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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, 1998.
[ ] 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
incorporation or organization) Identification No.)
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 $3,846,000.
The aggregate market value of the voting stock held by non-affiliates of
the registrant on January 31, 1999 was approximately $1.7 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, 1999.
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, 1998
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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
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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 27
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</TABLE>
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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. 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. 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.
PRODUCTS
The Company specializes in the development, manufacture and marketing of
disposable cleaning and contamination control products for use in 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. All of the Company's products are sold under
its brand names, including UltraSORB(R) and UltraSOLV(R) for wipers and swabs,
and DuraCLEAN(R) and PolyDERM(TM) for gloves. The Company has received one
patent and applied for two other patents on hydrophilic foam articles and
cleaning methods for clean rooms including all UltraSOLV(R) and UltraSORB(R)
products.
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(R) and PolyClean(R).
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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. Both the UltraSORB(R) and UltraSOLV(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 UltraSOLV(R) polyurethane
material. Similar to the UltraSOLV(R) wiper, the UltraSOLV(R) swab is the first
polyurethane-foam swab that is hydrophilic and meets Class 1 and Class 10
specifications. UltraSOLV(R) has an open cellular structure which is
highly-absorbent and has excellent particle trapping capability. Also, because
of its abrasion resistance, the UltraSOLV(R) material does not generate
particulate contamination during use.
SCRUBPADS. In 1998 the Company began commercial shipments of its UltraSOLV(R)
ScrubPADs which provide a clean replacement for commercial abrasive pads
constructed of tangled fibers frequently used in wet-clean procedures for
process equipment used in the semiconductor, disk media, magnetic head and flat
panel display industries. Highly cleaned and uniform silicon carbide grit is
bonded to an inter-liner that attaches to UltraSOLV(R) foam, providing uniform
abrasion and controlled moisture release for thorough removal of hardened
residues without scoring. UltraSOLV(R) ScrubPADs have been designed to reduce
cleaning times, pump-down times and contamination levels of wet-clean
procedures.
GLOVES. Most of the gloves purchased in the United States for use in Class 1, 10
and 100 clean rooms are 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 believes that its polyurethane gloves are 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 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. 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. The Company
has been testing these gloves with several major semiconductor customers and is
currently operating a developmental glove line in its Tijuana, Mexico plant
facility to supply test sites. The Company's first full-scale glove production
line is expected to begin operation in the first quarter of 1999.
PATENTS, LICENSES AND PROPRIETARY RIGHTS
The Company has applied for three 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.
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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.
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) and UltraSOLV(R), the breathable, hydrophilic
polyurethane foams 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) and UltraSOLV(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 in its leased facility in Tijuana, Mexico. The Company
purchases the polymer for the gloves from The Polymer Technology Group, Inc.
under the terms of an exclusive supply agreement. Certain processes required to
finish the product are performed in Mexico by Advanced Barrier Technologies,
Inc. 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 1998
the Company sold approximately 33% of its products through VWR Scientific
Products and approximately 16% 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.
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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., Coventry
Manufacturing Co., Kimberly Clark Corp., and Baxter International.
A number of major corporations manufacture and sell latex and non-latex gloves
to the clean room markets. These include Baxter International, Smith and Nephew
Perry, and Ansell Edmont.
EMPLOYEES
As of November 30, 1998, the Company had 19 full-time employees, of whom 8 were
employed in manufacturing and shipping, 5 in sales and marketing, 1 in
engineering, and 5 in administration.
ITEM 2. DESCRIPTION OF PROPERTY.
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 increases 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.
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.
In December, 1998, the Company completed two sublease agreements, one with
Software of the Month Club, Inc ("SOMC"), and the other with Intecon Systems,
Inc. ("Intecon") for space in the Company's leased facility in Carlsbad,
California. The SOMC sublease is for 7,170 square feet for 24 months beginning
January 1, 1999 at a monthly rent of $3,872, plus utilities. The Intecon
sublease is for 800 square feet for 6 months beginning February 1, 1999 at a
monthly rent of $432, plus utilities. Both subleases 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 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
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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 March 20, 1998) for the Annual Meeting of
Shareholders held on April 30, 1998. 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 11,890,432 were represented. Holders of 5,100 shares withheld voting
authority. All nominees were elected by the affirmative vote of 11,885,332
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, 1999, 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 and
OTCBB in FY1997, and on the OTCBB in FY 1998.
<TABLE>
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FY1997 HIGH LOW
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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
FY1998
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First Quarter 11/16 5/16
Second Quarter 19/32 9/32
Third Quarter 21/32 7/32
Fourth Quarter 11/16 9/32
</TABLE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS.
OVERVIEW
The Company achieved record sales of $3.8 million in fiscal year 1998 and
recorded the lowest loss from operations in its 6 years as a public company.
During 1998, the Company focused on completing construction of the equipment for
the new glove production line and installing the equipment in the Company's
leased plant facility in Tijuana, Mexico. The installation phase has been
completed, and the equipment is now in the start-up phase. Management expects
the line to begin production of the Company's DuraCLEAN(R) polyurethane gloves
in the first quarter of fiscal year 1999.
Also, the Company has improved the performance of its contamination control
business during fiscal year 1998 by introducing the new UltraSOLV(R) ScrubPAD
and Chamber Cleaning Kit for maintenance of equipment used in the industrial
electronics industry, increasing sales of the UltraSOLV(R) Rollers to a major
computer disk drive manufacturer, and reducing production costs by moving some
manufacturing operations to Tijuana, Mexico. As a result, sales of contamination
control products are up 10%, gross profit is up 57% and gross profit margin
improved by 9.5% points for fiscal year 1998 versus fiscal year 1997.
From time to time the Company may report, through its press releases and/or
Securities and Exchange Commission filings, certain forward-looking statements
that are subject to risks and uncertainties. Important factors that could cause
actual results to differ materially from those projected by such forward-looking
statements are set forth in Exhibit 99 to the 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.
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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 $387,000 (11.2%) to $3,846,000 in 1998 from $3,459,000 in
1997, due to increased sales of contamination control products. Increased sales
of rollers and scrubpads offset a decline in sales of swabs and wipers in 1998
versus 1997.
GROSS PROFIT
Gross profit increased by $115,000 to $551,000 in 1998 from $436,000 in 1997,
primarily due to increased sales and a favorable product mix in contamination
control products, partially offset by costs of the developmental glove line.
Gross profit margin as a percent of sales increased to 14.3% in 1998 from 12.6%
in 1997. Excluding the impact of the glove sales and cost of sales on gross
profit, the gross profit margin as a percentage of sales was 31.4% in 1998, and
21.9% in 1997.
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 increased $283,000 (14.8%) to
$2,194,000 in 1998 from $1,911,000 in 1997, primarily due to additions in sales
personnel and higher professional fees.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased $248,000 (56.8%) to $189,000 in 1998
from $437,000 in 1997 primarily due to reductions in research and development
personnel and in project expense. As a percentage of sales, research and
development expenses were 4.9% in 1998, compared to 12.6% in 1997.
INTEREST INCOME (EXPENSE), NET
Net interest expense increased by $562,000 to $871,000 in 1998 from $309,000 in
1997. 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, 1998 and 1997, 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 1998 and 1997.
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 1997 and 1998, the Company has not generated sufficient cash from
operations to fund its working capital requirements. Net cash used in operating
activities was $2,497,000 in 1998 versus $1,692,000 in
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1997. The increase in the cash used in operating activities in 1998 was
primarily due to an increase in losses in 1998, and to payment of past due
accounts payable.
Net cash used in investing activities was $2,324,000 in 1998 versus $636,000 in
1997, primarily due to the purchase of equipment in 1998 for the new glove
production line in Mexico.
Net cash provided by financing activities was $4,726,000 in 1998 versus
$2,276,000 in 1997. Debt financing in 1998 and 1997 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 into a Credit
Agreement (the "Agreement") for a credit line of $1,000,000 secured by the
Company's assets. Under the terms of the Agreement, the principal was due on
June 30, 1996 and the interest was payable monthly at a rate of prime plus
3.75%. The Agreement was amended on June 30, 1996, September 30, 1996, April 15,
1997, and September 19, 1997, to a total credit line of $4,000,000 and a
termination date of June 30, 1998. See Note 4 to the consolidated financial
statements for details of the Agreement and Amendments.
On January 7, 1998, February 17, 1998 and March 10, 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
could be completed.
On March 31, 1998 the Company and Trilon Dominion completed an Amended and
Restated Credit Agreement and Revolving Line of Credit (the "Amended
Agreement":) which included the principal of $4,000,000 from the previous
Agreement and Amendments, the principal of $750,000 from the three Demand Notes,
the accrued interest and management fees of $543,297 on the Agreement and Notes,
and a new credit line commitment of $2,200,000. Under the terms of the Amended
Agreement, the principal of $7,493,297 was due on December 31, 1998, and the
interest was payable quarterly at an annual rate of 11.5%. In connection with
the Amendment Agreement, the Company paid Trilon $100,000 for debt issuance
costs and issued Trilon Dominion a five-year warrant that entitles Trilon
Dominion to purchase 650,000 shares of the Company's authorized but unissued
common stock at an exercise price of $0.41 per share, subject to adjustment to
protect against dilution. The warrant is exercisable immediately and expires on
March 31, 2003. The Company recorded the estimated fair value of the warrant to
purchase 650,000 shares as a debt issuance cost in the second quarter of fiscal
year 1998 at $0.07 per underlying common share. Also, under the terms of the
Amended Agreement, the Company issued Trilon Dominion a second five-year warrant
which became exercisable when the Company and Trilon Dominion agreed to extend
the due date of the principal and interest from December 31, 1998 to January 31,
2000. The second warrant entitles Trilon Dominion to purchase 250,000 shares of
the Company's authorized but unissued common stock at an exercise price of $0.42
per underlying common share and expires on March 31, 2003.
On August 5, 1998, September 1, 1998, October 1, 1998, November 2, 1998,
December 1, 1998, January 4, 1999, and February 1, 1999, the Company and Trilon
Dominion completed Demand Notes at an interest rate of 11.5% to fund the
Company's ongoing operations. The August and September notes each were in the
amount of $220,000, the October, January and February notes each were in the
amount of $250,000, the November note was in the amount of $240,000 and the
December note was in the amount of $260,000.
As of January 31, 1999, the Company has used its current credit facilities and
anticipates continuing negative cash flow through at least the first half of
fiscal year 1999. Trilon Dominion, the Company's largest shareholder with over
72% of the shares outstanding, has continued to provide financial support to the
Company during 1998, and management believes that Trilon Dominion will continue
to support the Company as necessary through the end of fiscal year 1999.
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YEAR 2000 ISSUE
The Company has assessed its readiness for the Year 2000 by focusing on four key
areas: (1) internal infrastructure readiness, addressing internal hardware and
software, and non-information technology systems; (2) product readiness,
addressing the functionality of the Company's products; (3) supplier readiness,
addressing the preparedness of key suppliers to the Company, and (4) customer
readiness, addressing customer support and transactional activity. For each
readiness area, the Company is performing a risk assessment, conducting testing
and remediation, developing contingency plans to mitigate unknown risk, and
communicating with employees, suppliers, customers and other third parties to
raise awareness of the Year 2000 issue.
Internal Infrastructure Readiness. The Company, assisted by third parties, has
conducted an assessment of internal applications and computer hardware. Some
software applications have been made Year 2000 compliant, and resources have
been assigned to address other applications based on their importance and the
time required to make them Year 2000 compliant. All software remediation is
expected to be completed no later than May 1999. The Year 2000 compliance
evaluation of hardware, including servers, desktops, telecommunication equipment
and non-information technology systems, has been completed. All hardware
remediation is expected to be completed no later than August 1999.
Product Readiness. The Company has conducted an assessment to identify and
resolve possible Year 2000 issues existing in the Company's products. To date,
the Company has not identified any Year 2000 issues with its products.
Supplier Readiness. The Company has identified and contacted key suppliers to
solicit information on their Year 2000 readiness. To date, the responses the
Company has received indicate that the Company's key suppliers are in compliance
with Year 2000 requirements. Based on the Company's assessment of each
supplier's progress to adequately address the Year 2000 issue, the Company will
develop a supplier action list and contingency plans.
Customer Readiness. The Company will be contacting its customers to assess their
Year 2000 readiness. Based on the Company's assessment of each customer's
progress to adequately address the Year 2000 issue, the Company will develop a
customer action list and contingency plans.
The Company estimates that the cost of complying with the Year 2000 requirements
will be approximately $35,000 in additional software and hardware purchases. The
Company is continuing its assessments and developing alternatives that will
necessitate refinement of this estimate over time. There can be no assurance,
however, that there will not be a delay in, or increased costs associated with,
the remedial actions described in this section.
Since the efforts described above are ongoing, all potential Year 2000
complications have not yet been identified. Therefore, while the Company
continues to believe the Year 2000 issues discussed above will not have a
materially adverse impact on its business, financial condition or results of
operations, it is not possible to determine with certainty whether or to what
extent the Company may be affected.
10
<PAGE> 12
ITEM 7. FINANCIAL STATEMENTS.
Index to Consolidated Financial Statements
Years ended November 30, 1998 and 1997
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, 1998 and 1997 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, 1998 and 1997, and the consolidated results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
San Diego, California
January 15, 1999
12
<PAGE> 14
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS (Note 4)
Current assets:
Cash $ 42,000 $ 137,000
Accounts receivable trade, less allowance for doubtful
accounts of $5,000 at November 30, 1998 and
November 30, 1997, respectively 310,000 335,000
Inventories (Note 2) 1,228,000 1,037,000
Current portion of note receivable (Note 3) 127,000 198,000
Other current assets 246,000 262,000
------------ ------------
Total current assets 1,953,000 1,969,000
Property and equipment, less accumulated depreciation (Note 2) 3,565,000 1,293,000
Note Receivable from the sale of discontinued business
less current portion (Note 3) -- 111,000
Goodwill, less accumulated amortization of $365,000
and $323,000 at November 30, 1998 and November 30,
1997, respectively 377,000 419,000
Patents and trademarks, net 116,000 115,000
------------ ------------
$ 6,011,000 $ 3,907,000
============ ============
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Accounts payable $ 412,000 $ 625,000
Accrued expenses 416,000 372,000
Interest payable 578,000 330,000
Line of credit, net of debt issue costs (Note 4) 8,407,000 3,750,000
------------ ------------
Total current liabilities 9,813,000 5,077,000
Commitments and contingencies (Note 6)
Net capital deficiency (Note 7):
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, 1998 and
November 30, 1997, respectively 25,907,000 25,907,000
Common stock warrants and options 370,000 301,000
Accumulated deficit (30,079,000) (27,378,000)
------------ ------------
Net capital deficiency (3,802,000) (1,170,000)
------------ ------------
$ 6,011,000 $ 3,907,000
============ ============
</TABLE>
See accompanying notes.
13
<PAGE> 15
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended November 30,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Net sales $ 3,846,000 $ 3,459,000
Cost of sales 3,295,000 3,023,000
------------ ------------
Gross profit 551,000 436,000
Operating expenses:
Marketing and selling 553,000 568,000
General and administrative 1,641,000 1,343,000
Research and development 189,000 437,000
------------ ------------
Total operating expenses 2,383,000 2,348,000
------------ ------------
Loss from operations (1,832,000) (1,912,000)
Other income 3,000 --
Interest income (expense), net (871,000) (309,000)
------------ ------------
Loss before provision
for state income taxes (2,700,000) (2,221,000)
Provision for state income taxes - current 1,000 1,000
------------ ------------
Net loss $ (2,701,000) $ (2,222,000)
============ ============
Weighted average shares outstanding 12,943,000 12,943,000
============ ============
Basic and diluted loss per share $ (0.21) $ (0.17)
============ ============
</TABLE>
See accompanying notes.
14
<PAGE> 16
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
YEARS ENDED NOVEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
Common stock
Common stock warrants and options
------------------------- ------------------------ Accumulated
Shares Amount Warrants Amount deficit Total
------------------------ ------------------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
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)
Issuance of warrants -- -- 790,000 69,000 -- 69,000
and options
Net loss -- -- -- -- (2,701,000) (2,701,000)
---------- ----------- --------- -------- ------------ -----------
Balances - November 30, 1998 12,943,385 $25,907,000 4,140,000 $370,000 $(30,079,000) $(3,802,000)
========== =========== ========= ======== ============ ===========
</TABLE>
See accompanying notes.
15
<PAGE> 17
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended November 30,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(2,701,000) $(2,222,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 275,000 234,000
Warrants and options issued to majority shareholder
and suppliers 23,000 26,000
Provision for loss on accounts receivable -- (12,000)
Loss on disposal of equipment -- 38,000
Expense paid by majority shareholder -- 50,000
Net change in operating assets and liabilities:
Decrease in accounts receivable 25,000 248,000
Increase in inventories (191,000) (446,000)
Increase (decrease) in other current assets 16,000 (31,000)
(Increase) decrease in accounts payable and
accrued expenses (169,000) 150,000
Increase in interest payable 248,000 299,000
----------- -----------
Net cash used in operating activities (2,474,000) (1,666,000)
----------- -----------
INVESTING ACTIVITIES
Purchase of equipment (2,497,000) (792,000)
Decrease in note receivable from sale of discontinued operations 182,000 175,000
Increase in other assets (9,000) (19,000)
----------- -----------
Net cash used in investing activities (2,324,000) (636,000)
----------- -----------
FINANCING ACTIVITIES
Proceeds from line of credit 4,673,000 2,250,000
Warrants issued to majority shareholder 46,000 --
Debt issue costs, net (16,000) --
----------- -----------
Net cash provided by financing activities 4,703,000 2,250,000
----------- -----------
NET DECREASE IN CASH (95,000) (52,000)
CASH - BEGINNING OF PERIOD 137,000 189,000
----------- -----------
CASH - END OF PERIOD $ 42,000 $ 137,000
=========== ===========
</TABLE>
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
1999.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. Significant intercompany amounts and transactions
have been eliminated.
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.
INTANGIBLE ASSETS
Goodwill is being amortized over 17 years. For each of the years ended November
30, 1998 and 1997, amortization was $42,000.
CONCENTRATION OF CREDIT RISK
Sales to a national distributor accounted for 33% and 49% of total sales during
1998 and 1997, 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.
17
<PAGE> 19
LOSS PER SHARE
Net loss per common share in fiscal 1998 and 1997 was computed using the
weighted average number of common shares outstanding during the period which
excludes all common equivalent shares since they are antidilutive.
During the period ending February 28, 1998, the Company adopted Statement of
Financial Standards (SFAS) No. 128, Earnings Per Share. The adoption of this
statement did not 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
share calculations as their effect is anti-dilutive or not required.
NEW ACCOUNTING STANDARDS
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.
2. FINANCIAL STATEMENTS INFORMATION
Inventories consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------
1998 1997
----------- ----------
<S> <C> <C>
Raw materials $ 604,000 $ 156,000
Work in process 239,000 265,000
Finished goods 385,000 616,000
---------- ----------
$1,228,000 $1,037,000
========== ==========
</TABLE>
Property and equipment consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
------------------------
1998 1997
----------- ----------
<S> <C> <C>
Machinery and equipment $ 4,007,000 $1,008,000
Furniture and office equipment 372,000 370,000
Leasehold improvements 144,000 45,000
Construction in progress -- 648,000
----------- ----------
4,523,000 2,071,000
Less accumulated depreciation and
amortization (958,000) (778,000)
----------- ----------
$ 3,565,000 $1,293,000
=========== ==========
</TABLE>
18
<PAGE> 20
3. NOTE RECEIVABLE
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. The disposition of this business has
been accounted for as a discontinued operation. Pursuant to the sale of its
Medical Products division, the Company received a $540,000 secured note, payable
over 36 months, and bearing interest at a rate of 5% per annum.
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, to 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 and warrants for 50,000
shares were issued in fiscal year 1998. The Company recorded the estimated fair
value of the warrants issued in fiscal year 1997 and fiscal year 1998 at $0.07
per underlying common share with a corresponding charge to earnings of $16,000
in fiscal 1997 and $3,500 in fiscal year 1998.
On January 7, 1998, February 17, 1998 and March 10, 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
could be completed.
On March 31, 1998 the Company and Trilon Dominion completed an Amended and
Restated Credit Agreement and Revolving Line of Credit (the "Amended
Agreement":) which included the principal of $4,000,000 from the previous
Agreement and Amendments, the principal of $750,000 from the three Demand Notes,
the accrued interest and management fees of $543,297 on the Agreement and Notes,
and a new credit line commitment of $2,200,000. Under the terms of the Amended
Agreement, the principal of $7,493,297 was due on December 31, 1998, and the
interest was payable quarterly at an annual rate of 11.5%. In connection with
the Amendment Agreement, the Company paid Trilon $100,000 for debt issuance
costs and issued Trilon Dominion a five-year warrant that entitles Trilon
Dominion to purchase 650,000 shares of the Company's authorized but unissued
common stock at an exercise price of $0.41 per share, subject to adjustment to
protect against dilution. The warrant is exercisable immediately and expires on
March 31, 2003. The Company recorded the estimated fair value of the warrant to
purchase 650,000 shares as a debt issuance cost in the second quarter of fiscal
year 1998 at $0.07 per underlying common share. On December 31, 1998, under the
terms of the Amended Agreement, the Company issued Trilon Dominion a second
five-year warrant which became exercisable when the Company and Trilon Dominion
agreed to extend the due date of the principal
19
<PAGE> 21
and interest from December 31, 1998 to January 31, 2000. The second warrant
entitles Trilon Dominion to purchase 250,000 shares of the Company's authorized
but unissued common stock at an exercise price of $0.42 per underlying common
share and expires on March 31, 2003.
On August 5, 1998, September 1, 1998, October 1, 1998, November 2, 1998,
December 1, 1998, January 4, 1999, and February 1, 1999, the Company and Trilon
Dominion completed Demand Notes at an interest rate of 11.5% to fund the
Company's ongoing operations. The August and September notes each were in the
amount of $220,000, the October, January and February notes each were in the
amount of $250,000, the November note was in the amount of $240,000 and the
December note was in the amount of $260,000.
5. INCOME TAXES
At November 30, 1998, the Company had federal net operating loss carryforwards
of approximately $26,863,000 which will begin to expire in 2006 unless
previously utilized. In addition, the Company had California and Texas net
operating loss carryforwards of approximately $12,275,000 which will begin to
expire in 1999 (approximately $204,000 expired in 1998). 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
1998 1997
----------- -------------
<S> <C> <C>
Deferred tax assets:
Depreciation and amortization $ -- $ 18,000
Installment Sale 1,058,000 1,058,000
Warrants 113,000 113,000
Accrued liabilities 25,000 87,000
Inventory reserves 140,000 24,000
Other 213,000 220,000
Net operating loss carryforwards 10,112,000 6,696,000
------------ -----------
Total deferred assets 11,661,000 8,216,000
Valuation allowance for deferred assets (11,626,000) (8,216,000)
------------ -----------
Net deferred tax assets $ 35,000 $ --
============ ===========
Deferred tax liabilities:
Depreciation and amortization $ (35,000) $ --
------------ -----------
Net deferred tax asset (liability) $ -- $ --
============ ===========
</TABLE>
20
<PAGE> 22
The reconciliation of income tax computed at the federal statutory tax rate to
income tax expense for the years ended November 30, 1998 and 1997 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
1998 1997
------------------------ ----------------------
Amount Percentage Amount Percentage
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Tax at Federal Rate $ 918,000 34 % $ 761,000 34 %
Change in Valuation Allowance (918,000) (34)% (761,000) (34)%
--------- ---------- --------- ----------
$ -- -- % $ -- -- %
--------- ---------- --------- ----------
</TABLE>
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
2,400 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
21
<PAGE> 23
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 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.
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, net of future
sublease rental income, required under operating leases which have remaining non
cancelable lease terms in excess of one year at November 30, 1998:
<TABLE>
<S> <C>
1999 $ 301,000
2000 293,000
2001 234,000
2002 233,000
2003 20,000
----------
Total minimum payments $1,081,000
==========
</TABLE>
Rent expense was $461,000 and $337,000 for the years ended November 30, 1998 and
1997, respectively. During 1998, the Company received $35,000 of sublease rental
income.
22
<PAGE> 24
7. SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
COMMON STOCK
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 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 to 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 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.
On December 31, 1997 and on June 30, 1998 warrants issued to Trilon Dominion,
each to purchase 25,000 shares, became exercisable at the respective market
prices of $0.47 and $0.34 per share. The Company recorded the estimated fair
value of these warrants in fiscal year 1998 at $0.07 per underlying common share
and recorded a corresponding charge to interest expense of $3,500 in fiscal year
1998.
23
<PAGE> 25
On March 31, 1998 the Company and Trilon Dominion completed an Amended and
Restated Credit Agreement and Revolving Line of Credit (the "Amended Agreement")
which included the principal of $4,000,000 from the previous Agreement and
Amendments, the principal of $750,000 from the three Demand Notes, the accrued
interest and management fees of $543,297 on the Agreement and Notes, and a new
credit line commitment of $2,200,000. Under the terms of the Amended Agreement,
the principal of $7,493,297 was due on December 31, 1998, and the interest was
payable quarterly at an annual rate of 11.5%. In connection with the Amended
Agreement, the Company paid Trilon $100,000 for debt issuance costs and issued
Trilon Dominion a five-year warrant that entitles Trilon Dominion to purchase
650,000 shares of the Company's authorized but unissued common stock at an
exercise price of $0.41 per share, subject to adjustment to protect against
dilution. The warrant is exercisable immediately and expires on March 31, 2003.
The Company recorded the estimated fair value of the warrant to purchase 650,000
shares as a debt issuance cost in the second quarter of fiscal year 1998 at
$0.07 per underlying common share. Also, under the terms of the Amended
Agreement, the Company issued Trilon Dominion a second five-year warrant which
became exercisable on December 31, 1998 when the Company and Trilon Dominion
agreed to extend the termination date of the Amended Agreement from December 31,
1998 to January 31, 2000. The second warrant entitles Trilon Dominion to
purchase 250,000 shares of the Company's authorized but unissued common stock at
an exercise price of $0.42 per underlying common share and expires on March 31,
2003.
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, 1998, the following options were outstanding under each respective Stock
Option Plan: none under the 1992 Plan, 14,000 under the 1993 Plan, and 1,371,000
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.
On October 7, 1998 the Board of Directors approved six grants of stock options
on a total of 670,000 shares under the 1995 Plan at the market price on the
respective date of each grant. Two of these six grants, on a total of 90,000
shares, were issued to outside consultants of the Company and were recorded in
fiscal year 1998 at their estimated fair value of $19,000 with a corresponding
charge to administrative expense.
24
<PAGE> 26
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, 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
Granted........................... 688,000 0.49
Canceled.......................... (198,500) 1.16
----------
Outstanding at November 30, 1998 1,665,000 0.84
==========
</TABLE>
As of November 30, 1998, 615,000 shares are available for future grant under the
Stock Option Plans.
Following is a further breakdown of the options outstanding as of November 30,
1998:
<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>
$.34 8,000 4.58 $0.34 8,000 $0.34
0.38 5,000 9.56 0.38 1,666 0.38
0.48 145,000 9.49 0.48 84,999 0.48
0.50 540,000 9.66 0.50 10,000 0.50
0.63 740,000 5.29 0.63 722,499 0.63
0.75 126,000 3.56 0.75 63,000 0.75
0.84 6,000 3.58 0.84 6,000 0.84
0.88 15,000 6.92 0.88 15,000 0.88
6.00 80,000 3.41 6.00 80,000 6.00
---------- --------- ---- ----- ------- -----
$0.34-6.00 1,665,000 6.87 $0.84 991,164 $1.06
========== ========= ==== ===== ======= =====
</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 1998 and 1997: 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,
1998 1997
---- ----
<S> <C> <C>
Adjusted proforma net loss............................. $(2,944,00 $(2,564,000)
Adjusted proforma net loss per share................... $(0.23) $(0.20)
</TABLE>
The weighted average fair value of options granted during 1997 and 1998 was
$0.98 and $0.73, respectively.
At November 30, 1998, 5,715,000, shares were reserved for the issuance of
options and warrants.
25
<PAGE> 27
8. RELATED PARTY TRANSACTIONS
On November 30, 1998, the Company had short-term debt outstanding to Trilon
Dominion of $8,423,000 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 1,150,000 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.
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 26, 1999
ITEM 10. EXECUTIVE COMPENSATION.
The information required in this Item is incorporated herein by reference to the
Company's Proxy Statement dated March 26, 1999
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 26, 1999
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 26, 1999
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
(a) EXHIBITS:
<S> <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 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)
</TABLE>
27
<PAGE> 29
<TABLE>
<S> <C>
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)
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)
</TABLE>
28
<PAGE> 30
<TABLE>
<S> <C>
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)
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)
</TABLE>
29
<PAGE> 31
<TABLE>
<S> <C>
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)
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)
</TABLE>
30
<PAGE> 32
<TABLE>
<S> <C>
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)
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)
</TABLE>
31
<PAGE> 33
<TABLE>
<S> <C>
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)
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. (55)
10.103 Lease Agreement dated November 25, 1997 among the Registrant,
Wilshire International de Mexico S.A. de C.V., and Mr. Rafael
Mizrachi. (55)
10.104 Warrant Agreement, dated November 24, 1997, between the
Registrant and American Stock Transfer and Trust Company. (55)
10.105 Employment Agreement, dated January 1, 1998 between the
Registrant and Mr. John Van Egmond. (55)
10.106 Demand Note, dated January 7, 1998, between the Registrant and
Trilon Dominion Partners, L.L.C. (55)
10.107 Demand Note dated February 17, 1998, between the Registrant and
Trilon Dominion Partners, L.L.C. (55)
</TABLE>
32
<PAGE> 34
<TABLE>
<S> <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. (55)
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. (55)
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. (55)
10.111 Demand Note dated March 10, 1998 between the Registrant and
Trilon Dominion Partners, L.L. C., (56)
10.112 Amended and Restated Credit Agreement and Revolving Line of
Credit (the "Amended Agreement") dated March 31, 1998 between the
Registrant and Trilon Dominion Partners, L.L.C., exclusive of
certain schedules. (56)
10.113 Warrant dated March 31, 1998 to purchase 650,000 shares of the
Registrant's Common Stock, issued to Trilon Dominion Partners,
L.L.C. pursuant to the Amended Agreement. (56)
10.114 Springing Warrant dated March 31, 1998 to purchase 250,000 shares
of the Registrant's Common Stock, issued to Trilon Dominion
Partners, L.L.C. pursuant to the Amended Agreement. (56)
10.115 Grid Promissory Note dated March 31, 1998 between the Registrant
and Trilon Dominion Partners L.L.C. issued under the Amended
Agreement. (56)
10.116 Employment Agreement dated May 18, 1998 between the Registrant
and Mr. Paul Fennell. (57)
10.117 Sales Representative Agreement dated June 1, 1998 between the
Registrant and Exxustech, Inc. (57)
10.118 Exclusive Product Supply Agreement dated July 28, 1998 between
the Registrant and Time Release Sciences, Inc. (57)
10.119 Independent Consultant Agreement dated August 5, 1998 between the
Registrant and Percura, Inc. (57)
10.120 Employment Agreement dated August 17, 1998 between the Registrant
and Mr. Kevin Mulvihill. (57)
10.121 Demand Note dated August 5, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C. (57)
10.122 Demand Note dated September 1, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C. (57)
10.123 Demand Note dated October 1, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C. (57)
10.124 Distributor Agreement dated October 15, 1998 between the
Registrant and Foamex Asia Company, Ltd.
</TABLE>
33
<PAGE> 35
<TABLE>
<S> <C>
10.125 Demand Note dated November 2, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C.
10.126 Demand Note dated December 1, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C.
10.127 Demand Note dated January 4, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C.
10.128 Demand Note dated February 1, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C.
10.129 Amendment dated December 31, 1998, to the Amended Agreement dated
March 31, 1998 between the Registrant and Trilon Dominion
Partners, L.L.C.
10.130 Sublease Agreement dated December 9, 1998 between the Registrant
and Software of the Month Club, Inc.
10.131 Sublease Agreement dated December 14, 1998 between the Registrant
and Intecon Systems, Inc.
10.132 Distributor Agreement, dated January 1, 1999, between the
Registrant and VWR Scientific Products Corporation.
21 Subsidiaries of the Registrant. (55)
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:
<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
(the "1994 8-K") 1
3 1994 8-K 4
4 1994 8-K 2
5 1994 8-K 3
6 Form 10-KSB for fiscal 1993 28
7 Incorporated to the identically numbered
</TABLE>
34
<PAGE> 36
<TABLE>
<S> <C> <C>
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)
</TABLE>
35
<PAGE> 37
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
- --------- ----------------- -----------
<S> <C> <C>
14 Form 10-QSB dated July 12, 1995
(the "July 1995 QSB") 10.1
15 July 1995 QSB 10.2
16 July 1995 QSB 10.3
17 Form 10-QSB dated October 10, 1995
(the "October 1995 QSB") 10.1
18 October 1995 QSB 10.2
19 Form 8-K dated August 7, 1995 2
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
(the "January, 1996 8-K") 1
36 January, 1996 8-K 2
</TABLE>
36
<PAGE> 38
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
- --------- ----------------- -----------
<S> <C> <C>
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
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
(the "May, 1996 8-K") 3(i)(a)
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.
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
- --------- ----------------- -----------
<S> <C> <C>
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.
55 Incorporated to the identically numbered
Exhibit in Form 10-KSB dated February 25, 1998.
56 Incorporated to the identically numbered
Exhibit in Form 10-QSB dated April 10, 1998.
57 Incorporated to the identically numbered
Exhibit in Form 10-QSB dated October 12, 1998.
</TABLE>
(b) REPORTS ON FORM 8-K.
None
38
<PAGE> 40
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: January 29, 1999 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
- ------------------------------------ Chairman of the Board January 29, 1999
Ronald W. Cantwell
Director, and
/s/John Van Egmond President and Chief Executive Officer
- ------------------------------------ (Principal Executive Officer) January 29, 1999
John Van Egmond
/s/James W. Klingler Chief Financial Officer,
- ------------------------------------ Treasurer and Secretary January 29, 1999
James W. Klingler (Principal Financial Officer and
Principal Accounting Officer)
/s/Charles H. Black Director January 29, 1999
- ------------------------------------
Charles H. Black
/s/Joe E. Davis Director January 29, 1999
- ------------------------------------
Joe E. Davis
/s/Ralph V. Whitworth Director January 29, 1999
- ------------------------------------
Ralph V. Whitworth
</TABLE>
39
<PAGE> 41
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Number Description Numbered Page
- -------------- ----------- -------------
<S> <C> <C>
10.124 Distributor Agreement dated October 15, 1998 between 41
the Registrant and Foamex Asia Company, Ltd.
10.125 Demand Note dated November 2, 1998 between 54
the Registrant and Trilon Dominion Partners, L.L.C.
10.126 Demand Note dated December 1, 1998 between 55
the Registrant and Trilon Dominion Partners, L.L.C.
10.127 Demand Note dated January 4, 1999 between 56
the Registrant and Trilon Dominion Partners, L.L.C.
10.128 Demand Note dated February 1, 1999 between 57
the Registrant and Trilon Dominion Partners, L.L.C.
10.129 Amendment dated December 31, 1998, to the 58
Amended Agreement dated March 31, 1998 between
the Registrant and Trilon Dominion Partners, L.L.C.
10.130 Sublease Agreement dated December 9, 1998 between 62
the Registrant and Software of the Month Club, Inc.
10.131 Sublease Agreement dated December 14, 1998 between 69
the Registrant and Intecon Systems, Inc.
10.132 Distributor Agreement, dated January 1, 1999, between 75
the Registrant and VWR Scientific Products Corporation.
</TABLE>
40
<PAGE> 1
EXHIBIT 10.124
WILSHIRE TECHNOLOGIES, INC.
DISTRIBUTOR AGREEMENT
This Distributor Agreement ("this Agreement") is made effective and
entered into this 15th day of October, 1998 ("Effective Date") by and between
WILSHIRE TECHNOLOGIES, INC., with a principal place of business at 5861 Edison
Place, Carlsbad, California 92008 ("WTI")
and
FOAMEX ASIA COMPANY, LTD., a corporation organized and existing under the laws
of Thailand, with its head office and principal place of business at 175 Sathorn
City Tower, 22nd Floor, South Sathorn Road, Thungmahamek, Sathorn, Bangkok,
10120 Thailand ("DISTRIBUTOR").
1. APPOINTMENT AND ACCEPTANCE.
1.1 WTI hereby appoints DISTRIBUTOR on an exclusive basis to
purchase and resell the Products to the Customers in the Territory. DISTRIBUTOR
accepts this appointment on the terms and conditions set forth herein and
obligates itself to the requirements of this Agreement.
1.2 The term "Products" shall mean the WTI products listed on
Exhibit A attached hereto. WTI reserves the right to delete discontinued
Products upon thirty (30) days prior written notice to DISTRIBUTOR.
1.3 The term "Customers" shall mean the companies listed on Exhibit
B attached hereto.
1.4 The term "Territory" shall mean the geographic area defined on
Exhibit C attached hereto. DISTRIBUTOR shall not reexport the Products from the
territory without the express written authorization of WTI.
2. DISTRIBUTOR'S REPRESENTATIONS.
In order to induce WTI to enter into this agreement DISTRIBUTOR, and its
undersigned officer, warrant and represent that:
2.1 DISTRIBUTOR is a corporate entity duly organized and in good
standing, and will remain in compliance with all applicable laws in the
Territory.
2.2 DISTRIBUTOR is and will remain an independent contractor with
respect to its relationship with WTI. DISTRIBUTOR agrees that WTI has granted it
no authority to make changes to WTI's terms and conditions of sale, to extend
WTI warranties or, in general , to enter into contracts or make quotations on
behalf of or to bind WTI in any transactions with DISTRIBUTOR's Customers or any
governmental agencies or third parties. No relationship of employment shall
arise between WTI and DISTRIBUTOR, or
<PAGE> 2
between WTI or any employee or representative of DISTRIBUTOR. DISTRIBUTOR is at
all times acting for its own account, and at its own expense.
3. TERM.
3.1 Subject to the provisions of Section 13 below, the term of this
agreement shall be for six (6) months, commencing on the Effective Date, unless
renewed as provided in Section 3.2 below.
3.2 If WTI and DISTRIBUTOR expressly agree in writing to renew this
Agreement prior to the foregoing expiration date, this Agreement shall continue
in full force and effect for one or more successive one (1) year renewal
periods. Notwithstanding the foregoing, if WTI or DISTRIBUTOR elect not to renew
or extend the agreement, such party shall provide notice of its intention to the
other party no later than 30 days prior to the expiration date of the applicable
duration period.
4. PRICES AND TERMS.
4.1 The Product prices to the DISTRIBUTOR shall be those listed in
the attached price list in Exhibit D. The prices quoted are exclusive of any
freight charges, national, state or local sales, use, value added or other
taxes, customs duties, or similar tariffs and fees which shall be the
responsibility of DISTRIBUTOR. In the event that WTI is required to pay any such
freight, taxes, duties or fees, such items will be added to the invoice to be
paid by DISTRIBUTOR.
4.2 WTI may change the prices of the Products from time to time upon
sixty (60) days prior written notice to DISTRIBUTOR. DISTRIBUTOR shall submit a
list of outstanding quotations to WTI at time of price change and WTI shall use
its best efforts to price protect such quotations for a period not to exceed two
(2) months from the effective date of the price change (provided that WTI will
price protect any product releases made under blanket purchase orders previously
accepted by WTI).
4.3 All payment shall be made in United States dollars. Unless
otherwise agreed by WTI in writing, terms of payment for all international sale
transactions shall be by irrevocable letter of credit acceptable to WTI, by
sight draft due on receipt of goods, or prepayment by wire transfer.
5. WTI OBLIGATIONS.
WTI will, during the term of this Agreement:
5.1 Provide training for a reasonable number of DISTRIBUTOR'S
representatives in the application, use, and sale of the Products. DISTRIBUTOR
agrees to pay all expenses of its representatives to attend such training
sessions, including salaries and transportation;
2
<PAGE> 3
5.2 Render periodic assistance to DISTRIBUTOR on technical and sales
problems;
5.3 Invoice DISTRIBUTOR for each Product sold on the day it is
shipped or in accordance with the terms of the accepted order; and
5.4 Prepare and provide to the DISTRIBUTOR, at WTI's expense,
product specifications, product information bulletins, testing/stability
certification and any other information required for initial product
registration and maintaining registration compliance.
6. DISTRIBUTOR OBLIGATIONS.
In order to induce WTI to enter into this Agreement, and as a condition
of this continuation in force, DISTRIBUTOR agrees that it shall;
6.1 Actively use its best efforts to promote and sell the Products
to the Customers in the Territory;
6.2 Maintain adequate premises and facilities within the Territory,
at its own expense, from which to inventory, demonstrate and sell the Products;
6.3 Employ an adequate number of capable personnel to engage in the
sale of the Products;
6.4 Cooperate with WTI in obtaining marketing and competitive data;
6.5 Submit to WTI regular quarterly status reports reflecting sales
activities and anticipated requirements of the Customers in the Territory;
6.6 Shall submit purchase orders for product(s) to WTI in writing by
mail, courier, or telefax, which shall set forth (a) an identification of
product(s) ordered, (b) quantity, (c) requested delivery dates and (d) shipping
instructions and shipping address. Delivery dates requested in any purchase
order must be at least thirty (30) days from the date of receipt by WTI of such
purchase order;
6.7 Not undertake to represent, distribute, or otherwise handle
products which are in competition with the Products;
6.8 Obtain, at DISTRIBUTOR'S expense, all needed import permits and
applicable exemptions from customs duties needed to import the Product(s).
3
<PAGE> 4
7. FORECASTS/PURCHASE ORDERS.
7.1 During the first week of each month, DISTRIBUTOR shall forward
to WTI a three (3) month rolling forecast of Product purchases designating the
quantities of each model of the Products which DISTRIBUTOR intends to sell in
this period.
7.2 Any purchase orders issued by DISTRIBUTOR are subject to
acceptance by WTI and will not be deemed accepted until a written confirmation
has been dispatched by WTI.
8. DELIVERY/TITLE/RISK OF LOSS.
8.1 Delivery of all Products ordered by DISTRIBUTOR for domestic
shipment shall be made FOB point of shipment (e.g., WTI's Carlsbad, California
facility). Delivery of all Products ordered by DISTRIBUTOR for international
shipment shall be made Ex-Works (e.g., WTI's Carlsbad, California facility). ICC
Incoterms (1990 editions) shall apply to all international shipments, except
insofar as these Incoterms may be inconsistent with the terms of this Agreement.
8.2 Risk of loss to the Products shall pass to DISTRIBUTOR at the
point of shipment (e.g., WTI's Carlsbad, California facility).
8.3 All Products ordered pursuant to accepted purchase orders will
be scheduled for delivery in accordance with WTI's then current and normal
delivery times. WTI shall not be responsible for failure to deliver or comply
with any provision of this Agreement if such non-performance is due to causes
beyond its reasonable control such as, but not limited to, acts of God, fire or
explosions, civil and labor disturbances or delays in transportation. In such
event, the time for performance hereunder shall be extended by the period of
time attributable to the delay.
9. PRODUCT WARRANTY.
9.1 DISTRIBUTOR understands and acknowledges that this Product
Warranty is made to DISTRIBUTOR only and shall not be passed through to
DISTRIBUTOR's customer.
9.2 WTI warrants the Products to be free from defects in material
and workmanship for thirty (30) days from date of shipment.
9.3 The sole responsibility of WTI under the foregoing warranty
shall be limited, at its option, to the repair or replacement of defective
Products returned by DISTRIBUTOR to WTI, at WTI's expense.
9.4 All WTI warranties hereunder are conditioned upon proper
storage, handling and use of the Products in the application for which they are
intended.
4
<PAGE> 5
9.5 THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED (INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE). REPAIR OR REPLACEMENT IN
THE MANNER PROVIDED ABOVE SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF PURCHASER
FOR BREACH OF WARRANTY AND SHALL CONSTITUTE FULFILLMENT OF ALL LIABILITIES OF
WTI WITH RESPECT TO THE QUALITY AND PERFORMANCE OF THE PRODUCTS.
9.6 In no event shall WTI's liability to DISTRIBUTOR, whether in
contract or in tort (including negligence and strict liability), exceed the
price of the Product from which such liability arises.
10. COMPLIANCE WITH LAWS IN THE TERRITORY.
DISTRIBUTOR and WTI shall strictly comply with all applicable laws,
rules, regulations and other governmental requirements governing the
manufacture, packaging, labeling, distribution and sale of the Products in the
Territory. Such compliance shall include, but shall not be limited to, the
following:
10.1 DISTRIBUTOR shall keep WTI informed of the particular
requirements imposed on such products by the laws and regulations of the
Territory;
10.2 DISTRIBUTOR shall distribute, promote and sell the Products only
for the uses and applications approved by WTI and as permitted under the
applicable laws and regulations in the Territory;
10.3 DISTRIBUTOR shall comply with any recalls of the Products
initiated by WTI or governmental authorities; and
10.4 DISTRIBUTOR shall promptly disclose to WTI all reports, data and
other information received by DISTRIBUTOR relating to the unfavorable (including
physiological or psychological) effects or toxicity of the Products. WTI will
promptly address all reports received and reply in writing to DISTRIBUTOR.
11. WTI'S PROPRIETARY INFORMATION AND RIGHTS.
11.1 Each party acknowledges and understands that all information
disclosed by one party to the other not generally known concerning WTI and
DISTRIBUTOR and the Products, including but not limited to a party's
organization and business affairs, customer lists, sales information, operating
procedures and practices, technical data, designs, know-how, trade secrets, and
processes (the "Proprietary Information"), whether owned by such party or
licensed by such party from third parties, is subject to valuable proprietary
interest of the disclosing party, and that the receiving party is under an
obligation to maintain the confidentiality of such Proprietary Information.
Without limiting the generality of the foregoing obligations, the receiving
party agrees that for the
5
<PAGE> 6
term of this Agreement and thereafter until such time as the Proprietary
Information is in the public domain, such receiving party will (i) not disclose,
publish or disseminate any Proprietary Information, (ii) not use any Proprietary
Information for its own account, (iii) not authorize any other person to
disclose, publish or disseminate the Proprietary Information, and (iv) treat all
Proprietary Information in a confidential manner, including appropriate marking
and secure storage of written Proprietary Information.
11.2 During the term of this Agreement, DISTRIBUTOR is authorized to
use WTI trademarks for the Products in connection with DISTRIBUTOR's
advertisement, promotion and distribution of the Products in the Territory.
DISTRIBUTOR acknowledges that WTI owns and retains all patents, trademarks,
copyrights and other proprietary rights in the Products, and agrees that it will
not at any time during or after the termination of this Agreement assert or
claim any interest in or take any action which may adversely affect the validity
or enforceability of any patent, trademark, trade name, trade secret, copyright,
or logo belonging to or licensed to WTI.
11.3 DISTRIBUTOR agrees to use reasonable efforts to protect WTI's
proprietary rights and to cooperate in WTI's efforts to protect its proprietary
rights. DISTRIBUTOR agrees to notify WTI of any known or suspected breach of
WTI's proprietary rights and to cooperate with WTI without making any charge
therefore in any action by WTI to investigate or remedy an infringement of such
rights.
11.4 Neither DISTRIBUTOR nor its employees and agents, shall, without
WTI's prior consent, alter any of the Products or remove, alert, obliterate or
mar any notice or legend of WTI's patent, copyright, trademarks or trade
secrets.
12. INFRINGEMENT INDEMNIFICATION.
12.1 WTI shall defend any claim, suit or proceeding brought against
DISTRIBUTOR so far as it is based on a claim that the use, transfer or resale of
any Products delivered hereunder constitutes an infringement of a patent,
trademark or copyright registered in the United States, so long as WTI is
notified promptly in writing by the DISTRIBUTOR of any such action and given
full authority, information and assistance at WTI's expense for the defense of
any such claim or proceedings. WTI shall pay all damages and cost awarded
against the DISTRIBUTOR but shall not be responsible for any settlement made
without its consent. In the event of final judgment which prohibits the
DISTRIBUTOR or the DISTRIBUTOR's customers from continued use of any Products by
reason of infringement of such patent, trademark or copyright, WTI may, at its
sole option and at its expense, obtain the rights to continued use of any such
Product, replace or modify such Product so that it is no longer infringing.
12.2 WTI shall have no liability to the DISTRIBUTOR under any
provisions of this Section 12 if any patent, trademark or copyright infringement
or claim thereof is based upon the use of Products delivered hereunder in
connection or in combination with equipment or devices not delivered by WTI or
use of any such Product in a manner for which the same was not designed.
6
<PAGE> 7
13. TERMINATION.
13.1 WTI or DISTRIBUTOR may terminate this Agreement at any time
prior to the expiration of its stated term upon the occurrence of any of the
following events, each of which is expressly declared to be "Just Cause" for
termination of this Agreement:
13.1.1 DISTRIBUTOR defaults in any payment due WTI for Products
purchased under this Agreement and such default continues unremedied for a
period of fifteen (15) days following WTI's notice to default;
13.1.2 DISTRIBUTOR or WTI fails to perform any other material
obligation, warranty, duty or responsibility under the Agreement, and such
failure or default continues unremedied for a period of thirty (30) days
following the other party's notice; 13.1.3 DISTRIBUTOR or WTI becomes insolvent;
proceedings are instituted by or against it in bankruptcy, insolvency,
reorganization or dissolution; or it makes an assignment for the benefit of
creditors; or
13.1.4 DISTRIBUTOR or WTI is merged, consolidated, or
substantially changes the nature or character of its business, or substantially
changes its management ownership or principals.
13.2 Upon termination hereby by either party:
13.2.1 All sums due to either party from the other shall be
promptly paid;
13.2.2 DISTRIBUTOR orders received and accepted by WTI prior to
termination of this Agreement shall be fulfilled in accordance with their terms;
13.2.3 All property belonging to one party but in the custody
of the other shall be returned;
13.2.4 DISTRIBUTOR shall cease all display, advertising and use
of WTI tradenames, trademarks, logos and designations, except uses on the
Products which remain in DISTRIBUTOR's possession; and
13.2.5 WTI shall have the option to repurchase any or all of
the Products in DISTRIBUTOR inventory which are new and unused at net price paid
originally by DISTRIBUTOR.
14. GOVERNING LAW.
The place of the making and execution of this Agreement, and the
location of WTI shall be Carlsbad, California, U.S.A. Accordingly, the parties
agree that the law of the State of California (except for the body of law known
as conflicts of law and
7
<PAGE> 8
excluding any applicable provisions of the United Nations Convention for the
International Sale of Goods) shall govern the interpretation, enforcement and
performance of this Agreement. WTI and DISTRIBUTOR each expressly waive and
disavow any rights that may accrue under any other body of law.
15. LIMITATION OF LIABILITY.
Neither WTI nor DISTRIBUTOR shall be liable to the other, or to
DISTRIBUTOR's customers, for any special, indirect, or consequential damages,
including but not limited to loss of profits, loss of business opportunities, or
loss of business investment.
16. INDEMNIFICATION.
DISTRIBUTOR agrees to indemnify and hold WTI harmless from any costs,
claims, damages, losses, liabilities or expenses (including reasonable
attorney's fees) asserted by any third party resulting from DISTRIBUTOR's breach
of this Agreement, inaccurate representation or warranty made by DISTRIBUTOR, or
failure to conform to local laws and regulations.
17. ASSIGNMENT.
Neither party may assign any of the rights or obligations set forth in
this Agreement without the prior written consent of the other, provided that WTI
shall have the right to assign any portion of the Agreement to its subsidiaries
and affiliated companies.
18. NOTICES.
All notices and demands under this Agreement shall be in writing and
shall be served by personal service or by mail at the address of the receiving
party first stated in this Agreement (or such different address as may be
designated by such party to the other in writing). All notices or demands by
mail shall be by facsimile, or by certified or registered airmail,
return-receipt requested, and shall be deemed complete upon receipt.
19. INTEGRATED AGREEMENT.
This Agreement (and attached Exhibits) constitutes the entire
understanding and agreement between WTI and DISTRIBUTOR and terminates and
supersedes all prior formal or informal understandings. Should any Section of
this Agreement be held unenforceable by a court of law or other tribunal having
jurisdiction over both parties, WTI or DISTRIBUTOR may elect to terminate this
Agreement.
8
<PAGE> 9
20. LANGUAGE AND ORIGINALS.
This Agreement has been written in the English language. It may be
translated, for convenience, into other languages. However, in case of error or
disagreement, the executed English language version shall prevail.
This Agreement shall be executed in three (3) original copies, one for
each party, and one that DISTRIBUTOR can use for registration purposes as
needed.
Entered into in Carlsbad, California, U.S.A.
WILSHIRE TECHNOLOGIES, INC. FOAMEX ASIA COMPANY, LTD.
BY: /s/John Van Egmond BY: /s/Phararat Jianthanakanon
---------------------------- ---------------------------------
TITLE: President & CEO TITLE: Financial Controller
------------------------- ------------------------------
DATE: 10/15/98 DATE: 11/10/98
-------------------------- -------------------------------
9
<PAGE> 10
DISTRIBUTOR AGREEMENT
BETWEEN WTI AND FOAMEX ASIA COMPANY, LTD.
EXHIBIT A
The Products
All Wilshire Contamination Control Swabs and Wipers.
EFFECTIVE DATE: October 15, 1998
-------------------------
WTI: /s/John Van Egmond
-------------------------------------
DISTRIBUTOR: /s/Phararat Jianthanakanon
-----------------------------
10
<PAGE> 11
DISTRIBUTOR AGREEMENT
BETWEEN WTI AND FOAMEX ASIA COMPANY, LTD.
EXHIBIT B
The Customers
Fujitsu, Ltd.
Seagate Technology, Ltd.
EFFECTIVE DATE: October 15, 1998
-------------------------
WTI: /s/John Van Egmond
-------------------------------------
DISTRIBUTOR: /s/Phararat Jianthanakanon
-----------------------------
11
<PAGE> 12
DISTRIBUTOR AGREEMENT
BETWEEN WTI AND FOAMEX ASIA COMPANY, LTD.
EXHIBIT C
The Territory
China
Malaysia
Philippines
Singapore
Thailand
EFFECTIVE DATE: October 15, 1998
-------------------------
WTI: /s/John Van Egmond
-------------------------------------
DISTRIBUTOR: /s/Phararat Jianthanakanon
-----------------------------
12
<PAGE> 13
DISTRIBUTOR AGREEMENT
BETWEEN WTI AND FOAMEX ASIA COMPANY, LTD.
EXHIBIT D
Pricing
Per Distributor Price List for Wilshire Contamination Control products.
EFFECTIVE DATE: October 15, 1998
-------------------------
WTI: /s/John Van Egmond
-------------------------------------
DISTRIBUTOR: /s/Phararat Jianthanakanon
-----------------------------
13
<PAGE> 1
EXHIBIT 10.125
DEMAND NOTE
$240,000.00 New York, New York
November 2, 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
Forty Thousand and 00/100, DOLLARS ($240,000.00), 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 3.0%, 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: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.126
DEMAND NOTE
$260,000.00 New York, New York
December 1, 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
Sixty Thousand and 00/100, DOLLARS ($260,000.00), 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 3.0%, 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: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.127
DEMAND NOTE
$250,000.00 New York, New York
January 4, 1999
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 3.0%, 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: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.128
DEMAND NOTE
$250,000.00 New York, New York
February 1, 1999
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 3.0%, 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/ John Van Egmond
--------------------------
Name: John Van Egmond
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.129
AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment to the Amended and Restated Credit Agreement
("Amendment") is made and entered into as of December 31, 1998, by and between
Trilon Dominion Partners L.L.C. ("Trilon Dominion") and Wilshire Technologies,
Inc. ("Borrower").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into an Amended and Restated
Credit Agreement dated as of March 31, 1998 (the "Agreement"); and
WHEREAS, the parties hereto wish to further amend the Agreement as set
forth in this Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Amendment. Section 1.6 of the Agreement is hereby amended by
replacing the phrase, "or, (ii) December 31, 1998" in the second line of such
section with the phrase, "or, (ii) January 31, 2000". Except as specifically set
forth in this Amendment the Agreement and all other documents and agreements
entered into in connection with the Agreement including without limitation the
Warrants and Springing Warrants shall remain unchanged and in full force and
effect.
2. Governing Law. Except as otherwise expressly provided, this Amendment
shall be governed and construed in accordance with the laws of the State of
Delaware applicable to contracts made in such State and without regard to
conflicts of law doctrines.
<PAGE> 2
3. Counterparts. This Amendment may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
---------------------------------------
Name: James W. Klingler
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: /s/ Ronald W. Cantwell
---------------------------------------
Name: Ronald W. Cantwell
Title: President
2
<PAGE> 3
AMENDMENT TO
GRID PROMISSORY NOTE
This Amendment to the Grid Promissory Note ("Note") issued pursuant to
the Amended and Restated Credit Agreement ("Amendment") is made and entered into
as of December 31, 1998, by and between Trilon Dominion Partners L.L.C. ("Trilon
Dominion") and Wilshire Technologies, Inc. ("Borrower").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into an Amended and Restated
Credit Agreement dated as of March 31, 1998 (the "Agreement") and pursuant to
the Agreement the Note was issued;
WHEREAS, the parties hereto wish to further amend the Note as set forth
in this Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Amendment. Section 4 of the Note is hereby amended by replacing the
phrase, "or (ii) December 31, 1998" in the second line of such section with the
phrase, "or (ii) January 31, 2000". Except as specifically set forth in this
Amendment the Agreement and all other documents and agreements entered into in
connection with the Agreement shall remain unchanged and in full force and
effect.
2. Governing Law. Except as otherwise expressly provided, this Amendment
shall be governed and construed in accordance with the laws of the State of
Delaware applicable to contracts made in such State and without regard to
conflicts of law doctrines.
3
<PAGE> 4
3. Counterparts. This Amendment may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other party.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
---------------------------------------
Name: James W. Klingler
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: /s/ Ronald W. Cantwell
---------------------------------------
Name: Ronald W. Cantwell
Title: President
4
<PAGE> 1
EXHIBIT 10.130
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD SUBLEASE
(SHORT-FORM TO BE USED WITH POST 1995 AIR LEASES)
1. PARTIES. This sublease, dated, for reference purposes only. December 8,
1998 is made by and between Wilshire Technologies, Inc., A California
Corporation ("SUBLESSOR") and Software of the Month Club Group, Inc., A
California Corporation ("SUBLESSEE").
2. PREMISES. Sublessor hereby subleases to Sublessee and Sublessee hereby
subleases from Sublessor for the term, at the rental, and upon all of the
conditions set forth herein, that certain real property, including all
improvements therein, and commonly known by the street address of 5861 Edison
Place, Carlsbad, CA 92008 located in the County of San Diego , State of
California and generally described as (describe briefly the nature of the
property) approximately a 7,170 square foot warehouse portion of a larger
building. (See Exhibit A attached) ("PREMISES").
3. TERM.
3.1. TERM. The term of this Sublease shall be for twenty-four (24) months
commencing on January 1, 1999 , and ending on December 31, 2000 ,
unless sooner terminated pursuant to any provision hereof.
3.2. DELAY IN COMMENCEMENT. Sublessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises by the
commencement date. If, despite said efforts, Sublessor is unable to
deliver possession as agreed, the rights and obligations of Sublessor
and Sublessee shall be as set forth in Paragraph 3.2 of the Master
Lease (as modified by Paragraph 7.3 of this Sublease).
4. RENT.
4.1. BASE RENT. Sublessee shall pay to Sublessor as Base Rent for the
Premises equal monthly payments of $3,871.80 in advance, on the first
(1st) day of each month of the term hereof. Sublessee shall pay
Sublessor upon the execution hereof $3,871.80 as Base Rent for
January, 1999. (See addendum 12.1). Base Rent for any period during
the term hereof which is for less than one month shall be a pro rata
portion of the monthly installment.
4.2. RENT DEFINED. All monetary obligations of Sublessee to Sublessor under
the terms of this Sublease (except for the Security Deposit) are
deemed to be rent ("RENT"). Rent shall be payable in lawful money of
the United States to Sublessor at the address stated herein or to such
other persons or at such other places as Sublessor may designate in
writing.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor upon execution
hereof $3,871.80 as security for Sublessee's faithful performance of Sublessee's
obligations hereunder. The rights and obligations of Sublessor and Sublessee as
to said Security Deposit shall be as set forth in Paragraph 5 of the Master
Lease (as modified by Paragraph 7.3 of this Sublease).
6. USE.
6.1. AGREED USE. The Premises shall be used and occupied only for office,
assembly, distribution and related uses for a computer software
fulfillment company and for no other purpose.
6.2. COMPLIANCE. (See addendum 12.2).
6.3. ACCEPTANCE OF PREMISES AND LESSEE. Sublessee acknowledges that:
Page 1 of 5
<PAGE> 2
(a) it has been advised by Brokers to satisfy itself with respect to
the condition of the Premises (including but not limited to the electrical, HVAC
and fire sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Sublessee's intended use.
(b) Sublessee has made such investigation as it deems necessary with
reference to such matters and assumes all responsibility therefor as the same
relate to its occupancy of the Premises, and
(c) neither Sublessor, Sublessor's agents, nor any Broker has made
any oral or written representations or warranties with respect to said matters
other than as set forth in this Sublease.
In addition, Sublessor acknowledges that:
(a) Broker has made no representations, promises or warranties
concerning Sublessee's ability to honor the Sublease or suitability to occupy
the Premises, and
(b) it is Sublessor's sole responsibility to investigate the
financial capability and/or suitability of all proposed tenants.
7. MASTER LEASE
7.1. Sublessor is the lessee of the Premises by virtue of a lease,
hereinafter the "MASTER LEASE", a copy of which is attached hereto
marked Exhibit B, wherein Frank Naliboff and Nathan Morton is the
lessor, hereinafter the "MASTER LESSOR"
7.2. This Sublease is and shall be at all times subject and subordinate to
the Master Lease.
7.3. The terms, conditions and respective obligations of Sublessor and
Sublessee to each other under this Sublease shall be the terms and
conditions of the Master Lease except for those provisions of the
Master Lease which are directly contradicted by this Sublease in which
event the terms of this Sublease document shall control over the
Master Lease. Therefore, for the purposes of this Sublease, wherever
in the Master Lease the work "Lessor" is used it shall be deemed to
mean the Sublessor herein and wherever in the Master Lease the word
"Lessee" is used it shall be deemed to mean the Sublessee herein.
7.4. During the term of this Sublease and for all periods subsequent for
obligations which have arisen prior to the termination of this
Sublease, Sublessee does hereby expressly assume and agree to perform
and comply with, for the benefit of Sublessor and Master Lessor, each
and every applicable obligation of Sublessor under the Master Lease.
7.5. The obligations that Sublessee has assumed under paragraph 7.4 hereof
are hereinafter referred to as the "SUBLESSEE'S ASSUMED OBLIGATIONS".
The obligations that Sublessee has not assumed under paragraph 7.4
hereof are hereinafter referred to as the "SUBLESSOR'S REMAINING
OBLIGATIONS".
7.6. Sublessee shall hold Sublessor free and harmless from all liability,
judgments, costs, damages, claims or demands, including reasonable
attorneys fees, arising out of Sublessee's failure to comply with or
perform Sublessee's Assumed Obligations.
7.7. Sublessor agrees to maintain the Master Lease during the entire term
of this Sublease, subject, however, to any earlier termination of the
Master Lease without the fault of the Sublessor, and to comply with or
perform Sublessor's Remaining Obligations and to hold Sublessee free
and harmless from all liability, judgments, costs, damages, claims or
demands arising out of Sublessor's failure to comply with or perform
Sublessor's Remaining Obligations.
7.8. Sublessor represents to Sublessee that the Master Lease is in full
force and effect and that no default exists on the part of any Party
to the Master Lease.
8. ASSIGNMENT OF SUBLEASE AND DEFAULT.
Page 2 of 5
<PAGE> 3
8.1. Sublessor hereby assigns and transfers to Master Lessor the
Sublessor's interest in this Sublease, subject however to the
provisions of Paragraph 8.2 hereof.
8.2. Master Lessor, by executing this document, agrees that until a Default
shall occur in the performance of Sublessor's Obligations under the
Master Lease, that Sublessor may receive, collect and enjoy the Rent
accruing under this Sublease. However, if Sublessor shall Default in
the performance of its obligations to Master Lessor then Master Lessor
may, at its option, receive and collect, directly from Sublessee, all
Rent owing and to be owed under this Sublease. Master Lessor shall
not, by reason of this assignment of the Sublease nor by reason of the
collection of the Rent from the Sublessee, be deemed liable to
Sublessee for any failure of the Sublessor to perform and comply with
Sublessor's Remaining Obligations.
8.3. Sublessor hereby irrevocably authorizes and directs Sublessee upon
receipt of any written notice from the Master Lessor stating that a
Default exists in the performance of Sublessor's obligations under the
Master Lease, to pay to Master Lessor (See addendum 12.3) statement
and request from Master Lessor, and that Sublessee shall pay such Rent
to Master Lessor without any obligation or right to inquire as to
whether such Default exists and notwithstanding any notice from or
claim from Sublessor to the contrary and Sublessor shall have no right
or claim against Sublessee for any such Rent so paid by Sublessee.
8.4. No changes or modifications shall be made to this Sublease without the
consent of Master Lessor.
9. CONSENT OF MASTER LESSOR.
9.1. In the event that the Master Lease requires that Sublessor obtain the
consent of Master Lessor to any subletting by Sublessor, then, this
Sublease shall not be effective unless, within ten days of the date
hereof, Master Lessor signs this Sublease thereby giving its consent
to this Subletting.
9.2. In the event that the obligations of the Sublessor under the Master
Lease have been guaranteed by third parties then neither this
Sublease, nor the Master Lessor's consent, shall be effective unless,
within 10 days of the date hereof, said guarantors sign this Sublease
thereby giving their consent to this Sublease.
9.3. In the event that Master Lessor does give such consent then:
(a) Such consent shall not release Sublessor of its obligations or
alter the primary liability of Sublessor to pay the Rent and perform
and comply with all of the obligations of Sublessor to be performed
under the Master Lease.
(b) The acceptance of Rent by Master Lessor from Sublessee or anyone
else liable under the Master Lease shall not be deemed a waiver by
Master Lessor of any provisions of the Master Lease.
(c) The consent to this Sublease shall not constitute a consent to
any subsequent subletting or assignment.
(d) In the event of any Default of Sublessor under the Master Lease,
Master Lessor may proceed directly against Sublessor, any guarantors
or anyone else liable under the Master Lease or this Sublease without
first exhausting Master Lessor's remedies against any other person or
entity liable thereon to Master Lessor.
(e) Master Lessor may consent to subsequent subletting and
assignments of the Master Lease or this Sublease or any amendments or
modifications thereto without notifying Sublessor or any one else
liable under the Master Lease and without obtaining their consent and
such action shall not relieve such persons from liability.
Page 3 of 5
<PAGE> 4
(f) In the event that Sublessor shall Default in its obligations
under the Master Lease, See addendum 12.4) option and without being
obligated to do so, may require Sublessee to attorn to Master Lessor
in which event Master Lessor shall undertake the obligations of
Sublessor under this Sublease from the time of the exercise of said
option to termination of this Sublease but Master Lessor shall not be
liable for any prepaid Rent not any Security Deposit paid by
Sublessee, nor shall Master Lessor be liable for any other Defaults of
the Sublessor under the Sublease.
9.4 The signatures of the Master Lessor and any Guarantors of Sublessor at
the end of this document shall constitute their consent to the terms
of this Sublease.
9.5 Master Lessor acknowledges that, to the best of Master Lessor's
knowledge, no Default presently exists under the Master Lease of
obligations to be performed by Sublessor and that the Master Lease is
in full force and effect.
9.6 In the event that Sublessor Defaults under its obligations to be
performed under the Master Lease by Sublessor, Master Lessor agrees to
deliver to Sublessee a copy of any such notice of default. Sublessee
shall have the right to cure any Default of Sublessor described in any
notice of default within ten days after service of such notice of
default on Sublessee. If such Default is cured by Sublessee then
Sublessee shall have the right of reimbursement and offset from and
against Sublessor.
10. BROKER'S FEES.
10.1 Upon execution hereof by all parties, Sublessor shall pay to Business
Real Estate Brokerage Co. a licensed real estate broker, ("Broker"), a fee as
set forth in a separate agreement between Sublessor and Broker, or in the event
there is no such separate agreement, the sum of $ per agreement for brokerage
services rendered by Broker to Sublessor in this transaction.
10.2 Sublessor agrees that if Sublessee exercises any option or right of
first refusal as granted by Sublessor herein, or any option or right
substantially similar thereto, either to extend the term of this Sublease, to
renew this Sublease, to purchase the Premises, or to lease or purchase adjacent
property which Sublessor may own or in which sublessor has an interest, then
Sublessor shall pay to Broker a fee in accordance with the schedule of Broker in
effect at the time of the execution of this Sublease. Notwithstanding the
foregoing, Sublessor's obligation under this Paragraph 10.2 in limited to a
transaction in which Sublessor is acting as a Sublessor, lessor or seller.
10.3 Master Lessor agrees that if Sublessee shall exercise any option or
right of first refusal granted to Sublessee by Master Lessor in connection with
this Sublease, or any option or right substantially similar thereto, either to
extend or renew the Master Lease, to purchase the Premises or any part thereof,
or to lease or purchase adjacent property which Master Lessor may own or in
which Master Lessor has an interest, or if Broker is the procuring cause of any
other lease or sale entered into between Sublessee and Master Lessor pertaining
to the Premises, any part thereof, or any adjacent property which Master Lessor
owns or in which it has an interest, then as to any of said transactions, Master
Lessor shall pay to Broker a fee, in cash, in accordance with the schedule of
Broker in effect at the time of the execution of this Sublease.
10.4 Any fee due from Sublessor or Master Lessor hereunder shall be due and
payable upon the exercise of any option to extend or renew, upon the execution
of any new lease, or, in the event of a purchase, at the close of escrow.
10.5 Any transferee of Sublessor's interest in this Sublease, or of Master
Lessor's interest in the Master Lease, by accepting an assignment thereof, shall
be deemed to have assumed the respective obligations of Sublessor or Master
Lessor under this Paragraph 10. Broker shall be deemed to be a third-party
beneficiary of this paragraph 10.
Page 4 of 5
<PAGE> 5
11. ATTORNEY'S FEES. If any party named herein brings an action to enforce the
terms hereof or to declare rights hereunder, the prevailing party in any
such action, on trial and appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the Court.
12. ADDITIONAL PROVISIONS. [If there are no additional provisions, draw a line
from this point to the next printed word after the space left here. If
there are additional provisions place the same here.]
See Addendum - Attached
Exhibit A "Floor Plan" - Attached
Hazardous Materials Disclaimer - Attached
Exhibit I - Master Lease
- --------------------------------------------------------------------------------
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY REAL ESTATE BROKER AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS SUBLEASE OR THE
TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
SUBLEASE
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES, SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND
THE SUITABILITY OF THE PREMISES FOR SUBLESSEE'S INTENDED USE.
WARNING: IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
CERTAIN PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO COMPLY WITH THE
LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.
- --------------------------------------------------------------------------------
Executed at: Wilshire Technologies, Inc.
------------------------- ----------------------------------------
on: By: John Van Egmond, President & CEO
---------------------------------- ------------------------------------
Address: By: /s/John Van Egmond
----------------------------- -------------------------------------
"Sublessor" (Corporate Seal)
Executed at: Software of the Month Club Group, Inc.
------------------------- ----------------------------------------
on: By: Jeffrey L. Wolff -- CFO
---------------------------------- -------------------------------------
Address: By: /s/Jeffrey L. Wolff
----------------------------- -------------------------------------
"Sublessee" (Corporate Seal)
Executed at: Frank Naliboff and Nathan Morton
------------------------- ----------------------------------------
on: By: /s/Frank Naliboff
---------------------------------- ------------------------------------
Address: By: /s/Nathan Morton
----------------------------- ------------------------------------
"Master Lessor" (Corporate Seal)
NOTE: THESE FORMS ARE OFTEN MODIFIED TO MEET CHANGING REQUIREMENTS OF LAW AND
NEEDS OF THE INDUSTRY. ALWAYS WRITE OR CALL TO MAKE SURE YOU ARE UTILIZING THE
MOST CURRENT FORM: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 SO. FLOWER
ST., SUITE 600, LOS ANGELES, CA 90017. (213) 687-8777.
Page 5 of 5
<PAGE> 6
ADDENDUM TO SUBLEASE DATED DECEMBER 9, 1998 BY AND BETWEEN WILSHIRE
TECHNOLOGIES, INC., A CALIFORNIA CORPORATION, AS SUBLESSOR AND SOFTWARE OF
THE MONTH CLUB GROUP, INC., A CALIFORNIA CORPORATION, AS SUBLESSEE FOR
THE PROPERTY AT 5861 EDISON PLACE, CARLSBAD,
CALIFORNIA
This addendum modifies the Sublease in the following particulars only. Should
the terms and conditions of this addendum conflict with the terms and conditions
of the Sublease, the terms and conditions of this addendum shall prevail.
12.1 BASE RENT: January 1,1999 to December 31, 1999 = $3,871.80 per month
modified gross.
January 1,2000 to December 31, 2000 = $4,015.20 per
month modified gross.
12.2 (6.2 MODIFIED) COMPLIANCE: Sublessee acknowledges it is accepting the
Premises in its "as is" condition, has inspected the Premises and satisfied
itself as to the condition and compliance with all applicable statutes,
laws, regulations, covenants, conditions, and restrictions of record. Note:
Sublessee is responsible for determining whether or not the zoning is
appropriate for its intended use, and acknowledges that past uses of the
Premises may no longer be allowed.
12.3 (8.3 MODIFIED): the Rent due and to become due under the Sublease,
provided Sublessor has received 10 days prior written notice of such
Default during which time Sublessor may cure the Default. Sublessor agrees
that, except as provided above, Sublessee shall have the right to rely upon
any such...
12.4 (9.3 (f) MODIFIED): then, after 10 days written notice to Sublessor
during which it may cure such Default, Master Lessor, at its...
12.5 TENANT IMPROVEMENTS: Sublessor, at Sublessor's sole cost and expense,
shall install a chain-link fence, 8 feet in height, demising the premises
to include a sliding gate next to the dock-high door, 8 feet in width.
Sublessee shall install a modular office with restroom at Sublessee's
expense, subject to the written consent of Sublessor and Master Lessor of
plans, specifications, method of payment and manner of installation.
Sublessee acknowledges and agrees that any and all of Sublessee's
improvements or alterations of the premises be removed, repaired and
restored to its original condition by Sublessee by the last day of the
Sublease term.
12.6 OPTION TO RENEW: Provided Sublessee is not then in Default and has no
more than one cured Default during the previous term, Sublessee shall have
two (2) Options to Renew the Sublease each for a period of twelve (12)
months. Sublessee shall exercise its Option(s) by giving Sublessor written
notice at least six (6) months prior to the ending date of the existing
lease term. The Rent shall be as follows:
January 1, 2001 to December 31, 2001 = $4,158.60 per month modified
gross.
January 1, 2002 to December 31, 2002 = $4,302.00 per month modified
gross.
12.7 PARKING: Sublessee shall have use of 10 unassigned parking spaces in
the southeast part of the parking area.
12.8 SIGNAGE: Sublessee shall have the right to place signage on the
building in accordance with the Master Lessor's and Sublessor's criteria
and prior written approval and subject to the CC&R's of the park.
12.9 DOCK HIGH ACCESSIBILITY: Sublessee shall have access to the dock-high
loading door during normal business hours of Sublessor.
12.10 TRASH, WATER AND ELECTRICAL: Sublessee shall reimburse Sublessor
($150.00) per month for trash and water usage and ($100.00) per month for
electrical usage. These charges will be reviewed on a quarterly basis and
can be adjusted by Sublessor based upon cost and usage.
12.11 RIGHTS AND REMEDIES: All rights and remedies available to the Master
Lessor pursuant to the terms of the Master Lease or by law as to the
Sublessor, shall be available to Sublessor as to the Sublessee.
12.12 BROKERAGE FEE: Sublessor shall pay Business Real Estate a brokerage
fee of 6% of the total sublease consideration of the initial sublease term
and option terms if exercised. The fee is due and payable upon the full
execution of subleases and at the time the Option(s) to Renew is exercised.
12.13 ADDITIONAL RENT: All amounts due under provisions of Master Lease are
sole responsibility of the Sublessor.
Page 1 of 2
<PAGE> 7
CONSULT YOUR ATTORNEY/ADVISORS - THIS DOCUMENT HAS BEEN PREPARED FOR APPROVAL BY
YOUR ATTORNEY. NO REPRESENTATION OR RECOMMENDATION IS MADE BY SUBLESSOR AS TO
THE LEGAL EFFECT OR TAX CONSEQUENCES OF THIS DOCUMENT OR TO THE TRANSACTION TO
WHICH IT RELATES. THESE ARE QUESTIONS FOR YOUR ATTORNEY.
AGREED AND ACCEPTED:
SUBLESSOR SUBLESSEE
Wilshire Technologies, Inc. Software of the Month Club Group, Inc.
A California Corporation Corporation A California Corporation
By: /s/John Van Egmond By: /s/Jeffrey L. Wolff
--------------------------------- ------------------------------------
John Van Egmond --President & CEO Jeffrey L. Wolff -- CFO
Date: December 15, 1998 Date: December 10, 1998
------------------------------- ----------------------------------
MASTER LESSOR
Frank Naliboff and Nathan Morton
By: /s/Frank Naliboff By: /s/Nathan Morton
-------------------------------- ------------------------------------
Frank Naliboff Nathan Morton
Date: Date:
------------------------------- -----------------------------------
Page 2 of 2
<PAGE> 1
EXHIBIT 10.131
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD SUBLEASE
(SHORT-FORM TO BE USED WITH POST 1995 AIR LEASES)
1. PARTIES. This sublease, dated, for reference purposes only. December 14,
1998, is made by and between Wilshire Technologies, Inc., A California
Corporation ("SUBLESSOR") and Intecon Systems, Inc., A California Corporation
("SUBLESSEE").
2. PREMISES. Sublessor hereby subleases to Sublessee and Sublessee hereby
subleases from Sublessor for the term, at the rental, and upon all of the
conditions set forth herein, that certain real property, including all
improvements therein, and commonly known by the street address of 5861 Edison
Place, Carlsbad, CA 92008 located in the County of San Diego , State of
California and generally described as (describe briefly the nature of the
property) approximately an 800 square foot warehouse portion of a larger
building. (See Exhibit A attached) ("PREMISES").
3. TERM.
3.1. TERM. The term of this Sublease shall be for six (6) months commencing
on February 1, 1999 , and ending on July 31, 1999 , unless sooner
terminated pursuant to any provision hereof.
3.2. DELAY IN COMMENCEMENT. Sublessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises by the
commencement date. If, despite said efforts, Sublessor is unable to
deliver possession as agreed, the rights and obligations of Sublessor
and Sublessee shall be as set forth in Paragraph 3.2 of the Master
Lease (as modified by Paragraph 7.3 of this Sublease).
4. RENT.
4.1. BASE RENT. Sublessee shall pay to Sublessor as Base Rent for the
Premises equal monthly payments of $432.00 in advance, on the first
(1st) day of each month of the term hereof. Sublessee shall pay
Sublessor upon the execution hereof $432.00 as Base Rent for February,
1999 (February, 1999 to July 31, 1999 = $432.00 per month modified
gross). Base Rent for any period during the term hereof which is for
less than one month shall be a pro rata portion of the monthly
installment.
4.2. RENT DEFINED. All monetary obligations of Sublessee to Sublessor under
the terms of this Sublease (except for the Security Deposit) are
deemed to be rent ("RENT"). Rent shall be payable in lawful money of
the United States to Sublessor at the address stated herein or to such
other persons or at such other places as Sublessor may designate in
writing.
5. SECURITY DEPOSIT. Sublessee shall deposit with Sublessor upon execution
hereof $432.00 as security for Sublessee's faithful performance of Sublessee's
obligations hereunder. The rights and obligations of Sublessor and Sublessee as
to said Security Deposit shall be as set forth in Paragraph 5 of the Master
Lease (as modified by Paragraph 7.3 of this Sublease).
6. USE.
6.1. AGREED USE. The Premises shall be used and occupied only for office,
assembly, distribution and related uses for a research company and for
no other purpose.
6.2. COMPLIANCE. Sublessee acknowledges it is accepting the Premises in its
"as is" condition, has inspected the Premises and satisfied itself as
to the condition and compliance with all applicable
PAGE 1 OF 5
<PAGE> 2
statutes, laws, regulations, covenants, conditions, and restrictions
of record. Note: Sublessee is responsible for determining whether or
not the zoning is appropriate for its intended use, and acknowledges
that past uses of the Premises may no longer be allowed.
6.3. ACCEPTANCE OF PREMISES AND LESSEE. Sublessee acknowledges that:
(a) it has been advised by Sublessor to satisfy itself with respect
to the condition of the Premises (including but not limited to the electrical,
HVAC and fire sprinkler systems, security, environmental aspects, and compliance
with Applicable Requirements), and their suitability for Sublessee's intended
use.
(b) Sublessee has made such investigation as it deems necessary with
reference to such matters and assumes all responsibility therefor as the same
relate to its occupancy of the Premises, and
(c) neither Sublessor, Sublessor's agents, nor any Broker has made
any oral or written representations or warranties with respect to said matters
other than as set forth in this Sublease.
In addition, Sublessor acknowledges that:
(a) Broker has made no representations, promises or warranties
concerning Sublessee's ability to honor the Sublease or suitability to occupy
the Premises, and
(b) it is Sublessor's sole responsibility to investigate the
financial capability and/or suitability of all proposed tenants.
7. MASTER LEASE
7.1. Sublessor is the lessee of the Premises by virtue of a lease,
hereinafter the "MASTER LEASE", a copy of which is attached hereto
marked Exhibit B, wherein Frank Naliboff and Nathan Morton is the
lessor, hereinafter the "MASTER LESSOR"
7.2. This Sublease is and shall be at all times subject and subordinate to
the Master Lease.
7.3. The terms, conditions and respective obligations of Sublessor and
Sublessee to each other under this Sublease shall be the terms and
conditions of the Master Lease except for those provisions of the
Master Lease which are directly contradicted by this Sublease in which
event the terms of this Sublease document shall control over the
Master Lease. Therefore, for the purposes of this Sublease, wherever
in the Master Lease the work "Lessor" is used it shall be deemed to
mean the Sublessor herein and wherever in the Master Lease the word
"Lessee" is used it shall be deemed to mean the Sublessee herein.
7.4. During the term of this Sublease and for all periods subsequent for
obligations which have arisen prior to the termination of this
Sublease, Sublessee does hereby expressly assume and agree to perform
and comply with, for the benefit of Sublessor and Master Lessor, each
and every applicable obligation of Sublessor under the Master Lease.
7.5. The obligations that Sublessee has assumed under paragraph 7.4 hereof
are hereinafter referred to as the "SUBLESSEE'S ASSUMED OBLIGATIONS".
The obligations that Sublessee has not assumed under paragraph 7.4
hereof are hereinafter referred to as the "SUBLESSOR'S REMAINING
OBLIGATIONS".
7.6. Sublessee shall hold Sublessor free and harmless from all liability,
judgments, costs, damages, claims or demands, including reasonable
attorneys fees, arising out of Sublessee's failure to comply with or
perform Sublessee's Assumed Obligations.
7.7. Sublessor agrees to maintain the Master Lease during the entire term
of this Sublease, subject, however, to any earlier termination of the
Master Lease without the fault of the Sublessor, and to comply with or
perform Sublessor's Remaining Obligations and to hold Sublessee free
and
PAGE 2 OF 5
<PAGE> 3
harmless from all liability, judgments, costs, damages, claims or
demands arising out of Sublessor's failure to comply with or perform
Sublessor's Remaining Obligations.
7.8. Sublessor represents to Sublessee that the Master Lease is in full
force and effect and that no default exists on the part of any Party
to the Master Lease.
8. ASSIGNMENT OF SUBLEASE AND DEFAULT.
8.1. Sublessor hereby assigns and transfers to Master Lessor the
Sublessor's interest in this Sublease, subject however to the
provisions of Paragraph 8.2 hereof.
8.2. Master Lessor, by executing this document, agrees that until a Default
shall occur in the performance of Sublessor's Obligations under the
Master Lease, that Sublessor may receive, collect and enjoy the Rent
accruing under this Sublease. However, if Sublessor shall Default in
the performance of its obligations to Master Lessor then Master Lessor
may, at its option, receive and collect, directly from Sublessee, all
Rent owing and to be owed under this Sublease. Master Lessor shall
not, by reason of this assignment of the Sublease nor by reason of the
collection of the Rent from the Sublessee, be deemed liable to
Sublessee for any failure of the Sublessor to perform and comply with
Sublessor's Remaining Obligations.
8.3. Sublessor hereby irrevocably authorizes and directs Sublessee upon
receipt of any written notice from the Master Lessor stating that a
Default exists in the performance of Sublessor's obligations under the
Master Lease, to pay to Master Lessor the Rent due and to become due
under the Sublease, provided Sublessor has received 10 days prior
written notice of such Default during which time Sublessor may cure
the Default. Sublessor agrees that, except as provided above,
Sublessee shall have the right to rely upon any such statement and
request from Master Lessor, and that Sublessee shall pay such Rent to
Master Lessor without any obligation or right to inquire as to whether
such Default exists and notwithstanding any notice from or claim from
Sublessor to the contrary and Sublessor shall have no right or claim
against Sublessee for any such Rent so paid by Sublessee.
8.4. No changes or modifications shall be made to this Sublease without the
consent of Master Lessor.
9. CONSENT OF MASTER LESSOR.
9.1. In the event that the Master Lease requires that Sublessor obtain the
consent of Master Lessor to any subletting by Sublessor, then, this
Sublease shall not be effective unless, within ten days of the date
hereof, Master Lessor signs this Sublease thereby giving its consent
to this Subletting.
9.2. In the event that the obligations of the Sublessor under the Master
Lease have been guaranteed by third parties then neither this
Sublease, nor the Master Lessor's consent, shall be effective unless,
within 10 days of the date hereof, said guarantors sign this Sublease
thereby giving their consent to this Sublease.
9.3. In the event that Master Lessor does give such consent then:
(a) Such consent shall not release Sublessor of its obligations or
alter the primary liability of Sublessor to pay the Rent and perform
and comply with all of the obligations of Sublessor to be performed
under the Master Lease.
(b) The acceptance of Rent by Master Lessor from Sublessee or anyone
else liable under the Master Lease shall not be deemed a waiver by
Master Lessor of any provisions of the Master Lease.
(c) The consent to this Sublease shall not constitute a consent to
any subsequent subletting or assignment.
PAGE 3 OF 5
<PAGE> 4
(d) In the event of any Default of Sublessor under the Master Lease,
Master Lessor may proceed directly against Sublessor, any guarantors
or anyone else liable under the Master Lease or this Sublease without
first exhausting Master Lessor's remedies against any other person or
entity liable thereon to Master Lessor.
(e) Master Lessor may consent to subsequent sublettings and
assignments of the Master Lease or this Sublease or any amendments or
modifications thereto without notifying Sublessor or any one else
liable under the Master Lease and without obtaining their consent and
such action shall not relieve such persons from liability.
(f) In the event that Sublessor shall Default in its obligations
under the Master Lease, then, after 10 days written notice to
Sublessor during which it may cure such Default, Master Lessor, at its
option and without being obligated to do so, may require Sublessee to
attorn to Master Lessor in which event Master Lessor shall undertake
the obligations of Sublessor under this Sublease from the time of the
exercise of said option to termination of this Sublease but Master
Lessor shall not be liable for any prepaid Rent not any Security
Deposit paid by Sublessee, nor shall Master Lessor be liable for any
other Defaults of the Sublessor under the Sublease.
9.4 The signatures of the Master Lessor and any Guarantors of Sublessor at
the end of this document shall constitute their consent to the terms
of this Sublease.
9.5 Master Lessor acknowledges that, to the best of Master Lessor's
knowledge, no Default presently exists under the Master Lease of
obligations to be performed by Sublessor and that the Master Lease is
in full force and effect.
9.6 In the event that Sublessor Defaults under its obligations to be
performed under the Master Lease by Sublessor, Master Lessor agrees to
deliver to Sublessee a copy of any such notice of default. Sublessee
shall have the right to cure any Default of Sublessor described in any
notice of default within ten days after service of such notice of
default on Sublessee. If such Default is cured by Sublessee then
Sublessee shall have the right of reimbursement and offset from and
against Sublessor.
10. ATTORNEY'S FEES. If any party named herein brings an action to enforce the
terms hereof or to declare rights hereunder, the prevailing party in any
such action, on trial and appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the Court.
11. ADDITIONAL PROVISIONS. [If there are no additional provisions, draw a line
from this point to the next printed word after the space left here. If
there are additional provisions place the same here.]
See Addendum -- Attached
Exhibit A "Floor Plan" -- Attached
Exhibit B -- Master Lease
PAGE 4 OF 5
<PAGE> 5
- --------------------------------------------------------------------------------
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY REAL ESTATE BROKER AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS SUBLEASE OR THE
TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
SUBLEASE
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES, SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND
THE SUITABILITY OF THE PREMISES FOR SUBLESSEE'S INTENDED USE.
WARNING: IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
CERTAIN PROVISIONS OF THE SUBLEASE MAY NEED TO BE REVISED TO COMPLY WITH THE
LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.
- --------------------------------------------------------------------------------
Executed at: Wilshire Technologies, Inc.
------------------------- ----------------------------------------
on: By: John Van Egmond, President & CEO
---------------------------------- ------------------------------------
Address: By: /s/John Van Egmond
----------------------------- -------------------------------------
"Sublessor" (Corporate Seal)
Executed at: Intecon Systems, Inc.
------------------------- ----------------------------------------
on: By: Ralph Sias, President
---------------------------------- -------------------------------------
Address: By: /s/Ralph Sias
----------------------------- -------------------------------------
"Sublessee" (Corporate Seal)
Executed at: Frank Naliboff and Nathan Morton
------------------------- ----------------------------------------
on: By: /s/Frank Naliboff
---------------------------------- ------------------------------------
Address: By: /s/Nathan Morton
----------------------------- ------------------------------------
"Master Lessor" (Corporate Seal)
NOTE: THESE FORMS ARE OFTEN MODIFIED TO MEET CHANGING REQUIREMENTS OF LAW AND
NEEDS OF THE INDUSTRY. ALWAYS WRITE OR CALL TO MAKE SURE YOU ARE UTILIZING THE
MOST CURRENT FORM: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 SO. FLOWER
ST., SUITE 600, LOS ANGELES, CA 90017. (213) 687-8777.
PAGE 5 OF 5
<PAGE> 6
ADDENDUM TO SUBLEASE DATED DECEMBER 14, 1998 BY AND BETWEEN WILSHIRE
TECHNOLOGIES, INC., A CALIFORNIA CORPORATION, AS SUBLESSOR AND
INTECON SYSTEMS INC., A CALIFORNIA CORPORATION, AS SUBLESSEE FOR THE
PROPERTY AT 5861 EDISON PLACE, CARLSBAD, CALIFORNIA
This addendum modifies the Sublease in the following particulars only. Should
the terms and conditions of this addendum conflict with the terms and conditions
of the Sublease, the terms and conditions of this addendum shall prevail.
12.1 TENANT IMPROVEMENTS: Sublessor, at Sublessor's sole cost and expense,
shall install a chain-link fence, 8 feet in height, demising the premises
to include a sliding gate next to the outside door, 6 feet in width.
Sublessee shall install a modular cleanroom at Sublessee's expense, subject
to the written consent of Sublessor and Master Lessor of plans,
specifications, method of payment and manner of installation. Sublessee
acknowledges and agrees that any and all of Sublessee's improvements or
alterations of the premises be removed, repaired and restored to its
original condition by Sublessee by the last day of the Sublease term.
12.2 OPTION TO RENEW: Provided Sublessee is not then in Default and has no
more than one cured Default during the previous term, Sublessee shall have
two (2) Options to Renew the Sublease each for a period of six (6) months.
Sublessee shall exercise its Option(s) by giving Sublessor written notice
at least three (3) months prior to the ending date of the existing lease
term. The Rent shall be as follows:
August 1, 1999 to January 31, 2000 = $432.00 per month
modified gross.
February 1, 2000 to July 31, 2000 = $432.00 per month
modified gross.
12.3 PARKING: Sublessee shall have use of 2 unassigned parking spaces in
the parking area.
12.4 DOCK HIGH ACCESSIBILITY: Sublessee shall have access to the dock-high
loading door during normal business hours of Sublessor.
12.5 TRASH, WATER AND ELECTRICAL: Sublessee shall reimburse Sublessor
($100.00) per month for trash, water and electrical usage. These charges
will be reviewed on a quarterly basis and can be adjusted by Sublessor
based upon cost and usage.
12.6 RIGHTS AND REMEDIES: All rights and remedies available to the Master
Lessor pursuant to the terms of the Master Lease or by law as to the
Sublessor, shall be available to Sublessor as to the Sublessee.
CONSULT YOUR ATTORNEY/ADVISORS - THIS DOCUMENT HAS BEEN PREPARED FOR APPROVAL BY
YOUR ATTORNEY. NO REPRESENTATION OR RECOMMENDATION IS MADE BY SUBLESSOR AS TO
THE LEGAL EFFECT OR TAX CONSEQUENCES OF THIS DOCUMENT OR TO THE TRANSACTION TO
WHICH IT RELATES. THESE ARE QUESTIONS FOR YOUR ATTORNEY.
AGREED AND ACCEPTED:
SUBLESSOR SUBLESSEE
Wilshire Technologies, Inc. Intecon Systems, Inc.
A California Corporation Corporation A California Corporation
By: /s/John Van Egmond By: /s/Ralph Sias
--------------------------------- ------------------------------------
John Van Egmond --President & CEO Ralph Sias, President
Date: 12/18/98 Date: 1/4/99
------------------------------- ----------------------------------
MASTER LESSOR
Frank Naliboff and Nathan Morton
By: /s/Frank Naliboff By: /s/Nathan Morton
-------------------------------- ------------------------------------
Frank Naliboff Nathan Morton
Date: Date:
------------------------------- -----------------------------------
PAGE 1 OF 1
<PAGE> 1
EXHIBIT 10.132
WILSHIRE TECHNOLOGIES, INC.
DISTRIBUTOR AGREEMENT
This Distributor Agreement ("this Agreement") is made effective and
entered into this 1st day of January, 1999 ("Effective Date") by and between
Wilshire Technologies, Inc. a corporation organized and existing under the laws
of California with its head office and principal place of business at 5861
Edison Place, Carlsbad, California 92008 ("Wilshire")
and
VWR Scientific Products Corporation, a corporation organized and existing under
the laws of Pennsylvania with its head office and principal place of business at
Goshen Corporate Park West, 1310 Goshen Parkway, West Chester, Pennsylvania,
19380 ("DISTRIBUTOR") ("VWR").
1. APPOINTMENT AND ACCEPTANCE.
1.1 Wilshire hereby appoints DISTRIBUTOR on an exclusive basis to
purchase and resell the Products in the Territory. DISTRIBUTOR accepts this
appointment on the terms and conditions set forth herein and obligates itself to
the requirements of this Agreement.
1.2 The term "Products" shall mean the Wilshire products listed on
Exhibit A attached hereto. Wilshire reserves the right to delete discontinued
Products upon thirty (30) days prior written notice to DISTRIBUTOR.
1.3 The term "Territory" shall mean the geographic area defined on
Exhibit B attached hereto. DISTRIBUTOR shall not reexport the Products from the
territory without the express written authorization of Wilshire.
2. DISTRIBUTOR'S REPRESENTATIONS.
In order to induce Wilshire to enter into this Agreement DISTRIBUTOR,
and its undersigned officer, warrant and represent that:
2.1 DISTRIBUTOR is a corporate entity duly organized and in good
standing, and will remain in compliance with all applicable laws in the
Territory.
2.2 DISTRIBUTOR is and will remain an independent contractor with
respect to its relationship with Wilshire. DISTRIBUTOR agrees that Wilshire has
granted it no authority to make changes to Wilshire's terms and conditions of
sale, to extend Wilshire warranties or, in general, to enter into contracts or
make quotations on behalf of or to bind Wilshire in any transactions with
DISTRIBUTOR's customers or any governmental agencies or third parties. No
relationship of employment shall arise between Wilshire
<PAGE> 2
and DISTRIBUTOR, or between Wilshire or any employee or representative of
DISTRIBUTOR. DISTRIBUTOR is at all times acting for its own account, and at its
own expense.
3. TERM.
3.1 Subject to the provisions of Section 14 below, the term of this
Agreement shall be for three (3) years, commencing on the Effective Date, unless
renewed as provided in Section 3.2 below.
3.2 If Wilshire and DISTRIBUTOR expressly agree in writing to renew this
Agreement prior to the foregoing expiration date, this Agreement shall continue
in full force and effect for one or more successive one (1) year renewal
periods. Notwithstanding the foregoing, if Wilshire or DISTRIBUTOR elect not to
renew or extend the Agreement, such party shall provide notice of its intention
to the other party no later than 90 days prior to the expiration date of the
applicable duration period.
4. PRICES AND TERMS.
4.1 The Product prices and discounts shall be those listed in Wilshire's
domestic and/or international distributor price list and in Exhibit E. The
prices quoted are exclusive of any national, state or local sales value added or
other taxes, customs duties, or similar tariffs and fees which shall be the
responsibility of DISTRIBUTOR. In the event that Wilshire is required to pay any
such taxes, duties or fees, such items will be added to the invoice to be paid
by DISTRIBUTOR.
4.2 Wilshire may change the prices of the Products as set forth in
exhibit A upon ninety (90) days prior written notice to DISTRIBUTOR.
4.3 All payment shall be made in United States dollars. Unless otherwise
agreed by Wilshire in writing, terms of payment for all international sale
transactions shall be by irrevocable letter of credit acceptable to Wilshire, or
prepayment by wire transfer. Terms of payment for all domestic sale transactions
shall be determined by Wilshire based on a review of the DISTRIBUTOR'S credit
history.
5. WILSHIRE OBLIGATIONS.
Wilshire will, during the term of this Agreement:
5.1 Provide training for a reasonable number of DISTRIBUTOR'S
representatives in the application, use, and sale of the Products. DISTRIBUTOR
agrees to pay all expenses of its representatives to attend such training
sessions, including salaries and transportation;
2
<PAGE> 3
5.2 Render periodic assistance to DISTRIBUTOR on technical and sales
problems and on technical support of the Products through Wilshire personnel and
through a national network of manufacturer sales representatives located in
strategic markets throughout the United States; The manufacturer sales
representatives are highly skilled professionals with many years of experience
in the equipment maintenance area of the semiconductor and microelectronics
industry.
5.3 Invoice DISTRIBUTOR for each Product sold on the day it is shipped
or in accordance with the terms of the accepted order;
5.4 Participate in trade shows, open houses or exhibits in the Territory
as Wilshire deems appropriate in its discretion.
5.5 Prepare and provide to the DISTRIBUTOR, at Wilshire's expense,
product specifications, product information bulletins, testing/stability
certification and any other information required for initial product
registration and maintaining registration compliance.
5.6 Pay part of the promotion costs as outlined in Exhibit C.
5.7 Include in all Wilshire Sales Representative Agreements a provision
that the Representative shall not, without the prior written consent of
Wilshire, undertake to promote or solicit orders for competitive products of the
type, specification and capability of the Products, or for competitive clean
room consumable products (not equipment) of the type, specification and
capability of the products sold by DISTRIBUTOR at the Effective Date of this
Agreement.
6. DISTRIBUTOR OBLIGATIONS.
In order to induce Wilshire to enter into this Agreement, and as a
condition of this continuation in force, DISTRIBUTOR agrees that it shall;
6.1 Actively use its best efforts to promote and penetrate the market
for the Products in the Territory;
6.2 Maintain adequate premises and facilities within the Territory, at
its own expense, from which to inventory, demonstrate and sell the Products;
6.3 Sell the annual minimum quantity of Products as outlined in Exhibit
D; If quantities are not achieved, Wilshire can terminate this Agreement subject
to paragraphs 3.2 and 13.1.2.
6.4 Employ an adequate number of capable personnel to engage in the sale
of the Products;
3
<PAGE> 4
6.5 Require its sales personnel from time to time, as may be mutually
agreeable, to visit Wilshire's facility (or other facility designated by
Wilshire) at DISTRIBUTOR's expense, for the purpose of developing expertise in
the application, capabilities, competitive advantages, and use of the Products;
6.6 Pay part of the promotion costs as outlined in Exhibit C;
6.7 Cooperate with Wilshire in obtaining marketing and competitive data;
6.8 Provide Wilshire an itemized account of sales on a monthly basis.
This report will be provided no later than the 15th day of the month following
the sale. This report will include the following fields of information, VWR
manager name and ID number, VWR sales representative name and ID number,
customer number, city, state, zip code, invoice date, vendor number, vendor
catalog number, VWR catalog number, unit of measure, unit sold and extended
cost.
6.9 Submit to Wilshire regular quarterly status reports reflecting sales
activities and anticipated requirements of customers in the Territory;
6.10 Shall submit purchase orders for product(s) to Wilshire in writing
by mail, courier, or telefax, which shall set forth (a) an identification of
product(s) ordered, (b) quantity, (c) requested delivery dates and (d) shipping
instructions and shipping address.
6.11 Not undertake to represent, distribute, or otherwise handle
competitive products of the type, specification and capability of the Products.
6.12 Furnish Wilshire copies of DISTRIBUTOR's certain public financial
information and any updates which Wilshire personnel may request from time to
time.
6.13 Register this Agreement with any government authority if required,
and shall be responsible for payment of any required tax, fee, fine, or duty
levied thereon.
6.14 On an ongoing basis, use best efforts to convert its existing foam
wiper and swab products from competitive suppliers to foam wiper and swab
products supplied by Wilshire on items where there is a direct cross reference.
The only exception will be customers who decide to maintain their current
product.
6.15 DISTRIBUTOR agrees to follow the list price guidelines as set forth
on the attached price list and Exhibit A.
7. FORECASTS/PURCHASE ORDERS.
7.1 During the first week of each quarter, DISTRIBUTOR shall forward to
Wilshire a three (3) month forecast of Product purchases designating the
quantities of each model of the Products which DISTRIBUTOR intends to sell in
this period. In
4
<PAGE> 5
addition, DISTRIBUTOR will provide Wilshire with a quarterly projection for the
period of one year for each of the Products.
7.2 Any purchase orders issued by DISTRIBUTOR are subject to acceptance
by Wilshire and will not be deemed accepted until a written confirmation has
been dispatched by Wilshire.
8. DELIVERY/TITLE/RISK OF LOSS.
8.1 Delivery of all Products ordered by DISTRIBUTOR for domestic
shipment shall be made FOB point of shipment (e.g., Wilshire's Carlsbad,
California facility). Delivery of all Products ordered by DISTRIBUTOR for
international shipment shall be made EX Works (e.g., Wilshire's Carlsbad,
California facility). ICC Incoterms (1990 editions) shall apply to all
international shipments, except insofar as these Incoterms may be inconsistent
with the terms of this Agreement.
8.2 Risk of loss to the Products shall pass to DISTRIBUTOR at the point
of shipment (e.g., Wilshire's Carlsbad, California facility).
8.3 All Products ordered pursuant to accepted purchase orders will be
scheduled for delivery in accordance with Wilshire's then current and normal
delivery times. Wilshire shall not be responsible for failure to deliver or
comply with any provision of this Agreement if such non-performance is due to
causes beyond its reasonable control such as, but not limited to, acts of God,
fire or explosions, civil and labor disturbances or delays in transportation. In
such event, the time for performance hereunder shall be extended by the period
of time attributable to the delay.
9. PRODUCT WARRANTY.
9.1 DISTRIBUTOR understands and acknowledges that this Product Warranty
is made to DISTRIBUTOR only and shall not be passed through to DISTRIBUTOR's
customer.
9.2 Wilshire warrants the Products to be free from defects in material
and workmanship for thirty (30) days from date of shipment to VWR customer.
9.3 The sole responsibility of Wilshire under the foregoing warranty
shall be limited, at its option, to the repair or replacement of defective
Products returned by DISTRIBUTOR to Wilshire, at Wilshire's expense.
9.4 All Wilshire warranties hereunder are conditioned upon proper
storage, handling and use of the Products in the application for which they are
intended.
9.5 THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED
5
<PAGE> 6
(INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE).
REPAIR OR REPLACEMENT IN THE MANNER PROVIDED ABOVE SHALL BE THE SOLE AND
EXCLUSIVE REMEDY OF PURCHASER FOR BREACH OF WARRANTY AND SHALL CONSTITUTE
FULFILLMENT OF ALL LIABILITIES OF Wilshire WITH RESPECT TO THE QUALITY AND
PERFORMANCE OF THE PRODUCTS.
9.6 In no event shall Wilshire's liability to DISTRIBUTOR, whether in
contract or in tort (including negligence and strict liability), exceed the
price of the Product from which such liability arises.
9.7 Wilshire shall add DISTRIBUTOR as an "additional insured" under the
coverage of its general liability policy which shall have the coverages and
policy limits as set forth in the certificate of insurance attached hereto as
Exhibit F. Further, Wilshire shall maintain such coverage during the term of
this Agreement. DISTRIBUTOR understands and acknowledges that such general
liability coverage is written on an "occurance" basis. In the event of a
termination of this Agreement, Wilshire shall continue to maintain such general
liability coverage (including additional insured coverage for the benefit of
DISTRIBUTOR) for a period of two (2) years from the effective date of
termination.
10. COMPLIANCE WITH LAWS IN THE TERRITORY.
DISTRIBUTOR and Wilshire shall strictly comply with all applicable laws,
rules, regulations and other governmental requirements governing the
manufacture, packaging, labeling, distribution and sale of the Products in the
Territory. Such compliance shall include, but shall not be limited to, the
following:
10.1 DISTRIBUTOR shall keep Wilshire informed of the particular
requirements imposed on such products by the laws and regulations of the
Territory;
10.2 DISTRIBUTOR shall distribute, promote and sell the Products only
for the uses and applications approved by Wilshire and as permitted under the
applicable laws and regulations in the Territory;
10.3 DISTRIBUTOR shall comply with any recalls of the Products initiated
by Wilshire or governmental authorities; and
10.4 DISTRIBUTOR shall promptly disclose to Wilshire all reports, data
and other information received by DISTRIBUTOR relating to the unfavorable
(including physiological or psychological) effects or toxicity of the Products.
Wilshire will promptly address all reports received and reply in writing to
DISTRIBUTOR.
6
<PAGE> 7
11. WILSHIRE'S PROPRIETARY INFORMATION AND RIGHTS.
11.1 Each party acknowledges and understands that all information
disclosed by one party to the other not generally known concerning Wilshire and
DISTRIBUTOR and the Products, including but not limited to a party's
organization and business affairs, customer lists, sales information, operating
procedures and practices, technical data, designs, know-how, trade secrets, and
processes (the "Proprietary Information"), whether owned by such party or
licensed by such party from third parties, is subject to valuable proprietary
interest of the disclosing party, and that the receiving party is under an
obligation to maintain the confidentiality of such Proprietary Information.
Without limiting the generality of the foregoing obligations, the receiving
party agrees that for the term of this Agreement and thereafter until such time
as the Proprietary Information is in the public domain, such receiving party
will (i) not disclose, publish or disseminate any Proprietary Information, (ii)
not use any Proprietary Information for its own account, (iii) not authorize any
other person to disclose, publish or disseminate the Proprietary Information,
and (iv) treat all Proprietary Information in a confidential manner, including
appropriate marking and secure storage of written Proprietary Information.
11.2 During the term of this Agreement, DISTRIBUTOR is authorized to use
Wilshire trademarks for the Products in connection with DISTRIBUTOR's
advertisement, promotion and distribution of the Products in the Territory.
DISTRIBUTOR acknowledges that Wilshire owns and retains all patents, trademarks,
copyrights and other proprietary rights in the Products, and agrees that it will
not at any time during or after the termination of this Agreement assert or
claim any interest in or take any action which may adversely affect the validity
or enforceability of any patent, trademark, trade name, trade secret, copyright,
or logo belonging to or licensed to Wilshire.
11.3 DISTRIBUTOR agrees to use reasonable efforts to protect Wilshire's
proprietary rights and to cooperate in Wilshire's efforts to protect its
proprietary rights. DISTRIBUTOR agrees to notify Wilshire of any known or
suspected breach of Wilshire's proprietary rights and to cooperate with Wilshire
without making any charge therefore in any action by Wilshire to investigate or
remedy an infringement of such rights.
11.4 Neither DISTRIBUTOR nor its employees and agents, shall, without
Wilshire's prior consent, alter any of the Products or remove, alert, obliterate
or mar any notice or legend of Wilshire's patent, copyright, trademarks or trade
secrets.
12. INFRINGEMENT INDEMNIFICATION.
12.1 Wilshire shall defend any claim, suit or proceeding brought against
DISTRIBUTOR so far as it is based on a claim that the use, transfer or resale of
any Products delivered hereunder constitutes an infringement of a patent,
trademark or copyright registered in the United States, so long as Wilshire is
notified promptly in
7
<PAGE> 8
writing by the DISTRIBUTOR of any such action and given full authority,
information and assistance at Wilshire's expense for the defense of any such
claim or proceedings. Wilshire shall pay all damages and cost awarded against
the DISTRIBUTOR but shall not be responsible for any settlement made without its
consent. In the event of final judgment which prohibits the DISTRIBUTOR or the
DISTRIBUTOR's customers from continued use of any Products by reason of
infringement of such patent, trademark or copyright, Wilshire may, at its sole
option and at its expense, obtain the rights to continued use of any such
Product, replace or modify such Product so that it is no longer infringing.
12.2 Wilshire shall have no liability to the DISTRIBUTOR under any
provisions of this Section 12 if any patent, trademark or copyright infringement
or claim thereof is based upon the use of Products delivered hereunder in
connection or in combination with equipment or devices not delivered by Wilshire
or use of any such Product in a manner for which the same was not designed.
13. TERMINATION.
13.1 Wilshire or DISTRIBUTOR may terminate this Agreement at any time
prior to the expiration of its stated term upon the occurrence of any of the
following events, each of which is expressly declared to be "Just Cause" for
termination of this Agreement:
13.1.1 DISTRIBUTOR defaults in any payment due Wilshire for
Products purchased under this Agreement and such default continues unremedied
for a period of fifteen (15) days following Wilshire's notice to default;
13.1.2 DISTRIBUTOR fails to meet the annual minimum quota agreed
to and set forth in Exhibit D;
13.1.3 DISTRIBUTOR or Wilshire fails to perform any other
material obligation, warranty, duty or responsibility under the Agreement, and
such failure or default continues unremedied for a period of thirty (30) days
following the other party's notice;
13.1.4 DISTRIBUTOR or Wilshire becomes insolvent; proceedings are
instituted by or against it in bankruptcy, insolvency, reorganization or
dissolution; or it makes an assignment for the benefit of creditors; or
13.1.5 DISTRIBUTOR or Wilshire is merged, consolidated, or
substantially changes the nature or character of its business, or substantially
changes its management ownership or principals, excluding an increase in
ownership of DISTRIBUTOR by E. Merck, who currently owns 49% of DISTRIBUTOR.
13.1.6 DISTRIBUTOR or Wilshire is affected by a force majeure
event which continues for more than six (6) months.
8
<PAGE> 9
13.2 Upon termination hereby by either party:
13.2.1 All sums due to either party from the other shall be
promptly paid;
13.2.2 DISTRIBUTOR orders received and accepted by Wilshire prior
to termination of this Agreement shall be fulfilled in accordance with their
terms;
13.2.3 All property belonging to one party but in the custody of
the other shall be returned;
13.2.4 DISTRIBUTOR shall cease all display, advertising and use
of Wilshire tradenames, trademarks, logos and designations, except uses on the
Products which remain in DISTRIBUTOR's possession; and
13.2.5 Wilshire shall have the option to repurchase any or all of
the Products in DISTRIBUTOR inventory which are new and unused at net price paid
originally by DISTRIBUTOR.
14. APPLICABLE LAW AND VENUE.
This agreement is made pursuant to, and shall be construed and enforced
exclusively in accordance with, the internal laws of the Commonwealth of
Pennsylvania )and United States federal law, to the extent applicable), without
giving effect to otherwise applicable principles of conflicts of l\aw. Any
lawsuit arising from or related to this agreement shall be brought exclusively
be fore the United States District Court for the Eastern District of
Pennsylvania or any Commonwealth court sitting in Chester County, Pennsylvania
and each party hereby consents to the jurisdiction of any such court.
15. LIMITATION OF LIABILITY.
Neither Wilshire nor DISTRIBUTOR shall be liable to the other, or to
DISTRIBUTOR's customers, for any special, indirect, or consequential damages,
including but not limited to loss of profits, loss of business opportunities, or
loss of business investment.
16. INDEMNIFICATION.
DISTRIBUTOR agrees to indemnify and hold Wilshire harmless from any
costs, claims, damages, losses, liabilities or expenses (including reasonable
attorney's fees) asserted by any third party resulting from DISTRIBUTOR's breach
of this Agreement, inaccurate representation or warranty made by DISTRIBUTOR, or
failure to conform to local laws and regulations.
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<PAGE> 10
17. ASSIGNMENT.
Neither party may assign any of the rights or obligations set forth in
this Agreement without the prior written consent of the other, provided that
Wilshire shall have the right to assign any portion of the Agreement to its
subsidiaries and affiliated companies.
18. NOTICES.
All notices and demands under this Agreement shall be in writing and
shall be served by personal service or by mail at the address of the receiving
party first stated in this Agreement (or such different address as may be
designated by such party to the other in writing). All notices or demands by
mail shall be by facsimile, or by certified or registered airmail,
return-receipt requested, and shall be deemed complete upon receipt.
19. INTEGRATED AGREEMENT.
This Agreement (and attached Exhibits) constitutes the entire
understanding and agreement between Wilshire and DISTRIBUTOR and terminates and
supersedes all prior formal or informal understandings. Should any Section of
this Agreement be held unenforceable by a court of law or other tribunal having
jurisdiction over both parties, Wilshire or DISTRIBUTOR may elect to terminate
this Agreement.
20. LANGUAGE AND ORIGINALS.
This Agreement has been written in the English language. It may be
translated, for convenience, into other languages. However, in case of error or
disagreement, the executed English language version shall prevail.
This Agreement shall be executed in three (3) original copies, one for
each party, and one that DISTRIBUTOR can use for registration purposes as
needed.
21. PROMOTIONAL MATERIALS.
Both DISTRIBUTOR and Wilshire must agree on promotional materials used
in this alliance.
22. DECON OPPORTUNITIES.
In the event that DISTRIBUTOR enters the decon industries (off line
cleaning of process tools) Wilshire will be paid a 5% royalty based on sales in
return for bringing this opportunity to DISTRIBUTOR.
10
<PAGE> 11
Entered into in West Chester, Pennsylvania, U.S.A.
WILSHIRE TECHNOLOGIES, INC. VWR SCIENTIFIC PRODUCTS
BY: /s/ Kevin Mulvihill BY: /s/ Kevin P. Leak
TITLE: Executive Vice President TITLE: Vice President
DATE: January 20, 1999 DATE: January 20, 1999
11
<PAGE> 12
DISTRIBUTOR AGREEMENT
BETWEEN WILSHIRE AND VWR
EXHIBIT A
The Products
See attached UltraSOLV(TM) Chamber Cleaning Price List
EFFECTIVE DATE: January 1, 1999
WILSHIRE: /s/ Kevin Mulvihill
VWR: /s/ Kevin Leak
12
<PAGE> 13
DISTRIBUTOR AGREEMENT
BETWEEN WILSHIRE AND VWR
EXHIBIT B
The Territory / Market
The United States of America
EFFECTIVE DATE: January 1, 1999
WILSHIRE: /s/ Kevin Mulvihill
VWR: /s/ Kevin Leak
13
<PAGE> 14
DISTRIBUTOR AGREEMENT
BETWEEN WILSHIRE AND VWR
EXHIBIT C
Wilshire and DISTRIBUTOR Promotion Plan
INTRODUCTION
In order to establish brand identity for DISTRIBUTOR and Wilshire and to become
the market leader, various marketing and advertising projects must be
undertaken. The projects and their associated costs are estimated in the
following table.
<TABLE>
<CAPTION>
1999 2000 2001
---- ---- ----
<S> <C> <C> <C>
Direct Mail
Magazine Advertising
Trade Show Attendance
DISTRIBUTOR Representative
Training
Literature
Technical Seminars _______ _______ ______
Total $62,000 $80,000 $95,000
------- ------- -------
</TABLE>
1. DISTRIBUTOR and Wilshire agree to split the costs on a 50/50 basis. The above
costs are estimates only. All costs and projects have to be agreed to in writing
prior to the costs being incurred. DISTRIBUTOR shall have the right to approve
all joint publications. The costs for 2000 and 2001 may be revised by
DISTRIBUTOR or Wilshire if the sales by DISTRIBUTOR to end-users is less than
$360,000 in 1999.
2. DISTRIBUTOR will not charge Wilshire any customary fees for booth space at
DISTRIBUTOR'S national sales meeting during the term of this Agreement.
3. DISTRIBUTOR will give Wilshire the opportunity to make a presentation at the
DISTRIBUTOR'S national sales meeting at no cost to Wilshire during the term of
this Agreement.
4. DISTRIBUTOR will invite Wilshire to attend DISTRIBUTOR'S regional sales
meetings at least twice per year at no cost to Wilshire during the term of this
Agreement.
14
<PAGE> 15
5. DISTRIBUTOR will give Wilshire's products a priority position in
DISTRIBUTOR'S product catalog and web site within the designated product
category at no cost to Wilshire during the term of this Agreement.
6. DISTRIBUTOR will give Wilshire's products space at all of DISTRIBUTOR'S local
and regional trade shows in which Wilshire participates at no cost to Wilshire
for the duration of this Agreement.
EFFECTIVE DATE: January 1, 1999
WILSHIRE: /s/ Kevin Mulvihill
VWR: /s/ Kevin Leak
15
<PAGE> 16
DISTRIBUTOR AGREEMENT
BETWEEN WILSHIRE AND VWR
EXHIBIT D
Minimum Purchase Quantities
<TABLE>
<S> <C>
1999 $1,000,000
2000 $2,000,000
2001 $4,000,000
</TABLE>
16
<PAGE> 17
DISTRIBUTOR AGREEMENT
BETWEEN WILSHIRE AND VWR
EXHIBIT E
Commission Schedule
From the Effective Date until two years after the Effective Date
<TABLE>
<CAPTION>
Representation Territory Commission
------------------------ -----------
<S> <C>
With a Manufacturer's Sales Representative 25% Discount off Suggested Resale
Price shown in Exhibit A.
Without a Manufacturer's Sales Representative 25% Discount off Suggested Resale
Price shown in Exhibit A,
plus
a Rebate of 15% of Suggested Resale
Price shown in Exhibit A.(Note 1)
</TABLE>
From the beginning of the third year after the Effective Date until
Termination
<TABLE>
<CAPTION>
Representation Territory Commission
------------------------ ----------
<S> <C>
With a Manufacturer's Sales Representative 28% Discount off Suggested Resale
Price shown in Exhibit A.
Without a Manufacturer's Sales Representative 28% Discount off Suggested Resale
Price shown in Exhibit A,
plus
a Rebate of 12% of Suggested Resale
Price shown in Exhibit A.(Note 1)
</TABLE>
Note 1: Rebate will be paid monthly to DISTRIBUTOR after verification of the
monthly sales reports provided by DISTRIBUTOR.
EFFECTIVE DATE: January 1, 1999
WILSHIRE: /s/ Kevin Mulvihll
VWR: /s/ Kevin Leak
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-KSB FOR THE YEAR ENDED NOVEMBER 30, 1998, 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-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> NOV-30-1998
<CASH> 42
<SECURITIES> 0
<RECEIVABLES> 315
<ALLOWANCES> 5
<INVENTORY> 1,228
<CURRENT-ASSETS> 1,953
<PP&E> 4,523
<DEPRECIATION> 958
<TOTAL-ASSETS> 6,011
<CURRENT-LIABILITIES> 9,813
<BONDS> 0
0
0
<COMMON> 25,907
<OTHER-SE> (29,709)
<TOTAL-LIABILITY-AND-EQUITY> 6,011
<SALES> 3,846
<TOTAL-REVENUES> 3,846
<CGS> 3,295
<TOTAL-COSTS> 5,678
<OTHER-EXPENSES> (3)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 871
<INCOME-PRETAX> (2,700)
<INCOME-TAX> 1
<INCOME-CONTINUING> (2,701)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,701)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
