-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TsZYq3KbsacOK0tjx4hNTtTiw/2OprvWPGcc1wCmkjMFj42KP76OJvDBhSeM1fUs 8vhCsMKYvdMblPpkBl1j5g== 0001038838-05-000334.txt : 20050316 0001038838-05-000334.hdr.sgml : 20050316 20050316115849 ACCESSION NUMBER: 0001038838-05-000334 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041202 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review ITEM INFORMATION: Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050316 DATE AS OF CHANGE: 20050316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIATECT INTERNATIONAL CORP CENTRAL INDEX KEY: 0000319124 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE CHEMICALS [2870] IRS NUMBER: 820513109 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-10147 FILM NUMBER: 05684044 BUSINESS ADDRESS: STREET 1: 875 SOUTH INDUSTRIAL PARKWAY CITY: HEBER STATE: UT ZIP: 84032 BUSINESS PHONE: 435-654-4370 MAIL ADDRESS: STREET 1: 875 SOUTH INDUSTRIAL PARKWAY CITY: HEBER STATE: UT ZIP: 84032 FORMER COMPANY: FORMER CONFORMED NAME: SAN DIEGO BANCORP DATE OF NAME CHANGE: 19931124 8-K 1 form8k120204.txt FORM 8-K DATED DECEMBER 2, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): December 2, 2004 Diatect International Corporation ----------------------------------------------------- (Exact name of registrant as specified in its charter) California 000-10147 82-0513109 - -------------------------------- ------------ ------------------- (State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization) File Number) Identification No.) 875 Industrial Parkway, Heber City, Utah 84032 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) 435-654-4370 --------------------------------------------------- (Registrant's telephone number, including area code) n/a ------------------------------------------------------------ (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) - -------------------------------------------------------------------------------- ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS - -------------------------------------------------------------------------------- On March 9, 2005, Diatect International, Inc. (the "Company") sold its 20,254 square foot office and warehouse building on 1.928 acres in Heber City, Utah, to Morrell & Associates, LLC, for $900,000 cash. The Company is currently negotiating a lease agreement for the property with Morrell & Associates, LLC, and anticipates remaining in that location. Morrell & Associates, LLC, is an affiliate of Philip Morrell, an individual to whom the Company sold stock on March 9, 2005, (see Item 3.02 below) and with whom the Company has entered into a Memorandum of Understanding (see Item 8.01 below). The price was determined in arm's-length negotiations between the parties as a component of the entire agreement between the Company and Mr. Morrell and his affiliated entities. - -------------------------------------------------------------------------------- ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES - -------------------------------------------------------------------------------- On March 9, 2005, the Company agreed to issue to Philip Morrell 1,400,000 shares of restricted common stock for an aggregate of $402,000. The issuance of these shares was based on the exemption from registration provided in Section 4(2) of the Securities Act of 1933. The Company provided Philip Morrell with its recent Securities and Exchange Commission periodic reports prior to the transaction. No general solicitation was used; Philip Morrell is an accredited investor who negotiated the terms of the agreement directly with the officers of the Company; and Philip Morrell acknowledged in writing that these shares of common stock have restrictions on their transfer. The certificates to be issued to Philip Morrell will bear a restrictive legend and stop-transfer instructions will be placed with the Company's transfer agent. As discussed in Item 8.01 below, the Company has agreed that these shares will not be subject to dilution or to consolidation in the contemplated reverse split of the Company's common stock. - -------------------------------------------------------------------------------- ITEM 4.02. NON-RELIANCE ON PREVIOUSLY ISSUED FINANCIAL STATEMENTS OR A RELATED AUDIT REPORT OR COMPLETED INTERIM REVIEW - -------------------------------------------------------------------------------- On November 5, 2004, following the Company's appointment of an interim President and Chief Executive Officer (see Item 5.02 below), the Company filed a report on Form 8-K announcing that it had dismissed Williams & Webster as its principal auditor. On March 1, 2005, the Company filed a report on Form 8-K announcing that it had engaged Hansen, Barnett & Maxwell as its principal auditor. On March 9, 2005, the Company's Board of Directors concluded that its financial statements for the fiscal year ended December 31, 2003, and all interim periods thereafter, should be placed under review and should no longer be relied on. As an initial matter, the Board of Directors has concluded that the Company's recording of a $12,000,000 note receivable from a related party is likely misstated and that, on final review and evaluation, the Company will likely record either no value or only a substantially reduced value for that 2 note receivable. That conclusion has led the Company to retain an accounting professional to assist in a comprehensive internal review of its financial statements for the year ended December 31, 2003, and thereafter, to determine the nature and extent of any future corrections that may be necessary. The Company's principal executive and financial officer has discussed the matters discussed in this Item 4.02 with the Company's newly-engaged independent auditor, which has been engaged to audit the Company's financial statements for the fiscal year ending December 31, 2004. The Company expects that its financial statements for the year ended December 31, 2003, will be restated to correct the foregoing misstatement and any other items that may be detected on review. - -------------------------------------------------------------------------------- ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS - -------------------------------------------------------------------------------- On December 2, 2004, the Company named David H. Andrus its President, Chief Executive Officer and Chairman. Mr. Andrus had been serving in those positions in an interim capacity since the October 28, 2004, resignation of the former officer holder. The Company and Mr. Andrus entered into an employment agreement through December 31, 2006, under which Mr. Andrus is to be paid the sum of $150,000 per year. Upon execution of the agreement, Mr. Andrus received an incentive bonus of 3,000,000 shares of restricted common stock, 2,000,000 of which were immediately vested and 1,000,000 of which vest subject to certain performance benchmarks. These shares of common stock are not subject to dilution or to consolidation in the contemplated reverse split of the Company's common stock. - -------------------------------------------------------------------------------- ITEM 8.01. OTHER EVENTS - -------------------------------------------------------------------------------- On March 9, 2005, the Company entered into a Memorandum of Understanding with Philip Morrell, under which the Company would acquire the assets of The Event Source, a division of Paul Morrell, Inc., for $80,000,000. Paul Morrell is the brother of Philip Morrell. As currently envisioned, the Company would issue Philip Morrell a promissory note for the purchase price, secured by the assets of The Event Source. Following the acquisition, the Company would operate The Event Source's business in addition to its current insecticide business. The Event Source is a military contractor that provides life support areas and construction projects and supplies to the United States military in Iraq. The potential acquisition is subject to a number of conditions, including Philip Morrell's consolidation of the ownership interest in The Event Source's assets, the preparation of audited financial statements for The Event Source's assets, satisfactory due diligence by both Philip Morrell and the Company, the negotiation of definitive agreements, the satisfaction of various conditions precedent to close, compliance with representation and warranties, the approval of legal and accounting matters, and other conditions. Prior to completing the acquisition, the stockholders will be required to approve a change of domicile of the Company from California and a recapitalization of the Company in which the approximate 92,000,000 shares of issued and outstanding common stock will be reverse split 6-to-1, without any consolidation of approximately 7,400,000 additional shares outstanding that by contrast are not subject to consolidation, while retaining the current authorized capitalization of 100,000,000 shares of common stock. The shares not subject to consolidation include the 1,400,000 shares the Company agreed to issue to Philip Morrell on March 9, 2005, approximately 3,000,000 shares held by David H. Andrus, the Company's Chief Executive Officer, and approximately 3,000,000 shares held by Catalyst Business Development, LLC. The Company anticipates that it will also change its corporate name to reflect the post-acquisition principal activities. 3 - -------------------------------------------------------------------------------- ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS - -------------------------------------------------------------------------------- The following are filed as exhibits to this report: Exhibit Number Title of Document Location - --------------- --------------------------------------------------- ----------- Item 10 Material Contracts - --------------- --------------------------------------------------------------- 10.01 Real Property Purchase Agreement between Diatect This filing International Corporation and the Morrell & Associates, LLC, dated March 9, 2005 10.02 Subscription Agreement This filing 10.03 Employment Agreement of David H. Andrus dated This filing December 2, 2004 - -------------------------------------------------------------------------------- SIGNATURES - -------------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. DIATECT INTERNATIONAL CORPORATION Date: March 15, 2005 By /s/ David H. Andrus -------------------------------- David H. Andrus Its Chief Executive Officer 4 EX-10.01 2 ex1001form8k120204.txt REAL PROPERTY PURCHASE AGREEMENT Exhibit 10.01 REAL PROPERTY PURCHASE AGREEMENT THIS REAL PROPERTY PURCHASE AGREEMENT (this "Agreement") is entered into as of the 9th day of March, 2005, by and between Diatect International Corporation, a California corporation, ("Seller") and the Morrell & Associates, LLC ("Buyer"). WITNESSETH: Buyer desires to purchase from Seller all of Seller's interest in the real property described below and Seller is willing to sell such interest in real property to Buyer, on the terms, conditions, and provisions hereinafter set forth. NOW, THEREFORE, in consideration of the covenants and agreements herein contained and for good and valuable consideration, the receipt and sufficiency of which are acknowledged, Seller and Buyer hereby agree as follows: 1. PURCHASE, SALE, AND AGREEMENTS. 1.1 Description of Real Property. Seller shall sell to Buyer, and Buyer shall purchase from Seller, on the terms, conditions, and provisions herein contained, all of Seller's interest in and to certain real property (hereinafter the "Property") situated at approximately 875 Industrial Parkway, Heber, Utah 84032, and more particularly described as: Beginning at a point that is South a distance of 4200.91 feet and West a distance of 2411.87 feet from the witness corner for the Northeast corner of Section 6, Township 4 South, Range 5 East, Salt Lake Base and Meridian; thence North 0(Degree) 20' 27" East a distance of 199.93 feet; thence North 89(Degree) 54' 02" East a distance of 400.00 feet; thence South 0(Degree) 20' 27" West a distance of 210.00 feet; thence South 89(Degree) 54' 02" West a distance of 389.93 feet to the beginning of a 10 foot tangent curve to the right; thence along said curve through a central angle of 90(Degree) 26' 25", chord bearing and distance of said curve being North 44(Degree) 52' 46" West a distance of 14.20 feet to the point of beginning. OHE-1263-A Subject to the general property taxes for the year 2003 and thereafter, and any special assessments to become due. Subject to easements and restrictions of record. Excepting therefrom all oil, gas and/or other minerals previously reserved. including the following items if presently attached to the Property: plumbing, heating, air conditioning fixtures and equipment; water heater; light fixtures and bulbs; bathroom fixtures; permanently affixed carpets; fencing; and trees and shrubs. 1.2 Purchase Price. The Buyer shall pay the Seller for the Property, Nine Hundred Thousand and No/100 Dollars ($900,000), payable to Seller at Closing. 1.3 Title Report. Immediately after the execution of this Agreement, Seller shall obtain and deliver to Buyer a current commitment for title insurance covering the Property (the "Commitment") issued by a real estate title company licensed to conduct business as such in the state of Utah (the "Escrow Agent"). Buyer shall, within five days of Buyer's receipt of the Commitment, notify Seller of any and each title exception contained in the Commitment that is reasonably objectionable to Buyer. If Buyer timely notifies Seller of any reasonably objectionable title exception, Seller shall attempt to cause each such objectionable title exception to be removed or cured prior to the Closing; provided, however, that if any such objectionable title exception is not or cannot be removed or cured (in the judgment of Seller), then Buyer shall, within five days after written notice from Seller that any objectionable title exception cannot or will not be removed prior to Closing, elect in a written notice to Seller either: (a) to waive each objectionable exception and proceed with the Closing without any adjustment to the Purchase Price and accept such objectionable title exception as a "Permitted Encumbrance"; or (b) to terminate this Agreement and all of the rights and obligations of the parties hereunder. Failure of Buyer to timely deliver notice to Seller of Buyer's election under the preceding subsection shall be deemed an election by Buyer to waive each objectionable title exception and to accept such objectionable title exceptions as "Permitted Encumbrances." 1.4 Permitted Encumbrances. As used in this Agreement, the term "Permitted Encumbrances" shall mean: (a) real property taxes and assessments for the year in which the Closing takes place and all periods thereafter; (b) any impositions or assessments resulting from a change in use or tax status of the Subject Property effected by Buyer, including without limitation any roll-back taxes payable for periods prior to Closing; (c) all conditions, restrictions, easements, rights-of-way, encroachments, shortages in area, title exceptions, and other matters of any nature disclosed in the Commitment, other than such title exceptions as to which Buyer timely objects in writing and does not thereafter waive such objection; (d) all conditions, easements, rights-of-way, encroachments, title exceptions, and other matters that would be disclosed or discovered by Buyer making a complete and thorough inspection and survey (conforming to ALTA minimum standard detail requirements for urban properties) of the Property; and (e) any other matters or conditions arising as a result of the acts or omissions of Buyer or its successors-in-interest. 2. CONDITIONS OF CLOSING. 2.1 Conditions of Seller's Obligations. The obligations of Seller under this Agreement to sell the Property are subject to the fulfillment, prior to or at Closing, of Buyer having performed and complied in all material respects with its obligations, covenants, and agreements contained in this Agreement on its 2 part to be performed and complied with at the appropriate time for such performance and compliance. In the event each of such conditions shall not have been satisfied at or prior to the Closing or waived by Seller, then Seller shall have the right, at Seller's option, to (a) terminate this Agreement by giving written notice of such termination to Buyer, in which event this Agreement shall automatically terminate, and Seller and Buyer shall each be released automatically from all further obligations and liabilities hereunder, except as set forth in sections 5.8 and 5.10 hereof, or (b) pursue any other remedies available to Seller. 2.2 Conditions to Buyer's Obligations. The obligations of Buyer under this Agreement to purchase the Property are subject to Seller's fulfillment prior to or at the Closing in all material respects with its obligations, covenants, and agreements contained in this Agreement on its part to be performed and complied with at the appropriate times for such performance and compliance. In the event each of such conditions have not been satisfied at or prior to Closing or waived by Buyer, then Buyer shall have the right, at Buyer's option, to terminate this Agreement by giving written notice of such termination to Seller, in which event this Agreement shall automatically terminate and Buyer and Seller each shall be released automatically from all further obligations and liabilities hereunder, except as set forth in sections 5.8 and 5.10 hereof. 2.3 Condemnation. Buyer shall be bound to purchase the Property for the full purchase price as required by the terms hereof, without regard to the occurrence or effect of any partial condemnation of the Property occurring after the date hereof and prior to the Closing, provided, that such partial condemnation does not result in the taking of more than 5% of the total area of the Property and does not impair Buyer's intended use of the Property. At Closing, Buyer shall have credited against the purchase price due hereunder the amount of any condemnation proceeds collected by Seller prior to Closing as a result of any such partial condemnation, or such proceeds shall be assigned to Buyer if not then collected. In the event any partial condemnation of the Property results in the taking of more than 5% of the total area of the Property or impairs Buyer's intended use of the Property, Buyer may, by written notice to Seller within 15 days after Buyer's receipt of such notice of such partial condemnation of the Property, elect to terminate this Agreement, in which event this Agreement shall automatically terminate and the Buyer and Seller shall each be released from all further obligations and liabilities hereunder, except as set forth in sections 5.8 and 5.10 hereof. 3. CLOSING AND POST-CLOSING. 3.1 Closing. The Closing of the subject transaction shall be held at the offices of First American Title at 81 South Main Street, Heber City, Utah 84032, on Wednesday, March 9, 2005 ("Closing"), or at such other date or place as shall be mutually agreed to in writing by Seller and Buyer; provided, however, that Closing may be accomplished on such date through another escrow agent approved in writing by both Seller and Buyer. The date on which the Closing actually takes place or, if more than one day is required to complete the Closing, the date on which the Closing is actually accomplished, is herein referred to and designated as the "Closing Date." At the Closing, the following shall occur, each action being considered a condition precedent to the others and all being considered as taking place simultaneously and (subject to the terms and conditions hereof), each party covenanting to perform or cause to be performed each such action to be performed on its part. (a) Seller shall execute, acknowledge, and deliver to Buyer a Special Warranty Deed conveying and warranting to the Buyer against 3 those claiming by, through, or under Seller, but not otherwise, title to the Property, subject only to the Permitted Encumbrances referred to in section 1.4 hereof. (b) Buyer shall pay to Seller the purchase price in the sum of $900,000, in current and immediately available funds as provided in section 1.2 hereof. (c) All reasonable and customary proration shall be made as of the date that possession of the Property is delivered to Buyer and appropriate credits shall be given for real property taxes (excluding any real property taxes resulting from any change in the use or tax status of the Property affected by Buyer or Buyer's successors-in-interest), assessments, rents, deposits, and other matters, the nature of which properly require such treatment. If on the Closing Date either the applicable assessed value or mill levy for the year in which the Closing occurs cannot be ascertained, real property taxes relative to the property shall be apportioned on the basis of the assessed value and mill levy for the year in which the Closing occurs when such information is available. (d) Seller shall pay in full the premium for the policy of title insurance to be issued in connection with the subject transaction, as set forth in section 3.2 hereof; the Buyer shall pay all costs and premiums required for issuance of such policy as an extended coverage policy of insurance. (e) Buyer shall pay all costs of recording the Special Warranty Deed and all costs associated with Buyer's loan. (f) Buyer and Seller shall each pay one-half of the costs of any escrow established in conjunction with the Closing. (g) Seller shall deliver to Buyer possession of the Property, subject to the Permitted Encumbrances referred to in section 1.4 hereof. (h) Seller and Buyer shall execute and deliver to each other closing statements reflecting the adjustment, payments, and credits described in this section 3.1. (i) Each party shall execute, acknowledge, and deliver such other documents and instruments and take such other action as the either party or its legal counsel may reasonably require in order to document and carry out the transactions contemplated by this Agreement. 3.2 Owner's Title Insurance. In conjunction with the Closing, Seller shall, at Seller's sole cost and expense, cause to be issued and delivered to Buyer, as the named insured, an ALTA standard form owner's policy of title insurance in the amount of the purchase price of the Property, ensuring that fee simple title to the Property is vested in the Buyer subject only to the Permitted Encumbrances referred to in section 1.4 hereof standard items and exceptions. In the event Buyer desires to obtain an extended coverage policy of title insurance or any requested endorsements or easements to such policy of title insurance, Buyer shall pay the additional costs and premiums necessary for issuance of an extended coverage policy of title insurance and/or any requested endorsement to such policy of title insurance. 4. DEFAULT AND REMEDIES. 4.1 Buyer's Remedies on Default. In the event of a default by Seller in the performance of its obligations hereunder, Buyer shall give written notice to Seller designating such default. Seller shall have a period of 10 days following 4 the effective date of said notice within which to correct the default of which Seller has received notice. In the event that Seller shall fail to correct such default within said 10-day period, the Buyer shall have the right, at his option, to: (a) terminate this Agreement and all rights, duties, and obligations of the parties hereunder by giving written notice thereof to Seller; or (b) recover damages from Seller resulting from said default. 4.2 Seller's Remedies on Default. In the event of a default by Buyer in the performance of its obligations hereunder, Seller shall give written notice to Buyer designating such default. Buyer shall have a period of 10 days following the effective date of said notice within which to correct the default of which Buyer has received notice. In the event that Buyer shall fail to correct such default within said 10-day period, Seller have the right, at its option, to: (a) terminate this Agreement and all rights, duties, and obligations of the parties hereunder by giving written notice thereof to Buyer; or (b) recover damages from Buyer resulting from said default. 5. GENERAL PROVISIONS. 5.1 Broker or Finder. Seller represents and warrants to Buyer that Seller has not engaged any broker or finder. Buyer represents and warrants to Seller that Buyer has not engaged any broker or finder. 5.2 Notices. Any notice, demand, request, or other communication permitted or required under this Agreement shall be in writing and shall be deemed to have been given as of the date so delivered, if personally served; as of the date so sent, if transmitted by facsimile and receipt is confirmed by the facsimile operator of the recipient; as of the date so sent, if sent by electronic mail and receipt is acknowledged by the recipient; one day after the date so sent, if delivered by overnight courier service; or three days after the date so mailed, if mailed by certified mail, return receipt requested, addressed as follows: If to Buyer, to: Morrell & Associates, LLC Phil Morrell, Member 617 North Desoto Street Salt Lake City, Utah If to Seller, to: Diatect International Corporation 875 South Industrial Parkway Heber City, Utah 84032 Facsimile: (435) 657-9794 or such other addresses and facsimile numbers as shall be furnished in writing by any party in the manner for giving notices hereunder. 5.3 Costs. Except as otherwise specifically provided in this Agreement, Seller and Buyer shall each pay its own costs and expenses incurred in preparation and execution of and performance under this Agreement. 5 5.4 Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto relative to the subject matter hereof. Any prior negotiations, correspondence, or understandings relative to the subject matter hereof shall be deemed to be merged into this Agreement and shall be of no further force or effect. This Agreement may not be amended or modified except in writing executed by both parties hereto. 5.5 Interpretation. This Agreement shall be interpreted and construed only by the contents hereof, and there shall be no presumption or standard of construction in favor of or against either Seller or Buyer. This Agreement shall be governed by and construed under and in accordance with the internal laws of the state of Utah. Whenever the context requires, the singular shall include the plural, the plural shall include the singular, the whole shall include any part thereof, any gender shall include both other genders, and the term "Buyer" shall include the Buyer herein named and any permitted assignee of such Buyer. The section headings contained in this Agreement are for purposes of reference only and shall not limit, expand, or otherwise affect the construction of any provision of this Agreement. Time is of the essence. The provisions of this Agreement shall be construed both as covenants and conditions in the same manner as though the words importing such covenants and conditions were used in each separate provision hereof. 5.6 Counterparts. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original and all of which shall together constitute one and the same instrument. 5.7 No Waiver. Acceptance by either party of any performance less than required hereby shall not be deemed to be a waiver of the rights of such party to enforce all of the terms and conditions hereof. Except as otherwise expressly provided herein, no waiver of any such right hereunder shall be binding unless reduced to writing and signed by the party to be charged therewith. 5.8 Right of Access. Until the date scheduled for Closing, Buyer and his authorized representatives shall, at all reasonable times, have the right to enter upon and examine the Property for the purpose of examining the condition thereof, conducting soils test, and preparing surveys. Buyer shall not conduct any invasive drilling or testing without the prior consent of Seller; the Seller may withhold any such consent if the proposed drilling or testing will damage the Property. Buyer agrees to indemnify, defend, and hold Seller harmless from all claims or liens for soils tests, surveys, or other reports or examination of the Property ordered by Buyer or his agents or representatives. Buyer also agrees to and hereby does indemnify and hold Seller harmless from and against all claims, obligations, liabilities, and damages resulting from such testing, drilling, investigations, inspections, or entry upon the Property by Buyer or his agents, representatives, or contractors. The provisions of this section 5.8 shall survive the Closing or any termination of this Agreement. 5.9 Invalidity of Provision. If any of the provisions of this Agreement as applied to either party or to any circumstance shall be adjudged by a court of competent jurisdiction to be void or unenforceable for any reason, the same shall in no way affect (to the maximum extent permitted by applicable law) any other provision of this Agreement, the application of any such provision under circumstances different from those adjudicated by the court, or the validity or enforceability of this Agreement as a whole. 5.10 Quit-Claim Deed. If for any reason, other than a breach by Seller of its obligations hereunder, the Closing does not occur, Buyer shall execute, acknowledge, and deliver to Seller a quit-claim deed to the Property or such 6 other instrument as Seller may reasonably request for purpose of eliminating any cloud on the title to the Property that might result from this Agreement. The provisions of this section 5.10 shall survive any termination of this Agreement. 5.11 No Recordation. Buyer covenants and agrees that neither this Agreement nor any memorandum or other notice of this Agreement shall be recorded in the real property records of the county in which the Property is located without the prior written consent of Seller. 5.12 Disclaimer of Warranties. Buyer acknowledges that Buyer will, prior to closing, have the opportunity to conduct all tests and inspections of the property that it deems necessary or advisable. Accordingly, Seller makes no representation or warranty, express or implied (except as may be set forth in the deed delivered at Closing), and specifically disclaims any implied representation or warranty including representations or warranties as to the condition, quality, freedom from defects (whether or not detectable by inspection), fitness for Buyer's intended use, freedom from contamination by hazardous wastes or substances (whether or not detectable), zoning or other legal requirements, size, acreage, or boundaries of the property. Accordingly, Buyer assumes as of the date of Closing all risks relating to the Property including the risks described above and/or associated with conditions that may or may not be discoverable by inspection. 5.13 Attorneys' Fees. In the event a party commences a legal proceeding to enforce any of the terms of this Agreement, the prevailing party in such action shall have the right to recover reasonable attorneys' fees and costs from the other party to be fixed by the court in the same action. The term "legal proceedings" as used above shall be deemed to include appeals from a lower court judgment and it shall include proceedings in the Federal Bankruptcy Court, whether or not they are adversary proceedings or contested matters. The term "prevailing party" as used above in reference to proceedings in the Federal Bankruptcy Court shall be deemed to mean the prevailing party in any adversary proceeding or contested matter, or any other actions taken by the nonbankrupt party that are reasonably necessary to protect its rights in the subject Property and the terms of this Agreement. 5.14 Survival. The provisions of the indemnity agreement contained in section 5.8 shall survive any expiration or termination of this Agreement and shall not merge into any deed delivered and accepted upon the Closing of the transaction herein contemplated. 5.15 Successors and Assigns. The terms, covenants and conditions herein contained shall be binding upon and inure to the benefit of the heirs, successors, transferees and assigns of the parties hereto. Neither Buyer nor Seller shall assign this Agreement or any rights hereunder to anyone except with the prior written consent of the other party; provided, Seller may assign this Agreement or its rights hereunder to any entity that is wholly-owned or ultimately owned (i.e., through various subsidiaries) by Seller or to any third party for purposes of effectuating a tax-tree exchange. 7 IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written by the undersigned, hereunto duly authorized. SELLER Diatect International Corporation /s/ Dave Andrus ---------------------------------- By: Dave Andrus Its CEO BUYER Morrell & Associates, LLC Phil Morrell, Member /s/ Philip Morrell ---------------------------------- By: Philip Morrell Its CEO 8 EX-10.02 3 ex1002form8k120204.txt SUBSCRIPTION AGREEMENT Exhibit 10.02 SUBSCRIPTION AGREEMENT THIS SUBSCRIPTION AGREEMENT (this "Agreement") is entered into by and between Diatect International Corporation, a California corporation (the "Company"), and the undersigned subscriber, (the "Investor"), to purchase securities of the Company pursuant hereto. The Company is offering for sale up to One Million Four Hundred Thousand (1,400,000 shares of its restricted common stock, no par value per share (the "Common Stock") at a purchase price of $0.287 per share. On the foregoing premises, the Investor hereby subscribes for the purchase of the Common Stock on the following terms and conditions: 1. Subscription to Purchase Common Stock 1.1 Offer to Purchase. Subject to the terms and conditions of this Agreement, the Investor irrevocably subscribes to purchase at Closing (as hereinafter defined), as follows: Name of Investor: Philip M. Morrell Number of Shares: 1,400,000 Total Subscription Price: $402,000 With this Agreement, the Investor is also tendering to the Company: (i) a suitability letter, (ii) an investment letter, (iii) payment of the full subscription amount, and (iv) a certificate of corporation, partnership, or other entity, if applicable. The foregoing are sometimes hereinafter referred to as the "Subscription Documents." 1.2 Acceptance or Rejection. The acceptance or rejection of the offer to purchase Common Stock shall take place at such time and place within a maximum of up to 10 days of the date hereof, as the Company may specify (which time and place are designated as the "Closing"). The purchaser has read and understands that there are no provisions for escrow of the funds being delivered concurrently with the execution of this Agreement and further understands that at the Closing, the Company shall either (a) accept this subscription (in whole or in part) and deliver to the Investor certificates represent the Common Stock, all against delivery to the Company of the full purchase price of the Common Stock or (b) reject this subscription and return to the Investor his or her subscription (or as much thereof as is not accepted). 2. Representations. The Investor hereby represents and warrants as follows: 2.1 Age. The Investor, if a natural person, is over the age of 18 years. 2.2 No Governmental Approval. The Investor acknowledges that neither the United States Securities and Exchange Commission nor the securities commission of any other state or federal agency has made any determination as to the merits of purchasing the Common Stock. 2.3 Information Provided by the Investor. All information, which the Investor has provided to the Company, or to its representatives concerning the Investor's suitability to invest in the Company, is complete, accurate, and correct as of the date of this Agreement. Such information includes, but is not limited to, information concerning the Investor's personal financial affairs, business position, and the knowledge and experience of the Investor and the Investor's advisors. 2.4 Information Provided by the Company. The Investor has been provided with all material information requested by either the Investor, the Investor's purchaser representative, or others representing the Investor, including any information requested to verify any information furnished, and there has been direct communication between the Company and its representatives on the one hand and the Investor and the Investor's representatives and advisors on the other in connection with information regarding the purchase made hereby. There has been made available the opportunity to ask questions of and receive answers from the Company and/or the officers, employees, or representatives of the Company concerning the terms and conditions of this offering and to obtain any additional information (to the extent the Company possesses such information or can acquire it without unreasonable effort or expense) desired or necessary to verify the accuracy of the information provided. 2.5 Subscription Subject to Acceptance. The Investor acknowledges that this Agreement may be accepted or rejected by the Company with respect to all or part of the amount subscribed and that, to the extent the subscription may be rejected, the accompanying subscription payment will be refunded without payment of interest and without deduction of expenses. 2.6 Financial Condition of the Investor. The Investor has adequate means of providing for his or her current needs and possible personal contingencies and has no need now, and anticipates no need in the foreseeable future, to sell the securities for which the undersigned hereby subscribes. The Investor represents that Investor is able to bear the economic risks of this investment and is able to hold the securities for an indefinite period of time and has a sufficient net worth to sustain a loss of the entire investment, in the event such loss should occur. 2.7 Purchase Entirely for Own Account. The Investor has no present intention of dividing the securities with others or of reselling or otherwise disposing of any portion of the securities, unless registered pursuant to a registration statement filed with the Securities and Exchange Commission. 2.8 No Reliance on Unauthorized Representations. The Investor has relied on no representations from the Company, or any broker or salesman or their partners, shareholders, directors, officers, 2 employees, or agents. In making a decision to purchase the securities, the Investor has made an independent investigation without assistance of the Company. The Investor has received no offering literature regarding the Company. 2.9 No Solicitation. The Investor was at no time solicited by any leaflet, public promotional meeting, circular, newspaper or magazine article, radio or television advertisement, or any other form of general advertising or solicitation in connection with the offer, sale, or purchase of the securities. 3. Representations Regarding Exemptions and Restrictions on Transfer. The Undersigned is executing and delivering to the Company a separate investment letter setting forth additional representations and warranties, which are incorporated herein by reference. 4. Indemnity. The Investor hereby agrees to indemnify the Company, any registered sales agent, and any person participating in the offering, to hold them harmless, and to grant them a right of set-off, from and against any and all liability, damages, cost, or expense (including, but not limited to, reasonable attorneys' fees), including the amount paid in settlement and whether or not suit is commenced, incurred on account of or arising out of: (a) Any inaccuracy in the Investor's declarations, representations, and warranties set forth in any subscription document executed and delivered by the Investor in connection with his or her subscription for the Common Stock; (b) The disposition of any of the securities contrary to the Investor's declarations, representations, and warranties set forth herein or in any subscription document executed in connection with his or her subscription for the Common Stock; and (c) Any action, claim, threat, allegation, suit or proceeding based on (i) the claim that any such declaration, representation, or warranty was inaccurate or misleading or otherwise cause for obtaining damages or redress from the Company, any sales agent, or any person participating in the offering; or (ii) the disposition of any of the securities by any party hereof. 5. Setoff. Notwithstanding the provisions of the last preceding section or the enforceability thereof, the Investor hereby grants the Company the right of Setoff against any amounts payable by the Company to the Investor for whatever reason, any and all damages, costs, or expenses (including, but not limited to, reasonable attorneys' fees) incurred on account of or arising out of any of the items referred to in clauses (a) through (c) of the last preceding section. 3 6. Miscellaneous. The Investor further understands, acknowledges, and agrees that: (a) This Agreement is not transferable or assignable by the Investor. (b) This Agreement constitutes the entire agreement between the parties respecting the subject matter hereof. (c) Notwithstanding any of the representations, warranties, acknowledgments, or agreements made herein by the Investor, the Investor does not hereby or in any other manner waive any rights granted to the Investor under federal or state securities laws. (d) This Agreement does not entitle the undersigned to any rights as a shareholder of the Company's securities with respect to any securities purchasable hereunder which have not been fully paid for. INVESTOR Date: March 9, 2005 Philip M. Morrell -------------------------- Subscriber - ------------------------ Social Security Number /s/ Philip M. Morrell -------------------------- Signature 615 Desota Street Salt Lake City, UT 84103 4 EX-10.03 4 ex1003form8k120204.txt EMPLOYMENT AGREEMENT OF DAVID H. ANDRUS Exhibit 10.03 EMPLOYMENT AGREEMENT THIS Employment Agreement ("Agreement") is hereby entered into and made effective this 2nd day of December, 2004, by and between Diatect International Corporation, a California corporation, with it's principal place of business located in Heber City, Utah (the "Company") and David Andrus of Heber City, Utah, ("Andrus"). RECITALS 1. The Company is engaged in the business of developing, manufacturing and marketing environmentally benign, diatomaceous earth ("DE") based insecticide products, and desires to acquire qualified, experienced leadership in this endeavor. 2. In view of his considerable experience and effective service to the Company as Executive Vice President of Operations and as a director, the Company has determined that it desire to employ Andrus as its President and Chief Executive Officer for the period set forth below. 3. In consideration for the terms of this Agreement, Andrus desires to be employed by the Company as its President and Chief Executive Officer. NOW, THEREFORE, in consideration of the foregoing recitals and of the mutual covenants, promises, terms and conditions hereinafter set forth, the parties hereto agree as follows: I. EMPLOYMENT. The Company hereby employs, engages and hires Andrus as its President and Chief Executive Officer on the terms and conditions hereinafter set forth, and Andrus hereby accepts such employment and agrees to perform such services and duties and to carry out such responsibilities as hereinafter set forth. II. TERMS OF EMPLOYMENT. The term of employment under this Agreement shall be for a period of two (2) years and twenty-eight (28) days commencing as of December 3, 2004 and terminating on December 31, 2006, subject, however, to prior termination as hereinafter provided. Unless otherwise agreed in writing, subject to mutual agreement of the parties, continued employment of Andrus by the Company after December 31, 2006 shall be for a term and on the conditions to be agreed to by the parties prior to the expiration of the Agreement. III. SERVICES, DUTIES AND RESPONSIBILITIES a. Andrus will faithfully and to the best of his ability serve the Company in his capacity as its President and Chief Executive Officer, subject to the policy direction of the Board of Directors of the Company. Andrus shall perform such services and duties as are customarily performed by holding the position of President and Chief Executive Officer of a public corporation. b. As President and Chief Executive Officer, Andrus shall be responsible for the overall management of the Company's business. Andrus will devote his full time, energy and skill during regular business hours to his employment with the Company. Such duties shall be rendered at Heber City, Utah, and sat such other place or places as the Company shall in good faith require or as interests, needs, business or opportunity of the Company shall require. While occupying the office of the President and Chief Executive Officer, and as a member of the Board of Directors, Andrus shall be willing to occupy the officer of Chairman of the Board of Directors and shall be willing to serve as Chairman of the Executive Committee of the Board of Directors. Andrus shall be responsible on a continuing basis for the development, implementation and maintenance of a business plan for the corporation and all activities defined therein. He shall be responsible for coordination of efforts of the corporate and subsidiary officers and management teams and their respective staffs and for the maximization of corporate performance and overall profitability of the corporation and its respective subsidiaries; conditioned, however, upon the Company's providing sufficient funds for Andrus to so manage and regulate the Company. c. Andrus shall be responsible for reporting in writing to the Board of Directors on a regular basis. d. As Chief Executive Officer, Andrus shall be responsible for the development, coordination and execution of all aspects of the operation as directed by the Board of Directors. Subject to the Company's continuing ability to pay Andrus' salary on a regular basis as hereinafter provided, Andrus will devote full time, energy and skill during regular business hours to providing services and carrying out the duties and responsibilities of his employment with the Company. Such duties shall be rendered at the principal place of business of the Company and at such other places as the Company shall in good faith require or as interests, needs business or opportunity of the Company shall require. e. Andrus shall not directly or indirectly represent or be engaged by or be an employee of any other person, firm or corporation or be engaged for his services as an officer, general manager or consultant in any other business or enterprise while he is in the employ of the Company, unless specifically authorized to do so. It is understood, however, that the foregoing in no way prevents Andrus from owning stock or having economic interest in other businesses or enterprises. Furthermore, Andrus may serve on the board of directors of other companies so long as such service does not conflict with his interest in and duties of the Company. Also, he may hold the position of corporate officer in any family or personal investment business so long as it does not conflict with his interest in and duties to the Company. IV. COMPENSATION a. Base Salary. The Company shall pay Andrus a base salary at the rate of One Hundred and Fifty Thousand Dollars ($150,000) per year, payable twice a month on the first and fifteenth days of each month while this Agreement shall be in force. Said salary payments will be subjected to withholding taxes, e.g., Federal Income Tax, FICA, State and/or Local Withholding Taxes. Whereas such salary shall not be decreased during the term of this Agreement without the consent 2 of Andrus, it shall be subject to increase by the Board of Directors which shall review the salary periodically, and at least annually. It is understood that Company may not be able to pay this base salary on a regular basis. In the event that any portion of said salary is not paid as scheduled on the basis of fiscal inability of the Company to pay, such event shall not constitute a default. In such event, Andrus may elect to defer said payment shortfall, with interest thereon, simple fixed, at the rate of 10%, or, on a quarterly basis (at the end of each calendar quarter) take payment of any portion of said shortfall in form of restricted rule 144K common stock of the Company at the average price quoted over the ten (10) day period immediately prior to the end of said quarter. b. Salary Subject to "Take or Pay". The foregoing salary of Andrus shall be subject to "take or pay" provisions, whereby the Company hereby commits to pay said salary (including any increases from date) for the entire term of this Agreement, regardless of whether his employment is terminated hereunder at any earlier date, unless such termination is for cause based on malfeasance, as defined in Section X (b) herein below. c. Incentive Bonus Stock. The Company here by grants and issues to Andrus an incentive bonus of three million (3,000,000) shares of restricted, non-diluteable stock of the Company. Two million of these shares are granted without restriction and the remaining one million shall follow the vesting/performance items noted below: i. 250,000 shares are fully vested to Andrus upon the successful presentation of the Fire Ant product to 70 of the local vendor number stores of the awarded big box retailer. ii. 250,000 shares are fully vested to Andrus upon the receipt of orders from at least 50 of the local vendor number stores of the awarded big box retailer. iii. 250,000 shares are fully vested to Andrus upon reaching sales of $250,000 to the local vendor number stores of the awarded big box retailer. iv. 250,000 shares are fully vested to Andrus upon reaching sales of $500,000 to the local vendor number stores of the awarded big box retailer. d. Performance Bonus. Commencing at the date hereof, Andrus shall be granted a bonus equal to one percent (1%) of the gross sales receipts determined quarterly based on the filing of the 10Q report with the SEC. Said payment shall occur within thirty (30) days following the filing of the 10Q report. e. Deferred Compensation Plan. As soon as it is economically feasible and appropriate as determined by the Board of Directors of the Company, the Company will establish a Deferred Compensation Plan for its senior executives, including Andrus. f. Benefits. As soon as it is financially able, as determined by the Board of Directors, the Company shall provide the following benefits to Andrus: i. Participation in a group medical plan; 3 ii. Comprehensive dental care plan; iii. Life insurance at the rate of at least four times Andrus' annual salary, with the beneficiary of said insurance to be named by Andrus; iv. Disability insurance; v. A reasonable vehicle allowance V. BUSINESS FACILITIES AND EQUIPMENT. The Company shall provide Andrus, or shall pay for, suitable work facilities and adequate business accommodation, office equipment and devices as may be reasonably necessary for Andrus to perform his services and carry out his responsibilities and duties to the Company. VI. DIRECTORS AND OFFICERS INSURANCE. As soon as it is financially able, as determined by the Board of Directors, the Company shall purchase and maintain Directors' and Officers' liability insurance, including coverage for Andrus, in an amount of not less than five million dollars ($5,000,000). VII. INDEMNIFICATION. The Company shall indemnify Andrus, his heirs, executors, administrators and assigns, against, and he shall be entitled without further act on his part, to be indemnified by the Company for, all expenses, including, but not limited to, amounts of judgments, reasonable settlement of suits, attorney fees and related costs of litigation, reasonably incurred by him in connection with or arising out of any action, suit or cause of action against the Company and/or against Andrus as a result of his having been, an officer and/or director of the Company, or, at its request, of any other corporation which the Company owns or of which the Company is a stockholder or creditor, whether or not he continues to be such officer or director at the time of incurring said expenses. Said indemnity shall apply, but not be limited to, expenses incurred in respect to: a. Any matter in which he shall be finally adjudged in any such action, suit or proceeding to be liable for gross negligence or intentional misconduct in the performance of his duty as such officer and/or director, or; b. Any matter in which a settlement is effected to an amount in excess of the amount of reasonable expenses incurred by or on behalf of Andrus in such action, suit or proceeding to the point of final settlement and resolution. Further, nothing in this section regarding indemnification shall be construed to require or authorize the Company to indemnify Andrus against any liability to which he would, but for settlement or compromise of such action, suit or proceeding, be otherwise subject by reason of his gross negligence or intentional misconduct in the performance of his duties as an officer and/or director of the Company. The foregoing right of indemnification shall not be exclusive of other rights to which Andrus may be entitled. VIII. BUSINESS EXPENSE REIMBURSEMENT. The Company shall reimburse Andrus for all reasonable business expenses incurred by him in the performance of his services, duties and responsibilities, including, but not limited to, transportation, travel expenses, board and room, entertainment, and other business expenses incurred within the scope of presentation to the Company by Andrus of an itemized accounting of said expenses substantiated by account books, receipts, bills and other documentation where applicable. If reimbursement, advances or 4 allowances are based on permitted mileage or per diem rates, then Andrus shall submit specification of relevant mileage, destination, dates and other supporting information required for tax purposes. IX. VACATION. During the term of this Agreement, Andrus shall have the right to six (6) weeks of paid vacation during each year. Vacation time may be taken all at once or in segments as desired by Andrus, subject to reasonable notice to the Company for the purpose of coordinating work schedules. Such vacation is not cumulative from year to year. X. TERMINATION OF EMPLOYMENT. a. Termination for Cause, Generally. Under this Agreement, the Company shall have the right to terminate the employment of Andrus for cause, which shall consist of two classes: cause involving malfeasance on the part of Andrus, and causes not involving malfeasance (no-fault). Upon termination, all Company property and credit cards in the possession and control of Andrus must be returned to the Company. b. Malfeasance Termination for Cause. In the event the employment of Andrus is terminated on the grounds of malfeasance, then, in that event, all compensation, including salary, stock options, bonuses, deferred compensation and benefits cease immediately. Termination for cause on grounds of malfeasance included, but is not limited to, the following conduct: i. Breach of restrictive covenant contained herein against competition or disclosure of trade secrets; ii. Continued failure and refusal to carry out the duties and responsibilities of the office under this Agreement within a reasonable time following written notice from the Board of Directors requiring the subject performance; iii. Failure to cure a material breach of this Agreement within ten (10) days after receiving written notice from the Board of Directors; iv. Failure to cease conduct unbecoming the President and CEO of the Company after receipt of written notice from the Board of Directors to cease such conduct; v. Commission of a felony. c. No-Fault Termination for Cause. At no fault of Andrus, termination of employment hereunder for cause can occur as the result of death, disability, sale of the Company (asset or stock sale), merger or consolidation, "takeover" of control and operation of the business by an outside entity or group, or termination of the business for any reason whatsoever. d. Rights, Stock and Benefits Surviving No-Fault Termination for Cause. Termination of Andrus' employment for cause based upon any of the no-fault reasons or events described in the foregoing subsection c, shall not effect Andrus' right to the following compensation under this Agreement: i. Base salary for the entire term of this Agreement. ii. Full vesting of the Incentive Bonus Stock. iii. Performance Bonus for two quarters following termination. 5 iv. Deferred compensation vested at time of termination. v. Company benefits including, but not limited to, group medical insurance, comprehensive dental plan, life insurance, disability insurance, and car allowance shall be continued for a period of six (6) months following such termination of employment. e. Sale/Take-Over Termination Bonus. In the event the employment of Andrus is terminated because of the sale of the business (either asset or stock sale), merger, consolidation, or by "takeover" by any outside entity or group, then, Andrus shall be entitled to a termination bonus equal to three times the amount of bonus he received in the aggregate over the four quarters immediately preceding such termination of employment, but in no event shall said bonus be less than five hundred thousand dollars ($500,000). f. Resignation or Withdrawal. In the event Andrus' employment is terminated by his voluntary resignation or withdrawal, then, in that event, the following will apply unless otherwise agreed between the parties in writing: i. If such resignation or withdrawal occurs during the first year of the term of this Agreement, then Andrus will be entitled only to two weeks salary following notice of resignation or withdrawal. Company benefits set forth in Section IV (f) shall be terminated at the end of the calendar month next following the date of notice of resignation or withdrawal. All rights to stock options, bonuses or deferred compensation not granted or vested shall be forfeited. ii. If such resignation or withdrawal occurs during the second year of the term of this Agreement, then Andrus will be entitled only to two months salary following notice of resignation or withdrawal. Company benefits set forth in Section IV (f) shall be terminated at the end of the calendar month next following the date of notice of resignation or withdrawal. All rights to stock options, bonuses or deferred compensation not granted or vested shall be forfeited. g. Death or Disability. In the event Andrus' employment is terminated by death or upon medical certification of total disability ("disability"), then the following will apply in that respective event: i. In the event of Andrus' death, the Company shall: Pay to Andrus' estate an amount equal to Andrus' base salary for a three-month period following his death; Grant to Andrus' estate the fully vesting of his Incentive Stock Bonus; Pay to Andrus' estate an amount equal to the bonus Andrus would have received for the next two quarters following termination; Continue providing the medical and dental benefits to Andrus' survivors (to the extent applicable) for a period of one year. iii. In the event of Andrus' disability, the Company shall: Pay to Andrus' estate an amount equal to Andrus' base salary for a three-month period following his disability; Grant to Andrus fully vesting of his Incentive Stock Bonus; 6 Pay to Andrus an amount equal to the bonus Andrus would have received for the next two quarters following termination; Continue providing the medical and dental benefits to Andrus for a period of two years. XI. RESTRICTIVE COVENANTS a. Confidential Information. Andrus covenants not to disclose the following specified confidential information to competitors or to others outside of the scope of reasonably prudent business disclosure, at any time during or after the termination of his employment by the Company. i. Customer lists, contracts, and other sales and marketing information; ii. Financial information, cost data; iii. Formulas, trade secrets, processes and devices related to the product and its manufacture; iv. Supply sources, contracts; v. Business opportunities for the product or new developing business for the Company; vi. Proprietary plans, models and other proprietary information of the Company. b. Affirmative Duty to Disclose. Andrus shall promptly communicate and disclose to the Company all observations made, information received, and data maintained relating to the business of the Company obtained by him as a consequence of his employment by the Company. All written material, possession during his employment with the Company concerning business affairs of the Company or any of its affiliates, are the sole property of the Company and its affiliates, and Andrus is obligated to make reasonably prompt disclosures of such information and documents to the Company, and, further, upon termination of this Agreement, or upon request of the Company, Andrus shall promptly deliver the same to the Company of its affiliates, and shall not retain any copies of same. c. Covenant Not to Compete. For a period of three (3) years following the termination of his employment with the Company, Andrus shall not work, directly or indirectly, for a competitor of the Company, nor shall he himself establish a competitive business. This restrictive covenant shall apply worldwide but shall be limited to businesses that use diatomaceous earth and/or pyrethrum in any of its products which they manufacture, distribute, sell, market or otherwise promote. d. Material Harm Upon Breach. The parties acknowledge the unique and secret nature of the Company's formulas for the composition of its DE-based products and related proprietary information, and that material irreparable harm occurs to the Company if these restrictive covenants are breached. Further, the parties hereto acknowledge and agree that injunctive relief is not an exclusive remedy and that an election on the part of the Company to obtain an injunction does not preclude other remedies available to the Company. 7 e. Arbitration. Any controversy, claims, or matter in dispute occurring between these parties and arising out of or relating to this Agreement shall be submitted by either or both of the parties to arbitration administered by the American Arbitration Association or its successor and said arbitration shall be final and absolute. The Commercial Arbitration Rules of the American Arbitration Association shall apply subject to the following modifications: i. The venue for said arbitration shall be Salt Lake City, Utah, and the laws of the State of Utah regarding arbitration shall apply to said arbitration. ii. The decision of the arbitration panel may be entered as a judgment in any court of the general jurisdiction in any state of the United States or elsewhere. XII. NOTICE. Except as otherwise provided herein, all notices required by this Agreement as well as any other notice to any party hereto shall be given by certified mail (or equivalent), to the respective parties as required under this Agreement or otherwise, to the following addresses indicated below or to any change of address given by a party to the others pursuant to the written notice. COMPANY: Diatect International, Inc. 875 S. Industrial Parkway Heber City, UT 84032 ANDRUS: David Andrus 1248 S. Pangea Cir Heber City, UT 84032 XIII. GENERAL PROVISIONS a. Entire Agreement. This Agreement constitutes and is the entire Agreement of the parties and supersedes all other prior understandings and/or Agreements between the parties regarding the matters herein contained, whether verbal or written. b. Amendments. This Agreement may be amended only in writing signed by both parties. c. Assignment. No party of this Agreement shall be entitled to assign his or its interest herein without the prior written approval of the other party. d. Execution of Other Documents. Each of the parties agree to execute any other documents reasonably required to fully perform the intention of this Agreement. e. Binding Effect. This Agreement shall inure to and be binding upon the parties hereto, their agents, employees, heirs, personal representatives, successors and assigns. f. No Waiver of Future Breach. The failure of one party to insist upon strict performance or observation of this Agreement shall not be a waiver of any future breach or of any terms or conditions to this Agreement. 8 g. Execution of Multiple Originals. Two (2) original counterparts of this Agreement shall be executed by these parties. h. Governing Law. This Agreement shall be governed and interpreted by the laws of the State of Utah. i. Severability. In the event any provision or section of this Agreement conflicts with the applicable law, such conflict shall not affect the provisions of the Agreement with can be given effect without the conflicting provisions. WHEREFORE, this Agreement is hereby executed and made effective day and year first above written. COMPANY DIATECT INTERNATIONAL, INC. BY /s/ John L. Runft ------------------------- John Runft, On behalf of the Board of Directors ANDRUS /s/ David Andrus ------------------------- David Andrus ATTEST: /s/ Margie Humphries -------------------------------------- Margie Humphries, Corporate Secretary 9 -----END PRIVACY-ENHANCED MESSAGE-----