As filed with the Securities and Exchange Commission on October 18, 1999
Registration No.: 333-82595
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 to FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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TECH LABORATORIES, INC.
(Name of small business issuer in its charter)
New Jersey 3679, 3573, 3629, and 3613 22-1436279
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
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955 Belmont Avenue, North Haledon, New Jersey 07508, (973) 427-5333
(Address and telephone number of principal executive offices)
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955 Belmont Avenue, North Haledon, New Jersey 07508, (973) 427-5333
(Address of principal place or intended principal place of business)
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Bernard M. Ciongoli, President and Chief Executive Officer
Tech Laboratories, Inc.
955 Belmont Avenue, North Haledon, New Jersey 07508, (973) 427-5333
(Name, address, and telephone number of agent for service)
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Copies to:
C. Walter Stursberg, Jr., Esq.
Stursberg & Veith
405 Lexington Avenue
New York, New York 10174
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Approximate date of proposed sale to the public: As soon as practicable
after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_| ________
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_| ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum maximum Amount of
Title of each class of Amount to Offering Price aggregate registration
securities to be registered be Registered Per Share offering price(1) fee
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<S> <C> <C> <C> <C>
Shares of Common Stock,
par value $.01 per share
("Common Stock") 1,000,000 $3.50 $3,500,000 $973.00
- --------------------------------------------------------------------------------------------------------------------------------
Shares of Common Stock 90,045 3.50 $315,516 88.20
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Common Stock, $.01 par
value(2) 50,000 1.85 $92,500 25.72
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</TABLE>
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457(o).
(2) Represents shares issuable upon the exercise of warrants issued by the
Company having an exercise price of $1.85 per share. Pursuant to Rule 416,
also includes such additional shares as may be issuable as a result of the
anti-dilution provisions of said warrants.
================================================================================
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
EXPLANATORY NOTE
This Registration Statement covers the registration of (a) 1,000,000 shares
of common stock, $.01 par value, of Tech Laboratories, Inc., a New Jersey
Corporation, for sale by our company in a self-underwritten public offering, and
(b) 140,045 shares of common stock for sale by the selling securityholders, all
for resale from time to time by the selling securityholders.
<PAGE>
We will amend and complete the information in this Prospectus. Although we are
permitted by US federal securities laws to offer to sell these securities using
this Prospectus, we may not sell them or accept your offer to buy them until the
documentation filed with the SEC relating to these securities has been declared
effective by the SEC. This Prospectus is not an offer to sell these securities
and it is not soliciting your offer to buy these securities in any state where
that would not be permitted or legal.
SUBJECT TO COMPLETION, DATED October 18, 1999
PROSPECTUS
1,000,000 Shares
TECH LABORATORIES, INC.
955 Belmont Avenue
North Haledon, New Jersey 07508
(973) 427-5333
We are selling a minimum of 571,428 and a maximum of 1,000,000 shares of
common stock at a price of $____ per share pursuant to a direct participation
offering. Until we receive and accept subscriptions for the minimum number or
571,428 shares, subscribers' funds will be deposited in escrow with United
Hudson Bank. If we do not receive subscriptions for the minimum number of shares
within 90 days after the date of this prospectus, unless we extend the offering
period for up to an additional 90 days, the offering will be terminated and all
subscribers' funds will be returned promptly, in full, without interest or
deduction and with interest if the minimum offering is not sold and the funds
are held in escrow more than 90 days. You may not withdraw funds deposited in
escrow.
We are also registering 90,045 shares of common stock for certain persons
and 50,000 shares of common stock issuable upon exercise of certain outstanding
warrants that may be resold from time to time in the future by certain selling
securityholders.
Our shares of common stock trade on the OTC Bulletin Board under the symbol
"TCHL." On ______ _____________, 1999, the last reported sale price of our
common stock was $____ per share
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This investment involves certain risks. See "Risk Factors," which begins on
page 4.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
You should only rely on the information incorporated by reference or
provided in this Prospectus or any supplement. We have not authorized anyone
else to provide you with
<PAGE>
different information. Our common stock is not being offered in any state where
the offer is not permitted. You should not assume that the information in this
prospectus or any supplement is accurate as of any date other than the date on
the front of those documents.
<TABLE>
<CAPTION>
====================================================================================================
Price to Underwriting Discounts Proceeds to
Public and Commissions Tech Labs(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $3.50 $0 $3.50
Total Maximum.......................... $3,500,000 $0 $3,500,000
Total Minimum.......................... $2,000,000 $0 $2,000,000
====================================================================================================
</TABLE>
The proceeds to be received by Tech Labs are amounts before deducting expenses
of the offering, estimated to be $100,000.
The date of this Prospectus is ____________, 1999
<PAGE>
[PICTURES OF IDS AND DYNATRAX]
<PAGE>
PROSPECTUS SUMMARY
Unless the context indicates otherwise, all references herein to "we"
include Tech Labs and its wholly-owned subsidiary, Tech Logistics, Inc.,
collectively, and references to "Tech Labs" or "Tech Logistics" shall mean each
of such companies alone. You should read the entire Prospectus carefully,
especially the risks of investing in the common stock discussed under "Risk
Factors."
Tech Labs
We manufacture and sell various electrical and electronic components. We
recently acquired from NORDX/CDT, INC., a subsidiary of Cable Design
Technologies Corp., the DynaTraX(TM) digital matrix technology which is a
patented, state-of-the-art, transparent customer-premise, high-speed network
switching system. We believe the DynaTraX(TM) technology will enable us to
become a provider of multi-media, digital network distribution and management
equipment for use in community, campus and building facilities.
The DynaTraX(TM) technology will also play a large role in helping
developers, builders and/or managers of private residential communities and
commercial, industrial, educational and hospitality complexes establish
facilities that will distribute and manage high-speed digital Internet, Long
Distance and CATV services. This technology permits these users to bypass
current telephone and CATV companies' "Last Mile" connection service, possibly
allowing them to realize recurring revenues and to make their properties more
attractive to users.
We also market and manufacture, under our exclusive license, an infrared
perimeter intrusion and anti-terrorist detection system or "IDS". We currently
market this product to government agencies and private industry.
We have been in business since the 1930s, and in 1947, we were incorporated
in New Jersey. Our principal offices are located at 955 Belmont Avenue, North
Haledon, New Jersey 07508, and our telephone number is (973) 427-5333.
The Offering
Shares offered:
Maximum.......................... 1,000,000 shares
Minimum.......................... 571,428 shares
The shares are being offered on a minimum/maximum basis. No shares will be sold
in the offering unless at least 571,428 shares are sold.
<PAGE>
Shares to be outstanding
after the offering:..... There will be a maximum of 4,575,660 shares
outstanding and a minimum of 4,147,088 after
the offering. These amounts exclude:
o the issuance of 75,000 shares subsequent to June 30, 1999 pursuant to
a consulting agreement;
o options to purchase 100,000 shares at $1.25 per share and an
additional 100,000 shares at $1.75 per share pursuant to a consulting
agreement;
o options to purchase 50,000 shares exercisable at $1.85 per share
pursuant to a consulting agreement;
o options to purchase an aggregate of 190,000 shares exercisable at $.50
per share granted under our company's stock option plan for officers
and directors;
o options to purchase 75,000 shares exercisable at $1.12 per share; and
o pursuant to the employment agreement with our president, options to
purchase up to 300,000 shares, 100,000 options of which are vested,
with the balance to vest in 100,000 increments on each of October 1,
1999, and October 1, 2000, so long as the president is employed, such
options to be exercisable at $.50 per share.
If Maximum Sold.......... 4,575,660 shares
If Minimum Sold.......... 4,147,088 shares
Current Trading Symbol:
OTC Bulletin Board...... TCHL-BB
Risk Factors.................. For a discussion of risks that you should
consider before buying the shares, see "RISK
FACTORS."
Use of Proceeds(upon
completion of maximum
offering)............... Assembly and testing of DynaTraX(TM) assets,
development of additional DynaTraX(TM)
products, marketing and sales, completion of
DynaTraX(TM) inventory, sales and marketing for
IDS and working capital.
Plan of Distribution.......... The shares will be offered and sold by our
executive officers and directors. We may retain
the services of one or more NASD-registered
broker-dealers as selling agents to effect
offers and sales on our behalf.
Escrow........................ All funds we receive with respect to the sale
of the first 571,428 shares will be deposited
in a special escrow account at a federally
insured national bank. If 571,428 shares are
not sold within ninety (90) days following the
effective date of the Registration Statement of
which this prospectus is a part, the offering
will terminate and all funds will be promptly
returned without interest or deduction, unless
we extend the offering period for up to an
additional 90 days, in which case if the
minimum offering is not sold all funds
deposited in escrow will be returned with
interest.
-2-
<PAGE>
Summary Financial Information
<TABLE>
<CAPTION>
Statement of
Operations Data Period Ended
Periods Ended December 31 June 30
----------------------------------------- -----------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Sales .............................. $647,015 $444,322 $552,486 $172,319 $160,304
Net Income (loss) .................. 49,182 (274,069) (169,104) (192,847) (250,220)
Earnings (loss) per share .......... $0.04 ($0.18) ($0.06) ($0.09) ($0.08)
</TABLE>
<TABLE>
<CAPTION>
Period Ended
June 30
------------
(unaudited)
Actual
December 31, 1998 ------
Balance Sheet Data ----------------
(unaudited):
- ------------
<S> <C> <C>
Total Assets ........................ $1,018,597 $1,260,294
Working Capital ..................... 851,540 1,026,243
Current Portion of Long-Term ........ 32,742 31,131
Debt
Long-Term Debt ...................... 0 0
Shareholders' Equity ................ 863,727 $1,138,407
</TABLE>
-3-
<PAGE>
RISK FACTORS
In addition to other matters described in this document, prospective
investors should carefully consider the following factors:
We have limited sales revenue, have a history of losses and may not be
profitable in the future.
Our limited sales revenue and history of losses makes it uncertain when or
if we will become profitable. For the years ended December 31, 1997 and 1998 our
sales were $444,322 and $552,486, respectively, and we had net losses of
($274,069) and ($169,104). As of December 31, 1998, we had an accumulated
deficit of ($475,476). We have had limited cash flow and working capital, which
has restricted our recent operations. Although the proceeds of this offering
will enable us to implement our business plan, we must increase our sales and
margins of our products significantly in order to avoid continued losses.
Our capital requirements may be greater than the proceeds we receive from this
offering.
The net proceeds from this offering are estimated to be approximately
$1,900,000, if only the minimum number of shares is sold, and $3,400,000 if the
maximum number of shares is sold. We are significantly under-capitalized and if
less than all of the shares are sold, we will still be in need of significant
additional capital after completion of this offering in order to expand our
operations in the manner contemplated by our management. Our primary capital
requirements over the next 12 months include:
o payments of trade payables;
o marketing expenses;
o research and development; and
o tooling costs for improved versions of our existing products and
development of new products.
We believe that funds generated by operations and the proceeds of this
offering, if only the minimum number of shares is sold, will be sufficient to
sustain current operating levels; however, expansion of operations will need to
proceed at a slower pace as operating funds permit unless we are able to arrange
for financing from other sources. We currently have no agreements or
understanding with respect to additional sources of capital or financing in
addition to amounts raised in this offering. We face all of the difficulties of
a company that is undercapitalized. Accordingly, investors should be aware of
the substantial risk that we may not achieve all of our proposed business
objectives due to a lack of adequate capital.
Although we have acquired and/or developed new products, we have had limited
sales of these products to date.
We have, in the past two years, entered into a number of agreements and
arrangements to acquire, develop and/or market a broader range of products, some
of which incorporate some of our historical products and others of which involve
diversification into the areas of security devices and systems and network
switching systems. Due to our limited resources, we have engaged in only limited
development and marketing of these products, and our revenues from such
activities have been minimal. We will need the proceeds of this offering to
market these products and develop and market new products.
-4-
<PAGE>
The market for our service is uncertain.
We believe that the DynaTraX(TM) technology will serve as the basis for new
products in the area of multi-media digital network distribution and management
equipment for use in campus and building facilities. Our success depends upon
several factors including, among others:
o The development of an effective marketing and distribution network;
o The acceptance of our products by potential users; and
o Our ability to support existing products and develop and support new
products that are compatible with other systems in use by potential
customers and provide useful features that are user friendly.
While we are not a new enterprise, because we are in the process of
substantially changing our product line, we are encountering many of the
problems faced by a new enterprise. You should be aware of the difficulties
normally encountered by a new enterprise and the high rate of failure of such
enterprises. There is no history upon which to base any assumption as to the
likelihood that we will prove successful. The likelihood of our success must be
considered in light of the delays, uncertainties, difficulties and risks
inherent in a new business, many of which may be beyond our control. These
include, but are not limited to, unanticipated problems relating to testing,
manufacturing, marketing and competition, development of new products, and
additional costs and expenses that may exceed current estimates.
The market in which we sell our products is characterized by many competing
technologies and continual advancements. We may not be able to compete
effectively against other technologies.
Our future success will depend in large part on timely development and
introduction of new products that provide enhanced security, network switching
capabilities and related features. The security systems and products that we
intend to develop and market represent a significant investment on the part of a
customer. Our products will have to be:
o technologically equivalent or superior to competing products;
o cost-effective; and
o flexible and designed to meet specific and changing customer needs.
Customers will be seeking to invest in systems that will not be rendered
obsolete or inadequate in the foreseeable future. In addition, we will have to
develop and maintain a service capacity for the systems we sell and install. If
we fail to introduce technologically superior, cost-competitive products and to
demonstrate our ability to maintain and service our products, we will not be
able to achieve significant sales.
We have made a substantial investment in acquiring the technology
underlying the DynaTraX(TM) products and services from NORDX/CDT, Inc. Although
NORDX/CDT, Inc. has made some sales of DynaTraX(TM)-based products, the sales
and operations history of such products has been limited. Because we have not
sold a sufficient number of DynaTraX(TM) products since our acquisition of the
technology, we can not judge the level of performance of this product. We also
can not determine at this time whether our DynaTraX(TM) product will be
compatible with other systems in use by potential customers, be capable of being
sold, installed and supported in commercial volumes at reasonable prices and
costs or be successfully marketed. We will be required to create product
awareness and demand, and persuade potential customers of the advantages of
adapting or replacing existing network switching systems.
-5-
<PAGE>
In the past we have experienced, and we are likely to experience in the
future, delays in the development and introduction of products. We cannot assure
you that we will keep pace with the rapid rate of change in security and network
switching systems research, or that our new products will adequately meet the
requirements of the marketplace or achieve market acceptance.
Our dependence on third parties could hamper our growth prospects.
Our operating results will depend to a large extent on our ability to
educate sophisticated potential customers about the advantages of our products
and to market our products to the users and decision makers within those
potential customers. We currently market our existing products primarily through
our catalog. We have very limited marketing capabilities and experience, and we
need to develop a sales and marketing program and distribution channels.
We are currently primarily dependent on our president, Bernard M. Ciongoli,
who, because of his other duties as president, is only able to devote a part of
his time to such activities, and our consultant, MPX Network Solutions, Inc.,
for development and implementation of our sales and marketing program. We
anticipate that we will depend, to a significant extent, on distributors to
market and support our products. We have not established any such arrangements
to date. The success of any such relationship will depend in part upon such
parties' own competitive, marketing and strategic considerations, including the
relative advantages of alternative products being marketed by such persons. We
could be dependent for a substantial portion of our sales on one or a very small
number of distributors. In such event, the loss of one or more significant
distributors could have a material adverse effect on our business and financial
condition. Our success will depend in great part on our ability to successfully
implement our marketing and sales program and create sufficient levels of demand
for our products.
We may be unable to protect certain intellectual property.
We have no patent or copyright protection on our current products, other
than the DynaTraX(TM) product and technology. Our ability to compete effectively
with other companies will depend, in part, on our ability to maintain the
proprietary nature of our technologies. Other than with regard to the
DynaTraX(TM) patents, which have been issued to date only in England, we intend
to rely substantially on unpatented, proprietary information and know-how. We
are also presently prosecuting the patent applications filed in the United
States and Europe.
-6-
<PAGE>
We may incur product liability or other liabilities relating to new products.
There is a risk that our current products may malfunction and cause loss
of, or error in, data, loss of man hours, damage to, or destruction of,
equipment or delays. Consequently, we, as the manufacturer of components,
assemblies and devices may be subject to claims if such malfunctions or
breakdowns occur. We are not aware of any past or present claims against us.
While we presently do not maintain product liability insurance, we intend to
obtain such coverage at the completion of this offering if such coverage can be
obtained on affordable terms.
We cannot predict at this time our potential liability if customers make
claims against us asserting that DynatraX(TM), IDS or other new products fail to
function.
Management has acquired a significant interest in Tech Labs at a cost
substantially less than that which the new investors will pay for their
shareholdings. Therefore, the investors will bear a substantial risk of loss,
while, as a practical matter, control of Tech Labs is likely to remain in the
hands of management.
-7-
<PAGE>
The offering price of the shares was arbitrarily determined and may not reflect
ordinary investment criterion.
While our shares trade on the OTC Bulletin Board, the volume is
substantially less than that being offered in this offering, and does not
reflect the market price for the amount of stock we are offering in this
Offering. The price at which the shares are being offered has been arbitrarily
determined by us, and does not necessarily bear any relationship to assets,
earnings, book value, or any other ordinary investment criterion.
We manufacture and sell the IDS system under a license agreement
We entered into an Amended Joint Marketing Agreement as of October 1, 1997
with Elektronik Apparatebau GmbH (EAG), W.T. Sports, Ltd. and FUA Safety
Equipment, AG and a Confidentialty and Manufacfuring Agreement with the same
parties and dated the same date, pursuant to which our company was granted the
exclusive right to manufacture in the U.S. and market and sell in the U.S.,
Canada and South America the IDS products. The agreements terminate on September
30, 2007 subject to automatic renewals for successive one-year periods unless
either party gives notice of non-renewal. The agreements can be terminated
earlier upon a default of any material obligation. If the license is terminated,
we would be unable to use EAG's technology in our perimeter detection system
products. Even if the agreements remain in effect until September 30, 2007, it
will be necessary at that time to negotiate a new agreement or license or
acquire a suitable replacement technology.
-8-
<PAGE>
Potential unavailablility of components; limited or single source of supply.
Current inventory component purchases for all our products are made from
OEMs, brokers and other vendors. We typically have more than a single source of
supply for each part, component or service . During the year ended December 31,
1998, Wiggins Plastics was our largest supplier with 14.2% of our overall
inventory purchases. These purchases were primarily used in the manufacture of
electromechanical switches. During the year ended December 31, 1997, Wiggins
Plastics accounted for 16.8% of our supply of inventory. Those components were
in products that produced approximately 25.7% of our revenue for such year. We
have no long-term agreements with any of our suppliers.
We have no insurance on the DynaTraX(TM) product inventory.
We currently do not have insurance on the DynaTraX(TM) inventory of
furnished products and parts purchased from NORDX/CDT. Damage or destruction of
some or all of the inventory would result in a substantial loss to us.
We are dependent on our key personnel, and we will also need additional
management and outside directors with business expertise.
We are highly dependent upon the efforts of Bernard M. Ciongoli, our
president and chief executive officer. The loss of the services of Mr. Ciongoli
would be detrimental to our operations. We do, however, maintain key man life
insurance on Mr. Ciongoli to compensate for any such loss, and have an
employment agreement with him. Expansion of our business may require additional
managers and employees with industry experience.
Competition for skilled management personnel in the industry is intense,
which may make it more difficult and expensive to attract and retain qualified
managers and employees. Additionally, our board of directors currently consists
of Mr. Ciongoli, Mr. Earl M. Bjorndal, Mr. Louis Tomasella, Mr. Carmine O.
Pellosie, Jr. and Mr. Richard Rice. Mr. Ciongoli and Mr. Bjorndal are both
employed by Tech Labs. Expansion of our business will likely require additional
non-employee board members with business and industry experience. We do not have
directors' and officers' liability insurance. This may limit our ability to
attract qualified non-employee board members.
We may need additional capital in the future and may not be able to secure
adequate funds in terms acceptable to us.
We have plans to expand our business operations in a number of ways over
the next 12 to 18 months, provided that we receive the proceeds of this
offering. We plan to begin the sale of the DynaTraX(TM) switch, to complete the
DynaTraX(TM) unfinished inventory we
-9-
<PAGE>
acquired, and to develop improved and modified DynaTraX(TM) products. Additional
financing may be necessary to pursue these plans, and we may be unable to secure
such financing. In pursuing business expansion, we may incur expenses that we
cannot recover, and we will be required to expense certain costs which may
negatively affect our operating results.
Since this is a direct participation offering and there is no underwriter, there
may be less due diligence performed.
This offering is a direct participation offering. No underwriter has been
retained by Tech Labs to sell these securities. One of the functions of an
underwriter, along with such underwriter's counsel, is the performance of due
diligence in addition to that performed by our counsel. Without an underwriter,
we do not have the benefit of an additional due diligence review.
This prospectus contains forward-looking information.
This prospectus contains forward-looking information. These statements are
not guarantees of future performance and are subject to certain risks,
uncertainties and other factors, some of which are beyond our control, are
difficult to predict and could cause actual results to differ materially from
those expressed or forecasted in the forward-looking statements.
This prospectus contains forward-looking statements that have been made
under the provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements are not historical facts but rather are based
on current expectations, estimates and projections about our industry, our
beliefs, and assumptions. Words such as " anticipates," "expects," "intends",
"plans," "believes," "seeks," "estimates" and variations of these words and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements. These
risks and uncertainties include those described in "Risk Factors" and elsewhere
in this prospectus.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus. We undertake no obligation to update these statements or publicly
release the result of any revisions to the forward-looking statements that we
may make to reflect events or circumstances after the date of this prospectus or
to reflect the occurrence of unanticipated events.
-10-
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale by us of the minimum number of 571,428
shares, after deducting estimated expenses of this offering, are estimated to be
$1,900,000. The net proceeds from the sale by us of the maximum number of
1,000,000 shares, after deducting expenses of this offering, are estimated to be
$3,400,000. The net proceeds will be used by us in approximately the following
amounts:
MINIMUM MAXIMUM
Assembly and testing of DynaTraX(TM) $100,000 $100,000
assets
Product Development of Additional
DynaTraX(TM) Products 375,000 750,000
Marketing and Sales 560,000 1,000,000
Completion of DynaTraX(TM) Inventory 275,000 500,000
IDS Enhancement, Sales, Marketing 150,000 250,000
Working capital primarily
for accounts receivable and
inventory growth 440,000 800,000
---------- ----------
Total $1,900,000 $3,400,000
The foregoing represents our best estimate of the net proceeds of the
offering based on current planning and business conditions. Tech Labs management
has broad discretionary authority to determine the exact allocation of the
proceeds for the purposes set forth above and the timing of the expenditures,
which may vary significantly depending upon the exact amount of funds raised,
the time and cost involved in deploying the funds and other factors. Pending
usage of the funds, as set forth above, the funds will be invested in short-term
interest bearing securities or money market funds.
The exact allocation of the proceeds for the purposes set forth above and
the timing of the expenditures may vary significantly depending upon the exact
amount of funds raised, the time and cost involved in deploying the funds and
other factors.
We believe that the proceeds from the minimum offering in addition to
revenues from operations will be sufficient to fund our operations for the next
12 months, although such development would be at a reduced pace than if the
maximum offering proceeds were received. If an amount less than maximum offering
is raised, we may be required to delay, scale back, or eliminate parts of our
development plan or obtain funds through additional financing, including loans
or offerings of our securities. We presently have no agreements or
understandings with respect to any future financing or loan agreements.
-11-
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock has been trading publicly on the OTC Bulletin Board under
the symbol "TCHL" since 1994. The table below sets forth the range of quarterly
high and low closing sales prices for our common stock on the OTC Bulletin Board
during the calendar quarters indicated. The quotations reflect inter-dealer
prices, without retail mark-ups, mark-downs, or conversion, and may not
represent actual transactions.
TCHL COMMON STOCK
<TABLE>
<CAPTION>
CLOSING BID CLOSING ASK
----------------------- -------------------------
YEAR ENDING DECEMBER 31, 1999 HIGH LOW HIGH LOW
- ----------------------------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter................................... $2.625 $1.0625 $3.0 $1.3125
Second Quarter.................................. 3.125 1.50 3.875 2.00
Third Quarter................................... 3.25 1.50 3.625 1.625
YEAR ENDING DECEMBER 31, 1998
- -----------------------------
First Quarter................................... $3.125 $1.75 $3.375 $2.125
Second Quarter.................................. 2.6875 1.6875 3.0 2.0
Third Quarter................................... 2.1875 1.125 2.625 1.4375
Fourth Quarter.................................. 2.0625 1.25 2.625 1.50
YEAR ENDING DECEMBER 31, 1997
- -----------------------------
First Quarter................................... $2.25 $ .125 $2.75 $ .625
Second Quarter.................................. 3.125 1.4375 4.125 1.9375
Third Quarter................................... 2.75 2.0625 3.875 2.3125
Fourth Quarter.................................. 2.625 1.375 2.75 1.75
</TABLE>
As of October __, 1999, there were ___ holders of record of our common
stock.
DIVIDEND POLICY
We have never paid any cash dividends on our common stock and anticipate
that, for the foreseeable future, we will continue to retain any earnings for
use in the operation of our business. Payment of cash dividends in the future
will depend upon our earnings, financial condition, any contractual
restrictions, restrictions imposed by applicable law, capital requirements, and
other factors deemed relevant by our Board of Directors.
-12-
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1999:
o on an actual basis; and
o as adjusted to reflect the sale of the minimum of 571,428 shares and the
maximum of 1,000,000 shares of common stock offered hereby, after deducting
the estimated offering expenses:
<TABLE>
<CAPTION>
Period Ended
June 30, 1999
-----------------------------------
As Adjusted
---------------------
Actual Minimum Maximum
-------- -------- --------
<S> <C> <C> <C>
Total Debt: $121,887 $121,887 $121,887
Stockholders' equity:
Common Stock, $.01 par value; 5,000,000
shares authorized; 3,575,660 shares issued and
outstanding-- actual and 4,147,088
(minimum) and 4,575,660 (maximum)-- as
adjusted; 11,316 shares held in treasury(1)............ $35,757 $41,471 $45,757
Additional paid-in capital............................. $1,828,346 $3,722,632 $5,218,346
Accumulated deficit.................................... ($725,696) ($725,696) ($725,696)
Total stockholders' equity (deficiency)................ $1,138,407 $3,038,407 $4,538,407
Total Capitalization................................... $1,260,294 $3,160,294 $4,660,294
</TABLE>
- --------
(1) Excludes (A) 75,000 shares issued subsequent to June 30, 1999 pursuant to a
consulting agreement and (B) shares issuable upon the exercise of
outstanding (1) options and warrants and (2) options that may be granted
pursuant to certain consulting agreements and under our stock option plan.
See "Management" and "Description of Securities -- Stock Options, Stock
Option Plan, and Other Agreements to Issue Stock."
-13-
<PAGE>
DILUTION
Purchasers of the shares will experience immediate and substantial dilution
in the value of their shares after purchase. Dilution represents the difference
between the initial public offering price per share paid by the purchaser in the
offering and the net tangible book value per share immediately after completion
of the offering. Net tangible book value per share represents the net tangible
assets, defined as total assets less total liabilities, divided by the number of
shares of common stock outstanding upon closing of the offering. Our net
tangible book value (actual) at June 30, 1999 (unaudited), was $1,138,407 or
$.32 per common share.
Giving effect to the issuance after June 30, 1999 of 571,428 shares
assuming an offering price of $3.50 per share (minimum) and 1,000,000 shares
assuming an offering price of $3.50 per share (maximum) and the receipt of the
net proceeds by Tech Labs, the pro forma net tangible book value would have
been:
o $3,038,407 or $.73 per share upon completion of the minimum offering; and
o $4,538,407 or $.99 per share upon completion of the maximum offering.
This represents an immediate increase in net tangible book value of $.41
per common share (minimum offering) and $.67 per common share (at maximum
offering) to the existing shareholders and an immediate dilution of $2.77 per
common share (minimum offering) and $2.51 per common share (maximum offering) to
persons purchasing shares in this offering. The following table illustrates this
per share dilution:
Minimum Maximum
------- -------
Offering price per share $3.50 $3.50
Net tangible book value per share at June 30, .32 .32
1999 (unaudited)
Increase per common share attributable to .41 .67
payments by new investors ----- -----
Net tangible book value per share at June 30, .73 .99
1999 (unaudited), on a pro forma basis ----- -----
reflecting the proceeds of this offering
Dilution of net tangible book value per share to $2.77 $2.51
new shareholders(1) ----- -----
- ---------
(1) Represents dilution of approximately 79% with the completion of the minimum
offering and 72% with the completion of the maximum offering, respectively,
to purchasers of common stock offered hereby.
-14-
<PAGE>
The following table sets forth on June 30, 1999, on a pro forma basis, the
differences between existing shareholders and new investors in the offering with
respect to the number of shares of common stock purchased, the total
consideration paid, and the average price per share paid by existing
shareholders and by new investors.
<TABLE>
<CAPTION>
Minimum Offering(1)
Percentage of
Percentage of Total
Outstanding Consideration Consideration Average Price
Number Shares Paid Paid per Share
<S> <C> <C> <C> <C> <C>
Existing
Shareholders 3,575,660 86% $ 35,757 2% $0.01
New Investors 571,428 14% $2,000,000 98% $3.50
Total 4,147,088 100% $2,035,757 100% --
Maximum Offering(1)
<CAPTION>
Percentage of
Percentage of Total
Outstanding Consideration Consideration Average Price
Number Shares Paid Paid per Share
<S> <C> <C> <C> <C> <C>
Existing
Shareholders 3,575,660 77% $ 35,757 1% $0.01
New Investors 1,000,000 23% $3,500,000 99% $3.50
Total 4,575,660 100% $3,535,757 100% --
</TABLE>
- --------
(1) Based on the number of outstanding shares as of June 30, 1999 and excludes:
o 75,000 shares issued subsequent to June 30, 1999 pursuant to a consulting
agreement;
o options to purchase 100,000 shares at $1.25 per share and an additional
100,000 shares at $1.75 per share pursuant to a consulting agreement;
o options to purchase 50,000 shares exercisable at $1.85 per share pursuant
to a consulting agreement;
o options to purchase an aggregate of 190,000 shares exercisable at $.50 per
share granted under Tech Lab's stock option plan for officers and
directors;
o options to purchase 75,000 shares exercisable at $1.12 per share; and
o pursuant to the employment agreement with our president, options to
purchase up to 300,000 shares, 100,000 options of which are vested, with
the balance to vest in 100,000 increments on each of October 1, 1999, and
October 1, 2000, so long as the president is employed, such options to be
exercisable at $.50 per share. See "Management," "Management-- Stock Option
Plans" and "Description of Securities."
-15-
<PAGE>
SELECTED FINANCIAL DATA
The financial data included in the following table has been derived from
our unaudited financial statements and should be read together with our
unaudited financial statements and related notes and "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
<TABLE>
<CAPTION>
Period Ended Period Ended
December 31, June 30,
-------------------------------------------- --------------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Sales $647,015 $444,322 $552,486 $172,319 $160,304
Cost of Sales 337,269 446,457 386,425 173,182 112,213
-------- -------- -------- -------- --------
Gross Profit 309,746 (2,135) 166,061 (863) 48,091
Operating Expenses
General and administrative 246,915 257,826 311,716 188,569 298,311
Depreciation and
amortization 10,849 7,278 18,133 -- --
-------- -------- -------- -------- --------
Income (loss) from operations 51,982 (267,239) (163,788) (189,432) (250,220)
Other income-- Interest 388 166 1,654 83 -0-
Interest expense 3,188 6,996 6,970 3,498 -0-
-------- -------- -------- -------- --------
Income (loss) before provision
for income taxes 49,182 (274,069) (169,104) (192,847) (250,220)
Provision for income -0- -0- -0- -0- -0-
Net income (loss) 49,182 (274,069) (169,104) (192,847) (250,220)
Net income (loss) per share $0.04 ($0.18) ($0.06) ($0.09) ($0.08)
</TABLE>
<TABLE>
<CAPTION>
Period Ended Period Ended
December 31, June 30,
------------------------------------------- --------------------------
1996 1997 1998 1998 1999
---- ---- ---- ---- ----
Balance Sheet Data: (unaudited)
<S> <C> <C> <C> <C>
Total assets $459,711 $609,526 $1,018,597 $590,126 $1,260,294
Working Capital 267,436 405,548 851,540 384,671 1,026,243
Current Portion of long-term debt 34,445 34,445 32,742 32,742 31,131
Long-term debt (less current portion) -0- -0- -0- -0- -0-
Shareholders' equity $296,184 $429,615 $ 863,727 $424,268 $ 1,138,407
</TABLE>
-16-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
We were incorporated in 1947 as a New Jersey corporation. Our focus has
historically been the design, manufacture, and sale of rotary switches. Switches
have been a significant part of our revenue for five decades. In 1995, to
augment revenues, we sought business in transformers and contract manufacturing.
In 1998, we made a shift to new product development. In 1998, we also made our
first sales of the IDS product, and in April of 1999, we completed the
acquisition of the DynaTraX(TM) switch and technology. We will continue to focus
on IDS and DynaTraX(TM) sales and development of additional products using these
technologies.
The following table sets forth the components of our revenues for each of
our major business activities in 1996, 1997, and 1998 and for the six months
ended June 30, 1998 and 1999 and their approximate percentage contribution to
revenues for the period indicated:
<TABLE>
<CAPTION>
PRODUCT TYPE 1996 % of Revenue 1997 % of Revenue 1998 % of Revenue
- ------------ ---- ------------ ---- ------------ ---- ------------
<S> <C> <C> <C> <C> <C> <C>
Rotary Switches $262,858 40.6% $199,324 44.8% $166,550 30.1%
IDS Sensors 0 0 0 0 254,900 46.2%
Transformers/Coils 60,741 9.4% 53,595 12.1% 50,515 9.1%
Contract Manufacturing 323,416 50.0% 191,404 43.1% 80,520 14.6%
-------- ----- -------- ------ -------- ------
Totals $647,015 100.0% $444,323 100.0% $552,485 100.0%
======== ===== ======== ====== ======== ======
<CAPTION>
Six Months Ended
June 30,
------------------------------------------------------------
(unaudited)
PRODUCT TYPE 1998 % of Revenue 1999 % of Revenue
- ------------ ---- ------------ ---- ------------
<S> <C> <C> <C> <C>
Rotary Switches $ 97,016 56.3 $ 76,160 47.5
IDS Sensors 22,229 12.9 47,474 29.6
Transformers/Coils 36,876 21.4 22,006 13.8
Contract Manufacturing 16,198 9.4 14,664 9.1
-------- ------ -------- ------
Totals $172,319 100.0% $160,304 100.0%
======== ====== ======== ======
</TABLE>
As the foregoing reflects, there was a significant decrease in sales of
rotary switches and contract manufacturing, due to a shift to new product
development and sales. There were no sales of the new IDS in 1997. In 1998,
sales of the IDS were $254,900.
The following table sets forth the percentages of gross profit for each of
our major business activities in 1997 and 1998, and for the three months ended
June 30, 1998 and 1999:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------
(unaudited)
PRODUCT TYPE 1997 1998 Net Change 1998 1999 Net Change
- ------------ ---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Rotary Switches 44.2% 45.0% 0.8% 44.2% 45.0% 0.8%
IDS Sensors -0- 52.0% 52.0% 52.0% 54.6% 2.6%
Transformers/Coils 22.7% 25.0% 2.3% 22.7% 25.0% 2.3%
Contract Manufacturing 20.0% 22.8% 2.8% 20.0% 22.8% 2.8%
Unallocated company expenses(1) (31.2%) (13.1%) 18.1% (38.8%) (13.1%) 25.7%
Total company gross profit % (0.5%) 30.1% 30.6% (0.05%) 30.0% 30.5%
</TABLE>
We have begun to shift out of the subcontracting and transformer business
which provides low gross profit margins, for higher gross profit margin sales of
IDS and other new products. While rotary switches produce high gross profits,
demand for rotary switches is low.
We have gradually shifted our product offering from less profitable to more
profitable proprietary products.
- ----------
(1) Includes physical inventory adjustments and factory overhead.
-17-
<PAGE>
Results of Operations
Six Months Ended June 30, 1999, Compared to Six Months Ended June 30, 1998 --
Unaudited.
Sales were $160,304 for the first six months of 1999 as compared to
$172,319 for the six months ended June 30, 1998. The decrease was due to limited
marketing efforts and the lack of new product introductions.
Cost of sales of $112,213 for the six months ended June 30, 1999 compared
to $173,182 for the same period in 1998 decreased significantly due to
reductions in manufacturing costs, efficiencies and reduction of manufacturing
staff.
Selling, general, and administrative expenses increased by $109,742 or 58%
in the first half of 1999 as compared to the prior period in 1998 which resulted
from higher than normal expenses in 1999 due to professional fees associated
with the acquisition of DynaTraX(TM).
Losses from operations of ($250,220) in the first half of 1999 increased by
$57,373 or 30% compared to losses of ($189,432) for the prior period as a direct
result of higher costs and lower selling, general, and administrative expenses.
1998 Compared to 1997.
Sales increased 24% from $444,322 in 1997 to $552,486 in 1998. This was due
to an increase in sales of the Intrusion Detection System (IDS).
Cost of sales decreased 16% from $446,457 in 1997 to $386,425 in 1998 due
to an increase in sales of lower costs IDS products.
Selling, general and administrative expenses, including depreciation,
increased 24% from $265,104 in 1997 to $329,849 in 1998 due to increased sales
efforts, engineering, testing, and promotion of new product introductions, as
well as consulting, legal, and other expenses in connection with the acquisition
of the DynaTraX(TM) product line.
Income (loss) from operations decreased 39% from a loss of ($267,239) in
1997 to a loss of ($163,788) in 1998 due to higher gross profit margins on new
products.
Interest expense decreased negligibly from $6,996 in 1997 to $6,970 in
1998.
1997 Compared to 1996
Sales decreased 31.3% from $647,015 in 1996 to $444,322 in 1997 due to a
decrease in subcontracting activity.
Cost of sales increased 32.4% from $337,269 in 1996 to $446,457 in 1997 due
to fixed overhead.
Selling, general and administrative expenses, including depreciation,
increased slightly from $257,764 in 1996 to $265,104 in 1997.
We had income of $51,982 for 1996 as compared to a loss of ($267,239) for
1997 due to lower sales from subcontracting activity.
Interest expense increased 119% from $3,188 in 1996 to $6,996 in 1997.
Liquidity and Capital Resources.
During the years ended December 31, 1997 and 1998 and for the six months
ended June 30, 1998 and 1999 we have had difficulty meeting our working capital
requirements, which was a result of lower sales, limited marketing efforts, and
continued losses from operations. During the years ended December 31, 1997 and
1998, we completed sales of our common stock which raised approximately $407,000
in 1997 and $603,716 in 1998. During calendar 1999 we raised an additional
$250,000 for the acquisition of the DynaTraX(TM) assets and an additional
$200,000 for working capital.
During 1998 we sold our first IDS products to the U.S. government Los
Alamos facility. Continued sales will, however, be dependent upon sustained
marketing efforts. Bacause sales from our historical lines of products have not
in the past, and are not in the future expected to generate sufficient revenue
to support our product development and marketing and sales efforts for our
DynaTraX(TM) and IDS products, we will be required to meet our capital needs to
finance our business plan through the sale of our shares of common stock in this
offering. In the event we are unable to complete this offering or we sell less
than the maximum number of shares offered hereby, we will be required to curtail
the implementation of our business plan.
Year 2000 Readiness
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field and cannot distinguish
21st century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th century dates to avoid system failures
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities. As a result, many companies' software and
computer systems may need to be upgraded or replaced in order to comply with
such "Year 2000" requirements.
Our Year 2000 review is in progress. We believe that all of our own
computer systems and products will be compliant before 2000.
o Products. The DynaTraX(TM) system software runs on Microsoft Windows
NT, which is Year 2000 compliant. The DynaTraX(TM) hardware is also
compliant. The IDS and the various electronic and electrical
components that we manufacture neither contain microprocessors nor are
they reliant on time or date software. We believe such equipment to be
unaffected by the Year 2000 problem.
o Vendors. All of our components are bought "off the shelf" and are
manufactured by numerous companies. We believe we will be able to
replace supplies from any vendor experiencing manufacturing
difficulties due to the Year 2000 problem.
o IT Systems. We conducted a survey of our information technology
hardware and and have scheduled upgrades and/or replacements of all
identified Year 2000 non-compliant hardware and software prior to
2000.
o Costs. We do not currently expect that costs associated with Year 2000
compliance will materially affect our operations or financial
position. However, if we discover Year 2000 problems in the future, we
may not be able to develop, implement, or test remediation or
contingency plans in a timely or cost-effective manner.
o Risks. Failure of third party products, such as a breakdown in
telephone, electric service or other utilities, e-mail, voicemail or
the World Wide Web could cause a disruption in our business
operations. Disruptions in services provided by banks, telephone
companies and the U.S. Postal Service could negatively impact our
business. Although we believe that our products are Year 2000
compliant, it is possible that they may not contain the date codes
necessary to operate in the year 2000. Any failure of the products to
perform could result in the delay or cancellation of product orders
and the diversification of managerial and technical resources from
product development and other business activities to attend to Year
2000 issues.
-18-
<PAGE>
BUSINESS
General
Tech Laboratories, Inc., which was incorporated in 1947, manufactures and
sells various electrical and electronic components. On April 27, 1999 we
completed the acquisition of the DynaTraX(TM) high-speed digital switch matrix
system. We believe that the acquisition of the DynaTraX(TM) technology will
enable us to become a provider of multi-media digital network distribution and
management equipment for use in campus and building facilities.
In addition, during the last two years, through our subsidiary, Tech
Logistics, Inc., we have been marketing and manufacturing under our exclusive
license, an infrared perimeter intrusion and anti-terrorist detection system or
"IDS." The IDS was originally designed for military applications, and we
currently market this product to government agencies and private industry for
use in nuclear, industrial and institutional installations.
Historical Business
We manufacture and sell standard and customized switches, transformers and
test equipment. In addition, we act as a contract manufacturer for other
companies and produce on an OEM basis electronic and electrical assemblies,
printed circuit board assemblies, cable and harness assemblies and specialized
electronic equipment. Approximately 15% of our products are manufactured for
military applications.
Our switches are primarily incorporated in electronic and electrical
devices, test field engineering, manufacturing and quality control equipment,
and are standardized and custom-made. Transformers are devices for converting a
varying current from one voltage to another and may increase the voltage. Our
historic customer base for transformers has been the elevator industry.
Our contract manufacturing activities have included fabrication of computer
boards and assembly of cables and harnesses. In addition, we have manufactured,
on an OEM basis, such products as infrared beam perimeter security devices,
microprocessor based machine controls, test instruments for ophthalmology
products, test instruments for manufacturers of integrated circuits, control
components for photo-lithographic products, high-power control panels and power
distribution control panels.
We have also expanded our product lines by manufacturing test equipment in
which switches are a key component. We have designed test instruments in the
fields of resistance, inductance and capacitance decade substitution that serve
as calibration and design aids for engineers.
We have also developed a new line of decade resistance, capacitance and
inductance substituters, utilizing our highly reliable rotary switches.
Prototypes for these products have been made and evaluated, and the tooling to
produce these products has been completed. We intend to market our new line over
the Internet, as well as through our distribution and outside sales agents. Our
website is currently on-line. Our website address is www.techlabsinc.com.
We have, in the past two years, entered into a number of agreements and
arrangements to develop and/or market a broader range of products, some of which
incorporate some of our historical products and others of which involve
diversification into the areas of security devices and systems and network
switching systems. Due to our limited resources, we have only engaged in limited
development and marketing of these products, and our revenues from such
activities have been minimal.
-19-
<PAGE>
We will require the proceeds of this offering to market these products and
develop additional products, and there can be no assurance that any of these
products will achieve significant market acceptance or that we can derive
significant revenues from these products.
The DynaTraX(TM) Asset Acquisition
On April 27, 1999, we completed the acquisition of the DynaTraX(TM) system,
from NORDX/CDT, INC. for a purchase price of $500,000. In connection with the
acquisition of DynaTraX(TM) technology, we acquired certain inventory, customer
and supplier lists, marketing and promotional materials, patents and patent
applications, and other equipment related to the DynaTraX(TM) product. We
believe that the acquisition of the DynaTraX(TM) technology will enable us to
become a provider of multi-media digital network distribution and management
equipment for use in campus and building facilities.
We believe that there is a rapidly growing marketplace for "digital"
multi-media, including internet, high-speed data, digital voice and video; and,
information equipment and systems. We intend to use the DynaTraX(TM) unique
high-speed, transparent digital cross-connect matrix to produce a line of
standard, universal firmware, configurable digital network distribution and
management equipment that OEM's and/or Value-Added-Resellers will be able to use
as a platform they can custom configure, through software, to supply a variety
of industry and customer-specific applications and functions.
We may be unable to develop or successfully market these proposed products.
We will need the funds from this offering to develop and market our existing
DynaTraX(TM) products, as well as developing new products incorporating the
DynaTraX(TM) technology. See "Risk Factors." In the long term, we intend to
build industry recognition for producing private, customer-premise (community,
commercial, educational and hospitality complexes, and residential buildings),
high-speed Internet, Long Distance, Intranet information distribution and
management switching systems.
We believe the future trend in communications is reselling local loop
services using new digital transmission technology and equipment to get around
the present "de facto monopoly" telephone and CATV companies maintain over local
connection and distribution services.
We feel our DynaTraX(TM) technology will play a large role in helping
developers, builders and/or managers of private residential communities and
commercial, industrial, educational and hospitality complexes establish
facilities that will distribute and manage high-speed digital Internet, Long
Distance and CATV services. This technology permits these users to bypass
current telephone and CATV companies' "Last Mile" connection service, possibly
allowing them to increase rents and to make their properties more attractive to
tenants.
Industry
DynaTraX(TM) Networking Management and Maintenance Technology
Our DynaTraX(TM) product is proposed to be sold in the multi-media digital
network distribution and management equipment industry. The growth in digital
networks is clear as is the cost in supporting and maintaining these networks.
We initially intend to market the DynaTraX(TM) product in the eastern portion of
the United States with expansion to other markets over time. There are at least
four companies that have products that compete with the DynaTraX(TM) product.
However, we believe none of these competitors offer a product with all of the
features or capabilities of DynaTraX(TM).
-20-
<PAGE>
We expect that competition in the sale of our DynaTraX(TM) product will be
on the basis of price, features, service and technical support. Pricing of our
products is based upon obtaining a margin above cost of production. The margin
we will accept varies with quantity and the channels of distribution.
We believe that our DynaTraX(TM) product offers a faster switch and a much
smaller port size than any competing product and is not limited to a specific
type of network as with some competing products.
Competition for network management products comes from several different
sources. One source of competition is the designated employees of large
organizations which have been hired to manage and maintain their internal
networks. However, we believe the need to reduce costs through the
implementation of automated cost saving technologies such as the DynaTraX(TM)
technology, will provide Tech Labs with market opportunities.
Another group of competitors which produce products to manage and maintain
the network physical layer consists of NHC, RIT and Cyteck. Of these three
companies, NHC is the only one that offers a transparent high-speed switch. The
NHC switch is not as fast as our DynaTraX(TM) product and much smaller in port
size. In addition, V-LAN switching, which is a technology utilized by a number
of companies, can be regarded as a competing technology. However, V-LAN
switching is limited to a specific type of network (Ethernet) and not able to
support many tasks which our DynaTraX(TM) technology is designed to complete.
These tasks are:
o rearranging network physical layer connections e.g.s moves, adds and
changes of equipment such as computer terminals; fax machines; and
printers;
o testing circuits;
o managing and mainatining end-to-end network configuration; and
o maintaining asset inventory records.
We regard V-LAN as complementary to DynaTraX(TM) circuit switching since
they can work together to provide a more comprehensive network
management/maintenance solution. The four competitors all have greater financial
and other resources and currently account for substantially all of the existing
market.
Infrared Intrusion Detection System ("IDS")
In April 1997, we formed Tech Logistics, Inc., a joint venture subsidiary
owned at that time 80% by our company and 20% by Carmine O. Pellosie, Jr., a
director of our company and president of International Logistic, Inc., a
privately owned company that distributes police, security, safety and
communication security devices. In May 1998, we acquired Mr. Pellosie's interest
in Tech Logistics. The IDS, which is an active infrared sensor system able to
detect intrusions by humans or vehicles into protected areas, was originally
designed for military applications.
We have recently begun marketing IDS to government agencies and private
industry for use in nuclear, industrial, and institutional installations. We
have also begun to manufacture and market products currently sold by
International Logistics Inc., as well as new security, police training, bomb
detection and disposal equipment, anti-terrorism countermeasures and lie
detection devices. New devices are intended to include hand-held letter bomb
detectors, hand-held weapons detectors, video surveillance equipment as well as
integrated audio-visual surveillance vehicles for government and police use.
We have entered into an Amended and Restated Joint Marketing Agreement and
a Confidentiality and Manufacturing Agreement as of October 1, 1997 with
Elekronik Apparatebau GmbH (EAG), W.T. Sports, Ltd. and FUA Safety Equipment, AG
(FUA), pursuant to which our company was granted an exclusive right until
September 30, 2007 to manufacture and sell in the U.S., Canada and South America
the IDS products. The agreements provide that gross pre-tax profits shall be
calculated according to GAAP and shall be distributed quarterly in arrears 70%
to our company and 30% to FUA until March 31, 2001. Thereafter, until September
30, 2007 the agreements provide that any pre-tax net profit in excess of 16%
shall be distributed 70% to our company and 30% to FUA. In addition, we will
also pay FUA a royalty of 5% of the cost of any IDS products we manufacture and
sell. We also intend to market metal detection equipment manufactured by EAG for
use in security and industrial applications, such as walk-through metal
detectors and hand-held metal detectors.
We are marketing our IDS product to the security and anti-terrorist
industry. We believe this is a growing industry and that terrorist incidents and
security breaches serve to increase the demand for our products. We have
recently completed the sale of an IDS to Los Alamos National
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<PAGE>
Laboratories.
This industry has a number of different competing products and
technologies. Competition in the industry is partly based on price and partly on
other factors such as effectiveness of a product in the field, acceptable levels
of false alarms for a given application and service. We are marketing the IDS
product for global distribution. We have a number of competitors for the IDS
products offering competitive technology, many of whom have greater financial
and other resources.
We have received approval for the IDS from the U.S. Air Force for inclusion
in their Tactical Automated Security System (TASS) program which is a $500
million program to thwart enemy attacks on critical military installations
throughout the world. Subsequent to this approval, Tech Labs has received a
blanket order to provide 50 IDS systems to the U.S. Air Force. Tech Labs has as
of the date of this Prospectus shipped 6 systems under its blanket order to the
TASS prime contractor. Pricing of our products is based upon obtaining a margin
above cost of production. The margin we will accept varies with quantity and the
channels of distribution.
Switches, Transformers and Test Equipment
We sell our switch, transformer and test equipment products in the
electronics and electrical industries, primarily as a contract manufacturer for
other companies or for inclusion in OEM products. We market our products in
these industries in the United States. This is a mature market. Competition is
on the basis of price and service. Pricing of our products is based upon
obtaining a margin above cost of production. The margin we will accept varies
with quantity and the channels of distribution. We have many competitors in this
market who are able to produce similar quality products, many of whom have
greater financial and other resources than we do.
Marketing Strategies
Marketing. We plan to implement a three-pronged marketing program
consisting of:
o Industry announcements and presentations through business and industry
trade groups;
o Establishing relationships with several industry recommenders and
specifiers, who are consultants and engineering companies to help
present our cable management and network physical layer solutions to
the end-users and their contract management or system integrators; and
o A promotional campaign of ads, mailings, and on-line Web site media,
targeted at the end-user communications managers, their consultants
and advisers.
Initially, we will focus on the communication/computer centers in the
eastern part of the United States. We plan to divide this area into four sales
regions:
o New England states;
o New York metropolitan area;
o Mid-Atlantic/Washington DC area; and
o South East Coast states.
We will quickly set up several regional representatives, sales agents,
and/or certified value added resellers (VARs) in each of the four regions. Our
plan is to have one representative and, initially, up to two VARs for each
region. Whenever possible, we plan to use former NORDX/CDT trained sales agents
and certified VARs.
Sales representatives will be commissioned sales agents. VARs will be
system integrators who will purchase DynaTraX(TM) products at a volume based
discount price for resale as part of a turn-key (design, install, maintain)
service.
We also plan to expand on the initial program by opening up additional
sales areas in the country and overseas. We contemplate doing this by adding
regional representatives or agents, or through current VAR organizations that
have a national presence.
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<PAGE>
In the established East Coast area, we intend to set up three regional
sales/service centers:
o Massachusetts;
o Washington, DC; and
o Florida
We will repeat the process in the other areas as they become established.
We plan to use our sales/service centers to introduce new, enhanced
versions of the DynaTraX(TM) system and to provide territory customer support
services. We also plan to set up a separate marketing campaign and sales
operations to build markets for our expanded high-speed, customer-premise
DynaTraX(TM) gateway networking switch.
In addition, working with VARs, we will focus on providing turn-key,
private customer-premise digital gateway exchange networking systems. We will
target real estate developers, builders and/or owners of private communities,
commercial community retail complexes and shared rental buildings to enable them
to control and resell Internet, Long Distance, CATV, and building automation
information services going into and out of their private facilities.
Although we believe that we can be profitable by the fourth quarter of 1999
from the increased sales of our IDS products and sales of the newly acquired
DynaTraX(TM) completed inventory, our profitability is subject to both the
successful and timely implementation of our business plan and market acceptance
of our new products. All research and development of our IDS products have been
expensed and we have received approval from the U.S. Air Force for inclusion of
the IDS products in its TASS program. We received our first blanket order for
our IDS product in May 1999.
Our plan to become profitable included the acquisition of the DynaTraX(TM)
product in April 1999 and to sell the finished DynaTraX(TM) inventory we
acquired.
Because we have incurred substantially all our anticipated research and
development costs with respect to our IDS product and have had it approved by
the Air Force for inclusion in the TASS program, and have completed the purchase
of the DynaTraX(TM) switch, technology and marketing materials, upon completion
of this offering, we believe we will have the funds necessary to market our
products and achieve profitability.
Our profitability will be delayed if we are not able to sell our products
as we have anticipated. We believe we are raising sufficient funds with this
offering to achieve the sales necessary to become profitable and to provide
sufficient liquidity until such time as we become profitable. In the event that
sales and profitability are delayed to the point beyond that anticipated and
liquidity is impacted, we would reduce or defer operating expenses, such as
expenses to finish work in progress relating to the DynaTraX(TM) inventory and
research and development of additional DynaTraX(TM) products.
Source of Supply
Current inventory component purchases for all our products are made from
OEMs, brokers, and other vendors. We typically have more than a single source of
supply for each part, component, or service, but from time to time we may
utilize a single supplier for a particular part or component. During the year
ended December 31, 1998, Wiggins Plastics was our largest supplier with 14.2% of
our overall inventory purchases. These purchases were primarily used in the
manufacture of electromechanical switches. During the year ended December 31,
1997, Wiggins Plastics accounted for 16.8% of our supply of inventory. Those
components were in products that produced approximately 25.7% of our revenue for
such year. We have no long-term agreements with any of our suppliers.
Order Backlog
The backlog of written firm orders for our products and services as of June
30, 1999, was as follows:
As of June 30, 1999: $485,440
As of June 30, 1998: $159,109
Patents
In connection with our acquisition of the DynaTraX(TM) assets, we acquired
certain patents and pending patent applications. While a patent has been granted
in Great Britain, our patent applications in the U.S., Europe and elsewhere are
subject to review in those jurisdictions. There can be no assurance that these
patents will be granted and even if granted may afford us limited or no
protection, depending upon the nature of competing technology and upon our
ability to defend our intellectual property rights.
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<PAGE>
Employees
As of June 30, 1999, we had 11 full-time employees, including our officers,
seven of whom were engaged in manufacturing, one in repair services, one in
administration and financial control, one in engineering and research and
development, and one in marketing and sales.
Facilities; Manufacturing
Our corporate headquarters and manufacturing facility is located in North
Haledon, New Jersey. Our primary manufacturing and office facility is a
one-story building that is adequate for our current needs. We lease this
facility of 8,000 square feet, from a non-affiliated person, under a lease that
ends in May, 2001. The annual base rent is $48,000 and includes property taxes
and other adjustments. We believe our premises are adequate for our current
needs and that if and when additional space is required, it would be available
on acceptable terms.
We are an integrated manufacturer and, accordingly, except for plastic
moldings and extrusions, produce nearly all major subassemblies and components
of our devices from raw materials. We purchase certain components from outside
sources and maintain an in-house, light machine shop allowing fabrication of a
variety of metal parts and castings, complete tool room for making and repairing
dies, a stamping shop and an assembly shop with light assembly presses. Our test
lab checks and tests our products at various stages of assembly and each
finished product undergoes a complete test prior to shipment.
We anticipate that we will either manufacture any new products ourselves or
subcontract their manufacture, in whole or in part, to others. We believe that
personnel, equipment, and/or subcontractors will be readily available as and
when needed.
We offer warranties on all our current products, including parts and labor
for one year.
We have limited research and development facilities and currently employ
one (1) engineer.
Litigation
We are involved in a lawsuit arising from a letter of intent relating to a
small potential transaction we did not complete because we believed there were
misrepresentations made to us. We believe that the outcome is likely to be
favorable, but that our maximum liability if we do not prevail would be $30,000.
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<PAGE>
MANAGEMENT
Directors, Executive Officers, and Key Consultants
Name Age Title
- ---- --- -----
Bernard M. Ciongoli 52 President, Treasurer, and Director
Earl M. Bjorndal 47 Vice President and Director
Carmine O. Pellosie, Jr. 57 Secretary and Director
Louis Tomasella 58 Director
Richard J. Rice 62 Director
Each director is elected for a period of three years and until his
successor is duly elected by shareholders and qualified. Officers serve at the
will of the board of directors.
Bernard M. Ciongoli became our president and a director in late 1992, and
became Treasurer in 1998. From 1990 through 1991 he served as president of
HyTech Labs, a company engaged in sales and servicing of electronic test
equipment. During the years of 1987 to 1990, he acted as the principal owner and
President of Bernco Developers, a real estate developer. Mr. Ciongoli holds a
degree in electronic engineering from Paterson Institute of Technology.
Earl M. Bjorndal has been with us in various capacities since 1981. He has
been a director since 1985, and became a vice president in 1992. He is a
graduate of the New Jersey Institute of Technology with both bachelor's and
master's degrees in industrial engineering.
Carmine O. Pellosie, Jr. has been a director since the formation of Tech
Logistics, Inc. in 1997 and has been our Secretary since April 1999. Since
January 1, 1999, he has been the Controller of the Passaic County Department of
Health and Human Services. Prior to January 1999, he was, for more than five
years, president of International Logistics, Inc.
Louis J. Tomasella has served as director since 1994 and was treasurer from
1994 through 1998. He is the owner of Tomco Realty, a general real estate
brokerage firm in New Jersey. Mr. Tomasella holds a bachelors degree in liberal
arts from Rutgers University.
Richard J. Rice has served as a director since July 1999. He has served as
chairman of Teletalk International Services, Inc. since June 1994. He also
serves as president and CEO of Richard J. Rice, Inc. since November 1993. Prior
to 1993 Mr. Rice was president and CEO of Long Distance Services, Inc. for more
than five years.
Executive Compensation
The following table summarizes the compensation paid to or earned by our
president. No other officer has received compensation in excess of $100,000 in
any recent fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------------------- -------------
Shares of
Common Stock
Issuable Upon
Name and 1998 Exercise of
Principal Position Year Salary($) Bonus($) Options
------------------ ---- --------- -------- -------
<S> <C> <C> <C> <C>
Bernard M. Ciongoli 1998 $125,000 0 300,000
President, Treasurer
</TABLE>
The following table sets forth information realting to all options granted:
Option Grants in Fiscal Year 1998
<TABLE>
<CAPTION>
Percent of
Number of Total Options
Securities Granted to
Underlying Employees in
Options Granted Fiscal Year Exercise Expiration
Name (#)(1) (%)(2) Price($)(3) Date
---- --------------- ------------ ----------- ----------
<S> <C> <C> <C>
Bernard M. Ciongoli 300,000 85.7 $.50 10/1/03
Earl M. Bjorndal 50,000 14.3 $.50 10/1/03
Carmine O. Pellosie, Jr. 0 N/A N/A N/A
</TABLE>
We have a five (5) year employment contract with Mr. Ciongoli that
commenced October 1, 1998, and amended June 18, 1999. Mr. Ciongoli is currently
compensated at the base salary rate of $125,000 per annum. Mr. Ciongoli is also
entitled to receive two (2%) percent of our sales in excess of $1,000,000 during
any year he is employed by ua. In addition, Mr. Ciongoli was also granted an
option exercisable for five (5) years from date of grant to purchase 300,000
shares of stock at $.50 per share, such option to vest in increments of 100,000
shares per annum on each anniversary date of the agreement commencing October 1,
1998. The agreement is automatically renewed for one (1) year unless either
party terminates the agreement in writing at least 180 days prior to the
expiration of the term or of any renewal period.
In 1996 we granted to Mr. Ciongoli an option to purchase 100,000 shares of
common stock exercisable for five (5) years at $.50 per share under our stock
option plan.
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<PAGE>
We do not have employment agreements with any other officer or other
employee. Our directors are not presently compensated.
Consultants
We have entered into a consulting agreement with MPX Network Solutions,
Inc. The term of the agreement is for one year expiring on March 14, 2000,
renewable for an additional one year period. MPX will provide consulting
services in the areas of marketing, customer relations and strategic and product
development planning, particularly with regard to communications products. MPX
will receive an annual fee of $52,000 and commissions on sales of
telecommunications products during the term of the agreement ranging from 3% of
the first $1,000,000 of the net sale prices to 1/2% of the net sale prices over
$4,000,000. MPX will also receive 50,000 shares of common stock and will be
issued options to purchase up to 50,000 shares of common stock, at a purchase
price of $1.25 per share, depending on net sales of telecommunications products
during the initial term and the extension term of the agreement. These services
will be provided on an as needed basis, primarily by MPX's president, Mr. Sal
Grisafi.
We have also entered into a consulting agreement with Scott Coby. Under the
terms of the agreement, the consultant will provide certain marketing and
financial services. In consideration for entering into the agreement, which has
an initial term of two years, we issued to the consultant a warrant to purchase
50,000 shares of common stock at $1.85 per share exercisable for five (5) years,
and an additional warrant (the "Second Warrant") to purchase up to 200,000
shares of common stock at $3.50 per share exercisable for five (5) years, the
Second Warrant to vest in increments of 25,000 shares each for sales of $250,000
or more of Tech Lab's products to purchasers obtained by consultant within the
initial two (2) year term of the Consulting Agreement. The shares underlying the
warrants have certain registration rights.
We have also entered into a consulting agreement dated March 10, 1999, with
Mint Corporation, a New York corporation, to provide certain financial and
business consulting services, which include assisting our management in
developing its business plan, introducing Tech Labs to members of the financial
community, and assisting us in our financial planning. Under the terms of the
consulting agreement, which may be terminated by us upon ten (10) days' prior
written notice, we (a) issued 100,000 shares to Mint, 25,000 shares of which
were issued in June 1999 and 75,000 shares were issued in October 1999; and, (b)
granted to consultant an option to purchase up to 200,000 shares of common
stock, such options to be exercisable to purchase 100,000 shares at $1.25 per
share and options to purchase 100,000 shares at $1.75 per share. The options
vests in full if the agreement has not been terminated by Tech Labs prior to
July 10, 1999. The shares underlying the options have certain registration
rights.
Stock Option Plan
On December 11, 1996, the Board of Directors adopted a stock option plan
for officers, directors, and other key employees. Options issued pursuant to the
stock option plan are meant to qualify as incentive stock options within the
meaning of Secion 422A of the Internal Revenue Code. A total of 450,000 shares
were set aside for this purpose, and options for an aggregate of 190,000 shares
have been granted at an exercise price of $.50 per share.
CERTAIN TRANSACTIONS
The information set forth herein describes certain transactions between
Tech Labs and certain affiliated parties. Future transactions, if any, must be
approved by the Board of Directors.
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<PAGE>
On December 11, 1996, we agreed to compensate our president, Bernard M.
Ciongoli, and our vice president, Earl M. Bjorndal, for unpaid salary earned
during 1996 in the form of common stock. Mr. Ciongoli received 280,000 shares
for unpaid salary earned in the amount of $14,000 at $0.05 per share, and Mr.
Bjorndal received 160,000 shares for unpaid salary earned in the amount of
$8,000 at $0.05 per share.
In December, 1996, we issued to Louis Tomasella 100,000 shares of common
stock for consulting services.
In April, 1997, we formed Tech Logistics, Inc., a joint venture subsidiary
with Carmine O. Pellosie, Jr. to market security devices distributed by
International Logistics, Inc., a private-owned company, of which Mr. Pellosie
was the president and principal shareholder. Mr. Pellosie became a director of
Tech Labs at that time. In May 1998, we acquired Mr. Pellosie's interest in Tech
Logistics, Inc. for 15,000 shares of our common stock. See "Business -- Other
Recent Developments."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as the date of this prospectus and as
anticipated following this offering, the ownership of the presently issued and
outstanding shares of our common stock (a) by persons known to us to own more
than 5% of such stock, and (b) the ownership of common stock by our directors,
and by all officers and directors as a group.
<TABLE>
<CAPTION>
Number of
Shares Owned % of Shares % of Shares
Beneficially Prior to Outstanding After
Name and of Record Offering(1) Offering(1)
- ---- ------------- -------- --------
Minimum Maximum
------- -------
<S> <C> <C> <C> <C>
Bernard M. Ciongoli(2) 720,000 20.14% 17.36% 15.74%
Earl Bjorndal(3) 248,344 6.95% 5.99% 5.43%
Carmine O. Pellosie, Jr.(4) 40,000 1.12% * *
Louis Tomasella(5) 120,000 3.36% 2.89% 2.62%
Richard J. Rice 80,000 2.24% 1.92% 1.75%
All officers and directors as a 1,208,344 33.80% 29.13% 26.40%
group (4 persons)(2-5)
</TABLE>
- -----------
* less than 1%.
(1) Excludes 75,000 shares issued to a consultant subsequent to June 30, 1999.
(2) Includes 100,000 shares issuable upon the exercise of immediately
exercisable options granted under our stock option plan and 100,000 shares
issuable upon exercise of options earned under our employment agreement
with Mr. Ciongoli.
(3) Includes 50,000 shares issuable upon the exercise of immediately
exercisable options granted under our stock option plan.
(4) Does not include 20,000 shares issuable upon the exercise of options
granted upon our stock option plans, which options are not exercisable
until July 2000.
(5) Includes 20,000 shares issuable upon the exercise of immediately
exercisable options granted under our stock option plan.
PLAN OF DISTRIBUTION
We will receive proceeds from the sale of 1,000,000 shares, aggregating a
maximum of $3,500,000, before deducting offering expenses, if all such shares
are sold. We will not receive the proceeds of any sale of the securities by any
selling securityholders. We will pay all of the expenses incident to the
registration of the securities, including registration pursuant to the
securities laws of certain states, other than commissions, expenses,
reimbursements, and discounts of underwriters, dealers, and agents, if any, made
pursuant to any sales by the selling securityholders.
Minimum offering and escrow account
All funds received by us with respect to the sale of the first 571,428
shares will be deposited by us at Hudson United Bank. If a minimum of 571,428
shares offered for sale in our direct participation offering are not sold within
ninety (90) days following the effective date of the registration statement of
which this prospectus is a part, the offering will automatically terminate
unless extended for up to an additional ninety (90) days in our sole discretion
and all funds received from the sale of the shares will be returned to
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<PAGE>
the purchasers thereof with interest if the funds are held in escrow more than
90 days, at the same rate as paid by the escrow bank, and without interest if
held less than 90 days. At the time that 571,428 shares have been sold prior to
the expiration of the 90-day period, as the same may be extended, we will
release the funds from the escrow account for deposit into the working account
of our company. Although we will continue to sell the offering to attempt to
reach the maximum offering (1,000,000 shares), such released funds will be used
at that time as described herein.
We may use one or more member firms of the National Association of
Securities Dealers, Inc. to sell the shares. As of the date hereof, we have not
entered into any agreements or arrangements for the sale of the shares with any
broker, dealer, or sales agent. Any underwriters, dealers, or agents who
participate in the distribution of the shares may be deemed to be "underwriters"
under the Securities Act of 1933, and any discounts, commissions, or concessions
received by any such underwriters, dealers, or agents may be deemed to be
underwriting discounts and commissions. We anticipate that we will pay a
commission or underwriting fee to such brokers or dealers of no more than 10%.
If, at some time, we meet the requirements of the NASDAQ SmallCap Market
for listing of our shares, we will apply for listing. If our shares should be
accepted for listing thereon, then certain underwriters may engage in passive
market making transactions in our common stock in accordance with Rule 103 of
Regulation M.
In order to comply with the applicable securities laws, if any, of certain
states, the securities will be offered or sold in such states through registered
or licensed brokers or dealers in those states. In addition, in certain states,
the securities may not be offered or sold unless they have been registered or
qualified for sale in such states or an exemption from such registration or
qualification requirement is available and with which we have complied.
Limited state registration
We anticipate that we will primarily sell the shares in a limited number of
states, depending on the location and registration of any selling broker or
dealer that it locates. We will initially seek to qualify or register the sales
of the shares in the states of New York, New Jersey, Connecticut, California,
Pennsylvania, Michigan, Texas and Florida. We will not accept subscriptions from
investors resident in other states unless we effect a registration therein or
determines that no such registration is required.
Sales by the selling securityholders
The selling securityholders shares may be sold to purchasers from time to
time directly by and subject to the discretion of the selling securityholders.
The selling securityholders may, from time to time, offer their securities for
sale through underwriters, dealers, or agents, who may receive compensation in
the form of underwriting discounts, concessions, or commissions from the selling
securityholders and/or the purchasers of the securities for whom they may act as
agents.
Any underwriters, dealers, or agents who participate in the distribution of
the securities may be deemed to be "underwriters" under the 1933 Act, and any
discounts, commissions, or concessions received by any such underwriters,
dealers, or agents may be deemed to be underwriting discounts and commissions
under the 1933 Act. The securities sold by the selling securityholders may be
sold from time to time in one or more transactions at an offering price that is
fixed or that may vary from transaction to transaction depending upon the time
of sale or at prices otherwise negotiated at the time of sale. Such prices will
be determined by the selling securityholders or by agreement between the selling
securityholders and any underwriters.
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<PAGE>
Any underwriters, dealers, or agents who participate in the distribution of
the securities may be deemed to be "underwriters" under the Securities Act, and
any discounts, commissions, or concessions received by any such underwriters,
dealers, or agents may be deemed to be underwriting discounts and commissions
under the Securities Act.
At the time a particular offer is made by or on the behalf of the selling
securityholders, a prospectus, including any necessary supplement thereto, will
be distributed which will set forth the number of shares of common stock and
other securities being offered, and the terms of the offering, including the
name or names of any underwriters, dealers, or agents, the purchase price paid
by any underwriter for the shares purchased from the selling securityholders,
any discounts, commissions and other items constituting compensation from the
selling securityholders, any discounts, commissions, or concessions allowed,
reallowed, or paid to dealers, and the proposed selling price to the public.
Use of a Broker-Dealer
If we determine to use a broker-dealer, such broker-dealer must be a member
in good standing of the National Association of Securities Dealers, Inc. and
registered, if required, to conduct sales in those states in which it would sell
the shares. We anticipate that we would not pay in excess of 10% as a sales
commission for any sales of the shares.
If a broker-dealer were to sell the shares, it is likely that such
broker-dealer would be deemed to be an underwriter of the securities as defined
in Section 2(11) of the Securities Act of 1933 and we would be required to
obtain a no-objection position from the National Association of Securities
Dealers, Inc. regarding the underwriting and compensation terms entered into
between Tech Labs and such potential broker-dealer. In addition, we would be
required to file a post-effective amendment to the registration statement of
which this prospectus is a part to disclose the name of such selling
broker-dealer and the agreed underwriting and compensation terms. In order to
comply with the applicable securities laws, if any, of certain states, the
securities will be offered or sold in such states through registered or licensed
brokers or dealers in those states.
Pursuant to Regulation M of the General Rules and Regulations of the
Securities and Exchange Commission, any person engaged in a distribution of
securities, including on behalf of a selling securityholder, may not
simultaneously bid for, purchase or attempt to induce any person to bid for,
purchase, or attempt to induce any person to bid for or purchase securities of
the same class for a period of five business days prior to the commencement of
such distribution and continuing until the selling securityholder, or other
person engaged in the distribution, is no longer a participant in the
distribution.
We may select dealers who are members of the National Association of
Securities Dealers, Inc. to sell the shares, and may pay commissions of up to
[10]% to such dealers. No underwriter or dealer has made any firm commitment to
purchase or sell any of the Shares offered hereby.
Determination of Offering Price
While there is a limited market for the stock, the amount of stock to be
offered in this offering is substantially greater than the daily volume in our
stock. We have, therefore, arbitrarily priced the stock
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<PAGE>
we are offering at a price that we feel is reflective of what the current market
would support, given the number of shares we are selling. However, there can be
no assurances that after this offering the market price of the stock will not
decline.
OFFERING BY SELLING SECURITYHOLDERS
An additional 90,045 outstanding shares and 50,000 shares of common stock
issuable upon exercise of warrants held by the selling securityholders have been
registered pursuant to the registration statement under the Securities Act, of
which this prospectus forms a part, for sale by such holders. The shares may be
sold subsequent to the effective date of the offering if a current prospectus
relating to the securityholder shares is in effect and the securityholder shares
are qualified for sale. None of the shares being registered by the selling
securityholders pursuant to this registration statement are being offered for
sale in connection with the offering. The shares of common stock and the shares
underlying any warrants are not, however, subject to a lock-up.
We will not receive any proceeds from the market sales of the
securityholder shares, although we will receive the proceeds from the exercise
of the warrants held by the selling securityholders. Tech Labs is paying all
costs and expenses of registering the securityholder shares. Sales of the
securityholder shares or the potential of such sales could have an adverse
effect on the market price of our common stock. See "Risk Factors -- Shares
Eligible for Future Sale."
The selling securityholders and the number of shares held by each are as
listed below:
SECURITYHOLDER
SELLING SECURITYHOLDERS SHARES
----------------------- ------
Scott Coby.................................................... 45,045
Coby Capital Corporation...................................... 50,000
David Harris.................................................. 45,000
--------
TOTAL..................................................... 140,045
There are no other material relationships between any of the selling
securityholders and Tech Labs, nor have any such material relationships existed
within the past three years.
The sale of the securityholder shares may be effected from time to time in
transaction, which may include block transactions, in:
o the over-the-counter market;
o in negotiated transactions; or
o a combination of such methods of sale or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices.
Selling securityholders may effect such transactions by selling their
securities directly to purchasers
o through broker-dealers acting as agents; or
o to broker-dealers who may purchase shares as principals and thereafter
sell the securities from time to time in the market in negotiated
transactions or otherwise.
Broker-dealers, if any, may receive compensation in the form of discounts,
commissions, or concessions and/or the purchasers from whom such broker-dealers
may act as agents or to whom they may sell as principals or otherwise, which
compensation as to a particular broker-dealer may exceed customary commissions.
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<PAGE>
At the time a particular offer of securityholder shares is made by or on
behalf of a selling securityholder, to the extent required, a Prospectus will be
distributed that will set forth the number of securityholder shares being
offered and the terms of the offering, including the name or names of any
underwriters, dealers, or agents, if any, the purchase price paid by any
underwriter for any securityholder shares purchased from the selling
securityholder, and any discounts, commissions, or concessions allowed or
reallowed or paid to dealers, and the proposed selling price to the public.
If any of the following events occurs, this Prospectus will be amended to
include additional disclosure before offers and sales of the securityholder
shares are made:
o To the extent such securities are sold at a fixed price or by option
at a price other than the prevailing market price, such price would be
set forth in this Prospectus;
o If the securities are sold in block transactions and the purchaser
wishes to resell, such arrangements would be described in this
Prospectus;
o If the compensation paid to broker-dealers is other than usual and
customary discounts, commissions, or concessions, disclosure of the
terms of the transaction would be included in this Prospectus.
This prospectus would also disclose if there are other changes to the
stated plan of distribution, including arrangements that either individually or
as a group would constitute an orchestrated distribution of the securityholder
shares.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of securityholder shares may not simultaneously
engage in market making activities with respect to any securities of Tech Labs
for a period of at least two (and up to nine) business prior to the commencement
of such distribution. In addition, each selling securityholder desiring to sell
securityholder shares will be subject to the applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of the purchases
and sales of shares of our company's securities by such selling securityholders.
The selling securityholders and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commission received by
them and any profit on the resale of the securities may be deemed underwriting
discounts and commissions under the Securities Act.
-32-
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
If we sell the maximum number of shares in this offering, we will have
4,575,660(1) common shares outstanding. Other than shares sold to affiliates of
Tech Labs, the shares sold in this offering will be freely tradeable without
restriction under the Securities Act of 1933. Of the 3,575,660 shares of common
stock currently outstanding, 2,368,266 are freely tradeable without restriction
under the Act. The remaining 1,207,394 shares held by existing shareholders are
deemed "restricted" securities within the meaning of Rule 144 under the Act.
In general, under Rule 144, restricted securities held by any person who is
not an affiliate of the company and who has beneficially owned his or her shares
for at least two years are freely tradeable. In addition, under Rule 144, a
person who has beneficially owned restricted securities for at least one year,
including persons who may be deemed "affiliates" of the company, as the term
affiliate is defined in Rule 144, would be entitled to sell, within any
three-month period, a number of common shares of which does not exceed the
greater of 1% of our then outstanding common shares or the average weekly
trading volume in the over-the-counter market during the four calendar weeks
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission under Rule 144.
No sales are permitted, however, unless the current information about Tech
Labs prescribed by Rule 144 is publicly available, sales are made through
brokers or market makers in the manner prescribed by the rule, and all other
requirements of the rule are met. The restricted shares outstanding have been
held for varying periods of time, and certain of such shares have been held for
the requisite periods and may be sold at any time subject to the volume
limitations set forth above. If there are significant sales of our common shares
by existing shareholders or sales of any of the shares underlying warrants when
such shares have been registered pursuant to an effective registration
statement, the price of our common shares may go down.
There is presently no agreement by any holder, including our "affiliates",
of "restricted" shares not to sell his shares.
The Securities and Exchange Commission has adopted Rule 15g-9 which
requires broker-dealers who recommend "penny stocks" to persons other than
established customers and accredited investors to make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale.
The regulations that generally define a "penny stock" to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such exceptions include an equity security listed on NASDAQ
and an equity security issued by an issuer that has (a) net tangible assets of
at least $2,000,000, if such issuer has been in continuous operation for three
years; (b) net tangible assets of at least $5,000,000, if such issuer has been
in continuous operation for less than three years, or (c) average annual revenue
of at least $6,000,000 for the preceding three years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.
After receipt of the net proceeds from this offering, our net tangible
assets are expected to exceed $2,000,000, providing an exception to this
regulation even though our share price is below $5.00, so this regulation should
not be applicable, initially, to our shares. If our net tangible assets fall
below $2,000,000 and the market price of our shares is less than $5.00 per
share, then this regulation will apply. If our securities were subject to the
regulations applicable to penny stocks, the market liquidity for the securities
would be severely affected by limiting the ability of broker-dealers to sell the
securities and the ability of purchasers in this offering to sell their
securities in the secondary market. There is no assurance that trading in our
securities will not be subject to these or other regulations that would
adversely affect the market for such securities.
There is a very limited market for our common stock and a more substantial
market may not develop in the future; or if developed, be maintained, or that
the market price of our common stock will not decline. Even if a more active
trading market does develop, the market price of our common stock is likely to
be highly volatile and could be subject to wide fluctuations in response to
factors such as:
o actual or anticipated variations in our quarterly operating results;
o announcements of new product or service offerings;
o future technological innovations;
o new commercial products;
o changes in regulation;
o changes in financial estimates by securities analysts;
o conditions and trends in the electrical, electronic component,
security, and network switching industries;
o changes in the economic performance and/or market valuations of other
security and network switching companies; and
o general market conditions and other general factors.
Furthermore, the stock markets, and in particular, the OTC Bulletin Board
and NASDAQ stock markets, have experienced extreme price and volume fluctuations
that have particularly affected the market prices of many technology companies,
and have often been unrelated or disproportionate to the operating performance
of such companies. Additionally, the market price of our common stock could be
adversely affected by losses and other negative news regarding one or more other
companies, despite the fact that such information is not related to us
specifically. The trading prices of many technology companies' stocks are at or
near their historical highs. Such high trading prices may not be sustained.
These broad market factors may adversely affect the market price of our common
stock. In addition, general economic, political, and market conditions, such as
recessions, changes in interest rates, or international currency fluctuations,
may adversely affect the market price of our common stock.
- ----------
(1) Does not give effect to the issuance of 75,000 shares subsequent to June
30, 1999 pursuant to a consulting agreement.
-33-
<PAGE>
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 5,000,000 shares of common stock
having a par value of $.01 each, of which 3,575,660(1) shares are currently
outstanding and 11,316 shares are held in treasury. There are currently
approximately [___] holders of common stock.
Common Stock
Each share of common stock is entitled to one vote on all matters submitted
to a vote of shareholders. The common stock does not have cumulative voting
rights, which means that the holders of a majority of the outstanding shares may
elect all of the directors of Tech Labs. The common stock does not have any
preemptive rights. Stockholders holding a majority of the voting power of the
capital stock issued and outstanding and entitled to vote, represented in person
or by proxy, are necessary to constitute a quorum at any meeting of our
stockholders, and the vote by the holders of a majority of such outstanding
shares is required to effect certain fundamental corporate changes such as
liquidation, merger or amendment of our Certificate of Incorporation.
Holders of common stock are entitled to receive dividends pro rata based on
the number of shares held, when, as and if declared by the Board of Directors,
from funds legally available therefor. In the event of the liquidation,
dissolution or winding up of the affairs of our company, all assets and funds of
our company remaining after the payment of all debts and other liabilities shall
be distributed, pro rata, among the holders of the common stock. Holders of
common stock are not entitled to preemptive, subscription, or conversion rights,
and there are no redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are, and the shares of common
stock offered hereby will be when issued, fully paid and non-assessable.
Stock Options, Stock Option Plan, and Other Agreements to Issue Stock
We have outstanding options to consultants and third parties (a) to
purchase 50,000 shares exercisable for five years at $1.85 per share, (b)
options to purchase 75,000 shares exercisable for five years at $1.12 per share,
(c) options to purchase 200,000 shares exercisable for two years, as to 100,000
shares at $1.25 per share and as to 100,000 shares at $1.75 per share, and (d)
50,000 shares exercisable for five (5) years from date of vesting at $1.25 per
share.
Tech Labs has granted options to purchase 300,000 shares exercisable at
$.50 per share pursuant to an employment agreement with our president, 100,000
options of which have vested and the remaining 200,000 options to vest 100,000
options on each of October 1, 1999, and October 1, 2000.
We have also adopted a stock option plan for officers, directors, and other
key employees. A total of 450,000 shares have been reserved for issuance under
the plan, and options for an aggregate of 190,000 shares, exercisable at $.50
per share, have been granted to date.
We issued 50,000 shares of common stock to MPX pursuant to our consulting
agreement. Pursuant to the consulting agreement dated March 10, 1999 with Mint,
in addition to the options set forth above, we issued 25,000 shares and are
obligated to issue an additional 37,500 shares as of July 10, 1999, and an
additional 37,500 shares as of August 10, 1999.
- ----------
(1) Does not give effect to the issuance of 75,000 shares issued subsequent to
June 30, 1999 pursuant to a consulting agreement.
-34-
<PAGE>
Market Information
Our common stock is listed on the OTC Electronic Bulletin Board under the
symbol "TCHL-BB." Trading in the common stock has historically been very
limited.
Transfer Agent
The transfer agent for our common stock is Interwest Transfer Co., Inc., P.
O. Box 17136, Salt Lake City, Utah 84117.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Stursberg & Veith, 405 Lexington Avenue, New York, New York 10174, the
partners of which law firm own options to purchase 75,000 shares.
EXPERTS
Charles J. Birnberg, CPA, independent auditors, have audited our financial
statements at December 31, 1998, for the years ended December 31, 1997 and 1998,
as set forth in their report. We have included our financial statements in the
prospectus and elsewhere in the registration statement in reliance on Charles J.
Birnberg's report, given on their authority as experts in accounting and
auditing.
ADDITIONAL INFORMATION
We have filed a Registration Statement on Form SB-2 under the Securities
Act of 1933, as amended, with the Securities and Exchange Commission (the
"Commission") with respect to the common stock offered pursuant to this
Prospectus. This Prospectus, which forms a part of the Registration Statement,
does not contain all of the information included in the Registration Statement
and amendments thereof and the exhibits thereto, which are available for
inspection without charge, and copies of which may be obtained at prescribed
rates, at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048, and at the Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661-2511. The Commission
maintains a Website that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission (http://www.sec.gov).
INFORMATION NOT REQUIRED IN PROSPECTUS
We will provide, without charge, to each person who received a Prospectus,
upon written or oral request of such person to us at the mailing address or
telephone number listed below, a copy of any of the information incorporated by
reference. The mailing address of our principal executive offices is Tech
Laboratories, Inc., 955 Belmont Avenue, North Haledon, New Jersey 07508, (973)
427-5333.
-35-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Charles J. Birnberg, CPA Independent Auditors.....................F-1
Audited Financial Statements
Balance Sheets.........................................................F-2, F-3
Statements of Operations....................................................F-4
Statements of Cash Flows....................................................F-5
Notes to Financial Statements...............................................F-6
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Charles J. Birnberg, CPA
150 Overlook Avenue
Hackensack, New Jersey 07601
March 16, 1999
To The Board of Directors of Tech Laboratories, Inc.
I have audited the Balance Sheets of Tech Laboratories, Inc. as of December
31, 1997 and 1998 and the related Statements of Income and Retained Earnings,
and Cash Flows for the years then ended. These financial statements are the
responsibility of the Company's management.
The audits were conducted in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audits 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.
I believe that the audits provide a reasonable basis for my opinion.
Therefore, the financial statements in my opinion, present fairly the
financial position of Tech Laboratories, Inc. as of December 31, 1998 and 1997
and the results of operations and cash flows for the years then ended in
conformity with generally accepted accounting principles.
Sincerely,
/s/ Charles J. Birnberg
Charles J. Birnberg
Certified Public Accountant
Hackensack, New Jersey
F-1
<PAGE>
TECH LABORATORIES, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
ASSETS
For the Periods Ended For the Periods Ended
December 31 June 30,
------------------------------ ------------------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Current Assets:
Cash $ 166,173 $ 532,780 $ 109,414 $ 204,510
Marketable Securities, at the Lower of
Cost or Market (Note 1) 59,343 56,693 59,124 61,923
Accounts Receivable, net of Allowance
of $10,000 in 1998 and $10,000 in 1997 90,734 143,462 158,802 128,255
Inventories (Notes 1 & 2) 269,209 270,118 220,619 750,085
Prepaid Expense 0 3,357 2,570 3,357
---------- ---------- ---------- ----------
Total Current Assets $ 585,459 $1,006,410 $ 550,529 $1,148,130
---------- ---------- ---------- ----------
Property, Plant and Equipment, at Cost (Note 1):
Leasehold Improvements 2,247 2,247 2,000 2,247
Machinery, Equipment and Instruments 223,884 230,137 223,884 330,114
Furniture and Fixtures 67,425 67,425 67,425 67,425
---------- ---------- ---------- ----------
$ 293,556 $ 299,809 $ 293,309 $ 399,786
Less: Accumulated Depreciation & Amortz 281,029 299,162 262,902 299,162
---------- ---------- ---------- ----------
Net, Property, Plant and Equipment $ 12,527 $ 647 $ 30,407 $ 100,624
---------- ---------- ---------- ----------
Other Assets $ 11,540 $ 11,540 $ 9,190 $ 11,540
---------- ---------- ---------- ----------
Total Assets $ 609,526 $1,018,597 $ 590,126 $1,260,294
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-2
<PAGE>
TECH LABORATORIES, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' INVESTMENT
FOR THE
FOR THE PERIODS
PERIODS ENDED ENDED
DECEMBER 31 JUNE 30
--------------------------------- -------------------------------
1997 1998 1998 1999
----------- ----------- ------------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Current Liabilities:
Current Portion of L.T. Debt (Note 5) $ 34,445 $ 32,742 $ 32,742 $ 31,131
Short-Term Loans Payable (Note 6) 43,373 43,373 43,373 43,373
Accounts Payable 48,148 42,155 23,813 9,615
Other Liabilities & Investor Notes Payable 53,945 36,600 65,930 37,768
----------- ----------- ----------- -----------
Total Current Liabilities $ 179,911 $ 154,870 $ 165,858 $ 121,887
----------- ----------- ----------- -----------
Stockholders' Investment:
Common Stock. $.01 Par Value;
5,000,000 Shares Authorized; 2,869,943
Issued (Note 7) $ 13,753 $ 23,483 14,741 35,870
Less: 11,316 Shares Reacquired and
and Held in Treasury (113) (113) (113) (113)
----------- ----------- ----------- -----------
$ 13,640 $ 23,370 14,628 35,757
Common Stock Subscribed (Note 7) 0 500 0 -0-
Capital Contributed in Excess of Par Value 721,847 1,315,833 908,859 1,828,346
Retained Earnings 0 0 0 0
Accumulated Deficit (306,372) (475,476) (499,219) (725,696)
----------- ----------- ----------- -----------
$ 429,615 $ 863,727 $ 424,268 $ 1,138,407
----------- ----------- ----------- -----------
Total Liabilities and Stockholders'
Investment $ 609,526 $ 1,018,597 $ 590,126 $ 1,260,294
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE>
TECH LABORATORIES, INC.
STATEMENTS OF OPERATIONS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
FOR THE
FOR THE PERIODS
PERIODS ENDED ENDED
DECEMBER 31 JUNE 30
----------------------------- -----------------------------
1997 1998 1998 1999
--------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Sales $ 444,322 $ 552,486 $ 172,319 $ 160,304
--------- --------- --------- ---------
Costs and Expenses:
Cost of Sales 446,457 386,425 173,182 112,213
Selling, General and Administrative
Expenses 265,104 329,849 188,569 298,311
--------- --------- --------- ---------
711,561 716,274 361,751 410,524
--------- --------- --------- ---------
Income/(Loss) From Operations ($267,239) ($163,788) (189,432) (250,220)
--------- --------- --------- ---------
Other Income (Expenses):
Interest Income $ 166 $ 1,654 83 0
Interest Expense (6,996) (6,970) (3,498) 0
--------- --------- --------- ---------
($ 6,830) ($ 5,316) (3,415) 0
--------- --------- --------- ---------
Income/(Loss) Before Income Taxes ($274,069) ($169,104) (192,847) (250,220)
Provision for Income Taxes (Notes 1 & 4) 0 0 0 0
--------- --------- --------- ---------
Net Income/(Loss) ($274,069) ($169,104) (192,847) (250,220)
Retained Earnings/(Accum. Deficit,) Beg. of Period ($ 32,303) ($306,372) (306,372) (475,476)
--------- --------- --------- ---------
Retained Earnings/(Accum. Deficit,) End of Period ($306,372) ($475,476) ($499,219) ($725,696)
========= ========= ========= =========
Income/(Loss) Per Share (Note 3) ($ 0.18) ($ 0.06) ($ 0.09) ($ 0.08)
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
TECH LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIODS ENDED PERIODS ENDED
DECEMBER 31 JUNE 30
----------------------------- ---------------------------
1997 1998 1998 1999
--------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Cash Flows From (For) Operating Activities:
Net Income/(Loss) From Operations ($274,069) ($169,104) ($192,847) ($250,220)
Add/(Deduct) Items Not Affecting Cash:
Depreciation/Amortization (Note 1) 7,278 11,880 0 0
Unrealized (Gain)/ Loss on Valuation of
Marketable Securities (Note 1) 0 3,357 0 0
Changes in Operating Assets and Liabilities:
Marketable Securities (35,001) (2,650) 219 5,230
Accounts Receivable 2615 (52,728) (68,068) 15,207
Inventories 22,665 (909) 48,590 (479,967)
Accounts Payable (7,925) (40,249) (24,335) (32,540)
Other Assets and Liabilities 15,862 14,997 (18,100) 1,168
--------- --------- --------- ---------
Net Cash Flows For Operating Activities ($252,725) ($235,406) (255,041) (751,582)
--------- --------- --------- ---------
Cash Flows From (For) Investing Activities:
DynatraX Machinery & Equipment $ 0 $ 0 0 (99,977)
--------- --------- --------- ---------
Net Cash Flows From Investing Activities $ 0 $ 0 0 (99,977)
--------- --------- --------- ---------
Cash Flows From (For) Financing Activities:
Acquisition/(Repayment) of S.T. Debt ($ 10,000) ($ 1,703) 10,282 (1,611)
Acquisition/(Repayment) of L.T. Debt 0 0 0 0
Issuance of Common Stock 407,500 603,716 188,000 524,900
--------- --------- --------- ---------
Net Cash Flows From (For) Financing Activities: $ 397,500 $ 602,013 198,282 523,289
--------- --------- --------- ---------
Net Increase/(Decrease) in Cash $ 144,775 $ 366,607 (56,759) (328,270)
Cash Balance, Beginning of Year 21,398 166,173 166,173 532,780
--------- --------- --------- ---------
Cash Balance, End of Year $ 166,173 $ 532,780 $ 109,414 $ 204,510
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
TECH LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1998
(1) Summary of Significant Accounting Policies
CASH - Includes Tech Lab's checking account at Hudson United Bank. There
are no Cash Equivalents.
ACCOUNTS RECEIVABLE - Tech Labs recognizes sales when orders are shipped to
customers. The allowance for bad debts is accrued based on a review of customer
accounts receivables aging.
INVENTORIES - Inventories are valued at cost or market, whichever is lower.
The FIFO cost method is generally used to determine the cost of the inventories.
At December 31, 1997 and 1998 physical inventories were taken and tested.
PROPERTY AND DEPRECIATION - Additions to property and equipment are recorded at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows:
ASSETS ESTIMATED USEFUL LIVES
Machinery 5 to 7 years
Furniture & Fixtures 5 to 7 years
Maintenance and repairs are charged to expense as incurred. The cost of
betterments is capitalized and depreciated at appropriate rates. Upon retirement
or other disposition of property items, cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in the statement of
income.
INCOME TAXES - Income tax expense is based on reported income and deferred tax
credit is provided for temporary differences between book and taxable income.
MARKETABLE SECURITIES - The marketable securities are recorded at the lower of
cost or market. The cost of securities was $59,343 at December 31, 1997 and
$56,693 at December 31, 1998.
(2) Inventories:
Inventories at December 31, 1997 and 1998 were as follows:
1997 1998
---- ----
Raw Materials & Finished Components $231,202 $202,359
Work in Process & Finished Goods 38,007 67,759
-------- --------
$269,209 $270,118
-------- --------
(3) Income/(loss) Per Share:
Income/(loss) per share was calculated on the weighted average number of shares
outstanding during the year ended December 31, 1997 of 1,550,048 and during the
year ended December 31, 1998 of 2,202,905.
(4) Income Taxes:
At December 31, 1997 and 1998, the balance of operating loss carryforward was
$1,049,903 and $1,219,007, respectively, which can be utilized to offset future
taxable income.
(5) Short-Term Loans Payable:
Loans payable to banks were as follows for the years indicated:
CURRENT NON-CURRENT
YEAR ENDED PAYEE INTEREST RATE AMOUNT AMOUNT
- ---------- ----- ------------- ------ ------
1997 Hudson United Bank Prime +1.5% $34,445 --
1998 Hudson United Bank Prime +1.5% $32,742 --
Certain marketable securities are pledged as collateral on the above loan.
(6) Short-Term Loans Payable to Officers and Directors:
Demand loans payable include loans from stockholders, officers and members of
the Board of Directors. The outstanding loan balances due as of December 31,
1997 and 1998 was $43,373 for each of such years. The annual interest rate for
these loans ranged between six (6%) percent and ten (10%) percent. One loan in
the principal amount of $11,500 together with accrued interest of $3,604 at
December 31, 1998 is secured by the assets of Tech Labs.
(7) Common Stock
In 1997, Tech Labs converted $217,500 of short term loans into 198,750 shares of
common stock.
In 1997 and 1998, Tech Labs completed a placement pursuant to Rule 504 of common
stock which raised $917,324.
(8) Commitments and Contingencies
Tech Labs entered into an exclusive agreement with Elektronik Apparatebau
(EAG) whereby it received exclusive rights to manufacture and market IDS
products until September 30, 2007. Since Elektronik Apparatebau (EAG) receives a
share of the incremental gross profit generated by incremental IDS product
sales, Tech Labs has no future commitments or contingencies caused by this
agreement.
(9) Subsequent Events
On April 27, 1999, Tech Labs completed the purchase of existing inventories
and test equipment of the DynaTrax(TM) Product Line from NORDX/CDT for $500,000.
In accordance with the purchase price method of accounting, the purchase price
for the assets referenced above was allocated to the assets acquired on the
basis of preliminary fair market values, which may be revised at a later date.
Results subsequent to the date of acquisition will be included in Tech Lab's
financial statements. Had the results of the DynaTrax(TM) acquisition been
included in our consolidated results for 1998, the effect would have been
material.
1998
Dynatrax Product Line Tech Laboratories, Inc.
--------------------- -----------------------
Net Sales $400,000 $952,486
Operating Loss (2,500,000)* (2,669,104)
EPS -0- $1.21
* Includes one time R&D expense of $900,000.
F-6
<PAGE>
, 1999
TECH LABORATORIES, INC.
1,000,000 Shares of Common Stock
------------------------------------
PROSPECTUS
------------------------------------
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson, or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of the company
have not changed since the date hereof.
================================================================================
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY......................................................... 1
RISK FACTORS............................................................... 4
USE OF PROCEEDS............................................................ 11
PRICE RANGE OF COMMON STOCK................................................ 12
DIVIDEND POLICY............................................................ 12
CAPITALIZATION............................................................. 13
DILUTION .................................................................. 14
SELECTED FINANCIAL DATA.................................................... 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS............................................. 17
BUSINESS .................................................................. 19
MANAGEMENT................................................................. 25
CERTAIN TRANSACTIONS....................................................... 26
PRINCIPAL STOCKHOLDERS..................................................... 28
PLAN OF DISTRIBUTION....................................................... 28
OFFERING BY SELLING SECURITYHOLDERS........................................ 31
SHARES ELIGIBLE FOR FUTURE SALE............................................ 33
DESCRIPTION OF SECURITIES.................................................. 34
LEGAL MATTERS.............................................................. 35
EXPERTS .................................................................. 35
ADDITIONAL INFORMATION..................................................... 35
INFORMATION NOT REQUIRED IN PROSPECTUS..................................... 35
Until_________, 1999 (25 days after the date of this prospectus), all dealers
that effect transactions in these shares of Common Stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter and with respect to their unsold
allotments or subscriptions.
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
Indemnification of Directors and Officers
Tech Labs is incorporated in New Jersey. Under Section ____ of the
Corporation Law of the State of New Jersey, a New Jersey corporation has the
power, under specified circumstances, to indemnify its directors, officers,
employees, and agents in connection with actions, suits, or proceedings brought
against them by a third party or in the right of the corporation, by reason of
the fact that they were or are such directors, officers, employees, and agents,
against expenses incurred in any action, suit, or proceeding. The Certificate of
Incorporation and the By-laws of Tech Labs provide for indemnification of
directors and officers to the fullest extent permitted by the General
Corporation Law of the State of New Jersey.
The General Corporation Law of the State of New Jersey provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director (a) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (b) for
acts of omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section ____ (relating to liability for
unauthorized acquisitions or redemptions of, or dividends on, capital stock) of
the General Corporation Law of the State of New Jersey, or (d) for any
transaction from which the director derived an improper personal benefit. Tech
Labs's Certificate of Incorporation contains such a provision.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS, OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION
OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
Other Expenses of Issuance and Distribution
The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission.
Filing Fee-- Securities and Exchange Commission $
Fees and Expenses of Accountants
Fees and Expenses of Legal Counsel
Blue Sky Fees and Expenses
Printing and Engraving Expenses
Miscellaneous Expenses
Total.................................... $
Recent Sales of Unregistered Securities
As listed below, the Company issued shares of its Common Stock, par value
$.0001 per share, to the following individuals or entities for the consideration
as listed in cash or services. All sales
II-1
<PAGE>
made within the United States or to United States citizens or residents were
made in reliance upon the exemptions from registration under the Securities Act
of 1933 as follows:
In October 1999 we issued 75,000 shares to Mint Corporation for consulting
services pursuant to our agreement with Mint dated March 10, 1999. The issuance
of the shares was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof.
In June 1999 we issued to Coby Capital Corporation options to purchase 50,000
shares at $1.85 per share. The issuance of the options were exempt from
registration under the Securities Act pursuant to Section 4(2) thereof.
In June 1999 we sold 90,045 shares to "accredited" investors for gross proceeds
of $200,000. The issuance of the shares was exempt from registration under the
Securities Act pursuant to Section 4(2) thereof.
In June 1999 we issued 25,000 shares to Mint Corporation for previously rendered
consulting services pursuant to our agreement with Mint dated March 10, 1999.
Pursuant to said agreement, Mint was also granted options to purchase 100,000
shares at $1.25 per share and 100,000 shares at $1.75 per share. The issuance of
the shares and options was exempt from Registration under the Securities Act
pursuant to Section 4(2) thereof.
In June 1999 we issued 50,000 shares to MPX Network Solutions, Inc. pursuant to
a consulting agreement in exchange for services. The issuance of the shares was
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof.
In March 1999 we issued 600 shares to a noteholder in payment of $600 in
interest in lieu of cash, as provided under the terms of the note. The issuance
of the shares was exempt from registration under the Securities Act pursuant to
Section 4(2) thereof.
From September 1997 to April 1999, we sold shares of our Common Stock
pursuant to Rule 504 of Regulation D under the Securities Act to various
investors who were either sophisticated or "accredited" as that term is defined
under Rule 501(a) of Regulation D under the Securities Act. These sales were
made on the dates and in the amounts as follows:
On April 5, 1999, we sold 278,572 shares of Common Stock for a total of
$250,000.00.
On January 29, 1999, we sold 168,000 shares of Common Stock for a total of
$95,250.00.
On December 17, 1998, we sold 18,000 shares of Common Stock for a total of
$20,250.00.
On December 5, 1998, we sold 17,000 shares of Common Stock for a total of
$19,125.00.
On November 26, 1998, we sold 31,000 shares of Common Stock for a total of
$34,875.00.
On November 18, 1998, we sold 100,000 shares of Common Stock for a total of
$50,000.00.
On November 16, 1998, we sold 27,500 shares of Common Stock for a total of
$30,937.00.
On November 13, 1998, we sold 111,000 shares of Common Stock for a total of
$124,875.00.
On October 23, 1998, we sold 107,000 shares of Common Stock for a total of
$120,375.00.
On October 13, 1998, we sold 18,000 shares of Common Stock for a total of
$20,250.00.
On October 9, 1998, we sold 18,000 shares of Common Stock for a total of
$20,250.00.
On October 2, 1998, we sold 51,000 shares of Common Stock for a total of
$57,375.00.
On September 25, 1998, we sold 44,500 shares of Common Stock for a total of
$50,062.50.
On July 10, 1998, we issued 20,300 shares of Common Stock for services rendered
by prior counsel to our company for $22,167.40.
On March 4, 1998, we sold 7,500 shares of Common Stock for a total of
$15,000.00.
On February 24, 1998, we sold 27,500 shares of Common Stock for a total of
$55,000.00.
II-2
<PAGE>
On February 23, 1998, we sold 95,500 shares of Common Stock for a total of
$85,700.00.
On February 10, 1998, we sold 10,000 shares of Common Stock for a total of
$20,000.00.
On December 19, 1997, we sold 125,000 shares of Common Stock for a total of
$62,500.00.
On December 16, 1997, we sold 100,000 shares of Common Stock for a total of
$200,000.00.
On September 29, 1997, we sold 2,000 shares of Common Stock at $2.50 for a total
of $5,000.00.
In November 1998 we issued 15,000 shares to Mr. Sal Grisafi in exchange for
consulting services. The issuance of the shares was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof.
In November 1998 we issued 40,000 shares to Emerson Callahan, a former director
of the company, for consulting services. The issuance of the shares was exempt
from registration under the Securities Act pursuant to Section 4(2) thereof.
In November 1998, we issued 25,000 shares to Carmine Pellosie, a director of the
company, for services rendered to Tech Logistics, Inc. The issuance of the
shares was exempt from registration under the Securities Act pursuant to Section
4(2) thereof.
In November 1998, we issued 15,000 shares to Carmine Pellosie, a director of the
company, in exchange for his ownership of 20% of Tech Logistics, Inc. a partly
owned subsidiary of our company. The issuance of the shares was exempt from
registration under the Securities Act of 1933 pursuant to Section 4(2) thereof.
Between December 1996 and October 1997 we sold an aggregate of $217,500
principal amount of 8% convertible notes to eleven purchasers, $75,000 of which
notes were convertible at $.75 per share and $142,500 were convertible at $1.00
per share. The issuance of the notes was exempt from registration under the
Securities Act pursuant to Section 4(2) thereof.
In December 1996, we issued 280,000 shares to Bernard M. Ciongoli, our president
and a director and 160,000 shares to Earl Bjorndal, our vice president and a
director for unpaid salaries in the amounts of $14,000 and $8,000, respectively
at $.05 per share. The issuance of the shares was exempt from registration
under the Securities Act pursuant to Section 4(2) thereof.
In December 1996, we issued 100,000 shares to Louis Tomasella, a director in
exchange for consulting services. The issuance of the shares was exempt from
registration under the Securities Act pursuant to Section 4(2) thereof.
Exhibits and Financial Statement Schedules
EXHIBIT INDEX
1.1 Subscription Agreement*
3.1 Certificate of Incorporation is incorporated by reference to the
Company's Registration Statement on Form SB-2 as filed on July 9, 1999
(the "Registration Statement")
3.2 By-Laws of Tech Labs are incorporated by reference to the Company's
Registration Statement.
4.1 Form of Common Stock Certificate*
5.1 Opinion of Stursberg & Veith*
10.1 Amended Joint Marketing Agreement and Confidentiality and Manufacturing
Agreement dated as of October 1, 1998 between Tech Labs and Elktronic
Apparutebau Gmbh (EAG), W.T. Sports, Ltd. and FVA Safety Equipment, AG.
is incorporated by reference to the Company's Registration Statement.
10.2 Employment Agreement between Tech Labs and Bernard M. Ciongoli is
incorporated by reference to the Company's Registration Statement.
10.3 First Amendment to Employment Agreement between Tech Labs and
Bernard M. Ciongoli.
10.6 Patent and Trademark assignments is incorporated by reference to the
Company's Registration Statement.
10.7 Consulting Agreement dated March 10, 1999 between Tech Labs and Mint
Corporation.
10.8 Consulting Agreement dated March 22, 1999 between Tech Labs and MPX
Network Solutions.
10.9 Consulting Agreement dated June 2, 1999 between Tech Labs and Coby
Capital Corporation.
10.10 Assignment of Lease dated May 1, 1992 between William Tanis as
Landlord, Forsee Corporation as Assignor and Tech Labs as Assignee.
10.11 Asset Acquisition Agreement dated as of March 12, 1999 by and between
NORDX/CDT, Inc. and Tech Labs.
10.12 Tech Labs Stock Option Plan.
10.13 Stock Option Agreement dated June 3, 1999 between Tech Labs and Coby
Capital Corporation.
10.14 Stock Option Agreement dated March 10, 1999 between Tech Labs and
Mint Corporation.
10.15 Stock Option Agreement dated March 10, 1999 between Tech Labs and
Mint Corporation.
21.1 Subsidiaries of the Company*
24.1 Consent of Charles J. Birnberg, CPA, certified public accountants
24.2 Consent of Stursberg & Veith (included in Exhibit 5)*
27 Financial Data Schedule
- --------------
* To be filed by Amendment.
(b) The following financial statement schedules are included in this
Registration Statement:
None.
Undertakings
The undersigned registrant hereby undertakes:
II-3
<PAGE>
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(1) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(2) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement, or the most recent
post-effective amendment thereof, which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(3) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities other than
the payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense
of any action, suit, or proceeding is asserted by such director, officer,
or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof
II-4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933, this Offering Statement has been
signed on behalf of the registrant in the City of North Haledon and State of New
Jersey on the 18th day of October, 1999.
TECH LABORATORIES, INC.
By: /s/ Bernard M. Ciongoli
------------------------------
Bernard M. Ciongoli, President
As required by the Securities Act of 1933, this Offering Statement has been
signed by the following persons in the capacities and on the dates indicated.
Know all men by these presents, that each of the undersigned constitutes
and appoints Bernard M. Ciongoli as his true and lawful attorney-in-fact and
agent, with full power of substitution, for him, and in his name, place, and
stead, in any and all capacities, to sign any and all amendments, including
post-effective amendments, to this offering statement or any offering statement
relating to the offering to which this offering statement relates and any
post-effective amendments thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his substitute, may lawfully do or
cause to be done by virtue hereof.
Signature Title Date
--------- ----- ----
/s/ Bernard M. Ciongoli President, Treasurer, CEO, October 18, 1999
- ----------------------------- CFO, and Director ----------------
Bernard M. Ciongoli
/s/ Earl M. Bjorndal* Vice President and Director October 18, 1999
- ----------------------------- ----------------
Earl M. Bjorndal
/s/ Carmine O. Pellosie, Jr.* Secretary and Director October 18, 1999
- ----------------------------- ----------------
Carmine O. Pellosie, Jr.
/s/ Louis Tomasella* Director October 18, 1999
- ----------------------------- ----------------
Louis Tomasella
/s/ Richard J. Rice Director October 18, 1999
- ----------------------------- ----------------
Richard J. Rice
By: /s/ Bernard M. Ciongoli
------------------------
Bernard M. Ciongoli
Attorney-in-Fact*
II-5
<PAGE>
EXHIBIT INDEX
1.1 Subscription Agreement*
3.1 Certificate of Incorporation is incorporated by reference to the
Company's Registration Statement on Form SB-2 as filed on July 9, 1999
(the "Registration Statement")
3.2 By-Laws of Tech Labs are incorporated by reference to the Company's
Registration Statement.
4.1 Form of Common Stock Certificate*
5.1 Opinion of Stursberg & Veith*
10.1 Amended Joint Marketing Agreement and Confidentiality and Manufacturing
Agreement dated as of October 1, 1998 between Tech Labs and Elktronic
Apparutebau Gmbh (EAG), W.T. Sports, Ltd. and FVA Safety Equipment, AG.
is incorporated by reference to the Company's Registration Statement.
10.2 Employment Agreement between Tech Labs and Bernard M. Ciongoli is
incorporated by reference to the Company's Registration Statement.
10.3 First Amendment to Employment Agreement between Tech Labs and
Bernard M. Ciongoli.
10.6 Patent and Trademark assignments is incorporated by reference to the
Company's Registration Statement.
10.7 Consulting Agreement dated March 10, 1999 between Tech Labs and Mint
Corporation.
10.8 Consulting Agreement dated March 22, 1999 between Tech Labs and MPX
Network Solutions.
10.9 Consulting Agreement dated June 2, 1999 between Tech Labs and Coby
Capital Corporation.
10.10 Assignment of Lease dated May 1, 1992 between William Tanis as
Landlord, Forsee Corporation as Assignor and Tech Labs as Assignee.
10.11 Asset Acquisition Agreement dated as of March 12, 1999 by and between
NORDX/CDT, Inc. and Tech Labs.
10.12 Tech Labs Stock Option Plan.
10.13 Stock Option Agreement dated June 3, 1999 between Tech Labs and Coby
Capital Corporation.
and Coby Capital Corporation.
10.14 Stock Option Agreement dated March 10, 1999 between Tech Labs and
Mint Corporation.
10.15 Stock Option Agreement dated March 10, 1999 between Tech Labs and
Mint Corporation.
21.1 Subsidiaries of the Company*
24.1 Consent of Charles J. Birnberg, CPA, certified public accountants
24.2 Consent of Stursberg & Veith (included in Exhibit 5)*
27 Financial Data Schedule
- --------------
* To be filed by Amendment.
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT (the "First Amendment") to the Employment Agreement
dated as of the 1st day of October, 1998, is entered into as of the ___ day of
______, 1999 by and between Tech Laboratories, Inc., with its principal place of
business at 955 Belmont Avenue, North Haledon, NJ (the "Company"), and Bernard
M. Ciongoli, residing at 17 Liberty Ridge Trail, Totowa, NJ (the "Executive").
The Company and the Executive are individually referred to as a "Party" and
collectively referred to as the "Parties."
WHEREAS, the undersigned are the Parties to an Employment Agreement dated
as of October 1, 1998 (the "Employment Agreement"); and
WHEREAS, under Paragraph 16 of the Employment Agreement the Parties may
amend the Employment Agreement in a writing signed by the Parties;
NOW, THEREFORE, the Parties hereby amend the Employment Agreement as
follows:
FIRST: Paragraph 1 of said Employment Agreement is hereby deleted in its
entirety and the following new paragraph is hereby inserted in lieu thereof:
Subject to the terms and conditions hereinafter set forth, the Company
hereby employs the Executive, and the Executive hereby agrees to enter into the
employ of the Company, or any parent, subsidiary, or affiliate of the Company as
the Company shall from time to time select, for an employment term commencing as
of the 1st day of October, 1998, and continuing for a period of five (5) years
from such date (the "Term of Employment"). At the end of the initial Term of
Employment, this Agreement shall automatically be renewed for an additional
three (3) year period, unless either Party provides at least one hundred eighty
(180) days written notice of its decision not to renew the Agreement.
SECOND: Paragraph 6 of said Employment Agreement is hereby deleted in its
entirety and the following new paragraph is hereby inserted in lieu thereof:
In addition, the Executive will receive a cash bonus of two percent (2%) of
the Company sales in excess of one million dollars ($1,000,000) in each fiscal
year that ends during the Term of Employment, beginning with the fiscal year
ending December 31, 1998, which bonus shall be paid on or before of February 15
of each year. On the 1st day of October of each year of the Term of Employment,
the Company will grant to Executive, pursuant to a stock option agreement, stock
options to purchase up to one hundred thousand (100,000) shares of the Company's
common stock, exercisable for a period of five (5) years from their date of
vesting, at a price of fifty cents $.50 per share. Pursuant to said stock option
agreement, the common stock underlying the options shall have, among other
provisions, customary registration rights and provide for the cashless exercise
of the vested options.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have caused this First Amendment to
be entered into as of the date and year herein above first set forth.
TECH LABORATORIES, INC.
Board of Directors
By:
--------------------------
Name:
By:
--------------------------
Name:
By:
--------------------------
Name:
EXECUTIVE
By:
--------------------------
Bernard M. Ciongoli
Exhibit 10.7
CONSULTING AGREEMENT
This Consulting Agreement is dated the 10th day of March, 1999, by and
between Tech Laboratories, Inc., a New Jersey corporation with its principal
place of business located at 955 Belmont Avenue, North Haledon, New Jersey 07508
(the "Company") and Mint Corporation, consultant, with its principal place of
business located at 211 Park Avenue, Hicksville, New York 11801 (the
"Consultant").
AGREEMENTS
1. Consulting Services. The Consultant will advise and consort with the
Company on such matters relating to the conduct of the Company's business as the
Company may reasonably request, and the Consultant will make available to the
Company its knowledge, skill, and expertise concerning the Company's business
and all information pertaining thereto, during the period from March 10, 1999,
through March 10, 2000 (the "Service Period").
2. The Consultant, having served in the financial community for more than
twenty-five years, will draw on the experience and associations at such time, to
introduce the Company's story as it exists today, and in the future, to the
financial community.
3. The parties acknowledge that such consulting services will be performed
by the Consultant in his capacity as an independent contractor, and that the
Consultant shall not otherwise be considered to be an employee, agent, or other
representative of the Company.
4. Compensation. The Company agrees to issue and deliver to the Consultant
for undertaking this engagement and for good and valuable consideration:
(a) 25,000 shares of Tech Labs common stock on the date of this
Agreement, from the Company's 504 Offering.
(b) 37,500 shares of Tech Labs common stock 90 days from the date of
this Agreement, from a proposed Regulation A Offering.
(c) 37,500 shares of Tech Labs common stock 120 days from the date of
this Agreement, from a proposed Regulation A Offering.
(d) The Company agrees to issue and deliver to the Consultant for
undertaking this engagement and for good and valuable
consideration, the form of 200,000 options (the "Options"), 120
days after the signing of this Agreement, entitling the
Consultant the right to purchase shares of the Company's common
stock at a designated price of $1.25 for the first 100,000
options and $1.75 for the second 100,000 options. The term of
these Options shall be 2 years, commencing with the issuing of
the Options.
5. Disclaimer. The Consultant covenants and represents that he has no
previous interest in, or claim to, any of the procedures, technical data,
customer lists, patents, trade secrets, practices, trademarks, or tradenames
relating to the Company's business.
<PAGE>
6. The Consultant recognizes and acknowledges that he will not use any
private, confidential, or inside information in telling the Company's story to
"Wall Street."
7. Termination. This Agreement may be terminated by the Company with 10
days' notice. Only compensation earned by the Consultant at time of termination
will be credited to the Consultant.
8. Agreement. This Agreement supersedes all previous agreements, written or
oral, relating to the Consultant's services to the Company hereunder and
constitutes the entire agreement between the parties.
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year herein above first
set forth.
Company: Tech Laboratories, Inc.
Date: 3/10/99 By: /s/
----------------------------------
Bernard M. Ciongoli, President
Consultant: Mint Corporation
Date: 3/10/99 By: /s/
----------------------------------
Richard Kandel
Exhibit 10.8
CONSULTING AGREEMENT
AGREEMENT, dated as of March 22, 1999, and made effective as of March 15,
1999, by and between TECH LABORATORIES, INC., a New Jersey corporation with
offices at 955 Belmont Avenue, North Haledon, New Jersey 07608 (the "Company")
and MPX NETWORK SOLUTIONS, INC., a Florida corporation with offices at 16680
Beach Resort Road, No. 13, Naples, Florida 34114 ("Consultant"). This Consulting
Agreement between Consultant and the Company shall be hereinafter referred to as
the "Agreement."
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of developing, acquiring,
marketing and selling various products including, among other things,
communication/networking products (the "Products"); and
WHEREAS, the Company wishes to engage Consultant to provide marketing and
business development services for the Products; and
WHEREAS, Consultant has experience in providing the services the Company
wishes to have performed; and
WHEREAS, the Company and Consultant mutually desire to enter into an
Consulting Agreement with respect to Consultant's engagement by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration the receipt of which is hereby
acknowledged, the Company and Consultant hereby agree as follows:
1. Engagement of Consultant.
(a) The Company hereby engages Consultant to provide certain Services,
as described in Section 2. Consultant hereby accepts such engagement with
the Company upon the terms and conditions hereinafter set forth and agrees
to perform the Services. The parties agree that the Consultant shall be
engaged by the Company as an independent contractor on a consulting basis,
and neither Consultant, nor any employee of Consultant shall be deemed an
employee of the Company.
(b) Consultant acknowledges that Company is entering into this
Agreement in reliance upon the continued employment by Consultant, on a
full-time basis, of Sal Grisafi ("Grisafi"). Consultant agrees that the
failure of Grisafi to be employed by Consultant, including by reason of
death or disability, on a full-time basis at any time during the term of
this Agreement shall be deemed an attempted assignment of this Agreement by
Consultant and subject to the provisions of Section 14(e) hereof.
2. Services To Be Rendered.
<PAGE>
(a) During the term of this Agreement, Consultant shall furnish to the
Company advice and recommendations with respect to the business and affairs
of the Company in general, and in connection with the Products in
particular, as the Company shall, from time to time, reasonable request
upon reasonable notice (the "Services"). The Services shall include, but
not be limited to, advising and assisting the Company in connection with
(i) the development of the Products, (ii) development and implementation of
a marketing plan for the Products, (iii) promotion of the Products, (iv)
customer development and reactions.
(b) Consultant shall perform such Services for the Company and other
entities now or hereafter affiliated with the Company. Consultant will
devote that amount of its time and effort to the affairs of the Company as
the Company reasonably deems necessary to perform the Services, and
Consultant agrees to provide the services of Grisafi on matters relating to
the Company's business, if so requested by the Company. Consultant agrees
to perform the Services in a diligent and professional manner.
(c) Consultant shall perform the services at the Company's offices
and, if applicable, the business locations of customers and potential
customers. The Company shall supply Consultant with an office or other
facility for the performance of the services.
3. Term.
(a) The term of this Agreement shall commence as of March 15, 1999,
and shall continue to and include March 14, 2000 (the "Consulting Period"),
unless sooner terminated as hereinafter provided. The Consulting Period may
be extended by the mutual agreement of the Company and Consultant;
provided, however, notwithstanding anything to the contrary in this
Agreement, this Agreement shall be automatically extended for one (1) year
(the "Extension Period") so long as neither Consultant nor the Company has
provided written notice to the other party that this Agreement is not being
renewed. Such notice must be sent at least 60 days prior to the end of the
Consulting Period.
(b) This Agreement may be terminated by Company, without notice, if at
any time:
i) Consultant commits a breach of any of the material
obligations under this Agreement;
ii) Consultant or its owner or any employee of Consultant
performing service for Company on behalf of Consultant has
been convicted of an indictable offence resulting in
incarceration or has improperly enriched itself at the
expense of Company or has committed an act evidencing
dishonesty, including, without limitation, an act of theft;
iii) Consultant, in carrying out its duties hereunder, has failed
to comply with any written instruction or direction from
Company;
-2-
<PAGE>
iv) Consultant becomes bankrupt or in the event that a receiving
order (or any analogous order under any applicable law) is
made against it or in the event that it makes any general
disposition or assignment for the benefit of its respective
creditors;
v) The Consultant attempts to assign this Agreement without the
consent of the Company.
(c) Upon the termination of Consultant's engagement, Company shall pay
Consultant any unpaid amounts due under this Agreement for services
rendered through the date of such termination.
(d) It is expressly agreed that (i) notwithstanding termination of the
Agreement by either party, for any reason and in any circumstance
whatsoever, such termination shall be without prejudice to the rights of
Company, in relation to, up to and including the date of termination; and
(ii) the provisions of Sections 6, 7 and 8 shall survive the termination of
this Agreement for any reason and in any circumstance whatsoever any and
continue in full force and effect unless and until Company, in its absolute
discretion, resolves otherwise and so notifies Consultant in writing.
4. Compensation
(a) So long as Consultant performs the Services set forth in Section 2
for Company and complies with the terms and conditions of this Agreement,
Company shall pay to Consultant (a) an annual fee of Fifty-two Thousand
Dollars ($52,000) for the Consulting Period and the Extension Period,
payable in equal monthly installments in arrears (the "Consulting Fee").
(b) In addition to the Consulting Fee, for each of the Consulting
Period and the Extension Period, the Company shall pay to Consultant a
commission (the "Commission Payment") equal to (i) three (3%) percent of
the first $1,000,000 of the net sale price of all Products sold during the
applicable period, (ii) two (2%) percent of the next $1,000,000 of the net
sale price of all Products sold during the applicable period, (iii) one
(1%) percent of the next $2,000,000 of the net sale price of all Products
sold during the applicable period; and (iv) one-half (1/2%) percent of the
excess over $4,000,000 of the net sale price of all Products sold during
the applicable period. Such commissions shall be payable quarterly in
arrears, in accordance with Section 4(e).
(c) "The net sale price of all Products sold during the applicable
period," as used herein, means the price at which Communication/Networking
Products, as hereinafter defined, are sold by the Company, not including
taxes, freight or transportation or other such charges or costs, less
returns, the costs of collections, and standard trade discounts or
allowances or special reductions that the Company may allow; it being
understood that the granting and fixing and withholding of discounts,
allowances and special reductions and changes in any of the foregoing from
time to time shall be in the discretion of the Company.
"Communication/Networking Products" shall be those Products set forth on
Schedule A hereof or otherwise designated as Communication/Networking
Products on the internal records of the Company, in its sole discretion.
(d) The Company shall, as soon as practicable after the close of each
Communication/Networking Products calendar quarter prepare and deliver to
Consultant a statement of the amounts of revenues from the sale of all
Communication/Networking Products and of Consultant's commissions for the
reported period. Within 10 days after the delivery of any such statement,
Consultant
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<PAGE>
shall notify the Company in writing of its objections, if any, to such
statement. In the event that Consultant does not object to the statement in
accordance with this Section 4(d), such statement shall deemed accepted and
shall become final and binding upon the parties. If Consultant shall object to
the statement, and the parties cannot agree as to the subject matter of the
statement, the matter shall be submitted to the Company's independent auditors,
whose determination, to be rendered in not more than 30 days of submission,
shall be final and binding upon the parties. Payment of any commissions due
shall be made not later than 10 days after acceptance of the statement or
resolution or determination of any objection, as the case may be.
(e) If Consultant's engagement is terminated pursuant to Sections 3(a)
or (b), or if Consultant terminates its engagement voluntarily, then
Consultant shall not be entitled to any compensation from and after such
date of termination.
(f) As further compensation for the Services to be rendered by
Consultant, the Company will (i) simultaneously with the execution of this
Agreement, (A) issue to Consultant 50,000 shares of the common stock, par
value $.01 per share ("Common Stock"), of the Company and (B) grant to
Consultant a three (3) year option to purchase 50,000 shares of Common
Stock at an exercise price of $1.25 per share. The option shall be
exercisable (i) as to 25,000 shares, commencing 30 days after the end of
the Consulting Period, in full, if the net sale price of all Products sold
during the Consulting Period equals at least $3,000,000, and (ii) as to
25,000 shares, commencing 30 days after the end of the Extension Period, in
full, if the net sale price of all Products sold during the Extension
Period equals at least $3,000,000. The option agreement shall provide,
among other things, that (i) if the net sale price of all Products sold
shall be less than $3,000,000 during either the Consulting Period or the
Extension Period, then the number of shares as to which the option shall be
exercisable as relates to such period shall be decreased in proportion to
the amount by which such net sale price is less than $3,000,000, and (ii)
if Consultant's engagement is terminated (A) pursuant to Section 3(a) or if
Consultant terminates its engagement voluntarily, then the number of shares
as to which the option shall be exercisable shall be determined as of the
date of such termination, or (B) pursuant to Section 3(b), then the option
shall terminate as to any and all shares, and Consultant shall not be
entitled to exercise the option as to any shares.
5. Expenses.
The Consultant shall be solely responsible for paying any expenses,
including, without limitation, salaries and commissions of Consultant's
employees, if any, and expenses for travel, meals, transportation, equipment,
supplies, licenses, and telephone incurred by Consultant or its employees in
connection with the performance of this Agreement. The Company shall reimburse
Consultant against appropriate vouchers or other receipts for business expenses
reasonably incurred by it in the performance of its duties pursuant to the terms
hereof.
6. Non-Competition.
(a) During the period of Consultant's engagement by the Company and
for a period of one (1) year following termination of Consultant's
engagement, other than by reason of the Company's breach of any provision
of this Agreement (the "Non-Competition Period"), Consultant agrees that it
will not, anywhere in the United States, directly or indirectly enter into
or participate in (whether as owner, partner, shareholder, officer,
director, salesman, consultant, employee or otherwise) any business which
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<PAGE>
is in competition with any material business in which the Company or any of
its subsidiaries may engage after the date hereof, without having first
obtained the Company's prior written consent; provided, however, that (a)
the Company specifically acknowledges and agrees that Consultant may own up
to 5% of the outstanding equity securities of any entity that is subject to
the public reporting requirements of the Securities Exchange Act of 1934.
(b) Consultant shall not at any time within a period of one (1) year
following the termination of its engagement, without the prior written
consent of the Company, directly or indirectly, (i) solicit, request, cause
or induce any person who is at the time, or within 12 months prior thereto
had been, an employee or a consultant to the Company, to leave the employ
of or terminate his relationship with the Company or (ii) solicit the
employment, engagement or association with, or endeavor to entice away from
the Company to any business that is competitive with any of the businesses
engaged in by the Company during the time that Consultant, any such person.
(c) Consultant may perform services, including services similar to the
services it performs for the Company, for other individuals and businesses;
provided, however, that Consultant shall not provide services to entities
that compete directly with the business of the Company.
7. Non-Disclosure of Confidential Information.
(a) Subject in all respects to the provisions of, and as contemplated
by, clause (a) of Section 6 hereof, Consultant shall at all times, both
during and after the Consulting Period, hold in a fiduciary capacity for
the benefit of the Company and each of its subsidiaries, and shall not use
or disclose or permit the use of the disclosure to any third party, any and
all trade secrets, information, knowledge and data not generally known to,
or easily obtainable by, the public that it may have learned, discovered,
developed, conceived, originated or prepared during or as a result of its
relationship with the Company or any of its subsidiaries (as a stockholder
or otherwise) or any predecessor-in-interest to any of the Company's or any
of its subsidiaries' business or assets with respect to the operations,
business, New Technology as hereinafter defined, affairs, products,
technology or services of the Company or any of its subsidiaries.
(b) Consultant acknowledges that any breach of the provisions of
Sections 6 and 7 hereof can cause irreparable harm to the Company and its
subsidiaries for which the Company and its subsidiaries would have no
adequate remedy at law. In the event of a breach or threatened breach by
Consultant of any of such provisions, in addition to any and all other
rights and remedies it may have under this Agreement or otherwise, the
Company or any of its subsidiaries may immediately seek any judicial action
it deems necessary, including, without limitation, temporary, preliminary,
and/or permanent injunctive relief.
8. Rights to Technology.
(a) The property rights in and to all items of New Technology as
defined below herein, shall be deemed to have been created for the Company
as work for hire and are and shall be the sole and exclusive property of
the Company, and Consultant does hereby agree that he will make full and
prompt disclosure to the Company of any and all such New Technology. For
the purposes of this Agreement, the term "New Technology" shall mean each
and every invention, discovery and development, device, design, apparatus,
practice, method, product, item of know-how, improvement, process, item of
technical knowledge, formula, trade secret, trade name and modification,
whether or not
-5-
<PAGE>
patentable, trademarkable or copyrightable, which were made, developed or
first reduced to practice by Consultant (whether acting alone or with
others) during the term of its engagement hereunder (the "Technology
Term"), and which relate primarily to the Company's business.
(b) During the Technology Term, and at any time and from time to time
thereafter, Consultant shall (i) execute all documents requested by the
Company to assign to the Company all of his right, title and interest in
and to any New Technology and to confirm the complete ownership by the
Company of such New Technology, (ii) execute any and all documents
requested by the Company for filing and prosecuting applications for
patents, design patents, trademarks or copyrights for or with respect to
the New Technology, and (iii) render to the Company all assistance that it
may request, including the giving of testimony in any suit, action or
proceeding before any court of appropriate jurisdiction, including, but not
limited to, any governmental or quasi-governmental agency or other
regulatory body, in order to obtain, maintain and protect the Company's
rights and ownership interests with respect to the New Technology.
9. Severability. In the event of the invalidity or unenforceability of any
one or more provisions of this Agreement, such illegality or unenforceability
shall not affect the validity or enforceability of the other provisions hereof
and such other provisions shall be deemed to remain in full force and effect.
10. Independent Status. Consultant shall be treated as an independent
contractor for all purposes, including employment tax purposes. Consultant shall
report such payment and pay all applicable taxes, including, without limitation,
income, unincorporated business, FICA and self- employment taxes, with respect
thereto. Company and Consultant agree that Consultant shall not be considered or
deemed to be an agent, employee, joint venturer, or partner of the Company.
Consultant shall have no authority to contract for or bind the Company in any
manner and shall not represent himself as an agent of the Company except as
authorized in writing by the Company. Neither Consultant nor any owner, officer
or employee of Consultant shall have any status as an employee or any right to
the benefits that the Company grants its employees.
11. Insurance. On an annual basis, Consultant shall provide the Company
evidence that Consultant has obtained and maintains insurance prior to the
performance of any work under this Agreement. Such insurance shall include, but
is not limited to, workers' compensation insurance and general liability
applicable to all employees of Consultant.
12. Maintenance of Records. Consultant shall maintain records as required
and specified by Company. It will submit a monthly invoice for services rendered
on behalf of Company by it in the performance of this Agreement. All such
records and invoices shall remain the property of Company.
13. Indemnification. Consultant hereby indemnifies and holds harmless
Company with respect to any liability arising from the negligence or willful
misconduct of Consultant or its employees or representatives. Consultant, at its
expense, shall defend any claim or legal proceeding which is brought against
Company and is within the foregoing indemnification, and pay any judgment
formally awarded in any such legal proceeding; provided that Company gives
Consultant notice of such claim or legal proceeding, furnishes a copy of all
documents and instruments served upon Company in connection therewith and
reasonably cooperates with Consultant in such defense.
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<PAGE>
14. Miscellaneous.
(a) Nothing in this Agreement shall be deemed to preclude Company from
obtaining the services of other persons or entities undertaking the same or
similar services as those undertaken by Consultant or from independently
developing or acquiring materials or programs that are similar to, or
competitive with, the services provided under this Agreement.
(b) This Agreement supersedes any prior agreements or understandings,
oral or written, between the parties hereto and represents their entire
understanding and agreement with respect to the subject matter hereof. This
Agreement can be amended, supplemented or changed, and any provision hereof
can be waived, only by written instrument making specific reference to this
Agreement which is signed by the party against whom enforcement of any such
amendment, supplement, modification or waiver is sought. Any waiver of any
breach of this Agreement shall not be construed to be a continuing waiver
or consent to any subsequent breach by any party hereto.
(c) No delay or omission in exercising any right or remedy hereunder
shall operate as a waiver thereof or of any other right or remedy, and no
single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. Any waiver
of any breach of this Agreement shall not be construed to be a continuing
waiver or consent to any subsequent breach by any party hereto.
(d) Any notice, consent, direction or other instruction required or
permitted to be given under the provisions of this Agreement shall be in
writing and delivered or sent by personal delivery, overnight delivery
service, registered mail, or by facsimile transmission addressed to the
recipient at the address first above written or such address as may be
designated by notice by either party to the other. Any communication made
or given by personal delivery, overnight delivery service, or facsimile
transmission shall be conclusively deemed to have been given on the day of
actual delivery thereof, provided that if delivery is effected after 5:00
p.m. (New York time) delivery shall be deemed to have been made on the next
following day which is not a Saturday, Sunday or statutory holiday in New
York City. Any communication made or given by registered mail shall be
conclusively deemed to have been given on the fifth day, other than
Saturday, Sunday or statutory holiday in New York City following the
deposit thereof in the mail.
(e) Consultant's rights and duties under this Agreement may not be
assigned or delegated without the prior written consent of Company in its
sole discretion, and any attempted assignment or delegation without such
consent shall be void. The rights of Company may be assigned to a successor
carrying on substantially the same business as Company. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto
and their legal representatives, successors and assigns; but nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights or remedies under or by reason of this Agreement.
(f) Consultant acknowledges that it has read this Agreement and has
been given the opportunity to obtain independent legal advice and that such
advice has either been obtained or waived.
(g) This Agreement shall be construed and governed by the laws of the
State of New York.
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<PAGE>
(h) This Agreement shall be binding upon and shall inure to the
benefit of the Company and Consultant and their respective heirs, legal
representatives, successors and assigns.
(i) The Section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
(j) This Agreement shall be construed and governed in accordance with
the laws of the State of New York.
(k) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
TECH LABORATORIES, INC.
By: /s/
---------------------------------
Bernard M. Ciongoli, President
MPX NETWORK SOLUTIONS, INC.
By: /s/
---------------------------------
Sal Grisafi, President
The undersigned agrees to be personally
bound by Sections 6, 7, and 8 of this
Agreement.
/s/
- -------------------------------------
Sal Grisafi
-8-
Exhibit 10.9
CONSULTING AGREEMENT
AGREEMENT, dated as of June 2, 1999, by and between TECH LABORATORIES,
INC., a New Jersey corporation with offices at 955 Belmont Avenue, North
Haledon, New Jersey 07608 (the "Company") and COBY CAPITAL CORPORATION, a
Connecticut corporation with offices at 1055 Warlington Blvd., Stanford, CT
06901 ("Consultant"). This Consulting Agreement between Consultant and the
Company shall be hereinafter referred to as the "Agreement."
W I T N E S S E T H:
WHEREAS, the Company is engaged in the business of developing, acquiring,
marketing and selling various products including, among other things, security
and anti-terrorist products and communication/networking products (the
"Products"); and
WHEREAS, the Company wishes to engage Consultant to provide certain
financial and business development services; and
WHEREAS, Consultant has experience in providing the services the Company
wishes to have performed; and
WHEREAS, the Company and Consultant mutually desire to enter into an
Consulting Agreement with respect to Consultant's engagement by the Company;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and for other good and valuable consideration the receipt of which is hereby
acknowledged, the Company and Consultant hereby agree as follows:
1. Engagement of Consultant.
(a) The Company hereby engages Consultant to provide certain services,
as described in Section 2. Consultant hereby accepts such engagement with
the Company upon the terms and conditions hereinafter set forth and agrees
to perform the services. The parties agree that the Consultant shall be
engaged by the Company as an independent contractor on a consulting basis,
and neither Consultant, nor any employee of Consultant shall be deemed an
employee of the Company.
(b) Consultant acknowledges that Company is entering into this
Agreement in reliance upon the continued employment by Consultant, on a
full-time basis, of Scott Coby ("Coby"). Consultant agrees that the failure
of Coby to be employed by Consultant, including by reason of death or
disability, on a full-time basis at any time during the term of this
Agreement shall be deemed an attempted assignment of this Agreement by
Consultant and subject to the provisions of Section 14(e) hereof.
2. Services To Be Rendered.
(a) During the term of this Agreement, Consultant shall furnish to the
Company advice and recommendations with respect to the business and affairs
of the Company in general, and in connection with the development of the
Company's business plan, particularly with respect to the financial
requirements of the Company in the development of its business and in the
negotiation and securing the necessary capital, including debt and equity,
and the marketing of the Company's Products. The Company shall, from time
to time, request upon reasonable notice those services from Consultant that
<PAGE>
shall be necessary in the sole discretion of the Company's management. The
services shall also include advising and assisting the Company in
connection with (i) the development and implementation of a marketing plan
for the Products and (ii) customer development.
(b) Consultant shall perform such services for the Company and other
entities now or hereafter affiliated with the Company. Consultant will
devote that amount of its time and effort to the affairs of the Company as
is reasonably necessary to perform the services.
(c) Consultant shall perform the services at the Consultant's or the
Company's offices and, if applicable, the business locations of customers
and potential customers or at such other location as is reasonably
necessary.
3. Term.
(a) The term of this Agreement shall commence as of May ___, 1999, and
shall continue to and including May ___, 2001 (the "Consulting Period"),
unless sooner terminated as hereinafter provided. The Consulting Period may
be extended by the mutual agreement of the Company and Consultant;
provided, however, notwithstanding anything to the contrary in this
Agreement, this Agreement shall be automatically extended for one (1) year
(the "Extension Period") so long as neither Consultant nor the Company has
provided written notice to the other party that this Agreement is not being
renewed. Such notice must be sent at least 90 days prior to the end of the
Consulting Period. Notwithstanding anything herein to the contrary, this
Agreement shall terminate in the event the Company has not raised $200,000
in equity financing to fund its operations by June 1, 1999.
(b) This Agreement may be terminated by Company, without notice, if at
any time:
i) Consultant commits a breach of any of the material
obligations under this Agreement and such breach has not
been cured within fifteen (15) days of written notice of
such breach;
ii) Consultant or its owner or any employee of Consultant
performing service for Company on behalf of Consultant has
been convicted of an indictable offence resulting in
incarceration or has improperly enriched itself at the
expense of Company or has committed an act evidencing
dishonesty, including, without limitation, an act of theft;
iii) Consultant becomes bankrupt or in the event that a receiving
order (or any analogous order under any applicable law) is
made against it or in the event that it makes any general
disposition or assignment for the benefit of its respective
creditors;
iv) The Consultant attempts to assign this Agreement without the
consent of the Company.
(c) Upon the termination of Consultant's engagement, the Company shall
pay Consultant any unpaid amounts due under this Agreement for services
rendered through the date of such termination.
(d) It is expressly agreed that notwithstanding termination of the
Agreement by either party, for any reason in an any circumstance
whatsoever, such termination shall be without prejudice to
2
<PAGE>
the rights of the Company, in relation to, up to and including the date of
termination; and the provisions of Section 7 respecting confidentiality
shall remain and continue in full force and effect unless and until the
Company, in its absolute discretion, resolves otherwise and so notifies
Consultant in writing.
4. Compensation
(a) So long as Consultant performs the services set forth in Section 2
for the Company and the Company has raised proceeds of at least Two Hundred
Thousand Dollars ($200,000) on or before June , 1999 (the "Interim
Financing"), through the sale of its shares of common stock at a price of
not less than $2.22 per share, the Company shall issue to Consultant (i) an
option exercisable for four (4) years to purchase 50,000 shares of its
common stock at $1.85 per share, which option (in the form attached hereto
as Exhibit A) shall vest upon the completion of the Interim Financing, and
(ii) an option (in the form attached hereto as Exhibit B) to purchase up to
200,000 shares of the Company's common stock exercisable for four (4) years
at $3.50 per share, such option to vest in increments of not less than
25,000 shares, which vesting shall occur upon the Company's receipt of the
proceeds from the sale of its Products of $250,000 or more up to a maximum
of sales of $2,000,000 at any time and from time to time during the two
year term of this Agreement (such 25,000 shares to increase pro rata with
sales in excess of $250,000) as a result of Consultant's efforts. Options
shall continue to vest with respect to any proceeds received after the
expiration of the two (2) year term of this Agreement, which proceeds were
derived from contracts or firm orders received by the Company prior to the
expiration of the two (2) year term of this Agreement or from parties
introduced by the Consultant for the Company prior to the expiration of the
two (2) year term as more fully described in Exhibit B.
(b) The Company shall, as soon as practicable after the close of each
calendar month, prepare and deliver to Consultant a statement of the
amounts of revenues from the sale of all Products sold due to Consultant's
efforts and of the number of shares vested for the reported period.
(c) If Consultant's engagement is terminated pursuant to Sections 3(a)
or (b), or if Consultant terminates its engagement voluntarily, then
Consultant shall not be entitled to any compensation from and after such
date of termination, except any sales proceeds or the fulfillment of any
firm orders generated by Consultant prior to the date of termination shall
cause the corresponding portion of the option described above to vest.
5. Expenses.
The Consultant shall be solely responsible for paying any expenses,
including, without limitation, salaries and commissions of Consultant's
employees, if any, and expenses for equipment, supplies and licenses, incurred
by Consultant or its employees in connection with the performance of this
Agreement. The Company shall reimburse Consultant against appropriate vouchers
or other receipts for business expenses reasonably incurred by it in the
performance of its duties pursuant to the terms hereof, provided that the
Company has previously approved such expenses.
6. Non-Competition.
(a) During the period of Consultant's engagement by the Company and
for a period of one (1) year following termination of Consultant's
engagement, other than by reason of the Company's breach of any provision
of this Agreement (the "Non-Competition Period"), Consultant agrees that it
will not, anywhere in the United States, directly or indirectly enter into
or participate in (whether as owner, partner, shareholder, officer,
director, salesman, consultant, employee or otherwise) any business which
is in competition with any material business in which the Company or any of
its subsidiaries may engage
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<PAGE>
after the date hereof, without having first obtained the Company's prior
written consent; provided, however, that (a) the Company specifically
acknowledges and agrees that Consultant may own up to 5% of the outstanding
equity securities of any entity that is subject to the public reporting
requirements of the Securities Exchange Act of 1934.
(b) Consultant shall not at any time within a period of one (1) year
following the termination of its engagement, without the prior written
consent of the Company, directly or indirectly, (i) solicit, request, cause
or induce any person who is at the time, or within 12 months prior thereto
had been, an employee or a consultant to the Company, to leave the employ
of or terminate his relationship with the Company or (ii) solicit the
employment, engagement or association with, or endeavor to entice away from
the Company to any business that is competitive with any of the businesses
engaged in by the Company during the time that Consultant, any such person.
(c) Consultant may perform services, including services similar to the
services it performs for the Company, for other individuals and businesses;
provided, however, that Consultant shall not provide services to entities
that compete directly with the business of the Company.
7. Non-Disclosure of Confidential Information.
(a) Subject in all respects to the provisions of, and as contemplated
by, clause (a) of Section 6 hereof, Consultant shall at all times, both
during and after the Consulting Period, hold in a fiduciary capacity for
the benefit of the Company and each of its subsidiaries, and shall not use
or disclose or permit the use of the disclosure to any third party, any and
all trade secrets, information, knowledge and data not generally known to,
or easily obtainable by, the public that it may have learned, discovered,
developed, conceived, originated or prepared during or as a result of its
relationship with the Company or any of its subsidiaries (as a stockholder
or otherwise) or any predecessor-in-interest to any of the Company's or any
of its subsidiaries' business or assets with respect to the operations,
business, New Technology as hereinafter defined, affairs, products,
technology or services of the Company or any of its subsidiaries.
(b) Consultant acknowledges that any breach of the provisions of
Sections 6 and 7 hereof can cause irreparable harm to the Company and its
subsidiaries for which the Company and its subsidiaries would have no
adequate remedy at law. In the event of a breach or threatened breach by
Consultant of any of such provisions, in addition to any and all other
rights and remedies it may have under this Agreement or otherwise, the
Company or any of its subsidiaries may immediately seek any judicial action
it deems necessary, including, without limitation, temporary, preliminary,
and/or permanent injunctive relief.
8. Rights to Technology.
(a) The property rights in and to all items of New Technology as
defined below herein, shall be deemed to have been created for the Company
as work for hire and are and shall be the sole and exclusive property of
the Company, and Consultant does hereby agree that he will make full and
prompt disclosure to the Company of any and all such New Technology. For
the purposes of this Agreement, the term "New Technology" shall mean each
and every invention, discovery and development, device, design, apparatus,
practice, method, product, item of know-how, improvement, process, item of
technical knowledge, formula, trade secret, trade name and modification,
whether or not patentable, trademarkable or copyrightable, which were made,
developed or first reduced to practice by Consultant (whether acting alone
or with others) during the term of its engagement hereunder (the
"Technology Term"), and which relate primarily to the Company's business.
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<PAGE>
(b) During the Technology Term, and at any time and from time to time
thereafter, Consultant shall (i) execute all documents requested by the
Company to assign to the Company all of his right, title and interest in
and to any New Technology and to confirm the complete ownership by the
Company of such New Technology, (ii) execute any and all documents
requested by the Company for filing and prosecuting applications for
patents, design patents, trademarks or copyrights for or with respect to
the New Technology, and (iii) render to the Company all assistance that it
may request, including the giving of testimony in any suit, action or
proceeding before any court of appropriate jurisdiction, including, but not
limited to, any governmental or quasi-governmental agency or other
regulatory body, in order to obtain, maintain and protect the Company's
rights and ownership interests with respect to the New Technology.
9. Severability. In the event of the invalidity or unenforceability of any
one or more provisions of this Agreement, such illegality or unenforceability
shall not affect the validity or enforceability of the other provisions hereof
and such other provisions shall be deemed to remain in full force and effect.
10. Independent Status. Consultant shall be treated as an independent
contractor for all purposes, including employment tax purposes. The Company will
report any payments made to Consultant in accordance with this Agreement on IRS
Form 1099-MISC. Consultant shall report such payment and pay all applicable
taxes, including, without limitation, income, unincorporated business, FICA and
self-employment taxes, with respect thereto. The Company and Consultant agree
that Consultant shall not be considered or deemed to be an agent, employee,
joint venturer, or partner of the Company. Consultant shall have no authority to
contract for or bind the Company in any manner and shall not represent himself
as an agent of the Company except as authorized in writing by the Company.
Neither Consultant nor any owner, officer or employee of Consultant shall have
any status as an employee or any right to the benefits that the Company grants
its employees.
11. Insurance. On an annual basis, Consultant shall provide the Company
evidence that Consultant has obtained and maintains insurance prior to the
performance of any work under this Agreement. Such insurance shall include, but
is not limited to, workers' compensation insurance applicable to all employees
of Consultant.
12. Maintenance of Records. Consultant shall maintain records as required
and specified by the Company. It will submit a monthly invoice for services
rendered on behalf of the Company by it in the performance of this Agreement.
All such records and invoices shall remain the property of the Company.
13. Indemnification.
(a) Consultant hereby indemnifies and holds harmless the Company with
respect to any liability arising from the negligence or willful misconduct
of Consultant or its employees or representatives. Consultant, at its
expense, shall defend any claim or legal proceeding which is brought
against the Company and is within the foregoing indemnification, and pay
any judgment formally awarded in any such legal proceeding; provided that
the Company gives Consultant notice of such claim or legal proceeding,
furnishes a copy of all documents and instruments served upon the Company
in connection therewith and reasonably cooperates with Consultant in such
defense.
(b) Company hereby indemnifies and holds harmless the Consultant with
respect to any liability arising from the negligence or willful misconduct
of Company or its employees or representatives. Company, at its expense,
shall defend any claim or legal proceeding which is brought
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<PAGE>
against the Consultant and is within the foregoing indemnification, and pay
any judgment formally awarded in any such legal proceeding; provided that
the Consultant gives Company notice of such claim or legal proceeding,
furnishes a copy of all documents and instruments served upon the
Consultant in connection therewith and reasonably cooperates with the
Company in such defense.
14. Miscellaneous.
(a) Nothing in this Agreement shall be deemed to preclude the Company
from obtaining the services of other persons or entities undertaking the
same or similar services as those undertaken by Consultant or from
independently developing or acquiring materials or programs that are
similar to, or competitive with, the services provided under this
Agreement.
(b) This Agreement supersedes any prior agreements or understandings,
oral or written, between the parties hereto and represents their entire
understanding and agreement with respect to the subject matter hereof. This
Agreement can be amended, supplemented or changed, and any provision hereof
can be waived, only by written instrument making specific reference to this
Agreement which is signed by the party against whom enforcement of any such
amendment, supplement, modification or waiver is sought. Any waiver of any
breach of this Agreement shall not be construed to be a continuing waiver
or consent to any subsequent breach by any party hereto.
(c) No delay or omission in exercising any right or remedy hereunder
shall operate as a waiver thereof or of any other right or remedy, and no
single or partial exercise thereof shall preclude any other or further
exercise thereof or the exercise of any other right or remedy. Any waiver
of any breach of this Agreement shall not be construed to be a continuing
waiver or consent to any subsequent breach by any party hereto.
(d) Any notice, consent, direction or other instruction required or
permitted to be given under the provisions of this Agreement shall be in
writing and delivered or sent by personal delivery, overnight delivery
service, registered mail, or by facsimile transmission addressed to the
recipient at the address first above written or such address as may be
designated by notice by either party to the other. Any communication made
or given by personal delivery, overnight delivery service, or facsimile
transmission shall be conclusively deemed to have been given on the day of
actual delivery thereof, provided that if delivery is effected after 5:00
p.m. (New York time) delivery shall be deemed to have been made on the next
following day which is not a Saturday, Sunday or statutory holiday in New
York City. Any communication made or given by registered mail shall be
conclusively deemed to have been given on the fifth day, other than
Saturday, Sunday or statutory holiday in New York City following the
deposit thereof in the mail.
(e) Consultant's rights and duties under this Agreement may not be
assigned or delegated without the prior written consent of the Company in
its sole discretion, and any attempted assignment or delegation without
such consent shall be void. The rights of the Company may be assigned to a
successor carrying on substantially the same business as the Company. This
Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their legal representatives, successors and assigns; but
nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any rights or remedies under or by reason of
this Agreement.
(f) Consultant acknowledges that it has read this Agreement and has
been given the opportunity to obtain independent legal advice and that such
advice has either been obtained or waived.
-6-
<PAGE>
(g) This Agreement shall be construed and governed by the laws of the
State of New York.
(h) This Agreement shall be binding upon and shall inure to the
benefit of the Company and Consultant and their respective heirs, legal
representatives, successors and assigns.
(i) The Section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of this Agreement.
(j) This Agreement shall be construed and governed in accordance with
the laws of the State of New York.
(k) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first written above.
TECH LABORATORIES, INC.
By: /s/
------------------------------
Bernard M. Ciongoli, President
COBY CAPITAL CORPORATION
By: /s/
------------------------------
Scott Coby, President
The undersigned agrees to be personally
bound by Sections 6, 7, and 8 of this
Agreement.
/s/
- --------------------------------------------
Scott Coby
-7-
Exhibit 10.10
ASSIGNMENT OF LEASE
FOR VALUE RECEIVED, the undersigned hereby assigns, sets over and transfers
unto Tech Laboratories, Inc., a corporation of the State of New Jersey, all of
its right, title and interest in and to a certain Lease Agreement dated May 1,
1992 between William Tanis as Landlord and the undersigned as Tenant for the
demised premises described as 953 Belmont Avenue, Borough of North Haledon,
County of Passaic, State of New Jersey, together with all of the undersigned's
right, title and interest in and to the security deposit of $9,190.00.
The Assignor hereby warrants and represents that its only use of the
demised premises since May 1, 1992 has been for the minifolding of instruction
sheets for pharmaceutical products; (Standard Industrial Classification number
7389), and Foresee Corporation hereby agrees to hold and save harmless and to
indemnify Tech Laboratories, Inc., against any and all liability for damages,
loss, costs, charges and expenses of whatever kind or nature (including counsel
and attorney's fees) which Tech Laboratories, Inc. may, at any time, sustain or
incur by reason of or in consequence of any environmental concerns, damage or
cleanup that may have been caused or may have occurred at any time from May 1,
1992 to the date possession of the demised premises is delivered to Tech
Laboratories, Inc.
The Landlord hereby consents to the assignment of the above described lease
between Foresee corporation and Tech Laboratories, Inc. provided, however, that
the Assignor shall continue to remain liable under the terms of the lease and is
not released from any liability thereunder.
Tech Laboratories, Inc., Assignee-Tenant does hereby accept assignment of
the above described lease and agrees to make all payments to be made thereunder;
and otherwise to perform and abide by all the covenants, conditions, and
obligations of the Tenant-Assignor under said lease.
The Landlord hereby consents to the within Assignment and acknowledges that
the responsibility of Tech Laboratories, Inc., under the 33rd paragraph of the
said lease pertains only to any environmental damage caused by Foresee
Corporation or Tech Laboratories, Inc. from and after May 1, 1992.
ATTEST: FORESEE CORPORATION, Assignor
/s/ By: /s/
- ------------------------------------ ---------------------------------
Secretary LESTER A. CIOFFI, President
ATTEST: TECH LABORATORIES, INC., Assignee
/s/ By: /s/
- ------------------------------------ ---------------------------------
Secretary President
WITNESS:
/s/ /s/
- ------------------------------------ ---------------------------------
WILLIAM TANIS, SR., Landlord
<PAGE>
This Lease Agreement made the 1st day of May, 1992, Between WILLIAM TANIS,
residing or located at 42 Lake[la]nd Road, Green Pond in the Township of
[Ro]ckaway in the County of Morris and State of New Jersey, herein designated as
the Landlord And FORESEE CORPORATION residing or located at 953 Belmont Avenue
in the Borough of North Haledon in the County of Passaic and State of New
Jersey, herein designated as the Tenant Witnesseth that, the Landlord does
hereby lease to the Tenant and the Tenant does hereby rent from the Landlord,
the following described premises: 953 Belmont Avenue, Borough of North Haledon,
County of Passaic, State of New Jersey for a term of five (5) years commencing
on May 1, 1992, and ending on April 30, 1997, to be used and occupied such uses
as permitted by the zoning ordinances of the Borough of North Haledon.
Upon the following Conditions and Covenants:
1st: The Tenant covenants and agrees to pay to the Landlord, as rent for
and during the term hereof, in the following manner:
First year commencing May 1, 1992, the sum of $3,900.00 per month, payable on
the first day of each and every month, and thereafter the rental shall be the
aforesaid sum increased yearly in accordance to the same proportion that the
inflationary rate of the United States increased over the previous year. The
inflationary increase will be determined by the Consumer Price Index - A[ll]
Urban Consumers, New York -- Northeast New Jersey, A[ll] Items ["]Index" as
published by the United States Department of Labor's Bureau of Labor Statistics
or such other Index used to determine inflationary increase. The rental shall be
increased by the identical percentage of increase over the previous years
Consumer Price Index. The Consumer Price Index for the month preceding the
anniversary date compared to the same [mo]nth of the previous year shall be used
for com[pa]rison purposes. In no event shall the base rental be reduced.
2nd: The Tenant has examined the premises and has entered into this lease
without any representation on the part of the Landlord as to the condition
thereof. The Tenant shall take good care of the premises and shall at the
Tenant's own cost and expense, make all repairs, including painting and
decorating, and shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof, shall deliver up
the rented premises in good order and condition, wear and tear from a reasonable
use thereof, and damage by the elements not resulting from the neglect or fault
of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and
maintain the same in a clean condition, free from debris, trash, refuse, snow
and ice.
3rd: In case of the destruction of or any damage to the glass in the leased
premises, or the destruction of or damage of any kind whatsoever to the said
premises, caused by the carelessness, negligence or improper conduct on the part
of the Tenant or the Tenant's agents, employees, guests, licensees, invitees,
subtenants, assignees or successors, the Tenant shall repair the said damage or
replace or restore any destroyed parts of the premises, as speedily as possible,
at the Tenant's own cost and expense.
4th: No alterations, additions or improvements shall be made, and no
climate regulating, air conditioning, cooling, heating or sprinkler systems,
television or radio antennas, heavy equipment, apparatus and fixtures, shall be
installed in or attached to the leased premises, without the written consent of
the Landlord. Unless otherwise provided herein, all such alterations, additions
or improvements and systems, when made, installed in or attached to the said
premises, shall belong to and become the property of the Landlord and shall be
surrendered with the premises and as part thereof upon the expiration or sooner
termination of this lease, without hindrance, molestation or injury.
5th: The Tenant shall not place nor allow to be placed any signs of any
kind whatsoever, upon, in or about the said premises or any part thereof, except
of a design and structure and in or at such places as may be indicated
<PAGE>
and consented to by the Landlord in writing. In case the Landlord or the
Landlord's agents, employees or representatives shall deem it necessary to
remove any such signs in order to paint or make any repairs, alterations or
improvements in or upon, said premises or any part thereof, they may be so
removed, but shall be replaced at the Landlord's expense when the said repairs,
alterations or improvements shall have been completed. Any signs permitted by
the Landlord shall at all times conform with all municipal ordinances or other
laws and regulations applicable thereto.
6th: The Tenant shall pay when due all the rents or charges for water or
other utilities used by the Tenant, which are or may be assessed or imposed upon
the leased premises or which are or may be charged to the Landlord by the
suppliers thereof during the term hereof, and if not paid, such rents or charges
shall be added to and become payable as additional rent with the installment of
rent next due or within 30 days of demand therefor, whichever occurs sooner.
7th: The Tenant shall promptly comply with all laws, ordinances, rules,
regulations, requirements and directives of the Federal, State, and Municipal
Governments or Public Authorities and all of their departments, bureaus and
subdivisions, applicable to and affecting the said premises, their use and
occupancy, for the correction, prevention and abatement of nuisances, violations
or other grievances in, upon or connected with the said premises, during the
term hereof; and shall promptly comply with all orders, regulations,
requirements and directives of the Board of Fire underwriters or similar
authority and of any insurance companies which have issued or are about to issue
policies of insurance covering the said premises and its contents, for the
prevention of fire or other casualty, damage or injury, at the Tenant's own cost
and expense.
8th: The Tenant, at Tenant's own cost and expense, shall obtain or provide
and keep in full force for the benefit of the Landlord, during the term hereof,
general public liability insurance, insuring the Landlord against any and all
liability or claims of liability arising out of, occasioned by or resulting from
any accident or otherwise in or about the leased premises, for injuries to any
person or persons, for limits of not less than $500,000.00 for injuries to one
person and $1,000,000.00 for injuries to more than one person, in any one
accident or occurrence, and for loss or damage to the property of any person or
persons, for not less than $500,000.00. The policy or policies of insurance
shall be of a company or companies authorized to do business in this State and
shall delivered to the Landlord, together with evidence of the payment of the
premiums therefor, not less than fifteen days prior to the commencement of the
term hereof or of the date when the Tenant shall enter into possession, which
occurs sooner. At least fifteen days prior to the expiration or termination date
of any policy, the Tenant shall deliver a renewal or replacement policy with
proof of the payment of the premium therefor. The Tenant also agrees to and
shall save, hold and keep harmless and indemnify the Landlord from and for any
and all payments, expenses, costs, attorney fees and from and for any and all
claims and liability for losses or damage to property or injuries to persons
occasioned wholly or in part by or resulting from any acts or omissions by the
Tenant or the Tenant's agents, employees, guests, licensees, invitees,
subtenants, assignees or successors, or for any cause or reason whatsoever
arising out of or by reason of the occupancy by the Tenant and the conduct of
the Tenant's business.
9th: The Tenant shall not, without the written consent of the Landlord
assign, mortgage or hypothecate this lease, nor sublet or sublease the premises
or any part thereof. The consent of the Landlord shall not be unreasonably
withheld.
10th: The Tenant shall not occupy or use the leased premises or any part
thereof, nor permit or suffer the same to be occupied or used for any purpose
other than as h[ ]imited, nor for any purposed deemed unlawful, disreputable, or
extra hazardous, on account of fire or other casualty.
11th: This lease shall not be a li[ ] said premises in respect to any
mortgages that may hereafter be placed upon said premises. The recording of
s[uch] mo[rtgage] or mortgages shall have preference and precedence and be
superior and prior in lien to this lease, irrespective of [the] da[ ] [ ]cording
and the Tenant agrees to execute any instruments, without cost, which may be
deemed necessary or desirable, [to] further effect the subordination of this
lease to any such mortgage or mortgages. A refusal by the Tenant to execute such
instrument
<PAGE>
shall entitle the Landlord to the option of cancelling this lease, and the term
hereof is hereby expressly [limi]ted accordingly.
12th: If the land and the premises [ ] the leased premises are a part, or
any portion thereof, shall be taken under eminent domain or co[ ]nation
proceeding [ ] if suit or other action shall be instituted for the taking or
condemnation thereof, or if in lieu of p[ ]mal [c]ondemnation proceedings or
actions, the Landlord shall grant an option to purchase and/or shall sell and
convey [ ] [s]aid premises or any portion thereof, to the governmental or other
public authority, agency, body or public utility, s[ ]g to take said land and
premises or any portion thereof, then this lease, at the option of the Landlord,
shall be terminate [and] the term hereof shall end as of such date [ ] the
Landlord shall fix by notice in writing; and the Tenant shall have no [claim] or
[right] to claim or be entitled to any portion of any amount which may be
awarded as damages or paid as a result of such [ ]dem[ ] proceedings or paid as
the purchase price for such option, sale or conveyance in lieu of formal
condemnation [pro]ceed[ings] and all rights of the Tenant in damages, if any,
are hereby assigned to the Landlord. The Tenant agrees to execute and deliver
any instruments, at the expense of the Landlord, as may be deemed necessary or
required to expedite any condemnation proceedings or to effectuate a proper
transfer of title to such governmental or other public authority, agency, body
or public utility seeking to take or acquire the said lands and premises or any
portion thereof. The Tenant covenants and agrees to vacate the [ ] premises,
remove all the Tenant's personal property therefrom and deliver up peaceable
possessions [ ] to the Landlord [or] such other party designated by the Landlord
in the aforementioned notice. Failure by the Tenant [to co]mply with any
p[rovis]ions of this clause shall subject the Tenant to such costs, expenses,
damages and losses [as] the Landlord may incur by rea[son] of the Tenant's
breach hereof.
13th: In case of fire or other casualty, the Tenant shall give imm[ediate]
notice to the Landlord. If the premises shall be partially damaged by fire, the
elements or other casualty, the Landlord [shall] repair the same as speedily as
practicable, but the Tenant's obligation to pay the rent hereunder shall not
cease. [If, in] the o[pin]ion of the Landlord, the premises be so extensively
and substantially damaged as to render them untenantable, then the [rent] shall
cease until such time as the premises shall be made tenantable by the Landlord.
However, if, in the opinion of the Landlord, the premises be totally destroyed
or so extensively and substantially damaged as to require practically a
rebuilding thereof, then the rent shall be paid up to the time of such
destruction and then and from henceforth this lease shall come to an [end.] In
no event however, shall the provisions of this clause become effective or be
applicable, if the fire or other casualty and damage shall be the result of the
carelessness, negligence or improper conduct of the Tenant or the Tenant's
ag[ents,] employees, guests, licensees, invitees, subtenants, assignees or
successors. In such case, the Tenant's liability for the payment of the rent and
the performance of all the covenants, conditions and terms hereof on the
Tenant's part to be performed shall continue and the Tenant shall be liable to
the Landlord for the damage and l[oss] suffered by the Landlord. If the Tenant
shall have been insured against any of the risks herein covered, then the
proceeds of such insurance shall be paid over to the Landlord to the extent of
the Landlord's costs and expenses to make the repairs hereunder, and such
insurance carriers shall have no recourse against the Landlord for
reimbursement.
14th: If the Tenant shall fail or refuse to comply with and perform any
conditions and covenants of the within lease, the Landlord may, if the Landlord
so elects, carry out and perform such conditions and covenants, at the cost and
expense of the Tenant, and the said cost and expense shall be payable on demand,
or at the option of the Landlord shall be added to the installment of rent due
immediately thereafter but in no case later than one month after such demand,
whichever occurs sooner, and shall be due and payable as such. This remedy shall
be in addition to such other remedies as the Landlord may have hereunder by
reason of the breach by the Tenant of any of the covenants and conditions in
this lease contained.
15th: The Tenant agrees that the Landlord and the Landlord's agents,
employees or other representatives, shall have the right to enter into and upon
the said premises or any part thereof, at all reasonable hours, for the purposes
of examining the same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause shall not be
deemed to be a covenant by the Landlord nor be construed to create an obligation
on the part of the Landlord to make such inspection or repairs.
<PAGE>
16th: The Tenant agrees to permit the Landlord and the Landlord's agents,
employees or other representatives to show the premises to persons wishing to
rent or purchase the same, and Tenant agrees that on and after six months next
preceding the expiration of the term hereof, the Landlord or the Landlord's
agents, employees or other representatives shall have the right to place notice
on the front of said premises or any part thereof, offering the premises for
rent or for sale; and the Tenant hereby agrees to permit the same to remain
thereon without hindrance or molestation.
17th: If for any reason it shall be impossible to obtain fire and other
hazard insurance on the buildings and improvements on the leased premises, in an
amount and in the form and in insurance companies acceptable to the Landlord,
the Landlord may, if the Landlord so elects at any time thereafter, terminate
this lease and the term hereof, upon giving to the Tenant fifteen days notice in
writing of the Landlord's intention so to do, and upon the giving of such
notice, this lease and the term thereof shall terminate. If by reason of the use
to which the premises are put by the Tenant or character of or the manner in
which the Tenant's business is carried on, the insurance rates for fire and
other hazards shall be increase, the Tenant shall upon demand, pay to the
Landlord as rent, the amounts by which the premiums for such insurance are
increased. Such payment shall be paid with the next installment of rent but in
no case later than one month after such demand, whichever occurs sooner.
18th: Any equipment, fixtures, goods or other property of the Tenant, not
removed by the Tenant upon the termination of this lease, or upon any quitting,
vacating or abandonment of the premises by the Tenant, or upon the Tenant's
eviction, shall be considered as abandonment and the Landlord shall have the
right, without any notice to the Tenant, to sell or otherwise dispose of the
same, at the expense of the Tenant, and shall not be accountable to the Tenant
for any part of the proceeds of such sale, if any.
19th: If there should occur any default on the part of the Tenant in the
performance of any conditions and covenants herein contained, or if during the
term hereof the premises or any part thereof shall be or become abandoned or
deserted, vacated or vacant, or should the Tenant be evicted by summary
proceedings or otherwise, the Landlord, in addition to any other remedies herein
contained or as may be permitted by law, may either by force or otherwise,
without being liable for prosecution therefor, or for damages, re-enter the said
premises and the same have and again possess and enjoy; and as agent for the
Tenant or otherwise, re-let the premises and receive the rents therefor and
apply the same, first to the payment of such expenses, reasonable attorney fees
and costs, as the Landlord may have been put to in re-entering and repossessing
the same and in making such repairs and alterations as may be necessary; and
second to the payment of the rents due hereunder. The Tenant shall remain liable
for such rents as may be in arrears and also the rents as may accrue subsequent
to the re-entry by the Landlord, to the extent of the difference between the
rents reserved hereunder and the rents, if any, received by the Landlord during
the remainder of the unexpired term hereof, after deducting the aforementioned
expenses, fees and costs; the same to be paid as such deficiencies arise and are
ascertained each month.
20th: Upon the occurrence of any of the contingencies set forth in the
preceding clause, or should the Tenant be adjudicated a bankrupt, insolvent or
placed in receivership, or should proceedings be instituted by or against the
Tenant for bankruptcy, insolvency, receivership, agreement of composition or
assignment for the benefit of creditors, or if this lease or the estate of the
Tenant hereunder shall pass to another by virtue of any court proceedings, writ
of execution, levy, sale, or by operation of law, the Landlord may, if the
Landlord so elects, at any time thereafter, terminate this lease and the terms
hereof, upon giving to the Tenant or any trustee, receiver, assignee or other
person in charge of or acting as custodian of the assets or property of the
Tenant, five days notice in writing, of the Landlord's intention so to do. Upon
the giving of such notice, this lease and the terms hereof shall end on the date
fixed in such notice as if the said date was the date originally fixed in this
lease for the expiration hereof; and the Landlord shall have the right to remove
all persons, goods, fixtures and chattels therefrom, by force or otherwise,
without liability for damages.
21th: The Landlord shall not be liable for any damage or injury which may
be sustained by the Tenant or any other person, as a consequence of the failure,
breakage, leakage or obstruction of the water, plumbing, steam, sewer, waste or
soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the like or
of the electrical, gas,
<PAGE>
power, conveyor, refrigeration, sprinkler, airconditioning or heating systems,
elevators or hoisting equipment; or by reason of the elements; or resulting from
the carelessness, negligence or improper conduct on the part of any other Tenant
or of, the Landlord or the Landlord's or this or any other Tenant's agents,
employees, guests, licensees, invitees, subtenants, assignees or successors; or
attributable to any interference with, interruption of or failure, beyond the
control of the landlord, of any services to be furnished or supplied by the
Landlord.
22nd: The various rights, remedies, options and elections of the Landlord,
expressed herein, are cumulative, and the failure of the Landlord to enforce
strict performance by the Tenant of the conditions and covenants of this lease
or to exercise any election or option or to resort or have recourse to any
remedy herein conferred or the acceptance by the Landlord of any installment of
rent after any breach by the Tenant, in any one or more instances, shall not be
construed or deemed to be a waiver or a relinquishment for the future by the
Landlord of any such conditions and covenants, options, elections or remedies,
but the same shall continue in full force and effect.
23rd: This lease and the obligation of the Tenant to pay the rent hereunder
and to comply with the covenants and conditions hereof, shall not be affected,
curtailed, impaired or excused because of the Landlord's inability to supply any
service or material called for herein, by reason of any rule, order, regulation
or preemption by any governmental entity, authority, department, agency or
subdivision or for any delay [that] may arise by reason of negotiations for the
adjustment of any fire or other casualty loss or because of strikes or other [ ]
trouble or for any cause beyond the control of the Landlord.
24th: The terms, conditions, covenants a[nd pro]vis[ion] of this lease
shall be deemed to be severable. If any clause or provision herein contained
shall be adjudged [ ]inv[ ] or unenforceable by a court of competent
jurisdiction or by operation of any applicable law, it sh[all n]ot [affect] the
validity of any other clause or provision herein, but such other clauses or
provisions shall remain in full force and effect.
25th: All notices required under [the] terms of this lease shall be given
and shall be complete[d] by mailing such notice by certified or registered mail,
return receipt requested, [to] the address of the parties as shown at the head
of this lease, or to such other address as may be [ ]na[ ]d in writin[g,] which
notice of change of address shall be given in the same manner.
26th: The Landlord covenants and represents that the Landlord is the owner
of the premises herein leased and has the right and authority to enter into,
execute and deliver this lease; and does further covenant that the Tenant on
paying [the] rent and performing the conditions and covenants herein contained,
shall and may peaceably and quietly have, hold and enjoy the leased premises for
the terms aforementioned.
27th: This lease contains the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized to make
any representations [or pr]omises with reference to the within letting or to
vary, alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Landlord and the Tenant.
28th: DELETED.
29th: DELETED.
30th: If any mechanical or other liens shall be created or filed against
the leased premises by reason of labor performed or materials furnished for the
Tenant in the erection, construction, completion, alteration, repair or
utilities to any building or improvement, the Tenant shall within 30 days
thereafter, at the Tenant's own cost and expense, cause such lien or liens to be
satisfied and discharged of record together with any Notices of Intention that
may have been filed. Failure so to do shall entitle the Landlord to resort to
such remedies as are provided herein in the case of any default of this lease,
in addition to such as are permitted by law.
<PAGE>
31st: The Tenant waives all rights of recovery against the Landlord or the
Landlord's agents, employees or other representatives, for any loss, damages or
injury of any nature whatsoever is property or persons for which the Tenant is
insured. The Tenant shall obtain from the Tenant's insurance carrier and will
deliver to the Landlord, waivers of the subrogation rights under the respective
policies.
32nd: The Tenant has this day deposited with the Landlord the sum of
$1,190.00 as security for the payment of the rent hereunder and the full and
faithful performance by the Tenant of the covenants and conditions on the part
of the Tenant to be performed. Said sum shall be returned to the Tenant, without
interest, after the expiration of the term hereof, provided that the Tenant has
fully and faithfully performed all such covenants and conditions and is not in
arrears in rent. During the term hereof, the Landlord may, if the Landlord so
elects, have recourse to such security, to make good any default by the Tenant,
in which event the Tenant shall, on demand, promptly restore said security to
its original amount. Liability to repay said security to the Tenant shall run
with the reversion and title to said premises, whether any change in ownership
thereof be by voluntary alienation or as the result of judicial sale,
foreclosure or other proceedings or the exercise of a right of taking or entry
by any mortgagee. The Landlord shall assign or transfer said security, for the
benefit of the Tenant, to any subsequent owner or holder of the reversion or
title to said premises, in which case the assignee shall become liable for the
repayment thereof s herein provided, and the assignor shall be deemed to be
released by the Tenant from all liability to return such security. This
provision shall be applicable to every alienation or change in title and shall
in no wise be deemed to permit the Landlord to retain the security after
termination of the Landlord's ownership of the reversion or title. The Tenant
shall not mortgage, encumber or assign said security without the written consent
of the Landlord.
33rd: The Tenant, at its own cost and expense, agrees to comply with all
applicable environmental laws, ordinances, requirements, orders, rules and
regulations of the federal, state, county and municipal governments and agencies
having jurisdiction over the Premises (the "Environmental Regulations") in
connection with and arising out of the Tenant's use of the Premises. The Tenant
also agrees to hold the Landlord harmless from any expenses or damages resulting
from violations of the aforesaid environmental requirements.
34th: It is the obligation of the Landlord to maintain all external walls
and roofs only, and all other repairs and maintenance shall be the
responsibility of the Tenant.
35th: Utilities to be paid by the tenant: gas, electric, water, heat, and
air-conditioning, and sewer charges.
36th: The Tenant shall have the option to renew this lease for an
additional term of five (5) years under the same terms and conditions stated
herein. The Tenant shall at least six (6) months prior to the expiration of this
lease notify the Landlord in writing of its election to exercise this right.
37th: It is agreed that if Lessor, at any time during the term of this
lease receives a bonafide offer from a third party to purchase the leased
premises and the Landlord accepts such offer, then the Landlord agrees to notify
the leasee in writing, giving full details of said offer, and the leasee shall
within 15 days of receipt of such notice notify the Landlord in writing of its
election to purchase or not to purchase under the same conditions and terms
contained in the offer. Failure of the leasee to give written notice as required
herein shall deem to be a rejection to purchase and this right shall terminate
upon sale of the premises.
38th: The Tenant shall have the right to use all parking spaces located in
front of the building, and shall be responsible for the maintenance of said
parking area and sidewalk area including the removal of snow, ice, and debris.
The Landlord may pursue the relief or remedy sought in any invalid clause,
by conforming the said clause with the provisions of the statutes or the
regulations of any governmental agency in such case made and provided as if the
particular provisions of the applicable statutes or regulations were set forth
herein at length.
<PAGE>
In all references herein to any parties, persons, entities or corporations
the use of any particular gender or the plural or singular number is intended to
include the appropriate gender or number as the text of the within instrument
may require. All the terms, covenants and conditions herein contained shall be
for and shall inure to the benefit of and shall bind the respective parties
hereto, and their heirs, executors, administrators, personal or legal
representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals, or caused these presents to be signed by their proper corporate officers
and their proper corporate seals to be hereto affixed, the day and year first
above written.
Signed, Sealed and Delivered
in the presence of
or Attested by
/s/ /s/
- ------------------------------------ ---------------------------------
WILLIAM TANIS, SR., Landlord
FORESEE CORPORATION
---------------------------------
Tenant
By:/s/
------------------------------
President
<PAGE>
EXTENTION OF LEASE AMENDMENT OF April 28, 1982
Extend current lease which expires April 28, 1987, for five (5) years with a
five (5) year option to renew, between William Tanis, Sr., 29 Lake End Road,
Green Pond, New Jersey, LANDLORD, and Alfred Cioffi, Pres. Foresee Corporation,
955 Belmont Avenue, North Haledon, New Jersey, TENANT, with the following
modifications:
Rent increase, based on C.P.I. from May 1, 1982 to April 30, 1987, $310.00
per (1) month to $3,373,00.
One (1) year to $40,476.00.
C.P.I. increases to determine rent renewal as of May 1, 1987 to April 30,
1992.
FORESEE CORPORATION agrees to hold Owner harmless on any action arising
from any Agency, (EPA, DEP, New Jersey Department of Health, or ECRA) on
said Lease, due to use of combustibles or any hazardous substance used by
Foresee Corporation.
Furthermore, if Lease is terminated, Foresee Corporation will be held
responsible for cleanup of Buildings controlled by these Agencies.
Foresee's responsibility is limited to interior and exterior of buildings.
All other conditions and terms of previous Lease, dated April 28, 1982 shall be
continued.
/s/
-------------------------------------------
WILLIAM TANIS, SR., Landlord
/s/
-------------------------------------------
Alfred C. Cioffi, President
dated May 21, 1987 Foresee Corporation
<PAGE>
MODIFICATION OF LEASE
WHEREAS, William Tanis, Sr., as Landlord, entered into a lease with Foresee
Corporation, as Tenant, for the premises known as 953 Belmont Avenue, Borough of
North Haledon, County of Passaic, State of New Jersey;
WHEREAS, said lease was assigned by Foresee Corporation to the Tech
Laboratories, Inc.;
WHEREAS, Tech Laboratories, Inc., has exercised the option therein
contained;
WHEREAS, the parties wish to modify the rental terms of the aforesaid
lease;
NOW, THEREFORE, it is agreed as follows:
1. All references in the lease to the Consumer Price Index rental
increase is deleted.
2. The rental for the option period commencing May 1, 1997, shall be as
follows:
1st year of option -- $4,300.00 monthly;
2nd year of option -- $4,500.00 monthly;
3rd year of option -- $4,500.00 monthly;
4th year of option -- $4,500.00 monthly;
5th year of option -- $4,700.00 monthly.
DATED: June 26, 1997
/s/
-----------------------------------
WILLIAM TANIS, SR., Landlord
TECH LABORATORIES, INC.
By: /s/
--------------------------------
BERNARD M. CIONGOLI, President
Foresee Corporation
Exhibit 10.11
ASSET ACQUISITION AGREEMENT
THIS ASSET ACQUISITION AGREEMENT (this "Agreement") is dated as of the
March 12, 1999, by and between NORDX/CDT, Inc., a corporation organized under
the laws of Canada ("Seller"), and Tech Laboratories Inc., a New Jersey
corporation ("Purchaser").
WHEREAS, Seller, in connection with the purchase of Northern Telecom Inc.'s
structured wiring business, acquired certain assets and technology for a switch
matrix intended to provide physical connectivity functions between networking
equipment and users (such product line, excluding the automated
telecommunications switching apparatus (referred to internally by Seller as
"DynaTrax II" or "DynaTraX Voice Technology") and Data Valet programs devolved
by Seller, is referred to herein as the "DynaTrax Product").
WHEREAS, Seller has ceased the development, manufacturing and sales of the
DynaTrax Product;
WHEREAS, Purchaser desires to purchase the assets relating to the DynaTrax
Product;
WHEREAS, it is the intention of the parties that the sale of assets be on
an "as is" basis, and that, following the Closing Date, Seller have no
involvement with Purchaser's development, manufacturing or sales efforts in
connection with the DynaTrax Product except in the limited manner specifically
set forth herein;
WHEREAS, Seller had desired to close the transactions in January, 1999; and
WHEREAS, Purchaser requested that Seller provide Purchaser with additional
time to close the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein, the parties agree as follows:
ARTICLE 1. SALE OF ASSETS AND LIMITED ASSUMPTION OF LIABILITIES.
1.1 Transferred Assets. Subject to the terms and conditions of this
Agreement, on the Closing Date (defined in Section 2.1), Seller shall sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser shall purchase,
acquire and accept from Seller, all of the rights, title and interests of Seller
in and to the assets relating exclusively to the DynaTrax Product, other than
the Excluded Assets (defined in Section 1.2), as the same shall exist on the
Closing Date (collectively, the "Transferred Assets"), which assets are
comprised of the following:
(a) the equipment and other assets listed on Exhibit A hereto;
<PAGE>
(b) the files relating to the development and manufacture of, and
sales efforts relating to, the DynaTrax Product, including customer and
supplier lists;
(c) marketing and promotional materials used exclusively for the
DynaTrax Product;
(d) all raw materials, work in progress and finished inventory of the
DynaTrax Product ("Inventory"); and
(e) the patents and patent applications set forth on Exhibit B; the
"DynaTrax" trademark and trade name described on Exhibit C, and all
goodwill associated therewith; the DynaTrax web site and related
intellectual property; and all trade secrets, confidential information,
ideas, formulae, compositions, know-how, manufacturing and production
processes and techniques, research information, drawings, specifications,
designs, plans, improvements, proposals, technical and computer data,
documentation and software all other know-how and intellectual property
rights and all tangible embodiments thereof exclusively relating to the
DynaTrax Product (the "Proprietary Rights").
1.2 Excluded Assets. Seller is not selling, and Purchaser is not
purchasing, any of the following assets relating to the DynaTrax Product, all of
which shall be retained by Seller (collectively, the "Excluded Assets"):
(a) 50 DynaTrax units (as defined below), subject to reductions as
contemplated by Section 2.4 (the "Retained Units");
(b) equipment and other items relating to the service lab listed on
Exhibit D (the "Service Lab assets");
(c) replacement parts described on Exhibit E;.
For purposes of clarity, the following assets are also not included in the
Transferred Assets:
(a) Seller's rights under this Agreement;
(b) Seller's financial and accounting records relating to the DynaTrax
Product and all records related to employees employed in connection with
the DynaTrax Product;
(c) warehouse storage or shipping equipment;
(d) wiring installed in, and other fixtures of, the DynaTrax
laboratories;
(e) Proprietary Rights relating exclusively to the automated
telecommunications switching apparatus (referred to internally by Seller as
"DynaTrax II" or "DynaTraX Voice Technology") and Data Valet; and
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<PAGE>
(f) any refunds, rebates, recoveries or other financial items relating
to the period prior to the Closing Date.
1.3 Excluded Liabilities. Purchaser does not assume and shall not pay,
perform or discharge any Liabilities of Seller, including any liabilities or
obligations relating to DynaTrax units sold or installed by Seller prior to the
Closing Date ("Unassumed Liabilities").
ARTICLE 2. PURCHASE PRICE; CLOSING.
2.1 Closing. The closing of the transactions contemplated herein (the
"Closing") will take place at the offices of Seller at 10:00 a.m., local time,
on such date as specified by Purchaser, which date must be on or before April
30, 1999, or at such place or on such other date as Seller and Purchaser may
mutually agree in writing. Such date and time of Closing is herein referred to
as the "Closing Date."
2.2 Consideration for Signing Purchase Agreement. As consideration for
signing this Agreement, Purchaser shall pay to Seller (a) Two Hundred Thousand
Dollars ($200,000) on the date of this Agreement and (b) One Hundred Thousand
Dollars ($100,000) on or before March 31, 1999 (or, if earlier, the Closing
Date). Such amount shall be paid in immediately available funds to an account
specified by the Seller. Such amounts are consideration to Seller for entering
into this Agreement (including the provisions of Section 5.13) and agreeing to
delay closing of the purchase and sale, and shall be non-refundable (except as
set forth in Section 5.14).
2.3 Closing Payment and Documents. At the Closing, Purchaser shall deliver
Two Hundred Thousand Dollars ($200,000) to Seller by wire transfer of
immediately available funds as the purchase price for the Transferred Assets
and, upon receipt of such payment, Seller shall deliver to Purchaser (a) a bill
of sale for the Transferred Assets and (b) assignments of patents and
assignments of trademarks and trade names referred to on Exhibits B and C,
respectively. To the extent requested by Purchaser, Seller shall assist
Purchaser in filing such transfer documents in the appropriate jurisdictions;
provided that in the event that the cost to Seller of such assistance exceeds
$2,000, Purchaser shall upon demand reimburse Seller.
2.4 Post-Closing Sales. In the event orders for DynaTrax unit(s) are
received by Seller prior to the Closing Date, Seller may accept such orders and
fulfill them out of Retained Units (thereby reducing the number of Retained
Units included in the Excluded Assets), and Seller shall be entitled to retain
100% of the sales proceeds. Following the Closing Date, Seller shall have the
right to sell Retained Units in connection with the Data Valet program.
"DynaTrax unit" shall have the definition set forth in Exhibit G.
2.5 Pre-Closing Loss or Damage. Prior to the sale and transfer of the
Transferred Assets, Seller shall have no liability to Purchaser in connection
with any loss or damage to the Transferred Assets (including any casualty loss)
except to the extent provided under Section 5.14.
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<PAGE>
2.6 Inventory. Attached hereto as Schedule 2.6 is Seller's most current
list of the Inventory (the "Estimated Inventory"). Prior to the Closing Date,
Seller shall present to Purchaser an updated Inventory (the "Updated
Inventory"). Seller shall permit a representative(s) of Purchaser to participate
in the taking of the Updated Inventory. Following the taking of the Updated
Inventory, Purchaser shall use reasonable efforts to keep the Updated Inventory
segregated from other assets of Seller.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby represents
and warrants to Purchaser the following:
3.1 Capacity. Seller has the legal right, power and capacity to execute,
deliver and perform this Agreement and the agreements, certificates and
instruments to be executed and delivered by Seller pursuant hereto.
3.2 Enforceability. The execution, delivery and performance by Seller of
this Agreement and all agreements, certificates and instruments to be executed
and delivered by Seller pursuant hereto, and the consummation by Seller of the
transactions contemplated hereby and thereby, have been duly authorized by all
requisite corporate action. This Agreement and the agreements, certificates and
instruments to be executed and delivered by Seller pursuant hereto have been
duly and validly executed and delivered by Seller to the extent a party thereto
and, to the extent a party thereto, constitute, the valid and legally binding
obligations of Seller enforceable against Seller in accordance with their
respective terms.
3.3 No Conflicts. The (a) execution, delivery and performance of this
Agreement by Seller do not, (b) execution, delivery and performance by Seller of
the agreements, certificates and instruments to be executed and delivered by
Seller pursuant hereto will not, and (c) consummation of the transactions by
Seller contemplated hereby and thereby will not, (i) conflict with, or result in
any violation of, the articles of incorporation or by-laws of Seller as the same
may have been amended or (ii) conflict with, result in a breach of any term of,
constitute a default under or result in the acceleration of any material
agreement, or any judgment, decree, order, statute, rule or regulation to which
Seller or any material portion of their assets is subject or bound. No consent
or authorization of or filing with any court or other governmental entity is
required of Seller in connection with Seller's execution, delivery or
performance of this Agreement.
3.4 Title. Seller has good and marketable title to all of the Transferred
Assets free and clear of all liens, security interests and other similar
encumbrances. Nothing in this Section 3.4 shall be deemed to be a representation
or warranty as to the validity or enforceability of any Proprietary Rights, the
condition of any assets or the existence of any quantities of inventory or other
equipment.
3.5 Sale on an "As Is" Basis. The sale of the Transferred Assets hereunder
is being made on an "as is" basis. Except for the specific representations and
warranties set forth in this Article 3, neither Seller, any of its affiliates
nor any of their officers, directors,
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<PAGE>
employees, advisors or agents shall be deemed to have made any representation or
warranty regarding the Transferred Assets, and Seller expressly disclaims any
other representation or warranty of any kind, express or implied, arising by law
or custom, with respect to the Transferred Assets, including warranties of
merchantability; fitness for a particular purpose; non-infringement; validity or
enforceability of Proprietary Rights; condition of any of the Transferred
Assets; function, performance or salability of the DynaTrax Product; cost of
development, manufacturing or marketing of the DynaTrax Product; quantity or
condition of inventory; interest of potential or actual customers in the
DynaTrax Product; or any other matter.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF Purchaser. Purchaser represents and
warrants to Seller as follows:
4.1 Existence; Good Standing; Corporate Authority. Purchaser is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of New Jersey. Purchaser has all requisite corporate power and
authority to execute, deliver and perform this Agreement and all other
agreements, certificates and instruments to be executed and delivered by it
pursuant hereto.
4.2 Enforceability. The execution, delivery and performance by Purchaser of
this Agreement and all agreements, certificates and instruments to be executed
and delivered by Purchaser pursuant hereto, and the consummation by Purchaser of
the transactions contemplated hereby and thereby, have been duly authorized by
all requisite corporate action. This Agreement and the agreements, certificates
and instruments to be executed and delivered by Purchaser pursuant hereto have
been duly and validly executed and delivered by Purchaser to the extent a party
thereto and, to the extent a party thereto, constitute, the valid and legally
binding obligations of Purchaser enforceable against Purchaser in accordance
with their respective terms.
4.3 No Conflicts. The (a) execution, delivery and performance of this
Agreement by Purchaser do not, (b) execution, delivery and performance by
Purchaser of the agreements, certificates and instruments to be executed and
delivered by Purchaser pursuant hereto will not, and (c) consummation of the
transactions by Purchaser contemplated hereby and thereby will not, (i) conflict
with, or result in any violation of, the articles of incorporation or by-laws of
Purchaser as the same may have been amended or (ii) conflict with, result in a
breach of any term of, constitute a default under or result in the acceleration
of any material agreement, or any judgment, decree, order, statute, rule or
regulation to which Purchaser or any material portion of their assets is subject
or bound. No consent or authorization of or filing with any court or other
governmental entity is required of Purchaser in connection with Purchaser's
execution, delivery or performance of this Agreement.
4.4 Diligence. Purchaser has conducted such due diligence as it deems
necessary in connection with the transactions contemplated hereby. Except as
specifically set forth in Article 3, no representation or warranty has been made
to Purchaser, any its affiliates,
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<PAGE>
or any officer, director, employee, agent or advisor to Purchaser or its
affiliates, in connection with the Transferred Assets, this Agreement or the
transactions contemplated hereby.
ARTICLE 5. CERTAIN OTHER AGREEMENTS.
5.1 Expenses. Each of the parties hereto agrees to bear its own transaction
expenses and brokerage fees in connection with the transactions contemplated
hereby.
5.2 Transfer Taxes. Purchaser shall pay any sales or other transfer taxes
relating to the transfer of the Transferred Assets.
5.3 Removal of Assets. Within 30 days following the Closing Date, Purchaser
shall cause any Transferred Assets located in any of Seller's premises to be
removed at the cost of Purchaser; provided that if events beyond the reasonable
control of Purchaser prevent such removal during such 30 day period, Seller
shall extend such period for a reasonable period. Any such removal shall be
coordinated with Seller so as not to disrupt any production or other activity of
Seller. Purchaser shall be liable for any damage caused to Seller's premises in
connection with such removal. Purchaser shall bear the risk of loss or damage of
any such Transferred Assets prior to such removal from Seller's premises, except
for any loss or damage caused by Seller's gross negligence or willful
misconduct.
5.4 No License of Seller's Intellectual Property Rights. Nothing in this
Agreement or otherwise shall be deemed to grant to, or establish in, Purchaser
or any of its affiliates a license or other right to any trade name, trademark,
service mark or other similar right of Seller or its affiliates, except the
Trademark. Without limiting the foregoing, (a) any references to "NORDX/CDT" or
any of its affiliates (including any trade names or trademarks of Seller or its
affiliates) in or on any of the Transferred Assets shall, at Purchaser's cost,
be removed or permanently covered and (b) Purchaser shall not make references to
Seller or its affiliates (including any references to the limited support
contemplated by Section 5.6) in any of its marketing, promotional or other
activities relating to the Transferred Assets. In the event that the action
required by clause (a) of the prior sentence are not possible with respect to
any Transferred Asset, such Transferred Asset shall be destroyed by Purchaser
at, Purchaser's cost and without recourse to Seller or its affiliates. This
Section 5.4 shall not prevent press releases as provided in Section 6.6.
5.5 License by Purchaser. Effective on the Closing Date, Purchaser grants
to Seller a non-exclusive, royalty free license, to use the Proprietary Rights
contained in the Transferred Assets in connection with the service of any
DynaTrax Products sold or installed prior to the Closing Date and in connection
with any sales contemplated under Section 2.4. The license contained in this
Section 5.5 shall be for a period of 2 years from the Closing Date.
5.6 Limited Post-Closing Service. To the extent the necessary resources are
available (including knowledgeable personnel) and it does not divert resources
from other activities of Seller (in each case, determined in Seller's sole
discretion), following the Closing
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<PAGE>
Date, Seller will provide Purchaser with post-installation service support using
the Service Lab assets for a period up to the date on which Seller offers to
sell the Service Lab assets to Purchaser in accordance with Section 5.7, which
service is intended to be required on an infrequent basis. Such assistance shall
be limited to service that Seller is able to be performed from its premises
using available equipment. Seller has no obligation to retain personnel or
maintain the Service Lab assets. Purchaser shall pay Seller $75 per hour for
such assistance (provided that such amount shall be adjusted in good faith to
reflect any increases in the costs of providing such assistance). Seller shall
have no liability to Purchaser or any third party for any such service provided,
and Purchaser shall indemnify and hold Seller, its affiliates and their
officers, directors, employees, agents and advisors harmless from any and all
losses, claims, actions, damages and liabilities, and any and all out-of-pocket
costs and expenses, including reasonable attorneys' fees and disbursements and
costs of investigation (collectively, "Losses") arising from or relating to
providing such service, except to the extent a court of competent jurisdiction
determines that such Losses were the result of Seller's gross negligence or
willful misconduct.
5.7 Purchase of the Service Lab assets; Access by Purchaser.
(a) Upon Seller's determination that any commitment (legal or
otherwise) relating to DynaTrax Products sold or installed prior to the
Closing Date have ceased, Seller will offer to sell the Service Lab assets
(as described on Exhibit D) to Purchaser (in such condition or state as
they shall then exist) for an amount equal to $100; provided that Seller
will offer such assets no later than December 31, 1999. Purchaser may
accept such offer during the 30 days after such offer is made, and must
close such purchase within 30 days following such acceptance. Any sale of
such assets shall be on an "as is" basis, without representation or
warranty and subject to terms similar to those set forth herein with
respect to the Transferred Assets (excluding Section 5.6). Nothing in this
Section 5.7 shall be deemed to require Seller to service or maintain the
Service Lab assets, or make Seller liable for any loss or damage relating
thereto; provided that in the event of a casualty event relating to such
assets for which Seller has third party insurance, Seller shall, upon
recovery of any such insurance proceeds (reduced by the amount of any
self-insurance or deductible or costs associated with such recovery),
either (i) use such insurance proceeds, to the extent available, to replace
the Service Lab assets (which shall remain subject to this purchase option)
or (ii) turn such proceeds over to the Purchaser, net of the $100 purchase
price. Seller shall not be liable in the event such proceeds are not
available for any reason.
(b) Following the Closing Date and prior to the time when Seller
offers to sell the Service Lab assets to Purchaser, Seller shall permit
Purchaser reasonable access to such Service Lab assets so that Purchaser
may service its customers. Purchaser shall comply with such rules,
regulations and procedures regarding security, access, number of persons
having access, visitors, types of activities which may be carried on and
other reasonably related matters as designated by Seller from time to time.
Seller shall not be responsible or liable for any of Purchaser's employees
or invitees (including any injury or death thereto) or any use or non-use
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<PAGE>
of the Service Lab assets by Purchaser, and Purchaser shall indemnify and
hold Seller harmless from any liability relating thereto.
5.8 Service Obligation of Tech Labs. At the request of Seller,
Purchaser will offer to any persons or entities that purchased DynaTrax Products
prior to the Closing Date service of such DynaTrax Products at a level, priority
and cost commensurate with service provided to any purchasers or users of the
DynaTrax Products after the Closing Date.
5.9 Retained Units. The handling, location and other matters relating to
the Retained Units are described on Exhibit F.
5.10 Prohibition on Hiring Seller's Employees. Without Seller's consent,
for a period of two years following the date hereof, Purchaser shall not (a)
induce or attempt to induce any person employed by Seller or its affiliates on
the date hereof to leave the employ of Seller or such affiliate, or in any way
interfere with the relationship between Seller or such affiliate and any
employee thereof or (b) hire directly or through another entity any person who
is an employee of Seller or its affiliates on the date hereof.
5.11 Indemnification. Purchaser shall indemnify and hold Seller, its
affiliates and their officers, directors, employees, agents and advisors
harmless from any Losses arising out of (a) the breach by Purchaser of any
covenant, representation or warranty set forth herein or (b) any activities of
Purchaser or its affiliates in connection with the DynaTrax Product, including
marketing efforts, sales, installations or other activities of Purchaser in
connection with the DynaTrax Product, or any DynaTrax Product sold by Purchaser.
Seller shall indemnify and hold Purchaser, its affiliates and their officers,
directors, employees, agents and advisors harmless from any Losses arising out
of (a) the breach by Seller of any covenant, representation or warranty set
forth herein or (b) any Unassumed Liability.
5.12 Litigation Support. In the event and for so long as any party to this
Agreement is actively contesting or defending against any third party action,
suit, proceeding, hearing, investigation, charge, complaint, claim or demand in
connection with any fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or
transaction, with respect to the Transferred Assets, the party not so contesting
or defending agrees to (a) use reasonable efforts to make available employees,
as reasonably necessary, to provide testimony, to be deposed, to act as
witnesses and to assist counsel and (b) provide reasonable access to its books
and records relating to the Transferred Assets (to the extent it has any such
books and records) as may be reasonably necessary in connection with the defense
or contest, all at the sole cost and expense of the contesting or defending
party (including the cost of any legal advice or support in providing such
access or information).
5.13 Exclusivity. Neither Seller nor any of its affiliates or their
employees, officers, directors or agents will solicit, initiate, encourage or
discuss any proposal or offer from any person (other than Purchaser) relating to
the sale of the Transferred Assets, or provide any confidential information
relating thereto after the date hereof and until the termination of this
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Agreement pursuant to Section 5.14; provided that this Section 5.13 shall not
prohibit sales of DynaTrax units as contemplated in Section 2.4.
5.14 Termination. This Agreement may be terminated:
(a) by mutual written consent of the Seller and Purchaser;
(b) by Purchaser if there is any material change between the Estimated
Inventory and the Updated Inventory (which shall be reported promptly) or
any material damage or loss to the Transferred Assets between the date
hereof and the Closing Date (including any material discrepancy from the
Updated Inventory); or
(c) by Seller if Purchaser fails to make the payment contemplated by
Section 2.2.
In the event of any termination of pursuant to clauses (a) or (c) of this
Section 5.14, the payments made pursuant to Section 2.2 shall be retained by
Seller unless, in the case of clause (a), otherwise agreed by Seller and
Purchaser. In the event of any termination pursuant to clause (b) of this
Section 5.14, the payments made pursuant to Section 2.2 shall be promptly
returned to Purchaser.
ARTICLE 6. MISCELLANEOUS.
6.1 Dollar Amounts. All currency amounts set forth herein are United States
dollars.
6.2 Notice. Any notice required or permitted hereunder shall be in writing
and shall be sufficiently given if personally delivered, sent by nationally
recognized overnight courier, faxed or mailed by certified or registered mail,
return receipt requested, addressed as follows:
If to Seller:
NORDX/CDT, Inc.
2345 Sources Blvd.
Pointe-Claire, Quebec H9R 5Z3
Fax: (514) 822-7975
Attn: Chief Financial Officer
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with a copy to:
Cable Design Technologies Corporation
Foster Plaza 7
661 Andersen Drive
Pittsburgh, Pennsylvania 15220
Fax:(412) 937-9690
Attn:General Counsel
If to Purchaser:
Tech Laboratories Inc.
955 Belmont Avenue
North Haledon, N.J. 07508
Fax: (973) 427-5455
Attn:President
with a copy to:
Stursberg & Veith
405 Lexington Avenue
New York, N.Y. 10174
Fax: (212) 922-0995
Attn: Walter Stursberg
(or to such other address as any party shall specify by written notice so
given), and shall be deemed to have been delivered as of the date so personally
delivered, one day following deposit with a nationally recognized overnight
courier (with all delivery charges prepaid), upon the sending machine's
confirmation of receipt by the receiving fax machine if faxed or three days
following mailing if mailed (postage prepaid).
6.3 Execution of Additional Documents. The parties hereto will at any time,
and from time to time after the Closing Date, upon request of another party,
execute, acknowledge and deliver all such further assignments, transfers and
assurances as may be required to carry out the intent of this Agreement, and to
transfer and vest title to any Transferred Assets, and to protect the right,
title and interest in and enjoyment of all of the Transferred Assets sold,
assigned, transferred and delivered pursuant to this Agreement, provided,
however, that this Agreement shall be effective regardless of whether any such
additional documents are executed.
6.4 Binding Effect; Benefits; Assignment. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and permitted assigns. Except as
specifically provided herein, nothing in this Agreement is intended to confer on
any person other than the parties hereto or their respective heirs, executors,
administrators, successors and permitted assigns any rights, remedies,
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<PAGE>
obligations or liabilities under or by reason of this Agreement. Nothing
contained herein shall restrict Purchaser's ability to assign any or all of its
rights hereunder.
6.5 Limitation of Damages. Under no circumstances shall any party hereto be
liable to the other party for any consequential or special damages (including,
without limitation, loss of profits, damage to business reputation or damage to
systems or components), excluding in the case of any indemnification by
Purchaser of Seller, any such damages that are asserted by a third party against
Seller, its affiliates or any of their officers, directors, employees, agents or
advisors. In no event will Seller have any liability to Purchaser under or in
connection with this Agreement in excess of the amounts actually paid to
Purchaser pursuant to this Agreement.
6.6 Press Releases and Public Announcements. No party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement without the prior written approval of the other party, which approval
will not be unreasonably withheld.
6.7 Entire Agreement. This Agreement, together with the Exhibits, Schedules
and other documents executed and delivered pursuant hereto, constitute the final
written expression of all of the agreements between the parties, and is a
complete and exclusive statement of those terms, superseding all understandings
and negotiations concerning the subject matter hereof. Any representations,
promises, warranties or statements made by any party that differ in any way from
the terms of this written Agreement, and the Exhibits, Schedules and other
documents executed and delivered pursuant hereto, shall be given no force or
effect. The parties specifically acknowledge and agree that there are no
additional or supplemental agreements between them related in any way to the
matters herein contained. No addition to or modification of any provision of
this Agreement shall be binding upon any party unless made in writing and signed
by the parties against whom enforcement is sought.
6.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York exclusive of the conflict of
law principles thereof.
6.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
6.10 No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction shall be applied to this Agreement.
6.11 Severability. If for any reason whatsoever, any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid as applied to any particular case or in all cases, such
circumstances shall not have the effect of
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<PAGE>
rendering such provision invalid in any other case or of rendering any of the
other provisions of this Agreement inoperative, unenforceable or invalid.
6.12 Delivery by Facsimile. This Agreement, any signed agreement or
instrument entered into pursuant to this Agreement, and any amendments hereto or
thereto, to the extent signed and delivered by means of a facsimile machine,
shall be treated in all manner and respects as an original agreement or
instrument and shall be considered to have the same binding legal effect as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement or instrument, each other party
hereto or thereto shall re-execute original forms thereof and deliver them to
all other parties. No party hereto or to any such agreement or instrument shall
raise the use of a facsimile machine to deliver a signature or the fact that any
signature or agreement or instrument was transmitted or communicated through the
use of a facsimile machine as a defense to the formation of a contract and each
such party forever waives any such defense.
6.13 Gender; Number. The use of the masculine, feminine or neuter pronoun
herein shall not be restrictive as to gender, and the use of the singular or
plural herein shall not be restrictive as to number, but shall be interpreted in
all cases as the context may require.
6.14 Interpretation. When a reference is made in this Agreement to a
Section, Subsection, Exhibit or Schedule, such reference shall be to a Section,
Subsection, Exhibit or Schedule of this Agreement unless otherwise indicated.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement. As
used herein, the term "include" or "including" shall be deemed to be followed by
"without limitation."
* * * * *
IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year hereinabove first
set forth.
NORDX/CDT, INC.
By: /s/
-----------------------------
Name:
Its:
TECH LABORATORIES INC.
By: /s/ Bernard M. Ciongoli
-----------------------------
Name: Bernard M. Ciongoli
Its: President
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<PAGE>
EXHIBIT F
25 completed DynaTrax units will be retained by Seller on Closing Date; provided
that in the event Retained Units are sold prior to the Closing Date, such number
shall be reduced by the number of such sold units. The remaining Retained Units
shall be held by Purchaser for the benefit of the Seller (provided such units do
not need to be fully assembled until such time as they are shipped to the Seller
and provided further that Purchaser may substitute newly manufactured DynaTrax
units for units held on behalf of Seller).
Promptly following notice from Seller that Seller has sold DynaTrax units,
including sales prior to the Closing Date (which notice does not need to be
given immediately following a sale), Purchaser shall, without any cost to
Seller, ship to Seller a number of completed DynaTrax units equal to the number
of units sold by Seller, but in no event more than the total number of Retained
Unites held for the benefit of Seller by Purchaser (i.e., the 50 units less the
number sold by Seller prior to the Closing Date less the number retained by
Seller on the Closing Date). Seller's request for replacement shall be made at
reasonable times and with reasonable notice taking into account the demand of
Seller and Purchaser and the completed DynaTrax unit inventory levels of Seller
and Purchaser.
Purchaser shall, without charge, provide to Seller and Seller's purchasers with
its customary warranty and service.
On June 30, 2000, Purchaser may purchase from Seller any unsold Retained Units
(including any units that are held by Purchaser on behalf of Seller) for a cash
purchase price of $5,000 per unit, on an "as is basis." In the event that such
units are not purchased by Purchaser, the number of units then held by Purchaser
shall be promptly delivered to Seller in a completed form.
Exhibit 10.12
STOCK OPTION PLAN
450,000 SHARES
450,000 shares have been set aside for the management, directors, and employees
of Tech Labs. These shares are exercised at $0.50 per share. The following sets
forth the Plan's distribution:
FULL TIME OFFICERS
President 100,000 shares
Vice President 50,000 shares
Vice President 50,000 shares
After three years service.
NON-EMPLOYEE DIRECTORS
7 Potential 20,000 each 140,000 shares
After three years service.
EMPLOYEES
22 Potential 5,000 each 110,000 shares
After three years service.
<PAGE>
Incentive Stock Option Plan
of
TECH LABORATORIES, INC.
----------
1. PURPOSE.
This Incentive Stock Option Plan (the "Plan") is intended as an incentive
for and encouragement of stock ownership by certain officers, directors, and key
employees of Tech Laboratories, Inc. (the "Corporation"), so that they may
acquire or increase their proprietary interest in the success of the
Corporation, and to encourage them to remain in its employ. It is further
intended that Options issued pursuant to this Plan shall constitute qualified
incentive stock options within the meaning of Section 422A of the Internal
Revenue Code, as amended (the "Code").
2. ADMINISTRATION.
The Plan shall be administered by a committee appointed by the Board of
Directors of the Corporation (the "Committee"). The Committee shall consist of
two or more members of the Corporation's Board of Directors. The Board of
Directors may, from time to time, remove members from, or add members to, the
Committee. The Committee shall select one of its members as Chairperson, and
shall hold meetings at such times and places as it may determine. Action by a
majority of the Committee shall be the valid acts of the Committee. The
Committee shall, from time to time at its discretion, consult with management of
the Corporation and make recommendations to the Board of Directors with respect
to the officers, directors, and key employees who shall be granted options and
the amount of stock to be optioned to each.
The interpretation and construction by the Committee of any provisions of
the Plan or of any Option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it.
3. ADMINISTRATION.
The persons who shall be eligible to receive Options shall be officers,
directors, and key executive employees of the Corporation as the Board of
Directors shall select from time to time among those nominated by the Committee.
An Optionee may hold more than one Option, but only on the terms and subject to
the restrictions hereafter set forth. No person shall be eligible to receive an
Option for a larger number of shares than is recommended for him by the
Committee.
4. STOCK.
The stock subject to the Options shall be shares of the Corporation's
authorized but unissued or reacquired par value $.01 per share common stock
hereafter sometimes called Common Stock. The aggregate number of shares which
may be issued pursuant to this Plan shall be subject to adjustment as provided
in Article 5(I) of the Plan.
In the event that any outstanding Option under the Plan for any reason
expires or is terminated, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option under the
Plan.
<PAGE>
5. TERMS AND CONDITIONS OF OPTIONS.
Stock Options granted pursuant to the Plan shall be authorized by the Board
of Directors and shall be evidenced by agreements in such form as the Committee
shall from time to time approve, which agreements shall comply with and be
subject to the following terms and conditions:
A. Number of Shares.
(1) Each Option shall state the number of shares to which it pertains.
(2) If the aggregate fair market value of the shares of stock
(determined as of the time of grant of such option(s), with respect to
which incentive stock options are exercisable for the first time by an
optionee during any calendar year (under all such plans of the Corporation
and its parent and subsidiary corporations, if any)) exceeds $100,000, then
only the first $100,000 of such shares so purchased will be treated as
exercised under this Plan, and any excess over $100,000 so purchased shall
be treated as options which are not incentive stock options; provided,
however, that this rule shall be applied by taking options into account in
the order or sequence in which they were granted.
(3) For purposes of computing the annual limitation, the fair market
value of Common Stock of the Corporation granted under this Plan shall be
aggregated with the fair market value of any other stock of the Corporation
granted to such optionee under this Plan or any other plan or plans
maintained by the Corporation.
B. Option Price.
Each Option shall state the Option price, which shall not be less than 100%
of the fair market value of the shares of Common Stock of the Corporation on the
date of the granting of the Option; provided, however, that if the Option is
granted to an Optionee who, at the time of the grant, owns (as determined in
accordance with Section 425(d) of the Code) stock of the Corporation possessing
more than 10% of the total voting power of all classes of stock of the
Corporation, then the option price shall be not less than 110% of the fair
market value of the shares of Common Stock of the Corporation on the date of the
granting of the Option.
During such time as such stock is not listed upon an established stock
exchange or exchanges or NASDAQ System, the fair market value per share shall be
the mean between dealer "bid" and "ask" process of the Common Stock in the
over-the-counter market on the day the Option is granted, as reported by the
National Association of Securities Dealers, Inc. If the stock is listed upon an
established stock exchange or exchanges or NASDAQ System, such fair market value
shall be deemed to be the highest closing price of the Common Stock on such
stock exchange or exchanges or system the day the Option is granted or, if no
sale of the Corporation's Common Stock shall have been made on any stock
exchange or such system on that day, on the next preceding day on which there
was a sale of such stock. If the stock is neither listed on an established stock
exchange or the NASDAQ System, nor traded over-the-counter, the Committee shall
determine such fair market value under the general principles of valuing the
stock of corporations whose shares are not publicly traded. Subject to the
foregoing, the Board of Directors and the Committee fixing the Option price
shall have full authority and discretion and be fully protected in doing so.
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<PAGE>
C. Medium and Time of Payment.
The Option price shall be payable in cash or by check upon the exercise of
the Option; provided, however, the Board of Directors, in its sole discretion,
may accept other forms of payment, including, but not limited to, other stock of
the Corporation then owned by Optionee.
D. Term and Exercise of Options.
(1) Each Option shall specify the dates upon which such Options can be
exercised, and shall designate the maximum number of shares granted by the
Option that can be exercised on such dates. To the extent that the maximum
number of shares permitted to be exercised on such date or dates are not so
exercised, such shares may be so exercised at any subsequent date not later
than ten (10) years after the Option was granted; provided, however, that
no Option granted to an Optionee who, at the time of the grant, owns stock
of the Corporation (as determined in accordance with Section 425(d) of the
Code) possessing more than 10% of the total voting power of all classes of
stock of the Corporation, shall be exercisable more than five (5) years
after such Option was granted.
(2) During the lifetime of the Optionee, the Option shall be
exercisable only by him and shall not be assignable or transferable by him,
and no other person shall acquire any rights herein.
E. Termination of Employment Except Death.
(1) In the event that an Optionee shall voluntarily terminate his
employment with the Corporation, other than as a result of his death, and
shall no longer be in its employ, subject to the condition that no Option
shall be exercisable after the expiration of ten (10) years from the date
it is granted (or after the expiration of five (5) years if such shorter
period is applicable), such Optionee shall have the right to exercise the
Option at any time within five (5) days prior to such termination of
employment, but only to the extent his right to exercise such Option had
accrued as specified in such Option and had not previously been exercised
at the date of his termination from employment. Whether authorized leaves
of absence or absence for military or governmental service shall constitute
termination of employment, for the purposes of the Plan, shall be
determined by the Committee, which determination, unless overruled by the
Board of Directors, shall be final and conclusive.
(2) In the event that an Optionee shall have his employment with the
Corporation involuntarily terminated for reasons other than his death, any
Option held by such employee and not exercised as of the date of such
termination may be exercised within 30 days thereof to the extent currently
exercisable otherwise they shall be cancelled and no longer exercisable.
(3) The Board of Directors, at its sole discretion, may redeem any
accrued but unexercised Options of an employee whose employment with it has
terminated by paying to such employee an amount equal to the difference
between the Option price and the then fair market value of the stock, as
determined in accordance with Article 5(B) of the Plan.
F. Death of Optionee and Transfer of Option.
If the Optionee shall die while in the employ of the Corporation and shall
not have fully exercised the Option, the Option may be exercised, subject to the
condition that no Option shall be exercisable after the expiration of ten (10)
years from the date it is granted (or after the expiration of five (5) years, if
such shorter period is applicable), at any time within one (1) year after the
Optionee's death, by the executors, administrators, or personal representatives
of the Optionee or by bequest or inheritance,
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<PAGE>
but only to the extent that the Optionee's right to exercise such Option had
accrued as specified in the Option at the time of his death and had not
previously been exercised.
No Option shall be transferable by the Optionee other than by will or the
applicable laws of descent and distribution.
G. Adjustment of Shares.
Subject to any required action by the stockholders, the number of shares of
Common Stock covered by each outstanding Option, and the price per share thereof
of each such Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock of the Corporation
resulting from a subdivision or consolidation of shares or the payment of a
stock dividend (but only on the Common Stock) or any other increase or decrease
in the number of such shares effected without receipt of consideration by the
Corporation.
Subject to any required action by the stockholders, if the Corporation
shall be the surviving corporation in any merger or consolidation, each
outstanding Option shall pertain to and apply to the securities to which a
holder of the number of shares of Common Stock subject to the Option would have
been entitled. A dissolution or liquidation of the Corporation or a merger or
consolidation in which the Corporation is not the surviving corporation, shall
cause each outstanding Option to terminate; provided, however, that each
Optionee shall, in such event, have the right immediately prior to such
dissolution or liquidation, or merger or consolidation in which the Corporation
is not the surviving corporation, to exercise limitations contained in the
Option.
In the event of a change in the Common Stock of the Corporation, as
presently constituted, which is limited to a change of all its authorized shares
in the same number of shares with the stated par value, the share resulting from
any such change shall be deemed to be the Common Stock subject to the Option.
Except as hereinbefore expressly provided in this Article 5(H), the
Optionee shall have no rights by reason of subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger or consolidation, or spin-off of assets
or stock of another corporation, and any issue by the Corporation of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall not affect the number or price of shares of Common Stock subject to the
Option.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Corporation to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve, liquidate or sell, or transfer all or any part of
its business or assets.
H. Rights as a Stockholder.
An Optionee or a transferee of an Option shall have no rights as a
stockholder with respect to any shares covered by his Option until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in case, securities,
or other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued, except as provided in
Article 5(G) hereof.
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<PAGE>
I. Modification, Extension, and Renewal of Options.
Subject to the terms and conditions and within the limitations of the Plan,
the Board of Directors may modify, extend, or renew outstanding Options granted
under the Plan, or accept the surrender of outstanding Options (to the extent
not theretofore exercised) and authorize the granting of new Options in
substitutions therefor (to the extent not theretofore exercised). However, no
modifications of an Option shall, without the consent of the Optionee, alter or
impair any rights or obligations under any Option theretofore granted under the
Plan.
J. Investment Purpose.
Each Option under the Plan shall be granted on the condition that the
purchases of Common Stock thereunder shall be for investment purposes, and not
with a view to resale or distribution except that in the event the Common Stock
subject to such Option is registered under the Securities Act of 1933, as
amended, or in the event a resale of such stock without such registration would
otherwise be permissible, such condition shall be inoperative if in the opinion
of counsel for the Corporation such condition is not required under the
Securities Act of 1933 or any other applicable law, regulation, or rule of any
governmental agency. Each Optionee shall give to the Corporation an investment
letter, in a form prescribed by the Board of Directors, as a condition precedent
to the issuance of certificates representing shares exercised by such Optionee.
K. Other Provisions.
The Option agreements authorized under the Plan shall contain such other
provisions, including, without limitation, restrictions upon the exercise of the
option, as the Committee and the Board of Directors of the Corporation shall
deem advisable. Any such Option agreement shall contain such limitations and
restrictions upon the exercise of the Option, and the amount of such Option, as
shall be necessary in order that such Option will be an "incentive stock Option"
as defined in Section 422A of the Code or to conform to any change in the law.
6. TERM OF PLAN.
Options may be granted pursuant to the Plan from time to time within a
period of ten years from the date the Plan is adopted or the date the Plan is
approved by the Stockholders, whichever is earlier.
7. INDEMNIFICATION OF COMMITTEE.
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Corporation against the reasonable expenses, including
attorney's fees, actually and necessarily incurred in connection with the
defense of any action, suit, or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Corporation) or paid by them in satisfaction of a judgment in any such
action, suit, or proceeding, except in relation to matters as to which it shall
be adjudged in such action, suit, or proceeding, that such Committee member is
liable for negligence or misconduct in the performance of his duties; provided
that within 60 days after institution of any such action, suit, or proceeding a
Committee member shall in writing offer the Corporation the opportunity at its
own expense, to handle and defend the same.
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<PAGE>
8. AMENDMENT OF THE PLAN.
The Board of Directors of the Corporation may, insofar as permitted by the
law, from time to time, with respect to any share at the time not subject to
Options, suspend or discontinue the Plan or revise or amend it in any respect
whatsoever except that without approval of the stockholders, no such revision or
amendment shall change the number of shares subject to the Plan, change the
designation of the class of employees eligible to receive Options, decrease the
price at which Options may be granted, remove the administration of the Plan
from the Committee, or render any member of the Committee eligible to receive an
Option under the Plan while serving thereon. Furthermore, the Plan may not,
without the approval of the stockholders, be amended in any manner that will
cause Options issued under it to fail to meet the requirements of incentive
stock Options as defined in Section 422A of the Code.
9. APPLICATION OF FUNDS.
The proceeds received by the Corporation from the sale of Common Stock
pursuant to Options will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION.
The granting of an Option shall impose no obligation upon the Optionee to
exercise such Option.
11. EFFECTIVE DATE; APPROVAL OF STOCKHOLDERS.
The Plan shall not take effect until approved by the holders of a majority
of the outstanding shares of Common Stock of the Corporation, which approval
must occur within the date the Plan is adopted by the Board of Directors.
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<PAGE>
----------
Incentive Stock Option Agreement
----------
Agreement made this ________ day of ____________, 1995, between TECH
LABORATORIES, INC., a New Jersey corporation (the "Company" or "TLI") and
_______________________, an employee (or independent director) of the Company
residing at __________________________________________ (the "Employee" or
"Director").
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties hereto as follows:
1. Grant of Option.
The Company hereby grants the Employee (Director) the right privilege and
Option to purchase up to __________ of its shares of Common Stock, par value
$____ per share, at an exercise price of $_____ per share in the manner and
subject to the conditions provided herein and in its Incentive Stock Option Plan
(the "Plan").
2. Times of Exercise.
The Option covered by this Agreement may be exercised by the Employee
(Director) from _________, 1999, until ___________, ____, in whole or in part or
until its expiration or termination as provided herein or in the Plan. In the
case of an Employee, the option vests and may only be exercisable at a rate no
greater than 33 1/3% each continuous year in which the Employee is employed on a
full-time basis by the Company. (In the case of an independent Director, the
option vests and may only be exercisable after one full year's membership on
TLI's Board of Directors.)
3. Method of Exercise.
The Option shall be exercised by delivering a written notice to a member of
the Stock Option Committee at the Company's principal offices, accompanied by
the Employee's (Director's) personal check in the appropriate amount for payment
of the exercise price for the number of shares of Common Stock of TLI specified
to be purchased. The written notice shall indicate such number of shares to be
purchased and the total exercise price applicable thereto. The Company shall,
within 30 days of receiving such notice and the Employee's (Director's) check
covering the exercise price, deliver a stock certificate(s). The date of
delivery of such stock certificate(s) may be extended by mutual agreement of the
Company and the Employee (Director) or due to any law or regulation which may
require the Company to take action with respect to the shares covered by such
notice prior to issuance thereof.
4. Termination of Option.
Except as otherwise state herein, the Option, to the extent that it has not
been exercised, shall terminate upon the occurrence of any of the following
events:
(A) Within 5 days after the Employee (Director) voluntarily terminates his
employment with the Company but only to the extent that such Option has become
exercisable as of the date of termination of such the Employee (Director);
<PAGE>
(B) Within 30 days if such employment was terminated on a non-voluntary
basis other than death but only to the extent that such Option has become
exercisable as of the date of termination of such the Employee (Director);
(C) Within one year after the Employee's (Director's) death by his or her
executor, administrator, or personal representative, but only to the extent that
such Option has become exercisable s of the date of death of such employee; or
(D) _______, __ (representing the expiration of five years from the grant
of this Option).
Questions, including, but not limited to, such voluntary or
non-voluntary terminations, the disability of the Employee, and related
treatment hereunder, shall be determined by the Stock Option Committee.
5. Reclassification, Consolidation, or Merger.
This Option is subject to certain anti-dilution provisions set forth in the
Plan.
6. Rights Prior to Exercise of Option.
This Option is non-assignable and non-transferable by the Employee, except
in the event of his or her death as specified in the Plan and during the
Employee's (Director's) lifetime is exercisable only by him or her. The Employee
(Director) shall have no rights as a stockholder of the Company merely because
he or she has been granted this Option. Such rights only accrue upon exercise of
the Option, in whole or in part, payment of the appropriate exercise price, and
issuance and delivery of the underlying shares as provided in this Agreement.
7. Restrictions on Dispositions.
In order to realize the tax benefits allowed under Section 424(a) of the
Internal Revenue Code of 1986, as amended regarding any gains derived from the
sale of the shares underlying this Option, no disposition of such shares may be
made by the Employee (Director) within two (2) years from the date of the
granting of this Option or within one (1) year after the transfer of such shares
to the Employee (Director) and the Employee (Director) must remain in the employ
of the Company from the time the Option is granted until three (3) months before
its exercise, and in the case of his or her disability, twelve (12) months
before its exercise.
All shares acquired by the Employee (Director) shall be deemed restricted
securities as that term is defined under the Securities Act of 1933, as amended
(the "Act"), and may not be sold or transferred unless certain conditions are
met. It is understood that the shares so acquired hereunder are to be purchased
for investment only and not with a view to, or for, sale in connection with any
public offering or distribution. The stock certificates representing such shares
shall contain a legend delineating all the restrictions to which such shares are
subject.
8. Plan and Its Amendment.
This Option has been granted pursuant to the Plan, adopted by the Company's
Board of Directors and its shareholders, and the Board of Directors has reserved
the right to amend or discontinue the Plan at any time as long as such action
does not impair this Option or any rights thereunder.
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<PAGE>
9. Binding Effect.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, and
assigns. The laws of the State of New Jersey shall govern the interpretation and
enforceability of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
TECH LABORATORIES, INC.
By: /s/
---------------------------
President
AGREED AND ACCEPTED BY:
/s/
- -----------------------
Employee (Director)
-3-
Neither this Option nor the Common Stock to issued upon exercise hereof has been
registered under the Securities Act of 1933 (the "Act"), or qualified under any
state securities law (the "Law"), and this Option has been, and the Common Stock
to be issued upon exercise hereof will be, acquired for investment and not with
a view to, or for resale in connection with, any distribution thereof. No such
sale or other disposition may be made without an effective registration
statement under the Act and qualification under the law related thereto or an
opinion of counsel reasonably satisfactory to Tech Laboratories, Inc. and its
counsel, that said registration and qualifications are not required under the
Act and Law, respectively.
TECH LABORATORIES, INC.
STOCK OPTION AGREEMENT
This stock option (the "Option" or the "Agreement") is being granted
pursuant to that certain consulting agreement dated June 3, 1999, by and between
Tech Laboratories, Inc. (the "Company") and Coby Capital Corporation (the
"Optionee").
I. NOTICE OF STOCK OPTION GRANT
The Optionee is being granted an Option to purchase Common Stock of the
Company. This Option shall be subject to the following terms and conditions:
Date of Grant: June 3, 1999
Exercise Price: $1.85 per share
Number of Shares Granted: 50,000
Type of Option: Nonstatutory Stock Option
Expiration Date: May , 2003, except as otherwise provided in this
Agreement.
II. AGREEMENT
1. GRANT OF OPTION. The Company hereby grants to the Optionee the Option to
purchase the number of shares ("Shares") set forth in the Notice of Grant, at
the Exercise Price per share set forth in the Notice of Grant, subject to the
terms and conditions set forth herein.
2. EXERCISE OF OPTION.
(a) Right of Exercise. This Option may be exercised, in whole or in
part, subject to the terms of this Agreement, at any time from time to
time, after the Date of Grant and prior to the Expiration Date.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares
in respect of which the Option is being exercised (the "Exercised Shares"),
and such other representations and agreements as may be required by the
Company. The Exercise Notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company.
The Exercise Notice shall be accompanied by payment of the aggregate
Exercise Price as to all Exercised Shares. This Option shall be
<PAGE>
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) Cash; or
(b) Check.
4. REGISTRATION UNDER THE SECURITIES ACT.
(a) "Piggyback Registration". If the Company shall determine to
proceed with the actual preparation and filing of a registration statement
under the Securities Act in connection with the proposed offer and sale of
any of its securities by it or any of its security holders in an initial
public offering or otherwise (other than a registration statement on Form
S-4 or S-8), then the Company will give written notice of its determination
to all record holders of the Option and/or any Shares, as the case may be.
Upon the written request from any record holder or holders of an aggregate
of more than 50% of the Options and Shares, considered in the aggregate,
within 20 days after receipt of any such notice from the Company, the
Company will, except as herein provided, cause all such Shares to be
included in such registration statement, all to the extent requisite to
permit the sale or other disposition by the prospective seller or sellers
of the Shares to be so registered; provided, further, that nothing herein
shall prevent the Company from, at any time, abandoning or delaying any
registration. If any registration pursuant to this Section 4(a) shall be
underwritten in whole or in part, the Company will require that the Shares
requested for inclusion pursuant to this Section 4(a) be included in the
underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters.
The obligation of the Company under this Section 4(a) shall be limited
to one registration statement.
(b) Registration Procedures. If and whenever the Company is required
by the provisions of Section 4(a) to effect the registration of Registrable
Securities under the Securities Act, the Company will:
i) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective until the Shares
are freely salable without the volume limitations of Rule 144;
ii) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective until the Shares are freely saleable without the volume
limitations of Rule 144;
iii) furnish to the security holders participating in such
registration and to the underwriters of the securities being
registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
iv) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such
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<PAGE>
participating holders may reasonably request in writing within 20 days
following the original filing of such registration statement, except
that the Company shall not for any purpose be required to execute a
general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so
qualified;
v) notify the holders of Shares participating in such
registration, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration
statement has been filed;
vi) notify such holders promptly of any request by the SEC for
the amending or supplementing of such registration statement or
prospectus or for additional information;
vii) prepare and file with the SEC, promptly upon the request of
any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such
holders (and concurred in by counsel for the Company), is required
under the Securities Act or the rules and regulations thereunder in
connection with the distribution of Common Stock by such holder;
viii) prepare and promptly file with the SEC and promptly notify
such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct
any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities
Act, any event shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
ix) advise such holders, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued.
(c) Expenses.
i) With respect to the registration required pursuant to Section
4(a) or 4(b) hereof, all fees, costs and expenses of and incidental to
such registration, inclusion and public offering (as specified in
paragraph (ii) below) in connection therewith shall be borne by the
Company, provided, however, that any securityholders participating in
such registration shall bear their pro rata share of the underwriting
discount and commissions and transfer taxes.
ii) The fees, costs and expenses of registration to be borne by
the Company as provided in paragraph (i) above shall include, without
limitation, all registration, filing, and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the
Company, and all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions
in which the securities to be offered are to be registered and
qualified (except as provided in (i) above). Fees and disbursements of
counsel and accountants for the selling securityholders and any other
expenses incurred by the selling securityholders not expressly
included above shall be borne by the selling securityholders.
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<PAGE>
(d) Indemnification.
i) The Company will indemnify and hold harmless each holder of
Shares which are included in a registration statement pursuant to the
provisions of Section 4(a) or 4(b) hereof, its directors and officers,
and any underwriter (as defined in the Securities Act) for such holder
and each person, if any, who controls such holder or such underwriter
within the meaning of the Securities Act, from and against, and will
reimburse such holder and each such underwriter and controlling person
with respect to, any and all loss, damage, liability, cost and expense
to which such holder or any such underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any
untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, damage,
liability, cost or expenses arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
so made in conformity with information furnished by such holder, such
underwriter or such controlling person in writing specifically for use
in the preparation thereof.
ii) Each holder of Shares included in a registration pursuant to
the provisions of Section 4(a) hereof will indemnify and hold harmless
the Company, its directors and officers, any controlling person and
any underwriter from and against, and will reimburse the Company, its
directors and officers, any controlling person and any underwriter
with respect to, any and all loss, damage, liability, cost or expense
to which the Company or any controlling person and/or any underwriter
may become subject under the Securities Act or otherwise, insofar as
such losses, damages, liabilities, costs or expenses are caused by any
untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf
of such holder specifically for use in the preparation thereof.
iii) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (i) or (ii) of this Section 4(d) of notice
of the commencement of any action involving the subject matter of the
foregoing indemnity provisions such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (i) or (ii), promptly notify the
indemnifying party of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or in addition to
those available to the indemnified
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<PAGE>
party, or if there is a conflict of interest which would prevent
counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to
select separate counsel to participate in the defense of such action
on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party pursuant to the provisions of said paragraph
(i) or (ii) for any legal or other expense subsequently incurred by
such indemnified party in connection with the defense thereof other
than reasonable costs of investigation, unless (1) the indemnified
party shall have employed counsel in accordance with the provisions of
the preceding sentence, (2) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the notice of the
commencement of the action or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
5. TRANSFERABILITY OF OPTION. This Option may only be transferred in
compliance with the Act. The Company may request in its sole discretion an
opinion of counsel from the transferor prior to any transfer to the effect that
the Option may be transferred by the transferor without violation of the
registration provision of the Act. Transferor shall notify the Company of any
proposed transfer. The terms of this Agreement shall be binding upon the
executors, administrators, heirs, successors, and assigns of the Optionee.
6. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option Agreement.
7. TERMINATION OF OPTION. The Option shall terminate on the Expiration
Date; provided, however, that if the Company files any registration statement
(other than a registration statement on Form S-4 or S-8) on or prior to May ___,
2003, the Expiration Date shall be a date that is (i) if the Shares are included
in that registration statement, 90 days after the effective date of that
registration statement, or (ii) if the Shares are not included in that
registration statement, 90 days after the effective date of the registration
statement in which the Shares are included in accordance with the last sentence
of Section 4(a).
8. DILUTION PROTECTION.
(a) In the event the Company shall (i) declare a dividend on its
Common Stock in shares of Common Stock or make a distribution in shares of
Common Stock, (ii) declare a stock split or reverse stock split of its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv) issue
by reclassification of its shares of Common Stock other securities
(including any such reclassification in connection with a consolidation or
merger in which the Company or any of its subsidiaries is the continuing
corporation), then the number of shares of Common Stock of the Company,
deliverable to the Optionee hereunder and the exercise price related
thereto shall be adjusted so that the Optionee shall be entitled to receive
the kind and number of shares of Common Stock of the Company which the
Optionee has the right to receive, upon the happening of any of the events
described above, with respect to the shares of the Company stock which were
otherwise deliverable pursuant herein. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of
such event;
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<PAGE>
(b) Whenever the number of Shares or the exercise price of this Option
is adjusted pursuant to this paragraph, the Company shall promptly mail by
first class mail, postage prepaid, to the Optionee, notice of such
adjustment or adjustments.
9. AVAILABILITY OF COMPANY STOCK. The Company hereby agrees and covenants
that at all times during the Exercise Period it shall reserve for issuance a
sufficient number of shares of common stock as would be required upon full
exercise of the rights represented by this Agreement.
10. NO RIGHT TO EMPLOYMENT. Nothing in this Agreement shall be deemed to
create a relationship of employer to employee. The Company granted the Option to
Optionee in consideration of the performance of certain consulting services by
Optionee.
11. TAX CONSEQUENCES. Some of the federal tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option. The Optionee may incur regular federal
income tax liability upon exercise of the Option. The Optionee will be
treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise
Price. If the Optionee is deemed for any reason to be an employee, the
Company will be required to withhold from his or her compensation or
collect from the Optionee and pay to the applicable taxing authorities an
amount equal to a percentage of this compensation income at the time of
exercise.
(b) Disposition of Shares. If the Optionee holds Shares for at least a
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
12. GOVERNING LAW. This Agreement is governed by the laws of the State of
New York.
IN WITNESS WHEREOF, this Agreement is executed this 3rd day of June, 1999.
TECH LABORATORIES, INC.
By:
-------------------------------------
OPTIONEE:
----------------------------------------
Scott Coby
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<PAGE>
TECH LABORATORIES, INC.
EXERCISE NOTICE
Tech Laboratories, Inc.
955 Belmont Avenue
North Haledon, New Jersey 07508
1. EXERCISE OF OPTION. Effective as of today, _____________, 199___, the
undersigned ("Purchaser") hereby elects to purchase ___________ shares (the
"Shares") of the Common Stock of Tech Laboratories, Inc. (the "Company") under
and pursuant to the Stock Option Agreement dated May ____, 1999 (the "Option
Agreement"). The purchase price for the Shares shall be as set forth in the
Option Agreement, as adjusted.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the full
purchase price for the Shares (either in cash or by check).
3. REPRESENTATION OF PURCHASER. Purchaser acknowledges that Purchaser has
received, read, and understood the Option Agreement and agrees to abide by and
be bound by its terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing the Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to the Optionee
as soon as practicable after exercise of the Option.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. ENTIRE AGREEMENT. The Option Agreement is incorporated herein by
reference. This Exercise Notice and the Option Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof.
Submitted by: Accepted by:
OPTIONEE:
- ----------------------------------
Address:
By:
- ---------------------------------- ----------------------------------
Its:
- ---------------------------------- ----------------------------------
Neither this Option nor the Common Stock to issued upon exercise hereof has been
registered under the Securities Act of 1933 (the "Act"), or qualified under any
state securities law (the "Law"), and this Option has been, and the Common Stock
to be issued upon exercise hereof will be, acquired for investment and not with
a view to, or for resale in connection with, any distribution thereof. No such
sale or other disposition may be made without an effective registration
statement under the Act and qualification under the law related thereto or an
opinion of counsel reasonably satisfactory to Tech Laboratories, Inc. and its
counsel, that said registration and qualifications are not required under the
Act and Law, respectively.
TECH LABORATORIES, INC.
STOCK OPTION AGREEMENT
This stock option (the "Option" or the "Agreement") is being granted
pursuant to that certain consulting agreement dated March 10, 1999, by and
between Tech Laboratories, Inc. (the "Company") and Mint Corporation (the
"Optionee").
I. NOTICE OF STOCK OPTION GRANT
The Optionee is being granted an Option to purchase Common Stock of the
Company. This Option shall be subject to the following terms and conditions:
Date of Grant: July 10, 1999
Exercise Price: $1.25 per share
Number of Shares Granted: 100,000
Type of Option: Nonstatutory Stock Option
Expiration Date: July 10, 2001, except as otherwise provided in this
Agreement.
II. AGREEMENT
1. GRANT OF OPTION. The Company hereby grants to the Optionee the Option to
purchase the number of shares ("Shares") set forth in the Notice of Grant, at
the Exercise Price per share set forth in the Notice of Grant, subject to the
terms and conditions set forth herein.
2. EXERCISE OF OPTION.
(a) Right of Exercise. This Option may be exercised, in whole or in
part, subject to the terms of this Agreement, at any time from time to
time, after the Date of Grant and prior to the Expiration Date.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares
in respect of which the Option is being exercised (the "Exercised Shares"),
and such other representations and agreements as may be required by the
Company. The Exercise Notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company.
The Exercise Notice shall be accompanied by payment of the aggregate
Exercise Price as to all Exercised Shares. This Option shall be
<PAGE>
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) Cash; or
(b) Check.
4. REGISTRATION UNDER THE SECURITIES ACT.
(a) "Piggyback Registration". If the Company shall determine to
proceed with the actual preparation and filing of a registration statement
under the Securities Act in connection with the proposed offer and sale of
any of its securities by it or any of its security holders in an initial
public offering or otherwise (other than a registration statement on Form
S-4 or S-8 or an offering statement on Form 1-A), then the Company will
give written notice of its determination to all record holders of the
Option and/or any Shares, as the case may be. Upon the written request from
any record holder or holders of an aggregate of more than 50% of the
Options and Shares, considered in the aggregate, within 20 days after
receipt of any such notice from the Company, the Company will, except as
herein provided, cause all such Shares to be included in such registration
statement, all to the extent requisite to permit the sale or other
disposition by the prospective seller or sellers of the Shares to be so
registered; provided, further, that nothing herein shall prevent the
Company from, at any time, abandoning or delaying any registration. If any
registration pursuant to this Section 4(a) shall be underwritten in whole
or in part, the Company will require that the Shares requested for
inclusion pursuant to this Section 4(a) be included in the underwriting on
the same terms and conditions as the securities otherwise being sold
through the underwriters. In the event that the Shares requested for
inclusion pursuant to this Section 4(a) together with any other shares
which have similar piggyback registration rights (such other shares and the
Shares being collectively referred to as the "Requested Stock") would, in
the sole discretion of the managing underwriter, interfere with the
successful marketing of the shares of stock offered by the Company, the
number of shares of Requested Stock otherwise to be included in the
underwritten public offering may be reduced pro rata (by number of shares)
among the holders thereof requesting such registration or excluded in their
entirety if so required by the underwriter. To the extent all or any
portion of the Requested Stock is excluded from the underwritten public
offering, those shares of Requested Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the
holders thereof for a period, not to exceed 120 days, which the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering; provided, however, that the Shares included
in such Requested Stock shall be included in the Company's next
registration statement, subject to the earlier registration pursuant to
Section 4(b).
The obligation of the Company under this Section 4(a) shall be limited
to one subsequent registration statement and shall not apply in the event
and for so long as the Company has an effective registration statement
including a current prospectus pursuant to Section 4(b) hereof.
(b) Mandatory Registration. In the event the undersigned or its
transferees have not had included in the registration statement all of
their Shares in connection with the Company's initial public offering, then
the Company shall effect the registration of all remaining Shares as soon
as practicable, but not later than 180 days after the effective date of
such initial public offering; provided, however, that such period may be
extended or delayed by the Company for
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<PAGE>
one period up to 90 days if, upon advice of counsel at the time such
registration statement is required to filed, or at the time the Company is
required to exercise best efforts to cause such registration statement to
become effective, such delay is advisable and in the best interests of the
Company because of the existence of non-public material information, or to
allow the Company to complete any pending audit of its financial statement,
or any non-routine transaction, such as a merger, reorganization, or
acquisition, which would require the filing of a Current Report on Form
8-K.
(c) Registration Procedures. If and whenever the Company is required
by the provisions of Section 4(a) or 4(b) to effect the registration of
Registrable Securities under the Securities Act, the Company will:
i) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective until the Shares
are freely salable without the volume limitations of Rule 144;
ii) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective until the Shares are freely saleable without the volume
limitations of Rule 144;
iii) furnish to the security holders participating in such
registration and to the underwriters of the securities being
registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
iv) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such participating holders may
reasonably request in writing within 20 days following the original
filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
v) notify the holders of Shares participating in such
registration, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration
statement has been filed;
vi) notify such holders promptly of any request by the SEC for
the amending or supplementing of such registration statement or
prospectus or for additional information;
vii) prepare and file with the SEC, promptly upon the request of
any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such
holders (and concurred in by counsel for the Company), is required
under the Securities Act or the rules and regulations thereunder in
connection with the distribution of Common Stock by such holder;
viii) prepare and promptly file with the SEC and promptly notify
such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct
any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities
Act, any event shall have
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<PAGE>
occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they
were made, not misleading; and
ix) advise such holders, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued.
(d) Expenses.
i) With respect to the registration required pursuant to Section
4(a) or 4(b) hereof, all fees, costs and expenses of and incidental to
such registration, inclusion and public offering (as specified in
paragraph (ii) below) in connection therewith shall be borne by the
Company, provided, however, that any securityholders participating in
such registration shall bear their pro rata share of the underwriting
discount and commissions and transfer taxes.
ii) The fees, costs and expenses of registration to be borne by
the Company as provided in paragraph (i) above shall include, without
limitation, all registration, filing, and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the
Company, and all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions
in which the securities to be offered are to be registered and
qualified (except as provided in (i) above). Fees and disbursements of
counsel and accountants for the selling securityholders and any other
expenses incurred by the selling securityholders not expressly
included above shall be borne by the selling securityholders.
(e) Indemnification.
i) The Company will indemnify and hold harmless each holder of
Shares which are included in a registration statement pursuant to the
provisions of Section 4(a) or 4(b) hereof, its directors and officers,
and any underwriter (as defined in the Securities Act) for such holder
and each person, if any, who controls such holder or such underwriter
within the meaning of the Securities Act, from and against, and will
reimburse such holder and each such underwriter and controlling person
with respect to, any and all loss, damage, liability, cost and expense
to which such holder or any such underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any
untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, damage,
liability, cost or expenses arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
so made in conformity with information furnished by such holder, such
underwriter or such controlling person in writing specifically for use
in the preparation thereof.
ii) Each holder of Shares included in a registration pursuant to
the provisions of Section 4(a) or 4(b) hereof will indemnify and hold
harmless the Company, its directors and
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<PAGE>
officers, any controlling person and any underwriter from and against,
and will reimburse the Company, its directors and officers, any
controlling person and any underwriter with respect to, any and all
loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was so made in reliance upon and in strict conformity with written
information furnished by or on behalf of such holder specifically for
use in the preparation thereof.
iii) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (i) or (ii) of this Section 4(e) of notice
of the commencement of any action involving the subject matter of the
foregoing indemnity provisions such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (i) or (ii), promptly notify the
indemnifying party of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or in addition to
those available to the indemnified party, or if there is a conflict of
interest which would prevent counsel for the indemnifying party from
also representing the indemnified party, the indemnified party or
parties have the right to select separate counsel to participate in
the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party
pursuant to the provisions of said paragraph (i) or (ii) for any legal
or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (1) the indemnified party shall have employed
counsel in accordance with the provisions of the preceding sentence,
(2) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of
the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
5. TRANSFERABILITY OF OPTION. This Option may only be transferred in
compliance with the Act. The Company may request in its sole discretion an
opinion of counsel from the transferor prior to any transfer to the effect that
the Option may be transferred by the transferor without violation of the
registration provision of the Act. Transferor shall notify the Company of any
proposed transfer. The terms of this Agreement shall be binding upon the
executors, administrators, heirs, successors, and assigns of the Optionee.
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<PAGE>
6. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option Agreement.
7. TERMINATION OF OPTION. The Option shall terminate on the Expiration
Date; provided, however, that if the Company files any registration statement
(other than a registration statement on Form S-4 or S-8) on or prior to July 10,
2010, the Expiration Date shall be a date that is (i) if the Shares are included
in that registration statement, 90 days after the effective date of that
registration statement, or (ii) if the Shares are not included in that
registration statement, 90 days after the effective date of the registration
statement in which the Shares are included in accordance with the last sentence
of Section 4(a) or with Section 4(b).
8. DILUTION PROTECTION.
(a) In the event the Company shall (i) declare a dividend on its
Common Stock in shares of Common Stock or make a distribution in shares of
Common Stock, (ii) declare a stock split or reverse stock split of its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv) issue
by reclassification of its shares of Common Stock other securities
(including any such reclassification in connection with a consolidation or
merger in which the Company or any of its subsidiaries is the continuing
corporation), then the number of shares of Common Stock of the Company,
deliverable to the Optionee hereunder and the exercise price related
thereto shall be adjusted so that the Optionee shall be entitled to receive
the kind and number of shares of Common Stock of the Company which the
Optionee has the right to receive, upon the happening of any of the events
described above, with respect to the shares of the Company stock which were
otherwise deliverable pursuant herein. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of
such event;
(b) Whenever the number of Shares or the exercise price of this Option
is adjusted pursuant to this paragraph, the Company shall promptly mail by
first class mail, postage prepaid, to the Optionee, notice of such
adjustment or adjustments.
9. AVAILABILITY OF COMPANY STOCK. The Company hereby agrees and covenants
that at all times during the Exercise Period it shall reserve for issuance a
sufficient number of shares of common stock as would be required upon full
exercise of the rights represented by this Agreement.
10. NO RIGHT TO EMPLOYMENT. Nothing in this Agreement shall be deemed to
create a relationship of employer to employee. The Company granted the Option to
Optionee in consideration of the performance of certain consulting services by
Optionee.
11. TAX CONSEQUENCES. Some of the federal tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option. The Optionee may incur regular federal
income tax liability upon exercise of the Option. The Optionee will be
treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise
Price. If the Optionee is deemed for any reason to be an employee, the
Company will be
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<PAGE>
required to withhold from his or her compensation or collect from the
Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(b) Disposition of Shares. If the Optionee holds Shares for at least a
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
12. GOVERNING LAW. This Agreement is governed by the laws of the State of
New York.
IN WITNESS WHEREOF, this Agreement is executed this ___ day of April, 1999.
TECH LABORATORIES, INC.
By:
------------------------------------
OPTIONEE:
MINT CORPORATION
By:
------------------------------------
Richard Kandel, President
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<PAGE>
TECH LABORATORIES, INC.
EXERCISE NOTICE
Tech Laboratories, Inc.
955 Belmont Avenue
North Haledon, New Jersey 07508
1. EXERCISE OF OPTION. Effective as of today, _____________, 199___, the
undersigned ("Purchaser") hereby elects to purchase ___________ shares (the
"Shares") of the Common Stock of Tech Laboratories, Inc. (the "Company") under
and pursuant to the Stock Option Agreement dated April ____, 1999 (the "Option
Agreement"). The purchase price for the Shares shall be as set forth in the
Option Agreement, as adjusted.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the full
purchase price for the Shares (either in cash or by check).
3. REPRESENTATION OF PURCHASER. Purchaser acknowledges that Purchaser has
received, read, and understood the Option Agreement and agrees to abide by and
be bound by its terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing the Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to the Optionee
as soon as practicable after exercise of the Option.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. ENTIRE AGREEMENT. The Option Agreement is incorporated herein by
reference. This Exercise Notice and the Option Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof.
Submitted by: Accepted by:
OPTIONEE:
- ----------------------------------
Address:
By:
- ---------------------------------- ----------------------------------
Its:
- ---------------------------------- ----------------------------------
Neither this Option nor the Common Stock to issued upon exercise hereof has been
registered under the Securities Act of 1933 (the "Act"), or qualified under any
state securities law (the "Law"), and this Option has been, and the Common Stock
to be issued upon exercise hereof will be, acquired for investment and not with
a view to, or for resale in connection with, any distribution thereof. No such
sale or other disposition may be made without an effective registration
statement under the Act and qualification under the law related thereto or an
opinion of counsel reasonably satisfactory to Tech Laboratories, Inc. and its
counsel, that said registration and qualifications are not required under the
Act and Law, respectively.
TECH LABORATORIES, INC.
STOCK OPTION AGREEMENT
This stock option (the "Option" or the "Agreement") is being granted
pursuant to that certain consulting agreement dated March 10, 1999, by and
between Tech Laboratories, Inc. (the "Company") and Mint Corporation (the
"Optionee").
I. NOTICE OF STOCK OPTION GRANT
The Optionee is being granted an Option to purchase Common Stock of the
Company. This Option shall be subject to the following terms and conditions:
Date of Grant: July 10, 1999
Exercise Price: $1.75 per share
Number of Shares Granted: 100,000
Type of Option: Nonstatutory Stock Option
Expiration Date: July 10, 2001, except as otherwise provided in this
Agreement.
II. AGREEMENT
1. GRANT OF OPTION. The Company hereby grants to the Optionee the Option to
purchase the number of shares ("Shares") set forth in the Notice of Grant, at
the Exercise Price per share set forth in the Notice of Grant, subject to the
terms and conditions set forth herein.
2. EXERCISE OF OPTION.
(a) Right of Exercise. This Option may be exercised, in whole or in
part, subject to the terms of this Agreement, at any time from time to
time, after the Date of Grant and prior to the Expiration Date.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares
in respect of which the Option is being exercised (the "Exercised Shares"),
and such other representations and agreements as may be required by the
Company. The Exercise Notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company.
The Exercise Notice shall be accompanied by payment of the aggregate
Exercise Price as to all Exercised Shares. This Option shall be
<PAGE>
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) Cash; or
(b) Check.
4. REGISTRATION UNDER THE SECURITIES ACT.
(a) "Piggyback Registration". If the Company shall determine to
proceed with the actual preparation and filing of a registration statement
under the Securities Act in connection with the proposed offer and sale of
any of its securities by it or any of its security holders in an initial
public offering or otherwise (other than a registration statement on Form
S-4 or S-8 or an offering statement on Form 1-A), then the Company will
give written notice of its determination to all record holders of the
Option and/or any Shares, as the case may be. Upon the written request from
any record holder or holders of an aggregate of more than 50% of the
Options and Shares, considered in the aggregate, within 20 days after
receipt of any such notice from the Company, the Company will, except as
herein provided, cause all such Shares to be included in such registration
statement, all to the extent requisite to permit the sale or other
disposition by the prospective seller or sellers of the Shares to be so
registered; provided, further, that nothing herein shall prevent the
Company from, at any time, abandoning or delaying any registration. If any
registration pursuant to this Section 4(a) shall be underwritten in whole
or in part, the Company will require that the Shares requested for
inclusion pursuant to this Section 4(a) be included in the underwriting on
the same terms and conditions as the securities otherwise being sold
through the underwriters. In the event that the Shares requested for
inclusion pursuant to this Section 4(a) together with any other shares
which have similar piggyback registration rights (such other shares and the
Shares being collectively referred to as the "Requested Stock") would, in
the sole discretion of the managing underwriter, interfere with the
successful marketing of the shares of stock offered by the Company, the
number of shares of Requested Stock otherwise to be included in the
underwritten public offering may be reduced pro rata (by number of shares)
among the holders thereof requesting such registration or excluded in their
entirety if so required by the underwriter. To the extent all or any
portion of the Requested Stock is excluded from the underwritten public
offering, those shares of Requested Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the
holders thereof for a period, not to exceed 120 days, which the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering; provided, however, that the Shares included
in such Requested Stock shall be included in the Company's next
registration statement, subject to the earlier registration pursuant to
Section 4(b).
The obligation of the Company under this Section 4(a) shall be limited
to one subsequent registration statement and shall not apply in the event
and for so long as the Company has an effective registration statement
including a current prospectus pursuant to Section 4(b) hereof.
(b) Mandatory Registration. In the event the undersigned or its
transferees have not had included in the registration statement all of
their Shares in connection with the Company's initial public offering, then
the Company shall effect the registration of all remaining Shares as soon
as practicable, but not later than 180 days after the effective date of
such initial public offering; provided, however, that such period may be
extended or delayed by the Company for
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<PAGE>
one period up to 90 days if, upon advice of counsel at the time such
registration statement is required to filed, or at the time the Company is
required to exercise best efforts to cause such registration statement to
become effective, such delay is advisable and in the best interests of the
Company because of the existence of non-public material information, or to
allow the Company to complete any pending audit of its financial statement,
or any non-routine transaction, such as a merger, reorganization, or
acquisition, which would require the filing of a Current Report on Form
8-K.
(c) Registration Procedures. If and whenever the Company is required
by the provisions of Section 4(a) or 4(b) to effect the registration of
Registrable Securities under the Securities Act, the Company will:
i) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective until the Shares
are freely salable without the volume limitations of Rule 144;
ii) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective until the Shares are freely saleable without the volume
limitations of Rule 144;
iii) furnish to the security holders participating in such
registration and to the underwriters of the securities being
registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
iv) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such participating holders may
reasonably request in writing within 20 days following the original
filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
v) notify the holders of Shares participating in such
registration, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration
statement has been filed;
vi) notify such holders promptly of any request by the SEC for
the amending or supplementing of such registration statement or
prospectus or for additional information;
vii) prepare and file with the SEC, promptly upon the request of
any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such
holders (and concurred in by counsel for the Company), is required
under the Securities Act or the rules and regulations thereunder in
connection with the distribution of Common Stock by such holder;
viii) prepare and promptly file with the SEC and promptly notify
such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct
any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities
Act, any event shall have
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<PAGE>
occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they
were made, not misleading; and
ix) advise such holders, promptly after it shall receive notice
or obtain knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued.
(d) Expenses.
i) With respect to the registration required pursuant to Section
4(a) or 4(b) hereof, all fees, costs and expenses of and incidental to
such registration, inclusion and public offering (as specified in
paragraph (ii) below) in connection therewith shall be borne by the
Company, provided, however, that any securityholders participating in
such registration shall bear their pro rata share of the underwriting
discount and commissions and transfer taxes.
ii) The fees, costs and expenses of registration to be borne by
the Company as provided in paragraph (i) above shall include, without
limitation, all registration, filing, and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for the
Company, and all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions
in which the securities to be offered are to be registered and
qualified (except as provided in (i) above). Fees and disbursements of
counsel and accountants for the selling securityholders and any other
expenses incurred by the selling securityholders not expressly
included above shall be borne by the selling securityholders.
(e) Indemnification.
i) The Company will indemnify and hold harmless each holder of
Shares which are included in a registration statement pursuant to the
provisions of Section 4(a) or 4(b) hereof, its directors and officers,
and any underwriter (as defined in the Securities Act) for such holder
and each person, if any, who controls such holder or such underwriter
within the meaning of the Securities Act, from and against, and will
reimburse such holder and each such underwriter and controlling person
with respect to, any and all loss, damage, liability, cost and expense
to which such holder or any such underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any
untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, damage,
liability, cost or expenses arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
so made in conformity with information furnished by such holder, such
underwriter or such controlling person in writing specifically for use
in the preparation thereof.
ii) Each holder of Shares included in a registration pursuant to
the provisions of Section 4(a) or 4(b) hereof will indemnify and hold
harmless the Company, its directors and
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<PAGE>
officers, any controlling person and any underwriter from and against,
and will reimburse the Company, its directors and officers, any
controlling person and any underwriter with respect to, any and all
loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was so made in reliance upon and in strict conformity with written
information furnished by or on behalf of such holder specifically for
use in the preparation thereof.
iii) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (i) or (ii) of this Section 4(e) of notice
of the commencement of any action involving the subject matter of the
foregoing indemnity provisions such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (i) or (ii), promptly notify the
indemnifying party of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or
other indemnified parties which are different from or in addition to
those available to the indemnified party, or if there is a conflict of
interest which would prevent counsel for the indemnifying party from
also representing the indemnified party, the indemnified party or
parties have the right to select separate counsel to participate in
the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party
pursuant to the provisions of said paragraph (i) or (ii) for any legal
or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (1) the indemnified party shall have employed
counsel in accordance with the provisions of the preceding sentence,
(2) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of
the action or (iii) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party.
5. TRANSFERABILITY OF OPTION. This Option may only be transferred in
compliance with the Act. The Company may request in its sole discretion an
opinion of counsel from the transferor prior to any transfer to the effect that
the Option may be transferred by the transferor without violation of the
registration provision of the Act. Transferor shall notify the Company of any
proposed transfer. The terms of this Agreement shall be binding upon the
executors, administrators, heirs, successors, and assigns of the Optionee.
-5-
<PAGE>
6. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the terms of this Option Agreement.
7. TERMINATION OF OPTION. The Option shall terminate on the Expiration
Date; provided, however, that if the Company files any registration statement
(other than a registration statement on Form S-4 or S-8) on or prior to July 10,
2010, the Expiration Date shall be a date that is (i) if the Shares are included
in that registration statement, 90 days after the effective date of that
registration statement, or (ii) if the Shares are not included in that
registration statement, 90 days after the effective date of the registration
statement in which the Shares are included in accordance with the last sentence
of Section 4(a) or with Section 4(b).
8. DILUTION PROTECTION.
(a) In the event the Company shall (i) declare a dividend on its
Common Stock in shares of Common Stock or make a distribution in shares of
Common Stock, (ii) declare a stock split or reverse stock split of its
outstanding shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv) issue
by reclassification of its shares of Common Stock other securities
(including any such reclassification in connection with a consolidation or
merger in which the Company or any of its subsidiaries is the continuing
corporation), then the number of shares of Common Stock of the Company,
deliverable to the Optionee hereunder and the exercise price related
thereto shall be adjusted so that the Optionee shall be entitled to receive
the kind and number of shares of Common Stock of the Company which the
Optionee has the right to receive, upon the happening of any of the events
described above, with respect to the shares of the Company stock which were
otherwise deliverable pursuant herein. An adjustment made pursuant to this
paragraph shall become effective immediately after the effective date of
such event;
(b) Whenever the number of Shares or the exercise price of this Option
is adjusted pursuant to this paragraph, the Company shall promptly mail by
first class mail, postage prepaid, to the Optionee, notice of such
adjustment or adjustments.
9. AVAILABILITY OF COMPANY STOCK. The Company hereby agrees and covenants
that at all times during the Exercise Period it shall reserve for issuance a
sufficient number of shares of common stock as would be required upon full
exercise of the rights represented by this Agreement.
10. NO RIGHT TO EMPLOYMENT. Nothing in this Agreement shall be deemed to
create a relationship of employer to employee. The Company granted the Option to
Optionee in consideration of the performance of certain consulting services by
Optionee.
11. TAX CONSEQUENCES. Some of the federal tax consequences relating to this
Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option. The Optionee may incur regular federal
income tax liability upon exercise of the Option. The Optionee will be
treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise
Price. If the Optionee is deemed for any reason to be an employee, the
Company will be
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<PAGE>
required to withhold from his or her compensation or collect from the
Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(b) Disposition of Shares. If the Optionee holds Shares for at least a
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
12. GOVERNING LAW. This Agreement is governed by the laws of the State of
New York.
IN WITNESS WHEREOF, this Agreement is executed this day of April, 1999.
TECH LABORATORIES, INC.
By:
-------------------------------------
OPTIONEE:
MINT CORPORATION
By:
-------------------------------------
Richard Kandel, President
-7-
<PAGE>
TECH LABORATORIES, INC.
EXERCISE NOTICE
Tech Laboratories, Inc.
955 Belmont Avenue
North Haledon, New Jersey 07508
1. EXERCISE OF OPTION. Effective as of today, _____________, 199___, the
undersigned ("Purchaser") hereby elects to purchase ___________ shares (the
"Shares") of the Common Stock of Tech Laboratories, Inc. (the "Company") under
and pursuant to the Stock Option Agreement dated April ____, 1999 (the "Option
Agreement"). The purchase price for the Shares shall be as set forth in the
Option Agreement, as adjusted.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the Company the full
purchase price for the Shares (either in cash or by check).
3. REPRESENTATION OF PURCHASER. Purchaser acknowledges that Purchaser has
received, read, and understood the Option Agreement and agrees to abide by and
be bound by its terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing the Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Shares, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to the Optionee
as soon as practicable after exercise of the Option.
5. TAX CONSULTATION. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. ENTIRE AGREEMENT. The Option Agreement is incorporated herein by
reference. This Exercise Notice and the Option Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof.
Submitted by: Accepted by:
OPTIONEE:
- ----------------------------------
Address:
By:
- ---------------------------------- ----------------------------------
Its:
- ---------------------------------- ----------------------------------
CONSENT OF CHARLES J. BIRNBERG, CPA, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 16, 1999, in Amendment No. 1 to the Registration
Statement (Form SB-2) and the related Prospectus of Tech Laboratories, Inc.
/s/ Charles J. Birnberg
----------------------------------
Charles J. Birnberg
Hackensack, New Jersey
October 18, 1999
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