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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED COMMISSION FILE NO.
DECEMBER 31, 1996 000-28112
MOTORVAC TECHNOLOGIES, INC.
(Name of Small Business Issuer in its Charter)
DELAWARE 33-0522018
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1431 S. Village Way, Santa Ana, California 92705
(Address of Principal Executive Offices)(Zip Code)
Issuer's telephone number: (714) 558-4822
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $0.01 Par Value
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange 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. [ ]
The issuer's revenues for the fiscal period ended December 31, 1996 were
$8,242,735.
The aggregate market value of the voting stock held by non-affiliates of the
issuer as of February 3, 1997, was $8,681,030. Shares of common stock held by
each officer and director and by each person who owns 5% of more of the
outstanding common stock of the Company have been excluded because such persons
may be deemed to be affiliates.
The total number of shares outstanding of the Issuer's Common Stock was
4,514,918 as of March 25, 1997.
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DOCUMENTS INCORPORATED BY REFERENCE
Issuer's definitive Proxy Statement to be filed with the Commission pursuant to
Regulation 14A in connection with the Issuer's 1997 Annual Meeting of
Stockholders is incorporated herein by reference into Part III of this report.
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MOTORVAC TECHNOLOGIES, INC.
FORM 10-KSB
YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Item
Number Page
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PART I
<S> <C> <C> <C>
1. Description of Business........................................................ 3
2. Description of Property........................................................ 21
3. Legal Proceedings.............................................................. 22
4. Submission of Matters to a Vote of Security Holders............................ 22
PART II
5. Market for Common Equity and Related Stockholders Matters...................... 23
6. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................ 23
7. Financial Statements........................................................... 27
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures........................................... 27
PART III
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.............................. 27
10. Executive Compensation......................................................... 27
11. Security Ownership of Certain Beneficial Owners and Management................. 27
12. Certain Relationships and Related Transactions................................. 27
PART IV
13. Exhibits, Lists and Reports on Form 8-K........................................ 28
Signatures..................................................................... 32
Power of Attorney.............................................................. 32
</TABLE>
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PART I
This Annual Report on Form 10-KSB contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends that
such statements shall be protected by the safe harbors provided for in such
sections. Such statements are subject to risks and uncertainties that could
cause actual results to vary materially from those projected in the
forward-looking statements. The Company may experience significant fluctuations
in future operating results due to a number of economic, competitive,
governmental and technological factors, including, among other things, changes
in laws, the size and timing of customer orders, new or increased competition,
delays in new product enhancements and new product introductions, quality
control difficulties, changes in market demand, market acceptance of new
products, product returns, seasonality in product purchases by distributors and
end users, and pricing trends in the automotive after-market industry in
general, and in specific, markets in which the Company is active. Any of these
factors, or others, could cause operating results to vary significantly from
those in prior periods, and those projected in the forward-looking statements.
Additional information with respect to these and other factors which could
materially affect the Company and its operations is included in the Company's
filings with the Securities and Exchange Commission, including the Registration
Statement on Form SB-2 dated April 25, 1996 and any subsequent filings.
ITEM 1. DESCRIPTION OF BUSINESS.
MotorVac Technologies, Inc. (the "Company") designs, develops,
assembles, markets and sells the MotorVac CarbonClean System for the diagnosis,
maintenance and repair of internal combustion engine fuel systems primarily for
the automotive after-market repair and service industry. The MotorVac
CarbonClean System is comprised of a fuel system cleaning machine and a
proprietary cleaning detergent. Servicing an engine with the MotorVac
CarbonClean System enhances engine performance by removing dirt, carbon deposits
and other contaminants from fuel systems of both gasoline and diesel-powered
engines. Additionally, the MotorVac CarbonClean System's diagnostic capabilities
help to insure fuel system safety and reliability by allowing the technician to
check fuel pressure, fuel volume and system leak down (internal fuel pressure
system loss). The Company believes that its MotorVac CarbonClean System advances
both the vehicle manufacturers' mandated goal to develop efficient fuel
distribution systems that meet increasingly stringent state and federal emission
requirements and customer demands for enhanced engine performance and improved
fuel economy.
The Company was incorporated in the State of Delaware on June 19, 1992
as CarbonClean Corporation. In August 1992, the Company acquired certain assets
from Enviromotive Inc. ("EMI"), an independent third party, which, in February
1992, had acquired the assets from the Chapter 11 Trustee in the Parker
Automotive Corporation bankruptcy proceeding. At the same time, a then existing
affiliate of the Company licensed from EMI the worldwide rights to utilize
certain patent rights and certain trademarks and service marks, including the
name "CarbonClean" (collectively, the "EMI Property"), and the affiliate of the
Company sublicensed to the Company the right to utilize the EMI Property in the
United States and Canada. In March 1993, CarbonClean Corporation changed its
name to MotorVac Technologies, Inc. The tradename MotorVac is used by the
Company throughout North America. The Company also uses the tradename
CarbonClean in North America, but the Company uses the CarbonClean name outside
of the United States and Canada because the Company believes the tradename
CarbonClean has stronger brand name recognition outside the United States and
Canada. Through a series of restructurings effected in 1994 and 1995, the
Company acquired the license to utilize the EMI property worldwide. Effective as
of December 31, 1995, the Company purchased all of the EMI Property from EMI.
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INDUSTRY OVERVIEW
The Fuel System Contamination Problem. Today's engines are computer
controlled and, although generally effective in providing reliable performance
and reasonable fuel mileage while complying with applicable state and federal
emission standards, they provide little opportunity for adjustment when
driveability problems occur. Specifically, fuel system contamination causes
problems such as knocking, pinging, rough idle, and high speed miss. All fuel
system components, from the intake through the fuel rail, injector screens,
injector pintel, intake valves, combustion chamber, O2 sensor and catalytic
converters, are impacted by the contamination caused by dirt and carbon build-up
in the fuel system.
The Company believes that the automotive service and repair industry,
along with vehicle owners, are experiencing some or all of the following
problems:
- Driveability Problems. A driveability problem is present when
a vehicle is not performing well and the problem is difficult
to solve or repair. Typically, these problems are caused by a
computer problem, a transmission problem, or a fuel system
problem. Additionally, automotive manufacturers do not
generally recommend regular cleaning of the vehicle's fuel
system with available solvents because of the potential
damaging effect that some of these solvents may have on engine
parts.
- Tune-Ups. Tune-ups are presently done as preventive
maintenance and do not usually correct or reduce driveability
problems with today's engines. Generally, all that can be done
on today's engines is replace the spark plugs because many
engines have no distributors or plug wires and the ignition
timing is set at the factory and controlled by the vehicle's
on-board computer.
- Emissions. In response to emission programs established in
most states, emission testing and repair has become a major
profit center for many automotive service and repair
facilities. However, most automotive service and repair
facilities do not currently have a complete fuel system
cleaning service available to repair vehicles that, when
tested on existing emissions equipment, exhibit no parts
failures but nevertheless fail inspection.
- Profitability. Automotive service and repair facilities need
maintenance services that are easily performed by their
technicians, are profitable for the facility and provide a
noticeable difference in performance to the consumer,
particularly given the declining necessity for a tune-up on
today's computer-controlled engines.
- Maintaining Customer Satisfaction. Repeat and referral
business is critical to the automotive service and repair
facility's survival. Because most automotive service and
repair facilities do not currently have a cost effective
solution for addressing many driveability problems, the
Company believes that a cost effective solution that enhances
vehicle performance is central to increased customer
satisfaction and a stable customer base.
Current Market Solution. In addition to the Company's products, there
are presently three main product lines broadly available to address the market
opportunity created by the fuel system contamination problem:
The first product solution is positioned as a fuel tank
additive and marketed as a fuel system cleaner by such companies as
Wynn's International, Inc., First Brands Corporation (which markets and
sells STP) and Pennzoil Company (which markets and sells GUMOUT).
The second product solution is presented by national brands of
gasoline, such as Chevron with Techron and Mobil, that include
additives that purport to clean fuel injectors and other parts of the
fuel system.
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The third product solution currently offered by companies such
as Borg Warner and Champion are pressurized spray cans that contain
solvents which are sprayed into the engine's fuel system, usually
without the aid of any mechanical process regulating pressure and flow
or longevity of the cleaning process.
The Company believes that the foregoing methods provide an incomplete
solution to the fuel system contamination problem primarily because (i) they
usually introduce the cleaning additive in a more diluted form than the MotorVac
CarbonClean System and/or (ii) the cleaning additive does not remain in the fuel
system during the cleaning process for as long a period of time as with the
MotorVac CarbonClean System. The Company believes that the industry is now faced
with a rapidly growing problem that requires a solution not offered by existing
products. The MotorVac CarbonClean System provides a complete all-in-one fuel
system service, diagnostic and cleaning solution which the Company believes is
positioned to effectively address this market opportunity.
The MotorVac CarbonClean System Solution. The Company markets and sells
the MotorVac CarbonClean System for the diagnosis, maintenance and repair of
both gasoline and diesel engine fuel systems. The MotorVac CarbonClean System is
comprised of a machine and a proprietary detergent. Servicing an engine with the
MotorVac CarbonClean System simultaneously accomplishes two goals:
Diagnosis. The MotorVac CarbonClean System is a fuel system
diagnostic tool that allows the technician to check fuel pressure, fuel
volume, system leak down and fuel pump "dead-head" test in order to
identify problems and ensure overall system reliability and safety.
The MotorVac CarbonClean System cleans the entire fuel system in
gasoline engines with a three-step process:
(1) The first step recirculates the detergent and gas mixture
through the fuel rail, behind the regulator and over the top of the
injector openings (where the tiny injector screens are located) or the
throttle plat carburetor and choke system. During this step, the
MotorVac CarbonClean machine pulses the mixture in the rail which
vacuums off the debris lodged in the injector screens and filters
contaminants through the machine's on-board filtering system.
(2) The second step in the cleaning process uses the Company's
intake cleaning kit to coat the inside of the air intake manifold and
idle air control opening. This removes the build-up that causes
stalling and hesitation.
(3) The third and final step is as simple as starting the
engine and letting it idle. The fuel keeps the engine running while the
detergent/gas mixture passes through and cleans the injectors intake
valves, combustion chambers and exhaust valves by removing soft carbon
and other contaminants. Because the detergent survives combustion, the
exhaust gases carry the detergent as steam, which cleans the O2 sensor
and catalytic converter before dissipating. In addition, the service
and detergent are safe on all engine components and will not harm
injectors or any sensitive computer components.
Repair. The MotorVac CarbonClean System is a repair tool that
enhances engine performance by removing dirt and carbon deposits
through a three-step process from the complete fuel system (air intake
through the fuel rail, throttle plate, idle control devices, injector
screens and pintel, intake valves, combustion chamber, O2 sensor,
catalytic converters and exhaust system components). Central to the
cleaning process is the MotorVac CarbonClean detergent, which is a
proprietary detergent that is safe for use in all engines and survives
combustion, thereby cleaning the entire fuel system from the air intake
through the catalytic converter.
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MOTORVAC'S PRODUCTS
The MotorVac CarbonClean System--Product Overview.
The Company markets and sells internal combustion engine fuel system
cleaning systems for both gasoline and diesel-powered engines under the
tradenames MotorVac CarbonClean System in the United States and Canada and
CarbonClean System in other international markets. The MotorVac CarbonClean
System is comprised of fuel system cleaning machines and proprietary cleaning
detergents designed for both gasoline and diesel engines.
The gasoline system machine is a 12-volt powered 2-line cleaning system
which connects to the engine through vehicle specific adapters for all types of
carbureted and fuel-injected engines. The machine passes a detergent and gas
mixture over the components of the fuel system. With gasoline systems, the
gasoline to detergent mixture is generally three to one. With the engine off,
the system removes both organic and inorganic fuel deposits that build up in the
fuel rail, injector screens, and pressure regulator areas while filtering the
contaminants through the on-board filtering system. With the engine idling, the
solution passes through the injectors or carburetor jets and into the engine's
combustion chambers. Carbon, gum and varnishes built up in these areas are
softened and removed, and then passed out the exhaust.
The Company markets its diesel engine cleaning system under the
tradename Industrial Diesel Tune ("IDT"), which is comprised of a patented
diesel engine cleaning machine and a proprietary diesel detergent. The machine
is a 2-line cleaning system that connects to the engine through specific
adapters temporarily taking the place of the engine's fuel tank. The IDT passes
a concentrated mixture of MotorVac3D cleaning detergent and diesel fuel through
the components of the fuel system while the engine is running. With diesel
systems, the diesel fuel to detergent mixture is generally one to one. The
system removes both organic and inorganic fuel deposits that build up in the
fuel injectors, injection pumps and combustion chambers. Carbon, gum and
varnishes in the upper engine are softened and removed during combustion and
then passed out of the exhaust.
The Company believes that its proprietary cleaning detergent is the
safest and most effective engine fuel system cleaner on the market. It is safe
for use on all engine components and will not harm injectors or any sensitive
computer components. The Company has obtained test results that indicate that
the MotorVac CarbonClean System improves the performance of the vehicle,
increases fuel mileage and reduces harmful emissions. Because of these results,
the Company refers to the MotorVac CarbonClean service as "The Tune-Up of the
90's."
During the twelve-month year ended December 31, 1995, the Company
derived approximately 77% of its total sales from sales of fuel system cleaning
machines, approximately 17% of its total sales from sales of fuel system
cleaning detergents and approximately 6% of its total sales from sales of
adapters and parts. During the Company's fiscal year ended December 31, 1996,
the Company derived approximately 75% of its total sales from the sale of fuel
system cleaning machines, approximately 22% of total sales from the sales of
fuel system cleaning detergent, and 3% of its total sales from adapters and
parts.
Fuel System Cleaning Machines. The Company markets and sells a number
of different models of the MotorVac CarbonClean fuel system cleaning machine for
gasoline engines as described below:
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<TABLE>
<CAPTION>
SUGGESTED
MODEL DESCRIPTION RETAIL PRICES
<S> <C> <C>
MCS400 Sold in the United States and Canada through independent $4,495
automotive distributors. This unit is housed in a metal
cabinet, uses analog displays and is manually controlled.
EEFS100A A patented system distributed exclusively by Sun/Snap-On. $4,495
Performs same functions as MCS400 but with microprocessor
controls, digital and analog readouts and a composite cabinet.
EEFS302A Distributed in Canada and Japan by Snap-On. Identical to the $5,495
EEFS100A except for brand name. (Canadian Dollars)
ECS300e Marketed under the CarbonClean brand name in over 55 Approximately $4,000
countries worldwide. Performs same functions as MCS400 (estimate may vary
in a different style cabinet. depending upon
country, duties
and freight)
CarbonClean Marketed as the CarbonClean System II and is the Company's Approximately $2,500
System II, international entry-level product designed with fewer features (estimate may vary
Model LE1 for use with less sophisticated fuel systems. It is a compact depending upon
portable version of the ECS300e. country, duties
and freight)
ProLine 500 Distributed in the United States, Canada and Europe by $4,495
John Bean Company. Identical to the MCS400 except for
cranberry-colored cabinet and brand name.
</TABLE>
The Company markets and sells the MotorVac CarbonClean fuel system
cleaning machine for diesel engines under the tradename Industrial Diesel Tune
or IDT. The Company markets three models of the IDT, each of which is
specifically designed and patented for use with all sizes and makes of diesel
engines as described below:
<TABLE>
<CAPTION>
SUGGESTED
MODEL DESCRIPTION RETAIL PRICES
<S> <C> <C>
IDT 4000 Sold in the United States and Canada under the MotorVac $4,495
brand name.
IDT 4000i Marketed under the CarbonClean brand name in over 55 Approximately $4,000
countries worldwide. Identical to IDT 4000 except for (estimate may vary
brand name. depending upon
country, duties
and freight)
EEFS103A A patented system distributed exclusively by Sun/Snap-On. $4,495
Identical to IDT 4000 except for brand name.
ProLine 550 Distributed in the United States, Canada and Europe by $4,495
John Bean Company. Identical to the IDT 4000 except for
cranberry-colored cabinet and brand name.
</TABLE>
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The Company also markets and sells both separately and together with
its fuel system cleaning machines, standard and deluxe adapter kits which allow
the Company's fuel system cleaning machines to be connected to the fuel system
lines of most vehicles on the road today.
Product Warranties. The Company offers a limited warranty covering
parts for a period of one year from the date of sale on all equipment
distributed in the United States. For equipment delivered internationally, the
Company provides a limited parts warranty only for a period of either 12 or 18
months from the date of shipment. The Company also offers a limited warranty for
a period of one year for all of its proprietary fuel system detergents. The
Company's warranties generally provide that, in the case of defects in material
or workmanship, the Company will, at its option, replace or repair the defective
product without charge. The Company's warranty provides that it is void if any
detergent other than the Company's detergents are utilized in the Company's fuel
system cleaning machines. During the Company's fiscal year ended December 31,
1996, the Company's aggregate warranty expense was approximately $41,000. During
the Company's fiscal year ended December 31, 1995, the Company's aggregate
warranty expense was approximately $53,000. There can be no assurance that
future warranty expense will not have an adverse effect on the Company's results
of operations or financial condition. The Company currently maintains product
liability insurance for its products worldwide, with limits of $10,000,000 per
occurrence and $11,000,000 in the aggregate per annum. Such coverage is becoming
increasingly expensive and there can be no assurance that the Company's
insurance will be adequate to cover future product liability claims, or that the
Company will be able to maintain adequate product liability insurance at
commercially reasonable rates. The Company may be exposed to potential
significant product liability claims by its customers and users of its products.
See "Risk Factors--Risk of Product Liability."
Fuel System Cleaning Detergents. The Company markets and sells its
proprietary fuel system detergents for both the United States and international
markets utilizing different tradenames in different markets as described below.
All of the Company's detergents clean dirt, varnish, waxes, carbon and other
types of contaminants that build up in critical areas of the engine. The
Company's detergents will not damage vehicle surfaces or paint, and are safe for
use on all engine fuel system components (will not harm injectors or any
sensitive computer components).
<TABLE>
<CAPTION>
SUGGESTED
DETERGENT DESCRIPTION RETAIL PRICES
<S> <C> <C>
MotorVac3 The Company's original gasoline engine detergent for $100.00 per case
use in MotorVac CarbonClean machines, as well as for of twelve
use in any other fuel system service tool that requires a eight-ounce bottles
fuel cleaning mixture. MotorVac3 is also marketed in
international markets as CarbonClean Gas Detergent.
The Company also distributes MotorVac3 under the
tradename MotorVac Carbon Clean System Detergent
and Top Engine Cleaner exclusively through Snap-On.
MotorVac4 The Company's newest formulation of detergent for $110.00 per case
decoking intake plenums and cleaning throttle plates of twelve
and idle bypass circuits. Also a suitable replacement eight-ounce bottles
for any top engine application requirement. MotorVac4
is designed to work with the Company's ICS intake
cleaning system kit.
MotorVac 3D Specially formulated to address the unique conditions $180.00 per case
that exist in diesel engines and designed to safely of twelve
increase horsepower and lower opacity as well as sixteen-ounce cans
increase fuel mileage. MotorVac 3D is also marketed
in international markets under the name CarbonClean
Diesel Detergent.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
ICS Intake Designed to remove the build-up of residues in the air $79.95
Cleaning System intake manifold of fuel injected engines and the air
intake on carbureted engines. Used as part of the
MotorVac CarbonClean System to coat the inside of the
air intake manifold and idle air control opening in
order to remove build-up that causes stalling and
hesitation. Also sold as a separate product for use
independently from the MotorVac CarbonClean System.
Consists of a reusable pressure sprayer, an
eight-ounce bottle of MotorVac4 and an applicator
tube with perforations at the tip.
</TABLE>
PRODUCT DISTRIBUTION
The Company's products are currently sold through a national and
international distribution network consisting primarily of the categories
described below:
Snap-On Incorporated/Sun Electric Corporation Division. The Company
sells the MotorVac CarbonClean System Model Nos. EEFS100A and EEFS103A to the
Sun Electric Corporation Division ("Sun") of Snap-On, Incorporated ("Snap-On")
and the MotorVac CarbonClean Detergent and Top Engine Cleaner to Snap-On for
distribution through Snap-On's tool and equipment network, made up in the U.S.
of approximately 3,800 Snap-On dealers and approximately 325 Sun tech reps
selling to approximately 300,000 automotive after-market consumers. The Company
also sells the MotorVac CarbonClean System, Model No. EEFS302A and Model No.
EEFS301A to Snap-On Canada with the Snap-On Detergent and Top Engine Cleaner.
Snap-On is a leading manufacturer and distributor of high-quality hand
tools, power tools, tool storage products, diagnostics and shop equipment and
information services primarily for use by professional technicians. Snap- On
markets the Company's MotorVac CarbonClean System and MotorVac CarbonClean
Detergent and Top Engine Cleaner to individual automotive technicians, shop
owners and professional equipment users for use in automotive service and repair
shops, industrial and governmental entities and original equipment
manufacturers, throughout the United States and Canada. Snap-On also distributes
the Industrial Diesel Tune System and MotorVac Diesel Detergent, the Company's
proprietary diesel detergent, through its approximately 400-person industrial
and governmental sales network.
The Company entered into an Exclusive Distribution Agreement dated as
of April 10, 1995 (the "Snap-On Distribution Agreement") with Snap-On. Pursuant
to the Snap-On Distribution Agreement, the Company appointed Snap-On as its
exclusive distributor in the United States and Canada of the Company's engine
cleaning system (the "Sun System"), fuel system detergent and enhanced adapter
kit when marketed under the names "MotorVac CarbonClean System Model No.
EEFS100A" and "MotorVac CarbonClean System Cleaning Detergent and Top Engine
Cleaner, distributed exclusively by Snap-On." The Company has the right,
however, to enter into other distribution arrangements in the United States and
Canada for machines that perform the same functions as the Sun System being sold
through Snap-On and for its fuel system detergent in the same formulation as
that sold to Snap-On in any size container other than the 32-oz. container,
provided that the machines are not identical in design to the Sun System and
that the machines and detergent are marketed under a name other than "MotorVac
CarbonClean System Model No. EEFS100A" and "MotorVac CarbonClean System Cleaning
Detergent and Top Engine Cleaner, distributed exclusively by Snap-On,"
respectively. In order to maintain its exclusivity, Snap-On must meet minimum
purchase requirements set forth in the Snap-On Distribution Agreement. If
Snap-On fails to meet the minimum purchase requirements, the Company's sole
remedy is to withdraw Snap-On's exclusivity and to increase the purchase price
for the Sun System and the detergent in accordance with the Snap-On Distribution
Agreement. The Snap-On Distribution Agreement expires on April 10, 1998 but is
automatically renewable for additional one-year terms unless either party gives
written notice of cancellation within sixty (60) days prior to the expiration of
such term. In addition, the agreement may be terminated prior to such dates in
the event of certain defaults by the Company or Snap-On.
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John Bean Company. The Company sells the MotorVac CarbonClean System
Model Numbers ProLine 500 and ProLine 550, and MotorVac CarbonClean Detergent
through John Bean Company's sales and distribution network in the United States,
Canada and in a number of international markets. John Bean Company ("John Bean")
is a division of Snap-On Incorporated and is a leading manufacturer of under-car
and under-hood maintenance and diagnostic equipment with approximately 60
distributors worldwide. John Bean markets the Company's products to automotive
service and repair shops throughout the United States and Canada and certain
other international markets.
Other Independent Distributors. The Company also markets the MotorVac
CarbonClean System throughout the United States and Canada through a small
network of independent distributors. In addition, the Company markets the
CarbonClean System in over 55 countries worldwide through local and , in some
cases, multinational independent distributors. The Company sells its products to
a number of distributors covering the United States, Canada and many other
international markets, including, but not limited to, Australia, New Zealand,
China, Taiwan, Korea, Japan, India, Indonesia, the Philippines, Poland, Greece,
Turkey, Italy, France, Great Britain, Germany, a number of Middle Eastern and
African countries, South America, Mexico and others.
In general, the Company's international distribution agreements provide
that the distributor has the exclusive right to sell and distribute the
Company's products within the specified territory . The distribution agreements
generally include minimum performance goals that, if not met, entitle the
Company to terminate the agreements. The distribution agreements generally have
initial terms of three (3) years which are automatically extendible for
successive one-year periods unless either party gives written notice of
termination a specified number of days prior to the expiration of the
then-effective term. The distribution agreements generally provide that the
distributor must obtain all of its supply of products from the Company.
Furthermore, the distribution agreements generally provide that the distributor
may not sell other products in the territory that are similar to or competitive
with the Company's products and that during the term of the agreement and any
extensions thereto, and for a period of three (3) years after termination of the
distribution agreement, the distributor will not replicate, sell or manufacture
any cleaning solution or fuel system cleaning machines for use with the
Company's system.
By selling its products through independent distribution channels, the
Company is able to target broader markets for its products while avoiding the
expense of supporting a large in-house sales force. During the fiscal years
ended December 31, 1995 and December 31, 1996, respectively, sales of the
Company's products to Sun Equipment, a division of Snap-On Incorporated,
accounted for approximately 45% and 51%, respectively, of the Company's net
sales. No other distributor or customer accounted for more than 10% of the
Company's net sales in the fiscal years ended December 31, 1995 and December 31,
1996.
SALES
The Company maintains a highly responsive sales, technical support and
service staff. The Company's customer service department is divided into two
departments, a technical service department and an order entry department. The
Company's technical service department is open from 7:00 a.m. to 6:00 p.m.,
California time, daily for service inquiries and technical assistance and
maintains toll free (800) hot lines for the Company's distributors, customers
and service technicians. In addition, the Company maintains an order entry
department which handles customer inquiries for advertising, order entry and
invoicing. The Company provides customers and distributors with toll free
telephone sales and technical support, an account representative for orders, and
shipping and general information. Technical and sales support personnel receive
training in all of the Company's products and services.
The Company's sales department is divided into two divisions, one for
the United States and Canada and one for other international markets. The
Company employs six Regional Managers in the United States, one Regional Manager
in Canada, and two Industrial Diesel Tune Specialists. Regional Managers are
responsible for training and sales support for the Sun/Snap-On and John Bean
Company sales group. The Industrial Diesel Tune specialists are responsible for
developing, educating and establishing the MotorVac CarbonClean System via the
Snap-On Industrial Sales group and John Bean Company specialty distributors. The
Company divides the United States into six regional areas in automotive and two
industrial areas in diesel, which report to the Company's Vice President,
Marketing and Sales. The Company also has a National Account Manager who is
responsible for developing the national distribution
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network with Snap-On's and other distributors' National Account Managers.
National accounts to which the Company is currently selling through Snap-On or
through John Bean include Goodyear, Hyundai and Canadian Tire. Generally, the
Company's terms of sales in the United States and Canada are net 30 days, FOB
the Company's facilities in Santa Ana, California.
The Company's international sales department is comprised of a Managing
Director of International Sales, who is directly responsible for South America,
Central America and Asia, and a Director of International Sales responsible for
Europe, the Middle East, Africa and India. Terms of sales in the international
markets generally require payment in full in advance or delivery of irrevocable
letters of credit. Some international sales are made on a net 30-day basis with
freight paid by the distributor and shipped FOB warehouse or FOB port of export.
The Company seeks to expand its international sales by addressing selected
foreign markets and securing foreign distribution channels for its products. For
the fiscal year ended December 31, 1996 and the nine months ended December 31,
1995, international sales accounted for approximately 29% and 28%, respectively,
of the Company's net sales.
MARKETING
Market Segments. The following provides a brief general discussion of
the various target markets for the Company's products:
Automotive Service and Repair Shops. This market consists primarily of
automotive service and repair shops, including independent, chain and dealership
facilities. The Company estimates that there are over 300,000 automotive service
and repair shops in the United States and Canada and approximately 1.5 million
in other international countries. Locations that are targeted in this segment
include automobile dealerships, repair garages, service stations, and specialty
repair and service shops. In the United States, the Company's products can be
found in Goodyear shops, Precision Tune shops and SpeeDee Oil Change and Tune-Up
shops, as well as many independent repair and service shops. In Canada, the
Company's products can be found in Canadian Tire shops, as well as many
independent repair and service locations. From April 1, 1994 to December 31,
1995, the Company sold approximately 2,228 MotorVac CarbonClean Systems in the
United States and Canada, and approximately 2,093 in other international
markets. For the year ended December 31, 1996, the Company sold approximately
3,126 MotorVac CarbonClean Systems in the United States and Canada, and 886 in
other international markets. To date, this market segment has been the primary
focus of the Company's marketing efforts.
Fleet Operators. This segment is comprised of over 585,000 fleets in
the United States, according to Fleet Owner Magazine. In its 1997 media kit,
Fleet Owner Magazine estimated that these fleets contain approximately seven (7)
million cars, trucks, buses and vans and are comprised of government and public
utility vehicles, trucking and public transportation companies, taxis and other
livery services. The Company believes this market offers significant potential
due to the MotorVac CarbonClean System's ease of operation and proven ability to
reduce fuel costs, maintenance and harmful emissions while potentially
lengthening vehicle life. An independent test conducted in early 1996 showed an
average 14% increase in miles per gallon for a fleet of trucks following service
with the Company's MotorVac CarbonClean System.
Governmental Agencies. The Company believes that fleets of vehicles
operated by the United States and foreign governmental agencies, such as the
postal service and military agencies, represent a significant potential market
for both the Company's gasoline and diesel engine products. To date, the Company
has not expended significant resources marketing its products to governmental
agencies; however, the Company's products have been approved by the United
States General Services Administration for sale to United States governmental
agencies. The Company has sold some of its products to certain governmental
agencies, including for military applications, and the Company is currently
targeting Snap-On's approximately 400-person industrial and governmental sales
force to provide assistance for future expansion of the Company's marketing
efforts to governmental agencies.
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Marine. This market is estimated by the Company at over one million
marine craft in the United States alone. Both gasoline and diesel engines are
target markets for the Company's service, although diesel engines are greater in
number. The Company's service can be performed while the craft is docked or at
any mobile location. While the Company has not, to date, expended significant
resources marketing its products in the marine markets, the Company believes
that this market segment offers significant potential for growth for the Company
in the future.
Stationary Engines. The Company believes that oil pumps and fuel driven
generator motors represent a market opportunity in the United States of over a
million engines, including pumping stations and power stations. Because the
Company's MotorVac CarbonClean System is mobile, it can effectively treat these
engines on site. To date, the Company has not expended significant resources
marketing its products to the stationary engine market. However, the Company
believes that this market segment offers significant opportunities for future
growth for the Company.
Marketing Methods. The Company's marketing department includes product
development, marketing communications and market development. The product
development staff identifies new products and product enhancements that meet
customer needs and manages product positioning and introductions. The marketing
staff creates and coordinates advertising in domestic and international trade
publications and magazines, produces the Company's brochures and documentation,
arranges for the Company's participation in automotive events and trade shows,
both in the United States and abroad, and assists in placing articles
highlighting applications of the Company's products in consumer, trade and
industry publications.
The Company encourages its distributors to contribute to its marketing
and selling efforts through a variety of programs, including cooperative
advertising and sales incentive programs. The Company's marketing staff consists
of a Director of Marketing who reports directly to the Company's President, and
a marketing support manager. As a result of the Company's marketing efforts and
the quality of the Company's MotorVac CarbonClean System, Motor Magazine named
the MotorVac CarbonClean System as one of its "Top 20 Tools for 1995."
The Company has retained the services of a press relations agency for
the purpose of increasing consumer awareness of the MotorVac CarbonClean service
through editorial coverage in general consumer and enthusiast publications,
including daily newspapers. An article about the benefits of the MotorVac
service has recently been published in the Repair and Maintenance section of
"The Auto Channel" Web Site (http://www.theautochannel.com).
The Company has initiated, and Snap-On is now participating in, what
the Company believes is the first automotive after-market repair guarantee,
which the Company calls "MotorVac or Your Money Back." This guarantee is
extended by the Company through the service technician to the vehicle owner, who
purchases a MotorVac CarbonClean service in the United States or Canada. Simply
stated, if the customer cannot feel the difference in his vehicle within one
week after the service is performed, his money will be refunded. To date, tens
of thousands of cleanings have been performed and, to the Company's knowledge,
only four people have requested their money back.
The Company continues to focus on additional methods to promote its
products, including product refinement, new product introduction and competitive
pricing, all with the goal of increasing the distribution of the Company's
products.
Impact of Clean Air Regulations. The Company believes that the
continued worldwide concern with reducing air pollution and other harmful
emissions from diesel and gasoline internal combustion engines represents a
significant market opportunity for the Company's products.
United States Federal Laws. The vehicle emissions testing industry
developed in response to the Clean Air Act of 1970 (the "Clean Air Act") and
subsequent amendments thereto. The Clean Air Act Amendments of 1977 required,
for the first time, the implementation of rudimentary inspection and maintenance
("I/M") programs in certain metropolitan areas. The 1990 Amendments classified
U.S. metropolitan areas by the degree of air pollution and required the U.S.
Environmental Protection Agency ("EPA") to review and revise its regulations on
I/M programs. On November 5, 1992, the EPA adopted regulations (the
"Regulations") that require approximately 181 metropolitan areas in 38 states
and the District of Columbia, with a total of approximately 87 million vehicles,
to have either a basic or enhanced I/M program in place by specified dates. The
number of areas requiring basic and enhanced I/M is
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continuously updated by the EPA, and in February 1995, the EPA published a
report indicating that a total of 179 metropolitan areas required I/M, 84 of
which (with approximately 57 million vehicles) required enhanced I/M programs
and 95 of which (with approximately 30 million vehicles) required basic I/M
programs.
The Company believes that many vehicles that fail emissions inspections
are suffering from engine contamination due to improper driving habits or poor
quality gas or suffering from inadequate or infrequent engine maintenance.
Consequently, the Company believes servicing a vehicle with the MotorVac
CarbonClean System provides motorists with a quick and economical way to bring
their vehicles into compliance. The Company has obtained test results showing
decreases in hydrocarbons, carbon monoxide, carbon dioxide, and nitrogen oxides
in exhausts from vehicles following a service with the MotorVac CarbonClean
System.
California Smog Check Program. California, which has one of the
nation's most severe air quality problems, contains approximately 25% of the
vehicles nationwide that are, or will be, subject to the new federal testing
requirements. California has licensed approximately 35,000 mechanics and 8,400
repair shops, dealers and fleets to perform emissions inspections and repairs.
The State of California mandates bi-annual emissions certification under the
"Bar 90" program. Under the Bar 90 program, vehicles are subjected to a visual
and functional test and then are tested under both an idle and high idle test
for emissions of hydrocarbons, carbon monoxide and carbon dioxide. Under
recently passed legislation, California is upgrading both the licensing
requirements for mechanics and developing new mandatory equipment requirements
for inspection and repair facilities. As part of the new legislation, vehicle
emissions inspections will be required to test for nitrogen oxides in enhanced
program areas in addition to hydrocarbons, carbon monoxide and carbon dioxide,
and the California Bureau of Automotive Repair ("BAR") will be authorized to
list engine maintenance practices that reduce vehicle emissions.
International Clean Air Programs. The Company believes that the
proliferation of clean air programs internationally represents a significant
opportunity for the sale of the Company's machines and detergent. Most countries
in Southeast Asia are now experiencing growth in the population of cars, trucks
and motorcycles. Emissions from their growing engine populations is exacerbated
by poor quality gasoline and lubricants. The CarbonClean System is suited for
those countries that choose to implement mandatory maintenance programs as a
cost effective alternative to U.S. or European style emissions inspection and
maintenance programs.
ASSEMBLY AND QUALITY ASSURANCE
The Company assembles, finishes and packages its fuel system cleaning
machines at its Santa Ana, California facilities. See "Business--Properties."
The Company purchases the component parts utilized in the assembly of its fuel
system cleaning machines from independent third-party suppliers and the Company
assembles the machines at its facility. Manufacturing activities by outside
suppliers are coordinated by the Company's Vice President-Operations. The
Company's internal manufacturing operations consist primarily of the production
of prototypes, test engineering, material and component part purchasing,
assembly, testing, quality control and technical service.
The Company uses material resource planning and schedules its
production to manage inventory levels and meet customer delivery demands. The
Company utilizes a "pull" system in its assembly operation that seeks to
minimize down time in the assembly process and maximize output by coordinating
assembly operations and the time required to perform each operation at each
stage of assembly. In addition, the Company continually seeks to increase
efficiency at its production facilities through automation and increased use of
technology. The Company anticipates that its existing production facilities and
equipment will be adequate to meet the Company's needs for the next 2 to 3 years
for its existing product lines.
The Company maintains the MotorVac quality control system that begins
with design and continues through assembly, marketing, sales and customer
service. The Company involves its design and engineering department,
manufacturing personnel, marketing and sales departments in quality control.
As stated above, the Company relies upon outside suppliers for the
manufacture of the component parts for its fuel system cleaning machines.
Although certain of these component parts are obtained from a single supplier or
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a limited number of suppliers, the Company believes that there are a sufficient
number of alternative sources of supply for all of the component parts utilized
in its machines, except for the pumps incorporated into its machines. With
respect to the pumps, the Company relies upon Tuthill Corporation, a single
supplier, to manufacture a Company-designed proprietary pump. While the Company
believes it could secure another manufacturer of the pump, any significant
interruption in deliveries of pumps could have a material adverse effect upon
the Company's results of operations and financial condition until such time as
the Company was able to secure an alternative supplier.
The Company generally estimates its anticipated need for components
over a three-month period and submits purchase orders to its suppliers for such
amounts based upon the specific lead time necessary for such supplier. There can
be no assurance that the Company's suppliers will be able to make timely
delivery of components in the future. The inability of the Company to obtain the
components necessary to enable it to fill its then-existing orders for any
reason, including, but not limited to, shortages, production delays or work
stoppages experienced by the Company's suppliers, could have a material adverse
effect on the Company's results of operations and financial condition. While, to
date, the Company has not experienced any significant interruptions in the
supply of its components, there is no assurance that significant supply
interruptions will not occur in the future.
BACKLOG
The Company normally does not have any significant backlog.
COMPETITION
The automotive service and after-market products industries are highly
competitive and require substantial technical expertise and capital resources.
These industries are characterized by an abundance of manufacturers focusing on
the technician, equipment and other after-market performance enhancements. The
Company believes that competition in the automotive service and after-market
products industries is based primarily on product performance, ease of
operation, price, product selection, product availability and service. The
Company's products compete with a variety of products designed to clean engine
fuel systems and reduce emissions while improving performance, including
gasoline fuel additives, detergent additives that are mixed with fuel in the
fuel tank, and solvents that are introduced directly into the fuel system,
either with or without the aid of a mechanical delivery system. Most of the
Company's competitors in each of these product categories have significantly
greater financial, manufacturing, marketing, distribution and other resources
than the Company.
With respect to direct competition with the Company's integrated fuel
system cleaning machine and detergent delivery system, the Company is aware of a
few small manufacturers that produce products capable of performing functions
similar to those performed by the Company's products. One such competitor is
Injector Clean Systems, Inc., who manufactures a fuel injector cleaning machine
and cleaning detergent. Their product is distributed worldwide by Bilstein
Corporation under the Bilstein brand. Bilstein Corporation's main business is
the manufacturing of shock absorbers. In addition, a large number of companies,
such as Wynn's International, Inc., First Brands Corporation (which markets and
sells STP) and Pennzoil Company (which markets and sells GUMOUT), offer fuel
additives that are marketed as fuel system cleaners with claims that they
improve performance, reduce exhaust emissions and improve fuel economy.
Moreover, many national brands of gasoline, including Chevron with Techron and
Mobil, advertise that their gasoline additives clean fuel injectors and other
parts of the fuel system. The Company believes that it indirectly benefits from
this advertising because it increases the public's awareness of the engine fuel
system contamination problem and the need for cleaning engine fuel systems. The
Company believes that its fuel system cleaning service will be able to
effectively compete with fuel additives and gasoline detergents because the
MotorVac CarbonClean System offers a complete fuel intake to exhaust cleaning
service that improves engine performance, driveability and fuel economy. In
addition, most fuel additives become highly diluted when introduced into the
fuel tank and, therefore, are less effective in removing dirt and contamination
from the fuel system than a service with the MotorVac CarbonClean System.
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The business of providing an integrated fuel system cleaning service is
relatively new and the Company anticipates that competition will likely increase
from existing competitors, companies that are not currently competitors but have
the financial resources and expertise to compete in this market and newly-formed
companies as market awareness of the fuel system contamination problem
increases, and as and when government-mandated emissions testing programs
expand. The Company believes, however, that there are significant barriers to
entry for companies that are not currently marketing integrated fuel system
cleaning machine and detergent delivery systems such as the Company's MotorVac
CarbonClean System because any new entrant will likely be required to obtain
certifications from private and governmental agencies, which can take as long as
one year to obtain. Increased competition from manufacturers or distributors of
systems offering fuel system cleaning services or detergents similar to that
offered by the Company could result in price reductions, reduced margins and
loss of market share, all of which could have a material adverse effect on the
Company's results of operations and financial condition. There can be no
assurance that the Company will be able to successfully compete in this
marketplace.
GOVERNMENTAL REGULATION
The Company's operations are subject to a number of federal, state and
local laws relating to environmental, health, safety and labor matters. The
Company believes its business is operated in substantial compliance with all
material applicable government regulations. There can be no assurance that
future regulations will not require the Company to modify its products, business
or operations to meet environmental, health, safety or labor requirements, or
that the Company will be able, for financial or other reasons, to comply with
such future requirements. Failure to comply with future governmental regulations
could subject the Company to fines and injunctions, which could result in a
material adverse effect on the Company's results of operations and financial
condition. Although the Company is not aware of any claim involving violation of
environmental, health, safety or labor laws or regulations, there can be no
assurance that such claims may not arise in the future, which may have a
material adverse effect on the Company.
The Company's products are marketed in part based on their ability to
reduce air pollution and other harmful emissions from diesel and gasoline
internal combustion engines as required by foreign, federal, state and local
governmental regulations. Significant changes in such laws that reduce or alter
clean air requirements, or the failure of the Company's products to enhance
compliance with such laws in the future, could have a material adverse effect on
the Company's results of operations.
INTELLECTUAL PROPERTY
The Company relies on patent and trademark protection and nondisclosure
agreements to protect its intellectual property. The Company believes that its
owned and licensed tradenames and trademarks are critical to the Company's
marketing strategy and its business.
In connection with the purchase of certain assets from EMI in August
1992, a then-existing affiliate of the Company licensed from EMI under an
exclusive license agreement all of EMI's rights in and to U.S. Patent No.
4,787,348 (carbon cleaning apparatus for diesel engines), which covered certain
aspects of the Company's diesel fuel system cleaning machines, and licensed the
registered trademarks "CarbonClean(R)," "Industrial Diesel Tune(R)" and "Helping
You Get The Most Out Of Today's Engines(R)" (collectively, the "EMI Property").
At the same time, the affiliate of the Company sublicensed to the Company the
right to utilize the EMI Property in the United States and Canada. Through a
series of restructurings effected in 1994 and 1995, the Company acquired the
license to utilize the EMI Property worldwide. Effective as of December 31,
1995, the Company purchased all of the EMI Property from EMI. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
The Company licenses the rights with respect to U.S. Patent
No. 5,381,810 (for electronically controlled carbon cleaning system for internal
combustion engines), which covers certain aspects of the Company's gasoline and
diesel fuel system cleaning machines, from Frederick A. Mosher and Max Q
Systems, Inc. (collectively, "Max Q"). Under the license agreement, the Company
paid an initial royalty payment of $30,000 upon the signing of the agreement and
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has agreed to pay royalties in the amount of the greater of (a) a minimum
royalty of $10,000 on each January 1, May 1 and September 1 of each calendar
year commencing January 1, 1995 or (b) $50 per unit sold during the term of the
license agreement. The license agreement terminates on the later of December
1998 or the expiration of the term of the patent and may be terminated earlier
by either party in the event of certain defaults.
The Company purchases all of its fuel system cleaning detergents from
Shrader Packaging Co., Inc. ("Shrader"), a single supplier, under an Exclusive
Supply Agreement. Under the terms of the Exclusive Supply Agreement, Shrader has
agreed to produce and deliver to the Company, and the Company has agreed to buy,
all of the chemical formulations required by the Company in its business. The
Company is also required to make minimum annual purchases of $250,000 per year,
subject to annual inflation based increases. The Company pays Shrader the unit
price in effect at the time each order is placed by the Company and payment
terms are generally net 30 days from the date of shipment. Shrader has agreed to
limit price increases to increases in its material costs and operating overhead
as necessary to maintain Shrader's profit margins. Under the Exclusive Supply
Agreement, Shrader has agreed that it will not produce or sell any formulations
substantially similar to the chemical formulations produced for the Company or
which are in competition with the Company's chemical formulations without the
Company's written permission. In exchange for its exclusive rights to the
chemical formulations, the Company has agreed that in the event that it ceases
purchasing the chemical formulations from Shrader, it will purchase Shrader's
remaining inventory of chemical formulations and Shrader will not, for a period
of one year thereafter, sell any of the chemical formulations to any
distributors of the Company or any competitors of the Company. In addition, the
Company has obtained a right of first refusal from Shrader to purchase Shrader's
worldwide rights to the chemical formulations. The chemical formulations used in
the Company's detergents are the proprietary property and a trade secret of
Shrader but, to the Company's knowledge, are not patented or otherwise
protected. There can be no assurance that Shrader will be able to maintain its
chemical formulations as trade secrets or that others will not independently
develop chemical formulations that are similar to or competitive with Shrader's
chemical formulations. The Company believes that the proprietary nature of the
Company's detergents and the Company's exclusive right to obtain those
detergents from Shrader are important to the Company's business and any loss of
such proprietary protection or the exclusive rights to obtain the detergents
could have a material adverse effect on the Company's results of operations and
financial condition. See "Risk Factors-- Dependence Upon Single Sources of
Supply; Lack of Long Term Supply Contracts for Machine Components."
RESEARCH AND DEVELOPMENT
For the fiscal year ended December 31, 1996 and the nine months ended
December 31, 1995, the Company spent $68,697 and $162,779, respectively, on
research, development and testing.
EMPLOYEES
As of December 31, 1996, the Company had 40 employees, all of which
were full-time employees, including 14 employed in sales and marketing, 18
employed in research and development, technical support and production, and 8
employed as administrative, accounting and support staff. None of the Company's
employees are represented by unions, and the Company considers its employee
relations to be good.
RISK FACTORS
Operating Losses; Accumulated Deficit; Profitability Uncertain
From August 28, 1992 (inception) through December 31, 1996, the Company
has continued to incur net losses. For the year ended December 31, 1996, the
Company's net loss was $1,281,090. In addition, as of that date, the Company had
an accumulated deficit of $11,974,082. There can be no assurance that the
Company will be able to realize significant revenues in the future in an amount
sufficient to realize profitable operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
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Lack of Significant Operating History
In February 1992, Enviromotive, Inc., a California corporation
unaffiliated with the Company ("EMI"), purchased certain assets of Parker
Automotive Corporation ("PAC") from the trustee in the PAC bankruptcy action,
and in August 1992, EMI sold and licensed certain of those assets to the Company
and an affiliate of the Company. The Company commenced operations in August 1992
after raising approximately $2.5 million in debt and equity financing from
EMIIC, which was used to fund the operations of the Company and to purchase and
license certain assets from EMI. Consequently, the Company is a relatively new
entity and has an unproven track record. Because of the Company's limited
operating history, the Company must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development. To address these risks, the Company must, among other
things, respond to competitive developments, continue to attract, retain and
motivate qualified personnel, manage its inventory levels and costs in relation
to rapidly increasing sales, and continue to expand its distribution network,
both domestically and internationally. There can be no assurance that the
Company will be successful in addressing such risks. Moreover, because of the
relatively short period of time during which the Company has been in operation,
there can be no assurance that the Company will be able to continue to
successfully market its products over an extended period of time. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Dependence Upon Single Sources of Supply; Lack of Long Term Supply Contracts for
Machine Components
The formulations utilized in the Company's gasoline and diesel
detergents are manufactured by Shrader Packaging Co., Inc. ("Shrader"), an
independent third party. These formulations are the proprietary property and a
trade secret of such party, but are not, to the Company's knowledge, patented or
otherwise protected. There can be no assurance that the supplier will be able to
maintain its chemical formulations as trade secrets or that others will not
independently develop chemical formulations that are similar to or competitive
with the supplier's chemical formulations. The Company currently relies upon
this supplier as the sole supplier of the Company's gasoline and diesel engine
detergents under the terms of an exclusive supply agreement (the "Exclusive
Supply Agreement"). Under the Exclusive Supply Agreement, the supplier can
increase the price charged to the Company to reflect increases in material costs
and operating overhead and as necessary to maintain the supplier's profit
margins. Any increase in price that the Company is unable to pass through to its
customers could have a material adverse effect on the Company's results of
operations. The Company considers its detergents to be important proprietary
assets. The loss by the supplier of the proprietary protection for its detergent
formulas, a significant interruption in detergent deliveries by the supplier or
the inability to obtain detergents from the supplier for any reason for any
significant period of time could have a material adverse effect upon the Company
and its results of operations. See "Business--Intellectual Property."
The Company relies upon outside suppliers for the manufacture of the
component parts of its fuel system cleaning machines. The Company does not have
written long-term contracts with any of these suppliers. The Company generally
estimates its anticipated need for components over a three-month period and
submits purchase orders to its suppliers for such amounts. There can be no
assurance that the Company's suppliers will be able to make timely delivery of
components in the future. The inability of the Company to obtain the components
necessary to enable it to fill its then-existing orders for any reason,
including, but not limited to, shortages, product delays or work stoppages
experienced by the Company's suppliers, could have a material adverse effect on
the Company's results of operations and financial condition.
Certain of the Company's component parts are obtained from a single
supplier or a limited number of suppliers. The Company believes, however, that
there are a sufficient number of alternative sources of supply for all of the
component parts utilized in its machines, except for the pumps incorporated into
its machines. With respect to the pumps, the Company relies upon Tuthill
Corporation, a single supplier, to manufacture a Company-designed proprietary
pump. While the Company believes it could secure another manufacturer of the
pump, any significant interruption in deliveries of the pumps could have a
material adverse effect upon the Company's results of operations and financial
condition until such time as the Company was able to secure an alternative
supplier.
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Dependence Upon Significant Customer
During the fiscal year ended December 31, 1996 and the nine months
ended December 31, 1995, the Company derived approximately 51% and 45%,
respectively, of its total sales from sales to Sun Electric Corporation, a
division of Snap-On, Incorporated ("Sun/Snap-On"), a distributor of the
Company's products. No other customer accounted for more than 10% of the
Company's net sales during the fiscal year ended December 31, 1996 or the nine
months ended December 31, 1995. Any significant decrease in sales to the
Company's principal distributors, including Sun/Snap-On, or any termination of
existing relationships with any such principal distributors which are not offset
by increases in sales to other existing or new distributors, could have a
material adverse effect upon the Company's results of operations and financial
condition.
Future Capital Requirements
The Company believes that available working capital at December 31,
1996 of $3,010,282 will be sufficient to allow the Company to meet its
obligations as they become due through January 1, 1998, including repayment of a
short-term note payable to Imperial Bank of $1,500,000 due June 16, 1997. There
can be no assurance that the Company's working capital will be sufficient to
enable the Company to increase its revenues in an amount sufficient to attain
profitable operations. To the extent that the Company's cash flow from
operations, if any, are insufficient to fund the Company's activities, the
Company will be required to raise additional funds through equity or debt
financings. No assurance can be given that such financing will be available on
terms acceptable to the Company, if at all, and if available, such financing may
result in further dilution to the Company's stockholders and/or in additional
interest expense. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
Competition; Technological Developments
The automotive service and after-market products industries are highly
competitive and require substantial technical expertise and capital resources.
These industries are characterized by an abundance of manufacturers focusing on
the technician, equipment and other after-market performance enhancements. The
Company believes that competition in the automotive service and after-market
products industries is based primarily on product performance, ease of
operation, price, product selection, product availability and service. The
Company's products compete with a variety of products designed to clean engine
fuel systems and reduce emissions while improving performance, including
gasoline fuel additives, chemical formulations that are mixed with fuel in the
fuel tank, and chemical formulations that are introduced directly into the fuel
system either with or without the aid of a mechanical delivery system. Most of
the Company's competitors in each of these product categories have significantly
greater financial, manufacturing, marketing, distribution and other resources
than the Company.
With respect to direct competition with the Company's integrated fuel
system cleaning and detergent delivery system, the Company is aware of a few
small manufacturers and a number of distributors, including Bilstein, that
produce products capable of performing some functions similar to those performed
by the Company's products. In addition, a large number of companies, such as
Wynn's International, Inc., First Brands Corporation (which markets and sells
STP) and Pennzoil Company (which markets and sells GUMOUT), offer fuel additives
that are marketed as fuel system cleaners with claims that they improve
performance, reduce exhaust emissions and improve fuel economy. Moreover, many
national brands of gasoline, including Chevron with Techron and Mobil, advertise
that their gasoline additives clean fuel injectors and other parts of the fuel
system.
The business of providing an integrated fuel system cleaning service is
relatively new and the Company anticipates that competition will likely increase
from existing competitors, companies that are not currently competitors but have
the financial resources and expertise to compete in this market and newly-formed
companies as the market awareness of the fuel system contamination problem
increases, and if and when government-mandated emissions testing programs
expand. Increased competition from manufacturers or distributors of systems
offering similar fuel system cleaning services or detergents could result in
price reductions, reduced margins and loss of market share or could render
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the Company's technology obsolete, all of which could have a material adverse
effect on the Company's results of operations and financial condition. Although
the Company is aware of a number of competitors that have attempted to duplicate
the Company's detergent formulations, to date the Company is not aware of any
competitor that has been successful in duplicating the formulations. There can
be no assurance that the Company will be able to successfully compete in this
marketplace or develop sufficient new products or chemical formulations to
maintain its position in the market, and any failure to do so could have a
material adverse effect on its results of operations and financial condition.
See "Business--Competition."
Dependence Upon Trademarks, Patents and Proprietary Rights
The Company's success is, in part, dependent upon the protection
afforded by the patented technology incorporated in some of the fuel system
cleaning machines manufactured by the Company, the Company's rights to its
trademarks "MotorVac" and "CarbonClean" and the goodwill associated therewith.
The Company believes that its products and trademarks do not infringe on any
third party's patents, trademarks or other proprietary rights. In the event of a
legal challenge, the Company would be required to defend its patents and
trademarks and there can be no assurance that the Company would prevail in such
a proceeding. Additionally, the Company must identify and prosecute infringement
by others in order to protect its patents and trademarks. Trademark and patent
litigation entails substantial legal and other costs. There can be no assurance
that the Company will have the necessary financial resources to defend or
prosecute its rights in connection with any such litigation. Responding to,
defending or bringing claims related to the Company's rights to its intellectual
property may require the Company's management to redirect its resources to
address such claims, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Moreover, if any
significant suppliers of the Company are subjected to claims challenging their
proprietary rights, the Company could be materially adversely affected if such
suppliers' operations are significantly interrupted or if they re unable to
defend their respective proprietary rights against such a challenge. See "Risk
Factors-- Dependence Upon Single Sources of Supply; Lack of Long Term Supply
Contracts for Machine Components" and "Business--Intellectual Property."
Variability in Operating Results; Seasonality
The Company may experience significant fluctuations in future operating
results due to a number of factors including, among other things, the size and
timing of customer orders, new or increased competition, delays in new product
enhancements and new product introductions, quality control difficulties,
changes in market demand, market acceptance of new products, product returns,
seasonality in product purchases by distributors and end users and pricing
trends in the automotive after-market industry in general, and in the specific,
markets in which the Company is active. Any of these factors could cause
operating results to vary significantly from prior periods. Further, the
Company's business is seasonal. Historically, the Company's net sales have been
highest in the third quarter and lowest in the first quarter of each calendar
year, and the Company anticipates that this trend will continue in the future.
The primary reason for the decrease in net sales in the first quarter is the
impact of buying patterns in both the domestic and international markets
following the holiday period in November and December, and traditionally slower
sales in the automotive equipment after-market following these holiday periods.
Significant variability in orders during any period may have a material adverse
impact on the Company's cash flow or work flow, and any significant decrease in
orders could have a material adverse impact on the Company's results of
operations and financial condition. As a result, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as any indication of future
performance. Fluctuations in the Company's operating results could cause the
price of the Company's Common Stock to fluctuate substantially. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Management of Company Growth
The Company has experienced significant revenue and personnel growth in
recent years. This growth will continue to make significant demands on the
Company's management, resources and operations. To manage its growth
19
<PAGE> 20
effectively, the Company has improved and intends to continue to improve its
operational, financial, sales and marketing systems and to hire and train new
employees and better manage its current employees. There can be no assurance
that the Company will be able to identify, hire, train and retain qualified
individuals or otherwise manage its growth effectively, and such failure could
have a material adverse effect on the Company's results of operations and
financial condition. In addition, the Company may increase its operating
expenses in order to fund the expansion of its advertising and marketing
efforts, hire additional advertising and marketing personnel, and make strategic
acquisitions of related and/or complimentary products and/or product lines. The
foregoing expenses will, by necessity, be incurred prior to any potential
positive impact on revenues. If such expenses are not subsequently followed by
sufficient increased revenues, the Company's operating results and financial
condition for the period ending December 31, 1997 could be materially adversely
affected.
Dependence on International Sales
A significant element of the Company's business strategy is to continue
to expand in selected international markets. In the Company's fiscal year ended
December 31, 1996 and the nine months ended December 31, 1995, respectively, the
Company derived approximately 29% and 28%, respectively, of total sales from
international markets. The Company's international sales efforts are subject to
the customary risks of doing business abroad, including exposure to regulatory
requirements, political and economic instability, barriers to trade, trade
restrictions (including import quotas), tariff regulations, foreign taxes,
restrictions on transfer of funds, difficulty in obtaining distribution and
support and export licensing requirements, any of which could have a material
adverse effect on the Company's results of operations and financial condition.
The Company sells its products in United States dollar denominations only.
Consequently, a weakening in the value of foreign currencies relative to the
U.S. dollar and potential fluctuations in foreign currency exchange rates could
have an adverse impact on the Company's sales and could cause the Company to
reduce its selling prices, which could have a negative impact on gross margins
on international sales. See "Business-- Product Distribution."
Risk of Product Liability
The nature of the Company's business exposes it to risk from product
liability claims. The Company currently maintains product liability insurance
for its products worldwide, with limits of $10,000,000 per occurrence and
$11,000,000 in the aggregate, per annum. However, such coverage is becoming
increasingly expensive and there can be no assurance that the Company's
insurance will be adequate to cover future product liability claims, or that the
Company will be successful in maintaining adequate product liability insurance
at commercially reasonable rates. Any losses that the Company may suffer from
future liability claims, including the successful assertion against the Company
of one or a series of large uninsured claims in excess of the Company's
coverage, may have a material adverse effect on the Company's business,
financial condition and results of operation. Even if the Company is successful
in the defense of product liability claims, the defense of product liability
claims generally requires substantial expenditures of funds and management time
which could have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, any product liability
litigation may have a material adverse effect on the reputation and
marketability of the Company's products. See "Business--Product Warranties."
Governmental Regulation
The Company's products are marketed in part based on their ability to
reduce air pollution and other harmful emissions from diesel and gasoline
combustion engines as required by foreign, federal and state governmental
regulations, as well as their ability to fix some driveability problems and
increase fuel economy. Significant changes in such laws that reduce clean air
requirements or the failure of the Company's products to enhance compliance with
such laws in the future could have a material adverse effect on the Company's
results of operations. Additionally, there may be changes in governmental
regulations related to environmental, health, safety or labor matters with which
the Company will have to comply. There can be no assurance that the Company will
be able, for financial or other reasons, to comply with the requirements of any
future changes in governmental regulations. Failure to comply with future
20
<PAGE> 21
governmental regulations could subject the Company to fines and injunctions,
which could result in a material adverse effect on the Company's results of
operations and financial condition. Although the Company is not aware of any
claim involving violation of environmental, health, safety or labor laws or
regulations, there can be no assurance that such a claim may not arise in the
future, which may have a material adverse effect on the Company. See "Business--
Governmental Regulation."
Control by Existing Stockholders
At December 31, 1996, EMIIC, the principal stockholder of the Company,
and the Company's directors and officers collectively beneficially owned
approximately 64.51% of the Company's Common Stock (EMIIC, 61.37%; the Company's
directors and officers, 3.14%). Consequently, these persons will have the
ability to control the election of all the Company's directors, to determine the
outcome of most corporate actions submitted to the vote of the Company's
stockholders and to generally control the affairs and management of the Company.
See "Security Ownership of Certain Beneficial Owners and Management." In
addition, such concentration of ownership and control may have the effect of
delaying, deferring or preventing a change of control in the Company.
Dependence on Key Personnel
The Company's success is dependent, in part, upon the continued
services of certain key executive officers, including Lee W. Melody, the
Company's President and Chief Executive Officer. The loss of any one of its key
executive officers could have a material adverse effect on the Company's results
of operations and financial condition. The continued success of the Company may
also be dependent upon its ability to attract and retain highly qualified
marketing, sales and other personnel. There can be no assurance that the Company
will be able to recruit and retain such personnel. See "Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act."
Possible Issuance of Preferred Stock; Anti-takeover Effect of Delaware Law
The Company is authorized to issue up to 500,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). The Preferred Stock may
be issued in one or more series, the terms of which may be determined at the
time of issuance by the Board of Directors, without further action by the
Company's stockholders, and may include voting rights, preferences as to
dividends and liquidation, conversion and redemption rights, and sinking fund
provisions as determined by the Board of Directors. Although the Company has no
present plans to issue any shares of Preferred Stock following consummation of
this offering, the issuance of any additional shares of Preferred Stock in the
future could affect the rights of the holders of Common Stock and thereby reduce
the value of the Common Stock. In particular, specific rights granted to future
holders of Preferred Stock could be used to restrict the Company's ability to
merge with or sell its assets to a third party, thereby preserving control of
the Company by its present owners. These provisions, together with certain
provisions of Delaware law, may also have the effect of delaying or preventing
changes in control or management of the Company which could adversely affect the
market price of the Company's Common Stock.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive offices, research and product development,
assembly, warehousing and distribution facilities are currently housed in a
single leased industrial building comprised of approximately 24,360 square feet
located in a state-designated enterprise zone in Santa Ana, California. Under
the terms of the lease, the Company presently pays rent of approximately $8,282
per month plus the Company's pro rata share of common area maintenance and
operating expenses. The lease expires on January 31, 1998 and the Company has an
option to renew the lease for
21
<PAGE> 22
an additional five-year term. Commencing in March 1997, the monthly rent
increases to approximately $8,614 and will increase (but not decrease) to the
prevailing market rate during the extension period if the Company exercises its
extension option. The Company believes that its existing facilities are adequate
to meet its needs for at least the next 2 to 3 years.
ITEM 3. LEGAL PROCEEDINGS.
On May 24, 1996, the Company was served with a complaint by its former
Australia distributor in a matter entitled DeCarbon Australia Pty. Ltd. v.
MotorVac Technologies, Inc. (Case No. 764248) in the Superior Court of the State
of California, County of Orange. On August 13, 1996, the Company filed a
cross-complaint against DeCarbon and Robert L. Fisher, the Company's former Vice
President of International Sales, and ETCO, Mr. Fisher's company (collectively
"Fisher"). On September 16, 1996, Fisher filed a cross-complaint against the
Company and Lee W. Melody, the Company's President. On October 31, 1996, Judge
Ronald L. Bauer granted a preliminary injunction against DeCarbon and Fisher. On
January 6, 1997, the Company and DeCarbon entered into a Settlement Agreement
pursuant to which, among other things, (a) DeCarbon paid MotorVac $100,000, (b)
DeCarbon agreed to an additional $150,000 Stipulation for Entry of Judgment
against DeCarbon should DeCarbon violate the Settlement Agreement, and (c)
MotorVac and DeCarbon provided each other with mutual releases. On March 14,
1997, the Company and Lee Melody, on one side, and Fisher and ETCO, on the
other, entered into a letter agreement of full and final settlement.
The definitive agreement was entered into on March 27, 1997.
On February 28, 1996, the Company filed a proceeding in the United
States District Court, Northern District of Ohio, Eastern Division, against
Richard R. Green, individually and doing business as P & R Equipment Company,
Gregory M. Phillips, C. S. P. International, Inc. and certain other defendants
seeking compensatory and punitive damages and injunctive relief for trademark
and trade name infringement, breach of contract, unfair competition, deceptive
trade practices, misappropriation of trade secrets, breach of loyalty, and
interference with contracts and business relations. The foregoing proceeding
arises out of actions taken by Messrs. Green, Phillips and the other named
defendants, each of whom are former officers and/or employees of the Company, in
forming a new company for the purpose of competing with the business of the
Company. On April 3, 1996, a counterclaim was filed by certain of the defendants
in the foregoing action pursuant to which such defendants allege that the
Company brought the foregoing action for the unlawful purpose of harassing and
injuring the defendants and that the Company is engaged in unfair competition
and attempting to unlawfully restrain trade. Such defendants have requested
compensatory damages in the amount of $500,000, punitive damages in the amount
of $1,000,000 and attorneys' fees and costs. The Company believes that the
defendants' counterclaims are without merit and intends to prosecute this action
vigorously. The Company also has filed an arbitration action in Orange County,
California against Messrs. Phillips and Green covering substantially the same
subject matter as the foregoing litigation.
In addition to the foregoing, the Company, from time to time, is
involved in routine litigation incidental to the conduct of its business. Except
for the litigation described above, there are currently no material pending
legal proceedings to which the Company is a party to or to which any of its
property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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<PAGE> 23
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock trades on the Nasdaq SmallCap Market under
the symbol "MVAC." The following table sets forth, for the periods indicated,
the high and low sales prices of the Company's Common Stock as furnished by
Nasdaq. Prices reflect inter-dealer prices without retail mark-up, mark-down or
commissions, and may not necessarily reflect actual transactions.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
YEAR ENDED DECEMBER 31, 1996
<S> <C> <C>
Second Quarter (from April 26, 1996) 7 3 3/8
Third Quarter.................. 6 1/8 4 1/2
Fourth Quarter................. 6 3/4 4 11/32
</TABLE>
There were approximately 156 holders of record as of March 25, 1997.
No dividends have been declared or paid on the Company's Common Stock.
Subsequent to January 1, 1996 and on various dates through April 25,
1996, the Company issued incentive and nonstatutory stock options to purchase an
aggregate of 231,954 shares of Common Stock to directors, officers, employees
and consultants. The exercise price for such options ranges from $5.10 to $5.375
per share. The Company issued such options in reliance upon the exemption
provided by Rule 701 under the Securities Act of 1933, as amended (the "Act").
Subsequent to April 25, 1996 and on various dates through December 31, 1996, the
Company issued incentive and nonstatutory stock options to purchase an aggregate
of 70,100 shares of Common Stock to directors, officers, employees and
consultants. The exercise price for such options was $6.125 per share. The
Company issued such options in reliance upon the exemption provided by Section
4(2) of the Act.
On April 24, 1996, immediately prior to consummation of the Company's
initial public offering, approximately $4,410,000 of outstanding indebtedness
owed to EMIIC was exchanged for 820,521 shares of Common Stock, and all of the
95,105 shares of Series A Preferred Stock (including all accrued dividends
thereon) held by EMIIC and one individual was converted into 966,247 shares of
Common Stock at a per share price of $5.375.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read together with the
financial statements and notes thereto included elsewhere in this Annual Report
on Form 10-KSB.
OVERVIEW
MotorVac Technologies, Inc. (the "Company") designs, develops,
assembles, markets and sells the MotorVac CarbonClean System for the diagnosis,
maintenance and repair of internal combustion engine fuel systems primarily for
the automotive after-market repair and service industry. The Company markets and
sells its fuel system cleaning machines and detergents through various
distribution channels, both in the United States and Canada ("Domestic") under
the trade name MotorVac, and outside the United States and Canada
("International") under the trade name CarbonClean.
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<PAGE> 24
The Company elected to change its fiscal year end to December 31 from
March 31, effective with the fiscal year ended December 31, 1995. The Company
elected to make this change because the quarters ended December 31 and March 31
have traditionally been the Company's slowest quarters for sales and, therefore,
the Company believes that this fiscal year-end better matches the Company's
natural business cycle. The Company continues on a March 31 year-end for tax
reporting purposes. The following discussion and analysis addresses the results
of the Company's operations for the twelve months ended December 31, 1996, as
compared to the Company's results of operations for the twelve months ended
December 31, 1995, except as otherwise noted. On May 1, 1996, the Company
consummated an initial public offering (the "IPO") of 1,100,000 shares of its
common stock, resulting in gross proceeds of approximately $5,912,500. On June
13, 1996, the Company completed the sale of an additional 110,000 shares of its
Common Stock upon exercise of the underwriter's overallotment option (the
"Overallotment"), resulting in gross proceeds to the Company of approximately
$591,250.
This Annual Report on Form 10-KSB contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 (the "Exchange Act"), and the
Company intends that such forward-looking statements be subject to the safe
harbors created thereby. The Company may experience significant fluctuations in
future operating results due to a number of factors, including, among other
things, the size and timing of customer orders, new or increased competition,
delays in new product enhancements and new product introductions, quality
control difficulties, changes in market demand, market acceptance of new
products, product returns, seasonality in product purchases by distributors and
end users, changes in inventory levels, and pricing trends in the automotive
after-market industry in general, and in the specific markets in which the
Company is active. Any of these factors could cause operating results to vary
significantly from prior periods. Significant variability in orders during any
period may have a material adverse impact on the Company's cash flow or work
flow, and any significant decrease in orders could have a material adverse
impact on the Company's results of operations and financial condition. As a
result, the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as any
indication of future performance. Fluctuations in the Company's operating
results could cause the price of the Company's Common Stock to fluctuate
substantially.
Assumptions relating to the foregoing involve judgments with respect
to, among other things, future economic, competitive and market conditions, all
of which are difficult or impossible to predict accurately, and many of which
are beyond the control of the Company. In addition, the business and operations
of the Company are subject to substantial risks which increase the uncertainty
inherent in the forward-looking statements. In light of the significant
uncertainties inherent in the forward-looking information included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives or plans of the Company will be
achieved.
RESULTS OF OPERATIONS
The Company's fiscal year in 1995 was nine months and its fiscal year
in 1996 was twelve months. The Company believes that a comparison of the pro
forma twelve months ended December 31, 1995 to the twelve months ended December
31, 1996 provides a more meaningful comparison. Consequently, the Results of
Operations discussion below compares these two twelve-month periods as set out
below. The Liquidity and Capital Resources section compares the cash flow
statements for the nine-month period ended December 31, 1995 and the
twelve-month period ended December 31, 1996.
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<PAGE> 25
The results of operations for the twelve months ended December 31, 1995 and
December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Audited
3 Mos. Ended 9 Mos. Ended 12 Mos. Ended Year Ended
3/31/95 12/31/95 12/31/95 12/31/96
----------------- -------------- -------------- -----------
(Pro Forma)
(Unaudited) (Audited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $1,033,880 $ 3,992,398 $ 5,026,278 $ 8,242,735
COST OF SALES 595,136 2,480,690 3,075,826 5,026,486
---------- ----------- ----------- -----------
GROSS PROFIT 438,744 1,511,708 1,950,452 3,216,249
OPERATING EXPENSES 1,288,513 3,194,957 4,483,470 4,338,332
---------- ----------- ----------- -----------
LOSS FROM OPERATIONS (849,769) (1,683,249) (2,533,018) (1,122,083)
INTEREST EXPENSE-
RELATED PARTIES 112,308 446,309 558,617 157,751
---------- ----------- ----------- -----------
LOSS BEFORE PROVISION
FOR INCOME TAX (962,077) (2,129,558) (3,091,635) (1,279,834)
PROVISION FOR INCOME TAX 0 850 850 1,256
---------- ----------- ----------- -----------
NET LOSS $ (962,077) $(2,130,408) $(3,092,485) $(1,281,090)
========== =========== =========== ===========
</TABLE>
Certain amounts in the twelve months ended March 31, 1995 and the nine months
ended December 31, 1995 have been reclassified to reflect the 1996 presentation.
COMPARISON OF TWELVE MONTHS ENDED DECEMBER 31, 1996 TO THE PRO FORMA UNAUDITED
TWELVE MONTHS ENDED DECEMBER 31, 1995
Net Sales. Net sales for the twelve months ended December 31, 1996 of
$8,242,735 increased $3,216,457 (approximately 64%) from $5,026,278 for the
twelve months ended December 31, 1995. The primary reason for the sales
increases was the increase in the number of MotorVac CarbonClean Systems sold of
approximately 55.8% and an increase in equivalent cases of detergent sold of
approximately 99%.
Domestic sales increased $2,629,674 (approximately 81.1%) to $5,870,757
for the twelve months ended December 31, 1996 from $3,241,083 for the twelve
months ended December 31, 1995. International sales increased $586,783
(approximately 32.9%) to $2,371,978 for the twelve months ended December 31,
1996 from $1,785,195 for the twelve months ended December 31, 1995.
The primary reason for the domestic sales increase was the increase in
units sold to the Company's largest customer, Sun/Snap-On, in the U.S., the
launch of Sun/Snap-On in Canada, and the launch of John Bean Company in late
1996 in the U.S. and Canada. The primary reason for the international sales
increase was the increase in orders by a number of existing and new distributors
and a large international order sold by the Company to one customer in China in
early 1996.
Cost of Sales. Cost of sales for the twelve months ended December 31,
1996 increased by $1,950,660 (approximately 63.4%) to $5,026,486 from $3,075,826
for the twelve months ended December 31, 1995. The primary reason for the cost
of sales increase of 63.4% is the sales increase of approximately 64%. Cost of
sales as a percent of sales, for the twelve months ended December 31, 1996, was
61% of sales and was 61.2% of sales for the twelve months ended December 31,
1995. The primary reason for the cost of sales decrease as a percent of sales
was the favorable effect of the increase in detergent equivalent cases sold less
the effect of a unilateral price increase from a former supplier of electronic
components used in the Company's MotorVac CarbonClean Systems.
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<PAGE> 26
Gross Profit. Gross profit for the twelve months ended December 31,
1996 of $3,216,249 increased by $1,265,797 (approximately 64.9%) from $1,950,452
for the twelve months ended December 31, 1995. The primary reason for this
increase is the sales increase and cost of sales decrease discussed above.
Operating Expenses. Operating expenses for the twelve months ended
December 31, 1996 of $4,338,332 decreased $145,138 (approximately 3.2%) from
$4,483,470 for the twelve months ended December 31, 1995. The major reason for
the decrease was staff cutbacks from 1995 to 1996, elimination of duplication of
certain expenses, such as duplicate plant costs for some of 1995, net of certain
increases in other operating expenses. These increased operating expenses in
1996 include: royalty asset amortization of $318,090 (the royalty asset was
acquired effective December 31, 1995), increased insurance costs, largely
related to Directors and Officers Insurance, and legal expense, largely related
to defending a suit from a former distributor, which was favorably settled in
early 1997.
Loss from Operations. As a result of the above, the loss from
operations for the twelve months ended December 31, 1996 of $1,122,083 improved
by $1,410,935 (approximately 55.7%) from $2,533,018 for the twelve months ended
December 31, 1995.
Interest Expense (Net) - Related Parties. Interest expense, net,
related parties for the twelve months ended December 31, 1996 of $157,751
decreased by $400,866 (approximately 71.8%) from $558,617 for the twelve months
ended December 31, 1995. The improvement was a result of the conversion of
$4,410,300 of notes payable to EMIIC and related parties, repayment of $123,572
of debt to EMIIC at the time of the Company's initial public offering related to
initial public offering costs advanced by EMIIC, and the interest earned by the
Company on initial public offering funds invested from time to time.
Net Loss. The net loss for the twelve months ended December 31, 1996 of
$1,281,090 improved by $1,811,395 (approximately 58.6%) from $3,092,485 for the
twelve months ended December 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995, the Company had a working capital deficit of
$179,276. As of December 31, 1996, the Company had working capital of
$3,010,282.
For the Nine Months Ended December 31, 1995
Cash at April 1, 1995 was $17,196. Cash used in operating activities,
which includes changes in current assets and current liabilities, except notes
and amounts payable to related parties, was $1,578,872 for the nine months ended
December 31, 1995. Cash used in investing activities was $116,934, which
primarily represented the purchase of computer equipment and software. Cash flow
from financing activities for the nine months ended December 31, 1995 was
$1,683,618. This amount includes proceeds from the issuance of notes payable to
EMIIC and related parties of $2,590,000, payments of notes payable to EMIIC of
$920,000, and a decrease in receivable from licensor of $13,618. Cash at
December 31, 1995 was $5,008. The Company, in the nine months ended December 31,
1995, paid $22,340 in interest and $1,650 in income taxes. These amounts are
included in net cash used in operating activities above.
For the Twelve Months Ended December 31, 1996
Cash at January 1, 1996 was $5,008. Cash used in operating activities,
which includes changes in current assets and current liabilities, except notes
and amounts payable to related parties and ex-licensor, was $2,801,557 for the
twelve months ended December 31, 1996. Cash used in investing activities was
$73,316, which primarily represents purchase of computer equipment and software,
and manufacturing molds. Cash from financing activities for the twelve months
ended December 31, 1996 was $5,429,854. This amount includes net proceeds from
the issuance of 1,210,000 shares of common stock of $5,151,978, proceeds from
the issuance of notes payable to EMIIC and related parties of $680,000, payments
of notes payable to EMIIC and related parties of $1,543,572, payments to
ex-licensor of $358,552 and proceeds from the issuance of notes payable to
Imperial Bank of $1,500,000. The Company, during the twelve months ended
December 31, 1996, paid $930,127 for interest and $1,256 for taxes. In addition,
the Company (i)
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<PAGE> 27
converted 95,295 shares of Preferred Stock, Series A with a carrying value of
$4,659,499, into 966,247 shares of common stock, (ii) converted 54,300 shares of
Preferred Stock, Series B, with a carrying value of $2,170,425, into 570,150
shares of common stock, (iii) converted $4,410,300 of notes payable to EMIIC
into 820,521 shares of common stock, and (iv) reduced the payable to
ex-licensor by $79,993 (non-cash) by receiving a discount for paying other
amounts due early, which totaled approximately $280,052 at that time. Cash at
December 31, 1996 was $2,559,989, of which $1,500,000 is pledged as collateral
for a bank loan of an equal amount.
ITEM 7. FINANCIAL STATEMENTS.
The information required by this item is included in Pages F-1 through
F-17 attached hereto and incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The information required by this item is incorporated herein by
reference from Issuer's Definitive Proxy Statement to be filed with the
Commission pursuant to Regulation 14A in connection with the Issuer's 1997
Annual Meeting of Stockholders (the "Proxy Statement") under the headings
"Proposal 1--Election of Directors," "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" and "Additional Information--Management."
ITEM 10. EXECUTIVE COMPENSATION.
The information required by this item is incorporated herein by
reference from Issuer's Proxy Statement under the heading "Executive
Compensation."
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by this item is incorporated herein by
reference from Issuer's Proxy Statement under the heading "Security Ownership of
Certain Beneficial Owners and Management."
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this item is incorporated herein by
reference from Issuer's Proxy Statement under the heading "Certain Relationships
and Related Transactions."
27
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<TABLE>
<CAPTION>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<S> <C> <C>
1. (a) Financial Statements. Financial statements are
attached to this report as pages F-1 through F-17.
The index to the financial statements is found on
page F-1.
(b) The Company did not file any reports on Form 8-K
during the quarter ended December 31, 1996.
2. Exhibits. See Exhibit Index below.
</TABLE>
28
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C> <C>
3.1 (1) Amended and Restated Certificate of Incorporation.
3.2 (1) Third Amended and Restated Bylaws, as amended.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 (1) Specimen Stock Certificate.
10.1 (1) Letter Agreement dated February 12, 1996 by and among the
Registrant, Enviromotive, Inc. and International Turbo Center,
Inc.
10.2 (1)+ 1996 Stock Incentive Award Plan of Registrant.
10.3 (1)+ Form of 1996 Director Nonqualified Stock Option Agreement.
10.4 (1)+ Form of 1996 Employee Nonqualified Stock Option Agreement.
10.5 (1)+ 1996 Director Stock Plan of Registrant.
10.6 (1)+ Amended and Restated Employment Agreement dated March 21, 1996
between the Registrant and Allan T. Maguire.
10.7 (1) Form of Consent to Amendment of Registration Rights Agreement and
Stock Purchase Warrant and Waiver of Notice entered into between
the Registrant and each of the holders of Stock Purchase Warrants
to purchase Series B Preferred Stock.
10.8 (2) Products Distribution Agreement dated May 1, 1996 by and between
the Registrant and Sun Electric De Mexico, S.A. De C.V.
10.9 (1) Transfer Agreement dated October 23, 1995 by and between
CarbonClean International Ltd. and the Registrant.
10.10 (1) Transfer Agreement dated October 23, 1995 by and between MIML and
the Registrant.
10.11 (1) Amended and Restated Secured Subordinated Promissory Note dated
December 31, 1995 in the original principal amount of $1,040,000
payable by the Registrant in favor of The WH & NC Eighteen
Corporation.
10.12 (1) Security Agreement dated August 3, 1995 by and between the
Registrant and The WH & NC Eighteen Corporation.
10.13 (3) First Amendment to Purchase Agreement dated September 30, 1996, by
and among the Registrant, International Turbo Center, Inc., and
Enviromotive, Inc.
10.14 Products Distribution Agreement dated December 1, 1996, by and
between the Registrant and Snap-On Tools Japan K.K.
10.15 Products Distribution Agreement dated January 6, 1997, by and
between the Registrant and China Motor-Vehicle Safety Appraisal
and Inspection Center.
</TABLE>
29
<PAGE> 30
<TABLE>
<CAPTION>
<S> <C>
10.16 (1) Products Distribution Agreement dated January 27, 1995 by and
between the Registrant and DeCarbon Pty. Ltd.
10.17 (1) Supplier Purchase Agreement dated April 10, 1995 by and between
the Registrant and Snap-On Incorporated.
10.18 (1) Exclusive Distribution Agreement dated April 10, 1995 by and
between the Registrant and Snap-On Incorporated.
10.19 (1) Products Distribution Agreement dated November 16, 1995 by and
between the Registrant and Automotive Diagnostics.
10.20 (1) Letter Agreement dated February 12, 1996 by and among the
Registrant, Enviromotive, Inc., and International Turbo Center,
Inc.
10.21 (1) Standard Industrial Lease--Multi-Tenant dated November 29, 1995
by and between Northern McFadden Limited Partnership, an
Illinois limited partnership, and the Registrant.
10.22 (4) Products Distribution Agreement dated March 28, 1996, by and
between the Registrant and Cameo (QLD) Pty. Ltd.
10.23 (1)+ Employment Agreement dated October 24, 1994 by and between the
Registrant and Lee William Melody, as amended as of November 3,
1995.
10.24 (1) Employment Agreement dated as of November 20, 1995 by and between
the Registrant and Michael G. Arkell.
10.25 (1) Offer Letter to Michael G. Hosch dated December 16, 1992 from the
Registrant, as amended by Memorandum dated March 21, 1995.
10.26 (1) Form of Indemnity Agreement entered into with each of the
Registrant's officers and directors.
10.27 (1) Amendment to Stockholders Voting Agreement dated March 8, 1996 by
and among the Registrant, Erin Mills International Investment
Corporation, George H. David and Robert G. Reese.
10.28 (1) Purchase Agreement dated February 22, 1996, but made effective as
of December 31, 1995, by and among the Registrant, International
Turbo Center, Inc. and Enviromotive, Inc.
10.29 (1) MotorVac Technologies, Inc. Cash Bonus Plan.
10.30 (1) Letter Agreement dated April 5, 1996 between the Registrant and
Shrader Packaging Co., Inc. amending the Exclusive Supply
Agreement and granting a right of first refusal to the Registrant.
10.31 Settlement Agreement and Mutual Release dated January 6, 1997 by
and between the Registrant, DeCarbon Australia Pty. Ltd. , Carbon
Clean Corporation Pty. Ltd., Carbon Tune Pty. Ltd., Chris Somas,
Roydn Sweet and Jim Litis (collectively "DeCarbon").
10.32 First Amendment and Modification to Settlement Agreement and
Mutual Release by and between the Registrant and DeCarbon, dated
January 4, 1997.
10.33 Second Amendment and Modification to Settlement Agreement and
Mutual Release by and between the Registrant and DeCarbon, dated
January 7, 1997.
</TABLE>
30
<PAGE> 31
<TABLE>
<CAPTION>
<S> <C>
10.34 Letter Agreement confirming settlement between the Registrant and
Lee W. Melody on the one hand and Robert L. Fisher and ETCO on the
other hand, dated March 14, 1997.
10.35 (3) Letter Agreement dated September 15, 1996, by and between the
Registrant and Automotive Diagnostics canceling the Products
Distribution Agreement dated November 16, 1995, along with the
Product Labeling Agreement.
10.36 (3) Products Distribution Agreement dated September 15, 1996, by and
between the Registrant and Cartek International, Inc.
10.37 (1) Letter Agreement dated as of December 31, 1995 between the
Registrant and EMIIC amending certain promissory notes and waiving
certain defaults thereunder.
10.38 Settlement Agreement and Mutual Release dated March 27, 1997 by
and between Lee W. Melody and the Registrant on the one side, and
Robert L. Fisher and ETCO on the other.
11.1 Statement of Calculation of Net Loss Per Share and Supplementary
Net Loss Per Share.
24.1 Power of Attorney. Reference is made to page 32.
27.1 Financial Data Schedule in accordance with Article 5 of Regulation
SX.
</TABLE>
- --------------------------
(1) Previously filed as an exhibit to the Registration Statement on
Form SB-2, as amended (No. 333-1866-LA), and incorporated herein by
reference.
(2) Previously filed as an exhibit to the Form 10-QSB for the period ended
March 31, 1996, and incorporated herein by reference.
(3) Previously filed as an exhibit to the Form 10-QSB for the period ended
September 30, 1996, and incorporated herein by reference.
(4) Previously filed as an exhibit to the Form 10-QSB for the period ended
June 30, 1996, and incorporated herein by reference.
+ Indicates a management contract or compensatory plan or arrangement.
31
<PAGE> 32
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
<TABLE>
<CAPTION>
<S> <C> <C>
MotorVac Technologies, Inc.
Date: March 31, 1997 By: /s/ Lee W. Melody
-------------------------------------------
Lee W. Melody
President and Chief Executive Officer
Date: March 31, 1997 By: /s/ Allan T. Maguire
-------------------------------------------
Allan T. Maguire
Vice President of Finance, Chief Financial
Officer, Treasurer and Secretary
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Lee W. Melody his attorney-in-fact, with
the power of substitution, for him, in any and all capacities, to sign any
amendments to this report, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and conforming all that the attorney-in-fact, or his
substitute, may do or cause to be done by virtue hereof.
32
<PAGE> 33
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Gerald C. Quinn Chairman of the Board, March 27, 1997
- ------------------------------ Director
Gerald C. Quinn
/s/ Lee W. Melody President and Chief March 27, 1997
- ------------------------------ Executive Officer,
Lee W. Melody Director
/s/ Allan T. Maguire Vice President of Finance, March 27, 1997
- ------------------------------ Chief Financial Officer,
Allan T. Maguire Treasurer and Secretary,
Director
/s/ Stephen L. Greaves Director March 27, 1997
- ------------------------------
Stephen L. Greaves
/s/ James M. Andre Director March 27, 1997
- ------------------------------
James M. Andre
/s/ Robert P. Schaen Director March 27, 1997
- ------------------------------
Robert P. Schaen
/s/ George L. Schmutz Director March 27, 1997
- ------------------------------
George L. Schmutz
/s/ John I. Leahy Director March 27, 1997
- ------------------------------
John I. Leahy
</TABLE>
33
<PAGE> 34
MOTORVAC TECHNOLOGIES, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 AND
INDEPENDENT AUDITORS' REPORT
<PAGE> 35
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS:
Consolidated balance sheets as of December 31, 1996 and December 31, 1995 F-3
Consolidated statements of operations for the year ended December 31, 1996
and the nine months ended December 31, 1995 F-4
Consolidated statements of stockholders' equity (deficiency) for the year ended
December 31, 1996 and the nine months ended December 31, 1995 F-5
Consolidated statements of cash flows for the year ended December 31, 1996
and the nine months ended December 31, 1995 F-6
Notes to consolidated financial statements F-8
</TABLE>
F-1
<PAGE> 36
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
MotorVac Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of MotorVac
Technologies, Inc. (the "Company") as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity (deficiency)
and cash flows for the year ended December 31, 1996 and the nine months ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of MotorVac Technologies, Inc. as of
December 31, 1996 and 1995, and the results of their operations and their cash
flows for the year ended December 31, 1996 and nine months ended December 31,
1995, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Costa Mesa, California
February 28, 1997
F-2
<PAGE> 37
MOTORVAC TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
---------------- -----------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents (Note 6) $2,559,989 $ 5,008
Accounts receivable, net of allowance for doubtful
accounts of $14,952 (December 31, 1996) and
$28,310 (December 31, 1995) 1,220,029 773,329
Inventories, net of reserve of $40,000 (December 31, 1996) (Note 3) 1,165,411 1,109,250
Other current assets (including deposits with vendors of
$345,779 at December 31, 1996) 459,465 166,778
------------------------------ ---------- -----------
Total Current Assets 5,404,894 2,054,365
PROPERTY AND EQUIPMENT, net (Note 4) 259,651 288,527
INTANGIBLE ASSETS, net of accumulated amortization of
$516,983 (December 31, 1996) and $152,095
(December 31, 1995) (Note 9) 1,307,460 1,672,348
OTHER ASSETS 17,227 25,000
---------- -----------
$6,989,232 $ 4,040,240
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and other current liabilities (Note 5) $ 894,612 $1,364,490
Accrued interest - related parties (Note 10) 649,901
Amounts payable to ex-licensor (Note 9) 219,250
Short-term note payable to bank (Note 6) 1,500,000
---------- ----------
Total Current Liabilities 2,394,612 2,233,641
AMOUNTS PAYABLE TO EX-LICENSOR (Note 9) 219,295
NOTES PAYABLE TO RELATED PARTIES (Note 10) 5,273,872
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (DEFICIENCY) (Notes 1,11 and 12):
Cumulative Series A preferred stock ($.01 par); 95,295 shares authorized and
outstanding at December 31, 1995 (preferred liquidation preference
$4,764,750 at December 31, 1995) 953
Cumulative Series B preferred stock ($.01 par); 55,000 shares
authorized; 54,300 outstanding at December 31, 1995
(preferred liquidation preference $2,715,000
at December 31, 1995) 543
Common stock, $.01 par value; 10,000,000 shares authorized;
948,000 and 4,514,918 issued and outstanding at December 31,
1995 and December 31, 1996, respectively 45,149 9,480
Additional paid-in capital 16,523,553 6,995,448
Accumulated deficit (11,974,082) (10,692,992)
---------- ----------
Total Stockholders' Equity (Deficiency) 4,594,620 (3,686,568)
---------- ----------
$6,989,232 $4,040,240
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 38
MOTORVAC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
NET SALES (Note 13) $ 8,242,735 $ 3,992,398
COST OF SALES 5,026,486 2,480,690
GROSS PROFIT 3,216,249 1,511,708
OPERATING EXPENSES (Notes 7 and 9) 4,338,332 3,194,957
----------- -----------
LOSS FROM OPERATIONS (1,122,083) (1,683,249)
INTEREST EXPENSE (NET) -
RELATED PARTIES (Note 10) 157,751 446,309
----------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (1,279,834) (2,129,558)
PROVISION FOR INCOME TAXES (Note 8) 1,256 850
----------- -----------
NET LOSS $(1,281,090) $(2,130,408)
=========== ===========
NET LOSS PER SHARE AND COMMON
SHARE EQUIVALENT $(0.31) $(0.64)
=========== ===========
WEIGHTED AVERAGE OUTSTANDING COMMON AND
COMMON EQUIVALENT SHARES 4,140,845 3,304,918
=========== ===========
SUPPLEMENTARY DATA (Note 1)
Historical net loss $(1,281,090) $(2,130,408)
Supplementary reduction in interest expense 132,416 446,309
----------- -----------
SUPPLEMENTARY NET LOSS $(1,148,674) $(1,684,099)
=========== ===========
SUPPLEMENTARY NET LOSS PER SHARE AND
COMMON EQUIVALENT SHARES $(0.28) $(0.50)
=========== ===========
SUPPLEMENTARY WEIGHTED AVERAGE OUTSTANDING
COMMON AND COMMON EQUIVALENT SHARES 4,165,481 3,387,952
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 39
MOTORVAC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
SERIES A SERIES B
PREFERRED STOCK PREFERRED STOCK COMMON STOCK
--------------- --------------- ------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, April 1, 1995 95,295 $953 54,300 $543 948,000 $ 9,480
Net loss
Decrease in receivable
from ex-licensor
Exchange of receivable from
ex-licensor for an intangible
asset (Note 9)
------ -------- ------- ---- --------- --------
BALANCE, December 31, 1995 95,295 953 54,300 543 948,000 9,480
Issuance of common stock to
EMIIC in exchange for debt 820,521 8,205
Exchange of Series A
preferred stock for
common stock (95,295) (953) 966,247 9,662
Exchange of Series B
preferred stock for
common stock (54,300) (543) 570,150 5,702
Issuance of shares on initial
public offering, net of issuance cost 1,210,000 12,100
Net loss
------ -------- ------- ---- --------- --------
BALANCE, December 31, 1996 -- $ -- -- $ -- 4,514,918 $45,149
====== ======== ======= ==== ========= ========
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL RECEIVABLE
PAID-IN ACCUMULATED FROM
CAPITAL DEFICIT EX-LICENSOR TOTAL
------- ------- ----------- -----
<S> <C> <C> <C> <C>
BALANCE, April 1, 1995 $ 6,995,448 ($8,562,584) ($1,203,814) ($2,759,974)
Net loss (2,130,408) (2,130,408)
Decrease in receivable
from ex-licensor 13,618 13,618
Exchange of receivable from
ex-licensor for an intangible
asset (Note 9) 1,190,196 1,190,196
----------- ----------- ---------- ----------
BALANCE, December 31, 1995 6,995,448 (10,692,992) (3,686,568)
Issuance of common stock to
EMIIC in exchange for debt 4,402,095 4,410,300
Exchange of Series A
preferred stock for
common stock (8,709)
Exchange of Series B
preferred stock for
common stock (5,159)
Issuance of shares on initial
public offering, net of issuance cost 5,139,878 5,151,978
Net loss (1,281,090) (1,281,090)
----------- ----------- ---------- ----------
BALANCE, December 31, 1996 $16,523,553 ($11,974,082) $ -- $4,594,620
=========== =========== ========== ==========
</TABLE>
See Notes to consolidated financial statements.
F-5
<PAGE> 40
MOTORVAC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
---------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($1,281,090) ($2,130,408)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 467,080 123,871
Loss on disposal of long-term assets 57,894
Discounts earned for early payment to ex-licensor (79,993)
Net change in operating assets and liabilities:
Accounts receivable (446,700) (184,416)
Inventories (56,161) 35,573
Other current assets, intangibles and other assets (284,914) (75,523)
Interest payable to related parties (649,901)
Accounts payable and other current liabilities (469,878) 594,137
---------- ---------
Net cash used in operating activities (2,801,557) (1,578,872)
CASH FLOW FROM INVESTING ACTIVITY -
Purchase of equipment (73,316) (116,934)
CASH FLOW FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common shares 5,151,978
Proceeds from issuance of notes payable to related parties 680,000 2,590,000
Payments of notes payable to related parties (1,543,572) (920,000)
Decrease in receivable from ex-licensor 13,618
Payments to ex-licensor (358,552)
Proceeds from issuance of notes payable to bank 1,500,000
---------- ---------
Net cash provided by financing activities 5,429,854 1,683,618
NET INCREASE (DECREASE) IN CASH 2,554,981 (12,188)
CASH AND CASH EQUIVALENTS, beginning of period 5,008 17,196
---------- --------
CASH AND CASH EQUIVALENTS, end of period $2,559,989 $5,008
========== ========
SUPPLEMENTAL DISCLOSURES OF NONCASH
INFORMATION:
Interest paid $930,127 $22,340
========== ========
Income taxes paid $1,256 $1,650
========== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 41
MOTORVAC TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
-------------- --------------
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING ACTIVITIES:
<S> <C>
Conversion of Series A preferred stock to
common stock net of issuance costs $4,659,499
==========
Conversion of Series B preferred stock to
common stock net of issuance costs $2,170,425
==========
Conversion of notes payable to related
parties to common stock $4,410,300
==========
</TABLE>
F-7
<PAGE> 42
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995
1. GENERAL
Incorporation - MotorVac Technologies, Inc. (the "Company") was
incorporated under the general corporation law of the State of Delaware
on June 19, 1992 as CarbonClean Corporation ("CCC"). On March 12, 1993,
CCC changed the name of the corporation to MotorVac Technologies, Inc.
On April 1, 1994, MotorVac International Marketing Ltd. ("MIML") (a
company under common ownership control) and the Company entered into an
Asset Transfer Agreement and an Operations Transfer Agreement whereby
MIML transferred all operations and assets and liabilities to the
Company. The Company continued the business of MIML from that date
forward. On November 29, 1995, MIML was dissolved into the Company,
effective December 31, 1995.
On June 9, 1994, the Company acquired 100% of the outstanding common
stock of MIML in exchange for 1,500,000 shares of the Company's common
stock. The licensing and sublicensing agreements between the Company
and MIML were replaced by two exclusive license agreements - one
between the Company and Enviromotive, Inc. ("EMI"), now an ex-licensor,
and one between MIML and EMI. The new agreements licensed certain
patents, trademarks and other rights to the Company in the United
States ("U.S.") and Canada and to MIML outside the U.S. and Canada in
exchange for a continuing royalty payment. Effective December 31, 1995,
the Company terminated the exclusive license agreements and purchased
the patents, trademarks and other rights of EMI (Note 8).
Line of Business - The Company designs, develops, assembles, markets
and sells the MotorVac CarbonClean System and proprietary detergent
primarily to the automotive after-market industry through various
distribution channels both in the U.S. and Canada under the trade name
MotorVac, and outside the U.S. and Canada under the trade name
CarbonClean.
Fiscal Year - In January 1996, the Company's Board of Directors elected
to change the Company's year-end for financial reporting purposes to
December 31, effective December 31, 1995. The Company continues to
report on a March 31 year-end for income tax purposes.
Principles of Consolidation - The consolidated financial statements for
1995 include the accounts of MotorVac Technologies, Inc. and MIML. All
intercompany accounts and transactions are eliminated in consolidation.
Stock Split - The Company's Board of Directors and stockholders
approved a 1-for-.316 reverse stock split of its common stock on
February 29, 1996. All share and per share amounts included in the
accompanying consolidated financial statements have been restated to
reflect the reverse stock split.
Initial Public Offering - The Company closed an initial public offering
on May 1, 1996, and the overallotment on June 13, 1996 where the
Company sold 1,100,000 and 110,000 shares of common stock,
respectively. Immediately prior to the closing of the initial public
offering, the holders of the Series A preferred stock and Series B
preferred stock converted that stock into 966,247 and 570,150 shares of
common stock, respectively. At the same time, the Erin Mills
International Investment Corporation ("EMIIC"), a related party,
converted $4,410,300 of debt payable by the Company into 820,521 shares
of common stock.
F-8
<PAGE> 43
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 (Continued)
Supplementary Net Loss - Supplementary net loss for the nine months
ended December 31, 1995 and the twelve months ended December 31, 1996
represent the results of operations adjusted to reflect the impact of
the elimination of interest expense related to the $4,410,300 in debt
due EMIIC, and The WH & NC Eighteen Corporation ("WH & NC"), an
affiliate of EMIIC, which was exchanged for common stock immediately
prior to the consummation of the initial public offering (Note 10).
Supplementary Net Loss Per Common and Common Equivalent Share -
Supplementary net loss per common and common equivalent share is
computed by dividing supplementary net loss by the weighted average
number of shares of common stock outstanding during the period.
Weighted average common shares include common stock, options for the
purchase of stock issued during the most recent 12 months using the
treasury stock method, and the conversion of all outstanding shares of
Series A and B preferred stock into shares of common stock, the assumed
issuance of 820,521 shares of common stock by the Company to effect the
exchange (using an initial offering price of $5.375 per share) of
$4,410,300 in borrowings and the issuance of 83,034 shares of common
stock which would be necessary to generate gross proceeds of $446,309
of pro forma interest expenses due EMIIC and WH & NC. Pursuant to
Securities and Exchange Commission Staff Accounting Bulletin Topic 4D,
stock options granted during the twelve months prior to the date of the
initial filing of the Company's Form SB-2 Registration Statement have
been included in the calculation of common equivalent shares using the
treasury stock method, if they were outstanding as of the beginning of
the period, for the nine months ended December 31, 1995.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - The Company recognizes revenue when products are
shipped.
Concentration of Credit Risk - The Company's revenues are generated
primarily from credit sales. The Company performs ongoing credit
evaluations of its customers and maintains reserves for potential
credit losses. The Company does not require collateral for its
receivables.
Significant Supplier - The Company currently relies on a supplier as a
sole source of the Company's gasoline and diesel engine detergents
under the terms of an exclusive supply contract. The Company considers
its detergents to be a critical proprietary asset. The loss of the
supplier of the proprietary product or an inability to obtain detergent
from the supplier for any significant period of time could have a
material adverse effect on results of operations.
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 periods.
Actual results could differ from those estimates.
Inventories - Inventories are stated at the lower of cost, determined
by the first-in, first-out (FIFO) method, or market.
F-9
<PAGE> 44
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 (Continued)
Depreciation and Amortization - Depreciation and amortization are
provided using the straight-line method, over the following estimated
useful lives:
<TABLE>
<S> <C>
Computer equipment and software 5 years
Machinery and equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements Lesser of life of lease or 5 years
</TABLE>
Intangible Assets - Intangible assets, consisting of organization costs
and a covenant not-to-compete, are stated at cost and amortized using
the straight-line method over the lesser of five years or the useful
life of the asset. Effective December 31, 1995, the Company acquired
certain patents, trademarks and other rights described in Note 8. These
rights are to be amortized using the straight-line method over five
years or 3% of net sales, if greater in any year. The recoverability of
intangibles is measured based on gross profit margin on the sale of
related products and is evaluated annually.
Income Taxes - The Company provides for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109. SFAS No.
109 is an asset and liability approach that requires the recognition of
deferred tax assets (if realizable) and liabilities for the expected
future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future
events other than enactments of changes in the tax law or rates. In the
event the future consequences of differences between financial
reporting bases and the tax bases of the Company's assets and
liabilities result in a deferred tax asset, SFAS No. 109 requires an
evaluation of the probability of being able to realize the future
benefits indicated by such asset. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that
some portion or all of the deferred tax asset will not be realized.
Reclassification - Certain reclassifications have been made to the
1995 financial statements to conform to the 1996 presentation.
3. INVENTORIES
Inventories, which include materials, supplies, labor and manufacturing
overhead, are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Materials and supplies $ 710,174 $ 639,914
Work in process 74,902 100,750
Finished product 420,335 368,586
Reserve (40,000) --
----------- -----------
$ 1,165,411 $ 1,109,250
=========== ===========
</TABLE>
F-10
<PAGE> 45
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 (Continued)
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Computer equipment and software $ 212,872 $ 176,136
Machinery and equipment 145,260 122,378
Furniture and fixtures 188,835 176,591
Leasehold improvements 2,434 1,030
----------- -----------
549,401 476,135
Less accumulated depreciation and
amortization (289,750) (187,608)
----------- -----------
$ 259,651 $ 288,527
=========== ===========
</TABLE>
5. ACCOUNTS PAYABLE AND OTHER CURRENT LIABILITIES
Accounts payable and other current liabilities consist of the
following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Accounts payable $ 632,431 $ 1,045,869
Other accrued liabilities 262,181 318,621
----------- -----------
$ 894,612 $ 1,364,490
=========== ===========
</TABLE>
6. SHORT-TERM NOTE PAYABLE
Short-term note payable consists of a note payable to Imperial Bank.
The note is collateralized by a $1,500,000 certificate of deposit on
deposit with the bank. Interest is payable monthly at prime (8.25% at
December 31, 1996). Principal is due June 16, 1997.
7. COMMITMENTS AND CONTINGENCIES
Leases - The Company leases an office and manufacturing facility under
an operating lease.
F-11
<PAGE> 46
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 (Continued)
Future minimum annual payments on the noncancelable facility lease are
as follows:
<TABLE>
<S> <C> <C>
Year ending December 31:
1997 $ 116,054
1998 10,319
---------
$ 126,373
=========
</TABLE>
Under the lease agreement, the Company is required to pay various
expenses including maintenance, insurance, utility costs and property
taxes. Rental expense amounted to $109,403 for the year ended December
31, 1996 and $137,217 for the nine months ended December 31, 1995.
Employment Contracts - The Company has entered into employment
contracts with four officers of the Company that provide for minimum
annual salaries aggregating $466,300 at December 31, 1996. The
contracts have one-year or multiple-year automatic renewals based on
the Company's failing to give "Notice of Non-Renewal" sixty (60) days
before the expiration of such contracts. In the event of termination of
a contract by the Company without cause, the Company would be required
to pay continuing salary payments for specified periods in accordance
with the contracts.
License Agreements - The Company accepted written notice of termination
of a licensing agreement under which royalties were paid monthly. For
the year ended December 31, 1996 and the nine months ended December 31,
1995, royalties of $1,200 and $18,650, respectively, expensed under
this agreement.
The Company has commitments to pay fees under an exclusive agreement to
license certain technology. The agreement provides for payment of a
minimum royalty of the greater of $50 per machine sold or $10,000 on
January 1, May 1 and September 1 of each calendar year through the
latter of December 31, 1998 or the expiration date of any patent
related to the technology. For the year ended December 31, 1996 and the
nine months ended December 31, 1995, royalties of $30,000 and $20,000,
respectively, have been expensed under such agreement.
Litigation - As of December 31, 1996, the Company is involved in
various lawsuits, claims and inquiries arising from transactions
entered into in the ordinary course of business. While the Company's
future liability with respect to these matters cannot be predicted with
certainty, it is the opinion of the management, after consultation with
outside counsel, that any liability from lawsuits or claims known to
the Company, whether asserted or unasserted, would not have a material
adverse effect on the financial position or operations of the Company.
At December 31, 1996, the Company had a lawsuit outstanding between
itself and DeCarbon Australia Pty. Ltd., et al. This was settled in the
Company's favor on January 6, 1997.
F-12
<PAGE> 47
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 (Continued)
8. INCOME TAXES
Temporary differences which give rise to deferred income taxes are as
follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net deferred taxes:
Accrued or disallowed related party interest $ - $ 486,232
Tax credit carryforwards 50,053 50,053
Reserves 55,677 94,499
Capitalized costs 295,394 229,109
Net operating losses 4,193,720 3,059,178
Other (65,197) 9,993
----------- ------------
4,529,647 3,929,064
Valuation allowance (4,529,647) (3,929,064)
----------- ------------
Net deferred tax benefit $ - $ -
=========== ============
</TABLE>
The valuation allowance increased $600,583 and $659,856 during the year
ended December 31, 1996 and the nine months ended December 31, 1995,
respectively. The difference between the Company's effective tax rate
and the federal statutory rate is comprised of the valuation allowance
on deferred assets.
As of December 31, 1996, the Company had net operating loss
carryforwards for federal and state income tax purposes of
approximately $10,470,070 and $5,690,277, respectively. The federal and
state net operating loss carryforwards begin expiring in 2007 and 1997,
respectively. The Company also has research and experimentation credit
carryforwards for federal and state income tax purposes of
approximately $37,000 and $13,000, respectively, which begin to expire
in 2007. Pursuant to Section 382 of the Internal Revenue Code, use of
the Company's net operating loss and credit carryforwards may be
limited if the Company experiences a cumulative change in ownership of
greater than 50% in a moving three-year period. Ownership changes could
impact the Company's ability to utilize net operating losses and credit
carryforwards remaining at the ownership change date. The limitation
will be determined by the fair market value of common stock outstanding
prior to the ownership change, multiplied by the applicable federal
rate.
9. PURCHASE OF INTANGIBLES
On December 31, 1995, the Company purchased certain intangibles from
EMI (ex-licensor) in an exchange transaction as described below. Prior
to December 31, 1995, the Company advanced money to EMI to pay for
substantially all of the operating expenses and obligations on behalf
of EMI.
F-13
<PAGE> 48
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 (Continued)
Additionally, prior to December 31, 1995, the Company had two exclusive
license agreements with the ex-licensor to utilize certain patents,
trademarks and other rights in exchange for a royalty of 3% of net
sales. For the nine months ended December 31, 1995, the Company
recorded royalties of $119,901 related to this agreement (none during
the year ended December 31, 1996).
Effective December 31, 1995, the Company entered into a Purchase
Agreement with EMI. The agreement provided for the termination of the
license agreements and the purchase of the patents, trademarks and
other rights in exchange for the forgiveness of receivables due from
the ex-licensor, the discharge of accrued royalties owed to the
ex-licensor, minimum payments of $116,000, payable at $20,000 upon
signing of the agreement, and $4,000 per month through December 1997,
and the assumption of an obligation for future payments based on sales
of a certain product. The Company recorded $1,590,452 for the
acquisition of these intangible assets, which reflects forgiveness of
receivables of $1,190,196, discharge of accrued royalties payable of
$38,289, required future payments of $116,000 and estimated minimum
payments of $322,545 for the assumption of the obligation for future
payments. On October 17, 1996, the Company paid $200,059, which
represented payment in full of all amounts then due to EMI totaling
$280,052. The Company recorded a gain of $79,993, which is included in
operating expenses. No amounts are due EMI at December 31, 1996.
10. RELATED PARTIES TRANSACTIONS
Notes payable to related parties consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1995
----------
<S> <C>
Notes payable to EMIIC, a major stockholder, interest at prime plus
2%, collateralized by all the assets of the Company (converted to
common shares prior to the initial public offering) (Note 11) $3,853,872
Note payable to the WH & NC bearing interest at prime plus 2%,
collateralized by all the assets of the Company (paid on December
16, 1996 with proceeds of short-term note payable to
Imperial Bank) (Note 6) 1,420,000
----------
$5,273,872
==========
</TABLE>
For the year ended December 31, 1996 and the nine months ended December
31, 1995, the Company recorded interest expense due to related parties
of $280,905 and $446,309, respectively. All accrued interest payable
due related parties was paid during the year ended December 31, 1996.
F-14
<PAGE> 49
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 (Continued)
11. PREFERRED STOCK
Series A Preferred Stock - On June 9, 1994, the stockholders of the
Company exchanged $4,764,750 of notes payable for 95,295 shares of
Series A preferred stock. Under the original terms, the Series A
preferred stock was nonvoting, not convertible into common stock,
redeemable at the option of the Company upon certain events, and had a
6% cumulative dividend payable quarterly, if declared.
Series B Preferred Stock - Under the original terms, the Series B
preferred stock had a 6% cumulative dividend, payable quarterly, if
declared, and was convertible at any time at the option of the holder
or automatically converted upon a public offering into shares of the
Company's common stock at a conversion price of $5.10 per share.
The Company revised the terms of the above preferred stock issues as
follows:
Series A Preferred Stock - The Company provided a conversion privilege
to these stockholders to convert to common shares all Series A
preferred stock (including all accrued dividends thereon) at the actual
initial public offering price per share.
In conjunction with the issuance of Series B preferred shares, the
Company issued warrants to purchase 5,500 shares of Series B preferred
stock at $50 per share at any time through October 1998. At December
31, 1996, all the warrants were outstanding and exercisable. No value
has been ascribed to such warrants.
Initial Public Offering - The holders of Series A preferred stock and
Series B preferred stock converted such stock into 966,247 and 570,150
shares of common stock, respectively, immediately prior to the
consummation of the initial public offering.
12. STOCK INCENTIVE AWARD PLAN
In 1994, the Company adopted the 1994 Stock Incentive Award Plan (the
1994 Plan). The Company has reserved an aggregate of 126,400 shares of
common stock for issuance under the Plan. All options were granted at
fair market value at the date of grant. On February 9, 1996, the
Company's Board of Directors approved the 1996 Stock Incentive Award
Plan (the "Incentive Plan") and the 1996 Director Stock Plan (the
"Director Plan"). These plans provide for the Company to issue options
to purchase up to 325,000 and 50,000 shares, respectively, of the
Company's common stock at fair market value on the date of grant. All
options granted have been granted in accordance with the provisions of
the 1994 Plan and the Incentive Plan. Provisions of the plans call for
options to be granted at the estimated fair market value which is
generally the average of the bid and ask price on the day of the grant.
As of December 31, 1996, options representing 65,445 shares were
exercisable. Subsequent to December 31, 1995 but prior to consummation
of the initial public offering, all options were granted at $5.10,
which reflected fair market value at that time.
F-15
<PAGE> 50
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 (Continued)
Stock option activity for the year ended December 31, 1996 and the nine
months ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE PER
SHARES SHARE
-------- --------
<S> <C> <C>
BALANCE, April 1, 1995 106,710 $ 5.10
Granted 25,912 $ 5.10
Options lapsed (16,116) $ 5.10
--------
BALANCE, December 31, 1995 116,506 $ 5.10
Granted 288,594 $ 5.10 to $6.125
Options lapsed (8,660) $ 5.10
--------
BALANCE, December 31, 1996 396,440 $ 5.10 to $6.125
========
</TABLE>
As discussed in Note 1, the Company continues to account for its
stock-based awards using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
to Employees, and its related interpretations. Accordingly, no
compensation expense has been recognized in the financial statements
for employee stock arrangements.
SFAS No. 123, Accounting for Stock-Based Compensation, requires the
disclosure of pro forma net income and earnings per share had the
Company adopted the fair value method as of the beginning of fiscal
1995. Under SFAS No. 123, the fair value of stock-based awards to
employees is calculated through the use of option pricing models, even
though such models were developed to estimate the fair value of freely
tradable, fully transferable options without vesting restrictions,
which significantly differ from the Company's stock option awards.
These models also require subjective assumptions, including future
stock price volatility and expected time to exercise, which greatly
affect the calculated values. The Company's calculations were made
using the Black-Scholes option pricing model with the following
weighted average assumptions: expected life, 120 months following
grant; stock volatility, 32% in 1996 and 1995; risk-free interest
rates, 5.5% in 1996 and 1995; and no dividends during the expected
term. Forfeitures are recognized as they occur. If the computed fair
values of the 1995 and 1996 awards had been amortized to expense over
the vesting period of the awards, pro forma net loss would have been
$2,143,126 ($0.65 per share) in 1995 and $1,386,513 ($0.33 per share)
in 1996. However, the impact of outstanding stock options granted prior
to 1995 has been excluded from the pro forma calculation; accordingly,
the 1995 and 1996 pro forma adjustments are not indicative of future
period pro forma adjustments, when the calculation will apply to all
applicable stock options.
F-16
<PAGE> 51
MOTORVAC TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE NINE MONTHS ENDED DECEMBER 31, 1995 (Continued)
The weighted average remaining contractual life and weighted average
exercise price are 8.2 years and $5.42, respectively. The weighted
average fair value of options granted during the periods ending
December 31, 1996 and 1995 were $2.83 and $3.07, respectively.
13. CONCENTRATION OF NET SALES
Approximately 51% and 45% of the Company's net sales were made to one
customer during the year ended December 31, 1996 and the nine-month
period ended December 31, 1995, respectively. A decision by this
customer to decrease the amount purchased from the Company or to cease
distributing the Company's products could have a material adverse
effect on the Company's financial conditions and results of operations.
The Company sells its products through distributors in the domestic
(defined as U.S. and Canada) and the international marketplace. For the
year ended December 31, 1996 and the nine months ended December 31,
1995, net sales by region were as follows:
<TABLE>
<CAPTION>
YEAR NINE MONTHS
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
--------- ----------
<S> <C> <C>
North America $5,870,757 $2,870,560
South and Central America 292,721 289,909
Europe 286,260 119,436
Middle East and Africa 140,627 106,822
Asia 1,652,370 605,671
--------- ----------
$8,242,735 $3,992,398
========== ==========
</TABLE>
14. FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires management to disclose the estimated fair value of certain
assets and liabilities defined by SFAS No. 107 as financial
instruments.
Financial instruments are generally defined by SFAS No. 107 as cash,
evidence of ownership interest in equity, or a contractual obligation
that both conveys to one entity a right to receive cash or other
financial instruments from another entity and imposes on the other
entity the obligation to deliver cash or other financial instruments to
the first entity. At December 31, 1996, management believes that the
carrying amounts of cash, accounts receivable, accounts payable and
other current liabilities, and notes payable to bank approximate fair
value because of the short maturity of these financial instruments.
F-17
<PAGE> 52
MOTORVAC TECHNOLOGIES, INC.
EXHIBIT INDEX TO FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31, 1996
3.1 (1) Amended and Restated Certificate of Incorporation.
3.2 (1) Third Amended and Restated Bylaws, as amended.
4.1 Reference is made to Exhibits 3.1 and 3.2.
4.2 (1) Specimen Stock Certificate.
10.1 (1) Letter Agreement dated February 12, 1996 by and among the
Registrant, Enviromotive, Inc. and International Turbo Center,
Inc.
10.2 (1)+ 1996 Stock Incentive Award Plan of Registrant.
10.3 (1)+ Form of 1996 Director Nonqualified Stock Option Agreement.
10.4 (1)+ Form of 1996 Employee Nonqualified Stock Option Agreement.
10.5 (1)+ 1996 Director Stock Plan of Registrant.
10.6 (1)+ Amended and Restated Employment Agreement dated March 21, 1996
between the Registrant and Allan T. Maguire.
10.7 (1) Form of Consent to Amendment of Registration Rights Agreement and
Stock Purchase Warrant and Waiver of Notice entered into
between the Registrant and each of the holders of Stock Purchase
Warrants to purchase Series B Preferred Stock.
10.8 (2) Products Distribution Agreement dated May 1, 1996 by and between
the Registrant and Sun Electric De Mexico, S.A. De C.V.
10.9 (1) Transfer Agreement dated October 23, 1995 by and between
CarbonClean International Ltd. and the Registrant.
10.10 (1) Transfer Agreement dated October 23, 1995 by and between MIML and
the Registrant.
10.11 (1) Amended and Restated Secured Subordinated Promissory Note dated
December 31, 1995 in the original principal amount of $1,040,000
payable by the Registrant in favor of The WH & NC Eighteen
Corporation.
10.12 (1) Security Agreement dated August 3, 1995 by and between the
Registrant and The WH & NC Eighteen Corporation.
10.13 (3) First Amendment to Purchase Agreement dated September 30, 1996,
by and among the Registrant, International Turbo Center, Inc.,
and Enviromotive, Inc.
<PAGE> 53
10.14 Products Distribution Agreement dated December 1, 1996, by and
between the Registrant and Snap-On Tools Japan K.K.
10.15 Products Distribution Agreement dated January 6, 1997, by and
between the Registrant and China Motor-Vehicle Safety Appraisal
and Inspection Center.
10.16 (1) Products Distribution Agreement dated January 27, 1995 by and
between the Registrant and DeCarbon Pty. Ltd.
10.17 (1) Supplier Purchase Agreement dated April 10, 1995 by and between
the Registrant and Snap-On Incorporated.
10.18 (1) Exclusive Distribution Agreement dated April 10, 1995 by and
between the Registrant and Snap-On Incorporated.
10.19 (1) Products Distribution Agreement dated November 16, 1995 by and
between the Registrant and Automotive Diagnostics.
10.20 (1) Letter Agreement dated February 12, 1996 by and among the
Registrant, Enviromotive, Inc., and International Turbo Center,
Inc.
10.21 (1) Standard Industrial Lease--Multi-Tenant dated November 29, 1995
by and between Northern McFadden Limited Partnership, an Illinois
limited partnership, and the Registrant.
10.22 (4) Products Distribution Agreement dated March 28, 1996, by and
between the Registrant and Cameo (QLD) Pty. Ltd.
10.23 (1)+ Employment Agreement dated October 24, 1994 by and between the
Registrant and Lee William Melody, as amended as of November 3,
1995.
10.24 (1) Employment Agreement dated as of November 20, 1995 by and between
the Registrant and Michael G. Arkell.
10.25 (1) Offer Letter to Michael G. Hosch dated December 16, 1992 from the
Registrant, as amended by Memorandum dated March 21, 1995.
10.26 (1) Form of Indemnity Agreement entered into with each of the
Registrant's officers and directors.
10.27 (1) Amendment to Stockholders Voting Agreement dated March 8, 1996 by
and among the Registrant, Erin Mills International Investment
Corporation, George H. David and Robert G. Reese.
10.28 (1) Purchase Agreement dated February 22, 1996, but made effective as
of December 31, 1995, by and among the Registrant,
International Turbo Center, Inc. and Enviromotive, Inc.
10.29 (1) MotorVac Technologies, Inc. Cash Bonus Plan.
10.30 (1) Letter Agreement dated April 5, 1996 between the Registrant and
Shrader Packaging Co., Inc. amending the Exclusive Supply
Agreement and granting a right of first refusal to the Registrant.
10.31 Settlement Agreement and Mutual Release dated January 6, 1997 by
and between the Registrant, DeCarbon Australia Pty. Ltd. ,
Carbon Clean Corporation Pty. Ltd., Carbon Tune Pty. Ltd., Chris
Somas, Roydn Sweet and Jim Litis (collectively "DeCarbon").
<PAGE> 54
10.32 First Amendment and Modification to Settlement Agreement and
Mutual Release by and between the Registrant and DeCarbon, dated
January 4, 1997.
10.33 Second Amendment and Modification to Settlement Agreement and
Mutual Release by and between the Registrant and DeCarbon, dated
January 7, 1997.
10.34 Letter Agreement confirming settlement between the Registrant and
Lee W. Melody on the one hand and Robert L. Fisher and ETCO on
the other hand, dated March 14, 1997.
10.35 (3) Letter Agreement dated September 15, 1996, by and between the
Registrant and Automotive Diagnostics canceling the Products
Distribution Agreement dated November 16, 1995, along with the
Product Labeling Agreement.
10.36 (3) Products Distribution Agreement dated September 15, 1996, by and
between the Registrant and Cartek International, Inc.
10.37 (1) Letter Agreement dated as of December 31, 1995 between the
Registrant and EMIIC amending certain promissory notes and
waiving certain defaults thereunder.
10.38 Settlement Agreement and Mutual Release dated March 27, 1997 by
and between Lee W. Melody and the Registrant on the one side, and
Robert L. Fisher and ETCO on the other.
11.1 Statement of Calculation of Net Loss Per Share and Supplementary
Net Loss Per Share.
24.1 Power of Attorney. Reference is made to page 32.
27.1 Financial Data Schedule in accordance with Article 5 of
Regulation SX.
____________________________________
(1) Previously filed as an exhibit to the Registration Statement on
Form SB-2, as amended (No. 333-1866-LA), and incorporated herein
by reference.
(2) Previously filed as an exhibit to the Form 10-QSB for the period
ended March 31, 1996, and incorporated herein by reference.
(3) Previously filed as an exhibit to the Form 10-QSB for the period
ended September 30, 1996, and incorporated herein by reference.
(4) Previously filed as an exhibit to the Form 10-QSB for the period
ended June 30, 1996, and incorporated herein by reference.
+ Indicates a management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 10.14
MOTORVAC TECHNOLOGIES, INC.
PRODUCTS DISTRIBUTION AGREEMENT
THIS PRODUCTS DISTRIBUTION AGREEMENT ("AGREEMENT") is made and entered
into this 1st day of December, 1996, by and between MOTORVAC TECHNOLOGIES, INC.,
a Delaware Corporation ("MTI"), with its principal place of business located at
1431 S. Village Way, Santa Ana, California, U.S.A. and SNAP-ON TOOLS JAPAN K.K.
("Distributor") with its principal place of business located at 3-5-12, Konan,
Minato-Ku, Tokyo 108, Japan, with reference to the following facts:
RECITALS
A. MTI markets a range of products and replacement parts for cleaning
gasoline and diesel engines that are sold under the brand names listed
in the schedule attached hereto as Exhibit A, hereinafter referred to
as the "Products."
B. Distributor hereby represents that it possesses the facilities and
ability to promote the sale and distribution of the Products, in
accordance with the Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the covenants
and agreements contained herein, the parties hereto hereby agree as follows:
1. APPOINTMENT OF SOLE AND EXCLUSIVE DISTRIBUTOR:
a. The territory (the "Territory") covered by this Agreement is
Japan.
(i) For the term of this Agreement and in accordance with
all of the terms, and subject to the conditions
herein set forth, MTI hereby appoints Distributor as
the sole and exclusive distributor for the sale and
distribution of the Products within the Territory.
b. Distributor hereby accepts its appointment as a distributor of
the Products to develop a demand for, and to the best of its
ability, sell and distribute the Products within the
Territory, and Distributor hereby represents and warrants that
it will make all sales hereunder in accordance with the terms
contained in this Agreement. Distributor's obligations under
this Agreement shall include, but not be limited to:
(i) Establishing and maintaining Distributor owned
facilities located within the Territory for display
and demonstration of the Products;
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
1
<PAGE> 2
(ii) Hiring, training and maintaining adequately trained
sales and technical personnel to develop a market and
service the demand for the Products in the Territory:
(iii) Undertaking advertising campaigns and trade shows;
(iv) Concurrent with execution hereof, Distributor shall
provide to MTI an Annual Minimum Performance Goal
("Annual Goal"), which Annual Goal represents the
minimum amount of Products to be purchased by the
Distributor from MTI for the first year of this
Agreement. The Distributor agrees that the Annual
Goal shall be required to be purchased by Distributor
from MTI as follows:
(a) 50% of the Annual Goal or greater
must be purchased during the first
180 days of this Agreement and
subsequent years of this Agreement
(the "First 180-Day Goal"), and the
balance of the Annual Goal must be
purchased during the second 180 days
of this Agreement and subsequent
years of this Agreement (the "Second
180-Day Goal") (collectively called
the "Annual Goal"), which Annual
Goal shall be deemed to be added to
Section 3b of this Agreement.
During the remainder of the term of
this Agreement, the Distributor
shall provide MTI with an Annual
Goal for all subsequent years, and
such Annual Goals shall be delivered
to MTI at least 60 days in advance
of the start of each respective
year. All Annual Goals are subject
to acceptance by MTI at its sole
discretion. In the event that MTI
does not accept the Annual Goal set
by the Distributor, MTI and the
Distributor shall attempt to come to
an agreement on an Annual Goal. In
the event that (A) the Distributor
does not timely deliver an Annual
Goal to MTI or (B) MTI does not
accept an Annual Goal set by the
Distributor, or MTI and the
Distributor are unable to agree upon
a replacement Annual Goal, within 30
days of the date that the
Distributor communicates the Annual
Goal to MTI (collectively, an
"Annual Goal Default"), then MTI may
terminate this Agreement in
accordance with the provisions of
Section 8b hereof;
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
2
<PAGE> 3
(v) Conducting its business in a manner that will reflect
favorably at all times on Distributor, MTI and the
Products and the good name, good will and reputation
of MTI and its authorized distributors. Distributor
shall not itself or with others participate in any
illegal, deceptive, misleading or unethical
advertising or other practices or techniques that are
or might be detrimental to MTI, the Products or the
public; and
(vi) Complying with all applicable laws and with the terms
of this Agreement in connection with the distribution
of the Products.
2. TERM OF AGREEMENT:
a. The initial term of this Agreement shall be for three (3)
years unless earlier terminated as provided in this Agreement.
Thereafter, the term of this Agreement shall be automatically
extended for successive one-year periods unless either party
to this Agreement gives the other party to this Agreement
notice of its intent to terminate this Agreement, and such
notice is received by the non-terminating party at least sixty
(60) days prior to the expiration of the initial term or
renewal term, as applicable.
3. DISTRIBUTOR PURCHASES:
a. Exclusivity. Distributor shall obtain its requirements of
Products only from MTI.
b. Minimum Purchases/Performance Goals. Distributor acknowledges
that it has represented to MTI that it possesses the
facilities and the ability to generate sales of and distribute
the Products, in accordance with this Agreement, and that
based upon these representations, MTI has entered into this
Agreement with the understanding that Distributor shall make
the minimum purchases of Product, in accordance with the
Annual Goals set forth in this Agreement or as periodically
required by this Agreement. The Distributor and the Company
hereby agree that the Annual Goals, as set forth following,
are expressed in U.S. dollars and Units of Product. If the
Distributor meets or exceeds the Annual Goals or the First
180-day Goal or the Second 180-day Goal, as defined in Section
1.b. of this Agreement, for the first year or subsequent years
of this Agreement, in either U. S. dollar purchases or Units
of Product Purchases, that particular Goal will be deemed
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
3
<PAGE> 4
to have been met. For the first year of this Agreement, set
forth below are the ANNUAL GOALS AS AGREED TO BETWEEN MTI AND
THE DISTRIBUTOR:
FOR THE FIRST YEAR:
PRODUCTS
Equipment:
Units of Petrol Machines ________________
Units of Diesel Machines ________________
Cleaning Solution:
Cases of Gasoline Fuel
System Cleaner or Drum
Equivalent ________________
Cases of Diesel Fuel
System Cleaner or Drum
Equivalent ________________
U.S. Dollar Annual Goal $150,000 USD
________________
NOTE: MINIMUM PURCHASES OF 50% OF THE ABOVE TOTALS (IN EITHER PRODUCT OR IN
DOLLARS) MUST BE ACHIEVED WITHIN THE FIRST 180 DAYS FOR THIS FIRST YEAR OF THIS
AGREEMENT.
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
4
<PAGE> 5
c. Minimum Performance Goals / Subsequent Years. The form of
schedule shown below should be used by the Distributor to
submit Annual Goals for the Year as specified in Section
1.b.iv.
Set forth below is the ANNUAL GOAL as agreed between MTI and
the Distributor:
FOR THE YEAR FROM ___________________ TO ___________________ :
PRODUCTS
Equipment:
Units of Petrol Machines _____________________
Units of Diesel Machines _____________________
Cleaning Solution:
Cases of Gasoline Fuel
System Cleaner or Drum
Equivalent _____________________
Cases of Diesel Fuel
System Cleaner or Drum
Equivalent _____________________
U.S. Dollar Annual Goal _____________________
ANNUAL GOAL IS REQUIRED TO BE SUBMITTED BY THE DISTRIBUTOR TO MTI AT
LEAST 60 DAYS BEFORE THE EXPIRATION OF EACH YEARLY ANNIVERSARY OF THE
DATE OF SIGNING OF THAT CERTAIN PRODUCTS DISTRIBUTION AGREEMENT
BETWEEN DISTRIBUTOR AND MOTORVAC TECHNOLOGIES, INC. ("MTI") AND THIS
ANNUAL GOAL IS SUBJECT TO ACCEPTANCE BY MTI IN ITS SOLE DISCRETION.
SUBMITTED BY: ____________________________ DATE:____________
DISTRIBUTOR NAME: ____________________________
ACCEPTED BY: ____________________________ DATE:____________
ON BEHALF OF MTI
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
5
<PAGE> 6
d. Normal Retail Price. Concurrent with each submission of
Annual Goal by the Distributor under this Agreement, the
Distributor shall also submit to MTI the "Normal Retail Price"
of each and all Products in the Distributor's Territory. Such
Normal Retail Price shall be the price at which the Products
are sold to the end user of the Products, normally a repair
garage or service center. Notwithstanding the foregoing,
Distributor is free to set its own resale prices unilaterally.
No employee or representative of MTI has any authority to tell
Distributor what its resale prices must be, nor to inhibit in
any way a Distributor's independent pricing decision.
e. Non-compete. During the term of this Agreement, Distributor
will not, directly or indirectly, supply, sell, promote or
distribute in the Territory any other products that are
similar to, or competitive with, the Products. Distributor
agrees that during the term of this Agreement, and for a
period of three (3) years after the termination of this
Agreement , Distributor will not attempt to replicate, sell,
promote, distribute or manufacture any cleaning solution or
fuel system cleaning machines for use, under any
circumstances, with MTI's patented and proprietary systems ,
and that any such actions by Distributor would substantially
and permanently damage MTI, and result in the immediate
termination of this Agreement (if applicable), and, in
connection therewith, MTI will be entitled to seek any remedy
available at law or in equity.
f. Restrictions With Respect to Proprietary Information.
(i) Trade Secrets. Distributor hereby acknowledges and
agrees that MTI owns certain trade secrets and other
confidential and/or proprietary information and
intellectual property which constitute valuable
property rights, which MTI has developed through a
substantial expenditure of time and money, which are
and will continue to be utilized in MTI's business
and which are not generally known to the trade. This
proprietary information expressly includes, but is
not limited to, the list of names of the
distributors, dealers, customers and suppliers of
MTI, the identities of key personnel of the
distributors, dealers, customers and suppliers of
MTI, and other information concerning the Products,
finances, personnel contractors processes, pricing
information, production schedules and other types of
proprietary information relating to MTI's operations.
In recognition of these facts, Distributor hereby
agrees that the Distributor, both during and after
the term of this Agreement:
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
6
<PAGE> 7
(a) Will not use or disclose, directly or
indirectly, and will keep secret and
confidential, all trade secrets and
proprietary information of MTI, including but
not limited to those items specifically
mentioned above;
(b) Will not, directly or indirectly, either on
Distributor's own behalf or on behalf of any
other person or entity, solicit or attempt to
solicit any employee, contractor, dealer or
distributor of MTI to leave their employment,
contractor, dealer or distributor
relationship with MTI;
(c) Upon the termination of this Agreement or at
anytime at MTI's request, Distributor shall
return all documents or materials which have
been furnished to Distributor by MTI in
connection with this Agreement; and
(d) All uses by Distributor of MTI's name or any
trademarks or tradenames (or any other marks
or names closely resembling the same) now and
hereafter owned by MTI or its affiliates
shall be subject to prior written approval by
MTI. Distributor is not authorized to use
MTI's names or trademarks in connection with
any aspect of its business other than in the
sales, marketing and advertising of the
Products.
g. Distributor Further Acknowledges and Agrees:
(i) Copying, duplicating, or imitating the Products by
Distributor is illegal and would result in permanent
irreparable injury to MTI. Any such activities will
cause an immediate termination of this Agreement, and
MTI will be entitled to seek any remedy available at
law or in equity.
(ii) Distributor may sell the Products only in the
Territory. If Distributor sells any Products outside
said Territory, either directly or indirectly, the
Distributor shall be in breach of this Agreement and
MTI shall have the right to terminate this Agreement
at its sole discretion by providing the Distributor
with 90 days advance written notice. MTI shall not be
required to sell to the Distributor any further
Products after notification of termination has been
sent by MTI to the Distributor.
h. Purchase Price. MTI will sell to the Distributor the Products
at the prices shown in Exhibit B of this Agreement. These
prices are consistent with those
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
7
<PAGE> 8
given to MTI's international distributors. MTI reserves the
right to adjust prices from time to time, but may not increase
prices more than two times per year, and each such price
increase shall be effective only on delivery of 30 days prior
written notice by MTI to the Distributor.
i. Payment. The payment of the purchase price for Products
purchased by the Distributor from MTI may be made by cash,
irrevocable letter of credit, sight draft, electronic bank
transfer or other such methods as may be negotiated and
accepted by MTI. No shipments of Product will be made by MTI
until method of payment has been accepted by MTI.
j. Brochures. MTI shall, at its expense, provide Distributor
with an initial supply of MTI's current sales brochures and
descriptive materials in English, which materials include
negatives, color separations and ad slicks, as may be
reasonably requested by Distributor in connection with
fulfilling Distributor's obligations hereunder.
k. Orders. Distributor shall transmit written orders for
Products to MTI. Distributor reserves the right to cancel an
order if and when any of the following circumstances occur and
adversely affect the Distributor or its business:
(i) War;
(ii) Cancellation of Most Favored Nation Treaty and
Article 301; or
(iii) Anti-dumping duty charge.
l. Orders. MTI reserves the right to cancel any orders of the
Distributor if and when any of the following circumstances
occur and adversely affect MTI or its business:
(i) War;
(ii) Orders by the government of the United States of
America banning foreign shipments; or
(iii) Acts of God that prevent MTI from completing an
order.
MTI also reserves the right to cancel any order placed by the
Distributor or to refuse to ship or to delay the shipment
thereof if
1. Distributor:
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
8
<PAGE> 9
(i) shall fail to make any payments for Products in
accordance with the terms of this Agreement or in
accordance with terms agreed to between MTI and the
Distributor, from time to time;
(ii) shall fail to meet the Annual Goal, or the First
180-day Goal or the Second 180-day Goal set forth as
part of this Agreement or otherwise established from
time to time;
(iii) has been notified of MTI's intent to terminate
Distributor as a distributor of MTI pursuant to this
Agreement; or
(iv) is not in good financial condition, as determined by
MTI; or
2. this Agreement shall have terminated pursuant to the
provisions hereof.
m. Shipments. MTI shall ship the Products or cause the Products
to be shipped as ordered by Distributor upon MTI's acceptance
of Distributor's order and payment terms. MTI will not be
responsible for delays caused by shortage of materials,
strikes, shortage of shipping facilities, acts of God, or
other causes not within the reasonable control of MTI.
4. TRAINING:
a. MTI shall provide initial training in the use of the Products
to Distributor except as specified below. MTI shall be
responsible for paying all expenses, salaries, travel and
other costs incurred by MTI's employees in connection with
providing such training. Distributor shall be responsible for
the following expenses :
(i) Local transportation
(ii) Room and board (under special circumstances)
(iii) Any expenses related to the training which occurred
in the Territory.
Following the completion of the initial training and upon
reasonable request of Distributor, MTI shall make its
personnel or consultants available at locations to be selected
by MTI for the purpose of providing additional training in the
use of the Products upon reasonable request of Distributor.
MTI shall, at its expense, supply to Distributor a reasonable
number of MTI's current operator manuals, service bulletins
and other materials for use in connection with the use of the
Products.
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
9
<PAGE> 10
5. WARRANTIES:
a. Exclusive Warranties. MTI shall provide Distributor with the
manufacturer's warranty applicable for the Products. Such
warranty generally provides that the equipment shall be in
good working order for a period of one (1) year from the date
the Product is first placed in service provided that the end
of the Warranty period shall not be later than eighteen (18)
months from the date of shipment of such Product to the
Distributor or the Distributor's customer by MTI (The
"Warranty Period").
b. Warranty Repairs. It will be the responsibility of the
Distributor to effect repairs to the Products during the
Warranty Period.
c. Parts Warranty Claims. All warranty claims must be submitted
by the Distributor to MTI for approval. During the Warranty
Period, MTI will replace defective parts on a case by case
basis at no charge to Distributor with an agreed to freight
allowance.
d. Sale of Replacement Parts. Nothing contained herein shall be
deemed to prohibit Distributor from selling replacement parts
for the Products within the Territory, provided that subject
parts are purchased from MTI.
e. Other. Distributor further acknowledges that said warranty is
effective only if the Products are used with
CarbonClean/MotorVac cleaning solutions listed in Exhibit A
attached hereto. Distributor acknowledges that no Warranties
are created by this Agreement and, with respect to the
Products, MTI hereby disclaims all implied warranties of
merchantability and fitness for use for a particular purpose.
6. INDEPENDENT CONTRACTOR:
This Agreement does not create the relationship of employer and
employee, partnership or agency between MTI and Distributor.
Distributor, in connection with all of its obligations hereunder,
shall be an independent contractor of MTI and under no circumstances
is Distributor to be considered to be the employee, partner or agent
of MTI. Distributor is not granted any right by this Agreement to
create any obligation or responsibility, on behalf of or in the name
of MTI. Distributor covenants that it is and will remain in
compliance with all federal, state and local laws and regulations
applicable to its business including, without limitation, all labor
regulations, and foreign, and United States federal and state tax
requirements.
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
10
<PAGE> 11
7. MODIFICATIONS AND IMPROVEMENTS:
Upon making or discovering any improvements to the Product,
Distributor shall:
a. provide MTI with all details of such improvements;
b. acknowledge that such improvements and the right to obtain any
patent, trademark, copyright or other similar protection belong
exclusively to MTI; and
c. provide such assistance to MTI as MTI may reasonably require
to obtain patents, copyrights or other similar protection.
8. TERMINATION:
This Agreement may be terminated for any of the following reasons:
a. Expiration. After the expiration of the term of this
Agreement, in accordance with Section 2 hereof.
b. Goals. In the event that Distributor fails to provide the
required Annual Goals in accordance with Section 1(b(iv)
hereof or fails to purchase the required First 180-day Goal or
Second 180-day Goal amounts at any time, MTI may terminate
this Agreement, at its sole discretion, by providing the
Distributor with thirty (30) days advance written notice of
its intent to terminate this Agreement.
c. Default. If, during the term of this Agreement, Distributor
defaults in the performance of any of its other obligations
under this Agreement, or any of the representations or
warranties made by Distributor are determined to be untrue,
MTI may give Distributor notice of default and if Distributor
fails to cure such default within thirty (30) days (or if such
default cannot be cured within thirty (30) days, no diligent
effort has been made to cure such default), this Agreement
shall be deemed terminated as of the end of such ninety (90)
day period without any further action on the part of MTI .
Distributor will then accept no further orders for the
Products from the Territory and MTI shall have no further
obligations to Distributor hereunder.
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
11
<PAGE> 12
d. Insolvency. This Agreement will automatically terminate if
either party should become bankrupt, insolvent, or cease to do
business, or make an assignment for the benefit of creditors.
e. Competition. This Agreement shall automatically terminate in
the event that the Distributor breaches any of the covenants
against competition contained in Sections 3.e. and 3.f.(i)
hereof;
f. Sales Outside the Territory. In the event that the
Distributor breaches the sales covenants contained in Section
3.g.(ii) hereto, then MTI may terminate this Agreement in
accordance with the notice provisions contained in Section
3.g.(ii) hereof.
g. No Waivers. The failure of MTI to terminate this Agreement
pursuant to any of the subparagraphs in this Section shall not
be considered to be a waiver by MTI of its right to terminate
this Agreement in the future pursuant to this section for such
default or any similar default.
h. Repurchase. In the event of termination of this Agreement by
either party for any reason, MTI may at its option repurchase
from Distributor at the net price paid by the Distributor to
MTI, less a 25% restocking charge and actual freight, duties
and taxes on the shipment thereof to the Distributor, any MTI
Products at the Distributor's place of business or in the
possession of the Distributor. On demand and at the tender of
the repurchase price and related cost, shipping and handling
expenses and charges incurred by the Distributor, Distributor
shall deliver such Products to MTI. The payment shall be by
negotiable instrument.
9. MISCELLANEOUS:
a. Modification-Waiver. No cancellation, modification,
amendment, deletion, addition, or other change in this
Agreement or any provision hereof, or waiver of any right or
remedy herein provided, shall be effective for any purpose
unless specifically set forth in a writing signed by the party
to be bound thereby. No waiver of any right or remedy in
respect of any occurrence or event shall be deemed nor shall
constitute a continuing waiver or a waiver of any similar
occurrence or event on any other occasion.
b. Final Agreement. This Agreement shall be deemed for all
purposes to have been made in California. This Agreement
supersedes and terminates all prior or contemporaneous other
agreements, oral or written, between the
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
12
<PAGE> 13
parties hereto with respect to the subject matter hereof and
the transactions contemplated hereby and discharges any
liability of MTI or any affiliated or predecessor corporation
in respect of any such prior agreements, and, together with
the Exhibits hereto, contains the entire agreement of the
parties with respect to the subject matter hereof.
c. Controlling Law. This Agreement and the performance of the
obligations imposed upon the parties hereunder shall be
governed by and construed in accordance with the laws of the
State of California, to the exclusion of all other laws. The
parties each
(i) confer sole and exclusive jurisdiction upon, and
agree that the proper venue of any such action shall
be in, the courts located in Orange County,
California, in connection with all disputes arising
under or related to this Agreement, and
(ii) waive any and all objections that they may have with
respect to jurisdiction of, or venue in, such court.
d. Successors and Assigns. The provisions of this Agreement
shall be binding upon and insure to the benefit of MTI and
Distributor and their respective successors and permitted
assigns. Distributor may not assign this Agreement (by
operation of law or otherwise) without the prior written
consent of MTI. MTI may assign this Agreement to its
subsidiaries or parent company or to any related company upon
30 days advance written notice provided by MTI to the
Distributor.
e. Confidentiality. The parties mutually agree that any
confidential information furnished to the other, so labeled or
described shall remain confidential and not be made available
to any other party, without written permission from the party
furnishing said information.
f. Notices. Any notice required or permitted hereunder shall be
given by mailing the same in a sealed envelope, postage paid
and sent via registered mail addressed as follows:
MTI: MOTORVAC TECHNOLOGIES, INC.
1431 S. Village Way
Santa Ana, California, USA 92705
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
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<PAGE> 14
Distributor: SNAP-ON TOOLS JAPAN K.K.
3-5-12 Konan
Minato-Ku, Tokyo 108, Japan
Attention: Mr. C. John Creech,
President/Representative Director
Either party may change its address for notices hereunder by
written notice to the other party.
g. Limitation of Liability. MTI's liability to Distributor
hereunder with respect to any order, MTI's performance
thereof, or the Products sold hereunder shall not exceed the
purchase price paid by Distributor for the Products. In no
event shall MTI be liable to Distributor for special,
incidental or consequential damages.
h. Extraordinary Circumstances. Except for any payment
obligations of either party hereunder, neither MTI nor
Distributor shall be liable for any delay or failure to
perform on account of any cause beyond such party's reasonable
control, including, but not limited to, work stoppages, work
slow-downs, strikes or other industrial disputes; fire,
explosions, floods, earthquakes or other acts of God; riots or
civil disturbances, war or other acts of civil or military
authorities; and delays caused by suppliers or material
shortages.
i. Changes to Products. The Distributor hereby agrees and
acknowledges the Company may, at its sole discretion, withdraw
or replace or add products to Exhibit A or B attached hereto
at any time. The distributor waives any right or notice on
such a change.
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MotorVac Technologies, Inc., Snap-On Tools Japan K.K.
a Delaware corporation
By: s/ Lee W. Melody By: s/ C. John Creech
------------------------------ ---------------------------
Its: President Its: President & Rep. Director
------------------------------ ---------------------------
Date: Dec. 9, 1996 Date: November 20, 1996
------------------------------ ----------------------------
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
15
<PAGE> 16
EXHIBIT A
PRODUCTS
SUMMARY
<TABLE>
<CAPTION>
PART # BRAND NAME
- ------ ----------
<S> <C>
500-0301 ECS-300e CarbonClean Gasoline Fuel System
Cleaning Machine
Includes: 200-3000 Basic Adaptor Kit
200-3000 Foreign Adaptor Kit
Instruction Manual
One Year Warranty
500-4010 IDT 4000i CarbonClean Diesel Fuel System
Cleaning Machine
Includes: 200-3040 Adaptor Kit
User & Service Guide
One-Year Warranty
400-0010 CarbonClean Diesel Fuel System Cleaner
(12) 16oz Cans
400-0020 CarbonClean Gasoline Fuel System Cleaner
(12) 8oz. Bottles
400-0030 CarbonClean Intake Cleaner (12) 8oz. Bottles
400-DRUM-D CarbonClean Diesel Fuel System Cleaner
55 Gallon Drum
500-0241 EEFS-302A Sun/Snap-On Gasoline Fuel System
Cleaning Machine
Includes: 200-3025 Sun/Snap-On Basic Adaptor Kit
200-3020 Deluxe Adaptor Kit
Instruction Manual
One-Year Warranty
400-0050 MotorVac/CarbonClean System Cleaning Detergent
and Top Engine Cleaner
Packaged exclusively for Sun/Snap-On
Sun/Snap-On Part #EEFS-301A-C4
(4) 32 oz. Bottles per Case
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
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<PAGE> 17
EXHIBIT A
PRODUCTS
EQUIPMENT AND SOLVENT
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
400-0010 Diesel Fuel System Cleaner - (12) 16oz. Cans
1 case = 12" x 10" x 8" (15 lbs)
30.5cm x 25.4cm x 20.3cm (6.8 kg)
400-0020 Gasoline Fuel System Cleaner - (12) 8oz. Bottles
1 case = 9" x 7" x 6" (7 lbs)
22.8cm x 17.8cm x 15.2cm (3.2 kg)
400-0030 Intake Cleaning Solvent - (12) 8oz. Bottles
1 case = 9" x 7" x 6" (7 lbs)
22.8cm x 17.8cm x 15.2cm (3.2 kg)
200-6000 Intake Cleaning Kit - (12) 8oz Bottle & Sprayer
1 case = 17" x 17" x 11" (15 lbs)
43.2cm x 43.2cm x 27.9cm (6.8 kg)
400-DRUM-D Diesel Fuel System Cleaner - 55 Gallon Drum
24" x 24" x 35" (462 lbs)/61.0cm x 61.0cm x 88.9cm (210 kg)
500-0301 ECS-300e Gasoline Fuel System Cleaning Machine
Includes: 200-3000 Basic Adaptor Kit
200-3009 Foreign Adaptor Kit
User Guide
One Year Warranty
16" x 15" x 38" (82 lbs)
40.6cm x 38.1cm x 96.5cm (37.2 kg)
500-4010 IDT 4000i Diesel Fuel System Cleaning Machine
Includes: 200-3040 Adaptor Kit
User and Service Guide
One Year Warranty
24" x 20" x 41" (115 lbs)
61.0cm x 50.8cm x 104cm (52.2 kg)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
17
<PAGE> 18
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
500-0200 CCS II - CarbonClean System II
Includes: 200-8085 CCS II Basic Adaptor Kit
200-8059 CCS II - Deluxe Adaptor Kit
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
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EXHIBIT A
PRODUCTS
CARBONCLEAN REPLACEMENT PARTS
SERIES 200 & 300
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
010-0005B XOLOX SHIELD
010-0006B TANK CAP
010-0007B P-200 CASTER
010-0008B P-200 HANDLE
010-0009B TANK RESERVOIR
010-0017B ECS 300i OVERLAY
010-0019B ECS HANDLE
010-0020B ECS AXLE
010-0021B ECS WHEEL
010-0022B ECS BASE LEG
010-0024B ECS HOSE BRACKET
010-0025B ECS CORD BRACKET
020-0010B BUZZER
020-0030B EXTERNAL WIRING HARNESS
020-0035B 5 AMP CIRCUIT BREAKER
020-0037B 10 AMP CIRCUIT BREAKER
020-0038B 15 AMP CIRCUIT BREAKER
020-0040B INTERNAL WIRING HARNESS
020-0063B ELEC. LAMP AMBER
020-0067B ELEC. LAMP WHITE
020-0073B ELEC. LAMP GREEN
020-0083B ELEC. LAMP RED
020-0090B RELAY 8 TRIM, EAR MOUNT
020-0100B ONOFF & PS/LEAK SWITCH
020-0110B PURGE SWITCH, 1/2 MT
020-0120B START SWITCH, 1/2 MT
020-0150B TIMER 60 MIN 3/8 W/NUT
020-0151B TIMER FACE PLATE
020-0152B TIMER KNOB BLACK
020-0374B STRAIN RELIEF 1/2 MT
030-0002B F.CONN 1/4 X 1/8 FPT NI
030-0004B P-200 FM UNION 5/16 X 1/4 NT (NY)
030-0005B MALE ELBOW 1/4 X 1/4 MPT
030-0006B MALE ELBOW 1/4 X 1/8 MPT
030-0013B HEX NIPPLE 1/4 P NI
030-0015B MALE ELBOW 5/16 X 1/8 MPT NY
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
19
<PAGE> 20
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
030-0016B M. CONN 5/16 X 1/8 MPT NY
030-0017B M. CONN 5/16 X 1/4 MPT NY
030-0020B M. CONN 3/8 X 1/4 MPT NAB NI
030-0021B ECS F CONN 5/16 X 1/8 FPT NI
030-0022B F. CONN 5/16T X 1/4 P NI
030-0023B M. CONN 5/16T X 1/4 P NI
030-0024B M. ELBOW 5/16T X 1/8 NI
030-0025B M. CONN 3/8T X 1/4P NI
030-0026B ECS F. CONN 1/4 BARB X 1/8 NI
030-0030B F. CONN 3/8 X 1/4 FPT NI
030-0031B ELBOW 1/4 MPT X 1/4 FPT NI
030-0050B M. CONN 3/8 X 1/8 MPT NI
030-0090B P-200 JUNCTION BLOCK 2 WAY 1/8 FPT
030-0095B ECS JUNCTION BLOCK, 2 WAY 1/4
030-0100B P-200 JUNCTION BLOCK-5 WAY 1/8
030-0105B ECS JUNCTION BLOCK-5 WAY 1/4
030-0130B MALE ELBOW 3/8 X 1/4 MPT NI
030-0131B FEMALE ELBOW 3/8 X 1/4 MPT NI
030-0140B MALE ELBOW 3/8 X 1/8 MPT NI
030-0150B MALE ELBOW 5/16 X 1/4 MPT NI
030-0160B M. CONN 5/16 X 1/8 MPT NI
030-0189B F. CONN 1/4 FPT X MPT NI
030-0192B COMP ALIGN NUT 5/16
030-0205B P-200 CROSS 1/8 FPT NI
030-0206B CROSS 1/4 FPT NI
030-0208B J. CONN 3/8 X 1/4 MPT NI
030-0209B TEE 3/8 NT X 1/4 MPT X 3/8 (NY)
USED WITH VACUUM SWITCH
030-0210B UNION 1/8 MPT X 1/4 MPT (NY)
030-0211B F. CONN 90 3/8 X 1/4 FPT NY
040-0401B XOLOX PUMP MOUNT NUT
040-0500B ECS GRAB HANDLE LOCKWASHER
040-0502B ECS "E' CLIP FOR AXLE
040-0503B ECS AXLE SPACER
040-0505B ECS GRAB HANDLE NUT
040-0506B ECS LEG CAP
040-0507B ECS AXLE BUSHING NY
040-0508B ECS VAC HOSE SNAP BUSHING
040-0509B ECS GRAB HANDLE BOLT
040-5326B 3/32 X 4 NYLON CABLE TIE
050-0010B PSI GAUGE
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
20
<PAGE> 21
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
050-0011B BAR GAUGE
050-0012B ECS VACUUM GAUGE
050-0013B ECS BAR VACUUM GAUGE
050-0008B VACUUM SWITCH 1/4 MPT
050-0015B 3 WAY SOLENOID 3/32
050-0017B PRESSURE SWITCH 1/8
050-0021B STAINLESS CK VALUE
050-0052B REG NEEDLE VALVE
050-0065B CONTROL VALVE
050-0074B FILTER, INLINE
050-0075B FILTER, SPIN-ON
050-0076B FILTER & BASE 1/4 FPT
050-0088B RELIEF VALVE 105 PSI
060-0440B HOSE CLAMP
060-0450B HOSE CLAMP
060-1000B 1/4 MALE TUBE ADAPTOR
060-1100B 5/16 MALE TUBE ADAPTOR
060-1200B 3/8 MALE TUBE ADAPTOR
060-1300B 1/4 FEMALE ADAPTOR (Open-end hose)
060-1400B 5/16 FEMALE ADAPTOR (Open-end hose)
060-1500B 3/8 FEMALE ADAPTOR (Open-end hose)
060-1600B 12 MM BANJO
060-1700B 90 TUBE 5/16 MPT FUEL INLET ADAPTOR
060-1800B 90 TUBE 3/8 MPT FUEL INLET ADAPTOR
060-1900B 12 MM BANJO BOLT
060-1901B 12 MM WASHER
060-1902B 12 MM CAP NUT
060-2000B 5/16 LOOP MALE ADAPTOR
060-2100B 3/8 PLUG COLLAR
060-2101B 3/8 CARB PLUG ADAPTOR
060-2200B 5/16 PLUG COLLAR
060-2201B 5/16 CARB PLUG ADAPTOR
060-2300B 14 MM FEMALE
060-2400B 1C MM BANJO
060-2401B 8 MM BANJO
060-2402B 14 MM BANJO
060-2501B FQD LOOP ADAPTOR
060-2502B TEE
060-2600B 16 MM FEMALE
060-2720B 10 MM BANJO BOLT
060-2800B 1/4 MALE CONNECTOR (Ford,GM,Chrysler,Jeep)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
21
<PAGE> 22
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
060-2900B 5/16 MALE NYLON (Ford,Lincoln,Mercury)
060-3000B 1/8 MPT ADAPTOR (Ford,Lincoln,Mercury)
060-3100B TBI & PFI INLET (GM)
060-3105B FEMALE SIDE OF 3100 (GM)
060-2700B 14 MM X 16 MM MALE UNION
060-2710B 8 MM BANJO BOLT
060-2711B 8 MM WASHER (Set of 3)
060-3200B 1/4 MPT ADAPTOR (Ford,Lincoln,Mercury)
060-3300B TBI & PFI OUTLET (GM)
060-3304B TBI & PFI USED W/1700 (GM)
060-3305B FEMALE SIDE OF 3300 (GM) (Replaces 060-4000)
060-3500B 3/8 MALE ADAPTOR (Ford,Lincoln,Mercury)
060-3505B 3/8 FEMALE ADAPTOR (Ford,Lincoln,Mercury)
060-3508B SHRADER VALVE (Ford,Lincoln,Mercury)
060-3600B 1/2 MALE ADAPTOR (Ford,Lincoln,Mercury)
060-3605B 1/2 FEMALE ADAPTOR (Ford,Lincoln,Mercury)
060-3700B SHRADER VALVE (GM,Chrysler,Jeep)
060-3800B VOLVO ADAPTOR
060-3900B 5/16 FQD (Ford,Lincoln,Mercury)
060-3901B 3/8 FQD (Ford,Lincoln,Mercury)
060-3902B 1/4 FQD (Ford,Lincoln,Mercury)
060-4100B HYUNDAI ADAPTOR
060-4200B 5/16 MALE METAL (GM,Chrysler,Jeep)
060-4205B 5/16 FQD (GM,Chrysler,Jeep)
060-4300B 3/8 MALE CONNECTOR(Ford,GM,Chrysler,Jeep)
060-4305B 3/8 FQD (GM,Chrysler,Jeep)
060-4405B 1/4 FQD (GM,Chrysler,Jeep)
070-0080B 1/4 NYLON TUBE
070-0085B 5/16 NYLON TUBE
070-0086B 3/8 NYLON TUBE
070-0100B HOSE VACUUM
080-0230B 1/4 FPT FQD NI
080-3301B O-RING VITON USED w/3304
080-3302B SM. O-RING VITON Used w/3300,3304
080-3402B LG. O-RING VITON Used w/3100,3500,4100
080-3501B SMALL CLIP & TETHER (Ford,Lincoln,Mercury)
080-3601B LARGE CLIP & TETHER (Ford,Lincoln,Mercury)
080-3602B O-RING VITON Used w/3600
080-3701B VITON SEAL,3700
080-3903B 5/16 RETAINER (Ford,Lincoln,Mercury)
080-3904B 3/8 RETAINER (Ford,Lincoln,Mercury)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
22
<PAGE> 23
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
080-3905B 1/4 RETAINER (Ford,Lincoln,Mercury)
080-4206B 5/16 RETAINER (GM,Chrysler,Jeep)
080-4306B 3/8 RETAINER (GM,Chrysler,Jeep)
080-4408B 1/4 RETAINER (GM,Chrysler,Jeep)
100-0090B ECS INTERNATIONAL MANUAL
100-0300B CHINESE OVERLAY
100-0104B FUEL INJECTOR PULSER IT100 (MQ)
100-4047B SPANNER NUT
100-4048B SPANNER WRENCH
100-5001B ICS TUBING (30")
200-0006B P-200 LOW FM ASSEMBLY
200-0007B P-200 HIGH FM ASSEMBLY
200-0011B P-200 BAR GAUGE ASSEMBLY
200-0050B P-200 2-WAY BLOCK ASSEMBLY
200-0064B P-200 5-WAY ASSEMBLY
200-0076B P-200 OUTPUT REGULATOR ASSEMBLY
(All"D"machines)
200-0083B P-200 RETURN REGULATOR ASSEMBLY
200-0093B TEE ASSEMBLY
200-0200B IN-LINE FILTER ASSEMBLY
200-0203B FILTER & TANK 5/16" ASSEMBLY
200-0204B TUTHILL FILTER & TANK 3/8" ASSEMBLY
200-0280B P-200 VACUUM SWITCH ASSEMBLY
200-0300B ECS/P-200 RETURN HOSE ASSEMBLY
200-0400B ECS/P-200 OUTPUT HOSE ASSEMBLY
200-0704B TUTHILL PUMP 5/16" ASSEMBLY
(With plumbing fittings)
200-0705B TUTHILL PUMP 3/8" ASSEMBLY
(With plumbing fittings)
200-0706B XOLOX PUMP ASSEMBLY
(With plumbing fittings)
200-0800B P-200 CONTROL VALVE ASSEMBLY
200-1002B ECS BAR GAUGE ASSEMBLY
200-1004B ECS BAR VACUUM GAUGE ASSEMBLY
200-1008B ECS 2-WAY ASSEMBLY
200-1010B ECS 5-WAY ASSEMBLY
200-1011B ECS OUTPUT REGULATOR ASSEMBLY
200-1012B ECS RETURN REGULATOR ASSEMBLY
200-1013B ECS CONTROL VALVE ASSEMBLY
200-1014B ECS TEE ASSEMBLY
200-1175B FUEL QD TOOL KIT
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
23
<PAGE> 24
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
200-3000B BASIC ADAPTOR KIT
200-3006B FORD ADAPTOR KIT
200-3008B GM ADAPTOR KIT
200-3009B ASIAN/EURO ADAPTOR KIT
200-4007B TIMER ASSEMBLY
200-4008B FILTER & BASE 3/8" ASSEMBLY
200-4009B FILTER & BASE 5/16" ASSEMBLY
200-5000B SOLENOID REPAIR KIT
200-8009B P-200 REGULATOR RETROFIT
300-3000B BASIC ORGANIZER BAG (GREEN)
300-3006B FORD ORGANIZER BAG (RED)
300-3008B GM ORGANIZER BAG (BLUE)
300-3009B ASIAN/EURO ORGANIZER BAG (ORANGE)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
24
<PAGE> 25
EXHIBIT A
IDT 4000I REPLACEMENT PARTS
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
010-0034B TANK CAP
010-0026B WHEEL
010-0037B LEG
010-0040B FOOT GLIDE
010-0461B LOWER SENDING UNIT ADAPTOR
020-0049B ALARM HORN
020-4045B LOWER SENDING UNIT
020-0043B ELECTRICAL HARNESS, LOWER UNIT
020-0045B ELECTRICAL HARNESS, INTERNAL MAIN
020-0046B ELECTRICAL HARNESS, EXT. BATTERY
020-0047B ELECTRICAL HARNESS, EXT. SHUTDOWN
020-0091B RELAY
050-0018B PRESSURE SWITCH
050-0044B HYDRAULIC PUMP 12v (Diesel)
050-0086B FILTER ELEMENT REPLACEMENTS (20)
060-0590B FQD (Supply Tank)
060-0592B MQD (Supply Tank)
080-0230B FQD (Hose End)
100-0200B CHINESE OVERLAY
200-1471B OUTPUT HOSE ASSEMBLY
200-1472B RETURN HOSE ASSEMBLY
200-1960B UNIVERSAL ADAPTOR KIT
200-4003B OUTPUT SOLENOID ASSEMBLY
200-4004B PUMP ASSEMBLY
200-4031B ELECTRONIC HEAD ASSEMBLY
200-4032B FILTER ASSEMBLY
200-4038B PRESSURE SWITCH ASSEMBLY
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
25
<PAGE> 26
EXHIBIT B
PRICING
EFFECTIVE JANUARY 1, 1996
Home Office:
1431 S. Village Way
Santa Ana, CA 92705
Tel: (714) 558-4822
Fax: (714) 558-2756
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
26
<PAGE> 27
EXHIBIT B
PRICING
F.O.B. WAREHOUSE
<TABLE>
<CAPTION>
PART # DESCRIPTION COST
- ------ ----------- ----
<S> <C> <C>
400-0010 Diesel Fuel System Cleaner - (12) 16oz Cans 95.00
1 case = 12" x 10" x 8" (15 lbs)
30.5cm x 25.4cm x 20.3cm (6.8 kg)
400-0020 Gasoline Fuel System Cleaner - (12) 8oz Bottles 62.00
1 case = 9" x 7" x 6" (7 lbs)
22.8cm x 17.8cm x 15.2cm (3.2 kg)
400-0030 Intake Cleaning Solvent - (12) 8oz Bottles 65.00
1 case = 9" x 7" x 6" (7 lbs)
22.8cm x 17.8cm x 15.2cm (3.2 kg)
200-6000 Intake Cleaning Kit - (12) 360.00
8oz Bottle & Sprayer
1 case = 17" x 17" x 11" (15 lbs)
43.2cm x 43.2cm x 27.9cm (6.8 kg)
400-DRUM-D Diesel Fuel System Cleaner - 55 Gallon Drum 2,050.00
24" x 24" x 35" (462 lbs)
61.0cm x 61.0cm x 88.9cm (210 kg)
500-0200 System II CarbonClean Machine w/Standard 825.00
Adaptor Set
200-8059 Adaptor Set - Deluxe for System II 150.00
(when purchased w/machine)
200-8059 Adaptor Set - Deluxe for System II 200.00
(when purchased without machine)
500-0307 ECS-300e Fuel System Cleaning Machine 1,495.00
for Gasoline
Includes: 200-3000 Basic Adaptor Kit
200-3009 Euro/Asia Kit
User Guide
One Year Warranty
16" x 15" x 38" (82 lbs)
40.6cm x 38.1cm x 96.5cm (37.2 kg)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
27
<PAGE> 28
<TABLE>
<CAPTION>
PART # DESCRIPTION COST
- ------ ----------- ----
<S> <C> <C>
500-0241 EEFS-302A Sun/Snap-On Gasoline Fuel System 1,600.00
Cleaning Machine
Includes: 200-3025 Sun/Snap-On Basic Adaptor Kit
200-3020 Deluxe Adaptor Kit
Instruction Manual
One-Year Warranty
400-0050 MotorVac/CarbonClean System Cleaning 40.00
Detergent and Top Engine Cleaner
Packaged exclusively for Sun/Snap-On
Sun/Snap-On Part #EEFS-301A-C4
(4) 32 oz. Bottles per Case
500-4000i IDT-4000i Fuel System Cleaning Machine 1,650.00
for Diesel
Includes: 200-3040 Adaptor Kit
User & Service Guide
One Year Warranty
23 1/4" x 18" x 39 1/2" (98 lbs.)
59.0cm x 45.7cm x 100.3cm (44.5 kg)
200-3006 U.S. Ford Adaptor Kit 315.00
200-3008 U.S. G.M. Adaptor Kit 197.00
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
28
<PAGE> 29
EXHIBIT B
CARBONCLEAN REPLACEMENT PARTS PRICING
SERIES 200 & 300
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
010-0005B XOLOX SHIELD 15.65
010-0006B TANK CAP 7.75
010-0007B P-200 CASTER 9.50
010-0008B P-200 HANDLE 18.75
010-0009B TANK RESERVOIR 105.00
010-0017B ECS 300i OVERLAY 28.25
010-0019B ECS HANDLE 45.00
010-0020B ECS AXLE 23.70
010-0021B ECS WHEEL 12.55
010-0022B ECS BASE LEG 14.60
010-0024B ECS HOSE BRACKET 11.80
010-0025B ECS CORD BRACKET 14.05
020-0010B BUZZER 18.00
020-0030B EXTERNAL WIRING HARNESS 25.00
020-0035B 5 AMP CIRCUIT BREAKER 7.05
020-0037B 10 AMP CIRCUIT BREAKER 7.05
020-0038B 15 AMP CIRCUIT BREAKER 7.05
020-0040B INTERNAL WIRING HARNESS 60.00
020-0063B ELEC. LAMP AMBER 4.75
020-0067B ELEC. LAMP WHITE 4.75
020-0073B ELEC. LAMP GREEN 4.75
020-0083B ELEC. LAMP RED 4.75
020-0090B RELAY 8 TRIM, EAR MOUNT 18.65
020-0100B ONOFF & PS/LEAK SWITCH 4.20
020-0110B PURGE SWITCH, 1/2 MT 6.30
020-0120B START SWITCH, 1/2 MT 11.55
020-0150B TIMER 60 MIN 3/8 W/NUT 26.80
020-0151B TIMER FACE PLATE 3.05
020-0152B TIMER KNOB BLACK 1.75
020-0374B STRAIN RELIEF 1/2 MT 0.25
030-0002B F.CONN 1/4 X 1/8 FPT NI 2.18
030-0004B P-200 FM UNION 5/16 X 1/4 NT (NY) 6.55
030-0005B MALE ELBOW 1/4 X 1/4 MPT 2.50
030-0006B MALE ELBOW 1/4 X 1/8 MPT 2.18
030-0013B HEX NIPPLE 1/4 P NI 1.45
030-0015B MALE ELBOW 5/16 X 1/8 MPT NY 5.25
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
29
<PAGE> 30
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
030-0016B M. CONN 5/16 X 1/8 MPT NY 2.55
030-0017B M. CONN 5/16 X 1/4 MPT NY 2.65
030-0020B M. CONN 3/8 X 1/4 MPT NAB NI 2.33
030-0021B ECS F CONN 5/16 X 1/8 FPT NI 2.40
030-0022B F. CONN 5/16T X 1/4 P NI 3.30
030-0023B M. CONN 5/16T X 1/4 P NI 2.35
030-0024B M. ELBOW 5/16T X 1/8 NI 2.75
030-0025B M. CONN 3/8T X 1/4P NI 2.90
030-0026B ECS F. CONN 1/4 BARB X 1/8 NI 2.20
030-0030B F. CONN 3/8 X 1/4 FPT NI 2.89
030-0031B ELBOW 1/4 MPT X 1/4 FPT NI 2.26
030-0050B M. CONN 3/8 X 1/8 MPT NI 2.56
030-0090B P-200 JUNCTION BLOCK 2 WAY 1/8 FPT 8.50
030-0095B ECS JUNCTION BLOCK, 2 WAY 1/4 6.25
030-0100B P-200 JUNCTION BLOCK-5 WAY 1/8 10.50
030-0105B ECS JUNCTION BLOCK-5 WAY 1/4 8.25
030-0130B MALE ELBOW 3/8 X 1/4 MPT NI 3.10
030-0131B FEMALE ELBOW 3/8 X 1/4 MPT NI 4.39
030-0140B MALE ELBOW 3/8 X 1/8 MPT NI 2.91
030-0150B MALE ELBOW 5/16 X 1/4 MPT NI 2.88
030-0160B M. CONN 5/16 X 1/8 MPT NI 2.09
030-0189B F. CONN 1/4 FPT X MPT NI 1.95
030-0192B COMP ALIGN NUT 5/16 0.97
030-0205B P-200 CROSS 1/8 FPT NI 3.97
030-0206B CROSS 1/4 FPT NI 6.31
030-0208B J. CONN 3/8 X 1/4 MPT NI 3.96
030-0209B TEE 3/8 NT X 1/4 MPT X 3/8 (NY) 7.70
USED WITH VACUUM SWITCH
030-0210B UNION 1/8 MPT X 1/4 MPT (NY) 1.06
030-0211B F. CONN 90 3/8 X 1/4 FPT NY 6.12
040-0401B XOLOX PUMP MOUNT NUT 0.05
040-0500B ECS GRAB HANDLE LOCKWASHER 0.05
040-0502B ECS "E' CLIP FOR AXLE 0.10
040-0503B ECS AXLE SPACER 0.45
040-0505B ECS GRAB HANDLE NUT 0.05
040-0506B ECS LEG CAP 0.20
040-0507B ECS AXLE BUSHING NY 0.15
040-0508B ECS VAC HOSE SNAP BUSHING 0.10
040-0509B ECS GRAB HANDLE BOLT 0.10
040-5326B 3/32 X 4 NYLON CABLE TIE 0.05
050-0008B VACUUM SWITCH 1/4 MPT 61.75
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
30
<PAGE> 31
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
050-0010B PSI GAUGE 34.75
050-0011B BAR GAUGE 37.45
050-0012B ECS VACUUM GAUGE 37.45
050-0013B ECS BAR VACUUM GAUGE 38.75
050-0015B 3 WAY SOLENOID 3/32 68.52
050-0017B PRESSURE SWITCH 1/8 46.75
050-0021B STAINLESS CK VALUE 78.63
050-0052B REG NEEDLE VALVE 50.00
050-0065B CONTROL VALVE 45.00
050-0074B FILTER, INLINE 14.95
050-0075B FILTER, SPIN-ON 15.95
050-0076B FILTER & BASE 1/4 FPT 56.90
050-0088B RELIEF VALVE 105 PSI 74.48
060-0440B HOSE CLAMP 1.40
060-0450B HOSE CLAMP 1.50
060-1000B 1/4 MALE TUBE ADAPTOR 9.24
060-1100B 5/16 MALE TUBE ADAPTOR 9.94
060-1200B 3/8 MALE TUBE ADAPTOR 10.64
060-1300B 1/4 FEMALE ADAPTOR (Open-end hose) 7.21
060-1400B 5/16 FEMALE ADAPTOR (Open-end hose) 7.42
060-1500B 3/8 FEMALE ADAPTOR (Open-end hose) 7.63
060-1600B 12 MM BANJO 21.70
060-1700B 90 TUBE 5/16 MPT FUEL INLET ADAPTOR 16.10
060-1800B 90 TUBE 3/8 MPT FUEL INLET ADAPTOR 15.61
060-1900B 12 MM BANJO BOLT 8.00
060-1901B 12 MM WASHER 0.42
060-1902B 12 MM CAP NUT 4.00
060-2000B 5/16 LOOP MALE ADAPTOR 7.07
060-2100B 3/8 PLUG COLLAR 3.57
060-2101B 3/8 CARB PLUG ADAPTOR 9.31
060-2200B 5/16 PLUG COLLAR 2.38
060-2201B 5/16 CARB PLUG ADAPTOR 9.31
060-2300B 14 MM FEMALE 13.58
060-2400B 1C MM BANJO 16.80
060-2401B 8 MM BANJO 16.24
060-2402B 14 MM BANJO 22.82
060-2501B FQD LOOP ADAPTOR 37.00
060-2502B TEE 40.80
060-2600B 16 MM FEMALE 14.98
060-2700B 14 MM X 16 MM MALE UNION 13.30
060-2710B 8 MM BANJO BOLT 10.60
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
31
<PAGE> 32
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
060-2711B 8 MM WASHER (Set of 3) 0.28
060-2720B 10 MM BANJO BOLT 11.90
060-2800B 1/4 MALE CONNECTOR (Ford,GM,Chrysler,Jeep) 19.67
060-2900B 5/16 MALE NYLON (Ford,Lincoln,Mercury) 19.67
060-3000B 1/8 MPT ADAPTOR (Ford,Lincoln,Mercury) 9.87
060-3100B TBI & PFI INLET (GM) 21.00
060-3105B FEMALE SIDE OF 3100 (GM) 19.32
060-3200B 1/4 MPT ADAPTOR (Ford,Lincoln,Mercury) 9.87
060-3300B TBI & PFI OUTLET (GM) 22.86
060-3304B TBI & PFI USED W/1700 (GM) 9.95
060-3305B FEMALE SIDE OF 3300 (GM) (Replaces 060-4000) 19.32
060-3500B 3/8 MALE ADAPTOR (Ford,Lincoln,Mercury) 34.26
060-3505B 3/8 FEMALE ADAPTOR (Ford,Lincoln,Mercury) 19.74
060-3508B SHRADER VALVE (Ford,Lincoln,Mercury) 13.68
060-3600B 1/2 MALE ADAPTOR (Ford,Lincoln,Mercury) 34.56
060-3605B 1/2 FEMALE ADAPTOR (Ford,Lincoln,Mercury) 20.72
060-3700B SHRADER VALVE (GM,Chrysler,Jeep) 17.92
060-3800B VOLVO ADAPTOR 16.80
060-3900B 5/16 FQD (Ford,Lincoln,Mercury) 18.62
060-3901B 3/8 FQD (Ford,Lincoln,Mercury) 14.91
060-3902B 1/4 FQD (Ford,Lincoln,Mercury) 14.70
060-4100B HYUNDAI ADAPTOR 34.93
060-4200B 5/16 MALE METAL (GM,Chrysler,Jeep) 19.67
060-4205B 5/16 FQD (GM,Chrysler,Jeep) 19.10
060-4300B 3/8 MALE CONNECTOR(Ford,GM,Chrysler,Jeep) 19.67
060-4305B 3/8 FQD (GM,Chrysler,Jeep) 14.70
060-4405B 1/4 FQD (GM,Chrysler,Jeep) 19.67
070-0080B 1/4 NYLON TUBE 0.82ft
070-0085B 5/16 NYLON TUBE 1.18ft
070-0086B 3/8 NYLON TUBE 1.56ft
070-0100B HOSE VACUUM 0.75ft
080-0230B 1/4 FPT FQD NI 12.65
080-3301B O-RING VITON USED w/3304 0.55
080-3302B SM. O-RING VITON Used w/3300,3304 0.55
080-3402B LG. O-RING VITON Used w/3100,3500,4100 0.50
080-3501B SMALL CLIP & TETHER (Ford,Lincoln,Mercury) 4.00
080-3601B LARGE CLIP & TETHER (Ford,Lincoln,Mercury) 4.00
080-3602B O-RING VITON Used w/3600 0.60
080-3701B VITON SEAL,3700 4.25
080-3903B 5/16 RETAINER (Ford,Lincoln,Mercury) 0.30
080-3904B 3/8 RETAINER (Ford,Lincoln,Mercury) 0.30
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
32
<PAGE> 33
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
080-3905B 1/4 RETAINER (Ford,Lincoln,Mercury) 0.40
080-4206B 5/16 RETAINER (GM,Chrysler,Jeep) 0.75
080-4306B 3/8 RETAINER (GM,Chrysler,Jeep) 0.80
080-4408B 1/4 RETAINER (GM,Chrysler,Jeep) 0.70
100-0090B ECS INTERNATIONAL MANUAL
100-0300B CHINESE OVERLAY 28.00
100-0104B FUEL INJECTOR PULSER IT100 (MQ) 144.00
100-4047B SPANNER NUT 5.00
100-4048B SPANNER WRENCH 12.00
100-5001B ICS TUBING (30") 0.75
200-0006B P-200 LOW FM ASSEMBLY 20.75
200-0007B P-200 HIGH FM ASSEMBLY 21.80
200-0011B P-200 BAR GAUGE ASSEMBLY 39.65
200-0050B P-200 2-WAY BLOCK ASSEMBLY 9.40
200-0064B P-200 5-WAY ASSEMBLY 119.31
200-0076B P-200 OUTPUT REGULATOR ASSEMBLY
(All"D"machines) 231.72
200-0083B P-200 RETURN REGULATOR ASSEMBLY 53.00
200-0093B TEE ASSEMBLY 16.35
200-0200B IN-LINE FILTER ASSEMBLY 14.95
200-0203B FILTER & TANK 5/16" ASSEMBLY 150.00
200-0204B TUTHILL FILTER & TANK 3/8" ASSEMBLY 160.00
200-0280B P-200 VACUUM SWITCH ASSEMBLY 62.95
200-0300B ECS/P-200 RETURN HOSE ASSEMBLY 27.00
200-0400B ECS/P-200 OUTPUT HOSE ASSEMBLY 27.00
200-0704B TUTHILL PUMP 5/16" ASSEMBLY
(With plumbing fittings) 215.00
200-0705B TUTHILL PUMP 3/8" ASSEMBLY
(With plumbing fittings) 215.00
200-0706B XOLOX PUMP ASSEMBLY
(With plumbing fittings) 215.00
200-0800B P-200 CONTROL VALVE ASSEMBLY 50.00
200-1002B ECS BAR GAUGE ASSEMBLY 39.95
200-1004B ECS BAR VACUUM GAUGE ASSEMBLY
200-1008B ECS 2-WAY ASSEMBLY 9.20
200-1010B ECS 5-WAY ASSEMBLY 198.50
200-1011B ECS OUTPUT REGULATOR ASSEMBLY 256.00
200-1012B ECS RETURN REGULATOR ASSEMBLY 53.00
200-1013B ECS CONTROL VALVE ASSEMBLY 50.00
200-1014B ECS TEE ASSEMBLY 20.45
200-1175B FUEL QD TOOL KIT 19.95
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
33
<PAGE> 34
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
200-3000B BASIC ADAPTOR KIT 325.00
200-3006B FORD ADAPTOR KIT 315.00
200-3008B GM ADAPTOR KIT 197.00
200-3009B ASIAN/EURO ADAPTOR KIT 263.00
200-4007B TIMER ASSEMBLY 31.60
200-4008B FILTER & BASE 3/8" ASSEMBLY 59.55
200-4009B FILTER & BASE 5/16" ASSEMBLY 58.25
200-5000B SOLENOID REPAIR KIT 35.00
200-8009B P-200 REGULATOR RETROFIT 60.00
300-3000B BASIC ORGANIZER BAG (GREEN) 22.95
300-3006B FORD ORGANIZER BAG (RED) 22.95
300-3008B GM ORGANIZER BAG (BLUE) 22.95
300-3009B ASIAN/EURO ORGANIZER BAG (ORANGE) 22.95
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
34
<PAGE> 35
EXHIBIT B
IDT 4000I REPLACEMENT PARTS PRICING
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
010-0034B TANK CAP 15.00
010-0026B WHEEL 12.50
010-0037B LEG 25.00
010-0040B FOOT GLIDE 3.75
010-0461B LOWER SENDING UNIT ADAPTOR 12.50
020-0049B ALARM HORN 22.50
020-4045B LOWER SENDING UNIT 81.25
020-0043B ELECTRICAL HARNESS, LOWER UNIT 12.50
020-0045B ELECTRICAL HARNESS, INTERNAL MAIN 87.50
020-0046B ELECTRICAL HARNESS, EXT. BATTERY 25.00
020-0047B ELECTRICAL HARNESS, EXT. SHUTDOWN 37.50
020-0091B RELAY 18.95
050-0018B PRESSURE SWITCH 50.00
050-0044B HYDRAULIC PUMP 12v (Diesel) 121.25
050-0086B FILTER ELEMENT REPLACEMENTS (20) 125.25
060-0590B FQD (Supply Tank) 24.96
060-0592B MQD (Supply Tank) 17.19
080-0230B FQD (Hose End) 12.65
100-0200B CHINESE OVERLAY 28.00
200-1471B OUTPUT HOSE ASSEMBLY 45.50
200-1472B RETURN HOSE ASSEMBLY 45.50
200-1960B UNIVERSAL ADAPTOR KIT 368.30
200-4003B OUTPUT SOLENOID ASSEMBLY 54.70
200-4004B PUMP ASSEMBLY 201.80
200-4031B ELECTRONIC HEAD ASSEMBLY 676.81
200-4032B FILTER ASSEMBLY 151.56
200-4038B PRESSURE SWITCH ASSEMBLY 49.70
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 11/13/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
35
<PAGE> 1
EXHIBIT 10.15
MOTORVAC TECHNOLOGIES, INC.
PRODUCTS DISTRIBUTION AGREEMENT
THIS PRODUCTS DISTRIBUTION AGREEMENT ("AGREEMENT") is made and entered
into this 6th day of January, 1997, by and between MOTORVAC TECHNOLOGIES, INC.,
a Delaware Corporation ("MTI"), with its principal place of business located at
1431 S. Village Way, Santa Ana, California, U.S.A. and CHINA MOTOR-VEHICLE
SAFETY APPRAISAL AND INSPECTION CENTER (CMVSAIC) ("Distributor") with its
principal place of business located at 12 Chao Yang Men South Street, Chao Yang
District, Beijing, China, with reference to the following facts:
RECITALS
A. MTI markets a range of products and replacement parts for cleaning
gasoline and diesel engines that are sold under the brand names listed
in the schedule attached hereto as Exhibit A, hereinafter referred to
as the "Products."
B. Distributor hereby represents that it possesses the facilities and
ability to promote the sale and distribution of the Products, in
accordance with the Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the covenants
and agreements contained herein, the parties hereto hereby agree as follows:
1. APPOINTMENT OF SOLE AND EXCLUSIVE DISTRIBUTOR:
a. The territory (the "Territory") covered by this Agreement is
People's Republic of China.
(i) For the term of this Agreement and in accordance with
all of the terms, and subject to the conditions
herein set forth, MTI hereby appoints Distributor as
the sole and exclusive distributor for the sale and
distribution of the Products within the Territory.
b. Distributor hereby accepts its appointment as a distributor of
the Products to develop a demand for, and to the best of its
ability, sell and distribute the Products within the
Territory, and Distributor hereby represents and warrants that
it will make all sales hereunder in accordance with the terms
contained in this Agreement. Distributor's obligations under
this Agreement shall include, but not be limited to:
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
1
<PAGE> 2
(i) Establishing and maintaining Distributor owned
facilities located within the Territory for display
and demonstration of the Products;
(ii) Hiring, training and maintaining adequately trained
sales and technical personnel to develop a market and
service the demand for the Products in the Territory:
(iii) Undertaking advertising campaigns and trade shows;
(iv) Concurrent with execution hereof, Distributor shall
provide to MTI an Annual Minimum Performance Goal
("Annual Goal"), which Annual Goal represents the
minimum amount of Products to be purchased by the
Distributor from MTI for the first year of this
Agreement. The Distributor agrees that the Annual
Goal shall be required to be purchased by Distributor
from MTI as follows:
(a)(i) No less than $300,000 of the Annual Goal for
the first year of this Agreement must be
purchased concurrent with or before the
execution of this Agreement (the "Initial
Order"). The balance or greater of the
Annual Goal for the first year must be during
the remainder of the first year of this
Agreement.
(a)(ii) In the second year of this Agreement, and any
subsequent years of this Agreement or any
extensions thereto (the "Subsequent Years"),
50% of the Annual Goal or greater must be
purchased during the first 180 days of the
Subsequent Years of this Agreement (the
"First 180-Day Goal"), and the balance of the
Annual Goal must be purchased during the
second 180 days of the Subsequent Years of
this Agreement (the "Second 180-Day Goal")
(collectively called the "Annual Goal"),
which Annual Goal shall be deemed to be
added to Section 3b of this Agreement.
For the second year and subsequent years of
this Agreement, MTI and the Distributor agree
that subsequent years Annual Goals shall be
at least the greater of (1) the previous
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
2
<PAGE> 3
years Annual Goal plus 10%, or (2) the
previous years actual purchases plus 10%.
Such Goal shall be acceptable to MTI under the
paragraph following.
For all Subsequent Years of this Agreement,
the Distributor shall provide MTI with an
Annual Goal for all subsequent years, and
such Annual Goals shall be delivered to MTI
at least 60 days in advance of the start of
each Subsequent Year. All Annual Goals are
subject to acceptance by MTI at its sole
discretion. In the event that MTI does not
accept the Annual Goal set by the
Distributor, MTI and the Distributor shall
attempt to come to an agreement on an Annual
Goal. In the event that (A) the Distributor
does not timely deliver an Annual Goal to
MTI or (B) MTI does not accept an Annual Goal
set by the Distributor, or MTI and the
Distributor are unable to agree upon a
replacement Annual Goal, within 30 days of
the date that the Distributor communicates
the Annual Goal to MTI (collectively, an
"Annual Goal Default"), then MTI may
terminate this Agreement in accordance with
the provisions of Section 8b hereof;
(v) Conducting its business in a manner that will reflect
favorably at all times on Distributor, MTI and the
Products and the good name, good will and reputation
of MTI and its authorized distributors. Distributor
shall not itself or with others participate in any
illegal, deceptive, misleading or unethical
advertising or other practices or techniques that are
or might be detrimental to MTI, the Products or the
public; and
(vi) Complying with all applicable laws and with the terms
of this Agreement in connection with the distribution
of the Products.
2. TERM OF AGREEMENT:
a. The initial term of this Agreement shall be for three (3)
years unless earlier terminated as provided in this Agreement.
Thereafter, the term of this Agreement shall be automatically
extended for successive one-year periods unless either party
to this Agreement gives the other party to this Agreement
notice of its intent to terminate this Agreement, and such
notice is received by the non-terminating party at least sixty
(60) days prior to the expiration of the initial term or
renewal term, as applicable.
3. DISTRIBUTOR PURCHASES:
a. Exclusivity. Distributor shall obtain its requirements of
Products only from MTI.
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
3
<PAGE> 4
b. Minimum Purchases/Performance Goals. Distributor acknowledges
that it has represented to MTI that it possesses the
facilities and the ability to generate sales of and distribute
the Products, in accordance with this Agreement, and that
based upon these representations, MTI has entered into this
Agreement with the understanding that Distributor shall make
the minimum purchases of Product, in accordance with the
Annual Goals set forth in this Agreement or as periodically
required by this Agreement. The Distributor and the Company
hereby agree that the Annual Goals, as set forth following,
are expressed in U.S. dollars and Units of Product. If the
Distributor meets or exceeds the Annual Goals or the First
180-day Goal or the Second 180-day Goal, as defined in Section
1.b. of this Agreement, for the first year or subsequent years
of this Agreement, in either U. S. dollar purchases or Units
of Product Purchases, that particular Goal will be deemed to
have been met. For the first year of this Agreement, set
forth below are the ANNUAL GOALS AS AGREED TO BETWEEN MTI AND
THE DISTRIBUTOR:
FOR THE FIRST YEAR:
PRODUCTS
Equipment:
Units of Petrol Machines ___________________
Units of Diesel Machines ___________________
Cleaning Solution:
Cases of Gasoline Fuel
System Cleaner or Drum
Equivalent ___________________
Cases of Diesel Fuel
System Cleaner or Drum
Equivalent ___________________
U.S. Dollar Annual Goal $800,000
___________________
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
4
<PAGE> 5
c. Minimum Performance Goals / Subsequent Years. The form of
schedule shown below should be used by the Distributor to
submit Annual Goals for the Year as specified in Section
1.b.iv.
Set forth below is the ANNUAL GOAL as agreed between MTI and
the Distributor:
FOR THE YEAR FROM ____________________ TO __________________ :
PRODUCTS
Equipment:
Units of Petrol Machines ___________________
Units of Diesel Machines ___________________
Cleaning Solution:
Cases of Gasoline Fuel
System Cleaner or Drum Equivalent ___________________
Cases of Diesel Fuel
System Cleaner or Drum Equivalent ___________________
U.S. Dollar Annual Goal ___________________
ANNUAL GOAL IS REQUIRED TO BE SUBMITTED BY THE DISTRIBUTOR TO MTI AT
LEAST 60 DAYS BEFORE THE EXPIRATION OF EACH YEARLY ANNIVERSARY OF THE
DATE OF SIGNING OF THAT CERTAIN PRODUCTS DISTRIBUTION AGREEMENT
BETWEEN DISTRIBUTOR AND MOTORVAC TECHNOLOGIES, INC. ("MTI") AND THIS
ANNUAL GOAL IS SUBJECT TO ACCEPTANCE BY MTI IN ITS SOLE DISCRETION.
SUBMITTED BY: __________________________ DATE: ________________
DISTRIBUTOR NAME: __________________________
ACCEPTED BY: __________________________ DATE: _________________
ON BEHALF OF MTI
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
5
<PAGE> 6
d. Normal Retail Price. Concurrent with each submission of
Annual Goal by the Distributor under this Agreement, the
Distributor shall also submit to MTI the "Normal Retail Price"
of each and all Products in the Distributor's Territory. Such
Normal Retail Price shall be the price at which the Products
are sold to the end user of the Products, normally a repair
garage or service center. Notwithstanding the foregoing,
Distributor is free to set its own resale prices unilaterally.
No employee or representative of MTI has any authority to tell
Distributor what its resale prices must be, nor to inhibit in
any way a Distributor's independent pricing decision.
e. Non-compete. During the term of this Agreement and for three
(3) years after termination, Distributor will not, directly or
indirectly, supply, sell, promote or distribute in the
Territory any other products that are similar to, or
competitive with, the Products. For the same period,
Distributor will not attempt to replicate, sell, promote,
distribute or manufacture any cleaning solution or fuel system
cleaning machines for use, under any circumstances, with or
without MTI's patented and proprietary technology or systems.
Any such actions by Distributor would substantially and
permanently damage MTI, and result in the immediate
termination of this Agreement (if applicable). In connection
with the above, MTI will be entitled to seek any remedy
available at law or in equity.
f. Restrictions With Respect to Proprietary Information.
(i) Trade Secrets. Distributor hereby acknowledges and
agrees that MTI owns certain trade secrets and other
confidential and/or proprietary information and
intellectual property which constitute valuable
property rights, which MTI has developed through a
substantial expenditure of time and money, which are
and will continue to be utilized in MTI's business
and which are not generally known to the trade. This
proprietary information expressly includes, but is
not limited to, the list of names of the
distributors, dealers, customers and suppliers of
MTI, the identities of key personnel of the
distributors, dealers, customers and suppliers of
MTI, and other information concerning the Products,
finances, personnel contractors processes, pricing
information, production schedules and other types of
proprietary information relating to MTI's operations.
In recognition of these facts, Distributor hereby
agrees that the Distributor, both during and after
the term of this Agreement:
(a) Will not use or disclose, directly or
indirectly, and will keep secret and
confidential, all trade secrets and
proprietary
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
6
<PAGE> 7
information of MTI, including but not limited
to those items specifically mentioned above;
(b) Will not, directly or indirectly, either on
Distributor's own behalf or on behalf of any
other person or entity, solicit or attempt to
solicit any employee, contractor, dealer or
distributor of MTI to leave their employment,
contractor, dealer or distributor
relationship with MTI;
(c) Upon the termination of this Agreement or at
anytime at MTI's request, Distributor shall
return all documents or materials which have
been furnished to Distributor by MTI in
connection with this Agreement; and
(d) All uses by Distributor of MTI's name or any
trademarks or tradenames (or any other marks
or names closely resembling the same) now and
hereafter owned by MTI or its affiliates
shall be subject to prior written approval by
MTI. Distributor is not authorized to use
MTI's names or trademarks in connection with
any aspect of its business other than in the
sales, marketing and advertising of the
Products.
g. Distributor Further Acknowledges and Agrees :
(i) Copying, duplicating, or imitating the Products by
Distributor is illegal and would result in permanent
irreparable injury to MTI. Any such activities will
cause an immediate termination of this Agreement, and
MTI will be entitled to seek any remedy available at
law or in equity.
(ii) Distributor may sell the Products only in the
Territory. If Distributor sells any Products outside
said Territory, either directly or indirectly, the
Distributor shall be in breach of this Agreement and
MTI shall have the right to terminate this Agreement
at its sole discretion by providing the Distributor
with 90 days advance written notice. MTI shall not be
required to sell to the Distributor any further
Products after notification of termination has been
sent by MTI to the Distributor.
h. Purchase Price. MTI will sell to the Distributor the Products
at the prices shown in Exhibit B of this Agreement. These
prices are consistent with those given to MTI's international
distributors. MTI reserves the right to adjust prices from
time to time, but may not increase prices more than two times
per
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
7
<PAGE> 8
year, and each such price increase shall be effective only on
delivery of 30 days prior written notice by MTI to the
Distributor.
i. Payment. The payment of the purchase price for Products
purchased by the Distributor from MTI may be made by cash,
irrevocable letter of credit, sight draft, electronic bank
transfer or other such methods as may be negotiated and
accepted by MTI. No shipments of Product will be made by MTI
until method of payment has been accepted by MTI.
j. Brochures. MTI shall, at its expense, provide Distributor
with an initial supply of MTI's current sales brochures and
descriptive materials in English, which materials include
negatives, color separations and ad slicks, as may be
reasonably requested by Distributor in connection with
fulfilling Distributor's obligations hereunder.
k. Orders. Distributor shall transmit written orders for
Products to MTI. Distributor reserves the right to cancel an
order if and when any of the following circumstances occur and
adversely affect the Distributor or its business:
(i) War;
(ii) Cancellation of Most Favored Nation Treaty and
Article 301; or
(iii) Anti-dumping duty charge.
l. Orders. MTI reserves the right to cancel any orders of the
Distributor if and when any of the following circumstances
occur and adversely affect MTI or its business:
(i) War;
(ii) Orders by the government of the United States of
America banning foreign shipments; or
(iii) Acts of God that prevent MTI from completing an
order.
MTI also reserves the right to cancel any order placed by the
Distributor or to refuse to ship or to delay the shipment
thereof if
1. Distributor:
(i) shall fail to make any payments for Products in
accordance with the terms of this Agreement or in
accordance with terms agreed to between MTI and the
Distributor, from time to time;
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
8
<PAGE> 9
(ii) shall fail to meet the Annual Goal, or the First
180-day Goal or the Second 180-day Goal set forth as
part of this Agreement or otherwise established from
time to time;
(iii) has been notified of MTI's intent to terminate
Distributor as a distributor of MTI pursuant to this
Agreement; or
(iv) is not in good financial condition, as determined by
MTI; or
2. this Agreement shall have terminated pursuant to the
provisions hereof.
m. Shipments. MTI shall ship the Products or cause the Products
to be shipped as ordered by Distributor upon MTI's acceptance
of Distributor's order and payment terms. MTI will not be
responsible for delays caused by shortage of materials,
strikes, shortage of shipping facilities, acts of God, or
other causes not within the reasonable control of MTI.
4. TRAINING:
a. MTI shall provide initial training in the use of the Products
to Distributor except as specified below. MTI shall be
responsible for paying all expenses, salaries, travel and
other costs incurred by MTI's employees in connection with
providing such training. Distributor shall be responsible for
the following expenses :
(i) Local transportation
(ii) Room and board (under special circumstances)
(iii) Any expenses related to the training which occurred
in the Territory.
Following the completion of the initial training and upon
reasonable request of Distributor, MTI shall make its
personnel or consultants available at locations to be selected
by MTI for the purpose of providing additional training in the
use of the Products upon reasonable request of Distributor.
MTI shall, at its expense, supply to Distributor a reasonable
number of MTI's current operator manuals, service bulletins
and other materials for use in connection with the use of the
Products.
5. WARRANTIES:
a. Exclusive Warranties. MTI shall provide Distributor with the
manufacturer's warranty applicable for the Products. Such
warranty generally provides that
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
9
<PAGE> 10
the equipment shall be in good working order for a period of
one (1) year from the date the Product is first placed in
service provided that the end of the Warranty period shall not
be later than eighteen (18) months from the date of shipment
of such Product to the Distributor or the Distributor's
customer by MTI (The "Warranty Period").
b. Warranty Repairs. It will be the responsibility of the
Distributor to effect repairs to the Products during the
Warranty Period.
c. Parts Warranty Claims. All warranty claims must be submitted
by the Distributor to MTI for approval. During the Warranty
Period, MTI will replace defective parts on a case by case
basis at no charge to Distributor with an agreed to freight
allowance.
d. Sale of Replacement Parts. Nothing contained herein shall be
deemed to prohibit Distributor from selling replacement parts
for the Products within the Territory, provided that subject
parts are purchased from MTI.
e. Other. Distributor further acknowledges that said warranty is
effective only if the Products are used with
CarbonClean/MotorVac cleaning solutions listed in Exhibit A
attached hereto. Distributor acknowledges that no Warranties
are created by this Agreement and, with respect to the
Products, MTI hereby disclaims all implied warranties of
merchantability and fitness for use for a particular purpose.
6. INDEPENDENT CONTRACTOR:
This Agreement does not create the relationship of employer and
employee, partnership or agency between MTI and Distributor.
Distributor, in connection with all of its obligations hereunder,
shall be an independent contractor of MTI and under no circumstances
is Distributor to be considered to be the employee, partner or agent
of MTI. Distributor is not granted any right by this Agreement to
create any obligation or responsibility, on behalf of or in the name
of MTI. Distributor covenants that it is and will remain in
compliance with all federal, state and local laws and regulations
applicable to its business including, without limitation, all labor
regulations, and foreign, and United States federal and state tax
requirements.
7. MODIFICATIONS AND IMPROVEMENTS:
Upon making or discovering any improvements to the Product,
Distributor shall:
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
10
<PAGE> 11
a. provide MTI with all details of such improvements;
b. acknowledge that such improvements and the right to obtain any
patent, trademark, copyright or other similar protection
belong exclusively to MTI; and
c. provide such assistance to MTI as MTI may reasonably require
to obtain patents, copyrights or other similar protection.
8. TERMINATION:
This Agreement may be terminated for any of the following reasons:
a. Expiration. After the expiration of the term of this
Agreement, in accordance with Section 2 hereof.
b. Goals. In the event that Distributor fails to provide the
required Annual Goals in accordance with Section 1(b(iv)
hereof or fails to purchase the required First 180-day Goal or
Second 180-day Goal amounts at any time, MTI may terminate
this Agreement, at its sole discretion, by providing the
Distributor with thirty (30) days advance written notice of
its intent to terminate this Agreement.
c. Default. If, during the term of this Agreement, Distributor
defaults in the performance of any of its other obligations
under this Agreement, or any of the representations or
warranties made by Distributor are determined to be untrue,
MTI may give Distributor notice of default and if Distributor
fails to cure such default within thirty (30) days (or if such
default cannot be cured within thirty (30) days, no diligent
effort has been made to cure such default), this Agreement
shall be deemed terminated as of the end of such ninety (90)
day period without any further action on the part of MTI .
Distributor will then accept no further orders for the
Products from the Territory and MTI shall have no further
obligations to Distributor hereunder.
d. Insolvency. This Agreement will automatically terminate if
either party should become bankrupt, insolvent, or cease to do
business, or make an assignment for the benefit of creditors.
e. Competition This Agreement shall automatically terminate in
the event that the Distributor breaches any of the covenants
against competition contained in Sections 3.e. and 3.f.(i)
hereof;
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
11
<PAGE> 12
f. Sales Outside the Territory. In the event that the
Distributor breaches the sales covenants contained in Section
3.g.(ii) hereto, then MTI may terminate this Agreement in
accordance with the notice provisions contained in Section
3.g.(ii) hereof.
g. No Waivers. The failure of MTI to terminate this Agreement
pursuant to any of the subparagraphs in this Section
shall not be considered to be a waiver by MTI of its right to
terminate this Agreement in the future pursuant to this
section for such default or any similar default.
h. Repurchase. In the event of termination of this Agreement by
either party for any reason, MTI may at its option repurchase
from Distributor at the net price paid by the Distributor to
MTI, less a 25% restocking charge and actual freight, duties
and taxes on the shipment thereof to the Distributor, any MTI
Products at the Distributor's place of business or in the
possession of the Distributor. On demand and at the tender of
the repurchase price and related cost, shipping and handling
expenses and charges incurred by the Distributor, Distributor
shall deliver such Products to MTI. The payment shall be by
negotiable instrument.
9. MISCELLANEOUS:
a. Modification-Waiver. No cancellation, modification,
amendment, deletion, addition, or other change in this
Agreement or any provision hereof, or waiver of any right or
remedy herein provided, shall be effective for any purpose
unless specifically set forth in a writing signed by the party
to be bound thereby. No waiver of any right or remedy in
respect of any occurrence or event shall be deemed nor shall
constitute a continuing waiver or a waiver of any similar
occurrence or event on any other occasion.
b. Final Agreement. This Agreement shall be deemed for all
purposes to have been made in California. This Agreement
supersedes and terminates all prior or contemporaneous other
agreements, oral or written, between the parties hereto with
respect to the subject matter hereof and the transactions
contemplated hereby and discharges any liability of MTI or any
affiliated or predecessor corporation in respect of any such
prior agreements, and, together with the Exhibits hereto,
contains the entire agreement of the parties with respect to
the subject matter hereof.
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
12
<PAGE> 13
c. Controlling Law. This Agreement and the performance of the
obligations imposed upon the parties hereunder shall be
governed by and construed in accordance with the laws of the
State of California, to the exclusion of all other laws. The
parties each
(i) confer sole and exclusive jurisdiction upon, and
agree that the proper venue of any such action shall
be in, the courts located in Orange County,
California, in connection with all disputes arising
under or related to this Agreement, and
(ii) waive any and all objections that they may have with
respect to jurisdiction of, or venue in, such court.
d. Successors and Assigns. The provisions of this Agreement
shall be binding upon and insure to the benefit of MTI and
Distributor and their respective successors and permitted
assigns. Distributor may not assign this Agreement (by
operation of law or otherwise) without the prior written
consent of MTI. MTI may assign this Agreement to its
subsidiaries or parent company or to any related company upon
30 days advance written notice provided by MTI to the
Distributor.
e. Confidentiality. The parties mutually agree that any
confidential information furnished to the other, so labeled or
described shall remain confidential and not be made available
to any other party, without written permission from the party
furnishing said information.
f. Notices. Any notice required or permitted hereunder shall be
given by mailing the same in a sealed envelope, postage paid
and sent via registered mail addressed as follows:
MTI: MOTORVAC TECHNOLOGIES, INC.
1431 S. Village Way
Santa Ana, California, USA 92705
Distributor: CHINA MOTOR-VEHICLE SAFETY APPRAISAL
AND INSPECTION CENTER (CMVSAIC)
12 Chao Yang Men South Street
Beijing, China
Attention: Mr. Wang Huande, President
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
13
<PAGE> 14
Either party may change its address for notices hereunder by
written notice to the other party.
g. Limitation of Liability. MTI's liability to Distributor
hereunder with respect to any order, MTI's performance
thereof, or the Products sold hereunder shall not exceed the
purchase price paid by Distributor for the Products. In no
event shall MTI be liable to Distributor for special,
incidental or consequential damages.
h. Extraordinary Circumstances. Except for any payment
obligations of either party hereunder, neither MTI nor
Distributor shall be liable for any delay or failure to
perform on account of any cause beyond such party's reasonable
control, including, but not limited to, work stoppages, work
slow-downs, strikes or other industrial disputes; fire,
explosions, floods, earthquakes or other acts of God; riots or
civil disturbances, war or other acts of civil or military
authorities; and delays caused by suppliers or material
shortages.
i. Changes to Products. The Distributor hereby agrees and
acknowledges the Company may, at its sole discretion, withdraw
or replace or add products to Exhibit A or B attached hereto
at any time. The distributor waives any right or notice on
such a change.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
MotorVac Technologies, Inc., China Motor-Vehicle Safety Appraisal
a Delaware corporation and Inspection Center (CMVSAIC)
By: s/ Lee W. Melody By: s/ Wang Huan De
------------------------------ -------------------------------
Its: President Its: General Manager
----------------------------- ------------------------------
Date: 1/6/97 Date: 1/6/97
---------------------------- -----------------------------
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
14
<PAGE> 15
EXHIBIT A
PRODUCTS
SUMMARY
<TABLE>
<CAPTION>
PART # BRAND NAME
- ------ ----------
<S> <C>
ECS-300e ECS-300e Fuel System Cleaning Machine for Gasoline
Includes: 200-3000 Basic Adaptor Kit
200-3009 Euro/Asia Adaptor Kit
200-3006 U.S. Ford Adaptor Kit
200-3008 U.S. GM Adaptor Kit
User Guide
16" x 15" x 38" (82 lbs.)
40.6cm x 38.1cm x 96.5cm (37.2 kg)
IDT-4000i Fuel System Cleaning Machine for Diesel
Includes: 200-3040 Adaptor Kit
User & Service Guide
23 1/4" x 18" x 39 1/2" (98 lbs.)
59.0cm x 45.7cm x 100.3cm (44.5 kg)
400-0010 Fuel System Cleaner for Diesel
(12) 16 oz. Cans
1 case = 12" x 10" x 8" (15 lbs.)
30.5cm x 25.4cm x 20.3cm (6.8 kg)
400-0020 Fuel System Cleaner for Gasoline
(12) 8oz. Bottles
1 case = 9" x 7" x 6" (7 lbs.)
22.8cm x 17.8cm x 15.2cm (3.2 kg)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
15
<PAGE> 16
EXHIBIT A
PRODUCTS
EQUIPMENT AND SOLVENT
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
400-0030 Intake Cleaning Detergent - (12) 8oz. Bottles
1 case = 9" x 7" x 6" (7 lbs.)
22.8cm x 17.8cm x 15.2cm (3.2 kg)
200-6000 Intake Cleaning Kit - (12 kits per case)
(1 kit includes 8 oz. Bottle & Sprayer)
1 case = 17" x 17" x 11" (15 lbs.)
43.2cm x 43.2cm x 27.9cm (6.8 kg)
050-0073 Filter for ECS-300e
($12.00/filter) (case of 12)
050-0075 Filter (Spin On) for ECS-300i
(case of 12)
050-1909 Filter for IDT-4000i
($19.95/filter) (case of 12)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
16
<PAGE> 17
EXHIBIT A
PRODUCTS
CARBONCLEAN REPLACEMENT PARTS
SERIES 300
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
010-0005B XOLOX SHIELD
010-0006B TANK CAP
010-0009B TANK RESERVOIR
010-0017B ECS 300i OVERLAY
010-0019B ECS HANDLE
010-0020B ECS AXLE
010-0021B ECS WHEEL
010-0022B ECS BASE LEG
010-0024B ECS HOSE BRACKET
010-0025B ECS CORD BRACKET
020-0010B BUZZER
020-0030B EXTERNAL WIRING HARNESS
020-0035B 5 AMP CIRCUIT BREAKER
020-0037B 10 AMP CIRCUIT BREAKER
020-0038B 15 AMP CIRCUIT BREAKER
020-0040B INTERNAL WIRING HARNESS
020-0063B ELEC. LAMP AMBER
020-0067B ELEC. LAMP WHITE
020-0073B ELEC. LAMP GREEN
020-0083B ELEC. LAMP RED
020-0090B RELAY 8 TRIM, EAR MOUNT
020-0100B ONOFF & PS/LEAK SWITCH
020-0110B PURGE SWITCH, 1/2 MT
020-0120B START SWITCH, 1/2 MT
020-0150B TIMER 60 MIN 3/8 W/NUT
020-0151B TIMER FACE PLATE
020-0152B TIMER KNOB BLACK
020-0374B STRAIN RELIEF 1/2 MT
030-0002B F.CONN 1/4 X 1/8 FPT NI
030-0005B MALE ELBOW 1/4 X 1/4 MPT
030-0006B MALE ELBOW 1/4 X 1/8 MPT
030-0013B HEX NIPPLE 1/4 P NI
030-0015B MALE ELBOW 5/16 X 1/8 MPT NY
030-0016B M. CONN 5/16 X 1/8 MPT NY
030-0017B M. CONN 5/16 X 1/4 MPT NY
030-0020B M. CONN 3/8 X 1/4 MPT NAB NI
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
17
<PAGE> 18
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
030-0021B ECS F CONN 5/16 X 1/8 FPT NI
030-0022B F. CONN 5/16T X 1/4 P NI
030-0023B M. CONN 5/16T X 1/4 P NI
030-0024B M. ELBOW 5/16T X 1/8 NI
030-0025B M. CONN 3/8T X 1/4P NI
030-0026B ECS F. CONN 1/4 BARB X 1/8 NI
030-0030B F. CONN 3/8 X 1/4 FPT NI
030-0031B ELBOW 1/4 MPT X 1/4 FPT NI
030-0050B M. CONN 3/8 X 1/8 MPT NI
030-0090B P-200 JUNCTION BLOCK 2 WAY 1/8 FPT
030-0095B ECS JUNCTION BLOCK, 2 WAY 1/4
030-0100B P-200 JUNCTION BLOCK-5 WAY 1/8
030-0105B ECS JUNCTION BLOCK-5 WAY 1/4
030-0130B MALE ELBOW 3/8 X 1/4 MPT NI
030-0131B FEMALE ELBOW 3/8 X 1/4 MPT NI
030-0140B MALE ELBOW 3/8 X 1/8 MPT NI
030-0150B MALE ELBOW 5/16 X 1/4 MPT NI
030-0160B M. CONN 5/16 X 1/8 MPT NI
030-0189B F. CONN 1/4 FPT X MPT NI
030-0192B COMP ALIGN NUT 5/16
030-0205B P-200 CROSS 1/8 FPT NI
030-0206B CROSS 1/4 FPT NI
030-0208B J. CONN 3/8 X 1/4 MPT NI
030-0209B TEE 3/8 NT X 1/4 MPT X 3/8 (NY)(USED WITH VACUUM SWITCH)
030-0210B UNION 1/8 MPT X 1/4 MPT (NY)
030-0211B F. CONN 90 3/8 X 1/4 FPT NY
040-0401B XOLOX PUMP MOUNT NUT
040-0500B ECS GRAB HANDLE LOCKWASHER
040-0502B ECS "E' CLIP FOR AXLE
040-0503B ECS AXLE SPACER
040-0505B ECS GRAB HANDLE NUT
040-0506B ECS LEG CAP
040-0507B ECS AXLE BUSHING NY
040-0508B ECS VAC HOSE SNAP BUSHING
040-0509B ECS GRAB HANDLE BOLT
040-5326B 3/32 X 4 NYLON CABLE TIE
050-0010B PSI GAUGE
050-0011B BAR GAUGE
050-0012B ECS VACUUM GAUGE
050-0013B ECS BAR VACUUM GAUGE
050-0008B VACUUM SWITCH 1/4 MPT
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
18
<PAGE> 19
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
050-0015B 3 WAY SOLENOID 3/32
050-0017B PRESSURE SWITCH 1/8
050-0021B STAINLESS CK VALUE
050-0052B REG NEEDLE VALVE
050-0065B CONTROL VALVE
050-0074B FILTER, INLINE
050-0075B FILTER, SPIN-ON
050-0076B FILTER & BASE 1/4 FPT
050-0088B RELIEF VALVE 105 PSI
060-0440B HOSE CLAMP
060-0450B HOSE CLAMP
060-1000B 1/4 MALE TUBE ADAPTOR
060-1100B 5/16 MALE TUBE ADAPTOR
060-1200B 3/8 MALE TUBE ADAPTOR
060-1300B 1/4 FEMALE ADAPTOR (Open-end hose)
060-1400B 5/16 FEMALE ADAPTOR (Open-end hose)
060-1500B 3/8 FEMALE ADAPTOR (Open-end hose)
060-1600B 12 MM BANJO
060-1700B 90 TUBE 5/16 MPT FUEL INLET ADAPTOR
060-1800B 90 TUBE 3/8 MPT FUEL INLET ADAPTOR
060-1900B 12 MM BANJO BOLT
060-1901B 12 MM WASHER
060-1902B 12 MM CAP NUT
060-2000B 5/16 LOOP MALE ADAPTOR
060-2100B 3/8 PLUG COLLAR
060-2101B 3/8 CARB PLUG ADAPTOR
060-2200B 5/16 PLUG COLLAR
060-2201B 5/16 CARB PLUG ADAPTOR
060-2300B 14 MM FEMALE
060-2400B 1C MM BANJO
060-2401B 8 MM BANJO
060-2402B 14 MM BANJO
060-2501B FQD LOOP ADAPTOR
060-2502B TEE
060-2600B 16 MM FEMALE
060-2720B 10 MM BANJO BOLT
060-2800B 1/4 MALE CONNECTOR (Ford,GM,Chrysler,Jeep)
060-2900B 5/16 MALE NYLON (Ford,Lincoln,Mercury)
060-3000B 1/8 MPT ADAPTOR (Ford,Lincoln,Mercury)
060-3100B TBI & PFI INLET (GM)
060-3105B FEMALE SIDE OF 3100 (GM)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
19
<PAGE> 20
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
060-2700B 14 MM X 16 MM MALE UNION
060-2710B 8 MM BANJO BOLT
060-2711B 8 MM WASHER (Set of 3)
060-3200B 1/4 MPT ADAPTOR (Ford,Lincoln,Mercury)
060-3300B TBI & PFI OUTLET (GM)
060-3304B TBI & PFI USED W/1700 (GM)
060-3305B FEMALE SIDE OF 3300 (GM) (Replaces 060-4000)
060-3500B 3/8 MALE ADAPTOR (Ford,Lincoln,Mercury)
060-3505B 3/8 FEMALE ADAPTOR (Ford,Lincoln,Mercury)
060-3508B SHRADER VALVE (Ford,Lincoln,Mercury)
060-3600B 1/2 MALE ADAPTOR (Ford,Lincoln,Mercury)
060-3605B 1/2 FEMALE ADAPTOR (Ford,Lincoln,Mercury)
060-3700B SHRADER VALVE (GM,Chrysler,Jeep)
060-3800B VOLVO ADAPTOR
060-3900B 5/16 FQD (Ford,Lincoln,Mercury)
060-3901B 3/8 FQD (Ford,Lincoln,Mercury)
060-3902B 1/4 FQD (Ford,Lincoln,Mercury)
060-4100B HYUNDAI ADAPTOR
060-4200B 5/16 MALE METAL (GM,Chrysler,Jeep)
060-4205B 5/16 FQD (GM,Chrysler,Jeep)
060-4300B 3/8 MALE CONNECTOR(Ford,GM,Chrysler,Jeep)
060-4305B 3/8 FQD (GM,Chrysler,Jeep)
060-4405B 1/4 FQD (GM,Chrysler,Jeep)
070-0080B 1/4 NYLON TUBE
070-0085B 5/16 NYLON TUBE
070-0086B 3/8 NYLON TUBE
070-0100B HOSE VACUUM
080-0230B 1/4 FPT FQD NI
080-3301B O-RING VITON USED w/3304
080-3302B SM. O-RING VITON Used w/3300,3304
080-3402B LG. O-RING VITON Used w/3100,3500,4100
080-3501B SMALL CLIP & TETHER (Ford,Lincoln,Mercury)
080-3601B LARGE CLIP & TETHER (Ford,Lincoln,Mercury)
080-3602B O-RING VITON Used w/3600
080-3701B VITON SEAL,3700
080-3903B 5/16 RETAINER (Ford,Lincoln,Mercury)
080-3904B 3/8 RETAINER (Ford,Lincoln,Mercury)
080-3905B 1/4 RETAINER (Ford,Lincoln,Mercury)
080-4206B 5/16 RETAINER (GM,Chrysler,Jeep)
080-4306B 3/8 RETAINER (GM,Chrysler,Jeep)
080-4408B 1/4 RETAINER (GM,Chrysler,Jeep)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
20
<PAGE> 21
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
100-0090B ECS INTERNATIONAL MANUAL
100-0300B CHINESE OVERLAY
100-0104B FUEL INJECTOR PULSER IT100 (MQ)
100-4047B SPANNER NUT
100-4048B SPANNER WRENCH
100-5001B ICS TUBING (30")
200-0083B P-200 RETURN REGULATOR ASSEMBLY
200-0093B TEE ASSEMBLY
200-0200B IN-LINE FILTER ASSEMBLY
200-0203B FILTER & TANK 5/16" ASSEMBLY
200-0204B TUTHILL FILTER & TANK 3/8" ASSEMBLY
200-0280B P-200 VACUUM SWITCH ASSEMBLY
200-0300B ECS/P-200 RETURN HOSE ASSEMBLY
200-0400B ECS/P-200 OUTPUT HOSE ASSEMBLY
200-0704B TUTHILL PUMP 5/16" ASSEMBLY
(With plumbing fittings)
200-0705B TUTHILL PUMP 3/8" ASSEMBLY
(With plumbing fittings)
200-0706B XOLOX PUMP ASSEMBLY
(With plumbing fittings)
200-1002B ECS BAR GAUGE ASSEMBLY
200-1004B ECS BAR VACUUM GAUGE ASSEMBLY
200-1008B ECS 2-WAY ASSEMBLY
200-1010B ECS 5-WAY ASSEMBLY
200-1011B ECS OUTPUT REGULATOR ASSEMBLY
200-1012B ECS RETURN REGULATOR ASSEMBLY
200-1013B ECS CONTROL VALVE ASSEMBLY
200-1014B ECS TEE ASSEMBLY
200-1175B FUEL QD TOOL KIT
200-3000B BASIC ADAPTOR KIT
200-3006B FORD ADAPTOR KIT
200-3008B GM ADAPTOR KIT
200-3009B ASIAN/EURO ADAPTOR KIT
200-4007B TIMER ASSEMBLY
200-4008B FILTER & BASE 3/8" ASSEMBLY
200-4009B FILTER & BASE 5/16" ASSEMBLY
200-5000B SOLENOID REPAIR KIT
300-3000B BASIC ORGANIZER BAG (GREEN)
300-3006B FORD ORGANIZER BAG (RED)
300-3008B GM ORGANIZER BAG (BLUE)
300-3009B ASIAN/EURO ORGANIZER BAG (ORANGE)
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
21
<PAGE> 22
EXHIBIT A
IDT 4000I REPLACEMENT PARTS
<TABLE>
<CAPTION>
PART # DESCRIPTION
- ------ -----------
<S> <C>
010-0034B TANK CAP
010-0026B WHEEL
010-0037B LEG
010-0040B FOOT GLIDE
010-0461B LOWER SENDING UNIT ADAPTOR
020-0049B ALARM HORN
020-4045B LOWER SENDING UNIT
020-0043B ELECTRICAL HARNESS, LOWER UNIT
020-0045B ELECTRICAL HARNESS, INTERNAL MAIN
020-0046B ELECTRICAL HARNESS, EXT. BATTERY
020-0047B ELECTRICAL HARNESS, EXT. SHUTDOWN
020-0091B RELAY
050-0018B PRESSURE SWITCH
050-0044B HYDRAULIC PUMP 12v (Diesel)
050-0086B FILTER ELEMENT REPLACEMENTS (20)
060-0590B FQD (Supply Tank)
060-0592B MQD (Supply Tank)
080-0230B FQD (Hose End)
100-0200B CHINESE OVERLAY
200-1471B OUTPUT HOSE ASSEMBLY
200-1472B RETURN HOSE ASSEMBLY
200-1960B UNIVERSAL ADAPTOR KIT
200-4003B OUTPUT SOLENOID ASSEMBLY
200-4004B PUMP ASSEMBLY
200-4031B ELECTRONIC HEAD ASSEMBLY
200-4032B FILTER ASSEMBLY
200-4038B PRESSURE SWITCH ASSEMBLY
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
22
<PAGE> 23
EXHIBIT B
PRICING
EFFECTIVE JANUARY 1, 1996
Home Office:
1431 S. Village Way
Santa Ana, CA 92705
Tel: (714) 558-4822
Fax: (714) 558-2756
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
23
<PAGE> 24
EXHIBIT B
PRICING
F.O.B. WAREHOUSE
<TABLE>
<CAPTION>
PART # DESCRIPTION COST
- ------ ----------- ----
<S> <C> <C>
400-0010 Fuel System Cleaner for Diesel - (12) 16 oz. Cans 77.00
1 case = 12" x 10" x 8" (15 lbs.)
30.5cm x 25.4cm x 20.3cm (6.8 kg)
400-0020 Fuel System Cleaner for Gasoline - (12) 8 oz. Bottles 50.00
1 case = 9" x 7" x 6" (7 lbs.)
22.8cm x 17.8cm x 15.2cm (3.2 kg)
400-0030 Intake Cleaning Detergent - (12) 8 oz. Bottles 53.00
1 case = 9" x 7" x 6" (7 lbs.)
22.8cm x 17.8cm x 15.2cm (3.2 kg)
200-6000 Intake Cleaning Kit - (12 kits per case) 360.00
(1 kit includes 8 oz. Bottle & Sprayer)
1 case = 17" x 17" x 11" (15 lbs.)
43.2cm x 43.2cm x 27.9cm (6.8 kg)
ECS-300e ECS-300e Fuel System Cleaning Machine for Gasoline 1,695.00
Includes:
200-3000 Basic Adaptor Kit
200-3009 Euro/Asia Adaptor Kit
200-3006 U.S. Ford Adaptor Kit
200-3008 U.S. GM Adaptor Kit
User Guide
16" x 15" x 38" (82 lbs.)
40.6cm x 38.1cm x 96.5cm (37.2 kg)
IDT-4000i Fuel System Cleaning Machine for Diesel 1,650.00
Includes:
200-3040 Adaptor Kit
User & Service Guide
23 1/4" x 18" x 39 1/2" (98 lbs.)
59.0cm x 45.7cm x 100.3cm (44.5 kg)
400 DRUM G 55-Gallon Drum (Gasoline) 2,950.00
400 DRUM D 55-Gallon Drum (Diesel) 2,050.00
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
24
<PAGE> 25
EXHIBIT B
CARBONCLEAN REPLACEMENT PARTS PRICING
SERIES 300
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
010-0005B XOLOX SHIELD 15.65
010-0006B TANK CAP 7.75
010-0009B TANK RESERVOIR 105.00
010-0017B ECS 300i OVERLAY 28.25
010-0019B ECS HANDLE 45.00
010-0020B ECS AXLE 23.70
010-0021B ECS WHEEL 12.55
010-0022B ECS BASE LEG 14.60
010-0024B ECS HOSE BRACKET 11.80
010-0025B ECS CORD BRACKET 14.05
020-0010B BUZZER 18.00
020-0030B EXTERNAL WIRING HARNESS 25.00
020-0035B 5 AMP CIRCUIT BREAKER 7.05
020-0037B 10 AMP CIRCUIT BREAKER 7.05
020-0038B 15 AMP CIRCUIT BREAKER 7.05
020-0040B INTERNAL WIRING HARNESS 60.00
020-0063B ELEC. LAMP AMBER 4.75
020-0067B ELEC. LAMP WHITE 4.75
020-0073B ELEC. LAMP GREEN 4.75
020-0083B ELEC. LAMP RED 4.75
020-0090B RELAY 8 TRIM, EAR MOUNT 18.65
020-0100B ONOFF & PS/LEAK SWITCH 4.20
020-0110B PURGE SWITCH, 1/2 MT 6.30
020-0120B START SWITCH, 1/2 MT 11.55
020-0150B TIMER 60 MIN 3/8 W/NUT 26.80
020-0151B TIMER FACE PLATE 3.05
020-0152B TIMER KNOB BLACK 1.75
020-0374B STRAIN RELIEF 1/2 MT 0.25
030-0002B F.CONN 1/4 X 1/8 FPT NI 2.18
030-0004B P-200 FM UNION 5/16 X 1/4 NT (NY) 6.55
030-0005B MALE ELBOW 1/4 X 1/4 MPT 2.50
030-0006B MALE ELBOW 1/4 X 1/8 MPT 2.18
030-0013B HEX NIPPLE 1/4 P NI 1.45
030-0015B MALE ELBOW 5/16 X 1/8 MPT NY 5.25
030-0016B M. CONN 5/16 X 1/8 MPT NY 2.55
030-0017B M. CONN 5/16 X 1/4 MPT NY 2.65
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
25
<PAGE> 26
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
030-0020B M. CONN 3/8 X 1/4 MPT NAB NI 2.33
030-0021B ECS F CONN 5/16 X 1/8 FPT NI 2.40
030-0022B F. CONN 5/16T X 1/4 P NI 3.30
030-0023B M. CONN 5/16T X 1/4 P NI 2.35
030-0024B M. ELBOW 5/16T X 1/8 NI 2.75
030-0025B M. CONN 3/8T X 1/4P NI 2.90
030-0026B ECS F. CONN 1/4 BARB X 1/8 NI 2.20
030-0030B F. CONN 3/8 X 1/4 FPT NI 2.89
030-0031B ELBOW 1/4 MPT X 1/4 FPT NI 2.26
030-0050B M. CONN 3/8 X 1/8 MPT NI 2.56
030-0095B ECS JUNCTION BLOCK, 2 WAY 1/4 6.25
030-0105B ECS JUNCTION BLOCK-5 WAY 1/4 8.25
030-0130B MALE ELBOW 3/8 X 1/4 MPT NI 3.10
030-0131B FEMALE ELBOW 3/8 X 1/4 MPT NI 4.39
030-0140B MALE ELBOW 3/8 X 1/8 MPT NI 2.91
030-0150B MALE ELBOW 5/16 X 1/4 MPT NI 2.88
030-0160B M. CONN 5/16 X 1/8 MPT NI 2.09
030-0189B F. CONN 1/4 FPT X MPT NI 1.95
030-0192B COMP ALIGN NUT 5/16 0.97
030-0206B CROSS 1/4 FPT NI 6.31
030-0208B J. CONN 3/8 X 1/4 MPT NI 3.96
030-0209B TEE 3/8 NT X 1/4 MPT X 3/8 (NY) 7.70
USED WITH VACUUM SWITCH
030-0210B UNION 1/8 MPT X 1/4 MPT (NY) 1.06
030-0211B F. CONN 90 3/8 X 1/4 FPT NY 6.12
040-0401B XOLOX PUMP MOUNT NUT 0.05
040-0500B ECS GRAB HANDLE LOCKWASHER 0.05
040-0502B ECS "E' CLIP FOR AXLE 0.10
040-0503B ECS AXLE SPACER 0.45
040-0505B ECS GRAB HANDLE NUT 0.05
040-0506B ECS LEG CAP 0.20
040-0507B ECS AXLE BUSHING NY 0.15
040-0508B ECS VAC HOSE SNAP BUSHING 0.10
040-0509B ECS GRAB HANDLE BOLT 0.10
040-5326B 3/32 X 4 NYLON CABLE TIE 0.05
050-0008B VACUUM SWITCH 1/4 MPT 61.75
050-0010B PSI GAUGE 34.75
050-0011B BAR GAUGE 37.45
050-0012B ECS VACUUM GAUGE 37.45
050-0013B ECS BAR VACUUM GAUGE 38.75
050-0015B 3 WAY SOLENOID 3/32 68.52
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
26
<PAGE> 27
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
050-0017B PRESSURE SWITCH 1/8 46.75
050-0021B STAINLESS CK VALUE 78.63
050-0052B REG NEEDLE VALVE 50.00
050-0065B CONTROL VALVE 45.00
050-0074B FILTER, INLINE 14.95
050-0075B FILTER, SPIN-ON 15.95
050-0076B FILTER & BASE 1/4 FPT 56.90
050-0088B RELIEF VALVE 105 PSI 74.48
060-0440B HOSE CLAMP 1.40
060-0450B HOSE CLAMP 1.50
060-1000B 1/4 MALE TUBE ADAPTOR 9.24
060-1100B 5/16 MALE TUBE ADAPTOR 9.94
060-1200B 3/8 MALE TUBE ADAPTOR 10.64
060-1300B 1/4 FEMALE ADAPTOR (Open-end hose) 7.21
060-1400B 5/16 FEMALE ADAPTOR (Open-end hose) 7.42
060-1500B 3/8 FEMALE ADAPTOR (Open-end hose) 7.63
060-1600B 12 MM BANJO 21.70
060-1700B 90 TUBE 5/16 MPT FUEL INLET ADAPTOR 16.10
060-1800B 90 TUBE 3/8 MPT FUEL INLET ADAPTOR 15.61
060-1900B 12 MM BANJO BOLT 8.00
060-1901B 12 MM WASHER 0.42
060-1902B 12 MM CAP NUT 4.00
060-2000B 5/16 LOOP MALE ADAPTOR 7.07
060-2100B 3/8 PLUG COLLAR 3.57
060-2101B 3/8 CARB PLUG ADAPTOR 9.31
060-2200B 5/16 PLUG COLLAR 2.38
060-2201B 5/16 CARB PLUG ADAPTOR 9.31
060-2300B 14 MM FEMALE 13.58
060-2400B 1C MM BANJO 16.80
060-2401B 8 MM BANJO 16.24
060-2402B 14 MM BANJO 22.82
060-2501B FQD LOOP ADAPTOR 37.00
060-2502B TEE 40.80
060-2600B 16 MM FEMALE 14.98
060-2700B 14 MM X 16 MM MALE UNION 13.30
060-2710B 8 MM BANJO BOLT 10.60
060-2711B 8 MM WASHER (Set of 3) 0.28
060-2720B 10 MM BANJO BOLT 11.90
060-2800B 1/4 MALE CONNECTOR (Ford,GM,Chrysler,Jeep) 19.67
060-2900B 5/16 MALE NYLON (Ford,Lincoln,Mercury) 19.67
060-3000B 1/8 MPT ADAPTOR (Ford,Lincoln,Mercury) 9.87
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
27
<PAGE> 28
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
060-3100B TBI & PFI INLET (GM) 21.00
060-3105B FEMALE SIDE OF 3100 (GM) 19.32
060-3200B 1/4 MPT ADAPTOR (Ford,Lincoln,Mercury) 9.87
060-3300B TBI & PFI OUTLET (GM) 22.86
060-3304B TBI & PFI USED W/1700 (GM) 9.95
060-3305B FEMALE SIDE OF 3300 (GM) (Replaces 060-4000) 19.32
060-3500B 3/8 MALE ADAPTOR (Ford,Lincoln,Mercury) 34.26
060-3505B 3/8 FEMALE ADAPTOR (Ford,Lincoln,Mercury) 19.74
060-3508B SHRADER VALVE (Ford,Lincoln,Mercury) 13.68
060-3600B 1/2 MALE ADAPTOR (Ford,Lincoln,Mercury) 34.56
060-3605B 1/2 FEMALE ADAPTOR (Ford,Lincoln,Mercury) 20.72
060-3700B SHRADER VALVE (GM,Chrysler,Jeep) 17.92
060-3800B VOLVO ADAPTOR 16.80
060-3900B 5/16 FQD (Ford,Lincoln,Mercury) 18.62
060-3901B 3/8 FQD (Ford,Lincoln,Mercury) 14.91
060-3902B 1/4 FQD (Ford,Lincoln,Mercury) 14.70
060-4100B HYUNDAI ADAPTOR 34.93
060-4200B 5/16 MALE METAL (GM,Chrysler,Jeep) 19.67
060-4205B 5/16 FQD (GM,Chrysler,Jeep) 19.10
060-4300B 3/8 MALE CONNECTOR(Ford,GM,Chrysler,Jeep) 19.67
060-4305B 3/8 FQD (GM,Chrysler,Jeep) 14.70
060-4405B 1/4 FQD (GM,Chrysler,Jeep) 19.67
070-0080B 1/4 NYLON TUBE 0.82ft
070-0085B 5/16 NYLON TUBE 1.18ft
070-0086B 3/8 NYLON TUBE 1.56ft
070-0100B HOSE VACUUM 0.75ft
080-0230B 1/4 FPT FQD NI 12.65
080-3301B O-RING VITON USED w/3304 0.55
080-3302B SM. O-RING VITON Used w/3300,3304 0.55
080-3402B LG. O-RING VITON Used w/3100,3500,4100 0.50
080-3501B SMALL CLIP & TETHER (Ford,Lincoln,Mercury) 4.00
080-3601B LARGE CLIP & TETHER (Ford,Lincoln,Mercury) 4.00
080-3602B O-RING VITON Used w/3600 0.60
080-3701B VITON SEAL,3700 4.25
080-3903B 5/16 RETAINER (Ford,Lincoln,Mercury) 0.30
080-3904B 3/8 RETAINER (Ford,Lincoln,Mercury) 0.30
080-3905B 1/4 RETAINER (Ford,Lincoln,Mercury) 0.40
080-4206B 5/16 RETAINER (GM,Chrysler,Jeep) 0.75
080-4306B 3/8 RETAINER (GM,Chrysler,Jeep) 0.80
080-4408B 1/4 RETAINER (GM,Chrysler,Jeep) 0.70
100-0090B ECS INTERNATIONAL MANUAL
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
28
<PAGE> 29
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
100-0300B CHINESE OVERLAY 28.00
100-0104B FUEL INJECTOR PULSER IT100 (MQ) 144.00
100-4047B SPANNER NUT 5.00
100-4048B SPANNER WRENCH 12.00
100-5001B ICS TUBING (30") 0.75
200-0093B TEE ASSEMBLY 16.35
200-0200B IN-LINE FILTER ASSEMBLY 14.95
200-0203B FILTER & TANK 5/16" ASSEMBLY 150.00
200-0204B TUTHILL FILTER & TANK 3/8" ASSEMBLY 160.00
200-0704B TUTHILL PUMP 5/16" ASSEMBLY
(With plumbing fittings) 215.00
200-0705B TUTHILL PUMP 3/8" ASSEMBLY
(With plumbing fittings) 215.00
200-0706B XOLOX PUMP ASSEMBLY
(With plumbing fittings) 215.00
200-1002B ECS BAR GAUGE ASSEMBLY 39.95
200-1004B ECS BAR VACUUM GAUGE ASSEMBLY
200-1008B ECS 2-WAY ASSEMBLY 9.20
200-1010B ECS 5-WAY ASSEMBLY 198.50
200-1011B ECS OUTPUT REGULATOR ASSEMBLY 256.00
200-1012B ECS RETURN REGULATOR ASSEMBLY 53.00
200-1013B ECS CONTROL VALVE ASSEMBLY 50.00
200-1014B ECS TEE ASSEMBLY 20.45
200-1175B FUEL QD TOOL KIT 19.95
200-3000B BASIC ADAPTOR KIT 325.00
200-3006B FORD ADAPTOR KIT 315.00
200-3008B GM ADAPTOR KIT 197.00
200-3009B ASIAN/EURO ADAPTOR KIT 263.00
200-4007B TIMER ASSEMBLY 31.60
200-4008B FILTER & BASE 3/8" ASSEMBLY 59.55
200-4009B FILTER & BASE 5/16" ASSEMBLY 58.25
200-5000B SOLENOID REPAIR KIT 35.00
300-3000B BASIC ORGANIZER BAG (GREEN) 22.95
300-3006B FORD ORGANIZER BAG (RED) 22.95
300-3008B GM ORGANIZER BAG (BLUE) 22.95
300-3009B ASIAN/EURO ORGANIZER BAG (ORANGE) 22.95
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
29
<PAGE> 30
EXHIBIT B
IDT 4000I REPLACEMENT PARTS PRICING
<TABLE>
<CAPTION>
PART # DESCRIPTION PRICE
- ------ ----------- -----
<S> <C> <C>
010-0034B TANK CAP 15.00
010-0026B WHEEL 12.50
010-0037B LEG 25.00
010-0040B FOOT GLIDE 3.75
010-0461B LOWER SENDING UNIT ADAPTOR 12.50
020-0049B ALARM HORN 22.50
020-4045B LOWER SENDING UNIT 81.25
020-0043B ELECTRICAL HARNESS, LOWER UNIT 12.50
020-0045B ELECTRICAL HARNESS, INTERNAL MAIN 87.50
020-0046B ELECTRICAL HARNESS, EXT. BATTERY 25.00
020-0047B ELECTRICAL HARNESS, EXT. SHUTDOWN 37.50
020-0091B RELAY 18.95
050-0018B PRESSURE SWITCH 50.00
050-0044B HYDRAULIC PUMP 12v (Diesel) 121.25
050-0086B FILTER ELEMENT REPLACEMENTS (20) 125.25
060-0590B FQD (Supply Tank) 24.96
060-0592B MQD (Supply Tank) 17.19
080-0230B FQD (Hose End) 12.65
100-0200B CHINESE OVERLAY 28.00
200-1471B OUTPUT HOSE ASSEMBLY 45.50
200-1472B RETURN HOSE ASSEMBLY 45.50
200-1960B UNIVERSAL ADAPTOR KIT 368.30
200-4003B OUTPUT SOLENOID ASSEMBLY 54.70
200-4004B PUMP ASSEMBLY 201.80
200-4031B ELECTRONIC HEAD ASSEMBLY 676.81
200-4032B FILTER ASSEMBLY 151.56
200-4038B PRESSURE SWITCH ASSEMBLY 49.70
</TABLE>
INITIAL: ____________
____________
REVISION DATE: 12/6/96
THIS AGREEMENT IS INVALID UNLESS ALL PAGES ARE INITIALED BY THE COMPANY AND THE
DISTRIBUTOR AND EXHIBITS A AND B ARE ATTACHED
30
<PAGE> 1
EXHIBIT 10.31
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (hereinafter the
"Agreement") is entered into as of this __ day of January, 1997, by and between
MotorVac Technologies, Inc. (hereinafter "MTI"), on the one side, and De-Carbon
Australia Pty Ltd, Carbon Clean Corporation Pty Ltd, Carbon Tune Pty Ltd, Chris
Somas, Roydn Sweet and Jim Litis (hereinafter collectively referred to as
"De-Carbon"), on the other.
This Agreement is executed with reference to the following facts:
RECITALS
A. On or about May 24, 1996, De-Carbon Australia Pty Ltd filed a
complaint against MTI, formerly known as CarbonClean Corporation, in the Orange
County Superior Court, designated as Case No. 764248. Subsequently, on or about
August 13, 1996, MTI filed a cross-complaint in that action against De-Carbon
Australia Pty Ltd and Robert Fisher. (The complaint and cross-complaint shall
hereinafter be referred to collectively as the "Lawsuit").
B. This Agreement does not pertain in any way to Robert Fisher, and
nothing stated herein is intended to affect the rights of the parties hereto
with respect to Robert Fisher.
C. The parties hereto desire to enter into this Agreement in order to
finally resolve the disputes existing between them relating to the Lawsuit.
1
<PAGE> 2
NOW THEREFORE, in consideration of the foregoing facts and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. ASSIGNMENT OF THE CARBONCLEAN NAME AND LOGO
(a) De-Carbon will assign, deed and take all other steps
necessary to transfer to MTI, or to MTI's designee, all of De-Carbon's alleged
rights to the name and logo of CarbonClean (and any trade names or trademarks
related thereto).
(b) Within ten (10) days of the date of full execution of this
Agreement (hereinafter "the Due Date"), MTI will provide De-Carbon with the
required transfer documentation.
(c) Within ten (10) days of the date of De-Carbon's receipt of
the transfer documentation from MTI, De-Carbon will execute and return this
documentation to MTI's Australian counsel, Phillips Fox (attention Shayne
Leslie), with a fax copy to MTI's United States counsel, Tredway, Lumsdaine &
Doyle LLP (attention Joseph A. Lumsdaine).
(d) De-Carbon further agrees that it will, as of the Due Date,
discontinue all use of the CarbonClean name and logo, and not use the
CarbonClean name or logo as part of any company name.
(e) The failure by De-Carbon to comply with the terms of this
paragraph shall be a breach of this Agreement, but which is subject to the cure
period set forth in paragraph 13(b), below (hereinafter the "Cure Period").
2
<PAGE> 3
2. ASSIGNMENT OF THE MOTORVAC NAME AND LOGO
(a) De-Carbon will assign, deed and take all other steps
necessary to transfer to MTI, or to MTI's designee, all of De-Carbon's alleged
rights to the name and logo of MotorVac (and any trade names or trademarks
related thereto).
(b) Within ten (10) days of the date of dismissal of the Lawsuit
as provided in paragraph 12, below (hereinafter "the Due Date"), MTI will
provide De-Carbon with the required transfer documentation.
(c) Within ten (10) days of the date of De-Carbon's receipt of
the transfer documentation from MTI, De-Carbon will execute and return this
documentation to MTI's Australian counsel, Phillips Fox (attention Shayne
Leslie), with a fax copy to MTI's United States counsel, Tredway, Lumsdaine &
Doyle LLP (attention Joseph A. Lumsdaine).
(d) De-Carbon further agrees that it will, as of the Due Date,
discontinue all use of the MotorVac name and logo, and not use the MotorVac name
or logo as part of any company name.
(e) The failure by De-Carbon to comply with the terms of this
paragraph shall be a breach of this Agreement, but which is subject to the Cure
Period.
3. NON-COMPETITION
(a) For the period of three (3) years immediately following the
date of this Agreement, De-Carbon shall not solicit any dealer, supplier,
distributor or customer
3
<PAGE> 4
to leave its relationship with MTI or an MTI distributor. The failure by
De-Carbon to comply with this provision shall be a breach of this Agreement,
but which will be subject to the Cure Period. De-Carbon will remedy such a
breach by providing written support of and approval of MTI products and
recommend that the relationship in question with MTI continue.
(b) For the period of three (3) years immediately following
the date of this Agreement, De-Carbon shall not manufacture, assemble,
wholesale or distribute any engine fuel systems cleaning machines, devices or
cleaning solvents or detergents for use in gasoline or diesel engines, within
the territories of Australia, New Zealand, Malaysia, Singapore, Indonesia and
Japan. De-Carbon may only sell carbon cleaning services through its retail
outlets in Australia and franchise those retail outlets in Australia with
respect to fuel system cleaning machines or detergents, except as provided in
paragraph 10, below. De-Carbon shall only use MTI CarbonClean detergent in MTI
CarbonClean equipment. The failure by De-Carbon to comply with this
subparagraph shall be a breach of this Agreement, but which will be subject to
the Cure Period.
4. ABANDONMENT OF RIGHTS TO THE CARBON TUNE AND DE-CARBON NAMES
MTI will abandon, now and forever, the right to acquire the Carbon Tune
and De-Carbon names or trademarks in Australia. However, De-Carbon will allow
all MTI distributors outside of Australia who are currently using the Carbon
Tune name to continue to use that name.
4
<PAGE> 5
5. CHANGE OF STYLE OF THE CARBON TUNE AND DE-CARBON NAMES
(a) Within ten (10) days of the Due Date, De-Carbon shall
change the logo, type and style of the Carbon Tune and De-Carbon names and
submit changes to MTI for approval at MTI's sole discretion. However, MTI's
approval shall not unreasonably be withheld. Subject to MTI's review and
approval, MTI will agree to accept a new logo for Carbon Tune and De-Carbon
that is:
(i) One word;
(ii) Of a different type set;
(iii) Not red and blue; and
(iv) Has no jet-stream effect.
(b) Within twenty (20) days after notification by MTI of
its approval of the new Carbon Tune and De-Carbon logos, De-Carbon shall no
longer use, and shall change, all signs, literature, business cards and other
items containing De-Carbon's use of the CarbonClean, De-Carbon and Carbon Tune
logo as currently fashioned, and provide MTI with a written statement
evidencing such compliance.
(c) The failure by De-Carbon to comply with this paragraph
shall be a breach of this Agreement, but which will be subject to the Cure
Period.
6. NOTIFICATION REGARDING TESTS CONDUCTED
De-Carbon shall notify in writing the Royal Melbourne Institute of
Technology ("RMIT"), the Federal Office of Road Safety ("FORS"), Broken Hill
Proprietary Ltd
5
<PAGE> 6
("BHP"), and Australian Environmental Health Services ("AEHS") that the tests
conducted by De-Carbon were conducted using only MTI-branded CarbonClean
equipment (which may have been modified to mining regulations) and detergent.
De-Carbon shall make such notifications, and provide MTI with proof thereof,
within ten (10) days of the Due Date.
7. REPURCHASE OF EQUIPMENT
With respect to the equipment described in Michele Ahrens' letter to
Jerome Amante dated December 19, 1996, whereby MTI agreed to repurchase five
(5) units, and regarding which MTI has delivered a check for $4,421.25 to
Jerome Amante on December 30, 1996:
(a) With regard to machine number 4 on page 2, MTI will pay
a total of $1,121.25 (an increase of $825) if the four (4) complete adaptors
are included; and with regard to machine number 5, MTI will pay a total of
$1,237.50 (an increase of $825) if all four (4) adaptors are included. MTI
will supply De-Carbon with an adaptor list.
(b) With regard to the "15 units loaned out", MTI will
allow these units to remain loaned out provided that within ten (10) days of
the Due Date, De-Carbon provides MTI with a list of serial numbers, location,
business address of user, etc.
(c) MTI will also exercise its option to repurchase the 16
CCs II's (items 6 through 21 of Michele Ahrens' December 19, 1996 letter) at
$725 x 75% or $543.75, subject to the inspection and approval by MTI or MTI's
distributor. Within ten (10) days
6
<PAGE> 7
of the Due Date, De-Carbon will allow MTI's distributor to inspect these 16
machines. Within ten (10) days after a satisfactory inspection by MTI's
distributor, MTI will send its distributor a check for the applicable funds
($8,700 if all is in good order), and MTI's distributor will in turn deliver
such payment to De-Carbon and pick up the subject machines. The failure by
De-Carbon to allow MTI's distributor to inspect these 16 units or to release
the subject units to MTI's distributor shall be a breach of this Agreement, but
which is subject to the Cure Period.
8. LIST OF WHOLESALE CUSTOMERS
Within ten (10) days of the Due Date, De-Carbon shall provide MTI with
a list of all of De-Carbon's current wholesale customers (including, but not
limited to, those for the fifteen (15) units loaned out as referred to in
paragraph 7(b), above), for the purpose of allowing MTI or MTI's distributor to
endeavor to supply further machines or detergent to such customers. De-Carbon,
however, shall have no obligation to require those customers in possession of
the fifteen (15) loaned out units to use any specific detergent.
9. SUPPLY OF MTI DETERGENT
If, during the three (3) year period immediately following the date of
this Agreement, MTI's distributor fails to supply De-Carbon with detergent for
its retail or franchise locations for any reason other than the breach of this
Agreement or business reasons, e.g., the failure by De-Carbon to pay, MTI will
supply De-Carbon with detergent at the international retail price. MTI shall
have the right to terminate this provision
7
<PAGE> 8
should De-Carbon commit an uncured breach of this Agreement.
10. SALE OF NON-REPURCHASED MACHINES
With respect to the machines for which MTI has not exercised its
repurchase option, as set forth in Michele Ahrens' letter of December 19, 1996,
De-Carbon may sell these units only if:
(a) They are sold within one hundred fifty (150) days of
the date of this Agreement; and
(b) De-Carbon provides MTI with a list of locations, serial
numbers, address of unit, and other necessary identifying information of the
purchasers within one hundred sixty (160) days of the date of this Agreement or
within ten (10) days of sale by De-Carbon, whichever comes first.
(c) De-Carbon shall not sell to the users of the machines
referred to in this paragraph any additional detergent.
11. PAYMENT OF $100,000
(a) Subject to a letter by Roy A. Hoff, Inc., De-Carbon
will forward by wire transfer the sum of One Hundred Thousand Seven Hundred and
Fifty Dollars ($100,750) to Roy A. Hoff, Inc. by January 3, 1997. This wire
transfer shall be made to Roy A. Hoff, Inc., a Professional Law Corporation
Client Trust Account, Account No. 16643-30927, Bank of America (La Mirada
Branch), Corporate office, 345 Montgomery, San Francisco, California 94104,
telephone (415) 615-4700, ABA/Routing No. 121 000
8
<PAGE> 9
358. Of the above amount, the sum of $100,000 is for the benefit of MTI and
$750 is an administrative fee to Roy A. Hoff, Inc.
(b) This $100,000 payment shall be as consideration for MTI's release
of De-Carbon from liability and full settlement with De-Carbon, as provided in
this Agreement. This sum will only be released to MTI upon MTI's signing of
this Agreement, MTI's filing of a request to withdraw the pending OSC re
contempt against De-Carbon, and the Court's entry of a dismissal with prejudice
of MTI's cross-complaint in the Lawsuit (except as to Robert Fisher). This sum
is separate from and unrelated to any Stipulated Judgment as set forth in
paragraph 13, below.
(c) MTI will pay its attorneys' fees related to the drafting and
processing of this settlement with the court.
12. DISMISSAL OF LAWSUIT
As soon as practicable, but in no event later than ten (10) days from
the expiration date specified in paragraph 13(e) of this Agreement, De-Carbon
shall dismiss its complaint in the Lawsuit with prejudice and MTI shall dismiss
its cross-complaint in the Lawsuit with prejudice (except as to Robert Fisher).
13. STIPULATED JUDGMENT
(a) Concurrently with the execution of this Agreement, De-Carbon
Australia Pty Ltd, Carbon Clean Corporation Pty Ltd, Carbon Tune Pty Ltd, Chris
Somas, Rodyn Sweet, and Jim Litis shall execute a Stipulation for Entry of
Judgment in favor of
9
<PAGE> 10
MTI in the amount of One Hundred Fifty Thousand Dollars (U.S. $150,000). MTI
will prepare the Stipulation for Entry of Judgment and Stipulated Judgment, in
form and content satisfactory to both De-Carbon and MTI. For purposes of the
Stipulated Judgment, Carbon Clean Corporation Pty Ltd, Carbon Tune Pty Ltd,
Chris Somas, Rodyn Sweet, and Jim Litis will be added as Roe cross-defendants in
MTI's cross-complaint in the Lawsuit. MTI may have the Stipulated Judgment
entered only against that entity and/or individual who violates the Settlement
Agreement.
(b) The Cure Period: In the event of a breach of this
Agreement, MTI shall notify De-Carbon thereof by both facsimile and courier
service. De-Carbon shall then have twenty (20) days from the receipt of MTI's
faxed written notice to remedy the breach specified and to notify MTI in writing
by facsimile and courier service that the breach has been cured. All references
to date and time shall be to Perth WA, Australia date and time.
(c) In the event that the breach is not remedied within the
twenty (20) day Cure Period, MTI may show proof to the Court and have the
Stipulated Judgment enforced against the entity and/or individual who violated
the Agreement.
(d) De-Carbon agrees and acknowledges that any breach of
this Agreement and failure to cure, if applicable, will amount to substantial
and irreparable harm to MTI. Therefore, in addition to enforcement of the
Stipulated Judgment, MTI may also exercise its right to any injunctive relief.
10
<PAGE> 11
(e) The Stipulated Judgment shall expire and be removed on
the third anniversary of the Due Date.
14. MUTUAL RELEASE
(a) For the consideration referred to herein, De-Carbon, on
the one side, and MTI, on the other, on behalf of themselves and for all of
their principals, agents, employees, predecessors, successors, assigns,
officers, directors, shareholders, trustees, representatives, heirs, executors,
administrators, attorneys, insurance carriers, partners, joint venturers,
investors, parent companies, subsidiaries, and affiliates, hereby forever
release and discharge each other, and the other's principals, agents,
employees, predecessors, successors, assigns, officers, directors,
shareholders, trustees, representatives, heirs, executors, administrators,
attorneys, insurance carriers, partners, joint venturers, investors, parent
companies, subsidiaries, and affiliates, from any and all claims, causes of
action, judgments, injunctions, pending depositions, liens, promises,
agreements, contracts, obligations, transactions, costs, damages, losses,
lawsuits, arbitrations, appeals, liabilities, indemnifications, debts,
restrictive covenants, demands, attorneys' fees or expenses of any nature
whatsoever, and rights of any kind or character, whether known or unknown or
speculative, except as to the enforcement of obligations expressly set forth in
this Agreement, which either party had, now has or may hereafter have against
the other, or any of them, by reason of any claims or allegations raised in or
arising out of the Lawsuit.
11
<PAGE> 12
(b) Without limitation on the generality of the above
release, De-Carbon further releases from any liability in any way relating to
their declarations all those who provided declarations for MTI in support of
MTI's Motion for Preliminary Injunction.
(c) Neither the above release nor any other provision of
this Agreement shall apply to Robert Fisher.
15. WAIVER OF CIVIL CODE SECTION 1542
(a) By releasing and forever discharging any and all
claims, both known and unknown, as provided for in paragraph 14 above, the
parties hereto expressly waive their rights under California Civil Code section
1542, which provides:
"(a) A general release does not extend to
claims which the creditor does not know or
suspect to exist in his favor at the time of
executing the release, which if known by him,
must have materially affected his settlement
with the debtor."
(b) With full knowledge and understanding of Civil Code
section 1542, the parties hereby waive and relinquish any and all rights and
benefits which they have or may have under section 1542, or under any similar
law of any other jurisdiction. The parties hereto acknowledge that they are
aware that they may hereafter discover facts in addition to or different from
those which they now know or believe to be true with respect to the subject
matter of the Lawsuit, but it is their intention hereby to fully and finally
forever settle and release any and all matters, disputes and differences
relating to the
12
<PAGE> 13
Lawsuit, known or unknown, suspected or unsuspected, which now exist, may exist
or heretofore have existed, and that in furtherance of this intention, the
releases herein given shall be and remain in effect as full and complete general
releases, notwithstanding the discovery or existence of any such additional or
different fact.
16. WITHDRAWAL OF OSC RE CONTEMPT
Within ten (10) days of the date of this Agreement, MTI will file with
the Orange County Superior Court a document requesting the withdrawal of the
OSC re contempt against De-Carbon.
17. STIPULATION FOR RELEASE OF CASH IN LIEU OF BOND
Within ten (10) days of the date of this Agreement, De-Carbon shall
execute a stipulation or other suitable document enabling the Orange County
Superior Court to release to MTI the cash deposited by MTI in lieu of bond for
the preliminary injunction. MTI will prepare the required documentation.
18. CONTROLLING LAW
This Agreement shall, in all respects, be deemed entered into in Orange
County, California, and interpreted, enforced and governed exclusively by and
under the laws of the state of California. Jurisdiction and venue for any
disputes that may arise out of this Agreement shall be exclusively in the
Orange County Superior Court.
19. ATTORNEYS' FEES
In any action or proceeding at law or in equity arising out of this
Agreement, the
13
<PAGE> 14
prevailing party shall be entitled to recover from the unsuccessful party all
costs, expenses and actual attorneys' fees incurred therein by the prevailing
party.
20. SOLE AND ONLY AGREEMENT
This Agreement, the Stipulation for Entry of Judgment executed pursuant
hereto, and that letter dated January 2, 1997 by Kathleen A. Tomeo of Roy A.
Hoff, Inc. contain the entire understanding of the parties with respect to the
subject matter hereof. There are no representations, conditions, covenants, or
understandings other than those expressly referred to therein. Each party
acknowledges that no other party or any agent or attorney of any other party
has made any promise, representation or warranty whatsoever, not expressly
contained therein, concerning the subject matter hereof, to induce the other
party to execute this Agreement, and each party warrants and acknowledges that
he has not executed this Agreement in reliance on any such promise,
representation or warranty not specifically contained therein.
21. BINDING ON PREDECESSORS AND SUCCESSORS
This Agreement shall apply to, be binding upon and inure to the benefit
of the respective predecessors, successors, assigns, agents, employees, heirs,
administrators, executors, trustees, and all representatives of the parties
hereto.
22. WARRANTY OF AUTHORITY
The parties executing this Agreement warrant that they have the
authority and authorization to enter into this Agreement, and to bind their
respective corporate entities.
14
<PAGE> 15
23. SEVERABILITY
The provisions of this Agreement are severable, and should any
provision for any reason be unenforceable, the balance shall nonetheless be of
full force and effect.
24. JOINT PREPARATION
This Agreement shall be deemed to have been jointly prepared by the
parties hereto. Therefore, any uncertainty or ambiguity that may exist herein
shall not be interpreted against any party hereto, but otherwise according to
the application of the rules on interpretation of contracts.
25. COUNTERPARTS
This Agreement may be executed in counterparts.
26. KNOWING AND VOLUNTARY EXECUTION
The parties hereto warrant and acknowledge that they fully understand
the terms and consequences of this Agreement, that they have had the
opportunity to employ the services of independent and competent legal counsel
with respect to this Agreement, and that their decision to enter into this
Agreement was of their own free will, and was not based on, influenced by or
induced by any threat or coercion whatsoever.
27. NECESSARY DOCUMENTS AND INSTRUMENTS
The parties hereto agree to execute any and all other documents and
instruments which may be reasonably necessary or proper to effectuate and carry
out the purposes of
15
<PAGE> 16
this Agreement.
28. NO ASSIGNMENT
The parties warrant to one another that they have not assigned or
transferred, or purported to assign or transfer, to any person or entity, either
voluntarily or involuntarily, any claim, cause of action or right based on,
arising out of, or in connection with any matter, fact or anything described or
referred to in any of the pleadings, records or papers in the Lawsuit.
29. GENDER
Wherever the masculine, feminine or neuter form is used in this
Agreement, said term shall apply with equal force and effect to any other
gender, or to an entity, as required by the context wherein the term appears.
30. WAIVER AND MODIFICATION
No provision of this Agreement may be waived or modified except by a
writing signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement so that
the same shall be effective as of the date first above written.
MOTORVAC TECHNOLOGIES, INC.
/s/ Lee W. Melody
------------------------------
By: Lee W. Melody
Its: President
16
<PAGE> 17
DE-CARBON AUSTRALIA PTY LTD
/s/ JIM LITIS
-----------------------------------
By: Jim Litis
Its: [SIG] JL
-------------------
CARBON CLEAN CORPORATION PTY LTD
/s/ JIM LITIS
-----------------------------------
By: Jim Litis
Its: [SIG] JL
-------------------
CARBON TUNE PTY LTD
/s/ JIM LITIS
-----------------------------------
By: Jim Litis
Its: [SIG] JL
-------------------
/s/ CHRIS SOMAS
-----------------------------------
Chris Somas
/s/ ROYDN SWEET
-----------------------------------
Roydn Sweet
/s/ JIM LITIS
-----------------------------------
Jim Litis
17
<PAGE> 18
APPROVED AS TO FORM AND CONTENT:
[SIG] J.A. Lumsdaine
- ---------------------------------------------
Attorneys for Motor Vac Technologies, Inc.
[SIG] Christopher M. Laquer
- ---------------------------------------------
Attorneys for De-Carbon Australia Pty Ltd,
Carbon Clean Corporation Pty Ltd,
Carbon Tune Pty Ltd, Chris Somas, Roydn Sweet
and Jim Litis
18
<PAGE> 1
EXHIBIT 10.32
FIRST AMENDMENT AND MODIFICATION
TO
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This First Amendment and Modification to Settlement Agreement and Mutual
Release (hereinafter "Amendment") is entered into as of this __ day of January,
1997, by and between MotorVac Technologies, Inc. (hereinafter "MTI"), on the one
side, and De-Carbon Australia Pty Ltd, Carbon Clean Corporation Pty Ltd, Carbon
Tune Pty Ltd, Chris Somas, Roydn Sweet and Jim Litis (hereinafter collectively
referred to as "De-Carbon"), on the other. This Amendment modifies that certain
Settlement Agreement and Mutual Release (hereinafter "Agreement") entered into
on this same day between the same parties only to the extent stated herein and,
except as stated herein, all other terms of the Agreement are affirmed.
Paragraph 11(b) of the Agreement is replaced by the following:
This $100,000 payment shall be as consideration for MTI's release of
De-Carbon from liability and full settlement with De-Carbon, as provided in this
Agreement. This sum will only be released to MTI upon MTI's signing of this
Agreement, MTI's filing of a request to withdraw the pending OSC re contempt
against De-Carbon, and the Court's approval of the Stipulation for Entry of
Judgment referred to in paragraph 13 below. This sum is separate from and
unrelated to any Stipulated Judgment as set forth in paragraph 13, below.
Paragraph 12 of the Agreement is replaced by the following:
With the execution of this Agreement, De-Carbon and MTI hereby
authorizes their respective attorneys of record in the Lawsuit to execute a full
Dismissal with prejudice of the Complaint and Cross-complaints as to the parties
to this Agreement only. Said Dismissal form shall be held in trust by the law
firm of Tredway, Lumsdaine and Doyle to be filed with the Court only upon the
expiration of three years from the approval of the Stipulation for Entry of
Judgment, provided that neither party is in breach of the terms of that
Stipulation at that time.
At paragraph 13(a) of the Agreement, in the fifth line, the words "and
Stipulated Judgment" shall be stricken.
Paragraph 13(e) of the Agreement is replaced by the following:
<PAGE> 2
The Stipulation for Entry of Judgment shall expire and be of no further
force and effect three years after its approval by the Court.
IN WITNESS WHEREOF, the parties have executed this Agreement so that the same
shall be effective as of the date first above written.
MOTORVAC TECHNOLOGIES, INC.
/s/ LEE W. MELODY
-----------------------------------
By: Lee W. Melody
Its: President
DE-CARBON AUSTRALIA PTY LTD
-----------------------------------
By: Jim Litis
Its:
-------------------
CARBON CLEAN CORPORATION PTY LTD
-----------------------------------
By: Jim Litis
Its:
-------------------
CARBON TUNE PTY LTD
-----------------------------------
By: Jim Litis
Its:
-------------------
-----------------------------------
Chris Somas
<PAGE> 3
The Stipulation for Entry of Judgment shall expire and be of no further
force and effect three years after its approval by the Court.
IN WITNESS WHEREOF, the parties have executed this Agreement so that the same
shall be effective as of the date first above written.
MOTORVAC TECHNOLOGIES, INC.
-----------------------------------
By: Lee W. Melody
Its: President
DE-CARBON AUSTRALIA PTY LTD
/s/ JIM LITIS
-----------------------------------
By: Jim Litis
Its: [SIG] JL
-------------------
CARBON CLEAN CORPORATION PTY LTD
/s/ JIM LITIS
-----------------------------------
By: Jim Litis
Its: [SIG] JL
-------------------
CARBON TUNE PTY LTD
/s/ JIM LITIS
-----------------------------------
By: Jim Litis
Its: [SIG] JL
-------------------
/s/ CHRIS SOMAS
-----------------------------------
Chris Somas
<PAGE> 4
/s/ ROYDN SWEET
-----------------------------------
Roydn Sweet
/s/ JIM LITIS
-----------------------------------
Jim Litis
APPROVED AS TO FORM AND CONTENT:
[SIG] J.A. Lumsdaine
- ---------------------------------------------
Attorneys for Motor Vac Technologies, Inc.
[SIG] Christopher M. Laquer
- ---------------------------------------------
Attorneys for De-Carbon Australia Pty Ltd,
Carbon Clean Corporation Pty Ltd,
Carbon Tune Pty Ltd, Chris Somas, Roydn Sweet
and Jim Litis
<PAGE> 1
EXHIBIT 10.33
SECOND AMENDMENT AND MODIFICATION
TO
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Second Amendment and Modification to Settlement Agreement and
Mutual Release (hereinafter "Second Amendment") is entered into as of this
____day of January, 1997, by and between MotorVac Technologies, Inc.
(hereinafter "MTI"), on the one side, and De-Carbon Australia Pty Ltd ACN 050
959 290, Carbon Clean Corporation Pty Ltd ACN 058 097 144, Carbon Tune Pty Ltd
ACN 055 216 012, Chris Somas, Roydn Sweet and Jim Litis (hereinafter
collectively referred to as "De-Carbon"), on the other. This Second Amendment
modifies that certain Settlement Agreement and Mutual Release (hereinafter
"Agreement") and that certain First Amendment and Modification to Settlement
Agreement and Mutual Release (hereinafter "First Amendment"), both of which
were entered into on this same day between the same parties only to the extent
stated herein and, except as stated herein, all other terms of the Agreement
and First Amendment are affirmed.
The term "Due Date" as referenced in the Agreement and First Amendment
at paragraphs 1(b), 2(b) and 11(b), or anywhere else therein, shall mean the
date when all three of these conditions have been satisfied: (1) MTI has signed
the Agreement and the First Amendment and this Second Amendment; (2) MTI has
filed a request with the Court to withdraw the pending OSC Re Contempt against
De-Carbon; and (3) the Court has signed the Stipulation for Entry of Judgment
and Order for Stay.
As recited in that letter to the Law Offices of Roy A. Hoff, Inc. from
Joseph A. Lumsdaine dated January 3, 1997, the $100,750 in funds held by that
office will be returned to De-Carbon, minus the administrative fee of $750, if
MTI declines the settlement.
MTI warrants that Lee W. Melody is its corporate president and
authorized to execute the Agreement, the First Amendment and this Second
Amendment on MTI's behalf and to bind MTI thereto.
De-Carbon Australia Pty Ltd, Carbon Clean Corporation Pty Ltd and
Carbon Tune Pty Ltd, and each of them, warrant that Jim Litis is authorized to
execute the Agreement, the First Amendment and this Second Amendment on each of
their behalf, and to bind each of them thereto.
IN WITNESS WHEREOF, the parties have executed this Agreement so that the same
shall be effective as of the date first above written.
1
<PAGE> 2
MOTORVAC TECHNOLOGIES, INC.
/s/ Lee W. Melody
-------------------------------------
By: Lee W. Melody
Its: President
DE-CARBON AUSTRALIA PTY LTD
/s/ Jim Litis
--------------------------------------
By: Jim Litis
Its: JL
---------------------------------
CARBON CLEAN CORPORATION PTY LTD
/s/ Jim Litis
--------------------------------------
By: Jim Litis
Its: JL
---------------------------------
CARBON TUNE PTY LTD
/s/ Jim Litis
--------------------------------------
By: Jim Litis
Its: JL
---------------------------------
/s/ Chris Somas
--------------------------------------
Chris Somas
2
<PAGE> 3
/s/ ROYDN SWEET
--------------------
Roydn Sweet
/s/ JIM LITIS
--------------------
Jim Litis
APPROVED AS TO FORM AND CONTENT:
/s/ J.A. LUMSDAINE
- ---------------------------------------------
Attorneys for MotorVac Technologies, Inc.
/s/ CHRISTOPHER M. LAQUER
- ---------------------------------------------
Attorneys for De-Carbon Australia Pty Ltd,
Carbon Clean Corporation Pty Ltd,
Carbon Tune Pty Ltd, Chris Somas, Roydn Sweet
and Jim Litis
3
<PAGE> 1
EXHIBIT 10.34
[TREDWAY LUMSDAINE DOYLE LLP LETTERHEAD]
March 14, 1997
VIA FACSIMILE & U.S. MAIL
(714) 724-4504
Jerome L. Amante, Esq.
THE AMANTE LAW FIRM
19800 MacArthur Boulevard
Suite 1450
Irvine, California 92715
Re: De-Carbon Australia Pty Ltd. v. MotorVac Technologies, Inc., et al.
OCSC Case No.: 764248
Dear Jerry:
This letter will serve as written confirmation of the full and complete
settlement which has been reached by MotorVac and Lee Melody, on the one side,
and Robert Fisher and ETCO, on the other. This letter, whether in facsimile or
original form, may be used to seek entry of judgment pursuant to Code of Civil
Procedure section 664.6.
By their telecopied signatures at the end of this letter, the parties
specifically agree to settle the above-entitled lawsuit as follows:
(1) The parties will execute a formal Settlement Agreement that will
contain a mutual and general release of all claims by Fisher and ETCO,
on the one side, and MotorVac and Melody, on the other. This would
include a specific release of any and all obligations called for under
all prior agreements, written or verbal, between the respective parties.
The release will also cover any causes of action that might have been
raised by prior litigation, such as the Ohio lawsuit, which causes of
action had been dismissed without prejudice. It will be a "global"
release of all claims, known and unknown, from the beginning of time
until the date of the Settlement Agreement. It will include all agents,
representatives, attorneys, parent or affiliate companies, officers,
directors, etc.;
<PAGE> 2
Jerome L. Amante, Esq.
March 14, 1997
Page 2
(2) Each side will bear their own attorneys' fees and costs and will
release the other from any claims for sanctions, contempt proceedings,
etc. Forthwith after execution of the Settlement Agreement, the lawsuit
will be mutually dismissed with prejudice as to the cross-complaint
between these parties;
(3) Fisher and ETCO may issue a press release containing the
following language, "The dispute between MotorVac and Robert Fisher has
been amicably resolved and no disputes between the parties remain.
Details of the resolution between the parties were not disclosed." If
Fisher and ETCO desire to issue a press release with wording different
than the above, the wording will have to be mutually agreed upon by all
parties.
(4) All actions in the pending lawsuit will cease and desist as of
the date of the signing of this letter. Specifically, all discovery and
law and motion matters are to be held in abeyance until dismissal of the
cross-complaint has been filed with the Court. Any deadline for
discovery, or for the bringing of any discovery motions, is hereby
extended for thirty (30) days, or until consummation of this settlement.
All depositions currently scheduled are postponed indefinitely.
Time is of the essence. The court reporter scheduled for Monday will need to
be canceled before 5:00 p.m. today. Accordingly, I would ask that you obtain
your client's signature by telecopy, and forward the same to this office by
telecopy before 5:00 p.m. Either myself, or Gary Lieberman, will do the same
with reference to the signatures of Mr. Melody and MotorVac.
Should you have further questions or comments, please call.
Very truly yours,
TREDWAY, LUMSDAINE & DOYLE LLP
/s/ J. A. LUMSDAINE
------------------------------
By: Joseph A. Lumsdaine
JAL:ah
cc: Client
<PAGE> 3
Jerome L. Amante, Esq.
March 14, 1997
Page 3
The above settlement is agreed to as of this date.
Dated: March 14, 1997
-------------------------------------
Robert L. Fisher
Dated: March 14, 1997
-------------------------------------
ETCO
By: Robert L. Fisher, President
The above settlement is agreed to as of this date.
Dated: March 14, 1997 /s/ LEE MELODY
-------------------------------------
Lee Melody
Dated: March 14, 1997 /s/ LEE MELODY
-------------------------------------
MotorVac Technologies, Inc.
By: Lee Melody, President
Approved as to form and content.
Dated: March 14, 1997
-------------------------------------
Jerome L. Amante, Esq.
Attorneys for Robert Fisher and ETCO
Dated: March 14, 1997 /s/ J.A. LUMSDAINE
-------------------------------------
Joseph A. Lumsdaine, Esq.
Attorneys for Lee Melody and MotorVac
<PAGE> 4
Jerome L. Amante, Esq.
March 14, 1997
Page 3
The above settlement is agreed to as of this date.
Dated: March 14, 1997 /s/ ROBERT L. FISHER
-------------------------------------
Robert L. Fisher
Dated: March 14, 1997 /s/ ROBERT L. FISHER
-------------------------------------
ETCO
By: Robert L. Fisher, President
The above settlement is agreed to as of this date.
Dated: March 14, 1997
-------------------------------------
Lee Melody
Dated: March 14, 1997
-------------------------------------
MotorVac Technologies, Inc.
By: Lee Melody, President
Approved as to form and content.
Dated: March 14, 1997 /s/ JEROME L. AMANTE
-------------------------------------
Jerome L. Amante, Esq.
Attorneys for Robert Fisher and ETCO
Dated: March 14, 1997 /s/ J.A. LUMSDAINE
-------------------------------------
Joseph A. Lumsdaine, Esq.
Attorneys for Lee Melody and MotorVac
<PAGE> 1
EXHIBIT 10.38
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE (the "Agreement") is
entered into as of this 27th day of March, 1997, by and between Lee W. Melody
("Melody") and MotorVac Technologies, Inc. ("MTI"), on the one side, and Robert
L. Fisher ("Fisher") and Equipment Technology Company, Inc. ("ETCO"), on the
other.
This Agreement is executed with reference to the following facts:
RECITALS
A. On or about August 13, 1996, MTI filed a cross-complaint against
Robert Fisher in the case of De-Carbon Australia Pty Ltd v. MotorVac
Technologies, Inc., Orange County Superior Court Case No. 764248. Subsequently,
on or about September 16, 1996, Fisher and ETCO filed a cross-complaint in that
action against MTI and Melody. These cross-complaints shall hereinafter be
referred to collectively as the "Lawsuit".
B. This Agreement does not pertain in any way to De-Carbon Australia
Pty Ltd, Carbon Clean Corporation Pty Ltd, Carbon Tune Pty Ltd, Chris Somas,
Roydn Sweet and Jim Litis (collectively "the De-Carbon Parties"), and nothing
stated herein is intended to affect the rights of the parties hereto with
respect to the De-Carbon Parties.
C. The parties hereto desire to enter into this Agreement in order to
finally resolve any and all disputes existing between them from the beginning
of time through the date hereof.
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NOW THEREFORE, in consideration of the foregoing facts and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. DISMISSAL OF LAWSUIT
Concurrently with the execution of this Agreement, MTI shall
dismiss its cross-complaint in the Lawsuit (except as to the De-Carbon Parties)
with prejudice, and Fisher and ETCO shall dismiss their cross-complaint in the
Lawsuit with prejudice.
2. MUTUAL RELEASE
(a) For the consideration referred to herein, Melody and MTI, on
the one side, and Fisher and ETCO, on the other, on behalf of themselves and
for all of their principals, agents, employees, predecessors, successors,
assigns, officers, directors, trustees, representatives, heirs, executors,
administrators, attorneys, insurance carriers, partners, joint venturers, parent
companies, subsidiaries, and affiliates, hereby forever release and discharge
each other, and the other's principals, agents, employees, predecessors,
successors, assigns, officers, directors, trustees, representatives, heirs,
executors, administrators, attorneys, insurance carriers, partners, joint
venturers, parent companies, subsidiaries, and affiliates, from any and all
claims, causes of action, judgments, injunctions, sanctions, contempt
proceedings, liens, promises, agreements, contracts, obligations, transactions,
costs, damages, losses, lawsuits, arbitrations, appeals, liabilities,
indemnifications, debts, restrictive covenants, demands, attorneys' fees or
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expenses of any nature whatsoever, and rights of any kind or character, whether
known or unknown or speculative, except as to the enforcement of obligations
expressly set forth in this Agreement, which either party has ever had against
the other from the beginning of time through the date of this Agreement.
(b) Neither the above release nor any other provision of this
Agreement shall apply to the De-Carbon Parties.
3. WAIVER OF CIVIL CODE SECTION 1542
(a) By releasing and forever discharging any and all claims, both
known and unknown, as provided for in paragraph 2 above, the parties hereto
expressly waive their rights under California Civil Code Section 1542, which
provides:
"(a) A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him, must
have materially affected his settlement with the debtor."
(b) With full knowledge and understanding of Civil Code section
1542, the parties hereby waive and relinquish any and all rights and benefits
which they have or may have under section 1542, or under any similar law of any
other jurisdiction. The parties hereto acknowledge that they are aware that
they may hereafter discover facts in addition to or different from those which
they now know or believe to be true, but it is their intention hereby to fully
and finally forever settle and release any and all matters,
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disputes and differences between them, known or unknown, suspected or
unsuspected, which now exist or heretofore have existed, and that in
furtherance of this intention, the releases herein given shall be and remain in
effect as full and complete general releases, notwithstanding the discovery or
existence of any such additional or different fact.
4. STIPULATION FOR RELEASE OF CASH IN LIEU OF BOND
Concurrently with the execution of this Agreement, Fisher and ETCO
shall execute a stipulation or other suitable document enabling the Orange
County Superior Court to release to MTI the cash deposited by MTI in lieu of
bond for the preliminary injunction. MTI will prepare the required
documentation.
5. PRESS RELEASE
Fisher and ETCO may issue a press release containing the following
language: "The dispute between MotorVac and Robert Fisher has been amicably
resolved and no disputes between the parties remain. Details of the resolution
between the parties were not disclosed." If Fisher and ETCO desire to issue a
press release with wording different than the above, the wording will have to
be mutually agreed upon by all parties.
6. CONTROLLING LAW
This Agreement shall, in all respects, be deemed entered into in Orange
County, California, and interpreted, enforced and governed exclusively by and
under the laws of the State of California. Jurisdiction and venue for any
disputes that may arise out of this Agreement shall be exclusively in the
Orange County Superior Court.
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7. ATTORNEYS' FEES
In any action or proceeding at law or in equity arising out of this
Agreement, the prevailing party shall be entitled to recover from the
unsuccessful party all costs, expenses and actual attorneys' fees incurred
therein by the prevailing party.
8. SOLE AND ONLY AGREEMENT
This Agreement contains the entire understanding of the parties with
respect to the subject matter hereof, and supersedes any and all prior
agreements between the parties hereto. There are no representations,
conditions, covenants or understandings other than those expressly referred to
herein. Each party acknowledges that no other party or any agent or attorney of
any other party has made any promise, representation or warranty whatsoever,
not expressly contained herein, concerning the subject matter hereof, to induce
the other party to execute this Agreement, and each party warrants and
acknowledges that he has not executed this Agreement in reliance on any such
promise, representation or warranty not specifically contained herein.
9. BINDING ON PREDECESSORS AND SUCCESSORS
This Agreement shall apply to, be binding upon and inure to the benefit
of the respective predecessors, successors, assigns, agents, employees, heirs,
administrators, executors, trustees, and all representatives of the parties
hereto.
10. WARRANTY OF AUTHORITY
The parties executing this Agreement warrant that they have the
authority and authorization to enter into this Agreement, and to bind their
respective corporate entities.
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11. SEVERABILITY
The provisions of this Agreement are severable, and should any
provision for any reason be unenforceable, the balance shall nonetheless be of
full force and effect.
12. JOINT PREPARATION
This Agreement shall be deemed to have been jointly prepared by the
parties hereto. Therefore, any uncertainty or ambiguity that may exist herein
shall not be interpreted against any party hereto, but otherwise according to
the application of the rules on interpretation of contracts.
13. COUNTERPARTS
This Agreement may be executed in counterparts.
14. KNOWING AND VOLUNTARY EXECUTION
The parties hereto warrant and acknowledge that they fully understand
the terms and consequences of this Agreement, that they have had the
opportunity to employ the services of independent and competent legal counsel
with respect to this Agreement, and that their decision to enter into this
Agreement was of their own free will, and was not based on, influenced by or
induced by any threat or coercion whatsoever.
15. NECESSARY DOCUMENTS AND INSTRUMENTS
The parties hereto agree to execute any and all other documents and
instruments which may be reasonably necessary or proper to effectuate and carry
out the purposes of this Agreement.
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16. NO ASSIGNMENT
The parties warrant to one another that they have not assigned or
transferred, or purported to assign or transfer, to any person or entity,
either voluntarily or involuntarily, any claim, cause of action or right being
released herein.
17. GENDER
Wherever the masculine, feminine or neuter form is used in this
Agreement, said term shall apply with equal force and effect to any other
gender, or to an entity, as required by the context wherein the term appears.
18. WAIVER AND MODIFICATION
No provision of this Agreement may be waived or modified except by a
writing signed by all of the parties hereto.
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IN WITNESS WHEREOF, the parties have executed this Agreement so that
the same shall be effective as of the date first above written.
MOTORVAC TECHNOLOGIES, INC.
/s/ LEE W. MELODY
---------------------------------
By: Lee W. Melody
Its: President
/s/ LEE W. MELODY
---------------------------------
Lee W. Melody
EQUIPMENT TECHNOLOGY COMPANY, INC.
/s/ ROBERT L. FISHER
---------------------------------
By: Robert L. Fisher
Its: President
/s/ ROBERT L. FISHER
---------------------------------
Robert L. Fisher
APPROVED AS TO FORM AND CONTENT:
TREDWAY, LUMSDAINE & DOYLE LLP
By: /s/ J. A LUMSDAINE
-------------------------------------
Attorneys for MotorVac Technologies, Inc.
and Lee W. Melody
THE AMANTE LAW FIRM
By: /s/ JEROME L. AMANTE
-------------------------------------
Attorneys for Equipment Technology Company,
Inc. and Robert L. Fisher
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EXHIBIT 11.1
MOTORVAC TECHNOLOGIES, INC.
CALCULATION OF NET LOSS PER SHARE AND SUPPLEMENTARY NET LOSS PER SHARE
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995 AND THE TWELVE MONTHS ENDED
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Proforma Proforma
Twelve Months Nine Months
Ended Ended
Dec. 31, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
Supplementary Net Loss:
Net Loss ($1,281,090) ($2,130,408)
Supplementary Reduction of Interest Expense 132,416 446,309
----------- -----------
Supplementary Net Loss (1,148,674) (1,684,099)
=========== ===========
Supplementary Weighted Average Outstanding Common and
Common Equivalent Shares:
Common Stock Outstanding, December 31, 1995 948,000 948,000
Common stock equivalents:
Conversion of Series A Preferred Stock 966,247 966,247
Conversion of Series B Preferred Stock 570,150 570,150
Conversion of $4,410,300 of Notes Payable to Related party 820,521 820,521
Common Shares Issued in Initial Public Offering April 24, 1996 1,100,000
Weighting of Initial Public Offering Stock 756,438
Common stock issued in Overallotment on June 15, 1995 100,000
Weighting of overallotment Stock 79,489
----------- -----------
Common Stock Equivalents before below 4,140,845 3,304,918
Incremental Shares, assuming exercise of options granted
after Dec. 31, 1995 and Dec. 31, 1996 4,013 6,467
Weighting of incremental shares from options (eliminated if
increases loss per share) 0 0
Incremental Shares Related to repayment of Interest 24,636 83,034
----------- -----------
Total Incremental Shares 24,636 83,034
----------- -----------
Supplementary Weighted Average Outstanding Common and
Common Equivalent Shares 4,165,481 3,387,952
=========== ===========
Deduct Incremental Shares Related to repayment of Interest (24,636) (83,034)
----------- -----------
Weighted Average Outstanding Common and
Common Equivalent Shares 4,140,845 3,304,918
=========== ===========
Supplementary Net Loss per Common Share and Common
Share Equivalent (0.28) (0.50)
=========== ===========
Net Loss per Common Share and Common
Share Equivalent (0.31) (0.64)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF MOTORVAC TECHNOLOGIES, INC. FOR THE YEAR
ENDED DECEMBER 31, 1996 AND THE NINE MONTHS ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,559,989
<SECURITIES> 0
<RECEIVABLES> 1,234,981
<ALLOWANCES> 14,952
<INVENTORY> 1,165,411
<CURRENT-ASSETS> 5,404,894
<PP&E> 549,401
<DEPRECIATION> 289,750
<TOTAL-ASSETS> 6,989,232
<CURRENT-LIABILITIES> 2,394,612
<BONDS> 0
0
0
<COMMON> 45,149
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,989,232
<SALES> 8,242,735
<TOTAL-REVENUES> 8,242,735
<CGS> 5,026,486
<TOTAL-COSTS> 5,026,486
<OTHER-EXPENSES> 4,338,332
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157,751
<INCOME-PRETAX> (1,279,834)
<INCOME-TAX> 1,256
<INCOME-CONTINUING> (1,281,090)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,281,090)
<EPS-PRIMARY> (0.31)
<EPS-DILUTED> 0
</TABLE>
