FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Qtr. Ended: March 31,1998 File No.: 2-20954-NY
KBF POLLUTION MANAGEMENT, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2687588
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 KBF PLAZA END OF JASPER STREET PATERSON NEW JERSEY 07522
(Address of principal executive offices)
(973) 942-7700
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
Indicate the number of shares outstanding of each of the registrant's classes of
stock as of March 31, 1998:
Common stock, $.00001 par value - 56,388,565 shares outstanding.
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10-Q
March 31, 1998
INDEX
PART I - FINANCIAL INFORMATION
Item I - FINANCIAL STATEMENTS
Balance Sheets -
March 31,1998 and December 31, 1997 3-4
Statement of Income -
Three Months Ended March 31,1998 and 1997 5
Statement of Cash Flows -
Three Months Ended March 31, 1998 and 1997 6-7
Notes to Financial Statements 8-9
Item II - MANAGEMENT'S DISCUSSION AND ANALYSIS 10
PART II - OTHER INFORMATION 11
SIGNATURES 11
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10 - Q
MARCH 31, 1998
BALANCE SHEET
ASSETS
3/31/98 12/31/97
------- --------
Unaudited Audited
--------- -------
CURRENT ASSETS:
Cash $ 170,958 $ 224,643
Cash - Restricted 27,500 27,500
Trade Accounts Receivable (Net of
allowance for doubtful accounts
of $39,381 & $26,782) 356,303 241,041
Other Receivables 574,600 49,572
Inventories 11,072 11,670
Prepaid Expendable Supplies 14,246 14,246
Other Prepaid Expenses 17,307 193,780
---------- ----------
Total Current Assets 1,171,986 762,452
FIXED ASSETS:
Property, Equipment & Improvements
(Net of Accumulated Depreciation &
Amortization of $1,718,492 & $1,670,954) 1,649,633 832,851
Leased Property under Capital Leases
(Amortization of $383,745 & $378,869) 103,154 108,030
Non Expendable Stock, Parts & Drums 139,367 139,368
---------- ----------
Total Fixed Assets, Net 1,892,154 1,080,249
OTHER ASSETS:
Security Deposits 7,002 7,662
Patent (Net of Accumulated Amortization
of $11,463 & $11,164) 8,866 9,165
Capitalized Permit Costs 89,179 89,179
---------- ----------
Total Other Assets 105,047 106,006
---------- ----------
TOTAL ASSETS $3,169,187 $1,948,707
========== ==========
See accompanying notes to financial statements.
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10 - Q
MARCH 31, 1998
BALANCE SHEET
LIABILITIES & STOCKHOLDERS' EQUITY
3/31/98 12/31/97
------- --------
Unaudited Audited
--------- -------
CURRENT LIABILITIES:
Accounts Payable - Trade $ 600,601 $ 454,657
Accrued Expenses 104,979 52,354
Taxes Withheld & Accrued 11,795 11,873
Current Portion of Long - Term
Debt 60,000 60,000
Current Portion of Capital Lease
Obligations 51,832 51,832
----------- ----------
Total Current Liabilities 829,207 630,716
LONG-TERM LIABILITIES:
Long - Term Lease Obligations 177,626 189,977
----------- ----------
Total Long - Term Liabilities 177,626 189,977
STOCKHOLDERS' EQUITY:
Com. Stock par value .00001 per sh.
Authorized - 500,000,000 shares
Issued & Outstanding
March 31, 1998 - 56,388,565 564
Dec. 31, 1997 - 49,112,690 491
Capital in Excess of Par Value 5,377,959 4,871,362
Retained Earnings (Deficit) (3,216,169) (3,743,839)
----------- ----------
Total Stockholders' Equity 2,162,354 1,128,014
----------- ----------
TOTAL LIABILITIES
& STOCKHOLDERS' EQUITY (DEFICIT) $ 3,169,187 $1,948,707
=========== ==========
See accompanying notes to financial statements.
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10 - Q
MARCH 31, 1998
STATEMENT OF INCOME
(Unaudited)
THREE MONTHS ENDED
3/31/98 3/31/97
------- -------
REVENUES $ 1,080,799 422,027
LESS: Cost of Operations 311,522 347,699
------------ ------------
Gross Profit 769,277 74,328
LESS: General & Admin. Expenses 232,289 243,357
Advertising 242 379
------------ ------------
Operating Income (Loss) 536,746 (169,408)
OTHER INCOME (EXPENSES):
Interest Income 309 0
Interest Expense (8,358) (8,322)
Income Tax Provision (1,033) (1,074)
------------ ------------
NET INCOME (LOSS) $ 527,664 $ (178,804)
============ ============
Number of Shares Outstanding 56,388,565 42,432,546
Basic Earnings (Loss) Per Share $ .0095 $ (.0040)
============ ============
Diluted Earnings (Loss) Per Share $ .0061 $ (.0042)
============ ============
See accompanying notes to financial statements.
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10 - Q
MARCH 31, 1998
STATEMENT OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
3/31/98 3/31/97
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash Received from Customers $ 427,910 $ 457,963
Cash Paid to Suppliers & Employees (288,864) (405,387)
Interest Paid (8,455) (8,182)
Income Taxes Paid (380) (474)
--------- ---------
Net Cash Provided (Used) by
Operating Activities 130,211 43,920
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash Purchases of Equipment & Facility (678,215) 0
Cash Purchases of Intangible &
Other Assets 0 0
--------- ---------
Net Cash Provided (Used) in Investing
Activities (678,215) 0
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Stock &
Warrants 506,670 0
Repayment of Long-Term Debt &
Capital Lease Obligations (12,351) (42,019)
--------- ---------
Net Cash Provided (Used) by Financing
Activities 494,319 (42,019)
--------- ---------
NET INCREASE (DECREASE) IN CASH (53,685) 1,901
CASH at Beginning of Period 224,643 19,174
--------- ---------
CASH at End of Period $ 170,958 $ 21,075
========= =========
See accompanying notes to financial statements.
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10 - Q
MARCH 31, 1998
STATEMENT OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
3/31/98 3/31/97
------- -------
RECONCILIATION OF NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 527,664 $(178,804)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation 52,414 59,057
Amortization 299 299
Consulting & Professional Fees Paid in Stock 0 (10,437)
Bad Debts 12,599 (3,594)
(Increase) Decrease in:
Trade Accounts Receivable (127,861) 35,936
Other Receivables (525,028) 23,312
Inventories 598 4,710
Prepaid Expenses & Deposits (8,965) 9,400
Increase (Decrease) in:
Accounts Payable 145,944 127,468
Withholding Taxes Payable (78) (2,439)
Accrued Expenses 52,625 (20,988)
--------- ---------
$ 130,211 $ 43,920
========= =========
See accompanying notes to financial statements.
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10-Q
MARCH 31, 1998
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for fair presentation have been included. Operating results for the
three months ended March 31, 1998 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1998. For further
information, refer to the financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended December 31, 1997.
NOTE 2 - INVENTORIES
Inventories are comprised of the following major categories:
3/31/98 12/31/97
------- --------
Shipping Supplies $ 4,895 $ 4,985
Reagents 6,177 6,685
-------- --------
$ 11,072 $ 11,670
======== ========
NOTE 2 - LICENSE AGREEMENT
In March 1998, the Company signed an exclusive world-wide License Agreement with
Solucorp Industries, Ltd., for the utilization of the Company's patent allowed
technology. The terms of the agreement call for an initial license fee of
$500,000, plus an additional license fee of $.005 per processed gallon. The
agreement also requires royalty payments of 50% of gross per gallon receipts,
not to be less than $3 million at the end of the first two years from the
signing of the contract, and $2 million by the end of each year thereafter. The
initial agreement is for a five year term, with automatic five year continuous
renewal.
NOTE 3 - REVENUE RECOGNITION
The foregoing License Agreement transfers rights, for a specified period of
time, for the use of the Company's patent and related processes, similar to a
franchise agreement. Accordingly, the
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10-Q
MARCH 31, 1998
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3 - REVENUE RECOGNITION (continued)
Company is recognizing income from this agreement as required by FAS-45
(Accounting for Franchise Fee Revenue). Under FAS-45, the initial fee is
recognized upon the consummation of the transaction, when substantially all
material services or conditions have been met. The transaction has met the above
criteria, therefore the Company has recognized the initial fee of $500,000 in
the current period. The related revenue is reported on the Statement of Income
in the revenue from normal operations. The receivable is included in the Other
Receivables section in the Statement of Financial Position.
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10-Q
MARCH 31, 1998
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31,1998
AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1997
Total revenues for the three months ended March 31, increased to $1,080,799 as
compared to $422,027 for the same period in 1997, an increase of 256%. The
Company attributes the increase to a rise in sales volume, along with the
collection of the licensing fee received in March 1998 (see Footnote 2).
Management anticipates this trend to continue due to its recent move to New
Jersey where business is more easily obtained . In addition, the Company
anticipates the continuing revenue from licensing agreements.
Cost of sales for the three months ended March 31, 1998 decreased to 28% of
revenues from 82% of revenues for the same period in 1997. This decrease is the
result of the increase in sales volume and collection of the licensing fee as
mentioned above. Along with the increase in revenue, the Company also attributes
this decrease to the continued efforts taken by Management to reduce costs.
General and administrative expenses decreased by 5% to $ 232,289 for the three
months ended March 31, 1998 from $243,357 for 1997. This decrease is primarily
due to the continued efforts of Management to reduce costs as mentioned above.
During 1998, the Company will incur expenses related to the closure of the New
York facility under New York State Department of Environmental Conservation
regulations. These costs, along with certain costs associated with the licensing
revenue may affect this trend.
The Company incurred a net profit of $527,664 for the first quarter of 1998, a
395% increase from the net loss of -$178,804 for the same period in 1997, due to
the increase in sales and other revenue and reduced costs mentioned above.
LIQUIDITY AND CAPITAL RESOURCES
The Company has relocated its facility to Paterson, New Jersey in March 1998.
Management believes that this new location will result in additional business
opportunities and lower operating costs. Management believes that current
operations and anticipated profits will provide adequate cash flow to meet
current obligations.
The Company has working capital of $342,779 as compared to $131,736 at December
31, 1998, which is indicative of the funds received through the 504 Offering
Memorandum.
The Company has a negative cash flow of -$53,685 at March 31, 1998 as compared
to the positive cash flow of $1,904 at December 31, 1997. This is due to the
increase in capital expenditures incurred to relocate to its new facility in New
Jersey and a significant increase in accounts and other receivables.
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KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
FORM 10-Q
MARCH 31, 1998
PART II - OTHER INFORMATION
Item VI - Exhibits and Reports on Form 8-K
Exhibits No. Description
------------ -----------
27 Financial Data Schedule
10.6 Licensing Agreement
Reports on Form 8-K for the three months ended
March 31, 1998, there were no reports filed on
Form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KBF POLLUTION MANAGEMENT, INC.
Dated: May 18,1998 LARRY KREISLER
---------------------------------
LARRY KREISLER - PRESIDENT
Dated: May 18,1998 KATHI KREISLER
---------------------------------
KATHI KREISLER SECRETARY /
TREASURER
-11-
LICENSING AGREEMENT
This Licensing Agreement is effective as of this 20th day of March, 1998 by and
between KBF Pollution Management, Inc., a New York Corporation, with offices
located at One KBF Plaza, End of Jasper Street, Paterson 07522 (hereinafter the
"Licensor") and EPS Environmental, Inc. dba Solucorp Industries, a British
Columbia Corporation, with its principal offices located at 250 West Nyack Road,
West Nyack, New York 10994 (hereinafter the "Licensee").
WITNESSETH
WHEREAS, the Licensor owns the exclusive rights to a patent-pending process to
separate, recover and reclaim metals from liquids by the addition of certain
reagents (hereinafter the "Technology"), under prescribed methodological
conditions (hereinafter the "Process"); and,
WHEREAS, the Licensor possesses expertise in determining the nature and extent
of the applicability of the Technology and Process (hereinafter the "Know-how");
and,
WHEREAS, the Licensee is involved in the environmental remediation business and
desires to obtain a License for the use and marketing of the Technology and
Process to remediate, recover and/or treat liquid streams of wastes containing
metals throughout the world.
NOW THEREFORE, in consideration of the foregoing premises and of the mutual
promises, covenants, conditions, and limitations herein contained, as well as
other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, and intending to be legally bound hereby, the Licensor and
the Licensee do hereby agree as follows:
ARTICLE I
DEFINITIONS
As used above and throughout this entire Agreement, the following terms shall
have the meanings as hereinafter defined:
1.01 Affiliates. Any entity in which a party to this Agreement or any of its
stockholders, directors or officers has a direct or indirect ownership
interest (other than insubstantial interests in publicly held companies),
or any entity which directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with a party to this Agreement.
1.02 Consumer Price Index ("CPI"). The index used for site specific price
escalation as determined by the prevailing official rates and other
factors of the national market in which that site exists (see Attachment
B).
1.03 Demand. The demand for the Licensed Material shall be evidenced by any and
all potential clients, customers, third party environmental remediation or
management companies, governments and/or site operators which generate or
in any manner produce, remediate or manage any liquid metal bearing waste
to which the Licensed Material may apply.
1.04 Effective Date. The effective date of this Agreement shall be the 20th day
of March, 1998.
1.05 Engineering Contractor. An engineering and/or construction firm shall be
designated for each site. This engineering contractor will work directly
with the Licensor in the design and engineering of the site, and consult
with the Licensor as needed during the construction of the site. The
engineering contractor will be required to enter into separate agreements
directly with the Licensor.
1.06 Essential Components. Components without which the Technology and/or the
Process would be, at worst, ineffective, and at best, inefficient. These
components include SST, a required polymer and
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the items and categories of equipment provided for pursuant to the terms
and conditions of each site specific agreement. All essential components
shall be purchased directly from the Licensor.
1.07 F.o.b. Shipping. Method of shipping having that meaning ascribed to it by
standard convention that essentially provides that title for any goods
purchased changes hands at the point of distribution. The Licensee will
after taking such title be responsible for all costs, taxes,
transportation, insurance and/or damage.
1.08 Feasibility Study. Upon the provision of certain information and samples,
detailed herein, the Licensor will perform an analysis of each site and
the existing contamination and/or waste stream. This study will allow the
Licensor to determine the nature and the extent of the applicability of
the Technology and Process. This feasibility study will ultimately form
the basis for all subsequent design, engineering, technical assistance,
training and standard operating procedures for each site.
1.09 Gross Receipts. The residual gross revenue upon which the royalties
payable hereunder shall be calculated in accord with the principles
outlined in Attachment B, specifically Section A of said Attachment.
1.10 Know-how. The Licensor possesses considerable knowledge and experience in
practicing the Licensed Material. Every site and every stream of waste is
unique and requires different procedures, quantities of reagents and
equipment to process efficiently. The Licensor's expertise in this respect
is critical in determining the nature and extent of the applicability of
the Technology and Process to each individual site or stream of waste.
Know-how is expressly excluded from Licensed Material.
1.11 Letter of Credit. Stand-by letter of credit with site draft attached
provided by banking institution approved by the Licensor.
1.12 Licensed Material. The license herein granted applies to the use and
marketing of the present Technology and Process to remediate, recover
and/or treat liquid streams of wastes containing metals as defined in
Attachment A, annexed hereto, and does not apply to other technologies or
processes now existing or hereafter to be created, designed or engineered
by the Licensor.
1.13 Off-Spec Waste or Site. Pursuant to the terms herein, the Licensor will be
performing a feasibility study for each site. This study is critical to
determining the nature and the extent of the applicability of the
Technology and Process, as well as the design, engineering and
construction for each site. In order to perform this feasibility study,
samples and other information must be provided. If the actual site or
waste characteristics materially differ from the sample's characteristics,
the site or waste will be deemed by the Licensor to be off-spec.
1.14 Patent. Shall refer to and include applications for letters patent,
letters patent (including reissues, divisions, continuations or extensions
thereof), and rights by license or otherwise acquired under letters of
patent whenever acquired, owned, or possessed, applicable to the use of
the Technology and Process to remediate, recover and/or treat liquid
streams of wastes containing metals as defined in Attachment A, annexed
hereto.
1.15 Polymer. A coagulating compound that may or may not be used in treatment.
Its use will be a function of the characteristics of the individual site
and/or waste at issue. The polymer is one of the essential components as
that term is defined herein.
1.16 Process. The portion of the Licensed Material that details the general
methodology for the correct application of the Technology to remediate,
treat, recover and reclaim metals from liquid waste for re-use as provided
for in Attachment A, annexed hereto.
1.17 Quality Control and Assurance ("QC/QA"). The quality control and quality
assurance protocols are essential to the effective and efficient operation
of the Technology and Process. Failure to conform
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to these protocols may result in the failure of the Technology and Process
to perform the functions contemplated herein.
1.18 Reagent. A chemical compound that is required for the use of the Licensed
Material.
1.19 Recovered Product. An ultimate end product of the use of the Licensed
Material. The recovered product will take the form of a dried powder that
will have moderate to high concentrations of elemental metals. The
recovered product is analogous to virgin ore taken directly from the
ground and is likely to have concentrations of metals and a higher
commercial value than virgin ore.
1.20 Related Company. Any third party with whom the Licensee has entered into a
partnering, licensing, sales, marketing, contracting, or other
remediation, recover and/or treatment relationship with for the express
purpose of carrying out the transactions contemplated hereby in the Grant
Territory.
1.21 Selective Separation Technology ("SST"). An essential chemical component
of the Technology without which the Licensed Material would be
ineffective.
1.22 Site Approval. After performing the initial feasibility study for a
specific site, the Licensor will make a determination as to whether or not
and/or to what extent the Licensed Material applies to the characteristics
of the site. The Licensor, upon making its final determination will issue
a site approval and prepare a preliminary proposal for the process to be
employed at the site.
1.23 Site Operator. The Related Company or other entity in charge of the
management and/or operations of an individual site.
1.24 Site Specific Agreement. Separate per site agreement contemplating the use
of the Technology and Process as applied to the specific conditions of one
individual site. It is the intent of the parties hereto to enter into a
site specific agreement for each and every site, as that term is herein
defined. This agreement shall state with precision (in terms of U.S.
dollars) the gross per gallon receipts and other price and cost terms
herein referenced for each site, which terms will be defined upon the
final site approval of each site (see Attachment B). This agreement shall
also detail with precision all such terms herein referenced that remain
discretionary and conditioned upon final site approval, including, but not
limited to, any terms detailing the requisite standard operating
procedures and quality control protocols, the required essential equipment
and the furnishing of Know-how to the site operator or other third party.
1.25 Site. A specific treatment or remediation system, designed for the
treatment, recovery, and/or remediation of a specific stream of waste
using the Licensed Material. There can be more than one site at any one
individual location.
1.26 Standard Operating Procedure ("SOP"). As part of the preparation of the
final design proposal for each site, the Licensor shall prepare a site
specific standard operating procedure manual for the site. All site
personnel will be trained according to the standard operating procedure of
their respective sites. Strict adherence to SOP protocols is essential to
the efficient use of the Licensed Materials.
1.27 Technology. The portion of the Licensed Material that details the general
chemistry and reagents for the correct application of the Technology to
remediate, treat, recover and reclaim metals from liquid waste as provided
for in Attachment A, annexed hereto.
1.28 Work-plan. After performing the initial feasibility study for each site,
and upon issuance of the specific site approval, the Licensor will prepare
a preliminary proposal and work plan for the design and construction of
the site. This proposal will be presented to the Licensee or any Related
Company, including the engineering contractor for inclusion into the a
final work plan for each site.
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ARTICLE II
GRANT OF LICENSE; TERRITORY AND LIMITATIONS
2.01 Grant. The Licensor hereby grants to the Licensee, for approved sites
within the Grant Territory only, as provided for by provision 2.02 hereof, the
exclusive right, license and privilege, subject to provision 5.07 hereof, to use
and market the Technology and Process to remediate, recover and/or treat liquid
streams of wastes containing metals.
2.02 Grant Territory. The exclusive license herein granted is world-wide and for
only those sites approved by the Licensor.
2.03 Scope. The grant shall be inclusive of the right, license and privilege
solely to the use of the Technology and Process as contemplated by this
Agreement only.
(a) Exclusion of Know-how. The parties hereby agree that Know-how, as
that term is herein defined, will be furnished by the Licensor,
pursuant to the terms as herein defined, on a site specific basis as
needed for the consideration defined in Article IV, "Royalties and
Fees," and that this Know-how shall not be included in the grant of
the Licensed Material.
(b) Exclusion of the Manufacture of Reagents. Neither the Licensee or
any Related Company, Affiliate, sublicensee or other party shall
have the right to manufacture SST or the polymer required for the
Technology and Process as herein defined or referenced, and shall
purchase the SST and the polymer exclusively from the Licensor on
the cost basis and upon terms defined in Article IV, "Royalties and
Fees," and the applicable site specific agreement.
(c) Exclusion of New Technologies, Processes and Know-how. The license
herein granted applies to the Technology and Process in existence on
the effective date of this Agreement, and does not apply to other
technologies or processes now existing or hereafter created,
designed or engineered by the Licensor or others. In the event that
the Licensee desires to obtain the rights to any additional
technologies or processes now or hereafter existing, the granting of
such rights shall be subject to separate written agreement then to
be negotiated, for which rights the Licensee shall have a right of
first refusal in the Grant Territory only.
2.04 Site Specific Approval. The Licensee shall not under any circumstance use
or otherwise arrange for the use of the Licensed Material in any site not
approved by the Licensor.
2.05 Transferability. The grant of the License to Licensee is nontransferable,
nonassignable and indivisible. The Licensee shall have the right, however, to
sub-license to any third party upon the prior express written consent of the
Licensor, which consent shall not be unreasonably withheld. Upon such
circumstance, the Licensor reserves the right, free of restriction, to make
independent arrangements with the third-party with respect to the furnishing of
Know-how, purchase of reagents and equipment, quality control and assurance,
training, record keeping and reporting, and any technical or other support that
may be required.
2.06 No Competitive Technologies, Processes or Know-how. Until either party
shall give to the other notice of termination of this Agreement as hereinafter
provided: (a) Licensee shall not enter into any other license agreement for any
directly competitive Technology and/or Process within the Grant Territory and,
(b) the Licensee shall not directly or indirectly undertake to purchase and/or
use any directly competitive Technology or Process, if any such technologies
and/or processes presently or hereafter exist, except those of the Licensor.
2.07 Sales Through Related Company. Licensee shall have the right to conduct
sales, marketing and contracting through a Related Company provided that the
Licensee shall be responsible for the payment
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of royalties and other obligations under this Agreement. The Licensee shall
within reason disclose to the Licensor the identity of any such Related Company,
and provide copies of all relevant agreements in place with the Related Company
that are reasonably related to the transaction contemplated by this Agreement.
2.08 Patent Coverage Delimited. No license or right is hereby granted by
implication or otherwise, with respect to any other letters patent or
applications thereto except as specifically set forth herein and in Attachment
A, annexed hereto.
2.09 Breach Event. Breach of this Article of the License Agreement in any manner
shall be deemed a material breach for which the Licensor may pursue termination
in full accord with the provisions of this Agreement.
ARTICLE III
TERMINATION AND TENURE
3.01 Term. This agreement shall continue in effect, unless sooner terminated as
hereinafter provided, for a period of five (5) years ending on March 20, 2003.
The term of this Agreement shall automatically renew for successive periods of
one year at the end of the term hereof, including renewal terms, unless either
party shall have given written notice of non-renewal at least one year prior to
the end of the term.
3.02 Material Breach. If the Licensee shall at any time and for any reason not
make payment to the Licensor of any royalty or other amount agreed to be paid
hereunder by the date required by this Agreement as required under any site
specific agreements, or shall default in the making and provision of any report
hereunder required by the date required by this Agreement, or shall commit any
breach of any covenant or agreement herein contained, or shall negligently make
any false report and shall fail to remedy such default, breach or report within
thirty (30) days in the case of the Licensee or sixty (60) days in the case of
any potential sub-licensee after written notice thereof by Licensor. Licensor
may, at its option, terminate this Agreement and the Licenses herein granted by
written notice of such termination.
(a) In the event of any or more of the following:
(i) any breach of this Agreement not cured within sixty (60) days
after notification thereof;
(ii) insolvency or bankruptcy of either party;
(iii) appointment of a trustee or receiver for either party;
(iv) the failure of the Licensee to use its best efforts to satisfy
any of the Demand, as herein defined, in the Grant Territory
after a period of one (1) year from the date of this
Agreement;
(v) the failure of the Licensee to comply with and abide by the
terms of any the Licensor's feasibility studies, final work
plans or designs, quality control and assurance procedures and
reporting requirements or any instructional manual detailing
the standard operating procedures for each site; and/or,
(vi) the production by the Licensee of any intentionally misleading
or otherwise fraudulent or false report,
then, and in addition to all other rights and remedies which either
party may have in law or equity, the party not in default may at its
option terminate this Agreement by written notice. Such termination
shall become effective on the date set forth in the said notice of
termination but in no event shall it be earlier than thirty (30)
days from the date of notice thereof. The waiver of the right of
termination for any default under this Agreement shall
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not constitute a waiver of the right to claim damages for such
default or the right to terminate for any subsequent default.
3.03 Agreement Not to Use or Employ. On termination of this Agreement, Licensee
hereby agrees that it will not, in perpetuity, either directly, indirectly or
through any of its Related Companies or Affiliates, Licensees, sublicenses,
clients, or partners, use or employ any information disclosed by the Licensor
from the patent disclosures and applications, technologies, trade secrets,
designs, formulas, processes, Know-how, contracts, samples, feasibility studies,
work-plans, project documentation, books, instructional volumes, notes,
drawings, writings, documents, files, models, photographs, videos, drawings,
sketches, ideas, concepts and inventions in any stage of development or
completion, improvements and discoveries relating to the rights, privileges and
license, and any improvements thereto, which are the subject matter of this
Agreement.
(a) Sublicense Contingency. In the event that, pursuant to provision
2.05, and upon the express written consent of the Licensor, the
Licensee sublicenses any rights or privileges to any third party,
the Licensee shall impose the same condition in perpetuity upon its
sublicensees with respect to not using any of the information
disclosed by the Licensor or the Licensee from the Licensor's patent
disclosures and applications, technologies, trade secrets, designs,
formulas, processes, Know-how, contracts, samples, feasibility
studies, work-plans, project documentation, books, instructional
volumes, notes, drawings, writings, documents, files, models,
photographs, videos, drawings, sketches, ideas, concepts and
inventions in any stage of development or completion, improvements
and discoveries relating to the rights, privileges and license, and
any improvements thereto, which are the subject matter of this
Agreement.
(b) Covenant to Enforce as to Sublicensee. The Licensee agrees and
hereby covenants that it shall engage in all reasonable efforts to
enforce the terms of this subsection 3.03 as against any possible
defaulting sublicensee, the failure of which enforcement may result
in the initiation of suit in infringement and breach as against any
possible defaulting sublicensee.
3.04 Surrender of Rights and Know-how. On the termination of this Agreement, for
any reason whatsoever, Licensee, its Related Companies or Affiliates shall
deliver to Licensor all patent disclosures and applications, technologies, trade
secrets, designs, formulas, processes, Know-how, contracts, samples, feasibility
studies, work-plans, project documentation, books, instructional volumes,
standard operating procedures, notes, drawings, writings, documents, files,
models, photographs, videos, drawings, sketches, any and all duplicated
materials on whatever media so reproduced, ideas, concepts and inventions in any
stage of development or completion, improvements and discoveries relating to the
rights, privileges and license, and any improvements thereto, which are the
subject matter of this Agreement.
(a) Sublicense Contingency. In the event that, pursuant to provision
2.05, and upon the express written consent of the Licensor, the
Licensee sublicenses any rights or privileges to any third party,
the Licensee shall to the best of its ability cause said
sublicensee(s) to deliver to Licensor all patent disclosures and
applications, technologies, trade secrets, designs, formulas,
processes, Know-how, contracts, samples, feasibility studies,
work-plans, project documentation, books, instructional volumes,
standard operating procedures, notes, drawings, writings, documents,
files, models, photographs, videos, drawings, sketches, any and all
duplicated materials on whatever media so reproduced, ideas,
concepts and inventions in any stage of development or completion,
improvements and discoveries relating to the rights, privileges and
license, and any improvements thereto, which are the subject matter
of this Agreement.
3.05 Disposal of Inventory. In the event of termination, Licensor shall be given
right of first refusal to purchase any reagents and/or stocks of any raw
materials, as required to have been purchased from the Licensor pursuant to the
terms herein defined, as the Licensee and/or any Related Company, Affiliate or
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sublicensee of the Licensee may have in its possession. If the Licensor does not
buy said inventories, the Licensor will give to the Licensee or Related Company,
Affiliate or sublicensee the right to continue selling or using the stock on
hand and raw materials until these stocks on hand are exhausted.
3.06 Rights and Obligations Upon Termination. In case of termination, Licensor
shall have the right to give public notice thereof in such manner and at such
time and places as it may deem advisable. Upon termination of this Agreement, by
expiration or otherwise, the following rights, privileges and/or obligations
shall continue to inure to the benefit of the parties:
(a) The Licensor shall have the right, free of restriction, to directly
contract or otherwise conduct any transaction in furtherance of the
purposes herein contemplated with any Related Company, Affiliate,
and/or sublicensee of the Licensee or any other third party then
using, preparing for or otherwise anticipating the use of the
Technology and Process.
(b) The termination of this Agreement shall not relieve the Licensee in
any way from its obligation to pay Licensor all royalties and fees
which shall have accrued up to the effective date of termination.
(c) Any termination or expiration of this Agreement shall not prejudice
any cause of action or claim of Licensor accrued or to accrue on
account of any breach or default by Licensee.
(d) Any termination or expiration of this Agreement under this Article
shall not prejudice the right of the Licensor to a final audit of
the records of the Licensee in accordance with the provisions of
Article IV hereof.
(e) Any termination or expiration of this Agreement shall not affect the
continued operation or enforcement of any provision of this
Agreement which by its express terms is to survive expiration or
termination.
3.07 Remedies. The parties hereto agree that the remedy at law for any breach of
this Agreement will be inadequate and it will be impracticable and extremely
difficult to prove, and further agree that such a breach would cause the
aggrieved party irreparable harm, and each party hereby covenants and agrees
that such aggrieved party shall be entitled to temporary and permanent
injunctive relief, without the necessity of proving actual damages.
ARTICLE IV
ROYALTIES AND FEES
All royalties and fees outlined hereafter become payable as scheduled herein:
4.01 License Fee. The Licensee shall pay to the Licensor, simultaneously with
the execution and delivery of this license, an initial license issue fee of
$500,000. The Licensee shall further pay to the Licensor a residual license fee
of $0.0005 per gallon for the entire term of this agreement, which fee shall be
paid by the Licensee out of its percentage of the total gross per gallon
receipts, as that term is herein defined.
(a) The initial license issue fee shall be paid in the form of
unrestricted common stock of the Licensee, at 80% of its market
value as of the close of business on March 19, 1998 (190,550
shares). Four-fifths of this stock shall be held in escrow by
Sonageri & Fallon LLC, Continental Plaza II, Hackensack, New Jersey
07601. The stock held in escrow shall be released to the Licensor in
three equal disbursements on April 20, 1998, May 20, 1998 and June
20, 1998.
(b) The residual license fee shall be paid on the fifteenth (15th) of
every month, commencing with the onset of operations at the first
approved site and continuing in perpetuity thereafter on a per
gallon basis.
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4.02 Royalty. For the rights and privileges granted under the License, the
Licensee shall pay to the Licensor, in the manner hereinafter provided, and
until this license is terminated as herein provided, a standard royalty 50% of
the gross per gallon receipts, as that term is herein defined, calculated on a
per site basis (see Attachment B), for the use of the Technology and Process for
the remediation, recovery and/or treatment of any and all quantities of liquid
waste processed in the Grant Territory.
(a) Minimum Royalty. Except upon the express written consent of the
Licensor or as provided in provision 4.02 (b) hereof in no event
shall the Licensee pay to the Licensor a royalty of less than
$3,000,000 for the first two years, and $2,000,000 per year
thereafter for the remaining term of the agreement. In the event
that the minimum royalty shall be paid, the first minimum royalty
shall be payable in full by December 31, 1999, and all minimum
royalties thereafter shall be payable in full at the end of the
relevant calendar year.
(b) In the event that the Licensed Material is not as warranted herein,
and provided that the total gross receipts, as that term is herein
defined, do not exceed $6,000,000 in the first two years and
$4,000,000 per year for each year thereafter for the term of this
Agreement, the extent of the Licensee's pecuniary liability for the
minimum royalty payable hereunder to the Licensor shall be limited
to 50% of the gross receipts.
(c) The dollar amount of the royalty and all costs and calculations
therefor shall be precisely detailed in each Site Specific Agreement
to be entered into by the parties hereto upon the final site
approval of each site. It is the intent of the parties to compute
the above defined costs and figures on a per gallon basis, using
dollars per gallon as the unit of calculation, and to standardize
these costs by taking into account the total quantity of waste per
site anticipated to be processed per year as herein contemplated.
All costs of operations and reagents shall be expressed as a
function of this projected total quantity (see Attachment B).
(d) The royalty shall be computed per site, and shall under no
circumstance be less than $0.007 per gallon. The royalty due on any
one site shall not under any circumstance have any impact on the
amount of the royalty due on any other site.
4.03 Purchase of Reagents. The Licensee shall cause to be purchased exclusively
from the Licensor the SST at a rate of $18.00 per gallon, and a required polymer
at a rate of $5.00 per pound. All costs of shipment of the reagents f.o.b. from
the point of manufacture to the Grant Territory.
(a) The payment will be tendered by an approved institutional stand-by
letter of credit with site draft attached for each order or as
approved in writing individually by Licensor.
4.04 Purchase of Equipment. Except upon the express written consent of the
Licensor, the Licensor shall distribute and/or make available to the Licensee
and/or the sublicensee and/or the site operator specific items of essential
equipment at a cost plus ten and ten (10% plus 10%) basis.
(a) The payment will be tendered by an approved institutional stand-by
letter of credit with site draft attached for each order or as
approved in writing individually by Licensor.
4.05 Feasibility Report. The Licensor shall at its own expense perform a
feasibility study and produce a report thereon on a site by site basis.
(a) The Licensee, or any of its Related Companies, Affiliates,
sublicensees, site operators or the engineering contractor shall
provide all relevant information for each site reasonably required
by the Licensor to perform the initial feasibility study, including
but not limited to samples, process descriptions, engineering
drawings and schematics, precise quantity, flow and throughput
figures, and, if travel to any site is for any reason impracticable,
a video recording of the site.
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4.06 Training. The Licensor shall at its own expense provide for all training
for each site. All personnel will be trained for a two week period at the
Licensor's facility in Paterson, New Jersey, and then for a period of time, not
to exceed one week, at their respective site.
(a) General Indemnification. The Licensee hereby agrees to indemnify and
hold the Licensor harmless from all loss, expense (including
reasonable attorney's fees) and damages arising out of any claims,
demands and liabilities (including claims by Related Companies,
sublicensees, employees and other third panics) incurred by the
neglect, crime or other act of any person under control of the
Licensee being trained by the Licensor.
4.07 Support. The Licensor shall be responsible for and shall render technical
support to the Related Company, Affiliate, sublicensee, and/or the site operator
at a cost of up to $300.00 per hour, but at no time less than $190.00 per hour
(depending on the level of support required), for all technical support, billed
to each quarter hour. All support fees shall be payable within thirty days of
the date the support is rendered.
4.08 Quality Control Monitoring. All quality control monitoring shall be the
responsibility of the Licensor and shall be charged to each site operator
pursuant to the terms of its respective site specific agreement.
4.09 Escalation Factor and Price Adjustment. All prices and fees heretofore
detailed in this Article will automatically escalate per calendar year pursuant
to the following:
(a) Per Annum Escalation The per year fee escalation will be determined
in accord with the provisions of section C of Attachment B, and as
specified in each site specific agreement.
(b) Discretionary Adjustment. All prices will be subject to further
discretionary adjustments where market forces and other unforeseen
factors resulting in increased costs to the Licensor require any
such increases to be proportionately passed along to the Licensee
(c) Annual Review of Royalties. The parties hereby agree that they shall
conduct an annual review of the royalty schedule herein defined at
or about each anniversary date of this agreement, at which time the
parties agree, as pan of the consideration for this Agreement, that
they may, only upon the express written consent of both parties,
modify the amounts of the royalties payable hereunder.
4.10 Reports, Records and Audits. The Licensee hereby covenants, as part of the
consideration for this Agreement, that it shall cause to be paid any and all
reasonable costs associated with ensuring compliance with the record keeping,
reporting and auditing procedures as defined herein by causing to be integrated
into any sublicensing or other agreement entered into for the purposes herein
contemplated sufficient provisions to ensure said compliance as against any
Related Company, Affiliate, sublicensee or other third party.
(a) Records. Licensee agrees that it shall cause to be kept accurate
records in full accord with the site specific Standard Operating
Procedures in sufficient detail to enable the royalties payable
hereunder to be determined, and agrees to cause such records to be
made available for inspection from time to time during the term of
this Agreement. Such inspection shall be made by authorized
representatives of the Licensor at reasonable intervals during
normal business hours to the extent necessary to verify the reports
and payments required as specified herein.
(b) Reports. Reports shall be produced, in accord with the notice
provisions hereof on an as needed basis to the extent deemed
necessary by the Licensee and/or Licensor. The intent of any such
report is to clearly and unambiguously set forth the following
information:
(i) Influent gallonage, flow, rate and throughput statistics
measured hourly, with specific reference to time of
measurement and cumulative quantity and flow data:
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(ii) Analytical data, including but not limited to, concentrations
of inorganic, and when applicable, organic compounds and pH of
both the influent and effluent. This data shall be compiled
hourly;
(iii) Precise quantities used of SST and polymer per day;
(iv) Any additional information deemed necessary and requested by
the Licensor; and,
(v) The assessment of the royalties due thereon.
(c) Provision of Samples. To the extent that any site specific agreement
calls for or otherwise requires samples to be taken at any time,
such samples shall be taken and clearly and unambiguously identified
in full accord with the site specific standard operating procedure.
(e) Procedure on Audit. It is hereby agreed that Licensor shall have the
privilege of having a certified public accountant, or other
representative or agent of the Licensor audit all statements of
account, reports and records required or contemplated by this
Agreement to be made by Licensee to Licensor, as frequently as
Licensor may desire to have such audits made, and that Licensee
shall place at the disposal of said certified public accountant for
the purposes of this paragraph any and all records essential to the
verification of such reports. The expense of such audits and
verifications shall be borne jointly by the Licensee and Licensor
except upon the development of conditions giving either party
reasonable cause to suspect any violation of the reporting and
record keeping requirements defined herein, in which circumstance
the site operator shall be responsible for all costs and expenses of
the audit.
(i) Reasonable Cause. Any information from whatever source derived
that may be interpreted by either party as a potential
violation of any term herein defined.
(ii) Notice Prior to Audit. The Licensee and/or Licensor shall give
to the site operator express written notice of its discovery
of any fact, condition or circumstance giving the auditing
party reasonable cause to suspect any violation of the terms
of this Agreement. The site operator shall be given a
reasonable opportunity to take corrective action not to exceed
ten (10) business days. If upon the failure of the corrective
action to remedy the fact, condition or circumstance giving
rise to reasonable cause, or upon the failure of the site
operator to take corrective action, the Licensee and/or
Licensor will arrange for the audit to commence immediately.
(iii) Notice of Violation. The Licensee and/or Licensor shall
provide express written notice of any violation revealed as a
result of any audit conducted. The site operator will then be
obligated to cure said violation or shall suffer default
pursuant to the provisions of Article III hereunder.
(iv) Examination Upon and After Termination Event. In the event of
termination or expiration of this Agreement for any reason
whatsoever. Licensee agrees to provide access, or to otherwise
cause access to be provided, to the Licensor, its auditors,
accountants or agents to inspect all said records and books of
Licensee, and/or any sublicensee and/or any site operator and
to investigate generally all transactions of business carried
on by Licensee and/or any sublicensee and/or any site
operator, or any of its Related Companies, in the Grant
Territory pursuant to this Agreement and the License hereby
granted for a one (1) year period of time after such
termination.
4.11 Interest on Overdue Payments. Licensee shall cause to be paid to Licensor
with interest thereon at the rate of 18% per annum any and all amounts past due
and owing for sixty (60) days hereunder to the Licensor, calculated from the
date when such payments are due and payable as provided herein to the date
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of payment. This provision shall survive termination of this Agreement and shall
remain in effect until all sums due including interest thereon are paid in full
without offset or counterclaim.
4.12 Acceleration of Overdue Account. The payment provisions of this agreement
are to be strictly construed with time being of the essence with regard to all
payments to be made hereunder by the Licensee to the Licensor. The failure of
the Licensee to make such payments on their due dates shall be deemed a material
breach of this Agreement, and the Licensor, at its option, may terminate this
Agreement upon notice to the Licensee.
ARTICLE V
OTHER PRINCIPAL RIGHTS AND OBLIGATIONS; PATENT PROVISIONS
5.01 Representations and Warranties of Licensor. As of the effective date of
this Agreement, Licensor represents and warrants to Licensee as follows:
(a) Organization and Qualification. Licensor is a corporation duly
organized, validly existing and in good standing under the laws of
the State of New York, and has the corporate power and authority to
enter into this Agreement, to consummate the transactions
contemplated hereby and thereby, Licensor is duly licensed or
qualified to do business, and is in good standing, in every
jurisdiction in which it is required to be so licensed or qualified
due to its business or ownership of its assets and where failure to
be so licensed or qualified would have a material adverse effect on
its ability to perform its obligations hereunder.
(b) Authority. Licensor has full power, capacity and authority
(corporate or otherwise) to execute and deliver this Agreement upon
the concurrent payment to Licensor of the required licensing fees
and payments, and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement, and the
consummation of the transactions contemplated hereby, have been duly
and validly authorized by Licensor, and no other proceedings
(corporate or otherwise) on the part of Licensor are necessary to
authorize this Agreement, or to consummate the transactions
contemplated hereby. This agreement has been duly and validly
executed and delivered by Licensor and (assuming the valid execution
and delivery of the agreement by Licensee) constitute legal, valid
and binding agreements of Licensor.
(c) Consents and Approvals. There is no authorization, consent, order or
approval of or notice to or filing with, any individual or entity
required to be obtained, given or made in order for Licensor to
execute and deliver this Agreement, to consummate the transactions
contemplated hereby and thereby and fully perform its obligations
hereunder and thereunder.
(d) Absence of Conflicts. The execution, delivery and performance by
Licensor of this Agreement, and the consummation by Licensor of the
transactions contemplated hereby will not, with or without the
giving of notice or the lapse of time, or both, (i) violate any
provision of law, statute, rule or regulation to which Licensor is
subject, (ii) violate any order, judgment or decree applicable to
Licensor, or (iii) conflict with, or result in a breach or default
under, any term or condition of the charter or by-laws of Licensor,
if applicable, or any agreement or other instrument to which
Licensor is a party or by which Licensor is bound, or to which any
of Licensor's assets are subject.
(e) Brokers and Finders. Neither Licensor nor any of its officers,
directors, employees, Affiliates or associates has employed any
broker, finder or investment banker, or incurred any liability for
any brokerage fees, commissions or finders' fees in connection with
this Agreement or the transactions contemplated by this Agreement.
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(f) Ownership and Right to License. Licensor represents and warrants
that it is the owner of the world-wide exclusive right, title and
interest in and to the applications for letters patent for the
Licensed Material, and that it has the sole right to grant licenses
under said applications for letters patent, prospective letters
patent, reissues and extensions, of the scope herein granted.
(g) Commercial Utility. Licensor hereby represents and warrants that the
Licensed Material has commercial utility.
(h) Validity. Licensor hereby represents and warrants that said
application for letters patent is genuine and valid.
5.02 Acknowledgment of Validity. Licensee hereby covenants and agrees that it
will not contest, nor assist others in contesting, the validity of the letters
patent, or applications thereto, of the United States which are the subject of
this Agreement, nor the title thereto of Licensor.
5.03 Third Party Infringement. If at any time any third party shall infringe the
patent(s) licensed hereunder in the Grant Territory, then Licensee and/or the
Licensor shall, promptly either (1) obtain a discontinuance of said infringing
operations or (2) bring suit, bringing said suit in the name of the Licensee, or
if so required by the laws of the State of New York, bringing suit in the name
of the Licensor or joining Licensor as a party plaintiff with the Licensee. For
this purpose Licensor shall execute such legal papers necessary for the
prosecution of such suit as may be reasonably requested by Licensee. The
Licensor further covenants that it will otherwise provide all reasonable
assistance to the Licensee in the prosecution of any such suit.
(a) Prosecution of Rights. Licensee, with the reasonable assistance of
the Licensor, agrees to bring and diligently prosecute such suits
for the infringement of the aforesaid patent(s) as may reasonably be
necessary to prevent unlicensed competition materially interfering
with the businesses of the Licensee and Licensor hereunder. Whenever
any suit is brought against any infringer by Licensee as above
provided, Licensee shall immediately notify Licensor of such suit.
The costs and expenses of such suit and all recoveries therefrom
shall be shared equally by the parties hereto, except that, at the
option of the Licensor, the Licensor's contribution shall be limited
to one-half (50%) of the royalties payable to Licensor by Licensee
during the pendency of any such action.
(i) Trigger Event; Duties Thereafter. If at any time hereafter any
third party shall infringe any unexpired patent licensed
hereunder and Licensor shall give notice in writing to
Licensee of the existence of such infringement, including such
evidence of infringement as Licensor may possess and if
Licensee shall fail to assist in the suit against such third
party as provided above or obtain a discontinuance of such
infringing operations within six (6) months of the date of
receipt of such notice, then Licensor may at its election
either terminate this Agreement and the rights, privileges and
license herein granted and any sublicenses that may be granted
by the Licensee (pursuant to provision 2.05 of Article II
above) or bring suit in its own name as against such
infringer. Should Licensor bring suit in its own name as
hereinbefore provided. Licensee shall execute such legal
papers necessary for the prosecution of such suit as may be
requested by Licensor, and Licensor shall be liable for all
costs and expenses of such litigation and shall be entitled to
receive and retain all recoveries therefrom. In the event that
the Licensor should undertake such litigation, then the
Licensor has the right to cancel the exclusive features of
this license and may thereupon license others in the Grant
Territory. In case the Licensee terminates this Agreement by
material breach or otherwise failing to satisfy its duties as
defined herein. Licensee shall assign to Licensor all
sublicenses
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that may have been granted hereunder pursuant to provision
2.05 of Article II of this Agreement.
(ii) Rights Reserved to Licensor. Licensor shall have the right, in
any suit brought by the Licensee, pursuant to the foregoing,
to be represented at its own expense by counsel of its own
selection to the extent of having access to full information
and opportunity to be heard in the councils and attorneys of
the Licensee, but such expense shall not be considered as
costs or expenses of the litigation unless Licensor elects to
participate in the suit as provided in subparagraph (a) of
this clause.
(b) Defense of Third Party Suit. The Licensor agrees during the term of
this Agreement to defend Licensee against any suit for infringement
of any patent of third parties covering the Licensed Material so
long as said patent(s) were issued prior to the effective date of
this Agreement in the Grant Territory. This obligation is subject to
the following conditions:
(i) Licensee must have given notice to Licensor of the claim of
infringement within twenty (20) days after receipt of service
thereof upon Licensee;
(ii) Licensor's liability shall be restricted to the defense of any
suits arising from claims based on any of the Licensor's
letters patent, for the Licensed Material granted hereunder;
and,
(iii) Licensee shall render reasonable assistance to Licensor or,
upon the request of the Licensee and at the Licensor's option,
shall be permitted to defend against the suit and shall be
entitled to receive and retain all recoveries, if any
therefrom.
(c) No Effect on Royalties. Upon the circumstance of any suit for
infringement being brought by Licensee and/or Licensor or against
Licensee and/or Licensor, there shall be no effect upon the amount
or schedule of royalties owing from the sublicensee or site operator
as so defined in Article IV hereunder.
5.04 Improvements. Licensee, as a part of the consideration for the License
hereby granted to it, hereby agrees to submit to Licensor, during the term of
this Agreement, all developments or improvements in the Licensed Material or
Know-how made by or at the instance of the Licensee, and Licensee hereby agrees
that, during the life of thus Agreement, the Licensor and each of its
Affiliates, both past and future, shall have the exclusive right to said
developments and improvements, whether patented or unpatented.
(a) Assignment to Licensor. Said developments or improvements shall be
entirely assigned to the Licensor and shall be the sole property of
the Licensor, except, however, that the Licensee shall automatically
have an exclusive license thereunder in the Grant Territory without
additional charge.
(b) Development or Improvement. As used herein, the terms development
and improvement mean any design, process, method, modification,
idea, concept or Technology, of whatever form, the use of which
affects the Licensed Material in any one or more of the following
ways:
(i) Reduces Process or Technology costs;
(ii) Improves the efficiency or performance of the Process in any
manner;
(iii) Improves the efficiency or performance of the Technology in
any manner;
(iv) Improves reaction efficiency or performance in any manner;
(v) In any way broadens the scope or range of Process and/or
Technology applicability;
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(vi) Increases marketability; or,
(vii) Results in any further invention that was reasonably
discovered as a direct or indirect result of the Licensor
disclosing any information herein contemplated as necessary to
the rights, privileges and license herein granted.
(c) Licensee's Covenant to Disclose. The Licensee hereby covenants to
immediately communicate any developments, improvements,
modifications, further inventions, and designs it or its Related
Companies or Affiliates may discover, make, or develop with respect
to the Licensed Material. Know-how and other information herein
contemplated as necessary to the rights, privileges and license
herein granted, and shall fully disclose to the Licensor the nature
and manner of applying and utilizing such improvements,
developments, modifications, further inventions and designs. Failure
to promptly comply with this covenant in any manner shall be deemed
a material breach for which the Licensor may pursue termination in
full accord with the provisions this Agreement.
(d) Development or Improvement by Licensor. The Licensor hereby agrees,
as part of the consideration for this Agreement, that it shall make
available all direct Developments and Improvements to the Licensed
Material, made by or at the instance of the Licensor, for no
additional cost and under the same terms as this Agreement, except
as provided for in subparagraph 5.04(d)(i) hereof. The Licensee
hereby agrees that, during the life of this Agreement, the Licensor
and each of its Affiliates, both past and future, shall have the
exclusive right to said Developments and Improvements, whether
patented or unpatented. This provision shall apply only to those
direct Developments and Improvements of the Licensed Material that
are applicable to the same market (e.g., liquid metal bearing
wastes) and the same media (e.g., liquid) that the Licensed Material
presently applies.
(i) Licensee to Bear Costs of Research and Development. The
Licensee hereby agrees that it shall bear all costs and shall
compensate Licensor for all reasonable expenses incurred by
the Licensor in research and development of any direct
Developments or Improvements as provided for by subparagraph
5.04 (d) hereof. The Licensee shall pay this amount to the
Licensor by reducing its percentage of the gross receipts as
provided in provision 4.02 hereof and Attachment B, annexed
hereto, by 10% to 40% for a period of time until the amount
owing under this provision is paid in full.
(e) New or Different Market. In the event that any Development or
Improvement on the Licensed Material enables access to a new market
(e.g., solid, air or radioactive waste), the parties hereby agree
that the terms of this License shall not apply. In such instance,
the Licensee shall have the right of first refusal on entering into
a separate license with the Licensor for such new market
Developments or Improvements.
5.05 License Under Foreign Patents; Requirement of Foreign Patents. The Licensee
shall have the right to the Licensed Material herein contemplated under any and
all foreign letters patent now pending or hereafter to be filed expressly and
exclusively corresponding to the herein defined United States letters patent.
Under no circumstance shall the Licensee be permitted to use or sublicense the
Licensed Material in any geographic region or country for the purposes herein
contemplated prior to the Licensor's filing of the application for letters
patent corresponding to the herein defined United States letters patent in that
geographic region or country.
5.06 Licensor's Covenant to Disclose. In the event that the Licensor contacts or
is ever contacted directly by any third party seeking to remediate, recover
and/or treat liquid streams of wastes containing metals in the Grant Territory,
the Licensor hereby covenants to disclose the identity of any such party to
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the Licensee and to simultaneously therewith refer such party to the Licensee,
except as provided for in Attachment C, annexed hereto.
5.07 Sales and Marketing; Commissions to Licensor. The Licensor shall have the
right to engage the market on its own behalf provided that any such sales shall
be made through the Licensee, upon which the Licensee shall pay a commission to
the Licensor's sales or marketing agent, which commission shall be paid out of
the Licensee's percentage of the gross per gallon receipts, calculated on a per
site basis. The commission shall be paid in accord with the provisions of the
relevant Licensor marketing agreement. All Licensor costs of sale shall be borne
by the Licensee, and shall be deducted from its percentage of the gross per
gallon receipts, calculated on a per site basis.
5.08 Profit and Commission on Licensor Sale of Licensee Product. In the event
that the efforts of the sales or marketing agents of the Licensor result in any
sale of any product or service of the Licensee, the Licensee shall pay to the
Licensor 50% of the relevant gross receipts, calculated on a per site basis (see
Attachment B), derived from any use or sale of any product or service of the
Licensee in the Grant Territory. The Licensor shall pay the relevant commission
to the Licensor's sales or marketing agent responsible for said sale of the
Licensee's product or service.
ARTICLE VI
KNOW-HOW, TECHNICAL ASSISTANCE, PURCHASE OF ESSENTIAL COMPONENTS
6.01 Know-how Commitment. The Licensor shall from time to time, and to such
extent that it shall consider to be reasonably necessary for the performance of
this Agreement, furnish to Licensee information essential to determining the
nature and extent of the applicability of the Technology and Process. Only the
Licensor has the right-to divulge Know-how, and at no time shall the Licensee or
its Related Companies or Affiliates divulge any Know-how taught or otherwise
discovered.
(a) Delimitation of Commitment. The Licensor shall communicate to the
Licensee upon request such information relating to the Licensed
Material which shall in the opinion of the Licensor be of use to the
Licensee in its licensed operations. Such information shall, at the
option of the Licensor, consist of any patent disclosures and
applications, technologies, trade secrets, designs, formulas,
processes, Know-how, contracts, samples, feasibility studies,
work-plans, project documentation, books, instructional volumes,
notes, drawings, writings, documents, files, models, photographs,
videos, drawings, sketches, ideas, concepts and any improvements
thereto, which are the subject matter of this Agreement, and which
is directly applicable to the operations of the Licensee or its
Related Companies or Affiliates. The Licensor shall undertake in the
initial feasibility studies, work plan preparations, designs and
engineering development, pursuant to the terms herein, of each
individual site with respect to the Licensed Material and may
provide special, specific or additional information pertaining
thereto to the Licensee or its Related Companies or Affiliates or
sublicensees. The Licensee shall cause to be paid the relevant
support owing to the Licensor for such additional information
pursuant to the applicable fees delineated in Article IV. To the
extent that the Licensor in its own opinion deems this information
to be necessary for the Licensee's use of the Licensed Material, the
Licensor shall furnish such specific Know-how as the Licensor deems
required and has in its possession.
(b) Covenant to Provide Technical Assistance. On the cost basis defined
in Article IV and other terms herein defined, the Licensor shall
provide all reasonable support to the Licensee and/or its Related
Companies, Affiliates, sublicensees or other third parties in the
use of the Licensed Material on a site by site basis.
(c) Excluded Know-how. Information with respect to research and advance
development activities is not included in the scope of this
Agreement and shall not be made available
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hereunder. Nothing contained in this Agreement shall oblige the
Licensor or its Affiliates to make available to Licensee or its
Related Companies or Affiliates any information concerning any
further invention, development or improvement of the Licensor until
an application for letters patent thereon has been filed in the
United States patent office.
6.02 Provision of Necessary Information. The Licensee shall cause to be provided
to the Licensor any and all information requested and otherwise known to be
required, as detailed hereafter, so that the Licensor may conduct an initial
feasibility study and prepare a preliminary proposal for each site. The
information required by the Licensor shall include, but shall not be limited to:
(a) Nature, extent and relative degradation of the site with specific
identifying information;
(b) Quantity, flow throughput and influent source characteristics as
applicable;
(c) Specific details on the existing industrial processes and
operations;
(d) Sufficient characteristic samples of the waste intended to be
remediated and/or treated by the Licensed Material, not less than
one (1) gallon for liquids and five (5) pounds for soils, sludges,
and other semi-solid wastes;
(i) Sampling Procedure. The sampling procedures which shall be
adhered to will be provided in the site specific SOP manuals.
(e) Desired nature, level and extent of treatment and/or recovery cry;
(f) Specific site information (including schematics if accessible)
detailing the site accessibility, structural design requirements,
sewer availability, power and water supply availability, power type;
(g) Overall geophysical and hydraulic characteristics of the site; and,
(h) Any other information deemed necessary by the Licensor on a site by
site basis.
6.03 Non-Conformance of Information; Off-Spec Wastes and/or Sites. As provided
herein, the Licensor will be performing a feasibility study for each site. The
parties recognize that this study is critical for determining the nature and the
extent of the applicability of the Technology and Process, as well as the
design, engineering and construction for each site. In order to perform this
feasibility study, samples and other information must be provided. If the actual
site or waste characteristics materially differ from the samples,
characteristics, the site or waste will be deemed by the Licensor to have not
met the original specifications of the site. The non-conforming waste or site
will be deemed to be off-spec. The Licensee hereby agrees that it shall bear all
reasonable costs and expenses associated with re-performing any additional
feasibility studies, designs, proposals or work-plans.
6.04 Licensee to Bear Costs.
(a) Set-up. The Licensor will bear the costs of preparing its per site
process design proposal and work-plan. The Licensee will cause the
sublicensee and/or site operator, at its cost, to obtain all
necessary approvals needed to operate the site, and will bear all
remaining costs associated with site set-up, including but not
limited to final process design, engineering, construction, and
operation. Any support required at any time will be provided by the
Licensor on the cost basis defined in Article IV. The Licensor or
Licensee shall designate a third-party engineering and/or
construction firm (hereinafter the "engineering contractor") for
each site. The engineering contractor shall work with the Licensor
and will be required to enter into separate agreements (including
but not limited to nondisclosures and indemnifications) directly
with the Licensor. The Licensee will bear any additional costs which
may be charged for any regulatory, legal or permitting requirements,
which requirements are the sole obligation of the Licensee or its
Related Companies or the engineering contractor to comply with.
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(b) Covenant to Assist in Design, Engineering and Construction. Upon
satisfaction of the condition that the engineering contractor enters
into any separate agreements with Licensor as the Licensor deems
necessary, the Licensor covenants to assist the engineering
contractor in the design, engineering and construction of that
portion of any site in which the remediation, recovery and/or
treatment activities contemplated by this Agreement shall be
conducted. The Licensor further covenants that, to the extent only
that it is able, it will assist the engineering contractor in a
reasonable manner in the design, engineering and construction of
other portions of any site. The Licensor shall furnish that
reasonable Know-how necessary to comply with the conditions of this
covenant.
(i) Any support required at any time to comply with the conditions
of this covenant will be provided by the Licensor on the cost
basis defined in Article IV.
(c) Covenant to Render Technical Assistance for Operation. The Licensee
shall designate for each site a Related Company, third party or
itself as the Site Operator. The site operator, may at the option of
the Licensor, be required to enter into separate agreements
(including but not limited to nondisclosures and indemnifications)
directly with the Licensor. This covenant shall only be given upon
the execution of these agreements in the event that the Licensor
elects to have said agreements executed.
(i) Upon satisfaction of the forgoing condition, the Licensor
covenants to assist and to render all reasonable technical and
other support required to initiate and maintain operation at
each site, for only those portions of each site in which the
remediation, recovery and/or treatment activities contemplated
by this, Agreement shall be conducted.
(ii) Any support required at any time to comply with the conditions
of this covenant will be provided by the Licensor on the cost
basis defined in Article IV.
(iii) The determination as to whether any on-site assistance by the
Licensor is required will be made solely by the Licensor.
6.05 Purchase of Essential Components Exclusively from Licensor. The Licensee
shall cause the sublicensee and/or site operator to purchase all components
termed herein as essential directly from the Licensor pursuant to the following
terms and conditions:
(a) Essential Reagents. The Licensee, as a part of the consideration for
the License herein granted, hereby agrees to purchase the essential
reagents directly from the Licensor. There are two essential
reagents for which this term applies: (1) SST; and, (2) a required
polymer compound. SST shall be purchased on a per gallon basis and
the polymer shall be purchased on a per pound basis pursuant to the
cost basis provided for in Article IV.
(i) Requirement of Manufacturing. At no time, except upon the
express written consent and control of the Licensor, shall SST
or the polymer be manufactured in the Grant Territory.
(ii) Shipping. All costs of shipment shall be borne by the site
operator. The method of shipment shall be f.o.b. (shipping)
from point of manufacture, having that meaning ascribed to it
by standard convention.
(b) Essential Process Equipment. Except upon the express written consent
of the Licensor, the Licensee, as a part of the consideration for
the License herein granted, hereby agrees to cause the sublicensee
and/or site operator to purchase the essential process equipment
directly from the Licensor. All pieces or categories of equipment
which shall be deemed essential and shall be purchased directly from
the Licensor shall be detailed in the Site Specific Agreement for
each site.
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(i) Shipping. All costs of shipment shall be borne by the site
operator. The method of shipment shall be f.o.b., (shipping)
from the point of manufacture and/or distribution, having that
meaning ascribed to it by standard convention
(c) Licensor Covenants to Supply Essential Components. The Licensor
hereby covenants that it will within a reasonable time supply the
aforesaid essential components to the Licensee or its designated
recipient on an as needed basis.
(i) Ability to Supply. As of the date hereof, Licensor represents
and warrants to Licensee that it presently has and shall have
the ability to supply the aforesaid essential components to
the Licensee or its designated recipient.
(d) Excluded Components. The Licensee or its Related Companies or any
engineering contractors shall source and provide for all components
not herein referenced, or provided for in any Site Specific
Agreement.
6.06 Covenant to Provide Training. Licensor hereby covenants and agrees to train
the personnel of the site operator for the requisite laboratory and process
operations.
(a) Procedure on Training. All personnel shall be trained over the
course of two (2) weeks at the Licensor's principal facility at One
KBF Plaza in Paterson, New Jersey, and a period of time not to
exceed one (1) week on location at the individual site.
(b) Standard Operating Procedure. As part of the preparation of the
final design proposal for each site, the Licensor shall prepare a
site specific Standard Operating Procedure (the "SOP") manual for
the site. All personnel will be trained according to the standard
operating procedure of their respective sites.
(c) Indemnification on Failure to Comply with the SOP. The Licensee
hereby agrees to indemnity and hold the Licensor harmless from all
loss, expense (including reasonable attorney's fees) and damages
arising out of any claims, demands and liabilities (including claims
by Related Companies, sublicensees, employees and/or other third
parties) incurred by its, their own or the site operator's neglect
arising out of the failure to strictly abide by and adhere to the
terms and instructions specified in the site SOP manual and the
relevant Site Specific Agreement.
6.07 Assumption of Risk by Licensee. Licensee agrees that it shall be
responsible for damage to its or its Related Companies' property and for injury
or death of its employees and agents caused by any acts or omissions to act
arising from its or its sublicensee's direction, supervision or instruction,
including negligence, of the employees or agents of the Licensor, during the
performance of this Agreement. The Licensee agrees to release the Licensor from
any and all liability for loss or damage so caused to its or its Related
Companies' properties, and further agrees to indemnify and hold harmless the
Licensor against all claims and causes of action arising out of such damage to
property or such injury or death of employees or agents, except where actions or
omissions of the Licensor or its agents give rise to any claims, demands and
liabilities.
(a) Environmental, Health and Safety Considerations. Since the Licensee
will hire or cause to be hired various engineering contractors, the
Licensee expressly acknowledges that it will be the responsibility
of such engineering contractors as well as the Licensee, not the
Licensor, to ensure that each site is ultimately designed,
engineered, constructed and thereafter operated in accordance with
the applicable safety, health, and environmental standards or
requirements of the Grant Territory.
(b) General Indemnification. Licensee further indemnifies and holds
Licensor harmless from any and all claims, demands, causes of action
and all costs of defense incurred by the Licensor (including court
costs and reasonable attorney's fees actually incurred) which
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claims, demands or causes of action are asserted by any third party
whatsoever including employees of the Licensee and its Related
Companies and are caused or alleged to be caused by reason of any
fault or defect in the design, construction or operation of any
site.
(c) Survival. The provisions of this clause shall survive expiration or
termination of this Agreement for any reason and shall not be
affected thereby.
6.08 Maintenance of Secrecy; Restrictions; Survival. It is recognized by the
parties hereto that information in the form of Know-how will be disclosed,
taught or delivered by the Licensor pursuant to this Agreement and will contain
and incorporate confidential information in which Licensor has and will continue
to have a proprietary interest as the owner of such information, and Licensee
agrees to maintain, and will maintain, as confidential any and all information
disclosed to Licensee, directly or indirectly, pursuant to this Agreement.
Licensee will obtain from its employees, contractors, consultants, agents,
stockholders and other persons having access to Know-how acquired by Licensee
from Licensor (or any possible third party infringer), pursuant to this
Agreement, duly binding agreements from such persons, in a form acceptable to
Licensor, to maintain in confidence any such information disclosed to such
person by Licensee. Licensee agrees to reveal Know-how revealed to it by
Licensor pursuant to this Agreement, only to such persons and only to the extent
as may be required to permit Licensee to make possible the utilization of such
Know-how pursuant to this Agreement. The provisions of this paragraph shall
survive the termination of this Agreement.
ARTICLE VII
DISTRIBUTION, MARKETING, MINIMUM SALES AND BEST EFFORTS
7.01 Authorized Sales Channel. Licensee shall arrange for the sale or use of the
Licensed Material in the Grant Territory.
7.02 No Competitive Products. Licensee hereby covenants and agrees that it shall
not sell or use any material which may be regarded by the Licensor as directly
competitive with the Licensed Material, except upon the express written consent
of the Licensor.
7.03 Reciprocal Exchange of Commercial Information. The Licensor agrees to
furnish to the Licensee all commercial and marketing information and contacts
which it has heretofore obtained or developed in connection with the
exploitation of the Licensed Material in the Grant Territory, and the Licensee
agrees to furnish to the Licensor all commercial and marketing information and
contacts which it has heretofore obtained or developed in connection with the
exploitation of the Licensed Material in the Grant Territory.
7.04 Best Efforts of Licensee. The Licensee hereby covenants and agrees to use
its best efforts to promote the sale and use of the Licensed Material in the
Grant Territory. The Licensee shall as soon as possible after receiving the
Licensed Material herein granted begin to sell and to arrange for penetration of
the Grant Territory. The Licensee shall at all times throughout the life of this
Agreement exert its best efforts to create, service, supply and otherwise
satisfy as extensive a market for the Licensed Material in the Grant Territory
as is possible. Breach of this provision in any manner shall be deemed a
material breach for which the Licensor may pursue termination in full accord
with this Agreement.
(a) Duty to Exploit. It is understood and agreed that the Licensee
undertakes for itself the obligation to sell the Licensed Material,
but shall not incur any pecuniary liability for breach of this
undertaking, it being understood and agreed that if the Licensee
declines to accept otherwise feasible orders from any purchasers or
fails to meet the requirements of any purchaser of the Licensed
Material provided for in orders accepted by the Licensee, the
Licensor may license such other third parties to supply the Licensed
Material to such purchasers. Said licenses to said third parties
shall be confined to supplying the Licensed Material to only such
purchasers from whom the Licensee may have refused to accept orders
or whom the Licensee has failed to supply, and said license shall be
limited as to
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time only to the extent that the Licensee corrects such
non-conforming conduct. The Licensor agrees that, in the event of
the Licensee's breach of this duty to exploit the Licensed Material,
no license shall be granted to any third party upon terms more
favorable than the terms then in force between the Licensee and the
Licensor.
(b) Sales Organization and Efforts. The Licensee agrees to maintain
suitable sales personnel and exert its best efforts toward
vigorously promoting the sales and use of the Licensed Material,
including prompt handling of all inquiries, personal calls on
customers and/or potential site operators and local marketing to the
extent permissible or practical in the Grant Territory.
7.05 Minimum Sales Requirement. If within any one (1) year period, as measured
by the anniversary date of the first Site Specific Agreement, there shall be any
less than ten (10) additional individual sites in operation in the Grant
Territory using the Licensed Material (i.e., ten additional sites each year), or
otherwise in substantial completion of construction, the Licensor may, at its
option, choose to excise the exclusivity provisions from this Agreement and
license the Licensed Material to others for the exploitation of the Grant
Territory market. This requirement shall accrue and is to be satisfied only by
the sales and marketing efforts of the Licensee; any site or contract that
results from the sales or marketing efforts of the licensor shall not be
included in the accrual or satisfaction of this requirement. Breach of this
provision in any manner shall be deemed a material breach for which the Licensor
may pursue termination in full accord with this Agreement.
7.06 Remedy on Inability to Supply Demand. In the event of or at the time the
Licensee should be unable to supply the Demand for the Licensed Material, the
Licensor shall have the right after reasonable notice to the Licensee to engage
in sufficient efforts (including licensing to others) to fill such demand over
and above the then present capacity of the Licensee but only so long as the
Licensee shall be unable to fulfill said demand or otherwise gives its consent
to the Licensor to engage in such efforts. Otherwise, the Licensor shall have
the right to pursue termination in accord with Section 3.02(a)(ix) hereof.
ARTICLE VIII
QUALITY CONTROL; STANDARD OPERATING PROCEDURES
8.01 Quality Control. Since quality control and quality assurance protocols
(hereinafter ("QC/QA") are essential to the efficient operation of the
Technology and Process, and the failure to conform to these protocols may result
in the failure of the Technology and Process to function as contemplated hereby,
the Licensee hereby agrees that it shall, pursuant to this Agreement and each
individual Site Specific Agreement, cause strict adherence to all QC/QA
standards for each site precisely equivalent to those provided for in the
Standard Operating Procedure (the "SOP") manual, which manual shall be provided
to the Licensee and/or site operator and the individual employees of the site
operator by the Licensor.
8.02 Standard Operating Procedures. As part of the preparation of the final
design proposal for each site, the Licensor shall prepare a site specific SOP
manual for each site. All personnel trained by the Licensor will be trained
according to the standard operating procedure of their respective sites. All
necessary copies of the SOP manual shall be provided to trained personnel and/or
the site operator and/or the Licensee at the expense of the Licensor.
8.03 QC/QA Reporting Requirement. The Licensee shall, pursuant to this Agreement
and each individual Site Specific Agreement cause to be enforced strict
compliance with all site specific QC/QA reporting requirements detailed in each
site specific SOP manual, to be provided prior to the commencement of operations
at each site.
8.04 Procedure on Failure to Comply. Strict adherence to the QC/QA protocols and
the SOP shall be required. Since strict compliance with the SOP and QC/QA
protocols is critical to the effective use of the Licensed Material, the
Licensee, as a part of the consideration for the License herein granted, agrees
to
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cause strict compliance with the SOP and QC/QA protocols. The Licensee further
covenants that it shall have the responsibility and authority to enforce
compliance of these protocols, and shall do so in strict compliance with the
terms and provisions of this Article.
(a) Notice of Non-Compliance. Any deviation from the QC/QA protocols or
any material operating provision of the SOP will result in the
issuance of a Notice of Non-Compliance. The notice will issue to the
Licensee as well as to the site operator. The site operator will
then be given ten days (10) to cure the compliance deficiency. If
the deficiency remains uncured, an additional notice will issue. The
site operator will be given ten (10) additional day's to cure the
deficiency. This process of notice and instruction to cure will
repeat a maximum of five (5) times for the same deficiency. If the
deficiency at issue still remains uncured, the Licensor shall issue
to the Licensee and the site operator a Notice of Issuance of
Penalty.
(b) Issuance of Penalty. The Licensor may issue to the Licensee a fine
not to exceed $15,000 for each penalty required to be imposed. The
Licensee shall then enforce and make all reasonable efforts to
collect this penalty as against the site operator.
(c) Visitation. The Licensor, at its option, may at any time elect to
visit the site in violation in order to ensure correction of any
deficiency. The reasonable costs of any such visitation shall be
borne equally by the Licensee and Licensor.
(d) Material Breach. Continued persistent failure to correct any one
single violation and/or deviation from the procedure as outlined
herein and in the individual per site SOP manuals over the course of
any six (6) month period will be deemed a material breach for which
the Licensor may pursue termination in full accord with the
provisions of this Agreement.
ARTICLE IX
MUTUAL COVENANTS
Each of the parties hereto covenants to the other party as follows:
9.01 Incorporation of Previous Agreements. The parties hereto agree that all
confidential information and/or evaluation materials, respectively defined in
the Nondisclosure and Confidentiality Agreements (collectively, the
"confidentiality agreements"), executed by the parties on December 30, 1997, and
disclosed in furtherance of this Agreement, shall remain confidential between
the parties and there will be no disclosure of these materials except as
provided under the terms of the confidentiality agreements and this Agreement.
9.02 Confidentiality of Terms. With the exception of acknowledging that this
exclusive license for the territory has been established for a minimum period of
ten (10) years, all other terms relating to this contract shall remain
confidential between the parties and there shall be no disclosure of them by a
party without the written consent of the other party, except as is necessary to
comply with any legal and/or accounting disclosure requirements.
9.03 General Confidentiality. Except as otherwise required by law or in
connection with judicial, administrative or arbitration proceedings (in which
case the disclosing party shall be afforded a reasonable opportunity to seek a
protective order), each of the parties agrees not to (i) disclose any
confidential information herein defined of the other party, or the remaining
terms of this Agreement, to any individual or entity (other than its directors,
officers, employees, agents and representatives with a need to know such
confidential information) or (ii) use any confidential information of the other
party for any purpose other than consummating the transaction contemplated
hereby and, with respect to Licensee, conducting the remediation, recovery
and/or treatment contemplated herein.
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9.04 Mutual Cooperation. The parties acknowledge that in order to further the
purposes of this Agreement, information containing or consisting of trade
secrets, customer lists and other confidential information may be communicated
by either party to the other. Such information may take the forms of plans,
drawings and data, and will be deemed confidential unless otherwise designated
by the Licensor of Licensee as "Non-Confidential Information." The parties
hereto agree to cooperate after the execution of this Agreement to the fullest
extent reasonably necessary to consummate fully the transaction contemplated
hereby, including but not limited to accounting for the transaction hereunder.
9.05 General Indemnification of Licensor. The Licensee shall not incur any
liability or indebtedness in the name of the Licensor, nor do or suffer any act
or thing which may render the Licensor liable for the payment of any money to
any third person for any purpose whatsoever, except as herein otherwise
provided. The Licensee hereby agrees to indemnify and hold the Licensor harmless
from all loss, expense (including reasonable attorney's fees) and damages
arising out of any claims, demands and liabilities incurred by its own neglect
in connection with the fulfillment of the terms and conditions of this
Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.01 Representations and Warranties of Licensee. As of the date hereof Licensee
represents and warrants to Licensee as follows:
(a) Authority. Licensee has full power, capacity and authority
(corporate or otherwise) to execute and deliver this Agreement, and
to consummate the transactions contemplated hereby, The execution
and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly and validly
authorized by Licensee, and no other proceedings (corporate or
otherwise) on the part of Licensee are necessary to authorize this
Agreement, or to consummate the transactions contemplated hereby.
This agreement has been duly and validly executed and delivered by
Licensee, and (assuming valid execution and delivery by Licensor)
constitutes the legal, valid and binding agreement of Licensee.
(b) Consents and Approvals. There is no authorization, consent, order or
approval of, or notice to or filing with, any individual or entity
required to be obtained or given in order for Licensee to execute
and deliver this Agreement, to consummate the transactions
contemplated hereby and to fully perform its obligations hereunder.
(c) Absence of Conflicts. The execution, delivery and performance by
Licensee of this Agreement, and the consummation by Licensee of the
transactions contemplated hereby and thereby, will not, with or
without the giving of notice or lapse of time or both, (i) violate
any provision of law, statute, rule or regulation to which Licensee
is subject, (ii) violate any order, judgment or decree applicable to
Licensee, or (iii) conflict with or result in a breach or default
under any term or condition of the Certificate of Incorporation or
By Laws of Licensee, or any agreement or other instrument to which
Licensee is a party or by which it is bound.
(d) Brokers and Finders. Neither Licensee nor any of its officers,
directors, employees, Affiliates or associates has employed any
broker, finder or investment banker, or incurred any liability for
any brokerage fees, commissions or finders' fees in connection with
this Agreement or the transactions contemplated by this Agreement.
(e) Related Companies and Affiliates. The Licensee has the means to
exploit the entire market in the Grant Territory, and to arrange for
timely payment of all fees and royalties herein defined itself or
through existing arrangements with Related Companies or other third
parties.
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10.02 Licensee Covenant to Assist in Approvals. The Licensee hereby covenants,
as part of the consideration of this Agreement, to engage in all reasonable
efforts to secure all approvals reasonably required by the Licensor, including
but not limited to approval to the EPA SITE program and any and all patent
approvals in each national market in which the Licensee will market the Licensed
Material.
10.03 Survival of Representations and Warranties; Covenants; Indemnities. All
representations, warranties, covenants and indemnities contained herein or made
in writing by any party in connection herewith shall survive the termination or
expiry of this Agreement indefinitely. All covenants contained herein shall
survive until performed fully. The provisions for payment of (and accounting in
respect to) the fees detailed in Article IV of this Agreement and other monies
due to the Licensor under this Agreement shall survive the termination or expiry
of this Agreement.
10.04 Severability. If any provision of this Agreement or the application of
such provision to any person or circumstance shall be held invalid, the
remainder of thus Agreement, or the application of such provision to persons or
circumstances other than to those to which it was held invalid, shall not be
affected thereby, shall be severable, shall inure to the benefits of both
parties and shall be valid and enforceable in accordance with their terms.
10.05 Further Acts. The parties hereto agree, as part of the consideration to
this Agreement, to perform such further acts and execute such additional
instruments as may be necessary to carry out the full intent and purpose of this
Agreement.
10.06 Counterparts. This agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which shall constitute one and
the same instrument.
10.07 Headings. The article, section and provision headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.08 Application. This agreement applies to, inures to the benefit of, and
binds the parties hereto and, subject to the express assignment provisions
hereof, their respective successors and assigns.
10.09 Scope. This agreement together with the attachments annexed hereto
constitutes the entire agreement between the parties. It supercedes any prior
agreement or understandings between them as to the subject matter contemplated
herein, and it may not be modified or amended in any manner other than as set
forth herein.
10.10 Amendment and Modification. This agreement may only be amended, modified
or supplemented by written agreement of the parties.
10.11 Assignment. Licensor shall have a right to assign any and all of its
rights under this Agreement to any Affiliate or other entity owned or controlled
by Licensor provided that Licensor and the assignee shall be jointly and
severally liable to perform all of Licensor's obligations hereunder. Otherwise,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by either of the parties hereto without the express prior
written consent of the other party, except that Licensor or Licensee may assign
their respective rights and obligations under this Agreement to any purchaser of
all or substantially all of their respective assets or the assets or their
respective parent companies.
10.12 Waiver. Any failure of the Licensor, on the one hand, or the Licensee, on
the other, to comply with any obligation herein may be expressly waived
hereunder, but such waiver shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure. Any waiver must be in writing and
duly executed by the appropriate party. The remedies set forth in this Agreement
shall be cumulative and no one shall be construed as exclusive of any other or
of any remedy provided by law. The failure of any party to exercise any remedy
at any time shall not operate as a waiver of them or the right of such party to
exercise any remedy for the same or subsequent default at any time.
10.13 Reservation of Rights. All rights not specifically and expressly granted
to the Licensee by this Agreement are reserved to the Licensor.
- --------------------------------------------------------------------------------
23
<PAGE>
10.14 Third Parties. Except as specifically set forth or referred to herein,
nothing herein shall be construed to confer upon or give to any party other than
the parties hereto and, only if applicable their successors or permitted
assigns, any rights or remedies under or by reason of this Agreement.
10.15 No Agency or Partnership. The parties are not partners or joint ventures
nor is the Licensee entitled to act as the Licensor's agent, nor shall the
Licensor be liable in respect of any representation, act or omission of the
Licensee of whatever nature.
10.16 Force Majeure. The parties hereto shall not be liable for the failure of
performance hereunder if occasioned by war, declared or undeclared, fire, flood,
acts of God, interruption of transportation, embargo, accident, explosion,
inability to procure or shortage of supply of raw materials, equipment, or
production facilities, prohibition of import or export of the Licensed Materials
covered hereby, governmental orders, regulations, restrictions, priorities or
rationing, or by strike, lockout, or other labor troubles interfering with the
production or transportation of such goods or with the supplies of raw materials
entering into their production of or any other cause beyond the control of the
parties. Any suspension of performance by reason of this article shall be
limited to the period during which such cause of failure exists, but such
suspension shall not affect the running of the term of this Agreement.
(a) Merger or Acquisition. In the event of the direct or indirect
acquisition, or assumption of a 20% or greater controlling interest
of the Licensee by any superior authority, the Licensor shall, at
its option, have the right to terminate this Agreement at any time
thereafter upon giving written notice thereof to the Licensee, and,
upon the giving of such notice of termination, this Agreement shall
terminate forthwith.
(i) Continuing Rights and Obligations. In the event of such
termination, the Licensee and/or the relevant superior
authority shall be entitled to income as provided for by the
terms of this Agreement, and shall remain obligated to the
Licensor for all royalties payable and duties owing hereunder
for only those sites, as that term is herein defined, existing
upon termination in the event provided for by subparagraph
10.16 (a) hereof. In the event of any such termination, the
Licensor hereby covenants to contract or otherwise deal with
the Licensee and/or the relevant superior authority on a site
by site basis as is reasonably necessary for each of these
existing sites.
(ii) Non-Exclusivity. In the event of the direct or indirect
acquisition, or assumption of a 20% or greater controlling
interest of the Licensee by any superior authority, the
Licensor, at its option, and in lieu of termination, may
choose to excise the exclusivity provisions from this
Agreement and may license the Licensed Material to others for
the exploitation of the Grant Territory market. If the
Licensor chooses to exercise this option, there shall be no
effect on the royalties pay-able and duties owing to the
Licensor pursuant to the remaining terms of this Agreement.
10.17 Conflicts. In the event that any provision, term, condition, or object of
this Agreement may be in conflict with any law, measure, ruling, court judgment
(by consent or otherwise), or regulation of the any governmental authority, or
any department or agency thereof, and the legal counsel of either party shall
advise that in their considered opinion such conflict, or a reasonable
possibility of such conflict exists, then either party may propose to the other
appropriate modifications of this Agreement to avoid such conflict. In such
case, if an agreement or modification is not reached within sixty (60) days, the
party making such proposal, after thirty (30) day written notice to the other
party, may terminate this Agreement in its entirety, as of a date subsequent to
such thirty (30) days, and which shall be specified in said notice.
10.18 Government Approval. Any approval of this Agreement by any government
which may require the Licensee to seek its approval to enable the Licensee to
enter into this Agreement or to make payments
- --------------------------------------------------------------------------------
24
<PAGE>
hereunder in United States dollars in the United States of America shall be
secured in writing by the Licensee which shall supply the same or a true copy
thereof to the Licensor within six (6) months of the date of this Agreement.
10.19 Joint and Several. All agreements on part of either of the parties which
comprises more than one person or entity shall be joint and several.
10.20 Currency. Throughout this Agreement the currency is U.S. Dollars.
10.21 Entire Agreement. This agreement sets forth the entire agreement and
understanding between the parties as to the subject matter of this Agreement and
merges all prior discussions between them, and neither of the parties shall be
bound by any conditions, definitions, warranties or representations with respect
to the subject matter of this Agreement, other than as expressly provided in
this Agreement or as duly set forth on or subsequent to the date hereof in
express writing and signed by a proper and duly authorized representative of the
party to be bound thereby. This written agreement embodies all of the
understanding and obligations between the parties with respect to the subject
matter hereof.
ARTICLE XI
GOVERNING LAW
11.01 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to its
conflicts of law principles.
ARTICLE XII
NOTICE PROVISIONS
12.0l Notices. All notices, consents, requests, demands mid other communications
required or permitted hereunder shall not be binding unless in writing and shall
be deemed to have been duly given when delivered by hand or by facsimile
transmission (transmission confirmed and hard copy mailed by first class mail)
or three (3) days after mailed, certified or registered mail with postage
prepaid
(a) If to Licensor, to:
KBF Pollution Management, Inc.
1 KBF Plaza
End of Jasper Street
Paterson, New Jersey, 07522
Attn: Lawrence M. Kreisler
Fax No.: 973-942-7700
or to such other person or address as the Licensor shall furnish to the Licensee
in writing by notice given in the manner set forth above.
(b) If to the Licensee, to:
Solucorp Industries, Ltd.
250 West Nyack Road
West Nyack, New York 10994
Attn: Peter Mantia
Fax No.: 914-623-4987
or to such other person or address as the Licensee shall furnish to the Licensor
in writing by notice given in the manner set forth above.
- --------------------------------------------------------------------------------
25
<PAGE>
12.02 Adequacy of Service. Notice given personally shall be deemed given at the
time of delivery. Notice sent by post in accord with this clause shall be deemed
given at the commencement of business on the second business day following its
posting. Notice sent by telefax or facsimile transmission in accord with this
clause shall be deemed given at the time of actual transmission and must be
accompanied by notice by post. Notice sent by post must either be sent certified
mail, return receipt requested, or Federal Express or other suitable licensed
overnight carrier.
ARTICLE XIII
DELIVERIES UPON EXECUTION
13.01 Deliveries. The following deliveries shall be made upon execution and,
unless waived by the appropriate party in writing or by consummating the
transactions contemplated hereby without them, are conditions precedent to
execution of this Agreement:
(a) Letters patent and applications for letters patent of the Licensor
(Attachment A);
(b) All relevant agreements as and between the Licensee and any Related
Company in the Grant Territory with whom the Licensee intends on
working or partnering with to conduct the remediation, recovery
and/or treatment activities contemplated herein;
(c) Samples, and precise quantity, flow, throughput and existing process
data for the anticipated first site;
(d) All unrestricted common stock of the Licensee due upon execution;
and.
(e) All other attachments to this Agreement as deemed reasonable
necessary by either party.
13.02 Further Assurances. Licensor and Licensee shall each deliver, or cause to
be delivered, all other documents reasonably required to be delivered by the
other party at the execution and shall take all other actions which are
reasonably necessary or appropriate in order to consummate fully the
transactions contemplated hereby.
13.03 Compliance With Payment Schedule. Concurrently upon execution of this
Agreement, Licensee shall pay all fees owing to Licensor in accord with the
terms of Article IV.
IN WITNESS WHEREOF, Licensor and Licensee have caused this Agreement to be duly
executed in their names by their proper officers thereunto duly authorized and
their corporate seals to be hereunto affixed on the date hereinafter set forth.
KBF POLLUTION MANAGEMENT, INC. SOLUCORP INDUSTRIES
By: /s/ Lawrence M. Kreisler By: /s/ Peter R. Mantia
---------------------------------- ------------------------------
Lawrence M. Kreisler Peter R. Mantia
President, Chief Executive Officer President
Date: March 20, 1998 Date: March 20, 1998
------------------------------ ------------------------------
[Corporate Seal] [Corporate Seal]
- --------------------------------------------------------------------------------
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements dated March 31, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 198,458
<SECURITIES> 0
<RECEIVABLES> 395,684
<ALLOWANCES> (39,381)
<INVENTORY> 11,072
<CURRENT-ASSETS> 1,171,986
<PP&E> 3,855,024
<DEPRECIATION> (2,102,237)
<TOTAL-ASSETS> 3,169,187
<CURRENT-LIABILITIES> 829,207
<BONDS> 0
0
0
<COMMON> 564
<OTHER-SE> 2,161,790
<TOTAL-LIABILITY-AND-EQUITY> 3,169,187
<SALES> 1,080,799
<TOTAL-REVENUES> 1,080,799
<CGS> 311,522
<TOTAL-COSTS> 311,522
<OTHER-EXPENSES> 232,531
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,358
<INCOME-PRETAX> 528,697
<INCOME-TAX> 1,033
<INCOME-CONTINUING> 527,664
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 527,664
<EPS-PRIMARY> .009
<EPS-DILUTED> .009
</TABLE>
