SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S - 4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
Interactive Technologies Corp., Inc.
(Exact name of registrant as specified in its charter)
Wyoming 98-0120805
State of Incorporation (I.R.S. Employer Identification Number)
0000883041
(Primary Standard Industrial Classification Code Number)
102 South Harbor City Blvd., Melbourne, Fl. 32901; (407) 953-4811
(Address, including zip code, and telephone number, including area code,
of Registrant's Principal Executive Offices)
Perry Douglas West, Chief Executive Officer
Interactive Technologies Corp., Inc.
102 South Harbor City Blvd., Melbourne, Fl. 32901; (407) 953-4811
With a Copy to:
James J. Panipinto, Esq.
Panipinto & Associates, P.C.
10440 N. Central Expwy., Ste. 1440, Dallas, TX 75231
(Name, Address, and Telephone Number, Including Zip Code and Area Code,
of Agent for Service of Process)
-----------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Title of Proposed Proposed
Securities Amount Maximum Maximum Amount of
to be to be Offering Price Aggregate Registration
Registered Registered Per Share (1) Offering Price (1) Fee
- --------------------------------------------------------------------------------
Common Stock 29,707,140(1) $1.00 $29,707,140 $9002.16
Convertible
Peferred Stock 8,850,000(1)(2) N/A
Convertible
Debentures 9,000,000(1)(2) N/A
- --------------------------------------------------------------------------------
(1) The Common Stock, Preferred Shares and Convertible Debentures to be
issued in units in exchange for the Common Stock of AIRTECH
International Corporation ("AIRTECH Common Stock").
(2) Convertible into 8,850,000 shares of Common Stock, included in
29,707,140, set out above.
(3) Convertible into 9,000,000 shares of Common Stock, inlcuded in
29,707,140, set out above.
<PAGE>
CROSS REFERENCE SHEET
PART I
A. INFORMATION ABOUT THE TRANSACTION.
ITEM 1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus.................Forepart and Outside Cover Page
ITEM 2. Inside Front and Outside
Back Cover Pages of Prospectus.............Inside Front and Outside Back
ITEM 3. Summary Information..............................................Summary
Risk Factors................................................Risk Factors
Ratio of Earnings to Fixed Charges........................Not Applicable
ITEM 4. Terms of the Transaction.................................The Transaction
ITEM 5. Pro Forma Financial Information..........Pro Forma Financial Information
ITEM 6. Material Contacts with the
Company Being Acquired...................................The Transaction
ITEM 7. Additional Information Required
for Reoffering by Persons Deemed
to be Underwriters........................................Not Applicable
ITEM 8. Interests of Named Experts and Counsel...............Experts and Counsel
ITEM 9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities...............Indemnification for Securities Act Liabilities
B. INFORMATION ABOUT THE REGISTRANT.
ITEM 10. Information with Respect
to S-3 Registrants.......................................Not Applicable
ITEM 11. Incorporation of Certain
Information by Reference.................................Not Applicable
ITEM 12. Information with Respect
to S-2 or S-3 Registrants................................Not Applicable
ITEM 13. Incorporation of Certain
Information by Reference.................................Not Applicable
ITEM 14. Information with Respect to
Other Than S-2 or S-3 Registrants........................The Registrant
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED.
ITEM 15. Information with Respect to S-3 Companies................Not Applicable
ITEM 16. Information with Respect to S-2 or S-3 Companies.........Not Applicable
ITEM 17. Information with Respect to
Other Than S-2 or S-3 Companies...The Acquired Company; The Transaction
D. VOTING AND MANAGEMENT INFORMATION.
ITEM 18. Information if Proxies, Consents
or Authorizations Are to be Solicited....................Not Applicable
ITEM 19. Information if Proxies,
Consents or Authorizations
Are Not to be Solicited...............Voting and Management Information
PART II
INFORMATION NOT REQUIRED TO BE IN PROSPECTUS
ITEM 20. Indemnification of Directors and Officers
ITEM 21. Exhibits and Financial Statement Schedules
ITEM 22. Undertakings
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
Interactive Technologies Corp., Inc.
29,707,142 Shares Common Stock
8,850,000 Convertible Preferred Shares
$9,000,000 Convertible 10% Debentures
- --------------------------------------------------------------------------------
This Prospectus pertains to an offer by Interactive Technologies Corp.,
Inc. ("ITC"), a Wyoming corporation, to purchase all, but not less than 81%, of
the issued and outstanding $0.0001 par value common stock (the "AIRTECH Common
Stock") of AIRTECH International Corporation ("AIRTECH"). The offer is being
made pursuant to a Stock Purchase Agreement (herein so called), dated as of May
8, 1997, as amended and restated as of August 1, 1997. Pursuant to the Stock
Purchase Agreement, each holder of the AIRTECH common stock shall receive in
exchange for such AIRTECH Common Stock: (i) his pro-rata percent of 8,000,000
shares of the $0.01 par value ITC common stock (the "ITC Common Stock") being
registered hereunder; (ii) his pro-rata share of 8,850,000 shares of ITC's
Convertible Preferred Shares (the ITC Preferred Shares"), and his pro-rata share
of $9,000,000 aggregate principal amount of ITC Convertible 10% Debentures (the
"ITC Debentures"). The remaining 21,707142 shares of ITC Common Stock being
registered hereunder will be reserved by ITC for the conversion if any of the
ITC Preferred Shares and the ITC Debentures, in accordance with their terms.
(See EXHIBIT "A" - Terms of ITC Preferred Stock.
See also EXHIBIT "B" -Terms of ITC Debentures.)
See "Risk Factors" for a discussion of certain material factors which
should be considered in connection with an investment in the Securities.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
The date of this Prospectus is September ____, 1997.
<PAGE>
AVAILABLE INFORMATION
ITC is subject to the informational requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by ITC under the Exchange Act can be inspected and copied, at
the prescribed rates, at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N. W., Washington, D.C. 20549, and at
certain of its regional offices. The Commission maintains a web site on the
Internet at www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants, including ITC, that file
electronically.
Where any document or part thereof is incorporated by reference in this
Prospectus but not delivered herewith, ITC shall provide without charge to each
person, including any beneficial owner, to whom a Prospectus is delivered, upon
written or oral request of such person, a copy of any and all of the information
that has been incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless such
exhibits are specifically incorporated by reference into the information that
this Prospectus incorporates). Any such requests and inquiries may be made to
Interactive Technologies Corp., Inc., (407) 953-4811, Attn: Chief Executive
Officer.
TABLE OF CONTENTS
Page
Summary Information..................................................... 1
Risk Factors............................................................ 3
The Transaction......................................................... 7
Means of Offer and Acceptance........................................... 9
Selected Pro Forma Financial Data....................................... 12
Management's Discussion and Analysis.................................... 11
The Registrant.......................................................... 15
The Acquired Company.................................................... 20
Management Information.................................................. 26
Voting Securities and Principal Holders Thereof......................... 30
Interests of Experts and Counsel........................................ 33
Certain Legal Matters................................................... 33
Experts................................................................. 33
Transfer Agent.......................................................... 33
Indemnification for Securities Act Liabilities......................... 33
SIGNATURES.............................................................. 54
EXHIBITS
EXHIBIT "A" - Terms of ITC Preferred Stock ....................A-1/34
EXHIBIT "B" - Terms of ITC Debenture...........................B-1/40
EXHIBIT "C" - Form for Accepting Tender Offer..................C-1/52
<PAGE>
SUMMARY INFORMATION
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements appearing elsewhere, or
incorporated by reference, in this Prospectus. The Securities offered hereby
involve a high degree of risk. Investors should carefully consider the
information set forth under the heading "Risk Factors".
Principal Offices. Interactive Technologies Corp., Inc.
102 South Harbor City Blvd.
Melbourne, FL 32901
Tele: (407) 953-4811
AIRTECH International Corporation
15400 Knoll Trail, Ste. 106
Dallas, TX 75248
Tele: (972) 960-9400
Business of ITC. Interactive Technologies Corp., Inc. ("ITC") develops
and produces interactive television and interactive digital
media programming for distribution via cable, and by
broadcast and direct satellite television. ITC's principal
interactive programming product is Rebate TVTM, a
television programing product which incorporates
interactive media and computer data management which allows
retail vendors to advertise on television and which allows
the consumer to receive a cash rebate through ITC.
Additionally, ITC has begun pursuing opportunities in
Interactive Video and Data Services ("IVDS"), a new
communications industry, initially licensed by the Federal
Communications Commission in 1993, with the majority of the
licenses being offered in July 1994. No IVDS services
are currently being offered. (See "THE REGISTRANT-Principal
Products or Services and their Markets".)
Business
of AIRTECH. AIRTECH International Corporation ("AIRTECH") is engaged in
the business of manufacturing and selling indoor air
filtration systems and supplies under the name of AIRTECH.
AIRTECH offers solutions to corporate, light commercial
and residential users. Through its wholly owned subsidiary
Airsopure, Inc. ("Airsopure"), AIRTECH began offering
franchises in April 1997. As of August 1, 1997, Airsopure
has entered into agreements with four franchisees (for the
States of Oklahoma and Nevada, for Northern California and
for Canada), and has sold distribution rights for the
countries of Turkey, the Philippines and Taiwan. (See "THE
ACQUIRED COMPANY - The Franchise Program".)
If ITC is able to acquire the minimum number of shares of
AIRTECH, ITC intends to operate AIRTECH as its wholly owned
subsidiary, and does not intend, in the foreseeable future,
to make significant changes in the Board of Directors,
executive officers or key employees.
The Transaction. ITC has offered to purchase all, but not less than 81%, of
the issued and outstanding $0.0001 par value common stock
of AIRTECH pursuant to a Stock Purchase Agreement, dated as
of May 8, 1997. (Such Stock Purchase Agreement, as amended
and restated as of August 1, 1997, the "Stock Purchase
Agreement") Pursuant to the Stock Purchase Agreement, each
holder of the AIRTECH common stock (the "AIRTECH Common
Stock") which accepts ITC's purchase offer shall receive in
exchange for such AIRTECH Common Stock: (i) his pro-rata
percent of 8,000,000 shares of ITC's $.01 par value common
shares;(ii) his pro-rata share of 8,850,000 shares of ITC's
Convertible Preferred Shares (the " ITC Preferred Shares"),
and his pro-rata share of $9,000,000 aggregate principal
amount of ITC's Convertible 10% Debentures (the "ITC
Debentures"). The remaining 21,707,142 shares of Commo
Stock being registered hereunder is being reserved by ITC
against the conversion, if any,of the Convertible Preferred
Shares and the ITC Debentures.
1
<PAGE>
Market Value
of Securities. The following sets forth the market value of ITC and
AIRTECH (both on an historical and equivalent per share
basis) as of May 8, 1997, the date preceding the date of
the public announcement of the proposed transaction:
ITC (1) AIRTECH(2)
High Lo
May 8, 1997 1 9/16 1 3/8 $1.00
Quarter ended February 28, 1997 1 1/2 1 1/8 $2.00
Quarter ended November 30, 1996 4 1 1/4 $1.50
Quarter ended August 31, 1996 5 1/4 4 1/4 $1.50
Quarter ended May 31, 1996 5 4 7/8 (2)
Quarter ended March 29, 1996 4 3/4 3 7/8 (2)
Quarter ended December 29, 1995 4 2 1/2 (2)
(1) Beginning April 30, 1996, the ITC Common Stock has been
traded on the National Association of Securities
Dealers Automated Quotation System (NASDAQ) SmallCap
Market under the Symbol "ITNL". Prior to being traded
on the NASDAQ exchange the ITC Common Stock were traded
in the "over-the-Counter" or "Bulletin Board" market.
Prior to the quarter ended December 29, 1995, to the
best of ITC's knowledge, no trading occurred in the ITC
Common Stock.
(2) The AIRTECH Common Stock has never been
traded on a market. During 1996, AIRTECH has
sold shares of AIRTECH Common Stock in a
Private Placement pursuant to Regulation
504, at the prices and during the periods
reflected in the table above.
HISTORICAL PRO FORMA
ITC AIRTECH COMBINED
Book Value - Fiscal Year 5/31/96 $ 0.35
Book Value - Fiscal Year 2/28/96 $ 0.20
Book Value - Nine Months Ended
February 28, 1997 $ 0.30 $ 0.22 $ 0.49
Earnings (Loss) per Share:
Fiscal year ended 5/31/96
Primary ($ 0.05)
Fully Diluted ($ 0.05)
Fiscal year ended 2/28/96
Primary ($ 0.04)
Fully Diluted ($ 0.03)
Nine months ended 2/28/97
Primary ($ 0.13) $ 0.01 ($ 0.08)
Fully Diluted ($ 0.13) $ 0.01 ($ 0.04)
(See Exhibits for explanation of principals of
consolidation, earnings per share and computation of
primary and fully diluted shares outstanding)
Voting and
Affiliate Votes. Directors, executive officers and their
affiliates of ITC control approximately 49% of the
issued and outstanding shares of ITC's Common Stock.
Authorization of the transaction by ITC does not
require the approving vote of the Shareholders of the
ITC Common Stock. The transaction was approved by the
ITC Board of Directors on May 8, 1997.
2
<PAGE>
Directors, executive officers and their affiliates of
AIRTECH control approximately 43% of the issued and
outstanding shares of AIRTECH's Common Stock. On
April 20, 1997 AIRTECH shareholders, in a special
shareholders, meeting voted on acceptance of the
Stock Purchase Agreement submitted by ITC. At that
meeting held in Dallas, Texas at 7:00 AM, on April
20, 1997 15,652,825 shares (representing
approximately 90% of the issued and outstanding
AIRTECH Common Stock) voted in favor of authorizing
the officers and directors of AIRTECH to enter into
the Stock Purchase Agreement ( See Stock Purchase
Agreement) and to take such other actions as should
be reasonably required and necessary to assist ITC in
the preparation of its tender offer contemplated
thereby. No (0.0%) shares voted against the
proposition, and 1,082,175 (representing
approximately 0.6% of the issued and outstanding
AIRTECH Common Stock) abstained. This vote exceeds
the 81% required by the Stock Purchase Agreement.
Regulatory
Approval No federal or state regulatory requirements must be
complied with or approval obtained in connection with
the proposed transaction.
Dissenter's Rights Holders of the AIRTECH Common Stock electing
not to sell their shares to ITC have no dissenters
rights of appraisal.
Tax Consequences The transaction is being structured as a
"tax-free exchange" pursuant to Section 368(a)(1)(b)
of the Internal Revenue Code of 1986, as amended.
(the "Code").
RISK FACTORS
An exchange of the AIRTECH Common Stock for the securities of ITC, as described
in this Prospectus, involves a high degree of risk. Prospective investors should
consider carefully the following risk factors, in addition to the other
information contained in this Prospectus, before agreeing to the exchange of the
AIRTECH Common Stock or otherwise purchasing the securities of ITC. This
Prospectus contains certain statements of a forward-looking nature relating to
future events or the future financial performance of ITC and AIRTECH's
operations as a wholly owned subsidiary of ITC. Prospective investors are
cautioned that such statements are only predictions and that actual events or
results may differ materially. In evaluating such statements, prospective
investors should specifically consider the various factors identified in this
Prospectus, including the matters set forth below, which could cause actual
results to differ materially from those indicated by such forward-looking
statements.
ITC - Negative Cash Flow and Operating Losses
- ---------------------------------------------
ITC has had a net loss from operations from inception. ITC does not anticipate
that it will generate income from operations during its fiscal year ended May
31, 1998.
Limited History of Operations - General
- ---------------------------------------
ITC'S continued operations, and AIRTECH'S continued operations as a wholly owned
subsidiary of ITC, are subject to all of the risks inherent in the operation of
a new business enterprise. Prospective investors, therefore, have limited
historical financial information about ITC and AIRTECH upon which to base an
evaluation of such companies' performance. The likelihood of the success of ITC
and AIRTECH must be considered in the light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection with
the formation of a new business and the competitive environments in which ITC
and AIRTECH operate. Consequently, there can be no assurance that the operations
of ITC, or the operations of AIRTECH as a wholly owned subsidiary of ITC, will
be successful in the future.
3
<PAGE>
In light of the limited operating history of ITC and AIRTECH, their history of
significant operating losses and their expectation that they will continue to
incur significant expenses and operating losses for the foreseeable future,
there can be no assurance that either ITC or AIRTECH will be able to implement
its growth strategy, or achieve or sustain profitability.
Limited History of Operations - ITC.
- ------------------------------------
Rebate TVTM. Rebate TVTM is a relatively new product that has not yet
become widely utilized. ITC has completed its beta test (April 15, 1996 to
December 31, 1996); and is currently in pre-production for Rebate. There is no
assurance that Rebate TVTM will result in revenue or profit to ITC.
IVDS Services. IVDS is a new communications industry licensed by the FCC
for the first time in 1993. ITC acquired its licenses in the July 1994 auction,
subject to, among other things, payment of a licensing fee. As of August 1,
1997, the balance of the licensing fees owed to the FCC was $540,000. There is
no performance data on the industry or markets which it intends to serve. No
IVDS services are being offered presently by ITC. There is no assurance that the
proposed IVDS services will result in revenue or profit to ITC.
Limited History of Operations - AIRTECH .
- -----------------------------------------
AIRTECH has conducted operations for approximately two (2) years and had a net
loss from operations for its fiscal year ended February 28, 1996 in the amount
of $556,255. For the nine month period ended February 28, 1997 (after giving
effect to a change in fiscal years) AIRTECH has net income of $104,090. There is
no assurance that the operations of AIRTECH will result in revenue or profit.
Significant Future Capital Requirements
- ---------------------------------------
The development of the businesses of ITC and AIRTECH, and the development, sales
and delivery of their products and services require significant expenditures, a
substantial portion of which are made before any revenues may be realized.
Certain of the expenditures, including marketing, sales and general and
administrative costs, will be expensed as incurred, while certain other
expenditures, including product design, network design and costs to obtain legal
and regulatory approval, are deferred until the applicable network or product is
installed and operational. ITC and AIRTECH will continue to incur significant
expenditures in connection with the construction, acquisition, development and
expansion of their products, services and customer base.
ITC and AIRTECH expect to fund additional capital requirements through
additional equity and debt offerings, secured credit facilities, and internally
generated funds, as appropriate. There can be no assurance, however, that either
ITC or AIRTECH will be successful in generating sufficient cash flow or in
raising sufficient capital on terms that it will consider acceptable, or at all.
Joint Ventures
- --------------
AIRTECH will be and has entered into licensing agreements, joint ventures and
the formation of additional subsidiaries whether wholly owned or less than
wholly owned. It is contemplated that AIRTECH will generally own at least 81%
any joint venture or subsidiary. It is also contemplated that AIRTECH will
always own at least 51% of any such joint venture or subsidiary, and will
maintain controls over operating and accounting policies of such entities.
Competition - ITC.
- ------------------
ITC is unaware of any direct competition with Rebate TVTM. However, there are
other companies in the interactive television industry that have announced that
they will provide programming to the interactive television marketplace. Many of
these companies will be better capitalized than ITC and will be better
positioned to take to take advantage of this emerging market. There is no
assurance that ITC will secure a competitive position in such market or that its
activities will result in profit to ITC.
4
<PAGE>
Competition - AIRTECH.
- ----------------------
The demand for air purification technology is rapidly growing and the industry
is becoming highly competitive. Most larger metropolitan areas have one or more
small distributors or small manufacturers, such as AIRTECH, each with limited
capital and limited products. The largest competitor in the industry is
Honeywell with its Duracraft and Envirocare subsidiaries.
Competition will increase with society's growing awareness of air quality
problems such as the sick building syndrome (where respiratory illness spreads
through out a building by the heating and air conditioning system, increasing
loss of workers productivity and the development of asthma in infants and small
children). Competition will also increase with the identification of niche
markets, such as (i) the food and beverage industry where smoking problems exist
or local regulations make certain demands, (ii) the growth of cigar bars, (iii)
the creation of lounges for smoking in airports and other public buildings,
(iii) and other smoking and non-smoking environment demands.
As competition increases, there will be many companies engaging in the air
purification industry which are more experienced, more established and
financially stronger than ITC. There can be no assurance that AIRTECH will be
able to successfully compete against such companies.
Dependence upon Key Management
- ------------------------------
ITC is dependent on its present officers and key employees with respect to its
current business and growth strategy. (See "MANAGEMENT INFORMATION - Directors
and Executive Officers".) Should one or more of them cease to be affiliated with
ITC before acceptable replacements are found, there could be a material adverse
effect on ITC's business and prospects, and no assurance can be given that
suitable replacements could be hired, if at all, except at substantial
additional cost to ITC. As a result, ITC may be subject to the effect of
possible conflicts of interest arising from the relationship of such persons in
connection with the pursuit of business opportunities. There can be no assurance
that any such conflict will be resolved in favor of ITC.
If ITC is able to acquire the minimum number of shares of AIRTECH, ITC intends
to operate AIRTECH as its wholly owned subsidiary. ITC does not intend, in the
foreseeable future to make significant changes in the Board of Directors,
executive officers or key. Therefore, ITC will be dependent upon the present
officers and key employees of AIRTECH with respect to the business being
acquired. (See "MANAGEMENT INFORMATION - Directors and Executive Officers".)
Members of AIRTECH'S present management have conducted extensive marketing and
technical activities in the past, and AIRTECH exclusively distributed HONEYWELL
ENVIRONMENTAL AIR CONTROL, INC.'s products prior to the termination of AIRTECH's
Honeywell Environmental full Service Distributorship on May 26, 1996. AIRTECH
has continued to purchase Honeywell products since the termination of AIRTECH's
full service distributorship (See "THE ACQUIRED COMPANY - Legal Proceedings").
AIRTECH has limited air purification experience and since the termination by
Honeywell of its full service distributorship has actively pursued the
development and design of a full line of air purification products. AIRTECH has
hired additional experienced personnel to conduct, develop and design these
products including the startup of manufacturing. AIRTECH will require additional
personnel with extensive experience in manufacturing operations, sales and
marketing and research and design of new state of the art air purification
products. No assurance can be given that such experienced personnel will be
available to ITC following the proposed transaction. Further, should one or more
of AIRTECH's present officers or key employees cease to be affiliated with ITC
and AIRTECH before acceptable replacements are found, there could be a material
adverse effect on AIRTECH's business and prospects, and no assurance can be
given that suitable replacements could be hired, if at all, except at
substantial additional cost to ITC and AIRTECH. As a result, ITC may be subject
to the effect of possible conflicts of interest arising from the relationship of
such persons in connection with the pursuit of business opportunities. There can
be no assurance that any such conflict will be resolved in favor of ITC.
5
<PAGE>
Expansion Risk
- --------------
ITC and AIRTECH expect to experience a period of rapid expansion. The operating
complexity of ITC, as well as the level of responsibility for management
personnel, are expected to increase as a result of such expansion. ITC's ability
to manage such growth effectively will require it and AIRTECH to continue to
expand and improve its operational and financial systems and to expand, train
and manage their employee base.
Rapid Technological Changes
- ---------------------------
The telecommunications and air purification industries are subject to rapid and
significant changes in technology. While ITC believes that for the foreseeable
future these changes will not materially hinder ITC's ability to acquire
necessary technologies, the effect of technological changes on the businesses of
ITC and AIRTECH cannot be predicted. Thus, there can be no assurance that
technological developments will not have a material adverse effect on ITC and
AIRTECH.
Control of AIRTECH by ITC.
- --------------------------
Upon completion of the proposed acquisition, ITC will own a controlling number
of the outstanding voting stock of ITC and will control the affairs and policies
of AIRTECH.
Limited Prior Trading Market; Potential Volatility
- --------------------------------------------------
There has been a limited public market for the ITC Common Stock. There has been
no public market for the ITC Preferred Stock or the ITC Debentures. The AIRTECH
Common Stock has not been publicly traded. There can be no assurance that an
active trading market will develop for the ITC Preferred Stock or the ITC
Debentures. Nor can there be any assurance that an active trading market for the
ITC Common Stock will develop or be sustained after the date hereof. The market
price of the shares of ITC Common Stock may be significantly affected by factors
such as actual or anticipated fluctuations in ITC's and AIRTECH's operating
results, new products or services or new contracts by ITC, AIRTECH or their
competitors, legislative and regulatory developments, conditions and trends in
the telecommunications industry, the air purification industry, general market
conditions and other factors. In addition, the stock market, from time to time,
has experienced significant price and volume fluctuations that have particularly
affected the market prices for the common stock of telecommunications, high
technology and other companies that have often been unrelated to the operating
performance of particular companies. These broad market fluctuations may also
adversely affect the market price of ITC's Common Stock, the ITC Preferred Stock
or the ITC Debentures.
Shares Eligible for Future Sale; Dilution.
- ------------------------------------------
If the proposed stock purchase takes place following the acceptance of ITC's
tender offer by holders of 81% or more of the AIRTECH Common Stock, there will
be no immediate dilution in the net tangible book value of the ITC Common Stock
computed on a fully diluted basis.
However, ITC has a significant number of authorized, but unissued shares, which
may be issued by the Board of Directors without shareholder approval. Should the
Board of Directors issue any such shares, AIRTECH Common Shareholders accepting
the tender offer described herein will suffer additional dilution. Sales of
substantial amounts of ITC Common Stock in the public market following
completion of the proposed transaction may have an adverse effect on the market
price of the ITC Common Stock. ITC has not agreed to, directly or indirectly,
offer, sell, grant any option to purchase or otherwise dispose (or approve any
offer, sale, grant or other disposition) of any shares of the ITC Common Stock
or other capital stock of ITC or any securities convertible into, or exercisable
or exchangeable for, any share of ITC Common Stock or other capital stock of
ITC. Unless otherwise restricted, all shares of the ITC Common Stock offered
hereby will be immediately eligible for sale in the public market.
6
<PAGE>
ITC and AIRTECH have negotiated the offering and issuance, in a private
placement to accredited investors, of a special series of preferred stock by ITC
which would have pledged thereto the first 20% of the net revenues arising out
of the sale to medicare and other patients of the AIRTECH 950 Air Purification
and Filtration System. Approximately 3/4 of the net proceeds of the proposed
offering would be paid to AIRTECH in consideration of the pledge of revenues,
and the balance would be retained by ITC for unspecified purposes. There is no
assurance that such offering will materialize, or if it is completed, the terms
or conditions thereof.
Lack of Dividend History
- ------------------------
ITC has never declared or paid any cash dividends on the ITC Common Stock and
does not expect to declare any such dividends in the foreseeable future. Payment
of any future dividends will depend upon earnings and capital requirements of
ITC and AIRTECH, their debt facilities and other factors the Board of Directors
considers appropriate. ITC intends to retain its earnings, if any, to finance
the development and expansion of its business and, therefore, does not
anticipate paying any dividends in the foreseeable future. In addition, ITC
anticipates entering into certain borrowing arrangements which will restrict its
ability to pay dividends. Upon completion of the proposed transaction, ITC
intends to adopt a policy that, for the foreseeable future, it will not take any
action to upstream the earnings of AIRTECH from that subsidiary.
Government Regulation
- ---------------------
The ability of ITC to provide IVDS services in the United States is subject to
the rules and regulations, if any, promulgated by the FCC. At present there are
only limited rules or regulations. However, there is no assurance that there
will not be further rules and regulations forthcoming which are adverse to the
interests of ITC.
The AIRTECH 950 Air Purification and Filtration System described herein has been
approved by the United States Food and Drug Administration as a Class II Medical
Device. To realize maximum benefit from the manufacture and sale of such system,
it is necessary for the system (i) to be designated as a Class II Medical
Device, and (ii) to receive Medicare approval for a Medicare Part B Code with
the approved reimbursement as a related billing charge. There is no assurance
that such designation will be obtained.
THE TRANSACTION
The Stock Purchase Agreement.
- -----------------------------
General. The following is a summary of certain provisions of the Stock
Purchase Agreement (herein so called), executed as of May 8, 1997, by and
between ITC, AIRTECH, and certain shareholders of AIRTECH, as amended and
restated as of August 1, 1997. The Stock Purchase Agreement was filed as an
exhibit to ITC's Current Report on Form 8-K on May 22, 1997, and the First
Amended and Restated Stock Purchase Agreement has been filed as an Exhibit to
the Registration Statement of which this Prospectus is a part. (Reference is
hereby made to such filings for the full text of the agreements between the
parties concerning the proposed transactions. See also herein, "MEANS OF OFFER
AND ACCEPTANCE".)
Offer to Purchase. Subject to and upon the terms and conditions contained
in the Stock Purchase Agreement, ITC will accept and acquire from those
shareholders of AIRTECH (the "Selling Shareholders"), in the aggregate: a
minimum of eighty-one percent (81%) of, and up to a maximum of one hundred
percent (100%) of, the issued and outstanding shares of the AIRTECH Common
Stock. At the Closing (as defined in the Stock Purchase Agreement), the Selling
Shareholders shall assign, transfer, convey and deliver their respective AIRTECH
Common Stock, free and clear of any liens, encumbrances and charges whatsoever.
Consideration. At the Closing, in consideration of the shares of AIRTECH
Common Stock of the Selling Shareholders, ITC shall deliver to the Escrow Agent,
defined below, for the benefit of the Selling Shareholders, one or more
certificates representing shares of his pro-rata percentage of: (i) 8,000,000
shares of ITC's $.01 par value Common Stock; (ii) 8,850,000 shares of ITC's
7
<PAGE>
Convertible Preferred Shares, and (iii) $9,000,000 principal amount ITC
Debentures. (If the proposed transaction closes with only the minimum percentage
(81%) of the AIRTECH Common Stock being exchanged, then the Selling Shareholders
would receive their pro rata share of (i) 6,480,000 shares of ITC's $.01 par
value Common Stock; (ii) 7,168,500 shares of ITC's Convertible Preferred Shares,
and (iii) $7,290,000 principal amount ITC Debentures.)
Escrow Agent. Interwest Transfer Company, P.O. Box 17136, Salt Lake City,
Utah 84117, Tele: 801-272-9294, Fax: 801-277-3147 will serve as Escrow Agent
(the "Escrow Agent") for the transaction pursuant to the terms of the Escrow
Agreement, the form of which is included as an Exhibit to the Registration
Statement of which this Prospectus is a part (the "Escrow Agreement") and which
is incorporated herein by reference.
Closing. The closing of the transaction contemplated hereby shall occur on
the twentieth (20) day following the date of delivery of this Prospectus to
AIRTECH shareholders, or on such later date after required compliance with state
and federal laws, and receipt of the acceptances from Selling Shareholders
owning at least eighty-one percent (81%) of the issued and outstanding AIRTECH
Common Stock.
ITC Preferred Stock. Each share of the 8,850,000 shares of ITC's one dollar
($1.00) par value Convertible Preferred Stock being registered hereunder, if not
earlier converted, shall be convertible at the option of the holder thereof,
into one registered share of ITC Common Stock from and after the expiration of
24 months following the Closing. At its option, ITC may elect to convert these
shares of Preferred Stock at any time during the 24 month period. (See "EXHIBIT
"A" - Terms of ITC Preferred Stock".)
ITC Debentures. ITC's $9,000,000 principal amount Convertible 10%
Debentures will be secured by the shares of AIRTECH Common Stock purchased by
ITC in the proposed transaction, and shall be convertible after 24 months into
registered shares of ITC Common Stock at a rate of $0.70 per share. ITC at its
option, may elect to convert the ITC Debentures at any time during the 24 month
period. The interest accruing on the ITC Debentures, at ITC's option, can be
paid in cash or in additional registered shares of ITC's Common Stock. If such
interest is paid in shares of ITC Common Stock, the convertible rate shall be
$0.70. The remaining 21,857,143 shares of Common Stock being registered
hereunder will be reserved by ITC against conversion, if any, of the ITC Stock
and the ITC Debentures. (See "EXHIBIT "B" - Terms of ITC Debenture".)
Reasons for Entering into the Proposed Transaction.
- ---------------------------------------------------
ITC believes that the business of AIRTECH has the potential for growth. The
management of AIRTECH is of the opinion that the access to the capital markets
which will result from the proposed transaction, will expedite the development
of AIRTECH's product line and the implementation of AIRTECH's franchise program.
Management of AIRTECH is of the opinion that such developments, together with
the liquidity provided to AIRTECH's shareholders, is in the best long-term
interest of AIRTECH's shareholders.
Material Contacts between ITC and AIRTECH.
- ------------------------------------------
Prior to the meetings resulting in the execution of the Stock Purchase
Agreement, there were no material contacts between ITC and AIRTECH. ITC and
AIRTECH have negotiated of offer and sale in a private placement to accredited
investors a series of ITC Series M Preferred Stock which will have pledged
thereto a portion of AIRTECH'S revenue stream. (See "RISK FACTORS - Shares
Eligible for Future Sale; Dilution".)
Accounting Treatment.
- ---------------------
The proposed transaction is being treated as a purchase.
Tax Consequences.
- -----------------
The transaction is being structured as a "tax-free exchange" pursuant to Section
368(a)(1)(b) of the Code. Prior to accepting ITC's exchange offer, AIRTECH
Common Stockholders should consult with their tax advisor concerning the affect
of any sale of the ITC shares received upon completion of the proposed
transaction.
8
<PAGE>
MEANS OF OFFER AND ACCEPTANCE
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
Meeting of Shareholders.
- ------------------------
No meeting is required of either the shareholders of ITC or AIRTECH in
connection with the proposed offering. On April 20, 1997 AIRTECH shareholders,
in a special shareholders, meeting voted on of the Stock Purchase Agreement
submitted by ITC. At that meeting held in Dallas, Texas at 7:00 AM on April 20,
1997 15,652,825 shares voted for the agreement representing 90%, 0 shares voted
against the agreement and 1,082,175 abstained representing 6%.This vote exceeds
the 81% required by the Stock Purchase Agreement.
Means of Offer
- --------------
The offer to purchase the AIRTECH Common Stock is being made by ITC solely by
means of this Prospectus.
Means of Acceptance
- -------------------
Holders of AIRTECH's Common Stock may accept ITC's offer to purchase at any time
during the twenty (20) calendar day period commencing on the date of delivery of
this Prospectus, or during such longer period as shall be established from time
to time by ITC. Acceptance of the offer may be made solely by delivery to the
Escrow Agent of a fully completed, executed and notarized Acceptance Certificate
in the form attached hereto as EXHIBIT "C".
Delivery of Tendered Shares.
- ----------------------------
The certificates (the "Certificates") representing the AIRTECH Common Stock
tendered by Selling Shareholders shall be delivered to the Escrow Agent by the
Selling Shareholders at such time as they deliver their acceptance of ITC's
tender offer in the form attached hereto as EXHIBIT "C". The Certificates, when
delivered by the Selling Shareholders with their acceptances, shall be in
suitable form for transfer by delivery or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to Escrow Agent and ITC.
If less than 81% of the issued and outstanding shares of the AIRTECH Common
Stock are tendered with an acceptance of ITC's offer prior to the passage of 20
days (the "Acceptance Period") following delivery of the Prospectus; then,
unless the Escrow Agent shall have received written notice from both ITC and
AIRTECH extending the Acceptance Period, the Escrow Agent shall return the
Certificates, together with all related endorsements, to the respective Selling
Shareholders tendering the same.
If 81% or more of the issued and outstanding shares of the AIRTECH Common Stock
are tendered with an acceptance of ITC's offer prior to the passage of the
Acceptance Period or any extension thereof, then the Certificates shall be held
by Escrow Agent for the benefit of each Secured Party.
Delivery of Prospectus
- ----------------------
This Prospectus shall be delivered to the holders of the AIRTECH Common Stock as
soon as practical following its effective date. Delivery shall be made by hand
delivery, overnight courier, or the deposit of this Prospectus in the United
States mail. All costs of such offering are being paid by ITC.
Acceptance Revocable
- --------------------
Any consent or acceptance of ITC's offer given prior to receipt of this
Prospectus is revocable at any time.
Dissenters' Rights of Appraisal
- -------------------------------
Holders of the AIRTECH Common Stock electing not to sell their shares to ITC
have no dissenters rights of appraisal.
9
<PAGE>
Material Interests of Affiliates
- --------------------------------
None of the affiliates of ITC or AIRTECH have any material interest in the
proposed transaction, direct or indirect, by security holdings or otherwise,
except to the extent that affiliates of AIRTECH have interests arising from
their security holdings in AIRTECH which is shared on a pro rata basis with all
other holders of the AIRTECH common stock.
Record Date
- -----------
The record date for the transaction contemplated hereby is September 1, 1997.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
- ---------------------
Revenues for the combined operations of ITC and AIRTECH were $1,648,878 for the
nine months ending February 28, 1997, with a Gross Profit of $1,048,391 after
Cost of Goods Sold.
ITC's operations for the same nine month period consisted of primarily of
completion of its initial market testing of its Rebate TVTM television program
in the Central Florida Market. Net revenues for this period were $194,804. ITC
has developed and operates a computer system and communications system to
support its Rebate TVTM program on a national basis. The operation of these
systems and the development of a national marketing program during this period
resulted in General and Administrative Expenses of $1,356,397 and a net loss
from operations of $1,158,593. During this period ITC realized a gain of
$311,500 from the sale of a 90% interest in its Charleston, South Carolina IVDS
license. Development of ITC's computer system and communications link are
substantially complete and now available for access on a national basis.
AIRTECH for such nine month period had Gross Revenues in the amount of
$1,648,878 resulting in Gross Income after Cost of Goods sold of $1,048,391.
During such period, AIRTECH was completing development of a new line of air
filtration equipment after cancellation of its agreement with Honeywell
Environmental Air Control, Inc. Cancellation of such Agreement, resulted in
General and Administrative Expenses of $2,102,894 and a Net Loss of $1,054,503
before depreciation and amortization. Development of AIRTECH's basic line of
products is substantially complete and AIRTECH has begun marketing its products
directly and through its new franchise program.
Material Changes in Operations and Financial Condition
- ------------------------------------------------------
With the end of its initial market testing, ITC has changed its focus from
program development and testing to market expansion. Operation of Rebate TVTM,
although currently distributable and supportable on a national basis, requires
that it be rolled out on a market by market basis. ITC faces a number of
decisions as to whether to concentrate its resources on local markets supported
by smaller vendors (such as Bedroom Land and Kobe Steak Houses) or to
concentrate on multiple markets driven by regional and national advertisers
(such as Airtran Airways and Cakes Across America). ITC is currently developing
promotional programs to drive subscribers to either market but is concentrating
on a single market approach to support each market with such programs as its
School Organization Promotion (Rebate TVTM goes to School).
ITC has been subject to several delays in its expansion with the departure of
Mr. Poe who was in charge of the market expansion effort including some
additional delays in recovering company files and information from Mr. Poe. ITC
is currently in pre-production of its new program and expects it to air within
the fall of 1997. Also during this period, ITC withdrew from a production studio
project in New Jersey due to substantial delays caused by both the real estate
lessor and the studio equipment lessor. This decision by management was
encouraged by substantial changes in post production equipment and software
technology in the very short term which would have required additional capital
expenditures by ITC.
The Company continues to produce Rebate TVTM in central Florida and has entered
into a strategic relationship with Bottomline, Inc. of Atlanta, Georgia which
will make available to ITC production and post production resources to meet
requirements by the ITC as it expands into additional markets.
AIRTECH until May of 1996 was a full service distributor for Honeywell
Environmental Air Control, Inc. Upon termination of that contract, AIRTECH began
development of a complete line of air purification products to replace the
Honeywell line. AIRTECH sales for the 9 month period referenced above are a
result of this product development (See Principal Products and Services). In
March 1997, AIRTECH incorporated Airsopure, Inc. as a wholly owned subsidiary
for the implementation and operation of a franchise sales program for the
distribution and sales of air purification products. (See "Franchise Program").
AIRTECH continues to distribute products directly and through its subsidiary
McClesky Sales and Service, Inc. In addition, AIRTECH has developed certain
products which has presented for distribution to the multilevel marketing
industry.
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<PAGE>
Liquidity and Capital Resources
- -------------------------------
During the nine month period ending February 28, 1997, ITC and AIRTECH continued
to fund operations and expansion through revenues and private sales of equity
securities and debt. In fiscal year 1996, ITC received net cash from financing
activities in the amount of $1,172,150 with AIRTECH receiving $2,698,530 during
that period. For the nine month period referenced above, the combined companies
received $1,837,023 in cash and subscription receivables from financing
activities. Although neither ITC nor AIRTECH have commitments for future
funding, management believes that it can continue to raise additional capital
for expansion of its markets though revenue and private sources.
In addition, ITC has agreed to issue $5,000,000 in Series M Preferred Stock (the
"Series M Stock") on a private basis to accredited investors in the form of 200
units consisting of 25,000 shares of convertible preferred stock convertible
into common at the rate of one share for one share of preferred and 25,000
warrants convertible into common stock at a price of $2.00 per share. The
preference for this series is to a pro rata portion of 20% of the Gross Profits
from the sales of the AIRTECH Model 950 Air Purification and Filtration System
being developed as a Class II Medical Device for Medicare Recipients with
Respiratory Conditions. This preference is for a period of three years from the
date production begins. AIRTECH has agreed to assign a 25% interest in this
revenue stream to ITC out of which this 20% will be set aside for this
preference. The Series M Stock will be offered pursuant to Rule 506 of
Regulation D of the Securities Act of 1933. Twenty-five percent (25%) of the net
proceeds of the sale of the Series M Stock will be used for market expansion and
distribution of the Rebate TVTM programming, and seventy-five percent (75%) of
such net proceeds will be allocated for the development and distribution of the
AIRTECH Model 950. ITC does not have an underwriter for this placement.
Management expects that the sales of the Series M Stock will be completed,
although there is no assurance that either it will be completed or that the
funds will otherwise be available to fund the operations and expansion of the
combined companies.
SELECTED PRO FORMA FINANCIAL DATA
The financial statements are being filed as Exhibits to the Registration
Statement of which this Prospectus is a part.
AIRTECH's audit for its new fiscal year elected as May 31, 1997 is currently in
process and will be submitted as an amendment to the Registration Statement of
which this Prospectus is a part. The following pro-forma balance sheet as of
February 28, 1997 has been prepared as if the transaction between ITC and
AIRTECH had been consummated as of that date. The accompanying pro-forma
statements of operation for the nine months ended February 28, 1997 have been
prepared as if the transactions were consummated as of June 1, 1996. The
financial statements presented for the nine months ended February 28, 1997 are
unaudited for both ITC and AIRTECH.
The pro-forma financial statements do not purport to be indicative of the
results which would actually have been obtained had the transaction been
completed on the dates indicated or which may be obtained in the future. The
pro-forma financial statements should be read in conjunction with the notes
thereto and the historical financial statements of the parties involved in the
proposed transaction.
12
<PAGE>
PRO-FORMA COMBINED BALANCE SHEETS
FEBRUARY 28, 1997
(Unaudited)
Historical Acquired
Acquisition
ITC AIRTECH Adjustments Combined
--- ------- ----------- --------
ASSETS
Current Assets $206,627 $1,122,819 $1,329,446
Stock subscription receivable 507,577(2) 507,577
Property and equipment
net of depreciation 96,289 214,485 310,774
Intellectual properties
Net of amortization 5,142,712(3) 336,977(4) 12,250,000(5) 17,729,689
Goodwill 1,408,474(5) 1,408,474
Other Assets 1,866 1,896,489 1,898,355
----- --------- ---------
Total Assets 5,447,494 4,078,347 $ 23,184,315
========= =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 536,432 $ 248,205 (250,000)(6) $ 534,637
Long-term Liabilities 1,299,573 26,116 (800,000)(6) 9,525,689
9,000,000 (5)
Total Liabilities 1,836,005 274,321 10,060,326
--------- --------- ------------- ----------
Commitments and Contingencies (7)
Stockholders' Equity
Paid in Capital 9,614,244 4,360,281(1) 4,658,474(5) 19,682,999
Retained Earning (Deficit) (6,002,755) (556,255) (6,559,010)
----------- ------------ ------------ -----------
3,611,489 3,804,026 13,123,989
----------- ------------ ------------ -----------
Total Liabilities and
Stockholders' Equity $ 5,447,494 $4,078,347 $23,184,315
========== ========= ==========
13
<PAGE>
PRO-FORMA COMBINED STATEMENT OF OPERATIONS
For The Nine Months Ended February 28, 1997
(Unaudited)
Historical Acquired
Acquisition
ITC AIRTECH Adjustments Combined
--- ------- ----------- --------
ASSETS
Net Revenues $ 197,804 $ 1,451,074 $ 1,648,878
Cost of Sales 600,487 600,487
--------- ----------- -----------
Gross Income 197,804 850,587 1,048,391
General and Administrative 1,356,397 746,497 2,102,894
--------- ----------- -----------
Net Income from Operations
Before depreciation,
Amortization and taxes (1,158,593) 104,090 (1,054,503)
Depreciation
and amortization 721,088 721,088
--------- ------------ -----------
Net Income from Operations (1,879,681) 104,090 (1,775,591)
Gain on Sale of
Charleston License 311,500 311,500
--------- ------------ -----------
Net Income before Income Taxes(1,568,181) 104,090 (1,464,091)
Income Taxes -0- -0- -0-
Net Income $(1,568,181) $ 104,090 $(1,464,091)
============ ========== ============
Primary earnings per share $(0.13) $0.01 $(0.08)
Diluted earnings per share $(0.01)
The notes to the pro forma financial statements and the basis for presentation
of the financial statements are included in the exhibits and are an integral
part of these financial statements.
14
<PAGE>
THE REGISTRANT
Background.
- -----------
Interactive Technologies Corporation, Inc. ("ITC") was incorporated in the state
of Wyoming on August 8, 1991. At that time, ITC was engaged in the business of
exploiting its rights under a license granted by CST Entertainment Imaging, Inc.
("CST"). Such license gave ITC the exclusive right to use CST's coloring process
to convert to color black-and-white film and videotape, including
black-and-white theatrical films and television programs produced for
distribution in Europe. ITC also had exclusive right to use CST's technology to
provide digital special visual effects for new film and video productions
produced for distribution primarily in the European territory. ITC ceased this
effort on October 18, 1995, when it exchanged the license in satisfaction of
certain of its debt.
On October 20, 1995, ITC entered into an agreement to acquire assets of
Syneractive, Inc. ("SI"), a Florida corporation. SI's assets included
intellectual property consisting of a television production and the trade name
Rebate TV. The assets also included license rights from the FCC to provide
Interactive Video and Data Service ("IVDS") in the Charleston-North Charleston,
South Carolina, and Melbourne-Titusville-Palm Bay, Florida metropolitan areas.
In exchange for such assets, ITC issued 5,700,000 shares of common stock to
Perry Douglas West, its current sole director and officer. In November 1996, ITC
sold a 90% interest in the Charleston-North Charleston license.
Principal Products or Services and Their Markets.
- -------------------------------------------------
General. ITC develops and produces interactive television and interactive
digital media programming for distribution on cable, by broadcast and direct
satellite television, and over the Internet. ITC's principal interactive
programming product is Rebate TV TM. The product allows a consumer to receive a
cash rebate from ITC for purchases of products advertised on the Rebate TV TM
television program by incorporating interactive media and computer data
management. Rebate TVTM is designed to utilize existing communication
technologies for consumer responses. It now uses the telephone and the Internet
as return links. However, it is also designed to easily accommodate the emerging
interactive television systems as they come into use, such as IVDS and
Interactive Television (via fiber optic cable/telephone cable etc.)
Beta Test. ITC conducted a beta test of Rebate TVTM from April 15, 1996,
through December, 1996 (the "Test Period"). During the Test Period, Rebate TVTM
aired 1/2 hour daily, seven days a week, on WIRB/Channel 56 in the central
Florida market. That market serves a population of approximately 2,175,000.
During the Test Period, the television program was divided into 14 one minute
retail information segments which were utilized by advertisers to provide
information about their company and a brief description of the cash rebate
offered to the consumer. The balance of the program consisted of information
segments, rebate reviews and instructional segments. Retailers represented a
broad spectrum of business including grocery chains, furniture stores, tire
service stores, retail banks, restaurants, car dealers and various specialty
businesses. ITC collected point-of-sale information from the vendors who
participated during the Test Period, and processed that data along with Rebate
TVTM customer call-in data. Rebates were credited to customer accounts as they
were verified. ITC manages escrow accounts for retail vendors so that rebates
are transferred to a general customer escrow fund as they are credited.
Consumers making a purchase of items of product or in dollar amounts which
carried the rebate offered by a participating retailer (i.e. a $5 rebate on a
purchase of $50 or more, or $10 rebate on the purchase of a brake package,
etc.). By calling ITC's toll free telephone number, 1-888-REBATE, the consumer
would be connected to ITC's computer data base, and could then register the
Rebate TVTM number on the bottom of the receipt. At the end of the month, ITC
sends a check to the Rebate TVTM customer for a total of all rebates processed
during that month. These rebates are in addition to coupons or other promotional
offers by the vendor. Rebate TVTM had approximately 4,000 subscribers by the end
of the Test Period.
15
<PAGE>
Revenue Sources. ITC receives revenues of two types from Rebate TVTM.
First, retail vendors will pay an initial production fee to ITC for the
production of the information segment that becomes part of the television show.
Then, the retail vendors will pay ITC a transaction fee based upon verified
sales. The amount of the transaction fee will vary with the type of retailer and
the frequency of purchase of its products. For instance, the transaction fee for
a automobile sale is much higher than a grocery store because of the size and
frequency of purchase.
Program Development.
- --------------------
ITC's research and development efforts consumed the technical efforts of ITC
from October 1995 through the airing of Rebate TVTM on April 15, 1996, and
involved two basic areas: the television programming for the shows, and the data
management and computer interface development efforts for the interaction with
the retailers and the consumers. None of this expense will be borne directly by
the retailers or the consumers, but will be recouped through profits as ITC
expands its markets.
Development of Rebate TVTM basic programming by ITC has been done during the
fiscal year with Century III at Universal Studios, Florida. Established in 1976,
Century III has serviced a widely diverse client base with high production
values utilizing the latest and finest in production and post-production
hardware. This includes local, regional, national and international projects for
all four broadcast television networks, national cable networks such as
Nickelodeon and HBO, major independent producers, advertising agencies and major
corporate and governmental organizations such as Digital Equipment Corporation,
Harris Corporation, General Electric, NCR, AT&T, Kodak, Polaroid, Walt Disney
World, Harcourt Brace Jovanovich, FPL Group, Westinghouse, McDonnell Douglas,
Martin Marietta, Reebok, International and NASA. The creative director for
Rebate TVTM is Michael Hamilton who has designed, directed and produced such
television series as "Magnum P.I.", "Simon & Simon", "Wings" and "The Twilight
Zone". His commercial experience includes such clients as CadillacTM, Texaco,
Coca ColaTM, Heineken, American Airlines, Donna Karan, Elizabeth Arden, QVC,
Business Technology Management and the Family Channel.
The computer development efforts related to Rebate TVTM were done at ITC's
engineering offices in Melbourne, Florida, where the hardware and software
designs and specifications were developed, tested and implemented during Fiscal
Years 95/96 and 96/97, to: (i) manage the large amounts of data and transactions
involved in collecting and verifying sales information from the Rebate TVTM
retailers; (ii) calculate the rebates, record the credits, and issue the checks
to the consumer; (iii) accommodate and record the telephone rebate requests, and
(iv) provide automated participation information to the public.
ITC looks to Rebate TVTM to attract its share of the communications industry
end-user market which is estimated to be $189.3 billion by 1998. Interactive
digital media is projected to remain the fastest growing category in the
industry.
Internet Access.
- -----------------
ITC's Internet home pages for use with Rebate TVTM allow viewers to access the
program's data base through the Internet. It allows them to view the status of
their accounts, enter vendor rebate claims, and later will allow viewers to
access a variety of products and services associated with Rebate TVTM which ITC
expects to include. ITC's home page is located at http://www.REBATETV.com.
Network Operations.
- -------------------
ITC intends to develop and produce its own television channel and to distribute
its Rebate TVTM video programming in this format to customers. ITC's
distribution plan currently provides for distribution of this programming
started in the central Florida markets to expand from there. ITC's business plan
calls for Rebate TVTM to expand into additional national markets. ITC expects to
hire additional employees over the next 24 months to support the operation of
this programming and to continue to develop and refine the programming as ITC
adds markets for these services.
16
<PAGE>
Interactive Video and Data Services.
- ------------------------------------
Federal Communications Commission Interactive Video and Data Services ("IVDS")
radio station licenses in the Charleston-North Charleston, South Carolina, and
Melbourne-Titusville-Palm Bay, Florida service areas represent an additional
enhancement to ITC's programming distribution. These licenses have a duration of
an initial five years, and are renewable if all conditions of the license are
met. Such conditions include, among other requirements: that the license fee be
paid quarterly, that 30%of the licensed area be built out within three years and
that 50%of the licensed area be built out within five years of the date of the
granting of the license. Pending the promulgation of regulations, ITC has
obtained temporary waivers of certain of the build out requirements.
IVDS, a two way communications system, will allow viewers to take an active role
in systems delivered through broadcast television, cable television, wireless
cable, direct broadcast satellite or other future television delivery methods.
IVDS is regulated as a personal radio service under the rules of the FCC which
has allocated spectrum in the 218-219 MHZ range for its use. IVDS systems are
designed to operate with a hand-held remote control device that controls the
interactive set top device on the subscriber's television set. A viewer would
interact with the TV station through a radio signal using an IVDS frequency.
ITC has sold 90% of its ownership of the Charleston-North Charleston license,
and has reserved rights to provide programming to this license area when it is
in operation.
ITC is reviewing alternative uses and equipment proposals for its
Melbourne-Titusville-Palm Bay, Florida license and expects to proceed to install
a system for the license. Although ITC will run its Rebate TVTM and other
programs on its own service area systems, the programs it develops are intended
for use on various interactive delivery systems and are not specific to
Interactive Video and Data Services systems. They are marketed to all of these
various delivery systems. For broadcast of Rebate TVTM programming ITC currently
uses and plans to use standard video media distribution methods such as cable,
broadcast stations, wireless cable and direct broadcast satellite. Although ITC
has designed its programs to utilize an IVDS return link (a "return link" is the
method by which data is sent from the consumer or viewer back to the originator
of the program), they are also designed to accommodate other return links such
as the telephone. ITC has purchased equipment and software to provide a
telephone return link as an interim return link for its own license areas as
well as other areas where it is providing programming, to be utilized where IVDS
is not available; until the installation an operation of the IVDS equipment as a
return link is completed as well as for use with non subscribers to IVDS.
Intellectual Content.
- ---------------------
ITC has developed a plan for the accumulation and sale of intellectual content.
This content takes several forms, including completed television and video
programming, both developed and produced by ITC and by third parties; property
rights to written scripts and publications for the purpose of producing or
having produced television or motion picture products; and program ideas,
concepts and designs. In addition to the Rebate TVTM programs, ITC has filed and
had accepted trademark applications with the United States Patent and Trademark
Office for "Rebate TV", for "DEAL! DEALS! DEALS!" (a direct shopping program
which ITC has produced), and "Television that pays you to shop".
ITC has in addition under this plan a number of projects under consideration and
review. To date, revenue from these activities has been limited to the Rebate
TVTM television program, and to a limited showing of its DEAL! DEALS! DEALS!
program. There is associated with each of these shows and projects a lead time
or advance period necessary for development and scheduling. In addition, ITC may
elect to sell outright or resell any of these properties.
ITC acquired $1,040,800 in working capital during Fiscal Year 96/97, through
loans and private stock sales. ITC believes that it can meet its cash
requirements during the first quarter of the Fiscal Year 97/98 but expects to
require additional funds over the next 12 months for the expansion and addition
of markets for its product and for operations. Although ITC currently has no
written commitments for additional funds, it believes that it can raise
additional cash required from private sources. A $5 million offering is
presently being structured in conjunction with AIRTECH. (See "MANAGEMENT'S
DISCUSSION AND ANALYSIS - Liquidity and Capital Resources".)
17
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ITC continually accumulates data in the operation of its Rebate TVTM, and
examines this data with regard to indicated changes in its programming. ITC
expects to continue research and development of its products based upon the
collection of this data.
Competitive Conditions.
- -----------------------
ITC is unaware of any direct competition with Rebate TVTM. However, there are
other companies in the interactive television industry that have announced that
they will provide programming to the interactive television marketplace. Many of
these companies will be better capitalized than ITC and will be better
positioned to take to take advantage of this emerging market. There is no
assurance that ITC will secure a competitive position in such market or that its
activities will result in profit to ITC.
FCC Licensing.
- --------------
The ability of ITC to provide IVDS services in the United States is subject to
the rules and regulations, if any, promulgated by the FCC. At present there are
only limited rules or regulations. However, there is no assurance that there
will not be rules and regulations forth coming which are adverse to the
interests of ITC.
Number of Persons Employed.
- ---------------------------
As of August 1, 1997, ITC had five employees, four of which are full-time.
Description of Properties.
- --------------------------
ITC currently has executive and engineering offices at 102 South Harbor City
Boulevard, Suite A, Melbourne, Florida; programming and media offices at Century
III at Universal Studios, 2000 Universal Studios Plaza, Suite 100, Orlando,
Florida. The Melbourne facility consists of 1,250 square feet of office and
engineering space, and is leased for a term of one year, with automatic renewal
for an additional 12 months unless either Landlord or Tenant is notified in
writing by the other party at least 60 days prior to termination date. Monthly
lease payments are $1,250.00 plus applicable Florida sales tax. ITC's Century
III office at Universal Studios consists of approximately 250 square feet of
office space and use of common areas. The cost of this space is included in
invoicing for production work Century III is performing for ITC.
Legal Proceedings.
- ------------------
ITC is a defendant in a proceeding filed in the United States District Court for
the Southern District of New York, Cause No. 97 CIV 1988(ss). It accepted
service April 5, 1997, in an action brought by Studiolink Corporation and Steven
Campus for damages arising out of an equipment lease agreement. ITC expects to
assert counterclaims against the plaintiffs in that action for losses suffered
as a result of their failure to perform. Settlement discussions have been
ongoing and ITC expects this matter to be settled in a manner not unfavorable to
ITC. In related matters, ITC is also in litigation with LLB Realty, L.L.C. which
has filed a claim alleging claims under an office lease agreement in Superior
Court of New Jersey, Mercer County, Cause No. MER-L00 1535-97. ITC has asserted
claims against LLB Realty, L. L.C. for failure to perform under the conditions
of the office lease agreement. Settlement negotiations have been ongoing and ITC
expects this matter to be settled in a manner no unfavorable ITC. ITC is not as
party to any other pending legal proceedings except for claims and lawsuits
arising in the normal course of business. ITC does not believe that these claims
or lawsuits will have a material effect on ITC's financial condition or results
of operations
ITC Securities.
- ---------------
Capital Stock. ITC is authorized to issue 70 million shares of capital
stock, consisting of 50 million $0.01 par value common shares, and 20 million
$1.00 par value preferred shares. As of August 1, 1997, there were issued and
outstanding 13,284,309 shares of the ITC common stock. These shares have full
voting rights. Of the common shares outstanding, 7,457,134 were restricted, of
which 3,400,000 shares are acheduled to be cancelled upon the closing of the
proposed transaction. There were no ITC preferred shares issued and outstanding
as of August 1, 1997.
18
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Stock Options. ITC has not authorized and does not have outstanding any
stock options to key employees.
Convertible Debentures. Effective as of May 31, 1997, Exergon Capital
S.A.,Laughlin Securities Limited, Crestridge Investments, Ltd. and Jayhead
Investments Ltd. (collectively, the "Converting Debenture Holders" exercised
their $1,050,000 principal amount of ITC's Convertible Debentures (the "May 1997
Debentures") in exchange for 1,144,444, aggregate number, of ITC's Common Stock.
In connection with such conversion, the Converting Debenture Holders received
the May 31 Warrants (defined below).
May 31 Warrants. In connection with the conversion of the May 31
Debentures, the Converting Debenture Holders received warrants (the "May 31
Warrants") which are exercisable within five years from May 31, 1997, upon 30
days written notice and upon payment of the exercise price. The May 31 Warrants
may be converted, in the aggregate, into 1,144,444 shares of ITC common stock as
follows:
Debenture Holder No. Of Shares Exercise Price
Per Share
Exergon Capital, S.A. 333,333 $0.90
Laughlin Securities Limited 250,000 $0.90
Crestridge Investments Ltd. 250,000 $0.75
Jayhead Investments Ltd. 250,000 $1.00
Shares to Consultants and Other Claimants. ITC has reserved 500,000 shares
of ITC Common Stock for issuance to consultants in lieu of other compensation,
and to other claimants.
Warrants. ITC has issued warrants to George Clark, a current employee, and
to a non-affiliate former employee in lieu of deferred compensation. Such
warrants are exercisable within five years from the date of issuance at $0.75
per share.
Market Information - Common Shares. ITC's common shares are traded on the
National Association of Securities Dealers Automated Quotation Systems
("NASDAQ") SmallCap Market under the symbol "ITNL". ITC" common shares began
trading on the NASDAQ exchange on April 30, 1996. High and low quotes for May 8,
1997, the day immediately preceding the announcement of the proposed acquisition
of the shares of AIRTECH were 1 9/16 and 1 3/8.
High and low quotes for the last quarter of ITC's fiscal year when the shares
began trading on NASDAQ were:
High Low
Fiscal Year 1997 4th Quarter 1 15/16 1 3/8
3rd Quarter 1 1/2 1 1/8
2nd Quarter 4 1 1/4
1st Quarter 5 1/4 4 1/4
Fiscal Year 1996 4th Quarter 5 4 7/8
Prior to being traded on the NASDAQ exchange, the Company's common shares were
traded in the "over-the-counter" or "Bulletin Board" market. The following
quotes represent the quarterly high and low quotes available through the quarter
ending December 29, 1995. These quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions:
High Low
Fiscal Year 1996
Quarter Ending 3/29/96 4 3/8 3 7/8
Quarter Ending 12/29/95 4 2 1/2
Prior to the quarter ending December 29, 1995 of ITC's 1996 Fiscal Year, and
during the previous 1995 Fiscal Year, to the best of ITC's knowledge, no trading
occurred in ITC's common stock.
Other Market Information. To the best of ITC's knowledge, no trading
occurred in ITC's preferred shares or ITC's debentures.
Holders. As of August 1, 1997, there were approximately 950 record holders
of ITC's Common Stock.
19
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Dividends. ITC has never paid any cash dividends on its Common Stock and
has no present intent to pay any cash dividends in the foreseeable future. The
declaration of cash dividends will depend on future earnings, if any, the
financial needs of ITC, and other pertinent factors. Further, the declaration of
dividends will be at the discretion of ITC's Board of Directors.
Selected Financial Data. The selected financial data shown below for the
year ended May 31, 1996 and the nine month period ended February 28, 1997 have
been derived from, and is qualified by reference to, the Financial Statements of
ITC and have been audited by Turner, Stone & Company, LLC, independent public
accountants, except for the nine month period ended February 28, 1997 which are
unaudited. The data set forth below are qualified by reference to, and should be
read in conjunction with "Management's Discussion and Analysis.
Summary Financial Information
(In thousands, except per share and other portfolio data)
February 28 Year ended May 31
----------- -----------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
STATEMENT OF
OPERATIONAL DATA
Total Revenue $ 198 $ 57 $-0- $-0- $-0-
Net Loss (1,568) ( 447) ( 136) -0- -0-
Net Loss Per Share ( 0.13) (0.05) (0.02) -0- -0-
BALANCE SHEET DATA
Working Capital ($330) ($1,089) ($665) -0- -0-
Total Assets $5,447 $7,485 $11 -0- -0-
Changes In and Disagreements With Accountants. By unanimous consent of its
Board of Directors on November 10, 1995, ITC engaged the accounting firm of
Turner, Stone & Company of Dallas, Texas as independent accountants for ITC for
the fiscal year beginning June 1, 1995, and voted to excuse the accounting firm
of Lumsden & McCormick from further service to ITC after the completion of its
work on the audit for ITC for the fiscal year ending May 31, 1995. During the
previous two fiscal years ending May 31, 1995, there were no disagreements with
Lumsden & Company on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure or any reportable events.
Important Considerations Related to Forward-Looking Statements
- --------------------------------------------------------------
It should be noted that this discussion contains forward looking statements
which are subject to substantial risks and uncertainties. There are a number of
factors which could cause actual results to differ materially from those
anticipated by statements made herein. Such factors include, but are not limited
to, changes in general economic conditions, the growth rate of the market for
ITC's products and services, the timely availability and market acceptance of
these products and services, the effect of competitive products and pricing, and
the irregular pattern of revenues, as well as a number of other risk factors
which could effect the future performance of ITC.
THE ACQUIRED COMPANY
Background.
- -----------
AIRTECH was incorporated in Texas in March 1995. AIRTECH is an operating company
which has engaged in the sales, distribution and installation of Honeywell air
purification systems. In January of 1996, AIRTECH began manufacturing its 2000
Manicure Table. In September 1996, AIRTECH started the design of a full line of
air purification products to include ceiling mounted units, ductable units,
portable units and an automobile unit. AIRTECH has developed different marketing
20
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plans for the sale and distribution of this line of air purification products.
The sales and distribution will include direct sales by personnel of AIRTECH, a
franchise program, sales to multi-level network marketing firms and foreign
sales. AIRTECH also anticipates that it will receive a Medicare Part B billing
code for the sale of its proprietary portable air purification machine for
medical applications. Many of the products being designed will be subject to
patent or trademark (See Management Forecast and Analysis). AIRTECH'S principal
executive offices are located at 15400 Knoll Trail, Suite 106, Dallas, Texas
75248, telephone number (972) 960-9400.
Following the termination of AIRTECH's full service distributorship by Honeywell
in May 1996, management aggressively started the development of a complete line
of air purification products that would replace the Honeywell line. During
August and September 1996, AIRTECH hired two former key employees of Honeywell
Environcaire to assist AIRTECH in its development of air purification products.
AIRTECH also withdrew its application for Medicare Part B coverage of the
Honeywell model 13000 and with the litigation pending, prohibits Honeywell from
pursuing this application.
For the first two months of fiscal year 1998 AIRTECH had gross sales and work in
process of $1,260,000. These results are from the aggressive marketing program
initiated by AIRTECH concentrating on the food and beverage industry. AIRTECH 's
marketing programs are developed for identified niche markets for the air
purification products currently available and the various products under
development. Management, with its planned pricing structure for the new
products, anticipates net pretax return on sales of approximately 20%.
The Franchise Program
- ---------------------
In March 1997, AIRTECH incorporated Airsopure, Inc., a wholly owned subsidiary
for the implementation and operation of a franchise program for the distribution
and sales of the air purification products developed and underdevelopment. The
Airsopure name for product identification was registered as a trademark and will
be the product name used by AIRTECH for its various commercial and consumer
products. A copy of the Airsopure Uniform Offering Circular has been filed as an
Exhibit to the Registration Statement of which this Prospectus is a part, which
Uniform Offering Circular is incorporated herein by reference.
The franchising program was first introduced at the International Franchise Show
in Washington D. C. in April 1997. Airsopure has been involved as an exhibitor
in several additional franchise shows and has numerous additional franchise show
planed for the balance of calendar year 1997. As of August 1, 1997, Airsopure
has sold 3 foreign franchises and 4 domestic franchises, with several other
franchise sales pending. AIRTECH is forecasting that Airsopure will sell
approximately 100 franchises by fiscal year end May 31, 1998. In addition to the
revenues received from the sale of the franchise, the franchisee's should
purchase from AIRTECH in excess of 2,000 units of its air purification products.
These sales should exceed several million dollars during this current fiscal
year.
Principal Products or Services and Their Markets.
- -------------------------------------------------
The following air purification are in various development stages but all
scheduled for production in calender 1997.
Series 12000: The series 12000 is designed to fit into a 2 foot x 4
foot space of a ceiling. When installed in a ceiling opening on 5.5
inches of the units decorative ABS plastic lid protrudes from the
ceiling. This unit will filter approximately 1200 cubic feet of air
each minute removing particulates, gases and odors. Markets for this
unit include the food and beverage industry, hospital and nursing
homes, print shops, office buildings and other industries with problems
involving cigarette or cigar smoke, particulates larger than .3 microns
or odors.
Series 13000: The series 13000 is designed to mount against a wall at
the joining point of wall to ceiling. The unit is approximately 36" x
14" x 14" with the visible portion being molded ABS plastic having a
sculptured geometric appeal. The unit will filter approximately 250
cubic feet of air per minute. The markets for this product will have
problems with any particulate, gas or odor found in rooms under 400 sq.
ft. such as offices, class rooms, patient rooms and small shops.
Multiple units can be installed to accommodate larger rooms.
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Series 14000: The series 14000 is a larger version of the series 13000.
The unit will be approximately 48" x 17" x 17" and filter 650 cubic
feet of air per minute. Visually it will have the same ABS plastic
sculptured geometric appearance. This unit will be installed where the
series 12000 is not usable or multiple 13000's are not suitable.
Series 15000: The series 15000 is a relative of the 12000 series.
Series 21000: The series 21000 is a ductable unit for both commercial
and light industrial applications. This unit will allow remote
positioning (i.e. on the roof) and collection of contaminants from
distant zones. The clean air discharge can be directed to zones as
needed. This unit permits creation of negative and positive pressure
zones providing maximum control of airborne contaminant movement. The
air cleaning capacity will be approximately 1800 cubic feet per minute.
This unit will also be available for the upscale residential market for
both new construction and retrofit.
Series 22000: The series 22000 is a simple fugitive capture air cleaner
designed for light industrial applications for the collection of
airborne dust and particulates in smoke. The markets for this series
include auto body repair shops, small welding and machine shops,
woodworking and ceramic shops, vocational schools and college
industrial arts classes. This unit will clean 2500 cubic feet of air
per minute of particulates only, it is not suitable for gas and odor
control.
Series 900: The series 900 is a small portable unit designed for the
automobile that will remove both gases and particulates. It will clean
approximately 30 cubic feet of air per minute. With mounting anxiety
over air quality amount new car buyers, automakers are examining
options for improving the environment in the interior of vehicles. Some
industry experts currently predict the non-existent market for auto
filtration systems in the U.S. will skyrocket to $200 million by the
year 2000. Several companies, Freudenberg, 3M and a joint venture
between Donaldson and Hoechst Celanese are scrambling to create just
such in-cabin air filtration system as part of the cars air
conditioning and ventilation system at a price affordable to the
consumer. To date no filtration system for automobiles has been
developed that will remove particulates and gases at a price less than
$500. The series 900 will retail for $149. and the Company is
developing a second generation automobile filtration system that will
mount on the firewall inside the cabin with an anticipated retail price
in the $350. to $400 range.
Series 950: The series 950 is the initial portable air cleaner designed
to sit on the floor and will clean approximately 250 cubic feet of air
per minute. This series will remove both particulates and gases
utilizing an air flow pattern discharged from the top of the unit. This
product will be configured to meet the needs of the medical community
and is the unit the Company will apply for Medicare Part B approval.
With minor cosmetic changes it will be sold to the general public via
multilevel and private label marketers. The suggested retail price will
be in the range of $350. to $400.
Series 2000 Down Draft Table: The series 2000 was designed for the nail
manicure industry and was first introduced in January 1996. It has been
modified from the original design to reduce manufacturing cost and ease
of servicing while improving gas, odor and particulate filtration
efficiency and extending the life of the sorbent media filter. This
series has a single speed 450 CFM blower with sorbent media filter
designed for special need of this industry.
Series 3000 Down Draft Table: The series 3000 is a modified version of
the series 2000 designed to appeal to the pathology/histology
environment, the dental lab industry and other light industrial
markets. This series utilizes a 700 CFM two speed blower using the same
sorbent media filter but the minerals in the filter will be varied to
the correct absorbent for the application. It will use a polyester
pre-filter as standard and offer up to a 95% ASHRAE 2" x 4" pleated as
an option.
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Replacement Filters: The Company will manufacture its sorbent media
filters, pre-filter material will be purchase in bulk and cut to proper
sizes and the HEPA type filters will be out-sourced. Our filters will
be interchangeable with the Honeywell ceiling units but the Honeywell
filters will not interchange with ours. The life of the filters will
vary application and the degree of contaminates however the Company
anticipates each unit sold will require an average one to two complete
filter changes per year. The filters in the ceiling units will be
standardized with a set of new filters having a retail price of $125 to
$395 depending on uses. The automobile unit will require approximately
$50. in replacement filters per year, the portable unit approximately
$100. per year and the down draft tables $600. per year depending on
application. The Company will realize in excess of 300% average gross
profit on filter sales at current pricing levels.
Prospective Operations/Marketing.
- ---------------------------------
General. During 1995 and 1996 AIRTECH identified niche markets having a
need for air purification technology. Federal, state and local regulatory
agencies changes in and enforcement of air quality regulations has increased the
size and scope of these markets. AIRTECH concentrated on these niche markets
during this period in the Dallas/Fort Worth and North Texas area. In 1996 the
City of Plano, Texas choose the Honeywell technology represented by AIRTECH, as
the exception to its smoking ban. In 1997, AIRTECH, using its technology, has
worked with Fort Worth, Texas and Grand Prairie, Texas on the smoking ordinances
as well as with the counties of Niagra and Erie New York on their smoking
ordinances. The cities of Toronto and Vancouver Canada have also contacted
AIRTECH for assistance in changing their no smoking ordinances. In each case,
the AIRTECH technology will provide, at least the minimum standards required
under these ordinances for permitting smoking in public areas.
AIRTECH in 1996 completed installations in excess of 100 ceiling mounted units
primarily for smoking related problems using Honeywell technology. These
installations included restaurants, bingo halls, office buildings and the
conference room for the board of directors of Southwest Airlines. The AIRTECH
model 12000 ceiling unit is being included by Lone Star Steakhouses in all their
new restaurants in the future (Del Fresco, Sullivan's and Longhorn restaurants).
A pilot program was installed in July 1997 in a major truck stop chain with over
200 facilities. Additionally, AIRTECH is working with many casino operators to
provide a solution to their smoking problems both in the casino and barge
operations.
Property Management. The air quality problems that exist in office building
and shopping centers caused by smoking, odors caused by sewer gas backup,
methane gas, fumes from parking garages, cooking odors, odors from beauty salons
or print shops has opened the door to Property Management companies. While most
of these types of sales will not be direct by AIRTECH it will be a program for
our franchisee's that will be supported by the Company. These problems are
prevalent in most building including schools, city and county building and other
governmental installations. The AIRTECH technology will provide a solution to
most of these types of problems economically.
Health Care Industry. Early in the first quarter of 1997, the Company
anticipates completing a contract with two large nursing home groups that own or
manage over 400 properties located in the southwest, southeast and mid-west.
Under our proposed pilot program we will install an average of 10 units in 100
properties using ceiling, wall mounted and ducted units. We are confident our
technology will greatly reduce the odors, remove airborne particulate (pollen,
dust, mold viruses etc) that cause respiratory illness. If this pilot is
successful it will produce sales of several thousand units over the next two
years just to these properties or gross revenues exceeding $15 million.
Down Draft Tables. The series 2000 is designed for the manicure industry.
In Texas alone, there are over 25000 licenced manicurist. In this industry many
of the manicurist are independent contractors renting space in a shop and have
limited capital or credit. The Company, in the Dallas market, has developed a
rental program requiring a deposit and first months rent, this recovers the cost
of the table in approximately 3 months. We apply one half of the monthly rental
to the full retail purchase price thus allowing the manicurist to own the table
in 12 to 18 months. The rental program coupled with direct sales the Company
anticipates selling 1,000 units in 1997 or $1.5 million in gross revenue.
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The series 3000 is designed for the pathology lab, dental lab, optical lab and
light industry where odors, gases or particulate are a problem. The first of
these units were sold in December 1996 to pathology labs, initial reports of the
efficiency of this table are excellent. The Company developed a marketing plan
for the series 3000 in the first quarter of 1997.
Series 900: This unit is a portable automobile unit, that will remove gases and
particulates. A working prototype of this unit has been completed and appears to
the only portable automobile unit available in the U.S. if, not in the world.
AIRTECH in April, entered into a license agreement with Air Care, L.L.C. giving
marketing right for Mexico and certain regions of the U.S. Under this license
agreement Air Care has minimum purchase requirements of 100,000 units per year.
In August 1997, AIRTECH anticipates completing a contractual agreement with a
large multi- level marketing company (MLM) for distribution of the portable
automobile air filtration through its sales and distribution network. Under this
contract the MLM will advance monies necessary for production tooling, of
approximately $500,000. Initial sales volume by this MLM is in the range of
5,000 to 10,000 units per month at a wholesale price of $40 per unit. A contract
completed in August would allow for production starting in November of 1997.
Other MLM's have contacted AIRTECH wanting this automobile unit model 900.
AIRTECH will agree to private label and produce a cosmetically different unit
utilizing the same motor and filtration system. AIRTECH anticipates that during
the fiscal year ending May 31, 1998 that demand could exceed 50,000 units per
month. A second generation is currently under development that would be hard
mounted in the trunk of an automobile and marked through dealerships as a add on
item much like alarm systems. This model could be in production by the 4th
quarter of this fiscal year.
Series 950: A working proto-type of this unit is anticipated in the late fourth
quarter of 1997. Once this proto-type has been tested for design and efficiency
numerous proto-types will be produced. This unit is being carefully designed for
approval as a Class B Medical Device and will be submitted to medicare for
acceptance under Medicare Part B with related charges. The medicare approval
process should be completed in AIRTECH's current fiscal year. If approved, the
Company will market the unit through the DME (Durable Medical Equipment)
network. Discussions with several DME's have indicated that demand would exceed
25,000 units per month from the start. The Company anticipates a price to the
DME of $190. per unit equating to gross revenues of in excess of $4.7 million
per month.
A scaled down version of the series 950 will be produced for MLM and retail
marketing. This version is scheduled for production in the calendar year 1998.
Franchise Program.
- ------------------
In January 1997 the Company employed an individual to develop and manage a
franchising program. During 1997 it is anticipated that approximately 100
franchises will be sold. The specific's of this program are under development
with sales planned to start in April 1997. The development of a franchise
network is the Company's plan for national distribution of its air purification
products. Management feels that for a franchisee to be successful, it would
purchase a minimum of $500,000 of products from the Company each year.
Competitive Conditions.
- -----------------------
Honeywell Environmental Air Control, Inc. is the only manufacturer with
a national distribution system for commercial air filtration systems. Since the
corporate restructure of this division in the spring of 1996 the commercial
division has been downsized. What continued presence is planned by Honeywell in
the commercial air filtration market is unknown to AIRTECH . In most
metropolitan area's there exist one or more independent manufacturer or service
companies for commercial grade air filtration systems. Most deal with
electrostatic filtration or smoke eaters a very ineffective method of
particulate removal but some offer charcoal and HEPA based systems. These
independent companies are usually small with very limited marketing servicing a
specific niche market. By the end of calender year 1997, with the air filtration
systems outlined above, AIRTECH will have the most complete line of air
filtration systems available in the U.S.
24
<PAGE>
Number of Persons Employed.
- ---------------------------
AIRTECH presently has 21 employees, ten of which are employed by its
subsidiary McCleskey Sales and Service, Inc., and two of which are employed by
its subsidiary AirSoPure, Inc..
Legal Proceedings.
- ------------------
Airtech International Corporation, McClesksy Sales and Service, Inc., C.J.
Comu and John Potter, plaintiffs, v. Honeywell, Inc., Honeywell Environmental
Air Control, Inc. and Suzanne Haas, defendants; No. 3:96-CV-1855.D (United
States District Court for the Northern District of Texas, Dallas Division). In
this case, AIRTECH, on of its subsidiaries and two of its officers flied suit
against Honeywell, Inc. and a Honeywell subsidiary and employee asserting
several causes of action. These causes of action include breach of contract
relating to termination of Full Service Distributorship agreements, for
defamation and tortious interference with contract relating to merger agreement
between AIRTECH and DCX, Inc., for unfair competition regarding claims made by
Honeywell about its air purification products, for negligent misrepresentation
regarding representations made to AIRTECH and its subsidiary regarding the
exclusivity of certain arrangements with the defendants, and for declaratory
relief and attorney's fees. Honeywell filed a counterclaim against AIRTECH,
McCleskey, Comu and Potter. Honeywell alleges that AIRTECH rnd McCleskey owe
Honeywell money for past purchases, and that Comu and Potter interfered with the
relationship between McCleskey and Honeywell. Honeywell seek $ 71,000 in actual
damages and unspecified punitive damages and attorney's fees. AIRTECH has denied
all of the material allegations of Honeywell's counterclaim. AIRTECH plans to
vigorously defend the counterclaim and believes the counterclaim to be without
merit.
2. Honeywell, Inc., plaintiff, v. Airtech International Corporation, AirSoPure,
Inc. and Richard Allegrati, defendants; No. WMN 97-238 (United States District
Court for the District of Maryland, Baltimore Division). Honeywell filed suit
against AIRTECH and a subsidiary and an employee, alleging violations of the
Lanham Act and the Maryland Uniform Trade Secrets Act and the common law. The
suit alleges that certain Airtech and AirSoPure products were sold in violation
of Honeywell's trademarks, and that the cover design of certain products of
Airtech and AirSoPure was wrongfully obtained. The suit seeks and injunction and
unspecified damages. Rarher than incur substantial additional attorney's fees,
AIRTECH agreed to the entry of a preliminary injunction regarding the sale of a
very small number of modified Honeywell products, immaterial to AIRTECH's
business. AIRTECH denies all of the material allegations of Honeywell's claims
and is vigorously defending this case. AIRTECH believes Honeywell's claims to
be without merit.
AIRTECH Securities.
- -------------------
Common Stock. AIRTECH is authorized to issue 90 million common shares at a
par value of $0.0001 per share. These shares have full voting rights. There were
17,491,129 shares issued as of August 1, 1997. Of the shares outstanding, there
were 17,491,129 restricted..
Preferred Stock. AIRTECH is authorized to issue 10 million shares of
preferred stock at a par value of $1.00 per share. There were no shares issued
and outstanding as of August 1, 1997.
Class C Common. At August 1, 1997, there were 1,000 shares of Class C
Preferred issued and outstanding. These shares are scheduled to be canceled as a
result of the completion of the proposed transaction with ITC.
Stock Options. AIRTECH has not authorized and does not have outstanding any
stock options.
Important Considerations Related to Forward-Looking Statements
- --------------------------------------------------------------
It should be noted that this discussion contains forward looking statements
which are subject to substantial risks and uncertainties. There are a number of
factors which could cause actual results to differ materially from those
anticipated by statements made herein. Such factors include, but are not limited
to, changes in general economic conditions, the growth rate of the market for
25
<PAGE>
AIRTECH's products and services, the timely availability and market acceptance
of these products and services, the effect of competitive products and pricing,
and the irregular pattern of revenues, as well as a number of other risk factors
which could effect the future performance of AIRTECH.
MANAGEMENT INFORMATION
Directors and Executive Officers
- --------------------------------
The following table sets forth, as of August 1, 1997, the name, age,
position and biographical information of each executive officer and director and
the term of office of each director of ITC.
Perry Douglas West, 50.
- ------------------------
Mr. West joined ITC in October 1995, and is Chairman and Chief Executive
Officer of ITC. Mr. West co-founded American Financial Network in July of 1985.
Headquartered in Dallas, Texas, American Financial Network operated a national
computerized mortgage loan origination network. Mr. West served as Executive
Vice President/Director and General Counsel of this public company from 1985 to
1991. Mr. West has practiced law in Florida since 1974, representing various
business institutions in the financial, computer, natural resources and general
business industries and international transactions. He was graduated with a
Bachelor of Arts degree from The Florida State University in 1968 and with a
Juris Doctorate degree from The Florida State University, College of Law in
1974.
John Potter, 53.
- -----------------------
Mr. Potter, was appointed to serve as a director of ITC in July, 1997. Mr.
Potter serves as President & Director of AIRTECH. (See below.)
George C. Clark, Ph.D., 59.
- ---------------------------
Dr. Clark joined ITC in November 1995 as Director of Systems Development.
He was previously a Senior Scientist in the Advanced Technology Department in
the Electronics Systems Sector of Harris Corporation, headquartered in
Melbourne, Florida from 1964 through 1994. During his tenure at Harris, Dr.
Clark conducted advanced research and development in antennas, electronic
communications systems, statistical communication theory, error correction
coding, computer-aided design of electronic circuits and systems, object
oriented programming methodologies, and modeling of transportation systems. He
also served as Director of the Advanced Technology Department at Harris,
co-authored a graduate level text book on error correction coding, spent two
years as a Visiting Scientist at the MIT Laboratory for Computer Science, and
taught many undergraduate courses in Electronic Engineering, Artificial
Intelligence and in Signal and Systems Theory. Dr. Clark holds a Bachelor of
Science degree in Electrical Engineering from the Massachusetts Institute of
Technology in 1959, a Masters Degree in Physics from the University of Miami in
1961 and a Ph.D. degree in Electrical Engineering from Purdue University in
1965.
Dr. Clark managed the development of the computer software and hardware
systems that form the infrastructure to the operations of Rebate TVTM, and his
absence from ITC would have an initial adverse effect on operations.
Michael Hamilton, 50.
- ----------------------
Mr. Hamilton joined ITC in April 1996 as Executive Vice President,
Production, in charge of all creative operations and new program development for
ITC. Mr. Hamilton is an entertainment industry veteran, whose recent credits
include developing a Movie of the Week for the ABC network, a feature in
conjunction with Jason Alexander's Daeson Productions, and transactional
programming for QVC. He also designed and directed such television series as
Wings, Murder She Wrote, The Twilight Zone and Magnum P.I., with experience
extending to commercial clients such as Donna Karan, CadillacTM and Coca-ColaTM.
His absence from the Company would have an initial adverse effect on programming
operations.
26
<PAGE>
The following table sets forth, as of June 1, 1997, the name, age, position
and biographical information of each executive officer and director and the term
of office of each director of AIRTECH who will become a director of ITC
subsequent to the approval of the proposed transaction.
John Potter, 53.
- ------------------------
Mr. Potter, President & Director of AIRTECH, began his business career with
Xerox Corporation. He moved into the world of finance with Wells Fargo &
Company, handling their national leasing division. Mr. Potter, was the founder
of Alpha Leasing, which grew into one of the largest leasing companies in the
Southwest. Mr. Potter co-founded Transworld Leasing Corporation, with Mr.6,
providing financing and marketing expertise to the medical, computer and
corporate sector, prior to the formation and launch of AIRTECH . Prior to
beginning his business career Mr. Potter was an officer in the US Army.
C. J. Comu, 36.
- ---------------
Mr. Comu, Chief Executive Officer & Director of AIRTECH, began his career
in the stock and commodities business as a specialist in precious metals and
currencies. Mr. Comu co-founded MBA Corporate Group, one of the largest
financial application software companies. Mr. Comu has been an entrepreneur,
financier and turnaround professional to several start ups and operating
companies during his term as President of Credit America Holdings Group, a
privately held and managed investment banking and consulting firm. Mr. Comu
co-founded Transworld Leasing with Mr. Potter, a full service leasing and
finance firm, prior to the formation of AIRTECH.
Bobby W. Cox, 51.
- -----------------
Mr. Cox, Chief Financial Officer, has over 29 years of experience in both
public as well as private accounting. Mr. Cox obtained his B.B.A. in accounting
from West Texas State University. Mr. Cox was employed with a large local
accounting firm in Amarillo then with the largest local firm in Texas based in
Houston. Following the merger of the Houston based firm into Coopers & Lybrand
was a manager in the tax department. Mr. Cox was then treasurer and controller
for a wholesale drug company, growing the company from $6 million to $13
million. Mr. Cox, was one of the founding partners in a local firm in Houston
that grew to a staff of 20+ accountants before selling his interest in the
partnership.
Richard A. Allegrati, 61.
- -------------------------
Mr. Allegrati, Executive Vice President, has over 25 years experience in
the air purification industry. He has directed the design of various products,
in marketing of these products as national sales director for Honeywell
Environmental Air Control, Inc., as a founding member of CADM (Clean Air Device
Manufacturers Association) and 1997 Chairman and is currently a member of UL's
(Underwriters Laboratories) Technical Committee for Development of Standards for
Indoor Air Emissions. Mr. Allegrati is directly involved in the design of the
Company's line of air filtration products, in the development of marketing
programs and interfaces directly with customers where special problems have been
identified.
Paul Williams, 46.
- ------------------
Mr. Williams, Vice President of Manufacturing, was formerly director of
manufacturing and quality control for Honeywell Environmental Air Control, Inc.
He was also involved in product development for the commercial division. Mr.
Williams, with his background, will be an integral part of the Company's product
development from conception thru production. With his engineering experience, he
is working with the different outside engineering groups development, production
cost analysis including the required injection molds, procurement of required
materials and the assembly of finished units.
27
<PAGE>
Scott McCleskey, 38.
- --------------------
Mr. McCleskey, President of McCleskey Sales and Service, a wholly owned
subsidiary of AIRTECH, has over 15 years experience in the HVAC industry, along
with sales, service and repair of commercial air cleaning technology.
Douglas S. Keane, 46.
- ---------------------
Mr. Keane, Vice President of Franchise Development, joined Airtech in
January of 1997. He was moved to Airsopure, Incorporated in the same capacity in
March of 1997. From 1980 until January 1997 he served as a franchise experience
and is the founder of National Pet Care Centers, Beauty Secrets International,
featuring Victoria Jackson Cosmetics and Nutra First Corporation. He has owned
franchised regions for Realty World Corporation and Vidtron International
Corporation.
Term of Office
- --------------
Each director of ITC serves for a term of one year, and thereafter until
his or her successor is elected at ITC's annual shareholder's meeting, and is
qualified, subject to removal by ITC's shareholders. Each officer serves, at the
pleasure of the Board of Directors, for a term of one year.
Executive Compensation
- ----------------------
Perry Douglas West, Chairman and Chief Executive Officer of ITC has no
employment agreement in force as of May 31, 1997, and receives no current
compensation. Mr. West has agreed to defer compensation and compensation issues
until a future date.
Robert J. Poe, a former Chief Operating Officer has an employment agreement
with ITC effective November 1, 1995, with an initial term of ten years. He is to
receive 5% of the gross profits from the operation of ITC's Rebate TVTM
television programming, as well as other programming brought into ITC by Mr.
Poe.
Set forth below is a summary of the annual compensation set for fiscal year
1996-97.
Bonus
Cash Restricted
Name and Position Salary Bonus Stock
----------------- ------ ----- -----
John Potter, $250,000 none none
President
C. J. Comu, $250,000 none none
Chief Executive Officer
Bobby Cox, $100,000 none none
Chief Financial Officer
John Harris, $100,000(1) none none
Chief Executive Officer
Richard A. Allegrati,
Executive Vice President $110,000(2) none none
Paul Williams,
Vice President of
Manufacturing $ 60,000(2)(3) none none
(1) Resigned in June 1997.
(2) Employed in August and October 1996
(3) Salary increase to $75,000 in April 1997.
28
<PAGE>
Transactions with and Indebtedness of Management and Others
- -----------------------------------------------------------
AIRTECH is obligated to pay a royalty to C. J. Comu, John Potter and John
Harris, officers of AIRTECH , based on the sales of portable air cleaning
machine pursuant to Medicare Part B Billing Code, when received by AIRTECH .
Messrs Potter and Comu will each receive $2.50 and Mr. Harris will receive $1.00
for each machine purchased through Medicare. AIRTECH has issued 1,340,000 shares
of common stock each to Messrs Potter and Comu as a pre-paid royalty for the
sale of the first 100,000 such machines. AIRTECH has a royalty agreement with
Richard A. Allegrati, dated in 1995, based on 4% of the wholesale sales and
payable quarterly. As of financial statement date no royalty payments have been
made.
Except as described above, there were no material transactions or series of
similar transactions, since the beginning of ITC's last fiscal year, or any
currently proposed transactions, or series of similar transactions, to which ITC
was or is to be a party, in which the amount involved exceeds $60,000 and in
which any director or executive officer, or any security holder who is known to
ITC to own of record or beneficially more than 5% of any class of ITC's common
stock, or any member of the immediate family of any of the foregoing persons,
has an interest.
Involvement in Certain Legal Proceedings
- ----------------------------------------
To the knowledge of management, during the past five years, no present or
former director, executive officer, person nominated to become a director or an
executive officer of ITC, promoter, or control person:
(1) filed a petition under the federal bankruptcy laws or any
state insolvency law, nor had a receiver, fiscal agent or similar officer
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years
before the time of such filing, or any corporation or business
association of which he was an executive officer at or within two years
before the time of such filing, or any corporation or business
association of which he was an executive officer at or within two years
before the time of such filing;
(2) was convicted in a criminal proceeding or named the subject of
a pending criminal proceeding (excluding traffic violation and other
minor offenses);
(3) was the subject of any order, judgement or decree, not
subsequently reversed, suspended, or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining him from or otherwise
limiting, the following activities: acting as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, leveraged transaction merchant associated person
of any of the foregoing, or as an investment advisor, underwriter,
broker, or dealer in securities, or as an affiliate person, director, or
employee of any investment company, or engaging in or continuing any
conduct or practice in connection with such activity; (ii) engaging in
any type of business practice; or (ii) engaging in any activity in
connection with the purchase or sale of any security or commodity or in
connection with any violation of federal or state securities laws or
federal commodities laws;
(4) was the subject of any order, judgment, or decree, not
subsequently reversed, suspended, or vacated, of any federal or state
authority barring, suspending, or otherwise limiting for more than 60
days the right of such person to engage in any activity described above
under this item, or to be associated with persons engaged in any such
activity;
(5) was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have violated any
federal or state securities law, and the judgment in such civil action or
finding by the Securities and Exchange Commission has not been
subsequently reversed, suspended, or vacated; or
(6) was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have violated
any federal commodities law, and the judgment in such civil action or
finding by the Commodity Futures Trading Commission has not been
subsequently reversed, suspended, or vacated.
29
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
ITC - Preclosing.
- -----------------
The following tables set forth as of August 1, 1997, the address, and the
number of shares of ITC's Common Stock, par value $0.001 per share, held of
record or beneficially by each person who held of record, or was known by ITC to
own beneficially, more than 5% of the then 12,209,612 issued and outstanding
shares of ITC' s Common Stock, and the name and share holdings of each director
and of all officers and directors as a group:
Security Ownership of Certain Beneficial Owners
As of August 1, 1997
%of
Class Beneficial Owner Amount Class
----- ---------------- ------ -----
Common Perry Douglas West 5,700,000 48.54%
Security Ownership of Management. The following table sets forth
information with respect to the share ownership of Common Stock, par value
$0.01, of ITC by its officers and directors, both individually and as a group,
who are the beneficial owner of more than 5% of ITC's Common Shares.
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
Name & Address Nature of Amount and
Title of Class of Beneficial Owner 1 Beneficial Ownership 2 Percent of Class
- --------------------------------------------------------------------------------
Common Perry Douglas West 5,700,000 48.54
1270 Orange Avenue
Suite A
Winter Park, FL 32789
All Directors and Officers as a group 5,728,600 48.78
NOTES:
1. Each person has sole voting and investment power with respect to the
shares indicated as owned beneficially by each person.
2. Except as other wise noted, all shares listed are owned both of record
and beneficially.
3. As part of the proposed acquisition of AIRTECH common stock, Mr. West
has agreed to transfer back to ITC, at closing, 3,400,000 shares of ITC
common stock.
AIRTECH - Preclosing
- --------------------
The following tables set forth as of August 1, 1997, the address, and the
number of shares of AIRTECH's Common Stock, par value $0.001 per share, held of
record or beneficially by each person who held of record, or was known by
AIRTECH to own beneficially, more than 5% of the then 15,743,569 issued and
outstanding shares of AIRTECH' s Common Stock, of AIRTECH'S Series C Preferred
Stock. The tables also include the name and share holdings of each director and
of all officers and directors as a group:
30
<PAGE>
Security Ownership of Certain Beneficial Owners
-----------------------------------------------
As of August 1, 1997
%of
Class Beneficial Owner Amount Class
----- ---------------- ------ -----
Series C John Potter 500 50.00%
Preferred
Series C C.J. Comu 500 50.00%
Preferred
Common John Potter 1,346,217 08.00%
Common C.J. Comu 1,840,000 12.00%
Common Clean Air Partnership 1,601,277 10.00%
Security Ownership of Management. The following table sets forth
information with respect to the share ownership of Common Stock, par value
$0.0001, of AIRTECH by its officers and directors, both individually and as a
group, who are the beneficial owner of more than 5% of AIRTECH's Common Shares.
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
Name & Address Nature of Amount and
Title of Class of Beneficial Owner 1 Beneficial Ownership 2 Percent of Class
- --------------------------------------------------------------------------------
Common John Potter 1,346,217 08.00%
Dallas, Texas
Common C.J. Comu 1,840,000 12.00%
Dallas, Texas
Common Bobby Cox 400,000 03.00%
Dallas, Texas
Common Richard A. Allegrati, 100,000 01.00%
Dallas, Texas
Common Paul Williams 25,000 0.25%
Dallas, Texas
Common Scott McCleskey 282,500 02.00%
Dallas, Texas
Common ____________
Dallas, Texas
All Officers and
Directors as a
Group (7)
4,512,534 29.00%
Common Clean Air Partnership 1,601,277 10.00%
Eerie, NY
NOTES:
1. Each person has sole voting and investment power with respect to the
shares indicated as owned beneficially by each person.
2. Except as other wise noted, all shares listed are owned both of record
and beneficially.
31
<PAGE>
Post Closing
- ------------
The following pro forma tables set forth the number of shares of ITC Common
Stock which will be held of record or beneficially, after giving effect to the
proposed transaction, by each person who held of record, or was known by AIRTECH
or ITC to own beneficially, more than 5% of their then issued and outstanding
shares of common stock as of the closing of the transaction. The tables also
include the name and share holdings of each proposed director and of all
proposed officers and directors as a group:
Security Ownership of Certain Beneficial Owners
As of August 1, 1997
%of
Class Beneficial Owner Amount Class
----- ---------------- ------ -----
Common Perry Douglas West 2,300,000 10.77
Security Ownership of Management. The following table sets forth
information with respect to the share ownership of Common Stock, par value
$0.01, of ITC by its officers and directors, both individually and as a group,
who are the beneficial owner of more than 5% of ITC's Common Shares.
- --------------------------------------------------------------------------------
(1) (2) (3) (4)
Name & Address Nature of Amount and
Title of Class of Beneficial Owner 1 Beneficial Ownership 2 Percent of Class
- --------------------------------------------------------------------------------
Common Perry Douglas West 2,300,000 10.77%
Winter Park, FL
Common John Potter 586,137 2.75%
Dallas, Texas
Common C.J. Comu 687,491 3.22%
Dallas, Texas
Common Bobby Cox 194,384 .91%
Dallas, Texas
Common Richard A. Allegrati, 45,737 .21%
Dallas, Texas
Common Paul Williams 11,434 .01%
Dallas, Texas
Common Scott McCleskey 118,917 .56%
Dallas, Texas
All Officers and
Directors as a
Group (7) 3,944,100 22.17%
NOTES:
1. Each person has sole voting and investment power with respect to the
shares indicated as owned beneficially by each person.
2. Except as other wise noted, all shares listed are owned both of record
and beneficially.
32
<PAGE>
INTERESTS OF EXPERTS AND COUNSEL
No expert named in this prospectus as having prepared or certified any part of
this prospectus, no person having prepared or certified a report or valuation
for use in connection with this prospectus, and no counsel named in this
prospectus as having rendered an opinion upon the validity of the securities
being registered or upon other legal matters in connection with the registration
or offering of such securities was employed for such purpose on a contingent
basis, or at the time of such preparation, certification or opinion or at any
time thereafter through the date of effectiveness of the registration statement
had, or is to receive, in connection with the offering, a substantial interest,
direct or indirect, in the registrant or any of its parents or subsidiaries, or
was an underwriter, voting trustee, director, officer, or employee.
CERTAIN LEGAL MATTERS
Certain legal matters in connection with the shares of Common Stock which
are the subject of this Prospectus will be passed upon by Perry West, Esg.
EXPERTS
The consolidated financial statements and schedules of ITC, included in
this Prospectus and elsewhere in the Registration Statement have been audited by
Turner, Stone & Company, Dallas Texas, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm of experts in giving said reports.
The consolidated financial statements and schedules of AIRTECH, included in
this Prospectus and elsewhere in the Registration Statement have been audited by
Alvin L. Dalt Associates, P.C., independent public accountants, as indicated in
their reports with respect thereto, and are included herein in reliance upon the
authority of said firm of experts in giving said reports.
TRANSFER AGENT
Interwest Transfer Company, P.O. Box 17136, Salt Lake City, Utah 84117,
Tele: 801-272-9294, Fax: 801-277-3147 will act as Transfer Agent for the ITC
Common Stock. ITC will act as transfer agent for the ITC Debentures and the ITC
Preferred Stock.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling ITC
pursuant to the foregoing provisions, ITC has been informed that in the opinion
of the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
33
<PAGE>
EXHIBIT "A"
TERMS OF ITC PREFERRED STOCK
The ITC Preferred Stock shall consist of 8,850,000 shares, each share
having the par value of $1.00 per share, and shall be designated Senior
Cumulative Convertible Preferred Stock. All shares of the ITC Preferred Stock
shall be identical with each other in all respects.
Part 1. Dividends.
- ------------------
1.01 No Dividends. No dividends are payable on the ITC Preferred Shares.
Part 2. Redemption.
- --------------------
2.01 Redemption. The ITC Preferred Shares may not be redeemed by ITC.
Part 3. Conversion.
- --------------------
3.01 Conversion Procedure. Each ITC Preferred Share may be converted into
one share of ITC Common Stock as hereinafter set forth:
(a) Conversion by Shareholder. Each Registered Holder of ITC
Preferred Shares may exercise all or a portion of the conversion rights
at any time or from time to time after the second anniversary of the
date of issuance.
(b) Conversion by ITC. At its option, ITC may convert all or any
portion of the ITC Preferred Shares at any time or from time to time
after the date of issuance.
(c) Exercise Procedure. Any ITC Preferred Share shall be deemed
to have been exercised (the "Exercise Time") when ITC shall have
received the certificate evidencing such shares appropriately endorsed
to reflect conversion thereof; whereupon ITC shall issue so many shares
of its Common Stock ("Conversion Stock") computed on the basis of one
share of Common Stock for one share of ITC Preferred Share so
converted.
(d) Delivery of New Certificates. Certificates for Conversion
Shares shall be delivered to the Holder named therein within 15 days
after the Exercise Time. Unless all of the Convertible Preferred
evidenced by the certificate delivered shall have been converted or
shall have been redeemed, ITC shall within a 15-day period prepare a
new certificate, substantially identical to that surrendered,
representing the balance of the ITC Preferred Shares formerly
represented by the certificate which shall not have converted or
redeemed and shall within the said 15-day period deliver such
certificate to the person designated as the holder thereof.
(e) Return of Certificate. The certificate evidencing the ITC
Preferred Shares shall be endorsed to reflect the conversion of all or
such portion thereof as the Registered Holder determines to convert. If
the Conversion Shares are not to be issued in the name of the Holder to
whom the Preferred Shares are registered, such Registered Holder shall
also state the name of the person to whom the certificate for the
Conversion Shares are to be issued, and if the Conversion Shares to be
issued shall not be all the Conversion Shares into which the ITC
Preferred Shares may be converted upon surrender of the ITC Preferred
Share certificates so surrendered, the name of the person to whom shall
be delivered a new certificate evidencing the balance of the ITC
Preferred Shares.
(f) Assignment. Assignment of ITC Preferred Shares shall be in
the form set forth on the reverse side of the certificate evidencing
same.
(g) Authorization and Issuance. ITC covenants and agrees that:
(i) All Conversion Shares which may be issued upon any
conversion of any ITC Preferred Shares will, upon issuance, be fully
paid and non-assessable and free from all taxes, liens and charges with
respect to the issue thereof.
A-1 34
<PAGE>
(ii) ITC will take all such action as may be necessary to assure
that all Conversion Shares issuable upon conversion of ITC Preferred
Shares may be issued without violation of any applicable law or
regulation or of any requirements of any domestic securities exchange
upon which securities of the same class may be listed.
(iii) The issuance of certificates for Conversion Shares upon
conversion of the ITC Preferred Shares shall be made without charge to
the Registered Holder thereof for any issuance tax in respect thereof
or other cost incurred by ITC in connection with the conversion of the
ITC Preferred Shares and the related issuance of Conversion Shares.
(iv) ITC will at no time close its transfer books against the
transfer of the ITC Preferred Share or of any Conversion Shares issued
or issuable upon the conversion of the ITC Preferred Shares in any
manner which interferes with the timely conversion of the ITC Preferred
Shares.
(h) Transferability. The ITC Preferred Shares and all rights
evidenced thereby are transferable on ITC's books by the Registered
Holder in person or by duly authorized attorney upon surrender of
certificate(s) evidencing said ITC Preferred Shares properly endorsed
at ITC's principal office provided that the Registered Holder complies
with such provisions governing transfer as shall be reasonably
established by ITC.
(i) Break-up of Certificates. Each certificate evidencing ITC
Preferred Shares is exchangeable, upon the surrender of the certificate
by the Registered Holder at ITC's principal office, for a new
certificate or certificates of like tenor representing in the aggregate
the right to purchase the number of Conversion Shares which may be
purchased under the Certificate surrendered, each of which new
certificates shall represent the right to purchase the number of
Conversion Shares as shall be designated by the Registered Holder
of this certificate at the time of such surrender.
Part 4. Liquidation.
- ---------------------
4.01 Rights of Holders of ITC Preferred Shares. In the event of any
voluntary or involuntary liquidation (whether complete or partial), dissolution
or winding up of ITC, the holders of ITC Preferred Shares shall be entitled to
be paid out of the assets of ITC available for distribution to its stockholders,
whether from capital, surplus or earnings, prior to the making of any
distribution shall be made on any Junior Security of ITC by reason of any
voluntary or involuntary liquidation (whether complete or partial), dissolution
or winding up of ITC.
4.02 Allocation of Liquidation Payments Among Holders of ITC Preferred
Shares. If upon any dissolution, liquidation (whether complete or partial), or
winding up of ITC, the assets of ITC available for distribution to holders of
ITC Preferred Shares (hereinafter in this ss.4.02 called the "Total Amount
Available") shall be insufficient to pay the holders of outstanding ITC
Preferred Shares, the full amounts to which they shall be entitled under
ss.4.01, each holder of ITC Preferred Shares shall be entitled to receive an
amount equal to the product derived by multiplying the Total Amount Available
times a fraction the numerator of which shall be the number of shares of ITC
Preferred Shares held by such holder and the denominator of which shall be the
total number of shares of ITC Preferred Shares then outstanding.
5. Additional Provisions Governing ITC Preferred Shares.
- ----------------------------------------------------------
5.01 Voting Rights. (a) Each outstanding share of Preferred Stock shall
entitle the holder thereof to notice of, and the right to vote at, any meeting
of stockholders at which any provision of ITC's certificate of incorporation or
any of ITC's bylaws is to be adopted, repealed, or amended or at which a merger,
consolidation, reorganization, dissolution, liquidation, winding up or sale of
all or substantially all of ITC's assets is to be or is voted upon.
Additionally, each outstanding share of Preferred Stock shall entitle the holder
thereof to notice of, and the right to vote upon all matters at, any meeting of
stockholders during the duration of an Event of Non-Compliance (as defined in
Section 6.01 below).
A-2 35
<PAGE>
(b) Except as otherwise provided by law, the entire voting power for
the election of directors and for all other purposes shall be vested exclusively
in the holders of the outstanding Common Stock.
(c) Except for any other rights set forth in the Certificate of
Incorporation and ss.5.01(a) hereof, the holders of Preferred Stock shall have
no voting rights.
5.02 Amendment and Waiver. No change in the provision of this Section
affecting any interests of the holders of any shares of ITC Preferred Share
shall be binding or effective unless such change shall have been approved in
writing by at least two unaffiliated holders of at least 66-2/3% of the ITC
Preferred Shares outstanding at the time such change shall be made, provided
that no change shall be made in the provisions for conversion contained herein.
5.03 Registration of Transfer of Preferred Stock. ITC will keep at its
principal office a register for the registration of the Preferred Stock. Upon
the surrender of any certificate representing ITC Preferred Shares at ITC's
principal office, ITC will, at the request of the registered holder of such
certificate, execute and deliver, at ITC's expense, a new certificate or
certificates in exchange representing the number of shares of ITC Preferred
Share represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of ITC
Preferred Shares as shall be requested by the holder of the surrendered
certificate, and shall be substantially identical in form to the surrendered
certificate, and the ITC Preferred Shares represented by such new certificate
shall earn cumulative dividends.
5.06 Replacement. Upon receipt by ITC of evidence reasonably satisfactory
to it of the ownership of and the loss, theft, destruction or mutilation of any
certificate evidencing one or more of the ITC Preferred Shares (an affidavit of
the Registered Holder, without bond shall be satisfactory), ITC at its expense
will execute and deliver in lieu of such certificate, a new certificate of like
kind, representing the number of shares of the ITC Preferred Shares which shall
have been represented by such lost, stolen, destroyed, or mutilated certificate,
dated and earning cumulative dividends from the date to which dividends shall
have paid on such lost, stolen, destroyed or mutilated certificate.
6. Events of Noncompliance.
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6.01 Definitions.
(a) For purposes of this Section, an Event of Noncompliance will be
deemed to have occurred if:
(i) ITC or any of its subsidiaries shall fail in a material
manner to perform or observe any covenant set forth in the Agreement or
shall fail to comply with any other provision of the Agreement and the
holders of the ITC Preferred Shares shall have given at least 30 days
prior written notice of such failure and the same shall not have been
cured; or any representation, warranty or information contained in any
writing supplied by ITC or any of its subsidiaries or by an officer or
director thereof to any holder of ITC Preferred Shares shall be
materially false or misleading in any material respect on the date on
which made or furnished; or
(ii) ITC or any of its subsidiaries shall be in default under
any material contract(s) or agreement(s) to which it IS a party, which
default could have a material adverse effect on the consolidated
operating results of ITC, whether or not a default has been declared;
or
(iii) without limiting the generality of (ii) above, ITC or any
of its subsidiaries shall fail to make any payment due on any other
obligation and the effect of such failure shall be to cause such
obligation to become due prior to its date of maturity; or
(iv) if ITC shall fail to pay when due any payment of money
including any payment due under any securities or otherwise not comply
with the provisions of any such security or allow any default under any
other agreement involving the borrowing or money or the advance of
credit, if such default gives to the holder of the obligation concerned
the right to accelerate the indebtedness; or
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(v) a receiver, liquidator or trustee of ITC or any of its
subsidiaries or of any property of ITC or any of its subsidiaries,
shall be appointed by court order and such appointment shall remain in
effect for 30 days; or ITC or any of its subsidiaries shall be adjudged
bankrupt or insolvent; or any of the property of ITC or any of its
subsidiaries shall be sequestered by court order and such order shall
remain in effect for more than 30 days; or a petition to reorganize ITC
or any of its subsidiaries under any bankruptcy, reorganization or
insolvency law shall be filed against ITC or any of its subsidiaries
and shall not be dismissed within 30 days after such filing; or
(vi) ITC or any of its subsidiaries shall file a petition in
voluntary bankruptcy or requesting reorganization under any provision
of any bankruptcy, reorganization or insolvency law or shall consent to
the filing of any petition against it under any such law; or
(vii) ITC or any of its subsidiaries shall make a formal or
informal assignment for the benefit of its creditors or admit in
writing its inability to pay its debts generally when they become due
or consent to the appointment of a receiver, trustee or liquidator of
ITC or any of its subsidiaries or of all or any part or the property of
ITC or any of its subsidiaries; or
(viii)final judgment for payment of money aggregating in excess
of $250,000 shall be outstanding against ITC or any of its subsidiaries
and any one of such judgments shall have been outstanding for more than
30 days from the date of its entry and shall not have been discharged
in full or stayed and such event shall not have been cured within a
period of 30 days.
(b) An Event of Non-compliance shall be deemed to exist at any time any
state of facts shall have come about voluntarily or involuntarily or shall be
beyond ITC's control or shall have come about or been effected by operation of
law or pursuant to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(c) The term "Potential Event of Non-compliance" means the occurrence
of any event which with the passage of time or the giving of notice or both
would become an Event of Non-compliance.
6.02 Action to be Taken in Case of Certain Events of Non-compliance. In the
event that any Event of Non-compliance described in Section 6.01 shall exist,
then at least two unaffiliated holders of an aggregate of at least 66-2/3% of
the then outstanding ITC Preferred Shares shall have the right to demand and
shall be given the right to vote on all matters.
6.03 Non-Exclusivity. The rights under ss.6.02 shall not be deemed to be
exclusive. If any Event of Non-compliance shall exist, the holders of shares of
ITC Preferred Share shall have all other rights which such holder shall have
been granted under any contract or agreement at any time, and all other rights
which such holders shall have under any law Any person having any rights under
any provision in this Section shall be entitled to enforce such person's rights
specifically, to recover damages by reason of any non-compliance with any
provision in this Section, and to exercise all other rights granted by law.
Part 7. Interpretation of this Instrument.
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7.01 Definitions. Each term defined in this Section 7.01 has the meaning
indicated in this instrument whenever such term is used in this instrument.
"Agreement" means any agreement, as amended, modified or
extended, between ITC and any person holding Preferred Stock.
"Common Stock" or "Common Shares" designates and includes ITC's
Existing Common Stock of all classes and any capital stock of any class
of ITC authorized after the date of the Agreement which shall not be
limited to a fixed sum or a percentage of par value in respect to the
rights of the holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary liquidation or
winding-up of ITC.
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"Conversion Share" means one share of ITC's authorized Common
Stock, provided that if under the provisions hereof, there shall be a
change such that the securities purchasable hereunder shall be issued
by an entity other than ITC or class of securities purchasable
hereunder, then the term "Conversion Share" shall mean one share of the
security purchasable upon the exercise of the rights granted hereunder
if such security shall be issuable in shares or shall mean the smallest
unit which such security shall be issuable if such security shall not
be issuable in shares.
"Conversion Shares" means the aggregate Conversion Shares at any
time issuable upon conversion of the ITC Preferred Shares.
"Existing Common Stock" designates ITC-authorized Common Stock,
par value $0.01, per share, of all classes, as constituted on the
Closing Date as set forth in the Agreement.
"ITC Preferred Stock" or " ITC Preferred Shares" means 8,000,000
shares of the ITC Convertible Preferred Stock so designated which shall
be convertible into shares of Common Stock, as set forth in Section 7
hereof.
"Junior Securities" shall mean any equity security of any kind
which ITC or any subsidiary shall at any time issue or be authorized to
issue other than ITC Preferred Shares.
"Number of Common Shares Deemed Outstanding" at any given time
means the sum of (a) the number of Common Shares actually outstanding
at such time, plus (b) the number of the Company's Common Shares deemed
to be outstanding under sub-sections (i) to (ix) inclusive, of ss.8.02
hereof at such time.
Part 8. Anti-dilution Provisions.
- ----------------------------------
8.01 Adjustment of Number of Shares. In order to prevent dilution of the
rights granted hereunder, the Conversion Price shall be subject to adjustment
from time to time as follows:
(a) If ITC shall: (A) declare a dividend on its ITC Common Stock
in shares of ITC Common Stock or make a distribution in shares of ITC
Common Stock, (B) subdivide its outstanding shares of ITC Common Stock,
(C) combine its outstanding shares of ITC Common Stock into a smaller
number of shares of ITC Common Stock or (D) issue by reclassification
of its shares of ITC Common Stock other securities of ITC (including
any such reclassification in connection with a consolidation or merger
in which ITC is the continuing corporation); then the number of shares
of ITC Common Stock issuable upon conversion of the ITC Preferred
Shares immediately prior thereto shall be adjusted so that the holder
of the ITC Preferred Shares shall be entitled to receive the kind and
number of shares of ITC Common Stock of ITC which he would have owned
or have been entitled to receive after the happening of any of the
events described above, had the ITC Preferred Shares been converted
immediately prior to the happening of such event or any record date
with respect thereto. An adjustment made pursuant to this paragraph
4(c)(iii)(1) shall become effective immediately after the effective
date of such event retroactive to immediately after the record date, if
any, for such event.
(b) If the Corporation shall issue either (A) any shares of ITC
Common Stock or (B) any right to buy ITC Common Stock at a price per
share which is less than the fair market value per share of the ITC
Common Stock as of the time of any such issuance, in an amount which
has a material dilutive effect (which for purposes hereof shall mean
issuance, at less than fair market value, of an aggregate number of
shares of ITC Common Stock equal to at least ten percent (10%) of the
then issued and outstanding shares of ITC ); then the number of shares
of ITC Common Stock which the Conversion Rate shall thereafter entitle
the holders of the ITC Preferred Shares to receive shall be determined
by multiplying the number of shares of ITC Common Stock which the
Conversion Rate entitled the holder to receive immediately prior to
such issuance by a fraction, the numerator of which shall be the number
of shares of ITC Common Stock outstanding immediately prior to such
issuance plus the number of additional shares of ITC Common Stock so
issued, and the denominator of which shall be the number of shares of
ITC Common Stock outstanding immediately prior to such issuance plus
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<PAGE>
the number of shares of ITC Common Stock which the consideration
received by ITC would purchase at fair market value (as determined in
good faith by the Board of Directors of ITC ). This provision shall not
apply to any shares of ITC Common Stock issued pursuant to any
presently existing option, warrant or right to convert any obligation
of ITC into shares of its ITC Common Stock which are issued and
outstanding as of the date of the adoption of the Designation of Rights
and Preferences or to shares issued pursuant to the conversion of
debentures of ITC or to shares issued pursuant to options or warrants
hereafter granted if the exercise price for the purchase of said shares
was equal to or greater than fair market value (as determined in good
faith by the Board of Directors of ITC ) at the date of such grant. In
determining the fair market value for purposes of this paragraph, a
recent bid price for ITC 's ITC Common Stock may be conclusively
presumed to be the fair market value by the Board of Directors;
provided that the Board of Directors may consider other factors, in
good faith, if they so choose.
(c) No adjustment in the number of shares of ITC Common Stock
issuable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the
number of shares of ITC Common Stock issuable upon the conversion of
the ITC Preferred Shares.
(d) If the number of shares of ITC Common Stock issuable upon
the conversion of the ITC Preferred Shares or the conversion price of
such ITC Common Stock is adjusted as provided above, then ITC shall
mail promptly, by first class mail, postage prepaid, to each holder
notice of such adjustment or adjustments.
(e) In case of any consolidation of ITC or merger or share
exchange of ITC with or into another corporation or in case of any sale
or conveyance to another corporation of the property of ITC as an
entirety or substantially as an entirety, ITC or such successor or
purchasing corporation (or an affiliate of such successor or purchasing
corporation), as the case may be, agrees that each holder shall have
the right thereafter to convert the ITC Preferred Shares into the kind
and amount of shares and other securities and property (including cash)
which such holder would have owned or have been entitled to receive
after the happening of such consolidation, merger, sale or conveyance
had the ITC Preferred Shares been converted immediately prior to such
action. The provisions of this paragraph shall similarly apply to
successive consolidations, mergers, sales or conveyances.
(g) Notwithstanding any adjustment in the number or kind of
shares issuable upon the conversion of the ITC Preferred Shares,
certificates representing shares of ITC Preferred Shares issued prior
or subsequent to such adjustment may continue to refer to the same
number and kind of shares as were issuable prior to such adjustment.
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<PAGE>
ATTACHMENT "B"
TERMS OF ITC SENIOR CONVERTIBLE PREFERRED DEBENTURE
INTERACTIVE TECHNOLOGIES CORP., INC., a Wyoming corporation (the
"Company"), for value received, hereby promises to pay to the above stated
Registered Holder or his assigns (collectively, the "Registered Holder") the
above stated principal amount (the "Principal Amount"), and to pay interest
TERMS AND CONDITIONS
1. Description. The Debentures (herein this "Debenture") is one of a
series of Debentures, (collectively, the "Debentures") aggregating SIX
MILLION DOLLARS ($6,000,000) all issued pursuant to an Amended and
Restated Stock Purchase Agreement (the "Agreement"), dated as of August
1,1997, by and among the Company, AIRTECH International Corporation
("AIRTECH"), and certain of the shareholders of the $0.0001 par value
common stock (the "AIRTECH Stock") of AIRTECH, and that certain
Stock Pledge and Escrow Agreement (the "Pledge Agreement"), dated as
of August 1, 1997, respecting the common stock of AIRTECH acquired by
the Company pursuant to the Agreement. The Debentures are entitled
to the benefits of the Agreement and Stock Pledge Agreement which among
other things contains provisions with respect to the acceleration of
the maturity of this Debenture upon the happening of certain stated
events.
2. Rate. The Debentures bear interest on the unpaid Principal Amount at
the rate of ten percent (10%) per annum from the date hereof until this
Debenture (herein so called) shall be paid in full.
3. Payments Dates. Interest on this Debenture shall be payable annually,
commencing on September 15, 1998 and continuing on the same day of each
third month thereafter until the entire principal of and interest on
this Debenture shall have been paid in full. The principal of this
Debenture shall be payable ____________. The principal of the
Debentures may be prepaid in whole or in part, and if in part by lot,
at any time.
4. Currency for Payment. Both the principal of and interest on this
Debenture are payable in the lawful money of the United States of
America; provided however, at the Company's option, interest on the
Debentures may be paid by the issuance of shares of the Company's $0.01
par value Common Stock (the "Common Stock"). If the Company elects to
so issue its Common Stock in payment of interest on the Debentures, the
initial rate shall be at seventy cents ($0.70) per share.
5. Place of Payment. Both the principal of and interest on this Debenture
are payable at the Registered Address set forth above, or at such
other address as shall have been provided to the Company, i writing,
by the Registered Holder hereof.
6. Conversion - Holder's Option. Subject to and upon compliance with the
provisions set forth herein, this Debenture, or any portion of the
principal amount hereof, may be converted, at the option of the
Registered Holder hereof, at 100% or so much of the principal amount of
this Debenture as is so converted into Common Stock at the Conversion
Price, determined as hereinafter provided, in effect at the date of the
conversion. The Registered Holder hereof may exercise all or any
portion of the conversion rights at any time or from time to time after
the second anniversary of the date hereof.
7. Conversion - Company's Option. Subject to and upon compliance with the
provisions of set forth herein, this Debenture, or any portion of the
principal amount hereof, may be converted, at the option of the
Company, at 100% or so much of the principal amount of this Debenture
as is so converted into Common Stock at the Conversion Price, in effect
at the date of the conversion. The Company may exercise all or any
portion of the conversion rights at any time or from time to time after
the date of hereof.
8. Conversion Price. The price at which shares of Common Stock shall be
delivered upon conversion (the "Conversion Price") shall initially be
seventy cents ($0.70) per share of Common Stock. The Conversion Price
in effect or to be in effect at any time shall be subject to adjustment
from time to time as provided in Section 9 hereof.
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<PAGE>
9. Application of Prepayment or Conversions. Prepayments or conversions
(whether made at the option of the Company or at the option of the
Registered Holder) shall be applied as follows: (i) cash, if any, shall
be applied first to accrued and unpaid interest and then to principal
in inverse order of maturity, then (ii) payments in stock or
conversions shall be applied first to accrued and unpaid interest and
then to principal in inverse order of maturity.
10. Adjustment of Conversion Price. Upon each adjustment of the Conversion
Price, the Registered Holder hereof shall thereafter be entitled to
purchase, at the conversion price resulting from such adjustment, the
number of shares obtained by multiplying the Conversion Price in effect
immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the conversion price resulting from
such adjustment. The Conversion Price shall be subject to adjustment
from time to time as follows:
A. If the Company shall at any time or from time to time
after the date hereof: (i) issue or sell any additional shares of
Common Stock for a consideration per share less than the
Conversion Price in effect immediately prior to the issue or sale
of such additional shares, or without consideration, or (ii) pay
or make a dividend (other than in cash payable from retained
earnings or earned surplus) or other distribution on Common Stock,
then and thereafter successively upon each such issue, sale,
dividend or other distribution, the Conversion Price for each
share of Common Stock in effect immediately prior to such issue,
sale, dividend or other distribution shall forthwith be reduced to
a price (calculated to the nearest full cent) equal to the
quotient obtained by dividing (i) an amount equal to the sum of
(a) the total number of shares of Common Stock outstanding
immediately prior to such issue, sale, dividend or other
distribution multiplied by such Conversion Price in effect
immediately prior to such issue, sale, dividend or other
distribution, plus (b) in the case of such an issue or sale, the
consideration, if any, received by the Company upon such issue or
sale, or minus (c) in the case of such a dividend or other
distribution, the amount of such dividend or other distribution,
by (ii) the total number of shares of Common Stock outstanding
immediately after such issue, sale, dividend or other
distribution. The Company shall not be required to make any
adjustment of the Conversion Price if the amount of such
adjustment shall be less than____________ cents ($0.__) per share,
but in such case any adjustment that would otherwise be required
then to be made shall be carried forward and shall be made at the
time and together with the next subsequent adjustment, which,
together with any adjustment so carried forward, shall amount to
not less than (insert amount) per share.
B. For the purposes of any adjustment as provided in
subsection A, the following provisions shall also be applicable:
(i) In case of the issue of additional shares of
Common Stock for cash, the consideration received by the
Company therefor shall be deemed to be the cash proceeds
received by the Company for such shares, without deduction
therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in
connection therewith;
(ii) If, at any time, the Company shall grant any
rights to subscribe for or to purchase, or any options for
the purchase of, Common Stock or any stock or other
securities convertible into or exchangeable for Common Stock
(such convertible or exchangeable stock or securities being
herein called "Convertible Securities"), whether or not such
rights or options or the rights to convert or exchange any
such Convertible Securities are immediately exercisable, and
the price per share for which Common Stock is issuable upon
the exercise of such rights or options or upon conversion or
exchange of such Convertible Securities, (determined by
dividing (a) the total amount, if any, received or
receivable by the Company as consideration for the granting
B-2 41
<PAGE>
of such rights or options, plus the minimum aggregate amount
of additional consideration payable to the Company upon the
exercise of such rights or options, plus, in the case of any
such rights or options which relate to such Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of
such Convertible Securities and upon the conversion or
exchange thereof, by (b) the total maximum numbers of shares
of Common Stock issuable upon the exercise of such rights or
options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such
rights or options) shall be less than the conversion price
in effect immediately prior to the time of the granting of
such rights or options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such
rights or options or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable
upon the exercise of such rights or options shall (as of the
date of granting of such rights or options) be deemed to be
outstanding and to have been issued for such price per
share. No further adjustments of the conversion price shall
be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such rights or
options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(iii) If, at any time, the Company shall declare a
dividend or make any other distribution upon any stock of
the Company payable in Common Stock or Convertible
Securities, any Common Stock or Convertible Securities, as
the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold
without consideration.
(iv) If any shares of Common Stock or Convertible
Securities or any rights or options to purchase any such
Common Stock or Convertible Securities shall be issued or
sold, in whole or in part, for a consideration other than
cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair value
of such consideration as determined by the Board of
Directors of the Company.
(v) In the event of the consolidation of the Company
with or the merger of the Company into any other corporation
or of the sale of the properties and assets of the Company
as, or substantially as, an entirety for stock or other
securities of any corporation, or the merger of any other
corporation into the Company as a result of which the
Registered Holders of shares of Common Stock of the Company
shall be deemed to have become the holders of, or shall
become entitled to, stock or other securities of any
corporation other than the Company, the Company shall be
deemed to have issued a number of shares of its Common Stock
for such stock or securities computed on the basis of the
exchange ratio actually applied in the transaction and for a
consideration equal to the fair market value on the date of
such transaction of such stock or securities of the other
corporation. If such determination shall cause an adjustment
in the Conversion Price, the determination of the number of
shares of Common Stock issuable upon the conversion of any
Debenture immediately prior to such consolidation, merger or
sale for the purposes of subsection (iii) of this subsection
shall be made after giving effect to such adjustment of the
Conversion Price.
(vi) In case of the payment or making of a dividend or
other distribution on Common Stock in property (other than
in shares of Common Stock and securities convertible into or
exchangeable for shares of Common Stock, but including all
other securities) such dividend or other distribution shall
be deemed to have been paid or made at the close of business
at the record date fixed for the determination of Registered
Holders entitled to receive such dividend or other
distribution and the amount of such dividend or other
B-3 42
<PAGE>
distribution shall be the amount of cash and, if in property
other than cash, shall be deemed to be the value of such
property as determined in good faith by the Board of
Directors of the Company at the time of the declaration of
such dividend or other distribution.
(vii) The number of shares of Common Stock outstanding
at any given time shall not include shares owned or held by
or for the account of the Company, and the disposition of
any such shares shall be considered an issue of sale of
Common Stock.
B. Anything to the contrary notwithstanding, the Company shall
not be required to make any adjustment of the Conversion Price as a
result of the happening of any of the following:
(i) The issuance of any of the Debentures of the series of
which this Debenture is a part;
(ii) The issue of shares of Common Stock upon the conversion
from time to time of the Debentures.
C. If, at any time, the Company shall subdivide its outstanding
shares of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the out-standing
shares of Common Stock of the Company shall be combined into a small
number of shares, the conversion price in effect immediately prior to
such combination shall be proportionately increased.
D. If any capital reorganization or reclassification of the
capital stock of the Company, or consolidation or merger of the Company
with another corporation, or the sale of all or substantially all of
its assets to another corporation shall be effected in such a way that
Registered Holders of Common Stock (or any other securities of the
Company then issuable upon the conversion of this Debenture) shall be
entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock (or such other securities) then, as a
condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby the
Registered Holder hereof shall thereafter have the right to purchase
and receive upon the basis and upon the terms arid conditions specified
in this Debenture and in lieu of the shares of the Common Stock (or
other securities) of the Company immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby, such
shares of stock, securities or assets as may be issued or payable with
respect to or in exchange for a number of shares of such Common Stock
(or such other securities) immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby, had such
reorganization, reclassification, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made
with respect to the rights and interests of the Registered Holder of
this Debenture to the end that the provisions hereof (including without
limitation provisions for adjustments of the conversion price and of
the number of shares purchasable upon the conversion of this Debenture)
shall thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities or assets thereafter deliverable upon the
conversion hereof (including an immediate adjustment, by reason of such
consolidation, merger or sale, of the conversion price, to the value
for the Common Stock reflected by the terms of such consolidation,
merger or sale if the value so reflected is less than the conversion
price in effect immediately prior to such consolidation, merger or
sale). The Company shall not effect any such consolidation, merger or
sale, unless prior to the consummation thereof the successor
corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets shall
assume, by written instrument executed and mailed to the Registered
Holder hereof at the last address of such Registered Holder appearing
on the books of the Company, the obligation to deliver to such
Registered Holder such shares of stock, securities or assets, as, in
accordance with the foregoing provisions, such Registered Holder may be
entitled to purchase. The successor corporation shall be deemed
substituted for the Company for all purposes of this Agreement and the
Debentures. The provisions of this subsection governing the
substitution of another corporation for the Company shall similarly
apply to successive instances in which the corporation then deemed to
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<PAGE>
be the Company hereunder shall either sell all or substantially all of
its properties and assets to any other corporation, shall consolidate
with or merge into any other corporation or shall be the surviving
corporation of the merger into it of any other corporation as a result
of which the Registered Holders of any of its stock or other securities
shall be deemed to have become the Registered Holders of, or shall
become entitled to, the stock or other securities of any corporation
other than the corporation at the time deemed to be the Company
hereunder.
11. Notice of Conversion Price. Upon any adjustment of the conversion
price, then and in each such case the Company shall give written notice
thereof, to the Registered Holder thereof, which notice shall state
the conversion price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price
upon the exercise of this Debenture, setting forth in reasonable
detail the method of calculation and the facts upon which such
calculation is based. The Company will, within 90 days after the end
of each of its fiscal years, and at such other times as the
Registered Holder may reasonably request, mail to the Registered
Holder of each Debenture at the address of such Registered Holder shown
on the books of the Company a certificate of the independent public
accountants for the Company specifying the Conversion Price in effect
as of the end of such fiscal year and the number of shares of Common
Stock, or the kind and amount of any securities or property other than
Common Stock or both, issuable upon the conversion of the Debentures.
12. Manner of Exercise of Conversion and Pre-Payment Rights by Company.
A. CONVERSION.
---------------
(a) When any of the Debentures of the series of which this
Debenture is a part are to be converted pursuant to Section 6, the
Escrow Agent shall cause a notice of conversion to be mailed to the
Registered Holders thereof at least thirty (30) but not more than
forty-five (45) days prior to the date fixed for conversion.
(b) Each notice of conversion shall be deposited by the Escrow
Agent in the United States mail with first class postage prepaid and
addressed to the Registered Holders of the Debentures called for
conversion at their respective addresses appearing upon the records of
the Escrow Agent.
(c) Notwithstanding the foregoing, any defect in any notice given
pursuant to this Section shall not affect the validity of the
proceedings for the proposed conversion.
(d) Each notice required by this Section shall state: (1) the
maturity date and rate of interest borne by each Debenture being
converted; (2) the date fixed for conversion; (3) the conversion price;
(4) the date on which such notice is mailed; (5) if less than all
Outstanding Debentures are to be converted, the Debenture number (and,
in the case of a partial conversion of any Debenture, the Principal
Amount) of each Debenture to be converted; (6) that on such conversion
date there shall become due and payable upon each Debenture to be
pre-paid the conversion price thereof, or the conversion price of the
specified component of the Principal Amount thereof in the case of
Debentures to be pre-paid in part only, together with interest with
respect thereto to the conversion date, and that from and after such
date interest with respect thereto shall cease to accrue and be
payable; (7) that the Debentures to be pre-paid, whether as a whole or
in part are to be surrendered for payment of the conversion price at
the corporate trust office of the Escrow Agent; and (8) the name and
telephone number of a person designated by the Escrow Agent to be
responsible for such conversion.
B. PREPAYMENT RIGHTS.
----------------------
(a) When any of the Debentures of the series of which this
Debenture is a part are to be pre-paid pursuant to Section 2, the
Escrow Agent shall cause a notice of pre-payment to be mailed to the
Registered Holders thereof at least thirty (30) but not more than
forty-five (45) days prior to the date fixed for pre-payment.
B-5 44
<PAGE>
(b) Each notice of pre-payment shall be deposited by the Escrow
Agent in the United States mail with first class postage prepaid and
addressed to the Registered Holders of the Debentures called for
pre-payment at their respective addresses appearing upon the records of
the Escrow Agent.
(c) Notwithstanding the foregoing, any defect in any notice given
pursuant to this Section shall not affect the validity of the
proceedings for the proposed pre-payment.
(d) Each notice required by this Section shall state: (1) the
maturity date and rate of interest borne by each Debenture being
pre-paid; (2) the date fixed for pre-payment; (3) the pre-payment
price; (4) the date on which such notice is mailed; (5) if less than
all Outstanding Debentures are to be pre-paid, the Debenture number
(and, in the case of a partial pre-payment of any Debenture, the
Principal Amount) of each Debenture to be pre-paid; (6) that on such
pre-payment date there shall become due and payable upon each Debenture
to be pre-paid the pre-payment price thereof, or the pre-payment price
of the specified component of the Principal Amount thereof in the case
of Debentures to be pre-paid in part only, together with interest with
respect thereto to the pre-payment date, and that from and after such
date interest with respect thereto shall cease to accrue and be
payable; (7) that the Debentures to be pre-paid, whether as a whole or
in part are to be surrendered for payment of the pre-payment price at
the corporate trust office of the Escrow Agent; and (8) the name and
telephone number of a person designated by the Escrow Agent to be
responsible for such pre-payment.
(e) If at the time of mailing of notice of any pre-payment, the
Company shall not have deposited with the Escrow Agent moneys
sufficient to redeem all the Debentures called for pre-payment, such
notice shall state that it is conditional, subject to the deposit of
funds with the Escrow Agent not later than the pre-payment date, and
such notice shall be of no effect unless such moneys are so deposited.
COSTS OF CONVERSION OR PRE-PAYMENT.
-----------------------------------
Whenever Debentures are to be pre-paid or converted, all pre-payment
costs or conversion costs, including the amounts necessary to pay all
costs of required mailing, any other costs incidental to the
pre-payment or conversion, and to pay the principal, and all interest
accrued and to accrue to the date fixed for pre-payment (or any earlier
date to which interest shall be paid), shall be set aside and held in
separate trust to be established therefor by the Escrow Agent
exclusively for such purposes. Notice having been given in the manner
hereinbefore provided, or written waivers of notice having been filed
with the Escrow Agent prior to the date set for pre-payment or
conversion, the Debentures so called for pre-payment or conversion
shall become due and payable on the pre-payment date or conversion date
so designated and interest on such Debentures shall cease to accrue
from the pre-payment or conversion date whether or not the Debentures
shall be presented for payment. The final distribution (representing
principal and accrued interest) on any Debenture so called for
pre-payment or conversion shall be paid by the Escrow Agent upon
presentation and surrender thereof.
13. Manner of Exercise of Conversion Rights by Holder. In order to
exercise the conversion privilege, the Registered Holder hereof may
surrender this Debenture to the Company at any time after the second
anniversary of the date hereof , during usual business hours at its
office or agency in the City of (insert address), State of (insert
address), accompanied by written notice to the Company at such office
or agency that the Registered Holder elects to convert this Debenture
or a specified portion hereof and stating the name or names (with
address) in which the certificate or certificates for shares of Common
Stock which shall be issuable on such conversion shall be issued. All
Debentures surrendered for conversion shall (if so required by the
Company) be accompanied by proper assignments thereof to the Company or
be blank. As promptly as practicable after the receipt of such notice
and the surrender of this Debenture as aforesaid, the Company shall
issue and deliver at such office or agency to the Registered Holder, or
on his written order, a certificate or certificates for the number of
B-6 45
<PAGE>
full shares of Common Stock issuable on such conversion in accordance
with the provision of this Article and cash, as provided in Section
_____ hereof, in respect of any fraction of a share of Common Stock
otherwise issuable upon such conversion. Such conversion shall be
deemed to have been effected at the close of business on the Date of
Conversion, and the person or persons in whose name or names any
certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the
Registered Holder or Registered Holders of record of the shares
represented thereby on such date; provided, however, that any such
surrender on any date when the stock transfer books of the Company
shall be closed shall constitute the person or persons in whose name or
names the certificate or certificates for such shares are to be issued
as the record Registered Holder or Registered Holders thereof for all
purposes at the close of business on the next succeeding day on which
such stock transfer books are open, and this Debenture shall not be
deemed to have been converted until such time for all purposes, but
such conversion shall be at the conversion price in effect at the close
of business on the date of such surrender. In case this Debenture shall
be surrendered for conversion of only a portion of the principal amount
thereof, the Company shall execute and deliver to the Registered Holder
of such Debenture, at the expense of the Company, a new Debenture in
the denomination or denominations ($1,000 and integral multiples
thereof, plus one Debenture in a lesser denomination, if required) as
such Registered Holder may request in an aggregate principal amount
equal to the unconverted portion of the Debenture so surrendered.
14. Fractions of Share. The Company shall not be required to issue
fractions of a share or scrip representing fractional shares of Common
Stock upon conversion of this Debenture. If any fraction of a share of
Common Stock would, except for the provisions of this Section be
issuable on the conversion of this Debenture (or specified portions
hereof), the Company shall pay a cash adjustment in respect of such
fraction, equal to the value of such fraction based on the then
conversion price.
15. Delivery of New Certificates. Certificates for Conversion Shares shall
be delivered to the Registered Holder named therein within 15 days
after the Exercise Time. Unless all of the principal amount evidenced
by this Certificate shall have been converted or shall have been
redeemed, the Company, within a 15-day period, prepare a new
certificate, substantially identical to this Certificate, representing
the balance of the principal amount which shall not have converted or
redeemed and shall within the said 15-day period deliver such
certificate to the person designated as the Registered Holder thereof.
16. Assignment. Assignment of this Debenture shall be in the form set forth
hereon.
17. Authorization and Issuance. The Company covenants and agrees that:
(i) Conversion Shares which may be issued upon any conversion of
any portion of the principal amount of this Debenture, upon issuance,
will be fully paid and non-assessable and free from all taxes, liens
and charges with respect to the issue thereof.
(ii) The Company will take all such action as may be necessary to
assure that all Conversion Shares issuable upon conversion of this
Debenture may be issued without violation of any applicable law or
regulation or of any requirements of any domestic securities exchange
upon which securities of the same class may be listed.
(iii) The issuance of certificates for Conversion Shares upon
conversion of this Debenture shall be made without charge to the
Registered Holder hereof for any issuance tax in respect thereof or
other cost incurred by the Company in connection with the conversion of
this Debenture and the related issuance of Conversion Shares.
(iv) The Company will at no time close its transfer books against
the transfer of this Debenture or of any Conversion Shares issued or
issuable upon the conversion of this Debenture in any manner which
interferes with the timely conversion of this Debenture.
B-7 46
<PAGE>
(v) The Company shall not at any time authorize or issue any
security which under the definition given in 31 constitutes "Common
Stock" and which grants to its security holders rights to share in
dividends or any other distributions of any kind at any time made by
the Company (including but not limited to liquidating distributions)
which could result in the distribution of a greater amount per share
than the amount per share distributable on the Company's Existing
Common Stock or which are in any respect more favorable than the
corresponding rights attributable to Existing Common Stock.
18. Transferability. This Debenture and all rights evidenced hereby are
transferable on the Company's books by the Registered Holder in person
or by a duly authorized attorney upon surrender hereof properly
endorsed at the Company's principal office; provided that the
Registered Holder complies with such provisions governing transfer as
shall be reasonably established by the Company.
19. Break-up of Certificates. This Debenture is exchangeable, upon the
surrender of hereof by the Registered Holder at the Company's principal
office, for a new certificate or certificates of like tenor
representing in the aggregate the principal amount hereof, each of
which new certificates shall represent shall be in the principal amount
designated by the Registered Holder at the time of such surrender.
20. Notice of Distributions, Rights of Reorganization, Etc. In case, at any
time:
(i) the Company shall pay any dividend payable in stock upon
its Common Stock or make any distribution (other than regular cash
dividends) to the Registered Holders of its Common Stock;
(ii) the Company shall offer for subscription pro rata to
the Registered Holders of its Common Stock any additional shares
of stock of any class or other rights;
(iii) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or
consolidation or merger of the Company, or sale of all or
substantially all of its assets to, another corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give written
notice, to the Registered Holder of this Debenture, of the date on
which (a) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (b)
such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up shall take place, as the case
may be. Such notice shall also specify the date as of which the
Registered Holders of this Debenture shall participate in such
dividend, distribution or subscription rights, or shall be entitled to
exchange this Debenture for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in
question, and not less than 20 days prior to the record date or the
date on which the Company's transfer books are closed in respect
thereto.
21. Company to Reserve. The Company shall at all times reserve and keep
available out of its authorized but unissued stock, for the purpose of
converting the Debentures, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding Debentures.
22. No Rights as Stock Holders. Prior to the conversion of this Debenture,
the Registered Holder of such Debenture shall not be entitled to any
rights of a stock holder of the Company, including without limitation
the right to vote, to receive dividends or other distributions or to
exercise any pre-emptive rights, and shall not be entitled to receive
any notice of any proceedings of the Company, except as provided
herein.
B-8 47
<PAGE>
23. Rights of Registered Holder Upon Liquidation. In the event of any
voluntary or involuntary liquidation (whether complete or partial),
dissolution or winding up of the Company, the Registered Holder of this
Debenture shall be entitled to be paid out of the assets of the
Company, prior to the making of any payment on any Equity Security or
Junior Indebtedness of the Company.
24. Allocation of Liquidation Payments Among Registered Holders of The
Debentures. If upon any dissolution, liquidation (whether complete
or partial), or winding up of the Company, the assets of the Company
available therefor (hereinafter in this Section called the "Total
Amount Available") shall be insufficient to pay the Registered Holders
of outstanding the Debentures the full amounts to which they shall be
entitled thereunder, each Registered Holder of the Debentures shall
be entitled to receive an amount equal to the product derived by
multiplying the Total Amount Available times a fraction the numerator
of which shall be the aggregate principal amount of the Debentures
held by such Registered Holder and the denominator of which shall be
the aggregate principal amount of all of the Debentures then
outstanding.
25. Amendment and Waiver. No change in the provision of this Section
affecting any interests of the Registered Holders of any of the
Debentures shall be binding or effective unless such change shall have
been approved in writing by at least two unaffiliated Registered
Holders of at least 66-2/3% of the aggregate principal amount of all
Debentures outstanding at the time such change shall be made, provided
that no change shall be made in the provisions for conversion contained
herein.
26. Registration of Transfer of Debentures. The Company will keep at its
principal office a register for the registration of the Debentures.
Upon the surrender of this Debenture at the Company's principal office,
the Company, at the request of the Registered Holder, will execute and
deliver, at the Company's expense, a new certificate or certificates in
exchange representing the aggregate principal amount of this Debenture.
Each such new certificate shall be registered in such name and shall
represent such principal amount as shall be requested by the Registered
Holder of the surrendered certificate, and shall be substantially
identical in form, except as to principal amount, to the surrendered
certificate.
27. Replacement. Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction
or mutilation of any certificate evidencing one or more of the
Debentures (an affidavit of the Registered Holder, without bond shall
be satisfactory), the Company at its expense will execute and deliver
in lieu of such certificate, a new certificate of like kind,
representing the then outstanding principal amount of the Debenture
which shall have been represented by such lost, stolen, destroyed, or
mutilated certificate, dated and earning interest from the date to
which interest shall have paid on such lost, stolen, destroyed or
mutilated certificate.
28. Events of Noncompliance.
Definitions. For purposes of this Section, an "Event of Noncompliance"
will be deemed to have occurred if:
(i) The Company or any of its subsidiaries shall fail in a
material manner to perform or observe any covenant set forth in
the Agreement or shall fail to comply with any other provision of
the Agreement and the Registered Holders of the Debentures shall
have given at least 30 days prior written notice of such failure
and the same shall not have been cured; or any representation,
warranty or information contained in any writing supplied by the
Company or any of its subsidiaries or by an officer or director
thereof to any Registered Holder of this Debenture shall be
materially false or misleading in any material respect on the date
on which made or furnished; or
(ii) The Company or any of its subsidiaries shall be in
default under any material contract(s) or agreement(s) to which it
is a party, which default could have a material adverse effect on
the consolidated operating results of the Company, whether or not
a default has been declared; or
B-9 48
<PAGE>
(iii) without limiting the generality of (ii) above, the
Company or any of its subsidiaries shall fail to make any payment
due on any other obligation and the effect of such failure shall
be to cause such obligation to become due prior to its date of
maturity; or
(iv) if the Company shall fail to pay when due any payment
of money including any payment due under any securities or
otherwise not comply with the provisions of any such security or
allow any default under any other agreement involving the
borrowing or money or the advance of credit, if such default gives
to the owner of the obligation concerned the right to accelerate
the indebtedness; or
(v) a receiver, liquidator or trustee of the Company or any
of its subsidiaries or of any property of the Company or any of
its subsidiaries, shall be appointed by court order and such
appointment shall remain in effect for 30 days; or the Company or
any of its subsidiaries shall be adjudged bankrupt or insolvent;
or any of the property of the Company or any of its subsidiaries
shall be sequestered by court order and such order shall remain in
effect for more than 30 days; or a petition to reorganize the
Company or any of its subsidiaries under any bankruptcy,
reorganization or insolvency law shall be filed against the
Company or any of its subsidiaries and shall not be dismissed
within 30 days after such filing; or
(vi) the Company or any of its subsidiaries shall file a
petition in voluntary bankruptcy or requesting reorganization
under any provision of any bankruptcy, reorganization or
insolvency law or shall consent to the filing of any petition
against it under any such law; or
(vii) the Company or any of its subsidiaries shall make a
formal or informal assignment for the benefit of its creditors or
admit in writing its inability to pay its debts generally when
they become due or consent to the appointment of a receiver,
trustee or liquidator of the Company or any of its subsidiaries or
of all or any part or the property of the Company or any of its
subsidiaries; or
(viii) final judgment for payment of money aggregating in
excess of $250,000 shall be outstanding against the Company or any
of its subsidiaries and any one of such judgments shall have been
outstanding for more than 30 days from the date of its entry and
shall not have been discharged in full or stayed and such event
shall not have been cured within a period of 30 days.
An Event of Non-compliance shall be deemed to exist at any time
any state of facts shall have come about voluntarily or
involuntarily or shall be beyond the Company's control or shall
have come about or been effected by operation of law or pursuant
to or in compliance with any judgment, decree or order of any
court or any order, rule or regulation of any administrative or
governmental body.
The term "Potential Event of Non-compliance" means the occurrence
of any event which with the passage of time or the giving of
notice or both would become an Event of Non-compliance.
29. Action to be Taken in Case of Certain Events of Non-compliance. In the
event that any Event of Non-compliance described herein shall exist,
then, up demand of at least two unaffiliated Registered Holders of an
aggregate of at least 66-2/3% of the then outstanding principal amount
of the Debentures the Registered Holders shall be given the right to
vote on all matters which may be properly brought before the
shareholders. For the purpose of calculating the votes which may be
cast by such Registered Holders, each Registered Holder here shall be
allowed to vote the number of Conversion Shares into which this
Debenture is convertible as of the record date established for such
vote.
30. Non-Exclusivity. The rights under this Section shall not be deemed to
be exclusive. If any Event of Non-compliance shall exist, the
Registered Holders of shares of Debenture shall have all other rights
which such Registered Holder shall have been granted under any contract
or agreement at any time, and all other rights which such Registered
B-10 49
<PAGE>
Holders shall have under any law Any person having any rights under any
provision in this Section shall be entitled to enforce such person's
rights specifically, to recover damages by reason of any non-compliance
with any provision in this Section, and to exercise all other rights
granted by law.
31. Definitions. Each term defined in this Section 7.01 has the meaning
indicated in this instrument whenever such term is used in this
instrument.
"Common Stock" or "Common Shares" designates and includes the
Company's Existing Common Stock of all classes and any capital stock of
any class of the Company authorized after the date of the Agreement
which shall not be limited to a fixed sum or a percentage of par value
in respect to the rights of the Registered Holders thereof to
participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation or winding-up of the Company.
"Conversion Share" means one share of the Company's authorized
Common Stock, provided that if under the provisions hereof, there shall
be a change such that the securities purchasable hereunder shall be
issued by an entity other than the Company or class of securities
purchasable hereunder, then the term "Conversion Share" shall mean one
share of the security purchasable upon the exercise of the rights
granted hereunder if such security shall be issuable in shares or shall
mean the smallest unit which such security shall be issuable if such
security shall not be issuable in shares.
"Conversion Shares" means the aggregate Conversion Shares at any
time issuable upon conversion of the Debentures.
"Equity Security" means any of the Company's securities other than
the Debentures or any Junior Debt.
"Existing Common Stock" designates the Company-authorized Common
Stock, par value $0.01 per share, of all classes, as constituted on the
Closing Date as set forth in the Agreement.
"Junior Debt" shall mean any debt security of any kind which the
Company or any subsidiary shall at any time issue or be authorized to
issue other than the Debentures.
"Number of Common Shares Deemed Outstanding" at any given time
means the sum of (a) the number of Common Shares actually outstanding
at such time, plus (b) the number of the Company's Common Shares
otherwise deemed to be outstanding.
32. Adjustment of Number of Shares. In order to prevent dilution of the
rights granted hereunder, the Conversion Price shall be subject to
adjustment from time to time as follows:
(a) If the Company shall: (A) declare a dividend on its the Common
Stock in shares of the Common Stock or make a distribution in shares of
the Common Stock, (B) subdivide its outstanding shares of the Common
Stock, (C) combine its outstanding shares of the Common Stock into a
smaller number of shares of the Common Stock or (D) issue by
reclassification of its shares of the Common Stock other securities of
the Company (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing
corporation); then the number of shares of the Common Stock issuable
upon conversion of the Debentures immediately prior thereto shall be
adjusted so that the Registered Holder of this Debenture shall be
entitled to receive the kind and number of shares of the Common Stock
of the Company which he would have owned or have been entitled to
receive after the happening of any of the events described above, had
the this Debenture been converted immediately prior to the happening of
such event or any record date with respect thereto. An adjustment made
pursuant to this paragraph shall become effective immediately after the
effective date of such event retroactive to immediately after the
record date, if any, for such event.
(b) If the Company shall issue either (A) any shares of the Common
Stock or (B) any right to buy the Common Stock at a price per share
which is less than the fair market value per share of the Common Stock
as of the time of any such issuance, in an amount which has a material
B-11 50
<PAGE>
dilutive effect (which for purposes hereof shall mean issuance, at less
than fair market value, of an aggregate number of shares of the Common
Stock equal to at least ten percent (10%) of the then issued and
outstanding shares of the Company ); then the number of shares of the
Common Stock which the Conversion Rate shall thereafter entitle the
Registered Holders of the Debentures to receive shall be determined by
multiplying the number of shares of the Common Stock which the
Conversion Rate entitled the Registered Holder to receive immediately
prior to such issuance by a fraction, the numerator of which shall be
the number of shares of the Common Stock outstanding immediately prior
to such issuance plus the number of additional shares of The Common
Stock so issued, and the denominator of which shall be the number of
shares of the Common Stock outstanding immediately prior to such
issuance plus the number of shares of the Common Stock which the
consideration received by the Company would purchase at fair market
value (as determined in good faith by the Board of Directors of the
Company ). This provision shall not apply to any shares of the Common
Stock issued pursuant to any presently existing option, warrant or
right to convert any obligation of the Company into shares of the
Common Stock which are issued and outstanding as of the date of the
adoption of the Designation of Rights and Preferences or to shares
issued pursuant to the conversion of debentures of the Company or to
shares issued pursuant to options or warrants hereafter granted if the
exercise price for the purchase of said shares was equal to or greater
than fair market value (as determined in good faith by the Board of
Directors of the Company ) at the date of such grant. In determining
the fair market value for purposes of this paragraph, a recent bid
price for the Company's Common Stock may be conclusively presumed to be
the fair market value by the Board of Directors; provided that the
Board of Directors may consider other factors, in good faith, if they
so choose.
(c) No adjustment in the number of shares of the Common Stock
issuable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the
number of shares of the Common Stock issuable upon the conversion of
the Debentures.
(d) If the number of shares of the Common Stock issuable upon the
conversion of the this Debenture or the conversion price of such The
Common Stock is adjusted as provided above, then the Company shall mail
promptly, by first class mail, postage prepaid, to each Registered
Holder notice of such adjustment or adjustments.
(e) In case of any consolidation of the Company or merger or share
exchange of the Company with or into another corporation or in case of
any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, the Company or
such successor or purchasing corporation (or an affiliate of such
successor or purchasing corporation), as the case may be, agrees that
each Registered Holder shall have the right thereafter to convert this
Debenture into the kind and amount of shares and other securities and
property (including cash) which such Registered Holder would have owned
or have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had the This Debenture been
converted immediately prior to such action. The provisions of this
paragraph shall similarly apply to successive consolidations, mergers,
sales or conveyances.
B-12 51
<PAGE>
EXHIBIT "C"
ACCEPTANCE OF TENDER OFFER AND STOCK POWER
RECEIPT AND REVIEW OF PROSPECTUS.
The undersigned Shareholder ("Shareholder") of $0.0001 par value common
stock (the "AIRTECH Common Stock") of AIRTECH International Corporation
("AIRTECH") does hereby acknowledge and affirm that Shareholder has received and
reviewed that certain Prospectus, dated September ___, 1997 (the "Prospectus")
delivered by Interactive Technologies Corp., Inc. ("ITC") with respect to the
tender offer (the "Offer") by ITC for all but not less than eighty-one percent
(81%) of the AIRTECH Common Stock, upon the terms and conditions described in
the Prospectus. Shareholder acknowledges and affirms that it has had the
opportunity to request and review those portions of the registration statement
of which the prospectus is a part, and other information as shall be on file
with the Securities and Exchange Commission concerning ITC.
RECEIPT AND REVIEW OF ESCROW AND PLEDGE AGREEMENT.
Shareholder does hereby acknowledge and affirm that Shareholder has
received and reviewed that certain Escrow and Pledge Agreement to be executed
and delivered by and between AIRTECH, ITC and Interwest Transfer Company (the
"Escrow Agent") which is referenced in the Prospectus and included in the
Registration Statement of which this Prospectus is a part.
ACCEPTANCE OF TENDER OFFER.
Subject to the acceptance thereof by the holders of at least eighty-one
percent (81%) of the issued and outstanding shares of the Common Stock (the
"Requisite Number"), shareholder does hereby accept the Offer; and Shareholder
does hereby tender to Interwest Transfer Company, as escrow and transfer agent,
certificates evidencing the number of shares set forth below opposite
Shareholder's name and address. Such tender is made in trust however, pending
acceptance of the Offer by the Requisite Number.
STOCK POWER.
Subject to the acceptance thereof by the Requisite Number, and the closing
of the exchange of shares as described in the Prospectus, and further subject to
the pledge thereof as security for the ITC Debentures described in the
Prospectus, Shareholder hereby sells, assigns, and transfers to Interactive
Technologies, Corp., Inc. the number of shares of AIRTECH Common Stock set forth
opposite Shareholder's name and address, now standing in the name of Seller on
the books of AIRTECH, and represented by Certificate(s) Number(s) set forth
opposite Shareholder's name and address.
Subject to the acceptance thereof by the Requisite Number, and the closing
of the exchange of shares as described in the Prospectus, and further subject to
the pledge thereof as security for the ITC Debentures described in the
Prospectus, hereby irrevocably appoints, with full power of substitution,
Interwest Transfer Company, to transfer the stock listed in the preceding
paragraph on the books of the AIRTECH.
Dated: ______________, 1997.
Certificate No.(s)/Number of Shares____________
__________________________
_______________________________________________ [SIGNATURE OF SHAREHOLDER]
_______________________________________________
By:________________________________________
[OFFICIAL SIGNATURE, TYPED NAME & TITLE]
SIGNATURE GUARANTEED
_______________________________________
[NAME OF BANK, TRUST COMPANY OR BROKER]
By: ___________________________________________________
[OFFICIAL SIGNATURE] [TYPED NAME AND TITLE]
C-1 52
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Wyoming Business Corporation Act authorizes a corporation, under certain
circumstances, to indemnify its directors and officers, including reimbursement
for expenses incurred. ITC has provided in its by-laws for indemnification to
the fullest extent permitted by the Wyoming Statute.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
EXHIBIT NO. DESCRIPTION REFERENCE
1.1 Form of Underwriting Agreement Not Applicable.
2.1 First Amended and Restated Stock
Purchase Agreement Filed herewith.
3.1 Certificate of Incorporation
of the Company, together
with all amendments Incorporated herein by reference
3.2 Bylaws of ITC. Incorporated herein by reference
5.1 Opinion of Counsel for ITC Filed herewith.
23.1 Consent of Counsel to ITC
(contained in its opinion filed as
Exhibit 5.1 hereto). Filed herewith.
23.2 Consent of Accountants for ITC Filed herewith.
24.1 Power of Attorney. Not Applicable
27.1 Financial Data Schedule. Not Applicable
27.2(99) Other Financial Information
27.2.1 Audited Financial Statements
of ITC for the 12 month
period ended May 31, 1996 Incorporated herein by reference
27.2.2 Audited Financial Statements
of AIRTECH for the 12 month
period ended February 28, 1996 Filed Herewith
27.2.3 Un-audited Condensed Financial
Statements of AIRTECH for the
9 month period ended February 28, 1997 Filed Herewith
27.2.4 Un-audited Condensed Financial
Statements of Interactive for
the 9 month period ended
February 28, 1997 Filed Herewith
27.2.5 Un-audited Combined Pro Forma
Financial Statements for the
9 month period ended February 28, 1997 Filed Herewith
28.1 AIRTECH Uniform Offering Circular Filed Herewith
28.2 Form of Escrow and Pledge Agreement Filed Herewith
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Part II-1 53
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned hereunto duly authorized in the City of Melbourne,
State of Florida on August 22, 1997.
Interactive Technologies Corp., Inc.,
a Wyoming corporation
/s/ Perry Douglas West
-----------------------------------
Perry Douglas West
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been duly signed by the following persons in the capacities and on
the date indicated.
/s/ Perry Douglas West
------------------------------------
Perry Douglas West
Chief Executive Officer and Director
Part II-2 54
<PAGE>
FIRST AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
by and between
INTERACTIVE TECHNOLOGIES CORPORATION
a Wyoming corporation
and
AIRTECH INTERNATIONAL CORPORATION SHAREHOLDERS
and
AIRTECH INTERNATIONAL CORPORATION,
a Texas corporation
* * * * *
2.1 1
<PAGE>
TABLE OF CONTENTS
Page
Article I Exchange of Shares 1
Article II Purchaser's Representations and Warranties 3
Article III Representations and Warranties of Airtech
and the Selling Shareholders 5
Article IV Airtech's covenants 8
Article V Purchaser's Covenants 9
Article VI Purchaser's Conditions Precedent 11
Article VII Conditions Precedent of Airtech Selling Shareholders 11
Article VIII Miscellaneous 12
Exhibit 1.03 17
2.1 2
<PAGE>
FIRST AMENDED
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDED STOCK PURCHASE AGREEMENT is entered into effective as of
August 31, 1997, by and among Interactive Technologies Corporation, Inc. a
Wyoming corporation ("Purchaser"), Airtech International Corporation, a Texas
corporation ("Airtech") and the shareholders of the outstanding common stock of
Airtech (the "Selling Shareholders").
W I T N E S S E T H :
WHEREAS, Purchaser is a publicly held corporation that desires to acquire a
business which has growth potential; and
WHEREAS, Airtech is a business engaged in the business of manufacturing and
marketing of portable and commercial air purification equipment that appears to
have growth potential; and
WHEREAS, Purchaser desires to acquire at least eight-one percent (81%) of
the issued and outstanding shares of common stock, $0.0001 par value, of Airtech
(the "Airtech Common Stock") owned by the Selling Shareholders in exchange for
Purchaser's common stock, par value $0.01 ("ITC Common Stock"), Purchaser's
preferred stock, par value $1.00 ("ITC Preferred Stock") and Purchaser's
debentures (the "ITC Debentures") in a tax-free transaction pursuant to the
provisions of Section 368(a)(1)(B) of the Internal Revenue Code as amended;
NOW, THEREFORE, for and in consideration of the mutual representations,
warranties and covenants herein contained, and on the terms and subject to the
conditions set forth herein, the parties hereto agree as follows:
ARTICLE I
PURCHASE OF SHARES
1.01 Purchase of Stock. Subject to and upon the terms and conditions
contained herein, at the Closing (as hereinafter defined), the Selling
Shareholders shall assign, transfer, convey and deliver to Interwest Transfer
Company, P.O. Box 17136, Salt Lake City, Utah, 84117 the Escrow Agent hereon,
together with any substitute escrow agent designated by Purchaser and Airtech,
the Airtech Common Stock, pursuant to the terms of the Escrow Agreement, the
form of which is attached hereto as Exhibit "A" (the "Escrow Agreement") and
incorporated by reference, free and clear of any liens, encumbrances and charges
whatsoever, and Purchaser shall accept and acquire from the Selling Shareholders
the Airtech Common Stock owned by them. Purchaser shall accept and acquire from
the Selling Shareholders, as provided herein, in the aggregate a minimum of
eighty-one percent (81%) and up to a maximum of one hundred percent (100%) of
Airtech Common Stock.
1.02 Delivery of Consideration and Registration of ITC Common Stock. In
consideration of the shares of Airtech Common Stock of the Selling Shareholders,
Purchaser at the Closing shall deliver to the Escrow Agent for the Selling
Shareholders one or more certificates representing shares of ITC Common Stock,
one or more certificates representing shares of ITC Preferred Stock and one or
more ITC Debentures, to which they are entitled to receive in exchange for
certificates representing their shares of Airtech Common Stock, as set forth
opposite such shareholders' name on Exhibit 1.03. When issued such security will
legally and valididly issued and is paid and nonassessable free and clear of any
leins, encumbraces or chages whatsoever.
1.02.1 ITC Common Stock. ITC shall issue in exchange for the Airtech Common
Stock, 8,000,000 shares of registered ITC Common Stock. Each Airtech shareholder
will receive their pro-rata percent of the of the ITC Common Stock (number of
Shareholder's shares of Common Stock in Airtech / total issued and outstanding
shares of Airtech Common Stock). Prior to the Closing, as defined herein and in
the Escrow Agreement, ITC shall file a registration statement with the
Securities and Exchange Commission to register the ITC Common Stock, Preferred
Stock and Debentures under the Securities Act of 1933 and after the registration
statement is declared effective file such post-effective amendments and such
other documents as may be required to enable the Selling Shareholders to sell
any such ITC Common Stock acquired by them pursuant to the provisions of this
Stock Purchase Agreement. It is mutually agreed that ITC and Airtech shall work
together in the preparation of the information required in the Registration Form
and that Airtech shall be responsible for the cost associated with registering
the shares for the Airtech Shareholders.
2.1 3
<PAGE>
1.02.2 ITC Preferred Stock. ITC shall, in addition, issue in exchange for
the Airtech Common Stock 8,850,000 shares of Convertible Preferred Stock, par
value $1.00. ITC at its option may elect to convert these shares of Preferred
Stock at any time during the 24 month period. At closing each selling
shareholder will receive his pro-rata percent of the ITC Preferred Stock (number
of each selling Shareholder's shares of Common Stock in Airtech / total issued
and outstanding shares of Airtech Common Stock).
1.02.3 ITC Debentures. ITC shall issue in exchange for the Airtech Common
Stock $6,000,000 principal amount Convertible 10% Debentures. These Debentures
will be secured by the shares of Airtech Common Stock purchased by ITC pursuant
to this Article I, and shall be convertible after 24 months into registered
shares of ITC Common Stock at a rate of $0.70 per share. ITC at its option, may
elect to convert the ITC Debentures at any time during the 24 month period. At
closing, each Shareholder will receive his pro-rata percent of the ITC
Debentures (number of each selling Shareholder's shares of Common Stock in
Airtech total issued and outstanding shares of Airtech Common Stock). The
interest accruing on these Debentures, at ITC's option, can be paid in cash or
in additional registered shares of Common Stock in ITC. If the interest is paid
in shares of Common Stock the convertible rate shall be $0.70.
1.03 Closing. The closing of the transaction contemplated hereby (the
"Closing") shall occur on June 30, 1997 or such date after required compliance
with state and federal laws, notification of shareholders, required votes by
shareholders and the registration statement has been filed by ITC with the
Securities and Exchange Commission.
As soon as practical following the effective date of the registration
statement filed with respect to the closing of the transaction contemplated
hereby shall occur on the twentieth (20) day following the date of delivery of
this Prospectus to Airtech shareholders, or on such later date required
compliance with state and federal laws and receipt of the acceptance from
Selling Shareholders owning at least eighty-one percent (81%) of the issued and
outstanding Airtech Common Stock.
1.04 Instruments of Transfer; Further Assurances. In order to consummate
the transaction contemplated hereby, the following documents and instruments
shall be delivered:
(a) Documents from Selling Shareholders. Selling Shareholders shall deliver
to Purchaser's Escrow Agent at the Closing one or more stock certificates
representing in the aggregate the number of shares of Airtech Common Stock owned
by them plus duly executed stock powers or other instrument of transfer for each
such stock certificate.
(b) Documents from Purchaser. Purchaser's Escrow Agent shall deliver to
Selling Shareholders at the closing one or more stock certificates representing
in the aggregate the number of shares of ITC Preferred Stock, the Dollar amount
of Debentures to which such Selling Shareholders are entitled, to be registered
in such names and in such denominations as shall be requested by Selling
Shareholders not less than thre (3) business days prior to the Closing Date. The
Purchaser's Escrow Agent, after the effective date of the registration is
received from the Securities and Exchange Commission shall deliver to the
Selling Shareholders the aggregate number of shares of ITC Common Stock to which
such Selling Shareholders are entitled, registered in such names and in such
denominations as shall be requested by Selling Shareholders.
(c) Further Documents. At the Closing, and at all times thereafter as may
be necessary (i)Selling Shareholders shall execute and deliver to Purchaser
such other instruments of transfer as shall be reasonably necessary or
appropriate to vest in Purchaser good and indefeasible title to the shares of
Airtech Common Stock owned by them and to comply with the purposes and intent of
this Agreement, and (ii)Purchaser shall execute and deliver to Selling
Shareholders such other instruments as shall be reasonably necessary or
appropriate to comply with the purposes and intent of this Agreement.
2.1 4
<PAGE>
ARTICLE II
PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants that the following are true and correct
as of this date and will be true and correct through the Closing Date as if made
on that date:
2.01 Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, with all requisite power and authority to carry on the
business in which it is engaged, to own the properties it owns and to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby.
2.02 Authorization and Validity. The execution, delivery and performance of
this Agreement by Purchaser and the consummation of the transactions
contemplated hereby have been or will be prior to Closing duly authorized by
Purchaser. This Agreement constitutes or will constitute legal, valid and
binding obligations of Purchaser, enforceable against Purchaser in accordance
with its terms, and neither the execution or delivery of this Agreement nor the
consummation by the Purchaser of the transactions contemplated hereby
(i)violates any statute or law or any rule, regulation or order of any court or
any governmental authority, or (ii) violates or conflicts with, or constitutes a
default under or will constitute a default under, any contract, commitment,
agreement, understanding, arrangement, or restriction of any kind to which the
Purchaser is a party or by which the Purchaser is bound.
2.03 No Violation. Neither the execution and performance of this Agreement
nor the consummation of the transactions contemplated hereby will (a)conflict
with, or result in a violation or breach of the terms, conditions and provisions
of, or constitute a default under, the Articles of Incorporation or Bylaws of
Purchaser or any agreement, indenture or other instrument under which Purchaser
is bound or to which the assets of Purchaser are subject, or result in the
creation or imposition of any lien, charge or encumbrance upon any of such
assets, or (b)violate or conflict with any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or regulatory agency
or body having jurisdiction over Purchaser or the properties or assets of
Purchaser. Purchaser has complied in all material respects with all applicable
laws, regulations and licensing requirements, and has filed with the proper
authorities all necessary statements and reports. Purchaser possesses all
necessary licenses, franchises, permits and governmental authorizations to
conduct its business as now conducted.
2.04 Capitalization. As of the date hereof, Purchaser had an authorized
capitalization of 70,000,000 shares, consisting of 50,000,000 shares of Common
Stock, par value $0.01, of which 12,209,612 shares are issued and outstanding
and 20,000,000 shares of Preferred Stock, par value $1.00, no shares are issued
and outstanding. Each outstanding share of capital stock has been legally and
validly issued and is fully paid and nonassessable.
2.05 Corporate Records. The copies of the Articles of Incorporation and all
amendments thereto and the Bylaws of Purchaser that have been delivered or made
available to Airtech are true, correct and complete copies thereof. The minute
book of Purchaser, copies of which have been delivered or made available to
Airtech, contain minutes of all meetings of and consents to all actions taken
without meetings by the Board of Directors and the shareholders of Purchaser
since the formation of Purchaser, all of which are accurate in all material
respects.
2.06 Financial Statements. Purchaser has furnished Airtech and the Selling
Shareholders a copy of Purchaser's audited financial statements as of May 31,
1996 and unaudited February 28, 1997 financial statements, including the notes
thereto. Since the date of such balance sheets, statements of operations and
cash flows, except as set forth on Schedule 2.06, Purchaser has incurred no
unpaid obligations, liabilities or commitments or acquired assets other than in
the ordinary course of business.
2.07 Absence of Certain Changes. Except as set forth in Exhibit 2.07
hereto, since February 28, 1997, Purchaser has not: (a)suffered any material
adverse change in its financial condition, assets, liabilities or business;
(b)contracted for or paid any capital expenditures in excess of $10,000.00;
(c)incurred any indebtedness for borrowed money, issued or sold any debt
securities or discharged any liabilities or obligations; (d)mortgaged, pledged
or subjected to any lien, lease, security interest or other charge or
encumbrance any of their properties or assets; (e)paid any material amount on
2.1 5
<PAGE>
any indebtedness prior to the due date, forgiven or canceled any material debts
or claims or released or waived any material rights of claims; (f)suffered any
damage or destruction to or loss of any assets (whether or not covered by
insurance) that materially and adversely affects its business; (g acquired or
disposed of any material assets or incurred any material liabilities or
obligations; (h) made any payments to or loaned any money to its affiliates or
associates; (I)formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity; (j)entered into any
material employment, compensation, consulting or collective bargaining agreement
with any person or group, or modified or amended in any material respect the
terms of any such existing agreement; or (k)entered into any other commitment or
transaction or experienced any other event that is material to this Agreement or
to the transactions contemplated hereby, or that has affected, or may adversely
affect Airtech's business, operations, assets, liabilities or financial
condition.
2.08 Title; Leased Assets. Except as described in Exhibit 2.08 hereto,
Purchaser owns its assets, and its real and personal property leaseholds, free
and clear of all liens, claims and encumbrances, except for (I) liens for
non-delinquent ad valorem taxes or non-delinquent statutory liens arising other
than by reason of its default, and (ii) such liens, minor imperfections of title
or easements on real property, leasehold estates or personalty as do not in any
material respect detract from the value thereof and do not interfere with the
present use of the properties subject thereof. Such assets and leaseholds are
the only ones necessary for the conduct of Purchaser's business as now being
conducted.
2.09 Insurance. All of the insurable properties of Purchaser are insured
for its benefit under valid and enforceable policies, issued by insurers of
recognized responsibility in amounts and against such risks and losses as is
customary in Purchaser's industry.
2.10 Disclosure. No representation or warranty by Purchaser in this
Agreement nor any statement or certificate furnished or to be furnished by it
pursuant hereto or in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
therein not misleading or necessary in order to provide Airtech and the Selling
Shareholders with complete and accurate information.
2.11 Consents. Except as set forth in Exhibit 2.11, there is no
authorization, consent, approval, permit or license of, or filing with, any
governmental or public body or authority, any lender or lessor or any other
person or entity is required to authorize, or is required in connection with,
the execution, delivery and performance of this Agreement or the agreements
contemplated hereby on the part of Purchaser.
2.12 Compliance with Laws. There are no existing violations of any
applicable federal, state or local law or regulation that could materially
adversely affect the property or business of Purchaser and there are no known,
noticed or threatened violations of any zoning, building, fire, safety or wage
and hour laws or regulations.
2.13 Litigation. Except as described in Exhibit 2.13, Purchaser has not had
any legal action or administrative proceeding or investigation instituted or, to
the best of the knowledge of Purchaser, threatened against or affecting any of
the assets or business of Purchaser. Purchaser is not (a) subject to any
continuing court or administrative order, writ, injunction or decree applicable
specifically to Purchaser or to its business, assets, operations or employees,
or (b) in default with respect to any such order, writ, injunction or decree.
Purchaser knows of no basis for any such action, proceeding or investigation.
2.14 Disclosure. No representation or warranty by Purchaser in this
Agreement nor any statement or certificate furnished or to be furnished by it or
them pursuant hereto or in connection with the transactions contemplated hereby
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
therein not misleading or necessary in order to provide Purchaser with complete
and accurate information.
2.15 Tax Returns. Purchaser has prepared and filed, or has caused to be
prepared and filed, with the appropriate United States, state and local
government agencies, and all political subdivisions thereof, all tax returns
required to be filed by, on behalf of or on account of the operations of
Purchaser and has paid or caused to be paid all assessments shown to be due and
claimed to be due on such tax returns.
2.1 6
<PAGE>
2.16 Contracts. All contracts and agreements to which Purchaser is a party
are described in Exhibit 2.16. Such contracts and agreements have not been
amended and remain in full force and effect in accordance with their respective
terms.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AIRTECH
AND THE SELLING SHAREHOLDERS
Airtech and the Selling Shareholders, jointly and severally, represent and
warrant that the following are true and correct as of this date and will be true
and correct through the Closing Date as if made on that date:
3.01 Organization and Good Standing. Airtech is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation with all requisite power and authority to carry on the business in
which it is engaged and to own the properties it owns. Airtech is duly qualified
and licensed to do business and is in good standing in all jurisdictions where
the nature of its business makes such qualification necessary. Airtech does not
have any assets, employees or offices in any state other than the state of
Texas.
3.02 Authorization and Validity. The execution, delivery and performance of
this Agreement by Airtech and the consummation of the transactions contemplated
hereby have been or will be prior to Closing duly authorized by Airtech. This
Agreement constitutes or will constitute legal, valid and binding obligations of
Airtech, enforceable against Airtech in accordance with its terms and neither
the execution or delivery of this Agreement nor the consummation of the
transactions contemplated hereby (i) violates any statute or law or any rule,
regulation or order of any court or any governmental authority, or (ii) violates
or conflicts with, or constitutes a default under or will constitute a default
under, any contract, commitment, agreement, understanding, arrangement, or
restriction of any kind to which a party or by which Airtech is are bound.
3.03 Capitalization. As of the date hereof, Airtech has an authorized
capitalization of 100,000,000 shares, consisting of Ninety Million (90,000,000)
shares of common stock, $0.0001 par value, of which 15,743,569 shares are issued
and outstanding, One Million Seven Hundred Fifty Thousand (1,750,000) shares of
Series A Preferred Stock, $1.00 par value, no shares outstanding; Five Million
(5,000,000) shares of Series AA Preferred Stock, of which no shares are issued
and outstanding and 1,000 shares of Series C Preferred Stock, $1.00 par value,
1,000 shares outstanding. The record and beneficial shareholders of all issued
and outstanding Airtech Common Stock held by the Selling Shareholders will be
transeferred to ITC, free and clear by each Selling Shareholder of all liens,
claims, encumbrances, equities and proxies. Each outstanding share of common
capital stock has been legally and validly issued and is fully paid and
nonassessable. There are no outstanding securities, obligations, rights,
subscriptions, warrants, options or other rights to purchase shares of common
stock or preferred stock of Airtech.
3.04 Corporate Records. The copies of the Articles of Incorporation and all
amendments thereto and the Bylaws of Airtech that have been delivered or made
available to Purchaser are true, correct and complete copies thereof. The minute
book of Airtech, copies of which have been delivered or made available to
Purchaser, contain minutes of all meetings of and consents to all actions taken
without meetings by the Board of Directors and the shareholders of Airtech since
the formation of Airtech, all of which are accurate in all material respects.
3.05 Financial Statements. Airtech has furnished to Purchaser Airtech's
audited balance sheet and related statements of operations and cash flows for
the period ended February 29, 1996 and interim financial statements for the
periods through February 28, 1997 (the "Airtech Financial Statements"). The
Airtech Financial Statements fairly present the financial condition and results
of operations of Airtech as of the dates and for the periods indicated and have
been prepared in conformity with generally accepted accounting principles.
3.06 Absence of Certain Changes. Except as set forth in Exhibit 3.06
hereto, since February 28, 1997, Airtech has not: (a) suffered any material
adverse change in its financial condition, assets, liabilities or business; (b)
contracted for or paid any capital expenditures in excess of $50,000.00;
(c)incurred any indebtedness for borrowed money, issued or sold any debt
securities or discharged any liabilities or obligations; (d) mortgaged, pledged
or subjected to any lien, lease, security interest or other charge or
encumbrance any of their properties or assets; (e) paid any material amount on
2.1 7
<PAGE>
any indebtedness prior to the due date, forgiven or canceled any material debts
or claims or released or waived any material rights of claims; (f) suffered any
damage or destruction to or loss of any assets (whether or not covered by
insurance) that materially and adversely affects its business; (g) acquired or
disposed of any material assets or incurred any material liabilities or
obligations; (h) made any payments to or loaned any money to its affiliates or
associates; (I) formed or acquired or disposed of any interest in any
corporation, partnership, joint venture or other entity; (j) entered into any
material employment, compensation, consulting or collective bargaining agreement
with any person or group, or modified or amended in any material respect the
terms of any such existing agreement; or (k) entered into any other commitment
or transaction or experienced any other event that is material to this Agreement
or to the transactions contemplated hereby, or that has affected, or may
adversely affect Airtech's business, operations, assets, liabilities or
financial condition.
3.07 Title; Leased Assets. Except as described in Exhibit 3.07 hereto,
Airtech owns its assets, and its real and personal property leaseholds, free and
clear of all liens, claims and encumbrances, except for (I) liens for
non-delinquent ad valorem taxes or non-delinquent statutory liens arising other
than by reason of its default, and (ii) such liens, minor imperfections of title
or easements on real property, leasehold estates or personality as do not in any
material respect detract from the value thereof and do not interfere with the
present use of the properties subject thereof. Such assets and leaseholds are
the only ones necessary for the conduct of Airtech business as now being
conducted.
3.08 Insurance. All of the insurable properties of Airtech are insured for
its benefit under valid and enforceable policies, issued by insurers of
recognized responsibility in amounts and against such risks and losses as is
customary in Airtech's industry.
3.09 No Violation. Neither the execution and performance of this Agreement
nor the consummation of the transactions contemplated hereby will (a) conflict
with, or result in a violation or breach of the terms, conditions and provisions
of, or constitute a default under, the Articles of Incorporation or Bylaws of
Airtech or any agreement, indenture or other instrument under which Airtech is
bound or to which any of the assets of Airtech are subject, or result in the
creation or imposition of any lien, charge or encumbrance upon any of such
assets, or (b) violate or conflict with any judgment, decree, order, statute,
rule or regulation of any court or any public, governmental or regulatory agency
or body having jurisdiction over Airtech or the properties or assets of Airtech.
Airtech has complied in all material respects with all applicable laws,
regulations and licensing requirements, and has filed with the proper
authorities all necessary statements and reports. Airtech possesses all
necessary licenses, franchises, permits and governmental authorizations to
conduct its business as now conducted.
3.10 Consents. Except as set forth in Exhibit 3.10, no authorization,
consent, approval, permit or license of, or filing with, any governmental or
public body or authority, any lender or lessor or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated hereby
on the part of Airtech.
3.11 Compliance with Laws. There are no existing violations of any
applicable federal, state or local law or regulation that could materially
adversely affect the property or business of Airtech and there are no known,
noticed or threatened violations of any zoning, building, fire, safety or wage
and hour laws or regulations.
3.12 Litigation. Except as described in Exhibit 3.12, Airtech has not had
any legal action or administrative proceeding or investigation instituted or, to
the best of the knowledge of Airtech, threatened against or affecting any of the
assets or business of Airtech. Airtech is not (a) subject to any continuing
court or administrative order, writ, injunction or decree applicable
specifically to Airtech or to its business, assets, operations or employees, or
(b) in default with respect to any such order, writ, injunction or decree.
Airtech knows of no basis for any such action, proceeding or investigation.
2.1 8
<PAGE>
3.13 Disclosure. No representation or warranty by Airtech or the Selling
Shareholders in this Agreement nor any statement or certificate furnished or to
be furnished by it or them pursuant hereto or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements contained therein not misleading or necessary in order to
provide Purchaser with complete and accurate information.
3.14 Tax Returns. Airtech has prepared and filed, or has caused to be
prepared and filed, with the appropriate United States, state and local
government agencies, and all political subdivisions thereof, all tax returns
required to be filed by, on behalf of or on account of, the operations of
Airtech and has paid or caused to be paid all assessments shown to be due and
claimed to be due on such tax returns. 3.15 Contracts. All contracts and
agreements to which Airtech is a party are described on Exhibit 3.15 and are in
full force and effect in accordance with their respective terms.
ARTICLE IV
AIRTECH'S COVENANTS
Airtech agrees that on or prior to the Closing:
4.01 Business Operations. Airtech shall operate its business only in the
ordinary course and Airtech shall use its best efforts to preserve the business
of Airtech intact, to retain its present customers and suppliers so that they
will be available to Purchaser after the Closing and to cause the consummation
of the transactions contemplated by this Agreement in accordance with its terms
and conditions. Airtech shall not take any action that might impair the business
or assets of Airtech without the prior consent of Purchaser or take or fail to
take any action that would cause or permit the representations made in
Article III hereof to be inaccurate at the time of Closing or preclude Airtech
from making such representations and warranties at the Closing.
4.02 Access. Airtech shall permit Purchaser and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Airtech, including Airtech's employees, customers and
suppliers, and Airtech shall furnish Purchaser all documents, records and
information with respect to the affairs of Airtech as Purchaser and its
representatives may reasonably request.
4.03 Material Change. Prior to the Closing, Airtech shall promptly inform
Purchaser in writing of any material adverse change in the condition of the
business of Airtech. Notwithstanding the disclosure to Purchaser of any such
material adverse change, Airtech shall not be relieved of any liability for, nor
shall the providing of such information by Airtech to Purchaser be deemed a
waiver by Purchaser of, the breach of any representations or warranty of Airtech
contained in this Agreement.
4.04 Approvals of Third Parties. As soon as practicable after the execution
of this Agreement, but in any event prior to the Closing Date, Airtech will use
its best efforts to secure all necessary approvals and consents of third parties
to the consummation of the transactions contemplated by this Agreement.
4.05 Contracts. Except with Purchaser's prior written consent, Airtech
shall not waive any material right or cancel any material contract, debt or
claim nor with it assume or enter into any contract, lease, license obligation,
indebtedness, commitment purchase or sale involving more than $10,000.00, each.
4.06 Capital Assets; Payments of Liabilities. Except with Purchaser's prior
written consent, Airtech will not acquire or dispose of any capital asset having
an initial cost of $10,000.00 or more, nor will Airtech discharge or satisfy any
lien or encumbrance or pay or perform any obligation or liability other than
(I) liabilities and obligation reflected in the Airtech Financial Statements,
and (ii) current liabilities and obligations incurred in the usual and ordinary
course of business since February 28, 1997, and, in either such case only as
required by the express terms of the agreement or other instrument pursuant to
which the obligation or liability was incurred.
4.07 Mortgages, Liens. Except with Purchaser's prior written consent,
Airtech will not enter into or assume any mortgage, pledge, conditional sale or
other title retention agreement, permit any lien, encumbrance or claim of any
kind to attach to any of its assets, whether nor owned or hereafter acquired, or
guarantee or otherwise become contingently liable for any obligations of another
or make any capital contributions or investments in any corporation, business or
other person.
2.1 9
<PAGE>
4.08 Sales of Stock. Except as set forth on Schedule 4.08, Airtech will
not, without Purchaser's prior written consent, after the date hereof, issue any
shares of its common stock or preferred stock nor will it issue or enter into an
agreement to issue any securities, rights, subscriptions, warranties or options
to purchase shares of its common stock or preferred stock or which are
convertible into shares of its common stock or preferred stock in whole or in
part.
ARTICLE V
PURCHASER'S COVENANTS
Purchaser agrees that on or prior to the Closing:
5.01 Business Operations. Purchaser shall operate its business only in the
ordinary course and Purchaser shall use its best efforts to preserve the
business of Purchaser intact, to retain its present customers and suppliers so
that they will be available to Purchaser after the Closing and to cause the
consummation of the transactions contemplated by this Agreement in accordance
with its terms and conditions. Purchaser shall not take any action that might
impair the business or assets of Purchaser without the prior consent of Airtech
or take or fail to take any action that would cause or permit the
representations made in Article II hereof to be inaccurate at the time of
Closing or preclude Purchaser from making such representations and warranties at
the Closing.
5.02 Access. Purchaser shall permit Airtech and its authorized
representatives full access to, and make available for inspection, all of the
assets and business of Purchaser, and Purchaser shall furnish Airtech all
documents, records and information with respect to the affairs of Purchaser as
Airtech and its representatives may reasonably request.
5.03 Sales of Stock. Except with Airtech's prior written consent Purchaser
will not, after the date hereof, issue any shares of its common stock nor will
it issue or enter into an agreement to issue any securities, rights,
subscriptions, warranty or options to purchase shares of its common stock or
preferred stock or which are convertible into shares of its common stock or
preferred stock in whole or in part.
5.04 Material Change. Prior to the Closing, Purchaser shall promptly inform
Airtech in writing of any material adverse change in the condition of the
business of Purchaser. Notwithstanding the disclosure to Airtech of any such
material adverse change, Purchaser shall not be relieved of any liability for,
nor shall the providing of such information by Purchaser to Airtech be deemed a
waiver by Airtech of, the breach of any representation or warranty of Purchaser
contained in this Agreement.
5.05 Contracts. Except with Airtech's prior written consent, Purchaser
shall not waive any material right or cancel any material contract, debt or
claim nor with it assume or enter into any contract, lease, license obligation,
indebtedness, commitment purchase or sale involving more than $10,000.00, each.
5.06 Capital Assets; Payments of Liabilities. Except with Airtech's prior
written consent, Purchaser will not acquire or dispose of any capital asset
having an initial cost of $10,000.00 or more, nor will Purchaser discharge or
satisfy any lien or encumbrance or pay or perform any obligation or liability
other than (i) liabilities and obligation reflected in the Purchaser Financial
Statements, and (ii) current liabilities and obligations incurred in the usual
and ordinary course of business since February 28, 1997, and, in either such
case only as required by the express terms of the agreement or other instrument
pursuant to which the obligation or liability was incurred other than payments
of liabilities disclosed on Exhibit 5.06 and does warrant and represent that the
total outstanding liabilities of Purchaser shall not exceed $60,000 at Closing.
5.07 Mortgages, Liens. Except with Airtech's prior written consent,
Purchaser will not enter into or assume any mortgage, pledge, conditional sale
or other title retention agreement, permit any lien, encumbrance or claim of any
kind to attach to any of its assets, whether nor owned or hereafter acquired, or
guarantee or otherwise become contingently liable for any obligations of another
or make any capital contributions or investments in any corporation, business or
other person.
5.08 Approvals of Third Parties. As soon as practicable after the execution
of this Agreement, but in any event prior to the Closing Date, Purchaser will
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated by this Agreement.
2.1 10
<PAGE>
ARTICLE VI
PURCHASER'S CONDITIONS PRECEDENT
Except as may be waived in writing by Purchaser, the obligations of
Purchaser hereunder are subject to the fulfillment at or prior to the Closing of
each of the following conditions:
6.01 Representations and Warranties. The representations and warranties of
Airtech contained herein shall be true and correct in all material respects as
of the Closing, and Purchaser shall not have discovered any material error,
misstatement or omission therein. At the Closing, Purchaser shall have received
a certificate, dated the date of the Closing, and executed by the President of
Airtech, certifying in such detail as Purchaser may reasonably request as to the
accuracy of such representations and warranties referred to in Article III and
the fulfillment of the obligations and compliance with the covenants referred to
in Article IV as of the Closing.
6.02 Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.
6.03 Consents and Approvals. Airtech shall have obtained, and delivered to
Purchaser evidence thereof, all consents and approvals required to be obtained
in connection with the consummation of the transactions contemplated hereby.
6.04 No Material Adverse Change. No material, adverse change in the assets,
business operations or financial conditions of Airtech shall have occurred after
the date hereof and prior to the Closing. Purchaser shall have received a letter
from the chief financial officer of Airtech, dated the date of the Closing,
stating that on the basis of a limited review (not an audit) of the latest
available accounting records of Airtech, consultations with responsible officers
of Airtech, and other pertinent inquiries that they may deem necessary, they
have no reason to believe that during the period from February 29, 1996 to a
specific date not more than five business days before the Closing, there is any
change in the financial condition or results of operations of Airtech, except
for changes incurred in the ordinary and usual course of business of Airtech
during that period that in the aggregate are not materially adverse, and except
for other changes or transactions, if any, contemplated by this Agreement.
6.05 Approval of Airtech's Board of Directors and Selling Shareholders.
This Agreement shall have been approved by the Board of Directors of Airtech and
at least two-thirds of the Selling Shareholders entitled to vote thereon.
ARTICLE VII
CONDITIONS PRECEDENT OF AIRTECH SELLING SHAREHOLDERS
Except as may be waived in writing by Airtech and the Selling Shareholders,
the obligations of the Selling Shareholders hereunder are subject to fulfillment
at or prior to the Closing of each of the following conditions:
7.01 Representations and Warranties. The representations and warranties of
Purchaser contained herein shall be true and correct in all material respects as
of the Closing, and Airtech and the Selling Shareholders shall not have
discovered any material error, misstatement or omission therein. At the Closing,
Airtech and the Selling Shareholders shall have received a certificate, dated
the date of the Closing, and executed by the President of Purchaser, certifying
in such detail as Airtech and the Selling Shareholders may reasonably request as
to the accuracy of such representations and warranties referred to in Article II
and the fulfillment of the obligations and compliance with covenants referred to
in Article V as of the Closing.
7.02 Proceedings. No action, proceeding or order by any court or
governmental body or agency shall have been threatened in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated by this Agreement.
7.03 Consents and Approvals. Purchaser shall have obtained, and delivered
to Airtech evidence thereof, all consents and approvals required to be obtained
in connection with the consummation of the transactions contemplated hereby.
2.1 11
<PAGE>
7.04 No Material Adverse Change. No material, adverse change in the assets,
business operations or financial condition of Purchaser shall have occurred
after the date hereof and prior to the Closing. The Selling Shareholders shall
have received a letter from the chief financial officer of Purchaser, dated the
date of the Closing, stating that on the basis of a limited review (not an
audit) of the latest available accounting records of Purchaser, consultations
with responsible officers of Purchaser, and other pertinent inquiries that he
may deem necessary, there is no reason to believe that during the period from
March 31, 1996 to a specific date not more than five business days before the
Closing, there is any change in the financial condition or results of operations
of Purchaser, except for changes incurred in the ordinary and usual course of
business of Purchaser, during that period that in the aggregate are not
materially adverse, and except for other changes or transactions, if any,
contemplated by this Agreement.
7.05 Approval of Purchaser's Board of Directors. This Agreement shall have
been approved by the Board of Directors of Purchaser.
ARTICLE VIII
MISCELLANEOUS
8.01 Amendment. This Agreement may be amended, modified or supplemented
only by an instrument in writing executed by the party against which enforcement
of the amendment, modification or supplement is sought.
8.02 Parties in Interest. This Agreement shall be binding on and inure to
the benefit of and be enforceable by Selling Shareholders, Airtech, and the
Purchaser, their respective heirs, executors, administrators, legal
representatives, successors and assigns, except as otherwise expressly provided
herein.
8.03 Assignment. Neither this Agreement nor any right created hereby shall
be assignable by either party hereto except by Purchaser to a wholly-owned
subsidiary of Purchaser.
8.04 Notice. Any notice or communication must be in writing and given by
depositing the same in the United States mail, addressed to the party to be
notified, postage prepaid and registered or certified with return receipt
requested or by delivering the same in person. Such notice shall be deemed
received on the date on which it is hand-delivered or on the third business day
following the date on which it is so mailed. For purposes of notice, the
addresses of the parties shall be:
If to Airtech:
John Potter, President
15400 Knoll Trail, Suite 106
Dallas, Texas 75248
If to the Selling Shareholders:
At the address set forth above.
If to Purchaser:
Perry Douglas West, Chairman and Chief Executive Officer
104 South Harbor City Boulevard, Suite A
Melbourne, Florida 32901
Any party may change its address for notice by written notice given to the
other parties.
8.05 Entire Agreement. This Agreement and the exhibits hereto supersede all
prior agreements and understandings relating to the subject matter hereof,
except that the obligations of any party under any agreement executed pursuant
to this Agreement shall not be affected by this Section.
8.06 Costs, Expenses and Legal Fees. Whether or not the transactions
contemplated hereby are consummated, each party hereto shall bear its own costs
and expenses (including attorneys' fees) except that each party hereto agrees to
pay the costs and expenses, including reasonable attorneys' fees, incurred by
the other parties in successfully (I) enforcing any of the terms of this
Agreement, or (ii) proving that the other parties breached any of the terms of
this Agreement in any material respect.
2.1 12
<PAGE>
8.07 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance here from. Furthermore,
in lieu of such illegal, invalid or unenforceable provision, there shall be
added automatically as part of this Agreement, a provision as similar in its
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable.
8.08 Governing Law. This Agreement and the rights and obligations of the
parties hereto shall be governed, construed and enforced in accordance with the
laws of the State of Colorado. The parties agree that any litigation relating
directly or indirectly to this Agreement must be brought before and determined
by a court of competent jurisdiction with the State of Colorado.
8.09 Captions. The captions in this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
8.10 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this agreement effective as
of the date first written above.
PURCHASER:
INTERACTIVE TECHNOLOGIES CORPORATION
________________________________________
Perry Douglas West,
Chairman and Chief Executive Officer
AIRTECH:
AIRTECH INTERNATIONAL CORPORATION:
________________________________________
John Potter, President and Chairman
SELLING SHAREHOLDERS:
___________________________________
John Potter, Power of Attorney
2.1 13
<PAGE>
UNANIMOUS CONSENT IN LIEU OF A SPECIAL MEETING
OF THE
BOARD OF DIRECTORS
OF
AIRTECH INTERNATIONAL CORPORATION
May __, 1997
The undersigned, being all of the members of the Board of Directors of
AIRTECH INTERNATIONAL CORPORATION (the "Corporation"), have, by signing this
consent, taken the following action without a meeting, pursuant to the
provisions of Article 9.10B of the Texas Business Corporation Act:
RESOLVED, that the Corporation enter into a Stock Purchase Agreement
between the Corporation, the Corporation's shareholders and Interactive
Technologies Corporation, a Wyoming corporation, a copy of which is attached to
this Consent marked Exhibit "A".
RESOLVED FURTHER, that the Corporation's President is hereby authorized, on
behalf of the Corporation, to execute the Stock Purchase Agreement attached
hereto as Exhibit "A", pursuant to the provisions of Section 368(a)(1)(B) of the
Internal Revenue Code, as amended.
EXECUTED effective as the day and year written above.
C. J. Comu
John Potter
2.1 14
<PAGE>
PERRY DOUGLAS WEST
Attorney and Counsellor at Law
1270 Orange Avenue, Suite A
Winter Park, Florida 32789
407-647-5552
407-647-5766 (fax)
Interactive Technologies Corp., Inc.
102 South Harbor City Boulevard
Melbourne, Florida 32901
Re: Registration Statement on Form S-4
Gentlemen:
At your request, we have examined the Registration Statement, on Form S-4
together with exhibits thereto, to be filed by you relating to the registration
of 29,707,140 shares of common stock, $.01 par value per share (the Common
Stock), by Interactive Technologies Corp., Inc., a Wyoming corporation (ITC).
In connection with the proposed public offering, we have examined the
Amended and Restated Certificate of Incorporation of ITC, the Bylaws of ITC, as
amended, the relevant corporate proceedings of ITC, the Registration Statement
on Form S-4 covering the proposed public offering (the "Registration
Statement"), and such other documents, records, certificates of public
officials, statutes and decisions as we considered necessary to express the
opinions contained herein. In the examination of such documents, we have assumed
the genuiness of all signatures and the authenticity of all documents submitted
to us as originals and the conformity to the original documents of all documents
submitted to us as certified or photostatic copies.
We understand that the shares of Common Stock are to offered and sold in
the manner described in the Prospectus which is a part of the Registration
Statement.
Based on the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of Wyoming with an
authorized and issued capital stock as set forth in the Prospectus; it is duly
authorized and empowered to own its properties and to transact its business as
described in the Prospectus.
2. The Common Stock being offered in the Prospectus, upon the consummation
of the offering, will have been duly and validly authorized and issued, fully
paid and non-assessable as stated in the Prospectus, and will conform to the
descriptions thereof contained in the Prospectus.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus under the
heading "Legal Matters."
Very truly,
/s/ Perry Douglas West
- ----------------------
Perry Douglas West
5.1 1
<PAGE>
ALVIN L. DAHL & ASSOCIATES, PC
Certified Public Accountants
11615 Forrest Central Drive, Ste 301
Dallas, TX 75243
214-340-5885
214-340-2410 fax
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation in this S-4 filing of Interactive
Technologies Corporation of our report dated April 26, 1996 on Airtech
International Corporation.
We also consent to the addition of the financial statements covered by our
repor t dated April 26, 1996 incorporated herein.
/s/Alvin L. Dahl & Associates, P.C.
- -----------------------------------
ALVIN L. DAHL & Associates, Inc, PC
Dallas, Texas
August 19, 1997
23.2 1
<PAGE>
May 26, 1997
Board of Directors
Airtech International Corporation, Inc.
15400 Knoll Trail Suite 106
Dallas, TX 75248
The accompanying balance sheet as of February 28, 1997 and statement of
income and retained earnings for the nine months then ended have been prepared
from the books and record of the Company. These financial statements do not
contain all the disclousers required required by generally accepted accounting
principals and are intended for the use of management.
/s/ Bobby Cox
-------------------------------
Bobby Cox, Chief Financial Officer
27.2 1
<PAGE>
AIRTECH INTERNATIONAL CORPORATION, INC.
CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1997
(Unaudited)
ASSETS
Current Assets
Cash in banks $ 34, 946
Accounts receivable 789,621
Inventories 274,361
Prepaid expenses 23,891
Total Current Assets 1,122,819
Property Plant and Equipment
Equipment $ 207,472
Vehicles 77,686
285,158
Accumulated depreciation 77,686 214,485
Other Assets
Organization cost-net 2,771
Notes receivable 350,000
Investment in wholly owned subsidary 649,000
Prepaid royalty 500,000
Division startup cost 26,300
Patents and intellectial properties 336,977
Taiwan investment 150,000
Merger cost 202,138
Deposits 16,280 2,233,466
Total Assets $3,570,770
See notes to Consolidated Financial Statements
27.2 2
<PAGE>
AIRTECH INTERNATIONAL CORPORATION, INC.
CONSOLIDATED BALANCE SHEET
FEBRUARY 28, 1997
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 202,123
Taxes 46,082
Total Current Liabilities 248,205
Long Term Liabilities
Notes Payable - Securred by vehicles 26,116
Total Liabilities 274,321
Stockholders' Equity
Common stock 90,000,000 shares authorized 16,396,200
shares issued and outstanding, par value $0.0001 $ 1,640
Preferred stock 20,000,000 shares authorized, 1,000
shares designated as Series C issued and outstanding 1,000
Additional paid in capital 3,850,064
Retained earnings (Deficit) ( 556,255)
Total Stockholders' Equity 3,296,449
Total Liabilites and Stockholders' Equity $ 3,570,770
See notes to Consolidated Financial Statements
27.2 3
<PAGE>
AIRTECH INTERNATIONAL CORPORATION, INC.
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 1997
(Unaudited)
Three Months Nine Months
Ended Ended
February 28, 1997 February 28, 1997
Net revenues $ 910,943 $ 1,451,074
Cost of Sales 372,191 600,487
Gross Income 538,752 850,587
General and Administrative Expenses 188,780 746,497
Income from operations before
depreciation and amortization 349,972 104,090
Depreciation and amortization -0- -0-
Net Income before income taxes 349,972 104,090
Estimated income taxes -0- -0-
Net Income $ 49,972 104,090
Retained earnings (Deficit) - beginning ( 660,345)
Retained earnings ( Deficit) - ending ($ 556,255)
Primary earnings per share $ 0.02 $ 0.01
Diluted earnings per share $ 0.02 $ 0.01
See notes to Consolidated Financial Statements
27.2 4
<PAGE>
AIRTECH INTERNATIONAL CORPORATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation The accompanying audited fiancial statments include the
accounts of the Corporation and McCleskey Sales and Service, Inc., its
wholly-owned subsidiary. The audited financial statements presented herein
reflect all adjustments of a normal and recurring nature, related elimination of
inter company transactions, which in the opinion of management of the
Corporation, are necessary for a fair presentation.
Inventory Valuation Inventories ar stated at the lower of cost (first-in,
first-out) or market
Property, Plant and Equipment Property, Plant and Equipment are depreciated
on the straight-line method over the useful lives of the assets using lives
ranging from 3 to 30 years. Maintenance and repairs are charged to operations;
betterments are capitalized. The cost of property and the related accumulated
depreciation accounts and any resulting gain or loss is credited or charged to
income.
Income Taxes The Corporation has a net loss for the fiscal year just ended
and will carry the loss forward to offset against future taxable income. Tax
credits are recorded by the flow-through method. No Deferred Tax Asset has been
reflected in the financial statements and the net operating loss carry forward
will expire in fiscal year 2002 if not used. There is no assurance that this net
operating loss will ever be used by the Company.
Patents and Trademarks Patents and trademarks are recorded at cost and
amortized over their useful lives on a stright-line method.
Earnings Per Share Earnings per share and the dilutive effect on earnings
per share of potentially dilutive stock options or other stock transactions are
computed by the treasury stock method. This computation takes into account the
weighted average number of shares outstanding during each year, outstanding
stock options and their exerise price.
2. Significant Risks and Uncertainties Under SOP 94-6
Nature of Operations Airtech International Corporation is located in
Dallas, Texas, incorporated under the laws of the State of Texas in March 1995.
The Company during 1995 became a full service distributor (FSD) for Honeywell
Evironmental Air Control, inc., with rights to sell market and distribute
commercial air purification products throughout the United States, and acquired
exclusive distribution in the countries of Turkey and Taiwan. In June of 1996
the full service distributorship was cancelled by Honeywell without cause (See
Litigation). After development of the down draft table in early 1996 and
following the termination of the Honeywell FSD the Company began development of
a full line of air purification product hiring key employees from Honeywell
Evironmental. Therefore in 1996 the Company transformed from a distributor to
preparation of becoming a EOM of air purification products. A variety of
products are scheduled to enter production in 1997. The Company's primary
revenues are derived from sales of air purification products to the end user and
is developing a wholesale program for these products. In January 1997 the
Company sold its exclusive distribution right for the country of Turkey. As a
part of the transaction the Company also granted exclusive rights to the
AirsopureTM line of air purification products currently being developed and
marketed in the USA.
Use of Estimates Management uses estimates and assumptions in preparing
these financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and libilities, the disclosure of contingent assets and liabilities, and
the reported revenues and expenses. Actual results could vary from the estimates
that are used.
27.2 5
<PAGE>
AIRTECH INTERNATIONAL CORPORATION, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 28, 1997
3. Commitments and Contigencies
In 1995, the Company entered into certain royalty agreements with
individuals involved in the Medicare Part B Code and Related Charge and in the
development of the first generation of the down draft table. At balance sheet
date the Company reflects $500,000 in prepaid royalties for the Medicare
program. As a result of the termination of the FSD, the various royalty
agreements are in a process of re-assessment, but the Company anticipates some
royalty agreements for this program. The 4% royalty agreement on the wholesale
price of the down draft table remains in effect, todate no payments of royalties
have been made or accrued.
4. Litigation
In June of 1996 the Company filed suit Texas State Court against Honeywell
Corporation and Honeywell Environmental Air Control, Inc. as a result of its
breech of the Full Service Distributorship Agreement. This suit was moved to
U.S. District Court in July 1996 byHoneywell Corporation and was amended by
Airtech to include damages of $110 million. This suit remains in the discover
phase as of January 31, 1997.
An original petition was filed in State District Court, Dallas, Texas in
August 1995 by Kristen S. Venable naming McCleskey Sales and Service, Inc., and
Trane, Inc. Defendants, alleging breach of contract, breach of warranty and
neglience relation to the installation of Trane air conditioning equipment. This
suit remains in discovery as of December 31, 1996. The claims against McCleskey
are covered by insurance which coverage amount is believed by management to be
sufficient to cover the claims in the event of an adverse judgement.
5. Subsequent Events
On December 31, 1996, the Company entered into a Letter of Intent with
Polyphase Corp., where by a wholly owned subsidary of Polyphase will purchase
the outstanding shares of stock of Airtech International Corporation. This
Letter of Intent expired on March 31, 1997.
On April 1, 1997, the Company entered into a Letter of Intent with
Interactive Technologies Corporation, Inc., to purchase the outstanding shares
of stock of Airtech International Corporation. On May 8, 1997, the Company and
Interactive Technologies Corporation, Inc. entered into a Stock Purchase
Agreement.
27.2 6
<PAGE>
AIRSOPURE, INC.
INFORMATION FOR PROSPECTIVE FRANCHISEES
REQUIRED BY THE FEDERAL TRADE COMMISSION
**********
To protect you, we've required your franchisor to give you this information. We
haven't checked it and don't know if it's correct. It should help you make up
your mind. Study it carefully, while it includes some information about your
contract, don't rely on it to understand your contract. Read all of your
contract carefully. Buying a franchise is a complicated investment. Take your
time to decide. If possible, show your contract and this information to an
advisor like a lawyer or an accountant. If you find anything you think may be
wrong or anything important that's been left out, you should let us know about
it. It may be against the law.
There may also be laws on franchising in your state. Ask your state agencies
about them.
Federal trade Commission
Washington, D.C. 20580
CALIFORNIA, HAWAII, ILLINOIS, INDIANA, MARYLAND, MICHIGAN, MINNESOTA, NEW YORK,
NORTH DAKOTA, RHODE ISLAND, SOUTH DAKOTA, VIRGINIA, WASHINGTON AND WISCONSIN
REQUIRE FRANCHISORS TO MAKE ADDITIONAL DISCLOSURES RELATED TO THE INFORMATION
CONTAINED IN THIS OFFERING CIRCULAR. IF APPLICABLE, THESE ADDITIONAL DISCLOSURES
WILL BE FURNISHED TO YOU IN AN ADDENDUM TO THIS OFFERING CIRCULAR.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE FEDERAL TRADE COMMISSION, THIS
OFFERING CIRCULAR WAS ISSUED ON APRIL 2, 1997. IF THIS OFFERING IS REGISTERED IN
A STATE LISTED ABOVE, THE EFFECTIVE DATE OF THIS OFFERING CIRCULAR WILL BE
DISCLOSED IN THE ADDENDUM FOR THAT STATE.
28.1 1
<PAGE>
[GRAPHIC OMITTED]
FRANCHISE OFFERING CIRCULAR
Airsopure, Inc.
15400 Knoll Trail, Suite 106
Dallas, Texas 75248
(972) 960-9400
The date of issuance of this offering circular for use in nonregistration
states is April 1, 1997.
The franchisee will represent and sell air filtration systems to
commercial businesses.
The initial franchise fee is $15,000. The estimated initial investment
required ranges from $54,200 - $56,800.
Risk Factors:
1. THE FRANCHISE AGREEMENT PERMITS THE FRANCHISEE TO SUE THE MORE TO
SUE OR ARBITRATE WITH THE FRANCHISOR ONLY IN TEXAS. OUT OF STATE LITIGATION
OR ARBITRATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR
DISPUTES. IT MAY ALSO COST N IN YOUR HOME STATE.
2. THE FRANCHISE AGREEMENT STATES THAT TEXAS LAW GOVERNS THE
AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS
AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
EVEN THOUGH THE FRANCHISE AGREEMENT PROVIDES THAT TEXAS LAW APPLIES AND
REQUIRES YOU TO RESOLVE DISPUTES IN SPECIFIC VENUES, LOCAL LAW MAY SUPERSEDE IT
IN YOUR STATE. PLEASE REFER TO THE ATTACHED UNIFORM STATE- SPECIFIC ADDENDUM TO
UFOC AND TO THE SEPARATE STATE-SPECIFIC AMENDMENTS ATTACHED AS EXHIBIT G TO THIS
OFFERING CIRCULAR FOR INFORMATION REQUIRED BY YOUR STATE ADMINISTRATOR.
Information comparing franchisors is available. Call the state
administrators listed in Exhibit A or your public library for sources of
information.
Registration of this franchise with the state does not mean that the state
recommends it or has verified the information in this offering circular. If you
learn that anything in this offering circular is untrue, contact the Federal
Trade Commission and your state administrator listed in Exhibit A.
Effective Date April 2, 1997
28.1 2
<PAGE>
TABLE OF CONTENTS
Item Page
1 The Franchisor, its Predecessors and Affiliates 4
2 Business Experience 4
3 Litigation 4
4 Bankruptcy 5
5 Initial Franchise Fee 5
6 Other Fees 5
7 Initial Investment 6
8 Restrictions on Sources of Products and Services 7
9 Franchisees' Obligations 8
10 Financing 8
11 Franchisor's Obligations 9
12 Territory 11
13 Trademarks 11
14 Patents, Copyrights and Proprietary Information 11
15 Obligation to Participate in the Actual
Operation of the Franchise Business 11
16 Restrictions on What the Franchisee May Sell 12
17 Renewal, Termination, Transfer and Dispute Resolution 12
18 Public 14
19 Earnings Claim 14
20 List of Outlets 14
21 Financial Statements 16
22 Contracts 16
23 Receipt 16
Exhibits
A. List of State Administrators
B. List of Agents for Service of Process
C. Financial Statements
D. List of Current Franchisees
E. List of Franchisees Who Have Left the System
Within the Past 12 Months
F. Franchise Agreement
G. Telephone Assignment Agreement
H. Non Disclosure Agreement
I. Personal Guarantee
J. Lists of Registration States and Effective Dates
K. State Amendments to Uniform Offering Circular
28.1 3
<PAGE>
ITEM 1
THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES
"Airsopure" or "we" means Airsopure, Inc. the franchisor. "You" means the
person who buys the franchise. If the franchise owner is a corporation or other
entity, "you" refers only to the business entity which owns the franchise unless
we indicate otherwise. Airsopure is a Texas corporation which was incorporated
on February 20, 1997. Our principal place of business is located at 15400 Knoll
Trail, Suite 106, Dallas, Texas 75248. We conduct business under the names'
Airsopure, Inc., Airsopure, and Airtech International Corporation.
Airsopure is a wholly owned subsidiary of Airtech International
Corporation. It has no predecessors nor does it have any affiliates which offer
franchises in any line of business or provide products or services to Airsopure
franchisees. We sell franchises under a franchise agreement (the "Franchise
Agreement") which grants the right to use our system and to sell our indoor air
purification products and supplies and to use the name "Airsopure."
Prior to selling franchises, Airtech International Corporation utilized
company salesman and current management to represent and sell their indoor air
filtration systems and supplies under the name Airtech. Airsopure began offering
franchises of the type offered herein in April 1997 under the name "Airsopure."
The demand for indoor air cleaning is growing rapidly. You will compete
with other companies as they offer solutions to a wide variety of corporate,
light commercial and residential users. Your competition currently comes from
tradesmen in the heating, ventilation and air-conditioning fields. It is
possible that rapid growth will motivate new levels of competition to enter the
market.
ITEM 2
BUSINESS EXPERIENCE
The following is the list of directors, principal officers and other
executives who have management responsibility in the operation of our business
relating to the franchises described in this offering circular. The principal
occupation and business experience of each person during the past five years is
described below.
John Potter, President and Director
Mr. Potter has been President and a Director of Airsopure, Inc. since its
conception in February 1997. He has served as President of Airtech International
Corporation since February 1995. From 1990 until February 1995 he was Vice
President and Co-founder of Transworld Leasing Corporation.
C.J. Comu, Chief Executive Officer and Director
Mr. Comu has serves as Chief Executive Officer and Director of Airsopure
since its conception in February 1997. He has served as Chief Executive Officer
of Airtech International Corporation since February 1995. From 1990 to February
1995 he was President and Co-founder of Transworld Leasing.
Bobby Cox, Chief Financial Officer
Mr. Cox has been Chief Financial Officer since of Airsopure since February
1997. He has served as Chief Financial Officer of Airtech since October 1995.
Prior to joining the company Mr. Cox spent the prior five years as in
independent financial and tax consultant.
Douglas S. Keane, Vice President Franchise Development
Mr. Keane joined the Airtech International Corporation in January 1997. In
February 1997 he became Vice President of Franchise Development for Airsopure,
Inc. From 1990 to January 1997 he was President of Keane Ideas, Inc.
ITEM 3
LITIGATION
No litigation is required to be in this Offering Circular.
28.1 4
<PAGE>
ITEM 4
BANKRUPTCY
No person previously identified in Items 1 or 2 of this offering circular
has been involved as a debtor in proceeding under the U.S. Bankruptcy Code
required to be disclosed in this Item.
ITEM 5
INITIAL FRANCHISE FEE
All franchisees pay a $15,000 lump sum franchise fee when they sign the
Franchise Agreement. Airsopure will refund the entire amount if we do not
approve your application within 45 days. There are no refunds under any other
circumstances.
ITEM 6
OTHER FEES
-------------------------------------------------------------------------------
Name of Fee Amount Due Date Remarks
-------------------------------------------------------------------------------
Royalty 0 No royalty is due for
the initial agreement
period. We reserve
the right to implement
at renewal.
- --------------------------------------------------------------------------------
Advertising Fund 2% of total Payable monthly Begin 60 days after
gross sales on the 7th day of you begin operation
the next month
- --------------------------------------------------------------------------------
Transfer $1,500 Payable prior to Payable only if you
the sale of the sell your franchise to
franchise a third party
- --------------------------------------------------------------------------------
Audit Cost of an audit Upon demand Payable only if audit
reveals understatement
of at least 2% of
amounts due
- --------------------------------------------------------------------------------
Interest (1) Lesser of Upon demand Payable on overdue
Prime rate charged by amounts
Chase Manhattan
Bank plus 2% or
maximum permitted my
state law
- --------------------------------------------------------------------------------
Renewal $1500 Upon demand
- --------------------------------------------------------------------------------
All fees are imposed by and payable to Airsopure. All fees are
non-refundable.
------------------
(1) Interest begins from the date the payment was due.
28.1 5
<PAGE>
ITEM 7
INITIAL INVESTMENT
Your Estimated Initial Investment
- --------------------------------------------------------------------------------
EXPENDITURES AMOUNT METHOD OF WHEN DUE TO WHOM PAID
PAYMENT
- --------------------------------------------------------------------------------
Franchise Licensing Fee $15,000 Lump Sum At Signing Airsopure
(Note 1
- --------------------------------------------------------------------------------
Travel and Living Expenses $300-$500 As Incurred During Restaurants,
Training (Note 2) Training Misc.Expenses
- --------------------------------------------------------------------------------
Real Estate and (Note 3) (Note 3) (Note 3) (Note 3)
Improvements
- --------------------------------------------------------------------------------
Operational Equipment $500 to Lump Sum Prior to Office Supply
and Supplies $1500 Opening Store &
(Note 4) Airsopure
- --------------------------------------------------------------------------------
Initial Inventory $35,000 Lump Sum As Incurred Airsopure
- --------------------------------------------------------------------------------
Insurance $200 Lump Sum As Incurred Insurers
to $300
(Note 5)
- --------------------------------------------------------------------------------
Miscellaneous Opening $1,700 to As Incurred As Incurred Outside
Costs $2,500 Vendors
(Note 6)
- --------------------------------------------------------------------------------
Real Estate and
Improvements (Note 7) (Note 7) (Note 7) (Note 7)
- --------------------------------------------------------------------------------
Advertising - 3 months $500 Monthly Airsopure
(Note 8)
- --------------------------------------------------------------------------------
Additional Funds $1,000 to As Incurred As Incurred Employees,
3 months $1,500 Suppliers,
(Note 9) Utilities
- --------------------------------------------------------------------------------
TOTALS $54,200 to
$56,800
(Note 10) (Note 11)
- --------------------------------------------------------------------------------
Notes:
(l) See Item 5 for conditions when this fee is refundable. Airsopure does not
finance any fee.
(2) This estimate is based on expenses for two during the franchise school. We
pay for the cost of 1-2 persons' round-trip transportation to and from Texas
(where the training site is currently located) and for your lodging and local
transportation (typically a rental car which is shared with other attendees), as
well as for training instructors, facilities and training materials. You pay for
any meals, other travel, and wages (if any) during the franchise school.
(3) Airsopure anticipates that most franchisees will elect to operate the
franchised business out of their homes. Some my wish to rent a small storage
locker to keep inventory.
(4) Airsopure anticipates that many franchisees will already have access to an
adequate computer. Other items that may be needed include answering machine,
beeper, answering service.
(5) Amounts shown represent our estimate of the premiums for your first three
months of operation.
(6) Includes security deposits, utility costs, licenses, permits, and cost for
legal and accounting services if needed, to set up your business entity. These
fees may vary from state to state and from one municipality to another.
(7) Business is based out of the home and no improvements are necessary.
28.1 6
<PAGE>
(8) No advertising is required for the first two months, thereafter two percent
of gross is paid. Additional dollars estimated are for supplemental mailing
costs of brochures included in start-up packages.
(9) You will need capital to support ongoing expenses such as direct mail,
promoting and payroll to the extent these are not covered by revenues generated
by your sales. Airsopure estimates that the amounts given will be sufficient to
cover ongoing expenses for the start-up phase of the business, which we
calculate to be three months. This is only an estimate and there is no assurance
that additional working capital will not be necessary during the start-up phase.
(10) We have based these estimates on Airsopure's managements direct experience
over the last two years marketing the company's line of air purification
products directly to the end consumer. This is only an estimate based on three
months. You should review these figures carefully with business and financial
advisers before making a decision to purchase the franchise.
(11) Other than security deposits included in Note 9, none of these expenses are
refundable. We do not offer direct or indirect financing to franchisees for any
items.
ITEM 8
RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
You must purchase all air purification products from Airsopure. These products
are manufactured by Airsopure to strict standards and are proprietary. You are
allowed to sell products and services only that have been expressly authorized
for sale in writing in the manner we specify. You must not deviate from any of
our specifications without our written consent. The current product line for
equipment and filters offered by Airsopure is described in the confidential
Operating Procedure Manual (also referred to as the "Manual"). You have complete
discretion as to the prices you charge customers for your products and services
although we recommend suggested retail pricing.
We are currently the only suppliers of support materials (marketing materials)
in the system. These promotional materials are designed to promote sales within
the Airsopure product line for the benefit of the franchisee. If you desire to
obtain promotional materials or advertisements from other suppliers, you must
submit such materials to Airsopure for our approval in writing prior to use
(Franchise Agreement Section X.10.01).
You must obtain your initial inventory order before opening. Replenishment will
be based on customer demand at your discretion.
It is your responsibility to locate local installers to handle any estimates of
installation or actual installation of Airsopure products. These installers must
file an "Approved Installers Authorization" provided in your operations manual.
The current general criteria for approval are:
1. Contractors must be licensed and familiar with local electrical
installation codes.
2. Must carry $1,000,000 of liability insurance to cover installation and
name you as "additionally insured" on his/her policy.
3. Should specialize in light commercial business as an HVAC repair
facility or electrical contractor.
4. Should be willing to sign a non-compete non disclosure agreement.
5. Must have a respectable record with the Better Business Bureau.
We will notify you of our approval or rejection of the installer within 5
business days after receiving your request.
28.1 7
<PAGE>
ITEM 9
FRANCHISEES' OBLIGATIONS
THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AND OTHER
AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR
OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR.
- --------------------------------------------------------------------------------
Obligation Section in Agreement Item in Offering
Circular
- --------------------------------------------------------------------------------
a. Site selection and None Item 11
acquisition/lease
- --------------------------------------------------------------------------------
b. Pre-opening Sections V.F. Items 7 and 8
purchases/leases Franchise Agreement
- --------------------------------------------------------------------------------
c. Site development and other Section V. of Franchise Items 7 and 8
pre-opening requirements Agreement
- --------------------------------------------------------------------------------
d. Initial and ongoing training Section V.5.01.A.C. of Items 7 and 11
Franchise Agreement
- --------------------------------------------------------------------------------
e. Opening Section XIV.14.01.G None
Franchise Agreement
- --------------------------------------------------------------------------------
f. Fees Section III of Franchise Items 5 and 6
Agreement
- --------------------------------------------------------------------------------
g. Compliance with standards Sections V.5.01. Items 8, ll,
and policies/operationsmanual Franchise Agreement and 14
- --------------------------------------------------------------------------------
h. Trademarks and proprietary Sections VII. and VIII. of Items 13
information Franchise Agreement and 14
- --------------------------------------------------------------------------------
I. Restrictions on Sections V.5.01.G and VI. Item 8
products/services offered of FranchiseAgreement
- --------------------------------------------------------------------------------
j. Warranty and customer Section V.5.01.S of None
service requirements Franchise Agreement
- --------------------------------------------------------------------------------
k. Territorial development and None None
sales quotas
- --------------------------------------------------------------------------------
l. Ongoing product/service Sections VI. 6.02.of Item 8
purchases Franchise Agreement
- --------------------------------------------------------------------------------
m. Maintenance, appearance None None
and remodeling requirements
- --------------------------------------------------------------------------------
n. Insurance Section XI. of Franchise Items 6 and 11
Agreement
- --------------------------------------------------------------------------------
p. Indemnification Section XVII.of Franchise None
Agreement
- --------------------------------------------------------------------------------
q. Owner's participation/ Sections XVI.16.01 Item 15
management/staffing of Franchise Agreement
- --------------------------------------------------------------------------------
r. Records and reports Section IX of Franchise Item 6
Agreement
- --------------------------------------------------------------------------------
ITEM 10
FINANCING
Airsopure does not offer direct or indirect financing. We do not offer any
notes, leases or any obligation.
28.1 8
<PAGE>
ITEM 11
FRANCHISOR'S OBLIGATIONS
Except as listed below, we need not provide any assistance to you.
Pre-Opening Obligations
Before you open your franchised business, we will:
1) Conduct a market evaluation of the proposed territory to determine its
suitability for the franchised business (Franchise Agreement Section IV.4.01.A).
2) Designate a geographic area to be your designated territory (Franchise
Agreement Section IV.4.01.B).
3) Within four weeks of your signing the Franchise Agreement, provide an initial
training program for you as described below (Franchise Agreement Section
IV.4.01.C.).
4) Provide daily advisory assistance by telephone for the first two weeks after
you complete the training program (Franchise Agreement Section IV.4.02.A.).
5) Provide you, on loan, one copy of Airsopure's Franchise Operations Manual
(Franchise Agreement Section
IV.4.01.D).
6) Provide you with specifications for inventory, supplies and equipment
(Franchise Agreement Section V.5.01.F).
Continuing Obligations
During the operation of the franchise business, we will:
1) Provide continuing consultation and advisory assistance to you in the manner
and at such time as we deem advisable concerning the operation, advertising and
promotion of the franchised business (Franchise Agreement Section IV.4.02.B).
2) Provide you with any updates, revisions and amendment of the Franchise
Operations Manual (Franchise Agreement Section IV.4.02.C. and VIII.8.03.).
3) Conduct if deemed necessary by Airsopure, inspections of your franchised
business and staff. (Franchise Agreement Section V.5.01.N.)
4) Provide you at Airsopure's sole discretion such continuing training programs
as we deem appropriate (Franchise Agreement Section IV.4.02.E.).
5) At our discretion use test customers to verify that our standards are being
upheld (Franchise Agreement Section IV.4.02.F.).
6) Develop new and improved existing methods, services, programs, operational
systems and management techniques and products (Franchise Agreement Section
VIII.8.03.).
7) Defend you at our expense against any third-party claim or lawsuit involving
you use of the Airsopure trademarks as long as you have used the Airsopure
trademarks as the franchise agreement requires (Franchise Agreement VII.7.05.and
7.06.).
8) Administer the Airsopure Advertising Fund (Franchise Agreement Section
X.10.03)
Advertising Program
Airsopure may at its discretion provide placement of advertising for the benefit
of the entire Airsopure system. Most of the advertising will be placed on a
national basis, typically by management of Airsopure or by Airsopure's public
relations company. Airsopure anticipates that most of its advertising will be
created by an outside advertising agency. You may develop advertising materials
for your own use at your cost, but Airsopure must approve the advertising
materials in advance in writing before use (Franchise Agreement Section
X.10.01). Beginning 60 days after you have opened, you must begin contributing
to the Marketing Fund (Franchise Agreement Section III.3.01.C.).
28.1 9
<PAGE>
Airsopure reserves the right to use the monthly fees collected for the Marketing
Fund to place advertising in national media (including broadcast, print or other
media). All amounts contributed to the Marketing Fund are used to promote the
products sold by franchisees and are not used to sell additional franchises. Any
amount remaining in the Marketing Fund at the end of a fiscal year may be spent
in subsequent fiscal years. An accounting of the Marketing Fund expenditures is
available to any franchisee upon request following the close of each fiscal year
(Franchise Agreement Section X.10.03.A.). No Marketing Fund fees were collected
during 1996.
In addition to your contributions to the Marketing Fund, you must also spend
annually at least 3% of your gross sales on local advertising within your
Designated Territory (Franchise Agreement Section X.10.04.)
We are not obligated by the Franchise Agreement or any other agreement to
provide any other supervision, assistance or services in connection with the
ongoing operation of the franchised business. Any duty or obligation imposed on
us by the Franchise Agreement or otherwise may be performed by any of our
designees, employees or agents, as we may direct.
You will be given an opportunity to review the Franchise Operations Manual
before you sign the Franchise Agreement.
Training Programs
Within four weeks of your signing of the Franchise Agreement, you (or, if you
are a corporation or partnership, a majority shareholder or general partner)
must attend and complete to our reasonable satisfaction our initial training
program. One other individual may attend the initial training program as well.
You and your manager must also attend such additional continuing education and
training programs as we may require. All training programs will be at such times
and places as we designate. We will not charge you and one additional person for
your initial training.
Airsopure will arrange and pay for transportation, lodging and training
materials for your initial training. You and your manager must also attend such
additional continuing education and training programs as we may require. All
training programs will be at such times and places as we designate. We will not
charge you for such training, but you or your employees will be responsible for
all expenses incurred in connection with the training programs, including the
costs of transportation, lodging, meals, wages and other incidental or living
expenses (Franchise Agreement Section V.5.01.C. ).
The initial training program will last approximately five days, consisting of
classroom training, and is conducted on an as-needed basis. The initial training
program will be conducted at our headquarters in Dallas, Texas. The school is
conducted by Dr. John Harris, Chief Operating Officer, who has been employed by
Airtech for two years. Other Airsopure employees, including individuals directly
responsible for product development and manufacturing, product marketing and
customer service will give instruction in areas in which they specialize.
As of the date of this offering circular, the Initial Training required by
Airsopure before opening your business consists of the following:
- --------------------------------------------------------------------------------
Subject Time Hours of Classroom Location
Training
- --------------------------------------------------------------------------------
Company Overview Monday 2 hours Home Office
- --------------------------------------------------------------------------------
Technology Today Tuesday 6 hours Home Office
- --------------------------------------------------------------------------------
Pollution Problems Tuesday 2 hours Home Office
- --------------------------------------------------------------------------------
The Market Wednesday 1 hour Home Office
- --------------------------------------------------------------------------------
The Competition vs Wednesday 2 hours Home Office
Airsopure
- --------------------------------------------------------------------------------
Field Applications Wednesday 5 hours Home Office
- --------------------------------------------------------------------------------
Administration Thursday 8 hours Home Office
- --------------------------------------------------------------------------------
Sales & Marketing Friday 8 hours Home Office
- --------------------------------------------------------------------------------
Quick-Start Sunday 6 hours Home Office
- --------------------------------------------------------------------------------
28.1 10
<PAGE>
ITEM 12
TERRITORY
You will not be granted an exclusive territory for the operation of your
franchised business. Airsopure may establish other franchised or company owned
outlets that may compete with your franchised business. Notwithstanding the
above, Airsopure will designate up to five zip codes as your "Farm Area"
(Franchise Agreement Section I.1.02) within which you will have the exclusive
right to solicit customers by use of direct mail advertising. However, other
Airsopure outlets are not precluded from servicing customers in the Farm Area or
elsewhere in your Designated Territory, and likewise, you are not precluded from
servicing customers elsewhere in your Designated Territory outside your Farm
Area.
ITEM 13
TRADEMARKS
We grant you the right to operate your indoor air purification business under
the name "Airsopure." By "trademark," we mean trademarks, trade names, service
marks and logos used to identify your franchised business. Airsopure has filed
an application for registration with the United States Patent and Trademark
Office for "Airsopure"on March 4, 1997, serial number 75/252317.
You must follow our rules when you use Airsopure's marks. You cannot use our
marks as part of your corporate legal name or with modifying words, designs or
symbols except for those which we license to you. You may not use our mark in
connection with the sale of an unauthorized product or in a manner not
authorized in writing by us.
You must notify us immediately when you learn about an infringement of or
challenge to your use of our mark, and you must cooperate with Airsopure in
defending or settling any litigation (Franchise Agreement Section VII.7.04). We
will take the action we deem necessary to preserve and protect the ownership and
validity of the mark (Franchise Agreement Section VII.7.05). Airsopure will
defend and indemnify you in legal proceedings involving the licensed mark filed
by third parties alleging infringement provided that you have used Airsopure's
mark as authorized by the Franchise Agreement (Franchise Agreement Section
VII.7.06.). We reserve the right to substitute different marks for use in
identifying the "Airsopure" system without liability to you (Franchise
Agreement Section VII7.03.F.).
ITEM 14
PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION
There are no patents or copyrights currently registered or which we have applied
for which are material to the franchise, but you can use the proprietary
information in our Operations Manual. Although we have not filed an application
for a copyright registration for the Operating Manual, we claim a copyright, and
the information is proprietary. Section VII of the Franchise Agreement describes
the restrictions on your use of our Operating Manual and your obligation to
maintain the contents of the Operating Manual in confidence. All new air
purification products, including those under current testing will have patents
filed with the U.S. Patent and Trademark Office.
We have no obligation under the Franchise Agreement to defend the above
described copyrights or to defend you in any litigation relating to these
materials, and you have no obligation to report infringement of these to us. We
will take such action as we deem appropriate, and we have the right to control
all litigation involving these copyrights/patents. We know of no infringement
relating to these materials which could materially affect you.
ITEM 15
OBLIGATION TO PARTICIPATE IN THE
ACTUAL OPERATION OF THE FRANCHISE BUSINESS
Airsopure requires that you personally supervise and devote full time and best
efforts to run the business (Franchise Agreement Section XVI.16.01)
The manager must sign a written agreement to maintain confidentiality of the
proprietary information described in Item 14 and to comply with the covenants
not to compete described in Item 17 (Franchise Agreement Section VIII.8.02.).
28.1 11
<PAGE>
If the franchisee is a corporation, the individual who owns controlling interest
in the corporation must sign a personal guarantee (Exhibit H) of all of the
corporations' obligations to Airsopure.
ITEM 16
RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
Airsopure requires you to offer and sell only those products that Airsopure has
approved (see Items 8 and 9). You must offer all products that Airsopure
designates as required for all franchisees. These required products currently
include air purification equipment and air filters. (See Item 8) Airsopure has
the right to add additional authorized products that you are required to offer.
There are no limits on Airsopure's right to do so.
You are not restricted in the customers to whom you may provide products.
However, you may only solicit customers by direct mail in your Designated
Territory (see Item 12).
ITEM 17
RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION
This table lists certain important provisions of the franchise and related
agreements. You should read the provisions in the agreements attached to this
offering circular.
- --------------------------------------------------------------------------------
Provision Section in Franchise Summary
Agreement
- --------------------------------------------------------------------------------
a.Terms of the franchise Section II.2.01 5 years
- --------------------------------------------------------------------------------
b.Renewal or extension of Section II.2.02 One renewal term of 5 years
the term subject to contractual
requirements
- --------------------------------------------------------------------------------
c.Requirements for you to Section II.2.02 Notice, good standing,
renew or extend A.B.C.D.E.F.G. training, upgrade,business,
sign release and new
agreement, pay fees
- --------------------------------------------------------------------------------
d.Termination by you None None
- --------------------------------------------------------------------------------
e.Termination by Airsopure None None
without cause
- --------------------------------------------------------------------------------
f.Termination by Airsopure Section XIV.14.01 Can terminate only if you
with cause default
- --------------------------------------------------------------------------------
g."Cause" defined--defaults Section XIV.1402. You have 30 days to cure:
which can be cured failure to make payments,
submit reports, maintain
standard or follow
procedures; legal
violations; or any other
default not listed in
Section XIV.14.01.A.
- --------------------------------------------------------------------------------
h."Cause" defined--defaults Section Includes insolvency;
which cannot be cured XIV.14.01.A.B.C conviction of felony;
D.E.F.G.H.I.J unauthorized transfer;
disclosure of confidential
information; failure to
complete training;falsified
records and reports;
repeated defaults even if
cured; other
- --------------------------------------------------------------------------------
I.Your obligations on Section XV. Includes complete
termination/non-renewal deidentification; payment
of amounts due; return of
proprietary information;
cessation of operation;
assignment of a telephone
number; (also see r. below)
- --------------------------------------------------------------------------------
28.1 12
<PAGE>
- --------------------------------------------------------------------------------
j.Assignment of the contract Section XII.12.01.A. No restriction on our right
by Airsopure to assign
- --------------------------------------------------------------------------------
k."Transfer" by you-- Section Includes transfer of the
definition XII.12.02.A.B. contract or assets or
ownership change
- --------------------------------------------------------------------------------
l.Our approval of transfer Section XII.12.02.C. We have the right to
by you approve all transfers but
will not unreasonably
withhold approval
- --------------------------------------------------------------------------------
m.Conditions for our approval Section Includes payment of amounts
XII.12.02.C.1.2 due; no defaults;.release
.34.5.6 signed; new franchisee
qualifies and signs new
agreement;upgrade business;
training; transfer fees
(see also r. below)
- --------------------------------------------------------------------------------
n.Our right of first refusal Section XII.D.12.03 We can match any offer for
to acquire your business your business
- --------------------------------------------------------------------------------
o.Our option to purchase Section XV.15.01.H. Upon expiration or
your business termination we have
the right to acquire
certain assets
- --------------------------------------------------------------------------------
p.Your death or disability Section XII.D.12.04. Franchise may be
transferred to heirs or
to approved third party
within 6 months with
Airsopure Approval
- --------------------------------------------------------------------------------
q.Non-competition covenants Section XVI16.02.C. No involvement in competing
during the term of the business
franchise
- --------------------------------------------------------------------------------
r.Non-competition covenants Section No competing business for
XVI.16.02.A.B.C two years within 25 miles
16.03 and 16.04 of Designated Territory or
any other Airsopure
franchise
- --------------------------------------------------------------------------------
s.Modification of the Section XIII.8.03 No modifications generally
agreement and XVII 17.05 but Operations Manual and
products subject to change
- --------------------------------------------------------------------------------
t.Integration/merger clause Section XVIII.18.05 Only the terms of the
Franchise Agreement is
binding (subject to state
law). Any other promises
may not be enforceable.
- --------------------------------------------------------------------------------
u.Dispute resolution by None None
arbitration or mediation
- --------------------------------------------------------------------------------
v.Choice of forum Section XVIII.18.07 Litigation must be in Texas
- --------------------------------------------------------------------------------
w.Choice of law Section XVIII.18.08 Texas law applies
- --------------------------------------------------------------------------------
These states have statutes which may supersede the Franchise Agreement in
your relationship with us including the areas of termination and renewal of your
franchise: ARKANSAS [Stat. Section 70-807], CALIFORNIA [Bus. & Prof. Code
Sections 20000-20043], CONNECTICUT [Gen. Stat. Section 42-133e et seq.],
DELAWARE [Code, tit.], HAWAII [Rev. Stat. Section 482E-1], ILLINOIS [Rev. Stat.
Chapter 121 1/2 par 1719-1720], INDIANA [Stat. Section 23-2-2.7], IOWA [Code
Sections 523H.1-523H.17, MICHIGAN [Stat. Section 19.854 (27)], MINNESOTA [Stat.
Section 80C.14], MISSISSIPPI [Code Section 75-24-51, MISSOURI [Stat. Section
28.1 13
<PAGE>
407.400], NEBRASKA [Rev. Stat. Section 87-401], NEW JERSEY [Stat. Section
56:10-1], SOUTH DAKOTA [Codified Laws Section 37-5A-51], VIRGINIA [Code
13.1-557-574-13.1-564], WASHINGTON [Code Section 19.100.180], WISCONSIN (Stat.
Section 135.03]. These and other states may have court decisions which may
supersede the Franchise Agreement in your relationship with us, including the
areas of termination and renewal of your franchise.
ITEM 18
PUBLIC FIGURES
We do not use any public figure to promote our franchise.
ITEM 19
EARNINGS CLAIMS
Airsopure does not furnish or authorize its salespersons to furnish any oral or
written information concerning the actual or potential sales, cost, income or
profits anticipated from operation of an Airsopure franchise. Actual results
will vary from unit to unit, and we cannot estimate the results of any
particular franchise.
ITEM 20
LIST OF OUTLETS
FRANCHISED
STORE STATUS SUMMARY
FOR YEARS 1996/1995/1994
- --------------------------------------------------------------------------------
State Transfers Cancelled Not Reacquired Left the Total Franchises
Or Renewed by System From Left Operating
Terminated Airsopure Other Columns At year
(2) End
- --------------------------------------------------------------------------------
Totals 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0 0/0/0
- --------------------------------------------------------------------------------
(1) Note: All numbers are as of December 31 for each year.
(2) The numbers in the "Total" column may exceed the number of stores affected
because several events may have affected the same store. For example, the same
store may have had multiple owners.
STATUS OF COMPANY OWNED STORES
FOR YEARS 1996/1995/1994
- --------------------------------------------------------------------------------
State Stores Closed Stores Opened Total Stores
During Year During Year Operating
At Year End
- --------------------------------------------------------------------------------
Texas 0/0/0 0/1/0 1/1/0
- --------------------------------------------------------------------------------
Totals 0/0/0 0/1/0 1/1/0
- --------------------------------------------------------------------------------
PROJECTED OPENINGS
AS OF DECEMBER 31, 1996
- --------------------------------------------------------------------------------
State Franchise Projected Franchised Projected Company
Agreements New Owned Openings in
Signed But Store Not Stores In the next Next Fiscal Year
Open (1) Fiscal Year
- --------------------------------------------------------------------------------
Arizona 0 2 0
- --------------------------------------------------------------------------------
California 0 3 0
- --------------------------------------------------------------------------------
Colorado 0 2 0
- --------------------------------------------------------------------------------
Florida 0 3 0
- --------------------------------------------------------------------------------
Georgia 0 2 0
- --------------------------------------------------------------------------------
28.1 14
<PAGE>
- --------------------------------------------------------------------------------
Hawaii 0 0 0
- --------------------------------------------------------------------------------
Illinois 0 2 0
- --------------------------------------------------------------------------------
Indiana 0 2 0
- --------------------------------------------------------------------------------
Kansas 0 1 0
- --------------------------------------------------------------------------------
Kentucky 0 2 0
- --------------------------------------------------------------------------------
Louisiana 0 2 0
- --------------------------------------------------------------------------------
Maryland 0 1 0
- --------------------------------------------------------------------------------
Massachusetts 0 1 0
- --------------------------------------------------------------------------------
Michigan 0 1 0
- --------------------------------------------------------------------------------
Mississippi 0 1 0
- --------------------------------------------------------------------------------
Missouri 0 1 0
- --------------------------------------------------------------------------------
Montana 0 1 0
- --------------------------------------------------------------------------------
Nevada 0 1 0
- --------------------------------------------------------------------------------
New Jersey 0 1 0
- --------------------------------------------------------------------------------
New York 0 2 0
- --------------------------------------------------------------------------------
North Dakota 0 1 0
- --------------------------------------------------------------------------------
Ohio 0 2 0
- --------------------------------------------------------------------------------
Oklahoma 0 1 0
- --------------------------------------------------------------------------------
Oregon 0 1 0
- --------------------------------------------------------------------------------
Pennsylvania 0 2 0
- --------------------------------------------------------------------------------
South Dakota 0 1 0
- --------------------------------------------------------------------------------
Tennessee 0 1 0
- --------------------------------------------------------------------------------
Texas 0 4 0
- --------------------------------------------------------------------------------
Utah 0 2 0
- --------------------------------------------------------------------------------
Virginia 0 1 0
- --------------------------------------------------------------------------------
Washington 0 2 0
- --------------------------------------------------------------------------------
West Virginia 0 1 0
- --------------------------------------------------------------------------------
Wisconsin 0 1 0
- --------------------------------------------------------------------------------
Wyoming 0 1 0
- --------------------------------------------------------------------------------
Totals 0 50 0
- --------------------------------------------------------------------------------
Note (1) As of December 31, 1996
The names and addresses and telephone numbers of the franchisees and their
outlets are attached as Exhibit D.
The name and last known home addresses and telephone number of every franchisee
who have had an outlet terminated, cancelled, not renewed or otherwise
voluntarily or involuntarily ceased to do business under the Franchise Agreement
during the most recently completed fiscal year or who has not communicated with
Airsopure within 10 weeks of our application date are attached as Exhibit E.
28.1 15
<PAGE>
ITEM 21
FINANCIAL STATEMENTS
Exhibit C is the audited financial statements for Airtech International
Corporation., as of (Insert date).
ITEM 22
CONTRACTS
The following contract documents are attached to this offering circular as
exhibits:
Franchise Agreement Exhibit F
Telephone Assignment Agreement Exhibit G
Nondisclosure Agreement Exhibit H
ITEM 23
RECEIPT
THIS OFFERING CIRCULAR SUMMARIZES PROVISIONS OF THE FRANCHISE AGREEMENT AND
OTHER INFORMATION IN PLAIN LANGUAGE. READ THIS OFFERING CIRCULAR AND ALL
AGREEMENTS CAREFULLY.
IF AIRSOPURE OFFERS YOU A FRANCHISE, WE MUST PROVIDE THIS OFFERING CIRCULAR TO
YOU BY THE EARLIEST OF:
(1) THE FIRST PERSONAL MEETING TO DISCUSS OUR FRANCHISE; OR (2) TEN
BUSINESS DAYS BEFORE SIGNING OF A BINDING AGREEMENT; OR (3) TEN BUSINESS
DAYS BEFORE ANY PAYMENT TO US.
YOU MUST ALSO RECEIVE A FRANCHISE AGREEMENT CONTAINING ALL MATERIAL TERMS AT
LEAST FIVE BUSINESS DAYS BEFORE YOU SIGN ANY FRANCHISE AGREEMENT.
IF WE DO NOT DELIVER THIS OFFERING CIRCULAR ON TIME OR IF IT CONTAINS A FALSE OR
MISLEADING STATEMENT, OR A MATERIAL OMISSION, A VIOLATION OF FEDERAL AND STATE
LAW MAY HAVE OCCURRED AND SHOULD BE REPORTED TO THE FEDERAL TRADE COMMISSION,
WASHINGTON, D.C. 20580 AND ANY APPLICABLE STATE AGENCY.
I HAVE RECEIVED A UNIFORM FRANCHISE OFFERING CIRCULAR DATED APRIL 2, 1997. THIS
OFFERING CIRCULAR INCLUDED THE FOLLOWING EXHIBITS:
Exhibit A List of State Administrators
Exhibit B List of Agents for Service of Process
Exhibit C Financial Statements
Exhibit D List of Current Franchisees
Exhibit E List of Franchisees Who Have Left the System Within the Past 12 Months
Exhibit F Franchise Agreement
Exhibit G Telephone Assignment Agreement
Exhibit H Nondisclosure Agreement
Exhibit I Personal Guarantee
Exhibit J Lists of Registration States and Effective Dates
Exhibit K State Amendments to Uniform Offering Circular
- ------------------------------------------- ------------------------
Signature Date
- ------------------------------------------- ------------------------
Print Name Date
28.1 16
<PAGE>
FRANCHISE AGREEMENT
FOR
AIRSOPURE INC.
AIRSOPURE
FRANCHISE AGREEMENT
THIS AGREEMENT is entered into on this ____ day of _______________,
19___, by and between AIRSOPURE, INC., a Texas corporation whose principal place
of business is located at 15400 Knoll Trail, Suite 106, Dallas, Texas 75248
(hereinafter "AIRSOPURE"), and
_______________________________________________________________, whose address
is _____________________________________________________(hereinafter
"FRANCHISEE").
RECITALS
A. AIRSOPURE and its affiliate design, manufacture and distribute indoor
air cleaning systems under the name and mark "AIRSOPURE(TM)" (the "Products").
B. AIRSOPURE has developed a system for the establishment, development and
operation of sales centers ("AIRSOPURE Service Centers" or "Centers") for the
sale and servicing of AIRSOPURE's exclusive line of Products using the service
mark "AIRSOPURE" and other trademarks, service marks, logos and identifying
features designated from time to time by AIRSOPURE (the "Licensed Marks") and
using AIRSOPURE's distinctive methods for establishing and operating AIRSOPURE
Service Centers.
C. FRANCHISEE desires to establish an AIRSOPURE Service Center to be
located in the following geographic area:_______________________________________
(the "Designated Territory"), and AIRSOPURE desires to grant FRANCHISEE the
right to operate an AIRSOPURE Service Center at such location under the terms
and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual rights, covenants and
obligations set forth herein, the parties agree as follows:
I. GRANT OF FRANCHISE
1.01. AIRSOPURE grants to FRANCHISEE, and FRANCHISEE accepts from
AIRSOPURE, the right and license to operate an AIRSOPURE Service Center for the
sale or lease of AIRSOPURE's exclusive line of Products (the "Franchise" or
"Franchised Business") at a location in the Designated Territory to be approved
in writing by AIRSOPURE and listed in attached Exhibit A (the "Authorized
Location"), to purchase Products from AIRSOPURE or its affiliates for resale at
the Authorized Location to customers in the Designated Territory, and to use the
Licensed Marks only in connection with the operation of the Franchised Business
in accordance with the terms and conditions of this Agreement. AIRSOPURE grants
the Franchise to FRANCHISEE hereunder in reliance upon FRANCHISEE's agreement to
at all times operate and manage the Franchised Business faithfully, honestly and
diligently in strict conformance with AIRSOPURE's operating procedures and
specifications, as set forth herein and as otherwise from time to time
communicated to FRANCHISEE, using FRANCHISEE's best efforts to promote and
enhance the performance and operation of the Franchised Business.
1.02. AIRSOPURE hereby grants to FRANCHISEE the exclusive right to solicit
customers for the Products by direct mail advertising in the Designated
Territory described above. Other AIRSOPURE franchisees will not be permitted to
solicit customers for Products by use of direct mail advertising in the
Designated Territory. However, other franchisees will not be restricted from
other forms of advertising within the Designated Territory, including without
limitation advertising by television, radio or by newspapers whose coverage
areas include the Designated Territory. Other franchisees will not be prohibited
from providing sales and service to customers located in the Designated
Territory. Likewise, FRANCHISEE may not solicit customers for Products by direct
mail advertising outside the Designated Territory, but FRANCHISEE shall not be
prohibited from providing sales and service to customers located outside the
Designated Territory. FRANCHISEE has not been granted an exclusive trade area by
this Agreement.
28.1 17
<PAGE>
II. TERM AND RENEWAL
2.01. The term of this Agreement shall be for five (5) years commencing on
the date of execution of this Agreement by AIRSOPURE.
2.02. At the expiration of the term or any renewal term hereof, FRANCHISEE
may, at its option, renew the Franchise granted hereunder for addition terms of
five (5) years each on the following terms and conditions:
A. FRANCHISEE shall give AIRSOPURE notice in writing of its election to
renew this Agreement at least three (3) months prior to the expiration of the
then-current term.
B. FRANCHISEE shall not be in default of any provision of this Agreement or
amendment hereto, including without limitation all payment obligations to
AIRSOPURE and its affiliates.
C. As a condition of renewal of the Franchise, FRANCHISEE agrees to execute
AIRSOPURE's then-current form of Franchise Agreement and to comply fully with
all terms and conditions thereof, and to pay AIRSOPURE the then-current renewal
fee, which is presently $1,500.00. FRANCHISEE understands that AIRSOPURE may
revise its Franchise Agreement for any renewal term, at AIRSOPURE's sole
discretion, including without limitation to increase the royalty fees or other
fees payable by FRANCHISEE or to require other obligations of franchisees.
D. FRANCHISEE shall meet AIRSOPURE's then-current qualifications and
training requirements.
E. FRANCHISEE shall execute a general release in a form prescribed by
AIRSOPURE releasing AIRSOPURE and its affiliates, directors, officers, employees
and agents from all known and unknown claims and liabilities to the extent
permitted by state and federal law.
F. FRANCHISEE may be required, at AIRSOPURE's sole discretion, to upgrade
or remodel its authorized location for FRANCHISEE's AIRSOPURE Service Center to
conform to AIRSOPURE's then-current specifications and standards as specified in
AIRSOPURE's Operating Manual of otherwise in writing.
III. FEES
3.01. In consideration of the Franchise rights and license granted herein,
FRANCHISEE agrees to pay to AIRSOPURE the following fees:
A. FRANCHISEE shall pay to AIRSOPURE an initial franchise fee of Fifteen
Thousand Dollars ($15,000.00) upon execution of this Agreement. FRANCHISEE
agrees that the initial franchise fee represents payment for the initial grant
of the Franchise rights and license granted herein, shall be fully earned upon
execution of this Agreement, and the said fee will not be refunded under any
circumstances unless otherwise specifically set forth herein.
B. FRANCHISEE shall pay to AIRSOPURE a continuing non-refundable royalty
fee on a monthly basis of ______ percent (___%) of FRANCHISEE's total monthly
gross sales, as defined below.
C. FRANCHISEE shall pay to AIRSOPURE a continuing non-refundable
advertising fee of two percent (2%) of FRANCHISEE's total monthly gross sales,
as defined below. Such advertising fee shall be contributed to AIRSOPURE's
marketing fund, which is described in Section X hereof.
D. "Gross sales" as used in this Section 3.01 shall mean the amount of
gross revenues received by FRANCHISEE from all sources, including without
limitation sales of Products, services or other merchandise of every kind or
nature from, at or in connection with the operation of the AIRSOPURE Service
Center Franchise granted herein, excluding state, federal or local sales taxes
collected from customers and paid to the appropriate taxing authority.
E. Fees payable under Paragraphs 3.01.B and 3.01.C above shall be due and
payable monthly by the seventh day of each month, based on FRANCHISEE's gross
sales of the previous month. Delinquent fees shall bear interest at a rate of
the lower of: (i) one and one-half percent (1.5%) per month, or (ii) the maximum
rate permitted by applicable law.
28.1 18
<PAGE>
IV. DUTIES OF AIRSOPURE
4.01. Prior to the opening of the Franchise, AIRSOPURE shall:
A. Following receipt in writing from FRANCHISEE of a request for approval
of a location as the Authorized Location for the Franchised Business, AIRSOPURE
will promptly evaluate such location and notify FRANCHISEE in writing of its
approval or rejection of such location.
B. Provide FRANCHISEE with AIRSOPURE's specifications and requirements or
other assistance deemed necessary by AIRSOPURE to assist FRANCHISEE in opening
the Franchised Business.
C. Provide an initial training program for two persons to be designated by
FRANCHISEE as described in AIRSOPURE's Operations Manual.
D. Provide one copy, on loan to FRANCHISEE, of AIRSOPURE's Operations
Manual as described in Section VIII hereof for use solely in connection with
operation of the AIRSOPURE Service Center Franchise granted hereunder.
E. Sell to FRANCHISEE an opening order of Products for resale or lease at
the Franchised Business as described in Paragraph 6.01 below.
4.02. Following the opening of the Franchise, AIRSOPURE shall:
A. Provide daily consultation by telephone as reasonably requested by
FRANCHISEE during the first two weeks of operation of the AIRSOPURE Service
Center Franchise.
B. Provide continuing general advisory assistance as deemed necessary by
AIRSOPURE regarding the operation and advertising of the Franchised Business.
C. Provide updates, revisions and amendments to the AIRSOPURE Operating
Manual and system as AIRSOPURE may from time to time deem necessary or
desirable.
D. Fill FRANCHISEE's orders for Products for resale at the Franchised
Business in accordance with Section VI below.
E. Provide training programs or seminars as AIRSOPURE may, from time to
time in its sole discretion, deem appropriate. AIRSOPURE's training programs for
franchisees is described in AIRSOPURE's Operations Manual, and is subject to
change at any time in AIRSOPURE's sole discretion.
F. AIRSOPURE may, from time to time at its sole discretion, provide test
customers or store visits by AIRSOPURE representatives to evaluate FRANCHISEE's
methods of operation and compliance with AIRSOPURE's standards and
specifications.
V. DUTIES OF FRANCHISEE
5.01. FRANCHISEE shall:
A. Attend (or if FRANCHISEE is a corporation, its majority shareholder will
attend) and successfully complete to AIRSOPURE's reasonable satisfaction
AIRSOPURE's initial training program within four weeks following execution of
this Agreement.
B. Obtain all federal, state and local business licenses, permits,
certifications and bonds required for lawful operation of the Franchised
Business and certify in writing to AIRSOPURE prior to opening that all such
requirements have been obtained.
C. Attend (or FRANCHISEE's manager attend) and complete to AIRSOPURE's
reasonable satisfaction such continuing training or educational programs as
AIRSOPURE may from time to time require in writing. AIRSOPURE will not charge
FRANCHISEE for the training programs, but FRANCHISEE shall be responsible for
the costs of meals, lodging, travel and all other expenses incurred by
FRANCHISEE or its employees in attending such programs.
D. Actively promote AIRSOPURE's Products and services and exert his best
efforts to fully develop and maximize the market for AIRSOPURE's Products and
services. in the Designated Territory.
28.1 19
<PAGE>
E. Devote his full time (or if FRANCHISEE is a corporation, the majority
owner will do so) to the management and operation of the Franchised Business.
F. Purchase and maintain and adequate supply for use in connection with the
operation of the Franchise Business various copyrighted materials and forms
which are the proprietary property of AIRSOPURE and which are an integral part
of AIRSOPURE's system franchised hereunder. Other supplies and equipment
necessary for operation of the Franchised Business may be purchased from third
party suppliers who meet AIRSOPURE's standards and specifications and have been
approved in writing by AIRSOPURE in accordance with the procedures set forth in
AIRSOPURE's Operating Manual, which may be amended from time to time by
AIRSOPURE at its sole discretion.
G. Purchase Products from AIRSOPURE for resale to customers in the
Designated Territory in accordance with Section VI below.
H. Comply with all federal, state and local health and safety laws, rules
and standards applicable to operation of the Franchised Business. FRANCHISEE
will forward copies of all notices of non-compliance by the Franchised Business
with any law, rule, regulation or ordinance to AIRSOPURE within three days from
receipt thereof accompanied by a summary of action FRANCHISEE will take to
comply.
I. Maintain adequate working capital to operate the Franchised Business in
accordance with the AIRSOPURE Operations Manual, as such may be amended by
AIRSOPURE from time to time.
J. Operate the Franchised Business in strict conformance with AIRSOPURE's
policies, procedures, standards and specifications as may be prescribed by
AIRSOPURE from time to time in the Operations Manual or otherwise in writing,
including without limitation all changes specified by AIRSOPURE to its system or
Products.
K. Operate the Franchised Business at all times in a highly ethical manner,
and shall not engage in deceptive, misleading or unethical practices, or any
other activity which would have a negative effect on the name, reputation or
goodwill of AIRSOPURE, its Products, the Licensed Marks or other AIRSOPURE
franchisees.
L. Display AIRSOPURE's Licensed Marks or logos on all marketing materials
and at FRANCHISEE's AIRSOPURE Service Center, if such is open to the public.
AIRSOPURE reserves the right to alter or change its Licensed Marks, logos or
trade dress at any time, and FRANCHISEE agrees to use such Licensed Marks, logos
or trade dress as specified from time to time by AIRSOPURE promptly upon receipt
of notice in writing from AIRSOPURE.
M. Maintain and supply to third parties upon request information to be
supplied by AIRSOPURE regarding the availability of franchises.
N. Provide AIRSOPURE and its representatives with unlimited access to
FRANCHISEE'S offices or its AIRSOPURE Service Center, including FRANCHISEE's
books and records of the Franchised Business, during normal business hours for
purposes of conducting inspections to fully examine and evaluate FRANCHISEE's
methods of doing business, including interviews with FRANCHISEE's employees and
customers. FRANCHISEE acknowledges and agrees that such inspections and
evaluations are necessary for AIRSOPURE to insure the maintenance of its quality
standards, and FRANCHISEE agrees to fully cooperate with any reasonable request
by AIRSOPURE in connection with such inspections and evaluations.
O. Diligently and immediately take such steps as are deemed reasonably
necessary by AIRSOPURE to correct any deficiencies detected by AIRSOPURE in
FRANCHISEE's adherence to AIRSOPURE's operating policies, procedures, standards
and specifications.
R. In the event FRANCHISEE is a corporation, comply with the following:
1. FRANCHISEE will provide in its Articles of Incorporation that
FRANCHISEE's sole corporate purpose is operation of the Franchised Business.
28.1 20
<PAGE>
2. Every certificate for shares of stock in the corporation will include
the following legend printed thereon:
THE TRANSFER, PLEDGE OR ASSIGNMENT OF THE SHARES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND RESTRICTIONS CONTAINED IN A
FRANCHISE AGREEMENT BETWEEN THE HOLDER OF THESE SHARES AND AIRSOPURE,
INC.
3. FRANCHISEE agrees to comply with the restrictions on transfer of
ownership of the corporation set forth in Section 12.02 below.
4. FRANCHISEE will provide AIRSOPURE, prior to the opening of the
Franchised Business, with copies of FRANCHISEE's Articles of Incorporation,
Bylaws and other governing documents, including all amendments thereto, and a
copy of the resolutions by FRANCHISEE's Board of Directors authorizing execution
of this Agreement, certified by the Secretary of the corporation.
5. FRANCHISEE will provide AIRSOPURE with a current list of shareholders
and will update such list from time to time as the list changes.
6. Each shareholder of the corporation will execute a personal guarantee of
FRANCHISEE's performance under this Agreement and all amounts owed by FRANCHISEE
to AIRSOPURE in the form of attached Exhibit B.
S. The parties recognize the importance of fully developing the market for
Products in the Designated Territory, and a substantial part of the
consideration for and inducement to AIRSOPURE to enter into this Agreement is
FRANCHISEE's agreement to devote his best efforts to market, sell and support
Products to customers located in the Designated Territory. FRANCHISEE agrees to
concentrate his marketing efforts to customers located in the Territory, and
FRANCHISEE agrees not to advertise the Products using media or publications
whose primary coverage area is outside the Designated Territory.
T. If initially permitted to operate the Franchised Business out of his
home, FRANCHISEE shall relocate the Franchised Business to a commercial location
at any time if requested to do so by AIRSOPURE. In such event, FRANCHISEE will
have thirty days from receipt of notice from AIRSOPURE to locate a satisfactory
location for the Franchised Business and to secure a lease, and ninety days to
begin operating the Franchised Business from such commercial location. Any
commercial location for the Franchised Business must be approved in writing in
advance by AIRSOPURE. AIRSOPURE also reserves the right to set reasonable
specifications and standards for any commercial location for the Franchised
Business.
VI. PURCHASE AND SALE OF PRODUCTS
6.01. Franchisee will purchase from AIRSOPURE and AIRSOPURE will sell to
FRANCHISEE for resale or lease at the Franchised Business to customers in the
Designated Territory an opening order of Products having an aggregate cost to
FRANCHISEE of at least $______________. Such purchase must be consummated in its
entirety within thirty days following the date of this Agreement unless
AIRSOPURE agrees in writing to extend such time period.
6.02. After the opening order contemplated by the preceding Paragraph,
FRANCHISEE will from time to time place orders for Products with AIRSOPURE on
the following basis:
A. All orders for Products shall be accompanied by payment, unless at
AIRSOPURE's sole discretion, other payment terms are permitted.
B. All orders will be shipped freight collect unless freight is paid in
advance by FRANCHISEE.
C. FRANCHISEE will pay the prices then prevailing at the time AIRSOPURE
receives each order. Such prices are subject to change at any time by AIRSOPURE.
D. All merchandise will be shipped to FRANCHISEE at the Authorized Location
for resale or lease to customers in the Designated Territory. FRANCHISEE will
sell Products only to end-user customers and not for resale. FRANCHISEE will not
sell or lease Products at any location other than the Authorized Location,
engage in mail order sales of Products or supply Products to others for resale
or lease at any other location.
28.1 21
<PAGE>
E. All orders for Products are subject to availability. In the event any
Product is in short supply, AIRSOPURE shall have the right to allocate such
Product on an equitable basis.
F. FRANCHISEE will not modify the Products, and FRANCHISEE will not offer
or carry any products or services other than AIRSOPURE'S Products and services
specified by AIRSOPURE.
G. Notwithstanding nationally advertised prices by AIRSOPURE, FRANCHISEE
may resell Products purchased under this Agreement at prices set by FRANCHISEE.
However, AIRSOPURE retains the right, to the extent permitted by law, to refuse
to fill FRANCHISEE's orders for Products if FRANCHISEE fails to honor
AIRSOPURE's suggested prices for Products.
VII. LICENSED MARKS
7.01. AIRSOPURE represents with respect to the Licensed Marks that:
A. AIRSOPURE is the owner of all right, title and interest in and to the
Licensed Marks or has the right and license to use and grant a license to
FRANCHISEE to use the said Licensed Marks. B. AIRSOPURE will take all steps
reasonably necessary to preserve and protect the ownership and validity in and
to the Licensed Marks.
7.02. With respect to FRANCHISEE's licensed use of the Licensed Marks
pursuant to this Agreement, FRANCHISEE agrees that:
A. FRANCHISEE shall use only the Licensed Marks designated by AIRSOPURE and
shall use them only in the manner authorized and permitted by AIRSOPURE.
B. FRANCHISEE shall use the Licensed Marks only for the operation of the
Franchised Business at the Authorized Location.
C. During the term of this Agreement, FRANCHISEE shall identify itself as
the owner of the Franchised Business in conjunction with any use of the Licensed
Marks, including, but not limited to, on invoices, order forms, receipts,
business cards, contracts and at such conspicuous locations on the Franchised
Business premises as AIRSOPURE may specify. The identification shall be in a
form which specifies FRANCHISEE's name, followed by the term "Franchised Owner"
or such other identification as shall be approved by AIRSOPURE.
D. FRANCHISEE shall not use the Licensed Marks to incur any obligation or
indebtedness on behalf of AIRSOPURE, and FRANCHISEE shall not represent that it
is owned, operated by or affiliated with AIRSOPURE other than as a franchisee.
E. FRANCHISEE shall not use the Licensed Marks as part of its corporate or
other legal name, without the prior written consent of AIRSOPURE.
F. FRANCHISEE shall file an assumed name registration, and shall execute
any documents deemed necessary by AIRSOPURE to obtain protection for the
Licensed Marks or to maintain their continued validity and enforceability.
7.03. FRANCHISEE expressly understands and acknowledges that:
A. As between the parties hereto, AIRSOPURE is the owner of all right,
title and interest in and to the Licensed Marks and the goodwill associated with
and symbolized by them.
B. FRANCHISEE shall not directly or indirectly contest the validity of the
ownership of the Licensed Marks.
C. FRANCHISEE's use of the Licensed Marks pursuant to this Agreement does
not give FRANCHISEE any ownership interest or other interest in or to the
Licensed Marks.
D. Any and all goodwill arising from FRANCHISEE's use of the Licensed Marks
in the Franchised Business under AIRSOPURE's system shall inure solely and
exclusively to the benefit of AIRSOPURE, and upon expiration or termination of
this Agreement and the Franchise herein granted, no monetary amount shall be
assigned as attributable to any goodwill associated with FRANCHISEE's use of the
Licensed Marks.
28.1 22
<PAGE>
E. The right and license to use the Licensed Marks granted hereunder to
FRANCHISEE is nonexclusive, and AIRSOPURE may use and grant franchises to others
to use the Licensed Marks in any manner except as expressly provided otherwise
herein.
F. AIRSOPURE reserves the right to substitute different Licensed Marks for
use in identifying the System and the businesses operating thereunder, and
FRANCHISEE agrees to comply with AIRSOPURE's requirements relating thereto.
7.04. FRANCHISEE shall promptly notify AIRSOPURE of any unauthorized use of
the Licensed Marks or marks confusingly similar thereto, any challenge to the
validity of the Licensed Marks, or any challenge to AIRSOPURE's ownership of, or
FRANCHISEE's right to use, the Licensed Marks. FRANCHISEE acknowledges that
AIRSOPURE has the sole right to direct and control any administrative proceeding
or litigation involving the Licensed Marks, including any settlement thereof.
AIRSOPURE has the right, but not the obligation, to take action against uses by
others that may constitute infringement of the Licensed Marks.
7.05. Provided FRANCHISEE has used the Licensed Marks in accordance with
this Franchise Agreement and AIRSOPURE's Operations Manual, AIRSOPURE will
defend FRANCHISEE at AIRSOPURE's expense against any third party claim, suit or
demand involving the Licensed Marks and arising out of FRANCHISEE's use thereof.
In the event that FRANCHISEE has not used the Licensed Marks in accordance with
this Agreement, AIRSOPURE shall defend FRANCHISEE, at FRANCHISEE's expense,
against such third party claims, suits or demands.
7.06. In the event of any litigation or administrative proceeding relating
to the Licensed Marks, FRANCHISEE shall execute any and all documents and do all
acts as may, in the opinion of AIRSOPURE, be necessary to carry out such defense
or prosecution, including, but not limited to, becoming a nominal party to any
legal action. Except to the extent that such litigation is the result of
FRANCHISEE's use of the Proprietary Marks in a manner inconsistent with the
terms of this Agreement, AIRSOPURE agrees to reimburse FRANCHISEE for its
out-of-pocket costs in performing such acts, except that FRANCHISEE shall bear
the salary costs of its employees, and AIRSOPURE shall bear the cost of any
judgment or settlement.
VIII. OPERATIONS MANUAL
8.01. AIRSOPURE shall provide FRANCHISEE with one copy of AIRSOPURE's
Operations Manual covering the proper operating and marketing techniques and the
standards and specifications for operation of the Franchised Business.
FRANCHISEE agree to fully comply with the Operations Manual in its entirety as
an essential aspect of its obligations under this Agreement. Failure to so
comply shall be treated a breach of this Agreement.
8.02. FRANCHISEE shall at all times treat the Operations Manual, all
supplements and revisions thereto, any other operations manual, brochure or
memorandum created for or approved for use in the operation of the Franchised
Business and the information contained therein as the confidential and
proprietary information of AIRSOPURE, and shall use all reasonable efforts to
maintain the confidentiality of such information. FRANCHISEE shall not at any
time, without AIRSOPURE's prior written consent, copy, duplicate, record, or
otherwise reproduce the foregoing materials, in whole or in part, nor otherwise
make the same available to any unauthorized person. FRANCHISEE may disclose such
information and materials only to such of FRANCHISEE's employees or agents, or
others who must have access to it in connection with their employment or the
performance of this Agreement, in which event FRANCHISEE shall obtain the
agreement of such persons and entities to maintain the confidentiality thereof.
The Operations Manual shall remain at all times the sole property of AIRSOPURE.
8.03. AIRSOPURE may from time to time revise the contents of the Operations
Manual, and FRANCHISEE expressly agrees to comply with each new or changed
standard, specification or procedure set forth therein. FRANCHISEE shall at all
times ensure that FRANCHISEE's copy of the Operations Manual is kept current and
up to date. In the event of any dispute as to the content of the Operations
Manual, the terms of the master copy of the Operations Manual maintained by
AIRSOPURE at AIRSOPURE's home office shall be controlling.
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IX. ACCOUNTING AND RECORDS
9.01. During the term of this Agreement, FRANCHISEE shall maintain and
preserve, for at least five years from the date of their preparation, full,
complete, and accurate, books, records and accounts in the form and manner
prescribed by AIRSOPURE from time to time in the Operations Manual or otherwise
in writing.
9.02. FRANCHISEE shall, at FRANCHISEE's expense, submit to AIRSOPURE, by
the tenth day of each month, a monthly statement on forms prescribed by
AIRSOPURE accurately reflecting gross sales of the Franchised Business for the
preceding calendar month. Each statement shall accompany FRANCHISEE'S monthly
royalty and advertising fee payments and shall be signed by FRANCHISEE attesting
that it is true and correct.
9.03. FRANCHISEE shall, at FRANCHISEE's expense, submit to AIRSOPURE an
annual financial statement for the Franchised Business, which includes an income
statement prepared in accordance with generally accepted accounting principals,
within ninety days of the end of each fiscal year during the term hereof. Each
statement shall be signed by FRANCHISEE attesting that it is true and correct.
9.04. FRANCHISEE shall submit to AIRSOPURE for review and auditing such
other forms, reports, records, information and data, as AIRSOPURE may reasonably
request in writing.
9.05. AIRSOPURE or its designated agents shall have the right at all
reasonable times to examine and copy, at its expense, all books, records,
receipts and tax returns of FRANCHISEE related to the Franchised Business and,
at its option, to have an independent audit made. If an inspection or audit
should reveal that payments have been understated in any report to AIRSOPURE,
then FRANCHISEE shall immediately pay to AIRSOPURE the amount understated upon
demand, in addition to interest from the date such amount was due until paid, at
the prime rate being charged by Chase Manhattan Bank, NA on the date the payment
was due plus two percent, or the maximum rate permitted by law, whichever is
less. If an inspection discloses an underpayment to AIRSOPURE of two percent or
more of the total amount that should have been paid to AIRSOPURE, FRANCHISEE
shall, in addition to repayment of such understated amount with interest,
reimburse AIRSOPURE for any and all costs and expenses incurred in connection
with the inspection or audit (including, without limitation, reasonable
accounting and attorneys' fees). The foregoing remedies shall be in addition to
any other remedies AIRSOPURE may have, including without limitation, the
remedies for default.
X. MARKETING AND ADVERTISING
10.01. FRANCHISEE shall submit to AIRSOPURE for review prior to use samples
of all advertising and promotional materials that have not been previously
approved by AIRSOPURE. AIRSOPURE shall notify FRANCHISEE of its approval or
disapproval within fifteen days from the date of receipt by AIRSOPURE of such
materials. Failure by FRANCHISEE to obtain the prior approval in writing of
AIRSOPURE for all advertising and promotional materials shall be a violation of
this Agreement.
10.02. AIRSOPURE has established a marketing fund (the "Fund") to build
recognition of the Products and the Licensed Marks and to promote AIRSOPURE's
Products and the Franchised Business. FRANCHISEE shall participate in the Fund,
in addition to its obligation to conduct local advertising of the Franchised
Business, on the basis described in Paragraph 3.01.C above.
10.03. AIRSOPURE will administer the Fund as follows:
A. The Fund shall be maintained in a separate bank account. Upon request by
FRANCHISEE, AIRSOPURE will provide an annual accounting of amounts spent from
the Fund, including a reasonable allocation to cover AIRSOPURE's overhead
expenses for administration and management of the Fund.
B. AIRSOPURE may allocate amounts held in the Fund at its discretion as
AIRSOPURE deems appropriate. FRANCHISEE is not guaranteed that any particular
amount or percentage of the Fund will be spent in FRANCHISEE's local market.
C. AIRSOPURE shall have the right to terminate the Fund at any time.
However, the Fund will not be terminated until all moneys in the Fund have been
expended for the purposes stated in Paragraph 10.02 above.
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D. AIRSOPURE may from time to time amend its policies or establish new
policies and procedures for administration of the Fund.
10.04. In addition to its monthly contribution to the Fund, FRANCHISEE
shall spend an amount equal to at least three percent (3%) of FRANCHISEE's total
monthly gross sales (as defined in Paragraph 3.01.E above) on local advertising
in the Designated Territory. FRANCHISEE shall submit to AIRSOPURE a monthly
report to accompany FRANCHISEE's advertising fee and royalty fee payments
accounting for and evidencing FRANCHISEE's local advertising expenditures.
FRANCHISEE's local advertising shall comply with the procedures specified in
Paragraph 10.01 above.
XI. INSURANCE
11.01. FRANCHISEE shall procure and maintain in full force and effect
during the term of this Agreement, at FRANCHISEE's expense, insurance policies
written by an insurance company satisfactory to AIRSOPURE in accordance with
standards and specifications set forth in the Operations Manual or otherwise by
AIRSOPURE in writing. Such policies shall name AIRSOPURE as an additional
insured and shall include, at a minimum:
A. Comprehensive general liability insurance in the amount of One Million
Dollars ($1,000,000.00).
B. Comprehensive automobile liability insurance, including collision,
comprehensive, medical and liability to satisfy state law requirements.
C. Additional coverages and higher policy limits may be required from time
to time by AIRSOPURE.
11.02. At least seven days prior to the opening of the Franchised Business
and on each policy renewal date thereafter, FRANCHISEE shall submit to AIRSOPURE
copies of all policies and policy amendments. The evidence of insurance shall
include a statement by the insurer that the policy or policies will not be
canceled or materially altered without at least thirty (30) days' prior written
notice to AIRSOPURE.
11.03. FRANCHISEE's obligation to obtain and maintain the foregoing policy
or policies in the amounts specified shall not be limited in any way by reason
of any insurance which may be maintained by AIRSOPURE, nor shall FRANCHISEE's
performance of that obligation relieve FRANCHISEE of liability under the
indemnity provisions set forth in Section XVII of this Agreement.
11.04. Should FRANCHISEE, for any reason, fail to procure or maintain the
insurance required by this Agreement, AIRSOPURE shall have the right and
authority (without, however, any obligation to do so) immediately to procure
such insurance and to charge same to FRANCHISEE, which charges, together with a
reasonable fee for AIRSOPURE's expenses in so acting, shall be payable by
FRANCHISEE immediately upon notice.
XII. TRANSFER OF INTEREST
12.01. Transfer by AIRSOPURE
A. AIRSOPURE shall have the right to transfer or assign all or any part of
its rights or obligations in this Agreement to any person or legal entity.
AIRSOPURE may sell or assign any of its assets, including without limitation the
Licensed Marks, the system or Products, to any person or legal entity without
liability or obligation to FRANCHISEE.
B. Nothing in this Agreement or otherwise shall obligate AIRSOPURE to
remain in the indoor air purification business in the event AIRSOPURE should
exercise its right to assign this Agreement or its assets which are the subject
of this Agreement to a third party.
12.02. Transfer by FRANCHISEE
A. FRANCHISEE agrees that the rights and duties set forth in this Agreement
are personal to FRANCHISEE, and that AIRSOPURE has entered into this Agreement
and granted the Franchise rights and license hereunder in reliance on the
business skill, financial capacity, and character of FRANCHISEE. Accordingly,
FRANCHISEE shall not sell, assign, transfer, convey, give away, mortgage or
otherwise encumber any direct or indirect interest in FRANCHISEE or the
Franchised Business without the prior written consent of AIRSOPURE.
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B. Any purported assignment or transfer, by operation of law or otherwise,
not having the prior written consent of AIRSOPURE shall be null and void and
shall constitute a material breach of this Agreement.
C. AIRSOPURE shall not unreasonably withhold its consent to a transfer of
any interest in FRANCHISEE or in this Agreement if the following conditions have
been met:
1. All of FRANCHISEE's accrued monetary and other obligations to AIRSOPURE
and its subsidiaries, affiliates and suppliers shall have been satisfied;
2. FRANCHISEE shall not be in default of any provisions of this Agreement
or any other agreement between FRANCHISEE and AIRSOPURE or its affiliates or
suppliers;
3. FRANCHISEE shall have executed a general release, in a form satisfactory
to AIRSOPURE, of any and all claims against AIRSOPURE and its officers,
directors, shareholders and employees.
4. FRANCHISEE shall remain liable for all obligations to AIRSOPURE in
connection with the Franchised Business prior to the effective date of the
transfer;
5. The transferee shall enter into a written assignment in a form
satisfactory to AIRSOPURE assuming and agreeing to discharge all of FRANCHISEE's
obligations under this Agreement;
6. The transferee shall demonstrate to AIRSOPURE's satisfaction that the
transferee meets AIRSOPURE's then-existing requirements and qualifications for
the granting of an AIRSOPURE Franchise;
7. The transferee shall execute for a term ending on the expiration date of
this Agreement the standard form franchise agreement then being offered to new
franchisees and such other ancillary agreements and documents as AIRSOPURE may
then require for the Franchised Business, which may include changes in required
fee payments or other terms;
8. The transferee shall agree to upgrade the Franchised Business to conform
to the then-current standards and specifications for AIRSOPURE franchises;
9. Transferee and its employees shall complete such training programs as
AIRSOPURE may reasonably require, at the transferee's expense;
10. FRANCHISEE shall pay AIRSOPURE a transfer fee of One Thousand Five
Hundred Dollars ($1,500.00) to cover AIRSOPURE's administrative expenses in
connection with the transfer.
12.03. Right of First Refusal.
In the event FRANCHISEE desires to sell the AIRSOPURE Service Center and
Franchise rights and license granted herein, or any part of his stock interest
in a corporation that has been granted such rights, and receives a bona fide
acceptable offer in writing, FRANCHISEE agrees to notify AIRSOPURE in writing of
the terms and conditions of such offer. AIRSOPURE shall have the option, within
thirty (30) days after receipt of such written notice, to notify FRANCHISEE that
AIRSOPURE elects to purchase the rights and license granted herein or stock
ownership on the same terms and conditions as the bona fide written offer.
FRANCHISEE agrees to sell to AIRSOPURE on the same terms and conditions as the
bona fide offer and to comply with all applicable laws relating to bulk
transfers of assets. If AIRSOPURE fails to notify FRANCHISEE of its election to
exercise its right of first refusal granted herein within the thirty day period,
then FRANCHISEE may sell the franchise rights and license or the stock for the
amount of the bona fide offer, subject to AIRSOPURE's rights under Section 12.02
above. Any material change in the terms or conditions of any offer prior to
closing shall constitute a new offer subject to AIRSOPURE's right of first
refusal described herein. If FRANCHISEE fails to consummate the transaction
within sixty (60) days from the earlier of: (a) receipt of notice from AIRSOPURE
that it elects not to exercise its right of first refusal, or (b) expiration of
the thirty day period referred to herein, then FRANCHISEE must resubmit the
proposed transaction to AIRSOPURE, and AIRSOPURE shall have a new thirty day
review period and right of first refusal.
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12.04. Transfer Upon Death or Mental Incapacity
Upon the death or mental incapacity of FRANCHISEE or a person owning all or
controlling interest in FRANCHISEE, AIRSOPURE shall consent to the transfer of
such interest to the spouse or heirs of the FRANCHISEE provided, in AIRSOPURE's
sole determination, such person(s) meet AIRSOPURE's then-existing requirements
and qualifications for the granting of an AIRSOPURE Franchise. If the said
transfer shall not be approved by AIRSOPURE, the executor, administrator or
personal representative of FRANCHISEE shall transfer FRANCHISEE's interest to a
third party approved by AIRSOPURE within six months after FRANCHISEE's death or
the determination of his mental incapacity. If FRANCHISEE's interest is not
disposed of within six months after such death or mental incapacity, AIRSOPURE
may terminate this Agreement.
12.05. Operation of Franchise by AIRSOPURE
In order to prevent any interruption in the business that would cause harm
to the Franchised Business or AIRSOPURE, FRANCHISEE authorizes AIRSOPURE, at its
option, in the event that FRANCHISEE is absent or incapacitated by reason of
illness, death or otherwise and is not, in AIRSOPURE's sole judgment, able to
operate the Franchised Business for any extended period of time, to operate and
manage the Franchised Business for so long as AIRSOPURE deems necessary, without
waiving any of AIRSOPURE's other rights and remedies under this Agreement. All
moneys from the operation of the Franchised Business during such period of
operation by AIRSOPURE shall be kept in a separate account, and the expenses of
AIRSOPURE during such period for operating the Franchised Business, including
reasonable compensation of AIRSOPURE and its employees or representatives, shall
be charged to such account. FRANCHISEE agrees to save harmless and fully
indemnify AIRSOPURE and its employees and representatives for and against all
claims, losses or actions in connection with the operation and management of the
Franchised Business hereunder.
12.06. Non-Waiver of Claims AIRSOPURE's consent to a transfer of any
interest in the Franchise granted herein shall not constitute a waiver of any
claims it may have against FRANCHISEE, nor shall it be deemed a waiver of
AIRSOPURE's right to demand exact compliance with any of the terms of this
Agreement by the transferee.
XIII. CONFIDENTIAL INFORMATION
13.01 FRANCHISEE shall not, during the term of this Agreement or
thereafter, communicate, divulge, or use for the benefit of any other person or
entity any confidential information, knowledge, or know-how concerning
AIRSOPURE's system, the Products or the operation of the Franchised Business,
including without limitation the Operations Manual. FRANCHISEE shall divulge
such confidential information only to such of FRANCHISEE's employees or agents
as must have access to it in order to operate the Franchised Business. Any and
all information, trade secrets, knowledge, know-how, or other data concerning
AIRSOPURE's system, the Products or which AIRSOPURE designates as confidential
shall be deemed confidential for purposes of this Agreement, except information
which FRANCHISEE can demonstrate came to FRANCHISEE's attention prior to
disclosure thereof by AIRSOPURE, or which, at or after the time of disclosure by
AIRSOPURE to FRANCHISEE, had become or later becomes a part of the public
domain, through publication or communication by others. FRANCHISEE agrees to use
such proprietary information of AIRSOPURE only for operation of the Franchise
Business.
13.02. FRANCHISEE acknowledges that the provisions of this Section XIII are
and have been a primary inducement to AIRSOPURE to enter into this Agreement,
and that any failure to comply with the requirements of Section 13.01 will cause
AIRSOPURE irreparable injury without an adequate remedy at law; and FRANCHISEE
agrees to pay all court costs and reasonable attorneys' fees incurred by
AIRSOPURE in obtaining specific performance of, or an injunction against any
violation of, the requirements of Section 13.01.
XIV. DEFAULT AND TERMINATION
14.01. AIRSOPURE may, at its option, terminate this Agreement and all
rights granted hereunder, without affording FRANCHISEE any opportunity to cure
the defaults, effective immediately upon receipt of notice by FRANCHISEE, upon
the occurrence of any of the following:
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A. FRANCHISEE shall become insolvent or makes a general assignment for the
benefit of creditors; or if a petition in bankruptcy is filed by FRANCHISEE or
such a petition is filed against and consented to by FRANCHISEE; or if
FRANCHISEE is adjudicated a bankrupt; or if FRANCHISEE is unable to pay
commercial debts as they become due.
B. FRANCHISEE (or a principal shareholder if FRANCHISEE is a corporation)
is convicted of a felony or any other crime or offense that is reasonably
likely, in the sole opinion of AIRSOPURE, to adversely affect the goodwill or
reputation of AIRSOPURE or the Licensed Marks.
C. A judgment or consent decree is entered against FRANCHISEE (or a
principal shareholder if FRANCHISEE is a corporation) in a case involving
allegations of fraud, racketeering, unfair or deceptive trade practices or
similar allegations which, in AIRSOPURE's judgment, are likely to adversely
affect AIRSOPURE, its Products, the Licensed Marks or the goodwill associated
therewith.
D. FRANCHISEE or any partner or shareholder in FRANCHISEE transfers any
rights or obligations under this Agreement or any interest in FRANCHISEE or in
the Franchised Business to any third party without AIRSOPURE's prior written
consent.
E. FRANCHISEE intentionally discloses the contents of the Operations Manual
or other trade secrets or confidential information provided to FRANCHISEE by
AIRSOPURE to any unauthorized person or fails to exercise reasonable care to
prevent such disclosure.
F. FRANCHISEE maintains false books or records of the Franchised Business
or knowingly makes any material false statements or omissions to AIRSOPURE in
connection with FRANCHISEE's application for the franchise granted herein or in
connection with any reports submitted to AIRSOPURE, including without limitation
the understatement of gross sales by more than two percent.
G. FRANCHISEE fails to commence business within sixty days following the
execution of this Agreement.
H. FRANCHISEE (or its manager if FRANCHISEE is a corporation) fails to
attend any scheduled training program which AIRSOPURE has indicated is
mandatory.
I. FRANCHISEE operates the Franchised Business in such a manner which
causes a threat or danger to public health or safety.
J. FRANCHISEE receives three or more notices of default of this Agreement
from AIRSOPURE for violations under Section 14.02 hereof.
14.02. Except for violations of this Agreement listed in Section 13.01
above, or violations specifically provided for elsewhere in this Agreement,
FRANCHISEE shall have thirty (30) days from receipt from AIRSOPURE of a written
Notice of Termination (citing the reason(s) therefor) within which to remedy any
default listed in this Section 13.02, or any other violation of this Agreement.
A. FRANCHISEE fails to pay promptly any monies owing to AIRSOPURE or its
subsidiaries or affiliates when due, or to submit the financial information or
reports required by AIRSOPURE under this Agreement.
B. FRANCHISEE fails to meet or comply with any standards, specifications or
procedures prescribed by AIRSOPURE in this Agreement, the Operations Manual or
otherwise specified in writing from time to time by AIRSOPURE.
C. FRANCHISEE is convicted, pleads guilty or enters into a consent
agreement for violation of any federal, state or local law, ordinance, rule or
regulation that is reasonably likely, in the sole opinion of AIRSOPURE, to
materially and unfavorably affect the Franchised Business or AIRSOPURE, the
Licensed Marks or the goodwill associated therewith.
D. FRANCHISEE misuses or makes any unauthorized use of the Proprietary
Marks or otherwise impairs the goodwill associated therewith or AIRSOPURE's
rights therein.
E. FRANCHISEE abandons the Franchised Business or fails to operate the
Franchised Business during normal business hours without the consent in writing
of AIRSOPURE.
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F. FRANCHISEE fails to submit advertising or promotional materials to
AIRSOPURE for approval in writing prior to use.
14.03. No right or remedy of AIRSOPURE conferred herein shall be exclusive
of any other right or remedy provided herein, at law or in equity, unless
specifically provided otherwise in this Agreement or any amendment hereto.
14.04. In the event this Agreement is terminated by AIRSOPURE for violation
of this Agreement by FRANCHISEE, AIRSOPURE shall have the right, at its option,
to purchase FRANCHISEE's interest in the tangible assets of the Franchised
Business at their fair market value.
XV. OBLIGATIONS UPON TERMINATION
15.01. Upon termination or expiration of this Agreement, this Agreement and
all rights granted hereunder to FRANCHISEE shall immediately terminate, and:
A. FRANCHISEE shall immediately cease to operate the Franchised Business
and shall not thereafter, directly or indirectly, represent to the public or
hold itself out as a present or former franchisee of AIRSOPURE.
B. FRANCHISEE shall immediately and permanently cease to use, by
advertising or in any other manner whatsoever, the Licensed Marks of AIRSOPURE,
any other identifying characteristics or trade dress of the system, and all
confidential methods, procedures and techniques associated with the Franchised
Business.
C. FRANCHISEE shall take such action as may be necessary to cancel any
assumed name or equivalent registrations or listings in telephone or other
directories which contain the names or Licensed Marks of AIRSOPURE, and
FRANCHISEE shall furnish AIRSOPURE with evidence satisfactory to AIRSOPURE of
compliance with this obligation within thirty days after termination or
expiration of this Agreement.
D. FRANCHISEE shall promptly pay all sums owing to AIRSOPURE and its
subsidiaries and affiliates, including all damages, costs and expenses,
including reasonable attorneys' fees, incurred by AIRSOPURE as a result of the
default.
E. FRANCHISEE shall pay to AIRSOPURE all damages, costs and expenses,
including reasonable attorneys' fees, incurred by AIRSOPURE subsequent to the
termination or expiration of the Franchise herein granted in obtaining
injunctive or other relief for the enforcement of any provisions of this
Agreement.
F. FRANCHISEE shall immediately turn over to AIRSOPURE the Operations
Manual, records, files, instructions, software, correspondence, and all other
materials provided by AIRSOPURE related to the operation of the Franchised
Business, and all copies thereof (all of which are acknowledged to be
AIRSOPURE's property), and shall retain no copy or record of any of the
foregoing, except only FRANCHISEE's copy of this Agreement and any
correspondence between the parties, and any other documents which FRANCHISEE
reasonably needs for compliance with any applicable provision of law.
G. Upon request by AIRSOPURE, FRANCHISEE will execute a document assigning
FRANCHISEE's telephone numbers at the Franchised Business to AIRSOPURE.
H. AIRSOPURE shall have the right, but not the duty, to be exercised by
notice of intent to do so within thirty days after termination or expiration, to
purchase any or all signs, advertising materials, supplies and inventory and any
other items bearing AIRSOPURE's Licensed Marks, at FRANCHISEE's cost or at fair
market value, whichever is less. If the parties cannot agree on the fair market
value of such items, the parties will select and share the expense of an
independent appraiser to determine fair market value. With respect to any
purchase by AIRSOPURE as provided herein, AIRSOPURE shall have the right to set
off against the purchase price all amounts due from FRANCHISEE under this
Agreement.
XVI. COVENANTS
16.01. FRANCHISEE covenants and agrees (or if FRANCHISEE is a corporation
FRANCHISEE's controlling shareholder agrees) to devote his full time and best
efforts to manage and operate the Franchised Business.
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16.02. FRANCHISEE acknowledges that, pursuant to this Agreement, FRANCHISEE
will receive valuable specialized training and confidential and proprietary
information of AIRSOPURE, including, without limitation, information regarding
the operational, sales, promotional, and marketing methods and techniques of
AIRSOPURE and its system. FRANCHISEE covenants and agrees that during the term
of this Agreement, and subject to the post-termination provisions contained
herein, FRANCHISEE shall not, except as otherwise approved in writing by
AIRSOPURE, either directly or indirectly:
A. Divert or attempt to divert any business or customer of the Franchised
Business to any competitor, or competing business, by direct or indirect
inducement or otherwise, or do or perform, directly or indirectly, any other act
injurious or prejudicial to AIRSOPURE or the goodwill associated with the
Licensed Marks and Products.
B. Employ or seek to employ any person who is at that time employed by
AIRSOPURE or by another AIRSOPURE franchisee or induce such person to leave his
or her employment.
C. Own, maintain, engage in, be employed by, advise, consult, assist,
invest in or have any interest whatsoever in any business or entity which
competes with or offers products or services which are the same or similar to
those of AIRSOPURE or the Franchised Business.
16.03. FRANCHISEE covenants and agrees that FRANCHISEE (or any shareholder
if FRANCHISEE is a corporation) shall not, for a period of two years following
termination of this Agreement for any reason, either directly or indirectly own,
maintain, engage in, be employed by, advise, consult, assist, invest in or have
any interest whatsoever in any business or entity which competes with or offers
products or services which are the same or similar to those of AIRSOPURE or the
Franchised Business within a radius of twenty-five miles of the Designated
Territory. In the event a court of competent jurisdiction should hold this
covenant to be unreasonable or overly broad, the parties agree to reduce the
scope of such covenant to the maximum restriction permitted by law, and
FRANCHISEE agrees to be bound by such less restrictive terms of this covenant.
If requested by AIRSOPURE, FRANCHISEE agrees to obtain and provide to AIRSOPURE
executed covenants containing terms equivalent to those contained herein from
any employee of FRANCHISEE who has received training from AIRSOPURE, and, if
FRANCHISEE is a corporation, from any director or shareholder of FRANCHISEE.
16.04. AIRSOPURE covenants and agrees that the restrictions set forth above
in Paragraphs 15.02.C and 15.03 shall not apply to ownership by FRANCHISEE of
less than a five percent beneficial interest in the outstanding equity
securities of any publicly traded corporation, provided that FRANCHISEE is not
an employee, consultant or director of such corporation.
16.05. FRANCHISEE covenants and agrees that its violation of any covenant
contained herein would result in serious, immediate and irreparable injury to
AIRSOPURE for which no adequate remedy at law will be available, and FRANCHISEE
consents, in addition to other remedies which may be available to AIRSOPURE, to
the entry without opposition of an injunction prohibiting any conduct by
FRANCHISEE in violation of any covenant set forth herein.
XVII. INDEMNIFICATION
17.01. FRANCHISEE agrees to defend, indemnify and hold AIRSOPURE and its
affiliates, directors, officers, employees and agents harmless from all claims,
losses, lawsuits and expenses arising from or relating to the Franchised
Business and FRANCHISEE's operation thereof, except for: (i) any claims of
infringement from third parties due to FRANCHISEE's use of the Licensed Marks,
provided that FRANCHISEE has used the said Licensed Marks as authorized by
AIRSOPURE; and (ii) claims alleging that Products sold or leased by FRANCHISEE
are defective.
17.02. AIRSOPURE agrees to defend, indemnify and hold FRANCHISEE harmless
from all claims, losses, lawsuits and expenses arising from or relating to: (i)
any claims of infringement from third parties due to FRANCHISEE's use of the
Licensed Marks, provided that FRANCHISEE has used the said Licensed Marks as
authorized by AIRSOPURE; and (ii) claims alleging that Products sold or leased
by FRANCHISEE are defective.
28.1 30
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XVIII. GENERAL PROVISIONS
18.01. No failure of a party to exercise any power reserved to it by this
Agreement or to insist upon strict compliance by the other party with any
obligation or condition hereunder shall constitute a waiver of such party's
rights unless such waiver is in writing. Any waiver by either party shall not
constitute a waiver thereafter to demand exact compliance with any of the terms
herein. Waiver by a party of any particular default by the other party shall not
affect or impair such party's rights with respect to any subsequent default of
the same, similar or different nature; nor shall any delay, forbearance or
omission of a party to exercise any power or right arising out of any breach or
default by the other party of any of the terms, provisions, or covenants
thereof, affect or impair such party's right to exercise the same.
18.02. Delays in the performance of any duties hereunder which are not the
fault of and are beyond the ability of the party to control, including without
limitation fires, floods, natural disasters, acts of God, labor disputes, riots
or other similar events, shall not constitute a default in the party's
performance of this Agreement, and the parties agree to extend the time of
performance for a reasonable period of time to allow for such delays.
18.03. The relationship between the parties is that of independent
contractors. No partnership, joint venture, employment or relationship of
principal and agent is intended, and FRANCHISEE may not commit or bind AIRSOPURE
to any obligation whatsoever.
18.04. Any and all notices required or permitted under this Agreement shall
be in writing and shall be delivered by any means which will provide evidence of
the date received, to the respective parties at the following addresses unless
and until a different address has been designated by written notice to the other
party:
Notices to AIRSOPURE: Airsopure, Inc.
15400 Knoll Trail, Suite 106
Dallas, Texas 75248
Attn: John Potter, President
Notices to FRANCHISEE: ________________________________
Any notice shall be deemed to have been given at the date and time it is
received.
18.05. This Agreement and the documents referred to herein constitute the
entire Agreement between AIRSOPURE and FRANCHISEE concerning the subject matter
hereof, and supersede all prior agreements, oral or written. No amendment,
change or variance from this Agreement shall be binding on either party unless
executed by both parties in writing.
18.06. Except as expressly provided to the contrary herein, each provision
of this Agreement shall be considered severable; and if, for any reason, any
provision herein is determined to be invalid under any law or by a court having
valid jurisdiction, such shall not impair the operation of, or have any other
effect upon, such other provisions of this Agreement, and the latter shall
continue to be given full force and effect and bind the parties hereto, and the
invalid provision shall be deemed not to be a part of this Agreement.
18.07. This Agreement takes effect upon its acceptance and execution by
AIRSOPURE in the State of Texas, and shall be interpreted and construed under
the laws of the State of Texas.
18.08. The parties agree that any action brought by either party against
the other in any court, whether federal or state, shall be brought within the
State of Texas in the judicial district in which AIRSOPURE has its principal
place of business and do hereby waive all questions of personal jurisdiction or
venue for the purpose of carrying out this provision.
18.09. If either party is required to resort to legal process to enforce
any provision of this Agreement, the prevailing party will recover all costs,
including reasonable attorneys fees, incurred in such legal proceeding.
28.1 31
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18.10. FRANCHISEE represents to AIRSOPURE that FRANCHISEE has conducted an
independent investigation of the business franchised hereunder and recognizes
that the business venture contemplated by this Agreement involves business
risks, and that its success will be largely dependent upon the ability of
FRANCHISEE as an independent businessman. AIRSOPURE expressly disclaims the
making of, and FRANCHISEE acknowledges that FRANCHISEE has not received, any
representation or guarantee, express or implied, as to the potential volume,
profits or success of the business venture contemplated by this Agreement.
18.11. FRANCHISEE acknowledges that FRANCHISEE received a completed copy of
this Agreement, the attachments hereto, if any, and agreements relating thereto,
if any, at least five business days prior to the date on which this Agreement
was executed. FRANCHISEE further acknowledges that FRANCHISEE has received the
disclosure documents required by the Trade Regulation Rule of the Federal Trade
Commission entitled Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures, at least ten business days prior
to the date on which this Agreement was executed.
18.12. This Agreement contains various headings, but it is agreed that such
headings are for convenience only and shall not affect the meaning of the
provisions of this Agreement.
18.13. FRANCHISEE acknowledges that he has read and understood this
Agreement, the attachments hereto, if any, and agreements relating thereto, if
any, and that AIRSOPURE has accorded FRANCHISEE ample time and opportunity to
consult with advisors of FRANCHISEE's own choosing about the potential benefits
and risks of entering into this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and
delivered this Agreement on the day and year first above written.
AIRSOPURE, INC.
By:______________________________
John Potter, President
FRANCHISEE
By:______________________________
Title:______________________________
28.1 32
<PAGE>
EXHIBIT "B"
PERSONAL GUARANTEE
For value received, and in consideration of the execution by Airsopure,
Inc. ("Airsopure") of a Franchise Agreement with
_________________________________("Franchisee"), the undersigned
__________________________ ("Guarantor") hereby unconditionally guarantees to
Airsopure all indebtedness, obligations and liabilities, direct or indirect,
matured or unmatured, primary or secondary, certain or contingent, of Franchisee
to Airsopure, now or hereafter owing or incurred. This Guarantee is an absolute,
unconditional, unlimited and continuing guarantee of the full and punctual
payment by Franchisee of the foregoing indebtedness, obligations and liabilities
and not of their collectibility only. Upon any default by Franchisee in such
full and punctual payment, the liabilities and obligations of the Guarantor
hereunder shall, at Airsopure's option, become forthwith due and payable without
demand or notice of any nature, all of which are expressly waived by the
Guarantor.
Airsopure may deal with Franchisee in such manner as Airsopure in its
sole discretion deems fit, and Guarantor gives to Airsopure full authority, in
its sole discretion, to do any or all of the following things: a) extend credit,
make loans and afford other financial accommodations to Franchisee at such
times, in such amounts and on such terms as Airsopure may approve; b) vary the
terms and grant extensions or renewals of any present or future indebtedness of
Franchisee to Airsopure; c) grant time, waivers and other indulgences in respect
thereto; d) vary, exchange, release or discharge, wholly or partially, or delay
in or abstain from perfecting and enforcing any security or guaranty or other
means of obtaining payment; e) accept partial payments from Franchisee; f)
release or discharge, wholly or partially, any endorser or guarantor; g)
compromise or make any settlement or other arrangement with Franchisee.
Guarantor waives notice of acceptance hereof or of any action taken or
omitted by Airsopure in reliance hereon and any requirement that Airsopure be
diligent or prompt in making demands hereunder, giving notice of any default by
Franchisee or asserting any other right hereunder.
No provision of this Guaranty can be changed, waived, discharged or
terminated except by an instrument in writing signed by Airsopure and Guarantor,
and no such waiver shall extend to, affect or impair any other right of
Airsopure hereunder.
This Unlimited Guarantee shall inure to the benefit of Airsopure and
its successors and assigns, and shall be binding on the Guarantor and the
Guarantor's successors, heirs and assigns.
EXECUTED on this ____ day of _______________, 19____.
------------------------------ ------------------------------
Guarantor Witness
28.1 33
<PAGE>
FORM OF ESCROW AND PLEDGE AGREEMENT
THIS ESCROW AND PLEDGE AGREEMENT (as amended, modified or supplemented from
time to time, this "Agreement") is executed by and among AIRTECH International
Corporation ("AIRTECH"), a Texas corporation, Interactive Technologies Corp.,
Inc., a Wyoming corporation ("ITC"), and Interwest Transfer Company, Inc.
("Escrow Agent") for the benefit of the sellers (the "Selling Shareholders") of
certain shares (the "Tendered Shares") of the $0.0001 par value common stock
(the "AIRTECH Common Stock") of AIRTECH.
RECITALS:
A. In connection with the execution and delivery of this Agreement, ITC,
AIRTECH and the Selling Shareholders are entering into a Stock Purchase
Agreement, dated as of May 8, 1997 and a Restated and Amended Stock
Purchase Agreement, dated as of August 1, 1997 (as amended or modified
from time to time, the "Purchase Agreement"), pursuant to which, among
other things, ITC shall sell, issue and deliver to the Selling
Shareholders, and the Selling Shareholders shall purchase, accept and
acquire from ITC, among other securities, their pro rata share of ITC's
Senior Convertible Preferred 10% Debentures in the aggregate principal
amount of $9,000,000 (the "Debentures").
B. In connection with such tender offer, the Selling Shareholders will
tender the Tendered Shares to Escrow Agent to be held in trust pending
the closing of the proposed transaction, and thereafter pending
satisfaction in full of ITC's obligations under the Debentures.
C. To secure payment of the Debentures, ITC is, among other things,
pledging the Tendered Shares to the respective Selling Shareholder
tendering the same (each, together with its successors and assigns, the
"Secured Party") and granting to the Secured Party a security interest
in his Tendered Shares.
D. The execution and delivery of this Agreement is a condition precedent
to the proposed purchase of the Debentures and ITC's other Securities
by the Selling Shareholders.
AGREEMENT
Each of the parties agrees as follows:
SECTION 1. DELIVERY OF TENDERED SHARES.
(a) The certificates representing the Tendered Shares (the "Certificates")
shall be delivered to Escrow Agent by the Selling Shareholders at such time as
they deliver their receipt and review of an effective Registration Statement
(the "Prospectus") with respect to, and their acceptance of the offer of ITC to
purchase the AIRTECH Common Stock upon the terms and conditions set forth in the
Prospectus.
(b) The Certificates, when delivered by the Selling Shareholders with their
acceptances, shall be in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to Escrow Agent and ITC.
(c) If less than 81% of the issued and outstanding shares (13,992,800
shares) of the AIRTECH Common Stock are tendered with an acceptance of ITC's
offer prior to the passage of 20 days (the "Acceptance Period") following
delivery of the Prospectus (as defined in the Prospectus), then, unless Escrow
Agent shall have received written notice from both ITC and AIRTECH extending the
Acceptance Period, Escrow Agent shall return the Certificates, together with all
related endorsements, to the respective Selling Shareholders tendering the same.
(d) If 81% or more of the issued and outstanding shares (_________ shares)
of the AIRTECH Common Stock are tendered with an acceptance of ITC's offer prior
to the passage of the Acceptance Period or any extension thereof, then the
Certificates shall be held by Escrow Agent for the benefit of each Secured
Party.
28.2 1
<PAGE>
SECTION 2. ESCROW AGENT.
(a) It is understood and agreed that the duties of Escrow Agent are
entirely ministerial, being limited to receiving, holding, and performing any
actions regarding Pledged Share Collateral in accordance with this Agreement.
(b) Escrow Agent is not a party to, and is not bound by, any other
agreement with respect to AIRTECH, ITC and the Selling Shareholders.
(c) Escrow Agent acts hereunder as a "depository" only and is not
responsible or liable, in any manner whatsoever, for the sufficiency,
correctness, genuineness, or validity of any instrument deposited with it, or
with the respect to the form or execution of the same, or the identity,
authority, or rights of any person executing or depositing the same.
(d) Escrow Agent shall not be required to take or be bound by any notice of
any default of by any person, or to take any action with respect to such default
involving any expense or liability, unless notice, in writing, is given to an
officer of Escrow Agent of such default by a party entitled to give said notice
and unless it is indemnified in the matter satisfactory to it against any
expense or liability arising therefrom.
(e) Escrow Agent shall not be liable for acting upon any notice, request,
waiver. consent, receipt, or other paper or document believed by Escrow Agent to
be genuine and to have been signed by the proper party or parties.
(f) Escrow Agent shall not be liable for any error of judgement for or any
act done or step taken or admitted by it, in good faith, or for any mistake of
fact or law, or for anything that t may do or refrain from doing in connection
therewith, except its own willful misconduct.
(g) Escrow Agent may consult with legal counsel in the event of any dispute
or question as to construction of the foregoing instructions or Escrow Agent's
duties hereunder, and Escrow Agent shall no incur no liability and shall be
fully protected in acting in accordance with the opinion and instructions of
such counsel.
(h) In the event of any disagreement, default or dispute between AIRTECH,
ITC and the Selling Shareholders, or any one of them, which might result in
adverse claims and/or demands being made in connection with the Pledged Share
Collateral involved herein or affected hereby, Escrow Agent's sole duties shall
be to act in good faith and a commercially reasonable manner as to all parties.
Specifically, Escrow Agent may file an interpleader action in the District
Courts of the State of Utah in which it indicates that there is a dispute
between the parties, it tenders the pledged collateral to the court, and asks
the court to determine the proper ownership or disposition of the Pledged Share
Collateral. Upon filing of said action and tendering of the Pledged Share
Collateral, all duties, responsibilities, and liabilities of Escrow Agent under
this Agreement shall be considered fully performed and cease to exist.
(i) Until such time as Escrow Agent has received an advance of its
estimated costs and attorney's fees to file any aforementioned interpleader
action from AIRTECH, ITC, Selling Shareholders, or any one or more thereof,
Escrow Agent, at its option, shall be entitled to refuse to comply with any
claim or demand so long as such disagreement shall continue and, in so refusing,
Escrow Agent shall not be or become liable to AIRTECH, ITC, Selling
Shareholders, or any one or more thereof for the failure or refusal to comply
with such conflicting or adverse demands ad Escrow Agent shall be entitled to
continue to so refrain and refuse to so act until:
(A) The rights of the adverse claimants have been fully adjudicated
in a court assuming and having jurisdiction of the parties and the
pledged security affected hereby. and/or
(B) All differences have adjusted by agreement and Escrow Agent having
been notified thereof in writing signed by all of the parties
interested.
28.2 2
<PAGE>
SECTION 3. GRANT OF SECURITY
(a) ITC hereby pledges to each Secured Party, and hereby grants to each
Secured Party a security interest in, all of ITC's right, title and interest in
and to the following (the "Pledged Share Collateral"):
(i) The Tendered Shares tendered by such Secured Party, as
contemplated by Section 1 hereof, and all rights and powers of a
shareholder arising in connection therewith, together with certificates
representing all of such shares or other interests, and any interest of
such ITC in the entries on the books of any financial intermediary
pertaining to the Tendered Shares and all dividends, cash, options,
warrants, rights, instruments and other property, or proceeds from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any and all of the Tendered Shares;
(ii) all books, records, ledger cards, files, correspondence,
computer programs, tapes, disks and related data processing software that
at any time evidence or contain information relating to any of the
Pledged Share Collateral or are otherwise necessary or helpful in the
collection thereof or realization thereupon; and
(iii) all proceeds, products, rents and profits of or from any and
all of the foregoing Pledged Share Collateral and, to the extent not
otherwise included, all payments under insurance (whether or not Secured
Party is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss with respect to any of the foregoing Pledged
Share Collateral.
For purposes of this Agreement, the term "Proceeds" shall have the
meaning assigned that term under the Uniform Commercial Code of the State
of Texas ("Code") or under other relevant law and, in any event, shall
include, but not be limited to, any and all (i) proceeds of any
insurance, indemnity, warranty or guaranty payable to ITC from time to
time with respect to any of the Pledged Share Collateral, (ii) payments
(in any form whatsoever) made or due and payable to ITC from time to time
in connection with any requisition, confiscation, condemnation, seizure,
forfeiture or other disposition of all or any part of the Pledged Share
Collateral, whether voluntary or involuntary, and (iii) other amounts
from time to time paid or payable under or in connection with any of the
Pledged Share Collateral.
(b) At the expense of ITC, ITC shall promptly execute and deliver all
further instruments and documents, and take all further action, that the Secured
Party in its sole discretion may determine to be reasonably necessary or
convenient from time to time in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any
Pledged Share Collateral. Without limiting the generality of the foregoing, at
the request of Secured Party, ITC shall:
(i) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as Secured Party may request, in order to
perfect and preserve the security interests granted or purported to be
granted hereby; and
(ii) appear in and defend any action or proceeding that may affect
ITC's title to or Secured Party's security interest in all or any part of
the Pledged Share Collateral.
(c) ITC hereby authorizes Secured Party to file one or more financing or
continuation statements, and amendments thereto, relative to all or any part of
the Pledged Share Collateral without the signature of ITC. ITC agrees that a
carbon, photographic or other reproduction of this Agreement or of a financing
statement signed by ITC shall be sufficient as a financing statement and may be
filed as a financing statement in any and all jurisdictions.
(d) ITC shall furnish to Secured Party from time to time statements and
schedules further identifying and describing the Pledged Share Collateral and
such other reports in connection with the Pledged Share Collateral as Secured
Party may reasonably request, all in reasonable detail.
28.2 3
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SECTION 4. SECURITY FOR OBLIGATIONS.
This Agreement secures, and the Pledged Share Collateral is collateral
security for, the prompt payment or performance in full when due (including,
without limitation, the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. Section 362(a)), of all obligations of ITC arising out of or in
connection with the Debentures.
SECTION 5. NO ASSUMPTION.
Notwithstanding any of the foregoing, this Agreement shall not in any way
be deemed to obligate Secured Party, any purchaser at a foreclosure sale under
this Agreement or any other person to assume any of ITC's obligations or other
liabilities under the Debentures or the Purchase Agreement or under any and all
other agreements now existing or hereafter drafted or executed in connection
with the Debentures or the Purchase Agreement (collectively, the "ITC
Obligations") unless Secured Party, such purchaser or such other person
otherwise expressly agrees to assume any or all of said ITC Obligations in
writing. In the event of foreclosure by Secured Party, ITC shall remain bound
and obligated to perform the ITC Obligations and neither Secured Party nor any
other person shall be deemed to have assumed any of such ITC Obligations except
as provided in the preceding sentence.
SECTION 6. VOTING OF TENDERED SHARES.
Unless an Event of Default (as defined in Section 12) has occurred and is
continuing:
(a) ITC shall be entitled to exercise any and all voting and other
consensual rights pertaining to all or any part of the Tendered Shares
for any purpose not inconsistent with the terms of this Agreement; and
(b) The Secured Party shall execute and deliver, or cause to be
executed and delivered, to ITC all proxies and other instruments
reasonably requested by ITC for the purpose of enabling ITC to exercise
the voting and other rights that it is entitled to exercise pursuant to
this Section 5.
SECTION 7. REPRESENTATIONS AND WARRANTIES.
ITC represents and warrants that, upon delivery of the Tendered Shares
pursuant to Section 1(d) hereof, and upon completion of the transactions
contemplated by the Purchase Agreement:
(a) ITC is the legal, record and beneficial owner of the Tendered
Shares and, with respect to Pledged Share Collateral to be acquired, will
be the legal, record and beneficial owner of the Pledged Share
Collateral, in each case free and clear of any lien, except for the liens
created by this Agreement. No effective financing statement or other
instrument similar in effect covering all or any part of the Pledged
Share Collateral is on file in any recording office, except such as may
have been filed in favor of the Secured Party relating to this Agreement.
(b) This Agreement and the delivery of the Certificates under
Section 4 create a valid and perfected first priority lien on and
security interest in the Pledged Share Collateral, enforceable against
all third parties and securing the payment of the ITC Obligations, and
all filings and other actions necessary or desirable to perfect and
protect such liens and security interests have been duly made or taken.
(c) All of the Certificates, instruments and other documents
constituting, evidencing or representing Pledged Share Collateral have
been duly delivered to Escrow Agent.
(d) The Tendered Shares are, to the knowledge of ITC, duly
authorized, validly issued, fully paid and non assessable and are owned
beneficially and of record by ITC. AIRTECH does not have outstanding
shares of its capital stock or other securities convertible or
exchangeable into or exercisable for any shares of its capital stock,
rights to subscribe for or to purchase, options for the purchase of,
calls, commitments or claims of any character relating to, any shares of
its capital stock or any securities convertible into or exchangeable or
exercisable for any of the foregoing.
28.2 4
<PAGE>
(e) There is no agreement or arrangement restricting the voting or
transfer of the Tendered Shares or the transfer of the other Pledged
Share Collateral except as provided in this Agreement. There is no
agreement or arrangements providing for the issuance of any shares of
capital stock or other securities of AIRTECH.
(f) There are no legal, contractual or other restrictions on the
payment of dividends on any shares of the capital stock or securities of
AIRTECH, except for restrictions imposed by statutory restrictions of
general application.
(g) No person is subject to any obligation or has any right,
contingent or otherwise, to purchase, repurchase, redeem or otherwise
acquire or retire any of the Tendered Shares.
(h) There is no action against ITC that involves or affects or may
involve or affect any of the Pledged Share Collateral.
(i) The chief place of business, the chief executive office and
the office where ITC keeps its records regarding the Pledged Share
Collateral is, and has been for the four month period preceding the date
hereof, located at the address specified therefor on the signature page
hereof. ITC has not in the past done, and does not now do, business under
any other name (including any trade name or fictitious business name).
(j) All information heretofore, herein or hereafter supplied to
Secured Party by or on behalf of ITC with respect to the Pledged Share
Collateral is accurate and complete in all material respects.
SECTION 8. COVENANTS OF ITC.
(a) AFFIRMATIVE COVENANTS. So long as any of the Debentures shall remain
unpaid or unperformed, ITC shall do the following at its own expense:
(i) Cause Escrow Agent to mark conspicuously each certificate
evidencing or representing any of the Pledged Share Collateral, and at
the request of the Secured Party, each of its records pertaining to the
Pledged Share Collateral with a legend, in form and substance
satisfactory to the Secured Party, indicating that the note, certificate,
instrument or other document is subject to the security interests granted
by this Agreement;
(ii) deliver to Escrow Agent promptly upon receipt all notes,
certificates, instruments and other documents constituting, evidencing or
representing any of the Pledged Share Collateral duly endorsed or
accompanied by instruments of transfer or assignment duly executed in
blank, in each case with signatures guaranteed and otherwise in form and
substance satisfactory to the Secured Party;
(iii) execute and file such financing or continuation statements,
and such amendments to those statements, and such other instruments or
notices, as may be necessary or desirable, or as the Secured Party may
request, in order to perfect and preserve the pledges, liens and security
interests granted or purported to be granted by this Agreement;
(iv) promptly notify the Secured Party and Escrow Agent of any
lien or claim made or asserted against any of the Pledged Share
Collateral and take all steps necessary or in the judgment of the Secured
Party advisable to preserve rights against prior parties with respect to
the Pledged Share Collateral;
(v) furnish to the Secured Party and Escrow Agent from time to
time statements and schedules further identifying and describing the
Pledged Share Collateral and other reports in connection with the Pledged
Share Collateral requested by the Secured Party, all in reasonable
detail;
(vi) advise the Secured Party and Escrow Agent promptly, in
sufficient detail, of any substantial change in the Pledged Share
Collateral, and of the occurrence of any event that could materially and
adversely affect the value of the Pledged Share Collateral or the
validity or priority of the security interest of the Secured Party in the
Pledged Share Collateral;
28.2 5
<PAGE>
(vii) comply with all regulations of each governmental body and
all decisions, rulings, orders and awards of each arbitrator applicable
to the Pledged Share Collateral or any part of the Pledged Share
Collateral or to ITC;
(viii) promptly pay and discharge before they become delinquent,
all taxes assessed, levied or imposed upon or relating to, and all claims
against the Pledged Share Collateral or ITC if the failure to so pay
could adversely affect the value of the Pledged Share Collateral or the
validity or priority of the security interest of the Secured Party in the
Pledged Share Collateral except those contested in good faith and for
which adequate reserves are maintained;
(ix) permit representatives of the Secured Party and Escrow Agent,
at any time during the normal business hours to inspect and make
abstracts from ITC's records relating to the Pledged Share Collateral;
(x) perform and observe all of the terms and provisions of the
Pledged Share Collateral to be performed or observed by it, except as
otherwise provided by law and maintain the Pledged Share Collateral in
full force and effect;
(xi) subject to Section 11, collect all amounts due or to become
due to ITC under the Pledged Share Collateral and otherwise enforce its
rights under and in respect of the Pledged Share Collateral; and
(xii) furnish to the Secured Party promptly upon receipt copies of
all notices, requests and other documents received by ITC under or in
respect of the Pledged Share Collateral and from time to time (A) furnish
to the Secured Party and Escrow Agent the information and reports
regarding those obligations requested by the Secured Party and (B) at the
request of the Secured Party, make the demands and requests for
information or action that ITC is entitled to make under the Pledged
Share Collateral
(xiii) notify Secured Party and Escrow Agent of any change in
ITC's name, identity or organizational structure within 15 days of such
change;
(xiv) give Secured Party and Escrow Agent 30 days' prior written
notice of any change in ITC's chief place of business, chief executive
office or residence or the office where ITC keeps its records regarding
the Pledged Share Collateral; and
(b) NEGATIVE COVENANTS. So long as any of the Debentures shall remain
unpaid or unperformed, ITC shall not do any of the following without the prior
written approval of the Secured Party:
(i) transfer any of the Pledged Share Collateral, whether by
operation of law or otherwise;
(ii) create, incur, assume or suffer to exist any lien on or in
respect of any of the Pledged Share Collateral except pursuant to this
Agreement and the Debenture;
(iii) use, store or keep any Pledged Share Collateral or records
relating to Pledged Share Collateral in any location other than those
expressly permitted by this Agreement; or
(iv) take any action in connection with any Pledged Share
Collateral that could materially and adversely affect the value of the
Pledged Share Collateral or the validity or priority of the security
interest of the Secured Party in the Pledged Share Collateral.
SECTION 10. PAYMENTS HELD IN TRUST.
All payments, funds, instruments and other items received by ITC under or
in respect of any Pledged Share Collateral shall be received in trust for the
Secured Party, segregated from other funds of ITC and shall be promptly
delivered to the Secured Party in the form received, together with all necessary
endorsements.
28.2 6
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SECTION 11. GRANT OF POWER OF AUTHORITY.
ITC, and its successors and assigns, hereby irrevocably constitutes and
appoints Secured Party as its true and beneficial attorney, in its name, place
and stead of ITC, with full power of substitution, after the occurrence and
during the continuation of an Event of Default, to take any action and to make,
execute, convert to, swear to, acknowledge, record and file any financing
statements, certificates, instruments or other documents of any character that
Secured Party may deem necessary or desirable fully to carry out the provisions
of this Agreement, including, without limitation:
(i) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Pledged Share Collateral;
(ii) to receive, endorse and collect all instruments made payable
to ITC representing any payment of profits, dividends or any other
distribution in respect of any of the Pledged Share Collateral;
(iii) to file any claims or take any action or institute any
proceedings that Secured Party may deem reasonably necessary or desirable
for the collection of any of the Pledged Share Collateral or otherwise to
enforce the rights of Secured Party with respect to any of the Pledged
Share Collateral; and
(iv) to do, at Secured Party's option and ITC's expense, at any
time or from time to time, all acts and things that Secured Party deems
reasonably necessary or convenient to protect, preserve or realize upon
the Pledged Share Collateral and Secured Party's security interest
therein in order to effect the intent of this Agreement, all as fully and
effectively as ITC might do.
SECTION 12. SECURED PARTY MAY PERFORM.
If ITC fails to perform any agreement contained herein, Secured Party may
itself perform, or cause performance of, such agreement, and the reasonable and
customary expenses of Secured Party incurred in connection therewith shall be
payable by ITC under Section 13.
SECTION 13. STANDARD OF CARE.
(a) The powers conferred on Secured Party hereunder are solely to protect
its interest in the Pledged Share Collateral and shall not impose any duty upon
it to exercise any such powers. Except for the exercise of reasonable care in
the custody of any Pledged Share Collateral in its possession and the accounting
for monies actually received by it hereunder, Secured Party shall have no duty
as to any Pledged Share Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Pledged Share Collateral. Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of any Pledged Share Collateral
in its possession if such Pledged Share Collateral is accorded treatment
substantially equal to that which Secured Party accords its own property of a
similar nature.
(b) Whenever this Agreement or any other agreement contemplated hereby
provides that Secured Party is permitted or required to make a decision in the
"discretion" or the "sole discretion" of Secured Party, Secured Party shall be
entitled to consider only such interests and factors as it desires and Secured
Party shall have no duty or obligation to give any consideration to any interest
of or factors affecting the Purchaser, ITC or any other person.
SECTION 14. REMEDIES.
(a) In the event of default in the payment of any of the Debentures (each
an "EVENT OF DEFAULT"), Secured Party in its sole discretion may exercise in
respect of the Pledged Share Collateral, in addition to all other rights and
remedies provided for herein. or otherwise available to it, all the rights and
remedies of a secured party on default under the Code as in effect in any
relevant jurisdiction (the "UCC") (whether or not the UCC applies to the
affected Pledged Share Collateral), and Secured Party may also in its sole
discretion, without notice except as specified below or as required by
applicable law sell the Pledged Share Collateral or any part thereof in one or
more parcels at public or private sale, at any exchange or broker's board or at
any of Secured Party's offices or elsewhere, for cash, on credit or for future
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delivery, at such time or times and at such price or prices and upon such other
terms as Secured Party may deem commercially reasonable, irrespective of the
impact of any such sales on the market price of the Pledged Share Collateral.
Secured Party or any other person may be the purchaser of any or all of the
Pledged Share Collateral at any such sale and Secured Party, for itself or on
behalf of any other person, shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of the
Pledged Share Collateral sold at any such public sale, to use and apply any of
the Debentures as a credit on account of the purchase price for any Pledged
Share Collateral payable by Secured Party at such sale. Each purchaser at any
such sale shall hold the property sold absolutely free from any claim or right
on the part of ITC, and ITC hereby waives (to the extent permitted by applicable
law) all rights of redemption, stay and appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted. ITC agrees that, to the extent notice of sale shall be
required by law, at least ten days' notice to ITC of the time and place of any
public sale or the time after which any private sale is to be made shall
constitute reasonable notification. Secured Party shall not be obligated to make
any sale of Pledged Share Collateral regardless of whether notice of sale has
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. ITC hereby waives any claims against Secured Party arising by reason
of the fact that the price at which any Pledged Share Collateral may have been
sold at such a private sale was less than the price which might have been
obtained at a public sale, even if Secured Party accepts the first offer
received and does not offer such Pledged Share Collateral to more than one
offeree.
(b) ITC recognizes that, by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (the "Securities Act"), and applicable state
securities laws, Secured Party may be compelled, with respect to any sale of all
or any part of the Pledged Share Collateral conducted without prior registration
or qualification of such Pledged Share Collateral under the Securities Act and
such state securities laws, to limit purchasers to those who will agree, among
other things, to acquire the Pledged Share Collateral for their own account, for
investment and not with a view to the distribution or resale thereof. ITC
acknowledges that any such private sales may be at prices and on terms less
favorable than those obtainable through a public sale without such restrictions
(including, without limitation, a public offering made pursuant to a
registration statement under the Securities Act) and, notwithstanding such
circumstances, ITC agrees that any such private sale shall be deemed to have
been made in a commercially reasonable manner and that Secured Party shall have
no obligation to engage in public sales and no obligation to delay the sale of
any Pledged Share Collateral for the period of time necessary to permit the
Purchaser to register it for a form of public sale requiring registration under
the Securities Act or under applicable state securities laws, even if the
Purchaser would, or should, agree to so register it.
SECTION 15. APPLICATION OF PROCEEDS.
Except as expressly provided elsewhere in this Agreement, all proceeds
received by Secured Party in respect of any sale of, collection from, or other
realization upon all or any part of the Pledged Share Collateral may, in the
discretion of Secured Party, be held by Secured Party as Pledged Share
Collateral for, or then, or at any other time thereafter, applied in full or in
part by Secured Party against, the Debentures in the following order of
priority:
(i) to pay or reimburse in full the costs and expenses of such
sale, collection or other realization, including reasonable compensation
to Secured Party and its agents and counsel, and all other costs,
expenses, obligations and other liabilities incurred or paid by Secured
Party in connection therewith, and all amounts for which Secured Party is
entitled to indemnification hereunder and all advances made by Secured
Party hereunder for the account of ITC, and to the payment of all costs
and expenses paid or incurred by Secured Party in connection with the
exercise of any right or remedy hereunder, all in accordance with Section
13;
(ii) to pay all other Obligations (for the ratable benefit of the
holders thereof) and thereafter in such order as Secured Party shall
elect; and(iii) to pay to or upon the order of ITC, or to whomsoever may
be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, the balance of the proceeds.
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SECTION 16. INDEMNITY AND EXPENSES.
(a) ITC shall indemnify Secured Party and its Related Persons
(collectively, the "Indemnified Persons") against all losses, costs, expenses
(including attorneys' fees and expenses), judgments, fines, amounts paid in
settlement and other liabilities incurred, suffered or paid by the Indemnified
Person (collectively, "Indemnified Expenses") in connection with any threatened,
pending or completed claim, action, suit, complaint, investigation, inquiry or
other proceeding, whether civil, criminal, administrative or investigative,
which is or was brought or threatened against any Indemnified Person by reason
of or in connection with actions taken or omitted to be taken by one or more
Indemnified Persons in the performance of the exercise of the rights and powers
or performance of the obligations of Secured Party under this Agreement or
otherwise in connection with this Agreement, except that ITC shall have no
liability under this Section 14 with respect to any Indemnified Expense to the
extent the liability results from the fraud, gross negligence, willful
misconduct or bad faith of the Indemnified Person, as determined by a final
judgment or final adjudication. For purposes of this Agreement, the term
"Related Persons" means, with respect to any person, any other person that
directly or indirectly controls or is controlled by or is under common control
with the specified person and the direct or indirect controlling persons,
principals, partners, trustees, stockholders, officers, directors, employees,
independent contractors and agents for or of any of the foregoing.
(b) To the fullest extent permitted by law ITC shall, from time to time,
advance Indemnified Expenses to an Indemnified Person prior to the final
disposition of the Action upon receipt by ITC of an undertaking by or on behalf
of the Indemnified Person to repay such amount if it shall be determined that
the Indemnified Person is not entitled to be indemnified as authorized in this
Section 14.
(c) ITC shall pay to Secured Party upon demand the amount of any and all
costs and expenses, including the reasonable fees and expenses of its counsel
and of any experts and agents, that Secured Party may incur in connection with
(i) the administration of this Agreement, (ii) the custody or preservation of,
or the sale of, collection from, or other realization upon, any of the Pledged
Share Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder, or (iv) the failure by ITC to perform or observe any of
the provisions hereof.
SECTION 17. CONTINUING SECURITY INTEREST; TRANSFER OF OBLIGATIONS.
(a) ITC agrees that its obligations hereunder are irrevocable, absolute,
independent and unconditional and shall not be affected by any circumstance
which constitutes a legal or equitable discharge of a guarantor or surety other
than indefeasible payment in full of ITC Obligations. This Agreement shall
create a continuing security interest in the Pledged Share Collateral and shall
(i) remain in full force and effect until the indefeasible payment in full of
ITC Obligations, (ii) be binding upon ITC, its successors and assigns, and (iii)
inure, together with the rights and remedies of Secured Party hereunder, to the
benefit of Secured Party and its successors, transferees and assigns.
(b) Upon the indefeasible payment in full of all Debentures, the payment in
full of all ITC Obligations, including without limitation all obligations of ITC
to secured party hereunder, the security interest granted hereby shall terminate
and all rights to the Pledged Share Collateral shall revert to ITC. Upon any
such termination, Secured Party shall, at ITC's expense, execute and deliver to
ITC such documents as ITC shall reasonably request to evidence such termination.
SECTION 18. NOTICES.
All notices, requests and other communications to any party or under this
Agreement shall be in writing. Communications may be made by telecopy or similar
writing. Each communication shall be given to the party at its address stated on
the signature pages of this Agreement or at any other address as the party may
specify for this purpose by notice to the other party Each communication shall
be effective (1) if given by telecopy, when the telecopy is transmitted to the
proper address and the receipt of the transmission is confirmed, (2) if given by
mail, 72 hours after the communication is deposited in the mails properly
addressed with first class postage prepaid or (3) if given by any other means,
when delivered to the proper address and a written acknowledgment of delivery is
received
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SECTION 19. NO WAIVERS; REMEDIES; SPECIFIC PERFORMANCE.
(a) No failure or delay by any party in exercising any right, power or
privilege under this Agreement shall operate as a waiver of the right, power or
privilege. A single or partial exercise of any right, power or privilege shall
not preclude any other or further exercise of the right, power or privilege or
the exercise of any other right, power or privilege. The rights and remedies
provided in this Agreement shall be cumulative and not exclusive of any rights
or remedies provided by law
(b) in view of the uniqueness of the transactions contemplated hereby,
neither of the parties would have an adequate remedy at law for money damages in
the event that this Agreement is not performed in accordance with its terms, and
therefore each of the parties agree that the other party shall be entitled to
specific enforcement of the terms of this Agreement in addition to any other
remedy to which it may be entitled, at law or in equity.
SECTION 20. AMENDMENTS, ETC.
No amendment, modification, termination, or waiver of any provision of this
Agreement, and no consent to any departure by a party to this Agreement from any
provision of this Agreement, shall be effective unless it shall be in writing
and signed and delivered by the other party to this Agreement, and then it shall
be effective only in the specific instance and for the specific purpose for
which it is given.
SECTION 21. SUCCESSORS AND ASSIGNS.
(a) Purchaser may assign its rights and delegate its obligations under this
Agreement; such assignee shall accept those rights and assume those obligations
for the benefit of the other party in writing in form reasonably satisfactory to
the other party. Thereafter, without any further action by any person, all
references in this Agreement to 'Purchaser", and all comparable references,
shall be deemed to be references to the transferee, but Purchaser shall not be
released from any obligation or liability under this Agreement.
(b) Except as provided in Section 23(a), no party may assign its rights
under this Agreement. Any delegation in contravention of this Section shall be
void AB INITIO and shall not relieve the delegating party of any obligation
under this Agreement.
(c) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties to this Agreement and their respective successors and
permitted assigns.
SECTION 22. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Utah. All rights and obligations of the parties
shall be in addition to and not in limitation of those provided by applicable
law.
SECTION 23. COUNTERPARTS; EFFECTIVENESS.
This Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if all signatures were on the same
instrument.
SECTION 24. SEVERABILITY OF PROVISIONS.
Any provision of this Agreement, that is prohibited or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of the
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or affecting the validity or enforceability of the provision in
any other jurisdiction.
SECTION 25. HEADINGS AND REFERENCES.
Section headings in this Agreement are included in this Agreement for the
convenience of reference only and do not constitute a part of this Agreement for
any other purpose. References to parties and sections in this Agreement are
references to the parties to or the sections of this Agreement, as the case may
be, unless the context shall require otherwise.
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SECTION 26. ENTIRE AGREEMENT.
Except as otherwise specifically provided in this Section, this Agreement
embodies the entire agreement and understanding of the respective parties and
supersede all prior agreements or understandings with respect to the subject
matters of those documents. ITC and the Secured Party shall remain subject to
the other Transaction Documents and paragraphs (1) through (3), inclusive, of
the letter agreement between ITC and the Secured Party in accordance with the
terms thereof.
SECTION 27. SURVIVAL.
Except as otherwise specifically provided in this Agreement, each
representation, warranty or covenant of each party this Agreement contained in
or made pursuant to this Agreement shall survive each Closing and remain in full
force and effect, notwithstanding any investigation or notice to the contrary or
any waiver by any other party of a related condition precedent to the
performance by the other party of an obligation under this Agreement.
SECTION 28. EXCLUSIVE JURISDICTION.
Each of AIRTECH, ITC and Secured Party (1) agrees that any legal action
with respect to this Agreement shall be brought exclusively in the courts of
Utah, (2) accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of those courts and (3) irrevocably waives any
objection, including, without limitation, any objection to the laying of venue
or based on the grounds of FORUM NON CONVENIENS, which it may now or hereafter
have to the bringing of any legal action in those jurisdictions; PROVIDED,
HOWEVER, that each of AIRTECH, ITC and Purchaser may assert in any other
jurisdiction or venue each mandatory defense, third party claim or similar claim
that, if not so asserted in such Action, may not be asserted in an original
legal action in the courts referred to in clause (1) above.
SECTION 29. WAIVER OF JURY TRIAL.
Each party waives any right to a trial by jury in any Action to enforce or
defend any right under this Agreement or any amendment, instrument, document or
agreement delivered, or which in the future may be delivered, in connection with
this Agreement and agrees that any Action shall be tried before a court and not
before a jury.
IN WITNESS WHEREOF, the undersigned have executed this Stock Pledge Agreement as
of the date first above written in _________________
ESCROW AGENT:
INTERWEST TRANSFER, INC.
By: ______________________________
Name:
Title:
Address: Interwest Transfer Company
1981 East 4800 South
Ste. 100
Salt Lake City, Utah 84117
INTERACTIVE TECHNOLOGIES
CORP., INC.
By:_____________________________
AIRTECH INTERNATIONAL CORPORATION
By:_____________________________
28.2 11
