<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark one)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________to________.
Commission File No. 0-23900
IDM ENVIRONMENTAL CORP.
------------------------
(Exact Name of Registrant as Specified in Its Charter)
New Jersey 22-2194790
---------------- ----------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
396 Whitehead Avenue, South River, New Jersey 08882
----------------------------------------------------
(Address of principal executive offices)
(908) 390-9550
---------------
(Registrant's Telephone Number, Including Area Code)
---------------------------------------------------
(Former name, former address and formal fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
As of August 12, 1996, 8,968,067 shares of Common Stock of the issuer
were outstanding.
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
INDEX
Page
Number
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995. . . . . . . . . . . . . . . . . . . 1
Consolidated Statements of Operations - For the
six months ended June 30, 1996 and June 30, 1995 . . . 2
Consolidated Statements of Operations - For the
three months ended June 30, 1996 and June 30, 1995 . . 3
Consolidated Statements of Cash Flows - For the
six months ended June 30, 1996 and June 30, 1995 . . . 4
Notes to Consolidated Financial Statements . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 6
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 9
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
------------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $2,920,814 $83,286
Accounts receivable, net of allowance for doubtful accounts of $200,000 7,777,938 6,616,130
Notes receivable - current 1,804,113 1,596,559
Inventory 1,482,517 1,482,517
Costs and estimated earnings in excess of billings 4,551,460 3,634,052
Prepaid expenses 628,812 710,706
Bonding deposits 500,000 883,163
Deferred income taxes 414,992 652,600
Recoverable income taxes 1,095,167 1,114,442
Due from officers 57,263 548,488
Other current assets 52,916 55,238
------------------- -----------------
Total Current Assets 21,285,992 17,377,181
------------------- -----------------
Notes Receivable - long term 1,596,559 1,596,559
Deferred Issuance Costs, net 49,237 506,586
Property, Plant and Equipment, net 2,943,696 2,547,406
------------------- -----------------
$25,875,484 $22,027,732
------------------- -----------------
------------------- -----------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $354,905 $327,974
Accounts payable and accrued expenses 3,660,634 5,836,510
Billings in excess of costs and estimated earnings 194,032 919,575
------------------- -----------------
Total Current Liabilities 4,209,571 7,084,059
------------------- -----------------
Long-Term Debt 801,628 4,004,142
------------------- -----------------
Commitments and Contingencies
Stockholders' Equity:
Common stock, authorized 20,000,000 shares $.001 par value, issued
and outstanding 8,660,317 in 1996 and 5,783,334 in 1995 8,660 6,200
Additional paid-in capital 22,762,280 13,693,895
Retained earnings (deficit) (1,906,655) (2,760,564)
------------------- -----------------
20,864,285 10,939,531
------------------- -----------------
$25,875,484 $22,027,732
------------------- -----------------
------------------- -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements 1
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
-------------- ---------------
<S> <C> <C>
Revenue:
Sale of equipment $152,800 $979,548
Contract income 14,631,854 17,435,204
Sale of scrap 328,746 170,185
-------------- ---------------
15,113,400 18,584,937
-------------- ---------------
Cost of Sales:
Cost of equipment sales 72,844 388,054
Direct job costs 10,018,263 15,648,259
-------------- ---------------
10,091,107 16,036,313
-------------- ---------------
Gross Profit 5,022,293 2,548,624
-------------- ---------------
Operating Expenses:
General and administrative expenses 3,590,010 3,736,485
Depreciation and amortization 382,245 225,924
-------------- ---------------
3,972,255 3,962,409
-------------- ---------------
Income (Loss) from Operations 1,050,038 (1,413,785)
Other Income (Expense):
Interest income(expense) 15,871 178,249
-------------- ---------------
Income (Loss) before Provision (Credit) for Income Taxes 1,065,909 (1,235,536)
Provision (Credit) for Income Taxes 212,000 (490,000)
-------------- ---------------
Net Income (Loss) $853,909 ($745,536)
-------------- ---------------
-------------- ---------------
Earnings (Loss) per Share:
Primary earnings (loss) per share $0.12 ($0.13)
-------------- ---------------
-------------- ---------------
Fully diluted earnings (loss) per share $0.12 ($0.13)
-------------- ---------------
-------------- ---------------
Primary common shares outstanding 7,006,780 5,783,334
-------------- ---------------
-------------- ---------------
Fully diluted common shares outstanding 7,006,780 5,783,334
-------------- ---------------
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements 2
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
1996 1995
-------------- ---------------
<S> <C> <C>
Revenue:
Sale of equipment $152,800 $465,757
Contract income 7,215,056 12,002,006
Sale of scrap 263,699 107,945
-------------- ---------------
7,631,555 12,575,708
-------------- ---------------
Cost of Sales:
Cost of equipment sales 72,844 167,767
Direct job costs 5,454,122 10,106,087
-------------- ---------------
5,526,966 10,273,854
-------------- ---------------
Gross Profit 2,104,589 2,301,854
-------------- ---------------
Operating Expenses:
General and administrative expenses 1,937,227 1,832,834
Depreciation and amortization 171,084 129,297
-------------- ---------------
2,108,311 1,962,131
-------------- ---------------
Income (Loss) from Operations (3,722) 339,723
Other Income (Expense):
Interest income(expense) 13,046 81,303
-------------- ---------------
Income (Loss) before Provision (Credit) for Income Taxes 9,324 421,026
Provision (Credit) for Income Taxes 2,000 170,000
-------------- ---------------
Net Income (Loss) $7,324 $251,026
-------------- ---------------
-------------- ---------------
Earnings (Loss) per Share:
Primary earnings (loss) per share $0.00 $0.04
-------------- ---------------
-------------- ---------------
Fully diluted earnings (loss) per share $0.00 $0.04
-------------- ---------------
-------------- ---------------
Primary common shares outstanding 7,372,627 5,783,334
-------------- ---------------
-------------- ---------------
Fully diluted common shares outstanding 7,372,627 5,783,334
-------------- ---------------
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements 3
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended June 30,
1996 1995
-------------- ---------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $853,909 ($745,536)
Adjustments to reconcile net income (loss) to net cash (used in) operating activities:
Deferred Taxes 237,608 -
Depreciation and amortization 382,245 225,924
Decrease (Increase) In:
Accounts receivable (1,161,808) 402,971
Inventory - 318,590
Notes receivable (207,554) -
Costs and estimated earnings in excess of billings (917,408) (2,691,985)
Prepaid expenses and other current assets 81,894 (233,358)
Bonding deposits 383,163 529,682
Recoverable income taxes 19,275 14,037
Due from officers (179,355) -
Other current assets 2,322 -
Increase (Decrease) In:
Accounts payable and accrued expenses (2,108,564) (1,643,561)
Billings in excess of costs and estimated earnings (725,543) 611,572
Income taxes payable - (477,600)
-------------- ---------------
Net cash (used in) operating activities (3,339,816) (3,689,264)
-------------- ---------------
Cash Flows from Investing Activities:
Acquisition of property, plant and equipment (538,523) (474,361)
Increase (decrease) of officers loans - (129,048)
-------------- ---------------
Net cash (used in) investing activities (538,523) (603,409)
-------------- ---------------
Cash Flows from Financing Activities:
Principal payments and current maturities of long-term debt (197,521) (85,826)
Issuance of common stock upon exercise of stock options and warrants 6,913,388 -
-------------- ---------------
Net cash provided by (used in) financing activities 6,715,867 (85,826)
-------------- ---------------
Increase (Decrease) in Cash and Cash Equivalents 2,837,528 (4,378,499)
Cash and Cash Equivalents, beginning of period 83,286 5,068,325
-------------- ---------------
Cash and Cash Equivalents, end of year $2,920,814 $689,826
-------------- ---------------
-------------- ---------------
Supplementary Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest expense $24,833 $11,676
-------------- ---------------
-------------- ---------------
Supplemental Disclosure of Noncash Investing and Financing Activities:
Property, plant and equipment financing $163,605 $16,421
-------------- ---------------
-------------- ---------------
Conversion of convertible promissory notes to common stock $2,157,457 -
-------------- ---------------
-------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements 4
<PAGE>
IDM ENVIRONMENTAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The interim consolidated financial statements are prepared pursuant to the
requirements for reporting on Form 10-Q. These statements include the
accounts of IDM Environmental Corp. and its majority owned subsidiary
companies. The December 31, 1995 balance sheet data was derived from
audited financial statements but does not include all disclosures required
by generally accepted accounting principles. The interim financial
statements and notes thereto should be read in conjunction with the
financial statements and notes included in the Company's Form 10-K for the
year ended December 31, 1995. In the opinion of management, the interim
financial statements reflect all adjustments of a normal recurring nature
necessary for a fair statement of the results for the interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full year
ending December 31, 1996.
2. On June 28, 1996 IDM granted to Arle L. Pierro a non qualified option for
50,000 shares of its Common Stock at $3.23125 per share pursuant to a
consulting agreement that expires on June 30, 1997.
3. On July 11, 1996, effective June 30, 1996, IDM entered into an exclusive
license agreement with LIFE INTERNATIONAL PRODUCTS (Life) pursuant to
which IDM shall market and employ Life's patented environmental
remediation technology for long term bioremediation of contaminated
groundwater throughout North America. IDM also acquired a ten percent
interest in Life for $1,250,000.
4. On July 19, 1996, IDM, through a newly formed 90% owned subsidiary,
Continental Waste Conversion International, Inc. ("International"),
entered into an agreement with Continental Waste Conversion, Inc. ("CWC")
pursuant to which International acquired, in exchange for a 10% interest
in International, the exclusive worldwide rights (excluding Canada) to
the proprietary Kocee Gas Generator waste treatment technology that
converts municipal solid waste, including tires and plastics, into
electrical energy. IDM has committed to loan up to $1,350,000 over a
four month period to International to carry on its waste-to-energy
business. At closing, IDM made an initial loan of $600,000 to
International repayable upon demand with interest at 9.25%. In addition,
IDM, through a wholly-owned subsidiary of International loaned $160,000
(Canadian) to CWC repayable in 18 consecutive installments commencing
January 1, 1997 with interest at 7.5% per annum.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of Securities Exchange Act of
1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth in this
report.
SECOND QUARTER OF 1996 COMPARED WITH SECOND QUARTER OF 1995
The Company's total revenues decreased by approximately 39.3% from $12,576,000
for the quarter ended June 30, 1995 to $7,632,000 for the quarter ended June 30,
1996. Contract service income decreased during the quarter by 39.9% from
$12,002,000 in 1995 to $7,215,000 in 1996. The decrease in contract service
income and total revenues is attributable to the completion of the Company's
services during the quarter in connection with the FFC-Jordan Fertilizer
Project. The relative work load in connection with the commencement of the FFC-
Jordan Fertilizer Project during the second quarter of 1995 and the subsequent
completion of such project during the second quarter of 1996 resulted in
substantially higher revenues being reported during the early phase of the
project. The Surplus equipment and scrap sales revenues decreased by 27.6% from
$574,000 in 1995 to $416,000 in 1996. The decrease in surplus equipment and
scrap sales revenues was attributable to varying product mix and lower volume in
1996.
Direct job costs decreased by approximately 46.0% from $10,106,000 for the
quarter ended June 30, 1995 to $5,454,000 for the same period in 1996. The
primary elements of such decrease in job costs were job salaries and material
and supplies. The decrease in job costs was attributable to the decrease in
contract service revenues during the quarter. Cost of equipment sales decreased
from $168,000 in 1995 to $73,000 in 1996. The decrease in cost of equipment
sales was attributable to varying product mix and lower volume in 1996.
While total revenues decreased by 39.3% for the quarter, general and
administrative expenses increased from $1,833,000 during the quarter ended June
30, 1995 to $1,937,000 during the same period in 1995. The increase in general
and administrative expense was primarily attributable to an increase in salaries
due to hiring additional personnel.
In addition to its operating income and expenses, the Company reported net
interest income of $13,000 for the quarter ended June 30, 1996 as compared to
net interest income of $81,000 for the same period in 1995. The decrease in net
interest income/expense was attributable to $25,000 in interest expense which
accrued on $1,750,000 of indebtedness which remained outstanding during most of
the quarter out of the $5,000,000 of convertible notes issued in the third
quarter of 1995 and an increase in interest expense due to the additional
$450,000 in equipment financing compared to the same period last year.
As a result of the foregoing, the Company reported income before taxes of $9,000
and net income of $7,000 for the quarter ended June 30, 1996 as compared to a
income before taxes of $421,000 and net income of $251,000 for the same quarter
in 1995.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Total revenues decreased by approximately 18.7% from $18,585,000 for the six
months ended June 30, 1995 to $15,113,000 for the same period in 1996. Contract
service income decreased during the period by 16.1% from $17,435,000 in 1995
to $14,632,000 in 1996. Surplus equipment and scrap sales revenues decreased
58.1% from $1,150,000 in 1995 to $482,000 in 1996. See the quarterly
comparison for discussion of the factors contributing to the decrease in surplus
equipment and scrap sales revenues.
Direct job costs decreased by approximately 36.0% from $15,648,000 for the six
months ended June 30, 1995 to $10,018,000 for the same period in 1996. See the
quarterly comparison for a discussion of the factors contributing to the
decrease in direct job costs.
Cost of equipment sales decreased from $388,000 in 1995 to $73,000 in 1996. The
decrease in cost of equipment sales was attributable to varying product mix and
lower volume.
6
<PAGE>
General and administrative expenses decreased 3.9% from $3,736,000 during the
six months ended June 30, 1995 to $3,590,000 during the same period in 1996.
The decrease was primarily attributable to two refunds in the first quarter of
insurance refunds totaling $90,000 as a result of audits on prior years
premiums.
The Company reported a decrease in net interest income/(expense) from $178,000
for the six months ended June 30, 1995 to $16,000 for the same period in 1995.
See the quarterly comparison for a discussion of the factors contributing to the
increase in net interest income/(expense).
As a result of the foregoing, the Company reported income before taxes of
$1,066,000 and net income after tax of $854,000 for the six months ended June
30, 1996 as compared to a loss before taxes of $1,236,000 and a net loss after
taxes of $746,000 for the same period in 1995.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES.
At June 30, 1996, the Company had a backlog totaling approximately $52 million
compared to a backlog of approximately $58 million at June 30, 1995. The
largest component of the Company's backlog at June 30, 1996 was $25 million for
a paper plant relocation to the People's Republic of China.
In addition to its existing backlog, the Company is presently bidding on, and
intends to bid on numerous projects to replace revenues from projects which will
be completed during 1996 and to increase the total dollar volume of projects
under contract. Management anticipates that the Company's efforts to bid on and
secure new contracts will focus on projects which can be readily serviced from
the three regional offices opened by the Company during 1994 and 1995. In
addition, the Company has submitted proposals on several large international
plant relocation projects. The Company's regional offices, particularly the Oak
Ridge, Tennessee and Los Alamos, New Mexico offices are strategically located in
areas having a high concentration of prospective public and private remediation
sites. While bidding to perform services at such sites is expected to be highly
competitive, management believes that the Company's existing presence on
projects at these locations combined with its proven expertise and resources
will enhance the Company's chances of successfully bidding on substantial new
projects.
The Company had working capital of $ 17,076,000, including cash and cash
equivalents balances of $2,921,000 at June 30, 1996. This compares to working
capital of $10,293,000 and a cash balance of $83,000 at December 31, 1995. The
increase in working capital and cash is attributable to the exercise of
warrants and options totaling $6,913,000 during the period.
Approximately $500,000 of the Company's working capital at June 30, 1996
consisted of a cash performance bond which the Company had posted in connection
with the performance of a project which is expected to be released during
August.
Additionally, $1,483,000 of the Company's working capital at June 30, 1996
consisted of surplus equipment inventory. Such inventory level compares to the
same amount at December 31, 1995.
At June 30, 1996, the Company's only long term debt other than the convertible
notes was $657,000 in installment debt secured by job equipment.
On July 11, 1996, effective June 30, 1996, the company acquired a ten percent
interest in Life International Products (Life) for $1,250,000. The Company
also entered into a licensing agreement with Life whereby IDM shall market
and employ Life's patented environmental remediation technology for long term
bioremediation of contaminated groundwater throughout North America.
On July 19, 1996, IDM, through a newly formed 90% owned subsidiary,
Continental Waste Conversion International, Inc. ("International"), entered
into an agreement with Continental Waste Conversion, Inc. ("CWC") pursuant to
which International acquired, in exchange for a 10% interest in
International, the exclusive worldwide rights (excluding Canada) to the
proprietary Kocee Gas Generator waste treatment technology that converts
municipal solid waste, including tires and plastics, into electrical energy.
IDM has committed to loan up to $1,350,000 over a four month period to
International to carry on its waste-to-energy business. At closing, IDM made
an initial loan of $600,000 to International repayable upon demand with
interest at 9.25%. In addition, IDM, through a wholly-owned subsidiary of
International loaned $160,000 (Canadian) to CWC repayable in 18 consecutive
installments commencing January 1, 1997 with interest at 7.5% per annum.
Other than funding the Company's bonding and other job costs the Company does
not anticipate any substantial demands on the liquidity or capital resources of
the Company during the following twelve months.
7
<PAGE>
Management believes that the Company's working capital is sufficient to meet the
Company's anticipated needs for at least the following twelve months, including
the performance of all existing contracts of the Company. However, as the
Company is presently pursuing bids on multiple large projects, the Company may
be required to seek new bank lines of credit or other financing in order to
facilitate the performance of jobs if the volume and size of projects being
performed by the Company increases substantially. While the Company is
conducting ongoing discussions with various potential lenders with a view to
establishing available bank lines of credit if and when needed to support future
growth, the Company presently has no commitments from any bank or other lender
to provide financing if such financing becomes necessary to support growth.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 License Agreement dated June 30, 1996 with Life International
Products, Inc.
10.2 Agreement dated July 19, 1996 with Continental Waste
Conversion, Inc.
10.3 License Agreement dated July 18, 1996 between Continental
Waste Conversion, Inc. and Continental Waste Conversion
International, Inc.
10.4 Promissory note in the amount of $160,000 (Canadian) dated
July 22, 1996 from Continental Waste Conversion, Inc. to
Continental Waste Conversion International, Inc.
10.5 Pledge and Security Agreement dated July 19, 1996 between
Contintental Waste Conversion, Inc. and Continental Waste
Conversion International, Inc.
(b) Reports on Form 8-K
Form 8-K dated April 1, 1996 - Item 5 Reporting Adoption of a
Shareholder's Rights Plan.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IDM ENVIRONMENTAL CORP.
Dated: August 26, 1996 By: /S/ Joel Freedman
-----------------------------------
Joel Freedman, President
Dated: August 26, 1996 By: /S/ Michael B. Killeen
-----------------------------------
Michael B. Killeen, Principal
Financial and Accounting Officer
10
<PAGE>
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is entered into as of the 30th day of June,
1996 by and between Life International Products, Inc., a California Corporation
(the "Licensor") and IDM Environmental Corp., a New Jersey Corporation (the
"Licensee"), with respect to the following:
WHEREAS, Licensor is the owner and developer of the Process, as that term is
defined below; and the owner, by assignment, of patent and patent applications
in the United States, Canada and various other countries throughout the world
claiming the Process for its manufacture; and
WHEREAS, Licensee desires to obtain a license from Licensor to market the
Process to third parties for their use in the field of bioremediation treatment
of contaminated groundwater as further described in section 1.5 of this
Agreement, and to lease or solicit the lease of Equipment or Units, as defined
below, provided by the Licensor to enable such third parties to so utilize the
Process, and to act as or provide the services of a third party contractor to
act as the service manager for the installation and maintenance of such Units at
the sites of such third parties; and
WHEREAS, Licensor is willing to grant such license and provide such Units for
lease.
NOW, THEREFORE, in consideration of the terms and conditions and mutual promises
and covenants contained herein, the parties hereto agree as follows:
1. DEFINITIONS. Terms defined in this Section 1 and elsewhere,
parenthetically and/or in quotations, in this Agreement, shall have the same
meaning throughout the Agreement. Defined terms may be used in the singular or
plural.
1.1. "Process" shall mean the process for enriching water with oxygen,
developed and owned by Licensor for which Licensor has Patents, which Process is
more fully described in that certain document entitled "Oxygenating Apparatus,
Method For Oxygenating Water Therewith, and Applications Thereof", attached
hereto as Exhibit "A".
1.2. "Patents" shall mean any and all patents and patent applications
throughout the world for the Process, its manufacture and any claims thereon,
including without limitation, US Patent No. 5,006,352, US Patent application No.
08/411,708, Canadian Patent application for the national phase of International
Application No. PCT/US95/03889, European Patent No. 0303 658, and Hungarian
Patent application No. P9401210, and any reissue, extension or addition to any
such patents and/or patent applications and any future patents and patent
applications filed and/or granted throughout the world.
1.3. "Patent Rights" shall mean Licensor's sole and exclusive right to make
use of the Patents, including the right to license to any party the Patent
Rights, or a portion thereof.
-1-
<PAGE>
1.4. "Equipment" shall mean the equipment manufactured by Licensor which
makes use of the Process in order to produce oxygenated water. The Equipment is
also referred to in herein as the "Unit".
1.5. "Licensed Use" shall mean the use of the Equipment and Process as
licensed by the Licensee specifically and solely for use in connection with
bioremediation treatment of contaminated groundwater, as more particularly
described in that certain document entitled "Groundwater Bioremediation Can Be
Greatly Enhanced By New Superoxygenation Process" dated April 9, 1996, written
by Dr. Richard P. Maas, and attached hereto as Exhibit "B".
1.6. "Territory" shall mean the countries of the United States, Canada, and
Mexico.
1.7. "Customers" shall mean the third parties with which the Licensee shall
enter into agreements for the lease of the Process and Equipment for the
Licensed Use as well as Service Agreements for such Equipment.
1.8. "Purpose of this Agreement" shall mean the marketing in the Territory
of the Process by Licensee to Customers to use the Equipment for the Licensed
Use and the Licensee's installation, servicing and maintenance of such Equipment
by way of service contracts with such Customers.
1.9. "Service Agreements" shall mean the contracts entered into between
Licensee and Customers for Licensee's installation, servicing and maintenance of
the Equipment in connection with the Customers' lease of same.
1.10. "Confidential Information" shall mean all confidential and
proprietary information disclosed by the parties to each other, including this
Agreement, and all information related to the Process, the Patents, the
Equipment, Licensor and Licensee technology, know-how, current products, future
products, potential products, drawings, intellectual property, services,
marketing and other business information, whether disclosed orally or in
writing, and shall, without limiting the foregoing, specifically include all
information marked as "Confidential" or "Proprietary".
2. GRANT OF LICENSE.
2.1. Subject to the further terms of this Agreement, Licensor hereby grants
to Licensee the exclusive right and license ("License") to market the use of the
Process and the Patent Rights for the Licensed Use to Customers in and
throughout the Territory for a period commencing the date hereof and terminating
on September 30, 2001 (the "Initial Term"). Subject to Section 8 hereof, nothing
contained herein shall be deemed as to grant to Licensee the right or license to
make use of the Process for any other purpose within or outside of the Territory
nor to market the Licensed Use of the Process to Customers outside of the
Territory nor permit others to do so.
-2-
<PAGE>
2.2. Extension of Term.
2.2.1. First Renewal Term. Provided Licensee has met the
Minimum Revenues set forth in section 6 hereof, that Licensee is not in breach
of any other terms of this Agreement and conditioned on Licensee and Licensor
agreeing on new Minimum Revenues for the First Renewal Term, this Agreement will
be automatically renewed for an additional term of five (5) years ("First
Renewal Term") commencing on October 1, 2001.
2.2.2. Succeeding Renewal Terms. Provided Licensee continues to
meet the Minimum Revenues as agreed for the First Renewal Term, and Licensee is
not in breach of any other terms of this Agreement, the term of this Agreement
shall be extended for successive five (5) year terms (each referred to as
"Succeeding Renewal Terms"), commencing on the expiration of the First Renewal
Term or such preceding Succeeding Renewal Term, as the case may be, and provided
that for each Succeeding Renewal Term the parties agree to a schedule of Minimum
Revenues which continue to be met throughout the term of the Agreement.
3. STRATEGIC MARKETING PLAN.
3.1. The parties agree to work together to develop a strategic
marketing plan which will serve as a basis for the marketing of the Licensed Use
of the Process to Customers. The Marketing Plan will also address the service
contracts to be sold to customers as well as the marketing plan for the
Territory, including plans for introduction of the Equipment to Customers,
advertising, promotions, and order of market penetration. The Marketing Plan
will also include the budget (the "Budget") for marketing, operational and
advertising expenses, which such expenses shall be funded fully by Licensee.
The Licensee will attempt to adhere to the Marketing Plan whenever possible with
regard to its performance under this Agreement.
4. LEASE & SERVICE CONTRACTS - UNITS.
4.1. Each agreement entered into by Licensee with a Customer will be
primarily negotiated by Licensee in accordance with the Marketing Plan, and in
full consultation with Licensor. Lease agreements are hereafter referred to as
"Customer Leases" and service agreements are referred to as "Service Contracts".
All such agreements shall require the approval of Licensor prior to execution
thereof.
4.2. Licensor shall provide all Units required under any Customer
Lease. The cost of manufacturing such Units shall be advanced by Licensor, but
shall be reimbursed pursuant to Section 5.3.1 hereof, provided however, it is
contemplated that the Customer Leases will include either an advance payment or
will provide sufficient security to enable financing of the manufacture of such
Units. Licensor will deliver all Units on a timely basis in accordance with
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the terms of the Customer Lease as approved by Licensor. All such Units shall
be delivered in good working condition.
4.3. Service Contracts. It is contemplated that each agreement
entered into with a Customer will provide for Customer to purchase a Service
Contracts for all Units leased to Customer. The parties will agree as to the
best party to be responsible for providing technical service and maintenance
under the Service Contract. Furthermore, the parties will determine the party
to install the Units and remove same when the term has expired. Such
responsible party shall employ all contractors and employees necessary to
provide such service, including service center employees, technicians, and
telephone operators, as well as the physical facilities for all service centers
and operations offices.
5. COSTS - DIVISION OF PROFITS.
5.1. Licensee shall fund the operation and expenses associated with
the Marketing Plan in accordance with the Budget.
5.2. All revenues earned from the Customer Leases and the Service
Contracts shall be collected by the Licensee and shall be deposited only into a
special account, segregated from all other accounts of Licensee, designated as
the Life/IDM Bioremediation Account.
5.3. Disbursement of Revenues. All revenues earned by the Licensee
from the Customer Leases and Service Contracts ("Gross Revenues") shall be
disbursed as follows:
5.3.1. First to the repayment of all costs incurred by Licensor
(including financing fees and interest, if any) in connection with the
manufacturing the Units leased to Customers. Licensor hereby covenants to
submit to Licensee statements reflecting the costs to be reimbursed hereunder.
5.3.2. Second to the reimbursement, pro rata, of any actual
expenses of Licensee and Licensor, including (a) actual unrecouped direct
marketing costs as provided in the Budget and incurred by Licensee, (b) actual
unrecouped manufacturing costs of all Units provided to any Customers, to the
extent such costs have been advanced by Licensor, and (c) travel and other
incidental expenses, including those incurred pursuant to 5.5 below. All such
expenses shall be subject to substantiation by each party. Regular accounts
shall be maintained by each party copies of which shall be provided to the other
party on a monthly basis.
5.3.3. The balance (the "Net Revenues") to the parties, eighty
(80%) percent to Licensor and twenty (20%) percent to Licensee.
5.4. Any sales commissions or incentives paid to Licensee's employees
or third party contractors shall be payable only from Licensee's share of the
Net Revenues as set forth in Section 5.3.2 above.
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5.5. Any expenses incurred by Licensor as a result of Licensee's
request that Licensor be present at any meetings or functions in connection with
the operation of the business hereunder shall be paid for by the Licensee. Any
expenses incurred by Licensee as a result of Licensor's request that Licensee be
present at any meetings or functions unrelated to the business hereunder shall
be paid for by the Licensor.
6. MINIMUM REVENUES.
6.1. Licensee agrees that Licensee's operations under this Agreement
by way of Customer Leases and Service Contracts shall yield a minimum annual Net
Revenue payment ("Minimum Revenues") to Licensor as set forth in the following
schedule:
6.1.1. For the period from the date hereof to October 1, 1997,
Licensor shall receive net profits of no less than $400,000, which shall be the
Minimum Revenues for such period.
6.1.2. For each 12 month period thereafter, the Minimum Revenues
shall be no less than the greater of the actual net profits received for the
previous period or $400,000.
6.2. Renewal Terms. The parties agree to negotiate in good faith for
the Minimum Revenue schedules for the First Renewal Term and all Succeeding
Renewal Terms before the commencement of such Renewal Terms.
7. PAYMENT OF REVENUES TO LICENSOR - ACCOUNTING STATEMENTS.
7.1. On or before the 10th day after the beginning of each calendar
quarter during the term hereof, and any extension thereof, Licensee shall
deliver to Licensor a written statement, certified to be true and correct by the
Chief Financial Officer of Licensee, setting forth (i) the Gross Revenues
received by Licensee during the preceding calendar quarter, (ii) an accounting
of all actual expenses incurred by Licensee and chargeable against the Gross
Revenues pursuant to Section 5.3.1 above, (iii) the actual expenses incurred by
Licensor pursuant to Section 5.3.1 above, and (iv) the Net Revenues due to each
party hereunder. Concurrent with the delivery of such statement, Licensee
shall deliver to Licensor, by check or wire, the sum equal to Licensor's Net
Revenues for such period plus the reimbursement of actual expenses due, if any,
under (iii) above..
7.1.1. Within 10 days after the end of each fiscal year, Licensee
shall provide a yearly accounting for the prior year which shall show the Net
Revenues and the portion paid to Licensor. In the event that the Net Revenues
paid to Licensor for the first fiscal year (ending September 30, 1997) is less
than $400,000, Licensee shall have the option of paying the difference between
said $400,000 and the amount of Net Revenues paid, or terminating this
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Agreement. In the event Licensee elects to pay said difference, said payment
shall accompany the aforementioned accounting. In the event that the Net
Revenues paid to Licensor for the any fiscal year beyond the first fiscal year
is less than the Minimum Revenues applicable under section 6.1.2 hereof,
Licensee shall pay the difference between said Minimum Revenues and the amount
of Net Revenues paid, said payment to accompany the accounting for that year.
7.1.2. If Licensee fails to pay any sum due hereunder within ten
(10) days after its due date, the amount owing will thereupon bear interest
until paid at the rate of 2% above prime rate per annum as established by Bank
of America, Los Angeles Branch, with the amount of such interest calculated from
such time as said amounts were initially due hereunder until they are actually
paid. In no event shall the interest rate charged exceed the maximum rate
allowable under the relevant provisions of the laws of California and Licensee's
domicile. The foregoing notwithstanding, if the amount due for such period
remains unpaid for 90 days after such sum is due, then Licensor shall have the
right to immediately terminate this Agreement upon notice delivered to Licensee.
7.2. Copies of Statements. Licensee shall deliver to Licensor copies
of all bank statements regarding the Life/IDM Bioremediation Account within
three (3) business days of Licensee's receipt of same. In the event Licensor
shall reasonably suspect any misappropriation of such monies, Licensee shall be
required to substantiate any such suspected transaction within five (5) business
days of receipt of Licensor's demand for same. Should Licensee fail to so
substantiate, Licensor may immediately terminate this Agreement in addition to
seeking appropriate remedies at law or in equity.
7.3. Audit Rights. Licensee shall keep full and accurate books and
records in sufficient detail so that Net Revenues can be properly calculated.
At all times during the existence of this Agreement and for twelve (12) months
thereafter, Licensor, upon giving to Licensee at least ten (10) days advance
written notice of its intention so to do, shall have the right to inspect or
audit all books and records of Licensee with respect to this Agreement. If any
such audit shall disclose that Licensee has understated Gross Revenues, Net
Revenues or has underpaid Net Revenues for any reporting period, Licensee shall,
within three (3) days of receipt of written demand therefor, pay to Licensor the
amount, if any, by which the Net Revenues owing exceed Net Revenues paid, with
additionally, interest at 2% over the prime rate, as described in section 7.1
above. In the event that Licensee has understated Gross Revenues in excess of
5% or under paid Net Revenues in excess of 5% of the amount due, Licensee shall,
within three (3) days of written demand therefor, pay to Licensor all costs,
fees and expenses incurred by Licensor in conducting such audit, including
without limitation, reasonable travel expenses.
8. OTHER USES BY LICENSEE AND LICENSOR.
8.1. Licensee shall be entitled to consider other uses for the Process
that have not previously been discovered by Licensor. Furthermore, in the event
Licensee should desire to
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perform Licensed Use services directly for any third party, rather than
licensing such third party to do so for itself, the "net profits" earned by
Licensee will be divided equally (50% to Licensee and 50% to Licensor).
Licensee shall pay to Licensor its share of such "net profits" within 10 days
of Licensee's receipt of monies paid from such third party. For purposes of
this paragraph, the term "net profits" shall be deemed to mean the gross sum
received from the third party less actual costs incurred by Licensee, including
without limitation, the cost paid by Licensee to Licensor for the Unit(s)
required for said service. It is contemplated that such use by Licensee shall
be in connection with a larger environmental clean-up job which may only
require the use of the Process for a portion of said job. In such case, the
costs and "net profits" associated with this portion of such job will be
allocated in good faith as disclosed to the third party client for such job.
8.2. The foregoing section notwithstanding, Licensee acknowledges that
Licensee shall not have any rights in or to any uses of the Process now known or
hereafter devised, other than the right to license the Licensed Use. Without
limiting the generality of the foregoing, Licensor specifically reserves to
itself all uses including, without limitation, bioremediation treatment of
groundwater outside of the Territory, treatment of human and animal waste,
commercial industrial and municipal waste, other treatment of chemical and other
waste, medical uses, beverage and drinking water uses, agricultural uses,
aquacultural uses and all other environmental uses.
9. CUSTOMERS - OTHER USES.
9.1. In the event Licensor has knowledge of or discussions with any
potential Customer for the Licensed Use, including without limitation, Customers
who may also be customers of Licensor for other uses of the Process, Licensor
will immediately refer such potential Customers to Licensee for negotiations
with respect to the Licensed Use.
9.2. In the event Licensee has knowledge of or discussions with any
parties, including Customers, who may have a need to use the Process for a use
other than the Licensed Use, and such use does not qualify as a use to be
developed by the Licensee under 8.1 above, Licensee shall immediately refer such
party to Licensor.
9.3. In either event set forth above, neither Licensee nor Licensor
shall be entitled to a referral fee or percentage of the business from such
potential party, except with respect to Licensor's normal interest in the Net
Revenues from Customers as set forth herein.
10. CONFIDENTIAL INFORMATION
10.1. The parties agree, at all times, to immediately furnish each
other with any and all information each develops, maintains or otherwise has
knowledge of with respect to the Process.
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In the event this Agreement is terminated in whole or in part, each party
agrees that all such technical information shall become the property of
Licensor.
10.2. Without limiting the generality of the foregoing paragraph, if,
at any time, Licensee intends to file information concerning the Process with a
governmental agency, (for example, the Environmental Protection Agency),
Licensee shall furnish Licensor all such information prior to such filings.
10.3. Licensee agrees to hold all Confidential Information provided by
Licensor in strict confidence and not to disclose such Confidential Information
to any third parties, including, without limitation, consultants, sub-licensees,
and contractors. Licensee may disclose the Confidential Information only to its
responsible employees who require such information in order to carry out the
Purpose of this Agreement. Licensee agrees to instruct all such employees
regarding the foregoing obligations and shall use its reasonable best faith
efforts to have such employees sign nondisclosure agreements in content similar
to the provisions of this paragraph. Licensee may also disclose such
Confidential Information to any company providing the services under the Service
Contracts, provided that such company shall first execute and deliver to
Licensor a confidentiality non-disclosure agreement provided by Licensor, which
shall be substantially as contained in this paragraph. Licensee agrees that it
shall take all reasonable measures to protect the confidentiality of and avoid
disclosure or use of Confidential Information in order to prevent it from
falling into the public domain or the possession of persons other than those
persons authorized hereunder to have any such information, which measures shall
include the highest degree of care that Licensee utilizes to protect its own
confidential information of a similar nature. Licensee further agrees not to
publish any studies, results or reports relating to the Process or the
Confidential Information. The obligation of confidentiality imposed by this
Section shall be in effect for the term hereof, as extended, plus fifteen (15)
years. No copies of Confidential Information may be made unless approved in
writing by Licensor. The foregoing obligations shall not apply to any
Confidential Information which Licensee can demonstrate:(i) relates to
disclosures by Licensee required by governmental agencies; or (ii) is in any of
the Patents or; (iii) is or becomes publicly known through no wrongful act of
Licensee, or (iv) was known by Licensee prior to the disclosure thereof by
Licensor. Licensee's obligation to keep Confidential Information confidential
shall not terminate upon the termination of this Agreement.
10.4. Licensor agrees to hold all Confidential Information provided by
Licensee in strict confidence and not to disclose such Confidential Information
to any third parties, including, without limitation, consultants, and
contractors. Licensor may disclose the Confidential Information only to its
responsible employees who require such information in order to carry out the
Purpose of this Agreement. Licensor agrees to instruct all such employees
regarding the foregoing obligations and shall use its reasonable best faith
efforts to have such employees sign nondisclosure agreements in content similar
to the provisions of this paragraph. Licensor agrees that it shall take all
reasonable measures to protect the confidentiality of and avoid disclosure or
use of Confidential Information in order to prevent it from falling into the
public domain or the possession of persons other than those persons authorized
hereunder to have any such
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information, which measures shall include the highest degree of care that
Licensor utilizes to protect its own confidential information of a similar
nature. Licensor further agrees not to publish any studies, results or
reports relating to the Process or the Confidential Information. The
obligation of confidentiality imposed by this Section shall be in effect for
the term hereof, as extended, plus fifteen (15) years. No copies of
Confidential Information may be made unless approved in writing by Licensee.
The foregoing obligations shall not apply to any Confidential Information
which Licensor can demonstrate:(i) relates to disclosures by Licensor
required by governmental agencies; or (ii) is in any of the Patents or;
(iii) is or becomes publicly known through no wrongful act of Licensor, or
(iv) was known by Licensor prior to the disclosure thereof by Licensee.
Licensor's obligation to keep Confidential Information confidential shall not
terminate upon the termination of this Agreement.
10.5. Noncompetition. Licensee agrees that for a period of five (5)
years following the termination of the Agreement, Licensee shall not use nor
permit others to use the Process or the Units in any manner whatsoever, whether
or not in competition with Licensor, except to the extent that such other
parties have the right to do so under pre-existing Customer Leases and Service
Contracts. Furthermore, during the term hereof, Licensee shall only be
permitted to market the use of oxygenated water for uses contemplated hereunder
under the terms of and subject to this Agreement.
11. LICENSOR'S RIGHT TO TERMINATE IN EVENT OF NONMARKETING OF LICENSED USE.
11.1. Licensor shall have the right to terminate in its entirety this
Agreement and the license granted herein in the event that (i) Licensee fails to
follow the agreed upon schedules and marketing procedures as agreed upon by the
parties consistent with the strategic marketing plan described in section 3.1
hereof, or (ii) Licensee fails to market the Licensed Use to potential new
Customers during any three (3) month period hereunder.
11.2. Termination of the license and this Agreement under this Section
11 shall be effective only after Licensor has given Licensee notice of such
event of termination and Licensee fails to cure such breach of 11.1 within
thirty (30) days of such notice.
12. INSURANCE
12.1. Within three (3) months from the date hereof or five (5) days of
the date of the first Customer Lease with the first Customer, whichever is
first, the Licensee shall submit to Licensor proof, in form and substance
satisfactory to Licensor, that the Licensee has purchased comprehensive product
liability insurance in an amount sufficient for the level of operation of
Licensee, but, in no event less than $1,000,000/$2,000,000 for personal injury
and $1,000,000 for property damage, including without limitation, product
liability insurance, for each occurrence related to the Licensed Use and the
Units. The Licensee shall maintain such insurance in full force and effect at
all times during the Initial Term of this Agreement, and any Renewal Term,
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and coverage shall survive termination of the License granted hereby for any
Customer Leases and Service Contracts existing at the termination hereof.
Such insurance coverage shall insure the Units at the Customer's premises,
with acknowledgement in the insurance policy that such Units are the property
of Licensor. Each insurance policy shall name the Licensor as an additional
insured party. Licensee shall give Licensor at least 30 days notice of
cancellation before any cancellation shall be effective as to the Licensor.
Licensee shall submit to the Licensor proof of renewal of such insurance
coverage at least 30 days prior to the expiration date of any such policy.
The Licensee shall require each Customer to provide substantially similar
insurance protection. Licensor covenants to Licensee to maintain products
liability insurance for the Units in amounts no less than those stated above
and affording Licensee identical rights granted to Licensor hereunder and
shall cause any contractor manufacturer to also provide like insurance
coverage.
13. TERMINATION.
13.1. This Agreement and the license granted hereunder shall terminate
at the expiration of any term or renewal term hereof, unless terminated earlier
in accordance with this section 13.
13.2. This Agreement may be terminated upon notice:
13.2.1. by Licensor pursuant to the terms of Sections 7 and 11
hereof; or
13.2.2. by Licensor, in the event that the Licensee shall have
failed to either remit Net Revenues or Minimum Revenues full when due, or failed
to fully and fairly report Gross Revenues, which failure shall be discerned by
Licensor pursuant to the audit rights provided by Section 7.3.
13.2.3. by either party, if the other party has materially breached
or failed to punctually perform any of its duties or obligations under this
Agreement and such breach remains uncured or such failure to perform continues
for at least 90 days after the aggrieved party has given notice to the other; or
13.2.4. by either party, if the other party is insolvent or becomes
the subject of a voluntary or involuntary petition in bankruptcy for its
reorganization or liquidation, or makes any assignment for the benefit of its
creditors, or if a trustee or receiver of its property is appointed, or if such
party takes or is subjected to any other similar action based upon its inability
to meet its financial obligations, provided, however, that in the case of an
involuntary bankruptcy proceeding filed against any party, such party shall have
thirty (30) days to cure such event by causing a dismissal thereof prior to
termination of this Agreement; or
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13.2.5. by the Licensor, if the Licensee assigns this Agreement or
any of its rights under this Agreement without obtaining the Licensor's prior
written consent, except for assignments to wholly-owned subsidiaries under the
terms of section 16.10 hereof; or
13.2.6. by the Licensor, if there is a sale of substantially all of
the assets or a majority of the shares of the Licensee, or if there is a change
in control of the Licensee by contract, a change of management or otherwise.
13.3. Effects of Expiration or Termination. If the term (or renewal
term, if applicable) expires or if the Agreement is terminated, all rights of
the Licensee under this Agreement shall cease and the Licensee shall cease to
market the Licensed Use, the Licensee concurring that any such continued
marketing shall, in and of itself, cause irreparable injury to Licensor.
Furthermore, Licensee shall immediately return to and/or surrender control of
all material in Licensee's possession which is related to the Process or the
Units. Within 5 days of such termination, Licensee shall cause a final
accounting of the Life/IDM Bioremediation Account, and, if Licensor agrees with
such accounting, all funds shall be immediately disbursed in accordance
therewith. However, if Licensor disputes such accounting, the funds shall
remain in the Life/IDM Bioremediation Account until a full and complete
settlement of any such dispute. Furthermore, upon termination hereof, Licensee
shall immediately assign all Customer Leases to Licensor or its designee and
instruct all Customers to make any future payments to Licensor or its designee.
Notwithstanding the foregoing, if Licensee is obligated to perform any services
under any Service Contract, Licensee shall continue to so perform such
obligations or shall be replaced by Licensor or Licensor's designee, at
Licensor's sole discretion.
13.4. Obligations Surviving Termination. Notwithstanding any
termination of this Agreement and exercise of any rights or remedies hereunder,
the following rights and obligations shall survive any such termination or
exercise of rights to the degree necessary to permit their complete fulfillment
or discharge:
13.4.1. the Licensee's right to receive or recover, and the
Licensor's obligation to pay, twenty (20%) percent of all Net Revenues as may be
due and payable at the time of such termination, or as may become due and
payable after such termination, plus any unrecovered expenses incurred before
termination pursuant to this Agreement;
13.4.2. in the event Licensee continues to receive payments from
Customers, notwithstanding Licensee's instructions to Customers to remit
payments directly to Licensor, Licensee shall forward all such payments to
Licensor, who shall then return the twenty percent of Net Revenues due to
Licensee; and
13.4.3. Licensee's and Licensor's obligations under Section 10
hereof; and
13.4.4. Any other rights and obligations intended in this Agreement
to survive termination.
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14. IMPROVEMENTS TO UNITS AND PROCESS.
14.1. Subject to the provisions of Section 8 hereof, Licensee
acknowledges that any and all improvements, inventions, modifications,
technology or development (collectively "Improvements") made by Licensee, its
employees and agents, to the Units and/or the Process, if any, shall be the
sole and exclusive property of Licensor and that Licensor shall have the right
to use, refrain from using, change, modify, add to, subtract from and to file
for any patents for the Improvements or any of them in any manner and in any and
all countries throughout the world, in perpetuity, as Licensor in its sole
discretion shall determine. Licensee hereby irrevocably and exclusively assigns
to Licensor, in perpetuity, all rights (including without limitation all patents
and renewals and extensions thereof) in and to such Improvements. Licensee
further agrees to execute and shall use its best faith reasonable efforts to
cause its employees to execute any and all documents (including without
limitation assignments, declarations, and affidavits) requested by Licensor or
Licensor's attorneys in furtherance of the provisions of this paragraph.
15. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
15.1. Each party hereto represents and warrants the following:
15.1.1. Corporate Status. Licensee is a corporation, duly
incorporated, in good standing and authorized to transact business in this
jurisdiction and all other jurisdictions which the respective corporation
transacts business. Licensor is a corporation duly incorporated, in good
standing and authorized to transact business in this jurisdiction and all other
jurisdictions which the respective corporation transacts business.
15.1.2. Authorization. Each party hereto has taken the necessary
corporate or other action to properly authorize and bind such party to the terms
and conditions hereof. Nothing contained in the Agreement shall violate any of
the Articles of Incorporation, By-Laws or any other agreement or arrangement of
the respective parties.
15.1.3. Full Disclosure. That the parties have disclosed all
contracts, agreements and obligations that may affect this Agreement, and that
to the best of the parties knowledge nothing in existence prevents them from
entering into this Agreement and will disclose any and all new contracts,
agreements and obligations affecting this Agreement or the other party's rights
hereunder.
15.2. Indemnification. Each party ("Indemnifying Party") agrees to
indemnify, hold harmless, reimburse and defend the other party ("Indemnified
Party") at all times against any claim, costs, expense, liability, obligation,
loss, damage or judgment (including legal fees) of any nature (collectively
referred to as "Claim"), incurred by or imposed upon the Indemnified Party which
results, arises out of or is based upon any misrepresentation by the
Indemnifying Party.
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The Indemnified Party shall send notice to the Indemnifying Party of any Claim,
and within ten (10) business days thereafter counsel for the Indemnified Party
and counsel for the Indemnifying Party shall determine if the Indemnifying Party
shall assume the defense of the Claim; provided, however, the failure to give
notice shall not affect the Indemnified Party's rights hereunder so long as the
Indemnified Party vigorously defends the Claim.
16. MISCELLANEOUS.
16.1. Ambiguities. The terms of this Agreement are contractual, not
mere recitals. This Agreement is the result of protracted, arms-length
negotiation between the parties, each of whom has participated in the drafting
hereof, through their respective attorneys or legal representatives. The rule
of construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
16.2. Applicable Law and Severability. This Agreement shall, in all
respects, be governed by the laws of the State of California applicable to
agreements executed and to be wholly performed within the State of California.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provision contained herein and any present or future statute, law, ordinance or
regulation contrary to which the parties have no legal right to contract, the
latter shall prevail but the provision of this document which is affected shall
be curtailed and limited only to the extent necessary to bring it within the
requirements of the law.
16.3. Attorneys' Fees and Costs. In the event any action or
arbitration is instituted by a party hereto to any of the terms or provisions
hereof, the prevailing party in such action or arbitration shall be entitled to
such reasonable fees, costs and expenses (including the costs of the arbitrator
as may be fixed by the Court or arbitrator and any attorneys' fees rates which
have been raised within the ordinary course of the prevailing parties
representation).
16.4. Captions. The captions appearing at the commencement of the
paragraphs hereof are descriptive only and are for convenience and reference and
shall not be construed as part of this Agreement. Should there be any conflict
between any such caption and the paragraph at the head of which it appears, the
paragraph and not such caption shall control and govern in the construction of
this document.
16.5. No Partnership or Franchise created. The relationship between
the parties hereto is contractual only, and nothing contained in this Agreement
shall be construed so as to create a joint venture or partnership between the
parties hereto or a third party beneficiary relationship to any third party.
Furthermore, nothing contained herein shall be deemed to create any franchise
rights in Licensee; this Agreement is not a franchise and does not include
payment of a franchise fee, any right in Licensee to utilize any commercial
symbols of Licensor (other than Licensee's incidental use of such commercial
symbols in connection with the marketing of the Licensed Use), and does not
require distribution of the Product under the control or plan of Licensor.
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16.6. Notices. Any and all notices, demands or other communications
required or desired to be given hereunder by any party shall be in writing and
shall be validly given or made to another party if given by person, telex,
facsimile, telegram or if deposited in the United States mail, certified or
registered, postage prepaid, return receipt requested. If such notice, demand
or other communication be given by personal delivery, telex, facsimile or
telegram, service shall be conclusively deemed made at the time of such personal
service. If such notice, demand or other communication is given by mail, such
notice shall be conclusively deemed given forty-eight (48) hours after the
deposit thereof in the United States mail addressed to the party to whom such
notice, demand or other communication is to be given as hereinafter set forth:
If to the Licensor Life International Products, Inc.
attn: Frank Abramoff
400 S. Beverly Drive, Suite 408
Beverly Hills, CA 90212
Telephone: (310) 286-1967
Facsimile: (310) 286-1969
With a copy to: Robert W. Abramoff, Esq.
Burgee & Abramoff
16133 Ventura Boulevard
Suite 955
Encino, California 91436
Telephone: (818) 788-1600
Facsimile: (818) 788-2600
If to Licensee: IDM Environmental Corp.
Attn: Jose Capote
396 Whitehead Avenue
South River, NJ 08882
Tel: (908) 390-9550
Fax: (908) 390-9545
Any party hereto may change its address for the purpose of receiving
notices, demands and other communications as herein provided by a written notice
given in the manner provided hereby to the other party or parties hereto.
16.7. Waiver. No reliance upon or waiver of one or more provisions of
this Agreement shall constitute or be deemed a waiver of any other provisions
hereof or of any subsequent breach of the same or any other provision.
-14-
<PAGE>
16.8. Separate Counterparts; Execution by Facsimile. This Agreement
may be executed in one or more separate counterparts, each of which, when so
executed, shall be deemed to be an original. Such counterparts shall, together,
constitute and shall be one and the same instrument. Any signed copy of this
document or of any other document or agreement referred to herein, or copy or
counterpart thereof, delivered by facsimile transmission, shall for all purposes
be treated as if it were delivered containing an original manual signature of
the party whose signature appears in the facsimile, and shall be binding upon
such party in the same manner as though an originally signed copy had been
delivered.
16.9. Modifications or Amendments. No amendment, change or
modification of this Agreement shall be valid unless in writing and signed by
all of the parties in interest at the time of such amendment, change or
modification.
16.10. Assignments. This Agreement may not be assigned by either party
without the written consent of the other party, which consent shall not be
unreasonably withheld. Notwithstanding the foregoing, the parties may assign
this Agreement to any respective wholly-owned subsidiary of such party,
provided, however, in each such case, the original party shall remain
secondarily liable for all obligations and responsibilities under this Agreement
as assigned.
16.11. Further Assurances. Each of the parties hereto shall execute and
deliver any and all additional papers, documents, and other assurances, and
shall do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
16.12. Remedies. Nothing contained herein is intended to or shall be
construed so as to limit the remedies which any party hereto may have against
any other party hereto in the event of a breach by any party of any
representation, warranty, covenant or agreement made under or pursuant to this
Agreement, it being intended that any remedies shall be cumulative and not
exclusive. Without limiting the generality of the foregoing, the rights
granted to Licensee pursuant to this Agreement are of a special, unique,
unusual, extraordinary and intellectual character which gives them a peculiar
value, the loss of which cannot be reasonably or adequately compensated by
damages in an action at law. As such, Licensor may seek, but shall not be
limited to, equitable relief, by injunction or otherwise, in the event of a
default by Licensee.
16.13. Entire Agreement. The parties hereto intend this Agreement,
together with any related documents referred to in this Agreement, to constitute
the entire understanding and agreement of the parties with respect to the
subject matter of this Agreement, and any and all prior agreements,
understandings or representations are hereby and intended to be terminated and
canceled in their entirety.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this License Agreement as of the
date first written above.
"Licensee" "Licensor"
IDM ENVIRONMENTAL CORP. LIFE INTERNATIONAL PRODUCTS, INC.
By: /s/ Frank A Falco, Chairman By: /s/ Frank Abramoff
---------------------------- -----------------------------------
Frank A Falco, Chairman Frank Abramoff, its president
and Executive Vice President
-16-
<PAGE>
AGREEMENT made as of the 19th day of July, 1996,
BETWEEN:
CONTINENTAL WASTE CONVERSION INC., a body
corporate duly incorporated under the laws of the Province
of Alberta, Canada,
(hereinafter referred to as "CWC"),
OF THE FIRST PART;
- and -
IDM ENVIRONMENTAL CORP., a body corporate
duly incorporated under the laws of the State of New Jersey,
United States of America,
(hereinafter referred to as "IDM"),
OF THE SECOND PART.
WHEREAS CWC has developed know-how in connection with the
environmentally-safe conversion of certain domestic, industrial and agricultural
solid waste (hereinafter referred to as the "Technology");
AND WHEREAS CWC or the companies referred to in section 5.1 hereof
have entered into agreements with KASTERKA VERTRIEBS - GmbH (hereinafter
referred to as the "Kasterka Contract"), THE COUNCIL OF MAYORS OF THE
METROPOLITAN AREA OF SAN SALVADOR and COMPANIA DE ALUMBRADO ELECTRICO DE SAN
SALVADOR, S.A. DE C.V. (hereinafter collectively referred to as the "El Salvador
Contract"), THE MUNICIPALITY OF GUATEMALA (hereinafter referred to as the
"Guatemala Contract"), the NANHAI CITY GAS COMPANY (hereinafter referred to as
the "China Contract"), and LA SOCIETE GUI DAUPHIN ENVIRONNEMENT (hereinafter
referred to as the "France Contract"), as more particularly described in
Schedule "A" attached hereto (such agreements being hereinafter collectively
referred to as the "Existing Contracts");
AND WHEREAS CWC and IDM have agreed to incorporate a Delaware
corporation (hereinafter referred to as "CWC Delaware") to acquire from CWC
rights to the marketing and use of the Technology, and to incorporate an Alberta
corporation (hereinafter referred to as "CWC International") as a wholly-owned
subsidiary of CWC Delaware to acquire the interests of CWC in the Existing
Contracts and to actively pursue opportunities to construct and operate
facilities outside
<PAGE>
-2-
of Canada utilizing the Technology in converting certain domestic, industrial
and agricultural solid waste to gas and utilization of such gas to generate
electricity (hereinafter referred to as the "Waste-to-Energy Business");
AND WHEREAS CWC and IDM have agreed to enter into the within agreement
to set forth their respective rights and obligations relating to the marketing
and use of the Technology and the operation of the Waste-to-Energy Business:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE 1 - INCORPORATION AND OPERATION OF CWC DELAWARE
1.1 CWC and IDM shall cause a new corporation to be incorporated under the
laws of Delaware under the name CONTINENTAL WASTE CONVERSION INTERNATIONAL INC.
and a new corporation to be incorporated under the laws of Alberta under the
name CONTINENTAL WASTE CONVERSION INTERNATIONAL INC.
1.2 The initial shares issued in CWC Delaware shall be issued to CWC and
IDM at a consideration of one ($0.01) cent per share, with ninety (90%) percent
of such shares being issued to IDM and ten (10%) percent of such shares being
issued to CWC.
1.3 It is acknowledged that the parties hereto have agreed to exercise the
voting rights attaching to the shares held by them in CWC Delaware to ensure
that no shares in CWC Delaware other than those referred to in section 1.2
hereof will be allotted or issued and no options or other rights to acqurie
shares in CWC Delaware will be granted to any person not dealing at arm's length
with CWC Delaware or its directors and officers without the written consent of
both CWC and IDM, such consent not to be unreasonably withheld or delayed.
ARTICLE 2 - LICENCE
2.1 Following incorporation and the organization of CWC Delaware and CWC
International, as contemplated in Article 1 hereof, and provided that IDM and
CWC Delaware concurrently advance loans to CWC International and CWC as provided
in Article 3 hereof, CWC
<PAGE>
-3-
shall grant CWC Delaware an exclusive, irrevocable licence to market and use
the Technology in the form attached hereto as Schedule "B" (hereinafter
referred to as the "Licence Agreement"). It is acknowledged and agreed that
CWC shall continue to own the Technology and that no right, title or interest
in the Technology is being transferred or granted to IDM, CWC International
or CWC Delaware except as expressly set forth in this agreement and the
Licence Agreement.
ARTICLE 3 - LOANS
3.1 IDM agrees that it will, concurrently with CWC granting CWC Delaware
the licence referred to in Article 2 hereof, advance CWC Delaware the sum of Six
Hundred Thousand ($600,000) United States Dollars and One Hundred Sixty Thousand
($160,000) Canadian Dollars (hereinafter collectively referred to as the
"Initial IDM Loans") on the following terms and conditions:
(a) the sum of $160,000 (Canadian) shall be secured by a Promissory Note
and a Pledge and Security Agreement substantially in the form attached
hereto as Schedules "C" and "D", respectively;
(b) the sum of $600,000 (U.S.) loaned by IDM, together with accrued
interest, shall be repaid from the proceeds raised by CWC Delaware
through the sale of capital stock or through CWC Delaware borrowing
funds from third parties or, if not earlier repaid, shall be paid from
twenty-five (25%) percent of the net profits generated by CWC Delaware
or CWC International under the El Salvador Contract or any other
contracts.
3.2 The parties hereto agree to cause CWC Delaware to advance the sum of
$600,000 (U.S.) to CWC International concurrently with CWC granting CWC Delaware
the licence referred to in Article 2 hereof. The parties further agree to cause
CWC International to advance the sum of $160,000 (Canadian) to CWC. The United
States Dollars loans made by IDM to CWC Delaware, CWC Delaware to CWC
International, and CWC International to CWC shall bear interest at the rate
equal to the United States prime rate as published in the Eastern edition of the
WALL STREET JOURNAL on the date of the advance of funds, plus one (1%) percent.
The Canadian Dollars loans made by IDM to CWC Delaware, CWC Delaware to CWC
International, and CWC International to CWC
<PAGE>
-4-
shall bear interest at the prime rate established by the Royal Bank of Canada
on the date of the advance of funds, plus one (1%) percent.
3.3 IDM further agrees that, to enable CWC Delaware to carry on through
its subsidiary, CWC International, the Waste-to-Energy Business, it will advance
to CWC Delaware by way of loan the additional sums of Two Hundred Fifty Thousand
($250,000) United States Dollars on or before August 15, 1996, Two Hundred Fifty
Thousand ($250,000) United States Dollars on or before September 15, 1996, and
Two Hundred Fifty Thousand ($250,000) United States Dollars on or before October
15, 1996 (hereinafter collectively referred to as the "Additional IDM Loans").
The interest rate and terms of repayment for the Additional IDM Loans shall be
the same as the Initial IDM Loans and shall be secured by one or more promissory
notes in such form as may be reasonably stipulated by IDM. The parties hereto
agree to cause CWC Delaware to loan the amounts received pursuant to the
Additional IDM Loans to CWC International on the terms and conditions provided
in section 3.2 hereof. It is understood and agreed, however, that the
obligation of IDM to advance the Additional IDM Loans to CWC Delaware as
aforesaid will terminate should CWC Delaware be successful in raising in excess
of $500,000 (U.S.) through loans from third parties or from a private or public
sale of its shares.
ARTICLE 4 - ASSIGNMENT OF EXISTING CONTRACTS
4.1 Concurrently with the receipt of $160,000 (Canadian) by way of loan
from CWC International, CWC undertakes and agrees that it will assign to CWC
International its right, title and interest in those Existing Contracts not
entered into in the names of the companies referred to in section 5.1 hereof,
and that it will also assign its right, title and interest in those agreements
described in Schedule "E" attached hereto (such agreements being hereinafter
collectively referred to as the "Other Agreements"). CWC International agrees
to indemnify and save harmless CWC against all burdens and obligations under the
Existing Contracts and the Other Agreements. The assignments to CWC
International shall be in such form as may be required by the other parties
thereto, it being acknowledged and agreed, however, that:
(a) CWC will have to obtain the consent of the other party to each of the
Guatemala Contract and the Kasterka Contract after the date hereof and
undertakes and agrees to use its best efforts to obtain such consents;
<PAGE>
-5-
(b) CWC International shall agree to assume all obligations of CWC under
the Existing Contracts and the Other Agreements;
(c) while it is agreed that CWC shall be entitled to the benefits accruing
under section 3.1 of the Kasterka Contract after deducting all costs
reasonably incurred in obtaining the permits and drawings necessary to
construct the "Pilot Plant" referred to in such section of the
Kasterka Contract, it is agreed that the respective rights and
obligations under the Kasterka Contract are herewith assigned to CWC
Delaware.
4.2 CWC agrees that should it have been successful in entering into a
contract with the Czech Republic prior to the date hereof or should it obtain
any leads for additional sales of Gas Generators anywhere in the world outside
of Canada, it will advise CWC International and assign all benefits to such
leads or contracts to CWC International, provided that CWC International
undertakes and agrees to be responsible for and to indemnify and save harmless
CWC against all burdens and obligations under any contracts entered into by CWC.
ARTICLE 5 - SUBSIDIARIES AND AFFILIATES OF CWC
5.1 CWC agrees that upon receipt of the loan of $160,000 (Cdn) from CWC
International, it will cause all shares in the following companies owned by it
to be transferred to CWC International:
(a) CWC (East Asia) Inc., a wholly-owned subsidiary of CWC and being a
company duly incorporated in the Turks and Caicos Islands;
(b) CWC El Salvador S.A. de C.V., a wholly-owned subsidiary of CWC and
being a company duly incorporated in El Salvador;
(c) CWC France S.A.R.L., a company owned as to fifty (50%) percent by CWC
and duly incorporated in France.
5.2 CWC shall cause its nominees as directors and officers of the
companies referred to in section 5.1 hereof to resign, if requested by CWC
International, and the nominees of CWC International to be duly appointed.
<PAGE>
-6-
5.3 CWC represents and warrants that all shares held by it in the
companies referred to in section 5.1 are fully paid and non-assessable.
ARTICLE 6 - PURCHASE OF ASSETS/SUBLEASE
6.1 The parties hereto agree that immediately following execution of this
agreement they will cause CWC International to purchase the furniture and other
assets described in Schedule "F" attached hereto from CWC at and for the
purchase price of Eight Thousand Five Hundred ($8,500) Canadian Dollars.
6.2 It is further agreed that the parties hereto shall cause CWC
International to enter into an agreement to sublease the existing premises being
leased by CWC at 1509 Centre Street S.W., Calgary, Alberta, on the same terms
and at the same rental rate per square foot being paid by CWC. The form of such
sublease agreement shall be as mutually agreed, and failing agreement, in such
form as may be determined by arbitration. CWC International shall make two
offices in such premises available for use by CWC at cost.
ARTICLE 7 - EMPLOYEES
7.1 The parties hereto acknowledge and confirm that it is intended that
CWC International will commence employing the existing employees of CWC listed
in Schedule "G" attached hereto effective as of the date hereof and each of the
parties hereto agree to facilitate the transferring of such employees from the
payroll of CWC to the payroll of CWC International effective as of such date.
ARTICLE 8 - WARRANTIES
8.1 CWC warrants and represents to IDM as follows:
(a) CWC is a corporation duly organized and existing under the laws of the
Province of Alberta;
<PAGE>
-7-
(b) CWC has full corporate power and authority to enter into this
agreement and to licence the Technology as contemplated in Article 2
hereof and to perform each and every covenant and agreement herein
contained;
(c) the execution of the within agreement has been duly authorized, and
upon execution by any two officers or directors of CWC will constitute
a valid, binding and legally enforceable agreement of CWC;
(d) the execution and delivery of this agreement and the performance of
the covenants and agreements herein contained are not limited or
restricted by and are not in conflict with any contract, agreement or
other instrument to which CWC is bound;
(e) CWC has not infringed any patents, trademarks, trade name rights,
service marks, copyrights, applications for any of the foregoing, or
similar intellectual property of any person or entity. Attached
hereto as Schedule "H" is a copy of a patent filed by Orville
Burkinshaw relating to portions of the Technology and a copy of the
assignment of such patent in favour of CWC;
(f) the terms of the Existing Contracts are those set forth in copies of
such contracts previously described by CWC to IDM, and CWC is not in
default of any of its obligations as of the date hereof under the
Existing Contracts; and
(g) the Existing Contracts are legal and valid and, to the information and
belief of CWC, are binding and enforceable in accordance with their
terms.
8.2 IDM represents and warrants to CWC as follows:
(a) IDM is a corporation duly organized and existing under the laws of the
State of New Jersey;
(b) IDM has full corporate power and authority to enter into this
agreement and to perform each and every covenant and agreement herein
contained;
<PAGE>
-8-
(c) this agreement has been duly authorized, executed and delivered by IDM
and constitutes a valid, binding and legally enforceable agreement of
IDM;
(d) the execution and delivery of this agreement and the performance of
the covenants and agreements herein contained are not limited or
restricted by and are not in conflict with any contract, agreement or
other instrument to which IDM is bound.
8.3 Each of CWC and IDM shall indemnify and save the other party of, from
and against any losses, damage and costs (including counsel fees and expenses on
a solicitor-and-his-own-client basis) which the other party may suffer or incur
by reason of a breach of the representations and warranties set out in this
Article 8, or a breach of any of its obligations set forth in this agreement.
ARTICLE 9 - TRADEMARK AND LOGOS
9.1 CWC agrees that it will grant CWC Delaware and CWC International the
non-exclusive right to utilize the logo described in Schedule "I" attached
hereto for so long as the licence to be granted to CWC Delaware, as contemplated
in Article 2 hereof, shall remain in full force and effect.
9.2 It is agreed that:
(a) should CWC develop an alternate logo for use in connection with the
Technology, such alternate or modified logo shall be made available to
CWC Delaware and CWC International alone for use in connection with
the Technology to the same extent as specified in section 9.1 hereof;
(b) should CWC Delaware or CWC International develop an alternate logo for
use in connection with the Technology, such alternate or modified logo
shall be made available to CWC alone for use in connection with the
Technology to the same extent as specified in section 9.1 hereof.
<PAGE>
-9-
ARTICLE 10 - ASSIGNMENT
10.1 Neither this agreement nor any part thereof shall be assignable or
transferable by operation of law or otherwise except as otherwise herein
provided or unless the parties hereto consent in writing to such assignment or
transfer.
ARTICLE 11 - ARBITRATION
11.1 All disputes, questions or differences arising in connection with this
agreement which the parties cannot resolve themselves shall be finally settled
by arbitration in accordance with the America Arbitration Association Rules for
Commercial Disputes, and such arbitration shall take place in Alberta. If the
parties agree on one arbitrator, such arbitrator shall act as the sole
arbitrator. If within a period of ten (10) days following the delivery of a
notice to the other party requesting arbitration the parties have not agreed on
an arbitrator, each of the parties shall appoint one arbitrator and such
arbitrators shall appoint the third arbitrator.
ARTICLE 12 - GENERAL PROVISIONS
12.1 No waiver, modification or cancellation of any term or condition or of
any breach of any term or condition of this agreement shall be effective unless
executed in writing. No waiver shall excuse the performance of any act other
than the act specifically referred to in such waiver. No assent to or waiver of
any breach of any one or more of the covenants and agreements herein contained,
whether such assent or waiver is express or implied, shall be deemed to be taken
to be a waiver of any succeeding or other breach.
12.2 Any notice, request, demand, consent or other communication provided
or permitted hereunder shall be in writing and given by personal delivery or
sent by registered mail, postage prepaid, addressed to the party for which it is
intended at its address as set out below or as may be designated by notice
pursuant hereto:
CWC: Continental Waste Conversion Inc.
230, 1509 Centre Street S.W.
Calgary, Alberta
Canada T2G 2E6
<PAGE>
-10-
IDM: IDM Environmental Corp.
P.O. Box 388
386 Whitehead Avenue
South River, New Jersey
U.S.A. 08882
Each party may change its address for purposes of transmittal or receipt of any
such communication by giving ten (10) days' prior written notice of such change
to the other party in the manner prescribed above. Any notice so given shall be
deemed to have been received on the date on which it was delivered or
transmitted by telecommunications service, or if mailed, on the fifth business
day following the mailing thereof.
12.3 This agreement does not constitute and shall not be construed as
constituting a partnership or a joint venture between the parties hereto.
12.4 Neither of the parties hereto makes nor has made any warranties,
inducements, promises or representations to the other respecting the subject
matter of this agreement, except as may be expressly stated in this agreement.
12.5 This agreement, together with the schedules attached hereto, contains
the entire agreement between CWC and IDM with respect to the subject matter
hereof as of its date and supersedes all other prior agreements, negotiations,
representations and proposals, written or oral, relating to its subject matter.
12.6 This agreement may be executed in several counterparts, each of which
when so executed shall be deemed to be an original, and such counterparts
together shall constitute but one and the same instrument and, notwithstanding
their date of execution, shall be deemed to bear the date first above written.
<PAGE>
-11-
12.7 This agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey, United States of America.
IN WITNESS WHEREOF the parties hereto have executed this agreement as
of the day and year first above written.
CONTINENTAL WASTE CONVERSION INC.
per: /s/ STANLEY J. POWELL
------------------------------------
Stanley J. Powell
Chairman of the Board
per: /s/ DENNIS HAZELTON
------------------------------------
Dennis Hazelton, Secretary
Subscribed and Sworn to
by Stan Powell and
Dennis Hazelton before
me,
/s/ WALTER W. STANFORD
- --------------------------
Walter W. Stanford
A Notary Public
IDM ENVIRONMENTAL CORP.
by: /s/ JOEL FREEDMAN
------------------------------------
Joel Freedman, President &
Chief Executive Officer
by: /s/ FRANK FALCO
------------------------------------
Frank Falco, Chairman &
Chief Operating Officer
<PAGE>
LICENCE AGREEMENT
THIS AGREEMENT made as of the 18th day of July, 1996,
BETWEEN:
CONTINENTAL WASTE CONVERSION INC., a body
corporate duly incorporated under the laws of the Province
of Alberta,
(hereinafter referred to as "CWC"),
OF THE FIRST PART;
- and -
CONTINENTAL WASTE CONVERSION
INTERNATIONAL INC., a body corporate duly
incorporated under the laws of Delaware,
(hereinafter referred to as "Delaware"),
OF THE SECOND PART.
WHEREAS CWC has developed and owns certain valuable know-how and
confidential information and has acquired certain property rights in respect of
the Technology (as herein defined) and has the right to grant licences in
respect of such property rights and to transfer to others certain valuable
technology, know-how and confidential information relating to the Technology;
AND WHEREAS Delaware acknowledges CWC's ownership of such know-how,
confidential information and property rights;
AND WHEREAS Delaware wishes to acquire from CWC certain licence rights
to commercialize the Technology worldwide excepting only Canada;
AND WHEREAS CWC has agreed to grant Delaware such licence upon the
terms and subject to the conditions set forth herein:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
<PAGE>
-2-
ARTICLE 1 - INTERPRETATION
1.1 DEFINITIONS
In this agreement, the following terms shall have the following
meanings:
(a) "Affiliate" shall mean any corporation or entity which controls a
party to this agreement or is controlled either directly or indirectly
by a party to this agreement;
(b) "Confidential Information" shall mean any and all information and
know-how relating to the Technology that is proprietary to the party
disclosing it, excepting such information:
(i) that is within the public domain at the date of disclosure or
which thereafter enters the public domain through no fault of the
party receiving such information;
(ii) information that is already known to the recipient thereof at the
time of its disclosure to such recipient;
(iii) following its disclosure to the recipient thereof is
received by such recipient without obligation of confidence
from a third party who was lawfully in possession of such
information and free of any obligation of confidentiality;
(iv) received by a recipient under conditions which suggest approval
from the disclosing party for the disclosure of such information;
(v) information which is required in the reasonable opinion of legal
counsel to be disclosed by applicable law or government
regulation, provided that the party which is required to disclose
any such information shall advise the other party in writing
prior to making such disclosure and shall use all reasonable
efforts to prevent such disclosure;
<PAGE>
-3-
(c) "Costs of Manufacturing" shall mean the actual costs reasonably
incurred by CWC in designing and manufacturing Gas Generators at
Calgary, Alberta, Canada, or such other location as shall be agreed
upon between CWC and Delaware for and on behalf of Delaware or its
Affiliates as provided herein;
(d) "CWC Improvements" shall mean any improvement, modification or change
to the Technology developed or created by or for CWC after the date
hereof which continues to utilize any of the basic principles
represented by, contained in or disclosed by the Technology;
(e) "Delaware Improvements" shall mean any improvement, modification or
change to the Technology discovered, developed or created by or for
Delaware or by any Affiliate of Delaware;
(f) "Existing Technology" shall mean the Technology as it exists as of the
date hereof;
(g) "Gas Generators" shall mean a system to dispose of domestic,
industrial or agricultural waste utilizing the Technology, including
burners and afterburners;
(h) "Gross Manufacturing Costs" shall mean the costs invoiced to Delaware
or its subsidiaries or Affiliates for the construction of Gas
Generators plus fifteen (15%) percent of such costs;
(i) "IDM Agreement" shall mean the agreement dated the 18th day of July,
1996, entered into between CWC and IDM Environmental Corp.;
(j) "Technology" shall mean the technology acquired or developed as of the
date hereof by CWC relating to the construction and operation of
continuous-feed, oxygen-starved gas burners and afterburners capable
of disposing of domestic, industrial or agricultural waste, and
including the Confidential Information, property rights and know-how
relating thereto now known by CWC or hereafter developed, enhanced or
improved by the CWC Improvements.
<PAGE>
-4-
1.2 CURRENCY
All sums due under this agreement shall be paid in Canadian dollars.
1.3 GOVERNING LAW
This agreement shall be governed by and construed in accordance with
the laws of the Province of Alberta, and the parties hereto agree that all
actions and proceedings relating in any way, directly or indirectly, to this
agreement shall be exclusively in courts located in the Province of Alberta and
consent to the service of process in any such action or proceeding by personal
delivery or any other method permitted by law.
1.4 SEVERABILITY
If any covenant, obligation, term or condition of this agreement
shall, to any extent, be invalid, illegal or unenforceable, the remainder of
this agreement shall not be affected thereby and each covenant, obligation, term
and condition of this agreement shall be separately valid and enforceable to the
fullest extent permitted by law.
ARTICLE 2 - LICENCE
2.1 GRANT OF LICENCE
Subject to the rights already conferred to others as set out in
Schedule "A" attached hereto (hereinafter referred to as the "Existing Rights to
Technology"), CWC hereby grants to Delaware, as at and from the date hereof, the
sole and exclusive right and licence to use and otherwise fully exploit the
Technology throughout the world, excepting only Canada.
2.2 RESTRICTIONS ON ASSIGNING LICENCE
Delaware shall be entitled to enter into agency agreements to
authorize others to assist Delaware in marketing the Technology in areas other
than Canada. It is agreed, however, that Delaware shall not, without the
consent of CWC first had and obtained, which consent shall not be
<PAGE>
-5-
unreasonably withheld or delayed, sell, transfer or assign the licence hereby
granted to any persons other than a wholly-owned subsidiary. Any person to
whom Delaware assigns this licence shall, as part of the assignment
agreement, agree to be bound by the provisions of this licence agreement.
2.3 EXISTING RIGHTS TO TECHNOLOGY
Delaware acknowledges that CWC is reserving the right to market and
otherwise use and fully exploit the Technology in Canada, and Delaware further
acknowledges that it has received copies of the contracts establishing the
Existing Rights to Technology and that the granting of the licence to use the
Technology as herein provided is subject to the Existing Rights to Technology.
2.4 KNOWLEDGE OF POTENTIAL CUSTOMERS
In the event that CWC receives an inquiry, written or oral, from or
identifies any potential customer for the use of the Technology outside of
Canada, it shall promptly refer same to Delaware. In the event that Delaware
receives an inquiry, written or oral, from or identifies any potential customer
for use of the Technology in Canada, Delaware shall promptly refer same to CWC.
ARTICLE 3 - PAYMENT
3.1 ROYALTY
Delaware shall pay to CWC a royalty equal to five (5%) percent of the
Gross Manufacturing Costs. Such royalty shall be paid as construction of Gas
Generators progresses in such increments as may be agreed to between the parties
hereto.
3.2 RIGHT TO MANUFACTURE GAS GENERATORS
Delaware and any Affiliate or subsidiary of Delaware undertake and
agree to retain CWC to supply all of the Gas Generators directly or indirectly
sold or otherwise disposed of by them or others on their behalf or benefit, and
CWC undertakes and agrees to manufacture and deliver such Gas Generators to
Delaware on commercially reasonable terms. It is further agreed that:
<PAGE>
-6-
(a) Delaware shall prepare and deliver to CWC detailed engineering
drawings for each Gas Generator required, it being understood and
agreed that CWC shall be consulted before any material changes to the
Technology are incorporated into the detailed engineering drawings;
(b) CWC shall, as soon as possible and in any event within ninety (90)
days following receipt of completed engineering drawings for a Gas
Generator from Delaware, obtain three proposals or bids from all
significant subcontractors (the "Subcontractors");
(c) should Delaware request CWC, at the time of delivering the engineering
drawings to CWC, that it wishes CWC to obtain a proposal or bid from a
specific subcontractor or subcontractors in connection with any Gas
Generator, CWC shall obtain a proposal or bid from such subcontractor
or subcontractors;
(d) as soon as reasonably practicable following receipt of completed
engineering drawings as aforesaid, CWC shall supply copies of the
proposals or bids obtained by it as above provided and advise Delaware
of the Costs of Manufacturing the Gas Generators required by Delaware
and the proposed delivery schedule and other reasonable commercial
terms relating to the construction of the Gas Generators at a price
equal to the Costs of Manufacturing plus fifteen (15%) percent;
(e) Delaware shall have the right, within thirty (30) days following
receipt of the Costs of Manufacturing from CWC, to request that CWC
use one of the subcontractors from which bids or proposals were
obtained as aforesaid or to obtain an additional bid or bids, and the
Costs of Manufacturing shall be adjusted accordingly. When Delaware
is satisfied with the Costs of Manufacturing, it shall deliver written
confirmation to CWC to proceed with the construction of the Gas
Generators and thereafter a binding contract shall be entered into for
the construction of the Gas Generators at the Costs of Manufacturing
plus 15%;
(f) should there be any dispute between Delaware and CWC as to the terms
of the construction of Gas Generators, Delaware shall, acting
reasonably, be entitled to place the order to manufacture and deliver
the Gas Generator with another
<PAGE>
-7-
manufacturer having given CWC prior opportunity to satisfy Delaware's
demand for performance.
ARTICLE 4 - BEST EFFORTS
4.1 BEST EFFORTS
Delaware shall use its best efforts to market, sell, promote and
create a demand for Gas Generators on a commercial scale. Without restricting
the generality of the foregoing, it is understood and agreed that Delaware shall
develop and implement a sales and marketing program either directly or through a
subsidiary created for such purpose and shall use its best efforts to complete
the projects described in the "Existing Contracts" as defined in the IDM
Agreement.
ARTICLE 5 - WARRANTIES AND REPRESENTATIONS
5.1 WARRANTIES BY CWC
CWC represents and warrants to Delaware as follows:
(a) CWC is a corporation duly organized and existing under the laws of the
Province of Alberta;
(b) CWC has full power and authority to enter into this agreement and to
license the Technology and to grant to Delaware the licence provided
in section 2.1 hereof;
(c) this agreement has been duly authorized, executed and delivered by CWC
and constitutes a valid, binding and legally enforceable agreement of
CWC;
(d) the execution and delivery of this agreement and the performance of
the covenants and agreements herein contained are not limited or
restricted by and are not in conflict with any contract, agreement or
other instrument to which CWC is bound;
<PAGE>
-8-
(e) CWC has no knowledge of any valid patent or other property right
belonging to a third party which would be infringed by the exercise by
Delaware of the licence or the use of the Technology by Delaware;
(f) CWC has not infringed any patents, trademarks, trade name rights,
service marks, copyrights, applications for any of the foregoing, or
similar intellectual property of any person or entity. Attached
hereto as Schedule "B" is a copy of a patent filed by Orville
Burkinshaw relating to portions of the Technology and a copy of the
assignment of such patent in favour of CWC;
(g) CWC has received the letters attached hereto as Schedules "C" and "D"
from Canadian Commercial Corporation ("CCC") and believes that CCC has
endorsed the Technology and is prepared to support the Gas Generators
process on a project-by-project basis.
5.2 WARRANTIES BY DELAWARE
Delaware represents and warrants as follows:
(a) Delaware is a corporation duly organized and existing under the laws
of Delaware;
(b) Delaware has full power and authority to enter into this agreement and
to perform each and every covenant herein contained;
(c) this agreement has been duly authorized, executed and delivered by
Delaware and constitutes a valid, binding and legally enforceable
agreement of Delaware.
5.3 INDEMNITY
Each of the parties hereto shall indemnify and save the other party
hereto of, from and against any losses, damages and costs (including counsel
fees and expenses) which the other may suffer or incur by reasons of the breach
of the representations and warranties set out in this Article 5.
<PAGE>
-9-
ARTICLE 6 - ONGOING OBLIGATIONS OF CWC
6.1 FURTHER RESEARCH AND DEVELOPMENT BY CWC
Following execution of this agreement, CWC may continue to work on the
development of the Technology and will otherwise use its commercially reasonable
best efforts to assist Delaware in completing the commercial development of Gas
Generators.
ARTICLE 7 - DISCLOSURE, PROTECTION AND CONFIDENTIALITY
7.1 DISCLOSURE
CWC agrees that it will give employees of Delaware access during
normal business hours to all the technical details relating to the Technology.
7.2 DISCLOSURE OF CWC IMPROVEMENTS
CWC agrees that it will at all times and from time to time make
complete and full disclosure to Delaware of all CWC Improvements and shall
deliver or make available all documents, papers, designs, specifications,
software and other material containing information relating thereto. Delaware
shall be entitled to use and exploit the CWC Improvements under the terms and
conditions of this agreement without payment of further compensation to CWC
(except as shall be mutually agreed upon in writing between CWC and Delaware)
and the definition of Technology shall include all CWC Improvements. The CWC
Improvements will be owned by CWC.
7.3 DISCLOSURE OF DELAWARE IMPROVEMENTS
Delaware agrees that it will at all times and from time to time make
complete and full disclosure to CWC of all Delaware Improvements and shall
deliver or make available all documents, papers, designs, specifications,
software and other material containing information relating thereto. CWC shall
be entitled to use and exploit the Delaware Improvements in Canada under the
terms and conditions of this agreement without payment of further compensation
to Delaware (except as shall be mutually agreed upon in writing between Delaware
and CWC) and the definition of Technology
<PAGE>
-10-
shall include all Delaware Improvements. The Delaware Improvements shall be
owned exclusively by Delaware.
7.4 CONFIDENTIALITY
(a) Delaware undertakes and agrees that it will not disclose Confidential
Information to any other person or firm except to its employees,
agents or representatives, or employees of Affiliates of Delaware or
their agents or representatives and, to the extent necessary, to
customers or potential customers for the purchase of Gas Generators.
(b) CWC undertakes and agrees that it will not disclose Confidential
Information to any other person or firm except to its employees,
agents or representatives, or employees of Affiliates of CWC or their
agents or representatives and, to the extent necessary, to customers
or potential customers for the purchase of Gas Generators.
ARTICLE 8 - NON-COMPETITION
8.1 DELAWARE
For a period of three (3) years following termination of the within
agreement, Delaware undertakes and agrees that it will not, directly or
indirectly, through Affiliates or otherwise, market Gas Generators to third
parties or operate facilities using Gas Generators. This restriction shall
apply notwithstanding the termination of this agreement unless such termination
arises from a breach of this agreement by CWC, in which event this restriction
shall not apply. Delaware undertakes and agrees that it will not in Canada, so
long as the within agreement is in full force and effect, directly or
indirectly, through Affiliates or otherwise, operate or participate in the
operation of a business involving the use or operation of Gas Generators or
generators using a similar technology.
8.2 CWC
CWC undertakes and agrees that, except in Canada, it will not, so long
as the within agreement is in full force and effect, directly or indirectly,
through Affiliates or otherwise, operate
<PAGE>
-11-
or participate in the operation of a business involving the use or operation
of Gas Generators or generators using a similar technology.
ARTICLE 9 - RIGHT OF FIRST REFUSAL
9.1 CWC agrees to grant Delaware a right or first refusal to construct any
commercial waste conversion facility (excluding Gas Generators) that is to be
constructed in Canada on behalf of CWC or a subsidiary of CWC. CWC shall
supply Delaware with detailed plans and specifications for the required facility
and Delaware shall, as soon as reasonably practicable thereafter, submit a
proposal to CWC for the construction of the facility including a breakdown of
the costs to be incurred in constructing the facility. Such proposal shall
contain commercially reasonable terms consistent with usual construction
practices and clearly state the amount of the consideration payable to Delaware
to complete the required work. Provided that such proposal does not contain
terms or prices materially less favourable than those available from third-party
contractors, CWC shall retain Delaware to construct such facility.
9.2 Should CWC decide to dispose of its right to market or use the
Technology in Canada, it shall give Delaware the first right, for a period of
fourteen (14) days, to match any offer received by CWC for such right to market
or use the Technology.
ARTICLE 10 - DEFAULT AND TERMINATION
10.1 EVENTS OF DEFAULT
The following shall constitute events of default:
(a) if Delaware for any reason ceases for a period in excess of six (6)
months to make reasonable efforts to market the Technology;
(b) if Delaware is in material breach of the IDM Agreement or if Delaware
makes a default in payment of any amount required to be paid to CWC
under this agreement or if Delaware's subsidiary fails to make the
loans to CWC referred to in Article 3 of the IDM Agreement;
<PAGE>
-12-
(c) if Delaware assigns or attempts to assign this agreement or any rights
hereunder other than as provided hereunder or conditional upon the
consent of CWC;
(d) if CWC assigns or attempts to assign this agreement or any rights
hereunder other than as provided hereunder or conditional upon the
consent of Delaware;
(e) if Delaware fails to perform any one or more of any of its material
obligations under the terms of this agreement;
(f) if CWC fails to perform any one or more of any of its material
obligations under the terms of this agreement;
(g) if:
(i) Delaware or any person to whom it has assigned its rights
hereunder becomes insolvent, or makes an assignment for the
general benefit of creditors, or if Delaware or any person to
whom it has assigned its rights hereunder ceases to carry on
business; or
(ii) any proceedings shall be commenced by or against Delaware under
any bankruptcy or insolvency laws or proceedings for the
appointment of a custodian, receiver or receiver-manager, and
Delaware does not forthwith dispute any such appointment or
proceedings and fails to have such appointment vacated or such
proceedings dismissed within seventy-five (75) days after such
appointment or commencement of such proceedings;
(h) if in each twelve-month period following the earlier of:
(i) the date a third party or Delaware or a subsidiary or Affiliate
of Delaware has operated a commercially viable waste disposal
facility for a period of one year using Gas Generators supplied
by CWC or Delaware, and
(ii) the date CWC has operated a commercially viable waste disposal
facility for a period of one year using Gas Generators,
<PAGE>
-13-
Delaware, or the person to whom it has assigned its rights hereunder
as herein provided, fails to either:
(iii) commence the construction of not less than three (3) Gas
Generators, or
(iv) pays CWC the sum of One Hundred Fifty Thousand ($150,000) Dollars
during such twelve-month period as additional consideration for
keeping the within licence in good standing.
10.2 NOTICE OF DEFAULT
Before any default is effective herein, the defaulting party shall be
provided with a written notice by the other party specifying the claimed
default. Such notice shall provide a period of thirty (30) days from the date
of the notice within which the defaulting party may cure such default.
10.3 FAILURE TO CURE
In the event that the defaulting party fails to cure any default to
the other party's reasonable satisfaction within the thirty-day period referred
to in section 10.2 hereof, the default will, unless the other party specifies
otherwise, become effective on the last day of the said period and thereafter
this agreement will terminate.
ARTICLE 11 - RESULTS OF TERMINATION
11.1 RESULTS OF TERMINATION
On termination of this agreement, then:
(a) the licence shall be cancelled;
(b) Delaware shall cease use of the Technology;
<PAGE>
-14-
(c) Delaware shall return to CWC all written documents and other materials
furnished by CWC to Delaware and all copies thereof;
(d) all amounts accrued or payable by Delaware to CWC to the date of
termination shall become due and payable and shall be paid within
thirty (30) days of the effective date of termination;
(e) all other rights and obligations between the parties pursuant to this
agreement shall terminate, except for the rights and obligations
which, according to the provisions of this agreement, survive the
termination of same.
ARTICLE 12 - ASSIGNMENT
12.1 ASSIGNMENT
Except as herein provided, neither this agreement nor any part thereof
shall be assignable or transferable by Delaware without the prior written
consent of CWC, which consent shall not be unreasonably withheld or delayed.
CWC may assign this agreement or any of its rights hereunder on thirty (30)
days' prior written notice to Delaware, and Delaware may assign this agreement
or any rights hereunder to a wholly-owned subsidiary of Delaware.
ARTICLE 13 - ARBITRATION
13.1 ARBITRATION
All disputes, questions or differences arising in connection with this
agreement which the parties cannot resolve themselves shall be finally settled
by arbitration in accordance with the ARBITRATION ACT of the Province of
Alberta, and such arbitration shall take place in Alberta. If the parties agree
on one arbitrator, such arbitrator shall act as the sole arbitrator. If within
a period of ten (10) days following the delivery of a notice to the other party
requesting arbitration the parties have not agreed on an arbitrator, each of the
parties shall appoint one arbitrator and such arbitrators shall appoint the
third arbitrator.
<PAGE>
-15-
ARTICLE 14 - GENERAL PROVISIONS
14.1 WAIVER
No waiver, modification or cancellation of any term or condition or of
any breach of any term or condition of this agreement shall be effective unless
executed in writing. No waiver shall excuse the performance of any act other
than the act specifically referred to in such waiver.
14.2 NOTICES
Any notice, request, demand, consent or other communication provided
or permitted hereunder shall be in writing and given by personal delivery or
sent by registered mail, postage prepaid, addressed to the party for which it is
intended at its address as set out below or as may be designated by notice
pursuant hereto:
CWC: Continental Waste Conversion Inc.
230, 1509 Centre Street S.W.
Calgary, Alberta
Canada T2G 2E6
Delaware: Continental Waste Conversion International Inc.
P.O. Box 388
386 Whitehead Avenue
South River, New Jersey
U.S.A. 08882
Each party may change its address for purposes of transmittal or receipt of any
such communication by giving ten (10) days' prior written notice of such change
to the other party in the manner prescribed above. Any notice so given shall be
deemed to have been received on the date on which it was delivered or
transmitted by telecommunications service, or if mailed, on the fifth business
day following the mailing thereof.
14.3 INDEPENDENT CONTRACTORS
This agreement does not constitute and shall not be construed as
constituting a partnership or a joint venture between the parties hereto.
<PAGE>
-16-
14.4 COUNTERPARTS
This agreement may be executed in several counterparts, each of which
when so executed shall be deemed to be an original, and such counterparts
together shall constitute but one and the same instrument and, notwithstanding
their date of execution, shall be deemed to bear the date first above written.
14.5 ENTIRE AGREEMENT
This agreement and an agreement of the same date entered into between
CWC and Delaware and the Schedules attached hereto and thereto contain the
entire agreement between Delaware and CWC with respect to the subject matter
hereof as of its date and supersedes all other prior agreements, negotiations,
representations and proposals, written or oral, relating to its subject matter.
IN WITNESS WHEREOF the parties hereto have executed this agreement as
of the day and year first above written.
CONTINENTAL WASTE CONVERSION INC.
per: /s/ STANLEY J. POWELL
-----------------------------------
Chairman of the Board
per: /s/ DENNIS L. HAZELTON
-----------------------------------
CONTINENTAL WASTE CONVERSION
INTERNATIONAL INC.
by: /s/ B. MUNCK
------------------------------------
by:
------------------------------------
<PAGE>
PROMISSORY NOTE
$160,000.00(Canadian)
July 22, l996
FOR VALUE RECEIVED, and intended to be legally bound hereby, CONTINENTAL
WASTE CONVERSION INTERNATIONAL INC., a Delaware corporation ("Maker"), at its
offices at 396 Whitehead Avenue, South River, New Jersey promises to pay to the
order of IDM ENVIRONMENTAL CORP., a New Jersey corporation ("Payee"), at its
offices at 396 Whitehead Avenue, South River, New Jersey or at such place as
Payee may direct, the principal sum of One Hundred Sixty Thousand Canadian
Dollars ($160,000.00), in a twenty-four (24) month period together with
interest accruing on the amount outstanding from the date of this Note at the
rate of seven and one half percent (7.50%). The Maker shall pay Nine Thousand
Seven Hundred Forty Five Canadian Dollars and Fifty Eight Cents ($9,745.48
Canadian) to Payee in consecutive monthly installments commencing on the 5th
business day of February, 1997. This note will mature on the 1st day of July,
1998.
ACCELERATION UPON DEFAULT. The unpaid principal sum of this Note and all
other sums owing hereunder may be declared immediately due and payable by Payee
at its option: (i) upon the nonpayment when due of any installment payment under
this Note; (ii) if Maker makes an assignment for the benefit of creditors or if
there is the commencement of a cause by or against Maker under any bankruptcy,
rehabilitation, reorganization, debt adjustment, liquidation or receivership
law, state or federal; or (iii) the entry of any judgment against Maker or the
issuing of any attachment or garnishment against property of Maker.
COSTS OF COLLECTION; LATE CHARGE. If any installment or other payment
is not paid when due, the amount thereof shall bear an additional late charge
at a rate of five (5%) percent per year until paid, but in no event shall
such late charge exceed the maximum permitted under applicable law. Maker
agrees to pay all costs of collection, including reasonable attorney's fees
and disbursements, if any payment hereunder is not made when due.
NO RIGHT OF SET-OFF; CONFESSIONS OF JUDGMENT. This Note shall not be
subject to any right of set-off, counterclaim, defense, abatement, suspension,
deferment or reduction, and the Maker shall not have the right to be released,
relieved or discharged from the obligation and liability under this Note for any
reason whatsoever except by full timely payment. Maker hereby irrevocably
authorizes and empowers any attorney or the prothonotary or clerk of any court
of the United States of America, or elsewhere, to appear for Maker at any time
after default hereunder in any action brought against Maker on this Note at the
suit of Payee, with or without declaration filed, as of any term after default
hereunder, and therein to confess or enter judgment against Maker for the amount
due and payable under this Note, together with costs of suit including
attorney's fees for collection; and for so doing, this Note or a copy hereof
verified by affidavit shall be a sufficient warrant. The authority to confess
judgment shall not be exhausted by any exercise thereof but shall continue until
payment in full of all amounts due hereunder.
1
<PAGE>
This confession of judgment clause shall be unenforceable, invalid, void and
of no force or effect if the law of the state in which this Note is enforced
declares confession of judgment clauses or cognovit notes void, invalid,
unenforceable, against public policy or illegal.
WAIVER OF NOTICE. Maker hereby waives any requirement of presentment,
notice of protest and all other notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note.
NO WAIVER OF RIGHT OR REMEDY. No delay, failure or omission by the Payee
or any subsequent holder in respect of the exercise of any right or remedy
granted to the Payee or other holder or allowed to the Payee or other holder by
law, herein, under said Note or otherwise, shall constitute a waiver of the
right to exercise the right or remedy at that or any future time or in the same
or other circumstance.
NOTICE. Notices and demands hereunder on the Maker may be given in
writing at the address below:
Continental Waste Conversion International, Inc
396 Whitehead Avenue
South River, New Jersey 08882
Attention: President
PREPAYMENT. The principal sum of this Note may be prepaid in whole or in
part at the option of the Maker, without premium or penalty, at any time or
times prior to the date it is due. Any such prepayment shall be applied to the
installments of such principal sum in the inverse order of the date thereof and
shall be accompanied by the payment of interest accrued on the principal amount
of such prepayment to the date thereof.
SUBSEQUENT CERTIFICATIONS. Each of the Maker and Payee, within fifteen
(l5) days after request by the other, shall certify to such person as the
requesting party may designate, the amount of principal, interest or other sums
payable hereunder, the date to which the same shall have been paid, whether this
Note has been modified or amended, whether any default exists under this Note,
and in the case of Maker, whether any set-offs or defenses exist against this
Note or the obligations of the Maker hereunder.
APPLICABLE LAW. All rights and obligations hereunder shall be governed
by the laws of the State of New Jersey. This Note shall be binding upon Maker
and inure to the benefit of Payee and its respective assigns and successors.
2
<PAGE>
Maker acknowledges that this Note has been delivered to Payee pursuant to a
commercial transaction and that nothing herein contained shall be construed as
constituting the Payee a partner of or joint venturer with the Maker.
The facsimile signature of this Note shall be deemed enforceable against
Maker.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed and
delivered by a duly authorized officer of Maker as of the day and year first
above written.
CONTINENTAL WASTE CONVERSION
INTERNATIONAL INC
By: /s/ STANLEY J. POWELL
-------------------------------------
Stanley J. Powell
-------------------------------------
(Print Name)
Title: Chairman of the Board
-------------------------------
/s/ DENNIS L. HAZELTON
-------------------------------
Sworn & Subscribed to before me
this 19th day of July, 1996 Dennis L. Hazelton
-------------------------------
W.W Sanford Secretary
- -------------------------------- -------------------------------
Notary Public
3
<PAGE>
PLEDGE AND SECURITY AGREEMENT
WHEREAS:
A. Continental Waste Conversion International Inc., a Delaware corporation
with its principal place of business located at 300/360, 1590 Centre Street
S.W., Calgary, Alberta, Canada T2G 2E6 ("Secured Party"), has agreed to make a
loan (together with outstanding interest, the "Loan") to Continental Waste
Conversion, an Alberta corporation with its principal place of business located
at 300/360, 1590 Centre Street S.W., Calgary, Alberta, Canada T2G 2E6 ("CWC") in
the principal amount of One Hundred Sixty Thousand Dollars ($160,000.00) in
Canadian funds, which Loan is evidenced by a promissory note made by CWC in
favor of Secured Party dated the date hereof (the "Promissory Note").
B. In consideration of, and as security for the Loan, CWC has agreed to pledge
to Secured Party one hundred (100) common shares (the "Pledged Shares") that CWC
owns in the capital stock of Secured Party which represents all of the equity
ownership by CWC in Secured Party.
NOW, THEREFORE, in consideration of the aforesaid agreements and the
mutual covenants and conditions herein contained, the parties hereto covenant
and agree with each other as follows:
1. PLEDGE
Subject to the terms of this Agreement, CWC hereby pledges, assigns,
transfers and delivers to the Secured Party the Pledged Shares. CWC and Secured
Party hereby agree that the Pledged Shares, and all the proceeds therefrom, are
delivered as collateral security for the fulfillment of all obligations, present
or future, direct or indirect, absolute or contingent, matured or not, of CWC to
Secured Party under the Promissory Note.
2. DEFAULT
If CWC fails to pay the Loan or the interest thereon, or any part thereof,
when due in
<PAGE>
accordance with the terms of the Promissory Note, or if CWC fails to fulfill
any other obligation to Secured Party under the Promissory Note, then Secured
Party may, without restricting the remedies available to it, upon providing
written notice to CWC of such failure and provided the failure has continued
for a period of seven (7) days from the date of receipt by CWC of such
notice, sell any of the Pledged Shares by public or private sale and realize
upon the security of the Pledged Shares, and all proceeds therefrom, up to
the amount of the outstanding portion of the Loan, as fully and effectually
as if Secured Party were the absolute owner thereof.
3. RELEASE AND/OR RETURN OF PLEDGED SHARES
Upon full and final payment of all debts due and owing under the Promissory
Note, Secured Party shall return the Pledged Shares to CWC.
GENERAL
4. During the period in which any of the Pledged Shares are retained pursuant
hereto, any dividend, including a dividend paid in shares, shall be received by
the Secured Party in respect of the Pledged Shares, such dividend shall be held
as additional collateral.
5. All voting rights attached to the Pledged Shares may at all times be
exercised by CWC until the occurance of a default by CWC under the Promissory
Note, written notice of which has been given to CWC by the Secured Party, at
which time such voting rights may be exercised by the Secured Party.
6. The parties hereby acknowledge the terms and conditions of this Agreement
and agrees to take all reasonable steps to facilitate its performance.
7. The release of all or part of the Pledged Shares in accordance with the
terms of this Agreement shall terminate this Agreement only in respect to these
Pledged Shares so released.
8. COUNTERPARTS
This Agreement may be executed in counterparts, each of which will be
deemed to be an
<PAGE>
original and all of which will together constitute one and the same instrument.
9. MISCELLANEOUS
(a) Except as herein otherwise provided, no subsequent alteration, amendment,
change or addition to this Agreement will be binding upon the parties hereto
unless reduced to writing and signed by the parties.
(b) This Agreement will enure to the benefit or and be binding upon the parties
and their respective successors and assigns.
(c) The parties will execute and deliver all such further documents, do or
cause to be done all such further acts and things, and give all such further
assurances as may be necessary to give full effect to the provisions and intent
of this Agreement.
(d) This Agreement will be governed by and construed in accordance with the law
of the State of Delaware, U.S.A.
(e) Any notice required or permitted to be given under this Agreement will be
in writing and may be given by delivering, sending by telegram, sending by
telecopier, or sending by prepaid registered mail posted in Canada or the United
States, the notice to the addresses set forth on the first page of this
agreement (or to such other address or telecopier number as any party may
specify by notice in writing to another party. Any notice delivered or sent by
telegram or sent by telecopier on a business day prior to 12:00 p.m. will be
deemed conclusively to have been effectively given on the day the notice was
delivered, or the telegram was filed with the telegraph company, or the telecopy
transmission was sent successfully, as the case may be. Any notice sent by
prepaid registered mail will be deemed conclusively to have been effectively
given on the fifth business day after posting; but it at the time of posting of
between the time of posting and the third business day thereafter there is a
strike, lockout or other labor disturbance affecting postal service, then the
notice will not be effectively given until actually delivered.
(f) Delivery of an executed copy of this Agreement by telecopy, telex, or other
means of electronic communication producing a printed copy will be deemed to be
execution and delivery of this Agreement on the date of such communication by
the party so delivering such copy.
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be executed under
seal and delivered this 19th day of July, 1996.
CONTINENTAL WASTE CONVERSION, INC.
By: /s/ Stanley J. Powell /s/ Dennis L. Hazelton
--------------------------- ---------------------------
Authorized Signatory
Stanley J. Powell Dennis L. Hazelton
--------------------------- ---------------------------
Print Name
Title: Chairman of the Board Secretary
------------------------ ---------------------------
Sworn & Subscribed to before me this
19th day of July, 1996
W.W. Sanford
- ------------------------------------
A Notary Public
CONTINENTAL WASTE CONVERSION INTERNATIONAL INC.
By: B. Munck
--------------------------
Authorized Signatory
B. Munck
-------------------------
Print Name
Title: President
------------------------
Sworn & Subscribed to before me this
31 day of July, 1996
______________________________
A Notary Public in and for
the Providence of Alberta
<TABLE> <S> <C>
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2921
<SECURITIES> 0
<RECEIVABLES> 7978
<ALLOWANCES> 200
<INVENTORY> 1483
<CURRENT-ASSETS> 21286
<PP&E> 2944
<DEPRECIATION> 0
<TOTAL-ASSETS> 25875
<CURRENT-LIABILITIES> 4210
<BONDS> 802
0
0
<COMMON> 9
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<TOTAL-LIABILITY-AND-EQUITY> 25875
<SALES> 15113
<TOTAL-REVENUES> 15129
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<TOTAL-COSTS> 3972
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