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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended August 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____________ to ____________
COMMISSION FILE NUMBER 0-20866
WILSHIRE TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
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CALIFORNIA 33-0433823
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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5441 AVENIDA ENCINAS, STE. A
CARLSBAD, CALIFORNIA 92008
(Address of principal executive offices)
(760) 929-7200
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No ____
The number of shares outstanding of the registrant's only class of
Common Stock, no par value, was 12,943,385 on September 30, 1997.
Transitional Small Business Disclosure Format. Yes [ ] No [X]
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WILSHIRE TECHNOLOGIES, INC.
INDEX TO FORM 10-QSB
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PART 1 - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of 3
August 31, 1997 and November 30, 1996
Condensed Consolidated Statements of Operations 4
for the Quarters ended August 31, 1997 and
August 31, 1996
Condensed Consolidated Statements of Operations 5
for the Nine Months ended August 31, 1997 and
August 31, 1996
Condensed Consolidated Statements of Cash Flows 6
for the Nine Months ended August 31, 1997 and
August 31, 1996
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
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WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
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<CAPTION>
August 31, November 30,
1997 1996
------------ ------------
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ASSETS (Unaudited) (Note)
Current assets:
Cash $ 137,000 $ 189,000
Accounts receivable trade, less allowance for doubtful
accounts of $16,000 and $17,000 at August 31,
1997 and November 30, 1996, respectively 568,000 571,000
Inventories (Note 2) 1,101,000 591,000
Current portion of note receivable (Note 3) 196,000 204,000
Other current assets 222,000 231,000
------------ ------------
Total current assets 2,224,000 1,786,000
Property and equipment, less accumulated depreciation
of $768,000 and $637,000 at August 31, 1997 and
November 30, 1996, respectively 890,000 723,000
Note receivable from the sale of discontinued business
less current portion (Note 3) 158,000 280,000
Goodwill, less accumulated amortization of $312,000
and $281,000 at August 31, 1997 and November 30,
1996, respectively 430,000 461,000
Patents and trademarks, net 113,000 104,000
------------ ------------
$ 3,815,000 $ 3,354,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 452,000 $ 393,000
Accrued expenses 412,000 454,000
Interest payable 228,000 31,000
Line of credit from Trilon Dominion Partners LLC (Note 4) 3,000,000 1,500,000
------------ ------------
Total current liabilities 4,092,000 2,378,000
Shareholders' equity:
Preferred stock, no par value, 2,000,000 shares authorized;
none issued and outstanding -- --
Common stock, no par value, 50,000,000 shares
authorized; 12,943,385 shares issued and
outstanding at August 31, 1997 and
November 30, 1996 25,857,000 25,857,000
Common stock warrants 275,000 275,000
Accumulated deficit (26,409,000) (25,156,000)
------------ ------------
Total shareholders' equity (277,000) 976,000
------------ ------------
$ 3,815,000 $ 3,354,000
============ ============
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Note: The condensed consolidated balance sheet at November 30, 1996 has been
derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See accompanying notes.
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WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Three Months Ended August 31
------------------------------
1997 1996
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Continuing operations:
Net sales $ 1,011,000 $ 712,000
Cost of sales 765,000 639,000
------------ ------------
Gross profit 246,000 73,000
Operating expenses:
Marketing and selling 147,000 146,000
General and administrative 340,000 526,000
Research and development 123,000 138,000
------------ ------------
Total operating expenses 610,000 810,000
------------ ------------
Loss from operations (364,000) (737,000)
Other expense -- (2,000)
Interest income (expense), net (76,000) (27,000)
------------ ------------
Loss before provision
for state income taxes (440,000) (766,000)
Provision for state income taxes - current -- --
------------ ------------
Loss from continuing operations (440,000) (766,000)
Gain from discontinued operations (Note 6) -- 33,000
------------ ------------
Net loss $ (440,000) $ (733,000)
============ ============
Weighted average shares outstanding 12,943,000 12,932,000
============ ============
Loss per share:
Loss from continuing operations $ (0.03) $ (0.06)
Loss from discontinued operations -- --
------------ ------------
Net loss per share $ (0.03) $ (0.06)
============ ============
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See accompanying notes.
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WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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Nine Months Ended August 31
------------------------------
1997 1996
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Continuing operations:
Net sales $ 2,602,000 $ 2,434,000
Cost of sales 1,976,000 2,112,000
------------ ------------
Gross profit 626,000 322,000
Operating expenses:
Marketing and selling 424,000 428,000
General and administrative 946,000 1,461,000
Research and development 313,000 394,000
------------ ------------
Total operating expenses 1,683,000 2,283,000
------------ ------------
Loss from operations (1,057,000) (1,961,000)
Other income -- 190,000
Interest expense (195,000) (96,000)
------------ ------------
Loss before provision
for state income taxes (1,252,000) (1,867,000)
Provision for state income taxes - current 1,000 1,000
------------ ------------
Loss from continuing operations (1,253,000) (1,868,000)
Gain from discontinued operations (Note 6) -- 27,000
------------ ------------
Net loss $ (1,253,000) $ (1,841,000)
============ ============
Weighted average shares outstanding 12,943,000 11,827,000
============ ============
Loss per share:
Loss from continuing operations $ (0.10) $ (0.16)
Loss from discontinued operations -- --
------------ ------------
Net loss per share $ (0.10) $ (0.16)
============ ============
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See accompanying notes.
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WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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Nine Months Ended August 31,
----------------------------
1997 1996
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OPERATING ACTIVITIES
Net loss $(1,253,000) $(1,841,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 168,000 261,000
Provision for loss on accounts receivable (1,000) (23,000)
Gain on sale of discontinued operations -- (27,000)
Gain on settlement of note receivable -- (190,000)
Net change in operating assets and liabilities:
Decrease in accounts receivable 4,000 16,000
Increase in inventories (510,000) (122,000)
Decrease in other current assets 9,000 408,000
Increase (decrease) in accounts payable and
accrued expenses 17,000 (761,000)
Increase in interest payable 197,000 108,000
----------- -----------
Net cash used in operating activities (1,369,000) (2,171,000)
----------- -----------
INVESTING ACTIVITIES
Purchase of equipment (298,000) (104,000)
Decrease in note receivable from sale of discontinued operations 130,000 --
(Increase) decrease in other assets (15,000) 320,000
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Net cash (used in) provided by investing activities (183,000) 216,000
----------- -----------
FINANCING ACTIVITIES
Proceeds from line of credit 1,500,000 1,000,000
Proceeds from settlement of note receivable -- 1,190,000
----------- -----------
Net cash provided by financing activities 1,500,000 2,190,000
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NET (DECREASE) INCREASE IN CASH (52,000) 235,000
CASH - BEGINNING OF PERIOD 189,000 18,000
----------- -----------
CASH - END OF PERIOD $ 137,000 $ 253,000
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
In January, 1996, the Company completed an Exchange Agreement with Trilon
Dominion Partners,LLC pursuant to which the Company exchanged long-term debt and
accrued interest for common stock (Note 4).
In June, 1996, the Company completed the sale of certain assets of the Medical
Products division (Note 6).
See accompanying notes.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Wilshire Technologies, Inc. (the "Company") develops, manufactures and markets
engineered polymer products for industrial clean room use. The Company, based in
Carlsbad, California, operates through two divisions - - Wilshire Contamination
Control ("WCC"), and Wilshire Gloves ("WGL") and a wholly-owned subsidiary.
During 1996, the Company divested its Medical Products and Transdermal Products
divisions. In 1997, the Company will focus primarily on products used in
industrial clean rooms, such as gloves and contamination control products.
BASIS OF PRESENTATION
The accompanying condensed consolidated unaudited financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB for quarterly
reports under Section 13 or 15(d) of the Securities Exchange Act of 1934.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the quarter and nine months ended August 31, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending November 30, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the fiscal year ended November 30, 1996.
The consolidated financial statements include the accounts of the Company's two
divisions and its wholly-owned subsidiary. Significant intercompany amounts and
transactions have been eliminated.
In March 1996, the Board of Directors authorized management to proceed with the
sale of the assets of the Medical Products division which was completed on June
30, 1996, pursuant to a Purchase of Assets and Assumption of Sublease Agreement
with Acacia Laboratories of Texas, Inc., (See Note 6). The disposition of this
business has been accounted for as a discontinued operation. Accordingly, the
financial statements of all prior periods have been restated to exclude the
results of the Medical Products division from the results of continuing
operations.
2. FINANCIAL STATEMENT INFORMATION
Inventories consist of the following:
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AUGUST 31, NOVEMBER 30,
1997 1996
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Raw materials $ 346,000 $ 141,000
Work in process 164,000 175,000
Finished goods 591,000 275,000
========== ==========
$1,101,000 $ 591,000
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3. NOTE RECEIVABLE
Pursuant to the sale of its Medical Products division, the Company received a
$540,000 secured note, payable over 36 months, and bearing interest at a rate of
5% per annum (see Note 6).
4. LINE OF CREDIT
On January 5, 1996, the Company and Trilon Dominion Partners LLC ("Trilon
Dominion") entered into a Credit Agreement (the "Agreement") for a credit line
of $1,000,000 secured by the Company's assets. Under the terms of the Agreement,
which was subsequently amended, the principal was due on June 30, 1996 and the
interest was payable monthly at a rate of prime plus 3.75%. In connection with
the loan, the Company issued Trilon Dominion a five-year warrant that entitles
Trilon Dominion to purchase 100,000 shares of the Company's authorized but
unissued common stock at an exercise price of $0.75 per share, subject to
adjustment to protect against dilution. The warrant is exercisable immediately
and expires on January 5, 2001. Also, under the terms of the Agreement, the
Company issued Trilon Dominion a second five-year warrant which became
exercisable when the Company amended the Agreement ("First Amendment") to extend
the termination date of the Agreement from June 30, 1996 to December 31, 1996.
The second warrant entitles Trilon Dominion to purchase 25,000 shares of the
Company's authorized but unissued common stock at an exercise price equal to the
closing price on June 30, 1996, which was $1.75 per share and it expires on
January 5, 2001. The holder of each of such five-year warrants may, without
payment to the Company, convert the warrant in whole or in part into shares of
the Company's common stock having a market value equal to the difference between
(x) the market value per share of common stock multiplied by the number of
warrants that are converted and (y) the warrant exercise price, multiplied by
the number of warrants that are converted. Pursuant to the Agreement, the
Company used part of the proceeds of the credit line to repay the $400,000
borrowed from Trilon Dominion under the sixth amendment to the November 18, 1994
Credit Agreement, plus the interest accrued on that amount.
On September 30, 1996, the Company and Trilon Dominion entered into a Second
Amendment to the Agreement ("Second Amendment") whereby the amount of the credit
line was increased from $1,000,000 to $2,000,000 and the termination date was
extended from December 31,1996 to June 30, 1997. Pursuant to the Second
Amendment, the Company drew on the additional credit line upon achievement of
certain milestones. In addition, two warrants were issued in connection with the
Second Amendment. The first warrant entitles Trilon Dominion to purchase 100,000
shares of the Company's authorized but unissued common stock at an exercise
price of $1.31 per share, subject to adjustment to protect against dilution. The
warrant is exercisable immediately and expires on September 30, 2001. Also,
under the terms of the Agreement, the Company issued Trilon Dominion a second
five-year warrant which became exercisable when the Company entered the Third
Amendment to the Agreement and extended the termination date of the Agreement
from June 30, 1997 to December 31, 1997. The second warrant entitles Trilon
Dominion to purchase 25,000 shares of the Company's authorized but unissued
common stock at an exercise price equal to the closing price on June 30, 1997,
which was $0.84 per share, and it expires on September 30, 2001. All other terms
of the two warrants are the same as those issued under the Agreement.
On April 15, 1997, the Company and Trilon Dominion entered into a Third
Amendment to the Agreement ("Third Amendment") whereby the amount of the credit
line was increased from $2,000,000 to $3,000,000 and the termination date was
extended from June 30, 1997 to December 31, 1997. In addition, two warrants were
issued in connection with the Third Amendment. The first warrant entitles Trilon
Dominion to purchase 100,000 shares of the Company's authorized but unissued
common stock at an exercise price of $0.44 per share, subject to adjustment to
protect against dilution. The warrant is exercisable immediately and expires on
April 15, 2002. Also, under the terms of the Agreement, the Company issued
Trilon Dominion a second five-year warrant which only becomes exercisable if the
Company does not pay Trilon Dominion the principal and interest due on December
31, 1997. The second warrant entitles Trilon Dominion to purchase 25,000 shares
of the Company's authorized but unissued
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common stock at an exercise price equal to the closing price on December 31,
1997, and it expires on April 15, 2002. All other terms of the two warrants are
the same as those issued under the Agreement.
On September 19, 1997, the Company and Trilon Dominion entered into a Fourth
Amendment to the Agreement ("Fourth Amendment") whereby the amount of the credit
line was increased from $3,000,000 to $4,000,000 and the termination date was
extended from December 31, 1997 to June 30, 1998. In addition, two warrants were
issued in connection with the Fourth Amendment. The first warrant entitles
Trilon Dominion to purchase 100,000 shares of the Company's authorized but
unissued common stock at an exercise price of $0.95 per share, subject to
adjustment to protect against dilution. The warrant is exercisable immediately
and expires on September 19, 2002. Also, under the terms of the Agreement, the
Company issued Trilon Dominion a second five-year warrant which only becomes
exercisable if the Company does not pay Trilon Dominion the principal and
interest due on June 30, 1998. The second warrant entitles Trilon Dominion to
purchase 25,000 shares of the Company's authorized but unissued common stock at
an exercise price equal to the closing price on June 30, 1998, and it expires on
September 19, 2002. All other terms of the two warrants are the same as those
issued under the Agreement.
5. COMMITMENTS AND CONTINGENCIES
BREAST IMPLANT LITIGATION
During the first nine months of 1997, there have been no significant
developments in the Breast Implant Litigation. For information regarding legal
proceedings, refer to the information contained in the Company's Annual Report
on Form 10-KSB for the fiscal year ended November 30, 1996, under Note 6 to the
Financial Statements included therein.
SUPPLIER LAWSUIT
On October 22, 1996, Powell Products, Inc. ("Powell") sued the Company in state
court in Dallas County, Texas alleging a variety of claims, all centered upon
Powell's assertion that the Company has wrongfully obtained and used Powell's
trade secrets for manufacturing foam-tipped applicators. On November 5, 1996,
the Company removed the case to the U.S. District court for the Northern
District of Texas. The Company denied any wrongdoing and filed a counterclaim
for wrongful injunction.
On July 31, 1997, Powell and the Company entered into a Settlement Agreement
including a Mutual Release and Injunction ("Settlement Agreement"). Pursuant to
the Settlement Agreement, the Company paid Powell $75,000, and the Company and
Powell released each other from all claims or causes of action related to the
case. In addition, the Company is prevented from (a) making foam-tipped
applicators for the cosmetic industry for 5 years; (b) building cosmetic
applicator or swab-making equipment for sale to third parties for 8 years; (c)
making automated swab-making equipment materially different from its present
equipment for 3 years; and (d) participating in any way with Wormser
Corporation, Accessories Plus, North-Plex Tool, and Micro Designs, and also from
participating with any present and certain former employees of these entities.
Except for these restrictions the Company may continue to conduct its
swab-making business as it wants. The Company anticipates that the Settlement
Agreement will have no material effect on revenues.
6. DISCONTINUED OPERATIONS
On June 30, 1996, pursuant to a Purchase of Assets and Assumption of Sublease
Agreement, the Company sold certain assets of the Wilshire Medical Products
division ("WMP") to Acacia Laboratories of Texas, Inc. ("Acacia"), a
wholly-owned subsidiary of Acacia Laboratories, Inc., a California corporation,
that does business under the name of Horizon Medical, Inc. The assets sold
consisted of equipment, inventory, accounts receivable, patents, trademarks,
trade names,
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and regulatory approvals used in the Medical Products business. The purchase
price of $1,082,000 consisted of $200,000 cash at closing, $342,000 in accounts
receivable to be collected by the Company, and $540,000 in a secured, fully
amortized, 36 month promissory note in favor of the Company, bearing interest at
the rate of 5% per annum.
There were no sales for WMP in the quarter ended August 31, 1996. Sales of WMP
for the nine months ended August 31, 1996, were $888,000. The effect on the
results of operations from the operations of the WMP division for the quarter
and nine months ended August 31, 1996 was $33,000 and $27,000, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
During the first nine months of 1997, the Company has made significant progress
on its business plan for both contamination control products and gloves. In the
first quarter, the Company's contamination control swab manufacturing equipment
was successfully moved from Texas to the Company's facility in Tijuana, Mexico,
thus lowering future production costs. In addition, the developmental glove
equipment moved from the UK to the Tijuana, Mexico, facility in the fourth
quarter of 1996 began producing gloves at the rate of 40,000 gloves per month at
a significantly lower cost. Customer response based on their testing of the
gloves produced in Mexico has been excellent.
In the second quarter, the Company achieved sales of $1 million which set a
record for the highest quarterly sales. In addition, the Company completed a
distributor agreement for Singapore, Malaysia, Thailand, and Indonesia, an
important milestone for servicing the Company's customers in the computer
component industry in Southeast Asia. Also, in April the Company arranged
financing for the first full-scale glove production line and for working capital
needs in the second half of fiscal year 1997.
In the third quarter, the Company achieved another sales record of over $1
million including the sales benefit of the restocking by a major distributor of
contamination control wipers to bring its inventory levels back to normal. In
addition, the Company completed a development and supply agreement for an
improved glove polymer, and made further progress on the design and manufacture
of the first full-scale glove production line.
In the fourth quarter, the Company plans to move its warehouse operation from
Dallas, Texas to Carlsbad, California into a combined facility with its
headquarters office. This will save the Company the time and expense of
maintaining two facilities and related freight costs. Also, the Company is
looking for a larger facility in Tijuana, Mexico for its full-scale glove
production line. It expects to lease a building for that line and the Company's
other equipment by the end of fiscal year 1997.
From time to time the Company may report, through its press releases and/or
Securities and Exchange Commission filings, certain forward-looking statements
that are subject to risks and uncertainties. Important factors that could cause
actual results to differ materially from those projected by such forward-looking
statements are set forth in Exhibit 99 to the Company's Annual Report on Form
10-KSB for the fiscal year ended November 30, 1996. These include operating
losses, liquidity, reliance on major distributors, new product development,
competition, technological change, patents, trade secrets, product liability,
dependence on key suppliers, and dependence on key personnel.
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RESULTS OF OPERATIONS
NET SALES
Wilshire Contamination Control and Wilshire Gloves market their products
directly to end users through an internal sales force utilizing outside
distributors. Revenue for all sales is recognized when title transfers,
generally when products are shipped.
Quarter
Net sales set a quarterly record, and increased by $299,000 (42.0%) to
$1,011,000 in the third quarter of 1997 from $712,000 in the third quarter of
1996. Sales were favorably impacted by significant new orders from a
contamination control wiper customer and the restocking by a major distributor
of contamination control wipers to bring its inventory levels back to normal.
Nine Months
Net sales increased by $168,000 (6.9%) to $2,602,000 in the first nine months of
1997 from $2,434,000 in the same period of 1996. The sales increase was related
to the impact of third quarter sales of contamination control wipers discussed
above.
GROSS PROFIT
Quarter
Gross profit increased by $173,000 to $246,000 in the third quarter of 1997 from
$73,000 in the third quarter of 1996, primarily due to increased sales of
contamination control products and reduced costs of the developmental glove
plant. Gross profit margin as a percent of sales increased to 24.3% in the third
quarter of 1997 from 10.3% in the third quarter of 1996.
Nine Months
Gross profit increased by $304,000 to $626,000 in the first nine months of 1997
from $322,000 in the same period of 1996, primarily due to increased sales of
contamination control products and reduced costs of the developmental glove
plant. Gross profit margin as a percent of sales increased to 24.1% in the first
nine months of 1997 from 13.2% in the same period of 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses include additional costs related to
the Company's marketing activities and administrative costs (such as executive
and office salaries, related payroll expenses, investor relations, professional
fees, supplies and utilities).
Selling, general and administrative expenses decreased $185,000 (27.5%) to
$487,000 in the third quarter of 1997 from $672,000 in the third quarter of
1996. In the first nine months of 1997, selling, general and administrative
expenses decreased $519,000 (27.5%) to $1,370,000 from $1,889,000 in the same
period of 1996. The expense reduction in both periods primarily resulted from
reductions in personnel, lower professional fees, and non-recurring expenses in
1996 related to the move of the developmental glove plant from the U.K.
to Mexico.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased $15,000 (10.9%) to $123,000 in the
third quarter of 1997 from $138,000 in the third quarter of 1996. In the first
nine months of 1997, research and development expenses decreased $81,000 (20.6%)
to $313,000 from $394,000 in
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the same period of 1996. The expense reduction in both periods primarily was due
to the divestiture of the Transdermal Products business.
As a percentage of sales, research and development expenses were 12.2% in the
third quarter of 1997, compared to 19.4% in the third quarter of 1996. For the
first nine months of 1997, research and development expenses as a percentage of
sales were 12.0%, compared to 16.2% in the same period of 1996.
OTHER INCOME
The other income in the third quarter and nine months of 1996 was related
primarily to the gain from the payment of the note receivable by Advanced
Materials, Inc.
INTEREST INCOME (EXPENSE), NET
The Company reported higher interest expense in the third quarter and nine
months of 1997 versus the same period of 1996 due to increased debt outstanding.
The interest expense was related primarily to the line of credit due to Trilon
Dominion Partners, LLC. (see Note 4).
INCOME TAXES
For the quarters and nine months ended August 31, 1997 and August 31, 1996, the
Company sustained losses for both financial reporting and income tax purposes. A
tax provision of $1,000 related to state income taxes was recorded in the
financial statements for 1997 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
Management assesses the Company's liquidity by its ability to generate cash to
fund its operations. Significant factors in the management of liquidity are:
funds generated by operations; levels of accounts receivable, inventories,
accounts payable and capital expenditures; adequate lines of credit; and
financial flexibility to attract long-term capital on satisfactory terms.
During 1996 and the first nine months of 1997, the Company has not generated
sufficient cash from operations to fund its working capital requirements. Net
cash used in operating activities was $1,369,000 in the first nine months of
1997 versus $2,171,000 in the first nine months of 1996. The decrease in the
cash used in operating activities was primarily due to lower operating expenses,
and increased gross profit.
Net cash used in investing activities was $183,000 in the first nine months of
1997, versus $216,000 provided by investing activities in the first nine months
of 1996. The use of cash in 1997 was primarily due to the purchase of glove
manufacturing equipment. The decrease in other assets in 1996 was related to the
cancellation of the License Agreement with Innovative Technologies, Ltd.
Net cash provided by financing activities was $1,500,000 in the first nine
months of 1997 versus $2,190,000 in the first nine months of 1996. The debt
financing in both years was obtained from Trilon Dominion Partners, LLC. The
settlement of the note receivable in 1996 is related to the payment of the note
receivable by Advanced Materials, Inc.
On January 5, 1996, the Company and Trilon Dominion entered into a Credit
Agreement (the "Agreement") for a credit line of $1,000,000 secured by the
Company's assets. Under the terms of the Agreement, the principal was due on
June 30, 1996 and the interest was payable monthly at a rate of prime plus
3.75%. The Agreement was amended on June 30, 1996 ("First
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amendment") to extend the termination date of the Agreement from June 30, 1996
to December 31, 1996. See Note 4 to the financial statements for details of the
Agreement.
Pursuant to the Agreement, the Company used part of the proceeds of the credit
line to repay the $400,000 borrowed from Trilon Dominion under the sixth
amendment to the November 18, 1994 Credit Agreement, plus the interest accrued
on that amount. Also, the Company used an additional $400,000 of the credit line
in January 1996 to pay past due accounts payable, and the final $200,000
available under the credit line in February 1996 to fund working capital
requirements.
On September 30, 1996, the Company and Trilon Dominion entered into a Second
Amendment to the Agreement ("Second Amendment") whereby the amount of the credit
line was increased from $1,000,000 to $2,000,000 and the termination date was
extended from December 31,1996 to June 30, 1997. Pursuant to the Second
Amendment, the Company drew on the additional credit line upon achievement of
certain milestones. See Note 4 to the financial statements for details of the
Amendments.
On April 15, 1997, the Company and Trilon Dominion entered into a Third
Amendment to the Agreement ("Third Amendment") whereby the amount of the credit
line was increased from $2,000,000 to $3,000,000, and the termination date was
extended from June 30, 1997 to December 31, 1997. See Note 4 to the financial
statements for details of the Amendments.
On September 19, 1997, the Company and Trilon Dominion entered into a Fourth
Amendment to the Agreement ("Fourth Amendment") whereby the amount of the credit
line was increased from $3,000,000 to $4,000,000, and the termination date was
extended from December 31, 1997 to June 30, 1998. See Note 4 to the financial
statements for details of the Amendments.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
For information regarding legal proceedings, refer to the information
contained in the Company's annual report on Form 10-KSB for the fiscal
year ended November 30, 1996 under the heading, "Legal Proceedings" and
Note 6 to the financial statements therein.
ITEM 2. CHANGES IN SECURITIES:
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None
ITEM 5. OTHER INFORMATION:
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
10.97 Equipment Supply Agreement, dated July 28, 1997, between ACC
Automation Company and the Registrant.
10.98 Settlement Agreement, Mutual Release, and Injunction, dated
July 31, 1997, between Powell Products, Inc. and the
Registrant.
10.99 Equipment Supply Agreement, dated September 16, 1997, between
the Vara International Division of Calgon Carbon Corporation
and the Registrant.
10.100 Development and Supply Agreement, dated September 18, 1997,
between PTG Medical LLC and the Registrant.
10.101 Fourth Amendment, dated September 19, 1997, to Credit Agreement
and to Grid Promissory Note dated January 5, 1996 between
Trilon Dominion Partners LLC, and the Registrant.
(b) REPORTS ON FORM 8-K:
None
14
<PAGE> 15
SIGNATURES
In accordance with requirements of the Securities Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
WILSHIRE TECHNOLOGIES, INC.
Dated: October 10, 1997 By: /s/ James W. Klingler
------------------------------------
James W. Klingler
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
<S> <C> <C>
10.97 Equipment Supply Agreement, dated July 28, 1997, between ACC
Automation Company and the Registrant. 17
10.98 Settlement Agreement, Mutual Release, and Injunction, dated
July 31, 1997, between Powell Products, Inc. and the
Registrant. 43
10.99 Equipment Supply Agreement, dated September 16, 1997,
between the Vara International Division of Calgon Carbon
Corporation and the Registrant. 54
10.100 Development and Supply Agreement, dated September 18, 1997,
between PTG Medical LLC and the Registrant. 59
10.101 Fourth Amendment, dated September 19, 1997, to Credit
Agreement and to Grid Promissory Note dated January 5,
1996 between Trilon Dominion Partners LLC, and the Registrant. 96
</TABLE>
<PAGE> 1
EXHIBIT 10.97
SYNTHETIC DIPPING MACHINE
FOR
WILSHIRE TECHNOLOGIES, INC.
PROPOSAL NUMBER: 7109-00: REV. 2
PROPOSAL DATE: JULY 3, 1997
THIS PROPOSAL IS SUBMITTED WITH THE UNDERSTANDING THAT PRICING, DELIVERY,
ENGINEERING, DESIGN, TECHNICAL AND OPERATIONAL DETAILS ARE CONFIDENTIAL TO ACC
AUTOMATION AND SHALL NOT BE PASSED ON TO ANYONE OTHER THAN THE EMPLOYEES OF THE
COMPANY RECEIVING THIS PROPOSAL WHO HAVE A NEED FOR SUCH INFORMATION.
<PAGE> 2
I N D E X
I. EQUIPMENT AND SERVICES
EXHIBIT A GENERAL MACHINE SPECIFICATIONS
EXHIBIT B SEQUENCE OF OPERATION
EXHIBIT C MACHINE LAYOUT / DRAWINGS
EXHIBIT D SCOPE OF SUPPLY BY BUYER
EXHIBIT E PROJECT SCHEDULE
EXHIBIT F ACCEPTANCE TESTS AND DOCUMENTATION
EXHIBIT G OPERATIONS TO BE CONTROLLED, MONITORED, AND/OR
REPORTED BY PROCESS CONTROLLER
EXHIBIT H PRICING - BASE MACHINE PACKAGE
EXHIBIT I SPARE PARTS
EXHIBIT J PRE-INSTALLATION REQUIREMENTS
EXHIBIT K PROGRESSIVE PAYMENT SCHEDULE
EXHIBIT L INSTALLATION SUMMARY
EXHIBIT M TRAINING
EXHIBIT N FREIGHT / SHIPPING
EXHIBIT O PLANT LAYOUT
II. SALES AGREEMENT
<PAGE> 3
SYNTHETIC DIPPING SYSTEM
EXHIBIT H
PRICING
<TABLE>
<S> <C> <C>
1.0 BASE MACHINE PRICE
PRICE ......................................................... $ 805,660.00
* Project Management
* Two (2) - 2 axis Dipping Robots
* (12) "C" Channel Slave Pallets
* (300) Form Mounting Racks
* Four (4) - Oven/Rotate Stations
* One (1) - Pre Heat Oven
* One (1) - Glove Soak Tank with Single Speed Vertical and Timer
* One (1) - Pallet Entry Station
* One (1) - Pallet Exit Station
* Electrical panel
* PLC and control interface terminal
* Operating and Maintenance manuals
* Machine Enclosure for Automated Cell
2.0 OPTION - HUMIDITY CONTROL FOR DIP CHAMBERS
PRICE .......................................................... $ 39,410.00
GRAND TOTAL PRICE (SECTION 1.0 AND 2.0) ....................... $ 845,070.00
</TABLE>
Installation labor and material is not included in the pricing above, which can
be provided by SELLER on a time and material basis. Pricing shown is valid for a
period of 60 days beyond the date of this quotation.
<PAGE> 4
SYNTHETIC DIPPING SYSTEM
EXHIBIT I
MECHANICAL AND ELECTRICAL SPARE PARTS
As per Exhibit A, SELLER will define and recommend a spare parts package for
BUYER's review after the design phase of the project. Typical allotment for
spare parts for budgetary purposes can range from 2% to 5% of total machine
price.
<PAGE> 5
SYNTHETIC DIPPING SYSTEM
EXHIBIT J
PRE-INSTALLATION REQUIREMENTS
Buyer to provide:
1. Clean, clear installation site including the preparation of any required
machine pads, trenching and supporting utilities according to SELLER's
requirements.
2. Personnel and equipment for transporting the machine from any place of
temporary storage at CUSTOMER'S facility to the final installation
location, including rental of crane if necessary.
3. Office space for SELLER's use at or in close proximity to the
installation site.
4. Fax machine for use by SELLER at or in close proximity to the
installation site. BUYER to pay the charges for each fax sent.
5. Telephone for use by SELLER at or in close proximity to the installation
site. BUYER to pay usage charges.
6. Free and clear access to loading and unloading facilities.
7. Personnel support facilities at or in close proximity to the
installation site.
8. Any building modifications required to support Machine.
9. Any foundation work necessary for the support of Machine.
10. All temporary power to facilitate installation and start up by ACC
Automation personnel.
11. All building and other licenses and permits required.
<PAGE> 6
SYNTHETIC DIPPING SYSTEM
EXHIBIT K
PROGRESSIVE PAYMENT SCHEDULE
<TABLE>
<S> <C>
*DOWN PAYMENT ............................................................................. $ 84,507.00
MONTH ONE (30 DAYS A.R.O - Block Plan Layout Complete) .................................... $ 84,507.00
MONTH TWO (61 DAYS A.R.O - Approval Drawings; Dip Station, Dip Tank) ...................... $ 126,760.00
MONTH THREE (92 DAYS A.R.O - Approval Drawings; Dry/Rotate Oven, Pre Heat Oven, Soak Tank) $ 84,507.00
MONTH FOUR (122 DAYS A.R.O - Approval Drawings; Electrical) ............................... $ 126,760.00
MONTH FIVE (153 DAYS A.R.O - Shipment #1) ................................................. $ 84,507.00
MONTH SIX (184 DAYS A.R.O - Shipment #2) .................................................. $ 126,760.00
MONTH SEVEN (214 DAYS A.R.O - Shipment #3) ................................................ $ 84,507.00
COMPLETION OF COMMISSIONING ............................................................... $ 42,255.00
TOTAL UNITED STATES DOLLARS ............................................................... $ 845,070.00
</TABLE>
<PAGE> 7
SYNTHETIC DIPPING SYSTEM
EXHIBIT L
INSTALLATION SUMMARY
1.0 SCOPE
The equipment is designed in modular fashion to be erected in segments at the
BUYER's site. SELLER to provide necessary field supervision on a time and
material basis.
2.0 PRICING
Due to the unforeseen nature of field installations, all field services to be
supplied to BUYER by SELLER, on a time and material basis, at the following
rates;
* Field Supervisor at $65.00 per hour
* Field Engineering at $65.00 per hour
* Field Living/Travel Expenses at cost plus 0%, including agreed
upon "per diem" (estimated US$ 35.00 to $40.00 per day).
For budgetary purposes, we envision the installation to require approximately
(400) to (500) field supervisory hours and (200) to (300) field engineering
hours for equipment commissioning.
BUYER to supply one (1) round trip airfare every 30 days for Field Supervisor,
allowing for a four (4) day departure from job site.
SELLER proposes that BUYER provide local installation trade labor and field
material to interconnect equipment, under supervision of SELLER's Field
Supervisor.
3.0 INSTALLATION PARAMETERS
3.1 ELECTRICAL SERVICE
The BUYER is responsible for providing power (as stipulated in the contract) to
the ACC AUTOMATION provided control panel. The final connection of the power
feed into the main disconnect is the responsibility of the BUYER, under ACC
AUTOMATION's supervision.
<PAGE> 8
All material and labor required to wire from the ACC AUTOMATION control panel to
ACC's machine is the responsibility of BUYER, under supervision and guidance of
SELLER'S on-site supervisor.
3.2 UTILITIES
All utilities (water, steam, chilled water, air, etc.) shall be piped to the
final connection points to the machine enclosure point by the BUYER, under
supervision and guidance of SELLER'S on-site supervisor.
3.3 FIELD ELECTRICAL MATERIAL
Field electrical material is defined as all items required to interconnect the
control panel to the items it will control Example: wire duct, conduit and
fittings, wire, hangers, fasteners, welding rod, brackets, support steel, etc.
All field material to be supplied by BUYER up to machine enclosure connection
point.
3.4 FIELD MECHANICAL MATERIAL
Field mechanical material is defined as all items required to interconnect and
attach the non-electrical components of the "Line", and stops at Machine
Enclosure. Example: Hangers, fasteners, pipe, fittings, welding rod, brackets,
support steel, grout, caulk, etc. All field material to be supplied by BUYER up
to machine connection point.
3.5 FIELD LABOR AND TOOLS
BUYER will supply necessary electricians, millwrights, welders, etc. to install
equipment as supervised by SELLER. BUYER will pay these third parties direct for
services rendered. All laborers to supply personal tool sets. Purchased and/or
rented field tools and lifts to be supplied by BUYER.
For budgetary purposes, field installation labor and field material/services
(Sections 3.2 through 3.5 above) typically are estimated to be between 15% and
20% of the purchase price of the equipment.
<PAGE> 9
SYNTHETIC DIPPING SYSTEM
EXHIBIT M
OPERATING AND MAINTENANCE TRAINING
The BUYER's operating and maintenance personnel will be provided with adequate
exposure and guidance to operate, monitor, and maintain the basic machine
functions. SELLER's engineer(s) will be available during the installation,
debugging, and acceptance testing. During this time, the operating and
maintenance personnel will be familiarized with the PLC operational and
maintenance features. There will also be a review of the pneumatic, electrical,
and lubrication schematics and their recommended maintenance requirements.
When the acceptance testing is completed, if the personnel require additional
training; on-site training can be provided on a per diem basis.
<PAGE> 10
SYNTHETIC DIPPING SYSTEM
EXHIBIT N
FREIGHT/SHIPPING INFORMATION
F.O.B POINT OF MANUFACTURE
A. ESTIMATED VOLUME AND BUDGETARY COSTS
4 to 6 Containers @ $2,500.00 each ....... $ 10,000.00 to $15,000.00
<PAGE> 11
EXHIBIT O
PLANT LAYOUT
* SELLER will assist BUYER in proper layout of equipment and companion
facilities within the plant.
<PAGE> 12
SALES AGREEMENT
AGREEMENT made as of the 3rd day of July, by and between ACC AUTOMATION CO. L.P.
("SELLER") a Delaware limited partnership with a principal place of business at
475 Wolf Ledges Parkway, Akron, Ohio 44311, United States of America and
WILSHIRE TECHNOLOGIES INC., a company located at 5441 Avendida Encinas, Suite A,
Carlsbad, CA 92008.
WITNESSETH:
WHEREAS, BUYER desires to purchase from SELLER, and SELLER desires to sell to
BUYER, Dipping Equipment (the "Equipment") manufactured, assembled and installed
by SELLER in accordance with the specifications set forth on Exhibit "A"
attached hereto; and
WHEREAS, BUYER and SELLER desire to establish the terms and conditions under
which the Equipment will be manufactured, sold and installed by SELLER and
purchased by BUYER.
NOW, THEREFORE, in consideration of the promises, agreements and covenants
contained herein and other good and valuable consideration had and received, the
receipt and sufficiency of which is hereby acknowledged, the parties hereby
agree as follows:
1.0 SALE OF EQUIPMENT
In accordance with the terms and conditions of this Agreement SELLER shall sell
and BUYER shall purchase Dipping Equipment in accordance with the specifications
as set forth in Exhibits "A" (hereinafter such Dipping Equipment shall be
individually and collectively referred to as "Equipment").
2.0 PRICE
The total purchase price hereinafter referred to as the "Purchase Price" for the
Equipment, is stated in Exhibit H.
Any and all amounts, monies and charges required to be paid by BUYER to SELLER
under this Agreement shall be made in lawful United States currency only as per
terms of payment given in Section 3.0.
<PAGE> 13
3.0 PAYMENT TERMS AND ACCEPTANCE
3.1
Payment for Equipment purchased by BUYER hereunder or for any other service
provided hereunder shall be made to SELLER or its nominee in the lawful currency
of the Unites States of America by establishment of a signed contract and direct
bank wire transfer or bank check of down payment in accordance with the terms of
Exhibit K.
3.2
SELLER will furnish or otherwise make available to BUYER operating manuals,
schematic drawings, maintenance information and all other documents and
information required to be given to BUYER under this Agreement.
3.3
In the event that there is no breach in any material respect on the part of
SELLER of its obligation to BUYER herein contained and the BUYER fails to comply
in any respect concerning payment of the Purchase Price, then in addition to all
other rights and remedies available to SELLER in law or in equity, SELLER shall
have the right after 10 days prior written notice, in its sole discretion to
suspend further performance under this Agreement until such time after 10 days
written notice that BUYER complies with the provisions relating to payment of
the Purchase Price, or may at its option, terminate this Agreement upon
providing 30 days written notice, and pursue any other remedy available at law
or equity. Any delay occasioned by BUYER'S failure aforementioned, shall extend
any period in which SELLER is to perform for a period equal to the delay caused
by BUYER hereunder.
In no event shall SELLER be liable for any costs, losses, or other liability, of
any kind whatsoever which is occasioned by BUYER's failure to make timely
payment and SELLER's subsequent consent.
4.0 PROJECT SCHEDULE
Subject to Section 5.0 below and to conduct of BUYER in 3.3 above, SELLER shall
make commercially reasonable efforts to complete the project by the milestones
in accordance with Exhibit E.
<PAGE> 14
5.0 FORCE MAJEURE
SELLER shall make a commercially reasonable effort to meet the schedule set
forth within the time or times stated therein, but SELLER will not be liable for
any damages or delays resulting directly or indirectly from fire, embargo,
strikes, Act of God, civil strike or insurrection, or failure by vendors,
sub-contractors, including vendors and subcontractors of BUYER furnished
equipment components or installation labor and materials, or other support
agencies to meet promised shipment or required lead times when SELLER has
provided timely orders, specifications, and communications that would reasonably
lead to such shipments, or from the delay by reason of any rule, regulation or
order of any government authority or any other cause or event beyond SELLER's
reasonable control affecting its performance hereunder.
In the event of occurrence of any of the aforesaid force majeure events, the
dates set forth shall be extended for a mutually agreed length of time which
shall at least equal the period of such force majeure event, and all subsequent
supplied shall have a corresponding time extension, in delivery by SELLER so as
to avoid unnecessary building up of inventory with BUYER.
6.0 CHANGE ORDER PROCEDURE
6.1
No changes shall be made in the specifications for the Equipment set forth in
Exhibit "A" hereto, or any component or sub-system thereof unless:
6.1.1
The request for the change is made in writing.
6.1.2
And, the authorized representatives of both the parties hereto sign the document
requesting the change(s) within 7 days from date of receipt of the written
request for the change. If either party hereto objects to the change that party
must inform the other of its objection within 7 days from date of receipt of the
written request for the change, failing which the proposed change shall be taken
as approved by that party.
6.1.3
The Purchase Price for the Equipment shall be adjusted as mutually agreed
between SELLER and BUYER to account for any changes to the Equipment which are
made hereunder. Any delays occasioned as a result of such changes shall extend
SELLER'S performance obligation hereunder for a reasonable length of time as
mutually agreed between SELLER and BUYER which shall at least equal the period
of such delay.
<PAGE> 15
7.0 DELIVERY
Equipment shall be shipped F.O.B. Akron, Ohio USA or F.O.B. point of
manufacture. SELLER shall have the right to select the carrier unless the
carrier is designated by the BUYER, and upon delivery of the Equipment by the
SELLER to the carrier, the carrier shall be deemed to be the agent of the BUYER
and thereafter the risk of loss shall be on the BUYER.
8.0 WARRANTY
8.1
SELLER warrants that the Equipment manufactured and delivered by it hereunder
shall (a) be free from defect in workmanship under normal use and service, (b)
conform to the specifications and all applicable laws and regulations (except as
otherwise expressly stipulated in the Agreement.) The warranty under this
section 8.1 shall extend only to BUYER. No other warranty, whether express,
implied or statutory including, without limitation, warranties as to
merchantability, fitness for a particular purpose, or infringement, or arising
from or under common law, multilateral or bilateral treaties, or course of
dealing or usage of trade or otherwise shall exist with respect to the
equipment.
8.2
All claims under such warranty shall be made in writing setting forth the
alleged defect in sufficient detail to permit the identification thereof by
SELLER and shall be delivered to SELLER prior to the expiration of one (1) year
from the passing of the acceptance tests in accordance with acceptance criteria
set forth in Exhibit F attached hereto, or be barred. Upon receipt of a timely
claim, SELLER shall have the option either to inspect the Equipment claimed to
be defective, while in BUYER's possession or to other designated site, at
BUYER's expense, for SELLER's inspection. SELLER shall repair or, at its option,
replace free of charge, any such Equipment which SELLER reasonably determines to
be in breach of such warranty excluding normal wear and tear. SELLER shall ship
the repaired or replaced Equipment to BUYER F.O.B. point of shipment designated
by SELLER; provided, however that if in SELLER's judgment circumstances are such
as to preclude the remedy of a breach of such warranty by repair or replacement,
SELLER shall refund to BUYER by issuance of credit or otherwise, any part of the
Purchase Price theretofore paid to SELLER.
8.3
Any installation, operation, use, maintenance, or application of any Equipment
other than according to the capacities, conditions, and instructions published
by SELLER or approved in writing by SELLER, or any improper storage of Equipment
or the substitution in or with any
<PAGE> 16
product of integral, reciprocating, or related parts not approved in writing by
SELLER, shall void the warranty under this Section 8.
8.4
In the event any component of the Equipment is purchased by SELLER from a third
party, SELLER will extend to BUYER all applicable warranties or remedies
extended to SELLER by such third party; provided however, that such extension
shall not impose any additional obligation on SELLER and such warranties or
remedies shall be permitted by such third party to be so extended. All
limitation of liability concerning such third party warranties or remedies shall
apply to BUYER to the same extent as it applies to SELLER. SELLER shall use its
best efforts to execute any instruments or other documents required to extend
such third party warranty and remedy to BUYER. BUYER shall contact SELLER for
warranty provisioning covered by third party components.
8.5
SELLER shall charge, and BUYER shall pay, for all non-warranty service with
respect to the Equipment at a rate of $65 per hour, per man, plus all applicable
transportation and living costs.
8.6
The production and output references for the Equipment are subject to various
external factors not within SELLER'S control, including, but not limited, to
material and process formulation management and/or normal and regular
maintenance of the Equipment. Accordingly, SELLER makes no express or implied
guarantees concerning production or output capacities of the Equipment.
8.7
SELLER makes no warranties express or implied, of any kind or nature including
the warranties of merchantability or fitness for a particular purpose,
concerning the process by which, or the quality of, the end product to be
produced on the Equipment.
9.0 LIMITATION OF LIABILITY
The parties hereto expressly agree that repair, replacement or refund of the
Purchase Price shall be the exclusive remedy for any breach of warranty or any
other claim in respect of the Equipment, including, without limitation, those
based upon contract, warranty, including, without limitation, those based upon
contract, warranty, tort, or strict liability. Notwithstanding any other
provision herein, in no event shall SELLER or any of its subcontractors or
suppliers be liable for removal or installation costs, downtime, damage to other
property, loss of business or
<PAGE> 17
profits, or any similar or dissimilar incidental special or consequential
damages of any nature arising at any time or from any cause whatsoever. In no
event shall BUYER be liable for an amount greater than the Purchase Price plus
any adjustments or additions thereto as expressly provided in this Agreement.
10.0 PROPERTY AND PATENT RIGHTS
10.1
SELLER retains for itself all property rights in and to all designs, inventions
and improvements pertaining to the Equipment or any component thereof invented
or discovered by SELLER and to all patents, trademarks, copyrights and related
industrial property rights arising out of SELLER'S discovery or invention.
BUYER shall not assert any rights to property rights retained by SELLER in
accordance with this Section 10.
In the event that any invention and/or improvement pertaining to the Equipment
or any component thereof is invented or discovered by SELLER prior to
fabrication/manufacture of the Equipment or any component thereof, SELLER shall
offer but is not obligated to incorporate such invention and/or improvement into
the Equipment or any component thereof to BUYER at an additional charge, and
BUYER has the option whether to accept or reject such an offer as determined by
SELLER.
10.2
SELLER retains exclusive rights to all engineering drawings. BUYER agrees to
assert no claims to nor expect to receive any machine drawings beyond those to
be supplied under this Agreement or necessary for normal, routine maintenance of
the Equipment.
10.3
SELLER shall indemnify and hold harmless BUYER from any claim, suit or
proceeding brought by a third party against BUYER based on a claim that the
Equipment furnished hereunder infringes any patent, copyright, trade secret,
trademark or other proprietary right; provided, however, that BUYER shall give
SELLER prompt notice in writing of the assertion of any such claim and all
authority, information and assistance required for the defense of the same.
SELLER will defend any such suit or proceeding, and pay any damages and costs
awarded therein against BUYER, and in the event that the use or sale of the
Equipment is enjoined, SELLER shall, at its option and its own expense either
(i) replace the Equipment with non-infringing products; (ii) procure for BUYER
the right to continue using the Equipment; or (iii) as a last resort, refund to
BUYER the purchase price for any infringing Equipment. SELLER shall have no
liability to
<PAGE> 18
BUYER for any infringement based upon: (a) the use of the Equipment furnished
hereunder with any other device, software or data not supplied to BUYER by
SELLER; or (b) BUYER's alteration of the Equipment.
11.0 CANCELLATION
11.1
In the event that BUYER requests SELLER to stop work or cancels this Agreement
or any part thereof, which for purposes of cancellation becomes effective from
the date of opening of the letter of credit, for any reason other than SELLER'S
breach of its obligations contained in this Agreement, cancellation charges
shall be paid to SELLER as follows:
Any and all work that is complete or scheduled for completion within 30 days of
the date of notification by BUYER in writing to stop work or notification of
cancellation, shall be invoiced and paid in full.
All sums paid to date shall be fully earned and non-refundable, and SELLER shall
invoice BUYER within 30 days for any additional charges required to reimburse
SELLER for costs incurred to date that exceed the amount paid from date of
termination.
11.2
For work in progress, other than work covered by Section 11.1, hereof, and any
materials and supplies procured, or for which definite commitments have been
made by SELLER in connection with BUYER'S order and which cannot be canceled by
SELLER without liability or obligation, BUYER shall pay the actual costs for
such materials and supplies and, if applicable, SELLER'S overhead expenses
determined in accordance with SELLER'S standard accounting practices
consistently applied, plus an amount equal to fifteen percent (15%) of such
total, BUYER or BUYER'S designee shall have the right to audit SELLER'S records
concerning such material, supplies, and overhead expenses.
BUYER shall promptly instruct SELLER as to the disposition of Equipment canceled
pursuant to this Section 11, hereof, and SELLER shall, if requested, hold the
Equipment for BUYER'S account. All costs of storage, insurance, handling, boxing
or other costs in connection therewith shall be borne by BUYER and BUYER shall
bear all risks of loss.
<PAGE> 19
12.0 APPLICABLE LAWS
12.1
Any writ or other notice of legal process shall be sufficiently served on SELLER
if delivered to SELLER'S office at the following address:
ACC Automation Co.
P. O. Box 569
475 Wolf Ledges Parkway
Akron, OH 44309
Attn: President
12.2
The parties hereto hereby irrevocably agree that any legal action or proceeding
against either of them with respect to this Agreement and any transaction
contemplated hereby shall be brought in the courts of the State of Ohio located
in Cuyahoga county, or of the United States of America for the Northern District
of the State of Ohio, and by execution and delivery of the Agreement, the
parties hereby irrevocably submit to the jurisdiction of each such court.
13.0 COMPLETE AGREEMENT; AMENDMENT
This Agreement shall constitute the entire Agreement between the parties
relating to the subject matter thereof and the Equipment provided pursuant
thereto, and shall supersede all previous communications or understandings
between BUYER and SELLER with respect to the subject matter hereof, and except
as expressly set forth herein, no alteration or addition to this Agreement shall
be binding on SELLER and BUYER unless it is in writing and signed by a duly
authorized officer of SELLER and BUYER respectively.
14.0 WAIVER OF TERMS AND CONDITIONS
Failure or delay of either party to insist upon strict performance of any of the
terms and conditions of this Agreement or to exercise any rights or remedies
provided herein or by law, shall not release the other party from any of the
obligations of this Agreement and shall not be deemed a waiver of any right of
the other party to insist upon strict performance hereof or of any rights or
remedy of the other party as to any prior or subsequent default hereunder.
<PAGE> 20
15.0 INDEMNIFICATION
15.1 INDEMNIFICATION BY BUYER
BUYER shall protect, defend, indemnify and hold harmless SELLER, its directors,
officers, employees, agents and any other person acting for or on behalf of
SELLER from and against any and all expenses, claims, actions, liabilities,
damages, and losses of any kind whatsoever (including, without limitation,
attorneys' fees and expenses) actually or allegedly resulting from one or more
of the following;
15.1.1
Inaccurate or faulty specifications, designs, data, or criteria furnished by
BUYER to SELLER (BUYER'S specifications).
15.1.2
Any infringement or alleged infringement of any patent, trademark or other
proprietary right arising out of SELLER's compliance with BUYER's
specifications.
15.1.3
Changes in engineering specifications, data, designs or criteria made by BUYER.
15.1.4
BUYER's or any of its employees, agents, or contractors' negligence or willful
misconduct in the performance or non-performance of its obligations under this
Agreement.
15.1.5
The failure of BUYER, its officers, directors, agents, employees or anyone
acting through or on behalf of BUYER, to operate the Equipment in accordance
with manuals, directions or other operating specifications furnished by SELLER
to BUYER.
15.1.6
The modification, alteration or change of the Equipment or any component,
subassembly or part thereof without the prior written consent of SELLER.
<PAGE> 21
15.1.7
Any lack of quality of good workmanship, or any failure in performance, of any
product manufactured by BUYER, whether or not such product is manufactured,
inspected, or tested with the aid or use of the Equipment, training or any other
data or services furnished or recommended by SELLER.
15.1.8
Any installation, manufacture, and/or fabrication of the Equipment or any
component or part thereof by BUYER or any contractor, subcontractor or other
third party retained, hired, or employed by BUYER, whether directly or
indirectly.
The provisions of the section 15.0 shall survive the delivery of and payment for
all equipment under this Agreement.
With respect to the foregoing indemnification, BUYER expressly waives any and
all rights of immunity which it may be afforded under the Workers' Compensation
laws as enacted and amended from time to time in the state jurisdiction
(domestic or foreign) where the principal place of business of the BUYER is
located or where the BUYER has occasion to use or operate the Equipment, or
where the injury, loss or damage occurred.
15.2 INDEMNIFICATION BY SELLER
SELLER shall indemnify, defend, save and hold BUYER, including its directors,
officers, employees, agents and anyone else acting for or on its behalf,
harmless from and against any and all liability, claims, damage, loss, demands,
judgements and actions for personal injury including death or property damage,
which arise or are claimed to arise out of, result from or connected with:
15.2.1
SELLER'S sole negligence or intentional misconduct in the performance or
non-performance of its obligations under this Agreement.
15.2.2
Notwithstanding anything contained in this Agreement to the contrary, under no
circumstance(s) will SELLER'S obligation to indemnify BUYER in accordance with
this Agreement including any
<PAGE> 22
warranty obligation or obligation related to any claim of breach or any other
claim, exceed in the aggregate, the amount of loss to BUYER (excluding
consequential damages of any kind), or the Purchase Price to be paid by BUYER to
SELLER for the Equipment, whichever is less.
16.0 TECHNICAL INFORMATION AND CONFIDENTIALITY
16.1
BUYER understands it may acquire or have access to information under this
Agreement that is owned by SELLER and considered confidential. Concurrently,
SELLER understands it may acquire or have access to information under this
Agreement that is owned by BUYER and considered confidential.
This information may include research and development projects as well as data
relating to them, formulations, designs, products, processes, supplies, methods
of manufacture, drawings, specifications, ideas, inventions, and other
information, whether patentable or copyrightable or not (the "Technical
Information"). The Technical Information of the one party shall not be
furnished, disclosed, distributed or otherwise used by the other party, its
affiliates and/or subsidiaries, employees or agents for any purpose whatsoever
without the express written consent of the other party.
In no event shall the obligations of confidentiality extend more than five (5)
years from date of this Agreement.
17.0 BUYER'S RIGHT TO INSPECT
BUYER shall from time to time and during normal business hours and upon one week
prior notification have the absolute right as it deems fit, whether by itself,
its servants and/or agents to inspect the progress of fabrication of the
Equipment at the premises of SELLER and/or its contractors.
18.0 TAXES
BUYER shall be responsible for the payment, if any, of all sales and/or use
taxes imposed upon, or associated with the sale of the Equipment by the SELLER
to BUYER. To the extent BUYER is exempt from paying sales and/or use taxes,
BUYER will furnish SELLER with an appropriate tax exemption certificate.
<PAGE> 23
The price determined in paragraph two is the total price to be paid to SELLER by
BUYER inclusive of all taxes, fees, and duties and/or levies in the United
States.
19.0 NOTICES
Unless otherwise specified herein, all notices, requests or other communications
to or upon any of the parties hereto shall be in writing and shall be sent by
prepaid registered post, telex or cable. Any such notices, requests or other
communications to SELLER shall be sent to SELLER in the manner aforesaid.
Any such notices, requests or other communication to BUYER shall be sent to the
address of BUYER here above written. Any notice, request or other communication
sent by registered post shall be deemed to have been delivered at the time when
in the ordinary course of such post it would have been so delivered and in the
case of despatch by telex or cable on the business day immediately following the
date of despatch. The controlling language for all communication between the
parties hereto shall be English.
20.0 CAPTIONS
The captions herein are inserted for convenience only and shall not define,
limit, extend or describe the scope of the Agreement or affect the construction
hereof.
21.0 NOUNS AND PRONOUNS
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms and the singular form of names
and pronoun shall include the plural and vice-versa.
22.0 SEVERABILITY
If any provision hereof is held invalid or at variance with the present or
future requirements of the law applicable thereto, such provision alone shall
become inoperative, and the rights of the parties hereto shall in no manner be
prejudiced by reason of the inclusion of such provision in this Agreement.
The parties hereto shall negotiate in good faith to replace such unlawful
provision with a lawful provision which accomplishes to the fullest possible
extent the intent and purpose of the provision so declared unlawful.
<PAGE> 24
23.0 MERGER PROVISIONS
This Agreement constitutes the entire Agreement among the parties pertaining to
the subject matter hereof and supersedes all prior and contemporaneous
Agreements and understandings of the parties in connection therewith.
24.0 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original, but all of which taken together shall constitute
one and the same instrument, provided however that the English text of this
Agreement shall be considered the original version of this Agreement and shall
be binding upon the parties hereto.
25.0 EXHIBITS
Exhibits A, B, C, D, E, F, G, H, I, J, K, L, M, N, and O hereto shall be read
and construed as an essential part of this Agreement.
EXHIBIT A - General Machine Specifications
EXHIBIT B - General Machine Layout
EXHIBIT C - Selected Machine Conceptual Engineered Drawings
EXHIBIT D - Scope of Supply by BUYER
EXHIBIT E - Project Schedule
EXHIBIT F - Acceptance Tests and Documentation
EXHIBIT G - Operations to Be Controlled by the PLC
EXHIBIT H - Pricing EXHIBIT I - Spare Parts
EXHIBIT J - Pre-Installation Requirements
EXHIBIT K - Progressive Payment Schedule
EXHIBIT L - Installation Summary
EXHIBIT M - Training
EXHIBIT N - Freight / Shipping
EXHIBIT O - Plant Layout
26.0 AGREEMENT BINDING ON SUCCESSORS-IN-TITLE
This Agreement shall be binding on the successors-in-title of SELLER and the
successors-in-title of BUYER.
<PAGE> 25
27.0 ASSIGNABILITY
This Agreement and all rights and obligations hereunder shall not be assigned in
whole or in part by the SELLER without the prior written consent of the BUYER,
except that without such consent, SELLER may assign this Agreement to any
person, corporation or other entity to which SELLER or substantially all of
SELLER's business with respect to the Equipment, is transferred by merger,
consolidation, sale of assets or otherwise, or to any subsidiary or affiliated
corporation. The parties hereto hereby expressly agree that the restriction on
assignment contained in this Section does not affect the BUYER, provided,
however, and notwithstanding any assignment by BUYER.
BUYER shall remain liable in all respects concerning all obligations imposed
upon it under this Agreement, including without limitation that relating to the
payment of the Purchase Price set forth in Section 2.0.
28.0 FIELD AND TECHNICAL SUPPORT
SELLER will provide to BUYER field and technical support personnel plus living
expenses in the field, to supervise installation, trial runs and commissioning,
on a time and material basis at a cost of $65.00 per hour, per man. BUYER to
provide for field labor, field material, and associated erection costs for
installation of equipment.
Any payments to SELLER by BUYER under this paragraph shall be paid in lawful
United States currency, in accordance with expended amount. Invoices will be
mailed by SELLER every 2 weeks based upon actual accrued expenses at the rates
specified in this Agreement. Payment is due 7 days after receipt of invoice.
29.0 REPRESENTATION OF AUTHORITY
The parties further represent and warrant to the other that they have the full
and absolute authority to enter into this Agreement and the individual signing
this Agreement on their behalf has the authority to do so. This Agreement when
executed shall constitute the legally binding obligation of the parties hereto.
30.0 SOFTWARE TECHNOLOGY LICENSE
SELLER is the owner of certain proprietary and confidential computer software
technology used in connection with the operation and programming of the
Equipment. SELLER hereby grants to BUYER a fully paid up non-exclusive license
to use such technology only in connection with the Equipment which is the
subject of this Agreement. The grant of the license hereunder is conditioned and
contingent upon payment in full of the purchase price for the Equipment.
<PAGE> 26
This license expressly permits BUYER to deliver the Equipment, the computer
software technology, the drawings, specifications, instructions, and other
written materials to a third party who will maintain possession of all such
property and operate same for the benefit of BUYER under a written contract,
provided that such written contract restricts such third party from use of all
such property other than as permitted to BUYER according to the terms hereof.
This license expressly prohibits BUYER or any third party from manufacturing
another unit of the Equipment or any component thereof, or any variation of such
equipment or component.
ACC AUTOMATION CO.
/s/ Thomas A. Doland
- --------------------
SIGNATURE
Thomas A. Doland, President
- ---------------------------
NAME AND TITLE
7/16/97
- -------
DATE
WILSHIRE TECHNOLOGIES, INC.
/s/ John Van Egmond
- -------------------
SIGNATURE
President & CEO
- ---------------
NAME AND TITLE
7/28/97
- -------
DATE
<PAGE> 1
EXHIBIT 10.98
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT is made and entered into this 31st day of July,
1997, by and between Powell Products, Inc., a Colorado corporation ("Powell"),
and Wilshire Technologies, Inc., a California corporation, Alan R. Seacord
("Seacord"), Marc Peterson ("Peterson"), and Sarah Casey ("Casey").
WHEREAS, Powell has filed a lawsuit against Wilshire and Seacord and
Peterson which is pending in the United States District Court for the Northern
District of Texas, Dallas Division, Civil Action No. 396 CV3012-T (the "Civil
Litigation") where it has raised claims against Wilshire and Seacord and
Peterson for, inter alia, misappropriation of trade secrets, and has notified
Casey that it intends to seek to add her as a Defendant in the Civil Litigation
and assert claims against her for, inter alia, misappropriation of trade
secrets; and
WHEREAS, Powell and Wilshire, Seacord, Peterson, and Casey desire to
settle and compromise all of their claims or potential claims and disputes
against one another, including, but not limited to, the claims and counterclaim
which are the subject of the Civil Litigation.
NOW, THEREFORE, in consideration of the Premises, the terms and conditions
set forth below, the mutual benefits to be derived therefrom, and other good and
valuable consideration, the receipt and adequacy of which Powell and Wilshire,
Seacord, Peterson, and Casey all acknowledge, Powell and Wilshire, Seacord,
Peterson, and Casey agree as follows:
1. CASH PAYMENT. Wilshire shall pay to Powell, on or before August 1,
1997, in certified funds or by wire transfer, $75,000.00 which shall be
delivered or wired to the trust account of Davis & Ceriani, P.C.
2. PRODUCTION" AND "USE" INJUNCTION. The Court shall enter the
Injunction in the style and fashion attached as Exhibit "A," the terms of which
are hereby incorporated into this Agreement by this reference. The Court shall
retain jurisdiction over Powell and
<PAGE> 2
Wilshire and Seacord and Peterson and Casey for the purpose of enforcing the
Injunction. Powell and Wilshire and Seacord and Peterson and Casey shall file
the Stipulation in the style and fashion attached as Exhibit "B" requesting that
the Court add Casey as a Defendant, enter the Injunction, and dismiss Powell's
and Wilshire's respective claims, with prejudice, with each party to pay its or
his own costs and attorneys fees.
3. MUTUAL RELEASE. Upon Wilshire's payment of the amount set forth in
paragraph number 1 (above) and the Court's entry of the Injunction in the style
and fashion attached as Exhibit "A," Powell and Wilshire and Seacord and
Peterson and Casey shall make and execute the Mutual Release in the style and
fashion attached as Exhibit "C."
4. OTHERS. This Agreement shall not affect or prejudice in any way
Powell's claims or potential claims against any other person or entity,
including, without limitation, Jose Figueroa and Frederick W. Marks, III, a/k/a
Trey Marks.
5. JURISDICTION AND VENUE FOR ENFORCEMENT OF AGREEMENT AND
INJUNCTION/ATTORNEY'S FEES. Powell and Wilshire and Seacord and Peterson and
Casey hereby submit and consent to the jurisdiction of the United States
District Court for the Northern District of Texas, Dallas Division, for the
resolution of any disputes that may arise under this Agreement. The parties
agree the Court shall have exclusive jurisdiction with respect to the
enforcement of the Injunction the Court is to enter pursuant to paragraph number
2 (above) and shall also have exclusive jurisdiction over any dispute related in
any way to the Injunction or the Agreement. If Powell or Wilshire or Seacord or
Peterson or Casey files any litigation against the other related to this
Agreement or the Injunction, the prevailing party shall be entitled to recover
from the opposing party its or his reasonable costs and attorney's fees incurred
in connection with such litigation.
6. BINDING EFFECT. This Agreement, including the terms of the
Injunction, shall be binding on Powell, Wilshire, Alan R. Seacord, Marc
Peterson, Sarah Casey, and their respective heirs, successors and assigns, and,
without limiting the foregoing, any person or entity who purchases all, or
substantially all, of the assets of Wilshire Technologies, Inc.'s swab-making
<PAGE> 3
operation. However, a person or entity who purchases all, or substantially all,
of the assets of Wilshire Technologies Inc's swab-making business shall not be
prohibited from using any foam-tipped applicator or swab-making equipment which
it has acquired, designed or built, independently, provided that neither
Wilshire nor Seacord nor Peterson discloses any information to such purchaser in
breach of this Agreement or in violation of the Injunction, or otherwise
breaches this Agreement or violates the Injunction in connection with such
purchaser's acquisition, ownership or use of such equipment.
7. AUTHORITY. The undersigned warrant and represent that they have full
power and authority to execute this Agreement on behalf of the corporate parties
to this Agreement.
8. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
counterparts.
THE UNDERSIGNED, HAVING FIRST CONSULTED WITH COUNSEL, WARRANT AND REPRESENT THAT
THEY UNDERSTAND THIS AGREEMENT, THAT THEY HAVE ENTERED INTO IT VOLUNTARILY, AND
THAT THEY AGREE TO ALL ITS TERMS AND CONDITIONS.
WILSHIRE TECHNOLOGIES, INC.
/s/ John Van Egmond
-------------------
By: John Van Egmond
Its: President
/s/ Alan R. Seacord
-------------------
Alan R. Seacord, Individually
/s/ Marc Peterson
-----------------
Marc Peterson, Individually
/s/ Sarah Casey
---------------
Sarah Casey, Individually.
POWELL PRODUCTS, INC.
/s/ Stephen Robards
-------------------
By: Stephen Robards
Its: President
<PAGE> 4
MUTUAL RELEASE
Powell Products, Inc., hereby releases acquits and forever discharges,
Wilshire Technologies, Inc., and its officers and directors, and attorneys, Alan
R. Seacord, Marc Peterson, Sarah Casey, and its and their respective heirs,
successors and assigns, of and from any and all claims or potential claims and
causes of action, whether in law or in equity, for any damages, losses or other
injuries, of every kind or nature, known and unknown, which have or could arise
prior to the date hereof, including, but not limited to, any claims or causes of
action which were, or could have been, the subject of Powell Products, Inc. v.
Wilshire Technologies, Inc., U.S. District Court, Northern District of Texas,
Dallas Division, Civil Action No. 3.96-CV-3012-T (the "Civil Action").
Wilshire Technologies, Inc., Alan R. Seacord, Marc Peterson, and Sarah
Casey hereby release, acquit and forever discharge, Powell Products, Inc., its
officers and directors and attorneys, including Bruce E. Rohde and Davis &
Ceriani, P.C., and its and their respective heirs, successors and assigns, of
and from any and all claims or potential claims and causes of action, whether in
law or in equity, for any damages, losses or other injuries, of every kind or
nature, known and unknown, which have or could arise prior to the date hereof,
including, but not limited to, any claims or causes of action which were, or
could have been, the subject of the Civil Action.
WILSHIRE TECHNOLOGIES, INC.
/s/ John Van Egmond
-------------------
By: John Van Egmond
Its: President
<PAGE> 5
POWELL PRODUCTS, INC.
/s/ Stephen Robards
-------------------
By: Stephen Robards
Its: President
/s/ Alan R. Seacord
-------------------
Alan R. Seacord, Individually
/s/ Marc Peterson
-----------------
Marc Peterson, Individually
/s/ Sarah Casey
---------------
Sarah Casey, Individually
<PAGE> 6
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
POWELL PRODUCTS, INC.,
Plaintiff,
CIVIL ACTION NO.
v. 3:96-CV-3012-T
WILSHIRE TECHNOLOGIES, INC.
ALAN R. SEACORD, and MARC
PETERSON,
Defendants
INJUNCTION
The Court, having reviewed and considered the Stipulation For Entry of
Injunction between Plaintiff Powell Products, Inc. ("Powell") and Defendants
Wilshire Technologies, Inc. ("Wilshire") and Alan R. Seacord ("Seacord") and
Marc Peterson ("Peterson") and Sarah Casey ("Casey"), and being otherwise fully
advised in the premises, hereby ORDERS, ADJUDGES AND DECREES as follows:
1. Neither Wilshire nor Seacord nor Peterson nor Casey, nor their
respective representatives, shall make or participate in making, directly or
indirectly, in any way, foam-tipped cosmetic applicator making equipment, of any
kind, for five (5) years.
2. Wilshire shall not invent, design, build, or otherwise make, or
participate, directly or indirectly, in any way, in inventing, designing,
building, or otherwise making, any foam-tipped cosmetic applicator or
swab-making equipment for any third-party for eight (8) years.
<PAGE> 7
However, Wilshire may sell its own swab-making equipment as part of the sale of
its swab-making business or its sale of substantially all of the assets of its
swab-making business.
3. Neither Seacord nor Peterson nor Casey shall invent, design, build,
or otherwise make, or participate, directly or indirectly, in any way, in
inventing, designing, building, or otherwise making, any foam-tipped cosmetic
applicator or swab-making equipment for any third-party for six and one-half
(6 1/2) years.
4. Wilshire, and its employees and representatives and, without
limiting the foregoing, Alan R. Seacord, shall not make or participate, directly
or indirectly, in any way, in making, any new "automated" swab-making machines
for Wilshire's own use or benefit for three (3) years, except that Wilshire may
make additional "automated" swab-making machines which are identical, in all
material respects, it its present swab-making machine, a picture of which is
attached as Exhibit "A," and it may incorporate, in any such additional
machines, the modifications set out in the document attached as Exhibit "B." For
the purposes of this Injunction, the term "automated" shall mean equipment by
which swab parts, such as swab handles, are, after being loaded in the equipment
(perhaps manually), non-manually conveyed or moved to one or more manufacturing
or production stations (such as a foam application station, a foam sealing
station, or a sharing station), before the parts are removed (perhaps manually).
5. Neither Wilshire nor Seacord nor Peterson nor Casey, nor either of
their employees or other representatives, shall participate, directly or
indirectly, in any way, with Stephen, David or Alan Wormser, with any employee
of Wormser Corporation, with Frederick Marks, III a/k/a "Trey" Marks, with
Frederick Marks, II, with Jose Figueroa, with any employee of Accessories Plus,
with Lino Onofre, or with any employee of North-Plex Tool and Manufacturing, or
with any employee of Micro Designs, (which shall all be referred to collectively
as the "Accessories Plus Affiliates") in inventing, designing, building, or
otherwise making, any foam-tipped cosmetic applicators, foam-tipped swabs, or
foam tipped cosmetic applicator or foam-tipped swab-making equipment.
6. Notwithstanding the foregoing paragraph 4, Wilshire and Seacord and
Peterson and Casey may engage third parties to make "automated" (as that term is
defined in paragraph 4) swab-making equipment for it or them provided neither
Wilshire nor Seacord nor Peterson nor Casey nor their respective employers,
employees, or representatives provides any such third-
<PAGE> 8
party with any information that Wilshire or Seacord or Peterson or Casey has
obtained from any of the Accessories Plus Affiliates. If Wilshire or Seacord or
Peterson or Casey does engage a third party to make automated swab-making
equipment, Wilshire or Seacord or Peterson or Casey shall promptly identify such
third-party to Bruce E. Rohde, or whatever other attorney Powell's designates
provided such other attorney agrees to be bound by this Court's Agreed
Protective Order, and Wilshire or Seacord or Peterson or Casey shall cause such
third-party to provide Mr. Rohde or the other attorney with copies of all the
information Wilshire or Seacord or Peterson or Casey provides such third-party
to assist in making automated swab-making equipment; both the identity of any
third party and any information provided to Mr. Rohde or any other attorney
under this paragraph shall be treated as Confidential Information under the
terms of the agreed Protective Order entered in this case on November 1, 1996.
7. Except as expressly set out herein, Wilshire shall not be limited or
otherwise restricted from conducting its swab-making business as it sees fit.
<PAGE> 9
Done this 13th day of August, 1997.
BY THE COURT
/s/ Robert B. Maloney
----------------------------------
United States District Court Judge
Approved as to form and content:
DAVIS & CERIANI, P.C. BAKER & BOTTS, L.L.P.
By:/s/ Bruce E. Rohde By: /s/ Timothy S. Durst
------------------------------ --------------------------------
Bruce E. Rohde, CO Bar #11465 Timothy S. Durst
1350 17th Street, Suite 400 State Bar No. 00786924
Denver, Colorado 80202 2001 Ross Avenue, Suite 900
Telephone: (303) 534-9000 Dallas, Texas 75201-2980
Telefax: (303) 534-4618 Telephone: (214) 953-6500
Attorneys for Plaintiff Telefax: (214) 953-6503
Attorneys for Defendants Wilshire
SMYSER KAPLAN & VESELKA Technologies, Inc. and Alan R. Seacord
By: _____________________________
Lee L. Kaplan
700 Louisiana, Suite 2300
Houston, Texas 77002
(713) 221-2320
Attorneys for Plaintiff
By: /s/ Marc Peterson By: /s/ Sarah Casey
----------------------------- --------------------------------
Marc Peterson, Individually Sarah Casey, Individually
<PAGE> 10
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
POWELL PRODUCTS, INC.,
Plaintiff,
vs. CIVIL ACTION NO. 3:96-CV-3012-T
WILSHIRE TECHNOLOGIES, INC.,
ALAN R. SEACORD, MARC
PETERSON and SARAH CASEY,
Defendants.
STIPULATION FOR ENTRY OF INJUNCTION AND
DISMISSAL OF CLAIMS AND COUNTERCLAIMS
Plaintiff, Powell Products, Inc., and Defendants, Wilshire Technologies,
Inc., Alan Seacord, Marc Peterson, and Sarah Casey, by their respective
attorneys, stipulate and agree as follows:
1. Sarah Casey shall be joined as a Defendant and the parties agree
that she is a Texas resident, and diversity jurisdiction will not be affected
thereby;
2. The Court shall enter the Injunction submitted herewith; and
3. Plaintiffs' claims against Defendant Wilshire Technologies, Inc.,
Alan R. Seacord, and Marc Peterson, and Wilshire Technologies, Inc.'s
Counterclaim against Powell Products, Inc., shall all be dismissed, with
prejudice, each party to bear its, his or her own costs and attorney's fees.
STIPULATION FOR ENTRY OF INJUNCTION AND
DISMISSAL OF CLAIMS AND COUNTERCLAIMS
<PAGE> 11
DATED this 13th day of August, 1997
/s/ Robert B. Maloney
----------------------------------
United States District Court Judge
Approved as to form and content:
DAVIS & CERIANI, P.C. BAKER & BOTTS, L.L.P.
By: /s/ Bruce E. Rohde By: /s/ Timothy S. Durst
------------------------------ --------------------------------
Bruce E. Rohde Timothy S. Durst
Bar No. 11465 State Bar No. 00786924
1350 17th Street, Suite 400 2001 Ross Avenue, Suite 900
Denver, Colorado 80202 Dallas, Texas 75201
(303) 534-9000 (214) 953-6500
(303) 534-4618 Fax (214) 953-6503 Fax
Attorneys for Plaintiff Attorneys for Defendants
Wilshire Technologies, Inc.
and Alan R. Seacord
/s/ Marc Peterson /s/ Sarah Casey
- ---------------------------------- ------------------------------------
Marc Peterson, Individually Sarah Casey, Individually
STIPULATION FOR ENTRY OF INJUNCTION AND
DISMISSAL OF CLAIMS AND COUNTERCLAIMS
<PAGE> 1
EXHIBIT 10.99
EQUIPMENT SUPPLY AGREEMENT
This Equipment Supply Agreement ("this Agreement") is made effective as of
the 16th day of September, 1997 by and between Calgon Carbon Corporation, doing
business through its VARA International division ("VARA") with a place of
business at 1201 19th Place, Vero Beach, Florida 32960, and Wilshire
Technologies, Inc. ("WTI") with a place of business at 5441 Avenida Encinas,
Suite A, Carlsbad, California.
WHEREAS, VARA is engaged in the manufacture of capital equipment; and
WHEREAS, WTI is engaged in the manufacture of gloves and other products;
and
WHEREAS, VARA desires to design, build and supply a solvent recovery
system for WTI and WTI desires to purchase such a system from VARA.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter contained, the parties hereto agree as follows:
1. THE EQUIPMENT
The VARA equipment (the "Equipment") which is the subject of this
Agreement is a solvent recovery system as further identified on Exhibit A
attached hereto.
2. EQUIPMENT PRICE
The price to be paid by WTI for the Equipment shall be the amount of
$942,000.00.
3. TERMS OF PAYMENT
The terms of payment for the Equipment shall be as follows:
3.1 15% payment made to VARA by November 15, 1997 - Net 30.
3.2 75% payment due based upon notification that the Equipment is ready
for shipment -- February 1998 -- Net prior to shipment.
3.3 remaining 10% due and payable upon WTI's acceptance of the Equipment
(but shall be paid 90 days from date of shipment in the event that
the acceptance test of the Equipment is delayed solely due to the
responsibility of WTI).
<PAGE> 2
4. DELIVERY
The Equipment shall be delivered F.O.B. point of destination (i.e., WTI's
factory) no later than the first week of February, 1998. WTI shall reimburse
VARA for all freight charges at cost. Time is of the essence.
5 TITLE AND RISK OF LOSS
Title to and risk of loss of the Equipment shall pass to WTI upon delivery
to the F.O.B. point of destination.
6. SERVICE AND SUPPORT
The Equipment price includes (at no additional cost):
6.1 a one year labor service contract, at no additional cost, which
covers two (2) site visits (excluding travel costs incurred by VARA
representatives) during the first year of operation for the purpose of
subsequent Equipment operation follow-up, additional training, and other related
activities required by WTI;
6.2 in-house computer remote monitoring for system analysis, as required
(duration of one year from date of acceptance of the Equipment);
6.3 an additional ten (10) mandays, less travel and living expenses, for
construction supervision/management to used as deemed appropriate by WTI.
6.4 an additional ten (10) days of Equipment startup supervision,
including (two) (2) days of service training at WTI's site. Training materials
shall also be supplied at no extra charge.
7. LOSS, DAMAGE OR DELAY
VARA shall not be liable for loss, damage, detention or delay resulting
from any causes beyond its reasonable control such as fire, flood, strike or
other labor difficulty, lock out, priority requests of any government or
department, transportation shortage or delay, wreck or inability to obtain labor
or material from VARA's usual sources.
8. WARRANTY
8.1 VARA warrants that the Equipment sold hereunder shall be free from
defects in materials and workmanship and conform to the applicable
specifications for a period of eighteen (18) months from date of shipment or one
year from the date of acceptance, whichever occurs first. This warranty does not
apply to problems associated with normal wear and tear, improper maintenance,
negligence, misuse, abuse, or the failure to operate the Equipment in strict
accordance with the
2
<PAGE> 3
operating and maintenance plan provided. The foregoing warranty excludes
removal, reinstallation, and freight for Equipment components not manufactured
by VARA.
8.2 The Equipment as supplied by VARA, has been specifically designed to
handle the design basis furnished by the customer. Any changes, modifications or
additions to this design basis or electronic program modifications to the VARA
supplied control system, without written VARA approval, will result in a void of
warranties and process guarantees.
8.3 THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES OF QUALITY, WHETHER WRITTEN, ORAL OR IMPLIED (INCLUDING ANY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR PURPOSE).
9. INDEMNIFICATION
Each party will indemnify and save the other party harmless at all times
against any liability on account of any and all claims, damages, lawsuits,
litigation, expenses, counsel fees, and compensation arising out of property
damages or injuries (including death) except to the extent caused by the
negligence of the other party.
10. LIMITATION OF LIABILITY
The liability of VARA and WTI for any cause of action arising out of this
transaction, including but not limited to breach of warranty, negligence and/or
indemnification, is expressly limited to a maximum of the Equipment purchase
price. All claims of whatsoever nature shall be deemed waived unless made in
writing within forty-five (45) days of the occurrence giving rise to the claim.
In no event shall either party be liable to the other under this Agreement for
any indirect, incidental (including labor costs), or consequential damages.
11. PATENTS
11.1 VARA shall at its own expense defend, or at its option settle, any
claim, suit or proceeding brought against WTI based on an allegation that the
Equipment or any part supplied hereunder constitutes a direct or contributory
infringement of any claim of a United States patent. This obligation shall be
effective only if WTI shall have made all payments then due hereunder or if VARA
is notified promptly in writing and given authority, information and assistance
for the defense of such claim, suit or proceeding. In the event equipment or
parts supplied by VARA hereunder become the subject of a claim, suit or
proceeding for infringement of a United States patent, or in the event of any
adjudication that such product or part infringes a United States patent, then
VARA shall at its option either (a) procure the right to continue using said
equipment or part thereof; or (b) replace it with non-infringing equipment; or
(c) modify it so that it becomes non-infringing; or (d) as a last resort, remove
it and refund the purchase price and the transportation and installation costs
thereof.
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11.2 This patent indemnity does not apply to the following:
a. patented processes formed by the equipment in conjunction with
equipment not sold by VARA or another product produced thereby;
b. equipment supplied according to a design other than that of
VARA which is required by WTI;
c. combinations of the equipment with another product not
furnished hereunder unless VARA is a contributory infringer;
d. any settlements of a suit or proceeding made without VARA's
written consent.
12. CHOICE OF LAW
The construction interpretation performance of this Agreement and all
transactions under it shall be governed by the domestic law of the California.
13. INTEGRATION
This Agreement contains the entire understanding of the parties with
respect to the sale of the products covered hereunder. There are no agreements,
restrictions, promises, representations, warranties, covenants or understandings
between the parties with respect hereto, other than those expressly set forth.
This Agreement supersedes all prior understandings and purchase order terms
between the parties with respect to the sale of the products covered by this
Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement.
CALGON CARBON CORPORATION WILSHIRE TECHNOLOGIES, INC.
VARA INTERNATIONAL DIVISION
By: /s/ Michael Thomas By: /s/ John Van Egmond
------------------ -------------------
Michael Thomas John Van Egmond
Title: President Title: President
Chief Executive Officer
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SCHEDULE A
THE EQUIPMENT
(Technical Description and Specification)
5
<PAGE> 1
EXHIBIT 10.100
DEVELOPMENT AND SUPPLY AGREEMENT
This Development and Supply Agreement ("this Agreement") is made effective on
the 18th day of September, 1997 ("Effective Date") by and between Wilshire
Technologies, Inc. ("WTI"), a California corporation with a place of business at
5441 Avenida Encinas, Suite A, Carlsbad, California 92008 and PTG Medical LLC
("PTG"), a California limited liability company with a place of business at 2810
7th Street, Berkeley, California 94710.
RECITALS
WHEREAS, WTI is a manufacturer and supplier of polyurethane, breathable gloves;
WHEREAS, PTG is a manufacturer of a proprietary hydrophilic glove polymer
material developed in a strategic business alliance with WTI;
WHEREAS, WTI desires to purchase such proprietary polymer material from PTG; and
WHEREAS, PTG wishes to supply WTI's requirements of the polymer material.
NOW THEREFORE, the parties hereto agree as follows:
1.0 DEFINITIONS.
1.1 Escrow Arrangement shall mean the deposit of the PTG proprietary
information and other materials related to the Product Technology pursuant to
the provisions of the three party technology escrow agreement among Data
Security International, Inc. ("DSI"), WTI and PTG attached to this Agreement as
Exhibit D.
1.2 Mexico Plant shall mean WTI's Tijuana, Mexico production facility
located at Avenida Ferocarril Km, 14.5 Bodega 9-10, Centro Industrial Limon, Los
Pinos Tijuana, B.C. Mexico.
1.3 Minimum Quantity shall mean the minimum quantity of the Products
(solid and liquid) which WTI is obligated to purchase from PTG, on a quarterly
basis, as set forth on Exhibit B attached hereto.
1.4 Product(s) shall mean the hydrophilic glove polymer material
developed by PTG in a strategic business alliance with WTI known as
"MPU-12031"and/or any solvent based, polyurethane glove material made with all
and only the reactants which are included in MPU-12031 in any ratio.
1.5 Product Technology shall mean the Product formula, technical data,
manufacturing procedures and other know-how and data which is reasonably
required by WTI to establish an alternative manufacturing source for the
Product.
<PAGE> 2
1.6 Specification shall mean the Product specification attached to this
Agreement as Exhibit A.
2.0 TERM.
2.1 The term of this Agreement shall be for a period of five (5) years
(the "Initial Term") commencing on the Effective Date above.
2.2 Following the expiration of the Initial Term, this Agreement shall
automatically renew on a year-to-year basis for successive one (1) year renewal
periods.
2.3 PTG or WTI may preclude the automatic renewal of this Agreement by
providing written notice to other party of its intention not to renew or
otherwise extend this Agreement (which notice must be received by the other
party no later than twelve months prior to the expiration of the Initial Term or
any annual period thereafter).
3.0 SUPPLY AND PURCHASE.
3.1 During the term of this Agreement, WTI agrees that it will purchase
the Products exclusively from PTG.
3.2 Provided that WTI performs its material obligations under this
Agreement and except as set forth in Section 3.3 below, PTG agrees that it will
not supply the Products to any other manufacturer for the production of gloves
during the term of this Agreement. For the purposes of this Section 3.2, Product
shall also be deemed to include a surface-modifying end group ("SME") extension
of the Product as a replacement for some or all of the monofunctional chain
termination agents of the original Product.
3.3 WTI shall purchase, and PTG will use its best efforts to supply, the
Annual Minimum Quantity and any additional quantities forecasted by WTI pursuant
to Section 4.0 below.
3.3.1 Concurrently with the execution of this Agreement, WTI
shall deliver to PTG its purchase order for the quantity of Products to be
supplied in the first six (6) months under this Agreement. Such purchase order
will be subject to the provisions of Section 4.0 below.
3.3.2 No later than three (3) calendar months prior to the
commencement of the second annual period ("second supply year") following the
Effective Date, and each succeeding supply year during the term of this
Agreement, WTI and PTG shall agree upon the Annual Minimum Quantity for the
applicable supply year. In the event that the parties fail to reach agreement on
the Annual Minimum Quantity for a particular succeeding supply year, the Annual
Minimum Quantity for such year shall be the Annual Minimum Quantity established
in the prior supply year.
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<PAGE> 3
3.3.3 In the event that WTI shall fail to meet the Annual Minimum
Quantity for a particular supply year, and any supply year thereafter, PTG shall
be entitled, at its option, to continue to supply WTI the Products on a
nonexclusive basis or to terminate this Agreement. Notwithstanding the
foregoing, WTI shall be entitled to ninety (90) days prior written notice of
PTG's intention to take such action, and such notice shall permit WTI to cure
its failure to meet its Annual Minimum Quantity purchase requirement by
purchasing the Products then remaining. The sole and exclusive remedy of PTG for
WTI's failure to meet the Annual Minimum Quantity purchase requirement in the
second supply year or thereafter (i.e., purchase of Products not delivered to
WTI) shall be conversion of the Agreement to a non-exclusive Product supply
arrangement (in which case WTI will continue to be subject to the provisions of
Section 3.1), or termination of the Agreement in the manner provided above. In
no event shall WTI be obligated in such event to purchase any remaining Annual
Minimum Quantity purchase requirements.
4.0 PURCHASE ORDERS/FORECASTS
During the first week of each month, WTI shall also forward to PTG a
twelve (12) month rolling forecast of Product requirements (in increments which
are integer multiples of a current batch) designating the quantities of the
Products which WTI intends to purchase in such period. Product requirements
scheduled for delivery in months 1, 2 and 3 of the rolling forecast will be
considered firm orders and may not be rescheduled or canceled by WTI. However,
Products scheduled for delivery in months 4, 5, and 6 of the rolling forecast
may be adjusted up or down in quantity by up to 10% (in increments which are
integer multiples of a current batch) by WTI, provided that WTI shall fulfill
its obligation to purchase Minimum Quantities. The quantities forecast in the
remaining months (i.e., months 7-12) shall be considered estimated requirements
only.
5.0 DELIVERY/RISK OF LOSS
5.1 Delivery of all Products ordered by WTI shall be made F.O.B. point
of shipment. WTI shall be responsible for the payment of all freight and
insurance charges.
5.2 Title and risk of loss to the Products shall pass to WTI when PTG
gives possession to the carrier at the F.O.B. point of shipment.
6.0 PRICES AND PAYMENT
6.1 The unit prices for the Products shall decline as the volume
purchased increases, and are listed on Exhibit C attached hereto. Such prices
shall be fixed and firm during the term of this Agreement, provided that such
prices may shall be adjusted upward or downward on a bi-annual basis in
proportion to any cost increases (or decreases) caused by (i) raw materials
price increases (or decreases), (ii) direct labor increases (or decreases), or
(iii) indirect labor [as later defined by the
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<PAGE> 4
parties consistent with the application of generally accepted accounting
principles]. In no event shall WTI be obligated to pay price increases related
to cost increases which were within the reasonable control of PTG.
6.2 In the event that PTG and WTI fail to agree on the prices to be paid
for the Products following any bi-annual review conducted pursuant to Section
6.1 above, the dispute shall be resolved by an arbitrator pursuant to the
provisions of Section 17 below.
6.3 PTG shall have the option from time to time to propose price
increases to WTI related to cost increases related to items outside the scope of
Section 6.1 above. WTI shall negotiate in good faith such price increase
proposals with PTG but shall be under no obligation to accept any such price
increase proposal.
6.4 The terms of payment for the Products shall be net 30 days from the
date of invoice.
7.0 TECHNICAL ASSISTANCE AND SETUP.
7.1 PTG shall provide on-site assistance for a period of ten (10)
man-days at the Mexico Plant at no additional cost to WTI to facilitate
prepolymer scale-up.
7.2 Exclusive of the services provided under Section 7.1 above, PTG
shall allot 10 man days for technical assistance to be provided to WTI at WTI's
request over the period commencing on the Effective Date and ending eighteen
(18) months from the Effective Date.
7.3 WTI shall pay PTG a one-time setup fee in the amount $25,000 upon
execution of this Agreement.
8.0 TESTING PROCEDURES.
WTI and PTG shall jointly develop the quality control testing procedures
for the Products. Such procedures shall be reduced to writing promptly after
they are developed. All Products which pass, or Products samples of which pass,
such testing procedures shall be conclusively deemed to meet and comply with the
Specification at the time of delivery. PTG shall promptly replace at its cost
any Product which fails such testing procedures following the delivery of the
Product, and such replacement shall be the sole remedy for failure to meet the
Specification at the time of delivery. WTI shall be conclusively deemed to have
accepted any Product if it does not give written notice of rejection within ten
(10) days after the test procedure has been conducted with respect to that
Product or a sample thereof. Procedures must provide that test is to be
conducted promptly on delivery.
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<PAGE> 5
9.0 WARRANTIES.
9.1 PTG warrants that the Products as shipped will be free from defects
in material and workmanship and conform to the Specification for a period of six
(6) months from the date of shipment (the "Warranty Period"). PTG shall promptly
replace at its cost any defective or nonconforming Product during the Warranty
Period, and such replacement shall be the sole and exclusive remedy for breach
of the Product warranty. PTG HEREBY DISCLAIMS ALL OTHER WARRANTIES, WHETHER
EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR PURPOSE.
9.2 PTG warrants that it will manufacture the Products and otherwise
operate in accordance with Good Manufacturing Practices ("GMP") as such
practices relate to raw material supply.
10.0 INTELLECTUAL PROPERTY.
10.1 In the event that the Product or any part thereof should infringe
any copyright, trademark, trade secret or U.S. patent of any third party, PTG
shall have the responsibility at its option and expense to: (i) procure for WTI
the right or license to continuing using the Product as delivered; or (ii)
modify the Product so as to render it non-infringing (and still conform to the
Specification), or as a last resort, (iii) accept the return of the Product and
grant WTI an equitable adjustment to the purchase price paid by WTI.
10.2 Notwithstanding Section 10.1 above, PTG shall have no liability for
any infringement solely based on the combination or use of the Product in other
products (i.e., gloves).
11.0 PATENT COOPERATION.
11.1 WTI acknowledges that the Product Technology existing as of the
date of this Agreement is the property of PTG.
11.2 Any improvements to the Product Technology or inventions acquired
or developed during the term of the Agreement which are necessary or useful for
the manufacture of gloves from the Products, or which the parties otherwise
mutually identify as directly related to the Products (together referred to as
"Subsequent Inventions"), shall be subject to the following provisions:
11.2.1 Neither PTG and WTI will file any patent application
covering any Subsequent Invention without the consent of the other party, which
consent shall not be unreasonably withheld;
11.2.2 PTG and WTI will execute such assignments and other
instruments as may be necessary, and otherwise cooperate, to cause any patent on
any Subsequent Invention to be owned jointly by WTI and PTG ("Joint Patents");
5
<PAGE> 6
11.2.3 WTI will grant to PTG under such Joint Patents an
exclusive, royalty-free, worldwide, assignable license (including the right to
sublicense) to make, have made, use and distribute any and all products derived
from such Joint Patents (except products covered by one or more claims relating
to manufacturing processes for gloves which patent exploitation rights shall be
retained as exclusive to WTI); and
11.2.4 PTG will grant to WTI under such Joint Patents an
exclusive, royalty-free, worldwide, assignable license (including the right to
sublicense) to make, have made, use and distribute any and all products derived
from such Joints Patents (except products covered by one or more claims relating
to compositions of matter which patent exploitation rights shall be retained as
exclusive to PTG).
11.3 WTI and PTG will grant to each other such other or further licenses
under the Joint Patents as may be necessary for the use, enjoyment and
exploitation of the rights granted under this Agreement.
12.0 CONFIDENTIALITY.
12.1 To the extent that WTI and PTG must disclose confidential
information not generally known in the industry to each other as a consequence
of the performance of this Agreement, the parties shall clearly identify such
information upon disclosure. If such disclosure is made in writing, each page
thereof containing such information shall be marked with the legend
"Confidential Information" or similar designation. If such disclosure is made
orally or visually, each party shall identify the data or material disclosed as
"Confidential Information" or similar designation at the time of disclosure, and
such oral or visual disclosure shall be reduced to writing promptly by the
disclosing party no later than thirty (30) days after disclosure. Each party
shall use such Confidential Information only for the purposes of fulfilling its
obligations under this Agreement and shall take reasonable precautions to limit
the disclosure of Confidential Information. Such information shall be disclosed
only to those employees, agents, representatives and suppliers having a need to
know Confidential Information in connection with their performance of this
Agreement.
12.2 Notwithstanding the foregoing, Information shall not be deemed to
be Confidential Information if:
(a) the Information was known to a party prior to its receipt of
the Information from the other party;
(b) the Information became known or available to a party from an
independent third party source under no obligation of secrecy with respect
thereto;
(c) the Information became part of the public domain in any way
without breach of the Agreement; and
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<PAGE> 7
(d) the Information was disclosed by a party in accordance with
the written approval of the other party.
13.0 ESCROW OF PRODUCT TECHNOLOGY.
13.1 Within thirty (30) days following the Effective Date, PTG will
deliver to DSI ("Escrow Agent") the Product formula, and the remainder of the
Product Technology will be delivered within six (6) months following the
Effective Date (together referred to as "Escrow Materials") pursuant to the
terms of the escrow agreement ("Escrow Agreement") attached hereto as Exhibit D.
Such Escrow Materials will include all of the items listed on Schedule A to the
Escrow Agreement. Escrow Agent will not deliver the Escrow Materials to WTI
unless and until a condition of release ("Release Conditions") occurs and the
conditions of the Escrow Agreement have been satisfied. The Release Conditions
are defined in Section 13.3 below. All costs and expenses related to the
establishment of the Escrow Agreement will be the responsibility of WTI.
13.2 During the term of the Escrow Agreement, WTI shall have the right
to verify the Escrow Materials at Escrow Agent's site for accuracy, completeness
and sufficiency, and to confirm that it complies to the requirements of the
Escrow Agreement. PTG will promptly correct any deficiencies noted by WTI. Such
verification shall be performed by a mutually acceptable third party who has
executed a confidentiality agreement acceptable to PTG and WTI.
13.3 Subject to the provisions of the Escrow Agreement relating to
disputing the same, any of the following events shall be Release Conditions for
purposes of this Section:
(a) PTG breaches a material provision of this Agreement and fails
to cure such breach within the time period specified in Section 15 below; or
(b) PTG fails to continue to do business in the ordinary course,
files or has filed against it a petition under the Federal Bankruptcy Code,
becomes insolvent or has a receiver appointed for all or a substantial part of
its business.
14.0 MANUFACTURING LICENSE
14.1 In the event that PTG declines to renew or otherwise extend the
Agreement pursuant to Section 2 above, WTI shall be entitled to exercise a
non-exclusive, irrevocable world-wide license under the Product Technology and
any patents obtained pursuant to Section 11.0 to (i) make or have made the
Products, and (ii) make, have made, sell and distribute gloves made from the
Products. The foregoing shall include a license to exploit all patent,
copyright, trade secret and other intellectual property rights of PTG necessary
to facilitate the grant and implementation of such manufacturing license. The
term of the manufacturing license will be for a period of thirty (30) months
from the effective date of termination of this Agreement.
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14.2 Upon WTI's exercise of such license, PTG shall disclose and
transfer all Product Technology to WTI, including but not limited to all
materials and documentation which compose the Escrow Materials referenced in
Section 12 above, not later than 15 days following PTG's receipt of WTI's
written notice of intention to exercise the manufacturing license. At the time
of such notification, WTI shall also pay a fee to PTG in the amount of $10,000
to compensate PTG for all costs incurred to transfer such data and to provide 15
days of technical assistance. The confidentiality provisions of this Agreement
shall apply to the Product Technology, and WTI shall comply with such
provisions, which shall not be terminated by any termination or this Agreement,
making only such disclosure as is necessary to properly exercise the license
rights hereunder, and then only after the party to whom the disclosure has been
made executes in favor of PTG as confidentiality agreement similar to that
contained in this Agreement.
14.3 In the event that WTI manufactures the Product internally, the
foregoing manufacturing license shall be granted on royalty-free basis. If WTI
elects to manufacture the Product using a third party supplier or vendor, WTI
shall pay PTG a royalty of 12.5% of the value of any purchase orders given by
WTI to such third party supplier or vendor.
15.0 TERMINATION
Notwithstanding the provisions of Section 2, this Agreement may be
terminated immediately by written notice upon the occurrence of any of the
following events:
(i) by PTG or WTI in the event proceedings are instituted by or against
the other party in bankruptcy or under in solvency laws, and such proceeding is
not dismissed within sixty (60) days; or
(ii) by PTG or WTI in the event of a breach of any material term of the
Agreement by the other party and failure to cure such breach within forty-five
(45) days after such party's receipt of written notice detailing such breach.
Material terms of the Agreement shall include, but not be limited to the
purchase of Minimum Quantities, the supply of the Products as described in
Section 3.0, and the Warranties described in Section 9.0.
The obligations set forth in Sections 10.0, 12.0, 16.0, 17.0, and 18.0
shall expressly survive any termination of this Agreement.
16.0 ARBITRATION
Any and all controversies or disputes between the parties arising under
any Section of this Agreement shall be submitted to an arbitrator for final and
binding resolution in accordance with the commercial arbitration rules of the
American Arbitration Association. The site of the arbitration shall be at San
Diego, California and the law of the State of California shall be applied by the
arbitrators.
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17.0 LIMITATION OF LIABILITY
IN NO EVENT WHATSOEVER SHALL PTG OR WTI OR ANY OF THEIR AFFILIATES OR
ANY OF THEIR AGENTS, EMPLOYEES, OFFICERS, DIRECTORS OR SHAREHOLDERS, BE LIABLE
FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL DAMAGES, WHETHER FOR BREACH OF THIS
AGREEMENT OR BREACH OF WARRANTY OR BREACH OF ANY OTHER LEGAL DUTY, ARISING UNDER
THIS AGREEMENT OR RELATED IN ANY WAY TO THE TRANSACTIONS CONTEMPLATED BY IT.
18.0 GENERAL LIABILITY INSURANCE COVERAGE.
WTI shall add PTG as an "additional insured" under the coverage of its
general liability policy which shall have the coverages and policy limits as set
forth in the certificate of insurance attached hereto as Exhibit E. Further, WTI
shall maintain such coverage during the term of this Agreement. PTG understands
and acknowledges that such general liability coverage is written on an
"occurrence" basis. In the event of a termination of this Agreement, WTI shall
continue to maintain such general liability coverage (including additional
insured coverage for the benefit of PTG) for a period of one (1) year from the
effective date of termination.
19.0 GENERAL
19.1 Force Majeure. Neither PTG nor WTI shall be liable for failure to
perform or for delay in performance due to fire, flood, strike, act or God, act
of any governmental authority, embargo or other reasonably unforeseeable cause.
In the event of delay in performance due to any such cause, the date of delivery
or time for completion will be extended by a period of time reasonably necessary
to overcome the effect of such delay. This provision shall not, however, operate
to excuse any delay in the performance of any obligation to pay money.
19.2 Notices. All notices permitted or required under this Agreement
shall be sent via facsimile, certified mail or courier to the signature parties
at the addresses set forth above.
19.3 Independent Contractor Status. Nothing contained in this Agreement
shall be construed as creating a partnership or joint venture between the
parties. The relationship of PTG to WTI shall at all times be that of an
independent contractor. Neither party to this Agreement shall have any implied
or express rights or authority to assume or create any obligations on behalf of
or in the name of the other party.
19.4 Assignment. This Agreement and the mutual obligations and duties of
the parties hereunder may not be assigned or transferred by either party without
the prior written consent of the other party to this Agreement, except that
either party may assign this Agreement in connection with a merger or the sale
of substantially all the assets of such party, provided that the assignee is at
least as capable, financially and otherwise, of performing this Agreement as the
assigning party at that time.
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19.5 Entire Agreement. This Agreement (including the referenced
Exhibits) contains the complete understanding of the parties with respect to the
development, manufacture and sale of the Products. This Agreement supersedes all
previous agreements and understandings between the parties with respect to the
subject of the Agreement including but not limited to the September 10, 1996
letter between James Klingler and James Smith, and may be amended or
supplemented only by another writing signed by the parties.
19.6 Warrant. No later than five (5) days following the joint execution
of this Agreement by WTI and PTG, WTI shall deliver the Warrant Agreement to PTG
in the form attached hereto as Exhibit F.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives.
WILSHIRE TECHNOLOGIES, INC. PTG MEDICAL LLC
By: /s/ John Van Egmond By: /s/ James W. Smith
-------------------------- ----------------------------
Title: President & CEO Title: Executive Vice President
----------------------- -------------------------
Date: August 15, 1997 Date: September 18, 1997
----------------------- -------------------------
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EXHIBIT 10.100
DEVELOPMENT AND SUPPLY AGREEMENT
BETWEEN WTI AND PTG DATED SEPTEMBER 18, 1997
EXHIBIT A
"PROVISIONAL"
Product Specification
<PAGE> 12
DEVELOPMENT AND SUPPLY AGREEMENT
BETWEEN WTI AND PTG DATED SEPTEMBER 18, 1997
EXHIBIT B
Minimum Purchase Requirements
<TABLE>
<CAPTION>
Production Polymer Minimum
Period Description Units Purchased
- ------ ----------- ---------------
<S> <C> <C>
From the Effective Date 19% Solids 2,500 Gallons/Quarter
of this Agreement and or or
for 12 months thereafter 100% Solids 4,000 Pounds/Quarter
</TABLE>
<PAGE> 13
DEVELOPMENT AND SUPPLY AGREEMENT
BETWEEN WTI AND PTG DATED SEPTEMBER 18, 1997
EXHIBIT C
Product Prices
<TABLE>
<CAPTION>
Minimum
Description Order Quantity Unit Price
- ----------- -------------- ----------
Pilot Line
- ----------
<S> <C> <C>
19% Solids 2,500 Gallons/Quarter $36.00 Per Gallon
100% Solids 4,000 Pounds/Quarter (To Be Determined)
Production Line
- ---------------
100% Solids 18,000 Pounds/Quarter $11.35 Per Pound
100% Solids 36,000 Pounds/Quarter $10.00 Per Pound
100% Solids 54,000 Pounds/Quarter $ 9.00 Per Pound
</TABLE>
<PAGE> 14
EXHIBIT 10.100
EXHIBIT D
PREFERRED ESCROW AGREEMENT
Account Number 1620003-00001-2309040
This Agreement is effective September 18, 1997 among Data Securities
International, Inc. ("DSI"), PTG Medical LLC ("Depositor") and Wilshire
Technologies, Inc. ("Preferred Beneficiary"), who collectively may be referred
to in this Agreement as "the parties."
A. Depositor and Preferred Beneficiary have entered or will enter into a
Development and Supply Agreement, regarding certain proprietary technology of
Depositor (referred to in this Agreement as "the Supply Agreement").
B. Depositor desires to avoid disclosure of its proprietary technology except
under certain limited circumstances.
C. The availability of the proprietary technology of Depositor is critical to
Preferred Beneficiary in the conduct of its business and, therefore, Preferred
Beneficiary needs access to the proprietary technology under certain limited
circumstances.
D. Depositor and Preferred Beneficiary desire to establish an escrow with DSI to
provide for the retention, administration and controlled access of the
proprietary technology materials of Depositor.
E. The parties desire this Agreement to be supplementary to the Supply Agreement
pursuant to 11 United States [Bankruptcy] Code, Section 365(n).
ARTICLE 1 -- DEPOSITS
1.1 Obligation to Make Deposit. Upon the signing of this Agreement by the
parties, Depositor shall deliver to DSI the proprietary information and other
materials ("deposit materials") required to be deposited by the Supply Agreement
or, if the Supply Agreement does not identify the materials to be deposited with
DSI, then such materials will be identified on an Exhibit A. If Exhibit A is
applicable, it is to be prepared and signed by Depositor and Preferred
Beneficiary. DSI shall have no obligation with respect to the preparation,
signing or delivery of Exhibit A.
1.2 Identification of Deposit Materials. Prior to the delivery of the deposit
materials to DSI, Depositor shall conspicuously label for identification each
document. Additionally, Depositor shall complete Exhibit B to this Agreement by
listing each such deposit materials by the item label description, the material
and the quantity. The Exhibit B must be signed by Depositor and delivered to DSI
with the deposit materials. Unless and until Depositor makes the initial deposit
with DSI, DSI shall have no obligation with respect to this Agreement, except
the obligation to notify the parties regarding the status of the deposit account
as required in Section 2.2 below.
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<PAGE> 15
1.3 Deposit Inspection. When DSI receives the deposit materials and the Exhibit
B, DSI will conduct a deposit inspection by visually matching the labeling of
the tangible media containing the deposit materials to the item descriptions and
quantity listed on the Exhibit B. In addition to the deposit inspection,
Preferred Beneficiary may elect to cause a verification of the deposit materials
in accordance with Section 1.6 below.
1.4 Acceptance of Deposit. At completion of the deposit inspection, if DSI
determines that the labeling of the deposit materials matches the item
descriptions and quantity on Exhibit B, DSI will date and sign the Exhibit B and
mail a copy thereof to Depositor and Preferred Beneficiary. If DSI determines
that the labeling does not match the item descriptions or quantity on the
Exhibit B, DSI will (a) note the discrepancies in writing on the Exhibit B; (b)
date and sign the Exhibit B with the exceptions noted; and (c) provide a copy of
the Exhibit B to Depositor and Preferred Beneficiary. DSI's acceptance of the
deposit occurs upon the signing of the Exhibit B by DSI. Delivery of the signed
Exhibit B to Preferred Beneficiary is Preferred Beneficiary's notice that the
deposit materials have been received and accepted by DSI.
1.5 Depositor's Representations. Depositor represents as follows:
a. Depositor lawfully possesses all of the deposit materials
deposited with DSI;
b. With respect to all of the deposit materials, Depositor has the
right and authority to grant to DSI and Preferred Beneficiary
the rights as provided in this Agreement;
c. The deposit materials are not subject to any lien or other
encumbrance;
d. The deposit materials consist of the proprietary information and
other materials identified either in the Supply Agreement or
Exhibit A, as the case may be; and
e. The deposit materials are readable and useable in their current
form or, if the deposit materials are encrypted, the decryption
tools and decryption keys have also been deposited.
1.6 Verification. During the term of the Escrow Agreement, and as expressly
provided in Section 13 of the Supply Agreement, Preferred Beneficiary shall have
the right to verify the Escrow Materials at Escrow Agent's site for accuracy,
completeness and sufficiency, and to confirm that it complies to the
requirements of the Escrow Agreement. Depositor will promply correct any
deficiencies noted by Preferred Beneficiary. Such verification shall be
performed by a mutually acceptable third party who has executed a
confidentiality agreement acceptable to Depositor and Preferred Beneficiary.
1.7 Deposit Updates. Unless otherwise provided by the Supply Agreement,
Depositor shall update the deposit materials within 60 days of each release of a
new version of the product which is subject to the Supply Agreement. Such
updates will be added to the existing deposit. All deposit updates shall be
listed on a new Exhibit B and the new Exhibit B shall be signed by Depositor.
Each Exhibit B will be held and maintained separately within the escrow account.
An independent record will be created which will document the activity for each
Exhibit B. The processing of all deposit updates shall be in accordance with
Sections 1.2 through 1.6 above. All
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<PAGE> 16
references in this Agreement to the deposit materials shall include the initial
deposit materials and any updates.
1.8 Removal of Deposit Materials. The deposit materials may be removed and/or
exchanged only on written instructions signed by Depositor and Preferred
Beneficiary, or as otherwise provided in this Agreement.
ARTICLE 2 -- CONFIDENTIALITY AND RECORD KEEPING
2.1 Confidentiality. DSI shall maintain the deposit materials in a secure,
environmentally safe, locked facility which is accessible only to authorized
representatives of DSI. DSI shall have the obligation to reasonably protect the
confidentiality of the deposit materials. Except as provided in this Agreement,
DSI shall not disclose, transfer, make available, or use the deposit materials.
DSI shall not disclose the content of this Agreement to any third party. If DSI
receives a subpoena or other order of a court or other judicial tribunal
pertaining to the disclosure or release of the deposit materials, DSI will
immediately notify the parties to this Agreement. It shall be the responsibility
of Depositor and/or Preferred Beneficiary to challenge any such order; provided,
however, that DSI does not waive its rights to present its position with respect
to any such order. DSI will not be required to disobey any court or other
judicial tribunal order. (See Section 7.5 below for notices of requested
orders.)
2.2 Status Reports. DSI will issue to Depositor and Preferred Beneficiary a
report profiling the account history at least semi-annually. DSI may provide
copies of the account history pertaining to this Agreement upon the request of
any party to this Agreement.
2.3 Audit Rights. During the term of this Agreement, Depositor and Preferred
Beneficiary shall each have the right to inspect the written records of DSI
pertaining to this Agreement. Any inspection shall be held during normal
business hours and following reasonable prior notice.
ARTICLE 3 -- GRANT OF RIGHTS TO DSI
3.1 Title to Media. Depositor hereby transfers to DSI the title to the deposit
materials upon which the proprietary information and materials are written.
However, this transfer does not include the ownership of the proprietary
information and materials contained on the media such as any copyright, trade
secret, patent or other intellectual property rights.
3.2 Right to Make Copies. DSI shall have the right to make copies of the deposit
materials as reasonably necessary to perform this Agreement. DSI shall copy all
copyright, nondisclosure, and other proprietary notices and titles contained on
the deposit materials onto any copies made by DSI. With all deposit materials
submitted to DSI, Depositor shall provide any and all instructions as may be
necessary to duplicate the deposit materials including but not limited to the
hardware and/or software needed.
3.3 Right to Transfer Upon Release. Depositor hereby grants to DSI the right to
transfer the deposit materials to Preferred Beneficiary upon any release of the
deposit materials for use by Preferred Beneficiary in accordance with Section
4.5. Except upon such a release or as otherwise provided in this Agreement, DSI
shall not transfer the deposit materials.
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<PAGE> 17
ARTICLE 4 -- RELEASE OF DEPOSIT
4.1 Release Conditions. As used in this Agreement, "Release Conditions" shall
mean the following:
a. Depositor breaches a material provision of the Supply
Agreement and fails to cure such breach within the time period
specified in Section 15 of the Supply Agreement.
b. Depositor fails to continue to do business in the ordinary
course, files or has filed against it a petition under the
Federal Bankruptcy Code, becomes insolvent or has a receiver
appointed for all or a substantial part of its business (and
provided that such proceeding is not dismissed within sixty
days).
4.2 Filing For Release. If Preferred Beneficiary believes in good faith that a
Release Condition has occurred, Preferred Beneficiary may provide to DSI written
notice of the occurrence of the Release Condition and a request for the release
of the deposit materials. Upon receipt of such notice, DSI shall provide a copy
of the notice to Depositor, by certified mail, return receipt requested, or by
commercial express mail.
4.3 Contrary Instructions. From the date DSI mails the notice requesting release
of the deposit materials, Depositor shall have ten business days to deliver to
DSI Contrary Instructions. "Contrary Instructions" shall mean the written
representation by Depositor that a Release Condition has not occurred or has
been cured. Upon receipt of Contrary Instructions, DSI shall send a copy to
Preferred Beneficiary by certified mail, return receipt requested, or by
commercial express mail. Additionally, DSI shall notify both Depositor and
Preferred Beneficiary that there is a dispute to be resolved pursuant to the
Dispute Resolution section (Section 7.3) of this Agreement. Subject to Section
5.2, DSI will continue to store the deposit materials without release pending
(a) joint instructions from Depositor and Preferred Beneficiary; (b) resolution
pursuant to the Dispute Resolution provisions; or (c) order of a court.
4.4 Release of Deposit. If DSI does not receive Contrary Instructions from the
Depositor, DSI is authorized to release the deposit materials to the Preferred
Beneficiary or, if more than one beneficiary is registered to the deposit, to
release a copy of the deposit materials to the Preferred Beneficiary. However,
DSI is entitled to receive any fees due DSI before making the release. This
Agreement will terminate upon the release of the deposit materials held by DSI.
4.5 Right to Use Following Release. Unless otherwise provided in the Supply
Agreement, upon release of the deposit materials in accordance with this Article
4, Preferred Beneficiary shall have the right to use the deposit materials for
the sole purpose of continuing the benefits afforded to Preferred Beneficiary by
the Supply Agreement. Preferred Beneficiary shall be obligated to maintain the
confidentiality of the released deposit materials.
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ARTICLE 5 -- TERM AND TERMINATION
5.1 Term of Agreement. The initial term of this Agreement is for a period of one
year. Thereafter, this Agreement shall automatically renew from year-to-year
unless (a) Depositor and Preferred Beneficiary jointly instruct DSI in writing
that the Agreement is terminated; or (b) the Agreement is terminated by DSI for
nonpayment in accordance with Section 5.2. If the deposit materials are subject
to another escrow agreement with DSI, DSI reserves the right, after the initial
one year term, to adjust the anniversary date of this Agreement to match the
then prevailing anniversary date of such other escrow arrangements.
5.2 Termination for Nonpayment. In the event of the nonpayment of fees owed to
DSI, DSI shall provide written notice of delinquency to all parties to this
Agreement. Any party to this Agreement shall have the right to make the payment
to DSI to cure the default. If the past due payment is not received in full by
DSI within one month of the date of such notice, then DSI shall have the right
to terminate this Agreement at any time thereafter by sending written notice of
termination to all parties. DSI shall have no obligation to take any action
under this Agreement so long as any payment due to DSI remains unpaid.
5.3 Disposition of Deposit Materials Upon Termination. Upon termination of this
Agreement by joint instruction of Depositor and Preferred Beneficiary, DSI shall
destroy, return, or otherwise deliver the deposit materials in accordance with
Depositor's instructions. Upon termination for nonpayment, DSI may, at its sole
discretion, destroy the deposit materials or return them to Depositor. DSI shall
have no obligation to return or destroy the deposit materials if the deposit
materials are subject to another escrow agreement with DSI.
5.4 Survival of Terms Following Termination. Upon termination of this Agreement,
the following provisions of this Agreement shall survive:
a. Depositor's Representations (Section 1.5);
b. The obligations of confidentiality with respect to the deposit
materials;
c. The rights granted in the sections entitled Right to Transfer
Upon Release (Section 3.3) and Right to Use Following Release
(Section 4.5), if a release of the deposit materials has
occurred prior to termination;
d. The obligation to pay DSI any fees and expenses due;
e. The provisions of Article 7; and
f. Any provisions in this Agreement which specifically state they
survive the termination or expiration of this Agreement.
ARTICLE 6 -- DSI'S FEES
6.1 Fee Schedule. DSI is entitled to be paid its standard fees and expenses
applicable to the services provided. DSI shall notify the party responsible for
payment of DSI's fees at least 90
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days prior to any increase in fees. For any service not listed on DSI's standard
fee schedule, DSI will provide a quote prior to rendering the service, if
requested.
6.2 Payment Terms. DSI shall not be required to perform any service unless the
payment for such service and any outstanding balances owed to DSI are paid in
full. All other fees are due upon receipt of invoice. If invoiced fees are not
paid, DSI may terminate this Agreement in accordance with Section 5.2. Late fees
on past due amounts shall accrue at the rate of one and one-half percent per
month (18% per annum) from the date of the invoice.
ARTICLE 7 -- LIABILITY AND DISPUTES
7.1 Right to Rely on Instructions. DSI may act in reliance upon any instruction,
instrument, or signature reasonably believed by DSI to be genuine. DSI may
assume that any employee of a party to this Agreement who gives any written
notice, request, or instruction has the authority to do so. DSI shall not be
responsible for failure to act as a result of causes beyond the reasonable
control of DSI.
7.2 Indemnification. DSI shall be responsible to perform its obligations under
this Agreement and to act in a reasonable and prudent manner with regard to this
escrow arrangement. Provided DSI has acted in the manner stated in the preceding
sentence, Depositor and Preferred Beneficiary each agree to indemnify, defend
and hold harmless DSI from any and all claims, actions, damages, arbitration
fees and expenses, costs, attorney's fees and other liabilities incurred by DSI
relating in any way to this escrow arrangement.
7.3 Dispute Resolution. Any dispute relating to or arising from this Agreement
shall be resolved by arbitration under the Commercial Rules of the American
Arbitration Association. Unless otherwise agreed by Depositor and Preferred
Beneficiary, arbitration will take place in San Diego, California, U.S.A. Any
court having jurisdiction over the matter may enter judgment on the award of the
arbitrator(s). Service of a petition to confirm the arbitration award may be
made by First Class mail or by commercial express mail, to the attorney for the
party or, if unrepresented, to the party at the last known business address.
7.4 Controlling Law. This Agreement is to be governed and construed in
accordance with the laws of the State of California, without regard to its
conflict of law provisions.
7.5 Notice of Requested Order. If any party intends to obtain an order from the
arbitrator or any court of competent jurisdiction which may direct DSI to take,
or refrain from taking any action, that party shall:
a. Give DSI at least two business days' prior notice of the
hearing;
b. Include in any such order that, as a precondition to DSI's
obligation, DSI be paid in full for any past due fees and be
paid for the reasonable value of the services to be rendered
pursuant to such order; and
c. Ensure that DSI not be required to deliver the original (as
opposed to a copy) of the deposit materials if DSI may need to
retain the original in its possession to fulfill any of its
other duties.
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ARTICLE 8 -- GENERAL PROVISIONS
8.1 Entire Agreement. This Agreement, which includes the Exhibits described
herein, embodies the entire understanding among the parties with respect to its
subject matter and supersedes all previous communications, representations or
understandings, either oral or written. No amendment or modification of this
Agreement shall be valid or binding unless signed by all the parties hereto,
except that Exhibit A need not be signed by DSI, Exhibit B need not be signed by
Preferred Beneficiary and Exhibit C need not be signed.
8.2 Notices. All notices, invoices, payments, deposits and other documents and
communications shall be given to the parties at the addresses specified in the
attached Exhibit C. It shall be the responsibility of the parties to notify each
other as provided in this Section in the event of a change of address. The
parties shall have the right to rely on the last known address of the other
parties. Unless otherwise provided in this Agreement, all documents and
communications may be delivered by First Class mail.
8.3 Severability. In the event any provision of this Agreement is found to be
invalid, voidable or unenforceable, the parties agree that unless it materially
affects the entire intent and purpose of this Agreement, such invalidity,
voidability or unenforceability shall affect neither the validity of this
Agreement nor the remaining provisions herein, and the provision in question
shall be deemed to be replaced with a valid and enforceable provision most
closely reflecting the intent and purpose of the original provision.
8.4 Successors. This Agreement shall be binding upon and shall inure to the
benefit of the successors and assigns of the parties. However, DSI shall have no
obligation in performing this Agreement to recognize any successor or assign of
Depositor or Preferred Beneficiary unless DSI receives clear, authoritative and
conclusive written evidence of the change of parties.
<TABLE>
<CAPTION>
<S> <C>
PTG Medical LLC Wilshire Technologies, Inc.
Depositor Preferred Beneficiary
By: /s/ James Smith By: /s/ James W. Klingler
--------------- ---------------------
Name: James Smith Name: James Klingler
Title: EVP Title: VP & Chief Financial Officer
Date:September 18, 1997 Date: August 15, 1997
</TABLE>
Data Securities International, Inc.
By: /s/Kathleen M. Cummins
-------------------------------
Name:Kathleen M. Cummins
Title: Contract Administrator
Date: October 1, 1997
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EXHIBIT A
MATERIALS TO BE DEPOSITED
Account Number 162003-00001-2309040
Depositor represents to Preferred Beneficiary that deposit materials delivered
to DSI shall consist of the following:
1. Product Specification including:
a.) Reactants
b.) Stoichiometry
c.) Process Conditons
d.) Reaction Mechanism Conditions
2. Equipment List and Contacts
3. Pricing and Availability of Equipment and Materials
4. QA/QC Specifications including test methods for:
a.) Deleted
b.) Deleted
c.) Fouier Transform Infrared Spectroscopy
d.) Molecular Distribution
5. Production Specification
6. Stability Studies of the Polymer
7. List of reputable polymer manufacturers with capability to make product
Depositor Preferred Beneficiary
PTG Medical LLC Wilshire Technologies, Inc.
By: /s/ James Smith By: /s/James W. Klingler
---------------------------- ----------------------------
Name: James Smith Name: James Klingler
Title:EVP Title: VP & Chief Financial
Date:September 18, 1997 Officer
Date:August 15, 1997
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EXHIBIT B
DESCRIPTION OF DEPOSIT MATERIALS
Depositor Company Name Wilshire Technologies, Inc.______________________________
Account Number _________________________________________________________________
PRODUCT DESCRIPTION:
Product Name MPU-12031
I certify for Depositor that the above described DSI has inspected and accepted
the above deposit materials have been transmitted to DSI: materials (any
exceptions are noted above):
Signature______________________ Signature__________________________________
Print Name_____________________ Print Name_________________________________
Date___________________________ Date Accepted______________________________
Exhibit B#_________________________________
Send materials to: DSI, 9555 Chesapeake Dr. #200, San Diego, CA 92123
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EXHIBIT C
Account Number 1620003-00001-2309040
Notices, deposit material returns and
communications to Depositor Invoices to Depositor should be
should be addressed to: addressed to:
CompanyName: PTG Medical LLC
------------------------------- -------------------------------
Address: 2810 7th Street
---------------------------------- -------------------------------
Berkeley, CA 94710
---------------------------------- -------------------------------
Designated Contact: James Smith Contact:
------------------------ -----------------------
Telephone: (510) 841-8800
---------------------------------- -------------------------------
Facsimile: (510)841-7800
---------------------------------- -------------------------------
Notices and communications to Invoices to Preferred
Preferred Beneficiary should be addressed to: Beneficiary should be addressed
to:
Company Name: Wilshire Technologies Inc. Wilshire Technologies, Inc.
------------------------------- -------------------------------
Address: 5441 Avenida Encinas 5441 Avenida Encinas
------------------------------------ -------------------------------
Suite A Suite A
------------------------------------ -------------------------------
Carlsbad, CA 92008 Carlsbad, CA 92008
------------------------------------ -------------------------------
Designated Contact: James Klingler Contact: James Klingler
------------------------------------ -------------------------------
Telephone:(760) 929-7200
------------------------------------ -------------------------------
Facsimile: (760) 929-0683
------------------------------------ -------------------------------
Requests from Depositor or Preferred Beneficiary to change the designated
contact should be given in writing by the designated contact or an authorized
employee of Depositor or Preferred Beneficiary.
Contracts, deposit materials and notices to Invoice inquiries and fee
DSI should be addressed to: remittances to DSI should be
addressed to:
DSI DSI
Contract Administration Accounts Receivable
Suite 200 Suite 1450
9555 Chesapeake Drive 425 California Street
San Diego, CA 92123 San Francisco, CA 94104
Telephone: (619) 694-1900 (415) 398-7900
Facsimile: (619) 694-1919 (415) 398-7914
Date: September 18, 1997
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EXHIBIT 10.100
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED OR ANY STATE SECURITIES LAWS AND NEITHER THE SECURITIES
NOR ANY INTEREST THEREIN MAY BE TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR
SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER.
Warrant No. PTG-1 September 18, 1997
EXHIBIT F
WARRANT TO PURCHASE SHARES OF COMMON
STOCK OF WILSHIRE TECHNOLOGIES, INC.
This certifies that PTG MEDICAL LLC, a California limited liability
company (the "Holder"), for value received is entitled, subject to the
adjustment and to the other terms set forth below, to purchase from WILSHIRE
TECHNOLOGIES, INC., a California corporation (the "Company"), One Hundred
Thousand (100,000) fully paid and nonassessable shares of the Company's Common
Stock, no par value per share (the "Stock"), at a per share price calculated in
the manner set forth in Section 1, below (the "Stock Purchase Price"), at any
time on or after September 18, 1997 (the "Commencement Date") but not later than
5:00 p.m. (Pacific Time) on the Expiration Date (as defined below), upon
surrender to the Company at its principal office at 5441 Avenida Encinas, Suite
A, Carlsbad, California 92008 (or at such other location as the Company may
advise Holder in writing) of this Warrant properly endorsed with the Form of
Subscription Agreement attached hereto duly filled in and signed and upon
payment in cash or cashier's check of the aggregate Stock Purchase Price for the
number of shares for which this Warrant is being exercised determined in
accordance with the provisions hereof. The Stock Purchase Price and, in some
cases, the number of shares purchasable hereunder are subject to adjustment as
provided in Section 3 of this Warrant. This Warrant and all rights hereunder, to
the extent not exercised in the manner set forth herein shall terminate and
become null and void on the Expiration Date. "Expiration Date" means the fifth
anniversary of the Commencement Date; provided, however, that if the Development
and Supply Agreement dated September 18, 1997, between the Holder and the
Company (the "Supply Agreement") shall be terminated by Holder in accordance
with the provisions of set forth in Section 15 of the Supply Agreement prior to
the occurrence of such fifth anniversary, the Expiration Date shall be
accelerated to a date that is thirty (30) days following such termination date.
This Warrant is issued in conjunction with the Supply Agreement.
This Warrant is subject to the following terms and conditions:
1. Exercise; Stock Purchase Price; Issuance of Certificates; Payment for
Shares. This Warrant is exercisable at the option of Holder at any time or from
time to time but not earlier than the Commencement Date or later than 5:00 p.m.
(Pacific Time) on the Expiration Date for all or a portion of the shares of
Stock which may be purchased hereunder. The Company agrees that the shares of
Stock purchased under this Warrant shall be and are deemed to be issued to
Holder as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered and payment made for such
shares. The per share Stock Purchase Price shall be 25 cents greater than the
mean average of the bid and asked prices for the five trading days immedi-
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<PAGE> 25
ately preceding the effective date of the Supply Agreement. Subject to the
provisions of Section 2, certificates for the shares of Stock so purchased,
together with any other securities or property to which Holder is entitled upon
such exercise, shall be delivered to Holder by the Company's transfer agent at
the Company's expense within a reasonable time after the rights represented by
this Warrant have been exercised. Each stock certificate so delivered shall be
in such denominations of Stock as may be requested by Holder and shall be
registered in the name of Holder or such other name as shall be designated by
Holder, subject to the limitations contained in Section 2. If, upon exercise of
this Warrant, fewer than all of the shares of Stock evidenced by this Warrant
are purchased prior to the Expiration Date of this Warrant, one or more new
warrants substantially in the form of, and on the terms in, this Warrant will be
issued for the remaining number of shares of Stock not purchased upon exercise
of this Warrant.
2. Shares to Be Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares of Stock which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be duly authorized,
validly issued, fully paid and nonassessable and free from all preemptive rights
of any shareholder and free of all taxes, liens and charges with respect to the
issue thereof. The Company covenants that it will reserve and keep available a
sufficient number of shares of its authorized but unissued Stock for such
exercise. The Company will take all such reasonable action as may be necessary
to assure that such shares of Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of any
domestic securities exchange or automated quotation system upon which the Stock
may be listed.
3. Adjustment of Stock Purchase Price and Number of Shares. The Stock
Purchase Price and, in some cases, the number of shares purchasable upon the
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events described in this Section 3.
3.1 Subdivision or Combination of Stock and Stock Dividend. In
case the Company shall at any time subdivide its outstanding shares of Stock
into a greater number of shares or declare a dividend upon its Stock payable
solely in shares of Stock, the Stock Purchase Price in effect immediately prior
to such subdivision or declaration shall be proportionately reduced, and the
number of shares issuable upon exercise of the Warrant shall be proportionately
increased. Conversely, in case the outstanding shares of Stock of the Company
shall be combined into a smaller number of shares, the Stock Purchase Price in
effect immediately prior to such combination shall be proportionately increased,
and the number of shares issuable upon exercise of the Warrant shall be
proportionately reduced.
3.2 Notice of Adjustment. Promptly after adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares purchasable
upon the exercise of this Warrant, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Company. The notice shall be signed by the Company's chief financial officer
and shall state the effective date of the adjustment and the Stock Purchase
Price resulting from such adjustment and the increase or decrease, if any, in
the number of shares purchasable at such price
-2-
<PAGE> 26
upon the exercise of this Warrant, setting forth in reasonable detail the method
of calculation and the facts upon which such calculation is based.
3.3 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its
Stock;
(b) the Company shall declare any dividend upon its Stock
payable in stock (other than a dividend payable solely in shares of Stock) or
make any special dividend or other distribution to the holders of its Stock;
(c) there shall be any consolidation or merger of the
Company with another corporation, or a sale of all or substantially all of the
Company's assets to another corporation; or
(d) 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, by certified or
registered mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder, as shown on the books of the Company, (i)
at least 30 days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect of any such
dissolution, liquidation or winding-up; (ii) at least 10 days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for determining rights to vote in respect of any such
reorganization, reclassification, consolidation, merger or sale, and (iii) in
the case of any such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, at least 30 days' written notice
of the date when the same shall take place. Any notice given in accordance with
clause (i) above shall also specify, in the case of any such dividend,
distribution or option rights, the date on which the holders of Stock shall be
entitled thereto. Any notice given in accordance with clause (iii) above shall
also specify the date on which the holders of Stock shall be entitled to
exchange their Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up, as the case may be. If the Holder of the Warrant does
not exercise this Warrant prior to the occurrence of an event described above,
except as provided in Sections 3.1 and 3.4, the Holder shall not be entitled to
receive the benefits accruing to existing holders of the Stock in such event.
Notwithstanding anything herein to the contrary, if and to the extent the Holder
chooses to exercise this Warrant within the ten-day period following receipt of
the notice specified in clause (ii) above, the Holder may elect to pay the
aggregate Stock Purchase Price by delivering to the Company cash or a cashier's
check in the amount of the aggregate par value of the shares of Stock to be
purchased and the Holder's full recourse Promissory Note in the amount of the
balance of the aggregate Stock Purchase Price, which Note shall be payable to
the order of the Company in a single sum on the 30th day following the date of
receipt of such notice and shall bear interest at the lowest applicable federal
short term rate (using monthly compounding) as established pursuant to Section
1274(d) of the Internal Revenue Code of 1986, as amended, or any successor
provision; provided, however,
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<PAGE> 27
that if the Holder elects to deliver such a Promissory Note to the Company, the
Holder will pledge to the Company all Stock issued in connection with the
exercise of this Warrant, and the Company shall retain possession of the
certificates evidencing such Stock, until such time as the Note is paid in full.
3.4 Changes in Stock. In case at any time following the
Commencement Date, the Company shall be a party to any transaction (including,
without limitation, a merger, consolidation, sale of all or substantially all of
the Company's assets or recapitalization of the Stock) in which the previously
outstanding Stock shall be changed into or exchanged for different securities of
the Company or common stock or other securities of another corporation or
interests in a noncorporate entity or other property (including cash) or any
combination of any of the foregoing (each such transaction being herein called
the "Transaction" and the date of consummation of the Transaction being herein
called the "Consummation Date"), then, as a condition of the consummation of the
Transaction, lawful and adequate provisions shall be made so that each Holder,
upon the exercise hereof at any time on or after the Consummation Date, shall be
entitled to receive; and this Warrant shall thereafter represent the right to
receive, in lieu of the stock issuable upon such exercise prior to the
Consummation Date, the highest amount of securities or other property to which
such Holder would actually have been entitled as a shareholder upon the
consummation of the Transaction if such Holder had exercised such Warrant
immediately prior thereto. The provisions of this Section 3.4 shall similarly
apply to successive Transactions.
4. Issue Tax. The issuance of certificates for shares of Stock upon the
exercise of the Warrant shall be made without charge to the holder of the
Warrant for any issue tax in respect thereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of any certificate in a name
other than that of the then holder of the Warrant being exercised.
5. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the holder
hereof the right to vote or to consent or to receive notice as a shareholder in
respect of meetings of shareholders for the election of directors of the Company
or any other matters or any rights whatsoever as a shareholder of the Company.
Except for the adjustment to the Stock Purchase Price pursuant to Section 3.1 in
the event of a dividend on the Stock payable in shares of Stock, no dividends or
interest shall be payable or accrued in respect of this Warrant or the interest
represented hereby or the shares purchasable hereunder until, and only to the
extent that, this Warrant shall have been exercised. No provisions hereof, in
the absence of affirmative action by the holder to purchase shares of Stock, and
no mere enumeration herein of the rights or privileges of the holder hereof,
shall give rise to any liability of such holder for the Stock Purchase Price or
as a shareholder of the Company whether such liability is asserted by the
Company or by its creditors.
6. Restrictions on Transferability of Securities; Compliance With
Securities Act.
6.1 Restrictions on Transferability. This Warrant and the Stock
issuable upon exercise hereof (collectively, the "Securities") shall be
transferable only in accordance with the provisions of the Securities Act of
1933, as amended, and the state securities and Blue Sky laws.
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<PAGE> 28
6.2 Restrictive Legend. Each certificate representing the
Securities or any other securities issued in respect of the Securities upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of the Purchase
Agreement) be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required under applicable state
securities laws):
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR ANY STATE
SECURITIES LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST
THEREIN MAY BE TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID
ACT OR SUCH LAWS AND THE RULES AND REGULATIONS THEREUNDER."
7. Registration Rights. Holder shall have the registration rights set
forth in Exhibit A attached hereto and incorporated herein by this reference.
8. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
9. Notices. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified or registered mail, postage prepaid, to each such
holder at its address as shown on the books of the Company or to the Company at
the address indicated therefor in the first paragraph of this Warrant.
10. Descriptive Headings and Governing Law. The descriptive headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of California.
11. Lost Warrants or Stock Certificates. The Company represents and
warrants to Holder that upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Warrant or stock
certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity and, if requested, bond reasonably satisfactory to the
Company, or in the case of any such mutilation, upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
12. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share pay the holder entitled to such
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<PAGE> 29
fraction a sum in cash equal to the fair market value of any such fractional
interest as it shall appear on the public market, or if there is no public
market for such shares, then as shall be reasonably determined by the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer, thereunto duly authorized as of this 18th day of September,
1997.
WILSHIRE TECHNOLOGIES, INC.
By: /s/ John Van Egmond
-------------------------------------------
President & Chief Executive Officer
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<PAGE> 30
FORM OF SUBSCRIPTION AGREEMENT
(To be signed and delivered upon execution of Warrant)
WILSHIRE TECHNOLOGIES, INC.
5441 Avenida Encinas, Suite A
Carlsbad, California 92008
Attention: Chief Financial Officer
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, _______ shares of common stock, no par value per share (the
"Stock"), of WILSHIRE TECHNOLOGIES, INC. (the "Company") and herewith makes
payment of ____________________ Dollars ($ ) therefor and requests that the
certificates for such shares be issued in the name of, and delivered to, whose
address is ___________________________________________________________________.
If the exercise of this Warrant is not covered by a registration
statement effective under the Securities Act of 1933, as amended (the
"Securities Act"), the undersigned represents that
(i) the undersigned is acquiring such Stock for investment for
its own account, not as nominee or agent, and not with a view to the
distribution thereof and the undersigned has not signed or otherwise arranged
for the selling, granting any participation in, or otherwise distributing the
same;
(ii) the undersigned has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of the undersigned's investment in the Stock;
(iii) the undersigned has received all of the information the
undersigned has requested from the Company and considers necessary or
appropriate for deciding whether to purchase the shares of Stock;
(iv) the undersigned has the ability to bear the economic risks
of its prospective investment;
(v) the undersigned is able, without materially impairing its
financial condition, to hold the shares of Stock for an indefinite period of
time and to suffer complete loss on its investment;
(vi) the undersigned understands and agrees that (A) it may be
unable to readily liquidate its investment in the shares of Stock and that the
shares must be held indefinitely unless a subsequent disposition thereof is
registered or qualified under the Securities Act and applicable
-1-
<PAGE> 31
state securities or Blue Sky laws or is exempt from such registration or
qualification, and that the Company is not required to register the same or to
take any action or make such an exemption available except to the extent
provided in the within Warrant; and (B) the exemption from registration under
the Securities Act afforded by Rule 144 promulgated by the Securities and
Exchange Commission ("Rule 144") depends upon the satisfaction of various
conditions by the undersigned and the Company and that, if applicable, Rule 144
affords the basis for sales under certain circumstances in limited amounts, and
that if such exemption is utilized by the undersigned, such conditions must be
fully complied with by the undersigned and the Company, as required by Rule 144;
(vii) the undersigned either (A) is familiar with the definition
of and the undersigned is an "accredited investor" within the meaning of such
term under Rule 501 of Regulation D promulgated under the Securities Act, or (B)
is providing representations and warranties reasonably satisfactory to the
Company and its counsel, to the effect that the sale and issuance of Stock upon
exercise of such Warrant may be made without registration under the Securities
Act or any applicable state securities and Blue Sky laws; and
(viii) the address set forth below is the true and correct
address for the undersigned.
DATED:_________________
______________________________________
______________________________________
______________________________________
(Address)
-2-
<PAGE> 32
Exhibit A to Warrant to Purchase Shares
of Common Stock of Wilshire Technologies, Inc.
1. Certain Definitions. As used herein, the following terms shall have
the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Conversion Stock" means the Stock issued or issuable pursuant to this
Warrant.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
commission thereunder, all as the same shall be in effect at the time.
"Registrable Securities" means (i) the Conversion Stock; and (ii) any
Stock of the Company issued or issuable in respect of the Conversion Stock or
other securities issued or issuable pursuant to the conversion of the Stock upon
any stock split, stock dividend, recapitalization, or similar event, or any
Common Stock otherwise issued or issuable with respect to the Stock; provided,
however, that shares of Common Stock or other securities shall only be treated
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold or are available for sale in the opinion of
counsel to the Company in a single transaction exempt from the registration and
prospectus delivery requirements of the Securities Act so that all transfer
restrictions and restrictive legends with respect thereto are or may be removed
upon the consummation of such sale.
The terms "register", "registered" and "registration" refer to a
registration effected by preparing and filing with the Commission a registration
statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except Selling Expenses
as defined below, incurred by the Company in complying with Sections 2 and 3
hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for the Company, blue sky fees and expenses, the expenses of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company) and the reasonable fees and disbursements of counsel for Holder.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the securities registered by Holder.
-1-
<PAGE> 33
2. Company Registration.
(a) Notice of Registration. If, at any time or from time to time,
the Company shall determine to register any of its securities, either for its
own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws, or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request,
made within 20 days after receipt of such written notice from the Company, by
Holder.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holder as a part of the written notice given
pursuant to Section 2(a)(i). In such event, the right of Holder to registration
pursuant to this Section 2 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable Securities
in the underwriting to the extent provided herein. If Holder proposes to
distribute its Registrable Securities through such underwriting, Holder,
together with the Company, shall enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section 2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter, in its sole
discretion, may limit the Registrable Securities to be included in such
registration, and the Company shall promptly so advise Holder thereof. If Holder
disapproves of the terms of any such underwriting, Holder may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. Any
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration, and shall not be transferred in a public distribution prior
to 90 days after the effective date of the registration statement relating
thereto, or such other shorter period of time as the underwriter may require.
The Company may include shares of Stock held by shareholders other than Holder
in a registration statement pursuant to this Section 2.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration.
3. Expenses of Registration. All Registration Expenses incurred in
connection with any registration pursuant hereto, shall be borne by the Company,
and all Selling Expenses incurred in connection with any registration pursuant
hereto shall be borne by Holder.
4. Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant hereto, the Company
will keep Holder advised in writing
-2-
<PAGE> 34
as to the initiation of each registration, qualification and compliance and as
to the completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least ninety (90)
days, and prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for at least
ninety (90) days, provided that no such registration shall constitute a shelf
registration under Rule 415 promulgated by the Commission under the Securities
Act;
(b) Enter into a written underwriting agreement in customary form
and substance reasonably satisfactory to the Company, the Holder and the
managing underwriter or underwriters of the public offering of such securities,
if the offering is to be underwritten in whole or in part;
(c) Furnish to the Holder and to the underwriters of the
securities being registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
such underwriter may reasonably request in order to facilitate the public
offering of such securities;
(d) Notify the Holder, promptly after it shall receive notice
thereof, of the time when such registration statement has been effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
(e) Notify Holder promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus or
for additional information;
(f) Prepare and file with the Commission promptly upon the
request of Holder, any amendments or supplements to such registration statement
or prospectus which, in the reasonable opinion of counsel for Holder, is
required under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Registrable Securities by Holder;
(g) Prepare and promptly file with the Commission, and promptly
notify Holder of the filing of, such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event has
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of material fact or omit to
state any material fact necessary to make the statements therein not misleading
in light of the circumstances in which they were made;
(h) In case Holder or any underwriter for Holder is required to
deliver a prospectus at a time when the prospectus then in effect may no longer
be used under the Securities Act, prepare promptly upon request such amendment
or amendments to such registration statement
-3-
<PAGE> 35
and such prospectuses as may be necessary to permit compliance with the
requirements of the Securities Act;
(i) Advise Holder, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued; and
(j) At the request of Holder, furnish on the effective date of
the registration statement and, if such registration includes an underwritten
public offering, at the closing provided for in the underwriting agreement, (i)
an opinion, dated each such date, of the counsel representing the Company for
the purposes of such registration, addressed to the underwriters, if any, and to
the Holder, covering such matters with respect to the registration statement,
the prospectus and each amendment or supplement thereto, proceedings under state
and federal securities laws, other matters relating to the Company, the
securities being registered and the offer and sale of such securities as are
customarily the subject of opinions of issuer's counsel provided to underwriters
in underwritten public offerings, and (ii) to the extent the Company's
accounting firm is willing to do so, a letter dated each such date, from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and to the Holder, stating that they are independent
certified public accountants within the meaning of the Securities Act and that
in the opinion of such accountants the financial statements and other financial
data of the Company included in the registration statement or the prospectus or
any amendment or supplement thereto comply in all material respects with the
applicable accounting requirements of the Securities Act, and additionally
covering such other financial matters, including information as to the period
ending not more than five (5) business days prior to the date of such letter
with respect to the registration statement and prospectus, as the underwriters
or Holder may reasonably request.
5. Information by Holder. The Holder shall furnish the Company such
information regarding Holder, the Registrable Securities held by Holder and the
distribution proposed by Holder as the Company may request in writing and as
shall be required in connection with any registration, qualification or
compliance referred to herein.
6. Indemnification.
(a) The Company will indemnify Holder, each of its officers,
directors and partners, and each person controlling Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant hereto, and each
underwriter, if any, and each person who controls any underwriter within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any omission (or
alleged omission) to state
-4-
<PAGE> 36
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, or any violation by the Company of the Securities Act or any rule or
regulation promulgated under the Securities Act applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse Holder, each of its officers and directors, and each
person controlling Holder, each such underwriter and each person who controls
any such underwriter, for any legal and any other expenses reasonably incurred
in connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement of omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by Holder,
such controlling person or underwriter and stated to be specifically for use
therein.
(b) Holder will, if Registrable Securities held by Holder are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of a or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such
directors, officers, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by Holder and stated to be specifically for use therein.
Notwithstanding the foregoing, the liability of Holder under this subsection (b)
shall be limited to an amount equal to the initial public offering price of the
shares sold by Holder, unless such liability arises out of or is based on
willful conduct by Holder.
(c) Each party entitled to indemnification under this Section 6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder unless the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action and
provided further, that the Indemnifying Party shall not assume the defense
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<PAGE> 37
for matters as to which there is a conflict of interest or separate and
different defenses. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgement or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
7. No Transfer of Registration Rights. The rights to cause the Company
to register securities granted hereunder may not be assigned to any transferee
or assignee of the Registrable Securities.
-6-
<PAGE> 1
EXHIBIT 10.101
FOURTH AMENDMENT TO
CREDIT AGREEMENT
This Fourth Amendment to the Credit Agreement ("Fourth Amendment") is
made and entered into as of September 19, 1997, by and between Trilon Dominion
Partners L.L.C. ("Trilon Dominion") and Wilshire Technologies, Inc.
("Borrower").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into a Credit Agreement dated
as of January 5, 1996 (the "Agreement"); the Amendment to the Credit Agreement
("First Amendment") as of June 30, 1996; the Second Amendment to the Credit
Agreement ("Second Amendment") dated September 30, 1996; and the Third Amendment
to the Credit Agreement ("Third Amendment") dated April 15, 1997;
WHEREAS, the parties hereto wish to further amend the Agreement as set
forth in this Fourth Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Amendment.
1.1 Section 1.1 of the Agreement is hereby amended by replacing the
phrase "not exceeding $1,000,000" in the fifth line of such section with the
phrase "not exceeding $4,000,000".
1.2 Section 1.4 of the Agreement is hereby amended to read as follows:
Warrant and Springing Warrant. In consideration of the Lender's providing the
Commitment dated January 5, 1996, the Commitment as amended by the Second
Amendment dated September 30, 1996, the Commitment as amended by the Third
Amendment dated April 15, 1997, and the Commitment as amended by the Fourth
Amendment dated September 19, 1997, the Borrower hereby agrees to issue to the
<PAGE> 2
Lender
(i) four warrants in the form of Exhibit B attached hereto (the "Warrant") each
to purchase 100,000 shares of common stock of the Borrower, no par value per
share (the "Common Stock"), at an exercise price per share equal to the closing
price per share of Common Stock on January 5, 1996 for the first warrant, on
September 30, 1996 for the second warrant, on April 15, 1997 for the third
warrant, and on September 19, 1997 for the fourth warrant, exercisable from the
date hereof through January 5, 2001 for the first warrant, through September 30,
2001 for the second warrant, through April 15, 2002 for the third warrant; and
through September 19, 2002 for the fourth warrant; and (ii) four springing
warrants in the form of Exhibit C attached hereto (the "Springing Warrant") each
to purchase 25,000 shares of Common Stock, exercisable in the event that the
principal and interest on the Note (as defined in Section 1.5 of the Agreement)
shall not be paid in full on or before June 30, 1996 for the first Springing
Warrant, on or before June 30, 1997 for the second Springing Warrant, on or
before December 31, 1997 for the third Springing Warrant, and on or before June
30, 1998 for the fourth Springing Warrant.
1.3 Section 1.5 of the Agreement is hereby amended by replacing the
phrase "not to exceed $1,000,000" in the fifth line of such section with the
phrase "not to exceed $4,000,000".
1.4 Section 1.7 of the Agreement is hereby amended by replacing the
phrase, "or, (ii) December 31, 1996" in the fifth line of such section with the
phrase, "or, (ii) June 30, 1998".
1.5 Except as specifically set forth in this Amendment the Agreement and
all other documents and agreements entered into in connection with the Agreement
including without limitation the Warrants and Springing Warrants shall remain
unchanged and in full force and effect.
<PAGE> 3
2. Governing Law.Except as otherwise expressly provided, this Amendment
shall be governed and construed in accordance with the laws of the State of
Delaware applicable to contracts made in such State and without regard to
conflicts of law doctrines.
3. Counterparts. This Amendment may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other party.
IN WITNESS WHEREOF, the parties have caused this Fourth Amendment to be
duly executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
-------------------------------
Name: James W. Klingler
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: /s/ William P. Gendron
-------------------------------
Name: William P. Gendron
Title: Treasurer
<PAGE> 4
EXHIBIT 10.101
FOURTH AMENDMENT TO
GRID PROMISSORY NOTE
This Fourth Amendment to the Grid Promissory Note ("Note") issued
pursuant to the Credit Agreement ("Fourth Amendment") is made and entered into
as of September 19, 1997, by and between Trilon Dominion Partners L.L.C.
("Trilon Dominion") and Wilshire Technologies, Inc. ("Borrower").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into a Credit Agreement dated
as of January 5, 1996 (the "Agreement"), the Amendment to the Credit Agreement
("First Amendment") as of June 30, 1996, and the Second Amendment to the Credit
Agreement ("Second Amendment") as of September 30, 1996, and the Third Amendment
to the Credit Agreement ("Third Amendment") as of April 15, 1997; and pursuant
to the Agreement the Note was issued.
WHEREAS, the parties hereto wish to further amend the Note as set forth
in this Fourth Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Amendment.
1.1 Section 1 of the Note is hereby amended by replacing the phrase,
"principal sum of ONE MILLION DOLLARS ($1,000,000):" in the sixth line of such
section with the phrase, "principal sum of FOUR MILLION DOLLARS ($4,000,000)".
1.2 Section 4 of the Note is hereby amended by replacing the phrase, "or
(ii) June 30, 1996" in the fifth line of such section with the phrase, "or (ii)
June 30, 1998".
<PAGE> 5
1.3 Except as specifically set forth in this Fourth Amendment the
Agreement and all other documents and agreements entered into in connection with
the Agreement shall remain unchanged and in full force and effect.
2. Governing Law.Except as otherwise expressly provided, this Fourth
Amendment shall be governed and construed in accordance with the laws of the
State of Delaware applicable to contracts made in such State and without regard
to conflicts of law doctrines.
3. Counterparts. This Fourth Amendment may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other party.
IN WITNESS WHEREOF, the parties have caused this Fourth Amendment to be
duly executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
-------------------------------
Name: James W. Klingler
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: /s/ William P. Gendron
-------------------------------
Name: William P. Gendron
Title: Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB FOR THE QUARTER ENDED AUGUST 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-QSB AND THE ACCOMPANYING NOTES THERETO.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> NOV-30-1997 NOV-30-1997
<PERIOD-START> DEC-01-1996 DEC-01-1996
<PERIOD-END> AUG-31-1997 AUG-31-1997
<CASH> 137 137
<SECURITIES> 0 0
<RECEIVABLES> 584 584
<ALLOWANCES> 16 16
<INVENTORY> 1,101 1,101
<CURRENT-ASSETS> 2,224 2,224
<PP&E> 1,658 1,658
<DEPRECIATION> 768 768
<TOTAL-ASSETS> 3,815 3,815
<CURRENT-LIABILITIES> 4,092 4,092
<BONDS> 0 0
0 0
0 0
<COMMON> 25,857 25,857
<OTHER-SE> (26,134) (26,134)
<TOTAL-LIABILITY-AND-EQUITY> 3,815 3,815
<SALES> 1,011 2,602
<TOTAL-REVENUES> 1,011 2,602
<CGS> 765 1,976
<TOTAL-COSTS> 1,375 3,659
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 76 195
<INCOME-PRETAX> (440) (1,252)
<INCOME-TAX> 0 1
<INCOME-CONTINUING> (440) (1,253)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (440) (1,253)
<EPS-PRIMARY> (0.03) (0.10)
<EPS-DILUTED> (0.03) (0.10)
</TABLE>
