SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended: December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number: 0-24736
BioProgress Technology International, Inc.
(Exact name of registrant as specified in its charter)
Nevada 88-0361701
(State or other jurisdiction) (I.R.S. employer)
of incorporation or organization identification number
9055 Huntcliff Trace, Atlanta, Georgia 30350-1735
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 641-0264;
Securities registered pursuant to Section 12(b) of the Act: None;
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value (Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes X No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Rule 405
of Regulation S-K is not contained herein and will not 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-K or any amendment to this
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing: On
June 7, 1999, the closing inside bid and asked prices for the shares of common
stock of registrant, which is the sole voting stock outstanding of registrant,
were $1.28 and $1.43, respectively. On that date, there were approximately
33,052,137 shares of common stock outstanding. Affiliates held 16,484,066 shares
of this stock; thus, the aggregate market value of the voting stock held by
non-affiliates approximated $22,335,910. Indicate the number of shares
outstanding of each of the registrant's classes of common stock as of the latest
practicable date: As of June 7, 1999, there were approximately 33,052,137 shares
outstanding.
Registrant had nominal revenues during fiscal 1998.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents incorporated by reference and the Part of this Form
10-KSB into which the document is incorporated: None.
<PAGE>
PART I.
Item 1. Description of Business:
History: BioProgress International, Inc. (the "Company"), was incorporated in
California on March 5, 1990. Subsequently, shares of the common stock of the
Company ("Common Stock") were distributed to the shareholders of the parent
corporation then owning the Company after registration with the U.S. Securities
and Exchange Commission ("Commission"). The Company changes its domicile to
Nevada in 1997.
Subsidiary Acquisitions:
Acquisition of BioProgress Technology, Inc.: On October 30, 1997, the
Company entered into a letter of intent with BioProgress Technology, Inc., a
Colorado corporation ("BioProgress Technology"), which was followed on November
17, 1997, by a formal agreement (the "Reorganization Agreement"). Pursuant to
the Reorganization Agreement, the Company agreed to acquire all of the
outstanding capital stock of BioProgress Technology in exchange for 4,000,000
post-split shares of Common Stock.
Distributorship and Acquisition Agreement with BioProgress Technology
Limited (UK): In conjunction with the execution and delivery of the
Reorganization Agreement, the Company entered into an agreement (the "BTL Option
Agreement") with certain of the shareholders of BioProgress Technology Limited,
an entity incorporated in the United Kingdom ("BTL"), which gave the Company the
option of acquiring all or any part, on a pro rata basis, of the issued and
outstanding proprietary interest of BTL on or before June 30, 1998. The Company
was required under the BTL Option Agreement to issue one and 1/2 shares of
Common Stock for each share outstanding of BTL, which then had 10,100,000 shares
outstanding; thus, if the option had been exercised in full and in accordance
with the original terms of this agreement, the Company would have issued
15,150,000 shares of Common Stock. BTL was required to have had no more than
10,100,000 shares outstanding, and the Company was required to have had no more
than 5,000,000 shares of Common Stock issued and outstanding and to have
completed or be in a position to have completed the sale of such number of
shares of Common Stock at a price of no less than $5.00 per share so as to
generate no less than $4,000,000 net of all costs. The terms and conditions of
the BTL Option Agreement were not met, however, and the Company and original
signators elected to amend the agreement and go forward with the acquisition of
BTL by the Company.
On June 30, 1998, the Company and BTL amended the BTL Option Agreement. First,
the maximum number of shares BTL was allowed to have outstanding at the closing
date was raised from 10,100,000 to 16,000,000. Second, the requirement that the
Company have no more than 5,000,000 shares of Common Stock issued and
outstanding and to have completed or be in a position to have completed the sale
of such number of shares of Common Stock at a price of no less than $5.00 per
share so as to generate no less than $4,000,000 net of all costs was waived.
Third, the Company undertook to assume up to a maximum of $1,000,000 in
liabilities, satisfying such through the issuance of shares of Common Stock
valued at the inside bid price on the closing date. The closing date was changed
from June 30, 1998, to no later than March 31, 1999. The Company acquired
approximately 62% of BTL on November 11, 1998, and acquired the remaining 38% of
BTL on December 31, 1998, issuing 22,818,446 shares of Common Stock as the sole
consideration for the acquisition.
Acquisition of DHA Nutrition Limited (UK): On July 31, 1998, the Company
agreed to acquire DHA Nutrition Limited (UK), an entity organized in the United
Kingdom ("DNL"), as a wholly-owned subsidiary in exchange solely for 400,000
shares of Common Stock. (These shares were restricted from sale, assignment or
disposal for 18 months beginning July 31, 1998.) The acquisition closed on
August 12, 1998. The number of shares which the Company issued in the
acquisition of DNL may be increased in the event that DNL's cumulative gross
revenues in respect of its feed supply sales exceed L1,500,000 (STERLING) in
the period to September 30, 1999, and exceed L5,000,000 (STERLING) in the
period beginning October 1, 1999, and ending September 30, 2000. In these
events, the Company will issue to the former DNL shareholders an additional
200,000 and 400,000 shares of Common Stock, respectively. Further and in
addition to the foregoing shares, if DNL's cumulative gross revenues in respect
of its food supply sales exceed L150,000 (STERLING) in the period to September
30, 1999, and exceed L500,000 (STERLING) in the period beginning October 1,
1999, and ending September 30, 2000, the Company will issue an additional
100,000 and 200,000 shares of Common Stock, respectively.
The sole asset of DNL on the date of acquisition was an agreement with Martek
Biosciences Corporation ("Martek"), a publicly-held corporation organized in the
United States whose securities trade on the NASDAQ System maintained by the
National Association of Securities Dealers, Inc. DNL is working with Martek to
develop the market in the United Kingdom for the use of Martek's nutritional
oils in infant formula, vegetarian foods, dietary supplements and agro feed
markets. Martek has identified and patented DHA (docosahexaenoic acid) producing
varieties of micro algae (sea plankton), and has developed techniques for the
production of both a powder form and an oil form of DHA. The oil form of DHA,
management feels, is an excellent candidate for delivery using the film system
developed by BTL.
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On closing of the acquisition of DNL by the Company, Mesrrs. Muncaster, Longley
and Brown were named to the board of DNL and assumed analogous officerial
positions with DNL as they maintain with the Company and BTL. Correspondingly,
the principal shareholder of DNL, Mr. Graham Hind, was named to the board of the
Company and was appointed Vice-President of Sales and Marketing of the Company
and BTL.
Martek has granted DNL exclusive DHA nutrition rights to develop a meat concept,
and on July 23, 1998, DNL entered into a development agreement with ABN Foods
Limited, which is one of Europe's largest feed companies, to develop this
opportunity with the support of several U.K retailers.
The Company horizontally expanded its product line as a result of the DNL
acquisition, and gained direct access to several leading retailers in the U.K.,
which, management feels, will offer potential to expand the customer base for a
proposed line of vegetarian soft-capsule dietary supplements by BTL.
Product Acquisition and License Agreements:
Product Acquisiton from Trutona International: On February 15, 1999, the
Company acquired from Trutona International, Inc., a privately-held
Atlanta-based corporation ("Trutona"), patents, licenses and trademarks relating
to a broad range of products, including an award winning range of flushable and
biodegradable disposable products designed by Trutona. The Company paid Trutona
$1,500,000 in the acquisition, of which $750,000 was paid through the delivery
of 1,875,000 shares of Common Stock at an agreed price of $.40 per share, with
the remainder payable on or before December 31, 1999, through either the
delivery of cash or of additional shares of Common Stock valued at $.40 per
share, or any combination of the two at the option of the Company. The products
acquired include an ultra thin, flushable and biodegradable line of feminine
sanitary napkins which were recently selected for a "Millennium Product" award
under a program initiated by the British Government to promote innovative
technological achievements. Trutona is an affiliate of the Company since Messrs.
Muncaster, Longley and Brown are directors, officers and significant
shareholders of each entity.
License to Consolidated EcoProgress Technologies: On March 23, 1999, the
Company completed the sale of a license to Consolidated EcoProgress Technologies
("EcoProgress"), a Canadian company with securities traded on the Vancouver
Stock Exchange. The license was sold for the sum of U.S. $1,500,000 and gives
EcoProgress the exclusive right to manufacture, sell and distribute in the U.S.
a line of flushable and biodegradable disposable products employing the
intellectual property that the Company acquired from Trutona. EcoProgress paid
$380,000 cash at closing and the remaining $1,120,000 was paid through the
issuance of 1,400,000 shares of free trading common stock in EcoProgress at an
agreed price of $.80 per share. The sale allowed the Company to recoup the
entire price paid by the Company to Trutona for the technology. In addition to
the consideration paid at closing the Company is entitled to receive up to a
maximum of $3,500,000 by way of royalty on gross revenues achieved by
EcoProgress. Contemporaneous to the completion of the sale to EcoProgress the
Company and EcoProgress executed a research and development agreement that
provides for the Company to exclusively develop products subject of the license
for a minimum term of two years.
Consulting Agreements:
Jade Partnership International Consulting Agreement. On April 1, 1998, the
Company entered into a consulting and option agreement with The Jade Partnership
International, Inc., a Delaware corporation ("Jade") owned by affiliates of the
Company. Under this contract, Jade assisted the Company in obtaining equity and
debt financing, and provided general business management, administration
services, international licensing and sales and marketing strategies. This
agreement provided that the Company was to have paid $50,000 per month as a fee
to Jade which, at the option of Jade, was convertible into common stock of the
Company at a price of $.28 per share, the then market price. The agreement was
terminated during the latter part of 1998, with the Company agreeing to pay Jade
the sum of $356,595.68 in fees. Jade elected to convert this amount into shares
of Common Stock, agreeing to receive 1,273,556 shares on December 21, 1998. The
stock will be issued when the Company is again current in its reports with the
Commission.
Ormiston-Gore Securities Consulting Agreement with the Company. On April 1,
1998, the Company entered into a financial consulting agreement with
Ormiston-Gore Securities Limited ("OGSL"), a Bahamian investment and financial
services company. Under this contract, OGSL provided services for the Company in
obtaining equity and debt financing. All services had been rendered as of
November 12, 1998. The Company agreed to pay OGSL a minimum fee of $10,000 per
month which, at the option of OGSL, was convertible into common stock of the
Company at a price of $.28 per share, the then market price. The Company agreed
to pay OGSL the sum of $171,023.40 in fees. OGSL elected to convert this amount
into shares of Common Stock, agreeing to receive 610,798 shares on December 21,
1998. The stock will be issued when the Company is again current in its reports
with the Commission.
<PAGE>
Ormiston-Gore Securities Consulting Agreement with BTL. On April 1, 1998,
BTL entered into a financial consulting agreement with OGSL. Under this
contract, OGSL provided services for BTL in obtaining equity and debt financing
and also loaned BTL $230,746.36. All services had been rendered as of November
12, 1998. The Company agreed to pay OGSL the sum of $230,746.36 in settlement of
the loan made by OGSL to BTL. OGSL elected to convert this amount into shares of
Common Stock at a price of $.28 per share, the then market price, agreeing to
receive 824,094 shares on December 21, 1998. The stock will be issued when the
Company is again current in its reports with the Commission.
Business Conducted by the Company and its Subsidiaries: The Company is a
development stage company engaged in the research, development, manufacturing,
marketing, sales and distribution of products that use water soluble and
biodegradable films. During 1998, the Company focussed on the development and
commercialization of its unique and proprietary process, the XGel(TM) Film
System ("XGel(TM) FS"). The XGel(TM) FS is used to produce soft capsules that
are free-from animal by-products; gelatin in particular. Soft capsules are
commonly recognized as products that contain a wide variety of non-aqueous
fillings either in ingestible form, such as vitamin, herbal and mineral
supplements and as oral delivery systems for drugs; or in non-ingestible form,
such as paintballs and toiletries (bath and aromatherapy oils).
Gelatin is a protein, which is predominantly derived from animal renderings. For
many years gelatin has proven to be an acceptable and cost-effective
encapsulation medium for soft capsules; however, the Company is of the opinion
that this position is changing. Following the outbreak in Europe of Bovine
Spongiform Encephalopathy ("BSE"), or "mad cow" disease, all animal derived food
and by-products have come under the scrutiny of the scientific community and
legislators for fear that BSE may have entered the human food chain. The reason
for concern is that BSE may be linked to Creutzfeldt Jakob Disease ("CJD"),
which is fatal to humans. During 1997, twelve deaths from CJD were reported in
Great Britain.
The Company believes that its XGel(TM) FS is the only viable alternative for
consumers who are anxious to switch to animal-free products in the global market
for soft capsules. In addition, the XGel(TM) FS opens up a substantial untapped
market for animal-free soft capsules that exists amongst vegetarian and
religious groups. These groups, because of belief or culture, refuse to consume
gelatin derived from cows or pigs, or in some cases, from any source. In
addition, market research carried out in the United States and in Europe has
indicated that in excess of 30% of all families are making efforts, on a regular
basis, to remove animal products from their diet.
The XGel(TM) FS not only provides consumers with the choice of an animal-free
soft capsule, but its unique and revolutionary design delivers significant
advantages in the manufacturing process when compared to traditional
encapsulation processes. One such advantage is the elimination of capital
intensive equipment employed to mix and heat gelatin prior to its delivery to
the encapsulating machine. A further example of the XGel(TM) FS's efficiency
lies in its ability to produce soft capsules that do not require drying before
being packed. Using traditional methods of manufacture, soft capsules may take
up to 48 hours to dry, thereby requiring a substantial investment in inventory
financing and resources. The Company believes its XGel(TM) FS to be the first
revolutionary development within the encapsulation industry since it was first
established in 1935. The Company has identified several new and substantial
market opportunities that can benefit from the XGel(TM) FS and which are not
available to traditional soft capsule manufacturers because of the limitations
imposed by the use of gelatin. The Company's strength lies in innovation and the
ability to commercialize innovative products. The Company is committed to a
research and development program targeted to introduce enhancements to the
XGel(TM) FS on a regular basis, which will expand the opportunities for both
horizontal and vertical penetration of the Company's target markets.
During 1998 the Company made two acquisitions. The first acquisition, effected
July 31, 1998, was the purchase of the entire issued share capital of DNL, as
discussed above. DNL is a U.K. based company having certain exclusive rights to
distribute and develop the market for certain products of Martek Biosciences,
Inc. (NASDAQ: MATK). Two such products are Biomass and DHA (Docosahexaenoic)
oil. These products have the benefit of substantial clinical evidence that
supports their critical importance as additives to the diet of vegetarians and
pregnant mothers. For example, in over fifty countries around the globe,
Biomeal, a derivative of Biomass, is a mandatory additive to baby formula. The
strategy behind the acquisition of DNL is to provide the Company with access to
unique and important ingredients, which, when encapsulated in ingestible
XGel(TM) Film, will facilitate the world's first full range of vitamin, herbal
and mineral supplement products for vegetarians. During October 1998, the
Company executed a technology collaboration agreement with United Biscuits
Frozen & Chilled Foods ("UBFCF"), a division of United Biscuits, a $3.6 billion
food producer based in the U.K. UBFCF is the owner of the leading brand of
vegetarian prepared foods within the U.K., generating brand sales revenues in
excess of $75 million. The agreement provides for the Company to develop a full
line of vegetarian dietary supplements to be sold in the U.K. under the UBFCF's
brand name. The Company is exploring the possibility of introducing the proposed
branded range of vitamin, herbal and mineral supplement products to the market
in North America. In late 1998 the Company effected its second acquisition
within the year by completing the acquisition of BTL, also as discussed above.
BTL was and is responsible for all research and development activities related
to the XGel(TM) FS.
On February 15, 1999, the Company completed the purchase of certain patents and
intellectual property rights relating to water dispersible and biodegradable
products from Trutona, as discussed above. The patents and intellectual property
purchased from Tutrona have a symbiotic relationship to the Company's patents,
intellectual property and knowledge base and, together, position the Company as
a leading technologist in the field of water soluble and biodegradable composite
<PAGE>
products. Subsequently, on March 23, 1999, the Company completed the sale of a
license to EcoProgress which permits EcoProgress to use certain of the patents
and intellectual property purchased from Trutona in a broad range of products
including, but not limited to, flushable and biodegradable feminine hygiene
pads, biodegradable diapers for infants, flushable and biodegradable pads for
incontinent adults, and water soluble gowns and utensils for use in medical
applications. The EcoProgress license expressly excludes all rights to the
Company's XGel(TM) FS and resultant products. EcoProgress has several major
Canadian retailers as its customers, including Overwaitea, London Drugs and
Safeway.
This year has been one of foundation for the Company. Many major companies
operating in the world's largest markets have approached the Company for details
of the XGel(TM) FS and for the purpose of exploring possibilities for joint
ventures, licenses, purchase of XGel(TM) FS equipment, or co-development of
products for sale through their existing channels. The Company's management
intends to explore all such opportunities in the search for maximum value for
its shareholders.
During the year, the Company acquired many of the physical and human resources
it needs to commercialize the XGel(TM) FS, and to prepare the necessary
administration, manufacturing, marketing, sales and distribution resources and
systems needed to reliably deliver high quality and cost effective products to
its targeted customers. Part of the preparation program included delivering
sample products of the Company's non-ingestible range to large and medium sized
target customers. Each potential customer subjected the Company's samples to
stability and performance testing. The results of each such test showed the
Company's samples to either meet or exceed the performance characteristics of
comparable gelatin based products. The Company has commenced the rollout of
non-ingestible soft capsules and anticipates having its range of ingestible soft
capsules completed during the final quarter of 1999.
Description of Products: The Company's primary focus is to commercialize its
XGel(TM) FS. Products currently in development that are not related to the
XGel(TM) FS include flushable and biodegradable pouches for colostomists. These
and other products, which are subjects of the Company's research and development
programs, are not expected to contribute to the Company's planned revenues
during the current year.
XGel(TM) FS: The Company's soft capsule technology can be considered as two
separate technologies: the XGel(TM) FS for non-ingestible soft capsules, which
is fully developed and in use, and the XGel(TM) FS for ingestible soft capsules,
which is in the final stages of its development program.
The Company believes that its XGel(TM) FS has significant advantages over
traditional gelatin based soft capsule production machinery. These advantages
are: Lower Raw Material Costs: The cost of XGel(TM) Film per tonne is currently
marginally less than that of gelatin in powder forms. There are no additional
costs incurred to deliver XGel(TM) Film to the encapsulating head; whereas,
gelatin has to be mixed with glycerin to form a liquid film. Reduced Capital
Investment and Manpower: The availability of XGel(TM) Film in a film format
eliminates the need for mixing containers and vats currently used to prepare
gelatin for the encapsulation machine. In addition, expensive machinery is
needed to maintain the viscosity of gelatin during its transportation to the
encapsulation machine. The resultant savings to the Company in terms of capital
investment and human resources compared to those of its competitors are
significant. Multi-Task Encapsulating Head: A modular design of the filling,
sealing, and cutting head makes it possible to produce capsules having a range
of shapes and sizes with differing fills during the same encapsulation cycle.
Traditional machinery cannot deliver this flexibility. Improved Speed of
Processing: To achieve the correct viscosity for processing, gelatin requires
wide changes in temperature prior to it being fed to the encapsulation machine.
The time taken to achieve this change in temperature is one of the controlling
factors that determine the speed at which the encapsulation machine can operate.
XGel(TM) Film requires no such temperature variation, and its use significantly
increases potential processing speeds to a level controlled by the rate of
injection of the material to be encapsulated. Reduced Drying Time: Gelatin soft
capsules require up to 48 hours in which to dry after being made. This lengthy
process requires a substantial resource in terms of material handling equipment
and storage facilities. XGel(TM) soft capsules require less than 1 hour to dry.
XGel(TM) FS - Non-Ingestible Products: This unique process is the subject
of an international patent application. The raw material used in the process is
supplied in a film format (XGel(TM) Film) and is made from a water soluble and
biodegradable polymer, which is naturally resistant to oils. This version of
XGel(TM) Film exhibits good elasticity and forms a very strong bond when sealed
during the encapsulation process.
The first products to be produced using the XGel(TM) FS comprise a range of
moisturizing bath oils. There are four different soft capsules in the range;
each containing a different fragrance designed to deliver a sensual, relaxing,
refreshing or invigorating ambience to the bathroom.
The Company is working with a leading producer of enzymes and bacteria, with a
view to developing a novel delivery system for use in composting, agro-chemical
and fat removal environments.
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The Company has identified soft capsules produced using the XGel(TM) FS as
potentially superior performing paintballs, as used in the fast growing leisure
pursuit. The Company is conducting research to determine how the advantages of
the XGel(TM) FS can be best applied to the paintball industry.
XGel(TM) Film System - Ingestible Products: The Company's second
technology, which is the subject of a patent application, relates to materials
that utilize all of the benefits of XGel(TM) FS, but which can be made from FDA
approved natural and sustainable resource materials, and are, therefore
ingestible. These materials are code named ProTex. ProTex is produced in a film
format that enables it to be processed using similar machinery as used for
non-ingestible soft capsules. Using proprietary techniques, ProTex films may be
formulated and/or coated to produce an encapsulation medium with broad ranging
characteristics that facilitate the oral delivery of oils, pastes and powders by
time or at site within the human body. ProTex film is processed using the
XGel(TM) FS.
The Company has under development a comprehensive range of vitamin, herbal and
mineral supplements. The Company does not intend to release for sale any of its
ingestible products until such time as they can be produced in manufacturing
premises built to GMP (Good Manufacturing Practice) standards. The Company is in
discussions with U.K. based property developers with a view to having a GMP
facility constructed to its specifications for subsequent occupancy under lease
during the final quarter of this year
Markets: The gelatin capsule market is divided into two sectors: "hard" or
"soft," according to the nature of the capsule shell. Hard capsules are
manufactured in two pieces and then filled with either, a powdered dose or a
liquid dose "washed" with nitrogen. These processes are expensive, and the
resultant capsules are used predominantly to carry orally administered
medications and drugs. Soft capsules are formed and filled simultaneously and
predominantly carry liquid fills which enables their use in a far wider variety
of products, including pharmaceutical, vitamin, herbal and mineral, toiletries
and paintballs.
The gelatin soft capsule market is currently dominated by two companies, namely
R. P. Scherer Inc., (a subsidiary of Cardinal Health, Inc.), and Banner
Pharmacaps Inc. (a subsidiary of Sobel NV) Recently, R. P. Scherer Inc. ("RPS"),
was acquired by Cardinal Healthcare, Inc, for $2.4 billion. RPS has headquarters
in Troy, Michigan, and 24 operating subsidiaries. Sobel NV is a Dutch
organization with a number of subsidiaries, including Banner Pharmacaps, Ltd.,
Banner Pharmacaps Inc., and Sobel Pharma BV.
The Company believes that its XGel(TM) FS gelatin-free soft capsule will be
extremely attractive to vegetarians and certain ethnic and religious groups,
such as Hindus and Muslims. These groups represent large potential markets. The
Muslim population now stands globally at 935 million. There are an estimated 2
million vegetarians in the United States, and 250,000 in the United Kingdom. In
addition, market research has indicated that in excess of 29 million households
in the United States qualify as "meat reducers" by making a regular effort to
remove animal products from their diet.
The value of a soft capsule rests in its contents. The shell is simply a means
of transporting the contents from the manufacturer to the consumer. Some soft
capsule manufacturers produce the contents as well as the shell and sell the
finished product under their own brand or for use in private label brands. Other
manufacturers simply act as sub-contract suppliers to the proprietors of main
brands.
Soft capsules reach consumers via a multitude of distribution channels. In the
United States dietary supplements and pharmaceuticals are sold through
traditional OTC outlets, as well as "in-store" locations at large food
retailers. The Natural Food and Healthcare market, which in the United States
grew by 23% to $13 billion during 1997, is serviced by around 8,000 small and
medium sized stores that tend to purchase from national distributors, such as
Tree of Life, Cornucopia and Lotus Light. Direct mail suppliers account for a
small but important part of the market. In general terms, the sales and
distribution channels to be used by the Company are mature and can be easily
identified.
The market for dietary supplements in the United Kingdom was approximately $500
million in 1997. The leading producer in the United Kingdom is Peter Black
Healthcare Limited, which accounts for approximately 30% of the entire market.
The market for soft capsules in the pharmaceutical market is vast and global.
The Company intends to seek strategic alliances with pharmaceutical companies to
enter this high risk and high cost of entry market.
Marketing and Sales:
Marketing: The Company's initial marketing and sales strategy is to create
market expansion by facilitating animal free soft capsules for consumers within
the vegetarian and religious groups referred to earlier. The second phase to the
Company's plan is to offer animal free soft capsules to existing consumers of
gelatin based soft capsules. In addition, the Company anticipates that new
markets for its products will be developed as future versions of its XGel(TM) FS
are proven.
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The Company has adopted a dual approach to commence sales of non-ingestible soft
capsules. First, the Company will sell a range of branded toiletry and
aromatherapy products to the Natural Food and Healthcare market in the United
States and Western Europe. The Company is in discussions with established
distributors who currently service in excess of 6,000 retail outlets within
these territories. The second approach is to produce a similar range of products
for some of the world's leading retailers for resale under their own-brand
labels. The Company is currently in discussions with major retailers who
collectively have in excess of 3,500 outlets around the globe.
Sales: The Non-Ingestible Range: The Company is in discussion with several
major retail organizations and each has expressed an interest in a range of
private label gelatin-free soft capsules for toiletries. Under a private label
scenario, the Company will produce soft capsules containing oils and fragrances
specified by the customer. Many opportunities exist for expansion of the private
label market; particularly in the rapidly expanding Natural Foods and Healthcare
market evident in the USA and Western Europe.
Sales: The Ingestible Range: The Company has executed a Technology
Collaboration Agreement with UBFCF, a part of the United Biscuits plc group,
which enjoys annual revenues of $3.6 billion. UBFCF is the owner of the leading
brand of vegetarian prepared foods for the U.K. market, where it is the brand
leader by a large margin. The Company approached UBFCF with the idea that,
because of its dominant market position, the brand would be the perfect vehicle
through which to launch the first full line of dietary supplements designed
specifically for vegetarians. The Company, because of its unique technology, is
the only company capable of making such a proposition. Under the terms of the
Technology Collaboration Agreement the Company has with UBFCF, the Company has
been asked to compile a range of dietary supplements that deliver the perfect
cocktail to address the shortfall of nutrition evident in a vegetarian diet.
This task will be carried out by the Company's subsidiary, DNL.
Certain formulations of XGel(TM) Film will enable its use as a drug delivery
system. The inherent difficulty of entering the pharmaceutical industry, and its
complex nature, behoves the Company to seek allegiances with established
organizations. The Company has appointed a patent strategist to ensure maximum
protection is achieved with regard to this particular sector, and intends to
employ consultants with specialist knowledge of the industry who have access to
decision makers. It is too early in the Compan s development to comment in more
detail on the possibilities within this market sector.
Manufacturing: During the year, the Company commissioned its XGel(TM) FS at a
temporary manufacturing facility. Commissioning is now complete and the Company
has occupied a plant in March, Cambridgeshire, England, where it will produce
its non-ingestible range of products.
The Company's prime costs in producing soft capsules are comparable to those of
gelatin capsule manufacturers; however, the capital investment required per line
of XGel(TM) FS is significantly less than gelatin systems (approximately
one-fifth). In addition, operational costs are dramatically reduced using the
XGel(TM) FS by reason of the elimination of the need to dry capsules
post-production.
Research and Development: The XGel(TM) FS has potential for exploitation in many
new markets. The Company is committed to a research and development program
intended to produce new products for self-exploitation and, in some cases, for
third parties that have the resources needed to penetrate specialized and high
entry cost markets.
The research and development program seeks to explore the use of alternative
materials and formulations and to test their suitability to form capsules
suitable for ingestion and drug delivery by time and at site.
In parallel with the formulatory work, the Company aims to expand the processing
abilities of the XGel(TM) FS.
Throughout the research and development program specialist centers of excellence
are deployed and their expertise used to optimize materials and processes.
Y2K Disclosure: The Company has conducted a review of its systems and processes
to determine what affect, if any, the Y2K computer problem may have on its
operations. The Company is reasonably assured that no material disruption will
occur to its internal systems and procedures. The Company's suppliers have
provided the Company with written comfort that no material disruption is
envisioned to their operations. The Company has made no effort to validate any
of the statements made by its suppliers in this regard, therefore, it can
provide no assurance that disruption will not occur. Furthermore, in the event
that disruption does occur the Company is unable to predict the materiality that
such disruption may have on its operations.
Item 2. Description of Property: The Company, as of the date of this report,
owned no real or personal property, tangible or intangible, other than the
shares of its wholly-owned subsidiaries. The executive offices of the Company
are being provided by The Jade Partnership, a significant shareholder of the
Company owned by several of the executive officers and directors of the Company,
free of charge on a month-to-month basis. These offices are located at 9055
Huntcliff Trace, Atlanta, Georgia, 30350-1735. The telephone number at this
<PAGE>
address is (770) 641-0264. BioProgress Technology, BTL and DNL are leasing at
market rates from a third party approximately 15,000 square feet of laboratory,
executive office, manufacturing and storage facilities at Unit 1, Norwood Road,
March, Cambridgeshire, United Kingdom PE15 8QD. The telephone number at this
address is 011-44-1354-655-674.
Item 3. Legal Proceedings: No material legal proceedings to which the Company
(or any officer or director of the Company, or any affiliate or owner of record
or beneficially of more than five percent of the Common Stock, to management's
knowledge) is a party or to which the property of the Company is subject is
pending, and no such material proceeding is known by management of the Company
to be contemplated.
Item 4. Submission of Matters to a Vote of Security Holders: There were no
meetings of security holders during the period covered by this report.
Item 5. Market for Common Equity and Related Shareholder Matters: As of June 8,
1999, there were approximately 33,052,137 shares of Common Stock issued and
outstanding, which were held of record by approximately 308 shareholders. The
Common Stock is currently quoted on the Bulletin Board maintained by the
National Association of Securities Dealers, Inc., under the symbol "BPRG." There
was no trading in the Common Stock prior to August, 1996. The following table
sets forth the range of high, low and closing bid and asked prices per share of
the Common Stock as reported by National Quotation Bureau, Inc., for the
quarterly period indicated.
Closing
Calendar Quarter High Bid Low Bid Bid High Ask Low Ask Closing Ask
- ---------------- -------- ------- --- -------- ------- -----------
September 30, 1996 $ 4.50 $ 1.00 $ 4.375 $ 5.50 $ 2.00 $ 5.375
December 31, 1996 1.875 .75 1.75 2.25 1.25 2.25
March 31, 1997 .75 .75 .75 1.25 1.25 1.25
June 30, 1997 1.00 0.125 0.1875 1.25 0.375 0.4375
September 30, 1997 0.21875 0.125 0.1875 0.46875 0.25 0.4375
December 31, 1997 1.375 0.125 1.25 2.00 0.375 1.375
March 31, 1998 1.375 0.8125 1.125 1.75 0.90625 1.25
June 30, 1998 0.96875 0.25 0.5 1.125 0.46875 0.53125
September 30, 1998 0.65625 0.375 0.375 0.6875 0.46875 0.46875
December 31, 1998 0.4063 0.22 0.27 0.4688 0.25 0.31
March 31, 1999 0.8438 0.26 0.78 0.92 0.30 0.83
The above prices represent inter-dealer quotations without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.
Further, the above prices have been adjusted to reflect two previous reverse
share splits. On June 7, 1999, the closing inside bid and asked prices for the
Common Stock were $1.28 and $1.43, respectively. On that date there were eleven
market makers publishing quotes.
The Company has paid no dividends on the Common Stock since inception and does
not expect to pay dividends in the foreseeable future. There are, however, no
restrictions on the payment of dividends.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
Results of Operations: The Company had no operations, revenues or income during
1996 and 1997, and only nominal revenues or income during 1998. BioProgress
Technology was organized in late 1997 and was in the development stage during
1997 and 1998. BTL and DNL were also in the development stage during the period
covered by this report. A full description of the development efforts of the
Company, BioProgress Technology, BTL and DNL is set forth above under Item 1.
The Company's expenses on a consolidated basis with its subsidiaries during the
period covered by this report were administrative and organizational in nature.
Due to the foregoing, no meaningful comparison may be made between fiscal years.
Liquidity and Capital Resources: During the first six months of 1999, Management
enacted a string of measures to improve the Company's liquidity and capital
resources and prepare it for a switch in focus from research & development to
production, marketing & sales.
Relocation of facilities: Upon completion of the initial commissioning of its
XGel(TM) Film System the Company vacated its temporary factory and relocated to
premises in March, Cambridgeshire, England, a low cost zone. At the same time,
the Company relocated its research & development laboratories from the St.
John's Innovation Centre, Cambridge, thereby consolidating all operational
activities in the one facility. This consolidation of operations has produced
significant savings in fixed costs, reduced the costs of travel and
communication, and generally increased the efficiency of operations.
<PAGE>
Sale of license: The sale of the license to Ecoprogress produced $100,000 cash
and a cash receivable of $346,000 due for payment before the end of July 1999.
Additional consideration in the form of 1,066,666 shares of Ecoprogress was
received in respect of the license. Within each calendar month the Company is
permitted to sell Ecoprogress shares to realize $100,000, without the consent of
Ecoprogress. Subject to serving 30 days prior notice on Ecoprogress, the Company
may sell such number of Ecoprogress shares it deems necessary to meet its cash
requirements. In addition, during the third quarter of this year the Company
expects Ecoprogress to commence paying royalties to the Company in respect of
sales made by it of the Trutona products under license.
Sale of Preference Shares: The Company has made significant improvements to its
liquidity and capital resources by the sale of Preference Shares to accredited
investors. In the first six months of this year the Company received proceeds of
$1,074,475 from the sale of Preference Shares. These proceeds have been used to
reduce trade and short term liabilities to a nominal value and for general
working capital purposes, including research & development and the construction
of plant and machinery. Management is confident that the sale of the Company's
Preference Shares to accredited investors will continue at times and in such
amounts as Management deems necessary to finance the Company's working capital
requirement for the next twelve months.
Conversion of debt to equity: As soon as is practicable, the Company intends to
complete the agreements it has secured with the Jade Partnership and
Ormiston-Gore Securities Limited to convert accrued debt to equity in the
Company.
The Company is in discussion with several parties regarding joint ventures,
license agreements and distribution agreements for its XGel(TM) Film System and
derived products. In addition, the Company is engaged in discussions with
institutional investors and with industry peers regarding an investment in the
Company.
Management believes and is confident that the aforementioned actions and
activities by themselves will generate sufficient cash to fully meet its working
capital requirement for the twelve months following the date of this report.
Compliance with Beneficial Ownership Reporting Rules: Section 16(a) of the
Securities Act of 1934, as amended ("Exchange Act"), requires the executive
officers and directors of the Company, and persons who beneficially own more
than 10% of the Common Stock, to file initial reports of ownership and reports
of changes in ownership with the Commission. These officers, directors and
shareholders are also required to furnish the Company with copies of certain of
these reports. Based solely on a review of copies of reports furnished to the
Company during its fiscal year ended December 31, 1998, and thereafter, or
written representations, if any, received by the Company from these persons that
no other reports were required, the Company believes that, during 1998, not all
applicable Section 16(a) filing requirements were satisfied; however, it has
been assured that the reporting persons are endeavoring to immediately file
these reports.
Item 7. Financial Statements:
Report Of Independent Public Accountants
<PAGE>
Arthur Andersen & Company
To the Board of Directors and Stockholders
of BioProgress Technology International, Inc:
We have audited the accompanying consolidated balance sheet of BioProgress
Technology International, Inc. (a Nevada corporation) and subsidiaries as of
December 31, 1998, and the related consolidated statements of operations,
changes in stockholders' equity (deficit) and cash flows for each of the two
years in the period ended December 31, 1998. 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
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of BioProgress Technology
International, Inc. and subsidiaries as of December 31, 1998, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1998 in conformity with generally accepted accounting
principles.
New York, New York
July 7, 1999
<PAGE>
<TABLE>
<CAPTION>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
ASSETS
------
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $ 82,119
Accounts receivable 12,675
Prepaid expenses and other current assets 52,357
-----------
Total current assets 147,151
PROPERTY AND EQUIPMENT, net (Notes 1 and 4) 156,792
GOODWILL, net 5,666,159
OTHER ASSETS 32,569
-----------
Total assets $ 6,002,671
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Deferred revenue $ 114,456
Accounts payable 287,315
Amounts owed to related parties (Note 8) 758,365
Accrued expenses and other current liabilities 53,716
-----------
Total current liabilities 1,213,852
LONG-TERM DEBT (Note 6) 1,914
-----------
Total liabilities $ 1,215,766
===========
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $0.008 par value-
50,000,000 shares authorized; 38,214,403 shares issued
and outstanding (Note 3) $ 66,694
Additional paid-in capital (Note 3) 6,132,870
Accumulated deficit (1,404,297)
Accumulated other comprehensive loss (8,362)
-----------
Total stockholders' equity (deficit) 4,786,905
-----------
Total liabilities and stockholders' equity (deficit) $ 6,002,671
===========
The accompanying notes to consolidated
financial statements are an integral
part of this balance sheet.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
<S> <C> <C>
NET REVENUE $ 28,118 $ --
COST AND EXPENSES:
Cost of revenues (42,287) --
General and administrative expenses (318,545) (499,011)
Professional fees (258,195) --
Management fee (314,377) --
------------ ------------
Total cost and expenses (933,404) (499,011)
------------ ------------
Loss from operations and net loss applicable to
common stockholders ($ 905,286) ($ 499,011)
============ ============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED ($ 0.07) ($ 0.05)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 12,921,392 10,500,000
============ ============
The accompanying notes to consolidated
financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
DECEMBER 31, 1998 AND 1997
Accumulated Total
Additional Other Stockholders'
Common Paid-in Accumulated Comprehensive Equity
Shares Amount Capital Deficit Loss (Deficit)
------ ------ ------- ------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE at December 31, 1996 -- $ -- $ -- $ -- $ -- $ --
Net loss -- -- -- (499,011) -- (499,011)
Currency translation adjustment
comprehensive loss -- -- -- -- (2,226) (2,226)
-----------
Comprehensive loss -- -- -- -- -- (501,237)
-----------
Issuance of common shares 10,500,000 380 327,791 -- -- 328,171
----------- ----------- ----------- ----------- ----------- -----------
BALANCE at December 31, 1997 10,500,000 380 327,791 (499,011) (2,226) ($ 173,066)
===========
Net loss -- -- -- (905,286) -- ($ 905,286)
Currency translation adjustment -- -- -- -- (6,136) (6,136)
-----------
Comprehensive loss (911,422)
-----------
Issuance of common shares for
BTL acquisition 22,818,446 22,818 1,723,430 -- -- 1,746,248
Issuance of common shares 4,895,957 43,496 4,081,649 -- -- 4,125,145
----------- ----------- ----------- ----------- ----------- -----------
BALANCE at December 31, 1998 38,214,403 $ 66,694 $ 6,132,870 ($1,404,297) ($ 8,362) $ 4,786,905
=========== =========== =========== =========== =========== ===========
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss ($905,286) ($499,011)
Adjustments to reconcile net loss to net cash used in operating
activities-
Changes in operating assets and liabilities-
Depreciation and amortization 40,742 8,823
Increase in accounts receivable (12,675) --
(Increase) in prepaid expenses and other current assets (51,704) (5,928)
Increase in deferred revenue 79,343 35,112
Increase in accounts payable 261,864 25,451
Increase in accrued expenses and other current liabilities 568,349 191,171
--------- ---------
Net cash used in operating activities (19,367) (244,382)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock -- 245,868
Proceeds from sale of preferred stock 100,000 --
--------- ---------
Net cash provided by financing activities 100,000 245,868
--------- ---------
Net increase in cash and cash equivalents 80,633 1,486
CASH AND CASH EQUIVALENTS, beginning of year 1,486 --
--------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 82,119 $ 1,486
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
Cash paid during the year for interest $ 1,995 $ 329
========= =========
The accompanying notes to consolidated
financial statements are an integral
part of these statements.
</TABLE>
<PAGE>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BACKGROUND AND ORGANIZATION:
History-
--------
BioProgress Technology International, Inc. (the "Company"), was
incorporated in California on March 5, 1990, under the name of U.S.
Flywheel, Inc., as a subsidiary of Sunbird Technologies, Inc., a Utah
corporation ("Sunbird Technologies"). In June, 1991, the Company acquired
three patents and a license relating to flywheel technology from Sunbird
Technologies and its affiliates in exchange for common shares of the
Company "Common Stock". These shares of Common Stock were subsequently
distributed to the shareholders of Sunbird Technologies after registration
with the U.S. Securities and Exchange Commission ("Commission"). The
Company subsequently transferred its flywheel technology to a partnership
(the "Partnership") in exchange for a minority interest in the Partnership.
The Partnership interest of the Company was subsequently sold, after which
the Company began its search for a business in which to engage.
Operations-
-----------
The group's primary operations are in the United Kingdom. The principal
activities of the group are the development, manufacture, and sale of
non-gelatin encapsulation materials for the dietary supplement,
pharmaceutical and recreational industries, cosmetics and other related
applications.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation-
----------------------------
The accompanying consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiaries: BioProgress
Technology Inc., BioProgress Technology Limited, and DHA Nutrition Limited.
All significant intercompany transactions and balances have been
eliminated.
Use of Estimates-
-----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash and Cash Equivalents-
--------------------------
Cash and cash equivalents represent all highly liquid investments with
maturities of three months or less when purchased.
Revenue Recognition-
--------------------
Revenue is recognized as products are shipped or services are performed.
<PAGE>
Property and Equipment-
-----------------------
Property and equipment is stated at cost. Depreciation of property and
equipment is provided for using the straight-line method over the estimated
useful lives of the respective assets, ranging from 4 to 7 years.
Amortization of leasehold improvements is provided for over the related
lease term.
Long-Lived Assets-
------------------
The provisions of Statement of Financial Accounting Standards (SFAS) No.
121 "Accounting for the Impairment of Long Lived Assets and for Long Lived
Assets to be Disposed of" requires, among other things, that an entity
review its long lived assets and certain related intangibles for impairment
whenever changes in circumstances indicate that the carrying amount of an
asset may not be fully recoverable. Management does not believe that any
such change in circumstances has occurred.
Earnings Per Share-
-------------------
Effective for the year ended December 31, 1998 the Company adopted SFAS No.
128 "Earnings per share". The adoption of SFAS No. 128 requires the
presentation of basic earnings per share and diluted earnings per share.
Basic loss per common share was calculated based upon the net loss
available to common stockholders divided by the weighted average number of
shares of common stock outstanding during the period.
Foreign Currency Translation-
-----------------------------
The financial statements of the foreign subsidiaries are translated into
U.S. dollars using the exchange rate in effect at year end for balance
sheet accounts and the average exchange rate in effect during the year for
revenue and expense accounts with currency translation adjustments
reflected in other comprehensive loss in stockholders' equity. Gains and
losses from foreign currency transactions, such as those resulting from the
settlement of foreign receivables or payables, are included in the
consolidated statement of operations. The functional currency of foreign
operations is the local currency.
Income Taxes-
-------------
The Company applies the deferred method of accounting for income taxes
whereby deferred taxes are recognized for tax consequences of temporary
differences by applying enacted statutory tax rates to differences between
financial statements carrying amounts and the tax bases of existing assets
and liabilities.
<PAGE>
Comprehensive Income-
---------------------
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No.130 - "Reporting Comprehensive Income". This
standard increases financial reporting disclosures and has no impact on the
Company's financial position or results of operations. Certain
reclassifications have been made to the December 31, 1997 consolidated
financial statements to conform with financial reporting requirements of
SFAS No. 130 and to reflect the acquisition of BTL which was accounted for
as a reverse acquisition (Note 3).
(3) ACQUISITIONS:
On October 30, 1997, the Company entered into a letter of intent with
BioProgress Technology, Inc., a Colorado corporation ("BioProgress
Technology"), which was followed on November 17, 1997, by a formal
agreement (the "Reorganization Agreement"). Pursuant to the Reorganization
Agreement, the Company agreed to acquire all of the outstanding capital
stock of BioProgress Technology in exchange for 4,000,000 post split shares
of Common Stock. Immediately prior to closing, the Company effected a one
for five (1:5) reverse stock split.
In conjunction with the execution and delivery of the Reorganization
Agreement, the Company entered into an agreement (the "BTL Option
Agreement") with certain of the shareholders of BioProgress Technology
Limited, an entity incorporated in the United Kingdom ("BTL"), which gave
the Company the option of acquiring all or any part, on a pro-rata basis,
of the issued and outstanding common shares of BTL on or before June 30,
1998. The Company was required under the BTL Option Agreement to issue 1
1/2 shares of Common Stock for each outstanding share of BTL, which then
had 10,100,000 shares outstanding; thus, if the option had been exercised
in full and in accordance with the original terms of this agreement, the
Company would have issued 15,150,000 shares of Common Stock. BTL was
required to have no more than 10,100,000 shares outstanding, and the
Company was required to have no more than 5,000,000 shares of Common Stock
issued and outstanding and to have completed or be in a position to
complete the sale of such number of shares of Common Stock at a price of no
less than $5.00 per share so as to generate no less than $4,000,000 net of
all costs. The terms and conditions of the BTL Option Agreement were not
met, however, the Company and original signators elected to amend the
agreement and go forward with the acquisition of BTL.
On June 30, 1998, the Company and BTL amended the BTL Option Agreement.
First, the maximum number of shares BTL was allowed to have outstanding at
the closing date was raised from 10,100,000 to 16,000,000. Second, the
requirement that the Company have no more than 5,000,000 shares of Common
Stock issued and outstanding and to have completed or be in a position to
complete the sale of such number of shares of Common Stock at a price of no
less than $5.00 per share so as to generate no less than $4,000,000 net of
all costs was waived. Third, the Company undertook to assume debt up to a
maximum of $1,000,000, satisfying such through the issuance of shares of
Common Stock valued at the average market price on the closing date. The
closing date was changed from June 30, 1998, to March 31, 1999. The Company
acquired approximately 62% of BTL on November 11, 1998, and acquired the
remaining 38% of BTL on December 31, 1998, issuing a total of 22,818,446
shares of Common Stock as sole consideration for the acquisition.
<PAGE>
The acquisition of BTL was treated as a reverse acquisition of the Company
by BTL. In a reverse acquisition the shareholders of a Company own less
than 50% of the post acquisition shares. The shareholders of BTL received
approximately 81% of the post acquisition shares of the Company and
therefore, BTL is the accounting acquirer. The financial information
presented is therefore that of BTL for 1997. Common stock and additional
paid-in capital have been restated such that the total dollar value of
common stock and additional paid-in capital for 1997 is split to reflect
the same ratio as the Company's common stock and additional paid-in capital
at that time. The Company's financial results are included in the
consolidated financial statements for a period of two weeks during 1998.
Goodwill generated in the acquisition of $5,666,159 will be amortized on a
straight-line basis over a period of 10 years.
On July 31, 1998, the Company agreed to acquire DHA Nutrition Limited (UK),
an entity organized in the United Kingdom ("DNL"), as a wholly-owned
subsidiary in exchange for sole consideration of 400,000 shares of Common
Stock. These shares will be restricted from sale, assignment or disposal
for 18 months beginning July 31, 1998. The acquisition closed on August 12,
1998. The number of shares which the Company issued in the acquisition of
DNL may be increased in the event that DNL's cumulative gross revenues in
respect of its Feed Supply sales exceed $2,495,700 in the period from
August 12, 1998 to September 30, 1999, and exceed $8,319,000 in the period
from October 1, 1999 to September 30, 2000. In this event, the Company will
issue to the former DNL shareholders an additional 200,000 and 400,000
shares of Common Stock, respectively. Further, and in addition to the
foregoing shares, if DNL's cumulative gross revenues in respect of its Food
Supply sales exceed $249,570 in the period from August 17, 1998 to
September 30, 1999, and exceed $831,900 in the period October 1, 1999 to
September 30, 2000, the Company will issue an additional 100,000 and
200,000 shares of Common Stock, respectively.
The acquisition of DNL was accounted for as a purchase. DNL's financial
results of operations are included in the consolidated financial statements
for a period of five months in 1998.
The following unaudited pro forma consolidated results of operations are
presented as if the BTL and DNL acquisitions had been made at the beginning
of the periods presented-
1998 1997
---- ----
Net revenue $ 42,731 $ --
Loss from operations and net loss
applicable to common stockholders ($1,557,426) ($ 622,184)
=========== ===========
Basic and diluted loss per common share ($ 0.12) ($ 0.07)
=========== ===========
<PAGE>
(4) PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost and consist of the following-
Estimated
1998 1997 Useful Lives
---- ---- ------------
Plant and machinery $ 155,188 $ 19,548 4
Equipment under capital leases 4,021 -- 4
Office equipment 18,189 -- 4
Laboratory equipment 26,353 29,620 6
--------- ---------
Less- Accumulated depreciation (46,959) (8,823)
--------- ---------
Total $ 156,792 $ 40,345
========= =========
Accumulated depreciation related to equipment acquired under capital leases
amounted to approximately $1,248 and $0 at December 31, 1998 and 1997,
respectively.
(5) LONG-TERM DEBT:
Long-term debt consists of capital lease obligations. The equipment lease
obligations are payable in monthly installments of $210, through May 2000.
The debt is collateralized by the related equipment. The Company's lease
obligations are due as follows-
1999 $2,520
2000 $1,914
======
(6) INCOME TAXES:
The Company has net operating loss carry forwards of approximately
$4,652,269 which expire in various years through 2013. The Company had
deferred tax assets (DTA's) at December 31, 1998 and 1997 of approximately
$1,861,000 and $498,012, respectively, representing the tax effect of the
net operating loss carry forwards. Due to uncertainty regarding the
ultimate amount of income tax benefits to be derived from the net operating
loss carry forwards, the company has recorded valuation allowances against
the entire DTAs.
(7) AMOUNTS OWED TO RELATED PARTIES:
On April 1, 1998, the Company entered into a consulting and option
agreement with The Jade Partnership International, Inc. ("Jade"), a
Delaware Corporation.
Certain directors of the Company, are controlling shareholders in Jade. The
Company had a contract with Jade, under which Jade assisted the Company in
obtaining equity and debt financing, and provided general business
management, administration services, international licensing and sales and
marketing strategies. In the opinion of management all transactions were at
<PAGE>
arms length. This agreement provided that the Company was to pay $50,000
per month as a fee to Jade which, at the option of Jade, was convertible
into Common Stock of the Company at a price of $0.28 per share. The
agreement was terminated during the latter part of 1998, with the Company
agreeing to pay Jade the sum of $356,595 in fees. Jade elected to convert
this amount into 1,273,556 shares of the Common Stock of the Company. This
conversion has yet to take place, but was approved by the board of
directors of the Company prior to December 31, 1998.
Certain directors of the Company are also directors of Trutona
International, Inc., a privately held Atlanta based corporation
("Trutona"). Details of a transaction entered into by the Company with
Trutona are described in Note 8.
(8) SUBSEQUENT EVENTS:
On January 25, 1999, the Company granted 2.5m stock options to executives.
These stock options are for ordinary shares of common stock and are
exercisable on the following terms-
Exercise
Options Expiring Price Number
---------------- ----- ------
12/31/2003 $0.35 500,000
12/31/2003 $0.75 500,000
12/31/2003 $1.25 500,000
12/31/2003 $1.75 500,000
12/31/2003 $2.25 500,000
---------
Total 2,500,000
=========
Trutona International, Inc.-
----------------------------
On February 15, 1999, the Company acquired from Trutona patents, licenses
and trademarks relating to a broad range of products, including a range of
flushable and biodegradable disposable products designed by Trutona. The
consideration payable to Trutona by the Company was $1,500,000 in the
acquisition, of which $750,000 was paid through the delivery of 1,875,000
shares of Common Stock at an agreed price of $0.40, with the remainder
payable on or before December 31, 1999, through either the delivery of cash
or of additional shares of Common Stock valued at $0.40 per share, or any
combination of the two at the option of the Company.
On March 23, 1999, the Company completed the sale of a license to
Consolidated EcoProgress Technologies, Inc. ("EcoProgress"), a Canadian
company with securities traded on the Vancouver Stock Exchange. The license
was sold for the sum of $1,500,000 and gives EcoProgress the exclusive
right to manufacture, sell and distribute in the US a line of flushable and
biodegradable disposable products utilizing the intellectual property that
the Company recently acquired from Trutona International. EcoProgress is to
<PAGE>
pay $380,000 in cash and the remaining $1,120,000 will be paid through the
issuance of 1,066,666 shares of free trading common stock in EcoProgress at
an agreed price of $1.05 per share. The sale allowed the Company to recoup
the entire price paid by the Company to Trutona for the technology. As of
the date of signing of these financial statements approximately $100,000
had been received.
On April 1, 1998, the Company entered into a financial consulting agreement
with Ormiston-Gore Securities Limited ("OGSL"), a Bahamian investment and
financial services company.
OGSL, under this contract, provided services for BTL in obtaining equity
and debt financing and also loaned $230,746 to the Company. All services
had been rendered as of November 12, 1998. The Company agreed to pay OGSL a
fee of $10,000 per month which, at the option of OGSL, was convertible into
common stock of the Company at a price of $0.28 per share. The Company
agreed to pay OGSL the sum of $171,023 for fees. OGSL elected to convert
this amount into 610,798 shares of the common stock of the Company. This
conversion has not yet taken place but was approved by the board of
directors of the Company prior to December 31, 1998.
OGSL elected to convert the outstanding loan of $230,746 into shares of the
Common Stock of the Company at a price of $0.28 per share, receiving
824,094 shares. This conversion has not yet taken place but was approved by
the board of directors prior to December 31, 1998.
Through June 1999, 1,074,475 preferred shares were issued in return for
$1,074,475 in cash.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure: On March 8, 1999, the Company informed Halliburton, Hunter
& Associates that it would not retain them as the independent accountant to
audit the financial statements of the Company as of and for the year ended
December 31, 1998, because it had retained Arthur Andersen & Company. The
Company had no disagreement with its former accountant on any matter of
accounting principal or practice, financial statement disclosure or auditing
scope or procedure which would have caused the accountant to make reference in
its report upon the subject matter of the disagreement. Further, the former
principal accountant's report on the financial statements did not contain an
adverse opinion or a disclaimer of opinion or qualification as to audit scope or
accounting principle. The decision to change accountants was approved by the
full Board of Directors, which at that time had no audit or similar committee.
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Company: The following table
sets forth all current directors, executive officers and significant employees
of the Company, BioProgress Technology, BTL and/or DNL, as well as their ages:
Name Age Position with Company
----- --- -----------------------------
Barry J. Muncaster 53 Chairman of the Board of Directors and Chief
Executive Officer of the Company, BioProgress
Technology, BTL and DNL; President of the Company,
BTL and DNL
Malcolm D. Brown 40 Director and Executive Vice-President of Research
and Development of the Company, BioProgress
Technology, BTL and DNL
James T.C. Longley 39 Director, Chief Financial and Accounting Officer,
and Treasurer and Secretary of the Company,
BioProgress Technology, BTL and DNL
Robert G.M. Hind 49 Director and Vice-President of Sales and Marketing
of the Company BioProgress Technology, BTL and DNL
Edward Z. Nowak 45 Director of Research and Development for BTL
Gregg Bowers 47 Director of the Company and President of
Bioprogress Technology.
No current director has any arrangement or understanding whereby he is or will
be selected as a director or nominee, other than those gentlemen under
employment agreements, as discussed below. Directors and executive officers will
hold office until the next annual meeting of shareholders and until their
respective successors have been duly elected and qualified or until they earlier
resign. Officers are generally elected by the Board of Directors at its annual
meeting immediately following the shareholders' annual meeting and hold office
until their death or until they earlier resign or are removed from office. The
Company does not have any standing audit, nominating or compensation committees,
or any committees performing similar functions.
Profiles of Directors and Executive Officers of the Company and BioProgress
Technology:
Barry J. Muncaster: Chairman, Chief Executive Officer and President. Mr.
Muncaster is Chairman of the Board of Directors and Chief Executive Officer of
the Company, BioProgress Technology and BTL, having served in these capacities
since November 17, 1997, for the Company and inception for BioProgress
Technology and BTL. He has also served the Company and BTL as President since
November 17, 1997, and inception, respectively. Mr. Muncaster also served
BioProgress Technology as President from inception until the engagement of Mr.
Bowers. He has served in similar positions with DNL since the acquisition of
that entity as a wholly-owned subsidiary.
Mr. Muncaster trained as a telecommunications engineer with British Telecom, and
obtained a diploma in Telecommunications Engineering in 1970 from the Cambridge
College of Arts and Technology. Since 1970 Mr. Muncaster has been involved at
the executive and senior executive level with companies engaged in the
development and commercialization of high technology products, which include:
laser -based systems employed in high energy physics experiments, electronic
taxi meters, personal computer systems and home banking systems. He was a
cofounder, and served as Chief Executive Officer, of Oric Products
International, Limited which, within three years of start-up, manufactured and
sold in excess of 300,000 personal computers, achieving annual sales revenues in
excess of $45,000,000 prior to its sale in 1983 to an investment company quoted
on the London Stock Exchange.
Since 1987 Mr. Muncaster has been a partner in the Jade Partnership, a firm of
management consultants which specializes in assisting developmental companies
engaged in high technology activities. The Jade Partnership was the sole
shareholder of BioProgress Technology and now owns a substantial portion of the
outstanding shares of Common Stock. Mr. Muncaster entered into an employment
agreement with the Company on January 25, 1999, as discussed further below.
Malcolm D. Brown: Director and Executive Vice-President of Research and
Development. Mr. Brown has served the Company as a director and as the Executive
Vice-President of Research and Development since November 17, 1997, and for
BioProgress Technology and BTL from inception. He has served in similar
positions with DNL since the acquisition of that entity as a wholly-owned
<PAGE>
subsidiary. He is responsible for the direction and implementation of the
research and development program of BioProgress Technology, the production
engineering of its products, and for the environmental, safety and performance
compliance of all raw materials used. Mr. Brown received a Bachelor of Science
Degree (Honors) in Applied Biology from Northeast London University in 1984 and
a Masters of Science Degree in Microbiology from London University in 1986.
Prior to his affiliation with BioProgress Technology and BTL, Mr. Brown held
senior research positions with Gestetner Corporation and with Ferrisgate
Limited, where he worked on the formulation of specialist inks and coatings used
in industrial processes. Mr. Brown entered into an employment agreement with the
Company on January 25, 1999, as discussed further below.
Mr. Brown is also a director, officer and shareholder of The Jade Partnership.
James T.C. Longley: Director and Chief Financial and Accounting Officer and
Treasurer. Mr. Longley has been a director and the Chief Financial and
Accounting Officer, Treasurer and Secretary the Company since November 17, 1997,
and of BioProgress Technology and BTL since inception. He has served in similar
positions with DNL since the acquisition of that entity as a wholly-owned
subsidiary. He received a Bachelor of Arts degree in accounting with honors from
Leeds University in 1980, and was admitted to the Institute of Chartered
Accountants in England in July, 1983, and was admitted as a fellow to the
Institute of Chartered Accountants in England and Wales in 1993. Mr. Longley in
1983 joined Arthur Andersen & Co., where he worked for two years, attaining the
position of Senior Accountant, Auditing Division. He then served for three years
as a manager in the Merchant Banking Division of Creditanstalt-Bankverein before
leaving to join Touche Ross and Co., another accounting firm, as a senior
manager in its corporate financial division. In 1991, Mr. Longley founded
Chapman Longley Chartered Accountants and Registered Auditors in the United
Kingdom where, in addition to providing services to a range of clients, he
participated as part of a management team which successfully completed a L10.5
million (Sterling) management buy-in within the manufacturing industry, and
served as the finance director of The Fleet Management Group Limited which had
annual revenues of L18 million (Sterling) during this time. Mr. Longley entered
into an employment agreement with the Company on January 25, 1999, as discussed
further below.
Mr. Longley is also a director, officer and shareholder of The Jade Partnership.
Robert Graham Mason Hind: Director and Vice-President of Sales and Marketing.
Mr. Hind has been an executive officer and director of the Company and BTL since
the acquisition by the Company of DNL, prior to which he served as a consultant
to BioProgress Technology and BTL from June 30, 1998. Mr. Hind has served DNL as
a director and executive officer since inception. Mr. Hind entered into an
employment agreement with the Company after its acquisition of DNL, as discussed
further below.
Edward Z. Nowak: Vice-President of Research. Mr. Nowak has been with BTL since
March, 1997. He received a Bachelor of Science Degree in Applied Chemistry from
Stockport in the United Kingdom in 1978. Mr. Nowak then joined Ciba Geigy
agrochemical and industrial chemical divisions, where he worked for 12 years. He
headed up formulations groups and pioneered technology in micro-emulsions,
granulation and polymer seed coatings. In 1989 Mr Nowak joined Jeyes Group,
where he was research and development manager. In 1992 Mr. Nowak joined Bush
Boake Allen's fragrance division as European technical manager. He developed a
number of new products for launch within the personal care and household sectors
for both Jeyes and Bush Boake Allen. Mr. Nowak has been responsible for much of
the product and process development of encapsulation technology at BTL. Mr.
Nowak entered into an employment agreement with the Company on January 25, 1999,
as discussed further below.
Gregory L. Bowers: Mr. Bowers was engaged as a director of the Company and as
President of BioProgress Technology earlier this year. Prior to the Company, he
was employed as the Senior Vice-President of Sales and Marketing in Health and
Nutrition with the Banner Pharmacap Division of Sobel International from April,
1996. In this capacity, Mr. Bowers was responsible for all sales and marketing
activities of a $120 million domestic and international nutrition and generic
drug business. From April, 1994, until April, 1996, Mr. Bowers was employed by
Chase Pharmaceutical as Executive Vice President and General Manager. (Chase
Pharmaceutical was purchased by Sobel International in March 1994.) In this
capacity, he was responsible for all business operations of a $55 million, 350
employee pharmaceutical and nutritional products manufacturer. Mr. Bowers
reported directly to the CEO of the parent company and directing the Senior VP
Technical Affairs, VP Finance, VP Operations and VP Sales and Marketing. From
April, 1990, to April, 1994, Mr. Bowers served as Executive Vice President of
Sales and Marketing for Chase Pharmaceutical. In this capacity, he reported
directly to the CEO and was responsible for sales and marketing for Chase
Laboratories (generic drug division), Chase Pharmaceuticals (prescription and
OTC contract manufacturing) and Encapsulations, Inc. (nutritional products). Mr.
Bowers developed and directed long and short-term sales and marketing
strategies, including establishing operating budgets, negotiating licenses and
royalty agreements domestically and internationally. Prior to Chase
Pharamaceutical, Mr. Bowers worked in various sales and marketing positions in
the pharmaceutical and other industries.
<PAGE>
Mr. Bowers is a member of the (1) American Association of Pharmaceutical
Scientists, (2) National Association of Chain Drugstores, (3) National Wholesale
Drug Association, (4) National Association of Pharmaceutical Manufacturers, and
(4) Council for Responsible Nutrition. He attended the University of Texas in
Austin, Texas, receiving a Bachelors of Arts in Biology and also attended
Columbia University, participating in their executive marketing program
Consultants to BioProgress Technology:
Dawn M. Franklin. Ms. Franklin served for 21 years as Marketing Property Manager
for Mars, Inc., where she was responsible for the management, registration and
prosecution of intellectual property and trademarks. She has a very high
standing in the international trademark community and holds the following
positions: (i) Member of Board of Directors of International Trademark
Association; (ii) Chairman of Membership Committee of International Trademark
Association; (iii) Vice-Chairman of Public Relations Committee of International
Trademark Association; (iv) Vice-Chairman of British Brands Group; (v) Member of
Trademark Committee of AIM (European Association of Branded Goods
Manufacturers); (vi) Delegate representing AIM at World Intellectual Property
Organization ("WIPO"); (vii) Member of Committee of Experts on Subject of Famous
Marks at WIPO; (viii) Consultant to WIPO and Member of Committee of Experts at
WIPO on Subject of International Trademark Licensing; and (ix) Member of MARQUES
(Association of European Trademark Proprietors).
Item 10. Executive Compensation: No compensation was paid during 1998 directly
to the Board of Directors or executive officers of the Company in their
capacities as such; however, Jade received the compensation set forth under Item
1, above, and Item 13, below, in exchange for providing management services
under a contract between the Company and Jade. These services included the
services of Messrs. Muncaster, Brown and Longley.
Employment Agreements: Barry J. Muncaster. On January 25, 1999, Mr. Muncaster
and the Company entered into an agreement for a term of five years pursuant to
which Mr. Muncaster is to serve the Company as a director and chief executive
officer. He serves in a similar capacity with BioProgress Technology, BTL and
DNL. Mr. Muncaster is entitled to receive cash compensation of $2,000 per month
from the Company, subject to upward revision per board review every six months.
Mr. Muncaster also received an option from the Company under this agreement
which is exercisable on or before December 31, 2003. This option grants Mr.
Muncaster the right to purchase up to 500,000 shares Common Stock in 100,000
share increments at prices per share of $.35, $.75, $1.25, $1.75 and $2.25 per
share. These shares are to be registered under applicable securities laws before
issuance. James T.C. Longley. On January 25, 1999, Mr. Longley and the Company
entered into an agreement for a term of five years pursuant to which Mr. Longley
is to serve the Company as a director and as Chief Financial Officer, Treasurer
and Secretary. He serves in a similar capacity with BioProgress Technology, BTL
and DNL. Mr. Longley is entitled to receive cash compensation of $2,000 per
month from the Company, subject to upward revision per board review every six
months. Mr. Longley also received from the Company an option under this
agreement which is exercisable on or before December 31, 2003. This option
grants Mr. Longley the right to purchase up to 500,000 shares Common Stock in
100,000 share increments at prices per share of $.35, $.75, $1.25, $1.75 and
$2.25 per share. These shares are to be registered under applicable securities
laws before issuance. Malcolm D. Brown: On January 25, 1999, Mr. Brown and the
Company entered into an agreement for a term of five years pursuant to which Mr.
Brown is to serve the Company as a director and as Executive Vice President
Research and Development. He serves in a similar capacity with BioProgress
Technology, BTL and DNL. He is entitled to receive cash compensation of $2,000
per month from the Company, subject to upward revision per board review every
six months. Mr. Brown also received from the Company an option under this
agreement which is exercisable on or before December 31, 2003. This option
grants Mr. Brown the right to purchase up to 500,000 shares of Common Stock in
100,000 share increments at prices per share of $.35, $.75, $1.25, $1.75 and
$2.25 per share. These shares are to be registered under applicable securities
laws before issuance. Edward Z. Nowak. On January 25, 1999, Mr. Nowak and the
Company entered into an agreement for a term of five years pursuant to which Mr.
Nowak is to serve the Company in connection with the business of the Company's
wholly owned subsidiary, BTL. Mr. Nowak serves BTL as Director of Research and
Development. In this capacity he receives $8,000 per month from BTL. Mr. Nowak
has received from the Company an option under this agreement which is
exercisable on or before December 31, 2003. This option grants Mr. Nowak the
right to purchase up to 500,000 shares of Common Stock in 100,000 share
increments at prices per share of $0.35,$0.75,$1.25, $1.75 and $2.25. These
shares are to be registered under applicable securities laws before issuance.
<PAGE>
Item 11. Security Ownership of Management and Certain Others: Based on
information which has been made available to the Company by its stock transfer
agent and the individual officers and directors of the Company, the following
table sets forth, as of June 7, 1999, the shares of Common Stock owned by each
current director, by directors and executive officers as a group and by each
person known by the Company to own more than 5% of the outstanding Common Stock:
Title of Class Name of Beneficial Owner Number of Shares Percent of Class (1)
- -------------- ------------------------ ---------------- --------------------
Common Stock The Jade Partnership (2) (2) (2)
Common Stock Trutona International (3) (3) (3)
Common Stock Barry J. Muncaster (2,3,4,5) 10,261,949 29.70%
Common Stock Malcolm D. Brown (5) 3,947,117 11.424%
Common Stock James T.C. Longley (5) 575,000 1.664%
Common Stock Robert G. M. Hinds (5) 820,000 2.373%
Common Stock Edward Nowak 880,000 2.547%
Directors and Executive Officers as a Group: 16,484,066 47.708%
- ------------
(1) Based on approximately 33,052,137 shares of common stock issued and
outstanding on June 7, 1999, and including 1,500,000 of the 2,500,000 shares
under those options described in footnote five below, an aggregate of 34,552,137
shares.
(2) The Jade Partnership is a Delaware corporation, the equity ownership of
which is as follows: (i) 42.49% - Barry J. Muncaster; (ii) 21.22% - Joe
Muncaster, the son of Barry J. Muncaster; (iii) 7.067% - Linda Zangus, the wife
of Barry J. Muncaster; and (iv) 29.23% - Malcolm D. Brown. All 4,000,000 shares
of Common Stock owned by Jade are attributed to Mr. Muncaster for purposes of
this table.
(3) Trutona International is a privately-held Delaware corporation whose
officers and directors are roughly similar to those of the Company. Further,
Messrs. Muncaster and Brown own a significant number of shares of the
outstanding stock of Trutona. All 1,875,000 shares of Common Stock owned by
Trutona are attributed to Mr. Muncaster for purposes of this table.
(4) These shares include 3,491,857 shares owned directly by Mr. Muncaster and
595,092 shares held by his wife, as well as the 4,000,000 shares held by The
Jade Partnership and 1,875,000 shares held by Trutona since Mr. Muncaster
controls these entities.
(5) These shares include an option to acquire up to 500,000 shares of Common
Stock. This option is currently exercisable in whole or in part at any time and
from time to time. The option was granted on January 25, 1999, and allows the
holder to purchase 500,000 shares Common Stock on or before December 31, 2003.
The option is exercisable in 100,000 share increments at prices per share of
$.35, $.75, $1.25, $1.75 and $2.25 per share. The number of shares included in
this figure is 300,000 since the market price for the Common Stock exceeded the
option price for the 100,000 shares acquirable at $.35, $.75 and $1.25,
respectively, 1999. Messrs. Muncaster, Brown, Longley, Nowak and Hind each had
an option to acquire 500,000 shares at the date of this report under similar
terms and conditions, for an aggregate of 2,500,000 shares; thus, shares
aggregating 1,500,000 in number under these options were included in the
outstanding figure since the strike price for these shares was less than the
market price at June 7, 1999.
<PAGE>
Item 12. Certain Transactions:
Product Acquisiton from Trutona International: On February 15, 1999, the
Company acquired from Trutona patents, licenses and trademarks relating to a
broad range of products, including an award winning range of flushable and
biodegradable disposable products designed by Trutona. The Company paid Trutona
$1,500,000 in the acquisition, of which $750,000 was paid through the delivery
of 1,875,000 shares of Common Stock at an agreed price of $.40 per share, with
the remainder payable on or before December 31, 1999, through either the
delivery of cash or of additional shares of Common Stock valued at $.40 per
share, or any combination of the two at the option of the Company. The products
acquired include an ultra thin, flushable and biodegradable line of feminine
sanitary napkins which were recently selected for a "Millennium Product" award
under a program initiated by the British Government to promote innovative
technological achievements. Trutona is an affiliate of the Company since Messrs.
Muncaster, Longley and Brown are directors, officers and significant
shareholders of each entity.
Jade Partnership International Consulting Agreement. On April 1, 1998, the
Company entered into a consulting and option agreement with Jade, which is owned
by affiliates of the Company. Under this contract, Jade assisted the Company in
obtaining equity and debt financing, and provided general business management,
administration services, international licensing and sales and marketing
strategies. This agreement provided that the Company was to have paid $50,000
per month as a fee to Jade which, at the option of Jade, was convertible into
common stock of the Company at a price of $.28 per share, the then market price.
The agreement was terminated during the latter part of 1998, with the Company
agreeing to pay Jade the sum of $356,595.68 in fees. Jade elected to convert
this amount into shares of Common Stock, receiving 1,273,556 shares on December
21, 1998.
Item 13. Exhibits and Reports on Form 8-K:
(a) Exhibits:
3.1 (a) Articles of Incorporation and Amendments (California). (1)
3.1 (b) Articles of Incorporation and Amendments (Nevada). (2)
3.1 (c) Articles of Incorporation and Amendments (Nevada). (4)
3.1 (d) Articles of Incorporation and Amendments (Nevada). (5)
3.2 (a) Bylaws (California). (1)
3.2 (b) Bylaws (Nevada). (2)
4.1 Specimen stock certificate. (1)
10.1 Partnership Agreement dated October 20, 1993, among the Company,
Costner Industries, Inc., a California corporation, Jack Bitterly and
Steve Bitterly. (1)
10.2 Asset Purchase Agreement dated October 20, 1993, among the Company,
the Partnership, Jack Bitterly, Steve Bitterly, Bruce Swartout, U.S.
Flywheel, Inc., a California corporation and Sunbird Technologies,
Inc. (1)
10.3 U.S. Flywheel Systems Unit Purchase Agreement dated July 16, 1994,
between the Company and Costner Industries, Inc. (1)
10.4 Straight Note dated October 21, 1993, between the Company and Sunbird.
(1)
10.5 Consulting Agreement dated October 20, 1993, between the Partnership
and Bruce Swartout. (1)
10.6 Asset Purchase Agreement dated May 31, 1996, changing name and
domicile to Nevada and reverse splitting outstanding capitalization
and increasing authorized capital. (2)
10.7 Reorganization Agreement between the Company and Famous Sam's. (2)
10.8 Liquidating Trust. (2)
10.9 Recision Agreement. (4)
10.10 Reorganization Agreement between the Company and BioProgress
Technology. (4)
10.11 Acquisition Agreement - DHA Nutrition (5)
10.12(a) Acquisition Agreement - BioProgress Limited (UK) (5)
10.12(b) - Amendment to Acquisition Agreement - BioProgess Limited (UK) (5)
10.13 Employment Agreement - Barry J. Muncaster (5)
10.14 Employment Agreement - James T. C. Longley (5)
10.15 Employment Agreement - Malcolm D. Brown (5)
10.16 Employment Agreement - Edward I. Nowak (5)
<PAGE>
10.17 Employment Agreement - Graham Hind (5)
10.18 Professional Services Agreement - The Jade Partnership International,
Inc. (5)
10.19 Professional Services Agreement - Company and Ormiston-Gore Securities
Limited (5)
10.20 Professional Services Agreement - BTL and Ormiston-Gore Securities
Limited (5)
10.21 Trutona Purchase Agreement (5)
10.22 EcoProgress License (5)
- -----------------
(1) Filed as an exhibit to the Company's Registration Statement on Form 10-SB
dated August 23,1994, or October 21, 1994 (Registration No. 0-24736).
(2) Filed as an exhibit to the Company's Form 10-KSB for the year ended
December 31, 1995.
(3) Filed as an exhibit to the Company's Form 10-KSB for the year ended
December 31, 1996.
(4) Filed as an exhibit to the Company's Form 10-KSB for the year ended
December 31, 1997.
(5) Filed herewith.
- -----------------
(b) Forms 8-KSB: None.
SIGNATURES
In accordance with the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cambridge,
United Kingdom on the 12th day of July, 1999.
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
(Registrant)
/s/ Barry J. Muncaster
- ----------------------
Barry J. Muncaster, Chief Executive Officer
and President
/s/ James T.C. Longley
- ----------------------
James T.C. Longley, Chief Financial
and Accounting Officer, Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the registrant in the
capacity on this 8th day of July, 1999.
/s/ Barry J. Muncaster
- ----------------------
Barry J. Muncaster, Director
/s/ James T.C. Longley
- ----------------------
James T.C. Longley, Director
/s/ Malcolm Brown
- -----------------
Malcolm Brown, Director
/s/ Robert GM Hind
- ------------------
Robert G.M. Hind, Director
/s/ Gregory L. Bowers
- ---------------------
Gregory L. Bowers, Director
<PAGE>
EXHIBITS
TABLE OF CONTENTS
3.1 (d) Articles of Incorporation and Amendments (Nevada).
10.11 Acquisition Agreement - DHA Nutrition
10.12(a) Acquisition Agreement - BioProgress Limited (UK)
10.12(b) Amendment to Acquisition Agreement - BioProgress Limited (UK)
10.13 Employment Agreement - Barry J. Muncaster
10.14 Employment Agreement - James T. C. Longley
10.15 Employment Agreement - Malcolm D. Brown
10.16 Employment Agreement - Edward I. Nowak
10.17 Employment Agreement - Graham Hind
10.18 Professional Services Agreement - The Jade Partnership International,
Inc.
10.19 Professional Services Agreement - Company and Ormiston-Gore Securities
Limited
10.20 Professional Services Agreement - BTL and Ormiston-Gore Securities
Limited
10.21 Trutona Purchase Agreement
10.22 EcoProgress License
Exhibit 3.1(d) - Articles of Incorporation and Amendments (Nevada)
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
Filed By:
Name of Corporation
We the undersigned President and Secretary of BioProgress Technology
International, Inc., (f/k/a Famous Sam's Group, Inc.) do hereby certify:
That the Board of Directors of said corporation at a meeting duly convened and
held on the 1st day of November, 1998, adopted a resolution to amend the
original articles as follows: Article IV, Section 4.1, Increase in Share
capital. All of which is restated in its entirety, along with the other articles
in the attachment.
The number of shares of the corporation outstanding and entitled to vote on an
amendment of the Articles of Incorporation was 5,000,000: that the said
change(s) and amendment have been consented to and approved by a majority vote
of the stockholders holding at least a majority of each class of stock
outstanding and entitled to vote thereon.
- -----------------------------------
President or Vice President
- -----------------------------------
Secretary or Assistant Secretary
City of Cambridge )
County of Cambridgeshire ) ss.
United Kingdom )
On December 17, 1998, personally appeared before me, a Notary Public, Barry J.
Muncaster, who acknowledged that he executed the above instrument.
Notary Public
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FAMOUS SAM'S GROUP, INC.
Know All Men By These Presents: that the following amended and restated articles
of incorporation (i) were adopted by the board governing this corporation, as
required by the shareholders thereof and approved in accordance with the laws of
the State of Nevada, and (ii) from and after the date of filing with the
Secretary of State for the State of Nevada, constitute the Amended and Restated
Articles of Incorporation for BioProgress Technology International, Inc.,
formerly known as Famous Sam's Group, Inc.
ARTICLE I
(Name)
The name of the corporation shall be BioProgress Technology International, Inc.
(the Corporation).
ARTICLE II
(Period of Duration)
The Corporation shall exist in perpetuity from and after the date of filing
these Articles of Incorporation with the Secretary of State for the State of
Nevada, unless and until dissolved according to law.
<PAGE>
ARTICLE III
(Purpose and Powers)
The Corporation has been formed for the purpose of transacting any and all
lawful business for which corporations may be formed under the laws of the State
of Nevada. The Corporation shall have and may exercise all rights, powers and
privileges now and hereafter conferred upon corporations formed under the laws
of the State of Nevada to effectuate its stated purpose and may do everything
necessary, lawful, suitable, and proper in accomplishment thereof.
ARTICLE IV
(Capital)
Section 4.1 Classes of Shares. The proprietary interest of the Corporation shall
be divided into two classes of stock, which are collectively referred to herein
as Shares. The first is a class of common stock, par value $.00l per share, and
the second a class of preferred stock, par value $.0l per share. (An individual
share within the respective classes of stock shall be referred to appropriately
as either a Common Share or a Preferred Share). The Corporation shall have the
authority to issue 50,000,000 Common Shares and 5,000,000 Preferred Shares. The
authority of the Corporation to issue shares may be limited by resolution of the
board of directors of the Corporation (the Board of Directors). Shares may be
issued from time to time for such consideration in money or property (tangible
or intangible) or labor or services actually performed as the Board of Directors
may determine in its sole judgment and without the necessity of action by the
holders of Shares. Common Shares may be issued in series. Shares may not be
issued until paid for and, when issued, are non assessable. Fractional Shares
may not be issued by the Corporation and, in the event fractional shares are or
may become outstanding, the Corporation shall redeem said shares at the then
market price.
Section 4.2 Preferred Shares. The Board of Directors is authorized to act by
resolution, subject to limitations prescribed by the laws of the State of
Nevada, these Articles of Incorporation, the Bylaws of the Corporation (the
Bylaws), and previous resolutions by the Board of Directors limiting this
authorization, to provide for the issuance of Preferred Shares in series. To
exercise this authority the Board of Directors must first designate the series
so established, and, secondly, fix and determine the relative rights,
preferences, and limitations of the Preferred Shares in the series established
to the extent not fixed and determined by reference to the Nevada Corporation
Code. Without limiting the generality of the foregoing, this authority includes
fixing and determining the following:
(a) The number of Preferred Shares which may be issued under the series
established, and the designation of such series;
(b) The rate of dividend on Preferred Shares of that series, if any, the time of
payment of dividends, whether dividends shall be cumulative, and, if cumulative,
the date from which dividends shall begin accruing;
(c) Whether Preferred Shares of that series may be redeemed, and, if redeemable,
the redemption price, terms, and conditions of redemption;
(d) Whether to establish a sinking fund or make other provisions for the
redemption or purchase of Preferred Shares of that series;
(e) The amount payable per Preferred Share of that series in the event of the
dissolution, liquidation, or winding up of the Corporation, whether voluntarily
or involuntarily;
(f) Voting powers, if any, of the series; and
(g) Whether the series shall have conversion privileges, and, if convertible,
the terms and conditions upon which Preferred Shares of that series shall be
convertible, including, without limitation, the provision, if any, for
adjustment for the conversion rate and the payment of additional amounts by
holders of such shares upon the exercise of this privilege.
Irrespective of the limitations set forth in subsection (a) of this section, the
Board of Directors may, at any time after the number of Preferred Shares
authorized under a series has been established, authorize the issuance of
additional Preferred Shares of the same series or reduce the number of Preferred
Shares authorized under such series. All Preferred Shares shall be identical to
each other in all respects, except as to those relative rights, preferences, and
limitations established by the Board of Directors pursuant to its authority as
determined by reference to the Nevada Corporation Code and as established in
subsections (a) through (g), inclusive, of this section, as to which there may
be variations between series.
Section 4.3 Voting. Each record holder of Common Shares (and to the extent, if
any, provided by the laws of the State of Nevada or by the Board of Directors
acting pursuant to the authority set forth in Section 4.2(f). of this article
each record holder of Preferred Shares) shall have one vote on each matter
submitted to a vote for each Share standing in his name on the books of the
<PAGE>
Corporation. Unless otherwise required under the laws of the State of Nevada,
these Articles of Incorporation, the Bylaws, or the resolution of the Board of
Directors creating any series of Preferred Shares, no matter submitted to a
Shareholder vote shall require the approval of a class or series of Shares
voting separately.
Section 4.4 Quorum. At all meetings of Shareholders, one third (1/3) of the
Shares entitled to vote at such meeting, whether represented in person or by
proxy, shall constitute a quorum and at any meeting at which a quorum is present
the affirmative vote of a majority of the Shares represented at such meeting and
entitled to vote on the subject matter shall be the act of the Shareholders.
ARTICLE V
(Rights of Shareholders)
Section 5.1. Cumulative Voting. Shareholders are not entitled to cumulative
voting unless expressly provided to the contrary by resolution of the Board of
Directors in establishing a series within a class of Shares.
Section 5.2. Pre emptive Rights. Shareholders shall not be entitled to any pre
emptive or similar rights, including, without limitation, any pre emptive or
similar right to purchase, subscribe for, or otherwise acquire unissued or
treasury Shares of the Corporation that may be issued at any time, or to
purchase, subscribe for, or otherwise acquire any options, warrants, or
privileges to purchase, subscribe for, or otherwise acquire any such unissued or
treasury Shares, or to purchase, subscribe for, or otherwise acquire bonds,
notes, debentures, or other securities convertible into or carrying options,
warrants, or privileges to purchase, subscribe for, or otherwise acquire any
such unissued or treasury Shares unless expressly provided to the contrary by
resolution of the Board of Directors in establishing a series within a class of
Shares.
ARTICLE VI
(Registered Office and Registered Agent)
The registered office of the Corporation is One East First Street, Reno,
Colorado 89501, and the name of the registered agent of the Corporation at this
address is The Corporation Trust Company of Colorado.
ARTICLE VII
(Board of Directors)
Section 7.1. Exercise of Corporate Powers. The corporate powers shall be
exercised by the Board of Directors. The number of directors shall be set under
the Bylaws or by resolution of the Board of Directors, either of which shall
meet the requirements set forth under the Nevada Corporation Code.
Section 7.2. Limitation of Liability. To the fullest extent permitted by the
Nevada Corporation Code, as the same exists or may hereafter be amended, a
director of the corporation shall not be liable to the Corporation or to the
Shareholders for breach of fiduciary duty as a director.
Section 7.3. Delegation to Bylaws. All other provisions relating to the
governance of the Board of Directors shall be set forth in the Bylaws, or
established by resolutions of the Board of Directors in accordance with
authority granted thereby.
ARTICLE VIII
(Transactions with Certain Interested Parties)
Section 8.1. Directors and Officers. No contract or other transaction between
the Corporation and one or more of its directors or officers or any other
corporation, firm, association, or entity in which one or more directors of the
Corporation are directors or officers or are financially interested shall be
either void or voidable solely because of such relationship or interest, or
solely because such directors are present at the meeting of the Board of
Directors or a committee thereof which authorized, approved, or ratified such
contract or transaction, or solely because their votes were counted for such
purpose if (a) the fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested persons; (b) the fact
<PAGE>
of such relationship or interest is disclosed to or known by the Shareholders
entitled to vote and they authorize, approve, or ratify such contract or
transaction by vote or written consent; or (c) the contract or transaction is
fair and reasonable to the Corporation. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or a committee thereof, which authorizes, approves, or ratifies such
contract or transaction.
Section 8.2. Certain Other Persons. No contract or other transaction between the
Corporation and one or more of its employees, fiduciaries, or agents or between
the Corporation and any corporation, firm, association, or entity of which one
of the employees, fiduciaries, or agents of the Corporation is a director,
officer, member, employee, trustee or shareholder, or otherwise has a direct or
indirect financial interest is void or voidable solely because of such
relationship or interest or solely because such persons were present at the
meeting of the Board of Directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction or solely because their votes
are counted for such purpose if: (a) the fact of such relationship or interest
is disclosed to or known by the Board of Directors or committee which
authorizes, approves, or ratifies the contract or transaction by a vote or
consent sufficient for the purpose without counting the votes or consents of
such interested persons; or (b) the fact of such relationship or interest is
disclosed to or known by the Shareholders entitled to vote and they authorize,
approve, or ratify such contract or transaction by vote or written consent.
ARTICLE IX
(Corporate Opportunity and Indemnification)
Section 9.1. Corporate Opportunity. The officers, directors, and other members
of management of the Corporation shall be subject to the doctrine of corporate
opportunities only insofar as this doctrine applies to business opportunities in
which the Corporation has expressed an interest as determined from time to time
by the Board of Directors through resolutions appearing in the minutes of the
Corporation. Once such areas of interest are delineated, all business
opportunities within such areas of interest which come to the attention of the
officers, directors, and other members of management of the Corporation shall be
disclosed promptly to the Corporation and made available to it. The Board of
Directors may reject any business opportunity. Until such time as the
Corporation, through its Board of Directors, has designated an area of interest,
the officers, directors, and other members of management of the Corporation
shall be free to engage in such areas of interest on their own. This doctrine
shall not limit the right of any officer, director, or other member of
management of the Corporation to continue a business existing prior to the time
that an area of interest is designated by the Corporation. This provision shall
not be construed to release any employee of the Corporation (other than an
officer, director, or other member of management) from any duties which he may
have to the Corporation; additionally, an agreement between the Corporation and
an officer, director, or other member of the management of the Corporation may
expressly modify this article to such extent as the Board of Directors in its
sole discretion may determine.
Section 9.2. Indemnification. The Bylaws shall set forth the indemnification
rights available to officers, directors, employees and agents.
ARTICLE X
(Majority Vote)
When, with respect to any action to be taken by Shareholders of the Corporation,
the Nevada Corporation Code requires the vote or concurrence of the holders of
two thirds of the outstanding Shares entitled to vote thereon, or of any class
or series, such action may be taken by the vote or concurrence of a majority of
such Shares or class or series thereof.
ARTICLE XI
(Transfer Restrictions on Shares)
The Corporation has the right, by appropriate action, to impose restrictions
upon the transfer of any of its Shares, or any interest therein; provided,
however, that such restrictions or the substance thereof shall be set forth upon
the face or back of the certificates representing such Shares.
<PAGE>
ARTICLE XII
(Amendments; Bylaws)
The Bylaws of the Corporation may contain any provision for the regulation and
management of the affairs of the Corporation not inconsistent with the laws of
the State of Nevada or these Articles of Incorporation. The Board of Directors,
in addition to the Shareholders, shall have the power to alter, amend, or repeal
the Bylaws or to adopt new Bylaws.
IN WITNESS WHEREOF, the undersigned has signed these Amended and Restated
Articles of Incorporation this 17th day of December, 1998.
- -----------------------------------
Barry J. Muncaster, President
9055 Huntcliff Trace
Atlanta
GA 30350
Exhibit 10.11- Acquisition Agreement - DHA Nutrition
An AGREEMENT dated this 31st day of July, 1998, by and between: BIOPROGRESS
TECHNOLOGY INTERNATIONAL, INC., (BTII), a publicly-held and traded Nevada
corporation, having offices situate at 9055 Huntcliff Trace, Atlanta, GA 30350;
and, GRAHAM HIND, an individual residing at Silver Lodge, 22 Twentypence Road,
Wilburton, Ely, Cambridgeshire CB6 3RN; and, BIG SIX LIMITED, a company
registered in the United Kingdom, having offices situate at Number One, Tudor
Rose Industrial Estate, Dock Road, Chatteris, Cambridgeshire PE16 6TY; and, MARK
LANGLEY, an individual residing at Berristead Close, Wilburton, Ely,
Cambridgeshire CB6 3RN, and, COLM MURPHY, an individual residing at Killanully,
Ballygarvan, County Cork, Republic of Ireland, (hereinafter collectively
referred to as the Vendors).
WHEREAS:
The Vendors collectively own the entire issued share capital of DHA Nutrition
Limited (DNL), a company registered in the United Kingdom, and individually own
the number of shares (DNL Shares) set forth next to their names in Schedule 1
attached hereto.
BTII wishes to buy and the Vendors wish to sell all DNL Shares owned by them,
individually and collectively, upon the terms and conditions set forth in this
agreement (the Agreement).
It is AGREED as follows:
1 Consideration:
1.1 In consideration of the Vendors transferring to BTII absolute and beneficial
ownership of the DNL Shares, and upon receipt thereof, BTII shall forthwith
issue to the Vendors a total of FOUR HUNDRED THOUSAND (400,000) ordinary shares
of common stock in BioProgress Technology International, Inc., (the BTII
Shares); and,
1.1.1 if DNL's cumulative gross revenues in respect of Feed Supply sales exceed
L1,500,000 (STERLING) in the period to September 30, 1999, and exceed L5,000,000
(STERLING) in the period October 1, 1999 to September 30, 2000, then BTII shall
forthwith issue to the Vendors additional BTII Shares of TWO HUNDRED THOUSAND
(200,000) and FOUR HUNDRED THOUSAND (400,000) for the respective periods; and,
1.1.2 if DNL's cumulative gross revenues in respect of Food Supply sales exceed
L150,000 (STERLING) in the period to September 30, 1999, and exceed L500,000
(STERLING) in the period October 1, 1999 to September 30, 2000, then BTII shall
forthwith issue to the Vendors additional BTII Shares of ONE HUNDRED THOUSAND
(100,000) and TWO HUNDRED THOUSAND (200,000) for the respective periods.
1.2 Unless previously registered with the Securities and Exchange Commission of
the United States of America (such registration to be at the sole discretion of
BTII), the BTII Shares shall be restricted from sale, assignment or disposal for
a period of EIGHTEEN (18) months from the date of this Agreement and each share
certificate shall bear a legend stating the same.
1.3 The transfer and issue of the DNL Shares and the BTII Shares respectively
contemplated herein shall be the only consideration in respect of this
Agreement.
2 Representations, Warranties and Covenants of BTII:
2.1 All necessary steps have been taken to make this Agreement a legal, valid
and binding obligation of BTII enforceable in accordance with its terms and
conditions.
2.2 The execution and delivery of this Agreement and the performance by BTII of
its obligations hereunder will not result in any material breach or violation of
or material default under any material agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
rule, regulation, statute, order or decree of any kind, to which BTII or any of
its subsidiaries is a party or by which they or any their property is or may be
or become subject, nor in the violation of the articles or bylaws governing the
conduct of BTII.
2.3 BTII has delivered to the Vendors its annual report on Form 10-KSB (and the
amendment thereto on Form 10-KSB/A) for the year ended December 31, 1997, and
its quarterly reports on Form 10-QSB for the fiscal quarters ended March 31,
1998, and June 30, 1998, all of which were true and correct as of the date of
filing and remain true and correct in all material respects as of the date
hereof. Also, BTII has provided the Vendors full access to any and all
information they desired concerning the business and operations of BTII, and
BTII has made available to the Vendors such personnel as has been requested to
answer any and all questions which the Vendors may have had concerning their
investment in BTII. Further, BTII is current in all of its required reports
under the Securities Exchange Act of 1934, as amended.
<PAGE>
2.4 The BTII Shares have each been validly issued and are fully paid and
non-assessable.
3 Representations, Warranties and Covenants of the Vendors:
3.1 All necessary steps have been taken to make this Agreement a legal, valid
and binding obligation of the Vendors enforceable in accordance with its terms
and conditions.
3.2 The execution and delivery of this Agreement and the performance by the
Vendors of their obligations hereunder will not result in any material breach or
violation of or material default under any material agreement, indenture, lease,
license, mortgage, instrument, or understanding, nor result in any violation of
any law, rule, regulation, statute, order or decree of any kind, to which the
Vendors are a party or by which they or any their property is or may be or
become subject, nor in the violation of the articles or bylaws governing the
conduct of DNL.
3.3 The DNL Shares have each been validly issued and are fully paid and
non-assessable.
3.4 The DNL Shares are not, and shall not become subject to any lien,
encumbrance, security interest or financing statement whatsoever. Further, the
DNL Shares are not the subject of any other agreement in regards thereof.
3.5 The DNL Shares represent ONE HUNDRED PERCENT (100%) of the outstanding
proprietary interest of DNL, and there are no outstanding commitments (direct or
indirect) which would cause the issuance or transfer out of treasury of any
additional proprietary interest of DNL, whether common shares, preferred shares
or debt.
3.6 The sole asset of DNL is the Agreement with Martek Biosciences Corporation,
a company incorporated in the United States of America, which shall include any
and all relationships, agreements, understandings and undertakings arising from
or relative thereto, and DNL has no other assets or liabilities of any kind,
save for audit fees accrued at the date hereof.
3.7 The Vendors have provided BTII full access to any and all information it
desired concerning the business and operations of DNL, and the Vendors have made
available to BTII such personnel as has been requested to answer any and all
questions which BTII may have had concerning its investment in DNL.
4 Understandings of BTII:
4.1 The Vendors make no warranties (expressed or implied) regarding the value or
potential value of the DNL Shares, or of the value or potential value of the
Agreement with Martek Biosciences Corporation.
4.2 In order to maximise the benefit, if any, of the Agreement with Martek
Biosciences Corporation, additional and substantial funds may be required, all
of which is the responsibility of BTII.
5 Understandings of the Vendors:
5.1 The certificate(s) representing the BTII Shares will bear a legend
restricting its or their transfer under Rule 144 of the Securities Act of 19933,
as amended, and will be issued solely in the names of the Vendors.
5.2 The BTII Shares have not been registered under the Securities Act of 19933,
as amended, or any applicable state law (collectively, the "Securities Act");
further, the BTII Shares may not be sold, offered for sale, transferred,
pledged, hypothecated or otherwise disposed of except in compliance with the
Securities Act; further, BTII has no obligation, and does not intend, to cause
the BTII Shares to be registered under the Securities Act, or to comply with any
exemption under the Securities Act that would permit a sale or sales or all or
any portion of the BTII Shares; further, the legal consequences of the foregoing
mean that the Vendors must bear the economic risk of the investment in the BTII
Shares for an indefinite period of time; and, further, if the Vendors desire to
sell or transfer all or any part of the BTII Shares within the restricted
period, BTII may require the Vendors' counsel to provide legal opinion that the
transfer may be made without registration under the Securities Act.
<PAGE>
5.3 No federal or state agency has made any findings or determination as to the
fairness of an investment in BTII, or any recommendation or endorsement of this
investment.
5.4 There is presently only a limited market for the BTII Shares and no market
may exist in the future for any sale or sales of all or any part thereof.
5.5 Their commitment to investments that are not readily marketable is not
disproportionate to their net worth, and their investment in the BTII Shares
will not cause such overall commitment to become excessive.
5.6 They have the financial ability to bear the economic risks of their
investment, have adequate means of providing for their current needs, and have
no need for liquidity in this investment.
5.7 They have evaluated the high risks of investing in the BTII Shares and have
such knowledge and experience in financial and business matters in general and
in particular with respect to this type of investment that they are capable of
evaluating the merits and risks of an investment in the BTII Shares.
5.8 They have been given the opportunity to ask questions and receive answers
from BTII concerning the terms and conditions of this investment, and to obtain
additional information necessary to verify the accuracy of the information they
desired in order to evaluate their investment, and in evaluating the suitability
of an investment in the BTII Shares have not relied upon any representations or
other information (whether oral or written) other than that furnished to it by
BTII or the representatives of BTII.
5.9 They have had the opportunity to discuss with their professional, legal, tax
and financial advisers the suitability of an investment in the BTII Shares for
their particular tax and financial situation and all information that they have
provided to BTII concerning DNL and its financial position is correct and
complete at the date hereof.
5.10 In making the decision to purchase the BTII Shares they have relied solely
upon independent investigations made by them or on their behalf.
5.11 They are acquiring the BTII Shares solely for their own account, for
investment purposes only, and are not purchasing with a view to, or for, the
resale, distribution, subdivision or fractionalisation thereof.
6 Miscellaneous:
6.1 This Agreement sets forth and constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes any and
all prior agreements, understandings, promises, warranties, covenants and
representations made by any party to any other party concerning the subject
matter hereof and the terms applicable hereto. This Agreement may not be
released, discharged, amended or modified in any manner except by an instrument
in writing signed by duly authorised representatives of the parties hereto.
6.2 The invalidity or unenforceability of one or more provisions of this
Agreement shall not affect the validity or enforceability of any of the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provisions are omitted.
6.3 This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of the State of Nevada.
6.4 The failure of any party hereto to insist, in any one or more instances,
upon the performance of any of the terms, covenants or conditions of this
Agreement or to otherwise exercise any right hereunder, shall not be construed
as a waiver or relinquishment of the future performance of any such term,
covenant or condition or the future exercise of such right, but the obligations
of the party with respect to such future performance shall continue in full
force and effect.
6.5 The headings in this Agreement are included for convenience only and are not
to be used in construing or interpreting this Agreement.
<PAGE>
6.6 All notices, demands, or requests hereunder shall be in writing and served
either personally, by certified mail, return receipt requested, by Federal
Express or other reputable overnight courier, or by facsimile, as follows; If to
BTII: BioProgress Technology International, Inc., 9055 Huntcliff Trace, Atlanta,
GA 30350; Fax: (770) 594 8613; If to the Vendors: Graham Hind, Silver Lodge, 22
Twentypence Road, Wilburton, Ely, Cambridgeshire CB6 3RN (+44) 1353 741308
6.7 This Agreement, and each and every provision thereof, shall be binding upon
and shall inure to the benefit of the parties, their successors,
successors-in-title, heirs and assigns, and each and every successor-in-interest
to any party, whether such successor acquires such interest by way of gift,
purchase, foreclosure, or by any other legal method, who shall hold such
interest subject to all the terms and conditions of this Agreement.
6.8 This Agreement may be executed in any number of counterparts; each of which
shall be an original, but such counterparts shall together constitute one and
the same instrument.
6.9 In the event of any dispute with respect to this Agreement, the prevailing
party shall be entitled to its reasonable attorneys' fees and other costs and
expenses incurred in resolving such dispute.
6.10 Each party shall pay the expenses incurred by them under or in connection
with this Agreement, including counsel fees and expenses of their respective
representatives.
6.11 The representations, warranties and covenants of BTII and the Vendors
contained in this Agreement shall survive the execution hereof, and shall be
unaffected by any investigation made by any party at any time.
6.12 At any time and from time to time after the date of this Agreement, each
party shall execute such additional instruments and take such other further
action as may be reasonably requested by any other party or otherwise to fulfil
the intent and purpose of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered the date first above written.
By: Barry J. Muncaster
President and Chief Executive Officer
For and on behalf of BioProgress Technology International, Incorporated.
By: Graham Hind
By: Mark Langley
Managing Director
For and on behalf of Big Six Limited
By: Mark Langley
By: Colm Murphy
<PAGE>
SCHEDULE 1
Name Number of DNL Shares
- ---- --------------------
Graham Hind 80
Big Six Limited 5
Mark Langley 5
Colm Murphy 10
Total Shares Issued and Outstanding: 100
Exhibit 10.12(a) - Acquisition Agreement - BioProgess (UK)
An AGREEMENT dated this 19th day of November, 1997. BETWEEN:
(1) BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC., (the Company), a company
registered in Nevada, United States of America, having offices situate at 1999
Broadway, Suite 3235, Denver, Colorado 80202. (2) THE JADE PARTNERSHIP
INTERNATIONAL, INC., (JPI) a company registered in Delaware and having offices
situate at 9055 Huntcliff Trace, Atlanta, Georgia 30350. (3) BARRY JOHN
MUNCASTER (BJM) an individual residing at 8 Burling Walk, Milton, Cambs., CB4
6DX, England. (4) MALCOLM DAVID BROWN (MDB) an individual residing at 87 The
Lammas, Mundford, Norfolk IP26 5DS England. (5) JAMES TIMOTHY CHAPMAN LONGLEY
(JTCL) an individual residing at 33B Marryat Square, Wyfold Road, London 5W6
6UA, England. (6) EDWARD ZBIGNEW NOWAK (EZN) an individual residing at 4 Davey
Close, Impington, Cambs., England. (7) JOE MUNCASTER (JM) an individual residing
at 8 Burling Walk, Milton, Cambs., CB4 6DX, England.
WHEREAS: (A) The Company wishes to purchase for valuable consideration an option
(the Option as hereinafter defined) to acquire all shares beneficially owned by
the other parties hereto in BioProgress Technology Limited (BTL), a company
registered in England, and upon the terms and conditions set forth herein. (B)
Each of JPI, BJM, MDB, JTCL, EZN and JM wish to grant to the Company an option
to acquire all shares beneficially owned respectively by them in BTL. BJM, MDB,
JTCL and EZN are the only Directors of BTL and individually and collectively
they wish to give the Company their irrevocable undertaking to recommend to all
shareholders in BTL the offer (the Offer as hereinafter defined) to be submitted
by the Company at the time it exercises the Option granted hereunder. JPI owns a
beneficial interest in the controlling number of shares of BTL and JPI wishes to
grant BTI an option to acquire such interest.
1. OPERATIVE PROVISIONS In this Agreement, the following terms shall have the
following meanings unless the context otherwise requires: Effective Date - The
date hereof. Completion - Exercise of the Option by the Company and exchange,
delivery and registration of the Consideration Shares and exchange, delivery and
registration of the BTL Shares. Option - An option to purchase one share of
common stock in BTL by way of a share exchange for one and one-half shares of
common stock in the Company Exercise Date - 30 June, 1998. Offer - An offer
submitted in writing by the Company to all registered shareholders in BTL at the
time said offer is made and which offers to purchase by way of a share exchange
all shares of common stock beneficially owned by said shareholders on the same
terms and conditions as the Option. Consideration Shares - Ordinary shares of
common stock in the Company which shall be delivered to the Vendors in exchange
for shares of common stock in BTL pursuant to the Offer. BTL Shares - Those
shares of BTL owned by the Vendors or in which they have a beneficial interest.
Agreement - This Agreement. Vendors - Collectively, JPI, BJM, MDB, DB, JTCL, EZN
and JM. Authorised Vendor - JPI.
1.2 Number and Gender Terms: In construing this Agreement, feminine or neuter
pronouns shall be substituted for those masculine in form and vice versa in any
place where the context so requires, and plural terms shall be substituted for
singular and singular for plural in any place where the context so requires.
2. GRANT OF OPTION
2.1 The Vendors do individually and collectively hereby grant to the Company the
Option to purchase the BTL Shares.
3. CONSIDERATION
3.1 Consideration for this Agreement shall be the mutual undertakings hereby
given and received, the sufficiency of which is hereby acknowledged by the
Parties.
4. AUTHORISED VENDOR
4.1 The Vendors hereby nominate and authorise JPI to act as their Authorised
Vendor in all matters relating to the subject matter of this Agreement, and to
execute, sign and deliver all documents as may be required and to perform all
acts and to do all things deemed necessary by JPI in order to properly and
effectively deliver the obligations of the Vendors hereunder, and the Vendors do
hereby irrevocably appoint and constitute JPI as the Vendors' true and lawful
attorney with full power (in the name of the Vendors or otherwise) to execute
the documents referred to earlier in this clause for the purpose of securing and
putting into effect the intent of this Agreement such authority and appointment
shall take effect as an irrevocable appointment pursuant to the Powers of
Attorney Act 1971 Section 4.
4.2 The Vendors do hereby collectively and individually covenant with and
undertake with JPI to indemnify JPI and to hold JPI free from any and all claims
and liabilities, whether actual or contingent, and no matter how arising related
to JPI's appointment as Authorised Vendor.
<PAGE>
5. EXERCISE OF OPTION
5.1 The Company may, at any time on or before close of business on the Exercise
Date, exercise the Option in the following manner:
5.1.1 by notice in writing to the Vendors; and,
5.1.2 by delivery of the Consideration Shares in accordance with Schedule 1;
and,
5.1.3 by registering the Consideration Shares in the names of the Vendors; and,
5.1.4 by contemporaneously delivering the Offer to all registered and beneficial
owners of BTL's common stock as shall be registered at the time the Offer is
made.
5.2 Upon satisfaction of the provisions of sub-clause 5.1, and subject to the
provisions of Clause 6, the Vendors shall deliver to the Company the BTL Shares,
along with a signed stock transfer form in respect of the full amount of shares
held by them.
5.3 Upon satisfaction of the provisions of sub-clause 5.1, BJM, MDB, JTCL and EN
shall deliver to all registered shareholders of common stock in BTL, save for
the Vendors, a letter prepared on behalf of the board of directors of BTL
unanimously recommending acceptance of the Offer.
6. CONDITIONS PRECEDENT OF THE VENDORS
6.1 Completion shall be subject to the following conditions precedent:
6.1.1 The Company shall deliver to the Vendors a copy of its latest audited
financial statements and management accounts in respect of any whole calendar
month following completion of its audited financial statements, and following a
review thereof, the Vendors shall have the right, at their sole discretion, to
terminate this Agreement without liability or recourse if the Vendors determine
such audited financial statements or management accounts to be unsatisfactory
for any reason; and,
6.1.2 during the term of this Agreement the Company shall at all times have
available under the absolute control of its directors such number of authorised
shares of its common stock as shall be required to effect Completion; and,
6.1.3 the Company shall not have created or allowed to persist any class of
stock other than common shares; and,
6.1.4 save for the provisions of sub-clause 6.1.5, the maximum number of shares
of common stock in the Company which shall be issued and outstanding immediately
prior to Completion shall be FIVE MILLION (5,000,000), and at Completion the
Company shall not have entered into any agreement with any third party which
would conflict with the provisions of this sub-clause had such agreement been
exercised or made effective; and,
6.1.5 the Company shall have completed or shall be in a position to complete at
Completion the sale of such number of shares of its common stock at a price not
less than FIVE DOLLARS ($5) per share so as to generate the sum of FOUR MILLION
DOLLARS ($4,000,000) net of all costs, expenses, commissions and fees paid or
incurred relative thereto.
6.2 The Vendors may, at their sole discretion, waive, amend, vary or otherwise
agree to change any or all of the conditions precedent set forth in this Clause
6.
7 CONDITIONS PRECEDENT OF THE COMPANY
7.1 Completion shall be subject to the following conditions precedent:
7.1.1 BTL shall deliver to the Company a copy of its latest audited financial
statements and management accounts in respect of any whole calendar month
following completion of its audited financial statements, and following a review
thereof, the Company shall have the right, at its sole discretion, to terminate
this Agreement without liability or recourse if it determines such audited
financial statements or management accounts to be unsatisfactory for any reason;
and,
7.1.2 BTL shall not have created or allowed to persist any class of stock other
than common shares; and,
<PAGE>
7.1.3 the maximum number of shares of common stock in BTL which shall be issued
and outstanding at Completion shall be TEN MILLION ONE HUNDRED THOUSAND
(10,100,000), and at Completion BTL shall not have entered into any agreement
with any third party which would conflict with the provisions of this sub-clause
had such agreement been exercised or made effective.
7.2 BTL may, at its sole discretion, waive, amend, vary or otherwise agree to
change any or all of the conditions precedent set forth in this Clause 7.
8. TERM AND TERMINATION
8.1 This Agreement shall be in effect from the Effective Date through close of
business on the Exercise Date.
8.2 In the event that for any or no reason the Company fails to exercise the
Option in accordance with the provisions of this Agreement, in full and on time,
time being of the essence, then this Agreement shall forthwith lapse and shall
cease to be of any effect without liability of any party to any other party
hereto.
9. GENERAL
9.1 This Agreement shall be binding upon and enure to the benefit of the parties
hereto and their respective legal successors but shall not otherwise be
assignable by any party without the written consent of the other party, such
consent not to be unreasonably withheld.
9.2 No variation or amendment of this Agreement shall bind any party unless made
in writing and agreed to in writing by duly authorised representatives of the
parties.
9.3 Wherever possible, each provision of this Agreement shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision hereof shall be prohibited or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or remaining provisions of
this Agreement.
9.4 The headings in this Agreement are for convenience only and are not intended
to have any legal effect.
9.5 A failure by any party hereto to exercise or enforce any rights conferred
upon it by this Agreement shall not be deemed to be a waiver of any such rights
or operate so as to bar the exercise or enforcement thereof at any subsequent
time or times.
9.6 This Agreement contains the whole agreement between the parties and
supersedes any and all prior written or oral agreement(s) between them in
relation to its subject matter.
9.7 This Agreement may be executed in seven (7) counterparts, each of which
shall be deemed an original, but which together shall be deemed to constitute
one (1) and the same agreement.
9.8 Time shall be of the essence throughout this Agreement.
10. NOTICES
10.1 Any and all notices required or permitted hereunder shall be in writing and
sent to the intended recipient at its address set forth herein, either by
registered or certified mail, return receipt requested, postage prepaid,
facsimile transmission (and any such notice shall be confirmed promptly
thereafter by personal delivery or mailing in accordance with the other
provisions of this Clause, but such confirmation delivery shall not affect the
date on which such notice shall have been given), overnight delivery service, or
personal delivery. Each such notice shall be effective (i) if given by mail, as
of three (3) business days after such notice or communication is deposited in
the United States Mail, (ii) if given by facsimile communication, as of the date
on which such notice is transmitted to the facsimile number herein specified
below, (iii) if sent for overnight delivery via Federal Express or other
reputable national overnight delivery service, one (1) business day after such
notice or delivery is entrusted to such service, with recipient signature
required, or (iv) if personally delivered, when delivered at the address of the
intended recipient. Any party may change the address or facsimile number to
which notices or other communications hereunder are to be delivered or sent by
giving the other party notice in the manner set forth herein. Any notice
required to be made within a stated period of time shall be considered timely
mailed if deposited before midnight of the last day of the stated period.
<PAGE>
(a) If to the Vendors: The Jade Partnership International, Inc., 9055 Huntcliff
Trace, Atlanta, GA 30350; Facsimile: (+01) 770 594 8613; and (b) If to the
Company: Mark Pierce, 4221 E. East Pontatoc Canyon Drive, Tucson, Arizona 85718,
Facsimile: (+01) 520 529 6799
16. GOVERNING LAW
16.1 This Agreement shall be governed by and construed in accordance with the
laws of England and Wales and the parties do hereby submit themselves
exclusively to this jurisdiction.
AS WITNESS the hands of the parties the day and year first written above.
Signed:______________________________
Duly authorised for and on behalf of
BIOPROGRESS TECHNOLOGY, INC.
Signed:______________________________
Duly authorised for and on behalf of
THE JADE PARTNERSHIP INTERNATIONAL, INC.
Signed:______________________________
BARRY JOHN MUNCASTER
Signed:______________________________
MALCOLM DAVID BROWN
Signed:______________________________
JAMES TIMOTHY CHAPMAN LONGLEY
Signed:______________________________
EDWARD ZBIGNEW NOWAK
Signed:______________________________
JOE MUNCASTER
<PAGE>
Exhibit 10.12(b) - Amendment to Acquisition Agreement - BioProgess (UK)
An AGREEMENT dated this 30th day of June 1998, between:
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC., (BTI), a corporation registered in
the State of Nevada, having offices at 1999 Broadway, Suite 3235, Denver,
Colorado 80202; and,
THE JADE PARTNERSHIP INTERNATIONAL, INC., (JPI), a corporation registered in the
State of Delaware, having offices at 9055 Huntcliff Trace, Atlanta, Georgia
30350.
WHEREAS:
BTI, JPI et al, are parties to a Share Purchase Option Agreement (the Agreement)
dated 31st October, 1997.
Pursuant to Clause 4 of the Agreement, JPI has the power of attorney to act on
and to deal with all matters relative to or arising from the Agreement on behalf
of the other parties, excluding BTI. Pursuant to Clause 6 and to Clause 7 of the
Agreement, BTI and JPI wish to agree to waive, vary and amend certain provisions
of the Agreement.
IT IS HEREBY AGREED AS FOLLOWS:
Definitions in this Agreement shall have the same meanings as Definitions in the
Agreement.
In consideration of the mutual obligations, undertakings and other benefits
hereby delivered and received, the sufficiency of which is acknowledged by the
parties hereto, then:
1. Pursuant to subclause 7.1.3 of the Agreement, BTI agrees to amend the maximum
number of shares of common stock in BTL which shall be issued and outstanding at
Completion from TEN MILLION ONE HUNDRED THOUSAND (10,100,000), to SIXTEEN
MILLION (16,000,000).
2. Pursuant to Subclause 6.1.5 of the Agreement, JPI agrees to waive the
condition precedent under which the Company shall have completed or shall be in
a position to complete at Completion the sale of such number of shares of its
common stock at a price not less than FIVE DOLLARS ($5) per share so as to
generate the sum of FOUR MILLION DOLLARS ($4,000,000) net of all costs,
expenses, commissions and fees paid or incurred relative thereto.
3. In consideration of JPI having agreed to the waiver pursuant to Clause 2
hereof, BTI undertakes at Completion to purchase debt incurred by BTL, whether
actual or contingent, to a maximum of ONE MILLION DOLLARS ($1,000,000), and
shall pay for such debt by the issue of ordinary shares of its common stock at a
value equal to the closing inside bid price the day on which the purchase of
said debt is made.
4. BTI and JPI both agree to change the Effective Date from 30th June, 1998 to
31st March 1999.
5. All other terms and conditions of the Agreement shall, mutatis mutandis,
remain in full force and effect.
6. This Agreement shall be governed by and construed in accordance with the laws
of England and Wales and the parties do hereby submit themselves exclusively to
this jurisdiction.
AS WITNESS the hands of the parties the day and year first written above.
Signed:______________________________
Barry J. Muncaster, C. E. O.
Duly authorised for and on behalf of
BIOPROGRESS TECHNOLOGY, INC.
Signed:______________________________
James T. C. Longley, Director and C. F. O.
Duly authorised for and on behalf of
THE JADE PARTNERSHIP INTERNATIONAL, INC.
10.13 Employment Agreement - Barry J. Muncaster
EMPLOYMENT AND OPTION AGREEMENT
This Employment and Option Agreement is made and entered into to be effective as
of January 25, 1999 and is by and between Barry J. Muncaster (Employee) and
BioProgress Technology International, Inc. (Company). The Employee is willing
and able to provide various valuable services for and on behalf of the Company
in connection with the business of the Company. The Company desires to retain
the Employee as a director and executive officer on behalf of the Company and
the Employee desires to be retained in that capacity upon the terms and
conditions hereinafter set forth. In consideration of the foregoing premises,
the mutual promises and agreements hereinafter set forth, and such other and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Employee agree as follows:
1. Services. The Company hereby retains the Employee as a director and as chief
executive officer and the Employee hereby accepts and agrees to such retention.
The Employee shall render to the Company services of such nature as are
necessary to provide for the strategic direction and day to day management of
the Company.
2. Time, Place and Manner of Performance. The Employee shall render his services
at reasonable and convenient times and places. Except as aforesaid, the time,
place and manner of performance of the services hereunder, including the amount
of time to be allocated by the Employee to any specific service, shall be
determined in the sole discretion of the Company.
3. Term of Agreement. This agreement shall begin on the date first referred to
above, and shall terminate five (5) years from the date thereof unless extended
by mutual agreement, or unless terminated at any time by the Company for just
cause being Employee's negligence, dishonesty or incapacity for any or no reason
to perform services specified herein.
4. Compensation. The Company shall pay the Employee a fee in the amount of
$2,000 per month subject to upward only review at the discretion of the Company,
such review to be conducted at least once in every six (6) month period. In
addition, the Company grants the Employee an option (the Option) to purchase up
to 500,000 ordinary shares of common stock (the Option Shares) in the Company in
accordance with the following schedule: at any time on or before December 31,
2003 the Employee may purchase up to 100,000 Option Shares at a price of $0.35
per share, and up to 100,000 Option Shares at a price of $0.75 per share, and up
to 100,000 Option Shares at a price of $1.25 per share, and up to 100,000 Option
Shares at a price of $1.75 per share, and up to 100,000 Option Shares at a price
of $2.25 per share. In the event that the Employee purchases any or all Option
Shares, then the Company shall provide to the Employee shares of the free
trading common stock of the Company registered under a Form S-8 filed in
accordance with the terms and conditions set forth under the Securities Act of
1933, as amended. The Option and any exercise of Option Shares shall at all
times be conditional upon Employee not being, nor having been in breach of this
Agreement, and further upon Employee being an employee of the Company at the
time the Option is exercised in whole or in part. In the event that this
Agreement is terminated either by the Company or by the Employee the Option
shall lapse simultaneously and shall cease to have any effect whatsoever,
notwithstanding that any or all Option Shares may not have been purchased by
Employee.
5. Expenses. The Company shall reimburse the Employee on demand for all expenses
and other disbursements, including, but not limited to, travel, entertainment,
mailing, printing and postage, incurred by the Employee on behalf of the Company
in connection with the performance of the services pursuant to this agreement.
These expenses shall be paid in cash.
6. Disclosure of Information. The Employee recognizes and acknowledges that the
Employee has and will have access to certain confidential information of the
Company and its affiliates that are valuable, special and unique assets and
property of the Company and such affiliates. The Employee will not, during or
after the term of this agreement, disclose, without the prior written consent or
authorization of the Company, any such information to any person, except to
authorized representatives of the Employee or its affiliates for purposes of the
services to be rendered under this agreement, for any reason or purpose
whatsoever. In this regard, the Company agrees that such authorization or
consent to disclosure may be conditioned upon the disclosure being made pursuant
to a secrecy agreement, protective order, provision of statute, rule, regulation
or procedure under which the confidentiality of the information is maintained in
the hands of the person to whom the information is to be disclosed or in
compliance with the terms of a judicial order or administrative process.
7. Miscellaneous Provisions. (a) Notices. Any notices required or permitted to
be given under this Agreement shall be sufficient if in writing and delivered or
sent by registered or certified mail to the principle office of each party. (b)
Waiver of Breach. Any waiver by a party of a breach of any provision of this
agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by the waiving party. (c) Assignment. This agreement and
the rights and obligations of the parties hereunder are not assignable by either
party. (d) Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Nevada and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this Agreement, the laws of the State of Nevada shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted. (e)
Severability. All agreements and covenants contained herein are severable, and
in the event any of them shall be held to be invalid by any competent court, the
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein. (f) Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties and supersedes
and replaces all prior understandings, agreements and negotiations between the
parties. (g) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which taken together shall
constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the day and year first above written.
EMPLOYEE:
Barry J. Muncaster
COMPANY: BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
James T. C. Longley
Duly Authorized Officer
10.14 Employment Agreement - James T. C. Longley
EMPLOYMENT AND OPTION AGREEMENT
This Employment and Option Agreement is made and entered into to be effective as
of January 25, 1999 and is by and between James Timothy Chapman Longley
(Employee) and BioProgress Technology International, Inc. (Company). The
Employee is willing and able to provide various valuable services for and on
behalf of the Company in connection with the business of the Company. The
Company desires to retain the Employee as a director and executive officer on
behalf of the Company and the Employee desires to be retained in that capacity
upon the terms and conditions hereinafter set forth. In consideration of the
foregoing premises, the mutual promises and agreements hereinafter set forth,
and such other and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Employee agree as follows:
1. Services. The Company hereby retains the Employee as a director and as Chief
Financial Officer, Treasurer and Secretary and the Employee hereby accepts and
agrees to such retention. The Employee shall render to the Company services of
such nature as are necessary to provide for the strategic direction and day to
day management of the finance, accountancy and statutory activities of the
Company.
2. Time, Place and Manner of Performance. The Employee shall render his services
at reasonable and convenient times and places. Except as aforesaid, the time,
place and manner of performance of the services hereunder, including the amount
of time to be allocated by the Employee to any specific service, shall be
determined in the sole discretion of the Company.
3. Term of Agreement. This agreement shall begin on the date first referred to
above, and shall terminate five (5) years from the date thereof unless extended
by mutual agreement, or unless terminated at any time by the Company for just
cause being Employee's negligence, dishonesty or incapacity for any or no reason
to perform services specified herein.
4. Compensation. The Company shall pay the Employee a fee in the amount of
$2,000 per month subject to upward only review at the discretion of the Company,
such review to be conducted at least once in every six (6) month period. In
addition, the Company grants the Employee an option (the Option) to purchase up
to 500,000 ordinary shares of common stock (the Option Shares) in the Company in
accordance with the following schedule: at any time on or before December 31,
2003 the Employee may purchase up to 100,000 Option Shares at a price of $0.35
per share, and up to 100,000 Option Shares at a price of $0.75 per share, and up
to 100,000 Option Shares at a price of $1.25 per share, and up to 100,000 Option
Shares at a price of $1.75 per share, and up to 100,000 Option Shares at a price
of $2.25 per share. In the event that the Employee purchases any or all Option
Shares, then the Company shall provide to the Employee shares of the free
trading common stock of the Company registered under a Form S-8 filed in
accordance with the terms and conditions set forth under the Securities Act of
1933, as amended. The Option and any exercise of Option Shares shall at all
times be conditional upon Employee not being, nor having been in breach of this
Agreement, and further upon Employee being an employee of the Company at the
time the Option is exercised in whole or in part. In the event that this
Agreement is terminated either by the Company or by the Employee the Option
shall lapse simultaneously and shall cease to have any effect whatsoever,
notwithstanding that any or all Option Shares may not have been purchased by
Employee.
5. Expenses. The Company shall reimburse the Employee on demand for all expenses
and other disbursements, including, but not limited to, travel, entertainment,
mailing, printing and postage, incurred by the Employee on behalf of the Company
in connection with the performance of the services pursuant to this agreement.
These expenses shall be paid in cash.
6. Disclosure of Information. The Employee recognizes and acknowledges that the
Employee has and will have access to certain confidential information of the
Company and its affiliates that are valuable, special and unique assets and
property of the Company and such affiliates. The Employee will not, during or
after the term of this agreement, disclose, without the prior written consent or
authorization of the Company, any such information to any person, except to
authorized representatives of the Employee or its affiliates for purposes of the
services to be rendered under this agreement, for any reason or purpose
whatsoever. In this regard, the Company agrees that such authorization or
consent to disclosure may be conditioned upon the disclosure being made pursuant
to a secrecy agreement, protective order, provision of statute, rule, regulation
or procedure under which the confidentiality of the information is maintained in
the hands of the person to whom the information is to be disclosed or in
compliance with the terms of a judicial order or administrative process.
<PAGE>
7. Miscellaneous Provisions. (a) Notices. Any notices required or permitted to
be given under this Agreement shall be sufficient if in writing and delivered or
sent by registered or certified mail to the principle office of each party. (b)
Waiver of Breach. Any waiver by a party of a breach of any provision of this
agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by the waiving party. (c) Assignment. This agreement and
the rights and obligations of the parties hereunder are not assignable by either
party. (d) Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Nevada and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this Agreement, the laws of the State of Nevada shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted. (e)
Severability. All agreements and covenants contained herein are severable, and
in the event any of them shall be held to be invalid by any competent court, the
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein. (f) Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties and supersedes
and replaces all prior understandings, agreements and negotiations between the
parties. (g) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which taken together shall
constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the day and year first above written.
EMPLOYEE:
James Timothy Chapman Longley
COMPANY: BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Barry J. Muncaster
Duly Authorized Officer
10.15 Employment Agreement - Malcolm D. Brown
EMPLOYMENT AND OPTION AGREEMENT
This Employment and Option Agreement is made and entered into to be effective as
of January 25, 1999 and is by and between Malcolm David Brown (Employee) and
BioProgress Technology International, Inc. (Company). The Employee is willing
and able to provide various valuable services for and on behalf of the Company
in connection with the business of the Company. The Company desires to retain
the Employee as a director and executive officer on behalf of the Company and
the Employee desires to be retained in that capacity upon the terms and
conditions hereinafter set forth. In consideration of the foregoing premises,
the mutual promises and agreements hereinafter set forth, and such other and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Employee agree as follows:
1. Services. The Company hereby retains the Employee as a director and as
Executive Vice President Research and Development and the Employee hereby
accepts and agrees to such retention. The Employee shall render to the Company
services of such nature as are necessary to provide for the strategic direction
and day to day management of the research and development activities of the
Company.
2. Time, Place and Manner of Performance. The Employee shall render his services
at reasonable and convenient times and places. Except as aforesaid, the time,
place and manner of performance of the services hereunder, including the amount
of time to be allocated by the Employee to any specific service, shall be
determined in the sole discretion of the Company.
3. Term of Agreement. This agreement shall begin on the date first referred to
above, and shall terminate five (5) years from the date thereof unless extended
by mutual agreement, or unless terminated at any time by the Company for just
cause being Employee's negligence, dishonesty or incapacity for any or no reason
to perform services specified herein.
4. Compensation. The Company shall pay the Employee a fee in the amount of
$2,000 per month subject to upward only review at the discretion of the Company,
such review to be conducted at least once in every six (6) month period. In
addition, the Company grants the Employee an option (the Option) to purchase up
to 500,000 ordinary shares of common stock (the Option Shares) in the Company in
accordance with the following schedule: at any time on or before December 31,
2003 the Employee may purchase up to 100,000 Option Shares at a price of $0.35
per share, and up to 100,000 Option Shares at a price of $0.75 per share, and up
to 100,000 Option Shares at a price of $1.25 per share, and up to 100,000 Option
Shares at a price of $1.75 per share, and up to 100,000 Option Shares at a price
of $2.25 per share. In the event that the Employee purchases any or all Option
Shares, then the Company shall provide to the Employee shares of the free
trading common stock of the Company registered under a Form S-8 filed in
accordance with the terms and conditions set forth under the Securities Act of
1933, as amended. The Option and any exercise of Option Shares shall at all
times be conditional upon Employee not being, nor having been in breach of this
Agreement, and further upon Employee being an employee of the Company at the
time the Option is exercised in whole or in part. In the event that this
Agreement is terminated either by the Company or by the Employee the Option
shall lapse simultaneously and shall cease to have any effect whatsoever,
notwithstanding that any or all Option Shares may not have been purchased by
Employee.
5. Expenses. The Company shall reimburse the Employee on demand for all expenses
and other disbursements, including, but not limited to, travel, entertainment,
mailing, printing and postage, incurred by the Employee on behalf of the Company
in connection with the performance of the services pursuant to this agreement.
These expenses shall be paid in cash.
6. Disclosure of Information. The Employee recognizes and acknowledges that the
Employee has and will have access to certain confidential information of the
Company and its affiliates that are valuable, special and unique assets and
property of the Company and such affiliates. The Employee will not, during or
after the term of this agreement, disclose, without the prior written consent or
authorization of the Company, any such information to any person, except to
authorized representatives of the Employee or its affiliates for purposes of the
services to be rendered under this agreement, for any reason or purpose
whatsoever. In this regard, the Company agrees that such authorization or
consent to disclosure may be conditioned upon the disclosure being made pursuant
to a secrecy agreement, protective order, provision of statute, rule, regulation
or procedure under which the confidentiality of the information is maintained in
the hands of the person to whom the information is to be disclosed or in
compliance with the terms of a judicial order or administrative process.
7. Miscellaneous Provisions. (a) Notices. Any notices required or permitted to
be given under this Agreement shall be sufficient if in writing and delivered or
sent by registered or certified mail to the principle office of each party. (b)
Waiver of Breach. Any waiver by a party of a breach of any provision of this
agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by the waiving party. (c) Assignment. This agreement and
the rights and obligations of the parties hereunder are not assignable by either
party. (d) Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Nevada and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this Agreement, the laws of the State of Nevada shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted. (e)
Severability. All agreements and covenants contained herein are severable, and
in the event any of them shall be held to be invalid by any competent court, the
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein. (f) Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties and supersedes
and replaces all prior understandings, agreements and negotiations between the
parties. (g) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which taken together shall
constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the day and year first above written.
EMPLOYEE:
Malcolm David Brown
COMPANY: BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Barry J. Muncaster
Duly Authorized Officer
10.16 Employment Agreement - Edward I. Nowak
OPTION AGREEMENT
This Option Agreement is made and entered into to be effective as of January 25,
1999 and is by and between Edward Zbignew Nowak (Employee) and BioProgress
Technology International, Inc. (Company). The Employee is willing and able to
provide various valuable services for and on behalf of the Company in connection
with the business of the Company's wholly owned subsidiary, BioProgress
Technology Limited (BTL). The Company desires to appoint the Employee as a
director of BTL and the Employee desires to be appointed in that capacity upon
the terms and conditions hereinafter set forth. In consideration of the
foregoing premises, the mutual promises and agreements hereinafter set forth,
and such other and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Company and the Employee agree as follows:
1. Services. The Company hereby appoints the Employee as a director of BTL in
the capacity of Director of Research and Development and the Employee hereby
accepts and agrees to such appointment. The Employee shall render to BTL
services of such nature as are necessary to provide for the strategic direction
and day to day management of the research and development activities of BTL and
as set out more fully in a contract of employment (Contract) between Employee
and BTL.
2. Time, Place and Manner of Performance. The Employee shall render his services
at reasonable and convenient times and places. Except as aforesaid, the time,
place and manner of performance of the services hereunder, including the amount
of time to be allocated by the Employee to any specific service, shall be
determined in the sole discretion of BTL without conflict to the Contract.
3. Term of Agreement. This Agreement shall begin on the date first referred to
above, and shall terminate five (5) years from the date thereof unless extended
by mutual agreement, or unless terminated at any time by the Company for just
cause being Employee's negligence, dishonesty or incapacity for any or no reason
to perform services specified in the Contract.
4. Compensation. The Company grants the Employee an option (the Option) to
purchase up to 500,000 ordinary shares of common stock (the Option Shares) in
the Company in accordance with the following schedule: at any time on or before
December 31, 2003 the Employee may purchase up to 100,000 Option Shares at a
price of $0.35 per share, and up to 100,000 Option Shares at a price of $0.75
per share, and up to 100,000 Option Shares at a price of $1.25 per share, and up
to 100,000 Option Shares at a price of $1.75 per share, and up to 100,000 Option
Shares at a price of $2.25 per share. In the event that the Employee purchases
any or all Option Shares, then the Company shall provide to the Employee shares
of the free trading common stock of the Company registered under a Form S-8
filed in accordance with the terms and conditions set forth under the Securities
Act of 1933, as amended. The Option and any exercise of Option Shares shall at
all times be conditional upon Employee not being, nor having been in breach of
this Agreement, and further upon Employee being an employee of BTL at the time
the Option is exercised in whole or in part. In the event that this Agreement is
terminated either by the Company or by the Employee the Option shall lapse
simultaneously and shall cease to have any effect whatsoever, notwithstanding
that any or all Option Shares may not have been purchased by Employee.
5. Disclosure of Information. The Employee recognizes and acknowledges that the
Employee has and will have access to certain confidential information of the
Company and its affiliates that are valuable, special and unique assets and
property of the Company and such affiliates. The Employee will not, during or
after the term of this agreement, disclose, without the prior written consent or
authorization of the Company, any such information to any person, except to
authorized representatives of the Employee or its affiliates for purposes of the
services to be rendered under this agreement, for any reason or purpose
whatsoever. In this regard, the Company agrees that such authorization or
consent to disclosure may be conditioned upon the disclosure being made pursuant
to a secrecy agreement, protective order, provision of statute, rule, regulation
or procedure under which the confidentiality of the information is maintained in
the hands of the person to whom the information is to be disclosed or in
compliance with the terms of a judicial order or administrative process.
6. Miscellaneous Provisions. (a) Notices. Any notices required or permitted to
be given under this Agreement shall be sufficient if in writing and delivered or
sent by registered or certified mail to the principle office of each party. (b)
Waiver of Breach. Any waiver by a party of a breach of any provision of this
agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by the waiving party. (c) Assignment. This agreement and
the rights and obligations of the parties hereunder are not assignable by either
party. (d) Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
<PAGE>
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Nevada and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this Agreement, the laws of the State of Nevada shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted. (e)
Severability. All agreements and covenants contained herein are severable, and
in the event any of them shall be held to be invalid by any competent court, the
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein. (f) Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties and supersedes
and replaces all prior understandings, agreements and negotiations between the
parties. (g) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which taken together shall
constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the day and year first above written.
EMPLOYEE:
Edward Zbignew Nowak
COMPANY: BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Barry J. Muncaster
Duly Authorized Officer
Exhibit 10.17 Employement Agreement - Graham Hind
EMPLOYMENT AND OPTION AGREEMENT
This Employment and Option Agreement is made and entered into to be effective as
of January 25, 1999 and is by and between Graham Hind (Employee) and BioProgress
Technology International, Inc. (Company). The Employee is willing and able to
provide various valuable services for and on behalf of the Company in connection
with the business of the Company. The Company desires to retain the Employee as
a director and executive officer on behalf of the Company and the Employee
desires to be retained in that capacity upon the terms and conditions
hereinafter set forth. In consideration of the foregoing premises, the mutual
promises and agreements hereinafter set forth, and such other and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Employee agree as follows:
1. Services. The Company hereby retains the Employee as a director and as
Managing Director of BioProgress Technology Limited and the Employee hereby
accepts and agrees to such retention. The Employee shall render to the Company
services of such nature as are necessary to provide for the strategic direction
and day to day management of the finance, accountancy and statutory activities
of the Company.
2. Time, Place and Manner of Performance. The Employee shall render his services
at reasonable and convenient times and places. Except as aforesaid, the time,
place and manner of performance of the services hereunder, including the amount
of time to be allocated by the Employee to any specific service, shall be
determined in the sole discretion of the Company.
3. Term of Agreement. This agreement shall begin on the date first referred to
above, and shall terminate five (5) years from the date thereof unless extended
by mutual agreement, or unless terminated at any time by the Company for just
cause being Employee's negligence, dishonesty or incapacity for any or no reason
to perform services specified herein.
4. Compensation. The Company shall pay the Employee a fee in the amount of
$2,000 per month subject to upward only review at the discretion of the Company,
such review to be conducted at least once in every six (6) month period. In
addition, the Company grants the Employee an option (the Option) to purchase up
to 500,000 ordinary shares of common stock (the Option Shares) in the Company in
accordance with the following schedule: at any time on or before December 31,
2003 the Employee may purchase up to 100,000 Option Shares at a price of $0.35
per share, and up to 100,000 Option Shares at a price of $0.75 per share, and up
to 100,000 Option Shares at a price of $1.25 per share, and up to 100,000 Option
Shares at a price of $1.75 per share, and up to 100,000 Option Shares at a price
of $2.25 per share. In the event that the Employee purchases any or all Option
Shares, then the Company shall provide to the Employee shares of the free
trading common stock of the Company registered under a Form S-8 filed in
accordance with the terms and conditions set forth under the Securities Act of
1933, as amended. The Option and any exercise of Option Shares shall at all
times be conditional upon Employee not being, nor having been in breach of this
Agreement, and further upon Employee being an employee of the Company at the
time the Option is exercised in whole or in part. In the event that this
Agreement is terminated either by the Company or by the Employee the Option
shall lapse simultaneously and shall cease to have any effect whatsoever,
notwithstanding that any or all Option Shares may not have been purchased by
Employee.
5. Expenses. The Company shall reimburse the Employee on demand for all expenses
and other disbursements, including, but not limited to, travel, entertainment,
mailing, printing and postage, incurred by the Employee on behalf of the Company
in connection with the performance of the services pursuant to this agreement.
These expenses shall be paid in cash.
6. Disclosure of Information. The Employee recognizes and acknowledges that the
Employee has and will have access to certain confidential information of the
Company and its affiliates that are valuable, special and unique assets and
property of the Company and such affiliates. The Employee will not, during or
after the term of this agreement, disclose, without the prior written consent or
authorization of the Company, any such information to any person, except to
authorized representatives of the Employee or its affiliates for purposes of the
services to be rendered under this agreement, for any reason or purpose
whatsoever. In this regard, the Company agrees that such authorization or
consent to disclosure may be conditioned upon the disclosure being made pursuant
to a secrecy agreement, protective order, provision of statute, rule, regulation
or procedure under which the confidentiality of the information is maintained in
the hands of the person to whom the information is to be disclosed or in
compliance with the terms of a judicial order or administrative process.
<PAGE>
7. Miscellaneous Provisions. (a) Notices. Any notices required or permitted to
be given under this Agreement shall be sufficient if in writing and delivered or
sent by registered or certified mail to the principle office of each party. (b)
Waiver of Breach. Any waiver by a party of a breach of any provision of this
agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by the waiving party. (c) Assignment. This agreement and
the rights and obligations of the parties hereunder are not assignable by either
party. (d) Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Nevada and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this Agreement, the laws of the State of Nevada shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted. (e)
Severability. All agreements and covenants contained herein are severable, and
in the event any of them shall be held to be invalid by any competent court, the
Agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein. (f) Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties and supersedes
and replaces all prior understandings, agreements and negotiations between the
parties. (g) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but both of which taken together shall
constitute but one and the same document.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the day and year first above written.
EMPLOYEE:
Graham Hind
COMPANY: BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Barry J. Muncaster
Duly Authorized Officer
10.18 Professional Services Agreement - The Jade Partnership International, Inc.
CONSULTING AND OPTION AGREEMENT
This Consulting and Option Agreement is made and entered into to be effective as
of the date upon which Services were first rendered in accordance herewith and
is by and between The Jade Partnership International, Inc., (Consultant) and
BioProgress Technology International, Inc. (Client). Consultant is willing and
able to provide various valuable Services for and on behalf of Client in
connection with the business of Client including, but not limited to, procuring
equity or debt finance for the Company and providing general business management
and administration Services and development of sales & marketing and
international licensing strategies (together the Services). Client desires to
retain Consultant as provider of Services to be performed by Consultant on
behalf of Client and Consultant desires to be retained in that capacity upon the
terms and conditions hereinafter set forth. In consideration of the foregoing
premises, the mutual promises and agreements hereinafter set forth, and such
other and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Client and Consultant agree as follows:
1. Services. Client hereby retains Consultant and Consultant hereby accepts and
agrees to such retention. Consultant shall render to Client Services of such
nature as are necessary to provide for the strategic direction and day to day
management of the Company. It is not intended that the performance of the
Services described herein shall be accomplished exclusively by Consultant;
therefore, Consultant may engage persons as subcontractors to assist in the
discharge of the responsibilities hereunder; however, the cost of such persons
or subcontractors shall be at the cost and expense of Consultant.
2. Time, Place and Manner of Performance. Consultant shall render Services at
reasonable and convenient times and places. Except as aforesaid, the time, place
and manner of performance of the Services hereunder, including the amount of
time to be allocated by Consultant to any specific service, shall be determined
in the sole discretion of Consultant.
3. Term of Agreement. This agreement shall begin when Consultant first began
rendering Services for Client, and shall terminate when the Services have been
fully rendered hereunder or when a change in control of Client shall have
occurred.
4. Compensation. Client shall pay Consultant a fee in the amount of $50,000 per
month. At the option of Consultant, Consultant may elect to take all or any
portion of this amount in shares of the free trading common stock of Client and
Client undertakes with Consultant to procure the registration of such shares as
soon as permissible under statute, law or regulation following the issue of the
same. The parties have agreed that the fair market value of this stock, after
considering the financial condition of Client, as well as the lack of a trading
market for the stock, is $0.28 per share.
5. Expenses. Client shall reimburse Consultant on demand for all expenses and
other disbursements, including, but not limited to, travel, entertainment,
mailing, printing and postage, incurred by Consultant, or any of its
subcontractors, on behalf of Client in connection with the performance of the
Services pursuant to this agreement. Expenses and disbursements in excess of
$100 shall have Client's prior approval. These expenses shall be paid in cash,
or, at the option of Consultant, in shares of Client's common and Client
undertakes with Consultant to procure the registration of such shares as soon as
permissible under statute, law or regulation following the issue of the same. If
this option is exercised, said shares shall be issued at the fair market value
therefor, which Client and Consultant agree will be the closing inside bid price
therefor on the date of payment.
6. Work Product. It is agreed that, all intellectual property, business
contacts, commercial knowledge, actual or intangible know-how, documents,
materials, and any and all other work produced or performed by the Consultant
pursuant to this Agreement shall be the sole and exclusive property of the
Client upon payment to the Consultant therefor.
7. Disclosure of Information. Consultant recognizes and acknowledges that
Consultant has and will have access to certain confidential information of
Client and its affiliates that are valuable, special and unique assets and
property of Client and such affiliates. Consultant will not, during or after the
term of this agreement, disclose, without the prior written consent or
authorization of Client, any such information to any person, except to
authorized representatives of Consultant or its affiliates for purposes of the
Services to be rendered under this agreement, for any reason or purpose
whatsoever. In this regard, Client agrees that such authorization or consent to
disclosure may be conditioned upon the disclosure being made pursuant to a
secrecy agreement, protective order, provision of statute, rule, regulation or
procedure under which the confidentiality of the information is maintained in
the hands of the person to whom the information is to be disclosed or in
compliance with the terms of a judicial order or administrative process.
<PAGE>
8. Conflict of Interest. Consultant shall be free to perform Services for other
persons during the term of this agreement. Consultant will notify Client of the
performance of consulting Services for any other person that would conflict with
the obligations of this agreement. Upon receiving such notice, Client may
terminate this agreement or consent to Consultant's outside consulting Services.
Failure to terminate this agreement shall constitute Client's ongoing consent to
Consultant's outside consulting activities.
9. Miscellaneous Provisions. (a) Notices. Any notices required or permitted to
be given under this agreement shall be sufficient if in writing and delivered or
sent by registered or certified mail to the principle office of each party. (b)
Waiver of Breach. Any waiver by a party of a breach of any provision of this
agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by the waiving party. (c) Assignment. This agreement and
the rights and obligations of the parties hereunder are not assignable by either
party. (d) Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Nevada and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this agreement, the laws of the State of Nevada shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted. (e)
Severability. All agreements and covenants contained herein are severable, and
in the event any of them shall be held to be invalid by any competent court, the
agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein. (f) Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties and supersedes
and replaces all prior understandings, agreements and negotiations between the
parties solely and expressly in respect of the subject matter. (g) Counterparts.
This agreement may be executed in counterparts, each of which shall be deemed an
original, but both of which taken together shall constitute but one and the same
document.
IN WITNESS WHEREOF, the parties hereto have entered into this agreement
effective as of the day and year first above written.
CONSULTANT:
The Jade Partnership International, Inc.
CLIENT: BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Barry J. Muncaster, President
10.19 Professional Services Agreement -
Company and Ormiston Gore Securities Limited
FINANCIAL SERVICES AGREEMENT
This Financial Services Agreement is made and entered into to be effective as of
the date upon which Financial Services were first rendered in accordance
herewith and is by and between Ormiston-Gore Securities Limited (OGSL) and
BioProgress Technology International, Inc. (Client). OGSL is willing and able to
provide various valuable services for and on behalf of Client in connection with
the business of Client including, but not limited to, procuring equity or debt
finance for the Company (together the Services). Client desires to retain OGSL
as provider of Services to be performed by OGSL on behalf of Client and OGSL
desires to be retained in that capacity upon the terms and conditions
hereinafter set forth. In consideration of the foregoing premises, the mutual
promises and agreements hereinafter set forth, and such other and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Client and OGSL agree as follows:
1. Services. Client hereby retains OGSL and OGSL hereby accepts and agrees to
such retention. OGSL shall render to Client Services of such nature as are
necessary to provide for the day to day financial needs of the Company. It is
not intended that the performance of the Services described herein shall be
accomplished exclusively by OGSL; therefore, OGSL may engage persons as
subcontractors to assist in the discharge of the responsibilities hereunder;
however, the cost of such persons or subcontractors shall be at the cost and
expense of OGSL.
2. Time, Place and Manner of Performance. OGSL shall render Services at
reasonable and convenient times and places. Except as aforesaid, the time, place
and manner of performance of the Services hereunder, including the amount of
time to be allocated by OGSL to any specific service, shall be determined in the
sole discretion of OGSL.
3. Term of Agreement. This agreement shall begin when OGSL first began rendering
Services for Client, and shall terminate when the Services have been fully
rendered hereunder or when a change in control of Client shall have occurred.
4. Compensation. Client shall pay OGSL a fee in the amount of $10,000 per month.
At the option of OGSL, OGSL may elect to take all or any portion of this amount
in shares of the free trading common stock of Client and Client undertakes with
OGSL to procure the registration of such shares as soon as permissible under
statute, law or regulation following the issue of the same. The parties have
agreed that the fair market value of this stock, after considering the financial
condition of Client, as well as the lack of a trading market for the stock, is
$0.28 per share.
5. Loans and Loan Advances. Any and all loans or loan advances made to the
Client by OGSL, or procured by OGSL on behalf of a third party, shall be
unsecured and repayable in full upon formal demand made in writing and submitted
to the Client by OGSL. At the option of OGSL, OGSL may elect to accept repayment
of any and all loans or loan advances made to Client under this Agreement in
shares of the free trading common stock of Client and Client undertakes with
OGSL to procure the registration of such shares as soon as permissible under
statute, law or regulation following the issue of the same. The parties have
agreed that the fair market value of this stock, after considering the financial
condition of Client, as well as the lack of a trading market for the stock, is
$0.28 per share.
6 Expenses. Client shall reimburse OGSL on demand for all expenses and other
disbursements, including, but not limited to, travel, entertainment, mailing,
printing and postage, incurred by OGSL, or any of its subcontractors, on behalf
of Client in connection with the performance of the Services pursuant to this
agreement. Expenses and disbursements in excess of $100 shall have Client's
prior approval. These expenses shall be paid in cash, or, at the option of OGSL,
in shares of Client's common and Client undertakes with OGSL to procure the
registration of such shares as soon as permissible under statute, law or
regulation following the issue of the same. If this option is exercised, said
shares shall be issued at the fair market value therefor, which Client and OGSL
agree will be the closing inside bid price therefor on the date of payment. 6.
Work Product. It is agreed that, all intellectual property, business contacts,
commercial knowledge, actual or intangible know-how, documents, materials, and
any and all other work produced or performed by the OGSL pursuant to this
Agreement shall be the sole and exclusive property of the Client upon payment to
the OGSL therefor.
7. Disclosure of Information. OGSL recognizes and acknowledges that OGSL has and
will have access to certain confidential information of Client and its
affiliates that are valuable, special and unique assets and property of Client
and such affiliates. OGSL will not, during or after the term of this agreement,
disclose, without the prior written consent or authorization of Client, any such
information to any person, except to authorized representatives of OGSL or its
affiliates for purposes of the Services to be rendered under this agreement, for
any reason or purpose whatsoever. In this regard, Client agrees that such
authorization or consent to disclosure may be conditioned upon the disclosure
being made pursuant to a secrecy agreement, protective order, provision of
statute, rule, regulation or procedure under which the confidentiality of the
information is maintained in the hands of the person to whom the information is
to be disclosed or in compliance with the terms of a judicial order or
administrative process.
8. Conflict of Interest. OGSL shall be free to perform Services for other
persons during the term of this agreement. OGSL will notify Client of the
performance of consulting Services for any other person that would conflict with
the obligations of this agreement. Upon receiving such notice, Client may
terminate this agreement or consent to OGSL's outside consulting Services.
Failure to terminate this agreement shall constitute Client's ongoing consent to
OGSL's outside consulting activities.
<PAGE>
9. Miscellaneous Provisions. (a) Notices. Any notices required or permitted to
be given under this agreement shall be sufficient if in writing and delivered or
sent by registered or certified mail to the principle office of each party. (b)
Waiver of Breach. Any waiver by a party of a breach of any provision of this
agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by the waiving party. (c) Assignment. This agreement and
the rights and obligations of the parties hereunder are not assignable by either
party. (d) Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Nevada and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this agreement, the laws of the State of Nevada shall be applicable and shall
govern to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted. (e)
Severability. All agreements and covenants contained herein are severable, and
in the event any of them shall be held to be invalid by any competent court, the
agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein. (f) Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties and supersedes
and replaces all prior understandings, agreements and negotiations between the
parties solely and expressly in respect of the subject matter. (g) Counterparts.
This agreement may be executed in counterparts, each of which shall be deemed an
original, but both of which taken together shall constitute but one and the same
document.
IN WITNESS WHEREOF, the parties hereto have entered into this agreement
effective as of the day and year first above written.
OGSL: ORMISTON-GORE SECURITIES LIMITED
Simon Ashley Couldridge, Director
CLIENT: BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
Barry J. Muncaster, President
10.20 Professional Services Agreement - BTL and Ormiston Gore Securities Ltd.
FINANCIAL SERVICES AGREEMENT
This Financial Services Agreement is made and entered into to be effective as of
the date upon which Financial Services were first rendered in accordance
herewith and is by and between Ormiston Gore Securities Limited (OGSL) and
BioProgress Technology Limited. (Client). OGSL is willing and able to provide
various valuable services for and on behalf of Client in connection with the
business of Client including, but not limited to, procuring equity or debt
finance for the Company (together the Services). Client desires to retain OGSL
as provider of Services to be performed by OGSL on behalf of Client and OGSL
desires to be retained in that capacity upon the terms and conditions
hereinafter set forth. In consideration of the foregoing premises, the mutual
promises and agreements hereinafter set forth, and such other and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Client and OGSL agree as follows:
1. Services. Client hereby retains OGSL and OGSL hereby accepts and agrees to
such retention. OGSL shall render to Client Services of such nature as are
necessary to provide for the day to day financial needs of the Company. It is
not intended that the performance of the Services described herein shall be
accomplished exclusively by OGSL; therefore, OGSL may engage persons as
subcontractors to assist in the discharge of the responsibilities hereunder;
however, the cost of such persons or subcontractors shall be at the cost and
expense of OGSL.
2. Time, Place and Manner of Performance. OGSL shall render Services at
reasonable and convenient times and places. Except as aforesaid, the time, place
and manner of performance of the Services hereunder, including the amount of
time to be allocated by OGSL to any specific service, shall be determined in the
sole discretion of OGSL.
3. Term of Agreement. This agreement shall begin when OGSL first began rendering
Services for Client, and shall terminate when the Services have been fully
rendered hereunder or when a change in control of Client shall have occurred.
4. Compensation. Client shall pay OGSL a fee in the amount of $14,806.85. At the
option of OGSL, OGSL may elect to accept repayment of any and all loans or loan
advances made to Client under this Agreement in shares of the free trading
common shares of Client. The parties have agreed that the fair market value of
this stock, after considering the financial condition of Client, as well as the
lack of a trading market for the stock, is $0.17 per share.
5. Loans and Loan Advances. Any and all loans or loan advances made to the
Client by OGSL, or procured by OGSL on behalf of a third party, shall be
unsecured and repayable in full upon formal demand made in writing and submitted
to the Client by OGSL. At the option of OGSL, OGSL may elect to accept repayment
of any and all loans or loan advances made to Client under this Agreement in
shares of the free trading common shares of Client. The parties have agreed that
the fair market value of this stock, after considering the financial condition
of Client, as well as the lack of a trading market for the stock, is $0.17 per
share.
6. Expenses. Client shall reimburse OGSL on demand for all expenses and other
disbursements, including, but not limited to, travel, entertainment, mailing,
printing and postage, incurred by OGSL, or any of its subcontractors, on behalf
of Client in connection with the performance of the Services pursuant to this
agreement. Expenses and disbursements in excess of $100 shall have Client's
prior approval. These expenses shall be paid in cash, or, at the option of OGSL,
in shares of Client's common stock and Client undertakes with OGSL. If this
option is exercised, said shares shall be issued at the fair market value
therefor, which Client and OGSL agree will be the last price paid therefor prior
to the date of payment.
6. Work Product. It is agreed that, all intellectual property, business
contacts, commercial knowledge, actual or intangible know how, documents,
materials, and any and all other work produced or performed by the OGSL pursuant
to this Agreement shall be the sole and exclusive property of the Client upon
payment to the OGSL therefor.
<PAGE>
7. Disclosure of Information. OGSL recognizes and acknowledges that OGSL has and
will have access to certain confidential information of Client and its
affiliates that are valuable, special and unique assets and property of Client
and such affiliates. OGSL will not, during or after the term of this agreement,
disclose, without the prior written consent or authorization of Client, any such
information to any person, except to authorized representatives of OGSL or its
affiliates for purposes of the Services to be rendered under this agreement, for
any reason or purpose whatsoever. In this regard, Client agrees that such
authorization or consent to disclosure may be conditioned upon the disclosure
being made pursuant to a secrecy agreement, protective order, provision of
statute, rule, regulation or procedure under which the confidentiality of the
information is maintained in the hands of the person to whom the information is
to be disclosed or in compliance with the terms of a judicial order or
administrative process.
8. Conflict of Interest. OGSL shall be free to perform Services for other
persons during the term of this agreement. OGSL will notify Client of the
performance of consulting Services for any other person that would conflict with
the obligations of this agreement. Upon receiving such notice, Client may
terminate this agreement or consent to OGSL's outside consulting Services.
Failure to terminate this agreement shall constitute Client's ongoing consent to
OGSL's outside consulting activities.
9. Miscellaneous Provisions. (a) Notices. Any notices required or permitted to
be given under this agreement shall be sufficient if in writing and delivered or
sent by registered or certified mail to the principle office of each party. (b)
Waiver of Breach. Any waiver by a party of a breach of any provision of this
agreement by the other party shall not operate or be construed as a waiver of
any subsequent breach by the waiving party. (c) Assignment. This agreement and
the rights and obligations of the parties hereunder are not assignable by either
party. (d) Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
England and Wales and that in any action, special proceeding or other proceeding
that may be brought arising out of, in connection with or by reason of this
agreement, the laws of of England and Wales shall be applicable and shall govern
to the exclusion of the law of any other forum, without regard to the
jurisdiction in which any action or special proceeding may be instituted. (e)
Severability. All agreements and covenants contained herein are severable, and
in the event any of them shall be held to be invalid by any competent court, the
agreement shall be interpreted as if such invalid agreements or covenants were
not contained herein. (f) Entire Agreement. This Agreement constitutes and
embodies the entire understanding and agreement of the parties and supersedes
and replaces all prior understandings, agreements and negotiations between the
parties solely and expressly in respect of the subject matter. (g) Counterparts.
This agreement may be executed in counterparts, each of which shall be deemed an
original, but both of which taken together shall constitute but one and the same
document.
IN WITNESS WHEREOF, the parties hereto have entered into this agreement
effective as of the day and year first above written.
OGSL: ORMISTON GORE SECURITIES LIMITED
Simon Ashley Couldridge, Director
CLIENT: BIOPROGRESS TECHNOLOGY LIMITED
Malcolm D. Brown, Managing Director
10.21 Trutona Purchase Agreement
An AGREEMENT dated this 15th day of February 1999, by and between:
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC., (BTI), a corporation registered in
the State of Nevada, having offices situate at 1999 Broadway, Suite 3235,
Denver, Colorado 80204; and,
TRUTONA INTERNATIONAL, INC., (TI) a corporation registered in the State of
Delaware, having offices situate at 9055 Huntcliff Trace, Atlanta, Georgia
30350.
WHEREAS:
TI is the owner of those patents, trademarks, licenses, other valuable
intellectual property and inventory (together the Assets) set out in Schedule 1
attached hereto.
BTI wishes to buy and TI wishes to sell the Assets upon the terms and conditions
set forth in this agreement (the Agreement).
It is AGREED as follows:
1. Consideration:
1.1 The consideration payable (the Purchase Price) by BTI to TI for the purchase
of the Assets shall be ONE MILLION FIVE HUNDRED THOUSAND US DOLLARS (US
$1,500,000).
1.2 The Purchase Price shall be paid as follows:
1.2.1 upon formal closing of this Agreement (Completion) BTI shall issue to TI
ONE MILLION EIGHT HUNDRED AND SEVENTY FIVE THOUSAND (1,875,000) ordinary shares
of common stock in BTI (the BTI Shares) having an agreed price (the Agreed
Price) of US FORTY CENTS (US $0.40) per share; and,
1.2.2 on or before 31 December 1999, BTI shall (a) issue to TI an additional ONE
MILLION EIGHT HUNDRED AND SEVENTY-FIVE THOUSAND (1,875,000) BTI Shares, or (b)
shall pay to TI in cash up to THREE HUNDRED AND EIGHTY THOUSAND US DOLLARS (US
$380,000) plus such number of BTI Shares at the Agreed Price as shall equal the
total amount of SEVEN HUNDRED AND FIFTY THOUSAND US DOLLARS (US $750,000), the
apportionment of said cash and BTI Shares shall be determined by BTI at its sole
discretion.
1.2.3 Unless previously registered with the Securities and Exchange Commission
of the United States of America (such registration to be at the sole discretion
of BTI), the BTI Shares shall be restricted from sale, assignment or disposal
for a period of TWENTY-FOUR (24) months from the date of Completion of this
Agreement and each share certificate shall bear a legend stating the same.
2. Effective Date and Completion
2.1. This Agreement shall be effective the date hereof.
2.2. Completion of this Agreement shall be take place at any time on or before
31 March 1999.
2.3. At Completion BTI shall deliver to TI ONE MILLION EIGHT HUNDRED AND
SEVENTY-FIVE THOUSAND (1,875,000) BTI Shares and TI shall deliver to BTI the
Assets.
3. Representations, Warranties and Covenants of BTI:
3.1. All necessary steps have been taken to make this Agreement a legal, valid
and binding obligation on BTI and enforceable in accordance with its terms and
conditions.
3.2. The execution and delivery of this Agreement and the performance by BTI of
its obligations hereunder will not result in any material breach or violation of
or material default under any material agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
rule, regulation, statute, order or decree of any kind, to which BTI or any of
its subsidiaries is a party or by which they or any of their property is or may
be or become subject, nor in the violation of the articles or bylaws governing
the conduct of BTI.
<PAGE>
3.3. BTI has delivered to TI its annual report on Form 10-KSB for the year ended
December 31, 1997, and its quarterly reports on Form 10-QSB for the fiscal
quarters ended March 31, 1998, June 30, 1998, and September 30, 1998 all of
which were true and correct as of the date of filing and remain true and correct
in all material respects as of the date hereof. Also, BTI has provided TI full
access to any and all information it desires concerning the business and
operations of BTI, and BTI has made available to TI such personnel as has been
requested to answer any and all questions that TI may have had concerning its
investment in BTI. Further, BTI is current in all of its required reports under
the Securities Exchange Act of 1934, as amended.
3.4. The BTI Shares have each been validly authorized and are fully paid and
non-assessable.
4. Representations, Warranties and Covenants of the TI:
4.1. All necessary steps have been taken to make this Agreement a legal, valid
and binding obligation on TI enforceable in accordance with its terms and
conditions.
4.2. The execution and delivery of this Agreement and the performance by TI of
its obligations hereunder will not result in any material breach or violation of
or material default under any material agreement, indenture, lease, license,
mortgage, instrument, or understanding, nor result in any violation of any law,
rule, regulation, statute, order or decree of any kind, to which TI is a party
or by which it or any its property is or may be or become subject, nor in the
violation of the articles or bylaws governing the conduct of TI.
4.3. The Assets are not, and prior to Completion shall not become subject to any
lien, encumbrance, security interest or financing statement whatsoever. Further,
the Assets are not the subject of any other agreement in regards thereof.
4.4. TI has provided BTI full access to any and all information it desires
concerning the Assets, and TI has made available to BTI such personnel as has
been requested to answer any and all questions which BTI may have had concerning
its purchase of the Assets.
5. Understanding of BTI:
5.1. TI makes no warranties (expressed or implied) regarding the value or
potential value of the Assets.
6. Understandings of TI:
6.1. The certificates representing the BTI Shares will bear a legend restricting
transfer under Rule 144 of the Securities Act of 1933, as amended, and will be
issued solely in the name of TI.
6.2. The BTI Shares have not been registered under the Securities Act of 1933,
as amended, or any applicable state law (collectively, the Securities Act);
further, the BTI Shares may not be sold, offered for sale, transferred, pledged,
hypothecated or otherwise disposed of except in compliance with the Securities
Act; further, BTI has no obligation, and does not intend, to cause the BTI
Shares to be registered under the Securities Act, or to comply with any
exemption under the Securities Act that would permit a sale or sales or all or
any portion of the BTI Shares; further, the legal consequences of the foregoing
mean that TI must bear the economic risk of the investment in the BTI Shares for
an indefinite period of time; and, further, if TI desires to sell or transfer
any or all of the BTI Shares within the restricted period, BTI may require TI's
counsel to provide legal opinion that the transfer may be made without
registration under the Securities Act.
6.3. No federal or state agency has made any findings or determination as to the
fairness of an investment in BTI, or any recommendation or endorsement of this
investment.
6.4. There is presently only a limited market for the BTI Shares and no market
may exist in the future for any sale or sales of all or any part thereof.
6.5. TI has evaluated the high risks of investing in the BTI Shares and has such
knowledge and experience in financial and business matters in general and in
particular with respect to this type of investment that it is capable of
evaluating the merits and risks of an investment in the BTI Shares.
6.6. TI has been given the opportunity to ask questions and receive answers from
BTI concerning the terms and conditions of this investment, and to obtain
additional information necessary to verify the accuracy of the information it
desired in order to evaluate its investment, and in evaluating the suitability
of an investment in the BTI Shares has not relied upon any representations or
other information (whether oral or written) other than that furnished to it by
BTI or the representatives of BTI.
<PAGE>
6.7. It has had the opportunity to discuss with its professional, legal, tax and
financial advisers the suitability of an investment in the BTI Shares for its
particular tax and financial situation and all information that it has provided
to BTI concerning TI and its financial position is correct and complete at the
date hereof.
6.8. In making the decision to purchase the BTI Shares it has relied solely upon
independent investigations made by it or on its behalf.
6.9. It is acquiring the BTI Shares solely for its own account, for investment
purposes only, and is not purchasing with a view to, or for, the resale,
distribution, subdivision or fractionalisation thereof.
7. Miscellaneous:
7.1. This Agreement sets forth and constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof, and supersedes any and
all prior agreements, understandings, promises, warranties, covenants and
representations made by any party to any other party concerning the subject
matter hereof and the terms applicable hereto. This Agreement may not be
released, discharged, amended or modified in any manner except by an instrument
in writing signed by duly authorised representatives of the parties hereto.
7.2. The invalidity or unenforceability of one or more provisions of this
Agreement shall not affect the validity or enforceability of any of the other
provisions hereof, and this Agreement shall be construed in all respects as if
such invalid or unenforceable provisions are omitted.
7.3. This Agreement shall be deemed to have been entered into and shall be
construed and enforced in accordance with the laws of the State of Nevada.
7.4. The failure of any party hereto to insist, in any one or more instances,
upon the performance of any of the terms, covenants or conditions of this
Agreement or to otherwise exercise any right hereunder, shall not be construed
as a waiver or relinquishment of the future performance of any such term,
covenant or condition or the future exercise of such right, but the obligations
of the party with respect to such future performance shall continue in full
force and effect.
7.5. The headings in this Agreement are included for convenience only and are
not to be used in construing or interpreting this Agreement.
7.6. All notices, demands, or requests hereunder shall be in writing and served
either personally, by certified mail, return receipt requested, by Federal
Express or other reputable overnight courier, or by facsimile, as follows;
If to BTI:
BioProgress Technology International, Inc.,
1999 Broadway
Suite 3235
Denver, CO 80204
Fax: (303) 292 2882
If to TI:
Trutona International, Inc.,
9055 Huntcliff Trace
Atlanta, GA 30350
Fax: (770) 594 8613
7.7. This Agreement, and each and every provision thereof, shall be binding upon
and shall inure to the benefit of the parties, their successors,
successors-in-title, heirs and assigns, and each and every successor-in-interest
to any party, whether such successor acquires such interest by way of gift,
purchase, foreclosure, or by any other legal method, who shall hold such
interest subject to all the terms and conditions of this Agreement.
7.8. This Agreement may be executed in any number of counterparts; each of which
shall be an original, but such counterparts shall together constitute one and
the same instrument.
7.9. In the event of any dispute with respect to this Agreement, the prevailing
party shall be entitled to its reasonable attorneys' fees and other costs and
expenses incurred in resolving such dispute.
7.10. Each party shall pay the expenses incurred by them under or in connection
with this Agreement, including counsel fees and expenses of their respective
representatives.
<PAGE>
7.11. The representations, warranties and covenants of BTI and TI contained in
this Agreement shall survive the execution hereof, and shall be unaffected by
any investigation made by any party at any time.
7.12. At any time and from time to time after the date of this Agreement, each
party shall execute such additional instruments and take such other further
action as may be reasonably requested by any other party or otherwise to fulfil
the intent and purpose of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered the date first above written.
By:
Barry J. Muncaster
President and Chief Executive Officer
For and on behalf of BioProgress Technology International, Incorporated.
By:
Larry Shattles
President
For and on behalf of Trutona International, Incorporated.
<PAGE>
SCHEDULE 1
THE ASSETS
PATENTS:
GB2295553 A Water Dispersible Bodily Liquid Absorbent Composite
PCT/GB96/00298 A Water Dispersible Bodily Liquid Absorbent Composite
PCT/GB96/01267 A Water dispersible Enclosure
TRADEMARKS:
HARMONIES
TRUTONA
TRUE TO NATURE
LICENSES:
CONSOLIDATED ECOPROGRESS TECHNOLOGIES, INC.
HOSPECO (PRIVATE LABEL)
HOSPECO (INSTITUTION)
INVENTORY:
ALL HARMONIES: SUPER NAPKINS, REGULAR NAPKINS, PANTYLINERS
ALL SIMPLICITIES: SUPER NAPKINS, REGULAR NAPKINS, PANTYLINERS
ALL TRUTONA: SUPER NAPKINS, REGULAR NAPKINS, PANTYLINERS
ALL PACKAGING AT HOSPECO AND ONTEX
RAW MATERIALS: ALL B-9 FILM AT HOSPECO. AT ONTEX: 3.67 TONNES AIR LAID PAPER,
142,260 SQUARE METRES COVERSTOCK.
SUNDRY:
EXHIBITION BOOTH
ALL CUSTOMER, BROKER AND DISTRIBUTOR RECORDS
ALL ARTWORKS, DESIGNS, PROOFS, AND ADVERTISEMENT MATERIALS.
10.22 EcoProgress License
EXCLUSIVE LICENSE AGREEMENT
MEMORANDUM OF VARIATION - EFFECTIVE MARCH 23rd, 1999
BETWEEN:
BioProgress Technology International, Inc., (BTI), a corporation registered in
the State of Delaware, having offices situate at 9055 Huntcliff Trace, Atlanta,
GA 30350; and, Consolidated Ecoprogress Technology, Inc., (CET), a corporation
registered in British Columbia, having offices situate at Suite 800-850 West
Hastings Street, Vancouver, B.C. V6C 1E1.
WHEREAS:
A. CET was formerly known as, first, Allmed International Investments, Inc.,
(Allmed), and second, as Ecoprogress Canada Holdings, Inc., (ECH). The change of
name from Allmed to ECH was effected on February 7th, 1997, and the change of
name from ECH to CET was effected on February 25th, 1998.
B. By way of an agreement dated February 15th, 1999 BTI acquired from Trutona
International, Inc., (TI), inter alia, the sole and beneficial interest in an
Exclusive License Agreement (the Exclusive License) made between EcoProgress
International, Limited, Envirofilm Technology, Inc., and Allmed on November
28th, 1994. A copy of the minutes of a meeting of the directors of TI approving
and ratifying the sale of the Exclusive License to BTI is attached hereto as
Schedule 1.
C. The Exclusive License Agreement was varied by way of a Memorandum of
Variation dated August 31st, 1998 a copy, of which, is attached hereto as
Schedule 2.
D. CET wishes to extend the Territory (as defined in the Exclusive Agreement)
and to acquire certain valuable assets (the Assets) being the property of BTI as
set out in Schedule 3 attached hereto, and BTI is willing to extend the
Territory and to sell the Assets on the terms and conditions contained herein.
It is AGREED as follows:
GENERAL
1. Pursuant to Clause 15.2 of the Exclusive License this Memorandum of Variation
shall be legally binding upon the parties hereto with effect from the date
hereof.
2. For the avoidance of doubt the Exclusive License, mutatis mutandis, remains
in full force and effect in all respects.
3. The sole parties to the Exclusive License shall be BTI and CET.
4. The front page and the signature page of the Exclusive License incorrectly
refer to Allmed as being Allmed International Investors.
5. The Effective Date (as defined therein) of the Exclusive License is November
28th, 1994.
VARIATIONS TO THE EXCLUSIVE LICENSE
1. Forthwith upon the execution and delivery of this Agreement the Exclusive
License shall be amended as follows:
1.1. Territory shall be The World, (the Extended Territory);
1.2. Products, as defined in the License, shall be limited in scope to be
disposable absorbent products (feminine hygiene products, baby diapers, adult
incontinence pads and sheets, and such like) until such time as:
(a) cumulative royalties of US $1,000,000 have been paid in respect of the
Extended Territory (excluding Canada), at which time Products shall
automatically and without the need for further documentation be amended to
include Ostomy Products;
(b) cumulative royalties of US $2,500,000 have been paid in respect of the
Extended Territory (excluding Canada), at which time Products, as amended under
1.2(a) hereof, shall automatically and without the need for further
documentation be amended to include disposable medical gowns, drapes, utensils,
wipes and solids for removal and recycling of hazardous materials, and a
processor system for their dissolution, and any and all products that have an
orifice and which can be used for the containment or handling of materials and
powders and for the avoidance of doubt this expressly excludes Encapsulation
Products and Encapsulation Products as defined in the Memorandum of Variation
attached here to; and,
<PAGE>
(c) those Products referred to in Subclause (a) hereof, may be sold by CET
within the Extended Territory at any time, provided that, such sales shall be on
a nonexclusive basis and subject to a royalty of 5% payable to BTI in respect of
gross proceeds received by CET from such sales, and such royalty shall be
excluded from the cumulative royalties payable under the Subclause (a) referred
to herein.
(d) those Products referred to in Subclause (b) hereof, may be sold by CET
within the Extended Territory at any time, provided that, such sales shall be on
a nonexclusive basis and subject to a royalty of 5% payable to BTI in respect of
gross proceeds received by CET from such sales, and such royalty shall be
excluded from the cumulative royalties payable under the Subclause (b) referred
to herein.
CONSIDERATION
1. Consideration payable upon execution of this agreement in respect of the
Extended Territory (excluding Canada) shall be US $380,000 cash and US
$1,120,000 payable by way of the issue of free trading shares of common stock
(the Shares) in CET at an agreed price of US $1.05 per share.
2. The initial cash consideration of US $380,000 shall include the sum of
$160,000 being the total sum applicable to the purchase of the Assets, which
shall expressly exclude title to the Patents as defined in the License.
PAYMENT
1. Upon execution of this Agreement CET shall pay to BTI the sum of US $100,000
by way of wire transfer or certified cheque, or a combination thereof at BTI's
direction, and such payment shall be nonrefundable in the event that, for any or
no reason, CET fails to obtain the approvals referred to in Clause 3 hereof.
2. Upon regulatory approval or no later than April 7th, 1999 CET shall to BTI
the sum of US $280,000 by way of wire transfer or certified cheque, or a
combination thereof at BTI's direction.
3. Within seven (7) working days of CET receiving approval to enter into this
Agreement from the Vancouver Stock Exchange and a majority of CET shareholders,
whichever is the later, CET shall deliver up to BTI the Shares deemed fully paid
and registered in the name of BTI.
4. Any and all other sums that become due under this Agreement shall be paid in
full and on time, time being of the essence, in US dollars to a bank account or
bank accounts nominated by BTI from time to time.
ROYALTY
1. A royalty of 5% capped at the cumulative sum of US $3,500,000 shall be
payable by CET to BTI in respect of the sale of Products within the Extended
Territory.
OPTION TO PURCHASE TITLE TO PATENTS
1. Upon payment of the cumulative sum of US $3,500,000 CET may purchase absolute
and beneficial title to the Patents for the sum of US $1.00 per patent.
2. In the event that the Patents are acquired by CET in accordance with 1
hereof, then CET shall grant to BTI a consideration free license to use the
Patents, provided that, such use does not conflict or compete with the Products.
APPOINTMENT OF DISTRIBUTOR
1. CET shall appoint BTI as its exclusive distributor for the Products within
the EEC upon terms and conditions consistent with CET's normal commercial terms
and conditions for such rights.
APPROVAL OF DIRECTORS
1. This Memorandum of Variation has been unanimously approved and ratified at a
meeting of the Directors of CET and BTI respectively, and a copy of the minutes
of each of the said meetings is attached hereto as Schedule 4.
OBLIGATIONS OF BTI
1. Within thirty (30) days of the date hereof, BTI shall deliver up the Assets
to CET, provided that, the cost of delivery (if any) shall be borne by CET.
2. BTI shall procure and deliver to CET all documentation, customer lists,
customer correspondence, sales and marketing collateral, and any and all other
materials or information deemed necessary by CET to enable it to take maximum
commercial advantage of the Products within the Extended Territory.
<PAGE>
OBLIGATIONS OF CET
1. CET shall use its best endeavours to maximise the commercial exploitation of
the Products to maximum benefit within the Extended Territory.
2. CET by itself and jointly and severally by its directors and officers shall
take all necessary steps, and sign and deliver all documents deemed necessary,
to ensure that the Shares are properly registered and free from restriction of
sale, transfer, assignment or disposal by other means within the minimum time as
required by statute, law or regulatory authority.
CONTINUITY
1. All other terms and conditions of the Exclusive License, including governing
law, remain unchanged and in full force and effect as if the parties hereto had
been signatories and principals to the Exclusive License at the Effective Date
thereof.
CONFLICT
1. In the event of conflict between the terms, conditions and expression of this
Agreement and the terms, conditions and expression of the Exclusive License,
then the terms, conditions and expression of this Agreement shall prevail upon
the parties in all respects.
The parties hereto have the day first written above signed in agreement.
By:
Duly authorized officer for and on behalf of
BioProgress Technology International, Inc.
Name:
Title:
By:
Duly authorized officer for and on behalf of
Consolidated Ecoprogress Technology, Inc.
Name:
Title:
<PAGE>
SCHEDULE 1
MINUTES OF A MEETING OF THE DIRECTORS OF
TRUTONA INTERNATIONAL, INC.
HELD ON FEBRUARY 15TH, 1999.
BY TELEPHONE
Present: Barry J Muncaster (Chairman)
Larry C. Shattles (President)
James T. C. Longley (C.F.O., Secretary and Treasurer)
Malcolm D. Brown (V. P. Research & Development)
There was presented to the meeting an agreement between the company and
BioProgress Technology International, Inc., (BTI) The agreement provides for the
Company to sell all of its assets in flushable and biodegradable products for a
total consideration of $1,500,000, to be satisfied by the issue of shares in
BTI, with the proviso that BTI may pay up to $380,000 in cash in lieu of 950,000
shares.
Mr. Muncaster, Mr. Longley and Mr. Brown declared an interest in the proposed
agreement by virtue of their executive positions with BTI and respective
personal shareholdings in that Company. Accordingly, they refrained from
discussion of the agreement and declared their intention to abstain from voting
on the proposition.
The Proposition:
It was proposed by the President that it is in the best interests of the Company
and its creditors and shareholders to accept and execute the agreement with BTI
and as tabled at the meeting.
Resolution:
It was resolved, and is hereby approved and ratified, that the President is
instructed and authorized to execute and deliver the agreement with BTI in the
form tabled at the meeting. Further, the President is instructed and authorized
to sign, execute, seal, agree and deliver any and all documents deemed necessary
to properly and fully effectuate the BTI agreement in all respects.
There being no other business the meeting was closed.
This is a true and accurate minute of the meeting of the directors held on the
date first written above.
Barry J. Muncaster
Chairman
James T. C. Longley
C.F.O, Secretary and Treasurer.
<PAGE>
SCHEDULE 2
EXCLUSIVE LICENSE AGREEMENT
MEMORANDUM OF VARIATION EFFECTIVE AUGUST, 31, 1998
BETWEEN:
EcoProgress International, Limited (EIL), a corporation registered in the State
of Delaware, having offices situate at 9055 Huntcliff Trace, Atlanta, GA 30350;
and, Trutona International, Inc., (TI), a corporation registered in the States
of Delaware, having offices situate at 9055 Huntcliff Trace, Atlanta, GA 30350;
and, Consolidated Ecoprogress Technology, Inc., (CET), a corporation registered
in British Columbia, having office situate at 3002 West King Edward Avenue,
Vancouver, B.C. V6L 1V3.
WHEREAS:
A. CET was formerly known as, first, Allmed International Investments, Inc.,
(Allmed), and second, as Ecoprogress Canada Holdings, Inc., (ECH). The change of
name from Allmed to ECH was effected on February 7th, 1997, and the change of
name from ECH to CET was effected on February 25th, 1998.
B. By way of an agreement dated September 19th, 1997, TI acquired from
EcoProgress, Inc., (ECO) the sole and beneficial interest in an Exclusive
License Agreement (the Exclusive License) made between EIL, ECO and Allmed on
November 28, 1994.
C. In the period since the effective date of the Exclusive License there has
been numerous changes, amendments, additions and deletions to the terms and
conditions of the Exclusive License, all of which have been agreed to either
orally or in writing by the parties hereto, and the parties now wish to record
by this Memorandum of Variation the aforementioned changes, amendments,
additions and deletions to the terms and conditions of the Exclusive License.
It is agreed as follows:
6. Pursuant to Clause 15.2 of the Exclusive License this Memorandum of Variation
shall be binding upon the parties hereto.
7. For the avoidance of doubt the License Agreement, mutatis mutandis, remains
in full force and effect in all respects.
8. The sole parties to the Exclusive License are EIL, TI and CET.
9. The front page and the signature page of the Exclusive License incorrectly
refer to Allmed as being Allmed International Investors.
10. The Effective Date (as defined therein) of the Exclusive License is November
28, 1994.
11. By way of agreement dated November 12th, 1996, between Allmed and EIL,
Allmed agreed to buyout the R&D Contribution (as defined in the Exclusive
License) for the agreed sum of $189,990 to be satisfied by the issue to EIL of
821,970 shares of Allmed's common stock. The aforementioned agreement has been
completed and there is no accrued, actual or future liability on Allmed or EIL
on any account whatsoever and no matter how arising in respect thereof.
12. At the date hereof the principal sum of US$155,526.74 remains outstanding
and payable by CET to TI in respect of the License Fee (as defined in the
Exclusive License). CET shall pay to TI the sum of US$155,526.74 in the amounts
and at the times following:
12.1. Forthwith, upon completion of a private placement of CET's common shares
in progress at the date hereof, but in any event no later than September 25th,
1998, time being of the essence, the sum of US$44,442.52, such sum to be paid by
way of telegraphic transfer for the account of TI at NationsBank, 8755 Roswell
Road, Atlanta, GA 30350, ABA Number: 061000052, Account Number: 022 77 945.
12.2. On September 30th, 1998, the sum of: US$11,110.63
12.3. On December 31st, 1998, the sum of: US$11,110.63
<PAGE>
12.4. On March 31st, 1999, the sum of: US$23,340.93
12.5. On June 30th, 1999, the sum of: US$23,340.93
12.6. On September 30th, 1999, the sum of: US$23,340.93
12.7. On December 31st, 1999, the sum of: US$18,840.17
13. At the date hereof the amount of US$3,125.41 remains outstanding and payable
by CET to TI in respect interest due on arrears of the License Fee (as defined
in the Exclusive License). CET shall pay to TI the sum of US$3,125.41 forthwith
upon completion of a private placement of CET's common shares in progress at the
date hereof.
14. At the date hereof the amount of US$1,121.48 remains outstanding and payable
by CET to TI in respect of arrears of Royalties (as defined in the Exclusive
License). ). CET shall pay to TI the sum of US$1,121.48 forthwith upon
completion of a private placement of CET's common shares in progress at the date
hereof.
15. Pursuant to an agreement dated April 22, 1997, CET sold to EIL absolute and
beneficial title to any and all rights to encapsulation technologies and
encapsulated products developed, or to be developed by EIL, which would
otherwise be subject of the Exclusive License, in consideration of the issue to
CET of 125,000 ordinary shares of common stock in BioProgress Technology
Limited, a private company incorporated in the United Kingdom.
16. The original patent application No.912452.4 was replaced on February 9, 1995
by patent application No: PCT/GB96/00298. In addition, Patent applications
numbers: Canadian No: 2 212 445 and Canadian No: 2 222 167 became subject of the
Exclusive License on, and claim international priority from February 9, 1995,
and on May 25, 1995 respectively.
17. Other products identified as Products (as Defined in the Exclusive License),
for which a patent application may or may not be submitted but which are subject
to intellectual property, are: organic cotton digital tampons and organic cotton
applicator tampons; breast pads for breast feeding mothers; incontinence pads
for light and medium levels of incontinence; two part flushable and
biodegradable diaper.
18. All other terms and conditions of the Exclusive License, including governing
law, remain unchanged and in full force and effect as if the parties hereto had
been signatories to the Exclusive License at the Effective Date thereof.
The parties have the day first written above signed in agreement.
By:
Name:
Title:
Duly authorized officer for and on behalf of
EcoProgress International, Limited
By:
Name:
Title:
Duly authorized officer for and on behalf of
Trutona International, Inc.
By:
Name:
Title:
Duly authorized officer for and on behalf of
Consolidated Ecoprogress
Technology, Inc.
<PAGE>
SCHEDULE 3
THE ASSETS
TRADEMARKS
1. HARMONIES
2. TRUTONA
3. TRUE TO NATURE
4. INVENTORY:
1. ALL HARMONIES: SUPER NAPKINS, REGULAR NAPKINS, PANTYLINERS
2. ALL TRUTONA: SUPER NAPKINS, REGULAR NAPKINS, PANTYLINERS
3. ALL PACKAGING AT HOSPECO AND ONTEX
4. ALL B 9 FILM AT HOSPECO.
5. ALL MATERIALS AT ONTEX: 3.67 TONNES AIR LAID PAPER, 142,260 SQUARE METRES
COVERSTOCK.
SUNDRY:
1. EXHIBITION BOOTH
2. ALL ARTWORKS, DESIGNS, PROOFS, AND ADVERTISEMENT MATERIALS.
SCHEDULE 4
COPIES OF MINUTES OF A MEETING OF THE DIRECTORS OF CET AND OF BTI, RESPECTIVELY,
APPROVING AND RATIFYING THIS AGREEMENT
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<PERIOD-END> DEC-31-1998
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<SECURITIES> 0
<RECEIVABLES> 12,675
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<COMMON> 66,694
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<TOTAL-LIABILITY-AND-EQUITY> 6,002,671
<SALES> 28,118
<TOTAL-REVENUES> 28,118
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<INCOME-PRETAX> (905,286)
<INCOME-TAX> (905,286)
<INCOME-CONTINUING> (905,286)
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