Reclamation Consulting and Applications, Inc., a Colorado corporation (refered
to herein as "We" or the "Company" or the "Registrant" specializes in the
production and sales of the AlderoxTM line of products including Alderox TM
ASA-12TM, DCR TM, KR-7 TM, TSR TM,and ASA Cleaners.
Reclamation Consulting and Applications, Inc. is a Colorado corporation,
originally formed in 1976 under the name Vac-Tec Systems, Inc. and reorganized
as a public shell corporation without significant assets in early 1997, after we
ceased operations in the glass vacuum coating business.
II. BUSINESS
Our primary business at this date is the production and sale of our AlderoxTM
line of products including ASA-12TM, DCR TM, KR-7 TM, TSR TM, and ASA Cleaners.
ASA-12TM is an asphalt release agent and DCR TM is a drag chain lubricant that
were both developed by the Company in reponse to the asphalt industry's need for
effective, economical and environmentally friendly products. KR7TM is a
concrete release agent also developed by the Company in reponse to the this
industry's same needs. TSRTM was specifically designed as an environmentally
friendly product for the oil sands industry to reduce the build-up of clay, lime
and mud on the undercarriages and sides of transport vehicles and equipment.
(a) Products and Services
(i) AlderoxTM ASA-12TM, DCRTM, KR-7TM, TSRTM and ASA Cleaners. The Company
manufactures, sells and services the AlderoxTM line of products throughout the
United States through North American Systems, Inc. and throughout Canada by
Canadian Release Agents, Inc. AlderoxTM ASA-12TM is a ready-to-use product that
allows asphalt to slide easily from truck beds. AlderoxTM DCRTM is a ready-to-
use lubricant used to reduce start-up amps and eliminates power spiking while
ensuring that highely polymerized asphalt mixes do not build-up on drag chains
or slats. AlderoxTM KR7TM is a ready-to-use product that allows concrete to
easily release from concrete molds and forms.
(ii) We have obtained government approval for all of Canada for both
AlderoxTM ASA-12TM and KR-7TM and have been approved as the national standard
for both products, which now carry the Canadian Environmental Choice EcoLogo. We
will be applying for national standard EcoLogo status for TSRTM and DCRTM in the
future. We are not aware of any Canadian government approvals necessary for the
sale of TSRTM, DCRTM, or ASA Cleaners. In the United States, we have obtained
approval from the Connecticut, Utah, Georgia, Washington, Colorado and Oklahoma
Departments of Transportation for government use of ASA-12TM within those
States. There are no government approvals required for the sale of the AlderoxTM
line of products in California, Florida, Hawaii, New Jersey, Pennsylvania, West
Virginia, Arizona or Oregon. We have applied for approval of AlderoxTM ASA-12TM
in Texas, New York, Nevada and Wyoming. The Company is currently in the process
of applying for approvals within other States. We are not aware of any United
States government approvals necessary prior to the sales of AlderoxTM KR7TM,
DCRTM, or ASA Cleaners.
Management believes the advantages of the AlderoxTM line of products over its
competitors are as follows:
- 100% biodegradable
- Completely non-hazardous
- Easily applied
- Zero negative impact to equipment or asphalt/concrete
- Exclusive filming technology
(iii) AlderoxTM ASA-12TM, DCRTM, KR7TM, TSRTM and ASA Cleaners were designed
for use in the asphalt, concrete and oil sands industries. The products are
manufactured by North American Systems, Inc. and the formulations are
proprietary to Reclamation Consulting and Applications, Inc. We have applied for
both national and international patents and are Patent Pending on both ASA-12TM
and KR-7TM. At this time, the ingredients and formulas of all other AlderoxTM
products are Proprietary Trade Secrets of the Company. North American Systems,
Inc. is under agreement with Reclamation Consulting And Applications, Inc. for
the manufacturing of all AlderoxTM products in the United States at their Salt
Lake City, Utah manufacturing facility.
(b) Marketing & Sales
Our marketing program includes the development of international markets and
support of existing distributors, including North American Systems, Inc.
throughout the United States and Canadian Release Agents, Inc. throughout
Canada. This support includes;
the development of compliance data, sales materials, product demonstrations and
sales leads. Compliance Data is performance data we generated from on-site
pilot testing. This data specifically shows the characteristics of asphalt
release from trucks prior to applying AlderoxTM ASA-12TM and after applying
AlderoxTM ASA-12TM in comparison with other competitive products currently used
by our potential customers. We utilize, and have under contract, North American
Systems, Inc., nationwide for all marketing, sales, manufacturing and service of
our AlderoxTM line of products. Reclamation Consulting & Applications, Inc is
also under agreement with Canadian Release Agents, Inc. for the marketing, sales
and service of our AlderoxTM line of products throughout Canada.
(c) Competition
We compete with over 60 other companies who have competing products. Primarily,
our competition are considerably smaller than RCAI and with less financial
resources who operate on a strictly regional basis. However, there are some
companies who are larger, with greater financial resources and larger
organizations.
Competition in this industry focuses on price, quality, features, performance,
specialization, expertise, reliabilty, technology, customer relationships,
marketing, advertising, sales, publicity, distribution, serving particular
market niches, and appealing to particiular consumers.
(d) Raw Materials
Our products are produced by North American Systems, Inc. using 100% natural
ingredients. The formulas used in our AlderoxTM line of products are
proprietary and exculsive to the Company. One of the raw materials for the
product is difficult to obtain. This raw material is purchased by the Company
under contract from a sole service supplier.
(e) Dependence on a Few Customers
There are 2 single customers who currently dominate our business. These
customers are North American Systems, Inc., the sole distributor of our
AlderoxTM line of products in the United States and Canadian Release Agents,
Inc., the sole distributor of our AlderoxTM line of products in Canada.
(f) Patents, Trademarks, Licenses, etc.
(i) Trade Secrets, Patents and Trademarks
We have two (2) domestic Patents Pending, two (2) international Patents Pending,
two (2) Trade Secrets and five (5) Trademarks. Our Patents Pending are for
AlderoxTM ASA-12TM and ALderoxTM KR-7TM. Our Trade Secrets are for the
ingredients and production methods of our proprietary products AlderoxTM DCRTM
and TSRTM. Our Trademarks are AlderoxTM, KR7TM , ASA-12TM, DCRTM and TSRTM.
(g) Government Regulation
There are certain government regulations through State aprovals for asphalt
release agents on a State by State basis. Each State has their own approval
process, with some being more stringent than others. This process is designed
to assure the States that the products that are approved meet certain
environmental regulations. Our customers are responsible for compliance with
these regulations and we have not assumed any responsibility for compliance as a
provider of products to our customers. Not all of the individual States require
approval. We are not aware of any government regulations that are required
prior to product sale and use of concrete release agents such as AlderoxTM
KR7TM, drag chain lubricants such as AlderoxTM DCRTM , non-stick undercoatings
and coatings, such as AlderoxTM TSRTM or cleaners, such as our ASA Cleaners.
(h) After Market Sales Responsibility
Reclamation Consulting and Applications, Inc. warrants to its customers that the
AlderoxTM line of products will preform to their specifications.
(i) Research and Development
The technology and products sold by us are in the early stages of market
acceptance. As a result, in order to accomplish a sale, a customer will
typically require a significant research and development effort, in the form of
testing and trials. These costs are funded in part by us, and expensed as a
sales expense.
In addition, management believes there may be additional undiscoverd
applications for the AlderoxTM line of products. The Company is currently
exploring additional markets.
(j) Employees
We have four full-time employees, including three located in California, and one
located in Connecticut.
ITEM 2. DESCRIPTION OF PROPERTY
We own no real property or personal property.
Facilities
Our corporate offices are located at 23832 Rockfield Blvd., Suite 275,
Lake Forest, CA 92630. We are under a three-year lease agreement for
the 876 square feet offices ending April 2005 Our monthly lease
payments are $1,919.
North American Systems, Inc.'s manufacturing warehouse is located at
3558 South 900 West, Salt Lake City, UT 84104. We are under a five-year
lease for this 12,020 square feet warehouse ending June 2007. Our
monthly lease payments are $5289.70. Through our Distribution Agreement
with North American Systems, Inc. and as long as NAS occupies the Salt
Lake City warehouse, they will pay the monthly lease payment directly to
the landlord while the agreement is in affect between RCAI and NAS.
ITEM 3. LEGAL PROCEEDINGS
A former employee sued the Company for a breach of contract claim
arising from an employment agreement entered into between the ex-
employee and the Company on April 7, 2003. The original complaint was
filed on Feb. 5, 2004 and asserts the following causes of action: breach
of contract, breach of covenant of good faith and fair dealing, and
fraud. The plaintiff is demanding compensatory and punitive damages as
well as attorneys' fees and costs.
The Company filed its Cross-Complaint on April 15, 2004 alleging breach of
contract, negligence, intentional misrepresentation, rescission, and declaratory
relief. An amended Cross-Complaint was filed July 6, 2004.
The amount of potential loss is $19,000 on the case. The company has accrued
this amount in the accompanying financial statement.
The Company settled a lawsuit with two former employees during the year ended
June 30, 2004. The former employees had alleged that the Company and its officer
were liable to them for losses suffered by the former employees due to breach of
employment contract. Per the settlement agreement, the Company agreed to pay to
the former employees in a total amount of $128,000 in exchange of 200,000 shares
of the Company's common stock. The payments will be paid in combined monthly
installment of $14,333. Per the settlement agreement, these settlements shall
pay off before December 31, 2004. The Company has recorded $128,000 as accrued
expense in the accompanying financial statements. The Company has paid $71,109
through June 30, 2004.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY SHAREHOLDERS
Nothing to report.
Part II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock trades over-the-counter on the Bulletin Board under
the trading symbol "RCAA". The closing sales price as of Jun 30, 2004, was
$0.38 per share.
Set forth below is the high and low bid information for the Company's Common
Stock for each full quarterly period within the four most recent fiscal years.
ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS JUNE 30, 2004 AND 2003
Twelve Month Statement of Operations
The Company has incurred net losses for twelve months ended June 30, 2004 of
$2,272,770 as compared to a net loss of $1,698,498 for the twelve months ended
June 30, 2003. The losses for the twelve months ended June 30, 2004 and 2003
can be attributed in part to significant costs incurred in the introduction of
the Company's AlderoxTM line of products to the marketplace. Management is
optimistic that sales of its proprietary AlderoxTM line of products will
continue to lead towards contracts which will begin to generate significant
revenues to cover the Company's operating expenses.
The revenues for the twelve months ending June 30, 2003 are $261,235 and are
from the sales of AlderoxTM products. The revenues from the twelve months ending
June 30, 2004 are $289,218 and are from the sales of AlderoxTM products.
The Cost of Goods Sold represents sixty four percent (64%) as compared to one
hundred thirteen percent (113%) of sales for the twelve months ending June 30,
2003. The Costs of Goods are not consistent between years as a result of the
varying sources, which created sales revenues in each year.
Operating expenses consist primarily of general and administrative expenses. For
the twelve months ended June 30, 2004 operating expenses totaled $1,774,600 as
compared to $1,823,307 for the twelve months ended June 30, 2003. The decrease
in operating expenses between the years of $48,707 can be primarily attributed
to the Distribution and Manufacturing Agreements with North American Systems,
Inc. Consulting fees of $0 were attributed to the cost of the raising of
capital to finance operations.
Interest expense and other finance charges decreased from $106,454 for the
twelve months ended June 30, 2003 to $45,622 for the twelve months ending June
30, 2004. The decrease between years can be attributed to the decrease in Notes
payable between years 2003 and 2004.
Liquidity and Capital Resources
As of June 30, 2004 the Company had cash and cash equivalents of $1,043, as
compared to cash and cash equivalents of $300 as of June 30, 2003. At June 30,
2004, the Company had a working capital deficiency (total current liabilities in
excess of total current assets) of $193,375 as compared to a working capital
deficit (total current liabilities in excess of total current assets) of
$1,088,216 as of June 30, 2003.
The principal use of cash for the twelve months ended June 30, 2004 and 2003 was
to fund North American Systems, Inc. The Company received capital of $1,796,433
in the twelve months ended June 30, 2004 from the private sale of common stock
as compared to $279,967 in the twelve months ending June 30, 2003.
The management of the Company is endeavoring to cover operating expenses in
excess of revenues of the Company until adequate sales are generated, through
the private sale of additional shares, but there is no insurance of success in
such placement. Management projects that the Company may become profitable and
will begin to generate sufficient cash flow to meet its monthly operating
expenses sometime during the first quarter of the current fiscal year, but
cannot guarantee this result. The Company's monthly operating expenses
currently average approximately $35,000.00 per month. In addition to the
raising of capital through the Private Sale of shares, the Company has secured
an operating line of credit from Canvasback Company Limited in the amount of
$650,000.00. During the twelve months ending June 30, 2004, the Company raised
$15,000 in convertible notes payable.
ITEM 7. FINANCIAL STATEMENTS
CONTENTS
PAGE
Independent Auditors' Report .......................... F-2
Balance Sheets ........................................ F-3
Statement of Operations ............................... F-4
Statements of Stockholders' Equity (Deficit) .......... F-5
Statements of Cash Flows .............................. F-6
Notes to the Financial Statements ................ F-7-F-16
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Reclamation Consulting and Applications, Inc.
We have audited the accompanying balance sheet of Reclamation Consulting and
Applications, Inc. (formerly, Recycling Centers of America, Inc.) as of June 30,
2004 and the related statements of operations, stockholders' equity, and cash
flows for each of the two years in the period ended June 30, 2004. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audits of these statements in accordance with the standards of
the Public Company Accounting Oversight Board ( United States) Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Reclamation Consulting and
Applications, Inc. as of June 30, 2004, and the results of its operations and
its cash flows for each of the two years in the period ended June 30, 2004, in
conformity with accounting principles generally accepted in the United States of
America.
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has accumulated deficit of $ 11,112,519 as of June 30,
2004. The Company incurred net losses of $ 2,542,770 and $ 1,698,498 for the
years ended June 30, 2004 and 2003 respectively. These factors as discussed in
Note 15 to the financial statements, raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 15. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
KABANI & COMPANY, INC.
CERTIFIED PUBLIC ACCOUNTANTS
Fountain Valley, California
September 2, 2004
RECLAMATION CONSULTING AND APPLICATIONS, INC.
(FORMERLY, RECYCLING CENTERS OF AMERICA, INC.)
BALANCE SHEET
JUNE 30, 2004
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $ 1,043
Accounts receivable 262,844
Notes recivable, net of allowance of
doubtful debts of $ 270,000 547,476
Employee advances 16,953
----------
Total current assets 828,316
PROPERTY AND EQUIPMENT, net 11,942
----------
$ 840,258
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 193,053
Accrued expenses 384,242
Customer deposit 7,542
Convertible loans 50,104
-----------
Total current liabilities 634,941
LONG TERM LIABILITIES:
Note payable-related party 121,763
Convertible debentures 55,850
-----------
Total liabilities 812,554
COMMITMENTS
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value;
Authorized shares 75,000,000;
25,492,620 shares issued and outstanding 254,926
Additional paid in capital 10,895,296
Treasury stock (15,000)
Shares to be issued 5,000
Accumulated deficit (11,112,519)
------------
Total stockholders' equity 27,704
-------------
$ 840,258
=============
The accompanying notes are an integral part of these financial statements.
RECLAMATION CONSULTING AND APPLICATIONS, INC.
(FORMERLY, RECYCLING CENTERS OF AMERICA, INC.)
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003
---------- ----------
Net revenue $ 289,218 $ 261,235
Cost of revenue 185,280 295,675
----------- -----------
Gross loss 103,938 (34,440)
Total operating expenses 2,044,600 1,823,307
----------- -----------
Loss from operations (1,940,662) (1,857,747)
Non-operating income (expense):
Interest income 46,284 -
Interest expense (45,622) (106,454)
Loss on Impairment of inventory (583) (127,034)
Loss on disposal of asset (22,692) -
Gain (loss) on settlement of debts (578,695) 393,537
------------- -------------
Total non-operating income (expense) (601,308) 160,049
Loss before income tax (2,541,970) (1,697,698)
------------- -------------
Provision for income tax 800 800
Net loss $(2,542,770) $ (1,698,498)
============== ==============
Basic and diluted weighted average
shares outstanding 21,968,260 16,602,590
============== ==============
Basic and diluted net loss per share $ (0.12) $ (0.10)
============== ==============
The accompanying notes are an integral part of these financial statements.
RECLAMATION CONSULTING AND APPLICATION, INC.
(FORMERLY, RECYCLING CENTERS OF AMERICA,
INC.) STATEMENTS OF STOCKHOLDERS' DEFICIT FOR
THE YEARS ENDED JUNE 30, 2004 AND 2003
Common stock Total
-------------------- Additional stockholders'
Number of paid in Treasury Stock to Accumulated equity
shares Amount capital stock be issued deficit (deficit)
Balance at June 30, 2002 12,211,523 $122,495 $5,011,575 $(15,000) $1,050,594 $(6,871,251) $ (701,587)
Issuance of shares for cash recived in the
prior year 743,594 7,436 290,002 - (297,438) - -
Issuance of shares for service recived in the
prior year 153,125 1,531 42,875 - (44,406) - -
Issuanve of shares for debt settlement 1,875,000 18,750 690,000 - (708,750) - -
Issuance of shares on loan conversion 1,253,369 12,533 330,470 - - - 343.003
Issuance of shares for cash 1,138,440 11,384 207,416 - - - 218,800
Issuance of shares for service 1,019,608 10,196 394,014 - - - 404,210
Issuance of shares for compensation 425,000 4,250 113,725 - - - 117,975
Conversion provision on debenture and notes - (379) 236,632 - - - 236,253
Cancellation of shares issued to founder (150,000) (1,500) 1,500 - - - -
177,918 shares of common stock to be issued
for cash received - - - - 71,167 - 71,167
Net loss for the year ended June 30, 2003 - - - - - (1,698,498) (1,698,498)
----------- ---------- --------- ----------- ---------- ----------- -------------
Balance at June 30, 2003 18,669,659 $186,696 $7,318,209 $(15,000) 71,167 $(8,569,749) $(1,008,677)
Issuance of shares for cash recived in the
prior year 127,918 1,279 49,888 - (51,167) - -
Issuance of shares for service recived in the
prior year 50,000 500 19,500 - (20,000) - -
Issuanve of shares for debt settlement 1,546,131 15,461 1,176,493 - - - 1,191,954
Issuance of shares on loan conversion 41,432 414 26,917 - - - 27,331
Issuance of shares for cash 4,279,805 42,798 1,753,635 - - - 1,796,433
Issuance of shares for service 777,675 7,777 519,156 - - - 526,933
Option granted for services - - 31,500 - - - 31,500
10,000 shares of common stock to be issued
for service rendered - - - - 5,000 - 5,000
Net loss for the year ended June 30, 2004 - - - - - (2,542,770) (2,542,770)
---------- ------- ---------- -------- ----- ------------ -----------
Balance at June 30, 2004 25,492,620 254,926 10,895,296 (15,000) 5,000 (11,112,519) 27,704
========== ======= ========== ======== ===== ============ ======
The accompanying notes are an integral part of these financial statements.
RECLAMATION CONSULTING AND APPLICATIONS, INC.
(FORMERLY, RECYCLING CENTERS OF AMERICA, INC.)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2004 AND 2003
2004 2003
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(2,542,770) $(1,698,498)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 5,338 37,504
Issuance of shares for services
and compensation 526,933 522,185
Shares to be issued for service 5,000 -
Loss (gain) on settlement of debts 578,695 (393,537)
Allowance for doubtful debts 270,000 -
Impairment of inventory 583 127,034
Loss on disposal of asset 22,692 -
Option granted for compensation
and services 31,500 -
Debenture conversion provision - 236,253
Shares to be issued for services - -
(Increase)/decrease in current assets:
Accounts receivable (224,967) 34,185
Notes receivable (714,178) -
Inventory 98,116 11,186
Prepaid expenses 11,476 (3,462)
Employee advances (6,523) (10,430)
Other assets 3,285 (3,285)
Increase/(decrease) in current
Liabilities:
Accounts payable and accrued Expenses 93,672 142,020
Customer deposit 7,542 -
----------- ---------
Total adjustments 709,163 699,653
----------- ---------
Net cash used in operating activities (1,833,607) (998,845)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment (1,948) (140,637)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible loans 15,000 90,604
Repayment of convertible loans (35,000) -
Proceeds from shareholder loans - 479,234
Proceeds from other loans 83,112 278,302
Repayment of loans (23,246) -
Cash received for shares to be issued - 71,167
Common stock issuance for cash 1,796,433 218,800
--------- ---------
Net cash provided by financing activities 1,836,299 1,138,107
--------- ---------
NET DECREASE IN CASH & CASH EQUIVALENTS 743 (1,375)
CASH & CASH EQUIVALENTS, BEGINNING BALANCE 300 1,675
--------- ---------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ 1,043 300
========= =========
The accompanying notes are an integral part of these financial statements.
RECLAMATION CONSULTING AND APPLICATIONS, INC.
(FORMERLY, RECYCLING CENTERS OF AMERICA, INC.)
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATIONS AND DESCRIPTION OF BUSINESS
Reclamation Consulting and Applications, Inc. (formerly, Recycling Centers of
America, Inc.) (the "Company") is a Colorado corporation, originally formed in
1976 under the name of Vac-Tech Systems, Inc. The Company changed its name to
Recycling Centers of America on March 26, 1999. On January 16, 2002, an article
of amendment was filed to change the name of corporation to Reclamation
Consulting and Applications, Inc.
Presently, the Company's primary business is the production and sale of Alderox
TM line of products including ASA-12TM, DCR TM, KR-7 TM, TSR TM, and ASA
Cleaners. ASA-12 TM is an asphalt release agent, DCR TM is a drag chain
lubricant. KR7TM is a concrete release agent and TSRTM was specifically designed
for the oil sands industry.
During the period ended December 31, 2003, the Company appointed North American
Systems (NAS) as the sole United States distributor of Company's AlderoxTM line
of products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the Company's significant accounting policies consistently applied
in the preparation of the accompanying financial statements follows:
Cash and cash equivalents
The Company considers all liquid investments with a maturity of three months or
less from the date of purchase that are readily convertible into cash to be cash
equivalents.
Accounts Receivable:
The Company's customer base consists of a geographically dispersed customer's
base. The Company maintains reserves for potential credit losses on accounts
receivable. Management reviews the composition of accounts receivable and
analyzes historical bad debts, customer concentrations, customer credit
worthiness, current economic trends and changes in customer payment patterns to
evaluate the adequacy of these reserves. Reserves are recorded primarily on a
specific identification basis.
Property & Equipment
Property and equipment is carried at cost. Depreciation of property and
equipment is provided using the straight-line method for substantially all
assets with estimated lives of three to seven years.
Expenditures for maintenance and repairs are charged to expense as incurred.
Income taxes
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (SFAS 109). Under SFAS 109, deferred income taxes are reported
using the liability method. Deferred tax assets are recognized for deductible
temporary differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Revenue Recognition
The Company recognizes its revenue in accordance with the Securities and
Exchange Commissions ("SEC") Staff Accounting Bulletin No. 104, "Revenue
Recognition in Financial Statements" ("SAB 104"). Revenue is recognized when
merchandise is shipped to a customer.
Using Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
Statement of financial accounting standard No. 107, Disclosures about fair value
of financial instruments, requires that the Company disclose estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position for current assets and current liabilities qualifying, as
financial instruments are a reasonable estimate of fair value.
Earnings per share
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". Basic net
loss per share is based upon the weighted average number of common shares
outstanding. Diluted net loss per share is based on the assumption that all
dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the period.
Weighted average number of shares used to compute basic and diluted loss per
share is the same in these financial statements since the effect of dilutive
securities is anti-dilutive.
Stock-based compensation
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation". SFAS No. 123 prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options, restricted
stock, employee stock purchase plans and stock appreciation rights. SFAS No. 123
requires compensation expense to be recorded (i) using the new fair value method
or (ii) using the existing accounting rules prescribed by Accounting Principles
Board Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and
related interpretations with pro forma disclosure of what net income and
earnings per share would have been had the Company adopted the new fair value
method. The company uses the intrinsic value method prescribed by APB25 and has
opted for the disclosure provisions of SFAS No.123.
Issuance of shares for service
The Company accounts for the issuance of equity instruments to acquire goods and
services based on the fair value of the goods and services or the fair value of
the equity instrument at the time of issuance, whichever is more reliably
measurable.
Segment Reporting
Statement of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure
About Segments of an Enterprise and Related Information" requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company.
Currently, SFAS 131 has no effect on the Company's financial statements as
substantially all of the Company's operations are conducted in one industry
segment.
Recent Pronouncements
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation-Transition and Disclosure". SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock Based Compensation", to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used, on reported
results. The Statement is effective for the Companies' interim reporting period
ending January 31, 2003.
In compliance with FAS No. 148, the Company has elected to continue to follow
the intrinsic value method in accounting for its stock-based employee
compensation plan as defined by APB No. 25 and has made the applicable
disclosures below.
Had the Company determined employee stock based compensation cost based on a
fair value model at the grant date for its stock options under SFAS 123, the
Company's net earnings per share would have been adjusted to the pro forma
amounts for the year ended June 30, 2004 and 2003, as follows ($ in thousands,
except per share amounts). :
Year ended June 30,
2004 2003
-------- --------
Net loss - as reported $ (2,543) $ (1,698)
Stock-Based employee compensation
expense included in reported net
income, net of tax 31
Total stock-based employee
compensation expense determined
under fair-value-based method for all
rewards, net of tax (57) (194)
-------- -------
Pro forma net loss $ (2,569) $ (1,892)
======== =======
Earnings (loss) per share:
Basic, as reported $ (0.12) $ (0.10)
Diluted, as reported $ (0.12) $ (0.11)
Basic, pro forma $ (0.12) $ (0.10)
Diluted, pro forma $ (0.12) $ (0.11)
On May 15, 2003, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 150 (FAS 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. FAS 150 changes the accounting
for certain financial instruments that, under previous guidance, could be
classified as equity or "mezzanine" equity, by now requiring those instruments
to be classified as liabilities (or assets in some circumstances) in the
statement of financial position. Further, FAS 150 requires disclosure regarding
the terms of those instruments and settlement alternatives. FAS 150 affects an
entity's classification of the following freestanding instruments: a)
Mandatorily redeemable instruments b) Financial instruments to repurchase an
entity's own equity instruments c) Financial instruments embodying obligations
that the issuer must or could choose to settle by issuing a variable number of
its shares or other equity instruments based solely on (i) a fixed monetary
amount known at inception or (ii) something other than changes in its own equity
instruments d) FAS 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety. The guidance in FAS 150 is
generally effective for all financial instruments entered into or modified after
May 31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. For private companies, mandatorily
redeemable financial instruments are subject to the provisions of FAS 150 for
the fiscal period beginning after December 15, 2003. The adoption of SFAS 150
does not have a material effect on the earnings or financial position of the
Company.
In December 2003, the Financial Accounting Standards Board (FASB) issued a
revised Interpretation No. 46, "Consolidation of Variable Interest Entities"
(FIN 46R). FIN 46R addresses consolidation by business enterprises of variable
interest entities and significantly changes the consolidation application of
consolidation policies to variable interest entities and, thus improves
comparability between enterprises engaged in similar activities when those
activities are conducted through variable interest entities. The Company does
not hold any variable interest entities.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current
period presentation.
3. ACCOUNTS RECEIVABLE
All accounts receivable are trade related. These receivables are current and no
reserve for uncollectible accounts is deemed necessary.
4. NOTES RECEIVABLE
The notes receivable comprises of $ 817,476 due from North American Systems Inc.
(NAS), the sole United States distributor of the Company's line of AlderoxTM
products, working in Salt Lake City (SLC) under a revolving loan agreement. The
receivable is for the sale of all the assets of the Company in SLC as well as
other amounts transferred to the distributor at various times during the period
according to the agreement with NAS and is secured by assets of NAS. Part of the
agreement with NAS requires that the Company will provide loans to NAS to be
used towards meeting the working capital requirements until such time when NAS
is able to start paying the amount owed to the Company through sale of the
Company's line of AlderoxTM products. The receivable bears interest at the rate
of 10% per annum. The agreement terminates October 14, 2005. As of June 30,
2004, the Company has recorded an allowance for doubtful debts of $ 270,000
against the notes receivable.
NSA also owes $ 262,844 in account receivable to the Company.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at June 30, 2004:
Computers and office equipment $ 16,140
Test equipment 4,916
------
21,056
Less accumulated depreciation (9,114)
-------
Balance $ 11,942
=======
Depreciation expense was $5,338 and $37,504 for the year ended June 30, 2004 and
2003.
Disposal of fixed assets
During the year, the Company appointed North American Systems (NAS) as the sole
United States distributor of the Company's products ASA-12, KR-7, TSR, DCR and
cleaners. On August 1, 2003 the Company sold all the assets in Salt Lake City to
NAS. The assets transferred had a carrying value of $111,834. The Company
recorded $71,355 as a receivable from NAS and offset the remaining balance of
$40,479 against outstanding debts to NAS.
During the year, the Company disposed off the vehicles and recorded loss of $
22,692 in the accompanying financial statement.
6. NOTES PAYABLE - RELATED PARTY
Notes payable consisted of the following at June 30, 2004:
Note payable to shareholder
bearing interest rate of 10 %, unsecured,
payable on December 31, 2005 $27,000
Notes payable to shareholder,
bearing interest rate of 20%, unsecured
payable on December 31, 2005 28,000
Notes payable to shareholder,
bearing interest rate of 10%, unsecured
payable on December 31, 2005 28,000
Notes payable bearing interest
rate of 10%, unsecured
payable on December 31, 2005 38,763
---------
Total Notes payable $ 121,763
=========
Interest expense for the year ended June 30, 2004 and June 30, 2003 amounted to
$7,707 and $ 37,239 respectively.
7. CONVERTIBLE LOANS
The Company has convertible loans outstanding at June 30, 2004 totaling $50,104.
The loans are convertible to stock at the price of $ 0.40 or $ 0.45. The
investor has an option to convert their loan, or any portion, of to the
restricted capital stock of the Company at price per the agreement and receiving
one share, up front at inception of the loan, for each dollar invested. Interest
will accumulate at rate of 10% per annum until conversion date and paid semi
annually over the term of the agreement leaving the initial loan until
expiration of the agreement convertible to Company's restricted capital stock
per the agreement or principal returned with the last interest payment. Loan can
be converted at any time within the 3 year loan period.
8. CONVERTIBLE DEBENTURES
The Company, through a 506 D Securities Offerings, solicited investment funds.
The Convertible Debentures bear interest at ten percent (10%) per annum payable
annually and are convertible into restricted common shares of the Company at
$0.40 per share. The Company has the right to change the conversion price of the
debentures. The Debentures are unsecured and are due and payable by December 31,
2005. The Company recorded beneficial conversion feature expense for $ 236,253
during the year ended June 30, 2003.
9. COMMITMENTS
The Company conducts its operations utilizing leased facilities and equipment
under non-cancelable operating lease agreements expiring at various dates
through the year 2007. Future minimum lease commitments, excluding property
taxes and insurance are approximately as follows:
Year ending June 30,
2005 $77,118
2006 61,386
2007 57,814
===========
Total $ 196,318
Rent expenses for all leased facilities and equipment were $ 38,661 and $75,700
for the year ended June 30, 2004 and 2003, respectively.
10. MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The majority of the Sales in the year ended June 30, 2004 and 2003 was made to a
few customers. At June 30, 2004, the total sales to two major customers was
$321,239 and the receivable balance from these major customers was $262,844. In
fiscal year 2003, the two major customers comprised approximately $187,078 of
the Company's total sale and the receivable balance from these major customers
was $11,939. Management believes that customer acceptance, billing, and
collection policies are adequate to minimize potential risk on trade
receivables.
11. INCOME TAXES
No provision was made for Federal income tax since the Company has significant
net operating loss carryforwards. Through June 30, 2004, the Company incurred
net operating losses for tax purposes of approximately $11,100,000. The net
operating loss carryforwards may be used to reduce taxable income through the
year 2024. The availability of the Company's net operating loss carryforwards
are subject to limitation if there is a 50% or more positive change in the
ownership of the Company's stock. The provision for income taxes consists of the
state minimum tax imposed on corporations.
Temporary differences which give rise to deferred tax assets and liabilities at
June 30, 2004 comprised of depreciation and amortization and net operating loss
carry forward. The gross deferred tax asset balance as of June 30, 2004 was
approximately $4,440,000. A 100% valuation allowance has been established
against the deferred tax assets, as the utilization of the loss carrytforwards
cannot reasonably be assured.
The following is a reconciliation of the provision for income taxes at the U.S.
federal income tax rate to the income taxes reflected in the Consolidated
Statements of Operations:
June 30, June 30,
2004 2003
-------- -------
Tax expense (credit) at statutory rate-federal (34)% (34)%
State tax expense net of federal tax ( 6) ( 6)
Permanent differences 1 1
Changes in valuation allowance (39) (39)
Tax expense at actual rate - -
12. STOCKHOLDERS' EQUITY
Common Stock:
During the year ended June 30, 2004 and 2003, the Company issued stocks at
various times, as described per the following. The stocks were valued at the
average fair market value of the freely trading shares of the Company as quoted
on OTCBB on the date of issuance:
During the fiscal year 2004, the Company issued 4,279,805 shares of common stock
for cash amounting $1,796,433 and 1,546,131 shares of common stock for
settlement of debt amounting $1,191,954 and 41,432 shares of common stock for
conversion of loan amounting $27,331.
The Company issued 777,675 shares of common stock for services in fiscal year
2004 for services amounting $526,933.
The Company issued 127,918 shares in the year ended June 30, 2004 for cash
received in the prior year and issued 50,000 shares in the year ended June 30,
2004 for conversion of loan for prior year.
The Company has 10,000 shares of common stock to be issued for service rendered
valued at $5,000.
During the fiscal year 2003, the Company issued 1,138,440 shares of common stock
for cash amounting $218,800 and 1,253,369 shares of common stock for conversion
of loans amounting $343,003.
The Company issued 1,019,608 shares of common stock for services in fiscal year
2003 for services amounting $404,210 and 425,000 shares of common stock for
compensation amounting $117,975.
The Company issued 743,594 shares in the year ended June 30, 2003 for cash
received in the prior year and issued 153,125 shares in the year ended June 30,
2003 for service received in the prior year.
The Company issued 1,875,000 shares for debt settlement recorded in the prior
year.
The Company cancelled 150,000 shares for founder's shares.
The Company received cash of $71,167 for 177,918 shares to be issued.
Stock Options:
The number and weighted average exercise prices of options granted by the
Company are as follows:
Options Outstanding
Number Weighted
of Average
Options Exercise
Price
--------- ------------
Outstanding June 30, 2002 7,555,208 $0.40
Granted during the year 1,257,500 $0.40
Exercised (125,000) (0.40)
Expired/forfeited (1,290,208) (0.40)
Outstanding June 30, 2003 7,397,500 $0.40
Granted during the year 150,000 $0.40
Exercised (921,250) $0.40
Expired/forfeited (432,500) $0.40
Outstanding June 30, 2004 6,193,750 $0.40
Following is a summary of the status of options outstanding at June 30, 2004:
Outstanding Options Exercisable Options
------------------- -------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Exercise Price Number Life Price Number Price
-------------- -------- -------- -------- -------- ---------
$ 0.40 181,250 4 months $ 0.40 181,250 $ 0.40
$ 0.40 537,500 6 months $ 0.40 537,500 $ 0.40
$ 0.40 450,000 1.5 years $ 0.40 450,000 $ 0.40
$ 0.40 4,875,000 2.6 years $ 0.40 4,875,000 $ 0.40
$ 0.56 150,000 5 months $ 0.56 150,000 $ 0.56
The Company granted options to various consultants for services rendered. These
options were accounted for using the fair value of the options granted based on
the Black- Scholes option-pricing model. The Company recorded $31,500 during the
year ended June 30, 2004 and $-0- in 2003 as consulting expense.
The Company accounts for stock based compensation to employees under APB 25
using the intrinsic value method.
Pro forma information regarding the effect on operations is required by SFAS
123, and has been determined as if the Company had accounted for its employee
stock options under the fair value method of that statement. Pro forma
information using the Black-Scholes method at the date of grant based on the
following assumptions for the year ended June 30, 2004 and 2003 was as follows:
Expected life (years) 1-5 years
Risk-free interest rate 3% and 5.0%
Dividend yield 0% and 0%
Volatility 100% and 50%
13. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
The Company paid income taxes of $0 and interest of $25,003 during the fiscal
year 2004. The Company paid income taxes of $0 and interest of $15,400 during
the fiscal year 2003.
Supplemental disclosure of non-cash investing and financing activities:
The cash flow statements do not include following non-cash investing and
financing activities:
During the fiscal year 2004, the company issued 1,546,131 shares of common stock
for debt settlement valued $1,191,954 and issued 41,432 shares of common stock
for conversion of loan valued $27,331.
During the fiscal year 2003, the Company issued 1,253,369 shares of common stock
for conversion of loans amounting $343,003.
14. LITIGATION:
A former employee sued the Company for a breach of contract claim arising from
an employment agreement entered into between the ex-employee and the Company on
April 7, 2003. The original complaint was filed on Feb. 5, 2004 and asserts the
following causes of action: breach of contract, breach of covenant of good faith
and fair dealing, and fraud. The plaintiff is demanding compensatory and
punitive damages as well as attorneys' fees and costs.
The Company filed its Cross-Complaint on April 15, 2004 alleging breach of
contract, negligence, intentional misrepresentation, rescission, and declaratory
relief. An amended Cross-Complaint was filed July 6, 2004.
The amount of potential loss is $19,000 on the case. The company has accrued
this amount in the accompanying financial statement.
The Company settled a lawsuit with two former employees during the year ended
June 30, 2004. The former employees had alleged that the Company and its officer
were liable to them for losses suffered by the former employees due to breach of
employment contract. Per the settlement agreement, the Company agreed to pay to
the former employees in a total amount of $128,000 in exchange of 200,000 shares
of the Company's common stock. The payments will be paid in combined monthly
installment of $14,333. Per the settlement agreement, these settlements shall
pay off before December 31, 2004. The Company has recorded $128,000 as accrued
expense in the accompanying financial statements. The Company has paid $71,109
through June 30, 2004.
15. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. This basis of accounting contemplates
the recovery of the Company's assets and the satisfaction of its liabilities in
the normal course of business. Through June 30, 2004, the Company had incurred
cumulative losses of $11,112,519 including net losses of $2,542,770 and
$1,698,498 for the fiscal years 2004 and 2003, respectively.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying balance
sheet is dependent upon continued operations of the Company, which in turn is
dependent upon the Company's ability to raise additional capital, obtain
financing and to succeed in its future operations. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or amounts and classification of liabilities that might
be necessary should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable effort
during the period ended June 30, 2004, towards (i) obtaining additional equity
financing (ii) controlling of salaries and general and administrative expenses
(iii) management of accounts payable and (iv) evaluation of its distribution and
marketing methods.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Nothing to report.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The names, ages and positions of the directors and executive officers of the
Company as of June 30, 2004, are as follows:
NAME AGE POSITION SINCE
--------------------------------------------------------------
Michael C. Davies 34 CFO, Vice President Dec. 1997
and Director
Gordon W. Davies 36 President and Dec. 1997
Director
Paul J. Petit Director March 2003
The Directors serve until the next annual meeting of shareholders, or until
their successors are elected.
MR. MICHAEL C. DAVIES
From 1988 to 1991 Mr. Davies was the Owner/Manager of Fuel Oil Polishing Company
located in Vancouver, British Columbia, Canada. Mr. Davies' company was in the
sales, marketing and project management of fuel oils polishing within the
Province of British Columbia.
From 1991 to 1993 he was an Accounts Executive with Innovative Environmental
Services, Ltd. in Vancouver, a company in the business of sales and marketing of
wastewater treatment equipment.
From 1993 to 1994 he was the Marketing Manager for Transenviro, Inc., located in
Irvine, California. Transenviro is an international supplier of wastewater
treatment equipment and process design engineering.
From 1994 to 1996 Mr. Davies was the Marketing Manager for Babcock King-
Wilkinson, LP, Irvine, California, a wastewater treatment business.
From 1996 to 2000 Mr. Davies has held the positions of Vice President and a
Director for Aquadynamic Technologies, Inc. and Aquatek, Inc., which is a wholly
owned subsidiary of Aquadynamic Technologies. Aquadynamic Technologies, Inc.
was acquired by Registrant and became Registrant's wholly-owned subsidiary in
November of 1997.
From 1996 to 1998 Mr. Davies held the position of Vice President, Sales/Director
for Wil-Flow, Inc., the sole supplier of its patented RGD (Rapid Gravity
Dewatering) wastewater sludge dewatering system.
From 1997 to the present, Mr. Davies has been the Vice President, Chief
Financial Officer and a Director. Mr. Davies is the brother of Gordon Davies.
MR. GORDON W. DAVIES
From 1991 to 1994 Mr. Davies was an Accounts Executive for Innovative
Environmental Services, Ltd., located in Vancouver, British Columbia, which is a
company in the business of wastewater treatment equipment.
From 1993 to 1993 he held a Sales Manager position at Transenviro,Inc. in
Irvine, California.
From 1994 to 1996, Mr. Davies was the Sales/Marketing & Proposals Manager for
Babcock King-Wilkinson, LP in Irvine, California, and in 1996 he was the acting
CEO for this company.
Babcock King-Wilkinson, LP is in the business of wastewater treatment system
process design/engineering and equipment supply operations on a worldwide basis.
From 1996 to 2000 Mr. Davies has been the President and a Director of
Aquadynamic Technologies, Inc. He is also a Director of Aquatek,Inc., the
wholly-owned subsidiary of Aquadynamic Technologies, Inc. Aquatek,Inc. is an
engineering design house and supplier of computer-automated process and motor
control systems for water and wastewater treatment systems.
From 1996 to 1998 Mr. Davies was the General Manager of Wil-Flow, Inc.
From 1997 to the present, Mr. Davies has held the position of President and a
Director for us. Gordon Davies is the brother of Michael Davies.
MR. PAUL J. PETIT
Born and educated in London, England, Mr. Petit is a
Graduate of the City and Guilds in Mechanical Engineering. Mr. Petit is now
based in Toronto, Ontario, Canada and brings over 35 years of experience to the
Company.
Specializing in international business management and acquisitions, Mr. Petit is
the founder of Sherwood Data Security, Inc., a specialized data
management/storage company serving Canada's major corporations and financial
institutions. After nine years of building and developing this company, Mr.
Petit orchestrated the sale of SDSI to Brambles PTY of Australia in 1996 after
which, he was retained as President of their new division.
The Company has received no filings under Section 16(a) of the Securities
Exchange Act of 1934, and is unable to determine if forms were filed on a
delinquent basis or are missing.
ITEM 10. EXECUTIVE COMPENSATION
Director Compensation
The following table reflects compensation paid or accrued during the indicated
fiscal years, which end on June 30th of the indicated year with respect to
compensation paid or accrued by Reclamation Consulting And Applications, Inc.
The Company's two principal officers, Gordon Davies, Chief Executive Officer,
President and a Director, and Michael Davies, Chief Financial Officer, Vice
President and a Director, entered into new Employment Agreements, commencing
June 30, 2004, and having a five year term. There are no changes in the new
contracts other than the extension of the term from 3 years to 5 years. The
Employment Agreements are identical, and provide for a base salary of $135,200
for the first year. If the Company realizes a minimum net profit for its 12
months ended June 30, 2005 of $250,000 or more, base compensation increases by
20% effective as of the beginning of the second twelve months of the Contract.
If the Company realizes a net profit of at least $250,000 over the 12 months
ended June 30, 2006, June 30 2007, June 30 2008 and June 30 2009 the base
compensation increases by an additional 20% over the preceding year's
compensation.
In addition, the Employment Agreements provide for bonuses on a sliding scale
based on the Company realizing net profits each fiscal year. A bonus equal to
10% of the base salary will be paid in any fiscal year in which net profits
equal or exceed $250,000. This percentage increases on a sliding scale as net
profits in any fiscal year over the three year contract term increase above
$500,000, with a bonus equal to 100% of base salary to be paid if the Company in
any fiscal year realizes a net income of $2,500,000 or more.
In addition, the Employment Contract grants each employee 1,500,000 options to
acquire the Company's common stock. These options are all pre-existing options
granted under previous contracts with each employee. All the stock option have
vested under the following terms for each employee, 500,000 shares vest on
January 15, 2002, 500,000 shares vest on January 15, 2003, and 500,000 shares
vest on January 15, 2004. The option exercise price is $.40 per share.
These Agreements have non-compete provisions and various other provisions,
including a death disability benefit of 3 months' pay plus 3 months' benefits.
Copies of each of these Employment Agreements with each executive officer are
attached hereto as Exhibits and by this reference incorporated herein.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the common stock (including common stock acquirable within 60 days
pursuant to options, warrants, conversion privileges or other rights) of the
company as of June 30, 2004 (i) by each of the Company's directors and executive
officers, (ii) all executive officers and directors as a group, and (iii) all
persons known by the Company to own beneficially more than 5% of the common
stock. All persons listed have sole voting and investment power over the
indicated shares unless otherwise indicated.
Name Shares
Michael Davies 2,025,807
Gordon Davies 2,017,400
Kurt Baum 3,859,341
Canvasback Company Limited 4,003,924
----------
All Officers and Directors 11,906,472
As a Group ==========
The address for Mr. Michael Davies is 23832 Rockfield Blvd. Suite 275 Lake
Forest, CA 92630
The address for Mr. Gordon Davies is 23832 Rockfield Blvd. Suite 275 Lake
Forest, CA 92630
The address for Mr. Kurt Baum is 680 S. Avon Avenue, Azusa, CA 91702
The address for Canvasback Company Limited is Hannah & Waver House The Valley,
Anguilla, BWI
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Nothing to Report
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
---------- -----------
10.01. Management contract for Mr. Gordon Davies
10.02. Management contract for Mr. Michael Davies
10.03. Agreement with North American Systems, Inc.
10.04. Agreement with Canadian Release Agents, Inc.
10.05 Revolving Loan Agreement North American Systems, Inc.
10.06 Security Agreement North American Systems, Inc.
31.1 Rule 13a-14(a)/15d-14(a) Certifications.
31.2 Rule 13a-14(a)/15d-14(a) Certifications.
32.1 Section 1350 Certifications.
32.2 Section 1350 Certifications
ITEM 14 CONTROLS AND PROCEDURES.
(a) Within 90 days prior to the filing date of this report, with the
participation of the Company's management, the Company's President and Chief
Executive Officer and Vice President - Finance and Chief Financial Officer,
evaluated the effectiveness of the Company's disclosure controls and procedures
in accordance with Rule 13a-14 of the Securities Exchange Act of 1934 (the
"Exchange Act"). Based upon that evaluation, the President and Chief Executive
Officer and Vice President - Finance and Chief Financial Officer concluded that
the Company's disclosure controls and procedures are effective in providing
reasonable assurance that information required to be disclosed by the Company in
reports that it files under the Exchange Act is recorded, processed, summarized
and reported within the time period specified in the Commission's rules and
procedures.
(b) Changes in Internal Controls. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of the evaluation.
SIGNATURES
In accordance with then requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Reclamation Consulting and Applications, Inc.
/s/ Michael Davies, Secretary
--------------------------
Michael Davies, Secretary
/s/ Gordon Davies, President
--------------------
Gordon Davies, President
Date: October 01, 2004
EX 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the day of June 30, 2004, by and
between Michael Davies ("Employee") and RECLAMATION CONSULTING AND APPLICATIONS,
INC., a Colorado Corporation with its principal place of business at 23832
Rockfield Boulevard, Suite 275, Lake Forest, California 92630 ("Company").
1. RECITALS:
1.1 The company is in the business of manufacturing and marketing asphalt,
cement and related products release agents in liquid form that are non-toxic,
non-explosive and environmentally compatible, the formulation and ingredients
of which are confidential.
1.2 Employee has experience in the businesses conducted and to be conducted
by the Employer, or in related businesses, and desires to be employed by the
Company, and the Company desires to employee the Employee, on the terms and
conditions specified below
2. COVENANTS:
In consideration of the recitals and mutual covenants contained herein, the
parties agree that:
2.1 Employment. The Company will employ Employee to serve as Executive
Vice President & Chief Financial Officer with the duties listed and defined
by the Company or the Board, in connection with the Company's operations and
Employee does hereby accept such employment, all subject to the terms and
provisions of this Agreement. Employee represents that he is legally free
to enter into this agreement and that it does not conflict with any of his
duties or obligations to any other person and that he is not in any way
restricted by any duties or obligations to any other person from contributing
his knowledge and talents to the Company in performing his duties hereunder.
2.2 Term. This Agreement shall have an initial five-year term, which shall
be automatically renewed each year thereafter unless the Company, upon thirty
(30) days prior notice notifies Employee of its intent not to renew the
Agreement. Notwithstanding the foregoing, the Company or the Employee may
at any time terminate this Agreement and the employment relationship on
thirty (30) days prior notice to the other, with the consequences hereinafter
set forth.
2.3 Compensation. During the first twelve months of employment, the
Company agrees to compensate Employee (from the commencement of this
agreement) at the rate of not less than $135,200 per year base compensation
for the first year of employment. Thereafter, Employee's annual compensation
shall be increased by 20% on each anniversary date of this agreement, provided
that the Company reaches a minimum net profit of $250,000. In no event shall
Employee's minimum base compensation be reduced below $135,200 per year.
Such compensation shall be payable monthly or on such more frequent basis
as the Company may establish.
2.4 Bonuses. An annual bonus will be paid to Employee, the amount of
which is based upon the Company's net profits and shall be structured as
follows:
2.5 Stock Options. The option to purchase 1,500,000 shares of common
restricted stock in the Company has been granted in Employee's name. All
options shall expire 5-years from the vesting date. 1,500,000 of these options
have been carried over from Employee's previous Employment Agreement with th
e Company. Options will be vested annually, subject to continued employment,
and released to Employee as per the schedule below. The corresponding number
of share options shall be vested to Employee at the purchase values and on the
dates indicated.
No. Options Date Available Exercise Price
500,000 January 15, 2002 $0.40 per share
500,000 January 15, 2003 $0.40 per share
500,000 January 15, 2004 $0.40 per share
Additional stock options shall be granted to Employee each year following the
above schedule on the anniversary date of this Agreement, the amount and price
of which to be determined solely by the Company.
2.6 Duties. Employee agrees to devote his energies to the business of the
Company and agrees to perform such reasonable responsibilities and duties as may
be assigned to him from time to time by the Company or by the Company's board of
directors, which shall be consistent with his position as Executive Vice
President. In no event shall the Employee be precluded from activities in
professional societies, or from lecturing or writing in areas of his
professional expertise for reasonable periods, and Employee shall be entitled to
retain fees, honoraria, publication royalties and similar compensation paid as a
result of such activities.
2.7 Additional Benefits. The Company agrees to reimburse Employee promptly
for or to pay on behalf of Employee, any reasonable expenses heretofore or h
ereafter incurred by Employee (to the extent not paid by others) in the
furtherance of the goals of the Company upon submission of a satisfactory
accounting by Employee, and to provide Employee with the following additional
benefits:
2.7.1 A minimum of three weeks annual paid vacation. Vacation shall accrue
on a monthly basis or part thereof; however, once unused vacation has accrued
to a maximum of three weeks, accrual of additional vacation shall cease until
the balance of accrued vacation has been reduced below six weeks. The Company
will not cause the vacation accrual to cease by withholding its approval of any
of the Employee's vacation requests.
2.7.2 Any other standard benefits that may be established by the Company or
its affiliates for its employees.
2.8 Non-Disclosure of Confidential Information. It is understood that
employee will acquire and be informed of confidential technical and/or business
information used by and belonging to the Company ("Confidential Information"),
including Confidential Information as defined in the Company's EMPLOYEE
NON-DISCLOSURE AND NON-COMPETITION AGREEMENT. Employee agrees that some or
all of such Confidential Information is in the nature of trade secrets and
is the sole property of the Company. Employee will keep confidential, and
will not disclose to any third person or entity, any Confidential Information
without Employer's consent and pursuant to the proceedings further defined in
the Company's EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT.
2.9 Confidentiality after Termination of Employment. Employee agrees that
upon termination of employment, he or she shall surrender promptly to the
Company any and all documents and property of the Company, including, but
not limited to: reports, drawings, manuals, correspondence, customer lists
and other Confidential Information which he or she may possess, and all other
materials and all copies thereof relating in any way to the Company's business,
or in any way obtained by the Employee during the course of his employment,
and that he shall not retain any copies, notes or abstracts of the foregoing.
Employee further agrees that such documents, lists and information shall
be and remain the sole property of the Company. All of the terms of
paragraph 2.8 shall remain in full force and effect both during the
continuation of employment of Employee by the Company and after the
termination of employment for any reason.
2.10 Confidentiality. Employee agrees to execute standard Company documents
establishing the Employee's duties of confidentiality and the rights of the
Company to all inventions, trade secrets, etc., developed by the Employee in
the course of his employment, namely the EMPLOYEE NON-DISCLOSURE AND
NON-COMPETITION AGREEMENT.
2.11 Non-Competition. Employee agrees that during the term of his
employment by Company, Employee will not engage in any way whatsoever,
directly or indirectly, in any business that is competitive with the
Company and its subsidiaries and affiliate operations, nor solicit or
in any other manner work for or assist any business which is competitive
to the Company and its subsidiaries and affiliate operations.
2.12 Non-Participation in Competitive Activities. During the term of this
agreement, Employee will undertake no planning for or organization of any
business activity competitive with the work he performs as an Employee of
the Company and its subsidiaries and affiliate operations, and Employee will
not combine or participate with other employees of the Company and its
subsidiaries and affiliate operations for the purpose of organization of any
such competitive business activity.
2.13 Assignment to Company of Proprietary Rights. Employee agrees to
execute any and all documents and take any and all other actions necessary
or desirable for the assignment to the Company and its subsidiaries and
affiliate operations of all of his interests in any Confidential Information,
trade secrets, copyrightable materials and patentable or patented ideas
developed by him, alone or in conjunction with others, in the course of
his employment by the Company.
2.14 Injunctive Relief. The parties hereto agree and acknowledge that
many of the rights conveyed by this Agreement are of a unique and special
nature and that the Company and its subsidiaries and affiliate operations
will not have an adequate remedy at law in the event of failure of Employee
to abide by its terms and conditions, nor will money damages adequately
compensate for such injury. It is, therefore, agreed between the parties
that in the event of breach by Employee of Employee's covenants contained
in this Agreement, the Company and its subsidiaries and affiliate operations
shall have the rights, among other rights, to damages sustained thereby and
to a preliminary or permanent injunction to restrain Employee from the
prohibited acts. Employee agrees that this Paragraph shall survive for
one year after the termination of his employment, and Employee shall be
bound by its terms for a period of one year subsequent to the termination
of his employment, providing that the Company and its subsidiaries and
affiliate operations continue to conduct the same business or businesses
as they were conducting during the period of this Agreement. Nothing herein
contained shall in any way limit or exclude any and all other rights granted
by law or equity to the Company and its subsidiaries and affiliate operations.
2.15 Termination of Employment. If Employee's employment terminates or
is terminated, the rights and obligations of the parties shall depend upon
the reason for termination. Termination may occur for any one of the
following reasons: termination by the Company for cause, termination by
the Company without cause, termination by Employee without cause,
termination by Employee with cause, or termination of Employee by reason
of his death or long-term disability.
2.15.1 Termination by Company for Cause. In the event of termination by the
Company for cause, which shall consist only of specific actions knowingly and
intentionally taken by Employee to the specific material detriment of the
Company and not reasonably intended by him to benefit the company, the Employee
will receive all unpaid salary, bonuses, and other benefits accrued through
the last day of employment. Employee agrees, if he is so terminated for cause,
that, for a period of one year following the termination of employment of the
Employee, Employee will not engage in any way whatsoever, directly or
indirectly, in any business that is competitive with the Company and its
subsidiaries and affiliates utilizing any Confidential Information acquired
while organizing, founding, or acting as an officer, director or employee of
the Company, its subsidiaries or affiliates, nor solicit customers,
investors, service providers, or strategic partners of the Company, with
the Company's, or its subsidiary's or affiliates' business whether by
interfering with or raiding their employees, or disrupting or interfering
with their relationships with customers, investors, service providers, or
strategic partners. Employee will have thirty days after termination by
the Company for cause to challenge the termination. Employee may challenge
the termination by the Company for cause by sending written notice to that
effect to the Company via registered or certified mail, postmarked no later
than 30-days from the date that employee received notice from the Company
that Employee was being terminated by the Company for cause. The Company
and Employee will each select an arbitrator who will each review the facts
surrounding the termination and the challenge. The arbitrators will
decide whether the Company was justified in terminating the Employee
for cause. If the arbitrators cannot agree whether the Company was
justified in terminating Employee for cause, the arbitrators will select
a third arbitrator who will make the determination of whether the
Company was justified in terminating the Employee for cause. The arbitration
proceeding shall be conducted in accordance with the provisions of California's
Arbitration act, Code of Civil Procedure, Sections 1280, et seq. The Company
and Employee agree to abide by the decision of the arbitration.
If the arbitrators agree or if the third arbitrator determines, as applicable,
that the Company was not justified in terminating the Employee for cause,
within 72 hours of receiving the arbitration decision that the termination
by the Company for cause was not justified, the Company will pay Employee
back pay for all salaries and benefits from the date of termination through
the date of the arbitration decision. The termination will then be treated
as a termination by the Company without cause, subject to the provisions of
subparagraphs
2.15.2 Termination by Company without Cause. In the event of termination by
the Company without cause, i.e., an involuntary termination, or notification
by the Company of an intent not to renew the Agreement pursuant to paragraph
2.2 of this Agreement, Employee shall be entitled to elect to receive
severance pay equal to 50% of the annual total compensation in effect in
the last month of employment, but in no cause less than $67,600 and will
receive all unpaid salary, bonuses, and other benefits accrued through the
last day of employment.
2.15.3 Termination by Employee without Cause. In the event of termination by
Employee without cause, i.e., a voluntary termination, the Employee will
receive all unpaid salary, bonuses, and other benefits accrued through the
last day of employment. Employee agrees, if he so terminates without cause,
that, for a period of one year following the termination of employment of
the Employee, Employee will not engage in any way whatsoever, directly of
indirectly, in any business that is competitive with the Company and its
subsidiaries and affiliates utilizing any Confidential Information acquired
while organizing, founding, or acting as an officer, director or employee of
the Company, its subsidiaries, or affiliates, nor solicit customers, investors,
service providers, or strategic partners of the Company, or any of its
subsidiaries or operating affiliates; or disrupt, damage, impair or interfere
with the Company's, or its subsidiary's or affiliates' business whether by
interfering with or raiding their employees, or disrupting or interfering with
their relationships with customers, investors, service providers or strategic
partners. Thereafter, he will be free to so compete or participate with a
competitor.
2.15.4 Termination by Employee with Cause. In the event of receipt of notice
of termination by Employee with cause, which shall consist only of a material
breach of the agreement by the Company including, without limitation,
nonpayment of salary or other compensation due, non-reimbursement of
business expenses, or failure to provide either health insurance allowance
or coverage or other benefits, the Company will have thirty days after receipt
of notice of termination by Employee to challenge the termination by Employee
with cause. The Company and Employee will each select an arbitrator who will
each review the facts surrounding the termination and the challenge. The
arbitrators will decide wither the Employee is justified in terminating
with cause. If the arbitrators cannot agree whether the Employee is justified
in terminating with cause, the arbitrators will select a third arbitrator who
will make the determination of whether the Employee is justified in
terminating with cause. The arbitration proceeding shall be conducted in
accordance with the provisions of California's Arbitration act, Code of
Civil Procedure, Sections 1280, et seq. The Company and Employee agree
to abide by the decision of the arbitration.
If the arbitrators agree, or if the third arbitrator determines, as applicable,
that the Employee is justified in terminating with cause, or if the Company
fails to challenge the termination by the Employee with cause within the thirty
day period, the Employee shall be entitled to elect to receive severance pay
equal to 100% of the annual total compensation in effect in the last month of
employment, but in no case less than
$135,200 and will receive all unpaid salary, bonuses, and other benefits
accrued through the last day of employment plus 30 days. If the arbitrators
agree, or if the third arbitrator determines, as applicable, that the Employee
is not justified in terminating with cause, the termination will be treated as
a termination by Employee without cause, subject to the provisions of
subparagraphs 2.15.3.
2.15.5 Termination by Death or Disability. In the event of termination by
reason of death of the Employee or the long-term disability of the Employee,
Employee shall be entitled to termination pay equal to three month's pay
plus three month's benefits, and will receive all unpaid salary, bonuses,
and other benefits accrued through the last day of employment. All payments
due under this paragraph will be made on the date of termination of employment.
For purposes of this section, the Company may terminate the Employee due to
long-term disability if the Employee is unable to perform any of his duties
for a period of ninety consecutive days or more, for reasons of sickness or
injury. Additionally, in the event of the long-term disability of Employee,
if Employee is terminated by the Company and then subsequently recovers from
the disability, Employee will be free to compete in any way whatsoever,
directly or indirectly, in any business that is competitive with the Company,
and may solicit or in any other manner work for or assist any business
which is competitive to the Company.
2.15.6 Severance Pay. If Employee elects to receive the severance pay
provided for in subparagraph 2.15.2 or 2.15.4, whichever is applicable,
and that severance pay together with all other payments required by this
Agreement are paid to Employee in accordance with subparagraph 2.15.7,
Employee agrees that for a period of one year following the termination
of employment of the Employee, Employee will not engage in any way whatsoever,
directly or indirectly, in any business that is competitive with the Company
and its subsidiaries and affiliates utilizing any Confidential Information
acquired while organizing, founding, or acting as an officer, director or
employee of the Company, its subsidiaries or affiliates, nor solicit
customers, investors, service providers, or strategic partners of the
Company, or any of its subsidiaries or operating affiliates; or disrupt,
damage, impair or interfere with the Company's, or its subsidiary's or
affiliates' business whether by interfering with or raiding their employees,
or disrupting or interfering with their relationships with customers,
investors, service providers or strategic partners.
If Employee elects not to receive such severance pay, Employee will be free to
compete in any way whatsoever, directly or indirectly, in any business that
is competitive with the Company, and may solicit or in any other manner work
for or assist any business which is competitive to the Company.
2.15.7 Termination for any reason. In the event of termination for any
reason, all pay due under this Agreement except for severance pay is payable
by the Company on the last day of employment. Severance pay, when applicable,
will be paid as follows: one-half on the last day of employment and the
remaining payments in three equal monthly installments payable on the
first of months four through six.
2.16 Future Agreement. This Agreement and the documents referred to
herein contain the entire agreement of the parties relevant to the subject
matter hereof, and it may be amended only by a written document signed by
both Employee and Company.
2.17 Governing Law. The laws of California, without regard to conflicts
of laws principles thereof, shall govern this agreement.
2.18 Binding Effect. This Agreement shall inure to the benefit of
and be binding upon the heirs, successors and assigns of the parties
hereto.
EMPLOYEE:
[Print Name]
RECLAMATION CONSULTING AND APPLICATIONS, INC.
By:
Its.
EX 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the day of June 30, 2004,
by and between Gordon Davies ("Employee") and RECLAMATION CONSULTING AND
APPLICATIONS, INC., a Colorado Corporation with its principal place of
business at 23832 Rockfield Boulevard, Suite 275, Lake Forest,
California 92630 ("Company").
1. RECITALS:
1.1 The company is in the business of manufacturing and marketing
asphalt, cement and related products release agents in liquid form that
are non-toxic, non-explosive and environmentally compatible, the
formulation and ingredients of which are confidential.
1.2 Employee has experience in the businesses conducted and to
be conducted by the Employer, or in related businesses, and desires
to be employed by the Company, and the Company desires to employee
the Employee, on the terms and conditions specified below
2. COVENANTS:
In consideration of the recitals and mutual covenants contained herein,
the parties agree that:
2.1 Employment. The Company will employ Employee to serve as
President with the duties listed and defined by the Company or the
Board, in connection with the Company's operations and Employee does
hereby accept such employment, all subject to the terms and provisions
of this Agreement. Employee represents that he is legally free to enter
into this agreement and that it does not conflict with any of his duties
or obligations to any other person and that he is not in any way restricted
by any duties or obligations to any other person from contributing his
knowledge and talents to the Company in performing his duties hereunder.
2.2 Term. This Agreement shall have an initial five-year term, which
shall be automatically renewed each year thereafter unless the Company,
upon thirty (30) days prior notice notifies Employee of its intent not to
renew the Agreement. Notwithstanding the foregoing, the Company or the
Employee may at any time terminate this Agreement and the employment
relationship on thirty (30) days prior notice to the other, with the
consequences hereinafter set forth.
2.3 Compensation. During the first twelve months of employment,
the Company agrees to compensate Employee (from the commencement of
this agreement) at the rate of not less than $135,200 per year base
compensation for the first year of employment. Thereafter, Employee's
annual compensation shall be increased by 20% on each anniversary date
of this agreement, provided that the Company reaches a minimum net
profit of $250,000. In no event shall Employee's minimum base
compensation be reduced below $135,200 per year. Such compensation
shall be payable monthly or on such more frequent basis as the Company
may establish.
2.4 Bonuses. An annual bonus will be paid to Employee, the amount
of which is based upon the Company's net profits and shall be
structured as follows:
2.5 Stock Options. The option to purchase 1,500,000 shares of common
restricted stock in the Company has been granted in Employee's name. All
options shall expire 5-years from the vesting date. 1,500,000 of these
options have been carried over from Employee's previous Employment Agreement
with the Company. Options will be vested annually, subject to continued
employment, and released to Employee as per the schedule below. The
corresponding number of share options shall be vested to Employee at
the purchase values and on the dates indicated.
No. Options Date Available Exercise Price
500,000 January 15, 2002 $0.40 per share
500,000 January 15, 2003 $0.40 per share
500,000 January 15, 2004 $0.40 per share
Additional stock options shall be granted to Employee each year following
the above schedule on the anniversary date of this Agreement, the amount
and price of which to be determined solely by the Company.
2.6 Duties. Employee agrees to devote his energies to the business of
the Company and agrees to perform such reasonable responsibilities and
duties as may be assigned to him from time to time by the Company or by
the Company's board of directors, which shall be consistent with his
position as Executive Vice President. In no event shall the Employee
be precluded from activities in professional societies, or from lecturing
or writing in areas of his professional expertise for reasonable periods,
and Employee shall be entitled to retain fees, honoraria, publication
royalties and similar compensation paid as a result of such activities.
2.7 Additional Benefits. The Company agrees to reimburse Employee
promptly for or to pay on behalf of Employee, any reasonable expenses
heretofore or hereafter incurred by Employee (to the extent not paid by
others) in the furtherance of the goals of the Company upon submission
of a satisfactory accounting by Employee, and to provide Employee with
the following additional benefits:
2.7.1 A minimum of three weeks annual paid vacation. Vacation shall
accrue on a monthly basis or part thereof; however, once unused vacation
has accrued to a maximum of three weeks, accrual of additional vacation
shall cease until the balance of accrued vacation has been reduced below
six weeks. The Company will not cause the vacation accrual to cease by
withholding its approval of any of the Employee's vacation requests.
2.7.2 Any other standard benefits that may be established by the Company
or its affiliates for its employees.
2.8 Non-Disclosure of Confidential Information. It is understood that
employee will acquire and be informed of confidential technical and/or
business information used by and belonging to the Company ("Confidential
Information"), including Confidential Information as defined in the
Company's EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT.
Employee agrees that some or all of such Confidential Information is
in the nature of trade secrets and is the sole property of the Company.
Employee will keep confidential, and will not disclose to any third
person or entity, any Confidential Information without Employer's
consent and pursuant to the proceedings further defined in the
Company's EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT.
2.9 Confidentiality after Termination of Employment. Employee
agrees that upon termination of employment, he or she shall surrender
promptly to the Company any and all documents and property of the
Company, including, but not limited to: reports, drawings, manuals,
correspondence, customer lists and other Confidential Information
which he or she may possess, and all other materials and all copies
thereof relating in any way to the Company's business, or in any
way obtained by the Employee during the course of his employment,
and that he shall not retain any copies, notes or abstracts of the
foregoing. Employee further agrees that such documents, lists and
information shall be and remain the sole property of the Company.
All of the terms of paragraph 2.8 shall remain in full force and effect
both during the continuation of employment of Employee by the Company
and after the termination of employment for any reason.
2.10 Confidentiality. Employee agrees to execute standard Company
documents establishing the Employee's duties of confidentiality and
the rights of the Company to all inventions, trade secrets, etc.,
developed by the Employee in the course of his employment, namely the
EMPLOYEE NON-DISCLOSURE AND NON-COMPETITION AGREEMENT.
2.11 Non-Competition. Employee agrees that during the term of
his employment by Company, Employee will not engage in any way whatsoever,
directly or indirectly, in any business that is competitive with the Company
and its subsidiaries and affiliate operations, nor solicit or in any other
manner work for or assist any business which is competitive to the Company
and its subsidiaries and affiliate operations.
2.12 Non-Participation in Competitive Activities. During the term of
this agreement, Employee will undertake no planning for or organization
of any business activity competitive with the work he performs as an
Employee of the Company and its subsidiaries and affiliate operations, and
Employee will not combine or participate with other employees of the
Company and its subsidiaries and affiliate operations for the purpose of
organization of any such competitive business activity.
2.13 Assignment to Company of Proprietary Rights. Employee agrees
to execute any and all documents and take any and all other actions necessary
or desirable for the assignment to the Company and its subsidiaries and
affiliate operations of all of his interests in any Confidential Information,
trade secrets, copyrightable materials and patentable or patented ideas
developed by him, alone or in conjunction with others, in the course of
his employment by the Company.
2.14 Injunctive Relief. The parties hereto agree and acknowledge that
many of the rights conveyed by this Agreement are of a unique and special
nature and that the Company and its subsidiaries and affiliate operations
will not have an adequate remedy at law in the event of failure of Employee
to abide by its terms and conditions, nor will money damages adequately
compensate for such injury. It is, therefore, agreed between the parties
that in the event of breach by Employee of Employee's covenants contained
in this Agreement, the Company and its subsidiaries and affiliate operations
shall have the rights, among other rights, to damages sustained thereby and
to a preliminary or permanent injunction to restrain Employee from the
prohibited acts. Employee agrees that this Paragraph shall survive for
one year after the termination of his employment, and Employee shall be
bound by its terms for a period of one year subsequent to the termination
of his employment, providing that the Company and its subsidiaries and
affiliate operations continue to conduct the same business or businesses
as they were conducting during the period of this Agreement. Nothing
herein contained shall in any way limit or exclude any and all other
rights granted by law or equity to the Company and its subsidiaries and
affiliate operations.
2.15 Termination of Employment. If Employee's employment terminates or
is terminated, the rights and obligations of the parties shall depend upon
the reason for termination. Termination may occur for any one of the
following reasons: termination by the Company for cause, termination
by the Company without cause, termination by Employee without cause,
termination by Employee with cause, or termination of Employee by reason
of his death or long-term disability.
2.15.1 Termination by Company for Cause. In the event of termination
by the Company for cause, which shall consist only of specific actions
knowingly and intentionally taken by Employee to the specific material
detriment of the Company and not reasonably intended by him to benefit
the company, the Employee will receive all unpaid salary, bonuses, and
other benefits accrued through the last day of employment. Employee
agrees, if he is so terminated for cause, that, for a period of one
year following the termination of employment of the Employee, Employee
will not engage in any way whatsoever, directly or indirectly, in any
business that is competitive with the Company and its subsidiaries and
affiliates utilizing any Confidential Information acquired while
organizing, founding, or acting as an officer, director or employee
of the Company, its subsidiaries or affiliates, nor solicit customers,
investors, service providers, or strategic partners of the Company,
with the Company's, or its subsidiary's or affiliates' business whether
by interfering with or raiding their employees, or disrupting or interfering
with their relationships with customers, investors, service providers, or
strategic partners. Employee will have thirty days after termination by
the Company for cause to challenge the termination. Employee may challenge
the termination by the Company for cause by sending written notice
to that effect to the Company via registered or certified mail,
postmarked no later than 30-days from the date that employee received
notice from the Company that Employee was being terminated by the
Company for cause. The Company and Employee will each select an
arbitrator who will each review the facts surrounding the termination
and the challenge. The arbitrators will decide whether the Company was
justified in terminating the Employee for cause. If the arbitrators
cannot agree whether the Company was justified in terminating Employee for
cause, the arbitrators will select a third arbitrator who will make the
determination of whether the Company was justified in terminating the
Employee for cause. The arbitration proceeding shall be conducted in
accordance with the provisions of California's Arbitration act, Code
of Civil Procedure, Sections 1280, et seq. The Company and Employee
agree to abide by the decision of the arbitration.
If the arbitrators agree or if the third arbitrator determines, as
applicable, that the Company was not justified in terminating the
Employee for cause, within 72 hours of receiving the arbitration decision
that the termination by the Company for cause was not justified, the
Company will pay Employee back pay for all salaries and benefits from
the date of termination through the date of the arbitration decision.
The termination will then be treated as a termination by the Company
without cause, subject to the provisions of subparagraphs
2.15.2 Termination by Company without Cause. In the event of termination
by the Company without cause, i.e., an involuntary termination, or notification
by the Company of an intent not to renew the Agreement pursuant to
paragraph 2.2 of this Agreement, Employee shall be entitled to elect
to receive severance pay equal to 50% of the annual total compensation
in effect in the last month of employment, but in no cause less than $67,600
and will receive all unpaid salary, bonuses, and other benefits accrued
through the last day of employment.
2.15.3 Termination by Employee without Cause. In the event of termination
by Employee without cause, i.e., a voluntary termination, the Employee will
receive all unpaid salary, bonuses, and other benefits accrued through the
last day of employment. Employee agrees, if he so terminates without
cause, that, for a period of one year following the termination of employment
of the Employee, Employee will not engage in any way whatsoever, directly o
f indirectly, in any business that is competitive with the Company and its
subsidiaries and affiliates utilizing any Confidential Information acquired
while organizing, founding, or acting as an officer, director or employee of
the Company, its subsidiaries, or affiliates, nor solicit customers,
investors, service providers, or strategic partners of the Company, or
any of its subsidiaries or operating affiliates; or disrupt, damage,
impair or interfere with the Company's, or its subsidiary's or affiliates'
business whether by interfering with or raiding their employees, or
disrupting or interfering with their relationships with customers, investors,
service providers or strategic partners. Thereafter, he will be free to
so compete or participate with a competitor.
2.15.4 Termination by Employee with Cause. In the event of receipt of notice
of termination by Employee with cause, which shall consist only of a material
breach of the agreement by the Company including, without limitation,
nonpayment of salary or other compensation due, non-reimbursement of
business expenses, or failure to provide either health insurance allowance
or coverage or other benefits, the Company will have thirty days after
receipt of notice of termination by Employee to challenge the termination
by Employee with cause. The Company and Employee will each select an
arbitrator who will each review the facts surrounding the termination and
the challenge. The arbitrators will decide wither the Employee is
justified in terminating with cause. If the arbitrators cannot agree
whether the Employee is justified in terminating with cause, the arbitrators
will select a third arbitrator who will make the determination of whether
the Employee is justified in terminating with cause. The arbitration
proceeding shall be conducted in accordance with the provisions of
California's Arbitration act, Code of Civil Procedure, Sections 1280, et
seq. The Company and Employee agree to abide by the decision of the
arbitration.
If the arbitrators agree, or if the third arbitrator determines, as
applicable, that the Employee is justified in terminating with cause, or
if the Company fails to challenge the termination by the Employee with
cause within the thirty day period, the Employee shall be entitled to
elect to receive severance pay equal to 100% of the annual total
compensation in effect in the last month of employment, but in no
case less than
$135,200 and will receive all unpaid salary, bonuses, and other benefits
accrued through the last day of employment plus 30 days. If the
arbitrators agree, or if the third arbitrator determines, as applicable,
that the Employee is not justified in terminating with cause, the
termination will be treated as a termination by Employee without
cause, subject to the provisions of subparagraphs 2.15.3.
2.15.5 Termination by Death or Disability. In the event of termination
by reason of death of the Employee or the long-term disability of the
Employee, Employee shall be entitled to termination pay equal to three
month's pay plus three month's benefits, and will receive all unpaid
salary, bonuses, and other benefits accrued through the last day of
employment. All payments due under this paragraph will be made on the
date of termination of employment. For purposes of this section, the
Company may terminate the Employee due to long-term disability if the
Employee is unable to perform any of his duties for a period of ninety
consecutive days or more, for reasons of sickness or injury. Additionally,
in the event of the long-term disability of Employee, if Employee is
terminated by the Company and then subsequently recovers from the
disability, Employee will be free to compete in any way whatsoever,
directly or indirectly, in any business that is competitive with the
Company, and may solicit or in any other manner work for or assist
any business which is competitive to the Company.
2.15.6 Severance Pay. If Employee elects to receive the severance pay
provided for in subparagraph 2.15.2 or 2.15.4, whichever is applicable,
and that severance pay together with all other payments required by this
Agreement are paid to Employee in accordance with subparagraph 2.15.7,
Employee agrees that for a period of one year following the termination
of employment of the Employee, Employee will not engage in any way
whatsoever, directly or indirectly, in any business that is competitive
with the Company and its subsidiaries and affiliates utilizing any
Confidential Information acquired while organizing, founding, or acting
as an officer, director or employee of the Company, its subsidiaries or
affiliates, nor solicit customers, investors, service providers, or
strategic partners of the Company, or any of its subsidiaries or operating
affiliates; or disrupt, damage, impair or interfere with the Company's,
or its subsidiary's or affiliates' business whether by interfering with
or raiding their employees, or disrupting or interfering with their
relationships with customers, investors, service providers or strategic
partners.
If Employee elects not to receive such severance pay, Employee will be
free to compete in any way whatsoever, directly or indirectly, in any
business that is competitive with the Company, and may solicit or in
any other manner work for or assist any business which is competitive
to the Company.
2.15.7 Termination for any reason. In the event of termination for
any reason, all pay due under this Agreement except for severance pay
is payable by the Company on the last day of employment. Severance
pay, when applicable, will be paid as follows: one-half on the last
day of employment and the remaining payments in three equal monthly
installments payable on the first of months four through six.
2.16 Future Agreement. This Agreement and the documents referred to
herein contain the entire agreement of the parties relevant to the
subject matter hereof, and it may be amended only by a written document
signed by both Employee and Company.
2.17 Governing Law. The laws of California, without regard to
conflicts of laws principles thereof, shall govern this agreement.
2.18 Binding Effect. This Agreement shall inure to the benefit
of and be binding upon the heirs, successors and assigns of
the parties hereto.
EMPLOYEE:
[Print Name]
RECLAMATION CONSULTING AND APPLICATIONS, INC.
By:
Its.
EX 10.3
DISTRIBUTORSHIP AGREEMENT
THIS AGREEMENT (Agreement) is entered into this 30th day of July 2003, by and
between Reclamation Consulting and Applications Inc., a company organized under
the laws of Colorado with its principal place of business at 23832 Rockfield
Blvd., Suite 273, Lake Forest, California 92630, USA and its manufacturing and
sales training site at 3558 West 900 South, Salt Lake City, Utah, 84104 USA
('RCAI')
and
North American Marketing, Inc., a company organized under the laws of Nevada,
and having its principal place of business at 1225 Wakeham Avenue, Santa Ana, CA
92705 ('Distributor')
RECITALS
RCAI manufactures and distributes certain asphalt, cement and related product
release agents, which are used in the construction and similar industries and
which are sold under the RCAI trademarks 'Alderox' and/or 'ASA-12'.
RCAI desires to appoint Distributor to promote, market, sell, distribute and
service RCAI's products and Distributor desires to promote, market, sell,
distribute and provide customer service for RCAI products in the territory,
defined herein below.
In consideration of the mutual representations, agreements and conditions
contained in this Agreement, RCAI and Distributor hereby agree as follows:
SECTION 1: DEFINITIONS
1.1 'Products' means asphalt, cement and related product release agents, in
liquid form that RCAI formulates and manufactures. RCAI authorizes Distributor
to distribute these Products under the RCAI Trademarks.
1.2 'Territory' means the entire geographic contiguous area of the United
States plus Alaska and Hawaii. The Territory will be broken into 4-5 sub-
Territories, each with its own minimum required sales volumes all as set forth
on Schedule A hereto.
1.3 'Effective Date' means the date first written above which will be
concurrent with the date when an authorized representative of the last party
hereto executes this Agreement.
1.4 'Agreement Year' means any partial or whole calendar year, commencing
with the Effective Date hereof, or any such subsequent period during the
continuance of this Agreement.
1.5 'Trademarks' means all trademarks, trade names, designs, logos or other
protected or protectable commercial symbols used by RCAI to identify RCAI as the
source of the Products to which RCAI grants Distributor the right of
distribution hereunder and as set forth in Schedule A hereto.
1.6 'Documentation' means any promotional, advertising, technical or
training materials developed and furnished by RCAI to Distributor hereunder,
specifically intended for the public, including customers and potential
customers and concerning the promotion, distribution, application or handling of
the Products. 1.7 'Distributor' means North American Marketing, Inc., and
any sub-distributor or subcontractor, agent, representative, successor or assign
to whom any of the rights or obligations of Distributor herein are assigned or
delegated upon the prior written consent of RCAI.
SECTION 2: GRANT OF DISTRIBUTORSHIP
2.1 As of the Effective Date of this Agreement and for the term hereof, RCAI
hereby appoints Distributor and Distributor hereby accepts the appointment to
promote, distribute and provide customer service for the Products in the
Territory under the terms and conditions of this Agreement.
2.2 The exclusive right granted herein will apply provided Distributor
achieves the Minimum Sales Objectives in the Territories for each Agreement Year
during the term hereof as further described below.
2.3 During the term hereof, Distributor will refrain from directly
promoting, distributing or servicing the Products outside the Territory by
soliciting orders, establishing or operating any branch or facilities for said
purposes outside the Territory, or taking any other direct action to obtain
customer orders outside of the Territory.
2.4 During the term RCAI shall appoint no other sales agents to distribute
the Products within the territory provided minimum sales objectives are achieved
as set out below. RCAI will use reasonable efforts to refer to Distributor any
customer inquiry or order originating from Distributor's Territory. However,
RCAI may directly sell, distribute or service the Products in the Territory
during the term for its own account, and shall not be obligated to compensate
Distributor for any such sales and activities.
2.5 The rights of Distributor to promote, distribute or provide customer
service for the Products include the right of sub-distribution or subcontract,
but only upon the prior written consent of RCAI. All other rights not expressly
granted in this Agreement to Distributor are reserved to RCAI.
SECTION 3: AUTHORIZED USE OF TRADEMARKS
3.1 As of the Effective Date of this Agreement and for the term hereof, RCAI
hereby grants Distributor the nonexclusive, nontransferable right to use the
Trademarks set forth in Schedule B hereto in connection with the promotion,
distribution and servicing of the Products in the Territory. RCAI may amend
Schedule B from time to time.
3.2 Distributor will comply with all RCAI requirements for affixing or using
the Trademarks on or in connection with the Products.
3.3 During the term hereof, Distributor will represent to customers and
other third parties that Distributor is an authorized independent distributor of
RCAI and the Products for the Territories. Distributor will refrain from using
any trademarks or other identifying symbols that may be considered by customers
or other third parties to be misleading as to the identity of Distributor, the
relationship of RCAI and Distributor, or the origin or nature of the Products.
SECTION 4: MINIMUM SALES OBJECTIVE
4.1 Set out on Exhibit A hereto are minimum volume of sales of the Products
that Distributor commits to use its best efforts to achieve for each of the
Territories on a quarterly basis in the first Agreement Year. RCAI will review
the minimum quarterly volume of sales of the Products prior to the beginning of
any successive term during which this Agreement may continue and RCAI may change
and adjust such minimums as it, in its sole judgment, sees fit.
4.2 Distributor will use its best efforts to achieve the Minimum Sales
Objective in any given Agreement Year. In particular, Distributor will:
a) actively promote, distribute and service the Products in the
Territories;
b) diligently pursue sales leads provided by RCAI;
c) initiate sales programs, campaigns, surveys, promotions and advertising
programs;
d) comply with all provisions of Sections 8 and 9 hereof on training and
advertising; and
e) respond promptly and fully to any of RCAI's requests for information on
customers or market conditions in Distributor's Territories.
f) assist RCAI, when requested, in the development and testing of new
products developed by RCAI
4.3 In the event that Distributor fails to achieve the Minimum Sales
Objective in one or more of the Territories in any quarterly period, RCAI may,
in its sole discretion, revise the Minimum Sales Objective for the subject
Territory or Territories, and/or revoke the exclusive appointment granted herein
in the subject Territory or Territories with immediate effect and appoint other
distributors in the Territory or Territories, and/or terminate this Agreement in
full, or as to such territory, immediately upon 20 days written notice to
Distributor.
SECTION 5: INVOICING, PURCHASE ORDERS & PAYMENT
5.1 Distributor will invoice customers on RCAI letterhead and payment shall
be made directly from the customer to RCAI.
5.2 Invoices to customers shall be payable net 30 days from date of invoice
and shall offer a 3% discount for payment received net 10 days.
5.3 Once payments are received from customers and funds have cleared, within
30 days thereafter RCAI will issue checks to Distributor, for the difference
between their current wholesale Product price and the net amount received.
5.4 Distributor will not be paid against payments received for product and
equipment that was in stock with RCAI at the time of this agreement (as per
inventory list of July 15, 2003).
SECTION 6: TERMS OF SALE
6.1 Unless otherwise agreed by RCAI, RCAI will deliver all Products for
which it accepts purchase orders FOB RCAI's manufacturing plant Salt Lake City,
Utah, or alternate pick-up site, Incoterms 2000, at which time and place title
to the Products and risk of loss of the Products will pass to Distributor.
6.2 After loading by RCAI at its designated facility, Distributor is
responsible for all costs and risks of transportation, insurance, any import
duties or other charges, sales, use or other taxes, and licenses or approvals
required for the transport, import, promotion, distribution and sale of the
Products in the Territory, and any loss or damage sustained from the point
RCAI's facility.
SECTION 7: TERMS OF PAYMENT
7.1 Payments made to Distributor from RCAI will reflect the difference
between the prices set forth on RCAI's wholesale Price List for the Products,
attached hereto as Schedule C, and as changed by RCAI from time to time, and
the net proceeds received.
7.2 RCAI may change the pricing for products on the Product/Price List of
Schedule C at any time, and, from time to time, any changes to said prices to be
effective upon thirty (30) days written notice by RCAI to Distributor.
7.3 Unless otherwise agreed, invoices will require customers to make payment
of the full invoice amount to RCAI, excluding any bank transfer or other
charges, in US dollars, transfer orders to be made payable to RCAI and to any
bank account as RCAI may designate from time to time.
7.5 RCAI reserves the right to request special terms of payment from certain
customers on an individual basis, as RCAI determines in its sole discretion.
7.6 If it is necessary to convert any amount paid or payable to US dollars
from any other currency, the conversion will be made at the rate of exchange
actually used by RCAI's bank or other institution, and less all charges and fees
for conversion.
SECTION 8: QUALITY CONTROL, SAFETY STANDARDS
8.1 Distributor will:
a) employ and maintain sufficient personnel to perform the obligations of
Distributor herein and ensure their adequate training in accordance with this
Agreement;
b) provide customers with adequate information and training on the safe and
effective handling of the Product(s) and their applications;
c) furnish all market development information reasonably requested by RCAI
concerning the customers of Products sold by Distributor; and
d) notify RCAI by phone, confirming in writing or confirming by e-mail, as
promptly as practicable after it comes to Distributor's attention, of any
customer complaints regarding the Products.
e) advertise and publicize the Products in the Territory in accordance with
any RCAI advertising and promotional guidelines set forth in any Documentation
or other materials, or as provided during any sales training or market
development assistance by RCAI, and spend a minimum of at least $_______ per
quarter on advertising for the Products.
SECTION 9: LIMITED WARRANTIES FOR PRODUCTS
9.1 RCAI hereby warrants with respect to all Products delivered to
Distributor pursuant to the terms and conditions hereof that all such Products
will be suitable for the applications intended, provided they are used as is
intended from the date of delivery to Distributor until one (1) year from the
pick-up date.
9.2 RCAI's entire liability and Distributor's customers' exclusive remedy is
limited to the replacement without charge, of any Products which prove not to
function as intended within the warranty period.
9.3 RCAI will not be liable for the replacement of Products which, in RCAI's
sole opinion, have been subjected to misuse, accident, alteration, neglect or
damage.
9.4 The warranties provided herein are the only warranties made by RCAI and
excludes all other express and implied warranties including those of
merchantability and fitness of the Products for a particular purpose.
9.5 IN NO EVENT WILL RCAI BE LIABLE FOR DAMAGES OF ANY KIND, DIRECT OR
INDIRECT, INCLUDING, WITHOUT LIMITATION, GENERAL AND SPECIAL DAMAGES SUFFERED BY
DISTRIBUTOR OR ANY CUSTOMER OR DISTRIBUTOR ARISING FROM BREACH OF WARRANTY,
BREACH OF CONTRACT, NEGLIGENCE OR OTHER TORT, EQUITY, OR ANY OTHER LEGAL GROUND
OF ACTION.
SECTION 10: DISTRIBUTOR'S LIABILITY
10.1 Distributor will limit its representations on warranty with regard to
the Products to correspond to the provisions of this Agreement.
10.2 Distributor will obtain as of the Effective Date of this Agreement and
maintain for the term hereof general liability coverage which includes
specifically the Products and completed operations coverage of at least
$1,000,000 per incident, property of at least $1,000,000 and such additional
insurance as may be required by the law or laws of the Territory, and which
names RCAI as an additional insured.
10.3 Within ten (10) days of the Effective Date, Distributor will provide
RCAI with a copy of the insurance policy evidencing compliance with Section 12.2
and will refrain from canceling or changing said policy, except to increase
Distributor's coverage, without prior written notice of RCAI.
SECTION 11: PROPRIETARY RIGHTS
11.1 Distributor on behalf of itself, its officers, employees, agents,
representatives, and assigns:
a) acknowledges that RCAI is the owner of all proprietary rights in the
Products and the Trademarks, to which RCAI grants Distributor the rights to
distribute and use pursuant to the provisions of this Agreement; and
b) will refrain from any unauthorized or infringing use of the Products,
Trademarks or any Documentation for the term hereof and thereafter.
11.2 Promptly after Distributor learns of any suspected or actual
unauthorized third party use of the Products, Trademarks or Documentation,
Distributor will notify RCAI of said unauthorized use or disclosure.
11.3 Should RCAI decide in its sole discretion to take any action to defend
against or terminate said infringing or unauthorized use of its proprietary
rights in the Distributor's Territory, Distributor will, upon RCAI's request,
render any assistance RCAI may require, at RCAI's expense.
SECTION 12: TERM AND TERMINATION
12.1 This Agreement will commence on the Effective Date hereof and will
continue for an initial term of one (1) year (Initial Term). This Agreement may
be renewed at RCAI's sole option for one or more successive terms of 1 year each
(Successive Term) by 90 days prior written notice by RCAI to Distributor. At
the time of renewal Distributor will:
a) have complied with its best efforts obligation to achieve the Minimum
Sales Objective for the Agreement Year concerned; and
b) have complied with all other obligations of this Agreement to RCAI's
satisfaction.
12.2 This Agreement may be terminated without cause by either party hereto if
the party wishing to terminate gives prior written notice to the other party at
least 90 days prior to the end of the Initial Term or any Successive Term.
12.3 RCAI may terminate this Agreement at any time during the Initial Term or
any Successive Term by giving written notice to Distributor, notice effective
upon the date given, in the event of any one or more of the following:
a) the failure of Distributor to achieve the Minimum quarterly Sales
Objective required hereunder, provided, however, that RCAI may elect in lieu of
termination, to revise the Minimum Sales Objective, appoint other distributors
in the Territory or take any other measures to ensure that the market in
Distributor's Territory is optimally developed;
b) Distributor's default in payment when due of any amount payable
hereunder, provided however, in lieu of or in addition to termination, RCAI may
take any measures to mitigate or reduce the extent of Distributor's default.
c) Distributor's breach of any obligation concerning RCAI's proprietary
rights;
d) Distributor's breach of any obligation or representation, other than
those of paragraphs a), b) and c) above,
e) Distributor's attempted assignment of this Agreement or any of rights
granted hereunder by Distributor by agreement or operation of law, without the
prior written consent of RCAI;
f) any legal or business transaction or event which causes a change in
majority ownership of Distributor and effectively results in an assignment of
this Agreement to owners substantially different from the owners of Distributor
at the time of execution of this Agreement without the prior written consent of
RCAI; and
g) any insolvency or inability of Distributor to pay debts as and when due,
or the initiation or tendency of any proceeding involving the insolvency,
bankruptcy, reorganization, or liquidation of Distributor.
SECTION 13: EFFECTS OF TERMINATION
13.1 Subject to Section 15.6, upon termination, Distributor will immediately
discontinue the promotion, distribution and servicing of the Products and will
cease to represent itself as an authorized Distributor of RCAI.
13.2 Distributor will further discontinue any use of RCAI's Trademarks and
any Documentation. At RCAI's option, Distributor will certify destruction of
Documentation.
13.3 Distributor will refrain from using any name, mark or logo which may
create a likelihood of confusion with RCAI's Trademarks and will further refrain
from copying in whole or in part any of the Confidential Information or
Documentation.
13.4 Unless termination occurs for cause, Distributor may sell any Products
remaining as of the date of termination, provided it does so within 30 days of
the date of termination. All other Products remaining thereafter must be
disposed of by Distributor and certified to RCAI.
13.5 Nothing herein will relieve or extinguish any of Distributor's payment
obligations under any provision of this Agreement. Nevertheless, in the event of
insolvency or refusal to pay for any reason by Distributor, RCAI may take
reasonable actions to mitigate its losses by sale of the Products ordered to
other distributors or customers.
13.6 Distributor will offer to RCAI and RCAI may at its sole option, elect to
assume the rights and obligations of any agreements between Distributor and its
customers for the service of the Products, effective as of the date of
termination or expiration.
13.7 In no event will termination or expiration with or without cause of this
Agreement entitle Distributor to any compensation by RCAI on any grounds
whatsoever.
14.1 Governing Law. This Agreement together with the Schedules hereto and
any valid agreement subsequently entered into between the parties regarding the
subject matter hereof will be governed and construed in accordance with the laws
of California.
14.2 Dispute Resolution. In the event of any controversy or claim arising
out of or relating to this Agreement, the parties agree to try in good faith to
settle the claim by mediation administered by the American Arbitration
Association ('AAA') under its International Commercial Mediation Rules before
resorting to arbitration. Any controversy or claim that cannot be resolved by
mediation will be settled by arbitration administered by the AAA in accordance
with its International Arbitration Rules. To the extent these rules require
supplementation and do not contradict the aforesaid Rules, the arbitral tribunal
will apply the California rules on Arbitration and Conciliation of International
Commercial Disputes. Unless otherwise agreed, the place of arbitration will be
Los Angeles, California. Judgment on the award rendered by the arbitrator will
be final and may be entered in any court having jurisdiction thereof.
14.3 In the event of unauthorized use or disclosure of the Products,
Trademarks, or Documentation, Distributor acknowledges that RCAI will be
irreparably harmed and, as there is no adequate remedy at law, RCAI may seek and
obtain injunctive relief against Distributor for any harm arising from or
relating to said unauthorized use or disclosure. Moreover, should the interim
measures for injunctive relief under the AAA International Arbitration Rules
prove inadequate, RCAI may seek injunctive relief, specific performance or any
other equitable relief from any competent court having jurisdiction.
14.4 The award of the arbitrator will be final and binding on the parties,
provided said award does not contradict in whole or in part the state of the
governing law hereof. Judgment upon the award rendered may be entered in any
court having jurisdiction or application may be made to such court for a
judicial acceptance of the award and an order of enforcement.
14.5 Attorney's Fees. In the event an action or arbitral proceeding is
instituted relating to this Agreement, the party which the arbitrator or court
of competent jurisdiction shall deem to have substantially prevailed therein
shall be entitled to recover all costs, expenses, and attorney's fees adjudged
by such arbitral tribunal or court.
SECTION 15: GENERAL PROVISIONS
15.1 Relationship of the Parties. Nothing in this Agreement will be
construed as creating a partnership or joint venture between the parties or
making Distributor a shareholder, agent, employee or other representative of
RCAI, but in all of its operations hereunder Distributor will be an independent
contractor, conduct its business at its own cost and expense and make no
representation, express or implied, that it is an employee, partner,
shareholder, joint venturer or other representative of RCAI. Distributor will
have no authority to make any representation or warranty on behalf of RCAI,
except as specified in this Agreement.
15.2 Force Majeure. In the event that either party is rendered wholly or
partially unable to carry out its obligations under this Agreement due to
reasons beyond its control (including, without limitation, acts of God,
industrial disputes, war or civil disturbances, fire, floods, storms,
earthquakes, landslides, acts of any governmental authority or agency, embargoes
or unavailability of equipment or transport), the failure to so perform will be
excused and not constitute default hereunder during the continuation of the
intervention of such force majeure. The party affected shall give prompt notice
to the other party, shall take all reasonable steps to eliminate the intervening
event and shall resume performance as promptly as is practicable.
15.3 Assignment. This Agreement will be binding upon and inure to the
benefit of RCAI, its successors and assigns. This Agreement will not be
assignable or transferable by Distributor unless prior written consent is
obtained from RCAI and provided that the assignee or transferee agrees in
writing to be bound by all the terms, condition and obligations of this
Agreement by which Distributor is bound and Distributor remains subject to the
obligations on confidentiality and proprietary rights set forth herein. Any
assignment of this Agreement or any rights or obligations arising therefrom
without RCAI's prior written consent shall be deemed void.
15.4 Severability. If any provision of this Agreement is held to be invalid,
illegal, or unenforceable by a court or other tribunal of competent
jurisdiction, this Agreement will be considered divisible as to such provision
and the remaining provisions hereof will remain valid and binding.
15.5 No Waiver. Failure or delay by either party to exercise or enforce any
term, right, power or privilege of this Agreement will not operate as a waiver
thereof nor will any single or partial exercise of any term, right, power or
privilege preclude any other or further exercise thereof.
15.6 Entire Agreement. This Agreement, and all schedules hereto form the
entire agreement of the parties hereto with respect to the subject matter
hereof. No modification, renewal, extension or waiver of this Agreement or any
of its provisions will be binding unless made in writing and signed by each
party=s duly authorized representative, except as to the Schedules attached
hereto, which RCAI may amend from time to time during the term hereof.
15.7 Survival. Neither termination nor expiration will affect any right or
obligation of either party hereunder which by its terms continues beyond the
effective date of termination or expiration.
15.8 Notices. Unless otherwise provided herein, any notice or other written
communication required or permitted in connection with this Agreement will be
properly given when made in writing and sent by first-class registered or
certified airmail, return receipt requested, or by courier or other personal
delivery service, and properly addressed to the appropriate party at the address
set forth above, until changed by written notice. Notice shall be effective
when given, provided it is given in accordance with this Section 15.8.
IN WITNESS WHEREOF, RCAI and Distributor has each caused this Agreement to be
executed on its behalf by its duly authorized officer as of the date first
written above.
RCAI North American Marketing, Inc.
By:__________________________ By:_____________________________
Gordon Davies George Aumond
President President
EX 10.4
MANUFACTURING AGREEMENT
This Agreement is made this 14th day of October, 2003, between Reclamation
Consulting & Applications, Inc. (RCAI), a Colorado corporation with its
principal place of business at 23832 Rockfield Blvd. Suite 272, Lake Forest,
California, 92630, and North American Systems, Inc., a Nevada corporation (NAS).
RECITALS
RCAI is the owner of certain proprietary technology used in the production of
asphalt, cement and related products release agents in liquid form that are non-
toxic, non-explosive and environmentally compatible. To date, RCAI has produced
and sold its own such liquid release agents, in particular under the trademarks
and names ASA 12, KR7, and Alderox.
Pursuant to a separate non-disclosure agreement between RCAI and NAS dated July
30th, RCAI disclosed its technology to NAS for the purpose, among others, of
NAS's evaluation of its capacity and capability to produce the Alderox products
and related applications on behalf of RCAI.
As a consequence, the parties have determined that NAS has the manufacturing
capability to produce Alderox products for RCAI. RCAI desires to license its
technology to NAS for the purpose of NAS manufacturing RCAI's requirements for
Alderox products and related applications, and NAS desires to obtain a license
to use RCAI's technology to manufacture and sell the Alderox products to RCAI.
In consideration of the premises, representations and agreements contained in
this Agreement, the parties agree as follows:
Section 1. Definitions
1.1. "Alderox Products" means RCAI's asphalt, cement and related product
release agents in liquid form and any applications, the primary characteristics
of which are that they are non-toxic, non-explosive and environmentally
compatible, or related services.
1.2 "Alderox Technology" means all information acquired or developed by RCAI
relating to Alderox Products, including their formulation, ingredients,
processing or other methods of production, all of which is owned by RCAI and
currently protected as trade secrets.
1.3 "Alderox Improvements" means any improvements to the Alderox Products or
Technology acquired or developed by RCAI during the term of this Agreement
relating to current or future Alderox Products.
1.4 "Confidential Information" means
a) all information in any tangible form or medium which RCAI has disclosed
under the NDA to NAS or which it will disclose hereunder relating to Alderox
Products, Alderox Technology, or Alderox Improvements;
b) production data, technical and engineering data, test data and test
results, or the status and details of research and development of Alderox
Technology, Improvements or Alderox Products;
c) any other information in any tangible form which is disclosed by RCAI to
Alderox during the term hereof which is reasonably necessary to enable NAS to
carry out its performance of this Agreement and which is marked by RCAI as
confidential, including without limitation, information relating to business
operations or development, marketing, customer or supplier information or
regulatory approvals or compliance.
1.5 "Licensed Technology" means all Alderox Technology and any Alderox
Improvements, which are licensed to NAS hereunder.
1.6 "Effective Date" means the date first written above, subsequent to the
execution of this Agreement by an authorized representative of each party
hereto.
Section 2. License to Manufacture
2.1 During the term hereof, RCAI grants to NAS the rights to use and
practice the Licensed Technology for the sole purpose of manufacturing Alderox
Products in the types and quantities ordered by RCAI in accordance with RCAI's
requirements. Provided that NAS continues to produce and deliver RCAI's
requirements for Alderox Products, and further provided that there is agreement
on price under Section 4 hereof, RCAI will purchase its requirements from NAS.
2.2 Unless otherwise agreed by amendment hereto, RCAI retains all rights to
market, distribute and sell the Alderox Products worldwide and all rights of
ownership and use to the Licensed Technology not otherwise granted herein to
NAS.
Section 3. Disclosure of Licensed Technology and Manufacture of Product
3.1 Promptly following the Effective Date hereof, RCAI will disclose to NAS
all the Licensed Technology in its possession and in any tangible form or medium
in which it exists.
3.2 Upon receipt of the Licensed Technology, NAS will use its best efforts
produce a sample(s) of the Alderox Products which RCAI orders. Upon approval by
RCAI, NAS will commence production of the Alderox Products ordered.
3.3 NAS will not pay any license fees for the use of the Licensed Technology.
However, NAS will assume all direct costs of manufacturing which are necessary
to produce the Alderox Products ordered by RCAI, including any costs in
connection with testing or regulatory approvals that are pre-requisite to NAS's
production of the Alderox Products.
3.4 During the term hereof, RCAI will provide at its own cost technical
assistance to NAS to the extent reasonably necessary and required by NAS to use
the Licensed Technology to its fullest extent.
Section 4. Purchase of RCAI's Requirements
4. 1 NAS will supply the Alderox Products only to RCAI.
4.2 During the term hereof, NAS agrees to refrain from developing,
manufacturing or distributing any product, which directly or indirectly competes
with any Alderox Products or is based in whole or in part on the Licensed
Technology.
Section 5. Shipment, Inventory, and Inspection
5.1 Unless otherwise agreed, all Alderox Products will be manufactured and
delivered F.O.B. NAS's Salt Lake City, Utah facility or other blending
facilities. NAS will bear the costs of shipment, insurance, taxes, and any
other such charges from the time RCAI delivers the Alderox Products to the
designated NAS facility.
5.2 During the term hereof, RCAI may inspect NAS's facilities and
operations, upon reasonable notice and at reasonable intervals, for the
purposes of determining if the Licensed Technology is being used and
practiced as intended. Costs of any inspection will be born by RCAI and
NAS will fully cooperate with RCAI during any such inspection.
Section 6. Purchase orders and terms of Payment
6.1 RCAI will submit to NAS its purchase orders for Alderox Products within
30 days of the desired delivery date. Within 48 hours of NAS's receipt of
RCAI's purchase order, NAS will provide RCAI with its pricing and estimated
delivery date for the Alderox Products ordered.
6.2. Payment of NAS's invoices for Alderox Products ordered by and delivered
to RCAI will be due and payable net thirty (30) days of delivery of the ordered
Products to RCAI, F.O.B. final delivery destination. Unless otherwise agreed,
all prices will be paid in US Dollars.
6.3. NAS may make adjustments to its prices during the term hereof; however,
any increases in pricing will require ninety (90) days' prior notice to RCAI of
any such change before making them effective, and any such changes will not
adversely affect the orders for Alderox Products already accepted by NAS for
production.
6.4 In the event of late payment, RCAI will notify NAS of the reasons for
late payment and the timeframe, if any, for making payment. RCAI will use its
best efforts to make full payment or otherwise resolve the issue. Late payment
will not constitute good cause to terminate this Agreement.
Section 7. Other Obligations of NAS
NAS, as provided for herein, will use its best efforts to:
7.1 ensure the confidentiality of all of Licensed Technology and Confidential
Information disclosed hereunder and the proper use of all Licensed Technology;
7.2 obtain all regulatory approvals or comply with all regulatory
requirements required or desirable to produce the ASA 12 Products.
Section 8. Proprietary Rights/Confidentiality
8.1 NAS will refrain from any unauthorized use of the Licensed Technology or
disclosure of said Technology protected as trade secrets to any third parties.
8.2 The above obligations will apply retroactively to any part of the
Licensed Technology disclosed by RCAI to NAS prior to execution hereof. They
will continue for the duration of this Agreement and thereafter, unless and
until any part of the Licensed Technology or the Confidential Information are
proven: a) to have fallen into the public domain or do not remain secret and
substantial through no fault of the receiving party; b) to have infringed the
proprietary rights of a third party; or c) to have been independently developed
by NAS prior to RCAI's disclosure.
8. 3 NAS agrees to use at least the same standard of care as it uses in
regard to its own confidential or proprietary information to prevent
unauthorized use or disclosure of the Licensed Technology or the Confidential
Information, including, without limitation, actively educating their employees,
agents, consultants or other representatives about the confidential treatment of
said information and instituting both contractual and practical measures to
ensure that they refrain from such unauthorized use or disclosure during the
term of their employment or service and thereafter.
Section 9. Third Party Infringement/Misuse
9.1 Upon: a) the discovery by NAS; or b) notice by NAS to RCAI: i) any
third party infringement of the Licensed Technology; or ii) any third party
claim that the Licensed Technology infringes such party's proprietary rights,
RCAI will take whatever action is reasonably necessary at RCAI's expense to
prevent or prosecute said alleged infringement or defend against, negotiate,
mediate or otherwise resolve said third party's claim.
9.2 NAS will render any assistance reasonably requested or required by RCAI,
provided the expense is born by RCAI. RCAI will retain any damages or other
compensation recovered from the prosecution, settlement or defense of such
claims.
9.3 Notwithstanding Section 9.2, in the event that the costs of litigation
become overly burdensome, RCAI will not be obligated to litigate or to continue
to litigate a third party infringement claim and will notify NAS in a timely
manner of any decision not to prosecute or defend on its own. The parties may
agree to jointly prosecute or defend such claims, in which case, they will
jointly assume the expenses and fees incurred and share any damages or other
compensation which may be recovered from prosecution, defense or settlement.
Should RCAI not wish to participate in any joint prosecution or defense, the
parties may, by subsequent agreement, determine whether and to what extent NAS
may, at its election, prosecute or defend such claims.
9.4 In any event, RCAI or both parties, to the extent both are involved, will
use its or their best efforts to: a) modify the Licensed Technology or amend
this Agreement so as to fulfill the objectives hereof; and b) mitigate any
actual or potential damage to the Alderox Products which RCAI has ordered and
NAS has in production or ready for delivery.
Section 10. Warranties/Indemnities
10.1 RCAI represents, that to its best knowledge: a) the Licensed Technology
does not infringe any third party's rights; and b) the Licensed Technology,
when properly used, will result in Alderox Products which have the function and
reliability they are intended to have. 10.2 NAS warrants to RCAI that it
will use its best efforts to: a) use the Licensed Technology so as to produce
all Alderox Products ordered with the function and reliability intended; and b)
deliver to RCAI all Alderox Products free of any and all material defects in
materials and workmanship.
10.3 The parties will give each other prompt notice of any alleged material
breach of these warranties. RCAI will take all reasonable measures to correct
any deficiencies in the Licensed Technology and will bear the expense of any
Alderox Products which are ordered and produced which contain such deficiencies.
Should the defects relate to the materials or workmanship, NAS will replace said
defective products at no charge. The parties' warranties will apply to third
party buyers or consumers as prescribed by the local laws of the territory in
which the Alderox Products are sold or used. In the absence of any statutory
or prescribed period, the applicable warranties will be for a period of 1 year
from the time the Alderox Products concerned are sold.
10.4 RCAI agrees to determine to what extent its product liability insurance
will cover third party claims and to otherwise procure comprehensive product
liability insurance sufficient to protect NAS from the claims of such third
party claimants for the U.S. market.
Section 11. Limitation of Liability
11.1 RCAI will have no responsibility for the workmanship or materials of the
Alderox Products manufactured by NAS or for compliance with the information
furnished to NAS in the Licensed Technology or related Confidential Information.
NAS will be liable, at its own cost, to correct or cure any such defects in
materials and workmanship, which occur under normal use or application from the
date of discovery of the defect and prompt notice to NAS to the end of any
applicable warranty period.
11.2 NAS will have no responsibility for any deficiencies in the information
provided in the Licensed Technology. RCAI will be liable, at its own cost, to
correct or cure any such deficiencies, so that the Alderox Products have the
function, and reliability they are intended to have under normal use or
application from the date of discovery of the defect and prompt notice thereof
to RCAI to the end of any applicable warranty period.
11.3 NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY CONSEQUENTIAL DAMAGES
TO EACH OTHER ARISING FROM THE BREACH HEREOF PROVIDED EACH ONE'S OBLIGATIONS
HEREIN ARE MET.
11.4 As between each other, the foregoing warranties are in lieu of all other
warranties or conditions, express or implied. Except as provided herein, neither
party will be liable for any damages other than actual damages, such actual
damages not to exceed the total price paid for the total amount of Alderox
Products ordered with regard to which a claim of liability is made.
Section 12. Term and Termination
12.1 This Agreement will commence on the Effective Date and continue for a
period of twelve full consecutive calendar months or part thereof, beginning
with the month in which the Effective Date occurs ("Annual Period"). It will be
automatically renewed for consecutive Annual Periods, unless terminated upon
notice by either party for good cause.
12.2 This Agreement may be terminated at any time for good cause by notice of
the party claiming breach to the allegedly breaching party. Good cause means:
a) a material breach of any warranty, term, condition or covenant of this
Agreement, unless the breaching party cures the breach to the notifying party's
satisfaction within ninety (90) days of the allegedly breaching party's receipt
of the notice; or
b) a material adverse change in the Licensed Technology, because of
misappropriation which is unsuccessfully defended or for any other reason, so
that the production and/or sale of the Alderox Products are no longer
economically viable;
c) an event of insolvency of either of the parties, including a failure to
pay debts or perform obligations, admission of and/or commencement of any
voluntary or involuntary insolvency proceeding, or an assignment for the benefit
of creditors.
12.3 RCAI reserves the right to terminate the rights of NAS hereunder during
in the event that NAS is unable or unwilling for any reason to meet RCAI's
requirements for Alderox Products, and such incapacity or decision not to
produce and supply by RCAI continues for a period of thirty (30) days from the
date of NAS's notice to terminate under this Section 12.3.
Section 13. Effects of Termination
13.1 Upon termination for any reason, NAS will cease and desist to use any of
RCAI's Licensed Technology or Confidential Information. At RCAI's election,
NAS will return or certify destruction of all such information in any form or
medium in which it is embodied, together with any copies.
13.2 RCAI will pay any amounts then due and owing to NAS for orders of
Alderox Products which have been ordered by RCAI in accordance with the terms
hereof.
13.3. Notwithstanding Section 13.1 and unless termination results from misuse
of the Licensed Technology or Confidential Information, NAS will complete any
orders of Alderox Products which are in progress using said Licensed Technology,
and thereafter return or certify their destruction.
13.4 Notwithstanding Section 13.1:
a) should RCAI terminate the production rights of NAS or should NAS decide
for any reason to cease production of the Alderox Products, RCAI may resume
production or grant a license to another third party to meet its requirements;
or
b) should RCAI for any reason, including an event of insolvency as defined in
Section 12.2. b), end its business of promoting, selling, marketing or otherwise
distributing the Alderox Products, RCAI will first offer to NAS a license of all
rights to use the Licensed Technology and to produce and sell the Alderox
Products. Should NAS wish to obtain said rights, RCAI will grant said license,
subject to the parties' mutual agreement on the terms and conditions of said
license.
13. 5 In the event either party should decide not to continue its performance
as set forth in Section 13.4 hereof, neither party will be liable for any claims
of damage from the other party, provided the proper notice period is observed
and further provided each party takes reasonable measures as provided in Section
13.4 to license or otherwise enable the party which wishes to continue
production and/or sale of the Alderox Products with the rights to so continue.
13.6 All other obligations of this Agreement which by their terms survive
termination hereof will continue to remain in effect.
Section 14. Governing Law and Dispute Resolution
14.1 This Agreement will be construed in accordance with, and governed by the
laws of the state of California, without regard to its conflicts of laws rules.
14.2 In the event of any dispute arising out of or relating to this
Agreement, the parties agree to try in good faith to settle the dispute by
mediation administered by the American Arbitration Association ("AAA") under its
Commercial Mediation Rules before resorting to arbitration. Any controversy or
claim arising out of or relating to this Agreement which cannot be settled
through mediation will be settled by arbitration administered by the AAA in
accordance with its Arbitration Rules. Judgment on the award rendered by the
arbitrator shall be final and may be entered in any court having jurisdiction
thereof.
14.3 In the event the interim measures for injunctive relief under the AAA
International Arbitration Rules prove inadequate, the parties may seek
injunctive relief, specific performance or any other equitable relief from any
competent court having jurisdiction.
Section 15. General Provisions
15.1 Force Majeure. Unless otherwise provided for herein, no party will be
liable for any failure or delay in its performance under this Agreement due to
causes, including, but not limited to, acts of God, such as fire, flood or
earthquake, acts of civil or military authority, riots, wars, governmental
actions, labor shortage or disputes or other acts which are beyond any of the
party's reasonable control, provided the party with the delay or failure gives
notice to the other party at least within 7 days of its discovery and uses
reasonable efforts to minimize or remedy such failure or delay in performance.
15.2 Relationship of Parties. RCAI and NAS are neither agents nor employees
of each other, nor joint venturers. Neither has the authority to bind the
other by contract or otherwise to any obligation, other than as expressly stated
herein.
15.3 Notices. Any notices under this Agreement must be in writing and may be
given by certified mail, courier, facsimile or email. In the case of facsimile
or email, confirmation must be given promptly thereafter by certified mail or
courier. Notices will be sent to each one's respective address as follows,
until otherwise notified of a change. Notices are effective upon receipt or
receipt of confirmation.
Mr. Gordon Davies RCAI
NAS 23832 Rockfield Blvd. Suite 272 Lake Forest, CA. 92630 Fax:
Fax: Email:
Email:
With a copy to: With a
copy to:
Shaub, Williams & Nunziato LLP 12121 Wilshire Blvd. #205 Los Angeles, CA. 90025
310 826 8042 lawfirm@swn-law.com
15.4 Assignment. Neither party may assign or delegate its rights or
obligations under this Agreement, without the prior written consent of the
other.
15.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties pertaining to the subject matter contained in it and
supersedes all prior and contemporaneous agreements, representations and
understandings of the parties. No amendments hereof will be binding unless
executed in writing subsequently to this Agreement by each of the authorized
representatives of the parties.
15.6 Waiver. Failure by either party to enforce any provision of this
Agreement will not be deemed to constitute a waiver of future enforcement of
that or any other provision, nor be binding unless executed in writing by the
party making the waiver.
15.7 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, all other provisions of
this Agreement will be construed to remain fully valid, enforceable and binding
on the parties.
15.8 Construction. This Agreement has been negotiated by the parties and
their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor of or
against either party.
15. 9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be considered an original, but all of which
together will constitute one and the same instrument. IN WITNESS WHEREOF, each
of the parties hereto or its authorized representative has executed this
Agreement as of the date first written above.
RECLAMATION CONSULTING & APPLICATIONS, INC.
By:____________________
Gordon Davies
President
NORTH AMERICAN SYSTEMS, INC.
By:______________________
Name:
Title:
EX 10.5
REVOLVING LOAN AGREEMENT
THIS REVOLVING LOAN AGREEMENT (the "Agreement") is entered into this 30th day of
July, 2003 by and between North American Systems, Inc., a Nevada corporation
("NAS") and Reclamation Consulting and Applications Inc., a Colorado Corporation
("RCAI").
NOW THEREFORE, it is hereby agreed as follows:
1. Periodic Loans
During the term hereof, RCAI hereby agrees to make periodic loans to NAS.
During the term hereof, from time to time NAS may notify RCAI of its need to
borrow funds pursuant to this Agreement. Within 30 business days of receipt of
such notice from NAS seeking to borrow funds and with the approval of RCAI's
Board of Directors, RCAI shall forward such funds to NAS.
NAS shall utilize the funds as set forth in a monthly Budget, which will be
submitted to RCAI and by this reference incorporated herein and for no other
purpose, without the specific written authorization and consent from RCAI.
2. Period Finance Charges
All principal outstanding shall bear interest at a rate of 10% per annum,
compounded annually.
3. Payments
All interest outstanding shall be due and payable by NAS on a quarterly basis,
30 days after the end of each calendar quarter. All interest then outstanding
shall be due and payable by NAS to RCAI under the terms of each advance. NAS
may, from time to time, in NAS's discretion, make one or more periodic payments
to RCAI. Such payments shall be credited to NAS's account on the date that such
payment is received and cleared by RCAI's bank. Such payments shall be applied
first to the interest outstanding, and then to the principal outstanding.
4. Term
This Agreement shall begin this date and shall terminate on October 14th 2005,
unless terminated earlier pursuant to the default provisions of this Agreement.
This Agreement may be renewed on an annual basis after the termination date.
5. Default Provisions
The occurrence of one or more of the following events shall constitute and event
of default:
5.1 The nonpayment of any interest of this loan when the same shall have
become due and payable. There shall be a 90 day cure period following any
Notice of Default.
5.2 The entry of a decree or order by a court having jurisdiction in the
premises adjudging NAS a bankrupt or insolvency, or approving as properly filed
a petition seeking reorganization, arrangement, adjustment or composition of or
in respect of NAS under the federal Bankruptcy Act or any other applicable
federal or state law, or appointing a receiver, liquidator, assignee or trustee
of NAS, or any substantial part if its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of sixty (60) consecutive days.
5.3 The institution by NAS of proceedings to e adjudicated a bankrupt or
insolvent, or the consent by it to the institution of bankruptcy or insolvency
proceedings against it, or the filing by it of a petition or answer or consent
seeking reorganization or relief under the federal Bankruptcy Act or any other
applicable federal or state law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee or trustee of
the company, or of any substantial part of its property, or the making by it of
an assignment for the benefit of creditors or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by NAS in furtherance of any such action.
5.4 Any default in the obligation of NAS for borrowed money, other than this
loan, which shall continue for a period of sixty (60) days.
5.5 The breach by NAS, of any other provision of this Agreement, or the
attached Security Agreement.
6. Acceleration
At the option of RCAI, and without demand or notice, all principal and any
unpaid interest shall become immediately due and payable upon a default as set
forth above.
7. Security
NAS's obligations as set forth in this Agreement are secured pursuant to the
provisions of a Security Agreement between RCAI and NAS, a true copy of which is
attached hereto and by this reference incorporated herein.
8. Notices
Any notice under this Agreement shall be in writing and shall be effective when
actually delivered in person or three days after being deposited in the U.S.
mail, registered or certified, postage prepaid and addressed to the party at the
address stated in this Agreement or such other address as either party may
designate by written notice to the other.
9. Address for Notices
Any notices permitted or required under this Agreement shall be deemed given
upon the date of personal delivery or 48 hours after deposit in the United
States mail, postage fully prepaid, return receipt requested, addressed to NAS
at:
1520 South Grand Avenue Santa Ana, CA 92705
Addressed to RCAI at:
23832 Rockfield Blvd., Suite 275 Lake Forest, CA 92630
Or at any other address as any party may, from time to time, designate by notice
given in compliance with this section.
10. Time
Time is of the essence of this Agreement
11. No Release
Both parties agree that the termination of this Agreement or the expiration of
the term of this Agreement shall not release either party from any obligations
hereunder.
12. Waiver
The waver by either party of the breach of any provision of his Agreement by the
other party shall not operate or be construed as a waver of any subsequent
breach.
13. Assignment
Except as otherwise provided within this Agreement, neither party hereto may
transfer or assign this Agreement without prior written consent of the other
party.
14. Law Governing
This Agreement shall be governed by and construed in accordance with the laws of
the State of California.
15. Arbitration
If at any time during the term of this Agreement any dispute, difference, or
disagreement shall arise upon or in respect of the Agreement, and the meaning
and construction hereof, every such dispute, difference, and disagreement shall
be referred to s a single arbiter agreed upon by the parties, or if no single
arbiter can be agreed upon, an arbiter or arbiters shall be selected in
accordance with the rules of the American Arbitration Association and such
dispute, difference, or disagreement shall be settled by arbitration in
accordance with the then prevailing commercial rules of the American Arbitration
Association, and judgement upon the award rendered by the arbiter may be entered
in any court having jurisdiction thereof.
16. Attorney Fees
In the event an arbitration, suit or action is brought by and any party under
this Agreement to enforce any of its terms, or in any appeal therefrom, it is
agreed that the prevailing party shall be entitled to reasonable attorneys fees
to be fixed by the arbitrator, trial court, and/or appellate court.
17. Presumption
This Agreement or any section thereof shall not be construed against any party
due to the fact that said Agreement or any section thereof was drafted by said
party.
18. Computation of Time
In computing any period of time pursuant to this Agreement, the day of the act,
event or default from which the designated period of time begins to run shall be
included, unless it is a Saturday, Sunday or a legal holiday, in which event the
period shall begin to run on the next day which is not a Saturday, Sunday or a
legal holiday, in which event the period shall run until the end of the next day
thereafter which is not a Saturday, Sunday or legal holiday.
19. Titles and Captions
All article, section and paragraph titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor affect the interpretation of this Agreement.
20. Pronouns and Plurals
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural as the identity of the Person or
Persons may require.
21. Entire Agreement
This Agreement and the attached Security Agreement contain the entire
understanding between and among the parties and supersedes any prior
understandings and agreement among them respecting the subject matter of this
Agreement.
22. Prior Agreements
This document is the entire, final and complete agreement of the parties
pertaining to the loan of money by RCAI to NAS, and supersedes and replaces all
prior or existing written and oral agreements between the parties or their
representatives relating to such financing.
23. Agreement Binding
This Agreement shall be binding upon the heirs, executors, administrators,
successors and assigns of the parties hereto.
24. Further Action
The parties hereto shall execute and deliver all documents, provide all
information and take or forbear from all such action as may be necessary or
appropriate to achieve the purposes of this Agreement.
25.0 Counterparts
This Agreement may be executed in several counterparts and all so executed shall
constitute one Agreement, binding on all the parties hereto even though all the
parties are not signatories to the original or the same counterpart.
26.0 Parties in Interest
Nothing herein shall be construed to be to the benefit of any third party, nor
is it intended that any provision shall be for the benefit of any third party.
WHEREOF, the parties have executed this Agreement this 30th day of July, 2003.
Reclamation Consulting & Applications, Inc.
Title:
Date: July 30, 2003
North American Systems, Inc.
Title:
Date: July 30, 20
EX 10.6
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into at Irvine,
California, as of the 30th day of July 2003 by and between RECLAMATION
CONSULTING AND APPLICATIONS, INC., a Colorado Corporation ("RCAI" or "Secured
Party") and NORTH AMERICAN SYSTEMS, INC., a Nevada Corporation ("NAS" or
"Debtor") with reference to the following facts:
A. Debtor has executed a Revolving Loan Agreement in favor of Secured Party
to evidence an outstanding debt owed by Debtor to Secured Party, and delivered
same to Secured Party, a copy of which is attached hereto (the "Loan
Agreement").
B. The purpose of this Security Agreement is to secure the full, faithful
and prompt payment by Debtor to Secured Party under the terms of the Loan
Agreement.
NOW THEREFORE, it is hereby agreed as follows:
1. Grant of Security Interest
Debtor hereby grants a security interest to and in favor of Secured Party, and
Secured Party retains a security interest in and to the Collateral (as
hereinafter defined in Paragraph 2) to secure the full, faithful and prompt
performance of the Loan Agreement. The security interest herein granted to, and
retained by, Secured Party shall be a lien and, except as otherwise provided
herein, shall attach to the Collateral immediately upon the execution hereof.
Debtor shall execute and deliver to Secured Party, for filing with California, a
California UCC Financial Statement, which Secured Party shall file.
2. Collateral
As used herein, the "Collateral" shall refer to the following: (i) All assets,
tangible and intangible, of NAS, wherever located; and (ii) all additions and
substitutions to or for the items referred to in (i) above; and (iii) all
proceeds therefrom; and (iv) if a part of the Collateral is inventory or
equipment, any after acquired inventory or equipment shall also be considered
Collateral (hereinafter collectively referred to as the "Collateral").
3. Books and Records; Inspection
Borrower shall keep and maintain, at its expenses, complete records of the
Collateral. Secured Party shall have the right at any time and from time to
time, without notice, to call at Borrower's place of business during normal
business hours to inspect the Collateral and to inspect the correspondence,
books, and records of Borrower relating to the Collateral.
4. Representations and Warranties of Borrower
Borrower represents and warrants to secured Party that, with respect to the
Collateral, Borrower posses and shall possess at all times while this Security
Agreement is in effect, full, complete and unencumbered title to such goods,
subject only to Secured Party's security interest hereunder.
5. Default
Debtor shall be deemed to be in "default" under this Agreement is Debtor fails
to pay any amount due under the Loan Agreement 90 days after written demand by
Secured Party to Debtor for such payment, or breaches any other provisions of
the Loan Agreement.
6. Rights Upon Default
6.1 Upon the occurrence of any Event of Default hereunder, Secured party, at
its option, may exercise any one or more of the cumulative rights and remedies
hereinafter set forth and any other right or remedy provided for in this
Agreement or available at law or in equity. Any one or more of such rights and
remedies may be exercised simultaneously or successively, and the initiation or
completion of any such exercise shall not constitute an election and shall not
stop or prevent the pursuit of any other right or remedy. Upon the occurrence
of any Event of Default hereunder Secured Party, in its discretion, may:
(a) Accelerate the maturity of, and declare immediately due and payable, the
full unpaid amount of Debtor's indebtedness to Secured Party under the Loan
Agreement and any other Secured Obligation;
(b) Enter on Debtor's premises to assemble and take possession of the
Collateral.
(c) Require Debtor to assemble the Collateral and make its possession
available to Secured Party at a place designated by Secured Party that is
reasonably convenient to both Debtor and Secured Party.
(d) Enter Debtor's premises, render the Collateral, if equipment, usable and
dispose of its in the manner provided by the Uniform Commercial Code of
California on Debtor's premises.
(e) Incur expenses, including reasonable attorney's' fees and related costs,
in the exercise of any right or remedy under or in connection with this
Agreement, including but not limited to expenses related to the protection of
Secured Party's security or the preservation of the Collateral. Debtor agrees
to pay, or reimburse Secured Party, for all such expenses and all such expenses
shall become a part of the Secured Obligations hereunder;
(f) Perform any obligation of Debtor hereunder, including but not limited to
the reasonable expenditure of any funds or the taking of any action which Debtor
is obligated to expend or take under or in connection with this Agreement.
(g) Notify any obligor or account debtor of the Debtor to make payments
directly to Secured Party and collect, by legal proceedings or otherwise and
endorse and receive all dividends, interest payments, proceeds and other sums
and property now or hereafter payable on account of the Collateral.
(h) Notify other interested persons, firms or corporations of the default
and of any of the Secured Obligations.
(i) Sue Debtor for the performance, demand or satisfaction of any of the
Secured Obligations.
7. Miscellaneous
7.1 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
7.2 Assignment by Secured Party. Secured Party may assign its rights
under this Security Agreement and the security interest created by this Security
Agreement. Should Secured Party assign his rights under this Agreement or the
security interest created by this Agreement, Secured Party's assignee shall be
entitled, on written notice of the assignment being given by Secured Party to
Debtor, to all performance required of Debtor by this agreement and all payments
and monies secured by this Agreement.
7.3 Severability. Nothing contained in this Agreement shall be construed
as requiring or permitting the commission of any act contrary to law. Wherever
there is any conflict between any provision of this Agreement and any present or
future statute, law, ordinance, or regulation pursuant to which the parties have
no legal right to contract, the latter shall prevail, but in such event the
provisions of this Agreement thus affected shall be curtailed and limited only
to the extent necessary to bring them within the requirement of the law. In the
event that any part, article, paragraph or clause of this Agreement shall be
held to be indefinite or invalid, the entire \Agreement shall not fail on
account thereof, and the balance of the Agreement shall continue in full force
and effect.
7.4 Notices. Any and all notices, requests, demands and other
communications which are required or may be given under, or in connection with,
this Agreement shall be in writing and shall be deemed given when delivered in
person or when received if by telegraphic or other electronic means (including,
without limitation, telecopy or telex) or, if mailed, three business days after
being deposited in the United States mail, certified or registered mail, postage
prepaid, or if sent via Federal Express or similar courier service, two days
after being deposited therewith, addressed to the party to whom it is to be
given at the address hereinafter specified:
If to Debtor:
North American Systems, Inc. 1520 South Grand Avenue Santa Ana,
CA 92705 Attention: George Aumond, President
If to Secured Party:
Reclamation Consulting & Applications, Inc. 23832 Rock field
Blvd., Suite 275 Lake Forest, CA 92630 Attention: Gordon
Davies, President
Any party hereto may, by notice given as provided herein, change the address to
which, or the person to whose attention, notices shall be given.
7.5 Attorneys' Fees. In the event that any action, suit or
proceeding is brought under or in connection with this Agreement, the prevailing
party therein shall be entitled to its reasonable costs, expenses and attorneys'
fees (including the reasonable estimate of the allocable costs of in-house legal
counsel and staff).
7.6 Entire Agreement. This Agreement supersedes any and all oral and
written statements and representations and together with the Revolving Loan
Agreement contains the entire agreement among the parties hereto with respect to
the subject matter hereof and the transactions contemplated hereby.
7.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.8 Captions. Captions and paragraph heading used herein are for
convenience only, are not a part of this Agreement and shall not be used in
construing it.
7.9 Gender. Terms used herein in any number of gender include other numbers
or genders, as the context may require.
7.10 Defined Terms. All capitalized terms used herein shall have,
unless otherwise defined herein, the meaning attributed to them in the
Agreement.
7.11 Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of California as applied between residents
of the State of California entering into contracts to be performed wholly within
the State of California.
7.12 Construction. This Agreement shall be construed without regard to the
identity of the person who drafted the various provisions of the same. Each and
every provision of this Agreement shall be construed as though all of the
parties participated equally in the drafting of the same. Consequently, the
parties acknowledge and agree that any rule of construction that a document is
to be construed against the drafting party shall not be applicable to this
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed s of the day and year
first above written.
SECURED PARTY DEBTOR
RECLAMATION CONSULTING & NORTH AMERICAN SYSTEMS, INC.
APPLICATIONS, INC.
By By
Title Title
EX31.1
RECLAMATION CONSULTING AND APPLICATIONS, INC.
(FORMERLY, RECYCLING CENTERS OF AMERICA, INC.)
CERTIFICATIONS
JUNE 30, 2004
I, Gordon W. Davies, certify that:
1. I have reviewed this annual report on Form 10-K of Reclamation
Consulting and Applications, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Securities Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and
material weaknesses.
Date: July 27, 2004
/s/ Gordon W. Davies
------------------------------------
Gordon W. Davies,
President
EX31.2
RECLAMATION CONSULTING AND APPLICATIONS, INC.
(FORMERLY, RECYCLING CENTERS OF AMERICA, INC.)
CERTIFICATIONS
JUNE 30, 2004
I, Michael C. Davies,, certify that:
1. I have reviewed this annual report on Form 10-K of Reclamation
Consulting and Applications, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Securities Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this annual report (the "Evaluation Date"); and
(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and
material weaknesses.
Date: October 1, 2004
/s/ Michael C. Davies
------------------------------------
Michael C. Davies,
Secretary
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Reclamation Consulting
and Applications, Inc. (the"Company") for the period ended June 30, 2003 as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"), the undersigned, Gordon W. Davies, President of the Company,
and Michael C. Davies, Secretary of the Company, each hereby certifies,
pursuant to 18 U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Gordon W. Davies
------------------------------------
Gordon W. Davies
President
Dated: October 01, 2004
/s/ Michael C. Davies
------------------------------------
Michael C. Davies
Secretary
Dated: October 01, 2004
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Reclamation Consulting
and Applications, Inc. (the"Company") for the period ended June 30, 2003 as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"), the undersigned, Gordon W. Davies, President of the Company,
and Michael C. Davies, Secretary of the Company, each hereby certifies,
pursuant to 18 U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/ Gordon W. Davies
------------------------------------
Gordon W. Davies
President
Dated: October 01, 2004
/s/ Michael C. Davies
------------------------------------
Michael C. Davies
Secretary
Dated: October 01, 2004