SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1999
Commission file number 0-22136
MENLO ACQUISITION CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 77-0332937
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
100 Misty Lane Parsippany, NJ 07054
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (973) 560-1400
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Title of each class:
Common stock $0.0001 par value
Indicate by check mark whether the registrant (1) has filed all reports required
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes No X
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to the Form 10-KSB. [ X}
At March 28, 2000 the registrant had issued and outstanding an aggregate of
5,263,348 shares of its common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Proxy Statement for the Annual Meeting of Shareholders
to be held on June 7, 2000, are incorporated by reference in Part III. The
Company's proxy statement will be filed within 120 days after December 31, 1999.
The issuers revenues from its most recent fiscal year were $13,594,524.
Aggregate market value of the voting stock held by non-affiliates of the
registrant on March 28, 2000 was $597,128.
<PAGE>
Menlo Acquisition Corporation
Annual Report on Form 10-KSB
For the Fiscal Year Ended December 31, 1999
Table of Contents
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
Cautionary Statement Regarding Forward-Looking Statements
The statements in this business section that are forward-looking are based on
current expectations and actual results may differ materially. The
forward-looking statements include those regarding future adoption of
regulations and statutes having an impact on the Company's business, the impact
of current regulations and statutes, the possible impact of current and future
claims against the Company based upon negligence and other theories of
liability, and the ability to successfully complete one or more acquisitions as
part of the Company's growth strategy. Forward-looking statements involve
numerous risks and uncertainties that could cause actual results to differ
materially, including, but not limited to, the possibilities that the demand for
the Company's services may decline as a result of possible changes in general
and industry specific economic conditions and the effects of competitive
services and pricing; one or more current or future claims made against the
Company may result in substantial liabilities; and such other risks and
uncertainties as are described in reports and other documents filed by the
Company from time to time with the Securities and Exchange Commission.
Menlo Acquisition Corporation
Menlo Acquisition Corporation ("Menlo") is a publicly traded Delaware
Corporation formerly doing business as Focus Surgery Inc. ("Focus"). Menlo is
now a holding company engaged in acquiring other operating businesses. Prior to
the consummation of the Second Amended Plan of Reorganization in March 1999
further described below, Focus specialized in the research and development of
techniques and equipment for non-invasive surgeries. On February 9, 1996, Focus
filed a petition for relief under Chapter 11 of the Bankruptcy Code. In August
1996, while in bankruptcy, Focus sold substantially all of its assets to an
unrelated company. As part of the sale, Focus transferred all rights to the
"Focus Surgery, Inc." name to the buyer and amended its Articles of
Incorporation to change its name to Menlo Acquisition Corporation.
Environmental Waste Management Associates, LLC, a New Jersey limited liability
company ("EWMA LLC"), and Environmental Waste Management Associates, Inc. a New
Jersey corporation ("EWMA Inc." and, together with EWMA LLC, "EWMA"), are
environmental consulting firms providing a broad range of environmental services
related to the investigation and remediation of hazardous waste sites. EWMA has
offices in Parsippany and West Windsor, New Jersey.
Integrated Analytical Laboratories, LLC, a New Jersey limited liability company
("IAL LLC"), and Integrated Analytical Laboratories, Inc. a New Jersey
corporation ("IAL Inc." and, together with IAL LLC, "IAL"), are firms providing
analytical laboratory services to the environmental and pharmaceutical
industries. IAL is located in Randolph, New Jersey.
EWMA, Inc. and IAL, Inc. were organized under the laws of the State of New
Jersey in 1987 and each sold primarily all of their respective assets, except
accounts receivable, to the aforementioned limited liability companies in April
1997. EWMA, Inc. and IAL, Inc. currently have no operations but exist primarily
for the purpose of collecting outstanding receivables. Additionally, the
personnel of EWMA and IAL remained as employees of EWMA, Inc. and IAL, Inc.
EWMA, LLC; EWMA, Inc.; IAL, LLC; and IAL, Inc.; are further defined,
collectively,as "the Acquired Entities"
Reverse Acquisition:
On March 10, 1999, Menlo and the Acquired Entities consummated certain
transactions pursuant to the Second Amended Plan of Reorganization filed with
the Bankruptcy Court on August 12, 1998 and approved on August 26, 1998. Menlo
converted all of its outstanding shares of existing common stock to 263,348
shares of new common stock with a par value of $.0001 per share. Additionally,
Menlo issued 5,000,000 shares of new common stock in exchange for 99% of the
equity interest in the Acquired Entities (the "acquisition"). Subsequently, the
remaining 1% of the acquired entities was purchased from an affilliated party
for a nominal amount ($1).
As a result of the acquisition and the subsequent 1% purchase, the Acquired
Entities became wholly owned subsidiaries of Menlo. Former owners and members of
the Acquired Entities became the owners of approximately 95% of the 5,263,348
shares of common stock of Menlo outstanding upon the consummation of the
acquisition. Stockholders of Menlo prior to the acquisition comprised the
ownership of the remaining 5% of outstanding shares at the date of the
acquisition. Therefore, the transaction was treated for accounting purposes as a
"purchase business combination" and a "reverse acquisition" effective as of
March 10, 1999 in which Menlo was the legal acquirer and the Acquired Entities
were the accounting acquirer.
Accordingly, the assets and liabilities of the accounting acquirer (the Acquired
Entities) continued to be accounted for at their historical carrying values as
of March 10, 1999. As further explained in the Financial Statements, the fair
value of the 263,348 shares deemed to have been issued to the stockholders of
Menlo prior to the acquisition was included in the total cost of the acquisition
of Menlo. The total cost was then allocated to the fair values of the net assets
acquired and the excess of the cost over the fair value of the net assets
acquired was allocated to goodwill. The accompanying consolidated statement of
operations for the years ended December 31, 1999 and 1998 reflect the results of
operations of the Acquired Entities. Prior to the acquisition , Menlo was in
bankruptcy and had limited operating activity, therefore no activity for Menlo
from the effective date of the acquisition is reflected in the accompanying
statements.
Business and Management of Menlo
As a public holding company, Menlo's sole assets are its investments in the
Acquired Entities. While Menlo is a public reporting company, the Acquired
Entities will not be reporting companies, and there is no present intent to
register any of the Acquired Entities as a reporting company. The management of
Menlo will overlap significantly with that of the Acquired Entities.
As a holding company Menlo will not have ongoing sources of revenues or income
apart from the Acquired Entities. Therefore, Menlo will be entirely dependent on
the financial ability of the Acquired Entities to pay dividends to it and on the
declaration and payment of such dividends by the Acquired Entities for funds to
meet its financial obligations. The Board of Directors of Menlo, which will
control the timing and amount of any dividends, initially will be composed of
individuals closely associated with the Acquired Entities, and the former owners
of the Acquired Entities will own sufficient Common Stock of Menlo to control
the election of directors in the future.
Environmental Waste Management Associates (EWMA) - Consulting Segment
General
EWMA provides a broad range of environmental services related to the
investigation and remediation of hazardous waste sites. EWMA's services include
(i) investigation of the nature and extent of contamination at affected sites;
(ii) design of remedial treatment systems; (iii) construction and management of
such treatment systems; (iv) regulatory assistance; and (v) real estate transfer
assistance.
At the time it commenced operations in 1987, EWMA primarily performed Phase I
environmental site assessments and underground storage tank removal. Shortly
thereafter, in response to its customers' needs, it substantially expanded its
environmental services and developed a comprehensive hazardous waste service
line, including a broad range of services related to environmental investigation
and remediation of soil and groundwater. More recently, EWMA also has expanded
its services into the areas of industrial hygiene and health and safety
compliance.
EWMA generally provides services for its customers pursuant to written
agreements. These agreements are primarily on a "fixed price" basis, with
additions and changes effected through change orders, and, to a lesser extent,
on a "time-and-materials" basis.
Services
EWMA provides consulting, engineering, construction and analytical services
utilizing a diverse staff of qualified scientists, engineers, geologists,
hydrogeologists, industrial hygienists and chemists. Project management teams
are organized to effect efficient communication, technical expertise and
subcontractor support, in light of the nature and scope of each project.
EWMA also provides services to determine if an environmental hazard exists at a
subject site and to assess the nature of any such risk, particularly in light of
the nature and extent of the hazard with respect to human health and the
environment. Customers generally seek these services in connection with real
estate transfers and site audits. These services include, but are not limited
to, historical data gathering and review, site investigation and evaluation,
sample collection through intrusive and non-intrusive methods, risk
determination and remedial design and implementation.
EWMA pioneered the use of "Plume Dating," which is a method of determining the
"age" of certain contamination. It is also a technique to help determine the
past, present and future risk factors of environmental hazards. EWMA provides
Plume Dating services in conjunction with "expert witness" testimony for
customers and attorneys. This "chemical finger printing" may help determine the
fair allocation of liability among responsible parties.
EWMA provides remedial design services based on the results of site history,
investigation and risk analysis. Depending on these factors and applicable
regulatory requirements, a remedial design can take several forms, ranging from
natural attenuation to large scale treatment systems to alternative remedial
technologies. EWMA assists customers in determining the most cost effective
method of remediation and has the capability to provide a broad range of
services relating to the design, building, maintenance and operation of
appropriate remediation systems. In connection with its remedial design
services, EWMA also undertakes the processes necessary for regulatory permit
approval.
EWMA has extensive experience in the design, construction and maintenance of
treatment systems. Such remedial systems are designed to treat contaminants
found in the soils and groundwater. Such contaminates generally are hydrocarbons
and solvents from leaking underground tanks and local spills. EWMA's remedial
treatment systems are designed to reduce contamination in the soils and
groundwater to levels acceptable for human health. Technologies utilized include
both in-situ and ex-situ treatment, chosen from among carbon absorption, air
stripping, soil venting, air sparging, in-situ oxidative injection and
biological degradation. EWMA continues to adopt and employ new technologies in
an ongoing attempt to provide the most cost effective remediation possible.
EWMA audits facilities with respect to indoor air quality and health and safety
issues. In addition, EWMA designs and implements plans to address indoor air
quality and health and safety concerns at its customers' facilities. Both
monitoring of these plans and on site services are necessary to document
compliance with applicable federal, state and local requirements, from federal
Occupational Safety and Health Administration ("OSHA") and Toxic Substances
Control Act ("TSCA") regulations to noise and nuisance limitations imposed by
local statute or ordinance.
EWMA also provides on-site, operational services to remove, replace and retrofit
underground storage tanks. EWMA provides a broad range of services in connection
with compliance with applicable federal and state regulations. EWMA also
provides a range of other operational services, including excavation and
backfilling of soils, subsurface exploration and support for treatment system
installation.
Customers and Marketing
EWMA's customers are primarily private-sector organizations. During the fiscal
year ended December 31, 1999, approximately 95% of EWMA's gross revenues were
derived from private-sector customers with the remainder associated with
public-sector customers. No single customer accounted for more than 5% of EWMA's
revenues in 1999.
EWMA identifies new customers through marketing efforts, utilizing a
professional sales and marketing staff. EWMA participates in and presents at
trade shows and technical conferences and produces literature to support its
marketing program.
Competition
EWMA operates primarily in New Jersey, New York and Pennsylvania and competes
against companies that are both much larger and smaller than EWMA. EWMA
generally competes on the basis of price and service, including technical
expertise. EWMA believes that it is competitive because of its industry
contacts, customer relationships, sales and marketing efforts, competitive
pricing and technical expertise.
Personnel
EWMA provides its services through a staff of approximately 65 employees,
consisting of approximately 45 professional staff (including engineers,
geologists, hydrogeologists and biologists) and 20 support personnel. None of
EWMA's employees are represented by a labor union, and EWMA is not a party to
any collective bargaining agreement. EWMA believes its employee relations are
good.
Integrated Analytical Laboratories (IAL) - Lab Segment
General
IAL provides analytical laboratory services to the environmental and
pharmaceutical industries. IAL's services also include collection and
transportation of samples from the customer's site to the laboratory and
delivery of the results package to the customer.
Environmental consulting and remediation companies generally do not have the
in-house capability to perform analytical services, as such, IAL historically
has serviced such companies. Also, because companies in the pharmaceutical
industry similarly frequently out-source analytical services, IAL more recently
has positioned itself to capture this pharmaceutical business as well. Many
large pharmaceutical companies have facilities in and around New Jersey.
Therefore, IAL is both technically and geographically well positioned to serve
this market.
IAL provides services on both a "job-by-job" and "bid" basis. Where projects are
undertaken on a job-by-job basis, IAL provides its customers with a published
rate sheet, which is updated periodically based upon prevailing market
conditions, and which sets out the cost for each analytical parameter and the
time frame for each analysis to be completed.
IAL owns or leases with an option to purchase substantially all of the equipment
necessary to conduct the contracted analyses. This capital equipment is highly
sophisticated and maintenance intensive. Each type of analysis requires a
specialized type of equipment that is maintained and operated by experienced
chemists according to applicable regulations and protocol.
IAL is required by federal and state regulations to maintain strict Quality
Assurance/Quality Control ("QA/QC") procedures. IAL's QA/QC program was
developed in accordance with the Good Laboratory Practices and Current Good
Manufacturing Practices of the U.S. Food and Drug Administration (the "FDA").
This program calls for routine and independent assessments of IAL's performance,
data and procedures to assure compliance with approved Standard Operation
Procedures, which cover applicable aspects of the FDA's laboratory regulations.
To conduct its business, IAL also must maintain certifications for each type of
analysis performed and from most states from which IAL receives a sample,
although a number of states allow for certification reciprocity. IAL currently
runs approved soil, wastewater and drinking water analyses for New Jersey, New
York, Connecticut and Rhode Island. In addition, pursuant to available
certification reciprocity, IAL currently is permitted to receive and perform
analyses on samples from Pennsylvania, Colorado and Maryland. IAL also holds FDA
and U.S. Department of Agriculture ("USDA") certifications to perform certain
analyses. Once granted, continuation of these certifications generally is
subject to annual performance evaluations, as well as periodic unannounced
in-house audits of IAL's laboratory facilities.
Customers and Marketing
Substantially all of IAL's customers are private-sector organizations. Except
for EWMA, which accounted for 16.7%, no single customer accounted for more than
5% of IAL's gross revenues during fiscal 1999.
IAL identifies and attracts new customers through marketing efforts utilizing
its in-house professional sales and marketing staff. While IAL's facilities are
located in New Jersey, it accepts and processes samples from any state in which
it currently is certified or in which certification reciprocity permits it to
perform the desired analysis. IAL participates in trade shows and technical
conferences and produces literature to support its marketing program.
Competition
There has been a consolidation of the laboratory industry during the last three
to four years. As a consequence, pricing of analytical services, which
previously had been on a downward trend, has stabilized. However, competition
continues to be primarily on the basis of price and service, including technical
expertise. IAL believes that its competitive pricing, contacts, customer
relationships, sales and marketing efforts and technical expertise allow it to
remain stable and competitive. IAL competes against companies, certain of which
are substantially larger, but many of which are of approximately the same size
as, or smaller than, IAL.
Personnel
IAL provides its services through a staff of approximately 60 employees,
consisting of approximately 40 professional staff (including engineers,
chemists, biologists and other scientists) and 20 support personnel. None of
IAL's employees are represented by a labor union, and IAL is not a party to any
collective bargaining agreement. IAL believes its employee relations are good.
In-Situ Oxidative Technologies
In-Situ Oxidative Technologies ("ISOTEC") is owned 50% by Dr. Richard S.
Greenberg, Menlo's Chief Executive Officer, and 50% by an unrelated third party.
ISOTEC is in the business of remediating contaminated properties using a
proprietary in-situ treatment program. The services performed by ISOTEC are
similar in nature to those provided by the operating segments of Menlo. During
1999 and 1998, EWMA and IAL have generated revenue directly from ISOTEC in the
amounts of approximately $183,000 and $36,000, respectively (see the related
party footnote in the accompanying notes to consolidated financial statements).
Additionally, the similar nature of ISOTEC's services has enabled EWMA to obtain
contracts and generate revenues with unrelated customers in the past and may
potentially enable it to continue to do so in the future.
On December 6, 1999, Menlo entered into an agreement with ISOTEC and an
unrelated third party to advance it operating capital. As of the date of this
agreement, the Company was owed approximately $195,000 for services it had
provided on behalf of ISOTEC, of which approximately $162,000 was outstanding as
of December 31, 1998. In consideration for Menlo entering into the
aforementioned agreement, ISOTEC agreed to repay in full the outstanding balance
of approximately $195,000. In addition, Menlo was granted the opportunity to
purchase up to 50% of ISOTEC.
The agreement calls for Menlo to advance operating funds up to $250,000 to
ISOTEC in equal amounts to that being advanced by the unrelated third party. In
return, Menlo will receive an option to purchase 20% of Dr. Greenberg's
ownership interest in ISOTEC (10% of the Company) for each $50,000 or portion
thereof loaned to ISOTEC. The options are exercisable through June 30, 2001 at a
price of $1,000 per option. As of March 28, 2000, Menlo had loaned $80,000 to
ISOTEC and therefore has two options to purchase a total of 40% of Dr.
Greenberg's interest (20% of the Company) for $2,000. Due to ISOTEC's financial
condition, Menlo's $80,000 advance/option investment in ISOTEC is being carried
at $0. Management does not intend to make any advances in excess of the $250,000
total commitment to ISOTEC until ISOTEC shows an improvement in their financial
condition and ability to pay.
Potential Liability and Insurance
The Company, in the normal course of business, encounters potential liability,
including claims for errors and omissions, resulting from the performance of its
services. The Company is party to lawsuits and is aware of potential exposure
related to certain claims. In the opinion of management, adequate provision has
been made for all known liabilities that are currently expected to result from
these matters, and in the aggregate, such claims are not expected to have a
material impact on the financial position and liquidity of the Company.
Currently, the Company is provided a $5 million per occurrence, $10 million
aggregate professional services insurance policy through an unrelated, rated
carrier. The Company also maintains a general liability insurance policy with an
unrelated, rated carrier.
ITEM 2. DESCRIPTION OF PROPERTY
EWMA operates out of two facilities located in Parsippany and West Windsor, New
Jersey. The Parsippany facility consists of approximately 18,000 square feet of
office space leased from Greenberg Property LLC, a company controlled by Richard
S. Greenberg. The lease, which is at $14 per square foot, expires in June 2007
and is subject to two five-year renewal options. The West Windsor facility
consists of approximately 5,200 square feet of office and warehouse space leased
from an unaffiliated lessor. The lease, which is at $5 per square foot, expires
in December 2000. Additionally, EWMA leases a warehouse facility in Boonton, New
Jersey utilized for equipment and supply storage. The facility consists of
approximately 6400 square feet at a cost of $6 per square foot. The lease
expires in December 2004 and is leased from an unaffiliated Lessor. Management
believes that EWMA's facilities are adequate for EWMA's current needs and will
support anticipated future growth for at least the next five years. EWMA also
expects, based on current market conditions, that suitable additional space will
be available on commercially acceptable terms as required in the future.
IAL operates out of facilities located in Randolph, New Jersey, consisting of
five units of office and warehouse space leased from an unaffiliated lessor. The
lease, which calls for monthly payments of $6,875, expires in December 2000.
Management has entered into a contract to purchase the facility in which IAL
operates from the current unaffiliated lessor at a cost of $1,850,000. The
contract is subject to certain contingencies, including a mortgage contingency,
which are not yet satisfied. Purchase of the facility will support anticipated
future growth for at least the next five years. IAL also expects, based on
current market conditions, that suitable additional space will be available on
commercially acceptable terms as required in the future.
The principal offices of Menlo Acquisition Corporation are located at the EWMA
facility.
Menlo believes that the space afforded by its properties is adequate for the
current needs of its businesses.
ITEM 3.LEGAL PROCEEDINGS
The Company is currently subject to certain claims and lawsuits arising in the
ordinary course of its business. In the opinion of management, adequate
provision has been made in the Company's Consolidated Financial Statements for
all known liabilities that are currently expected to result from these claims
and lawsuits, and in the aggregate such claims are not expected to have a
material effect on the financial position of the Company. The estimates used in
establishing these provisions could differ from actual results. Should these
provisions change significantly, the effect on operations for any quarterly or
annual reporting period could be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to the vote of security holders during
the fourth quarter of the fiscal year-ended December 31, 1999.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The shares of Common Stock of the Company trade on the OTC "Bulletin Board"
under the symbol "MENL". The range of high and low reported closing sales prices
for the Common Stock as reported by Nasdaq during the fiscal year ended December
31, 1999 were as follows:
High Low
---- ---
Fiscal Year 1999
- -------------------
Quarter Ended:
March 31, 1999............. $1.50 $1.00
June 30, 1999.............. $3.00 $1.25
September 30, 1999......... $3.00 $2.50
December 31, 1999.......... $2.625 $0.25
Fiscal Year 1998
- --------------------
Quarter Ended:
March 31, 1998............. * *
June 30, 1998.............. * *
September 30, 1998......... * *
December 31, 1998.......... * *
The prices set forth above reflect inter dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
*During 1998, there was a limited trading market for the shares of Focus, which
had not yet emerged from bankruptcy.
Holders
On March 28, 2000, as reported by the Company's transfer agent, shares of Common
Stock were held by 367 holders of record.
Dividends
The Company did not pay any dividends during 1999. The payment by the Company of
dividends, if any, is within the discretion of the Board of Directors and will
depend on the Company's earnings, if any, its capital requirements and financial
condition, as well as other relevant factors. The Board of Directors does not
intend to declare any dividends in the foreseeable future, but instead intends
to retain earnings, if any, for use in the Company's business operations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Cautionary Statement Regarding forward-Looking Statements
This report contains forward-looking statements made pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995. The
statements are identified by words such as "will," "expect," "anticipate,"
"plans," or "intends" and by other descriptions of future circumstances or
conditions. Such statements are based on current expectations and actual results
may differ materially. The forward-looking statements include, but are not
limited to, the possible impact of current and future claims against the Company
based upon negligence and other theories of liability, the level of future
purchases of fixed assets and the possibility of the Company's making
acquisitions during the next 12 to 18 months. Forward-looking statements involve
numerous risks and uncertainties that could cause actual results to differ
materially, including, but not limited to, the possibilities that the demand for
the Company's services may decline as a result of possible changes in general
and industry specific economic conditions and the effects of competitive
services and pricing; one or more current or future claims made against the
Company may result in substantial liabilities; and such other risks and
uncertainties as are described in reports and other documents filed by the
Company from time to time with the Securities and Exchange Commission.
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this report.
Results of Operations
(In thousands of dollars, except share data)
The following tables set forth, for the years indicated: (i) the percentage that
certain items in the consolidated statements of income and comprehensive income
of the Company bear to gross revenues, and (ii) the percentage increase
(decrease) in dollar amounts of such items from year to year.
Comparison for Fiscal Years 1999 and 1998
Percentage
Increase
(Decrease)
Fiscal
Year
Percentage Ended
of Gross Revenue 12/31/99
Fiscal Year Ended vs.
12/31/99 12/31/98 12/31/98
Gross revenue 100.0% 100.0% 5.8%
Direct project costs and other
costs of operations 38.6 45.6 (10.5)%
------ ------ -------
Net revenue 61.4 54.4 19.5%
------ ------ ------
Expenses:
Labor and related expenses 13.6 14.6 (0.8)%
Selling, general and
administrative 38.0 37.8 6.3%
------- ------- --------
Totals 51.6 52.4 4.3%
------ ------ ------
Income from operations 9.8 2.0 404.2%
Other income (loss) 0.7 (2.6) 128.4%
------ -------- ------
Income (loss) before income
taxes 10.5 (0.6) 2,108.5%
===== ===== =========
Gross revenues for the fiscal year ended December 31, 1999 were $13,594 versus
$12,848 for the fiscal year 1998, an increase of 5.8%. Lab revenues increased
$832 (net of inter-segment billing) and Consulting revenues decreased slightly
by $85. Consulting revenue is composed of both hours billed by the professional
staff and pass-through billing of subcontractor costs associated with client
projects. The amount of pass-through billing decreased in 1999 versus 1998 but
was almost entirely offset by increased utilization of the professional staff
versus the prior year. Profitability from hours billed is greater than that from
pass-through billing and resulted in increased income from operations as further
discussed below. The significant increase in the revenue of the Lab segment was
a result of effective direct sales efforts from a larger sales force than in the
prior year, greater utilization of equipment used in performing Lab services and
the broadening of the customer base into the pharmaceutical industry.
Income from operations was $1,331 in 1999 as opposed to $264 for 1998. This
represents an increase of 404.2%. Operating margins rose to 9.8% for the current
period from 2.0% for fiscal 1998. The increase in operating income and margin
was due to higher profitability in both the Consulting and Lab segments. There
was a significant reduction in the dollar amount of direct project costs
incurred in the Consulting segment in 1999. Consulting revenue, however,
remained relatively constant. A significantly larger portion of revenue was
generated from professional services, which is a more profitable component.
Therefore, a larger percentage of revenue was recognized as income.
Profitability of the Lab segment resulted from the increased volume as noted
above. In the Lab segment, marginal costs decrease as the volume increases. It
costs approximately the same to perform one analysis as it does to perform
several of the same type. Therefore, as analysis volume and equipment
utilization increase, costs remain relatively constant and more income is
generated.
Labor and related expenses remained relatively constant as compared to the prior
year.
Selling, general and administrative expenses increased 6.3% compared to the
prior year primarily due to the increase in the Lab segment direct sales force
and their associated direct selling expenses.
Other income (loss), which is composed of interest expense, administrative
income and sundry, was 128.4% greater than in 1998. The 1998 other income (loss)
amount of ($334) included a charge of $306 related to the write-off of an
accounts receivable from an insolvent affiliate. No such charges were made in
1999. Interest expense decreased 62.6% in 1999 as compared to 1998. This
decrease was due to limited use of a revolving line of credit throughout 1999.
There have been no amounts outstanding on the line since early March 1999
whereas there was significant usage of the facility during 1998 (Borrowings
averaged approximately $500 throughout 1998). Additionally, interest charges on
an equipment loan held by the Lab segment have decreased due to normal
amortization of the loan throughout 1999.
Income before taxes for the period was $1426 compared with a loss of ($71) in
1998, an increase of 2,108.5%. The substantial increase in income before taxes
in 1999 resulted from the issues discussed above. Additionally, the results from
1998 included non-recurring items such as the affiliate write-off. Tax
provisions were recorded at an effective rate of 40% for both 1999 and 1998.
Basic net income (loss) per share was $.16 in 1999 versus a loss of ($.01) in
1998. The Company had 5,263,348 shares outstanding at December 31, 1999 and the
December 31, 1998 per share amount was calculated assuming the same number of
shares were also effectively outstanding at that date. For the year ended
December 31, 1999, diluted earnings per share have not been presented because
there were no additional shares derived from the assumed exercise of stock
options and the application of the treasury stock method. For the year ended
December 31, 1998, the Company had no potentially dilutive common shares.
Liquidity and Capital Resources
Net cash provided by operations for fiscal year 1999 was $2,852 as compared to
$510 for the prior fiscal year. The largest factor of the increase in cash
provided by operations was the implementation of a new project accounting
software system in the Consulting segment. This enabled more timely billing of
the Company's services and resulting in improved monitoring of accounts
receivable and quicker conversion to cash. Additional factors increasing the
cash provided by operations were: substantial increase in net income,
implementation of more stringent cash management policies, collection of
accounts receivable from affiliated companies and improved vendor relations
resulting in longer payment terms.
The Company made net capital expenditures on equipment and furnishings of $483
in 1999 compared to similar net capital expenditures of $484 the prior year. The
Company anticipates that its capital expenditures, excluding acquisitions, for
the upcoming year will be slightly higher than those incurred in 1999 in order
to maintain the technology within its Lab segment. The Company utilized cash of
$506 in 1999 to re-pay, in full, amounts outstanding on its credit line and to
reduce a loan secured by equipment used by the Lab segment. In 1998, $694 of
cash was used for similar purposes. Additionally, for investment purposes, the
Company purchased $181 of marketable securities and approximately $500 of United
States Government securities during 1999. No such purchases were made during
1998. Excess operating cash will continue to be invested in order to maximize
returns while maintaining acceptable risk tolerances.
The Company, in the normal course of business, encounters potential liability,
including claims for errors and omissions, resulting from the performance of its
services. The Company is party to lawsuits and is aware of potential exposure
related to certain claims. In the opinion of management, adequate provision has
been made for all known liabilities that are currently expected to result from
these matters, and in the aggregate, such claims are not expected to have a
material impact on the financial position and liquidity of the Company.
Currently, the Company is provided a $5 million per occurrence, $10 million
aggregate professional services insurance policy through an unrelated, rated
carrier. The Company also maintains a general liability insurance policy with an
unrelated, rated carrier.
At December 31, 1999, the Company had cash and cash equivalents on hand of
$1,182. The Company has a $750 revolving credit line agreement that expires on
April 30, 2000. The banking relationship with the current lender will be
terminated at the expiration date of the credit line. Management is in the
process of negotiating a similar line of credit as part of an overall banking
relationship with a new lender. Management foresees no difficulties in
finalizing this new relationship by the expiration date of the current one. At
December 31, 1999, borrowings under the line were $0 leaving $750 available to
the Company compared to $400 outstanding at December 31, 1998. Borrowings were
available to the Company at an interest rate of 9.50% at December 31, 1999 and
8.50% at December 31, 1998. The Company is in compliance with all covenants
pertaining to the credit line agreement.
The Company believes that its available cash, as well as cash generated from
operations and its available credit line, will be sufficient to meet the
Company's cash requirements for the balance of the fiscal year. The Company
intends to actively search for acquisitions to expand its geographical
representation and enhance its technical capabilities. Additionally, the Board
of Directors has determined that acquisitions in aligned businesses may provide
more potential users of the Lab segment and monetary savings due to
consolidation of administrative functions. The Company expects to utilize a
portion of its liquidity over the next 12 to 18 months for capital expenditures,
including acquisitions and investments in aligned businesses.
Other than as discussed in Item 1. - Description of Business, there are no
present agreements, understandings or other arrangements with respect to any
acquisition or investment. However, future agreements concerning acquisitions
may require the Company to obtain additional financing.
Year 2000 Compliance
The potential risks of the Year 2000 issue were taken seriously by the Company
and it devoted resources to address the issue. The Company established a Year
2000 oversight committee, which was assigned to address the following key
components related to the Year 2000 issue:
- Information applications, including the Company's project management
and accounting systems
- Computer hardware, software, operating systems and network
infrastructure including telecommunications systems
- Facility and administrative systems
- Major suppliers and customers' systems
The Company also conducted an inventory and assessment of its hardware and
software for Year 2000 compliance. All non-compliant components identified
(hardware or software) were made compliant or replaced with compliant versions.
Facility and administrative systems that support the Company (such as telephone,
security systems, etc.) were also assessed for Year 2000 compliance and required
upgrades to such hardware and software were completed.
The costs associated with Year 2000 compliance were not material and fell within
normally anticipated operating and capital spending. These costs were not
material to the financial position of the Company.
The Company believes that the completion of its Year 2000 Project significantly
reduced the probability of major interruptions to its normal business
operations. To date, the Company has not experienced any Year 2000 related
difficulties
Seasonal Trends
The Company does not believe that its business is subject to seasonal trends.
Inflation
The Company does not believe that inflation had a significant impact on the
Company's results of operations for the periods presented. On an ongoing basis,
the Company attempts to minimize any effects of inflation on its operating
results by controlling operating costs, and, whenever possible, seeking to
insure that billing rates reflect increases in costs due to inflation.
ITEM 7. FINANCIAL STATEMENTS
The financial statements of the Company are set forth in a separate
section of this Annual Report on Form 10-KSB. See "Item 13. Exhibits and Reports
on Form 8-K" and the Index to Financial Statements on page F-1 of this Annual
Report on Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
See the section captioned "Election of Directors" included in the Company's
Proxy Statement in connection with its Annual Meeting scheduled to be held on
June 7, 2000, which section is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
See the section captioned "Executive Compensation" included in the Company's
Proxy Statement in connection with its Annual Meeting scheduled to be held on
June 7, 2000, which section is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
See the section captioned "Principal Shareholders of the Company" included
in the Company's Proxy Statement in connection with its Annual Meeting scheduled
to be held on June 7, 2000 which section is incorporated herein by reference.
(b) Security Ownership of Directors and Officers
See the section captioned "Principal Shareholders of the Company" included
in the Company's Proxy Statement in connection with its Annual Meeting scheduled
to be held on June 7, 2000, which section is incorporated herein by reference.
(c) Changes in Control
The Company knows of no contractual arrangements which may, at a subsequent
date, result in a change of control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the section captioned "Certain Transactions" included in the Company's Proxy
Statement in connection with its Annual Meeting scheduled to be held
June 7, 2000, which section is incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(1) The financial statements of the Company and the report thereon
listed on the Index to Financial Statements on page F-1 hereof are
being filed as part of this Annual Report on Form 10-KSB.
(2) The following exhibits are being filed as part of this
Annual Report on Form 10-KSB:
2.1* Agreement with In-situ Oxidative Technologies, Inc., Richard
S.Greenberg, Michael Mandelbaum, Rosebud, LLC and the
Company.
2.2 Second Amended Plan of Reorganization filed as of August 12,
1998 with the United States Bankruptcy Court,(incorporated
by reference to Item 3 of the Company's Current Report on
Form 8-K filed October 29, 1998.)
3.1* Certificate of Incorporation of Focal Surgery, Inc.
(former name of the Company)dated October 21, 1992.
3.2* Amended and Restated Certificate of Incorporation of Focal
Surgery, Inc. (former name of the Company) dated
April 27, 1993.
3.3* Certificate of Amendment of Amended and Restated Certificate
of Incorporation of Focal Surgery, Inc.(former name of the
Company) dated September 24, 1993.
3.4* Certificate of Amendment of Certificate of Incorporation of
Focal Surgery, Inc. (former name of the Company) dated
June 17, 1994.
3.5* Certificate of Amendment of Certificate of Incorporation of
Focus Surgery, Inc. (former name of the Company) dated
February 4,1997.
3.6* Second Amended and Restated Certificate of Incorporation of
Menlo Acquisition Corporation dated March 10,1999.
3.7* By-Laws of the Company.
4.1* Form of Certificate for Common Stock.
4.2* 1999 Stock Option Plan of the Registrant.
4.3* Form of Nonstatutory Stock Option Agreement under the 1999
Stock Option Plan.
4.4* Form of Incentive Stock Option Agreement under the 1999
Stock Option Plan.
10.1* Lease dated as of June 23, 1997 between Greenberg
Property, LLC and the Company.
10.2* Contract for property purchase dated as of February 2, 2000
between Integrated Analytical Laboratories, LLC and
East Morris Realty Associates, LLC, and Letter of Extension
Dated March 15, 2000.
10.3* Letter Agreement dated August 26, 1997 between PNC Bank,
National Association and Integrated Analytical
Laboratories, LLC.
10.4* Letter Agreement dated August 26, 1997 between PNC Bank,
National Association and Environmental Waste Management
Associates, LLC.
10.5* Letter Agreement dated February 22, 2000 between PNC Bank,
National Association and Environmental Waste Management
Associates, LLC.
10.6 Employment Agreement dated as of June 1998 between the
Company and Lawrence B. Seidman (incorporated by reference
to Exhibit 10.1 of the Company's Current Report on Form 8-K
filed May 10, 1999).
10.7 Employment Agreement dated as of June 1998 between the
Company and Richard S. Greenberg (incorporated by reference
to Exhibit 10.2 of the Company's Current Report on Form 8-K
filed May 10, 1999).
16 Letter on change in certifying accountant (incorporated by
reference to Item 4 of the Company's Current Report on
Form 8-K filed May 10, 1999).
21* Subsidiaries of the Registrant
27* Financial Data Schedule.
*Exhibits marked with an asterisk are attached as Exhibits to this Annual
Report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
period covered by this report.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Menlo Acquisition Corporation
(Registrant)
By: /s/ Richard S. Greenberg
---------------------
Richard S. Greenberg
Chairman of the Board
Date: March 28, 2000
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
Chairman of the Board, March 28, 2000
Chief Executive Officer
and Director (principal
/s/ Richard S. Greenberg executive officer)
------------------------
Richard S. Greenberg
President, General Counsel March 28, 2000
/s/ Lawrence B. Seidman and Director
- -------------------------
Lawrence B. Seidman
Chief Financial Officer March 28, 2000
/s/Frank Russomanno (principal financial and
- ------------------------- accounting officer)
Frank Russomanno
/s/ George Greenberg Secretary and Director March 28, 2000
- -------------------------
George Greenberg
Exhibit (1)
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
CONSOLIDATED:
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998 F-3
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998 F-4
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 1999 AND 1998 F-5
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998 F-6
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998 F-7
NOTES TO FINANCIAL STATEMENTS F-8/21
* * *
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders
Menlo Acquisition Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of MENLO
ACQUISITION CORPORATION AND SUBSIDIARIES as of December 31, 1999 and 1998, and
the related consolidated statements of operations, comprehensive income (loss),
changes in stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Menlo
Acquisition Corporation and Subsidiaries as of December 31, 1999 and 1998, and
their consolidated results of operations and cash flows for the years then ended
in conformity with generally accepted accounting principles.
/s/ J.H. Cohn, LLP
Roseland, New Jersey
February 11, 2000
F-2
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS 1999 1998
------ ---- ----
Current assets:
Cash and cash equivalents $1,182,079 $ 24,722
Investments in marketable securities 722,400
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $614,315 and $565,855 3,879,474 4,832,722
Unbilled receivables 65,269 107,276
Affiliates 109,545 284,963
Prepaid expenses and other current assets 99,855 82,193
Due from affiliate 27,001
Deferred tax assets 34,276
----------- -----------
Total current assets 6,092,898 5,358,877
Equipment and furnishings, net of accumulated
depreciation of $964,903 and $550,220 1,087,663 1,019,842
Other assets 66,989 37,886
----------- -----------
Totals $7,247,550 $6,416,605
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 400,000
Current portion of long-term debt $ 106,248 106,248
Accounts payable 942,071 610,201
Customer deposits 444,685 522,725
Accrued expenses and other liabilities 443,401 236,077
Due stockholder 54,825
Deferred tax liabilities 7,300
----------- -----------
Total current liabilities 1,936,405 1,937,376
Long-term debt, noncurrent portion 168,231 274,480
----------- -----------
Total liabilities 2,104,636 2,211,856
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.0001 par value;
2,000,000 shares authorized; none issued - -
Common stock, $.0001 par value; 40,000,000
shares authorized; 5,263,348 and
5,000,000 shares issued and outstanding 526 500
Additional paid-in capital 4,312,662 4,262,688
Retained earnings (deficit) 803,291 (58,439)
Accumulated other comprehensive income
- investment valuation allowance 26,435
----------- -----------
Total stockholders' equity 5,142,914 4,204,749
----------- -----------
Totals $7,247,550 $6,416,605
========== ===========
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
Gross revenue $13,594,524 $12,848,430
Direct project costs and other costs of
operations 5,242,744 5,856,090
------------ ------------
Net revenue 8,351,780 6,992,340
------------- ------------
Expenses:
Labor and related expenses 1,854,753 1,869,015
Selling, general and administrative 5,166,039 4,859,712
------------ ------------
Totals 7,020,792 6,728,727
------------ ------------
Income from operations 1,330,988 263,613
------------ ------------
Other income (expense):
Write-off of amounts due from affiliates (306,375)
Interest (33,695) (90,355)
Administrative fee income 42,000 48,000
Sundry, principally investment income 86,281 14,432
------------ ------------
Totals 94,586 (334,298)
------------ ------------
Income (loss) before income taxes 1,425,574 (70,685)
Provision (credit) for income taxes 563,844 (12,246)
------------ ------------
Net income (loss) $ 861,730 $ (58,439)
============= ==============
Unaudited:
Historical income (loss) before income
taxes $ 1,425,574 $ (70,685)
Pro forma for 1998 comparative purposes:
Provision (credit) for income taxes 563,844 (28,000)
------------ --------------
Net income (loss) $ 861,730 $ (42,685)
============ ==============
Basic earnings (loss) per share $.16 $(.01)
==== =====
Basic weighted average common shares
outstanding 5,263,348 5,263,348
========= =========
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
Net income (loss) $861,730 $(58,439)
Other comprehensive income - unrealized holding gain,
net of income taxes of $17,624 26,435
--------- --------
Comprehensive income (loss) $888,165 $(58,439)
======== ========
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
Unrealized
Holding
Common Stock Additional Gain on
------------ Paid-in Retained Marketable
Shares Amount Capital Earnings Securities Total
------ ----- ------- -------- ---------- -----
Balance
January 1, 1998 5,000,000 $500 $4,262,688 $4,263,188
Net loss $ (58,439) (58,439)
--------- ---- ---------- --------- ----------
Balance,
December 31, 1998 5,000,000 500 4,262,688 (58,439) 4,204,749
Effect of reverse
acquisition 263,348 26 49,974 50,000
Unrealized holding
gain, net of income
taxes of $17,624 $26,435 26,435
Net income 861,730 861,730
--------- ---- ---------- --------- ------- ----------
Balance, December
31, 1999 5,263,348 $526 $4,312,662 $803,291 $26,435 $5,142,914
========= ==== ========== ======== ======= ===========
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
---- ----
Operating activities:
Net income (loss) $861,730 $ (58,439)
Adjustments to reconcile net income
(loss) to net cash
provided by operating activities:
Depreciation and amortization 414,683 377,020
Bad debts 130,000 529,945
Write-off of amounts due from affiliates 306,375
Deferred income taxes (59,200) (10,700)
Changes in operating assets and liabilities:
Accounts receivable - trade 823,248 (1,250,930)
Unbilled receivables 42,007 303,978
Accounts receivable - affiliates 175,418 31,273
Prepaid expenses and other current assets (17,662) (22,637)
Other assets 20,897 (23,182)
Accounts payable 331,870 25,516
Customer deposits (78,040) 180,469
Accrued expenses and other liabilities 207,324 121,708
-------- ------------
Net cash provided by operating activities 2,852,275 510,396
----------- ------------
Investing activities:
Purchase of equipment and furnishings (482,504) (483,507)
Repayments from (advances to) affiliate 27,001 (211,376)
Purchase of marketable securities (678,341)
Repayments from stockholder 784,351
----------- ------------
Net cash provided by (used in)
investing activities (1,133,844) 89,468
----------- ------------
Financing activities:
Repayment of note payable - bank and
long-term debt (506,249) (694,272)
Proceeds of note payable - bank 115,000
Repayment of advances from stockholder (54,825)
----------- ------------
Net cash used in financing activities (561,074) (579,272)
----------- ------------
Net increase in cash and cash equivalents 1,157,357 20,592
Cash and cash equivalents, beginning of year 24,722 4,130
----------- -------------
Cash and cash equivalents, end of year $1,182,079 $ 24,722
========== ===========
Supplemental disclosure of cash flow data:
Interest paid $ 33,695 $ 90,355
========== ===========
Income taxes paid $ 571,763 $ 60,800
========== ===========
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business activities and reverse acquisition:
Business activities:
Menlo Acquisition Corporation ("Menlo") is a publicly traded
Delaware corporation formerly doing business as Focus Surgery,
Inc. ("Focus"). Menlo is now a holding company engaged in
acquiring other operating businesses. Prior to the
consummation of the Second Amended Plan of Reorganization in
March 1999 which is further described below, Focus specialized
in the research and development of techniques and equipment
used in noninvasive surgeries. On February 9, 1996, Focus
filed a petition for relief under Chapter 11 of the Bankruptcy
Code. In August 1996, while in bankruptcy, Focus sold
substantially all of its assets to an unrelated company. As
part of the sale, Focus transferred all rights to the "Focus
Surgery, Inc." name to the buyer and amended its Articles of
Incorporation to change its name to Menlo Acquisition
Corporation.
Environmental Waste Management Associates, LLC, a New Jersey
limited liability company ("EWMA, LLC"), and Environmental
Waste Management Associates, Inc., a New Jersey corporation
("EWMA, Inc.") and, together with EWMA, LLC (collectively
"EWMA"), are environmental consulting firms providing a broad
range of environmental services related to the investigation
and remediation of hazardous waste sites. EWMA has offices in
Parsippany and West Windsor, New Jersey.
Integrated Analytical Laboratories, LLC, a New Jersey limited
liability company ("IAL, LLC"), and Integrated Analytical
Laboratories, Inc., a New Jersey corporation ("IAL, Inc.")
and, together with IAL, LLC (collectively "IAL"), are firms
providing analytical laboratory services to the environmental
and pharmaceutical industries. IAL is located in Randolph, New
Jersey.
EWMA, Inc. and IAL, Inc. were organized under the laws of
the State of New Jersey in 1987 and each sold primarily all
of their respective assets, except accounts receivable, to
the aforementioned limited liability companies in April
1997. EWMA, Inc. and IAL, Inc. currently have no operations
but exist primarily for the purpose of collecting
outstanding receivables.
EWMA, LLC, EWMA, Inc., IAL, LLC, and IAL, Inc. are further
defined, collectively, as the "Acquired Entities" and were
related by common ownership.
Reverse acquisition:
On March 10, 1999, Menlo and the Acquired Entities consummated
certain transactions pursuant to the Second Amended Plan of
Reorganization filed with the Bankruptcy Court on August 12,
1998 and approved on August 26, 1998. Menlo converted all of
its outstanding shares of existing common stock to 263,348
shares of new common stock with a par value of $.0001 per
share. Additionally, Menlo issued 5,000,000 shares of new
common stock in exchange for 99% of the equity interest in the
Acquired Entities (the "Acquisition"). Subsequently, the
remaining 1% of the Acquired Entities was purchased from an
affiliated party for the nominal amount of $1.
F-8
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business activities and reverse acquisition (concluded):
Reverse acquisition (concluded):
As a result of the Acquisition and the subsequent 1% purchase,
the Acquired Entities became wholly-owned subsidiaries of
Menlo and the former owners and members of the Acquired
Entities became the owners of approximately 95% of the
5,263,348 shares of common stock of Menlo outstanding upon the
consummation of the Acquisition. Stockholders of Menlo prior
to the Acquisition comprised the ownership of the remaining 5%
of outstanding shares at the date of the Acquisition. The
transaction was treated for accounting purposes as a "purchase
business combination" and a "reverse acquisition" effective as
of March 10, 1999 in which Menlo was the legal acquirer and
the Acquired Entities were the accounting acquirer.
Accordingly, the assets and liabilities of the accounting
acquirer (the Acquired Entities) continue to be accounted for
at their historical carrying values as of March 10, 1999.
As further explained in Note 3, the fair value of the 263,348
shares of Menlo common stock ($50,000) issued became the
total cost of the acquisition of Menlo.
The accompanying consolidated statement of operations for the
years ended December 31, 1999 and 1998 reflect the results of
operations of the Acquired Entities. Prior to the Acquisition,
Menlo was in bankruptcy and had limited operating activities;
therefore, no activity from the effective date of the
Acquisition for Menlo is reflected in the accompanying
consolidated financial statements.
Note 2 - Summary of significant accounting policies:
Basis of presentation:
The accompanying consolidated financial statements include the
accounts of Menlo and the Acquired Entities. All significant
intercompany accounts and transactions have been eliminated in
consolidation. As used herein, the "Company" refers to Menlo
and the Acquired Entities, collectively.
Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires
management to make estimates and assumptions that affect
certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Revenue recognition:
Revenue is recognized as services are provided.
Cash equivalents:
Cash equivalents include all highly liquid investments with a
maturity of three months or less when acquired.
F-9
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of significant accounting policies (continued):
Allowance for doubtful accounts:
The Company establishes an allowance for uncollectible
accounts receivable based on historical collection experience
and management's evaluation of collectibility of outstanding
accounts receivable.
Concentrations of credit risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and
cash equivalents and accounts receivable. The Company places
its cash and cash equivalents with high credit quality
financial institutions. At times, the Company's cash and cash
equivalents exceed the current insured amount under the
Federal Deposit Insurance Corporation of $100,000. At December
31, 1999, the Company had cash and cash equivalent balances
that exceed Federally insured limits by approximately
$993,000. Concentrations of credit risk with respect to
accounts receivable are limited as the Company closely
monitors the extension of credit to its customers while
maintaining allowances for potential credit losses. Management
does not believe that significant credit risk exists at
December 31, 1999.
Investments in marketable securities:
Investments in marketable debt and equity securities
classified as "available for sale" are recorded at fair value.
Unrealized gains and losses are reported annually as other
comprehensive income in the consolidated statement of
comprehensive income and accumulated within stockholders'
equity.
Equipment and furnishings:
Equipment and furnishings are stated at cost, net of
accumulated depreciation. Depreciation is provided using
prescribed methods over the estimated useful lives of the
assets.
Routine maintenance and repair costs are charged to expense as
incurred and renewals and improvements that extend the useful
life of the assets are capitalized. Upon sale or retirement,
the cost and related accumulated depreciation are eliminated
from the respective accounts and any resulting gain or loss is
reported as income or expense.
Goodwill:
Goodwill, which is included in other assets, is comprised of
costs in excess of net assets of acquired businesses that are
being amortized on a straight-line basis over estimated useful
lives of 10 years.
Advertising:
The Company expenses the cost of advertising and promotions as
incurred. Advertising costs charged to operations amounted to
$136,548 and $188,932 in 1999 and 1998, respectively.
F-10
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of significant accounting policies (continued):
Impairment of long-lived assets:
The Company applies the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed
of", ("SFAS 121") to its long-lived assets. Under SFAS 121,
impairment losses on long-lived assets, such as goodwill and
equipment and furnishings, are recognized when events or
changes in circumstances indicate that the undiscounted cash
flows estimated to be generated by such assets are less than
their carrying value and, accordingly, all or a portion of
such carrying value may not be recoverable. Impairment losses
are then measured by comparing the fair value of assets to
their carrying amounts.
Income taxes:
Prior to the Acquisition on March 10, 1999, EWMA, Inc. and
IAL, Inc., with the consent of their stockholder, had elected
to be treated as "S" Corporations under the applicable
sections of the Internal Revenue Code. Under these sections,
corporate income or loss, prior to that date was allocated to
the stockholder for inclusion in his personal income tax
returns. Accordingly, there was no provision for Federal
income tax in the accompanying 1998 consolidated financial
statements.
EWMA, Inc. and IAL, Inc. had also elected to be treated as "S"
Corporations for New Jersey state income tax purposes.
However, the State of New Jersey does impose a tax on "S"
Corporation income at a reduced rate and, accordingly, a
provision for such tax has been provided in the accompanying
1998 consolidated financial statements for income attributable
to EWMA, Inc. and IAL, Inc.
In addition, prior to the Acquisition on March 10, 1999, EWMA,
LLC and IAL, LLC were New Jersey limited liability companies
and, as such, were treated as partnerships for Federal and
state income tax purposes. A partnership is not a tax paying
entity for Federal or state income tax purposes. Income or
loss of a limited liability company is reported in the
individual member's income tax returns and, accordingly, no
provision for income tax has been recorded in the accompanying
1998 consolidated financial statements for income attributable
to EWMA, LLC and IAL, LLC.
The Company accounts for income taxes pursuant to the asset
and liability method which requires deferred income tax assets
and liabilities be computed annually for differences between
the financial statement and tax bases of assets and
liabilities that result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to
the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or
refundable for the year plus or minus the change during the
year in deferred tax assets and liabilities.
F-11
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of significant accounting policies (continued):
Stock based compensation:
In accordance with the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to
Employees", the Company will recognize compensation costs as a
result of the issuance of stock options to employees based on
the excess, if any, of the fair value of the underlying stock
at the date of grant or award (or at an appropriate subsequent
measurement date) over the exercise price. The Company will
also make pro forma disclosures, as required by Statement of
Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), of net income or loss
using the Black-Scholes option pricing method if such amounts
differ materially from the historical amounts.
Transactions in which goods or services are the consideration
received for the issuance of equity instruments are accounted
for based on the fair value of the consideration received or
the fair value of the equity instrument issued, whichever is
more reliably measurable.
Earnings (loss) per share:
The Company presents "basic" and, if applicable, "diluted"
earnings (loss) per common share pursuant to the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("SFAS 128").
Basic earnings (loss) per common share is calculated by
dividing net income or loss by the weighted average number of
common shares outstanding during the period. The calculation
of diluted earnings (loss) per common share is similar to that
of basic earnings (loss) per common share, except that the
denominator is increased to include the number of additional
common shares that would have been outstanding if all
potentially dilutive common shares, principally those issuable
upon the exercise of stock options, were issued during the
period. For the year ended December 31, 1999, diluted earnings
per share have not been presented because there were no
additional shares derived from the assumed exercise of stock
options and the application of the treasury stock method. Such
potentially diluted securities, however, could dilute basic
earnings per share in the future. For the year ended December
31, 1998, the Company had no potentially dilutive common
shares.
Since EWMA, Inc. and IAL, Inc. had elected to be taxed as "S"
Corporations and EWMA, LLC and IAL, LLC were taxed as limited
liability corporations prior to the date of the Acquisition,
unaudited pro forma earnings (loss) per common share assuming
the Acquired Entities had been subject to Federal and state
income taxes have been presented for the year ended December
31, 1998.
F-12
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of significant accounting policies (concluded):
Comprehensive income:
Effective January 1, 1999, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," ("SFAS 130") which established new
rules for the reporting and display of comprehensive income
and its components. The Company owns marketable debt and
equity securities which are classified as available-for-sale.
SFAS 130 requires unrealized gains and losses on the Company's
available-for-sale securities to be included in other
comprehensive income. The adoption had no impact on prior year
financial statements.
Note 3 - Purchase business combination:
The Acquisition, as described in Note 1, has been accounted for
as a purchase business combination and a reverse acquisition in
which the Acquired Entities were the accounting acquirer and
Menlo was the legal acquirer. As noted previously, Menlo was in
bankruptcy and had limited assets and liabilities at the date of
the Acquisition. The cost of the Acquisition totaled $50,000,
inclusive of professional fees, and pursuant to the purchase
method of accounting, the initial cost of acquiring Menlo, which
exceeded the fair value of the net assets acquired by $50,000,
was allocated to goodwill and is included in other assets in the
accompanying consolidated financial statements.
Note 4 - Investments in marketable securities:
At December 31, 1999, the Company's investments in marketable
securities, all of which were classified as available-for-sale,
consisted of government agency debt securities and equity
securities as follows:
Cost or
Amortized
Cost Fair Value
---- ----------
Debt securities (maturity within 1 year) $497,400 $497,400
Equity securities 180,941 225,000
--------- ---------
Totals $678,341 $722,400
======== =========
F-13
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Equipment and furnishings:
Equipment and furnishings consist of the following:
Range of
Estimated
Useful Lives 1999 1998
------------ ---- ----
Equipment 5-7 years $1,603,202 $1,197,269
Furniture and fixtures 7 years 164,232 139,413
Vehicles 5 years 130,669 95,669
Leasehold improvements 7 years 154,463 137,711
---------- ----------
2,052,566 1,570,062
Less accumulated depreciation 964,903 550,220
---------- ----------
Totals $1,087,663 $1,019,842
========== ==========
Depreciation expense amounted to $414,683 and $377,020 in 1999
and 1998, respectively.
Note 6 - Notes payable - bank:
The Company has a committed line of credit agreement with PNC
Bank in the amount of $750,000 which expires on April 30, 2000.
Outstanding borrowings bear interest at the prime rate plus .75%
(an effective rate of 9.5% and 8.5% at December 31, 1999 and
1998, respectively). At December 31, 1999, the Company had no
outstanding borrowings on the line of credit.
Outstanding borrowings are collateralized by substantially all of
the Company's assets and are guaranteed by the principal
stockholder. The line of credit contains certain covenants, the
most restrictive of which includes the maintenance of a maximum
capital funds ratio, as defined.
Note 7 - Long-term debt:
The term loan is payable in monthly installments of $8,854 plus
interest at 200 basis points over the bank's four year cost of
funds rate (an effective rate of 7.90% at December 31, 1999 and
1998) until July 2002, at which time the unpaid balance is due.
The loan is collateralized by substantially all of the Company's
assets and guaranteed by the principal stockholder.
Principal amounts due under the term loan in each of the years
subsequent to December 31, 1999 total $106,248 in 2000 and
2001 and $61,983 in 2002.
F-14
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Retirement plan:
The Company maintains a retirement plan qualifying under Section
401(k) of the Internal Revenue Code which allows eligible
employees to defer a portion of their income through
contributions to the plan. The Company makes contributions to the
plan for the benefit of the employees subject to certain
limitations. The Company's contributions amounted to $78,220 and
$73,929 in 1999 and 1998, respectively.
Note 9 - Income taxes:
As explained in Note 2, prior to the Acquisition on March 10,
1999, the Company did not pay any Federal income taxes; however,
it was liable for state income taxes at a reduced rate.
Subsequent to the date of the Acquisition, the Company became
subject to Federal and state income taxes at full statutory
rates.
Accordingly, the historical provisions and credits for income
taxes shown in the accompanying consolidated statements of
operations for the years ended December 31, 1999 and 1998 were
comprised of the following:
1999 1998
----------- -----------
Federal:
Current $475,742
Deferred (40,200)
--------
Totals 435,542
--------
State:
Current 140,002 $ (1,546)
Deferred (11,700) (10,700)
--------- ---------
Totals 128,302 (12,246)
--------- ---------
Totals $563,844 $(12,246)
======== =========
Unaudited pro forma provisions and credits for income taxes
assuming the Acquisition had occurred on January 1, 1998 and the
Company was subject to Federal and state income taxes at full
statutory rates for the year ended December 31, 1998 is shown
comparatively with 1999 as follows:
Unaudited
Actual Pro Forma
------ ---------
1999 1998
---- ----
Federal:
Current $475,742
Deferred (40,200) $(21,870)
---------- --------
Totals 435,542 (21,870)
--------- ---------
State:
Current 140,002
Deferred (11,700) (6,130)
---------- ----------
Totals 128,302 (6,130)
--------- ----------
Totals $563,844 $(28,000)
======== ========
F-15
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Income taxes (concluded):
The provisions for income taxes in 1999 and the unaudited pro forma credit
for income taxes in 1998 differ from the amounts computed using the Federal
statutory rate of 34% as a result of the following:
1999 1998
---- ----
Expected provision (credit) at Federal statutory rate 34% (34)%
Effect of state income taxes, net of Federal income
tax effect 6 (6)
--- ---
Effective tax rate 40% (40)%
== ===
At December 31, 1999 and 1998, the net current tax assets were attributable
to the following:
1999 1998
------- --------
Deferred tax assets - allowance for
doubtful accounts $51,900
-------
Deferred tax liabilities:
Unrealized holding gains in marketable
securities (17,624)
Other $(7,300)
-------- -------
Totals (17,624) (7,300)
------- -------
Net current deferred tax assets (liabilities) $34,276 $(7,300)
======= =======
Note 10- Related party transactions:
At December 31, 1998, the amounts due from affiliate, which are
companies that are wholly-owned or substantially owned by the
Company's principal stockholder, consist of noninterest bearing
cash advances that are due on demand. During 1998, the Company
determined that amounts due from an affiliate totaling $306,375
were uncollectible and written off.
At December 31, 1998, the amount due stockholder consisted of
noninterest bearing, unsecured advances due on demand.
During 1999 and 1998, the Company had the following transactions
with affiliated companies which are wholly-owned or substantially
owned by the Company's principal stockholder:
1999 1998
---- ----
Laboratory fees (income) $ 82,717 $101,051
Consulting fees (income) 126,407
Administrative fees (income) 42,000 48,000
Subcontractor fees (expense) 55,683
F-16
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Related party transactions (concluded):
At December 31, 1999 and 1998, accounts payable included $4,296
and $53,439, respectively, which was owed to affiliated companies
which are wholly-owned or substantially owned by the Company's
principal stockholder.
At December 31, 1999, accounts receivable included $23,742, which
was owed from affiliated companies, which are wholly-owned or
substantially owned by the Company's principal stockholder. There
were no such accounts receivable at December 31, 1998.
In-Situ Oxidative Technologies ("ISOTEC") is owned 50% by Dr.
Richard S. Greenberg, Menlo's Chief Executive Officer, and 50% by
an unrelated third party. ISOTEC is in the business of
remediating contaminated properties using a proprietary in-situ
treatment program. The services performed by ISOTEC are similar
in nature to those provided by the operating segments of Menlo.
During 1999 and 1998, EWMA and IAL have generated revenue
directly from ISOTEC in the amounts of approximately $183,000 and
$36,000, respectively. Additionally, the similar nature of
ISOTEC's services has enabled EWMA to obtain contracts and
generate revenues with unrelated customers in the past and may
potentially enable it to continue to do so in the future.
On December 6, 1999, Menlo entered into an agreement with ISOTEC
and an unrelated third party to advance it operating capital. As
of the date of this agreement, the Company was owed approximately
$195,000 for services it had provided on behalf of ISOTEC, of
which approximately $162,000 was outstanding as of December 31,
1998. In consideration for Menlo entering into the aforementioned
agreement, ISOTEC agreed to repay in full the outstanding balance
of approximately $195,000. In addition, Menlo was granted the
opportunity to purchase up to 50% of ISOTEC.
The agreement calls for Menlo to advance operating funds up to
$250,000 to ISOTEC in equal amounts to that being advanced by the
unrelated third party. In return, Menlo will receive an option to
purchase 20% of Dr. Greenberg's ownership interest in ISOTEC (10%
of the Company) for each $50,000 or portion thereof loaned to
ISOTEC. The options are exercisable through June 30, 2001 at a
price of $1,000 per option. As of February 11, 2000, Menlo had
loaned $80,000 to ISOTEC and therefore has two options to
purchase a total of 40% of Dr. Greenberg's interest (20% of the
Company) for $2,000. Due to ISOTEC's financial condition, Menlo's
$80,000 advance/option investment in ISOTEC is being carried at
$0. Management does not intend to make any advances in excess of
the $250,000 total commitment to ISOTEC until ISOTEC shows an
improvement in their financial condition and ability to pay.
Note 11- Commitments and contingencies:
Lease commitments:
The Company is obligated under noncancelable leases for office
space, storage space and laboratory facilities at several
locations in New Jersey, one of which is a building owned by the
principal stockholder. The leases expire at various dates through
August 2007 and require the Company to pay minimum annual rentals
plus its pro rata share of common area maintenance, real estate
taxes, insurance, utilities and other occupancy costs, as
defined. Rent expense, including allocated pro rata charges,
amounted to $489,404 and $448,417 in 1999 and 1998, respectively,
inclusive of $290,539 and $318,762, respectively, paid to the
principal stockholder. Future minimum lease payments subsequent
to December 31, 1999 for each of the next five years and in the
aggregate are as follows:
F-17
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11- Commitments and contingencies (concluded):
Lease commitments (concluded):
Year Ending Nonrelated Principal
December 31, Parties Stockholder Total
----------- ------- ----------- -----
2000 $146,900 $305,578 $452,478
2001 38,400 305,578 343,978
2002 38,400 305,578 343,978
2003 38,400 305,578 343,978
2004 38,400 305,578 343,978
Thereafter 789,411 789,411
-------- -------- --------
Totals $300,500 $2,317,301 $2,617,801
======== ========== ==========
Litigation:
In the ordinary course of business, the Company is both a
plaintiff and defendant in various legal proceedings. In the
opinion of management, resolution of these claims is not
expected to have a material adverse effect on the consolidated
financial position or results of operations of the Company.
Note 12- Fair value of financial instruments:
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments,"
defines the fair value of a financial instrument as the amount
at which the instrument could be exchanged in a current
transaction between willing parties. In assessing the fair
value of cash and cash equivalents, accounts receivable and
accounts payable, management determined that they were carried
at values that approximated their fair values because of their
liquidity and/or their short-term maturities and long-term
debt was carried at values that approximated their fair values
because they had interest rates equivalent to those currently
prevailing for financial instruments with similar
characteristics.
Note 13- Business segments:
The Company is reporting segment revenue and income from
operations in the same format reviewed by the Company's
management (the "management approach"). The Company has two
reportable segments: providing consulting, remedial and disposal
services (consulting), and laboratory testing of soil and water
for environmental hazards (lab).
F-18
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13- Business segments (continued):
Revenue, income from operations and other related segment
information follows:
1999 1998
---- ----
Gross revenue:
Consulting $ 9,287,714 $ 9,372,764
Lab 5,168,785 4,260,293
Inter-segment (861,975) (784,627)
-------------- --------------
Totals $ 13,594,524 $ 12,848,430
=========== ===========
Direct project costs and
other costs of operations:
Consulting $ 3,693,389 $ 4,637,110
Lab 2,411,330 2,003,607
Inter-segment (861,975) (784,627)
-------------- --------------
Totals $ 5,242,744 $ 5,856,090
============ ============
Operating expenses:
Consulting $ 5,308,060 $ 5,211,275
Lab 2,272,709 1,992,137
Inter-segment (559,977) (474,685)
------------ --------------
Totals $ 7,020,792 $ 6,728,727
============ ============
Income (loss) from operations:
Consulting $ 286,265 $ (475,621)
Lab 484,746 264,549
Inter-segment 559,977 474,685
-------------- --------------
Totals $ 1,330,988 $ 263,613
============ =============
Other income (expense):
Consulting $ 636,265 $ 172,193
Lab 18,298 (31,806)
Inter-segment (559,977) (474,685)
-------------- --------------
Totals $ 94,586 $ (334,298)
============== =============
Income (loss) before taxes:
Consulting $ 922,530 $ (303,428)
Lab 503,044 232,743
-------------- --------------
Totals $ 1,425,574 $ (70,685)
============ ==============
Provision (credit) for income taxes:
Consulting $ 364,297 $ (9,810)
Lab 199,547 (2,436)
------------- --------------
Totals $ 563,844 $ (12,246)
============= ==============
Net income (loss):
Consulting $ 558,233 $ (293,618)
Lab 303,497 235,179
-------------- -------------
Totals $ 861,730 $ (58,439)
============= ==============
F-19
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13- Business segments (concluded):
1999 1998
---- ----
Assets:
Cash and marketable securities, at market:
Consulting $ 1,033,900 12,483
Labs 870,579 12,239
-------------- -------------
Totals 1,904,479 24,722
------------- -------------
Accounts receivable - net:
Consulting 3,037,305 4,213,123
Labs 1,036,390 1,587,540
Inter-segment (19,407) (575,702)
-------------- -------------
Totals 4,054,288 5,224,961
------------- -------------
Equipment and furnishings - net:
Consulting 397,189 425,491
Labs 690,474 594,351
-------------- -------------
Totals 1,087,663 1,019,842
------------- -------------
Other assets:
Holding 84,276
Consulting 133,024 126,428
Labs 18,096 20,652
Inter-segment (34,276)
-------------- -------------
Totals 201,120 147,080
-------------- -------------
Total assets $ 7,247,550 $ 6,416,605
============ ============
Note 14- Stock option plan:
On July 21, 1999, the Board of Directors approved the Company's
Stock Option Plan (the "Plan"), subject to ratification by the
Company's stockholders, whereby up to 525,000 shares of the
Company's common stock may be granted to key personnel in the
form of incentive stock options and nonstatutory stock options,
as defined under the Internal Revenue Code. Key personnel
eligible for these awards include all present and future
employees of the Company and individuals who are consultants to
the Company as well as nonemployee directors of the Company.
Under the Plan, the exercise price of options generally will be
the fair market value of the shares on the date of grant. The
exercise price of incentive stock options granted to a 10%
stockholder, however, will be 110% of the fair market value of
the shares on the date of grant. The maximum term of any stock
option granted may not exceed ten years (or in the case of a 10%
stockholder, five years) from the date of grant.
During November 1999, the Company issued 57,500 stock options to
key personnel, subject to ratification by the Company's
stockholders. The options, all of which are outstanding at
December 31, 1999, are exercisable through November 2009.
F-20
<PAGE>
MENLO ACQUISITION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14- Stock option plan (concluded):
The compensation cost, pro forma income and net income per common
share for 1999 determined using a fair value based method of
accounting for the stock options granted in 1999, as required by
SFAS 123, would not differ materially from the corresponding
historical amounts.
Note 15- Preferred stock:
No shares of preferred stock have been issued as of December 31,
1999. Under the Company's Articles of Incorporation, the Board
of Directors, within certain limitations and restrictions, can
fix or alter the dividend rights, dividend rate, conversion
rights, voting rights and terms of redemption including price
and liquidation preferences. As of February 11, 2000, the Board
of Directors has not yet fixed any terms to the preferred stock.
* * *
F-21
AGREEMENT
THIS AGREEMENT is dated as of December 6, 1999, by and among MENLO
ACQUISITION CORPORATION, a Delaware corporation, having an address for the
purposes hereof at 100 Misty Lane, Parsippany, New Jersey 07054 ("Menlo");
IN-SITU OXIDATIVE TECHNOLOGIES, INC., a Delaware corporation, having an address
for the purposes hereof at 51A Everett Drive, Lawrenceville, New Jersey 08648
("ISOTEC"); MICHAEL MANDELBAUM, an individual, having an address for the
purposes hereof at 80 Main Street, West Orange, New Jersey 07052 ("Michael");
RICHARD GREENBERG, an individual, having an address for the purposes hereof at
100 Misty Lane, Parsippany, New Jersey 07054 ("Richard"); and ROSEBUD HOLDING,
L.L.C., a New Jersey limited liability company, having an address for the
purposes hereof at 100 Misty Lane, Parsippany, New Jersey 07054 ("Rosebud").
W I T N E S S E T H:
Recitals:
A. ISOTEC is in the business of remediating contaminated properties using a
proprietary in-situ treatment program. ISOTEC has a negative net worth in excess
of $1 million, has experienced operating losses. Exclusive of previous loans
from Michael, ISOTEC has generated significant negative cash flows. ISOTEC
requires additional working capital.
B. Michael and Richard each own fifty (50%) percent of the issued and
outstanding shares of capital of ISOTEC.
C. Michaeland Rosebud are willing to provide loans to ISOTEC on the terms
and conditions set forth herein.
D. As an inducement to Menlo to make loans to ISOTEC hereunder, Richard has
agreed to give Menlo an option to purchase all or a portion of his shares of
ISOTEC, on the terms and conditions set forth herein.
E. In consideration of the option for ISOTEC shares being granted to it by
Richard, Menlo is willing to provide loans to ISOTEC on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed as follows:
1. Concurrent Actions: Concurrently herewith, the following actions are
being taken:
1.1 Michael is loaning ISOTEC Two Hundred Three Thousand ($203,000)
Dollars.
1.2 ISOTEC is executing and delivering to Michael a demand promissory
note in the form of Exhibit A annexed hereto in the principal amount of
Five Hundred Thirteen Thousand ($513,000) Dollars, to evidence such loan
and certain other loans to ISOTEC previously made by Michael.
1.3 Rosebud is loaning ISOTEC Three Hundred Thousand ($300,000)
Dollars. This loan is being effected by Rosebud's transferring three
hundred thousand (300,000) shares of capital of Menlo (the "Rosebud
Shares") to ISOTEC. The parties agree that the Rosebud Shares have a fair
market value of $1.00 per share.
1.4 ISOTEC is executing and delivering to Richard a demand promissory
note in the form of Exhibit A annexed hereto in the principal amount of
Forty-eight Thousand ($48,000)Dollars, to evidence certain other loans to
ISOTEC previously made by Richard.
1.5 ISOTEC is repaying a loan in the amount of One Hundred Ninety-five
Thousand ($195,000) Dollars to Environmental Waste Management Associates,
L.L.C., a wholly-owned subsidiary of Menlo.
2. Loans to ISOTEC.
2.1 If ISOTEC desires to borrow funds from Menlo and Michael, it shall
give each of them a written irrevocable notice (a "Loan Notice") signed by
its president, setting forth the amount it reasonably requires for working
capital and it wishes to borrow.
2.2 Within ten (10) business days after the giving of the Loan Notice,
Menlo and Michael shall each provide ISOTEC with one-half (1/2) the loan
amount requested in the Loan Notice.
a. Such moneys shall be provided by wired funds or good check.
b. With each Loan Notice, ISOTEC shall execute and deliver to each of
Menlo and Michael a demand promissory note in the form of Exhibit A annexed
hereto for one-half (1/2) the loan amount requested in the Loan Notice.
<PAGE>
2.3 The loans to be made to ISOTEC by Menlo and Michael under this
Section 2 (the "WC Loans") shall be subject to the following restrictions:
a. No Loan Notice shall be effective unless it is given prior to
December 31, 2000.
b. The aggregate WC Loans made by Menlo and Michael under this Section
2 shall not exceed the principal sum of Five Hundred Thousand ($500,000)
Dollars (i.e., $250,000 loaned by each of Menlo and Michael). Any moneys
that are repaid to Menlo or Michael shall not be available for reborrowing.
c. It is the intention of the parties hereto that the WC Loans to
ISOTEC by Menlo and Michael shall at all times be equal in amount. Towards
that end, neither Menlo nor Michael shall demand or accept repayment of any
WC Loan unless and until the other of them is repaid an equal amount on
account of its or his WC Loans.
3. Grant of Options.
3.1 As an inducement for Menlo to make the WC Loans, Richard hereby
agrees that for each Fifty Thousand ($50,000) Dollars or part thereof of WC
Loans that Menlo makes to ISOTEC, Richard shall grant Menlo an option to
buy twenty (20%) percent of his interest in ISOTEC, equaling ten (10%)
percent of the issued and outstanding shares of capital of ISOTEC.
a. By way of example, if Menlo makes WC Loans in the aggregate amount
of Five Thousand ($5,000) Dollars, Richard shall grant Menlo an option to
buy twenty (20%) percent of his interest in ISOTECH.
b. By way of a further example, if Menlo makes WC Loans to ISOTEC in
the aggregate amount of One Hundred Thousand ($100,000) Dollars, Richard
shall grant Menlo an option or options to buy forty (40%) percent of his
interest in ISOTEC.
3.2 The exercise price for each twenty (20%) percent of Richard's
interest in ISOTEC shall be One Thousand ($1,000) Dollars.
3.3 The options granted pursuant to this Section 3 shall be in the
form of Exhibit B annexed hereto, and shall be delivered by Richard to
Menlo concurrently with the making of the WC Loan giving rise thereto.
3.4 Concurrently herewith, Richard is delivering to Dunetz, Marcus,
Brody & Weinstein, L.L.C. (the "Escrowee") certificates evidencing the
shares of capital of ISOTEC he owns, accompanied by stock assignments
endorsed in blank, to be held in escrow under the terms of this Agreement.
3.5 Exercise of Options. Each option granted pursuant to this Section
3 may be exercised by Menlo by notice in writing to the Escrowee and
Richard given on or before June 30, 2001, and by deposit with the Escrowee
of the exercise price of such option. Within ten (10) business days after
the exercise of an option, the Escrowee shall cause ISOTEC to transfer the
shares of capital subject to the option to be transferred to Menlo, and
shall deliver to Richard the option price deposited by Menlo in payment
therefor.
<PAGE>
3.6 Dividends; Voting. Richard shall be entitled to all cash dividends
declared upon the shares held by the Escrowee between the date hereof and
the dates an option is exercised. All stock dividends on the option shares
declared between the date hereof and the date an option is exercised shall
attach to the respective stock and shall be considered part thereof.
Richard shall retain the right to vote all of the option shares.
3.7 Escrowee.
a. The Escrowee shall not be under any duty to deal with the property
held by it hereunder with any greater degree of care than it uses when
dealing with its own similar property.
b. The Escrowee may act in reliance upon any instrument or signature
believed by it to be genuine, and may assume that any person purporting to
give any notice or receipt of advice or to make any statement in connection
with the provisions hereof has been duly authorized to do so.
c. The Escrowee may act relative hereto in reliance upon advice of
counsel in reference to any matter connected herewith, and shall not be
liable for any mistake of fact or error of judgment, or for any acts or
omissions of any kind, unless caused by its willful misconduct.
d. In the event that the Escrowee shall be uncertain as to its duties
or rights hereunder or shall receive one or more instructions, claims or
demands from any of the parties hereto or from third persons with respect
to the property held hereunder which, in its opinion, are in conflict with
any other instructions it has received or any provision of this Agreement,
it may refrain from taking any action other than to use reasonable care to
keep safely said property until it shall be directed otherwise in writing
by the other parties hereto and such third persons, if any, or by a final
order or judgment of a court of competent jurisdiction; or, alternatively,
the Escrowee may resign and deliver the property to any party reasonably
deemed appropriate by the Escrowee, upon which all obligations of the
Escrowee hereunder shall cease and terminate.
e. The Escrowee may at any time resign hereunder by giving at least
ten (10) days' prior written notice thereof to the other parties hereto.
Upon the effective date of such resignation, all property then held by the
Escrowee hereunder shall be delivered to a joint designee of Richard and
Menlo. Upon making such delivery, all obligations of the Escrowee hereunder
shall cease and terminate. If no such person shall have been designated by
the date validly set hereunder for the Escrowee's resignation, all
obligations of the Escrowee hereunder shall, nevertheless, cease and
terminate. Its sole responsibility thereafter shall be to keep safely all
property then held by it and to deliver the same to a person designated by
both other parties hereto or in accordance with the directions of a final
order or judgment of a court of competent jurisdiction.
f. Notwithstanding any other provisions herein, no notice, demand,
request or other communication to the Escrowee in connection herewith shall
be binding on the Escrowee unless it is in writing, refers specifically to
this Agreement, is addressed to the Escrowee at 354 Eisenhower Parkway,
Livingston, New Jersey 07039, Attention: Ira B Marcus, Esq. or such other
address as the Escrowee may, at any time or from time to time, designate,
and is actually received by the Escrowee at that address.
g. The Escrowee is acting as a stakeholder at the request of the other
parties hereto, and may continue to act as counsel to Menlo notwithstanding
any dispute among the parties hereto.
h. This Agreement sets forth exclusively the duties of the Escrowee
with respect to any and all matters pertinent hereto. Except as otherwise
expressly provided herein, the Escrowee shall not refer to, and shall not
be bound by, the provisions of any other agreement.
3.8 Representation of Richard. Richard hereby warrants and represents
to Menlo, knowing and intending that it is relying hereon, that:
a. He is the sole owner, and has the lawful right to sell and transfer
the 1,000 shares of ISOTEC common stock, and that these shares of capital
are now, and shall be at all times during the option period, free of all
encumbrances.
b. He shall forthwith on notification and at his own expense,
discharge and satisfy all encumbrances against the option stock arising
during the option period, and shall pay to the Escrowee the cost of any and
all transfer or other taxes which may be required by law at the time an
option is exercised.
c. If Menlo exercises an option, it shall receive good and marketable
title to the option stock, free of all encumbrances and rights of others.
4. Matters Regarding Rosebud Shares.
4.1 Rosebud hereby warrants and represents to ISOTEC, knowing and
intending that it is relying hereon, that:
<PAGE>
a. Rosebud was the sole owner, and had the lawful right to transfer
the Rosebud Shares to ISOTEC. The transfer of the Rosebud Shares to ISOTEC
was duly authorized by all requisite action, and did not contravene the
organizational documents of Rosebud.
b. ISOTEC received good and marketable title to the Rosebud Shares,
free of all encumbrances and rights of others.
4.2 ISOTEC hereby warrants and represents to Rosebud, knowing and
intending that it is relying hereon, that:
a. ISOTEC has relied solely upon independent investigations made by
ISOTEC or representatives of ISOTEC regarding the value of the Rosebud
Shares, and has not relied on any oral or written representations which
have been made to ISOTEC or its representatives.
b. The Rosebud Shares are and will be characterized as "restricted
securities" under the Securities Act of 1933, as amended (the "Act"),
because they were acquired from Menlo in a transaction not involving a
public offering. Under the Act, the Rosebud Shares may be sold without
registration only in limited circumstances. ISOTEC understands that sales
of the Rosebud Shares may be subject to federal and/or state restrictions.
c. The certificate issued to ISOTEC representing the Rosebud Shares
shall, until such time as the same is no longer required by the Act and the
rules and regulations thereunder, contain a legend substantially in the
form set forth below:
THE SECURITIES REPRESENTED HEREBY
HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATES. THESE SECURITIES
ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY
NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. THE HOLDER OF
THE SECURITIES REPRESENTED HEREBY
SHOULD BE AWARE THAT IT MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF
COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE ACT
AND APPLICABLE STATE SECURITIES
LAWS.
5. Notice.
All notices, requests, demands and other communications made in
accordance with this Agreement shall be in writing and shall be sent by
certified mail, return receipt requested, to the addresses set forth herein
or to such other addresses it may be specified by like notice. All notices
given pursuant to this Section 5 shall be deemed given when mailed.
6. Resolution of Disputes.
6.1 Any controversy arising hereunder shall be settled by arbitration.
Such arbitration shall be governed by the Federal Arbitration Act, 9 USC
ss.1-15. A single arbitrator determined pursuant to 9 USC ss.5 shall be
empowered to determine each and every issue relating to such controversy or
claim including whether the controversy, claim or issue is subject to
arbitration.
6.2 The arbitration shall take place in Morristown, New Jersey and
shall be governed by the "Rules For Non-Administered Arbitration of
Business Disputes" promulgated by the Center for Public Resources, Inc.
(N.Y.), when not inconsistent with this Agreement.
6.3 Each party shall be entitled to discovery which must be completed
within forty-five (45) days of the date the arbitrator is appointed (unless
extended by the arbitrator for good cause). Discovery shall be limited to
the inspection and copying of documents within fifteen (15) days after a
written request therefor and oral depositions at which reasonable document
production may be requested.
6.4 The arbitrator shall make all decisions concerning issues
submitted in accordance with applicable principles of substantive law. The
arbitrator shall file a written determination making the award and stating
findings of fact and conclusions of law as to all relevant issues submitted
to arbitration. If the arbitrator fails to make his decision in accordance
with substantive law, or to properly apply the facts to the law, the
arbitrator's award will be deemed to have been procured by "undue means"
pursuant to 9 USC ss.10, sub-clause (a) and beyond the arbitrator's power
in violation of 9 USC ss.10, sub-clause (d). Any party may apply to a court
of competent jurisdiction to have the arbitrator's decision confirmed,
reviewed, modified, affirmed or remanded to the arbitrator with directions.
6.5 All fees and expenses of the arbitration, including the fees of
the arbitrator and costs of the hearing (including court reporter, hearing
room rental, etc.) shall be paid by the non-prevailing party. Should no
party be designated by the arbitrator as the "prevailing party" then each
of the parties shall pay one-half (1/2) of such fees and expenses. In
addition, the arbitrator shall order the non-prevailing party to pay
one-half (1/2) of the legal fees and disbursements of the prevailing party.
Should no party be designated as the "prevailing party," then each party
shall pay its own legal fees and disbursements.
7. Miscellaneous.
7.1 Headings. The headings contained in this Agreement are for
purposes of convenience only and shall not affect the meaning or
interpretation of this Agreement.
7.2 Entire Agreement. This Agreement, together with the Exhibits
hereto, constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
7.3 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original and all of which
shall together constitute one and the same instrument.
7.4 Governing Law. This Agreement shall be governed in all respects,
including as to validity, interpretation and effect, by the laws of the
State of New Jersey.
7.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors
and permitted assigns.
7.6 Assignment. This Agreement shall not be assignable by any party
hereto without the prior written consent of the other parties hereto.
7.7 No Third Party Beneficiaries. Nothing in this Agreement shall
confer any rights upon any person or entity other than the parties hereto
and their respective heirs, successors and permitted assigns.
7.8 Amendment; Waivers. No amendment, modification or discharge of
this Agreement, and no waiver hereunder, shall be valid or binding unless
set forth in writing and duly executed by the party against whom
enforcement of the amendment, modification, discharge or waiver is sought.
Neither the waiver by any of the parties hereto of a breach of or a default
under any of the provisions of this Agreement, nor the failure by any of
the parties, on one or more occasions, to enforce any of the provisions of
this Agreement or to exercise any right or privilege hereunder, shall be
construed as a waiver of any other breach or default of a similar nature,
or as a waiver of any of such provisions, rights or privileges hereunder.
[remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
MENLO ACQUISITION CORPORATION
By:/s/Frank Russomanno
______________________________
Name: Frank Russomanno
Title: CFO
IN-SITU OXIDATIVE TECHOLOGIES, INC.
By: /s/ Richard Greenberg
_______________________________
Name:Richard Greenberg
Title:
/s/ Michael Mandelbaum
________________________________
Michael Mandelbaum, Individually
/s/ Richard Greenberg
_______________________________
Richard Greenberg, Individually
ROSEBUD HOLDING, L.L.C.
By:/s/George Greenberg
______________________________
Name:George Greenberg
Title:
<PAGE>
The undersigned hereby agrees to act as Escrow Agent under the
within Agreement, and acknowledge receipt of a certificate(s) evidencing 1,000
shares of Isotec common stock registered in the name of Richard Greenberg,
together with blank stock powers.
DUNETZ, MARCUS, BRODY &
WEINSTEIN, L.L.C.
By: /s/Ira B. Marcus
___________________
IRA B MARCUS,
A Member of the Firm
<PAGE>
Exhibit A
Demand
Negotiable Promissory Note
(Unsecured)
DATED: PRINCIPAL AMOUNT:
For value received In-Situ Oxidative Technologies, Inc., a Delaware
corporation with an address for the purpose hereof at 51A Everett Drive,
Lawrenceville, New Jersey 08648 and its successors and assigns ("Maker")
promises to pay to the order ____________________of with an address for the
purpose hereof at _________________ ("Holder") or at such other place that
the Holder may from time to time designate in writing, the principal amount
of ______________________($___________ ) DOLLARS in lawful money of the
United States, ON DEMAND.
Interest shall accumulate on the outstanding principal balance of this
Note at the rate of six (6%) percent per year commencing with the date
hereof. Accumulated interest shall be paid in full monthly beginning on the
first monthly anniversary hereof or, ON DEMAND, at the option of the
Holder.
This Note may be prepaid in whole or in part at anytime. If Maker
fails to make any required payment of principal and/or interest when due
then from and after the due date late payment charges shall accrue on the
balance of principal and interest due on this Note at the rate of 1 1/2%
per every thirty day period, or part thereof, following this default. On
the event that Holder shall place this Note in the hands of an attorney for
collection on default, the Holder also shall be entitled to receive from
the Maker costs of collection and attorney's fees incurred in connection
therewith.
The Maker waives presentment, demand for payment, protest and notice
of dishonor of this Note.
The waiver by Holder of any one or more breaches or default of any
provision of this Note shall not constitute a waiver or estoppel as to any
other or subsequent breach or default.
This Note shall be construed under and governed by the laws of the
State of New Jersey.
<PAGE>
IN WITNESS WHEREOF, the Maker has executed and sealed this Note as of
the date first above written.
ATTEST: IN-SITU OXIDATIVE
TECHNOLOGIES, INC
___________________________ By _____________________
, Secretary , President
<PAGE>
Exhibit B
Option to Purchase Shares of
In-Situ Oxidative Technologies, Inc.,
a Delaware corporation ("ISOTEC")
DATED: _______________________
This is to certify that for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, RICHARD GREENBERG,
an individual having an address at 100 Misty Lane, Parsippany, New Jersey 07054
(the "Optionor") hereby grants to MENLO ACQUISITION CORPORATION, a Delaware
corporation having an address for the purposes hereof at 100 Misty Lane,
Parsippany, New Jersey 07054 (the "Optionee") the right to purchase (______ )
of the issued and outstanding common shares of ISOTEC upon presentation of this
Option and payment of ($ ) dollars at the office of Ira B Marcus, Esq., Dunetz,
Marcus, Brody & Weinstein, L.L.C., 354 Eisenhower Parkway, Livingston, NJ 07039.
This Option will be void unless exercised on or before June
30, 2001.
The Optionor agrees that if the Optionee exercises this
Option, it shall receive good and marketable title to the option stock, free and
clear of all encumbrances and rights of others.
This Option has been executed and delivered pursuant to and in
accordance with the terms and conditions of a certain Agreement, dated as of
October 26, 1999, by and among the Optionor, the Optionee, ISOTEC, Michael
Mandelbaum, and Rosebud Holding, L.L.C. (the "Agreement"), and is subject to the
terms and conditions of the Agreement, which are, by this reference,
incorporated herein and made a part hereof. Capitalized terms used in this
Option without definition shall have the respective meanings set forth in the
Agreement.
In the event of any stock dividend, stock split, combination,
recapitalization or other change in the capital structure of the ISOTEC, this
Option and the option exercise price shall be equitably adjusted.
This Option shall be construed under and governed by the laws
of the State of New Jersey.
IN WITNESS WHEREOF, the Optionor has executed and sealed this
Option as of the date first above written.
WITNESS
(L.S.)
______________________ ________________________
RICHARD GREENBERG
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
CERTIFICATE OF INCORPORATION OF "FOCAL SURGERY, INC.", FILED IN THIS OFFICE ON
THE TWENTY-FIRST DAY OF OCTOBER, A.D. 1992, AT 10 O'CLOCK A.M.
SEALED
/s/ Edward J. Freel
Edward J. Freel, Secretary of State
2313347 8100
981104690
AUTHENTICATION: 8981524
DATE: 03-19-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10: am 10/21/1992
7322955004 - 2313347
CERTIFICATE OF INCORPORATION OF
FOCAL SURGERY, INC.
ARTICLE I
The name of this corporation is Focal Surgery, Inc.
ARTICLE II
The address of the registered office of the corporation in the State
of Delaware is 1209 Orange Street, in the city of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
This corporation is authorized to issue one class of stock to be
designated "Common Stock". The total number of shares of Common Stock which the
corporation is authorized to issue is One Million (1,000,000) shares, par value
$.0001 per share.
ARTICLE V
The name and mailing address of the incorporator is Louise D. Moore,
Brobeck, Phleger & Harrison, Two Embarcadero Place, 2200 Geng Road, Palo Alto,
California 94303.
ARTICLE VI
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors is expressly authorized to make, repeal, alter, amend and rescind
any or all of the Bylaws of the corporation.
ARTICLE VII
The number of directors of the corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors or
by the stockholders.
G:\P\LDMOLP.W51
10/20/92
<PAGE>
ARTICLE VIII
Elections of directors need not be by written ballot unless
the Bylaws of the corporation shall so provide.
ARTICLE IX
Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the
statutes) outside the State of Delaware at such place or places as may
be designated from time to time by the Board of Directors or in the
Bylaws of the corporation.
ARTICLE X
A director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the corporation or
its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal
benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporation
action further eliminating or limiting the personal liability of
directors then the liability of a director of the corporation shall be
eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this
Article X by the stockholders of the corporation shall not adversely
affect any right or protection of a director of the corporation
existing at the time of such repeal or modification.
ARTICLE XI
The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, the undersigned has signed this
Certificate this 20th day of October, 1992.
/s/ Louise D. Moore
Louise D. Moore
Incorporator
2.
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
RESTATED CERTIFICATE OF "FOCAL SURGERY, INC.", FILED IN THIS OFFICE ON THE
TWENTY-SEVENTH DAY OF APRIL A.D.1993, AT 1 O'CLOCK P.M.
SEALED
/s/ Edward J. Freel
Edward J. Freel, Secretary of State
2313347 8100
981104690
AUTHENTICATION: 8981525
DATE: 03-19-98
<PAGE>
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF FOCAL SURGERY. INC.
A Delaware Corporation
(Originally incorporated on October 21, 1992.)
The undersigned, Louise D. Moore, hereby certifies that:
ONE: She is the sole Incorporator of said corporation.
TWO: The Certificate of Incorporation of said corporation shall be
amended to read in full as follows:
ARTICLE I
The name of this corporation is FOCAL SURGERY, INC., (the
"Corporation").
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of the corporation's registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. Classes of Stock. The corporation is authhorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to issue
is Eleven Million (11,000,000) shares. Ten Million (10,000,000) shares shall be
Common Stock, par value $0.0001 per share and One Million (1,000,000) shares,
par value $0.0001 per share. shall be Preferred Stock.
B. Rights, Preferences and Restrictions of Preferred Stock. The
Preferred Stock authorized by these Amended and Restated Certificate of
Incorporation may be issued from time to time in one or more series. The Board
of Directors is hereby authorized within the limitations and restrictions stated
in this Amended and Restated Certificate of Incorporation, to fix or alter the
divided rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price or
prices, and the liquidation preferences of any wholly unissued series of
Preferred Stock, and the number of shares constituting any such series and the
designation thereof, or any of them, and to increase or decrease the number of
shares of any series subsequent to the issue of shares of that series, but not
below the number of shares of such series then outstanding. In case the number
of shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
State of Delaware
Secretary of State
Division of Corporations
Filed 01:00 PM 4/27/1993
733117020 - 2313347
<PAGE>
ARTICLE V
Except as otherwise provided in this Amended and Restated Certificate
of Incorporation, in furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, repeal,
alter, amend and rescind any or all of the Bylaws of the Corporation.
ARTICLE VI
The number of directors of the Corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors or
by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
ARTICLE VIII
Stockholders of the Corporation shall take action by meetings held
pursuant to this Amended and Restated Certificate of Incorporation and the
Bylaws and shall have no right to take any action by written consent without a
meeting. Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article IX to authorize corporation action
further eliminating or limiting the personal liability of directors then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as so amended.
Any repeal or modification of the foregoing provisions of this Article
IX by the stockholders of the Corporation shall not adversely affect any right
or protection of a director of the Corporation existing at the time of such
repeal or modification.
ARTICLE X
To the fullest extent permitted by applicable law, this Corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits this
Corporation to provide indemnification) through Bylaw provisions, agreements
with such agents or other persons, vote of stockholders or disinterested
directors or otherwise, in excess of the indemnification and advancement
otherwise permitted by Section 145 of the General Corporation Law of the State
of Delaware, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to this
Corporation, its stockholders, and others.
<PAGE>
2.
Any repeal or modification of any of the foregoing provisions of this
Article X shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of this corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification
ARTICLE XI
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
THREE: The foregoing amendment has been duly adopted by the
Corporation's sole Incorporator in accordance with the applicable provisions of
Sections 241 and 245 of the General Corporation Law of the State of Delaware.
The corporation has not received any payment for any of its stock.
IN WITNESS WHEREOF, the undersigned has executed this certificate on
April 26, 1993.
/s/ Louise D. Moore
Louise D. Moore, Incorporator
The undersigned certifies under penalty of perjury that she has read
the foregoing Amended and Restated Certificate of Incorporation and knows the
contents thereof, and that the statements therein are true.
Executed at Palo Alto, California on April 26, 1993.
/s/ Louise D. Moore
Louise D. Moore
3.
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
CERTIFICATE OF AMENDMENT OF "FOCAL SURGERY, INC.", FILED IN THIS OFFICE ON THE
TWENTY-FOURTH DAY OF SEPTEMBER A.D. 1993 AT 4:20 O'CLOCK P.M.
SEALED
/s/Edward J. Freel
Edward J. Freel, Secretary of State
2313347 8100
981104690
AUTHENTICATION: 8981526
DATE: 03-19-98
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 04:20 PM. 9/24/1993
733267028 - 2313347
CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF FOCAL SURGERY, INC.
A Delaware Corporation
(Originally incorporated on October 21, 1992)
The undersigned, Stewart Carrell and Allen W. May hereby
certify that:
ONE: They are the duly elected and acting Chairman of the
Board and Assistant Secretary, respectively, of said corporation.
TWO: ARTICLE IV (A) of the Amended and Restated
Certificate of Incorporation of said corporation shall be deleted in its
entirety and replaced as set forth below:
"A. Classes of Stock. This corporation is authorized to issue
two classes of stock to be designated, respectively, "Common
Stock" and "Preferred Stock." The total number of shares which
the corporation is authorized to issue is Thirty Two Million
(32,000,000) shares. Thirty Million (30,000,000) shares, par
value $0.0001 per share, shall be Common Stock and Two Million
(2,000,000) shares, par value $0.0001 per share, shall be
Preferred Stock."
* * *
THREE: The foregoing amendment has been approved by the Board of
Directors of said corporation.
FOUR: The foregoing amendment was approved by the sole stockholder of
the corporation in accordance with Section 242 of the Delaware General
Corporation Law. The number of shares voting in favor of the foregoing amendment
equaled or exceeded the vote required, such required vote being a majority of
the outstanding shares of Common Stock.
FIVE: The foregoing amendment was adopted in conformity with
Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF: the undersigned have executed this certificate on
September 24, 1993.
/s/ Stewart Carrell
Stewart Carrell
Chairman of the Board
Attest:
/s/ Allen W. May
Allen W. May
Assistant Secretary
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
CERTIFICATE OF AMENDMENT OF "FOCAL SURGERY, INC.", CHANGING ITS NAME FROM "FOCAL
SURGERY, INC." TO "FOCUS SURGERY, INC.", FILED IN THIS OFFICE ON THE SEVENTEENTH
DAY OF JUNE, A.D. 1994 AT 10 O'CLOCK A.M.
SEALED
/s/ Edward J. Freel
Edward J. Freel, Secretary of State
2313347 8100
981104690
AUTHENTICATION: 8981527
DATE: 03-19-98
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
FOCAL SURGERY, INC.
FOCAL Surgery, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does hereby
certify :
FIRST: That at a meeting of the Board of Directors of FOCAL Surgery,
Inc., resolutions were duly adopted setting forth a proposed amendment of the
Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Amended and Restated Certificate of Incorporation of
the corporation be amended by striking Article I and Article IV, Section A in
their entirety and replacing therefor:
Article I
The name of this corporation is FOCUS Surgery, Inc. (the "Corporation")
And
Article IV
A.. Classes of Stock. The Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares which the Corporation is authorized to issue
is Forty Two Million (42,000,000) shares. Forty Million (40,000,000) shares, par
value $0.,0001 per share, shall be Common Stock, and Two Million (2,000,000)
shares, par value $0.0001 per share, shall be Preferred Stock."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed and attested to by its duly authorized officers this 15th day of June
1994.
FOCUS SURGERY, INC.
/s/ Edward C. Driscoll, Jr.
Edward C. Driscoll, Jr., PhD, President
/s/ Marshall A. Petersen
Marshall A. Petersen, Secretary
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 10:00 AM 06/17/1994
944110000 -2313347
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
CERTIFICATE OF AMENDMENT OF "FOCUS SURGERY, INC.", CHANGING ITS NAME FROM "FOCUS
SURGERY, INC." TO "MENLO ACQUISITION CORPORATION", FILED IN THIS OFFICE ON THE
FOURTH DAY OF FEBRUARY A.D. 1997, AT 9 O'CLOCK A.M.
SEALED
/s/Edward J. Freel
Edward J. Freel, Secretary of State
2313347 8100
981104690
AUTHENTICATION: 8981528
DATE: 03-19-98
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
FOCUS SURGERY, INC.
FOCUS Surgery, Inc., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation") does hereby
certify:
FIRST: That at a meeting of the Board of Directors of FOCUS Surgery,
Inc., resolutions were duly adopted setting forth a proposed amendment of the
Restated Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, that the Amended and Restated Certificate of Incorporation of
the corporation be amended by striking Article I in its entirety and replacing
therefor:
Article I
The name of this corporation is MENLO Acquisition Corporation (the
"Corporation").
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a meeting of the stockholders of said corporation was duly called and
held, upon notice in accordance with Section 222 of the General Corporation law
of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 02/04/1997
971036353 - 2313347
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 3/10/1999
991092790 - 2313347
FORM OF
SECOND AMENDED AND RESTATED CERTIFICATE OF INCOPORATION
OF MENLO ACQUISITION CORPORATION
A Delaware Corporation
(Originally Incorporated on October 21, 1992)
MENLO ACQUISITION CORPORATION, a corporation organized and existing
under the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name of this corporation is MENLO
ACQUISITION CORPORATION (hereinafter referred to as the "Corporation").
SECOND: That the original Certificate of Incorporation of the
Corporation was filed with the Secretary of State of the State of Delaware under
the name FOCAL SURGERY, INC. on October 21, 1992. An Amended and Restated
Certificate of Incorporation was filed with the Secretary of State of the
Delaware under the name FOCAL SURGERY, INC. on April 27, 1993 and an amendment
to that Amended and Restated Certificate of Incorporation, revising the
authorized capital of the Corporation, was filed with the Secretary of State of
the State of Delaware on September 24, 1993. A further amendment to the Amended
and Restated Certificate of Incorporation, further revising the authorized
capital of the Corporation and changing the name of the corporation to FOCUS
SURGERY, INC., was filed with the Secretary of State of the State of Delaware on
June 17, 1994. A further amendment to the Amended and Restated Certificate of
Incorporation, changing the name of the Corporation to MENLO ACQUISITION
CORPORATION, was filed with the Secretary of State of the State of Delaware on
February 4, 1997.
THIRD: That provision for the making of this Second Amended and
Restated Certificate of Incorporation is contained in an order dated 10/28/1998
(the "Confirmation Order") of the United States Bankruptcy Court for the
Northern District of California in case No. 96-41107-N confirming the Chapter 11
Plan of Reorganization of the Corporation (the "Plan").
FOURTH: That the Confirmation Order empowers and directs the
Corporation to execute such documents and take, or cause to be taken, any and
all actions required to enable the effective implementation of the Plan and the
Confirmation Order and that the Plan contemplates the filing of this Second
Amended and Restated Certificate of Incorporation in order to effectuate the
Plan's provisions.
FIFTH: That in accordance with Sections 242, 245 and 303 of the General
Corporation Law of the State of Delaware, this Second Amended and Restated
Certificate of Incorporation restates and integrates and further amends the
provisions of the Amended and Restated Certificate of Incorporation, as amended,
of the Corporation.
SIXTH; The text of the Amended and Restated Certificate of
Incorporation, as amended, is hereby restated and further amended to read in its
entirety as hereinafter set forth:
<PAGE>
ARTICLE I: NAME
The name of this corporation is MENLO ACQUISITION CORPORATION (the
"Corporation").
ARTICLE II: REGISTERED AGENT AND REGISTERED OFFICE
The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, in the City of Wilmington, County of New Castle.
The name of the registered agent at such address is CORPORATION SERVICE COMPANY.
ARTICLE III: PURPOSE
The nature of the business or purposes to be conducted or promoted is
to engage in any lawful act of activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
ARTICLE IV: AUTHORIZED CAPITAL
A. Classes of Stock. The Corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total number of shares which is the Corporation is authorized to issue is
Forty-Two Million (42,000,000) shares. Forty Million (40,000,000) shares shall
be Common Stock, par value $0.0001 per share, and Two Million (2,000,000) shares
shall be Preferred Stock, par value $0.0001 per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The
Preferred Stock authorized by this Second Amended and Restated Certificate of
Incorporation may be issued from time to time in one or more series. The Board
of Directors is hereby authorized, within the limitations and restrictions
stated in this Second Amended and Restated Certificate of Incorporation, to fix
or alter the divided rights, dividend rate, conversion rights, voting rights,
rights and terms of redemption (including sinking fund provisions), redemption
price or prices and liquidation preferences of any wholly unissued series of
Preferred Stock, and any other relative rights, preferences and limitations of
that series, and the number of shares constituting any such series and the
designation thereof, or any of them, and to increase or decrease the number of
shares of any series subsequent to the issue of shares of that series, but not
below the number of shares of such series then outstanding. In case the number
of shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
ARTICLE V: BOARD OF DIRECTORS
A. The business and affairs of the Corporation shall be managed by its
Board of Directors, which may exercise all such powers of the Corporation and do
all such lawful acts and things as are not by statute or this Second Amended and
Restated Certificate directed or required to be exercised or done by the
stockholders of the Corporation. The number of directors which shall constitute
the whole Board of Directors (the "Whole Board") shall be not less than one (1)
nor more than fifteen (15). Subject to the rights of the holders of any series
of Preferred Stock to elect additional directors under specified circumstances,
the number of directors that shall constitute the Whole Board shall be fixed,
from time to time, within the foregoing minimum and maximum, by the Board of
Directors pursuant to a resolution adopted by a majority of the Board of
Directors.
2.
<PAGE>
B. Election of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
C. Except as otherwise provided in this Second Amended and Restated
Certificate of Incorporation, in furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
repeal, alter, amend and rescind any or all Bylaws of the Corporation.
ARTICLE VI: LIMITATION ON LIABILITY OF DIRECTORS
A. A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of the General Corporation Law of the
State of Delaware; or (iv) for any transaction from which the director derived
any improper personal benefit. If the General Corporation Law of the State of
Delaware is hereafter amended to authorize further elimination of or limitation
on the liability of a director of a corporation, then the liability of a
director of this Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as so
amended.
B. Any repeal or modification of this Article VI by (i) the
stockholders of the Corporation or (ii) amendment to the General Corporation Law
of the State of Delaware (unless such statutory amendment specifically provides
to the contrary) shall not adversely affect any right or protection, existing
immediately prior to the effectiveness of such repeal or modification with
respect to any acts or omissions occurring either before or after such repeal or
modification, of a person serving as a director at the time of such repeal or
modification.
ARTICLE VII: INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
A. The Corporation shall, to the fullest extent permitted by Section
145 of the General Corporation Law of the State of Delaware, as amended from
time to time, indemnify each person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was, or has agreed to become, a director or officer of this
Corporation, or is or was serving, or has agreed to serve, at the request of
this Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation, partnership, joint venture, trust or other enterprise
(including any employee benefit plan), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such action, suit
or proceeding and any appeal therefrom.
B. Indemnification may include payment by the Corporation of expenses
in defending any action or proceeding in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by the person
indemnified to repay such payment if it is ultimately determined that such
person is not entitled to indemnification under this Article VII, which
undertaking may be accepted without reference to the financial ability of such
person to make such repayment.
3.
<PAGE>
C. The indemnification rights provided in this Article VII (i) shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled under any law, agreement or vote of stockholders or disinterested
directors or otherwise and (ii) shall inure to the benefit of the heirs,
executors and administrators of such persons. The Corporation may, to the extent
authorized from time to time by its Board of Directors, grant indemnification
rights to other employees or agents of this Corporation or other persons serving
this Corporation and such rights may be equivalent to, or greater or less than,
those set forth in this Article VII.
D. Any repeal or modification of this Article VII by (i) the
stockholders of the Corporation or (ii) amendment to the General Corporation Law
of the State of Delaware (unless such statutory amendment specifically provides
to the contrary) shall not adversely affect any right or protection, existing
immediately prior to the effectiveness of such repeal or modification with
respect to any acts of omissions occurring either before or after such repeal or
modification, of a person otherwise entitled to indemnification hereunder at the
time of such repeal or modification.
ARTICLE VIII: DURATION
The duration of the Corporation is perpetual, unless dissolved
according to law.
ARTICLE IX: PREEMPTIVE RIGHTS
Unless otherwise provided by the Board of Directors with
respect to a particular series of Preferred Stock, no holder of shares of
capital stock of the Corporation shall have any preemptive or similar rights,
except as such rights are expressly provided by contract, to purchase or
subscribe for or receive any shares of any class, or series thereof, of capital
stock of the Corporation, whether now or hereafter authorized, or any warrant,
option, bond, debenture or other security convertible into, exchangeable for or
carrying any right to purchase any shares of any class, or series thereof, of
capital stock of the Corporation.
ARTICLE X: COMPROMISE OR ARRANGEMENT
Whenever a compromise or arrangements proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation. Nothing contained herein shall affect or impair
the Corporation's ability to avail itself of any other state or federal law
concerning insolvency and/or reorganization, including but not limited to Title
11 of the U.S. Code.
4.
<PAGE>
ARTICLE XI: FURTHER AMENDMENT
The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Second Amended and Restated Certificate
of Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, the undersigned has caused this Second
Amended and Restated Certificate of Incorporation to be signed by its duly
authorized officer this 10th day of March 1999.
/s/ Richard S. Greenberg
Print name: Richard S. Greenberg, Ph.D.
Title: Chairman and Chief Executive Officer
5.
BY LAWS
OF
FOCAL SURGERY, INC.
ARTICLE I
OFFICES
Section 1. The registered office shall be in the city of
Wilmington, County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other
places both within and without the State of Delaware as the Board of Directors
may from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time and place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Annual meetings of stockholders, commencing with the year
1993, shall be held at such place, date and hour as shall be fixed by the Board
of Directors (the "Board") and stated in the notice if the meeting, at which the
stockholders shall elect a board of directors, and transact such other business
as may properly be brought before the meeting.
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<PAGE>
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, or cause a third party to prepare and make,
at least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute or by the certificate of
incorporation, may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors or at the request in writing of stockholders owning not less than 10%
of the entire voting stock of the corporation issued and outstanding. Such
request shall state the purpose or purposes of the proposed meeting.
2.
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<PAGE>
Section 6. Written notice of a special meeting stating the place, date
and hour of the meeting and the purpose or purposes for which the meeting is
called, shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy and voting on a certain question (abstentions being deemed
for purposes of this Section
3.
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<PAGE>
to be non-votes) shall decide any such question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. Nominations for election to the Board of Directors must be
made by the Board of Directors or by any stockholder of any outstanding class of
capital stock of the corporation entitled to vote for the election of directors.
Nominations other than those made by the Board of Directors of the corporation,
must be preceded by notification in writing in fact received by the Secretary of
the corporation not less than thirty (30) days nor more than sixty (60) days
prior to any meeting of stockholders called for the election of directors. Such
notification shall contain the written consent of each proposed nominee to serve
as a director if so elected and the following information as to each proposed
nominee and as to each person, acting alone or in conjunction with one or more
other persons as a partnership, limited partnership, syndicate or other group,
who participates or is expected to participate in making such nomination or in
organizing, directing or financing such nomination or solicitation of proxies to
vote for the nominee:
4.
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<PAGE>
(a) the name, age, residence, address and
business address of each proposed nominee and of each such person;
(b) the principal occupation or employment,
the name, type of business and address of the corporation or other organization
in which such employment is carried on of each proposed nominee and of
each suchperson;
(c) the amount of stock of the corporation owned
beneficially, either directly or indirectly, by each proposed nominee and each
such person; and
(d) a description of any arrangement or
understanding of each proposed nominee and of each such person with each other
or any other person regarding future employment or any future transaction to
which the corporation will or may be a party.
The presiding officer of the meeting shall have the authority to
determine and declare to the meeting that a nomination not preceded by
notification made in accordance with the foregoing procedure shall be
disregarded.
Section 12. At any meeting of the stockholders, only such business
shall be conducted as shall have been brought before the meeting (a) pursuant to
the corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the corporation who is a stockholder of
record at the time of giving of the notice provided for in this Bylaw, who shall
be entitled to vote at such meeting and who complies with the notice procedures
set forth in this Bylaw.
For business to be properly brought before any meeting by a stockholder
pursuant to clause (c) of this Section 12, the stockholder must have given
timely notice
5.
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<PAGE>
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than thirty (30) nor
more than sixty (60) days prior to the date of the meeting. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (a) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, and the name
and address of the beneficial owner, if any, on whose behalf the proposal is
made, (c) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder of record and by the beneficial
owner, if any, on whose behalf of the proposal is made and (d) any material
interest of such stockholder of record and the beneficial owner, if any, on
whose behalf the proposal is made in such business.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at a meeting except in accordance with the procedures set
forth in this Section 12. The presiding officer of the meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the procedures
prescribed by this Section 12, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 12, a stockholder shall also comply with all applicable
6.
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<PAGE>
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder with respect to the matters set forth in this Section
12.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be not less than three (3) and not more than five (5). The exact
number of directors shall be set within these limits by resolution of the Board
of Directors or by the stockholders at an annual meeting of the stockholders.
The directors shall be elected at the annual meeting of the stockholders, except
as provided in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified. Directors need not be
stockholders..
Section 2. Vacancies and newly created directorships may be filled by a
majority of the directors then in office, though less than a quorum, or by a
sole remaining director. The directors so chosen shall serve for the remainder
of the term of the vacated directorships being filled and until their successors
are duly elected and shall qualify, unless sooner displaced. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute.
Section 3. The business of the corporation shall be managed by or under
the direction of its board of directors, which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these bylaws directed or required to
be exercised or done by the stockholders.
7.
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<PAGE>
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The first meeting of each newly elected Board of Directors
shall be held immediately following the annual meeting of the stockholders and
no notice of such meeting shall be necessary to the newly elected directors in
order legally to constitute the meeting, provided a quorum shall be present. In
the event such meeting is not held at such time, the meeting may be held at such
time and place as shall be specified in a notice given as hereinafter provided
for special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
Section 7. Special meetings of the board may be called by the President
or Chairman on four (4) days' notice to each director by mail or 48 hours notice
to each director either personally or by telephone, telegram or facsimile;
special meetings shall be called by the President or Secretary in like manner
and on like notice on the written request of two directors unless the board
consists of only one director, in which case special meetings shall be called by
the President or Secretary in like manner and on like notice on the written
request of the sole director. A written waiver of notice, signed by the person
entitled thereto, whether before or after the time of the meeting stated
therein, shall be deemed equivalent to notice.
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Section 8. At all meetings of the board a majority of the directors
then in office shall constitute a quorum for the transaction of business, and
the act of a majority of the directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation of these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one
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or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee.
In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it, but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
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Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. Director compensation may include, among
other things, payment of their expenses, if any, of attendance at each meeting
of the Board of Directors, payment of a fixed sum for attendance at each meeting
of the Board of Directors or payment of a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the Certificate of
incorporation or by law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice (except as provided in Section 7 of Article III of these bylaws), but
such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of
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the corporation, with postage thereon prepaid, and such notice shall be deemed
to be given at the time when the same shall be deposited in the United States
mail. Notice to directors may also be given by telephone, telegram or facsimile.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. The written waiver need not specify the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends the meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board
of Directors and shall be a President, a Secretary and a Chief Financial Officer
or Treasurer. The Board of Directors may elect from among its members a Chairman
of the Board and a Vice Chairman of the Board. The Board of Directors may also
choose one or more vice-presidents, assistant secretaries and assistant
financial officers or assistant treasurers. Any number of offices may be held by
the same person, unless the certificate of incorporation or these bylaws
otherwise provide.
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.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a President, Secretary and Chief
Financial Officer or Treasurer and may choose vice-presidents.
Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers of the corporation shall be
fixed by the Board of Directors. The salaries of agents of the corporation
shall, unless fixed by the Board of Directors, be fixed by the President or any
Vice-President of the corporation.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such
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powers as are, from time to time, assigned to him by the Board and as may be
provided by law.
THE PRESIDENT AND VICE-PRESIDENT
Section 8. The President shall be the chief executive officer of the
corporation; and in the absence of the Chairman and Vice-Chairman of the Board
he or she shall preside at all meetings of the stockholders and the Board of
Directors; he or she shall have general and active management of the business of
the corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 9. The President or any Vice-President shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
Section 10. In the absence of the President or in the event of his or
her inability or refusal to act, the Vice-President, if any, (or in the event
there be more than one Vice-President, the Vice-Presidents in the order
designated by the directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. The Vice-Presidents shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The Secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and
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shall perform like duties for the standing committees when required. He or she
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or President, under whose
supervision he or she shall be. He or she shall have custody of the corporate
seal of the corporation and he or she, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his or her signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the fixing by his or
her signature.
Section 12. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as the Board of Directors
may from time to time prescribe.
THE CHIEF FINANCIAL OFFICER AND ASSISTANT FINANCIAL OFFICER
Section 13. The Chief Financial Officer or Treasurer shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the corporation in such depositories as may be designated by the Board
of Directors.
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Section 14. The Chief Financial Officer or Treasurer shall disburse the
funds of the corporation as may be ordered by the Board of Directors, taking
proper vouchers for such disbursements, and shall render to the President and
the Board of Directors, at its regular meetings, or when the Board of Directors
so requires, an account of all his or her transactions as Chief Financial
Officer or Treasurer and of the financial condition of the corporation.
Section 15. If required by the Board of Directors, the Chief Financial
Officer or Treasurer shall give the corporation a bond (which shall be renewed
every six years) in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his or her office and for the restoration to the corporation, in case
of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the corporation.
Section 16. The Assistant Financial Officer or Assistant Treasurer, or
if there shall be more than one, the Assistant Financial Officers or Assistant
Treasurers in the order determined by the Board of Directors (or if there be no
such determination, then in the order of their election) shall, in the absence
of the Chief Financial Officer or Treasurer or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of the
Chief Financial Officer or Treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
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ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
Chairman or Vice-Chairman of the Board of Directors, or the President or a
Vice-President and the Chief Financial Officer or Treasurer or an Assistant
Financial Officer or Assistant Treasurer, and the Secretary or an Assistant
Secretary of the corporation, certifying the number of shares owned by him or
her in the corporation.
Certificates may be issued for partly paid shares and in such case upon
the face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, designations, preferences and
relative, participating, optional or other special
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rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
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accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholder or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation, subject
to the provisions of the certificate of incorporation, if any, may be declared
by the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the certificate of incorporation.
Section 2. Before payment of any dividend, there may be set aside out
of any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
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SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify its officers and directors made, or
threatened to be made, a party to an action or proceeding, whether criminal,
civil, administrative or investigative, by reason of being an officer or
director of the corporation or a predecessor corporation or, at the
corporation's request, a director or officer of another corporation, provided,
however, that the corporation shall indemnify any such officer or director in
connection with a proceeding initiated by such officer or director only if such
proceeding was authorized by the Board of Directors of the corporation. The
indemnification provided for in this Section 6 shall: (i) not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement or vote of stockholders or disinterested directors or
otherwise, both as to action in their official capacities and as to action in
another capacity while holding such office, (ii) continue as to a person who has
ceased to be an agent, and (iii) inure to the benefit of the heirs, executors
and administrators of such a person. The corporation's obligation to provide
indemnification under this Section 6 shall be offset to the extent of any other
source of indemnification
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or any otherwise applicable insurance coverage under a policy maintained by the
corporation or any other person.
Expenses incurred by an officer or director of the corporation in
defending a civil or criminal action, suit or proceeding by reason of the fact
that he or she is or was an officer or director of the corporation (or was
serving at the corporation's request as a director or officer of another
corporation) shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such officer or director to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
corporation as authorized by relevant sections of the General Corporation Law of
Delaware. Notwithstanding the foregoing, the officer's or director's corporation
shall not be required to advance such expenses to an officer or director who is
a party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such officer or director, disclosure of
confidential information in violation of such officer's or director's fiduciary
or contractual obligations to the corporation or any other willful and
deliberate breach in bad faith of such officer's or director's duty to the
corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each officer and director who serves in
such capacity at any time while this bylaw is in effect, and any repeal or
modification thereof shall not affect any rights or obligations then existing
with respect to any state of facts then or theretofore existing or any action,
suit or proceeding theretofore or thereafter brought based in whole or in part
upon any such state of facts.
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The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than an officer or director, made
a party to any action, suit or proceeding by reason of the fact that he, his
testator or intestate, is or was an employee or agent of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. Except as otherwise provided in the Certificate of
Incorporation, these bylaws may be altered, amended or repealed or new bylaws
may be adopted by the stockholders or a majority of the Board of Directors, when
such power is conferred
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upon the Board of Directors by the certificate of incorporation, at any regular
meeting of the stockholders or of the Board of Directors or at any special
meeting of the stockholders or of the Board of Directors if notice of such
alteration, amendment, repeal or adoption of new bylaws be contained in the
notice of such special meeting.
24.
COMMON STOCK COMMON STOCK
NUMBER SHARES
MAC MENLO ACQUISITION CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS
AND A STATEMENT AS TO THE RIGHTS, PRE-
FERENCES, PRIVILEGES AND RESTRICTIONS
OF SHARES
CUSIP 586818 10 6
THIS CERTIFIES THAT
SPECIMEN
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, $.0001 PAR VALUE, OF
MENLO ACQUISITION CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid until countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signature of its duly authorized officers.
Dated:
/s/ George Greenberg /s/ Richard Greenberg
George Greenberg Richard Greenberg
Secretary Chief Executive Officer and President
(SEAL)
COUNTERSIGNED AND REGISTERED: CONTINENTAL STOCK TRANSFER & TRUST COMPANY (JERSEY
CITY, NJ)
TRANSFER AGENT AND REGISTRAR
BY:
------------------
AUTHORIZED OFFICER
<PAGE>
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of determination, the
number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request without charge at the
principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT- ____________Custodian_______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
Survivorship and not as Act______________
tenants in common (State)
UNIF TRF MIN ACT- ____________Custodian (until age ______)
(Cust)
__________________under Uniform Transfers
(Minor)
to Minors Act __________________
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
____________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated: _____________________
_________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
By_____________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
MENLO ACQUISITION CORPORATION
1999 STOCK OPTION PLAN
1. Purpose. The purpose of this Menlo Acquisition Corporation 1999
Stock Option Plan (the "Plan") is to further the long term stability and
financial success of Menlo Acquisition Corporation (the "Company") by attracting
and retaining key employees and obtaining the services of directors and
consultants through the use of stock incentives. It is believed that ownership
of Company Stock will stimulate the efforts of those employees, directors and
consultants upon whose judgment and interest the Company is and will be largely
dependent for the successful conduct of its business. It is also believed that
Incentive Awards granted to such employees under this Plan will strengthen their
desire to remain with the Company and will further the identification of those
employees' and directors' interests with those of the Company's shareholders.
The Plan is intended to conform to the provisions of Securities and Exchange
Commission Rule 16b-3.
2. Definitions. As used in the Plan, the following terms have the
meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Applicable Withholding Taxes" means the aggregate
amount of federal, state and local income and payroll taxes that the
Company is required to withhold in connection with any
exercise of a Nonstatutory Stock Option by an employee.
(c) "Board" means the board of directors of the Company.
(d) "Change of Control" means:
1
<PAGE>
(i) The acquisition by a Group of Beneficial
Ownership of 20% or more of the Stock or the Voting Power of
the Company, but excluding for this purpose: (A) any
acquisition by the Company (or a subsidiary), or an employee
benefit plan of the Company; or (B) any acquisition of Common
Stock of the Company by management employees of the Company.
"Group" means any individual, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of the Act,
"Beneficial Ownership" has the meaning in Rule 13d-3
promulgated under the Act, "Stock" means the then outstanding
shares of common stock, and "Voting Power" means the combined
voting power of the outstanding voting securities entitled to
vote generally in the election of directors.
(ii) Individuals who constitute the Board as of the
date of this Plan (the "Incumbent Board") cease to constitute
at least a majority of the Board, provided that any director
whose nomination was approved by a majority of the Incumbent
Board shall be considered a member of the Incumbent Board
unless such individual's initial assumption of office is in
connection with an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Act).
(iii) Approval by the shareholders of the Company of
a reorganization, merger or consolidation, in each case, in
which the owners of more than 50% of the Stock or Voting Power
of the Company do not, following such reorganization, merger
or consolidation, beneficially own, directly or indirectly,
more than 50% of the Stock or Voting Power of the corporation
resulting from such reorganization, merger or consolidation.
(iv) A complete liquidation or dissolution of the
Company or of its sale or other disposition of all or
substantially all of the assets of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means the committee appointed by the Board as
described under Section 12.
(g) "Company" means Menlo Acquisition Corporation, a Delaware
corporation.
(h) "Company Stock" means Common Stock, $.0001 par value, of
the Company. If the par value of the Company Stock is changed, or in
the event of a change in the capital structure of the Company (as
provided in Section 11), the shares resulting from such a change shall
be deemed to be Company Stock within the meaning of the Plan.
(i) "Date of Grant" means the date on which an Incentive Award
is granted by the Committee.
(j) "Disability" or "Disabled" means, as to an Incentive Stock
Option, a Disability within the meaning of Code section 22(e)(3). As to
all other Incentive Awards, the Committee shall determine whether a
Disability exists and such determination shall be conclusive.
(k) "Fair Market Value" means as of the Date of Grant (or, if
there were no trades on the Date of Grant, the last preceding day on
which Company Stock is traded) (i) if the Company Stock is traded on an
exchange the average of the highest and lowest registered sales prices
of the Company Stock at which it is traded on such day on the exchange
on which it generally has the greatest trading volume, (ii) if the
Company Stock is traded on the over-the-counter market, the average
between the lowest bid and highest asked prices as reported by The Wall
Street Journal, or (iii) if shares of Common Stock are not traded on
any exchange or over-the-counter market, the fair market value shall be
determined by the Committee using any reasonable method in good faith.
(l) "Incentive Award" means, collectively, the award of an
Nonstatutory Stock Option or Incentive Stock Option under the Plan.
(m) "Incentive Stock Option" means an Option intended to meet
the requirements of, and qualify for favorable federal income tax
treatment under, Code section 422.
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<PAGE>
(n) "Non-Employee Director" means a member of the Board who is
not an employee of the Company, a Parent or a Subsidiary.
(o) "Nonstatutory Stock Option" means an Option that does not
meet the requirements of Code section 422, or, even if meeting the
requirements of Code section 422, is not intended to be an Incentive
Stock Option and is so designated.
(p) "Option" means a right to purchase Company Stock granted
under the Plan, at a price determined in accordance with the Plan.
(q) "Parent" means, with respect to any corporation, a parent
of that corporation within the meaning of Code section 424(e).
(r) "Participant" means any employee, consultant, or
Non-Employee Director who receives an Incentive Award under the Plan.
(s) "Rule 16b-3" means Rule 16b-3 of the Securities and
Exchange Commission promulgated under the Act. A reference in the Plan
to Rule 16b-3 shall include a reference to any corresponding rule (or
number redesignation) of any amendments to Rule 16b-3 enacted after the
effective date of the Plan's adoption.
(t) "Subsidiary" means, with respect to any corporation, a
subsidiary of that corporation within the meaning of Code section
424(f).
(u) "10% Shareholder" means a person who owns, directly or
indirectly, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or
Subsidiary of the Company. Indirect ownership of stock shall be
determined in accordance with Code section 424(d).
3. General. Incentive Awards under the Plan may be either Incentive
Stock Options or Nonstatutory Stock Options.
4. Stock. Subject to Section 11 of the Plan, there shall be reserved
for issuance under the Plan an aggregate of 525,000 shares of Company Stock,
which shall be authorized, but unissued shares. Shares allocable to Options or
portions thereof granted under the Plan that expire or otherwise terminate
unexercised may again be subjected to an Incentive Award under the Plan. The
Committee is expressly authorized to make an Incentive Award to a Participant
conditioned upon the surrender for cancellation of an option granted under an
existing Incentive Award. For purposes of determining the number of shares that
are available for Incentive Awards under the Plan, such number shall include the
number of shares surrendered by an optionee or retained by the Company in
payment of Applicable Withholding Taxes. No more than 200,000 shares may be
allocated to the Incentive Awards that are granted to any individual Participant
during any single calendar year.
5. Eligibility.
(a) All present and future employees of the Company and
individuals who are consultants to the Company (or any Parent or Subsidiary of
3
<PAGE>
the Company, whether now existing or hereafter created or acquired) shall be
eligible to receive Incentive Awards under the Plan. The Committee shall have
the power and complete discretion, as provided in Section 12, to select eligible
employees to receive Incentive Awards and to determine for each employee the
terms and conditions, the nature of the award and the number of shares to be
allocated to each employee as part of each Incentive Award. Non-Employee
Directors are eligible to receive Incentive Awards in accordance with Section
13.
(b) The grant of an Incentive Award shall not obligate the
Company or any Parent or Subsidiary of the Company to pay a Participant any
particular amount of remuneration, to continue the employment of the Participant
after the grant or to make further grants to the Participant at any time
thereafter.
6. Stock Options.
(a) Whenever the Committee deems it appropriate to grant
Options, notice shall be given to the Participant stating the number of shares
for which Options are granted, the Option price per share, whether the Options
are Incentive Stock Options or Nonstatutory Stock Options, and the conditions to
which the grant and exercise of the Options are subject. This notice, when duly
accepted in writing by the Participant, shall become a stock option agreement
between the Company and the Participant.
(b) The exercise price of shares of Company Stock covered by
an Incentive Stock Option shall be not less than 100% of the Fair Market Value
of such shares on the Date of Grant; provided that if an Incentive Stock Option
is granted to a Participant who, at the time of the grant, is a 10% Shareholder,
then the exercise price of the shares covered by the Incentive Stock Option
shall be not less than 110% of the Fair Market Value of such shares on the Date
of Grant.
(c) The exercise price of shares covered by a Nonstatutory
Stock Option shall be not less than 100% of the Fair Market Value of such shares
on the Date of Grant.
(d) Options may be exercised in whole or in part at such times
as may be specified by the Committee in the Participant's stock option
agreement; provided that, the exercise provisions for Incentive Stock Options
shall in all events not be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after ten years
(or, in the case of an Incentive Stock Option granted to a 10%
Shareholder, five years) from the Date of Grant.
(ii) An Incentive Stock Option by its terms, shall be
exercisable in any calendar year only to the extent that the
aggregate Fair Market Value (determined at the Date of Grant)
of the Company Stock with respect to which Incentive Stock
Options are exercisable for the first time during the calendar
year does not exceed $100,000 (the "Limitation Amount").
Incentive Stock Options granted under the Plan and all other
plans of the Company and any Parent or Subsidiary of the
Company shall be aggregated for purposes of determining
whether the Limitation Amount has been exceeded. The Board may
4
<PAGE>
impose such conditions as it deems appropriate on an Incentive
Stock Option to ensure that the foregoing requirement is met.
(iii) If Incentive Stock Options that first become exercisable
in a calendar year exceed the Limitation Amount, the excess
Options will be treated as Nonstatutory Stock Options to the
extent permitted by law. If an Option designated as an
Incentive Stock Options otherwise fails to qualify as an
incentive stock option under the Code, the Option shall be
treated as a Nonstatutory Stock Option.
(e) The Committee may, in its discretion, grant Options that
by their terms become fully exercisable upon a Change of Control,
notwithstanding other conditions on exercisability in the stock option
agreement.
7. Method of Exercise of Options.
(a) Options may be exercised by the Participant giving written
notice of the exercise to the Company, stating the number of shares the
Participant has elected to purchase under the Option. In the case of the
purchase of shares under an Option, such notice shall be effective only if
accompanied by the exercise price in full in cash; provided, however, that if
the terms of an Option so permit, the Participant may (i) deliver, or cause to
be withheld from the Option shares, shares of Company Stock (valued at their
Fair Market Value on the date of exercise) in satisfaction of all or any part of
the exercise price, (ii) deliver a properly executed exercise notice together
with irrevocable instructions to a broker to deliver promptly to the Company,
from the sale or loan proceeds with respect to the sale of Company Stock or a
loan secured by Company Stock, the amount necessary to pay the exercise price
and, if required by the Committee, Applicable Withholding Taxes, or (iii)
deliver an interest bearing promissory note, payable to the Company, in payment
of all or part of the exercise price together with such collateral as may be
required by the Committee at the time of exercise. The interest rate under any
such promissory note shall be established by the Committee and shall be at least
equal to the minimum interest rate required at the time to avoid imputed
interest under the Code.
(b) The Company may place on any certificate representing
Company Stock issued upon the exercise of an Option any legend deemed desirable
by the Company's counsel to comply with federal or state securities laws, and
the Company may require a customary written indication of the Participant's
investment intent. Until the Participant has made any required payment,
including any Applicable Withholding Taxes, and has had issued a certificate for
the shares of Company Stock acquired, he or she shall possess no shareholder
rights with respect to the shares.
(c) Each Participant shall agree as a condition of the
exercise of an Option to pay to the Company, or make arrangements satisfactory
to the Company regarding the payment to the Company of, Applicable Withholding
Taxes. Until such amount has been paid or arrangements satisfactory to the
Company have been made, no stock certificate shall be issued upon the exercise
of an Option.
(d) As an alternative to making a cash payment to the Company
to satisfy Applicable Withholding Taxes, if the Option agreement so provides,
5
<PAGE>
the Participant may, subject to the provisions set forth below, elect to (i)
deliver shares of already owned Company Stock or (ii) have the Company retain
that number of shares of Company Stock that would satisfy all or a specified
portion of the Applicable Withholding Taxes. The Committee shall have sole
discretion to approve or disapprove any such election.
(e) Notwithstanding anything herein to the contrary, Options
shall always be granted and exercised in such a manner as to conform to the
provisions of Rule 16b-3.
8. Nontransferability of Options. Nonstatutory Stock Options shall not
be transferable except to the extent specifically provided in the Incentive
Award. Incentive Stock Options, by their terms, shall not be transferable except
by will or by the laws of descent and distribution and shall be exercisable,
during the Participant's lifetime, only by the Participant.
9. Effective Date of the Plan. The effective date of the Plan is July
21, 1999. The Plan shall be submitted to the shareholders of the Company for
approval. Until (i) the Plan has been approved by the Company's shareholders,
and (ii) the requirements of any applicable Federal or State securities laws
have been met, no Incentive Stock Option shall be exercisable.
10. Termination, Modification, Change. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on the tenth
anniversary of the effective date. No Incentive Awards shall be made under the
Plan after its termination. The Board may terminate the Plan or may amend the
Plan in such respects as it shall deem advisable; provided that, if and to the
extent required by the Code, no change shall be made that increases the total
number of shares of Company Stock reserved for issuance pursuant to Incentive
Awards granted under the Plan (except pursuant to Section 11), materially
modifies the requirements as to eligibility for participation in the Plan, or
materially increases the benefits accruing to Participants under the Plan,
unless such change is authorized by the shareholders of the Company.
Notwithstanding the foregoing, the Board may unilaterally amend the Plan and
Incentive Awards as it deems appropriate to cause Incentive Stock Options to
meet the requirements of the Code and regulations thereunder. Except as provided
in the preceding sentence, a termination or amendment of the Plan shall not,
without the consent of the Participant, adversely affect a Participant's rights
under an Incentive Award previously granted to him or her.
11. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or
combination of shares, recapitalization or merger in which the Company is the
surviving corporation or other change in the Company's capital stock (including,
but not limited to, the creation or issuance to shareholders generally of
rights, options or warrants for the purchase of common stock or preferred stock
of the Company), the number and kind of shares of stock or securities of the
Company to be subject to the Plan and to Options then outstanding or to be
granted thereunder, the maximum number of shares or securities which may be
delivered under the Plan, the exercise price and other relevant provisions shall
be appropriately adjusted by the Committee, whose determination shall be binding
on all persons. If the adjustment would produce fractional shares with respect
to any unexercised Option, the Committee may adjust appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.
6
<PAGE>
(b) If the Company is a party to an initial public offering, a
consolidation or a merger in which the Company is not the surviving corporation,
a transaction that results in the acquisition of substantially all of the
Company's outstanding stock by a single person or entity, or a sale or transfer
of substantially all of the Company's assets, the Committee may take such
actions with respect to outstanding Incentive Awards as the Committee deems
appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any Participant,
and the Committee's determination shall be conclusive and binding on all persons
for all purposes.
12. Administration of the Plan. The Plan shall be administered by the
Committee, which shall consist of not less than two members of the Board, who
shall be appointed by the Board. Subject to paragraph (d) below, the Committee
shall be the Compensation Committee unless the Board shall appoint another
Committee to administer the Plan. The Committee shall have general authority to
impose any limitation or condition upon an Incentive Award the Committee deems
appropriate to achieve the objectives of the Incentive Award and the Plan and,
without limitation and in addition to powers set forth elsewhere in the Plan,
shall have the following specific authority:
(a) The Committee shall have the power and complete discretion
to determine (i) which eligible employees shall receive Incentive
Awards and the nature of each Incentive Award, (ii) the number of
shares of Company Stock to be covered by each Incentive Award, (iii)
whether Options shall be Incentive Stock Options or Nonstatutory Stock
Options, (iv) the Fair Market Value of Company Stock, (v) the time or
times when an Incentive Award shall be granted, (vi) whether an
Incentive Award shall become vested over a period of time and when it
shall be fully vested, (vii) when Options may be exercised, (viii)
whether a Disability exists, (ix) the manner in which payment will be
made upon the exercise of Options, (x) conditions relating to the
length of time before disposition of Company Stock received upon the
exercise of Options is permitted, (xi) whether to approve a
Participant's election (A) to deliver shares of already owned Company
Stock to satisfy Applicable Withholding Taxes or (B) to have the
Company withhold from the shares to be issued upon the exercise of a
Nonstatutory Stock Option the number of shares necessary to satisfy
Applicable Withholding Taxes, (xii) notice provisions relating to the
sale of Company Stock acquired under the Plan, and (xiii) any
additional requirements relating to Incentive Awards that the Committee
deems appropriate. Notwithstanding the foregoing, no "tandem stock
options" (where two stock options are issued together and the exercise
of one option affects the right to exercise the other option) may be
issued in connection with Incentive Stock Options. The Committee shall
have the power to amend the terms of previously granted Incentive
Awards so long as the terms as amended are consistent with the terms of
the Plan and provided that the consent of the Participant is obtained
with respect to any amendment that would be detrimental to him or her,
except that such consent will not be required if such amendment is for
the purpose of complying with Rule 16b-3 or any requirement of the Code
applicable to the Incentive Award.
(b) The Committee may adopt rules and regulations for carrying
out the Plan. The interpretation and construction of any provision of
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<PAGE>
the Plan by the Committee shall be final and conclusive. The Committee
may consult with counsel, who may be counsel to the Company, and shall
not incur any liability for any action taken in good faith in reliance
upon the advice of counsel.
(c) A majority of the members of the Committee shall
constitute a quorum, and all actions of the Committee shall be taken by
a majority of the members present. Any action may be taken by a written
instrument signed by all of the members, and any action so taken shall
be fully effective as if it had been taken at a meeting.
(d) The Board from time to time may appoint members previously
appointed and may fill vacancies, however caused, in the Committee.
13. Grants to Non-Employee Directors. All provisions of the Plan shall
apply to the grant of Incentive Awards to Non-Employee Directors, except as
provided in this section. All Incentive Awards to Non-Employee Directors will be
Nonstatutory Stock Options. The exercise price of a Nonstatutory Stock Option
for a Non-Employee Director may not be less than 100% of the Fair Market Value
of the Company Stock on the Date of Grant. With respect to Incentive Awards to
Non-Employee Directors, the Board will have all of the authority of the
Committee under the Plan. The Board may delegate its authority to the
Compensation Committee or another committee of the Board that is composed solely
of Non-Employee Directors. The provisions for payment of Applicable Withholding
Taxes will not apply to Incentive Awards to Non-Employee Directors.
14. Notice. All notices and other communications required or permitted
to be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows (a) if to the Company - at its principal business address to the
attention of the Treasurer; (b) if to any Participant - at the last address of
the Participant known to the sender at the time the notice or other
communication is sent.
15. Interpretation. The terms of this Plan are subject to all present
and future regulations and rulings of the Secretary of the Treasury or his or
her delegate relating to the qualification of Incentive Stock Options under the
Code. If any provision of the Plan conflicts with any such regulation or ruling,
then that provision of the Plan shall be void and of no effect.
The terms of this Plan shall be governed by the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this ____ day of __________________, ________.
MENLO ACQUISITION CORPORATION.
By: ________________________
President
8
1999 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
Between
MENLO ACQUISITION CORPORATION
and
------------------------------
NSO
<PAGE>
MENLO ACQUISITION CORPORATION
1999 Stock Incentive Plan
Nonstatutory Stock Option Agreement
THIS AGREEMENT, dated the _____ of ________________, between MENLO
ACQUISITION CORPORATION., a Delaware corporation (the "Company"), and
____________________ ("Participant"), is made pursuant and subject to the
provisions of the Company's 1999 Stock Option Plan (the "Plan"), and all terms
used herein that are defined in the Plan shall have the same meaning given them
in the Plan:
W I T N E S S E T H :
1. Grant of Option. Pursuant to the provisions of the Plan, the Company has
granted to Participant on the _____ day of __________, _______ (the "Date of
Grant"), subject to the terms and conditions of the Plan and subject further to
the terms and conditions herein set forth, the right and option to purchase from
the Company (the "Option") all or any part of an aggregate of _______ shares of
Company Common Stock at the purchase price of $ _______ per share (the "Option
Price"), such Option to be exercisable as hereinafter provided. The Option
evidenced hereby is intended to be a nonstatutory stock option that does not
receive special tax treatment under Section 422 of the Internal Revenue Code
(the "Code").
1
<PAGE>
2. Terms and Conditions. The Option evidenced hereby is subject to the
following terms and conditions:
(a) Expiration Date. This Option shall expire ten years from
the Date of Grant.
(b) Nontransferability. This Option shall be
nontransferable except by will or by the laws of descent and
distribution and, during the lifetime of the
Participant, may be exercised only by the Participant,
except as provided in Section 3 below.
(c) Exercise of Service Option.
(i) Vesting:
____ This Option is 100% vested, and, subject to
the terms and conditions set forth herein, fully exercisable at all times.
____ This Option shall vest, and shall be
exercisable, in accordance with the following schedule:
Anniversary of Percentage of shares of Common
Date of Grant Stock allocable to Option which may
be purchased
First _____________
Second _____________
Third _____________
Fourth _____________
Fifth _____________
Sixth _____________
Seventh _____________
Eighth _____________
Ninth _____________
3
<PAGE>
(ii) Notwithstanding any provisions contained in the
Plan or in this Agreement, in the event of a Change of
Control, the Board may in its discretion provide that this
Option shall become fully vested and the Participant shall be
entitled to exercise such Option, in whole or in part.
(d) Method of Exercising and Payment for Shares. This Option may
only be exercised by written notice delivered to the Treasurer at the
Company's principal office. The exercise date will be (i) in the case
of notice by mail, the date of postmark or (ii) if delivered in
person, the date of delivery. Such notice shall be accompanied by
payment of the Option Price in full by cash (which shall include
payment by check, bank draft or money order payable to the order of
the Company).
3. Termination of Option Upon Termination of Employment. The right of
Participant and his successors in interest to exercise this Option or to vest in
any unvested portion of this Option shall terminate when his directorship or
other employment with the Company or any Subsidiary is terminated for any reason
except as provided in subsections 3(a) and 3(b) below.
(a) Exercise following Death. In the event Participant dies
while he is a director or is otherwise employed by the Company or any
Subsidiary or within three months following termination of his
4
<PAGE>
directorship or other employment due to retirement or disability and
before the exercise in full or expiration of this Option, Participant's
estate (or the person or persons to whom the rights under this Option
shall have passed by will or the laws of descent and distribution) may
exercise this Option at any time within one year next following
Participant's death (but in any event before the expiration date of the
Option period) for the entire number of shares remaining subject to
this Option.
(b) Exercise following Termination, Disability or Retirement.
In the event of termination of Participant's directorship or other
employment by the Company or any Subsidiary for any reason other than
death, including retirement or termination approved by the Company
because of disability, before exercise in full or expiration of this
Option, Participant may exercise the vested and exercisable portion of
this Option at any time within three months next following such
termination of directorship or other employment (but in any event
before the expiration date of the Option period) for the number of
shares remaining subject to the vested and exercisable portion of this
Option.
5
<PAGE>
For the purposes of this Section 3, it shall not be considered a
termination of employment if Participant is placed by the Company or any
Subsidiary on military or sick leave or such other type of leave of absence that
the Committee considers as continuing the employment relationship intact. For
the purposes of this Section 3, only a termination of directorship or other
employment on or after the Participant has reached age 65 shall be considered a
retirement, unless the Committee designates that an earlier termination shall be
considered a retirement. At the time of any exercise of any Option exercised
pursuant to this Section 3, the Option Price shall be paid in full as provided
in Section 2.
Notwithstanding subsections 3(a) and 3(b) above, in no event may this
Option be exercised after the Expiration Date.
4. Governing Law. This Agreement shall be governed by the laws of the State
of Delaware.
5. Conflicts. In the event of any conflict between the provisions of the
Plan as in effect on the date of grant and the provisions of this Agreement, the
provisions of the Plan shall govern. All references herein to the Plan shall
mean the Plan as in effect on the date hereof. Terms defined in the Plan are
used herein as so defined.
6. Participant Bound by Plan. In consideration of the grant of this Option,
Participant agrees he will comply with such conditions as the Board of Directors
and the Committee may impose on the exercise of the Option.
6
<PAGE>
7. Binding Effect. Subject to the limitations stated above and in the Plan,
this Agreement shall be binding upon and inure to the benefit of the legatees,
distributees and personal representatives of Participant and the successors of
the Company.
8. Change in Capital Stock Structure. In the event of changes in the
capital stock structure of the Company, appropriate adjustments in the number of
shares for which the Option shall be exercisable, or the exercise price, or
both, shall be made, and appropriate adjustments in the required values of
Common Stock under Section 3 shall be made, as provided in Section 11 of the
Plan.
9. Tax Obligations Upon Exercise. The difference between the "Fair Market
Value" of Company Common Stock purchased when the Option is exercised and the
Option Price is compensation taxable to the Participant as ordinary income and
subject to applicable federal and state taxes which the Company may be obligated
to withhold. The Participant agrees to make arrangements suitable to the Company
for the payment of all applicable withholding taxes, if any. By a timely
election (to the extent permitted by Rule 16b-3 under the Securities Exchange
Act of 1934), the Participant may elect to have the Company withhold upon
exercise a number of shares of Company Stock having a "Fair Market Value" equal
to the minimum applicable withholding taxes. Any such election shall be subject
to approval by the Committee.
7
<PAGE>
10. Successors and Assigns. This Agreement shall be binding on the Company
and shall be enforceable against its successors and assigns.
11. Notice Provisions. Any notice or election required or permitted under
this Option shall be delivered in writing to the Treasurer at the Company's
principal offices in Parsippany, New Jersey.
12. Transfer of Shares of Company Stock. Upon the exercise of the Option,
the Participant shall not transfer, encumber or dispose of the Common Stock so
purchased unless: (a) an effective registration statement covering such shares
is filed pursuant to the Securities Act of 1933, as amended, and applicable
state law, or (b) an opinion letter of the Participant's counsel is obtained,
satisfactory to the Company and its counsel, that such transfer is not in
violation of any applicable federal or state laws or regulations.
13. Amendment of this Option Agreement. The Board may modify or amend this
Option if it so determines, in its sole discretion, that amendment is necessary
or advisable. No amendment of this Option, however, may, without the consent of
the Participant, make any changes which would adversely affect the rights of the
Participant.
8
<PAGE>
14. No Guaranteed Right to Employment. If Participant is employed by the
Company, nothing contained herein shall confer upon the Participant any right to
be continued in the employment of the Company or interfere in any way with the
right of the Company to terminate his employment at any time for any cause.
With this Option, you will receive a number of documents relating to the
Company and a receipt for those documents. You should sign the receipt for this
material and return it to the Company.
IN WITNESS WHEREOF, MENLO ACQUISITION CORPORATION has caused this Agreement
to be signed by the President and the Participant has affixed his signature
hereto.
MENLO ACQUISITION CORPORATION
By______________________________
President
______________________________
Participant
9
1999 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
Between
MENLO ACQUISITION CORPORATION
and
------------------------------
ISO
<PAGE>
MENLO ACQUISITION CORPORATION
1999 Stock Option Plan
Incentive Stock Option Agreement
THIS AGREEMENT, dated the _____ of _________________, between MENLO
ACQUISITION CORPORATION., a Delaware corporation (the "Company"), and
____________________ ("Participant"), is made pursuant and subject to the
provisions of the Company's 1999 Stock Option Plan (the "Plan"), and all terms
used herein that are defined in the Plan shall have the same meaning given them
in the Plan:
W I T N E S S E T H :
1. Grant of Option. Pursuant to the provisions of the Plan, the Company has
granted to Participant on the _____ day of __________, _____ (the "Date of
Grant"), subject to the terms and conditions of the Plan and subject further to
the terms and conditions herein set forth, the right and option to purchase from
the Company (the "Option") all or any part of an aggregate of _______ shares of
Company Common Stock at the purchase price of $_______ per share (the "Option
Price"), being not less than 100% of the Fair Market Value per share of the
Common Stock on the Date of Grant, such Option to be exercisable as hereinafter
provided. The Option evidenced hereby is intended to be an incentive stock
option that receives special tax treatment under Section 422 of the Internal
Revenue Code (the "Code").
2. Terms and Conditions. The Option evidenced hereby is subject to the
following terms and conditions:
(a) Expiration Date. This Option shall expire ten years
from the Date of Grant.
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<PAGE>
(b) Nontransferability. This Option shall be
nontransferable except by will or by the laws of descent and
distribution and, during the lifetime of the Participant, may be
exercised only by the Participant, except as provided in Section 3
below.
(c) Exercise of Service Option.
(i) Vesting:
____ This Option is 100% vested, and, subject to
the terms and conditions set forth herein, fully
exercisable at all times.
____ This Option shall vest, and shall be
exercisable, in accordance with the following schedule:
Anniversary of Percentage of shares of Common
Date of Grant Stock allocable to Option which may
be purchased
First _____________
Second _____________
Third _____________
Fourth _____________
Fifth _____________
Sixth _____________
Seventh _____________
Eighth _____________
Ninth _____________
(ii) Notwithstanding any provisions contained in the
Plan or in this Agreement, in the event of a Change of
Control, the Board may in its discretion provide that this
Option shall become fully vested and the Participant shall be
entitled to exercise such Option, in whole or in part.
(d) Limitation on Exercise.
(i) Notwithstanding the provisions of subsection
2(c), the aggregate Fair Market Value (determined by reference to the exercise
price at the time the Option is granted) of the stock with respect to which
incentive stock options are exercisable for the first time
3
<PAGE>
by the Participant during a calendar year may not exceed $100,000 (the
"Limitation Amount"). Incentive stock options granted under this Option
agreement and the Plan and under all other plans of the Company and any Parent
and Subsidiary corporations shall be aggregated for purposes of the Limitation
Amount.
(ii) The portion of an Option that fails to qualify
for incentive stock option treatment in a calendar
year because of the Limitation Amount shall be treated as a nonqualified stock
option that does not receive special tax treatment under Code section 422. The
provisions of Section 10 shall apply to the extent an Option is treated as a
nonqualified stock option.
(e) Method of Exercising and Payment for Shares. This Option
may only be exercised by written notice delivered to the Treasurer at the
Company's principal office. The exercise date will be (i) in the case of notice
by mail, the date of postmark or (ii) if delivered in person, the date of
delivery. Such notice shall be accompanied by payment of the Option Price in
full by cash (which shall include payment by check, bank draft or money order
payable to the order of the Company).
3. Termination of Option Upon Termination of Employment. The right of
Participant and his successors in interest to exercise this Option or to vest in
any unvested portion of this Option shall terminate when his employment with the
Company or any Subsidiary is terminated for any reason except as provided in
subsections 3(a) and 3(b) below.
(a) Exercise following Death. In the event Participant dies
while he is employed by the Company or any Subsidiary or within three
months following termination of his employment due to retirement or
disability and before the exercise in full or expiration of this
Option, Participant's estate (or the person or persons to whom the
4
<PAGE>
rights under this Option shall have passed by will or the laws of
descent and distribution) may exercise this Option at any time within
one year next following Participant's death (but in any event before
the expiration date of the Option period) for the entire number of
shares remaining subject to this Option.
(b) Exercise following Termination, Disability or Retirement.
In the event of termination of Participant's employment by the Company
or any Subsidiary for any reason other than death, including retirement
or termination approved by the Company because of disability, before
exercise in full or expiration of this Option, Participant may exercise
the vested and exercisable portion of this Option at any time within
three months next following such termination of employment (but in any
event before the expiration date of the Option period) for the number
of shares remaining subject to the vested and exercisable portion of
this Option.
For the purposes of this Section 3, it shall not be considered a
termination of employment if Participant is placed by the Company or any
Subsidiary on military or sick leave or such other type of leave of absence that
the Committee considers as continuing the employment relationship intact. For
the purposes of this Section 3, only a termination of employment on or after the
Participant has reached age 65 shall be considered a retirement, unless the
Committee designates that an earlier termination shall be considered a
retirement. At the time of any exercise of any Option exercised pursuant to this
Section 3, the Option Price shall be paid in full as provided in Section 2.
Notwithstanding subsections 3(a) and 3(b) above, in no event may this
Option be exercised after the Expiration Date.
5
<PAGE>
4. Governing Law. This Agreement shall be governed by the laws of the State
of Delaware.
5. Conflicts. In the event of any conflict between the provisions of the
Plan as in effect on the date of grant and the provisions of this Agreement, the
provisions of the Plan shall govern. All references herein to the Plan shall
mean the Plan as in effect on the date hereof. Terms defined in the Plan are
used herein as so defined.
6. Participant Bound by Plan. In consideration of the grant of this Option,
Participant agrees he will comply with such conditions as the Board of Directors
and the Committee may impose on the exercise of the Option.
7. Binding Effect. Subject to the limitations stated above and in the Plan,
this Agreement shall be binding upon and inure to the benefit of the legatees,
distributees and personal representatives of Participant and the successors of
the Company.
8. Change in Capital Stock Structure. In the event of changes in the
capital stock structure of the Company, appropriate adjustments in the number of
shares for which the Option shall be exercisable, or the exercise price, or
both, shall be made, and appropriate adjustments in the required values of
Common Stock under Section 3 shall be made, as provided in Section 11 of the
Plan.
9. Notice of Early Disposition of Option Stock. Participant agrees to give
the Company prompt written notice of a sale or disposition of the Company Common
Stock acquired upon exercising the Option (i) within two years from the date on
which the Option was granted or (ii) within one year from the date on which the
Company Common Stock was transferred to Participant. If Participant fails to
give the Company prompt written notice, Participant will be liable to the
Company for any loss of deduction, any penalty imposed, and any other financial
loss incurred by the Company as a result of the Participant's failure to give
prompt notice.
10. Tax Obligations Upon Exercise of Nonqualified Portion of Option. To the
extent an Option is treated as a nonqualified stock option pursuant to
subsection 2(d)(ii), the difference between the "Fair Market Value" of Company
Common Stock purchased when the Option is exercised and the Option Price is
compensation taxable to the Participant as ordinary income and subject to
applicable federal and state taxes which the Company is obligated to withhold.
The Participant agrees to make arrangements suitable to the Company for the
payment of all applicable withholding taxes. By a timely election (to the extent
permitted by Rule 16b-3 under the Securities Exchange Act of 1934), the
Participant may elect to have the Company withhold upon exercise a number of
Company Shares having a "Fair Market Value" equal to the minimum applicable
withholding taxes. Any such election shall be subject to approval by the
Committee.
11. Successors and Assigns. This Agreement shall be binding on the Company
and shall be enforceable against its successors and assigns.
12. Notice Provisions. Any notice or election required or permitted under
this Option shall be delivered in writing to the Treasurer at the Company's
principal offices in Parsippany, New Jersey.
13. Transfer of Shares of Company Stock. Upon the exercise of the Option,
the Participant shall not transfer, encumber or dispose of the Common Stock so
purchased unless: (a) an effective registration statement covering such shares
is filed pursuant to the Securities Act of 1933, as amended, and applicable
state law, or (b) an opinion letter of the Participant's counsel is obtained,
satisfactory to the Company and its counsel, that such transfer is not in
violation of any applicable federal or state laws or regulations.
14. Amendment of this Option Agreement. The Board may modify or amend this
Option if it so determines, in its sole discretion, that amendment is necessary
or advisable. No amendment of this Option, however, may, without the consent of
the Participant, make any changes which would adversely affect the rights of the
Participant, except the Board may unilaterally amend the Plan and Incentive
Awards as it deems appropriate to cause Incentive Stock Options to meet the
requirements of the Code and regulations thereunder.
15. No Guaranteed Right to Employment. If Participant is employed by the
Company, nothing contained herein shall confer upon the Participant any right to
be continued in the employment of the Company or interfere in any way with the
right of the Company to terminate his employment at any time for any cause.
With this Option, you will receive a number of documents relating to the
Company and a receipt for those documents. You should sign the receipt for this
material and return it to the Company.
IN WITNESS WHEREOF, MENLO ACQUISITION CORPORATION has caused this Agreement
to be signed by the President and the Participant has affixed his signature
hereto.
MENLO ACQUISITION CORPORATION
By______________________________
President
-------------------------------
Participant
9
LEASE
LEASE, made this 23 day of June, 1997 between Greenberg Property, L.L.C.
whose address is 100 Misty Lane, Parsippany, New Jersey 07054 (hereinafter
referred to as "Lessor"); and Environmental Waste Management Associates, Inc.
whose address is 100 Misty Lane, Parsippany, New Jersey 07054.
PREAMBLE
In addition to other terms elsewhere defined in this Lease, the
following terms, whenever used in this Lease, should have only the meanings set
forth in this section unless such meanings are expressly modified, limited or
expanded elsewhere herein.
A. Additional Rent. All sums in addition to fixed basic rent
payable by Lessee to Lessor pursuant to the provisions of this Lease.
B. Base Period Costs. As to the following:
(1) Base Operating Costs. Those costs, not
otherwise specifically defined herein, incurred during Calendar Year 1998.
(2) Base Real Estate Taxes. Those real estate taxes incurred
for the building and office building area during Calendar Year 1998.
(3) Base Utility and Energy Costs. Those costs for utility and
energy (including surcharges and/or adjustments) incurred during Calendar Year
1998. These costs do not include other costs specifically defined herein.
C. Broker. None.
D. Building. 100 Misty Lane, Parsippany, New Jersey.
E. Building Holidays. The holidays listed on Exhibit E attached
hereto.
F. Commencement Date. August 1, 1997.
G. Demised Premises or Premises. Approximately 21,827 gross rentable
square feet on the 3rd floor and part of the first floor, as shown on Exhibit A
hereto, which includes an allocable share of the common facilities as defined in
paragraph 42(c).
H. Exhibits. The following exhibits attached to this Lease are
incorporated herein and made a part hereof:
Premises...............................Exhibit A
Rules and Regulations..................Exhibit B
Landlord's Work........................Exhibit C
Cleaning Services......................Exhibit D
Building Holidays......................Exhibit E
I. Fixed Basic Rent. Three Million Fifty-Five Thousand Seven
Hundred and Eighty ($3,055,780.00) Dollars for the term payable as follows:
Years 1 - 10
(1) Yearly Rate. Two Hundred and Eighty Thousand and
Six Hundred and Four ($305,578.00) Dollars.
(2) Monthly Rate. Twenty-Five Thousand Four
Hundred and Sixty-Four and 83/100 ($25,464.83.00) Dollars.
J. Lessee's Percentage. Forty-Four and 55/100 (44.55%)
percent subject to adjustment as provided for in paragraph 42(e).
K. Parking Spaces. A total of nine (9) assigned spaces.
L. Permitted Use. General office use and nothing else.
M. Security Deposit. None.
N. Term. Ten (10) years -0- months from the
commencement date plus two (2) five (5) year options.
O. Termination Date. The day before the 10th anniversary of the
commencement date.
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W I T N E S S E T H :
For and in consideration of the covenants herein contained, and upon
the terms and conditions herein set forth, Lessor and Lessee agree as follows:
1. Description. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the demised premises as defined in the preamble (hereinafter
called "demised premises" or "premises"), as shown on the plan or plans
initialed by the parties hereto marked "Exhibit A attached hereto and made a
part of this Lease, in the building as defined in the preamble (hereinafter
called the "building"), together with the right to use in common with other
lessees of the building, their invitees, customers and employees those public
areas of the common facilities as hereinafter defined.
2. Term. The premises are leased for the term to commence on the
commencement date and to end at 12:00 midnight on the termination date, all as
defined in the preamble.
3. Basic Rent. The Lessee shall pay to the Lessor during the term the
fixed basic rent, as defined in the preamble (hereinafter called "fixed basic
rent"), payable in draft or bank check. The fixed basic rent shall accrue at the
yearly rate, as defined in the preamble, and shall be payable in advance on the
first day of each calendar month during the term at the monthly installments, as
defined in the preamble, except that a proportionately lesser sum may be paid
for the first and last months of the term of this Lease if the term commences on
a day other than the first day of the month in accordance with the provision of
this Lease herein set forth. Lessor acknowledges receipt from Lessee of the
first monthly installment by check, subject to collection, for fixed basic rent
for the first month of the lease term. Lessee shall pay fixed basic rent and any
additional rent, as hereinafter provided, to Lessor at Lessor's above stated
address, or at such other place as Lessor may designate in writing without
demand and without counterclaim, deduction or setoff.
4. Use and Occupancy. Lessee shall use and occupy the premises for the
permitted use as defined in the preamble and for no other purpose.
5. Care and Repair of Premises. Lessee covenants to commit no act of
waste and to take good care of the premises and the fixtures and appurtenances
therein, and shall in the use and occupancy of the premises comply with all
laws, orders and regulations of the federal, state and municipal governments or
any of their departments affecting the premises, and with any and all
environmental requirements resulting from the Lessee's use of the premises, this
covenant to survive the expiration or sooner termination of the Lease; Lessor
shall, at Lessor's expense, make all necessary repairs to the common facilities
and to the parking areas, if any, the same to be included as an operating cost
except where the repair has been made necessary by misuse or neglect by Lessee
or Lessee's agents, servants, visitors of licensees, in which event Lessor shall
nevertheless make the repair, but Lessor shall pay to Lessor as additional rent,
immediately upon demand, the costs therefor. Lessee, at its sole cost and
expense, shall have the right to contest any order or regulation and shall not
be required to comply with any such order or regulation until a final
non-appealable decision is rendered. All improvements made by Lessee to the
premises which are so attached to the premises that they cannot be removed
without material injury to the premises, shall become the property of Lessor
upon installation. Not later than the last day of the term, Lessee shall, at
Lessee's expense, remove all Lessee's personal property and those improvements
made by Lessee which have not become the property of Lessor including trade
fixtures, cabinet work, movable paneling, partitions, and the like; repair all
injury done by or in connection with the installation or removal of said
property and improvements; and surrender the premises in as good condition as
they were at the beginning of the term, reasonable wear and damage by fire, the
elements, casualty, or other cause not due to the misuse or neglect by Lessee,
Lessee's agents, servants, visitors, or licensees excepted. All other property
of Lessee remaining on the premises after the last day of the term of the Lease
shall be conclusively deemed abandoned and may be removed by Lessor, and Lessee
shall reimburse Lessor for the cost of such removal. Lessor may have any such
property stored at Lessee's risk and expense. With respect to the common
facilities and parking area, Lessee shall be responsible for any damage which is
not covered by insurance caused by visitors and/or licenses.
6. Alterations, Additions or Improvements. Lessee shall not, without
first obtaining the written consent of Lessor, make any alterations, additions
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<PAGE>
or improvements in, to or about the premises which cost in excess of $10,000.
Below said dollar number no advance written or oral consent is required.
7. Activities Increasing Fire Insurance Rates. Lessee shall not do or
suffer anything to be done on the premises which will increase the rate of fire
insurance on the building. This clause shall not be applicable so long as Lessee
uses the premises solely for office use.
8. Assignment and Sublease. Lessee may not assign or sublease the
within lease to any party without Lessor's consent which shall not unreasonably
be withheld:
(a) Lessor's consent shall not be deemed unreasonably withheld
if it refuses to consent to any proposed sublease or an assignment of the lease
to a tenant, subtenant or other occupant of the building or, if in the
reasonable judgment of Lessor the business of such proposed subtenant or
assignee is not compatible with the type of occupancy of the building, violates
any exclusive granted to any other tenant in the building, or such business will
create increased use of the common facilities of the office building area and/or
building, or is to any state, federal or municipal agency or bureau.
(b) The Lessee and each assignee shall be and remain liable
for the observance of all the covenants and provisions of this Lease, including
but not limited to the payment of fixed basic rent and additional rent reserved
herein, through the entire term of this Lease as the same may be extended or
otherwise modified.
(c) In any event, the acceptance by Lessor of any fixed basic
rent or additional rent from the assignee or from any of the subtenants, or the
failure of Lessor to insist upon a strict performance of any of the terms,
conditions and covenants herein, shall not release Lessee herein nor any
assignee assuming this Lease from any and all of the obligations herein during
and for the entire term of this Lease.
(d) Lessor shall require a One Hundred ($100.00) Dollars
payment to cover its handling charges for each request for consent to any sublet
or assignment prior to its consideration of the same. Lessee acknowledges that
its sole remedy with respect to any assertion that Lessor's failure to consent
to any sublet or assignment is unreasonable, shall be the remedy of specific
performance and Lessee shall have no other claim or cause of action against
Lessor as a result of Lessor's actions in refusing to consent thereto.
(e) Any sublet or assignment to an "affiliate" (hereinafter
defined) shall not be subject to the provisions of subparagraph (a) hereof and
shall not require Lessor's prior written consent, but all other provisions of
this paragraph shall apply.
(f) The sale and transfer of stock or ownership control, (50%
or more of the stock of the corporation or partnership ownership) if Lessee be a
corporation, or partnership, shall be deemed an assignment of this Lease unless
(i) it involves the sale or issuance of securities registered under the
Securities Act of 1933, as amended; (ii) it is made amongst the existing
stockholders (partners) of Lessee; or (iii) it results from the death of a
stockholder (partner) of Lessee, in which event the Lessor's consent shall not
be required but all other provisions of this paragraph shall apply.
9. Compliance with Rules and Regulations. Lessee shall observe and
comply with the rules and regulations hereinafter set forth in Exhibit B hereto
and made a part hereof, and with such further reasonable rules and regulations
as Lessor may prescribe on written notice to Lessee for the safety, care and
cleanliness of the building, and the comfort, quiet and convenience of other
occupants of the building. Lessee must consent in writing to be bound by any
future rules and regulations. Lessee's consent shall not be unreasonably
withheld. Lessee shall not place a load upon any floor of the demised premises
exceeding the floor load per square foot area which it was designed to carry and
which is provided for in the Exhibit A attached hereto or allowed by law. Lessor
reserves the right to prescribe weight and position of all safes, business
machines and mechanical equipment. Such installments shall be placed and
maintained by Lessee, at Lessee's expense, in settings sufficient in Lessor's
reasonable judgment to absorb and prevent vibration, noise and annoyance.
10. Damages to Building/Waiver of Subrogation. If the building is
damaged by fire or any other cause to such extent that the cost of restoration,
3
<PAGE>
as reasonably estimated by Lessor, will equal or exceed twenty-five (25%)
percent of the replacement value of the building (exclusive of foundations) just
prior to the occurrence of the damage then Lessor may, no later than the
sixtieth (60th) day following the damage, give Lessee a notice of election to
terminate this Lease, or if the cost of restoration will equal or exceed fifty
(50%) percent of such replacement value and if the premises shall not be
reasonably usable for the purpose for which they are leased hereunder then
Lessee may, no later than the sixtieth (60th) day following the damage, give
Lessor a notice of election to terminate the Lease. In either said event of
election, this Lease shall be deemed to terminate on the thirtieth (30th) day
after the giving of said notice and Lessee shall surrender possession of the
premises within a reasonable time thereafter, and the fixed basic rent and any
additional rent shall be apportioned as of the date of said surrender, and any
fixed basic rent or additional rent paid for any period beyond said date shall
be repaid to Lessee. If the cost of restoration, as estimated by Lessor, shall
amount to less than twenty-five (25%) percent of said replacement value of the
building or if despite the cost Lessor does not elect to terminate the Lease,
Lessor shall restore the building and the premises with reasonable promptness
subject to force majeure, as hereinafter defined, and Lessee shall have no right
to terminate this Lease. Lessor need not restore fixtures and improvements owned
by Lessee. In any case in which use of the premises is affected by any damage to
the building, there shall be either an abatement or an equitable reduction in
fixed basic rent and any additional rent depending on the period for which and
the extent to which the premises are not reasonably usable for the purposes for
which they are leased hereunder. The words "restoration" and "restore" as used
in this paragraph shall include repairs. If the damage results from the fault of
Lessee or Lessee's agents, servants, visitors or licensees, which are not
covered by insurance, Lessee shall not be entitled to any abatement or reduction
in fixed basic rent or additional rent except to the extent of any rent
insurance maintained by Lessee and received by Lessor.
Notwithstanding the provisions of this paragraph of the Lease, in the
event of any loss or damage to the building, the premises and/or any contents
(herein "property damage"), each party waives all claims against the other for
any such loss or damage and each party shall look only to any insurance which it
has obtained to protect against such loss (or in the case of Lessee, against any
tenant of the building that has not waived subrogation against such Lessee), and
each party shall obtain for each policy of such insurance provisions waiving any
claims against the other party (and against any other tenant(s) in the building
that has waived subrogation against the Lessee) for loss or damage within the
scope of such insurance.
11. Eminent Domain. If Lessee's use of the premises is materially
affected due to the taking by eminent domain of (i) the premises or any part
thereof or any estate therein, or (ii) any other part of the building then, in
either event, this Lease shall terminate on the date when title vests pursuant
to such taking. The fixed basic rent and any additional rent shall be
apportioned as of said termination date, and any fixed basic rent or additional
rent paid for any period beyond said date shall be repaid to Lessee. Lessee
shall not be entitled to any part of the award for such taking or any payment in
lieu thereof, but Lessee may file a separate claim for any taking of fixtures
and improvements owned by Lessee which have not become Lessor's property, and
for moving expenses provided the same shall in no way affect or diminish
Lessor's award. In the event of a partial taking which does not effect a
termination of this Lease but does deprive Lessee of the use of a portion of the
demised premises, there shall either be an abatement or any equitable reduction
of the fixed basic rent and an equitable adjustment reducing the base period
costs depending on the period for which and the extent to which the premises so
taken are not reasonably usable for the purpose for which they are leased
hereunder. If any partial or total taking materially interferes with Lessee's
ability to conduct its business, Lessee shall have the option to terminate this
Lease.
12. Insolvency of Lessee. Either (i) the appointment of a receiver to
take possession of all or substantially all of the assets of Lessee, or (ii) a
general assignment by Lessee for the benefit of creditors, or (iii) any action
taken or suffered by Lessee under any insolvency or bankruptcy act shall
constitute a default of this Lease by Lessee, and Lessor may terminate this
Lease forthwith and upon notice of such termination, Lessee's right to
possession of the demised premises shall cease and Lessee shall then quit and
surrender the premises to Lessor, but Lessee shall remain liable as hereinafter
provided in paragraph 14 hereof. If Lessee contines to pay the basic rent and
additional rent after any insolvency filing, the filing of same shall not
constitute a Lease default.
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<PAGE>
13. Lessor's Remedies on Default. If Lessee defaults in the payment of
fixed basic rent or any additional rent, or defaults in the performance of any
of the other covenants and conditions hereof, Lessor may give Lessee notice of
such default and if Lessee does not cure any fixed basic rent or additional rent
default within ten (10) days or other default within thirty (30) days after
giving of such notice (or if such other default is of such nature that it cannot
be completely cured within such period if Lessee does not commence such curing
within such thirty (30) days and thereafter proceed with reasonable diligence
and in good faith to cure such default), then Lessor may terminate this Lease on
not less than ten (10) days' notice to Lessee, and on the date specified in said
notice, Lessee's right to possession of the demised premises shall cease and
Lessee shall then quit and surrender the premises to Lessor, but Lessee shall
remain liable as hereunder provided. If this Lease shall have been so terminated
by Lessor pursuant to paragraphs 12 or 13 hereof, Lessor may at any time
thereafter resume possession of the premises by any lawful means and remove
Lessee or other occupants and their effects.
14. Deficiency. In any case where Lessor has recovered possession of
the premises by reason of Lessee's default, Lessor may at Lessor's option occupy
the premises or cause the premises to be redecorated, altered, divided,
consolidated with any adjoining premises, or otherwise change or prepared for
reletting, and may relet premises or any part thereof as agent of Lessee, or
otherwise, for a term or terms to expire prior to, at the same time as, or
subsequent to the original expiration date of this Lease, at Lessor's option,
and receive the rent thereof (fixed basic rent or additional rent) so received
shall be applied first to the payment of such expenses as Lessor may have
incurred in connection with the recovery of possession, redecorating, altering,
dividing, consolidating with other adjoining premises, or otherwise changing or
preparing for re-letting, and the re-letting including brokerage and reasonable
attorneys fees, and then to the payment of damages in amounts equal to the fixed
basic rent and additional rent hereunder, and to the costs and expenses of
performance of the other covenants of Lessee as herein provided. Lessee agrees
in any such case, whether or not Lessor has re-let, to pay to Lessor damages
equal to the fixed basic rent and additional rent and other sums herein agreed
to be paid by Lessee less the net proceeds of the re-letting, if any, as
ascertained from time to time and the same shall be payable by Lessee on the
several rent days above specified. Lessee shall not be entitled to any surplus
accruing as a result of any such re-letting. In re-letting the premises as
aforesaid, Lessor may grant rent concessions and Lessee shall not be credited
herewith. No such re-letting shall constitute a surrender and acceptance or be
deemed evidence thereof. If Lessor elects, pursuant hereto, actually to occupy
and use the premises, or any part thereof, during any part of the balance of the
term as originally fixed or since extended, there shall be allowed against
Lessee's obligation for fixed basic rent and additional rent or damages as
herein defined, during the period of Lessor's occupancy, the reasonable value of
such occupancy not to exceed in any event the fixed basic rent and additional
rent herein reserved, and such occupancy shall not be construed as a release of
Lessee's liability hereunder.
Alternatively, in any case where Lessor has recovered
possession of the premises by reason of Lessee's default, Lessor may at Lessor's
option and at any time thereafter and without notice or other action by Lessor,
and without prejudice to any other rights or remedies it might have hereunder,
or at law or equity become entitled to recover from Lessee as damages for such
breach in addition to such other sums herein agreed to be paid by Lessee to the
date of re-entry, expiration and/or dispossess, an amount equal to the
difference between the fixed basic rent and additional rent reserved in this
Lease from the date of such default to the date of expiration of the term
demised, as the same may have been extended or renewed, and the then fair and
reasonable rental value (inclusive of additional rent and fixed basic rent) of
the premises for the same period. Said damages shall become due and payable to
Lessor immediately upon such breach of this Lease and without regard to whether
this Lease be terminated or not, and if this Lease be terminated without regard
to the manner in which it is terminated. In the computation of such damages, the
difference between any installments of fixed basic rent and additional rent
thereafter becoming due, and the fair and reasonable rental value of the
premises for the period for which such installment was payable, shall be
discounted to the date of such default at the rate of not more than four (4%)
percent per annum.
Lessee hereby waives all right of redemption to which Lessee or any
person under Lessee might be entitled by any law now or hereafter in force.
Lessor's remedies hereunder are in addition to any remedy allowed by
law.
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15. Subordination of Lease. This Lease shall at Lessor's option, or at
the option of any holder of any underlying lease or holder of any mortgage, be
subject and subordinate to any such underlying leases and to any such first
mortgage which may now or hereafter affect the real property of which the
premises form a part, and also to all renewals, modifications, consolidations
and replacements of said underlying leases and said first mortgage. Although no
instrument or act on the part of Lessee shall be necessary to effectuate such
subordination, Lessee will nevertheless execute and deliver such further
instruments confirming such subordination of this Lease as may be desired by the
holders of said first mortgage or trust deed or by any of the Lessors under such
underlying leases. Lessee hereby appoints Lessor attorney-in-fact irrevocably to
execute and deliver any such instrument for Lessee. If any underlying lease to
which this Lease is subject terminates, Lessee shall on timely request attorn to
the owner of the reversion.
16. Security. Intentionally left blank.
17. Right to Cure Lessee's Breach. If Lessee breaches any covenant or
condition of this Lease, Lessor may on reasonable notice to Lessee (except that
no notice need be given in case of emergency) cure such breach at the expense of
Lessee, and the reasonable amount of all expenses, including attorney's fees
incurred by Lessor, in so doing (whether paid by Lessor or third party) shall be
deemed additional rent payable on demand.
18. Mechanic's Lien. Lessee shall, within a reasonable period of time
after notice from Lessor, discharge or satisfy by bonding or otherwise any
mechanic's liens for materials or labor claimed to have been furnished to the
premises on Lessee's behalf.
19. Right to Inspect and Repair. Lessor may enter the premises but
shall not be obligated to do so (except as required by any specific provision of
this Lease) at any reasonable time on reasonable notice to Lessee (except that
no notice need be given in case of emergency) for the purpose of inspection or
the making of such repairs, replacements or additions in, to, on, and about the
premises or the building as Lessor deems necessary or desirable. Lessee shall
have no claims or cause of action against Lessor by reason thereof. Lessee,
except for claims not covered by a standard business interruption insurance
policy, (Lessee shall provide Lessor with copy of insurance policy) shall not
have any claim against Lessor for interruption to Lessee's business.
20. Services to be Provided by Lessor/Lessor's Exculpation. Subject to
intervening laws, ordinances, regulations, and executive orders, while Lessee is
not in default under any of the provisions of this Lease, Lessor agrees to
furnish, except on holidays as set forth on Exhibit E attached hereto and made a
part hereof.
(a) The cleaning services as set forth in Exhibit D attached
hereto and made a part hereof, and subject to the conditions therein stated.
Except as set forth on Exhibit D, Lessee shall pay the cost of all other
cleaning services required by Lessee.
(b) Heating, ventilating and air conditioning (herein "HVAC"),
as appropriate for the season, together with common facilities lighting and
electric energy, all during building hours, as hereinafter defined.
(c) Cold and hot water for drinking and lavatory purposes.
(d) Elevator service during building hours.
(e) Restroom supplies and exterior window cleaning when
reasonably required.
(f) Notwithstanding the requirements of other provision of
this Lease, Lessor shall not be liable for failure to furnish any of the
aforesaid services when such failure is due to force majeure as hereinafter
defined. If Lessor fails to provide necessary services to the premises for an
unreasonable length of time, Lessee may terminate this Lease. Lessor's liability
for its failure to furnish any service required to be furnished by it pursuant
to this Lease shall be as set forth in paragraph 21. Lessor shall not be liable
under any circumstance, including but not limited to that arising from the
negligence of Lessor, its agents, servants or invitees, or from defects, errors
or omissions in the construction or design of the demised premises and/or the
building including the structural and non-structural portions thereof, for loss
of or injury to Lessee or to property, however occurring, through or in
connection with or incidental to the furnishing of or failure to furnish any of
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the aforesaid services, or for any interruption to Lessee's business, however
occurring.
21. Interruption of Services or Use. Interruption or curtailment of any
service maintained in the building or at the office building area if caused by
force majeure, as hereinafter defined, shall not entitle Lessee to any claim
against Lessor or to any abatement of fixed basic rent or addition rent, and
shall not constitute a constructive or partial eviction unless Lessor fails to
take measures as may be reasonable under the circumstances to restore the
service without undue delay. If the premises are rendered untenantable in whole
or in part for a period of ten (10) consecutive business days by the making of
repairs, replacements or additions other than those made with Lessee's consent
or caused by misuse or neglect by Lessee, or Lessee's agents, servants, visitors
or licensees, there shall be a proportionate abatement of rent from and after
said tenth (10th) consecutive business day and continuing for the period of such
untenantability. In no event shall Lessee be entitled to claim a constructive
eviction from the premises unless Lessee shall first have notified Lessor in
writing of the condition or conditions giving rise thereto and if the complaints
be justified, unless Lessor shall have failed, within a reasonable time after
receipt of such notice, to remedy or commence and proceed with due diligence to
remedy such condition or conditions, all subject to force majeure as hereinafter
defined.
22. Building Standard Office Electrical Service.
(a) For so long as Lessee is not in default with respect to
the payment of basic rent and additional rent, Lessor agrees to provide office
electrical service (as hereinafter defined) to the premises upon the following
terms and conditions:
(1) Lessee shall pay to Lessor on the first
day of every month, in advance,$2,273.64 per month. Said amounts shall be
treated as additional rent due hereunder. Proportionate sums shall be
payable for periods of less than a full month if the term commences or ends
on any other than the first or last day of the month.
(2) Lessor shall not be liable in any way to
Lessee for any loss, damage or expense which Lessee may sustain or incur as a
result of any failure, defect or change in the quantity or character of
electrical energy available for redistribution to the premises pursuant to this
paragraph nor for any interruption in the supply, and Lessee agrees that such
supply may be interrupted for inspection, repairs, replacement and in
emergencies. In any event, the full measure of Lessor's liability for any
interruption in the supply due to Lessor's acts or omissions shall be an
abatement of rent. In no event shall Lessor be liable for any business
interruption suffered by Lessee.
(3) Lessee shall furnish and install all replacement
lighting tubes, lamps, ballasts and bulbs required in the premises.
(4) Lessee shall make no alteration to the existing
electrical risers, wiring and other conductors or outlets without Lessor's
consent. Should Lessor consent, all such alterations shall be provided by Lessor
and the cost therefor paid by Lessee upon demand as additional rent.
(b) For purposes of this paragraph 22, building standard
office electrical service shall mean the electrical energy required to provide
the lighting and operate general office equipment such as Lessee's present
computer system, typewriters, calculators and copiers; provided Lessee's present
such lighting and equipment does not require greater than a 15-amp line, but in
no event to include electrical energy for the operation of any computer
installation or data processing equipment other than personal computers, which
energy shall be provided during building hours as hereinafter defined.
23. Additional Rent. It is expressly agreed that Lessee will pay, in
addition to the basic rent provided in paragraph 3 above, an additional rent to
cover Lessee's percentage, as defined in the preamble, of the increased cost to
Lessor for each of the categories enumerated herein over the base period costs,
as defined in the preamble for said categories.
(a) Operating Cost Escalation. If the operating costs,
incurred for the building in which the demised premises are located and office
building area for any Lease year or proportionate part thereof during the Lease
term, shall be greater than the base operating costs (adjusted proportionately
for periods less than a lease year), then Lessee shall pay to Lessor as
additional rent Lessee's percentage of all such excess operating costs.
Operating costs shall include by way of illustration and not of limitation:
personal property taxes; labor including wages and salaries; social security
taxes and other taxes which may be levied against Lessor upon such wages and
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salaries; supplies; repairs and maintenance; maintenance and service contracts;
painting; wall and window washing; laundry and towel service; tools and
equipment (which are not required to be capitalized for federal income tax
purposes); fire and other insurance; trash removal; lawn care; snow removal and
all other items properly constituting direct operating costs according to
standard accounting practices (hereinafter collectively referred to as the
"operating costs") but not including depreciation of building or equipment;
interest; income or excess profits taxes; costs of maintaining Lessor's
corporate existence; franchise taxes; any expenditures required to be
capitalized for federal income tax purposes unless said expenditures are for the
purpose of reducing operating costs within the building and office building area
or are required under any governmental law, ordinance or regulation in which
event the costs thereof shall be included. The base operating costs shall be as
defined in the preamble. Any non-third party operating costs shall not increase
more than 50% of the Northeast Consumer Price Index or a comparable index, if
the index no longer exists. Third party costs shall not be subject to any cap.
(b) Fuel, Utilities and Electric Cost Escalation. Hereinafter
referred to as "utility and energy costs." If the utility and energy costs,
including any fuel surcharges or adjustments with respect thereto, incurred for
water, sewer, gas, electric, other utilities and heating, ventilating, and air
conditioning for the building to include all leased and leasable areas and
common facilities, electric, lighting, water, sewer and other utilities for the
building and office building area, for any Lease year or proportionate part
thereof, during the term, shall be greater than the base utility and energy
costs (adjusted proportionately for periods less than Lease year), then Lessee
shall pay to Lessor, as additional rent, Lessee's percentage as hereinafter
defined, all of such excess utility and energy costs. As used in this paragraph
23(b), the base utility and energy costs shall be as defined in the preamble. A
clause similar to this clause shall be included in all the other leases for the
premises.
(c) Tax Escalation. If the real estate taxes for the building
and office building area at which the demised premises are located for any Lease
year or proportionate part thereof, during the Lease term, shall be greater than
the base real estate taxes (adjusted proportionately for periods less than a
Lease year), then Lessee shall pay to Lessor, as additional rent, Lessee's
percentage, as hereinafter defined, of all such excess real estate taxes.
As used in this paragraph 23(c), the words and
terms which follow mean and include the following:
(1) "Base real estate taxes" shall be as defined
in the preamble.
(2) "Real estate taxes" shall mean the property taxes
and assessments imposed upon the building and office building area, or upon the
rent, as such, payable to Lessor, including but not limited to real estate,
city, county, village, school and transit taxes, assessments or charges levied,
imposed or assessed against the building and office building area by any other
taxing authority, whether general or specific, ordinary or extraordinary,
foreseen or unforeseen. If due to future change in the method of taxation any
franchise, income or profit tax shall be levied against Lessor in substitution
for or in lieu of or in addition to any tax which would otherwise constitute a
real estate tax, such franchise, income or profit tax shall be deemed to be a
real estate tax for the purposes hereof; conversely, any additional real estate
tax hereafter imposed in substitution for or in lieu of any franchise, income or
profit tax (which is not in substitution for or in lieu of or in addition to a
real estate tax as hereinabove provided) shall not be deemed a real estate tax
for the purposes hereof.
(d) Lease Year. As used in this paragraph 23, Lease year shall
mean the twelve (12) month period commencing January 1, 1998 and ending December
31, 1998 and each twelve (12) month period thereafter. Once the base costs are
established, in the event any lease period is less than twelve months, then the
base period costs for the categories listed above shall be adjusted to equal the
proportion that said period bears to twelve months, and Lessee shall pay to
Lessor, as additional rent for such period, an amount equal to Lessee's
percentage, as hereinafter defined, of the excess for said period over the
adjusted base with respect to each of the aforesaid categories.
(e) Payment. At any time and from time to time after the
establishment of the base period costs for each of the categories referred to
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above, Lessor shall advise Lessee in writing of Lessee's percentage with respect
to each of the categories as estimated for the next twelve (12) month period
(and for each succeeding twelve month period or proportionate part thereof if
the last period prior to the Lease's termination in less than twelve months) as
then known to Lessor, and hereafter, Lessee shall pay, as additional rent,
Lessee's percentage of these costs for the then current period affected by such
advice (as the same may be periodically revised by Lessor as additional costs
are incurred) in equal monthly installments, such new rates being applied to any
months for which the fixed basic rent shall have already been paid which are
affected by the operating cost escalation and/or utility and energy cost
escalation and/or tax escalation costs above referred to as well as the
unexpired months of the current period, the adjustment for the then expired
months to be made at the payment of the next succeeding monthly rental, as
subject to final adjustment at the expiration of each lease year as defined in
subparagraph (d) hereof (or proportionate part hereof if the last period prior
to the Lease's termination is less than twelve months).
Notwithstanding anything herein contained to the
contrary, in the event the last period prior to the Lease's termination is less
than twelve (12) months, the base period costs during said period shall be
proportionately reduced to correspond to the duration of said final period.
(f) Books and Records. For the protection of Lessee, Lessor
shall maintain books of account which shall be open to Lessee and its
representatives at all reasonable times so that Lessee can determine that such
operating, utility, energy and tax costs have in fact been paid or incurred. Any
disagreement with respect to anyone or more of said charges, if not
satisfactorily settled between Lessor and Lessee, shall be referred by either
party to an independent certified public accountant to be mutually agreed upon,
and if such an accountant cannot be agreed upon, the American Arbitration
Association may be asked by either party to select an arbitrator whose decision
on the dispute will be final and binding upon both parties who shall jointly
share any cost of such arbitration. Pending resolution of said dispute, Lessee
shall pay to Lessor the sum so billed by Lessor subject to its ultimate
resolution as aforesaid.
(g) Right to Review. Once Lessor shall have finally determined
said operating, utility and energy or tax costs at the expiration of a Lease
year, then as to the item so established, Lessee shall only be entitled to
dispute said charge as finally established for a period of six (6) months after
such charge is finally established, and Lessee specifically waives any right to
dispute any such charge at the expiration of said six (6) month period. Lessee
shall have the right to contest any fraudulent charge within three (3) years of
payment for said specific charge.
(h) Occupancy Adjustment. If with respect to operating cost
escalation, as established in subparagraph (a) hereof, and utility and energy
cost escalation, as established in subparagraph (b) hereof, the building is not
ninety-five (95%) percent occupied during the establishment of the respective
base periods, then the base costs incurred with respect to said operating cost
or utility and energy cost shall be adjusted during any such period within the
base period so as to reflect ninety-five (95%) percent occupancy. Similarly, if
during any Lease year or proportionate part thereof, subsequent to the base
period, the building is less than ninety-five (95%) percent occupied, then the
actual costs incurred for operating cost and utility and energy cost shall be
increased during any such period to reflect ninety-five (95%) percent occupancy
so that at all times after the base period the utility and energy cost or
operating cost shall be actual costs; but in the event less than ninety-five
(95%) percent of the building is occupied during all or part of the Lease year
involved, the utility and energy cost and operating cost shall not be less than
that which would have been incurred had ninety-five (95%) percent of the
building been occupied. The aforesaid adjustment shall only be made with respect
to those items that are in fact affected by variation in occupancy levels.
24. Lessee's Estoppel. Lessee shall from time to time, on not less than
ten (10) days' prior written request by Lessor, execute, acknowledge and deliver
to Lessor a written statement certifying that the Lease is unmodified and in
full force and effect, or that the Lease is in full force and effect as modified
and listing the instruments of modification; the dates to which the rents and
charges have been paid; and to the best of Lessee's knowledge, whether or not
Lessor is in default hereunder, and if so, specifying the nature of the default
and any such other reasonable information as Lessor may request. It is intended
that any such statement delivered pursuant to this paragraph may be relied on by
a prospective purchaser of Lessor's interest or mortgagee of Lessor's interest
or assignee of any mortgage of Lessor's interest.
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25. Holdover Tenancy. If Lessee holds possession of the premises after
the terms of this Lease, Lessee shall become a tenant from month to month under
the provisions herein provided, but at a monthly basic rental as provided for
pursuant to N.J.S.A. 2A:42-6 and without the requirement for demand or notice by
Lessor to Lessee demanding delivery of possession of said premises (but
additional rent shall continue as provided in this Lease), which sum shall be
payable in advance on the first day of each month, and such tenancy shall
continue until terminated by Lessor, or until Lessee shall have given to Lessor,
at least sixty (60) days prior to the intended date of termination, a written
notice of intent to terminate such tenancy, which termination date must be as of
the end of a calendar month.
26. Right to Show Premises. Lessor may shown the premises to
prospective purchasers and mortgagees; and during the six (6) months prior to
termination of this Lease, to prospective tenants during business hours on
reasonable notice to Lessee.
27. Lessor's Work; Condition of the Premises. This Section is left
intentionally blank.
28. Waiver of Trial by Jury. To the extent such waiver is permitted by
law, the parties waive trial by jury in any action or proceeding brought in
connection with this Lease or the premises.
29. Late Charge. Anything in this Lease to the contrary
notwithstanding, at Lessor's option, Lessee shall pay a "late charge" of four
(4%) percent of any installment of fixed basic rent or additional rent paid more
then ten (10) days after the due date thereof to cover the extra expense
involved in handling delinquent payments, said "late charge" to be considered
additional rent. The amount of the late charge to be paid by Lessee shall be
reassessed and added to Lessee's obligations for such successive monthly period
until paid.
30. Lessee's Insurance.
(a) Lessee covenants to provide on or before the commencement
date a comprehensive policy of general liability insurance naming Lessor as an
additional named insured, insuring Lessee and Lessor against any liability
commonly insured against and occasioned by accident resulting from any act or
omission on or about the premises and any appurtenances thereto. Such policy is
to be written by an insurance company qualified to do business in the State of
New Jersey reasonably satisfactory to Lessor. The policy shall be with limits
not less than One Million ($1,000,000.00) Dollars in respect of any one person,
in respect to any one accident, and in respect of property damage. Said limits
shall be subject to periodic review and Lessor reserves the right to increase
said coverage limits if, in the reasonable opinion of Lessor, said coverage
becomes inadequate and is less than commonly maintained by tenants in similar
buildings in the areas by tenants making similar uses. At least fifteen (15)
days prior to the expiration or termination date of any policy, Lessee shall
deliver a binder evidencing the renewal policy with proof of the payment of the
premium therefor.
(b) Lessee covenants and represents, said representation being
specifically designed to induce Lessor to execute this Lease, that Lessee's
personal property and fixtures and any other items which Lessee may bring to the
premises which may be subject to any claim for damages or destruction due to
Lessor's negligence shall be fully insured by a policy of insurance covering all
risks with only a reasonable deductible, which policy shall specifically provide
for a waiver of subrogation for Lessor and all building tenants without regard
to whether or not same shall cost an additional premium and notwithstanding
anything to the contrary contained in this Lease. Should Lessee fail to maintain
said all risk insurance with the required waiver of subrogation, or fail to
maintain the liability insurance naming Lessor as an additional named insured,
then Lessee shall be in default hereunder and shall be deemed to have breached
its covenants as set forth herein.
31. No Other Representations, No representations or promises shall be
binding on the parties hereto except those representations and promises
contained herein or in some future writing signed by the party making such
representation(s) or promise(s).
32. Quiet Enjoyment, Lessor covenants that if and so long as Lessee
pays the rent, and any additional rent as herein provided, and performs the
covenants hereof, Lessor shall do nothing to affect Lessee's right to peaceably
and quietly have, hold and enjoy the premises for the term herein mentioned,
subject to the provisions of this Lease.
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33. Management by Lessee, its subtenants, licensees, its or their
employees, agents, contractors or invitees on the demised premises, or of any
business therein; or any work or thing whatsoever done or any condition created
(other than by Lessor for Lessor's or Lessee's account) in or about the demised
premises during the term of this Lease or during the period of time, if any,
prior to the commencement date that Lessee may have been given access to the
demised premises; or (ii) arising from any negligent or otherwise wrongful act
or omission of Lessee or any of its subtenants or licensees or its or their
employees, agents, contractors or invitees; and (b) all costs, expenses and
liabilities incurred on or in connection with each such claim or action or
proceeding brought thereon. In case any action or proceeding be brought against
Lessor by reason of any such claim, Lessee upon notice from Lessor shall resist
and defend such action or proceeding.
34. Paragraph Headings. The paragraph headings in this Lease and
position of its provisions are intended for convenience only and shall not be
taken into consideration in any construction or interpretation of this Lease or
any of its provisions.
35. Applicability to Heirs and Assigns. The provisions of this Lease
shall apply to, bind and inure to the benefit of Lessor and Lessee and their
respective heirs, successors, legal representatives and assigns. It is
understood that the term "Lessor" as used in this Lease means only the owner, a
mortgagee in possession, or a term lessee of the building, so that in the event
of any sale of the building or of any lease thereof, or if a mortgagee shall
take possession of the premises, Lessor named herein shall be and hereby is
entirely freed and relieved of all covenants and obligations of Lessor hereunder
accruing thereafter, and it shall be deemed without further agreement that the
purchaser, the term lessee of the building, or the mortgagee in possession has
assumed and agreed to carry out any and all covenants and obligations of Lessor
hereunder.
36. Parking Spaces. In addition to the nine (9) assigned parking
spaces, Lessee's occupancy of the demised premises shall include the use of
those unassigned parking spaces.
37. Lessor's Liability for Loss of Property. Lessor shall not be liable
for any loss of property (except for a loss not covered by insurance) from any
cause whatsoever, including but not limited to theft or burglary from the
demised premises, and any such loss arising from the negligence of Lessor, its
agents, servants or invitees, or from defects, errors or omissions in the
construction or design of the demised premises and/or the building including the
structural and non-structural portions thereof, and Lessee covenants and agrees
to make no claim for any such loss at any time.
38. Partial Invalidity. If any of the provisions of this Lease or the
application thereof to any person or circumstances shall to any extent be
invalid or unenforceable, the remainder of this Lease or the application of such
provision or provisions to persons or circumstances other than those as to whom
or which it is held invalid or unenforceable shall not be affected thereby, so
long as Lessee's ability to conduct its business in the manner contemplated is
not materially affected, and every provision of this Lease shall be valid and
enforceable to the fullest extent permitted by law.
39. Broker. None.
40. Personal Liability. Notwithstanding anything to the contrary
provided in this Lease, except as provided for in Paragraph 61, it is
specifically understood and agreed such agreement being a primary consideration
for the execution of this Lease by Lessor and Lessee, that there shall be
absolutely no personal liability on the part of Lessor or Lessee, its
constituent members (to include but not be limited to officers, directors,
partners and trustees), their respective successors, assigns or any mortgagee in
possession (for the purposes of this paragraph, collectively referred to as
"Lessor" or "Lessee"), with respect to any of the terms, covenants and
conditions of this Lease, and that Lessee shall look solely to the equity of
Lessor in the building for the satisfaction of each and every remedy of Lessee
in the event of any breach by Lessor of any of the terms, covenants and
conditions of this Lease to be performed by Lessor, such exculpation of
liability to be absolute and without any exceptions whatsoever and Lessor shall
look solely to the equity of Lessee in his business conducted at the premises
for the satisfaction of each and every remedy of Lessor in the event of any
breach by Lessee of any of the terms, covenants and conditions of the Lease to
be performed by Lessee, such exculpation of liability to be absolute and without
any exceptions whatsoever.
41. No Option. The submission of this Lease agreement for examination
does not constitute a reservation of or option for the premises, and this Lease
agreement becomes effective as a Lease agreement only upon execution and
delivery thereof by Lessor and Lessee.
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42. Definitions.
(a) "Affiliate" shall mean any corporation related to Lessee
as a parent, subsidiary or brother/sister corporation so that such corporation
and such party or such corporation and such party and other corporations
constitute a controlled group as determined under Section 1563 of the Internal
Revenue Code of 1954, as amended, and as elaborated by the Treasury Regulations
promulgated thereunder or any business entity in which Lessee has more than a
fifty (50%) percent interest.
(b) "Building Hours" as used in this Lease shall be Monday
through Friday, 8:00 a.m. to 7:00 p.m., and Saturdays from 8:00 a.m. to 1:00
p.m., excluding those holidays as set forth on Exhibit E attached hereto and
made a part hereof, except that common facilities lighting in the building and
office building area shall be maintained for such additional hours as, in
Lessor's sole judgment, is necessary or desirable to insure proper operation of
the building and office building area.
At any time other than Business Hours, Landlord
shall provide Tenant, after-hours air conditioning, ventilation or heating, as
the case may be, for which Tenant shall pay to Landlord as additional rent
hereunder, a sum equal to $30.00 per hour, that being intended to cover
Landlord's cost for the power or fuel required to provide the same. In the event
that during the term of this Lease, or any renewal hereof, the Landlord's cost
for providing after-hours heating or air conditioning shall increase by virtue
of utility rate increases or fuel cost increase, the above hourly rate shall be
adapted, from time to time, to reflect such increases.
Tenant shall access after-hours air
conditioning, ventilation, or heating by an electronic key system located within
its space which shall record the hours for which Tenant is utilizing heat and
air conditioning beyond normal business hours.
(c) "Common facilities" shall mean the non-assigned parking
areas; lobby; elevator(s); fire stairs' public hallways' public lavatories' all
other general building facilities that service all building tenants; air
conditioning rooms; fan rooms; janitorial closets, electrical closets; telephone
closets; elevator shafts and machine rooms; flues; stacks; pipe shafts; and
vertical ducts with their enclosing walls. Lessor may at any time close
temporarily any of the common facilities to make repairs or changes therein or
to effect construction, repairs or changes within the building, or to discourage
non-tenant parking, and may do such other acts in and to the common facilities
as in its judgment may be desirable to improve the convenience thereof.
(d) "Force majeure"" shall mean and include those situations
beyond Lessor's control, including by way of example and not by way of
limitation, acts of God; accidents; repairs; strikes; shortages of labor;
supplies or materials; inclement weather; or where applicable, the passage of
time while waiting for an adjustment of insurance proceeds.
(e) "Lessee's Percentage," as defined in the preamble,
reflects the ratio of the gross square feet of the area rented to Lessee
(including an allocable share of all common facilities) as compared with the
total number of gross square feet of the entire building measured outside wall
to outside wall but excluding therefrom any storage areas. Lessor shall have the
right to make changes or revisions in the common facilities of the building so
as to provide additional leasing area. However, if any service provided for in
paragraph 23 (a) or any utility provided for in paragraph 23(b) is separately
billed or separately metered within the building, then the square footage so
billed or metered shall be subtracted from the denominator (the building's total
number of gross square feet), and Lessee's percentage for such service and/or
utility shall be separately computed and the base costs for such item shall not
include any charges attributable to said square footage. Lessee understands that
as a result of changes in the layout of the common facilities from time to time
occurring due to, by way of example and not by way of limitation, the
rearrangement of corridors, the aggregate of all building tenant proportionate
shares may be equal to, less than, or greater than one hundred (100%) percent.
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43. Lease Commencement. This Section left intentionally blank.
44. Notices. Any notice by either party to the other shall be in
writing and shall be deemed to have been duly give only if delivered personally
or sent by registered mail or certified mail in a postpaid envelope addressed,
if to Lessee, at the above-described building; if to Lessor, at Lessor's address
as set forth above, with a copy to Law Office of Lawrence Seidman, 100 Misty
Lane, Parsippany, NJ 07054 or to either of such other address as Lessee or
Lessor, respectively, may designate in writing. Notice shall be deemed to have
been duly given if delivered personally on delivery thereof, and if mailed upon
the fifth (5th) day after the mailing thereof.
45. Accord and Satisfaction. No payment by Lessee or receipt by Lessor
or a lesser amount than the rent and additional charges payable hereunder shall
be deemed to be other than a payment on account of the earliest stipulated basic
rent and additional rent, nor shall any endorsement or statement on any check or
any letter accompanying any check or payment for rent or additional rent to be
deemed an accord and satisfaction, and Lessor may accept such check or payment
without prejudice to Lessor's right to recover the balance of such fixed basic
rent and additional rent or pursue any other remedy provided herein or by law.
46. Effect of Waivers. No failure by Lessor to insist upon the strict
performance of any covenant, agreement, term or condition of this Lease, or to
exercise any right or remedy consequent upon a breach thereof, and no acceptance
of full or partial rent during the continuance of any such breach shall
constitute a waiver of any such breach or of such covenant, agreement, term or
condition. No consent or waiver, express or implied, by Lessor to or of any
breach of any covenant, condition or duty of Lessee shall be construed as a
consent or waiver to or of any other breach of the same or any other covenant,
condition or duty unless in writing signed by Lessor.
47. Lease Condition. This Section left intentionally blank.
48. Mortgagee's Notice and Opportunity to Cure. Lessee agrees to give
any mortgagees, by registered mail, a copy of any notice of default service upon
Lessor; provided that prior to such notice, Lessee has been notified in writing
(by way of notice of assignment of rents and leases or otherwise) of the address
of such mortgagees v. Lessee further agrees that if Lessor shall have failed to
cure such default within the time provided for in this Lease, then the
mortgagees vshall have any additional thirty (30) days within which to cure such
default; or if such default cannot be cured within that time, then such
additional time as may be necessary, if within such thirty (30) days any
mortgagee has commenced and is diligently pursuing the remedies necessary to
cure such default (including but not limited to commencement of foreclosure
proceedings if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so diligently pursued. It is
specifically understood that said mortgagee has the right to cure said default,
but is not obligated to do so.
49. Lessor's Reserved Right. Lessor and Lessee acknowledge that the
premises are in a building which is not open to the general public. Access to
the building is restricted to Lessor, Lessee, their agents, employees and
contractors and to their invited visitors. In the event of a labor dispute
including a strike, picketing, informal or associational activities directed at
Lessee or any other tenant, Lessor reserves the right unilaterally to alter
Lessee's ingress and egress to the building or make any other change in
operating conditions to restrict pedestrian, vehicular or delivery ingress and
egress to a particular location.
50. Corporate Authority. If Lessee is a corporation, Lessee represents
and warrants that this Lease and the undersigned's execution of this Lease has
been duly authorized and approved by the corporation's Board of Directors. The
undersigned officers and representatives of the corporation executing this Lease
on behalf of the corporation represent and warrant that they are officers of the
corporation with authority to execute this Lease on behalf of the corporation,
and within fifteen (15) days of execution hereof, Lessee will provide Lessor
with a corporate resolution confirming the aforesaid.
51. Environmental Liability. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any biologically
or chemically active or other hazardous substances, or materials. Tenant shall
not allow the storage or use of such substances or materials in any manner not
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sanctioned by law or by the highest standards prevailing in the industry for the
storage and use of such substances or materials, nor allow to be brought into
the building or parking area any such materials or substances except to use in
the ordinary course of Tenant's business, and then only after written notice is
given to Landlord of the identity of such substances or materials. Without
limitation, hazardous substances and materials shall include those described in
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq., any applicable state
or local laws and the regulations adopted under these acts. If any lender or
governmental agency shall ever required testing to ascertain whether or not
there has been release of hazardous materials, then the reasonable costs thereof
shall be reimbursed by Tenant to Landlord upon demand as additional charges if
such requirement applies to the Premises. In addition, Tenant shall execute
affidavits, representations and the like from time to time at Landlord's request
concerning Tenant's best knowledge and belief regarding the presence of
hazardous substances or materials on the Premises. In all events, Tenant shall
indemnify Landlord in the manner elsewhere provided in this lease from any
release of hazardous materials on the Premises occurring while Tenant is in
possession, or elsewhere if caused by Tenant or persons acting under Tenant. The
within covenants shall survive the expiration or earlier termination of the
lease term. Lessor shall provide Lessee with any written environmental reports
Lessor conducts with respect to the property and premises.
52. Relocation
This Section is left intentionally blank.
53. Three Month Free Rent Period This Section is left
intentionally blank.
54. Signage
Lessee shall be permitted, at its expense, to place a sign on
the building or on the ground equal to the size of its present sign.
55. Gutting
This Section is left intentionally blank.
56. Option Period
Lessee shall give Lessor notice of its intention to exercise
each option period six (6) months prior to the respective lease termination
date. If Lessee fails to give said notice, Lessee shall forfeit its right to
excercise any renewal option. Time is of the essence with respect to the renewal
notice. The fixed basic rent for the first five (5) year option shall be $16.20
per square foot and the base year for calculating the addtional rent expenses
shall remain the 1998 calendar year. The fixed basic rent for the second option
period shall be 19.44 per square foot and the base year for calculating the
additional rent expenses shall remain the 1998 calendar year. If Lessee does not
exercise the first option period, Lessee loses the right to the second option
period. In order to exercise any renewal option Lessee must not be in default of
any covenants of the lease and all basic fixed rent and additional rent must be
paid current.
57. Redecorating Allowance
Lessor shall provide Lessee with a Five Thousand ($5,000,00)
Dollars redecorating allowance five (5) years from the commencement date and at
the time Lessee exercises each renewal option.
58. Notwithstanding anything contained herein, this Lease shall not
become effective until the closing of the $2,700,000.00 first mortgage between
Greenberg Propery, L.L.C. and Providian Capital Management Real Estate Services,
Inc.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
WITNESS: GREENBERG PROPERTY, L.L.C.
/s/ George Greenberg /s/ Richard Greenberg
______________________ By: __________________________________________
Richard Greenberg, President
ATTEST:
ENVIRONMENTAL WASTE MANAGEMENT ASSOCIATES, INC.
/s/ George Greenberg /s/ Arthur Rosenbaum
______________________ By:____________________________________________
, Secretary Arthur Rosenbaum, Executive Vice President
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EXHIBIT B
RULES AND REGULATIONS
1. Lessee shall not obstruct or permit its employees, agents, servants,
invitees or licensees to obstruct, in any way, elevators of the Building, or use
the same in any way other than as a means of passage to and from the offices of
Lessee; bring in, store, test or use any materials in the Building which could
cause a fire or an explosion or produce any fumes or vapor; make or permit any
improper noises in the Building; smoke in any elevator; throw substances of any
kind out of windows or doors, or down the passages of the Building, or in the
halls or passageways; sit on or place anything upon the window sills; or clean
the windows.
2. Water closets and urinals shall not be used for any purpose other
than those for which they were constructed, and no sweepings, rubbish, ashes,
newspaper of any kind shall be thrown into them. Waste and excessive or unusual
use of electricity or water is prohibited.
3. The windows, doors, partitions and lights that reflect or admit
light into the halls or other places of the Building shall not be obstructed. NO
SIGNS, ADVERTISEMENTS OR NOTICES SHALL BE INSCRIBED, PAINTED, AFFIXED OR
DISPLAYED IN, ON UPON OR BEHIND ANY WINDOWS, except as may be required by law or
agreed upon by the parties; and no sign, advertisement or notice shall be
inscribed, painted or affixed on any doors, partitions or other part of the
inside of the Building, without the prior consent of Lessor If such consent be
given by Lessor, any such sign, advertisement, or notice shall be inscribed,
painted or affixed by Lessor, or a company approved by Lessor, but the cost of
the same shall be charged to and be paid by Lessee, and Lessee agrees to pay the
same promptly, on demand.
4. No contract of any kind in excess of $2,500 per annum with any
supplier of towels, water, ice toilet articles, waxing, rug shampooing, venetian
blind washing, furniture polishing, lamp servicing, cleaning of electrical
fixtures, removal of waste paper, rubbish or garbage, or other like service
shall be entered into by Lessee, v without the prior written consent of Lessor.
5. Except as provided on Exhibit A attached hereto, when electric
wiring of any kind is introduced it must be connected as directed by Lessor, and
no stringing or cutting of wires will be allowed, except with the prior written
consent of Lessor, and shall be done only by contractors approved by Lessor. The
number and location of telephones, telegraph instruments, electric appliances,
call boxes, etc., shall be approved by Lessor. No Lessee shall lay floor
covering so that the same shall be in direct contact with the floor of the
Premises; and if floor covering is desired to be used, an interline of builder's
deadening felt shall be first affixed to the floor by a paste or other material,
the use of cement or other similar adhesive material being expressly prohibited.
6. Lessor shall have the right to prescribe the weight, size and
position of all safes and other bulky or heavy equipment and all freight brought
into the Building by any Lessee; and the time of moving the same in and out of
the Building. All such moving shall be done under the supervision of Lessor.
Lessor will not be responsible for loss of or damage to any such equipment or
freight from any cause; but all damage done to the Building by moving or
maintaining any such equipment or freight shall be repaired at the expense of
Lessee. Lessor reserves the right to inspect all freight to be brought into the
Building and to exclude from the Building all freight which violates any of
these Rules and Regulations or the Lease of which these Rules and Regulations
are a part. Lessee shall not place a load upon any floor of the Premises that
exceeds the floor load per square foot that such floor was designed to carry and
which is allowed by certificate, rule, regulation, permit or law. Subject to the
terms of the preceding sentence, if Lessee wishes to place any safes or vaults
in the premises, it may do so at its own expense, provided the floor load
capacity is, in Lessor's judgment, sufficient and Lessor reserves the right to
prescribe their weight and position.
7. No machinery of any kind or articles of unusual weight or size will
be allowed in the Building, without the prior written consent of Lessor.
Business machines and mechanical equipment shall be placed and maintained by
Lessee, at Lessee's expense, in setting sufficient, in Lessor's judgment, to
absorb and prevent vibration, noise and annoyance to other Lessees.
8. No additional lock or locks shall be placed by Lessee on any door in
the Building, without the prior written consent of Lessor. Two keys will
initially be furnished to Lessee by Lessor; two additional keys will be supplied
to Lessee by Lessor, upon request, without charge; any additional keys requested
by Lessee shall be paid for by Lessee. Lessee, it agents and employees, shall
not have any duplicate keys made and shall not change any lock. All keys to
doors and washrooms shall be returned to Lessor on or before the Termination
Date, and, in the event of a loss of any keys furnished, Lessee shall pay Lessor
the cost thereof.
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9. Lessee shall not employ any persons or persons for the purpose of
cleaning the Premises, without the prior written consent of Lessor. Lessor shall
not be responsible to Lessee for any loss of property from the Premises however
occurring, or for any damage done to the effects of Lessee by such janitors or
any of its employees, or by any other person or any other cause.
10. No bicycles, vehicles or animals of any kind shall be brought into
or kept in or about the Premises.
11. The requirements of Lessee will be attended to only upon
application at the office of Lessor. Employees or Lessor shall not perform any
work for Lessee or do anything outside of their regular duties, unless under
special instructions from Lessor.
12. The Premises shall not be used for lodging or sleeping purposes,
and cooking therein prohibited.
13. Lessee shall not conduct, or permit any other person to conduct,
any auction upon the Premises; manufacture of store goods, wares or merchandise
upon the Premises, without the prior written approval of Lessor, except the
storage of usual supplies and inventory to be used by Lessee in the conduct of
its business; permit the Premises to be used for gambling; make any unusual
noises in the Building; permit to be played any musical instrument in the
Premises; permit to be played any radio, television, recorded or wired music in
such a loud manner as to disturb or annoy other Lessees; or permit any unusual
odors to be produced upon the Premises.
14. Between 7:00 P.M. and 8:00 A.M. on weekdays, before 8:00 A.M. and
after 1:00 P.M. on Saturdays, and all day Sunday and Building Holidays, the
Building is closed. Lessor reserves the right to exclude from the Building
during such periods all persons who do not present a pass to the Building signed
by Lessee. Each Lessee shall be responsible for all persons to whom such passes
are issued and shall be liable to Lessor for all acts of such persons.
15. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens shall be attached
to or hung in, or used in connection with, any window or door of the Premises,
without the prior written consent of Lessor. Such curtains, blinds and shades
must be a quality, type, design, and color, and attached in a manner approved by
Lessor.
16. Canvassing, soliciting and peddling in the Building are prohibited,
and Lessee shall cooperate to prevent the same.
17. There shall not be used in the Premises or in the Building either
by Lessee or by others in the delivery or receipt of merchandise, supplies or
equipment, any hand trucks except those equipped with rubber tire and side
guards. No hand trucks will be allowed in passenger elevators without
appropriate padding.
18. Each Lessee, before closing and leaving the Premises, shall ensure
that all windows are closed and all entrance doors are locked.
19. Lessor shall have the right to prohibit all advertising by Lessee
which in Lessor's opinion tends to impair the reputation of the Building or its
desirability as a building for offices, and upon written notice from Lessor,
Lessee shall refrain from or discontinue such advertising.
20. Lessor hereby reserves to itself any and all rights not granted to
Lessee hereunder, including, but not limited to, the following rights which are
reserved to Lessor for its purposes in operating the Building: (a) the exclusive
right to the use of the name of the Building for all purposes, except that
Lessee may use the name as its business address and for no other purpose; (b)
the right to change the name or address of the Building, without incurring any
liability to Lessee for so doing; (c) the right to install and maintain a sign
or signs on the exterior of the Building; (d) the exclusive right to use or
dispose of the use of the roof of the Building; (e) the right to limit the space
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on the directory of the Building to be allotted to Lessee; (f) the right to
grant to anyone the right to conduct any particular business or undertaking in
the Building.
21. Lessee shall list all articles to be taken from the Building (other
than those taken out in the usual course of business of Lessee) on Lessee's
letterhead, or a blank which will be furnished by Lessor. Such list shall be
presented at the office of the Building for approval before such articles are
taken from the Building.
22. Unless Exhibit "B" of the Lease shall designate Parking Spaces for
Lessee's exclusive use, Lessee shall have the non-exclusive right to use in
common with Lessor and other Lessees of the Building and their employees and
invitees the parking area provided by Lessor for the parking of passenger
automobiles, other than parking spaces specifically allocated to others by
Lessor. Lessor may issue parking permits, install a gate system, and impose any
other system as Lessor deems necessary for the use of the parking area. Lessee
agrees that it and its employees and invitees shall not park their automobiles
in parking spaces allocated to others by Lessor and shall comply with such rules
and regulations for use of the parking area as Lessor may from time to time
prescribe. Lessor shall not be responsible for any damage to or theft of any
vehicle in the parking area and shall not be required to keep parking spaces
clear of authorized vehicles or to otherwise supervise the use of the parking
area. Lessor reserves the right to change any existing or future parking area,
roads or driveways, and may make any repairs or alterations it deems necessary
to the parking area, roads and driveways and to temporarily revoke or modify the
parking rights granted to Lessee hereunder.
23. Lessee shall not use the Premises or permit the Premises to be used
for the sale of food or beverages, except for vending machines, to be utilized
by its employees and guests.
24. Lessee shall not permit any smoking inside the building by its
employees, guests or licensees.
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EXHIBIT C
100 Misty Lane
Work Letter
Not Applicable
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EXHIBIT D
BUILDING MAINTENANCE SPECIFICATIONS
A. GENERAL (Five Nights Per Week)
1. All ceramic tile and other unwaxed flooring to be swept nightly and
washed as necessary.
2. All composition tile to be swept. In sweeping, all furniture to be
moved when necessary to reach inaccessible areas.
3. All carpeting, rugs and upholstered furniture to be vacuumed.
4. All furniture, fixtures, pictures, ledges, chair rails and other
furniture and window sills to be hand-dusted and cleaned. All window sills to be
washed when necessary.
5. All ash trays to be emptied and damp-wiped clean.
6. All waste receptacles to be emptied and refuse removed to a
designated area of the Building.
7. Interiors of all waste disposal cans and baskets will be kept clean
by inserting a plastic liner in each. Wash disposal units and replace liners
upon request.
8. All water coolers to be washed.
9. All door louvers and other ventilating louvers within reach to be
hand-dusted.
10. All telephones to be hand-dusted.
11. All bright work to be wiped clean and polished.
12. All fingerprints and smudges to be removed from painted vertical
services whenever and wherever practicable.
13. All stairways to be swept and dusted nightly and mopped or scrubbed
weekly.
14. the elevators to be swept, dusted, washed nightly and waxed as
necessary.
B. LAVATORIES (Five Nights Per Week)
1. All lavatory rooms to be swept and washed nightly with Phenolic or
Quaternary disinfectant and power machine scrubbed monthly.
2. All mirrors, shelves, bright work and enameled surfaces in
lavatories to be washed and polished.
3. All basins, bowls and urinals to be sour-washed with a Phenolic or
Quaternary disinfectant.
4. All toilet seats to be sour-washed and disinfected.
5. All partitions, tile walls, dispensers and receptacles to be
hand-dusted and washed when necessary.
6. Landlord to furnish paper towels, toilet paper, hand soap and
sanitary napkins. Units should be checked and replenished daily.
7. All paper towel receptacles to be emptied.
8. All sanitary napkin disposal receptacles to be emptied.
9. All wash tile and stall surfaces to be washed and polished as often
as necessary.
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C. HIGH DUSTING
1. All pictures, frames, charts, graphs and similar wall hangings not
reached in daily cleaning to be dusted at least twice per month.
2. All vertical surfaces such as walls, partitions, doors, bucks and
other surfaces not reached in daily cleaning to be dusted at least once per
month.
3. All pipes, ventilating and air conditional louvers, ducts, high
molding and other high areas not reached in daily cleaning to be dusted at lease
once per month.
D. LOBBY
1. Floors of entrance lobby to be swept and washed as necessary.
2. Lobby wall surfaces to be hand-dusted as often as necessary.
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EXHIBIT E
SCHEDULE OF HOLIDAYS
1. New Year's Day
2. President's Day
3. Independence Day
4. Labor Day
5. Columbus Day
6. Veteran's Day
7. Thanksgiving Day
8. Day after Thanksgiving
9. Christmas Day
21
REAL ESTATE SALE AGREEMENT
THIS REAL ESTATE SALE AGREEMENT (hereinafter sometimes referred to as
the "Agreement") is made this 2nd day of February, 2000, by and between EAST
MORRIS REALTY ASSOCIATES, L.L.C., a limited liability company of the State of
New Jersey, having an address at 16 Elm Street, P. O. Box 1656, Morristown, New
Jersey 07960 ("Seller") and INTEGRATED ANALYTICAL LABORATORIES, LLC, a limited
liability company of New Jersey, having an address at 273 Franklin Road,
Randolph, New Jersey 07869 ("Buyer").
RECITALS
1. Seller is the owner of all ten (10) units and 100% of all common
elements in an industrial condominium known as "Millbrook Industrial
Park Condominium" created by that certain Master Deed dated September
12, 1986 and recorded on December 24, 1986 in the Morris County Clerk's
office in Book 2911 of Deeds at page 122 etc. The building and units
are utilized by five (5) tenants for the following uses:
a) Units 1 and 2, J&M Carpet Express for a showroom and warehouse
for carpeting and flooring, including offices, storage and
shipping.
b) Unit 3, Philip Morris for general warehousing and office for
sale of cigarettes.
c) Unit 4, Applied Nutrition for a supply, storage and repair
facility and office for computer business.
d) Unit 5, Internetwork Services for supply, storage and
repair facility and office for computer business.
e) Units 6-10, Integrated Analytical Laboratories for management
and consulting services in the environmental field and
environmental testing laboratory.
<PAGE>
The real estate is described in Exhibit I attached hereto. The real
estate shall hereafter be referred to as the Property.
2. Seller, for and in consideration of the purchase price as adjusted as
hereinafter provided, to be paid as stipulated herein, and also in
consideration of the terms, covenants and agreements to be performed by
Buyer as set forth herein, agrees to convey the Property to Buyer, free
from all encumbrances except as otherwise specifically hereinafter set
forth, by bargain and sale deed with covenants against grantor's acts
on the date herein fixed for closing of title to the Property.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
1. DEFINITIONS
The following terms, when capitalized, shall have the following
meanings:
"Agreement" - means, when fully executed by Seller and Buyer, this Real
Estate Sale Agreement.
"Agreement Date", "date of this Agreement", and words of similar import
- means the date upon which all parties to this Agreement have received
fully executed copies of this Agreement.
"Buyer" - means Integrated Analytical Laboratories, LLC, a New Jersey
limited liability company.
"Buyer's Attorney" - means Lawrence B. Seidman, Esq., P. O. Box 5430,
Parsippany, New Jersey 07054.
"Closing" - means the delivery of the deed to the Property and other
required documents of conveyance by the Seller to the Buyer and the
simultaneous payment of the Purchase Price to Seller, all in accordance
with this Agreement.
"Closing Date" - means the date and time specified in Section 8.1 of
this Agreement on which Seller shall convey title to the Property
pursuant to this Agreement.
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"Deposit - means the monies payable by Buyer together with interest on
account of this Agreement pursuant to Sections 3 and 5.
"Due Diligence" - means the process whereby the Buyer shall undertake
an investigation and review as to the feasibility and appropriateness
of the Property for their intended use within the context of the terms
of this Agreement.
"Industrial Site Recovery Act" - means N.J.S.A. 13:1K-6, et
seq., the regulations promulgated thereunder, and any
successor legislation or regulations.
"NJDEP" - means the New Jersey Department of Environmental Protection.
"Property" - means the lands and building described on Exhibit I.
"Purchase Price" - means ONE MILLION EIGHT HUNDRED FIFTY THOUSAND AND
NO/100 DOLLARS ($1,850,000.00), as same may be adjusted and as
hereinafter provided.
"Seller's Attorney" - means Dillon, Bitar & Luther, 53 Maple
Avenue, P. O. Box 398, Morristown, New Jersey 07963-0398,
Attention: Garth F. Weber.
"Termination Notice" - means a written instrument terminating this
Agreement in accordance with the terms of this Agreement and which has
been provided in conformity with Section 6.2 of this Agreement.
2. SALE AND PUCHASE OF THE PROPERTY
Seller hereby agrees to sell and convey to Buyer and Buyer hereby
agrees to purchase from Seller, upon the terms and subject to the
conditions hereinafter set forth, good and marketable title, free and
clear of any liens or encumbrances in and to the Property insurable by
a reputable title insurance company doing business in New Jersey at
regular rates and in accordance with this Agreement together with the
following:
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(a) all the rights and appurtenances pertaining to the Property,
including any right, title and interest of Seller in and to
adjacent streets, roads, alleys and rights-of-ways presently
existing or created in the future, including the existing
Leaseholds; and
(b) such other rights and interest as may be specified in this
Agreement to be sold, transferred, assigned or conveyed by
Seller to Buyer.
(c) None of the exceptions above set forth shall prevent the use
of the premises as currently used and specified in paragraph 1
of the recitals.
3. PURCHASE PRICE AND MANNER OF PAYMENT
Purchase Price: The Purchase Price (as may be adjusted as hereinafteR
provided) shall be paid by the Buyer to the Seller in the following
manner:
Upon signing of this Agreement 92,500.00
By Buyer obtaining a mortgage as
hereinafter provided in Paragraph 4 1,387,500.00
Balance to be paid at closing by
certified or bank cashier's check 370,000.00
-------------
Total $1,850,000.00
4. MORTGAGE CONTINGENCY
Buyer's obligation to consummate this Agreement is specifically
contingent upon Buyer obtaining a mortgage commitment from a reputable
financial institution in the principal amount of $1,387,500.00 based
upon an interest rate no greater than 8-1/2% per annum with a minimum
term of ten (10) years based on a twenty (20) year amortization
schedule. The said mortgage commitment is to be obtained within
forty-five (45) days from the date of this Agreement, the application
for such mortgage the Buyer agrees to make without delay. If the
mortgage commitment has not been received within said forty-five (45)
day period, then either party shall have the right to terminate this
Agreement by notice to the other in writing, and the Seller shall
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<PAGE>
return to the Buyer all deposit monies paid by Buyer and this Agreement
shall be declared null and void without any further right, claim or
demand of either party against the other for any damages or claims
arising directly or indirectly therefrom.
Seller acknowledges that in order for Buyer to obtain a mortgage and
close title, the requirements, which shall be at the cost and expense
of Buyer, may include the following:
a. procurement of a Phase I Environmental Audit
b. procurement of tenant estoppel letters and
subordination, non-disturbance and attornment
agreements
c. structural inspection by an engineer
d. survey
e. internal review of the leases
Seller agrees to cooperate with the Buyer to furnish the necessary data
for processing Buyer's mortgage application.
5. DEPOSIT MONIES
All deposit monies will be held in trust by Dillon, Bitar & Luther in
an interest-bearing account until closing of title. All interest earned
on the account shall be divided equally between the parties at closing.
Seller's Tax Identification Number is 22-2627664. Buyer's Tax
Identification Number is 22-3498363. If closing does not occur through
no fault of the Buyer, all deposit monies together with the interest
earned thereon will be returned to the Buyer.
6. CONDITIONS OF CLOSING
6.1 The obligations of Buyer hereunder (including its obligation
to close the transaction and consummate the purchase
contemplated hereby) are subject to the conditions precedent
set forth in this Section Six (any or all of which may be
waived by Buyer by an instrument in writing making reference
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<PAGE>
to this Section Six or other applicable provisions of this
Agreement). If any of the conditions precedent cannot be or
are not satisfied, Buyer or Seller may terminate this
Agreement in accordance with its terms and Buyer shall receive
the return of its deposit monies, unless Buyer is the cause of
the failure to satisfy the conditions precedent, in which case
Buyer agrees that the Deposit shall be paid to Seller as
liquidated damages.
a. Status Quo of the Property. Seller shall not,
directly or indirectly, undertake any construction or
other work (except for necessary repairs) upon the
Property except such work as Seller is directed to
undertake by any governmental agency having
jurisdiction over the Property, or any action
required to satisfy any condition of any approval
obtained by Seller with respect to the Property.
Seller shall not enter into any new leases, or
modify, amend, or terminate any existing leases
without Buyer's consent which may be withheld for any
reason or no reason.
b. Zoning. Buyer shall have confirmed that the Property
either lies in a zoning district that permits the use
of the Property as currently used, or that these uses
exist as prior, non-conforming permitted uses.
c. Title Requirements. Buyer shall have satisfied itself
within sixty (60) days from the execution of this
Agreement that the requirements of Section 7 of this
Agreement are satisfied.
d. ISRA. Seller shall have complied with the
requirements of Section 11 of this Agreement in
compliance with the Industrial Site Recovery Act.
e. Due Diligence. During the period beginning with the
date hereof first above written, and ending on the
date thirty (30) days from the date hereof, (the
"Feasibility period Date"), Buyer shall, at Buyer's
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sole cost and expense, conduct its own due diligence
investigation into the condition of the Premises,
including but not limited to, the roof, building,
structure, HVAC, electrical, plumbing, financial
records and the leases existing in connection with
the Premises.
In the event Buyer determines, in its sole and
absolute discretion, that any of the foregoing
conditions are not satisfactory, or Buyer determines
for any other reason that it does not desire to
complete the purchase of the Premises, Buyer shall
notify Sellers in writing of that determination
within the ten (10) days after the expiration of the
Feasibility Period Date. Upon such notification, this
Agreement shall terminate and be of no further force
and affect, neither party shall hereto have any
further liability to the other, and Buyer shall
receive a refund of the Deposit and any interest
thereon (as defined in Section 5 hereof).
6.2 Termination. If any of the conditions precedent set forth in
Section 6.1 are not satisfied within the time frames set
forth, this Agreement may be terminated by Buyer delivering a
Termination Notice to Seller, which Notice shall be effective
upon delivery. In the event this Agreement is terminated in
accordance with the terms of this Subsection 6.2 then the
Deposit, and all interest earned thereon, shall be promptly
returned to Buyer. The period in which Buyer must terminate
the Agreement pursuant to this Section 6.2 shall end at 5:00
P.M. on the forty-fifth (45th) day following receipt by Buyer
of a fully executed Agreement.
7. TITLE REQUIREMENTS; TITLE EVIDENCE
7.1 Type of Deed; Exceptions to Title. The Property shall be
conveyed to Buyer by Seller at Closing by a bargain and sale
deed with covenants against grantor's acts free of all
encumbrances, covenants, restrictions, easement agreements,
rights-of-way, and liens of any kind whatsoever, except (a)
all utility easements on that portion of the Property which
7
<PAGE>
fronts upon a public road; (b) restrictions of record provided
(i) they would not prohibit the use of the Property as
currently used for manufacturing, storage or light assembly;
(ii) they have not been violated prior to Closing and (iii)
violation would not result in forfeiture or reversion of
title; and (c) such facts as an accurate survey may reveal,
provided such facts do not render title unmarketable nor
prevent the use of the premises as presently used. The Deed
shall contain a description in accordance with a survey
prepared on behalf of the Buyer, at the Buyer's sole cost and
expense.
7.2 Title Search. Buyer shall apply for a report of title ("Title
Insurance Binder") from a title insurance company of its
selection ("Title Company") authorized and licensed to do
business in the State of New Jersey, promptly upon execution
of this Agreement and shall pursue delivery of the Title
Insurance Binder from the Title Company to Seller's Attorney.
Upon receipt of the Title Insurance Binder (and amendments and
endorsements to same), Buyer shall give Seller written notice
within sixty (60) days of the date of this Agreement of
defects or exceptions in title requiring correction, and the
requirements of the Title Company for correction of such
defects. In the event a defect or exception cannot be
corrected within thirty (30) days of Seller's receipt of
Buyer's notice, or Seller shall be unwilling to correct such
defect or exception, either party may terminate this Agreement
upon delivery of a Termination Notice to the other party. Upon
termination of this Agreement pursuant to this paragraph, the
Deposit shall be immediately returned to Buyer and the rights
and obligations of the Buyer and Seller hereunder shall
terminate. Notwithstanding the right of either party hereto to
terminate this Agreement, Buyer shall have the right
nonetheless to proceed to Closing without reference to such
title defect or exception and without an abatement in the
Purchase Price as a result of such defect or exception.
8
<PAGE>
7.3 Leases. Title shall be conveyed subject to the Leases attached
hereto as Exhibit II. At closing Seller shall assign to Buyer
any and all security deposits which Seller is holding and
shall furnish letters of attornment to each tenant.
8. CLOSING OF TITLE
8.1 Date and Place of closing. Buyer and Seller agree to make
March 15, 2000 the estimated date for closing. The closing
shall take place at Buyer's attorney's office, as long as same
is located in northern New Jersey.
In the event Seller is awaiting evidence of compliance with
ISRA pursuant to Section 11 of this Agreement, or is in the
process of complying with its other obligations under the
Agreement, the closing shall take place within fourteen (14)
days of receipt of evidence of satisfaction of any such
contingencies from Seller. Notwith-standing the foregoing,
neither party shall be compelled to close earlier than the
estimated date provided herein.
8.2 Delivery of Good and Marketable Title. At the closing, Seller
shall deliver a bargain and sale deed with covenants against
grantor's acts. Such Property title shall be insurable by a
title insurance company licensed to do business in New Jersey
at ordinary rates. At the closing, Seller shall, in addition
to the deed and other documents referred to in this Agreement,
furnish to Buyer an affidavit of title in usual form, a
resolution, and such other documents as may be reasonably
required or necessary to deliver and convey good and
marketable title to Buyer in accordance with this Agreement,
or as may be reasonably required by Buyer's Title Company.
Buyer shall have the right to discharge any encumbrances or
objections to title which can be removed by payment of a
liquidated sum at closing with the proceeds of sale. At
closing Seller shall deliver to Buyer an assignment of any and
all warranties that Seller may have with regard to the
premises such as the roof, water proofing, or any other
capital improvement.
9
<PAGE>
8.3 Adjustment at Closing. Taxes and municipal assessments (except
as otherwise provided in this Agreement) shall be adjusted,
apportioned and allowed as of the Closing Date. Any other
adjustment, including adjustments for insurance, rents,
profits, water or sewer fees, and the like, shall be allowed
and apportioned as of the Closing Date. Seller shall be
responsible for payment of the New Jersey Realty Transfer Tax.
In the event any assessment for any municipal improvement
completed prior to the Closing Date shall be imposed upon the
Property or any portion thereof, the same shall be paid in
full by the Seller or allowed as a credit against the Purchase
Price whether or not such assessment may be payable in
installments. In the event any such assessment for which
Seller is responsible is unconfirmed as of the Closing Date,
the Seller shall escrow with the Buyer's Title Company an
amount reasonably estimated to satisfy the pending assessment.
In the event the assessment, when confirmed, is less than the
escrowed sum, the balance shall be promptly returned to the
Seller. In the event the assessment, when confirmed, is more
than the escrowed sum, the Seller shall promptly pay the
balance. This provision shall survive the Closing. Seller has
received no notice of any assessments for public improvements.
9. BROKERAGE FEES AND COMMISSIONS
Each party represents to the other that no real estate broker was
instrumental in negotiating this transaction.
10. FIRPTA REPESENTATION
Seller represents that it is an entity formed and existing under the
laws of the State of New Jersey, and hence is not subject to the
Foreign Investment in Real Property Tax Act of 1980. Seller shall
deliver the appropriate certification of its non-foreign status at
closing.
10
<PAGE>
11. INDUSTRIAL SITE RECOVERY ACT
A. As a condition precedent to Buyer's obligation to purchase
the Property, Seller shall have received from the Industrial
Site Element or its successor ("Element") of the NJDEP, on
or before the Closing, a non-applicability letter
considering all uses conducted on the Property, for which
Seller shall apply pursuant to the Industrial Site Recovery
Act. Seller represents that its Standard Industrial
Classification Number (SIC Number) is 6512 If this condition
precedent shall not have been satisfied on or before the
ninetieth (90th) day following the date of this Agreement,
Buyer shall have the right to void this Agreement on notice
to Seller, in which event neither party shall be under any
further obligation to the other, with the exception that the
Deposit, together with interest, shall be promptly returned
to the Buyer. Seller shall make application for the letter
of non-applicability in accordance with the Industrial Site
Recovery Act within thirty (30) days of the date of this
Agreement and shall simultaneously provide to Buyer a copy
of the application(s).
In the event application for a non-applicability letter
is inappropriate, Seller shall, within thirty (30) days
after denial of its request for a letter of
non-applicability, apply for a de minimis exception,
negative declaration or letter of no further action. Buyer
shall have the right to terminate the Agreement and receive
the return of any and all monies paid in connection with
this Agreement if a de minimis exception, a negative
declaration or letter of no further action is not received
within six (6) months of the execution of this Agreement.
B. Buyer shall, at Buyer's sole cost and expense, obtain a
"Phase I Environmental Assessment" report with respect to
the Premises within thirty (30) calendar days from the date
of this Agreement. A copy of said report shall be provided
to Seller within the aforesaid time period. In the event
Buyer deems the Phase I to be unsatisfactory in any respect
whatsoever, in its sole and non-reviewable judgment, Buyer
11
<PAGE>
may terminate this Agreement upon ten (10) days notice
thereafter and Seller shall return the Deposit together with
all interest thereon to Buyer.
12. CONDEMNATION
If, at any time prior to Closing, all or any part of the Property shall
be taken, or threatened to be taken, in the exercise of the power of
eminent domain by any public or private authority, then Buyer may, upon
written notice to the Seller, terminate this Agreement, provided,
however, that in the event of a partial taking of the Property, Buyer
shall not be permitted to terminate this Agreement unless: (i) that
portion of the Property taken or sought to be taken amounts to more
than ten (10%) percent of the land constituting the Property; or (ii)
any such condemnation or taking effectively restricts ingress or egress
to the Real Property. Seller has no notice of any potential or
prospective condemnation proceeding.
13. LIQUIDATED DAMAGES
In the event that the Buyer should default under this Agreement, the
parties agree that the damages that Seller will sustain as a result
thereof will be difficult, if not impossible, to ascertain; and,
therefore, the parties agree that in the event of Buyer's default, the
Seller shall be entitled, as his sole remedy for Buyer's default
hereunder, to the deposit together with the interest earned thereon.
The Buyer shall have no further liability beyond said deposit.
LIABILITY OF SELLER
The liability of the Seller hereunder in the event of default in the
performance of any of the terms and provisions of this Agreement on the
part of Seller to be performed is hereby limited to the return of the
Deposit to Buyer, with interest, and upon return to Buyer of its
Deposit, the liability of Seller shall wholly cease, and Buyer shall
have no further claim against Seller for any default, breach, or
violation hereof; provided, however, that the foregoing shall not limit
Buyer's right to obtain specific performance of Seller's obligation to
convey title pursuant to this Agreement.
12
<PAGE>
14. RIGHT OF ENTRY
After execution of the Agreement, Buyer shall have the right, subject
to respective rights of tenants, to enter upon the property for the
purposes of investigating the Property's condition and preparing a
survey or other plans required for Buyer to consummate the sale. Such
right of entry shall extend to Buyer's representatives, agents, or
individual contractors which will be retained by Buyer to perform such
activity. Buyer shall indemnify and hold Seller harmless from all
claims for injuries to persons or damage to property, including
reasonable attorney fees, arising out of Buyer's entry, or that of its
representatives, agents or individual contractors, as provided herein.
15. RISK OF LOSS
By virtue of ownership of the premises the risk of loss shall be under
the Seller until closing of title. In the event of damage or
destruction to the property and if the cost of restoration thereof
shall be $180,000.00 or more, then in that event either party shall
have the right to terminate this Agreement, in which event all deposit
monies and interest earned thereon shall be returned to the Buyer.
Notwithstanding any of the above, if the Seller elects to terminate the
contract, Buyer shall have the right to reinstate the Agreement in
accordance with the terms hereof and receive the proceeds of the
insurance paid on account of damage.
16. CERTIFICATE OF OCCUPANCY, SMOKE DETECTOR, SEPTIC AND/OR WELL WATER
CERTIFICATION
If required by state, county or local regulation, Seller shall, at
Seller's own cost and expense, provide an unconditional Certificate of
Occupancy, and Smoke Detector Certification at closing and deliver same
to Buyer. Seller shall, at Seller's sole cost and expense (not to
exceed $1,000.00), effect all necessary repairs and/or other work
necessary to obtain any such Certificate and/or Certifications. In the
event the cost to obtain said Certificate or Certification shall exceed
13
<PAGE>
$1,000.00, Seller may, upon notice to Buyer, terminate this Agreement
and return the Deposit with interest to Buyer, unless Buyer elects to
pay for the cost of such Certifications and/or Certificates in excess
of $1,000.00.
17. REPESENTATIONS, WARRANTIES AND COVENANT OF SELLER
To the best of their knowledge, information and belief, Seller hereby
makes the following representations, warranties and covenants to Buyer
which representations, warranties and covenants are true and correct as
of the date hereof and shall be true and correct as of the date of
closing:
A. The execution and consummation of this Agreement by Seller
will not violate, conflict with or constitute a default under
any Agreement or other instrument to which Seller is a party
or by which Seller is bound;
B. All documents and instruments to be executed and delivered by
Seller in connection with this Agreement will be legally
enforceable, valid and binding obligations of Seller;
C. Seller has good and marketable title to the Property. Seller
represents that there are no encumbrances or liens against the
Property except for its mortgage loan with Banco Popular.
Seller shall be permitted to pay-off this loan, and any other
lien or encumbrance against the Property out of the proceeds
at closing. Seller further represents that they will do
nothing to impair or encumber the Property;
D. To the best of Seller's knowledge, there are no outstanding
taxes of any type due and owing on the Property, other than
currently real estate taxes. To the best of Seller's
knowledge, there are no assessments for public improvements
whether confirmed, unconfirmed, completed, approved, pending
or under construction as of the date of this Agreement.
Notwithstanding, and in any event, Seller shall pay all such
assessments at closing;
14
<PAGE>
E. Seller will cooperate with Buyer with regard to processing any
application for financing;
F. Seller shall assign all leases respecting the various
tenancies on the Property to Buyer at closing of title. The
names and addresses of all current tenants on the Property,
and the amounts of their monthly rents are listed on Exhibit
"III" hereto. Seller agrees to provide Buyer with copies of
all written leases with said tenants within five (5) days from
the date of this Agreement. Seller further represents that all
payments due and owing under the terms of said leases are
current; and
G. Seller certifies, represents and warrants that there are no
pending or threatened claim, action, complaint, notice of
violation or proceeding by any governmental authority or third
party respecting the Property arising out of any violation or
alleged violation of any environmental law.
18. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer, to the best of its knowledge, information and belief, hereby
makes the following representations, warranties and covenants to
Seller, which representations, warranties and covenants are true and
correct as of the date hereof and shall be true and correct as of the
date of closing:
A. Buyer is financially capable of entering into and
consummating the transaction contemplated by this Agreement
in accordance with the terms hereof;
B. The execution and consummation of this Agreement will not
violate, conflict with, or constitute a default under any
Agreement or other instrument to which Buyer is a party, or by
which Buyer is bound. Buyer has full power and authority to
perform and consummate this Agreement in accordance with the
terms and conditions herein contained;
C. All documents and instruments to be executed and delivered by
Buyer in connection with this Agreement will be legally
enforceable, valid and binding obligations of Buyer; and
15
<PAGE>
D. Except as otherwise set forth in this Agreement, Buyer
acknowledges that it is accepting the Property in "as is"
condition.
19. CONDEMNATION
In the event condemnation or eminent domain proceedings shall be
commenced, before closing, by any governmental or quasi-governmental
authority having jurisdiction therefor against all or any material part
of the Property, Buyer may, at its option, by giving notice to Seller
within ten (10) days after its receipt of the notice of such
proceedings, terminate this Agreement. Seller agrees to serve a copy of
all such notices on Buyer within ten (10) days of Seller's receipt of
such notice.
In the event of a non-material condemnation or if Buyer does not elect
to terminate this Agreement, then any award in condemnation shall be
assigned to Buyer at closing, or if paid to Seller prior thereto, shall
be credited against the unpaid balance of the purchase price due at
closing. If Buyer determines not to terminate this Agreement, Seller
shall not adjust or settle any condemnation awards without the prior
written approval of Buyer and shall allow Buyer to participate in all
proceedings.
20 PERSONAL PROPERTY AND FIXTURES
All personal property and fixtures belong to Seller, if any, unless
otherwise specifically excluded elsewhere in this Agreement, are
included in the sale.
21. RIGHT TO ASSIGN CONTRACT
Buyer shall have the right to assign this Contract to any entity in
which Buyer, or the principals of Buyer, have a controlling interest,
and as long as Buyer guarantees the performance of all Buyer
obligations contained in this Contract.
16
<PAGE>
22. MISCELLANEOUS
22.1 Entire Agreement. This Agreement and any Exhibits annexed (or
to be annexed) hereto embody the entire Agreement between the
parties in connection with this transaction, and there are no
oral or parole agreements, representations, or inducements
existing between the parties relating to this transaction
which are not expressly set forth herein and covered hereby.
This Agreement may not be modified except by a written
agreement executed by all parties.
22.2 Binding Effect. This Agreement shall be binding upon and inure
to the benefit of the respective parties hereto, their
respective heirs, legal representatives, administrators,
successors, and assigns.
22.3 Waiver. A Waiver by any party to this Agreement shall
constitute a waiver only for that one occasion and shall not
be deemed a permanent waiver of same. If any action by any
party shall require the consent or approval of another party,
such consent or approval on any one occasion shall not be
deemed a consent or approval of any other action on the same
or any subsequent occasion.
22.4 Notices. Any notice which is required to be given pursuant to
this Agreement shall be given by delivery of said notice by
personal delivery, Federal Express or equivalent service or by
certified mail, return receipt requested (the actual delivery
of said notice by express mail service or the posting of which
notice with the U.S. mails shall be deemed sufficient for this
purpose), and such notices shall be to the parties in care of
the addresses set forth on the first page of this Agreement
(or such other address as the parties may direct by written
notice to the other party). In case of Seller, copies of all
notices shall be sent to Garth F. Weber, Esq. In case of
Buyer, copies of all notices shall be sent to Lawrence B.
Seidman, Esq.
17
<PAGE>
22.5 Captions. The captions and other headings contained in this
Agreement as to the contents of particular articles, sections,
paragraphs or other subdivisions contained herein are inserted
for convenience of reference only and are in no way to be
construed as part of this Agreement or as limitations on the
scope of the particular articles, sections, paragraphs or
other subdivisions to which they refer and shall not affect
the interpretation or meaning of this Agreement.
22.6 Governing Law. This Agreement shall be controlled, construed
and enforced in accordance with and will be governed by the
laws of the State of New Jersey.
22.7 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
22.8 Parity. This Agreement shall be construed on a parity basis.
The Agreement is the result of negotiation between the Buyer
and the Seller and the identity of the draftsman shall not be
utilized in the interpretation of any provision of this
Agreement.
22.9 Gender; Context. Where the context shall indicate or require:
(a) all references to singular nouns or pronouns shall include
the plural, and vice versa; (b) the masculine shall include
the feminine, and the neuter, and vice versa; and (c) all
pronouns shall be deemed modified to reflect the correct
gender where so required.
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written.
WITNESS: SELLER:
EAST MORRIS REALTY ASSOCIATES,
L.L.C.
/s/ Garth F. Weber By: /s/ Thomas J.Collins
- -------------------- ------------------------
Garth F. Weber Thomas J. Collins, Manager
and Member
/s/ Garth F. Weber By: /s/ John E. Haug II
- ------------------- ------------------------
Garth F. Weber John E. Haug, II, Manager
and Member
WITNESS: BUYER:
INTEGRATED ANALYTICAL
LABORATORIES, LLC
/s/ Alan Belkin By: /s/Michael Leftin
- ------------------ -------------------------
Alan Belkin Michael Leftin, Manager
<PAGE>
CENTURY/INTERCOUNTY TITLE INSURANCE AGENCY, INC.
18 Hook Mountain Road,
P.O. Box 607,
Pine Brook, NJ 07058,
Phone (201) 808-0770 Fax (201)227-6604
CHICAGO TITLE INSURANCE COMPANY
COMMERCIAL COMMITMENT
SCHEDULE A
NUMBER 4
(CONTINUED)
DESCRIPTION: Title Number: CHI 56402
All that certain tract, lot and parcel of land lying and being in the Township
of Randolph County of Morris and State of New Jersey being more particularly
described as:
BEGINNING at a point in the center line of Franklin Road also known as Palmer
Road, where it is intersected by the easterly boundary of lands belonging to the
Township of Denville, said point beginning being distant 16.42 feet, on a course
of South 41 degrees 03 minutes east from a monument found on the north side of
the existing payment, and running; thence
1) passing through said monument, and along lands of the Township of Denville,
north 41 degrees, 03 minutes west 439.47 feet to a monument in the southerly
right of way line of the Erie Lackawanna Railroad; thence
2) in an easterly direction along said southerly line, being parallel to and
distant 90 feet southerly from the old center line of the Morris and Essex
Railroad, along a curve curving to the left, having a radius of 2000.08 feet, a
length of 57.36 feet whose chord is south 84 degrees 41 minutes 29 seconds east,
57.35 feet, to a point; thence
3) still along said Erie-Lackawanna Railroad right of way line, in an easterly
direction along a spiral curving to the left, whose chord is north 88 degrees 05
minutes 50 seconds east, 203.04 feet to a point; thence
4) still along the southerly sideline of the Erie-Lackawanna Railroad right of
way along a curve curving to the left, having a radius of 5819.65 feet a length
of 402.90 feet, and whose chord is north 88 degrees 35 minutes 30 seconds east,
402.79 feet to a point; thence
5) still along said southerly sideline being
along a spiral curve, whose chord is north 86 degrees 16 minutes 32 seconds east
100.85 feet to a point; thence
6) still along said southerly sideline north 86 degrees 06 minutes 30 seconds
east 154.75 feet to a point where is intersected by the division line between
the Township of Randolph and the Township of Rockaway; thence
7) along said boundary and crossing a monument marking the division between
Rockaway Township and Denville Township, south 19 degrees 29 minutes 31 seconds
west 218.50 feet, to a point in the centerline of the aforementioned Franklin
(Palmer) Road; thence
8) along the centerline in a westerly direction along a curve curving to the
left having a radius of 191.106 feet a length of 77.58 feet and whose chord is
south 73 degrees 11 minutes 49 seconds west 77.05 feet to a point; thence
<PAGE>
9) still along said center line in a westerly direction along a curve curving to
the right having a radius of 613.43 feet, a length of 159.35 feet, whose chord
is south 69 degrees 00 minutes 30 seconds west 158.90 feet to a point; thence
10) still along said center line south 76 degrees 27 minutes west 70.00 feet to
a point; thence
11) still along said center line south 80 degrees 27 minutes west 269.79 feet to
the point and place of BEGINNING.
Description in accordance with a survey made by THE RBA GROUP THOMAS
R. BADENOCH, NJLS, dated May 18, 1987 revised September 10, 1987.
BEING units 1-10, "Millbrook Industrial Park Condominium" together with 100
percent of the individual interest in the common elements thereto, according to
the Master Deed dated September 12, 1986 recorded December 24, 1986, deed book
2911 page 122 and as same may now or hereafter be lawfully amended.
<PAGE>
DILLON, BITAR & LUTHER, L.L.C.
COUNSELLORS AT LAW
THOMAS J. BITAR 53 MAPLE AVENUE WORRALL F. MOUNTAIN
HENRY N. LUTHER, III (1909-1992)
PETER E. HENRY P.O. BOX 39
ROBERT W. DELVENTHAL SIDNEY G. DILLON
GARTH F. WEBER MORRISTOWN, N.J. 07963-0398 WILLIAM E. BARDUSH, JR.
WILLIAM F. CAMPBELL, III BARRY M. JOHNSTON
MARY A. POWERS __________________ RETIRED
PETER J. WOLFSON (973) 539-3100 DOROTHEA GARBER CRACAS
MICHAEL L. RICH FAX (973) 292-2960 OF COUNSEL
STEVEN B. GREENAPPLE
MARIE-LAURENCE FABIAN ______
CHARLES V. QUINN
LAURA J. LANDE March 15, ARNOLD M. STEIN
JACK V. VALINOTI COUNSEL TO THE FIRM
LARA B. PENNINGTON
LEONARDO M. TAMBURELLO
Laurence J. Rappaport, Esq.
Bray, Chiocca, Rappaport & Rothstadt, L.L.C.
Lanidex Executive Center
100 Misty Lane
Parsippany, New Jersey 07054-2710
Re: East Morris Realty Associates, L.L.C. - Sale
To Integrated Analytical Laboratories, LLC;
Premises at 273 Franklin Road, Randolph, NJ
--------------------------------------------
Dear Mr. Rappaport:
We have been advised that your client has requested an extension of
time to obtain a mortgage commitment and consummate closing in the
above-referenced matter. Apparently, this request has been made, since Banco
Popular has made what your client considers an unreasonable request concerning
guaranty of the contemplated mortgage loan.
My client has indicated that it is agreeable to an extension.
Accordingly, please consider this letter as Seller's agreement to extend the
mortgage contingency period to April 30, 2000 and the closing date to May 15,
2000. Would you please contact your client and confirm to me Buyer's agreement
with respect to these two dates.
If you have any questions, please call me.
Very truly yours,
/s/ Garth F. Weber
------------------
Garth F. Weber
GFW:jd
cc: Mr. Thomas J. Collins
Mr. John E. Haug, II
PNC Bank, N.A. 201 898 4894 Fax
Corporate Banking Department
22 South Street
Morristown, NJ 07960
August 26, 1997
PNCBANK
Richard Greenberg, Managing Member
Integrated Analytical Laboratories, L.L.C.
273 Franklin Road
Randolph, NJ 07869
Re: $425,000.00 Non-Revolving Committed Line of Credit
Dear Richard:
We are pleased to inform you that PNC Bank, National Association (the "Bank")
has approved your request for a non-revolving committed line of credit to
Integrated Analytical Laboratories, L.L.C. (the "Borrower"). We look forward to
this opportunity to help you meet the financing needs of your business. As your
primary bank, we want to supply all your banking needs.
All the details regarding your loan are outlined in the following sections of
this letter. If these terms are satisfactory, please follow the instructions for
proceeding with your loan provided at the end of this letter.
1. Type of Facility and Use of Proceeds. This is a committed non-revolving
line of credit (convertible to a (4) four year term loan) under which
the Borrower may request and the Bank, subject to the terms and
conditions of this letter, will make advances to the Borrower from time
to time until the Expiration Date, in an amount in the aggregate at any
time outstanding not to exceed $425,000.00 (the "Line of Credit"). The
"Expiration Date" means July 31, 1998, or such later date as may be
designated by the Bank by written notice to the Borrower. Advances may
be used for the purchase of computerized testing equipment in the
maximum amount of $275,000 and the financing of leasehold improvement
expenses in the maximum amount of $150,000.
2. Interest Rate. Interest on the unpaid balance of the Line of Credit
advances will be charged at a rate per annum which is at all times
equal to the sum of the rate of interest publicly announced by the
Bank from time to time as its prime rate (the "Prime Rate") plus one
quarter percent (1/4%). At time of conversion to a four (4) year
term loan, the rate will be the Bank's 4 year cost of funds at the
date of closing, plus 200 basis points (which shall be determined by
the Bank in accordance with its procedures in this regard).
3. Repayment. Subject to the terms and conditions of this letter, the
Borrower may borrow (but may not repay and reborrow), under the Line of
Credit until the Expiration Date. Interest will be due and payable on a
monthly basis, and will be computed on the basis of a year of 360 days
and paid on the actual number of days elapsed. After the Expiration
Date (or earlier, at Borrower's option, advances under this Credit
Facility shall be termed out for a four (4) year period with equal
monthly principal payments, plus interest then due.
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
Richard Greenberg
Integrated Analytical
Laboratories, L.L.C.
August 26, 1997
Page 2
4. Note. The obligation of the Borrower to repay loans under the Line of
Credit shall be evidenced by a promissory note (the "Note") in form and
content satisfactory to the Bank.
5. Security. The Borrower must cause the following to be executed and
delivered to the Bank in form and content satisfactory to the Bank as
security for the Line of Credit:
(x) a guaranty and suretyship agreement, under which Richard
Greenberg, Integrated Analytical Laboratories, Inc.,
Environmental Waste Management Associates, Inc., Environmental
Waste Management Associates, L.L.C., Environmental Waste
Management Associates of Maryland, Inc., and Construction
Remediation and Maintenance, L.L.C. (individually or
collectively, the "Guarantors") will unconditionally jointly
and severally guarantee the due and punctual payment of all
indebtedness owed to the Bank by the Borrower.
(x) a security agreement granting the Bank a first priority
perfected lien on the Borrower's existing and future accounts,
inventory, equipment, general intangibles, chattel paper,
documents and instruments.
If the Line of Credit is secured by inventory, equipment or real
property, hazard insurance must be maintained on such property, in such
amounts and with such coverages as are acceptable to the Bank,
containing a standard lender loss payable or mortgagee clause in favor
of the Bank.
6. Covenants Unless compliance is waived in writing by the Bank or until payment
in full and termination of the Line of Credit:
(a) The Borrower will promptly submit to the Bank such information
relating to the Borrower'saffairs (including but not
limited to annual financialstatements and tax returns for
the Borrower and any guarantor) or any security for the
Line of Credit as the Bank may reasonably request.
(b) The Borrower will not make or permit any change in the nature
of its business as carried on as of the date of this letter or
in its senior management or equity ownership.
(c) The Borrower and the Guarantors will comply with the
financial and other covenants included in Exhibit "A" hereto.
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
Richard Greenberg
Integrated Analytical
Laboratories, L.L.C.
August 26, 1997
Page 3
7. Representations and Warranties. To induce the Bank to extend the Line
of Credit and upon the making of any advance to the Borrower, the
Borrower represents and warrants as follows:
(a) The Borrower's latest financial statements provided to the
Bank are true, complete and accurate in all material respects
and fairly present the financial condition, assets and
liabilities, whether accrued, absolute, contingent or
otherwise and the results of the Borrower's operations for the
period specified therein. The Borrower's financial statements
have been prepared in accordance with generally accepted
accounting principles consistently applied from period to
period subject in the case of interim statements to normal
year-end adjustments. Since the date of the latest financial
statements provided to the Bank, the Borrower has not suffered
any damage, destruction or loss which has materially adversely
affected its business, assets, operations, financial condition
or results of operations.
(b) There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrower,
threatened against the Borrower which could result in a
material adverse change in its business, assets, operations,
financial condition or results of operations and there is no
basis known to the Borrower or its officers, directors or
shareholders for any such action, suit, proceedings or
investigation.
(c) The Borrower has filed all returns and reports that are
required to be filed by it in connection with any federal,
state or local tax, duty or charge levied, assessed or imposed
upon the Borrower or its property, including unemployment,
social security and similar taxes and all of such taxes have
been either paid or adequate reserve or other provision has
been made therefor.
(d) If not a natural person, the Borrower is duly organized,
validly existing and in good standing under the laws of the
state of its incorporation or organization and has the power
and authority to own and operate its assets and to conduct its
business as now or proposed to be carried on, and is duly
qualified, licensed and in good standing to do business in all
jurisdictions where its ownership of property or the nature of
its business requires such qualification or licensing.
(e) The Borrower has full power and authority to enter into the
transactions provided for in this Letter Agreement and has
been duly authorized to do so by all necessary and appropriate
action and when executed and delivered by the Borrower, this
Letter Agreement and the other loan documents executed and
delivered pursuant hereto will constitute the legal, valid and
binding obligations of the Borrower enforceable in accordance
with their terms.
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
Richard Greenberg
Integrated Analytical
Laboratories, L.L.C.
August 26, 1997
Page 4
(f) There does not exist any default or violation by the Borrower
of or under any of the terms, conditions or obligations of:
(i) its organizational documents; (ii) any indenture,
mortgage, deed of trust, franchise, permit, contract,
agreement, or other instrument to which it is a party or by
which it is bound; or (iii) any law, regulation, ruling,
order, injunction, decree, condition or other requirement
applicable to or imposed upon the Borrower by any law or by
any governmental authority, court or agency.
8. Fees. The Borrower will reimburse the Bank for the Bank's out
of pocket expenses incurred or to be incurred in conducting
UCC, title and other public record searches, and in filing and
recording documents in the public records to perfect the
Bank's liens and security interests. The Borrower shall also
reimburse the Bank for the Bank's expenses (including the
reasonable fees and expenses of the Bank's outside and
in-house counsel) in documenting and closing this transaction
and in connection with any amendments, modifications, renewals
or enforcement actions relating to the Line of Credit.
9. Depository. The Borrower will establish and maintain at the
Bank the Borrower's primary depository accounts.
10. Additional Provisions. Before the first advance under the Line
of Credit, the Borrower agrees to sign and deliver to the Bank
the Note and other required documents and such other
instruments and documents as the Bank may reasonably request,
such as certified resolutions, incumbency certificates or
other evidence of authority. The Bank will not be obligated to
make any advance under the Line of Credit if any Event of
Default (as defined in the Note) or event which with the
passage of time, provision of notice or both would constitute
an Event of Default under the Note shall have occurred and be
continuing.
Prior to execution of the final documents, the Bank may terminate this letter if
a material adverse change occurs with respect to the Borrower, any guarantor,
any collateral for the Line of Credit or any other person or entity connected in
any way with the Line of Credit, or if the Borrower fails to comply with any of
the terms and conditions of this letter, or if the Bank reasonably determines
that any of the conditions cannot be met.
This letter is governed by the Laws of New Jersey. No modification or waiver of
any of the terms of this letter will be valid and binding unless agreed to in
writing by the Bank. When accepted, this letter and the other documents
described herein will constitute the entire agreement between the Bank and the
Borrower concerning the Line of Credit, and shall replace all prior
understandings, statements, negotiations and written material relating to the
Line of Credit.
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
Richard Greenberg
Integrated Analytical
Laboratories, L.L.C.
August 26, 1997
Page 5
To accept these terms, please sign the enclosed copy of this letter as set forth
below and return it to the Bank within 15 days from the date of this letter. If
accepted, the final documents must be executed within 30 days from the date of
this letter, or this letter may be terminated at the Bank's option without
liability or further obligation of the Bank.
Thank you for giving PNC Bank, National Association this opportunity to work
with your business. We look forward to other ways in which we may be of service
to your business or to you personally.
Very truly yours,
PNC Bank, National Association
By: /s/ Donna L. Keenan
Donna L. Keenan
Title: Vice President
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
Richard Greenberg
Integrated Analytical
Laboratories, L.L.C.
August 26, 1997
Page 6
ACCEPTANCE
With the intent to be legally bound hereby, the above terms and conditions are
hereby agreed to and accepted this ___ day of __________, _____.
BORROWER:
Integrated Analytical Laboratories, L.L.C.
By: /s/ Michael Leftin
Michael Leftin
(SEAL)
Title:___Managing Member
GUARANTORS:
Environmental Waste Management
Associates, L.L.C.
By: /s/ RichardGreenberg
Richard Greenberg,
Managing Member
By: /s/ Richard Greenberg Environmental Waste Management
Richard Greenberg, Individually Associates, Inc.
By: /s/ Richard Greenberg
Richard Greenberg, President
Integrated Analytical Laboratories, Inc.
By: /s/ Michael Leftin
Michael Leftin, President
Environmental Waste Management
Associates of Maryland, Inc.
By:__________________________
Construction Remediation and Maintenance, L.L.C. Jeff Burks, President
By: /s/ Jeff K. Burks
Jeff Burks, Managing Member
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
EXHIBIT A
FINANCIAL REPORTING COVENANTS:
(x) The Borrower will deliver to the Bank:
(x) Financial Statements for its fiscal year, within 90 days after fiscal year
end, prepared on a reviewed basis by a certified public accountant
acceptable to the Bank.
(x) Financial Statements for each fiscal quarter except the fourth quarter,
within 45 days after the quarter end.
(x) The Borrower will deliver to the Bank within 45 days following the close of
each fiscal quarter, the Borrower's detailed schedule of accounts
receivable aging report.
(x) The Guarantors will deliver to the Bank:
(x) Personal financial statements and federal income tax return for each
calendar year, within 90 days after year end.
(x) Financial statements for its fiscal year, within 90 days after fiscal year
end, prepared on a reviewed basis by a certified public accountant
acceptable to the Bank.
(x) Financial Statements for each fiscal quarter except the fourth quarter,
within 45 days after the quarter end.
(x) The Guarantors will deliver to the Bank within 45 days following the close
of each fiscal quarter, their detailed schedule of accounts receivable
aging report.
Form 7A - Multistate Rev. 3/95
PNC Bank, N.A. 201 898 4894 Fax
Corporate Banking Department
22 South Street
Morristown, NJ 07960
August 26, 1997
PNCBANK
Richard Greenberg, Managing Member
Environmental Waste Management Associates, L.L.C.
100 Misty Lane
Parsippany, NJ 07054
Re: $1,000,000.00 Committed Line of Credit
Dear Richard:
We are pleased to inform you that PNC Bank, National Association (the "Bank")
has approved your request for a committed line of credit to Environmental Waste
Management Associates, L.L.C. (the "Borrower"), which committed line is intended
as a renewal of the existing committed line to Environmental Waste Management
Associates, Inc., and not a novation. We look forward to this opportunity to
help you meet the financing needs of your business. As your primary bank, we
want to supply all your banking needs.
All the details regarding your loan are outlined in the following sections of
this letter. If these terms are satisfactory, please follow the instructions for
proceeding with your loan provided at the end of this letter.
1, Type of Facility and Use of Proceeds. This is a committed revolving
line of credit under which the Borrower may request and the Bank,
subject to the terms and conditions of this letter, will make advances
to the Borrower from time to time until the Expiration Date, in an
amount in the aggregate at any time outstanding not to exceed
$1,000,000.00 (the "Line of Credit"). The "Expiration Date" means July
31, 1998, or such later date as may be designated by the Bank by
written notice to the Borrower. Advances may be used for working
capital or other general business purposes of the Borrower.
2. Interest rate. Interest on the unpaid balance of the Line of Credit
advances will be charged at a rate per annum which is at all times
equal to the sum of the rate of interest publicly announced by the
Bank from time to time as its prime rate (the "Prime Rate") plus one
quarter percent (1/4%).
3. Repayment. Subject to the terms and conditions of this letter, the
Borrower may borrow, repay and reborrow until the Expiration Date, on
which the outstanding principal balance and any accrued but unpaid
interest shall be due and payable. Interest will be due and payable on
a monthly basis, and will be computed on the basis of a year of 360
days and paid on the actual number of days elapsed. Prior to the
original Expiration Date, and annually thereafter if the Expiration
date is extended, the Borrower must repay the Line of Credit in full so
that there is no outstanding principal balance for a period of at least
thirty (30) consecutive days.
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
Richard Greenberg
Environmental Waste Management
Associates L.L.C.
August 26, 1997
Page 2
4. Note. The obligation of the Borrower to repay loans under the Line of
Credit shall be evidenced by a promissory note (the "Note") in form and
content satisfactory to the Bank.
5. Security. The Borrower must cause the following to be executed and
delivered to the Bank in form and content satisfactory to the Bank as
security for the Line of Credit:
(x) a guaranty and suretyship agreement, under which Richard
Greenberg, Environmental Waste Management Associates, Inc.,
Integrated Analytical Laboratories, Inc. Integrated Analytical
Laboratories, L.L.C., Environmental Waste Management
Associates of Maryland, Inc. and Construction Remediation and
Maintenance, L.L.C. (individually or collectively, the
"Guarantors") will unconditionally jointly and severally
guarantee the due and punctual payment of all indebtedness
owed to the Bank by the Borrower.
(x) a security agreement granting the Bank a first priority
perfected lien on the Borrower's existing and future accounts,
inventory, equipment, general intangibles, chattel paper,
documents and instruments.
(x) The Bank Acknowledges that Greenberg Property, L.L.C. intends
to refinance its first commercial mortgage and its second
mortgage with a different financial institution. Upon payment
in full of all obligations owed by Greenberg Property, L.L.C.,
in respect of the mortgage to PNC Bank, the Bank will release
its mortgage claims on 100 Misty Lane, Parsippany, NJ and any
guarantee of Greenberg Property, L.L.C. will be released and
returned.
If the Line of Credit is secured by inventory, equipment or real
property, hazard insurance must be maintained on such property, in such
amounts and with such coverages as are acceptable to the Bank,
containing a standard lender loss payable or mortgagee clause in favor
of the Bank.
6. Covenants. Unless compliance is waived in writing by the Bank or until
payment in full and termination of the Line of Credit:
(a) The Borrower will promptly submit to the Bank such information
relating to the Borrower's affairs (including but not
limited to annual financial statements and tax returns for
the Borrower and any guarantor)or any security for the
Line of Credit as the Bank may reasonably request.
(b) The Borrower will not make or permit any change in the nature
of its business as carried on as of the date of this letter or
in its senior management or equity ownership.
<PAGE>
Form 7A - Multistate Rev. 3/95
PNCBANK
Richard Greenberg
Environmental Waste Management
Associates L.L.C.
August 26, 1997
Page 3
(c) The Borrower and the Guarantors will comply with the financial
and other covenants included in Exhibit "A" hereto.
7. Representations and Warranties. To induce the Bank to extend the Line
of Credit and upon the making of any advance to the Borrower, the
Borrower represents and warrants as follows:
(a) The Borrower's latest financial statements provided to the
Bank are true, complete and accurate in all material respects
and fairly present the financial condition, assets and
liabilities, whether accrued, absolute, contingent or
otherwise and the results of the Borrower's operations for the
period specified therein. The Borrower's financial statements
have been prepared in accordance with generally accepted
accounting principles consistently applied from period to
period subject in the case of interim statements to normal
year-end adjustments. Since the date of the latest financial
statements provided to the Bank, the Borrower has not suffered
any damage, destruction or loss which has materially adversely
affected its business, assets, operations, financial condition
or results of operations.
(b) There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrower,
threatened against the Borrower which could result in a
material adverse change in its business, assets, operations,
financial condition or results of operations and there is no
basis known to the Borrower or its officers, directors or
shareholders for any such action, suit, proceedings or
investigation.
(c) The Borrower has filed all returns and reports that are
required to be filed by it in connection with any federal,
state or local tax, duty or charge levied, assessed or imposed
upon the Borrower or its property, including unemployment,
social security and similar taxes and all of such taxes have
been either paid of adequate reserve or other provision has
been made therefor.
(d) If not a natural person, the Borrower is duly organized,
validly existing and in good standing under the laws of the
state of its incorporation or organization and has the power
and authority to own and operate its assets and to conduct its
business as now or proposed to be carried on, and is duly
qualified, licensed and in good standing to do business in all
jurisdictions where its ownership of property or the nature of
its business requires such qualification or licensing.
(e) The Borrower has full power and authority to enter into the
transactions provided for in this Letter Agreement and has
been duly authorized to do so by all necessary and appropriate
action and when executed and delivered by the Borrower, this
Letter Agreement and the other loan documents executed and
delivered pursuant hereto will constitute the legal, valid and
binding obligations of the Borrower enforceable in accordance
with their terms.
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
Richard Greenberg
Environmental Waste Management
Associates L.L.C.
August 26, 1997
Page 4
(f) There does not exist any default or violation by the Borrower
of or under any of the terms, conditions or obligations of:
(i) its organizational documents; (ii) any indenture,
mortgage, deed of trust, franchise, permit, contract,
agreement, or other instrument to which it is a party or by
which it is bound; or (iii) any law, regulation, ruling,
order, injunction, decree condition or other requirement
applicable to or imposed upon the Borrower by any law or by
any governmental authority, court or agency.
8. Fees. The Borrower will reimburse the Bank for the Bank's out
of pocket expenses incurred or to be incurred in conducting
UCC, title and other public record searches, and in filing and
recording documents in the public records to perfect the
Bank's liens and security interests. The Borrower shall also
reimburse the Bank for the Bank's expenses (including the
reasonable fees and expenses of the Bank's outside and
in-house counsel) in documenting and closing this transaction
and in connection with any amendments, modifications, renewals
or enforcement actions relating to the Line of Credit.
9. Depository. The Borrower will establish and maintain at the
Bank the Borrower's primary depository accounts.
10. Additional Provisions. Before the first advance under the Line
of Credit, the Borrower agrees to sign and deliver to the Bank
the Note and other required documents and such other
instruments and documents as the Bank may reasonably request,
such as certified resolutions, incumbency certificates or
other evidence of authority. The Bank will not be obligated to
make any advance under the Line of Credit if any Event of
Default (as defined in the Note) or event which with the
passage of time, provision of notice or both would constitute
an Event of Default under the Note shall have occurred and be
continuing.
Prior to execution of the final documents, the Bank may terminate this letter if
a material adverse change occurs with respect to the Borrower, any guarantor,
any collateral for the Line of Credit or any other person or entity connected in
any way with the Line of Credit, or if the Borrower fails to comply with any of
the terms and conditions of this letter, or if the Bank reasonably determines
that any of the conditions cannot be met.
This letter is governed by the Laws of New Jersey. No modification or waiver of
any of the terms of this letter will be valid and binding unless agreed to in
writing by the Bank. When accepted, this letter and the other documents
described herein will constitute the entire agreement between the Bank and the
Borrower concerning the Line of Credit, and shall replace all prior
understandings, statements, negotiations and written material relating to the
Line of Credit.
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
Richard Greenberg
Environmental Waste Management
Associates L.L.C.
August 26, 1997
Page 5
To accept these terms, please sign the enclosed copy of this letter as set forth
below and return it to the Bank within 15 days from the date of this letter. If
accepted, the final documents must be executed within 30 days from the date of
this letter, or this letter may be terminated at the Bank's option without
liability or further obligation of the Bank.
Thank you for giving PNC Bank, National Association this opportunity to work
with your business. We look forward to other ways in which we may be of service
to your business or to you personally.
Very truly yours,
PNC Bank, National Association
By: /s/ Donna L. Keenan
Donna L. Keenan
Title: Vice President
Form 7A - Multistate Rev. 3/95
<PAGE>
PNCBANK
Richard Greenberg
Environmental Waste Management
Associates L.L.C.
August 26, 1997
Page 6
ACCEPTANCE
With the intent to be legally bound hereby, the above terms and conditions are
hereby agreed to and accepted this 28th day of August 1997.
BORROWER:
Environmental Waste Management Associates, L.L.C.
By: /s/ Richard Greenberg
Richard Greenberg
(SEAL)
Title: Managing Member
GUARANTORS:
By: /s/ Richard Greenberg Integrated Analytical Laboratories, Inc.
Richard Greenberg, Individually
By: /s/ Michael Leftin
Michael Leftin, President
Environmental Waste Management Associates, Inc.
By: /s/ Richard Greenberg
Richard Greenberg, President
Integrated Analytical Laboratories, L.L.C.
By: /s/ Michael Leftin
Michael Leftin, Managing Member
Environmental Waste Management Associates
of Maryland, Inc.
By: /s/ Jeff K. Burks
Construction Remediation and Maintenance L.L.C.
By /s/ Jeff K. Burks
Form 7A -Multistate Rev. 3/95
<PAGE>
PNCBANK
EXHIBIT A
FINANCIAL REPORTING COVENANTS:
(x) The Borrower will deliver to the Bank:
(x) Financial Statements for its fiscal year, within 90 days after fiscal year
end, prepared on a reviewed basis by a certified public accountant
acceptable to the Bank.
(x) Financial Statements for each fiscal quarter except the fourth quarter,
within 45 days after the quarter end.
(x) The Borrower will deliver to the Bank within 45 days following the close of
each fiscal quarter, the Borrower's detailed schedule of accounts
receivable aging report.
(x) The Guarantors will deliver to the Bank:
(x) Personal financial statements and federal income tax return for each
calendar year within 90 days after year end.
(x) Financial statements for its fiscal year, within 90 days after fiscal year
end, prepared on a reviewed basis by a certified public accountant
acceptable to the Bank.
(x) Financial Statements for each fiscal quarter except the fourth quarter,
within 45 days after the quarter end.
(x) The Guarantors will deliver to the Bank within 45 days following the close
of each fiscal quarter, their detailed schedule of accounts receivable
aging report.
FINANCIAL COVENANTS:
(x) The Borrower will maintain at all times a debt to capital funds ratio of
1.0x or less. Debt will be defined as total liabilities, less any liability
subordinated to the Bank (if applicable). Capital funds will be defined as
corporate net worth, less intangible assets, including but not limited to
loans to stockholders and affiliates.
Form 7A - Multistate Rev. 3/95
PNC Bank, N.A. 973 881 5478 Tel
Corporate Banking 973 881 5288 Fax
1 Garret Mountain Plaza
West Paterson, NJ 07424
February 22, 2000 PNCBANK
Mr. Frank Russomanno, CFO
Environmental Waste Management Associates, L.L.C.
100 Misty Lane
Parsippany, NJ 07054
Re: Extension/Renewal of Expiration Date for Committed Line of Credit
Dear Mr. Russomanno:
We are writing to inform you that your committed line of credit has
been temporarily extended. The Expiration Date, as set forth in that certain
Letter Agreement dated August 26, 1997, and in the Committed Line of Credit Note
executed and delivered pursuant to that Letter Agreement, has been extended from
October 31, 1999 to April 30, 2000, effective on November 1, 1999. All other
terms and conditions of the Committed Line of Credit Note and the Letter
Agreement remain in full force and effect.
Please note that this extension through 4/30/2000 is subject to the receipt and
satisfactory review of the 1/31/2000 accounts receivable aging and Borrowing
Base Certificate.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Thomas Slater
-----------------
Name: Thomas Slater
-----------------
Title: Assistant Vice President
------------------------
CC: Environmental Waste Management Associates, Inc.
Integrated Analytical Laboratories, Inc.
Integrated Analytical Laboratories, L.L.C.
Menlo Acquisition Corporation
Richard Greenberg
<PAGE>
PNC Bank, N.A. 973 881 5478 Tel
Corporate Banking 973 881 5288 Fax
1 Garret Mountain Plaza
West Paterson, NJ 07424
February 22, 2000 PNCBANK
Environmental Waste Management Associates, LLC
100 Misty Lane
P. O. Box 5430
Parsippany, NJ 07054
Attention: Frank Russomanno, Chief Financial Officer
Re: $750,000.00 Committed Line of Credit ("Line of Credit") to EWMA, LLC
("Borrower") expired 10/31/99/Treasury Management Services from PNC Bank
Dear Mr. Russomanno:
Per our discussion of Monday, 2/14/2000, the Bank has agreed to extend your
Committed Line of Credit through 4/30/2000. The document evidencing the
extension has been executed and is attached for your records. Please note that
extension of the line is subject to receipt of the January 2000 accounts
receivable aging and Borrowing Base Certificate, which I expect to receive on or
before 3/8/2000. The terms and conditions of the Committed Line of Credit Note
and Letter Agreement, including the financial reporting requirements, shall
remain unchanged for the duration of the extension.
As we also discussed on 2/14/2000, the Bank is not willing to extend the
Committed Line of Credit beyond 4/30/2000. We intend to cancel the line as of
the expiration date, and we encourage you to make other lending arrangements as
soon as possible.
Please also be advised that your Treasury Management Services, including Direct
Deposit Payroll, will terminate at the same time as the Line of Credit. Those
products are tied together because of incidental extensions of unsecured credit
which are inherent in the Direct Deposit Payroll product. Once again, I
encourage you to seek another provider as soon as possible because there is
typically several weeks lead time necessary to establish such a service with no
inadvertent interruptions.
Despite the short tenure of our relationship, I wish you continued success in
your "new" position at EWMA. You are a strong addition to the management team.
Sincerely,
/s/ Thomas E. Slater
AVP/Relationship Manager
CC: Environmental Waste Management Associates, Inc.
Integrated Analytical Laboratories, Inc.
Integrated Analytical Laboratories, L.L.C.
Menlo Acquisition Corporation
Richard Greenberg
Exhibit Number 21 - Subsidiaries of the Registrant
Menlo Acquisition Corporation
Subsidiaries of the Registrant
Name State of Incorporation Percentage Ownership
Environmental Waste
Management Associates, LLC New Jersey 100%
Environmental Waste
Management Associates, Inc. New Jersey 100%
Integrated Analytical
Laboratories, LLC New Jersey 100%
Integrated Analytical
Laboratories, Inc. New Jersey 100%
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 1182
<SECURITIES> 722
<RECEIVABLES> 4669
<ALLOWANCES> 614
<INVENTORY> 0
<CURRENT-ASSETS> 6093
<PP&E> 2053
<DEPRECIATION> 965
<TOTAL-ASSETS> 7248
<CURRENT-LIABILITIES> 1936
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 5142
<TOTAL-LIABILITY-AND-EQUITY> 7248
<SALES> 13594
<TOTAL-REVENUES> 13594
<CGS> 5243
<TOTAL-COSTS> 5243
<OTHER-EXPENSES> 7021
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> 1426
<INCOME-TAX> 564
<INCOME-CONTINUING> 862
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 862
<EPS-BASIC> .16
<EPS-DILUTED> .16
</TABLE>
