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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(MARK ONE)
X ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934 For the fiscal year ended November 30, 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.
(Name of small business issuer in its charter)
CALIFORNIA 33-0433823
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5861 EDISON PLACE
CARLSBAD, CALIFORNIA 92008
(Address of principal executive offices)
(760) 929-7200
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value - Quoted on the OTC Bulletin Board
(Title of Class)
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
----- -----
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year were $3,459,000.
The aggregate market value of the voting stock held by non-affiliates of
the registrant on January 31, 1998 was approximately $1.6 million.
The number of shares outstanding of the registrant's only class of
Common Stock, no par value, was 12,943,385 on January 31, 1998.
Transitional Small Business Disclosure Format. Yes No X
----- -----
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WILSHIRE TECHNOLOGIES, INC.
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Annual Report on Form 10-KSB - November 30, 1997
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<TABLE>
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PART I PAGE
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Item 1. Description of Business 2
Item 2. Description of Property 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 6
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PART II
Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis or Plan of Operation 7
Item 7. Financial Statements 11
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 26
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Part III
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Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 27
Item 10. Executive Compensation 27
Item 11. Security Ownership of Certain Beneficial Owners and Management 27
Item 12. Certain Relationships and Related Transactions 27
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Part IV
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Item 13. Exhibits, List and Reports on Form 8-K 28
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
THE COMPANY
Wilshire Technologies, Inc. (the "Company"), incorporated in California on
October 17, 1990, develops, manufactures and markets engineered polymer products
for industrial clean room use. The Company, based in Carlsbad, California,
markets its products through its Wilshire Contamination Control Division, and
manufactures certain of its products in its wholly-owned subsidiary, Wilshire
International de Mexico S.A. de C.V. During 1996, the Company divested its
Medical Products and Transdermal Products divisions, and has since focused
primarily on products used in industrial clean rooms, such as gloves and
contamination control products.
MARKET OVERVIEW
The need for extraordinary cleanliness in various manufacturing and
high-technology processes has resulted in a requirement for products to be
manufactured in Class 1, 10 and 100 clean rooms. The Company markets swabs,
wipers and other disposable products used to help reduce particulate
contamination in the semiconductor, disk drive and microelectronics industry
clean rooms, which help to increase the yield and effectiveness of the
manufactured products. The Company also manufactures and markets a proprietary
synthetic glove for use in clean rooms in both the electronics and medical
industries. Disposable supplies used in clean rooms consist predominantly of
garments, gloves, swabs and wipers. Traditionally, most clean room suppliers
have adapted existing products from other applications, e.g., medical, which may
have inherent limitations. The Company intends to satisfy the needs of clean
room operators with advanced products designed and manufactured specifically for
clean room use.
CONTAMINATION CONTROL PRODUCTS
The Company specializes in the development, manufacture and marketing of
disposable cleaning and contamination control products for use in clean rooms. A
"clean room" is an environment in which particulate fluid and biological
contaminants are monitored and controlled. In the microelectronics,
semiconductor and aerospace industries, clean rooms are essential to the
manufacturing process to prevent minute particles from contaminating sensitive
and expensive products. In the pharmaceutical, biotechnology and medical device
industries, clean rooms are used to reduce the level of particulate and
biological contamination ("bioburden") or to ensure the sterility and
pyrogen-free nature of products. Clean rooms are classified according to the
allowable level of particulate contamination per cubic foot. A "Class I " clean
room may have just one particle of more than 0.5 microns per cubic foot.
The Company uses engineered materials and proprietary polyurethane formulations
to produce products specifically for the requirements of Class I, 10 and 100
clean rooms. For these clean rooms, the particulate compliance requirements are
extremely stringent, and the total cost of disposables represents only a small
percentage of the total cost of the customer's manufactured product. Clean room
users are generally willing to pay premium prices for products which reduce
particulate contamination, thereby reducing labor costs and increasing the
yields of their manufactured products. All of the Company's products are sold
under its brand names, including UltraSORB(R) and UltraSOLV(TM). The Company has
received one patent and applied for a second patent on hydrophilic foam articles
and cleaning methods for clean rooms including all UltraSOLV(TM) and
UltraSORB(R) products. Also, the Company has filed for a patent for the
manufacture of hydrophilic polyurethane foams.
Wipers. Clean room personnel use wipers for many applications, including the
cleaning of manufacturing and processing equipment and production components,
the decontamination of work surfaces and the removal of solvent or acid spills.
The most important considerations in the selection of the proper wiper are the
level of potential contamination contributed by the wiper, the wiper's
absorbency and its cost. Since no wiper material is best for all purposes, the
Company markets a variety of clean room wipers made of polyester and
polyurethane, covering a wide range of characteristics, under its various brand
names such as UltraSORB(R), UltraSOLV(TM) and PolyClean(TM).
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During 1993, the Company introduced its first wiper made of its UltraSORB(R)
material. Management believes that UltraSORB(R) is the first polyurethane foam
wiper that is hydrophilic. i.e., able to absorb water and other aqueous
solutions. These wipers provide the highly-absorbent, particle-trapping
performance and abrasion-resistance of the UltraSORB(R) material at a price
competitive with that of other foam wipers. The UltraSORB(R) wipers are
processed and packaged using proprietary methods in a Class 10 clean room to
ensure that the wipers have an initial low-particulate level.
Swabs. The Company markets a broad range of clean room swabs fabricated from
various materials including polyurethane foam. Swabs are used to clean surface
areas when a wiper is too large or when a wiper would add more particulate
contamination than a swab. The important considerations in swab selection are
the level of particulate contamination, absorbency and cost. Although cotton
swabs dominate the market due to lower cost and higher absorbency, cotton tends
to degenerate during use, thereby increasing the likelihood of contaminating the
clean room and the materials being produced in the clean room. Typically, users
in Class I and 10 clean rooms purchase synthetic swabs because their
non-shedding, non-friable nature offers superior cleanliness, while users in
Class 100-10,000 clean rooms purchase significantly more cotton swabs due to
their lower cost and higher absorbency.
To meet the demand for an absorbent, clean, synthetic swab, the Company has
developed a line of swabs fabricated from its UltraSORB(R) polyurethane
material. Similar to the UltraSORB(R) wiper, the UltraSOLV(TM) swab is the first
polyurethane-foam swab that is hydrophilic and meets Class 1 and Class 10
specifications. UltraSORB(R) has an open cellular structure which is
highly-absorbent and has excellent particle trapping capability. Also, because
of its abrasion resistance, the UltraSORB(R) material does not generate
particulate contamination during use.
GLOVES
Virtually all of the gloves purchased in the United States for use in Class 1,
10 and 100 clean rooms during 1995 were latex or polyvinyl chloride ("PVC")
medical gloves post-processed to be cleaner than the typical hospital or
surgeon's glove. Latex-based and PVC-based gloves have several disadvantages:
(1) the gloves are prone to deterioration during use, thereby generating
excessive particulate contamination; (2) the gloves are not breathable; and (3)
users may suffer from latex sensitivity. The Company has developed the
DuraCLEAN(R) clean room glove composed of a proprietary polyurethane material
which the Company believes addresses these problems. The Company has been
testing these gloves with several major semiconductor customers and is currently
operating a developmental glove plant in Tijuana, Mexico to supply test sites.
The Company markets these gloves through its own sales force and through major
distributors. Although these gloves are premium priced, management believes they
are cost effective for clean room users because they can be worn longer and
changed less frequently than less expensive latex gloves. In addition, the
Company has received a 510(k) approval to market from the FDA for medical use of
its PolyDERM(TM) glove. Non-latex exam gloves sell at a premium over latex exam
gloves due to more rigorous product requirements. The Company believes that
polyurethane medical gloves will be superior to latex gloves in many ways,
including breathability, durability, biocompatibility and resistance to tearing,
yet will be less expensive to manufacture than other non-latex medical gloves.
For semiconductor markets, the added benefit of the glove's electrostatic
dissipative (ESD) properties is a great advantage. Also, the gloves have the
lowest total non-volatile residues and total organic carbon levels in the
industry.
PATENTS, LICENSES AND PROPRIETARY RIGHTS
The Company has applied for four patents on various products and one of those
patents has been issued. The Company will apply for additional patents where
deemed appropriate.
The Company also relies upon trade secrets, technical know-how and continuing
technological innovation to develop and maintain its competitive position. The
Company typically requires its employees and consultants to execute appropriate
confidentiality and assignment of inventions agreements in connection with their
employment or consulting relationships with the Company.
No assurance can be given that competitors will not independently develop
substantially equivalent or superior proprietary materials and techniques or
otherwise gain access to the Company's proprietary technology, or that the
Company can meaningfully protect its rights in unpatented proprietary
technology.
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TECHNOLOGY
Many of the Company's current products use polymers, particularly polyurethane.
Polyurethane is a versatile synthetic material which can be produced to exhibit
a wide range of characteristics. By varying the underlying molecular structure
and manufacturing methods, polyurethane materials may be created with varying
degrees of absorbency, moisture vapor transfer, flexibility, elasticity,
structural integrity and stability. Polyurethane may also be fabricated with a
variety of techniques, including injection, extrusion or blow molding, which
allows easy variation of the physical form of products.
MANUFACTURING
The Company purchases UltraSORB(R), the breathable, hydrophilic polyurethane
foam currently used in its swabs and wipers, from Time Release Sciences, Inc.
Management believes that it can secure an alternative source of supply if
required. Further, Management believes that satisfactory substitutes can be
developed, over time, for use in its UltraSORB(R) products should the foam cease
to be available.
Certain of the Company's products are made for the Company by Advanced Materials
Group, Inc. ("Advanced Materials"). Although the Company expects to encounter no
difficulties in obtaining products from Advanced Materials, it believes that it
could manufacture those products itself or have them manufactured by any of a
number of other foam fabricators. The foam products industry has several major
fabrication suppliers, one of which is Advanced Materials. Because competition
among these companies is intense, the prices charged by Advanced Materials to
the Company must be competitive.
The Company manufactures the DuraCLEAN(R) gloves on its own equipment, using a
proprietary process and polymer. The Company leases a facility in Tijuana,
Mexico and uses contract labor from Advanced Barrier Technologies, Inc. (ABT),
under a three-year Manufacturing and Supply Agreement, dated April 11, 1996.
Certain processes required to finish the product are performed in the U.S. by
third party vendors in accordance with Company procedures.
Raw Materials. The materials that the Company uses, such as polypropylene,
polyurethane, plastic and metal, are generally available from multiple sources.
The Company has not experienced difficulty in obtaining raw materials.
Quality Assurance. Under the Company's quality assurance program, visual,
dimensional and functional inspections are performed and recorded on all raw
materials and finished goods based on product specifications as governed by the
Device Master Record. Additionally, Statistical Process Control and other Total
Quality Management methods are used in the manufacturing process.
SALES, MARKETING AND DISTRIBUTION
The Company's swabs, wipers, gloves and other specialty products are marketed
directly to end-users through a limited number of internal sales personnel and
are sold through international, national and regional distributors. During 1997,
the Company sold approximately 49% of its products to VWR Scientific Products
and approximately 14% of its products through international distributors.
COMPETITION
The Company is engaged in rapidly-evolving and highly-competitive fields. Many
major clean room companies in the United States and abroad currently produce and
will seek to develop competitive products. Competition from contamination
control manufacturers and others is intense and expected to increase. Many of
these companies have substantially greater capital resources and facilities, and
more experience in marketing and distributing products than the Company. In
addition, many of these companies employ large research and development staffs,
while the Company has traditionally had a small research and development budget.
The Company believes the clean room market has a large number of competitors,
some of which, such as Johnson & Johnson are much larger than the Company. Other
competitors include Texwipe, Berkshire Corporation, Contec Inc., Kimberly Clark
Corp., VWR Scientific and Edmont Fab Tek.
A number of major corporations manufacture and sell latex and non-latex gloves
to the clean room and medical markets. These include Baxter International,
Johnson and Johnson, Smith and Nephew, and Ansell.
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EMPLOYEES
As of November 30, 1997, the Company had 18 full-time employees, of whom 7 were
employed in manufacturing and shipping, 4 in sales and marketing, 1 in research,
development and engineering, and 6 in administration.
ITEM 2. DESCRIPTION OF PROPERTY.
In March 1993, the Company signed a five-year lease for a 19,000-square-foot
facility in Carlsbad, California. The building included office space for the
Company's administration functions, warehouse space, and space for future
manufacturing of clean room products. Under the terms of the lease, the Company
paid rent of approximately $12,400 per month. In September, 1994, the Company
moved to a 5,000 square-foot facility in Carlsbad under a three-year lease and
sublet the original facility for approximately $11,400 per month. Under the
terms of the lease, the Company paid approximately $4,500 per month for the
smaller facility. The Company extended the termination date of the three-year
lease through November 30, 1997, and then moved its employees and personal
property to its new Carlsbad facility described below.
During 1997, the Company subleased 16,500 square feet of warehouse and office
space in Dallas, Texas from Acacia Laboratories of Texas, Inc. ("Acacia") under
the terms of a Purchase of Assets and Assumption of Sublease Agreement described
in Note 10 of the notes to the financial statements. The Company subleased its
portion of the facility for approximately $4,500 per month. The sublease expired
on November 30, 1997, and the Company moved its inventory and other personal
property to its new Carlsbad facility described below.
In August 1997, the Company completed a five-year Lease Agreement with Messrs.
Frank Naliboff and Nathan Morton for a 25,500 square-foot office and warehouse
facility in Carlsbad, California. Under the terms of the lease, the Company will
pay rent of $17,500 per month for the first year, beginning January 1, 1998 with
annual rent adjustments of $500 per month in each of the following four years.
The lease expires on December 31, 2002 and can be renewed by mutual agreement of
the parties.
The Company subleases 10,000 square feet of manufacturing space in Tijuana,
Mexico from Advanced Barrier Technologies Inc. ("ABT"). The Company pays rent,
utilities, and related service charges for the space of $7,500 per month, based
on a manufacturing and supply agreement with ABT. In the second quarter of 1998,
the Company plans to move its equipment and personal property from this space to
its new Tijuana facility described below.
In November 1997, the Company completed a five-year Lease Agreement with Mr.
Rafael Mizrachi for a 23,500 square foot manufacturing facility and a 15,000
square foot adjacent lot in Tijuana, Mexico. Under the terms of the lease, the
Company will pay rent of $10,000 per month for the first year beginning January
1, 1998, with annual rent adjustments for the San Diego area Consumer Price
Index. The lease expires on December 31, 2002 and can be renewed by mutual
agreement of the parties.
ITEM 3. LEGAL PROCEEDINGS
BREAST IMPLANT LITIGATION
The Company and its alleged predecessor company, Wilshire Foam Products, Inc.
("Wilshire Foam"), have been named as defendants in hundreds of bodily injury
lawsuits involving breast implants pending in Alabama, Arizona, California,
Connecticut, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana,
Kansas, Louisiana, Michigan, Mississippi, Missouri, Nevada, New Jersey, New
Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South
Carolina, Tennessee, Texas, Utah and Washington, and in a federal multi-district
litigation ("MDL") venued in Birmingham, Alabama. These suits seek compensatory
and punitive damages under a variety of legal theories. The allegations against
Wilshire Foam concern the use by some implant manufacturers of polyurethane
products purportedly supplied by Wilshire Foam which were apparently
incorporated into the implants and placed in the plaintiffs' bodies. Plaintiffs
allege that they have suffered adverse effects of having polyurethane in their
bodies, in addition to the alleged adverse effects of silicone and other
components of the implants.
The Company believes it has several layers of protection from exposure in these
cases. First, the Company and Wilshire Foam carried insurance. Second, recent
developments in the MDL and in related negotiations
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have resulted in the probable resolution of most of the pending and possible
future claims against the Company. Third, there are a great number of
co-defendants, some of which are large corporations with significant resources,
that may be required to contribute to any award or indemnify the Company.
Fourth, the Company has asserted a number of legal defenses in the lawsuits as
described below. Fifth, these claims relate to products sold prior to the
acquisition of Wilshire Foam, in which product liabilities were expressly not
assumed and the Company was indemnified by the shareholders of Wilshire Foam. In
many, if not most of the cases, the Company believes it did not sell any product
to the implant manufacturers in question or during the relevant time period. The
Company has been dismissed by approximately 2000 plaintiffs because it was shown
that a Wilshire Foam product was not involved or in connection with a related
resolution of the case. This litigation is discussed fully in Note 6 of the
notes to the financial statements, which is hereby incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company solicited proxies pursuant to Regulation 14 under the Securities
Exchange Act (Proxy Statement dated August 15, 1997) for the Annual Meeting of
Shareholders held on September 26, 1997. The only matter submitted to the
shareholders was the election of five directors. There was no solicitation in
opposition to management's nominees for directors, listed in the Proxy
Statement. The number of shares entitled to vote at the meeting was 12,943,385.
Of these 12,499,198 were represented. Holders of 22,945 shares withheld voting
authority. All nominees were elected by the affirmative vote of 12,476,253
shares.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock was initially quoted on NASDAQ under the trading
symbol "WITE". On March 9, 1993, the Company began trading on the American Stock
Exchange ("AMEX") under the trading symbol "WIL". On December 19, 1996, the AMEX
filed an application to delist the Company's common stock from the AMEX because
the Company had not met certain financial guidelines necessary for continued
listing. The final day of trading was Friday, January 17, 1997. On Monday,
January 20, 1997, the Company's common stock was quoted and traded on the OTC
Bulletin Board ("OTCBB") under the symbol "WILK". On January 31, 1998, there
were approximately 120 holders of record of the Company's Common Stock and in
excess of 500 beneficial holders. The Company has not paid any cash dividends on
its Common Stock and does not anticipate paying cash dividends in the
foreseeable future.
The following table sets forth by fiscal quarters the high and low daily closing
sales prices quoted for one share of the Company's Common Stock on the AMEX in
FY1996 and on the AMEX and OTCBB in FY1997.
<TABLE>
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FY1996 HIGH LOW
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First Quarter 1-5/16 1/2
Second Quarter 1-5/8 1
Third Quarter 2-1/4 1-1/4
Fourth Quarter 1-3/4 1
FY1997
First Quarter 1-3/16 3/8
Second Quarter 15/16 7/16
Third Quarter 15/16 19/32
Fourth Quarter 1-1/16 7/16
</TABLE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS.
OVERVIEW
The Company achieved two record $1 million sales quarters in 1997 and made
significant progress to increase production capacity and reduce costs for both
gloves and contamination control products. In some of the major accomplishments
of 1997, the Company:
o Began producing gloves at the rate of 20,000 pairs of gloves per
month at a significantly lower cost on the developmental glove
equipment moved from the UK to Tijuana, Mexico in 1996.
o Ordered the equipment for the first full scale glove production line,
which will have an estimated capacity of over 800,000 pairs of gloves
per month.
o Completed a development and supply agreement for an improved glove
polymer.
o Leased a larger facility in Tijuana, Mexico which has space for two
full-scale glove production lines and the developmental glove
equipment, as well as space to manufacture certain of its
contamination control products.
o Completed a distributor agreement for Singapore, Malaysia, Thailand
and Indonesia, to better service the Company's customers in Southeast
Asia.
o Transferred its contamination control swab manufacturing equipment
from Texas to Tijuana, Mexico, thus lowering future production costs.
o Relocated its warehouse operation from Texas to Carlsbad, California
into a combined facility with its headquarters office, saving the
Company the time and expense of maintaining two facilities and
related freight costs.
In 1998, the Company will focus on increasing glove sales with the objective of
operating the glove production line at the rate 400,000 pairs per month by the
fourth quarter of 1998. Also, cost reduction efforts will continue with the
transfer of some additional contamination control operations to Tijuana, Mexico.
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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 Annual Report on Form 10-KSB for
the year ended November 30, 1996, which is herein incorporated by reference.
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.
RESULTS OF OPERATIONS
NET SALES
The Company markets 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.
Net Sales increased by $56,000 (1.6%) to $3,459,000 in 1997 from $3,403,000 in
1996, due to increased sales of contamination control products. Increased sales
of wipers offset a decline in sales of swabs in 1997 versus 1996.
GROSS PROFIT
Gross profit decreased by $102,000 to $436,000 in 1997 from $538,000 in 1996,
primarily due to a wiper supplier price increase during 1997 which increased
cost of sales by $279,000. Also, costs of the developmental glove plant
unfavorably affected gross profit. Gross profit margin as a percent of sales
decreased to 12.6% in 1997 from 15.8% in 1996. Excluding the impact of the
supplier price increase and the glove sales and cost of sales on gross profit,
the gross profit margin as a percentage of sales was 30.0% in 1997, and 27.5% in
1996.
The Company has taken action to address the supplier price increase by
increasing selling prices on the affected products to the extent possible, and
transferring as much of the manufacturing process as possible to other lower
cost suppliers.
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 $603,000 (24.0%) to
$1,911,000 in 1997 from $2,514,000 in 1996, primarily due to 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 $64,000 (12.8%) to $437,000 in 1997
from $501,000 in 1996 primarily due to the divestiture of the Transdermal
Products business. As a percentage of sales, research and development expenses
were 12.6% in 1997, compared to 14.7% in 1996.
OTHER INCOME (EXPENSE), NET
The other income in 1996 was related to the gain recognized from the payment of
the note receivable by Advanced Materials (see Note 3 to notes to the
consolidated financial statements).
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INTEREST INCOME (EXPENSE), NET
The Company recognized net interest expense of $309,000 in 1997 and $125,000 in
1996. The interest expense was related primarily to the line of credit with
Trilon Dominion Partners, LLC ("Trilon Dominion") (see Note 4 to notes to the
consolidated financial statements).
INCOME TAXES
For the fiscal years ended November 30, 1997 and 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 1997, the Company has not generated sufficient cash from
operations to fund its working capital requirements. Net cash used in operating
activities was $1,666,000 in 1997 versus $3,035,000 in 1996. The decrease in the
cash used in operating activities in 1997 was primarily due to a decrease in
losses in 1997, and to payment of past due accounts payable in 1996.
Net cash used in investing activities was $636,000 in 1997 versus $509,000
provided by investing activities in 1996, primarily due to the purchase of
equipment in 1997.
Net cash provided by financing activities was $2,250,000 in 1997 versus
$2,697,000 in 1996. Debt financing in 1997 and 1996 was obtained from Trilon
Dominion. The details of the debt financing are provided in Note 4 to the
consolidated financial statements.
On January 5, 1996, the Company and Trilon Dominion entered an Exchange
Agreement to exchange the note payable dated May 13, 1994, the note payable
dated November 18, 1994 including the five amendments, and the accrued interest
on these notes, all of which totaled approximately $8.8 million, for 8,441,430
shares of common stock valued at $1.04 per share. In addition, Trilon Dominion
surrendered the warrants dated May 13, 1994 and November 18, 1994, entitling it
to purchase 1,507,398 shares (after dilution adjustments) of the Company's
common stock.
Also, on January 5, 1996, the Company and Trilon Dominion entered into a Credit
Agreement (the "Agreement") for a credit line of $1 million 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, September 30, 1996, April 15,
1997, and September 19, 1997, to a current credit line of $4 million and a
termination date of June 30, 1998. See Note 4 to the consolidated financial
statements for details of the Agreement and Amendments.
On July 3, 1996, pursuant to a Release Agreement, Advanced Materials paid the
Company $1,190,000 in full and final payment of all remaining principal and
interest on the amended and restated secured subordinated promissory note dated
November 23, 1993.
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. The sale 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.
On January 7, 1998, and on February 17, 1998, the Company and Trilon Dominion
completed Demand Notes, each for $250,000 at an interest rate of 12.25%, to fund
the Company's ongoing operations until a new credit facility can be completed.
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As of January 31, 1998, the Company has used its current credit facilities and
anticipates continuing negative cash flow through at least the first half of
fiscal year 1998. Management is negotiating the terms of a new credit facility
with Trilon Dominion which will fund the remaining equipment purchases and the
Company's ongoing operations. It is expected this facility also will include the
$4 million credit line and the two $250,000 Demand Notes mentioned above, and
will have a termination date of December 31, 1998. Trilon Dominion, the
Company's largest shareholder with over 72% of the shares outstanding, has
continued to provide financial support to the Company during 1997, and
management believes that Trilon Dominion will continue to support the Company as
necessary through the end of fiscal year 1998.
YEAR 2000
The Company has received assurance from the suppliers of its computer software
that the versions the Company will be provided in 1998 for its accounting and
materials management functions are in compliance with Year 2000 requirements.
The Company expects that the cost of complying with Year 2000 requirements will
not have a material impact on the Company's financial statements.
10
<PAGE> 12
ITEM 7. FINANCIAL STATEMENTS.
Index to Consolidated Financial Statements
Years ended November 30, 1997 and 1996
Index
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors.............................12
Audited Financial Statements
Consolidated Balance Sheets...................................................13
Consolidated Statements of Operations.........................................14
Consolidated Statements of Shareholders' Equity (Net Capital Deficiency).....15
Consolidated Statements of Cash Flows.........................................16
Notes to Consolidated Financial Statements....................................17
</TABLE>
11
<PAGE> 13
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Shareholders
Wilshire Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Wilshire
Technologies, Inc. as of November 30, 1997 and 1996 and the related consolidated
statements of operations, shareholders' equity (net capital deficiency) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Wilshire
Technologies, Inc. at November 30, 1997 and 1996, and the consolidated results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
January 9, 1998
12
<PAGE> 14
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS (Note 4)
Current assets:
Cash $ 137,000 $ 189,000
Accounts receivable trade, less allowance for doubtful
accounts of $5,000 and $17,000 at November 30,
1997 and November 30, 1996, respectively 335,000 571,000
Inventories (Note 2) 1,037,000 591,000
Current portion of note receivable (Note 9) 198,000 204,000
Other current assets 262,000 231,000
------------ ------------
Total current assets 1,969,000 1,786,000
Property and equipment, less accumulated depreciation (Note 2) 1,293,000 723,000
Note Receivable from the sale of discontinued business
less current portion (Note 9) 111,000 280,000
Goodwill, less accumulated amortization of $323,000
and $281,000 at November 30, 1997 and November 30,
1996, respectively 419,000 461,000
Patents and trademarks, net 115,000 104,000
------------ ------------
$ 3,907,000 $ 3,354,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable $ 625,000 $ 393,000
Accrued expenses 372,000 454,000
Interest payable 330,000 31,000
Line of credit (Note 4) 3,750,000 1,500,000
------------ ------------
Total current liabilities 5,077,000 2,378,000
Commitments and contingencies (Note 6)
Shareholders' equity (net capital deficiency) (Note 8)
Preferred stock, no par value, 2,000,000 shares
authorized and none issued and outstanding -- --
Common stock, no par value, 50,000,000 shares
authorized; 12,943,385 shares issued and
outstanding at November 30, 1997 and
November 30, 1996, respectively 25,907,000 25,857,000
Common stock warrants 301,000 275,000
Accumulated deficit (27,378,000) (25,156,000)
------------ ------------
Total shareholders' equity (net capital deficiency) (1,170,000) 976,000
------------ ------------
$ 3,907,000 $ 3,354,000
============ ============
</TABLE>
See accompanying notes.
13
<PAGE> 15
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended November 30,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Continuing operations:
Net sales $ 3,459,000 $ 3,403,000
Cost of sales 3,023,000 2,865,000
------------ ------------
Gross profit 436,000 538,000
Operating expenses:
Marketing and selling 568,000 589,000
General and administrative 1,343,000 1,925,000
Research and development 437,000 501,000
------------ ------------
Total operating expenses 2,348,000 3,015,000
------------ ------------
Loss from operations (1,912,000) (2,477,000)
Other income (Note 3) -- 190,000
Interest income (expense), net (309,000) (125,000)
------------ ------------
Loss before provision
for state income taxes (2,221,000) (2,412,000)
Provision for state income taxes - current 1,000 1,000
------------ ------------
Loss from continuing operations (2,222,000) (2,413,000)
Gain (loss) from discontinued operations (Note 9) -- 19,000
------------ ------------
Net loss $ (2,222,000) $ (2,394,000)
============ ============
Weighted average shares outstanding 12,943,000 12,102,000
============ ============
Loss per share:
Loss from continuing operations $ (0.17) $ (0.20)
Loss from discontined operations -- --
------------ ------------
Net loss per share $ (0.17) $ (0.20)
============ ============
</TABLE>
See accompanying notes.
14
<PAGE> 16
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
YEARS ENDED NOVEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
Common stock Common stock warrants
------------------------ --------------------- Accumulated
Shares Amount Warrants Amount deficit Total
----------- ----------- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balances - November 30, 1995 4,490,455 $17,071,000 4,180,000 $ 418,000 $(22,762,000)$ (5,273,000)
Exchange Agreement 8,441,430 8,779,000 (1,430,000) (143,000) -- 8,636,000
Issuance of warrants -- -- 225,000 -- -- --
Exercise of options 11,500 7,000 -- -- -- 7,000
Net loss -- -- -- -- (2,394,000) (2,394,000)
----------- ----------- ---------- --------- ------------ -----------
Balances - November 30, 1996 12,943,385 25,857,000 2,975,000 275,000 (25,156,000) 976,000
Issuance of warrants -- -- 375,000 26,000 -- 26,000
Contribution to capital -- 50,000 -- --- -- 50,000
Net loss -- -- -- -- (2,222,000) (2,222,000)
----------- ----------- ---------- --------- ------------ -----------
Balances - November 30, 1997 12,943,385 $25,907,000 3,350,000 $ 301,000 $(27,378,000) $(1,170,000)
=========== =========== ========== ========= ============ ===========
</TABLE>
See accompanying notes.
15
<PAGE> 17
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended November 30,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(2,222,000) $(2,394,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 234,000 425,000
Provision for loss on accounts receivable (12,000) (12,000)
Loss on disposal of equipment 38,000 --
Expense paid by majority shareholder 50,000 --
Warrants issued to majority shareholder and
suppliers 26,000 --
Gain on sale of discontinued operations -- (19,000)
Gain on settlement of note receivable -- (190,000)
Net change in operating assets and liabilities:
(Increase) decrease in accounts receivable 248,000 (206,000)
(Increase) decrease in inventories (446,000) 182,000
Increase in other current assets (31,000) (1,000)
Increase (decrease) in accounts payable and
accrued expenses 150,000 (851,000)
Increase in interest payable 299,000 31,000
----------- -----------
Net cash used in operating activities (1,666,000) (3,035,000)
----------- -----------
INVESTING ACTIVITIES
Purchase of equipment (792,000) (201,000)
Proceeds from sale of discontinued operations -- 256,000
Decrease in note receivable from sale of discontinued
operations 175,000 --
(Increase) decrease in other assets (19,000) 454,000
----------- -----------
Net cash (used in) provided by investing activities (636,000) 509,000
----------- -----------
FINANCING ACTIVITIES
Proceeds from line of credit 2,250,000 1,500,000
Proceeds from settlement of note receivable -- 1,190,000
Proceeds from exercise of stock options -- 7,000
----------- -----------
Net cash provided by financing activities 2,250,000 2,697,000
----------- -----------
NET INCREASE (DECREASE) IN CASH (52,000) 171,000
CASH - BEGINNING OF PERIOD 189,000 18,000
----------- -----------
CASH - END OF PERIOD $ 137,000 $ 189,000
=========== ===========
</TABLE>
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 9).
See accompanying notes.
16
<PAGE> 18
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, markets its products through its Wilshire Contamination
Control Division, and manufactures certain of its products in its wholly-owned
Mexican subsidiary, Wilshire International de Mexico S.A. de C.V. During 1996,
the Company divested its Medical Products and Transdermal Products divisions and
has since focused primarily on products used in industrial clean rooms, such as
gloves and contamination control products.
BASIS OF PRESENTATION
The Company has incurred substantial losses since its inception in 1990, and has
relied on working capital provided by Trilon Dominion (previously Dominion
Capital, Inc.) in the form of both debt and equity to fund its operations. The
Company is attempting to raise additional capital to fund its ongoing operations
and capital requirements, and management believes that Trilon Dominion will
continue to support the Company as necessary through the end of fiscal year
1998.
The consolidated financial statements include the accounts of the Company 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 9). The disposition of this
business has been accounted for as a discontinued operation.
INVENTORIES
Inventories are stated at the lower of first in, first out cost or market.
REVENUE RECOGNITION
Sales are recognized when the product is shipped and customer acceptance is
received pursuant to applicable customer contracts or purchase orders.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
about the future that affect the amounts reported in the financial statements
and disclosures made in the accompanying notes to the financial statements. The
actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are being depreciated on a
straight-line basis over their estimated useful lives, which range from three to
seven years. Property and equipment under capital leases are amortized over the
life of the asset or the term of the lease, whichever is shorter.
17
<PAGE> 19
INTANGIBLE ASSETS
Goodwill is being amortized over 17 years. For the years ended November 30, 1997
and 1996, amortization was $42,000 and $61,000, respectively.
CONCENTRATION OF CREDIT RISK
Sales to a national distributor accounted for 49% and 33% of total sales during
1997 and 1996, respectively. Otherwise, the Company's customers are dispersed
across different industries and geographic locations. The Company reviews a
potential customer's credit history before extending credit. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
Management does not believe significant credit risks exist.
LOSS PER SHARE
Net loss per common share in fiscal 1997 and 1996 was computed using the
weighted average number of common shares outstanding during the period which
excludes all common equivalent shares since they are antidilutive.
NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share, which is
required to be adopted for fiscal years and interim periods ending after
December 15, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating basic net loss per share,
the dilutive effect of common stock equivalents will be excluded during
profitable reporting periods. The adoption of this statement is not expected to
have a material impact, since the Company has reported losses and the impact of
common stock equivalents is not included in the net loss per diluted share
calculations as their effect is antidilutive.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income, and SFAS No. 131, Segment Information. Both of
these standards are effective for fiscal years beginning after December 15,
1997. SFAS No. 130 requires that all components of comprehensive income,
including net income, be reported in the financial statements in the period in
which they are recognized. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-owner sources. Net income and other comprehensive income, including foreign
currency translation adjustments, and unrealized gains and losses on
investments, shall be reported, net of their related tax effect, to arrive at
comprehensive income. The Company does not believe that comprehensive income or
loss will be materially different than net income or loss. SFAS No. 131 amends
the requirements for public enterprises to report financial and descriptive
information about its reportable operating segments. Operating segments, as
defined in SFAS No. 131, are components of an enterprise for which separate
financial information is available and is evaluated regularly by the Company in
deciding how to allocate resources and in assessing performance. The financial
information is required to be reported on the basis that is used internally for
evaluating the segment performance. The Company believes it operates in one
business and operating segment and does not believe adoption of this standard
will have a material impact on the Company's financial statements.
STOCK-BASED COMPENSATION
As permitted by Statement of Financial Accounting Standards No. 123, the Company
has elected to follow Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations ("APB 25"), in accounting
for its employee stock options. Under APB 25, when the exercise price of the
Company's employee stock options is not less than the fair value of the
underlying stock on the date of grant, no compensation expense is recognized.
18
<PAGE> 20
2. FINANCIAL STATEMENTS INFORMATION
Inventories consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Raw materials $ 156,000 $ 141,000
Work in process 265,000 175,000
Finished goods 616,000 275,000
---------- ----------
$1,037,000 $ 591,000
========== ==========
</TABLE>
Property and equipment consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Machinery and equipment $ 1,008,000 $ 885,000
Furniture and office equipment 370,000 350,000
Leasehold improvements 45,000 87,000
Construction in progress 648,000 38,000
----------- -----------
2,071,000 1,360,000
Less accumulated depreciation and amortization (778,000) (637,000)
=========== ===========
$ 1,293,000 $ 723,000
=========== ===========
</TABLE>
3. NOTES RECEIVABLE
Pursuant to the sale of its Medical Products division on June 30, 1996, the
Company received a $540,000 secured note, payable over 36 months, and bearing
interest at a rate of 5% per annum (see Note 9).
On July 3, 1996, pursuant to a Release Agreement, Advanced Materials, Inc. paid
the Company $1,190,000 in full and final payment of all remaining principal and
interest on the amended and restated secured subordinated promissory note dated
November 23, 1993. Accordingly, the Company released $190,000 of the reserve
against the note to state the note at its net realizable value which is included
in other income in the accompanying Statement of Operations.
4. LINE OF CREDIT
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%. 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 and Trilon Dominion amended the
Agreement to extend the termination date of the Agreement 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 of $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.
The Agreement was amended further on September 30, 1996, April 15, 1997, and
September 19, 1997. Each amendment increased the credit line by $1,000,000, up
to a total of $4,000,000, and extended the termination date, up to the current
termination date of June 30, 1998. Trilon Dominion received a warrant to
purchase 100,000 shares at the market price with each credit line increase, and
a warrant to purchase 25,000 shares at the market price with each termination
date extension. Warrants for 225,000 shares were issued in each of
19
<PAGE> 21
fiscal years 1996 and 1997. The Company recorded the estimated fair value of the
warrants issued in fiscal year 1997 at $0.07 per underlying common share with a
corresponding charge to earnings of $16,000 in fiscal 1997.
5. INCOME TAXES
At November 30, 1997, the Company had federal net operating loss carryforwards
of approximately $17,330,000 which will begin to expire in 2006 unless
previously utilized. In addition, the Company had California and Texas net
operating loss carryforwards of approximately $13,228,000 which began to expire
in 1997 (approximately $1,961,000 expired in 1997). Research and development tax
credits of $92,000 will begin to expire in 2009.
As a result of ownership changes that occurred in February 1993 from a private
placement of common stock and in January 1996 from the exchange of common stock
for the outstanding debt and accrued interest, the Company's federal net
operating loss carryforwards will be subject to an annual limitation regarding
utilization against taxable income in future periods. The Company estimates that
approximately $6,800,000 of its federal net operating loss carry forward will be
unavailable for future tax benefit. Accordingly, the federal tax net operating
loss carry forward has been reduced, including the related deferred tax asset.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes. Due to the uncertainty
surrounding future realization of favorable tax attributes, a valuation
allowance was recorded against deferred tax assets. Significant components of
the Company's deferred tax assets and liabilities for federal and state income
taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets:
Depreciation and amortization $ 18,000 $ 44,000
Installment Sale 1,058,000 1,007,000
Warrants 113,000 108,000
Accrued liabilities 87,000 32,000
Inventory reserves 24,000 180,000
Other 220,000 141,000
Net operating loss carryforwards 6,696,000 5,959,000
----------- -----------
Total deferred assets 8,216,000 7,471,000
Valuation allowance for deferred assets (8,216,000) (7,471,000)
=========== ===========
Net deferred tax assets $ -- $ --
=========== ===========
</TABLE>
The reconciliation of income tax computed at the federal statutory tax rate to
income tax expense for the years ended November 30, 1997 and 1996 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
1997 1996
---------------------- ----------------------
Amount Percentage Amount Percentage
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Tax at Federal Rate $ 761,000 34% $ 821,000 34%
Change in Valuation Allowance (761,000) 34% (821,000) 34%
---------------------- ----------------------
$ -- --% $ -- --%
---------------------- ----------------------
</TABLE>
20
<PAGE> 22
6. COMMITMENTS AND CONTINGENCIES
BREAST IMPLANT LITIGATION
The Company and its alleged predecessor company, Wilshire Foam, have been named
as defendants in thousands of bodily injury lawsuits involving breast implants
pending in Alabama, Arizona, California, Colorado, Connecticut, District of
Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Louisiana,
Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico,
New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina,
Tennessee, Texas, Utah and Washington, and in a federal multi-district
litigation ("MDL") venued in Birmingham, Alabama. These suits seek compensatory
and punitive damages under a variety of legal theories. The allegations against
Wilshire Foam concern the use by some implant manufacturers of polyurethane
products purportedly supplied by Wilshire Foam which were apparently
incorporated into the implants and placed in the plaintiffs' bodies. Plaintiffs
allege that they have suffered adverse effects of having polyurethane in their
bodies, in addition to the alleged adverse effects of silicone and other
components of the implants.
The Company believes it has several layers of protection from exposure in these
cases. First, as described in greater detail below, the Company and Wilshire
Foam carried insurance. Second, also discussed below, recent developments in the
MDL and in related negotiations have resulted in the probable resolution of most
of the pending and possible future claims against the Company. Third, there are
a great number of co-defendants, some of which are large corporations with
significant resources, that may be required to contribute to any award or
indemnify the Company. Fourth, the Company has asserted a number of legal
defenses in the lawsuits as described below. Fifth, these claims relate to
products sold prior to the acquisition of Wilshire Foam, in which product
liabilities were expressly not assumed and the Company was indemnified by the
shareholders of Wilshire Foam. In many, if not most of the cases, the Company
believes it did not sell any product to the implant manufacturers in question or
during the relevant time period. The Company has been dismissed by approximately
2000 plaintiffs because it was shown that a Wilshire Foam product was not
involved or in connection with a related resolution of the case.
Management believes the Company is adequately covered by insurance for these
suits under one or more commercial general liability ("CGL") and excess
liability insurance policies. Between 1974 and 1980, Fireman's Fund Insurance
Company provided the CGL coverage; from 1980 through 1987, affiliates of the
Chubb Group provided both CGL and excess coverage. The CGL policies for
1987-1992 were underwritten by Allstate Insurance Company affiliates; excess
coverage for those years has been provided by Fireman's Fund. While Wilshire
Foam's greatest number of relevant sales appear to have taken place during the
early to mid-1980's, there appears to be over $100 million in combined potential
insurance coverage for the Company and/or Wilshire Foam during and after that
time period. To date, all of the claims have been tendered to the insurance
carriers, who have accepted defense of the litigation, subject to customary
reservations of rights. No assurance can be given that any future lawsuits will
be accepted by carriers. The cost of defense of the suits is generally not
applied toward the policy limits. The Company and its insurers are exploring
additional excess coverage which appears to have been in place during the 1970's
until 1980.
Many of the lawsuits have only recently been filed, and therefore all of the
facts and circumstances surrounding the various allegations have yet to be
determined. Consequently, it is difficult to predict the ultimate outcome and
extent of the Company's involvement. Nevertheless, the Company presently
believes that numerous legal defenses to potential liability exist, including,
but not limited to, the absence of causation, lack of identification, fault of
others, absence of defect, superseding cause, the component manufacturer
defense, statutes of limitations, the absence of successor liability, learned
intermediary, contribution and indemnity, and has in fact included these
defenses in its answers to the lawsuits. As with any litigation, there is a risk
of adverse judgments against the Company. The Company is actively cooperating
with its insurers and counsel in the defense of these lawsuits.
Previously, a number of defendants, including the Company, entered into a global
settlement agreement ("Global Settlement") in the MDL. Under the terms of the
Global Settlement, the Company would be required to contribute $8 million to the
global settlement fund, which the Company's insurers have agreed to pay. The
judge presiding over the MDL approved the Global Settlement and found it to be
fair; however, in September of 1995 that judge announced that the Global
Settlement is under funded, in part due to an unexpected number of registrants
and other reasons. The Company understands that efforts to resurrect or replace
the Global Settlement are ongoing but that the Global Settlement may not become
effective. The Company is to
21
<PAGE> 23
be a released party in the current draft of the replacement for the Global
Settlement without any additional funding requirements from the Company or its
insurers.
Separately, the Company has reached agreement with Medical Engineering
Corporation and Bristol-Myers Squibb ("MEC"), whereby, in essence, MEC has
agreed to indemnify the Company in all cases where a plaintiff, whose implant is
within MEC's chain of distribution, opts out of the Global Settlement. The MEC
indemnification also covers Wilshire for plaintiffs who opted into the Global
Settlement in the event that the Global Settlement does not become effective, so
that the Company remains protected in most cases even if the Global Settlement
cannot be resurrected. The Company's insurers have funded the initial amount the
Company agreed to pay to MEC in consideration of MEC's providing such
indemnification, and have agreed to pay the balance which would become due to
MEC if the Global Settlement does not become effective. These funding payments
reduced the limits of coverage under various CGL policies, but none of these
payments or funding commitments exhausted or will exhaust any of the policies'
limits or reached any excess policy.
The Company believes that the indemnification by MEC, with or without the Global
Settlement, would eliminate the great majority of implant-related cases pending
against the Company. However, even if the Global Settlement is finally approved,
cases will remain pending against the Company involving plaintiffs who opt out
of the Global Settlement and whose implants are outside of the MEC chain of
distribution and hence not covered by the MEC indemnification.
EQUIPMENT SUPPLY AGREEMENTS
In 1997, the Company completed two equipment supply agreements related to its
proprietary polyurethane glove. The first agreement provides for ACC Automation
Company (ACC), located in Akron, Ohio to manufacture an automated glove-dipping
line for the Company at a cost of $1,000,000. ACC is a major designer and
manufacturer of glove-dipping equipment. The Company will make payments to ACC
based on the accomplishment of agreed milestones.
The second agreement provides for the Vara International division of Calgon
Carbon Corporation (VARA) to manufacture a glove polymer solvent recovery system
for the Company at a cost of $942,000. The system will permit the recycling of
solvent used with the glove polymer, significantly reducing the raw material
costs of the glove. The Company will make payments to VARA based on the
accomplishment of agreed milestones.
CONTINGENT LIABILITIES RELATED TO THE SALE OF THE GENERAL FOAM DIVISION
The Company remains contingently liable for certain deferred compensation due
through 2025 aggregating $1,238,000 in connection with the sale of the general
foam division to Advanced Materials effective on November 30, 1992.
LEASE COMMITMENTS
The following is a schedule of the future minimum rental payments required under
operating leases which have remaining non cancelable lease terms in excess of
one year at November 30, 1997:
<TABLE>
<S> <C>
1998 $ 455,000
1999 381,000
2000 341,000
2001 238,000
2002 233,000
2003 20,000
----------
Total minimum payments $1,668,000
==========
</TABLE>
Rent expense was $337,000 and $301,000 for the years ended November 30, 1997 and
1996, respectively. During 1997, the Company received $98,000 of sublease rental
income.
22
<PAGE> 24
7. SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
COMMON STOCK
On January 5, 1996, the Company and Trilon Dominion entered an Exchange
Agreement to exchange the note payable dated May 13, 1994, the note payable
dated November 18, 1994 including the five amendments, and the accrued interest
on these notes, all of which totaled approximately $8.8 million, for 8,441,430
shares of common stock valued at $1.04 per share. In addition, Trilon Dominion
surrendered the warrants dated May 13, 1994 and November 18, 1994, entitling it
to purchase 1,507,398 shares (after dilution adjustments) of the Company's
common stock.
In November, 1996, stock options for 11,500 shares of common stock were
exercised, and the Company received proceeds of approximately $7,000.
During 1997, Trilon Dominion paid $50,000 of the President and Chief Executive
Officer's salary and did not charge the Company. The Company has recorded that
amount as a contribution to capital and a corresponding charge to general and
administrative expenses.
PREFERRED STOCK
On December 3, 1992, 2,000,000 shares of undesignated Preferred Stock were
authorized. The Board of Directors is authorized to provide for the issuance of
the undesignated Preferred Stock in one or more series, to establish from time
to time the number of shares to be included in each series, to fix or alter the
rights, preferences and privileges of the shares of each wholly unissued series
and any restrictions thereon, and to increase or decrease the number of shares
of any series.
COMMON STOCK WARRANTS
On May 16, 1995 a Settlement Agreement was approved by the United States
District Court for the Southern District of California between the Company and
members of the Settlement Class in an "Amended Consolidated Class Action
Complaint" against the Company. Under the Settlement Agreement, the Company
issued warrants for 2,750,000 shares of common stock to the Settlement Class at
an exercise price of $2.33 per share. The Company valued the warrants at $0.10
per underlying common share and recorded a charge to earnings of $275,000 in
fiscal 1994. The Settlement Warrants are exercisable between November 28, 1999
and November 28, 2002, but only after the Company's common stock underlying the
Settlement Warrants has been registered under the Securities Act of 1933.
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%. 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 and Trilon Dominion amended the
Agreement to extend the termination date of the Agreement 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 of $1.75 per
share, and it expires on January 5, 2001.
The Agreement was amended further on September 30, 1996, April 15, 1997, and
September 19, 1997. Each amendment increased the credit line by $1,000,000, up
to a total of $4,000,000 and extended the termination date, up to the current
termination date of June 30, 1998. Trilon Dominion received a warrant to
purchase 100,000 shares at the market price with each credit line increase, and
a warrant to purchase 25,000 shares at the market price with each termination
date extension. Warrants for 225,000 shares were issued in each of fiscal years
1996 and 1997. The Company recorded the estimated fair value of the warrants
issued to Trilon Dominion in fiscal year 1997 at $0.07 per underlying common
share and recorded a corresponding charge to interest expense of $16,000 in
fiscal 1997.
On September 18, 1997, the Company completed a Development and Supply Agreement
for glove polymer with PTG Medical LLC, an affiliate of Polymer Technology
Group, Inc. Under that Agreement, the Company
23
<PAGE> 25
issued a five-year warrant for 100,000 shares of common stock at an exercise
price of $1.09, which was $0.25 above the average market price for the five days
prior to the date of the Agreement.
On November 25, 1997 the Company completed a Lease Agreement for a manufacturing
facility in Tijuana, Mexico with Mr. Rafael Mizrachi. Under that Agreement, the
Company issued a five-year warrant for 50,000 shares of common stock at an
exercise price of $0.60, which was the market price on the date of the
Agreement.
The Company recorded the estimated fair value of the warrants issued to PTG
Medical LLC and Mr. Rafael Mizrachi in fiscal year 1997 at $0.07 per underlying
common share and recorded a corresponding charge to earnings of $10,000 in
fiscal 1997.
STOCK OPTIONS
On April 27, 1992, the Company's Board of Directors approved a stock option plan
for 150,000 options ("the 1992 Plan") and on December 1, 1993, approved a second
stock option plan for 250,000 options ("the 1993 Plan"). On December 6, 1994,
the Board of Directors approved a third stock option plan ("the 1995 Plan") for
options on 500,000 shares. The 1995 Plan was approved by the shareholders at the
Annual Meeting on August 1, 1995. An amendment to the 1995 Plan was approved by
the shareholders at the Annual Meeting on May 20, 1996, to increase the number
of shares that may be issued under such plan to 1,750,000 shares. As of November
30, 1997, the following options were outstanding under each respective Stock
Option Plan: 2,000 under the 1992 Plan, 24,000 under the 1993 Plan, and 869,500
under the 1995 Plan. In addition, there were 280,000 options outstanding which
were not issued under any of the above mentioned Plans.
Under the Plans, the Company may grant incentive stock options ("ISOs"), as
defined under the Internal Revenue Code or nonqualified stock options ("NQOs").
Options may be granted at not less than 100% of the fair market value on the
date of grant for ISOs. The option period cannot exceed 10 years from the date
an option is granted or five years in the case in which an option is granted to
a 10% shareholder of both classes of stock at the time the option is granted.
Generally, if an optionee's employment is terminated, all unvested options
granted to such employee under the Plans shall terminate and may no longer be
exercised.
On November 21, 1997 the Board of Directors approved a grant of stock options on
701,000 shares under the 1995 Plan at the market price on that date of $0.625
per share which included options on 157,500 new shares, and options on 543,500
shares to the Company's employees who were willing to surrender their currently
owned options.
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
Weighted
Number Average Exercise
of Shares Price Per Share
--------- ---------------
<S> <C> <C>
Outstanding at November 30, 1995 1,261,082 3.08
Granted.................... 370,000 1.46
Exercised.................. (11,500) 0.63
Canceled................... (213,982) 4.16
----------
Outstanding at November 30, 1996 1,405,600 2.51
Granted.................... 853,000 0.65
Canceled................... (1,083,100) 2.58
----------
Outstanding at November 30, 1997 1,175,500 1.10
==========
</TABLE>
As of November 30, 1997, 1,106,500 shares are available for future grant under
the Stock Option Plans.
24
<PAGE> 26
Following is a further breakdown of the options outstanding as of November 30,
1997:
<TABLE>
<CAPTION>
Weighted
Weighted Average
Average Weighted Exercise
Range of Remaining Average Price of
Exercise Options Life Exercise Options Options
Prices Outstanding in Years Price Exercisable Exercisable
------ ----------- -------- ----- ----------- -----------
<S> <C> <C> <C> <C> <C>
$0.50 20,000 8.03 $0.50 20,000 $0.50
0.63 901,000 6.56 0.63 641,000 0.63
0.75 126,000 4.56 0.75 0 0.75
0.84 6,000 4.58 0.84 0 0.84
0.88 15,000 7.92 0.88 10,000 0.88
1.38 5,000 0.02 1.38 3,334 1.38
1.44 2,500 0.02 1.44 833 1.44
1.69 4,000 0.09 1.69 4,000 1.69
1.75 4,000 0.09 1.75 4,000 1.75
2.13 2,000 0.09 2.13 2,000 2.13
5.88 2,000 0.09 5.88 2,000 5.88
6.00 80,000 4.41 6.00 80,000 6.00
6.25 4,000 0.09 6.25 4,000 6.25
15.00 4,000 0.09 15.00 4,000 15.00
- ----------- --------- ---- ----- ------- -----
$0.50-15.00 1,175,500 6.08 $1.10 775,167 $1.32
=========== ========= ==== ===== ======= =====
</TABLE>
Adjusted proforma information regarding net loss is required by SFAS 123 and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of SFAS 123. The fair value for these options was
estimated at the date of grant using the Black Scholes method for option pricing
with the following assumptions for 1997 and 1996: a risk free interest rate of
5.88%, a dividend yield of 0%, a weighted-average expected life of the option of
three years and expected volatility of 60 percent.
For purposes of adjusted proforma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period. The Company's adjusted
proforma information is as follows:
<TABLE>
<CAPTION>
Years Ended November 30,
1997 1996
---- ----
<S> <C> <C>
Adjusted proforma net loss.................... $(2,564,000) $(2,736,000)
Adjusted proforma net loss per share.......... $(0.20) $(0.23)
</TABLE>
The weighted average fair value of options granted during 1996 and 1997 was
$1.17 and $0.98, respectively.
At November 30, 1997, 4,533,532, shares were reserved for the issuance of
options and warrants.
8. RELATED PARTY TRANSACTIONS
On November 30, 1997, the Company had short-term debt outstanding to Trilon
Dominion of $3,750,000 plus accrued interest (see Note 4). In addition, Trilon
Dominion owned 9,416,430 shares, or 72.8%, of the Company's common stock and
warrants entitling it to purchase an additional 450,000 shares (before dilution
adjustments). Mr. Ronald Cantwell, who is President of Trilon Dominion, has been
a director and Chairman of the Board of the Company since December 6, 1996.
25
<PAGE> 27
9. 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, and regulatory approvals used in the Medical Products business. The
sale 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.
Sales of WMP for the year ended November 30, 1996 were $888,000. The effect on
the results of operations from the sale of WMP for the year ended November 30,
1996 was $19,000.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
26
<PAGE> 28
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required in this Item is incorporated herein by reference to the
Company's Proxy Statement dated March 20, 1998
ITEM 10. EXECUTIVE COMPENSATION.
The information required in this Item is incorporated herein by reference to the
Company's Proxy Statement dated March 20, 1998
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required in this Item is incorporated herein by reference to the
Company's Proxy Statement dated March 20, 1998
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required in this Item is incorporated herein by reference to the
Company's Proxy Statement dated March 20, 1998
27
<PAGE> 29
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
10.1 Settlement Agreement dated November 23, 1993 between the Company
and Wilshire Advanced Materials, Inc. ("Advanced Materials") (1)
10.2 Asset Purchase Agreement dated November 23, 1993, between the
Company and Advanced Materials (forms of bill of sale and
assignment, secured promissory note, amended and restated secured
subordinated promissory note, and amendment to security agreement
attached thereto) (1)
10.3 Maturity Date Extension to Secured Promissory Note dated January
24, 1994 between the Company and Advanced Materials (1)
10.4 Amendment to Manufacturers Sales Representative Agreement dated
January 27, 1994 between the Company and Professional Health
Sales, Inc. (1)
10.5 Mutual Release to terminate Joint Venture Agreement dated August
2, 1993 between the Company and Tillotson Healthcare Corporation
(1)
10.6 Release by the Company to terminate License and Sales Agreement
dated August 1, 1993 between the Company and Tyndale
Plains-Hunter, Ltd. ("TPH") (1)
10.7 Release by the Company to terminate Evaluation Agreement dated
August 19, 1993 between the Company and TPH (1)
10.8 Release by the TPH to terminate License and Sales Agreement dated
August 23, 1993 between the Company and TPH (1)
10.9 Release by the TPH to terminate Evaluation Agreement dated August
23, 1993 between the Company and TPH (1)
10.10 Product Development and License Agreement dated May 25, 1993
between the Company and Innovative Technologies Limited ("IT")
(1)
10.11 Product Development and License Agreement for Gloves dated June
20, 1993 between the Company and IT (1)
10.12 Amendment to Joint Venture Agreement dated January 5, 1994
between the Company and Intelligent Pharmaceuticals Corporation
(1)
10.13 Lease Agreement dated January 14, 1993 among the Company,
Ridgecrest Properties, R and B Properties and Hindry West
Development (1)
10.14 Lease Amendment dated June 30, 1993 among the Company, Ridgecrest
Properties, R and B Properties and Hindry West Development (1)
10.15 International Distribution Agreement dated July 16, 1993 between
WTP and B&R Consulting Limited, Inc. (1)
10.16 International Distribution Agreement dated August 11, 1993
between WTP and Dagal, Inc. (1)
10.17 International Distribution Agreement dated January 3, 1994
between WTP and Windsor Group, Ltd. (1)
28
<PAGE> 30
10.18 First Amendment to Credit and Security Agreement dated January
11, 1994 between the Company and City National Bank ("CNB") (1)
10.19 Revolving Credit Note dated January 11, 1994 between the Company
and CNB (1)
10.20 Equipment Acquisition Note dated January 11, 1994 between the
Company and CNB (1)
10.21 Credit Agreement dated May 13, 1994 between the Company and
Dominion (2)
10.22 Warrant to Purchase Common Stock of Company dated May 13, 1994
(3)
10.23 Security Agreement dated May 13, 1994 between the Registrant and
Dominion (4)
10.24 Promissory Note in the principal amount of $5,000,000 dated May
13, 1994 made by the Registrant to the order of Dominion (5)
10.25 Fairness Opinion dated November 24, 1993 regarding the sale by
the Company of certain assets related to WMP's OEM private-label
business to Advanced Materials prepared for the Company by
Laidlaw Holdings, Inc. (6)
10.26 Settlement Agreement and Release dated November 1, 1994 between
Coating Sciences, Inc. and the Registrant. (7)
10.27 Settlement Agreement dated May 12, 1994 between Time Release
Sciences, Inc. and the Registrant. (7)
10.28 Amendment thereto dated September 17, 1994. (7)
10.29 Agreement dated as of January 16, 1995 among Medical Engineering
Corporation, Wilshire Advanced Materials, Inc. and the
Registrant, concerning breast implant claims. (7)
10.30 Stipulation of Partial Settlement dated as of October 26, 1994 in
re Wilshire Technologies Securities Litigation Master File
94-0400-B (AJB), United States District Court for the Southern
District of California among the Registrant and the
Representative Plaintiffs named therein, exclusive of the
exhibits thereto. (7)
10.31 Articles of Incorporation (8)
10.32 Credit Agreement dated November 18, 1994 between the Registrant
and Dominion Capital, Inc., including form of Warrant and form of
Note. (9)
10.33 First Amendment, dated December 30, 1994 to such Credit
Agreement, including form of Promissory Note. (10)
10.34 Second Amendment, dated February 14, 1995, to such Credit
Agreement, including form of Promissory Note. (11)
10.35 1995 Stock Option Plan (12)
10.36 Form of Non-Qualified Stock Option Agreement. (13)
10.37 Third Amendment, dated May 23, 1995, to the Credit Agreement
dated November 18, 1994 between the Registrant and Dominion
Capital, Inc. (14)
10.38 Agreement between the Registrant and Dominion Capital, Inc. dated
June 29, 1995, on payment of interest. (15)
29
<PAGE> 31
10.39 Second Amendment dated May 17, 1995, to the Settlement Agreement
dated May 12, 1994 between Time Release Sciences, Inc. and the
Registrant. (16)
10.40 Letter Agreement dated June 29, 1995 between Dominion Capital,
Inc. ("Dominion") and the Registrant notifying Registrant of
Dominion's intent to transfer certain securities to Venture
Capital Equities, LLC (the "LLC"). (17)
10.41 Agreement dated June 30, 1995 among Dominion, the LLC and the
Registrant referred to in the preceding Letter Agreement with the
following Exhibits: (a) Lender Assignment and Assumption
Agreement dated June 30, 1995. (b) Grid Promissory Note dated May
23, 1995. (c) Assignment of Warrant by Dominion to the LLC. (18)
10.42 Amendment dated June 30, 1995 to Warrant Agreement dated May 13,
1994 between Wilshire and Dominion. (19)
10.43 Advice by Dominion and the LLC to the Registrant of the transfer
of the securities by Dominion to the LLC and of the proposed name
change of the LLC to Trilon Dominion Partners, LLC. (20)
10.44 Bylaw Amendment, effective July 31, 1995, fixing exact number of
directors at five. (21)
10.45 Registrant's Bylaws as in effect on October 9, 1995. (22)
10.46 Letter dated May 12, 1995 by Ministry of Health of the Republic
of Mexico granting Sanitary Registration No. 245M95 SSA for the
appetite suppressant ("TrimPatch(TM)"). (23)
10.47 English translation of Exhibit 10.7. (24)
10.48 Employment Agreement dated August 31, 1995 and effective April
17, 1995 between the Registrant and Mr. Stephen P. Scibelli, Jr.
(25)
10.49 Amendment to Asset Purchase Agreement, dated May 19, 1995 between
the Registrant and Wilshire Advanced Materials, Inc. (26)
10.50 Form of stock option granted on September 16, 1994 to directors
Black, Davis, Landry and Widder. (27)
10.51 Form of stock option granted on December 6, 1994 to director
William J. Hopke. (28)
10.52 Form of stock option granted on April 17, 1995 to directors
Black, Davis, Hopke, Landry and Widder. (29)
10.53 Form of stock option granted on September 16, 1994 to Mr. Stephen
P. Scibelli, Jr. (30)
10.54 Form of stock option granted on April 17, 1995 to Mr. Stephen P.
Scibelli, Jr. (31)
10.55 Technology and Peripheral Technology Rights Agreement dated June
30, 1995, among the Registrant, James A. Eisenstock, and Mikki
Rossin, relating to Bloodstopper products. (32)
10.56 Fourth Amendment, dated September 1, 1995, to the Credit
Agreement dated November 18, 1994 between the Registrant and
Trilon Dominion Partners, LLC. (33)
10.57 Industrial Sublease Agreement dated August 31, 1995 between the
Registrant and Advanced Materials, Inc. (34)
30
<PAGE> 32
10.58 Fifth Amendment dated as of November 1, 1995 to the Credit
Agreement dated November 18, 1994 (the "Credit Agreement")
between the Registrant and Trilon Dominion Partners LLC
("Trilon"). (35)
10.59 Sixth Amendment dated as of December 5, 1995 to the
above-mentioned Credit Agreement. (36)
10.60 Exchange Agreement dated as of January 5, 1996 between the
Registrant and Trilon. (37)
10.61 Credit Agreement (the "Trilon Agreement") dated January 5, 1996
between the Registrant and Trilon, exclusive of certain
schedules. (38)
10.62 Grid Promissory Note for not to exceed $1,000,000 to evidence
borrowings under the Trilon Agreement. (39)
10.63 Amendment No. 1 dated January 5, 1996 to Security Agreement dated
May 13, 1995 which secures borrowings under the Trilon Agreement.
(40)
10.64 Warrant dated January 5, 1996 to purchase 100,000 shares of the
Registrant's Common Stock, issued to Trilon pursuant to the
Trilon Agreement. (41)
10.65 Springing Warrant dated January 5, 1996 to purchase 25,000 shares
of the Registrant's Common Stock, issued to Trilon pursuant to
the Trilon Agreement. (42)
10.66 Consulting Agreement dated January 5, 1996 between the Registrant
and Trilon. (43)
10.67 Form of Stock Option granted on December 12, 1995 to Mr. James W.
Klingler. (44)
10.68 Agreement of Purchase and Sale of Joint Venture Interest and
Terminating Joint Venture, between the Company and Intelligent
Pharmaceuticals Corporation, dated November 1, 1995. (45)
10.69 Employment Agreement, dated October 3, 1994 between the Company
and James W. Klingler. (45)
10.70 Employment Agreement, dated August 15, 1995 between the Company
and David R. Byck. (45)
10.71 Bylaw Amendment adopted February 19, 1996. (45)
10.72 Bylaws as in effect on February 20, 1996. (45)
10.73 Principal/Agent Agreement dated March 13, 1996 between
Intelligent Pharmaceuticals Corporation and the Registrant. (46)
10.74 Manufacturing and Supply Agreement dated April 11, 1996, between
Advanced Barrier Technologies, Inc., and the Registrant. (47)
10.75 Agreement dated April 15, 1996, between Dagal, Inc., and the
Registrant. (47)
10.76 Agreement related to Wound Care Products, dated April 18, 1996,
between Innovative Technologies Ltd. and the Registrant. (47)
10.77 Agreement related to Gloves, dated April 18, 1996, between
Innovative Technologies Ltd. and the Registrant. (47)
10.78 Finder Agreement dated May 1, 1996, between Innovative Research
Associates, inc., and the Registrant. (47)
31
<PAGE> 33
10.79 Product Rights Transfer Agreement, dated May 24, 1996, between
Advanced Materials, inc., and the Registrant. (47)
10.80 Release Agreement dated July 3, 1996, between Advanced Materials,
Inc., and the Registrant. (47)
10.81 Purchase of Assets and Assumption of Sublease Agreement with
certain Exhibits dated June 30, 1996, between Acacia
Laboratories, inc., (dba Horizon Medical, Inc.,) and the
Registrant. (47)
10.82 Amendment dated June 30, 1996, to Credit Agreement and Grid
Promissory Note dated January 5, 1996, between Trilon Dominion
Partners, LLC, and the Registrant. (47)
10.83 Addendum Agreement dated July 26, 1996 to the Manufacturing and
Supply Agreement dated April 11, 1996 between Advanced Barrier
Technologies, Inc. and the Registrant. (48)
10.84 Bailment Agreement dated September 6, 1996 between Coastline de
Mexico S.A. de C.V., Advanced Barrier Technologies, Inc. and the
Registrant. (48)
10.85 Offer of Settlement of Wilshire Technologies, Inc. dated August
5, 1996 to the U.S. Securities and Exchange Commission. (48)
10.86 Order Instituting Proceedings Pursuant to Section 21C of the
Securities Exchange Act of 1934, Making Findings and Imposing a
Cease and desist Order, dated September 24, 1996 entered by the
U.S. Securities and Exchange Commission against the Registrant.
(48)
10.87 Agreement of Purchase and Sale of TrimPatch(TM) Business and
Assets dated September 30, 1996 between Intelligent
Pharmaceuticals Corporation and the Registrant. (48)
10.88 Restated Articles of Incorporation filed in the office of the
Secretary of State of California on May 24, 1996. (49)
10.89 Certificate of Amendment of Articles of Incorporation filed in
the office of the Secretary of State of California on June 10,
1996. (50)
10.90 Second Amendment dated September 30, 1996 to Credit Agreement and
Grid Promissory Note dated January 5, 1996, between Trilon
Dominion Partners, LLC, and the Registrant. (51)
10.91 Second Addendum, dated February 3, 1997, to the Manufacturing and
Supply Agreement dated April 11, 1996 between Advanced Barrier
Technologies, Inc. and the Registrant. (52)
10.92 Bailment Agreement, dated February 3, 1997, between Advanced
Barrier Technologies de Mexico S.A. de C.V., Advanced Barrier
Technologies, Inc. and the Registrant. (52)
10.93 Certificate, dated February 28, 1997, regarding the dissolution
of Wilshire Transdermal Products, Ltd. (52)
10.94 Distributor Agreement, dated March 5, 1997, between Armstrong
Industrial Corporation and the Registrant. (53)
10.95 Third Amendment, dated April 15, 1997, to Credit Agreement and to
Grid Promissory Note dated January 5, 1996 between Trilon
Dominion Partners LLC, and the Registrant. (53)
10.96 Agreement related to Gloves, dated April 29, 1997, between
Innovative Technologies Ltd. and the Registrant. (53)
32
<PAGE> 34
10.97 Equipment Supply Agreement, dated July 28, 1997, between ACC
Automation Company and the Registrant. (54)
10.98 Settlement Agreement, Mutual Release, and Injunction, dated July
31, 1997, between Powell Products, Inc. and the Registrant. (54)
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. (54)
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. (54)
10.102 Lease Agreement dated August 30, 1997 between the Registrant and
Messrs. Frank Naliboff and Nathan Morton.
10.103 Lease Agreement dated November 25, 1997 among the Registrant,
Wilshire International de Mexico S.A. de C.V., and Mr. Rafael
Mizrachi.
10.104 Warrant Agreement, dated November 24, 1997, between the
Registrant and American Stock Transfer and Trust Company.
10.105 Employment Agreement, dated January 1, 1998 between the
Registrant and Mr. John Van Egmond.
10.106 Demand Note, dated January 7, 1998, between the Registrant and
Trilon Dominion Partners, L.L.C.
10.107 Demand Note dated February 17, 1998, between the Registrant and
Trilon Dominion Partners, L.L.C.
10.108 Articles of Incorporation and by-laws granted May 9, 1997 and
recorded May 22, 1997 of Wilshire International de Mexico, S.A.
de C.V.
10.109 Management Services Agreement dated October 8, 1997 among
Wilshire International de Mexico S.A. de C.V., Tecnicas Mexicanas
de Ensamble, S.A. de C.V., and Made in Mexico, Inc.
10.110 Assembly (Maquila) Agreement and Commodatum Agreement dated
February 3, 1998, between the Registrant and Wilshire
International de Mexico S.A. de C.V.
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
99 Risks and Uncertainties in Forward-Looking Statements (51)
----------------------
NOTE: Certain of the Exhibits listed above are incorporated herein by
reference to other documents previously filed with the Commission
as follows:
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ------- --------
<S> <C> <C>
1 Incorporated to the identically 10-KSB for fiscal 1993
numbered Exhibit to Form
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ------- --------
<S> <C> <C>
2 Form 8-K dated May 23, 1
1994 (the "1994 8-K")
3 1994 8-K 4
4 1994 8-K 2
5 1994 8-K 3
6 Form 10-KSB for 28
fiscal 1993
7 Incorporated to the identically
numbered Exhibit in Form 10-KSB
for fiscal 1994 (the "1994 KSB")
8 1994 KSB 3(i)
9 1994 KSB 4(a)
10 1994 KSB 4(b)
11 1994 KSB 4(c)
12 1994 KSB 4(d)
13 1994 KSB 4(e)
14 Form 10-QSB dated July 12, 1995 10.1
(the "July 1995 QSB")
15 July 1995 QSB 10.2
16 July 1995 QSB 10.3
17 Form 10-QSB dated October 10, 1995 10.1
(the "October 1995 QSB")
18 October 1995 QSB 10.2
19 Form 8-K dated August 7, 1995 2
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ------- --------
<S> <C> <C>
20 October 1995 QSB 10.4
21 October 1995 QSB 10.5
22 October 1995 QSB 10.6
23 October 1995 QSB 10.7
24 October 1995 QSB 10.8
25 October 1995 QSB 10.9
26 October 1995 QSB 10.10
27 October 1995 QSB 10.11
28 October 1995 QSB 10.12
29 October 1995 QSB 10.13
30 October 1995 QSB 10.14
31 October 1995 QSB 10.15
32 October 1995 QSB 10.16
33 October 1995 QSB 10.17
34 October 1995 QSB 10.18
35 Form 8-K dated January 10, 1996 1
(the "January, 1996 8-K")
36 January, 1996 8-K 2
37 January, 1996 8-K 3
38 January, 1996 8-K 4
39 January, 1996 8-K 5
40 January, 1996 8-K 6
41 January, 1996 8-K 7
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ------- --------
<S> <C> <C>
42 January, 1996 8-K 8
43 January, 1996 8-K 9
44 January, 1996 8-K 10
45 Incorporated to the identically
numbered Exhibit in Form 10-KSB
for fiscal 1995
46 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated April 10, 1996
47 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated July 10, 1996
48 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated October 11, 1996
49 Form 8-K dated May 24, 1996 3 (i) (a)
(the "May, 1996 8-K")
50 May, 1996 8-K 3 (i) (b)
51 Incorporated to the identically
numbered Exhibit in Form 10-KSB
dated February 24, 1997.
52 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated April 11, 1997.
53 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated July 9, 1997
54 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated October 10, 1997.
</TABLE>
(b) REPORTS ON FORM 8-K.
None
36
<PAGE> 38
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WILSHIRE TECHNOLOGIES, INC.
Dated: February 25, 1998 By: /s/ John Van Egmond
---------------------------------
John Van Egmond,
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Ronald W. Cantwell Director and February 25, 1998
- ------------------------------------ Chairman of the Board
Ronald W. Cantwell
/s/ John Van Egmond Director, and February 25, 1998
- ------------------------------------ President and Chief Executive Officer
John Van Egmond (Principal Executive Officer)
/s/ James W. Klingler Chief Financial Officer, February 25, 1998
- ------------------------------------ Treasurer and Secretary
James W. Klingler (Principal Financial Officer and
Principal Accounting Officer)
/s/ Charles H. Black
- ------------------------------------
Charles H. Black Director February 25, 1998
/s/ Joe E. Davis
- ------------------------------------
Joe E. Davis Director February 25, 1998
/s/ Ralph V. Whitworth
- ------------------------------------
Ralph V. Whitworth Director February 25, 1998
</TABLE>
37
<PAGE> 39
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Sequential Page No.
----------- -------------------
<S> <C> <C>
10.1 Settlement Agreement dated November 23, 1993 between the Company
and Wilshire Advanced Materials, Inc. ("Advanced Materials") (1)
10.2 Asset Purchase Agreement dated November 23, 1993, between the
Company and Advanced Materials (forms of bill of sale and
assignment, secured promissory note, amended and restated secured
subordinated promissory note, and amendment to security reement
attached thereto) (1)
10.3 Maturity Date Extension to Secured Promissory Note dated January
24, 1994 between the Company and Advanced Materials (1)
10.4 Amendment to Manufacturers Sales Representative Agreement dated
January 27, 1994 between the Company and Professional Health
Sales, Inc. (1)
10.5 Mutual Release to terminate Joint Venture Agreement dated August
2, 1993 between the Company and Tillotson Healthcare Corporation
(1)
10.6 Release by the Company to terminate License and Sales Agreement
dated August 1, 1993 between the Company and Tyndale
Plains-Hunter, Ltd. ("TPH") (1)
10.7 Release by the Company to terminate Evaluation Agreement dated
August 19, 1993 between the Company and TPH (1)
10.8 Release by the TPH to terminate License and Sales Agreement dated
August 23, 1993 between the Company and TPH (1)
10.9 Release by the TPH to terminate Evaluation Agreement dated August
23, 1993 between the Company and TPH (1)
10.10 Product Development and License Agreement dated May 25, 1993
between the Company and Innovative Technologies Limited
("IT") (1)
10.11 Product Development and License Agreement for Gloves dated June
20, 1993 between the Company and IT (1)
10.12 Amendment to Joint Venture Agreement dated January 5, 1994
between the Company and Intelligent Pharmaceuticals Corporation
(1)
10.13 Lease Agreement dated January 14, 1993 among the Company,
Ridgecrest Properties, R and B Properties and Hindry West
Development (1)
10.14 Lease Amendment dated June 30, 1993 among the Company, Ridgecrest
Properties, R and B Properties and Hindry West Development (1)
</TABLE>
38
<PAGE> 40
<TABLE>
<CAPTION>
Exhibit No. Sequential Page No.
----------- -------------------
<S> <C> <C>
10.15 International Distribution Agreement dated July 16, 1993 between
WTP and B&R Consulting Limited, Inc. (1)
10.16 International Distribution Agreement dated August 11, 1993
between WTP and Dagal, Inc. (1)
10.17 International Distribution Agreement dated January 3, 1994
between WTP and Windsor Group, Ltd. (1)
10.18 First Amendment to Credit and Security Agreement dated January
11, 1994 between the Company and City National Bank ("CNB") (1)
10.19 Revolving Credit Note dated January 11, 1994 between the Company
and CNB (1)
10.20 Equipment Acquisition Note dated January 11, 1994 between the
Company and CNB (1)
10.21 Credit Agreement dated May 13, 1994 between the Company and
Dominion (2)
10.22 Warrant to Purchase Common Stock of Company dated May 13, 1994
(3)
10.23 Security Agreement dated May 13, 1994 between the Registrant and
Dominion (4)
10.24 Promissory Note in the principal amount of $5,000,000 dated May
13, 1994 made by the Registrant to the order of Dominion (5)
10.25 Fairness Opinion dated November 24, 1993 regarding the sale by
the Company of certain assets related to WMP's OEM private-label
business to Advanced Materials prepared for the Company by
Laidlaw Holdings, Inc. (6)
10.26 Settlement Agreement and Release dated November 1, 1994 between
Coating Sciences, Inc. and the Registrant. (7)
10.27 Settlement Agreement dated May 12, 1994 between Time Release
Sciences, Inc. and the Registrant. (7)
10.28 Amendment thereto dated September 17, 1994. (7)
10.29 Agreement dated as of January 16, 1995 among Medical Engineering
Corporation, Wilshire Advanced Materials, Inc. and the
Registrant, concerning breast implant claims. (7)
10.30 Stipulation of Partial Settlement dated as of October 26, 1994 in
re Wilshire Technologies Securities Litigation Master File
94-0400-B (AJB), United States District Court for the Southern
District of California among the Registrant and the
Representative Plaintiffs named therein, exclusive of the
exhibits thereto. (7)
10.31 Articles of Incorporation (8)
</TABLE>
39
<PAGE> 41
<TABLE>
<CAPTION>
Exhibit No. Sequential Page No.
----------- -------------------
<S> <C> <C>
10.32 Credit Agreement dated November 18, 1994 between the Registrant
and Dominion Capital,Inc., including form of Warrant and form of
Note. (9)
10.33 First Amendment, dated December 30, 1994 to such Credit
Agreement, including form of Promissory Note. (10)
10.34 Second Amendment, dated February 14, 1995, to such Credit
Agreement, including form of Promissory Note. (11)
10.35 1995 Stock Option Plan (12)
10.36 Form of Non-Qualified Stock Option Agreement. (13)
10.37 Third Amendment, dated May 23, 1995, to the Credit Agreement
dated November 18, 1994 between the Registrant and Dominion
Capital, Inc. (14)
10.38 Agreement between the Registrant and Dominion Capital, Inc. dated
June 29, 1995, on payment of interest. (15)
10.39 Second Amendment dated May 17, 1995, to the Settlement Agreement
dated May 12, 1994 between Time Release Sciences, Inc. and the
Registrant. (16)
10.40 Letter Agreement dated June 29, 1995 between Dominion Capital,
Inc. ("Dominion") and the Registrant notifying Registrant of
Dominion's intent to transfer certain securities to Venture
Capital Equities, LLC (the "LLC"). (17)
10.41 Agreement dated June 30, 1995 among Dominion, the LLC and the
Registrant referred to in the preceding Letter Agreement with the
following Exhibits: (a) Lender Assignment and Assumption
Agreement dated June 30, 1995. (b) Grid Promissory Note dated May
23, 1995. (c) Assignment of Warrant by Dominion to the LLC. (18)
10.42 Amendment dated June 30, 1995 to Warrant Agreement dated May 13,
1994 between Wilshire and Dominion. (19)
10.43 Advice by Dominion and the LLC to the Registrant of the transfer
of the securities by Dominion to the LLC and of the proposed name
change of the LLC to Trilon Dominion Partners, LLC. (20)
10.44 Bylaw Amendment, effective July 31, 1995, fixing exact number of
directors at five. (21)
10.45 Registrant's Bylaws as in effect on October 9, 1995. (22)
10.46 Letter dated May 12, 1995 by Ministry of Health of the Republic
of Mexico granting Sanitary Registration No. 245M95 SSA for the
appetite suppressant ("TrimPatch(TM)"). (23)
10.47 English translation of Exhibit 10.7. (24)
</TABLE>
40
<PAGE> 42
<TABLE>
<CAPTION>
Exhibit No. Sequential Page No.
----------- -------------------
<S> <C> <C>
10.48 Employment Agreement dated August 31, 1995 and effective April
17, 1995 between the Registrant and Mr. Stephen P. Scibelli, Jr.
(25)
10.49 Amendment to Asset Purchase Agreement, dated May 19, 1995 between
the Registrant and Wilshire Advanced Materials, Inc. (26)
10.50 Form of stock option granted on September 16, 1994 to directors
Black, Davis, Landry and Widder. (27)
10.51 Form of stock option granted on December 6, 1994 to director
William J. Hopke. (28)
10.52 Form of stock option granted on April 17, 1995 to directors
Black, Davis, Hopke, Landry and Widder. (29)
10.53 Form of stock option granted on September 16, 1994 to Mr. Stephen
P. Scibelli, Jr. (30)
10.54 Form of stock option granted on April 17, 1995 to Mr. Stephen P.
Scibelli, Jr. (31)
10.55 Technology and Peripheral Technology Rights Agreement dated June
30, 1995, among the Registrant, James A. Eisenstock, and Mikki
Rossin, relating to Bloodstopper products. (32)
10.56 Fourth Amendment, dated September 1, 1995, to the Credit
Agreement dated November 18, 1994 between the Registrant and
Trilon Dominion Partners, LLC. (33)
10.57 Industrial Sublease Agreement dated August 31, 1995 between the
Registrant and Advanced Materials, Inc. (34)
10.58 Fifth Amendment dated as of November 1, 1995 to the Credit
Agreement dated November 18, 1994 (the "Credit Agreement")
between the Registrant and Trilon Dominion Partners LLC
("Trilon"). (35)
10.59 Sixth Amendment dated as of December 5, 1995 to the
above-mentioned Credit Agreement. (36)
10.60 Exchange Agreement dated as of January 5, 1996 between the
Registrant and Trilon. (37)
10.61 Credit Agreement (the "Trilon Agreement") dated January 5, 1996
between the Registrant and Trilon, exclusive of certain
schedules. (38)
10.62 Grid Promissory Note for not to exceed $1,000,000 to evidence
borrowings under the Trilon Agreement. (39)
10.63 Amendment No. 1 dated January 5, 1996 to Security Agreement dated
May 13, 1995 which secures borrowings under the Trilon Agreement.
(40)
</TABLE>
41
<PAGE> 43
<TABLE>
<CAPTION>
Exhibit No. Sequential Page No.
----------- -------------------
<S> <C> <C>
10.64 Warrant dated January 5, 1996 to purchase 100,000 shares of the
Registrant's Common Stock, issued to Trilon pursuant to the
Trilon Agreement. (41)
10.65 Springing Warrant dated January 5, 1996 to purchase 25,000 shares
of the Registrant's Common Stock, issued to Trilon pursuant to
the Trilon Agreement. (42)
10.66 Consulting Agreement dated January 5, 1996 between the Registrant
and Trilon. (43)
10.67 Form of Stock Option granted on December 12, 1995 to Mr. James W.
Klingler. (44)
10.68 Agreement of Purchase and Sale of Joint Venture Interest and
Terminating Joint Venture, between the Company and Intelligent
Pharmaceuticals Corporation, dated November 1, 1995. (45)
10.69 Employment Agreement, dated October 3, 1994 between the Company
and James W. Klingler. (45)
10.70 Employment Agreement, dated August 15, 1995 between the Company
and David R. Byck. (45)
10.71 Bylaw Amendment adopted February 19, 1996. (45)
10.72 Bylaws as in effect on February 20, 1996. (45)
10.73 Principal/Agent Agreement dated March 13, 1996 between
Intelligent Pharmaceuticals Corporation and the Registrant.
(46)
10.74 Manufacturing and Supply Agreement dated April 11, 1996, between
Advanced Barrier Technologies, Inc., and the Registrant. (47)
10.75 Agreement dated April 15, 1996, between Dagal, Inc., and the
Registrant. (47)
10.76 Agreement related to Wound Care Products, dated April 18, 1996,
between Innovative Technologies Ltd. and the Registrant. (47)
10.77 Agreement related to Gloves, dated April 18, 1996, between
Innovative Technologies Ltd. and the Registrant. (47)
10.78 Finder Agreement dated May 1, 1996, between Innovative Research
Associates, inc., and the Registrant. (47)
10.79 Product Rights Transfer Agreement, dated May 24, 1996, between
Advanced Materials, inc., and the Registrant. (47)
10.80 Release Agreement dated July 3, 1996, between Advanced Materials,
Inc., and the Registrant. (47)
10.81 Purchase of Assets and Assumption of Sublease Agreement with
certain Exhibits dated June 30, 1996, between Acacia
Laboratories, inc., (dba Horizon Medical, Inc.,) and the
Registrant. (47)
</TABLE>
42
<PAGE> 44
<TABLE>
<CAPTION>
Exhibit No. Sequential Page No.
----------- -------------------
<S> <C> <C>
10.82 Amendment dated June 30, 1996, to Credit Agreement and Grid
Promissory Note dated January 5, 1996, between Trilon Dominion
Partners, LLC, and the Registrant. (47)
10.83 Addendum Agreement dated July 26, 1996 to the Manufacturing and
Supply Agreement dated April 11, 1996 between Advanced Barrier
Technologies, Inc. and the Registrant. (48)
10.84 Bailment Agreement dated September 6, 1996 between Coastline de
Mexico S.A. de C.V., Advanced Barrier Technologies, Inc. and the
Registrant. (48)
10.85 Offer of Settlement of Wilshire Technologies, Inc. dated August
5, 1996 to the U.S. Securities and Exchange Commission. (48)
10.86 Order Instituting Proceedings Pursuant to Section 21C of the
Securities Exchange Act of 1934, Making Findings and Imposing a
Cease and desist Order, dated September 24, 1996 entered by the
U.S. Securities and Exchange Commission against the Registrant.
(48)
10.87 Agreement of Purchase and Sale of TrimPatch(TM) Business and
Assets dated September 30, 1996 between Intelligent
Pharmaceuticals Corporation and the Registrant. (48)
10.88 Restated Articles of Incorporation filed in the office of the
Secretary of State of California on May 24, 1996. (49)
10.89 Certificate of Amendment of Articles of Incorporation filed in
the office of the Secretary of State of California on June 10,
1996. (50)
10.90 Second Amendment dated September 30, 1996 to Credit Agreement and
Grid Promissory Note dated January 5, 1996, between Trilon
Dominion Partners, LLC, and the Registrant.. (51)
10.91 Second Addendum, dated February 3, 1997, to the Manufacturing and
Supply Agreement dated April 11, 1996 between Advanced Barrier
Technologies, Inc. and the Registrant. (52)
10.92 Bailment Agreement, dated February 3, 1997, between Advanced
Barrier Technologies de Mexico S.A. de C.V., Advanced Barrier
Technologies, Inc. and the Registrant. (52)
10.93 Certificate, dated February 28, 1997, regarding the dissolution
of Wilshire Transdermal Products, Ltd. (52)
10.94 Distributor Agreement, dated March 5, 1997, between Armstrong
Industrial Corporation and the Registrant. (53)
10.95 Third Amendment, dated April 15, 1997, to Credit Agreement and to
Grid Promissory Note dated January 5, 1996 between Trilon
Dominion Partners LLC, and the Registrant. (53)
10.96 Agreement related to Gloves, dated April 29, 1997, between
Innovative Technologies Ltd. and the Registrant. (53)
</TABLE>
43
<PAGE> 45
<TABLE>
<CAPTION>
Exhibit No. Sequential Page No.
----------- -------------------
<S> <C> <C>
10.97 Equipment Supply Agreement, dated July 28, 1997, between ACC
Automation Company and the Registrant. (54)
10.98 Settlement Agreement, Mutual Release, and Injunction, dated July
31, 1997, between Powell Products, Inc. and the Registrant. (54)
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. (54)
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. (54)
10.102 Lease Agreement dated August 30, 1997 between the Registrant and
Messrs. Frank Naliboff and Nathan Morton.
10.103 Lease Agreement dated November 25, 1997 among the Registrant,
Wilshire International de Mexico S.A. de C.V., and Mr. Rafael
Mizrachi.
10.104 Warrant Agreement, dated November 24, 1997, between the
Registrant and American Stock Transfer and Trust Company.
10.105 Employment Agreement, dated January 1, 1998 between the
Registrant and Mr. John Van Egmond.
10.106 Demand Note, dated January 7, 1998, between the Registrant and
Trilon Dominion Partners, L.L.C.
10.107 Demand Note dated February 17, 1998, between the Registrant and
Trilon Dominion Partners, L.L.C.
10.108 Articles of Incorporation and by-laws granted May 9, 1997 and
recorded May 22, 1997 of Wilshire International de Mexico, S.A.
de C.V.
10.109 Management Services Agreement dated October 8, 1997 among
Wilshire International de Mexico S.A. de C.V., Tecnicas Mexicanas
de Ensamble, S.A. de C.V., and Made in Mexico, Inc.
10.110 Assembly (Maquila) Agreement and Commodatum Agreement dated
February 3, 1998, between the Registrant and Wilshire
International de Mexico S.A. de C.V.
21 Subsidiaries of the Registrant.
99 Risks and Uncertainties in Forward-Looking Statements. (51)
</TABLE>
----------------------
NOTE: Certain of the Exhibits listed above are incorporated herein by
reference to other documents previously filed with the Commission
as follows:
44
<PAGE> 46
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ------- --------
<S> <C> <C>
1 Incorporated to the identically
numbered Exhibit to Form 10-KSB
for fiscal 1993
2 Form 8-K dated May 23, 1994 1
(the "1994 8-K")
3 1994 8-K 4
4 1994 8-K 2
5 1994 8-K 3
6 Form 10-KSB for 28
fiscal 1993
7 Incorporated to the identically
numbered Exhibit in Form 10-KSB
for fiscal 1994 (the "1994 KSB")
8 1994 KSB 3(i)
9 1994 KSB 4(a)
10 1994 KSB 4(b)
11 1994 KSB 4(c)
12 1994 KSB 4(d)
13 1994 KSB 4(e)
14 Form 10-QSB dated July 12, 1995 10.1
(the "July 1995QSB")
15 July 1995 QSB 10.2
16 July 1995 QSB 10.3
17 Form 10-QSB dated October 10, 1995 10.1
(the "October 1995 QSB")
18 October 1995 QSB 10.2
19 Form 8-K dated August 7, 1995 2
20 October 1995 QSB 10.4
</TABLE>
45
<PAGE> 47
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ------- --------
<S> <C> <C>
21 October 1995 QSB 10.5
22 October 1995 QSB 10.6
23 October 1995 QSB 10.7
24 October 1995 QSB 10.8
25 October 1995 QSB 10.9
26 October 1995 QSB 10.10
27 October 1995 QSB 10.11
28 October 1995 QSB 10.12
29 October 1995 QSB 10.13
30 October 1995 QSB 10.14
31 October 1995 QSB 10.15
32 October 1995 QSB 10.16
33 October 1995 QSB 10.17
34 October 1995 QSB 10.18
35 Form 8-K dated January 10, 1996 1
(the "January, 1996 8-K")
36 January, 1996 8-K 2
37 January, 1996 8-K 3
38 January, 1996 8-K 4
39 January, 1996 8-K 5
40 January, 1996 8-K 6
41 January, 1996 8-K 7
</TABLE>
46
<PAGE> 48
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ------- --------
<S> <C> <C>
42 January, 1996 8-K 8
43 January, 1996 8-K 9
44 January, 1996 8-K 10
45 Incorporated to the identically
numbered Exhibit in Form 10-KSB
for fiscal 1995
46 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated April 10, 1996
47 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated July 10, 1996
48 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated October 11, 1996
49 Form 8-K dated May 24, 1996 3 (i) (a)
(the "May, 1996 8-K")
50 May, 1996 8-K 3 (i) (b)
51 Incorporated to the identically
numbered Exhibit in Form 10-KSB
dated February 24, 1997.
52 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated April 11, 1997.
53 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated July 9, 1997
54 Incorporated to the identically
numbered Exhibit in Form 10-QSB
dated October 10, 1997.
</TABLE>
47
<PAGE> 1
EXHIBIT 10.102
TRIPLE NET LEASE
(Single Tenant Building)
5861 EDISON PLACE, CARLSBAD, CA
By and Between
FRANK NALIBOFF and NATHAN MORTON
and
WILSHIRE TECHNOLOGIES, INC.,
A California Corporation
<PAGE> 2
TRIPLE NET LEASE
(Single Tenant Building)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Title Page
- ------- ----- ----
<S> <C> <C>
1 Parties..................................................................1
2 Premises.................................................................1
3 Term.....................................................................1
4 Monthly Base Rent........................................................2
5 Security Deposit.........................................................3
6 Use......................................................................4
7 Compliance with Law......................................................5
8 Condition of Premises....................................................5
9 Notices..................................................................6
10 Brokers..................................................................7
11 Holding Over.............................................................7
12 Maintenance, Repairs and Alterations.....................................7
13 Liens....................................................................9
14 Bankruptcy..............................................................10
15 Indemnification and Release.............................................10
16 Insurance...............................................................11
17 Damage or Destruction...................................................13
18 Real Property Taxes.....................................................15
19 Utilities...............................................................16
20 Defaults and Remedies...................................................16
21 Condemnation............................................................18
22 Estoppel Certificate....................................................19
23 Governing Law...........................................................19
24 Successors and Assigns..................................................19
25 Professionals' Fees.....................................................19
26 Performance by Lessee...................................................20
27 Mortgage Protection.....................................................20
28 Definition of Lessor....................................................20
29 Waiver..................................................................21
30 Identification of Lessee................................................21
31 Terms and Headings......................................................21
32 Examination of Lease....................................................22
33 Time....................................................................22
34 Prior Agreement; Amendments.............................................22
35 Separability............................................................22
36 Recording...............................................................22
37 Authority...............................................................22
38 Limitation on Liability.................................................22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
39 Lessor's Access.........................................................23
40 Auctions................................................................23
41 Signs...................................................................23
42 Guarantor...............................................................23
43 Subordination and Attornment............................................23
44 Riders..................................................................24
45 Easements...............................................................24
46 Performance Under Protest...............................................25
47 Assignment and Subletting...............................................25
48 Surrender Not Merger....................................................26
49 Covenants, Conditions and Restrictions..................................26
50 Additional Expenses.....................................................26
51 Option to Renew Lease...................................................27
52 Recovery of Abated Rent.................................................27
53 Indemnification.........................................................27
54 Tenant Improvements.....................................................28
Signatures..............................................................29
</TABLE>
EXHIBITS
Exhibit Title
A Legal Description of Premises
B Emissions; Storage, Use and Disposal of Waste
C Covenants, Conditions and Restrictions
D Tenant Improvement Plan
E Letter of Credit
<PAGE> 4
TRIPLE NET LEASE
(Single Tenant Building)
1. Parties.
1.1 This Lease, dated the 30th day of August 1997 for reference purposes
only, is made by and between FRANK NALIBOFF and NATHAN MORTON, (herein called
"Lessor") and WILSHIRE TECHNOLOGIES, INC., a California Corporation, (herein
called "Lessee").
2. Premises.
2.1 Lessor hereby leases to Lessee and Lessee leases from Lessor for the
term, at the rental, and upon all of the conditions set forth herein, that
certain real property situated in the County of San Diego, State of California,
and described as 5861 Edison Place, Carlsbad, California 92008 as more
particularly described in Exhibit A, attached hereto and incorporated herein by
reference. Said real property including the land and all improvements therein,
is herein called "the Premises."
2.2 The parties hereto agree that said letting and hiring is upon and
subject to the terms, covenants and conditions herein set forth. Lessee
covenants, as a material part of the consideration for this Lease to keep and
perform each and all of said terms, covenants and conditions for which Lessee is
liable and that this Lease is made upon the condition of such performance.
3. Term.
3.1 Term. The term of this Lease shall be for sixty (60) months,
commencing on January 1, 1998 (the "Commencement Date") and ending on December
31, 2002, unless sooner terminated pursuant to any provision hereof.
3.2 Delay in Possession. Notwithstanding said Commencement Date, if for
any reason Lessor cannot deliver possession of the Premises to Lessee on said
date, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity or enforceability of this Lease or the obligations
of Lessee hereunder or extend the term hereof, but in such case, all terms and
conditions of this Lease shall remain in full force and effect except that
Lessee shall not be obligated to pay rent until possession of the Premises is
tendered to Lessee; provided, however, in the event any such delay results, in
whole or in part, from any act, failure, omission or incapacity on the part of
Lessee, or any of its agents, contractors or employees, then Lessee shall be
obligated to commence payment of rent on the Commencement Date as if possession
of the Premises had been tendered by Lessor on such date.
-1-
<PAGE> 5
3.3 Early Possession. Lessee shall occupy the Premises upon completion
of tenant improvements which shall be at least thirty (30) days prior to the
Commencement Date. Such occupancy shall be subject to all provisions hereof.
Such occupancy shall adjust the Commencement and Termination Date of this Lease
which will be agreed to in writing by Lessor and Lessee prior to occupancy.
Lessee shall pay all net, net, net charges for such period.
4. Monthly Base Rent.
4.1 Lessee agrees to pay Lessor Monthly Base Rent for the Premises
determined pursuant to the following schedule:
January 1, 1998 - December 31, 1998 $17,500.00 NNN/Mo.
January 1, 1999 - December 31, 1999 $18,000.00 NNN/Mo.
January 1, 2000 - December 31, 2000 $18,500.00 NNN/Mo.
January 1, 2001 - December 31, 2001 $19,000.00 NNN/Mo.
January 1, 2002 - December 31, 2002 $19,500.00 NNN/Mo.
Monthly Base Rent shall be paid in advance, on the first day of each calendar
month during the term, except that the first month's rent shall be paid upon the
execution hereof.
4.2 If the term of this Lease commences or ends on a day other than the
first day of a calendar month, then the rental for such period shall be prorated
in the proportion that the number of days this Lease is in effect during such
period bears to the actual number of days in the month. In addition to the
Monthly Base Rent, Lessee agrees to pay as additional rental the amount of
rental adjustments and any other charges required by this Lease. All rental
shall be paid to Lessor, without prior demand and without any deduction or
offset, in lawful money of the United States of America, at the address of
Lessor designated at the end of this Lease or to such other person or at such
other place as Lessor may from time to time designate in writing.
4.3 Late Charges. Lessee acknowledges that, in the event Lessee fails to
pay any installment of rent when due or in the event Lessee fails to make any
other payment for which Lessee is obligated under this Lease when due, Lessor
will incur costs and expenses not contemplated by this Lease the exact amount of
which being extremely difficult and impractical to ascertain, including without
limitation, processing and accounting charges and financing costs and late
charges that may be imposed by the terms of any encumbrances on or note secured
by the Premises. Therefore, in the event of any such payment which is more than
ten (10) calendar days late from due date and following written notice from
Lessee eight (8) days after the due date, Lessee shall pay to Lessor a late
charge equal to ten percent (10%) of the amount due to compensate Lessor for the
extra costs incurred as a result of such late payment. Additionally, all such
delinquent rent or other sums shall bear interest at the rate of 12% per annum
or the maximum lawful rate, whichever is lesser.
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5. Security Deposit.
5.1 Lessee has deposited with Lessor the sum of SEVENTEEN THOUSAND AND
FIVE HUNDRED NO/100 DOLLARS ($17,500.00). Said sum shall be held by Lessor as
security for the faithful performance by Lessee of all of Lessee's obligations
hereunder. If Lessee defaults with respect to any provision of this Lease,
including but not limited to the provisions relating to the payment of rent,
Lessor may (but shall not be required to) use, apply or retain all or any part
of this security deposit for the payment of any rent or any other sum in
default, or for the payment of any other amount which Lessor may spend or become
obligated to spend by reason of Lessee's default or to compensate Lessor for any
other loss or damage which Lessor may suffer by reason of Lessee's default. If
any portion of the deposit is so used or applied, Lessee shall, within ten (10)
days after demand, deposit cash with Lessor in an amount sufficient to restore
the security deposit to its original amount. Lessee's failure to do so shall be
a material breach of this Lease. Lessor shall not be required to keep this
security deposit separate from its general funds, no trust relationship shall be
created between Lessor and Lessee with respect to the security deposit, and
Lessee shall not be entitled to interest on such deposit. In no event will
Lessee have the right to apply any part of the security deposit to any rent or
other sums due under this Lease. If Lessee shall fully and faithfully perform
all of its obligations under this Lease, the security deposit or any balance
thereof shall be returned to Lessee (or, at Lessor's option, to the last
assignee of Lessee's interests hereunder) at the expiration of the Lease term,
provided that Lessor may retain the security deposit until such time as any
amount due from Lessee in accordance with Article 4 hereof has been determined
and paid in full. Security deposit shall always be increased on the anniversary
of this Lease and shall always be equal to the then monthly rent.
5.2 Additional Security: Delivery of Standby Letter of Credit. In
addition to the security deposit provided in the preceding paragraph, Lessee
shall, upon the execution of this Lease, deliver to Lessor and cause to be in
effect during the term of this Lease an unconditional, irrevocable Standby
Letter of Credit ("LC") in the amount of ONE HUNDRED THOUSAND AND NO/100THS
DOLLARS ($100,000.00) (the "LC Amount"). The LC shall be in the form of Exhibit
E hereto and shall be issued by an LC bank selected by Lessee and reasonably
acceptable to Lessor.
5.2.1 Replacement of Letter of Credit. Lessee may from time to time,
replace any existing LC with a new LC if the new LC:
(a) becomes effective at least thirty (30) days before
expiration of the LC that it replaces;
(b) is in the required LC amount;
(c) is issued by an LC bank reasonably acceptable to Lessor,
and
(d) otherwise complies with the requirements of this
section.
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5.2.2 Lessor's Right to Draw on Letter of Credit. Lessor shall hold
the LC as security for the performance of Lessee's rent obligations under this
Lease. If, after notice and failure to cure within the applicable period within
this Lease any such rent obligation continues to be unpaid for a period of
seventy (70) days after the date it is due, Lessor may, without prejudice to any
other remedy it has, draw down the LC by the amount of TWENTY THOUSAND AND
NO/100THS DOLLARS ($20,000.00). This draw down is a non-refundable penalty to
the benefit of the Lessor.
If, after notice and failure to cure within the applicable
period within this Lease, any such rent obligation continues to be unpaid for an
additional thirty (30) days (one hundred [100] days total) after the date it is
due, Lessor may without prejudice to any other remedy it has drawn down the
balance of the LC EIGHTY THOUSAND AND NO/100THS DOLLARS ($80,000.00) which is a
non-refundable penalty to the benefit of the Lessor.
5.2.3 Lessor's Transfer of LC on Transfer of Real Property. If
Lessor transfers or mortgages its interest in the Premises, Lessor shall
transfer or assign the LC to Lessor's mortgagee or transferee provided, the
transferee agrees in writing to hold the LC under the provisions of this Lease.
If Lessor draws on the LC after a transfer or an assignment, the morgagee or the
transferee shall pay to Lessee within ten (10) days from the date of the draw
the amount of the LC. If the mortgagee or transferee fails to pay to Lessee the
amount of the LC within that period, Lessee may deduct from rent payable by
Lessee under this Lease the amount of the LC.
5.2.4 No Release of Lessee's Obligation. If Lessor draws down any or
all of LC, Lessee is still obligated to perform all its obligations as stated in
this Lease.
5.2.5 Reinstatement of Lease by Lessee. If Lessee elects to cure
this Lease, Lessee must cure all of Lessee's defaults of this Lease and replace
drawn down LC with a new LC per Paragraph 5.2.
6. Use.
6.1 Lessee shall use the Premises for general office/sales/R&D/general
warehouse purposes or similar uses, as is consistent with zoning requirements
and shall not use or permit the Premises to be used for any other purpose or
suffer or permit the Premises to remain vacant without the prior written consent
of Lessor. Nothing contained herein shall be deemed to give Lessee any exclusive
right to such use in the Premises or any adjoining property. Lessee shall not
use or occupy the Premises in violation of law or of the certificate of
occupancy issued for the Premises, and shall, upon written notice from Lessor,
discontinue any use of the Premises which is declared by any governmental
authority having jurisdiction to be a violation of law or of said certificate of
occupancy. Lessee shall comply with any direction of any governmental authority
having jurisdiction which shall, by reason of the nature of Lessee's use or
occupancy of the Premises, impose any duty upon Lessee or Lessor with respect to
the Premises or with respect to the use or occupation thereof. Lessee shall not
use or allow the Premises to be used for any improper, immoral, unlawful, or
objectionable purpose, nor shall Lessee cause, maintain
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<PAGE> 8
or permit any loud noise, vibration or other nuisance in, on or about the
Premises or otherwise disturb the peaceful possession of adjoining or nearby
Premises. In addition Lessee shall comply with the provisions of attached
Exhibit C. Lessee shall not commit or suffer to be committed any waste in or
upon the Premises, nor shall Lessee cause, maintain or permit any outside
storage on or about the Premises. 7. Compliance with Law.
7.1 Lessee shall, at its sole cost and expense, promptly comply with all
laws, statutes, ordinances, regulations, and other requirements of all
municipal, state and federal authorities now in force, or which may hereafter be
in force, pertaining to the use of Premises, and shall faithfully observe in the
use of the Premises the requirements of any board of fire underwriters, any
certificate of occupancy, and any recorded documents affecting the Premises,
insofar as the same relate to the condition, use or occupancy of the Premises.
The judgment of any court of competent jurisdiction, or the admission of lessee
in any action or proceeding against Lessee, whether Lessor be a party thereto or
not, that Lessee has violated any such ordinance or statute in the use of the
Premises, shall be conclusive of that fact as between Lessor and Lessee. Lessor
warrants and represents that as of the Commencement Date, the Premises shall be
in compliance with all laws, statutes, ordinances, regulations and other
requirements of municipal, state and federal authorities then in force. Lessor
shall at its sole expense, promptly make all repairs, replacements, alterations
or improvements needed to comply with such laws, etc. hereafter enacted to the
extent they relate to structural matters; if, however, such compliance work is
triggered by Lessee's alterations, Lessee shall bear the expense of such work.
8. Condition of Premises.
8.1 Acceptance. By taking possession Lessee shall be deemed to have
accepted the Premises as being in good and sanitary order, condition and repair
with respect to observable and patent defects and in accordance with the
requirements of this Lease as set forth in Exhibits "D or, in the event of any
discrepancy between the Premises as delivered and as described in such Exhibits
"D" Lessee shall be deemed to have waived and accepted any such discrepancy.
Lessor makes no representation or warranty as to the use or occupancy which may
be made thereof.
8.2 Surrender. The Lessee agrees on the last day of the term hereof, or
on the sooner termination of this Lease, to surrender the premises unto Lessor
in good condition and repair, normal wear and tear excepted, but in any event
with all interior walls cleaned and repaired, any carpets cleaned, the
ventilating, air conditioning and heating equipment serviced by a reputable
service man, all fixtures and equipment in good working order, and all floors
cleaned, together with all alterations, additions and improvements which may
have been made in, to, or on the Premises (except movable trade fixtures put in
at the expense of Lessee) except that Lessee shall ascertain from Lessor within
thirty days before the end of the term of this Lease whether Lessor desires to
have the premises or any part or parts thereof restored to their condition when
the Premises were delivered to Lessee; and if Lessor shall so desire, then
Lessee shall restore said Premises or such part or parts thereof before the end
of this Lease at Lessee's sole cost and expense. At any time within the final 90
days of the term of this Lease, or at any
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<PAGE> 9
time after the expiration or earlier termination of this Lease, Lessor may, at
its option and at a cost to be split equally between Lessor and Lessee, retain
the services of one or more mutually agreed upon inspectors or consultants to
inspect the Premises and all equipment and fixtures located on or affixed
thereto, to determine whether such Premises, equipment and fixtures are in the
condition required upon surrender of the Premises as described hereinabove. In
the event of any deficiency as determined by such inspection(s), Lessee shall
cause the same to be corrected promptly and in a good and workmanlike manner, at
its sole expense. Lessee, on or before the end of the term or sooner termination
of this Lease, shall remove all of Lessee's personal property and trade fixtures
from the Premises, and all property not so removed shall be deemed abandoned by
Lessee, and may be sold or otherwise disposed of at Lessee's expense. Lessee
waives all claims against Lessor for any cost or damage to Lessee arising out of
Lessor's retention or disposition of any such alterations, fixtures or personal
property. If the Premises are not surrendered at the end of the term or sooner
termination of this Lease, Lessee shall indemnify Lessor against any expense,
loss or liability (including reasonable professionals' fees) resulting from
delay by Lessee in so surrendering the Premises including, without limitation,
any claims made by any succeeding tenant founded on such delay. 8.3 Regulation.
Except as otherwise provided in this Lease, Lessee hereby accepts the Premises
in their condition existing as of the Lease Commencement Date or the date that
Lessee takes possession of the Premises, whichever is earlier, subject to all
applicable zoning, municipal, county and state laws, ordinances and regulations
governing and regulating the use of the Premises, and any covenants, conditions
or restrictions now of record, of which may hereafter be recorded with respect
to the Premises or any larger parcel of which the Premises are a part, as
amended from time to time, and accepts this Lease subject thereto and to all
matters disclosed thereby and by any Exhibits attached thereto. Lessee
acknowledges that neither Lessor nor Lessor's agent has made any representation
or warranty as to the present or future suitability of the Premises for the
conduct of Lessee's business. Lessor warrants that the Premises will be
completed in a good and workmanlike manner and in accordance with all applicable
building and zoning codes. Within sixty (60) days of occupancy of the Premises,
Lessee will provide to the Lessor a punch list of items to be corrected, which
items Lessor will repair or replace within sixty (60) days of notification by
the Lessee.
9. Notices.
9.1 Any notice, demand or communication required or permitted to be
given hereunder must be in writing and may be given by personal delivery or by
mail, and if given by mail shall be deemed sufficiently given when deposited in
the United States mail, registered or certified mail, postage prepaid, addressed
to Lessee at the Premises, or to Lessor at its address set forth at the end of
this Lease. Either party may specify a different or additional address for
notice purposes by written notice to the other hereunder except that the Lessor
may in any event use the Premises as Lessee's sole address for notice purposes.
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10. Brokers.
10.1 Lessee warrants that it has had no dealings with any real estate
broker or agent in connection with the negotiation of this Lease, except
BUSINESS REAL ESTATE BROKERAGE COMPANY, whose commission shall be payable by
LESSOR, and that it knows of no other real estate broker or agent who is or
might be entitled to a commission in connection with this Lease. If Lessee has
dealt with any other person or real estate broker with respect to leasing the
Premises, Lessee shall be solely responsible for the payment of any fee due said
person or firm and Lessee shall hold Lessor free and harmless against any
liability in respect thereto, including professionals' fees and costs, which
shall be paid as incurred.
11. Holding Over.
11.1 If Lessee holds over after the expiration or earlier termination of
the term hereof without the express written consent of Lessor, Lessee shall
become a Lessee at sufferance only, at a rental rate equal to one hundred fifty
percent (150%) of the rent in effect upon the date of such expiration (prorated
on a daily basis), and otherwise subject to the terms, covenants and conditions
herein specified, so far as applicable. Acceptance by Lessor of rent after such
expiration or earlier termination shall not result in a renewal of this Lease.
The foregoing provisions of this Article 11 are in addition to and do not affect
Lessor's right to re-entry or any rights of Lessor hereunder or as otherwise
provided by law. If Lessee fails to surrender the Premises upon the expiration
of this lease despite demand to do so by Lessor, Lessee shall indemnify and hold
Lessor harmless from all loss or liability, including without limitation, any
claim made by any succeeding tenant founded on or resulting from such failure to
surrender and any professionals' fees and costs.
12. Maintenance, Repairs and Alterations.
12.1 Lessee's Obligations. Lessee shall keep in good order, condition and
repair the non-structural Premises and every part thereof, (whether or not such
portion of the Premises requiring repair, or the means of repairing the same are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements, the age
or the quality of construction of such portion of the Premises) including,
without limiting the generality of the foregoing, all plumbing, heating,
ventilation, air conditioning (Lessee shall procure and maintain, at Lessee's
expense, a heating, ventilation and air conditioning systems maintenance
contract acceptable to Lessor), electrical, lighting facilities and equipment
within the Premises, fixtures, interior walls and exterior walls (maintenance
only), ceilings, non-structural components of the roof, floors, windows, doors,
plate glass and skylights located within the Premises, and all landscaping,
driveways, parking lots, fences and signs located on the Premises and sidewalks
and parkways adjacent to the premises. Lessor shall arrange for inspection of
the roof, mechanical, and electrical portions of the Premises annually. Lessor
shall pay for the costs of such inspections. Lessee shall arrange and pay for
the correction of any defects found, including implementation of a preventative
maintenance program for the roof. If Lessee is not properly maintaining
property, at Lessor's option, Lessor shall have the right to select, procure and
maintain, at Lessee's expense, maintenance contracts for the heating,
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ventilating and air conditioning systems, the landscaping on or about the
Premises, and/or the roof or other structural components of the Premises and
Lessee shall fully reimburse Lessor for the cost of same within 5 days after
demand thereof. Lessor shall assign to Lessee all warranties on the plumbing,
heating, ventilation, air conditioning, and electrical systems.
12.2 Lessor's Rights. If Lessee fails to perform Lessee's obligations
under this Paragraph 12, or under any other Paragraph of this Lease, Lessor may
at its option (but shall not be required to) enter upon the Premises after ten
(10) days prior written notice to Lessee (except in the case of an emergency, in
which case no notice shall be required), perform such obligations on Lessee's
behalf and put the same in good order, condition and repair, and the costs
thereof together with interest thereon at the rate described in Paragraph 4.3
above shall become due and payable as additional rental to Lessor together with
Lessee's next rental installment.
12.3 Lessor's Obligations. Except for the obligations of Lessor under
Paragraph 17 relating to destruction of the Premises, and under Paragraph 21
relating to condemnation of the Premises, it is intended by the parties hereto
that Lessor have no obligation, in any manner whatsoever, to repair and maintain
the Premises or the equipment therein, except structural walls, roof,
foundations, all of which obligations are intended to be that of the Lessee
hereunder or to pay any other cost or expense whatsoever directly or indirectly
relating to the ownership, management, lease, operation or use of the Premises.
Lessee expressly waives the benefit of any statute now or hereinafter in effect
which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Premises in good order, condition and repair.
12.4 Alternations and Additions.
(a) Lessee shall not, without Lessor's prior written consent
which will not be unreasonably withheld, make any alterations, improvements,
additions, or Utility Installations in, on or about the Premises, except for
nonstructural alterations not exceeding FIVE THOUSAND AND NO/100 DOLLARS
($5,000.00) in cumulative costs during the term of this Lease. In any event,
whether or not in excess of the foregoing cumulative cost, Lessee shall make no
change or alteration to the exterior of the Premises nor change to the interior
visible from the exterior without Lessor's prior written consent. As used in
this Paragraph 12.4, the term "Utility Installation" shall mean carpeting,
window coverings, air lines, power panels, electrical distribution systems,
lighting fixtures, space heaters, air conditioning, plumbing, fencing,
telephone, teletype, cable or other communications systems of any kind,
satellite or other radio reception or transmitting devises, or gas lines. Lessor
may require that Lessee remove any or all of said alterations, improvements,
additional or Utility Installations at the expiration of the term, and restore
the Premises to their condition as of the Commencement Date, reasonable wear and
tear excepted. As a condition of Lessor's consent, Lessor may require Lessee to
provide Lessor, at Lessee's sole cost and expense, a lien and completion bond in
an amount equal to one and one-half times the estimated cost of such
improvements, to insure Lessor against any liability for mechanic's and
materialmen's liens and to insure completion of the work. Should Lessee make any
alterations, improvements, additions or Utility Installations without the prior
approval of Lessor, Lessor may require that Lessee remove any or all of the same
at Lessee's expense.
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(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises that Lessee shall desire to make and
which require the consent of the Lessor shall be presented to Lessor in written
form, with proposed detailed plans. If Lessor shall give its consent, which
consent may be granted or withheld in Lessor's sole discretion, the consent
shall be deemed conditioned upon Lessee acquiring a permit to do so from
appropriate governmental agencies, the furnishing of a copy thereof to Lessor
prior to the commencement of the work, the compliance by Lessee of all
conditions of said permit, and a performance and payment bond in form and
substance acceptable to Lessor guaranteeing completion of and payment for all
such work in a timely manner. Any such work shall be completed by Lessee
promptly, expeditiously and in a good and workmanlike manner, using prime
quality materials, and in such a manner as not to cause any interruption of or
interference with the use or enjoyment of any adjoining premises. Lessee shall
hold Lessor harmless from any failure by Lessee to comply with the foregoing,
pursuant to Paragraph 15 below.
(c) Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use in the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days notice prior to the commencement of any
work in the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law. If Lessee shall, in
good faith, contest the validity of any such lien, claim or demand, then Lessee
shall, at its sole expense defend itself and Lessor against the same and shall
pay and satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof against the Lessor or the Premises, upon the condition
that if Lessor shall require, Lessee shall furnish to Lessor a surety bond
satisfactory to Lessor in an amount equal to such contested lien claim or demand
indemnifying Lessor against liability for the same and hold the Premises free
from the effect of such lien or claim. In addition, Lessor may require Lessee to
pay Lessor's professionals' fees and costs in participating in such action if
Lessor shall decide it is to its best interest to do so.
13. Liens.
13.1 Lessee shall not permit any mechanic's, materialmen's or other liens
to be filed against the Premises nor against Lessee's leasehold interest in the
Premises. Lessor shall have the right at all reasonable times to post and keep
posted on the Premises any notices which it deems necessary for protection from
such liens. If any such liens are filed, Lessor may, without waiving its rights
and remedies based on such breach of Lessee and without releasing Lessee from
any of its obligations, cause such liens to be released by any means it shall
deem proper, including payments in satisfaction of the claim giving rise to such
lien. Lessee shall pay to Lessor at once, upon notice by Lessor, any sum paid by
Lessor to remove such liens, together with interest at the rate per annum
described in Paragraph 4.3 above.
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14. Bankruptcy.
14.1 If Lessee shall file a petition in bankruptcy under any provision of
the Bankruptcy Code as then in effect, or if Lessee shall be adjudicated a
bankrupt in involuntary bankruptcy proceedings and such adjudication shall not
have been vacated within thirty days from the date thereof, or if a receiver or
trustee shall be appointed of Lessee's property and the order appointing such
receiver or trustee shall not be set aside or vacated within thirty days after
the entry thereof, or if Lessee shall make a general assignment for the benefit
of creditors, or if Lessee's interest in this Lease or a substantial portion of
Lessee's assets located at the Premises shall be seized or attached and such
seizure or attachment is not discharged within thirty (30) days, or if this
Lease shall, by operation of law or otherwise, pass to any person or persons
other than Lessee, then in any such event Lessor may terminate this Lease, if
Lessor so elects, with or without notice of such election and with or without
entry or action by Lessor. In such case, notwithstanding any other provisions of
this Lease, Lessor, in addition to any and all rights and remedies allowed by
law or equity, shall, upon such termination, be entitled to recover damages in
the amount provided in Paragraph 20.2 hereof. Neither Lessee nor any person
claiming through or under Lessee or by virtue of any statute or order of any
court shall be entitled to possession of the Premises but shall surrender the
Premises to Lessor. Nothing contained herein shall limit or prejudice the right
of Lessor to recover damages by reason of any such termination equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved; whether or
not such amount is greater, equal to, or less than the amount of damages
recoverable under the provisions of this Paragraph 14.
15. Indemnification and Release.
15.1 Lessee shall indemnify, defend and hold Lessor and its officers,
directors, agents and employees harmless from all claims, demands, costs and
expenses (including reasonable professionals' fees) directly or indirectly
arising from or in connection with Lessee's use of the Premises or the conduct
of its business or from any activity, work, or thing done, permitted or suffered
by Lessee in or about the Premises. Lessee shall further indemnify, defend and
hold Lessor harmless from all claims arising from any breach or default in the
performance of any obligation to be performed by Lessee under the terms of this
Lease, or arising from any act, neglect, fault or omission of Lessee or of its
agents or employees, and from and against all costs, professionals' fees,
expenses and liabilities incurred in or about such claim or any action or
proceeding brought thereon, notwithstanding any active or passive negligence of
Lessor. In case any action or proceeding shall be brought against Lessor by
reason of any such claim, Lessee upon notice from Lessor shall defend the same
at Lessee's expense by counsel selected by mutual agreement of Lessee and
Lessor. Lessee, as a material part of the consideration to Lessor, hereby
assumes all risk of damage to property or injury to persons in, upon or about
the Premises from any cause whatsoever except that which is caused by the
failure of Lessor to observe any of the terms and conditions of this Lease where
such failure has persisted for an unreasonable period of time after written
notice of such failure.
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16. Insurance.
16.1 Liability Insurance. Lessee shall, at Lessee's expense, obtain and
keep in force during the term of this Lease and any other period of occupancy
hereof, a policy of Combined Single Limit, Bodily Injury and Property Damage
insurance insuring Lessor and Lessee against any liability arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be in an amount not less than One
Million Dollars ($1,000,000) combined single limit, Two Million Dollars
($2,000,000) aggregate, for injury to or death of one or more persons in an
occurrence, and for damage to tangible property (including loss of use) in an
occurrence, said limit to be adjusted for inflation every three (3) years. The
policy shall insure the hazards of premises and operations, independent
contractors, contractual liability (covering the Indemnity Clause contained in
this Paragraph 16 and Paragraph 15 above), products and completed operations,
and shall (i) name Landlord and his managing agent as additional insured, (ii)
contain a cross liability provision, and (iii) contain an endorsement that "the
insurance provided the Landlord hereunder shall be primary and noncontributing
with any other insurance available to the Landlord." The limits of said
insurance shall not, however, limit the liability of Lessee hereunder. Not
withstanding any contrary provision contained herein, Lessee's insurance
requirements hereunder may be satisfied by a combination of primary and umbrella
or excess coverage.
16.2 Property Insurance.
(a) Lessee shall obtain at Lessee's sole cost and expense a
policy or policies of insurance covering loss or damage to the Premises, in the
amount of the full replacement value thereof, as the same may exist from time to
time, but in no event less than the total amount required by lenders having
liens on the Premises, against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, flood, earthquake, and
special extended period ("Special Form" as such term is used in the insurance
industry). Said insurance shall name as additional insured and provide for
payment of loss to Lessor, or to the holders of mortgages or to beneficiaries
under deeds of trust on the Premises. This insurance shall cover the building(s)
to which this Lease applies, including tenant improvements, heating and cooling
equipment or machinery and electrical equipment, as well as any furniture,
fixtures, equipment or other personal property owned by Lessor. A Stipulated
Value or Agreed Amount endorsement deleting the coinsurance provision of the
policy shall be procured with said insurance. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed Five Thousand Dollars
($5,000) per occurrence, and Lessee shall be liable for such deductible amount.
(b) If the Premises are part of a larger building, or if the
Premises are part of a group of buildings owned by Lessor which are adjacent to
the Premises, then Lessee shall pay for any increase in the property insurance
of such other building or buildings if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
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(c) Lessee shall insure its contents equipment and tenant
improvements at full replacement value.
(d) Lessee shall, at its own expense, obtain business
interruption insurance of such type and coverage sufficient to pay all rent and
other sums due hereunder for a period of not less than 12 months in the event of
any cessation or reduction of Lessee's business for any reason including,
without limitation, damage or destruction described in Paragraph 17 below.
(e) Earthquake insurance shall have a maximum deductible of
fifteen (15%) percent. Lessor shall be responsible for payment of the deductible
if earthquake damage occurs.
16.3 Other Required Insurance.
(a) Any other form or forms of insurance as Lessee or Lessor
or any mortgagees of Lessor may reasonably require from time to time in form, in
amounts and for insurance risks against which a prudent lessee would protect
itself.
16.4 Insurers. Insurance policies required hereunder shall be in a form
satisfactory to Lessor and issued by insurance companies holding a "General
Policyholders Rating" of at least A, or such other rating as may be required by
a lender having a lien on the Premises, as set forth in the most current issue
of "Best's Insurance Guide."
16.5 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the period insured against
under Paragraph 16, which perils occur in, on or about the Premises, whether due
to the negligence of Lessor or Lessee or their agents, employees, contractors
and/or invitees.
16.6 Exemption of Lessor from Liability. Lessee hereby agrees that Lessor
shall not be liable for injury to Lessee's business or any loss of income
therefrom or from damage to the goods, wares, merchandise or other property of
Lessee, Lessee's employees, invitees, customers, or any other person in or about
the Premises, nor shall Lessor be liable for injury to the person of Lessee,
Lessee's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any other
cause, whether the said damage or injury results from conditions arising upon
the Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damage arising from any act or
neglect of any other tenant, if any, of the building in which the Premises are
located. Notwithstanding the foregoing, Lessor's exemption from liability shall
not extend to damage otherwise suffered which is caused by Lessor's negligence.
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16.7 Insurance Policies. All insurance policies obtained by Lessee
hereunder shall:
(a) Provide for waiver of subrogation releasing Lessor from
any claims for damage to any persons or property in or about the Premises or any
other insured risk. The policies shall contain all necessary endorsements for
Lessor's or Lessee's insurance company which may be necessary or required to
effect this waiver of subrogation.
(b) Provide that such policy may not be canceled, reduced in
coverage or amount, or amended in any manner for any reason whatsoever except
after at least thirty (30) days prior written notice to Lessor and Lessor's
lender, if any.
(c) Within ten (10) days after execution of this Lease, and
thereafter upon demand at any time during the term hereof, Lessee shall deliver
to Lessor copies of policies or certificates of insurance evidencing existence
of the amounts and forms of coverage and proof of payment satisfactory to
Lessor.
(d) Lessee shall, within ten (10) days prior to the
expiration of the policies required hereunder, furnish the Lessor with renewal
policies or certificates or "binders" thereof. Failure to do so may result in
the Lessor ordering such insurance and charging the cost thereof to Lessee as
additional rent, or may, in Lessor's sole discretion, constitute a default under
this Lease. If Lessor does obtain any insurance that is the responsibility of
the Lessee under this section, Lessor shall deliver to Lessee a written
statement setting forth the cost of such insurance and showing in reasonable
detail the manner in which it has been computed.
17. Damage or Destruction.
17.1 Definitions.
(a) "Premises Partial Damage" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is less than
twenty five percent (25%) of the then replacement cost of the Premises, as such
replacement cost is determined by a licensed contractor mutually agreed upon by
Lessor and Lessee. "Premises Building Partial Damage" shall herein mean damage
or destruction to the building, if any, of which the Premises are a part of the
extent that the cost of repair is less than twenty five percent (25%) of the
then replacement cost (determined as described above) of such building as a
whole.
(b) "Premises Total Destruction" shall herein mean damage or
destruction to the Premises to the extent that the cost of repair is twenty five
percent (25%) or more of the then replacement cost of the Premises, as such
replacement cost is determined by a licensed contractor mutually agreed upon by
Lessor and Lessee. "Premises Building Total Destruction" shall herein mean
damage or destruction to the building, if any, of which the Premises are a part
to the extent that the cost of repair is twenty five percent (25%) or more of
the then replacement cost (determined as described above) of such building as a
whole.
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(c) "Insured Loss" shall herein mean damage or destruction
which was caused by an event required to be covered by the insurance described
in Paragraph 16 and for which the insurance proceeds of such policy(ies) are
sufficient to pay the full cost of repair, excluding any deductible amounts.
17.2 Partial Damage--Insured Loss. Subject to the provisions of
Paragraphs 17.4, 17.5, and 17.6, if at any time during the term of this Lease
there is damage which is an Insured Loss and which falls into the classification
of Premises Partial Damage or Premises Building Partial Damage, then Lessor
shall, at Lessor's expense utilizing insurance proceeds, repair such damage, but
not Lessee's fixtures, equipment or tenant improvements installed by Landlord at
Tenant's expense, as soon as reasonably possible and this Lease shall continue
in full force and effect. Notwithstanding the above, if the insurance proceeds
received by Lessor are not sufficient to effect such repair, Lessor shall give
notice to Lessee of the amount required in addition to the insurance proceeds to
effect such repair. Lessee shall contribute the required amount to Lessor within
ten days after Lessee has received notice from Lessor of the shortage in the
insurance, and Lessee's failure to do so shall be a material breach of this
Lease. When Lessee shall contribute such amount to Lessor, Lessor shall make
such repairs as soon as reasonably possible and this Lease shall continue in
full force and effect. Lessee shall in no event have any right to reimbursement
for any such amounts so contributed.
17.3 Partial Damage--Uninsured Loss. Subject to the provisions of
Paragraphs 17.4, 17.5, and 17.6, if at any time during the term of this Lease
there is damage which is not an Insured Loss and which falls within the
classification of Premises Partial Damage or Premises Building Partial Damage
unless caused by a negligent or willful act of Lessee (in which event Lessee
shall make the repairs at Lessee's expense), Lessor may at Lessor's option
either (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the date of the
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, as of the date of the occurrence of such damage.
17.4 Total Destruction. If at any time during the term of this Lease
there is damage, whether or not an Insured Loss, (including destruction required
by any authorized public authority), which falls into the classification of
Premises Total Destruction or Premises Building Total Destruction, this Lease
shall automatically terminate as of the date of such total destruction, and all
insurance proceeds (excepting Tenant's business fixtures and personal items)
shall be payable to Lessor.
17.5 Damage Near End of Term.
(a) If at any time during the last twelve (12) months of the
term of this Lease there is damage, whether or not an Insured Loss, which falls
within the classification of Premises Partial Damage, Lessor or Lessee may
cancel and terminate this Lease as of the date of occurrence of such damage by
giving written notice to the party of its election to do so within thirty (30)
days after the date of occurrence of such damage.
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(b) Notwithstanding Paragraph 17.5(a), in the event that
Lessee has an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Lessee may exercise such
option, if it is to be exercised at all or, in the event Lessee has already
exercised such option, shall reconfirm such exercise in writing, no later than
twenty (20) days after the occurrence of an Insured Loss falling within the
classification of Premises Partial Damage during the last six (6) months of the
term of this Lease. If Lessee duly exercises such option during said twenty (20)
day period, Lessor shall effect repairs in accordance with the provisions of
Paragraph 17.2 above, and this Lease shall continue in full force and effect. If
Lessee fails to exercise or reconfirm its prior exercise of such option during
said twenty (20) day period, then Lessor may at Lessor's option terminate and
cancel this Lease of the expiration of said twenty (20) day period by giving
written notice to Lessee of Lessor's election to do so within ten (10) days
after the expiration of said twenty (20) day period. In the event of any
conflict or inconsistency between the provisions of this Paragraph 17.5 and the
terms or conditions of any such option, the provisions hereof shall be
controlling in all respects notwithstanding any term or provision in the grant
of option to the contrary, unless otherwise expressly agreed in a writing which
expressly and specifically refers to this Paragraph 17.5.
17.6 Waiver. Lessor and Lessee hereby waive the provisions of any
statutes or court decisions which relate to the abatement or termination of
leases when leased property is damaged or destroyed, and agree that such event
shall be exclusively governed by the terms of this Lease.
18. Real Property Taxes.
18.1 Payment of Taxes. Lessee shall pay the real property tax, as defined
in Paragraph 18.2, applicable to the Premises during the term of this Lease. All
such payments shall be made to Lessor prior to the due date of such payment. If
any such real property taxes paid by Lessee shall cover any period of time prior
to or after the expiration of the term hereof, Lessee's share of such real
property taxes shall be equitably prorated to cover only the period of time
within the tax fiscal year during which this Lease shall be in effect, and
Lessor shall reimburse Lessee to the extent required. If Lessee shall fail to
pay any such real property taxes, Lessor shall have the right to pay the same,
in which case Lessee shall repay such amount to Lessor with Lessee's next rent
installment together with interest at the rate described in Paragraph 4.3. In
the event Lessee occupies a portion of a larger building and real property taxes
are billed to Lessor, Lessee shall pay its pro rata share as determined in
Paragraph 18.3 of said taxes within ten (10) days after billing by Landlord.
18.2 Definition of "Real Property Tax". As used herein, the term "real
property tax" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, rental tax, parking
surcharge, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on or with respect to the Premises by
any authority having the direct or indirect power to tax, including any city,
state or federal government, or any school, agricultural, sanitary, fire,
street, drainage or other improvement district thereof, as against any legal or
equitable interest of Lessor in the Premises or in the real property of which
the Premises are a part, as against Lessor's right to rent or other income
therefrom, and as against Lessor's business of leasing the Premises. The term
"real
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<PAGE> 19
property tax" shall also include any tax, fee, levy, assessment or charge (i) in
substitution of, partially or totally, any tax, fee, levy, assessment or charge
hereinabove included within the definition of "real property tax," or (ii) the
nature of which was hereinbefore included within the definition of "real
property tax," or (iii) which is imposed as a result of a transfer, either
partial or total, of Lessor's interest in the Premises or which is added to a
tax or charge hereinbefore included within the definition of real property tax
by reason of such transfer, or (iv) which is imposed by reason of this
transaction, any modifications or changes hereto, or any transfers hereof; or
(v) which is measured by or reasonably attributable to the cost or value of
Lessee's equipment, fixtures or other property located on the Premises or
Lessee's leasehold improvements made in or to the Premises, regardless whether
title to such improvements shall be in Lessor or Lessee; or (vi) upon or
measured by the rent payable hereunder; or (vii) upon or with respect to the
possession, leasing, operation, maintenance, management, repair, use or
occupancy of the Premises or any portion thereof.
18.3 Joint Assessment. If the premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Lessor from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Lessor's reasonable determination thereof shall be
conclusive.
18.4 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause said trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Lessor.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written statement
setting forth the taxes applicable to Lessee's property.
19. Utilities.
19.1 Lessee shall pay for all water, gas, heat, light, powers, telephone,
waste removal, sewer and other utilities and services supplied to the Premises,
together with any taxes thereon. If any such services are not separately metered
to Lessee, Lessee shall pay a reasonable proportion to be determined by Lessor
of all charges jointly metered with other Premises. Lessee agrees to pay for any
separate meters that Lessor may install from time to time.
20. Defaults and Remedies.
20.1 The occurrence of any one or more of the following events shall
constitute a default hereunder by Lessee:
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(a) The failure by Lessee to make any payment of rent or
additional rent or any other payment required to be made by Lessee hereunder, as
and when due.
(b) The failure by Lessee to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Lessee, other than as specified in Paragraph 20.1(a) or (b) above,
where such failure shall continue for a period of ten (10) days after written
notice thereof from Lessor to Lessee. Any such notice shall be in lieu of, and
not in addition to, any notice required under applicable state statutes
regarding unlawful detainer actions. If the nature of the Lessee's default is
such that more than ten (10) days are reasonably required for its cure, then
Lessee shall not be deemed to be in default if Lessee shall commence such cure
within said ten (10) day period and thereafter diligently prosecute such cure to
completion, which completion shall occur not later than sixty (60) days from the
date of such notice from Lessor.
(c) The occurrence of any event described in Paragraph 14
above.
20.2 In the event of any such default by Lessee, in addition to any other
remedies available to Lessor at law or in equity, Lessor shall have the
immediate option to terminate this Lease and all rights of Lessee hereunder and
offset any deposits of Lessee against Lessee's obligations. In the event that
Lessor shall elect to so terminate this Lease then Lessor may recover from
Lessee:
(a) the worth at the time of award of any unpaid rent which
had been earned at the time of such termination including interest at the
maximum permissible by law; plus
(b) the worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Lessee proves could have been
reasonably avoided including the maximum interest permissible by law; plus
(c) the worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Lessee proves could be reasonably avoided; plus
(d) any other amount necessary to compensate Lessor for the
detriment proximately caused by Lessee's failure to perform Lessee's obligations
under this Lease or which is the ordinary course of events would be likely to
result therefrom.
20.3 As used in Paragraphs 20.2(a) and (b) above, the "worth at the time
of award" is computed by allowing interest at the maximum rate permitted by law
or 12% whichever is greater. As used in Paragraph 20.2(c) above, the "worth at
the time of award" is computed by discounting such amount at the discount rate
of the Federal Reserve Bank of San Francisco at the time of award plus one (1)
percent. Efforts by Lessor to mitigate the damages caused by Lessee's breach of
this Lease shall to waive Lessor's right to recover damages under this Paragraph
20.2.
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20.4 In the event of any such default by Lessee, Lessor shall also have
the right, with or without terminating this Lease, to re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Lessee. No re-entry or taking possession of the Premises by Lessor pursuant
to this Paragraph 20.3 shall be construed as an election to terminate this Lease
unless a written notice of such intention is given by Lessee or unless the
termination thereof is decreed by a court of competent jurisdiction. In the
event of any such default by Lessee, Lessor shall also have the right and
option, but not the obligation, to apply or retain Lessee's security deposit as
provided in paragraph 5 above.
20.5 All rights, options and remedies of Lessor contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Lessor shall have the right to pursue any one or all
of such remedies or any other remedy or relief which may be provided by law,
whether or not stated in this Lease. No waiver of any default of Lessee
hereunder shall be implied from any acceptance by Lessor of any rent or other
payments due hereunder or any omission by Lessor to take any action on account
of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Lessor to or of any act by Lessee requiring Lessor's consent or
approval shall not be deemed to waive or render unnecessary Lessor's consent or
approval to or of any subsequent similar acts by Lessee.
21. Condemnation.
21.1 If the Premises or any portion thereof are taken under the power of
eminent domain, or sold under the threat of the exercise of said power (all of
which are herein called "condemnation"), this Lease shall terminate as to the
part so taken as of the date the condemning authority takes title or possession,
whichever first occurs, but shall remain in full force and effect as to the
balance of the Premises, except as hereinafter provided. If more than fifteen
percent (15%) of the floor area of the Premises, or more than twenty-five
percent (25%) of the land area of the Premises which is not occupied by any
building, is taken by condemnation, Lessee may, at Lessee's option, to be
exercised in writing only within ten (10) days after Lessor shall have given
Lessee written notice of such taking (or in the absence of such notice, within
ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the rent shall be reduced to the same
proportion that the floor area of the remaining Premises bears to the original
floor area of the Premises. No reduction of rent shall occur if the only area
taken is that which does not have a building located thereon. Any award for the
taking of all or any part of the Premises under the power of eminent domain or
any payment made under threat of the exercise of such power shall be the sole
and exclusive property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold or for the taking of the
fee, or as severance damages, or for the bonus value or market value of this
Lease, or for the value of any option to extent the term of this Lease or to
purchase the Premises; provided, however, that Lessee shall be entitled to any
award for loss of
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or damage to trade fixtures, removable personal property, bonus value of this
Lease, relocation and removal expenses, loss of good will and any other amount
of damage suffered by Lessee provided such other amount of damage does not
reduce Lessor's award, provided such award is separately made. In the event that
this Lease is not terminated by reason of such condemnation, Lessor shall to the
extent of severance damages received by Lessor in connection with such
condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Lessee has been reimbursed therefor by the condemning
authority.
22. Estoppel Certificate.
22.1 Within ten (10) days following any written request which Lessor may
make from time to time, Lessee shall execute and deliver to Lessor a statement
certifying: (i) the date of commencement of this Lease; (ii) the fact that this
Lease is unmodified and in full force and effect (or, if there have been
modifications hereto, that this Lease is in full force and effect, and stating
the date and nature of such modification); (iii) the date to which the rental
and other sums payable under this Lease have been paid; (iv) that there are no
current defaults under this Lease by either Lessor or Lessee except as specified
in Lessee's statement; and (v) such other matters requested by Lessor. Lessor
and Lessee intend that any statement delivered pursuant to this Article 22 may
be relied upon by any mortgagee, beneficiary, purchaser or prospective purchaser
of the Building or any interest therein.
22.2 Lessee's failure to deliver such statement within such time shall be
conclusive upon Lessee (i) that this Lease is in full force and effect, without
modification except as may be represented by Lessor, (ii) that there are no
uncured defaults in Lessor's performance, (iii) that not more than one month's
rental has been paid in advance, and (iv) that Lessee has thereby appointed
Lessor as Lessee's special attorney-in-fact for the purpose of executing and
delivering any statement on Lessee's behalf.
23. Governing Law.
23.1 This Lease shall be governed by and construed pursuant to the laws
of the state in which the Premises are located.
24. Successors and Assigns.
24.1 Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
25. Reasonable Professionals' Fees.
25.1 If Lessor shall bring suit for possession of the Premises, for the
recovery of any sum due under this Lease, or because of the breach of any
provisions of this Lease, or for any other relief against Lessee hereunder, or
in the event of any other litigation between the parties with respect to this
Lease, then all costs and expenses, including reasonable professionals' fees
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and costs of appeals incurred by the prevailing party therein shall be paid by
the other party, including professionals' fees short of litigation which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment.
25.2 If Lessor is named as a defendant in any suit brought against Lessee
in connection with or arising out of Lessee's occupancy hereunder, Lessee shall
pay to Lessor its costs and expenses incurred in such suit, including reasonable
professionals' fees and costs of appeals.
26. Performance by Lessee.
26.1 All covenants and agreements to be performed by Lessee under any of
the terms of this Lease shall be performed by Lessee at Lessee's sole cost and
expense and without any abatement of rent. If Lessee shall fail to pay any sum
of money owed to any party other than Lessor, for which it is liable hereunder,
or if Lessee shall fail to perform any other act on its part to be performed
hereunder or otherwise violate any term or provision of this Lease, and such
failure or violation shall continue for ten (10) days for monetary default and
thirty (30) days for non-monetary default after notice thereof by Lessor, Lessor
may, without waiving or releasing Lessee from obligations of Lessee, but shall
not be obligated to, make any such payment or perform any such other act to be
made or performed by Lessee. All sums so paid by Lessor and all necessary
incidental costs together with interest thereon at the rate described in
Paragraph 4.3 above, from the date of such payment by Lessor, shall be payable
to Lessor on demand. Lessee covenants to pay any such sums, and Lessor shall
have (in addition to any other right of remedy of Lessor) all rights and
remedies in the event of the non-payment thereof by Lessee as are set forth in
Article 20 hereof.
27. Mortgage Protection.
27.1 In the event of any default on the part of Lessor, Lessee will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Lessee, and shall offer such beneficiary or mortgagee a reasonable opportunity
to cure the default, including time to obtain possession of the Premises by
power of sale or a judicial foreclosure, if such should prove necessary to
effect a cure.
28. Definition of Lessor.
28.1 The term "Lessor," as used in this Lease, so far as covenants or
obligations on the part of Lessor are concerned, shall be limited to mean and
include only the owner or owners, at the time in question, of the fee title of
the Premises or the lessees under any ground lease, if any. In the event of any
transfer, assignment or other conveyance or transfer of any such title, Lessor
herein named (and in case of any subsequent transfers or conveyances, the then
grantor) shall be automatically freed and relieved from and after the date of
such transfer, assignment or conveyance of all liability as respects the
performance of any covenants or obligations on the part
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<PAGE> 24
of Lessor contained in this Lease thereafter to be performed. Without further
agreement, the transferee of such title shall be deemed to have assumed and
agreed to observe and perform any and all obligations of Lessor hereunder,
during its ownership of the Premises. Lessor may transfer its interest in the
Premises without the consent of Lessee and such transfer or subsequent transfer
shall not be deemed a violation on Lessor's part of any of the terms and
conditions of this Lease.
29. Waiver.
29.1 The waiver by Lessor of any breach of any term, covenant or
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant or condition herein contained,
nor shall any custom or practice which may grow up between the parties in the
administration of the terms hereof be deemed a waiver of or in any way affect
the right of Lessor to insist upon the performance by Lessee in strict
accordance with said terms. The subsequent acceptance of rent hereunder by
Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of
any term, covenant or condition of this Lease, other than the failure of Lessee
to pay the particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
30. Identification of Lessee.
30.1 If more than one person executes this Lease as Lessee, (i) each of
them is jointly and severally liable for the keeping, observing and performing
of all of the terms, covenants, conditions, provisions and agreements of this
Lease to be kept, observed and performed by Lessee, and (ii) the term "Lessee"
as used in this Lease shall mean and include each of them jointly and severally.
The act of or notice from, or notice or refund to, or the signature of any one
or more of them, with respect to the tenancy of this Lease, including, but not
limited to any renewal, extension, expiration, termination or modification of
this Lease, shall be binding upon each and all of the persons executing this
Lease as Lessee with the same force and effect as if each and all of them had so
acted or so given or received such notice or refund or so signed.
31. Terms and Headings.
31.1 The words "Lessor" and "Lessee" as used herein shall include the
plural as well as the singular. Words used in any gender include other genders.
The Paragraph headings of this Lease are not a part of this Lease and shall have
o effect upon the construction or interpretation of any part hereof.
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32. Examination of Lease.
32.1 Submission of this instrument for examination or signature by Lessee
does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution by and delivery to both Lessor
and Lessee.
33. Time.
33.1 Time is of the essence with respect to the performance of every
provision of this Lease.
34. Prior Agreement; Amendments.
34.1 This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provisions of this lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective successors
in interest.
35. Separability.
35.1 Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision hereof,
and such other provisions shall remain in full force and effect.
36. Recording.
36.1 Neither Lessor nor Lessee shall record this Lease nor a short form
memorandum thereof without the consent of the other.
37. Authority.
37.1 Each person executing this Lease on behalf of a party hereto hereby
represents and warrants that he has been thereunto duly authorized by
appropriate action of such party. Lessee agrees to provide to Lessor such
information or documents as Lessor may reasonably request in connection with the
foregoing.
38. Limitation on Liability. Subject to the provisions of Paragraph 28 above,
the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers, or shareholders, or any of their personal assets for such
satisfaction. This limitation on liability shall not apply to Lessor's
obligations to construct the Premises in a good and workmanlike manner and in
accordance with
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all applicable zoning, environmental and building codes and laws.
39. Lessor's Access.
39.1 Lessor and Lessor's agents shall have the right to enter the
Premises with reasonable advance notice to Lessee at reasonable times for the
purpose of inspecting the same, showing the same to prospective purchasers,
lenders, or lessees, and making such alterations, repairs, improvements or
additions to the Premises or to the building of which they are a part as Lessor
may deem necessary or desirable. Lessor may at any time place on or about the
Premises any ordinary "For Sale" signs and Lessor may at any time during the
last 180 days of the term hereof place on or about the Premises any ordinary
"For Lease" signs, all without rebate of rent or liability to Lessee.
40. Auctions.
40.1 Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
41. Signs.
41.1 All signs shall comply with rules and regulations set forth by
Lessor as may be modified from time to time. Lessee shall not place any signs or
other display materials in or about the Premises or proximate to any exterior
window if such sign is visible from the exterior of the Premises, without
Lessor's prior written consent. Any signs or display materials violating this
provision may be destroyed by Lessor without compensation to Lessee.
Additionally, Lessee shall place no window covering (e.g., shades, blinds,
curtains, drapes, screens, or tinting material), stickers, signs, lettering,
banners or advertising or display materials on or near exterior windows or doors
if such materials are visible from the exterior of the Premises, without
Lessor's prior written consent. Similarly, Lessee may not install any alarm
boxes, foil protection tape or other security equipment on the premises without
Lessor's prior written consent.
42. Guarantor.
42.1 In the event that there is a guarantor of this Lease, said guarantor
shall have the same obligations as Lessee under this Lease.
43. Subordination and Attornment.
43.1 This Lease, at Lessor's option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the real property of which the Premises are a part and to
any and all advances made on the security thereof and to all renewals,
modifications, consolidations, replacements and extensions thereof.
Notwithstanding such subordination, Lessee's right to quiet possession of the
Premises shall not
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be disturbed if Lessee is not in default and so long as Lessee shall pay the
rent and observe and perform all of the provisions of this Lease, unless this
Lease is otherwise terminated pursuant to its terms. In the event of any sale or
assignment of the Premises or if any proceedings are brought for foreclosure, or
in the event of the exercise of any power of sale under any mortgage or deed of
trust affecting the Premises, Lessee shall attorn to the purchaser and recognize
such purchaser as Lessor hereunder. If any mortgagee, trustee or ground lessor
shall elect to have this Lease prior to the lien of its mortgage, deed of trust
or ground lease, and shall give written notice thereof to Lessee, this Lease
shall be deemed prior to such mortgage, deed of trust, or ground lease, whether
this Lease is dated prior or subsequent to the date of said mortgage, deed of
trust or ground lease or the date of recording thereof.
43.2 Lessee agrees to execute any documents required to effectuate an
attornment, a subordination or to make this Lease prior to the lien of any
mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to
execute such documents within ten (10) days after written demand shall
constitute a material default by Lessee hereunder, or, at Lessor's option,
Lessor shall execute such documents on behalf of Lessee as Lessee's
attorney-in-fact. Lessee does hereby make, constitute and irrevocably appoint
Lessor as Lessee's attorney-in-fact and in Lessee's name, place and stead, to
execute such documents in accordance with this Paragraph 43.2. Lessor's
authority to execute subordination and attornment documents on behalf of Lessee
or on behalf of Lessee's attorney in fact is conditioned upon the following: (a)
Lessor having given Lessee ten (10) days' prior written notice; and (b)
Nondisturbance considerations providing that Lessee's possession shall not be
disturbed so long as Lessee is not in default and pays the rent and observes all
of the provisions of this Lease.
44. Riders.
44.1 If, in connection with obtaining construction, interim or permanent
financing for the Premises or any real property of which the Premises are a part
the lender shall request reasonable non-monetary modifications in this Lease as
a condition to such financing, Lessee will not unreasonably withhold, delay or
defer its consent thereto, provided that such modifications do not materially
increase the obligations of Lessee hereunder or materially adversely affect the
leasehold interest hereby created or Lessee's rights hereunder.
45. Easements.
45.1 Lessor reserve to itself the right, from time to time, to grant such
easements, rights and dedications that Lessor deems necessary or desirable, and
to cause the recordation of parcel maps and restrictions, so long as such
easements, rights, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material breach of this Lease.
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46. Performance Under Protest.
46.1 If at any time a dispute shall arise as to any amount or sum of
money to be paid by one party to the other under the provisions hereof, the
party against whom the obligation to pay the money is asserted shall have the
right to make payment "under protest" and such payment shall not be regarded as
a voluntary payment, and there shall survive the right on the part of said party
to institute suit for recovery of such sum. If it shall be adjudged that there
was no legal obligation on the part of said party to pay such sum or any part
thereof, said party shall be entitled to recover such sum or so much thereof as
it was not legally required to pay under the provisions of this Lease.
47. Assignment and Subletting.
47.1 Lessee shall not either voluntarily or by operation of law, assign,
sell, encumber, pledge or otherwise transfer all or any part of Lessee's
leasehold estate hereunder, or permit the Premises to be occupied by anyone
other than Lessee or Lessee's employees, or sublet the Premises or any portion
thereof, without Lessor's prior written consent in each instance, which consent
may not be unreasonably withheld. Consent by Lessor to one or more assignments
of this Lease or to one or more sublettings of the Premises shall not operate to
exhaust Lessor's rights under this Paragraph. If Lessee is a corporation which,
under the then current guidelines of the State, is not deemed a public
corporation or is an unincorporated association or partnership, the transfer,
assignment, or hypothecation of any stock or interest in such corporation,
association or partnership in the aggregate in excess of thirty-five percent
(35%), or liquidation thereof, shall be deemed an assignment. Lessee agrees to
reimburse Lessor for Lessor's reasonable costs and professionals' fees incurred
in conjunction with the processing and documentation of any such requested
assignment, subletting, transfer, change of ownership or hypothecation of this
Lease. However, assignment may be withheld in Lessor's sole and absolute
discretion.
47.2 If Lessee desires at any time to assign this Lease or to sublet the
premises or any portion thereof, it shall first notify Lessor of its desire to
do so and shall submit in writing to Lessor (i) the name of the proposed
subtenant or assignee; (ii) the nature of the proposed subtenant's or assignee's
business to be carried on in the Premises; (iii) the terms and provisions of the
proposed sublease or assignment; (v) the terms and provisions of the proposed
sublease or assignment; (iv) such reasonable financial information as Lessor may
request concerning the proposed subtenant or assignee.
47.3 As a condition for granting its consent to any assignment,
encumbrance of sublease, Lessor may require that the sublessee or assignee remit
directly to Lessor, on a monthly basis, all monies due to Lessee by said
assignee or sublessee. If said monies are greater than the rent required under
this Lease, Lessor shall retain fifty percent (50%) of the excess, and Lessee
shall have no interest therein. If said monies are less than the rent required
under this Lease, Lessee shall pay the difference to Lessor. Lessor's waiver or
consent to any assignment or subletting shall not relieve Lessee from any
obligation under this Lease. Neither an assignment by merger or the sale of all
or substantially all of the assets of Lessee nor the occupancy of all or
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part of the Premises by parent, wholly-owned subsidiary, or wholly-owned
affiliated companies of Lessee shall be deemed an assignment or subletting for
purposes of this Paragraph.
47.4 No subletting or assignment, even with the consent of Lessor, shall
relieve Lessee of its obligation to pay the rent and perform all the other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed to be a waiver by Lessor of any
provision of this Lease or to be consent to any assignment or subletting.
48. Surrender Not Merger.
48.1 The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, shall not work a merger, and shall, at the option
of Lessor, terminate all or any existing subleases and/or subtenancies, or may,
at the option of Lessor, operate as an assignment to it of any or all of such
subleases or subtenancies.
49. Covenants, Conditions and Restrictions.
49.1 In additional to requirements imposed by law, the care of the
Premises and conduct of business thereupon, among other things, are restricted
or subject to heightened requirements pursuant to one or more recorded Covenant,
Conditions and Restrictions ("CC&Rs"). The terms of all applicable CC&Rs, in
their entirety, are incorporated herein by this reference. Lessee has received a
copy of all applicable CC&R's prior to its execution of this Lease, and such
receipt is acknowledged hereby.
49.2 Lessee shall faithfully observe and comply with the provisions of
all applicable CC&Rs, and all modifications and additions which may from time to
time be enacted pursuant to their terms. Lessee shall similarly observe and
comply with all requests, demands and orders otherwise made by any governing
associations created under the authority of the CC&Rs ("the Associations"). Any
violation of the CC&Rs or orders of the Associations created thereby shall be a
default under this Lease. However, Lessor will not be responsible to Lessee for
the nonperformance of any provisions of such CC&Rs by its tenants occupying
neighboring properties, if any.
49.3 All payments, charges, dues, and assessments imposed under the
authority of the CC&Rs and the Associations ("Association Fees") shall be the
sole responsibility of Lessee, who shall timely pay such Associations Fees
directly to the Association. Each payment shall be made promptly on demand
throughout the term of this lease and shall be paid without deduction or offset.
Failure by Lessee to pay all amounts hereunder when due shall carry the same
consequences as Lessee's failure to pay rent.
50. Additional Expenses.
50.1 Among other obligations hereunder, Lessee is obligated to reimburse
Lessor a monthly management fee of 2% of the monthly base rent.
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51. Recovery of Abated Rent.
51.1 If this lease provides for a postponement of any monthly rental
payments, a period of "free" rent or other rental concession, such postponed
rent or "free" rent is called the "Abated Rent." Tenant shall be credited with
having paid all of the Abated Rent on the expiration of the term of this lease
only if tenant has fully, faithfully, and punctually performed all of tenant's
obligations hereunder, including the payment of all rent (other than Abated
Rent) and all other monetary and nonmonetary obligations, and the surrender of
the premises in the physical condition required by this lease. Tenant
acknowledges that its right to received credit for the Abated Rent is absolutely
conditioned upon tenant's full, faithful and punctual performance of its
obligations under this lease. If tenant defaults and does not cure within any
applicable grace period, the Abated Rent shall immediately become due and
payable in full and this lease shall be enforced as if there were no such rent
abatement or other rent concession. In such case, Abated Rent shall be
calculated based on the full initial rent payable under this lease.
52. Indemnification.
52.1 Lessee shall defend, indemnify and hold Lessor harmless from any
loss, claim, liability or expense, including professionals' fees and costs,
arising out of or in connection with its failure to observe or comply with the
provisions of the Lease.
53. Tenant Improvements.
53.1 Lessor shall provide Lessee with a tenant improvement allowance (the
"Tenant Improvement Allowance"), in the amount of TWO HUNDRED TEN THOUSAND AND
No/100 ($210,000.00), to be applied toward the construction of tenant
improvements ("Tenant Improvements"), space planning, construction,
documentation, permits, City fees and other costs directly related to the
construction of Tenant Improvements. The Tenant Allowance is to be applied,
subject to Lessor's written consent, Tenant Improvements to be conducted at the
Premises located at 5861 Edison Place, Carlsbad, CA. Plans for Tenant
Improvements shall be subject to Lessor's prior written consent, as set forth at
Paragraph 12.4 of the Lease and Exhibit "D" hereto.
53.2 Any unused Tenant Improvement Allowance shall be credited as rent
becomes due.
53.3 Lessor will construct Tenant Improvement per Exhibit "D." Lessor
will bid Tenant Improvements on an open book basis to be approved by Lessee.
Lessor will charge twelve and one-half percent (12.5%) for profit and overhead
as the contractor.
53.4 Tenant Improvements Contractor Warranty. The undersigned Owner
hereby guarantees to the Lessee that all Work, as defined in the Tenant
Improvement Contract Documents, performed by the contractor shall be free from
any defects in workmanship, materials and/or equipment and shall be in strict
compliance with the Tenant Improvement Contract Documents. If, within a period
of one (1) year from the date of acceptance of the Work
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by the Lessee, the Work shall prove to be defective, then the contractor shall
repair and/or replace the Work at its own cost and expense. Such repairs shall
be performed in accordance with the terms and conditions of the Contract
Documents.
54. Option to Renew Lease.
54.1 Grant of Option. For good and valuable consideration, including the
Premises and obligations undertaken in this Agreement, Lessor hereby grants to
Lessee an option to extend this Lease for an additional term of five (5) years
(the "Renewal Term"), commencing on January 1, 2003 (the "Renewal Commencement
Date") and ending on December 31, 2007 (the "Renewal Expiration Date").
54.2 Obligations of Renewal Term. The lease of the Premises for the
Renewal Term shall be on the same terms and conditions as set forth in the Lease
except (i) that the rental for the Premises during the Renewal Term shall be as
set forth in Paragraph 54.5 below, and (ii) the Security Deposit shall be
increased to an amount equal to the newly calculated option period monthly
rental amount (the "Increased Security Deposit Amount").
54.3 Exclusive Means of Exercising Renewal Option. Lessee may exercise its
right to renew the Lease to the Renewal Term only by (a) giving to Lessor
written notice of its election to renew the Lease for the Renewal Term not later
than four (4) months prior to the Renewal Commencement Date, and (b) delivering
to Landlord, in cash, a sum equal to the positive difference between (i) the
amount of the Increased Security Deposit Amount and (ii) the amount of the
then-existing Security Deposit within 10 days after notification from Lessor of
the amount of the increased security deposit. Any attempted exercise of this
Option made other than within the time periods stated or in the manner stated
will be void and of no force or effect.
54.4 No Default Under Lease Whatsoever. Lessee's option to renew this
Lease is expressly conditioned upon Lessee not being in default pursuant to
Paragraph 20 of this Agreement at the time it exercises the option to renew the
Lease.
54.5 Monthly Rent During Renewal Term. If Lessee shall have properly and
timely exercised its right to extend the term of this Lease, and provided that
Lessee is not in default under the terms of this Lease as of the Option Period
Commencement Date, the term of this Lease shall be so extended for such option
Period on the same terms and conditions contained in the Lease; provided,
however, the Fixed Monthly Rental shall be as follows:
January 1, 2003 - December 31, 2003 $19,500.00 NNN/Mo.
January 1, 2004 - December 31, 2004 $20,000.00 NNN/Mo.
January 1, 2005 - December 31, 2005 $20,500.00 NNN/Mo.
January 1, 2006 - December 31, 2006 $21,000.00 NNN/Mo.
January 1, 2007 - December 31, 2007 $21,500.00 NNN/Mo.
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IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
LESSEE: LESSOR:
WILSHIRE TECHNOLOGIES, INC. FRANK NALIBOFF and NATHAN MORTON
By: /s/ John Van Egmond By: /s/ Frank Naliboff
-------------------- -----------------------------------
Frank Naliboff
Its: President & CEO Its:___________________________________
-------------------
By: /s/ Nathan Morton
-----------------------------------
Nathan Morton
Its:___________________________________
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EXHIBIT "A"
LEGAL DESCRIPTION
THE LAND REFERRED TO HEREIN IN SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF
SAN DIEGO AND IS DESCRIBED AS FOLLOWS:
PARCEL A:
PARCEL 1 OF PARCEL MAP NO. 15687, IN THE CITY OF CARLSBAD, COUNTY OF SAN DIEGO,
STATE OF CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO
COUNTY ON MAY 30, 1989 AS FILE NO. 89-283195 OF OFFICIAL RECORDS.
EXCEPTING THEREFROM 50 PERCENT OF ALL OIL, MINERAL GAS AND OTHER HYDROCARBON
SUBSTANCES BELOW A DEPTH OF 500 FEET UNDER THE REAL PROPERTY DESCRIBED HEREIN,
WITHOUT THE RIGHT OF SURFACE ENTRY, AS RESERVED BY CARLSBAD PROPERTIES, A
PARTNERSHIP IN A DEED RECORDED JULY 5, 1978 RECORDER'S FILE NO. 78-279136 OF
OFFICIAL RECORDS.
PARCEL B:
AN EASEMENT FOR GENERAL ROAD, ALL UTILITIES, DRAINAGE AND INCIDENTAL PURPOSES
OVER THAT CERTAIN "GENERAL & PUBLIC ACCESS EASEMENT DEDICATED TO THE CITY OF
CARLSBAD THEREON" AKA EDISON PLACE (PRIVATE STREET) AS SHOWN ON PARCEL MAP
15687, IN THE CITY OF CARLSBAD, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, FILED
IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY ON MAY 30, 1989 AS FILE
NO. 89-283195 OF OFFICIAL RECORDS.
EXCEPTING THEREFROM ALL THAT PORTION LYING WITHIN PARCEL "A" ABOVE.
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EXHIBIT "B"
1. Emissions; Storage, Use and Disposal of Waste.
1.1 Emissions. Lessee shall not:
(a) Permit any vehicle on the premises to emit exhaust which is in
violation of any governmental law, rule, regulation or requirements;
(b) Discharge, emit or permit to be discharged or emitted, any
liquid, solid or gaseous matter, or any combination thereof, into the
atmosphere, the ground or any body of water, which matter, as reasonably
determined by Lessor or any governmental entity, does, or may, pollute or
contaminate the same, or is, or may become, radioactive or does, or may,
adversely affect the (1) health or safety of persons, wherever located, whether
on the Premises or anywhere else, (2) condition, use or enjoyment of the
Premises or any other real or personal property, whether on the Premises or
anywhere else, or (3) Premises or any of the improvements thereto or thereon
including buildings, foundations, pipes, utility lines landscaping or parking
areas;
(c) Produce, or permit to be produced, any intense glare, light or
heat except within an enclosed or screened area and then only in such manner
that the glare, light or heat shall not be discernible from outside the
Premises;
(d) Create, or permit to be created, any sound pressure level
which will interfere with the quiet enjoyment of any real property outside the
Premises, or which will create a nuisance or violate any government law, rule,
regulation or requirement;
(e) create, or permit to be created, any ground vibration that is
discernible outside the Premises;
(f) Transmit, receive, or permit to be transmitted or received,
any electromagnetic, microwave or other radiation which is harmful or hazardous
to any person or property in, on or about the Premises, or anywhere else.
1.2 Storage and Use.
(a) Storage. Subject to the uses permitted and prohibited to
lessee under this Lease, Lessee shall store in appropriate leak proof containers
all solid, liquid or gaseous matter, or any combination thereof, which matter,
if discharged or emitted into the atmosphere, the ground or any body of water,
does or may (1) pollute or contaminate the same, or (2) adversely affect the (i)
health or safety of persons, whether on the Premises or anywhere else, (ii)
condition, use or enjoyment of the Premises or any real or personal property,
whether on the Premises or anywhere else, or (iii) Premises or any of the
improvements thereto or thereon.
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(b) Use. In addition, without Lessor's prior written consent,
Lessee shall not use, store or permit to remain on the Premises any solid,
liquid or gaseous matter which is, or may become, radioactive. If Lessor does
give its consent, Lessee shall store the materials in such manner that no
radioactivity will be detectable outside a designated storage area and Lessee
shall use the materials in such a manner that (1) no real or personal property
outside the designated storage area shall become contaminated thereby or (2)
there are and shall be no adverse effects on the (i) health or safety of
persons, whether on the Premises or anywhere else, (ii) condition, use or
enjoyment of the Premises or any real or personal property thereon or therein,
or (iii) Premises or any of the improvements thereto or thereon.
1.3 Disposal of Waste.
(a) Refuse Disposal. Lessee shall not keep any trash, garbage,
waste or other refuse on the Premises except in sanitary containers and shall
regularly and frequently remove same from the Premises. Lessee shall keep all
incinerators, containers or other equipment used for the storage or disposal of
such materials in a clean and sanitary condition.
(b) Sewage Disposal. Lessee shall properly dispose of all sanitary
sewage and shall not use the sewage disposal system (1) for the disposal of
anything except sanitary sewage or (2) excess of the lesser of the amount of (a)
reasonably contemplated by the uses permitted under this Lease or (b) permitted
by any governmental entity. Lessee shall keep the sewage disposal system free of
all obstructions and in good operating condition.
(c) Disposal of Other Waste. Lessee shall properly dispose of all
other waste or other matter delivered to, stored upon, located upon or within,
used on, or removed from, the Premises in such a manner that it does not, and
will not, adversely affect the (1) health or safety of persons, wherever
located, whether on the Premises or elsewhere, (2) condition, use or enjoyment
of the Premises or any other real or personal property, wherever located,
whether on the Premises or anywhere else, or (3) Premises or any of the
improvements thereto or thereon including buildings, foundations, pipes, utility
lines, landscaping or parking areas.
1.4 Compliance with Law. Lessee shall comply with all laws, statutes,
ordinances, regulations, rules and other governmental requirements in complying
with its obligations under this Lease, and in particular, relating to the
storage, use and disposal of hazardous or toxic matter.
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EXHIBIT 10.103
LEASE AGREEMENT ENTERED INTO BY AND BETWEEN MR. RAFAEL MIZRACHI (HEREINAFTER
REFERRED TO AS THE "LESSOR") AND WILSHIRE INTERNATIONAL DE MEXICO S.A. DE C.V.,
REPRESENTED HEREIN BY JAMES W. KLINGLER (HEREINAFTER REFERRED TO AS THE
"LESSEE"), PURSUANT TO THE FOLLOWING RECITALS AND CLAUSES.
RECITALS
I. LESSOR hereby states that:
A. He is the owner of the industrial building, located at San Antonio del
Mar 20301 A, Tijuana, B.C. Mexico (hereinafter referred to as the
"LEASED PREMISES"), which location, metes and bounds are contained in
Exhibit "A" hereto, which forms an integral part hereof.
B. For purposes of this agreement its domicile is located at the following
address: Calle 7 Norte No. 202 CD. Industrial, Tijuana, B.C..
C. He is willing to lease the LEASED PREMISES to the LESSEE pursuant to the
terms and conditions of this agreement.
II. LESSEE hereby states that:
A. It is a corporation duly organized and existing according to the Laws of
the Mexican Republic.
B. For the purposes of this agreement its domicile is located at the LEASED
PREMISES, that is San Antonio del Mar 20301-A Tijuana, B.C.
C. It wishes to lease from the LESSOR the LEASED PREMISES pursuant to the
terms and conditions hereunder.
IN VIEW OF THE FOREGOING, the parties hereto agree as follows:
CLAUSES
FIRST: LEASE AND DELIVERY
The LESSOR hereby leases to the LESSEE and the LESSEE hereby leases from
the LESSOR the LEASED PREMISES, which are located at San Antonio del Mar 20301
A, in Tijuana, B.C., and which are described in Exhibit "A" hereto.
1
<PAGE> 2
SECOND: OCCUPANCY BY LESSEE
The LESSEE shall use the LEASED PREMISES for any lawful purposes in
accordance with applicable zoning, environmental and land use restrictions and
regulations.
Accordingly, it is hereby agreed that:
2.1. The LESSEE may, at its own risk and expense, install on the
LEASED PREMISES such fixtures, equipment and furniture as it may
deem necessary.
2.2 The LESSEE shall repair all damages caused to the LEASED PREMISES
during installation or removal of the fixtures, equipment and
furniture mentioned in the preceding paragraph.
2.3 The LESSEE shall perform the installation or removal of its
equipment and furniture in accordance with all applicable laws,
ordinances, and regulations, being liable for any violations
thereto.
2.4 The LESSEE agrees to retrieve such fixtures, equipment, furniture
and /or improvements it may have installed in the LEASED PREMISES
on or before the date of termination of this lease. Should the
LESSEE fail to retrieve such fixtures, equipment, furniture
and/or improvements from the LEASED PREMISES as provided above,
the LESSOR shall be entitled to either retrieve such fixtures,
equipment, furniture and/or improvements from the LEASED PREMISES
at the LESSEE's risk and expense, or deem that said fixtures,
equipment , furniture and /or improvements have been left in the
LEASED PREMISES by the LESSEE to gratuitously inure in favor of
the LESSOR.
2.5 The LESSEE may not modify the structure, facade or public
services of the LEASED PREMISES, nor may it perform any works or
make alterations without the LESSOR'S prior written consent, that
affect the structure, facade, or public services of the LEASED
PREMISES
THIRD: LEASE TERM
3.1 The term of this Lease shall commence on January 1, 1998 and
shall end on December 31, 2002.
3.2 Notwithstanding the foregoing, this lease by written consent of
both parties shall be renewed for two (2) additional five (5)
years terms.
2
<PAGE> 3
3.3 Should LESSEE lease or acquire any other industrial building
controlled by LESSOR, the LESSEE shall be entitled to terminate
this lease.
FOURTH. RENT
The LESSEE shall punctually and without deductions (except for those
provided by the applicable tax laws) pay to the LESSOR, at its Address or any
other address as instructed by the LESSOR.
4.1 For the first twelve months the rent will be $10,000.00 (Ten
Thousand Dollars 00/100) payable in advance during the first five
(5) business days of each month. The rent shall be payable in
U.S. Dollars or in Mexican pesos as desired by LESSEE.
4.2 As of the second year of this lease, the then monthly rent shall
be annually increased in accordance with the annualized
percentage increase of the Consumer Price Index for the San
Diego, California Metropolitan Area published by the U.S.
Department for the immediate preceding year.
4.3 For purposes of calculating the monthly rent in Mexican pesos,
the parties shall use the highest market rate of exchange for
sales of the day of payment or the immediately preceding business
day in case the day of payment is a holiday for the banking
institutions of Mexico.
4.4 All rental payments made after the term set forth above shall
accrue delinquent interest at a rate of five percent (5%) per
month).
FIFTH. IMPROVEMENTS
The LESSOR agrees to complete the improvements listed in Exhibit"B"
hereto accordingly to the specifications contained in the referred Exhibit "B"
on or before December 31, 1997.
SIXTH. INSURANCE
6.1 During the life of this agreement, the LESSEE, shall obtain and
maintain in full force an insurance policy to cover the LESSEE
and the LESSOR or designate LESSOR as additional insured on
LESSEE'S blanket insurance policy against any civil liability
claims, demands, lawsuits or actions, or against the accidents or
decease of any person, or from any damages to the goods of any
third party in connection with the use by the LESSEE of the
LEASED PREMISES. The corresponding insurance policy shall cover
an insurable value of at least $200,000.00 dollars.
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6.2 During the life of this agreement, the LESSEE shall obtain and
maintain in full force an insurance policy in favor of the LESSOR
to cover the payment of rents unpaid for any reason. The
corresponding insurance policy shall cover an insurable value
equal to the monthly rent, taxes and insurable costs for a period
of six (6) months.
6.3 The insurance policies referred to in paragraphs 6.1 and 6.2
above, shall be obtained with any insurance company authorized to
do business in Mexico acceptable to the LESSOR. Likewise, the
policies shall provide that the same may not be amended without
the prior written authorization of the LESSOR. Additionally, said
insurance policies shall provide that they shall not be subject
to cancellation or change, except after at least thirty (30) days
written notice to the LESSOR. Finally, the policies, or their
duly executed certificates, together with copies or receipts for
payment of the premiums thereof, shall be delivered to the LESSOR
at first domicile within the fifteen (15) days following the date
of execution of this agreement. All documents evidencing the
renewal of such policies shall be delivered to the LESSOR at
least thirty (30) days prior to the expiration of the term of
such coverage.
6.4 During the life of this agreement, the LESSEE agrees to obtain an
insurance policy in favor of the LESSOR to cover the LEASED
PREMISES against fire, lightning, explosion, falling aircraft,
collision, smoke, storms, hail, vehicle damage, earthquakes,
volcanic eruption, strikes, riots, civil commotion, vandalism,
flood and any other risks currently covered or which in the
future may be covered under the so called "extended coverage"
policy (including windows and gas tank coverage). In view of the
foregoing, the LESSEE hereby waives any right to demand payment
from the LESSOR for damages caused by fire, explosion and other
unforeseen events. The corresponding insurance policy shall cover
an insurable value of $400,000.00 (Four Hundred Thousand Dollars
and 00/100).
6.5 The coverage mentioned in paragraphs 6.1, 6.2, and 6.4 above
shall be annually increased thereafter in accordance with the
annualized percentage increase of the Consumer Price Index for
the San Diego, California Metropolitan Area, published by the
U.S. Department of Labor for the immediately preceding year.
SEVENTH. TAXES AND COSTS
The LESSOR shall be responsible of payment of the income and assets
taxes to which it is obligated. On its part, the LESSEE shall be responsible for
the payment of the corresponding value added tax, property tax and any other
taxes or costs which may affect the LEASED PREMISES, which may derive from this
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agreement or which may derive form the use of the LEASED PREMISES by the LESSEE.
The LESSEE shall submit to the LESSOR evidence satisfactorily to the LESSOR that
such taxes have been paid at least ten(10) days before said taxes become due and
payable.
EIGHTH. REPAIRS AND MAINTENANCE
8.1 LESSOR
8.1.1 After written notice from the LESSEE, the LESSOR shall repair the
structural or construction defects of the exterior wall, and roof
of the LEASED PREMISES caused as a consequence of the normal use
of the same. The LESSOR shall not be responsible for the repairs
of the LEASED PREMISES, unless the LESSEE informs such
circumstance immediately to the LESSOR.
8.1.2 The LESSOR shall not be responsible, or have the obligation to
repair the damages caused by the LESSEE's negligence, or that of
LESSEE's workers, clients, contractors, or guests.
8.2. LESSEE
8.2.1 LESSEE shall be responsible for the repairs to the damages
suffered in the LEASED PREMISES other than those referred to in
clause 8.1 herein above. The damages referred to in this
paragraph include, but are not limited to, the damages and
maintenance that shall be given to the plumbing systems, sewage,
telephone, gas, as well as for the equipment, interior walls,
interior painting, doors and windows, etc, of the LEASED
PREMISES. All the expenses resulting of disregarding and the
negligence of the LEASED PREMISES, or a violation and the
obligations of the LESSEE set herein, shall be borne by the
LESSEE.
8.2.2 The LESSEE shall maintain the LEASED PREMISES and its
improvements free from any liens.
NINTH. IDEMNIFICATION
9.1 If the LESSOR is held responsible for any obligation undertaken
by the LESSEE, the LESSEE agrees to indemnify and hold LESSOR
harmless from any and all claims for damages or losses of any
kind, and to restore or reimburse any all such costs and expenses
to the LESSOR.
9.2 If the LESSEE is held responsible for any obligation undertaken
by the LESSOR, the LESSOR agrees to indemnify and hold LESSEE
harmless
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from any and all claims for damages or losses of any kind, and to
restore or reimburse any all such costs and expenses to the
LESSEE.
TENTH. UTILITY SERVICES
10.1 LESSOR represents and warrants that utility service, including
water, electricity and telephone are available at the LEASED
PREMISES, and that LESSEE may secure at least three (3) telephone
lines at LESSEE'S expense.
10.2 The LESSEE agrees to request directly from the corresponding
utility companies that the public services be rendered by such
companies, to pay for the corresponding connection fees and to
promptly pay for any and all utilities and related services
furnished to the LESSEE in the LEASED PREMISES, including but not
limited to water, gas, electricity, and telephone charges.
ELEVENTH. ASSIGNMENT AND SUBLETTING
11.1 The LESSEE may not assign its rights and obligations under this
agreement, nor may it sublet the LEASED PREMISES unless it
obtains the prior written authorization of the LESSOR not
unreasonably withheld.
11.2 The LESSOR shall be entitled to assign, in whole or in part, its
rights and obligations under this agreement. Consequently, the
LESSEE hereby grants authorization to the LESSOR so that the
latter may formalize, the assignments which it may deem
appropriate. Likewise, LESSOR shall be expressly entitled to
guarantee any of its present of future obligations with its
rights under this agreement.
TWELFTH. ACCESS TO THE LEASED PREMISES
12.1 The LESSOR or its authorized representatives shall have the right
to enter the LEASED PREMISES during all of LESSEE's business
hours, and in emergencies at all times, to make repairs,
additions, or alterations to the LEASED PREMISES which may be
authorized or obligated to do under this agreement.
12.2 LESSOR, within a ninety (90) day period prior to the termination
of this agreement, shall have the right to show the LEASED
PREMISES to any prospective clients. Likewise, and during the
above mentioned term, the LESSOR shall have the right to post the
signs which it may deem appropriate in the facade of the LEASED
PREMISES in order to promote the same.
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12.3 Except in case of emergency, the LESSOR shall give notice to the
LESSEE before entering the LEASED PREMISES, and the LESSEE shall
have the right to escort any representatives of the LESSOR and
prospective clients.
THIRTEENTH. DAMAGE OR DESTRUCTION
13.1 TOTAL
In the event the whole or substantial part of the LEASED PREMISES
are damaged or destroyed so as to impede the LESSEE's operation
for the purposes for which the same were leased, the LESSOR
shall, within ten (10) days from such destruction, determine
whether the LEASED PREMISES can be restored within the following
three (3) months and notify the LESSEE of such determination. If
the LESSOR determines that the LEASED PREMISES cannot be restored
within the following three (3) months, either the LESSOR or the
LESSEE shall have the right and option to immediately terminate
this Lease Agreement by means of a written notice to the other
party. If the LESSOR determines that the LEASED PREMISES can be
restored within said three (3) month period, the LESSOR shall, at
its own expense, proceed diligently to reconstruct the LEASED
PREMISES, but only up to the amount which it may obtain from the
insurance coverage mentioned in clause Sixth above.
13.2 PARTIAL
In the event the referred damages do not prevent the LESSEE, in a
substantial way, from continuing the normal operation of its
business on the LEASED PREMISES, the LESSOR or the LESSEE, as the
case may be, shall repair said damages under the terms of clause
EIGHT above.
13.3 If the damage in question is caused by a negligent or willful act
of the LESSEE or its employees, the LESSEE agrees to punctually
pay the rent hereunder.
FOURTEENTH. CAUSES FOR TERMINATION OF LEASE.
The LESSEE will have the right to terminate this lease at any time in
case that for any circumstance of force majeure, fortuitous case or acts
of government (expropriation, seizure, etc.) he cannot continue
industrial operations within the leased premises. In such a case the
LESSEE will notify the LESSOR of his intention to terminate the lease 30
days in advance of the effective date of termination.
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FIFTEENTH. LESSOR'S RIGHT TO PERFORM THE LESSEE'S COVENANTS
If the LESSEE shall at any time fail to perform any one or more of its
covenants made in this lease, the LESSOR, after five (5) business days
written notice to the LESSEE (or without notice in the event the act or
acts to be performed in fulfillment of the breached covenant require an
immediate action) and without waiving or releasing the LESSEE from any
obligation of the LESSEE contained in this Lease, may (but shall be
under no obligation to ) perform any act on the LESSEE's part to be
performed as provided in this lease, and may enter upon the LEASED
PREMISES for that purpose and take all such actions thereon as may be
necessary therefor. All sums paid by the LESSOR and all costs and
expenses incurred by the LESSOR in connection with the performance of
any such obligation of the LESSEE, shall be payable by the LESSEE to the
LESSOR on demand, in the understanding that the late reimbursement of
costs and expenses shall accrue delinquent interest at a rate of five
percent (5) per month.
SIXTEENTH. GUARANTIES
16.1 LESSOR hereby acknowledges to have received from the LESSEE, as
deposit, the amount of U.S. $30,000 (Thirty Thousand U.S. Dollars
and 00/100) upon execution of lease in order to guarantee its
obligations hereunder. The deposit shall be reimbursed to the
LESSEE, without interest, after the LESSOR carries out an
inspection of the condition on which the LEASED PREMISES are
returned.
16.2 The LESSEE shall deliver to the LESSOR within the thirty days
following the execution of this lease agreement, a warrant (in
the form of Exhibit C) to purchase 50,000 shares of common stock
of Wilshire Technologies Inc, at the market price on the date
this lease agreement is executed.
16.3 In case of early termination for any cause attributable to the
LESSEE, the LESSOR shall be entitled to keep any amounts
delivered to the LESSOR as prepaid rent or deposit, regardless of
any other rights which the LESSOR may be entitled to .
16.4 LESSEE shall provide yearly financial information throughout the
course of the lease.
SEVENTEENTH. COVENANTS, CONDITIONS AND RESTRICTIONS
17.1 The LESSEE agrees to fully comply with the covenants, conditions
and restrictions of Parque Industrial Valle del Sur CC&R,
Tijuana, Baja California.
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17.2 LESSEE will pay park maintenance fees of US $0.50 per square
meter of land per year, beginning July 1, 1998.
EIGHTEENTH. NOTICES
18.1 Any notice to be given to the LESSOR under this agreement shall
be sent to the address mentioned in recital I.B. or to such other
addressses which may from time to time be notified by the LESSOR
to the LESSEE.
18.2 Any notice to be given to the LESSEE under this agreement shall
be addressed to the LEASED PREMISES.
18.3 Said notices shall be in writing, and shall be delivered
personally to the legal representative of the party in question,
or sent by certified mail, postage prepaid to the addresses
mentioned above, in which case the corresponding notice shall be
deemed delivered fourteen (14) days after the date of mailing
thereof.
NINETEENTH. EARLY TERMINATION
The LESSOR may terminate this agreement with proper written notification
or default in any of the following circumstances:
19.1 In case the term expressed in clause THIRD above expires.
19.2 The LESSEE's failure to pay any monthly rent due and payable
hereunder.
19.3 Default in the performance of any of the LESSEE's covenants,
agreements, or obligations hereunder.
19.4 The filing of a petition of bankruptcy against the LESSEE, that
is dismissed within one hundred eighty (180) days after filing.
19.5 Any other cause provided in the corresponding civil code.
TWENTY. MISCELLANEOUS
20.1 In case any party fails to execute any action against the other
as to project a certain right under this agreement, said failure
shall not be construed as a waiver of any other rights derived
herefrom.
20.2. This agreement may only be modified by written agreement signed
by the authorized representatives of the parties.
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20.3 In case any party hereto exercises an action against the other in
order to demand the performance of this agreement, the prevailing
party shall be entitled to reasonable attorney's fees.
20.4 The parties agree that this Lease Agreement shall be governed by
the laws of State of Baja California. For everything pertaining
to the interpretation and compliance of this Lease agreement the
parties hereby expressly submit to the jurisdiction of the Civil
Courts of the City of Tijuana, Baja California, waiving any other
jurisdiction which might be applicable by reason of their present
or future domiciles or otherwise.
TWENTY FIRST. PURCHASE OPTION
21.1 In the event LESSEE purchases a facility from LESSOR the term of
the lease can be terminated.
21.2 LESSEE will have right of first refusal to lease the building
site on the north side of the LEASED PREMISES.
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IN WITNESS WHEREOF, the parties have executed this agreement in the places and
on the dates stated herein below:
LESSOR LESSEE
/s/ Lic. Rafael Moises Mizrachi /s/ James W. Klingler
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November, 25, 1997 Wilshire International
Tijuana, B.C. Mexico de Mexico S.A. De C.V.
November 25,1997
Tijuana, B.C. Mexico
GUARANTOR
/s/ John Van Egmond
Wilshire Technologies, Inc
Chief Executive Officer
November 25, 1997
Tijuana, B.C. Mexico
/s/ Dolores Hernandez Sanchez /s/ Mary Beth Viruete
- ----------------------------- ---------------------
Witness Witness
Lease contract Wilshire
Draft - November 25, 1997
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EXHIBIT 10.103a
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. RM-1 November 25, 1997
WARRANT TO PURCHASE SHARES OF COMMON
STOCK OF WILSHIRE TECHNOLOGIES, INC.
This certifies that MR. RAFAEL MIZRACHI, (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"), Fifty Thousand (50,000) 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 November 25, 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 5861
Edison Place, 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 Lease
Agreement dated November 25, 1997, between the Holder and the Company (the
"Lease Agreement") shall be terminated by Holder in accordance with the
provisions as set forth in Section 19 of the Lease 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 Lease 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
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$0.60, which is the mean average of the bid and asked prices on November 25,
1997, the effective date of the Lease 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
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adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price 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
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the Internal Revenue Code of 1986, as amended, or any successor provision;
provided, however, 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.
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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.
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
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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 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 25th day of November, 1997.
WILSHIRE TECHNOLOGIES, INC.
By: /s/John Van Egmond By: /s/James W. Klingler
--------------------------------- --------------------------------
President & Chief Executive Vice President & Chief Financial
Officer Officer
-6-
<PAGE> 18
FORM OF SUBSCRIPTION AGREEMENT
(To be signed and delivered upon execution of Warrant)
WILSHIRE TECHNOLOGIES, INC.
5861 Edison Place
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> 19
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> 20
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> 21
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> 22
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> 23
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> 24
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
-5-
<PAGE> 25
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 10.104
WILSHIRE TECHNOLOGIES, INC.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
Warrant Agent
--------------------
WARRANT AGREEMENT
--------------------
Dated as of November 24, 1997
<PAGE> 2
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties .................................................................... 2
Recitals .................................................................... 2
Section 1 Appointment of Warrant Agent........................................ 2
Section 2 Form of Warrant..................................................... 2
Section 3 Countersignature and Registration................................... 3
Section 4 Transfers and Exchanges............................................. 3
Section 5 Exercise of Warrants................................................ 4
Section 6 Payment of Taxes.................................................... 5
Section 7 Mutilated or Missing Warrants....................................... 5
Section 8 Reservation of Common Stock......................................... 6
Section 9 Warrant Price....................................................... 7
Section 10 Adjustment of Warrant Price and Number of Shares.................... 7
Section 11 Fractional Interest................................................. 13
Section 12 Notices to Warrantholders........................................... 14
Section 13 Disposition of Proceeds on Exercise of Warrants..................... 15
Section 14 Merger or Consolidation or Change of Name of Warrant Agent.......... 15
Section 15 Duties of Warrant Agent............................................. 16
Section 16 Change of Warrant Agent............................................. 18
Section 17 Identity of Transfer Agent.......................................... 19
Section 18 Notices............................................................. 19
Section 19 Supplements and Amendments.......................................... 20
Section 20 Successors.......................................................... 21
Section 21 California Contract................................................. 21
Section 22 Benefits of this Agreement.......................................... 21
Section 23 Counterparts........................................................ 21
Signatures .................................................................... 21
</TABLE>
- --------------------------
* This Table of Contents does not constitute a part of this Agreement or have
any bearing upon the interpretation of any of its terms and provisions.
1
<PAGE> 3
WARRANT AGREEMENT dated as of November 24, 1997 between Wilshire
Technologies, Inc., a California corporation (hereinafter called the "Company"),
and American Stock Transfer & Trust Company, as warrant agent (hereinafter
called the "Warrant Agent").
WHEREAS, the Company will issue up to 2,750,000 Warrants (the
"Warrants"), each entitling the registered holder thereof to purchase one share
of the Company's Common Stock without par value (the "Shares"); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange, and exercise of the Warrants and the
rights of the holders thereof;
NOW THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows.
SECTION 1. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as agent for
the Company in accordance with the instructions hereinafter set forth in this
Agreement, and the Warrant Agent hereby accepts such appointment.
SECTION 2. FORM OF WARRANT.
The text of the Warrant certificates and of the form of election to
purchase Shares to be printed on the reverse thereof shall be substantially as
set forth in Exhibit A attached hereto. The per Share warrant price and the
number of Shares issuable upon exercise of the Warrants are subject to
adjustment upon the occurrence of certain events, all as hereinafter provided.
The Warrants shall be executed on behalf of the Company by the
2
<PAGE> 4
manual or facsimile signature of the present or any future President or any Vice
President of the Company, attested by the manual or facsimile signature of the
present or any future Secretary or Assistant Secretary of the Company. Warrants
shall be dated as of the date of issuance by the Warrant Agent either upon
initial issuance or upon transfer or exchange.
SECTION 3. COUNTERSIGNATURE AND REGISTRATION.
The Warrant Agent shall maintain books for the transfer and
registration of Warrants. Upon the initial issuance of the Warrants, the Warrant
Agent shall issue and register the Warrants in the names of the respective
holders thereof. The Warrants shall be countersigned manually or by facsimile by
the Warrant Agent (or by any successor to the Warrant Agent then acting as
warrant agent under this Agreement) and shall not be valid for any purpose
unless so countersigned. Warrants may be so countersigned, however, by the
Warrant Agent (or by its successor as warrant agent) and be delivered by the
Warrant Agent, notwithstanding that the persons whose manual or facsimile
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature or delivery, provided such
persons were proper officers of the Company at the time of such original
signing.
SECTION 4. TRANSFERS AND EXCHANGES.
The Warrant Agent shall transfer, from time to time, any outstanding
Warrants upon the books to be maintained by the Warrant Agent for that purpose,
upon surrender thereof for transfer properly endorsed or accompanied by
appropriate instructions for transfer. Upon any such transfer, a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be cancelled
by the Warrant Agent. Warrants so cancelled shall be delivered by the Warrant
Agent to the Company from time to time upon request. Warrants may be exchanged
at the option of the holder thereof, when surrendered at the office of the
Warrant Agent, for another Warrant, or other Warrants of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of shares of Common Stock.
3
<PAGE> 5
SECTION 5. EXERCISE OF WARRANTS.
Subject to the provisions of this Agreement, each registered holder
of a Warrant shall have the right, which may be exercised commencing on the
later of November 28, 1999 or the date on which the Shares issuable on exercise
of the Warrants shall have been registered under the Federal Securities Act of
1933, and terminating at 5:00 p.m. New York time on November 28, 2002 (the
"Warrant Expiration Date"), to purchase from the Company (and the Company shall
issue and sell to such registered holder of Warrants) the number of fully paid
and nonaccessible shares of Common Stock specified in such Warrants, upon
surrender to the Company at the office of the Warrant Agent of such Warrants,
with the form of election to purchase on the reverse thereof duly filled in and
executed, and upon payment to the Company of the Warrant Price, determined in
accordance with the provisions of Sections 9 and 10 of this Agreement, for the
number of Shares in respect of which such Warrants are then exercised. Payment
of such Warrant Price shall be made in cash or by check or bank draft to the
order of the Company. No adjustment shall be made for any dividends on any
shares of Common Stock issuable upon exercise of a Warrant. Subject to Section
6, upon such surrender of the Warrants and payment of the Warrant Price as
aforesaid, the Warrant Agent shall be authorized to send, upon the written order
of the registered holder of such Warrants, and in such name or names as such
registered holder may designate, a certificate or certificates for the number of
full shares of Common Stock so purchased upon the exercise of such Warrants. No
fractional shares of Common Stock will be issued. Such certificate or
certificates shall be deemed to have been issued and any person so designated to
be named therein shall be deemed to have become a holder of record of such
Shares as of the date of the surrender of such Warrants and payment of the
Warrant Price as aforesaid. The rights of purchase represented by the Warrants
shall be exercisable, at the election of the registered holders thereof, either
as an entirety or from time to time for part only of the Shares specified
therein and, in the event that any Warrant is exercised in respect of less than
all of the Shares specified therein at any time prior to the date of expiration
of the Warrant, a new Warrant or Warrants will be issued to such registered
holder for the
4
<PAGE> 6
remaining number of Shares specified in the Warrant so surrendered, and the
Warrant Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrants pursuant to the provisions of this Section and of Section
3 of this Agreement and the Company, whenever requested by the Warrant Agent,
will supply the Warrant Agent with Warrants duly executed on behalf of the
Company for such purpose. After the Expiration Date, any Warrants which have not
been exercised shall be void.
SECTION 6. PAYMENT OF TAXES.
The Company will pay any documentary stamp taxes attributable to the
issuance of Common Stock issuable upon the exercise of Warrants by the initial
registered holder thereof; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any transfer
of a Warrant or in respect of any transfer involved in the issue or delivery of
any certificates for shares of Common Stock in a name other than that of the
registered holder of Warrants in respect of which such shares are issued, and in
such case neither the Company nor the Warrant Agent shall be required to issue
or deliver any certificate for shares of Common Stock or any Warrant until the
person requesting the same has paid to the Company or Warrant Agent the amount
of such tax or has established to the Company's and Warrant Agent's satisfaction
that such tax has been paid.
SECTION 7. MUTILATED OR MISSING WARRANTS.
In case any of the Warrants shall be mutilated, lost, stolen or
destroyed, the Company may in its discretion issue and the Warrant Agent shall
countersign and deliver in exchange and substitution for and upon cancellation
of the mutilated Warrant, or in lieu of and in substitution for the Warrant
lost, stolen or destroyed, a new Warrant of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant and, in the case of a lost, stolen or destroyed Warrant, indemnity, if
requested, also satisfactory to them. Applicants for such substitute Warrants
shall also
5
<PAGE> 7
comply with such other reasonable regulations and pay such reasonable charges as
the Company or the Warrant Agent may prescribe.
SECTION 8. RESERVATION OF COMMON STOCK.
There has been reserved, and the Company shall at all times keep
reserved, out of the authorized and unissued shares of Common Stock, a number of
shares sufficient to provide for the exercise of the rights of purchase
represented by the Warrants, and the Transfer Agent for the shares of Common
Stock and every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of any of the rights of purchase
aforesaid are hereby irrevocably authorized and directed at all times to reserve
such number of authorized and unissued shares as shall be requisite for such
purpose. The Company agrees that all shares of Common Stock issued upon exercise
of the Warrants shall be, at the time of delivery of the certificates for such
shares of Common Stock, validly issued and outstanding, fully paid and
non-assessable and listed on any national securities exchange upon which the
other shares of Common Stock are then listed. So long as any unexpired Warrants
remain outstanding, the Company will file such post- effective amendments to the
Securities Act Registration Statement referred to in Section 5 of this Agreement
as may be necessary to permit it to deliver to each person exercising a Warrant,
a Prospectus meeting the requirements of Section 10(a)(3) of such Act and
otherwise complying therewith, and will deliver such a Prospectus to each
person. The Company will keep a copy of this Agreement on file with the Transfer
Agent for the shares of Common Stock and with every subsequent transfer agent
for any shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by the Warrants. The Warrant Agent is hereby
irrevocably authorized to requisition from time to time from such Transfer Agent
stock certificates required to honor outstanding Warrants. The Company will
supply such Transfer Agent with duly executed stock certificates for such
purpose. All Warrants surrendered in the exercise of the rights thereby
evidenced shall be cancelled by the Warrant Agent and shall thereafter be
delivered to the Company, and such cancelled Warrants shall constitute
sufficient evidence of the number of shares of Common Stock which have been
issued upon the
6
<PAGE> 8
exercise of such Warrants. Promptly after the date of expiration of the
Warrants, the Warrant Agent shall certify to the Company as to the total
aggregate amount of Warrants then outstanding, and thereafter no shares of
Common Stock shall be subject to reservation in respect to such Warrants which
shall have expired.
SECTION 9. WARRANT PRICE.
The warrant price at which Common Stock shall be purchasable
pursuant to the Warrants, subject to adjustment as provided in Section 10 hereof
(the "Warrant Price"), shall be $2.33 per Share or such lower price as may from
time to time in the future be established by unanimous action of the Board of
Directors of the Company, until the Expiration Date.
Any such action by the Board of Directors shall not constitute a "Supplement or
Amendment" for purposes of Section 19.
SECTION 10. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
The number and kind of securities purchasable upon the exercise of
the Warrants and the Warrant Price shall be subject to adjustment from time to
time upon the happening of certain events, as follows:
10.1 ADJUSTMENTS.
The number of Shares purchasable upon the exercise of the Warrant
and the Warrant Price shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in Common Stock or
make a distribution in Common Stock, (ii) subdivide its outstanding Common
Stock, (iii) combine its outstanding Common Stock into a smaller number of
shares of Common Stock or (iv) issue by reclassification of its Common Stock
other securities of the Company, the number of Shares purchasable upon exercise
of the Warrant immediately prior thereto shall be adjusted so that the
Warrantholder shall be entitled to receive the kind and number of Shares or
other securities of the Company which he would have owned or would have been
entitled to receive after the happening of any of the events described above,
had the Warrant been exercised immediately prior to the happening of
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any of the events or any record date with respect thereto. Any adjustment made
pursuant to this subsection 10.1 (a) shall become effective immediately after
the effective date of such event retroactive to the record date, if any, for
such event.
(b) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common Stock,
without any charge to such holders, entitling them to subscribe for or purchase
Common Stock at a price per share which is lower at the record date mentioned
below than the Warrant Price, the number of Shares thereafter purchasable upon
the exercise of the Warrant shall be determined by multiplying the number of
Shares theretofore purchasable upon exercise of the Warrant by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options or warrants plus the
number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such rights, options,
warrants or convertible securities plus the number of shares which the aggregate
offering price of the total number of shares offered would purchase at the
Warrant Price. Such adjustment shall be made whenever such rights, options or
warrants are issued, and shall become effective immediately and retroactively
after the record date for the determination of shareholders entitled to receive
such rights, options or warrants.
(c) In case the Company shall distribute to all or substantially all
holders of its Common Stock evidences of its indebtedness or assets (excluding
cash dividends or distributions out of earnings), then in each case the number
of Shares thereafter purchasable upon the exercise of the Warrant shall be
determined by multiplying the number of Shares theretofore purchasable upon
exercise of the Warrant by a fraction, of which the numerator shall be the
Warrant Price on the date of such distribution, and of which the denominator
shall be the Warrant Price on such date minus the then fair value of the portion
of the assets or evidences of indebtedness so distributed applicable to one
share. Such adjustment shall be made whenever any such distribution is made and
shall become effective on the date of distribution retroactive to the record
date for the determination of shareholders entitled to receive such
distribution.
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<PAGE> 10
(d) No adjustment in the number of Shares purchasable hereunder
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) in the number of Shares purchasable upon the
exercise of the Warrant; provided however, that any adjustment which by reason
of this subsection 10.1(d) is not required to be made immediately shall be
carried forward and taken into account in any subsequent adjustment.
(e) Whenever the number of Shares purchasable upon the exercise of
the Warrant is adjusted as herein provided, the Warrant Price payable upon
exercise of the Warrant shall be adjusted by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator shall
be the number of Shares purchasable upon the exercise of the Warrant immediately
prior to such adjustment, and of which the denominator shall be the number of
Shares so purchasable immediately thereafter.
(f) To the extent not covered by paragraphs (b) or (c) hereof, in
case the Company shall sell and issue Common Stock or rights, options, warrants
or convertible securities containing the right to subscribe for or purchase
shares of Common Stock at a price per share (determined, in the case of such
rights, options, warrants or convertible securities, by dividing (i) the total
amount received or receivable by the Company in consideration of the sale and
issuance of such rights, options, warrants or convertible securities, plus the
total consideration payable to the Company upon exercise or conversion thereof,
by (ii) the total number of shares covered by such rights, options, warrants or
convertible securities) lower than the Warrant Price in effect immediately prior
to such sale and issuance, then the Warrant Price shall be reduced to a price
(calculated to the nearest cent) determined by multiplying the Warrant Price by
a fraction of which the numerator is (i) an amount equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to such sale and
issuance multiplied by the then existing Warrant Price, plus (B) the
consideration received by the Company upon such sale and issuance, and the
denominator is the total number of shares of Common Stock outstanding
immediately after such sale and issuance multiplied by the Warrant Price. The
number of Shares purchasable upon the exercise of the Warrant shall be that
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<PAGE> 11
number determined by multiplying the number of Shares issuable upon exercise
immediately prior to such adjustment by a fraction, of which the numerator is
the Warrant Price in effect immediately prior to such adjustment and the
denominator is the Warrant Price as so adjusted. For the purposes of such
adjustments, the Common Stock which the holders of any such rights, options,
warrants or convertible securities shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company for such rights,
options, warrants or convertible securities, plus the consideration or premiums
stated in such rights, options, warrants or convertible securities to be paid
for the Common Stock covered thereby. In case the Company shall sell and issue
Common Stock or rights, options, warrants or convertible securities containing
the right to subscribe for or purchase Common Stock for a consideration
consisting, in whole or in part, of property other than cash or its equivalent,
then in determining the "price per share" of Common Stock and the "consideration
received by the Company" for purposes of the first sentence of this paragraph
(f), the Board of Directors shall determine the fair value of said property, and
such determination, if reasonable and based upon the Board of Directors' good
faith business judgment, shall be binding upon the Warrantholder and all other
persons. There shall be no adjustment of the Warrant Price pursuant to this
paragraph (f) if the amount of such adjustment would be less than two cents per
Share; provided, however, that any adjustment which by reason of this provision
is not required to be made immediately shall be carried forward and taken into
account in any subsequent adjustment.
(g) Whenever the number of Shares purchasable upon the exercise of
the Warrant or the Warrant Price is adjusted as herein provided, the Company
shall cause to be promptly mailed to the Warrantholders by first class mail,
postage prepaid, notice of such adjustment or adjustments and a certificate of a
firm of independent public accountants selected by the Board of Directors of the
Company (who may be the regular accountants employed by the Company) setting
forth the number of Shares purchasable upon the exercise of the Warrant and the
Warrant Price after such adjustment, a brief
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statement of the facts requiring such adjustment and the computation by which
such adjustment was made.
(h) For the purpose of this subsection 10.1, the term "Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the Company
at the date of this Agreement or (ii)_any other class of stock resulting from
successive changes or reclassifications of such Common Stock consisting solely
of changes in par value, or from par value to no par value, or from no par value
to par value. If at any time, as a result of an adjustment made pursuant to this
Section 10, the Warrantholders shall become entitled to purchase any shares of
the Company other than Common Stock, then the number of such other shares so
purchasable upon exercise of the Warrant and the Warrant Price of such shares
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Shares
contained in this Section 10.
(i) Upon the expiration of any rights, options, warrants or
conversion privileges, if such shall not have been exercised, the number of
Shares purchasable upon exercise of the Warrant and the Warrant Price, to the
extent the Warrant has not then been exercised, shall, upon such expiration, be
readjusted and shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
case may be) on the basis of (A) the fact that the only shares of Common Stock
so issued were the shares of Common Stock, if any, actually issued or sold upon
the exercise of such rights, options, warrants or conversion rights and (B) such
shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the consideration, if
any, actually received by the Company for the issuance, sale or grant of all
such rights, options, warrants or conversion rights whether or not exercised;
provided, however, that no such readjustment shall have the effect of increasing
the Warrant Price by an amount in excess of the amount of the adjustment
initially made in respect of the issuance, sale or grant of such rights,
options, warrants or conversion rights.
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10.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in subsection
10.1, no adjustment in respect of any dividends shall be made during the term of
the Warrant or upon the exercise of the Warrant.
10.3 NO ADJUSTMENT IN CERTAIN CASES. No adjustment shall be made in
connection with or resulting from (i) the issuance of the Warrants, (ii)_the
issuance of Shares upon exercise of the Warrants, (iii)_the issuance of Shares
on exercise of warrants and options of the Company outstanding on October 31,
1994, or (iv) the sale, at one time or from time to time after October 31, 1994,
of either
(x) up to 2,750,000 shares of Common Stock or
(y) rights, options, warrants or convertible securities
containing the right to purchase up to such number of shares
of Common Stock,
or
(z) a combination of (x) and (y)
at a price per share (determined as set forth in the first parenthetical clause
of Section 10.1(f)) of less than $2.33 per Share. The number of shares of Common
Stock issuable under (x), (y) and (z) in the aggregate shall not exceed
2,750,000.
10.4 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger
of the Company into another corporation or in case of any sale or conveyance to
another corporation of the property, assets or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute with the Warrantholder
an agreement that the Warrantholder shall have the right thereafter upon payment
of the Warrant Price in effect immediately prior to such action to purchase upon
exercise of the Warrant the kind and amount of shares and other securities and
property which he would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale or conveyance had the Warrant been
exercised immediately prior to such action. In the event of a merger described
in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, in
which the Company is the surviving corporation, the right to purchase Shares
under the Warrant shall terminate on the date of such merger and thereupon the
Warrant shall become null and
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<PAGE> 14
void but only if the controlling corporation shall agree to substitute for the
Warrant its warrant which entitles the holder thereof to purchase upon its
exercise the kind and amount of shares and other securities and property which
he would have owned or have been entitled to receive had the Warrant been
exercised immediately prior to such merger. The agreements referred to in this
subsection 10.4 shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section_10. The provisions of this subsection 10.4 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
10.5 STATEMENT ON WARRANTS. Irrespective of any adjustments in the
Warrant Price or the number or kind of shares purchasable upon the exercise of
the Warrant, the Warrant certificate or certificates theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in the Warrant initially issuable pursuant to this Agreement.
SECTION 11. FRACTIONAL INTEREST.
The Company shall not be required to issue fractional Shares or
Warrants on the exercise of the Warrant. If any fraction of a Share or Warrant
would, except for the provisions of this Section_11, be issuable on the exercise
of the Warrant (or specified portion thereof), the Company shall pay an amount
in cash equal to the then Current Market Price multiplied by such fraction. For
purposes of this Agreement, the term "Current Market Price" shall mean (i) if
the Common Stock or Warrants are traded in the over-the-counter market and not
in the Nasdaq National Market System and not on any national securities
exchange, the average mean between the per share closing bid and asked prices of
the Common Stock or Warrants, as the case may be, on the 30 consecutive trading
days immediately preceding the date in question as reported by Nasdaq or an
equivalent generally accepted reporting service, or (ii)_if the Common Stock or
Warrants are traded in the Nasdaq National Market System or on a national
securities exchange, the average for the 30 consecutive trading days immediately
preceding the date in question of the daily per share closing prices of the
Common Stock or Warrants, as the case may be, in the Nasdaq National Market
System or on the
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principal stock exchange on which they are listed, as the case may be. The
closing price referred to in clause (ii) above shall be the last reported sales
price or, in case no such reported sale takes place on such day, the average of
the reported closing bid and asked prices, in either case in the Nasdaq National
Market System or on the national securities exchange on which the Common Stock
or Warrants, as the case may be, are then listed.
SECTION 12. NOTICES TO WARRANTHOLDERS.
(A) Upon any adjustment of the Warrant Price or the number of Shares
issuable on exercise of a Warrant, then and in each such case the Company shall
give written notice thereof to the registered holders of the Warrants and to the
Warrant Agent, which notice shall state the Warrant Price resulting from such
adjustment and the increase or decrease, if any, in the number of Shares
purchasable at such price upon the exercise of a Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of the subject adjustment.
(B) In case at any time:
(a) the Company shall pay any dividends payable in stock upon
its Common Stock or make any distribution (other than regular cash dividends) to
the holders of its Common Stock;
(b) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or other
rights;
(c) there shall be any capital reorganization or
reclassification (other than a reclassification involving merely the subdivision
or combination of outstanding Common Stock) or merger or consolidation of the
Company with, or sale of all or substantially all of its 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 such cases,
the Company shall give written notice in the manner set forth above in this
Section 12 of the date on which (i) the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights, or
(ii) such reorganization, reclassification,
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consolidation, merger, sale, dissolution, liquidation or winding up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such notice shall be given at
least twenty (20) days prior to the action in question and not less than twenty
(20) days prior to the record date or the date on which the Company's transfer
books are closed in respect thereof. Failure to give such notice, or any defect
therein, shall not affect the legality or validity of any of the matters set
forth in this Section 12.
(C) The Company shall send copies of all reports, proxy statements
and other documents that it sends to its shareholders, on the date of mailing to
such shareholders, to each registered holder of Warrants at his address
appearing on the Warrant register as of the record date for the determination of
the shareholders entitled to such documents.
SECTION 13. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS.
(A) The Warrant Agent shall promptly forward to the Company all
monies received by the Warrant Agent for the purchase of shares of Common Stock
through the exercise of the Warrants.
(B) The Warrant Agent shall keep copies of this Agreement available
for inspection by holders of Warrants during normal business hours.
SECTION 14. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.
Any corporation or company which may succeed to the business of the
Warrant Agent by any merger or consolidation or otherwise to which the Warrant
Agent shall be a party, or any corporation or company succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of either party hereto, provided that such corporation
would be eligible for appointment as a successor Warrant Agent under the
provisions of Section 16 of this Agreement. In case at the time such
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<PAGE> 17
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrants shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent and deliver such Warrants so countersigned; and in the
case at that time any of the Warrants shall not have been countersigned, any
successor to the Warrant Agent shall countersign such Warrants in its own name;
and in all such cases such Warrants shall have the full force provided in the
Warrants and in this Agreement. In case at any time the name of the Warrant
Agent shall be changed and at such time any of the Warrants shall have been
countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name and deliver Warrants so countersigned; and
in case at that time any of the Warrants shall have been countersigned, the
Warrant Agent may countersign such Warrants either in its prior name or in its
changed name; and in all such cases such Warrants shall have the full force
provided in the Warrants and in this Agreement.
SECTION 15. DUTIES OF WARRANT AGENT
The Warrant Agent undertakes the duties and obligations imposed by
this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Warrants, by their acceptance thereof, shall be
bound:
A. The statements of fact and recitals contained herein and in the
Warrants shall be taken as statements of the Company, and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrants
except as herein expressly provided.
B. The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrants to be complied with by the Company.
C. The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action
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taken, suffered or omitted by it hereunder in good faith and in accordance with
the opinion or the advice of such counsel.
D. The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant for any action taken in reliance on
any notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
E. The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement and to indemnify the Warrant
Agent and save it harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or omitted by the Warrant
Agent in the execution of this Agreement except as a result of the Warrant
Agent's negligence, misconduct or bad faith.
F. The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expenses unless the Company or one or more registered holders of Warrants shall
furnish the Warrant Agent reasonable security and indemnity for any costs and
expenses which may be incurred, but this provision shall not affect the power of
the Warrant Agent to take such action as the Warrant Agent may consider proper,
whether with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrants or the production thereof at
any trial or other proceeding relative thereto, and any such action, suit or
proceeding instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the ratable benefit of
the registered holders of the outstanding Warrants, as their respective rights
or interests may appear.
G. The Warrant Agent and any shareholder, director, officer, partner
or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other
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securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to or
otherwise act as fully and freely as though it were not the Warrant Agent under
this Agreement. Nothing herein shall preclude the Warrant Agent from acting in
any other capacity for the Company or for any other legal entity.
H. The Warrant Agent shall act hereunder solely as agent and not in
a fiduciary capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement except for its
own negligence, misconduct or bad faith.
I. The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its agents, and the Warrant Agent shall not be answerable or accountable
for any act, default, neglect or misconduct of any such agent or for any loss to
the Company resulting from such act, default, neglect or misconduct, provided
reasonable care had been exercised in the selection and continued use of the
agent.
J. Any request, direction, election, order or demand of the Company
shall be sufficiently evidenced by an instrument signed in the name of the
Company by its President or any Vice President or its Secretary or any Assistant
Secretary or its Treasurer or any Assistant Treasurer (unless other evidence in
respect thereof be herein specifically prescribed); and any resolution of the
Board of Directors may be evidenced to the Warrant Agent by a copy thereof
certified by the Secretary or any Assistant Secretary of the Company.
SECTION 16. CHANGE OF WARRANT AGENT.
The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company not less than 20 days prior notice in
writing, and by mailing such notice to the holders of Warrants at their
addresses appearing on the Warrant register, specifying a date when such
resignation shall take effect. The Warrant Agent may be removed by like notice
to the Warrant Agent from the Company and by like mailing of notice to the
holders of Warrants. If the Warrant Agent shall resign or be
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removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity of the resigning or
incapacitated Warrant Agent, then the registered holder of any Warrant may apply
to any court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Any successor warrant agent, whether appointed by the Company or
by such a court, shall be a bank or trust company or stock transfer agency, in
good standing, incorporated under the laws of any state in the United States of
America or the United States of America. Pending appointment of a successor to
the Warrant Agent, either by the Company or by a court, the duties of the
Warrant Agent shall be carried out by the Company. After appointment, the
successor warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer to
the successor warrant agent cancelled Warrants, records and property at the time
held by it hereunder, and execute and deliver any further assurance, conveyance,
act or deed necessary for the purpose. Failure to file or mail any notice
provided for in this Section, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal of the Warrant Agent or
the appointment of the successor warrant agent, as the case may be.
SECTION 17. IDENTITY OF TRANSFER AGENT.
Forthwith upon the appointment of any Transfer Agent for the shares
of Common Stock or of any subsequent transfer agent for shares of Common Stock
or other shares of the Company's capital stock issuable upon the exercise of the
rights of purchase represented by the Warrants, the Company will file with the
Warrant Agent a statement setting forth the name and address of such Transfer
Agent.
SECTION 18. NOTICES.
Any notice pursuant to this Agreement to be given by the Warrant
Agent or by the registered holder of any Warrant to the Company shall be
sufficiently given if sent by
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first-class mail, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent) as follows:
Wilshire Technologies, Inc.
5861 Edison Place
Carlsbad, California 92008
Attn.: President
Any notice pursuant to this Agreement to be given by the Company or
by the registered holder of any Warrant to the Warrant Agent shall be
sufficiently given if sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing by the Warrant Agent with the
Company) as follows:
American Stock Transfer & Trust Company
6201 15th Avenue
Brooklyn, New York 11219
SECTION 19. SUPPLEMENTS AND AMENDMENTS.
Without the consent of Warrantholders, the Company and the Warrant
Agent may from time to time supplement or amend this Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrants and which shall not
adversely affect the interest of the holders of Warrants. With the consent of
Warrantholders entitled to purchase at least a majority of the Shares issuable
on exercise of all then outstanding Warrants, the Company and the Warrant Agent
may from time to time supplement or amend this Agreement in all respects except
to change the Warrant Price or the number of Shares issuable on exercise of
Warrants or to reduce the percentage of the outstanding Warrants required by
this Section 19 for any such supplement or amendment.
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SECTION 20. SUCCESSORS.
The covenants and provisions of this Agreement by or for the benefit
of the Company or the Warrant Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 21. CALIFORNIA CONTRACT.
This Agreement shall be deemed to be a contract made under the laws
of the State of California and for all purposes shall be construed in accordance
with the laws of said State.
SECTION 22. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person
or corporation other than the Company, the Warrant Agent and the registered
holders of the Warrants any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Warrant Agent and the registered holders of the Warrants.
SECTION 23. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
WILSHIRE TECHNOLOGIES, INC.
By: /s/ John Van Egmond
------------------------------------
President & Chief Executive Officer
AMERICAN STOCK TRANSFER & TRUST COMPANY
By______________________________________
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WILSHIRE TECHNOLOGIES, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF CALIFORNIA
WARRANT TO PURCHASE SHARES OF COMMON STOCK.
VOID AFTER 5:00 P.M. NEW YORK TIME ON NOVEMBER 28, 2002
This certifies that, for value received, the registered holder
hereof or registered assigns (the "Holder"), is entitled to purchase from
Wilshire Technologies, Inc. (the "Company"), a California corporation, at any
time after the later of November 28, 1999 or the date on which the shares
issuable on exercise of this Warrant shall have been registered under the
Federal Securities Act of 1933, and before 5:00 P.M. New York time on November
28, 2002, at the purchase price of $2.33 per share (the "Warrant Price"), a
number of shares of Common Stock without par value of the Company which is equal
to the number of shares of Common Stock set forth above. The number of shares
purchasable upon exercise of this Warrant and the Warrant Price per share shall
be subject to adjustment from time to time as set forth in the Warrant Agreement
referred to below.
This Warrant may be exercised in whole or in part by presentation of
this Warrant with the Purchase Form on the reverse side hereof duly executed,
with a signature guarantee, and simultaneous payment of the Warrant Price
(subject to adjustment) at the principal office in New York City, New York, of
American Stock Transfer & Trust Company (the "Warrant Agent"). Payment of such
price shall be made at the option of the Holder hereof in cash or by check or
bank draft, all as provided in the Warrant Agreement.
This Warrant is one of a duly authorized issue of Common Stock
Purchase Warrants with rights to purchase an aggregate of 2,750,000 shares of
Common Stock, without par value, of the Company and is issued under and in
accordance with a Warrant Agreement dated as of November 24, 1997 between the
Company and the Warrant Agent
22
<PAGE> 24
and is subject to the terms and provisions contained in such Warrant Agreement,
to all of which the Holder of this Warrant by acceptance hereof consents. A copy
of the Warrant Agreement may be obtained for inspection by the Holder hereof
upon written request to the Warrant Agent.
Upon any partial exercise of this Warrant, there shall be
countersigned and issued to the Holder hereof a new Warrant in respect of the
shares as to which this Warrant shall not have been exercised. This Warrant may
be exchanged at the office of the Warrant Agent by surrender of this Warrant
properly endorsed, with a signature guarantee, either separately or in
combination with one or more other Warrants, for one or more new Warrants to
purchase the same aggregate number of shares evidenced by the Warrant or
Warrants exchanged. No fractional shares will be issued upon the exercise of
rights to purchase hereunder, but the Company shall pay the cash value of any
fraction upon the exercise of one or more Warrants, as provided in the Warrant
Agreement. This Warrant is transferable at the office of the Warrant Agent in
the manner and subject to the limitations set forth in the Warrant Agreement.
The Holder hereof may be treated by the Company, the Warrant Agent
and all other persons dealing with this Warrant as the absolute owner hereof for
all purposes and as the person entitled to exercise the rights represented
hereby, or to the transfer hereof on the books of the Company, any notice to the
contrary notwithstanding, and until such transfer on such books, the Company may
treat the Holder hereof as the owner for all purposes.
This Warrant does not entitle any holder hereof to any of the rights
of a shareholder of the Company.
23
<PAGE> 25
This Warrant shall not be valid or obligatory for any purpose until
it shall have been countersigned by the Warrant Agent.
Dated:
WILSHIRE TECHNOLOGIES, INC.
By: ____________________________________
President
Attest: ________________________________
Secretary
Countersigned:
AMERICAN STOCK TRANSFER
& TRUST COMPANY
Warrant Agent
By:___________________________
Authorized Officer
24
<PAGE> 26
WILSHIRE TECHNOLOGIES, INC.
Mailing Address:
5861 Edison Place
Carlsbad, California 92008
PURCHASE FORM
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
shares of the _____________ stock provided for therein, and requests that
certificates for such shares be issued in the name of:
________________________________________________________________________________
(Please print name, address and Social Security number)
________________________________________________________________________________
________________________________________________________________________________
and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant Certificate for the balance of the shares
purchasable under the within Warrant Certificate be registered in the name of
the undersigned Warrantholder or his Assignee as below indicated and delivered
to the address stated below.
DATED:__________________
Name of Warrantholder
or Assignee: ___________________________________________________________________
Address: _______________________________________________________________________
Signature: _____________________________________________________________________
Signature Guaranteed:
Note: The above signature must correspond with the
name as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change whatever,
unless this Warrant has been assigned.
25
<PAGE> 27
ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________________________________________________________
(Name and address of assignee must be printed or typewritten)
the within Warrant, hereby irrevocably constituting and
appointing___________________
Attorney to transfer said Warrant on the books of the Company, with full power
of substitution in the premises.
DATED:
Signature Guaranteed:
_______________________________________
Signature of registered holder
Notice: The signature on this Assignment must
correspond with the name as it appears upon the
face of the within Warrant Certificate in every
particular, without alteration or enlargement or
any change whatever.
26
<PAGE> 1
EXHIBIT 10.105
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of January 1, 1998 (the "Agreement")
by and between Wilshire Technologies, Inc., a California corporation (the
"Company") and John Van Egmond, an individual residing at La Jolla, California
("Executive").
The Company and Executive desire to set forth the terms and
conditions on which (i) the Company shall employ Executive as President and
Chief Executive Officer (ii) Executive shall render services to the Company, and
(iii) the Company shall compensate Executive for such services.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. Employment.
The Company hereby employs Executive and Executive hereby accepts
such employment to perform executive services as hereinafter provided for the
period from January 1, 1998 through December 31, 1998. Commencing January 1,
1999, the period of employment shall be automatically extended from year to year
for additional periods of one year each unless the Company or Executive at least
three months prior to the time the Agreement would otherwise have expired shall
give the other party written notice of intention not to extend the employment.
The original one-year period of this Agreement and any extensions thereof are
hereinafter referred to as the "Term".
2. Duties and Responsibilities.
2.1 During the Term Executive shall devote his full attention and
expend his best efforts, energies, and skills, on a full-time basis, to the
business of the Company and any corporation controlled by the Company (each a
"Subsidiary"). For purposes of this Agreement, the term the "Company" shall mean
the Company and all Subsidiaries.
2.2 During the Term Executive shall serve as the President and Chief
Executive Officer of the Company. In the performance of his responsibilities
hereunder, Executive shall be subject to all of the Company's policies, rules
and regulations applicable to its executives of comparable status, shall report
directly to the Board of Directors of the Company (the "Board") and shall be
subject to the direction and control of the Board.
<PAGE> 2
Executive's services shall be rendered principally in or from an
office located in the Carlsbad, California, area. Nevertheless, Executive agrees
to make such trips out of the area, for limited periods, as are reasonably
incident to the performance of his duties.
2.3 Without first obtaining the written permission of the Board in
each instance, Executive will not authorize or permit the Company to engage the
services of, or engage in any business activity with, or provide any financial
or other benefit to, any affiliate of Executive. The phrase "affiliate of
Executive" as used in this Section shall mean and include Executive's family by
blood or marriage (including, without limitation, parents, spouse, siblings,
children and in-laws), and any business or business entity which is directly or
indirectly owned or controlled by Executive or any member of Executive's family
or in which Executive or any member of Executive's family has any direct or
indirect financial interest whatsoever, but shall not include Trilon Dominion
Partners, L.L.C.
2.4 In order to induce the Company to enter into this Agreement,
Executive represents and warrants to the Company that (a) Executive is not a
party or subject to any employment agreement or arrangement with any other
person, firm, company, corporation or other business entity, except Century
Power Corporation (b) Executive is subject to no restraint, limitation or
restriction by virtue of any agreement or arrangement, or by virtue of any law
or otherwise which would impair Executive's right or ability to remain in the
employ of the Company, or to perform fully his duties and obligations pursuant
to this Agreement, and (c) to the best of Executive's knowledge, no material
litigation is pending or threatened against any business or business entity
owned or controlled or formerly owned or controlled by Executive.
3. Compensation.
3.1 During the Term the Company shall pay Executive a salary at an
annual rate of $175,000, subject to review after six months, payable in
installments in accordance with the Company's regular practice, but not less
often than monthly.
3.2 Executive shall be entitled to reasonable periods of paid sick
leave, four weeks paid vacation per year and holidays in accordance with the
Company's regular policy.
3.3. Executive is authorized to incur reasonable expenses in the
performance of his duties hereunder. The Company shall reimburse Executive for
such expenses upon the presentation by Executive, not less frequently than
monthly, of signed, itemized accounts of such expenditures and vouchers, all in
accordance with the Company's procedures and policies as adopted and in effect
from time to time and applicable to its executives of comparable status.
<PAGE> 3
3.4 The Company shall provide Executive, at the Company's expense,
participation in group medical, dental, accident, disability and life insurance
plans of the Company and other standard benefits as may be provided by the
Company from time to time to its executives of comparable status, subject to,
and to the extent that, Executive is eligible under such benefit plans in
accordance with their respective terms. Executive and Company hereby agree that
Executive shall not participate in the Company's group medical and group dental
insurance plan during 1998.
4. Termination.
4.1 The Company may terminate Executive's employment under this
Agreement at any time for Cause. "Cause" shall exist for such termination if
Executive (i) is adjudicated guilty of illegal activities by a court of
competent jurisdiction, (ii) commits any act of fraud or intentional
misrepresentation, (iii) has, in the reasonable judgment of the Board, engaged
in serious misconduct, which misconduct has or would, if generally known,
materially adversely affect the good will or reputation of the Company and which
misconduct Executive has not cured or altered to the satisfaction of the Board
within ten days following notice by the Board to Executive regarding such
misconduct, (iv) refused to follow any lawful directive of the Board to
Executive concerning material aspect of the Company's business, (v) has made any
misrepresentation to the Company under Section 2.4 hereof, or (vi) has been
incapable to perform his duties under this Agreement for at least three
consecutive months.
4.2 The Company may terminate Executive's employment under this
Agreement at any time without Cause.
4.3 If the Company terminates Executive's employment pursuant to the
provisions of Section 4.2 hereof, or if the Company does not agree to extend
Executive's employment pursuant to the provisions of Paragraph 1 hereof,
Executive shall receive as his severance an amount equal to six months of
Executive's then salary, payable in six equal monthly installments. The first
payment shall be made on Executive's regular pay day immediately following the
date of termination.
4.4 If Executive does not agree to extend his employment pursuant to
the provisions of Paragraph 1 hereof, Executive shall receive no severance pay.
4.5 Death of Executive. In the event Executive shall die at any time
during the Term, this Agreement shall terminate. In such event the estate of
Executive shall forthwith receive any salary accrued or unpaid to the date of
his death.
<PAGE> 4
5. Restrictive Covenants.
5.1 Executive acknowledges that (i) he has a major responsibility
for the administration, development and growth of the Company's business, (ii)
his work for the Company will bring him into close contact with confidential
information of the Company and its customers, and (iii) the agreements and
covenants contained in this Section 5 are essential to protect the business
interests of the Company and that the Company will not enter into this Agreement
but for such agreements and covenants. Accordingly, Executive covenants and
agrees as follows:
5.1.a Except as otherwise provided for in this Agreement, during the
Term Executive shall not, directly or indirectly, within any state, province or
other political subdivision of the United States or any other country in which
the Company is conducting business, compete with respect to any services or
products of the Company which are either offered or are being developed by the
Company (the "Company's Business"), or, without limiting the generality of the
foregoing, be or become, or agree to be or become, interested in or associated
with, in any capacity (whether as partner, shareholder, owner, officer,
director, employee, principal, agent, creditor, trustee, consultant, co-venturer
or otherwise), any individual, corporation, firm, association, partnership,
joint venture or other business entity, which competes with the Company's
Business; provided, however, that Executive may own, solely as an investment,
not more than one (1%) percent of any class of securities of any publicly owned
corporation.
5.1.b During, and for one year after, the Term, Executive shall not,
directly or indirectly, (i) induce or attempt to influence any employee of the
Company to leave its employ, (ii) aid or agree to aid any competitor, customer
or suppliers of the Company in any attempt to hire any person who shall have
been employed by the Company within the one year period preceding such requested
aid, or (iii) induce or attempt to influence any person or business entity who
was a customer or supplier of the Company during any portion of said period to
transact business with a competitor of the Company.
5.1.c During the Term and thereafter, Executive shall not disclose
to anyone any information about the affairs of the Company, including, without
limitation, trade secrets, trade "know-how", inventions, customer lists,
business plans, operational methods, pricing policies, marketing plans, sales
plans, identity of suppliers or customers, sales, profits or other financial
information, which is confidential to the Company or is not generally known in
the relevant trade, nor shall Executive make use of any such information for his
own benefit.
5.2 Executive acknowledges and agrees that in the event of a
violation or threatened violation of any of the provisions of Section 5.1 (the
"Restrictive Covenants") the Company shall have no adequate remedy at law and
shall therefore be entitled to enforce each such provision by temporary or
permanent injunctive or mandatory relief obtained in any court of competent
jurisdiction without the necessity of
<PAGE> 5
proving damages or posting any bond or other security, and without prejudice to
any other rights and remedies which may be available at law or in equity.
5.3 If any of the Restrictive Covenants, or any part thereof, is
held to be invalid or unenforceable, the same shall not affect the remainder of
the covenant or covenants, which shall be given full effect, without regard to
the invalid or unenforceable portions. Without limiting the generality of the
foregoing, if any of the Restrictive Covenants, or any part thereof, is held to
be unenforceable because of the duration of such provision or the area covered
thereby, the parties hereto agree that the court making such determination shall
have the power to reduce the duration and/or scope and/or area of such provision
and, in its reduced form, such provision shall then be enforceable.
5.4 The parties hereto intend to and hereby confer jurisdiction to
enforce the Restrictive Covenants upon the courts of any jurisdiction within the
geographical scope of such Restrictive Covenants. In the event that the courts
of any one or more of such jurisdictions shall hold such Restrictive Covenants
wholly unenforceable by reason of the breadth of such scope or otherwise, it is
the intention of the parties hereto that such determination not bar or in any
way affect the Company's right to the relief provided above in the courts of any
other jurisdictions, within the geographical scope of such Restrictive
Covenants, as to breaches of such covenants in such other respective
jurisdictions, the above covenants as they relate to each jurisdiction being,
for this purpose, severable into diverse and independent covenants.
6. Insurance.
6.1 The Company may, from time to time, apply for and take out, in
its own name and at its own expense, life, health, accident, disability or other
insurance upon Executive in any sum or sums that it may deem necessary to
protect its interests, and Executive agrees to aid and cooperate in all
reasonable respects with the Company in procuring any and all such insurance,
including without limitation, submitting to the usual and customary medical
examinations, and by filling out, executing and delivering such applications and
other instruments in writing as may be reasonably required by an insurance
company or companies to which an application or applications for such insurance
may be made by or for the Company. In order to induce the Company to enter into
this Agreement, Executive represents and warrants to the Company that to the
best of his knowledge Executive is insurable at standard (non-rated) premiums.
6.2 Executive shall be insured under the Company's Officers' and
Directors' liability insurance policy, if any.
7. Miscellaneous.
7.1 This Agreement is a personal contract, and the rights and
interests of Executive hereunder may not be sold, transferred, assigned, pledged
or hypothecated except as otherwise expressly permitted by the provisions of
this Agreement. Executive
<PAGE> 6
shall not under any circumstances have any option or right to require payment
hereunder otherwise than in accordance with the terms hereof. Except as
otherwise expressly provided herein, Executive shall not have any power of
anticipation, alienation or assignment of payments contemplated hereunder, and
all rights and benefits of Executive shall be for the sole personal benefit of
Executive, and no other person shall acquire any right, title or interest
hereunder by reason of any sale, assignment, transfer, claim or judgment or
bankruptcy proceedings against Executive, provided, however, that in the event
of Executive's death, Executive's estate, legal representatives or beneficiaries
(as the case may be) shall have the right to receive all of the benefits that
accrued to Executive pursuant to, and in accordance with, the terms of this
Agreement.
7.2 The Company shall have the right to assign this Agreement to any
successor of substantially all of its business or assets which assumes the
Company's obligations hereunder.
7.3 Any notice required or permitted to be given pursuant to this
Agreement shall be in writing and shall be delivered personally, sent by
facsimile transmission, receipt requested, by nationally recognized overnight
courier for next business day delivery, or sent by registered or certified mail,
return receipt requested, postage prepaid, addressed to such party at the
address set forth below, or at such other addresses as such party shall
designate by notice to the other in the manner provided herein for giving
notice.
If to the Company: Wilshire Technologies, Inc.
5861 Edison Place
Carlsbad, California 92008
If to the Executive: John Van Egmond
8574 Villa La Jolla Drive
Apt. 310
La Jolla, California 92037
7.4 This Agreement may not be changed, amended, terminated or
superseded except by an agreement in writing, nor may any of the provisions
hereof be waived except by an instrument in writing, in any such case signed by
the party against whom enforcement of any change, amendment, termination,
waiver, modification, extension or discharge is sought.
7.5 Except as otherwise provided herein, this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of California, without giving any effect to the principles of conflicts of laws.
7.6 All descriptive headings of the several sections of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
<PAGE> 7
7.7 If any provision of this Agreement, or part thereof, is held to
be unenforceable, the remainder of this Agreement or provision, as the case may
be, shall nevertheless remain in full force and effect.
7.8 Each of the parties hereto shall at any time and from time to
time hereafter, upon the reasonable request of the other, take such further
action and execute, acknowledge and deliver all such instruments of further
assurance as may be necessary to carry out the provisions of this Agreement.
7.9 This Agreement contains the entire agreement and understanding
between the Company and Executive with respect to the subject matter hereof. No
representations or warranties of any kind or nature relating to the Company or
its affiliates or their respective businesses, assets, liabilities, operations,
future plans or prospects have been made by or on behalf of Company to
Executive; nor have any representations or warranties of any kind or nature been
made by Executive to the Company, except as expressly set forth in this
Agreement.
8. Authorization by Board of Directors.
The execution and delivery of this Agreement by and on behalf of the
Company has been authorized by the Company's Board of Directors at a meeting
duly held on November 21, 1997.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date hereinabove written.
WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
------------------------------------
Title: Chief Financial Officer
EXECUTIVE
/s/ John Van Egmond
----------------------------------------
John Van Egmond
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS
/s/ Ralph V. Whitworth
----------------------------------------
Ralph V. Whitworth
/s/ Charles H. Black
----------------------------------------
Charles H. Black
<PAGE> 1
EXHIBIT 10.106
DEMAND NOTE
$250,000.00 New York, New York
January 7, 1998
FOR VALUE RECEIVED, the undersigned, Wilshire Technologies, Inc. a
California corporation (hereinafter referred to as "Borrower"), hereby
unconditionally PROMISES TO PAY to the order to TRILON DOMINION PARTNERS, LLC,
a Delaware limited liability company ("Lender"), at 245 Park Avenue, 28th
Floor, New York, NY 10167, or at such other place as the holder of this Demand
Note may designate from time to time in writing, in lawful money of the United
States of America and in immediately available funds, the principal amount of
Two Hundred Fifty Thousand and 00/100, DOLLARS ($250,000.00), together with
interest on the unpaid principal amount of this Demand Note outstanding from
time to time from the date hereof, at a rate per annum equal to the Prime rate
of interest of 8.5% plus 3.75%, or the highest rate permitted by law, whichever
shall be less.
The principal amount of the indebtedness evidenced hereby shall be payable
on demand. Interest thereon shall be paid when principal is paid from the date
hereof until such principal amount is paid in full at such interest rate as
specified above. Following failure to pay on demand, Borrower agrees to pay
interest on any overdue payment of principal at a rate per annum equal to the
stated interest rate plus 5%, or the highest rate permitted by law, whichever
shall be less. All interest calculations shall be computed on the basis of a 360
day year.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
Borrower shall have no right to make any off-set against or deduct from
any payment due under this Demand Note.
Principal and interest may be prepaid at any time without penalty.
This Demand Note may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of such change is
sought.
All covenants of Borrower in this Demand Note and all rights of the holder
under this Demand Note shall bind Borrower and its successors and assigns, and
all such covenants and rights shall inure to the benefit of the holder of this
Demand Note and its successors and assigns.
This Demand Note has been delivered and accepted at New York, New York and
shall be interpreted, governed by, and construed in accordance with, the laws
of the State of New York.
Wilshire Technologies, Inc
By: /s/ James W. Klingler
-----------------------
Name: James W. Klingler
Title: VP & CFO
<PAGE> 1
EXHIBIT 10.107
DEMAND NOTE
$250,000.00 New York, New York
February 17, 1998
FOR VALUE RECEIVED, the undersigned, Wilshire Technologies, Inc. a
California corporation (hereinafter referred to as "Borrower"), hereby
unconditionally PROMISES TO PAY to the order to TRILON DOMINION PARTNERS, LLC, a
Delaware limited liability company ("Lender"), at 245 Park Avenue, 28th Floor,
New York, NY 10167, or at such other place as the holder of this Demand Note may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of Two Hundred
Fifty Thousand and 00/100, DOLLARS ($250,000.00), together with interest on the
unpaid principal amount of this Demand Note outstanding from time to time from
the date hereof, at a rate per annum equal to the Prime rate of interest of 8.5%
plus 3.75%, or the highest rate permitted by law, whichever shall be less.
The principal amount of the indebtedness evidenced hereby shall be
payable on demand. Interest thereon shall be paid when principal is paid from
the date hereof until such principal amount is paid in full at such interest
rate as specified above. Following failure to pay on demand, Borrower agrees to
pay interest on any overdue payment of principal at a rate per annum equal to
the stated interest rate plus 5%, or the highest rate permitted by law,
whichever shall be less. All interest calculations shall be computed on the
basis of a 360 day year.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
Borrower shall have no right to make any off-set against or deduct from
any payment due under this Demand Note.
Principal and interest may be prepaid at any time without penalty.
This Demand Note may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of such change is
sought.
All covenants of Borrower in this Demand Note and all rights of the
holder under this Demand Note shall bind Borrower and its successors and
assigns, and all such covenants and rights shall inure to the benefit of the
holder of this Demand Note and its successors and assigns.
This Demand Note has been delivered and accepted at New York, New York
and shall be interpreted, governed by, and construed in accordance with, the
laws of the State of New York.
Wilshire Technologies, Inc
By: /s/ James W. Klingler
------------------------------------
Name: James W. Klingler
Title: VP & CFO
<PAGE> 1
EXHIBIT 10.108
WILSHIRE INTERNATIONAL DE MEXICO, S.A. DE C.V.
ARTICLES OF INCORPORATION AND BY-LAWS
CHAPTER FIRST
NAME, CORPORATE PURPOSES, DOMICILE, DURATION AND NATIONALITY
ARTICLE FIRST.- NAME.
This company, which is of a commercial nature and is incorporated pursuant to
the laws of the Mexican Republic, shall be named "WILSHIRE INTERNATIONAL DE
MEXICO", which name shall be followed by the words "SOCIEDAD ANONIMA DE CAPITAL
VARIABLE", or their abbreviations "S.A. DE C.V."
ARTICLE SECOND.- CORPORATE PURPOSE.
The corporation shall have as corporate purposes:
a) To operate as a Mexican Corporation with 100% foreign capital stock, in
compliance with the Foreign Investment Law, as well as other applicable
legislation, for the purpose of rendering services related with the
manufacture, production, importation, exportation, purchase, sale,
commercialization and distribution of all kinds of national and foreign
products.
b) To promote, execute, organize, exploit and participate in the capital
and patrimony of all types of Mercantile and Civil corporations,
Associations, Industrial Companies, Services Corporations or any other
company, whether Mexican or Foreign and to participate in their
administration or liquidation.
c) The acquisition, subscription, acceptance, endorsement, guarantee of any
security or stock permitted by law.
d) The acquisition, alienation and, in general the negotiation of all types
of stock, corporate capital and of any security or bond permitted by
law.
e) To obtain and grant loans, obtaining specific guarantees, as well as to
transfer, endorse or guarantee all types of titles of credit, and to
grant bonds and guarantees of any kind with respect to the contracted
obligations or of the issued or accepted titles by third parties.
f) To acquire, alienate, obtain and grant the use and enjoyment under any
title permitted by law, of movable and fixed property.
<PAGE> 2
g) To obtain and grant under any title the use of patents, trademarks,
denominations, commercial names, options and preferences, copyrights and
concessions for all types of activities.
h) The rendering and hiring of technical and consultants services as well
as the execution of contracts and agreements for the realization of the
aforementioned purposes.
i) To grant commissions, act as mediator and accept the conveyance of
negotiations of any type.
j) The acquisition of real-estate for the installation of industrial plants
as well as for offices.
k) In general, the entering into or performance within the Mexican Republic
or abroad, on its own account and on behalf or on the account or behalf
of third parties, of all kinds of acts, contracts, agreements, whether
civil or commercial, principal or accessory or of any other nature
according to law.
ARTICLE THIRD.- CORPORATE DOMICILE.
The corporate domicile of the company shall be in the Municipality of Tijuana,
State of Baja California, although the company may establish agencies, branches,
correspondent and representative offices, in any other location in the Mexican
Republic or abroad or designate conventional addresses for specific purposes or
operations.
ARTICLE FOURTH.- D U R A T I O N.
The duration of the corporation shall be of ninety nine (99) years that shall
commence on the date of execution of this instrument.
ARTICLE FIFTH.- N A T I O N A L I T Y.
The corporation shall be of Mexican nationality, therefore, it is expressly
agreed through this article that:
"Every foreigner that upon incorporation or at any time thereafter acquires an
equity interest or stock participation in the company, shall consider himself
for that reason as a Mexican national with respect to one and the other, and it
is understood that he agrees not to invoke the protection of his Government,
under the penalty in case of breaching his agreement, of forfeiting said equity
interest or stock participation for the benefit of the Mexican Nation".
The foregoing shall be transcribed in the stock certificates that are issued.
2
<PAGE> 3
CHAPTER SECOND
CAPITAL STOCK AND STOCK CERTIFICATES
ARTICLE SIXTH.- CAPITAL STOCK
The capital stock of the corporation shall be variable. The fixed minimum
capital stock is the sum of $50,000.00 Mexican currency, fully subscribed and
paid for in cash. The maximum capital stock shall be unlimited.
ARTICLE SEVENTH.- STOCK CERTIFICATES
The minimum capital stock shall be represented by 1,000 (ONE THOUSAND)
registered, common and fully paid shares. Both, the fixed portion and the
variable portion shall be represented by shares with a par value of $50.00
Mexican currency each, divided in the following series:
a) Series "B" shares, which shall always represent the fixed minimum
capital stock of the corporation.
b) Series "BV" shares, which shall always represent the variable capital
stock of the corporation.
The shares of both Series "B" and Series "BV" shall be ordinary or common and
shall grant the holders equal rights and obligations and shall be indivisible
with respect to the corporation.
The acquisition of a share will produce the unconditional submission of the
stockholder to these Articles of Incorporation and By-laws and to any valid
resolution adopted by the corporate decision-making bodies.
The provisional stock certificates and the definitive stock certificates shall
be numbered progressively and shall contain, the requirements set forth in
Articles 125 and 127 of the General Law of Commercial Corporations, as well as
the provisions of Article FIFTH hereof and shall be signed by the Chairman and
any other member of the Board of Directors or by the Sole Administrator, as the
case may be, and they must contain the text required by the Regulations of the
Law Regulating Paragraph I of Article 27 of the Constitution.
ARTICLE EIGHTH.- STOCKHOLDER LEDGER
The corporation shall keep a Stockholder Ledger, in which the names, citizenship
and domiciles of the stockholders shall be recorded, expressing the
characteristics and other particularities of the stock, as well as the transfers
of the same. No transfer of stock shall be valid until duly recorded in the
stock certificate Stockholder Ledger.
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ARTICLE NINTH.- TRANSFERS OF SHARES
a) Series "B" and "BV" shares shall be represented by registered share
certificates and the ownership rights thereof shall be transferable by
endorsement and delivery of the share certificate, although they may be
transferred by any other legal means. The ownership of the stock and the
transfers thereof will be recognized by the corporation once duly
recorded in the Stock Certificate Registry Book.
b) The corporation shall recognize as a stockholder only those who are
registered as such in the Stockholder Registry Book.
The owner of any shares, and due to said fact, is obligated to abide by
the terms of this instrument and its amendments, as the case may be, and
by the resolutions and actions adopted by the corporate bodies. The
stockholders shall have a first refusal right to purchase on the same
terms and conditions, the shares representing the capital stock that are
offered for sale by other stockholders pursuant to the rules hereinafter
set forth.
It is understood that any corporation that is a stockholder may convey
without any limitation whatsoever, its shares (of this company) to
another corporation in which it owns the majority of the stock of the
stockholder corporation into which it merges.
c) If several stockholders were interested in acquiring the shares that are
offered for sale, the first refusal right shall be divided among them in
proportion to the number of shares that each one owns.
d) For the foregoing purposes, when a stockholder desires to sell his
stock, he shall so notify in writing to the Sole Administrator or the
Chairman of the Board, as the case may be, advising the price for which
he has an offer and attaching the document to prove said offer; or if
the transaction is to be among stockholders, the price at which he
desires to sell.
The Sole Administrator or the Chairman of the Board shall notify the
other stockholders at the domicile that appears in the Stockholder
Ledger by certified mail, return receipt requested, who shall have a
thirty (30) day period after receipt of the notice, to state to the
Chairman of the Board or the Sole Administrator, their decision to
purchase and the number of shares that they wish to acquire.
e) If the other stockholders do not exercise their right during the above
mentioned period, or they do not exercise the same for all the shares
offered, the stockholder that desires to sell may freely do so with
respect to those shares for which the first refusal right was not
exercised.
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f) The corporation shall not record any transfer of stock in the
Stockholder Ledger, nor shall it recognize the purchaser as a
Stockholder, unless it is proven that the requirements above mentioned
have been carried out.
The procedure for the transfer of shares established in the preceding
paragraphs shall not be required and may be waived by the Shareholders
when the proposed transfer is approved by the holders of the shares
representing 100% of the outstanding capital stock.
ARTICLE TENTH.- EXCHANGE OF SHARE CERTIFICATES
The stockholders may request the exchange of their share certificates at any
time. The costs that the exchange causes shall be borne by the requesting
shareholder.
ARTICLE ELEVENTH.- INDIVISIBLE STOCK.-
The corporation shall consider each share as one and indivisible. If one share
is owned by two or more persons, they must appoint a common representative who
shall be the only one who shall have the right to attend shareholders meetings.
In the event that the appointment of the common representative is omitted, the
appointment shall be made by a judicial authority. The common representative may
not sell or place a lien on the share unless the terms of law with respect to
joint ownership are followed.
ARTICLE TWELFTH.- REPLACEMENT OF SHARE CERTIFICATES.-
In the event of loss, destruction or theft of one or more share certificates,
the procedure outlined in Article 44 and others of the General Law of Negotiable
Instruments and Credit Operations shall be followed. Once the procedure referred
to above has been carried out, the corporation upon written request of the
interested shareholder shall reissue the share certificates at the owner's
expense.
ARTICLE THIRTEENTH.- INCREASES AND REDUCTION OF THE VARIABLE
CAPITAL STOCK.-
The Extraordinary Stockholders Meeting or the unanimous resolution adopted by
the shareholders out of a meeting and confirmed in writing, may pass resolutions
with regards to increases or reductions of the variable portion of the capital
stock.
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The variation of capital above the fixed minimum shall be regulated by the
following provisions:
a) The same shareholders that resolve the increase of capital stock, shall
resolve in respect to the form and terms in which said increase must be
subscribed and paid for, but no new increases may be resolved before the
prior increase has been fully paid for.
b) The Stockholders Meetings or the unanimous resolution adopted by the
shareholders out of a meeting and confirmed in writing, may also
authorize the Board of Directors or the Sole Administrator to place in
the market, the shares representing said capital stock, respecting
always the first refusal right of the stockholders.
c) The stockholders shall always have preference for the subscription of
the capital stock increases, in proportion to the number of their
shares, in the terms of Article 132 of the General Law of Mercantile
Corporations.
d) The capital stock may not be reduced below the fixed minimum, except
when its so determined by an Extraordinary Stockholders Meeting.
e) The Stockholders' Meeting that resolves the reduction of capital stock
shall determine the conditions under which it will be carried out.
f) As soon as a reduction or redemption of a class of capital stock is
resolved, said resolution must be notified to each one of the
stockholders of that class, granting them the right to redeem their
shares in proportion to the reduction or redemption of the class of
capital stock resolved; said right must be exercised within the fifteen
(15) days following receipt of such notice.
g) If within the term stipulated above, there is a petition for
reimbursement of the number of shares that correspond to the capital
stock that is to be reduced, the stockholders that so request it on the
date it was resolved shall be reimbursed.
h) If the request for reimbursement of shares exceed the capital stock that
is to be reduced, the amount of the reduction shall be distributed for
its amortization among the applicants in proportion to the number of
shares that each one offered for their amortization, and the
reimbursement shall proceed on the date determined.
i) If the request offered do not complete the number of shares that must be
amortized, the shares of the stockholders that requested it will be
reimbursed and the balance will be selected by means of lottery executed
before a Notary Public or licensed broker until the amount resolved is
completed.
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In any case the total or partial withdrawal of a shareholder will not
become effective until the end of that fiscal year, if the notice or the
lottery are carried out before the last quarter of said fiscal year, and
until the end of the next fiscal year, if they are carried out
thereafter.
j) The variations of capital must be registered in the Ledger that for said
effect the corporation will keep.
CHAPTER THIRD.
M A N A G E M E N T
ARTICLE FOURTEENTH.- MANAGEMENT OF THE CORPORATION.-
The management of the corporation shall be entrusted to a SOLE ADMINISTRATOR or
to a BOARD OF DIRECTORS.
The Ordinary Shareholders Meeting or the unanimous resolution adopted by the
shareholders out of a meeting and confirmed in writing, may freely decide on the
form of Management of the Corporation and in case a Board of Directors is
chosen, they shall be entitled to resolve on the number of members that shall
form it, that shall not be less than three and shall be appointed in or out of a
meeting.
The following rules shall apply in the event that the corporation is managed by
a Board of Directors with the exception of subsections a), d) and e), which
shall be applicable in all cases:
a) The Sole Administrator or the Members of the Board of Directors, shall
remain in office for one year, but they shall continue in office until
their successors are elected and they take office. They may be reelected
one or more times and the Shareholders Meeting may at any time revoke
their appointments.
b) The Shareholders Meeting or the shareholders through an unanimous
resolution adopted out of a meeting and confirmed in writing may appoint
Alternate Directors that it deems convenient, who shall substitute for a
specific Director or any Director as it is resolved.
c) Should the Shareholders Meeting or the shareholders through an unanimous
resolution adopted out of a meeting and confirmed in writing not elect
the Chairman of the Board, the Board shall do so; other Directors shall
occupy a specific position (Within the Board) unless they have received
an appointment by the Board, by unanimous resolution adopted by the
shareholders out of a meeting, or by the Shareholders Meeting. The
Shareholders Meeting or the Board of Directors shall also elect a
Secretary and if they consider it convenient, they will elect an
Assistant Secretary to substitute for him during his absences. Neither
the Secretary or Assistant Secretary need to be a Director or a
Shareholder.
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The Secretary or the Assistant Secretary, as the case may be, along with
the Chairman of the Board of Directors may issue the written evidence,
summaries and certifications that are required with respect to the
resolutions of the Shareholders Meetings, and the Meetings of the Board
of Directors, as well as to the Shareholder Ledger.
d) The Sole Administrator or the Members of the Board of Directors may be
appointed by the vote of the majority of the members of the Ordinary
Shareholders Meeting.
Any Shareholder or group of Shareholders that attend a meeting where the
appointment of Directors is included in the Agenda, shall have the right
to elect a Director provided they represent at least twenty five (25%)
percent of the capital stock.
e) The Board of Directors shall meet in the domicile of the corporation or
in any other place of the Mexican Republic, or abroad, when necessary;
the meetings shall be called by the Chairman of the Board or by two or
more Directors, by prior written notice or call to the other Directors
received with at least five days in advance, by certified mail
return-receipt requested or by telegram.
The prior notice or call shall not be required if all the Directors are
present, or if anyone who is not present were to express in writing his
consent that the Meeting be held without his attendance and without
waiting for the period of the prior notice or call.
The meeting of the Board shall be legally convened with the attendance
of the majority of its members and its resolutions shall be passed by
majority of votes, in case of a tie, the Chairman shall have a
tie-breaking vote.
f) Minutes of each meeting shall be prepared setting forth all resolutions
adopted, which minutes shall be signed by the Chairman and the
Secretary.
g) In the event that through a General Shareholders Meeting it is
determined that the company be managed by a Board of Directors, such
Meeting may at any time appoint, in addition to the principal directors,
alternate directors who shall act as directors in the event of temporary
or permanent absences or incapacity of any principal Board member. The
alternate directors may attend, with the right to vote, any meeting of
the Board of Directors, even though he/she may not have received notices
of the meeting, and substitute any absent principal director. Absent
directors may determine which of the alternate directors is to attend
the meeting in his/her stead. Alternate directors shall, when acting in
substitution of any director, have the same rights and duties that the
principal directors have in accordance herewith and with applicable
statutes.
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h) Also, in the event that the company shall be managed by a Board of
Directors, such directors may adopt any resolution of their interest
without a board meeting, when the corresponding resolution must be
approved unanimously by the directors who represent the Board of
Directors. The resolutions adopted through this manner, shall have all
the legal effects that any board meeting has, if it is evidenced by
public instrument or by private instrument ratified before a notary
public or it complies with the following requirements:
1. Once a consensus exists between the directors with respect to the
content of the resolutions, the Secretary of the meeting shall
prepare the text of the resolution and deliver it to the directors
through the most expeditious way to the domicile registered in the
company.
2. In the event that the directors agreed with the corresponding
text, each director shall sign a copy of the resolution and
deliver it to the Secretary of the company through the most
expeditious way.
3. Once, each of the directors have signed a copy of the resolution,
the Secretary of the company shall prepare minutes to evidence the
text of the resolution and that it was unanimously approved by the
directors with right to vote. Such minutes shall be transcribed in
the corresponding board meeting book and signed by the Secretary
or the Alternate Secretary of the company.
4. The Secretary shall have a file with regard to the minutes that
must be prepared in accordance with the above paragraph, and shall
aggregate copies of the resolution signed by each of the directors
and any other document related with the resolution approved.
ARTICLE FIFTEENTH.- AUTHORITY OF THE SOLE ADMINISTRATOR OR OF
THE BOARD OF DIRECTORS.
The Sole Administrator, or in its case, the Board of Directors, shall represent
the corporation and will be vested with the broadest authority granted by Law
and may handle the affairs of the corporation, execute agreements on its behalf
and dispose of its assets, with absolute authority and subject only to the
responsibility that corresponds thereto according to Law. For better
understanding, the Sole Administrator or the Board of Directors shall have all
the authority corresponding to an Attorney-in-fact with a General Power of
Attorney, and therefore may participate in all kinds of operations on behalf of
the corporation without any limitation whatsoever and as broad as provided in
Article 2554 of the Civil Code for the Federal District in its first three
paragraphs, and its correlative of the Civil Code of the State of Baja
California.
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Consequently, the Sole Administrator or the Board of Directors will be vested
with the authority that shall include but shall not be limited to the following:
a) POWER OF ATTORNEY FOR LAWSUITS AND COLLECTIONS.-
To be exercised to appear before all persons and Judicial,
Administrative, Civil, Criminal and Labor Authorities, whether they be
Federal or Local, with all general or special authority, including those
that require a special clause or mention, without limitation, in the
terms of article 2554 of the Civil Code for the Federal District, and
its correlative for the State of Baja California with the specific
authority that require special clause in accordance with the Law. They
shall also be authorized to file and process the special suit of amparo
and to withdraw therefrom, furthermore, they are granted express
authority to file criminal complaints, accusations, to act as special
assistant to the District Attorney and all the required authority in all
kinds of criminal matters.
b) GENERAL POWER OF ATTORNEY FOR ACTS OF MANAGEMENT.-
Granted with the broadest authorities to manage the property and
business of the corporation, with all general and special authority,
including those that according to Law, require a special mention or
clause, without limitation; whatsoever, in the terms of Article 2554 of
the Civil Code for the Federal District, and its correlative for the
State of Baja California.
c) POWER OF ATTORNEY FOR ACTS OF OWNERSHIP.-
Being hereby granted with the broadest authority to execute all kinds of
acts of ownership with respect to the rights and properties of the
corporation, equally with all the general and special authority,
including those that according to Law require special power of attorney
or clause, without limitation whatsoever, in the terms of article 2554
for the Civil Code of the Federal District, and its correlative for the
State of Baja California.
The Board or Sole Administrator shall also have authority to:
d) To issue, subscribe, grant, endorse and guarantee and in any other ways,
negotiate credit instruments or assume obligations on behalf of the
corporation, in the terms of Article 9 of the General Law of Negotiable
Instruments and Credit Operations.
e) To appoint and substitute the general Manager or managers of the
corporation and establish their authorities, obligations and
remunerations.
f) To act in the discharge of their duties through delegates appointed
among its members, and in lieu thereof, through their Chairman in case
the management is entrusted to a Board of Directors.
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g) To execute the resolutions of the Shareholders Meetings, to interpret
and promote the same, for their best use and fulfillment.
h) Delegate this power of attorney, in whole or in part reserving the
exercise thereof unto themselves, and grant special powers of attorney,
with the authority that they may deem convenient in each case, within
the scope of authority of the Board or Sole Administrator, as well as to
revoke the powers of attorney or delegations which they may grant.
ARTICLE SIXTEENTH.- MANAGERS AND OFFICERS.-
The ordinary Shareholders' Meeting, the shareholders through an unanimous
resolution adopted out of meeting, the Sole Administrator or the Board of
Directors, in its case, may appoint one or several managers, for the best
performance of corporate business, as well as the officers that are deemed
necessary.
The General Shareholders Meeting, the shareholders through and unanimous
resolution adopted out of meeting, the Sole Administrator or the Board of
Directors, may also appoint a Secretary of the corporation and one or more
Vice-Presidents, and as many officers as required, or necessary for the best
performance of corporate business, with the authority which on a case by case
basis shall be granted to the appointee.
CHAPTER FOURTH
STOCKHOLDERS MEETINGS
ARTICLE SEVENTEENTH.- STOCKHOLDERS' MEETINGS
The shareholders' resolutions adopted by a meeting or by unanimous resolution
out of a meeting, which shall be confirmed by writing, must be the supreme
authority of the corporation, such resolutions shall bind to all shareholders,
even for the absents or dissidents, in the event of the resolutions adopted in a
meeting, having then the absent shareholders the rights granted in Articles 201
and 206 and the applicable provisions established in the General Law of
Commercial Corporations.
The characteristics, operation and organization of such resolutions adopted in
or out of a meeting shall be governed by the following provisions:
A. TYPES OF MEETINGS.- The Stockholders Meetings shall be Ordinary or
Extraordinary depending upon the nature of the matters to be considered.
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1.- EXTRAORDINARY STOCKHOLDERS MEETINGS shall consider the following
matters:
a) Extension of the duration of the corporation.
b) Anticipated dissolution of the corporation.
c) Increase or reduction of the minimum fixed capital stock of the
corporation.
d) Change of corporate purpose of the corporation.
e) Change of nationality of the corporation.
f) Transformation of the corporation.
g) Merger with or into another corporation.
h) Issuance of preferred share.
i) Amortization by the corporation of its own share of the fixed
minimum capital share and issuance of special treasury share.
j) Issuance of founders share
k) Any other amendment of the By-Laws.
2. ORDINARY STOCKHOLDERS MEETING shall consider the matters contained
in Article 181 of the General Law of Commercial Corporation, and
all other matters contained in the Agenda that according to Law or
these by-laws, are not matters expressly reserved to an
Extraordinary Stockholders' Meeting.
B. ORDINARY STOCKHOLDERS MEETINGS AND ANNUAL ORDINARY STOCKHOLDERS
MEETINGS. Ordinary Stockholders Meetings shall be held at least once a
year during the first four months of the fiscal year and they shall be
referred to as Annual Stockholders Meetings; other meetings shall be
referred to as Ordinary Stockholders Meetings.
C. NOTICES OR CALLS FOR ORDINARY AND EXTRAORDINARY STOCKHOLDERS MEETINGS.
Ordinary and Extraordinary Stockholders Meetings shall be called by the
Sole Administrator or by any member of the Board of Directors.
Stockholders meetings may be called upon request of one Director or
group of Directors in the cases set forth in Articles 184 and 185 of the
General Law of Commercial Corporations.
The notice, or call in either case, shall be made by publishing a notice
or call at least fifteen days prior to the date of the meeting in the
official gazette of the domicile of the corporation, or in a newspaper
of major circulation in the domicile of the corporation.
In the notice, or call at least the date, time and place of the meeting,
as well as the Agenda, shall be transcribed, and will be signed by the
Secretary of the Corporation, by the Sole Administrator or by the person
designated by the Board of Directors or the Examiner, or in their
absence by a court with jurisdiction, in accordance with Articles 168,
184 and 185 of the General Law of Commercial Corporations.
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Ordinary and Extraordinary Stockholders Meetings may legally convene
without need of a prior notice or call when the capital stock is
completely represented and the stockholders agree to discuss the matters
that are submitted for their consideration.
D. QUORUM AT THE MEETINGS.- In order for the Stockholders Meetings to be
legally convened, the following shall be required:
1) Ordinary and annual stockholders meetings:
a) On first call or notices: The attendance of those that
represent at least the majority of the capital stock and the
resolutions shall be taken by the majority of the shares
represented in the Meeting.
b) On second or subsequent notice or call: The meeting will be
considered legally convened with any number of shares
represented, and the resolutions shall be taken by the majority
of the shares represented.
2) Extraordinary shareholders meetings will require:
a) On first notice or call: A minimum attendance of the number
shareholders that represent at least seventy five percent of
the capital, and the resolutions shall be adopted by an
affirmative vote of shareholders that represent at least half
of the capital stock.
b) On second and subsequent notices or calls: A minimum attendance
of those who represent the majority of the capital stock and
the resolutions shall be adopted by an affirmative vote of
shareholders that represent at least half of the Capital Stock.
E) OPERATION OF MEETINGS.- The Meetings shall be presided over by the Sole
Administrator or by the Chairman of the Board of Directors, and in the
event that they are not present, by whomever the Meeting elects.
The Secretary of the Board or of the corporation, or whomever the
Meeting designates, shall act as Secretary for that meeting. The
presiding officer shall appoint one or more Vote Inspectors whom will
certify the attendance and shall be in charge of collecting and carrying
out the count of the votes.
F) ATTENDANCE AND REPRESENTATION OF THE SHAREHOLDERS.- A Shareholder must
be registered in the Shareholder Ledger, in order to be admitted to a
Shareholders
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Meeting. Shareholders shall have the right to attend the Meetings either
in Person, or through a representative, who may appear and certify his
capacity with a simple proxy.
G) MINUTES OF THE MEETINGS AND CERTIFICATIONS.- The acting Secretary of a
Meeting shall draft the Minutes of the Meetings which shall be signed
by, at least, the acting Chairman and the Secretary, and shall be
recorded in a Special Book kept by the corporation for such purpose,
attaching to the ledger of said minutes the corresponding documents
related thereto.
When the minutes of a Meeting cannot be recorded in the authorized book,
they may be directly protocolized before a Notary Public.
Minutes of Extraordinary Shareholders Meetings shall always be
protocolized and shall be registered in the Commerce Section of the
Public Registry of Property.
The Secretary is authorized to issue proof or evidence and
certifications of the minutes.
H) RESOLUTIONS ADOPTED OUT OF SHAREHOLDERS' MEETINGS.- The shareholders may
adopt any resolution of their interest without a meeting, when the
corresponding resolution must be approved unanimously by the
shareholders who represent the totality of the shares with right to vote
or of the special class of shares. The resolutions adopted in this
manner, shall have all the legal effects that any ordinary,
extraordinary or special shareholders' meeting have, if they are
evidenced by public instrument or by private instrument ratified before
a notary public or they complied with the following requirements:
1. Once a consensus exists between the shareholders with respect to
the content of the resolution, the Secretary of the meeting shall
prepare the text of the resolution and deliver it to the
shareholders through the most expeditious way to the domicile
registered in the company.
2. In the event that the shareholders agreed with the corresponding
text, each shareholder shall sign a copy of the resolution and
deliver it to the Secretary of the company through the most
expeditious way.
3. Once, each of the shareholders have signed a copy of the
resolution, the Secretary of the company shall prepare minutes to
evidence the text of the resolution and that it was unanimously
approved by the shareholders with right to vote. Such minutes shall
be transcribed in the corresponding minutes book and signed by the
Secretary or the Alternate Secretary of the company.
4. The Secretary shall have a file with regard to the minutes that
must be prepared in accordance with the above paragraph, and shall
aggregate copies of the resolution
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signed by each of the shareholders with right to vote and any other
document related with the resolution approved.
5. The resolution shall be protocolized if it is one of those that
requires to be protocolized by law or by this By-laws, or when the
resolution requires an extraordinary shareholders' meeting.
CHAPTER FIFTH.
SURVEILLANCE
ARTICLE EIGHTEENTH.- EXAMINERS.-
The surveillance of the corporation shall be entrusted to an Examiner who will
be appointed by the General Ordinary Shareholder's Meeting or by the
shareholders through an unanimous resolution adopted out of a meeting.
The Examiner may or may not be a shareholder and shall remain in his position
for a term of one year; but will remain in the same, until his successor is in
office. The Examiner may be reelected and shall guarantee the performance of his
position, in the manner established for the Sole Administrator or the Board of
Directors. The Shareholders Meeting may appoint an Alternate Examiner.
The Shareholders that in the General Ordinary Shareholders Meeting deals with
the appointment of Examiners may be in the minority but who hold at least twenty
five percent of the capital stock, with respect to such appointment, shall have
the right to appoint one other Examiner.
The Examiners shall have the authority and obligations conferred to them by the
General Law of Mercantile Corporations, and shall be entitled to the
remunerations established by the General Ordinary Shareholders Meeting.
CHAPTER SIXTH
FISCAL YEAR, ANNUAL FINANCIAL STATEMENT, AND
DISTRIBUTION OF PROFIT AND LOSSES.
ARTICLE NINETEENTH.- FISCAL YEAR
The fiscal year shall be established by the shareholders through a meeting or
through an unanimous resolution, which has to be confirmed in writing.
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ARTICLE TWENTIETH.- FINANCIAL STATEMENTS.-
Within the first three months following the closing of every fiscal year, the
Annual Financial Report by the Administration referred to in Article 172 of the
General Law of Mercantile Corporations shall be submitted for its approval at
the General Shareholders Meeting, and shall be delivered to the Examiner or the
Examiners at least one month prior to the date on which the Meeting is to be
held.
The Examiners shall render their report with the comments and recommendations
that they consider proper, which report shall be available to the Shareholders
at least fifteen (15) days prior to the date of the Meeting.
ARTICLE TWENTY-FIRST.- DISTRIBUTION OF NET INCOME AND LIMITED LIABILITY.
A) The profits shown by the financial statements, after paying the
corresponding income tax and profit sharing to the workers, shall be
distributed pursuant to the following provisions:
I) An amount determined by the General Stockholders Meeting or by
the shareholders through an unanimous resolution adopted out of a
meeting, which shall never be less than five (5%) of the profits,
shall be taken to form the legal reserve fund, same that shall be
accumulated until reaching an amount equal to one fifth of the
capital share. Whenever it is necessary to rebuild the legal
reserve fund until it is again in an amount equal to one fifth of
the capital share, the same procedure shall be followed.
II) The stockholders shall pass a resolution establishing the
remuneration that must be paid to the Directors, the Sole
Administrator and the Examiner or Examiners, unless they are
receiving salaries established by the Meetings, and said salaries
were considered adequate.
III) A percentage of the profits or of all the remaining profits may
be set aside to form or to rebuild, as the case may be, the
profit reinvestment fund.
IV) The balance may be distributed among the stockholders in
proportion to the number of shares they own.
V) The Stockholders Meetings or the shareholders through an
unanimous resolution adopted out of a meeting shall determined or
delegate to the Board of Directors, or the Sole Administrator,
the authority to determine the date upon which the payment of
dividends is to be effected.
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VI) The dividends shall be paid to the Stockholders that are recorded
in the Stockholders Registry Book on the date set for the payment
of dividends.
VII) Dividends that are not collected in a term of five years counted
from the date set for their payment, shall be construed as waived
by their owners and assigned to the benefit of the corporation.
VIII) If increases of capital share occurred, the shares paid to cover
said increases will share the profits only in proportion to the
amount and term within the fiscal year in which they were paid,
but they will not share in the profits of a fiscal year if they
are paid during the last two months of the fiscal year.
B) The shareholders liability to the corporation or any third parties for
losses or any corporate obligations or responsibilities shall be limited
to the amount paid for their stock.
CHAPTER SEVENTH
DISSOLUTION AND LIQUIDATION.
ARTICLE TWENTY SECOND.- DISSOLUTION.-
The corporation may be dissolved for any of the reasons stated in Article 229 of
the General Law of Mercantile Corporations.
ARTICLE TWENTY-THIRD.- LIQUIDATION OF THE CORPORATION.-
Once the corporation is dissolved, it shall be liquidated and for that purpose,
the following provisions shall apply:
A) The Shareholders Meeting or the unanimous resolution adopted by the
shareholders out of a meeting and confirmed in writing that resolves the
dissolution shall appoint one or more liquidators.
B) Once the liquidators are appointed, their appointment shall be recorded
in the Public Registry of Property, Commerce Section, and until said
registration is effected, the Board of Directors or the Sole
Administrator, shall continue in office.
C) The Shareholders Meeting or the unanimous resolution adopted by the
shareholders out of a meeting and confirm in writing that resolves the
dissolution and appoints the liquidators
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shall set the rules which the liquidation procedures shall be subject
to, complying with the terms of Article 247 et al of the General Law of
Mercantile Corporations.
D) The Board of Directors or the Sole Administrator in its case, shall
deliver to the liquidators the assets, records and other documents of
the corporations, and shall draft Minutes detailing the assets and
liabilities of the corporation.
E) During the liquidation procedures, the liquidators shall be the legal
representatives of the Corporation with the following authority:
I. Conclude the transactions that were pending at the time of the
dissolution.
II. Collect what is owed to the Corporation and pay what is owed by
the Corporation.
III. Sell the assets of the Corporation.
IV. Distribute to every shareholder its part of the corporate assets.
V. Prepare the liquidating financial statement, which must be
submitted to the stockholders for its discussion and approval.
Once the Liquidating Financial Statement is approved, it shall be
recorded in the Commerce Section of the Public Registry of
Property.
VI. Obtain from the Commerce Section of the Public Registry of
Property, the cancellation of the registration of the Charter of
Incorporation and By-Laws, once the liquidation is concluded.
TRANSITORY ARTICLES
FIRST.- THE FIXED MINIMUM CAPITAL STOCK OF THE CORPORATION SHALL BE OF
$50,000.00 (FIFTY THOUSAND PESOS, 00/100) PESOS MEXICAN CURRENCY WHICH HAS BEEN
FULLY SUBSCRIBED AND PAID FOR IN CASH IN THE FOLLOWING MANNER:
<TABLE>
<CAPTION>
SHAREHOLDERS SHARES VALUE
------------ ------ ---------------
<S> <C> <C>
Wilshire Technologies, Inc. 999 $49,950.00
James W. Klingler 1 50.00
----- ---------------
T O T A L : 1,000 $50,000.00 M.N.
</TABLE>
18
<PAGE> 19
According to the foregoing, 1,000 shares have been fully subscribed to and paid
for in cash by the Shareholders, for a total of $50,000.00 Pesos Mexican
Currency which has been deposited in the treasury of the corporation.
SECOND.- THE FOUNDING SHAREHOLDERS, CONVENED IN THEIR FIRST ORDINARY
SHAREHOLDERS MEETING ADOPTED THE FOLLOWING RESOLUTIONS:
a) It is resolved to entrust the management of the corporation to a Board
of Directors to be composed by the following persons:
BOARD OF DIRECTORS
John Van Egmond - President
James W. Klingler - Secretary
Alan R. Seacord - Treasurer
b) The following persons are hereby appointed as officers of the
corporation:
Alan R. Seacord - General Manager
James W. Klingler - Chief Financial Officer
c) Mr. Diego Romero is hereby appointed as Examiner of the Corporation.
d) A GENERAL POWER OF ATTORNEY for ACTS OF MANAGEMENT, ACTS OF LABOR
MANAGEMENT and to OPEN AND CLOSE BANK ACCOUNTS are hereby granted in
favor of Mr. Alan R. Seacord and Mr. James W. Klingler to be exercised
jointly or separately in the following terms:
GENERAL POWER OF ATTORNEY FOR ACTS OF MANAGEMENT
Granted with the broadest authorities to manage the property and
business of the corporation, with all general and special authority,
including those that according to Law, require a special mention or
clause, without limitation, whatsoever, in the terms of the Civil Code
for the State of Baja California, and its correlative article 2554 of
the Civil Code for the Federal District.
POWER OF ATTORNEY FOR ACTS OF LABOR MANAGEMENT.
The attorneys in fact shall have authority for labor matters in order to
carry out the legal acts provided by articles 11,46, 47, 134, paragraph
III, 523, 692 paragraphs I, II and III, 786, 787,
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<PAGE> 20
878, 880, 883 and 884 of the Federal Labor Law. This power of attorney
is granted and conferred according to the following authorities, which
are included but no limited to act before those Union(s) having
Collective Bargaining Agreements with the Company or before the workers
individually considered and in general for all labor matters. The
attorneys in fact may exercise the power of attorney before the Labor
and Social Security authorities as it is provided by article 523 of the
Federal Labor Law. Likewise the attorney in fact may appear before the
Labor Board of Settlement and the Labor Board of Settlement and
Arbitration, either Local or Federal, consequently the attorney in fact
shall represent the Company for the effects of articles 11, 46 and 47 of
the Federal Labor Law as well as the Company=s representation in order
to evidence his capacity in court or out of court, in accordance with
articles 692 paragraphs II and III. They may appear to the production of
depositions as provided by articles 787 and 788 of the Federal Labor Law
with the authority to arbitrate, answer interrogatories and produce
evidences in all its parts. They may appoint a conventional address to
be served in accordance with article 876 of the Federal Labor Law, in
addition to the foregoing, the attorneys in fact may appear in their
capacity of Employer with the full and sufficient legal representation
to the labor hearings, as provided by article 873 of the Federal Labor
Law in its 3 phases of Settlement, Complaint and Defenses, offering and
admision of evidences as provided by articles 875, 876 paragraphs I and
IV, 877, 878, 879 and 880 of the Federal Labor Law. The attorneys in
fact may also appear to the production of evidences hearing in
accordance with articles 883 and 884 of the Federal Labor Law, also they
may execute Settlement Agreements as well as to Negotiate the like. In
addition the attorneys in fact may take any kind of decisions related to
labor matters, to negotiate and subscribe labor agreements and to
execute individual and collective agreements with the workers and to
terminate them. The attorneys in fact may appeal and bring the
injunction relief as well as offer, file and produce any kind of
evidences in favor of grantor. The attorneys in fact may also dismiss
the cause of action and execute any kind of termination of labor
agreements.
POWER OF ATTORNEY TO OPEN AND CLOSE BANK ACCOUNTS.
Granted with authority to open and close bank accounts in the country or
abroad on behalf of the corporation, to draw checks against said bank
accounts and to appoint additional persons to also draw against the
above mentioned bank accounts.
The attorneys-in-fact may substitute totally or partially the powers
granted and may revoke the powers granted.
e) A General Power of Attorney for Lawsuits and Collections is hereby
granted to Messrs. Jose M. Larroque, Rene X. Perez, Alfonso Rocha
Albertsen Federico Ruanova Guinea, Toshiro Ishino Lam, Juan Carlos
Gastelum, Carlos Perez Gautrin, Leobardo Tenorio Malof and Maria Ofelia
Guajardo, jointly or severally, for them to appear before any party any
judicial, administrative, civil, criminal or labor authority, federal or
local, with the general and special authority which may be required by
law without any limitation, in the terms of the
20
<PAGE> 21
first paragraph of Article 2554 of the Civil Code of the Federal
District and its corresponding article of the Civil Code for the State
of Baja California, with the specific authority which requires special
provisions. They shall also be empowered to file Amparo proceedings or
withdraw therefrom; they shall be vested with express authority to
absolve and articulate positions, to file criminal complaints and
accusations, to appear as party in Civil procedure, to act as special
assistant to the District Attorney and all the required authority in all
kinds of criminal or civil matters. The attorneys in-fact are hereby
authorized to grant the power of attorney conferred upon them, as well
as to revoke the powers of attorney which they may have granted.
f) Power of Attorney for Acts of Labor Management.- Is hereby granted to
Messrs. Jose M. Larroque, Rene X. Perez, Alfonso Rocha Albertsen,
Federico M. Ruanova, Toshiro Ishino Lam, Juan Carlos Gastelum, Carlos
Perez Gautrin, Leobardo Tenorio and Ma. Ofelia Guajardo, The attorneys
in fact shall have authority for labor matters in order to carry out the
legal acts provided by articles 11,46, 47, 134, paragraph III, 523, 692
paragraphs I, II and III, 786, 787, 878, 880, 883 and 884 of the Federal
Labor Law. This power of attorney is granted and conferred according to
the following authorities, which are included but no limited to act
before those Union(s) having Collective Bargaining Agreements with the
Company or before the workers individually considered and in general for
all labor matters. The attorneys in fact may exercise the power of
attorney before the Labor and Social Security authorities as it is
provided by article 523 of the Federal Labor Law. Likewise the attorney
in fact may appear before the Labor Board of Settlement and the Labor
Board of Settlement and Arbitration, either Local or Federal,
consequently the attorney in fact shall represent the Company for the
effects of articles 11, 46 and 47 of the Federal Labor Law as well as
the Company=s representation in order to evidence his capacity in court
or out of court, in accordance with articles 692 paragraphs II and III.
They may appear to the production of depositions as provided by articles
787 and 788 of the Federal Labor Law with the authority to arbitrate,
answer interrogatories and produce evidences in all its parts. They may
appoint a conventional address to be served in accordance with article
876 of the Federal Labor Law, in addition to the foregoing, the
attorneys in fact may appear in their capacity of Employer with the full
and sufficient legal representation to the labor hearings, as provided
by article 873 of the Federal Labor Law in its 3 phases of Settlement,
Complaint and Defenses, offering and admision of evidences as provided
by articles 875, 876 paragraphs I and IV, 877, 878, 879 and 880 of the
Federal Labor Law. The attorneys in fact may also appear to the
production of evidences hearing in accordance with articles 883 and 884
of the Federal Labor Law, also they may execute Settlement Agreements as
well as to Negotiate the like. In addition the attorneys in fact may
take any kind of decisions related to labor matters, to negotiate and
subscribe labor agreements and to execute individual and collective
agreements with the workers and to terminate them. The attorneys in fact
may appeal and bring the injunction relief as well as offer, file and
produce any kind of evidences in favor of grantor. The attorneys in fact
may also dismiss the cause of action and execute any kind of termination
of labor agreements.
21
<PAGE> 22
g) The fiscal year of the corporation shall run from the first day of
January until December 31 of each year, with the exception of the first
fiscal year, which shall being on the date hereof and shall conclude on
December 31, 1996.
h) The stockholders hereby authorize Messrs. Jose M. Larroque, Rene X.
Perez, Toshiro Ishino Lam, Juan Carlos Gastelum, Carlos Perez Gautrin,
Federico Ruanova Guinea, Leobardo Tenorio Malof, Maria Ofelia Guajardo
Calvillo, Sara Chavez Rubi, Concepcion Valladolid, Florentina Reyes
Retana, Paul Nerubay, Juan Pablo Corral Torres and Joshue Gross Saavedra
to jointly or severally carry out all judicial and administrative
proceedings necessary for the registration of the first official copy
hereof in the corresponding Public Registry of Property and before the
Ministry of Tax and Public Credit in order to register the corporation
in the Federal Taxpayers' Registry, as well as to secure the tax
identity certificate and carry out any act on behalf of the corporation
before the Ministry of Commerce and Industrial Development, National
Foreign Investments Registry and in general before any federal, state
and local office.
22
<PAGE> 1
EXHIBIT 10.109
MANAGEMENT SERVICES AGREEMENT
between
Wilshire International de Mexico, S.A. de C.V.,
a Subsidiary of Wilshire Technologies, Inc.
and
Tecnicas Mexicanas de Ensamble, S.A. de C.V.
and
Made in Mexico, Inc.
October 8, 1997
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<PAGE> 2
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (the "AGREEMENT") is made and
entered into effective as of this 8th day of October, 1997, by and between
Wilshire International de Mexico, S.A. de C.V., a Mexican corporation and a
Subsidiary of Wilshire Technologies, Inc., with its principal place of business
in Tijuana, Baja California, Mexico (THE "COMPANY"), Tecnicas Mexicanas de
Ensamble, S.A. de C.V., having its principal place of business in Tijuana, Baja
California, Mexico ("MIMI"), and Made in Mexico, Inc., a California corporation,
with its principal place of business in San Diego, California (THE "GUARANTOR"),
as Guarantor of MIMI.
RECITALS
WHEREAS, the Company desires to engage services related to the
manufacture, assembly, production, importation, exportation, purchase, sale
commercialization and distribution of all kinds of contamination control
products including but not limited to synthetic gloves, swabs, wipers and any
other products under the different governmental programs, such as, but not
limited to, the Border Industry Program, Temporary Import Program to Produce
Export Goods and Maquila Export Program;
WHEREAS, MIMI is in the business of assisting manufacturers in
establishing and operating manufacturing facilities in Mexico under Mexico's
"maquiladora" program;
WHEREAS, the Company wishes to engage MIMI to provide certain
management services in connection with its manufacturing operations in Mexico,
and MIMI is able, prepared and willing to provide those services; and
WHEREAS, the Company, with the assistance of MIMI, may elect to assume
partial or sole responsibility for the management of its manufacturing
operations in Mexico, and MIMI is willing to give its best efforts to assist the
Company in doing so;
WHEREAS, the Guarantor is also in the business of assisting
manufacturers in operating manufacturing facilities in Mexico.
WHEREAS, the Guarantor wishes to guaranty jointly and severally each
and all obligations of MIMI under this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties agree as follows:
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<PAGE> 3
AGREEMENT
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1 "Affiliate" shall mean and include any entity or association
controlled by, controlling or under common control with the Company or MIMI. For
purposes of this definition, the ownership of at least fifty percent (50%) of
the voting shares in any entity or association shall be conclusively be deemed
to constitute "control" of that entity or association.
1.2 "Books and Records" shall mean the books, records, and data
maintained by MIMI in connection with the performance of the Management
Services, as defined more fully in Section 6.1 herein.
1.3 "Confidential Information" shall mean and include the Contract
Specifications and all trade secrets, know-how, data and other information,
including customer and supplier lists and other information relating to the
Company's relations with its customers and suppliers, not in the public domain,
that relate to, are embodied in, or are associated with, the Products and/or the
present or future products, technology, services, business, customers, suppliers
and/or affairs of or to the Company, or with the quality control testing of the
Products and/or any other products of the Company. "Confidential Information"
shall also mean and include all books, records, and data maintained by MIMI
pursuant to Section 6 herein, and all software provided to MIMI in connection
with the Management Services or the Manufacturing Operations. Confidential
Information may be disclosed by the Company to MIMI orally, in writing or in any
other recorded or tangible form. Trade secrets, know-how, data and information
shall be considered to be Confidential Information hereunder (a) if they have
been marked as such; (b) if MIMI has been advised orally or in writing of their
confidential nature; or (c) if, due to their character or nature, a reasonable
person in a like position and under like circumstances as MIMI would treat them
as confidential.
1.4 "Contract Specifications" means any and all specifications,
plans, designs, drawings, blueprints, diagrams, formulations, models,
specifications, manufacturing data and procedures, performance data, production
and delivery schedules, know-how of other technical information relating to the
design, manufacture and/or operation of the Products, as well as systems and
controls related to materials, manufacturing, production, productivity, and
quality assurance relating to the efficient and proper manufacturing of the
Product.
1.5 "Direct and Indirect Labor Personnel" means all production
workers and other labor directly or indirectly required to manufacture the
Product,
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<PAGE> 4
including without limitation assemblers, finishers, machine operators, material
handlers, inspectors, production clerks, and laborers.
1.6 "Facility" means that industrial facility in Mexico owned or
leased by the Company or its designee, at which the Manufacturing Operations
will from time to time take place.
1.7 "Intellectual Property Rights" shall mean and include all of the
following (whether or not registered in any jurisdiction) that relate to, are
embodied in or are associated with, the Products: (a) copyrights, mask works,
patents, trade secrets, logos, trademarks, trade names and service marks; (b)
all non-English language phonetic and/or visual approximations of logos,
trademarks, trade names, service marks and all substitutions for such
approximations; (c) all other proprietary rights recognized under applicable
law; and (d) all applications and registrations, and the right to file all
applications and registrations, for, or relating to, all of the foregoing.
1.8 "Management Fee" means that fee which the Company shall pay to
MIMI in respect of Management Services pursuant to Section 5.1 herein;
1.9 "The Management Fee Schedule" shall mean Schedule "A" to this
Agreement.
1.10 "Management Services" shall mean the services to be provided by
MIMI pursuant to this Agreement, as set out more fully in Section 2.2 herein.
1.11 "Manufacturing" and its variations shall mean and refer to
manufacturing, assembling, finishing, processing, reworking, and any other
industrial or manufacturing process.
1.12 "Manufacturing Operations" shall mean the manufacturing of the
Products at the Facility.
1.13 "Means of Production" means those raw materials, components,
subassemblies and parts, and machinery, equipment, tools, tooling, fixtures,
molds, dies, jigs, testing equipment and all necessary spare parts therefor, and
other items as may be furnished to the Company by related parties, whether under
gratuitous bailment or not, for use by the Company in conducting the
Manufacturing Operations.
1.14 "Personnel" means, collectively, the Direct and Indirect Labor
Personnel and the Supervisory and Technical Personnel employed by the Company to
work on the Manufacturing Operations.
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<PAGE> 5
1.15 "Phase-Out" means the process by which the Company may assume
responsibility for some or all of the responsibilities of MIMI hereunder on a
gradual or phased basis pursuant to the terms and conditions set forth in
Section 8 herein.
1.16 "Product" or "Products" means the synthetic gloves, swabs,
wipers and any other product which the Company desires to manufacture at the
Facility.
1.17 "Renewal Period(s)" means the one or more periods of one (1)
year each by which this Agreement may be extended beyond its original term
pursuant to Section 9 herein.
1.18 "Subsidiary" means an entity in which either the Company or
MIMI has at least a majority interest and control.
1.19 "Supervisory and Technical Personnel" means those personnel
sufficient to discharge supervisory or technical duties designated by the
Company, including without limitation one or more of the following: operations
manager(s); technical manager(s); office manager(s); accounting and payroll
clerk(s); and technical or other clerical and secretarial staff;
1.20 "Termination" means the expiration or termination of this
Agreement pursuant to Section 10 herein, whether by action of the parties or by
the expiration of the Agreement without renewal.
2. ENGAGEMENT OF MIMI.
2.1 ENGAGEMENT OF MIMI. The Company hereby engages MIMI to provide,
and MIMI accepts the engagement to provide, the Management Services as set forth
herein.
2.2 MANAGEMENT SERVICES. Under this Agreement, MIMI will provide all
management, human resources management, import/export, and financial and
administrative services (collectively, the "Management Services") necessary and
appropriate to support the Manufacturing Operations. The Management Services
shall include, without limitation, those services set out specifically herein
and on Schedule "B" hereto.
2.3 COMPLIANCE WITH APPLICABLE LAWS. It shall be MIMI's principal
obligation hereunder, and the primary purpose of the provision of the Management
Services, to ensure that the Company and the Manufacturing Operations are at all
times carried out and maintained in full compliance with all applicable laws of
Mexico, or, with regard to aspects of the Manufacturing Operations which are not
under the direct control of MIMI, to timely advise the Company in such a manner
as to permit the Company to
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<PAGE> 6
comply with such laws. MIMI shall indemnify the Company pursuant to the
provisions of Section 14 herein for any failure or omission on its part to
discharge its responsibilities under this Section 2.3. To that end, MIMI shall
stand in the position of a fiduciary to the Company, and shall at all times
carry out the Management Services with the highest degree of care and
professionalism.
2.4 USE OF SUBCONTRACTORS. With the prior written consent of the
Company, MIMI may engage, at its sole cost and expense, one or more
subcontractors, including any Affiliate of MIMI, to perform some of the
Management Services contemplated by this Agreement. MIMI shall at all times
remain responsible and liable for the discharge of the Management Services by
any such subcontractor in complete compliance with the terms of this Agreement.
MIMI shall not need the consent of the Company to consult with its lawyers or
accountants so long as such consultation is at MIMI's expense.
2.5 INDEPENDENT CONTRACTOR. The Company and MIMI hereby agree that,
in the performance of their respective obligations hereunder, they are and shall
be independent contractors. Nothing in this Agreement shall be construed to
constitute the Company as the agent of MIMI, or MIMI as the agent of the
Company, or the parties as partners or joint venturers, for any purpose
whatsoever, and neither the Company nor MIMI shall bind or attempt to bind the
other to any contract or the performance of any other obligation, or represent
to any third party that it has any right to enter into any binding obligation on
the other's behalf.
3. COMPANY'S DUTIES AND RESPONSIBILITIES.
3.1 RESPONSIBILITY FOR MANUFACTURING OPERATIONS. The Company shall
be responsible for carrying out the Manufacturing Operations at the Facility at
its cost and expense. At all times MIMI and/or its employees will be subject to
the ultimate authority of the Company and the resident or non-resident
management, supervisory, or other personnel to whom the Company has delegated
such authority with regard to the conduct of the Management Services.
3.2 FINES AND PENALTIES. Any and all fines and penalties levied by
any governmental, judicial or administrative body or agency upon the Company due
to any misinterpretation, negligence, error or omission by the Company shall be
paid by the Company; however, any and all such fines and penalties levied upon
the Company due to any misinterpretation, negligence, error or omission by MIMI
shall be paid by MIMI.
4. U.S. AND MEXICAN CUSTOMS.
4.1 IMPORTER AND EXPORTER OF RECORD. The Company shall be the
importer and exporter of record, in both the United States and Mexico. As such,
it shall
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<PAGE> 7
be responsible to the United States and Mexican Governments for the proper
importation and exportation of all materials, components, equipment, machinery,
and products, including the Product, required to be transported across the
United States-Mexico border for purposes of this Agreement.
4.2 CUSTOMS BROKER. The Company shall, with the assistance and
advice of MIMI, employ such Customs broker(s) to assist in such functions.
"Customs brokerage functions," in both the U.S. and Mexico, include but are not
limited to, completion and submission to the applicable Customs authority of the
official entry forms, follow-up with the Customs authority regarding those entry
forms, and representation of the importer during the Customs authority's routine
inspections of the importer's shipments. It is understood that MIMI is not
providing U.S. or Mexican Customs brokerage services to the Company. In the
event that the Company utilizes a U.S. and/or Mexican Customs broker, MIMI shall
provide the broker(s) with complete and accurate documents, information, and
such other assistance as the broker(s) may require. As provided in Section 2.2
and Schedule "B" of this Agreement, MIMI, on the Company's behalf, will prepare
and may deliver to the Company's United States and Mexican Customs broker(s) a
United States and Mexican Customs commercial invoices covering each of the
Company's shipments and shall otherwise interface with, provide all necessary
management of, and be in contact with the Company's broker(s). MIMI shall also
provide to such broker(s) complete and accurate documents, information, and such
other assistance as the broker(s) may require.
4.3 FEES. Except as is otherwise provided in this Agreement, the
cost of all applicable United States and Mexican Customs duties, bonds, and
brokerage fees shall be paid for by the Company.
4.4 INFORMATION TO BE SUPPLIED BY THE COMPANY. The Company shall
supply all information requested by MIMI or by the Company's U.S. or Mexican
Customs broker. In particular, the Company shall provide accurate information
regarding all of the "assists" which are used in the production of the Products.
"Assists" are defined in 19 C.F.R. Section 152.102 (1996).
4.5 PENALTIES. Any and all additional duties and/or penalties
assessed against the Company by any agency of the United States or Mexican
Government with respect to the importation or exportation of any item, if due to
the misinterpretation, negligence, error or omission by the Company, shall be
paid by the Company. On the other hand, any and all such additional duties
and/or penalties assessed against the Company, if due to the misinterpretation,
negligence, error or omission by MIMI, shall be paid by MIMI.
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<PAGE> 8
4.6 IMPORT/EXPORT SERVICES. As a part of the Management Services,
MIMI shall provide the United States and Mexican import/export services set
forth in Schedule "B" hereto.
5. COMPENSATION OF MIMI.
5.1 MANAGEMENT FEE. In consideration of the Management Services
furnished by MIMI hereunder, the Company agrees to pay to MIMI the "Management
Fee" The Management Fee will be determined on a weekly basis by multiplying the
number of hours actually paid during the week by the Direct and Indirect Labor
Personnel, including overtime hours actually paid, by the applicable Management
Fee Per Paid Labor Hour set forth in Schedule "A" ("the "Management Fee
Schedule") attached hereto. The Management Fee will be payable weekly, upon
invoice in accordance with Section 5.3 herein.
5.2 ANCILLARY SERVICES. The cost of any services or items which the
Company may reasonably request MIMI to provide, which are not otherwise within
the scope of the Management Services, shall be reimbursed to MIMI by the Company
at the reasonable cost thereof to be agreed upon in advance in writing by the
Company.
5.3 INVOICES. MIMI's invoices in respect of all amounts due from the
Company to MIMI hereunder, together with all documentation reasonably required
to verify the accuracy of such amounts, shall be submitted on a weekly basis to
the Company at the address set forth in Section 15.4 herein, or some other
address as may be designated by the Company in writing, with a copy to the
Company's administrative manager or representative at the Facility.
5.4 PAYMENT. All valid invoices shall be paid by the Company within
ten (10) calendar days of its receipt of the original invoice specified in
Section 5.3. All payments to MIMI will be made by check from Company's bank
account in United States currency to the offices of MIMI in Mexico.
6. BOOKS AND RECORDS.
6.1 OPERATOR'S OBLIGATION TO MAINTAIN BOOKS AND RECORDS. In
connection with the discharge of its duties and obligations under this
Agreement, MIMI shall maintain complete and accurate books, records and data
(the "Books and Records) relating to that part of the Manufacturing Operations
implicated by the functions listed on Schedule "C" for which MIMI is
responsible, the provision of the Management Services, and the basis for any
compensation claimed by MIMI pursuant to this Agreement. The Books and Records
shall at all times be in compliance with all applicable laws, including
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<PAGE> 9
the laws of Mexico, and shall all times be in accordance with generally accepted
accounting principles consistently applied.
6.2 OWNERSHIP OF THE BOOKS AND RECORDS. The Books and Records
maintained by MIMI pursuant to this Agreement shall at all times be and remain
the exclusive property of the Company and shall be considered part of the
Confidential Information. All such Books and Records shall be returned to the
Company upon the termination of this Agreement pursuant to Section 10.7 herein.
6.3 LOCATION OF BOOKS AND RECORDS. Except as may be authorized in
writing by the Company, to the extent the original Books and Records are not
maintained at the Facility, MIMI shall maintain at MIMI's office an accurate,
complete, and current copy of all such Books and Records.
6.4 COMPANY'S RIGHT TO INSPECT THE BOOKS AND RECORDS. The Company
shall have the right at all times, at its own expense and upon forty-eight (48)
hours notice, to inspect, audit, and copy all or any part of the Books and
Records during the time they are maintained by or under the control of MIMI. In
performing such inspections and audits, the Company shall be entitled to use its
external and/or internal auditors, in addition to any other representatives of
the Company. In the event that an inspection or audit discloses that any amounts
improperly included as a part of any compensation claimed by MIMI have been
demanded of, or collected from, the Company during the term of this Agreement,
MIMI shall correct the invoices and either credit the same against any fees owed
to MIMI by the Company or return such amounts to the Company within ten (10)
days of notice thereof by the Company to MIMI.
7. PROPRIETARY RIGHTS AND CONFIDENTIALITY.
7.1 INTELLECTUAL PROPERTY RIGHTS. MIMI shall not take any action
that might impair in any way any right, title or interest of the Company in or
to any of the Intellectual Property Rights.
7.2 USE OF TRADE NAMES AND MARKS. MIMI shall not use any logo, name,
trademark, trade name or service mark, including, without limitation, any
non-English language phonetic and/or visual approximation (or substitution) for
any such logo, name or mark (collectively, "Name or Mark") of the Company, any
Name or Mark licensed to the Company, or any Name or Mark confusingly similar to
any Name or Mark owned by, or licensed to, the Company, except in the
performance of Management Services pursuant to this Agreement, and as instructed
by the Company. MIMI expressly agrees not to challenge the ownership or validity
of any such Name or Mark.
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<PAGE> 10
7.3 USE AND OWNERSHIP OF CONFIDENTIAL INFORMATION AND INTELLECTUAL
PROPERTY RIGHTS. From time to time, the Company shall make available to MIMI, in
the Company's sole discretion, Intellectual Property Rights as well as
information and materials embodying and/or conveying certain Confidential
Information for the sole purpose of enabling MIMI to perform and provide the
Management Services hereunder, which information and materials may include
technical data with respect to the Products. The parties agree as follows with
regard to the Confidential Information and Intellectual Property Rights:
a. Without the prior written authorization of the Company, MIMI
shall not use or copy any of the Confidential Information or
Intellectual Property Rights for any purpose other than as
specifically authorized by this Agreement, and shall not
transfer or disclose any of the Confidential Information to
any person, firm or entity, except to MIMI's authorized
employees as required for the performance of the Management
Services in accordance with this Agreement.
b. MIMI agrees to regard and preserve as confidential and
proprietary all Confidential Information and Intellectual
Property Rights, and to take all steps necessary or
appropriate to protect the Confidential Information and
Intellectual Property Rights against unauthorized disclosure
or use, including, without limitation, causing each of its
employees with access to the Confidential Information or
Intellectual Property Rights to enter into a confidentiality
agreement in a form acceptable to the Company and prior to
being granted such access.
c. MIMI shall immediately notify the Company of any
unauthorized disclosure or use of any of the Confidential
Information or Intellectual Property Rights that comes to
MIMI's attention, and shall take all action that the Company
reasonably requests to prevent any further unauthorized use
or disclosure thereof.
d. MIMI expressly acknowledges and agrees that, except as
specifically provided in this Agreement, at no time shall it
acquire or retain, or appropriate for its own use, any
right, title or interest in or to any of the Confidential
Information or Intellectual Property Rights.
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<PAGE> 11
e. The obligations set forth in this Section 7.3 shall not
apply to the extent, but only to the extent, that any of the
Confidential Information or Intellectual Property Rights (i)
becomes generally available to the public through no fault
of MIMI; (ii) is or has been disclosed to MIMI, directly or
indirectly, by any person, firm or entity that is under no
obligation of nondisclosure to the Company or an Affiliate;
or (iii) is required to be disclosed under any applicable
law, rule, regulation or governmental order.
7.4 EQUITABLE RIGHTS. MIMI, its employees and its subsidiaries=
employees further agree that nothing contained herein shall limit, in any way,
any legal or equitable rights which the Company would have in the absence of
this Agreement concerning the confidential information described in this Section
7. The commitment in this Section 7 shall inure to the benefit of the Company's
assignees and successors, and shall bind all employees of MIMI and any and all
of MIMI's subsidiaries incorporated in Mexico or elsewhere.
7.5 CONFIDENTIALITY. Each party shall keep confidential and shall
not disclose, without the other's prior written consent, either the existence
of, or any specifics regarding, this Agreement or their negotiations for or
business relationship with each other. MIMI shall not use the name of Wilshire
International de Mexico, S.A. de. C.V., or any of its shareholders or corporate
parents, in any advertising, promotion, or publicity of any kind without the
express written consent of the Company, its shareholders or corporate parents.
8. PHASE-OUT.
8.1 PHASE-OUT OPTION. At any time after this Agreement has been in
effect for two years, and at its sole option, the Company may elect, upon ninety
(90) days written notice, to assume one or more of the functions listed on
Schedule "A" (when each such function is assumed, an "Assumed Function"), and
MIMI agrees to a concomitant reduction in the Management Fee and bill for each
remaining function service as set forth in Schedule "A". The period commencing
when the Company assumes responsibility for the first of the functions listed on
Schedule "A" and ending when this Agreement terminates shall be referred to as
the "Phase-Out Period". The Company may make repeated elections under this
Section 8.1 during the Phase-Out Period. MIMI will cooperate in the Company's
assumption of certain functions pursuant to this Section 8.1 and take no action
inconsistent with the Phase-Out.
8.2 REDUCTION IN MANAGEMENT FEE. For purposes of calculating the
reduction in the Management Fee during the Phase-Out Period, the parties agree
that each
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<PAGE> 12
of the functions listed on Schedule "A" shall represent the part of the total
Management Fee indicated under to that function. As the Company takes
responsibility for each of the Assumed Functions, the rates listed on the
Management Fee Schedule shall be reduced by the part corresponding to the
Assumed Function. To the extent the Management Fee Schedule is amended during
the term of this Agreement by agreement of the parties, the Management Fee Per
Labor Hour paid shall continue to be expressed in terms of all of the functions
listed on the Management Fee Schedule.
8.3 NO CHANGES IN EMPLOYMENT TERMS. As a part of its obligation to
facilitate the Phase-Out, (i) MIMI shall take no action to make or encourage any
material changes in the compensation terms or other employment benefits provided
to the Personnel, except as may be required under applicable laws or collective
bargaining agreements, or as instructed or agreed to in writing by the Company;
and (ii) MIMI shall use its best efforts to cause the Personnel to continue to
report for work at the Facility, such that the Manufacturing Operations will
continue uninterrupted during and for a reasonable period after the Phase-Out
Period.
8.4 NO RECRUITMENT OF COMPANY PERSONNEL. MIMI agrees not to recruit
or offer employment to any person employed by the Company or any Affiliate of
the Company. Likewise, the Company agrees not to recruit or offer employment to
any person employed by MIMI or any Affiliate of MIMI.
9. TERM. This Agreement shall be effective for a term of two years
from the date of the first invoice for the Management Fee, and shall be
automatically extended for additional periods of one (1) year each (the "Renewal
Periods"), until terminated in accordance with Section 10 hereof.
10. TERMINATION.
10.1 BREACH; CURE PERIOD. Either the Company or MIMI may terminate
this Agreement upon the material breach by the other party of its obligations
hereunder, if such breach shall continue uncured more than ten (10) days after
receipt of notice thereof given by the non-breaching party to the breaching
party.
10.2 UNILATERAL TERMINATION. At any time after the first year
during which this Agreement is in effect, the Company may at any time terminate
this Agreement, for any reason or no reason, upon one hundred and twenty (120)
days' notice to MIMI of the Company's desire and intention to do so.
10.3 TERMINATION FOR CAUSE. The Company shall have the right to
terminate this Agreement immediately upon the occurance of any of the following
events:
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<PAGE> 13
a. The commission by MIMI of any act of fraud or dishonesty
in connection with the affairs of the Facility or the
conduct of the manufacturing operations contemplated by
this Agreement;
b. The commission of any act by MIMI outside the scope of
MIMI's authority in connection with the Management
Services or the Manufacturing Operations and which is
detrimental to the conduct of the same;
c. The communication or use to the detriment of the Company
or for the benefit of any person, or the misuse in any
way, of any confidential information or trade secrets of
the Company, or the breach of or default under any of
MIMI's obligations under Section 7;
d. The filing of a voluntary or involuntary petition in
bankruptcy by MIMI or of which MIMI is the subject, or the
insolvency of MIMI, or the commencement of any proceedings
placing MIMI in receivership, or of any assignment by MIMI
for the benefit of creditors; and
e. The sale of the company's glove business and/or all or
substantially all of Wilshire Technologies, Inc.'s and/or
the Company's assets.
10.4 MUTUAL TERMINATION. This Agreement may be terminated at any
time by the mutual consent of the Company and MIMI, evidenced by an agreement in
writing signed by all parties.
10.5 TERMINATION OF COMPENSATION. The compensation provisions of
this Agreement shall terminate concurrently with the termination or expiration
of this Agreement. Within thirty (30) days after the termination or expiration
of this Agreement, the Company shall pay to MIMI or MIMI shall pay to the
Company, as the case may be, any other sums due to the other pursuant to the
terms of this Agreement, including without limitation any refunds called for
herein.
10.6 CONSEQUENCES OF TERMINATION. Upon termination of this
Agreement for any reason whatsoever, MIMI shall (i) immediately cease performing
all Management Services hereunder and use of all Confidential Information or
Intellectual Property made available to, or produced by, MIMI pursuant to the
terms of this Agreement; (ii) within thirty (30) days deliver to the Company all
copies of documents and other materials related to, embodying, or associated
with, any of the Confidential
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<PAGE> 14
Information or Intellectual Property made available to, or produced by, MIMI
pursuant to the terms of this Agreement; and (iii) within thirty (30) days
deliver to the Company all books, records, data, files, contracts, leases and
all other documents and any other written or recorded information with respect
to the Facility, the Management Services, and the Manufacturing Operations as
may be in MIMI's possession, custody or control.
10.7 OTHER POST-TERMINATION OBLIGATIONS. In the event of
termination of this Agreement for any reason, MIMI's obligations hereunder which
by their terms extend beyond such termination will continue as set forth until
discharged in full: (i) MIMI shall not make or encourage any material changes in
the compensation terms or other employment benefits provided to the Personnel
without the prior written consent of the Company, except as may be required
under applicable laws or collective bargaining agreements; (ii) MIMI shall use
its best efforts to cause the Personnel to continue to report to work such that
the Manufacturing Operations will continue uninterrupted through and for thirty
(30) days after the termination of this Agreement; and (iii) MIMI shall take no
actions inconsistent with the continuation in effect any and all licenses,
permits and approvals obtained or necessary in connection with the Manufacturing
Operations.
11. RESOLUTION OF DISPUTES. Any dispute, controversy or claim arising
out of or relating to this Agreement, or to the performance, breach or
termination thereof, shall be resolved, to the exclusion of a court of law or
equity, by mandatory, binding arbitration. The arbitration shall take place in
San Diego, California at the offices of the American Arbitration Association
(the "AAA"), pursuant to the International Commercial Rules of the AAA (the
"Rules"). Such dispute, controversy or claim shall be resolved by the majority
decision of three arbitrators of whom one shall be nominated by the claimant,
one nominated by the respondent and a third nominated by the two party appointed
arbitrators, unless the claimant and respondent agree in any given dispute to
have such dispute settled by a single arbitrator acceptable to both the claimant
and the respondent. If a party fails to nominate its arbitrator to the three
arbitrator panel within thirty (30) calendar days after the other party has
appointed its arbitrator and served written notice of such appointment on the
other party or, if within thirty (30) calendar days after both party-appointed
arbitrators are appointed the two party- appointed arbitrators have not agreed
upon the appointment of a third arbitrator, then the missing arbitrator shall be
appointed by the AAA in accordance with the Rules. The arbitration shall be
conducted in English. The decision of the arbitrators, or of the single
arbitrator, as the case may be, shall be final and binding on the parties.
11.1 The parties expressly agree that prior to the selection of the
arbitral panel, nothing in this Agreement shall prevent the parties from
applying to a court that would otherwise have jurisdiction for provisional or
interim measures. After the arbitral panel is selected, it shall have sole
jurisdiction to hear such applications, except that the
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<PAGE> 15
parties agree that any measure ordered by the arbitrator may be immediately and
specifically enforced by a court otherwise having jurisdiction over the parties.
11.2 In any arbitration proceeding hereunder, each party shall bear
the expenses of its witnesses. All other costs of arbitration, including,
without limitation, the fees and expenses of the arbitrators, the cost of the
record or transcripts thereof, if any, and all other fees and costs shall be
allocated to the parties to the arbitration as determined by the arbitral panel.
12. NON-COMPETITION. During the term of this Agreement and for two (2)
years thereafter, MIMI shall not (i) divert or attempt to divert, directly or
indirectly, any business of the Company or any present or future customers or
suppliers of such business to any other person, entity or competitor, or induce
or attempt to induce, directly or indirectly, any person to leave his or her
employment with the Company or any of the Company's corporate shareholders or
parents; or (ii) provide services substantially similar to the Management
Services to any person or company in competition with the Company.
13. NOTICE OF CLAIMS. Each of the Company and MIMI shall give the other
prompt notice of all claims or other proceedings made or instituted against any
of them arising out of the operation of the Facility or out of the Management
Services provided hereunder. MIMI and the Company agree to cooperate fully with
each other and with any insurance carrier to cause all of such claims to be
properly investigated, defended, and resolved.
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<PAGE> 16
14. INDEMNIFICATION. Each party (the "Indemnifying Party") will
indemnify the other (the "Indemnified Party") from awarded damages, settlements,
costs, legal fees and other out-of-pocket expenses incurred in connection with
any claim, action, or proceeding against the Indemnified Party based on any
action or omission of the Indemnifying Party or its agents or employees related
to or arising out of the obligations of the Indemnifying Party under this
Agreement, including any breach by the Indemnifying Party of any of its
obligations under this Agreement (a "Claim"), provided, however, that (i) the
Indemnifying Party shall not be required to indemnify the Indemnified Party to
the extent that the Claim is found to be based upon the willful action or
inaction of the Indemnified Party, or if the Indemnified Party fails to give the
Indemnifying Party prompt notice of any Claim it receives and such failure
materially prejudices the Indemnifying Party; (ii) the Indemnifying Party shall
have no obligation to indemnify the other for the cost of its legal fees and
disbursements of counsel unless the Indemnifying Party has been given the
opportunity to control the defense of the Claim; (iii) the Indemnifying Party
shall have no obligation to indemnify the Indemnified Party for the cost of
settling any Claim unless the Indemnifying Party is given the opportunity to
approve any such settlement, which approval will not be unreasonably withheld;
and (iv) except in the event of a material conflict of interest, the
Indemnifying Party will not be liable for attorney's fees of the Indemnified
Party after assuming control of the defense or settlement of any Claim.
15. MISCELLANEOUS.
15.1 COMPLIANCE WITH MATERIAL CONTRACTS AND APPLICABLE LAWS. MIMI
shall comply with all of the terms, conditions and obligations of any material
contract to which it is a party and which shall relate to the Management
Services or the Manufacturing Operations. To the extent necessary to perform its
obligations hereunder, each party shall at all times and at its own expense (i)
strictly comply with all applicable laws, rules, regulations and governmental
orders, now or hereafter in effect, relating to its performance of this
Agreement; (ii) pay all fees and other charges required by such laws, rules,
regulations and orders; and (iii) maintain in full force and effect all
licenses, permits, authorizations, registrations and qualifications from all
applicable governmental departments and agencies.
15.2 CERTAIN PAYMENTS. In the performance of its obligations
hereunder, MIMI shall comply strictly with all applicable laws, regulations and
orders of the United States and Mexico. Without limiting the generality of this
Section, MIMI hereby acknowledges and agrees that certain laws of the United
States, including the Foreign Corrupt Practices Act, 15 U.S.C. sections 78dd-1,
et seq., prohibit any person subject to the jurisdiction of the United States
from making any payment of money or anything of value, directly or indirectly,
to any foreign government official, foreign political party or candidate for
foreign political office for the purpose of obtaining or
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<PAGE> 17
retaining business. MIMI hereby represents and warrants that, in the performance
of its duties hereunder, it has not made, and will not make, any such proscribed
payment. MIMI shall indemnify and hold harmless the Company from and against any
and all claims, losses and liabilities attributable to any breach by MIMI of its
obligations under this Section 15.2.
15.3 ATTORNEYS' FEES. If either the Company or MIMI shall be
required to employ the services of any attorney to enforce the terms of this
Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and charges, in addition to all other litigation costs and
expenses.
15.4 NOTICES. All notices required or permitted by or made pursuant
to this Agreement shall be in writing and shall be sent by facsimile or by
registered, first-class airmail, return receipt requested and postage prepaid,
to the following address:
If to the Company: Wilshire International de Mexico, S.A. de C.V.
San Antonio del Mar 20301 A
Tijuana, B.C., Mexico
With copies to: Wilshire Technologies, Inc.
5861 Edison Place
Carlsbad, CA 92008
Facsimile: 760-929-0683
Attention: Mr. James W. Klingler
And: Baker & McKenzie
Blvd. Agua Caliente 10611-1er Piso
Tijuana, Baja California 22240
Facsimile: 01152-66-33-43-99
Attention: Jose M. Larroque
If to MIMI: Tecnicas Mexicanas de Ensamble, S.A. de C.V.
Manuel Marquez de Leon #950
Zona Del Rio
Tijuana, B.C. 22320"
With a copy to: Made in Mexico, Inc.
1250 Sixth Ave., Suite 1100
San Diego, CA 92101
Facsimile: 619-702-3455
Attention: Mr. Anthony Ramirez
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<PAGE> 18
Notice may be addressed to such other address as shall from time to time have
been designated by written notice by either party to the other party. All
notices shall be deemed to have been received as follows: (a) if by facsimile,
twenty-four (24) hours after transmission; and (b) if by registered, first-class
airmail, five (5) calendar days after dispatch.
15.5 ASSIGNMENT. The rights of the Company may, without the consent
of MIMI, be assigned by the Company to any parent, Subsidiary, Affiliate or
successor of the Company, its successors and assigns. The rights and obligations
of the Company under this Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Company. Except as provided in
this Section 15.5, neither party may assign or delegate all or any part of its
rights, duties or obligations hereunder without the prior written consent of the
other party. Any change of control of MIMI will be deemed to be an assignment
which requires the consent of the Company.
15.6 FORCE MAJEURE. Notwithstanding anything in this Agreement to
the contrary, neither party shall be liable to the other party for any failure
to perform, or delay in the performance of that party's obligations hereunder,
when such failure to perform or delay in performance is caused by an event of
force majeure; provided, however, that the party whose performance is prevented
or delayed by such event of force majeure shall give prompt notice thereof to
the other party. For purposes of this Section 15.6, the term "force majeure"
shall include war, rebellion, civil disturbance, earthquake, fire, flood,
strike, lockout, labor unrest, acts of governmental authorities, industry-wide
shortage of materials, acts of God, acts of the public enemy and, in general,
any other causes or conditions beyond the reasonable control of the parties. If
any event of force majeure continues for more than ninety (90) calendar days,
either party may terminate this Agreement upon notice to the other party.
15.7 CHOICE OF LAW AND CHOICE OF FORUM. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Baja California, Mexico. The parties hereby submit
themselves to the jurisdiction thereof for any purpose contemplated by this
Agreement.
15.8 NO WAIVER. The delay or failure of either party to seek
redress for a violation, or to insist upon the strict performance of any
covenant, agreement, provision or condition of this Agreement shall not
constitute a waiver thereof and the aggrieved party shall have all remedies
provided herein, at law or in equity, with respect to any subsequent act which
would have originally constituted a violation of this Agreement.
15.9 ENTIRE AGREEMENT. The terms and provisions contained herein
constitute the entire agreement between the Company and MIMI and shall supersede
all
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<PAGE> 19
previous communications and agreements, either oral or written, between the
parties thereto with respect to the subject matter hereof, and no agreement or
understanding changing, modifying, waiving, or altering any provision of this
Agreement shall be binding upon either party unless so stated in writing and
signed by a duly authorized officer or representative of all parties.
15.10 SEVERABILITY. In the event that one or more of the provisions
contained in this Agreement for any reason shall be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement.
15.11 FURTHER ASSURANCES. Each party hereto agrees to execute,
acknowledge and deliver such further instruments, and to do all such other acts,
as may be necessary or appropriate in order to carry out the purposes of this
Agreement.
15.12 DUE EXECUTION. MIMI represents and warrants to the Company,
and the Company represents and warrants to MIMI, that this Agreement is binding
upon it and is fully enforceable, and that the execution and delivery hereof is
fully authorized.
15.13 JOINT AND SEVERAL OBLIGOR. The Guarantor represents and
warrants to the company that the Guarantor is and will be joint and severally
responsible with MIMI for compliance with each and all of MIMI's obligations
under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in
Tijuana, Baja California, Mexico as of the date and year first set forth above.
WILSHIRE INTERNATIONAL DE MEXICO, S.A. DE C.V.
By /s/ James W. Klingler
-------------------------------------------
Its: Chief Financial Officer
TECNICAS MEXICANAS DE ENSAMBLE, S.A. DE C.V.
By /s/ John Sauerman
-------------------------------------------
Its:
MADE IN MEXICO, INC.
By: /s/ Antonio M. Ramirez
-------------------------------------------
Its: Executive Vice President
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<PAGE> 20
SCHEDULE "A"
MANAGEMENT FEE SCHEDULE
ADMINISTRATIVE FEE PER PAID
LABOR HOUR FOR ALL OR EACH FUNCTION
<TABLE>
<CAPTION>
No. of Weekly
Employees Hours Billed All Functions Admin H.R. I/E
- --------- ------------ ------------- ----- ---- ---
<S> <C> <C> <C> <C> <C>
15 - 26 720 - 1,199 $ .95 $ .35 $ .35 $ .35
25 - 50 1,200 - 2,400 $ .90 $ .33 $ .33 $ .33
51 - 75 2,448 - 3,647 $ .85 $ .31 $ .31 $ .31
76 - 100 3,648 - 4,847 $ .80 $ .29 $ .29 $ .29
101- 125 4,848 - 6,047 $ .75 $ .27 $ .27 $ .27
126- UP 6,048 - UP $ .70 $ .25 $ .25 $ .25
</TABLE>
Management Services included in rate are as follows:
I. ADMINISTRATIVE SUPPORT
A. COMPUTERIZE ACCOUNTING SERVICES
1. General accounting
2. Internal monthly financial statements
3. Bank reconciliation
4. Minor purchasing
5. Foreign currency exchange reporting (FASB 52)
6. Accounts payable: purchase order's, control and issue,
invoicing; vendor payments
7. Other: banking; weekly cash flow; weekly expense
reporting; budgets, etc.
B. MEXICAN TAXES
1. Federal and State income tax data accumulation (assist in
year end reporting)
2. Sales tax declarations and refunds
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<PAGE> 21
3. Social Security liquidations
4. Income taxes (monthly and annual)
5. Value Added Tax (IVA) declarations
6. Assist with Transfer Pricing Analysis
C. LICENSES AND PERMITS (Updates, renewals, etc.)
1 SECOFI Material and Equipment Import Permits
2. SEMARNAP and Department of Ecology permits (environmental
regulation compliance, hazardous wastes reporting, etc.)
3. Health Permits
4. Business licenses
5. Representation in Mexican and U.S. Maquila Associations
6. Registration: CANACINTRA, Health Dept., Foreign Investment
Registry, etc.
7. Banco de Mexico and SECOFI currency exchange reporting
D. PERFORMANCE MONITORING
1. Access to Government authorities at the Local, State &
Federal levels, as required
2. Provide perspective on Mexican political issues
3. Assure compliance to laws and local regulations
4. Assist with Management issues: cultural sensitivities,
economic & political history, etc.
5. Representations in local Associations
HUMAN RESOURCES MANAGEMENT
A. PAYROLL SERVICES
1. Computerized payroll processing (labor reports, etc.)
2. Money Handling (stuffing envelopes)
3. Physical Distribution
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<PAGE> 22
B. PERSONNEL PAYROLL MANAGEMENT
1. Local advertising/recruiting
2. Personnel selection, screening, testing, etc.
3. Hiring and firing as requested by WILSHIRE
4. Establish and maintain employee records and labor
contracts
5. Social Security registrations and salary integration
6. Computerized Social Security liquidations
7. Employees Federal registrations
8. Coordinate bonus programs and agreements
9. Membership in employer's associations
10. Internal work rules
11. Develop wage, benefits programs
12. Organize employee relations programs (picnics, Christmas
parties, etc.)
13. Mexico human resource interface (organizations
associations, etc.)
14. Labor legal advice: labor collectives, labor unrest, labor
administrations, etc.)
15. Labor board relations
16. FM-3 work permit
17. Mixed Safety Committee incorporation, registration and
function
18. Labor accidents report to I.M.S.S.
19. Monthly safety inspection and report registration to Labor
Board Department.
20. Mixed training programs and committee registration
COMPUTARIZED IMPORT AND EXPORT ASSISTANCE
A MEXICO CUSTOMS
1. Brokerage coordination
2. Import and export documentation
3. Mexican CUSTOMS (Aduana) permit registration
4. Freight coordination and truck status report
5. Import Permits, filings, etc.
6. Daily import coordination of raw materials, finished,
goods, machinery & equipment, etc.
7. Customs interface (rulings, etc.)
8. Maquila cycle tracking documentation and reporting
9. Continuous monitoring of Maquila permit status
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<PAGE> 23
10. Computarized documentation for invoices, packing list and
Pediments
11. Mexican Customs Import-Export semiannual report
12. Mexican vehicle registration
13. Agricultural permits
14. Intermaquila transfers
B. U.S. CUSTOMS
1. Brokerage coordination
2. Freight coordination and truck status report
3. Daily import coordination of raw material, finished
goods., machinery & equipment, etc.
4. Cost Submissions, as required by Import Specialists
5. Customs interface (ruling, etc.)
6. Periodic documentation updating of bill of materials
changes, certificates of origin, and assists
7. Computarized documentation for invoices and packing lists
8. Import and export documentation
9. NAFTA Qualification Analysis
C. SECOFI
1. SECOFI permit application
2. SECOFI permit renewal
3. SECOFI permit extensions
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<PAGE> 24
SCHEDULE "B"
MANAGEMENT SERVICES
1. FINANCIAL AND ADMINISTRATIVE SERVICES.
1.1 LICENSES, PERMITS AND APPROVALS. Unless otherwise directed by
the Company, MIMI shall administer all United States and Mexican governmental
matters pertaining to the operation of the Company, including obtaining or
maintaining, on behalf of the Company, all appropriate licenses, permits, and
approvals for the operation of the Company (the "Licenses, Permits and
Approvals"). The Licenses, Permits and Approvals shall include, without
limitation, any and all licenses, permits, and approvals necessary to operate
the Company under the maquiladora program established by the federal government
of Mexico, all licenses, permits and approvals necessary for the import and
export of the Products, the Means of Production and all other items required for
the Manufacturing Operations, and all required licenses, permits and approvals
from the Mexican Ministry of Commerce and Industrial Development ("SECOFI
Permits"), and the various Mexican Ministries protecting the environment
("Mexican environmental permits"). MIMI shall provide to the Company the
original of each of the Licenses, Permits and Approvals.
1.2 MEXICAN TAX FILINGS. Unless otherwise directed by the Company,
MIMI shall prepare and file all appropriate Mexican payroll taxes, value-added
taxes and all other Mexican taxes, other than corporate income tax, directly or
indirectly related to the Manufacturing Operations, and satisfy all other legal
and accounting requirements with respect to any and all financial reporting,
customs and tax matters directly or indirectly related to the same. Upon request
by the Company, MIMI will provide to the Company's accountants all data,
maintained by MIMI pursusant to the terms of this Agreement, which is necessary
to prepare and file any Mexican tax returns. The taxes referred to in this
subsection are to be paid by the Company. All penalties, fines, assessments,
interest and expenses levied by the United States or Mexican governments upon
MIMI or the Company in respect of any matters referred to in this subsection
shall be exclusively borne by MIMI, unless caused by the Company directly or
otherwise due to its negligence.
1.3 ADMINISTRATION OF PAYROLL. MIMI shall prepare the payroll for
the Personnel and pay the wages to the Personnel, in accordance with the wage
rates set by the Company. All overtime worked by the Personnel will be approved
in writing in advance by the Company.
1.4 REPORTS. MIMI shall provide, from its existing accounting and
payroll database programs, any and all management, production, labor costs,
shipping
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<PAGE> 25
costs, labor turnover and other reports, summaries, or analyses as may be
reasonably requested from time to time by the Company.
1.5 ASSISTANCE WITH BUDGETING. On an annual basis and within the
capabilities of its database programs, MIMI will provide assistance to the
Company in developing and establishing annual and other budgets for the
Manufacturing Operations, Management Services, and maintenance of the Facility.
1.6 IMPROVEMENTS, ETC. AT THE FACILITY. Upon written request of the
Company, and in conjunction with the Company's representative, MIMI shall
arrange for, coordinate, and supervise, all remodeling, upgrades, improvements
and/or construction at or to the Facility, in addition to all equipment
installations or removals at the Facility.
1.7 MISCELLANEOUS. MIMI shall provide general guidance, support and
consulting services for the start-up of production, lease of the Facility, and
any general business matters directly or indirectly related to the Manufacturing
Operations which are not specifically covered in this Agreement.
2. HUMAN RESOURCES (PERSONNEL) SERVICES.
2.1 PERSONNEL POLICIES, CATEGORIES, AND QUALIFICATIONS. The Company
shall specify in writing the personnel policies, categories and job
qualifications for the Personnel required to perform the Manufacturing
Operations, as well as the numbers of each type of Personnel required. MIMI
shall recommend to the Company the labor categories, job qualifications, and
numbers of Personnel it considers, on the basis of its experience and expertise,
to be necessary, cost-effective, and appropriate to carry out the Manufacturing
Operations.
2.2 WAGES AND EMPLOYEE FRINGE BENEFITS. MIMI shall recommend to the
Company the level of wages for each type of Personnel, together with such fringe
benefits required by Mexican law or otherwise (such as transportation for the
Personnel to and from the Facility, kitchen or cafeteria services at the
Facility, work clothes and child care, and the like) which MIMI believes would
be cost-effective and beneficial to the manufacturing of the Products under this
Agreement. In all cases the Company shall be responsible for setting the level
of wages and the type and extent of fringe benefits with regard to the
Personnel.
2.3 HIRING OF PERSONNEL. MIMI shall be responsible for locating,
recruiting, screening, and hiring the Personnel, on behalf of the Company and as
directed by the Company, in accordance with the personnel policies, categories,
and job qualifications, and in accordance with the numbers of Personnel
specified by the Company in writing. MIMI's responsibilities hereunder shall
include reasonable advertising, as approved by the Company and at the Company's
expense, necessary and
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<PAGE> 26
appropriate to locate suitable candidates for employment by the Company. The
Company shall have the right to screen all applicants for employment by MIMI
under this Agreement and shall approve all hiring decisions of MIMI in advance.
The Company shall have access to all information which forms the basis for and
recruiting or hiring decision by MIMI.
2.4 MEDICAL EXAMINATION. As a part of the employment screening
process, the Company or MIMI may require any and all applicants for employment
as Personnel to undergo a medical examination, including substance screening,
prior to hiring by MIMI, to the extent permitted under applicable law. The costs
of any medical examinations will be borne or reimbursed by the Company.
2.5 EVALUATION, DISCIPLINE AND TERMINATION OF PERSONNEL. With the
advice and consent of the Company, or upon the specific direction of the
Company, MIMI shall assist the Company with job performance evaluations,
discipline and termination of the Personnel. The Company's advance written
approval shall be required for the discipline or termination of any Personnel.
2.6 PERSONNEL RECORDS. In addition to the general obligations set
out in this Schedule "B" Section 2, MIMI shall maintain accurate records
identifying each of the Personnel, listing individual titles or job functions
and rates of compensation, dates of hire, and, if applicable, labor union
affiliations. MIMI shall also maintain accurate records of all employee benefits
(exclusive of wages or salaries) provided to each of the Personnel, including,
without limitation, any participation in bonuses or other incentive
arrangements, vacation and sick leave, health insurance coverage or
participation in medical plans, and severance or retirement benefits.
2.7 U.S. IMMIGRATION MATTERS. At the request of the Company, MIMI
will provide assistance with regard to obtaining visas or other authorizations
under United States immigration law as necessary to permit citizens of Mexico to
visit and remain at the Company's facilities in the United States for periods of
up to six (6) months for purposes of training in the operations contemplated
hereunder or in related aspects of the Company's business, the costs of which,
including attorneys' fees, to be reimbursed by the Company.
2.8 MEXICAN IMMIGRATION MATTERS. At the request of the Company, MIMI
will provide immigration services including, but not necessarily limited to,
obtaining all required technical permits to enable the Company's personnel to
work in Mexico. Such permits shall be obtained by MIMI and issued to the
Company's personnel at the Company's cost.
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<PAGE> 27
2.9 FULL-TIME HUMAN RESOURCES REPRESENTATIVE. When the number of
Personnel first exceeds fifty (50), MIMI will supply a qualified, full-time
Human Resources Representative at the Facility to discharge, in whole or in
part, the Human Resources (Personnel) Services specified herein.
3. IMPORT/EXPORT SERVICES.
3.1 CUSTOMS BROKER(S). MIMI shall assist the Company, at its
request, in identifying and engaging Customs broker(s) for the purposes set out
in Section 4.2 of this Agreement.
3.2 SHIPPING AND TRANSPORTATION. MIMI, from time to time upon
request by the Company, shall obtain competitive bids for all shipping and
transportation services required to transport the Products, and all necessary
related materials, component parts, supplies, and equipment, between points in
the United States designated by the Company and the Facility in Tijuana, Baja
California, Mexico.
3.3 INSURANCE If directed in writing by the Company, MIMI shall
arrange for normal commercial Mexican insurance to cover the transportation of
the Product from the Facility to the Company's distribution facility in San
Diego, California or such other location or locations as may be designated by
the Company. The insurance will be placed through a Mexican insurance company or
insurance broker designated in writing by the Company. The cost of this
insurance shall be paid for by the Company.
3.4 PREPARATION OF COMMERCIAL INVOICES. MIMI shall prepare accurate
United States and Mexican commercial invoices for each southbound and northbound
shipment of goods and transmit these invoices to the Company's United States and
Mexican Customs brokers for preparation of the United States and Mexican Customs
clearance documents. MIMI shall not claim any preferential duty status for the
Company's Products or components on any U.S. and/or Mexican commercial invoice,
unless MIMI has in its possession all of the information necessary to support
that claim. For example, such supporting information might consist of
Certificates of U.S. Origin or North American Free Trade Agreement ("NAFTA")
Certificates of Origin. If the Company has chosen to perform its own U.S. or
Mexican Customs brokerage functions, MIMI shall transmit the United States and
Mexican commercial invoices to the Company.
3.5 REVIEW OF COSTED BILLS OF MATERIAL. In conjunction with
preparation of the semi-annual U.S. Customs cost submission report ("CF 247"),
and in any case at least once every six months, MIMI shall review with Company
personnel a costed bill of material for each Product. During this review, MIMI
shall inform the Company as to which components shall be considered to be
dutiable and which
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<PAGE> 28
components shall be considered to be non-dutiable, on the CF 247 being prepared
and the United States and Mexican commercial invoices to be prepared by MIMI on
the Company's behalf.
3.6 CONSULTATION REGARDING PREFERENTIAL DUTY PROGRAMS. MIMI shall
meet with Company personnel at the commencement of this Agreement, and at the
Company's written request thereafter, and advise the Company regarding the
qualification of the Company's Products and components for any applicable
preferential duty programs. Such programs include, for example, the North
American Free Trade Agreement ("NAFTA") and the U.S. Assembly Program provided
in subheading 9802.00.80 of the Harmonized Tariff Schedule of the United States
("HTSUS").
3.7 PREPARATION OF NAFTA CERTIFICATES OF ORIGIN. Should any one of
the Company's Products or components be entitled to favorable duty treatment
under NAFTA, and should the company choose to make a NAFTA claim with respect to
that Product or component, MIMI shall prepare the necessary NAFTA Certificate of
Origin for the Company's signature. MIMI shall also provide the Company with the
original of each such NAFTA Certificate of Origin and shall maintain a copy of
each such NAFTA Certificate of Origin at its U.S. offices.
3.8 PREPARATION OF CFS 247. If the Company is required to file CFs
247 with U.S. Customs, MIMI shall prepare these reports on behalf of the
Company. The Company shall provide all information and assistance required by
MIMI in its preparation of the CFs 247.
3.9 ASSISTANCE IN CONNECTION WITH COMPLIANCE ASSESSMENTS AND AUDITS.
Should either the United States Government or the Mexican Government conduct a
compliance assessment or audit of the Company's import or export transactions,
MIMI shall provide any documentation or assistance required by the Company in
such a proceeding.
3.10 PREPARATION OF REPORTE DE EMPRESAS MAQUILADORAS DE EXPORTACION
OR SIMILAR REPORT. On the Company's behalf, MIMI shall prepare and file on a
timely basis the Reporte de Empresas Maquiladoras de Exportacion, as well as any
other report adopted by the Mexican Government regarding the Company's
import/export activities.
3.11 TRACKING OF SECOFI PERMIT BALANCES AND QUANTITIES ON PEDIMENTOS
DE IMPORTACION AND PEDIMENTOS DE EXPORTACION. On the Company's behalf, MIMI
shall track the balance remaining for each category of raw materials listed on
all of the Company's SECOFI Permits. On the Company's behalf, MIMI shall also
cancel the quantities of raw materials shown on each pedimento de importacion
filed with the
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<PAGE> 29
Mexican Government on the Company's behalf by the quantities of raw materials
contained in the finished products shown on each pedimento de exportacion filed
with the Mexican Government on the Company's behalf. The purpose of these two
tracking requirements is to ensure that the Company does not import a greater
quantity of any raw material than SECOFI has permitted the Company to import and
that the raw materials which the Company has imported into Mexico do not remain
in Mexico longer than they are permitted to remain there. In addition, at least
once every six months, MIMI shall produce up-to-date reports for the Company's
review which document MIMI's compliance with these two tracking requirements.
3.12 TRACKING OF MEXICAN ENVIRONMENTAL PERMITS. On the Company's
behalf, MIMI shall also track all of the Company's imports and exports in
connection with the Company's Mexican environmental permits. The purpose of this
tracking requirement is to ensure that the Company does not import any material
which is controlled by the Mexican Government unless the Company has been
authorized to do so and that any such controlled material which the Company has
been authorized to import is exported or otherwise properly disposed of in
accordance with Mexican law. In addition, at least once every six months, MIMI
shall produce for the Company's review a report which documents MIMI's
compliance with this tracking requirement.
3.13 MAINTENANCE OF DATA BASES. MIMI shall maintain data bases of
(I) all of the United States and Mexican commercial invoices which it has
prepared on the Company's behalf; (ii) its tracking of the balance remaining for
each category of raw materials stated on each of the Company's SECOFI Permits;
(iii) its cancellation of the quantities of raw materials shown on the
pedimentos de importacion filed with the Mexican Government on the Company's
behalf by the quantities of raw materials contained in the finished products
shown on the pedimentos de exportacion which have been filed with the Mexican
Government on the Company's behalf; and (iv) its tracking of the Company's
imports and exports against each of the Company's Mexican environmental permits.
Furthermore, at least once every week, MIMI shall back-up these data bases.
3.14 DELIVERY OF IMPORT/EXPORT DOCUMENTS TO THE COMPANY. At the
conclusion of each month, MIMI shall provide the Company with hard copies of all
of the United States and Mexican commercial invoices which it has prepared on
the Company's behalf during that month. In addition, each time that MIMI
prepares a CF 247 or a Reporte de Empresas Maquiladoras de Exportacion (or any
similar report adopted by the Mexican Government) on the Company's behalf, MIMI
shall provide the Company with a hard copy of the report.
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<PAGE> 30
3.15 RETENTION OF IMPORT/EXPORT RECORDS. During the duration of this
Agreement, MIMI shall maintain a copy of each document discussed in this
Schedule B, Section 3, as well as any document relating to the Company's imports
or exports, for a period of (i) not less than seven (7) years from the date that
the document was prepared by MIMI, in the case of those documents prepared by
MIMI; or (ii) not less than seven (7) years from the date that the document was
provided to MIMI by the Company or by any other entity or person, in the case of
those documents provided to MIMI. As stated below, at the termination of this
Agreement or the transference of the import/export functions from MIMI to the
Company, MIMI shall deliver to the Company all import/export documents which
relate to the Company in any way, and MIMI shall have no further obligation with
respect to the retention of such documents.
3.16 PROVISION OF DOCUMENTS AND DATA BASES TO THE COMPANY UPON
TERMINATION OF THE AGREEMENT OR TRANSFERENCE OF THE IMPORT/EXPORT FUNCTIONS.
Within thirty (30) days of the date of a notice from the Company that the
Company intends to terminate this Agreement or take over the import/export
functions listed in this Schedule B, Section 3, MIMI shall deliver to the
Company the original of any and all documents which are in MIMI's possession and
which relate to the Company's import or export functions. If an original of a
particular document, such as a commercial invoice which has been submitted to
the United States or Mexican Government, is unavailable, MIMI can provide the
Company with a copy of the document. These documents shall include, without
limitation, the United States and Mexican commercial invoices which were
prepared by MIMI on the Company's behalf, all costed bills of material for the
Company's Products, all SECOFI Permits and Mexican environmental permits
obtained by MIMI on the Company's behalf, all Reportes de Empresas Maquiladoras
de Exportacion and/or similar reports filed by MIMI on the Company's behalf, all
CFs 247 prepared by MIMI on the Company's behalf, all NAFTA Certificates of
Origin maintained by MIMI on the Company's behalf, all Certificates of U.S.
Origin provided to MIMI by the Company, and up-to-date, hard copy reports of (I)
MIMI's tracking of the balance remaining for each category of raw materials
listed on each of the Company's SECOFI Permits; (ii) MIMI's cancellation of the
quantities of raw materials shown on the pedimentos de importacion filed with
the Mexican Government on the Company's behalf by the quantities of raw
materials contained in the finished products shown on the pedimentos de
exportacion filed with the Mexican Government on the Company's behalf; and (iii)
MIMI's tracking of the Company's imports and exports against each of the
Company's Mexican environmental permits. At the same time, MIMI shall deliver to
the Company copies of all of the electronic data bases which this Agreement
requires MIMI to maintain with respect to the Company's import/export functions.
3.17 FULL-TIME IMPORT/EXPORT REPRESENTATIVE. When the number of
shipments of Product from the Facility first exceeds six (6) truckloads per
week,
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<PAGE> 31
averaged over the preceding sixty (60) days, MIMI will supply a qualified,
full-time Import/Export Representative at the Facility to discharge, in whole or
in part, the Import/Export Services specified herein.
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<PAGE> 1
EXHIBIT 10.110
ASSEMBLY (MAQUILA) AGREEMENT
between
WILSHIRE TECHNOLOGIES, INC.
as "COMPANY"
and
WILSHIRE INTERNATIONAL DE MEXICO, S.A. DE C.V.
as "CONTRACTOR"
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C> <C>
Witnesseth......................................................1.
I Appointment.....................................................1.
II Delivery of materials...........................................1.
III Information.....................................................2.
IV Production estimates............................................2.
V Consideration...................................................2.
VI Accounting records..............................................3.
VII Company's inspections and visits................................3.
VIII Ownership of Materials and Fixed Assets.........................4.
IX Insurance.......................................................4.
X Sales in Mexico.................................................4.
XI Samples.........................................................5.
XII Confidentiality.................................................5.
XIII Compliance of laws and regulations..............................5.
XIV Independent Contractors.........................................5.
XV Term............................................................6.
XVI Jurisdiction....................................................6.
XVII Language........................................................6.
XVIII Notices.........................................................6.
XIV Previous agreements.............................................7.
EXHIBIT
A Employee certification
</TABLE>
ii
<PAGE> 3
THIS ASSEMBLY (MAQUILA) AGREEMENT IS ENTERED INTO BY AND BETWEEN WILSHIRE
TECHNOLOGIES, INC. ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF
CALIFORNIA, UNITED STATES OF AMERICA (HEREINAFTER REFERRED TO AS THE "COMPANY"),
AND BY WILSHIRE INTERNATIONAL DE MEXICO, S.A. DE C.V., A MEXICAN CORPORATION
(HEREINAFTER REFERRED TO AS THE "CONTRACTOR") PURSUANT TO THE FOLLOWING RECITALS
AND CLAUSES:
WITNESSTH
WHEREAS, COMPANY is the owner of certain technical know-how, processes,
knowledge, trade names and trademarks concerning parts, materials and equipment
in connection with the manufacturing of certain products used in industrial
clean rooms.
WHEREAS, the COMPANY desires to contract the assembly and/or manufacture in
Mexico of various products.
WHEREAS, the CONTRACTOR has adequate industrial facilities in Tijuana, Baja
California, Mexico, to assemble and/or manufacture such products and is willing
to assemble and/or manufacture those products for the COMPANY under the terms
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and mutual promises, covenants
and agreements hereinafter set forth, the COMPANY and the CONTRACTOR agree as
follows:
CLAUSES
FIRST.- APPOINTMENT. The COMPANY appoints the CONTRACTOR as its contract
manufacturer in Mexico for the purpose of assembling and/or manufacturing for
the COMPANY of various products used in industrial clean rooms, and assemblies
and subassemblies therefor, and such other products as may be agreed to upon by
the parties from time to time (hereinafter referred to as the "PRODUCTS"). The
CONTRACTOR accepts such appointment.
SECOND.- DELIVERY OF MATERIALS. The COMPANY shall deliver to the CONTRACTOR, on
a periodic basis, on consignment, such raw materials, components, subassemblies
and supplies as are necessary for the assembly and/or manufacture of the
Products. If appropriate, the parties shall agree in
<PAGE> 4
writing on any local components that should be incorporated into the assembly
and/or manufacturing process.
The CONTRACTOR shall carry out the assembly and/or manufacture of the Products
at its facilities in Tijuana, Baja California, Mexico, utilizing raw materials,
components, subassemblies and parts ("MATERIALS") machinery, equipment, tooling,
fixtures, molds, dies, jigs, testing equipment ("FIXED Assets") furnished by the
COMPANY under gratuitous bailment, as well as those assets now or hereafter
owned or possessed by the CONTRACTOR, if any.
For these purposes, the COMPANY will deliver to the CONTRACTOR, all the
necessary Materials and Fixed Assets as may be required.
THIRD.- INFORMATION. The COMPANY shall make available to the CONTRACTOR the
knowledge, technical and practical experience and all other know-how
("INFORMATION") as well as the technical assistance services necessary to enable
the CONTRACTOR to perform hereunder. The CONTRACTOR guarantees that the assembly
and/or manufacture of the Products shall be carried out in strict compliance
with the Information and the quality guidelines of the COMPANY.
FOURTH.- PRODUCTION ESTIMATES. From time to time, the COMPANY shall notify the
CONTRACTOR of the expected production schedule of the Products for the next
calendar semester and shall inform the CONTRACTOR the Materials and Fixed Assets
required therefor, to enable the CONTRACTOR to secure from the Federal
Government of Mexico the permits and licenses necessary to import into Mexico
such Materials and Fixed Assets. It shall be the exclusive responsibility of the
CONTRACTOR to secure all necessary import permits and licenses in a timely
fashion to allow for shipment by the COMPANY of the Materials and Fixed Assets
for importation thereof, for assembly and/or manufacture by the CONTRACTOR and
for shipment by the CONTRACTOR of the finished Products on schedule. The
COMPANY, in turn, shall be liable for timely shipment of all such Materials the
CONTRACTOR.
The COMPANY's requirements for assembled and/or manufactured Products are
estimated to range from zero (0) to one million (1,000,000) units per month. The
CONTRACTOR shall fill all orders within the above range not later than thirty
days after receipt thereof. Should the COMPANY's actual requirements for one or
more months exceed these estimates, and should the CONTRACTOR be unable to meet
the excess requirements, it shall so notify the COMPANY within the five days
next following receipt of the COMPANY's order for Products. Failure to serve
such notice in time shall be deemed as an acceptance of the order by the
CONTRACTOR.
FIFTH.- CONSIDERATION. The COMPANY agrees to pay the CONTRACTOR a sum equal to
the total normal and necessary cost and expenses incurred by the CONTRACTOR, for
the work hereunder, in assembling and/or manufacturing for the COMPANY the
Products in its industrial plant located in San
<PAGE> 5
Antonio del Mar 20301 A, Parque Industrial Valle Del Sur II, Tijuana, Baja
California, Mexico, including, but not limited to, the cost of direct and
indirect labor, fringe benefits, rent, utilities, purchase local components,
insurance and others.
In addition to the foregoing, the COMPANY shall pay to the CONTRACTOR, for the
work to be done hereunder, an assembly/manufacturing fee of two percent (2%)
calculated on the above amount of expenses and costs. The parties may from time
to time modify such assembly/manufacturing fee and its base for calculation.
The CONTRACTOR shall invoice the COMPANY the amounts determined under the
preceding paragraphs, on a monthly basis. All invoices must be prepared in
accordance with the provisions established by the Mexican tax laws and
regulations. In particular, the invoices must include Mexican value added tax,
if any, payable by the COMPANY. The invoices must be prepared in U.S. Dollars,
converting the corresponding amount of Mexican currency at the rate of exchange
published in the Federal Official Gazette each Monday following the week during
which the assembly/manufacture being invoiced was performed.
The COMPANY agrees to pay the CONTRACTOR each invoice within thirty (30) days
from the date of receipt. If any portion of the invoice is disputed by the
COMPANY, the COMPANY agrees that it will pay the undisputed portion of the
invoice within the above thirty (30) day period.
Unless otherwise instructed in writing by the CONTRACTOR, the COMPANY agrees to
make all payments directly to CONTRACTOR's bank account indicated by the
CONTRACTOR in writing, with instructions from the COMPANY to the bank to credit
the corresponding amount to the CONTRACTOR's account.
SIXTH.- ACCOUNTING RECORDS. The CONTRACTOR will maintain accurate and complete
records of all normal and necessary costs and expenses incurred by the
CONTRACTOR in assembling and/or manufacturing the Products which are payable by
the COMPANY under the Agreement. Such records will be maintained in accordance
with recognized commercial accounting practices so they may be readily audited.
The CONTRACTOR will permit the COMPANY to examine and audit these records and
all supporting records at all reasonable times. The CONTRACTOR will retain all
such records for a period of not less than one calendar year after the
completion of this Agreement.
SEVENTH.- COMPANY'S INSPECTIONS AND VISITS. The CONTRACTOR shall allow the
COMPANY's personnel access during business hours to the facility or facilities
in which the work contracted hereunder is being carried out, in order for the
COMPANY's personnel to provide the technical assistance indicated in Clause
Third and to ascertain compliance on the part of the CONTRACTOR with all of the
technical specifications and quality controls of the COMPANY in connection with
the assembly and/or manufacturing process, to assure that the Materials and
Fixed Assets provided to the CONTRACTOR by the COMPANY are utilized properly and
exclusively for the purposes stated herein.
<PAGE> 6
The CONTRACTOR will maintain accurate and complete records of all hours worked
by direct labor employees engaged in the Manufacturing for which payment under
this Agreement is to be computed on the basis of actual time clocked and all
other costs and charges of any kind payable by the COMPANY under the Agreement.
Such records will be maintained in accordance with the recognized commercial
accounting practices so they may be readily audited. CONTRACTOR will permit the
COMPANY to examine and audit these records and all supporting records at all
reasonable times. All payments, if any, made under this Agreement by the COMPANY
will be subject to final adjustments as determined by such audit(s). The
CONTRACTOR will retain all such records for a period of not less than one
calendar year after the completion of this Agreement.
The above assistance, inspection and auditing activities shall be carried out by
those employees or agents of the COMPANY, which the COMPANY may consider
appropriate. The individuals involved in carrying out such functions shall at
all times be employees or agents of the COMPANY. The CONTRACTOR assumes no
liability for the salaries and other benefits of such employees or agents, which
shall be covered by the COMPANY, and assumes no other liability with respect to
such employees or agents. Those employees or agents shall under no circumstances
be considered to be subordinated to the CONTRACTOR and they shall receive all
instructions and compensation directly from the COMPANY. Accordingly, no labor
relationship shall be deemed to exist between the CONTRACTOR and the COMPANY's
employees or agents for any purposes under Mexican law or under the laws of any
other jurisdiction. The COMPANY shall hold the CONTRACTOR harmless from any
salaries, other benefits or any other amounts it may be required to pay to such
personnel or to third parties as a result of a final court or labor board
decision, resulting from the activities of such employees or agents in Mexico.
In compliance with the foregoing provision, the COMPANY shall cause all its
employees and agents who may carry out the assistance, inspection and audit
functions referred to above, to execute an affidavit in the terms of the text
attached hereto as Exhibit A, certifying that no labor relationship exists
between them and the CONTRACTOR and that under no circumstances shall they
receive or execute instructions given to them by the CONTRACTOR or its
employees.
EIGHTH.- OWNERSHIP OF MATERIALS AND FIXED ASSETS. The CONTRACTOR shall under no
circumstances be considered to have any proprietary interest in the Materials or
in the Fixed Assets which the COMPANY may deliver to the CONTRACTOR for the
purposes indicated in Clause Second above, unless otherwise agreed by the
parties. Any commercial invoice which may be issued by the COMPANY in order to
comply with customs requirements for the importation or exportation of any items
provided by the COMPANY to the CONTRACTOR, shall not be considered for any
purposes to be evidence of conveyance of title of such items in favor of the
CONTRACTOR. Once the Products covered by this Agreement have been assembled
and/or manufactured by the CONTRACTOR they must be returned by the CONTRACTOR to
the COMPANY, at the latter's cost, to such places and destinations as the
COMPANY may indicate.
<PAGE> 7
NINTH.- INSURANCE. The COMPANY will obtain and maintain any and all insurance
that it deems necessary or appropriate for all Materials and Fixed Assets
furnished to the CONTRACTOR herein, from the time of delivery to the CONTRACTOR,
until same are returned to the COMPANY. Upon written request from the COMPANY,
the CONTRACTOR will acquire, through qualified brokers and at the COMPANY's
expense, Mexican insurance covering the COMPANY's above mentioned assets.
TENTH.- SALES IN MEXICO. In consideration for the CONTRACTOR's assembly and/or
manufacturing activities hereunder, the COMPANY may authorize the CONTRACTOR in
writing to sell finished Products in Mexico, for which purpose the COMPANY shall
sell to the CONTRACTOR the finished Products, at the then prevailing prices, for
resale by the CONTRACTOR. In the event of any such sales, the CONTRACTOR shall
secure proper approval from the competent Mexican authorities. The right granted
to the CONTRACTOR to sell Products in Mexico shall be without prejudice to the
right of the COMPANY to make direct sales of the Products in Mexico.
Other than as above provided, the CONTRACTOR may not, under any circumstances or
for any reason, sell or in any other manner dispose of, any of the Materials or
any of the Products which are the subject matter of this Agreement.
ELEVENTH.- SAMPLES. Any samples of the Products officially requested by an
agency or department of the Federal Government of the United Mexican States or
of the United States of America, may be delivered only upon written
authorization of the COMPANY, provided an official receipt is secured by the
requesting agency or department.
TWELFTH.- CONFIDENTIALITY. The CONTRACTOR will regard and preserve as
confidential all Information related to the COMPANY's business, revealed to or
learned by the CONTRACTOR from any source as a result of this Agreement. Except
to the extent absolutely necessary and essential to the process of training
employees for the assembly and/or manufacture of the Products, the CONTRACTOR
will not disclose nor disseminate, nor permit to be disclosed nor disseminated,
any customer list, pricing, methods, technical information, know-how, patents,
trademarks, processes, programs, practices, or other material or data conceived,
designed, created, developed, used, assembled or manufactured by the COMPANY.
The entire right, title, and interest, including copyright, in all original
works of authorship fixed and any tangible medium of expression heretofore or
hereafter created by the CONTRACTOR for the COMPANY or furnished to the COMPANY
hereunder is hereby transferred to and vested in the COMPANY. The parties
expressly agree to consider as work made for hire those works ordered or
commissioned by the COMPANY which qualify as such in accordance with applicable
copyright laws. For all such original works, the CONTRACTOR agrees to provide
documentation satisfactory to the COMPANY to assure the conveyance of all such
right, title, and interest, including copyright, to the COMPANY.
<PAGE> 8
THIRTEENTH.- COMPLIANCE OF LAWS AND REGULATIONS . The CONTRACTOR shall comply
with all existing laws and regulations in the United Mexican States in order to
avoid penalties or Government actions, so as to hold all Materials, Fixed Assets
or finished Products, which are owned by the COMPANY, free of any liens, claims
or charges by any agency or department of the Federal, State or Municipal
governments.
FOURTEENTH.- INDEPENDENT CONTRACTORS. This Agreement is entered into by
independent contractors on a principal-to-principal basis. The CONTRACTOR is an
independent contractor and consequently it is to carry out assembly and/or
manufacture of the Products and in general it is to perform this Agreement with
its own personnel and under its own direction and control. The CONTRACTOR shall
not be the agent, representative or attorney-in-fact of the COMPANY and
consequently it shall have no authority whatsoever to act in the name or on
behalf of the COMPANY or to bind the COMPANY in any way.
FIFTEENTH.- TERM. This Agreement shall continue in force until terminated by
either party. Either party may terminate this Agreement upon sixty (60) days
written notice to the other party.
The CONTRACTOR shall be entitled to no payment by reason of termination of this
Agreement.
Upon termination of this Agreement for whatever cause, the CONTRACTOR shall
immediately return to the COMPANY, at its domicile in the United States of
America or at such other place as the COMPANY may instruct, at the COMPANY's
cost, all Materials, Fixed Assets and Information furnished by the COMPANY, as
well as all Products in process and all finished Products. The CONTRACTOR
expressly waives any right of retention it may have over the aforesaid goods.
SIXTEENTH.- JURISDICTION. For the interpretation and fulfillment of this
agreement, the parties hereby expressly submit to the jurisdiction of the
competent courts in the City of Tijuana, State of Baja California, Mexico,
expressly waiving any other jurisdiction that might correspond to them by virtue
of their present or future domicile or for any other reason whatsoever.
SEVENTEENTH.- LANGUAGE The parties agree to execute this Agreement in English
and Spanish versions. In any event Spanish version shall prevail. .
<PAGE> 9
EIGHTEENTH.- NOTICES. All notices required to be sent to either party of this
Agreement shall be in writing and delivered personally to the address of the
other party as set forth below or to such other address as may be hereafter
designated in writing:
To COMPANY: WILSHIRE TECHNOLOGIES, INC.
5861 Edison Place
Carlsbad, CA 92008
USA
Attn.: Mr. James W. Klingler
To CONTRACTOR: WILSHIRE INTERNATIONAL DE MEXICO, S.A.
DE C.V.
San Antonio del Mar 20301 A
Parque Industrial Valle del Sur II
Tijuana, Baja California
Mexico
Attn.: Mr. Alan R. Seacord
NINETEENTH.- PREVIOUS AGREEMENTS. This Agreement substitutes any and all
agreements previously existing between the parties. This Agreement may only be
amended through a written agreement signed by a duly authorized representative
of each party.
IN WITNESS WHEREOF, the parties have executed this Agreement through their duly
authorized representatives in Carlsbad, California, United States of America, on
this 3rd day of February , 1998.
THE COMPANY THE CONTRACTOR
WILSHIRE TECHNOLOGIES, INC. WILSHIRE INTERNATIONAL DE MEXICO,
S.A. DE C.V.
By /s/ James W. Klingler By: /s/ Alan R. Seacord
------------------------------ ------------------------------
Name: Mr. James W. Klingler Name: Mr. Alan R. Seacord
Title: Chief Financial Officer. Title: General Manager
<PAGE> 10
EXHIBIT "A"
Wilshire Technologies, Inc.
5861 Edison Place
Carlsbad, CA
92008
Dear Sirs:
This will acknowledge that effective ___________, 199_, I have accepted an
assignment from Wilshire Technologies, Inc. ( THE "COMPANY") to carry out
services for installation, maintenance, and repair of machinery and equipment
and services under which no knowledge is transmitted or under which knowledge is
transmitted which is not secret, which may be obtained from the mere examination
of the product and mere knowledge of the progress of technique, or which are not
used in the industrial reproduction of a product or process, and therefore do
not constitute "Know How" such as supervision, inspection, control and/or audit
activities, related to the manufacturing and/or assembly services provided to
the Company by Wilshire International de Mexico, S.A. de C.V., at the latter's
facilities in Tijuana, Baja California, Mexico, for the time periods required
and in the functional areas, as will be determined by the Company. I understand
that the Company might also from time-to-time, enter into or amend Assembly
(Maquila) Agreements with its foreign subsidiaries or contractors and I fully
understand and accept the following provisions when providing services to the
Company at the facilities of its foreign subsidiaries or contractors under any
future Agreements:
1. Under no circumstances shall I ever be considered an employee of any
subsidiary or contractor with which the Company might conduct
business in a foreign country, and there shall not exist any
subordinate relationship between myself and such subsidiaries or
contractors and no foreign labor laws shall be applicable to any
services to the Company by the undersigned in any foreign country.
2. I am aware that any services which I might render for the Company in
any foreign country shall be on behalf of and for the benefit of the
Company, from which I shall receive orders and instructions
exclusively and from which I shall receive full compensation.
3. I understand that any orders and instructions that I might receive
regarding services rendered for the Company in a foreign country
must be issued by an officer or management employee of the Company.
In the event that I should receive instructions from persons who are
not employees of the Company, such instructions shall have to be
confirmed by an officer or management employee of the Company.
_____________________________________ Date: ____________________, 199_.
(Signature)
<PAGE> 11
The State of ________________)
County of ___________________)
BEFORE ME, the undersigned a Notary Public in and for said County and State on
this day personally appeared ___________________________________ known to me to
be the person whose name is that the foregoing instrument, and acknowledged to
me that he executed such instrument for the purpose and consideration therein
expressed.
GIVEN UNDER MY HAND AND SEAL OF THIS OFFICE, this ____ day of __________, 199_.
My commission expires: ____________________________________
Notary Public in and for __________,
County of ________________.
<PAGE> 12
Wilshire Technologies, Inc.
5861 Edison Place
Carlsbad, CA
92008
Dear Sirs:
I hereby acknowledge that effective , 19 I have accepted an assignment from
Wilshire Technologies,, Inc. (THE "COMPANY"), to carry out supervision,
inspection, control and/or audit activities related to the manufacturing and/or
assembly services provided to the Company by Wilshire International de Mexico,
S.A. de C.V., at the latter's facilities in Tijuana, Baja California, Mexico,
for the time periods required and in the functional areas, as will be determined
by the Company. I understand that the Company might also from time-to-time,
enter into Assembly (Maquila) Agreements with its foreign subsidiaries or
contractors and I fully understand and accept the following provisions when
providing services to the Company at the facilities of its foreign subsidiaries
or contractors under any future Agreements:
1. Under no circumstances shall I ever be considered an employee of any
subsidiary or contractor with which the Company might conduct
business in a foreign country, and there shall not exist any
subordinate relationship between myself and such subsidiaries or
contractors and no foreign labor laws shall be applicable to any
services provided to the Company by the undersigned in any foreign
country.
2. I am aware that any services which I might render for the Company in
any foreign country shall be on behalf of and for the benefit of the
Company, from which I shall receive orders and instructions
exclusively and from which I shall receive full compensation.
3. I understand that any orders and instructions that I might receive
regarding services rendered for the Company in a foreign country
must be issued by an officer or management employee of the Company.
In the event that I should receive instructions from persons who are
not employees of the Company, such instructions shall have to be
confirmed by an officer or management employee of the Company.
_____________________________________ Date: ____________________, 199_.
(Signature)
<PAGE> 13
The State of ________________)
County of ___________________)
BEFORE ME, the undersigned a Notary Public in and for said County and State on
this day personally appeared ___________________________________ known to me to
be the person whose name is that the foregoing instrument, and acknowledged to
me that he executed such instrument for the purpose and consideration therein
expressed.
GIVEN UNDER MY HAND AND SEAL OF THIS OFFICE, this ____ day of __________, 199_.
My commission expires: ____________________________________
Notary Public in and for __________,
County of ________________.
<PAGE> 14
EXHIBIT 10.110a
COMMODATUM AGREEMENT
between
WILSHIRE TECHNOLOGIES, INC.
as the "Bailor"
and
WILSHIRE INTERNATIONAL DE MEXICO,DE C.V.
as the "Bailee"
<PAGE> 15
INDEX
<TABLE>
<CAPTION>
CLAUSE PAGE
- ------ ----
<S> <C> <C>
Recitals.......................................................1.
I Purpose of the agreement.......................................1.
II Delivery of Equipment..........................................2.
III Maintenance Expenses...........................................2.
IV Location of Equipment..........................................2.
V No disposition or encumbrances.................................3.
VI Use of Equipment...............................................3.
VII Preservation of Equipment......................................3.
VIII Loss of Equipment..............................................3.
IX Insurance......................................................3.
X Return of Equipment............................................3.
XI Disclaimer of liability........................................4.
XII Inspection.....................................................4.
XIII Compliance with laws...........................................4.
XIV Expenses.......................................................4.
XV Recovery of Equipment..........................................4.
XVI Term...........................................................4.
XVII Jurisdiction...................................................4.
EXHIBIT
A List of Equipment
</TABLE>
<PAGE> 16
COMMODATUM AGREEMENT ENTERED INTO BY AND BETWEEN WILSHIRE TECHNOLOGIES, INC.,
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF CALIFORNIA, UNITED STATES
OF AMERICA (HEREINAFTER REFERRED TO AS THE "BAILOR" AND BY WILSHIRE
INTERNATIONAL DE MEXICO, S.A. DE C.V., A MEXICAN CORPORATION (HEREINAFTER
REFERRED TO AS THE "BAILEE"), PURSUANT TO THE FOLLOWING RECITALS AND CLAUSES:
RECITALS
A. That the Bailor and the Bailee, through their representatives, state
that they are parties to that certain Assembly (Maquila) Agreement dated
as of February 3, 1998, (the "MAQUILA AGREEMENT"), under which the
Bailee agreed to provide certain services with regard to products of the
Bailor.
B. The Bailor, through its representative, states that it is the owner of
the machinery and equipment object of this Agreement and that it wishes
to grant in commodatum to Bailee the machinery and equipment listed and
described in EXHIBIT "A" which is attached to this Agreement,
(hereinafter referred as the "EQUIPMENT").
C. The Bailee, through its representative, states that, in order to carry
out its obligations under the Maquila Agreement, it requires from the
Company the delivery in bailment (commodatum) the Equipment.
D. The Bailor states that for all legal purposes it has its domicile at
5861 Edison Place, Carlsbad, California, United States of America.
E. The Bailee states that for all legal purposes it has its domicile at San
Antonio del Mar 20301 A, Parque Industrial Valle del Sur, Tijuana, Baja
California, Mexico.
In consideration of the foregoing, the parties agree to the following:
CLAUSES
FIRST.- PURPOSE OF THE AGREEMENT. Bailor gratuitously grants to Bailee the use
of the Equipment referred to in Recital B. of this Agreement, for the exclusive
purpose stated in Recital C.. At all times, title and ownership of the Equipment
shall remain vested in Bailor.
<PAGE> 17
SECOND.- DELIVERY OF EQUIPMENT. Bailor shall deliver the Equipment to Bailee in
commodatum, at the times agreed to by the parties. The parties may from time to
time amend the list attached as Exhibit "A" so that it may include machinery
which may be delivered to Bailee in the future by Agreement of the parties. The
Equipment shall be complete with all their parts additions, accessories and
peripherals in operating condition.
Bailor will deliver the Equipment at R.L. Jones Customs Brokers, Calexico,
California, United States of America or such other customs broker as the Bailor
may designate, and the Bailee shall import the Equipment into Mexico under the
temporary importation regime under Bailee's Maquiladora Program. Any item added
to the Equipment delivered to the Bailee in the terms and conditions herein
established shall continue to be imported on a temporary basis and must be used
in the domicile located at San Antonio del Mar 20301 A, Parque Industrial Valle
del Sur II, Tijuana, Baja California, Mexico.
Bailee shall comply with all legal provisions applicable to the temporary
importation of the Equipment and shall provide all the administrative services
necessary to carry out the importation of the Equipment into Mexico. Bailee
shall appear as the importer of record of the Equipment in all the paperwork and
documents used for such importation into Mexico, however, it is expressly agreed
that Bailor is and shall continue to be the owner of the Equipment, thus the
commercial invoice to be utilized to import the Equipment into Mexico shall have
a provision stating the following:
"THIS COMMERCIAL INVOICE IS ISSUED EXCLUSIVELY FOR CUSTOMS PURPOSES
IN ORDER TO IMPORT INTO MEXICO THE GOODS COVERED BY SAME AND
THEREFORE DOES NOT TRANSFER THE OWNERSHIP OF THE GOODS. IN ADDITION,
THE ISSUER RESERVES ITSELF TITLE OVER SUCH GOODS."
Bailee shall keep in the domicile designated in Recital E. herein the permits,
licenses and official documentation pertaining to the importation into Mexico of
the Equipment.
Bailor shall assume the costs of all duties, fees, expenses and customs brokers=
fees, Mexican and American, incurred in importing, exporting and transporting
the Equipment in Mexico pursuant to the terms and conditions set forth herein.
THIRD.- MAINTENANCE EXPENSES. The necessary expenses for the use, maintenance,
repair and preservation of the Equipment hereby given in commodatum will be the
exclusive responsibility of Bailee.
FOURTH.- LOCATION OF EQUIPMENT. Bailee shall maintain the Equipment at its
current domicile and may not remove it from said location without the prior
written consent of Bailor.
<PAGE> 18
FIFTH.- NO DISPOSITION OR ENCUMBRANCES. Bailee shall not sell, assign its rights
hereunder or in any manner encumber, pledge or otherwise cause a lien on the
Equipment. Bailee further agrees to protect the Equipment from any and all third
party claims and for such purposes agrees and undertakes to file this Agreement
for registration with the Public Registry of Property and Commerce of Tijuana,
Baja California, Mexico, within thirty (30) days following its date of
execution.
SIXTH.- USE OF EQUIPMENT. Bailee promises to use the Equipment only and
exclusively for the purposes for which it was built, and will gear its
operations to the capabilities thereof.
SEVENTH.- PRESERVATION OF EQUIPMENT. Bailee covenants and agrees to diligently
preserve and maintain the Equipment in the state in which it is received.
EIGHTH.- LOSS OF EQUIPMENT. Bailee shall be liable towards Bailor for the total
or partial loss of the Equipment, as well as for the deterioration suffered
thereby, except for the deterioration deriving from its normal use, Bailee shall
also be liable in the event of loss of the Equipment when such is a result of
fortuitous cause or force majeure, and until the Equipment is returned to Bailor
pursuant to the terms of this Agreement.
NINTH.- INSURANCE. Bailee must contract with an authorized company, for extended
coverage insurance covering the Equipment for an amount not less than the
replacement value of the same, as indicated by Bailor, and must name Bailor as
the beneficiary of such insurance.
TENTH.- RETURN OF EQUIPMENT. Bailee shall cease using and immediately return the
Equipment to Bailor when Bailor so requests and at the place where Bailor so
requests, as no specific duration for the commodatum has been agreed upon
hereunder; and therefore, pursuant to Article 2385 of the Civil Code for the
State of Baja California, Bailor has the right to demand the return of the
Equipment at any time, in which case this Agreement will terminate.
ELEVENTH.- DISCLAIMER OF LIABILITY. Bailor does not assume any responsibility or
commitment towards Bailee, or towards any third party, with respect to their
personal property or to their persons, resulting from the possession or use of
the Equipment or from the lack of skill in using such Equipment, nor for any
other reason whatsoever. Bailee agrees to indemnify and hold Bailor harmless
with respect to any such responsibility, liability or commitment.
<PAGE> 19
TWELFTH.- INSPECTION. Bailor reserves unto itself the right to inspect the
Equipment at any time whatsoever, for the purpose of verifying the correct use
and operation thereof.
THIRTEENTH.- COMPLIANCE WITH LAWS. Bailee covenants, at its own cost, to comply
with all laws, regulations and other legal provisions applicable to the
Equipment and to notify Bailor immediately, in writing, of any claim, demand,
litigation, or any other lien, that might affect the Equipment.
FOURTEENTH.- EXPENSES. All expenses related to the use, operation, security
measures, maintenance and operation of the Equipment will be borne by Bailee.
FIFTEENTH.- RECOVERY OF EQUIPMENT. Bailor will have the right to recover the
Equipment at any time and Bailee covenants to return it upon request by Bailor
at the place where Bailor so requests. All expenses, including but not limited
to, Mexican customs fees, export duties, transportation, and any other type of
expense will be the exclusive responsibility of Bailee.
SIXTEENTH.- TERM. Unless earlier terminated pursuant to Clause Tenth hereof,
this Agreement will terminate immediately upon receipt by Bailee of written
notice from Bailor.
SEVENTEENTH.- JURISDICTION. For the interpretation and fulfillment of this
agreement, the parties hereby expressly submit to the jurisdiction of the
competent courts in the City of Tijuana, State of Baja California, Mexico,
expressly waiving any other jurisdiction that might correspond to them by virtue
of their present or future domicile or for any other reason whatsoever.
<PAGE> 20
This agreement is executed in triplicate, Carlsbad, California, United States of
America, on February 3, 1998.
BAILOR BAILEE
Whilshire Technologies, Inc. Wilshire International de Mexico,
S.A. de C.V.
By /s/ James W. Klingler By /s/ Alan R. Seacord
----------------------------- ------------------------------
Name: Mr. James W. Klingler Name: Alan R. Seacord
Title: Chief Financial Officer Title: General Manager
WITNESS WITNESS
- -------------------------------- ---------------------------------
/s/ Christine Murphy /s/ Christine Murphy
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
Name Jurisdiction of Incorporation Percentage Ownership
---- ----------------------------- --------------------
<S> <C> <C>
Wilshire International de Mexico 99.9%
Mexico, S.A. de C.V.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-KSB FOR THE YEAR ENDED NOVEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-KSB AND THE ACCOMPANYING NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<CASH> 137
<SECURITIES> 0
<RECEIVABLES> 340
<ALLOWANCES> 5
<INVENTORY> 1,037
<CURRENT-ASSETS> 1,969
<PP&E> 2,071
<DEPRECIATION> 778
<TOTAL-ASSETS> 3,907
<CURRENT-LIABILITIES> 5,077
<BONDS> 0
0
0
<COMMON> 25,907
<OTHER-SE> (27,077)
<TOTAL-LIABILITY-AND-EQUITY> 3,907
<SALES> 3,459
<TOTAL-REVENUES> 3,459
<CGS> 3,023
<TOTAL-COSTS> 5,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 309
<INCOME-PRETAX> (2,221)
<INCOME-TAX> 1
<INCOME-CONTINUING> (2,222)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,222)
<EPS-PRIMARY> (0.17)
<EPS-DILUTED> (0.17)
</TABLE>
