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Agreement or the other transactions contemplated by this
Agreement and shall not issue any other press release or make any other public
statement relating to the same without prior consultation with the other
parties, except as may be required by law or, with respect to NATK, by
obligations pursuant to any listing agreement with an national securities
exchange. Notwithstanding the foregoing or anything in this Agreement to the
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contrary, NATK may inform its financial advisors and placements agents, any of
NATK's investors or potential investors, and any purchaser representative or
other advisor of any such investor or potential investor of the progress of the
transactions contemplated by this Agreement and the proposed terms and
conditions of this Agreement.
4.10 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt notice to
NATK, and NATK shall give prompt notice to Seller, of (a) the occurrence or non-
occurrence of any event, the occurrence or non-occurrence of which would cause
any of its representations or warranties in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing and (b) any
material failure of Seller, on the one hand, or NATK or the Sub, on the other
hand, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement; provided,
however, the delivery of any notice pursuant to this Section shall not limit or
otherwise affect the remedies available to the party receiving such notice under
this Agreement.
4.11 EXPENSES. Except as otherwise expressly provided herein (including
without limitation the provisions of Section 4.1 hereof), all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
transactions contemplated hereby are consummated. Seller shall pay any and all
fees and expenses that may be due McKenna & Company or any of its affiliates in
connection with any of the transactions contemplated by this Agreement.
4.12. REGISTRATION RIGHTS. (a) Conditional Right to Piggyback. Subject
to the provisions and conditions of this Section 4.12, if NATK (sometimes
referred to in this Section as the "Company") proposes to register shares of
NATK Common Stock under the Securities Act of 1933, as amended (the "Securities
Act"), and if the registration form to be used may be used for the registration
of the shares of NATK Common Stock to be received by Seller in connection with
the purchase and sale of the Assets as provided in Section 1.2(b) of this
Agreement (the "Newly Issued Shares") (such registration event being referred to
herein as a "Piggyback Registration"), NATK shall, as promptly as reasonably
practical, give written notice to each of the holders of such Newly Issued
Shares (the "Shareholders") and will include in such Piggyback Registration,
subject to the allocation provisions below, all Newly Issued Shares with respect
to which NATK has received written requests (from the Shareholders owning of
record such Newly Issued Shares) for inclusion within 20 days after NATK's
mailing of such notice. The rights granted to the Seller under this Section
4.12(a) shall be exerciseable by any of them only during the period beginning
six (6) months following the Closing Date and ending three (3) years and six (6)
months after the Closing Date (the "Registration Rights Period"). The term
"Newly Issued Shares" shall include any Pledged Shares that are released or to
be released from the pledge thereof pursuant to the Crosstie Note during the
Registration Rights Period.
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(b) Demand Registration. During the Registration Rights Period and only
if NATK does not then have a registration statement filed with the Securities
and Exchange Commission ("SEC") or an effective registration statement,
Shareholders holding 75% or more of the Newly Issued Shares (which, for purposes
of such calculation, shall include the Pledged Shares) may request in writing
that the Company register such Newly Issued Shares under the Securities Act (a
"Registration Request"). The Company shall use all reasonable efforts to
expedite and effect the registration of such Newly Issued Shares that are the
subject of the Registration Request (the "Registrable Shares"). The Company may
include in any such registration (x) similar securities held by other parties
with registration rights and (y) similar securities that the Company desires to
register (provided, however, that the Newly Issued Shares shall, to the maximum
extent the Company is then permitted to do so, always have first priority with
respect to any registration pursuant to this Section 4.12(b)). The Company
shall have up to 180 days from the date of the Registration Request to file a
registration statement with the SEC. Notwithstanding anything herein to the
contrary any registration pursuant to this Section 4.12(b) (a "Demand
Registration") will not be deemed to have been effected unless it has become
effective and remained effective no less than 90 days (unless terminated with
the consent of the holders of such Registrable Shares); provided further, than
any such registration that does not become effective after the Company has filed
a registration statement in accordance with the provisions of this Section
4.12(b) solely by reason of the refusal to proceed of the holders of such
Registrable Shares that have made a Registration Request, including failure to
comply with the provisions of this Agreement (other than any refusal to proceed
based upon the advice of counsel to such holders that the registration
statement, or the prospectus contained therein, contains an untrue statement of
a material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in the light of the
circumstances then existing, or that such registration statement or such
prospectus, or the distribution contemplated thereby, otherwise violates or
would, if such distribution using such prospectus took place, violate any
applicable state or federal securities law) shall be deemed to have been
effected by the Company at the request of such holders. Notwithstanding
anything herein to the contrary, the NATK shall not be obligated to perform in
the aggregate more than one Demand Registration under the provisions of this
Section 4.12(b).
(c) Expenses. NATK will pay the Registration Expenses (as defined below),
but the Underwriting Commissions (as defined below) will be shared by NATK and
the holders of the Newly Issued Shares that are included in the Piggyback
Registration or a Demand Registration (each sometimes referred to as a
"Securities Registration" herein) in proportion to any securities included on
their behalf.
(d) Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of NATK, and the managing
underwriters advise NATK that in their opinion the number of shares of NATK
Common Stock requested to be included in such registration exceeds the number
that can be sold in such offering, at a price reasonably related to fair value,
NATK will allocate the shares of
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Common Stock to be included as follows: first, the securities NATK proposes to
sell on its own behalf; and second, other shares of NATK Common Stock (including
without limitation the Newly Issued Shares owned of record by the Shareholders)
requested by any shareholders or other parties (with rights against NATK
relating to such registration) to be included in such registration, pro rata on
the basis of the number of shares of NATK Common Stock owned of record by the
parties (other than NATK) desiring to have their shares so included (or, at the
sole option and in the discretion of NATK, any other reasonable method it deems
equitable, so long as such equitable method is determined by NATK in good faith,
primarily taking into account any contractual or other legal obligations of NATK
with respect thereto). The allocation priority specified above may not be
changed to lower the priority given to the Newly Issued Shares held by the
Shareholders to a priority below that of any other shareholder who acquired
equity securities of the Company as a result of the purchase by the Company (or
its affiliates) of the assets of another organization, or the acquisition by the
Company (or its affiliates) of another organization, whether by merger,
consolidation, stock purchase or otherwise.
(e) Priority on Secondary Registrations. If a Piggyback Registration is
initiated as an underwritten secondary registration on behalf of holders of NATK
Common Stock, and the managing underwriters advise NATK in writing that in their
opinion the number of shares of NATK Common Stock requested to be included in
such registration exceeds the number that can be sold in such offering, at a
price reasonably related to fair value, NATK will allocate the securities to be
included as follows: first, the shares of NATK Common Stock requested to be
included by the holders initiating such registration; and second, other shares
of NATK Common Stock (including without limitation the Newly Issued Shares owned
of record by the Shareholders) requested by any shareholders or other parties
(with rights against NATK relating to such registration) to be included in such
registration, pro rata on the basis of the number of shares of NATK Common Stock
owned of record by the parties (other than NATK) desiring to have their shares
so included (or, at the sole option and in the discretion of NATK, any other
reasonable method it deems equitable, so long as such equitable method is
determined by NATK in good faith, primarily taking into account any contractual
or other legal obligations of NATK with respect thereto). The allocation
priority specified above may not be changed to lower the priority given to the
Newly Issued Shares held by the Shareholders to a priority below that of any
other shareholder who acquired equity securities of the Company as a result of
the purchase by the Company (or its affiliates) of the assets of another
organization, or the acquisition by the Company (or its affiliates) of another
organization, whether by merger, consolidation, stock purchase or otherwise.
(f) Selection of Underwriters. In any Securities Registration, the
selection of investment banks(s), underwriters and manager(s), and the other
decisions regarding the underwriting arrangements and related matters for the
offering, shall be made exclusively by NATK.
(g) Registration Procedures. Whenever a holder of Newly Issued Shares
exercises its rights under this Section 4.12 (each an "Exercising Shareholder"),
NATK
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will, as expeditiously as possible:
(i) furnish to each Exercising Shareholder such number of copies of
the applicable registration statement, each amendment and supplement thereto and
the prospectus included in such registration statement (including each
preliminary prospectus), and such other documents as such Exercising Shareholder
may reasonably request in order to facilitate the disposition of the Newly
Issued Shares owned of record by such Exercising Shareholder to be included in
such registration statement;
(ii) use its best efforts to register or qualify such Newly Issued
Shares under such other securities or blue sky laws of such jurisdictions as the
managing underwriter(s) may request; and
(iii) cause such Newly Issued Shares to be listed or included on
securities exchanges on which shares of NATK Common Stock are then listed or
included.
(h) Indemnification.
(i) NATK will indemnify, to the extent permitted by law, each
Exercising Shareholder against all losses, claims, damages, liabilities and
expenses arising out of or resulting from any untrue or alleged untrue statement
of material fact contained in any registration statement, prospectus or
preliminary prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to NATK by such Exercising Shareholder
expressly for use therein or by any such Exercising Shareholder's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after NATK has furnished such Exercising Shareholder with a
sufficient number of copies of the same.
(ii) In connection with any registration statement in which an
Exercising Shareholder is participating, each such Exercising Shareholder will
furnish to NATK in writing such information as is reasonably requested by NATK
for use in any such registration statement or prospectus and will indemnify, to
the extent permitted by law, NATK, its directors and officers and each person
who controls NATK (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or alleged
untrue statement of material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or prospectus
or any amendment thereof or supplement thereto or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in, or omitted from, information so furnished
in writing by such holder specifically for use in preparing the registration
statement. Notwithstanding the foregoing, the liability of an Exercising
Shareholder under this subsection (h)(ii) shall be limited to an amount equal to
the net proceeds actually received
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by such Exercising Shareholder from the sale of such Exercising Shareholder's
Newly Issued Shares covered by the registration statement.
(iii) Any party entitled to indemnification under this subsection (h)
will: (x) give prompt notice to the indemnifying party of any claim with
respect to which such indemnified party seeks indemnification and (y) unless in
such indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party will not be subject to any liability for any settlement
made without its consent (but such consent will not be unreasonably withheld).
An indemnifying party who is not entitled, or elects not, to assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which case such
indemnifying party shall pay the fees and expenses of a sufficient number of
counsel so that such conflicts are resolved.
(i) Compliance with Underwriting Arrangements. No Shareholder may
participate in any Securities Registration unless such Shareholder: (i)
agrees to sell his Newly Issued Shares on the basis provided in any underwriting
arrangements approved by NATK and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
(j) Limitations on NATK's Obligations. In connection with its obligations
to register any of the Newly Issued Shares as provided in this Section 4.12,
NATK shall have no obligation (i) to assist or cooperate in the offering or
disposition of such Newly Issued Shares, (ii) except as expressly provided in
this Section 4.12, to indemnify any Shareholder, (iii) to obtain a commitment
from an underwriter relative to the sale of such Newly Issued Shares, or (iv) to
include such Newly Issued Shares within an underwritten offering of NATK
conducted on a firm basis.
(k) Definitions. As used in this Section 4.12, (x) "Registration
Expenses" means all expenses incident to NATK's performance of or compliance
with the provisions of this Section 5.12 and the registration of any other
securities in connection therewith, including without limitation all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges, and fees and
disbursements of counsel for NATK and all independent certified public
accountants, underwriters (other than Underwriting Commissions) and other
persons retained by NATK in connection therewith, and (y) "Underwriting
Commissions" means all underwriting discounts or commissions relating to the
sale of securities of NATK, but excludes any expenses reimbursed to
underwriters.
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(l) Limited Transferability or Assignability of Registration Rights.
Notwithstanding anything in this Section 4.12 or elsewhere in this Agreement to
the contrary, none of the rights granted to any holder of Newly Issued Shares
under this Section 4.12 shall be assignable or transferable by such Shareholder,
nor shall any such rights inure to the benefit of such Shareholder's assigns or
beneficiaries or any other party, including without limitation any subsequent
beneficial or record holder of any of the Newly Issued Shares or any interest
therein, without the prior written consent thereto of NATK (which consent shall
not be unreasonably withheld); provided, however, that such rights may be
transferred or assigned, without the prior written consent thereto of NATK, to
any current shareholder of Gaia Holdings or any member of Thor Ventures, or to
the spouse or children of any such shareholder or member who is a natural
person, to any trust the sole beneficiaries of which are any of such
shareholder's or member's spouse or children, and upon the death of any such
shareholder or member, to his or her estate; and provided further, that such
rights may not be further transferred or assigned to any other party or parties.
4.13 DISCLOSURE DOCUMENTS. Each Seller shall supply to NATK the necessary
information in writing, or cause the necessary information to be supplied in
writing, relating to Seller for inclusion in any documents to be filed with the
Securities and Exchange Commission or any regulatory agency in connection with
the transactions contemplated by this Agreement.
4.14. ONE DIRECTOR NOMINEE. NATK shall use its best efforts to cause Mr.
Aldrich (or another nominee selected by Sellers then holding a majority of the
NATK Shares and reasonably acceptable to NATK) to be elected or appointed to the
Board of Directors of NATK not later than the first regularly scheduled NATK
Board of Directors meeting in 1996. In addition, from the date hereof and
continuing until the Crosstie Purchase Option (as defined in the Crosstie
Purchase Option Period) is either exercised or has expired (which occurs first),
NATK shall use its best efforts to cause the name of Mr. Aldrich (or another
nominee selected by Sellers then holding a majority of the NATK Shares and
reasoanbly acceptable to NATK) to be included in the list of nominees for the
Board of Directors of NATK in the each proxy statement delivered to the
stockholders of NATK in connection with the each meeting of stockholders of NATK
at which directors are to be elected. If, on or before the date such proxy is
prepared in preliminary form, such nominee is then (for any reason) not an
employee of NATK, Sub or any of its affiliates, then, at the election of
Sellers, NATK shall use its best efforts to substitute for such nominee the name
of another substitute nominee (as selected by Sellers then holding a majority of
the NATK Shares) mutually acceptable to such Sellers and NATK in such list of
director nominees.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE CLOSING TRANSACTIONS
5.1 CONDITIONS TO SELLER'S OBLIGATIONS. The obligations of each Seller to
consummate the purchase and sale of the Purchased Assets and the other
transactions
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contemplated to be consummated by it at the Closing (collectively, the "Closing
Transactions") are subject to the satisfaction (or waiver by Seller) at or prior
to the Closing (or at such other time prior thereto as may be expressly provided
in this Agreement) of each of the following conditions:
(a) Seller shall have had the opportunity to conduct a due diligence
review of the books, records, operations, physical plant and facilities,
contracts and other documents of NATK and nothing shall have come to its
attention that would reasonably be expected to have a Material Adverse Effect on
NATK on and after the Closing.
(b) The representations and warranties of NATK and the Sub set out in this
Agreement shall be true and correct in all material respects, and no fact or
circumstance shall have come to the attention of Seller that is not disclosed in
this Agreement or any document or other writing delivered by NATK to Seller
prior to the date of this Agreement that could reasonably be expected to have a
Material Adverse Effect on NATK or the consideration to be received by the
Seller in connection with the transactions contemplated hereby to be consummated
at the Closing.
(c) Each of NATK and the Sub shall have complied in a timely manner and in
all material respects with their respective covenants and agreements set out in
this Agreement.
(d) All director, shareholder, lender, lessor and other parties' consents
and approvals, as well as all filings with, and all necessary consents or
approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the purchase and sale of the Purchased Assets and the other transactions at the
Closing shall have been secured, including without limitation that this
Agreement shall have been approved by the affirmative vote of the owners of each
Seller in accordance with applicable law.
(e) No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental authority that prohibits or
restricts the consummation of the purchase and sale of the Assets at the Closing
or the related transactions.
(f) The Closing shall have occurred not later than January 31, 1996,
unless such date is extended by the mutual written agreement of the parties
hereto.
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5.2 CONDITIONS TO NATK'S AND THE SUB'S OBLIGATIONS.
The obligations of NATK and the Sub to consummate the Closing Transactions
at the Closing are subject to the satisfaction (or waiver by NATK) at or prior
to the Closing (or at such other time prior thereto as may be expressly provided
in this Agreement) of each of the following conditions:
(a) NATK shall have been provided with an executed copy of each of those
certain Termination of License Agreements, in the form of EXHIBIT M-1 and
EXHIBIT M-2, attached hereto and made a part hereof, and that certain
Termination of Sublicense, in the form of EXHIBIT N, attached hereto and made a
part hereof, and the parties thereto shall have certified to NATK at the Closing
that each such License Termination Agreement is in full force and effect, and
has not been amended, altered or terminated as of the Closing.
(b) NATK shall have had the opportunity to conduct a due diligence review
of the books, records, operations, physical plant and facilities, contracts and
other documents of each Seller and nothing shall have come to its attention that
would reasonably be expected to have a Material Adverse Effect on any Seller or
the Purchased Assets (taken as a whole) on and after the Closing.
(c) None of the owners of any Seller shall have filed with a Seller a
written objection to the sale of the Purchased Assets, as required by Article
5.12A(1)(a) of the TBCA or the applicable provisions of any other law in order
for such owner to perfect the right to dissent from such proposed action.
(d) NATK shall be satisfied that the acquisition of the Purchased Assets
pursuant to this Agreement is a tax-free transaction to NATK under the Code (as
defined in this Agreement).
(e) The representations and warranties of Seller set out in this Agreement
shall be true and correct in all material respects, and no fact or circumstance
that is not disclosed in this Agreement or any document or other writing
delivered by Seller to NATK prior to the date of this Agreement shall have come
to the attention of NATK that could reasonably be expected to have a Material
Adverse Effect on Seller or any of them or the Purchased Assets (take as a
whole).
(f) Seller shall have complied in a timely manner and in all material
respects with their covenants and agreements set out in this Agreement.
(g) All director, shareholder, lender, lessor and other parties' consents
and approvals, as well as all filings with, and all necessary consents or
approvals of, all federal, state and local governmental authorities and
agencies, as are required under this Agreement, applicable law or any applicable
contract or agreement (other than as contemplated by this Agreement) to complete
the transactions contemplated to occur at
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the Closing shall have been secured, including without limitation that this
Agreement shall have been approved by the affirmative vote of the owners of each
Seller by the requisite vote, if any, in accordance with the TBCA or other
applicable laws.
(h) No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, entered, promulgated or enforced by
any court of competent jurisdiction or governmental authority that prohibits or
restricts the consummation of the purchase and sale of the Purchased Assets at
the Closing or the related transactions.
(i) The Closing shall have occurred not later than January 31, 1996,
unless such date is extended by the mutual written agreement of the parties
hereto.
(j) NATK shall be satisfied that the offer and issuance of the shares of
NATK Shares to Seller in connection with the transactions contemplated to occur
at the Closing are exempt from the registration provisions of the Securities Act
and similar provisions under applicable state securities laws.
(k) Each of the shareholders of Gaia Holdings and Thor Industries, and
each of the members of Thor Ventures, shall have executed and delivered to NATK
at or prior to the Closing a copy of an investment representation letter
("Investment Representation Letter") substantially in the form of EXHIBIT O,
attached hereto and made a part hereof.
ARTICLE VI
INDEMNIFICATION
6.1 INDEMNIFICATION BY SELLER. Each Seller jointly and severally agrees
to indemnify, defend and hold harmless, NATK, Sub and their affiliates,
officers, directors, employees, contractors and agents (collectively, NATK, Sub
and such other parties are being referred to as the "NATK Parties") against and
from any and all taxes, penalties, interest, claims, suits, causes of action
(recognized now or at any later time), liabilities, responsibilities, damages,
losses, costs, assessments and expenses, including without limitation reasonable
attorney's fees and other expenses of defending any actions or claims, amounts
of judgments and amounts paid in settlement (collectively, all of the foregoing
being referred to herein as "Costs") incurred by, asserted against or imposed
upon any of the NATK Parties arising out of or attributable to:
(a) any breach of any representation, warranty, covenant or agreement made
by Seller herein or in any schedule, exhibit, certificate, document or agreement
furnished by Seller in connection herewith (including without limitation any of
the documents to be executed and delivered at the Closing), or made by a
shareholder or member of any Seller in such party's Investment Representation
Letter;
(b) Any nonfulfillment of any agreement hereunder or entered into in
connection herewith by Seller or by a shareholder or member of any Seller; or
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(c) Any claim, known or unknown, arising out of, or by virtue of, or based
upon any Seller's operation of any Purchased Asset prior to the Closing.
6.1 INDEMNIFICATION BY NATK AND SUB. NATK and Sub jointly and severally
agree to indemnify, defend and hold harmless, each Seller and their affiliates,
officers, directors, employees, contractors and agents (collectively, each
Seller and such other parties are being referred to as the "Seller Parties")
against and from any and all Costs incurred by, asserted against or imposed upon
any of the Seller Parties arising out of or attributable to:
(a) any breach of any representation, warranty, covenant or agreement made
by NATK or Sub herein or in any schedule, exhibit, certificate, document or
agreement furnished by NATK or Sub in connection herewith or relating hereto
(including without limitation any of the documents to be executed and delivered
at the Closing);
(b) Any nonfulfillment of any agreement hereunder or entered into in
connection herewith by NATK or Sub; or
(c) Any claim, known or unknown, arising out of, or by virtue of, or based
upon any NATK's or Sub's operation of any Purchased Asset after the Closing.
6.3 CERTAIN INDEMNIFICATION-RELATED MATTERS. Any party entitled to
indemnification under the provisions of this Article VI will: (a) give prompt
notice to the indemnifying party of any claim with respect to which such
indemnified party seeks indemnification and (b) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled, or elects not, to assume the defense of
a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which case such
indemnifying party shall pay the fees and expenses of a sufficient number of
counsel so that such conflicts are resolved.
ARTICLE VII
TERMINATION
7.1 TERMINATION. This Agreement may be terminated and the purchase and
sale of the Purchased Assets and the other Closing Transactions may be abandoned
at any time prior to the Closing:
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(a) by mutual written consent of the board of directors of NATK, the Sub
and Seller; or
(b) by either of NATK or Seller:
(i) if the Closing shall not have occurred on or before January 31,
1996, unless such date is extended by the mutual written agreement of the
parties hereto, and in such event, only until the date the Closing has been
extended; provided, however, that the right to terminate this Agreement under
this Section 7.1(b)(i) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before that date; or
(ii) if any court of competent jurisdiction, or any governmental
body, regulatory or administrative agency or commission having appropriate
jurisdiction shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall not have been overturned; or
(iii) if the board of directors or managers (as appropriate) of any
Seller, in the exercise of its fiduciary duties and after consultation with
counsel, shall have withdrawn its recommendation to such corporation's
shareholders or such organization's members that they approve of this Agreement,
or if the board of directors of NATK, in the exercise of its fiduciary duty and
after consultation with counsel, shall have failed to approve of the
consummation of the transactions contemplated hereby.
7.2 NOTICE AND EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 7.1, written notice thereof
shall forthwith be given to the other party or parties specifying the provision
pursuant to which such termination is made, and this Agreement shall forthwith
become void and have no effect without any liability on the part of any party or
its directors, officers or shareholders, except for the provisions of this
Section 7.2 and Sections 4.4 and 4.9, which shall survive any termination of
this Agreement. Nothing contained in this Section 7.2 shall relieve any party
from any liability for any breach of this Agreement.
7.3 EXTENSION; WAIVER. Any time prior to the Closing, the parties may (a)
extend the time for the performance of any of the obligations or other acts of
any other party under or relating to this Agreement; (b) waive any inaccuracies
in the representations or warranties by any other party or (c) waive compliance
with any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any other party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
7.4 AMENDMENT AND MODIFICATION. This Agreement may not be amended except
by an instrument in writing signed by all of the parties hereto.
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ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of the parties hereto shall not be deemed waived
or otherwise affected by any investigation made by any other party hereto. Each
representation and warranty shall continue for a period of three (3) years after
the Closing Date. The provisions of this Section shall have no effect upon any
other obligation of the parties, whether to be performed before or after the
Closing.
8.2 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows (or at such other address or facsimile number
for a party as shall be specified by like notice):
(a) if to Seller, at: with a copy to:
Thor Ventures, L.C./
Gaia Holdings, Inc. Jeffrey Horowitz
4710 Bellaire Blvd., Suite 301 Crain, Caton & James
Bellaire, Texas 77401 909 Fannin, Suite 3300
Attention: Henry W. Sullivan/ Houston, Texas 77010
William T. Aldrich Fax: (713) 658-1921
Fax: (713) 661-1677
and with a copy to:
J. Denny Bartell
808 Travis, Suite 1001
Houston, Texas 77002
(b) if to NATK or the Sub, at: with a copy to:
North American Technologies Theodore J. Lee
Group, Inc. 3104 Edloe, Suite 204
4710 Bellaire Blvd., Suite 301 Houston, Texas 77027
Bellaire, Texas 77401 Fax: (713) 623-0990
Attention: Tim B. Tarrillion
Fax: (713) 662-3728
NATK and the Sub may rely on any notice it receives in accordance with the above
provisions from Thor Ventures or Gaia Holdings as a notice from Seller. Each
Seller may rely on any notice it receives in accordance with the above
provisions from NATK as a notice from NATK and the Sub.
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8.3 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, including all Exhibits
and Schedules hereto, (a) constitutes the entire agreement among the parties
with respect to its subject matter and supersedes all prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to such subject matter and (b) shall not be assigned by operation of law
or otherwise, provided that, subject to any approvals required by applicable
law, NATK or the Sub may assign its respective rights and obligation to any
majority-owning or owned, direct or indirect, parent, subsidiary or subsidiaries
of NATK, but no such assignment shall relieve NATK or the Sub of its obligations
under this Agreement.
8.4 BINDING EFFECT; BENEFIT. This Agreement shall inure to the benefit of
and be binding upon the parties and their respective successors and assigns.
Nothing in this Agreement is intended to confer on any person other than the
parties to this Agreement or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
8.5 HEADINGS. The descriptive headings of the articles, sections,
subsections, exhibits and schedules of this Agreement are inserted for
convenience only, do not constitute a part of this Agreement and shall not
affect in any way the meaning or interpretation of this Agreement.
8.6. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Texas, without regard to the laws that
might otherwise govern under principles of conflicts of laws applicable thereto.
8.8 ARBITRATION. In the event any party believes any other party hereto
has committed a breach of any provision of this Agreement or such parties cannot
agree on an interpretation of one or more of the provisions of this Agreement,
such parties agree to first meet in Houston, Texas, and discuss the same, and
attempt in good faith to resolve such matter. Any such matter, controversy or
claim arising out of or relating to this Agreement, or the breach of any
provision hereof, that cannot otherwise be resolved between the relevant parties
in such a meeting and discussion shall be settled by arbitration in Houston,
Texas, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and judgment upon any award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction. Any award
rendered may include an award of reasonable attorneys' fees, costs and expenses.
8.9 COURTS IN HARRIS COUNTY, TEXAS TO HAVE EXCLUSIVE JURISDICTION. THE
PARTIES AGREE THAT THE FEDERAL AND STATE COURTS LOCATED IN HARRIS COUNTY, TEXAS
SHALL HAVE EXCLUSIVE JURISDICTION OVER AN ACTION BROUGHT TO ENFORCE THE RIGHTS
AND OBLIGATIONS CREATED IN OR ARISING FROM THIS AGREEMENT TO ARBITRATE, AND EACH
OF THE
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PARTIES HERETO IRREVOCABLY SUBMITS TO THE JURISDICTION OF SAID COURTS.
NOTWITHSTANDING THE ABOVE, APPLICATION MAY BE MADE BY A PARTY TO ANY COURT OF
COMPETENT JURISDICTION WHEREVER SITUATED FOR ENFORCEMENT OF ANY JUDGMENT AND THE
ENTRY OF WHATEVER ORDERS ARE NECESSARY FOR SUCH ENFORCEMENT.
8.10 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void, unenforceable or against its regulatory policy, the
remainder of this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
8.11. FURTHER ASSURANCES. From time to time hereafter and without further
consideration, each of the parties hereto shall execute and deliver such
additional or further instruments of conveyance, assignment, assumption and
transfer, and take such actions, as any other party hereto may reasonably
request in order to more effectively convey and transfer to such other party the
assets, rights or other property to be sold or conveyed to such other party
hereunder or as shall be reasonably necessary or appropriate in connection with
the carrying out of such other party's obligations hereunder or the purposes of
this Agreement.
8.12 CERTAIN DEFINITIONS. As used herein:
(a) "affiliate" shall have the meanings ascribed to such term in Rule 12b-
2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended to date (the "Exchange Act");
(b) "business day" shall mean any day other than a Saturday, Sunday or a
day on which federally chartered financial institutions are not open for
business in the City of Houston, Texas;
(c) "Encumbrance" shall mean any lien, claim, charge, pledge, security
interest hypothecation or other claim or encumbrance;
(d) "Material Adverse Effect" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(e) "Person" means any individual, corporation, partnership, association,
trust or other entity or organization, including a governmental or political
subdivision or any agency or institution thereof; and
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(f) "subsidiary" shall mean, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which is owned
directly or indirectly, or a majority of the board of directors of which may be
elected, by such entity.
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
duly executed by or on behalf of such party, all as of the date first written
above.
NORTH AMERICAN TECHNOLOGIES
GROUP, INC.
By: /s/ Tim Tarrillion
Name: Tim Tarrillion
Title: President
GAIA TECHNOLOGIES, INC.
By: /s/ Tim Tarrillion
Name: Tim Tarrillion
Title: President
GAIA HOLDINGS, INC.
By: /s/ Henry Sullivan
Name: Henry Sullivan
Title: President
THOR VENTURES, L.C.
By: /s/ William Aldrich
Name: William Aldrich
Title: President
THOR INDUSTRIES, INC.
By: /s/ William Aldrich
Name: William Aldrich
Title: President
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Exhibit A Gaia/Thor Royalty Agreement
Exhibit B Gaia-TieTek License Agreement
Exhibit C-1 Bill of Sale (GAIA Holdings)
Exhibit C-2 Bill of Sale (Thor Industries, Inc.)
Exhibit C-3 Bill of Sale (Thor Ventures, L.C.)
Exhibit D Assignment of Patents
Exhibit E Form of 90 Day Note
Exhibit F [Intentionally Omitted]
Exhibit G Escrow Agreement
Exhibit H Aldrich Employment Agreement
Exhibit I Sullivan Employment Agreement
Exhibit J Option Agreement (Retek Equipment Purchase Option)
Exhibit K NATK/Sub Representations and Warranties
Exhibit L Representations and Warranties of Seller
Exhibit M-1 Termination of License (Saturn-GAIA)
Exhibit M-2 Termination of License (Thor-GAIA)
Exhibit N Termination of Sublicense
Exhibit O Investment Representation Letter
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EXHIBIT 10.1
PROMISSORY NOTE, SECURITY AGREEMENT AND PLEDGE
$1,050,000.00 Houston, Texas
December 29, 1995
FOR VALUE RECEIVED, NORTH AMERICAN TECHNOLOGIES GROUP, INC., a Delaware
corporation ("NATK"), and GAIA TECHNOLOGIES, INC., a Texas corporation ("Sub;"
together with NATK, "Maker"), jointly and severally promise to pay to the order
of GAIA HOLDINGS, INC., a Delaware corporation ("Payee"), in Houston, Texas, or
at such other place in the United States of America as Payee may designate in
writing, the aggregate principal sum of ONE MILLION FIFTY THOUSAND AND NO/100
DOLLARS ($1,050,000.00), in lawful money of the United States of America,
together with interest on the unpaid principal balance thereof, until the unpaid
principal balance shall be paid in full at the per annum rate of interest equal
to the lesser of (x) twelve percent (12.00%) or (y) the highest lawful, non-
usurious rate of interest then permitted under Texas law; provided, however,
that after maturity, whether maturity is brought about by acceleration as
described in this Note or otherwise, the rate of interest shall be the highest
lawful, non-usurious rate of interest then permitted under Texas law. Interest
shall be calculated on the basis of a 360-day year, consisting of 12 months of
30 days each.
This Note is the "90-Day Note," as defined in that certain Asset Purchase
Agreement, dated as of the date of this Note, by and among NATK, Sub, Gaia
Holdings, Thor Ventures, L.C., a Texas limited liability company, and Thor
Industries, Inc., a Texas corporation (the "Asset Purchase Agreement").
Capitalized terms used herein and not otherwise defined have the meanings given
them in the Asset Purchase Agreement.
1. Accrued and unpaid interest on this Note shall be due and payable on
each of January 31, 1996, and February 29, 1996. The entire outstanding and
unpaid principal amount of this Note, together with all unpaid interest and
other amounts due with respect to this Note, shall be due and payable in full on
March 28, 1996. Notwithstanding the foregoing, in the event that after the date
hereof, Maker (or either of them) receives cash from the issuance of new shares
of its capital stock (whether common or preferred), the sale of treasury shares
or the sale of any debt (other than from the sale of any debt security to the
extent the proceeds thereof are used to promptly purchase one or more specific,
identifiable capital assets) or other equity security of Maker (or either of
them), then Maker shall promptly apply an amount equal to 75% of such cash so
received and pay such amount to Payee to the extent of any outstanding
obligations (including principal, interest or any other amount) on this Note,
whether or not the same are then due. Notwithstanding anything in this Note to
the contrary, Maker may prepay all or a portion of this Note at any time without
premium or penalty.
2. In the event that any payment hereunder is due on a day other than a
business day, such payment shall instead be due and payable on the next
succeeding business day. As used herein, the term "business day" means any day
other than either a Federal holiday or a day during which state or federally-
chartered banks located in Harris County, Texas, are required by law to be
closed.
Page 1 of 5 pages
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3. To the extent of any partial payment or any partial prepayment
hereunder, amounts received shall first be applied to accrued and unpaid
interest, and the remainder, if any, shall then be applied to the payment of
outstanding principal.
4. In the event that there is a failure to pay when due any interest or
principal hereunder and such failure shall continue unremedied for a period of
seven (7) days after receipt of written notice of such failure to pay, then
Payee, without the necessity of further demand or presentment, may accelerate
and declare in a writing delivered to Maker the entire principal balance of this
Note then due and payable, together with any accrued interest thereon, and may
exercise any other remedy or remedies then available to it hereunder or under
law.
5. Maker hereby waives presentment for payment, demand, notice of protect,
and protest of this Note, as well as all other notices relating to this Note,
except as described in the immediately preceding paragraph. Payee shall not by
any act of omission or commission be deemed to waive any right or remedy
hereunder or under law, except such waiver as shall be in writing and signed by
Payee, and then only to the extent specifically set forth therein; a waiver as
to one event shall not be a bar to or waiver of any other right or remedy as to
a subsequent event.
6. (a) Sub hereby grants to Payee (sometimes referred to herein as
"Secured Party") a first priority security interest in, and a first lien on, and
agrees that Secured Party shall have and continue to have a first priority
security interest in, and a first lien on, all of the assets of Sub, including
without limitation the "Purchased Assets," as such term is defined in the Asset
Purchase Agreement, whether currently owned or hereafter acquired (including
without limitation all proceeds therefrom) (the "Collateral").
(b) The security interest and lien granted pursuant to Section 6(a) hereof
shall serve to secure all indebtedness, liabilities or other sums owed or to
become owing hereunder.
(c) Maker authorizes the Secured Party to file, in jurisdictions where
this authorization will be given effect, any financing statement or other
document or instrument of any kind evidencing the security interest and/or lien
granted hereunder, and at the request of Secured Party, from time to time, Maker
will join the Secured Party in executing one or more of such financing
statements and other documents or instruments in form and substance satisfactory
to Secured Party.
(d) Until all obligations of Maker hereunder are satisfied in full, Maker:
(i) shall keep the Collateral free from any and all superior or equal adverse
claims, pledges, mortgages, liens, charges, security interests and encumbrances,
(ii) shall not sell or grant to any other party any ownership or other interest
in any of the Collateral, except as expressly permitted by this Note, the Asset
Purchase Agreement or the Crosstie Purchase Option Agreement, and (iii) shall
not move any equipment constituting any portion of the Collateral to another
location without the prior written consent thereto of Secured Party (other than
to a location currently owned or leased by Maker, or such other location in
Texas as Maker may lease or purchase during the term hereof so long as Maker
shall have notified Payee ten (10) days in advance of such other location),
which may be granted in the sole and absolute discretion of Secured Party.
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<PAGE>
(iii) Maker shall immediately notify Secured Party of any transfer,
pledge, claim, lien, charge or encumbrance arising in connection with any
Collateral about which such party has actual knowledge.
(iv) Maker will pay in a timely manner all taxes and other amounts due
or to become due with respect to the Collateral on or after the date hereof and
will pay to Secured Party all expenses and expenditures including reasonable
attorney's fees and expenses incurred or paid by the Secured Party in exercising
or protecting the interests, rights and remedies of Secured Party hereunder with
respect to the Collateral. Maker shall, at Maker's own expense, defend the
Secured Party's right, title and interest in and to the Collateral against the
claims of any person, firm, corporation or other entity.
(vi) Maker shall, at its own expense, pay to Secured Party all
expenses and expenditures including reasonable attorney's fees and expenses
incurred or paid by the Secured Party in exercising or protecting the interests,
rights and remedies of Secured Party hereunder with respect to any of the
Collateral and shall defend the Secured Party's right, title and interest in and
to all of the against the claims of any person, firm, corporation or other
entity.
The obligations of each of Sub and NATK in this Note shall be deemed joint and
several obligations of Sub and NATK.
(f) The term "default," as used in this instrument, shall mean and include
any of the following: (i) a failure to pay when due any interest (if any) or
principal hereunder and such failure shall continue unremedied for a period of
seven (7) days after receipt of written notice of such failure to pay, or the
failure to pay when due any payment of principal or interest in accordance with
the terms hereof, or (ii) the failure of Maker to perform in a timely manner any
other obligation or agreement of such party under this instrument, which failure
under this clause (ii) shall continue unremedied for a period of fifteen (15)
days after receipt of written notice of such failure.
(g) In addition to any other right or remedy granted hereunder or under
law upon the occurrence of a default hereunder, the Secured Party may, upon 15
days' written notice to Maker, but without the necessity of further demand or
presentment, exercise with reference to the Collateral any and all of the rights
and remedies of a secured party under the laws of the State of Texas applicable
to the Collateral and, without limitation, any other right or remedy granted
hereunder (all of which rights and remedies shall be cumulative), including
without limitation the right and power to forthwith realize upon the Collateral
or any part thereof, and may forthwith sell or otherwise dispose of and deliver
the Collateral, or any part thereof or interest therein, at a public or private
sale or sales, at any location in Harris County, Texas selected by Secured
Party, upon such terms and conditions and for such consideration as Secured
Party shall deem appropriate (in Secured Party's sole discretion), so long as
the same are determined and conducted in a commercially reasonable manner, as
such term is defined in and interpreted under the Uniform Commercial Code as in
effect in the State of Texas on the date hereof.
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7. All notices, requests, demands, waivers and other communications
required or permitted to be given under this document shall be in writing and
shall be deemed to have been duly given if delivered personally, if mailed
(certified or registered mail with postage prepaid) or if sent by
telecopier/facsimile as follows (or at such other address or telecopy/facsimile
number for a party as shall be specified by like notice):
If to Maker: If to any Payee:
North American Technologies
Group, Inc./ Gaia Holdings, Inc.
Gaia Technologies, Inc. 4710 Bellaire Blvd., Suite 301
4710 Bellaire Blvd, Suite 301 Bellaire, Texas 77401
Bellaire, Texas 77401 Attn: William T. Aldrich and
Attn: Tim B. Tarrillion Henry W. Sullivan
Telecopy/Facsimile No: Telecopy/Facsimile No:
(713) 662-3728 (713) 661-1677
with a copy to:
Jeff Horowitz
Crain, Caton & James
909 Fannin, Suite 3300
Two Houston Center
Houston, Texas 77010
Telecopy/Facsimile No:
(713) 658-1921
and with a copy to:
J. Denny Bartell
808 Travis, Suite 1001
Houston, Texas 77002
8. The Payee and Maker intend to contract in strict compliance with
applicable usury law from time to time in effect. In furtherance thereof such
persons stipulate and agree that none of the terms and provisions contained
herein or in the Asset Purchase Agreement or in any other document executed and
delivered pursuant thereto shall ever be construed to provide for such interest
in excess of the maximum amount of interest permitted to be charged by
applicable law from time to time in effect. The holder of this Note expressly
disavow any intent to charge or collect excessive unearned interest in the event
the maturity of this Note is accelerated for any reason (whether by action of an
holder, any prepayments hereafter agreed to, the provisions of Paragraph 1
hereof or otherwise), and if any such acceleration or other event occurs, and,
as a result thereof, any amounts held to constitute interest are determined to
exceed any applicable legal limit, then such excess amounts shall, without
penalty, be applied to reduce the amounts otherwise owing under this Note or
otherwise returned to the Maker. Neither the Maker nor any present or future
endorsers, sureties, guarantors or other persons hereafter becoming liable for
payment of any obligations hereunder, under the Asset Purchase Agreement or any
other
Page 4 of 5 pages
<PAGE>
document executed and delivered pursuant to the Asset Purchase Agreement shall
ever be liable for unearned interest thereon or shall ever be required to pay
interest thereon in excess of the maximum amount that may be lawfully charged
under applicable law from time to time in effect, and the provisions of this
Paragraph 8 shall control over all other provisions herein or in the Asset
Purchase Agreement which may be in conflict or apparent conflict herewith.
9. This instrument and the rights and obligations hereunder shall
terminate upon the satisfaction in full of all obligations of Maker hereunder,
and upon such termination, Secured Party agrees to execute, at the expense of
Maker, such reasonable instruments to release its rights in and to the
Collateral as Maker may reasonably request.
10. THIS NOTE SHALL BE CONSTRUED, INTERPRETED, AND THE RIGHTS OF THE
PARTIES DETERMINED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. This Note may be
executed in counterparts each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Note
effective as of the date first above written.
"MAKER"
NORTH AMERICAN
TECHNOLOGIES GROUP, INC.
By: /s/ Tim B. Tarrillion
Tim B. Tarrillion
President and Chief Executive Officer
GAIA TECHNOLOGIES, INC.
By: /s/ Tim B. Tarrillion
Tim B. Tarrillion
President
"PAYEE"
GAIA HOLDINGS, INC.
By: /s/ Henry Sullivan
Name: Henry Sullivan
Title: President
Page 5 of 5 pages
<PAGE>
EXHIBIT 10.2
GAIA/THOR
---------
ROYALTY AGREEMENT
-----------------
This Gaia/Thor Royalty Agreement (hereinafter, this "Agreement") is made
and entered into as of December ____, 1995 (the "Effective Date"), by and among
Gaia Technologies, Inc., a Texas corporation ("Gaia"), North American
Technologies Group, Inc., a Delaware corporation ("NATK," and together with
Gaia, "Payor"), Gaia Holdings, Inc., a Delaware corporation ("GHI"), and Thor
Ventures, L.C., a Texas limited liability company ("Thor", and together with
GHI, "Payee").
RECITALS:
1. Payor, Payee and others are parties to that one certain Asset Purchase
Agreement (the "Purchase Agreement") of even or approximate date herewith
whereby, among other things, GHI contracted to sell its assets to Gaia.
2. As partial consideration for the assets transferred to Gaia from GHI,
the Purchase Agreement requires that Payor pay GHI certain royalties.
3. GHI has notified Payor that a portion of such royalties should be paid
directly to Thor.
4. This Agreement constitutes the royalty agreement contemplated by the
Purchase Agreement.
AGREEMENTS:
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements hereinafter set forth, the sum of $10.00, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties (as that term is defined below) hereby agree as follows:
ARTICLE I
Definitions
-----------
The following terms shall have the following meanings for purposes of the
Agreement:
1.1 "Affiliate" means "affiliate" and "insider" as those terms are defined
in Section 24.002 of the Texas Business & Commerce Code, except that the term
"debtor" shall be substituted with "Payor".
1
<PAGE>
1.2 "Applicable Hard Goods" means (a) railroad cross-ties, oil field mats,
marine structures, and other products all having advanced structural properties
derived from or growing out of any Technology used to produce railroad cross-
ties, and (b) roofing materials. "Applicable Hard Goods" does not include air
conditioning pads.
1.3 "Equipment" shall mean that equipment (including prototypes) now or
hereafter designed, engineered, acquired, created or employed for (a) the
implementation or practice of the Technology, or (b) the manufacture, production
or refinement of Products.
1.4 "Parties" shall mean Payor and Payee, and "Party" shall mean any of
them.
1.5 "Patents" means (a) United States Patent Number 4,191,522, 4,033,408,
4,168,799 and 4,110,420 together with any modifications, improvements,
corrections or substitutions thereto or thereof, and (b) any new patent
applications, newly issued patents, patents pending or patent amendments, in any
way associated therewith.
1.6 "Porous Pipe" means those Products, other than Applicable Hard Goods,
which (a) are extruded, and (b) have a constant cross section, and (c) have
porous walls.
1.7 "Porous Pipe Technology" means any portion of the Technology used in
the production or manufacture of Porous Pipe.
1.8 "Products" means all tangible, marketable goods, including Applicable
Hard Goods and Porous Pipe.
1.9. "Selected Parties" shall mean those entities listed on Exhibit "A"
attached hereto and incorporated herein by this reference for all purposes, and
their Affiliates.
1.10 "Technology" shall mean (a) the Patents, (b) the trade secrets,
design, instrumentation, technology, method and know-how developed, conceived,
owned, acquired and/or reduced to practice by Payor or its Affiliates for
materials, processes and methods (including Equipment) to be used in the
production, manufacture or refinement of Products, (c) any information, data, or
experience relating to the foregoing, including such information, data, or
experience relating to the operation and maintenance of Equipment and the method
or procedural steps followed to practice of anything described in subparts (a),
(b) or (d) hereof, and (d) any additions to or modifications of any of the
foregoing, including, without limitation, additions to or modifications of (i)
the methods or processes involved with the manufacturing of Products, (ii) the
methods of use of Equipment or Products, (iii) the design of the Equipment or
Products, (iv) the construction or fabrication of the Equipment or Products, (v)
the operating procedures which improve the manufacture, design, or operation of
the Equipment or Products, and (vi) any patent rights, new patent applications,
newly issued patents, or patents pending associated with any such addition or
modification.
2
<PAGE>
ARTICLE II
Royalties
---------
2.1 Generally. Payor shall pay to Payee royalties ("Royalties" or
"Royalty") as provided in this Article II. Royalties consist of both (a) ten
percent (10%) of all Gross Margin (as defined below) received or receivable
during the fifteen (15) year period beginning on the Effective Date, and (b) 10%
of all License Fees (as defined below) received or receivable during the five
(5) year period beginning on the Effective Date. Royalties shall be determined
for each calendar quarter (or portion thereof) within ninety (90) days following
the last day of each calendar quarter within which Royalties become due.
2.2 Gross Margin.
(a) The term "Gross Margin" means Revenues less Cost of Goods Sold.
(b) As used herein, the term "Revenues" includes all monies,
instruments, assets and other things of value received or
receivable by Payor or any of its Affiliates for (i) any
Applicable Hard Goods sold or transferred by any of them, and
(ii) any licensing, renting, sale, or transfer of all or any part
of the Technology relating to the manufacture, production or
refinement of Applicable Hard Goods. "Revenues" shall also
include any distribution or other compensation received by Payor
or any of its Affiliates from any company, partnership, joint
venture or other entity to which all or any portion of the
Technology relating to the manufacture, production or refinement
of Applicable Hard Goods is contributed, but if such entity is an
Affiliate of Payor, only to the extent that any such distribution
or compensation from such Affiliate is not derived from Revenues
on which Royalty has previously been paid. The term "Revenues"
shall not include and shall, if necessary, be calculated to
exclude (i) amounts paid by Payor to any third parties, who are
not Affiliates of Payor, acting as sales representatives of
Payor, which amounts are directly attributable to the sale of
Applicable Hard Goods, (ii) accounts which, according to
generally accepted accounting principles, are determined to be
uncollectable, provided, however, such accounts have previously
been credited to Payee as "Revenues" (but, any amounts received
by Payor on any account previously determined to be uncollectable
as aforesaid shall be treated as "Revenues"), (iii) governmental
excise or sales taxes, tariffs, duties and similar changes added
to the selling price of the item and paid by Payor directly to a
government, and/or (iv) refunds or allowances to customers
resulting from defects, failures or malfunctions not in excess of
the original selling price of the item. Under no circumstances
shall there be any deduction from Revenues by reason of Payor's
being liable to pay any franchise tax, capital stock tax, income
tax, or similar or dissimilar tax based upon Payor's income,
capital structure, or profits.
3
<PAGE>
(c) As used herein, the term "Cost of Goods Sold" means (i) direct
material cost, direct labor cost, and factory or other relevant
burden (including depreciation for equipment and facilities
directly used in the manufacture of Applicable Hard Goods)
incurred by Payor (or its Affiliate) directly associated with the
manufacture of Applicable Hard Goods, and (ii) any payments made
by Payor to Wolfgang Mack during any period in which Revenues are
received or receivable by Payor. Administrative costs associated
with procurement of materials, interest cost, advertising costs,
sales costs, office costs and administrative costs shall not
constitute a component of "Cost of Goods Sold." There shall be no
"Cost of Goods Sold" associated with Revenue described in Section
2.2(b)(ii). Whether a particular expense not specifically listed
should be treated as "Cost of Goods Sold" shall be resolved by
application of generally accepted accounting principles.
2.3 License Fees. The term "License Fees" includes all monies, instruments,
assets and other things of value received or receivable by Payor or any of its
Affiliates from any of the Selected Parties for a right to manufacture, produce,
sale or otherwise commercially exploit the Porous Pipe Technology. The term
"License Fees" shall not include and shall, if necessary, be calculated to
exclude (i) governmental excise or sales taxes, tariffs, duties and similar
changes added to the selling price of the item and paid by Payor directly to a
government or (ii) refunds or allowances to customers resulting from defects,
failures or malfunctions not in excess of the original selling price of the
item. Under no circumstances shall there by any deduction from License Fees by
reason of Payor's being liable to pay any franchise tax, capital stock tax,
income tax, or similar or dissimilar tax based upon Payor's income, capital
structure, or profits.
2.4 Records. All Gross Margin (including Revenues and Cost of Goods Sold)
and License Fees will be recorded in accordance with generally accepted
accounting principles. Full and adequate records and books of account shall be
accurately maintained by Payor on all business operations involving sale of
Products and licensing the Technology. All books of account, records, sales
slips, invoices, purchase orders, franchise tax returns, and federal income tax
returns relating to Payor's operations will be retained by Payor for a period of
three (3) years after preparation, and will be open to inspection by Payee (or
Payee's representative) at all reasonable times.
2.5 Statements. Within ninety (90) days after the end of each calendar
quarter during which Royalties are due, Payor will deliver to Payee a certified
statement in form reasonably approved by Payee, signed and sworn to by Payor,
accurately setting forth the amount of Gross Margin (together with an analysis
of Revenues and Cost of Goods Sold) and License Fees received or receivable
during said quarter, itemized in reasonable detail, and will contemporaneously
therewith pay any Royalty due. Within 180 days after the end of each calendar
year, Payor will furnish to Payee, according to the foregoing provisions, a
statement of sales, costs and other transactions itemized in reasonable detail
and in a form approved by Payee, accurately showing and reconciling Revenues,
Costs of Goods Sold, and License Fees
4
<PAGE>
for the entire preceding year, certified by Payor to be true and correct. The
Royalty payment (if any) due at the end of the second calendar quarter of any
calendar year shall include an adjustment or additional payment (as the case may
be) to reflect any uncollected receivables, to correct any mistakes, or as
otherwise may be necessary to properly reflect Royalty for the preceding
calendar year.
2.6 Audit.
(a) Payee may, at any time or times during normal business hours
designated by Payee upon three (3) days' prior written notice to
Payor, have an audit made of any statement delivered pursuant to
Section 2.5, and may examine Payor's sales reports, expense
records and other relevant records for such period. Acceptance of
any Royalty tendered by Payor shall not prejudice these rights.
(b) The cost of the first audit conducted by Payee pursuant to
Section 2.6(a) shall be the sole cost and expense of Payee.
(c) Except as provided in Section 2.6(b), the cost of any audit shall
be borne by Payee unless such audit shows that (i) Payor's
statement was in error by five percent (5%) or more of the Gross
Margin or License Fees for the relevant year, and (ii) such error
arose out of a situation, matter, problem, method, approach or
other criticism raised in any previous audit which demonstrated
an error by 5% or more of Gross Margin or License Fees for the
relevant quarter or year, in which event Payor will pay the cost
of such audit.
2.7 Prohibited Transactions. Payor shall not, at any time, transfer
(a) the Technology or any part thereof or (b) any commercial quantities of
Applicable Hard Goods to any third party except in an arms length transaction
where the value received by Payor has been established in good faith. Any
transfer in violation of this Section 2.7 shall be void.
2.8 GAAP. Any reference herein to "generally accepted accounting
principles" shall mean generally accepted accounting principles as applied
consistently by Payor.
ARTICLE III
Matters Concerning the Payee
----------------------------
Thor owns and shall be entitled to receive 66.67% of all Royalty. GHI owns
and shall be entitled to receive 33.33% of all Royalty. All Royalty paid by
Payor pursuant to Article II shall be paid pro rata to Thor and GHI according to
the foregoing percentages.
5
<PAGE>
ARTICLE IV
Miscellaneous
-------------
4.1 Governing Law. The construction and interpretation of this
Agreement shall be in accordance with the laws of the State of Texas and the
applicable laws of the United States of America.
4.2 Notice. Any payment, report, communication, request, or notice
required or permitted by this Agreement shall be in writing and shall become
effective at the time of receipt thereof and shall be addressed to the Parties
as follows:
(a) If to Payor:
North American Technologies Group, Inc.
Gaia Technologies, Inc.
4710 Bellaire Boulevard, Suite 301
Houston, Texas 77401
Attention: Tim Tarillion
WITH A COPY TO:
Theodore J. Lee
3104 Edloe St., Suite 204
Houston, Texas 77027
Telecopier: 713/623-0990
(b) If to Payee:
William T. Aldrich and Henry W. Sullivan
Gaia Holdings, Inc.
Thor Ventures, L.C.
4710 Bellaire Blvd., Suite 301
Houston, Texas 77401
Attention: William T. Aldrich
Telecopier: 713/661-1677
WITH A COPY TO:
J. Denny Bartell
808 Travis, Suite 1001
Houston, Texas 77002
Telecopier: 713/227-8503
6
<PAGE>
WITH A COPY TO:
Jeffrey I. Horowitz
Crain, Caton & James, P.C.
909 Fannin, Suite 3300
Houston, Texas 77010
Telecopier: 713/658-1921
Notice may be effected by hand delivery, U.S. mail, or telecopy. Each Party
shall have the continuing right to change its address for notice at any time or
times by giving ten (10) days' notice in the manner hereinabove described.
Notices shall be deemed given only upon actual receipt; however, notice sent by
U.S. mail, postage prepaid, certified, return receipt requested shall be deemed
received three business days after deposited with the U.S. Postal Service.
4.3 Amendments. This Agreement shall not be modified, amended or
otherwise varied by any oral agreement or representation and all modifications,
amendments and variations shall be by an instrument in writing executed by the
Parties hereto.
4.4 Successors and Assigns. This Agreement shall be binding on and
inure to the benefit of the Parties hereto and their successors and assigns.
4.5 No Partnership. Nothing in this Agreement shall in any way be
construed to make the Parties partners, joint venturers, agents, servants or
employees of one another, and no such relationship is intended.
4.6 Joint and Several Obligations. NATK and Gaia are and shall be
jointly and severally liable for the obligations of Payor hereunder. No
assignment of all or any part of the Technology shall relieve Payor of any
liability for any sums or obligations due hereunder.
4.7 Confidentiality. During the performance of each Party's obligation
under this Agreement, each Party may obtain information of various types from
the other Party. Each Party agrees that all such information, whether technical,
financial, business or other nature shall be held in confidence and not used to
the detriment of the disclosing Party by the non-disclosing Party nor disclosed
to any third party by the non-disclosing Party. This Section 4.7 shall not apply
to any information which (a) can be shown by a Party to have been in that
Party's possession prior to the date hereof; (b) is now or hereafter (by
operation of law) becomes information in the public domain, (c) can be shown by
a Party to have been received on a non-confidential basis from a third party who
did not acquire same, directly or indirectly, from the other Party, (d) can be
shown by a Party to have been developed without access to any confidential
information otherwise covered by this Section 4.7, (e) is required to be
disclosed as a matter of law, or (f) is required to be disclosed pursuant to a
written agreement between the parties.
7
<PAGE>
4.8 Payee Representatives. Payor shall only be required to rely on
instructions and directives from the President of either GHI and/or Thor with
respect to their pro rata share of Royalty. In the event that GHI or Thor
should dissolve or, alternatively, the rights to receive Royalty should
otherwise be distributed to the shareholders or members of GHI or Thor (as the
case may be), then Payor may rely on (a) a duly executed copy of the Agreement,
Plan and/or Articles of Dissolution of GHI or Thor (as the case may be, in the
case of dissolution) or (b) a duly executed assignment (in the case of
distribution) to determine the ownership of the rights to receive Royalty. In
addition, the members of Thor and/or the shareholders of Gaia shall each,
unanimously, designate among themselves a representative, and thereafter Payor
shall only be required to rely on instructions and directives from such
representative. Payor shall have the right to request and rely on instructions
from each such representative, provided such instructions do not impair the
rights of any shareholders or members represented by the other representative.
4.9 Headings. The headings and subheadings that are in this Agreement
are for convenience only and are not to be used in the interpretation of the
provisions of this Agreement.
4.10 Integration. This Agreement represents the final agreement
between the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements by the Parties with respect to
the subject matter of this Agreement. There are no unwritten oral agreements
between the Parties.
IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be
executed in duplicate by duly authorized persons.
"PAYOR"
NORTH AMERICAN TECHNOLOGIES GROUP, INC.
A DELAWARE CORPORATION
By: /s/ Tim Tarrillion December 29, 1995
Name: Tim Tarrillion Date
Title: President
8
<PAGE>
GAIA TECHNOLOGIES, INC.,
A TEXAS CORPORATION
By: /s/ Tim Tarrillion December 29, 1995
Name: Tim Tarrillion Date
Title: President
"PAYEE"
GAIA HOLDINGS, INC.,
A DELAWARE CORPORATION
By: /s/ Henry W. Sullivan December 29, 1995
Name: Henry W. Sullivan Date
Title: President
THOR VENTURES, L.C.,
A TEXAS LIMITED LIABILITY COMPANY
By: /s/ William T. Aldrich December 29, 1995
Name: William T. Aldrich Date
Title: President
9
<PAGE>
EXHIBIT 10.3
GAIA-TIETEK
-----------
LICENSE AGREEMENT
-----------------
(APPLICABLE HARD GOODS)
This License Agreement (hereinafter, this "Agreement") is made and entered
into as of December ____, 1995 (the "Effective Date") by and between Gaia
Technologies, Inc., a Texas corporation (hereinafter "Licensor"), and TieTek,
Inc., a Texas corporation (hereinafter "Licensee").
W I T N E S S E T H:
WHEREAS, Licensor is the owner of Technology (as that term is defined
below) relating to the manufacture of Products (as that term is defined below);
WHEREAS, pursuant to the terms of that one certain Asset Purchase Agreement
of even or approximate date herewith executed by and among Licensor and other
parties, Licensor is required to grant to Licensee a license of the Technology;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements hereinafter set forth, the sum of $10.00, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties (as that term is defined below) hereby agree as follows:
ARTICLE I
Definitions
-----------
The following terms shall have the following meanings for purposes of the
Agreement:
1.1 "Affiliate" means "affiliate" and "insider" as those terms are
defined in Section 24.002 of the Texas Business & Commerce Code, except that the
term "debtor" shall be substituted with "Payor".
1.2 "Applicable Hard Goods" shall mean (a) those Products which take the
form of oil field mats, marine structures, railroad ties, and other Products all
having advanced structural properties derived from or growing out of Technology
used to produce railroad cross-ties, and (b) roofing materials. "Applicable
Hard Goods" does not include air conditioning pads.
1.3 "Area of Use" shall mean the entire Universe.
1.4 "Equipment" shall mean that equipment now or hereafter designed,
engineered, acquired, created or employed for the implementation or practice of
the Technology or Improvements, including any prototypes thereof.
1
<PAGE>
1.5 "Improvements" shall mean additions to or modifications of the
Technology, including, without limitation, additions to or modifications of (a)
the methods of manufacturing the Products, (b) the methods of use of the
Equipment or the Products, (c) the design of the Equipment or the Products, (d)
the construction or fabrication of the Equipment or the Products, and/or (e) the
operating procedures which improve the manufacture, design, or operation of the
Equipment or the Products. The term "Improvements" includes any patent rights
associated with any Improvement.
1.6 "Parties" shall mean both Licensor and Licensee and "Party" shall mean
either of them.
1.7 "Patents" means (a) United States Patent Numbers 4,191,522, 4,003,408,
4,168,799 and 4,110,420, together with any modifications, Improvements,
corrections or substitutions thereto or thereof, and (b) any new patent
applications, newly issued patents, patents pending or patent applications, in
any way associated therewith.
1.8 "Products" means any tangible good or thing.
1.9 "Research and Development" shall mean those activities involved in (a)
the testing and evaluation of the Technology and the Products and (b) the
development of Improvements.
1.10 "Technology" shall mean (a) the Patents, (b) the trade secrets,
design, instrumentation, technology, method and know-how developed, conceived,
owned, acquired and/or reduced to practice by Licensor for materials, processes
and methods (including Equipment) to be used in the production, manufacture or
refinement of Products, (c) any information, data, or experience relating to the
foregoing, including such information, data, or experience relating to the
operation and maintenance of the Equipment and the method or procedural steps
followed to practice anything described in subparts (a), (b) or (d) hereof, and
(d) any Improvements.
ARTICLE II
Grant of License
----------------
Licensor does hereby grant to Licensee the following (collectively, the
"License"): (a) a non-exclusive license to incorporate the Technology and all
Improvements into one or more manufacturing facilities owned and operated by
Licensee in the Area of Use, (b) an exclusive license to use the Technology to
manufacture Applicable Hard Goods, (c) an exclusive license to market,
distribute, and sell Applicable Hard Goods, (d) a non-exclusive license to
engage in research and development with respect to the Technology, and (e) an
exclusive license to otherwise exploit the Technology in the Area of Use for
purposes of manufacturing, using, marketing, and selling Applicable Hard Goods.
The exercise of all aspects of the License shall be at Licensee's sole cost,
risk and expense.
2
<PAGE>
ARTICLE III
Technical and Development Activities
------------------------------------
3.1 Exchange of Information. Licensor and Licensee hereby mutually
agree that, throughout the term of this Agreement, both Parties shall freely
exchange all information, data, and results arising from research and
development and the manufacture or sale of Applicable Hard Goods which they may
develop or which may become known to them, insofar as such activities are
applicable to the production of Applicable Hard Goods.
3.2 Disclosure and Ownership of Improvements. Licensor and Licensee
agree to make prompt disclosure to each other of any Improvements, as soon as
practicable, but in any case, not more that 90 days following the commencement
of activities which lead or may lead to Improvements. Licensor and Licensee
mutually agree that in the event that Licensee or Licensor (or any Affiliate of
Licensor) shall develop Improvements on the Technology during the term of this
Agreement, such Improvements shall be promptly disclosed to the other party and
any patents which may mature therefrom shall be owned by Licensor. Licensee
shall cause any such Improvements, including any patents thereon, to be assigned
to Licensor, who, according to the terms of the License, is required to assign
such Improvements to the Licensor. Upon (a) the assignment of any Improvement,
including any patents thereon, developed by Licensee to Licensor, or (b)
Licensor's disclosure of any Improvements developed by Licensor (or its
Affiliate), Licensee shall have the option to acquire, from time to time, for
the sum of $10.00, the license to use such Improvements in the same manner and
subject to the same restrictions as the License. Licensor shall take all
necessary action under the License so that such Improvements are treated as a
part of the License. Upon Licensee's exercise of option described above, the
licenses so acquired shall be deemed to be included within the defined term
"License," and shall be governed by the terms of this Agreement without
additional payment. Notwithstanding anything contained in this Agreement to the
contrary, Licensee shall have the right, but not the obligation, to patent any
Improvement so acquired.
ARTICLE IV
Restriction on Licensor
-----------------------
Licensor shall not incorporate or use the Technology, nor license to
others any rights to the Technology, for purposes of manufacturing, marketing,
distributing, selling or otherwise exploiting Applicable Hard Goods. Licensee
shall have the exclusive right to manufacture Applicable Hard Goods using all or
any part of the Technology.
ARTICLE V
Indemnification Obligations of Licensee
---------------------------------------
Licensee agrees to indemnify and defend Licensor against any and all
liabilities and/or damages that may be incurred as a result of Licensee's use of
the Technology under this Agreement. Licensee agrees to hold Licensor harmless
for and defend Licensor from any injuries or claims made by virtue of Licensee's
employees', subcontractors', distributors' or agents' manufacture, use, or sale
of Applicable Hard Goods.
3
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ARTICLE VI
[INTENTIONALLY DELETED]
ARTICLE VII
Confidentiality
---------------
During the performance of each Party's obligations under this
Agreement, each Party may obtain information of various types from the other
Party. Each Party agrees that all such information, whether technical,
financial, business or other nature shall be held in confidence and not used to
the detriment of the disclosing Party by the non-disclosing Party nor disclosed
to any third party by the non-disclosing Party. This Article VII shall not
apply to any information which (a) can be shown by a Party to have been in that
Party's possession prior to the date hereof, (b) is now or hereafter (by
operation of law) becomes information in the public domain, (c) can be shown by
a Party to have been received on a non-confidential basis from a third party who
did not acquire same, directly or indirectly, from the other Party, (d) can be
shown by a Party to have been developed without access to any confidential
information otherwise covered by this Article VII, (e) is required to be
disclosed as a matter of law, or (f) is required to be disclosed pursuant to a
written agreement between the Parties.
ARTICLE VIII
Default; Remedies; Termination
------------------------------
8.1 Default. Upon the breach of or default under any term of this
Agreement by any Party, the non-defaulting Party may give the defaulting Party
written notice of such default or breach. After such notice, the defaulting
Party shall have thirty (30) days within which to cure such default or breach.
If such default or breach is not cured within said thirty day period, then, the
non-defaulting Party shall have the right at any time following such thirty (30)
day period to submit the issue of whether a default has occurred to mediation
(or, if necessary, arbitration) as provided in Article X of this Agreement, and
seek an award for damages relating to such default or breach.
8.2 Breach of Confidentiality Provisions. In the event that either
Party knows of a breach of Article VII hereof or has a reason to believe a
breach of such Article VII is imminent, then such Party shall, in addition to
all other remedies available to it under this Agreement, at law, or in equity,
be entitled to an immediate temporary restraining order and preliminary
injunction until the rights of such party, can be finally determined by a trial
on the merits.
8.3 Termination. This License shall be irrevocable and perpetual,
and may be terminated only by the express written agreement of the Parties.
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ARTICLE IX
Records
-------
Both Parties shall maintain accurate records on Research and
Development and the manufacture of Applicable Hard Goods. Each Party shall
provide to the other Party timely summaries of such records to keep each other
informed of such Research and Development as required by Paragraph 3.1 hereof.
ARTICLE X
Settlement of Disputes
----------------------
10.1 Mediation. In the event either of the Parties believes the
other has committed a breach of this Agreement or the parties cannot agree on an
interpretation of one or more provisions of this Agreement, the parties agree to
submit same to mediation pursuant to the terms and conditions of the alternative
dispute resolution system of Tex. Civ. Prac. & Rem. Code Ann. Sections 152.001 -
154.004. If mediation does not permit the Parties to resolve the dispute
between them, then the Parties agree to submit it to binding arbitration in
accordance with Paragraph 10.2.
10.2 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, which cannot otherwise be
resolved between the parties shall be settled by arbitration in Houston, Texas
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association and judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. The award rendered by the
Arbitrator(s) may include an award of attorney's fees.
ARTICLE XI
Miscellaneous
-------------
11.1 Governing Law. The construction and interpretation of this
Agreement shall be in accordance with the laws of the State of Texas and the
applicable laws of the United States of America.
11.2 Notice. Any payment, report, communication, request, or notice
required or permitted by this Agreement shall be in writing and shall become
effective at the time of receipt thereof and shall be addressed to the Parties
as follows:
(a) If to Licensor:
Gaia Technologies, Inc.
4710 Bellaire Blvd., Suite 301
Bellaire, Texas 77401
Attention: Tim Tarillion
Telecopier: 713/662-3728
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(b) If to Licensee:
TieTek, Inc.
4710 Bellaire Blvd., Suite 301
Bellaire, Texas 77401
Attention: William T. Aldrich
Telecopier: 713/661-1677
Notice may be effected by hand delivery, U.S. mail, or telecopy. Each Party
shall have the continuing right to change its address for notice at any time or
times by giving ten (10) days' notice in the manner hereinabove described.
Notices shall be deemed given only upon actual receipt; however, notice sent by
U.S. mail, postage prepaid, certified, return receipt requested shall be deemed
received three business days after deposited with the U.S. Postal Service.
11.3 Amendments. This Agreement shall not be modified, amended or
otherwise varied by any oral agreement or representation and all modifications,
amendments and variations shall be by an instrument in writing executed by the
Parties hereto.
11.4 Severability. If, contrary to expectation, any term or
provision of this Agreement shall be held invalid or unenforceable, the Parties
shall endeavor to replace the invalid term or provision by valid term or
provision which correspond as nearly as possible to their original economic
terms and general intentions. If the Parties fail to agree, either Party may
submit the matter to be resolved in accordance with Article X of this Agreement
for the purpose of making such modification to this Agreement as Parties (in the
case of mediation) or the arbitrator shall consider appropriate to return the
Parties as nearly as possibly to their original economic terms and general
intentions. The Agreement shall thereafter be read and interpreted to include
such modification.
11.5 Successors and Assigns. Subject to the restrictions of this
Section 11.5, this Agreement shall be binding on and inure to the benefit of the
Parties hereto and their successors and assigns. Neither Party shall assign
its rights or delegate its duties under this Agreement without the prior written
consent of the other Party.
11.6 No Partnership. Nothing in this Agreement shall in any way be
construed to make Licensor and Licensee partners, joint venturers, agents,
servants or employees of one another, and no such relationship is intended.
11.7 Headings. The headings and subheadings that are in this
Agreement are for convenience only and are not to be used in the interpretation
of the provisions of this Agreement.
11.8 Integration. This Agreement represents the final agreement
between the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements by the Parties. There are no
unwritten oral agreements between the Parties.
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IN WITNESS WHEREOF, the Parties hereto have caused this instrument to
be executed in duplicate by duly authorized persons to be effective as of the
Effective Date.
"LICENSOR"
GAIA TECHNOLOGIES, INC.
A TEXAS CORPORATION
By: _____________________________
Name: Tim Tarillion
Title: President
"LICENSEE"
TIETEK, INC.,
A TEXAS CORPORATION
By: _____________________________
William T. Aldrich,
President
7
<PAGE>
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement entered into this 29th day of December, 1995, is
between GAIA TECHNOLOGIES, INC., a Texas corporation ("Company"), and HENRY W.
SULLIVAN, a resident of Harris County, Texas ("Employee").
WHEREAS, the Company wishes to assure itself of the services of Employee
for the period provided in this Agreement, and Employee is willing to serve in
the employ of the Company on a full-time basis for said period, and upon the
other terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto hereby agree as follows:
1. Employment. The Company hereby employs Employee and the Employee
hereby accepts employment by the Company upon the terms and conditions of this
Agreement.
2. Position and Responsibilities. During the period of his employment
hereunder, Employee agrees to serve the Company and the Company shall employ
Employee as the Company's President. During the term of this Agreement,
Employee agrees to devote his full time and attention during normal business
hours to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Employee hereunder, to use the
Employee's best efforts to perform faithfully and efficiently such
responsibilities. The foregoing shall not be construed as preventing the
Employee from making passive investments in other businesses or enterprises;
provided, however, that (a) such investments would not require services on the
part of the Employee which would in any way impair the performance of his duties
under this Agreement and (b) are not in violation of any provision of Section 6
or 7 of this Agreement.
3. Term. The period of Employee's employment under this Agreement shall
commence on the date hereof and shall continue for a period of sixty (60) full
calendar months thereafter; provided, however, that on the first day of each
April and October during the term of this Agreement beginning on April 1, 1997,
either the Company or the Employee may, at such party's sole option, terminate
this Agreement, with or without cause, by providing not less than six (6)
months' prior notice to the other party (or the Company may also elect to
provide three (3) months's prior notice so long as it also provides three (3)
additional months of severance pay). Upon any termination of this Agreement, at
the written request of the sole shareholder of the Company, Employee shall
promptly resign in writing from any other positions as a director, officer,
employee or other position that he may then hold with respect to the Company or
any corporation, partnership or other entity controlling, controlled by or under
common control with the Company.
<PAGE>
4. Compensation.
a. Base Salary. For all services rendered by Employee in any
capacity during his employment under this Agreement, including, without
limitation, services as an executive, officer, director, or member of any
committee of the Company or of any subsidiary, affiliate, or division
thereof, the Company shall pay Employee as compensation a monthly salary at
the rate of not less than $7,500.00. Such salary shall be payable in
accordance with the customary payroll practices of the Company, but in no
event less than semi-monthly. During the period of this Agreement,
Employee's salary shall be reviewed at least annually, but there shall be
no obligation to increase such salary.
b. Bonus. From time to time, the Board of Directors of the Company,
or a committee designated by the Board of Directors, may (but is not
obligated to) elect to pay a bonus to Employee.
c. Stock Option Agreement. Contemporaneously with the execution and
delivery of this Agreement, the parties hereto shall cause to be executed
and delivered to each other that certain Stock Option Agreement,
substantially in the form of Exhibit A, attached hereto and made a part
hereof.
d. Benefits. Until the termination of the Employee's employment
pursuant to this Agreement, the Employee and the Employee's family, as the
case may be, shall be eligible for participation in and to receive all
benefits under welfare benefit plans, practices, policies and programs of
the Company or any other subsidiaries of North American Technologies Group,
Inc., a Delaware corporation ("NATK"), that are offered to officers
similarly situated (including, without limitation, medical, disability,
employee life, group life, accidental death and travel accident insurance
plans and programs), so long as, with respect to any such insurance plan or
program, Employee qualifies in, and his enrollment is accepted by the
insurer providing, such insurance plan or program, without any material
additional cost or expense by the Company; provided, however, that the
Company shall not be obligated to provide Employee with any benefit offered
by any other subsidiary of NATK that varies from a benefit offered by the
Company if such benefit is based primarily on the unique nature of the
business activities conducted by such other subsidiary.
e. Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable and proper travel and out-of-pocket expenses
incurred by Employee in connection with the performance of his duties, all
in accordance with the Company's policies as to the allowable amount of
such expenses and the provision of itemized reports.
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<PAGE>
5. Termination.
a. By Company for Cause. The Company may terminate the Employee's
employment of "Cause" at any time. Termination for "Cause" shall mean
termination of Employee's employment with the Company because of (i) any
act or omission that constitutes a material breach by Employee of his
obligations or agreements under this Agreement (other than any such act or
omission resulting from Employee's death or disability due to physical or
mental illness or accident), after written notice by the Board of such
breach which sets forth the nature of the material breach, and failure of
Employee to correct such breach within 30 business days of such notice;
(ii) Employee's being convicted of the commission of a felony; (iii)
Employee's engaging in willful misconduct, gross negligence or an act of
dishonesty that has or can reasonably be expected to have an adverse effect
on the Company; or (iv) a material failure by Employee to comply with the
procedures or policies of general application with respect to the operation
of the Company, as established by the Board, after written notice by the
Board of such failure which sets forth the nature of the material failure,
and failure of Employee to correct such failure within 30 business days of
such notice.
b. Death or Disability. The Employee's employment shall be
terminated on account of the Employee's death or disability. Employee
shall be deemed to be disabled if, as a result of incapacity due to
physical or mental illness or accident, the Employee shall have failed to
perform in any material respect Employee's duties with the Company for two
months within a twelve-month period and, within ten (10) days after written
notice of termination is given to the Employee, the Employee shall not have
returned to the full-time performance of the Employee's duties.
c. By Employee for Good Reason. The Employee's employment may be
terminated by the Employee at any time for "Good Reason." For purposes of
this Agreement, "Good Reason" shall mean, without the Employee's written
consent, the occurrence of any of the following circumstances unless such
circumstances are fully remedied by the Company within 30 days after the
Company's receipt of written notice thereof given by the Employee:
(i) Any act or omission that constitutes a material breach by the
Company of its obligations or agreements under this Agreement (and if
such omission is the failure to make any salary payment to Employee
when due, the Company shall only be entitled to receive ten (10) days'
(rather than 30 days') written notice and opportunity to remedy such
omission);
(ii) The assignment to the Employee of any duties materially
inconsistent with, or the withdrawal from the Employee of any duties
material to, the position in the Company that the Employee holds
pursuant to this Agreement; or
3
<PAGE>
(iii) The relocation of the Employee's office to a location
other than in Harris County, Texas or a county adjacent thereto,
except for required travel on the Company's business.
d. Notice of Termination. Any termination by the Company for Cause
or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section
10(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon and (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Employee's employment under the provision so
indicated.
e. Obligations upon Termination.
(i) If Employee's employment is terminated by the Company or the
Employee in accordance with the provisions of this Section or in
accordance with the provisions of Section 3, then the Company's
obligations to the Employee and the Employee's obligations to the
Company shall terminate except that the Company shall be obligated to
pay to the Employee the base salary earned by him and not previously
paid to him through the date of termination, and the Employee's
obligations under Sections 6 and 7 shall continue as provided therein.
(ii) If Employee's employment is terminated by the Company
without Cause (other than as a result of death, disability or as
provided in Section 3), or by Employee with Good Reason, Company's
obligations to the Employee and the Employee's obligations to the
Company shall terminate except that (A) the Company shall be obligated
to pay to the Employee the base salary earned by him and not
previously paid to him through the date of termination, (B) Company
shall continue to pay Employee (on a semi-monthly basis) his then
current base salary for the remainder of the then-current six (6)
month period at the end of which the Employee's employment could have
been terminated by the Company pursuant to Section 3 hereof, and (C)
Employee's obligations under Sections 6 and 7 shall continue as
provided therein.
6. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge, data and customer lists relating to the Company or any of its
affiliates and which shall not be or become public knowledge (other than by acts
by the Employee or his representatives in violation of this Agreement). After
termination of the Employee's employment with the Company, the Employee shall
not, without the prior written consent of the Company communicate or divulge any
such information, knowledge, data or customer list to any party other than the
Company and those designated by it.
4
<PAGE>
7. Obligations of Employee
a. Discoveries and Inventions. If Employee, while employed by the
Company or during a period of one year after termination of such
employment, makes, either solely or jointly with others, any discovery,
improvement, or invention which would pertain or relate in any way to the
Business (as defined in Section 7(e)(i)) as conducted by the Company, its
subsidiaries, or affiliates at the time of termination of his employment,
such discovery, improvement, or invention (whether or not of patentable
nature) shall be the exclusive property of the Company. Employee shall
execute and deliver to the Company, without further compensation, any and
all documents which the Company deems necessary or appropriate to prepare
or prosecute applications for patents upon such discovery, improvement, or
invention, to assign and transfer to the Company his entire right, title,
and interest in and to such discovery, improvement, or invention, and
patents therefor, and otherwise more fully and perfectly to evidence the
Company's ownership thereof.
b. Assistance in Litigation. Employee shall, upon reasonable notice
and at the Company's sole expense, furnish such information and assistance
to the Company as may reasonably be required by the Company in connection
with any litigation in which it or any of its subsidiaries or affiliates
is, or may become, a party that relates to any matter or event occurring
during Employee's tenure with the Company.
c. Return of Confidential Information. Upon termination of
Employee's employment by Company, Employee shall promptly return to Company
all property, papers, records and software of every kind relating to the
Company or its business, whether in hard copy form or electronically or
magnetically stored; provided, however, that in the event of a dispute
between the Company and Employee relating to the subject matter of this
Agreement, Employee may retain a copy of any of the foregoing that may
relate to such dispute until such dispute has been resolved, and Employee
shall continue to be subject to the provisions of Section 6 with respect to
such copy or copies.
d. Noncompetition. The parties recognize that the employment of
Employee with the Company will be special, unique and of an extraordinary
character and in connection with such employment Employee has special skill
and training and may acquire during the term hereof additional special
skill and training. Employee accordingly agrees that while Employee is
employed by Company and continuing from the date of the termination of
Employee's employment with the Company for any reason for three (3) years
thereafter, Employee shall not:
(i) directly or indirectly, either as principal, agent,
independent contractor, consultant, director, officer, employee,
employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for his own benefit or for
the benefit of any other person or entity either (a) hire, attempt to
hire, contact or solicit with respect to hiring any employee of the
Company or any of its affiliates, or (b) induce or otherwise
5
<PAGE>
counsel, advise or encourage any employee of the Company or any of its
affiliates to leave the employment of the Company or such affiliate,
in each case under this clause (i), unless Employee has received the
express prior written consent of NATK thereto, which consent shall not
be unreasonably withheld;
(ii) act or serve as a director, officer, employee, consultant,
independent contractor or in any other position or capacity with or
for, or acquire a direct or indirect ownership interest in or
otherwise conduct (whether as stockholder, partner, investor, joint
venturer, or as owner of any other type of interest), any Competing
Business as such term is defined herein; provided, however, that this
clause (ii) shall not prohibit Employee from being the owner of up to
5% of any class of outstanding securities of any company or entity if
such class of securities is publicly traded; or
(iii) directly or indirectly, either as principal, agent,
independent contractor, consultant, director, officer, employee,
employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for his own benefit or for
the benefit of any other person or entity, (A) divert or take away any
customers or clients of the Business or (B) contact, call upon or
solicit any such customer or client if the intent, effect or a
reasonably expected consequence of the same is to divert or take away
such customer or client.
Notwithstanding the provisions of this paragraph (d), in the event NATK or
one of its subsidiaries or affiliates does not elect to exercise the
Crosstie Purchase Option, as defined in that certain Crosstie Purchase
Option and Loan Agreement (the "Crosstie Agreement"), dated as of December
29, 1995, by and among TIETEK, INC., a Texas corporation, NATK, William T.
Aldrich, J. Denny Bartell and Henry W. Sullivan, in accordance with the
terms of such Crosstie Agreement, as the same may be amended from time to
time, then the provisions of clause (d)(ii) above shall not apply to
Employee's carrying on the activities described therein as they relate to
the Crosstie Business (as defined in the Crosstie Agreement), and shall
not be deemed to be violating the provisions of clause (d)(ii) with respect
thereto; provided, however, that Employee shall continue to be subject to
the other provisions of this paragraph (d).
e. In exchange for Employee's agreements contained in the provisions
of clause (d) of this Section 7, the Company agrees to pay to Employee on
or before March 28, 1996, the sum of $25,000.
f. For the purposes of this Section 7 the following terms shall have
the meaning set forth below:
6
<PAGE>
(iv) "Business" shall mean the design, development, engineering,
manufacture, marketing, service and supply of Products (as that term
is defined in that certain TieTek Royalty Agreement, a copy of which
is attached to the Crosstie Agreement, dated as of the date hereof)
that the Company is permitted to manufacture, other than Applicable
Hardgoods (as that term is defined in that certain Gaia-TieTek License
Agreement, dated as of the date hereof, by and between the Company and
TieTek, Inc., a Texas corporation); provided further that Products
shall also include such Applicable Hardgoods in the event NATK
exercises the Crosstie Purchase Option (as that term defined in the
Crosstie Agreement).
(v) "Competing Business" shall mean any individual, business,
firm, undertaking, company, partnership, corporation, joint venture,
limited liability company, organization or other entity that engages
in any aspect of the Business.
g. Should any portion of this Section 7 be deemed unenforceable
because of the scope, duration or territory encompassed by the undertakings
of the Employee hereunder, and only in such event, then the parties consent
and agree to such limitation on scope, duration or territory as may be
finally adjudicated as enforceable by a court of competent jurisdiction
after the exhaustion of all appeals.
8. Remedies. With respect to each and every breach or violation or
threatened breach or violation by Employee of Section 6 or 7, the Company, in
addition to all other remedies available at law or in equity including specific
performance of the provisions hereof, shall be entitled to enjoin the
commencement or continuance thereof and may, without notice to Employee, apply
to any court of competent jurisdiction for entry of an immediate restraining
order or injunction. The Company may pursue any of the remedies described in
this Section 8 concurrently or consecutively in any order as to any such breach
or violation, and the pursuit of one of such remedies at any time will not be
deemed an election of remedies or waiver of the right to pursue any of the other
of such remedies.
9. Successors.
a. This Agreement is personal to the Employee and without the prior
written consent of the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Employee's legal representatives.
b. This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
10. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without reference to principles of
conflict of laws. The
7
<PAGE>
captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
b. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid
addressed as follows:
If to the Employee: Henry W. Sullivan
4710 Bellaire Blvd., Suite 301
Houston, Texas 77401
If to the Company: 4710 Bellaire Boulevard, Suite 301
Bellaire, Texas 77401
Attn: Donovan Boyd
or to such other address as any party shall have furnished to the others in
writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
c. Except as specifically set forth in Section 7 hereof, any term or
provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions
of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable or invalid, such provision
shall be interpreted to be only so broad as is enforceable and valid.
d. This Agreement contains the entire understanding of the Company
and the Employee with respect to the subject matter hereof.
e. Any material decision or determination relating to the enforcement
of the Company's rights against Employee hereunder by the Company shall
only be made with the written concurrence or consent of the chief executive
officer or other executive officer of NATK.
11. Taxes. The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
12. Employment. Notwithstanding anything to the contrary in this
Agreement, the Employee and the Company acknowledge that the employment of the
Employee by the Company after expiration of the term of this Agreement as set
out in Section 3 hereof is "at will," unless
8
<PAGE>
the parties agree otherwise in writing, and may be terminated at any time
thereafter by either the Employee or the Company at any time.
IN WITNESS WHEREOF, the Employee has hereunto set his hand and the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
HENRY W. SULLIVAN
/s/ Henry Sullivan
-------------------------------
GAIA TECHNOLOGIES, INC.
By /s/ Tim Tarrillion
---------------------------
Name: Tim Tarrillion
-------------------------
Title: President
------------------------
9
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement entered into this 29th day of December, 1995, is
between GAIA TECHNOLOGIES, INC., a Texas corporation ("Company"), and WILLIAM T.
ALDRICH, a resident of Harris County, Texas ("Employee").
WHEREAS, the Company wishes to assure itself of the services of Employee
for the period provided in this Agreement, and Employee is willing to serve in
the employ of the Company on a full-time basis for said period, and upon the
other terms and conditions hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto hereby agree as follows:
1. Employment. The Company hereby employs Employee and the Employee
hereby accepts employment by the Company upon the terms and conditions of this
Agreement.
2. Position and Responsibilities. During the period of his employment
hereunder, Employee agrees to serve the Company and the Company shall employ
Employee as the Company's Executive Vice President. During the term of this
Agreement, Employee agrees to devote his full time and attention during normal
business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Employee hereunder,
to use the Employee's best efforts to perform faithfully and efficiently such
responsibilities. The foregoing shall not be construed as preventing the
Employee from making passive investments in other businesses or enterprises;
provided, however, that (a) such investments would not require services on the
part of the Employee which would in any way impair the performance of his duties
under this Agreement and (b) are not in violation of any provision of Section 6
or 7 of this Agreement.
3. Term. The period of Employee's employment under this Agreement shall
commence on the date hereof and shall continue for a period of sixty (60) full
calendar months thereafter; provided, however, that on the first day of each
April and October during the term of this Agreement beginning on April 1, 1997,
either the Company or the Employee may, at such party's sole option, terminate
this Agreement, with or without cause, by providing not less than six (6)
months' prior notice to the other party (or the Company may also elect to
provide three (3) months's prior notice so long as it also provides three (3)
additional months of severance pay). Upon any termination of this Agreement, at
the written request of the sole shareholder of the Company, Employee shall
promptly resign in writing from any other positions as a director, officer,
employee or other position that he may then hold with respect to the Company or
any corporation, partnership or other entity controlling, controlled by or under
common control with the Company.
<PAGE>
4. Compensation.
a. Base Salary. For all services rendered by Employee in any
capacity during his employment under this Agreement, including, without
limitation, services as an executive, officer, director, or member of any
committee of the Company or of any subsidiary, affiliate, or division
thereof, the Company shall pay Employee as compensation a monthly salary at
the rate of not less than $7,500.00. Such salary shall be payable in
accordance with the customary payroll practices of the Company, but in no
event less than semi-monthly. During the period of this Agreement,
Employee's salary shall be reviewed at least annually, but there shall be
no obligation to increase such salary.
b. Bonus. From time to time, the Board of Directors of the Company,
or a committee designated by the Board of Directors, may (but is not
obligated to) elect to pay a bonus to Employee.
c. Stock Option Agreement. Contemporaneously with the execution and
delivery of this Agreement, the parties hereto shall cause to be executed
and delivered to each other that certain Stock Option Agreement,
substantially in the form of Exhibit A, attached hereto and made a part
hereof.
d. Benefits. Until the termination of the Employee's employment
pursuant to this Agreement, the Employee and the Employee's family, as the
case may be, shall be eligible for participation in and to receive all
benefits under welfare benefit plans, practices, policies and programs of
the Company or any other subsidiaries of North American Technologies Group,
Inc., a Delaware corporation ("NATK"), that are offered to officers
similarly situated (including, without limitation, medical, disability,
employee life, group life, accidental death and travel accident insurance
plans and programs), so long as, with respect to any such insurance plan or
program, Employee qualifies in, and his enrollment is accepted by the
insurer providing, such insurance plan or program, without any material
additional cost or expense by the Company; provided, however, that the
Company shall not be obligated to provide Employee with any benefit offered
by any other subsidiary of NATK that varies from a benefit offered by the
Company if such benefit is based primarily on a nature of the business
activities conducted by such other subsidiary.
e. Reimbursement of Expenses. The Company shall reimburse the
Employee for all reasonable and proper travel and out-of-pocket expenses
incurred by Employee in connection with the performance of his duties, all
in accordance with the Company's policies as to the allowable amount of
such expenses and the provision of itemized reports.
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5. Termination.
a. By Company for Cause. The Company may terminate the Employee's
employment of "Cause" at any time. Termination for "Cause" shall mean
termination of Employee's employment with the Company because of (i) any
act or omission that constitutes a material breach by Employee of his
obligations or agreements under this Agreement (other than any such act or
omission resulting from Employee's death or disability due to physical or
mental illness or accident), after written notice by the Board of such
breach which sets forth the nature of the material breach, and failure of
Employee to correct such breach within 30 business days of such notice;
(ii) Employee's being convicted of the commission of a felony; (iii)
Employee's engaging in willful misconduct, gross negligence or an act of
dishonesty that has or can reasonably be expected to have an adverse effect
on the Company; or (iv) a material failure by Employee to comply with the
procedures or policies of general application with respect to the operation
of the Company, as established by the Board, after written notice by the
Board of such failure which sets forth the nature of the material failure,
and failure of Employee to correct such failure within 30 business days of
such notice.
b. Death or Disability. The Employee's employment shall be
terminated on account of the Employee's death or disability. Employee
shall be deemed to be disabled if, as a result of incapacity due to
physical or mental illness or accident, the Employee shall have failed to
perform in any material respect Employee's duties with the Company for two
months within a twelve-month period and, within ten (10) days after written
notice of termination is given to the Employee, the Employee shall not have
returned to the full-time performance of the Employee's duties.
c. By Employee for Good Reason. The Employee's employment may be
terminated by the Employee at any time for "Good Reason." For purposes of
this Agreement, "Good Reason" shall mean, without the Employee's written
consent, the occurrence of any of the following circumstances unless such
circumstances are fully remedied by the Company within 30 days after the
Company's receipt of written notice thereof given by the Employee:
(i) Any act or omission that constitutes a material breach by the
Company of its obligations or agreements under this Agreement (and if
such omission is the failure to make any salary payment to Employee
when due, the Company shall only be entitled to receive ten (10) days'
(rather than 30 days') written notice and opportunity to remedy such
omission);
(ii) The assignment to the Employee of any duties materially
inconsistent with, or the withdrawal from the Employee of any duties
material to, the position in the Company that the Employee holds
pursuant to this Agreement; or
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(iii) The relocation of the Employee's office to a location
other than in Harris County, Texas or a county adjacent thereto,
except for required travel on the Company's business.
d. Notice of Termination. Any termination by the Company for Cause
or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section
10(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon and (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Employee's employment under the provision so
indicated.
e. Obligations upon Termination.
(i) If Employee's employment is terminated by the Company or the
Employee in accordance with the provisions of this Section or in
accordance with the provisions of Section 3, then the Company's
obligations to the Employee and the Employee's obligations to the
Company shall terminate except that the Company shall be obligated to
pay to the Employee the base salary earned by him and not previously
paid to him through the date of termination, and the Employee's
obligations under Sections 6 and 7 shall continue as provided therein.
(ii) If Employee's employment is terminated by the Company
without Cause (other than as a result of death, disability or as
provided in Section 3), or by Employee with Good Reason, Company's
obligations to the Employee and the Employee's obligations to the
Company shall terminate except that (A) the Company shall be obligated
to pay to the Employee the base salary earned by him and not
previously paid to him through the date of termination, (B) Company
shall continue to pay Employee (on a semi-monthly basis) his then
current base salary for the remainder of the then-current six (6)
month period at the end of which the Employee's employment could have
been terminated by the Company pursuant to Section 3 hereof, and (C)
Employee's obligations under Sections 6 and 7 shall continue as
provided therein.
6. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge, data and customer lists relating to the Company or any of its
affiliates and which shall not be or become public knowledge (other than by acts
by the Employee or his representatives in violation of this Agreement). After
termination of the Employee's employment with the Company, the Employee shall
not, without the prior written consent of the Company communicate or divulge any
such information, knowledge, data or customer list to any party other than the
Company and those designated by it.
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7. Obligations of Employee
a. Discoveries and Inventions. If Employee, while employed by the
Company or during a period of one year after termination of such
employment, makes, either solely or jointly with others, any discovery,
improvement, or invention which would pertain or relate in any way to the
Business (as defined in Section 7(e)(i)) as conducted by the Company, its
subsidiaries, or affiliates at the time of termination of his employment,
such discovery, improvement, or invention (whether or not of patentable
nature) shall be the exclusive property of the Company. Employee shall
execute and deliver to the Company, without further compensation, any and
all documents which the Company deems necessary or appropriate to prepare
or prosecute applications for patents upon such discovery, improvement, or
invention, to assign and transfer to the Company his entire right, title,
and interest in and to such discovery, improvement, or invention, and
patents therefor, and otherwise more fully and perfectly to evidence the
Company's ownership thereof.
b. Assistance in Litigation. Employee shall, upon reasonable notice
and at the Company's sole expense, furnish such information and assistance
to the Company as may reasonably be required by the Company in connection
with any litigation in which it or any of its subsidiaries or affiliates
is, or may become, a party that relates to any matter or event occurring
during Employee's tenure with the Company.
c. Return of Confidential Information. Upon termination of
Employee's employment by Company, Employee shall promptly return to Company
all property, papers, records and software of every kind relating to the
Company or its business, whether in hard copy form or electronically or
magnetically stored; provided, however, that in the event of a dispute
between the Company and Employee relating to the subject matter of this
Agreement, Employee may retain a copy of any of the foregoing that may
relate to such dispute until such dispute has been resolved, and Employee
shall continue to be subject to the provisions of Section 6 with respect to
such copy or copies.
d. Noncompetition. The parties recognize that the employment of
Employee with the Company will be special, unique and of an extraordinary
character and in connection with such employment Employee has special skill
and training and may acquire during the term hereof additional special
skill and training. Employee accordingly agrees that while Employee is
employed by Company and continuing from the date of the termination of
Employee's employment with the Company for any reason for three (3) years
thereafter, Employee shall not:
(i) directly or indirectly, either as principal, agent,
independent contractor, consultant, director, officer, employee,
employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for his own benefit or for
the benefit of any other person or entity either (a) hire, attempt to
hire, contact or solicit with respect to hiring any employee of the
Company or any of its affiliates, or (b) induce or otherwise
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<PAGE>
counsel, advise or encourage any employee of the Company or any of its
affiliates to leave the employment of the Company or such affiliate,
in each case under this clause (i), unless Employee has received the
express prior written consent of NATK thereto, which consent shall not
be unreasonably withheld;
(ii) act or serve as a director, officer, employee, consultant,
independent contractor or in any other position or capacity with or
for, or acquire a direct or indirect ownership interest in or
otherwise conduct (whether as stockholder, partner, investor, joint
venturer, or as owner of any other type of interest), any Competing
Business as such term is defined herein; provided, however, that this
clause (ii) shall not prohibit Employee from being the owner of up to
5% of any class of outstanding securities of any company or entity if
such class of securities is publicly traded; or
(iii) directly or indirectly, either as principal, agent,
independent contractor, consultant, director, officer, employee,
employer, advisor, stockholder, partner or in any other individual or
representative capacity whatsoever, either for his own benefit or for
the benefit of any other person or entity, (A) divert or take away any
customers or clients of the Business or (B) contact, call upon or
solicit any such customer or client if the intent, effect or a
reasonably expected consequence of the same is to divert or take away
such customer or client.
Notwithstanding the provisions of this paragraph (d), in the event NATK or
one of its subsidiaries or affiliates does not elect to exercise the
Crosstie Purchase Option, as defined in that certain Crosstie Purchase
Option and Loan Agreement (the "Crosstie Agreement"), dated as of December
29, 1995, by and among TIETEK, INC., a Texas corporation, NATK, William T.
Aldrich, J. Denny Bartell and Henry W. Sullivan, in accordance with the
terms of such Crosstie Agreement, as the same may be amended from time to
time, then the provisions of clause (d)(ii) above shall not apply to
Employee's carrying on the activities described therein as they relate to
the Crosstie Business (as defined in the Crosstie Agreement), and shall
not be deemed to be violating the provisions of clause (d)(ii) with respect
thereto; provided, however, that Employee shall continue to be subject to
the other provisions of this paragraph (d).
e. In exchange for Employee's agreements contained in the provisions
of clause (d) of this Section 7, the Company agrees to pay to Employee on
or before March 28, 1996, the sum of $25,000.
f. For the purposes of this Section 7 the following terms shall have
the meaning set forth below:
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<PAGE>
(iv) "Business" shall mean the design, development, engineering,
manufacture, marketing, service and supply of Products (as that term
is defined in that certain TieTek Royalty Agreement, a copy of which
is attached to the Crosstie Agreement, dated as of the date hereof)
that the Company is permitted to manufacture, other than Applicable
Hardgoods (as that term is defined in that certain Gaia-TieTek License
Agreement, dated as of the date hereof, by and between the Company and
TieTek, Inc., a Texas corporation); provided further that Products
shall also include such Applicable Hardgoods in the event NATK
exercises the Crosstie Purchase Option (as that term defined in the
Crosstie Agreement).
.
(v) "Competing Business" shall mean any individual, business,
firm, undertaking, company, partnership, corporation, joint venture,
limited liability company, organization or other entity that engages
in any aspect of the Business.
g. Should any portion of this Section 7 be deemed unenforceable
because of the scope, duration or territory encompassed by the undertakings
of the Employee hereunder, and only in such event, then the parties consent
and agree to such limitation on scope, duration or territory as may be
finally adjudicated as enforceable by a court of competent jurisdiction
after the exhaustion of all appeals.
8. Remedies. With respect to each and every breach or violation or
threatened breach or violation by Employee of Section 6 or 7, the Company, in
addition to all other remedies available at law or in equity including specific
performance of the provisions hereof, shall be entitled to enjoin the
commencement or continuance thereof and may, without notice to Employee, apply
to any court of competent jurisdiction for entry of an immediate restraining
order or injunction. The Company may pursue any of the remedies described in
this Section 8 concurrently or consecutively in any order as to any such breach
or violation, and the pursuit of one of such remedies at any time will not be
deemed an election of remedies or waiver of the right to pursue any of the other
of such remedies.
9. Successors.
a. This Agreement is personal to the Employee and without the prior
written consent of the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Employee's legal representatives.
b. This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
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<PAGE>
10. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal
representatives.
b. All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid
addressed as follows:
If to the Employee: William T. Aldrich
4710 Bellaire Blvd., Suite 301
Houston, Texas 77401
If to the Company: 4710 Bellaire Boulevard, Suite 301
Bellaire, Texas 77401
Attn: Donovan Boyd
or to such other address as any party shall have furnished to the others in
writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
c. Except as specifically set forth in Section 7 hereof, any term or
provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms or provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions
of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable or invalid, such provision
shall be interpreted to be only so broad as is enforceable and valid.
d. This Agreement contains the entire understanding of the Company
and the Employee with respect to the subject matter hereof.
e. Any material decision or determination relating to the enforcement
of the Company's rights against Employee hereunder by the Company shall
only be made with the written concurrence or consent of the chief executive
officer or other executive officer of NATK.
11. Taxes. The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
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<PAGE>
12. Employment. Notwithstanding anything to the contrary in this
Agreement, the Employee and the Company acknowledge that the employment of the
Employee by the Company after expiration of the term of this Agreement as set
out in Section 3 hereof is "at will," unless the parties agree otherwise in
writing, and may be terminated at any time thereafter by either the Employee or
the Company at any time.
IN WITNESS WHEREOF, the Employee has hereunto set his hand and the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
WILLIAM T. ALDRICH
/s/ William T. Aldrich
----------------------------------
GAIA TECHNOLOGIES, INC.
By /s/ Tim B. Tarrillion
--------------------------------
Name: Tim B. Tarrillion
-----------------------------
Title: President
----------------------------
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EXHIBIT 10.6
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement"), dated as of December 29, 1995,
is by and between NORTH AMERICAN TECHNOLOGIES GROUP, INC., a Delaware
corporation (the "Company"), and HENRY W. SULLIVAN ("Employee").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Employee hereby agree as follows:
1. GRANT OF OPTION; VESTING SCHEDULE.
(a) Grant of Option. The Company hereby grants to Employee an option the
("Option") to purchase, subject to the terms and conditions hereof, from the
Company two hundred thousand (200,000) shares (the "Option Shares") of Common
Stock, par value $0.001 per share, of the Company (the "Common Stock") beginning
on the Commencement Date (as defined below) and ending at 5:00 p.m. Eastern
Standard Time, on December 29, 2004 (the "Termination Date"), at an exercise
price equal to $2.50 per share of Common Stock. As used herein, the term
"Commencement Date" shall mean the date first set out above. The number of
Option Shares and the exercise price per share shall be subject to adjustment
from time to time upon the occurrence of certain events as set forth below. The
shares of Common Stock or any other shares or other units of stock or other
securities or property, or any combination thereof then receivable upon exercise
of the Option, as adjusted from time to time, are sometimes referred to
hereinafter as "Exercise Shares." The exercise price per share as from time to
time in effect is referred to hereinafter as the "Exercise Price."
The Option is not an "incentive stock option" as described in Section 422A of
the Internal Revenue Code of 1986, as amended.
(b) Vesting Schedule. Following the Commencement Date, the Option shall
vest and be exerciseable (unless earlier terminated as provided herein) on
December 29 in the years set forth below and in the amounts set forth below:
<TABLE>
<CAPTION>
NUMBER OF
DECEMBER 29 SHARES
<S> <C>
1996 50,000
1997 50,000
1998 50,000
1999 50,000
-------
Total 200,000
</TABLE>
; provided, however, that (i) the Option to acquire such shares shall vest on
the date set forth above only in the event that Employee is in the employ of the
Company or any of
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its subsidiaries in any capacity on such date and (ii) the Option to acquire any
Exercise Shares, if not earlier terminated by the terms of this Agreement, shall
terminate on the 5th annual anniversary date of the date on which the Option to
acquire such Exercise Shares vested as provided in this clause (b). The period
beginning on the Commencement Date and ending on the Termination Date is
sometimes referred to herein as the Option Period. Except as provided otherwise
in the next succeeding paragraph, if Employee is not in the employ of the
Company or any of its subsidiaries in any capacity on any of the various vesting
dates set forth above, regardless of the reason therefore, then the Option with
respect to such year shall not vest.
Notwithstanding anything herein to the contrary, in the event Employee is
no longer employed by the Company or any of its subsidiaries as a result of the
termination of such employment relationship:
(x) by the Company or any of its subsidiaries for any reason other than
"Cause" (as such term is then defined in any written employment agreement
between Employee, on the one hand, and the Company or any such subsidiary, on
the other hand (the "Employment Agreement"), or the death or disability (as such
term may be defined in such Employment Agreement) of Employee, or
(y) by Employee for "Good Reason" (as such term may be defined in such
Employment Agreement), then 50% of all Option Shares that have not vested on or
before the date of such termination shall immediately vest as of such
termination date, and the Option Period with respect to such newly vested Option
Shares shall begin on such termination date and shall continue for a period of
five years thereafter and expire on the fifth anniversary date of such
termination date.
2. EXERCISE OF OPTION. The Option may be exercised, so long as it is then
valid and outstanding, from time to time in whole (as to Option Shares then
exercisable) or in part, and if in part, on as many occasions during the Option
Period as Employee shall desire, subject to the terms and provisions of this
Agreement. The Option may be exercised upon delivery on any business day to the
Company at its address set forth below (or such other office of the Company, if
any, as shall theretofore have been designated by the Company by written notice
to the Employee) of the following:
(a) a completed and executed Notice of Option Exercise in the form set
forth in Appendix A hereto and made a part hereof; and
(b) payment of the full Exercise Price for the number of Exercise Shares
set forth in the Notice of Option Exercise, in lawful money of the United States
of America, by certified check or cashier's check made payable to the order of
the Company (or with the consent of the Company, the purchase price therefor may
be paid in whole or in part by the delivery to the Company of certificates
representing shares of Common Stock held
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<PAGE>
by Employee, duly endorsed for transfer or accompanied by blank stock, each of
which shares shall be valued at a price equal to its then Current Market Value,
as defined below).
In the event that Employee is no longer in the employ of the Company or any of
its subsidiaries in any capacity, Employee shall be entitled to exercise this
Option, according to the terms and conditions set forth herein, to purchase only
that number of Option Shares in which Employee has become vested prior to the
termination of such employment or, pursuant to the provisions of the last
paragraph of Section 1(b) hereof, immediately as of such termination.
3. ISSUANCE OF EXERCISE SHARES; DELIVERY OF STOCK CERTIFICATE. The Company
shall, within ten (10) business days (or as soon thereafter as is practicable)
of the exercise of this Option, issue in the name of and cause to be delivered
to the Employee (or such other person or persons, if any, as the Employee shall
have designated in the Notice of Option Exercise) one or more certificates
representing the Exercise Shares to which the Employee (or such other person or
persons) shall be entitled upon such exercise under the terms hereof. Such
certificate or certificates shall be deemed to have been issued and the Employee
(or such other person or persons so designated) shall be deemed to have become
the record holder of the Exercise Shares as of the date of the due exercise of
this Option.
4. EXERCISE SHARES FULLY PAID AND NON-ASSESSABLE. The Company agrees and
covenants that all Exercise Shares issuable upon the due exercise of the Option
will, upon issuance of a certificate therefor in accordance with the terms
hereof, be duly authorized, validly issued, fully paid and non-assessable and
free and clear of all taxes (other than taxes which, pursuant to this Agreement,
the Company shall not be obligated to pay) or liens, charges, and security
interests created by the Company with respect to the issuance thereof.
5. RESERVATION OF EXERCISE SHARES. At the time of or before taking any
action which would cause an adjustment pursuant to this Agreement increasing the
number of shares of capital stock constituting the Exercise Shares, the Company
will take any corporate action which may be necessary in order that the Company
have remaining, after such adjustment, a number of shares of such capital stock
unissued and unreserved for other purposes sufficient to permit the exercise of
all the then vested Options under this Agreement of like tenor immediately after
such adjustment. The Company will also from time to time take action to
increase the authorized amount of its capital stock constituting the Exercise
Shares if at any time the number of shares of capital stock authorized but
remaining unissued and unreserved for other purposes shall be insufficient to
permit the exercise of the Options under this Agreement then vested.
The Company may but shall not be limited to reserve and keep available, out of
the aggregate of its authorized but unissued shares of capital stock, for the
purpose of enabling it to satisfy any obligation to issue Exercise Shares upon
exercise of Options,
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<PAGE>
through the Termination Date, the number of Exercise Shares deliverable upon the
full exercise of this Option.
At the time of or before taking any action which would cause (pursuant to the
provisions of this Section 5) an adjustment resulting in a reduction of the
Exercise Price below the then par value (if any) of the Exercise Shares issuable
upon exercise of the Options, the Company will take any corporate action which
may be necessary in order to assure that the par value per share of the Exercise
Shares is at all times equal to or less than the Exercise Price per share and so
that the Company may validly and legally issue fully paid and non-assessable
Exercise Shares at the Exercise Price, as so adjusted. The Company will also
from time to time take similar action if at any time the Exercise Price is below
the then par value of the Exercise Shares.
6. FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of capital stock upon the exercise of this Option or to
deliver stock certificates which evidence fractional shares of capital stock.
In the event that any fraction of an Exercise Share would, except for the
provisions of this Section 6, be issuable upon the exercise of this Option, the
Company shall pay to the Employee an amount in cash equal to such fraction
multiplied by the Current Market Value (as defined herein) of the Exercise
Share. For purposes of this subparagraph, the "Current Market Value" shall
mean, and be determined, as follows:
(a) if the type of securities representing the Exercise Shares are traded
in the over-the-counter market and not on any national securities exchange and
not in the NASDAQ Reporting System, the average of the mean between the last bid
and asked prices per share, as reported by the National Quotation Bureau, Inc.,
or another generally accepted reporting service, for the last business day prior
to the date on which this Option is exercised, or if not so reported, the
average of the closing bid and asked prices for an Exercise Share as furnished
to the Company by any member of the National Association of Securities Dealers,
Inc., selected by the Company for that purpose;
(b) if the type of securities representing the Exercise Shares are listed
or traded on a national securities exchange or in the NASDAQ National Market
System, the closing price on the principal national securities exchange on which
they are so listed or traded or in the NASDAQ National Market System, as the
case may be, on the last business day prior to the date of the exercise of this
Option. The closing price referred to in this clause (b) shall be the last
reported sales price or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices, in either case, on the
national securities exchange on which the Exercise Shares are then listed or in
the NASDAQ Reporting System; or
(c) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
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<PAGE>
7. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if
any, attributable to the issuance of Exercise Shares upon the exercise of this
Option; provided, however, that the Company shall not be required to pay any tax
or taxes which may be payable in respect of any transfer involved in the issue
of any certificates representing the Exercise Shares in a name other than that
of the Employee, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
8. RIGHTS OF EMPLOYEE. The Employee shall not, by virtue of anything
contained in this Agreement or otherwise, be entitled to any right whatsoever,
either in law or equity, of a stockholder of the Company, including without
limitation, the right to receive dividends or to vote or to consent or to
receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter, with respect to
any Exercise Shares prior to the acquisition of such Exercise Shares on the
exercise of this Option as provided in this Agreement .
9. ADJUSTMENT OF EXERCISE SHARES AND EXERCISE PRICE. The Exercise Price
and the number and kind of Exercise Shares purchasable upon the exercise of this
Option shall be subject to adjustment from time to time upon the happening of
certain events as provided in this Section 9. The Exercise Price in effect at
any time and the number and kind of securities purchasable upon exercise of this
Option also shall be subject to adjustment as hereinafter provided.
(a) In the case the Company shall (i) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (ii)
subdivide or classify its outstanding Common Stock into a greater number of
shares or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, classification, combination or reclassification shall be
proportionally adjusted so that the Employee, upon any exercise of this Option
immediately thereafter shall be entitled to receive the aggregate number and
kind of shares which, if this Option had been exercised by such Employee
immediately prior to such date, he would have owned upon such exercise and been
entitled to receive upon such dividend, subdivision, classification, combination
or reclassification. For example, if the Company declares a 2 for 1 stock
dividend or stock split and the Exercise Price immediately prior to such event
was $5.00 per share, the adjusted Exercise Price immediately after such event
would be $2.50 per share, and as a result, the number of Option Shares would
double. Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) In case the Company shall hereafter issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock
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<PAGE>
(or securities convertible into Common Stock) at a price (or having a conversion
price per share) less than the current market price of the Common Stock (as
defined in the subsection (d) below) on the record date mentioned below, the
Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior to the
date of such issuance by a fraction, the numerator of which shall be the sum of
the number of shares of Common Stock outstanding on the record date mentioned
below and the number of additional shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible securities so offered) would
purchase at such current market price per share of the Common Stock, and the
denominator of which shall be the sum of the number of shares of Common Stock
outstanding on such record date and the number of additional shares of Common
Stock offered for subscription or purchase (or into which the convertible
securities so offered are convertible). Such adjustment shall be made
successively whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
shareholders entitled to receive such rights or warrants; and to the extent that
shares of Common Stock are not delivered (or securities convertible into Common
Stock are not delivered) after the expiration of such rights or warrants the
Exercise Price shall be readjusted to the Exercise Price which would then be in
effect had the adjustments made upon the issuance of such rights or warrants
been made upon the basis of delivery of only the number of shares of Common
Stock (or securities convertible into Common Stock) actually delivered.
(c) Whenever the Exercise Price payable upon exercise of this Option is
adjusted pursuant to the provisions of (a) or (b) above, the number of Exercise
Shares purchasable upon exercise of this Option shall simultaneously be adjusted
by multiplying the number of Exercise Shares initially issuable upon exercise of
this Option by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(d) For the purpose of any computation under the subsection above, the
current market price per share of Common Stock at any date shall be deemed to be
the average of the daily closing prices for 30 consecutive business days before
such date. The closing price for each day shall be the last sale price (regular
way) or, in case no such reported sale takes place on such day, the average of
the last reported bid and lowest reported asked prices as reported by NASDAQ, or
other similar organization if NASDAQ is no longer reporting such information, or
if not so available, the fair market price as determined by the Board of
Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least one cent ($0.01) in
such price; provided, however, that any adjustments which by reason of the
provisions of this sentence are not required to be made shall be carried forward
and taken into account in any subsequent adjustment required to be made
hereunder. All calculations under this Section 9 shall be made to the nearest
cent or to the nearest one-hundredth of a share,
6
<PAGE>
as the case may be. Anything in this section to the contrary notwithstanding,
the Company shall be entitled, but shall not be required, to make such changes
in the Exercise Price, in addition to those required by this Section 9 as it, in
its sole discretion, shall determine to be advisable in order that any dividend
or distribution in shares of Common Stock, subdivision, classification,
reclassification or combination of Common Stock, issuance of warrants or options
or other rights to acquire Common Stock or distribution of evidences of
indebtedness or other assets (excluding cash dividends) referred to hereinabove
in this Section 9 hereafter made by the Company to the holders of its Common
Stock shall not result in any tax to the holders of its Common Stock or
securities convertible into Common Stock.
(f) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of Shares issuable upon exercise of this Option to be mailed
to the Employee, at the address set forth in this Agreement for notice, and
shall cause a certified copy thereof to be mailed to its transfer agent, if any.
The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 9, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(g) In the event that at any time, as a result of an adjustment made
pursuant to this Section 9, the Employee thereafter shall become entitled to
receive any Exercise Shares of the Company other than Common Stock, thereafter
the number of such other shares so receivable upon exercise of this Option shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in this Section 9.
10. RESTRICTIONS ON EXERCISE AND TRANSFERABILITY. This Option, and the
rights of Employee under this Agreement, shall be exerciseable only by the
Employee or, upon his death or disability, by his estate or any duly appointed
guardian, executor, administrator, trustee or other legal representative(s), and
shall not be transferred or assigned to any other party other than Employee's
estate upon his death.
11. RESTRICTIVE LEGENDS. So long as an exemption therefrom is then
available, the Company shall not be required by the terms of this Agreement to
register, under the Securities Act of 1933, as amended (the "Act"), or under
applicable state securities laws (together with the Act, the "Securities Laws"),
any of the Exercise Shares issued or to be issued upon the exercise of the
Option. In addition, in the event that any such Exercise Shares are not so
registered, Employee consents to the placement on the certificate or
certificates representing such Exercise Shares a legend or legends to the effect
that, among other things, neither such certificate or certificates nor the
Exercise Shares evidenced thereby have been registered under any Securities Laws
and that no sale, transfer or other disposition thereof or any interest therein
may be made or shall be recognized unless in the satisfactory written opinion of
counsel for, or satisfactory to,
7
<PAGE>
the Company, such transaction would not violate or required registration under
such Securities Laws. The Company may also place on such certificate or
certificates any other legend it deems necessary or desirable in order to
conform to any of the Securities Laws.
12. CERTAIN REGISTRATION RIGHTS. If at any time prior to the Termination
Date the Company registers under the Act any shares of Common Stock to be issued
to an executive officer of the Company or any of its subsidiaries upon exercise
of an option (a "Management Option") to acquire such shares of Common Stock
granted in connection with such person's employment with the Company or any of
its subsidiaries as an executive officer, then the Company shall offer in
writing to Employee a corresponding right to receive shares of Common Stock that
are registered under the Act upon the exercise of any of Employee's then vested
and unexercised shares of Common Stock under this Agreement upon similar terms
and provisions as those offered to such other executive officer. In addition,
if at any time prior to the Termination Date the Company offers to register any
of such other executive officer's outstanding shares of Common Stock that were
issued to him upon exercise of a Management Option, then the Company shall offer
in writing to Employee at the same time a corresponding right to cause the
Company to register any of the Employee's then outstanding shares of Common
Stock that were issued to him upon exercise of the Option granted under this
Agreement. The rights granted in favor of Employee under this Section 12: (a)
shall be as equal in nature to the rights granted in favor of such other
executive officer as is reasonably practicable, (b) shall relate to a
proportionate number of Employee's shares of Common Stock as the Board of
Directors of the Company deems reasonable and (c) shall be subject to such other
reasonable terms and conditions as the Board of Directors of the Company may
then impose.
13. NOTICES. All notices or other communications under or relating to
this Agreement shall be in writing and shall be deemed to have been given if
delivered by hand or mailed by certified mail, postage prepaid, return receipt
request, addressed as follows:
If to the Company:
North American Technologies Group, Inc.
4710 Bellaire Blvd., Suite 301
Bellaire, Texas 77401
Attention: Corporate Secretary
If to the Employee:
Henry W. Sullivan
4710 Bellaire Blvd., Suite 301
Bellaire, Texas 77401
8
<PAGE>
Either of the Company or the Employee may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Section.
14. AMENDMENTS. This Agreement may be amended or supplement only by a
writing signed by both parties hereto.
15. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 10
hereof, this Agreement shall inure to the benefit of and be binding on the
respective successors, assigns and legal representatives of the Employee and the
Company.
16. SEVERABILITY. If for any reason any provision, paragraph or terms of
this Agreement is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and Sections of this Agreement shall be deemed to be severable.
17. GOVERNING LAW. To the full extent controllable by stipulation of the
Company and Employee, this Agreement shall be interpreted and enforced under
Texas law.
18. HEADINGS. Headings used herein are included herein for convenience of
reference only and shall not affect the construction of this Agreement or
constitute a part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first set out above.
"Company" NORTH AMERICAN TECHNOLOGIES
GROUP, INC.
By: /s/ Tim B. Tarrillion
Tim B. Tarrillion
President and Chief Executive Officer
"Employee" HENRY W. SULLIVAN
/s/ Henry W. Sullivan
__________________________________________
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<PAGE>
APPENDIX A
NOTICE OF STOCK OPTION EXERCISE
Pursuant to that certain Stock Option Agreement, dated as of ____________,
1995, as amended to date (the "Agreement"), by and between North American
Technologies Group, Inc., a Delaware corporation (the "Company"), and the
undersigned, and subject to the vesting periods set forth therein, the
undersigned hereby irrevocably elects to exercise an option to acquire
________________ shares of _____________________________, at an exercise price
of $____ per share, or an aggregate purchase price of $__________. Enclosed
herewith is a certified check or cashier's check made payable to the order of
the Company in the amount of the aggregate purchase price set forth in the
preceding sentence [or, if, applicable: "; provided, however, that $________ of
such purchase price therefor is hereby paid by the delivery to the Company of
______ shares of Common Stock represented by certificate no(s) ___________, duly
endorsed for transfer or accompanied by a blank stock power, all in accordance
with the terms and provisions of the Agreement"]. Each capitalized terms used
herein, unless otherwise defined, has the meaning given such term in the
Agreement.
The undersigned hereby represents and agrees that the Exercise Shares
purchased pursuant hereto are being purchased for investment and not with a view
to the distribution or resale thereof, and that the undersigned understands that
said Exercise Shares have not been registered under the Securities Laws.
The undersigned requests that a certificate for the Exercise Shares be
issued in the name of:
______________________________________
______________________________________
______________________________________
[Please print name, address]
Address of Employee (if different from above):
_________________________________
_________________________________
_________________________________
Dated:__________________
Name of Employee: _________________________________
Employee's Signature: _________________________________
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<PAGE>
EXHIBIT 10.7
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT ("Agreement"), dated as of December 29, 1995,
is by and between NORTH AMERICAN TECHNOLOGIES GROUP, INC., a Delaware
corporation (the "Company"), and WILLIAM T. ALDRICH ("Employee").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Employee hereby agree as follows:
1. GRANT OF OPTION; VESTING SCHEDULE.
(a) Grant of Option. The Company hereby grants to Employee an option the
("Option") to purchase, subject to the terms and conditions hereof, from the
Company two hundred thousand (200,000) shares (the "Option Shares") of Common
Stock, par value $0.001 per share, of the Company (the "Common Stock") beginning
on the Commencement Date (as defined below) and ending at 5:00 p.m. Eastern
Standard Time, on December 29, 2004 (the "Termination Date"), at an exercise
price equal to $2.50 per share of Common Stock. As used herein, the term
"Commencement Date" shall mean the date first set out above. The number of
Option Shares and the exercise price per share shall be subject to adjustment
from time to time upon the occurrence of certain events as set forth below. The
shares of Common Stock or any other shares or other units of stock or other
securities or property, or any combination thereof then receivable upon exercise
of the Option, as adjusted from time to time, are sometimes referred to
hereinafter as "Exercise Shares." The exercise price per share as from time to
time in effect is referred to hereinafter as the "Exercise Price."
The Option is not an "incentive stock option" as described in Section 422A of
the Internal Revenue Code of 1986, as amended.
(b) Vesting Schedule. Following the Commencement Date, the Option shall
vest and be exerciseable (unless earlier terminated as provided herein) on
December 29 in the years set forth below and in the amounts set forth below:
<TABLE>
<CAPTION>
NUMBER OF
DECEMBER 29 SHARES
<S> <C>
1996 50,000
1997 50,000
1998 50,000
1999 50,000
-------
Total 200,000
</TABLE>
; provided, however, that (i) the Option to acquire such shares shall vest on
the date set forth above only in the event that Employee is in the employ of the
Company or any of
1
<PAGE>
its subsidiaries in any capacity on such date and (ii) the Option to acquire any
Exercise Shares, if not earlier terminated by the terms of this Agreement, shall
terminate on the 5th annual anniversary date of the date on which the Option to
acquire such Exercise Shares vested as provided in this clause (b). The period
beginning on the Commencement Date and ending on the Termination Date is
sometimes referred to herein as the Option Period. Except as provided otherwise
in the next succeeding paragraph, if Employee is not in the employ of the
Company or any of its subsidiaries in any capacity on any of the various vesting
dates set forth above, regardless of the reason therefore, then the Option with
respect to such year shall not vest.
Notwithstanding anything herein to the contrary, in the event Employee is
no longer employed by the Company or any of its subsidiaries as a result of the
termination of such employment relationship:
(x) by the Company or any of its subsidiaries for any reason other than
"Cause" (as such term is then defined in any written employment agreement
between Employee, on the one hand, and the Company or any such subsidiary, on
the other hand (the "Employment Agreement"), or the death or disability (as such
term may be defined in such Employment Agreement) of Employee, or
(y) by Employee for "Good Reason" (as such term may be defined in such
Employment Agreement), then 50% of all Option Shares that have not vested on or
before the date of such termination shall immediately vest as of such
termination date, and the Option Period with respect to such newly vested Option
Shares shall begin on such termination date and shall continue for a period of
five years thereafter and expire on the fifth anniversary date of such
termination date.
2. EXERCISE OF OPTION. The Option may be exercised, so long as it is then
valid and outstanding, from time to time in whole (as to Option Shares then
exercisable) or in part, and if in part, on as many occasions during the Option
Period as Employee shall desire, subject to the terms and provisions of this
Agreement. The Option may be exercised upon delivery on any business day to the
Company at its address set forth below (or such other office of the Company, if
any, as shall theretofore have been designated by the Company by written notice
to the Employee) of the following:
(a) a completed and executed Notice of Option Exercise in the form set
forth in Appendix A hereto and made a part hereof; and
(b) payment of the full Exercise Price for the number of Exercise Shares
set forth in the Notice of Option Exercise, in lawful money of the United States
of America, by certified check or cashier's check made payable to the order of
the Company (or with the consent of the Company, the purchase price therefor may
be paid in whole or in part by the delivery to the Company of certificates
representing shares of Common Stock held
2
<PAGE>
by Employee, duly endorsed for transfer or accompanied by blank stock, each of
which shares shall be valued at a price equal to its then Current Market Value,
as defined below).
In the event that Employee is no longer in the employ of the Company or any of
its subsidiaries in any capacity, Employee shall be entitled to exercise this
Option, according to the terms and conditions set forth herein, to purchase only
that number of Option Shares in which Employee has become vested prior to the
termination of such employment or, pursuant to the provisions of the last
paragraph of Section 1(b) hereof, immediately as of such termination.
3. ISSUANCE OF EXERCISE SHARES; DELIVERY OF STOCK CERTIFICATE. The Company
shall, within ten (10) business days (or as soon thereafter as is practicable)
of the exercise of this Option, issue in the name of and cause to be delivered
to the Employee (or such other person or persons, if any, as the Employee shall
have designated in the Notice of Option Exercise) one or more certificates
representing the Exercise Shares to which the Employee (or such other person or
persons) shall be entitled upon such exercise under the terms hereof. Such
certificate or certificates shall be deemed to have been issued and the Employee
(or such other person or persons so designated) shall be deemed to have become
the record holder of the Exercise Shares as of the date of the due exercise of
this Option.
4. EXERCISE SHARES FULLY PAID AND NON-ASSESSABLE. The Company agrees and
covenants that all Exercise Shares issuable upon the due exercise of the Option
will, upon issuance of a certificate therefor in accordance with the terms
hereof, be duly authorized, validly issued, fully paid and non-assessable and
free and clear of all taxes (other than taxes which, pursuant to this Agreement,
the Company shall not be obligated to pay) or liens, charges, and security
interests created by the Company with respect to the issuance thereof.
5. RESERVATION OF EXERCISE SHARES. At the time of or before taking any
action which would cause an adjustment pursuant to this Agreement increasing the
number of shares of capital stock constituting the Exercise Shares, the Company
will take any corporate action which may be necessary in order that the Company
have remaining, after such adjustment, a number of shares of such capital stock
unissued and unreserved for other purposes sufficient to permit the exercise of
all the then vested Options under this Agreement of like tenor immediately after
such adjustment. The Company will also from time to time take action to
increase the authorized amount of its capital stock constituting the Exercise
Shares if at any time the number of shares of capital stock authorized but
remaining unissued and unreserved for other purposes shall be insufficient to
permit the exercise of the Options under this Agreement then vested.
The Company may but shall not be limited to reserve and keep available, out of
the aggregate of its authorized but unissued shares of capital stock, for the
purpose of enabling it to satisfy any obligation to issue Exercise Shares upon
exercise of Options, through
3
<PAGE>
the Termination Date, the number of Exercise Shares deliverable upon the full
exercise of this Option.
At the time of or before taking any action which would cause (pursuant to the
provisions of this Section 5) an adjustment resulting in a reduction of the
Exercise Price below the then par value (if any) of the Exercise Shares issuable
upon exercise of the Options, the Company will take any corporate action which
may be necessary in order to assure that the par value per share of the Exercise
Shares is at all times equal to or less than the Exercise Price per share and so
that the Company may validly and legally issue fully paid and non-assessable
Exercise Shares at the Exercise Price, as so adjusted. The Company will also
from time to time take similar action if at any time the Exercise Price is below
the then par value of the Exercise Shares.
6. FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of capital stock upon the exercise of this Option or to
deliver stock certificates which evidence fractional shares of capital stock.
In the event that any fraction of an Exercise Share would, except for the
provisions of this Section 6, be issuable upon the exercise of this Option, the
Company shall pay to the Employee an amount in cash equal to such fraction
multiplied by the Current Market Value (as defined herein) of the Exercise
Share. For purposes of this subparagraph, the "Current Market Value" shall
mean, and be determined, as follows:
(a) if the type of securities representing the Exercise Shares are traded
in the over-the-counter market and not on any national securities exchange and
not in the NASDAQ Reporting System, the average of the mean between the last bid
and asked prices per share, as reported by the National Quotation Bureau, Inc.,
or another generally accepted reporting service, for the last business day prior
to the date on which this Option is exercised, or if not so reported, the
average of the closing bid and asked prices for an Exercise Share as furnished
to the Company by any member of the National Association of Securities Dealers,
Inc., selected by the Company for that purpose;
(b) if the type of securities representing the Exercise Shares are listed
or traded on a national securities exchange or in the NASDAQ National Market
System, the closing price on the principal national securities exchange on which
they are so listed or traded or in the NASDAQ National Market System, as the
case may be, on the last business day prior to the date of the exercise of this
Option. The closing price referred to in this clause (b) shall be the last
reported sales price or, in case no such reported sale takes place on such day,
the average of the reported closing bid and asked prices, in either case, on the
national securities exchange on which the Exercise Shares are then listed or in
the NASDAQ Reporting System; or
(c) if no such closing price or closing bid and asked prices are
available, as determined in any reasonable manner as may be prescribed by the
Board of Directors of the Company.
4
<PAGE>
7. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if
any, attributable to the issuance of Exercise Shares upon the exercise of this
Option; provided, however, that the Company shall not be required to pay any tax
or taxes which may be payable in respect of any transfer involved in the issue
of any certificates representing the Exercise Shares in a name other than that
of the Employee, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
8. RIGHTS OF EMPLOYEE. The Employee shall not, by virtue of anything
contained in this Agreement or otherwise, be entitled to any right whatsoever,
either in law or equity, of a stockholder of the Company, including without
limitation, the right to receive dividends or to vote or to consent or to
receive notice as a shareholder in respect of the meetings of shareholders or
the election of directors of the Company or any other matter, with respect to
any Exercise Shares prior to the acquisition of such Exercise Shares on the
exercise of this Option as provided in this Agreement .
9. ADJUSTMENT OF EXERCISE SHARES AND EXERCISE PRICE. The Exercise Price
and the number and kind of Exercise Shares purchasable upon the exercise of this
Option shall be subject to adjustment from time to time upon the happening of
certain events as provided in this Section 9. The Exercise Price in effect at
any time and the number and kind of securities purchasable upon exercise of this
Option also shall be subject to adjustment as hereinafter provided.
(a) In the case the Company shall (i) pay a dividend or make a
distribution on its shares of Common Stock in shares of Common Stock, (ii)
subdivide or classify its outstanding Common Stock into a greater number of
shares or (iii) combine or reclassify its outstanding Common Stock into a
smaller number of shares, the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, classification, combination or reclassification shall be
proportionally adjusted so that the Employee, upon any exercise of this Option
immediately thereafter shall be entitled to receive the aggregate number and
kind of shares which, if this Option had been exercised by such Employee
immediately prior to such date, he would have owned upon such exercise and been
entitled to receive upon such dividend, subdivision, classification, combination
or reclassification. For example, if the Company declares a 2 for 1 stock
dividend or stock split and the Exercise Price immediately prior to such event
was $5.00 per share, the adjusted Exercise Price immediately after such event
would be $2.50 per share, and as a result, the number of Option Shares would
double. Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) In case the Company shall hereafter issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock (or securities convertible into Common Stock) at a price (or
having a conversion price
5
<PAGE>
per share) less than the current market price of the Common Stock (as defined in
the subsection (d) below) on the record date mentioned below, the Exercise Price
shall be adjusted so that the same shall equal the price determined by
multiplying the Exercise Price in effect immediately prior to the date of such
issuance by a fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding on the record date mentioned below and the
number of additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered) would purchase at
such current market price per share of the Common Stock, and the denominator of
which shall be the sum of the number of shares of Common Stock outstanding on
such record date and the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so offered
are convertible). Such adjustment shall be made successively whenever such
rights or warrants are issued and shall become effective immediately after the
record date for the determination of shareholders entitled to receive such
rights or warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not delivered) after
the expiration of such rights or warrants the Exercise Price shall be readjusted
to the Exercise Price which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock (or securities convertible
into Common Stock) actually delivered.
(c) Whenever the Exercise Price payable upon exercise of this Option is
adjusted pursuant to the provisions of (a) or (b) above, the number of Exercise
Shares purchasable upon exercise of this Option shall simultaneously be adjusted
by multiplying the number of Exercise Shares initially issuable upon exercise of
this Option by the Exercise Price in effect on the date hereof and dividing the
product so obtained by the Exercise Price, as adjusted.
(d) For the purpose of any computation under the subsection above, the
current market price per share of Common Stock at any date shall be deemed to be
the average of the daily closing prices for 30 consecutive business days before
such date. The closing price for each day shall be the last sale price (regular
way) or, in case no such reported sale takes place on such day, the average of
the last reported bid and lowest reported asked prices as reported by NASDAQ, or
other similar organization if NASDAQ is no longer reporting such information, or
if not so available, the fair market price as determined by the Board of
Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least one cent ($0.01) in
such price; provided, however, that any adjustments which by reason of the
provisions of this sentence are not required to be made shall be carried forward
and taken into account in any subsequent adjustment required to be made
hereunder. All calculations under this Section 9 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be. Anything
in this section to the contrary notwithstanding, the
6
<PAGE>
Company shall be entitled, but shall not be required, to make such changes in
the Exercise Price, in addition to those required by this Section 9 as it, in
its sole discretion, shall determine to be advisable in order that any dividend
or distribution in shares of Common Stock, subdivision, classification,
reclassification or combination of Common Stock, issuance of warrants or options
or other rights to acquire Common Stock or distribution of evidences of
indebtedness or other assets (excluding cash dividends) referred to hereinabove
in this Section 9 hereafter made by the Company to the holders of its Common
Stock shall not result in any tax to the holders of its Common Stock or
securities convertible into Common Stock.
(f) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of Shares issuable upon exercise of this Option to be mailed
to the Employee, at the address set forth in this Agreement for notice, and
shall cause a certified copy thereof to be mailed to its transfer agent, if any.
The Company may retain a firm of independent certified public accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) to make any computation required by this Section 9, and a
certificate signed by such firm shall be conclusive evidence of the correctness
of such adjustment.
(g) In the event that at any time, as a result of an adjustment made
pursuant to this Section 9, the Employee thereafter shall become entitled to
receive any Exercise Shares of the Company other than Common Stock, thereafter
the number of such other shares so receivable upon exercise of this Option shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in this Section 9.
10. RESTRICTIONS ON EXERCISE AND TRANSFERABILITY. This Option, and the
rights of Employee under this Agreement, shall be exerciseable only by the
Employee or, upon his death or disability, by his estate or any duly appointed
guardian, executor, administrator, trustee or other legal representative(s), and
shall not be transferred or assigned to any other party other than Employee's
estate upon his death.
11. RESTRICTIVE LEGENDS. So long as an exemption therefrom is then
available, the Company shall not be required by the terms of this Agreement to
register, under the Securities Act of 1933, as amended (the "Act"), or under
applicable state securities laws (together with the Act, the "Securities Laws"),
any of the Exercise Shares issued or to be issued upon the exercise of the
Option. In addition, in the event that any such Exercise Shares are not so
registered, Employee consents to the placement on the certificate or
certificates representing such Exercise Shares a legend or legends to the effect
that, among other things, neither such certificate or certificates nor the
Exercise Shares evidenced thereby have been registered under any Securities Laws
and that no sale, transfer or other disposition thereof or any interest therein
may be made or shall be recognized unless in the satisfactory written opinion of
counsel for, or satisfactory to, the Company, such transaction would not violate
or required registration under such
7
<PAGE>
Securities Laws. The Company may also place on such certificate or certificates
any other legend it deems necessary or desirable in order to conform to any of
the Securities Laws.
12. CERTAIN REGISTRATION RIGHTS. If at any time prior to the Termination
Date the Company registers under the Act any shares of Common Stock to be issued
to an executive officer of the Company or any of its subsidiaries upon exercise
of an option (a "Management Option") to acquire such shares of Common Stock
granted in connection with such person's employment with the Company or any of
its subsidiaries as an executive officer, then the Company shall offer in
writing to Employee a corresponding right to receive shares of Common Stock that
are registered under the Act upon the exercise of any of Employee's then vested
and unexercised shares of Common Stock under this Agreement upon similar terms
and provisions as those offered to such other executive officer. In addition,
if at any time prior to the Termination Date the Company offers to register any
of such other executive officer's outstanding shares of Common Stock that were
issued to him upon exercise of a Management Option, then the Company shall offer
in writing to Employee at the same time a corresponding right to cause the
Company to register any of the Employee's then outstanding shares of Common
Stock that were issued to him upon exercise of the Option granted under this
Agreement. The rights granted in favor of Employee under this Section 12: (a)
shall be as equal in nature to the rights granted in favor of such other
executive officer as is reasonably practicable, (b) shall relate to a
proportionate number of Employee's shares of Common Stock as the Board of
Directors of the Company deems reasonable and (c) shall be subject to such other
reasonable terms and conditions as the Board of Directors of the Company may
then impose.
13. NOTICES. All notices or other communications under or relating to
this Agreement shall be in writing and shall be deemed to have been given if
delivered by hand or mailed by certified mail, postage prepaid, return receipt
request, addressed as follows:
If to the Company:
North American Technologies Group, Inc.
4710 Bellaire Blvd., Suite 301
Houston, Texas 77401
Attention: Corporate Secretary
If to the Employee:
William T. Aldrich
4710 Bellaire Blvd., Suite 301
Houston, Texas 77401
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Either of the Company or the Employee may from time to time change the
address to which notices to it are to be mailed hereunder by notice in
accordance with the provisions of this Section.
14. AMENDMENTS. This Agreement may be amended or supplement only by a
writing signed by both parties hereto.
15. SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 10
hereof, this Agreement shall inure to the benefit of and be binding on the
respective successors, assigns and legal representatives of the Employee and the
Company.
16. SEVERABILITY. If for any reason any provision, paragraph or terms of
this Agreement is held to be invalid or unenforceable, all other valid
provisions herein shall remain in full force and effect and all terms,
provisions and Sections of this Agreement shall be deemed to be severable.
17. GOVERNING LAW. To the full extent controllable by stipulation of the
Company and Employee, this Agreement shall be interpreted and enforced under
Texas law.
18. HEADINGS. Headings used herein are included herein for convenience of
reference only and shall not affect the construction of this Agreement or
constitute a part of this Agreement for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed the day and year first set out above.
"Company" NORTH AMERICAN TECHNOLOGIES
GROUP, INC.
By: /s/ Tim B. Tarrillion
Tim B. Tarrillion
President and Chief Executive Officer
"Employee" WILLIAM T. ALDRICH
/s/ William T. Aldrich
__________________________________________
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APPENDIX A
NOTICE OF STOCK OPTION EXERCISE
Pursuant to that certain Stock Option Agreement, dated as of December 29,
1995, as amended to date (the "Agreement"), by and between North American
Technologies Group, Inc., a Delaware corporation (the "Company"), and the
undersigned, and subject to the vesting periods set forth therein, the
undersigned hereby irrevocably elects to exercise an option to acquire
________________ shares of ____________________, at an exercise price of $____
per share, or an aggregate purchase price of $__________. Enclosed herewith is
a certified check or cashier's check made payable to the order of the Company in
the amount of the aggregate purchase price set forth in the preceding sentence
[or, if, applicable: "; provided, however, that $________ of such purchase
price therefor is hereby paid by the delivery to the Company of ______ shares of
Common Stock represented by certificate no(s) ___________, duly endorsed for
transfer or accompanied by a blank stock power, all in accordance with the terms
and provisions of the Agreement"]. Each capitalized terms used herein, unless
otherwise defined, has the meaning given such term in the Agreement.
The undersigned hereby represents and agrees that the Exercise Shares
purchased pursuant hereto are being purchased for investment and not with a view
to the distribution or resale thereof, and that the undersigned understands that
said Exercise Shares have not been registered under the Securities Laws.
The undersigned requests that a certificate for the Exercise Shares be
issued in the name of:______________________________________
______________________________________
______________________________________
[Please print name, address]
Address of Employee (if different from above):
_________________________________
_________________________________
_________________________________
Dated:__________________
Name of Employee: _________________________________
Employee's Signature: _________________________________
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EXHIBIT 10.8
CROSSTIE PURCHASE OPTION AND LOAN AGREEMENT
THIS PURCHASE OPTION AND LOAN AGREEMENT ("Agreement"), dated as of December
29, 1995, is by and between TIETEK, INC., a Texas corporation ("Borrower"),
NORTH AMERICAN TECHNOLOGIES GROUP, INC., a Delaware corporation ("NATK"), and
each of WILLIAM T. ALDRICH, J. DENNY BARTELL and HENRY W. SULLIVAN (Messrs.
Aldrich, Bartell and Sullivan collectively referred to herein as the "TIETEK
Owners").
RECITALS:
Borrower desires to borrow from NATK, and NATK desires to lend to Borrower,
certain funds to be used by Borrower exclusively for expenses incurred or to be
incurred in connection with the commercial development of railroad crosstie
technology as set out on a budget referred to below. In exchange for NATK's
agreement to lend the amounts described below, the TIETEK Owners agree to grant
to NATK the Crosstie Purchase Option, as defined below, upon the terms and
conditions of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE ONE
THE CROSSTIE LOAN
1.1 THE CROSSTIE LOAN.
(a) The Crosstie Loan and Crosstie Note. Upon the terms and subject to the
conditions of this Agreement, NATK hereby agrees to lend to Borrower from time
to time up to $1,500,000.00 pursuant to this Agreement. Such loan (the
"Crosstie Loan") shall be evidenced by the execution and delivery by Borrower
and the TIETEK Owners of that certain Promissory Note, Security Agreement and
Pledge, in the form of EXHIBIT A, attached hereto and made a part hereof (the
"Crosstie Note"). The parties acknowledge that certain amounts have already
been advanced by NATK to Borrower as reflected on the Crosstie Note in the form
of Exhibit A, and that the amounts advanced thereunder are to be treated for all
purposes as loaned and borrowed pursuant to the terms of this Agreement,
including without limitation the Crosstie Note. Notwithstanding anything in
this Agreement or in the Crosstie Note to the contrary, no TIETEK Owner shall be
individually responsible or liable for the payment or performance of Borrower's
obligations under the Crosstie Note to pay any amount of principal, interest or
other payment to NATK, except to the extent of the security interest, lien and
pledge of the TIETEK Owner's Collateral (as defined in the TIETEK Note) granted
or to be granted by such TIETEK Owner pursuant to the TIETEK Note, and NATK
agrees that its sole recourse against any TIETEK Owner in connection with such
payment or performance of Borrower's obligations shall be limited to the extent
of such security interest, lien and pledge of such TIETEK Owner's Collateral
granted or to be granted by such TIETEK Owner pursuant to the TIETEK Note.
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(b) The Crosstie Budget. Attached hereto as EXHIBIT B and made a part
hereof is an initial budget prepared by Borrower setting out all currently
intended needs and initial uses of funds for the operation of the Crosstie
Business (as defined in Section 3.2(b) hereof) during the Crosstie Advance
Period (as defined below in Section 1.2(a) hereof).
(i) Not less than quarterly, and at such times as either Borrower or
NATK shall reasonably request, Borrower shall present to NATK additional,
revised budgets addressing specific business objectives of TIETEK and other
business developments and new information affecting TIETEK and its business, and
Borrower and NATK shall jointly review and revise such budget as appropriate,
all as Borrower and NATK shall reasonably agree. Without limiting the
generality of the foregoing, the parties agree that anticipated and actual
revenues of Borrower shall not reduce NATK's obligations to fund the Crosstie
Loan; provided, however, that the parties anticipate that any such revenues will
be a factor in the budgeting process and, in particular, the cash flow analysis
used to develop and revise a budget. Each party agrees to carry out its
obligations under this clause (i) promptly and in good faith.
(ii) In the event that, after using good faith efforts to resolve any
disagreements the parties may have with respect to any budget, NATK does not
approve of such budget (and regardless of whether such failure to approve of the
budget is based upon NATK's good faith disagreement or disapproval of any
material proposed expenditure, NATK's good faith belief that the Crosstie
Business will not reasonably be expected to develop into an economically viable
enterprise unless more than $1.5 million is invested in the Crosstie Business,
or any other legitimate business reason), NATK shall not have any obligation to
fund additional Crosstie Advances. The budget referred to in this clause (b),
as revised and supplemented from time to time in accordance with the provisions
of this clause (b), is referred to in this Agreement as the "Crosstie Budget."
1.2 PROCEDURE FOR FUNDING CROSSTIE ADVANCES.
(a) Documents, Etc. Borrower may request, from time to time during the
period beginning on the date of this Agreement and continuing until the second
anniversary of the date hereof (the "Crosstie Advance Period"), that NATK fund
an advance (a "Crosstie Advance") under the Crosstie Loan, and NATK agrees to
fund such advance upon the receipt by NATK of:
(i) Schedule 1 to the Crosstie Note, duly executed by Borrower, which
shall evidence all prior Crosstie Advances made under the Crosstie Loan and the
then-proposed Crosstie Advance;
(ii) such documentation as NATK may reasonably request which shall
evidence the particular uses of the funds to be included in the requested
Crosstie Advance; and
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(iii) such documentation as NATK may reasonably request which shall
evidence the application of funds provided pursuant to all prior Crosstie
Advances in accordance with the Crosstie Budget (as defined below).
(b) Crosstie Advance Funding. Each Crosstie Advance shall be made within
five (5) business days of the date that NATK receives the documents referred to
in clause (a) above and the other conditions set out in clause (c) of this
Section have been fulfilled.
(c) Conditions to Funding Obligations. It shall be a condition to the
obligation of NATK to fund each Crosstie Advance that:
(i) at the time of such Crosstie Advance, a Crosstie Budget shall be
in place that was prepared and approved in accordance with the provisions of
Section 1.1(b) of this Agreement;
(ii) at all times prior to the funding of such Crosstie Advance,
Borrower shall have complied in all material respects with all of its covenants
and agreements set out in this Agreement (except as Borrower and NATK shall
otherwise agree in writing); and
(iii) at the time of such funding, NATK shall have sufficient
resources to permit it to fund such Crosstie Advance and to fund its other
financial obligations, in each such case, and such funding shall not result in
NATK violating any financial covenants or agreements by which NATK or any of its
assets are then bound, all as determined in the reasonable, good faith judgment
of NATK.
(d) How Crosstie Advance is to be Funded. Upon the fulfillment of the
conditions described in clause (c) above, NATK shall apply the amounts to be
funded pursuant to a Crosstie Advance, such application to be made, at the
option of NATK, either (i) by advancing such amounts to Borrower for payment to
the various third parties entitled thereto the various expenses and other
amounts due such parties (as evidenced by the documents submitted by Borrower to
NATK in requesting such Crosstie Advance) or (ii) by directly paying in a prompt
manner to such third parties such expenses and other amounts due such parties
(as evidenced by the documents submitted by Borrower to NATK in requesting such
Crosstie Advance, and as directed by Borrower) for the account of Borrower.
Copies of the disbursement payments (or reasonable evidence thereof) shall be
made available to both parties at all times. For purposes of the Crosstie Note,
interest shall be deemed to begin to accrue from the date NATK issues and mails
(or delivers to Borrower) a check or otherwise makes such payment with respect
to an amount paid from a Crosstie Advance.
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ARTICLE TWO
CROSSTIE PURCHASE OPTION
2.1 GRANT OF CROSSTIE PURCHASE OPTION. Each TIETEK Owner hereby grants to
NATK a right and option (the "Crosstie Purchase Option") to purchase all of the
shares of capital stock of Borrower currently existing or at any time hereafter
outstanding (the "TIETEK Shares") that are owned by such TIETEK Owner, upon the
terms and conditions of this Article Two.
2.2 CROSSTIE PURCHASE OPTION PERIOD. NATK may exercise the Crosstie
Purchase Option herein granted by delivering written notice to the TIETEK Owners
(and the Escrow Agent, if any, as defined below) at any time after the date
hereof and until the second anniversary date of the date hereof, subject to
extension as provided in Section 2.4 hereof. The period during which such
written notice may be given (including any extensions thereof) is referred to
herein as the "Crosstie Purchase Option Period." Notwithstanding anything
herein to the contrary, the Crosstie Purchase Option may not be exercised at any
time that the 90 Day Note (as defined in the Asset Purchase Agreement that is
referred to in the Crosstie Note) is outstanding, or is not otherwise paid in
full. In the event such written notice is not delivered during the Crosstie
Purchase Option Period, the Crosstie Purchase Option shall automatically expire
and be of no further force or effect. The date NATK delivers such notice is
referred to herein as the "Option Date." Such written notice shall specify a
time, which shall be not more than 45 days after the Option Date, and place in
Houston, Texas for the consummation and closing of the exercise of the Crosstie
Purchase Option (the "Option Closing"). In the event that NATK does not
exercise the Crosstie Purchase Option, then upon the request of the Borrower,
NATK agrees promptly to deliver to the Borrower a copy of all accounting,
payroll and other records (and all supporting documentation) then in its
possession relating to the performance by NATK of the accounting, payroll and
other functions described in Section 3.2(d)(iii) of this Agreement.
2.3 OPTION CLOSING. At the Option Closing:
(a) The TIETEK Owners shall (either directly or pursuant to the terms of
the Escrow Agreement, if any, as defined below) sell, transfer, convey, assign
and deliver to NATK all outstanding shares of capital stock of the Borrower
(including all of the TIETEK Shares), free and clear of all liens, claims,
charges, pledges or interests of any other kind or nature;
(b) NATK shall execute and deliver to the TIETEK Owners (or their
designees) that certain TIETEK Royalty Agreement substantially in the form of
EXHIBIT C, attached hereto and made a part hereof, together with such amendments
and modifications thereto as the TIETEK Owners and NATK shall mutually agree;
and
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(c) NATK shall also release its security interest in, lien on and pledge of
any of the Collateral (including without limitation the pledged shares of NATK
capital stock, if any) to the extent that such security interest, lien and
pledge was granted in order to secure payment of Borrower's obligations under
the Crosstie Note.
2.4 EXTENSION OF CROSSTIE PURCHASE OPTION PERIOD.
(a) NATK may extend the Crosstie Purchase Option Period for one additional
year (i.e., until the third anniversary of the date hereof) if, prior to the
second anniversary of the date hereof, NATK has funded the full amount of the
Crosstie Loan (i.e., $1,500,000).
(b) If NATK has not funded any amount requested (up to the full amount) of
the Crosstie Loan, then NATK may, at its option, extend the Crosstie Purchase
Option Period for one additional year if, and only if:
(i) Either (x) Borrower did not request funding of an amount (up to
the full amount) of the Crosstie Loan or (y) Borrower or one or more of the
TIETEK Owners have failed to fulfill any of such party's obligations under this
Agreement or the Crosstie Note, and such failure would reasonably be expected to
have a material adverse effect on the business or financial condition of the
Borrower or on NATK's ability to receive the benefits of having exercised the
Crosstie Option; provided, however, that in order for NATK to extend the
Crosstie Option for such additional year pursuant to the provisions of this
clause (y), NATK shall have given written prompt notice of any such failure and
shall use its good faith efforts to resolve any dispute or matter that arises in
connection with such failure; and/or
(ii) At the second anniversary date hereof, there is no unresolved
material disagreement between NATK and Borrower regarding the legitimate need
for further funding (up to the full amount) of the Crosstie Loan to assure the
timely commercialization of the Crosstie Business; provided, however, that if
Borrower believes, at any time prior to or at such second anniversary, that
there is such a disagreement, it shall give NATK prompt written notice thereof,
and both parties agree to use good faith efforts, and to act reasonably, in
connection with the determination of the matters described in this clause (ii)
and the resolution of any such disagreement.
(c) NATK's election to extend the Crosstie Purchase Option Period as
provided in this Section 2.4 shall be evidenced by its written notice to
Borrower of such election, such notice to be delivered either (i) if the
Crosstie Loan has been fully funded, then at any time after the Crosstie Loan
has been fully funded, but not later than the second anniversary of the date
hereof, or (ii) if the Crosstie Loan has not been fully funded but NATK is
nonetheless entitled to exercise such election pursuant to the terms of this
Section 2.4, then at any time during the period beginning on the sixtieth (60th)
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day before the second anniversary of the date hereof and ending on the second
anniversary.
(d) The provisions of this Section 2.4 shall relate exclusively to the
provisions of this Agreement governing the extension of the Crosstie Purchase
Option Period and no other purpose.
2.5 ADDITIONAL OBLIGATIONS RELATING TO PERFECTION OF PLEDGE OF SHARES.
Each of the TIETEK Owners agrees to cause the certificate or certificates
representing his shares of capital stock of Borrower, together with a stock
power executed in blank, to be delivered to an escrow agent ("Escrow Agent"),
pursuant to an escrow agreement ("Escrow Agreement") reasonably satisfactory in
form and substance to NATK and the TIETEK Owners. Such Escrow Agent shall hold
such documents and instruments as security for the Crosstie Note pursuant to the
terms and provisions of this Agreement and the Crosstie Note, except as
otherwise expressly amended by such Escrow Agreement or the Asset Purchase
Agreement (as that term is defined in the Crosstie Note). Prior to the
occurrence of an event of default under the Crosstie Note, NATK shall have no
rights to vote any of such shares or to take any other action or receive any
other benefits with respect to such shares, except as provided in the Crosstie
Note.
ARTICLE THREE
REPRESENTATIONS, WARRANTIES AND COVENANTS
3.1 BORROWER'S AND TIETEK OWNER'S REPRESENTATIONS AND WARRANTIES. The
Borrower and each TIETEK Owner, severally but not jointly, represent and warrant
to NATK those representations and warranties set out in the Crosstie Note and as
follows:
(a) Organization. Borrower is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Texas. Borrower has
all corporate power and authority to own and operate the Crosstie Business and
all other assets it may own or acquire during the term of this Agreement.
Borrower has delivered a true, correct and complete copy of its Articles of
Incorporation and Bylaws, together with all amendments thereto, as in effect on
the date hereof. Notwithstanding anything herein to the contrary, the
representations made by a TIETEK Owner in this subsection (a) are limited to the
current actual knowledge of the TIETEK Owner making such representation.
(b) Capitalization; Ownership of Shares. The capital stock of Borrower
consists solely of 200,000 shares of common stock, par value $.01 per share, of
which only three shares have been issued, one to each of the three TIETEK
Owners, which three shares constitute all of the TIETEK Shares. The TIETEK
Shares have been duly authorized, validly issued, are fully paid and non-
assessable. There are no other securities convertible into or exchangeable for
shares of Borrower's capital stock or any
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options, warrants or other rights to acquire any shares of its capital stock.
Notwithstanding anything herein to the contrary, the representations made by Mr.
Bartell in this subsection (b) are limited to his current actual knowledge.
(c) Authorization. (i) The Borrower has full right, power and authority
to execute, deliver and perform this Agreement and the Crosstie Note. All
corporate, shareholder and other approvals required on the part of the Borrower,
any TIETEK Owner or any other party in order for the Borrower or any TIETEK
Owner to enter into and perform such party's obligations under this Agreement
have been obtained on or before the date hereof. This Agreement and the
Crosstie Note have been duly authorized by all necessary corporate action on
behalf of the Borrower, and have been duly executed and delivered by Borrower.
Each of this Agreement and the Crosstie Note constitutes the valid and binding
obligation of the Borrower, enforceable against it in accordance with the
respective terms thereof. There are no agreements restricting the ability of
either the Borrower or any TIETEK Owner from entering into or performing such
party's obligations under this Agreement.
(ii) Each TIETEK Owner has duly executed and delivered this Agreement
and any other document to be delivered by him in connection herewith, and this
Agreement, and any such other document, constitute the valid and binding
obligation of each TIETEK Owner enforceable against him in accordance with their
respective terms.
Notwithstanding anything herein to the contrary, the representations made by a
TIETEK Owner in this subsection (c), as they relate to any other TIETEK Owner or
to the Borrower, are limited to the current actual knowledge of the TIETEK Owner
making such representation.
(d) Assets/Liabilities; No Operations. On the date hereof, the Borrower
has no liabilities or obligations of any kind or nature other than the
obligation to repay to NATK those Crosstie Advances made on or before the date
hereof, and such other obligations as TIETEK has incurred in the normal course
of pursuing the development and commercialization of the Crosstie Business, none
of which violates any of the provisions of Section 3.2 (except to the extent of
NATK's knowledge of the same on or before the date hereof). The Borrower has
not conducted any business or other operations prior to the date hereof other
than those operations relating to the Crosstie Business that NATK has been made
aware of on or before the date hereof. Notwithstanding anything herein to the
contrary, the representations made by a TIETEK Owner in this subsection (d) are
limited to the current actual knowledge of the TIETEK Owner making such
representation.
3.2 BORROWER'S COVENANTS. The Borrower covenants and agrees with NATK as
follows (except as NATK and Borrower shall otherwise agree in writing):
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(a) Expense and Payment Information. Until the earlier to occur of the
payment in full of all obligations under the Crosstie Note or the exercise of
the Crosstie Option, Borrower shall provide NATK in a timely manner all
information reasonably required by NATK in order to pay any costs, expenses or
other payments from the proceeds of a Crosstie Advance, and shall provide NATK
with reasonable access during normal business hours to the books and records of
the Borrower relating to the Crosstie Business.
(b) Use of Proceeds of Crosstie Advances. The proceeds of all Crosstie
Advances shall be use exclusively for expenses incurred or to be incurred in
connection with the commercial development, production, manufacture, marketing
and sale of railroad crosstie technology and business, including without
limitation the production of the railroad crossties themselves (collectively,
the "Crosstie Business"), as set out in the Crosstie Budget, as revised and
supplemented from time to time in accordance with the provisions of Section
1.1(b) hereof. Upon the request of NATK, Borrower shall provide to NATK
reasonable written documentation to evidence Borrower's compliance with the
terms and provisions of this clause (b).
(c) Ownership of Assets. Until the earlier to occur of the payment in
full of all obligations under the Crosstie Note or the exercise of the Crosstie
Option, all assets purchased with the proceeds of Crosstie Advances, and any and
all other assets currently owned or acquired by Borrower during the term of this
Agreement relating the Crosstie Business, shall be acquired in the name of
Borrower, and Borrower shall remain the sole record and beneficial owner of all
interests in and to such assets, free and clear of all liens, claims, pledges,
security interest and charges, other than any of the same granted in favor of
NATK or any of its affiliates.
(d) Conduct of Business. During the Crosstie Purchase Option Period,
Borrower (i) shall, subject to available funds, use its best efforts to develop,
preserve and protect the Crosstie Business, including without limitation the
Maker's Collateral (as defined in the Crosstie Note), and shall conduct its
operations in accordance with sound business practices, (ii) shall not, without
the prior consent of NATK (which consent shall not be unreasonably withheld),
enter into any contract or commitment regarding the performance of any service
or the delivery of any goods to or by Borrower that has a term of more than six
(6) months or that requirements the payment of more than $10,000 in the
aggregate and (iii) shall permit NATK, at the option of NATK, to carry out all
accounting, payroll and other functions relating to the payment and recording of
all costs and expenses incurred by Borrower; provided, however, that NATK shall
provide Borrower with access at all reasonable times to all of NATK's related
records maintained in connection with NATK's performance of such accounting,
payroll and other functions. In the event NATK elects to carry out such
accounting, payroll and/or other functions, it may allocate to Borrower a
reasonable amount per month to cover the costs of such functions, such amount
not to exceed $2,000 per month. The terms of this Section 3.2(d) shall cease to
apply upon the expiration of the Crosstie Purchase Option Period.
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(e) Grant and Protection of Security Interest in Collateral. Until the
earlier to occur of the payment in full of all obligations under the Crosstie
Note or the exercise of the Crosstie Option, Borrower shall grant, maintain,
preserve and protect the security interest, lien and pledge granted therein, and
all rights and benefits with respect thereto, in favor of NATK with respect to
Maker's Collateral (as defined in the Crosstie Note).
(f) Capitalization; Certain Corporate Actions. During the Crosstie
Purchase Option Period, Borrower shall not (i) issue any shares of capital
stock, any securities convertible into or exchangeable for shares of its capital
stock or any options, warrants or other rights to acquire any shares of its
capital stock (except to reflect a transfer of shares of capital stock as
expressly permitted by Section 3.3(a) below); (ii) amend its articles of
incorporation or bylaws; (iii) merge with or consolidate into any other
corporation or other entity; (iv) acquire any shares of capital stock or other
evidences of ownership of any other entity; (v) execute any note, guaranty or
any other evidence of an obligation for borrowed money, or otherwise become
obligated for any other obligation for borrowed money or the payment of any sum
or the performance of any other obligation, including without limitation any
obligation incurred in connection with the purchase of equipment, inventory or
other assets, if such note, guaranty or other obligation involves payments in
excess of $10,000 or, in the aggregate with all other notes, guaranties and
other obligations, in excess of $30,000 (provided, however, that NATK agrees
that it will not unreasonably withhold its consent to any trade credit proposed
to be entered into by Borrower in the ordinary course of Borrower's business in
order to secure supplies, materials or equipment, if the terms of such trade
credit are reasonably determined by both NATK and Borrower to be in the best
interests of Borrower's business); (vi) make any dividend or other distribution,
whether in cash, securities or otherwise, on or with respect to any shares of
capital stock of Borrower or (vii) enter into any other transaction outside the
ordinary course of business or unrelated to the Crosstie Business. The terms of
this Section 3.2(f) shall cease to apply upon the expiration of the Crosstie
Purchase Option Period.
(g) Payment and Performance of the Crosstie Note. During the term of the
Crosstie Note, Borrower shall pay all amounts of principal, interest and other
payments, if any, that may come due thereunder in a timely manner, and shall
perform all of its other obligations thereunder in accordance with the terms of
the Crosstie Note.
(h) Quarterly Meetings. During the term of this Agreement, Borrower agrees
to meet not less than once during each quarter with representatives of NATK
selected by NATK to discuss the results of operations and financial condition of
the Crosstie Business.
(i) Legend on Certificates. The Borrower agrees to cause the legend
referred to in Section 3.3(d) hereof to be placed and maintained on all
certificates representing the TIETEK Shares in accordance with the provisions of
Section 3.3(d) hereof.
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(j) Federal Tax Election. For all periods before and during the Crosstie
Purchase Option Period, the Borrower agrees (x) to make an election or elections
under Section 174(b) of the Internal Revenue Code of 1986, as amended to date,
or any successor provision, as NATK shall instruct (so long as such instruction
is provided in a timely manner and such election is not illegal or unavailable
for Borrower), with respect to qualifying research and experimental costs and
expenditures and (y) for Federal income tax purposes, to treat such research and
experimental costs and expenditures in accordance with such election.
3.3 TIETEK OWNER'S COVENANTS. Each TIETEK Owner covenants and agrees
severally but not jointly with NATK as follows (except as NATK and such TIETEK
Owner shall otherwise agree in writing):
(a) No Transfer of the TIETEK Shares; Certain Other Actions. Such TIETEK
Owner shall not transfer any of the TIETEK Shares or any interest therein,
except in accordance with the terms and provisions of this Agreement; provided,
however, that NATK agrees that (i) any TIETEK Owner may transfer all or a
portion of his TIETEK Shares to another TIETEK Owner or, upon NATK's receipt of
reasonable documentation evidencing a transferee's agreement to be bound (as a
TIETEK Owner) by the terms and provisions of this Agreement and the Crosstie
Note, to any other party who is (on the date of this Agreement) GAIA Holdings,
Inc., a Delaware corporation, Thor Ventures, L.C., a Texas limited liability
company, a shareholder of GAIA Holdings, Inc., a member of Thor Ventures, L.C.,
a Texas limited liability company, or any trust of which one or more of such
parties or their affiliates are the sole beneficiaries, or any affiliates of the
foregoing, and (ii) upon NATK's receipt of reasonable documentation evidencing a
transferee's agreement to be bound (as a TIETEK Owner) by the terms and
provisions of this Agreement and the Crosstie Note, and so long as NATK's rights
will not be impaired in any material respect (as determined in the reasonable,
good faith judgment of NATK), a TIETEK Owner may transfer all or a portion of
his TIETEK Shares to any other natural person. Such TIETEK Owner shall not take
any action that would reasonably be expected either to result in a breach of any
covenant or agreement of the Borrower or any TIETEK Owner set out in this
Agreement or that would reasonably be expected to cause NATK not to receive the
benefits and rights offered to it pursuant to this Agreement.
(b) Grant and Protection of Security Interest in Collateral. Until the
earlier to occur of the payment in full of all obligations under the Crosstie
Note or the exercise of the Crosstie Option, such TIETEK Owner shall grant,
maintain, preserve and protect the security interest, lien and pledge granted
therein, and all rights and benefits with respect thereto, in favor of NATK with
respect to the Collateral (as defined in the Crosstie Note) that is owned or
under the control of such TIETEK Owner at any time.
(c) Capitalization; Certain Corporate Actions. Without limiting the
generality of the provisions of subsections (a) and (b) above, during the
Crosstie Option Period,
10
<PAGE>
such TIETEK Owner shall not vote any of his TIETEK Shares in favor of, or take
any other action that would result in (i) the Borrower's issuance of any shares
of capital stock, any securities convertible into or exchangeable for shares of
its capital stock or any options, warrants or other rights to acquire any shares
of its capital stock (other than solely to evidence a transfer of shares as
expressly permitted by the terms of this Agreement); (ii) any amendment to the
Borrower's articles of incorporation or bylaws; (iii) the Borrower's merger with
or consolidate into any other corporation or other entity; (iv) the Borrower's
acquisition of any shares of capital stock or other evidences of ownership of
any other entity; (v) the Borrower's execution of any note, guaranty or any
other evidence of an obligation for borrowed money, or the Borrower's otherwise
becoming obligated for any other obligation for borrowed money or the payment of
any sum or the performance of any other obligation, including without limitation
any obligation incurred in connection with the purchase of equipment, inventory
or other assets, if such note, guaranty or other obligation involves payments in
excess of $10,000 or, in the aggregate with all other notes, guaranties and
other obligations, in excess of $30,000 (provided, however, that NATK agrees
that it will not unreasonably withhold its consent to any trade credit proposed
to be entered into by Borrower in the ordinary course of Borrower's business in
order to secure supplies, materials or equipment, if the terms of such trade
credit are reasonably determined by both NATK and Borrower to be in the best
interests of Borrower's business); or (vi) the Borrower's entering into any
other transaction outside the ordinary course of business or unrelated to the
Crosstie Business.
(d) Legend on Certificates. Such TIETEK Owner hereby consents to the
placement of a legend or legends, in form and substance reasoanbly satisfactory
to NATK and the Borrower, on each certificate representing his TIETEK Shares,
which legend(s) shall reference the existence of the various obligations of such
TIETEK Owner under this Agreement, such legend to be maintained on such
certificate or certificates during the term of the Crosstie Note.
ARTICLE FOUR
MISCELLANEOUS
4.1 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally
or mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows (or at such other address or facsimile number
for a party as shall be specified by like notice):
11
<PAGE>
(a) if to Borrower or any TIETEK
Owner, at: with a copy to:
TIETEK, Inc. Jeffrey Horowitz
4710 Bellaire Blvd., Suite 301 Crain, Caton & James
Bellaire, Texas 77401 909 Fannin, Suite 3300
Attention: William T. Aldrich Houston, Texas 77010
and Henry W. Sullivan Fax: (713) 658-1921
Fax: (713) 661-1677
and with a copy to:
J. Denny Bartell
808 Travis, Suite 1001
Houston, Texas 77002
(b) if to NATK, at:
North American Technologies Group, Inc.
4710 Bellaire Blvd., Suite 301
Bellaire, Texas 77401
Attention: Tim B. Tarrillion
Fax: (713) 662-3728
NATK may rely on any notice it receives in accordance with the above provisions
that is signed by any President or Vice President of Borrower as a notice
delivered to it by Borrower and the TIETEK Owners.
4.2 TERM OF AGREEMENT. Except as otherwise provided herein or in any
Exhibit hereto, this Agreement, and the rights and obligations set out herein,
shall continue in full force and effect until all obligations under the Crosstie
Note have been paid and performed in full, or otherwise forgiven or discharged
by NATK.
4.3 ENTIRE AGREEMENT; ASSIGNMENT; AND AMENDMENT.
(a) This Agreement, including all Exhibits and Schedules hereto (which for
all purposes, shall be deemed to be a part of this Agreement), constitutes the
entire agreement among the parties with respect to its subject matter and
supersedes all prior agreements and understandings, both written and oral, among
the parties or any of them with respect to such subject matter.
(b) This Agreement, including all rights (including without limitation the
Crosstie Option) and obligations hereunder, shall not be assigned by operation
of law or otherwise; provided, however, that subject to any approvals required
by applicable law, NATK may assign its rights and obligations to any majority-
owning or owned, direct or
12
<PAGE>
indirect, parent, subsidiary or subsidiaries of NATK, but no such assignment
shall relieve NATK of its obligations under this Agreement.
(c) This Agreement may not be amended except by an instrument in writing
signed by each of the parties hereto.
4.4 BINDING EFFECT; BENEFIT. This Agreement shall inure to the benefit of
and be binding upon the parties and their respective successors and assigns.
Nothing in this Agreement is intended to confer on any person other than the
parties to this Agreement or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
4.5 HEADINGS. The descriptive headings of the articles, sections,
subsections, Exhibits and Schedules of this Agreement are inserted for
convenience only, do not constitute a part of this Agreement and shall not
affect in any way the meaning or interpretation of this Agreement.
4.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
4.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of Texas, without regard to the laws that
might otherwise govern under principles of conflicts of laws applicable thereto.
4.8 ARBITRATION. In the event any party believes any other party hereto
has committed a breach of any provision of this Agreement or such parties cannot
agree on an interpretation of one or more of the provisions of this Agreement,
such parties agree to first meet in Houston, Texas, and discuss the same, and
attempt in good faith to resolve such matter. Any such matter, controversy or
claim arising out of or relating to this Agreement, or the breach of any
provision hereof, that cannot otherwise be resolved between the relevant parties
in such a meeting and discussion shall be settled by arbitration in Houston,
Texas, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and judgment upon any award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction. Any award
rendered may include an award of reasonable attorneys' fees, costs and expenses.
4.9 SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
13
<PAGE>
4.10 CERTAIN DEFINITIONS. As used herein:
(a) "affiliate" shall have the meanings ascribed to such term in Rule 12b-
2 of the General Rules and Regulations under the Securities Exchange Act of
1934, as amended to date (the "Exchange Act");
(b) "business day" shall mean any day other than a Saturday, Sunday or a
day on which federally chartered financial institutions are not open for
business in the City of Houston, Texas; and
(c) "subsidiary" shall mean, when used with reference to an entity, any
corporation, a majority of the outstanding voting securities of which is owned
directly or indirectly, or a majority of the board of directors of which may be
elected, by such entity.
IN WITNESS WHEREOF, each of the parties have caused this Agreement to be
duly executed by or on behalf of such party, all as of the date first written
above.
NORTH AMERICAN TECHNOLOGIES
GROUP, INC.
By: /s/ Tim B. Tarrillion
Name: Tim B. Tarrillion
Title: President
TIETEK, INC.
By: /s/ William T. Aldrich
Name: William T. Aldrich
Title: President
WILLIAM T. ALDRICH
/s/ William T. Aldrich
____________________________________
14
<PAGE>
J. DENNY BARTELL
/s/ J. Denny Bartell
____________________________________
HENRY W. SULLIVAN
/s/ Henry W. Sullivan
____________________________________
15
<PAGE>
EXHIBIT A Promissory Note, Security Agreement and Pledge
EXHIBIT B Initial Crosstie Budget
EXHIBIT C TIETEK Royalty Agreement
16
<PAGE>
EXHIBIT 10.9
PROMISSORY NOTE, SECURITY AGREEMENT AND PLEDGE
$1,500,000.00
Houston, Texas December 29, 1995
FOR VALUE RECEIVED, TIETEK, INC., a Texas corporation ("Maker"), promises
to pay to the order of NORTH AMERICAN TECHNOLOGIES GROUP, INC., a Delaware
corporation ("Payee"), in Houston, Texas, or at such other place in the United
States of America as Payee may designate in writing, the principal sum of all
advances of principal not to exceed in the aggregate ONE MILLION FIVE HUNDRED
THOUSAND DOLLARS ($1,500,000.00), such amount being the aggregate amount of the
Crosstie Loan (as defined in and made pursuant to the Crosstie Agreement
referred to below), in lawful money of the United States of America, together
with interest on the unpaid principal balance thereof, until the unpaid
principal balance shall be paid in full at the per annum rate of interest equal
to ten percent (10.00%); provided, however, that after maturity, whether
maturity is brought about by acceleration as described in this Note or
otherwise, the rate of interest shall be the highest lawful, non-usurious rate
of interest then permitted under Texas law. Interest shall be calculated on the
basis of a 365- or 366-day year as appropriate.
This Note evidences the "Crosstie Loan," as defined in that certain
Crosstie Purchase Option and Loan Agreement (the "Crosstie Agreement"), dated as
of the date of this Note, by and among the Maker, North American Technologies
Group, Inc., a Delaware corporation ("NATK"), and each of William T. Aldrich,
J. Denny Bartell and Henry W. Sullivan. All capitalized terms used but not
otherwise defined herein have the meanings given them in the Crosstie Agreement.
As of the date of this Note, $219,591.86 has been advanced under the
Crosstie Loan, as reflected on Schedule 1 hereto, all of which was advanced on
the date or dates reflected on such Schedule 1.
All additional advances made by Payee to Maker under the Crosstie Loan
pursuant to the provisions of the Crosstie Agreement shall be recorded by Payee
and endorsed by Maker on Schedule 1, attached hereto and incorporated herein by
this reference for all purposes. Payee agrees to make additional advances under
the Crosstie Loan pursuant to the terms of the Crosstie Agreement. Each such
advance shall constitute a portion of the principal amount due under this Note
and shall be due and payable as provided in, and shall be subject to the terms
and provisions of, this Note.
1. The entire outstanding and unpaid principal amount of all advances
evidenced by this Note, together with all unpaid interest and other amounts due
with respect to this Note, shall be due and payable in full on the earlier to
occur of:
Page 1 of 9 pages
<PAGE>
(a) the date that is two (2) years after the earlier to occur of (i) the
date that NATK provides written notice to the TIETEK Owners that NATK will not
exercise the Crosstie Purchase Option (as defined in the Crosstie Agreement), or
(ii) the expiration of the Crosstie Purchase Option Period (as defined in the
Crosstie Agreement), as such Crosstie Purchase Option Period may be extended in
accordance with the terms and provisions of the Crosstie Agreement.
(b) the date that an of the following occurs, after the expiration of the
Crosstie Purchase Option Period, as such Crosstie Purchase Option Period may be
extended in accordance with the terms and provisions of the Crosstie Agreement:
(i) the TIETEK Owners no longer own a majority of the capital stock of the
Maker; unless the party or parties who then own a majority of the capital stock
of the Maker include NATK or any of its affiliates or any other party or parties
reasonably acceptable to NATK, (ii) the engagement, to any substantial extent,
by the Maker and any of its subsidiaries (if any) in any business other than the
Crosstie Business (as defined in the Crosstie Agreement); (iii) the sale or
other disposition of 50% or more of the consolidated assets of the Maker and any
of its subsidiaries (if any), unless such sale or other disposition is made to
NATK or any of its affiliates; or (iv) the Maker's merger or consolidation with
any other entity, unless NATK or any of its affiliates is a party to such merger
or consolidation.
Interest shall be calculated from the date of each principal advance hereunder
as provided in the Crosstie Agreement. Accrued and unpaid interest on this Note
shall be due and payable on the first (1st) calendar day of each January, April,
July and October during the term of this Note after the earlier to occur of (x)
the date NATK provides written notice to the TIETEK Owners that NATK will not
exercise the Crosstie Purchase Option or (y) the expiration of the Crosstie
Purchase Option Period, as the same may be extended in accordance with the terms
and provisions of the Crosstie Agreement (such earlier date referred to in (x)
and (y) herein called the "Capitalization Date"). The amount of all interest
accruing on or before the Capitalization Date shall be added to the principal
amount of this Note on such date and shall be deemed to be principal under this
Note, subject to the provisions of Paragraph 8 hereof.
2. In the event that any payment hereunder is due on a day other than a
business day, such payment shall instead be due and payable on the next
succeeding business day. As used herein, the term "business day" means any day
other than either a Federal holiday or a day during which state or federally-
chartered banks located in Harris County, Texas, are required by law to be
closed.
3. To the extent of any partial payment or any partial prepayment
hereunder, amounts received shall first be applied to accrued and unpaid
interest, and the remainder, if any, shall then be applied to the payment of
outstanding principal. This Note, and all amounts due hereunder, may be
prepaid, in whole or in part, at Maker's option at any time, without premium or
penalty upon thirty (30) days prior written notice.
Page 2 of 9 pages
<PAGE>
4. In the event that there is a failure to pay when due any interest or
principal hereunder and such failure shall continue unremedied for a period of
seven (7) days after receipt of written notice of such failure to pay, then
Payee, without the necessity of further demand or presentment, may accelerate
and declare in a writing delivered to Maker the entire principal balance of this
Note then due and payable, together with any accrued interest thereon, and may
exercise any other remedy or remedies then available to it hereunder or under
law.
5. Maker hereby waives presentment for payment, demand, notice of protect,
and protest of this Note, as well as all other notices relating to this Note,
except as described in the immediately preceding paragraph. Payee shall not by
any act of omission or commission be deemed to waive any right or remedy
hereunder or under law, except such waiver as shall be in writing and signed by
Payee, and then only to the extent specifically set forth therein; a waiver as
to one event shall not be a bar to or waiver of any other right or remedy as to
a subsequent event.
6. (a) (i) Maker hereby grants to Payee (sometimes referred to herein as
"Secured Party") a first priority security interest in, and a first lien on, and
agrees that Secured Party shall have and continue to have a first priority
security interest in, and a first lien on, all of its assets including without
limitation, all equipment, technologies, know-how, patents and working capital
(and the proceeds of such working capital), in each case, whether currently
owned or hereafter acquired (the "Maker's Collateral").
(ii) Each of the TIETEK Owners hereby grants to Secured Party a first
priority security interest in, a first priority lien on, and a pledge of all of
such parties TIETEK Shares (and the proceeds thereof), in each case, whether
currently owned or hereafter acquired (the "TIETEK Owners' Collateral;" together
with the Maker's Collateral, the "Collateral").
(b) The security interest and lien granted pursuant to Section 6(a) hereof
shall serve to secure all indebtedness, liabilities or other sums owed or to
become owing hereunder. Notwithstanding the foregoing, at the time of the
Closing, as defined in and contemplated by that certain Asset Purchase Agreement
(dated as of December 29, 1995, by and among NATK, GAIA Technologies, Inc., a
Texas corporation, GAIA Holdings, Inc., a Delaware corporation, Thor Ventures,
L.C., a Texas limited liability company, and Thor Industries, Inc., a Texas
corporation, which Asset Purchase Agreement is referred to hereinafter as the
"Asset Purchase Agreement"), in addition to the security interest and lien on
the Collateral granted pursuant to this Note, the Borrower and the TIETEK Owners
shall cause to be added as addition security under this Note a first priority
security interest in, a first lien on, and pledge of, the 666,667 NATK Shares,
referred to as the "Pledged Shares," in the Asset Purchase Agreement.
Thereafter, as used herein the term, "Collateral" shall also include such
Pledged Shares.
(c) Maker authorizes the Secured Party to file, in jurisdictions where
this authorization will be given effect, any financing statement or other
document or
Page 3 of 9 pages
<PAGE>
instrument of any kind evidencing the security interest and/or lien granted
hereunder, and at the request of Secured Party, from time to time, Maker will
join the Secured Party in executing one or more of such financing statements and
other documents or instruments in form and substance satisfactory to Secured
Party.
(d) Until all obligations of Maker hereunder are satisfied in full:
(i) Maker: (x) shall keep the Maker's Collateral free from any and
all superior or equal adverse claims, pledges, mortgages, liens, charges,
security interests and encumbrances, (y) shall not sell or grant to any other
party any ownership or other interest in any of the Maker's Collateral, except
as expressly permitted by this Note or the Crosstie Agreement, and (z) shall not
move any equipment constituting any portion of the Maker's Collateral to another
location without the prior written consent thereto of Secured Party, which may
be granted in the sole and absolute discretion of Secured Party.
(ii) Each TIETEK Owner shall keep his TIETEK Owners' Collateral free
from any and all superior or equal adverse claims, pledges, mortgages, liens,
charges, security interests and encumbrances, and shall not sell or grant to any
other party any ownership or other interest in his TIETEK Owners' Collateral,
except as expressly permitted by this Note or the Crosstie Agreement.
(iii) Each of Maker and each TIETEK Owner shall immediately notify
Secured Party of any transfer, pledge, claim, lien, charge or encumbrance
arising in connection with any Collateral about which such party has actual
knowledge.
(iv) Maker will pay in a timely manner all taxes and other amounts due
or to become due with respect to the Maker's Collateral on or after the date
hereof and will pay to Secured Party all expenses and expenditures including
reasonable attorney's fees and expenses incurred or paid by the Secured Party in
exercising or protecting the interests, rights and remedies of Secured Party
hereunder with respect to the Maker's Collateral. Maker shall, at Maker's own
expense, defend the Secured Party's right, title and interest in and to the
Maker's Collateral against the claims of any person, firm, corporation or other
entity.
(v) Each TIETEK Owner shall, at his own expense, pay to Secured Party
all expenses and expenditures including reasonable attorney's fees and expenses
incurred or paid by the Secured Party in exercising or protecting the interests,
rights and remedies of Secured Party hereunder with respect to the TIETEK
Owners' Collateral, and each TIETEK Owner shall severally but not jointly defend
the Secured Party's right, title and interest in and to his TIETEK Owners'
Collateral against the claims of any person, firm, corporation or other entity.
(vi) Maker shall, at its own expense, pay to Secured Party all
expenses and expenditures including reasonable attorney's fees and expenses
incurred or paid by
Page 4 of 9 pages
<PAGE>
the Secured Party in exercising or protecting the interests, rights and remedies
of Secured Party hereunder with respect to any of the Maker's Collateral and
shall defend the Secured Party's right, title and interest in and to all of the
against the claims of any person, firm, corporation or other entity.
Notwithstanding anything herein to the contrary, no TIETEK Owner shall be
individually responsible or liable for the payment or performance of Maker's
obligations under this Note to pay any amount of principal, interest or other
payment to Payee, except to the extent of the security interest, lien and pledge
of his TIETEK Owners' Collateral granted or to be granted by him pursuant to
this Note, and NATK's sole recourse therefor against any TIETEK Owner shall be
limited to such security interest, lien and pledge of such TIETEK Owner's
Collateral granted or to be granted by him pursuant to this Note. In addition,
the obligations of each TIETEK Owner under this Note, as among the other TIETEK
Owners, shall be several and not joint obligations of each such TIETEK Owner.
(f) The term "default," as used in this instrument, shall mean and include
any of the following: (i) a failure to pay when due any interest (if any) or
principal hereunder and such failure shall continue unremedied for a period of
seven (7) days after receipt of written notice of such failure to pay, or the
failure to pay when due any payment of principal or interest in accordance with
the terms hereof, or (ii) the failure of Maker or any TIETEK Owner to perform in
a timely manner any other obligation or agreement of such party under this
instrument or the Crosstie Agreement, which failure under this clause (ii) shall
continue unremedied for a period of fifteen (15) days after receipt of written
notice of such failure.
(g) In addition to any other right or remedy granted hereunder or under
law upon the occurrence of a default hereunder, the Secured Party may, upon 15
days' written notice to Maker and the TIETEK Owners, but without the necessity
of further demand or presentment, exercise with reference to the Collateral any
and all of the rights and remedies of a secured party under the laws of the
State of Texas applicable to the Collateral and, without limitation, any other
right or remedy granted hereunder (all of which rights and remedies shall be
cumulative), including without limitation the right and power to forthwith
realize upon the Collateral or any part thereof, and may forthwith sell or
otherwise dispose of and deliver the Collateral, or any part thereof or interest
therein, at a public or private sale or sales, at any location in Harris County,
Texas selected by Secured Party, upon such terms and conditions and for such
consideration as Secured Party shall deem appropriate (in Secured Party's sole
discretion), so long as the same are determined and conducted in a commercially
reasonable manner, as such term is defined in and interpreted under the Uniform
Commercial Code as in effect in the State of Texas on the date hereof.
(h) Notwithstanding anything contained herein or at law to the contrary,
Secured Party shall exercise its remedies as a secured party against the
Collateral in the following order:
Page 5 of 9 pages
<PAGE>
(i) First, as to so many of the Pledged Shares (i.e., the 666,667 NATK
Shares referred to above), if any, as may be necessary to pay any amount due
hereunder; and
(ii) Thereafter, as to all other Collateral.
7. All notices, requests, demands, waivers and other communications
required or permitted to be given under this document shall be in writing and
shall be deemed to have been duly given if delivered personally, if mailed
(certified or registered mail with postage prepaid) or if sent by
telecopier/facsimile as follows (or at such other address or telecopy/facsimile
number for a party as shall be specified by like notice):
If to Payee: If to Maker or to any TIETEK Owner:
North American Technologies TIETEK, Inc.
Group, Inc. 4710 Bellaire Blvd., Suite 301
4710 Bellaire Blvd, Suite 301 Bellaire, Texas 77401
Bellaire, Texas 77401 Attn: William T. Aldrich and
Attn: Tim B. Tarrillion Henry W. Sullivan
Telecopy/Facsimile No: Telecopy/Facsimile No:
(713) 662-3728 (713) 661-1677
with a copy to:
Jeff Horowitz
Crain, Caton & James
909 Fannin, Suite 3300
Two Houston Center
Houston, Texas 77010
Telecopy/Facsimile No:
(713) 658-1921
and with a copy to:
J. Denny Bartell
808 Travis, Suite 1001
Houston, Texas 77002
8. The Payee, Maker and the other parties to this Note intend to contract
in strict compliance with applicable usury law from time to time in effect. In
furtherance thereof such persons stipulate and agree that none of the terms and
provisions contained herein or in the Crosstie Agreement or in any other
document executed and delivered pursuant thereto shall ever be construed to
provide for such interest in excess of the maximum amount of interest permitted
to be charged by applicable law from time to time in effect. The holder of his
Note expressly disavow any intent to charge or collect excessive unearned
interest in the event the maturity of this Note is accelerated for any reason
Page 6 of 9 pages
<PAGE>
(whether by action of an holder, any prepayments hereafter agreed to, the
provisions of Paragraph 1 hereof or otherwise), and if any such acceleration or
other event occurs, and, as a result thereof, any amounts held to constitute
interest are determined to exceed any applicable legal limit, then such excess
amounts shall, without penalty, be applied to reduce the amounts otherwise owing
under this Note or otherwise returned to the Maker. Neither the Maker, any
TIETEK Owner nor any present or future endorsers, sureties, guarantors or other
persons hereafter becoming liable for payment of any obligations hereunder,
under the Crosstie Agreement or any other document executed and delivered
pursuant to the Crosstie Agreement shall ever be liable for unearned interest
thereon or shall ever be required to pay interest thereon in excess of the
maximum amount that may be lawfully charged under applicable law from time to
time in effect, and the provisions of this Paragraph 8 shall control over all
other provisions herein or in the Crosstie Agreement which may be in conflict or
apparent conflict herewith.
9. This instrument and the rights and obligations hereunder shall
terminate upon the satisfaction in full of all obligations of Maker hereunder,
and upon such termination, Secured Party agrees to execute, at the expense of
Maker, such reasonable instruments to release its rights in and to the
Collateral as Maker or any of the TIETEK Owners may reasonably request.
10. THIS NOTE SHALL BE CONSTRUED, INTERPRETED, AND THE RIGHTS OF THE
PARTIES DETERMINED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS EXCEPT
WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES THEREOF. This Note may be
executed in counterparts each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
11. Each of the TIETEK Owners joins in the execution of this document only
to evidence (a) his agreement with respect to the TIETEK Owners' Collateral set
out in Paragraph 6 hereof, and the provisions applying thereto contained in
Paragraphs 7, 8, 9 and 10 hereof and (b) his consent to the Maker's request for
additional Crosstie Advances (as defined in the Crosstie Agreement) and the
execution and delivery by Borrower of a copy of Schedule 1 hereto in connection
with each such request.
IN WITNESS WHEREOF, the parties hereto have duly executed this Note
effective as of the date first above written.
"MAKER"
TIETEK, INC.
By: /s/ William T. Aldrich
Name: William T. Aldrich
Title: President
Page 7 of 9 pages
<PAGE>
"PAYEE"
NORTH AMERICAN
TECHNOLOGIES GROUP, INC.
By: /s/ Tim B. Tarrillion
Tim B. Tarrillion
President and Chief Executive Officer
"TIETEK OWNERS"
(for the limited purposes set out in
Paragraph 11 of this Note)
WILLIAM T. ALDRICH
/s/ William T. Aldrich
____________________________________
J. DENNY BARTELL
/s/ J. Denny Bartell
____________________________________
HENRY W. SULLIVAN
/s/ Henry W. Sullivan
____________________________________
Page 8 of 9 pages
<PAGE>
SCHEDULE 1 TO
PROMISSORY NOTE, SECURITY AGREEMENT AND PLEDGE
IN THE PRINCIPAL AMOUNT OF $1,500,000, DATED DECEMBER 29, 1995, ISSUED BY
TIETEK, INC. IN FAVOR OF NORTH AMERICAN TECHNOLOGIES, INC. (THE "NOTE")
Advances under Crosstie Loan
Date of Advance Amount of Advance
---------------------------------
November 7, 1995 $17,850.00
November 10, 1995 $13,230.85
November 13, 1995 $ 9,750.00
November 20, 1995 $38,390.00
November 21, 1995 $18,325.00
November 30, 1995 $25,667.00
December 1, 1995 $ 5,000.00
December 13, 1995 $ 3,514.34
December 18, 1995 $32,021.75
December 20, 1995 $ 1,711.10
December 28, 1995 $54,131.82
_______________________ ______________
_______________________ ______________
_______________________ ______________
_______________________ ______________
_______________________ ______________
_______________________ ______________
_______________________ ______________
All capitalized terms used on this Schedule 1, unless otherwise defined herein,
have the meanings given them in the Note.
Date:_______________________________
"PAYEE" "MAKER"
NORTH AMERICAN TECHNOLOGIES
GROUP, INC. TIETEK, INC.
By:______________________________ By:________________________________
Name:___________________________ Name:___________________________
Title:__________________________ Title:__________________________
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