SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-KSB/A-1
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998.
Commission file number 33-20954
KBF POLLUTION MANAGEMENT, INC.
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(Exact name of registrant as specified in its charter)
New York 11-2687588
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(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1 JASPER STREET, PATERSON, NEW JERSEY 07522
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(Address of principal executive offices) (Zip Code)
(973) 942-7700
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(Registrant's telephone number including area code)
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Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, 0.00001 par value
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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 as
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days-.Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB (__).
State issuer's revenues for its most recent fiscal year: $3,078,567
Based upon the average closing bid and asked price of the Registrant's common
stock, the aggregate market value of voting stock held by non-affiliates of the
Registrant as of March 26, 1999 was $16,736,258.
The number of outstanding shares common stock as of March 26, 1999 was:
68,257,315
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
INTRODUCTION
KBF Pollution Management, Inc., a New York corporation (the "Company"),
was organized in 1984 under the name Kreisler Bags & Filtration, Inc., which
name was changed to KBF Pollution Management, Inc. in 1986. The Company is
engaged in the environmental services business as a wastewater metal recovery
facility specializing in the resource recovery of hazardous and non hazardous
metal bearing wastes for the sole purpose of recycling the product produced
(metal(s)) back into commerce. The Company operates an in-house laboratory
certified in New Jersey to support the recycling process and perform research
and development. The Company also provides compliance support service to its
customers.
In December 1997, the Company began relocation of its facilities from
North Lindenhurst, New York to Paterson, New Jersey (See "Description of
Property"). As a result of the loss of the Company's lease (See Item 2,
PROPERTIES, 1996 Form 10K), in the Fall of 1997, the Company notified the New
York State Department of Environmental Conservation ("NYSDEC") that the Company
was withdrawing the 6 NYCRR ss. 373 (Federal Part B) Permit application and
simultaneously commencing Closure. The Closure plan used by the company was
taken directly from the permit application. According to the NYSDEC, the permit
application was approved and therefore, closure must proceed according to the
approved Closure Plan. However, prior to commencing with the closure, the plan
had to be approved by the public through a public commenting period. Once this
process was complete, the Company negotiated an expedited Closure with the
State. Closure sampling commenced in August and was completed on November 2,
1998. The Company has received written acceptance of the Closure from NYSDEC and
therefore, the Closure is now complete. The Company incurred direct cost for
closure of approximately $50,000. It is not expected that any significant
additional cost will be incurred due to the closure of the Long Island plant. On
April 15, 1998, the Company received the requisite permits to allow it to
operate its waste recovery services from the New Jersey facility. Since April
15, 1998, all of the Company's waste recovery business has been located in its
New Jersey facility except for storm water.
On May 6, 1997, the Company formed three corporations, Gryphon
Industries, Inc., AMR, Inc., and American Metal Recovery Corp. pursuant to the
laws of the State of Nevada. In late 1998, AMR,INC., a wholly owned subsidiary
of the Company became active raising capital for an expansion project. As of the
date hereof, only Gryphon Industries, Inc remains inactive and no stock has been
issued. In the foreseeable future, the Company plans to utilize Gryphon for the
distribution and possible manufacturing of the reagents used in the Company's
technology. It is presently anticipated that Gryphon Industries, Inc. will be a
wholly owned subsidiary of the Company.
American Metals Recovery Corp. was capitalized by the Company in
conjunction with the transfer of the base of the Company's principle operations.
Most costs associated with this transfer were borne by the Company and
simultaneously exchanged for 100% of the outstanding stock of American Metals
Recovery Corp., thereby making American Metals Recovery Corp. a wholly owned
subsidiary of the Company.
On June 24, 1998, the Company formed KBF-LI, Inc., pursuant to the laws
of the State of New Jersey. This corporation was formed to take over all
operations including closure and processing of incoming material shipments
(certain wastewater shipments could be received at the facility without any
impact on the closure operation). The Company transferred the remaining assets
and improvements, relating to the Long Island location to KBF-LI in exchange for
100% of the issued and outstanding stock of KBF-LI, in accordance with a Board
of Directors resolution on July 30, 1998. The investment in KBF-LI (net worth)
totaled $86,759.The Company is presently negotiating with an unrelated third
party the sale of KBF-LI for $100,000 which should result in no significant loss
to the company.
During the fourth quarter of 1998 the company spent $47,070 as an
investment in AMR, Inc., in conjunction with AMR, Inc.'s capital raising
activities. These activities resulted in AMR, Inc.'s borrowing of
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$1,275,000 from twelve private lenders. The obligations provide for interest at
6.5% per annum and principal repayment, commencing when AMR, Inc. commences
operations. Principal repayment will be equal to 41% of AMR, Inc.'s net income
until repayment is completed. Any unpaid principal remaining twenty-four months
after the commencement of AMR, Inc.'s operations, is convertible into the
company's common stock (restricted), convertible at the market price on the date
of conversion, less a 25% lack of marketability discount. The lenders,
regardless of whether or not a stock conversion was effectuated, as a group,
will receive 26% of AMR Inc.'s profits, as long as the related equipment remains
in service. The related equipment also secures the obligation. AMR Inc. had no
revenue during 1998 and is presently constructing and installing the related
equipment and anticipates commencing operations during the first quarter of
2000.
INDUSTRY BACKGROUND
Most chemical wastes generated in the United States by industrial
processes have been handled on-site at the generators' facilities. Over the past
15 to 20 years, increased public awareness of the harmful effects of unregulated
disposal of chemical wastes on the environment and health has led to federal,
state and local regulation of chemical waste management activities. Some
statutes regulating the management of chemical wastes include the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), the Toxic Substances
Control Act ("TSCA") and the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("Superfund"), most are primarily administered by the
federal Environmental Protection Agency ("EPA"). This body of laws and
regulations by federal and state environmental regulatory agencies, impose
stringent standards for management of chemical wastes and provide penalties for
violators, as well as continuing liability by generators and others for past
disposal and environmental degradation. For example, under Superfund,
responsible parties may be subject to remedial costs at abandoned hazardous
waste sites and, in some instances, treble damages. As a result of the increased
liability exposure associated with chemical waste management activities and a
corresponding decrease in the availability of insurance and significant cost
increases in administering compliance and facility capital improvements, many
generators of chemical wastes have found it uneconomical to maintain their own
treatment and disposal facilities or to develop and maintain the technical
expertise necessary to assure regulatory compliance. Accordingly, many
generators have sought to have their chemical wastes managed by firms that
possess both the appropriate treatment and disposal facilities, as well as the
expertise and financial resources necessary to attain and maintain compliance
with applicable environmental regulatory requirements. At the same time,
governmental regulation has resulted in a reduction of the number of facilities
available for chemical waste treatment, storage or disposal, as many facilities
have been unable to meet the strict standards imposed by RCRA or other laws.
WASTE RECOVERY SERVICES
Since 1986, the Company has operated a wastewater metal recovery
facility. In May 1998, the US Patent Office issued to Lawrence M. Kreisler a
patent for `Selective Separation Technology' (`SST'). In November 1997 the
Company and Mr. Kreisler entered into a license agreement through which the
Company, is able to recover metals from metal-bearing wastewater, which metals
can then be recycled.
The wastewater is received at the facility, transported in drums and/or
by tanker loads. (See "Description of Business Waste Transport" and "Certain
Transactions"). The waste is then analyzed at the Company's own laboratory
facilities to determine compliance with the approved waste profile which the
Company keeps on file for each customer, and to verify proper waste
classification. Currently, all testing is done from the Company's New Jersey
facility.
Once testing is completed, utilizing the Patented "Selective Separation
Technology," the metals are separated from the solutions. (See "Description of
Business - Patents and Proprietary Information"). Once the recovery process is
complete, the remaining effluent is analyzed to assure that its contents fall
within allowable discharge limits. The effluent is then discharged into the
sewer pursuant to an approved discharge certificate. The recovered metals are
recycled back into commerce.
PROJECT ENSURE, CERTIFICATE OF RECOVERY Under federal law, the prime generator
of hazardous waste remains liable for the waste for as long as it continues to
exist. Disposal of the waste by incineration, in a
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landfill or a deep injection well does not eliminate the generator's liability
for cleanup costs if leakage or spillage of the waste occurs.
Utilization of the Company's Patented "SST", however, terminates the
generator's liability. KBF's process removes the waste from the environment,
thereby terminating the generator's liability and exempting the generator from
the Superfund Generation Tax. When required, the Company issues a certificate of
recovery to the customer. The certificate, in conjunction with shipment
documentation, has been accepted by regulators (various Federal and State
environmental regulators of the customers) that the customer's waste has been
recycled. The Company's certificate is not formally endorsed by the United
States Environmental Protection Agency. Since the waste ceases to exist, the
Company believes that there is no potential liability to the company.
METAL RECOVERY. During the Company's recovery process, the metals contained in
the waste are removed from solution. The metals, which include silver, copper,
nickel, lead, zinc and others, are processed into solid form and recycled, as
product, back into commerce.
LABORATORY ANALYSIS. Prior to the Company's relocation to Paterson, New Jersey,
all laboratory analysis was conducted in laboratories located in the Company's
New York facility. On April 15, 1998, the Company received all necessary permits
and certificates to allow it to commence waste recovery from its New Jersey
facility. The laboratory located in the Company's New Jersey facility, like its
predecessor in the New York facility is utilized to continually monitor and
analyze the ongoing waste recovery operations. The Company performs an initial
analysis on waste from new customers, and continually on each waste shipment
received from the customer. The Company also utilizes its laboratory facility to
conduct research and development. (See "Description of Business - Research and
Development and Patents and Proprietary Information")
When closing the operations at the New York facility, the Company also closed
the Laboratory and cancelled its New York State Department of Health
Certification.
WASTE TRANSPORT. The Company uses a waste transporter, Metal Recovery
Transportation Corp. ("MRTC") that is licensed in New York, Connecticut, Rhode
Island, New Jersey, Massachusetts and New Hampshire. Lawrence Kreisler,
President of the Company, is the president and sole shareholder of Metal
Recovery Transportation Corp. The Company has an oral agreement with Metal
Recovery Transportation Corp to handle the Company's transportation needs. There
is no formal agreement existing between the Company and Metals Recovery
Transportation Corp. Metals Recovery Transportation Corp. charges the Company an
hourly rate based on the type of equipment required and bills monthly for
services rendered. The Company paid MRTC $0, $59,914, and $235,097 in 1996,
1997, and 1998, respectively. The Company also utilizes other unaffiliated
licensed transport companies. (See "Certain Relationships and Related
Transactions.")
CONTRACTS; CUSTOMERS. The Company's waste recovery services are typically
provided pursuant to nonexclusive service agreements, based on the acceptance of
a potential customer's waste. The fees charged by the Company for its services
are determined by several factors, including but not limited to volume, type of
waste, location and method of shipment.
The Company currently has approximately 2000 active repeating customers for its
waste recovery services. For the years ended December 31, 1998 and December 31,
1997, no single customer accounted for 10% or more of the Company's total
revenues
EQUIPMENT SERVICES
The Company provides waste handling equipment to its customers. This
equipment is supplied on an "as requested" basis. The Company's service
department covers the systems, which have been previously sold, and any new
equipment to be sold. The inventory is used to supply the servicing of this
equipment under contractual service agreements (generally one year contracts)
with customers or on an "on call" basis. (See Manufacturing & Supplies)
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GOVERNMENTAL REGULATION; PERMITS
The waste management industry is subject to regulation by federal,
state and local authorities. The Company makes a continuing effort to anticipate
regulatory, political and legal developments that might affect its operations
but is not always able to do so. The Company cannot predict the extent to which
any legislation or regulation that may be enacted or enforced in the future may
affect its operations.
In particular, the regulatory process requires firms in the Company's industry
to obtain and retain numerous governmental permits to conduct various aspects of
their operations, any of which permits may be subject to revocation,
modification or denial. In addition, changing governmental policies and
regulations may affect the Company's ability to obtain the necessary permits on
a timely basis and to retain such permits. The inability or failure of the
Company to obtain and maintain all of the permits required for its operations
would have a material adverse effect on the Company's business.
The Company had applied for or obtained all necessary permits for its
current facility in New Jersey. All permits for the closed New York facility
have been cancelled.
SALES AND MARKETING
The Company primarily markets its waste recovery services to generators
of metal bearing hazardous and non-hazardous waste. Generators of these wastes
include but are not limited to, printed circuit board manufacturers, photo
offset printers, photographic developers, lithographers, photographers,
microfilm users, x-ray users (dentists, doctors, hospitals, podiatrists,
orthopedic surgeons, veterinarians, radiologists and industrial x-ray users),
relay manufacturers, oil companies, chemical companies, battery manufacturers,
anodizing operations, metal finishers, jewelry manufacturers and numerous other
waste generators.
The Company's sales and marketing efforts are performed by in-house
personnel, and unaffiliated independent outside "Waste Brokers." In-house sales
efforts consist of direct telephone and mail contact with potential customers
whose names are received through customer referrals, or are located through
review of trade journals and other industrial reference materials.
In March of 1998, the Company signed a limited exclusive worldwide
license agreement with EPS Environmental, Inc., dba Solucorp Industries, a
publicly traded company, trading on the NASDAC electronic bulletin board
("SLUP") for the utilization of the Company's Patented Selected Separation
Technology. The terms of the agreement called for an initial license fee of
$500,000 plus an additional license fee of $0.0005 per processed gallon of
wastewater. The initial licensing fee was to be paid in unrestricted, free
trading Solucorp stock. Solucorp represented that it had the ability to issue
free-trading shares and the License Agreement contained representations and
warranties to that effect. Instead, Solucorp issued restricted and unregistered
shares and had agreed in May 1998 to pay for and register the shares and to
repurchase, with cash, at least $100,000 worth of the License Fee shares per
month. (See the "Legal Proceedings: General Comments with Reference to
Solucorp"). Solucorp's stock price has fallen as low as $ 0.333 at the end of
December 1998. No additional payments under the agreement were to be in the form
of shares of Solucorp stock. The agreement also required royalty payments of 50%
of gross per gallon receipts, not to be less than $3,000,000 for the first two
years of the agreement. Pursuant to this agreement, all royalty payments due to
the Company from Solucorp for the years ended December 31, 1998 and 1999 were to
be due and payable in cash on December 31, 1999. Minimum royalty payments for
each year after 1999 were to be $2,000,000 per year payable at the end of each
year in which the payment accrues and was due in cash. The agreement, which had
a five-year term, with automatic five-year continuous renewal, was terminated on
September 23, 1998.
The Solucorp agreement had been slated for modification removing the
worldwide exclusivity and the minimum royalty payments due to Management's
discovery of certain facts. (See the "Legal Proceedings: General Comments with
Reference to Solucorp"). All royalties and fees that had accrued prior to
termination remain outstanding and payable in full. No modified agreement was
executed. (See the "Legal Proceedings: General Comments with Reference to
Solucorp" for the reasons underlying the intent to modify the agreement).
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MANUFACTURING AND SUPPLIES
The Company no longer manufactures equipment, however it does
distribute for resale other manufacturers equipment. This equipment is
ordered/manufactured on an "as requested" basis.
The Company has an outside service department, covering the systems,
which have been previously sold, and any new equipment to be sold. (See
Equipment Sales & Services.)
COMPETITION
Competition in the waste treatment industry is intense and is
characterized by continued change and improvement in technology. The market is
fragmented and, in the opinion of the Company, no company holds a dominant
position.
The Company believes that its waste recovery process, which results in
the recycling of virtually all of the metals present in the waste, is unique,
and that the same or similar technology is not currently utilized by any
competitor. On May 19, 1998, the United States Patent and Trademark Office
issued a Patent for the "Selective Separation Technology" utilized by the
Company (patent number 5,735,125). (See "Description of Business - Patents and
Proprietary Information"). In December 1998, the United States Patent and
Trademark Office issued a "Notice of Allowability" on a second patent for the
Company's "Selective Separation Technology" ("SST"). The new patent essentially
broadens the coverage of the principal SST patent issued in May 1998. The
Company anticipates receipt of the new patent in the second quarter 1999.
The Company has filed for additional patents on several new resource
recovery technologies, three of which have been commercialized and are presently
available for use. These three technologies are SST-LiquidOre, SST-Tellus and
SST-Toxicure. Additional technologies and improvements for which patents are
currently pending remain in development.
The Company's competitors utilize a variety of methods for the
treatment and disposal of hazardous and non-hazardous waste, including deep well
injection, landfills, incineration and limited recovery of metals. The Company
believes that its recovery process provides a superior alternative to these
other methods. Many of the Company's competitors, however, are larger and more
established and have substantially greater financial and other resources than
the Company. The Company may compete for the same customers as these better
financed companies.
RESEARCH AND DEVELOPMENT
Research and Development of the Patented "Selective Separation
Technology" occurred over the years, as a daily on-going process. Only those
costs directly allocated to Research and Development are represented. For the
years ending December 31, 1998 and December 31, 1997, the Company did not incur
any costs directly related to research and development.
PATENTS AND PROPRIETARY INFORMATION
In the past, the Company had utilized proprietary know-how and
techniques in its waste recovery operations. In June 1995, Lawrence M. Kreisler,
the Company's President submitted a patent application on the current Selective
Separation Technology that was initially developed by Mr. Kreisler prior to the
Company's formation.
On May 19, 1998, the United States Patent and Trademark Office issued a
Patent for the Selective Separation Technology utilized by the Company (patent
number 5,735,125). In December 1998, the United States Patent and Trademark
Office issued a "Notice of Allowability" on a second patent for the Company's
"Selective Separation Technology" ("SST"). The new patent essentially broadens
the coverage of the principal SST patent issued in May 1998. The Company
anticipates receipt of the new patent in the second quarter 1999.
The Company has filed for additional patents on several new resource
recovery technologies, three of which have been commercialized and are presently
available for use. These three technologies are SST-LiquidOre, SST-Tellus and
SST-Toxicure. Additional technologies and improvements for which patents are
currently pending remain in development.
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Pursuant to a license agreement between Mr. Kreisler and the Company,
executed in November 1997 upon ratification by the shareholders of the Company,
the Company is able to utilize the Selective Separation Technology in its
operations, as well as other related technologies for which patents are
currently pending. In accordance with Schedule B of the License Agreement with
Mr. Kreisler, the conditions upon which royalty payments begin to accrue
(gallons processed in excess of 1,500,000 per annum), have not yet been attained
by the Company. Accordingly, no royalty payments have been made or accrued. The
Company anticipates the relevant conditions to be satisfied by the Company in
the second quarter 1999 (see Note 8 of the Notes to Financial Statements). The
license agreement has a minimum 15 year minimum term, and then subsequent 5 year
evergreen terms. The license agreement can be terminated after the minimum term
by either party, which would then fix the remaining life at five years
therefrom.
The Company is the owner of a United States patent issued in 1988
covering the design and function of its waste volume reduction system. The
Company has ceased manufacturing such systems, but continues to service those
systems previously sold. (See "Description of Business - Manufacturing and
Supplies.").
LIABILITY INSURANCE
The Company maintains pollution legal liability insurance in the amount
of $1,000,000 per incident and $2,000,000 in total covering the premises, and
vehicle liability insurance in the amount of $5,000,000. To date, the Company
has not experienced any material liability claims.
EMPLOYEES
The Company currently has 29 full-time employees. In addition to its
three executive officers, the Company employs two chemists and a chemical
technician (laboratory personnel), a recovery manager, nine recovery employees,
three facility maintenance technicians, six office personnel, four salesperson.
The Company will hire additional personnel when necessary. None of the Company's
employees is represented by a union. The Company considers the relations with
its employees to be satisfactory.
ITEM 2. SELECTED FINANCIAL DATA
The selected financial data pertaining to the financial condition and
operations of the Company for the years ended December 31, 1998 and 1997.has
been obtained from the Companies financial statements. The financial statements
for the year ended December 31, 1998 and December 31, 1997 were audited by
Irving Handel & CO., Independent Auditor. The information set forth below should
be read in conjunction with such financial statements and the notes thereto.
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Year Ended December 31.
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1998 1997
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SUMMARY OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE DATA)
Net Revenues 3,079 1,927
Net Income 386 (208)
EARNINGS PER SHARE 0.01 (0.01)
SUMMARY OF
BALANCE SHEET
Current Assets 921 762
Current Liabilities 688 631
Working Capital 233 131
Total Assets 3,486 1,949
Total Long-Term Debt 160 190
Total Liabilities 848 821
Stockholders' equity 2,637 1,128
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ITEM 3. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with the
Company's audited financial statements and notes thereto set forth elsewhere in
this annual report.
Results of operations for the year Ending
December 31, 1998 as Compared to the Year Ended
December 31, 1997
Total revenues for the year ended December 31, 1998 increased to $3,078,567 as
compared to $1,926,895 for the same period in 1997, an increase of 60%. The
Company attributes the increase to a rise in sales volume, along with the
collection (in restricted common stock - see Notes to Financial Statements - #3)
of the licensing fee (of $500,000) and royalty income accrued ($350,820) in 1998
(see Footnotes 7 & 9 ).
The revenues from the licensing fee and royalties were derived from the
terminated (see legal proceedings) license agreement with Solucorp and accounted
for 28% of the 1998 revenue. Although there were potential problems relating to
the Solucorp agreement in May of 1998, the company continued to honor the
agreement and incurred expenses against which the minimum royalties were
designed to be matched. The market value of the restricted common stock
received, as of December 31, 1998, was $86,591. A permanent decline of $373,430
is reflected as a loss on the statement of Income. Solucorp repurchased stock
for cash in the amount of $39,979. The company received no other cash payments
from Solucorp. Absent the Solucorp revenues, the 1998 revenue was $2,226,747 as
compared to $1,926,892 for the same period in 1997, for an adjusted increase of
16%. Management expects this trend to continue due to increased market
penetration, resulting from both internal and external sales efforts, and,
expansion of SST processing capabilities.
Despite the increase in sales volume, accounts receivable has remained
relatively constant. Current trade accounts receivable are as follows:
0-30 days $ 233,285
30-45 days 110,535
45-60 days 18,725
60-90 days 12,425
90-120 days 5,065
120 + days 72,559
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$ 452,592
An allowance in the amount of $31,183 has been provided against the foregoing
receivables, which are
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presented on the balance sheet net of said allowance. Based upon the company's
collection history, management believes this allowance is adequate.
Trade accounts receivable collected in cash subsequently through March 26,1999
was $431,450.
Long-term accounts receivable (other receivable) represents minimum royalties
due from Solucorp (see Footnotes 3,7,9, & 18) relating to the licensing
agreement terminated in 1998. These amounts are due December 31, 1999 and are
presented at present value, net of an allowance for uncollectability as follows:
Minimum Royalty $ 750,000
Discount to Present Value (107,753)
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Present Value of Minimum Royalty 642,247
Interest Earned through December 31, 1998 29,697
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Total Other Receivable & Revenue
Before Allowance 671,944
Allowance for Doubtful Accounts (321,124)
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Total Other Receivable Presented
And Revenue Reflected Herein $ 350,820
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Cost of sales for the year ended December 31, 1998 decreased to 46% of revenues
from 66% of revenues for the same period in 1997. This decrease is the result of
the increase in total revenues mentioned above.
General and administrative expenses increased by 53% to $1,221,375 for the year
ended December 31, 1998 from $806,027 for 1997. This increase is due to the
continued operation of two facilities, legal fees to register as a reporting
company (approx. $15,000) and litigation fees (approx. $65,000) regarding
Solucorp. In addition, there were costs (approx. $50,000) related to the closure
of the New York facility under New York State Department of Environmental
Conservation regulations. Legal fees associated with the Solucorp license
litigation will continue to occur and management estimates that the company will
incur $100,000 of litigation related expenses in 1999.
The Company incurred a net profit of $386,609 for the year ended 1998, a 286%
increase from the net loss of -$207,635 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 will provide adequate cash flow to meet current obligations.
The Company has working capital of $232,722 at December 31, 1998 as compared to
$131,736 at December 31, 1997. Further, the Company had cash flow of $75,570 for
the year ended December 31, 1998 as compared to cash flow of $205,469 for the
year ended December 31, 1997.
The decrease in cash flow is due to the increase in capital expenditures
incurred to relocate to its new facility in New Jersey, the operation of the
Long Island facility at a loss, costs associated with the New York State
closure, and the legal expenses mentioned above. In addition, the Company
incurred additional expenditures as a result of good faith reliance on the
Solucorp agreement and contract damages also associated with this agreement.
With the exception of the legal fees related to the Solucorp suit, these costs
should conclude in the foreseeable future. As a result, the Company expects
improved cash flow in future periods.
The Company is exploring areas to raise capital, which include both debt and
equity sources. In that regard, as of the date of this report $1,000,000 of debt
financing has been concluded.
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THE SOLUCORP AGREEMENT
In March of 1998, the Company signed a limited exclusive worldwide license
agreement with EPS Environmental, Inc., dba Solucorp Industries, a publicly
traded company, trading on the NASDAC electronic bulletin board ("SLUP") for the
marketing and utilization of the Company's Patented Selected Separation
Technology. This License Agreement was terminated on September 23, 1998. (See
the "Legal Proceedings: General Comments with Reference to Solucorp").
LONG ISLAND FACILITY
On June 24, 1998, the Company formed KBF-LI, Inc., pursuant to the laws of the
State of New Jersey. This corporation was formed to take over all operations
including closure and processing of incoming material shipments (certain
wastewater shipments could be received at the facility without any impact on the
closure operation). The Company has transferred the remaining assets and
improvements, relating to the Long Island location to KBF-LI in exchange for
100% of the issued and outstanding stock of KBF-LI, in accordance with a Board
of Directors resolution on July 30, 1998. The Company is a party to a Letter of
intent to sell the operation.
The Company received acceptance from New York State Department of Environmental
Conservation of the closure of the Long Island Facility. There will be no
further additional closure costs, however management believes that there may be
additional costs related to the Long Island facility but that these costs will
not be material. In addition, the Long Island operation is no longer subject to
any lease provisions or obligations. KBF's operation facilitated the closure of
the facility, which is to the benefit of the landlord, therefore no rent was
being charged. There has been no lease provision between the parties since
December 1997.
The following is a schedule of the anticipated cost savings associated with the
Companies move to Paterson New Jersey.
<TABLE>
<CAPTION>
Expense Savings Comments
- ------- ------- --------
<S> <C>
Office and Facility Labor $60,000 Cheaper Hourly rates
Rent $ 0,00 Same monthly expense for twice the space
Utilities $25,000 Cheaper Electric Rates and Incentives
Real-estate Tax $30,000 Cheaper Tax Rate
Telephones $15,000 Cheaper rates
Sewer Usage charge $25,000 Built into real estate tax.
</TABLE>
Significantly all of the foregoing savings have been realized since the
Company's move to New Jersey during 1998. Comparisons to periods when the
Company was paying significantly reduced rents, under temporary agreements,
along with costs associated with the Company's increased capacity, through
equipment purchases, increased sales efforts, increased management, and other
costs expended to grow the company, make these savings difficult to detect.
Management believes that the Company will continue to derive cost saving
benefits relating to this move.
CERTAIN EVENTS
The Company filed suit against Solucorp Industries, Ltd. (Solucorp) on October
7, 1998 for the Company's contract and fraud damages arising out of its
now-terminated License Agreement with Solucorp. The Company is represented by
the national law firm of Greenberg Traurig in this matter (See Item #2: Legal
Proceedings: General Comments with Reference to Solucorp).
10
<PAGE>
Solucorp holds itself out to be an environmental service organization devoted to
the development and marketing of innovative environmental technologies. The
Company was introduced to Solucorp and its consultant, Joseph Kemprowski, by the
Company's former investment banker, M.H. Meyerson & Co., Inc. in December 1997.
The Company had no affiliation with Solucorp, or any of its affiliates,
preceding this introduction. This agreement remains the only affiliation the
Company had with Solucorp. At this time, Solucorp and Kemprowski claimed to have
executed contracts with the Chinese government for the remediation of
contaminated sites in mainland China from which revenues would be made.
Furthermore, Solucorp and Kemprowski made it clear that they had an extensive,
global sales and marketing infrastructure. Management performed due diligence on
the basis of publicly available information, Solucorp's filings and press
releases, Meyerson's analyst's reports on Solucorp, and numerous meetings with
Solucorp executives, which included significant technical discussions covering a
number of sites. In addition, there were discussions with Solucorp's Chinese
marketing affiliates. There were other limited documents that Solucorp and
Kemprowski disclosed. The Company was precluded from reviewing the executed
Chinese contracts due to what Solucorp and Kemprowski represented to be as
confidentiality agreements. Principals of M.H. Meyerson & Co., Inc., however,
represented that they reviewed the pertinent agreements and advised the Company
that the agreements had in fact been executed. After several months of
negotiation, and with the recommendation of Meyerson, the Company and Solucorp
entered into an exclusive worldwide license for the marketing and sale of the
Company's patented SST process.
The agreement called for a license fee of $500,000 due upon execution on March
20, 1998. The license fee was to be paid for with the issuance of 190,550 shares
of free-trading, unrestricted Solucorp stock due upon execution. Solucorp
represented that it had the ability to issue free-trading shares prior to
execution and the License Agreement contained representations and warranties to
that effect. Instead, in the end of May 1998, the Company received 190,550
shares of restricted, unregistered stock - after having been given assurances
that Solucorp and Kemprowski would register, repurchase and assist with the
liquidation of the license fee stock at a rate of at least $100,000 per month.
The shares were issued after the Securities and Exchange Commission had
suspended Solucorp's stock. Despite countless requests and demands, Solucorp and
Kemprowski never attempted to register the license fee stock, and they
repurchased less than $50,000 worth of shares between March and September 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During 1998, Lawrence M. Kreisler, a director and officer of the Company,
reported six transactions on a late Form 4 filing. During 1998, Kathi A.
Kreisler, a director and officer of the Company, reported five transactions on a
late Form 4 filing. During 1998, Kevin E. Kreisler, a director and officer of
the Company, reported three transactions on a late Form 4 filing. During 1998,
Stephen Lewen, a director of the Company, reported one transaction on a late
Form 4 filing.
YEAR 2000
The Company's State of Readiness
The Company's information technology systems are presently year 2000 compliant.
All internal programs were written by Company's management with the year 2000
issue incorporated into the initial writing of the programs. The programs have
been tested and management is satisfied that they are working properly.
Year 2000 compliance of the Company's non-information technology system has been
addressed and management feels that systems in place are year 2000 compliant.
11
<PAGE>
Management has received verbal confirmation from many of the third parties that
provide services or products to the Company, and have been assured that they are
year 2000 compliant. The Company is presently developing questionnaires to be
answered by the third parties regarding their level of year 2000 compliance so
that management has written confirmation as to their status before the year is
complete.
The Costs to Address the Company's Year 2000 Issues
Management believes the estimated costs in connection with the third party
compliance will not be significant.
The Risks of the Company's Year 2000 Issues
Given the nature of the business, management does not believe there is any
significant risk and will not be any negative impact on their operations from
any source.
The Company's Contingent Plans
Due to management's comfort with internal control over the information
technology and non-information technology, the Company does not have a
contingency plan. Regarding third parties, management believes any potential
problems or losses arising from the unknown should be minimal.
Officer Employment Contracts
The Contracts signed in November of 1997, (see Item 6, Employment Agreements)
call for combined annual salaries for Lawrence M. Kreisler and Kathi A. Kreisler
of $245,000. This amount will exceed the compensation presented in the 1997
financial statements by $89,000, mostly due to Kathi A. Kreisler's payment of
salary in stock options in 1997. The Company believes that it will be able to
meet this increase with cash payments rather than options in the foreseeable
future.
ITEM 4. DESCRIPTION OF PROPERTY
On December 1, 1997, the Company began the relocation of its corporate
offices, laboratory and main operational facility to Paterson, New Jersey. The
new lease terms, which include a purchase option, are for $1,218,600 base rent
to be paid monthly over 6 years commencing December 1997. The Company occupies
the entire building of 60,000 square feet of space. Currently, all of the
Company's waste recovery operations are conducted from the New Jersey facility.
The Company's New York facility was located in a leased building in
North Lindenhurst, New York. The Company occupied approximately 30,000 square
feet of space, of the 68,000 square foot building. The Company occupied the
building until November 19, 1998 and closure of the facility was accepted by New
York State Department of Environmental Conservation in February 1999.
ITEM 5. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of Dec 31, 1998, certain information
concerning stock ownership by all persons known by the company to own
beneficially 5% or more of the outstanding shares of the Company's Common Stock,
each director, and all officers and directors of the Company as a group.
12
<PAGE>
NAME
AND ADDRESS OF AMOUNT AND PERCENTAGE
BENEFICIAL NATURE OF OF
HOLDER OR IDENTITY OF BENEFICIAL OUTSTANDING
GROUP OWNERSHIP STOCK
- --------------------------------------------------------------------------------
KATHI KREISLER 15,971,953 21.35%
One East Park Drive (1) (2)
Paterson, NJ 07504
LAWRENCE KREISLER 15,936,970 21.68%
One East Park Drive (1) (3)
Paterson, NJ 07504
STEVEN LEWEN 2,302,258 3.54%
10 Cabriolet Lane (4)
Melville, NY 11747
KEVIN KREISLER 1,255,000 1.92%
One East Park Drive (5)
Paterson, NJ 07504
JOSEPH J. CASUCCIO, JR., CPA 1,608,656 2.48%
7 North Equestrian Court (6)
Hauppauge, New York 11789
FREDERICK EISENBUD 409,013 0.64%
7 Bradshaw Lane
Fort Salonga, NY 11768
ANTHONY LETERI 433,000 0.68%
18 Allenby Drive
Northport, NY 11768
ALL OFFICERS & DIRECTORS 37,916,750 52.30%
as a group seven persons.
KREISLER FAMILY AS A GROUP 34,018,823 45.94%
(7)
1) Mr. and Ms. Kreisler each disclaim beneficial ownership of the shares of
Common Stock owned by the other.
2) Includes 10,759,270 shares of exercisable options for Common Stock.
3) Includes 9,474,278 shares of exercisable options for Common Stock.
4) Includes 1,002,258 shares of exercisable options for Common Stock.
5) Includes 1,250,000 shares of exercisable options for Common Stock.
6) Includes 728,550 shares of exercisable options for Common Stock.
7) Includes stock and options held by Lawrence M. Kreisler, Kathi A. Kreisler,
Kevin E. Kreisler and Scott C. Kreisler.
13
<PAGE>
ITEM 6. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
IDENTIFICATION OF DIRECTORS.
<TABLE>
<CAPTION>
CAPACITIES
PERIOD SERVED IN WHICH CURRENTLY
NAME AGE AS DIRECTOR SERVING
---- --- ----------- -------
<S> <C> <C> <C>
Lawrence Kreisler 52 Since 1984 Chairman
President
Kathi Kreisler 48 Since 1984 Vice President
Secretary, Treasurer
Director
Kevin Kreisler 26 Since July 1998 Vice President
Director
Frederick Eisenbud 52 Since January 1998 Director
Stephen Lewen 46 Since January 1998 Director
Joseph J. Casuccio, Jr., CPA 47 Since January 1998 Chief Financial Officer
Vice President
Director
Anthony Leteri 48 January to December Director
1998
</TABLE>
Lawrence M. Kreisler, President of the Company, is a Co-founder of the
Company and has been its Chairman of the Board and a Director since March 1984.
Mr. Kreisler invented the technology with which the Company transacts its
principal businesses (See "Patents and Proprietary Information"). He served as
Vice President, Secretary and Treasurer from March 1984 through December 1994.
In January 1995, Mr. Kreisler accepted the Board nomination to serve as
President of the Company. From 1973 to 1984 Mr. Kreisler managed pollution
treatment systems for several companies in the metal finishing industries. Mr.
Kreisler is the husband of Kathi Kreisler, Vice President, Secretary, Treasurer
and a director of the Company. He is the father of Kevin Kreisler, Vice
President and a director of the Company.
Kathi Kreisler is a Co-founder of the Company and served as its
President from 1984 through December 1994. She has been a Director since March
1984. In January 1995, Ms. Kreisler became Vice President, Secretary and
Treasurer of the Company. From 1979 to 1984, Ms. Kreisler was a principal in
Kreisler Bags (subsequently incorporated as Kreisler Bags and Filtration, Inc.,
which name was subsequently changed to KBF Pollution Management, Inc.). Ms.
Kreisler is the wife of Lawrence Kreisler, President and Chairman of the Board
of the Company. She is the mother of Kevin Kreisler, a Vice President and a
director of the Company.
Kevin Kreisler has been Vice President since January 1998 and director
since July 1998. Mr. Kreisler has continuously worked for the Company in various
part and full time capacities since 1990. He has also worked as a law clerk for
several law firms and clinics during his tenure at law school (September 1995 to
December 1997). Mr. Kreisler is a graduate of Rutgers University College of
Engineering (B.S., Civil and Environmental Engineering, 1994), Rutgers
University Graduate School of Management (M.B.A., 1995), and Rutgers University
School of Law (J.D., 1997). He is the son of Lawrence Kreisler, President and
Chairman of the Board of the Company, and Kathi Kreisler, a Vice President,
Secretary, Treasurer and a director of the Company.
Robert Misa became a Director of the Company in January 1991 and Vice
President in 1994. Mr. Misa has been the owner of Caro-Bob Plumbing Supply, Inc.
since 1974. Prior to that he owned and was engaged in various other plumbing
supply businesses. Mr. Misa resigned from the Board in February 1998. He was
succeeded by Kevin Kreisler.
14
<PAGE>
Frederick Eisenbud has been a director of the Company since January
1998. Since April 1998, Mr. Eisenbud has been the sole proprietor of the Law
Office of Frederick Eisenbud in Hauppaugue, New York, which law office currently
represents the Company in certain environmental matters. From 1990 until April
1998, Mr. Eisenbud was a partner of Cahn, Wishod & Lamb, L.L.P., a law firm
specializing in environmental law and civil litigation, which firm represented
the Company. In April 1998, Mr. Eisenbud resigned from that law firm. Cahn,
Wishod & Lamb, L.L.P. no longer represents the Company. Since March 1998, Mr.
Eisenbud has been President of Metal Recovery Marketing, L.L.P., a firm which
seeks to market the Company's technology to environmental consultants (See
"Certain Relationships and Related Transactions.") Mr. Eisenbud is a graduate of
New York University and Hofstra Law School.
Dr. Stephen Lewen has served as a director of the Company since
February 1998. Since 1982, Dr. Lewen has been a physician, and a member of
Suffolk Opthamology Associates, P.C. in Bayshore, New York. Dr. Lewen is a
graduate of Cornell University, Columbia
University and Chicago Medical School.
Joseph J. Casuccio, Jr., CPA has served as a Chief Financial Officer of
the Company since July 1998, and as Vice-President and director since January
1998. Since 1985, Mr. Casuccio has been a partner at Werblin, Casuccio & Moses,
a public accounting firm, which provides accounting services to the Company (See
"Certain Relationships and Related Transactions"). Mr. Casuccio is a graduate of
Suffolk County Community College and Long Island University.
Anthony Leteri had served as a director of the Company for the 1998
term only, January through December. Mr. Leteri has been president of Friendly
Carting/USA Recycling, a private sanitation and recycling company, since 1980.
Mr. Leteri attended the City University of New York at Queensborough and the
State University of New York at Stony Brook.
The Directors of the Company are elected at the annual meeting of
stockholders, and serve until the next annual meeting of stockholders. The
Company's executive officers are appointed by and serve at the discretion of the
Board of Directors, subject to the terms and conditions of the employment
agreements described below. There are no arrangements or understandings between
any of the Directors of the Company and any other person pursuant to which such
person was selected as a Director of the Company.
At the December 23, 1997 Annual Shareholders meeting the following
persons were elected to the Board of Directors for the year 1998: Lawrence M.
Kreisler, Kathi Kreisler, Robert W. Misa, Jr., Joseph J. Casuccio, Jr., CPA and
Anthony Leteri. In January 1998, the Board of Directors approved Frederick
Eisenbud to the Board and in February 1998, the Board of Directors further
approved Steven Lewen to the Board. In July 1998, the Board of Directors
approved Kevin Kreisler to succeed Robert Misa for the remainder of his term.
Mr. Misa resigned from the Board in February 1998.
IDENTIFICATION OF EXECUTIVE OFFICERS.
<TABLE>
<CAPTION>
Name Age Current Office Held
- ---- --- -------------------
<S> <C> <C>
Lawrence Kreisler 52 Chairman, President
Kathi Kreisler 48 Vice President, Secretary, Treasurer
Kevin Kreisler 26 Vice President
Joseph J. Casuccio Jr. 47 Vice President, Chief Financial Officer
</TABLE>
15
<PAGE>
Both Kathi Kreisler and Lawrence Kreisler entered into employment
agreements with the Company on November 7, 1997 (collectively, the "Employment
Agreements"). Pursuant to the Employment Agreements, both Ms. Kreisler and Mr.
Kreisler shall serve the Company in their individual capacities for a five year
period; however, the Employment Agreements shall be extended automatically each
day for an additional day so the remaining term of the Employment Agreements
will continue to be five (5) years at all times. Upon written notice by either
party, the "evergreen" provision of the Employment Agreements will cease, and
the final five- (5) year period will commence on the date of such written
notice. (See "Executive Compensation - Employment Arrangement"). As of December
31,1998, the Company has not entered into any employment agreements with Joseph
J. Casuccio, Jr., CPA or Kevin Kreisler. Agreements are presently being
negotiated.
Each person selected to become an executive officer has consented to
act as such and there are no arrangements or understandings between the
executive officers or any other persons pursuant to which he or she was or is to
be selected as an officer.
For a description of the backgrounds of Ms. Kreisler, Mr. Lawrence
Kreisler, Mr. Kevin Kreisler and Mr. Casuccio, see Identification of Directors.
The information in the above tables is based in part upon information
furnished by the respective persons listed above, and, in part, upon records of
the Company.
ITEM 7. EXECUTIVE COMPENSATION
The following table provides certain summary information concerning the
compensation paid or accrued by the Company during the fiscal year ended
December 31, 1998 to or on behalf of the Company's President and the one other
named executive officer of the Company (hereinafter referred to as the "named
executive officers") for services rendered in all capacities to the Company
whose total aggregate salary and bonus exceeded $100,000:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
------------------- ------------
Name and Principal Other Annual Awards, All Other
Position Year Salary ($) Bonus ($) Compensation Options/SARs(#) Compensation
- -------- ---- ---------- --------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kathi A. Kreisler 1998 $ 65,267 -- -- 7,500,000 --
Vice President
1997 $ 3,500 -- See Below 500,000 --
1996 $ 8,325 See Below --
Lawrence Kreisler, 1998 $ 167,791 -- -- 5,400,000 --
President
1997 $ 152,503 -- See Below -- --
1996 $ 195,474 -- See Below -- --
James Aiello, 1997 -- -- $ 20,000 -- --
Acting CEO
1996 -- -- $ 24,000 -- --
Kevin Kreisler 1998 $ 30,000 -- See Below -- --
Vice President
</TABLE>
There were new stock options granted to the named executive officers.
In January 1998, Kathi Kreisler was issued 7,500,000 options for past services
rendered and unpaid salary (See "Employment
16
<PAGE>
Arrangements") totaling $600,000. Lawrence Kreisler was issued 400,000 options
for past services rendered and unpaid salary totaling $32,000. The options were
granted at an exercise price of $0.40 per share, which was equal to the market
value on the date the options were granted. Therefore, since the company has
elected to utilize APB 25 to account for employee stock options, these option
grants did not result in any compensation expense being recorded in the
company's financial statements. Certain stock options granted to the executive
officers were revised and reallocated. (See "Stock Options" for further
information.)
The following table sets forth information concerning option exercises
and option holdings for the fiscal year ended December 31, 1998 with respect to
the Company's named executive officers. No stock appreciation rights were
exercised or outstanding during such fiscal year.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value
Realized
Market
price at FY Value of Unexercised
Share End Number of Securities in-the-Money Options at
on exercise Exercise Underlying Unexercised FY-End Market Price of
acquired less Options at Fiscal Year-End shares at FY-End ($)
on exercise exercise (#) less exercise price
Name (#) price) Exercisable Unexercisable Exercisable Unexercisable
- ---- --- ------ ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Kathi Kreisler 0 -- 10,759,270 $ 321,615 N/A
Lawrence Kreisler 0 -- 9,474,278 $ 403,115 N/A
Kevin E. Kreisler 0 -- 1,250,000 $ 125,000 N/A
Joseph Casuccio 728,550 $ 70,699 N/ A
</TABLE>
In 1997 the Company issued 1,500,000 incentive options to certain
employees exercisable at $0.10 per share for a period of the (10) years from the
date of grant. On January 2, 1998, the Company issued Kathi Kreisler 7,500,000
million incentive options for past services rendered. These options are
exercisable at $0.40 per share for a period of ten (10) years from the date of
grant. (See "Employment Arrangements"). On January 2, 1998, the Company issued
Lawrence Kreisler 400,000 incentive options for past services rendered. These
options are exercisable at $0.40 per share for a period of ten (10) years from
the date of grant. (See "Employment Arrangements"). No stock appreciation rights
were exercised during such fiscal year.
EMPLOYMENT ARRANGEMENTS
The Company has entered into an employment agreement with Lawrence M.
Kreisler, as the Chairman of the Board and President of the Company, on November
7, 1997 (the "Lawrence Kreisler Employment Agreement"). The Lawrence Kreisler
Employment Agreement provides for a five-year term and shall be extended
automatically each day for an additional day so that the remaining term of this
agreement will continue to be five years at all times. Either party may by
written notice, fix the term of the Lawrence Kreisler Employment Agreement at
five years without additional extension and would then end on a date five years
from the date of notice. Pursuant to the Lawrence Kreisler Employment Agreement,
Mr. Kreisler's annual base salary shall be $165,000, with annual cost of living
adjustments. Mr. Kreisler is entitled to receive an annual bonus equal to 6% of
the Company's annual net income before taxes,
17
<PAGE>
reimbursement of business related expenses, use of a Company automobile and
participation in any employee benefits provided to all employees of the Company.
The Company shall contribute 6% of the base weekly salary to Lawrence Kreisler's
401(k) savings plan.
Lawrence Kreisler's employment may be terminated by the Company at any
time for cause (as defined in the Lawrence Kreisler Employment Agreement) and
his employment may be terminated at any time by the mutual consent of the Board
of Directors and Mr. Kreisler. If Mr. Kreisler is terminated by the Company for
cause, the Company is obligated to pay him all amounts due under the Lawrence
Kreisler Employment Agreement, which have accrued but are unpaid as of the date
of termination. The Lawrence Kreisler Employment Agreement also includes
non-competition provisions which prevent Mr. Kreisler, during the term of the
agreement, from participating, directly or indirectly, in the ownership,
control, management or employ of any business entities other than the Company
without the prior written consent of the Board of Directors.
The Company entered into an employment agreement with Kathi Kreisler,
as Vice President and Secretary Treasurer, on November 7, 1997 (the "Kathi
Kreisler Employment Agreement"), which provides for a five-year term from the
date signed and shall be extended automatically each day for an additional day
so that the remaining term of this agreement will continue to be five years at
all times. Either party may by written notice fix the term of this Agreement at
five years without additional extension and would then end on a date five years
from the date of notice. Pursuant to this agreement, Ms. Kreisler shall receive
an annual base salary of $80,000, with cost of living adjustments. Ms. Kreisler
is entitled to receive an annual bonus equal to 4% of the Company's annual net
income before taxes, reimbursement of business related expenses, use of a
Company automobile and participation in any employee benefits provided to all
employees of the Company. The Company shall contribute 6% of the base weekly
salary to Ms. Kreisler's 401(k) savings plan.
Kathi Kreisler's employment may be terminated by the Company at any
time for cause (as defined in the Kathi Kreisler Employment Agreement) and her
employment may be terminated at any time by the mutual consent of the Board of
Directors and Ms. Kreisler. If Ms. Kreisler is terminated by the Company for
cause, the Company is obligated to pay her all amounts due under the Kathi
Kreisler Employment Agreement, which have accrued but are unpaid as of the date
of termination. The Kathi Kreisler Employment Agreement also includes
non-competition provisions, which prevent Ms. Kreisler, during the term of the
agreement, from participating, directly or indirectly, in the ownership,
control, management or employ of any business entities other than the Company
without the prior written consent of the Board of Directors.
Kathi Kreisler voluntarily lowered the amount of her 1997 salary to
$3,500, her 1996 salary to $8,325.00, her 1995 salary to $2,153, her 1994 salary
to $20,000 and deferred all 401k payments. In January 1998, the Company issued
Ms. Kreisler 7,500,000 stock options, each convertible to one share of common
stock at $0.40 per share for a period of ten (10) years from the date of
issuance for past services rendered.
In January 1998, the Company issued 400,000 stock options to Lawrence
Kreisler for past services rendered as a result of voluntarily reducing his
salary. Each of these stock options is convertible into one share of common
stock at $0.40 per share, for a period of ten (10) years from the date of
issuance.
18
<PAGE>
STOCK OPTIONS.
In October 1992, the Company issued stock options to purchase an
aggregate of 690,000 shares of the Company's Common Stock at $0.125 per share to
the following individuals. The options are exercisable at any time, during the
period December 31, 1992 through December 31, 1997. In December 1997, the Board
of Directors voted to extend the exercisable time for another five years to
December 31, 2002.
Name Number of Shares
---- ----------------
Kathi Kreisler 172,500
Larry Kreisler 172,500
Arthur Holland 86,250
Robert Misa 86,250
Joseph Casuccio 86,250
David Halperin 86,250
At the Annual Shareholders Meeting held on November 4, 1996, 15 million
options previously granted to Lawrence M. Kreisler and Kathi A. Kreisler were
revised and reallocated in accordance with the following table and are
immediately exercisable at $.10 per share for a period of 10 years, ending
November 4, 2006.
Name Number of Shares
---- ----------------
Larry Kreisler 4,091,778
Robert Misa 1,259,870
Arthur Holland 526,886
Kathi Kreisler 4,091,778
Joe Casuccio 642,300
David Halperin 1,210,209
Stephen Lewen 1,002,258
Stephen Jerome 1,573,076
Richard Moses 601,845
In 1998, the Company issued, for unpaid prior years salaries, Kathi
Kreisler and Lawrence Kreisler were issued 7,500,000 and 400,000 options
respectively. The options are exercisable for a period of ten years, exercisable
at $0.40 per share, equal to the market value at grant date. Mr. Lawrence
Kreisler was issued 5,000,000 options for new patent technology, (See Patents
and Proprietary Information). The options are exercisable for a period of ten
years, exercisable at $0.20 per share, equal to the market value at grant date.
In 1998 the company issued to unrelated third parties, 2,775,000
options for the arranging of the debt financing for the AMR expansion project.
The options are exercisable for a period of five years and execrable at
$0.15-$0.21 per share, equal to the market value at grant date.
In 1998 the company issued to unrelated third parties, in payment of
services rendered in connection to various consulting services, 325,000 options
that are exercisable for a period of five years at $0.20 per share, equal to the
grant date.
In 1998 the company issued to unrelated third parties, in payment of
services rendered in connection with facility construction, 812,000 options that
are exercisable for a period of ten years at $0.10 - 0.21 per share, with a
market value of a lesser amount at grant date.
In 1998, in connection with previously reported capital raises, the
company issued 2,695,000
19
<PAGE>
options for an exercisable period of five years and exercisable at $0.15-$0.25
per share with a market value of $0.25-$0.32 at grant date. These options
include the renegotiated M.H. Meyerson options.
In 1996, to unrelated third parties in payment of services rendered in
connection to various consulting services, 1,500,000 options were issued that
are exercisable for a period of ten years at $0.10 per share, equal to the grant
date.
In 1997, the Company issued 1,500,000 options to certain employees, as
an incentive to move to New Jersey along with the Company corporate relocation,
to purchase shares of Common Stock for $0.10 per share over a 10-year period.
Kathi Kreisler, Scott Kreisler and Kevin Kreisler, affiliates of the Company,
received 500,000, 200,000 and 200,000 of such options respectively.
In 1996, the Company issued to Kevin Kreisler, for prior years salaries
and various projects, 850,000 options. The options are exercisable for ten years
at $0.10 per share, equal to market value at grant date.
In 1996, the Company issued to Scott Kreisler, for prior years
salaries, 650,000 options. The options are exercisable for ten years at $0.10
per share, equal to market value at grant date.
In 1996, the company issued to an employee of the company 20,000
options. The options are exercisable for ten years at $0.10 per share, equal to
market value at grant date.
Directors, who are not employees of the Company, are to receive stock
options pursuant to the Company's Director Plan adopted in January 1998. The
Director's Plan provides for automatic grants of options to the Company's
eligible non-employee directors upon their election to the Board of Directors of
the Company. For the fiscal year ending December 31, 1998, 100,000 options at an
exercise price of 80% of the price of the stock as selling on January 1, 1998,
will be granted to each Director who has served as a director for the entire
year under the Directors Plan. The options have not yet been issued. The options
are exercisable for a period of 10 years, none of which have been exercised.
In June 1996, the Company issued 83,871 common stock options,
exercisable at $0.155 per share to Stephen Feldman, Esq. for services rendered.
The options shall expire in January 2001.
The Company entered into an agreement with M.H. Meyerson & Company
("Meyerson") dated June 8, 1995, whereby Meyerson would provide planning,
structuring, strategic and other investment banking services to the Company.
This agreement was terminated on August 27, 1998 for reasons impacting on
various issues of non-performance and conflicts of interest.
Under the agreement, Meyerson was to be granted warrants to purchase a
total of 1,500,000 shares of common stock with an exercise price of $0.15 per
share. The warrants and the underlying shares would be exercisable anytime
between June 1997 and June 2000. In March 1998, the Company agreed to issue
additional warrants to purchase a total of 2,500,000 shares of common stock with
an exercise price of $0.25 per share in exchange for investment banking
services. The warrants and underlying shares will expire by March 2003. To date
no warrants have been exercised.
On September 8, 1998, both Meyerson agreements were replaced with a new
warrant agreement to purchase total of 1,500,000 shares at $0.15 and 250,000
shares of restricted stock. The warrants and the underlying shares would be
exercisable at anytime between September 8, 1998 and August 30, 2003. And are
callable by the Company on November 8, 1999 @ $0.01 per option.
Lawrence M. Kreisler and Kathi A. Kreisler received options in 1998
pursuant to employment arrangements as disclosed above.
20
<PAGE>
STOCK OPTION PLAN
In January 1987, the Company adopted an Incentive Stock Option Plan
(the "ISO Plan") covering 50,000,000 shares of the Company's Common Stock,
pursuant to which employees, including officers, of the Company are eligible to
receive incentive stock options as defined under the Internal Revenue Code of
1986, as amended. Under the ISO Plan, options may be granted at not less than
80% (110% in the case of 10% shareholders) of the fair market value (100% of the
closing bid price on the date of grant) of the Company's Common Stock on the
date of grant. Options may not be granted more than ten years from the date of
adoption of the ISO Plan. Options granted under the ISO Plan must be exercised
within then (10) years from the date of grant. The optionee may not transfer any
option except by will or by the laws of descent and distribution. Options
granted under the ISO Plan must be exercised within three months after
termination of employment for any reason other than death or disability and
within one year after termination of employment due to death or disability. The
Board of Directors of the Company has the power to impose additional
limitations, conditions and restrictions in connection with the grant of any
option. The ISO expired in November of 1992.
In November of 1994 the Company revised and renewed the Incentive Stock
Option Plan to cover Employees, Officers and Directors. The revised plan covers
the same 50,000,000 shares of the Company's Common Stock as the expired plan,
pursuant to which employees, including Officers and Directors of the company are
eligible to receive incentive stock options as defined under the Internal
Revenue Code of 1986, as amended. Under the plan, options may be issued as an
incentive for services rendered. Optionees shall not be restricted as to
assignment or transferability. The Board of Directors has the authority to set
the price of the option at the time of the grant. Options may be exercised for a
period of 10 years from the date of grant and will expire if not exercised
during this period of time.
On December 16, 1998, the Company filed a registration statement on
Form S-8 for the Company's revised Stock Option Plan (the "1998 SOP"). The
revised plan covers 50,000,000 shares of the Company's common stock, pursuant to
which employees, including officers and directors of the Company, are eligible
to receive incentive stock options as defined under the Internal Revenue Code of
1986, as amended. The plan also makes grants of non-qualified options eligible
to consultants of the Company. Pursuant to the 1998 SOP, Optionees shall not be
restricted as to assignment or transferability. The Board of Directors has the
authority to set the price of the option at the time of the grant. Options may
be exercised for a period of 10 years from the date of grant and will expire if
not exercised during this period of time. The 1998 SOP amends and supercedes the
prior ISO Plan. The 1998 SOP will be submitted for ratification by the
shareholders of the Company at the Company's next subsequent annual
shareholder's meeting.
ITEM 8. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In May 1996, a new company was formed to handle the transportation
needs of KBF Pollution Management, Inc. The new company, Metal Recovery
Transportation Corp. is owned solely by Lawrence Kreisler. (See "Certain
Relationships and Related Transactions.") Metal Recovery Transportation
Corporation was formed without any financial assistance from KBF. Metal Recovery
Transportation has permits in New York, New Jersey, Connecticut, Rhode Island,
Massachusetts and New Hampshire.
Metal Recovery Transportation Corp. received from the company $ 0, $
59,914, and $ 235,097, in 1996,1997 and 1998 respectively. Metal Recovery
Transportation Corp. has operated at virtually break-even levels since inception
and as such, management believes that the company is benefitting with favorable
pricing as compared to those, which could be obtained from unrelated parties.
In November 1997, the Company executed a License Agreement with
Lawrence Kreisler, President of the Company. Mr. Kreisler granted the Company a
worldwide, exclusive license to Mr. Kreisler's Patent Rights that are defined as
"The Selective Separation Technology" for the purpose of resource recovery of
industrial metal bearing waste." (See "Description of Business - Patents and
Proprietary Information"). The license applies to any improvements or related
inventions. The Company
21
<PAGE>
may assign or sub-license the License with prior written consent which shall not
be unreasonably withheld. Mr. Kreisler shall receive $10,000 for all prior use
of the technology and a royalty fee based on a per gallon rate which differs
according to the type and quantity of material processed. The License Agreement
has a minimum 15-year term after which time changes to 5-year evergreen term. In
accordance with Schedule B of the relevant License Agreement, the condition upon
which royalty payments begin to accrue has not yet been satisfied by the
Company. Accordingly, no royalty payments have been made or accrued. The Company
anticipates the relevant condition to be satisfied by the Company in the second
quarter 1999. The company provides no financial support for any improvements or
related inventions to the SST process which might or have resulted in additional
patents being issued to Mr. Kreisler.
Joseph J. Casuccio, Jr., CPA, Chief Financial Officer, Vice President
and a director of the Company, is a partner of the accounting firm, Werblin,
Casuccio & Moses, which firm is the internal accountant for the Company. (See
"Management.")
Since March 1998, Frederick Eisenbud, a director of the Company, has
been President of Metal Recovery Marketing, L.L.P., a firm which seeks to market
the Company's technology to environmental consultants. The Company has entered
into an agreement with Metal Recovery Marketing, L.L.P., pursuant to which Metal
Recovery Marketing, L.L.P. will seek to market the Company's technology.
Additionally, from April 1990 to April 1998, Mr. Eisenbud was a partner at the
law firm of Cahn, Wishod & Lamb, L.L.P., which firm represented the Company. In
April 1998, Mr. Eisenbud resigned from that law firm. Cahn, Wishod & Lamb,
L.L.P. no longer represents the Company. The Law Firm of Frederick Eisenbud, of
which Mr. Eisenbud is sole proprietor, currently represents the Company on
certain environmental matters. (See "Management.")
ITEM 9. DESCRIPTION OF SECURITIES
QUALIFICATION: The following statements constitute brief summaries of the
Company's Certificate of Incorporation and Bylaws, as amended. Such summaries do
not purport to be complete and are qualified in their entirety by reference to
the full text of the Certificate of Incorporation and Bylaws.
COMMON STOCK: The Company' articles of incorporation authorize it to issue up to
500,000,000 shares of Common Stock, $.00001 par value per share. All outstanding
shares of Common Stock are legally issued, fully-paid and non-assessable.
LIQUIDATION RIGHTS: Upon liquidation or dissolution, each outstanding share of
Common Stock will be entitled to share equally in the assets of the Company
legally available for distribution to shareholders after the payment of all
debts and other liabilities.
DIVIDEND RIGHTS: There are no limitations or restrictions upon the rights of the
Board of Directors to declare dividends out of any funds legally available
therefor. The Company has not paid dividends to date and it is not anticipated
that any dividends will be paid in the foreseeable future. The Board of
Directors initially may follow a policy of retaining earnings, if any, to
finance the future growth of the Company. Accordingly, future dividends, if any,
will depend upon, among other considerations, the Company's need for working
capital and its financial conditions at the time.
VOTING RIGHTS: Shares of Common Stock are not redeemable, have no conversion
rights and carry no preemptive or other rights to subscribe to or purchase
additional shares of Common Stock in the event of a subsequent offering.
TRANSFER AGENT: The Company's transfer agent is American Stock Transfer & Trust.
22
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded in the over-the-counter market on
the National Association of Securities Dealers, Inc. Electronic Bulletin Board.
The following table sets forth, for the periods indicated, the range of
high and low closing bid prices for the Company's Common Stock as reported by
the National Association of Securities Dealers composite feed or other qualified
inter-dealer quotation medium and obtained from the National Quotation Bureau,
LLC.
High Low
---- ---
1995
FIRST QUARTER 0.09 0.05
SECOND QUARTER 0.17 0.06
THIRD QUARTER 0.4375 0.14
FOURTH QUARTER 0.34375 0.18
1996
FIRST QUARTER 0.23 0.1875
SECOND QUARTER 0.25 0.20
THIRD QUARTER 0.375 0.23
FOURTH QUARTER 0.375 0.19
1997
FIRST QUARTER 0.25 0.09
SECOND QUARTER 0.17 0.08
THIRD QUARTER 0.25 0.13
FOURTH QUARTER 0.40 0.16
1998
FIRST QUARTER 0.74 0.29
SECOND QUARTER 0.49 0.32
THIRD QUARTER 0.39 0.20
FOURTH QUARTER 0.23 0.15
Titles of Class Approximate number of holders
Titles of Class of record as of March 26, 1999
--------------- ------------------------------
Common Stock, .00001 par value 2,260
THE NUMBER OF HOLDERS DOES NOT GIVE EFFECT TO BENEFICIAL OWNERSHIP OF SHARES
HELD IN THE STREET NAME OF STOCK BROKERAGE HOUSES OR CLEARING AGENTS AND DOES
NOT NECESSARILY REFLECT THE ACTUAL OWNERSHIP OF THE SHARES.
DIVIDENDS.
The Company has never paid a cash dividend on its Common Stock and
management has no present intention of paying dividends in the foreseeable
future. The policy of the Company is to retain earnings and utilize the funds
for Company operations. Future dividend policy will be determined by the Board
of Directors based on the Company's earnings, financial condition, capital
requirements and other existing conditions.
ITEM 2. LEGAL PROCEEDINGS
The Company has filed suit against Solucorp Industries, Ltd. for the
Company's contract and fraud damages arising out of its now-terminated License
Agreement with Solucorp. The Company is represented by the national law firm of
Greenberg Traurig and the New York-New Jersey law firm of Sonageri & Fallon, LLC
in this matter.
23
<PAGE>
In November 1998, Solucorp filed a motion to dismiss the Company's
complaint for grounds based on the inconvenience of Solucorp. Solucorp's motion
to dismiss was denied in December 1998.
In January 1999, Solucorp filed an answer, counterclaim and third-party
complaint which denied all claims asserted by the Company and alleged
counterclaims against the Company seeking damages in excess of $350,000,000 in
compensatory damages and $500,000,000 in punitive damages. The third-party
complaint personally named two of the Company's directors and executive
officers, Lawrence M. Kreisler and Kevin E. Kreisler, and asserted further
claims against other third parties with whom the Company has no agreement.
In February 1999, the Company filed its answer to Solucorp's
counterclaim and third-party complaint. At this time, the Company further filed
a motion to dismiss Solucorp's counterclaims and third-party complaint on the
basis that Solucorp's responsive pleading violated New Jersey court rules which
prohibit the assertion of specific monetary amounts of unliquidated money
damages and the practice of reciting enormous sums of money for damages. The
Company's motion in this regard was granted and Solucorp's counterclaims and
third-party complaint were dismissed without prejudice.
Simultaneously with the grant of the Company's motion to dismiss, the
court hearing the matter entered a mediation order. An initial, non-binding
mediation session has been scheduled for April 1999.
GENERAL COMMENTS WITH REFERENCE TO SOLUCORP:
Solucorp holds itself out to be an environmental service organization
devoted to the development and marketing of innovative environmental
technologies. The Company was introduced to Solucorp and its consultant, Joseph
Kemprowski, by the Company's former investment banker, M.H. Meyerson & Co., Inc.
last December. The Company had no affiliation with Solucorp, or any of its
affiliates, preceding this introduction. This agreement remains the only
affiliation the Company had with Solucorp. At this time, Solucorp and Kemprowski
claimed to have executed contracts with the Chinese government for the
remediation of contaminated sites in mainland China from which revenues would be
made. Furthermore, Solucorp and Kemprowski made it clear that they had an
extensive, global sales and marketing infrastructure. Management performed due
diligence on the basis of publicly available information, Solucorp's filings and
press releases, Meyerson's analyst's reports on Solucorp, and numerous meetings
with Solucorp executives, which included significant technical discussions
covering a number of sites. In addition, there were discussions with Solucorp's
Chinese marketing affiliates. There were other limited documents that Solucorp
and Kemprowski disclosed. KBF was precluded from reviewing the executed Chinese
contracts due to what Solucorp and Kemprowski represented to be as
confidentiality agreements. Principals of M.H. Meyerson & Co., Inc., however,
represented that they reviewed the pertinent agreements and advised the Company
that the agreements had in fact been executed (Meyerson was the Company's
investment banker at the time).
After several months of negotiation, and with the recommendation of
Meyerson, the Company and Solucorp entered into an exclusive worldwide license
for the marketing and sale of the Company's patented SST process. The agreement
called for a license fee of $500,000 due upon execution on March 20, 1998. The
license fee was to be paid for with the issuance of 190,550 shares of
free-trading, unrestricted Solucorp stock due upon execution. Solucorp
represented that it had the ability to issue free-trading shares prior to
execution and the License Agreement contained representations and warranties to
that effect. Instead, in the end of May 1998, the Company received 190,550
shares of restricted, unregistered stock - after having been given assurances
that Solucorp and Kemprowski would register, repurchase and assist with the
liquidation of the license fee stock at a rate of at least $100,000 per month.
The shares were issued after the U.S. Securities and Exchange Commission had
suspended Solucorp's stock. Despite countless requests and demands, Solucorp and
Kemprowski never attempted to register the license fee stock, and they
repurchased less than $50,000 worth of shares between March and September 1998.
24
<PAGE>
Solucorp's breach of these, and many other terms of the license
agreement was at considerable cost to the Company. In good faith reliance on the
agreement, the Company expended several hundred thousand dollars in supporting
Solucorp's sales efforts. According to the agreement, the Company was never
supposed to expend any of its capital derived from sources other than the two
fees in providing Solucorp with support.
Further, Management discovered that much of what had been represented
to the Company by Solucorp and Kemprowski with reference to Solucorp's executed
agreements in China, the extent of its sales and marketing capabilities and its
ability to register, repurchase and liquidate the shares was not true.
In August 1998, in a final attempt to turn the Solucorp relationship
into a profitable venture, Management negotiated a modification that accounted
accurately for Solucorp's ability to pay the fees and to market SST. The
modification would have stripped Solucorp of the license to the technology and
required the payment of additional compensation to remedy the damages the
Company had suffered by that time. A letter of intent was executed and the
modification was drafted but negotiations broke down in the following weeks. On
September 23, 1998, the Company formally noticed Solucorp of Termination and the
Company filed suit against Solucorp and Kemprowski for breach of contract and
fraud damages.
The Company will pursue its interests against Solucorp and Kemprowski
and is seeking damages commensurate with the Company's good faith expenditures,
contract damages (which include the license fee and the first year's worth of
accrued minimum royalty) and fraud damages.
In March 1999, Solucorp filed a current report on Form 8-K pursuant to
section 13 or 15(d) of the Securities Exchange Act of 1934, which allegedly sets
forth the current status of the aforementioned, purportedly executed Chinese
remediation contracts. The filing confirms that no such contracts were ever
executed.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
NONE.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
Commencing November 1997, the Company offered up to 12,500,000 shares
of common stock at $0.08 per share. This offering was made pursuant to an
exemption from registration pursuant to Rule 504 of Regulation D of the
Securities Act of 1933, as amended. The offering was approved and/or exempted by
the required states and the appropriate Form D was filed with the Securities and
Exchange Commission.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
INDEMNIFICATION: The Company shall indemnify to the fullest extend permitted by,
and in the manner permissible under the laws of the State of New York, any
person made, or threatened to be made, a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he is or was a director or officers of the Company, or served any other
enterprise as director, officer or employee at the request of the Company. The
Board of Directors, in its discretion, shall have the power on behalf of the
Company to indemnify any person, other than a director or officer, made a party
to any action, suit or proceeding by reason of the fact that he/she is or was an
employee of the Company.
Insofar as indemnification for liabilities arising under the Act may be
permitted to director, officers and controlling person of the Company, the
Company has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act, and is therefor, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company in the successful defense of any action, suit or proceedings) is
asserted by such director, officer or controlling person in connection with any
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by its is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issues.
25
<PAGE>
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION, AND IS THEREFOR
UNENFORCEABLE.
PART F/S
The following financial statements required by Item 310 of Regulation S-B are
furnished below:
Independent Auditor's Report;
Balance Sheet as of; December 31, 1998 (audited) and December 31, 1997 (audited)
Statements of Income for the periods; January 1, 1997 to December 31, 1997
(audited); and January 1, 1998 to December 31, 1998 (audited);
Statements of Cash Flows for the periods; January 1, 1997 to December 31, 1997
(audited); and January 1, 1998 to December 31, 1998 (audited);
Statement of Changes in Stockholders Equity for the period; January 1, 1997
to December 31, 1998 (audited);
Notes to Financial Statements.
Financial data schedule-December 31, 1998 - exhibit 27
PART III
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
a) The following financial statements are included in Part
II, Item 8 and are attached hereto:
i) Balance Sheets
a) December 31, 1998
b) December 31, 1997
ii) Statements of Income Years Ended
a) December 31, 1998
b) December 31, 1997
iii) Statements of Stockholders' Equity a)
January 1, 1997 to December 31, 1998.
iv) Statements of Cash Flow Years Ended
a) December 31, 1998
b) December 31, 1997
v) Notes to Financial Statements
(b) Reports on Form 8-K.
i) None.
26
<PAGE>
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C> <C> <C>
10.1* - Lease/purchase agreement between the Company and Wasco Funding Co. dated March 24, 1993.
10.2* - Employment Agreement between the Company and Lawrence Kreisler dated October 15, 1992.
10.3* Employment Agreement between the Company and Kathi Kreisler dated October 15, 1992
10.4** - Amended Lease/purchase agreement between the Company and Wasco Funding Co. dated March 25,1994.
10.5***** - Stipulation, dated June 26, 1997, between the Company and John Spollen, Receiver f/b/o Apple Bank for
Savings
10.6*** - 1998 Stock Option Plan
10.7 - License Agreement as and between Lawrence M. Kreisler and the Company
10.8 - License Agreement as and between the Compaany and Solucorp Industries
27 - Financial Data Schedule
* Incorporated by reference to the exhibit of the same title in the annual report on Form 10-K for the fiscal year ended
December 31, 1992 (File No. 33-20954).
** Incorporated by reference to the exhibit of the same title in the annual report on Form 10-K for the fiscal year ended
December 31, 1993 (File No. 33-20954).
*** Incorporated by reference to the exhibit of the same title in the Registration Statement on Form S-8 (File No. 333-69011).
**** Incorporated by reference to the exhibit of the same title in the Registration Statement on Form 10-SB, as amended filed
December 24, 1998 (File No. 000-24841).
***** Incorporated by reference to the exhibit of the same title in the annual report on Form 10-K for the fiscal year ended
December 31, 1997 (File No. 033-20954).
</TABLE>
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
(Registrant) KBF POLLUTION MANAGEMENT, INC.
----------------------------------------------------
By (Signature and Title \s\ LAWRENCE KREISLER
-----------------------------------------
LAWRENCE KREISLER, PRESIDENT
Date: November 3, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By (Signature and Title \s\ LAWRENCE KREISLER
----------------------------------------------------
LAWRENCE KREISLER, CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER,
PRESIDENT,
DIRECTOR
Date: November 3, 1999
By (Signature and Title \s\ JOSEPH J. CASUCCIO, JR.
----------------------------------------------------
JOSEPH J. CASUCCIO, JR., CHIEF FINANCIAL OFFICER
VICE PRESIDENT,
DIRECTOR (ALSO CHIEF
ACCOUNTING OFFICER)
Date November 3, 1999
By (Signature and Title \s\ KATHI KREISLER
----------------------------------------------------
KATHI KREISLER, CHIEF ADMINISTRATIVE OFFICER
VICE PRESIDENT,
SECRETARY, TREASURER,
DIRECTOR
Date November 3, 1999
By (Signature and Title \s\ KEVIN KREISLER
----------------------------------------------------
KEVIN KREISLER, VICE PRESIDENT,
DIRECTOR
Date November 3, 1999
28
<PAGE>
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
AUDITED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND DECEMBER 31, 1997
29
<PAGE>
KBF POLLUTION MANAGEMENT, INC., AND SUBSIDIARIES
TABLE OF CONTENTS
INDEPENDENT AUDITOR'S REPORT..................................................31
BALANCE SHEET.................................................................32
STATEMENT OF INCOME...........................................................34
STATEMENT OF STOCKHOLDERS' EQUITY.............................................35
STATEMENT OF CASH FLOWS.......................................................36
30
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
Irving Handel & Co. Tel: 516-295-9290
CERTIFIED PUBLIC ACCOUNTANTS Fax 516-295-9298
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
of KBF Pollution Management, Inc.
We have audited the accompanying balance sheet of KBF Pollution
Management, Inc. as of December 31, 1998 and 1997, and the related statement of
income, stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of KBF Pollution
Management, Inc. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ Irving Handel & Co.
- -----------------------
March 24, 1999
Woodmere, NY 11598
31
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
12/31/98 12/31/97
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 300,213 $ 224,643
Cash - Restricted 27,500 0
Marketable Securities 86,591 0
Accounts Receivable (Net of allowance 421,411 290,613
for doubtful accounts of $31,183 and $26,782)
Inventories 12,707 11,670
Prepaid Expendable Supplies 13,821 14,246
Other Prepaid Expenses 11,854 7,682
---------- ----------
Total Current Assets 874,097 548,854
FIXED ASSETS:
Property, Equipment & Improvements
(Net of Accumulated Depreciation &
Amortization of $1,371,641 and $1,670,954) 1,923,229 1,018,949
Leased Property under Capital Lease Obligations
(Net of Accumulated Depreciation &
Amortization of $287,226 and $378,869) 88,527 108,030
Non-Expendable Stock, Parts & Drums 137,768 139,368
---------- ----------
Total Fixed Assets, Net 2,149,524 1,266,347
OTHER ASSETS:
Security Deposits 2,844 7,662
Other Receivable 350,820 0
License/Patent (Net of Accumulated Amortization
of $1,000 and $11,164) 13,922 9,165
Capitalized Permit Costs 47,279 89,179
Prepaid Financing Costs 47,070 0
Restricted Cash 0 27,500
---------- ----------
Total Other Assets 461,935 133,506
---------- ----------
TOTAL ASSETS $3,485,556 $1,948,707
========== ==========
</TABLE>
See accompanying notes and accountant's report.
32
<PAGE>
EXHIBIT A
BALANCE SHEET
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
12/31/98 12/31/97
-------- --------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable - Trade $ 383,367 $ 454,657
Accrued Expenses 191,509 52,354
Taxes Withheld & Accrued 5,801 11,873
Deposit Payable 40,000 0
Current Portion of Long-Term Debt 0 60,000
Current Portion of Capital Lease Obligations 67,768 51,832
---------------- ----------------
Total Current Liabilities 688,445 630,716
LONG-TERM LIABILITIES:
Capital Lease Obligations (Net of Current Portion) 160,085 189,977
---------------- ----------------
Total Long-Term Liabilities 160,085 189,977
STOCKHOLDERS' EQUITY:
Com. Stock par Value .00001 per Share
Authorized - 500,000,000 Shares Issued
And Outstanding
December 31, 1998 - 64,034,660 640
December 31, 1997 - 49,112,690 491
Capital in Excess of Par Value 6,367,040 4,871,362
Retained Earnings (Deficit) (3,730,654) (3,743,839)
---------------- ----------------
Total Stockholders' Equity 2,637,026 1,128,014
---------------- ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,485,556 $ 1,948,707
================ ================
</TABLE>
See accompanying notes and accountant's report.
33
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12/31/98 12/31/97
---------- -----------
<S> <C> <C>
REVENUES: $ 3,078,567 $ 1,926,895
Less:
Cost of Operations 1,438,639 1,277,974
----------------- ---------------
Gross Profit 1,639,928 648,921
Less:
General and Administrative Expenses
Advertising 1,221,375 806,027
Maintenance and Repairs 4,218 7,519
27,134 42,246
----------------- ---------------
Operating Income (Loss) 387,201 (206,871)
OTHER INCOME (EXPENSES):
Interest Income 31,035 1,236
Interest Expense (25,740) (1,656)
Unrealized Loss on Available for Sale Securities (373,430) 0
----------------- ---------------
Income (Loss) before Provision for Income Tax 19,066 (207,291)
Less: Income Tax Provision 5,887 344
----------------- ---------------
NET INCOME (LOSS) $ 13,179 $ (207,635)
================= ===============
OTHER COMPREHENSIVE INCOME (LOSS) 0 0
----------------- ---------------
COMPREHENSIVE INCOME (LOSS) $ 13,179 $ (207,635)
================= ===============
EARNINGS PER COMMON SHARE:
Basic $ .0001 (.0001)
================= ===============
Diluted $ .0001 $ (.0001)
================= ===============
</TABLE>
See accompanying notes and accountant's report.
34
<PAGE>
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
JANUARY 1, 1997 TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
Common Stock
(Par Value $.0001) Capital in Retained
Shares Amount Excess Earnings Total
Of Par (Deficit)
------ ------ ---------- --------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1997 43,405,546 $ 434 $ 4,344,671 $(3,536,203) $ 808,902
Common Stock issued 5,707,144 57 586,291 586,348
Rounding (1) (1)
Underwriting Costs (59,600) (59,600)
NET LOSS for the Year Ended December 31, 1997 (207,635) (207,635)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1997 49,112,690 491 4,871,362 (3,743,839) 1,128,014
Common Stock issued 14,921,970 149 1,415,356 0 1,415,505
Options Granted 538,814 238,222
Underwriting Costs 0 0 (458,492) 0 (157,900)
Rounding 6 6
NET INCOME for the Year Ended December 31, 1998 13,179 13,179
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1998 64,034,660 $ 640 $ 6,367,040 $(3,730,654) $ 2,637,026
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes and accountant's report.
35
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12/31/98 12/31/97
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from Customers $ 2,092,548 $ 1,954,700
Cash Paid to Suppliers and Employees (1,662,180) (2,078,014)
Interest and Dividends Received 31,035 1,236
Interest Paid (25,955) (34,601)
Income Taxes Paid (4,068) (604)
----------- -----------
Net Cash Provided (Used) by Operating Activities 431,380 (157,283)
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Patent (3,201) 0
Cash Purchases of Equipment (1,241,738) (9,390)
----------- -----------
Net Cash Provided (Used) in Investing Activities (1,244,759) (9,390)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Stock and Warrants 1,028,305 518,228
Underwriting Costs (75,400) (59,600)
Repayment of Long-Term Debt and Capital Lease
Obligations (63,956) (86,486)
----------- -----------
Net Cash Provided (Used) by Financing Activities 888,949 372,142
----------- -----------
NET INCREASE (DECREASE) IN CASH 75,570 205,469
CASH at Beginning of Year 224,643 19,174
----------- -----------
CASH at End of Year $ 300,213 $ 224,643
=========== ===========
</TABLE>
See accompanying notes and accountant's report.
36
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
12/31/98 12/31/97
---------- ----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET
CASH FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 13,179 $(207,635)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 360,392 237,368
Amortization 164 1,196
Accounts Payable Paid in Stock 0 22,830
Expenses Paid in Stock/Options 59,923 45,290
Bad Debts 4,401 (2,781)
Write-Off of Permit Costs 0 6,401
Unrealized Loss on Available for Sale Securities 373,430 0
(Increase) Decrease in:
Trade Accounts Receivable (135,199) 27,805
Other Receivables (810,841) 20,340
Inventories (612) 6,109
Prepaid Expenses & Deposits 186,744 (171,537)
Increase (Decrease) in:
Accounts Payable 206,710 (36,499)
Withholding Taxes Payable (6,072) (1,254)
Deposit Payable 40,000 0
Accrued Expenses 139,161 (104,916)
--------- ---------
$ 431,380 $(157,283)
========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common Stock and Options issued for the payment of accounts payable and accrued
expenses $ 244,700 $ 22,830
========= =========
Common Stock issued for the payment of notes payable $ 60,000 $ 0
========= =========
Common Stock received for the payment of other receivables
$ 500,000 $ 0
========= =========
Common Stock and Options issued for the payment of
Underwriting costs, equipment and expenses $ 320,722 $ 463,220
========= =========
Revaluation of Common Stock received $(373,430) $ 0
========= =========
</TABLE>
See accompanying notes and accountant's report.
37
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - BUSINESS DESCRIPTION
KBF Pollution Management, Inc. (the Parent) ("KBF") was incorporated in the
State of New York on March 15, 1984, with an initial authorized capitalization
of 200 shares of No Par Common capital stock, which was later increased to
500,000,000 shares of .00001 Par Value Common stock. On May 6, 1997, Gryphon
Industries, Inc., American Metals Recovery Corp., and AMR, Inc. (the
Subsidiaries) were formed pursuant to the laws of the State of Nevada. In the
third quarter of 1998, the Company formed KBF-LI, Inc.
The Company, through American Metal Recovery Corp., a wholly owned subsidiary,
is actively engaged in the environmental services business as a waste water
metal recovery facility specializing in the resource recovery of hazardous and
non-hazardous metal bearing wastes for the sole purpose of recycling the product
produced back into commerce. It operates an in-house industrial laboratory to
support the recycling process and performance of research and development. The
Company also provides waste handling equipment and compliance support service to
their customers. The Company operates predominately in the Northeast region.
AMR, Inc. (AMR) became active in 1998 when KBF incurred capitalized costs to
initiate debt financing for it, which were exchanged for stock, thereby making
it a wholly owned subsidiary of KBF. The financing (see Note 21 - Subsequent
Events) will be for AMR's purchase of equipment, which will be utilized in an
expansion project set to begin operations in 1999.
KBF-LI, Inc.(KBF-LI), exchanged stock with KBF for the remaining assets at the
Long Island, New York facility, thereby making it a wholly owned subsidiary of
KBF. Operations on Long Island have now ceased, however KBF-LI is party to a
letter of intent to sell the operation.
Gryphon Industries, Inc. is inactive and available for future use.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Environmental Services
Recovery service revenues are recognized and invoiced as such services are
completed.
Non-Expendable Stock, Parts, and Drums
Non-expendable stock, parts ,and drums represent an imprest supply of items
which generally have a life of one year or less. The level of this supply is
adjusted as a function of the company's sales volume. Replacements are expensed
as incurred. The value of these assets at each balance sheet date is not
materially different than the depreciated cost of the individual assets on hand
on that date.
38
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
License Agreements
The license agreement with Solucorp (see Note 9) contained an initial license
fee of $500,000; this fee then being recognized over the life of the initial
license term. At the date the license was terminated, September 30,1999, the
company was relieved of all obligations under it, and all remaining deferred
amounts were recognized as revenue.
INVENTORIES
Inventories are valued at the lower of average cost or market, using the FIFO
method.
DEPRECIATION AND AMORTIZATION
Property and equipment are depreciated for financial reporting and tax purposes
using the straight line method over the estimated useful lives of the assets.
Leasehold improvements are removable and are amortized over their useful lives.
Useful lives are estimated between 5 and 10 years. The license is being
amortized over 10 years.
USE OF ESTIMATES
Management uses estimates and assumptions in preparing these financial
statements in accordance with generally accepted accounting principles.
These estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the estimates
that were used.
RECENT PRONOUNCEMENTS
The Company has complied with all recent pronouncements, which have effective
dates preceding the dates relating to these financial statements.
All pronouncements with effective dates subsequent to the dates relating to
these financial statements, had they been in effect, would have had no impact on
these financial statements.
EARNINGS PER SHARE
In accordance with SFAS No. 128, the Company computes basic and fully diluted
earnings (loss) per share on a daily weighted average basis, as described in
Note 17.
39
<PAGE>
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRIOR PERIOD STATEMENTS
The 1996 and 1997 financial statements may have been reclassified to conform
with current year's classifications.
NOTE 3 - MARKETABLE SECURITIES
In conjunction with the license agreement discussed in Notes 7 & 9, and further
to an unenforceable modification to the license agreement, the Company received
190,550 shares of restricted (under Section 144) common shares of Solucorp
Industries, Ltd., on May 21, 1998, as payment against the $500,000 for the
initial license fee due to the Company, pursuant to the terms of its (now
terminated) license agreement with Solucorp. The issuance of the restricted
shares did not constitute satisfaction of the license agreement terms and
conditions and was moreover not precipitated through what the Company believes
to be the fraudulent representations of Solucorp Industries, Ltd. and Joseph
Kemprowski. The shares, however, do retain some minimal market value, which
value is being recognized herein. The Company is currently pursuing full payment
of the license fee in its pending litigation against Solucorp Industries, Ltd.
(see Note 18). The Company has presented these securities herein as
available-for-sale securities, adjusted to market value. Since trading of these
shares has been suspended, market value has been determined to be the closest
gray market price per share at December 31, 1998, less a 25% lack of
marketability discount. Because the Section 144 restriction expires on May 21,
1999, within twelve months of the balance sheet date, and the shares can, under
certain circumstances, be sold even though restricted, the securities are
presented as current assets. Based on the foregoing and in conjunction with FAS
115 & 130, these securities are presented at a fair market value of $86,591 and
the unrealized loss is presented as a loss in the current period as management
has determined that the decline in value is other than temporary. The chart
below describes the foregoing:
SOLUCORP INDUSTRIES, LTD: 12/31/98 12/31/97
------------------------- -------- --------
Shares Owned 183,262 0
Quoted Price .63 0
Quoted Value 115,455 0
Lack of Marketability Discount 28,864 0
Fair Value presented herein 86,591 0
======= =
40
<PAGE>
NOTE 4 - INVENTORIES
Inventories are comprised of the following major categories:
<TABLE>
<CAPTION>
12/31/98 12/31/97
-------- --------
<S> <C> <C>
Shipping Supplies $ 2,857 $ 4,985
Reagents 9,850 6,685
------- -------
$12,707 $11,670
======= =======
</TABLE>
NOTE 5 - OTHER PREPAID EXPENSES
The items included in other prepaid expenses are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Prepaid Insurance $ 11,854 $ 7,682
=========== ==========
</TABLE>
NOTE 6 - FIXED ASSETS
Fixed assets are categorized and listed below:
<TABLE>
<CAPTION>
Balance Additions Retirements Balance
Property, Equipment & Improvements at 12/31/97 1998 1998 at 12/31/98
- ---------------------------------- ----------- ---- ---- -----------
<S> <C> <C> <C> <C>
Facility $ 1,604,772 $ 1,392,271 138,974 $ 2,858,069
Office Equipment, Computers
& Furnishings 219,369 35,085 150,147 104,307
Manufactured Equipment Leased Out 72,999 0 0 72,999
Equipment 451,596 0 241,267 210,329
Leasehold Improvements 155,069 49,166 155,069 49,166
Assets Under Construction 186,098 (186,098) 0 0
-----------------------------------------------------------------------
SUB TOTAL 2,689,903 $ 1,290,424 $ 685,457 3,294,870
=============== ==========
Less: Accumulated Depreciation
and Amortization (1,670,954) (1,371,641)
---------- -----------
NET $ 1,018,949 $ 1,923,229
============ ===============
</TABLE>
41
<PAGE>
NOTE 6 - FIXED ASSETS (CONTINUED)
Leased Equipment Under Capital Leases
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Office Equipment & Furniture $ 135,039 $ 0 $ 90,112 $ 44,927
Equipment 351,860 0 21,034 330,826
--------------- ------------- -------------- ----------------
SUB TOTAL 486,899 $ 0 $ 111,460 375,753
============= =============== ---------------
Less: Accumulated Amortization (378,869) (287,226)
---------------- ----------------
NET $ 108,030 $ 88,527
=============== ================
</TABLE>
Depreciation charged to operations, which includes amortization of capital lease
obligations, was $360,392 and $237,368 for the years ended December 31, 1998 and
1997, respectively. Leased equipment secures the related capital lease
obligations.
NOTE 7 - OTHER RECEIVABLES
In conjunction with the license agreement discussed in Notes 3 & 9, the Company
accrued minimum royalties of $750,000 which are due on December 31, 1999. This
amount represents the prorated ( six out of twenty-four months) minimum royalty
of $3,000,000 for the for the first two years of the contract. This receivable
and the related revenue has been presented in the financial statements at
present value along with related interest earned to date. The Company has
considered all information available at this time concerning Solucorp
Industries, Ltd. and has presented the receivable and the related revenue net of
an allowance for doubtful accounts as detailed below:
Minimum Royalty $ 750,000
Discount to Present Value (107,753)
----------
Present Value of Minimum Royalty 642,247
Interest Earned through December 31, 1998 29,697
----------
Total Other Receivable & Revenue
Before Allowance 671,944
Allowance for Doubtful Accounts (321,124)
----------
Total Other Receivable Presented
And Revenue Reflected Herein $ 350,820
==========
42
<PAGE>
NOTE 8 - PATENT
The Company obtained a United States patent on its waste volume reduction unit
and method in August, 1988. The costs incurred to obtain the patent have been
capitalized and are being amortized over a 17 year life.
In June 1995, the Company's President, Lawrence Kreisler, submitted a patent
application on the "Selective Separation Technology" technique currently being
used. Mr. Kreisler had developed this process prior to the formation of KBF
Pollution Management, Inc. On February 3, 1998, the US Patent and Trademark
Office issued a Notice of Allowance for this patent. On May 19, 1998, the US
Patent and Trademark Office issued the final patent on the technology (Patent
No.: 5,735,125). Under a licensing agreement with Mr. Kreisler, the Company is
utilizing the patent in its operations. The agreement calls for royalty payments
commencing when the Company has processed in excess of 1.5 million gallons of
chargeable waste in a given year. There is no royalty due on the first 1.5
million gallons per annum. At that point, royalties are paid at rates beginning
at $.10 per gallon and decreasing to $.03 per gallon at a processing rate of
6,050,000 annually.
NOTE 9 - LICENSE AGREEMENT
In March 1998, the Company signed an exclusive worldwide License Agreement with
Solucorp Industries, Ltd., for the utilization of the Company's patent
technology. The terms of the agreement called for an initial license fee of
$500,000, plus an additional license fee of $.0005 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
agreement was for a five-year term, with automatic five-year continuous renewal.
The payment as against the initial fee described in Note 3 was recognized as
income in the current period, on the statement of income, in revenue from normal
operation.
On September 30, 1998, the Company formally terminated this contract and brought
suit against Solucorp Industries, Ltd. for breach of contract and fraud damages
(see Note 18- Commitments & Contingencies). While the contract has been
terminated, the partial payment against the initial license fee continues to be
recognized as revenue as the fee is non-refundable.
In June 1998, the Company filed for patent protection on four new technologies
developed by Lawrence M. Kreisler, which the Company has been and is presently
using. Pursuant to the terms of Mr. L. Kreisler's license agreement with the
Company, Mr. L. Kreisler is to receive a license fee for the Company's right to
use each technology. Mr. L. Kreisler was issued a total of 5,000,000 options in
lieu of cash for this fee (Note 14).
43
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 10 - CAPITALIZED PERMIT COSTS
The Company has incurred costs as part of the application process required to
obtain a Part 373(b) Permit. Prior to a 1994 change in the law that provided an
exemption on the handling of certain hazardous wastes, this permit would have,
among other things, enabled the Company to process a broader category of waste
streams than it was then permitted to handle at the time. The exemption provided
by the change in the law effectively allowed the Company to process additional
hazardous waste streams without the need for the Part 373(b) Permit. The permit
still has value, primarily for the provisions in the permit that allow for
increased storage of hazardous waste prior to its being treated.
It should be noted, that these permit costs are related to the Long Island
location, and have been transferred to KBF-LI. They are included in the assets
to be sold under a "letter of intent" to sell the Long Island operation. The
assets to be sold are presented at the lower of their carry amounts or their
fair value less costs to sell and total $62,759.
NOTE 11 - ACCRUED EXPENSES
Accrued expenses are broken down into categories as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Insurance $ 25,409 $ 11,535
Utilities 3,000 5,770
Professional Fees 5,250 8,600
Facility Equipment 100,476 0
Other Accrued Expenses 37,374 26,449
------------ ---------
$ 191,509 $ 52,354
============ =========
</TABLE>
NOTE 12 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
12/31/98 12/31/97
-------- --------
<S> <C> <C>
Notes payable to certain significant shareholders who
advanced money to the Company. This obligation is due
on demand and bears an interest rate of 10% per annum. $ 0 $ 60,000
(In the third quarter of 1998, this note was paid by
the issuance of common stock at $.10 per share).
Less: Current Portion 0 60,000
----------- -----------
Long-Term Portion $ 0 $ 0
=========== ===========
</TABLE>
44
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 13 - LEASES
CAPITAL LEASE OBLIGATIONS
The Company leases equipment with lease terms expiring through April 2002.
Future minimum payments under capital leases with initial terms of one year or
more consisted of the following at December 31, 1998:
1999 $ 85,502
2000 85,502
2001 85,502
2002 4,861
Thereafter 0
------------
Total minimum lease payments 261,367
Amounts representing interest (33,514)
Present value of net minimum
lease payments remaining 227,853
Less: Current portion 67,768
-------------
Long -Term Portion $ 160,085
=============
On all capital leases, the equipment under lease is pledged toward the lease
obligation.
OPERATING LEASES
As of December 1, 1997, the Company relocated its corporate offices, laboratory
and main operational facility to Paterson, New Jersey. The lease terms, which
includes a purchase option, provide for the base rent to be paid monthly over 6
years commencing December 1997. The Company occupies the entire building of
60,000 square feet of space. The lease obligations are as follows:
1999 $ 193,200
2000 200,500
2001 208,600
2002 213,550
2003 201,300
Thereafter 0
-----------
$ 1,017,150
===========
45
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 14 - STOCKHOLDERS' EQUITY
INCENTIVE STOCK PLAN
In January 1987, the Company adopted an Incentive Stock Option Plan (the "ISO
Plan") covering 50,000,000 shares of the Company's Common Stock , pursuant to
which employees, including officers of the Company are eligible to receive
incentive stock options as defined under the Internal Revenue Code of 1986, as
amended. Under the ISO Plan, options may be granted at not less than 80% (110%
in the case of 10% shareholders) of the fair market value (100% of the closing
bid price on the date of grant) of the Company's Common Stock on the date of
grant. Options may not be granted more than ten years from the date of the
adoption of the ISO Plan. Options granted under the ISO Plan must be exercised
within ten years from the date of grant. The optionee may not transfer any
option except by will or by the laws of descent and distribution. Options
granted under the ISO Plan must be exercised within three months after
termination of employment for any reason other than death or disability, and
within one year after termination due to death or disability. The Board of
Directors of the Company has the power to impose additional limitations,
conditions and restrictions in connection with the grant of any option. The ISO
expired in November 1992.
In November 1994, the Company revised and renewed the ISO to cover employees,
officers and directors. The revised plan covers the same 50,000,000 shares of
the Company's Common Stock as the expired plan, pursuant to which employees,
including officers and directors of the Company, are eligible to receive
incentive stock options as defined under the Internal Revenue Code of 1986, as
amended. Under the plan, the options may be issued as an incentive for services
rendered. Optionees shall not be restricted as to assignment or transferability.
The Board of Directors has the authority to set the price of the option at the
time of the grant. Options may be exercised for a period of ten years from the
date of grant and will expire if not exercised during this period of time.
STOCK OPTIONS
In 1997 the Company issued 1,500,000 options to employees as an incentive to
move to New Jersey along with the company corporate relocation. Of the 1,500,000
options, Kathi Kreisler and Kevin Kreisler, affiliates of the Company, received
500,00 and 200,000, respectively. These options are exercisable for ten years,
at .10 per share, equal to the market value at grant date. In accordance with
FAS 123, the Company elected to value these employee options at their intrinsic
value, as set forth in ARB No. 25, of zero, for financial statement purposes.
In 1998, the Company issued 19,507,000 options. These options were issued as
follows:
46
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 14 - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (continued)
1) 7,500,000 options to Kathi Kreisler and 400,000 options to Lawrence Kreisler
for unpaid prior years' salaries. The options are exercisable for a period of
ten years, at $.40 per share, equal to the market value at grant date. In
accordance with FAS 123, the Company elected to value these employee options at
their intrinsic value, as set forth in ARB No. 25, of zero, for financial
statement purposes.
2) 5,000,000 options to Lawrence Kreisler for new patent technology (Note 8).
The options are exercisable for a period of ten years, exercisable at $.20 per
share, equal to the market value at grant date. In accordance with FAS 123, the
Company elected to value these employee options at their intrinsic value, as set
forth in ARB No. 25, of zero, for financial statement purposes.
3) 2,775,000 options to unrelated third parties to arrange for debt financing
for the AMR project (Note 1). The options are exercisable for a period of five
years, at $.15 - $.20 per share, equal to the market value at grant date. In
accordance with FAS 123 these options have been valued utilizing the
Black-Scholes model and included in the financial statements presented herein at
$47,070, as prepaid financing costs (Note 5).
4) 2,695,000 options to unrelated third parties in payment for services rendered
in connection with previous capital raises. The options are exercisable for a
period of five years, exercisable at $.15 - $.25 per share, with a market value
of $.25 - $.32 at grant date. In accordance with FAS 123 these options have been
valued at $300,592, as underwriting expenses relating to prior capital raises.
5) 812,000 options to unrelated third parties in payment for services rendered
in connection with the facility construction. The options are exercisable for a
period of ten years, exercisable at $.10 - $.21 per share, with a market value
of a lesser amount at grant date. In accordance with FAS 123 these options have
been valued utilizing the Black-Scholes model and included in the financial
statements presented herein at $137,929, as facility costs.
6) 325,000 options to unrelated third parties in payment for services rendered
in connection various consulting services. The options are exercisable for a
period of five years, exercisable at $.20 per share, equal to the market value
at grant date. In accordance with FAS 123 these options have been valued
utilizing the Black-Scholes model and included in the financial statements
presented herewith at $53,223, as general & administrative expenses.
All employee stock options valued under APB 25 are presented in the following
Pro-forma Income statements utilizing the Black-Scholes model value.
47
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 14 - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (continued)
Alternative Presentation Of Accounting For Stock Options:
<TABLE>
<CAPTION>
12/31/98 12/31/97
-------- --------
Reported Proforma Reported Proforma
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUE $ 3,078,567 $ 3,078,567 $ 1,926,895 $ 1,926,895
OPERATING EXPENSES:
COST OF REVENUE 1,438,639 1,438,639 1,277,974 1,883,413
MAINT & REPAIR 27,134 27,134 42,246 42,246
ADVERTISING 4,218 4,218 7,519 7,519
GENERAL & ADMIN 1,221,375 4,696,635 806,027 862,727
----------- ------------ ------------ -----------
TOTAL OPERATING EXP 2,691,366 6,166,626 2,133,766 2,795,905
----------- ------------ ------------ -----------
OPERATING INCOME 387,201 (3,088,059) (206,871) (869,010)
INTEREST INCOME 31,035 31,035 1,236 1,236
OTHER INCOME/EXP (25,740) (25,740) (1,656) (1,656)
----------- ------------ ------------ -----------
INCOME BEFORE TAX 392,496 (3,082,764) (207,291) (869,430)
TAX PROVISION 5,887 5,887 344 344
----------- ------------- ------------ -----------
NET INCOME/(LOSS) AVAIL FOR COMMON S/H
$ 386,609 $ (3,088,651) $ (207,635) $ (869,774)
=========== ============= =========== ============
EARNINGS PER SHARE .01 (.05) (.01) (.02)
WEIGHTED AVERAGE
SHARES OUTSTANDING 56,438,560 56,438,560 44,993,841 44,993,841
OPTIONS GRANTED 19,507,000 19,507,000 1,500,000 1,500,000
</TABLE>
48
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 14 - STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (continued)
Additional Disclosures under SFAS 123
<TABLE>
<CAPTION>
1998 1997
---- ----
NO. OF PRICE PER NO. OF PRICE PER
SHARES SHARE SHARES SHARE
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Outstanding Beginning of Year 20,207,621 $ .120 18,707,621 $ .1267
Outstanding End of Year 39,714,621 $ .174 20,207,621 $ .1200
Exercisable at End of Year 39,714,621 $ .174 20,207,621 $ .120
Granted/Exercised/Forfeited/Expired 19,507,000 $ .228 1,500,000 $ .081
During Year
Weighted Average Granted $.240 $.280
Date Fair Value Options Granted during Year
Risk-Free Interest Rate 5.4% 5.4%
Average Expected Life 10 10
Average Expected Volatility 102.69% 72.67%
Expected Dividends $0 $0
Total Compensation Cost in Income $53,223 $45,290
Significant Modifications of Outstanding Awards
N/A N/A
Range of Exercise Prices for Options Outstanding $.0800-.4000 $.1000-.1000
Weighted Average Remaining 8.62 Years 8.85 Years
</TABLE>
NOTE 15 - GENERAL & ADMINISTRATIVE EXPENSES
The following is a list of the major general & administrative categories:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Selling Expenses $ 121,492 $ 129,519
Professional Fees 158,459 129,319
Salaries 350,464 254,551
Allocated Payroll Costs 81,291 39,483
Insurance 95,334 80,074
Other General & Administrative Expenses 414,335 173,081
----------- -----------
Total General & Administrative Costs $ 1,221,375 $ 806,027
=========== ===========
</TABLE>
49
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 16 - INCOME TAXES
Temporary differences and carryforwards which give rise to deferred tax assets
are as follows:
Deferred Tax Assets:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net Operating Loss Carry Forward $ 1,213,547 $ 1,344,994
Allowance for Doubtful Accounts 10,602 9,106
---------------- --------------
1,224,149 1,354,100
Valuation Allowance 1,224,149 1,354,100
---------------- --------------
Deferred Tax Assets $ 0 $ 0
================ ===============
Change in Valuation Allowance $ (129,951) $ 69,561
================= ===============
</TABLE>
The benefit for income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Current:
Federal $ 0 $ 0
State 5,887 334
Deferred:
Federal 0 0
State 0 0
---------------- ---------------
Total $ 5,887 $ 334
================ ===============
</TABLE>
At December 31, 1998 the Company's operating loss carry forward expires as
follows:
December 31,2002 $ 176,746
2003 120,270
2004 318,761
2005 116,490
2006 0
2007 279,456
2008 705,626
2009 850,743
2010 348,301
2011 445,228
2012 207,635
----------------
$ 3,569,256
50
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<CAPTION>
NOTE 17- EARNINGS PER SHARE
Number of Shares
Common Stock outstanding: 1998 1997
---- ---
<S> <C> <C>
Beginning of Year 49,112,690 43,405,546
End of Year 64,034,660 49,112,690
Issued during the year 13,072,053 5,707,144
Weighted Average number of options outstanding 29,559,204 19,207,621
Weighted Average number of outstanding shares 57,026,019 44,993,841
</TABLE>
Shares issuable under various stock options are excluded from the weighted
average number of shares on the assumption that their effect is non-diluting.
NOTE 18 - COMMITMENTS & CONTINGENCIES
LEGAL MATTERS
The Company filed suit against Solucorp Industries, Ltd. (Solucorp) for the
Company's contract and fraud damages arising out of its now-terminated License
Agreement with Solucorp. The Company is represented by the national law firm of
Greenberg Traurig and the New York- New Jersey law firm of Sonageri & Fallon,
LLC in this matter.
In November 1998, Solucorp filed a motion to dismiss the Company's complaint for
grounds based on the inconvenience of Solucorp. Solucorp's motion to dismiss was
denied in December 1998.
In January 1999, Solucorp filed an answer, counterclaim and third-party
complaint which denied all claims asserted by the Company and alleged
counterclaims against the Company seeking damages in excess of $350,000,000 in
compensatory damages and $500,000,000 in punitive damages. The third-party
complaint personally named two of the Company's officers, Lawrence M. Kreisler
and Kevin E. Kreisler, and asserted further claims against other third parties
with whom the Company has no agreement.
In February 1999, the Company filed its answer to Solucorp's counterclaim and
third-party complaint. At this time, the Company further filed a motion to
dismiss Solucorp's counterclaims and third party complaint on the basis that
Solucorp's responsive pleading violated New Jersey court rules which prohibit
the assertion of specific monetary amounts of unliquidated money damages and the
practice of reciting enormous sums of money for damages. The Company's motion in
this regard was granted and Solucorp's counterclaims and third-party complaint
were dismissed without prejudice.
Simultaneously with the grant of the Company's motion to dismiss, the court
hearing the matter entered a mediation order. An initial, non-binding mediation
session has been scheduled for April 1999.
The Company plans to aggressively pursue its interest against Solucorp and is
seeking damages commensurate with the Company's good faith expenditures,
contract damages and fraud.
NOTE 18 - COMMITMENTS & CONTINGENCIES (CONTINUED)
EMPLOYMENT CONTRACTS
The Company has entered into five year employment agreements with Kathi Kreisler
and Larry Kreisler, commencing November 1997. The terms of the Larry Kreisler
agreement call for him to receive an annual base salary of $165,000, with cost
of living adjustments. He will also be entitled to an annual bonus equal to 6%
of the Company's annual net income before taxes, reimbursement of business
related expenses, use of a Company automobile and participation in any employee
benefits provided to all employees of the Company. The Company shall contribute
4% of the base weekly salary to L. Kreisler's 401(k) savings plan.
51
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
The Kathi Kreisler employment contract calls for an annual base salary of
$80,000, with cost of living adjustments. K. Kreisler will be entitled to an
annual bonus equal to 4% of the Company's net income before taxes, reimbursement
of business expenses, use of a Company automobile and participation in any
employee benefits provided to all employees of the Company. The Company shall
contribute 4% of the base weekly salary to K. Kreisler's 401(k) savings plan.
See Note 19 for events that have a material impact on these employment
contracts.
NOTE 19 - EMPLOYMENT CONTRACT COMPENSATION
Kathi Kreisler and Larry Kreisler have voluntarily agreed to payment of certain
compensation due to them under their employment contracts in the form of stock
options. In 1996 and 1997, Kathi Kreisler received $8,325 and $3,500 in
compensation, respectively, agreeing to receive the balance of the compensation
she was entitled to under the existing contract in the form of stock options.
In January 1998, Kathi Kreisler was issued 7,500,000 options to purchase shares
of common stock for $.40 per share over a 10 year period commencing January 1998
for unpaid wages from March 1993 through December 1997.
Lawrence Kreisler was also issued 400,000 options to purchase common stock for
past performance under the same terms as Kathi Kreisler above.
NOTE 20 - CASH RESTRICTED
As a requirement with respect to the Company's Part 373(b) permit application,
the Company had to establish an irrevocable letter of credit with a commercial
bank for $27,500. The Certificate of Deposit is being held as collateral for the
letter of credit, and is required to remain on deposit at the commercial bank
which issued the letter of credit.
NOTE 21 - SUBSEQUENT EVENTS
As of the date of this report, the Company concluded $1,000,000 of debt
financing through AMR, Inc., its wholly owned subsidiary. The package calls for
debt re-payment out of AMR, Inc.'s net pre-tax revenues only and includes a
business-unit-specific profit participation component for the lender.
The Company has engaged in negotiations with various management officials, both
present and prospective, for performance based employment. In February, 1999,
the Board of Directors of the Company has approved approximately four million
options to compensate same, which will vest upon performance. . These options
carry an exercise price which range from $.19 to $ .20 per share, equal to the
market price on the grant date.
52
<PAGE>
EXHIBIT A
KBF POLLUTION MANAGEMENT, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 22- RELATED PARTY TRANSACTIONS
The Company has the following related party transactions:
1) Metal Recovery Transportation Corp. (owned by KBF's President and
Chairman, Lawrence Kreisler) entered into an agreement with KBF to handle all of
KBF's transportation needs. Metal Recovery Transportation Corp. (MRTC) will
assume the liability and provide transportation services to KBF at a rate below
market price. KBF paid MRTC $235,097 in 1998 and 59,914 in 1997. As of December
31, 1998, the Company owed MRTC $26,589.
2) Lawrence Kreisler, President and Chairman of KBF loaned the Company
$53,702 during 1997. The balance owed to Mr. Kreisler at December 31, 1998 is
$0.
3) Certain members of the Board of Directors and advisors to the Company
loaned the Company $60,000. Stock has been issued in repayment of this loan in
1998. (See Note 8 for additional information).
NOTE 23 - RETIREMENT PLAN
The Company maintains a retirement plan pursuant to Section 401(k) of the
Internal Revenue Code covering substantially all employees. While the Company
may elect to match employee contributions, it did not do so in 1998.
NOTE 24 - CONCENTRATIONS OF CREDIT RISK
The Company maintains its cash balances at one financial institution located in
Paterson, New Jersey. The Federal Deposit Insurance Corporation insures accounts
in each institution up to $100,000. Uninsured balances aggregated $330,717 at
December 31, 1998.
53
THIS AGREEMENT made and entered into as of this 1st day of November,
1997, by and between KBF POLLUTION MANAGEMENT, INC. ("Licensee") and LAWRENCE
M. KREISLER ("Licensor").
W I T N E S S E T H:
WHEREAS, Licensor is the owner of all right, title and interest in and
to certain Licensor Patent Rights relating to processes and reagents which are
more fully described on Schedule A, attached hereto, incorporated herein, and
hereinafter referred to as "the Licensor Patent Rights;" and
WHEREAS, Licensee desires to obtain an exclusive license under said
Licensor Patent Rights; and
WHEREAS, the parties wish to mutually release each other from any
claims relating to the ownership of the Licensor Patent Rights or the past use
of the processes and reagents which are the subject of the Licensor Patent
Rights (the "Processes and Reagents").
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, the parties agree as follows:
1. GRANT.
(a) Upon the term, payment of royalty payments, and conditions set
forth herein, Licensor hereby grants to Licensee a worldwide, exclusive license
under the claims of Licensor Patent Rights to use and have used the Processes
and Reagents. The exclusive license herein granted shall apply to, and royalties
due hereunder shall be payable in respect of, any improvements to the Processes
and Reagents or related inventions and Licensor's applications and letters
patent hereinafter arising which relate to the Processes and Reagents. The
Licensee shall pay all costs, including legal fees, incurred by the Licensor in
connection with any future or pending patent applications. Licensor will provide
Licensee with instructions and supervisory services required to implement the
Processes.
(b) Licensor shall disclose to Licensee the details of the Licensor
Patent Rights in writing in form and content as they now exist and as they may
at any time over the term of this Agreement exist. In addition, Licensor will be
available to instruct the Licensee from time to time in the operation and use of
the Processes and Reagents.
2. DISCHARGE OF PRIOR CLAIMS; ROYALTIES; ACCOUNTS.
(a) Upon execution of this Agreement, Licensee shall pay Licensor the
sum of $10,000 and concurrently therewith and in consideration therefor,
Licensor shall and hereby does release, remise and forever discharge Licensee
from any claim of infringement of licensor Patent Rights prior to the effective
date of this Agreement and Licensee does hereby acknowledge and confirm the
Licensor's sole and exclusive ownership of the Licensor Patent Rights and any
improvements thereto or related inventions developed by the Licensor, whether or
not the Licensor is then employed by the Licensee.
(b) Licensee agrees to pay, as hereinafter provided, to Licensor a
royalty in accordance with the provisions of schedule 'B' attached hereto and
incorporated herein on an annual basis, for each excess gallon of fluid
processed by Licensee or its sub-licensees using any of the Processes or
Reagents. Schedule B shall be applied separately to each user so that, for
example, if there are two users (i.e. the Licensee and one sub-licensee), and
each user processes 500,000 gallons, each user will pay Licensor at the rates
listed on schedule B associated with that level of waste processed.
1
<PAGE>
(c) The accounting period for payment of royalties shall be on a
calendar quarterly basis for the respective periods ending on March 31, June 30,
September 30 and December 31 of each year, beginning with the end of the period
first following the date of execution of this Agreement.
(d) Within 30 days of the end of each period, Licensee shall furnish
Licensor with a certified written statement of the quantity of fluid processed
in the preceding accounting period, setting forth the essential information
concerning the use of the Processes and Reagents. Payment shall be monthly
commencing on the 15th day of the month following the first accounting.
(e) Licensee agrees that it will at all times keep complete, true and
correct books of account containing a current record of data in sufficient
detail to enable the royalties payable under this Agreement to be computed and
verified Licensee further agrees to permit Licensor, his duly authorized agent
or an independent certified public accountant to have access for inspection
and/or to make copies of said books of account at reasonable intervals during
business hours. To the extent Licensor requires Licensee to utilize an
independent certified public accountant to inspect the books of account of
Licensee, Licensor and Licensee agree that the cost of such independent
certified public accountant shall be borne by Licensee.
(f) During the term of this Agreement, Licensee shall purchase, from
Licensor or his designated agent, all of the Reagents required for processing
under the Licensor Patent Rights, provided that Licensor shall price the same at
market price.
3. ASSIGNMENT OF SUBLICENSE OF LICENSE. Licensee shall have the right
to sub-license to third parties and to assign the License of the Processes and
Reagents. Sublicenses and assignment of the Processes and Reagents must have
prior written consent of Licensor, which consent shall not be unreasonably
withheld. All Licensee obligations set forth herein shall apply equally, and
with full force and effect on any sublicensee or assignee, which shall agree in
writing to be bound by the terms of this Agreement.
4. DURATION AND TERMINATION
(a) Unless otherwise terminated as hereinafter set forth, this
Agreement and the license under Licensor Patent Rights shall continue in full
force and effect for a minimum of 15 years (the "Minimum Term"), at which time,
this Agreement shall be extended automatically each day for an additional day so
that the remaining term of this Agreement will continue to be five years at all
times. After the expiration of the Minimum Term, either party may, by delivery
of written notice, at any time fix the term of this Agreement at five years
without additional extension. In such event, this Agreement shall end on a date
five years from the date of such notice. In such event, Licensee, Sub-Licensees
and Assignees will no longer use Licensor's Processes or Reagents.
(b) If Licensee at any time defaults in rendering any of the statements
required hereunder, in the payment of any monies due hereunder, or in
fulfilling any of the other obligations hereof, and such default shall not be
cured within 30 days after written notice thereof is given by Licensor to
Licensee, Licensor shall have the right to terminate this Agreement by giving
written notice of termination to Licensee; this Agreement thereby being
terminated 15 days after such notice of termination is mailed by Licensor.
Licensee shall have the right to cure any such default up to, but not after, the
giving of such notice of termination.
(c) Licensor shall have the right to terminate this Agreement by giving
written notice of termination to Licensee in the event of any one of the
following, such termination being effective upon receipt of such notice or five
days after such notice is mailed, whichever is earlier:
(1) Liquidation of Licensee;
(2) Insolvency or bankruptcy of Licensee, whether voluntary or
involuntary;
(3) Failure of Licensee to satisfy any judgment against it;
(4) Appointment of a trustee or receiver for Licensee;
(5) Any assignment by Licensee for the benefit of creditors; or
2
<PAGE>
(d) The waiver of any default under this Agreement by Licensor or
Licensee shall not constitute a waiver of the right to terminate this Agreement
for any subsequent or like default, and the exercise of the right of termination
shall not have the effect of waiving any damages to which Licensor might
otherwise be entitled.
(e) Termination of this Agreement, for any cause whatsoever, shall in
no manner interfere with affect or prevent the collection by Licensor of any and
all sums of money due under this Agreement. Upon termination of this Agreement
for any reason. Licensee's payments require by paragraph 2, but not yet due,
shall become immediately due and payable.
5. INFRINGEMENT. The Licensee shall defend, at its own expense, all
infringement suits that may be brought against it or its sub-licensees based on
or related to the Processes and Reagents. In the event any information is
brought to the attention of Licensor or Licensee that others without benefit of
license are infringing upon any of the rights granted pursuant to this
Agreement, Licensee shall, at its own expense, diligently, seek all available
legal remedies to remedy such infringement. In any of the foregoing suits, the
Licensor shall, at the expense and at the request of the Licensee, give evidence
and execute such documents as the Licensee may require, and the Licensor may, at
Licensee's expense, be represented by counsel of his own choice.
6. CONFIDENTIALITY. The parties acknowledge that the Licensor is
required to disclose to Licensee under the terms of this Agreement confidential,
non-public, proprietary information and trade secrets. Licensee agrees to
maintain the Confidentiality of all such information and to limit its
dissemination to only those employees of the Licensee and sublicenses who have a
need to know and agree to maintain the confidentiality of such information.
7. NOTICES.
(a) All notices, requests, demands and other communications under this
Agreement or in connection therewith shall be given to or be made upon the
respective parties hereto as follows:
To Licensee: KBF Pollution Management, Inc.
1110-A Farmingdale Road
North Lindenhurst, NY 11757
To Licensor: Lawrence M. Kreisler
23 Woodleigh Court
Holbrook, NY 11741
(b) All notices, requests, demands and other communications given or
made in accordance with the provisions of this Agreement shall be in writing,
shall be forwarded by certified mail, return receipt requested, and shall be
deemed to have been given when deposited for delivery or overnight delivery
courier service, addressed as specified in the preceding paragraph, postage
and/or delivery fees prepaid.
8. CONSTRUCTION AND ASSIGNMENT.
(a) This Agreement shall be binding upon and inure to the benefit of
Licensor, its legal representatives, successors, heirs and assigns.
(b) This Agreement shall be binding upon and inure to the benefit of
licensee, but shall not be transferable or assignable without the prior written
consent of Licensor.
3
<PAGE>
(c) This Agreement shall be deemed to be a contract made under the laws
of the State of New York, and for all purposes shall be interpreted in its
entirety in accordance with the laws of said State.
9. NEGATION OF WARRANTY. No representation or warranty has been or is
made by Licensor that the Processes and Reagents may be used, assigned or
sub-licensed free of infringement of patent rights or other proprietary rights
of others; it being understood that Licensor shall not be liable for any loss,
damage, or expense arising from any claim of patent or other propriety right
infringement.
10. MODIFICATION. This Agreement embodies all of the understanding and
obligations between the parties with respect to the subject matter hereof. No
amendment or modification of this Agreement shall be valid or binding upon the
parties unless made in writing, signed on behalf of each of the parties by, in
the case of Licensee, a duly authorized officer, and in the case of Licensor,
Lawrence M. Kreisler, in person, or his authorized representative.
IN WITNESS WHEREOF, the Licensee, through its duly authorized representatives
and Licensor, through Lawrence M. Kreisler, in person, have caused this
Agreement to be executed as of the date first above written.
KBF POLLUTION MANAGEMENT, INC.
Licensee
By: /s/
-----------------------------------------
LAWRENCE M. KREISLER
Licensor
By: /s/
-----------------------------------------
4
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
SCHEDULE B
From To Per Gallon Royalty # of Drums Company Company Net
Gross
<S> <C> <C> <C> <C> <C> <C>
-- 500,000 0.100 50,000 9,091 (1) 875,000 825,000
500,001 600,000 0.099 9,900 1,818 174,998 165,098
600,001 700,000 0.098 9,800 1,818 174,998 165,198
700,001 800,000 0.097 9,700 1,818 174,998 165,298
800,001 900,000 0.096 9,600 1,818 174,998 165,398
900,001 1,000,000 0.095 9,500 1,818 174,998 165,498
1,000,001 1,100,000 0.094 9,400 1,818 174,998 165,598
1,100,001 1,200,000 0.093 9,300 1,818 174,998 165,698
1,200,001 1,300,000 0.092 9,200 1,818 174,998 165,798
1,300,001 1,400,000 0.091 9,100 1,818 174,998 165,898
1,400,001 1,500,000 0.090 9,000 1,818 174,998 165,998
1,500,001 1,600,000 0.089 8,900 1,818 174,998 166,098
1,600,001 1,700,000 0.088 8,800 1,818 174,998 166,198
1,700,001 1,800,000 0.087 8,700 1,818 174,998 166,298
1,800,001 2,200,000 0.086 34,400 7,273 699,998 665,598
2,100,001 3,500,000 0.085 119,000 25,455 2,449,998 2,330,998
3,500,001 5,200,000 0.085 144,500 30,909 2,974,998 2,830,498
------------------------------------------------------------
468,799 96,363 9,274,972 8,806,173
BULK
-- 10,000,000 0.05 500,000 (2)3,500,000 3,000,000
10,000,001 20,000,000 0.04 400,000 7,000,000 6,600,000
20,000,001 50,000,000 0.03 900,000 17,500,000 16,600,000
50,000,001 100,000,000 0.02 1,100,000 35,000,000 34,000,000
---------------
2,800,000 63,000,000 60,200,000
</TABLE>
For the rights and privileges granted under the License Agreement, the License
shall pay to the Licensor, until this License is terminated as herein provided,
a royalty on sub-licensing or other assignment sales by the Licensee of eight
percent (8%) of the gross royalty revenues, calculated on a site specific
basis.
PAYMENT OF ROYALTIES AND FEES. It is expressly agreed and acknowledged by the
parties hereto that no royalty or fee hereunder shall be payable to the Licensor
until such time as (a) the Licensee has directly used or otherwise arranged for
the use of the Licensed Material on no less than one million five hundred
thousand gallons (1,500,000) of wastewater at the Licensee's facilities or
otherwise, and (b) the Licensee has a cumulative process capacity of no less
than thirty million gallons per year. The gallons reflected in this Schedule B
represent those in excess of 1,500,000 and no royalties are due on the first
1,500,000 gallons processed. Further, the payment and royalty provisions of this
Schedule B are to be applied on an annual basis.
- ---------------------
(1) To Calculate Gross Income for Drum Waste, an average income of $1.75 per
gallon was used.
(2) To Calculate Gross Income for Bulk Waste, an average income of $0.35 per
gallon was used.
5
EXHIBIT 10.8
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 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 name 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
1
<PAGE>
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 principle 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 form 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, sample 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 License has entered into a
partnering, licensing, sales, marketing, contracting, or other remediation,
recovery 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 size 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
train 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 approval 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 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 in to 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 tine 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 on 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, writing, 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 any 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 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 regents 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 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 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 irrepairable 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.
ARTICLES 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
be 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 the 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
therefore shall 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
circumstances 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 $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 throughout figures, and, if
travel to any site 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 parties) 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 part 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 throughout 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 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 the
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
form 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 transaction 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 the 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 interferring 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 the 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, when the Licensor has the right to
cancel the exclusive features of this license and may thereupon
license others in the Grant Territory. In the 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 owning from 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 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.
(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) Increase 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 disclosure the identify 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 size 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 of 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 of Affiliates divulge any Know-how taught or otherwise
discovered.
(a) Delimination 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, writing, 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;
(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 foregoing 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 by 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 dated 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 Covenants 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 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/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 Materials 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)(iv) 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 days 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
the 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 License 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 this 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.
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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, as 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 terms 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 owning 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 the 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 payable 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
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hereunder in United States dollars in the United States of America shall be
secured in writing by the Licensee who 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 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 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
12.01 Notices. All notices, consents, requests, demands and 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 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 Licensee shall furnish to the Licensor in
writing by notice given in the manner set forth above.
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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 by 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 reasonably 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 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]
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ATTACHMENT A: LETTERS PATENT: LICENSED MATERIAL
Method for Recovering and Separating Metals from Waste Streams
by
Lawrence Kreisler
FIELD OF THE INVENTION
The present invention relates generally to a method for removing
precious and non-precious metals from hazardous and non-hazardous waste streams,
and more particularly to a method for recovering and separating such metals.
BACKGROUND OF THE INVENTION
Treatment and reduction of concentrations of metals in metal bearing
industrial waste streams to environmentally acceptable levels has been a long
term problem. It is important to be able to treat such wastes and remove metals,
hazardous materials, and toxic substances, with minimal amounts of solid wastes
remaining in a cost effective manner. The ultimate solution to such
environmental problems, recovery, recycling, and reuse of metals contained
within waste streams has been inadequately addressed.
In those instances where metals, compounds, and hazardous materials are
not separated from waste streams, but are transported to special waste disposal
facilities for treatment or storage, the metals are not recovered, leaving them
to be disposed of with other unprocessed or partially processed wastes. As a
result, not only is there no recycling with the attendant potential for economic
profit or cost reduction, but waste disposal and waste storage problems are
created as well. Such waste disposal and waste storage problems are associated
with high cost and long waste storage time periods. Often, the wastes generated
are considered to be hazardous. Under many environmental statutes, hazardous,
toxic, and/or dangerous wastes remain the liability
<PAGE>
2
of the waste generator, as long as these wastes exist in the environment. Such
long term liability remains with the generator, even though the wastes may have
been treated and placed in a secure landfill for disposal.
Processes for removing metals from waste streams including ion exchange
and electrolysis have heretofore been known, but theses process are limited. Ion
exchange is costly, slow, and cumbersome to use, and in order to be effective,
the waste water being treated must be passed through a significant amount of
ion-exchange resin, usually in the form of a filter bed, making it effective, in
most cases, for only treating small volumes of waste water. The complex
fabrication process and sophisticated synthetic chemistry required by ion
exchange metal recovery technology significantly contributes to the expense of
its use to purify liquid waste streams. The cost and complexity of ion exchange
also limits the variety of resins available.
Although ion exchange resin beds may be regenerated, the waste waters
from regeneration must often be retreated to remove bulk contaminants and then
usually passed through the ion exchange resin again to eliminate hazardous
materials. Thus, ion exchange is a cumbersome process, and therefore
impractical, especially for large volumes of waste water in a
continuous-treatment process, as compared to using ion-exchange in a
batch-treatment process.
Electrolysis is also expensive, requires significant maintenance,
employs other resources, may create its own waste disposal problems and is
energy intensive. Electrolytic recovery is, at best, 70%-80% efficient. Besides,
the electrolyte systems available today are very sensitive to the presence of
contaminants.
Use of either ion exchange or electrolytic recovery of metals from
waste streams requires separation of streams for processing, thereby ultimately
creating
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3
multiple waste streams. This multiplicity of streams results in a costly waste
removal process for the waste stream generator.
In contrast to the ion exchange and electrolytic metal recovery
processes, one of the more acceptable technologies for treating waste water is
based on a settling process, using fixating agents such as hydroxides and
sulfates. The fixating chemicals are added to water in a settling tank to absorb
or otherwise transform the contaminants into materials which settle to the
bottom of the tank. This technology uses comparatively simple equipment and
permits the processing of large volumes of waste waters, without adding
materials which would result in an environmentally undesirable effluent stream.
However, in many cases, use of ordinary settling processes fails to reduce
contaminant concentrations to levels low enough to meet the statutory
requirements, without using excessive amounts of materials, over a protracted
processing time. Current settling processes often produce undesirably large
quantities of solid hazardous or toxic wastes in the form of sludge. The sludge
cannot, for the most part, be effectively regenerated. Thus, using current
settling techniques for waste water treatment, the resulting sludge product is
yet another waste material that must be disposed of in a secure landfill without
benefit of recycling. In turn, this process results ultimately in the necessity
to clean the environment in the long term future.
As a result of problems associated with the above noted technologies,
waste water generators have been forced to consider alternative methods which
employ the addition of metal complexing agents to waste water streams and sludge
of various industrial processes.
For example, U.S. Patent No. 3,966,601 (Stevenson, et al.) discloses a
purification process comprised of mixing a soluble heavy metal salt and a heavy
metal dithiocarbamate. U.S. Patent No. 4,387,034 (Unger, et al.) discloses a
collector for
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4
use in concentrating metal values in ores by flotation, the collector being
comprised of a mixture of 0-isopropyl N-ethylthionocarbamate and o-isobutyl
N-methylthionocarbamate.
U.S. Patent 4,578,195 (Moore, et al.) discloses a process for treating
aqueous effluents to remove polluting metallic elements wherein the effluent is
contacted with a poly(dithiocarbamate) chelating agent. U.S. Patent 4,612,125
(Elfline) discloses a method for removing heavy metals from waste water streams,
comprising treating the waste water with sulfur-containing compounds, such as
sodium tri-thiocarbamate.
U.S. Patent 4,678,584 (Elfline) discloses a method for treating a
liquid containing a heavy metal comprising contacting the liquid with a mixture
of sodium diethyldithiocarbamate and sodium tri-thiocarbanate. U.S. Patent
4,943,377 (Legare) discloses a method for removing heavy metals from waste
effluents comprising mixing the effluents with a solution of a sulfur compound
such as sodium polythiocarbamate. U.S. Patent 5,372,726 (Straten) discloses a
method for treating water polluted by metal ions comprising the steps of adding
thiocarbamide, potassium or sodium hydroxide, and potassium or sodium
hyposulfite.
U.S. Patent 5,264,135 (Mohn) discloses a method for treating sludge
from industrial waste water streams comprising the steps of adding a metal
complexing agent to the sludge such as dimethyl-dithiocarbamate or a salt
thereof. The metal complexing agent is added to a sludge thickening tank prior
to de-watering in a filter press to form a sludge that contains 60% to 85%
moisture by weight. Mohn does not disclose use source separation of the effluent
throughout the process and does not disclose adjusting the pH of the waste
solution to the optimal point of insolubility for the various metals involved.
Mohn characterizes the sludge as being fixated, thereby allowing disposal in
landfills.
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5
In addition, a number of metallurgical processes for recovering metal
have also been disclosed. For example, U.S. Patent 3,899,322 (Yosim et al.)
discloses a process for recovery of noble metals from scrap comprising melting
the scrap at a temperature between 800(degrees)F and 1,800(degrees)F. U.S.
Patent 4,135,923 (Day) discloses a process for the extraction of metals from
metallic materials comprising heating a lead-free mixture of metals and
separating the metals in a molten state.
U.S. Patent 5,008,017 (Kiehl, et al.) discloses a process for
recovering metals from waste liquids, including a step for obtaining pure metal.
A dewatered sludge is heated for a period from about thirty minutes to about one
hour at 900(degrees)F, to recover substantially pure silver. However, this
metallurgical process for recovering metals from a metallic sludge is very
complicated, and requires a metal complexing agent be applied to the metallic
sludge of waste streams.
None of the known prior art technologies separate and also recover a
variety of metals from one or more waste streams in order to use the metals as
valuable commercial products, nor do they disclose the recovery, recycling, and
reuse of the recovered metals. In those prior art processes using reagents to
cause fixation of metals and to produce a fixated hydroxide sludge byproduct,
the resulting byproducts must be sent to and disposed of in a secure landfill or
alternative receiving site.
For the foregoing reasons, there is a need for a method for removing,
separating, and recovering metals and groups of metals and groups of metals,
such as transition metals, alkali metals, and alkaline earth metals. An
efficient method for removing, separating, and recovering such metals in a cost
effective manner with a high degree of recovery from waste streams and with
minimal amounts of unprocessed solids and sludge remaining in the environment is
needed. Illustrative, but not limitative, of the metals that such a method can
be capable of separating, removing and recovering are such precious and
non-precious metals as aluminum, barium, beryllium, calcium, chromium,
<PAGE>
6
cobalt, copper, gold, iron, lead, magnesium, manganese, nickel, platinum,
potassium, silver, tin, vanadium, zinc, and the like.
Such a process should also be capable of removing other metals, such as
antimony, arsenic, selenium, thallium, and the like from waste streams with at
least 50% removal.
<PAGE>
7
SUMMARY OF THE INVENTION
The present invention is directed to a method for recovering and
separating precious and non-precious metals from hazardous and non-hazardous
industrial waste streams. The method of the present invention removes,
separates, and recovers such metals in a cost effective manner with more than
95% removal from waste streams and with minimal amounts of unprocessed solids
and sludge remaining in the environment.
The method of the present invention for separating and recovering
precious and non-precious metals from industrial waste stream generally
comprises: adjusting the pH of an industrial waste stream containing the
precious and non-precious metals to be recovered; adding a metal complexing
agent to said waste stream to form metal ions of the metals to be recovered;
adding a particle growth enhancer to promote the aggregation of said metal ions;
adding a flocculating agent to increase the particle size of said metal ions and
form a solution thereof; dewatering said solution to form a sludge and a
supernatant; dewatering and drying said sludge to form an ionic metal
concentrate; and, melting said concentrate to selectively remove and recover a
desired metal therefrom.
<PAGE>
8
DETAILED DESCRIPTION OF THE INVENTION
In accordance with the present invention, a method for recovering and
separating metals from waste streams, comprises the following steps:
pH of a waste stream is adjusted;
a metal complexing agent is added;
a particle growth enhancer is added;
a flocculating agent is added resulting in a solution;
the solution effluent is then dewatered, preferably using a plate and
frame press, resulting in a sludge and a supernatant; and
metals are recovered from the sludge upon melting, drying and
dewatering a filter cake with melting enhancers so as to permit
selective removal of a fused metal-bearing concentrate for casting into
ingots to be sold to primary smelters.
A suitable base such as sodium hydroxide (NaOH) or calcium hydroxide
(Ca(OH)2) or a suitable acid such as hydrochloric acid (HCl) can be used to C1
the pH of the waste stream from about 5 to about 13, preferably from about 7 to
about 12, depending upon the initial pH of the waste stream to be treated and
the metal(s) desired to be recovered.
The metal complexing agent that can be used comprises a mixture of a
carbamate compound, an inorganic base, and water. The carbamate that can be
employed are those selected from the group consisting of thiocarbamates,
dithiocarbamates, alkylthiocarbamates such as dimethyldithiocarbamate and
diethyldithiocarbamate, and salts thereof. The inorganic bases that can be used
are those selected from the group consisting of sodium hydroxide, potassium
hydroxide, and the like. A preferred compelxing agent comprises a mixture
<PAGE>
9
consisting of about 40% by weight sodium dimethyldithiocarbamate; about 10% by
weight sodium hydroxide; and, about 50% by weight water.
The particle growth enhancer is employed to promote an ionic exchange
with the metals in solution and to provide a foundation upon which the ionic
metal particles can grow. The preferred particle growth enhancer used is an
aqueous solution of calcium chloride comprising about fifty pounds (50 lbs.)
calcium chloride dissolved in about 100 gallons (gals.) of water in combination
with an ionic exchange promoter. The ionic exchange promoter employed is ferric
chloride (FeCl3) which is commercially obtained as a 38% liquid solution. The
amount of ionic exchange promoter used can range from about 0.03% to about 0.4%
by volume.
The flocculating agents employed in the method of the present invention
are commercially obtained material typically available as solid, granular ionic
polymers having a medium anionic charge. These flocculating agents, together
with the particle growth enhancer and the ionic exchange promoter, cause the
ionic metals in solution to increase in size and weight, precipitate, and
settle. Illustrative flocculating agents that can be used include Clarifloc
A-3020 available from Poly Pure, Inc., Parsippany, New Jersey; Floculite 402
available from Dubois, Cincinnati, Ohio, and J. Flock 711 available from
Jamestown Chemical, Westhaven, Connecticut. The flocculating agent is prepared
as a diluted aqueous solution consisting of one pound of the flocculating agent
in 65 gallons of water and then further diluting this concentrate in 200 gallons
of water. This dilute solution is then used in concentrations of from about
0.001% to about 0.01% by volume. The preferred flocculating agent employed is
Clarifloc A-3020.
When the industrial waste stream to be treated contains organic
compounds, they are initially degraded or destroyed by using a suitable
oxidizing agent such as sodium hypochlorite, hydrogen peroxide at 35% to 50%
concentration, ultra violet (UV)
<PAGE>
10
radiation or ozone (O3). When an oxidizing agent is used, the waste stream
should be monitored to assure that an oxygen reduction potential (ORP) of about
+350mv is achieved and maintained for a period of about 15 minutes before
treating the waste stream with the method of the invention.
Similarly, when the industrial waste stream to be treated is found to
contain chelating agents (e.g., hexavalent chromium) these agents are initially
degraded or destroyed by using a suitable reducing agent such as sodium
metabisulfite, sodium sulfide, and the like. The waste stream should be
monitored until the presence of the undesirable chelating agent can no longer be
detected.
The method of the invention includes the following steps:
a. Waste streams to be treated are analyzed to determine the types of
wastes and metals present, whether the waste streams contains precious
metals or non-precious metals; volatile organic compounds (VOCs);
solids above 5% by volume, chromium above an average of 15 parts per
million (ppm); and cyanide.
All incoming wastes are classified by priority metal which in a given waste
solution to be treated, is the metal found most prominently. "The most prominent
metal is analytically identified. For example, a waste solution containing 1000
ppm of copper and 200 ppm of cadmium has copper as the priority metal and
cadmium as the secondary metal.
b. Incoming waste streams are separated according to the priority metal,
identified by the analytical procedures for each respective waste
stream. Waste solutions with common dominant metals are mixed together
for processing. For example, a solution containing 1000 ppm or more of
copper
<PAGE>
11
is mixed only with a waste solution containing a priority metal of
copper, since to do otherwise would reduce the concentration of copper
in the final metal recovery product. Recovery product is sold to
primary smelters based on the level of the priority metal. As the
priority metal is removed, the secondary metals are all concentrated
and the process moves to the next level based on the new priority metal
selected from the remaining waste solution. Thus, a continuing
recycling process takes place removing each priority metal
successively.
c. The pH of the waste streams is adjusted, as required, to increase
insolubility of the priority metal with ionically bonded compounds and
to precipitate ionic metal particles upon addition of a reagent. The
optimum pH level will vary from 7 to 12 depending on the priority metal
being addressed in the waste solution. For purposes of selective
separation, the priority metal is the most prominent metal determined
by analysis, i.e., the metal which the aforementioned analysis reveals
to be present in the highest concentration.
d. The reagent, in the form of a metal complexing agent is added to
chelate certain metals from ionically bonded compounds. These metals
will ultimately be removed and recovered from the waste water. The
metal complexing agent comprising a dithiocarbamate and preferably
comprising about 40% sodium dimethyl dithiocarbamate, about 10% sodium
hydroxide (NaOH) and about 50% water is used.
e. In the continuous treatment process described herein, 30 gallons of the
aqueous calcium chloride particle growth enhancer solution is first
added to a primary reaction tank containing 1,400 gallons of waste
water as described herein below. When the contents of the tank are
processed, CaCl2 is added to the flash mix tank continuously.
<PAGE>
12
f. When the ferric chloride ionic exchange promoter is used, it is added
to the primary reaction tank used during the continuous treatment
process and is also added directly to the tank in the batch treatment
process.
g. Sodium hydroxide (NaOH) or calcium hydroxide Ca(OH)2 is added to the
mix, the choice of which to use depends on the solution's sensitivity
to pH change. A solution which is heavily buffered (resistant to pH of
change) is first graded with Ca(OH)2 and then fine-tuned with NaOH. On
the other hand, a solution that has little or no buffering and is thus
sensitive to pH change, will be adjusted with NaOH only. The hydroxide
is added to adjust pH to the optimum level for the priority metals, as
discussed more fully below:
h. As described above, flocculating agents are added to the mix, as
described below, to cause the ionic metallic precipitant to increase in
size and weight and settle.
As diluted working solution is used, proportional amounts of the
flocculant concentrate and water are added to replenish the working tank as
make-up flocculating agent.
The flocculant polymer solution is added to the continuous treatment
process by injecting it into the flash mix tank on a continuous basis. The
amount of flocculant polymer added is in proportion to the amount of dissolved
and suspended solids in the waste being treated. The flocculant is preferably
used in concentration ranging from about 0.0001% to about 0.01%.
i. Oxidation and reduction are used, as required. Waste solutions
containing
<PAGE>
13
both hexavalent chromium and cyanide ions, such as certain plating
solutions, requires oxidation first and reductin second to ensure that
metal separation is complete. Thus, there are cases requiring both
oxidation and reduction.
In those cases where oxidation and/or reduction is required prior to
processing the wastes, the wastes are first processed in a batch operation as
described under "Batch Treatment" below.
j. Heavy particles settle resulting in a sludge and the supernatant is
clarified and discharged. The sludge is thickened and dewatered, and
metals are recovered from the resulting thickened and dewatered sludge
as described below.
k. The present invention recovers metals in the form of a dried powder.
The metal-recovery dried powder may be either melted as specified and
preferred in the present invention or, alternatively, the
metal-recovery dried power may be sold to the smelter, where the
product is used as feed stock in place of a virgin product in the
smelting operation.
The final and preferred step in the metal recovery of the present
invention occurs with the melting of the ionic metal compounds. A flux,
preferably a mixture of sodium tetra borate pentahydrate and soda ash, is added
to facilitate this melting step. Sodium tetra borate decahydrate and sodium
tetra borate anhydrous may be used in place of sodium tetra borate pentahydrate.
The ionic metal compounds are melted and then allowed to cool, resulting in
solid recovered metal products.
The resulting metals are recovered and separated by priority metal and
are sold to secondary and primary smelting operations. The present
<PAGE>
14
invention provides the raw material feed stock for the smelting recovery of the
metals recovered as ionic compounds from waste streams. For example, a recovered
product containing copper as the primary metal is sold to a primary copper
smelter.
Waste streams containing large amounts of metals such as concentrations
equal to or greater than 2000 ppm (0.02% dissolved solids) and specific
solutions such as photographic wastes are treated in batch. In the batch
treatment, all operations occur in the same treatment vessel, i.e., a volume of
waste is placed in a tank, reagent is added, and the solution is allowed to
settle, leaving the clean supernatant at the top and prepared and/or ready for
discharge.
In comparison to batch treatment, continuous treatment is used for
waste solutions and in those cases where the volume of the waste stream is in
excess of 2000 gallons. In continuous treatment the waste solution is treated in
different tanks, each tank being used generally for a different purpose. The
wastes are moved from one tank to another allowing sufficient residence time for
the solution to be processed in each tank and for the required chemical
processes to take place. Solutions move at rates varying from about 5 gallons
per minute [gpm] to about 5000 gpm depending on the level of dissolved solids
being removed from the solution.
In continuous treatment, the wastes are moved from a primary treatment
tank to a flash mix tank, to a flocculatin tank, then to a gravity settler tank,
then to a filtration system, and finally to discharge. The solids that settle in
the gravity settler are continuously removed to a sludge settling tank prior to
de-watering. Continuous treatment operation is used to move large volumes of
waste containing low levels of dissolved
<PAGE>
15
contaminants rapidly through treatment.
Both the continuous treatment and batch treatment operations produce
sludge. The amount of sludge produced is directly related to the amount of
dissolved metal in the incoming waste. As an example, a solution containing one
pound of dissolved salts will produce approximately one pound of sludge.
Moreover, an input containing 60,000 mg/liter of copper and 0.15 mg/liter of
lead would be typically left with 0.8 mg/liter copper and 0.02 mg/liter lead,
which means that 59,999.02 mg/liter copper and 0.13 mg/liter lead could be
recovered by the process of the present invention. In such case, the recovery
rate for copper is 99.9987% and for lead 86.666%.
<PAGE>
16
CONTINUOUS TREATMENT OPERATION
In continuous treatment, incoming wastes are analyzed and are placed in
a tank depending on the level of metal in the waste stream, volume to be handled
and the reagents needed to cause metal separation.
Details on the continuous process are as follows:
a. The waste stream is analyzed.
b. All incoming waste streams are classified by priority metals.
c. A solution containing a priority metal of copper, for example, is
adjusted to a pH of 6 plus or minus 1 with an acceptable pH variation
of plus or minus 1, i.e., a pH range of from about 5 to about 7. The pH
is adjusted using NaOH, Ca(OH)2 or HCL depending on the initial pH of
the waste stream.
d. Once the pH of the waste is adjusted to the desired level, the metal
complexing agent of the present invention is added. The waste being
treated is allowed to mix with the metal complexing agent for about ten
minutes. As above described, the complexing agent preferably comprises
about 40% sodium dimethyl-dithiocarbamate, about 10% sodium hydroxide
and about 50% water.
e. After mixing the wastes being treated with the metal complexing agent,
calcium chloride solution is added and allowed to mix with the waste
for another ten minutes. The amount of calcium chloride added depends
on the level of dissolved metals in the solution being treated.
<PAGE>
17
f. Ferric chloride can be added, as required.
g. Additional pH adjustment, using sodium hydroxide or calcium hydroxide
may be required. The solution is then fed to a flash mix tank at a rate
of from about 5 gpm to about 50 pgm, depending on the amount of
dissolved and suspended solids where additional calcium chloride and
flock are added.
Where the total suspended and dissolved solids are below 0.01% the flow
rate could be 50 gpm. This flow rate decreases proportionally as the level of
dissolved and suspended solids increases, to where a concentration of 0.5% will
require a flow rate of approximately 5 gpm. Flow rates are dependent on the
level of dissolved and suspended solids and the type of equipment being used.
h. The solution then travels to the flocculation tank where it is
thoroughly mixed allowing particle size growth. The residence time in
the flocculation tank is dependent on the level of dissolved solids in
the waste solution being treated. The tanks used are sized to allow a
minimum of 10 minutes residence time at a flow rate of 50 gpm. For the
flocculating reagent to work properly, a minimum residence time of 10
minutes is required in 1,400 gallons for proper mixing and reaction.
i. After the required residence time in the flocculation tank, the waste
is fed to a flash mix tank where additional calcium chloride is
injected into the waste stream to act as a binder to which the
precipitated particles bind and begin to form particles of increasing
size.
j. The solution is then passed into a clarification chamber with
sufficient surface area to allow the heavy particles to settle to the
bottom of the
<PAGE>
18
clarification chamber. Clean or clarified solution is removed from the
top of the clarification chamber and passing thereafter into a sand
filter to remove any small particulate matter than escaped the
flocculation and settlement stages and then the effluent goes to a
discharge monitoring tank for pH monitoring and discharge.
k. At this point, the solution is fed to the gravity settling tank where
the supernatant is separated from the solids. The solids settle to the
bottom and are removed to the sludge thickening tank prior to
dewatering. The supernatant flows to the filter and finally to
discharge. Solid heavy material is removed from the bottom of the
settlement chamber periodically. The settlement chamber, or gravity
settler tank is one in which clarification of the solution occurs by a
process of settlement. The resulting solid or sludge is placed in a
sludge thickening tank where it is further settled into a conical
shaped bottom of a large holding tank. As solids accumulate at the
bottom of this settlement tank, they are drawn off by a pump and moved
into a plate and frame filter press for de-watering. During this
operation, excess water is removed from the sludge. The excess water is
recirculated back into the treatment system for further use.
l. This process produces an ionic metallic sludge with high metal
concentrations without the use of large quantities of reagents such as
hydroxides, sodium borohydrate that would be placed in landfill for
disposal.
De-watered sludge is removed from the filter press. This material can
contain between 25% and 50% moisture by weight. The dewatered sludge or filter
cake is placed in infra-red dryers where the moisture content is brought down to
less than 20% by weight. The dryers operate at temperatures of between about 350
degrees F to about 600 degrees F depending on the metal
<PAGE>
19
content and the desired level of moisture for the recovered product.
The resulting volume of recovered metal powder is reduced over the
previous de-watering step by as much as 30% to 50% by volume. The drying process
drives off the moisture and other compounds that are not metallic leaving the
metals in the resulting dry materials heavily concentrated.
m. The recovered dried metal powder is now converted to metallic metal by
melting the recovered metal powder in gas-fired or electrical induction
melting ovens. The melting process is conducted in two stages and
depending on the feed stock, can produce recovered metal ingots of from
about 50 to about 90 percent purity.
After de-watering and drying, the recovered metal powder is either sold
as a commodity or is further converted to metal ingots. To covert the recovered
metal powder to metal, which may be in the form of ingots, the powder is placed
into the melting oven where additional reagents are mixed with the recovered
metal powder. The reagents added are sodium tetra borate pentahydrate and soda
ash.
Sodium tetra borate pentahydrate is added to the powder to cause the
metals to liquefy once they reach the melting point. Soda ash is used to cause
the metal to separate from the flux. Flux is the combination of the soda ash and
sodium tetra borate pentahydrate (borax) used during the melting process.
The powder is first mixed with sodium tetra borate pentahydrate and
melted to cause a reduction in volume and produce a homogenous mixture of metal
and borax. This mixture is poured, cooled and re-melted in a second
<PAGE>
20
melting oven where soda ash is added to cause separation in the melted state.
This material is poured and allowed to cool.
Once cooled, the recovered metal, which has settled to the bottom of
the mold is separated from the slag comprised of the flux layer that is on top
of the recovered metal. The slag is reused in the next melt.
For those melts that produce clean black slag, the black slag is sold
as a cleaning compound. For those melts that produce a semi pure slag, the slag
is sold along with the metal to a primary smelter purchasing the recovered
metal.
The temperature in the melting oven is brought up to approximately 1800
degrees F and the materials are allowed to melt until it is verified that all
the material in the crucible is liquid. This usually takes from 2-4 hours
depending on the temperature of the oven when it is first charged. For example,
a melt from a cold over will take about 4 hours, whereas a melt from a hot oven
will usually take about 2 hours. At this point, the molten materials are poured
into a cast iron buggy or mold that has been pre-heated and coated with carbon
to prevent the molten material from sticking to the buggy walls. The purpose of
the preheating is to drive out any residual moisture and ensure that the surface
is not cold when pouring in the molten bath. If the mold were cold, it might
break from the sudden heat change or it might cause the molten bath to spray
molten slag out of the mold.
The material is allowed to cool and solidify at which time the
resulting solid is removed from the buggy and separated in two different layers.
The material is then placed into a second melting oven where the temperature is
brought up to approximately 1800 degrees and two additional reagents are added,
to
<PAGE>
21
induce the material to separate into three layers.
The lower layer consists of 60% to 90% of the recovered metal such as
copper or nickel. The second or middle layer consists of pig iron containing all
of the remaining metals, and the top layer consists of slag, i.e., the flux
containing the reagents that were added, one to each melt. The resulting
products from this operations are solid and are commercially recycled thus
completing the recycling of the components in the wastes. These materials can
then be sold as feed stock for primary smelting operations.
The above noted procedures to produce recovered metal ingot are
representative of each time the sludge is removed from the filter process. The
amount of sludge removed is directly related to the amount of dissolved salts in
the waste at the beginning of the metal recovery process. For example, a
solution containing 1 pound of dissolved salts produces approximately 1 pound of
sludge.
BATCH TREATMENT
Batch treatment takes place in one of a number of different tanks and
is a process that may be completed in the starting tank. A cycle of operations
is completed, and the effluent is removed for discharge, while the metal
recovery products are either removed or utilized for future batch processes, and
the cycle is repeated.
This batch recovery method is used for solutions containing precious
metals above 250 mg/liter and for non-precious metal solutions containing
concentrations of a priority metal above 0.2% (2,000 mg/liter).
<PAGE>
22
In the batch process, one cycle of operations is completed and the
effluent is removed for discharge to the sewer while the metal recovery products
are either removed or utilized for future batch process and the cycle is
repeated.
Upon completion of analysis and selective separation of priority metals
by the aforementioned processes, wastes containing precious metals are treated,
as follows:
a. All wastes containing precious metal with low chromium content,
generally less than 10 ppm of chromium, are placed in a separate tank
dedicated to such wastes and are subjected to batch treatment
operations.
b. Chromium present in wastes at levels greater than approximately 10 ppm
interferes with removal of other metals from solution. When the
chromium concentration of waste to be treated is generally greater than
about 10 ppm, the waste must be separated from other waste treatment.
All wastes containing precious metals with high chromium content are
placed in a separate batch treatment tank to undergo batch treatment
for high chromium and precious metals. The high chromium waste is then
separately treated as elsewhere described herein.
EXAMPLES
The following illustrative examples are set forth to demonstrate the
utility of the present invention of a number of different waste streams.
EXAMPLE 1
Example 1 illustrates treatment of a solution containing cyanide and
<PAGE>
23
metals in concentrations more than 500 mg/liter.
Large volumes are handled in an appropriate size tank. The waste is
transferred to the treatment tank using an air activated diaphragm pump. The
waste is then tested for pH and Oxygen Reduction Potential (ORP).
The solution is maintained at a pH above 10.5 with the addition of
caustic while the cyanide is oxidized using oxidizing reagents to maintain an
alkaline state within the solution. When the solution reaches and maintains the
desired ORP for the desired length of time, a sample is taken and analyzed for
cyanide content. This method controls the generation of heat and prevents
uncontrolled chemical reactions. When all the cyanide has been oxidized and the
batch is low enough in metal content, any remaining wastes are integrated into
the regular treatment for metal recovery.
If the metal level is above 1000 mg/liter, the batch will be completed
in the same treatment tank. If the metal level is less than 1000 mg/liter, the
solution is fed into a continuous treatment operation containing the same
priority metal.
All unused oxidizer is driven off from the solution by reducing the pH
to a point where the oxidizer will be liberated as a gas. The liberated gas is
trapped by an air scrubbing system attached to the treatment tanks and
neutralized prior to being discharged to the atmosphere. This prevents the
oxidizer from neutralizing the metal complexing agents that will be added to the
solution during this operation.
The ionic metal will drop out of the solution and become particulate
matter. To increase the rate of settlement, the pH of the solution will be
<PAGE>
24
adjusted to an ideal point of insolubility for the priority metal and a bindery
agent such as calcium chloride will be added.
The solution is allowed to mix for a predetermined time at which point
a polymer is added to cause the particles to increase in size. At this point,
mixing is terminated and the solution is allowed to settle. The clean effluent
or supernatant is removed for monitoring and discharge, while the ionic metal
sludge that settled to the bottom of the tank in removed and placed in the
sludge thickening tank prior to de-watering, drying and melting. Table I
illustrates details regarding quantities of reagents added:
<PAGE>
25
TABLE I
Treatment Reagents for Example 1
Step Operation Reagent Quantity
1 100 gallons H2O 3:1
2 pH to 8 Ca(OH)2 30 gr.
3 Complexing Agent NA2S 1 gal.
4 Complexing Agent * 0.5 gal.
5 pH 9.5 CA(OH)2 3 gr
Elemental analysis of Example 1 metals:
Element Amount Measurement Procedure
(United States Government)
Arsenic less than 0.050 SW-846 6010 ICP
Aluminum 2362.000 SW-846 6010 ICP
Barium 68.690 SW-846 6010 ICP
Beryllium less than 0.010 SW-846 6010 ICP
Cadmium less than 0.001 SW-846 6010 ICP
Hexavalent less than 0.001 SM17-418.1 UV
Chromium
Copper 418.000 SW-846 6010 ICP
Iron 203.400 SW-846 6010 ICP
Lead 3.280 SW-846 6010 ICP
Manganese 1.030 SW-846 6010 ICP
Mercury 0.073 SW-846 7470 AA
Nickel 0.500 SW-846 6010 ICP
Phenol less than 0.020 SW-846 9065 UV
Selenium less than 0.050 SW-846 6010 ICP
Silver 9.480 SW-846 6010 ICP
Zinc 0.620 SW-846 6010 ICP
<PAGE>
26
The physical analysis of Example is:
Physical Attributes Results Measurement Procedure
(United States Government)
Color Dark
Brown
Cyanide less than 0.02 SW-846 9010
Flash Point greater than 200 degrees F SW-846 1010
Odor None
pH -0.21 SW-846 9040
Percent Solids less than 1% SM17 2540b & 2540D
Specific Gravity 1.02
Total Petroleum NA SM17 418.1
Hydrocarbons
Viscosity Medium
Layers When 1
Standing
Percent Moisture NA
EXAMPLE 2
In this example, a metal waste stream containing hexavalent chromium is
treated. The pH of the solution is reduced to less than 2.0. A reducing agent
such as sodium mera-bisulfate is added and allowed to react with the waste for
approximate 20 minutes to ensure complete contact and reduction of the
hexavalent chromium to trivalent chromium.
The pH of the solution is adjusted to 3.5 and a volume of the metal
complexing agent will be added. The pH will rise with this addition and the
ionic metal will drop out of the solution and become particulate matter. To
<PAGE>
27
increase the rate of settlement, the pH of the solution will be adjusted to the
ideal point of insolubility for the priority metal and a bindery agent such as
calcium chloride will be added.
The solution will be allowed to mix for a predetermined time at which
point a flocculating agent will be added to cause the particles to increase in
size. Mixing will be terminated, and the solution will be allowed to settle. The
clean effluent or supernatant will be removed for monitoring and discharged to
the sewer while the ionic metal sludge that settled to the bottom of the tank
will be removed and placed in the sludge thickening tank prior to de-watering
drying and melting.
Table II below set forth the details of the reagents used:
TABLE II
Treatment Reagents for Example 2
Step Operation Reagent Quantity
1 100 gallons H2O 10:1
2 Reduce NAHSO3 25 lbs./100 gal. of
wastes
3 pH 7.00 CaOH2 60 lbs/ 100 gal. of waste
4 Complexing Agent NA2S 0.2 lbs./1000 gal. of
waste
5 Complexing Agent * 0.2 gal./1000 gal. of
waste
6 Coagulant 1 CaCl2 5 gal./100 gal. of
waste
7 Coagulant 2 Flocculating 1/4 lbs. per 100 gal.
Agent
* 40% sodium dimethyl-dithiocarbamate, 10% sodium hydroxide and 50% water.
<PAGE>
28
Elemental analysis of Example 2 metals:
Element Amount Measurement Procedure
(United States Government)
Arsenic 20.00 SW-846 6010 ICP
Aluminum 7232.00 SW-846 6010 ICP
Barium less than 0.01 SW-846 6010 ICP
Beryllium 5.30 SW-846 6010 ICP
Cadmium 108.60 SW-846 6010 ICP
Chromium 32070.00
Hexavalent 146.60 SM17-418.1 UV
Chromium
Copper 146.60 SW-846 6010 ICP
Iron 685.70 SW-846 6010 ICP
Lead less than 0.01 SW-846 6010 ICP
Manganese 22.3 SW-846 6010 ICP
Mercury SW-846 7470 AA
Nickel 340.90 SW-846 6010 ICP
Phenol SW-846 9065 UV
Selenium less than 0.05 SW-846 6010 ICP
Silver 74.10 SW-846 6010 ICP
Zinc 393.30 SW-846 6010 ICP
<PAGE>
29
The physical analysis of Example 2 is:
Physical Attributes Results Measurement Procedure
(United States Government)
Color Dark Brown
Cyanide less than 0.02 SW-846 9010
Flash Point greater than 200 degrees F SW-846 1010
Odor None
pH -0.21 SW-846 9040
Percent Solids less than 1% SM17 2540b & 2540D
Specific Gravity 1.02
Total Petroleum NA SM17 418.1
Hydrocarbons
Viscosity Medium
Layers When 1
Standing
Percent Moisture NA
EXAMPLE 3
This example describes the treatment process of a precious metal
bearing solution containing chromium.
The pH of the solution is reduced to less than 3.0 with the addition of
hydrochloric acid (HCl). A reducing agent such as sodium meta-bisuifate is added
to reduce the chromium. The solution is then agitated for approximately 20
minutes to ensure complete contact and reduction of the chromium.
<PAGE>
30
The pH of the solution is then increased to greater than 10.5 with the
addition of caustic reagents and a quantity of sodium hypochlorite is added to
oxidize any remaining chelating reagents. The oxidizer is added in small
quantities to prevent over feeding.
The pH is allowed to stabilized for approximately 15 minutes and is then
adjusted to a pH of 7.5, as necessary. If the pH drifts, additional pH
stabilization is implemented.
Metal complexing reagents are added to the solution in sufficient quantity
to cause all of the dissolved metal to precipitate out of the solution.
After the desired settlement time, the solution is checked for metal
content. Upon completion of the settlement process, the clean effluent is
removed for monitoring prior to discharge, and the ionic metal sludge is removed
to a conical-bottomed sludge thickening tank prior to de-watering and drying.
When the sludge is transferred from the treatment tank to the
conical-bottomed sludge thickening tank, a portion of the liquid is also
transferred,
<PAGE>
31
in order to facilitate the transfer. Allowing separation of sludge from transfer
liquid in the conical-bottomed thickening tank is simply called "sludge
thickening" and the tank in which is accomplished is so named.
EXAMPLE 4
This example relates to a precious metal bearing solution (such as
photographic processing waste) without chromium. Recovery of the metals from
this type of solution is conducted in a batch operation for control over the
recovered product, reuse of the recovered product as a seed for the next
operation, cost of the complexing agent, keeping the solution from outside
contaminants and complying with regulations that exempt precious metal recovery.
All material is paced in a large common holding tank. In this case, the
tank has a capacity of 7,000 gallons, is closed topped and vented to the
atmosphere through a permitted air scrubber. Once a sufficient quantity of
material is placed in the holding tank, samples are obtained from the top and
bottom of the tank. These samples are analyzed for metal content.
A bindery agent such as calcium chloride is mixed by dissolving
<PAGE>
32
approximately 50 pounds of it in 100 gallons of water and the resulting solution
is fed into the holding tank by pumping it in through the bottom of the tank so
as to ensure mixing and adequate contact with the solution in the holding tank.
Based on the metal content, i.e., the concentration of suspended and
dissolved metals determined to be present in the solution by chemical analysis,
the metal complexing agent is fed into the holding tank by being pumped in from
the bottom to ensure adequate contact with the solution in the tank. The amount
of complexing and bindery agents added to the batch is directly related to the
level of metal in the batch. For example, a 7,000 gallon batch containing 3,000
mg/liter of dissolved metal requires approximately 12 gallons of metal
complexing agent and 1000 gallons of bindery agent to bring the metal levels to
below 2 mg/liter of combined metals. The tank is agitated from the bottom with
air from an air pump for approximately 30 minutes to ensure adequate mixing of
the bindery agent, metal complexing agent and the solution in the tank. The
contents of the tank are then allowed to settle for approximately three to six
hours, after which time samples are obtained from the top and bottom of the tank
for chemical analysis. Alternatively, the metal complexing agent can be added to
the tank by itself to cause the separation and in such a case, CaCl2 is not
used.
<PAGE>
33
Based on the analytical results which, under normal operating conditions
shows that the solution is clean, the clean effluent is removed by use of an
electric centrifugal pump for pH monitoring prior to discharge. Monitoring
occurs in a discharge holding tank just prior to sewer discharge.
The precipitated ionic metal sludge is allowed to remain at the bottom of
the tank as a seed for the next batch to be processed in this tank. Under normal
conditions, this seed remains for five to six cycles before it is removed and
the cycle is started over.
When the ionic metal sludge generated in this batch operation is removed
from the processing tank, the sludge is placed into fifty-five gallon holding
drums for storage prior to being processed in a dedicated filter press. Effluent
from the filter press operation is returned to the dedicated batch process tank
and reused.
De-watered solids from this operation are placed directly into a silicon
carbide crucible in a melting oven, where the solids are blended with a flux,
i.e., sodium borate tetra pentahydrate and soda ash. For each 40 pounds of
recovered product that is placed in the first over for stage one of the melting
process, approximately three pounds of sodium tetra borate pentahydrate are
added. For each melt in stage two of the melting process, approximately 9-12
pounds of soda ash are added.
The melting oven is brought up to approximately 1800 degrees F and
monitored. Once it is determined that the batch is in a homogenous liquid state
by stirring, the contents of the crucible are poured into a cast iron buggy
(mold) that has been pre-heated and coated with a carbon water solution of
prevent sticking of the molten material. The mold is allowed to cool for 18
hours and the contents are removed and separated into three components.
Noble metal (usually 95% or higher concentration silver), pig iron and slag
is recovered. Both the silver an pig iron are placed into a second melting oven
where additional soda ash is added and the oven is brought to approximately 1800
degrees F. Once it is determined that the batch is molten by stirring the bath,
approximately one pound of black iron is added to the molten bath and allowed to
completely melt. The bath is then stirred to verify that the black iron has
melted.
After stirring is completed, the molten bath is poured into a pre-heated
buggy (mold) that has been coated with carbon black to prevent the molten
material from sticking to the sides of the mold. The mold is allowed to cool for
approximately 14 hours at which time the mold is emptied.
The recovered products are removed from the mold and separated into three
layers consisting of a noble metal such as silver with a purity of from 97% to
99.9%, a layer of pig iron containing all of the impurities, i.e., aluminum,
cadmium, chromium, cobalt, copper, iron, manganese, nickel and zinc), and a
layer of black slag.
<PAGE>
34
The black slag is recycled two to three times in the same operation before
it is sold as a scrubbing compound. The pig iron and silver are both sold for
their metal content completely recycling all of the components within the
incoming waste that caused the material to be classified as waste.
Table III below sets forth the percentage of recovery for those metals
analyzed in the incoming waste of Example 4.
TABLE III
<TABLE>
<CAPTION>
SUPERNATANT
AFTER PERCENTAGE
ELEMENT INCOME WASTE RECOVERY OF RECOVERY
<S> <C> <C> <C>
Arsenic ........... less than 0.050 less than 0.050 0.000%
Antimony .......... less than 0.050 less than 0.050 0.000%
Aluminum .......... 248.400 1.773 99.287%
Barium ............ less than 0.001 less than 0.001 0.000%
Beryllium ......... less than 0.001 less than 0.001 0.000%
Calcium ........... 385.500 265.300 31.258%
Cadmium ........... 1.560 less than 0.002 99.872%
Chromium .......... 0.230 less than 0.005 97.826%
Cobalt ............ 1.160 less than 0.003 99.741%
Copper ............ 167.900 less than 0.002 99.999%
Iron .............. 762.700 less than 0.005 99.993%
Lead .............. less than 0.025 less than 0.025 60.000%
Magnesium ......... 396.500 17.540 95.576%
Manganese ......... 161.900 0.250 99.846%
Mercury ........... less than 0.020 less than 0.020 0.000%
Nickel ............ 1.310 less than 0.010 99.237%
Phenol ............ less than 0.020 less than 0.020 0.000%
Potassium ......... 16.340 8.230 49.633%
Selenium .......... 0.060 less than 0.050 16.667%
Silver ............ 0.010 less than 0.003 70.000%
Sulfate ........... 8596.000 3400.000 60.447%
Thallium .......... 0.800 less than 0.020 82.500%
Vanadium .......... 0.470 less than 0.020 95.745%
Zinc .............. 570.000 less than 0.004 99.993%
</TABLE>
Although the present invention has been described in considerable detail
and with reference to certain preferred embodiments thereof, other variations
are possible. Therefore, the spirit and scope of the appended claims should not
be limited to the description of the preferred embodiments contained herein.
<PAGE>
ATTACHMENT B: STATISTICAL MODEL; DERIVATION OF GROSS RECEIPTS
This Model is a mutually agreed reference for the principles of
calculating revenues, royalties, et al on individual projects which utilize
KBF's Selective Separation Technology (SST), with one only numbers in the Model
that are to be accepted as legally binding being those pertaining to KBF's
guaranteed minimum of 0.7 cent per treated gallon.
A. Base Assumptions in Model:
A1. Waste generator ("Client") has a current treatment process, the costs
of which are recorded in the client's Product Cost Accounting and
include such costs as:
-- Current treatment reagent(s);
-- Space allocation for waste management;
-- Labor (including all applicable company overhead for such); --
Energy consumption; and, -- Insurance pertaining to environmental and
Health & Safety requirements.
A1a. On a per treated gallon basis, the Client's cost is 10 cents in this
Model.
A2. Solucorp/KBF's sale of SST to the Client will create the following cost
comparisons and/orbenefits:
-- Parity of reagent(s) cost;
-- Reduction of space allocation requirement, allowing for productivity
benefits; -- Significant reduction of labor requirement and associated
cost; -- Reduction of energy consumption for waste treatment; --
Significant reduction of insurance requirements and associated
premiums; -- Minimization of taxes, including negation of Superfund Tax
provisions, and, -- Additional costs for the installation of new
SST-requisite equipment.
A2a. On a per treated gallon basis, KBF expects the Model project's actual
costs to be: -- Reduced by 25% (2.5 cent in 10 cents) by savings
aspects; -- Increased by 1% (0.1 cent in 10 cents) by new equipment
requirement and, -- Net reduction in the project's actual costs is 2.4
cent in 10 cents.
A3. To effect the sale of SST, Solucorp/KBF expects to offer the Client a
cost of 9 cents per treated gallon -- saving the Client 1 cent per
treated gallon.
A3a. The basis cost model for calculating the "Gross Receipts" of projects
becomes -- Client's current costs 10.0 cents -- LESS 1 cent saving to
effect sale 9.0 cents = Client's new cost -- LESS 7.6 cent "Retained
Operations costs" 1.4 cents = Gross Receipts
A4. The Gross Receipts will be equally shared (50% each) by Solucorp and
KBF, with the provision that KBF receives a minimum of 0.7 cent per
treated gallon.
D. CLIENTS WITHOUT A CURRENT TREATMENT PROCESS:
Project proposals and cost estimates will be developed giving due
cognizance to the need to set a price (Gross Receipts) level within the relevant
market constraints while incorporating all of the factors detailed in the
foregoing Model.
<PAGE>
36
ATTACHMENT C: EXCEPTED SITES
A. It being understood that the Licensor has already expended sales and
marketing efforts to secure several contracts at several different sites, the
below listed sites and facilities shall be excepted from the terms of this
license only to the extent that the Licensee in any way has not assisted or does
not assist the Licensor in securing the final contract for each site. In the
event that the Licensee has provided or does provide said assistance, the site
or facility shall, at the option of the Licensee, be subject to the terms of
this license.
B. In the event of such option, the Licensee shall pay the relevant commission
to the sales or marketing agent of the Licensor pursuant to the provisions of
Article V of the Agreement.
C. The following are those sites and facilities to which the provisions of this
attachment apply:
1. The Butte, Montanan Superfund Site (open-pit copper mine).
2. The Stringfellow Superfund sites located in California, U.S.A.
(groundwater remediation).
D. The KBF Pollution Management, Inc., Paterson, New Jersey facility and
all use of the Licensed Material at said facility, or any KBF facility hereafter
existing, shall under no circumstance be subject to the terms of this license.
In the event however, that the Licensee's efforts result in any contract to ship
waste to the Paterson facility (or any other KBF facility hereafter existing)
for processing, the Licensee's sales or marketing agent shall receive a
commission on that sale to be determined at the time of the sale.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000810162
<NAME> KBF Pollution Management, Inc. and Subsidiaries
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1.00
<CASH> 327,713
<SECURITIES> 86,591
<RECEIVABLES> 452,594
<ALLOWANCES> (31,183)
<INVENTORY> 12,707
<CURRENT-ASSETS> 874,097
<PP&E> 3,808,391
<DEPRECIATION> (1,658,867)
<TOTAL-ASSETS> 3,458,867
<CURRENT-LIABILITIES> 688,445
<BONDS> 0
0
0
<COMMON> 640
<OTHER-SE> 2,636,386
<TOTAL-LIABILITY-AND-EQUITY> 3,485,556
<SALES> 3,078,567
<TOTAL-REVENUES> 3,078,567
<CGS> 1,438,639
<TOTAL-COSTS> 1,438,639
<OTHER-EXPENSES> 1,626,157
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,740
<INCOME-PRETAX> 19,066
<INCOME-TAX> 13,179
<INCOME-CONTINUING> 13,179
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,179
<EPS-BASIC> .001
<EPS-DILUTED> .001
</TABLE>
