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Form 10-KSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
[X] 15,ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED]
For the fiscal year ended April 30, 1997
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[ ] 15, TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from___________ to ____________
Commission file number 93-67656-S
LEADING-EDGE EARTH PRODUCTS, INC.
(Name of small business issuer in its charter)
Oregon 93-1002429
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(State of incorporation or organization) (I.R.S. Employer ID No.)
319 Nickerson St. #186, Seattle, WA 98109
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number 800-788-3599
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Securities registered under Section 12 (b) of the Exchange Act:
<TABLE>
<CAPTION>
Title of each Class Name of each exchange on which registered
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none none
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Securities registered under Section 12 (g) of the Exchange Act:
none
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 9d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $254,359
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State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock as of October 27, 1997: $12,657,192
State number of shares outstanding of the Registrants common stock as of October
27, 1997 28,326,400
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LEADING-EDGE EARTH PRODUCTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
PART 1
ITEM 1. DESCRIPTION OF BUSINESS.
INTRODUCTION. Leading-Edge Earth Products, Inc., an Oregon Company (the Company;
also referred to as LEEP), is the result of a merger on December 29, 1992, of
Leading-Edge Earth Products, a Washington corporation, and Crystal Asset
Management, an Oregon corporation. The merger was accounted for as a pooling of
interest. The objective of the Company is to develop lightweight,
highly-insulated, composite building panels to form entire wall, roof, floor and
partition sections for residential and non-residential building construction
applications. The panels are intended to be used as a substitute for wood and
other traditional forms of construction. The Company believes its products will
have major worldwide appeal for single-family and multi-family residential
construction, including third-world housing, as well as non-residential
construction.
The Company does research and development and is forming affiliate companies for
the purpose of using the technology developed by the Company. Other than
research and development the Company has had only nominal business activity.
During 1996 and 1997 the Company recognized some fee income and expenses related
to the use of its technology. See Management's Discussion and Analysis of
Operations below. The Company conducted research and development activities at a
series of locations beginning in Rainier, Washington (1992-1993); Shelton,
Washington (1993-1994); and Seattle, Washington (1994-1996). Commencing in 1995,
the Company began seeking a strategic alliance through which manufacturing
processes and further materials development could be financed and undertaken.
This search was concluded by an agreement in December 1995 between the Company
and a Pennsylvania-based group, WLP, Associates, Ltd. (WLP), which resulted in
the formation of an independent licensee company in which LEEP maintains a
minority interest, Agile Building Technology, Inc. (Agile), and Agile Investment
Corporation (AIC), both Pennsylvania-based companies. Agile was designed to be
the operating company, and AIC, a holding company, both affiliated with the
Company.
Upon Agile commencing operations, the Company's R&D staff was disbanded in
Seattle and the Company's only remaining employees, going into calendar 1996,
were a corporate communication assistant and its president, Grant C. Record. Mr.
Record moved to the Agile location to represent the Company and consult in
Agile's development activities in support of the Agile License in early January,
1996.
AGILE BUILDING TECHNOLOGY, INC. Between January 1996 and November 1996, Agile,
with the Company's support, developed to prototype levels two product groups for
the building construction industry. The first product group, Group 1, contained
(a) non-load-bearing steel frame panels for mid-rise construction, and (b)
load-bearing steel frame curtain panels for residential and low-end commercial
construction. The second product group, Group 2, contains an Exterior Insulated
Sheathing System product known as "EX-SULATE," and a similar product for
insulating interior walls known as "IN-SULATE." IN-SULATE is an insulated
wallboard for finishing and insulating cement, steel and/or wood building
constructions. Although extensive formal and internal testing was conducted on
the Group 1 load-bearing products with encouraging results, these products were
de-emphasized and effectively abandoned in order to allow focus on the other
group. The Group 2 products do not require extensive testing before sale. A
complete manufacturing capability is in place for the Group 2 products.
During the third quarter of calendar 1996, Agile investors ceased to financially
support the Agile/LEEP
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development activities. After the cancellation of the December 1995 Agreement
with WLP, new investors were identified and cultivated in order for Agile and
LEEP to keep developmental momentum. In December 1996, Agile completed
arrangements for a $800,000 bank line with Northern Central Bank of
Williamsport, Pennsylvania, and arrangements to purchase a complete, in-place,
operating Polyiso Foam Laminating production line from Winter Panel Company,
Brattleboro, Vermont, for $420,000. The Laminating Line installation was fully
funded out of the Northern Central bank line. Sales, marketing, and pilot
manufacturing activities were begun by Agile for the EX-SULATE and IN-SULATE
products in early 1997. On February 28, 1997, a new contract was signed which
replaced the Agile/LEEP December 1995 Agreement and gives Agile and LEEP
authority to independently develop their respective products and markets.
According to the terms of the February 28 Agreement, LEEP retained control of
35% of Agile. About 4,200,000 LEEP shares out of 11,000,000 held by AIC has been
returned to the Company, with the balance continuing to be held by WLP.
Agile's IN-SULATE and EX-SULATE products appear to have no direct competition at
this time.
PROPOSED NEW AFFILIATE. In November 1996, the Company began independent
development of another product known as LEEP STRUCTURAL CORE. Sufficient
development and testing was completed on LEEP STRUCTURAL CORE to attract and
interest the City of Twin Falls, Idaho, and investors, to assist the Company in
organizing and financing a proposed new affiliate company, Newco, to begin
manufacturing operations in Twin Falls. (See Management Discussion and Analysis
below.)
BACKGROUND. Wood, metal, and Portland concrete products are the predominant
materials used in the construction industry. The Company believes that
substitutes for traditional wood materials will be used for the future
generations of building components because of the dwindling supply of timber
occasioned by regulatory and environmental considerations. The Company believes
that the market will demand that future building materials be lightweight,
fire-resistant, water-resistant, sound-abating, rot-resistant and offer seismic-
and wind-resistant properties. The Company believes that many future
requirements cannot be met with current metal, wood and Portland concrete
products. The Company's LEEP STRUCTURAL CORE product addresses all of these
performance goals. Agile's products enhance sound-abating and water-resistance
properties as well as add decoration and finish advantages.
ENVIRONMENTAL CONSIDERATIONS. The Company's objective is to provide
environmentally friendly products that are nontoxic at every level from the
manufacturing process through the end product, and environmentally sound for all
other important considerations. As a practical matter, other than compliance
with OSHA standards for manufacturing, which is common to all U.S. manufacturing
companies, there are no major environmental considerations known by the Company,
relating to the Company's products, which are mandated by law at this time for
residential or low-end non-residential construction. The Company believes its
product performance specifications meet or exceed environmental requirements for
non-residential applications.
ABOUT THE TECHNOLOGY. The Company uses composite technology. Composite
technology is based on the principle that when two or more pieces of relatively
lightweight and/or structurally weak materials (sheets or beams) are laminated
together, the two or more pieces become a unitized composite member whose
structural strength-to-weight ratio is greatly improved, when compared with the
weight and corresponding strength of non-laminated, non-composite materials.
This laminated/composite technology is the basis for the Company's current and
future anticipated patent and other proprietary positions. Better
weight/strength ratio performance of products translates to less material being
required to construct buildings. This composite technology can be applied so as
to make products that weigh 200 pounds vs. 1,900 pounds, in the case of solid
concrete, brick or block comparisons; and 200 pounds vs. 900 pounds, in the case
of solid
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hard-wood product comparisons.
As a result, when fully implemented, it is believed that the Company's
technology will enable avoidance of the loss of substantial amounts of the
planet's forest products, and contribute to major savings in transportation and
attendant fossil fuel use. In addition, there will be savings in both summer and
winter fuel costs because the Company's main product and Agile's products offer
thermal insulation properties that are superior to those of conventional
materials. Insurance rates will likely be favorably affected as well because of
the products' natural calamity-resistant properties.
RESEARCH AND DEVELOPMENT. In the year ending April 30, 1997, the Company
expended $84,519 performing research and development on its technology and
products. Since inception, the Company has spent $935,348 for this purpose.
The Company's main focus between November 1996 and the present has been LEEP
STRUCTURAL CORE panel development, although it has supported various aspects of
Agile's development over the period.
The Company and Agile both elected to temporarily stop development activities on
Magnesium Oxide and other slurry-based surface-covering skins in order to
concentrate on their respective core products. Both companies began to work with
a variety of alternative skin materials which recently came to market.
Additional slurry-based skin materials research and experimentation is planned
by LEEP. Agile does not plan any such materials research.
MANUFACTURING METHODS AND OUTLOOK. To date, prototype panels have been made
using rudimentary manual presses and conventional metal bending equipment. Sheet
metal was bent to the Company's proprietary design configuration. The front and
back metal parts (top and bottom), up to 20' long, were put in a manual
containment press; expanding foam chemical was added to the cavity and held for
an adequate expansion and solidification time. The completed metal panels were
then removed and tested during the initial eight month development and testing
phase. Over this phase of development, the panel configuration was evolved to
meet higher and higher levels of performance criteria up to the point that 4"
thick panels are now meeting Commercial Floor Load and Hurricane V wind-load
codes. To the Company's knowledge, this advanced performance level has never
before been attained by 4" foam/metal panels.
The next phase of manufacturing will be done by affiliates with more advanced
containment presses known as "Shuttle Presses." The fabrication of the first in
a series of five such presses is nearing completion and will be put into
operation during the last quarter of 1997. Within six months after the
initiation of the first Shuttle Press, two-shift operation of five such presses
is anticipated. A five-press operation is capable of manufacturing sufficient
panels to construct approximately two medium-sized commercial buildings per
week. Commercial sheet metal fabricators will supply the custom metal parts to
support Phase 2.
The final manufacturing configuration consists of: metal roll forming machines
(one each) which pre-form the top and bottom parts; two metal coil handlers; an
automatic foam generator; a 100-foot long custom laminator (which takes the
place of the individual containment presses); a flying cut-off saw; and
100-to-300 feet of cool-down/stabilizing chamber. In this configuration,
individual panels are automatically cut to custom lengths per work order
instructions which are computer driven. The custom lengths will be automatically
bonded together as they come out of the stabilization chamber, to custom form
specific, large panel sections to construct walls, roofs and floors. This last
Automated Laminator Production System can be operational during the summer of
1998, given adequate funding of the Company's affiliates. The longer lead time
metal forming machine design and fabrication has been funded, contracted and
started. The aim
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of the current design and fabrication phase is to produce operating equipment by
the spring of 1998.
TESTING AND CODE APPROVALS
The Company's main product, LEEP STRUCTURAL CORE, has been tested extensively
using full ASTM specified test criteria for wind and floor loading capabilities.
The testing has been done internally. No test certifications are required at
this time. Such certified testing results are readily available, including those
from axial load compression tests that can be efficiently scheduled at
commercial labs for reasonable rates.
Agile has only light testing requirements for the Agile Group 2 products to meet
code approvals. Because the Group 2 products are manufactured using skin
materials manufactured by established industry companies that have passed all
required certifications, these products' testing requirements are such that the
Company's internal testing and technical calculations are sufficient to obtain
customer credibility.
The few certified tests required for most EX-SULATE and IN-SULATE applications,
namely, wind-load, acoustic, and thermal insulation, are easily calculated and
actual certified tests can be obtained after customer orders are received, but
before shipment.
MARKETS AND MARKETING. The Company believes that recent changes in the
construction industry create an increased desire by builders to buy
pre-manufactured, or fabricated, construction components. According to Automated
Builders Magazine (August 1996), panelized construction exceeded wood-frame
construction for the first time in history (39% vs.36%) in the United States in
calendar year 1995. The magazine also indicates the total of non-wood-frame
construction (i.e., modular, panelized and mobile home/pre-manufactured home)
exceeded wood-frame construction by a factor of 1.7 times in calendar 1995.
Builders may now buy pre-manufactured composite wood/foam building panels for
walls, roofs, partitions, floors, and other building components, as they satisfy
all structural specifications required by applicable building codes. Such
components are desirable since they decrease the time and expense involved in
constructing new buildings, while potentially increasing construction quality.
Company affiliates are expected to produce an array of structural panels from
which an architect can select the exact panels for each specific job. The panels
are planned to be manufactured and delivered to the construction site and
erected in relatively short times without the waste and cleanup usually involved
in wood or concrete construction. The wiring, plumbing access, and all such
contingencies can be engineered into each project. In some configurations, only
the exterior and interior finishes are applied at the construction site. In
other applications, finished surfaces can be factory supplied. The panels may be
drilled, routed and sawed, if necessary, on site; however, proper design and
panel selection will normally render field modifications unnecessary.
The Company's plan for marketing its building system involves two strategies.
The first is directed at the low-end non-residential construction market.
Planning and development of panel manufacturing, testing, pilot model
construction projects, and follow-on building construction projects for the
low-end non-residential market will be done exclusively by the Company. Company
affiliates will manufacture building panels for this market. The second
marketing strategy will be directed at residential construction, including
third-world housing markets. Marketing and sales programs are directed
principally at architects, designers, developers and builders who specialize in
the various markets.
After 18 to 24 months of initial manufacturing, the Company plans to use its
base products and technology to initiate directly, or by license, similar
manufacturing operations in the U.S. and throughout the world. The Company's
strategy is to use the initial operation/products/equipment specifications as a
template to
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go forth and duplicate such operations in other places, once the product
marketing and production relationships and processes are established.
The Company believes that laws will be enacted in the United States over the
intermediate to longer term, that will strongly favor products of both the
Company and Agile, for their fire, wind and prospective seismic resistance
features. At present, the United States is one of the few remaining First-World
countries that still allow major residential construction to continue without
strong wind, fire, and seismic resistance ratings. The Company believes that
there are significant public-interest implications associated with America's
lack of stringent wind, fire and seismic resistant standards being enacted and
enforced by U.S. regulators; especially so, given the large number of lives and
properties lost in the U.S. each year to these calamities.
COMPETITION. The Company believes there are no panels currently available in the
residential building panel industry which have fire-resistance, load-bearing,
rot-resistance, and insulating characteristics that are competitive with the
Company's proposed building panel systems. There are, however, a significant
number of manufacturers in the United States who produce residential building
panels constructed of wood. Wood-engineered panels represent currently accepted
technology in an industry that is generally slow to accept change in technology.
This reluctance may make it more difficult for a small company, such as the
Company, or a licensee of the Company, to penetrate the market because it is
introducing a new type of construction product without the benefit of an
established company name. The non-residential building construction products
industry is highly competitive and is dominated by companies that are typically
large international enterprises who actively promote their building construction
products to designers and property owners. Such competition from established
competitors that have, or may have, significantly greater financial, technical,
manufacturing and marketing resources than the Company, could adversely affect
the Company's prospects.
The principal non-residential panels on the current market are those made using
sheet metal/foam technology. These panels are often called foam/metal curtain
panels. Most of these panels are not load-bearing. The market-dominating
producers currently show no willingness or desire to develop panels that are
competitive to Agile and the Company's products. The Company's main product is
also in the class of foam/metal panels; however, the Company's LEEP STRUCTURAL
CORE product is distinguished from the traditional manufacturers' products in
that it is load bearing and as such can be used for floors, roofs and
load-bearing walls.
PATENTS AND LICENSES. On July 24, 1994, the Company received notice from the
U.S. Patent & Trademark office that 47 claims the Company considers important,
were granted. Mexican notice of allowance of the same base patent, except with
broader claims being allowed, was received by the Company in November 1996.
Exclusive rights to use the patented technology in the United States and
nonexclusive rights outside of the U.S., are assigned to the Company by the
inventor. Non-domestic rights are subject to the Company's paying for all costs
associated with developing foreign business and paying the costs of applicable
foreign patent work. All U.S. rights for subsequent related technology (patented
or not) are assigned to the Company by the Company's founder and early
management. The Company recently filed for additional patent protection to cover
additional inventions, including the new LEEP STRUCTURAL CORE product related
technology. Earlier patent applications no longer believed useful to the Company
were abandoned during the year.
LICENSEE TRANSACTIONS. Effective as of August 29, 1996, the Company assumed an
agreement entered into by Grant Record on March 30, 1996. In this agreement, the
inventor disclosed certain proprietary information for the use of Magnesium
Oxide Technology (MgO) and the Company received an exclusive and assignable
right to the licensed technology, including enhancements made by the licensee.
The inventor
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also agreed to provide certain consulting services for one year. The agreement
provided for a $25,000 license fee and minimum annual royalties of $25,000 for
seven (7) years. Consulting services were set at $2,000 per month. The Company
paid the full year's consulting agreement and more than one half of the first
year's fees by the time Agile's funding stopped. Nine months' time elapsed while
the Company studied its need for MgO-based technology in connection with its
LEEP STRUCTURAL CORE product. It was determined that newer elastomeric and
polymer-based cement products have come to the market and need to be considered
and studied to determine if such products are cost- and performance-effective.
Such effective products could eliminate the Company's requirement for additional
surface-covering skin research at this time.
LICENSOR TRANSACTIONS. An earlier agreement granting LSI (Traverse City, MI)
rights to develop and joint-venture with the Company in seven states, expired
and/or provisions provided by the agreement were replaced by agreements with
WLP.
AGILE LICENSE. The Company approved on December 4, 1995, and entered into a
comprehensive license agreement with Grant Record, WLP, Agile and Agile
Investment Corporation (AIC), under which the Company non-exclusively licensed
Agile to manufacture, market and sell products based on the Company's composite
building system concepts, patents, patents pending, pending patent applications,
trade secrets and future product developments (jointly or independently
accomplished). The final agreement, dated December 5, 1995, was replaced by a
February 28, 1997 Agreement after Agile was unable to continue to secure
adequate investment to sustain its activities, after raising approximately
$2,000,000 in cash and accomplishing ten months of intensive product
development, as described above. The new Agreement provides for autonomous
development and individual financing of the Company and Agile, respectively. The
agreement gives the Company the right to invest up to $4,000,000 in Agile and
take up to 49% ownership, if $1,000,000 is invested by December 31, 1997. The
Company has the right to manufacture Agile developed products anywhere outside a
500-mile radius of any Agile manufacturing plant. Agile has the right to
manufacture products developed by LEEP, but only in the Northeast United States.
Both of these rights, that of LEEP and that of Agile, may be subject to
renegotiation in connection with Agile's new investor agreement signed October
28, 1997. (See Management Discussion and Analysis, Item 6., Liquidity and
Capital Resources.) Approximately 4,200,000 LEEP shares which were held in AIC,
a holding company, on behalf of the Company and the Agile founders, were retired
and taken out of the Company's outstanding shares. The Company and Agile
continued their developments at Agile's physical facilities and both companies
kept their respective operational, product and market momentum.
CONTRACT EMPLOYEES. The Company signed a contract with David Moran in January
1997, whereby Mr. Moran became President of the Company. Grant Record,
President/Founder, remained as CEO upon Mr. Moran's joining the Company. Mr.
Record moved from Pennsylvania to Twin Falls, Idaho. Two technologists who
served Agile during the development period have supported the Company's target
LEEP STRUCTURAL CORE product and technology development. These personnel have
expertise in:
- - Machine design and fabrication
- - Polyisocyanurate (one of the technologists is a "father" of the American
Polyiso-foam/metal industry)
- - Quality control, plant planning, manufacturing systems and product
testing systems
The two contract employees representing the above critical operating functions,
have continued to work on the Company's products during the interim phase, with
an outlook towards long-term employment when the Company's first manufacturing
plant is operational. The agreement with Lenny H. Zallar, Chief Financial
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Officer, was terminated during the first quarter of 1997 due to funding delays.
Treasurer and director James R. Medley has acted in a near full-time capacity as
Financial Officer and Controller since Mr. Zallar's departure. Mr. Medley keeps
the books and records of the Company, and he is responsible for coordinating the
annual audit and all SEC reporting, including 10-K, 10-Q and 8-K reports.
Various consultants have been contracted to serve employee functions during the
Company's formative phase. An Agreement with EPO, Inc., was approved by the
Company's Board of Directors during the year ending April 30, 1996, which called
for EPO to receive an option for 100,000 shares of LEEP stock at $.50 per share,
a $4,200 per month fee, and various commission levels on money to be raised. No
fees are due and none have been paid. EPO will not claim any commission or other
compensation as a result of the agreement with EPO. The Company will honor the
100,000 share stock option which was given originally to help compensate for
past services rendered prior to the EPO Agreement. EPO has been a valuable ally
to the company and may be called upon for future services and agreements.
In addition to the contract employees and James R. Medley, there are full-time
employees at Agile working and assisting Company officers in the development of
Company products.
On October 28, 1997, Mr. Moran agreed to resign as President of the Company and
to become the CEO of the newly formed Agile Group, Inc.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's pilot production equipment and supplies, located at 500 South
Lander Street, in Seattle, Washington, were systematically packaged and shipped
to Pennsylvania over the period December 1995 to August 1996, for use in the
Agile facility under the Agile Licenses (reference: December 5, 1995 Agreement
replaced by February 28, 1997 Agreement). All remaining property and equipment
has been written off or sold. The Company occupied the Seattle facility pursuant
to a month-to-month rental agreement. Subsequent to development and testing of
the LEEP STRUCTURAL CORE, the Company required no development facility and
conducted no operations aside from research and development activities performed
with Agile in Pennsylvania at Agile's facilities. The Company is developing a
facility in Twin Falls, Idaho, for the purpose of manufacturing its products
(see Item 6). The Company or its proposed new affiliate company may rent or
acquire such facilities as deemed appropriate by Management.
Agile, in which the Company has significant investment (see Item 1), has
recently moved its executive offices to 30 W. 3rd Street, Williamsport,
Pennsylvania. The offices are leased on a year-to-year basis. Agile's pilot
production, research and short-run contracts are to be maintained at a leased
facility in the Williamsport/Lycoming County area. Agile seeks to lease or buy a
manufacturing facility, to expand the lamination operation in the Williamsport
plant. It is planned that the new facility will hold two Laminators of various
capabilities, and, depending on the product mix, be able to provide total annual
capacity to manufacture from 50,000,000 to 70,000,000 square feet of product per
machine (one production shift basis).
ITEM 3. LEGAL PROCEEDING.
On July 27, 1995, the Company filed an action against Timothy J. Metz in the
Superior Court of the Sate of Washington for King County, Cause No. 95-2-19488.
Mr. Metz is a former officer of the Company. The Company alleges that Mr. Metz
breached his contract with the company. The Company seeks: monetary damages
against Mr. Metz; an injunction enjoining Metz from violating the
confidentiality provisions of the contract; and a declaratory judgment that Mr.
Metz is not entitled to anything under his contract. On August 23, 1995, Mr.
Metz filed his answer to the company's action, and in addition filed a
counterclaim against the company and added Grant Record as a third party
defendant. In his counterclaim,
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Mr. Metz seeks to establish co-ownership and rights to certain patents involving
building panels and means for joining such panels. Mr. Metz also alleges he was
wrongfully terminated, and seeks damages of $395,000 in connection therewith.
Additionally, Mr. Metz seeks unspecified damages, which he seeks to have
trebled, plus attorney fees. Mr. Metz sought to remove the Company's action
against him and his counterclaim and third party complaint to the United States
District Court for the Western District of Washington. His removal petition is
filed in United States District Court, Cause No. C95-1302. The company resisted
the removal petition, and requested that the matter be heard in the same court.
The United States District Court granted the Company's motion to remand to the
state court, and ordered that all proceedings in the United States District
Court pertaining to the patent litigation be stayed until the state court case
is resolved. Because of a personal tragedy, Mr. Metz has not been able to
respond to the discovery requested of him by the Company. The Company has not
used and does not use the technology to which Mr. Metz claims rights. Although
the suit has been pending for over a year, no discovery has taken place. Based
on the Company's knowledge of Mr. Metz's claims, the Company is of the opinion
that it has meritorious defenses and intends to defend vigorously against the
claims brought by Mr. Metz, and seek all remedies offered by the law.
The Company has made demands to Harvey and Gary Bryant (Bryant Investment
Company, Las Vegas, NV) for their return to the Company of, respectively,
250,000 shares each of the common, restricted stock of the Company due to
nonperformance of an earlier (1994) undertaking in which Bryant Investment
Company committed to raise a minimum of $1,000,000 for the Company. To date,
Bryant Investment Company has not responded to the Company's demands to return
the stock and the Company is contemplating legal action to retrieve and cancel
the shares.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On October 14, 1996, at the annual meeting of shareholders, the following
persons received 23,731,293 votes for and 15,337 votes against election to serve
as Directors of the Company until the next annual meeting.
Name
- - Grant C. Record
- - Donald C. Bazemore
- - James R. Medley
- - Way Lee
- - Grant Todd
- - A. Charles Bush
- - Richard Pell
At the same meeting, Management was given the authority to change auditors. The
votes in favor of such authorization were 23,497,202, with 15,200 against and
234,228 abstaining.
Consistent with the restructuring provided for in the February 28, 1997,
Agreement with Agile and WLP, Messrs. Bush and Pell resigned from the Company's
Board of Directors.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is traded in the over-the-counter market and prices
are quoted on the NASDAQ Bulletin Board.
The following sets forth the high and low price information for each quarter
during the last two fiscal years, as provided by the NASDAQ Bulletin Board
quotations. The quotations provided reflect inter-dealer prices without retail
markup, mark-down or commission and may not represent actual stock buyer costs.
<TABLE>
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Year Ended April 30, 1996 High Low
First Quarter 1-1/4 5/8
Second Quarter 1 1/5
Third Quarter 1-1/2 1/2
Fourth quarter 2-1/4 1-1/4
Year Ended April 30,1997
First Quarter 2-3/4 1-1/8
Second Quarter 2 1-13/32
Third Quarter 1-17/32 13/16
Fourth Quarter 1-1/4 13/32
Year Ending April 30, 1998
First Quarter 5/8 13/32
</TABLE>
The number of holders of record of the Company's Common Stock on September 10,
1997, is: 1,390.
The Company has never paid a cash dividend and the Board of Directors does not
anticipate declaring cash dividends in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
PLAN OF OPERATION. The Company has yet to generate revenues from the sale of
building panels, however, $300,000 has been received in the form of License
revenue. $195,250 is due the Company from its affiliate, Agile, for fees and
services rendered. Due to cash flow constraints at Agile, as it ramps up its
production capacity to meet new orders, the Company has agreed with Agile that
payments on accrued revenues will be delayed until cash flow permits. Since
there is no date certain for the Company to receive payments on the receivable
from Agile, the Company has provided for a reserve of $222,750 as shown in the
financial statements to cover the license revenue and accrued interest due from
Agile. The operations of the Company since inception have been focused on
research and development (R&D). R&D activities were done by the Company from
1992 to 1996. R&D was done and paid for by Agile from January 1996 through
October 1996. The Company resumed direct R&D activities in November 1996.
Between November 1996 and the present, a viable structural panel product has
been developed by the Company. This product is known as "LEEP STRUCTURAL CORE."
Significant purchase of equipment and manufacturing facilities is expected by
affiliates during fiscal 1997/1998, as well as expansion of personnel.
The strategy of Management during fiscal 1997/1998 is to develop the LEEP
STRUCTURAL CORE product manufacturing capability and marketing through affiliate
companies performing manufacturing and marketing, while financing and marketing
in tandem with its affiliate company, Agile, who is developing
9
<PAGE> 11
the markets for its insulated wallboard product known as "IN-SULATE", and its
External Insulated Sheathing System product known as "EX-SULATE". All three
product lines are compatible and complementary and use the same basic
polyisocyanurate expanding foam lamination ("Polyiso") technology. The Company
believes that, over time, both Agile and the Company's new affiliate companies
will locate plants in the same locations to be able to share Polyiso chemical
unloading and storage facilities. Polyiso chemical shipping costs, intermediate
rail tank storage and in-plant, isolated temperature controlled storage are
major cost and logistic considerations with respect to efficient, economical
laminated Polyiso product manufacturing. Locating a Polyiso depot between future
Agile IN-SULATE/EX-SULATE and LEEP STRUCTURAL CORE plants lends these
operational pairings substantial advantage over future would-be competition.
With respect to Agile, considering Agile's bank facilities, equity investments
and long-term notes, over $3,000,000 has been invested in Agile and LEEP's
product developments and operations since Agile's inception in November 1995.
This investment has produced a group of new, well-timed products, including
Agile's EX-SULATE and IN-SULATE. EX-SULATE is an Exterior Insulated Sheathing
System Product which takes the place of multiple-step application external
finishing systems such as "Dryvet" (a 3-to-7-step, labor intensive competitive
product). IN-SULATE is an insulated wall board product for finishing the
interior of buildings, while providing thermal and sound insulation at the same
time. Agile purchased an operating production line at the Winter Panel
Corporation facility in Brattleboro, Vermont. Agile privately placed various
equities since November 1996, to develop its new products, markets, and sales
programs, and to modify the production line in Vermont to manufacture Agile's
products. Currently, the outlook for Agile's products, based on a growing number
of inquiries and several significant order commitments, encourage Agile to
prepare to order two additional Laminators similar to the one in Brattleboro.
The Agile products are fully developed and in pilot production. As such, Agile
is ready to upscale production quantities to pace their current visible market
demands. Management and Agile estimate that $20,000,000 first-year revenues of
Agile products are sufficient for Agile and the first of the Company's proposed
affiliate companies to begin side-by-side plant operations. The management and
directors of both the Company and Agile are in agreement and the process of
planning side-by-side, co-existing plants is underway. David Moran, the
Company's President, had been assisting Agile and the HKC investors (see
August 12, 1997 Amended Agreement, in Pennsylvania and Vermont to achieve the
next level of planning and product manufacturing efficiency at Agile. As of an
October 28, 1997 Agreement between Agile and the new investors, Mr. Moran
resigned as President of the Company and became the President of the Agile
Group, Inc.
The Company plans to form a new affiliate company in Twin Falls, Idaho. With
Agile and several private investors, the new affiliate company would build the
first side-by-side plants. The City of Twin Falls, Idaho, approved a
tax-advance-based loan in the amount of $500,000 as an incentive for the
Company's proposed new affiliate company to begin manufacturing operations in
Twin Falls. The Company made a purchase commitment to approximately 16 acres of
M-2 (heavy manufacturing) zoned industrial property on the Eastern Railroad
Company's north-south line. This commitment was subject to certain contingencies
having to do with rezoning and building permits. Subsequent to the City of Twin
Falls inviting the Company to participate in that industrial area development,
the location selected was strongly challenged by residents in the area. As a
result, the Company withdrew from that development to examine other of the
several opportunities and options in the region. The Twin Falls area offers
substantial transportation, work force, logistic and economic reasons to
encourage a continued aggressive outlook to manufacturing in the Twin Falls
area. The Company does not believe there is any need to expedite building a
manufacturing plant during the winter months as personnel and facilities are
available to manufacture the LEEP panels in Pennsylvania and ship them to Idaho
for developing the initial western markets between now and spring 1998, when
plant construction can begin in the Twin Falls area. Grant Record, CEO of the
Company, took
10
<PAGE> 12
up residence in Twin Falls in order to administer the planning for building
facilities. Options to purchase or lease turnkey manufacturing facilities will
be made available to Agile for one of the two new buildings now in planning for
the Twin Falls area.
The Company's proposed new affiliate company (Newco) and the Company's affiliate
company, Agile, will use the same basic technology, chemicals and equipment to
produce different products. Pilot product will be produced at a rate in
Pennsylvania which supports construction of two medium-sized commercial
buildings per week or one medium-sized refrigerated warehouse per day, for each
group of five (5) manual containment presses. By mid calendar 1998 the Company
projects that its affiliate companies will have production capacity to support
$90,000,000 in annual sales.
Newco will produce foam filled metal based structural panels using Manual
Presses in Agile's Pennsylvania facility. In the summer of calendar 1998, Newco
is expected to produce the LEEP STRUCTURAL CORE product on a new 100-foot
Laminator System in Idaho that will be capable of producing upwards of 48,000
square feet of LEEP STRUCTURAL CORE per ten-hour shift. In the interim it will
use shuttle containment presses which are currently in the final stage of
fabrication in Pennsylvania.
Agile purchased a used 100-foot long Polyiso Laminator during the last quarter
of calendar 1997, and in calendar 1998 it will order an additional laminator for
delivery in the middle of the calendar year. New capacity in Pennsylvania is
expected to allow Agile to produce foam insulation backed interior and exterior
sheeting products sufficient to meet projected market demand of sales of at
least $20,000,000.
LIQUIDITY AND CAPITAL RESOURCES. Investors have been doing "diligence and
planning" with the Company, with the intent of investing $6,000,000 in Agile--to
support manufacturing upgrades on present equipment and additional manufacturing
capacities to enable Agile to exceed $30,000,000 in sales revenues over the next
24 months--and an additional $3,700,000 for a proposed new affiliate company to
build the plant facilities necessary to begin manufacturing LEEP STRUCTURAL CORE
product in Idaho. The corporate budget for the next 12 months, independent of
manufacturing operations, is $500,000. The Company is planning with investors to
transact private placements for $500,000 at or around prevailing stock market
prices to support the Company's next 12-month overhead expenses.
The Company entered into an August 12, 1997 Amended Agreement with Harrison
Kramer Corporation ("HKC"), or assigns, on August 15, 1997. The Agreement gives
HKC until November 1997, if not extended, to consummate financing for a Company
affiliate to be formed in Idaho. Under the terms of the Agreement, HKC is to
receive an amount equal to 20% of a 5% royalty the Company will receive from the
investors, as a commission against product sales, if, as, and when such
royalties are received. The investor group to be identified by HKC will receive
51% of the ownership interest in the Company's Pacific Northwest manufacturing
operations and 1,000,000 shares of Rule 144 restricted stock of the Company,
upon completing the LEEP portion of the financing. HKC's investors will have a
right of first refusal to finance additional LEEP manufacturing plants in Canada
and America; however, that right shall be lost in the event they refuse to
sponsor two consecutive operations which are offered them by the Company. HKC
investors signed a binding agreement with Agile on October 28, 1997, to form
Agile Group, Inc. (AGI) and Agile Building Structures, Inc. (ABS), and to invest
$500,000 per month in ABS beginning November 31, 1997 and each month thereafter
for eleven consecutive months and to invest up to $400,000 prior to November 31,
1997. According to the terms of the October 28, 1997 Agreement, Agile will hold
49% of ABS, and AGI will hold 51%. Should AGI default on any monthly payment,
Agile has the right to control of ABS. AGI has the right to finance additional
joint venture operations on a 51%/49% basis and to provide all of the funding
for such operations. Should AGI not exercise the right, Agile has the right to
otherwise finance and control such future operations.
11
<PAGE> 13
The Company obtained a revolving credit facility from Rothchild SA, Nassau,
Bahamas. The credit facility presently provides for monthly draws of $137,500
which can be paid down subsequently in stock with a 1.08 repayment multiple if
repaid in stock at the then current market price for stock. The advances can be
repaid in cash at a 1.03 multiple rate. (Refer to Note 14 to the Financial
Statements.)
RESULTS OF OPERATIONS. The Company financed its cost of operations for the year
ending April 30, 1997, from stock sales, stockholder loans, stockholders
exercising options for stock, and debt conversions. As of September 29, 1997,
the Company has $337,371 in short-term borrowing. For further analysis, see the
Company's Statement of Cash Flows.
The Company's audit expenses were extraordinary because of the bringing on board
of a new affiliate company. The Company also retained an executive search firm.
Lastly, professional services were provided by a developer of new technology.
For those reasons, legal and professional expenses increased to $181,120 from
last year's $76,421.
Because of the increased stock market trading activity of what is becoming a
more mature company, Management retained the services of three outside companies
to provide corporate and capital formation development activities which include:
organizing stock broker and analyst following, supporting a publishing and
mailing program, compiling and publishing research, identifying merger and
acquisition candidates, providing information about the Company to selected
investors, managing broker/dealer relations, assisting with investor programs,
development and maintenance of an Internet Home Page, and providing other
corporate consulting in the area of financial and corporate strategies. For this
reason G&A expenses were $266,323 for the year ending April 30, 1997.
ADOPTION OF NEW ACCOUNTING STANDARDS. The Company has adopted certain new
accounting standards that are described in the Notes to the Financial
Statements.
RISK AND UNCERTAINTIES. Matters discussed herein, contain forward-looking
statements that involve risk and uncertainties. The Company's results may differ
significantly from results indicated by forward looking statements. Factors that
might cause some differences, include, but are not limited to:
- - Changes in general economic conditions, including but not limited to
increases in interest rates, and shifts in domestic building
construction requirements;
- - Changes in government regulations affecting customers, the Company, or
Agile;
- - Risks generally involved in the construction business, including
weather, fixed price contracts and shortages of materials or price
competitive labor;
- - Competition;
- - The ability of the Company to successfully bring the products from their
development stage into full and profitable production;
- - The Company and/or Agile and HKC's ability to raise sufficient debt and
equity capital to perfect business plans and to enable Agile to continue
in existence, and the proposed new affiliate to begin operations;
12
<PAGE> 14
- - The occurrences of incidents which could subject the Company to
liability or fines;
- - Agile's ability to obtain the sales orders necessary to support the
volume of production required to sustain successful operations.
ITEM 7. FINANCIAL STATEMENTS.
The Financial Statements appear in the Report following Part III.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
In a letter dated June 16, 1997, the registrant's certifying accountant, KPMG
Peat Marwick has declined to stand for re-election stating that they are
changing the profile of companies they wish to audit. A change in accountants
had been approved at a meeting of the stockholders. Please see Exhibit 1, and
two letters to the Company from KPMG Peat Marwick LLP: (1) dated August 19,
1997, Form 8-K/A filed August 20, 1997; and (2) dated June 27, 1997, found
attached to Form 8-K filed July 14, 1997.
With regards to the appointment of W. Alan Jorgensen, Certified Public
Accountant, as the Company's auditor for the year ending April 30,1997, please
see Form 8-K filed on July 14, 1997.
There were no disagreements with Accountants on Accounting and Financial
Disclosure.
There are no other reportable events under Item 304 of Reg 229.304.
13
<PAGE> 15
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Grant C. Record 61 Chief Executive Officer, Secretary, Director
David C. Moran 58 President until October 1997
Donald C. Bazemore 63 Director, Chairman of the Board
James R. Medley 57 Director, Treasurer
Grant Todd 47 Director
Way W. Lee 72 Director
</TABLE>
GRANT C. RECORD was the Founder, Executive Vice President, Secretary, and
Chairman of the Board of Directors of the Company from December 1992 until he
became President on June 28, 1995. He relinquished the office of President and
became Chief Executive Officer on March 5, 1997. During 1991 and 1992, Mr.
Record developed the Company's base technology and early patent positions. From
1983 to 1991, Mr. Record was Executive Vice President of Magnum Technology, a
developer of advanced magnetic disks for the magnetic disk drive industry. Prior
to Magnum, Mr. Record founded and developed the Data I/O Corporation, which
enabled the early Intel microprocessor technology to gain rapid worldwide
acceptance and use. Data I/O is yet the world leader in semi-conductor memory
and logic device programming, after twenty-five years.
DAVID C. MORAN, who joined the Company in January 1997, was elected President of
the Company in March 1997. In October 1997, he transferred to Agile Group, Inc.
to be its President. Most recently, Mr. Moran was Senior Vice President for
Product Development at Champion Home Builders Co., where his duties included
leading corporate level product engineering, purchasing, product costing,
product design and interior decor groups. Prior to Champion, Mr. Moran was a
Division General Manager at Fleetwood Enterprises, Inc., with profit
responsibility for ten manufacturing facilities in four states. Before that he
was a General Manager at Wick Building Systems, Inc., and a Division Vice
President at Redman Industries, Inc.
DONALD C. BAZEMORE is Chairman of the Board. Mr. Bazemore has been a director of
the Company since 1995 and the primary architect for the Company since 1992. Mr.
Bazemore founded the DB Associates firm in 1970. DB Associates is one of the
oldest architectural firms in Seattle. Prior to DB Associates, Mr. Bazemore was
Director of Architecture for Leo A. Daly Associates in Seattle, where he was
responsible for several major Boeing Aircraft construction projects. Leo A. Daly
is a well-known internationally significant architecture and engineering firm.
JAMES R. MEDLEY is Treasurer of the Company. Mr. Medley was first elected
director in 1995. Mr. Medley is founder of Laux Medley Norris, Inc., Investment
Advisors in Seattle since 1976. Laux Medley Norris does business planning for
large and small companies and is responsible for portfolios up to $100,000,000
in value. Mr. Medley was King County Republican Central Committee Chairman, 1979
to 1981, and King County Chairman of the Reagan/Bush campaign for president in
1980.
GRANT TODD first became a director in 1995. Mr. Todd served as President for two
Fortune 500 company divisions; Guilford of Maine, division of Interface, Inc.,
Atlanta, GA, and Interface Flooring Systems, Division of Interface, Inc.,
Atlanta, GA. During his 20-year tenure in the Fortune 500 environment, Mr.
14
<PAGE> 16
Todd also held high level marketing and corporate development positions with
Interface.
WAY W. LEE has been a director of the Company since December 1992. He served as
President of Fibertech Corporation from 1972 to 1985, and as President of
Crystal Asset Management, Inc., from 1985 to December 1992. He also was a
director of Crystal Asset Management, Inc., until its reverse merger with LEEP.
Mr. Lee is the President of Way W. Lee General Contractor and Acme Industries
Door and Millwork.
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth certain information concerning the compensation
paid by the Company to Grant C. Record, President and CEO until March 5, 1997,
when he relinquished the position of President, but retained the position of
Chief Executive Officer; to David C. Moran, President; and to Lennie H. Zallar,
Vice-President and Chief Financial officer until January 1997 :
<TABLE>
<CAPTION>
SUMMARY ANNUAL COMPENSATION TABLE
- ------------------------ ----------------------------------- ----------------- -----------------
Awards Payouts
----------------- -----------------
<S> <C> <C>
Grant C. Record President 1995 to January 1997; $60,000 -0-
CEO since 1995
----------------- -----------------
David C. Moran President until October 1997 $32,636 $10,000
----------------- -----------------
Lennie H. Zallar Vice-President and Chief $33,000 $13,702
Financial Officer until January
1997
</TABLE>
NON-QUALIFIED STOCK OPTIONS. The Company has issued non-qualified stock options
to selected employees, officers, directors, consultants and advisors. As of
April 30, 1997, options to purchase 1,127,305 shares of Common Stock were
outstanding at an average exercise price of approximately $.73 per share.
Subsequent to fiscal-year-end 1997, board members received a total of 250,000
options exercisable at $.375 per share; options expire in three years from date
of issue.
As of April 30, 1997, there were no options outstanding to purchase shares of
common Stock granted to Grant C. Record; there was an agreement to grant a
300,000 share option with piggyback registration rights (or S-8 Registration as
appropriate) to David C. Moran. (See Note 1(f) to the Financial Statements.)
The following table sets forth information as to all options exercised during
the fiscal year ended April 30, 1997:
<TABLE>
<CAPTION>
Names Shares Acquired on Exercise Value Realized (1)
- ----- --------------------------- ------------------
<S> <C> <C>
Donald C. Bazemore 150,000 $257,500
Carmen Manzonelli 50,000 $ 52,000
</TABLE>
Note: The Company is unable to calculate the value of un-exercised in-the-money
options because of the highly restricted nature of the option shares.
(1) "Value Realized" is based on NASDAQ bulletin board quoted prices for
publicly traded stock, and does not represent the fair market value of the
highly restricted shares.
EMPLOYMENT AGREEMENTS. The Company has entered into six employment agreements
since 1992. One agreement was with former financial officer, Gary Nees. Mr. Nees
resigned during the fiscal year
15
<PAGE> 17
1994/95 and his severance was amicable. The company agreed to extend certain
stock options for Mr. Nees (shown herein) for five years. An employment
agreement with Tim Metz, former President/CEO, is in dispute. Kirk Metz, a
former employee (deceased), is owed certain moneys from past services rendered.
The Company's current Management believes the contract with Kirk Metz is
abandoned during calendar year 1994. Approximately $49,992 is accrued for Kirk
Metz's estate (Kirk Metz died in early 1996). The fourth employment agreement is
with Grant C. Record, CEO. This contract is current and active. The terms of Mr.
Record's employment contract were disclosed in the SEC registration filing. The
fifth employment contract was a consulting contract for employment of Lennie H.
Zallar as Vice-President and CFO. This contract was terminated during the year
ending April 30, 1997. The sixth employment agreement is with David C. Moran,
President as dated January 7, 1997. This contract appears on Form 8-K filed on
March 27, 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of September 10, 1997, by (1) each
person who is known by the Company to own beneficially more than 5% of the
Common Stock, (2) each of the Company's primary investors and executive
officers, and (3) all directors and executives officers as a group. Each named
beneficial owner has sole voting and investment power with respect to the shares
listed unless otherwise indicated.
<TABLE>
<CAPTION>
Title of Class Name and Address Beneficial Owner Amount % of Class
(1)
- ----------------- ---------------------------------------------- ----------------- -------------
<S> <C> <C> <C>
Common Stock Grant C. Record (2) 6,450,662 shares 23.38%
616 Blue Lake Blvd., #139, Twin Falls. ID
83301
- ----------------- ---------------------------------------------- ----------------- -------------
Common Stock Donald C. Bazemore (2) 239,939 shares 0.87%
401 2nd Ave. So., Seattle, WA 98104
- ----------------- ---------------------------------------------- ----------------- -------------
Common Stock David C. Moran (3) 413,690 shares 1.50%
906 Oxford Circuit, Brentwood, TN 37027
- ----------------- ---------------------------------------------- ----------------- -------------
Common Stock Way W. Lee (2) 281,762 shares 1.02%
5210 SE 26th, Portland, OR 97202
- ----------------- ---------------------------------------------- ----------------- -------------
Common Stock Grant Todd (2) 264,862 shares 0.96%
1701 Lake Side Lane, Atlanta, GA 30339
- ----------------- ---------------------------------------------- ----------------- -------------
Common Stock James R. Medley (4) 116,319 shares 0.42%
10002 Aurora Ave. No., #3345, Seattle, WA
98133
- ----------------- ---------------------------------------------- ----------------- -------------
Common Stock Agile Building Technology, Inc. 2,000,000 shares 7.25%
30 W. 3rd St., 3rd Floor, Williamsport, PA
17701
- ----------------- ---------------------------------------------- ----------------- -------------
Common Stock Agile Investment Corporation, Inc. 2,501,096 shares 9.06%
30 W. 3rd St., 3rd Floor, Williamsport, PA
17701
- ----------------- ---------------------------------------------- ----------------- -------------
Common Stock All six executive officers and Directors as 7,767,234 shares 28.15%
a group (5), (6)
</TABLE>
(1) No special note(s).
(2) The amount beneficially owned includes 50,000 shares of Common Stock
issuable upon the exercise of options.
(3) The amount beneficially owned includes 300,000 shares of Common Stock
issuable upon the exercise of options.
(4) The amount beneficially owned includes 75,000 shares of Common Stock
issuable upon the exercise of options.
(5) The amount beneficially owned includes 575,000 shares of Common Stock
issuable upon the exercise
(6) Excluding Mr. Moran, who is no longer an executive officer as of October
1997, the total is 7,353,544 shares or 26.65% of Class.
16
<PAGE> 18
of options.
In connection with the Company's formation and investment in AIC, the ownership
interest in AIC changed per the agreement dated December 4, 1995, depending on
the relative financial performance of AIC and WLP. WLP's and AIC's financing
performance during the period December 4, 1995, to April 30, 1997, was such that
as of April 30, 1997, ownership of AIC was 56% held by WLP, and the 44% balance
held by the Company at the close of the reporting period. As a result of the
February 28, 1997 Agreement, AIC distributed 4,216,601 shares of LEEP common
stock to the Company and the Company released all of its ownership in AIC. The
4,216,601 shares were retired by the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
LICENSE AGREEMENT. On May 21, 1994, the Company and Grant C. Record entered into
a Purchase of Royalty Rights and Assignment of Technology Agreement, which,
among other things, canceled the Amended License Agreement dated June 10, 1993
as subsequently amended on August 5, 1993, and irrevocably assigned to the
Company from Mr. Record, all rights to patent applications, and any reissues,
divisions and continuations thereof, as well as any technology, process and/or
materials developed by Mr. Record and/or Timothy W. Metz, the Company's former
President. This assignment covers the United States only, however, the Company
is assigned the right to develop foreign construction projects provided the
Company is responsible for the costs of all relevant foreign patent protections
for the particular countries involved.
STOCK OPTIONS. In July 1996, Donald C. Bazemore, Chairman of the Board of
Directors of the Company, exercised 150,000 non-qualified stock options. Payment
was made in the form of an $80,000 8% note payable to the Company. The note is
secured by existing shares of the Company's stock held by the optionee. As long
as the optionee has sufficient shares of the Company's stock as collateral for
the note based on the market price of the stock, no interest will accrue and no
amount will be due under the note. The collateral stock and the shares issued
against the note are held by the Company. No transfers are permitted until the
note is fully paid. The Company also entered into an agreement with Mr. Bazemore
to provide architectural and sales services to the Company. In the 1996/1997
fiscal year, the company paid his company, DB Associates, $6,665. Mr. Bazemore
also performs architectural services for Agile, a Company affiliate. The
"Architectural Services Agreement," described in 5(a) of the notes to Financial
Statements, has not yet resulted in any fees paid because neither the company
nor its affiliates have sold any panels as required by the Agreement.
17
<PAGE> 19
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K.
(A) FINANCIAL STATEMENTS AND EXHIBITS
1. FINANCIAL STATEMENTS:
- - Independent Auditors' Report
- - Balance Sheets as of April 30, 1997 and 1996
- - Statements of Operations for years ended April 30, 1997 and 1996, and from
December 23, 1991 (inception) through April 30, 1997
- - Statement of cash flows for years ended April 30, 1997 and 1996 and from
inception
- - Statements of Stockholders' Deficit for years ended April 30, 1997 and 1996,
and from December 23, 1991 (inception) through April 30, 1997
- - Notes to Financial Statements
2. EXHIBITS
- - Exhibit 4, Instruments defining rights of holders
- - Exhibit 10.1, Agreement between Leading Edge Earth Products, Inc., and
Jasari International, Inc., dated June 16, 1997
- - Exhibit 10.2, Agreement between Kane International, Ltd. and Leading Edge
Earth Products, Inc., dated June 16, 1997
- - Exhibit 10.3, Agreement between Soralena Enterprises Limited and Leading
Edge Earth Products, Inc., dated June 16, 1997
- - Exhibit 10.4, Agreement between Leading Edge Earth Products, Inc., and
Harrison Kramer Corporation, dated August 12, 1997
- - Exhibit 10.5, Agreement between Leading Edge Earth Products, Inc., and
Rothchild Group S.A., dated July 1, 1997
- - Exhibit 16.1, Letter from KPMG Peat Marwick to Leading Edge Earth Products,
Inc., dated June 27, 1997
- - Exhibit 16.2, Letter from KPMG Peat Marwick to Leading Edge Earth Products,
Inc., dated August 19, 1997
- - Exhibit 21, Affiliate companies of the registrant
- - Exhibit 27, Financial Data Schedule
- - Exhibit 99, J. Ratkovich note
(B) REPORTS ON FORM 8-K
1. Letter of engagement from Grant C. Record, CEO, Leading Edge Earth Products,
Inc., to David Moran, dated January 7, 1997 -- please see Form 8-K filed on
March 27, 1997
2. Agreement between Leading-Edge Earth Products, Inc., Grant Record, Agile
Building Technology, Inc., WLP Associates, and Agile Investment Corporation,
dated February 28, 1997 -- please see Form 8-K filed on March 27, 1997
3. Letter from KPMG Peat Marwick to Securities and Exchange Commission, dated
June 27, 1997 -- please see appended to Form 8-K filed on July 14, 1997
18
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Leading-Edge Earth Products, Inc.:
I have audited the accompanying balance sheet of Leading-Edge Earth
Products, Inc. (a development stage enterprise) as of April 30, 1997, and the
related statements of operations, stockholders' deficit, and cash flows for the
years ended April 30, 1997 and 1996 and the period from December 23, 1991
(inception) to April 30, 1997. These financial statements are the responsibility
of the Company's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Leading-Edge Earth
Products, Inc. (a development stage enterprise) as of April 30, 1997, and the
results of its operations and its cash flows for the years ended April 30, 1997
and 1996, and the period from December 23, 1991 (inception) to April 30, 1997 in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Leading-Edge Earth Products, Inc. (a development stage enterprise) will continue
as a going concern. As discussed in note 3 to the financial statements, there is
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in note 3. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
W. Alan Jorgensen, CPA
November 3, 1997
Seattle, WA
<PAGE> 21
LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)
Condensed Balance Sheet April 30, 1997
<TABLE>
<CAPTION>
30-Apr-97
- ----------------------------------------------------------------------
<S> <C>
ASSETS
Current assets:
Cash $5,897
Receivables from affiliate, net of adjustment
of $222,750 4,070
Inventory
Prepaid expenses and deposits 6,500
--------------
Total current assets 16,467
Property, plant and equipment
Less accumulated depreciation
--------------
Net plant and equipment
Other assets:
Intangible asset 25,822
Less accumulated amortization (1,148)
--------------
Total other assets 24,674
--------------
Total assets $41,141
- ----------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Notes payable 74,630
Accounts payable 197,342
Accrued contract salary 334,728
Accrued royalties and interest payable 96,661
Loans from shareholder 324,575
--------------
Total current liabilities 1,027,936
Shareholders' equity (deficit):
Common stock, no par value 4,140,333
Note receivable from shareholders (483,784)
Deficit accumulated during development stage (4,643,344)
--------------
Total shareholders' deficit (986,795)
--------------
Total liabilities and shareholders'
equity $41,141
</TABLE>
<PAGE> 22
LEADING-EDGE EARTH PRODUCTS, INC.
Condensed Statements of Cash Flows for Years ended April 30, 1997 and 1996 and
period from December 23, 1991 (inception) through April 30, 1997
<TABLE>
<CAPTION>
Period from
Dec. 23, 1991
Years ended (inception)thrgh
30-Apr-97 30-Apr-96 30-Apr-97
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (838,139) $(402,536) $(4,643,344)
Adjustments to reconcile net loss to cash
flows used in operating activities:
Noncash compensaton expenses related to
nonqualified stock options granted 41,500 1,199,339
Depreciation and amortization 1,148 5,200 15,324
Write-off of long-term assets 36,534 31,264 147,089
Noncash compensation expenses
related to stock grants 257,128 841,876
Accrued royalty obligation 37,000 237,000
Changes in operating assets and liabilities:
Receivables 64,055 (68,125) (4,070)
Inventory 4,778 0
Prepaid expenses and deposits 31,901 (36,028) (6,500)
Accounts payable 175,944 220,983 591,368
Accrued salary obligations 106,975 93,457 349,352
Accrued interest payable 29,243 41,579 261,696
----------- ----------- -----------
Net cash used (93,433) (72,706) (1,010,870)
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases and disposals 11,000 (10,343) (159,064)
Purchase intangible (25,822) (26,822)
Pmts on notes receivable fm stockholders 6,500
----------- ----------- -----------
Net cash used in investing (14,822) (10,343) (179,386)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 10,000 370,000
Exercise of stock options 25,000 23,541 67,537
Exercise of Class A warrants 3,300
Contributed capital 100,910
Proceeds from notes payable 74,630 272,130
Proceeds from loans from stockholders 40,822 202,700 620,155
Payments on notes payable (4,500) (13,500)
Payments on loans from stockholders (32,000) (143,379) (224,379)
----------- ----------- -----------
Cash provided by financing 108,452 88,362 1,196,153
Net change in cash 197 5,313 5,897
Cash at beginning of period $ 5,700 $ 387 $ 0
----------- ----------- -----------
Cash at end of period $ 5,897 $ 5,700 $ 5,897
=========== =========== ===========
</TABLE>
<PAGE> 23
LEADING-EDGE EARTH PRODUCTS, INC.
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows for Years ended April 30, 1997 and 1996 and
period from December 23, 1991 (inception) through April 30, 1997 (Continued)
- ----------------------------------------------------------------------------------------------------------
Period from
Dec. 23, 1991
Years ended (inception)through
30-Apr-97 30-Apr-96 30-Apr-97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Fixed assets acquired under contract $ 4,976
Fixed assets acquired with a note payable 13,725
----------- ------------ -----------------
18,701
Notes receivable in exchange for common stock $355,000 607,599
Offset of notes receivable from stockholder
with related loans from stockholders $117,315 117,315
Cancellation of notes payable in exchange
for common stock 200,000 457,725
Acounts payable for services for common stock 238,000 276,240
Cancellation of accounts payable in return
of plant and equipment 22,500
Common stock issued for payment of accrued
royalties and interest payable 29,000 58,011 58,011
Grant of stock options in payment of accrued salary 120,000
Cancellation of note receivable initially received
for payment of shares upon exersise of options
Shares in exchange for note payable 40,000 40,000
Increase in shareholder loan for accounts payable 87,127 87,127
Note exchange for option exercise, 500,000 shares issued 3,500
----------- ------------ -----------------
$514,627 $613,326 $1,786,517
=========== ============ =================
</TABLE>
<PAGE> 24
LEADING-EDGE EARTH PRODUCTS, INC.
Statements of Operations years ended April 30, 1997 and 1996 and
period from December 23, 1991 (inception) through April 30, 1997
<TABLE>
<CAPTION>
Period from
Dec. 23, 1991
Years ended (inception)through
30-Apr-97 30-Apr-96 30-Apr-97
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME:
Licence and consulting revenues $ 225,125 $271,875 $497,000
Interest 27,592 8,127 35,719
Other 1,642 14,322 15,964
------------ ------------ ------------
Total income 254,359 294,324 548,683
RESEARCH AND DEVELOPMENT EXPENSES:
Salaries 14,642 418,827
Supplies/shipping 301 4,362 91,130
Professional fees 26,665 43,387 187,165
License fees
Travel 11,418
Rent 37,715
Legal 14,931 18,926 33,857
Depreciation/amortization 1,148 2,088 7,412
Utilities 162 625 6,371
Write-down of assets 41,312 31,264 141,453
------------ ------------ ------------
Total research and development 84,519 115,294 935,348
GENERAL AND ADMINISTRATIVE EXPENSES:
Contract salaries and incentives 162,685 143,202 1,352,343
Rent 15,459 9,456 79,321
Depreciation 3,112 7,912
Office supplies 10,956 6,058 51,505
Postage and shipping 6,345 5,124 23,782
Telephone 11,396 14,417 110,044
Travel and entertainment 32,968 40,250 175,860
Relocation 3,398 2,321 18,567
Payroll and payroll expenses 12,468 3,035 15,503
Legal and professional 176,920 76,421 957,821
Stockholder costs 10,387 5,514 47,689
Interest and bank charges 30,307 51,654 139,901
Promotion & corp. development 266,323 195,745 462,068
Insurance 4,283 7,865
Other 2,617 5,974 19,352
------------ ------------ ------------
Total general and administrative 742,229 566,566 3,469,533
Adjustment for unpaid revenues from affiliate 222,750
Royalties and royalty buyout expense 43,000 15,000 553,000
------------ ------------ ------------
Net loss $ (838,139) $ (402,536) $ (4,409,198)
Loss per common share $ (0.03) $ (0.02) $ (0.25)
Weighted average shares outstanding 28,863,150 21,485,377 17,669,546
============ ============ ============
</TABLE>
<PAGE> 25
LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' DEFICIT
Years ended April 30, 1997 and 1996 and from
December 23, 1991 (inception) through April 30, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Price Common stock
per ----------------------------
Date Share Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at December 31, 1991 (inception) $ - 11,936,830 $ 5,000
Cash contributions and unreimbursed expenditures incurred on behalf of the
Company 1/92-4/92 37,039
Net loss
----------------------------
Balances at April 30, 1992 - 11,936,830 $ 42,039
Cash contributions and unreimbursed expenditures incurred on behalf of the
Company 5/92-4/93 - - 63,871
Common stock issued for payment of note payable 4/30/1993 0.348 168,725 58,725
Common stock issued for payment of accrued salary 4/30/1993 0.116 40,000 4,654
Excess of market price over exercise price on options granted during the year - - 332,710
Net loss - - -
----------------------------
Balances at April 30, 1993 - 12,145,555 $ 501,999
Common stock issued for cash 6/22/1993 0.541 665,000 360,000
Common stock issued for payment of services received 6/22/1993 0.541 99,000 53,594
Common stock issued for payment of a loan from stockholder and related
accrued interest 7/27/1993 0.606 125,400 76,000
Exercise of stock options 4/30/1994 0.065 100,000 6,500
Excess of market price over exercise price on options granted during the year - - 825,129
Net loss - - -
----------------------------
Balances at April 30, 1994, carried forward - 13,134,955 $ 1,823,222
----------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Notes Deficit Total
receivable accumulated stock-
from during the holders'
stock- development equity
holders stage (deficit)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balances at December 31, 1991 (inception) $ - $ - $ 5,000
Cash contributions and unreimbursed expenditures incurred on behalf of the
Company - 37,039
Net loss - (34,725) (34,725)
-----------------------------------------------
Balances at April 30, 1992 $ - $ (34,725) $ 7,314
Cash contributions and unreimbursed expenditures incurred on behalf of the
Company - - 63,871
Common stock issued for payment of note payable - - 58,725
Common stock issued for payment of accrued salary - - 4,654
Excess of market price over exercise price on options granted during the year - - 332,710
Net loss - (504,175) (504,175)
-----------------------------------------------
Balances at April 30, 1993 $ - $ (538,900) $ (36,901)
Common stock issued for cash - - 360,000
Common stock issued for payment of services received - - 53,594
Common stock issued for payment of a loan from stockholder and related
accrued interest - - 76,000
Exercise of stock options (6,500) - -
Excess of market price over exercise price on options granted during the year - - 825,129
Net loss - (1,559,781) (1,559,781)
-----------------------------------------------
Balances at April 30, 1994, carried forward $ (6,500) $(2,098,681) $ (281,959)
-----------------------------------------------
</TABLE>
Page 1
<PAGE> 26
LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Price Common stock
per ----------------------------
Date Share Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at April 30, 1994, brought forward $ - 13,134,955 $ 1,823,222
Common stock issued for payment of professional fees and royalty obligations 5/31/1994 0.499 1,054,863 526,500
Exercise of options for cash 6/30/1994 0.092 207,400 18,996
Cash payment of note receivable from stockholder 7/31/1994 0 - -
Exercise of options for cancellation of note payable 8/4/1994 0.116 197,680 23,000
Grant of stock options in payment for accrued salary obligations 10/31/1994 0 - 120,000
Exercise of options for notes receivable 11/94-2/95 0.132 1,859,172 246,099
Common stock issued for payment of accounts payable 12/31/1994 0.835 45,796 38,240
Exercise of Class A warrants for cash 1/31/1995 2 1,650 3,300
Exercise of Class A warrants for payment of note payable 1/31/1995 2 50,000 100,000
Net loss 0 - -
-----------------------------
Balances at April 30, 1995 - 16,551,516 $ 2,899,357
Common stock issued for payment of accounts payable 9/28/1995 0.625 20,800 13,000
Common stock issued for cash 11/6/1995 0.800 12,500 10,000
Common stock issued in exchange for investments in affiliates 12/4/1995 - 11,884,615 -
Common stock issued for payment of accounts payable 12/10/1995 0.500 150,000 75,000
Exercise of options for cash 12/27/1995 0.116 202,320 23,541
Common stock issued for payment of accounts payable 1/12/1996 0.750 100,000 75,000
Offset of notes receivable from stockholders with related loans from
stockholders - - -
Common stock issued for payment of accounts payable 3/11/1996 0.750 100,000 75,000
Common stock issued for payment of note payable and accrued interest and
royalties 4/29/1996 1.032 250,000 258,011
Excess of market price over exercise price on options granted during the year 4/30/1996 - - 41,500
Net loss - - -
-----------------------------
Balances at April 30, 1996, carried forward - 29,271,751 $ 3,470,409
-----------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Notes Deficit Total
receivable accumulated stock-
from during the holders'
stock- development equity
holders stage (deficit)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balances at April 30, 1994, brought forward $ (6,500) $ (2,098,681) $ (281,959)
Common stock issued for payment of professional fees and royalty obligations - - 526,500
Exercise of options for cash - - 18,996
Cash payment of note receivable from stockholder 6,500 - 6,500
Exercise of options for cancellation of note payable - - 23,000
Grant of stock options in payment for accrued salary obligations - - 120,000
Exercise of options for notes receivable (246,099) - -
Common stock issued for payment of accounts payable - - 38,240
Exercise of Class A warrants for cash - - 3,300
Exercise of Class A warrants for payment of note payable - - 100,000
Net loss - (1,303,988) (1,303,988)
------------------------------------------------
Balances at April 30, 1995 $ (246,099) $(3,402,669) $ (749,411)
Common stock issued for payment of accounts payable - - 13,000
Common stock issued for cash - - 10,000
Common stock issued in exchange for investments in affiliates - - -
Common stock issued for payment of accounts payable - - 75,000
Exercise of options for cash - - 23,541
Common stock issued for payment of accounts payable - - 75,000
Offset of notes receivable from stockholders with related loans from -
stockholders 117,315 - 117,315
Common stock issued for payment of accounts payable - - 75,000
Common stock issued for payment of note payable and accrued interest and -
royalties - - 258,011
Excess of market price over exercise price on options granted during the year - - 41,500
Net loss - (402,536) (402,536)
-----------------------------
Balances at April 30, 1996, carried forward $ (128,784) $(3,805,205) $ (463,580)
------------------------------------------------
</TABLE>
Page 2
<PAGE> 27
LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)
STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Price Common stock
per ----------------------------
Date Share Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at April 30, 1996, brought forward - 29,271,751 $ 3,470,409
Common stock issued for payment of accrued salaries 6/15/1996 0.690 21,200 14,624
Common stock issued for payment of services 7/10/1996 1.000 75,000 75,000
Exercise of options for note receivable 7/20/1996 0.533 150,000 80,000
Removal of stop stock transfer for cash 8/10/1996 - - 3,500
Common stock issued for note receivable 8/15/1996 1.000 275,000 275,000
Common stock issued for payment of note payable and accrued interest 8/22/1996 0.690 100,000 69,000
Exercise of options for cash 10/3/1996 0.500 50,000 25,000
Common stock issued for payment of services 12/10/1996 1.000 75,000 75,000
Common stock issued for payment of services 3/10/1997 0.704 75,000 52,800
Common stock exchanged for stock of discontinued subsidiary 3/25/1997 - (4,216,601) -
Net loss - - -
----------------------------
Balances at April 30, 1997 - 25,876,350 $ 4,140,333
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Notes Deficit Total
receivable accumulated stock-
from during the holders'
stock- development equity
holders stage (deficit)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balances at April 30, 1996, brought forward $ (128,784) $(3,805,205) $(463,580)
Common stock issued for payment of accrued salaries - - 14,624
Common stock issued for payment of services - - 75,000
Exercise of options for note receivable (80,000) - -
Removal of stop stock transfer for cash - - 3,500
Common stock issued for note receivable (275,000) - -
Common stock issued for payment of note payable and accrued interest - - 69,000
Exercise of options for cash - - 25,000
Common stock issued for payment of services - - 75,000
Common stock issued for payment of services - - 52,800
Common stock exchanged for stock of discontinued subsidiary - - -
Net loss - (838,139) (838,139)
----------------------------------------------
Balances at April 30, 1997 $ (483,784) $(4,643,344) $(986,795)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
Page 3
<PAGE> 28
LEADING-EDGE EARTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND POOLING INTERESTS
Leading-Edge Earth Products, Inc. believes its products have
applications for single-family, multifamily residential, and low
rise commercial construction. As of April 30, 1997, the Company
is considered to be in a transition from the development stage to
the production stage through its affiliates and thus the
Company has not generated significant revenues from its research
and development efforts and operations have been financed
primarily through the issuance of equity securities, outside
loans, and loans from shareholders. The Company received its
first license fee revenue in 1995.
The Company is the result of a merger on December 29, 1992 of
Leading-Edge Earth Products, Inc., a Washington corporation
incorporated on December 23, 1991 (old LEEP), and Crystal Asset
Management, Inc. (CAM), an inactive public company incorporated
in 1968 in the state of Oregon.
This merger has been accounted for as a pooling of interests.
Accordingly, the assets, Liabilities, equity and operations of
both entities have been combined for all periods prior to the
merger.
December 23, 1991 is shown as the inception date of the Company
inasmuch as that is the date old LEEP was incorporated and
activities relating to the Company's business began.
(b) PROPERTY AND EQUIPMENT
All remaining property and equipment has been written down to
zero or sold as the Company expects all production to be carried
out by affiliate.
On August 29, 1996, the Company assumed an agreement entered into
by Grant Record on March 30, 1996. In this agreement, the
inventor disclosed certain proprietary
<PAGE> 29
information for the use of Magnesium Oxide Technology (MgO) and
the Company received an exclusive and assignable right to the
licensed technology, including enhancements made by the licensee.
The MgO technology is used to control odors produced in the
manufacturing process of its principal product. The Company
obtained the right to use the technology by paying $25,822 which
it financed with a stockholder loan. The Company shows this
purchase as an intangible asset. Amortization has been taken on
this asset from the date acquired by the Company using the
straight-line method over 15 years. The continued right to use
the product depends on the Company's payment of $25,000 per year
minimum royalty to the inventor. The Company's criteria for
developing and/or holding slurry technology is that MgO slurry or
equivalent be low cost, fire proof, water proof, and easy to
apply.
(c) INCOME TAXES
Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax basis of
assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected
to affect taxable income. Losses prior to 1995 will be
capitalized. From 1995 on, the year in which the Company received
its first license revenue, most losses should be carried forward.
Valuation allowances are established when necessary to reduce tax
assets to the amount expected to be realized. Income tax expense
is the tax payable or refundable for the period plus or minus the
change during the period in net deferred tax assets and
liabilities.
(d) NET LOSS PER COMMON SHARE
Net Loss per common share is computed based on weighted average
number of common shares and common share equivalents outstanding.
When dilutive, stock options are included as common share
equivalents using the treasury stock method.
There was no difference between primary and fully diluted
earnings per share for all periods presented.
<PAGE> 30
Shares outstanding for the loss calculations are net of 4,216,601
shares which were retired during the last quarter of the
reporting period.
(e) INVENTORY
Inventory, consisting principally of raw materials used in
producing test samples and to be used in full-scale production,
has been written down to zero as the Company expects all
production to be carried out by affiliates.
(f) STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 (SFAS 123)
which addresses the accounting for stock-based compensation
arrangements. SFAS 123 permits a company to choose either a new
fair-value-based method or the current APB Opinion 25
intrinsic-value-based method of accounting for stock-option-based
compensation arrangements.
Options to purchase 100,000 shares of restricted rule 144 stock
issued during the year were canceled before year end at no cost
to the Company and are not valued. Options to purchase 400,000
shares of restricted rule 144 stock were valued at $147,597. The
Black and Scholes method for valuing stock options was used with
the following assumptions:
Grant date January 7, 1997 Options to purchase 300,000
shares Stock price at date of issue 0.97 Exercise price
0.75 Expected life is the full term of 3 years Volatility
has been measured to be 37.8%
There are no dividends included in the calculations
Risk free interest rate used is 5.5%
Grant date April 23, 1997 Options to purchase 100,000
shares Stock price at date of issue 0.53 Exercise price
0.50 Expected life is the full term of 5 years Volatility
has been measured to be 37.8%
There are no dividends included in the calculations
Risk free interest rate used is 6.0%
<PAGE> 31
For the year ended April 30, 1996 options to purchase 200,000 shares of
restricted rule 144 stock issued in June, 1995 expired without being
exercised at no cost to the Company and are not valued. $41,500 was
recognized as an expense during 1996 based on the intrinsic value of
options granted during that year.
The pro forma effect of valuing the options for financial reporting
purposes would be to increase the net loss for fiscal 1997 by $147,597
to $985,736. The effect on loss per share would be negligible for 1997.
The Company has adopted SFAS 123 for the year ending April 30, 1997.
(2) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(3) GOING CONCERN
The Company's ability to continue as a going concern is dependent upon
its success in transforming its building panel technology into a
profitable operation. On December 4, 1995 the Company entered into an
agreement with WLP Associates, Ltd. (WLP) of Williamsport, PA, to form
Agile Building Technology, Inc.(Agile). That agreement has been canceled
and a new agreement between the parties was finalized on March 15, 1997.
Management believes this agreement will provide the necessary resources
to transform its technology into a commercially viable product.
Under the terms of the new Agreement, 2,000,000 shares of its common
stock will remain the property of Agile Building Technology and the
Company will retain its 35% ownership interest in Agile. LEEP received
$98,000 cash during the reporting period. The Company has the right to
receive an additional $226,820 in cash which has yet to be received by
the Company. The Company will be permitted to develop joint venture
arrangements with other interested parties and use its own or Agile's
technologies.
<PAGE> 32
The successful funding and development of affiliates as profitable
manufacturing entities is important to the Company's ability to continue
as a going concern. The accompanying financial statements have been
prepared on the basis that the Company will be able to continue in
existence as a going concern. These statements do not include any
adjustments that might result from the outcome of this uncertainty.
(4) INVESTMENTS IN AFFILIATE
The Company has a 35% interest in Agile with the remaining 65% interest
held by WLP. This investment is accounted for using the equity method.
Any asset or equity distributions from Agile will be made in accordance
with the respective ownership interests. Agile is established to
manufacture building panels using technology developed jointly and/or
independently by the Company and/or Agile and is just now starting
production. Agile's primary assets are its investment in the Company's
common stock, an operating production line at the Winter Panel
Corporation facility in Brattleboro, Vermont, research and pilot
production facilities in leased property located in Williamsport,
Pennsylvania, and its license right to use certain technology developed
by the Company, and technology and products jointly developed during the
period from December 4, 1995 to date. The Company has recorded no value
related to this investment due to the indeterminable values related to
the Company's common stock and technology given or the common stock of
Agile received in the investment transaction. Agile has incurred
operating losses since its inception in December 1995 through the period
ended April 30, 1997.
The Company has not recognized its proportionate share of Agile's net
losses as the Company has no obligation to fund any such losses and
carries its investment in Agile at zero.
As part of the cancellation of the December 4, 1995 agreement as
discussed in note 3, a total of 4,216,601 shares of common stock have
been released from escrow and subsequently retired.
(5) RELATED PARTY TRANSACTIONS
(a) ARCHITECTURAL SERVICES AGREEMENT
The Company has entered into an agreement with the owner of DB
Associates, a stockholder and member of the Board
<PAGE> 33
of Directors, to provide architectural and sales services. In
addition to normal hourly rates for architectural services, DB
Associates shall be paid for sales and marketing efforts at the
rate of $1.00 per panel for each panel sold to persons or
companies for which DB Associates performs architectural work.
DB Associates will alternatively receive $.25 per panel for
providing architectural review for compliance with the Company's
standards on projects with which DB Associates is not directly
involved as architect.
(b) CONSULTING AGREEMENTS
For the year ending April 30, 1997, the Company recognized
approximately $152,000 in consulting revenues from Agile for
services performed by an officer and stockholder of the Company.
In June 1996 the Company entered a consulting agreement with an
officer of the Company for which consultant was compensated
$5,000 per month for July, August, and September. Beginning in
October consultants compensation became $10,416.67 per month. The
consulting agreement was canceled in February of 1997.
In January of 1997 the Company entered a consulting agreement
with an officer of the Company for which the consultant is
compensated $10,417 per month and was granted options to purchase
300,000 shares of company stock at $0.75 per share
In January, 1996 the company entered a consulting agreement with
a vendor and stockholder to provide certain corporate development
activities including broker meetings, a publishing and mailing
program, broker and shareholder relations, and other corporate
consulting in the area of financial relations and strategic
planning. This vendor received 225,000 shares of Company stock
for services rendered during the year ended April 30, 1997.
(c) STOCK PURCHASE AGREEMENT WITH LEEP STRUCTURES, INC.
On June 22, 1993, the Company entered into a stock purchase
agreement with LEEP Structures, Inc. (LSI) of Michigan. Under the
terms of this agreement LSI purchased 665,000 shares for the
Company's common stock
<PAGE> 34
for $360,000. Additionally, LSI was granted an option to purchase
up to 200,000 additional shares of the Company's common stock at
$2.00 per share for a period of three years subject to the
achievement of certain levels of sales by LSI. This option
expired in June 1996.
The agreement grants to LSI the right of first refusal to act as
the Company's exclusive manufacturer's representative to market
the Company's products in seven mid-western states. LSI also had
the right of first refusal to participate with the Company in
building a manufacturing facility in these states. The rights
have expired and/or have been re-negotiated by WLP and Agile.
(6) PREFERRED AND COMMON STOCK
The Articles of Incorporation authorized issuance of up to 100,000,000
shares of common stock and up to 10,000,000 shares of preferred stock.
No preferred shares have been issued. The Board of Directors has the
authority, without further stockholder action, to determine the
preferences, limitations, and relative rights of the preferred stock,
subject to the requirements on the Oregon Business Corporation Act.
On March 4, 1994 the Company registered for sale with the Securities and
Exchange Commission 6,000,000 shares of common stock to be issued upon
exercise of outstanding warrants and 995,00 shares are subject to
registration rights agreements which restrict the number of shares that
a stockholder can sell into the market during any three-month period for
a period of three years.
On August 6, 1995 the Company's Board of Directors voted to withdraw the
remaining unsold 6.943,500 shares of common stock registered for sale
with the SEC on March 4, 1994.
Of the Company's common stock outstanding at April 30, 1997, only the
1,193,683 shares originally held by the stockholders of CAM and the
995,000 shares registered on March 4, 1994 and subsequently sold, and
those shares issued after December 29, 1992 where the holding
restrictions had been satisfied are freely tradable, subject to
aforementioned volume limitations. The shares issued pursuant to the
agreement of merger dated December 29, 1992 and any shares issued
subsequent thereto, are "restricted securities" under the Securities Act
of 1933 and, therefor, are subject to limitations on transferability.
<PAGE> 35
All warrants to purchase shares of common stock have been called or have
expired.
21,200 shares of stock was issued to an officer for services, 150,000
shares were issued to a member of the Board in exchange for a fully
secured note receivable, 225,000 shares were issued to a vendor for
services rendered, 100,000 shares were issued to a stockholder in
exchange for a note payable and accrued interest.
(7) STOCK OPTIONS AND NOTES RECEIVABLE FROM STOCKHOLDERS
(a) STOCK OPTIONS
The board of Directors has issued non-qualified stock options to
certain directors, employees, investors and consultants. All
outstanding options are exercisable as of April 30, 1997. The
options are for restricted shares under Rule 144 of the SEC.
<TABLE>
<CAPTION>
PRICE PER
SHARES SHARE
-----------------------
<S> <C> <C>
Balance at April 30, 1992 -- $ --
Granted 2,416,660 .07 - .50
Balance at April 30, 1993 2,416,660 .07 - .50
Granted 1,071,786 .41 -2.00
Exercised (100,000) .07
Balance at April 30, 1994 3,388,446 .07 -2.00
Granted 520,000 .13 - .50
Exercised (2,264,252) .07 - .50
Expired (80,960) .50 - .59
Balance at April 30, 1995 1,563,234 .07 -2.00
Granted 225,000 .50 - .70
Exercised (202,320) .12
Expired (405,311) .43 -2.00
Balance at April 30, 1996 1,180,603 .07 -2.00
Granted 500,000 .50 -1.00
Exercised (50,000) .50
Expired (603,298) .07 -2.00
Balance at April 30, 1997 1,027,305 .41 -2.00
</TABLE>
(b) NOTES RECEIVABLE FROM STOCKHOLDERS
In November 1994 and January 1995, the Company issued a total of
784,569 shares of unregistered common stock to a foreign,
off-shore corporation upon exercise of stock options that the
foreign corporation had purchased from an officer and director of
the Company. Payment upon
<PAGE> 36
exercise of the options was made in the form of demand notes
payable to the Company in the amount of $128,784, payable between
November 30, 1995 and January 6, 1996, with interest accruing at
8%. The officer responsible for the original transfer of the
784,659 shares left the Company during the fiscal year ended
April 30, 1996. The note has expired and the Company's shares are
not legally transferable. In February 1995, the Company issued
1,074,603 shares of unregistered common stock to another foreign
off-shore corporation upon exercise of stock options that the
foreign corporation had purchased from an officer and director of
the Company. Payment upon exercise of the options was made in the
form of a $117,315 note bearing interest at 8% per annum. This
note was paid during the fiscal year ended April 30, 1996 by
offsetting amounts owed by the Company to the selling optionee
(director/officer) and the foreign company. During fiscal year
1994, options to purchase 100,000 shares were exercised by an
officer and director of the Company at an exercise rate of $.065
per share. The aggregate purchase price of $6,500 was paid by a
note receivable due one year after issuance bearing interest at a
rate of 6%, such note was paid in full during fiscal year 1995.
In August, 1996 a stockholder provided funding to Agile in
exchange for LEEP stock for which the Company received a note
receivable for $275,000 with interest at 15%., An officer of the
Company exercised options to purchase 150,000 shares of stock
using a full recourse note for $80,000 with collateral in the
form of Company stock. The collateral stock and the shares issued
against the note are held by the Company. No transfers are
permitted until the note is fully paid.
The outstanding balance of these receivables at April 30, 1997 is
shown on the balance sheet as a reduction in equity.
(8) NOTES PAYABLE AND LOANS FROM STOCKHOLDERS
(a) NOTES PAYABLE
The Company owed $74,630 and $40,000 in unsecured, demand notes
payable at April 30, 1997 and 1996, respectively, whereby
interest accrues at .75% per month.
(b) LOANS FROM STOCKHOLDERS
<PAGE> 37
At April 30, 1997 and 1996, the Company owed $324,575 and
$177,798, respectively, in unsecured, demand notes payable to
stockholders with interest accruing at 8% or 10% per annum.
(9) INCOME TAXES
Deferred tax assets primarily consist of capitalized start up expenses
and net operating loss carry forwards. There are no significant deferred
tax liabilities. A valuation allowance has been established to reduce
the deferred tax assets to zero as a result of the development stage of
the Company and its recurring losses. Differences between the cumulative
net loss for financial reporting purposes and that available for income
tax purposes arise primarily as a result of nondeductible expenditures
paid by the issuance of options for securities and capitalized start up
expenses.
Net operating loss carry forwards for federal income tax purposes which
are available to offset future taxable income, if any, expire as
follows:
<TABLE>
<S> <C>
2007 $ 3,000
2008 15,000
2009 7,000
2010 31,000
2011 1,091,000
2012 1,627,000
</TABLE>
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include cash, receivables, accounts
payable, notes payable and loans from stockholders. Except for notes
receivable from stockholders and loans from stockholders, the Company
believes that the fair value of these financial instruments approximates
their carrying amounts based on current market indicators, such as
prevailing market rates.
(11) INVESTMENT SERVICES AGREEMENT
On June 13, 1994, the Company entered into a consulting agreement with
an investment company. The Company agreed to pay the investment company
a consulting fee of 5% of all moneys raised on the Company's behalf. As
part of the agreement, the Company also issued 500,000 of restricted
common shares to the owners of the investment company upon
<PAGE> 38
signing of the agreement. Pursuant to the agreement, an additional
500,000 restricted common shares were to be issued after the sale of
800,000 shares of Company stock. This agreement expired in December 1994
and the Company has requested return of the original 500,000 shares due
to nonperformance by the investment company.
(12) COMMITMENTS AND CONTINGENCIES
On March 30, 1996, the Company entered into a licensing agreement with
Polymag Products Research Company and Leonard Moon under which the
Company received the right to use proprietary magnesiumoxide technology.
The agreement required the payment of $25,000 in cash, a minimum annual
royalty of $25,000 and a consulting fee of $2,000 per month for twelve
months. The minimum annual royalty fee has been prorated at $18,750 for
the first year. The consulting fee was paid in full and initial
royalties were paid but subsequent royalties are not being paid while
the Company investigates other solutions which are compatible with the
Companies latest panel technology.
On July 27, 1995, the Company filed a complaint for Declaratory Judgment
and Injunction with the Superior Court of Washington in Seattle,
Washington, enjoining a former officer of the Company, Tim Metz (Mr.
Metz), not to use any patented or trade secret information covered by
his employment agreement. At the same time, suit was brought against Mr.
Metz in conjunction with severance details as it relates to his
employment contract and method of compensation. Mr. Metz filed suit in
the same time frame claiming certain rights to technology and damages in
excess of $395,000. Although the suit has been pending for over a year,
no discovery has taken place. Based on the Company's knowledge of Mr.
Metz's claims, the Company is of the opinion that it has meritorious
defenses and intends to defend vigorously against the claims brought by
Mr. Metz.
On August 6, 1995, the Company entered into a Memorandum of Basic
Understanding (MOBU) with Advanced Technology Builders, Inc. (ATB) of
Bainbridge Island, Washington, under which ATB will become a long-term,
price protected customer for the Company's building panels. According to
the MOBU, ATB will order sufficient panels to construct fifteen
residential townhouse units on Bainbridge Island. This order
relationship has been transferred to Agile.
(13) FOURTH QUARTER ADJUSTMENTS
<PAGE> 39
As a result of the agreement completed in March of 1997 with Agile and
WLP the Company does not expect to collect license and consulting
revenues and interest due from Agile until Agile is in production and is
in a position to make payments on its payables to the Company.
Consequently the Company has established a reserve for receivables from
Agile by $222,750
(14) SUBSEQUENT EVENTS
In May, 1997 the Company signed a contingent earnest-money agreement and
placed $15,000 in trust on the purchase of property to be used by a yet
to be formed subsidiary in Twin Falls Idaho. Management has decided to
withdraw its offer to purchase and is arranging to recover the
earnest-money deposit and apply it to another property in Idaho.
In June of 1997 the Company made a down payment to purchase metal to be
used by the yet to be formed affiliate in Twin Falls Idaho.
In May, 1997 the Company issued 62,500 shares to a vendor to reduce
accounts payable to the vendor and 75,000 shares to a vendor for
services rendered. In June, 1997 the Company issued 37,272 shares to a
stockholder in exchange for a note payable, 81,977 shares to a vendor in
exchange for accounts payable due, 113,690 shares to an officer for
accrued contract salary due, 28,819 to an officer for accounts payable
due, and 114,133 to a board member for cash. In August, the Company
issued 316,800 shares of stock in payment on its credit line established
with a credit facility in June. In October 1997 the Company agreed to
issue 424,000 shares of rule 144 stock in exchange for stockholder debt.
In September, 1997 the Company granted options to purchase 250,000
shares of rule 144 stock at $0.375 to its directors.
In June, 1997 the Company obtained a line of credit which allows
borrowing up to $550,000, depending on the market price of the Company's
stock, to be paid back monthly with Company stock or cash. In August the
Company drew down $137,500 on this agreement which has since been paid
back with stock. See Exhibit (3)10.5.
The Company entered into an agreement with consultant to introduce the
Company to foreign opportunities and obtain executed confidentiality
agreements in a form satisfactory to the Company for such opportunities.
Consultant received 400,000 regulation "S" shares of Company common
stock. Additional fees may be earned by Consultant and must be paid
<PAGE> 40
from transaction proceeds approved by the Company. Consultant will also
receive, at equivalent fair market value for services rendered, shares
of common stock to be exchanged during the first period at $.40/share,
and for such valuation as may be mutually agreed for services in
addition to those agreed. This agreement provides that 400,000 shares be
issued to consultant under Reg."S" U.S. security provisions.
The Company entered into an agreement with a consultant to advise on and
assist (1) establishment of international joint ventures, strategic
alliances and merger/acquisition possibilities, (2) development and
operation of the Company's products abroad, and (3) establishment of one
or more international business relationships with similar companies
engaged in the same field as the Company. Consultants received 400,000
Regulation "S" shares of Company common stock. Additional fees may be
earned by Consultant and must be paid from transaction proceeds approved
by the Company. Consultant will also receive, at equivalent fair market
value for services rendered, shares of common stock to be exchanged
during the first period at $.40/share, and for such valuation as may be
mutually agreed for services in addition to those agreed. This agreement
provides that 400,000 shares be issued to consultant under Reg."S" U.S.
security provisions.
The Company entered into an agreement with a consultant to provide
marketing, international consulting and general corporate guidance.
Consultant received 400,000 Regulation "S" shares of Company common
stock. Additional fees may be earned by Consultant and must be paid from
transaction proceeds approved by the Company. Consultant will also
receive, at equivalent fair market value for services rendered, shares
of common stock to be exchanged during the initial period at $.40/share,
and for such valuation as may be mutually agreed for services in
addition to those agreed. This agreement provides that 400,000 shares be
issued to consultant under Reg."S" U.S. security provisions.
In October 1997 the consulting agreement starting in January, 1997
described in (5)(b) above was canceled when the company's president
transferred to Agile Group, Inc.
<PAGE> 41
SIGNATURES
In accordance with Section 13 or 15(d) or 15(d) of the Exchange Act, the
registrant causes this report to be signed on its behalf by the undersigned or,
their in duly authorized representatives, and in the capacities, and on the date
indicated.
LEADING-EDGE EARTH PRODUCTS, INC.
By: Grant C. Record, its CEO and Secretary
Date October 20, 1997
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
Grant C. Record Secretary and Director 10/23/97
Donald a. Bazemore Chairman of the Board 10/20/97
of Directors
James R. Medley Treasurer and Director 10/27/97
Way W. Lee Director 10/20/97
Grant Todd Director ________
</TABLE>
<PAGE> 1
EXHIBIT 4
INSTRUMENTS DEFINING RIGHTS OF HOLDERS
There have been no changes in instruments defining the rights of holders of any
class of securities.
<PAGE> 1
EXHIBIT 10.1
CONSULTING AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into effective as of
the 16th day of June, 1997 by and between Leading Edge Earth Products, Inc., an
Oregon corporation ("Company") with offices located at 319 Nickerson Street,
Suite 186, Seattle, WA 98109 and Jasari International, Inc. ("Consultant") a
Belize Corporation. Hereinafter either party may be referred to as "Party" and
collectively as "Parties".
RECITALS:
WHEREAS, Company's primary business activity is to develop, manufacture
and commercialize its proprietary technology for cost/performance effective
building systems, and
WHEREAS, Company desires to develop business opportunities or strategic
partnership/relationships abroad; and
WHEREAS, Consultant desires to introduce Company to such relationship
opportunities.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
ARTICLE I
CONSULTING
1.1 Description.
Company hereby retains Consultant to perform, and Consultant hereby agrees to
perform, consulting services to Company as herein provided.
1.2 Services to be Performed.
Consultant will (a) introduce Company to foreign opportunities and (b) assist
Company in obtaining executed confidentiality agreements in a form satisfactory
to Company from such opportunities.
1
<PAGE> 2
1.3 Representations of Consultant.
As an inducement to, and to obtain the reliance of LEEP in connection with the
sale of the shares of Common Stock, Consultant represents and warrants as
follows:
a. Consultant is a corporation organized under the jurisdiction of Belize.
b. All corporate and other proceedings required to be taken by or on part of
Consultant to authorize Consultant to enter into and carry out this
Agreement and to acquire the shares of Common Stock hereunder have been
or, prior to the Closing will be, duly authorized and properly taken.
This Agreement has been duly executed and delivered by Consultant and is
valid and enforceable against it in accordance with its terms, subject to
laws of general application relating to bankruptcy, insolvency and the
relief of debtors and the rules of law governing specific performance,
injunctive relief and other equitable remedies. Consultant has the
capacity in all respects to carry out the services provided herein which
are the consideration for shares; the services provided for said shares
shall be at equivalent fair market value for the shares to be exchanged
at $.40/share for current services, and for such valuation as may be
mutually agreed for services in addition to those agreed.
c. Consultant is not a "U.S. Person" as defined in Regulation S promulgated
under the Securities Act of 1933, as amended, by the Securities and
Exchange Commission in that Consultant is not:
(i) a natural person resident in the United States;
(ii) a partnership or corporation organized or incorporated under the
laws of the United States;
(iii) an estate of which any executor or administrator is a U.S. Person;
(iv) a trust of which any trustee is a U.S. Person;
(v) an agency or branch of a foreign entity located in the United
States;
(vi) a non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary organized or
incorporated in the United States; and
2
<PAGE> 3
(vii) a partnership or corporation organized or incorporate under the
laws of any foreign jurisdiction formed by a U.S. Person
principally for the purpose of investing in securities not
registered under the Securities Act.
d. At all relevant times related to the negotiation, offer and sale of the
shares of Common Stock hereunder, Consultant was outside the United
States.
e. Consultant acknowledges that the Common Stock is subject to a
"restricted period" during which the Common Stock may not offered or
resold to or for the benefit of any U.S. Person, and that after the
expiration of the restricted period the Common Stock may be resold in
the United States or to U.S. persons without other restrictions,
providing an exemption from the registration requirements of the
Securities Act is available.
f. Consultant agrees that any offer or sale of the Common Stock prior to
the expiration of the "restricted period" will be made in accordance
with the provisions of Regulation S; and all offering materials and
documents used in connection with offers and sales of the Common Stock
prior to the expiration of the restricted period must include statements
to the effect that the Common Stock has not been registered under the
Securities Act and may not be sold in the United States or to U.S.
Persons unless the securities are registered under the Securities Act,
or an exemption from the registration requirements of the Securities Act
is available.
g. Consultant agrees that it is acting as a principal and that it or its
affiliates are not acquiring the shares hereunder with a purpose to
distributing said shares without registration or in an attempt to avoid
the registration requirements of the U.S. Securities laws or any other
applicable jurisdictions.
h. Consultant represents that it is a sophisticated corporation with
respect to investment transactions, and has had the opportunity to
review all Reports of the Company which are required to be filed under
the Exchange Act of 1934, and to ask questions with respect thereof; in
addition, Consultant represents that it is an "accredited investor" as
defined by Regulation D promulgated under the Securities Act of 1933.
Consultant further represents that it became aware of this investment
opportunity through a private introduction by related persons and that
it did not become aware of said opportunity through a general
solicitation of any form whatsoever.
3
<PAGE> 4
1.4 Independent Contractor.
Consultant acknowledges that Consultant's retention does not confer upon
Consultant any personal claim upon any license, right, product of Company, nor
does this Agreement confer any employment right on Consultant. Consultant agrees
that in performing its duties under this Agreement, it shall be operating as a
foreign independent contractor. Nothing contained herein shall in any way
constitute any association, partnership, employer/employee relationship, or
joint venture between the parties hereto, or be construed to evidence the
intention of the parties to establish any such relationship. Neither party shall
have any right, power or authority to make any representation nor to assume or
create any obligation, whether express or implied, on behalf of the other, or to
bind the other party in any manner whatsoever. Both of the parties agree,
respectively, that they shall not hold themselves out in any manner that would
be contrary to the terms of this Paragraph 1.4
1.5 Confidentiality and Non-Disclosure.
Consultant acknowledges that in the performance of services under this
Agreement, he may acquire confidential information concerning Company
technology, know-how, product plans and specifications, records, business
concepts, financial matters and other information which are valuable, special
and unique assets of Company (herein "Information"). Consultant will not, during
or after the term of this Agreement, disclose any Information, no matter how
acquired, to any person or entity for any reason or purpose outside of Company's
usual business activities as defined hereunder, and will not in any manner
directly or indirectly aid or be a party to any acts, the effects of which would
tend to divert, diminish or prejudice the technology, good will, business or
business opportunities of Company. In the event of a threatened breach by
Consultant of the provisions of this paragraph, Company shall be entitled to an
injunction restraining Consultant from disclosing any such information or from
rendering any services to any person or entity to whom any such information has
been disclosed or threatened to be disclosed.
1.5.1 In exchange for Company executing this Agreement and agreeing to
the retention of Consultant's Services by Company, Consultant
does hereby enter into this Covenant of Confidentiality and
acknowledges the adequacy of the consideration to support this
Covenant.
1.5.2 The covenants made by Consultant under Section 1.5 shall survive
the expiration or termination of this Agreement.
4
<PAGE> 5
ARTICLE II
TERM OF CONTRACT
2.1 Term.
The term of this Agreement shall be from the effective date hereof until June
15, 1999, except as provided in Article III.
2.2 Termination.
This agreement may be terminated with both parties' mutual consent or by the act
of an arbitrator agreed to by both parties, and such agreement will not be
unreasonably withheld by either party.
ARTICLE III
COMPENSATION
3.1 Compensation.
Consultant by executing this Agreement will be immediately paid Four Hundred
Thousand (400,000) Regulation "S" shares ("Consultant Shares") of Company common
stock. Additional fees may be earned by Consultant and must be paid from
transaction proceeds approved by the Company. Company reserves the right to
cancel this contract within 45 days of the date hereof by notifying Consultant
by US certified mail, and if so exercised all shares are to be returned to the
Company.
3.2 Expenses.
Consultant shall be responsible for the payment of any expenses incurred by
Consultant in the providing of Services hereunder.
3.3 Stock Conditions.
3.3.1 All shares referenced herein as compensation to Consultant are to
be issued in Street Name of Rothschild Group, S.A. and be delivered
to Rothschild Group S.A. at Lex House, George Street, P.O. Box
N-7101, Nassau Bahamas attention Andrew Bowe - Attorney.
5
<PAGE> 6
3.3.2 Consultant agrees to a two-year hold on all the shares referenced
herein, subject to third party rights. Consultant surrenders all
rights to the ownership and such rights that would accompany
ownership to Rothschild Group, S.A. while the shares are with
Rothschild Group, S.A. Consultant reserves the right to require
Company counsel to provide opinions in regard to Regulation S that
may be required for Consultant shares.
3.3.3 Consultant further agrees to limit the liquidation process of
Consultant shares in such a manner that will not adversely effect
the trading market for the Company's securities. Consultant will
not sell more than 10% of total LEEP shares owned either obtained
herewith or in future compensation paid by LEEP to Consultant over
any thirty-day period. Furthermore Consultant agrees to hold any
third party entities having interest in Consultant shares to item
3.3.2 and 3.3.3 herein.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.1 Entire Agreement.
This Agreement constitutes the entire agreement between the parties and
supersedes any prior written or oral agreements concerning the subject matter
contained herein.
4.2 Amendment.
This Agreement may be amended only by the written consent of the parties.
4.3 Waiver.
No waiver of any breach or default of this Agreement by either party hereto
shall be considered to be a waiver of any other breach or default of this
Agreement.
4.4 Notices.
Any notices pertaining to this Agreement shall be in writing and shall be
transmitted by personal hand delivery or fax to an officer or director of
Company or to Consultant, or through the facilities of the United States Post
Office, certified mail, return receipt requested. The addresses set forth below
for the respective parties shall be the places where notices shall be sent,
unless written notice of a change of address is given.
6
<PAGE> 7
Company: Leading Edge Earth Products, Inc.
319 Nickerson Street
Suite 186
Seattle, WA 98109.
Consultant: Jasari International, Inc.
SEE ITEM 4.5 HEREIN
Notices given by mail shall be deemed to be delivered on the day such notice is
deposited in the United States mail, postage prepaid or by overnight courier
receipt.
4.5 Development Period Contact.
All correspondence between parties during the first sixty (60) days of the
Agreement will utilize the firm of Fidelity Capital Houston Texas or their
assignee. All inquiries should commence with a faxed letter stating the request
or inquiry to:
Fidelity Capital
c/o Mark Rice
4617 Montrose Blvd., C-215
Houston, TX 77006
713-520-0676 (ext. 8)
713-520-0169
4.6 Cost of Default.
In addition to any other rights or damages contained herein, in the event either
party defaults in the performance of any term or condition hereunder, the
defaulting party shall pay all expenses and costs incurred by the other party in
enforcing the terms hereof, including, but not limited to, costs, reasonable
attorney's fees, expert witness fees and/or deposition costs, whether incurred
through legal action or otherwise and whether incurred before or after judgment.
4.7 Assignment.
Either parties' rights and duties pursuant to this Agreement are not assignable
without the express written agreement of both parties hereto.
4.8 Consultant not Exclusive Consultant of Company.
Nothing herein shall restrict or otherwise limit the right of Company to engage
or retain other consultants, either as employees or as independent contractors.
7
<PAGE> 8
4.9 No Representation Regarding Tax Treatment.
No representation or warranty is being made by any party to any other regarding
the treatment of this transaction for federal or state income taxation. Each
party has relied exclusively on its own legal, accounting and other tax advisers
regarding the treatment of this transaction for federal and state income taxes
and no representation, warranty or assurance from any other party or such other
party's legal, accounting or other adviser.
4.10 Governing Law.
It is understood and agreed that all communications, negotiations, meetings,
agreements and understandings relative to this Agreement have taken place in or
from the state of Tennessee or the state of Washington. No communications,
offerings, proposals or other forms of negotiations have been conducted from the
state of Pennsylvania. This agreement may not be modified or terminated orally,
and shall be construed and interpreted according to the laws of the state of
Washington and enforced in its courts.
4.11 Third Party Beneficiary.
The Company and Consultant are the only parties to this Agreement, and no one
else shall be deemed a third party beneficiary.
4.12 Confidential Information.
a) Consultant recognizes that the relationship created by this
Agreement may involve access by Consultant to information of
substantial value regarding LEEP, including, but not limited to,
designs, drawings, plans, software,, material and manufacturing
specifications, devices, trade secrets,, formulae, know-how, methods,
techniques, and processes (whether to LEEP's patents, or otherwise),
as well as financial, business, and product development information,
and customer lists relating to LEEP's products and operations
(collectively, "Confidential Information"). The Confidential
Information shall not include information: (a) in the public domain or
which subsequently falls into the public, (b) which Consultant can
prove was known through a source independent of prior to any
communication by LEEP, or (c) disclosed to Consultant in good faith by
a third party having a legal right to do so.
b) Consultant acknowledges and agrees that the Company owns and has
the legal right to all right, title and interest to the Confidential
Information. Consultant further agrees that it shall (i) maintain the
secrecy and confidentiality of all Confidential Information that comes
to its
8
<PAGE> 9
attention, (ii) take all necessary precautions to prevent any
disbursement of Confidential Information by any of its employees or
agents, and (iii) during the term of this Agreement and for so long as
Confidential Information does not enter into the public domain through
no act or omission of, neither publish, disclose nor disseminate any
part of such Confidential Information in any manner, or use the same,
without the prior written consent of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
Company:
LEADING EDGE EARTH PRODUCTS, INC.
By:
----------------------------
Grant Record
CONSULTANT:
JASARI INTERNATIONAL, INC.
By: /s/ Diane Dentith
----------------------------
Director
9
<PAGE> 1
EXHIBIT 10.2
CONSULTING AGREEMENT
THIS AGREEMENT is made as of the 16th day of June, 1997, by and between
Kane International, Ltd., ("Consultant") a Belize corporation and Leading Edge
Earth Products, Inc., (the "Company") an Oregon corporation with offices at 319
Nickerson Street, Suite 186, Seattle, WA 98109.
WHEREAS, Consultant possesses experience as an international consultant;
and
WHEREAS, the Company is a publicly-held company and files periodic
reports pursuant to the requirements of the Securities Exchange Act of 1934; and
WHEREAS, the Company desires advice and guidance relating to the areas
of expertise of Consultant, as aforesaid; and
WHEREAS, the Company desires to hire Consultant and Consultant is
willing to accept the Company as a client.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed:
1. The Company hereby engages Consultant to render advice and services with
respect to international opportunities applicable to the Company. Consultant
hereby accepts such engagement and agrees to render such advice throughout the
term of this Agreement.
2. Representations of Consultant.
As an inducement to, and to obtain the reliance of LEEP in connection with the
sale of the shares of Common Stock, Consultant represents and warrants as
follows:
A. Consultant is a corporation organized under the jurisdiction of
Belize.
B. All corporate and other proceedings required to be taken by or on
part of Consultant to authorize Consultant to enter into and carry out
this
1
<PAGE> 2
Agreement and to acquire the shares of Common Stock hereunder have been
or, prior to the Closing will be, duly authorized and properly taken.
This Agreement has been duly executed and delivered by Consultant and is
valid and enforceable against it in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and the rules of law governing specific
performance, injunctive relief and other equitable remedies. Consultant
has the capacity in all respects to carry out the services provided
herein which are the consideration for shares; the services provided for
said shares shall be at equivalent fair market value for the shares to
be exchanged at $.40/share for current services, and for such valuation
as may be mutually agreed for services in addition to those agreed.
C. Consultant is not a "U.S. Person" as defined in Regulation S
promulgated under the Securities Act of 1933, as amended, by the
Securities and Exchange Commission in that Consultant is not:
C.1 a natural person resident in the United States;
C.2 a partnership or corporation organized or incorporated
under the laws of the United States;
C.3 an estate of which any executor or administrator is a U.S.
Person;
C.4 a trust of which any trustee is a U.S. Person;
C.5 an agency or branch of a foreign entity located in the
United States;
C.6 a non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary
organized or incorporated in the United States; and
C.7 a partnership or corporation organized or incorporate
under the laws of any foreign jurisdiction formed by a U.S.
Person principally for the purpose of investing in securities not
registered under the Securities Act.
D. At all relevant times related to the negotiation, offer and sale of
the shares of Common Stock hereunder, Consultant was outside the United
States.
E. Consultant acknowledges that the Common Stock is subject to a
"restricted period" during which the Common Stock may not offered or
2
<PAGE> 3
resold to or for the benefit of any U.S. Person, and that after the
expiration of the restricted period the Common Stock may be resold in
the United States or to U.S. persons without other restrictions,
providing an exemption from the registration requirements of the
Securities Act is available.
F. Consultant agrees that any offer or sale of the Common Stock prior to
the expiration of the "restricted period" will be made in accordance
with the provisions of Regulation S; and all offering materials and
documents used in connection with offers and sales of the Common Stock
prior to the expiration of the restricted period must include statements
to the effect that the Common Stock has not been registered under the
Securities Act and may not be sold in the United States or to U.S.
Persons unless the securities are registered under the Securities Act,
or an exemption from the registration requirements of the Securities Act
is available.
G. Consultant agrees that it is acting as a principal and that it or its
affiliates are not acquiring the shares hereunder with a purpose to
distributing said shares without registration or in an attempt to avoid
the registration requirements of the U.S. Securities laws or any other
applicable jurisdictions.
H. Consultant represents that it is a sophisticated corporation with
respect to investment transactions, and has had the opportunity to
review all Reports of the Company which are required to be filed under
the Exchange Act of 1934, and to ask questions with respect thereof; in
addition, Consultant represents that it is an "accredited investor" as
defined by Regulation D promulgated under the Securities Act of 1933.
Consultant further represents that it became aware of this investment
opportunity through a private introduction by related persons and that
it did not become aware of said opportunity through a general
solicitation of any form whatsoever.
3. The services to be rendered by Consultant hereunder shall consist of the
following:
A. Rendering advice and performing services relating to the potential
establishment of international joint ventures, strategic alliances and
merger/acquisition possibilities.
B. Rendering advice and performing services relating to the development
and operation of the Company's products abroad.
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<PAGE> 4
C. Rendering advice and performing services (upon request) relating to
the establishment of one or more international business relationships
with similar companies engaged in the same field as the Company.
4. The term of this Agreement shall commence upon execution of this
Agreement and shall continue for a period of two (2) years.
5. In consideration of the services to be performed by Consultant, the
Company agrees to immediately pay the Consultant 400,000 shares of the
Company's Common Stock with the restrictions set forth below. Company
reserves the right to cancel this contract within 45 days of the date
hereof by notifying Consultant by US certified mail, and if so exercised
all shares are to be returned to the Company.
5.1 All shares referenced herein as compensation to Consultant are to
be issued in Street Name of Rothschild Group, S.A. and delivered
to Rothschild Group S.A. at Lex House, George Street, P.O. Box
N-7101, Nassau Bahamas attention Andrew Bowe - Attorney.
5.2 Consultant agrees to a two-year hold on all the shares referenced
herein, subject to third party rights. Consultant surrenders all
rights to the ownership of the shares and such rights that would
accompany ownership to Rothschild, S.A. while the shares are with
Rothschild Group, S.A. Consultant reserves the right to require
Company counsel to provide opinions in regard to Regulation S
that may be required for Consultant shares.
5.3 Consultant further agrees to limit the liquidation process of
Consultant shares in such a manner that will not adversely effect
the trading market for the Company's securities. Consultant will
not sell more than 10% of total LEEP shares owned either obtained
herewith or in future compensation paid by LEEP to Consultant
over any thirty-day period. Furthermore Consultant agrees to hold
any third party entities having interest in Consultant shares to
item 3.4.2 and 3.4.3 herein.
6. The Company represents and warrants to Consultant that:
A. The Company will cooperate fully and timely with Consultant to enable
Consultant to perform its obligations hereunder.
B. The execution and performance of this Agreement by the Company has
been duly authorized by the Board of Directors of the Company.
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<PAGE> 5
C. The performance by the Company of this Agreement will not violate any
applicable court decree, law or regulation, nor will it violate any
provisions of the organizational documents of the Company or any
contractual obligation by which the Company may be bound.
7. The parties agree that any information provided to either of them by the
other of a confidential nature will not be revealed or disclosed to any person
or entity, except in the performance of this Agreement, and upon completion of
Consultant's services and upon the written request of the Company, any original
documentation provided by the Company will be returned to it.
8. All notices hereunder shall be in writing and addressed to the party at the
address herein set forth, or at such other address as to which notice pursuant
to this section may be given, and shall be given by personal delivery, by
certified mail (return receipt requested), Express Mail or by national or
international overnight courier. Notices will be deemed given upon the earlier
of actual receipt of three (3) business days after being mailed or delivered to
such courier service.
Notices shall be addressed to Consultant at:
Kane International, Ltd.
SEE ITEM 9 HEREIN
and to the Company at:
Leading Edge Earth Products, Inc.
319 Nickerson Street
Suite 186
Seattle, WA 98109
9. Development Period Contact.
All correspondence between parties during the first sixty (60) days of
the Agreement will utilize the firm of Fidelity Capital Houston Texas or their
assignee. All inquiries should commence with a faxed letter stating the request
or inquiry to:
Fidelity Capital
c/o Mark Rice
4617 Montrose Blvd., C-215
Houston, TX 77006
713-520-0676 (ext. 8)
713-520-0169
10. Miscellaneous.
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<PAGE> 6
A. In the event of a dispute between the parties, both Consultant and
the Company agree to settle said dispute through the American
Arbitration Association (the "Association") at the Association's New
York City offices, in accordance with the then-current rules of the
Association; the award given by the arbitrators shall be binding and a
judgment can be obtained on any such award in any court of competent
jurisdiction. It is expressly agreed that the arbitrators, as part of
their award, can award attorneys fees to the prevailing party.
B. This Agreement is not assignable in whole or in any part, and shall
be binding upon the parties, their heirs, representatives, successors or
assigns.
C. This Agreement may be executed in multiple counterparts that shall be
deemed an original. It shall not be necessary that each party execute
each counterpart, or that any one counterpart be executed by more than
one party, if each party executes at least one counterpart.
D. It is understood and agreed that all communications, negotiations,
meetings, agreements and understandings relative to this Agreement have
taken place in or from the state of Tennessee or the state of
Washington. No communications, offerings, proposals or other forms of
negotiations have been conducted in or from the state of Pennsylvania.
This agreement may not be modified or terminated orally, and shall be
construed and interpreted according to the laws of the state of
Washington and enforced in its courts.
E. No representation or warranty is being made by any party to any other
regarding the treatment of this transaction for federal or state income
taxation. Each party has relied exclusively on its own legal, accounting
and other tax advisers regarding the treatment of this transaction for
federal and state income taxes and no representation, warranty or
assurance from any other party or such party's legal, accounting or
other adviser.
F. The Company and Consultant are the only parties to this Agreement,
and no one else shall be deemed to have any rights hereunder or be
deemed a third party beneficiary.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of day
and year first above written.
LEADING EDGE EARTH PRODUCTS, INC.
6
<PAGE> 7
(an Oregon corporation)
By:
-----------------------
Grant Record
KANE INTERNATIONAL, LTD.
(a Belize corporation)
By:/s/ Peyman Zia
------------------------
Registered Agent
7
<PAGE> 1
EXHIBIT 10.3
CONSULTING AGREEMENT
THIS AGREEMENT is made as of the 16th day of June, 1997 by and between
Soralena Enterprises Limited, (hereinafter called "Consultant"), an Irish
corporation, and Leading Edge Earth Products, Inc., an Oregon corporation
(hereinafter called the "Company" or "LEEP") with offices at 319 Nickerson St.,
Suite 186, Seattle, WA 98109.
R E C I T A L S
WHEREAS, the Company desires marketing, international consulting and
general corporate guidance (the "Services");
WHEREAS, Consultant is capable of providing such services (the
"Services").
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual contained herein, the Company and Consultant hereby agree as follows:
1. ENGAGEMENT.
Upon the terms, and subject to the terms and conditions, herein, LEEP hereby
engages Consultant, to provide the Services and Consultant agrees to serve as a
consultant to the Company and to provide the Services. Consultant shall devote
such time and attention as Consultant reasonably determines to successfully
provide the Services. As part of Consultant's duties hereunder, Consultant
shall:
1.1 Familiarize itself as required with the business, operations, conditions
(financial and otherwise) and prospects of LEEP and;
1.2 Consult and assist the Company (as requested) in developing a general
strategy for growth through international possibilities and;
1.3 Render such other international consulting services as LEEP may request
from time to time.
<PAGE> 2
2. REPRESENTATIONS OF CONSULTANT
As an inducement to, and to obtain the reliance of LEEP in connection with the
sale of the shares of Common Stock, Consultant represents and warrants as
follows:
2.1 Consultant is a corporation organized under the jurisdiction of Ireland.
2.2 All corporate and other proceedings required to be taken by or on part
of Consultant to authorize Consultant to enter into and carry out this
Agreement and to acquire the shares of Common Stock hereunder have been
or, prior to the Closing will be, duly authorized and properly taken.
This Agreement has been duly executed and delivered by Consultant and is
valid and enforceable against it in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and the rules of law governing specific
performance, injunctive relief and other equitable remedies. Consultant
has the capacity in all respects to carry out the services provided
herein which are the consideration for shares; the services provided for
said shares shall be at equivalent fair market value for the shares to
be exchanged at $.40/share for current services, and for such valuation
as may be mutually agreed for services in addition to those agreed.
2.3 Consultant is not a "U.S. Person" as defined in Regulation S promulgated
under the Securities Act of 1933, as amended, by the Securities and
Exchange Commission in that Consultant is not:
2.3.1 a natural person resident in the United States;
2.3.2 a partnership or corporation organized or incorporated under the
laws of the United States;
2.3.3 an estate of which any executor or administrator is a U.S.
Person;
2.3.4 a trust of which any trustee is a U.S. Person;
2.3.5 an agency or branch of a foreign entity located in the United
States;
2.3.6 a non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary organized or
incorporated in the United States; and
2.3.7 a partnership or corporation organized or incorporate under the
laws of any foreign jurisdiction formed by a U.S. Person
principally for the purpose of investing in securities not
registered under the Securities Act.
2.4 At all relevant times related to the negotiation, offer and sale of the
shares of Common Stock hereunder, Consultant was outside the United
States.
2
<PAGE> 3
2.5 Consultant acknowledges that the Common Stock is subject to a
"restricted period" during which the Common Stock may not offered or
resold to or for the benefit of any U.S. Person, and that after the
expiration of the restricted period the Common Stock may be resold in
the United States or to U.S. persons without other restrictions,
providing an exemption from the registration requirements of the
Securities Act is available.
2.6 Consultant agrees that any offer or sale of the Common Stock prior to
the expiration of the "restricted period" will be made in accordance
with the provisions of Regulation S; and all offering materials and
documents used in connection with offers and sales of the Common Stock
prior to the expiration of the restricted period must include statements
to the effect that the Common Stock has not been registered under the
Securities Act and may not be sold in the United States or to U.S.
Persons unless the securities are registered under the Securities Act,
or an exemption from the registration requirements of the Securities Act
is available.
2.7 Consultant agrees that it is acting as a principal and that it or its
affiliates are not acquiring the shares hereunder with a purpose to
distributing said shares without registration or in an attempt to avoid
the registration requirements of the U.S. Securities laws or any other
applicable jurisdictions.
2.8 Consultant represents that it is a sophisticated corporation with
respect to investment transactions, and has had the opportunity to
review all Reports of the Company which are required to be filed under
the Exchange Act of 1934, and to ask questions with respect thereof; in
addition, Consultant represents that it is an "accredited investor" as
defined by Regulation D promulgated under the Securities Act of 1933.
Consultant further represents that it became aware of this investment
opportunity through a private introduction by related persons and that
it did not become aware of said opportunity through a general
solicitation of any form whatsoever.
3. FEES.
As total compensation for the Services rendered by Consultant hereunder, the
Company shall pay Consultant 400,000 common shares (with Regulation "S"
restrictions) of LEEP within five (5) business days or as soon as possible
thereafter. Additional fees may be earned by Consultant and must be paid from
transaction proceeds approved by the Company. Company reserves the right to
cancel this contract within 45 days of the date hereof by notifying Consultant
by US certified mail, and if so exercised all shares are to be returned to the
Company.
4. FEE RESTRICTIONS
4.1 All shares referenced herein as compensation to Consultant are to issued
in Street Name of Rothschild Group, S.A. and to be delivered to
Rothschild Group, S.A. at Lex House, George Street, P.O. Box N-7101,
Nassau, Bahamas attention Andrew Bowe - Attorney.
4.2 Consultant agrees to a two-year hold on all the shares referenced herein
subject to third party rights. Consultant surrenders all rights to the
ownership of the shares and such
3
<PAGE> 4
rights that would accompany ownership to Rothschild, S.A. while the
shares are with Rothschild Group, S.A. Consultant reserves the right to
require Company counsel to provide opinions in regard to Regulation S
that may be required for Consultant shares.
4.3 Consultant agrees to limit the liquidation process of Consultant shares
in such a manner that will not adversely effect the Company's trading
market for their securities. Consultant will not sell more than 10% of
total LEEP shares owned either obtained herewith or in future
compensation paid by LEEP to Consultant over any thirty-day period.
Furthermore Consultant agrees to hold any third party entities having
interest in Consultant shares to item 4.2 and 4.3 herein.
5. RESTRICTIVE LEGEND
The shares will bear Regulation "S" restriction(s) when issued.
6. TERM.
6.1 This Agreement shall commence on June 16, 1997 and shall continue
until June 15, 1999, unless terminated by the mutual agreement of
Consultant and LEEP.
6.2 Notwithstanding the termination of this Agreement, Sections 5, 8, and
10 hereof shall survive, provided, however, Section 9 shall only
survive for a period of three (3) years.
7. CONFIDENTIAL INFORMATION.
7.1 DEFINITION. Consultant recognizes that the relationship created by
this Agreement may involve access by Consultant to information of
substantial value regarding LEEP, including, but not limited to,
designs, drawings, plans, software,, material and manufacturing
specifications, devices, trade secrets,, formulae, know-how, methods,
techniques, and processes (whether to LEEP's patents, or otherwise),
as well as financial, business, and product development information,
and customer lists relating to LEEP's products and operations
(collectively, "Confidential Information"). The Confidential
Information shall not include information: (a) in the public domain or
which subsequently falls into the public, (b) which Consultant can
prove was known through a source independent of prior to any
communication by LEEP, or (c) disclosed to Consultant in good faith by
a third party having a legal right to do so.
7.2 DEFINITION NON-DISCLOSURE. Consultant acknowledges and agrees that the
Company owns and has the legal right to all right, title and interest
to the Confidential Information. Consultant further agrees that it
shall (i) maintain the secrecy and confidentiality of all Confidential
Information that comes to its attention, (ii) take all necessary
precautions to prevent any disbursement of Confidential Information by
any of its employees or agents, and (iii) during the term of this
Agreement and for so long as Confidential Information does not enter
into the public domain through no act or omission of, neither publish,
disclose nor disseminate any part of such Confidential
4
<PAGE> 5
Information in any manner, or use the same, without the prior
written consent of the Company.
8. NOTICES
All notices, requests, demands and other communications for or contemplated
hereunder shall be in writing, and shall be addressed to the Parties, their
successors or their assignees at the addresses or such other addresses as the
Parties may designate.
If to the Company: Leading Edge Earth Products, Inc.
319 Nickerson St., Suite 186
Seattle, WA 98109.
If to Consultant: Soralena Enterprises Limited
SEE ITEM 16 HEREIN
Such notice shall be deemed duly given when enclosed in a properly sealed or
wrapper addressed package as aforesaid, registered or certified, and, postage
and registry or certification fees prepaid, in a post office branch post office
regularly maintained by the country of destination or by overnight courier's
pre-paid receipt. Parties hereto may change its address for purposes of this
Section by giving 30 days written notice of such change in the manner provided
for in this section.
9. ARBITRATION.
Any dispute between the parties hereto arising out of or to this Agreement shall
be submitted for binding arbitration to the American Arbitration Association
("AAA"), or such other arbitration organization acceptable to both parties and
the parties hereto shall be bound by the results. The prevailing party shall be
entitled to recover its costs, including reasonable attorneys' fees, from the
other party hereto, costs and fees on appeal, if any. The tried-of-fact shall
determine identity of the prevailing party whether or not the arbitration
proceeds to judgment.
10. GOVERNING LAW.
It is understood and agreed that all communications, negotiations, meetings,
agreements and understandings relative to this Agreement have taken place in or
from the state of Tennessee or the state of Washington. No communications,
offerings, proposals or other forms of negotiations have been conducted in or
from the state of Pennsylvania. This agreement may not be modified or terminated
orally, and shall be construed and interpreted according to the laws of the
state of Washington and enforced in its courts.
11. INTEGRATED AGREEMENT.
5
<PAGE> 6
As to the subject matter of this Agreement, the Agreement constitutes the entire
agreement of the parties and supersedes any prior agreements between the parties
and all such prior agreements shall be voluntarily terminated by the mutual
consent of the parties hereto and be of no further force or effect.
12. ASSIGNMENT.
This Agreement is not assignable but shall be binding and shall inure to the
benefit of the successors of each party hereto.
13. SEVERABILITY.
Any provision in this Agreement which is, by competent non-precedent setting
authority, declared illegal, invalid or unenforceable shall, as to such
jurisdiction, be ineffective to the extent of illegality, invalidity or
unenforceability without invalidating the provisions hereof or affecting the
legality, validity of such provision in any other jurisdiction. The parties
hereto agree to negotiate in good faith to replace any illegal or invalid
provision of this Agreement with a legal, valid and enforceable provision that,
to the extent possible, will preserve the economic bargain of the Agreement, or
otherwise to amend this Agreement, including the provision to choice of law, to
achieve such result.
14. NO REPRESENTATION REGARDING TAX TREATMENT
No representation or warranty is being made by any party to any other regarding
the treatment of this transaction for federal or state income taxation. Each
party has relied exclusively on its own legal, accounting and other tax advisers
regarding the treatment of this transaction for federal and state income taxes
and no representation, warranty or assurance from any other party or such other
party's legal, accounting or other adviser.
15. THIRD PARTY BENEFICIARY
The Company and Consultant are the only parties to this Agreement, and no one
else shall be deemed to have any rights hereunder or be deemed a third party
beneficiary.
16. DEVELOPMENT PERIOD CONTACT
All correspondence between parties during the first 60 days of the Agreement
will utilize the firm of Fidelity Capital Houston Texas or their assignee. All
inquiries should commence with a faxed letter stating the request or inquiry to:
Fidelity Capital
6
<PAGE> 7
c/o Mark Rice
4617 Montrose Blvd., C-215
Houston, TX 77006
713-520-0676 (ext. 8)
713-520-0169
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of day
and year first above written.
Leading Edge Earth Products, Inc. and Soralena Enterprises Ltd.,
an Oregon corporation an Irish corporation
By: By: /s/ Eilish Murphy
------------------------- -------------------------------
Grant Record Eilish Murphy
Chief Executive Officer Registered Agent
8
<PAGE> 1
EXHIBIT 10.4
THIS AGREEMENT is made as of the ________ day of August, 1997,
BETWEEN:
LEADING-EDGE EARTH PRODUCTS, INC., a company incorporated under
the laws of the State of Oregon, USA and having an office at 319
Nicherson Street, Suite 186, Seattle, Washington, USA, 98109,
(hereinafter referred to as "LEEP")
AND:
HARRISON KRAMER CORPORATION, a company incorporated under the
laws of British Columbia, Canada and having an office at Suite
1250 - 800 West Pender Street, Vancouver, British Columbia
V6C 2V6
(hereinafter referred to as "HKC")
AND:
GRANT C. RECORD, businessmen, of 616 Blue Lakes Blvd. North,
Suite 139, Twin Falls, Idaho, USA, 83301.
(hereinafter referred to as "Record")
WHEREAS:
A. Record has invented a pre-manufactured composite building panel utilizing the
benefits of shear connectors and other technology aspects (the "Invention") and
has assigned exclusively all United Stated and Canada right, title and interest
in and to the invention to LEEP.
B. LEEP is the owner of a patent in respect of the Technology (the "Patent")
issued by the United States Patent Office under no. 5,440,846 on August 15,
1995.
C. LEEP on April 25, 1997, filed a second patent application (the "Patent
Application") in respect of certain additional technical claims and applications
of the Invention.
D. The Invention, the Patent, the Patent Application and the related technology
are herein collectively referred to as the "Intellectual Property".
<PAGE> 2
E. LEEP requires financing in the amount of US$5 million (the "Financing") for
the purposes set forth in the financing proposal attached to this Agreement as
Schedule "A" (the "Financing Proposal").
F. LEEP has requested HKC to assist it in raising the Financing and in
particular to identify one or more investors to provide the Financing and to
participate in the joint venture outlined in the Financing Proposal.
G. HKC usually provides the services contemplated by LEEP on the basis of a per
day work fee and a success fee; LEEP has requested HKC be compensated for its
services hereunder by way of a Royalty (hereafter described) on commercial
applications of the Intellectual Property as set forth herein.
H. HKC and LEEP have agreed to enter into this Agreement to set forth their
mutual rights and obligations with respect to the activities to be undertaken by
HKC for LEEP, and as regards the Royalty.
NOW THEREFORE this Agreement witnesses that in consideration of $10.00 and
other good and valuable consideration now paid by HKC to LEEP (the receipt and
sufficiency of which are hereby by LEEP acknowledge) the parties hereto hereby
covenant and agree as follows:
1. Basic Agreement
LEEP hereby appoints HKC on a non-exclusive basis to provide the following
Services to:
1.1 generally, organize the Financing for a period of six months commencing on
the date of execution of this Agreement;
1.2 assist LEEP in preparing an offering document to describe the Financing, the
joint venture company, and all relevant aspects of LEEP's business for
presentation to prospective investors;
1.3 use its best efforts to identify one or more prospective investors who are
willing to complete the Financing on the terms set forth in the Financing
Proposal and/or such other terms as LEEP and any investor may agree upon;
1.4 make initial contact with prospective investors and their professional
advisors and arrange
<PAGE> 3
for demonstrations of the products which can be manufactured utilizing the
Intellectual Property (the "Products");
1.5 work with prospective investors and such investors' professional advisors
to make recommendations with respect to alternatives which any investor may wish
to pursue but which are not contemplated in the Financing Proposal;
1.6 assist in negotiating and finalizing all the agreements and documents
required in connection with the Financing; and
1.7 expedite and assist in closing the Financing.
2. Acceptance by HKC
HKC hereby agrees to accept the appointment set forth in paragraph 1.1 and
to perform the Services for LEEP on the terms and for the remuneration set
forth in this agreement.
3. LEEP's Obligations
3.1 LEEP will promptly notify HKC of any material change in the business or
affairs of LEEP or of any change in any material facts provided to investors or
any statement or report which might result in a misrepresentation to the
investors.
3.2 LEEP hereby agrees to consider carefully, and if reasonable in the opinion
of LEEP's Board of Directors, to accept HKC recommendations with respect to the
Financing and the details concerning the joint venture company.
3.3 LEEP shall supply such quantities of the Products as are reasonably
necessary in order for HKC to demonstrate the merits of the Invention. At the
request of HKC, LEEP shall provide such information, materials, pamphlets, test
results and other writings as HKC may reasonably require and to cause Record to
attend due diligence and other sessions with prospective investors, as HKC may
reasonably require.
3.4 LEEP shall respond reasonably to the requirements of the Investor with
respect to the structure of the joint venture company;
3.5 LEEP agrees that the following are the essential elements of the Financing
in addition to those set forth in the Financing Proposal:
<PAGE> 4
a) the joint venture company will own the land, building and any equipment
to be constructed in Twin Falls, Idaho (the "Twin Falls Plant");
b) the Investor may, in the Investor's discretion advance the Financing
partly to LEEP, partly to the joint venture company or wholly to one or
the other provided that LEEP and/or the joint venture company shall in
turn make advances one to the other in order to achieve the use and
allocation of the funds set forth in the Financing Proposal;
c) the joint venture company may be a corporation, partnership, limited
partnership, limited liability company or such other vehicle as may be
required by the Investor for the Investor's tax planning and other
purposes provided that notwithstanding the form of organization, the
Investor shall own 51% of the equity of and LEEP shall own 49% of the
equity of the joint venture company, as herein defined;
d) LEEP shall grant to the joint venture company a non-exclusive license
and right to use all of the Intellectual Property in exchange for which
LEEP shall receive a royalty ("LEEP Royalty") of not less then 5% of
Gross Revenues on sales of all Products produced using the Intellectual
Property whether produced by the joint venture company or any entity
which is granted rights of production by the joint venture company;
4. HKC Royalty
4.1 If HKC identifies the investor that advances the funds to close the
Financing (the "Investor"), LEEP hereby agrees that LEEP shall pay to HKC
one-fifth of the LEEP Royalty (i.e. 1% of the Gross Revenues from sales of
Products by the joint venture company (or any other entity granted it rights of
production by the joint venture company or by LEEP) the ("HKC Royalty") provided
that:
a) for greater certainty, to the extent that LEEP licenses in the
United States and Canada an entity other than joint venture company
to produce Products at a plant or plants other than the Twin Falls
Plant, HKC shall be entitled to receive the HKC Royalty provided
that funds to construct such plants other than the Twin Falls Plant
are provided by the Investor;
b) LEEP agrees that if it shall negotiate a sale, license or other
payment in the United
<PAGE> 5
States and Canada, wherein payment is received in the form of a
one-time or "bulk payment" as opposed to a royalty based on
production, HKC will be entitled to 20% of any such payment which
shall be payable immediately upon receipt of any such payment by
LEEP.
4.2 If the Investor provides funds to construct the Twin Falls plant but
subsequently chooses not to provide funds to construct other plants, HKC shall
have the non-exclusive right to identify other prospective investors to finance
such other plants. If HKC identifies additional investors acceptable to LEEP
that advance funds to construct other plants, HKC shall be entitled to receive a
royalty on the same basis as the HKC Royalty with respect to such plants.
4.3 LEEP shall cause proper books of account, records and supporting
materials covering all matters relevant to the calculation of the royalty
payable to HKC hereunder and for the reasonable verification thereof. The HKC
Royalty shall be calculated and paid at the end of each calendar quarter in
which revenues are received from the production of Products. The quarterly
calculations, except for the last quarter of the year, shall be submitted to HKC
within 60 days after the last day of the quarter. The calender year end
calculation of the HKC Royalty shall be submitted to HKC within 90 days after
the end of the calendar year. If requested by HKC, the year end calculation of
the HKC Royalty and the records relating thereto shall be audited by
professional accountants designated by HKC (which may be the auditors of LEEP)
and copies thereof shall be delivered to HKC and to LEEP. Either party shall
have 90 days after receipt of any such report to object thereto in writing to
the other party and failing such objectives, such report shall be deemed
correct. If either party shall object to any report and request a review and
reaudit, the professional accountants shall be directed to review and reaudit
the records for the period in question and all costs relating to such review and
reaudit shall be paid by LEEP, if the original audit is found to be in error and
if not, by HKC. LEEP shall at all reasonable times at HKC's sole cost permit
agents of HKC to inspect and audit and make copies of the books of account,
records and supporting materials relevant to the HKC Royalty.
4.4 Payment of the HKC Royalty to HKC shall be made within 60 days after the
end of each calendar quarter based on the calculations set forth in paragraph
4.3. Acceptance by HKC of any HKC Royalty payment shall not prejudice the right
of HKC to protest or question the correctness of the amount of any such payment
as contemplated herein.
4.5 LEEP agrees that no assignment, transfer, license, sub-license or
permitted use of the Intellectual Property shall be permitted or be effective
unless and until the party receiving the benefit thereof agrees to assume and be
responsible for the obligations of LEEP to HKC
<PAGE> 6
hereunder (including but not limited to payment of the HKC Royalty).
4.6 If any right, power or interest of any party under this Agreement would
violate the rule against or any law relating to perpetuities, such right, power
or interest shall terminate at the earlier of the expiration of 21 years after
the death of the last survivor of all of the lineal descendants of Her Majesty,
Queen Elizabeth II of England living on the date of execution of this Agreement,
or such date as otherwise required to render such right, power or interest
effective pursuant to applicable law.
5. Further Relationships
5.1 If requested by HKC, LEEP and Record shall use their best efforts to
cause Robert K. Kramer, a director of HKC, to be appointed to the Board of
Directors of LEEP.
6. Solemn Covenant
LEEP acknowledges that HKC will not be paid the usual work fee and cash
success fee normally required by it in performing the Services. Rather, HKC has
waved its usual work fee in favour of a success fee in the form of the HKC
Royalty. Accordingly, LEEP solemnly promises and agrees not to take any action,
organize its affairs, sell its assets, merge, amalgamate or otherwise combine
with another entity in order to eliminate, extinguish or diminish in any way
HKC's rights to the HKC Royalty.
7. Out-Of -Pocket Expenses
LEEP shall pay out of pocket expenses incurred by HKC if HKC is
requested by LEEP to travel from Vancouver, Canada to any other point in Canada
or the United States which is in excess of 200 miles from Vancouver, Canada. 8.
Confidentiality
HKC will carry out its obligations in a confidential matter with respect
to any information supplied by LEEP. HKC will require all prospective investors
to execute a confidentiality agreement, in form and content reasonably
acceptable to LEEP, following an initial expression of interest in the Financing
Proposal but in any event prior to HKC furnishing any samples or internal
technical details concerning the Products to prospective investors.
<PAGE> 7
9. General
9.1 This Agreement shall not be assignable by either party without the prior
written consent of the other and any attempt to assign the rights, duties or
obligations hereunder without such consent shall be of no effect.
9.2 No contractual or other legal right shall be created between the parties
hereto until a fully executed copy of this Agreement has been delivered to each
party.
9.3 The captions appearing in this Agreement have been inserted for
reference and as a matter of convenience and in no way define, limit or
enlarge the scope or meaning of this Agreement or any provision hereof.
9.4 This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same document.
9.5 All payments hereunder shall be made in lawful money of the United
States and may be made by bank wire transfer or certified cheque payable at par
at Vancouver, British Columbia.
9.6 The provisions herein contained constitute the entire agreement between
the parties and supersede all previous communications, representations and
agreements whether verbal or written between the parties with respect to the
subject matter hereof.
9.7 This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and permitted assigns.
9.8 Notwithstanding anything herein to the contrary, the parties hereto shall
not be deemed in default with respect to the performance of any of the terms,
covenants and conditions of this Agreement, if the same shall be due to any
strike, lock-out, civil commotion, invasion, rebellion, hostilities, sabotage,
governmental regulations or controls, Acts of God, inability to obtain any
materials, services or financing, or otherwise beyond the control of the
parties.
9.9 Each of the parties hereto hereby covenants and agrees to execute such
further and other documents and instruments and to do such further and other
things as may be necessary to implement and carry out the intent of this
Agreement.
<PAGE> 8
9.10 This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia which shall be deemed to be the proper
law hereof. The Courts of British Columbia shall have jurisdiction (but not
exclusive jurisdiction) to entertain and determine all disputes and claims,
whether for specific performance, injunction, declaration or otherwise howsoever
both at law and in equity, arising out of or in any way connected with the
construction, breach, or alleged, threatened or anticipated breach of this
Agreement and shall have jurisdiction to hear and determine all questions as to
the validity, existence or enforceability thereof.
9.11 All covenants, conditions and agreements herein contained shall be
construed as being joint and several obligations of executing parties.
9.12 This Agreement may not be modified or amended except by an instrument in
writing signed by the parties hereto or by their heirs, executors,
administrators, successors and permitted assigns.
9.13 No condoning, excusing or waiver by any party hereto of any default,
breach or non-observance by any other party hereto at any time or times in
respect of any covenant, proviso or condition herein contained shall operate as
a waiver of that party's rights hereunder in respect of any continuing or
subsequent default, breach or non-observance, or so as to defeat or affect in
any way the rights of that party in respect of any such continuing or subsequent
default, breach or non-observance, and no waiver shall be inferred from or
implied by anything done or omitted to be done by the party having those rights.
9.14 All notices, demands and payments required or permitted to be given
hereunder shall be in writing and may be delivered personally, sent by telegram
or facsimile transmission or may be forwarded by first class prepaid registered
mail to the addresses set forth below:
LEADING-EDGE EARTH PRODUCTS, INC.
319 Nicherson Street, Suite 186
Seattle, WA
USA 98109
HARRISON KRAMER CORPORATION
800 West Pender Street, Suite 1250
Vancouver, BC
<PAGE> 9
Canada V6C 2V6
GRANT C. RECORD
616 Blue Lakes Blvd. North, Suite 139
Twin Falls, Idaho
USA 83301
Any notice delivered or sent by telegraph or facsimile shall be deemed to have
been given and received at the time of delivery. Any notice mailed as aforesaid
shall be deemed to have been given and received on the expiration of 48 hours
after it is posted, addressed as set forth above, or at such other address or
addresses as may from time to time be notified in writing by the parties hereto
provided that if there shall be between the time of mailing and the actual
receipt of the notice a mail strike, slowdown or other labour dispute which
might affect the delivery of such notice by the mails, then such notice shall
only be effective if actually delivered.
9.15 All references to any party to this Agreement shall be read with such
changes in number and gender as the context hereof or reference to the parties
hereto may require.
9.16 All rights and remedies of either party hereunder are cumulative and are
in addition to, and shall not be deemed to exclude, any other right or remedy
allowed by law. All rights and remedies may be exercised concurrently.
9.17 Should any part of this Agreement be declared or held invalid for any
reason, such invalidity shall not affect the validity of the remainder which
shall continue in force and effect and be construed as if this Agreement had
been executed without the invalid portion and it is hereby declared the
intention of the parties hereto that this Agreement would have been executed
without reference to any portion which may, for any reason, be hereafter
declared or held invalid.
IN WITNESS WHEREOF the parties hereunto set their hands and seals as of
the day and year first above written.
LEADING-EDGE EARTH PRODUCTS, INC.
By:
-------------------------------
<PAGE> 10
HARRISON KRAMER CORPORATION
By:
-------------------------------
GRANT C. RECORD
By:
-------------------------------
<PAGE> 1
EXHIBIT 10.5
================================================================================
REVOLVING CREDIT AGREEMENT
between
LEADING EDGE EARTH PRODUCTS, INC.,
and
ROTHSCHILD GROUP, S.A., AS AGENT,
for
THE LENDING INSTITUTIONS LISTED HEREIN
-------------------------
$550,000
USD
-------------------------
Dated as of July 1, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
SECTION 1. Amount and Terms of Credit ......................................... 5
1.01 Commitments ........................................................ 5
1.02 Minimum Amount of Each Borrowing ................................... 6
1.03 Notice of Borrowings ............................................... 6
1.04 Disbursement of Funds .............................................. 6
1.05 Notes .............................................................. 6
1.06 Pro Rata Borrowings ................................................ 7
1.07 Interest ........................................................... 7
1.08 Capital Requirements ............................................... 7
1.09 Total Revolving Credit Facility; Limitations on Loan Amounts ....... 7
SECTION 2. Commitments and Liquidation ........................................ 7
2.01 Adjustments of Total Credit and Base Amounts ....................... 7
2.02 Liquidation Limitations ............................................ 7
SECTION 3. Payments ........................................................... 8
3.01 Method and Place of Payment ........................................ 8
3.02 Net Payments ....................................................... 8
3.03 Repayment Invoice Procedures ....................................... 9
3.04 Representations of Agent ........................................... 9
SECTION 4. Conditions Precedent to All Loans .................................. 11
SECTION 5. Representations, Warranties and Agreements ......................... 12
5.01 Corporate Status ................................................... 12
5.02 Corporate Power and Authority ...................................... 12
5.03 No Violation ....................................................... 12
5.04 Litigation ......................................................... 13
5.05 Use of Proceeds .................................................... 13
5.06 Governmental Approvals, etc ........................................ 13
5.07 True and Complete Disclosure ....................................... 13
5.08 Compliance with Laws, etc........................................... 14
5.09 Securities.......................................................... 14
SECTION 6. Affirmative Covenants............................................... 14
6.01 Information Covenants............................................... 14
6.02 Books, Records and Inspections...................................... 15
6.03 Performance of Obligations ......................................... 15
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 7. Negative Covenants.................................................. 15
7.01 Changes in Business................................................. 15
7.02 Merger and Consolidations........................................... 15
7.03 Immediate Credit Facility Revision.................................. 15
SECTION 8. Events of Default .................................................. 15
8.01 Payments............................................................ 15
8.02 Representations, etc................................................ 15
8.10 Ownership........................................................... 16
SECTION 9. Definitions ........................................................ 16
SECTION 10. The Agent .......................................................... 24
10.01 Appointment......................................................... 24
10.02 Delegation of Duties................................................ 24
10.03 Exculpatory Provisions.............................................. 24
10.04 Reliance by the Agent .............................................. 25
10.05 Notice of Default................................................... 25
10.06 Non-Reliance on Agent............................................... 25
10.07 Indemnification..................................................... 26
10.08 Successor Agents.................................................... 26
10.09 Resignation, Transfer by Agent...................................... 26
SECTION 11. Miscellaneous ...................................................... 27
11.01 Payment of Expenses, etc............................................ 27
11.02 Right of Setoff..................................................... 27
11.03 Notices............................................................. 28
11.04 Benefit of Agreement................................................ 28
11.05 No Waiver; Remedies Cumulative...................................... 29
11.06 Calculations; Computations.......................................... 29
11.07 Governing Law; Submission to Jurisdiction; Venue.................... 29
11.08 Counterparts ....................................................... 30
11.09 Effectiveness ...................................................... 30
11.10 Headings Descriptive ............................................... 30
11.11 Amendment or Waiver ................................................ 30
11.12 Survival ........................................................... 31
11.13 Domicile of Loans .................................................. 31
11.14 Waiver of Jury Trial ............................................... 31
11.15 Independence of Covenants .......................................... 31
11.16 No Representation Tax Treatment .................................... 31
11.17 Third Party Beneficiary ............................................ 31
11.18 Termination ........................................................ 31
</TABLE>
3
<PAGE> 4
ANNEX I - List of Lenders
EXHIBIT A - Notice of Borrowing Request
EXHIBIT B - Repayment Invoice (example)
4
<PAGE> 5
REVOLVING CREDIT AGREEMENT, dated as of July 1, 1997, between LEADING
EDGE EARTH PRODUCTS, INC., a Oregon corporation (the "Borrower"), and the
lending institutions listed in Annex I (each a "Lender" and, collectively, the
"Lenders") and ROTHSCHILD GROUP, S.A. ("Rothschild"), as agent for the Lenders
(the "Agent"). Unless otherwise defined herein, all capitalized terms used
herein and defined in Section 9 are used herein as so defined.
WITNESSETH:
WHEREAS, the Borrower and the Lenders desire to enter into a Credit
Facility Agreement (the "Agreement") and provide for the amount of available
Revolving Loan Commitments to the Company thereunder as described herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. Subject to and upon the terms and conditions herein
set forth, the Lenders agree, at any time and from time to time to make a Loan
or Loans to the Borrower, under the Loan Facility (each a "Revolving Loan" and,
collectively, the "Revolving Loans") which (i) shall be made to the Borrower at
any time and from time to time on and after the Commencement date set forth
herein, provided that all Revolving Loans made by all Lenders pursuant to the
same Borrowing shall, unless otherwise specifically provided herein, consist
entirely of Loans of the same Type, (iii) may be repaid and reborrowed in
accordance with the provisions hereof, (iv) shall not exceed for any Lender at
any time outstanding the Revolving Loan Commitment of such Lender at such time
and (v) shall not be made if the aggregate principal amount of Revolving Loans
then outstanding, after giving effect to the Revolving Loan requested by the
relevant Notice of Borrowing, would exceed the lesser of the Borrowing Allowable
Base as shown in the Borrowing Allowable Base Notice and or that will be
required to be delivered.
(a) The initial total Credit Facility Amount shall be equal to the
product of 1,200,000 times $0.458 or $550,000.00 USD. The initial
Borrowing Allowable Base will equal $137,500.00 USD. The Borrowing
Allowable Base will always equal twenty-five percent of the total Credit
Facility. Each "90 Day Revision Date" will use the last 20 trading days
average closing bid price to prospectively revise the total Credit
Facility and the Borrowing Allowable Base utilizing the formulas stated
herein section 1.01 (a)
5
<PAGE> 6
1.02 Minimum Amount of Each Borrowing. The minimum aggregate principal
amount of a Borrowing of Loans shall be the Minimum Borrowing Amount of
$25,000,00 (twenty-five thousand USD) and Borrowings in excess thereof shall be
in integral multiples of $25,000.00 USD.
1.03 Notice of Borrowings. Whenever the Borrower desires that the
Lenders make Loans under the Loan Facility, it shall give the Agent at the
Agent's Office prior to 12:00 Noon (New York time) (i) at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in writing)
of each requested Borrowing. Each such notice (each a "Notice of Borrowing"),
which shall be substantially in the form of Exhibit A, shall be deemed a
representation by the Borrower that all conditions precedent to such Borrowing
have been satisfied and shall specify (a) the aggregate principal amount in U.S.
dollars of the Loans to be made pursuant to such Borrowing, all of which shall
be specified in such manner as is necessary to comply with all limitations on
Revolving Loans outstanding hereunder, including without limitation.
availability under the Borrowing Allowable Base, (b) the requested date of such
Borrowing (which shall be a USA Business Day). The Agent, if needed shad as
promptly as practicable give each Lender written notice (or telephonic notice
promptly confirmed in writing) of each proposed Borrowing, of such Lender's
proportionate share thereof and of the other matters covered by the Notice of
Borrowing.
1.04 Disbursement of Funds.
(a) under optimal conditions, funds will be available to Borrower
no later than 12:00 noon (New York time) three business days from the
arrival date of each Notice of Borrowing to the Agent and the Agent will
make available to the Borrower the portion of each Borrowing requested
in the manner provided below.
(b) Each Lender, if required shall make available all amounts it is
to fund under any Borrowing on or after the Notice of Borrowing Date in
immediately available funds to the Agent to the account specified
therefor by the Agent or if no account is so specified at the Agent's
Office and the Agent will make such funds available to the Borrower by
depositing to the account specified therefor by the Borrower or if no
account is so specified to its account at the Agent's Office the
aggregate of the amounts so made available in the type of funds
received.
(c) Nothing herein shall be deemed to relieve any Lender from its
obligation to fulfill its commitment hereunder or to prejudice any
rights which the Borrower or any other Credit Party may have against any
Lender as a result of any default by such Lender hereunder.
1.05 Notes. The Borrower's obligations to pay the principal of and
interest on all the Loans made to it by each Lender she be evidenced by a
Repayment Invoice, annexed hereto as Exhibit B (each, a "Repayment Invoice")
duly executed and delivered to the Borrower by the Agent within three days of
the Borrower receiving proceeds of each Loan.
6
<PAGE> 7
1.06 Pro Rata Borrowings. All Borrowings under this Agreement shall be
loaned by the Lenders pro rata on the basis of their Revolving Loan Commitments.
No Lender shall be responsible for any default by any other Lender in its
obligation to make Loans hereunder and each Lender shall be obligated to make
the Loans provided to be made by it hereunder, regardless of the failure of any
other Lender to fulfill its commitments hereunder.
1.07 Interest.
(a) The unpaid principal amount of each Base Rate Loan shall not
bear interest from the date of the Borrowing thereof until maturity
unless unpaid for over 90 days thereafter a 2% penalty shall apply per
month of unpaid balance.
(b) All computations of interest hereunder shall be made in
accordance with Section 3.03 herein.
1.08 Capital Requirements. Lenders shall not require the Company their
subsidiaries or agents to maintain any enforceable capital requirements
associated with the Credit Facility and the adoption or effectiveness of such
will not be a fight of Lenders.
1.09 Total Revolving Loan Commitments; Limitations on Outstanding Loan
Amounts. The original amount of the Total Revolving Loan Commitments is
$550,000. Anything contained in this Agreement to the contrary notwithstanding,
(a) in no event shall the sum of the aggregate principal amount of all Revolving
Loans of any Lender at any time exceed such Lender's portion of the Total
Revolving Loan Commitment, (b) in no event shall the sum of the aggregate
principal amount of all Revolving Loans of all Lenders at any time exceed the
Total Revolving Loan Commitment and (c) in no event shall the aggregate
principal amount of outstanding Revolving Loans exceed the lesser of the Total
Revolving Loan Commitment or the Borrowing Allowable Base.
SECTION 2. COMMITMENTS AND LIQUIDATION.
2.01 Adjustments of Credit Facility and Base Amounts, The total Credit
Facility Amount and Borrowing Allowable Base will be evaluated every ninety days
from the commencement date set forth herein (the "90 Day Revision Date") and
adjustments of both Total Credit Facility and Borrowing Allowable Base will be
delivered by written notice (or telephonic notice promptly confirmed in writing)
to the Company within 14 days from each 90 Day Revision Date. The Total
Revolving Loan Credit Facility shall terminate on the Final Maturity Date.
2.02 Liquidation Limitations. The Lenders holding such securities issued
by the Borrower as repayment of Loans made hereunder shall be limited as to the
open market liquidation as set forth below
7
<PAGE> 8
(a) Lenders may only liquidate in the open market up to 10% of their
position of the total amount of Borrowers Securities held in any and all senior
and affiliated subsidiaries accounts in any one 30 day period.
(b) Lenders are not permitted to liquidate any portion of the total
position of Borrowers Securities held by Lenders or any affiliates in the open
market that would have an Materially Adverse Effect on the Borrowers market for
their Common Stock.
SECTION 3. PAYMENTS.
3.01 Method and Place of Payment.
(a) Except as otherwise specifically provided herein, all payments under
this Agreement shall be made to the Agent, for the Lenders entitled thereto, not
later than 1:00 p.m. (New York time) on the date when due and shall be made in
Common Stock described in 3.02 herein or in immediately available funds in
lawful money of the United States of America to the account specified therefor
by the Agent or at the Agent's Office.
(b) Any payments under this Agreement which are made by the Borrower
later than 1:00 p.m. (New York time) shall be deemed to have been made on the
next succeeding Business Day. Whenever any payment to be made hereunder shall be
stated to be due on a day that is not a Business Day, the due date thereof shall
be extended to the next succeeding Business Day.
3.02 Net Payments.
(a) All payments under this Agreement shall be made without set-off or
counterclaim and in such amounts as may be necessary in order that all such
payments (after deduction or withholding for or on account of any present or
future taxes, levies, imposts, duties or other charges of whatsoever nature
imposed by any governmental authority or any political subdivision or taking
authority thereof, other than any tax on or measured by the net income of a
Lender pursuant to the income tax laws of the jurisdictions where such Lender's
principal or lending office is located (collectively "Taxes") shall not be less
than the amounts otherwise specified to be paid under this Agreement set forth
in the Repayment Invoice. If the Borrower or the Company is required by law to
make any deduction or withholding on account of Taxes from any payment due
hereunder then (i) the Borrower shall timely remit such Taxes to the
governmental authority imposing the same and (ii) the amount payable hereunder
or under the applicable Credit Documents will be increased to such amount which,
after deduction from such increased amount of all amounts required to be
deducted or withheld therefrom, will not be less than the amount otherwise due
and payable.
8
<PAGE> 9
3.03 Repayment Invoice, Location and Formula.
(a) Repayment Invoices will be sent to Borrower via overnight courier by
the Agent on the same day funds are sent to Borrowers designated bank account or
designated place of delivery. Each Repayment Invoice shall include the
appropriate amount of common shares required to repay the Loan or the
appropriate amount of United States currency required to satisfy the repayment
of the Loan.
(b) The formula for repayment in Common Stock or United States currency
are set forth below:
(i) Payment in Common Stock: 108% of Loan amount, using the
previous five days average closing bid price on the day the Loan
proceeds are sent to the Borrower. Stock must be free trading or
acceptable by the Lenders, its counsel and the Company transfer agent
under Regulation S with all required materials for such, or other
acceptable conditions of the Lenders,
(ii) Payment in cash: 103% in United States currency.
3.04 Representations of Agent.
As an inducement to, and to obtain the reliance of LEEP in connection
with the Credit Facility, Agent represents and warrants as follows:
(a) Agent is a corporation organized under the jurisdiction of the
Bahamas.
(b) AU corporate and other proceedings required to be taken by or on
part of Agent to authorize Agent to enter into and carry out this Agreement and
to purchase the shares of Common Stock hereunder have been or, prior to the
Closing will be, duly authorized and properly taken. This Agreement has been
duly executed and delivered by Agent and is valid and enforceable against it in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law governing
specific performance, injunctive relief and other equitable remedies. Agent has
the capacity in all respects to carry out the services provided herein which are
the consideration for shares; the services provided for said shares shall be at
equivalent fair market value for the shares to be exchanged at $.40/share for
current services, and for such valuation as may be mutually agreed for services
in addition to those agreed.
(c) Agent is not a "U.S. Person" as defined in Regulation S promulgated
under the Securities Act of 1933, as amended, by the Securities and Exchange
Commission in that Agent is not:
9
<PAGE> 10
(i) a natural person resident in the United States;
(ii) a partnership or corporation organized or incorporated
laws of the United States;
(iii) an estate of which any executor or administrator is a
U.S. Person;
(iv) a trust of which any trustee is a U.S. Person;
(v) an agency or branch of a foreign entity located in the
United States;
(vi) a non-discretionary account or similar account (other
than an estate or trust) held by a dealer or other
fiduciary organized or incorporated in the United
States; and
(vii) a partnership or corporation organized or incorporate
under the laws of any foreign jurisdiction formed by a
U.S. Person principally for the purpose of investing in
securities not registered under the Securities Act.
(d) At all relevant times related to the negotiation, offer and
transfer, if any, of the shares of Common Stock, Agent was outside the
United States.
(e) Agent acknowledges that the Common Stock is subject to a
"restricted period" during which the Common Stock may not offered or
resold to or for the benefit of any U.S. Person, and that after the
expiration of the restricted period the Common Stock may be resold in
the United States or to U.S. persons without other restrictions,
providing an exemption from the registration requirements of the
Securities Act is available.
(f) Agent agrees that any offer or transfer of the Common Stock
prior to the expiration of the "restricted period" will be made in
accordance with the provisions of Regulation S; and all offering
materials and documents used in connection with offers and transfers of
the Common Stock prior to the expiration of the restricted period must
include statements to the effect that the Common Stock has not been
registered under the Securities Act and may not be sold in the United
States or to U.S. Persons unless the securities are registered under the
Securities Act, or an exemption from the registration requirements of
the Securities Act is available.
10
<PAGE> 11
(g) Agent agrees that it is acting as a principal and that it or
its affiliates are not acquiring the shares hereunder with a purpose to
distributing said shares without registration or in an attempt to avoid
the registration requirements of the U.S. Securities laws or any other
applicable jurisdictions.
(h) Agent represents that it is a sophisticated corporation with
respect to investment transactions, and has had the opportunity to
review all Reports of the Borrower which are required to be filed under
the Exchange Act of 1934, and to ask questions with respect thereof, in
addition, Agent represents that it is an "accredited investor" as
defined by Regulation D promulgated under the Securities Act of 1933.
Agent further represents that it became aware of this investment
opportunity through a private introduction by related persons and that
it did not become aware of said opportunity through a general
solicitation of any form whatsoever.
SECTION 4. CONDITIONS PRECEDENT TO ALL LOANS.
The obligation of the Lenders to make all Loans is subject, at the time
of each such Loan, to the satisfaction of the following conditions:
(a) Effectiveness. This Amendment shall have become effective.
(b) No Default; Representations and Warranties. At the time of
the making of each Loan and also after giving effect thereto (i) there
shall exist and be continuing no Default or Event of Default and (ii)
all representations and warranties contained herein in effect at such
time shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on
and as of the date of the making of such Loan, unless such
representation and warranty expressly indicates that it is being made as
of any other specific date in which case on and as of such other date.
(c) Adverse Change, etc. Since the Commencement Date nothing
shall have occurred or become known which the Lenders or the Agent could
reasonably expect to have a Materially Adverse Effect on the Company;
such determination shall be made both before and after giving effect to
the making of the Loans hereunder.
(d) Margin Rules. On the date of each Borrowing of Loans,
neither the making of any Loan nor the use of the proceeds thereof will
violate the provisions of Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System of the United States of America.
(e) Borrowing Allowable Base Certificate. The Agent shall have
received and the Lenders shall be reasonably satisfied (both as to form
and substance) with the Borrowing Allowable Base Certificate last
delivered to the Lenders.
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(f) All of the stock certificates, legal opinions and other
documents and papers referred to in this document, unless otherwise
specified, shall be delivered to the Agent at its Office (or such other
location as may be specified by the Agent) and shall be satisfactory in
form and substance to the Lenders.
SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
In order to induce the Lenders to enter into this Amendment and to make
the Loans provided for herein, the Borrower on behalf of itself makes the
following representations and warranties to, and agreements with, the Lenders,
all of which shall survive the execution and delivery of this Agreement and the
making of the Loans (with the execution and delivery of this Agreement and the
making of each Loan thereafter being deemed to constitute a representation and
warranty that the matters specified in this Section 5 are true and correct in
all material respects as of the date of each such Loan unless such
representation and warranty expressly indicates that it is being made as of any
specific date). It is understood by all parties to this Agreement that all
Schedules referred to herein set forth information as known to the Borrower only
as of the Commencement Date.
5.01 Corporate Status. Except as set forth on Schedule 5.01, the
Borrower (i)is a duly organized and validly existing corporation company in
good standing under the laws of the jurisdiction of its incorporation or
organization; (ii) has the corporate or other organizational power and authority
and has obtained all requisite governmental licenses, authorizations, consents
and approvals to own and operate its property and assets and to transact the
business in which it is engaged and presently proposes to engage, including,
without limitation, those in compliance with or required by the Environmental
Laws, except for those governmental licenses, authorizations, consents or
approvals the failure of which to be so obtained could not reasonably be
expected to have a Materially Adverse Effect; and (iii) is duly qualified and
authorized to do business and is in good standing in all jurisdictions where it
is required to be so qualified, except where the failure to be so qualified
could not be reasonably be expected to have a Materially Adverse Effect.
5.02 Corporate Power and Authority. The Borrower has the corporate power
and authority to execute, deliver and carry out the terms and provisions of the
Documents to which it is a party and has taken all the necessary corporate or
other actions to authorize the execution, delivery and performance of the
Documents to which it is a party. The Borrower has duly executed and delivered
each Document to which it is a party and each such Document constitutes the
legal, valid and binding obligation of such Person, enforceable against such
Person in accordance with its terms, except as such enforceability may be
limited by Bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally or by general principles of equity or the discretion
of the court before which any proceeding therefor may be brought.
5.03 No Violation. Neither the execution, delivery or performance by the
Borrower, of the Documents which it is a party nor compliance with the terms and
provisions thereof nor the
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consummation of the transactions contemplated therein (i) will violate any
applicable provision of any law, statute, rule, regulation, order, writ,
injunction or decree of any court or governmental authority, (ii) conflicts or
will conflict or be inconsistent with, results or will result in any breach or
violation of any of the terms, covenants, conditions or provisions of, results
in the creation or imposition of (or the obligation to create or impose) where
such contravention, conflict, inconsistency, breach, default, creation,
imposition, obligation or violation could not reasonably be expected to have a
Materially Adverse Effect.
5.04 Litigation. Except as disclosed within Borrower's most recent form
10Q or 10K filing with the SEC, there are no actions, judgments. suits,
investigations or proceedings by any administrative, governmental or other
public authority or other Person pending or, to the Borrower's knowledge,
threatened against or with respect to the Borrower or any of their respective
assets that (a) challenges the transactions contemplated thereby, including the
making of any Loans, or (b) could reasonably be expected to have a Materially
Adverse Effect.
5.05 Use of Proceeds. The proceeds of all Revolving Loans to be made to
the Borrower hereunder shall be utilized for working capital and other general
corporate purposes. Neither the making of any Loan hereunder, nor the use of the
proceeds therefrom, will violate or be inconsistent with the provisions of
Regulation G, T, U or X of the Board of Governors of the Federal Reserve System.
5.06 Governmental Approvals, etc. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption or other action by or notice to, any third party or any foreign or
domestic, administrative, governmental or public body or authority, or by any
subdivision thereof (other than those orders, consents, approvals, licenses,
authorizations or validations which, if not obtained or made, could not
reasonably be expected to have a Materially Adverse Effect or which have
previously been obtained or made, all of which will be accomplished on or prior
to the Commencement Date), is necessary or required to authorize or is required
in connection with (i) the execution, delivery and performance of any Document
or the transactions contemplated therein or (ii) the legality, validity, binding
effect or enforceability of any Document. At the time of the making of the
Initial Loans, there does not exist any judgment, order, injunction or other
restraint issued or filed against or with respect to the making of Loans or the
performance by the Borrower of its respective obligations under the Documents.
5.07 True and Complete Disclosure. All factual information (taken as a
whole) heretofore or contemporaneously furnished by the Borrower in writing to
the Agent or any Lender and all information furnished in writing by the Borrower
in writing to the Agent and which is furnished to any Lender by the Agent on
behalf of the Borrower for purposes of or in connection with this Agreement or
any transaction contemplated herein is (or was, on the date of making the
Initial Loans), and all other such factual information (taken as a whole)
hereafter furnished by any such Person in writing to any Lender (or furnished by
such Person in writing to the Agent and which is furnished to any Lender by the
Agent on behalf of such Person) will be, true and accurate in all material
respects on the date as of which such information is dated or certified.
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5.08 Compliance with Laws, etc. Except as set forth in this document,
the Borrower is in material compliance with all applicable laws and regulations,
including without limitation those relating to pollution and environmental
control, equal employment opportunity and employee safety, in all jurisdictions
in which it is presently doing business, and the Borrower will and the Borrower
if and when applicable will cause each of its Subsidiaries to comply with all
such material laws and regulations which may be imposed in the future in
jurisdictions in which it or such Subsidiary may then be doing business other
than those the non-compliance with which could not reasonably be expected to
have a Materially Adverse Effect.
5.09 Securities. The outstanding capital stock of the Borrower is duly
authorized, issued, delivered and is fully paid.
SECTION 6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that on the Commencement Date and
thereafter for so long as this Agreement is in effect and until the Revolving
Loan Commitments have terminated and the Loans together with interest, fees and
all other Obligations incurred hereunder are paid in full.
6.01 Information Covenants, The Borrower will furnish or cause to be
furnished to the Agent:
(a) As soon as available and in any event within 90 days after
the close of each fiscal year of the Borrower, the audited consolidated
balance sheets of the Borrower at the end of such fiscal year and the
related consolidated statements of operations, of cash flows and of
stockholders' equity for such fiscal year, setting forth comparative
consolidated figures for the preceding fiscal year by independent
public accountants of nationally recognized standing that is
satisfactory to the Agent, which report shall not be qualified as to the
scope of audit or as to the status of the Borrower and its Subsidiaries
as a going concern and shall state that such consolidated financial
statements present fairly the consolidated financial position of the
Borrower if applicable its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with
prior years (except for such changes with which the independent
certified public accountants concur) and the examination by such
accountants was conducted in accordance with generally accepted auditing
standards.
(b) As soon as available and in any event within 45 days after
the close of each of the first three quarterly accounting periods in
each fiscal year of the Borrower, commencing with the first fiscal
quarter following the Commencement Date, the unaudited consolidated
balance sheet of the Borrower and if applicable its Subsidiaries as at
the end of such quarterly period and the related unaudited consolidated
statements of operations, of cash flows and of stockholders' equity for
such quarterly period and for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, and in each case
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setting forth comparative consolidated figures for the related periods
in the prior fiscal year, subject to normal year-end audit adjustments.
6.02 Performance of Obligations. The Borrower will, and if applicable
cause each of its Subsidiaries to, perform in all material respects all of its
obligations under the terms of each mortgage, indenture, security agreement,
other debt instrument and material contract by which it is bound or to which it
is a party, except where such nonperformance could not reasonably be expected to
have a Materially Adverse Effect.
6.03 Use of Proceeds. All proceeds of the Loans shall be used as
provided in Section 5.05.
SECTION 7. NEGATIVE COVENANTS.
The Borrower hereby covenants and agrees that as of the Commencement Date and
thereafter for so long as this Agreement is in effect and until the Commitments
have terminated and until the Loans together with interest, fees and all other
Obligations incurred hereunder are paid in full
7.01 Changes in Business. The Borrower will not materially alter the
character of its business from that conducted by the Borrower at the
Commencement Date.
7.02 Merger and Consolidations. In the event the Borrower should merge
or consolidate with or into any other entity other than the merger into of one
or more Subsidiaries with and into the Subsidiaries of the Borrower this Credit
Facility would terminate.
7.03 Immediate Revision. Should the Company's Common Stock price drop
35% from the Closing Price of $0.43 on July 1, 1997 and remain trading at the
reduced level for seven consecutive trading days, this Credit Facility may be
revised by the Lenders taking into effect such drop by the formula described in
1.01 (a) herein.
SECTION 8. EVENTS OF DEFAULT.
Upon the occurrence and during the continuance of any of the following
specified events (each an "Event of Default"):
8.01 Payments. The Borrower shall (i) default in the payment when due of
any principal of the Loans, (ii) default, and such default shall continue for
two or more Business Days, in the payment when due of any interest on the Loans
or (iii) fail to pay any other amounts owing hereunder for five days after
receiving notice thereof, or
8.02 Representations, etc. Any representation, warranty or statement
made or deemed made by any Credit Party herein or in any statement or
certificate delivered or required to be delivered pursuant hereto or thereto
shall prove to be untrue in any material respect on the date as of which made or
deemed made; or
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8.03 Ownership. (i) Mr. Grant Record, the Chairman and Chief Executive
Officer, respectively, of the Borrower, (a) ceases to remain in the employ of
the Borrower in his current capacity or in some other executive capacity or (ii)
individuals who constituted the Board of Directors of Borrower on the Closing
Date (together with any new directors whose proposal for election by the
shareholders of Borrower was approved by a vote of 51% of the directors of
Borrower then still in office who either were directors on the Commencement Date
or whose election or nomination for election was previously so approved) shall
cease for any reason to constitute a majority of the members of the Board of
Directors of Borrower stiff in office; -(iii) the approval by stockholders of
Borrower of any plan or proposal for the liquidation, dissolution or winding up
of Borrower;
Then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Agent shall upon the written request of
the Lenders, by written notice to the Borrower, take any or all of the following
actions, without prejudice to the rights of the Agent or any Lender to enforce
its claims against the Borrower, except as otherwise specifically provided for
in this Agreement (i) declare the Total Revolving Credit Facility terminated,
whereupon; (ii) declare the principal of and accrued interest In respect of all
Loans and all Obligations owing hereunder and thereunder to be, whereupon the
same shall become, forthwith due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower.
SECTION 9. DEFINITIONS.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms in this Agreement
shall include in the singular number the plural and in the plural the singular:
"Account" means all of the Borrower's "accounts" whether or not
such Account has been earned by performance, whether now existing or
existing in the future.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to
all directors and executive officers of such Person), controlled by, or
under direct or indirect common control with such Person; provided that
neither Rothschild nor any Affiliate of Rothschild shall be deemed to
-be an Affiliate of any Credit Party. A Person shall be deemed to
control a corporation for the purposes of this definition if such Person
possesses, directly or indirectly, the power (i) to vote 10% or more of
the securities having ordinary voting power for the election of
directors of such corporation or (ii) to direct or cause the direction
of the management and policies of such corporation, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" shall mean Rothschild, or any successor thereto
appointed in accordance herewith in its capacity as agent for the
Lenders
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"Agreement" shall mean this Agreement amended, supplemented or otherwise
modified from time to time in accordance with the terms hereof, including the
Amendment.
"Commencement Date" means the effective date of this Total Revolving
Credit Facility Agreement.
"Authorized Officer" shall mean any senior officer of the Borrower,
designated as such in writing to the Agent by the Borrower, to the extent
acceptable to the Agent.
"Lender" shall have the meaning provided in the first paragraph of this
Agreement and in EXHIBIT 1.
"Borrower" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"Borrowing" shall mean the incurrence pursuant to a Notice of Borrowing
and to the Loan Facility of one Type of Loan by the Borrower from all of the
Lenders.
"Borrowing Allowable Base" means an amount equal to the Total Revolving
Credit Facility available every thirty days to the Borrower announced by the
Agent.
"Borrowing allowable base Certificate" shall mean the certificate
delivered to the Borrower from the Agent at the Commencement Date and at the 90
day Adjustment Date, if applicable stating the maximum drawdown available to the
Company.
"Business Day" shall mean (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which shall be
in the City of New York a legal holiday or a day on which Lending institutions
are authorized by law or other governmental actions to close and (ii) with
respect to all notices and determinations in connection with, and payments of
principal and interest on any day which is a Business Day described in clause
(i) and which is also a day for trading by and between Lenders in U.S. dollar
deposits in the interLender Eurodollar market.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Closing Date" shall mean June 20, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collective Bargaining Agreement" shall mean each Collective Bargaining
Agreement set forth in Section 5.
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"Contingent Obligations" shall mean, as to any Person, without
duplication, any obligation of such Person guaranteeing or intended to guarantee
any Indebtedness, leases, dividends or other obligations ("primary obligations")
of any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation. or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof,
provided, however, that the term Contingent Obligation shall not. include
endorsements of instruments for deposit or collection in the ordinary course of
business, The amount of any Contingent Obligation shall be deemed to be an
amount equal to the maximum amount that such Person may be obligated to expend
pursuant to the terms of such Contingent Obligation or, if such Contingent
Obligation is not so limited, the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.
"Credit Documents" shall mean (i) this Agreement, (ii) each Repayment
Invoice, (iii) each Security Document.
"Credit Party" shall mean the Borrower (other than the Lenders and their
respective Affiliates) party to the Credit Documents or the Security Documents.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Deposit Account" means a demand, time, savings, passbook or like
account with a Lender, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Documents" shall mean each Credit Document.
"Dollars" or "$" means United States Dollars.
"Environmental Laws" means the common law and all federal, state, local
and foreign laws or regulations, codes, orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder, now or
hereafter in effect, relating to pollution or protection of public or employee
health and safety or the environment, including, without limitation, laws
relating to (i) emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or
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hazardous constituents, substances or wastes, including, without limitation,
petroleum, including crude oil or any fraction thereof, or any petroleum product
(collectively referred to as "Hazardous Materials"), into the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), (ii) the manufacture, processing, distribution,
use, generation, treatment, storage, disposal, transport or handling of
Hazardous Materials, and (iii) underground and aboveground storage tanks, and
related piping, and emissions, discharges, releases or threatened releases
therefrom,
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time. Section references to ERISA are to ERISA as in
effect at the date of this Agreement and any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
"Event of Default" shall have the meaning provided in Section 8.
"Financing Proceeds" means the cash (other than Net Cash Proceeds)
received by the Borrower.
"Foreign Pension Plan" shall mean any Pension Plan or other deferred
compensation plan, program or arrangement maintained by any Subsidiary of the
Borrower organized under the laws of a jurisdiction other than the United States
of America or any state thereof which, under applicable law, is required to be
funded through a trust or other funding vehicle.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, it being understood and agreed that determinations in
accordance with GAAP for purposes of Section 7, including defined terms as used
therein, are subject (to the extent provided therein) to Section I 1.
"Governmental Authority" means any federal, state, local, foreign or
other governmental or administrative (including self-regulatory) body,
instrumentality, department or agency or any court, tribunal, administrative
hearing body, arbitration panel, commission, or other similar dispute-resolving
panel or body including, without limitation, those governing the regulation and
protection of the environment, whether now or hereafter in existence, or any
officer or official thereof
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person, whether
or not such Indebtedness has been assumed by such first Person (but the amount
of such Indebtedness, for all calculations hereunder, will not exceed the lesser
of (i) the amount of Indebtedness of such second Person so secured and (ii) the
fair market value of the
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property of such first Person securing such Indebtedness), (v) all Capitalized
Lease Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, i.e., take-or-pay and similar obligations, and (vii) all obligations
of such Person under Interest Rate Agreements; provided that Indebtedness shall
not include trade payables, accrued expenses, accrued dividends, accrued income
taxes and other similar current liabilities, in each case arising in the
ordinary course of business.
"Lenders" shall mean at any time Lenders holding at least 51% of the
Total Revolving Loan Commitments held by the Lenders; provided that for the
purposes of Section 4, the requirement that any document, agreement, certificate
or other writing is to be satisfactory to the Lenders shall be satisfied if (x)
such document, agreement, certificate or other writing was delivered in its
final form to the Lenders prior to the Amendment Date (or if amended or modified
thereafter, the Agent has reasonably determined such amendment or modification
not to be material), (y) such document, agreement, certificate or other writing
is satisfactory to the Agent and (z) Lenders holding more than 51% of the
Total Revolving Loan Commitments held by Lenders have not objected in writing to
such document, agreement, certificate or other writing to the Agent and the
Borrower prior to the Amendment Date.
"Liquidation Rights" shall mean the definitive right granted herein to
the Lenders for the Securities of the Borrower.
"Liquidation Covenants" shall mean the time and volume restraints
Lenders are held by under this Agreement herein referenced in Section 2.
"Loan" shall mean each and every Revolving Loan.
"Loan Facility" shall mean the credit facility evidenced by the Total
Revolving Loan Commitment.
"Materially Adverse Effect" means (i) with respect to the Borrower, any
materially adverse effect (both before and after giving effect to the financing
contemplated hereby and by the other Documents) with respect to the operations,
business, properties, assets, liabilities (contingent or otherwise) or financial
condition or prospects of the Borrower, or (ii) any fact or circumstance
(whether or not the result thereof would be covered by insurance) as to which
singly or in the aggregate there is a reasonable likelihood of (w) a materially
adverse change described in clause (i) with respect to the Borrower or (x) the
inability of the Borrower to perform in any material respect its Obligations
hereunder or under any of the other Documents or the inability of the Lenders to
enforce in any material respect their rights purported to be granted hereunder
(y) a materially adverse effect on the ability to effect (including hindering
or unduly delaying) the transactions contemplated hereby and by the Documents on
the terms contemplated hereby and thereby.
"Minimum Borrowing Amount" shall mean $25,000
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"Net Financing Proceeds" means Financing Proceeds, net of direct
expenses (including income taxes), of the transaction.
"Notes" shall mean any Revolving Note.
"Notice of Borrowing" shall have the meaning provided in Section 1.03.
"Obligations" shall mean all amounts, direct or indirect, contingent or
absolute, of every type or description, and at any time existing, owing to the
Agent or any Lender pursuant to the terms of this Agreement or any other Credit
Document or secured by any of the Security Documents.
"Office" shall mean the office of the Agent referenced herein or such
other office as the Agent may hereafter designate in writing as such to the
other parties hereto.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Regulation G" shall mean Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation T" shall mean Regulation T of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation U" shall mean Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Regulation X" shall mean Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing margin requirements.
"Revolving Loans" shall have the meaning provided in Section 1.
"Revolving Note" shall have the meaning provided in Section 1.
"Rothschild" shall mean Rothschild Group, S.A.
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"SEC" shall mean the Securities and Exchange Commission or any successor
thereto.
" SEC Regulation D" shall mean Regulation D as promulgated under the
Securities Act, as the same may be in effect from time to time.
"Securities" shall mean any stock, shares, voting trust certificates,
bonds, debentures, options, warrants, notes, or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Documents" shall mean each of the Notes, the Pledge Agreements
and any other documents utilized as such documents may after their execution be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof and thereof
"Subsidiary" of any Person shall mean and include (i) any corporation
more than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly through Subsidiaries and (ii) any partnership, association, joint
venture or other entity in which such Person directly or indirectly through
Subsidiaries has more than a 50% equity interest at the time.
"Termination Event" means (i) a "reportable event" described in Section
4043 of ERISA or in the regulations thereunder (excluding events for which the
requirement for notice of such reportable event has been waived by regulation by
the PBGC) with respect to a Title IV Plan, or (ii) the withdrawal of the
Borrower or any of its ERISA Affiliates from a Title IV Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) of
ERISA, or (iii) the filing of a notice of intent to terminate a Title IV Plan or
the treatment of a Title IV Plan amendment as a termination under Section 4041
of ERISA, or (iv) the institution of proceedings by the PBGC to terminate a
Title IV Plan or to appoint a trustee to administer a Title IV Plan, or (v) any
other event or condition which might constitute reasonable grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan, or (vi) the complete or partial withdrawal
(within the meaning of Sections 4203 and 4205, respectively, of ERISA) of the
Borrower or any of its ERISA Affiliates from a Multiemployer Plan, or (vii)
the insolvency or reorganization (within the meaning of Section 4245 and 4241,
respectively, of ERISA) or termination of any Multiemployer
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plan, or (viii) the failure to make any payment or contribution to any Pension
Plan or Multiemployer Plan or the making of any amendment to any Pension Plan
which could result in the imposition of a lien or the posting of a bond or other
security.
"Test Period" means the shorter of (i) the six consecutive complete
months from the Commencement date forward and the final six month of the Term of
the Total Revolving Credit Facility.
"Total Revolving Loan Commitment" shall mean the sum of the Revolving
Loan Commitment of each of the Lenders.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of New York.
"Voting Stock" means all classes of capital stock of a corporation then
outstanding and normally entitled to vote in the election of directors.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary of
such Person to the extent all of the capital stock or other ownership interests
in such Subsidiary, other than directors' or nominees' qualifying shares, is
owned directly or indirectly by such Person.
"Written" or "In Writing" shall mean any form of written communication
or a communication by means of telex, telecopier device, telegraph or cable.
"90 Day Evaluation Date" shall mean the ninety (90)-day evaluation date
and period as described in Section 2.
23
<PAGE> 24
SECTION 10. The Agent.
10.01 Appointment. Each Lender hereby irrevocably designates and
appoints Rothschild Group, S.A. as Agent of such Lender to act as specified
herein and each such Lender hereby irrevocably authorizes the Agent to take such
action on its behalf under the provisions of this Agreement and to exercise such
powers and perform such duties as are expressly delegated to such agent by the
terms of this Agreement, together with such other power as are reasonably
incidental thereto. The Agent agrees to act as such upon the express conditions
contained in this Section 10. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the. Agent shall not have any duties or
responsibilities, except those set forth herein, or any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against such Agent. The provisions of this Section 10 are solely for the benefit
of such Agent and the Lenders, and no Credit Party shall have any rights as a
third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, the Agent shall act solely as an
Agent of the Lenders and does not assume and shall not be deemed to have assumed
any obligation or relationship of agency or trust with or for any Credit Party.
The Lender hereby agrees to pay the Agent an annual agency fee of $5,000
payable quarterly in arrears.
10.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
No agent shall be responsible for the negligence or Misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 10.03.
10.03 Exculpatory Provisions. The Agent nor any of their respective
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person under or in connection with this Agreement (except for its or such
Person's own gross negligence or willful misconduct) or (ii) responsible in any
manner to any of the Lenders for any recitals, statements, representations or
warranties by the Borrower, any Subsidiary of the Borrower or any of their
respective officers contained in this Agreement, any other Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by such agent under or in connection with, this Agreement or any
other Document or for any failure of the Borrower or any of their respective
officers to perform its obligations hereunder or thereunder. The Agent shall not
be under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of the
Borrower. The Agent shall not be responsible to any Lender for the
effectiveness, genuineness, validity, enforceability, collectability or
sufficiency of this Agreement or for any representations, warranties, recitals
or statements made herein or therein or made in any written or oral statement or
in any financial or other statements, instruments, reports, certificates or any
other documents in connection herewith or therewith furnished or made by such
agent to the Lenders or by or on behalf of the Borrower, any of its Subsidiaries
or any Guarantor. to such agent or any Lender or be required to ascertain or
inquire as to the performance or observance of
24
<PAGE> 25
any of the terms, conditions, provisions, covenants or agreements contained
herein or as to the use of the proceeds of the Loans or of the existence or
possible existence of any Default or Event of Default.
10.04 Reliance by the Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
them to be genuine and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal opinion from independent
accountants and other experts selected by such agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement unless
they shall first receive such advice or concurrence of the Lenders as they deem
appropriate or they shall first be indemnified to their satisfaction by the
Lenders against any and all liability and expense which may be incurred by them
by reason of taking or continuing to take any such action. The Agent shall in
all cases be fully protected in acting or in refraining from acting, under this
Agreement in accordance with a request of the Lenders (or to the extent
specifically provided in Section 11.12, all the Lenders), and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
the Lenders.
10.05 Notice of Default. The Agent shall not be deemed to have knowledge
of the occurrence of any Default or Event of Default, other than a default in
the payment of principal or interest on the Loans hereunder unless it has
received notice from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". In the event that an agent receives such a notice, such
agent shall give prompt notice thereof to the Lenders. Such agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Lenders, provided that, unless and until such agent
shall have received such directions, such agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best interests of
the Lenders.
10.06 Non-Reliance on Agent. Each Lender expressly acknowledges that
neither the Agent, officers, directors, employees, agents, attorneys-in-fact or
affiliates of any agent has made any representations or warranties to it and
that no act by any agent hereafter taken, including any review of the affairs of
the Borrower shall be deemed to constitute any representation or warranty by
such agent to any Lender. Each Lender represents to each agent that it has,
independently and without reliance upon any such agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, assets, operations,
property, financial and other conditions, prospects and creditworthiness of the
Borrower and made its own decision to make its Loans hereunder and enter into
this Agreement and the other agreements contemplated hereby. Each Lender also
represents that it will, independently and without reliance upon any agent or
any other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement, and to make
such investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other conditions, prospects and
25
<PAGE> 26
creditworthiness of the Borrower. Except for documents expressly required to be
furnished to the Lenders by any agent hereunder, no agent shall have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, assets, property, financial and other
conditions, prospects or creditworthiness of the Borrower which may come into
the possession of any such agent or any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates.
10.07 Indemnification. The Lenders agree to indemnify the Agent in its
capacity as such, ratably according to their Commitments, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, reasonable expenses or disbursements of any kind
whatsoever which may at any time (including, without limitation, at any time
following the payment of the Obligations) be imposed on, incurred by or asserted
against each such agent in its capacity as such in any way relating to or
arising out of this Agreement, or any documents contemplated by or referred to
herein or the transactions contemplated hereby or any action taken or omitted to
be taken by any such agent under or in connection with any of the foregoing, but
only to the extent that any of the foregoing is not paid by Borrower, provided
that no Lender shall be liable to the Agent for the payment of any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from any such agent's
gross negligence or willful misconduct. If any indemnity furnished to an agent
for any purpose shall, in the opinion of such agent, be insufficient or become
impaired, the agent may call for additional indemnity and cease, or not
commence, to do the acts indemnified against until such additional indemnity is
furnished. The agreements in this Section 10.07 shall survive the payment of all
Obligations.
10.08 Successor Agents. Upon the acceptance of any appointment as an
Agent hereunder by a successor Agent by a successor "Agent" as the case may be,
shall include such successor agent effective upon its appointment, and the
resigning Agent's as the case may be, rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the part of such
former agent or any of the parties to this Agreement. After the retiring Agent's
resignation hereunder as Agent the provisions of this Section 10 shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
10.09 Resignation, Transfer by Agent.
(a) An Agent may resign from the performance of all its
functions and duties hereunder at any time by giving 45 Business Days'
prior written notice to the Borrower and the Lenders. Such resignation
shall take effect upon the acceptance by a successor Agent of
appointment pursuant to subsections B and C below or as otherwise
provided below.
(b) Upon any such notice of resignation of an Agent, the Lenders
shall appoint a successor Agent acceptable to the Borrower and which
shall be an incorporated Lender or trust company or other qualified
financial institution.
26
<PAGE> 27
(c) If a successor Agent shall not have been so appointed within
said 45 Business Day period, the resigning Agent with the consent of the
Borrower shall then appoint a successor Agent, who shall serve as a
successor Agent until such time, if any, as the Lenders appoint a
successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to
subsection B or C by the 50th Business Day after the date such notice of
resignation was given by the resigning Agent, such Agent's resignation
shall become effective and the Lenders shall thereafter perform all the
duties of Agent hereunder until such time, if any, as the Lenders
appoint a successor agent as provided above.
(e) Notwithstanding anything to the contrary contained in this
Section 10, Rothschild, as Agent, may transfer its rights and
obligations to perform all of its functions and duties hereunder to its
parent company or to any Affiliate of it or its parent company.
SECTION 11. MISCELLANEOUS.
11.01 Payment of Expenses, etc. The Borrower agrees to: (i) whether or
not the transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses (anticipated to be zero, and; must be approved
in writing by the Borrower) of the Agent in connection with the negotiation,
preparation, execution and delivery of the Final Credit Documents and
instruments referred to herein and any amendment, waiver or consent relating
thereto (ii) pay and hold the Agent and each of the Lenders harmless from and
against any and all present and future stamp and other similar taxes with
respect to the foregoing matters and save the Agent and each of the Lenders
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission (other than to the extent attributable to the Agent
or such Lender) to pay such taxes; (iii) indemnify the Agent and each Lender,
its officers, directors, employees, representatives and agents from and hold
each of them harmless against any and all losses, liabilities, claims, damages
or expenses (including, without limitation, any and all losses, liabilities,
claims, damages or expenses arising under Environmental Laws) incurred by any of
them as a result of, or arising out of, or in any way related to, or by reason
of any investigation, litigation or other proceeding (whether or not the Agent
or any Lender is a party thereto) related to the entering into and/or
performance of any Document or the use of the proceeds of any Loans hereunder or
the consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified); and (iv) pay all reasonable
out-of-pocket costs and expenses of Rothschild in connection with the assignment
to any other Person of all or any portion of Rothschild's interest under this
Agreement pursuant to Section 11.04.
11.02 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence and during the continuance of an Event of
Default, each Lender is hereby authorized at any time or from time
27
<PAGE> 28
to time, without presentment, demand, protest or other notice of any kind to any
Credit Party or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits (general or
special) and any other Indebtedness at any time held or owing by such Lender
(including, without limitation, by branches and agencies of such Lender wherever
located) to or for the credit or the account of any Credit Party against and on
account of the Obligations and liabilities of such Credit Party to such Lender
under this Agreement including, without limitation, all interests in Obligations
of such Credit Party purchased by such Lender pursuant to Section 11.06(b), and
all other claims of any nature or description arising out of or connected with
this Agreement irrespective of whether or not such Lender shall have made any
demand hereunder and although said Obligations, liabilities or claims, or any of
them, shall be contingent or unmatured; as a courtesy to the Borrower, the
Borrower shall receive notice of such set-off.
11.03 Notices. Except as otherwise expressly provided herein, all
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to the Borrower, to
Leading Edge Earth Products, Inc., 319 Nickerson Street #186, Seattle,
Washington, 98109 Attention: President and Chief Executive Officer, Telephone
Number: (800) 788-3599, if to any Lender, through Rothschild Group S.A. at its
address specified on Annex I attached hereto; or, at such other address as shall
be designated by any party in a written notice to the other parties hereto. All
such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, be effective two days after
being deposited in the mails, when delivered to the telegraph company, cable
company or overnight courier, as the case may be, or when delivered by telex or
telecopier, except that notices and communications to the Agent or the Borrower
shall not be effective until received by such party.
11.04 Benefit of Agreement.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto, all future holders
of the Notes, and their respective successors and assigns; provided that
no Credit Party may assign or transfer any of its interests hereunder
without the prior written consent of the Lenders; and provided,
further, that the rights of each Lender to transfer, assign or grant
participations in its rights and/or obligations hereunder shall be
limited as set forth below in this Section 11,04; provided that nothing
in this Section 11.04 shall prevent or prohibit any Lender from (i)
granting participations in or assignments of such Lender's Loans, Notes
and/or Revolving Loan Commitments hereunder to its parent company
and/or to any Affiliate of such Lender that is at least 50% owned by
such Lender or its parent company.
(b) Each Lender shall have the right to transfer, assign or
grant participations in all or any part of its remaining Loans, Notes
and/or Commitments hereunder on the basis set forth below in this clause
(b). Each Lender may furnish any information concerning the Borrower in
the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants).
28
<PAGE> 29
(i) Participations. Each Lender may transfer, grant or
assign participations in all or any part of such Lender's Loans,
Notes and/or Commitments hereunder pursuant to this clause
(b)(i) to any Person; provided that (i) such Lender shall remain
a "Lender" for all purposes of this Agreement and the transferee
of such participation shall not constitute a Lender hereunder
and (ii) no participant under any such participation shall have
fights to approve any amendment to or waiver of this Agreement
or any other Credit Document except to the extent such amendment
or waiver would (y) change the scheduled final maturity date of
any of the Loans, Notes or Commitments in which such participant
is participating or (z) reduce the principal amount, interest
rate or fees applicable to any of the Loans, Notes or
Commitments in which such participant is participating or
postpone the payment of any interest or fees. In the case of any
such participation, the participant shall not have any rights
under this Agreement or any of the other Credit Documents (the
participant's rights against the granting Lender in respect of
such participation to be those set forth in the agreement with
such Lender creating such participation) and all amounts payable
by the Borrower hereunder shall be determined as if such Lender
had not sold such participation; provided that such participant
shall be considered to be a "Lender" for purposes of Sections
11.02 and 11.06(b).
11.05 No Waiver; Remedies Cumulative. No failure or delay on the part of
any Agent or any Lender in exercising any right, power or privilege hereunder
and no course of dealing between any Credit Party and any Agent or any Lender
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power, or privilege hereunder or thereof or the exercise of any other
right, power or privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which any Agent or any Lender would otherwise have. No notice to or
demand on any Credit Party in any case shall entitle any Credit Party to any
other or further notice or demand in similar or other circumstances or
constitute a waiver of the fights of any Agent or the Lenders to any other or
further action in any circumstances without notice or demand.
11-06 Calculations; Computations. All computations hereunder shall be
made on the actual number of days elapsed over a year of 365 days; provided that
the actual calendar only will include 360 days. AU computations of "Repayment
Invoice's" and interest on such Loans stated therein shall be made on the actual
formulas set forth in Section 3.
11.07 Governing Law; Submission to Jurisdiction; Venue.
(a) This Agreement and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with and be
governed by the laws of the State of New York applicable to contracts
made and to be performed wholly therein. Any legal action or proceeding
with respect to this Agreement or any other Credit Document may be
brought in the courts of the State of New York or of the United States
for the Southern District of New York, and by execution and delivery of
this Agreement, each Creadit Party
29
<PAGE> 30
hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. Each Credit Party further irrevocably consents to the
service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to the respective Credit Party at its
address for notices pursuant to Section 11.03, such service to become
effective 30 days after such mailing. Each Credit Party hereby
irrevocably appoints the Borrower and such other persons as may
hereafter be selected by Borrower irrevocably agreeing in writing to
serve as its agent for service of process in respect of any such action
or proceeding. Nothing herein shall affect the right of the Agent or any
Lender to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any Credit Party
in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Agreement brought in the courts referred to in clause (a) above and
hereby further irrevocably waives and agrees not to plead or claim in
any such court that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
11.08 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all of
which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Agent.
11.09 Commencement Date. This Agreement shall become effective (the
"Commencement Date") on July 1 or the date on which each of the Borrower and
each of the Lenders, through the Agent shall have signed a copy hereof (whether
the same or different copies) and shall have delivered the same to the Agent at
its Office or, in the case of the Lenders, shall have given to the Agent
telephonic (confirmed in writing), written, telex or telecopy notice (actually
received) at such office that the same has been signed and mailed to it. The
Agent will give the Borrower and each Lender prompt written notice of the
effectiveness of this Agreement.
11.10 Headings Descriptive. The headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
11.11 Amendment or Waiver. Neither this Agreement nor any terms hereof
or thereof may be changed, waived, discharged or terminated unless such change,
waiver, discharge or termination is in writing signed by the Lenders; provided
that no such change, waiver, discharge or termination shall, without the consent
of each affected Lender and the Agent, (i) extend the scheduled final maturity
date of any Loan, or any portion thereof, or reduce the rate or extend the time
of payment of interest thereon or fees or reduce the principal amount thereof,
or increase the Total Revolving Credit Facility over the amount thereof then in
effect (it being understood that a
30
<PAGE> 31
waiver of any Default or Event of Default or of a mandatory reduction in the
Total Revolving Credit Facility shall not constitute a change in the terms of
any Commitment of any Lender), (ii) amend, modify or waive any provision of this
Section, or other Section herein (iii) reduce any percentage specified in, or
otherwise modify, the definition of Lenders or (iv) consent to the assignment or
transfer by any Credit Party of any of its rights and obligations under this
Agreement. No provision of Section 10 may be amended without the consent of the
Agent.
11.12 Survival. All indemnities set forth herein including, without
limitation shall survive the execution and delivery of this Agreement and the
making of the Loans, the repayment of the Obligations and the termination of the
Total Revolving Credit Facility.
11.13 Domicile of Loans. Each Lender may transfer and carry its Loans
at, to or for the account of any branch office, subsidiary or Affiliate of such
Lender.
11.14 Waiver of Jury Trial. Each of the parties to this agreement hereby
irrevocably waives all right to a trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement, the Credit Documents
or the transactions contemplated hereby or thereby.
11.15 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitation of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
condition exists.
11.16 No Representation Regarding Tax Treatment. No representation or
warranty is being made by any party to any other regarding the treatment of this
transaction for federal or state income taxation. Each party has relied
exclusively on its own legal, accounting and other tax advisers regarding
treatment of this transaction for federal and state income taxes and no
representation, warranty or assurance from any other party or such other party's
legal, accounting or other adviser.
11.17 Third Party Beneficiary. The Borrower and Agent are the only
parties to this Agreement, and no one else shall be deemed to have any rights
hereunder or be deemed a third party beneficiary.
11.18 Termination. The Credit Facility may be terminated prior to the
termination date of June 30, 1999 by written, agreed to and executed
documentation by both the Lenders and the Borrower delivered to the Agent at the
Agent's address. This Credit Facility may be terminated by the borrower under
non-performance by the Lenders or at the sole option of the Borrower. Should the
Borrower terminate this Credit Facility 1,200,000 shares of the Borrower held
with Rothschild Group, S.A. will be returned to the Borrower as set herein
section 11.18, pursuant to other agreement to which Borrower is party which
authorizes Rothschild to administer such transactions. Such termination must be
presented to the Agent and Lender in writing, with
31
<PAGE> 32
supporting documentation and delivered by United States post office certified
mail to the Lenders' and Agent's address of record stated herein.
Borrower terminates the Credit Facility from:
<TABLE>
<S> <C>
Shares returned
July 1, 1997 to July 31, 1997* - 1,200,000
August 1, 1997* to December 31, 1997 0
January 1, 1998 to June 30, 1998 0
July 1, 1998 to December 31, 1998 600,000 (pro-rated as of termination date)
January 1, 1999 to June 30, 1999 300,000 (pro-rated as of termination date)
</TABLE>
*or until Funds have been received by Borrower.
Should this Credit Facility be terminated by the Borrower, all covenants,
sections, items and obligations must be fulfilled completely by both the
Borrower and Lenders prior to the return of shares to the Borrower. Any shares
returned to the Borrower will be sent to the Borrower within 60 days of notice
of termination.
32
<PAGE> 33
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this
Total Revolving Credit Facility Agreement to be duly executed and delivered as
of the date first above written.
LEADING EDGE EARTH PRODUCTS, INC.
By:
--------------------------------
Name: Grant Record
Title: Chief Executive Officer
ROTHSCHILD GROUP, S.A. as Agent.
By:
--------------------------------
Name:
33
<PAGE> 34
Revolving Credit Facility
Between
Leading Edge Earth Products, Inc.
And
Rothschild Group, S.A.
July 1, 1997
ANNEX I
List of Lenders:
Rothschild Trust, S.A.
<PAGE> 35
Notice of Borrowing Request
DATE:
---------------
Leading Edge Earth Products, Inc.
319 Nickerson Street
Suite 186
Seattle, WA 98109
TO: Rothschild Group, S.A. CC: PRIMEX Capital
Nassau BAHAMAS Houston, Texas
This letter will authorize Rothschild Group, S.A. as Agent for the lenders to
arrange a loan against the Credit Facility issued by the Lenders to and for
Leading Edge Earth Products, Inc. (the "Borrower").
All necessary covenants and requirements have been met by the borrower in regard
to the executed Credit Facility document dated July 1, 1997.
Please wire transfer or send directly to the below coordinates of Leading Edge
Earth Products, Inc. the amount of $____________ (____________________________).
Wire transfer: Wells Fargo Bank
Fourth and Denny Branch
Seattle, WA
ABA # 121 000 248
Credit Account: Leading Edge Earth Products, Inc.
Account # 0204 - 602858
Send directly to: Leading Edge Earth Products, Inc.
391 Nickerson St., # 186
Seattle, WA 98109 Attn:
This authorization represents the _____________ ( ) of 24 drawdown requests that
may be available during the term of the Credit Facility.
This document was prepared by: _________________________________________
Print:___________________________________
Title:___________________________________
Phone Line_______________________________
<PAGE> 1
EXHIBIT 16.1
[KPMG Peat Marwick LLP LETTERHEAD]
June 27, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Leading-Edge Earth Products, Inc.
and, under the date of October 7, 1996, we reported on the financial statements
of Leading-Edge Earth Products, Inc. as of and for the years ended April 30,
1996 and 1995. On June 16, 1997, we declined to stand for re-election. We have
read Leading-Edge Earth Products, Inc.'s statements included under Item 4 of its
Form 8-K dated June 24, 1997 and we agree with such statements, except that
we are not in a position to agree or disagree with Leading-Edge Earth Products,
Inc.'s statement that the change was approved at a meeting of the stockholders.
Very truly yours,
KPMG Peat Marwick LLP
<PAGE> 1
EXHIBIT 16.2
[KPMG Peat Marwick LLP LETTERHEAD]
August 19, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Leading-Edge Earth Products, Inc.
and, under the date of October 7, 1996, we reported on the financial statements
of Leading-Edge Earth Products, Inc. as of and for the years ended April 30,
1996 and 1995. On June 16, 1997, we declined to stand for re-election. We have
read Leading-Edge Earth Products, Inc.'s statements included under Item 4 of its
Form 8-K/A dated August 18, 1997 and we agree with such statements, except that
we are not in a position to agree or disagree with Leading-Edge Earth Products,
Inc.'s statement that the change was approved at a meeting of the stockholders.
Very truly yours,
KPMG Peat Marwick LLP
<PAGE> 1
EXHIBIT 21
AFFILIATES OF THE REGISTRANT
The Company has one affiliate, Agile, Inc., whose address is 30 West 3rd
Street, 3rd Floor, Williamsport, PA 17701.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> APR-30-1997
<CASH> 5,897
<SECURITIES> 0
<RECEIVABLES> 226,820
<ALLOWANCES> 222,750
<INVENTORY> 0
<CURRENT-ASSETS> 16,467
<PP&E> 0
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</TABLE>
<PAGE> 1
EXHIBIT 99
TIME NOTE
$275,000 Williamsport, Pennsylvania
May 15, 1996
For Value Received, AGILE INVESTMENT CORPORATION, a Pennsylvania
business corporation with an office at 3500 West Fourth Street, Williamsport,
Pennsylvania 17701 (herein called the "Maker"), hereby promises to pay to the
order of JOHN RATKOVICH, with an address of American Home, 830 West Northwest
Highway, Palatine, Illinois 60067 (herein called the "Payee"), in the manner and
at the times herein stated, the principal sum of TWO HUNDRED SEVENTY-FIVE
THOUSAND ($275,000) DOLLARS, subject to discount, as herein provided.
This Time Note and any substitution or replacement therefor, renewal or
modification thereof, or amendment thereto (the "Note") evidences a loan made by
the Payee to the Maker on this date (the "Loan"), the proceeds of which will be
advanced by the Maker to Agile Building Technology, Inc. ("Agile") for the
purchase of Agile of certain equipment (the "Equipment") to be used by Agile in
connection with its business operations. In consideration therefore, Agile has
executed and delivered its Guaranty Agreement to the Payee (the "Guaranty")
whereby it has agreed to guaranty the obligation of the Maker to repay the Loan,
and has agreed to execute and deliver its Security Agreement to the Payee (the
"Security Agreement") whereby it will grant the Payee a security interest in the
Equipment upon Agile's acquisition thereof.
The Maker hereby agrees to keep, perform, and comply with all
covenants, terms, and conditions of all documents and instruments now and at
any time hereinafter delivered to and held by the Payee to evidence and secure
the Loan (herein collectively called the "Loan Documents"), all of which are
incorporated by reference in and made a part of this Note.
<PAGE> 2
This Note shall also evidence all advances and expenditures that the
Payee is authorized and permitted to make under the provisions of the Loan
Documents, and all other sums of every nature and kind that at any time
hereafter become due and owing by the Maker to the Payee under the Loan
Documents, which shall be added to and become part of the principal amount
evidenced by this Note and paid to the Payee, on the date the principal balance
of this Note is paid.
The Maker hereby agrees to repay the entire principal amount of this
Note on August 15, 1996 (the "Due Date"), provided however, that the Maker may
pay the Payee the sum of $256,666 between June 16, 1996 and July 15, 1996, in
which case the entire principal amount of this Note shall be deemed to be paid
in full, and provided further, that the Maker may pay the Payee the sum of
$256,333 on or before June 15, 1996, in which case the entire principal amount
of this Note shall be deemed to be paid in full.
All payments on this Note shall be made in immediately available funds
on the day when due, without presentment, demand, protest, or notice of any
kind, all of which are hereby waived. Payment shall be made at the address of
the Payee herein designated or at such other place as the Payee may from time
to time designate by written notice to the Maker, and shall be made in lawful
money of the United States of America without set-off, counterclaim, or other
deduction of any nature.
Upon a failure by the Maker to pay the principal amount of this Note by
the Due Date, upon the earlier filing of a petition for relief by or against
the Maker under the Bankruptcy Code, of upon the earlier occurrence of an event
of default under the Guaranty or the Security Agreement (any such event
constituting an "Event of Default"), this Note shall become immediately due
and payable without presentment, demand, protest, or notice of any kind, all of
which are hereby expressly waived by the Maker, plus interest on the unpaid
principal balance of this Note, which interest shall accrue at the rate of
fifteen percent (15%) per annum from the date of such Event of Default until
the date the principal balance of this Note is paid in full. In the event the
Payee initiates legal action against the Maker for the collection
2
<PAGE> 3
of any amounts due under this Note, the Maker shall pay to the Payee, in
addition to all amounts due hereunder, costs of suit and attorney's fees equal
to fifteen percent (15%) of the principal balance of this Note then due and
owing.
All notices and demands required by the provisions of this Note shall
be in writing and shall be effective upon delivery if hand delivered, upon the
date of mailing, by United States Certified Mail, Return Receipt Requested,
with postage prepaid, or upon the date of sending by Federal Express or other
recognized over-night carrier, addressed to the party to receive such notice or
demand at the address stated in the introductory portion of this Note or to
such other address stated in the introductory portion of this Note or to such
other address as such party shall from time to time direct by notice given in
like manner.
The Maker hereby consents to jurisdiction of the United States District
Court for the Northern District of Illinois in any and all actions and
proceedings arising under this Note, and agrees to service of process by
Certified Mail, Return Receipt Requested to the address of the Maker set forth
herein.
THIS MAKER KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT IT
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS NOTE. THE MAKER CERTIFIES THAT NO REPRESENTATIVE OR
AGENT OF THE PAYEE HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PAYEE
WOULD NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER OF A
RIGHT TO JURY TRIAL. THE MAKER ACKNOWLEDGES THAT THE PAYEE HAS BEEN INDUCED TO
MAKE THE LOAN IN PART BY THE PROVISIONS OF THIS WAIVER.
All of the foregoing agreements and obligations shall bind the Maker,
its successors and assigns, and shall inure to the benefit of the Payee, his
heirs, personal representatives, successors and assigns.
3
<PAGE> 4
In Witness Whereof, the Maker has caused this Time Note to be executed
by its proper officers, and its corporate seal to be affixed, as of the day and
year first above written, intending to be legally bound.
ATTEST: AGILE INVESTMENT CORPORATION
/s/ [SIG] By /s/ [SIG]
- ----------------------------- ----------------------------
Title: Controller Title:
[Corporate Seal]
4
