-----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, DYVp0QoIgCieCwTO04Yn7z9hxSMajJV7dk2nnpd4mvQ0sx/T+aSzSc2R+KAJHd1t b3BwK9NgTHrcSUEgzPso+A== 0000950170-96-000485.txt : 19960725 0000950170-96-000485.hdr.sgml : 19960725 ACCESSION NUMBER: 0000950170-96-000485 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 25 FILED AS OF DATE: 19960723 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MANSUR INDUSTRIES INC CENTRAL INDEX KEY: 0000934851 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 650226813 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-08657 FILM NUMBER: 96597974 BUSINESS ADDRESS: STREET 1: 8425 SW 129 TERRACE CITY: MIAMI STATE: FL ZIP: 33156 BUSINESS PHONE: 3052326768 MAIL ADDRESS: STREET 1: 8425 SW 129TH TERRACE CITY: MIAMI STATE: FL ZIP: 33156 S-1 1 As filed with the Securities and Exchange Commission on July 23, 1996 Registration No. 333-_____ ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------- MANSUR INDUSTRIES INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 3599 65-0226813 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
PAUL I. MANSUR CHIEF EXECUTIVE OFFICER MANSUR INDUSTRIES INC. 8425 S.W. 129TH TERRACE 8425 S.W. 129TH TERRACE MIAMI, FLORIDA 33156 MIAMI, FLORIDA 33156 (305) 232-6768 (305) 232-6768 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL INCLUDING AREA CODE, OF AGENT FOR SERVICE) EXECUTIVE OFFICES)
--------------- WITH COPIES TO: --------------- GARY M. EPSTEIN, ESQ. LAWRENCE B. FISHER, ESQ. GREENBERG, TRAURIG, HOFFMAN, ORRICK, HERRINGTON & SUTCLIFFE LIPOFF, ROSEN & QUENTEL, P.A. 666 FIFTH AVENUE 1221 BRICKELL AVENUE NEW YORK, NEW YORK 10103 MIAMI, FLORIDA 33131 (212) 506-5000 (305) 579-0500 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]
================================================================================================================================== CALCULATION OF REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------------------------------- TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION REGISTERED REGISTERED PER SECURITY(1) PRICE(1) FEE - ---------------------------------------------------------------------------------------------------------------------------------- Common Stock, $.001 par value 977,500 Shares(2) $8.00 per Share $7,820,000 $ 2,696.55 - ---------------------------------------------------------------------------------------------------------------------------------- Common Stock, $.001 par value 150,000 Shares(3) $6.75 per Share $1,012,500 $ 349.14 - ---------------------------------------------------------------------------------------------------------------------------------- Representative's Warrants 85,000 Warrants(4) $.001 per Warrant $ 85 (5) - ---------------------------------------------------------------------------------------------------------------------------------- Common Stock, $.001 par value 85,000 Shares(6) $9.60 per Share $ 816,000 $ 281.38 - ---------------------------------------------------------------------------------------------------------------------------------- Total Registration Fee...............................................................................................$ 3,327.07 ================================================================================================================================== (1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457. (2) Includes 127,500 Shares subject to the Underwriters' over-allotment option. (3) To be issued upon conversion of $1,012,500 in principal amount of Convertible Redeemable Notes due June 10, 1997. (4) To be issued to the Representative, as set forth on the cover page of the Prospectus comprising a portion of this Registration Statement. (5) No fee due pursuant to Rule 457(g). (6) Issuable upon exercise of the Underwriter's Warrants, together with such indeterminate number of shares of Common Stock as may be issuable by reason of the anti-dilution provisions contained therein.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
MANSUR INDUSTRIES INC. CROSS-REFERENCE SHEET Pursuant to Item 501(b) of Regulation S-K Showing Location in Prospectus of Information Required by Items of Form S-1. ITEM NUMBER AND HEADING IN FORM S-1 REGISTRATION STATEMENT LOCATION IN PROSPECTUS - ------------------------------- ---------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus...................Outside Front Cover Page 2. Inside Front and Outside Back Cover Pages of Prospectus..................Inside Front and Outside Back Cover Pages 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges..............................Prospectus Summary; Risk Factors 4. Use of Proceeds.................................Prospectus Summary; Use of Proceeds; Management's Discussion and Analysis of Financial Condition and Results of Operations 5. Determination of Offering Price.................Outside Front Cover Page; Underwriting 6. Dilution . . ...................................Dilution 7. Selling Security Holders........................Not Applicable 8. Plan of Distribution............................Outside Front Cover Page; Inside Front Cover Page; Underwriting 9. Description of Securities to be Registered.................................Prospectus Summary; Capitalization; Dividend Policy; Description of Capital Stock; Shares Eligible for Future Sale 10. Interests of Named Experts and Counsel ...............................Not Applicable 11. Information with Respect to the Registrant.................................Outside Front and Inside Front Cover Pages; Prospectus Summary; Risk Factors; Dividend Policy; Capitalization; Selected Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Certain Transactions; Principal Shareholders; Description of Capital Stock; Shares Eligible for Future Sale; Financial Statements 12. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................................Not Applicable
Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS - ---------- SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED JULY 23, 1996 850,000 SHARES MANSUR INDUSTRIES INC. COMMON STOCK The shares of Common Stock, $.001 par value ("Common Stock"), offered hereby are offered by Mansur Industries Inc. (the "Company"). Prior to this offering, there has been no public market for the Common Stock and there can be no assurance that any such market will develop. It is anticipated that the initial public offering price will be between $7.00 and $8.00 per share. For information regarding the factors considered in determining the initial public offering price of the Common Stock, see "Underwriting." The Company has made an application to include the Common Stock on the Nasdaq Small Cap Market under the symbol "MANS." -------------------- SEE "RISK FACTORS" ON PAGES 5 TO 10 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. -------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ================================================================================ PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY(2) - -------------------------------------------------------------------------------- Per Share...... $ $ $ - -------------------------------------------------------------------------------- Total(3)....... $ $ $ ================================================================================ (1) Does not include compensation payable to the Representative in the form of a nonaccountable expense allowance equal to 3% of the gross proceeds of this offering. In addition, see "Underwriting" for information concerning indemnification and contribution arrangements with and other compensation payable to the Underwriters. (2) Before deducting estimated expenses of $465,750 payable by the Company, which includes the nonaccountable expense allowance payable to the Representative. (3) The Company has granted the Underwriters a 45-day option to purchase up to 127,500 additional shares of Common Stock upon the same terms and conditions as set forth above, solely to cover over-allotments, if any. If such over-allotment option is exercised in full, the total Price to Public, Underwriting Discount and Proceeds to Company will be $_______, $______ and $_______, respectively. See "Underwriting." ------------------- The shares of Common Stock are offered by the Underwriters, subject to prior sale, when, as and if delivered to and accepted by the Underwriters, and subject to approval of certain legal matters by their counsel and to certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify this offering and to reject any order in whole or in part. It is expected that delivery of the shares of Common Stock offered hereby will be made against payment on or about ____________, 1996 at the offices of First Allied Securities Inc., New York, New York. ------------------- FIRST ALLIED SECURITIES INC. ____________, 1996 [Photos/Art] The following text appears as a caption: MANSUR. The Company's line of self-contained, recycling industrial parts washers incorporate innovative, proprietary and patented waste minimization technologies and represent a significant advance over currently available machinery and processes. Artistic depictions of the following appear here: The Company's Series 500 SystemOne washers, the Company's multiprocess Jet and Immersion Washers and the Company's Series 300 SystemOne Mini Washer. The following text appears as a caption: MANSUR versus INDUSTRY An artistic depiction of the Company's Series 500 SystemOne Washer appears here. The following text appears in a caption: The Company's products allow the use and re-use of the cleaning solvent by removing all the contaminants from the solvent within the cleaning unit itself, minimizing the volume of waste by-product and providing pure solvent to the customer on demand, without the costly and dangerous storage and transportation of hazardous waste. An artistic depiction of a large recycling plant and the recycling process employed by the Company's competitors appears here. The following text appears as a caption: Under the most common current practice, the cleaning solvent becomes contaminated (and less effective) with repeated use and it must be stored until pickup, when pure solvent is delivered and contaminated solvent is generally shipped to regional refining facilities (typically a four to six week cycle). IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. -------------------- THE COMPANY WILL FURNISH ITS SHAREHOLDERS WITH ANNUAL REPORTS CONTAINING AUDITED FINANCIAL STATEMENTS CERTIFIED BY AN INDEPENDENT AUDITING FIRM. PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED, THE INFORMATION IN THIS PROSPECTUS ASSUMES (I) THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION (THE "OVER-ALLOTMENT OPTION") TO PURCHASE UP TO 127,500 SHARES OF COMMON STOCK HAS NOT BEEN EXERCISED, (II) THAT THE REPRESENTATIVE'S WARRANTS TO PURCHASE 85,000 SHARES OF COMMON STOCK HAVE NOT BEEN EXERCISED, AND (III) THAT $1,012,500 IN PRINCIPAL AMOUNT OF CONVERTIBLE NOTES (THE "CONVERTIBLE NOTES") ISSUED IN A PRIVATE FINANCING COMPLETED BY THE COMPANY IN JUNE 1996 HAS BEEN CONVERTED INTO 150,000 SHARES OF COMMON STOCK SIMULTANEOUSLY WITH THE CLOSING OF THIS OFFERING. SEE "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "UNDERWRITING." THE COMPANY GENERAL Mansur Industries Inc. (the "Company") has developed and obtained patent protection with respect to a full line of self-contained, recycling industrial parts washers that incorporate innovative, proprietary waste minimization technologies and represent a significant advance over currently available machinery and processes. Focusing on waste minimization rather than its removal and recovery, the Company believes that its equipment will have a major impact on the industrial parts cleaning industry and will have a broad appeal to customers, because its equipment, unlike the machines now in use, facilitates efficient and economical compliance with environmental regulations, minimizes waste disposal requirements, enhances cleaning solution utilization, and increases worker safety and productivity. Most machinery and equipment require oil lubrication to function properly. Removal of lubrication oils from tools and parts during automotive, aviation, marine and general industrial maintenance, service and repair operations is typically effected through the use of mineral spirit solvents which become contaminated in the cleaning process. Under the most common current practice, the solvent becomes more contaminated (and less effective) with repeated use, and, when it is saturated with oil, sludge and other contaminants as a result of the cleaning process (and frequently classified as a hazardous waste under federal and state regulations), it must be stored on site until pick-up, when pure solvent is delivered and the contaminated solvent is, generally, shipped to regional refining facilities. This off-site recycling program is typically scheduled on four to sixteen week cycles and involves both the utilization of progressively more contaminated solvent for cleaning operations until the solvent is too contaminated for use, and thereafter, the on-site storage of the hazardous solution until the periodic waste recovery service. By contrast, the Company's products allow the use and re-use of the solvent by removing all the contaminants from the solvent within the cleaning unit itself, minimizing the volume of waste by-product and providing pure solvent to the customer on demand, without the costly and dangerous storage and transportation of hazardous waste. Moreover, the small amount of waste by-product yielded in the distillation process utilized by the Company's products can typically be recycled and/or disposed of together with the customer's used motor oil, which is generally not classified as a hazardous waste. Substantially all of the Company's target customers have established systems for the handling, transportation, recycling and disposal of used motor oil. The Company's products have been extensively tested and proven effective by independent engineering concerns and testing laboratories. While the Company intends to exploit its current full line of industrial washers, and to continue its research and development of new products, it has initially focused its attention on its General Parts Washer, marketed as SystemOne(TM) (the "SystemOne(TM) Washer"). The SystemOne(TM) Washer consists of a washing sink mounted on top of a metal cabinet in which the distillation and recovery apparatus is contained. The equipment allows the solvent to be used, treated and re-used, on demand, without requiring off-site processing. The Company has concluded extensive testing by independent laboratories -1- and at various commercial sites and is currently conducting test marketing in a local area within close proximity to its facilities. Demonstrator models were placed in 38 selected automotive repair facilities of national, fleet, industrial and commercial accounts. Notwithstanding the absence of a formal marketing program during the test period, the Company has, as of the date of this Prospectus, received orders from a number of facilities in which the machines were placed, including Florida Detroit Diesel MTU (46 Units); Kelly Tractor Company and Pantropic Power Products, South Florida Caterpillar dealers (48 Units); United States Postal Service (2 Units); Southern Sanitation, a subsidiary of Waste Management, Inc. (5 Units); Broward County Mass Transit (25 Units); and a number of South Florida automobile dealerships (an aggregate of 54 Units). The Company commenced commercial sales and delivery of units in July 1996 at an approximate price per unit of $2,700. The initial market for the Company's industrial cleaning product line includes automotive, aviation, marine and general industrial maintenance, service and repair operations. The Company believes that domestic expenditures in connection with industrial parts cleaning machines exceeds $1.0 billion annually, and that the anticipated monthly cost to the customer for the Company's products typically will not exceed, and is intended to be well below, the monthly cost of the non-recycling machines now in use. Additional competitive advantages provided by the Company's products include practical and cost effective compliance with demanding regulations of the Environmental Protection Agency; elimination of routine waste disposal costs; significant improvements in cleaning productivity; minimized cleaning solution purchases; and reduction of equipment down time for routine machine maintenance. The Company has retained experienced executives to head and develop its sales and marketing organization. In addition to its regional office in Miami, the Company expects to open four additional service centers in Orlando, Tampa, Jacksonville and West Palm Beach, Florida during 1996. The Company expects to pursue a national expansion program, through internal growth utilizing a network of regional distribution and service centers, as in Florida, through a strategic alliance with a national distributor, if one is available on favorable terms, or through a combination of the two. In August, the Company will commence a pilot program with First Recovery and Valvoline Oil Company, two affiliates of Ashland Inc., a multinational oil refiner and distributor of automotive related products, including Valvoline Oil and Ashland 140 Solvent, one of the brands of mineral spirits solvent used in the Company's SystemOne(TM) Washer. Under the pilot program, First Recovery will be the exclusive distributor of the SystemOne(TM) Washer in the Dallas/Ft. Worth and Houston markets. The initial term of the program is one year. If the arrangement proves successful, the Company expects to negotiate a broader agreement, possibly including a national distribution program. The Company has manufactured all its prototype and test models at its 10,000 square foot research and development ("R&D") facility. The Company's current manufacturing capabilities include advanced Computer Aided Design/Computer Aided Manufacturing technology and state of the art manufacturing machinery. Because the Company's R&D facility can be utilized to manufacture up to 200 units of the SystemOne(TM) Washer per month, all manufacturing operations, including design, metal fabrication, robotic welding, painting and assembly, can be performed in the Company's R&D facility during the Company's initial roll-out phase. At present, the Company plans to continue to use its own facility for existing and new product R&D activities and to use contract manufacturers when a product achieves commercial sales levels. In order to accommodate increased demand for the SystemOne(TM) Washer, the Company has entered into an agreement with a contract manufacturer with respect to the manufacture of at least 3,000 units during the first year thereof. In addition, the Company has entered into negotiations with a major contract manufacturer with a 2 million square foot facility and 75 years of experience to provide the manufacturing capacity needed to meet anticipated future customer demand. -2-
THE OFFERING Common Stock Offered............................. 850,000 shares Common Stock Outstanding After Offering.......... 4,351,309(1) Use of Proceeds by the Company................... The Company intends to apply the net proceeds of the offering for the: development of marketing, sales and service centers; development of manufacturing capacity; purchase of raw materials and inventory; development of corporate headquarters and research and development facilities; and working capital and general corporate purposes. See "Use of Proceeds." Risk Factors..................................... This offering involves a high degree of risk and immediate substantial dilution. See "Risk Factors" and "Dilution." Proposed Nasdaq SmallCap Symbol.................. MANS - -------------------- (1) Does not include an aggregate of 375,000 shares of Common Stock reserved for issuance upon exercise of options available for future grant and future restricted stock awards under the Company's Incentive Compensation Plan. See "Underwriting" and "Management--Incentive Compensation Plan."
Mansur Industries Inc. was incorporated in Florida in 1990. The Company's principal executive office is located at 8425 S.W. 129th Terrace, Miami, Florida 33156, and its telephone number is (305) 232-6768. -3- Summary Financial Data The summary financial information set forth below should be read in conjunction with financial statements appearing elsewhere in this Prospectus.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, --------------------------------------------------------------- ------------------------ 1991(1) 1992 1993 1994 1995 1995 1996 --------- ---------- ---------- ---------- ----------- ---------- ------------ STATEMENT OF OPERATIONS DATA: Operating expenses: General and administrative......$ 8,502 $ 8,971 $ 81,886 $ 268,414 $ 907,393 $ 418,079 $ 622,641 Research and development........ 128,439 31,924 69,256 178,146 393,874 162,732 365,435 --------- ---------- ---------- ---------- ----------- ---------- ------------ Total operating expenses.... 136,941 40,895 151,142 446,560 1,301,267 580,811 988,076 --------- ---------- ---------- ---------- ----------- ---------- ------------ Interest (expense), net.............. -- (16,299) (16,360) (46,312) (17,878) (26,462) (13,094) Conversion (expense) on redeemable preferred stock................. -- -- -- -- -- -- (344,631) Loss on disposition of property and equipment....................... -- (39,560) (18,000) -- -- -- -- --------- ---------- ---------- ---------- ----------- ---------- ------------ Net (loss)........................... (136,941) (96,754) (185,502) (492,872) (1,319,145) (607,273) (1,345,801) Dividends on redeemable preferred stock........................... -- -- (8,328) (53,929) (222,067) (75,066) (147,000) --------- ---------- ---------- ---------- ----------- ---------- ------------ Net (loss) to common shares..........$(136,941) $(96,754) $(193,830) $(546,801) $(1,541,212) $(682,339) $(1,492,801) ========= ========== ========== ========== =========== ========== ============ Net (loss) per common share(2)....... $(0.07) $(0.05) $(0.10) $(0.27) $(0.66) $(0.34) $(0.53) ========= ========== ========== ========== =========== ========== ============ Weighted average shares outstanding(2)..................2,000,000 2,000,000 2,000,000 2,000,000 2,335,140 2,000,000 2,799,071
JUNE 30, 1996 ----------------------------------- ACTUAL AS ADJUSTED(3) ------------ -------------- BALANCE SHEET DATA: Working capital............................. $(216,966) $5,921,034 Total assets................................ 1,562,712 6,628,212 Total liabilities........................... 1,575,428 502,928 Total stockholders' equity (deficit)........ (12,716) 6,125,284 - -------------------------- (1) Information provided for the period from November 13, 1990 (inception) to December 31, 1991. (2) See Note 1 to Notes to Financial Statements for information concerning the computation of net loss per share. (3) Adjusted to reflect (i) the issuance of 150,000 shares of Common Stock as a result of the conversion of the Convertible Notes; and (ii) the sale of 850,000 shares of Common Stock offered hereby at an assumed initial public offering price of $7.50 per share and the initial application of the estimated net proceeds therefrom. See "Capitalization" and "Use of Proceeds." -4- RISK FACTORS THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING AN INVESTMENT DECISION. LIMITED OPERATING HISTORY; SIGNIFICANT AND CONTINUING LOSSES. The Company was formed in November 1990 and was a development stage company through June 30, 1996. It has only recently commenced the marketing and sale of one of its product lines on a limited basis, and has a limited operating history upon which an evaluation of the Company's performance and prospects can be made. The Company's prospects must be considered in light of the numerous risks, expenses, delays, problems and difficulties frequently encountered in the establishment of a new business in an industry characterized by vigorous competition and regulatory requirements. Since inception, the Company has incurred significant losses, including losses of $492,872 and $1,319,145, for the years ended December 31, 1994 and 1995, respectively, and a loss of $1,345,801 for the six months ended June 30, 1996. Losses are continuing through the date of this Prospectus. Inasmuch as the Company's operating expenses have increased and can be expected to continue to increase significantly in connection with the Company's proposed expansion, including the development of manufacturing capabilities, the development and establishment of regional sales, service and technological support centers and a service fleet, the development of a larger corporate headquarters and research and development facility, and the purchase of raw materials and inventory, the Company anticipates that losses and negative operating cash flow will continue until such time, if ever, as the Company is able to generate sufficient revenues to offset its operating costs and the costs of continuing expansion. There can be no assurance that the Company will generate significant revenues or ever achieve profitable operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Financial Statements. UNCERTAINTY OF MARKET ACCEPTANCE. To date, the Company's products have been marketed in limited geographic areas and, thus, have achieved only limited market acceptance. The Company is attempting to market a new product which relies on a fundamental change in the way parts and tools are cleaned and solvent utilized, an activity pattern which has been relatively consistent within the target industries in the past. As is typically the case with an emerging business concept, demand and market acceptance for newly introduced products and services are subject to a high level of uncertainty. The Company has limited marketing experience and limited financial, marketing, personnel and other resources to undertake extensive marketing activities. The Company's success will be largely dependent on the Company's ability to position its products as a preferred method for cleaning parts. The Company believes that substantially all its target customers currently utilize competitive parts cleaning equipment. Potential customers may elect to utilize devices or methods with which they are more familiar or which they believe to be more efficient or have other advantages over the Company's system. Accordingly, achieving market acceptance for the Company's products will require substantial marketing efforts and expenditure of significant funds to educate automotive dealership and repair facilities and other potential users of the products of the distinctive characteristics and benefits of the Company's products as well as their environmental and cost savings advantages. There can be no assurance that the Company's efforts will result in significant initial or continued market acceptance for the Company's products or that the Company will succeed in positioning its products as a preferred method for cleaning parts. See "Business-Marketing and Servicing Strategy." INDUSTRY COMPETITION. The parts cleaning industry is characterized by intense competition, and the industry is dominated by Safety-Kleen, Inc. A number of other companies provide parts cleaning equipment and services. While the Company believes that none of its competitors offer a product with the same features as the Company's products, many customers may view the products as functionally equivalent, and there can be no assurance that functionally equivalent products will not become available in the near future. In addition, there are numerous companies involved in the waste management industry, -5- including waste hauling companies and companies engaged in waste separation, recovery and recycling, which may have the expertise and resources that would encourage them to attempt to develop and market products which would compete with the Company's products or render them obsolete or less marketable. Safety-Kleen, Inc., as well as most of the companies marketing such waste disposal services or products or with the potential to do so, are well established, have substantially greater financial and other resources than the Company, and have established reputations relating to product design, development, marketing and support. There can be no assurance that the Company's financial performance and prospects will not be negatively affected if Safety-Kleen, Inc. materially lowers the price to customers of its parts washers, or that the Company will be able to compete successfully. See "Business-Competition." RISKS ASSOCIATED WITH RAPID EXPANSION. The Company has achieved limited growth to date and has limited experience in effectuating rapid expansion or in managing operations which are geographically dispersed. Expansion of the Company's operations will be dependent on, among other things, the Company's ability to achieve significant market acceptance for its products, successfully locate, establish and operate Service Centers, hire and retain skilled management, marketing, technical and other personnel, secure adequate sources of supply on a timely basis and on commercially reasonable terms, successfully manage growth (including monitoring operations, controlling costs and maintaining effective quality controls), and maintain a third party leasing program capable of financing the customer's acquisition of the Company's products in a timely manner. To date, a substantial portion of the Company's products have been installed on a test basis in automotive dealership and repair facilities concentrated in limited geographic markets near the Company's headquarters. The Company's growth prospects will be largely dependent upon its ability to achieve greater penetration in these markets as well as significant penetration in new geographic markets. The Company's prospects could be adversely affected by declines in the automotive sales, maintenance or service industries or the economy generally, which could result in reduction or deferral of capital expenditures by prospective customers. The Company's future growth will also be dependent upon the Company's ability to achieve a sufficient installed base of its products. The Company may also seek to expand its operations through the acquisition of existing companies with customer bases that would appear to have needs for the Company's product line. There can be no assurance that the Company will be able to successfully expand its operations. See "Business-Marketing and Servicing Strategy." DEPENDENCE ON OFFERING PROCEEDS TO IMPLEMENT PROPOSED EXPANSION; POSSIBLE NEED FOR ADDITIONAL FINANCING. The Company's capital requirements have been and will continue to be significant. The Company is dependent on and intends to use a substantial portion of the proceeds of this offering to implement its proposed expansion. The Company anticipates, based on currently proposed plans and assumptions relating to its operations (including the anticipated costs associated with, and timetable for, its proposed expansion), that the proceeds of this offering, together with cash flow from operations, will be sufficient to satisfy its contemplated cash requirements for at least 12 months following the consummation of this offering. In the event that the Company's plans change, its third party lease financing arrangement does not function as anticipated, its assumptions change or prove to be inaccurate or if the proceeds of this offering or cash flow otherwise prove to be insufficient to fund expansion (due to unanticipated expenses, delays, problems, difficulties or otherwise), the Company has plans to restructure its operations to minimize cash expenditures and/or obtain additional financing in order to support its plan of operations. The Company has no current arrangements with respect to, or sources of, additional financing and there can be no assurance that any additional financing will be available to the Company on acceptable terms, or at all. Although the Company believes that available third party lease financing may help offset the Company's cost structure for product rollout, a significant level of demand for the Company's products will, in all likelihood, initially result in significant up-front capital expenditures without corresponding cash flow. Any additional equity financing may involve dilution to the interests of the Company's then existing shareholders. If adequate funds are not available from additional sources of financing, the Company's business may be materially adversely affected. See "Use of Proceeds." -6- RISKS ASSOCIATED WITH PRODUCT FINANCING. The Company has entered into a third party lease financing arrangement with Oakmont Financial Services ("Oakmont"), pursuant to which Oakmont has agreed to provide third party leasing services. If the Company breaches certain warranties, Oakmont has the right to require the Company to repurchase the leased unit from Oakmont. To the extent that the Company is required to use a portion of the proceeds of this offering to repurchase units from Oakmont, the Company will have less resources available to it for other purposes. Oakmont has the right to review the creditworthiness of proposed lessees and to withhold financing on the basis of its credit review. While the Company may terminate its agreement with Oakmont if Oakmont consistently refuses to approve the credit of the Company's proposed lessees, any such termination, in the absence of alternative financing programs, could have a material adverse effect on the Company. The Company is not likely to utilize third party financing with respect to units leased under its pilot marketing program with First Recovery and Valvoline Oil Company, but will, instead, use a portion of the proceeds of this offering. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." DEPENDENCE ON ENVIRONMENTAL LEGISLATION. In recent years, government authorities have adopted extensive regulations regulating the storage, handling, shipment, recycling and/or disposal of hazardous waste, including contaminated solvent used in industrial parts washers. The Company believes that continuing initiatives of federal, state and local government authorities and increasing storage and hauling costs and disposal fees will create incentives for customers to use the Company's products. Failure by government authorities to continue to implement such legislation or significant relaxation of such requirements or enforcement thereof could have a material adverse effect on the Company's business and prospects. Moreover, while the Company believes that its process results in pure solvent and a residue that is not classified as hazardous waste, but may, rather, be disposed of or utilized as used motor oil, there can be no assurance that environmental agencies will reach the same conclusion. If the residue is classified as hazardous waste, or if used motor oil itself is classified as hazardous waste, the Company will lose a significant competitive advantage. The Company believes that certain of its competitors have attempted and are continuing their efforts to have used motor oil classified as a hazardous waste. See "Business-Industry Overview" and "Risk Factors -- Potential Warranty Expense and Product Liability." DEPENDENCE ON THIRD-PARTY MANUFACTURING ARRANGEMENTS. The Company will be dependent on third parties for its components and for the manufacture of a large portion of its finished units. Although the Company has several alternative manufacturing sources and believes that additional alternative manufacturing sources are readily available, failure by its current manufacturers to continue to supply the Company on commercially reasonable terms, or at all, in the absence of readily available alternative sources, would have a material adverse effect on the Company. The Company is substantially dependent on the ability of its manufacturers, among other things, to satisfy performance and quality specifications and dedicate sufficient production capacity for components within scheduled delivery times. See "Business--Manufacturing and Supply." PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION. The Company holds four United States patents and has four United States patents pending with respect to the Company's products. Two of the five pending patents have been allowed by the U.S. Patent Office and are awaiting issuance. Other parts washing machines which may not be covered by the Company's patents are currently in commercial distribution by the Company's competitors. The Company has applied for international patents in Canada, Mexico, Europe and Japan and anticipates that it will apply for additional patents as deemed appropriate. The Company believes that patent protection is important to its business and that it could be required to expend significant funds in connection with enforcing or defending its patent rights. There can be no assurance as to the breadth or degree of protection which existing or future patents, if any, may afford the Company, that any unissued patent applications will result in issued patents or that patents will not be circumvented or invalidated. It is possible that the Company's existing patent rights may not be valid although the Company believes that neither its products nor processes now infringe or will infringe patents or violate proprietary rights of others. It is possible that infringement of existing or future patents or -7- proprietary rights of others may occur. In the event that the Company's products or processes infringe patents or proprietary rights of others, the Company may be required to modify the design or obtain a license. There can be no assurance that the Company will be able to do so in a timely manner, upon acceptable terms and conditions or at all. Failure to do any of the foregoing could have a material adverse effect on the Company. In addition, there can be no assurance that the Company will have the financial or other resources necessary to enforce or defend a patent infringement, proprietary rights violation action or alleged infringement or violation action. Moreover, if the Company's products or processes infringe patents or propriety rights of others, the Company could, under certain circumstances, become the subject of an immediate injunction and be liable for damages, which could have a material adverse effect on the Company. See "Business -Patents, Trademarks and Proprietary Technology." The Company also relies on trade secrets and proprietary know-how and employs various methods to protect the concepts, ideas and documentation of its proprietary information. However, such methods may not afford complete protection and there can be no assurance that others will not independently develop such know-how or obtain access to the Company's know-how, concepts, ideas and documentation. Although the Company has and expects to have confidentiality agreements with its employees, suppliers and appropriate vendors, there can be no assurance that such agreements will adequately protect the Company's trade secrets. Since the Company believes that its proprietary information is important to its business, failure to protect such information could have a material adverse effect on the Company. See "Business-Patents, Trademarks and Proprietary Information." POTENTIAL WARRANTY EXPENSE AND PRODUCT LIABILITY. The Company unconditionally warrants its products to be free of material defects for 60 months. In addition the Company warrants to users that if, for any reason, the residue generated by its System One(TM) Washer cannot be recycled and/or disposed of as used oil, the Company will pay for any required recovery and disposal services. Accordingly, the Company could incur significant warranty expenses as a result of defects in its products or a change in federal or state regulations pertaining to the disposal of cleaning residue. Since the Company only recently commenced its planned principal operations, the reserve account it will establish for warranty expense will be derived without the benefit of historical figures and actual warranty expenses could exceed the amount which will be established as a reserve. The Company may also be exposed to potential product liability claims by its customers and users of its products. The Company maintains product liability insurance coverage of $5,000,000 in the aggregate and $5,000,000 per occurrence. The Company believes such insurance provides adequate coverage for the types of products currently marketed by the Company. There can be no assurance, however, that such insurance will be sufficient to cover potential claims or that an adequate level of coverage will be available in the future at a reasonable cost. A partially insured or completely uninsured successful claim against the Company could have a material adverse effect on the Company. See "Business-Sales Financing and Service Programs" and "-Product Liability and Insurance." DEPENDENCE ON KEY PERSONNEL. The success of the Company will be largely dependent on the personal efforts of Pierre Mansur, its Chairman of the Board and President and the inventor of the Company's products, Paul Mansur, its Chief Executive Officer, and other key personnel. Although the Company has entered into employment agreements with Pierre Mansur and Paul Mansur which expire in September 1997, the loss of the services of either of such individuals or certain other key employees, could have a material adverse effect on the Company's business and prospects. The Company has obtained and is the sole beneficiary of "key-man" life insurance on Pierre Mansur and Paul Mansur each in the amount of $1,000,000. The success of the Company is also dependent upon its ability to hire and retain additional qualified marketing, technical and other personnel. There can be no assurance that the Company will be able to hire or retain such personnel. See "Management." CONTROL BY MANAGEMENT. After consummation of this offering, Pierre Mansur will beneficially own approximately 46% of the Company's outstanding Common Stock. Accordingly, Pierre Mansur will be in -8- a position to effectively control the Company, including the election of all of the directors of the Company. See "Management" and "Principal Shareholders." BROAD DISCRETION IN APPLICATION OF PROCEEDS; POSSIBLE BENEFITS TO RELATED PARTIES. Approximately $572,000 (11%) of the estimated net proceeds from this offering has been allocated to working capital and general corporate purposes. Accordingly, the Company's management will have broad discretion as to the application of such proceeds. In addition, the Company may use a portion of the net proceeds allocated to working capital to pay salaries and benefits of executive officers over the 12 months following the consummation of this offering to the extent cash flow is insufficient for such purpose. See "Use of Proceeds." NO PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE. Prior to this offering, there has been no public market for the Common Stock, and no assurance can be given that an active trading market will develop or be sustained after this offering. Since there has been no trading market, the initial public offering price of the Common Stock may not bear any relationship to the actual value of the Common Stock. The initial public offering price was established by negotiations between the Company and the Representative, is not necessarily related to the Company's asset value, net worth or other established criteria of value, and may not be indicative of prices that will prevail in the trading market. The stock market has experienced significant price and volume fluctuations that are often unrelated to the operating performance of particular companies. The market price of the Common Stock, similar to that of securities of other development stage companies, is likely to be highly volatile. Factors such as the results of studies and trials by the Company or its competitors, other evidence of the efficacy of products of the Company or its competitors, announcements of technological innovations or new products by the Company or its competitors, changes in governmental regulation, developments in patent or other proprietary rights of the Company or its competitors, including litigation, fluctuations in the Company's operating results and changes in general market conditions could have a significant impact on the future price of the Common Stock. See "Underwriting." EFFECTIVE OF ANTI-TAKEOVER LEGISLATION; POSSIBLE ADVERSE EFFECT OF ISSUANCE OF PREFERRED STOCK ON MARKET PRICE AND RIGHTS OF COMMON STOCK. The State of Florida has enacted legislation that may deter or frustrate takeovers of Florida corporations. The Florida Control Share Act generally provides that shares acquired in excess of certain specified thresholds will not posses any voting rights unless such voting rights are approved by a majority vote of a corporation's disinterested shareholders. The Florida Affiliated Transactions Act generally requires supermajority approval by disinterested directors or shareholders of certain specified transactions between a public corporation and holders of more than 10% of the outstanding voting shares of the corporation (or their affiliates). The Company's Articles of Incorporation authorize the issuance of 1,500,000 shares of "blank check" Preferred Stock ("Preferred Stock") with such designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors is empowered, without shareholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of the Common Stock. The issuance of any series of Preferred Stock having rights superior to those of the Common Stock may result in a decrease in the value or market price of the Common Stock. Holders of Preferred Stock to be issued in the future may have the right to receive dividends and certain preferences in liquidation and conversion rights. The issuance of such Preferred Stock could make the possible takeover of the Company or the removal of management of the Company more difficult, discourage hostile bids for control of the Company in which shareholders may receive premiums for their Common Stock and adversely affect the voting and other rights of the holders of the Common Stock. The Company may in the future issue additional shares of its Preferred Stock. See "Description of Securities." SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. As of the date of this Prospectus, 4,351,309 shares of Common Stock are issued and outstanding. Of such shares, 1,000,000 shares are freely tradeable -9- without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act"), unless held by an "affiliate" of the Company. The remaining 3,351,309 shares of Common Stock are "restricted securities," as that term is defined under Rule 144 promulgated under the Securities Act. Of such shares, 2,656,729 shares are currently eligible for sale under Rule 144 and the remainder will become eligible for sale under Rule 144 at various times prior to June 1998. No prediction can be made as to the effect, if any, that sales or shares of Common Stock or the availability of such shares for sale will have on the market prices prevailing from time to time. Nevertheless, the possibility that substantial amounts of Common Stock may be sold in the public market may adversely affect prevailing market prices for the Common Stock and could impair the Company's ability to raise capital through the sale of its equity securities. See "Shares Eligible for Future Sale." DIVIDENDS. The Company has not paid any cash dividends on its Common Stock and does not expect to declare or pay any cash dividends in the foreseeable future. See "Dividend Policy." DILUTION. The assumed initial offering price of $7.50 is substantially higher than the net tangible book value per share of Common Stock. Investors purchasing shares of Common Stock in this offering will incur immediate and substantial dilution of approximately $6.10 per share of Common Stock from the assumed initial public offering price. See "Dilution." INEXPERIENCE OF REPRESENTATIVE. The Representative commenced operations in 1994 and does not have extensive experience as an underwriter of public offerings of securities. The Representative has acted as the managing underwriter for three public offerings. The Representative is a relatively small firm and no assurance can be given that the Representative will participate as a market maker in the Common Stock. See "Underwriting." FORWARD -- LOOKING STATEMENTS AND ASSOCIATED RISK. This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding, among other items (i) the Company's growth strategies, (ii) the impact of the Company's products and anticipated trends in the Company's business, and (iii) the Company's ability to enter into contracts with certain suppliers and strategic partners. These forward-looking statements are based largely on the Company's expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Company's control. Actual results could differ materially from these forward-looking statements as a result of the factors described herein, including, among others, regulatory or economic influences. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Prospectus will in fact transpire or prove to be accurate. -10- USE OF PROCEEDS The net proceeds to be received by the Company from the sale of the shares of Common Stock offered hereby are estimated to be approximately $5,271,750 based on an assumed initial public offering price of $7.50 per share (approximately $6,103,688 if the Underwriters' over-allotment option is exercised in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
APPROXIMATE APPROXIMATE PERCENTAGE OF NET APPLICATION OF PROCEEDS DOLLAR AMOUNT PROCEEDS ----------------------- ------------- ----------------- Development of manufacturing capacity(1)........................... $ 750,000 14% Development of marketing, sales and service centers and service fleet(2).......................................... 1,250,000 24 Development of corporate headquarters and research and development facilities(3)................................. 700,000 13 Purchase of raw materials and inventory(4)......................... 2,000,000 38 Working capital and general corporate purposes..................... 571,750 11 ---------- --- Total............................................ $5,271,750 100% ========== === - --------------------------- (1) Represents the estimated cost of developing the Company's manufacturing capabilities, primarily for research and development, testing and initial pre-commercial manufacturing operations, including certain property, plant and equipment costs, set-up costs, hard and soft tooling costs and custom mold development costs over the next 12 months. See "Business - Manufacturing and Supply" and "--Research and Development." (2) Represents the estimated cost of developing sales, service and technological support centers and a fleet of service vehicles throughout Florida and the eastern United States over the next 12 months. See "Business - Marketing and Servicing Strategy." (3) Represents the estimated cost of developing a larger corporate headquarters and research and development facility, including the cost of a client server computer system, over the next 12 months. See "Business - Research and Development." (4) Represents the estimated cost of raw materials and finished goods inventory that may be held by the Company, as well as the cost of units provided under its pilot marketing program with First Recovery and Valvoline Oil Company for which the Company will not use third party financing.
The foregoing represents the Company's best estimate of its allocation of the net proceeds of this offering based upon the current status of its business operations, its current plans, and current economic and industry conditions. Future events, as well as changes in economic or competitive conditions or the Company's business and the results of the Company's sales and marketing activities may make shifts in the allocation of funds within or between each of the items referred to above necessary or desirable. If the Underwriters exercise the over-allotment option in full, the Company will realize additional net proceeds of approximately $832,000 which will be added to the Company's working capital. The Company anticipates, based on currently proposed plans and assumptions relating to its operations, that the proceeds of this offering, together with projected cash flow from operations, will be sufficient to satisfy its contemplated cash requirements for at least 12 months following the consummation of this offering. In the event that the Company's plans change or its assumptions change or prove to be inaccurate or if the proceeds of this offering or cash flow prove to be insufficient (due to unanticipated expenses or otherwise), the Company has plans to restructure its operations to minimize cash expenditures and/or obtain additional financing in order to support its plan of operations. There can be no assurance that additional financing will be available to the Company on commercially reasonable terms, or at all. -11- Proceeds not immediately required for the purposes described above will be invested principally in United States government securities, short-term certificates of deposit, money market funds or other short-term interest-bearing investments. -12- DILUTION The difference between the initial public offering price per share of Common Stock and the pro forma net tangible book value per share after this offering constitutes the dilution to investors in this offering. Net tangible book value per share is determined by dividing the net tangible book value of the Company (total tangible assets less total liabilities) by the number of outstanding shares of Common Stock. At June 30, 1996, the net tangible book value of the Company was $(37,170), or $(.01) per share. After giving effect to the sale of 850,000 shares of Common Stock offered hereby at an assumed initial public offering price of $7.50 per share and deducting underwriting discounts and commissions and estimated expenses of the offering, and assuming the conversion of the Convertible Notes into 150,000 shares of Common Stock, the pro forma net tangible book value of the Company as of June 30, 1996 would have been $6,100,830, or $1.40 per share. This represents an immediate increase in net tangible book value of $1.41 per share to the existing shareholders and an immediate dilution of $6.10 per share to new investors. The following table illustrates this dilution, on a per share basis: Initial public offering price of Common Stock........ $7.50 Net tangible book value before offering..... $(.01) Increase attributable to new investors...... 1.41 Pro forma net tangible book value after offering..... 1.40 ----- Total dilution to new investors...................... $6.10 ===== If the Underwriters' over-allotment option is exercised in full, the pro forma net tangible book value of the Company as of June 30, 1996 will be $6,932,768, or $1.59 per share. This represents an immediate increase in net tangible book value of $1.60 per share to the existing shareholders and an immediate dilution of $5.90 per share to new investors. The following table summarizes, as of June 30, 1996, the total number of shares of Common Stock purchased from the Company, the total consideration paid and the average price per share paid (assuming an initial public offering price of $7.50 per share) by the existing shareholders and the new investors.
PERCENT OF AVERAGE SHARES PERCENT OF AGGREGATE TOTAL PERCENT PER PURCHASED TOTAL SHARES CONSIDERATION CONSIDERATION SHARE --------- ------------ ------------- ------------- ---------- Existing Shareholders... 3,501,309 80.5% $4,142,500 39.4% $1.18 New Investors........... 850,000 19.5% 6,375,000 60.6% $7.50 ========== ====== ========== ====== Total............. 4,351,309 100.0% 10,517,500 100.0%
If the Underwriters' over-allotment option is exercised in full, the new investors will have paid $7,331,250 for 977,500 shares of Common Stock, representing 63.9% of the total consideration for 21.8% of the total number of shares outstanding. -13- DIVIDEND POLICY The Company intends to retain all future earnings for the operation and expansion of its business and does not anticipate paying any cash dividends on the Common Stock in the foreseeable future. Any future determination as to the payment of cash dividends will depend on a number of factors, including future earnings, results of operations, capital requirements, the financial condition and prospects of the Company and any restrictions under credit agreements existing from time to time, as well as such other factors as the Board of Directors may deem relevant. No assurance can be given that the Company will pay any dividends in the future. CAPITALIZATION Set forth below is the capitalization of the Company at June 30, 1996, and as adjusted to reflect the Company's issuance of 850,000 shares of Common Stock in this offering at an assumed initial public offering price of $7.50 per share and the automatic conversion of the Convertible Notes. See Note 5 of Notes to Financial Statements. JUNE 30, 1996 ------------------------- ACTUAL AS ADJUSTED ---------- ----------- DEBT: Short-term debt......................................$1,012,500 $ 0 Current installments of long-term debt............... 48,786 48,786 Long-term debt, excluding current installments....... 129,014 129,014 STOCKHOLDERS' EQUITY (DEFICIT): Preferred Stock, $1 par value; 1,500,000 shares authorized; no shares issued and outstanding................................ 0 0 Common Stock, $.001 par value; 25,000,000 shares authorized; 3,351,309 and 4,351,309 shares issued and outstanding, respectively............................... 3,351 4,351 Additional paid in capital.......................... 3,560,948 9,697,948 Deficit accumulated during the development stage.......................... 3,577,015 3,577,015 ---------- ---------- Total stockholders' equity (deficit)........ (12,716) 6,125,284 ---------- ---------- Total capitalization ................................$1,177,584 $6,303,084 ========== ========== -14- SELECTED FINANCIAL DATA The selected financial data set forth below has been derived from the financial statements of the Company. The financial statements as of and for the period from November 13, 1990 (inception) through December 31, 1991 and for the years ended December 31, 1992, 1993, 1994 and 1995 have been audited by KPMG Peat Marwick LLP, independent certified public accountants. In the opinion of the Company, the financial information for each of the six month periods ended June 30, 1995 and 1996, which is unaudited, includes all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of its financial position and results of operations for these periods. The statement of operations data for the six month period ended June 30, 1996 is not necessarily indicative of the results of operations that may be expected for the full year. The selected financial data presented below should be read in conjunction with the Company's financial statements, related notes, and other financial information contained in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ------------------------------------------------------------------------ --------------------------- 1991(1) 1992 1993 1994 1995 1995 1996 ------------ ----------- ----------- ----------- ------------ ----------- ------------ STATEMENT OF OPERATIONS DATA: Operating expenses: General and administrative ....... $ 8,502 $ 8,971 $ 81,886 $ 268,414 $ 907,393 $ 418,079 $ 622,641 Research and development .......... 128,439 31,924 69,256 178,146 393,874 162,732 365,435 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total operating expenses.......... 136,941 40,895 151,142 446,560 1,301,267 580,811 988,076 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Interest (expense), net ..... -- (16,299) (16,360) (46,312) (17,878) (26,462) (13,094) Conversion (expense) on redeemable preferred stock................... -- -- -- -- -- -- (344,631) Loss on disposition of property and equipment.. -- (39,560) (18,000) -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net (loss) .................. (136,941) (96,754) (185,502) (492,872) (1,319,145) (607,273) (1,345,801) Dividends on redeemable preferred stock ........ -- -- (8,328) (53,929) (222,067) (75,066) (147,000) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Net (loss) to common shares ................. $ (136,941) $ (96,754) $ (193,830) $ (546,801) $(1,541,212) $ (682,339) $(1,492,801) =========== =========== =========== =========== =========== =========== =========== Net (loss) per common share(2) ............... $ (0.07) $ (0.05) $ (0.10) $ (0.27) $ (0.66) $ (0.34) $ (0.53) =========== =========== =========== =========== =========== =========== =========== Weighted average shares outstanding(2) ......... 2,000,000 2,000,000 2,000,000 2,000,000 2,335,140 2,000,000 2,799,071
JUNE 30, 1996 --------------------------- ACTUAL AS ADJUSTED(3) ----------- -------------- BALANCE SHEET DATA: Working capital ................................ $ (216,966) $5,921,034 Total assets ................................... 1,562,712 6,628,212 Total liabilities .............................. 1,575,428 502,928 Stockholders' equity (deficit): Total stockholders' equity (deficit) ...... (12,716) 6,125,284 - ----------------------- (1) Information provided for the period from November 13, 1990 (inception) to December 31, 1991. (2) See Note 1 to Notes to Financial Statements for information concerning the computation of net loss per share. (3) Adjusted to reflect (i) the issuance of 150,000 shares of Common Stock as a result of the conversion of the Convertible Notes; and (ii) the sale of 850,000 shares of Common Stock offered hereby at an assumed initial public offering price of $7.50 per share and the initial application of the estimated net proceeds therefrom. See "Capitalization" and "Use of Proceeds." -15- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Financial Statements, including the notes thereto, contained elsewhere in this Prospectus. GENERAL Since its inception in November 1990 the Company has devoted substantially all of its resources to research and development programs relating to its full line of self contained, recycling industrial parts washers. The Company was a development stage company through June 30, 1996, and commenced its planned principal operations in July 1996. The Company has been unprofitable since its inception and expects that it will incur significant additional losses at least through December 31, 1996. From the period from inception through June 30, 1996, the Company incurred a cumulative net loss of $3,577,015. The Company anticipates that it will incur losses until such time, if ever, as the Company is able to generate sufficient revenues to offset its operating costs and the costs of its continuing expansion. In light of the material uncertainties in connection with the commencement of the Company's operations, the Company cannot reasonably estimate the length of time before the Company may generate net income, if ever. The Company intends to make its SystemOne(TM) Washer and services available to the public through a third party leasing program. The Company will recognize the revenue from the sale of a machine at the time that the equipment is delivered either to the third party lessor or directly by the Company to the lessee. A portion of the revenue (currently estimated at 10% of the sale price per machine) will be accounted for as deferred revenue, and recognized as revenue in respect of the service portion of the agreement over the term of the underlying lease. See "Business - Sales Financing and Servicing Programs" for a description of the Product Financing Agreement the Company has entered into with Oakmont Financial Services. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995. The Company did not generate any revenues prior to June 30, 1996. The Company's general and administrative expenses increased by $204,562 to $622,641 for the six months ended June 30, 1996 from $418,079 during the comparable period in 1995. The increase is primarily attributable to the Company's hiring of additional management, sales and marketing staff in anticipation of the Company's commencement of its planned principal operations and the Company's grant of an aggregate of 30,000 shares of Common Stock to three directors of the Company in exchange for certain consulting services. The Company's research and development expenses for the six months ended June 30, 1995 and 1996 were $162,732 and $365,435, respectively. The 125% increase is primarily a function of the Company's accelerated prototype development during the latter period, as opposed to the basic and applied research conducted during the prior period. During 1996, the Company manufactured and shipped a number of SystemOne(TM) Washers to various facilities to test market receptivity. The Company's interest expenses for the six months ended June 30, 1995 and 1996 were $38,259 and $24,179, respectively. The Company's interest expense in the six months ended June 30, 1996 decreased by 36% relative to the six months ended June 30, 1995 due to a relative decrease in the indebtedness of the Company. In the six months ended June 30, 1995 and 1996, the Company earned interest income of $11,797 and $11,085 on cash deposits. -16- In the six months ended June 30, 1995, the Company incurred a conversion expense of $344,631 in connection with its efforts to induce all the holders of the Company's Series A Preferred Stock to convert their Series A Preferred Stock to Common Stock. As a result of the foregoing, the Company incurred a net loss of $607,273 and $1,345,801 in the six months ended June 30, 1995 and 1996, respectively. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994. The Company's general and administrative expenses for the years ended December 31, 1994 and 1995 were $268,414 and $907,393, respectively. The $638,979 increase in general and administrative expenses was a function of the Company's hiring of additional management and sales staff, increased use of management consulting, engineering, legal and accounting professionals, purchase of more comprehensive insurance policies and increased executive compensation. For the years ended December 31, 1994 and 1995, the Company's research and development expenses were $178,146 and $393,874, respectively. The $215,728 increase in research and development expenses was a reflection of the Company's accelerated research and development efforts and an increased focus on developing prototype products during the latter part of 1995. The Company's interest expense was $46,312 and $63,528 for the years ended December 31, 1994 and 1995, respectively. The Company's interest expense increased by $17,216 as a result of additional interest expenses incurred with respect to equipment financing secured in September 1994. In the year ended December 31, 1995, the Company earned interest income of $45,650 on cash deposits. Due to the factors described above, the Company incurred net losses of $492,872 and $1,319,145 in the years ended December 31, 1994 and 1995, respectively. YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993. The Company's general and administrative expenses were $81,886 in the year ended December 31, 1993 and $268,414 in the year ended December 31, 1994. General and administrative expenses increased by $186,528 primarily in response to increases in the Company's staff and the Company's increased use of management consulting, engineering, legal and accounting professionals. For the years ended December 31, 1993 and 1994, research and development expenses were $69,256 and $178,146, respectively. The Company's expenses for research and development increased by $108,890 as the Company increased the scope of its research and development efforts to a number of product lines. Interest expense for the Company for the years ended December 31, 1993 and 1994 was $16,360 and $46,312, respectively. The Company's interest expense increased by $29,952 primarily as a result of $10,346 of additional interest expense with respect to equipment financing secured in September 1994 and $11,278 of additional interest expense with respect to notes payable. In the year ended December 31, 1993, the Company recognized a $18,000 loss on the disposal of property and equipment. As a result of the foregoing, the Company incurred net losses of $185,502 and $492,872 in the years ended December 31, 1993 and 1994, respectively. -17- LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company had a working capital deficiency of $(216,966) and cash and cash equivalents of $640,592. The Company intends to use the proceeds of this offering and the cash generated from operations, if any, to finance its proposed plan of operations. The capital requirements relating to implementation of the Company's business plan will be significant. Based on the Company's current assumptions relating to implementation of its business plan (including the timetable of and the cost associated with development of manufacturing capabilities, a service fleet, a corporate headquarters, and research and development facilities), the Company will seek to develop at least four service centers during the 12 months immediately following this offering. The Company believes that product sales will commence in the third quarter of 1996 and that the proceeds from the Convertible Notes are sufficient to fund working capital requirements until sales of the Company's products reach levels sufficient to fund working capital requirements. The Company believes that its ability to generate cash from operations is dependent upon, among other things, demand for its products and services and the Company's third party leasing arrangement with Oakmont. If the Company's third party leasing arrangements with Oakmont proves to be unsuccessful, and the Company is unable to locate another third party willing to provide comparable third party leasing services, the Company believes that it will be substantially dependent upon the proceeds of this offering to execute its proposed plan of operations over the next 12 months. If the Company's plans change, its assumptions prove to be inaccurate, the capital resources available to the Company otherwise prove to be insufficient to implement its business plan (as a result of unanticipated expenses, problems or difficulties, or otherwise) or in the event this offering is not completed, the Company has plans to restructure its operations to minimize cash expenditures and/or obtain additional financing in order to support its plan of operations. In order to reduce certain of the Company's up-front capital requirements associated with service center and service fleet development, the Company intends to lease service center sites and may seek to the extent possible, to lease rather than purchase certain equipment and vehicles necessary for service center development. There can be no assurance that the Company will have sufficient capital resources to permit the Company to fully implement its business plan. The Company has no current arrangements with respect to, or sources of, additional financing. There can be no assurance that any additional financing will be available to the Company on acceptable terms, or at all. If adequate funds are not available from additional sources of financing, the Company's business may be materially adversely affected. In addition, any implementation of the Company's business plan subsequent to the 12 month period immediately following this offering will require capital resources substantially greater than the proceeds of this offering or otherwise currently available to the Company. The Company's material commitments relate to its obligations to pay the contract manufacturers of its SystemOne(TM) Washers, make lease payments pursuant to certain real property and equipment leases and satisfy its financial obligations under three employment agreements. Upon consummation of this offering, the Company will not have any outstanding indebtedness. The Company anticipates that its material commitments will increase significantly upon the consummation of this offering as a result of the Company's planned expansion. See "Business-Manufacturing and Supply" and "-Properties" and "Executive Compensation." Additionally, under certain circumstances, the Company would be required to acquire the lessor's interest of First Recovery in certain leases entered into by First Recovery under a pilot marketing program. Because the Company does not intend to use third-party financing with respect to units leased under the pilot marketing program with First Recovery and Valvoline Oil Company, it will be required to use a portion of the proceeds of this offering to finance those units. See "Business-Marketing and Servicing Strategy." In August 1994, the Company acquired a Trumpf Model 200 TC Computer Numerical Controlled Punch Press (the "Punch Press"). The Company financed the acquisition of the Punch Press pursuant to a finance and security agreement with The CIT Group/Equipment Financing, Inc. ("CIT"). Pursuant to the terms of the finance agreement and security agreement, the Company has agreed to pay CIT an -18- aggregate of $341,397 in equal monthly payments of $5,690 over five years. The Company's obligations to CIT are secured by a security interest in the Punch Press. As indicated in the accompanying financial statements, as of June 30, 1996, the Company's accumulated deficit totalled $3,577,015. Since its inception, the Company has financed its operations through a variety of stock and debt issuances and conversions and the sale of property. In November 1990, the Company obtained from Pierre Mansur, its Chairman and President, all rights to certain ongoing research and development and related patents and patents pending, as well as certain real estate and equipment, in exchange for 2,000,000 shares of Common Stock. In January 1991, the Company issued $300,000 in principal amount of its 12% Promissory Notes (the "Promissory Notes"). To raise additional capital and refinance a portion of the Promissory Notes, in September 1993 the Company issued 580,000 shares of 12% Cumulative Redeemable Preferred Stock (the "First Series Preferred Stock") in exchange for $380,000 and the satisfaction of $200,000 in principal amount of the Promissory Notes. In April 1992, the Company sold the commercial property originally contributed to the Company in 1990 for $120,000 in cash and a $200,000 purchase money mortgage ("PMM"), which bore interest at a rate of 12%. In January 1994, the Company assigned its rights to receive interest with respect to the PMM to satisfy the Company's obligation to pay interest with respect to the remaining outstanding Promissory Note. The principal amount of the PMM was paid to the Company on April 24, 1995. In November 1994, the Company borrowed $500,000 pursuant to a 12% Secured Convertible Promissory Note (the "Secured Note") and in April 1995 the Company issued 490,000 shares of 12% Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") in exchange for $1,950,000 in cash and the satisfaction of the Secured Note. To minimize the Company's dividend obligations, in May 1995 the Company issued a notice of redemption with respect to the First Series Preferred Stock and, subsequently, all of the outstanding shares of First Series Preferred Stock and accrued interest thereon were converted into an aggregate 656,729 shares of Common Stock. In May 1996, the Company issued 20,000 shares of Common Stock in satisfaction of the remaining outstanding $100,000 in principal amount of the Promissory Notes. In June 1996, the Company issued 628,180 shares of Common Stock in exchange for all of the Series A Preferred Stock and accrued dividends thereon. Pursuant to a revolving line of credit dated June 1, 1990, Mr. Paul Mansur advanced the Company an aggregate of $150,000 (the "Debt") between June 1, 1990 and May 31, 1996. On December 31, 1994 and December 31, 1995, the Company paid Mr. Paul Mansur $34,814 and $12,000, respectively, in satisfaction of interest owed with respect to the Debt. On May 31, 1996, the Company paid Mr. Paul Mansur $150,000 and $5,000 in satisfaction of the outstanding principal balance of and the interest owed with respect to the Debt. In June 1996, the Company issued (the "Private Financing") $1,012,500 in principal amount of Convertible Notes, bearing interest at the rate of 4% per annum through September 30, 1996 and thereafter until maturity at the rate of 12% per annum, and convertible into Common Stock at a conversion price of $6.75 per share. Pursuant to the provisions of the Convertible Notes, the entire outstanding principal amount thereof will be automatically converted into 150,000 shares of Common Stock upon the consummation of this offering. Each of Environmental Technologies BVI, Limited, a consulting firm of which Dr. Jan Hedberg, a director of the Company, is Managing Director, Mr. Joseph E. Jack, a director of the Company, and Mr. Elias F. Mansur, a director of the Company, acquired Convertible Notes in the principal amount of $101,250, and, upon consummation of this offering, each of them will receive 15,000 shares of the Company's Common Stock pursuant to the automatic conversion thereof. -19- BUSINESS GENERAL The Company has developed and obtained patent protection with respect to a full line of self-contained, recycling industrial parts washers that incorporate innovative, proprietary waste minimization technologies and represent a significant advance over currently available machinery and processes. Focusing on waste minimization rather than its removal and recovery, the Company believes that its equipment will have a major impact on the industrial parts cleaning industry and will have a broad appeal to customers, because its equipment, unlike the machines now in use, facilitates efficient and economical compliance with environmental regulations, minimizes waste disposal requirements, enhances cleaning solution utilization, and increases worker safety and productivity. Most machinery and equipment require oil lubrication to function properly. Removal of lubrication oils from tools and parts during automotive, aviation, marine and general industrial maintenance, service and repair operations is typically effected through the use of mineral spirit solvents which become contaminated in the cleaning process. Under the most common current practice, the solvent becomes more contaminated (and less effective) with repeated use, and, when it is saturated with oil, sludge and other contaminants as a result of the cleaning process (and frequently classified as a hazardous waste under federal and state regulations), it must be stored on site until pick-up, when pure solvent is delivered and the contaminated solvent is, generally, shipped to regional refining facilities. This off-site recycling program is typically scheduled on four to sixteen week cycles and involves both the utilization of progressively more contaminated solvent for cleaning operations until the solvent is too contaminated for use, and thereafter, the on-site storage of the hazardous solution until the periodic waste recovery service. By contrast, the Company's products allow the use and re-use of the solvent by removing all the contaminants from the solvent within the cleaning unit itself, minimizing the volume of waste by-product and providing pure solvent to the customer on demand, without the costly and dangerous storage and transportation of hazardous waste. Moreover, the small amount of waste by-product yielded in the distillation process utilized by the Company's products can typically be recycled and/or disposed of together with the customer's used motor oil, which is generally not classified as a hazardous waste. Substantially all of the Company's target customers have established systems for the handling, transportation, recycling and disposal of used motor oil. The Company's products have been extensively tested and proven effective by independent engineering concerns and testing laboratories. STRATEGY The Company's strategy is to focus initially on the manufacture, marketing and sale of its SystemOne(TM) Washer because of the anticipated size of the market for the product. The Company anticipates that the product should be able to achieve fairly rapid market penetration because of its technological, economic and environmental advantages and its relatively low price point compared to competitive equipment. Once the manufacturing and marketing programs for the SystemOne(TM) Washer are fully implemented, it will commence marketing its other products for which it has continued its research and development. The Company hopes to rapidly penetrate the industrial parts cleaning market by entering into large quantity contracts with target customers which have already established a national or regional presence, and are able to exploit more fully the economic and environmental benefits of the Company's products. -20- The Company expects to pursue a national expansion program, through internal growth utilizing a network of regional distribution and service centers, through a strategic alliance with a national distributor, if one is available on favorable terms, or through a combination of the two. The Company is carrying out an internal growth program in Florida, where, in addition to its regional service center in Miami, it plans to establish at least four additional centers during the 12 months immediately following this offering, in Orlando, Tampa, Jacksonville and West Palm Beach. In August, the Company will commence a test of a strategic marketing alliance by entering into a pilot program with First Recovery and Valvoline Oil Company, two affiliates of Ashland Inc., a multinational oil refiner and distributor of automotive related products, including Valvoline Oil and Ashland 140 Solvent, one of the brands of mineral spirits solvent used in the Company's SystemOne(TM) Washer. Under the pilot program, First Recovery will be the exclusive distributor of the SystemOne(TM) Washer in the Dallas/Ft. Worth and Houston markets. The initial term of the program is one year. If the arrangement proves successful, the Company expects to negotiate a broader agreement, possibly including a national distribution program. The Company expects to continue its emphasis on research and development even after its initial products are commercialized. The Company believes that its technology and its emphasis on waste minimization should yield product advances with broad market applications beyond the Company's current target market. INDUSTRY OVERVIEW The Company believes the chemical industrial parts cleaning industry has grown primarily in response to the demand for means of removing lubrication oils and other contaminants from tools and parts during automotive, aviation, marine and general industrial maintenance, service and repair operations. Based on financial and trade journal reports, the Company believes that in 1996 businesses in the United States incurred more than $1 billion in expenses to clean industrial parts using chemical cleaning techniques. Industrial parts cleaning machines are used by automotive, aviation and maritime service, repair and rebuilding facilities, gas stations, transmission shops, parts remanufacturers, machine shops, and general manufacturing operations of every size and category requiring parts cleaning. The Company believes that the level of demand for the different types of industrial parts cleaning machines and services is and will continue to be a function of, among other things: (1) the effectiveness of the technology; (2) the cost of the machines and service; (3) the time and costs associated with documenting compliance with applicable environmental and other laws; (4) the safety and environmental risks associated with the machine and service; (5) customer service; and (6) the difficulty in handling the regulated substances used and/or generated by competitive machines. PRODUCTS AND SERVICES The Company product line includes a variety of self-contained recycling industrial cleaning and washing equipment, all of which incorporate proprietary waste minimization technology with respect to which the Company has obtained or applied for patent protection. The Company expects that all the products listed below will be available for commercial exploitation at various times prior to December 31, 1998. All of the Company's products utilize technology that (i) provides continuously recycled cleaning solution during the cleaning process, (ii) eliminates the necessity for continual replacement and disposal of contaminated cleaning solution and residues and (iii) facilitates practical and cost effective compliance with environmental laws and regulations. The Company anticipates that it will offer its various parts washing products to commercial users at prices which range from $2,000 to $25,000 per unit. -21- SYSTEMONE(TM) WASHER. The first of the Company's products to be available in commercial quantities is the SystemOne(TM) Washer. The SystemOne(TM) Washer line provides users with pure mineral spirit solvent for parts and tools cleaning purposes, utilizing a low-temperature vacuum distillation process to recycle the used solvent within the SystemOne(TM) Washer, so that the solvent may be reused, on demand, without any need for off-site processing. The SystemOne(TM) Washer minimizes the volume of waste by-product and eliminates the need for storage and disposal of the hazardous waste solvent necessitated by the most widely-used current treatment method. The Company's SystemOne(TM) Washer consists of one or two washing sinks mounted at standing level on top of a metal cabinet; a hinged lid on top of the washing sink to minimize evaporation of solvent; a five gallon primary solvent holding tank; a distillation unit which contains a residue reservoir; and a 30- gallon secondary solvent holding tank. The SystemOne(TM) Washer utilizes a manually operated hose and scrubber which directs the flow of solvent to the part being cleaned. The distillation unit separates the solvent from the contaminants that accumulate in the solvent as a result of use by heating the solvent solution in a vacuum to a temperature at which the solvent, but not the residue, vaporizes; and then, cooling the solvent vapor so that the vapor condenses and is converted back into a liquid. The distilled solvent is channeled to the secondary solvent holding tank for future use. Accordingly, the solvent may be repeatedly used, distilled and reused without need for off-site distillation or processing. The residue is collected and held in the residue reservoir until final disposal. With respect to SystemOne(TM) Washers which are used in accordance with their intended purpose, the Company believes that the residue may be legally recycled and/or disposed of in the same manner that used oil is recycled and/or disposed of. See "-Government Regulations." The Company believes that substantially all of its target customers currently have established systems for the handling, transportation, recycling and disposal of used oil. In those instances in which the residue may not be recycled as used oil, the residue, but not the distilled solvent, shall be periodically picked up, recycled and/or disposed of by a third party. The Company warrants to users that if, for any reason, the residue generated by its SystemOne(TM) Washer cannot be recycled and/or disposed of as used oil, the Company will pay for any required recovery and disposal services. The Company does not intend to be in the business of handling, transporting, recycling and/or disposal of residue. If it is required under its warranty to pay for recovery and disposal, it intends to retain a third party to provide the required services. The Company has also developed and obtained patent protection with respect to a general parts washer which utilizes an aqueous based cleaning solution. The Company is in the process of evaluating when it will commence the commercial production and marketing of its aqueous based parts cleaner. The target market for SystemOne(TM) Washers are automotive, aviation and maritime service, repair and rebuilding facilities, gas stations, transmission shops, parts remanufacturers, machine shops, and general manufacturing operations of every size and category requiring small parts cleaning. The Company anticipates that the SystemOne(TM) Washer will require service approximately four times a year for replacement of solvent lost to evaporation or spillage and general maintenance requirements. See "Marketing and Services Strategy" for additional information regarding the servicing of the SystemOne(TM) washers. -22- OTHER PRODUCTS. MULTIPROCESS POWER SPRAY WASHER is currently manufactured and marketed on a limited basis, and integrates three processes in one self-contained machine; a power spray wash process, a recycling/reclamation process and a thermal oxidation process. The Power Spray Washer is able to accommodate large and bulky parts or units that are too large for the SystemOne(TM) Washer. The target market for power spray washers are automotive, aviation and maritime maintenance, repair and rebuilding facilities, parts remanufactures, machine shops, transmission shops, and all facets of general manufacturing requiring maintenance and repair of mechanical equipment. MULTIPROCESS SPRAY GUN WASHER is scheduled for commercial introduction in late 1996. It incorporates the Company's recycling/reclamation capabilities for paint thinner recovery. The target market for spray gun washers are automotive, aviation and maritime paint shops and all general manufacturing operations that utilize paint. The Company anticipates that the auto paint industry will represent a substantial market. The MultiProcess Spray Gun Washer facilitates compliance with rigorous environmental disposal regulations for the paint industry. MULTIPROCESS IMMERSION WASHER is scheduled for commercial introduction in 1997. It integrates an immersion wash process, a recycling/reclamation process and a thermal oxidation process in one self-contained machine. The MultiProcess Immersion Washer is designed for cleaning of complex parts containing substantial integral and highly inaccessible passages requiring a total immersion washing. The primary target market for immersion washers are radiator rebuilding shops as well as automotive, aviation and maritime maintenance, repair and rebuilding facilities, parts remanufactures, machine shops, transmission shops, and all facets of general manufacturing requiring maintenance and repair of mechanical equipment. MINIDISPOSER is scheduled for commercial introduction in 1998. It is a compact and portable mini-thermal oxidizer developed as a practical and efficient means for the disposal of contaminants by thermal oxidation within a unit measuring only one cubic foot. The MiniDisposer will be marketed both as optional equipment with the SystemOne(TM) Washer and as a stand alone mini-thermal oxidizer. The Company believes that the size and scope of the market for the MiniDisposer is substantial and diversified and includes industrial, commercial and consumer applications that generate small contaminant waste by-products. The Company continues to explore potential markets in medical, restaurant and other commercial and consumer applications. COMPETITION The industrial parts cleaning industry is highly competitive and dominated by a large company, Safety-Kleen Inc. ("Safety-Kleen"), which has substantially greater financial and other resources than the Company. Safety-Kleen services the parts cleaning industry through a "closed-loop" recycling system in which contaminated solvent is removed for recycling and fresh solvent is delivered on a periodic basis. There can be no assurance that Safety-Kleen will not develop or acquire technology similar to or different from the Company's that would allow it to provide an on-site recycling service. To the best of the Company's knowledge, no other company is currently commercially marketing a recycling parts washer with comparable characteristics. There can be no assurance that Safety-Kleen or other competitors will not acquire or develop patent rights with respect to a recycling parts washer which are competitively superior to the Company's patent rights. See "-Patents, Trademarks and Proprietary Technology." The Company believes that certain of its target customers have attempted to enhance the capabilities of their existing industrial parts washers by acquiring machines capable of distilling solvent used in and removed from the parts washers. Although there are a wide variety and types of such -23- machinery currently available to the public, the Company believes its SystemOne(TM) Washers provide superior service at a lower cost. The Company believes that Safety-Kleen services a significant portion of the parts washing machines currently in use. Based upon market studies conducted by the Company, the Company believes that no other competitor accounts for more than 2% of the industrial parts washer market in the State of Florida or the United States. According to Safety-Kleen's Annual Report on Form 10-K for the year ended December 31, 1995 (the "Safety-Kleen Annual Report"), Safety-Kleen was the world's largest provider of parts washing services and one of the world's largest collectors and re-refiners of used oil. According to the Safety-Kleen Annual Report, at December 31, 1995, Safety-Kleen had Shareholders' Equity of approximately $433.0 million and, in the year ended December 31, 1995, Safety-Kleen had aggregate revenues of approximately $859.0 million, including revenues of approximately $240.0 million from its automotive/retail parts cleaning service and $119 million from its industrial parts cleaning service, and served its customers in North America and Europe through a network of 235 branch facilities. At December 31, 1995, Safety-Kleen was providing services for approximately 493,000 parts washers for customers in the United States, of which approximately 375,000 were owned by Safety-Kleen and 118,000 were owned by its customers. The Company believes that its SystemOne(TM) Washer will compete favorably with its competitors on the basis of, among other things, (1) the effectiveness of the technology; (2) cost; (3) the time and cost associated with documenting compliance with applicable environmental and other laws; (4) the safety and environmental risks associated with the machines and service; (5) customer service; and (6) the difficulty in handling the regulated substances used and/or generated by competitive machines. GOVERNMENT REGULATION The Company believes that federal and state laws and regulations have been instrumental in shaping the industrial parts washing industry. Federal and state regulations dictate and restrict to varying degrees what types of cleaning solvents may be utilized, how a solvent may be stored and utilized, and the manner in which contaminated solvents may be generated, handled, transported, recycled and disposed of. Although the federal and state laws and regulations discussed below regulate the behavior of the Company's customers, and not the Company, the Company believes that customer demand for its SystemOne(TM) Washer is partially a function of the legal environment in which the Company's customers conduct business. The Company's SystemOne(TM) Washer was designed to help minimize the cost of complying with existing federal and state environmental laws and regulations. Any changes, relaxation or repeal of the federal or state laws and regulations which have shaped the industrial parts washing industry may significantly affect demand for the Company's products and the Company's competitive position. REGULATION OF SOLVENT TYPES. Federal and state regulations have restricted the types of solvents that may be utilized in industrial parts cleaning machines. Prior to December 1995, methyl chloroform was a widely used cleaning solvent. The Clean Air Act of 1990 mandated the elimination of methyl chloroform by December 1995. REGULATION OF HANDLING AND USE OF SOLVENTS. Stoddard solvents, more commonly known as mineral spirits and solvent naphtha, are the cleaning solvents typically used in the industrial parts washers of the Company's closest competitors. The Company intends to use mineral spirits with a minimum of 140 degrees fahrenheit ignitable limits in its SystemOne(TM) Washer. Such mineral spirits do not exhibit the -24- ignitability characteristic for liquid hazardous wastes as defined in the Resource Conservation and Recovery Act of 1976, as amended, and the implementing regulations of that statute adopted by the United States Environmental Protection Agency (the "EPA") (collectively, "RCRA"). Certain machines of the Company's competitors use mineral spirits with lower ignitable limits, which may, after use, render such mineral spirits subject to regulation as a hazardous waste. The Company believes that the ability to recycle the mineral spirits used in its SystemOne(TM) Washer provides an economic benefit to the Company's customers by allowing them to avoid the expenses and potential liability associated with the disposal of such solvent as a hazardous waste. See "Government Regulation -Regulation of Generation, Handling, Transportation and Disposal of Contaminated Solvents." Federal, state and many local governments have adopted regulations governing the handling, transportation and disposal of such solvents. On the federal level, under the Hazardous Materials Transportation Act (HMTA), the United States Department of Transportation has promulgated requirements for the packaging, labeling and transportation of mineral spirits in excess of specified quantities. The Company does not intend to transport mineral spirits in quantities that would trigger the HMTA requirements. Relative to the handling and disposal of mineral spirits, many states and local governments have established programs requiring the assessment and remediation of hazardous materials that have been improperly discharged into the environment. Liability under such programs is possible for unauthorized release of mineral spirits in violation of applicable standards. Civil penalties and administrative costs may also be imposed for such violations. REGULATION OF GENERATION,TRANSPORTATION, TREATMENT, STORAGE AND DISPOSAL OF CONTAMINATED SOLVENTS. The generation, transportation, treatment, storage and disposal of contaminated solvents is regulated by the federal and state governments. At the federal level, the Resource Conservation and Recovery Act authorized the EPA to develop specific rules and regulations governing the generation, transportation, treatment, storage and disposal of hazardous wastes as defined by the EPA. The EPA's definition of hazardous waste appears under Chapter 40 CFR Part 261. The Company believes that none of the residue by-products, the used solvent before distillation or the solvent recycled in a SystemOne(TM) Washer used in accordance with its intended purpose and instructions is subject to regulation as a "hazardous waste." In contrast, the Company believes that the mixture of solvent and contaminants which is periodically recovered from the machines of many of its competitors is subject to regulation as "hazardous waste." The Company believes that the ability to recycle and dispose of its residue by-product as used oil rather than as a hazardous waste is economically attractive to the Company's customers for a number of reasons. The Company believes that substantially all of its target customers currently have established systems for the handling, transportation, recycling and/or disposal of used oil. Accordingly, the classification of the residue as used oil would enable the Company's customers to: (1) dispose of or recycle the residue at no significant additional cost; and (2) avoid certain costs associated with establishing and disposing of wastes in compliance with a hazardous waste disposal system. Even if the residue by-product was required to be handled, transported, recycled and/or disposed of as a hazardous waste, the fact that the SystemOne(TM) Washer effects a substantial reduction in the volume of waste product requiring disposal would still serve to minimize disposal costs. The Company believes that solvent which has been used and is being held in a SystemOne(TM) Washer prior to distillation is not a "waste" and is not subject to regulation as a hazardous waste. -25- RCRA establishes the basic framework for federal regulation of hazardous waste. RCRA governs the generation, transportation, treatment, storage, and disposal of hazardous waste. In contrast to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), which is discussed below, RCRA is designed to anticipate and prevent harm to human health and the environment, rather than to respond to the release of hazardous wastes. RCRA requires that facilities that generate, treat, store or dispose of hazardous wastes comply with certain operating and permitting standards. RCRA provides standards for permitting, maintenance and operation of facilities handling hazardous wastes, including requirements for testing and maintenance of equipment, contingency plans and emergency procedures, secondary containment, recordkeeping and reporting to government agencies. The recordkeeping and reporting requirements of RCRA are significant. Before transportation and disposal of hazardous wastes off-site, generators of such waste must package and label their shipments consistent with detailed regulations and prepare a manifest to be filed with the appropriate governmental agency identifying the material and stating its destination. The transporter must deliver the hazardous waste in accordance with the manifest and to a facility with an appropriate RCRA permit (a "TSD Facility"). Failure to comply with the manifesting requirements may result in the imposition of civil and/or criminal penalties. Many states and local governments have adopted regulatory programs which parallel the RCRA regulatory system, many of which programs are in certain ways more restrictive and burdensome than the RCRA system. With regard to regulation of "used oil", the EPA ruled in 1992 that used oil is not a hazardous waste under RCRA. Like the RCRA regulations pertaining to hazardous wastes, the EPA's used oil regulations provide standards for permitting, the maintenance and operation of used oil facilities, including requirements for testing and maintenance of equipment, contingency plans and emergency procedures, secondary containment, recordkeeping and reporting. However, there are some material differences between RCRA's regulation of hazardous waste and used oil. In contrast to hazardous wastes, used oil need not be processed solely at sites with treatment, storage and disposal permits. In addition, the generators of used oil are not required to file a shipping manifest with government agencies with respect to each shipment of used oil. Many state and local governments have adopted regulatory programs which parallel the EPA's program for regulating used oil, many of which programs are in certain ways more restrictive or burdensome than the EPA's program. For instance, certain state and local governments continue to regulate used oil as a hazardous waste. CERCLA, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), sets forth national policy and procedures for containing and removing releases of hazardous substances, and identifying and remediating sites contaminated with hazardous substances. CERCLA created an $8.5 billion fund (the "Superfund"), financed from taxes on petroleum and various chemicals, to be administered by the EPA to fund cleanup of hazardous waste sites. SARA significantly expanded the scope of hazardous waste cleanup and imposed more stringent cleanup requirements. The Superfund's most notable objective, however, is to provide criteria and financial assistance for site cleanups and to impose liability on parties responsible for such contamination - namely, owners and operators of vessels or facilities from which such releases occur, and persons who generated, transported, or arranged for the transportation of hazardous substances to a facility from which a release or threatened release occurs. Most states, including Florida, have created programs similar to Superfund. These state programs are principally designed to help finance the state's share of remediation costs of sites under the federal Superfund and to finance cleanups at state sites that are not considered a priority for remediation under the federal program. The CERCLA definition of hazardous substances provides a major exception for petroleum, including used oil if recycled. However, liability under CERCLA is possible if petroleum products are -26- released that contain hazardous substances as additives or that are tainted with hazardous substances during their use and disposal. The Company believes that the demand for its SystemOne(TM) Washer is enhanced as a result of certain federal and state environmental laws and regulations. Although the demand for industrial parts cleaning machines and services may be substantial in certain international markets, the level of demand for the Company's SystemOne(TM) Washer may not be substantial in certain countries as a result of permissive regulatory systems which allow the use of less environmentally stringent cleaning and waste disposal methods. MANUFACTURING AND SUPPLY The Company manufactures certain of its SystemOne(TM) Washers at its 10,000 square foot manufacturing facility located in Miami, Florida, at which all manufacturing operations, including design, metal cutting, bending and welding, painting and assembly can be performed. The Company has acquired all of the machinery necessary to manufacture SystemOne(TM) Washers. The Company believes that it can produce up to 200 SystemOne(TM) Washers a month at its manufacturing facility. The Company has secured third parties capable of manufacturing the balance of the SystemOne(TM) Washers needed to meet anticipated customer demand for the next 12 months. The Company intends to secure additional manufacturing capacity as the need arises. On May 7, 1996, the Company entered into an agreement (the "Supply Agreement") with a supplier (the "Supplier") pursuant to which the Supplier agreed to supply to the Company, at the Company's election, between 3,000 and 5,000 SystemOne(TM) Washers at established prices and in accordance with a delivery schedule. The Supply Agreement delivery schedule provides for the monthly delivery of a minimum of 100, 200, 300 and 400 SystemOne(TM) Washers in the quarters commencing August 1996, November 1996, February 1997 and May 1997, respectively, and for the monthly delivery of a maximum of 500 SystemOne(TM) Washers after December 1996. The Supply Agreement provides for adjustments in the established pricing schedule based upon certain reductions in the cost of production and/or increases in the cost of sheet metal. The Company has ordered a prototype SystemOne(TM) Washer manufactured by the Supplier and has paid the first of three $50,000 payments toward a $150,000 advance (the "Advance"), which amount will be credited against future purchases under the Supply Agreement at a rate of $50 per SystemOne(TM) Washer. The Supply Agreement provides that the Supplier will, based upon the Company's specifications and drawings, manufacture the SystemOne(TM) Washers in its factory and manufacture such items exclusively for the Company. According to the Supply Agreement, the Supplier is expressly responsible for all sheet metal fabrication, painting, assembling and quality assurance testing associated with the manufacture of SystemOne(TM) Washers. The Supply Agreement requires the Company to provide the Supplier with all of the components and raw materials, except for sheet metal, necessary to manufacture SystemOne(TM) Washers. In addition, the Supply Agreement requires the Company to acquire and provide to the Supplier for use all of the hard tooling required to manufacture the SystemOne(TM) Washers. The Supply Agreement provides that the Company may unilaterally terminate the contract in whole or in part for cause or for convenience. In the event the Supply Agreement is terminated by the Company for convenience, the Supplier will be entitled to reimbursement of the costs it has incurred through the date of termination and, if such termination occurs prior to the delivery of 3,000 SystemOne(TM) Washers, the Supplier will be entitled to payment for SystemOne(TM) Washers produced through the date of termination and retain any unapplied amount of the Advance. -27- The Company has retained the right to secure other contract manufacturers of SystemOne(TM) Washers. Although, at present, the Company seeks to avoid the transaction and opportunity costs associated with identifying, securing and training another SystemOne(TM) Washer manufacturer, the Company does not believe that it is dependent upon the Supplier to manufacture SystemOne(TM) Washers and that other manufacturers are readily available. The Company has entered into negotiations with a major contract manufacturer with a 2 million square foot facility and 75 years of experience to provide the manufacturing capacity needed to meet anticipated future customer demand. No assurances can be given that the Company and the major contract manufacturers will ever enter into a binding contract. The SystemOne(TM) Washer is an assembly of raw materials and components all of which the Company believes are readily obtainable in the United States of America. The Company does not believe that it nor the Supplier is dependent upon any of their respective current suppliers to obtain the raw materials and components necessary to assemble and manufacture SystemOne(TM) Washers. The Company is capable of manufacturing its other products in the amounts required for testing and test marketing in its own manufacturing facility. MARKETING AND SERVICING STRATEGY In order to create awareness of its products and test the demand for them, commencing in December 1995, the Company placed an aggregate of 47 SystemOne(TM) Washers in 38 automotive dealerships, municipal and private fleet maintenance facilities, repair facilities and other users of parts cleaning equipment in South Florida. The demonstrator units were provided at no charge. The test program was conducted primarily to enable the Company to gauge the demand for its products. Notwithstanding the absence of a formal marketing program during the test period, the Company has, to date, received orders from a number of facilities in which the machines were placed, including Florida Detroit Diesel MTU (46 Units); Kelly Tractor Company (23 units) and Pantropic Power Products (25 units), the South Florida Caterpillar dealers; United States Postal Service (2 units); Southern Sanitation, a subsidiary of Waste Management, Inc. (5 units); Broward County Mass Transit (25 units); and a number of South Florida automobile dealerships (an aggregate of 54 units). The Company commenced commercial sales and delivery of units in July 1996 at an approximate price per unit of $2,700. In a parallel marketing strategy, to test the viability of the strategic marketing alliance concept for its products, in August 1996 the Company will commence a pilot program with First Recovery and Valvoline Oil Company, two affiliates of Ashland Oil, pursuant to which First Recovery will serve as the exclusive distributor for the SystemOne(TM) Washer in the Dallas/Ft. Worth and Houston markets. The program, whose initial term is one year, but is cancelable by either party on 60 days notice, sets forth a schedule for the purchase of 1,000 units by First Recovery during the first year. First Recovery is obligated to provide routine service to customers. Upon termination of the program, First Recovery will have the option to require the Company to assume the leases it has entered into with its customers and to pay First Recovery, on a discounted basis, the profit it would have realized under such leases. If First Recovery does not exercise that option, it will have the additional option, for one year after termination of the program, to lease up to four times the number of units it leased under the program, but only to its existing customers. Subject to its assessment of First Recovery's performance, the Company will consider entering into a more extensive distribution agreement. The Company also intends to expand the geographic scope of its operations through its internal marketing operations, initially focusing on Florida and then expanding to other regions. In addition to its sales and service operations in Miami, the Company intends to establish sales, service and technical support service centers in Orlando, Tampa, Jacksonville and West Palm Beach, Florida during 1996 to support its proposed operations in Florida. The Company will market and service the SystemOne(TM) Washers it places with customers with its own marketing, service and technical support personnel. The -28- Company believes it will retain at least 15 marketing, service and technical support personnel to support its proposed operations in Florida over the next 12 months. The Company intends to continue to generate consumer awareness of its SystemOne(TM) Washer through the efforts of its sales force, general advertisements in trade publications, and participation in trade conventions. SALES FINANCING AND SERVICING PROGRAMS Initially, the Company intends to make its SystemOne(TM) Washers available to the public through a third party leasing program. The Company entered into an agreement (the "Product Financing Agreement") with Oakmont Financial Services ("Oakmont") on May 28, 1996 pursuant to which Oakmont agreed to provide third party leasing services. Pursuant to the Product Financing Agreement, the Company is to provide Oakmont certain information with respect to each proposed customer for which a third party lease is sought, including credit information with respect to each proposed lessee. Oakmont may reject a lease application if, in its sole discretion, the proposed transaction does not comply with Oakmont's then applicable criteria. If Oakmont elects to provide lease financing, Oakmont will purchase the SystemOne(TM) Washer in the manner and for an amount agreed to by the Company and Oakmont from time to time, upon Oakmont's receipt of required documentation. The Product Financing Agreement provides that, upon the customer's satisfaction of all of its lease payment obligations to Oakmont, the Company may, at its option, repurchase the subject equipment from Oakmont at a cash purchase price equal to the fair market value of the subject equipment plus applicable sales tax. The Product Financing Agreement states that the fair market value of a SystemOne(TM) Washer shall be determined by the mutual agreement of the Company and Oakmont or, if such an agreement is not reached, by an appraiser selected by mutual agreement of the Company and Oakmont. Under the Product Financing Agreement, the Company has agreed, for a fee, to utilize a reasonable and non-discriminatory approach to assist Oakmont in reselling any SystemOne(TM) Washers with respect to which a customer has failed to discharge its payment obligations to Oakmont. The Product Financing Agreement states that Oakmont does not have recourse against the Company for customer failures to discharge their obligations to Oakmont unless the Company has breached and failed to cure certain warranties. In such event, the Product Financing Agreement requires the Company to purchase from Oakmont the SystemOne(TM) Washer and Oakmont's rights under the financing agreements with the customer for an amount equal to the sum of all lease payments then due and owing under the lease, all lease payments payable from the date of default to the end of the lease term and twenty percent of the equipment cost, less any applicable deposit which may be retained by Oakmont. Where required by applicable law, the foregoing amounts are required to be calculated using the discounted present value of the subject lease payments. The Product Financing Agreement provides for a term of one year, which automatically renews for successive one-year terms. Under the Product Financing Agreement, either the Company or Oakmont may terminate the agreement with or without cause upon 60 days notice, without affecting the rights and obligations of either party with respect to previous sales. In addition, if Oakmont declines any five lease applications within a 30-day period, which lease applications are accepted and funded by a third party on terms declined by Oakmont, the Company may, upon 10 days notice, terminate the Product Financing Agreement. -29- PATENTS, TRADEMARKS AND PROPRIETARY TECHNOLOGY The Company holds United States patents relating to its SystemOne(TM) Washer, Power Spray Washer, Spray Gun Washer and Immersion Washer and anticipates that it will apply for additional patents it deems appropriate. The Company has applied for international patents in Canada, Japan, Europe and Mexico. The Company's patent with respect to its SystemOne(TM) Washer was issued on September 27, 1994 and will expire on September 26, 2011. The Company has three patents pending with respect to its SystemOne(TM) Washer, one of which was allowed by the U.S. Patent Office on April 2, 1996 and is awaiting issuance. The Company's patent with respect to its Power Spray Washer was issued on January 11, 1994, and expires on January 10, 2011. The Company's patent with respect to its Spray Gun Washer was issued on February 14, 1995, and expires on February 13, 2012. The Company's patent with respect to its Immersion Washer was issued on May 21, 1996 and expires on May 20, 2013. The Company's patent with respect to its MiniDisposer was allowed by the U.S. Patent Office on June 26, 1996 and is awaiting issuance. The Company believes that patent protection is important to its business. There can be no assurance as to the breadth or degree of protection which existing or future patents, if any, may afford the Company, that any patent applications will result in issued patents, that patents will not be circumvented or invalidated or that the Company's competitors will not commence marketing self-contained washers with similar technology. It is possible that the Company's existing patent rights may not be valid although the Company believes that its patents and products do not and will not infringe patents or violate proprietary rights of others. It is possible that infringement of existing or future patents or proprietary rights of others may occur. In the event the Company's products or processes infringe patents or proprietary rights of others, the Company may be required to modify the design of its products or obtain a license. There can be no assurance that the Company will be able to do so in a timely manner, upon acceptable terms and conditions or at all. The failure to do any of the foregoing could have a material adverse effect upon the Company. In addition, there can be no assurance that the Company will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation actions. Moreover, if the Company's product or processes infringes patents or proprietary rights of others, the Company could, under certain circumstances, become the subject of an immediate injunction and be liable for damages, which could have a material adverse effect on the Company. The Company has applied for a federal trademark with respect to the mark "SystemOne" and design. The Company also relies on trade secrets and proprietary know-how and employs various methods to protect the concepts, ideas and documentation of its proprietary information. However, such methods may not afford complete protection and there can be no assurance that others will not independently develop such know-how or obtain access to the Company's know-how, concepts, ideas and documentation. Although the Company has and expects to have confidentiality agreements with its employees, suppliers and appropriate vendors, there can be no assurance that such arrangements will adequately protect the Company's trade secrets. Since the Company believes that its proprietary information is important to its business, failure to protect such information could have a material adverse effect on the Company. RESEARCH AND DEVELOPMENT During the years ended December 31, 1994 and 1995 and the six months ended June 30, 1996, the Company expended $178,146, $393,874 and $365,435, respectively, on research and development of its various products. -30- The Company plans to continue to focus significant resources on research and development of existing and future product lines. Although the Company intends to continue to seek means of refining and improving its SystemOne(TM) Washer, the Company believes, based on market response, that the SystemOne(TM) Washer is at a stage where commercial exploitation is appropriate. The Company recognizes that the industrial parts cleaning industry may be entering a phase of rapid technological change and progress and the Company will seek to retain what the Company perceives as its technological superiority over its competitors' products. In order to keep pace with the rate of technological change, the Company intends to devote considerable resources in time, personnel and funds on continued research and development for its products. The Company recognizes that many of its competitors have far greater financial and personnel resources than the Company which may be devoted to research and development and can provide no assurance that it will maintain a technological advantage. Subject to the availability of financial and personnel resources, the Company intends to spend approximately $400,000 and $500,000 in the years ended December 31, 1996 and 1997, respectively, to finalize development and testing of its various products and to develop new products and concepts. Although there can be no assurance that the Company will ever develop any new products capable of commercialization, the Company intends to continue its programs to develop new products, some of which may utilize the Company's patented products and processes. PRODUCT LIABILITY AND INSURANCE The Company is subject to potential product liability risks which are inherent in the design and use of industrial parts cleaning machines. The Company has implemented strict quality control measures and currently maintains product liability insurance of $5,000,000 in the aggregate and $5,000,000 per occurrence. PROPERTIES The Company maintains its corporate headquarters, research and development laboratory and manufacturing facilities in a 10,000 square foot building located in Miami, Florida 33156, under a two year lease which commenced on January 1, 1995. The lease provides for two renewal terms of two years. The Company's annual lease payment approximates $61,000, which amount does not include the Company's responsibility to pay all charges for gas, water, sewer, trash collection and electrical services. The Company intends to seek additional space, either at its current location or elsewhere, to house expanded corporate headquarters and research and development facilities. The Company anticipates no significant difficulty in locating such space or reasonable terms. The Company does not anticipate that it will experience difficulty in locating and equipping its regional sales and service centers, which are expected to contain a small office space/showroom area and enough space for two or three delivery and maintenance vehicles. LEGAL PROCEEDINGS The Company is not involved in any litigation. EMPLOYEES As of the date of this Prospectus, the Company employed 15 employees, of whom four were in corporate management, three were in research and development, two were in sales and marketing, four were in manufacturing, and two were in administration. The Company intends to hire additional employees after this offering, commensurate with the Company's requirements and available funds, primarily to expand manufacturing and marketing operations. -31- MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth certain information concerning the executive officers and directors of the Company. NAME AGE POSITION WITH COMPANY - ---- --- --------------------- Pierre G. Mansur 44 Chairman of the Board and President Paul I. Mansur 45 Director, Chief Executive Officer and Chief Financial Officer Charles W. Profilet 59 Vice President-Business Development Lydia G. Hubbell 31 Controller Elias F. Mansur 53 Director Dr. Jan Hedberg 49 Director Joseph E. Jack 68 Director - ------------------- PIERRE G. MANSUR founded the Company and has served as its Chairman and President since its inception in November 1990. From June 1973 to August 1990, Mr. Pierre Mansur served as President of Mansur Industries Inc., a privately held New York corporation that operated a professional race engine machine shop. Mr. Pierre Mansur has over twenty years of advanced automotive and machinery operations experience including developing innovative automotive machine shop applications; designing, manufacturing, customizing, modifying and retooling high performance engines and component parts; developing state of the art automotive and powerboat race engines which have consistently achieved world championship status; and providing consulting services and publishing articles with respect to automotive technical research data. Mr. Pierre Mansur has conducted extensive research and development projects for several companies, including testing and evaluating engine parts and equipment for Direct Connection, a high performance racing division of the Chrysler Corporation; researching and developing specialized engine piston rings and codings for Seal Power Corporation; researching high-tech plastic polymers for internal combustion engines for ICI Americas; and designing and developing specialized high performance engine oil pan applications. Mr. Pierre Mansur is the brother of Paul I. Mansur and a cousin of Elias F.Mansur. Mr. Pierre Mansur is a graduate of the City University of New York. PAUL I. MANSUR has been Chief Executive Officer, Chief Financial Officer and a Director since September 1993. From September 1986 to July 1993, Mr. Paul Mansur served as Chief Executive Officer of Atlantic Entertainment Inc., a privately held regional retail chain of video superstores. From March 1981 to September 1986, Mr. Paul Mansur served as the Chief Executive Officer and President of Ameritrade Corporation, a privately held international distributor of factory direct duty free products. From June 1972 to March 1981, Mr. Paul Mansur held various finance and operation positions, including Assistant Vice President Finance and Operations for Mott's USA, Inc., a division of American Brands. Mr. Paul Mansur is the brother of Pierre G. Mansur and a cousin of Elias F. Mansur. Mr. Paul Mansur is a graduate of the City University of New York. CHARLES W. PROFILET has been the Vice President - Business Development of the Company since November 1995. From July 1992 to September 1995, Mr. Profilet served as Vice President - Florida -32- Operations for Rust Environment and Infrastructure, Inc., a privately held environmental remediation company that is controlled by WMX Technologies, a publicly traded waste collection and recycling company traded on the New York Stock Exchange. From March 1991 to July 1992, Mr. Profilet served as Vice President-Marketing at Metcalf and Eddy, a full-service engineering and environmental consulting firm specializing in the treatment of waste water, air quality assurance, emissions control and remedial design. From July 1987 to February 1990, Mr. Profilet served as Executive Vice President and Chief Operating Officer at Craig A. Smith and Associates, a privately-held civil engineering firm. From August 1979 to September 1985, Mr. Profilet served as Vice President- Business Development at Reynolds Smith and Hills, a privately-held architectural and engineering planning firm. Mr. Profilet is a graduate of the U.S. Military Academy at West Point and holds a Master of Engineering degree from the University of Oklahoma. LYDIA G. HUBBELL, C.P.A. has been the Controller of the Company since April 1995. From August 1994 until March 1995, Ms. Hubbell served as an internal auditor for American Savings of Florida, F.S.B. From September 1992 to August 1994, Ms. Hubbell worked with KPMG Peat Marwick LLP during which period she became the senior accountant with respect to the Company's audits. Ms. Hubbell is a graduate of the University of Florida and holds a Master of Accounting degree from the University of Florida. ELIAS F. MANSUR has been a Director of the Company since August 1995. From September 1968 to present, Mr. Elias Mansur served as Managing Director of the Mansur Trading Company and its subsidiaries, an international, diversified group of companies involved in banking, international trade, manufacturing, real estate and hotel operations. From June 1975 to March 1981, Mr. Elias Mansur served as Chairman of the Board of the Central Bank of the Netherlands Antilles. From September 1984 to December 1985, Mr. Elias Mansur served as Minister of Economic Affairs of the Netherlands Antilles. From October 1977 to September 1984, Mr. Elias Mansur served as the Chief Economic Advisor, Minister of Economic Affairs and Chairman of the Council of Economic Advisors to the government of Aruba. Mr. Elias Mansur is a cousin of Mr. Pierre Mansur and Mr. Paul I. Mansur. DR. JAN HEDBERG has been a Director of the Company since August 1995. From October 1987 to March 1993, Dr. Hedberg was the Chairman and Chief Executive Officer of Enprotec International Group, N.V., a company he co-founded and in the business of researching and developing of advanced waste oil recycling technologies. Since March 1993, Dr. Hedberg has been the Chairman of the Board and Chief Executive Officer of Enprotec (USA) Inc., a wholly owned subsidiary of Enprotec International Group, N.V., which manufactures, designs and assembles oil re-refining plants. Dr. Hedberg was the co-recipient of the 1991 International Technology Award for Enterprising Innovation and Creativity for the development of the Vaxon Re-refining Process, which is a proprietary process that transforms used oil into useable oil products. Dr. Hedberg has over 15 years of experience in oil related and environmental companies and 12 years of research and teaching experience, including executive management and advisory positions, with several multinational organizations. Dr. Hedberg received his Doctor of Philosophy (PhD) in Geotechnical Engineering from the Massachusetts Institute of Technology, Cambridge, Massachusetts in 1977. JOSEPH E. JACK has been a Director of the Company since August 1995. From May 1989 to June 1991, Mr. Jack served as Vice President of Waste Management Europe, a waste collection and recycling company that is a publicly traded company on the London Stock Exchange and a controlled subsidiary of WMX Technologies, a publicly traded New York Stock Exchange company. From April 1984 to December 1987, Mr. Jack was President of Waste Management Inc. of Florida, a waste collection and recycling company that is an affiliate of Waste Management, Inc.. From July 1983 to March 1984, Mr. Jack served as Vice President of Waste Management Partners, a division of Waste Management, Inc. From February 1982 to July 1983, Mr. Jack served as Vice President of Waste Management International, a subsidiary of Waste Management, Inc. From April 1980 to February 1982, Mr. Jack was Vice President of Waste -33- Management International (Middle East), a subsidiary of Waste Management, Inc., and from May 1978 to April 1980, Mr. Jack was the Resident Manager of Waste Management Saudi Arabia, a joint venture involving an affiliate of Waste Management, Inc. Under Mr. Jack's leadership, Waste Management experienced unprecedented growth in several markets worldwide including Waste Management Europe's growth of revenues from $10 million to $700 million in a three year period. Mr. Jack's significant accomplishments in the waste management field were acknowledged when he was inducted by the National Waste Management Association into the United States Waste Industry's "Hall of Fame". Mr. Jack has been an active investor in companies since he retired in June 1991. The Company has agreed that, for five years after the effective date of this Prospectus, the Representative will have the right to designate one individual to be elected to the Company's Board of Directors. -34- EXECUTIVE COMPENSATION The following table sets forth compensation paid or payable in respect of the three years ended December 31, 1995 to the Company's Chief Executive Officer and its other executive officer whose combined salaries and bonuses equalled or exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE LONG TERM ANNUAL COMPENSATION COMPENSATION --------------------------------------------------- ----------------- OTHER ANNUAL ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) COMPENSATION - ---------------------------- ------ -------- ------- --------------- -------------- Mr. Pierre G. Mansur, Chairman and 1995 $66,000 $267,460(1) $6,605(2) $0 President 1994 $66,000 $0 $ 550(2) $0 1993 $22,000 $0 $0 $0 Mr. Paul I. Mansur, Chief Executive 1995 $48,000 $0 $2,550(2) $0 Officer 1994 $48,000 $0 $0 $0 1993 $5,000 $0 $0 $0 - ------------------ (1) Represents incentive compensation earned by Pierre G. Mansur, $88,110 of which has been paid and the remainder of which has been accrued. (2) Automobile allowance paid by the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS In September 1993, the Company entered into a two year employment agreement with Mr. Pierre Mansur, which provides for an annual base salary of $66,000 and discretionary bonuses, based on Mr. Pierre Mansur's performance, as determined by the Compensation Committee of the Board of Directors. Pursuant to the terms of his employment contract, Mr. Mansur's employment was renewed in September 1995 by the Company for an additional two years. Pursuant to the employment agreement, during the term of Mr. Pierre Mansur's employment and for a period of three years following his termination of employment, Mr. Pierre Mansur is prohibited from disclosing any confidential information, including without limitation, information regarding the Company's patents, research and development, manufacturing process or knowledge or information with respect to confidential trade secrets of the Company. In addition, the employment agreement provides that Mr. Pierre Mansur is prohibited from, directly or indirectly, engaging in any business in substantial competition with the Company or its affiliates. The employment agreement also provides that Mr. Pierre Mansur is prohibited from becoming an officer, director or employee of any corporation, partnership or any other business in substantial competition with the Company or its affiliates during the term of his employment and for three years thereafter. In September 1995, the Company entered into a two year employment agreement with Mr. Paul Mansur, which provides for an annual base salary of $48,000 and discretionary bonuses, based on Mr. Paul Mansur's performance, as determined by the Compensation Committee of the Board of Directors. Pursuant to the employment agreement, during the term of Mr. Paul Mansur's employment and for a period of three years following his termination of employment, Mr. Paul Mansur is prohibited from disclosing any confidential information, including without limitation, information regarding the Company's patents, research and development, manufacturing process or knowledge or information with respect to confidential trade secrets of the Company. In addition, the employment agreement provides that Mr. Paul Mansur is -35- prohibited from, directly or indirectly, engaging in any business in substantial competition with the Company or its affiliates. The employment agreement also provides that Mr. Paul Mansur is prohibited from becoming an officer, director or employee of any corporation, partnership or any other business in substantial competition with the Company or its affiliates during the term of his employment and for three years thereafter. In November 1995, the Company entered into a one year employment agreement with Charles W. Profilet. Under the employment agreement, Mr. Profilet is entitled to an annual base salary of $80,000, a car allowance of $400 a month and monthly commissions, ranging from $5 per unit for parts washers to $25 per unit for jet washers, with respect to each new washer sold by the Company in the United States. The commissions earned by Mr. Profilet may be converted, at his option, into Common Stock at a discount on the then current trading price of the Common Stock. The conversion discount was 10% as of the date of this Prospectus, but, may be adjusted at the election of the Board of Directors of the Company. As of the date of this Prospectus, Mr. Profilet had earned an aggregate of $12,250 of commissions. The employment agreement provides that Mr. Profilet is eligible to participate in the Company's discretionary executive profit sharing awards and executive stock award or stock option awards. Pursuant to the employment agreement, if Mr. Profilet is terminated for cause, defined as an act of dishonesty, malfeasance, or other impropriety, he is not entitled to receive any severance payment. If Mr. Profilet is terminated without cause within his first year of employment, he is entitled to receive his current salary for six months or until he secures new employment, whichever occurs first. In addition to the employment agreement, the Company and Mr. Profilet entered into a Non-Circumvention and Non-Disclosure Agreement. INCENTIVE COMPENSATION PLAN The Company's 1996 Executive Incentive Compensation Plan (the "Incentive Plan") provides for grants of stock options, stock appreciation rights ("SARS"), restricted stock, deferred stock, other stock related awards and performance or annual incentive awards that may be settled in cash, stock or other property (collectively, "Awards"). The total number of shares of Common Stock that may be subject to the granting of Awards under the Incentive Plan at any time during the term of the Plan shall be 375,000. The Employee Plan is designed to serve as an incentive for retaining qualified and competent employees, directors, consultants and independent contractors of the Company. The persons eligible to receive Awards under the Incentive Plan are the officers, directors, employees and independent contractors of the Company, if any, and its subsidiaries. No director of the Company who is not an employee of the Company or any subsidiary (a "non-employee director") will be eligible to receive any Awards under the Incentive Plan other than automatic formula grants of stock options and restricted stock as described below, and no independent contractor will be eligible to receive any Awards other than stock options. The Incentive Plan is required to be administered by a committee designated by the Board of Directors consisting of not less than two directors (the "Committee"), each member of which must be a "disinterested person" as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an "outside director" for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Compensation Committee of the Board has been appointed as the Committee for the Incentive Plan. Subject to the terms of the Incentive Plan, the Committee is authorized to select eligible persons to receive Awards, determine the type and number of Awards to be granted and the number of shares of Common Stock to which Awards will relate, specify times at which Awards will be exercisable or settleable (including performance conditions that may be required as a condition thereof), set other terms and conditions of Awards, prescribe forms of Award agreements, interpret and specify rules and regulations relating to the Incentive Plan, and make any other determinations that may be necessary or advisable for the administration of the Incentive Plan. -36- In addition, the Incentive Plan imposes individual limitations on the amount of certain Awards in part to comply with Code Section 162(m). Under these limitations, during any fiscal year the number of options, SARS, restricted shares of Common Stock, deferred shares of Common Stock, shares as a bonus or in lieu of other Company obligations, and other stock-based Awards granted to any one participant may not exceed 250,000 for each type of such Award, subject to adjustment in certain circumstances. The maximum amount that may be paid out as a final annual incentive Award or other cash Award in any fiscal year to any one participant is $1,000,000, and the maximum amount that may be earned as a final performance Award or other cash Award in respect of a performance period by any one participant is $5,000,000. The Incentive Plan provides that each non-employee director shall automatically receive (i) on the date of his or her appointment as a director of the Company, an option to purchase 2,500 shares of Common Stock, and (ii) each year, on the day the Company issues its earnings release for the prior fiscal year, an option to purchase 2,500 shares of Common Stock. Such options will have a term of 10 years and become exercisable at the rate of 33-1/3% per year commencing on the first anniversary of the date of grant; provided, however, that the options will become fully exercisable in the event that, while serving as a director of the Company, the non-employee director dies, or suffers a "disability," or "retires" (within the meaning of such terms as defined in the Incentive Plan). The per share exercise price of all options granted to non-employee directors will be equal to the fair market value of a share of Common Stock on the date such option is granted. The Company will agree with the Representative that for a 13-month period immediately following the effective date of the Registration Statement of which this Prospectus forms a part, the Company will not, without the consent of the Representative, adopt or propose to adopt any plan or arrangement permitting the grant, issue or sale of any shares of its Common Stock or issue, sell or offer for sale any of its Common Stock, or grant any option for its Common Stock which shall: (x) have an exercise price per share of Common Stock less than (a) the initial public offering price of the Common Stock offered in this Prospectus or (b) the fair market value of the Common Stock on the date of grant; or (y) be granted to any direct or indirect beneficial holder of more than 10% of the issued and outstanding Common Stock of the Company. No option or other right to acquire Common Stock granted, issued or sold during the 13- month period immediately following the effective date of the Registration Statement of which this Prospectus forms a part shall permit (a) the payment with any form of consideration other than cash, (b) the payment of less than the full purchase or exercise price for such shares of Common Stock or other securities of the Company on or before the date of issuance, or (c) the existence of stock appreciation rights, phantom options or similar arrangements. The Company has not granted any Award under the Incentive Plan. COMPENSATION OF DIRECTORS After this offering, the Company will pay each director who is not an employee an annual retainer of $10,000. The Company will reimburse all directors for all travel-related expenses incurred in connection with their attendance at meetings of the Board of Directors. Directors will also be entitled to receive options under the Incentive Plan. See "Incentive Compensation Plan." Mr. Elias Mansur, Dr. Jan Hedberg and Mr. Joseph Jack were each granted 10,000 shares of the Company's Common Stock in April 1996 in exchange for previously rendered consulting services. -37- COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; AUDIT COMMITTEE The Board of Directors currently administers and determines compensation, including salary and bonus for the executive officers, directors and other employees. The Company intends to establish an Audit Committee and a Compensation Committee shortly after the closing of this offering. The Compensation Committee will be responsible for setting and administering policies that govern annual compensation of the Company's executive officers and administering the 1996 Stock Option and Incentive Plan and the Directors' Plan. The duties and responsibilities of the Audit Committee will include (i) recommending to the full Board the appointment of the Company's auditors and any termination of their appointment, (ii) reviewing the plan and scope of audits, (iii) reviewing the Company's significant accounting policies and internal controls, (iv) administering the Company's compliance programs, and (v) general responsibility for all related auditing matters. CERTAIN TRANSACTIONS COMMON STOCK OWNERSHIP In connection with the organization of the Company in November 1990, the Company issued 2,000,000 shares of Common Stock, par value $0.001 per share, to Mr. Pierre Mansur in exchange for the assignment to the Company of (i) certain ongoing research and development and rights to any related patents and patents pending, and (ii) real estate and equipment valued at $52,000. CONSULTING AGREEMENT AND SERVICES In November 1994, the Company entered into a two-year consulting agreement (the "Consulting Agreement") with Environmental Technologies BVI Limited (the "Consultant"). Pursuant to the Consulting Agreement, the Consultant agreed to advise, consult with, introduce to third parties and generally assist the Company in its efforts to explore new manufacturing and marketing arrangements. In exchange for such services, the Consulting Agreement provided that the Consultant was entitled to receive certain fees in connection with the sale of certain equipment, services, license rights, royalty rights, manufacturing rights, marketing rights or the Company's entrance into a partnership or joint venture arrangement or consummation of a merger. The Consultant did not receive any commissions pursuant to the Consulting Agreement. In December 1995, the Company issued the Consultant 10,000 shares of Common Stock in exchange for the services rendered by the Consultant and to secure the Consultant's agreement to terminate the Consulting Agreement and any and all associated rights of the Consultant. Dr. Jan Hedberg, a director of the Company, owns 50 percent and serves as the managing director of the Consultant. Mr. Elias Mansur, Dr. Jan Hedberg and Mr. Joseph Jack were each granted 10,000 shares of the Company's Common Stock in April 1996 in exchange for previously rendered consulting services. NOTE PAYABLE TO CHIEF EXECUTIVE OFFICER Pursuant to a revolving line of credit dated June 1, 1990, Mr. Paul Mansur made a series of advances ranging from $5,000 to $30,000, totaling an aggregate of $150,000 (the "Debt"), to the Company between June 1, 1990 and May 31, 1996. On December 31, 1994 and December 31, 1995, the Company paid Mr. Paul Mansur $34,814 and $12,000, respectively, in satisfaction of interest owed with respect to the Debt. On May 31, 1996, the Company paid Mr. Paul Mansur $150,000 and $5,000 in satisfaction of the outstanding principal balance of and the interest owed with respect to the Debt. -38- CONVERTIBLE NOTES In connection with its issuance of an aggregate of $1,012,500 in principal amount of Convertible Notes in June 1996, the Company issued promissory notes in the principal amount of $101,250 to each of Environmental Technologies BVI Limited, a consulting firm of which Dr. Jan Hedberg, a director of the Company, is Managing Director, Mr. Joseph E. Jack, a director of the Company, and Mr. Elias F. Mansur, a director of the Company. Upon consummation of this offering, each of the Convertible Notes will be automatically converted into 15,000 shares of the Company's Common Stock. Mr. Mansur, Mr. Jack and Environmental Technologies BVI Limited acquired the Convertible Notes on the same terms as other unaffiliated investors. -39- PRINCIPAL SHAREHOLDERS The following table sets forth certain information concerning the beneficial ownership of the Common Stock immediately prior to this offering, and as adjusted to reflect the sale of shares offered by this Prospectus, by: (i) each person known by the Company to be the beneficial owner of more than 5% of the Common Stock, (ii) each Director or nominee for Director of the Company, (iii) each of the Named Executive Officers and (iv) all Directors and Executive Officers of the Company as a group.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED PRIOR OWNED TO THIS OFFERING AFTER THIS OFFERING ---------- ---------- --------------- ----------- NAME NUMBER PERCENTAGE NUMBER PERCENTAGE - ---------------------------------------- ---------- ---------- --------------- ----------- Mr. Pierre G. Mansur..................... 2,000,000 59.68% 2,000,000 46.01% Mr. Paul I. Mansur....................... 0 * 0 * Mr. Elias F. Mansur...................... 26,025 * 41,025(2) * Dr. Jan Hedberg.......................... 20,000(1) * 35,000(1)(2) * Mr. Joseph E. Jack....................... 22,820 * 37,820(2) * Mr. Charles W. Profilet.................. 0 * 0 * All Directors and Executive Officers as a Group (6 persons)...... 2,068,845(3) 61.64% 2,113,845(3) 48.6% - ---------------------- * Less than 1% (1) Includes 10,000 shares of Common Stock held by Environmental Technologies BVI Limited, of which Dr. Hedberg owns 50 percent and serves as the Managing Director. (2) Includes 15,000 shares of Common Stock issuable upon the conversion of a Convertible Note in the principal amount of $101,250, which conversion shall occur simultaneously with the consummation of this offering. (3) See Notes (1) - (2).
DESCRIPTION OF CAPITAL STOCK The Company's authorized capital stock consists of 25,000,000 shares of Common Stock, $.001 par value per share, and 1,500,000 shares of Preferred Stock, $1.00 par value per share. As of the date of this Prospectus, 3,351,309 shares of Common Stock and 0 shares of Preferred Stock are outstanding. COMMON STOCK Each outstanding share of Common Stock is entitled to one vote on all matters submitted to a vote of shareholders. Subject to the restrictions summarized below, dividends may be paid to the holders of Common Stock when and if declared by the Board of Directors out of funds legally available for dividends. See "Dividend Policy." Holders of Common Stock have no conversion, redemption, or preemptive rights. All outstanding shares of Common Stock are fully paid and nonassessable. In the event of any liquidation, dissolution or winding up of the affairs of the Company, the holders of Common Stock will be entitled to share ratably in its assets remaining after provision for payment of creditors and holders of Preferred Stock. See "Dividend Policy." -40- PREFERRED STOCK The Company is authorized to issue Preferred Stock with such designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors is empowered, without shareholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the value or market price of the Common Stock and voting power or other rights of the holders of Common Stock. In the event of issuance, the Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. ANTI-TAKEOVER PROVISIONS OF FLORIDA LAW Florida has enacted legislation that may deter or frustrate takeovers of Florida corporations. The "Control Share Acquisitions" section of the Florida Business Corporation Act ("FBCA") generally provides that shares acquired in excess of certain specified thresholds, beginning at 20% of the Company's outstanding voting shares, will not possess any voting rights unless such voting rights are approved by a majority vote of a corporation's disinterested shareholders. The "Affiliated Transactions" section of the FBCA generally requires majority approval by disinterested directors or supermajority approval of disinterested shareholders of certain specified transactions (such as a merger, consolidation, sale of assets, issuance of transfer of shares or reclassifications of securities) between a corporation and a holder of more than 10% of the outstanding voting shares of the corporation, or any affiliate of such shareholder. The directors of the Company are subject to the "general standards for directors" provisions set forth in the FBCA. These provisions provide that in discharging his or her duties and determining what is in the best interests of the Company, a director may consider such factors as the director deems relevant, including the long-term prospects and interests of the Company and its shareholders and the social, economic, legal or other effects of any proposed action on the employees, suppliers or customers of the Company, the community in which the Company operates and the economy in general. Consequently, in connection with any proposed action, the Board of Directors is empowered to consider interests of other constituencies in addition to the Company's shareholders, and directors who take into account these other factors may make decisions which are less beneficial to some, or a majority, of the shareholders than if the law did not permit consideration of such other factors. CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK The authorized but unissued shares of Common Stock and Preferred Stock are available for future issuance without shareholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Common Stock and Preferred Stock may enable the Board of Directors to issue shares to persons friendly to current management which could render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender offer, merger, or otherwise, and thereby protect the continuity of the Company's management. LIMITED LIABILITY AND INDEMNIFICATION Under the FBCA, a director is not personally liable for monetary damages to the corporation or any other person for any statement, vote, decision, or failure to fact unless (i) the director breached or failed to perform his duties as a director and (ii) a director's beach of, or failure to perform, those duties constitutes (1) a violation of the criminal law, unless the director had reasonable cause to believe his -41- conduct was lawful or had no reasonable cause to believe his conduct was unlawful, (2) a transaction from which the director derived an improper personal benefit, either directly or indirectly, (3) a circumstance under which an unlawful distribution is made, (4) in a proceeding by or in the right of the corporation or procure a judgment in its favor or by or in the right of a shareholder, conscious disregard for the best interest of the corporation or willful misconduct, or (5) in a proceeding by or in the right of someone other than the corporation or a shareholder, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. A corporation may purchase and maintain insurance on behalf of any director or officer against any liability asserted against him and incurred by him in his capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the FBCA. The Articles and Bylaws of the Company provide that the Company shall, to the fullest extent permitted by applicable law, as amended from time to time, indemnify all directors of the Company, as well as any officers or employees of the Company to whom the Company has agreed to grant indemnification. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is Continental Stock Transfer & Trust Company. SHARES ELIGIBLE FOR FUTURE SALE GENERAL Upon the consummation of this offering, the Company anticipates that it will have 4,351,309 shares of Common Stock outstanding. The 1,000,000 shares of Common Stock offered hereby and pursuant to the conversion of the Convertible Notes will be freely tradeable without restriction or further registration under the Securities Act, except for any shares purchased by an "affiliate" of the Company (in general, a person who has a control relationship with the Company) which will be subject to the limitations of Rule 144 adopted under the Securities Act. All of the remaining 3,351,309 shares are deemed to be "restricted securities," as that term is defined under Rule 144 promulgated under the Securities Act, in that such shares were issued and sold by the Company in private transactions not involving a public offering. Of such remaining shares, 2,656,729 will become eligible for sale under Rule 144 90 days from the date of this Prospectus and the remainder will become eligible for such sale at various times prior to June 1998. In general, under Rule 144 as currently in effect, subject to the satisfaction of certain other conditions, a person, including an affiliate of the Company (or other persons whose shares are aggregated), who has owned restricted shares of Common Stock beneficially for at least two years is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of one percent of the total number of outstanding shares of the same class or the average weekly trading volume during the four calendar weeks preceding the sale. A person who has not been an affiliate of the Company for at least the three months immediately preceding the sale and who has beneficially owned -42- shares of Common Stock for at least three years is entitled to sell such shares under Rule 144 without regard to any of the limitations described above. All of the Company's officers, directors and shareholders have agreed not to sell or otherwise dispose of any of their shares of Common Stock for a period of 13 months from the date of this Prospectus without the prior written consent of the Representative. Prior to this offering, there has been no market for the Common Stock and no prediction can be made as to the effect, if any, that market sales of shares of Common Stock or the availability of such shares for sale will have on the market prices prevailing from time to time. Nevertheless, the possibility that substantial amounts of Common Stock may be sold in the public market may adversely affect prevailing market prices for the Common Stock and could impair the Company's ability to raise capital through the sale of its equity securities. See "Description of Securities" for information concerning outstanding warrants and convertible securities. -43- UNDERWRITING The Underwriters named below (the "Underwriters"), for whom First Allied Securities, Inc. is acting as Representative, have severally agreed, subject to the terms and conditions of the Underwriting Agreement (the "Underwriting Agreement"), to purchase from the Company and the Company has agreed to sell to the Underwriters on a firm commitment basis the respective number of shares of Common Stock set forth opposite their names: UNDERWRITER NUMBER - ------------ ---------- First Allied Securities Inc. ---------- Total ............................... 850,000 ========== The Underwriters are committed to purchase all shares of Common Stock offered hereby if any of such shares are purchased. The Underwriting Agreement provides that the obligations of the several Underwriters are subject to conditions precedent specified therein. The Company has been advised by the Representative that the Underwriters propose to initially offer the Common Stock to the public at the public offering prices set forth on the cover page of this Prospectus and to certain dealers at such prices less concessions of not in excess of $_______ per share of Common Stock. Such dealers may reallow a concession not in excess of $_______ per share of Common Stock to other dealers. After the commencement of this offering, the public offering prices, concessions and reallowances may be changed by the Representative. The Representative has advised the Company that it does not anticipate sales to discretionary accounts by the Underwriters to exceed five percent of the total number of shares of Common Stock offered hereby. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. The Company has also agreed to pay to the Representative an expense allowance on a nonaccountable basis equal to three percent (3%) of the gross proceeds derived from the sale of the Common Stock underwritten, of which $50,000 has been paid to date. The Underwriters have been granted an option by the Company, exercisable within forty-five (45) days after the date of this Prospectus, to purchase up to an additional 127,500 shares of Common Stock at the initial public offering price per share of Common Stock offered hereby, less underwriting discounts and the expense allowance. Such option may be exercised only for the purpose of covering over-allotments, if any, incurred in the sale of the shares offered hereby. To the extent such option is exercised in whole or in part, each Underwriter will have a firm commitment, subject to certain conditions, to purchase the number of the additional shares of Common Stock proportionate to its initial commitment. All of the Company's officers and directors and all of the holders of the Common Stock have agreed not to, directly or indirectly, sell, transfer, hypothecate or otherwise encumber any of their shares for thirteen (13) months following the date of this Prospectus without the prior written consent of the Representative. -44- The Company has agreed that, for five (5) years after the effective date of this Prospectus, the Representative will have the right to designate one individual to be elected to the Company's Board of Directors. Such individual may be a director, officer, employee or affiliate of the Representative. In the event the Representative elects not to designate a person to serve on the Company's Board of Directors, the Representative may designate an observer to attend meetings of the Board of Directors. In connection with this offering, the Company has agreed to sell to the Representative, for nominal consideration, the Representative's Warrants to purchase from the Company 85,000 shares of Common Stock. The Representative's Warrants are initially exercisable for shares of Common Stock at a price of $__________ [120% of the initial public offering price per share of Common Stock] per share of Common Stock for a period of four (4) years commencing one (1) year from the date of this Prospectus and are restricted from sale, transfer, assignment or hypothecation for a period of twelve (12) months from the date hereof, except to officers and principals of the Representative. The Representative's Warrants also provide for adjustment in the number of shares of Common Stock issuable upon the exercise thereof as a result of certain subdivisions and combinations of the Common Stock. The Representative's Warrants grant to the holders thereof certain rights of registration for the securities issuable upon exercise of the Representative's Warrants. In connection with the Private Financing, the Representative is entitled to receive a commission of $101,250 and a non-accountable expense allowance of $30,375. The Representative commenced operations in 1994 and does not have extensive experience as an underwriter of public offerings of securities. The Representative has acted as the managing underwriter for three public offerings. The Representative is a relatively small firm and no assurance can be given that the Representative will participate as a market maker in the Common Stock. Prior to this offering, there has been no public market for the Common Stock. Consequently, the initial public offering prices of the Common Stock has been determined by negotiations between the Company and the Representative and is not necessarily related to the Company's asset value, net worth or other established criteria of value. The factors considered in such negotiations included the history of and prospects for the industry in which the Company competes, an assessment of the Company's management, the prospects of the Company, its capital structure and certain other factors as were deemed relevant. The foregoing is a summary of the principal terms of the Underwriting Agreement and does not purport to be complete. Reference is made to the copy of the Underwriting Agreement filed as an Exhibit to the Registration Statement of which this Prospectus forms a part. LEGAL MATTERS The validity of the Common Stock offered hereby will be passed upon for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., Miami, Florida. Orrick, Herrington & Sutcliffe, New York, New York, has acted as counsel for the Underwriters in connection with the offering. -45- EXPERTS The financial statements of the Company as of December 31, 1995 and 1994 and for the period from November 13, 1990 (inception) to December 31, 1991, and each of the years in the four year period ended December 31, 1995 have been included in this Prospectus and in the registration statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere in this Prospectus, and upon the authority of said firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Commission a Registration Statement under the Securities Act with respect to the Common Stock offered hereby. As permitted by the rules and regulations of the Commission, this Prospectus does not contain all the information set forth in the Registration Statement and in the exhibits and schedules thereto. For further information about the Company and the Common Stock, reference is made to the Registration Statement and to the exhibits and schedules filed therewith. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement is qualified in its entirety by such reference. Copies of each such document may be obtained from the Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C., upon payment of the charges prescribed by the Commission. Copies of each document may also be obtained through the Commission's internet address at http://www.sec.gov. -46- INDEX TO FINANCIAL STATEMENTS Report of Independent Accountants.............................. F-2 Financial Statements Balance Sheets at December 31, 1994 and 1995 and June 30, 1996 (unaudited)............................. F-3 Statements of Operations for the period from November 13, 1990 (inception) to December 31, 1991, and each of the years in the four year period ended December 31, 1995 and for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited)............. F-4 Statements of Stockholders' Deficit for the period from November 13, 1990 (inception) to December 31, 1991, and each of the years in the four year period ended December 31, 1995 and for the six months ended June 30, 1996 (unaudited)........ F-5 Statements of Cash Flows for the period from November 13, 1990 (inception) to December 31, 1991, and each of the years in the four year period ended December 31, 1995 and for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited)........ F-6 Notes to Financial Statements......................... F-7 F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors Mansur Industries Inc.: We have audited the accompanying balance sheets of Mansur Industries Inc. (a development stage company) as of December 31, 1994 and 1995, and the related statements of operations, stockholders'(deficit) and cash flows for the period from November 13, 1990 (inception) to December 31, 1991, each of the years in the four-year period ended December 31, 1995, and the related statements of operations, stockholders' (deficit) and cash flows for the period from November 13, 1990 (inception) to December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mansur Industries Inc. as of December 31, 1994 and 1995 and the results of its operations and its cash flows for the period from November 13, 1990 (inception) to December 31, 1991, each of the years in the four-year period ended December 31, 1995 and for the period from November 13, 1990 (inception) to December 31, 1995, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Miami, Florida January 19, 1996 F-2
MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS ASSETS December 31, December 31, June 30, 1994 1995 1996 ------------- ------------ ----------- (unaudited) Current assets: Cash $ 20,766 916,383 640,592 Inventory 98,593 193,838 412,431 Other assets 85,810 18,290 176,425 ---------- ---------- ---------- Total current assets 205,169 1,128,511 1,229,448 Mortgage note receivable 200,000 0 0 Property and equipment, net 351,773 324,431 308,810 Intangible assets, net 0 0 24,454 ---------- ---------- ---------- 551,773 324,431 333,264 Total Assets $ 756,942 1,452,942 1,562,712 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current liabilities: Accounts payable and accrued expenses $ 6,007 219,478 382,878 Due to officers/ shareholders 250,000 250,000 0 Convertible notes payable 0 0 1,012,500 Interest payable 45,684 0 2,250 Current installments of long-term debt 43,637 45,846 48,786 ---------- ---------- ---------- Total current liabilities 345,328 515,324 1,446,414 Long-term debt, excluding current installments 700,011 154,165 129,014 ---------- ---------- ---------- Total liabilities 1,045,339 669,489 1,575,428 ---------- ---------- ---------- Convertible redeemable preferred stock, $1 par value. Authorized 1,500,000 shares, issued and outstanding 580,000 and 490,000 in 1994 and 1995 respectively. 633,929 2,573,863 0 ---------- ---------- ---------- Stockholders' (deficit): Common stock, $0.001 par value. Authorized 25,000,000 shares, issued and outstanding 2,000,000; 2,673,129 and 3,351,309 shares for 1994, 1995 and 1996 respectively 2,000 2,673 3,351 Additional paid-in capital (12,257) 438,131 3,560,948 Deficit accumulated during the development stage (912,069) (2,231,214) (3,577,015) ---------- ---------- ---------- Total stockholders' (deficit) (922,326) (1,790,410) (12,716) ---------- ---------- ---------- Total liabilities and stockholders' (deficit) $ 756,942 1,452,942 1,562,712 ========== ========== ==========
See accompanying notes to financial statements. F-3 MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS
November 13, 1990 Year ended December 31, Six Months Ended November 13, 1990 (inception) through June 30, (inception) December 31, ------------------------------------------ ----------------------- through 1991 1992 1993 1994 1995 1995 1996 June 30, 1996 ------------------- ------- -------- -------- ---------- ----------- ----------- ----------------- (unaudited) (unaudited) (unaudited) Operating expenses: General and administrative $ 8,502 8,971 81,886 268,414 907,393 418,079 622,641 1,897,807 Research and development 128,439 31,924 69,256 178,146 393,874 162,732 365,435 1,167,074 ---------- --------- -------- --------- --------- --------- --------- ---------- Total operating expenses 136,941 40,895 151,142 446,560 1,301,267 580,811 988,076 3,064,881 ---------- --------- --------- --------- ---------- --------- --------- ---------- Loss from operations (136,941) (40,895) (151,142) (446,560) (1,301,267) (580,811) (988,076) (3,064,881) ---------- --------- --------- --------- ---------- --------- --------- ---------- Interest expense - (16,299) (16,360) (46,312) (63,528) (38,259) (24,179) (166,678) Conversion expense on redeemable preferred stock - - - - - - (344,631) (344,631) Interest Income - - - - 45,650 11,797 11,085 56,735 Loss on disposal of property and equipment - (39,560) (18,000) - - - - (57,560) ---------- ---------- --------- --------- ---------- ---------- --------- ---------- Net loss (136,941) (96,754) (185,502) (492,872) (1,319,145) (607,273)(1,345,801) (3,577,015) Dividends on redeemable preferred stock - - (8,328) (53,929) (222,067) (75,066) (147,000) (431,324) ---------- ---------- --------- --------- ---------- ---------- --------- ---------- Net loss to common shares $ (136,941) (96,754) (193,830) (546,801) (1,541,212) (682,339)(1,492,801) (4,008,339) ========== ========== ========== ========= ========== ========== ========= ========== Net loss per common share $ (0.07) (0.05) (0.10) (0.27) (0.66) (0.34) (0.53) ========== ========== ========== ========= ========== ========== ========= Weighted average shares outstanding 2,000,000 2,000,000 2,000,000 2,000,000 2,335,140 2,000,000 2,799,071 ========== ========== ========== ========= ========== ========== =========
See accompanying notes to financial statements. F-4 MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS
November 13, 1990 (inception) through Year ended December 31, December 31, 1991 1992 1993 1994 1995 ------------------ -------- ---------- --------- ----------- Cash used in operating activities: Net loss $ (136,941) (96,754) (185,502) (492,872) (1,319,145) Adjustments to reconcile net loss to cash used in operating activities: Loss on sale of property - 31,680 - - - Write-off of equipment and patent 69,965 7,880 - - - Depreciation - - - 18,056 42,404 Common Stock issued for services - - - - 16,400 Changes in operating assets and liabilities: Inventory (5,095) (23,205) (29,838) (68,755) (95,245) Other assets 1,318) (1,174) (7,067) (76,251) (7,884) Intangible assets - - - - - Accounts payable and accrued expenses 1,790 (1,666) 8,461 12,415 167,786 Advances from customer 11,500 16,800 - - - --------- --------- --------- --------- ---------- Net cash used in operating activities (60,099) (66,439) (213,946) (607,407) (1,195,684) --------- --------- --------- --------- ---------- Investing activities: Purchase of property and equipment (6,207) (4,208) (43,157) (48,227) (15,062) Proceeds from mortgage note receivable - - - - 200,000 Net proceeds from sale of property - 68,320 - - - --------- --------- --------- --------- ---------- Net cash provided (used) by investing activities (6,207) 64,112 (43,157) (48,227) 184,938 --------- --------- --------- --------- ---------- Financing activities: Proceeds from notes payable and line of credit 68,911 52,627 24,860 500,000 - Repayment of notes payable - (15,000) - (9,262) (43,637) Conversion expense on preferred stock converted into common stock - - - - - Proceeds from issuance of preferred stock - - 380,000 - 1,950,000 --------- --------- --------- --------- ---------- Net cash provided by financing 68,911 37,627 404,860 490,738 1,906,363 activities --------- --------- --------- --------- ---------- Net increase (decrease) in cash 2,605 35,300 147,757 (164,896) 895,617 Cash, beginning of period - 2,605 37,905 185,662 20,766 --------- --------- --------- --------- ---------- Cash, end of period $ 2,605 37,905 185,662 20,766 916,383 ========= ========= ========= ========= ==========
November 13, 1990 Six Months Ended (inception) through June 30, June 30, 1995 1996 1996 ---------------------------- ------------------- (unaudited) (unaudited) (unaudited) Cash used in operating activities: Net loss (607,273) (1,345,801) (3,577,015) Adjustments to reconcile net loss to cash used in operating activities: Loss on sale of property - - 31,680 Write-off of equipment and patent - - 77,845 Depreciation 20,934 22,396 82,856 Common Stock issued for services 6,400 105,000 121,400 Changes in operating assets and liabilities: Inventory (85,366) (218,593) (440,731) Other assets (1,231) (158,135) (251,829) Intangible assets - (24,454) (24,454) Accounts payable and accrued expenses (38,739) 165,650 354,436 Advances from customer - - 28,300 --------- --------- --------- Net cash used in operating activities (705,275) (1,453,937) (3,597,512) --------- --------- --------- Investing activities: Purchase of property and equipment (7,828) (6,775) (123,636) Proceeds from mortgage note receivable 200,000 - 200,000 Net proceeds from sale of property - - 68,320 --------- --------- --------- Net cash provided (used) by investing activities 192,172 (6,775) 144,684 --------- --------- --------- Financing activities: Proceeds from notes payable and line of credit - 1,012,500 1,658,898 Repayment of notes payable (22,765) (172,210) (240,109) Conversion expense on preferred stock converted into common stock - 344,631 344,631 Proceeds from issuance of preferred stock 1,950,000 0 2,330,000 --------- --------- --------- Net cash provided by financing activities 1,927,235 1,184,921 4,093,420 --------- --------- --------- Net increase (decrease) in cash 1,414,132 (275,791) 640,592 Cash, beginning of period 20,766 916,383 - --------- --------- --------- Cash, end of period 1,434,898 640,592 640,592 ========= ========= =========
Supplemental disclosures of noncash investing and financing activities: As discussed in note 7(d), in November, 1990, the Company issued 2,000,000 shares of common stock for real estate and equipment having an aggregate market value of $52,000. In addition, the officer assigned to the Company ongoing research and development and rights to patents and patents pending. During April 1992, the Company sold real property for $120,000 in cash and a $200,000 mortgage note receivable, as discussed in note 2. In December 1993, the Company issued preferred stock in exchange for $200,000 of notes payable. In July 1994, the Company purchased equipment, issuing a note payable to the seller in the amount of $252,910 (see note 5). During 1995, convertible preferred stock in the amount of $580,000 and related accrued dividends in the amount of $76,729 were converted to common stock (see note 7). During 1996, convertible preferred stock in the amount of $2,374,596 and related accrued dividends in the amount of $346,269 and a conversion expense of 12% in the amount of $344,631 were converted to common stock (note 7). See accompanying notes to financial statements. F-5 MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' (DEFICIT) From November 13, 1990 (inception) to June 30, 1996 Preferred stock Common stock Deficit ---------------------- -------------------------------- accumulated Additional during the Total paid-in development stockholders' Shares Amount Shares Par capital stage (deficit) ------ ------ ------ --- ------- ----- ------- Balance at November 13, 1990 (inception) - $ - - $ - $ - $ - $ - Issuance of common stock to an officer in exchange for machinery and real estate valued at market and rights to ongoing research and development patents and - - patent pending 2,000,000 2,000 50,000 - 52,000 Net loss - - - - - (136,941) (136,941) --------- ---------- --------- --------- --------- ---------- ---------- Balance at December 31, 1991 - - 2,000,000 2,000 50,000 (136,941) (84,941) Net loss - - - - - (96,754) (96,754) --------- ---------- --------- -------- --------- ---------- ---------- Balance at December 31, 1992 - - 2,000,000 2,000 50,000 (233,695) (181,695) Issuance of preferred stock in exchange for cash 380,000 380,000 - - - - - Issuance of preferred stock in satisfaction of notes payable 200,000 200,000 - - - - - Accrued dividends on preferred stock (8,328) (8,328) Net loss - - - - - 185,502) (185,502) --------- ---------- --------- -------- --------- ---------- ---------- Balance at December 31, 1993 580,000 580,000 2,000,000 2,000 41,672 (419,197) (375,525) Accrued dividends on preferred stock 53,929 (53,929) (53,929) Net loss - - - - - (492,872) (492,872) --------- --------- --------- -------- --------- ---------- ---------- Balance at December 31, 1994 580,000 633,929 2,000,000 2,000 (12,257) (912,069) (922,326) Issuance of preferred stock in exchange for cash and note payable, net of costs 490,000 2,374,596 - - - - - Accrued dividends on preferred stock 22,800 (22,800) (22,800) Conversion of preferred stock and accrued dividends to common stock (580,000) (656,729) 656,729 657 656,072 - 656,729 Accrued dividends on preferred stock 199,267 (199,267) (199,267) Issuance of common stock in exchange for services rendered - - 16,400 16 16,384 - 16,400 Net loss - - - - - (1,319,145) (1,319,145) --------- --------- --------- -------- --------- ---------- --------- Balance at December 31, 1995 490,000 2,573,863 2,673,129 2,673 438,132 (2,231,214) (1,790,409) Issuance of common stock in exchange for - - 30,000 30 104,970 - 105,000 services rendered (unaudited) Conversion of note payable into - - 20,000 20 99,980 - 100,000 common stock (unaudited) Accrued dividends on preferred stock 147,000 (147,000) (147,000) (unaudited) Conversion of preferred stock and accrued (490,000) (2,720,863) 628,180 628 3,064,866 - 3,065,494 dividends to common stock (unaudited) Net loss (unaudited) - - - - - (1,345,801) (1,345,801) --------- --------- --------- -------- --------- ---------- --------- Balance at June 30, 1996 (unaudited) 0 $ 0 3,351,309 $ 3,351 $3,560,948 $(3,577,015 $ (12,716) ========= ========= ========= ======== ========= ========== =========
See accompanying notes to financial statements. F-6 MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS December 31, 1994 and December 31, 1995 and June 30, 1996 (unaudited) MANSUR INDUSTRIES INC. (1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Mansur Industries Inc. (the "Company") is primarily engaged in research and development, marketing, and initial production of industrial parts cleaning equipment for use in automotive, marine, airline and general manufacturing industries. The Company's focus is on the design, development and manufacture of industrial cleaning equipment which incorporate continuous recycling and recovery technologies for solvents and solutions, thereby reducing the need to replace and dispose of contaminated solvents and solutions. The Company is in the development stage. (A) OPERATIONS AND LIQUIDITY The Company has been primarily engaged in research, development, marketing, and initial production of its products. The Company's ultimate success is dependent upon future events, including the successful commercialization of the Company's products, establishing sources for manufacturing, marketing, and distribution channels, the outcomes of which are currently indeterminable, and is also dependent upon obtaining sufficient financing. As of June 30, 1996, the Company has realized no sales of its products. As indicated in the accompanying financial statements as of June 30, 1996, the Company's accumulated deficit totaled $3,577,015 (unaudited). The Company has financed this deficiency primarily through private placements of debt and equity securities. Management expects that product sales will commence during the second half of 1996 and that proceeds from the notes payable are sufficient to fund working capital requirements until sales of the Company's products reach levels sufficient to fund working capital requirements. In July 1996, the Company expects to file a registration statement with the Securities and Exchange Commission (the "SEC") in connection with a proposed initial public offering ("IPO") of shares of its common stock. In the event that the IPO is not completed, the Company has plans to restructure operations to minimize cash expenditures, and/or obtain additional financing in order to continue support of its activities. If adequate funds are not available from additional sources of financing, the Company's business may be materially adversely affected. F-7 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (B) INVENTORY Inventories are stated at the lower of cost or market using the first-in, first-out method. Inventory consists of the following.
DECEMBER 31, DECEMBER 31, JUNE 30, 1994 1995 1996 -------------------- -------------------- ------------------ Raw materials............. $13,937 55,738 233,456 Work in progress and finished goods.... 84,656 138,100 178,975 ------------------- --------------------- ------------------ $98,593 193,838 412,431 =================== ===================== ==================
(C) PROPERTY AND EQUIPMENT, NET Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the shorter of the lease term or the estimated useful lives of the respective assets. (D) INTANGIBLES Patents, patent applications and rights are stated at acquisition cost. Amortization of patents is recorded using the straight-line method over the legal lives of the patents, generally for periods ranging up to 17 years. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future cash flows from operations derived from such intangible assets is less than their carrying value. (E) OTHER ASSETS Included in other assets at December 31, 1994, were $75,404 in stock offering costs incurred in connection with the Series A preferred stock private placement (note 7). On June 30, 1996, other assets consist primarily of costs relating to the initial public offering of $94,251 and deposits with material suppliers (note 8). (unaudited) (F) FINANCIAL INSTRUMENTS (unaudited) In assessing the fair value of financial instruments at June 30, 1996 the Company has used a variety of methods and assumptions, which were based on estimates of market conditions and risks existing at that time. The carrying amount of long-term debt approximates fair value at June 30, 1996. For certain instruments, including accounts payable and accrued expenses, and short-term debt, the carrying amount approximates fair value due to their short maturity. F-8 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (G) RESEARCH AND DEVELOPMENT Research and development expenses consist primarily of costs incurred in connection with engineering activities related to the development of industrial parts cleaning machinery and are expensed as incurred. (H) INCOME TAXES The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (I) EARNINGS PER SHARE DATA The computation of loss per share in each year is based on the weighted average number of common shares outstanding. When dilutive, convertible preferred stock and convertible notes are included as common share equivalents using the if converted method. As these instruments have an anti-dilutive effect for the years presented, they are not included in the weighted average calculation. Primary and fully diluted earnings per share are the same for each of the years presented. (J) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) MORTGAGE NOTE RECEIVABLE During April 1992, the Company sold real property for $120,000 in cash and a $200,000 mortgage note receivable. The note bore interest at a rate of 12 percent per annum payable monthly with the principal due at maturity, being April 27, 1997. The interest received on the mortgage note receivable was assigned by the Company to repay interest due on an unsecured note payable and dividends on certain of the preferred stock. In April 1995, the balance of the note was received in full. F-9 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (3) PROPERTY AND EQUIPMENT, NET Property and equipment was as follows:
DECEMBER 31, DECEMBER 31, JUNE 30, 1994 1995 1996 USEFUL LIFE ------------------ ----------------- ---------------- ----------------- (UNAUDITED) Furniture and equipment......... $ 7,289 20,433 23,709 5 Years Machinery and equipment......... 351,688 353,606 357,105 10 Years Leasehold improvements.......... 10,852 10,852 10,852 ------------------ ----------------- ---------------- 369,829 384,891 391,666 Less accumulated depreciation... 18,056 60,460 82,856 ------------------ ----------------- ---------------- $351,773 324,431 308,810 ================== ================= ================
(4) DUE TO OFFICERS/SHAREHOLDERS (A) NOTES PAYABLE Notes payable at December 31, 1994 and 1995 consists of the following: 12% unsecured note payable $ 100,000 Note payable to chief executive officer 150,000 ------------ $ 250,000 ============ The 12% unsecured notes payable required interest payments monthly, with principal due at maturity. The note matured on December 31, 1995 and was renewed for one year. Pursuant to an amendment to the note signed in January 1996, the note was converted into common stock at a price of $5 per share (note 7). Advances made by the chief executive officer are pursuant to a $200,000 line of credit agreement signed in 1990. Under the terms of the agreement, interest is accrued at a variable rate not to exceed 10 percent per annum nor fall below 6 percent per annum negotiated annually. The rate for 1994 and 1995 was 6 percent. The note had a maturity date of December 31, 1995 and was renewed for one year to mature on December 31, 1996. The note payable to the chief executive officer was paid in full during May of 1996 (unaudited). (B) CONVERTIBLE NOTES PAYABLE (UNAUDITED) In June 1996, the Company issued cumulative convertible redeemable notes payable in the amount of $1,012,500, of which $303,750 was due to certain directors of the Company. The notes bear interest of 4% per annum until September 1996 and 12% thereafter. The notes will be automatically converted into common stock simultaneously with the initial public offering of the F-10 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT Company at a price of $6.75 per share. The Company may redeem these notes in full at any time at a price equal to the outstanding principal amount plus interest accrued thereon. Upon the conversion of the notes into common stock resulting from an IPO, a commission equalling 10% of the converted principal balance and a nonaccountable expense allowance equalling 3% of the converted principal balance is payable. (5) LONG-TERM DEBT
DECEMBER 31, ------------------------- June 30, 1994 1995 1996 -------- -------- ---------------- (UNAUDITED) Long-term debt consists of the following: 12% unsecured convertible promissory note, due May 10, 1996, converted into Series A preferred stock in 1995 (note 7)........................ $500,000 12.5% note payable in monthly installments of $5,690, including interest due August 4, 1999, secured by equipment with a depreciated cost of $230,277 on June 30, 1996 (unaudited)......... 243,648 200,011 177,800 Less current installments.................... 43,637 45,846 48,786 -------- ------- ------- Long-term debt, excluding current installments................................. $700,011 154,165 129,014 ======== ======= =======
The 12 percent unsecured convertible promissory note was converted into 100,000 shares of Series A preferred stock during 1995 and subsequently converted to common stock in June 1996 (unaudited) (note 7). The aggregate maturities of long-term debt for each of the four years subsequent to June 30, 1996, are as follows:
YEAR ENDING DECEMBER 31, AMOUNT ------------ ---------------- 1996 $ 23,635 1997 51,916 1998 58,791 1999 43,458 ---------------- $177,800 ================
F-11 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (6) INCOME TAXES For the period from November 13, 1990 (inception) to June 30, 1996, the operations of the Company generated net operating losses of approximately $3,577,015 (unaudited) for financial reporting purposes. Because the Company is in the development stage, all costs through 1995 have been capitalized for tax purposes. The only loss reported for tax has been a $14,280 capital loss on the sale of real property in 1992. This capital loss may be carried forward by the Company for up to five years and will expire at the end of 1997. Capital losses carried forward may only be used to offset future capital gains. The gross amount of the deferred tax asset as of June 30, 1996 was approximately $1,288,000 (unaudited), which consists primarily of capital loss carryforwards, start-up costs, and research and experimental costs capitalized for tax purposes. Since realization of these tax benefits are not assured, a valuation allowance has been recorded against the entire deferred tax asset balance. In addition, pursuant to the Tax Reform Act of 1986, if certain substantial changes in ownership should occur there would be an annual limitation on the amount of tax attribute carryforwards which can be utilized in the future. (7) STOCKHOLDERS' DEFICIT (A) "SERIES A" PREFERRED STOCK In April 1995, the Company issued 490,000 shares of 12 percent cumulative convertible redeemable preferred stock (the "Series A") as part of a second private placement at an offering price of $5 per share. The issuance raised $1,950,000 in cash and converted the $500,000 unsecured convertible promissory note (see note 5) into Series A shares. On April 27, 1996, the board of directors of the Company approved the early redemption of all of the Series A preferred stock outstanding as of May 31, 1996, at the redemption price of $5 per share plus the aggregate amount of dividends accrued through June 30, 1996 in the amount of $346,269 (unaudited) and a conversion expense of 12% in the amount of $344,631 (unaudited). In June 1996, 100% of Series A shareholders exercised their right to convert all of their preferred shares together with their dividends in the amount of $743,164 into common shares (unaudited). (B) "FIRST SERIES" PREFERRED STOCK In the fourth quarter of 1993, the Company issued 580,000 shares of 12 percent cumulative convertible redeemable preferred stock (the "First Series") in a private placement. On May 30, 1995, the board of directors of the Company approved the redemption of all of the First Series preferred stock outstanding as of June 30, 1995, at the redemption price of $1 per share plus dividends accrued through June 30, 1995, subject to the preferred shareholders' prior right to convert such preferred stock into common stock of the Company. In June 1995, 100% of the First Series with cumulative dividends thereon was converted into common stock, on a one for one basis. F-12 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (C) CONVERTIBLE NOTE PAYABLE (UNAUDITED) In May 1996, the Company converted a $100,000 note payable into common stock at a price of $5 per share pursuant to an amendment to the note signed in January of 1996. (D) COMMON STOCK In November 1990, the Company issued 2,000,000 shares of common stock with a par value of $0.001 per share to the President of the Company for the President's assignment to the Company of all ongoing research and development and the rights to any related patents and patents pending, in addition to real estate and equipment with an aggregate fair value of $52,000 as part of the formation of the Company. (8) COMMITMENTS (A) LEASES The Company leases operating facilities under fixed rent operating leases. The facilities had a 24 month lease expiring December 31, 1994 with a rent of $4,631 per month. The lease was renewed under cancelable terms in October 1994 for an additional two-year period at a monthly rent of $5,094. During 1994, the Company leased equipment under an operating lease which expired in September 1995. Total rent expense was as follows: For the six months ended June 30, 1996 (unaudited) $ 30,564 For the year ended December 31: 1995 $ 61,128 1994 55,572 1993 39,740 1992 24,835 From November 13 1990 (inception) to December 31, 1991. 14,540 (B) DUE TO OFFICER In 1995, the Board of Directors of the Company declared an incentive bonus payable to the President, Pierre G. Mansur in the amount of $267,460. Payment of bonuses are subject to the determination by the Board of Directors that the Company is able to effectuate such payment without impeding the Company's operations or development. As a result, $88,110 has been paid and an amount of $179,350 has been accrued at December 31, 1995 and June 30, 1996 (unaudited). F-13 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (C) SUPPLY AGREEMENT (unaudited) On May 7, 1996, the Company entered into an agreement (the "Supply Agreement" ) with a supplier (the "Supplier") pursuant to which the Supplier agreed to supply to the Company, at the Company's election, between 3,000 and 5,000 machine units per year at established prices and in accordance with a delivery schedule. The Company has agreed to pay $150,000 (the "Advance"), $50,000 of which has been advanced through June 30, 1996. The total Advance may be credited against future purchases under the Supply Agreement at the rate of $50 per unit. The Supply Agreement provides that the Company may unilaterally terminate the contract in whole or in part for cause or for convenience. In the event the Supply Agreement is terminated by the Company for convenience, the Supplier will be entitled to reimbursement of the costs it has incurred through the date of termination and, if such termination occurs prior to the delivery of 3,000 units, the Supplier will be entitled to payment for units produced through the date of termination and retain any unapplied amount of the Advance. (9) PRODUCT FINANCING AGREEMENT (unaudited) In May 1996, the Company entered into an agreement (the "Product Financing Agreement") with a leasing company which agrees to purchase machines produced by the Company and subsequently lease these machines to customers on 60 month terms. The Company will market the machines and provide the leasing company with credit information on potential customers which they may either accept or reject. The Product Financing Agreement states that the leasing company does not have recourse against the Company for customer failures to discharge their obligations to the leasing company unless the Company has breached and failed to cure certain warranties. Under the Product Financing Agreement, the Company has agreed to provide periodic service for the machines and replace solvent used in the machines. In addition, upon the leasing company's request, the Company agrees to assist the leasing company in remarketing any repossessed or surrendered equipment for a fee. At the end of each customer lease, the Company has the option to purchase the machine from the leasing company at its fair market value. F-14 NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THIS OFFERING AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ---------------------- TABLE OF CONTENTS PAGE Prospectus Summary.......................................................... Risk Factors................................................................ Use of Proceeds............................................................. Dilution ................................................................... Dividend Policy............................................................. Capitalization.............................................................. Selected Financial Data..................................................... Management's Discussion and Analysis of Financial Condition and Results of Operations................................ Business ................................................................... Management.................................................................. Executive Compensation...................................................... Certain Transactions........................................................ Principal Shareholders...................................................... Description of Capital Stock................................................ Shares Eligible for Future Sale............................................. Underwriting................................................................ Legal Matters............................................................... Experts ................................................................... Additional Information...................................................... Index to Financial Statements............................................... F-1 ---------------------- UNTIL ____________ , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 850,000 SHARES MASUR INDUSTRIES INC. COMMON STOCK PROSPECTUS FIRST ALLIED SECURITIES INC. ____________ , 1996 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED JULY 23, 1996 150,000 SHARES MANSUR INDUSTRIES INC. COMMON STOCK The shares of Common Stock, $.001 par value ("Common Stock"), offered hereby are issuable by Mansur Industries Inc. (the "Company") upon conversion of $1,012,500 in principal amount of its convertible notes due 1997 (the "Convertible Notes"), at a conversion price of $6.75 per share. Concurrently herewith, the Company is offering 850,000 shares of the Common Stock at an initial offering price of $ in an underwritten initial public offering (the "Concurrent Offering"). On the date of this Prospectus, a registration statement with respect to the shares offered in the Concurrent Offering was declared effective. Prior to the Concurrent Offering there was no public market for the Common Stock and there can be no assurance that any such market will develop or be sustained. For information regarding the factors considered in determining the initial public offering price in the Concurrent Offering, see "Risk Factors." The Common Stock will be included in the Nasdaq Small Cap Market under the symbol "MANS." The shares of Common Stock offered by this Prospectus will be subject to an agreement by the holders thereof with the Representative of the Underwriters in the Concurrent Offering (the "Representative") restricting the sale thereof within the 13 months from the date of this Prospectus without the prior written consent of the Representative. See "Concurrent Offering," "Description of Securities," and "Plan of Distribution." As a result of the conversion of the Convertible Notes and the issuance of shares of Common Stock hereby, $1,012,500 of the Company's indebtedness will be extinguished. The Company will receive none of the proceeds of the sale of the shares of Common Stock issued hereby by the holders thereof. The Company will bear all of the expenses of this offering, and will pay to the Representative commissions and fees in an aggregate amount of $131,625 in connection with services provided in connection with the Convertible Notes. -------------------- SEE "RISK FACTORS" ON PAGES 5 TO 10 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. -------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. July __, 1996 PROSPECTUS SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED, THE INFORMATION IN THIS PROSPECTUS ASSUMES (I) THAT THE CONCURRENT OFFERING HAS BEEN CONSUMMATED AT AN ASSUMED INITIAL OFFERING PRICE OF $7.50 PER SHARE (II) THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IN THE CONCURRENT OFFERING (THE "OVER-ALLOTMENT OPTION") TO PURCHASE UP TO 127,500 SHARES OF COMMON STOCK HAS NOT BEEN EXERCISED, AND (III) THAT THE REPRESENTATIVE'S WARRANTS TO PURCHASE 85,000 SHARES OF COMMON STOCK HAVE NOT BEEN EXERCISED. THE COMPANY GENERAL Mansur Industries Inc. (the "Company") has developed and obtained patent protection with respect to a full line of self-contained, recycling industrial parts washers that incorporate innovative, proprietary waste minimization technologies and represent a significant advance over currently available machinery and processes. Focusing on waste minimization rather than its removal and recovery, the Company believes that its equipment will have a major impact on the industrial parts cleaning industry and will have a broad appeal to customers, because its equipment, unlike the machines now in use, facilitates efficient and economical compliance with environmental regulations, minimizes waste disposal requirements, enhances cleaning solution utilization, and increases worker safety and productivity. Most machinery and equipment require oil lubrication to function properly. Removal of lubrication oils from tools and parts during automotive, aviation, marine and general industrial maintenance, service and repair operations is typically effected through the use of mineral spirit solvents which become contaminated in the cleaning process. Under the most common current practice, the solvent becomes more contaminated (and less effective) with repeated use, and, when it is saturated with oil, sludge and other contaminants as a result of the cleaning process (and frequently classified as a hazardous waste under federal and state regulations), it must be stored on site until pick-up, when pure solvent is delivered and the contaminated solvent is, generally, shipped to regional refining facilities. This off-site recycling program is typically scheduled on four to sixteen week cycles and involves both the utilization of progressively more contaminated solvent for cleaning operations until the solvent is too contaminated for use, and thereafter, the on-site storage of the hazardous solution until the periodic waste recovery service. By contrast, the Company's products allow the use and re-use of the solvent by removing all the contaminants from the solvent within the cleaning unit itself, minimizing the volume of waste by-product and providing pure solvent to the customer on demand, without the costly and dangerous storage and transportation of hazardous waste. Moreover, the small amount of waste by-product yielded in the distillation process utilized by the Company's products can typically be recycled and/or disposed of together with the customer's used motor oil, which is generally not classified as a hazardous waste. Substantially all of the Company's target customers have established systems for the handling, transportation, recycling and disposal of used motor oil. The Company's products have been extensively tested and proven effective by independent engineering concerns and testing laboratories. While the Company intends to exploit its current full line of industrial washers, and to continue its research and development of new products, it has initially focused its attention on its General Parts Washer, marketed as SystemOne(Trademark) (the "SystemOne(Trademark) Washer"). The SystemOne(Trademark) Washer consists of a washing sink mounted on top of a metal cabinet in which the distillation and recovery apparatus is contained. The equipment allows the solvent to be used, treated and re-used, on demand, without requiring off-site processing. The Company has concluded extensive testing by independent laboratories and at various commercial sites and is currently conducting test marketing in a local area within close proximity to its facilities. Demonstrator models were placed in 38 selected automotive repair facilities of national, fleet, industrial and commercial accounts. Notwithstanding the absence of a formal marketing program during - 1 - the test period, the Company has, as of the date of this Prospectus, received orders from a number of facilities in which the machines were placed, including Florida Detroit Diesel MTU (46 Units); Kelly Tractor Company and Pantropic Power Products, South Florida Caterpillar dealers (48 Units); United States Postal Service (2 Units); Southern Sanitation, a subsidiary of Waste Management, Inc. (5 Units); Broward County Mass Transit (25 Units); and a number of South Florida automobile dealerships (an aggregate of 54 Units). The Company commenced commercial sales and delivery of units in July 1996 at an approximate price per unit of $2,700. The initial market for the Company's industrial cleaning product line includes automotive, aviation, marine and general industrial maintenance, service and repair operations. The Company believes that domestic expenditures in connection with industrial parts cleaning machines exceeds $1.0 billion annually, and that the anticipated monthly cost to the customer for the Company's products typically will not exceed, and is intended to be well below, the monthly cost of the non-recycling machines now in use. Additional competitive advantages provided by the Company's products include practical and cost effective compliance with demanding regulations of the Environmental Protection Agency; elimination of routine waste disposal costs; significant improvements in cleaning productivity; minimized cleaning solution purchases; and reduction of equipment down time for routine machine maintenance. The Company has retained experienced executives to head and develop its sales and marketing organization. In addition to its regional office in Miami, the Company expects to open four additional service centers in Orlando, Tampa, Jacksonville and West Palm Beach, Florida during 1996. The Company expects to pursue a national expansion program, through internal growth utilizing a network of regional distribution and service centers, as in Florida, through a strategic alliance with a national distributor, if one is available on favorable terms, or through a combination of the two. In August, the Company will commence a pilot program with First Recovery and Valvoline Oil Company, two affiliates of Ashland Inc., a multinational oil refiner and distributor of automotive related products, including Valvoline Oil and Ashland 140 Solvent, one of the brands of mineral spirits solvent used in the Company's SystemOne(Trademark) Washer. Under the pilot program, First Recovery will be the exclusive distributor of the SystemOne(Trademark) Washer in the Dallas/Ft. Worth and Houston markets. The initial term of the program is one year. If the arrangement proves successful, the Company expects to negotiate a broader agreement, possibly including a national distribution program. The Company has manufactured all its prototype and test models at its 10,000 square foot research and development ("R&D") facility. The Company's current manufacturing capabilities include advanced Computer Aided Design/Computer Aided Manufacturing technology and state of the art manufacturing machinery. Because the Company's R&D facility can be utilized to manufacture up to 200 units of the SystemOne(Trademark) Washer per month, all manufacturing operations, including design, metal fabrication, robotic welding, painting and assembly, can be performed in the Company's R&D facility during the Company's initial roll-out phase. At present, the Company plans to continue to use its own facility for existing and new product R&D activities and to use contract manufacturers when a product achieves commercial sales levels. In order to accommodate increased demand for the SystemOne(Trademark) Washer, the Company has entered into an agreement with a contract manufacturer with respect to the manufacture of at least 3,000 units during the first year thereof. In addition, the Company has entered into negotiations with a major contract manufacturer with a 2 million square foot facility and 75 years of experience to provide the manufacturing capacity needed to meet anticipated future customer demand. - 2 -
THE OFFERING Common Stock Offered.......................................... 150,000 shares Common Stock Outstanding After Offering....................... 4,351,309(1) Use of Proceeds by the Company................................ The Company utilized the proceeds of the private financing pursuant to which the Convertible Notes were issued to finance the Concurrent Offering and for general corporate purposes. The Company will not receive any of the proceeds from the sale by the holders thereof of the shares of Common Stock issued pursuant to this Prospectus. Risk Factors.................................................. This offering involves a high degree of risk and immediate substantial dilution. See "Risk Factors" and "Dilution." Nasdaq SmallCap Symbol........................................ MANS - -------------------- (1) Does not include an aggregate of 375,000 shares of Common Stock reserved for issuance upon exercise of options available for future grant and future restricted stock awards under the Company's Incentive Compensation Plan. See "Underwriting" and "Management--Incentive Compensation Plans."
The Company will furnish its shareholders with annual reports containing audited financial statements certified by an independent auditing firm. CONCURRENT OFFERING On the date of this Prospectus, a registration statement filed under the Securities Act with respect to a concurrent underwritten public offering by the Company of 850,000 shares of Common Stock, and up to 127,500 additional shares of Common Stock to cover over-allotments, if any, was declared effective by the Securities and Exchange Commission (the "Concurrent Offering"). The Company received net proceeds of approximately $________ from the sale of those shares, and will receive approximately $________ in additional net proceeds if the over-allotment option is exercised in full, after payment of underwriting discounts and commissions and estimated expenses of the Concurrent Offering. Mansur Industries Inc. was incorporated in Florida in 1990. The Company's principal executive office is located at 8425 S.W. 129th Terrace, Miami, Florida 33156, and its telephone number is (305) 232-6768. - 3 - Summary Financial Data The summary financial information set forth below should be read in conjunction with financial statements appearing elsewhere in this Prospectus.
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, ----------------------------------------------------------- ---------------------- 1991(1) 1992 1993 1994 1995 1995 1996 ---------- --------- --------- ----------- ----------- --------- ---------- STATEMENT OF OPERATIONS DATA: Operating expenses: General and administrative.... $ 8,502 $ 8,971 $ 81,886 $ 268,414 $ 907,393 $ 418,079 $ 622,641 Research and development...... 128,439 31,924 69,256 178,146 393,874 162,732 365,435 ---------- --------- --------- ----------- ----------- --------- ---------- Total operating expenses.... 136,941 40,895 151,142 446,560 1,301,267 580,811 988,076 ---------- --------- --------- ----------- ----------- --------- ---------- Interest (expense), net.......... -- (16,299) (16,360) (46,312) (17,878) (26,462) (13,094) Conversion (expense) on redeemable preferred stock.... -- -- -- -- -- -- (344,631) Loss on disposition of property and equipment..................... -- (39,560) (18,000) -- -- -- -- ---------- --------- --------- ----------- ----------- --------- ---------- Net (loss)....................... (136,941) (96,754) (185,502) (492,872) (1,319,145) (607,273) (1,345,801) Dividends on redeemable preferred stock......................... -- -- (8,328) (53,929) (222,067) (75,066) (147,000) ---------- --------- --------- ----------- ----------- --------- ---------- Net (loss) to common shares...... $(136,941) $(96,754) $(193,830) $(546,801) $(1,541,212) $(682,339) $(1,492,801) ========== ========= ========= =========== =========== ========= ========== Net (loss) per common share(2)... $(0.07) $(0.05) $(0.10) $(0.27) $(0.66) $(0.34) $(0.53) ========== ========= ========= =========== =========== ========= ========== Weighted average shares outstanding(2)................ 2,000,000 2,000,000 2,000,000 2,000,000 2,335,140 2,000,000 2,799,071
JUNE 30, 1996 --------------------------------- ACTUAL AS ADJUSTED(3) ---------------- -------------- BALANCE SHEET DATA: Working capital.......................... $(216,966) $5,921,034 Total assets............................. 1,562,712 6,628,212 Total liabilities........................ 1,575,428 502,928 Total stockholders' equity (deficit)..... (12,716) 6,125,284 - -------------------------- (1) Information provided for the period from November 13, 1990 (inception) to December 31, 1991. (2) See Note 1 to Notes to Financial Statements for information concerning the computation of net loss per share. (3) Adjusted to reflect (i) the issuance of 150,000 shares of Common Stock as a result of the conversion of the Convertible Notes; and (ii) the sale of 850,000 shares of Common Stock offered in the Concurrent Offering at an assumed initial public offering price of $7.50 per share and the initial application of the estimated net proceeds therefrom. See "Capitalization" and "Use of Proceeds of Concurrent Offering." - 4 - RISK FACTORS THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. EACH PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING AN INVESTMENT DECISION. LIMITED OPERATING HISTORY; SIGNIFICANT AND CONTINUING LOSSES. The Company was formed in November 1990 and was a development stage company through June 30, 1996. It has only recently commenced the marketing and sale of one of its product lines on a limited basis, and has a limited operating history upon which an evaluation of the Company's performance and prospects can be made. The Company's prospects must be considered in light of the numerous risks, expenses, delays, problems and difficulties frequently encountered in the establishment of a new business in an industry characterized by vigorous competition and regulatory requirements. Since inception, the Company has incurred significant losses, including losses of $492,872 and $1,319,145, for the years ended December 31, 1994 and 1995, respectively, and a loss of $1,345,801 for the six months ended June 30, 1996. Losses are continuing through the date of this Prospectus. Inasmuch as the Company's operating expenses have increased and can be expected to continue to increase significantly in connection with the Company's proposed expansion, including the development of manufacturing capabilities, the development and establishment of regional sales, service and technological support centers and a service fleet, the development of a larger corporate headquarters and research and development facility, and the purchase of raw materials and inventory, the Company anticipates that losses and negative operating cash flow will continue until such time, if ever, as the Company is able to generate sufficient revenues to offset its operating costs and the costs of continuing expansion. There can be no assurance that the Company will generate significant revenues or ever achieve profitable operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Financial Statements. UNCERTAINTY OF MARKET ACCEPTANCE. To date, the Company's products have been marketed in limited geographic areas and, thus, have achieved only limited market acceptance. The Company is attempting to market a new product which relies on a fundamental change in the way parts and tools are cleaned and solvent utilized, an activity pattern which has been relatively consistent within the target industries in the past. As is typically the case with an emerging business concept, demand and market acceptance for newly introduced products and services are subject to a high level of uncertainty. The Company has limited marketing experience and limited financial, marketing, personnel and other resources to undertake extensive marketing activities. The Company's success will be largely dependent on the Company's ability to position its products as a preferred method for cleaning parts. The Company believes that substantially all its target customers currently utilize competitive parts cleaning equipment. Potential customers may elect to utilize devices or methods with which they are more familiar or which they believe to be more efficient or have other advantages over the Company's system. Accordingly, achieving market acceptance for the Company's products will require substantial marketing efforts and expenditure of significant funds to educate automotive dealership and repair facilities and other potential users of the products of the distinctive characteristics and benefits of the Company's products as well as their environmental and cost savings advantages. There can be no assurance that the Company's efforts will result in significant initial or continued market acceptance for the Company's products or that the Company will succeed in positioning its products as a preferred method for cleaning parts. See "Business-Marketing and Servicing Strategy." INDUSTRY COMPETITION. The parts cleaning industry is characterized by intense competition, and the industry is dominated by Safety-Kleen, Inc. A number of other companies provide parts cleaning equipment and services. While the Company believes that none of its competitors offer a product with the same features as the Company's products, many customers may view the products as functionally equivalent, and there can be no assurance that functionally equivalent products will not become available in the near future. In addition, there are numerous companies involved in the waste management industry, including waste hauling companies and companies engaged in waste separation, recovery and recycling, which may have - 5 - the expertise and resources that would encourage them to attempt to develop and market products which would compete with the Company's products or render them obsolete or less marketable. Safety-Kleen, Inc., as well as most of the companies marketing such waste disposal services or products or with the potential to do so, are well established, have substantially greater financial and other resources than the Company, and have established reputations relating to product design, development, marketing and support. There can be no assurance that the Company's financial performance and prospects will not be negatively affected if Safety-Kleen, Inc. materially lowers the price to customers of its parts washers, or that the Company will be able to compete successfully. See "Business-Competition." RISKS ASSOCIATED WITH RAPID EXPANSION. The Company has achieved limited growth to date and has limited experience in effectuating rapid expansion or in managing operations which are geographically dispersed. Expansion of the Company's operations will be dependent on, among other things, the Company's ability to achieve significant market acceptance for its products, successfully locate, establish and operate Service Centers, hire and retain skilled management, marketing, technical and other personnel, secure adequate sources of supply on a timely basis and on commercially reasonable terms, successfully manage growth (including monitoring operations, controlling costs and maintaining effective quality controls), and maintain a third party leasing program capable of financing the customer's acquisition of the Company's products in a timely manner. To date, a substantial portion of the Company's products have been installed on a test basis in automotive dealership and repair facilities concentrated in limited geographic markets near the Company's headquarters. The Company's growth prospects will be largely dependent upon its ability to achieve greater penetration in these markets as well as significant penetration in new geographic markets. The Company's prospects could be adversely affected by declines in the automotive sales, maintenance or service industries or the economy generally, which could result in reduction or deferral of capital expenditures by prospective customers. The Company's future growth will also be dependent upon the Company's ability to achieve a sufficient installed base of its products. The Company may also seek to expand its operations through the acquisition of existing companies with customer bases that would appear to have needs for the Company's product line. There can be no assurance that the Company will be able to successfully expand its operations. See "Business-Marketing and Servicing Strategy." DEPENDENCE ON OFFERING PROCEEDS TO IMPLEMENT PROPOSED EXPANSION; POSSIBLE NEED FOR ADDITIONAL FINANCING. The Company's capital requirements have been and will continue to be significant. The Company is dependent on and intends to use a substantial portion of the proceeds of the Concurrent Offering to implement its proposed expansion. The Company anticipates, based on currently proposed plans and assumptions relating to its operations (including the anticipated costs associated with, and timetable for, its proposed expansion), that the proceeds of this offering, together with cash flow from operations, will be sufficient to satisfy its contemplated cash requirements for at least 12 months following the consummation of this offering. In the event that the Company's plans change, its third party lease financing arrangement does not function as anticipated, its assumptions change or prove to be inaccurate or if the proceeds of this offering or cash flow otherwise prove to be insufficient to fund expansion (due to unanticipated expenses, delays, problems, difficulties or otherwise), the Company has plans to restructure its operations to minimize cash expenditures and/or obtain additional financing in order to support its plan of operations. The Company has no current arrangements with respect to, or sources of, additional financing and there can be no assurance that any additional financing will be available to the Company on acceptable terms, or at all. Although the Company believes that available third party lease financing may help offset the Company's cost structure for product rollout, a significant level of demand for the Company's products will, in all likelihood, initially result in significant up-front capital expenditures without corresponding cash flow. Any additional equity financing may involve dilution to the interests of the Company's then existing shareholders. If adequate funds are not available from additional sources of financing, the Company's business may be materially adversely affected. See "Use of Proceeds." RISKS ASSOCIATED WITH PRODUCT FINANCING. The Company has entered into a third party lease financing arrangement with Oakmont Financial Services ("Oakmont"), pursuant to which Oakmont has - 6 - agreed to provide third party leasing services. If the Company breaches certain warranties, Oakmont has the right to require the Company to repurchase the leased unit from Oakmont. To the extent that the Company is required to use a portion of the proceeds of the Concurrent Offering to repurchase units from Oakmont, the Company will have less resources available to it for other purposes. Oakmont has the right to review the creditworthiness of proposed lessees and to withhold financing on the basis of its credit review. While the Company may terminate its agreement with Oakmont if Oakmont consistently refuses to approve the credit of the Company's proposed lessees, any such termination, in the absence of alternative financing programs, could have a material adverse effect on the Company. The Company is not likely to utilize third party financing with respect to units leased under its pilot marketing program with First Recovery and Valvoline Oil Company, but will, instead, use a portion of the proceeds of the Concurrent Offering. See "Use of Proceeds of Concurrent Offering" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." DEPENDENCE ON ENVIRONMENTAL LEGISLATION. In recent years, government authorities have adopted extensive regulations regulating the storage, handling, shipment, recycling and/or disposal of hazardous waste, including contaminated solvent used in industrial parts washers. The Company believes that continuing initiatives of federal, state and local government authorities and increasing storage and hauling costs and disposal fees will create incentives for customers to use the Company's products. Failure by government authorities to continue to implement such legislation or significant relaxation of such requirements or enforcement thereof could have a material adverse effect on the Company's business and prospects. Moreover, while the Company believes that its process results in pure solvent and a residue that is not classified as hazardous waste, but may, rather, be disposed of or utilized as used motor oil, there can be no assurance that environmental agencies will reach the same conclusion. If the residue is classified as hazardous waste, or if used motor oil itself is classified as hazardous waste, the Company will lose a significant competitive advantage. The Company believes that certain of its competitors have attempted and are continuing their efforts to have used motor oil classified as a hazardous waste. See "Business-Industry Overview" and "Risk Factors -- Potential Warranty Expense and Product Liability." DEPENDENCE ON THIRD-PARTY MANUFACTURING ARRANGEMENTS. The Company will be dependent on third parties for its components and for the manufacture of a large portion of its finished units. Although the Company has several alternative manufacturing sources and believes that additional alternative manufacturing sources are readily available, failure by its current manufacturers to continue to supply the Company on commercially reasonable terms, or at all, in the absence of readily available alternative sources, would have a material adverse effect on the Company. The Company is substantially dependent on the ability of its manufacturers, among other things, to satisfy performance and quality specifications and dedicate sufficient production capacity for components within scheduled delivery times. See "Business-Manufacturing and Supply." PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION. The Company holds four United States patents and has four United States patents pending with respect to the Company's products. Two of the five pending patents have been allowed by the U.S. Patent Office and are awaiting issuance. Other parts washing machines which may not be covered by the Company's patents are currently in commercial distribution by the Company's competitors. The Company has applied for international patents in Canada, Mexico, Europe and Japan and anticipates that it will apply for additional patents as deemed appropriate. The Company believes that patent protection is important to its business and that it could be required to expend significant funds in connection with enforcing or defending its patent rights. There can be no assurance as to the breadth or degree of protection which existing or future patents, if any, may afford the Company, that any unissued patent applications will result in issued patents or that patents will not be circumvented or invalidated. It is possible that the Company's existing patent rights may not be valid although the Company believes that neither its products nor processes now infringe or will infringe patents or violate proprietary rights of others. It is possible that infringement of existing or future patents or proprietary rights of others may occur. In the event that the Company's products or processes infringe - 7 - patents or proprietary rights of others, the Company may be required to modify the design or obtain a license. There can be no assurance that the Company will be able to do so in a timely manner, upon acceptable terms and conditions or at all. Failure to do any of the foregoing could have a material adverse effect on the Company. In addition, there can be no assurance that the Company will have the financial or other resources necessary to enforce or defend a patent infringement, proprietary rights violation action or alleged infringement or violation action. Moreover, if the Company's products or processes infringe patents or propriety rights of others, the Company could, under certain circumstances, become the subject of an immediate injunction and be liable for damages, which could have a material adverse effect on the Company. See "Business -Patents, Trademarks and Proprietary Technology." The Company also relies on trade secrets and proprietary know-how and employs various methods to protect the concepts, ideas and documentation of its proprietary information. However, such methods may not afford complete protection and there can be no assurance that others will not independently develop such know-how or obtain access to the Company's know-how, concepts, ideas and documentation. Although the Company has and expects to have confidentiality agreements with its employees, suppliers and appropriate vendors, there can be no assurance that such agreements will adequately protect the Company's trade secrets. Since the Company believes that its proprietary information is important to its business, failure to protect such information could have a material adverse effect on the Company. See "Business-Patents, Trademarks and Proprietary Information." POTENTIAL WARRANTY EXPENSE AND PRODUCT LIABILITY. The Company unconditionally warrants its products to be free of material defects for 60 months. In addition the Company warrants to users that if, for any reason, the residue generated by its System One(Trademark) Washer cannot be recycled and/or disposed of as used oil, the Company will pay for any required recovery and disposal services. Accordingly, the Company could incur significant warranty expenses as a result of defects in its products or a change in federal or state regulations pertaining to the disposal of cleaning residue. Since the Company only recently commenced its planned principal operations, the reserve account it will establish for warranty expense will be derived without the benefit of historical figures and actual warranty expenses could exceed the amount which will be established as a reserve. The Company may also be exposed to potential product liability claims by its customers and users of its products. The Company maintains product liability insurance coverage of $5,000,000 in the aggregate and $5,000,000 per occurrence. The Company believes such insurance provides adequate coverage for the types of products currently marketed by the Company. There can be no assurance, however, that such insurance will be sufficient to cover potential claims or that an adequate level of coverage will be available in the future at a reasonable cost. A partially insured or completely uninsured successful claim against the Company could have a material adverse effect on the Company. See "Business-Sales Financing and Service Programs" and "-Product Liability and Insurance." DEPENDENCE ON KEY PERSONNEL. The success of the Company will be largely dependent on the personal efforts of Pierre Mansur, its Chairman of the Board and President and the inventor of the Company's products, Paul Mansur, its Chief Executive Officer, and other key personnel. Although the Company has entered into employment agreements with Pierre Mansur and Paul Mansur which expire in September 1997, the loss of the services of either of such individuals or certain other key employees, could have a material adverse effect on the Company's business and prospects. The Company has obtained and is the sole beneficiary of "key-man" life insurance on Pierre Mansur and Paul Mansur each in the amount of $1,000,000. The success of the Company is also dependent upon its ability to hire and retain additional qualified marketing, technical and other personnel. There can be no assurance that the Company will be able to hire or retain such personnel. See "Management." CONTROL BY MANAGEMENT. After consummation of this offering and the Concurrent Offering, Pierre Mansur will beneficially own approximately 46% of the Company's outstanding Common Stock. Accordingly, Pierre Mansur will be in a position to effectively control the Company, including the election of all of the directors of the Company. See "Management" and "Principal Shareholders." - 8 - BROAD DISCRETION IN APPLICATION OF PROCEEDS; POSSIBLE BENEFITS TO RELATED PARTIES. Approximately $572,000 (11%) of the estimated net proceeds from the Concurrent Offering has been allocated to working capital and general corporate purposes. Accordingly, the Company's management will have broad discretion as to the application of such proceeds. In addition, the Company may use a portion of the net proceeds allocated to working capital to pay salaries and benefits of executive officers over the 12 months following the consummation of this offering to the extent cash flow is insufficient for such purpose. See "Use of Proceeds of Concurrent Offering." NO PRIOR TRADING MARKET; POTENTIAL VOLATILITY OF STOCK PRICE. Prior to the Concurrent Offering, there has been no public market for the Common Stock, and no assurance can be given that an active trading market will develop or be sustained after this offering. Since there has been no trading market, the initial public offering price of the Common Stock and the conversion price of the Convertible Notes may not bear any relationship to the actual value of the Common Stock. The initial public offering price was established by negotiations between the Company and the Representative, is not necessarily related to the Company's asset value, net worth or other established criteria of value, and may not be indicative of prices that will prevail in the trading market. The stock market has experienced significant price and volume fluctuations that are often unrelated to the operating performance of particular companies. The market price of the Common Stock, similar to that of securities of other development stage companies, is likely to be highly volatile. Factors such as the results of studies and trials by the Company or its competitors, other evidence of the efficacy of products of the Company or its competitors, announcements of technological innovations or new products by the Company or its competitors, changes in governmental regulation, developments in patent or other proprietary rights of the Company or its competitors, including litigation, fluctuations in the Company's operating results and changes in general market conditions could have a significant impact on the future price of the Common Stock. See "Underwriting." EFFECTIVE OF ANTI-TAKEOVER LEGISLATION; POSSIBLE ADVERSE EFFECT OF ISSUANCE OF PREFERRED STOCK ON MARKET PRICE AND RIGHTS OF COMMON STOCK. The State of Florida has enacted legislation that may deter or frustrate takeovers of Florida corporations. The Florida Control Share Act generally provides that shares acquired in excess of certain specified thresholds will not posses any voting rights unless such voting rights are approved by a majority vote of a corporation's disinterested shareholders. The Florida Affiliated Transactions Act generally requires supermajority approval by disinterested directors or shareholders of certain specified transactions between a public corporation and holders of more than 10% of the outstanding voting shares of the corporation (or their affiliates). The Company's Articles of Incorporation authorize the issuance of 1,500,000 shares of "blank check" Preferred Stock ("Preferred Stock") with such designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors is empowered, without shareholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of the Common Stock. The issuance of any series of Preferred Stock having rights superior to those of the Common Stock may result in a decrease in the value or market price of the Common Stock. Holders of Preferred Stock to be issued in the future may have the right to receive dividends and certain preferences in liquidation and conversion rights. The issuance of such Preferred Stock could make the possible takeover of the Company or the removal of management of the Company more difficult, discourage hostile bids for control of the Company in which shareholders may receive premiums for their Common Stock and adversely affect the voting and other rights of the holders of the Common Stock. The Company may in the future issue additional shares of its Preferred Stock. See "Description of Securities." SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. As of the date of this Prospectus, 4,351,309 shares of Common Stock are issued and outstanding. Of such shares, 1,000,000 shares are freely tradeable without restriction or further registration under the Securities Act of 1933, as amended (the "Securities Act"), unless held by an "affiliate" of the Company. The remaining 3,351,309 shares of Common Stock are "restricted securities," as that term is defined under Rule 144 promulgated under the Securities Act. Of such shares, 2,656,729 shares are currently eligible for sale under Rule 144 and the remainder will become eligible - 9 - for sale under Rule 144 at various times prior to June 1998. No prediction can be made as to the effect, if any, that sales or shares of Common Stock or the availability of such shares for sale will have on the market prices prevailing from time to time. Nevertheless, the possibility that substantial amounts of Common Stock may be sold in the public market may adversely affect prevailing market prices for the Common Stock and could impair the Company's ability to raise capital through the sale of its equity securities. See "Shares Eligible for Future Sale." DIVIDENDS. The Company has not paid any cash dividends on its Common Stock and does not expect to declare or pay any cash dividends in the foreseeable future. See "Dividend Policy." DILUTION. The conversion price of $6.75 is substantially higher than the net tangible book value per share of Common Stock. Investors purchasing shares of Common Stock in this offering will incur immediate and substantial dilution of approximately $5.35 per share of Common Stock from the conversion price. See "Dilution." INEXPERIENCE OF REPRESENTATIVE. The Representative commenced operations in 1994 and does not have extensive experience as an underwriter of public offerings of securities. The Representative has acted as the managing underwriter for three public offerings. The Representative is a relatively small firm and no assurance can be given that the Representative will participate as a market maker in the Common Stock. See "Underwriting." FORWARD -- LOOKING STATEMENTS AND ASSOCIATED RISK. This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding, among other items (i) the Company's growth strategies, (ii) the impact of the Company's products and anticipated trends in the Company's business, and (iii) the Company's ability to enter into contracts with certain suppliers and strategic partners. These forward-looking statements are based largely on the Company's expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Company's control. Actual results could differ materially from these forward-looking statements as a result of the factors described herein, including, among others, regulatory or economic influences. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Prospectus will in fact transpire or prove to be accurate. CONCURRENT OFFERING On the date of this Prospectus, a registration statement filed under the Securities Act with respect to a concurrent underwritten public offering by the Company of 850,000 shares of Common Stock, and up to 127,500 additional shares of Common Stock to cover over-allotments, if any, was declared effective by the Securities and Exchange Commission (the "Concurrent Offering"). The Company received net proceeds of approximately $________ from the sale of those shares, and will receive approximately $________ in additional net proceeds if the over-allotment option is exercised in full, after payment of underwriting discounts and commissions and estimated expenses of the Concurrent Offering. - 10 - USE OF PROCEEDS OF CONCURRENT OFFERING The Company will receive no proceeds from the offering of shares under the Prospectus. However, the conversion of the Convertible Notes will result in the extinguishment of $1,012,500 of indebtedness. The net proceeds to be received by the Company from the sale of the shares of Common Stock offered pursuant to the Concurrent Offering are estimated to be approximately $5,271,750 based on an assumed initial public offering price of $7.50 per share (approximately $6,103,688 if the Underwriters' over-allotment option is exercised in full), after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
APPROXIMATE APPROXIMATE PERCENTAGE OF NET APPLICATION OF PROCEEDS DOLLAR AMOUNT PROCEEDS ----------------------- ------------------- ----------------- Development of manufacturing capacity(1)............................. $ 750,000 14% Development of marketing, sales and service centers and service fleet(2)................................................ 1,250,000 24 Development of corporate headquarters and research and development facilities(3)....................................... 700,000 13 Purchase of raw materials and inventory(4)........................... 2,000,000 38 Working capital and general corporate purposes....................... 571,750 11 --------- Total....................................................... $5,271,750 100% ========= === - --------------------------- (1) Represents the estimated cost of developing the Company's manufacturing capabilities, primarily for research and development, testing and initial pre-commercial manufacturing operations, including certain property, plant and equipment costs, set-up costs, hard and soft tooling costs and custom mold development costs over the next 12 months. See "Business - Manufacturing and Supply" and "--Research and Development." (2) Represents the estimated cost of developing sales, service and technological support centers and a fleet of service vehicles throughout Florida and the eastern United States over the next 12 months. See "Business - Marketing and Servicing Strategy." (3) Represents the estimated cost of developing a larger corporate headquarters and research and development facility, including the cost of a client server computer system, over the next 12 months. See "Business - Research and Development." (4) Represents the estimated cost of raw materials and finished goods inventory that may be held by the Company, as well as the cost of units provided under its pilot marketing program with First Recovery and Valvoline Oil Company for which the Company will not use third-party financing.
The foregoing represents the Company's best estimate of its allocation of the net proceeds of the Concurrent Offering based upon the current status of its business operations, its current plans, and current economic and industry conditions. Future events, as well as changes in economic or competitive conditions or the Company's business and the results of the Company's sales and marketing activities may make shifts in the allocation of funds within or between each of the items referred to above necessary or desirable. If the Underwriters exercise the over-allotment option in full, the Company will realize additional net proceeds of approximately $832,000 which will be added to the Company's working capital. The Company anticipates, based on currently proposed plans and assumptions relating to its operations, that the proceeds of the Concurrent Offering, together with projected cash flow from operations, will be sufficient to satisfy its contemplated cash requirements for at least 12 months following the consummation of this offering. In the event that the Company's plans change or its assumptions change or prove to be inaccurate or if the proceeds of this offering or cash flow prove to be insufficient (due to unanticipated expenses or otherwise), the Company may be required to seek additional financing. There can be no assurance that additional financing will be available to the Company on commercially reasonable terms, or at all. Proceeds not immediately required for the purposes described above will be invested principally in United States government securities, short-term certificates of deposit, money market funds or other short-term interest-bearing investments. - 11 - DILUTION The difference between the conversion price per share of Common Stock and the pro forma net tangible book value per share after this offering constitutes the dilution to holders of the Convertible Notes and recipients of shares of Common Stock pursuant to this offering. Net tangible book value per share is determined by dividing the net tangible book value of the Company (total tangible assets less total liabilities) by the number of outstanding shares of Common Stock. At June 30, 1996, the net tangible book value of the Company was $(37,170), or $(.01) per share. After giving effect to the conversion of the Convertible Notes into 150,000 shares of Common Stock, and assuming the sale of 850,000 shares of Common Stock offered in the Concurrent Offering at an assumed initial public offering price of $7.50 per share and deducting underwriting discounts and commissions and estimated expenses of that offering, the pro forma net tangible book value of the Company as of June 30, 1996 would have been $6,100,830, or $1.40 per share. This represents an immediate increase in net tangible book value of $1.41 per share to the existing shareholders and an immediate dilution of $5.35 per share to the holders of Convertible Notes. The following table illustrates this dilution, on a per share basis: Conversion price of Common Stock...................... $6.75 Net tangible book value before offering.......... $(.01) Increase attributable to new investors........... 1.41 Pro forma net tangible book value after offering...... 1.40 ---------- Total dilution to holders of Convertible Notes........ $5.35 If the Underwriters' over-allotment option is exercised in full, the pro forma net tangible book value of the Company as of June 30, 1996 will be $6,932,768, or $1.59 per share. This represents an immediate increase in net tangible book value of $1.60 per share to the existing shareholders and an immediate dilution of $5.15 per share to new investors. The following table summarizes, as of June 30, 1996, the total number of shares of Common Stock purchased from the Company, the total consideration paid and the average price per share paid by the existing shareholders and the new investors.
PERCENT OF SHARES PERCENT OF AGGREGATE TOTAL AVERAGE PRICE PURCHASED TOTAL SHARES CONSIDERATION CONSIDERATION PER SHARE ------------- ------------ ---------------- ------------- ------------- Existing Shareholders............. 3,501,309 80.5% $4,142,500 39.4% $1.18 New Investors..................... 850,000 19.5% 6,375,000 60.6% $7.50 Total.......................... 4,351,309 100.0% 10,517,500 100.0% ============= ============ ================ =============
If the Underwriters' over-allotment option is exercised in full, the new investors will have paid $7,331,250 for 977,500 shares of Common Stock, representing 63.9% of the total consideration for 21.8% of the total number of shares outstanding. - 12 - CAPITALIZATION Set forth below is the capitalization of the Company at June 30, 1996, and as adjusted to reflect the Company's issuance of 850,000 shares of Common Stock in this offering at an assumed initial public offering price of $7.50 per share and the automatic conversion of the Convertible Notes. See Note 5 of Notes to Financial Statements.
JUNE 30, 1996 --------------------------------------------- ACTUAL AS ADJUSTED --------------------- --------------------- DEBT: Short-term debt..................................................... $1,012,500 $ 0 Current installments of long-term debt.............................. 48,786 48,786 Long-term debt, excluding current installments...................... 129,014 129,014 STOCKHOLDERS' EQUITY (DEFICIT): Preferred Stock, $1 par value; 1,500,000 shares authorized; no shares issued and outstanding.......................... 0 0 Common Stock, $.001 par value; 25,000,000 shares authorized; 3,351,309 and 4,351,309 shares issued and outstanding, respectively................................. 3,351 4,351 Additional paid in capital.......................................... 3,560,948 9,697,948 Deficit accumulated during the development stage.................... 3,577,015 3,577,015 --------------------- --------------------- Total stockholders' equity (deficit)........................... (12,716) 6,125,284 --------------------- --------------------- Total capitalization................................................ $1,177,584 $6,303,084 ===================== =====================
- 13 - SELECTED FINANCIAL DATA The selected financial data set forth below has been derived from the financial statements of the Company. The financial statements as of and for the period from November 13, 1990 (inception) through December 31, 1991 and for the years ended December 31, 1992, 1993, 1994 and 1995 have been audited by KPMG Peat Marwick LLP, independent certified public accountants. In the opinion of the Company, the financial information for each of the six month periods ended June 30, 1995 and 1996, which is unaudited, includes all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of its financial position and results of operations for these periods. The statement of operations data for the six month period ended June 30, 1996 is not necessarily indicative of the results of operations that may be expected for the full year. The selected financial data presented below should be read in conjunction with the Company's financial statements, related notes, and other financial information contained in this Prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, -------------------------------------------------------- ----------------------- 1991(1) 1992 1993 1994 1995 1995 1996 --------- --------- ---------- ---------- ---------- ---------- --------- STATEMENT OF OPERATIONS DATA: Operating expenses: General and administrative.. $ 8,502 $ 8,971 $81,886 $268,414 $ 907,393 $ 418,079 $ 622,641 Research and development.... 128,439 31,924 69,256 178,146 393,874 162,732 365,435 --------- --------- ---------- ---------- ---------- ---------- --------- Total operating expenses.. 136,941 40,895 151,142 446,560 1,301,267 580,811 988,076 --------- --------- ---------- ---------- ---------- ---------- --------- Interest (expense), net........ -- (16,299) (16,360) (46,312) (17,878) (26,462) (13,094) Conversion (expense) on redeemable preferred stock.. -- -- -- -- -- -- (344,631) Loss on disposition of property and equipment............... -- (39,560) (18,000) -- -- -- -- --------- --------- ---------- ---------- ---------- ---------- --------- Net (loss)..................... (136,941) (96,754) (185,502) (492,872) (1,319,145) (607,273) (1,345,801) Dividends on redeemable preferred stock............. -- -- (8,328) (53,929) (222,067) (75,066) (147,000) --------- --------- ---------- ---------- ---------- ---------- --------- Net (loss) to common shares.... $(136,941) $(96,754) $(193,830) $(546,801) $(1,541,212) $(682,339) $(1,492,801) ========= ========= ========== ========== ========== ========== ========= Net (loss) per common share(2). $(0.07) $(0.05) $(0.10) $(0.27) $(0.66) $(0.34) $(0.53) ========= ========= ========== ========== ========== ========== ========= Weighted average shares outstanding(2).............. 2,000,000 2,000,000 2,000,000 2,000,000 2,335,140 2,000,000 2,799,071
JUNE 30, 1996 -------------------------------- ACTUAL AS ADJUSTED(3) --------------- -------------- BALANCE SHEET DATA: Working capital........................... $(216,966) $5,921,034 Total assets.............................. 1,562,712 6,628,212 Total liabilities......................... 1,575,428 502,928 Stockholders' equity (deficit): Total stockholders' equity (deficit)... (12,716) 6,125,284 - -------------------------- (1) Information provided for the period from November 13, 1990 (inception) to December 31, 1991. (2) See Note 1 to Notes to Financial Statements for information concerning the computation of net loss per share. (3) Adjusted to reflect (i) the issuance of 150,000 shares of Common Stock as a result of the conversion of the Convertible Notes; and (ii) the sale of 850,000 shares of Common Stock offered in the Concurrent Offering at an assumed initial public offering price of $7.50 per share and the initial application of the estimated net proceeds therefrom. See "Capitalization" and "Use of Proceeds of Concurrent Offering." - 14 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Financial Statements, including the notes thereto, contained elsewhere in this Prospectus. GENERAL Since its inception in November 1990 the Company has devoted substantially all of its resources to research and development programs relating to its full line of self contained, recycling industrial parts washers. The Company was a development stage company through June 30, 1996, and commenced its planned principal operations in July 1996. The Company has been unprofitable since its inception and expects that it will incur significant additional losses at least through December 31, 1996. From the period from inception through June 30, 1996, the Company incurred a cumulative net loss of $3,577,015. The Company anticipates that it will incur losses until such time, if ever, as the Company is able to generate sufficient revenues to offset its operating costs and the costs of its continuing expansion. In light of the material uncertainties in connection with the commencement of the Company's operations, the Company cannot reasonably estimate the length of time before the Company may generate net income, if ever. The Company intends to make its SystemOne(Trademark) Washer and services available to the public through a third party leasing program. The Company will recognize the revenue from the sale of a machine at the time that the equipment is delivered either to the third party lessor or directly by the Company to the lessee. A portion of the revenue (currently estimated at 10% of the sale price per machine) will be accounted for as deferred revenue, and recognized as revenue in respect of the service portion of the agreement over the term of the underlying lease. See "Business - Sales Financing and Servicing Programs" for a description of the Product Financing Agreement the Company has entered into with Oakmont Financial Services. RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995. The Company did not generate any revenues prior to June 30, 1996. The Company's general and administrative expenses increased by $204,562 to $622,641 for the six months ended June 30, 1996 from $418,079 during the comparable period in 1995. The increase is primarily attributable to the Company's hiring of additional management, sales and marketing staff in anticipation of the Company's commencement of its planned principal operations and the Company's grant of an aggregate of 30,000 shares of Common Stock to three directors of the Company in exchange for certain consulting services. The Company's research and development expenses for the six months ended June 30, 1995 and 1996 were $162,732 and $365,435, respectively. The 125% increase is primarily a function of the Company's accelerated prototype development during the latter period, as opposed to the basic and applied research conducted during the prior period. During 1996, the Company manufactured and shipped a number of SystemOne(TM) Washers to various facilities to test market receptivity. The Company's interest expenses for the six months ended June 30, 1995 and 1996 were $38,259 and $24,179, respectively. The Company's interest expense in the six months ended June 30, 1996 decreased by 36% relative to the six months ended June 30, 1995 due to a relative decrease in the indebtedness of the Company. In the six months ended June 30, 1995 and 1996, the Company earned interest income of $11,797 and $11,085 on cash deposits. - 15 - In the six months ended June 30, 1995, the Company incurred a conversion expense of $344,631 in connection with its efforts to induce all the holders of the Company's Series A Preferred Stock to convert their Series A Preferred Stock to Common Stock. As a result of the foregoing, the Company incurred a net loss of $607,273 and $1,345,801 in the six months ended June 30, 1995 and 1996, respectively. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994. The Company's general and administrative expenses for the years ended December 31, 1994 and 1995 were $268,414 and $907,393, respectively. The $638,979 increase in general and administrative expenses was a function of the Company's hiring of additional management and sales staff, increased use of management consulting, engineering, legal and accounting professionals, purchase of more comprehensive insurance policies and increased executive compensation. For the years ended December 31, 1994 and 1995, the Company's research and development expenses were $178,146 and $393,874, respectively. The $215,728 increase in research and development expenses was a reflection of the Company's accelerated research and development efforts and an increased focus on developing prototype products during the latter part of 1995. The Company's interest expense was $46,312 and $63,528 for the years ended December 31, 1994 and 1995, respectively. The Company's interest expense increased by $17,216 as a result of additional interest expenses incurred with respect to equipment financing secured in September 1994. In the year ended December 31, 1995, the Company earned interest income of $45,650 on cash deposits. Due to the factors described above, the Company incurred net losses of $492,872 and $1,319,145 in the years ended December 31, 1994 and 1995, respectively. YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993. The Company's general and administrative expenses were $81,886 in the year ended December 31, 1993 and $268,414 in the year ended December 31, 1994. General and administrative expenses increased by $186,528 primarily in response to increases in the Company's staff and the Company's increased use of management consulting, engineering, legal and accounting professionals. For the years ended December 31, 1993 and 1994, research and development expenses were $69,256 and $178,146, respectively. The Company's expenses for research and development increased by $108,890 as the Company increased the scope of its research and development efforts to a number of product lines. Interest expense for the Company for the years ended December 31, 1993 and 1994 was $16,360 and $46,312, respectively. The Company's interest expense increased by $29,952 primarily as a result of $10,346 of additional interest expense with respect to equipment financing secured in September 1994 and $11,278 of additional interest expense with respect to notes payable. In the year ended December 31, 1993, the Company recognized a $18,000 loss on the disposal of property and equipment. As a result of the foregoing, the Company incurred net losses of $185,502 and $492,872 in the years ended December 31, 1993 and 1994, respectively. - 16 - LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company had a working capital deficiency of $(216,966) and cash and cash equivalents of $640,592. The Company intends to use the proceeds of this offering and the cash generated from operations, if any, to finance its proposed plan of operations. The capital requirements relating to implementation of the Company's business plan will be significant. Based on the Company's current assumptions relating to implementation of its business plan (including the timetable of and the cost associated with development of manufacturing capabilities, a service fleet, a corporate headquarters, and research and development facilities), the Company will seek to develop at least four service centers during the 12 months immediately following this offering. The Company believes that product sales will commence in the third quarter of 1996 and that the proceeds from the Convertible Notes are sufficient to fund working capital requirements until sales of the Company's products reach levels sufficient to fund working capital requirements. The Company believes that its ability to generate cash from operations is dependent upon, among other things, demand for its products and services and the Company's third party leasing arrangement with Oakmont. If the Company's third party leasing arrangements with Oakmont proves to be unsuccessful, and the Company is unable to locate another third party willing to provide comparable third party leasing services, the Company believes that it will be substantially dependent upon the proceeds of the Concurrent Offering to execute its proposed plan of operations over the next 12 months. If the Company's plans change, its assumptions prove to be inaccurate, the capital resources available to the Company otherwise prove to be insufficient to implement its business plan (as a result of unanticipated expenses, problems or difficulties, or otherwise) or in the event the Concurrent Offering is not completed, the Company has plans to restructure its operations to minimize cash expenditures and/or obtain additional financing in order to support its plan of operations. In order to reduce certain of the Company's up-front capital requirements associated with service center and service fleet development, the Company intends to lease service center sites and may seek to the extent possible, to lease rather than purchase certain equipment and vehicles necessary for service center development. There can be no assurance that the Company will have sufficient capital resources to permit the Company to fully implement its business plan. The Company has no current arrangements with respect to, or sources of, additional financing. There can be no assurance that any additional financing will be available to the Company on acceptable terms, or at all. If adequate funds are not available from additional sources of financing, the Company's business may be materially adversely affected. In addition, any implementation of the Company's business plan subsequent to the 12 month period immediately following this offering will require capital resources substantially greater than the proceeds of the Concurrent Offering or otherwise currently available to the Company. The Company's material commitments relate to its obligations to pay the contract manufacturers of its SystemOne(Trademark) Washers, make lease payments pursuant to certain real property and equipment leases and satisfy its financial obligations under three employment agreements. Upon consummation of this offering, the Company will not have any outstanding indebtedness. The Company anticipates that its material commitments will increase significantly upon the consummation of this offering as a result of the Company's planned expansion. See "Business-Manufacturing and Supply" and "-Properties" and "Executive Compensation." Additionally, under certain circumstances, the Company would be required to acquire the lessor's interest of First Recovery in certain leases entered into by First Recovery under a pilot marketing program. Because the Company does not intend to use third-party financing with respect to units leased under the pilot marketing program with First Recovery and Valvoline Oil Company, it will be required to use a portion of the proceeds of the Concurrent Offering to finance those units. See "Business-Marketing and Servicing Strategy." In August 1994, the Company acquired a Trumpf Model 200 TC Computer Numerical Controlled Punch Press (the "Punch Press"). The Company financed the acquisition of the Punch Press pursuant to a finance and security agreement with The CIT Group/Equipment Financing, Inc. ("CIT"). Pursuant to the terms of the finance agreement and security agreement, the Company has agreed to pay CIT an aggregate - 17 - of $341,397 in equal monthly payments of $5,690 over five years. The Company's obligations to CIT are secured by a security interest in the Punch Press. As indicated in the accompanying financial statements, as of June 30, 1996, the Company's accumulated deficit totalled $3,577,015. Since its inception, the Company has financed its operations through a variety of stock and debt issuances and conversions and the sale of property. In November 1990, the Company obtained from Pierre Mansur, its Chairman and President, all rights to certain ongoing research and development and related patents and patents pending, as well as certain real estate and equipment, in exchange for 2,000,000 shares of Common Stock. In January 1991, the Company issued $300,000 in principal amount of its 12% Promissory Notes (the "Promissory Notes"). To raise additional capital and refinance a portion of the Promissory Notes, in September 1993 the Company issued 580,000 shares of 12% Cumulative Redeemable Preferred Stock (the "First Series Preferred Stock") in exchange for $380,000 and the satisfaction of $200,000 in principal amount of the Promissory Notes. In April 1992, the Company sold the commercial property originally contributed to the Company in 1990 for $120,000 in cash and a $200,000 purchase money mortgage ("PMM"), which bore interest at a rate of 12%. In January 1994, the Company assigned its rights to receive interest with respect to the PMM to satisfy the Company's obligation to pay interest with respect to the remaining outstanding Promissory Note. The principal amount of the PMM was paid to the Company on April 24, 1995. In November 1994, the Company borrowed $500,000 pursuant to a 12% Secured Convertible Promissory Note (the "Secured Note") and in April 1995 the Company issued 490,000 shares of 12% Cumulative Convertible Preferred Stock (the "Series A Preferred Stock") in exchange for $1,950,000 in cash and the satisfaction of the Secured Note. To minimize the Company's dividend obligations, in May 1995 the Company issued a notice of redemption with respect to the First Series Preferred Stock and, subsequently, all of the outstanding shares of First Series Preferred Stock and accrued interest thereon were converted into an aggregate 656,729 shares of Common Stock. In May 1996, the Company issued 20,000 shares of Common Stock in satisfaction of the remaining outstanding $100,000 in principal amount of the Promissory Notes. In June 1996, the Company issued 628,180 shares of Common Stock in exchange for all of the Series A Preferred Stock and accrued dividends thereon. Pursuant to a revolving line of credit dated June 1, 1990, Mr. Paul Mansur advanced the Company an aggregate of $150,000 (the "Debt") between June 1, 1990 and May 31, 1996. On December 31, 1994 and December 31, 1995, the Company paid Mr. Paul Mansur $34,814 and $12,000, respectively, in satisfaction of interest owed with respect to the Debt. On May 31, 1996, the Company paid Mr. Paul Mansur $150,000 and $5,000 in satisfaction of the outstanding principal balance of and the interest owed with respect to the Debt. In June 1996, the Company issued (the "Private Financing") $1,012,500 in principal amount of Convertible Notes, bearing interest at the rate of 4% per annum through September 30, 1996 and thereafter until maturity at the rate of 12% per annum, and convertible into Common Stock at a conversion price of $6.75 per share. Pursuant to the provisions of the Convertible Notes, the entire outstanding principal amount thereof will be automatically converted into 150,000 shares of Common Stock upon the consummation of this offering. Each of Environmental Technologies BVI, Limited, a consulting firm of which Dr. Jan Hedberg, a director of the Company, is Managing Director, Mr. Joseph E. Jack, a director of the Company, and Mr. Elias F. Mansur, a director of the Company, acquired Convertible Notes in the principal amount of $101,250, and, upon consummation of this offering, each of them will receive 15,000 shares of the Company's Common Stock pursuant to the automatic conversion thereof. - 18 - BUSINESS GENERAL The Company has developed and obtained patent protection with respect to a full line of self-contained, recycling industrial parts washers that incorporate innovative, proprietary waste minimization technologies and represent a significant advance over currently available machinery and processes. Focusing on waste minimization rather than its removal and recovery, the Company believes that its equipment will have a major impact on the industrial parts cleaning industry and will have a broad appeal to customers, because its equipment, unlike the machines now in use, facilitates efficient and economical compliance with environmental regulations, minimizes waste disposal requirements, enhances cleaning solution utilization, and increases worker safety and productivity. Most machinery and equipment require oil lubrication to function properly. Removal of lubrication oils from tools and parts during automotive, aviation, marine and general industrial maintenance, service and repair operations is typically effected through the use of mineral spirit solvents which become contaminated in the cleaning process. Under the most common current practice, the solvent becomes more contaminated (and less effective) with repeated use, and, when it is saturated with oil, sludge and other contaminants as a result of the cleaning process (and frequently classified as a hazardous waste under federal and state regulations), it must be stored on site until pick-up, when pure solvent is delivered and the contaminated solvent is, generally, shipped to regional refining facilities. This off-site recycling program is typically scheduled on four to sixteen week cycles and involves both the utilization of progressively more contaminated solvent for cleaning operations until the solvent is too contaminated for use, and thereafter, the on-site storage of the hazardous solution until the periodic waste recovery service. By contrast, the Company's products allow the use and re-use of the solvent by removing all the contaminants from the solvent within the cleaning unit itself, minimizing the volume of waste by-product and providing pure solvent to the customer on demand, without the costly and dangerous storage and transportation of hazardous waste. Moreover, the small amount of waste by-product yielded in the distillation process utilized by the Company if products can typically be recycled and/or disposed of together with the customer's used motor oil, which is generally not classified as a hazardous waste. Substantially all of the Company's target customers have established systems for the handling, transportation, recycling and disposal of used motor oil. The Company's products have been extensively tested and proven effective by independent engineering concerns and testing laboratories. STRATEGY The Company's strategy is to focus initially on the manufacture, marketing and sale of its SystemOne(TM) Washer because of the anticipated size of the market for the product. The Company anticipates that the product should be able to achieve fairly rapid market penetration because of its technological, economic and environmental advantages and its relatively low price point compared to competitive equipment. Once the manufacturing and marketing programs for the SystemOne(TM) Washer are fully implemented, it will commence marketing its other products for which it has continued its research and development. The Company hopes to rapidly penetrate the industrial parts cleaning market by entering into large quantity contracts with target customers which have already established a national or regional presence, and are able to exploit more fully the economic and environmental benefits of the Company's products. The Company expects to pursue a national expansion program, through internal growth utilizing a network of regional distribution and service centers, through a strategic alliance with a national distributor, if one is available on favorable terms, or through a combination of the two. The Company is carrying out an internal growth program in Florida, where, in addition to its regional service center in Miami, it plans to establish at least four additional centers during the 12 months immediately following this offering, in Orlando, Tampa, Jacksonville and West Palm Beach. In August, the Company will commence a test of a strategic marketing alliance by entering into a pilot program with First Recovery and Valvoline Oil Company, two - 19 - affiliates of Ashland Inc., a multinational oil refiner and distributor of automotive related products, including Valvoline Oil and Ashland 140 Solvent, one of the brands of mineral spirits solvent used in the Company's SystemOne(Trademark) Washer. Under the pilot program, First Recovery will be the exclusive distributor of the SystemOne(Trademark) Washer in the Dallas/Ft. Worth and Houston markets. The initial term of the program is one year. If the arrangement proves successful, the Company expects to negotiate a broader agreement, possibly including a national distribution program. The Company expects to continue its emphasis on research and development even after its initial products are commercialized. The Company believes that its technology and its emphasis on waste minimization should yield product advances with broad market applications beyond the Company's current target market. INDUSTRY OVERVIEW The Company believes the chemical industrial parts cleaning industry has grown primarily in response to the demand for means of removing lubrication oils and other contaminants from tools and parts during automotive, aviation, marine and general industrial maintenance, service and repair operations. Based on financial and trade journal reports, the Company believes that in 1996 businesses in the United States incurred more than $1 billion in expenses to clean industrial parts using chemical cleaning techniques. Industrial parts cleaning machines are used by automotive, aviation and maritime service, repair and rebuilding facilities, gas stations, transmission shops, parts remanufacturers, machine shops, and general manufacturing operations of every size and category requiring parts cleaning. The Company believes that the level of demand for the different types of industrial parts cleaning machines and services is and will continue to be a function of, among other things: (1) the effectiveness of the technology; (2) the cost of the machines and service; (3) the time and costs associated with documenting compliance with applicable environmental and other laws; (4) the safety and environmental risks associated with the machine and service; (5) customer service; and (6) the difficulty in handling the regulated substances used and/or generated by competitive machines. PRODUCTS AND SERVICES The Company product line includes a variety of self-contained recycling industrial cleaning and washing equipment, all of which incorporate proprietary waste minimization technology with respect to which the Company has obtained or applied for patent protection. The Company expects that all the products listed below will be available for commercial exploitation at various times prior to December 31, 1998. All of the Company's products utilize technology that (i) provides continuously recycled cleaning solution during the cleaning process, (ii) eliminates the necessity for continual replacement and disposal of contaminated cleaning solution and residues and (iii) facilitates practical and cost effective compliance with environmental laws and regulations. The Company anticipates that it will offer its various parts washing products to commercial users at prices which range from $2,000 to $25,000 per unit. SYSTEMONE(Trademark) WASHER. The first of the Company's products to be available in commercial quantities is the SystemOne(Trademark) Washer. The SystemOne(Trademark) Washer line provides users with pure mineral spirit solvent for parts and tools cleaning purposes, utilizing a low-temperature vacuum distillation process to recycle the used solvent within the SystemOne(Trademark) Washer, so that the solvent may be reused, on demand, without any need for off-site processing. The SystemOne(Trademark) Washer minimizes the volume of waste by-product and eliminates the need for storage and disposal of the hazardous waste solvent necessitated by the most widely-used current treatment method. The Company's SystemOne(Trademark) Washer consists of one or two washing sinks mounted at standing level on top of a metal cabinet; a hinged lid on top of the washing sink to minimize evaporation of solvent; - 20 - a five gallon primary solvent holding tank; a distillation unit which contains a residue reservoir; and a 30-gallon secondary solvent holding tank. The SystemOne(Trademark) Washer utilizes a manually operated hose and scrubber which directs the flow of solvent to the part being cleaned. The distillation unit separates the solvent from the contaminants that accumulate in the solvent as a result of use by heating the solvent solution in a vacuum to a temperature at which the solvent, but not the residue, vaporizes; and then, cooling the solvent vapor so that the vapor condenses and is converted back into a liquid. The distilled solvent is channeled to the secondary solvent holding tank for future use. Accordingly, the solvent may be repeatedly used, distilled and reused without need for off-site distillation or processing. The residue is collected and held in the residue reservoir until final disposal. With respect to SystemOne(Trademark) Washers which are used in accordance with their intended purpose, the Company believes that the residue may be legally recycled and/or disposed of in the same manner that used oil is recycled and/or disposed of. See "-Government Regulations." The Company believes that substantially all of its target customers currently have established systems for the handling, transportation, recycling and disposal of used oil. In those instances in which the residue may not be recycled as used oil, the residue, but not the distilled solvent, shall be periodically picked up, recycled and/or disposed of by a third party. The Company warrants to users that if, for any reason, the residue generated by its SystemOne(Trademark) Washer cannot be recycled and/or disposed of as used oil, the Company will pay for any required recovery and disposal services. The Company does not intend to be in the business of handling, transporting, recycling and/or disposal of residue. If it is required under its warranty to pay for recovery and disposal, it intends to retain a third party to provide the required services. The Company has also developed and obtained patent protection with respect to a general parts washer which utilizes an aqueous based cleaning solution. The Company is in the process of evaluating when it will commence the commercial production and marketing of its aqueous based parts cleaner. The target market for SystemOne(Trademark) Washers are automotive, aviation and maritime service, repair and rebuilding facilities, gas stations, transmission shops, parts remanufacturers, machine shops, and general manufacturing operations of every size and category requiring small parts cleaning. The Company anticipates that the SystemOne(Trademark) Washer will require service approximately four times a year for replacement of solvent lost to evaporation or spillage and general maintenance requirements. See "Marketing and Services Strategy" for additional information regarding the servicing of the SystemOne(Trademark) washers. OTHER PRODUCTS. MULTIPROCESS POWER SPRAY WASHER is currently manufactured and marketed on a limited basis, and integrates three processes in one self-contained machine; a power spray wash process, a recycling/reclamation process and a thermal oxidation process. The Power Spray Washer is able to accommodate large and bulky parts or units that are too large for the SystemOne(Trademark) Washer. The target market for power spray washers are automotive, aviation and maritime maintenance, repair and rebuilding facilities, parts remanufactures, machine shops, transmission shops, and all facets of general manufacturing requiring maintenance and repair of mechanical equipment. MULTIPROCESS SPRAY GUN WASHER is scheduled for commercial introduction in late 1996. It incorporates the Company's recycling/reclamation capabilities for paint thinner recovery. The target market for spray gun washers are automotive, aviation and maritime paint shops and all general manufacturing operations that utilize paint. The Company anticipates that the auto paint industry will represent a substantial market. The MultiProcess Spray Gun Washer facilitates compliance with rigorous environmental disposal regulations for the paint industry. - 21 - MULTIPROCESS IMMERSION WASHER is scheduled for commercial introduction in 1997. It integrates an immersion wash process, a recycling/reclamation process and a thermal oxidation process in one self-contained machine. The MultiProcess Immersion Washer is designed for cleaning of complex parts containing substantial integral and highly inaccessible passages requiring a total immersion washing. The primary target market for immersion washers are radiator rebuilding shops as well as automotive, aviation and maritime maintenance, repair and rebuilding facilities, parts remanufactures, machine shops, transmission shops, and all facets of general manufacturing requiring maintenance and repair of mechanical equipment. MINIDISPOSER is scheduled for commercial introduction in 1998. It is a compact and portable mini-thermal oxidizer developed as a practical and efficient means for the disposal of contaminants by thermal oxidation within a unit measuring only one cubic foot. The MiniDisposer will be marketed both as optional equipment with the SystemOne(Trademark) Washer and as a stand alone mini-thermal oxidizer. The Company believes that the size and scope of the market for the MiniDisposer is substantial and diversified and includes industrial, commercial and consumer applications that generate small contaminant waste by-products. The Company continues to explore potential markets in medical, restaurant and other commercial and consumer applications. COMPETITION The industrial parts cleaning industry is highly competitive and dominated by a large company, Safety-Kleen Inc. ("Safety-Kleen"), which has substantially greater financial and other resources than the Company. Safety-Kleen services the parts cleaning industry through a "closed-loop" recycling system in which contaminated solvent is removed for recycling and fresh solvent is delivered on a periodic basis. There can be no assurance that Safety-Kleen will not develop or acquire technology similar to or different from the Company's that would allow it to provide an on-site recycling service. To the best of the Company's knowledge, no other company is currently commercially marketing a recycling parts washer with comparable characteristics. There can be no assurance that Safety-Kleen or other competitors will not acquire or develop patent rights with respect to a recycling parts washer which are competitively superior to the Company's patent rights. See "-Patents, Trademarks and Proprietary Technology." The Company believes that certain of its target customers have attempted to enhance the capabilities of their existing industrial parts washers by acquiring machines capable of distilling solvent used in and removed from the parts washers. Although there are a wide variety and types of such machinery currently available to the public, the Company believes its SystemOne(Trademark) Washers provide superior service at a lower cost. The Company believes that Safety-Kleen services a significant portion of the parts washing machines currently in use. Based upon market studies conducted by the Company, the Company believes that no other competitor accounts for more than 2% of the industrial parts washer market in the State of Florida or the United States. According to Safety-Kleen's Annual Report on Form 10-K for the year ended December 31, 1995 (the "Safety-Kleen Annual Report"), Safety-Kleen was the world's largest provider of parts washing services and one of the world's largest collectors and re-refiners of used oil. According to the Safety-Kleen Annual Report, at December 31, 1995, Safety-Kleen had Shareholders' Equity of approximately $433.0 million and, in the year ended December 31, 1995, Safety-Kleen had aggregate revenues of approximately $859.0 million, including revenues of approximately $240.0 million from its automotive/retail parts cleaning service and $119 million from its industrial parts cleaning service, and served its customers in North America and Europe through a network of 235 branch facilities. At December 31, 1995, Safety-Kleen was providing services for approximately 493,000 parts washers for customers in the United States, of which approximately 375,000 were owned by Safety-Kleen and 118,000 were owned by its customers. - 22 - The Company believes that its SystemOne(Trademark) Washer will compete favorably with its competitors on the basis of, among other things, (1) the effectiveness of the technology; (2) cost; (3) the time and cost associated with documenting compliance with applicable environmental and other laws; (4) the safety and environmental risks associated with the machines and service; (5) customer service; and (6) the difficulty in handling the regulated substances used and/or generated by competitive machines. GOVERNMENT REGULATION The Company believes that federal and state laws and regulations have been instrumental in shaping the industrial parts washing industry. Federal and state regulations dictate and restrict to varying degrees what types of cleaning solvents may be utilized, how a solvent may be stored and utilized, and the manner in which contaminated solvents may be generated, handled, transported, recycled and disposed of. Although the federal and state laws and regulations discussed below regulate the behavior of the Company's customers, and not the Company, the Company believes that customer demand for its SystemOne(Trademark) Washer is partially a function of the legal environment in which the Company's customers conduct business. The Company's SystemOne(Trademark) Washer was designed to help minimize the cost of complying with existing federal and state environmental laws and regulations. Any changes, relaxation or repeal of the federal or state laws and regulations which have shaped the industrial parts washing industry may significantly affect demand for the Company's products and the Company's competitive position. REGULATION OF SOLVENT TYPES. Federal and state regulations have restricted the types of solvents that may be utilized in industrial parts cleaning machines. Prior to December 1995, methyl chloroform was a widely used cleaning solvent. The Clean Air Act of 1990 mandated the elimination of methyl chloroform by December 1995. REGULATION OF HANDLING AND USE OF SOLVENTS. Stoddard solvents, more commonly known as mineral spirits and solvent naphtha, are the cleaning solvents typically used in the industrial parts washers of the Company's closest competitors. The Company intends to use mineral spirits with a minimum of 140 degrees fahrenheit ignitable limits in its SystemOne(Trademark) Washer. Such mineral spirits do not exhibit the ignitability characteristic for liquid hazardous wastes as defined in the Resource Conservation and Recovery Act of 1976, as amended, and the implementing regulations of that statute adopted by the United States Environmental Protection Agency (the "EPA") (collectively, "RCRA"). Certain machines of the Company's competitors use mineral spirits with lower ignitable limits, which may, after use, render such mineral spirits subject to regulation as a hazardous waste. The Company believes that the ability to recycle the mineral spirits used in its SystemOne(Trademark) Washer provides an economic benefit to the Company's customers by allowing them to avoid the expenses and potential liability associated with the disposal of such solvent as a hazardous waste. See "Government Regulation -Regulation of Generation, Handling, Transportation and Disposal of Contaminated Solvents." Federal, state and many local governments have adopted regulations governing the handling, transportation and disposal of such solvents. On the federal level, under the Hazardous Materials Transportation Act (HMTA), the United States Department of Transportation has promulgated requirements for the packaging, labeling and transportation of mineral spirits in excess of specified quantities. The Company does not intend to transport mineral spirits in quantities that would trigger the HMTA requirements. Relative to the handling and disposal of mineral spirits, many states and local governments have established programs requiring the assessment and remediation of hazardous materials that have been improperly discharged into the environment. Liability under such programs is possible for unauthorized release of mineral spirits in violation of applicable standards. Civil penalties and administrative costs may also be imposed for such violations. - 23 - REGULATION OF GENERATION,TRANSPORTATION, TREATMENT, STORAGE AND DISPOSAL OF CONTAMINATED SOLVENTS. The generation, transportation, treatment, storage and disposal of contaminated solvents is regulated by the federal and state governments. At the federal level, the Resource Conservation and Recovery Act authorized the EPA to develop specific rules and regulations governing the generation, transportation, treatment, storage and disposal of hazardous wastes as defined by the EPA. The EPA's definition of hazardous waste appears under Chapter 40 CFR Part 261. The Company believes that none of the residue by-products, the used solvent before distillation or the solvent recycled in a SystemOne(Trademark) Washer used in accordance with its intended purpose and instructions is subject to regulation as a "hazardous waste." In contrast, the Company believes that the mixture of solvent and contaminants which is periodically recovered from the machines of many of its competitors is subject to regulation as "hazardous waste." The Company believes that the ability to recycle and dispose of its residue by-product as used oil rather than as a hazardous waste is economically attractive to the Company's customers for a number of reasons. The Company believes that substantially all of its target customers currently have established systems for the handling, transportation, recycling and/or disposal of used oil. Accordingly, the classification of the residue as used oil would enable the Company's customers to: (1) dispose of or recycle the residue at no significant additional cost; and (2) avoid certain costs associated with establishing and disposing of wastes in compliance with a hazardous waste disposal system. Even if the residue by-product was required to be handled, transported, recycled and/or disposed of as a hazardous waste, the fact that the SystemOne(Trademark) Washer effects a substantial reduction in the volume of waste product requiring disposal would still serve to minimize disposal costs. The Company believes that solvent which has been used and is being held in a SystemOne(Trademark) Washer prior to distillation is not a "waste" and is not subject to regulation as a hazardous waste. RCRA establishes the basic framework for federal regulation of hazardous waste. RCRA governs the generation, transportation, treatment, storage, and disposal of hazardous waste. In contrast to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), which is discussed below, RCRA is designed to anticipate and prevent harm to human health and the environment, rather than to respond to the release of hazardous wastes. RCRA requires that facilities that generate, treat, store or dispose of hazardous wastes comply with certain operating and permitting standards. RCRA provides standards for permitting, maintenance and operation of facilities handling hazardous wastes, including requirements for testing and maintenance of equipment, contingency plans and emergency procedures, secondary containment, recordkeeping and reporting to government agencies. The recordkeeping and reporting requirements of RCRA are significant. Before transportation and disposal of hazardous wastes off-site, generators of such waste must package and label their shipments consistent with detailed regulations and prepare a manifest to be filed with the appropriate governmental agency identifying the material and stating its destination. The transporter must deliver the hazardous waste in accordance with the manifest and to a facility with an appropriate RCRA permit (a "TSD Facility"). Failure to comply with the manifesting requirements may result in the imposition of civil and/or criminal penalties. Many states and local governments have adopted regulatory programs which parallel the RCRA regulatory system, many of which programs are in certain ways more restrictive and burdensome than the RCRA system. With regard to regulation of "used oil", the EPA ruled in 1992 that used oil is not a hazardous waste under RCRA. Like the RCRA regulations pertaining to hazardous wastes, the EPA's used oil regulations provide standards for permitting, the maintenance and operation of used oil facilities, including requirements for testing and maintenance of equipment, contingency plans and emergency procedures, secondary containment, recordkeeping and reporting. However, there are some material differences between RCRA's regulation of hazardous waste and used oil. In contrast to hazardous wastes, used oil need not be - 24 - processed solely at sites with treatment, storage and disposal permits. In addition, the generators of used oil are not required to file a shipping manifest with government agencies with respect to each shipment of used oil. Many state and local governments have adopted regulatory programs which parallel the EPA's program for regulating used oil, many of which programs are in certain ways more restrictive or burdensome than the EPA's program. For instance, certain state and local governments continue to regulate used oil as a hazardous waste. CERCLA, as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), sets forth national policy and procedures for containing and removing releases of hazardous substances, and identifying and remediating sites contaminated with hazardous substances. CERCLA created an $8.5 billion fund (the "Superfund"), financed from taxes on petroleum and various chemicals, to be administered by the EPA to fund cleanup of hazardous waste sites. SARA significantly expanded the scope of hazardous waste cleanup and imposed more stringent cleanup requirements. The Superfund's most notable objective, however, is to provide criteria and financial assistance for site cleanups and to impose liability on parties responsible for such contamination - namely, owners and operators of vessels or facilities from which such releases occur, and persons who generated, transported, or arranged for the transportation of hazardous substances to a facility from which a release or threatened release occurs. Most states, including Florida, have created programs similar to Superfund. These state programs are principally designed to help finance the state's share of remediation costs of sites under the federal Superfund and to finance cleanups at state sites that are not considered a priority for remediation under the federal program. The CERCLA definition of hazardous substances provides a major exception for petroleum, including used oil if recycled. However, liability under CERCLA is possible if petroleum products are released that contain hazardous substances as additives or that are tainted with hazardous substances during their use and disposal. The Company believes that the demand for its SystemOne(Trademark) Washer is enhanced as a result of certain federal and state environmental laws and regulations. Although the demand for industrial parts cleaning machines and services may be substantial in certain international markets, the level of demand for the Company's SystemOne(Trademark) Washer may not be substantial in certain countries as a result of permissive regulatory systems which allow the use of less environmentally stringent cleaning and waste disposal methods. MANUFACTURING AND SUPPLY The Company manufactures certain of its SystemOne(Trademark) Washers at its 10,000 square foot manufacturing facility located in Miami, Florida, at which all manufacturing operations, including design, metal cutting, bending and welding, painting and assembly can be performed. The Company has acquired all of the machinery necessary to manufacture SystemOne(Trademark) Washers. The Company believes that it can produce up to 200 SystemOne(Trademark) Washers a month at its manufacturing facility. The Company has secured third parties capable of manufacturing the balance of the SystemOne(Trademark) Washers needed to meet anticipated customer demand for the next 12 months. The Company intends to secure additional manufacturing capacity as the need arises. On May 7, 1996, the Company entered into an agreement (the "Supply Agreement") with a supplier (the "Supplier") pursuant to which the Supplier agreed to supply to the Company, at the Company's election, between 3,000 and 5,000 SystemOne(Trademark) Washers at established prices and in accordance with a delivery schedule. The Supply Agreement delivery schedule provides for the monthly delivery of a minimum of 100, 200, 300 and 400 SystemOne(Trademark) Washers in the quarters commencing August 1996, November 1996, February 1997 and May 1997, respectively, and for the monthly delivery of a maximum of 500 SystemOne(Trademark) Washers after December 1996. The Supply Agreement provides for adjustments in the established pricing - 25 - schedule based upon certain reductions in the cost of production and/or increases in the cost of sheet metal. The Company has ordered a prototype SystemOne(Trademark) Washer manufactured by the Supplier and has paid the first of three $50,000 payments toward a $150,000 advance (the "Advance"), which amount will be credited against future purchases under the Supply Agreement at a rate of $50 per SystemOne(Trademark) Washer. The Supply Agreement provides that the Supplier will, based upon the Company's specifications and drawings, manufacture the SystemOne(Trademark) Washers in its factory and manufacture such items exclusively for the Company. According to the Supply Agreement, the Supplier is expressly responsible for all sheet metal fabrication, painting, assembling and quality assurance testing associated with the manufacture of SystemOne(Trademark) Washers. The Supply Agreement requires the Company to provide the Supplier with all of the components and raw materials, except for sheet metal, necessary to manufacture SystemOne(Trademark) Washers. In addition, the Supply Agreement requires the Company to acquire and provide to the Supplier for use all of the hard tooling required to manufacture the SystemOne(Trademark) Washers. The Supply Agreement provides that the Company may unilaterally terminate the contract in whole or in part for cause or for convenience. In the event the Supply Agreement is terminated by the Company for convenience, the Supplier will be entitled to reimbursement of the costs it has incurred through the date of termination and, if such termination occurs prior to the delivery of 3,000 SystemOne(Trademark) Washers, the Supplier will be entitled to payment for SystemOne(Trademark) Washers produced through the date of termination and retain any unapplied amount of the Advance. The Company has retained the right to secure other contract manufacturers of SystemOne(Trademark) Washers. Although, at present, the Company seeks to avoid the transaction and opportunity costs associated with identifying, securing and training another SystemOne(Trademark) Washer manufacturer, the Company does not believe that it is dependent upon the Supplier to manufacture SystemOne(Trademark) Washers and that other manufacturers are readily available. The Company has entered into negotiations with a major contract manufacturer with a 2 million square foot facility and 75 years of experience to provide the manufacturing capacity needed to meet anticipated future customer demand. No assurances can be given that the Company and the major contract manufacturers will ever enter into a binding contract. The SystemOne(Trademark) Washer is an assembly of raw materials and components all of which the Company believes are readily obtainable in the United States of America. The Company does not believe that it nor the Supplier is dependent upon any of their respective current suppliers to obtain the raw materials and components necessary to assemble and manufacture SystemOne(Trademark) Washers. The Company is capable of manufacturing its other products in the amounts required for testing and test marketing in its own manufacturing facility. MARKETING AND SERVICING STRATEGY In order to create awareness of its products and test the demand for them, commencing in December 1995, the Company placed an aggregate of 47 SystemOne(Trademark) Washers in 38 automotive dealerships, municipal and private fleet maintenance facilities, repair facilities and other users of parts cleaning equipment in South Florida. The demonstrator units were provided at no charge. The test program was conducted primarily to enable the Company to gauge the demand for its products. Notwithstanding the absence of a formal marketing program during the test period, the Company has, to date, received orders from a number of facilities in which the machines were placed, including Florida Detroit Diesel MTU (46 Units); Kelly Tractor Company (23 units) and Pantropic Power Products (25 units), the South Florida Caterpillar dealers; United States Postal Service (2 units); Southern Sanitation, a subsidiary of Waste Management, Inc. (5 units); Broward County Mass Transit (25 units); and a number of South Florida - 26 - automobile dealerships (an aggregate of 54 units). The Company commenced commercial sales and delivery of units in July 1996 at an approximate price per unit of $2,700. In a parallel marketing strategy, to test the viability of the strategic marketing alliance concept for its products, in August 1996 the Company will commence a pilot program with First Recovery and Valvoline Oil Company, two affiliates of Ashland Oil, pursuant to which First Recovery will serve as the exclusive distributor for the SystemOne(Trademark) Washer in the Dallas/Ft. Worth and Houston markets. The program, whose initial term is one year, but is cancelable by either party on 60 days notice, sets forth a schedule for the purchase of 1,000 units by First Recovery during the first year. First Recovery is obligated to provide routine service to customers. Upon termination of the program, First Recovery will have the option to require the Company to assume the leases it has entered into with its customers and to pay First Recovery, on a discounted basis, the profit it would have realized under such leases. If First Recovery does not exercise that option, it will have the additional option, for one year after termination of the program, to lease up to four times the number of units it leased under the program, but only to its existing customers. Subject to its assessment of First Recovery's performance, the Company will consider entering into a more extensive distribution agreement. The Company also intends to expand the geographic scope of its operations through its internal marketing operations, initially focusing on Florida and then expanding to other regions. In addition to its sales and service operations in Miami, the Company intends to establish sales, service and technical support service centers in Orlando, Tampa, Jacksonville and West Palm Beach, Florida during 1996 to support its proposed operations in Florida. The Company will market and service the SystemOne(Trademark) Washers it places with customers with its own marketing, service and technical support personnel. The Company believes it will retain at least 15 marketing, service and technical support personnel to support its proposed operations in Florida over the next 12 months. The Company intends to continue to generate consumer awareness of its SystemOne(Trademark) Washer through the efforts of its sales force, general advertisements in trade publications, and participation in trade conventions. SALES FINANCING AND SERVICING PROGRAMS Initially, the Company intends to make its SystemOne(Trademark) Washers available to the public through a third party leasing program. The Company entered into an agreement (the "Product Financing Agreement") with Oakmont Financial Services ("Oakmont") on May 28, 1996 pursuant to which Oakmont agreed to provide third party leasing services. Pursuant to the Product Financing Agreement, the Company is to provide Oakmont certain information with respect to each proposed customer for which a third party lease is sought, including credit information with respect to each proposed lessee. Oakmont may reject a lease application if, in its sole discretion, the proposed transaction does not comply with Oakmont's then applicable criteria. If Oakmont elects to provide lease financing, Oakmont will purchase the SystemOne(Trademark) Washer in the manner and for an amount agreed to by the Company and Oakmont from time to time, upon Oakmont's receipt of required documentation. The Product Financing Agreement provides that, upon the customer's satisfaction of all of its lease payment obligations to Oakmont, the Company may, at its option, repurchase the subject equipment from Oakmont at a cash purchase price equal to the fair market value of the subject equipment plus applicable sales tax. The Product Financing Agreement states that the fair market value of a SystemOne(Trademark) Washer shall be determined by the mutual agreement of the Company and Oakmont or, if such an agreement is not reached, by an appraiser selected by mutual agreement of the Company and Oakmont. Under the Product Financing Agreement, the Company has agreed, for a fee, to utilize a reasonable and non-discriminatory approach to assist Oakmont in reselling any SystemOne(Trademark) Washers with respect to which a customer has failed to discharge its payment obligations to Oakmont. The Product Financing Agreement states that Oakmont does not have recourse against the Company for customer failures to - 27 - discharge their obligations to Oakmont unless the Company has breached and failed to cure certain warranties. In such event, the Product Financing Agreement requires the Company to purchase from Oakmont the SystemOne(Trademark) Washer and Oakmont's rights under the financing agreements with the customer for an amount equal to the sum of all lease payments then due and owing under the lease, all lease payments payable from the date of default to the end of the lease term and twenty percent of the equipment cost, less any applicable deposit which may be retained by Oakmont. Where required by applicable law, the foregoing amounts are required to be calculated using the discounted present value of the subject lease payments. The Product Financing Agreement provides for a term of one year, which automatically renews for successive one-year terms. Under the Product Financing Agreement, either the Company or Oakmont may terminate the agreement with or without cause upon 60 days notice, without affecting the rights and obligations of either party with respect to previous sales. In addition, if Oakmont declines any five lease applications within a 30-day period, which lease applications are accepted and funded by a third party on terms declined by Oakmont, the Company may, upon 10 days notice, terminate the Product Financing Agreement. PATENTS, TRADEMARKS AND PROPRIETARY TECHNOLOGY The Company holds United States patents relating to its SystemOne(Trademark) Washer, Power Spray Washer, Spray Gun Washer and Immersion Washer and anticipates that it will apply for additional patents it deems appropriate. The Company has applied for international patents in Canada, Japan, Europe and Mexico. The Company's patent with respect to its SystemOne(Trademark) Washer was issued on September 27, 1994 and will expire on September 26, 2011. The Company has three patents pending with respect to its SystemOne(Trademark) Washer, one of which was allowed by the U.S. Patent Office on April 2, 1996 and is awaiting issuance. The Company's patent with respect to its Power Spray Washer was issued on January 11, 1994, and expires on January 10, 2011. The Company's patent with respect to its Spray Gun Washer was issued on February 14, 1995, and expires on February 13, 2012. The Company's patent with respect to its Immersion Washer was issued on May 21, 1996 and expires on May 20, 2013. The Company's patent with respect to its MiniDisposer was allowed by the U.S. Patent Office on June 26, 1996 and is awaiting issuance. The Company believes that patent protection is important to its business. There can be no assurance as to the breadth or degree of protection which existing or future patents, if any, may afford the Company, that any patent applications will result in issued patents, that patents will not be circumvented or invalidated or that the Company's competitors will not commence marketing self-contained washers with similar technology. It is possible that the Company's existing patent rights may not be valid although the Company believes that its patents and products do not and will not infringe patents or violate proprietary rights of others. It is possible that infringement of existing or future patents or proprietary rights of others may occur. In the event the Company's products or processes infringe patents or proprietary rights of others, the Company may be required to modify the design of its products or obtain a license. There can be no assurance that the Company will be able to do so in a timely manner, upon acceptable terms and conditions or at all. The failure to do any of the foregoing could have a material adverse effect upon the Company. In addition, there can be no assurance that the Company will have the financial or other resources necessary to enforce or defend a patent infringement or proprietary rights violation actions. Moreover, if the Company's product or processes infringes patents or proprietary rights of others, the Company could, under certain circumstances, become the subject of an immediate injunction and be liable for damages, which could have a material adverse effect on the Company. The Company has applied for a federal trademark with respect to the mark "SystemOne" and design. The Company also relies on trade secrets and proprietary know-how and employs various methods to protect the concepts, ideas and documentation of its proprietary information. However, such methods may not - 28 - afford complete protection and there can be no assurance that others will not independently develop such know-how or obtain access to the Company's know-how, concepts, ideas and documentation. Although the Company has and expects to have confidentiality agreements with its employees, suppliers and appropriate vendors, there can be no assurance that such arrangements will adequately protect the Company's trade secrets. Since the Company believes that its proprietary information is important to its business, failure to protect such information could have a material adverse effect on the Company. RESEARCH AND DEVELOPMENT During the years ended December 31, 1994 and 1995 and the six months ended June 30, 1996, the Company expended $178,146, $393,874 and $365,435, respectively, on research and development of its various products. The Company plans to continue to focus significant resources on research and development of existing and future product lines. Although the Company intends to continue to seek means of refining and improving its SystemOne(Trademark) Washer, the Company believes, based on market response, that the SystemOne(Trademark) Washer is at a stage where commercial exploitation is appropriate. The Company recognizes that the industrial parts cleaning industry may be entering a phase of rapid technological change and progress and the Company will seek to retain what the Company perceives as its technological superiority over its competitors' products. In order to keep pace with the rate of technological change, the Company intends to devote considerable resources in time, personnel and funds on continued research and development for its products. The Company recognizes that many of its competitors have far greater financial and personnel resources than the Company which may be devoted to research and development and can provide no assurance that it will maintain a technological advantage. Subject to the availability of financial and personnel resources, the Company intends to spend approximately $400,000 and $500,000 in the years ended December 31, 1996 and 1997, respectively, to finalize development and testing of its various products and to develop new products and concepts. Although there can be no assurance that the Company will ever develop any new products capable of commercialization, the Company intends to continue its programs to develop new products, some of which may utilize the Company's patented products and processes. PRODUCT LIABILITY AND INSURANCE The Company is subject to potential product liability risks which are inherent in the design and use of industrial parts cleaning machines. The Company has implemented strict quality control measures and currently maintains product liability insurance of $5,000,000 in the aggregate and $5,000,000 per occurrence. PROPERTIES The Company maintains its corporate headquarters, research and development laboratory and manufacturing facilities in a 10,000 square foot building located in Miami, Florida 33156, under a two year lease which commenced on January 1, 1995. The lease provides for two renewal terms of two years. The Company's annual lease payment approximates $61,000, which amount does not include the Company's responsibility to pay all charges for gas, water, sewer, trash collection and electrical services. The Company intends to seek additional space, either at its current location or elsewhere, to house expanded corporate headquarters and research and development facilities. The Company anticipates no significant difficulty in locating such space or reasonable terms. The Company does not anticipate that it will experience difficulty in locating and equipping its regional sales and service centers, which are expected to contain a small office space/showroom area and enough space for two or three delivery and maintenance vehicles. - 29 - LEGAL PROCEEDINGS The Company is not involved in any litigation. EMPLOYEES As of the date of this Prospectus, the Company employed 15 employees, of whom four were in corporate management, three were in research and development, two were in sales and marketing, four were in manufacturing, and two were in administration. The Company intends to hire additional employees after this offering, commensurate with the Company's requirements and available funds, primarily to expand manufacturing and marketing operations. - 30 - MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS The following table sets forth certain information concerning the executive officers and directors of the Company. NAME AGE POSITION WITH COMPANY - ---- --- --------------------- Pierre G. Mansur 44 Chairman of the Board and President Paul I. Mansur 45 Director, Chief Executive Officer and Chief Financial Officer Charles W. Profilet 59 Vice President-Business Development Lydia G. Hubbell 31 Controller Elias F. Mansur 53 Director Dr. Jan Hedberg 49 Director Joseph E. Jack 68 Director - ------------------- PIERRE G. MANSUR founded the Company and has served as its Chairman and President since its inception in November 1990. From June 1973 to August 1990, Mr. Pierre Mansur served as President of Mansur Industries Inc., a privately held New York corporation that operated a professional race engine machine shop. Mr. Pierre Mansur has over twenty years of advanced automotive and machinery operations experience including developing innovative automotive machine shop applications; designing, manufacturing, customizing, modifying and retooling high performance engines and component parts; developing state of the art automotive and powerboat race engines which have consistently achieved world championship status; and providing consulting services and publishing articles with respect to automotive technical research data. Mr. Pierre Mansur has conducted extensive research and development projects for several companies, including testing and evaluating engine parts and equipment for Direct Connection, a high performance racing division of the Chrysler Corporation; researching and developing specialized engine piston rings and codings for Seal Power Corporation; researching high-tech plastic polymers for internal combustion engines for ICI Americas; and designing and developing specialized high performance engine oil pan applications. Mr. Pierre Mansur is the brother of Paul I. Mansur and a cousin of Elias F. Mansur. Mr. Pierre Mansur is a graduate of the City University of New York. PAUL I. MANSUR has been Chief Executive Officer, Chief Financial Officer and a Director since September 1993. From September 1986 to July 1993, Mr. Paul Mansur served as Chief Executive Officer of Atlantic Entertainment Inc., a privately held regional retail chain of video superstores. From March 1981 to September 1986, Mr. Paul Mansur served as the Chief Executive Officer and President of Ameritrade Corporation, a privately held international distributor of factory direct duty free products. From June 1972 to March 1981, Mr. Paul Mansur held various finance and operation positions, including Assistant Vice President Finance and Operations for Mott's USA, Inc., a division of American Brands. Mr. Paul Mansur is the brother of Pierre G. Mansur and a cousin of Elias F. Mansur. Mr. Paul Mansur is a graduate of the City University of New York. CHARLES W. PROFILET has been the Vice President - Business Development of the Company since November 1995. From July 1992 to September 1995, Mr. Profilet served as Vice President - Florida Operations for Rust Environment and Infrastructure, Inc., a privately held environmental remediation company that is controlled by WMX Technologies, a publicly traded waste collection and recycling company traded on the New York Stock Exchange. From March 1991 to July 1992, Mr. Profilet served as Vice President-Marketing at Metcalf and Eddy, a full-service engineering and environmental consulting firm specializing in the treatment of waste water, air quality assurance, emissions control and remedial design. From July 1987 to February 1990, Mr. Profilet served as Executive Vice President and Chief Operating Officer at Craig A. Smith and Associates, a privately-held civil engineering firm. From August 1979 to September - 31 - 1985, Mr. Profilet served as Vice President- Business Development at Reynolds Smith and Hills, a privately-held architectural and engineering planning firm. Mr. Profilet is a graduate of the U.S. Military Academy at West Point and holds a Master of Engineering degree from the University of Oklahoma. LYDIA G. HUBBELL, C.P.A. has been the Controller of the Company since April 1995. From August 1994 until March 1995, Ms. Hubbell served as an internal auditor for American Savings of Florida, F.S.B. From September 1992 to August 1994, Ms. Hubbell worked with KPMG Peat Marwick LLP during which period she became the senior accountant with respect to the Company's audits. Ms. Hubbell is a graduate of the University of Florida and holds a Master of Accounting degree from the University of Florida. ELIAS F. MANSUR has been a Director of the Company since August 1995. From September 1968 to present, Mr. Elias Mansur served as Managing Director of the Mansur Trading Company and its subsidiaries, an international, diversified group of companies involved in banking, international trade, manufacturing, real estate and hotel operations. From June 1975 to March 1981, Mr. Elias Mansur served as Chairman of the Board of the Central Bank of the Netherlands Antilles. From September 1984 to December 1985, Mr. Elias Mansur served as Minister of Economic Affairs of the Netherlands Antilles. From October 1977 to September 1984, Mr. Elias Mansur served as the Chief Economic Advisor, Minister of Economic Affairs and Chairman of the Council of Economic Advisors to the government of Aruba. Mr. Elias Mansur is a cousin of Mr. Pierre Mansur and Mr. Paul I. Mansur. DR. JAN HEDBERG has been a Director of the Company since August 1995. From October 1987 to March 1993, Dr. Hedberg was the Chairman and Chief Executive Officer of Enprotec International Group, N.V., a company he co-founded and in the business of researching and developing of advanced waste oil recycling technologies. Since March 1993, Dr. Hedberg has been the Chairman of the Board and Chief Executive Officer of Enprotec (USA) Inc., a wholly owned subsidiary of Enprotec International Group, N.V., which manufactures, designs and assembles oil re-refining plants. Dr. Hedberg was the co-recipient of the 1991 International Technology Award for Enterprising Innovation and Creativity for the development of the Vaxon Re-refining Process, which is a proprietary process that transforms used oil into useable oil products. Dr. Hedberg has over 15 years of experience in oil related and environmental companies and 12 years of research and teaching experience, including executive management and advisory positions, with several multinational organizations. Dr. Hedberg received his Doctor of Philosophy (PhD) in Geotechnical Engineering from the Massachusetts Institute of Technology, Cambridge, Massachusetts in 1977. JOSEPH E. JACK has been a Director of the Company since August 1995. From May 1989 to June 1991, Mr. Jack served as Vice President of Waste Management Europe, a waste collection and recycling company that is a publicly traded company on the London Stock Exchange and a controlled subsidiary of WMX Technologies, a publicly traded New York Stock Exchange company. From April 1984 to December 1987, Mr. Jack was President of Waste Management Inc. of Florida, a waste collection and recycling company that is an affiliate of Waste Management, Inc.. From July 1983 to March 1984, Mr. Jack served as Vice President of Waste Management Partners, a division of Waste Management, Inc. From February 1982 to July 1983, Mr. Jack served as Vice President of Waste Management International, a subsidiary of Waste Management, Inc. From April 1980 to February 1982, Mr. Jack was Vice President of Waste Management International (Middle East), a subsidiary of Waste Management, Inc., and from May 1978 to April 1980, Mr. Jack was the Resident Manager of Waste Management Saudi Arabia, a joint venture involving an affiliate of Waste Management, Inc. Under Mr. Jack's leadership, Waste Management experienced unprecedented growth in several markets worldwide including Waste Management Europe's growth of revenues from $10 million to $700 million in a three year period. Mr. Jack's significant accomplishments in the waste management field were acknowledged when he was inducted by the National Waste Management Association into the United States Waste Industry's "Hall of Fame". Mr. Jack has been an active investor in companies since he retired in June 1991. The Company has agreed that, for five years after the effective date of this Prospectus, the Representative will have the right to designate one individual to be elected to the Company's Board of Directors. - 32 - EXECUTIVE COMPENSATION The following table sets forth compensation paid or payable in respect of the three years ended December 31, 1995 to the Company's Chief Executive Officer and its other executive officer whose combined salaries and bonuses equalled or exceeded $100,000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE LONG TERM ANNUAL COMPENSATION COMPENSATION ---------------------------------------------------------------- ----------------- OTHER ANNUAL ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) COMPENSATION - ----------------------------------- ------------ ---------------- -------------- --------------- ----------------- Mr. Pierre G. Mansur, Chairman and 1995 $66,000 $267,460(1) $6,605(2) $0 President 1994 $66,000 $0 $ 550(2) $0 1993 $22,000 $0 $0 $0 Mr. Paul I. Mansur, Chief Executive 1995 $48,000 $0 $2,550(2) $0 Officer 1994 $48,000 $0 $0 $0 1993 $5,000 $0 $0 $0 - ------------------ (1) Represents incentive compensation earned by Pierre G. Mansur, $88,110 of which has been paid and the remainder of which has been accrued. (2) Automobile allowance paid by the Company.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS In September 1993, the Company entered into a two year employment agreement with Mr. Pierre Mansur, which provides for an annual base salary of $66,000 and discretionary bonuses, based on Mr. Pierre Mansur's performance, as determined by the Compensation Committee of the Board of Directors. Pursuant to the terms of his employment contract, Mr. Mansur's employment was renewed in September 1995 by the Company for an additional two years. Pursuant to the employment agreement, during the term of Mr. Pierre Mansur's employment and for a period of three years following his termination of employment, Mr. Pierre Mansur is prohibited from disclosing any confidential information, including without limitation, information regarding the Company's patents, research and development, manufacturing process or knowledge or information with respect to confidential trade secrets of the Company. In addition, the employment agreement provides that Mr. Pierre Mansur is prohibited from, directly or indirectly, engaging in any business in substantial competition with the Company or its affiliates. The employment agreement also provides that Mr. Pierre Mansur is prohibited from becoming an officer, director or employee of any corporation, partnership or any other business in substantial competition with the Company or its affiliates during the term of his employment and for three years thereafter. In September 1995, the Company entered into a two year employment agreement with Mr. Paul Mansur, which provides for an annual base salary of $48,000 and discretionary bonuses, based on Mr. Paul Mansur's performance, as determined by the Compensation Committee of the Board of Directors. Pursuant to the employment agreement, during the term of Mr. Paul Mansur's employment and for a period of three years following his termination of employment, Mr. Paul Mansur is prohibited from disclosing any confidential information, including without limitation, information regarding the Company's patents, research and development, manufacturing process or knowledge or information with respect to confidential trade secrets of the Company. In addition, the employment agreement provides that Mr. Paul Mansur is prohibited from, directly or indirectly, engaging in any business in substantial competition with the Company or its affiliates. The employment agreement also provides that Mr. Paul Mansur is prohibited from becoming an officer, director or employee of any corporation, partnership or any other business in substantial competition with the Company or its affiliates during the term of his employment and for three years thereafter. - 33 - In November 1995, the Company entered into a one year employment agreement with Charles W. Profilet. Under the employment agreement, Mr. Profilet is entitled to an annual base salary of $80,000, a car allowance of $400 a month and monthly commissions, ranging from $5 per unit for parts washers to $25 per unit for jet washers, with respect to each new washer sold by the Company in the United States. The commissions earned by Mr. Profilet may be converted, at his option, into Common Stock at a discount on the then current trading price of the Common Stock. The conversion discount was 10% as of the date of this Prospectus, but, may be adjusted at the election of the Board of Directors of the Company. As of the date of this Prospectus, Mr. Profilet had earned an aggregate of $12,250 of commissions. The employment agreement provides that Mr. Profilet is eligible to participate in the Company's discretionary executive profit sharing awards and executive stock award or stock option awards. Pursuant to the employment agreement, if Mr. Profilet is terminated for cause, defined as an act of dishonesty, malfeasance, or other impropriety, he is not entitled to receive any severance payment. If Mr. Profilet is terminated without cause within his first year of employment, he is entitled to receive his current salary for six months or until he secures new employment, whichever occurs first. In addition to the employment agreement, the Company and Mr. Profilet entered into a Non-Circumvention and Non-Disclosure Agreement. INCENTIVE COMPENSATION PLAN The Company's 1996 Executive Incentive Compensation Plan (the "Incentive Plan") provides for grants of stock options, stock appreciation rights ("SARS"), restricted stock, deferred stock, other stock related awards and performance or annual incentive awards that may be settled in cash, stock or other property (collectively, "Awards"). The total number of shares of Common Stock that may be subject to the granting of Awards under the Incentive Plan at any time during the term of the Plan shall be 375,000. The Employee Plan is designed to serve as an incentive for retaining qualified and competent employees, directors, consultants and independent contractors of the Company. The persons eligible to receive Awards under the Incentive Plan are the officers, directors, employees and independent contractors of the Company, if any, and its subsidiaries. No director of the Company who is not an employee of the Company or any subsidiary (a "non-employee director") will be eligible to receive any Awards under the Incentive Plan other than automatic formula grants of stock options and restricted stock as described below, and no independent contractor will be eligible to receive any Awards other than stock options. The Incentive Plan is required to be administered by a committee designated by the Board of Directors consisting of not less than two directors (the "Committee"), each member of which must be a "disinterested person" as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an "outside director" for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). The Compensation Committee of the Board has been appointed as the Committee for the Incentive Plan. Subject to the terms of the Incentive Plan, the Committee is authorized to select eligible persons to receive Awards, determine the type and number of Awards to be granted and the number of shares of Common Stock to which Awards will relate, specify times at which Awards will be exercisable or settleable (including performance conditions that may be required as a condition thereof), set other terms and conditions of Awards, prescribe forms of Award agreements, interpret and specify rules and regulations relating to the Incentive Plan, and make any other determinations that may be necessary or advisable for the administration of the Incentive Plan. In addition, the Incentive Plan imposes individual limitations on the amount of certain Awards in part to comply with Code Section 162(m). Under these limitations, during any fiscal year the number of options, SARS, restricted shares of Common Stock, deferred shares of Common Stock, shares as a bonus or in lieu of other Company obligations, and other stock-based Awards granted to any one participant may not exceed 250,000 for each type of such Award, subject to adjustment in certain circumstances. The maximum amount that may be paid out as a final annual incentive Award or other cash Award in any fiscal year to any one participant is $1,000,000, and the maximum amount that may be earned as a final performance Award or other cash Award in respect of a performance period by any one participant is $5,000,000. - 34 - The Incentive Plan provides that each non-employee director shall automatically receive (i) on the date of his or her appointment as a director of the Company, an option to purchase 2,500 shares of Common Stock, and (ii) each year, on the day the Company issues its earnings release for the prior fiscal year, an option to purchase 2,500 shares of Common Stock. Such options will have a term of 10 years and become exercisable at the rate of 33-1/3% per year commencing on the first anniversary of the date of grant; provided, however, that the options will become fully exercisable in the event that, while serving as a director of the Company, the non-employee director dies, or suffers a "disability," or "retires" (within the meaning of such terms as defined in the Incentive Plan). The per share exercise price of all options granted to non-employee directors will be equal to the fair market value of a share of Common Stock on the date such option is granted. The Company will agree with the Representative that for a 13-month period immediately following the effective date of the Registration Statement of which this Prospectus forms a part, the Company will not, without the consent of the Representative, adopt or propose to adopt any plan or arrangement permitting the grant, issue or sale of any shares of its Common Stock or issue, sell or offer for sale any of its Common Stock, or grant any option for its Common Stock which shall: (x) have an exercise price per share of Common Stock less than (a) the initial public offering price of the Common Stock offered in this Prospectus or (b) the fair market value of the Common Stock on the date of grant; or (y) be granted to any direct or indirect beneficial holder of more than 10% of the issued and outstanding Common Stock of the Company. No option or other right to acquire Common Stock granted, issued or sold during the 13-month period immediately following the effective date of the Registration Statement of which this Prospectus forms a part shall permit (a) the payment with any form of consideration other than cash, (b) the payment of less than the full purchase or exercise price for such shares of Common Stock or other securities of the Company on or before the date of issuance, or (c) the existence of stock appreciation rights, phantom options or similar arrangements. The Company has not granted any Award under the Incentive Plan. COMPENSATION OF DIRECTORS After this offering, the Company will pay each director who is not an employee an annual retainer of $10,000. The Company will reimburse all directors for all travel-related expenses incurred in connection with their attendance at meetings of the Board of Directors. Directors will also be entitled to receive options under the Incentive Plan. See "Incentive Compensation Plan." Mr. Elias Mansur, Dr. Jan Hedberg and Mr. Joseph Jack were each granted 10,000 shares of the Company's Common Stock in April 1996 in exchange for previously rendered consulting services. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION; AUDIT COMMITTEE The Board of Directors currently administers and determines compensation, including salary and bonus for the executive officers, directors and other employees. The Company intends to establish an Audit Committee and a Compensation Committee shortly after the closing of this offering. The Compensation Committee will be responsible for setting and administering policies that govern annual compensation of the Company's executive officers and administering the 1996 Stock Option and Incentive Plan and the Directors' Plan. The duties and responsibilities of the Audit Committee will include (i) recommending to the full Board the appointment of the Company's auditors and any termination of their appointment, (ii) reviewing the plan and scope of audits, (iii) reviewing the Company's significant accounting policies and internal controls, (iv) administering the Company's compliance programs, and (v) general responsibility for all related auditing matters. - 35 - CERTAIN TRANSACTIONS COMMON STOCK OWNERSHIP In connection with the organization of the Company in November 1990, the Company issued 2,000,000 shares of Common Stock, par value $0.001 per share, to Mr. Pierre Mansur in exchange for the assignment to the Company of certain ongoing research and development and rights to any related patents and patents pending and real estate and equipment valued at $52,000. CONSULTING AGREEMENT AND SERVICES In November 1994, the Company entered into a two-year consulting agreement (the "Consulting Agreement") with Environmental Technologies BVI Limited (the "Consultant"). Pursuant to the Consulting Agreement, the Consultant agreed to advise, consult with, introduce to third parties and generally assist the Company in its efforts to explore new manufacturing and marketing arrangements. In exchange for such services, the Consulting Agreement provided that the Consultant was entitled to receive certain fees in connection with the sale of certain equipment, services, license rights, royalty rights, manufacturing rights, marketing rights or the Company's entrance into a partnership or joint venture arrangement or consummation of a merger. The Consultant did not receive any commissions pursuant to the Consulting Agreement. In December 1995, the Company issued the Consultant 10,000 shares of Common Stock in exchange for the services rendered by the Consultant and to secure the Consultant's agreement to terminate the Consulting Agreement and any and all associated rights of the Consultant. Dr. Jan Hedberg, a director of the Company, owns 50 percent and serves as the managing director of the Consultant. Mr. Elias Mansur, Dr. Jan Hedberg and Mr. Joseph Jack were each granted 10,000 shares of the Company's Common Stock in April 1996 in exchange for previously rendered consulting services. NOTE PAYABLE TO CHIEF EXECUTIVE OFFICER Pursuant to a revolving line of credit dated June 1, 1990, Mr. Paul Mansur made a series of advances ranging from $5,000 to $30,000, totaling an aggregate of $150,000 (the "Debt"), to the Company between June 1, 1990 and May 31, 1996. On December 31, 1994 and December 31, 1995, the Company paid Mr. Paul Mansur $34,814 and $12,000, respectively, in satisfaction of interest owed with respect to the Debt. On May 31, 1996, the Company paid Mr. Paul Mansur $150,000 and $5,000 in satisfaction of the outstanding principal balance of and the interest owed with respect to the Debt. CONVERTIBLE NOTES In connection with its issuance of an aggregate of $1,012,500 in principal amount of Convertible Notes in June 1996, the Company issued promissory notes in the principal amount of $101,250 to each of Environmental Technologies BVI Limited, a consulting firm of which Dr. Jan Hedberg, a director of the Company, is Managing Director, Mr. Joseph E. Jack, a director of the Company, and Mr. Elias F. Mansur, a director of the Company. Upon consummation of this offering, each of the Convertible Notes will be automatically converted into 15,000 shares of the Company's Common Stock. Mr. Mansur, Mr. Jack and Environmental Technologies BVI Limited acquired the Convertible Notes on the same terms as other unaffiliated investors. - 36 - PRINCIPAL SHAREHOLDERS The following table sets forth certain information concerning the beneficial ownership of the Common Stock immediately prior to this offering, and as adjusted to reflect the sale of shares offered hereby and in the Concurrent Offering, by: (i) each person known by the Company to be the beneficial owner of more than 5% of the Common Stock, (ii) each Director or nominee for Director of the Company, (iii) each of the Named Executive Officers and (iv) all Directors and Executive Officers of the Company as a group.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED PRIOR OWNED TO THIS OFFERING AFTER THIS OFFERING ------------------------------------ -------------------------------- NAME NUMBER PERCENTAGE NUMBER PERCENTAGE - ----------------------------------------- ------------------ ---------------- ------------------ ----------- Mr. Pierre G. Mansur..................... 2,000,000 59.68% 2,000,000 46.01% Mr. Paul I. Mansur....................... 0 * 0 * Mr. Elias F. Mansur...................... 26,025 * 41,025(2) * Dr. Jan Hedberg.......................... 20,000(1) * 35,000(1)(2) * Mr. Joseph E. Jack....................... 22,820 * 37,820(2) * Mr. Charles W. Profilet.................. 0 * 0 * All Directors and Executive Officers as a Group (6 persons)...... 2,068,845(3) 61.64% 2,113,845(3) 48.6% - ---------------------- * Less than 1% (1) Includes 10,000 shares of Common Stock held by Environmental Technologies BVI Limited, of which Dr. Hedberg owns 50 percent and serves as the Managing Director. (2) Includes 15,000 shares of Common Stock issuable upon the conversion of a Convertible Note in the principal amount of $101,250, which conversion shall occur simultaneously with the consummation of this offering. (3) See Notes (1) - (2).
DESCRIPTION OF CAPITAL STOCK The Company's authorized capital stock consists of 25,000,000 shares of Common Stock, $.001 par value per share, and 1,500,000 shares of Preferred Stock, $1.00 par value per share. As of the date of this Prospectus, 3,351,309 shares of Common Stock and 0 shares of Preferred Stock are outstanding. COMMON STOCK Each outstanding share of Common Stock is entitled to one vote on all matters submitted to a vote of shareholders. Subject to the restrictions summarized below, dividends may be paid to the holders of Common Stock when and if declared by the Board of Directors out of funds legally available for dividends. See "Dividend Policy." Holders of Common Stock have no conversion, redemption, or preemptive rights. All outstanding shares of Common Stock are fully paid and nonassessable. In the event of any liquidation, dissolution or winding up of the affairs of the Company, the holders of Common Stock will be entitled to share ratably in its assets remaining after provision for payment of creditors and holders of Preferred Stock. See "Dividend Policy." - 37 - PREFERRED STOCK The Company is authorized to issue Preferred Stock with such designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors is empowered, without shareholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting or other rights that could adversely affect the value or market price of the Common Stock and voting power or other rights of the holders of Common Stock. In the event of issuance, the Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. ANTI-TAKEOVER PROVISIONS OF FLORIDA LAW Florida has enacted legislation that may deter or frustrate takeovers of Florida corporations. The "Control Share Acquisitions" section of the Florida Business Corporation Act ("FBCA") generally provides that shares acquired in excess of certain specified thresholds, beginning at 20% of the Company's outstanding voting shares, will not possess any voting rights unless such voting rights are approved by a majority vote of a corporation's disinterested shareholders. The "Affiliated Transactions" section of the FBCA generally requires majority approval by disinterested directors or supermajority approval of disinterested shareholders of certain specified transactions (such as a merger, consolidation, sale of assets, issuance of transfer of shares or reclassifications of securities) between a corporation and a holder of more than 10% of the outstanding voting shares of the corporation, or any affiliate of such shareholder. The directors of the Company are subject to the "general standards for directors" provisions set forth in the FBCA. These provisions provide that in discharging his or her duties and determining what is in the best interests of the Company, a director may consider such factors as the director deems relevant, including the long-term prospects and interests of the Company and its shareholders and the social, economic, legal or other effects of any proposed action on the employees, suppliers or customers of the Company, the community in which the Company operates and the economy in general. Consequently, in connection with any proposed action, the Board of Directors is empowered to consider interests of other constituencies in addition to the Company's shareholders, and directors who take into account these other factors may make decisions which are less beneficial to some, or a majority, of the shareholders than if the law did not permit consideration of such other factors. CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK The authorized but unissued shares of Common Stock and Preferred Stock are available for future issuance without shareholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved Common Stock and Preferred Stock may enable the Board of Directors to issue shares to persons friendly to current management which could render more difficult or discourage an attempt to obtain control of the Company by means of a proxy contest, tender offer, merger, or otherwise, and thereby protect the continuity of the Company's management. LIMITED LIABILITY AND INDEMNIFICATION Under the FBCA, a director is not personally liable for monetary damages to the corporation or any other person for any statement, vote, decision, or failure to fact unless (i) the director breached or failed to perform his duties as a director and (ii) a director's beach of, or failure to perform, those duties constitutes (1) a violation of the criminal law, unless the director had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful, (2) a transaction from which the director - 38 - derived an improper personal benefit, either directly or indirectly, (3) a circumstance under which an unlawful distribution is made, (4) in a proceeding by or in the right of the corporation or procure a judgment in its favor or by or in the right of a shareholder, conscious disregard for the best interest of the corporation or willful misconduct, or (5) in a proceeding by or in the right of someone other than the corporation or a shareholder, recklessness or an act or omission which was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property. A corporation may purchase and maintain insurance on behalf of any director or officer against any liability asserted against him and incurred by him in his capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the FBCA. The Articles and Bylaws of the Company provide that the Company shall, to the fullest extent permitted by applicable law, as amended from time to time, indemnify all directors of the Company, as well as any officers or employees of the Company to whom the Company has agreed to grant indemnification. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for the Common Stock is Continental Stock Transfer & Trust Company. SHARES ELIGIBLE FOR FUTURE SALE GENERAL Upon the consummation of this offering, the Company anticipates that it will have 4,351,309 shares of Common Stock outstanding. The 1,000,000 shares will be freely tradeable without restriction or further registration under the Securities Act, except for any shares purchased by an "affiliate" of the Company (in general, a person who has a control relationship with the Company) which will be subject to the limitations of Rule 144 adopted under the Securities Act. All of the remaining 3,351,309 shares are deemed to be "restricted securities," as that term is defined under Rule 144 promulgated under the Securities Act, in that such shares were issued and sold by the Company in private transactions not involving a public offering. Of such remaining shares, 2,656,729 will become eligible for sale under Rule 144 90 days from the date of this Prospectus and the remainder will become eligible for such sale at various times prior to June 1998. In general, under Rule 144 as currently in effect, subject to the satisfaction of certain other conditions, a person, including an affiliate of the Company (or other persons whose shares are aggregated), who has owned restricted shares of Common Stock beneficially for at least two years is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of one percent of the total number of outstanding shares of the same class or the average weekly trading volume during the four calendar weeks preceding the sale. A person who has not been an affiliate of the Company for at least the three months immediately preceding the sale and who has beneficially owned shares of Common Stock for at least three years is entitled to sell such shares under Rule 144 without regard to any of the limitations described above. - 39 - All of the Company's officers, directors and shareholders have agreed not to sell or otherwise dispose of any of their shares of Common Stock for a period of 13 months from the date of this Prospectus without the prior written consent of the Representative. Prior to this offering, there has been no market for the Common Stock and no prediction can be made as to the effect, if any, that market sales of shares of Common Stock or the availability of such shares for sale will have on the market prices prevailing from time to time. Nevertheless, the possibility that substantial amounts of Common Stock may be sold in the public market may adversely affect prevailing market prices for the Common Stock and could impair the Company's ability to raise capital through the sale of its equity securities. See "Description of Securities" for information concerning outstanding warrants and convertible securities. PLAN OF DISTRIBUTION The shares of Common Stock offered hereby are issuable by the Company upon conversion of $1,012,500 in principal amount of Convertible Notes at a conversion price of $6.75 per share. As a result of the conversion of the Convertible Notes and the issuance of shares of Common Stock hereby, $1,012,500 of the Company's indebtedness will be extinguished. The Company utilized the proceeds of the private financing pursuant to which the Convertible Notes were issued to finance the Concurrent Offering and for general corporate purposes. The Company will receive none of the proceeds of the sale of shares of Common Stock issued hereby by the holders thereof. The Company will bear all of the expenses of the offering, and will pay the Representative commissions and fees in an aggregate amount of $131,625 in connection with services provided in connection with the Convertible Notes. As of the date of this Prospectus, First Malro, Inc., Said Mouawad, Enrivonmental Technologies BVI Limited, Mr. Joseph E. Jack and Mr. Elias F. Mansur held $657,000, $33,750, $101,250, $101,250 and $101,250 in principal amount of the Convertible Notes, respectively. As of the date of this Prospectus and upon consummation of this offering and the Concurrent Offering, none of the holders of the Convertible Notes will beneficially own more than 5% of the Common Stock. - 40 - UNDERWRITING OF THE CONCURRENT OFFERING In connection with the Concurrent Offering, the Underwriters named below (the "Underwriters"), for whom First Allied Securities, Inc. is acting as Representative, have severally agreed, subject to the terms and conditions of the Underwriting Agreement (the "Underwriting Agreement"), to purchase from the Company and the Company has agreed to sell to the Underwriters on a firm commitment basis the respective number of shares of Common Stock set forth opposite their names: UNDERWRITER NUMBER - ----------- ------------- First Allied Securities, Inc. ------------- Total................................... 850,000 ============= The Underwriters are committed to purchase all shares of Common Stock offered in the Concurrent Offering if any of such shares are purchased. The Underwriting Agreement provides that the obligations of the several Underwriters are subject to conditions precedent specified therein. The Company has been advised by the Representative that the Underwriters propose to initially offer the Common Stock to the public for $_______ and to certain dealers at such prices less concessions of not in excess of $_______ per share of Common Stock. Such dealers may reallow a concession not in excess of $_______ per share of Common Stock to other dealers. After the commencement of the Concurrent Offering, the public offering prices, concessions and reallowances may be changed by the Representative. The Representative has advised the Company that it does not anticipate sales to discretionary accounts by the Underwriters to exceed five percent of the total number of shares of Common Stock offered in the Concurrent Offering. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. The Company has also agreed to pay to the Representative an expense allowance on a nonaccountable basis equal to three percent (3%) of the gross proceeds derived from the sale of the Common Stock underwritten, of which $50,000 has been paid to date. The Underwriters have been granted an option by the Company, exercisable within forty-five (45) days after the date of this Prospectus, to purchase up to an additional 127,500 shares of Common Stock at the initial public offering price per share of Common Stock offered in the Concurrent Offering, less underwriting discounts and the expense allowance. Such option may be exercised only for the purpose of covering over-allotments, if any, incurred in the sale of the shares offered in the Concurrent Offering. To the extent such option is exercised in whole or in part, each Underwriter will have a firm commitment, subject to certain conditions, to purchase the number of the additional shares of Common Stock proportionate to its initial commitment. All of the Company's officers and directors and all of the holders of the Common Stock have agreed not to, directly or indirectly, sell, transfer, hypothecate or otherwise encumber any of their shares for thirteen (13) months following the date of this Prospectus without the prior written consent of the Representative. - 41 - The Company has agreed that, for five (5) years after the effective date of this Prospectus, the Representative will have the right to designate one individual to be elected to the Company's Board of Directors. Such individual may be a director, officer, employee or affiliate of the Representative. In the event the Representative elects not to designate a person to serve on the Company's Board of Directors, the Representative may designate an observer to attend meetings of the Board of Directors. In connection with the Concurrent Offering, the Company has agreed to sell to the Representative, for nominal consideration, the Representative's Warrants to purchase from the Company 85,000 shares of Common Stock. The Representative's Warrants are initially exercisable for shares of Common Stock at a price of $__________ [120% of the initial public offering price per share of Common Stock] per share of Common Stock for a period of four (4) years commencing one (1) year from the date of this Prospectus and are restricted from sale, transfer, assignment or hypothecation for a period of twelve (12) months from the date hereof, except to officers and principals of the Representative. The Representative's Warrants also provide for adjustment in the number of shares of Common Stock issuable upon the exercise thereof as a result of certain subdivisions and combinations of the Common Stock. The Representative's Warrants grant to the holders thereof certain rights of registration for the securities issuable upon exercise of the Representative's Warrants. In connection with the Private Financing, the Representative is entitled to receive a commission of $101,250 and a non-accountable expense allowance of $30,375. The Representative commenced operations in 1994 and does not have extensive experience as an underwriter of public offerings of securities. The Representative has acted as the managing underwriter for three public offerings. The Representative is a relatively small firm and no assurance can be given that the Representative will participate as a market maker in the Common Stock. Prior to the Concurrent Offering, there has been no public market for the Common Stock. Consequently, the initial public offering prices of the Common Stock has been determined by negotiations between the Company and the Representative and is not necessarily related to the Company's asset value, net worth or other established criteria of value. The factors considered in such negotiations included the history of and prospects for the industry in which the Company competes, an assessment of the Company's management, the prospects of the Company, its capital structure and certain other factors as were deemed relevant. The foregoing is a summary of the principal terms of the Underwriting Agreement and does not purport to be complete. Reference is made to the copy of the Underwriting Agreement filed as an Exhibit to the Registration Statement of which this Prospectus forms a part. - 42 - LEGAL MATTERS The validity of the Common Stock offered hereby will be passed upon for the Company by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., Miami, Florida. Orrick, Herrington & Sutcliffe, New York, New York, has acted as counsel for the Underwriters in connection with the offering. EXPERTS The financial statements of the Company as of December 31, 1995 and 1994 and for the period from November 13, 1990 (inception) to December 31, 1991, and each of the years in the four year period ended December 31, 1995 have been included in this Prospectus and in the registration statement in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, appearing elsewhere in this Prospectus, and upon the authority of said firm as experts in accounting and auditing. ADDITIONAL INFORMATION The Company has filed with the Commission a Registration Statement under the Securities Act with respect to the Common Stock offered hereby. As permitted by the rules and regulations of the Commission, this Prospectus does not contain all the information set forth in the Registration Statement and in the exhibits and schedules thereto. For further information about the Company and the Common Stock, reference is made to the Registration Statement and to the exhibits and schedules filed therewith. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement is qualified in its entirety by such reference. Copies of each such document may be obtained from the Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C., upon payment of the charges prescribed by the Commission. Copies of each document may also be obtained through the Commission's internet address at http://www.sec.gov. - 43 -
INDEX TO FINANCIAL STATEMENTS Report of Independent Accountants.................................................... F-2 Financial Statements Balance Sheets at December 31, 1994 and 1995 and June 30, 1996 (unaudited)...... F-3 Statements of Operations for the period from November 13, 1990 (inception) to December 31, 1991, and each of the years in the four year period ended December 31, 1995 and for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited)............................................................ F-4 Statements of Stockholders' Deficit for the period from November 13, 1990 (inception) to December 31, 1991, and each of the years in the four year period ended December 31, 1995 and for the six months ended June 30, 1996 (unaudited)..................................................................... F-5 Statements of Cash Flows for the period from November 13, 1990 (inception) to December 31, 1991, and each of the years in the four year period ended December 31, 1995 and for the six months ended June 30, 1995 (unaudited) and 1996 (unaudited)............................................................ F-6 Notes to Financial Statements................................................... F-7
F-1 INDEPENDENT AUDITORS' REPORT The Board of Directors Mansur Industries Inc.: We have audited the accompanying balance sheets of Mansur Industries Inc. (a development stage company) as of December 31, 1994 and 1995, and the related statements of operations, stockholders' (deficit) and cash flows for the period from November 13, 1990 (inception) to December 31, 1991, each of the years in the four-year period ended December 31, 1995, and the related statements of operations, stockholders' (deficit) and cash flows for the period from November 13, 1990 (inception) to December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mansur Industries Inc. as of December 31, 1994 and 1995 and the results of its operations and its cash flows for the period from November 13, 1990 (inception) to December 31, 1991, each of the years in the four-year period ended December 31, 1995 and for the period from November 13, 1990 (inception) to December 31, 1995, in conformity with generally accepted accounting principles. KPMG PEAT MARWICK LLP Miami, Florida January 19, 1996 F-2
MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY) BALANCE SHEETS ASSETS December 31, December 31, June 30, 1994 1995 1996 ------------- ------------ ----------- (unaudited) Current assets: Cash $ 20,766 916,383 640,592 Inventory 98,593 193,838 412,431 Other assets 85,810 18,290 176,425 ---------- ---------- ---------- Total current assets 205,169 1,128,511 1,229,448 Mortgage note receivable 200,000 0 0 Property and equipment, net 351,773 324,431 308,810 Intangible assets, net 0 0 24,454 ---------- ---------- ---------- 551,773 324,431 333,264 Total Assets $ 756,942 1,452,942 1,562,712 ========== ========== ========== LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current liabilities: Accounts payable and accrued expenses $ 6,007 219,478 382,878 Due to officers/ shareholders 250,000 250,000 0 Convertible notes payable 0 0 1,012,500 Interest payable 45,684 0 2,250 Current installments of long-term debt 43,637 45,846 48,786 ---------- ---------- ---------- Total current liabilities 345,328 515,324 1,446,414 Long-term debt, excluding current installments 700,011 154,165 129,014 ---------- ---------- ---------- Total liabilities 1,045,339 669,489 1,575,428 ---------- ---------- ---------- Convertible redeemable preferred stock, $1 par value. Authorized 1,500,000 shares, issued and outstanding 580,000 and 490,000 in 1994 and 1995 respectively. 633,929 2,573,863 0 ---------- ---------- ---------- Stockholders' (deficit): Common stock, $0.001 par value. Authorized 25,000,000 shares, issued and outstanding 2,000,000; 2,673,129 and 3,351,309 shares for 1994, 1995 and 1996 respectively 2,000 2,673 3,351 Additional paid-in capital (12,257) 438,131 3,560,948 Deficit accumulated during the development stage (912,069) (2,231,214) (3,577,015) ---------- ---------- ---------- Total stockholders' (deficit) (922,326) (1,790,410) (12,716) ---------- ---------- ---------- Total liabilities and stockholders' (deficit) $ 756,942 1,452,942 1,562,712 ========== ========== ==========
See accompanying notes to financial statements. F-3 MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF OPERATIONS
November 13, 1990 Year ended December 31, Six Months Ended November 13, 1990 (inception) through June 30, (inception) December 31, ------------------------------------------ ----------------------- through 1991 1992 1993 1994 1995 1995 1996 June 30, 1996 ------------------- ------- -------- -------- ---------- ----------- ----------- ----------------- (unaudited) (unaudited) (unaudited) Operating expenses: General and administrative $ 8,502 8,971 81,886 268,414 907,393 418,079 622,641 1,897,807 Research and development 128,439 31,924 69,256 178,146 393,874 162,732 365,435 1,167,074 ---------- --------- -------- --------- --------- --------- --------- ---------- Total operating expenses 136,941 40,895 151,142 446,560 1,301,267 580,811 988,076 3,064,881 ---------- --------- --------- --------- ---------- --------- --------- ---------- Loss from operations (136,941) (40,895) (151,142) (446,560) (1,301,267) (580,811) (988,076) (3,064,881) ---------- --------- --------- --------- ---------- --------- --------- ---------- Interest expense - (16,299) (16,360) (46,312) (63,528) (38,259) (24,179) (166,678) Conversion expense on redeemable preferred stock - - - - - - (344,631) (344,631) Interest Income - - - - 45,650 11,797 11,085 56,735 Loss on disposal of property and equipment - (39,560) (18,000) - - - - (57,560) ---------- ---------- --------- --------- ---------- ---------- --------- ---------- Net loss (136,941) (96,754) (185,502) (492,872) (1,319,145) (607,273)(1,345,801) (3,577,015) Dividends on redeemable preferred stock - - (8,328) (53,929) (222,067) (75,066) (147,000) (431,324) ---------- ---------- --------- --------- ---------- ---------- --------- ---------- Net loss to common shares $ (136,941) (96,754) (193,830) (546,801) (1,541,212) (682,339)(1,492,801) (4,008,339) ========== ========== ========== ========= ========== ========== ========= ========== Net loss per common share $ (0.07) (0.05) (0.10) (0.27) (0.66) (0.34) (0.53) ========== ========== ========== ========= ========== ========== ========= Weighted average shares outstanding 2,000,000 2,000,000 2,000,000 2,000,000 2,335,140 2,000,000 2,799,071 ========== ========== ========== ========= ========== ========== =========
See accompanying notes to financial statements. F-4 MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY) STATEMENTS OF CASH FLOWS
November 13, 1990 (inception) through Year ended December 31, December 31, 1991 1992 1993 1994 1995 ------------------ -------- ---------- --------- ----------- Cash used in operating activities: Net loss $ (136,941) (96,754) (185,502) (492,872) (1,319,145) Adjustments to reconcile net loss to cash used in operating activities: Loss on sale of property - 31,680 - - - Write-off of equipment and patent 69,965 7,880 - - - Depreciation - - - 18,056 42,404 Common Stock issued for services - - - - 16,400 Changes in operating assets and liabilities: Inventory (5,095) (23,205) (29,838) (68,755) (95,245) Other assets 1,318) (1,174) (7,067) (76,251) (7,884) Intangible assets - - - - - Accounts payable and accrued expenses 1,790 (1,666) 8,461 12,415 167,786 Advances from customer 11,500 16,800 - - - --------- --------- --------- --------- ---------- Net cash used in operating activities (60,099) (66,439) (213,946) (607,407) (1,195,684) --------- --------- --------- --------- ---------- Investing activities: Purchase of property and equipment (6,207) (4,208) (43,157) (48,227) (15,062) Proceeds from mortgage note receivable - - - - 200,000 Net proceeds from sale of property - 68,320 - - - --------- --------- --------- --------- ---------- Net cash provided (used) by investing activities (6,207) 64,112 (43,157) (48,227) 184,938 --------- --------- --------- --------- ---------- Financing activities: Proceeds from notes payable and line of credit 68,911 52,627 24,860 500,000 - Repayment of notes payable - (15,000) - (9,262) (43,637) Conversion expense on preferred stock converted into common stock - - - - - Proceeds from issuance of preferred stock - - 380,000 - 1,950,000 --------- --------- --------- --------- ---------- Net cash provided by financing 68,911 37,627 404,860 490,738 1,906,363 activities --------- --------- --------- --------- ---------- Net increase (decrease) in cash 2,605 35,300 147,757 (164,896) 895,617 Cash, beginning of period - 2,605 37,905 185,662 20,766 --------- --------- --------- --------- ---------- Cash, end of period $ 2,605 37,905 185,662 20,766 916,383 ========= ========= ========= ========= ==========
November 13, 1990 Six Months Ended (inception) through June 30, June 30, 1995 1996 1996 ---------------------------- ------------------- (unaudited) (unaudited) (unaudited) Cash used in operating activities: Net loss (607,273) (1,345,801) (3,577,015) Adjustments to reconcile net loss to cash used in operating activities: Loss on sale of property - - 31,680 Write-off of equipment and patent - - 77,845 Depreciation 20,934 22,396 82,856 Common Stock issued for services 6,400 105,000 121,400 Changes in operating assets and liabilities: Inventory (85,366) (218,593) (440,731) Other assets (1,231) (158,135) (251,829) Intangible assets - (24,454) (24,454) Accounts payable and accrued expenses (38,739) 165,650 354,436 Advances from customer - - 28,300 --------- --------- --------- Net cash used in operating activities (705,275) (1,453,937) (3,597,512) --------- --------- --------- Investing activities: Purchase of property and equipment (7,828) (6,775) (123,636) Proceeds from mortgage note receivable 200,000 - 200,000 Net proceeds from sale of property - - 68,320 --------- --------- --------- Net cash provided (used) by investing activities 192,172 (6,775) 144,684 --------- --------- --------- Financing activities: Proceeds from notes payable and line of credit - 1,012,500 1,658,898 Repayment of notes payable (22,765) (172,210) (240,109) Conversion expense on preferred stock converted into common stock - 344,631 344,631 Proceeds from issuance of preferred stock 1,950,000 0 2,330,000 --------- --------- --------- Net cash provided by financing activities 1,927,235 1,184,921 4,093,420 --------- --------- --------- Net increase (decrease) in cash 1,414,132 (275,791) 640,592 Cash, beginning of period 20,766 916,383 - --------- --------- --------- Cash, end of period 1,434,898 640,592 640,592 ========= ========= =========
Supplemental disclosures of noncash investing and financing activities: As discussed in note 7(d), in November, 1990, the Company issued 2,000,000 shares of common stock for real estate and equipment having an aggregate market value of $52,000. In addition, the officer assigned to the Company ongoing research and development and rights to patents and patents pending. During April 1992, the Company sold real property for $120,000 in cash and a $200,000 mortgage note receivable, as discussed in note 2. In December 1993, the Company issued preferred stock in exchange for $200,000 of notes payable. In July 1994, the Company purchased equipment, issuing a note payable to the seller in the amount of $252,910 (see note 5). During 1995, convertible preferred stock in the amount of $580,000 and related accrued dividends in the amount of $76,729 were converted to common stock (see note 7). During 1996, convertible preferred stock in the amount of $2,374,596 and related accrued dividends in the amount of $346,269 and a conversion expense of 12% in the amount of $344,631 were converted to common stock (note 7). See accompanying notes to financial statements. F-5 MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' (DEFICIT) From November 13, 1990 (inception) to June 30, 1996 Preferred stock Common stock Deficit ---------------------- -------------------------------- accumulated Additional during the Total paid-in development stockholders' Shares Amount Shares Par capital stage (deficit) ------ ------ ------ --- ------- ----- ------- Balance at November 13, 1990 (inception) - $ - - $ - $ - $ - $ - Issuance of common stock to an officer in exchange for machinery and real estate valued at market and rights to ongoing research and development patents and - - patent pending 2,000,000 2,000 50,000 - 52,000 Net loss - - - - - (136,941) (136,941) --------- ---------- --------- --------- --------- ---------- ---------- Balance at December 31, 1991 - - 2,000,000 2,000 50,000 (136,941) (84,941) Net loss - - - - - (96,754) (96,754) --------- ---------- --------- -------- --------- ---------- ---------- Balance at December 31, 1992 - - 2,000,000 2,000 50,000 (233,695) (181,695) Issuance of preferred stock in exchange for cash 380,000 380,000 - - - - - Issuance of preferred stock in satisfaction of notes payable 200,000 200,000 - - - - - Accrued dividends on preferred stock (8,328) (8,328) Net loss - - - - - 185,502) (185,502) --------- ---------- --------- -------- --------- ---------- ---------- Balance at December 31, 1993 580,000 580,000 2,000,000 2,000 41,672 (419,197) (375,525) Accrued dividends on preferred stock 53,929 (53,929) (53,929) Net loss - - - - - (492,872) (492,872) --------- --------- --------- -------- --------- ---------- ---------- Balance at December 31, 1994 580,000 633,929 2,000,000 2,000 (12,257) (912,069) (922,326) Issuance of preferred stock in exchange for cash and note payable, net of costs 490,000 2,374,596 - - - - - Accrued dividends on preferred stock 22,800 (22,800) (22,800) Conversion of preferred stock and accrued dividends to common stock (580,000) (656,729) 656,729 657 656,072 - 656,729 Accrued dividends on preferred stock 199,267 (199,267) (199,267) Issuance of common stock in exchange for services rendered - - 16,400 16 16,384 - 16,400 Net loss - - - - - (1,319,145) (1,319,145) --------- --------- --------- -------- --------- ---------- --------- Balance at December 31, 1995 490,000 2,573,863 2,673,129 2,673 438,132 (2,231,214) (1,790,409) Issuance of common stock in exchange for - - 30,000 30 104,970 - 105,000 services rendered (unaudited) Conversion of note payable into - - 20,000 20 99,980 - 100,000 common stock (unaudited) Accrued dividends on preferred stock 147,000 (147,000) (147,000) (unaudited) Conversion of preferred stock and accrued (490,000) (2,720,863) 628,180 628 3,064,866 - 3,065,494 dividends to common stock (unaudited) Net loss (unaudited) - - - - - (1,345,801) (1,345,801) --------- --------- --------- -------- --------- ---------- --------- Balance at June 30, 1996 (unaudited) 0 $ 0 3,351,309 $ 3,351 $3,560,948 $(3,577,015 $ (12,716) ========= ========= ========= ======== ========= ========== =========
See accompanying notes to financial statements. F-6 MANSUR INDUSTRIES INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENTS December 31, 1994 and December 31, 1995 and June 30, 1996 (unaudited) (1) THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Mansur Industries Inc. (the "Company") is primarily engaged in research and development, marketing, and initial production of industrial parts cleaning equipment for use in automotive, marine, airline and general manufacturing industries. The Company's focus is on the design, development and manufacture of industrial cleaning equipment which incorporate continuous recycling and recovery technologies for solvents and solutions, thereby reducing the need to replace and dispose of contaminated solvents and solutions. The Company is in the development stage. (A) OPERATIONS AND LIQUIDITY The Company has been primarily engaged in research, development, marketing, and initial production of its products. The Company's ultimate success is dependent upon future events, including the successful commercialization of the Company's products, establishing sources for manufacturing, marketing, and distribution channels, the outcomes of which are currently indeterminable, and is also dependent upon obtaining sufficient financing. As of June 30, 1996, the Company has realized no sales of its products. As indicated in the accompanying financial statements as of June 30, 1996, the Company's accumulated deficit totaled $3,577,015 (unaudited). The Company has financed this deficiency primarily through private placements of debt and equity securities. Management expects that product sales will commence during the second half of 1996 and that proceeds from the notes payable are sufficient to fund working capital requirements until sales of the Company's products reach levels sufficient to fund working capital requirements. In July 1996, the Company expects to file a registration statement with the Securities and Exchange Commission (the "SEC") in connection with a proposed initial public offering ("IPO") of shares of its common stock. In the event that the IPO is not completed, the Company has plans to restructure operations to minimize cash expenditures, and/or obtain additional financing in order to continue support of its activities. If adequate funds are not available from additional sources of financing, the Company's business may be materially adversely affected. F-7 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (B) INVENTORY Inventories are stated at the lower of cost or market using the first-in, first-out method. Inventory consists of the following.
DECEMBER 31, DECEMBER 31, JUNE 30, 1994 1995 1996 ------------------- ------------------- ----------------- (UNAUDITED) Raw materials................ $13,937 55,738 233,456 Work in progress and finished goods.......... 84,656 138,100 178,975 ------------------- ------------------- ----------------- $98,593 193,838 412,431 =================== =================== =================
(C) PROPERTY AND EQUIPMENT, NET Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the shorter of the lease term or the estimated useful lives of the respective assets. (D) INTANGIBLES Patents, patent applications and rights are stated at acquisition cost. Amortization of patents is recorded using the straight-line method over the legal lives of the patents, generally for periods ranging up to 17 years. The carrying value of intangible assets is periodically reviewed by the Company and impairments are recognized when the expected future cash flows from operations derived from such intangible assets is less than their carrying value. (E) OTHER ASSETS Included in other assets at December 31, 1994, were $75,404 in stock offering costs incurred in connection with the Series A preferred stock private placement (note 7). On June 30, 1996, other assets consist primarily of costs relating to the initial public offering of $94,251 and deposits with material suppliers (note 8). (unaudited) (F) FINANCIAL INSTRUMENTS (unaudited) In assessing the fair value of financial instruments at June 30, 1996 the Company has used a variety of methods and assumptions, which were based on estimates of market conditions and risks existing at that time. The carrying amount of long-term debt approximates fair value at June 30, 1996. For certain instruments, including accounts payable and accrued expenses, and short-term debt, the carrying amount approximates fair value due to their short maturity. F-8 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (G) RESEARCH AND DEVELOPMENT Research and development expenses consist primarily of costs incurred in connection with engineering activities related to the development of industrial parts cleaning machinery and are expensed as incurred. (H) INCOME TAXES The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (I) EARNINGS PER SHARE DATA The computation of loss per share in each year is based on the weighted average number of common shares outstanding. When dilutive, convertible preferred stock and convertible notes are included as common share equivalents using the if converted method. As these instruments have an anti-dilutive effect for the years presented, they are not included in the weighted average calculation. Primary and fully diluted earnings per share are the same for each of the years presented. (J) USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) MORTGAGE NOTE RECEIVABLE During April 1992, the Company sold real property for $120,000 in cash and a $200,000 mortgage note receivable. The note bore interest at a rate of 12 percent per annum payable monthly with the principal due at maturity, being April 27, 1997. The interest received on the mortgage note receivable was assigned by the Company to repay interest due on an unsecured note payable and dividends on certain of the preferred stock. In April 1995, the balance of the note was received in full. F-9 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (3) PROPERTY AND EQUIPMENT, NET Property and equipment was as follows:
DECEMBER 31, DECEMBER 31, JUNE 30, 1994 1995 1996 USEFUL LIFE ---------------- --------------- -------------- ------------- (UNAUDITED) Furniture and equipment............. $ 7,289 20,433 23,709 5 Years Machinery and equipment............. 351,688 353,606 357,105 10 Years Leasehold improvements.............. 10,852 10,852 10,852 ---------------- --------------- -------------- 369,829 384,891 391,666 Less accumulated depreciation....... 18,056 60,460 82,856 ---------------- --------------- -------------- $351,773 324,431 308,810 ================ =============== ==============
(4) DUE TO OFFICERS/SHAREHOLDERS (A) NOTES PAYABLE Notes payable at December 31, 1994 and 1995 consists of the following: 12% unsecured note payable $ 100,000 Note payable to chief executive officer 150,000 ------- $ 250,000 The 12% unsecured notes payable required interest payments monthly, with principal due at maturity. The note matured on December 31, 1995 and was renewed for one year. Pursuant to an amendment to the note signed in January 1996, the note was converted into common stock at a price of $5 per share (note 7). Advances made by the chief executive officer are pursuant to a $200,000 line of credit agreement signed in 1990. Under the terms of the agreement, interest is accrued at a variable rate not to exceed 10 percent per annum nor fall below 6 percent per annum negotiated annually. The rate for 1994 and 1995 was 6 percent. The note had a maturity date of December 31, 1995 and was renewed for one year to mature on December 31, 1996. The note payable to the chief executive officer was paid in full during May of 1996 (unaudited). (B) CONVERTIBLE NOTES PAYABLE (UNAUDITED) In June 1996, the Company issued cumulative convertible redeemable notes payable in the amount of $1,012,500, of which $303,750 was due to certain directors of the Company. The notes bear interest of 4% per annum until September 1996 and 12% thereafter. The notes will be automatically converted into common stock simultaneously with the initial public offering F-10 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT of the Company at a price of $6.75 per share. The Company may redeem these notes in full at any time at a price equal to the outstanding principal amount plus interest accrued thereon. Upon the conversion of the notes into common stock resulting from an IPO, a commission equalling 10% of the converted principal balance and a nonaccountable expense allowance equalling 3% of the converted principal balance is payable. (5) LONG-TERM DEBT
DECEMBER 31, -------------------------------- JUNE 30, 1994 1995 1996 --------------- -------------- --------------- (UNAUDITED) Long-term debt consists of the following: 12% unsecured convertible promissory note, due May 10, 1996, converted into Series A preferred stock in 1995 (note 7)............................... $500,000 12.5% note payable in monthly installments of $5,690, including interest due August 4, 1999, secured by equipment with a depreciated cost of $230,277 on June 30, 1996 (unaudited)............................ 243,648 200,011 177,800 Less current installments............................ 43,637 45,846 48,786 --------------- -------------- --------------- Long-term debt, excluding current installments....... $700,011 154,165 129,014 =============== ============== ===============
The 12 percent unsecured convertible promissory note was converted into 100,000 shares of Series A preferred stock during 1995 and subsequently converted to common stock in June 1996 (unaudited) (note 7). The aggregate maturities of long-term debt for each of the four years subsequent to June 30, 1996, are as follows: YEAR ENDING DECEMBER 31, AMOUNT ------------------------------------ ------------------------- 1996 $ 23,635 1997 51,916 1998 58,791 1999 43,458 ------------------------- $177,800 ========================= F-11 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (6) INCOME TAXES For the period from November 13, 1990 (inception) to June 30, 1996, the operations of the Company generated net operating losses of approximately $3,577,015 (unaudited) for financial reporting purposes. Because the Company is in the development stage, all costs through 1995 have been capitalized for tax purposes. The only loss reported for tax has been a $14,280 capital loss on the sale of real property in 1992. This capital loss may be carried forward by the Company for up to five years and will expire at the end of 1997. Capital losses carried forward may only be used to offset future capital gains. The gross amount of the deferred tax asset as of June 30, 1996 was approximately $1,288,000 (unaudited), which consists primarily of capital loss carryforwards, start-up costs, and research and experimental costs capitalized for tax purposes. Since realization of these tax benefits are not assured, a valuation allowance has been recorded against the entire deferred tax asset balance. In addition, pursuant to the Tax Reform Act of 1986, if certain substantial changes in ownership should occur there would be an annual limitation on the amount of tax attribute carryforwards which can be utilized in the future. (7) STOCKHOLDERS' DEFICIT (A) "SERIES A" PREFERRED STOCK In April 1995, the Company issued 490,000 shares of 12 percent cumulative convertible redeemable preferred stock (the "Series A") as part of a second private placement at an offering price of $5 per share. The issuance raised $1,950,000 in cash and converted the $500,000 unsecured convertible promissory note (see note 5) into Series A shares. On April 27, 1996, the board of directors of the Company approved the early redemption of all of the Series A preferred stock outstanding as of May 31, 1996, at the redemption price of $5 per share plus the aggregate amount of dividends accrued through June 30, 1996 in the amount of $346,269 (unaudited) and a conversion expense of 12% in the amount of $344,631 (unaudited). In June 1996, 100% of Series A shareholders exercised their right to convert all of their preferred shares together with their dividends in the amount of $743,164 into common shares (unaudited). (B) "FIRST SERIES" PREFERRED STOCK In the fourth quarter of 1993, the Company issued 580,000 shares of 12 percent cumulative convertible redeemable preferred stock (the "First Series" ) in a private placement. On May 30, 1995, the board of directors of the Company approved the redemption of all of the First Series preferred stock outstanding as of June 30, 1995, at the redemption price of $1 per share plus dividends accrued through June 30, 1995, subject to the preferred shareholders' prior right to convert such preferred stock into common stock of the Company. In June 1995, 100% of the First Series with cumulative dividends thereon was converted into common stock, on a one for one basis. F-12 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (C) CONVERTIBLE NOTE PAYABLE (UNAUDITED) In May 1996, the Company converted a $100,000 note payable into common stock at a price of $5 per share pursuant to an amendment to the note signed in January of 1996. (D) COMMON STOCK In November 1990, the Company issued 2,000,000 shares of common stock with a par value of $0.001 per share to the President of the Company for the President's assignment to the Company of all ongoing research and development and the rights to any related patents and patents pending, in addition to real estate and equipment with an aggregate fair value of $52,000 as part of the formation of the Company. (8) COMMITMENTS (A) LEASES The Company leases operating facilities under fixed rent operating leases. The facilities had a 24 month lease expiring December 31, 1994 with a rent of $4,631 per month. The lease was renewed under cancelable terms in October 1994 for an additional two-year period at a monthly rent of $5,094. During 1994, the Company leased equipment under an operating lease which expired in September 1995. Total rent expense was as follows: For the six months ended June 30, 1996 (unaudited) $ 30,564 For the year ended December 31: 1995 $ 61,128 1994 55,572 1993 39,740 1992 24,835 From November 13 1990 (inception) to December 31, 1991. 14,540 (B) DUE TO OFFICER In 1995, the Board of Directors of the Company declared an incentive bonus payable to the President, Pierre G. Mansur in the amount of $267,460. Payment of bonuses are subject to the determination by the Board of Directors that the Company is able to effectuate such payment without impeding the Company's operations or development. As a result, $88,110 has been paid and an amount of $179,350 has been accrued at December 31, 1995 and June 30, 1996 (unaudited). F-13 MANSUR INDUSTRIES, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO THE FINANCIAL STATEMENT (C) SUPPLY AGREEMENT (unaudited) On May 7, 1996, the Company entered into an agreement (the "Supply Agreement" ) with a supplier (the "Supplier") pursuant to which the Supplier agreed to supply to the Company, at the Company's election, between 3,000 and 5,000 machine units per year at established prices and in accordance with a delivery schedule. The Company has agreed to pay $150,000 (the "Advance"), $50,000 of which has been advanced through June 30, 1996. The total Advance may be credited against future purchases under the Supply Agreement at the rate of $50 per unit. The Supply Agreement provides that the Company may unilaterally terminate the contract in whole or in part for cause or for convenience. In the event the Supply Agreement is terminated by the Company for convenience, the Supplier will be entitled to reimbursement of the costs it has incurred through the date of termination and, if such termination occurs prior to the delivery of 3,000 units, the Supplier will be entitled to payment for units produced through the date of termination and retain any unapplied amount of the Advance. (9) PRODUCT FINANCING AGREEMENT (unaudited) In May 1996, the Company entered into an agreement (the "Product Financing Agreement") with a leasing company which agrees to purchase machines produced by the Company and subsequently lease these machines to customers on 60 month terms. The Company will market the machines and provide the leasing company with credit information on potential customers which they may either accept or reject. The Product Financing Agreement states that the leasing company does not have recourse against the Company for customer failures to discharge their obligations to the leasing company unless the Company has breached and failed to cure certain warranties. Under the Product Financing Agreement, the Company has agreed to provide periodic service for the machines and replace solvent used in the machines. In addition, upon the leasing company's request, the Company agrees to assist the leasing company in remarketing any repossessed or surrendered equipment for a fee. At the end of each customer lease, the Company has the option to purchase the machine from the leasing company at its fair market value. F-14 ================================================================================ NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THIS OFFERING AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. ----------------- TABLE OF CONTENTS PAGE Prospectus Summary............................................. Summary Combined Financial and Operating Data.................. Risk Factors................................................... Concurrent Offering............................................ Use of Proceeds of Concurrent Offering......................... Dilution....................................................... Dividend Policy................................................ Capitalization................................................. Selected Financial Data........................................ Management's Discussion and Analysis of Financial Condition and Results of Operations....................... Business....................................................... Management..................................................... Executive Compensation......................................... Certain Transactions........................................... Principal Shareholders......................................... Description of Capital Stock................................... Shares Eligible for Future Sale................................ Plan of Distribution........................................... Underwriting of the Concurrent Offering........................ Legal Matters.................................................. Experts........................................................ Additional Information......................................... Index to Financial Statements.................................. F-1 ---------------------- UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 150,000 SHARES MANSUR INDUSTRIES INC. COMMON STOCK ---------- PROSPECTUS ---------- FIRST ALLIED SECURITIES, INC. --------------, 1996 ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The Registrant estimates that expenses in connection with the offering described in this registration statement, excluding the Underwriter's non-accountable expense allowance, will be as follows: Securities and Exchange Commission registration fee ................ $ 6,000 NASD filing fee..................................................... 1,465 Printing and engraving expenses..................................... 50,000 Accounting fees and expenses........................................ 35,000 Legal fees and expenses............................................. 125,000 NASDAQ National market listing fees................................. 6,500 Fees and expenses (including legal fees) for qualifications under state securities laws ........................................... 30,000 Registrar and Transfer Agent's fees and expenses.................... 5,000 Miscellaneous....................................................... 15,535 --------- Total............................................................... $ 274,500 ========= All amounts except the Securities and Exchange Commission registration fee and the NASD filing fee are estimated. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS PROSPECTUS The Registrant has authority under Section 607.0850 of the Florida Business Corporation Act to indemnify its directors and officers to the extent provided for in such statute. The Registrant's Articles of Incorporation provide that the Registrant shall indemnify and may insure its officers and directors to the fullest extent not prohibited by law. The Registrant has also entered into an agreement (the form of which is filed as Exhibit 10.3 hereto) with each of its directors and executive officers wherein it has agreed to indemnify each of them to the fullest extent permitted by law. In general, Florida law permits a Florida corporation to indemnify its directors, officers, employees and agents, and persons serving at the corporation's request in such capacities for another enterprise, against liabilities arising from conduct that such persons reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. Pursuant to the Underwriting Agreement filed as Exhibit 1.1 to this Registration Statement, the Underwriter has agreed to indemnify the directors, officers and controlling persons of the Registrant against certain civil liabilities that may be incurred in connection with the offering, including certain liabilities under the Securities Act of 1933, as amended. II-1 ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Set forth below are the dates, number of shares and purchase prices per share of all shares of capital stock sold by the Company during the past three years: ISSUANCE OF FIRST SERIES PREFERRED STOCK DATE NUMBER OF SHARES PRICE - --------------------- ----------------------- ------------------ October 1993 245,000(1) $1 November 1993 115,000(2) $1 December 1993 20,000(3) $1 - --------------------- (1) Such figure represents shares issued to a group of accredited investors comprised of Weymouth Investments, Mark J. Bryn, Timothy P. Gilbert, Nicholas Milazzo, John R. Tormondsen, Ronald J. Marks and Jack Milazzo. (2) Such figure represents shares issued to a group of accredited investors comprised of Crestwell Corporation and George V. Hindy. (3) Such figure represents shares issued to a group of accredited investors comprised of Robert M. & Angela M. Downey and Richard T. & John T. Downey. EXCHANGE OF PROMISSORY NOTES FOR COMMON STOCK DATE NUMBER OF SHARES PRICE - --------------------- ----------------------- ------------------ December 1993 200,000(1) $1 May 1996 20,000 $5 - -------------------- (1) Such figure represents 100,000 shares of the Company's Common Stock issued in exchange for a $100,000 Promissory Note issued in favor of Frank Sanci; and 100,000 shares of the Company's Common Stock issued in exchange for $100,000 of a $200,000 Promissory Note issued in favor of Philip Salvatore. (2) Such figure represents 20,000 shares of the Company's Common Stock issued in exchange for the remaining $100,000 principal amount of a $200,000 Promissory Note issued in favor of Philip Salvatore. ISSUANCE OF SERIES A PREFERRED STOCK DATE NUMBER OF SHARES PRICE - --------------------- ----------------------- ------------------ April 1995 390,000(1) $5 - --------------------- (1) Such figure represents shares issued to a group of accredited investors comprised of Landmark Services, Mark J. Bryn, First Malro, Timothy P. Gilbert, Nicholas Milazzo, John R. Tormondsen, Ronald J. Marks, Jack Milazzo, George V. Hindy, Joseph E. Jack, C. Steven Duncker, Antonin & Adele Tutter, Said H. Mouawad, Artur Sella, Patrick Buhse, Maria G. Jackson, Stanley Krueger, Paul H. Davis, Julian & Sydonia Nacron, Gerald Michelak, James J. & Paul E. Downey, Vincent Pacella, Peter H. Burger, Derek Lee, Peter L. Polito, Jonathan Savitz, Caballo Grande Investments, Howard J. Gilbert and William S. Gilbert. II-2 EXCHANGE OF PROMISSORY NOTES FOR SERIES A PREFERRED STOCK DATE NUMBER OF SHARES PRICE - --------------------- ----------------------- ------------------ April 1995 100,000(1) $5 - --------------------- (1) Such figure represents 100,000 shares of Series A Preferred Stock issued in exchange for a $500,000 12% Secured Convertible Promissory Note, dated as of November 1994, issued in favor of Imperial Trust. CONVERSION OF FIRST SERIES PREFERRED STOCK INTO COMMON STOCK DATE NUMBER OF SHARES PRICE - --------------------- ----------------------- ------------------ April 1995 456,729 $1 - --------------------- (1) Such figure includes (i) 380,000 shares of Common Stock issued upon conversion of 380,000 shares of First Series Preferred Stock and (ii) 76,729 shares of Common Stock issued in satisfaction of dividends with respect to the First Series Preferred Stock, which accrued at a rate of 12 percent from the date of issuance until the date of conversion. ISSUANCE OF COMMON STOCK DATE NUMBER OF SHARES PRICE - --------------------- ----------------------- ------------------ June 1995 6,400(1) $5 December 1995 10,000(2) $1 April 1996 30,000(3) $3.50 - ------------------------- (1) Such figure represents shares of the Company's Common Stock issued to William R. Burdette and Edward A. Calt, as Placement Agents in connection with the Series A Preferred Stock offering. (2) Such figure represents shares of the Company's Common Stock issued to Environmental Technologies BVI Limited for cancellation of any and all rights of that certain Consulting Agreement, dated as of November 10, 1994. (3) Such figure represents share of the Company's Common Stock issued to Elias F. Mansur, Jan Hedberg and Joseph E. Jack, non-employee directors of the Company, for previously rendered consulting services. CONVERSION OF SERIES A PREFERRED STOCK INTO COMMON STOCK DATE NUMBER OF SHARES PRICE - --------------------- ----------------------- ------------------ June 1996 628,180 $5 - --------------------- (1) Such figure includes (i) 490,000 shares of Common Stock issued upon conversion of 490,000 shares of Series A Preferred Stock; (ii) 69,254 shares of Common Stock issued in satisfaction of dividends with respect to the Series A Preferred Stock, which accrued at a rate of 12 percent from the date of issuance, through the maturity date of June 30, 1996; and (iii) 68,926 shares of Common Stock issued as a conversion expense to induce all of the holders of the Series A II-3 Preferred Stock to convert the Series A Preferred Stock into shares of Common Stock as of June 30, 1996. The aforementioned issuances and sales were made in reliance upon the exemption from the registration provisions of the 1933 Act afforded by Sections 4(2) and/or 4(6) thereof and/or Regulation D promulgated thereunder, as transactions by an issuer not involving a public offering. The Purchasers of the securities described above acquired them for their own account and not with a view to any distribution thereof to the public. The certificates evidencing the securities bear legends stating that the shares may not be offered, sold or transferred other than pursuant to an effective registration statement under the 1933 Act, or an exemption from such registration requirements. The Company will place stop transfer instructions with its transfer agent with respect to all such securities. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits: EXHIBIT DESCRIPTION - ------- ------------------------------------------------------------------- 1.1 Proposed form of Underwriting Agreement between the Registrant and First Allied Securities Inc. (the "Underwriter") 3.1 Amended and Restated Articles of Incorporation of Registrant 3.2 Bylaws of Registrant 4.1 Certificate for Shares of Common Stock, par value $.001* 4.3 Proposed form of Representatives' Warrant Agreement between the Registrant and the Underwriter with form of warrant attached 5.1 Opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. as to the validity of the Common Stock being registered* 10.1 Registrant's Executive Incentive Plan 10.2 Master Lease and Distribution Agreement, effective August 1, 1996, among the Registrant, The Valvoline Company and First Recovery 10.3 Form of Indemnification Agreement between the Registrant and each of its directors and executive officers 10.4 Employment Agreement between Pierre G. Mansur and the Registrant dated September 1, 1995 10.5 Employment Agreement between Paul I. Mansur and the Registrant dated September 1, 1995 10.6 Employment Agreement between the Company and Charles W. Profilet, dated as of November 27, 1995 10.7 Vendor Lease Plan Agreement between the Registrant and Oakmont Financial Services, dated as of May 28, 1996 10.8 A Manufacture Agreement between the Registrant and EMJAC Industries, Inc., dated as of May 7, 1996 10.9 Lease Agreement, dated October 29, 1994, between Registrant and Marvin L. Duncan II-4 EXHIBIT DESCRIPTION - ------- ------------------------------------------------------------------- 10.10 Security Agreement between the Registrant and The CIT Group/Equipment Financing, Inc. for one (1) TRUMPF TC 200 CNC Punching Machine, Serial No. 070080 with tooling package, dated as of October 25, 1995 10.11 Term Life Insurance Policy for Pierce G. Mansur with the Equitable Life Assurance Society of the United States, dated as of November 9, 1994 10.12 Term Life Insurance Policy for Paul I. Mansur with the Equitable Life Assurance Society of the United States, dated as of May 24, 1996 10.13 United States Patent No. 5,277,208 for Multi-Process Power Spray Washer Apparatus dated January 11, 1994 10.14 United States Patent No. 5,349,974 for SystemOne(TM)Washer dated September 27, 1994 10.15 United States Patent Application No. 08/394,290 for Improved SystemOne(TM)Washer allowed April 2, 1996 10.16 United States Patent No. 5,388,601 for Spray Gun Washer dated February 14, 1995 10.17 United States Patent No. 5,518,013 for Immersion Washer dated May 21, 1996 10.18 United States Patent Applications No. 08/364,785 for apparatus for disposal of refuse by thermal oxidation allowed June 26, 1996 23.1 Consent of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A. (to be included in its opinion to be filed as Exhibit 5.1)* 23.2 Consent of KPMG Peat Marwick LLP 24.1 Reference is made to the Signatures section of this Registration Statement for the Power of Attorney contained herein. 27.1 Financial Data Schedule - ------------------------ * To be filed by amendment II-5 ITEM 17. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective dateof the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes to provide to the Underwriter at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriter to permit prompt delivery to each purchaser. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on July 23, 1996. MANSUR INDUSTRIES INC. By: /s/ PAUL I. MANSUR ----------------------- Paul I. Mansur Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints each of Pierre G. Mansur and Paul I. Mansur, respectively, his true and lawful attorney-in-fact, with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments, including any post-effective amendments, to this Registration Statement, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitutes may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the date indicated. SIGNATURE TITLE DATE /S/ PIERRE G. MANSUR Chairman of the Board and July 23, 1996 - --------------------- President Pierre G. Mansur /S/ PAUL I. MANSUR Director and Chief Executive Officer July 23, 1996 - --------------------- [Principal Executive and Financial Officer] Paul I. Mansur /S/ LYDIA G. HUBBELL Controller July 23, 1996 - --------------------- [Principal Accounting Officer] Lydia G. Hubbell /S/ ELIAS F. MANSUR Director July 23, 1996 - --------------------- Elias F. Mansur /S/ DR. JAN HEDBERG Director July 23, 1996 - --------------------- Dr. Jan Hedberg /S/ JOSEPH E. JACK Director July 23, 1996 - --------------------- Joseph E. Jack II-7 INDEX TO EXHIBITS
SEQUENTIAL PAGE EXHIBIT DESCRIPTION NUMBER - --------------- --------------------------------------------------------------------- ------------------------ 1.1 Proposed form of Underwriting Agreement between the Registrant and First Allied Securities Inc. (the "Underwriter") 3.1 Amended and Restated Articles of Incorporation of Registrant 3.2 Bylaws of Registrant 4.3 Proposed form of Representatives' Warrant Agreement between the Registrant and the Underwriter with form of warrant attached 10.1 Registrant's Executive Incentive Plan 10.2 Master Lease and Distribution Agreement, effective August 1, 1996, among the Registrant, The Valvoline Company and First Recovery 10.3 Form of Indemnification Agreement between the Registrant and each of its directors and executive officers 10.4 Employment Agreement between Pierre G. Mansur and the Registrant dated September 1, 1995 10.5 Employment Agreement between Paul I. Mansur and the Registrant dated September 1, 1995 10.6 Employment Agreement between the Company and Charles W. Profilet, dated as of November 27, 1995 10.7 Vendor Lease Plan Agreement between the Registrant and Oakmont Financial Services, dated as of May 28, 1996 10.8 A Manufacture Agreement between the Registrant and EMJAC Industries, Inc., dated as of May 7, 1996 10.9 Lease Agreement, dated October 29, 1994, between Registrant and Marvin L. Duncan 10.10 Security Agreement between the Registrant and The CIT Group/Equipment Financing, Inc. for one (1) TRUMPF TC 200 CNC Punching Machine, Serial No. 070080 with tooling package, dated as of October 25, 1995 10.11 Term Life Insurance Policy for Pierce G. Mansur with the Equitable Life Assurance Society of the United States, dated as of November 9, 1994 10.12 Term Life Insurance Policy for Paul I. Mansur with the Equitable Life Assurance Society of the United States, dated as of May 24, 1996 10.13 United States Patent No. 5,277,208 for Multi-Process Power Spray Washer Apparatus dated January 11, 1994 10.14 United States Patent No. 5,349,974 for SystemOne(TM) Washer dated September 27, 1994 10.15 United States Patent Application No. 08/394,290 for Improved SystemOne(TM) Washer allowed April 2, 1996 10.16 United States Patent No. 5,388,601 for Spray Gun Washer dated February 14, 1995 10.17 United States Patent No. 5,518,013 for Immersion Washer dated May 21, 1996 10.18 United States Patent Applications No. 08/364,785 for apparatus for disposal of refuse by thermal oxidation allowed June 26, 1996 23.2 Consent of KPMG Peat Marwick LLP 24.1 Reference is made to the Signatures section of this Registration Statement for the Power of Attorney contained herein. 27.1 Financial Data Schedule
- 2 - EX-1.1 2 EXHIBIT 1.1 OH&S DRAFT [Form of Underwriting Agreement - Subject to Additional Review] 850,000 SHARES OF COMMON STOCK MANSUR INDUSTRIES INC. UNDERWRITING AGREEMENT New York, New York , 1996 FIRST ALLIED SECURITIES, INC. As Representative of the Several Underwriters listed on Schedule A hereto c/o First Allied Securities, Inc. 200 Park Avenue 24th Floor New York, New York 10166 Ladies and Gentlemen: Mansur Industries Inc., a Florida corporation (the "Company") confirms its agreement with First Allied Securities, Inc. ("First Allied") and each of the underwriters named in Schedule A hereto (collectively, the "Underwriters," which term shall also include any underwriter substituted as hereinafter provided in SECTION 11), for whom First Allied is acting as representative (in such capacity, First Allied shall hereinafter be referred to as "you" or the "Representative"), with respect to the sale by the Company and the purchase by the Underwriters, acting severally and not jointly, of the respective numbers of shares of the Company's common stock, $.001 par value per share ("Common Stock") set forth in Schedule A hereto. Such shares of Common Stock are hereinafter referred to as the "Firm Shares." Upon your request, as provided in Section 2(b) of this Agreement, the Company shall also sell to the Underwriters, acting severally and not jointly, up to an additional 127,500 shares of Common Stock for the purpose of covering over-allotments, if any (the "Option Shares"). The Firm Shares and the Option Shares are sometimes hereinafter referred to as the "Shares." The Company also proposes to issue and sell to you warrants (the "Representative's Warrants") pursuant to the Representative's Warrant Agreement (the "Representative's Warrant Agreement") for the purchase of an additional 85,000 shares of Common Stock. The shares of Common Stock issuable upon exercise of the Representative's Warrants are hereinafter referred to as the "Representative's Shares." The Firm Shares, the Option Shares, the Representative's Warrants and the Representative's Shares (collectively, hereinafter referred to as the "Securities") are more fully described in the Registration Statement and the Prospectus referred to below. 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and agrees with, each of the Underwriters as of the date hereof, and as of the Closing Date (hereinafter defined) and the Option Closing Date (hereinafter defined), if any, as follows: (a) The Company has prepared and filed with the Securities and Exchange Commission (the "Commission") a registration statement, and an amendment or amendments thereto, on Form S-1 (No. 333-_____), including any related preliminary prospectus ("Preliminary Prospectus"), for the registration of the Firm Shares and the Option Shares under the Securities Act of 1933, as amended (the "Act"), which registration statement and amendment or amendments have been prepared by the Company in conformity with the requirements of the Act, and the rules and regulations (the "Regulations") of the Commission under the Act. The Company will promptly file a further amendment to said registration statement in the form heretofore delivered to the Underwriters and will not, file any other amendment thereto to which the Underwriters shall have objected in writing after having been furnished with a copy thereof. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement becomes effective (including the prospectus, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein (including, but not limited to those documents or information incorporated by reference therein) and all information deemed to be a part thereof as of such time pursuant to paragraph (b) of Rule 430(A) of the Regulations)), is hereinafter called the "Registration Statement", and the form of prospectus in the form first filed with the Commission pursuant to Rule 424(b) of the Regulations, is hereinafter called the "Prospectus." For purposes hereof, "Rules and Regulations" mean the rules and regulations adopted by the Commission under either the Act or the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable. (b) Neither the Commission nor any state regulatory authority has issued any order preventing or suspending the use of any Preliminary Prospectus, the Registration Statement or the Prospectus or any part of any thereof and no proceedings for a stop order suspending the effectiveness of the Registration Statement or any of the Company's securities have been instituted or are pending or to the Company's knowledge, threatened. Each of the Preliminary Prospectus, Registration Statement and Prospectus at the time of filing thereof conformed with the requirements of the Act and the Rules and Regulations, and none of the Preliminary Prospectus, Registration Statement or Prospectus at the time of filing thereof contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein and necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except that this representation and warranty does - 2 - not apply to statements made in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by or on behalf of the Underwriters expressly for use in such Preliminary Prospectus, Registration Statement or Prospectus. (c) When the Registration Statement becomes effective and at all times subsequent thereto up to the Closing Date and each Option Closing Date, if any, and during such longer period as the Prospectus may be required to be delivered in connection with sales by the Underwriters or a dealer, the Registration Statement and the Prospectus will contain all statements which are required to be stated therein in accordance with the Act and the Rules and Regulations, and will conform to the requirements of the Act and the Rules and Regulations; neither the Registration Statement nor the Prospectus, nor any amendment or supplement thereto, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, PROVIDED, HOWEVER, that this representation and warranty does not apply to statements made or statements omitted in reliance upon and in conformity with information furnished to the Company in writing by or on behalf of any Underwriter expressly for use in the Preliminary Prospectus, Registration Statement or Prospectus or any amendment thereof or supplement thereto. (d) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the state of its incorporation. The Company does not own an interest in any corporation, partnership, trust, joint venture or other business entity. The Company is duly qualified and licensed and in good standing as a foreign corporation in each jurisdiction in which its ownership or leasing of any properties or the character of its operations requires such qualification or licensing. The Company has all requisite corporate power and authority, and the Company has obtained any and all necessary authorizations, approvals, orders, licenses, certificates, franchises and permits of and from all governmental or regulatory officials and bodies (including, without limitation, those having jurisdiction over environmental or similar matters), to own or lease its properties and conduct its business as described in the Prospectus; the Company is and has been doing business in compliance with all such authorizations, approvals, orders, licenses, certificates, franchises and permits and all federal, state and local laws, rules and regulations; and the Company has not received any notice of proceedings relating to the revocation or modification of any such authorization, approval, order, license, certificate, franchise, or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect the condition, financial or otherwise, or the earnings, position, prospects, value, operation, properties, business or results of operations of the Company. The disclosures in the Registration Statement concerning the effects of federal, state and local laws, rules and regulations on the Company's business as currently conducted and as contemplated are correct in all material respects and do not omit to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances in which they were made. (e) The Company has a duly authorized, issued and outstanding capitalization as set forth in the Prospectus, under "Capitalization" and "Description of Capital Stock" and will have the adjusted capitalization set forth therein on the Closing Date and the Option Closing Date, if any, based upon the assumptions set forth therein, and the Company is - 3 - not a party to or bound by any instrument, agreement or other arrangement providing for it to issue any capital stock, rights, warrants, options or other securities, except for this Agreement, the Representative's Warrant Agreement and as described in the Prospectus. The Securities and all other securities issued or issuable by the Company conform or, when issued and paid for, will conform, in all respects to all statements with respect thereto contained in the Registration Statement and the Prospectus. All issued and outstanding securities of the Company have been duly authorized and validly issued and are fully paid and non-assessable and the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The Securities are not and will not be subject to any preemptive or other similar rights of any stockholder, have been duly authorized and, when issued, paid for and delivered in accordance with the terms hereof, will be validly issued, fully paid and non-assessable and will conform to the description thereof contained in the Prospectus; the holders thereof will not be subject to any liability solely as such holders; all corporate action required to be taken for the authorization, issue and sale of the Securities has been duly and validly taken; and the certificates representing the Securities will be in due and proper form. Upon the issuance and delivery pursuant to the terms hereof of the Securities to be sold by the Company hereunder, the Underwriters or the Representative, as the case may be, will acquire good and marketable title to such Securities free and clear of any lien, charge, claim, encumbrance, pledge, security interest, defect or other restriction or equity of any kind whatsoever. (f) The financial statements, including the related notes and schedules thereto, included in the Registration Statement, each Preliminary Prospectus and the Prospectus fairly present the financial position, income, changes in cash flow, changes in stockholders' equity, and the results of operations of the Company at the respective dates and for the respective periods to which they apply [and the pro forma financial information included in the Registration Statement and Prospectus presents fairly on a basis consistent with that of the audited financial statements included therein, what the Company's pro forma capitalization would have been for the respective periods and as of the respective dates to which they apply after giving effect to the adjustments described therein.] Such financial statements have been prepared in conformity with generally accepted accounting principles and the Rules and Regulations, consistently applied throughout the periods involved. There has been no adverse change or development involving a material prospective change in the condition, financial or otherwise, or in the earnings, position, prospects, value, operation, properties, business, or results of operations of the Company whether or not arising in the ordinary course of business, since the date of the financial statements included in the Registration Statement and the Prospectus and the outstanding debt, the property, both tangible and intangible, and the business of the Company conform in all material respects to the descriptions thereof contained in the Registration Statement and the Prospectus. Financial information set forth in the Prospectus under the headings "Summary Financial Data," "Selected Financial Data," "Capitalization," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," fairly present, on the basis stated in the Prospectus, the information set forth therein, have been derived from or compiled on a basis consistent with that of the audited financial statements included in the Prospectus. - 4 - (g) The Company (i) has paid all federal, state, local, and foreign taxes for which it is liable, including, but not limited to, withholding taxes and amounts payable under Chapters 21 through 24 of the Internal Revenue Code of 1986 (the "Code"), and has furnished all information returns it is required to furnish pursuant to the Code, (ii) has established adequate reserves for such taxes which are not due and payable, and (iii) does not have any tax deficiency or claims outstanding, proposed or assessed against it. (h) No transfer tax, stamp duty or other similar tax is payable by or on behalf of the Underwriters in connection with (i) the issuance by the Company of the Securities, (ii) the purchase by the Underwriters of the Securities from the Company and the purchase by the Representative of the Representative's Warrants from the Company, (iii) the consummation by the Company of any of its obligations under this Agreement or the Representative's Warrant Agreement, or (iv) resales of the Shares in connection with the distribution contemplated hereby. (i) The Company maintains insurance policies, including, but not limited to, general liability and property insurance, which insures the Company and its employees, against such losses and risks generally insured against by comparable businesses. The Company (A) has not failed to give notice or present any insurance claim with respect to any matter, including but not limited to the Company's business, property or employees, under the insurance policy or surety bond in a due and timely manner, (B) does not have any disputes or claims against any underwriter of such insurance policies or surety bonds or has not failed to pay any premiums due and payable thereunder, or (C) has not failed to comply with all conditions contained in such insurance policies and surety bonds. There are no facts or circumstances under any such insurance policy or surety bond which would relieve any insurer of its obligation to satisfy in full any valid claim of the Company. (j) There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding (including, without limitation, those having jurisdiction over environmental or similar matters), domestic or foreign, pending or threatened against (or circumstances that may give rise to the same), or involving the properties or business of, the Company which (i) questions the validity of the capital stock of the Company, this Agreement or the Representative's Warrant Agreement or of any action taken or to be taken by the Company pursuant to or in connection with this Agreement or the Representative's Warrant Agreement, (ii) is required to be disclosed in the Registration Statement which is not so disclosed (and such proceedings as are summarized in the Registration Statement are accurately summarized in all material respects), or (iii) might materially and adversely affect the condition, financial or otherwise, or the earnings, position, prospects, stockholders' equity, value, operation, properties, business or results of operations of the Company. (k) The Company has full legal right, power and authority to authorize, issue, deliver and sell the Securities, enter into this Agreement and the Representative's Warrant Agreement and to consummate the transactions provided for in such agreements; and this Agreement and the Representative's Warrant Agreement have each been duly and properly authorized, executed and delivered by the Company. Each of this Agreement and the Representative's Warrant Agreement constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms, except (i) as such - 5 - enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws affecting creditors' rights generally, (ii) as enforceability of any indemnification or contribution provisions may be limited under applicable laws or the public policies underlying such laws and (iii) that the remedies of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceedings may be brought. None of the Company's issue and sale of the Securities, execution or delivery of this Agreement or the Representative's Warrant Agreement, its performance hereunder and thereunder, its consummation of the transactions contemplated herein and therein, the conversion of $1,012,500 in principal amount of convertible notes of the Company issued in June 1996 (the "Convertible Notes") into an aggregate of 150,000 shares of Common Stock or the conduct of its business as described in the Registration Statement, the Prospectus, and any amendments or supplements thereto, conflicts with or will conflict with or results or will result in any breach or violation of any of the terms or provisions of, or constitutes or will constitute a default under, or result in the creation or imposition of any lien, charge, claim, encumbrance, pledge, security interest, defect or other restriction or equity of any kind whatsoever upon, any property or assets (tangible or intangible) of the Company pursuant to the terms of, (i) the certificate of incorporation or by-laws of the Company, (ii) any license, contract, indenture, mortgage, deed of trust, voting trust agreement, stockholders agreement, note, loan or credit agreement or any other agreement or instrument to which the Company is a party or by which it is or may be bound or to which any of its properties or assets (tangible or intangible) is or may be subject, or any indebtedness, or (iii) any statute, judgment, decree, order, rule or regulation applicable to the Company of any arbitrator, court, regulatory body or administrative agency or other governmental agency or body (including, without limitation, those having jurisdiction over environmental or similar matters), domestic or foreign, having jurisdiction over the Company or any of its activities or properties. (l) Except as described in the Prospectus, no consent, approval, authorization or order of, and no filing with, any court, regulatory body, government agency or other body, domestic or foreign, is required for the issuance of the Shares pursuant to the Prospectus and the Registration Statement, the issuance of the Representative's Warrants, the performance of this Agreement and the Representative's Warrant Agreement and the transactions contemplated hereby and thereby, including without limitation, any waiver of any preemptive, first refusal or other rights that any entity or person may have for the issue and/or sale of any of the Shares, or the Representative's Warrants, except such as have been or may be obtained under the Act or may be required under state securities or Blue Sky laws in connection with the Underwriters' purchase and distribution of the Shares, and the Representative's Warrants to be sold by the Company hereunder. (m) All executed agreements, contracts or other documents or copies of executed agreements, contracts or other documents filed as exhibits to the Registration Statement to which the Company is a party or by which it may be bound or to which any of its assets, properties or business may be subject have been duly and validly authorized, executed and delivered by the Company, and constitute the legal, valid and binding agreements of the Company, enforceable against the Company, in accordance with their respective terms. The descriptions in the Registration Statement of agreements, contracts and other documents are accurate in all material respects and fairly present the information required to be shown with - 6 - respect thereto by Form S-1, and there are no contracts or other documents which are required by the Act to be described in the Registration Statement or filed as exhibits to the Registration Statement which are not described or filed as required, and the exhibits which have been filed are in all material respects complete and correct copies of the documents of which they purport to be copies. (n) Subsequent to the respective dates as of which information is set forth in the Registration Statement and Prospectus, and except as may otherwise be indicated or contemplated herein or therein, the Company has not (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money, (ii) entered into any transaction other than in the ordinary course of business, or (iii) declared or paid any dividend or made any other distribution on or in respect of its capital stock of any class, and there has not been any change in the capital stock, or any material change in the debt (long or short term) or liabilities or material adverse change in or affecting the general affairs, management, financial operations, stockholders' equity or results of operations of the Company. (o) No default exists in the due performance and observance of any term, covenant or condition of any license, contract, indenture, mortgage, installment sale agreement, lease, deed of trust, voting trust agreement, stockholders agreement, partnership agreement, note, loan or credit agreement, purchase order, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which the property or assets (tangible or intangible) of the Company is subject or affected. (p) The Company has generally enjoyed a satisfactory employer-employee relationship with its employees and is in compliance with all federal, state, local, and foreign laws and regulations respecting employment and employment practices, terms and conditions of employment and wages and hours. There are no pending investigations involving the Company by the U.S. Department of Labor, or any other governmental agency responsible for the enforcement of such federal, state, local, or foreign laws and regulations. There is no unfair labor practice charge or complaint against the Company pending before the National Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened against or involving the Company or any predecessor entity, and none has ever occurred. No representation question exists respecting the employees of the Company, and no collective bargaining agreement or modification thereof is currently being negotiated by the Company. No grievance or arbitration proceeding is pending under any expired or existing collective bargaining agreements of the Company. No labor dispute with the employees of the Company exists, or is imminent. (q) Except as described in the Prospectus, the Company does not maintain, sponsor or contribute to any program or arrangement that is an "employee pension benefit plan," an "employee welfare benefit plan," or a "multiemployer plan" as such terms are defined in Sections 3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans"). The Company does not maintain or contribute, now or at any time previously, to a defined benefit plan, as defined in Section 3(35) of ERISA. No ERISA Plan (or any trust created thereunder) has engaged in a "prohibited - 7 - transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code, which could subject the Company to any tax penalty on prohibited transactions and which has not adequately been corrected. Each ERISA Plan is in compliance with all reporting, disclosure and other requirements of the Code and ERISA as they relate to any such ERISA Plan. Determination letters have been received from the Internal Revenue Service with respect to each ERISA Plan which is intended to comply with Code Section 401(a), stating that such ERISA Plan and the attendant trust are qualified thereunder. The Company has never completely or partially withdrawn from a "multiemployer plan." (r) Neither the Company nor any of its employees, directors, stockholders, partners, or affiliates (within the meaning of the Rules and Regulations) of any of the foregoing has taken or will take, directly or indirectly, any action designed to or which has constituted or which might be expected to cause or result in, under the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities or otherwise. (s) Except as otherwise disclosed in the Prospectus, none of the patents, patent applications, trademarks, service marks, service names, trade names and copyrights, and none of the licenses and rights to the foregoing presently owned or held by the Company are in dispute or are in any conflict with the right of any other person or entity. The Company (i) owns or has the right to use, free and clear of all liens, charges, claims, encumbrances, pledges, security interests, defects or other restrictions or equities of any kind whatsoever, all patents, patent applications, trademarks, service marks, service names, trade names and copyrights, technology and licenses and rights with respect to the foregoing, used in the conduct of its business as now conducted or proposed to be conducted without infringing upon or otherwise acting adversely to the right or claimed right of any person, corporation or other entity under or with respect to any of the foregoing and (ii) is not obligated or under any liability whatsoever to make any payment by way of royalties, fees or otherwise to any owner or licensee of, or other claimant to, any patent, patent application, trademark, service mark, service names, trade name, copyright, know-how, technology or other intangible asset, with respect to the use thereof or in connection with the conduct of its business or otherwise. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental or other proceeding, domestic or foreign, pending or threatened (or circumstances that may give rise to the same) against the Company which challenges the exclusive rights of the Company with respect to any trademarks, trade names, service marks, service names, copyrights, patents, patent applications or licenses or rights to the foregoing used in the conduct of its business, or which challenge the right of the Company to use any technology presently used or contemplated to be used in the conduct of its business. (t) The Company owns and has the unrestricted right to use all trade secrets, know-how (including all other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), inventions, technology, designs, processes, works of authorship, computer programs and technical data and information (collectively herein "intellectual property") that are material to the development, manufacture, operation and sale of all products and services sold or proposed to be sold by the Company, free and clear of and without violating any right, lien, or claim of others, including without limitation, former - 8 - employers of its employees; provided, however, that the possibility exists that other persons or entities, completely independently of the Company, or its employees or agents, could have developed trade secrets or items of technical information similar or identical to those of the Company. The Company is not aware of any such development of similar or identical trade secrets or technical information by others. (u) The Company has good and marketable title to, or valid and enforceable leasehold estates in, all items of real and personal property stated in the Prospectus, to be owned or leased by it free and clear of all liens, charges, claims, encumbrances, pledges, security interests, defects, or other restrictions or equities of any kind whatsoever, other than those referred to in the Prospectus and liens for taxes not yet due and payable. (v) KPMG Peat Marwick, L.L.P., whose report is filed with the Commission as a part of the Registration Statement, are independent certified public accountants as required by the Act and the Rules and Regulations. (w) The Company has caused to be duly executed legally binding and enforceable agreements pursuant to which all of the holders of the Common Stock and holders of securities exchangeable or exercisable for or convertible into shares of Common Stock have agreed not to, directly or indirectly, offer to sell, sell, grant any option for the sale of, assign, transfer, pledge, hypothecate, distribute or otherwise encumber or dispose of any shares of Common Stock or securities convertible into, exercisable or exchangeable for or evidencing any right to purchase or subscribe for any shares of Common Stock (either pursuant to Rule 144 of the Rules and Regulations or otherwise) or dispose of any beneficial interest therein for a period of not less than 13 months following the effective date of the Registration Statement without the prior written consent of the Representative. The Company will cause the Transfer Agent, as defined below, to mark an appropriate legend on the face of stock certificates representing all of such securities and to place "stop transfer" orders on the Company's stock ledgers. (x) Except as described in the Prospectus under "Underwriting," there are no claims, payments, issuances, arrangements or understandings, whether oral or written, for services in the nature of a finder's or origination fee with respect to the sale of the Securities hereunder or any other arrangements, agreements, understandings, payments or issuance with respect to the Company or any of its officers, directors, stockholders, partners, employees or affiliates that may affect the Underwriters' compensation, as determined by the National Association of Securities Dealers, Inc. ("NASD"). (y) The Common Stock has been approved for quotation on the Nasdaq National Market ("NNM"). (z) Neither the Company nor any of its officers, employees, agents, or any other person acting on behalf of the Company, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency (domestic or foreign) or instrumentality of any government (domestic or foreign) or any political party or candidate for - 9 - office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist the Company in connection with any actual or proposed transaction) which (a) might subject the Company, or any other such person to any damage or penalty in any civil, criminal or governmental litigation or proceeding (domestic or foreign), (b) if not given in the past, might have had a materially adverse effect on the assets, business or operations of the Company, or (c) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company's internal accounting controls are sufficient to cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as amended. (aa) Except as set forth in the Prospectus, no officer, director or stockholder of the Company, or any "affiliate" or "associate" (as these terms are defined in Rule 405 promulgated under the Rules and Regulations) of any of the foregoing persons or entities has or has had, either directly or indirectly, (i) an interest in any person or entity which (A) furnishes or sells services or products which are furnished or sold or are proposed to be furnished or sold by the Company, or (B) purchases from or sells or furnishes to the Company any goods or services, or (ii) a beneficial interest in any contract or agreement to which the Company is a party or by which it may be bound or affected. Except as set forth in the Prospectus under "Certain Transactions," there are no existing agreements, arrangements, understandings or transactions, or proposed agreements, arrangements, understandings or transactions, between or among the Company and any officer, director, or Principal Stockholder (as such term is defined in the Prospectus) of the Company or any partner, affiliate or associate of any of the foregoing persons or entities. (bb) Any certificate signed by any officer of the Company, and delivered to the Underwriters or to Underwriters' Counsel (as defined herein) shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby. (cc) The minute books of the Company have been made available to the Underwriters and contains a complete summary of all meetings and actions of the directors, stockholders, audit committee, compensation committee and any other committee of the Board of Directors of the Company, respectively, since the time of its incorporation, and reflects all transactions referred to in such minutes accurately in all material respects. (dd) Except and to the extent described in the Prospectus, no holders of any securities of the Company or of any options, warrants or other convertible or exchangeable securities of the Company have the right to include any securities issued by the Company in the Registration Statement or any registration statement to be filed by the Company or to require the Company to file a registration statement under the Act and no person or entity holds any anti-dilution rights with respect to any securities of the Company. (ee) The Company has as of the effective date of the Registration Statement (i) entered into an employment agreement with each of Paul I. Mansur and Pierre G. Mansur, in the form filed as Exhibits ____ and ____, respectively, to the Registration Statement and (ii) - 10 - purchased term key-man insurance on the lives of Paul I. Mansur and Pierre G. Mansur in the amount of $1,000,000 each, which policies name the Company as the sole beneficiary thereof. (ff) The conversion of $1,012,500 in principal amount of the Convertible Notes into an aggregate of 150,000 shares of Common Stock as set forth in the Prospectus has been duly authorized by the Company, the holders of the Convertible Notes and the shareholders of the Company, if applicable, in accordance with all agreements, documents, understandings and instruments affecting the rights, duties, responsibilities, obligations and/or privileges of holders of the Convertible Notes or to which the Company is bound, including without limitation, the Convertible Notes, the Company's certificate of incorporation and the Company's by-laws; and upon the consummation of the Offering, without any further action of the Company, any holder of a Convertible Note(s) or any shareholder of the Company, the aggregate outstanding principal amount of the Convertible Notes will simultaneously convert into 150,000 validly issued, fully paid and nonassessable shares of Common Stock. 2. PURCHASE, SALE AND DELIVERY OF THE SECURITIES AND REPRESENTATIVE'S WARRANTS. (a) On the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter, severally and not jointly, agrees to purchase from the Company at a price of $_______ [90% of the initial public offering price] per share of Common Stock, that number of Firm Shares of set forth in Schedule A opposite the name of such Underwriter, plus any additional number of Firm Shares which such Underwriter may become obligated to purchase pursuant to the provisions of SECTION 11 hereof. (b) In addition, on the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, the Company hereby grants an option to the Underwriters, severally and not jointly, to purchase all or any part of an additional 127,500 shares of Common Stock at a price of $____ [90% of the initial public offering price] per share of Common Stock. The option granted hereby will expire 45 days after (i) the date the Registration Statement becomes effective, if the Company has elected not to rely on Rule 430A under the Rules and Regulations, or (ii) the date of this Agreement if the Company has elected to rely upon Rule 430A under the Rules and Regulations, and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Firm Shares upon notice by the Representative to the Company setting forth the number of Option Shares as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for any such Option Shares. Any such time and date of delivery (an "Option Closing Date") shall be determined by the Representative, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Date, as hereinafter defined, unless otherwise agreed upon by the Representative and the Company. Nothing herein contained shall obligate the Underwriters to make any over-allotments. No Option Shares shall be delivered unless the Firm Shares shall be simultaneously delivered or shall theretofore have been delivered as herein provided. - 11 - (c) Payment of the purchase price for, and delivery of certificates for, the Firm Shares shall be made at the offices of First Allied Securities, Inc. at 200 Park Avenue, 24th Floor, New York, New York 10166, or at such other place as shall be agreed upon by the Representative and the Company. Such delivery and payment shall be made at 10:00 a.m. (New York City time) on _________________ , 1996 or at such other time and date as shall be agreed upon by the Representative and the Company, but not less than three (3) nor more than seven (7) full business days after the effective date of the Registration Statement (such time and date of payment and delivery being herein called "Closing Date"). In addition, in the event that any or all of the Option Shares are purchased by the Underwriters, payment of the purchase price for, and delivery of certificates for, such Option Shares shall be made at the above mentioned office of the Representative or at such other place as shall be agreed upon by the Representative and the Company on each Option Closing Date as specified in the notice from the Representative to the Company. Delivery of the certificates for the Firm Shares and the Option Shares, if any, shall be made to the Underwriters against payment by the Underwriters, severally and not jointly, of the purchase price for the Firm Shares and the Option Shares, if any, to the order of the Company for the Firm Shares and the Option Shares, if any, by New York Clearing House funds. In the event such option is exercised, each of the Underwriters, acting severally and not jointly, shall purchase that proportion of the total number of Option Shares then being purchased which the number of Firm Shares set forth in Schedule A hereto opposite the name of such Underwriter bears to the total number of Firm Shares, subject in each case to such adjustments as the Representative in their discretion shall make to eliminate any sales or purchases of fractional shares. Certificates for the Firm Shares and the Option Shares, if any, shall be in definitive, fully registered form, shall bear no restrictive legends and shall be in such denominations and registered in such names as the Underwriters may request in writing at least two (2) business days prior to the Closing Date or the relevant Option Closing Date, as the case may be. The certificates for the Firm Shares and the Option Shares, if any, shall be made available to the Representative at such office or such other place as the Representative may designate for inspection, checking and packaging no later than 9:30 a.m. on the last business day prior to Closing Date or the relevant Option Closing Date, as the case may be. (d) On the Closing Date, the Company shall issue and sell to the Representative Representative's Warrants at a purchase price of $.001 per warrant, which warrants shall entitle the holders thereof to purchase an aggregate of 85,000 shares of Common Stock. The Representative's Warrants shall be exercisable for a period of four years commencing one year from the effective date of the Registration Statement at a price equaling one hundred twenty percent (120%) of the initial public offering price of the shares of Common Stock. The Representative's Warrant Agreement and form of Warrant Certificate shall be substantially in the form filed as Exhibit [4.3] to the Registration Statement. Payment for the Representative's Warrants shall be made on the Closing Date. 3. PUBLIC OFFERING OF THE SHARES. As soon after the Registration Statement becomes effective as the Representative deems advisable, the Underwriters shall make a public offering of the Shares (other than to residents of or in any jurisdiction in which qualification of the Shares is required and has not become effective) at the price and upon the other terms set forth in the Prospectus. The Representative may from time to time increase or decrease the public offering price after distribution of the Shares has been completed to such extent as the - 12 - Representative, in their discretion deems advisable. The Underwriters may enter into one of more agreements as the Underwriters, in each of their sole discretion, deem advisable with one or more broker-dealers who shall act as dealers in connection with such public offering. 4. COVENANTS AND AGREEMENTS OF THE COMPANY. The Company covenants and agrees with each of the Underwriters as follows: (a) The Company shall use its best efforts to cause the Registration Statement and any amendments thereto to become effective as promptly as practicable and will not at any time, whether before or after the effective date of the Registration Statement, file any amendment to the Registration Statement or supplement to the Prospectus or file any document under the Act or Exchange Act before termination of the offering of the Shares by the Underwriters of which the Representative shall not previously have been advised and furnished with a copy, or to which the Representative shall have objected or which is not in compliance with the Act, the Exchange Act or the Rules and Regulations. (b) As soon as the Company is advised or obtains knowledge thereof, the Company will advise the Representative and confirm the notice in writing, (i) when the Registration Statement, as amended, becomes effective, if the provisions of Rule 430A promulgated under the Act will be relied upon, when the Prospectus has been filed in accordance with said Rule 430A and when any post-effective amendment to the Registration Statement becomes effective, (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding, suspending the effectiveness of the Registration Statement or any order preventing or suspending the use of the Preliminary Prospectus or the Prospectus, or any amendment or supplement thereto, or the institution of proceedings for that purpose, (iii) of the issuance by the Commission or by any state securities commission of any proceedings for the suspension of the qualification of any of the Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose, (iv) of the receipt of any comments from the Commission; and (v) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information. If the Commission or any state securities commission authority shall enter a stop order or suspend such qualification at any time, the Company will make every effort to obtain promptly the lifting of such order. (c) The Company shall file the Prospectus (in form and substance satisfactory to the Representative) or transmit the Prospectus by a means reasonably calculated to result in filing with the Commission pursuant to Rule 424(b)(1) (or, if applicable and if consented to by the Representative, pursuant to Rule 424(b)(4)) not later than the Commission's close of business on the earlier of (i) the second business day following the execution and delivery of this Agreement and (ii) the fifteenth business day after the effective date of the Registration Statement. (d) The Company will give the Representative notice of its intention to file or prepare any amendment to the Registration Statement (including any post-effective amendment) or any amendment or supplement to the Prospectus (including any revised prospectus which the Company proposes for use by the Underwriters in connection with the - 13 - offering of the Securities which differs from the corresponding prospectus on file at the Commission at the time the Registration Statement becomes effective, whether or not such revised prospectus is required to be filed pursuant to Rule 424(b) of the Rules and Regulations), and will furnish the Representative with copies of any such amendment or supplement a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file any such prospectus to which the Representative or Orrick, Herrington & Sutcliffe ("Underwriters' Counsel"), shall object. (e) The Company shall endeavor in good faith, in cooperation with the Representative, at or prior to the time the Registration Statement becomes effective, to qualify the Securities for offering and sale under the securities laws of such jurisdictions as the Representative may designate to permit the continuance of sales and dealings therein for as long as may be necessary to complete the distribution, and shall make such applications, file such documents and furnish such information as may be required for such purpose; PROVIDED, HOWEVER, the Company shall not be required to qualify as a foreign corporation or file a general or limited consent to service of process in any such jurisdiction. In each jurisdiction where such qualification shall be effected, the Company will, unless the Representative agree that such action is not at the time necessary or advisable, use all reasonable efforts to file and make such statements or reports at such times as are or may reasonably be required by the laws of such jurisdiction to continue such qualification. (f) During the time when a prospectus is required to be delivered under the Act, the Company shall use all reasonable efforts to comply with all requirements imposed upon it by the Act and the Exchange Act, as now and hereafter amended and by the Rules and Regulations, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Securities in accordance with the provisions hereof and the Prospectus, or any amendments or supplements thereto. If at any time when a prospectus relating to the Securities or the Representative's Shares is required to be delivered under the Act, any event shall have occurred as a result of which, in the opinion of counsel for the Company or Underwriters' Counsel, the Prospectus, as then amended or supplemented, includes an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Act, the Company will notify the Representative promptly and prepare and file with the Commission an appropriate amendment or supplement in accordance with Section 10 of the Act, each such amendment or supplement to be satisfactory to Underwriters' Counsel, and the Company will furnish to the Underwriters copies of such amendment or supplement as soon as available and in such quantities as the Underwriters may request. (g) As soon as practicable, but in any event not later than 45 days after the end of the 12-month period beginning on the day after the end of the fiscal quarter of the Company during which the effective date of the Registration Statement occurs (90 days in the event that the end of such fiscal quarter is the end of the Company's fiscal year), the Company shall make generally available to its security holders, in the manner specified in Rule 158(b) of the Rules and Regulations, and to the Representative, an earnings statement which will be in the detail required by, and will otherwise comply with, the provisions of Section 11(a) of the Act - 14 - and Rule 158(a) of the Rules and Regulations, which statement need not be audited unless required by the Act, covering a period of at least 12 consecutive months after the effective date of the Registration Statement. (h) During a period of seven years after the date hereof, the Company will furnish to its stockholders, as soon as practicable, annual reports (including financial statements audited by independent public accountants) and unaudited quarterly reports of earnings, and will deliver to the Representative: i) concurrently with furnishing such quarterly reports to its stockholders, statements of income of the Company for each quarter in the form furnished to the Company's stockholders and certified by the Company's principal financial or accounting officer; ii) concurrently with furnishing such annual reports to its stockholders, a balance sheet of the Company as at the end of the preceding fiscal year, together with statements of operations, stockholders' equity, and cash flows of the Company for such fiscal year, accompanied by a copy of the certificate thereon of independent certified public accountants; iii) as soon as they are available, copies of all reports (financial or other) mailed to stockholders; iv) as soon as they are available, copies of all reports and financial statements furnished to or filed with the Commission, the NASD or any securities exchange; v) every press release and every material news item or article of interest to the financial community in respect of the Company, or its affairs which was released or prepared by or on behalf of the Company; and vi) any additional information of a public nature concerning the Company (and any future subsidiary) or its businesses which the Representative may request. During such seven-year period, if the Company has an active subsidiary, the foregoing financial statements will be on a consolidated basis to the extent that the accounts of the Company and its subsidiary are consolidated, and will be accompanied by similar financial statements for any significant subsidiary which is not so consolidated. (i) The Company will maintain a Transfer Agent and, if necessary under the jurisdiction of incorporation of the Company, a Registrar (which may be the same entity as the Transfer Agent) for its Common Stock. (j) The Company will furnish to the Representative or on the Representative's order, without charge, at such place as the Representative may designate, copies - 15 - of each Preliminary Prospectus, the Registration Statement and any pre-effective or post-effective amendments thereto (two of which copies will be signed and will include all financial statements and exhibits), the Prospectus, and all amendments and supplements thereto, including any prospectus prepared after the effective date of the Registration Statement, in each case as soon as available and in such quantities as the Representative may request. (k) On or before the effective date of the Registration Statement, the Company shall provide the Representative with true copies of duly executed, legally binding and enforceable agreements pursuant to which for a period of 13 months from the effective date of the Registration Statement, the holders of all shares of Common Stock and holders of securities exchangeable or exercisable for or convertible into shares of Common Stock, agree that it or he or she will not directly or indirectly, issue, offer to sell, sell, grant an option for the sale of, assign, transfer, pledge, hypothecate, distribute or otherwise encumber or dispose of any shares of Common Stock or securities convertible into, exercisable or exchangeable for or evidencing any right to purchase or subscribe for any shares of Common Stock (either pursuant to Rule 144 of the Rules and Regulations or otherwise) or dispose of any beneficial interest therein without the prior written consent of the Representative (collectively, the "Lock-up Agreements"). During the 13 month period commencing with the effective date of the Registration Statement, the Company shall not, without the prior written consent of the Representative, sell, contract or offer to sell, issue, transfer, assign, pledge, hypothecate, distribute, or otherwise dispose of, directly or indirectly, any shares of Common Stock or any options, rights or warrants with respect to any shares of Common Stock, except as set forth in clause (s) of SECTION 4 hereof. On or before the Closing Date, the Company shall deliver instructions to the Transfer Agent authorizing it to place appropriate legends on the certificates representing the securities subject to the Lock-up Agreements and to place appropriate stop transfer orders on the Company's ledgers. (l) Neither the Company, nor any of its officers, directors, stockholders, nor any of their respective affiliates (within the meaning of the Rules and Regulations) will take, directly or indirectly, any action designed to, or which might in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any securities of the Company. (m) The Company shall apply the net proceeds from the sale of the Securities in the manner, and subject to the conditions, set forth under "Use of Proceeds" in the Prospectus. Except as described in the Prospectus, no portion of the net proceeds will be used, directly or indirectly, to acquire any securities issued by the Company. (n) The Company shall timely file all such reports, forms or other documents as may be required (including, but not limited to, a Form SR as may be required pursuant to Rule 463 under the Act) from time to time, under the Act, the Exchange Act, and the Rules and Regulations, and all such reports, forms and documents filed will comply as to form and substance with the applicable requirements under the Act, the Exchange Act, and the Rules and Regulations. - 16 - (o) The Company shall furnish to the Representative as early as practicable prior to each of the date hereof, the Closing Date and each Option Closing Date, if any, but no later than two (2) full business days prior thereto, a copy of the latest available unaudited interim financial statements of the Company (which in no event shall be as of a date more than thirty (30) days prior to the date of the Registration Statement) which have been read by the Company's independent public accountants, as stated in its letter to be furnished pursuant to SECTION 6(i) hereof. (p) The Company shall cause the Common Stock to be quoted on NNM and for a period of seven (7) years from the date hereof, use its best efforts to maintain the NNM quotation of the Common Stock to the extent outstanding. (q) For a period of five (5) years from the Closing Date, the Company shall furnish to the Representative at the Representative's request and at the Company's sole expense, (i) daily consolidated transfer sheets relating to the Common Stock (ii) the list of holders of all of the Company's securities and (iii) a Blue Sky "Trading Survey" for secondary sales of the Company's securities prepared by counsel to the Company. (r) As soon as practicable, (i) but in no event more than 5 business days before the effective date of the Registration Statement, file a Form 8-A with the Commission providing for the registration under the Exchange Act of the Securities and (ii) but in no event more than 30 days from the effective date of the Registration Statement, take all necessary and appropriate actions to be included in Standard and Poor's Corporation Descriptions and Moody's OTC Manual and to continue such inclusion for a period of not less than seven (7) years. (s) The Company hereby agrees that it will not for a period of thirteen (13) months from the effective date of the Registration Statement, adopt, propose to adopt or otherwise permit to exist any employee, officer, director, consultant or compensation plan or arrangement permitting the grant, issue or sale of any shares of Common Stock or other securities of the Company (i) in an amount greater than an aggregate of 375,000 shares, (ii) at an exercise or sale price per share less than the greater of (a) the initial public offering price of the Shares set forth herein and (b) the fair market value of the Common Stock on the date of grant or sale, (iii) to any direct or indirect beneficial holder on the date hereof of more than 10% of the issued and outstanding shares of Common Stock, (iv) with the payment for such securities with any form of consideration other than cash, (v) upon payment of less than the full purchase or exercise price for such shares of Common Stock or other securities of the Company on the date of grant or issuance, or (vi) permitting the existence of stock appreciation rights, phantom options or similar arrangements. The Company further agrees that it will not issue any stock options to Pierre G. Mansur for a period of thirteen (13) months from the effective date of the Registration Statement. (t) Until the completion of the distribution of the Shares, the Company shall not without the prior written consent of the Representative and Underwriters' Counsel, issue, directly or indirectly, any press release or other communication or hold any press conference with respect to the Company or its activities or the offering contemplated hereby, - 17 - other than trade releases issued in the ordinary course of the Company's business consistent with past practices with respect to the Company's operations. (u) For a period equal to the lesser of (i) seven (7) years from the date hereof, and (ii) the sale to the public of the Representative's Shares, the Company will not take any action or actions which may prevent or disqualify the Company's use of Form S-1 (or other appropriate form) for the registration under the Act of the Representative's Shares. (v) For a period of five (5) years after the effective date of the Registration Statement, the Representative shall have the right to designate for election one (1) individual to the Company's Board of Directors (the "Board"). In the event the Representative elects not to exercise such right, then it may designate one (1) individual to attend meetings of the Company's Board. The Company shall notify the Representative of each meeting of the Board and the Company shall send to such individual all notices and other correspondence and communications sent by the Company to members of the Board. Such individual shall be reimbursed for all out-of-pocket expenses incurred in connection with his attendance of meetings of the Board. 5. PAYMENT OF EXPENSES. (a) The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date (to the extent not paid at the Closing Date) all expenses and fees (other than fees of Underwriters' Counsel, except as provided in (iv) below) incident to the performance of the obligations of the Company under this Agreement and the Representative's Warrant Agreement, including, without limitation, (i) the fees and expenses of accountants and counsel for the Company, (ii) all costs and expenses incurred in connection with the preparation, duplication, printing, (including mailing and handling charges) filing, delivery and mailing (including the payment of postage with respect thereto) of the Registration Statement and the Prospectus and any amendments and supplements thereto and the printing, mailing (including the payment of postage with respect thereto) and delivery of this Agreement, the Agreement Among Underwriters, the Selected Dealer Agreements, and related documents, including the cost of all copies thereof and of the Preliminary Prospectuses and of the Prospectus and any amendments thereof or supplements thereto supplied to the Underwriters and such dealers as the Underwriters may request, in quantities as hereinabove stated, (iii) the printing, engraving, issuance and delivery of the Securities including, but not limited to, (x) the purchase by the Underwriters of the Shares and the purchase by the Representative of the Representative's Warrants from the Company, (y) the consummation by the Company of any of its obligations under this Agreement and the Representative's Warrant Agreement, and (z) resale of the Shares by the Underwriters in connection with the distribution contemplated hereby, (iv) the qualification of the Securities under state or foreign securities or "Blue Sky" laws and determination of the status of such securities under legal investment laws, including the costs of printing and mailing the "Preliminary Blue Sky Memorandum," the "Supplemental Blue Sky Memorandum" and "Legal Investments Survey," if any, and disbursements and fees of counsel in connection therewith (such fees not to exceed $40,000), (v) costs and expenses in connection with due diligence investigations, including but not limited to the fees of any independent counsel or consultant retained, (vi) fees and expenses of the transfer agent and registrar, (vii) applications for assignments of a rating of the Securities by qualified rating agencies, - 18 - (viii) the fees payable to the Commission and the NASD, and (ix) the fees and expenses incurred in connection with the quotation of the Securities on NNM and any other exchange. (b) If this Agreement is terminated by the Underwriters in accordance with the provisions of SECTION 6 or SECTION 12, the Company shall reimburse and indemnify the Representative for all of its actual out-of-pocket expenses, including the fees and disbursements of Underwriters' Counsel, less any amounts already paid pursuant to SECTION 5(c) hereof. (c) The Company further agrees that, in addition to the expenses payable pursuant to subsection (a) of this SECTION 5, it will pay to the Representative on the Closing Date by certified or bank cashier's check or, at the election of the Representative, by deduction from the proceeds of the offering contemplated herein a non-accountable expense allowance equal to three percent (3%) of the gross proceeds received by the Company from the sale of the Firm Shares, $50,000 of which has been paid to date. In the event the Representative elect to exercise the over-allotment option described in SECTION 2(b) hereof, the Company agrees to pay to the Representative on the Option Closing Date (by certified or bank cashier's check or, at the Representative's election, by deduction from the proceeds of the Option Shares) a non-accountable expense allowance equal to three percent (3%) of the gross proceeds received by the Company from the sale of the Option Shares. 6. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The obligations of the Underwriters hereunder shall be subject to the continuing accuracy of the representations and warranties of the Company herein as of the date hereof and as of the Closing Date and each Option Closing Date, if any, with respect to the Company as if it had been made on and as of the Closing Date or each Option Closing Date, as the case may be; the accuracy on and as of the Closing Date or Option Closing Date, if any, of the statements of the officers of the Company made pursuant to the provisions hereof; and the performance by the Company on and as of the Closing Date and each Option Closing Date, if any, of its covenants and obligations hereunder and to the following further conditions: (a) The Registration Statement shall have become effective not later than 12:00 Noon, New York time, on the date of this Agreement or such later date and time as shall be consented to in writing by the Representative, and, at Closing Date and each Option Closing Date, if any, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or contemplated by the Commission and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of Underwriters' Counsel. If the Company has elected to rely upon Rule 430A of the Rules and Regulations, the price of the Shares and any price-related information previously omitted from the effective Registration Statement pursuant to such Rule 430A shall have been transmitted to the Commission for filing pursuant to Rule 424(b) of the Rules and Regulations within the prescribed time period, and prior to Closing Date the Company shall have provided evidence satisfactory to the Representative of such timely filing, or a post-effective amendment providing such information shall have been promptly filed and declared effective in accordance with the requirements of Rule 430A of the Rules and Regulations. - 19 - (b) The Representative shall not have advised the Company that the Registration Statement, or any amendment thereto, contains an untrue statement of fact which, in the Representative's opinion, is material, or omits to state a fact which, in the Representative's opinion, is material and is required to be stated therein or is necessary to make the statements therein not misleading, or that the Prospectus, or any supplement thereto, contains an untrue statement of fact which, in the Representative's opinion, is material, or omits to state a fact which, in the Representative's opinion, is material and is required to be stated therein or is necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (c) On or prior to the Closing Date, the Representative shall have received from Underwriters' Counsel, such opinion or opinions with respect to the organization of the Company, the validity of the Securities, the Representative's Warrants, the Registration Statement, the Prospectus and other related matters as the Representative may request and Underwriters' Counsel shall have received such papers and information as they request to enable them to pass upon such matters. (d) At Closing Date, the Underwriters shall have received the favorable opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., counsel to the Company, dated the Closing Date, addressed to the Underwriters and in form and substance satisfactory to Underwriters' Counsel, to the effect that: i) the Company (A) has been duly organized and is validly existing as a corporation in good standing under the laws of its jurisdiction, (B) is duly qualified and licensed and in good standing as a foreign corporation in each jurisdiction in which its ownership or leasing of any properties or the character of its operations requires such qualification or licensing, and (C) has all requisite corporate power and authority; and the Company has obtained any and all necessary authorizations, approvals, orders, licenses, certificates, franchises and permits of and from all governmental or regulatory officials and bodies (including, without limitation, those having jurisdiction over environmental or similar matters), to own or lease its properties and conduct its business as described in the Prospectus; the Company is and has been doing business in material compliance with all such authorizations, approvals, orders, licenses, certificates, franchises and permits and all federal, state and local laws, rules and regulations; the Company has not received any notice of proceedings relating to the revocation or modification of any such authorization, approval, order, license, certificate, franchise, or permit which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially adversely affect the business, operations, condition, financial or otherwise, or the earnings, business affairs, position, prospects, value, operation, properties, business or results of operations of the Company. The disclosures in the Registration Statement concerning the effects of federal, state and local laws, rules and regulations on the Company's business as currently conducted and as contemplated are correct in all material respects and do not omit to state a fact - 20 - necessary to make the statements contained therein not misleading in light of the circumstances in which they were made; ii) to the best of such counsel's knowledge, the Company does not own an interest in any other corporation, partnership, joint venture, trust or other business entity; iii) the Company has a duly authorized, issued and outstanding capitalization as set forth in the Prospectus, and any amendment or supplement thereto, under "Capitalization" and "Description of Capital Stock," and the Company is not a party to or bound by any instrument, agreement or other arrangement providing for it to issue any capital stock, rights, warrants, options or other securities, except for this Agreement, the Representative's Warrant Agreement and as described in the Prospectus. The Securities, and all other securities issued or issuable by the Company conform in all material respects to all statements with respect thereto contained in the Registration Statement and the Prospectus. All issued and outstanding securities of the Company have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company. The Shares, the Representative's Warrants and the Representative's Shares to be sold by the Company hereunder and under the Representative's Warrant Agreement are not and will not be subject to any preemptive or other similar rights of any stockholder, have been duly authorized and, when issued, paid for and delivered in accordance with the terms hereof, will be validly issued, fully paid and non-assessable and conform to the description thereof contained in the Prospectus; the holders thereof will not be subject to any liability solely as such holders; all corporate action required to be taken for the authorization, issue and sale of the Shares, the Representative's Warrants and the Representative's Shares has been duly and validly taken; and the certificates representing the Shares and the Representative's Warrants are in due and proper form. The Representative's Warrants constitute valid and binding obligations of the Company to issue and sell, upon exercise thereof and payment therefor, the number and type of securities of the Company called for thereby. Upon the issuance and delivery pursuant to this Agreement and the Representative's Warrant Agreement of the Shares and the Representative's Warrants, respectively, to be sold by the Company, the Underwriters and the Representative, respectively, will acquire good and marketable title to the Shares and Representative's Warrants free and clear of any pledge, lien, charge, claim, encumbrance, pledge, security interest, or other restriction or equity of any kind whatsoever. No transfer tax is payable by or on behalf of the Underwriters in connection with (A) the issuance by the Company of the Shares, (B) the purchase by the Underwriters and the Representative of the Shares and the Representative's Warrants, respectively, from the Company, (C) the consummation by the Company of any of its obligations under this Agreement or the Representative's - 21 - Warrant Agreement, or (D) resales of the Shares in connection with the distribution contemplated hereby; iv) The conversion of $1,012,500 in principal amount of the Convertible Notes into an aggregate of 150,000 shares of Common Stock of the Company as set forth in the Prospectus has been duly authorized by the Company, the holders of the Convertible Notes and the shareholders of the Company, if applicable, in accordance with all agreements, documents, understandings and instruments affecting the rights, duties, responsibilities, obligations and/or privileges of holders of the Convertible Notes or to which the Company is bound, including without limitation, the Convertible Notes, the Company's certificate of incorporation and the Company's by-laws; and upon the consummation of the Offering, without any further action of the Company, any holder of a Convertible Note(s) or any shareholder of the Company, the aggregate outstanding principal amount of the Convertible Notes will simultaneously convert into 150,000 validly issued, fully paid and nonassessable shares of Common Stock; v) the Registration Statement is effective under the Act, and, if applicable, filing of all pricing information has been timely made in the appropriate form under Rule 430A, and no stop order suspending the use of the Preliminary Prospectus, the Registration Statement or Prospectus or any part of any thereof or suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or are pending or, to the best of such counsel's knowledge, threatened or contemplated under the Act; vi) each of the Preliminary Prospectus, the Registration Statement, and the Prospectus and any amendments or supplements thereto (other than the financial statements and other financial and statistical data included therein, as to which no opinion need be rendered) comply as to form in all material respects with the requirements of the Act and the Rules and Regulations; vii) to the best of such counsel's knowledge, (A) there are no agreements, contracts or other documents required by the Act to be described in the Registration Statement and the Prospectus and filed as exhibits to the Registration Statement other than those described in the Registration Statement (or required to be filed under the Exchange Act if upon such filing they would be incorporated, in whole or in part, by reference therein) and the Prospectus and filed as exhibits thereto, and the exhibits which have been filed are correct copies of the documents of which they purport to be copies; (B) the descriptions in the Registration Statement and the Prospectus and any supplement or amendment thereto of contracts and other documents to which the Company is a party or by which it is bound, including any document to which the Company is a party or by which it is bound, incorporated by reference into the Prospectus and any supplement or amendment thereto, are accurate in all material respects and fairly represent the information required to be shown by Form S-1; (C) there is not pending or threatened against the Company any action, arbitration, suit, - 22 - proceeding, inquiry, investigation, litigation, governmental or other proceeding (including, without limitation, those having jurisdiction over environmental or similar matters), domestic or foreign, pending or threatened against (or circumstances that may give rise to the same), or involving the properties or business of the Company which (x) is required to be disclosed in the Registration Statement which is not so disclosed (and such proceedings as are summarized in the Registration Statement are accurately summarized in all material respects), (y) questions the validity of the capital stock of the Company or this Agreement or the Representative's Warrant Agreement, or of any action taken or to be taken by the Company pursuant to or in connection with any of the foregoing; (D) no statute or regulation or legal or governmental proceeding required to be described in the Prospectus is not described as required; and (E) there is no action, suit or proceeding pending, or threatened, against or affecting the Company before any court or arbitrator or governmental body, agency or official (or any basis thereof known to such counsel) in which there is a reasonable possibility of an adverse decision which may result in a material adverse change in the condition, financial or otherwise, or the earnings, position, prospects, stockholders' equity, value, operation, properties, business or results of operations of the Company, which could adversely affect the present or prospective ability of the Company to perform its obligations under this Agreement or the Representative's Warrant Agreement or which in any manner draws into question the validity or enforceability of this Agreement or the Representative's Warrant Agreement; viii) the Company has full legal right, power and authority to enter into each of this Agreement and the Representative's Warrant Agreement, and to consummate the transactions provided for herein and therein; and each of this Agreement and the Representative's Warrant Agreement has been duly authorized, executed and delivered by the Company. Each of this Agreement and the Representative's Warrant Agreement, assuming due authorization, execution and delivery by each other party thereto constitutes a legal, valid and binding agreement of the Company enforceable against the Company in accordance with its terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting enforcement of creditors' rights and the application of equitable principles in any action, legal or equitable, and except as rights to indemnity or contribution may be limited by applicable law), and none of the Company's execution or delivery of this Agreement and the Representative's Warrant Agreement, its performance hereunder or thereunder, its consummation of the transactions contemplated herein or therein, or the conduct of its business as described in the Registration Statement, the Prospectus, and any amendments or supplements thereto, or the conversion of the Convertible Notes as set forth in the Registration Statement, the Prospectus and any amendments or supplements thereto, conflicts with or will conflict with or results or will result in any breach or violation of any of the terms or provisions of, or constitutes or will constitute a default under, or result in the creation or imposition of any lien, charge, claim, encumbrance, pledge, security interest, defect or other restriction or equity of any - 23 - kind whatsoever upon, any property or assets (tangible or intangible) of the Company pursuant to the terms of, (A) the certificate of incorporation or by-laws of the Company, (B) any license, contract, indenture, mortgage, deed of trust, voting trust agreement, stockholders agreement, note, loan or credit agreement or any other agreement or instrument to which the Company is a party or by which it is or may be bound or to which any of its respective properties or assets (tangible or intangible) is or may be subject, or any indebtedness, or (C) any statute, judgment, decree, order, rule or regulation applicable to the Company of any arbitrator, court, regulatory body or administrative agency or other governmental agency or body (including, without limitation, those having jurisdiction over environmental or similar matters), domestic or foreign, having jurisdiction over the Company or any of its activities or properties; ix) except as described in the Prospectus, no consent, approval, authorization or order of, and no filing with, any court, regulatory body, government agency or other body (other than such as may be required under Blue Sky laws, as to which no opinion need be rendered) is required in connection with the issuance of the Shares pursuant to the Prospectus, the issuance of the Representative's Warrants, and the Registration Statement, the performance of this Agreement and the Representative's Warrant Agreement, and the transactions contemplated hereby and thereby; x) the properties and business of the Company conform in all material respects to the description thereof contained in the Registration Statement and the Prospectus; and the Company has good and marketable title to, or valid and enforceable leasehold estates in, all items of real and personal property stated in the Prospectus to be owned or leased by it, in each case free and clear of all liens, charges, claims, encumbrances, pledges, security interests, defects or other restrictions or equities of any kind whatsoever, other than those referred to in the Prospectus and liens for taxes not yet due and payable; xi) to the best knowledge of such counsel, the Company is not in breach of, or in default under, any term or provision of any license, contract, indenture, mortgage, installment sale agreement, deed of trust, lease, voting trust agreement, stockholders' agreement, partnership agreement, note, loan or credit agreement or any other agreement or instrument evidencing an obligation for borrowed money, or any other agreement or instrument to which the Company is a party or by which the Company may be bound or to which the property or assets (tangible or intangible) of the Company is subject or affected; and the Company is not in violation of any term or provision of its certificate of incorporation by-laws, or in violation of any franchise, license, permit, judgment, decree, order, statute, rule or regulation; xii) the statements in the Prospectus under "BUSINESS," "MANAGEMENT," "PRINCIPAL SHAREHOLDERS," "CERTAIN TRANSACTIONS," "DESCRIPTION OF CAPITAL STOCK," and "SHARES - 24 - ELIGIBLE FOR FUTURE SALE" have been reviewed by such counsel, and insofar as they refer to statements of law, descriptions of statutes, licenses, rules or regulations or legal conclusions, are correct in all material respects; xiii) the Shares have been accepted for quotation on NNM; xiv) the persons listed under the caption "PRINCIPAL SHAREHOLDERS" in the Prospectus are the respective "beneficial owners" (as such phrase is defined in regulation 13d-3 under the Exchange Act) of the securities set forth opposite their respective names thereunder as and to the extent set forth therein; xv) except as described in the Prospectus, no person, corporation, trust, partnership, association or other entity has the right to include and/or register any securities of the Company in the Registration Statement, require the Company to file any registration statement or, if filed, to include any security in such registration statement; xvi) except as described in the Prospectus, there are no claims, payments, issuances, arrangements or understandings for services in the nature of a finder's or origination fee with respect to the sale of the Securities hereunder or financial consulting arrangement or any other arrangements, agreements, understandings, payments or issuances that may affect the Underwriters' compensation, as determined by the NASD; xvii) assuming due execution by the parties thereto other than the Company, the Lock-up Agreements are legal, valid and binding obligations of parties thereto, enforceable against the party and any subsequent holder of the securities subject thereto in accordance with its terms (except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws of general application relating to or affecting enforcement of creditors' rights and the application of equitable principles in any action, legal or equitable, and except as rights to indemnity or contribution may be limited by applicable law); and xviii) except as described in the Prospectus, the Company does not (A) maintain, sponsor or contribute to any ERISA Plans, (B) maintain or contribute, now or at any time previously, to a defined benefit plan, as defined in Section 3(35) of ERISA, and (C) has never completely or partially withdrawn from a "multiemployer plan". Such counsel shall state that such counsel has participated in conferences with officers and other representatives of the Company and representatives of the independent public accountants for the Company at which conferences such counsel made inquiries of such officers, representatives and accountants and discussed the contents of the Preliminary Prospectus, the Registration Statement, the Prospectus, and related matters were discussed and, although such - 25 - counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Preliminary Prospectus, the Registration Statement and Prospectus, on the basis of the foregoing, no facts have come to the attention of such counsel which lead them to believe that either the Registration Statement or any amendment thereto, at the time such Registration Statement or amendment became effective or the Preliminary Prospectus or Prospectus or amendment or supplement thereto as of the date of such opinion contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading (it being understood that such counsel need express no opinion with respect to the financial statements and schedules and other financial and statistical data included in the Preliminary Prospectus, the Registration Statement or Prospectus). Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991), or any comparable State bar accord. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance satisfactory to Underwriters' Counsel) of other counsel acceptable to Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of fact, to the extent they deem proper, on certificates and written statements of responsible officers of the Company, and certificates or other written statements of officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to Underwriters' Counsel if requested. The opinion of such counsel for the Company shall state that the opinion of any such other counsel is in form satisfactory to such counsel and that the Representative and they are justified in relying thereon. At each Option Closing Date, if any, the Underwriters shall have received the favorable opinion of Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., counsel to the Company, dated the Option Closing Date, addressed to the Underwriters and in form and substance satisfactory to Underwriters' Counsel confirming as of Option Closing Date the statements made by Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., in its opinion delivered on the Closing Date. (e) On or prior to each of the Closing Date and the Option Closing Date, if any, Underwriters' Counsel shall have been furnished such documents, certificates and opinions as they may reasonably require for the purpose of enabling them to review or pass upon the matters referred to in subsection (c) of this SECTION 6, or in order to evidence the accuracy, completeness or satisfaction of any of the representations, warranties or conditions of the Company, or herein contained. (f) Prior to each of the Closing Date and each Option Closing Date, if any, (i) there shall have been no material adverse change nor development involving a prospective - 26 - change in the condition, financial or otherwise, prospects, stockholders' equity or the business activities of the Company, whether or not in the ordinary course of business, from the latest dates as of which such condition is set forth in the Registration Statement and Prospectus; (ii) there shall have been no transaction, not in the ordinary course of business, entered into by the Company, from the latest date as of which the financial condition of the Company is set forth in the Registration Statement and Prospectus which is materially adverse to the Company; (iii) the Company shall not be in default under any provision of any instrument relating to any outstanding indebtedness; (iv) the Company shall not have issued any securities (other than the Securities); the Company shall not have declared or paid any dividend or made any distribution in respect of its capital stock of any class; and there has not been any change in the capital stock of the Company, or any material change in the debt (long or short term) or liabilities or obligations of the Company (contingent or otherwise); (v) no material amount of the assets of the Company shall have been pledged or mortgaged, except as set forth in the Registration Statement and Prospectus; (vi) no action, suit or proceeding, at law or in equity, shall have been pending or threatened (or circumstances giving rise to same) against the Company, or affecting any of its properties or business before or by any court or federal, state or foreign commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may adversely affect the business, operations, prospects or financial condition or income of the Company, except as set forth in the Registration Statement and Prospectus; and (vii) no stop order shall have been issued under the Act and no proceedings therefor shall have been initiated, threatened or contemplated by the Commission. (g) At each of the Closing Date and each Option Closing Date, if any, the Underwriters shall have received a certificate of the Company signed by the principal executive officer and by the chief financial or chief accounting officer of the Company, dated the Closing Date or Option Closing Date, as the case may be, to the effect that each of such persons has carefully examined the Registration Statement, the Prospectus and this Agreement, and that: (i) The representations and warranties of the Company in this Agreement are true and correct, as if made on and as of the Closing Date or the Option Closing Date, as the case may be, and the Company has complied with all agreements and covenants and satisfied all conditions contained in this Agreement on its part to be performed or satisfied at or prior to such Closing Date or Option Closing Date, as the case may be; ii) No stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued, and no proceedings for that purpose have been instituted or are pending or, to the best of each of such person's knowledge, after due inquiry are contemplated or threatened under the Act; iii) The Registration Statement and the Prospectus and, if any, each amendment and each supplement thereto, contain all statements and information required to be included therein, and none of the Registration Statement, the Prospectus nor any amendment or supplement thereto includes any untrue statement of a material fact or omits to state any material fact required to be - 27 - stated therein or necessary to make the statements therein not misleading and neither the Preliminary Prospectus or any supplement thereto included any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and iv) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, (a) the Company has not incurred up to and including the Closing Date or the Option Closing Date, as the case may be, other than in the ordinary course of its business, any material liabilities or obligations, direct or contingent; (b) the Company has not paid or declared any dividends or other distributions on its capital stock; (c) the Company has not entered into any transactions not in the ordinary course of business; (d) there has not been any change in the capital stock of the Company or any material change in the debt (long or short-term) of the Company; (e) the Company has not sustained any material loss or damage to its property or assets, whether or not insured; (g) there is no litigation which is pending or threatened (or circumstances giving rise to same) against the Company, or any affiliated party of any of the foregoing which is required to be set forth in an amended or supplemented Prospectus which has not been set forth; and (h) there has occurred no event required to be set forth in an amended or supplemented Prospectus which has not been set forth. References to the Registration Statement and the Prospectus in this subsection (g) are to such documents as amended and supplemented at the date of such certificate. (h) By the Closing Date, the Underwriters will have received clearance from the NASD as to the amount of compensation allowable or payable to the Underwriters, as described in the Registration Statement. (i) At the time this Agreement is executed, the Underwriters shall have received a letter, dated such date, addressed to the Underwriters in form and substance satisfactory (including the non-material nature of the changes or decreases, if any, referred to in clause (iii) below) in all respects to the Underwriters and Underwriters' Counsel, from KPMG Peat Marwick, L.L.P.; (i) confirming that they are independent certified public accountants with respect to the Company within the meaning of the Act and the applicable Rules and Regulations; ii) stating that it is their opinion that the financial statements and supporting schedules of the Company included in the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Act and the Rules and Regulations thereunder and that the Representative may rely upon the opinion of KPMG Peat Marwick, L.L.P. with - 28 - respect to such financial statements and supporting schedules included in the Registration Statement; iii) stating that, on the basis of a limited review which included a reading of the latest available unaudited interim financial statements of the Company, a reading of the latest available minutes of the stockholders and board of directors and the various committees of the boards of directors of the Company, consultations with officers and other employees of the Company responsible for financial and accounting matters and other specified procedures and inquiries, nothing has come to their attention which would lead them to believe that (A) the pro forma financial information contained in the Registration Statement and Prospectus does not comply as to form in all material respects with the applicable accounting requirements of the Act and the Rules and Regulations or is not fairly presented in conformity with generally accepted accounting principles applied on a basis consistent with that of the audited financial statements of the Company or the unaudited pro forma financial information included in the Registration Statement, (B) the unaudited financial statements and supporting schedules of the Company included in the Registration Statement do not comply as to form in all material respects with the applicable accounting requirements of the Act and the Rules and Regulations or are not fairly presented in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements of the Company included in the Registration Statement, or (C) at a specified date not more than five (5) days prior to the effective date of the Registration Statement, there has been any change in the capital stock of the Company, any change in the long-term debt of the Company, or any decrease in the stockholders' equity of the Company or any decrease in the net current assets or net assets of the Company as compared with amounts shown in the June 30, 1996 balance sheets included in the Registration Statement, other than as set forth in or contemplated by the Registration Statement, or, if there was any change or decrease, setting forth the amount of such change or decrease, and (D) during the period from June 30, 1996 to a specified date not more than five (5) days prior to the effective date of the Registration Statement, there was any decrease in net revenues or net earnings of the Company or increase in net earnings per common share of the Company, in each case as compared with the corresponding period beginning June 30, 1995 other than as set forth in or contemplated by the Registration Statement, or, if there was any such decrease, setting forth the amount of such decrease; iv) setting forth, at a date not later than five (5) days prior to the date of the Registration Statement, the amount of liabilities of the Company (including a break-down of commercial paper and notes payable to banks); v) stating that they have compared specific dollar amounts, numbers of shares, percentages of revenues and earnings, statements and other financial information pertaining to the Company set forth in the Prospectus in each case to the extent that such amounts, numbers, percentages, statements and information - 29 - may be derived from the general accounting records, including work sheets, of the Company and excluding any questions requiring an interpretation by legal counsel, with the results obtained from the application of specified readings, inquiries and other appropriate procedures (which procedures do not constitute an examination in accordance with generally accepted auditing standards) set forth in the letter and found them to be in agreement; and vi) statements as to such other matters incident to the transaction contemplated hereby as the Representative may request. (j) At the Closing Date and each Option Closing Date, if any, the Underwriters shall have received from KPMG Peat Marwick, L.L.P. a letter, dated as of the Closing Date or the Option Closing Date, as the case may be, to the effect that they reaffirm the statements made in the letter furnished pursuant to SUBSECTION (i) of this Section hereof except that the specified date referred to shall be a date not more than five days prior to the Closing Date or the Option Closing Date, as the case may be, and, if the Company has elected to rely on Rule 430A of the Rules and Regulations, to the further effect that they have carried out procedures as specified in clause (v) of SUBSECTION (i) of this Section with respect to certain amounts, percentages and financial information as specified by the Representative and deemed to be a part of the Registration Statement pursuant to Rule 430A(b) and have found such amounts, percentages and financial information to be in agreement with the records specified in such clause (v). (k) The Company shall have delivered to the Representative a letter from KPMG Peat Marwick, L.L.P. addressed to the Company stating that they have not during the immediately preceding two year period brought to the attention of the Company's management any "weakness" as defined in Statement of Auditing Standards No. 60 "Communication of Internal Control Structure Related Matters Noted in an Audit," in any of the Company's internal controls. (l) On or before the Closing Date, the Underwriters shall have received the favorable opinion of [____________________], special intellectual property counsel to the Company, dated the Closing Date, addressed to the Underwriters, in form and substance satisfactory to Underwriters' Counsel, and in substantially the form of EXHIBIT A attached hereto. At each Option Closing date, if any, the Underwriters shall have received the favorable opinion of [___________________], dated the relevant Option Closing Date, addressed to the Underwriters and in form and substance satisfactory to Underwriter's Counsel confirming, as of the Option Closing Date, the statements made by [___________________], in its opinion delivered on the Closing Date. (m) On each of the Closing Date and Option Closing Date, if any, there shall have been duly tendered to the Representative for the several Underwriters' accounts the appropriate number of Shares. - 30 - (n) No order suspending the sale of the Securities in any jurisdiction designated by the Representative pursuant to subsection (e) of SECTION 4 hereof shall have been issued on either the Closing Date or the Option Closing Date, if any, and no proceedings for that purpose shall have been instituted or shall be contemplated. (o) On or before the Closing Date, the Company shall have executed and delivered to the Representative, (i) the Representative's Warrant Agreement substantially in the form filed as Exhibit 4.2 to the Registration Statement in final form and substance satisfactory to the Representative, and (ii) the Representative's Warrants in such denominations and to such designees as shall have been provided to the Company. (p) On or before the Closing Date, the Shares shall have been duly approved for quotation on NNM, subject to official notice of issuance. (q) On or before the Closing Date, there shall have been delivered to the Representative all of the Lock-up Agreements, in form and substance satisfactory to Underwriters' Counsel. If any condition to the Underwriters' obligations hereunder to be fulfilled prior to or at the Closing Date or the relevant Option Closing Date, as the case may be, is not so fulfilled, the Representative may terminate this Agreement or, if the Representative so elect, it may waive any such conditions which have not been fulfilled or extend the time for their fulfillment. 7. INDEMNIFICATION. (a) The Company, agrees to indemnify and hold harmless each of the Underwriters (for purposes of this SECTION 7 "Underwriter" shall include the officers, directors, partners, employees, agents and counsel of the Underwriter, including specifically each person who may be substituted for an Underwriter as provided in SECTION 11 hereof), and each person, if any, who controls the Underwriter ("controlling person") within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, from and against any and all losses, claims, damages, expenses or liabilities, joint or several (and actions, proceedings, investigations, inquiries, and suits in respect thereof), whatsoever (including but not limited to any and all costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against such action, proceeding, investigation, inquiry or suit, commenced or threatened, or any claim whatsoever), as such are incurred, to which the Underwriter or such controlling person may become subject under the Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon (A) any untrue statement or alleged untrue statement of a material fact contained (i) in any Preliminary Prospectus, the Registration Statement or the Prospectus (as from time to time amended and supplemented); (ii) in any post-effective amendment or amendments or any new registration statement and prospectus in which is included securities of the Company issued or issuable upon exercise of the Securities; or (iii) in any application or other document or written communication (in this SECTION 7 collectively called "application") executed by the Company or based upon written information furnished by the Company filed, delivered or used in any jurisdiction in - 31 - order to qualify the Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, NNM or any other securities exchange, (B) the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of the Prospectus, in the light of the circumstances under which they were made), or (C) any breach of any representation, warranty, covenant or agreement of the Company contained herein or in any certificate by or on behalf of the Company or any of its officers delivered pursuant hereto unless, in the case of clause (A) or (B) above, such statement or omission was made in reliance upon and in conformity with written information furnished to the Company with respect to any Underwriter by or on behalf of such Underwriter expressly for use in any Preliminary Prospectus, the Registration Statement or any Prospectus, or any amendment thereof or supplement thereto, or in any application, as the case may be. The indemnity agreement in this subsection (a) shall be in addition to any liability which the Company may have at common law or otherwise. (b) Each of the Underwriters agrees severally, but not jointly, to indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the Registration Statement, and each other person, if any, who controls the Company within the meaning of the Act, to the same extent as the foregoing indemnity from the Company to the Underwriters but only with respect to statements or omissions, if any, made in any Preliminary Prospectus, the Registration Statement or Prospectus or any amendment thereof or supplement thereto or in any application made in reliance upon, and in strict conformity with, written information furnished to the Company with respect to any Underwriter by such Underwriter expressly for use in such Preliminary Prospectus, the Registration Statement or Prospectus or any amendment thereof or supplement thereto or in any such application, provided that such written information or omissions only pertain to disclosures in the Preliminary Prospectus, the Registration Statement or Prospectus directly relating to the transactions effected by the Underwriters in connection with this Offering. The Company acknowledges that the statements with respect to the public offering of the Securities set forth under the heading "Underwriting" and the stabilization legend in the Prospectus have been furnished by the Underwriters expressly for use therein and constitute the only information furnished in writing by or on behalf of the Underwriters for inclusion in the Prospectus. The indemnity agreement in this subsection (b) shall be in addition to any liability which the Underwriters may have at common law or otherwise. (c) Promptly after receipt by an indemnified party under this SECTION 7 of notice of the commencement of any action, suit or proceeding, such indemnified party shall, if a claim in respect thereof is to be made against one or more indemnifying parties under this SECTION 7, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this SECTION 7 except to the extent that it has been prejudiced in any material respect by such failure or from any liability which it may have otherwise). In case any such action, investigation, inquiry, suit or proceeding is brought against any indemnified party, and it notifies an indemnifying party or parties of the commencement - 32 - thereof, the indemnifying party or parties will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel shall have been authorized in writing by the indemnifying parties in connection with the defense of such action at the expense of the indemnifying party, (ii) the indemnifying parties shall not have employed counsel reasonably satisfactory to such indemnified party to have charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action, investigation, inquiry, suit or proceeding on behalf of the indemnified party or parties), in any of which events such fees and expenses of one additional counsel shall be borne by the indemnifying parties. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action, investigation, inquiry, suit or proceeding or separate but similar or related actions, investigations, inquiries, suits or proceedings in the same jurisdiction arising out of the same general allegations or circumstances. Anything in this SECTION 7 to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; PROVIDED, HOWEVER, that such consent was not unreasonably withheld. An indemnifying party will not, without the prior written consent of the indemnified parties, settle compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, investigation, inquiry, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party form all liability arising out of such claim, action, suit or proceeding and (ii) doe snot include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) In order to provide for just and equitable contribution in any case in which (i) an indemnified party makes claim for indemnification pursuant to this SECTION 7, but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of this SECTION 7 provide for indemnification in such case, or (ii) contribution under the Act may be required on the part of any indemnified party, then each indemnifying party shall contribute to the amount paid as a result of such losses, claims, damages, expenses or liabilities (or actions, investigations, inquiries, suits or proceedings in respect thereof) (A) in such proportion as is appropriate to reflect the relative benefits received by each of the contributing parties, on the one hand, and the party to be indemnified on the other hand, from the offering of the Securities or (B) if the allocation provided by clause (A) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits - 33 - referred to in clause (i) above but also the relative fault of each of the contributing parties, on the one hand, and the party to be indemnified on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages, expenses or liabilities, as well as any other relevant equitable considerations. In any case where the Company is the contributing party and the Underwriters are the indemnified party, the relative benefits received by the Company on the one hand, and the Underwriters, on the other, shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities (before deducting expenses) bear to the total underwriting discounts received by the Underwriters hereunder, in each case as set forth in the table on the Cover Page of the Prospectus. Relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, or by the Underwriters, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, expenses or liabilities (or actions, investigations, inquiries, suits or proceedings in respect thereof) referred to above in this subdivision (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action, claim, investigation, inquiry, suit or proceeding. Notwithstanding the provisions of this subdivision (d) the Underwriters shall not be required to contribute any amount in excess of the underwriting discount applicable to the Securities purchased by the Underwriters hereunder. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this SECTION 7, each person, if any, who controls the Company within the meaning of the Act, each officer of the Company who has signed the Registration Statement, and each director of the Company shall have the same rights to contribution as the Company, subject in each case to this subparagraph (d). Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit, inquiry, investigation or proceeding against such party in respect to which a claim for contribution may be made against another party or parties under this subparagraph (d), notify such party or parties from whom contribution may be sought, but the omission so to notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have hereunder or otherwise than under this subparagraph (d), or to the extent that such party or parties were not adversely affected by such omission. The contribution agreement set forth above shall be in addition to any liabilities which any indemnifying party may have at common law or otherwise. 8. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties and agreements contained in this Agreement or contained in certificates of officers of the Company submitted pursuant hereto, shall be deemed to be representations, warranties and agreements at the Closing Date and the Option Closing Date, as the case may be, and such representations, warranties and agreements of the Company and the indemnity agreements contained in SECTION 7 hereof, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter, the Company, any controlling person of any Underwriter or the Company, and shall survive termination of this Agreement or the issuance and delivery of the Securities to the Underwriters and the Representative, as the case may be. - 34 - 9. EFFECTIVE DATE. (a) This Agreement shall become effective at 10:00 a.m., New York City time, on the next full business day following the date hereof, or at such earlier time after the Registration Statement becomes effective as the Representative, in its discretion, shall release the Shares for sale to the public; PROVIDED, HOWEVER, that the provisions of SECTIONS 5, 7 and 10 of this Agreement shall at all times be effective. For purposes of this SECTION 9, the Shares to be purchased hereunder shall be deemed to have been so released upon the earlier of dispatch by the Representative of telegrams to securities dealers releasing such shares for offering or the release by the Representative for publication of the first newspaper advertisement which is subsequently published relating to the Shares. 10. TERMINATION. (a) Subject to subsection (b) of this SECTION 10, the Representative shall have the right to terminate this Agreement, after the date hereof, (i) if any domestic or international event or act or occurrence has materially disrupted, or in the Representative's opinion will in the immediate future materially adversely disrupt the financial markets; or (ii) any material adverse change in the financial markets shall have occurred; or (iii) if trading generally shall have been suspended or materially limited on or by, as the case may be, any of the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Boston Stock Exchange, the Chicago Board of Trade, the Chicago Board of Options Exchange, the Chicago Mercantile Exchange, the Commission or any other government authority having jurisdiction; or (iv) if trading of any of the securities of the Company shall have been suspended, or any of the securities of the Company shall have been delisted, on any exchange or in any over-the-counter market; or (v) if the United States shall have become involved in a war or major hostilities, or if there shall have been an escalation in an existing war or major hostilities or a national emergency shall have been declared in the United States; or (vi) if a banking moratorium has been declared by a state or federal authority; or (vii) if a moratorium in foreign exchange trading has been declared; or (viii) if the Company shall have sustained a loss material or substantial to the Company by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in the Representative's opinion, make it inadvisable to proceed with the delivery of the Securities; or (viii) if there shall have occurred any outbreak or escalation of hostilities or any calamity or crisis or there shall have been such a material adverse change in the conditions or prospects of the Company, or such material adverse change in the general market, political or economic conditions, in the United States or elsewhere as in the Representative's judgment would make it inadvisable to proceed with the offering, sale and/or delivery of the Securities or (ix) if Paul I. Mansur and Pierre G. Mansur shall no longer serve the Company in their present capacity. (b) If this Agreement is terminated by the Representative in accordance with the provisions of SECTION 10(a) the Company shall promptly reimburse and indemnify the Representative for all of their actual out-of-pocket expenses, including the fees and disbursements of counsel for the Underwriters (less amounts previously paid pursuant to SECTION 5(c) above). Notwithstanding any contrary provision contained in this Agreement, if this - 35 - Agreement shall not be carried out within the time specified herein, or any extension thereof granted to the Representative, by reason of any failure on the part of the Company to perform any undertaking or satisfy any condition of this Agreement by it to be performed or satisfied (including, without limitation, pursuant to SECTION 6 or SECTION 12) then, the Company shall promptly reimburse and indemnify the Representative for all of their actual out-of-pocket expenses, including the fees and disbursements of counsel for the Underwriters (less amounts previously paid pursuant to SECTION 5(c) above). In addition, the Company shall remain liable for all Blue Sky counsel fees (such fees not to exceed $40,000) and expenses and filing fees. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement (including, without limitation, pursuant to SECTIONS 6, 10, 11 and 12 hereof), and whether or not this Agreement is otherwise carried out, the provisions of SECTION 5 and SECTION 7 shall not be in any way affected by such election or termination or failure to carry out the terms of this Agreement or any part hereof. 11. SUBSTITUTION OF THE UNDERWRITERS. If one or more of the Underwriters shall fail (otherwise than for a reason sufficient to justify the termination of this Agreement under the provisions of SECTION 6, SECTION 10 or SECTION 12 hereof) to purchase the Securities which it or they are obligated to purchase on such date under this Agreement (the "Defaulted Securities"), the Representative shall have the right, within 24 hours thereafter, to make arrangement for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representative shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the total number of Firm Shares to be purchased on such date, the non-defaulting Underwriters shall be obligated to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting Underwriters, or (b) if the number of Defaulted Securities exceeds 10% of the total number of Firm Shares, this Agreement shall terminate without liability on the part of any non-defaulting Underwriters. No action taken pursuant to this Section shall relieve any defaulting Underwriter from liability in respect of any default by such Underwriter under this Agreement. In the event of any such default which does not result in a termination of this Agreement, the Representative shall have the right to postpone the Closing Date for a period not exceeding seven days in order to effect any required changes in the Registration Statement or Prospectus or in any other documents or arrangements. 12. DEFAULT BY THE COMPANY. If the Company shall fail at the Closing Date or at any Option Closing Date, as applicable, to sell and deliver the number of Shares which it is obligated to sell hereunder on such date, then this Agreement shall terminate (or, if such default shall occur with respect to any Option Shares to be purchased on an Option Closing - 36 - Date, the Underwriters may at the Representative's option, by notice from the Representative to the Company, terminate the Underwriters' obligation to purchase Option Shares from the Company on such date) without any liability on the part of any non-defaulting party other than pursuant to SECTION 5, SECTION 7 and SECTION 10 hereof. No action taken pursuant to this Section shall relieve the Company from liability, if any, in respect of such default. 13. NOTICES. All notices and communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to the Representative c/o First Allied Securities, Inc., 200 Park Avenue, 24th Floor, New York, New York 10166, Attention: Scott A. Weisman, with a copy to Orrick, Herrington & Sutcliffe, 666 Fifth Avenue, New York, New York 10103, Attention: Lawrence B. Fisher, Esq. Notices to the Company shall be directed to the Company at 8425 S.W. 129th Terrace, Miami, Florida 33156, Attention: Paul I. Mansur, Chief Executive Officer, with a copy to Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221 Brickell Avenue, Miami, Florida 33131, Attention: Gary M. Epstein, Esq. 14. PARTIES. This Agreement shall inure solely to the benefit of and shall be binding upon, the Underwriters, the Company and the controlling persons, directors and officers referred to in SECTION 7 hereof, and their respective successors, legal representatives and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. No purchaser of Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. 15. CONSTRUCTION. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without giving effect to the choice of law or conflict of laws principles. 16. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which taken together shall be deemed to be one and the same instrument. 17. ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the Representative's Warrant Agreement constitute the entire agreement of the parties hereto and supersede all prior written or oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may not be amended except in a writing, signed by the Representative and the Company. - 37 - If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us. Very truly yours, MANSUR INDUSTRIES INC. By: Paul I. Mansur Chief Executive Officer Confirmed and accepted as of the date first above written. FIRST ALLIED SECURITIES, INC. For itself and as Representative of the several Underwriters named in Schedule A hereto. By: - 38 - SCHEDULE A Member of Firm Shares NAME OF UNDERWRITERS TO BE PURCHASED First Allied Securities, Inc.......................... Total.................................................. 850,000 - 39 - EXHIBIT A [FORM OF INTELLECTUAL PROPERTY OPINION] ___________________, 1996 FIRST ALLIED SECURITIES, INC. 200 Park Avenue, 24th Floor New York, New York 10166 Re: PUBLIC OFFERING OF MANSUR INDUSTRIES INC. Gentlemen: We have acted as special counsel to MANSUR INDUSTRIES Inc., a Florida corporation (the "Company"), in connection with the entering into by the Company of that certain Underwriting Agreement by and between First Allied Securities, Inc. ("First Allied"), as representative of the several underwriters named in Schedule A thereto, and the Company, dated _______________, 1996 (the "Underwriting Agreement"). This opinion is provided to you pursuant to Section ____ of the Underwriting Agreement. For the purpose of rendering the opinions set forth below we have reviewed the following (collectively, the "Documents"): (i) the Underwriting Agreement; (ii) that certain Registration Statement filed _____, 1996, together with any and all amendments thereof exhibits thereto (collectively, the "Registration Statement"); (iii) a search of the United States Patent and Trademark Office records relevant to ownership of any and all: patents and patent applications (including, without limitation, the patents and patent applications listed on Schedule A annexed hereto and hereby incorporated by reference herein (collectively, the "Patents")), and trademarks, trademark applications, service marks and service mark applications (collectively, the "Marks") (including, without limitation, the Marks listed on Schedule B annexed hereto and hereby incorporated by reference herein (collectively, the "Trademarks")), First Allied Securities, Inc. __________, 1996 owned, purportedly owned or licensed by the Company (including, those patents, patent applications and Marks licensed, without limitation, pursuant to the licenses listed on Schedule C annexed hereto and hereby incorporated by reference herein (collectively, the "Licenses")), conducted by ______________________________ and certified as true and correct as of _______________________, 1996 (no earlier than 5 days prior to the date of the Closing (as defined in the Underwriting Agreement)); (v) _____ a search of the United States Copyright Office records relevant to ownership of any and all copyrighted material (including, without limitation, the copyright in, or license permitting the Company's actual use of, the material licensed or otherwise distributed by the Company and listed on Schedule D annexed hereto and hereby incorporated by reference herein (collectively, the "Copyrighted Material")), owned, purportedly owned or licensed by the Company conducted by _____________________ and certified as true and correct as of __________________, 1996 (no earlier than 5 days prior to the date of the Closing); (vi) ____ an intellectual property litigation search with respect to all Patents, Trademarks, Licenses and Copyrighted Material, listed on Schedules A, B, C and D, respectively; (vii) a search of the Uniform Commercial Code ("UCC") recordation offices, in the following jurisdictions -- [________________, _____________ and _______], with respect to the following two categories of general intangibles: (a) the intellectual property general intangibles of the Company, including, without limitation, the Company's patents, patent applications, inventions, know how, trademarks, service marks, copyrights, service and trade names, intellectual property licenses and other rights, and (b) the intellectual property general intangibles licensed to the Company, including, without limitation, the patents, patent applications, inventions, know how, trademarks, service marks, copyrights, service and trade names and other intellectual property rights licensed to the Company pursuant to the Licenses (listed on Schedule C), said search certified to us as complete and accurate by ________________ and current through ________________________, 1996 (no earlier than 5 days prior to the date of the Closing) and said jurisdictions being the only jurisdictions in which filing of UCC financing statements or other documents may be filed to effectively evidence a security or other interest in said general intangibles; and A-2 First Allied Securities, Inc. __________, 1996 (viii) any and all records, documents, instruments and agreements in our possession or under our control relating to the Company. We have also examined such corporate records, documents, instruments and agreements, and inquired into such other matters, as we have deemed necessary or appropriate as a basis for the opinions set forth herein. Whenever our opinion herein is qualified by the phrase "to the best of our knowledge" or "to the best of our knowledge, after due inquiry," such language means that, based upon (i) our inquiries of officers of the Company, (ii) our review of the Documents, and (iii) our review of such other corporate records, documents, instruments and agreements described in the first sentence of this paragraph, we believe that such opinions are factually correct. To the best of our knowledge, as to all matters of fact represented to you by the Company, we advise you that nothing has come to our attention that would cause us to believe that such facts are incorrect, incomplete or misleading or that reliance thereon is not warranted under the circumstances. We call to your attention that our opinion is limited to such facts as they exist on the date hereof and do not take into account any change of circumstances, fact or law subsequent thereto. Based upon and subject to the foregoing, we are of the opinion that: 1. To the best of our knowledge, after due inquiry, except as described in the Registration Statement, the Company owns or has the right to use, free and clear of all liens, encumbrances, pledges, security interests, defects or other restrictions or equities of any kind whatsoever, (i) all patents and patent applications (including, without limitation, the Patents), (ii) all trademarks and service marks (including, without limitation, the Trademarks), (iii) all copyrights (including, without limitation, the Copyrighted Material), (iv) all service and trade names, and (v) all intellectual property licenses (including, without limitation, the Licenses), used in, or required for, the conduct of the Company's business. A-3 First Allied Securities, Inc. __________, 1996 2. To the best of our knowledge, after due inquiry, the Company possesses all material intellectual property licenses or rights used in, or required for, the conduct of its business (including, the Licenses and without limitation, any such licenses or rights described in the Registration Statement as being owned, possessed or licensed by the Company, as the case may be) and such licenses and rights are in full force and effect. 3. To the best of our knowledge, after due inquiry, there is no claim or action, pending, threatened or potential, which affects or could affect the rights of the Company with respect to any trademarks, service marks, copyrights, service names, trade names, patents, patent applications or licenses used in, or required for, the conduct of the Company's business. 4. To the best of our knowledge, after due inquiry, there is no intellectual property based claim or action, pending, threatened or potential, which affects or could affect the rights of the Company with respect to any products, services, processes or licenses, including, without limitation, the Licenses used in the conduct of the Company's business. 5. To the best of our knowledge, after due inquiry, except as described in the Registration Statement, the Company is not under any obligation to pay royalties or fees to any third party with respect to any material, technology or intellectual properties developed, employed, licensed or used by the Company. 6. To the best of our knowledge, after due inquiry, the statements in the Registration Statement under the headings, "Risk Factors - ______________________ " and "Business - ____________________", are accurate in all material respects, fairly represent the information disclosed therein and do not omit to state any fact necessary to make the statements made therein complete and accurate. 7. To the best of our knowledge, after due inquiry, the statements in the Registration Statement do not contain any untrue statement of a material fact with respect to the intellectual property position of the Company, or omit to state any material fact relating to the intellectual property position of the Company which is required to be stated in the Registration Statement or is necessary to make the statements therein not misleading. We call your attention to the fact that the members of this firm are licensed to practice law in the State of ______________ and before the United States Patent and Trademark Office as Registered Patent Attorneys. Accordingly, we express no opinion with respect to the laws, rules and regulations of any jurisdictions other than the State of ___________ and the United States of America. A-4 First Allied Securities, Inc. __________, 1996 The opinions expressed herein are for the sole benefit of, and may be relied upon only by, the several Underwriters named in Schedule A to the Underwriting Agreement and Orrick, Herrington & Sutcliffe. Very truly yours, A-5 EX-3.1 3 EXHIBIT 3.1 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF MANSUR INDUSTRIES INC. ARTICLE I The name of the corporation is MANSUR INDUSTRIES INC. ARTICLE II The period of its duration is perpetual. ARTICLE III The date and time of the commencement of the corporate existence shall be November 13, 1990, the date of the filing of the original Articles with the Department of State for the State of Florida. ARTICLE IV The purpose or purposes for which the corporation is organized is to engage in the transaction of any or all lawful business for which the corporation may be incorporated under the provisions of the Florida General Corporation Act of the State of Florida. ARTICLE V This Corporation is authorized to issue Ten Million (10,000,000) shares of $.001 par value common stock, which shall be designated "Common Shares" and One Million Five Hundred Thousand (1,500,000) shares of preferred stock of $1.00 per share par value, which shall be designated Preferred Shares". ARTICLE VI Preferred Shares may be issued from time to time in series. All Preferred Shares shall be of equal rank and identical, except in respect to the particulars that are set forth in these Articles or as they may be fixed by the Board of Directors consistent with these Articles. Consistent with the provisions of these Articles, the Board of Directors is authorized and required to fix, in the manner and to the full extent provided and permitted by law, all provisions of the shares of each series set forth below: 1. The distinctive designation of all series and the number of shares which shall constitute such series; 2. The annual rate and nature of dividends payable on the shares of all series and the time and manner of payment; 3. The redemption price or prices, if any, for the shares of each, any or all series; 4. The obligation, if any, of the Corporation to maintain a sinking fund for the periodic redemption of shares of any series and to apply the sinking fund to the redemption of such shares; and 5. The rights, if any, of the holders of shares of each series to convert such shares into Common shares and the terms and conditions of such conversion. ARTICLE VII SECTION 1. DIVIDENDS. The holders of record of Preferred Shares shall be entitled to cash dividends when and as declared by the Board of Directors at the rate per share per annum and at the time and in the manner determined by the Board of Directors in the resolution authorizing each series of Preferred Shares. Cash dividends on Preferred Shares shall accrue from the date of issue. Upon the payment or setting apart for payment of all current dividends at the specified percentage rate per share per annum upon the outstanding Preferred Shares, the Directors may declare and pay dividends upon the Common Shares. Cash dividends on Preferred Shares shall, unless specifically fixed otherwise by the Board of Directors with respect to any particular class or series of preferred stock, be cumulative so that if, for any dividend period, cash dividends at the specified percentage rate per share per annum shall not have been declared and paid or set apart for payment on the Preferred Shares outstanding, the deficiency shall be declared and paid or set apart for payment prior to the making of any dividend or other distribution in the Common Shares. SECTION 2. RIGHTS UPON LIQUIDATION OR DISSOLUTION. In the event of any voluntary or involuntary liquidation, dissolution or winding up of this Corporation, the holders of record of the outstanding Preferred Shares shall be entitled to be paid the value established by the Board of Directors at the time any series of Preferred Shares is authorized, consistent with these Articles. If no such value is established at the time of - 2 - authorization by the Board of Directors, then the holders of record of the Preferred Shares shall be entitled to be paid the book value for each of such Preferred Shares, plus accumulated dividends thereon up to the date of such liquidation, dissolution or winding up of this Corporation, whether or not this Corporation shall have a surplus or earnings available for dividends, and no more. After payment to the holders of Preferred Shares of the amount payable to them as above set forth, the remaining assets of this Corporation shall be payable to and distributed ratably among the holders of record of the Common Shares. SECTION 3. VOTING RIGHTS. Except as otherwise provided by law, the entire voting power for the election of Directors and for all other purposes shall be vested exclusively in the holders of the outstanding Common Shares. ARTICLE VIII SECTION 1. SERIES A 12% CUMULATIVE CONVERTIBLE PREFERRED STOCK. A. DESIGNATION. The shares of the second series of the Company's 12% Cumulative Convertible Preferred Stock, $1.00 par value, shall be designated "Series A 12% Cumulative Convertible Preferred Stock" (hereinafter the "Series A Preferred Stock") and the number of authorized shares constituting such series shall be 600,000. The number of authorized shares of Series A Preferred Stock may not be increased. B. DIVIDENDS. B.1. The holders of shares of Series A Preferred Stock shall be entitled, in preference to the Common Stock and any other stock of the Company, to receive cumulative cash dividends when and as declared by the Board of Directors out of funds legally available for the purpose, from the date of original issuance of such shares at a rate of $.60 per year per share of Series A Preferred Stock. The amount of dividends per share payable for any dividend period less than a full dividend period, shall be computed on the basis of a 360-day year of twelve 30-day months and the actual number of days elapsed in the period for which payable. Dividends shall be payable when and as declared by the Board of Directors, out of funds legally available therefor. Each such dividend shall be paid to the holders of record of shares of the Series A Preferred Stock as they appear on the stock register of the Corporation on any record date, not exceeding 30 days preceding the payment date thereof, as shall be fixed by the Board of Directors. Dividends may be declared and paid at any time, without reference to any regular dividend payment date, to holders of record on such date, not exceeding 45 days preceding the payment date thereof, as may be fixed by the Board of Directors. Dividends shall be cumulative, - 3 - whether or not earned, and will accrue on each share of Series A Preferred Stock from the date of original issuance thereof. B2. If dividends at the rate per share set forth in paragraph B1 shall not have been declared and paid or set apart for payment on all outstanding shares of Series A Preferred Stock, then, until the aggregate deficiency shall be declared and fully paid or set apart for payment, the Company shall not (i) declare or pay or set apart for payment any dividends or make any other distribution on any capital stock of the Company ranking junior to, or on parity with, the Series A Preferred Stock with respect to the payment of dividends or upon liquidation (such stock being herein referred to as "Junior or Parity Stock"), or dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of, Junior Stock, or (ii) make any payment on account of the purchase, redemption, retirement or other acquisition of any Junior Stock or any options, warrants or rights to subscribe for or purchase any Junior or Parity Stock. C. LIQUIDATION PREFERENCE. Upon any liquidation (complete or partial), dissolution or winding up of the Company, or sale of substantially all the Company's assets, whether voluntary or involuntary, or any similar distribution of its assets to its shareholders which results in a return of capital, whether voluntary or involuntary, the holders of Series A Preferred Stock, in preference to all other future issues of preferred stock or any junior stock, shall be entitled to be paid out of the assets of the Company available for distribution to its shareholders (whether from capital, surplus or earnings) an amount per share of Series A Preferred Stock equal to $5.00 plus twice the amount of aggregate dividends accrued through the date of distribution computed in accordance with this paragraph, through the effective date of liquidation or sale. D. REDEMPTION. D1. REDEMPTION OF SERIES A PREFERRED STOCK. The Company shall purchase or redeem the Series A Preferred Stock on June 30, 1996, or any extension of such redemption date which the Board of Directors of the Company may declare at their sole discretion. (a) For each share of the Series A Preferred Stock redeemed by the Company, pursuant to this paragraph D1, the Company shall be obligated to pay to the holder thereof, upon surrender, by such holder at the Company's principal office of the certificate representing such share, endorsed in blank or accompanied by an appropriate form of assignment, an amount in cash (the "Redemption Price") equal to the appropriate liquidation preference price of $5.00, plus twice the aggregate amount of dividends accrued with respect to such Series A Preferred Stock, calculated in accordance with this paragraph, through the date of redemption, which date shall be specified in the Company's notice to the Preferred Shareholder. (b) The number of shares of Series A Preferred Stock to be redeemed from each holder thereof in redemptions under this paragraph D1 shall be the - 4 - number of whole shares, as nearly as practicable to the nearest share, determined by multiplying the total number of shares of Series A Preferred Stock to be redeemed times a fraction, the numerator of which shall be the total number of shares of Series A Preferred Stock then held by such holder and the denominator of which shall be the total number of shares of Preferred Stock then outstanding. In case less than all the shares represented by any certificate are redeemed, a new certificate shall be issued representing the unredeemed shares without cost to the holder thereof. (c) Notice of any redemption of Series A Preferred Stock, specifying the date and time of redemption and the Redemption Price, shall be mailed by certified or registered mail, return receipt requested, to each holder of record of shares to be redeemed, at the address for such holder shown on the Company's records, not more than 60 nor less than 30 days prior to the date on which such redemption is to be made. If less than all the shares of the Series A Preferred Stock owned by such holder are then to be redeemed, the notice shall also specify the number of such shares and the certificate numbers thereof which are to be redeemed. Upon mailing any such notice of redemption, the Company shall become obligated to redeem, on the date specified therein, all shares of the Series A Preferred Stock specified in such notice. D2. RIGHTS AFTER REDEMPTION OR REPURCHASE. On the date any share of Series A Preferred Stock is redeemed or repurchased under this paragraph D, all rights of the holder of such share as a shareholder of the Company by reason of the ownership of such share shall cease, except the right to receive the Redemption Price of such share upon the presentation and surrender of the certificate representing such share, and such share shall not be deemed to be outstanding after the date on which it is redeemed or repurchased. D3. REDEEMED OR OTHERWISE ACQUIRED SHARES TO BE CANCELED. Any shares of Series A Preferred Stock redeemed or repurchased pursuant to this section or otherwise acquired by the Company in any manner whatsoever shall be canceled and shall not under any circumstances be reissued, sold or transferred. The Company shall from time to time take such action as may be necessary to reduce the authorized number of shares of Series A Preferred Stock accordingly. - 5 - E. CONVERSION. E1. CONVERSION PROCEDURES. (a) A holder of shares of Series A Preferred Stock may, at the holder's option, at any time prior to the effective date of redemption, as specified in the Company's notice in accordance with Paragraph D1(c) hereof, convert all or any part (in whole numbers of shares only) of the shares of Series A Preferred Stock held by such holder into such number of fully paid and nonassessable whole shares of Common Stock, on a one for one basis, that is one share of Series A Preferred Stock may be converted into one whole share of Common Stock. (b) Each conversion of shares of Series A Preferred Stock shall be effected by the surrender of the certificate or certificates representing the shares to be converted at the principal office of the Company (or such other office or agency of the Company as the Company may designate by notice in writing to the holder or holders of the Series A Preferred Stock) at any time during its usual business hours, together with written notice by the holder of such Series A Preferred Stock stating that such holder desires to convert the shares, or a stated number of the shares, represented by such certificate or certificates, into shares of Common Stock. Such notice shall also specify the name or names (with addresses) and denominations in which the certificate or certificates for Common Stock shall be issued and shall include instructions for delivery thereof. Such conversion shall be deemed to have been effected as of the close of business on the date on which such certificate or certificates shall have been surrendered, and as of such date (the "Conversion Date") the rights of the holder of such Series A Preferred Stock (or specified portion thereof) as such holder shall cease and the person or persons in whose name or names any certificate or certificates for shares of Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of the shares of Common Stock represented thereby. (c) As soon as possible after the Conversion Date (but in no event more than 30 days after the Conversion Date, the Company shall deliver to the converting holder or, with respect to the certificate(s) specified in (a) below, as specified by such converting holder: (i) a certificate or certificates representing the number of shares of Common Stock issuable by reason of such conversion registered in such name or names and such denomination or denominations as the converting holder shall have specified; and (ii) a certificate representing any shares of Series A Preferred Stock which shall have been represented by the certificate or certificates - 6 - which shall have been delivered to the Company in connection with such conversion but which shall not have been converted. (iii) A Company check in the amount of any accrued but unpaid dividends, which dividends have not been converted to shares of Common Stock. E2. AUTHORIZATION AND ISSUANCE OF COMMON STOCK. (a) The Company will at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issue upon the conversion of the Series A Preferred Stock, as provided in this paragraph, such number of shares of Common Stock as shall then be issuable upon the conversion of all outstanding shares of Series A Preferred Stock together with accrued interest thereon. The Company covenants that all shares of Common Stock which shall be so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges. The Company will take all such action as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or regulation. (b) The Company will not take any action which results in any adjustment of the number of shares of Common Stock acquirable upon conversion of shares of the Series A Preferred Stock if after such action the total number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock then outstanding, together with the total number of shares of Common Stock then outstanding and the total number of shares of Common Stock reserved for any purpose other than issuance upon conversion of Series A Preferred Stock, would exceed the total number of shares of Common Stock then authorized by these Articles of Incorporation. (c) If any shares of Common Stock required to be reserved for purposes of conversions of shares of Series A Preferred Stock under this paragraph E2 require registration with, or approval of, any governmental authority under any federal or state law (other than any registration under the Securities Act of 1933, as then in effect, or any similar federal statute then in force, or any state securities law, required by reason of any transfer involved in such conversion), or listing on any domestic securities exchange, before such shares may be issued upon conversion, the Company will, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered or approved for listing or listed on such domestic securities exchange, as the case may be. (d) The issuance of certificates for shares of Common Stock upon conversion of shares of the Series A Preferred Stock shall be made without charge to the holders of such shares for any issuance tax in respect thereof, or other cost - 7 - incurred by the Company in connection with such conversion and the related issuance of shares of Common Stock, provided that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the holder of the Series A Preferred Stock converted. (e) The Company will not close its books against the transfer of any share of Series A Preferred Stock or of any share of Common Stock issued or issuable upon the conversion of such shares in any manner which interferes with the timely conversion of such shares. E3. SUBDIVISIONS AND COMBINATIONS. In the event the Company shall at any time subdivide (by any stock split, stock dividend or otherwise) one or more classes of its outstanding Common Stock into a greater number of shares of Common Stock, the Conversion Price in effect immediately prior to such subdivision forthwith shall be proportionately reduced. Conversely, in the event the outstanding shares of one or more classes of the Common Stock shall be combined into a smaller number of shares (by reverse stock split or otherwise), the Conversion Price in effect immediately prior to such combination shall be proportionately increased. E4. LIQUIDATING DIVIDENDS. While any shares of Series A Preferred Stock are outstanding, the Company will not declare a dividend (other than a dividend payable in Common Stock, Options or Convertible Securities) upon Common Stock payable otherwise than out of earnings or retained earnings (determined in accordance with generally accepted accounting principles, consistently applied). For purposes of this paragraph E4, a dividend other than in cash shall be considered payable out of earnings or earned surplus only to the extent that such earnings or earned surplus are charged an amount equal to the fair value of such dividend. E5. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR SALE. If any capital reorganization or reclassification of the capital stock of the Company, or any consolidation or merger of the Company with or into another corporation, or any sale of all or substantially all of the Company's assets to another corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive (either directly, or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby each of the holders of the Series A Preferred Stock shall thereafter have the right to acquire and receive upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock of the Company immediately theretofore acquirable and receivable upon the conversion of such holder's Series A Preferred Stock, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of Common Stock equal to the number of shares of Common Stock immediately theretofore acquirable and receivable upon conversion of such Series A Preferred Stock had such reorganization, reclassification, consolidation, merger or sale not taken place, and, in any such case, appropriate provision shall - 8 - be made with respect to such holder's rights and interests to the end that the provisions of this paragraph E (including without limitation provisions for adjustments of the Conversion Price and of the number of shares of Common Stock acquirable and receivable upon the exercise of the conversion rights granted in this paragraph E) shall thereafter be applicable in relation to any shares of stock, securities or assets thereafter deliverable upon the conversion of such holder's shares (including, in the case of any such consolidation, merger or sale in which the successor corporation or purchasing corporation is other than the Company, an immediate adjustment of the Conversion Price to the value for the Common Stock reflected by the terms of such consolidation, merger or sale if the value so reflected is less than the Conversion Price in effect immediately prior to such consolidation, merger or sale). In the event of a merger or consolidation of the Company with or into another corporation or the sale of all or substantially all of the Company's assets to another corporation, as a result of which a number of shares of common stock of the surviving or purchasing corporation greater or lesser than the number of shares of Common Stock of the Company outstanding immediately prior to such merger, consolidation or sale are issuable to holders of Common Stock, then the Conversion Price in effect immediately prior to such merger, consolidation or sale shall be adjusted (pursuant to paragraph E) as though there were a subdivision or combination of the outstanding shares of Common Stock. The Company shall not effect any such consolidation, merger or sale, unless prior to the consummation thereof the successor corporation (if other than the Company) resulting from such consolidation or merger or the corporation purchasing such assets shall assume by written instrument, executed and mailed or delivered by first class mail, postage prepaid, to each holder of Series A Preferred Stock at the address of each such holder as shown on the books of the Company, the obligation to deliver to each such holder such shares of stock, securities or assets as, in accordance with the foregoing provisions, such holder may be entitled to acquire or receive. If the purchase, tender or exchange offer is made to and accepted by the holders of more than fifty percent (50%) of the outstanding shares of Common Stock, the Company shall not effect any consolidation, merger or sale with the person having made such offer or with any affiliate of such person unless prior to the consummation of such consolidation, merger or sale each of the holders of Series A Preferred Stock shall have been given a reasonable opportunity to then elect to receive upon the conversion of such holder's shares either the stock, securities or assets then issuable with respect to the Common Stock or the stock, securities or assets, or the equivalent, issued to previous holders of the Common Stock in accordance with such offer. E6. NOTICE OF ADJUSTMENT. Immediately upon any adjustment of the Conversion Price, the Company shall send written notice thereof to all holders of Series A Preferred Stock (by first class mail, postage prepaid, addressed to each such holder at the address for such holder shown on the books of the Company), which notice shall state the Conversion Price resulting from such adjustment and the increase or decrease, if any, in the number of shares of Common Stock acquirable and receivable upon conversions of all shares of Series A Preferred Stock held by each such holder, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. - 9 - E7. OTHER ADJUSTMENT-RELATED NOTICES. In the event that at any time: (a) the Company shall declare a dividend (or any other distribution) upon its Common Stock payable otherwise than in cash out of earnings or earned surplus; (b) the Company shall offer for subscription pro rata to the holders of any class of its Common Stock any additional shares of stock of any class or other rights; (c) there shall be any capital reorganization, reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation; or (d) there shall be any voluntary or involuntary dissolution, liquidation, winding up or similar distribution of the Company; then, in connection with any such event, the Company shall give, by first class mail, postage prepaid, addressed to the holders of Series A Preferred Stock at the address for each such holder as shown on the books of the Company: (a) at least 60 days prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights (and specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding up or similar distribution; and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding up or similar distribution, at least 60 days prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, winding up or similar distribution). E8. CERTAIN EVENTS. If any event occurs as to which, in the opinion of the Board of Directors, the other provisions of this paragraph E are not strictly applicable or if strictly applicable would not fairly protect the conversion rights of the Series A Preferred Stock in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such conversion rights as aforesaid, but in no event shall any such adjustment have the effect of increasing the Conversion Price as otherwise determined pursuant to this paragraph E except in the event of a combination of shares of the type contemplated in paragraph E3 and then in no event to an amount larger than the Conversion Price as adjusted pursuant to paragraph E3. - 10 - F. VOTING. Except as otherwise provided by law or herein, the holders of shares of Series A Preferred Stock shall not be entitled to vote upon any matter relating to the business or affairs of the Company or for any other purposes. G. REGISTRATION OF TRANSFER. The Company shall keep at its principal office (or such other place as the Company reasonably designates) a register for the registration of shares of Series A Preferred Stock. Upon the surrender of any certificate representing Series A Preferred Stock at such place, the Company shall, at the request of the registered holder of such certificate, execute and deliver (at the Company's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate, subject to the requirements of applicable securities laws. Each such new certificate shall be registered in such name and shall represent such number of shares as shall be requested by the holder of the surrendered certificate, shall be substantially identical in form to the surrendered certificate, and the holders of the shares represented by such new certificate shall be entitled to receive all mandatory redemption payments on the shares represented by the surrendered certificate. H. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the registered holder shall be deemed satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of the Series A Preferred Stock and, in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Company (provided that if the registered holder is an institutional investor its own agreement of indemnity, without bond, shall be satisfactory) or, in the case of any such mutilation, upon surrender of such certificate, the Company shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares represented by such lost, stolen, destroyed or mutilated certificate. The term "outstanding" when used herein with reference to shares of the Series A Preferred Stock as of any particular time shall not include any shares represented by any certificate in lieu of which a new certificate has been executed and delivered by the Company in accordance with paragraph 8 or this paragraph, but shall include only those shares represented by such new certificate. I. RESTRICTIONS ON COMPANY ACTION. So long as any shares of Series A Preferred Stock shall be outstanding, and in addition to any other approvals or consents required by law, without the prior affirmative vote or written consent of the holders of fifty percent (50%) of all shares of Series A Preferred Stock at the time outstanding: (i) The Company shall not authorize, create or issue any shares, or securities convertible into such shares, of any class of stock having preference over, or being on a parity with, the Series A Preferred Stock with respect to rights upon dissolution, liquidation, winding up or similar distribution of the Company or distribution of assets to its shareholders by way of return of capital, whether voluntary or involuntary. - 11 - (ii) The Company shall not sell, lease, or convey all or substantially all of the property or business of the Company (which for purposes hereof, "substantially all" shall be deemed to constitute fifty percent (50%) or more) and shall not effect a merger or consolidation of or with any other corporation or corporations unless such merger or consolidation shall be with a Subsidiary of the Company or unless as a result of such merger or consolidation and after giving effect thereto (a) the Company shall be the surviving corporation, (b) the Series A Preferred Stock then outstanding shall continue to be outstanding, (c) there shall be no alteration or change in the powers or designation or the preferences and rights, and the qualifications, limitations or restrictions applicable to outstanding shares of Series A Preferred Stock, in any material respect prejudicial to the holders thereof, and (d) there shall not be created or thereafter exist any new class or series of stock, or securities convertible into such stock, having preference over, or being on a parity with, the Series A Preferred Stock with respect to rights upon dissolution, liquidation, winding up or similar distribution or distribution of assets to shareholders by way of return of capital of the Company. (iii) The Company shall not amend, alter or repeal any of the provisions of these Articles of Incorporation or the Bylaws of the Company in any manner which would adversely affect the preferences and rights and the qualifications, limitations or restrictions of the Series A Preferred Stock or the holders thereof, nor shall the Company increase the number of shares of Series A Preferred Stock which the Company is authorized to issue. (iv) The Company shall not enter into any agreement which would by its terms prohibit or in any way restrict the Company from redeeming the Series A Preferred Stock or performing any other obligation to the holders of the Series A Preferred Stock imposed on the Company by these Articles of Incorporation. J. DEFINITIONS. The following terms shall have the following meanings, which meanings shall be equally applicable to the singular and plural forms of such terms: (i) "Common Stock" means, collectively, the Common Stock and any capital stock of any class of the Company hereafter authorized which shall not be limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution, winding up or similar distribution of the Company. (ii) "Common Stock Deemed Outstanding" means, at any given time, the sum of (a) the number of shares of Common Stock actually outstanding at such time (exclusive of any shares of Common Stock owned or held by or for the account of the Company), plus (b) the number of shares of Common Stock deemed to be outstanding under paragraph E hereof at such time. - 12 - (iii) "Conversion Price" means $1.00, as such price may be adjusted from time to time pursuant to the provisions of paragraph E hereof. (iv) "Person" means and includes an individual, a partnership, a corporation, a trust, a joint venture, an unincorporated organization or a government or any department or agency thereof. (v) "Junior Security" means the Company's Common Stock and any other equity security of any kind which the Company shall at any time issue or be authorized to issue other than the Series A Preferred Stock. The terms and conditions of Series A Preferred Stock are set forth in these Articles. (vi) "Series A Preferred Stock" means the Company's second series of 12% Cumulative Convertible Preferred Stock, par value $1.00 per share. (vii) "Subsidiary" means any corporation at least 50% of the voting stock of every class of which shall, at the time as of which any determination is being made, be owned by the Company either directly or through one or more Subsidiaries. K. SEVERABILITY. The unenforceability or invalidity of any provision or provisions hereof shall not affect or tender invalid or unenforceable any other provision or provisions herein contained. ARTICLE IX The number of directors constituting the Board of Directors of the Corporation is a minimum of one (1). The number of directors may be increased or diminished from time to time, pursuant to the Bylaws of the Corporation, but shall never be less than one (1). ARTICLE X The principal place of business and mailing address of this Corporation is: 8425 S.W. 129th Terrace Miami, Florida 33156 ARTICLE XI The by-laws of the Corporation may be adopted, altered, amended or repealed from time to time by either the shareholders or the Board of Directors, but the Board of Directors shall not - 13 - alter, amend or repeal any by-laws adopted by the shareholders if the shareholders specifically provide that such bylaws are not subject to amendment or repeal by the directors. ARTICLE XII SECTION 1. INDEMNIFICATION This Corporation shall indemnify and shall advance expenses on behalf of its officers and directors to the fullest extent not prohibited by law in existence either now or hereafter. SECTION 2. DIRECTORS AND OFFICERS INSURANCE The Corporation shall have power to purchase and maintain insurance on behalf of any person who was or is a director or officer of the Corporation, or who is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have authority to indemnify him or her against such liability under the provisions of these articles, or under the law. - 14 - EX-3.2 4 EXHIBIT 3.2 BYLAWS OF MANSUR INDUSTRIES INC. BYLAWS OF MANSUR INDUSTRIES INC. ARTICLE I. OFFICES 1 ARTICLE II. SHAREHOLDERS 1 Section 1. Annual Meetings 1 Section 2. Special Meetings 1 Section 3. Notice of Meeting 1 Section 4. Notice of Adjourned Meeting 2 Section 5. Waiver of Notice 2 Section 6. Voting Record 2 Section 7. Shareholder Quorum 2 Section 8. Proxies 2 Section 9. Voting of Shares 3 Section 10. Voting of Shares by Certain Holders 3 Section 11. Action Taken by Shareholders Without a Meeting 3 Section 12. Shareholders' Agreements 3 ARTICLE III. BOARD OF DIRECTORS 3 Section 1. Number, Qualification, Election and Tenure 3 Section 2. Regular Meetings 3 Section 3. Special Meetings 4 Section 4. Special Meetings 4 Section 5. Notice and Waiver 4 Section 6. Quorum and Voting 4 Section 7. Action Without a Meeting 4 Section 8. Presumption of Assent 4 Section 9. Vacancies 4 Section 10. Compensation 5 Section 11. Conflict of Interest 5 Section 12. Resignations 5 Section 13. Removal 5 ARTICLE IV. OFFICERS 5 Section 1. Officers 5 Section 2. Election and Term of Office 5 Section 3. Duties 5 Section 4. Vacancies 6 Section 5. Removal 6 Section 6. Compensation 6 Section 7. Repayment by Officers for Compensation Held Unreasonable 7 Section 8. Delegation of Duties 7 ARTICLE V. EXECUTIVE AND OTHER COMMITTEES 7 Section 1. Creation of Committees 7 Section 2. Authority 7 Section 3. Qualification and Tenure 7 Section 4. Meetings 7 Section 5. Quorum and Manner of Acting 7 Section 6. Action Without a Meeting Section 7. Procedure 8 ARTICLE VI. CONTRACTS, LOANS, CHECKS AND DEPOSITS 8 Section 1. Contracts 8 Section 2. Loans 8 Section 3. Checks, Drafts, Etc 8 Section 4. Deposits 8 ARTICLE Vll. STOCK 8 Section 1. Certificates 8 Section 2. Issuance of Shares for Future Services or Promissory Notes 9 Section 3. Transfer of Shares 9 ARTICLE VIII. FISCAL YEAR 9 ARTICLE IX. BOOKS AND RECORDS 9 Section 1. Books and Records 9 Section 2. Inspection by Shareholders 9 Section 3. Financial Reports 10 ARTICLE X. DIVIDENDS 10 ARTICLE XI. CORPORATE SEAL 10 ARTICLE XII. EMERGENCY BYLAWS 10 ARTICLE XIII. AMENDMENTS TO BYLAWS 10 ARTICLE XIV. INDEMNIFICATION 11 BYLAWS OF MANSUR INDUSTRIES INC. ARTICLE I - OFFICES The principal office of the Corporation shall be in the State of Florida. The Corporation may have such other offices, within or outside of the State of Florida, as the Board of Directors may designate as the business of the Corporation may require from time to time. The Corporation shall designate and maintain a registered office within the State of Florida. Such office need not be identical with the principal office of the Corporation and the address of the registered office may be changed from time to time by the Board of Directors. ARTICLE II - SHAREHOLDERS Section 1. Annual Meetings. The annual meeting of the Shareholders shall be held at the principal office of the Corporation during the month of December beginning with the year 1993 or at such other time and place as may be designated by the Board of Directors. If the day fixed for the annual meeting shall fall on a Sunday or legal holiday the meeting shall be held on the next succeeding business day. The purpose of the annual meeting shall be to elect the Directors of the Corporation and transact such other businesses as may come before the meeting. Failure to hold a timely meeting shall in no way affect the terms of Officers or Directors of the Corporation or the validity of actions of the Corporation. Section 2. Special Meetings. Special meetings of the Shareholders, unless otherwise prescribed by statute may be called by the President or the Board of Directors, and shall be called by the President at the request of the holders of not less than one-tenth of all outstanding Shares of the Corporation entitled to vote at the meeting. The purpose of such special meeting shall be stated in the notice of the meeting and only business within the purpose or purposes described in the special meeting notice may be conducted at a special Shareholders' meeting unless all Shareholders' are in attendance and agree to consider additional business. Section 3. Notice of Meeting. Oral or written notice stating the place, day and hour of the Shareholder's meeting and, in the case of a special meeting, the purpose of the meeting shall, unless otherwise prescribed by statute, be delivered not less than ten nor more than sixty days before the date of the meeting. Such notice may be delivered in person, by telephone, telegram, teletype, fax or other form of electronic communication, or by mail at the discretion of the person calling the meeting. If mailed, such notice shall be effective when mailed, postpaid, to the Shareholder's address of record. 1 Section 4. Notice of Adjourned Meeting. If a meeting is adjourned to another date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before the adjournment is taken, and any business may be transacted at the adjourned meeting that might have been transacted on the original date of the meeting. Section 5. Waiver of Notice. A written waiver of notice signed by a Shareholder before or after a meeting shall be the equivalent of giving the Shareholder notice of the meeting and shall be filed with the Corporate records. Attendance of a Shareholder at a meeting shall constitute a waiver of notice of the meeting except when the Shareholder attends for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any Shareholder attending a meeting also waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the Shareholder objects to considering the matter when it is presented. Section 6. Voting Record. The Officer or Agent having charge of stock transfer records of the Corporation shall make a list of all Shareholders entitled to vote at such meeting or any adjournment thereof. The record date may not be more than 70 days before the meeting or action requiring a determination of Shareholders and shall not be later than the day prior to delivery of the first notice to any Shareholder. Such record date shall be effective for any adjournment of the meeting unless the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. The list of Shareholders eligible to vote shall include the address and number of Shares held for each Shareholder, and shall be kept on file either at the registered or principal office of the Corporation or at the office of the transfer agent of the Corporation and shall be open for inspection during usual business hours by any Shareholder, Shareholder's agent, or attorney, at the Shareholder's expense, at least ten days prior to the meeting. The list shall also be available at the Shareholder's meeting and open for inspection by any Shareholder, Shareholder's agent or attorney at any time during the meeting. If the requirements of this section have not been substantially complied with, then, upon demand by any Shareholder, personally or by proxy, the meeting shall be adjourned until the requirements of this section are complied with. If no such demand is made, failure to comply with the requirements of this section shall not affect the validity of any action taken at such meeting. Section 7. Shareholder Quorum. A majority of the outstanding Shares of the Corporation, represented in person or by proxy, entitled to vote shall constitute a quorum at the meeting of Shareholders. If less than a quorum is present at the meeting, a majority of the Shares represented at the meeting may adjourn the meeting without further notice. The Shareholders present at a duly organized meeting may continue to transact business until adjournment notwithstanding the withdrawal of enough Shareholders during the meeting to leave less than quorum. Section 8. Proxies. Every Shareholder entitled to vote at a Shareholder's meeting may vote in person or by proxy executed in writing by the Shareholder or the Shareholder's attorney-in-fact. Such proxy shall be filed with the Secretary of the Corporation before or during the meeting. No proxy shall be valid after eleven months from the date of its execution unless otherwise provided in the proxy. Every proxy is revocable by the Shareholder unless the appointment form specifically states that is irrevocable and the appointment is coupled with an interest. 2 Section 9. Voting of Shares. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of Shareholders. Unless otherwise provided in the Articles of Incorporation or these Bylaws, at any duly convened Shareholders' meeting an affirmative vote of a majority of Shares in attendance shall be the act of Shareholders. If a quorum exists, action is taken affirmatively on a matter if the votes favoring the action exceed the votes cast opposing the action. Abstentions constitute neutral votes. Section 10. Voting of Shares by Certain Holders. Shares held in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or in the absence of such provision, as the Board of Directors of such other corporation may determine. Section 11. Action Taken by Shareholders Without a Meeting. Any action required or permitted to be taken at a meeting of the Shareholders may be taken without a meeting, without prior notice, and without a vote if consent in writing, setting forth the action so taken, shall be signed by the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all Shares entitled to vote thereon were present and voted. No written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the date of receipt by the Corporation of the earliest dated consent, all required consents are received. Any written consent may be revoked prior to the date the Corporation receives the required number of consents to authorize the proposed action. Whenever action is taken pursuant to this Section, all written consent of Shareholders shall be held with the Corporate minutes. Section 12. Shareholder's Agreements. The Shareholders may enter into a Shareholder's Agreement, and the provision of such agreement will supersede these Bylaws providing all Shareholders are parties to the agreement. ARTICLE III - BOARD OF DIRECTORS Section 1. Powers. Subject to limitation by the Articles of Incorporation these Bylaws and Florida statutes, all business of the Corporation shall be directed and managed by the Board of Directors. Section 2. Number, Qualification, Election. and Tenure. The initial Directors of the Corporation shall be Pierre G. Mansur and Paul I. Mansur. Pierre G. Mansur shall serve as the initial Chairman of the Board. Pierre G. Mansur may appoint additional directors who shall serve until the first annual meeting of the Shareholders in 1996. Commencing in 1996, Directors shall be elected by the Shareholders at the annual Shareholder's meeting and shall hold office until the next annual Shareholder's meeting and until their successors have been elected and qualified. The number of Directors may be increased or decreased from time to time by a majority of vote of the Shareholders without need to amend these Bylaws but shall never be less than one. The Directors must be natural persons but need not be Shareholders nor residents of the State of Florida. The majority of Directors in office shall select a Chairman immediately subsequent to their election. 3 Section 3. Regular Meetings. Regular annual meetings of the Board of Directors shall be held without other notice than by this bylaw immediately after, and at the same place as, the annual Shareholder's meeting. Additional regular meetings may be provided by resolutions of the Board of Directors and held without notice other than such resolution. Meetings may be held by telephone conference. Section 4. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the Chief Executive Officer, the President, or any Director. Meetings may be held by telephone conference. Section 5. Notice and Waiver. Oral or written notice of any special meeting shall be given at least two days prior to the meeting. Such notice may be delivered in person, mailed, or given by telephone, telegram, teletype, fax or other electronic method. If mailed, such notice shall be deemed to be delivered when mailed, postage paid, to the Director at the Director's current address in the Corporation's records. Any Director may waive notice of any meeting. Attendance by a Director at a meeting shall constitute a waiver of notice except where a Director attends a meeting for the express purpose of objecting to any business because the meeting was not lawfully called or convened. Neither the business to be transacted at the meeting nor the purpose need to be stated in the notice or waiver of any meeting. Section 6. Quorum and Voting. A majority of Directors shall constitute a quorum for the transaction of business and a vote of the majority of Directors present at a duly convened meeting shall be the act of the Board of Directors. If less than a quorum is present then a majority of the Directors present may adjourn the meeting without notice until a quorum is present. Section 7. Action without a Meeting. Any action required or permitted to be taken by the Board of Directors at a meeting may be taken without a meeting if a consent in writing, setting forth the action to be taken, shall be signed by all of the Directors. Such action is not effective until the last required consent is received by the Corporation. Section 8. Presumption of Assent. A Director who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless he votes against such action or abstains from voting. An abstention is a neutral vote. Section 9. Vacancies. Any vacancy occurring in the Board of Directors may be filled by an affirmative vote of majority of the remaining Directors though less than a quorum of the Board of Directors, or by a majority vote of the Shareholders. A Director elected to fill a vacancy shall be elected for the unexpired term of the Director's predecessor. Any Directorship to be filled due to an increase in the number of Directors shall be filled by a vote of the majority of the Board, the term of office continuing only until the next election of Directors by the Shareholders. 4 Section 10. Compensation. By resolution of the Board of Directors each Director may be paid the expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a stated salary as Director or a fixed sum for attendance at each meeting or both. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. Directors may set their own compensation for service as Officers as well as for service as Directors. Section 11. Conflict of Interest. Any contract or other transaction between the Corporation and any corporation or firm in which any of its Directors holds a financial interest shall be valid for all purposes notwithstanding the presence of such Director at the meeting authorizing such contract or transaction, or his participation in such meeting. The foregoing shall, however, apply only (a) if the interest of such Director is disclosed to the Board of Directors at said meeting; (b) the Board, having been apprised of the interest, affirmed the subject transaction with no vote cast by the interested Director; or (c) the contract or transaction is deemed to be fair and reasonable to the Corporation at the time it is authorized. The interested Director may be counted for the purpose of determining whether a quorum is present. Section 12. Resignations. Directors may resign at any time by delivering written notice to the Corporation or to the Board of Directors. Section 13. Removal. At any duly convened meeting of Shareholders called expressly for that purpose, any Director may be removed from office, with or without cause. ARTICLE IV - OFFICERS Section 1. Officers. The Officers of the Corporation shall be elected or appointed by the Board of Directors and may include a Chief Executive Officer, President, Secretary, Treasurer, one or more Vice Presidents, Controller and/or such other Officers as may be deemed necessary or desirable. Any two or more offices may be held by the same person. The Directors may eliminate or add Officers at any time by resolution. Section 2. Election and Term of Office. All Officers to be elected or appointed by the Board of Directors shall be elected or appointed at the regular annual meeting of the Board. Each Officer shall hold office until that Officer's death, resignation or removal or until his or her successor shall have been duly elected or appointed in accordance with these Bylaws. Section 3. Duties. A. President: The President shall have the responsibility for the general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board are carried into effect. The President shall preside at all meetings of the Shareholders and of Board of Directors unless the Board elects a Chairman of the Board or Chief Executive Officer. The President shall have all powers generally associated with the Presidency of the Corporation as well as any powers authorized by resolution of the Board. 5 B. Vice President: The Vice Presidents, in the order designated by the Board of Directors if there is more than one, shall in the absence or disability of the President, perform the duties and exercise the powers of the President and shall perform other duties as the Board of Directors may prescribe. C. Secretary: The Secretary shall attend all meetings of the Shareholders and of the Board of Directors and shall record all votes and the minutes of all such proceedings in a book to be kept for that purpose and shall perform like duties for committees of the Corporation when required. The Secretary shall give, or cause to be given, all required notices for such meetings and shall perform other duties as may be prescribed by the President or the Board of Directors. When required or requested, the Secretary shall execute with the President all contracts, conveyances or other instruments of the Corporation and shall, when requested, provide certifications of recorded minutes. The Secretary shall keep safe custody of the Corporate Seal and, when requested, shall affix same to any instrument requiring it. The Secretary shall keep a current register of the mailing addresses of each Shareholder, such addresses to be furnished to the Secretary by the Shareholders and the responsibility for keeping said addresses current shall be upon the Shareholders. The Secretary shall have general charge of the stock transfer books of the Corporation and shall issue or transfer stock at the direction of the Board of Directors. D. Treasurer: The Treasurer shall have custody of and keep of all money, funds and property of the Corporation, unless otherwise determined by the Board of Directors, and shall render such accounts and present such statements to the Directors and President when requested. The Treasurer shall deposit funds of the Corporation which may come into his or her hands into such bank or banks as designed by the Board of Directors and shall keep all bank accounts in the name of the Corporation and shall exhibit the Corporation's books and accounts at all reasonable times to any Director of the Corporation upon reasonable notice and during regular business hours. If required by the Board, the Treasurer shall give a bond to the Corporation with such surety in such amount as are acceptable to the Board. E. Assistant Officers: The Assistant Secretaries and Assistant Treasurers, if any, in the order designated by the Board, shall perform the respective duties of the Secretary and Treasurer. F. Other Officers: Should the Board designate Officers other than those listed above, they shall, by resolution, set forth the specific duties of each Officer designated. Section 4. Vacancies. Any vacancies shall be filled at any time by an election or appointment by the Board of Directors for the unexpired term of such offices. Section 5. Removal. Any Officer or Agent of the Corporation may be removed at any time with or without cause by the Board of Directors. Section 6. Compensation. All compensation of Officers shall be fixed from time to time by the Board of Directors; no Officer shall be prevented from receiving such compensation by reason of the fact that he is also a Director of the Corporation. 6 Section 7. Repayment by Officers for Compensation Held Unreasonable. Any payments made to an Officer of the Corporation, including but not limited to, salary, commissions, bonuses, interest, rent or entertainment or other expenses incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service shall be reimbursed by such Officer to the Corporation to the full extent of such disallowance. It shall be the duty of the Board to enforce payment of all amounts so disallowed. In lieu of payment by the Officer, subject to the determination of the Directors, proportionate amounts may be withheld from any Officer's future compensation payments until the amount owed to the Corporation has been recovered. Section 8. Delegation of Duties. Should an Officer be absent or disabled or for any other reason be unable to perform his duties, the Board of Directors may delegate his powers or duties to any other Officer. ARTICLE V - EXECUTIVE AND OTHER COMMITTEES Section 1. Creation of Committees. The Board of Directors may, by resolution, designate an Executive Committee or other committees consisting of two or more members of the Board. The designation of such committees, however, shall not relieve the Board of Directors or any member thereof of any responsibility imposed by law and any such committees' powers are limited by Florida Statutes. Section 2. Authority. The Executive Committee shall consult with and advise the Officers of the Corporation in the management of its business and shall have, and may exercise, to the extent provided in the resolution of the Board of Directors creating such committee, such powers as may be lawfully delegated by the Board. Other committees shall have the functions and may exercise such power of the Board as can be lawfully delegated and as provided in the resolutions of the Board creating such committees. Section 3. Qualifications and Tenure. All members of the Executive Committee and other committees appointed by the Board shall be members of the Board and shall hold office until the next regular annual meeting of the Board, their resignation, death or removal by a majority vote of the Board. Section 4. Meetings. Regular meetings of the Executive Committee may be held without notice at such times and places as the committee may affix from time to time by resolution. Special meetings of the Executive Committee or other committees, may be called by any member thereof upon not less than one day's notice to the other members of the committees, which notice may be oral or by mail. If given by mail, such notice shall be deemed to be delivered when deposited, postage paid, in the United States mail addressed to the committee member at this business address. Any member of any committee may waive notice of any meeting and attendance at a meeting shall constitute waiver of notice of the meeting. Section 5. Quorum and Manner of Acting. At all committee meetings, a majority of committee members then in office shall constitute a quorum for the transaction of business. The acts of a majority of committee members at any duly convened meeting of that committee shall be the act of that committee. 7 Section 6. Action without a Meeting. Any action required or permitted to be taken by a committee may be taken without a meeting if a consent in writing, setting forth the action so taken shall be signed by all the members of the Committee. Such action shall not become effective until the last required consent has been received by the Corporation. Section 7. Procedure. Each Committee shall elect its own presiding Officer from its members and may fix its own rules of procedure as long as such rules are not inconsistent with these Bylaws. The Committees shall keep regular minutes of their proceedings and report same to the Board of Directors when requested. ARTICLE VI - CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. Contracts. The Board of Directors may authorize any Officer or Agent to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by resolution of the Board of Directors. Such authority may be general or confined to specific instances. Section 3. Checks, Drafts, etc. All checks, drafts or other order for the payment of money, notes or other evidences of indebtedness of the Corporation shall be signed by such Officers or Agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. Section 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited to the credit of the Corporation in such depositories as the Board of Directors may select. ARTICLE VII - STOCK Section 1. Certificates. The Directors may, but do not need to, provide for Certificates to represent shares of the Corporation. If required, such certificates shall be in such form as shall be determined by the Board of Directors, signed by an authorized Officer of the Corporation and may, but need not be, sealed with a corporate seal or facsimile thereof. The signature of an authorized Officer upon a certificate may be a facsimile if the certificate is manually signed on behalf of transfer agent or a registrar. Each certificate shall be consecutively numbered and contain the following information: (a) the name of the Corporation, (b) that the Corporation is organized under the laws of the State of Florida, (c) the name of the person or persons to whom issued, (d) the number and class of shares and the designation of series, if any, which the certificate represents, (e) the par value of each share. If there are any restrictions on transfer of the stock, the certificate shall so state. 8 Section 2. Issuance of Shares for Future Services or Promissory Notes. Shares may be issued in exchange for a promissory note and such note may be unsecured if deemed sufficient by the Directors. Shares may be issued in exchange for a written contract for future services. Any shares issued in this manner must be disclosed to all existing Shareholders. In either event the Directors may determine whether to immediately issue such Shares or to place them in escrow until the promissory note is paid in full or the contract for services has been fully performed. In the event the promissory note is not paid or a contract for services not performed, the shares issued therefore shall be deemed recalled and cancelled. Section 3. Transfer of Shares. All certificates surrendered to the Corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for like number of shares shall have been surrendered and cancelled, except that in case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the Corporation as the Board of Directors may prescribe. Transfer of Shares shall be made only on the stock transfer books of the Corporation by the holder of record thereof or by his legal representative who shall furnish proper evidence of authority to transfer, or by his attorney authorized by power of attorney duly executed and filed with the Secretary of the Corporation. The person in whose name the shares stand on the books of the Corporation shall be deemed to be the owner thereof for all purposes. There shall be no treasury stock and all previously issued stock transferred to the Corporation shall revert to authorized unissued stock. ARTICLE VIII - FISCAL YEAR The fiscal year of the Corporation shall begin on the 1st day of January in each year. The fiscal year may be changed by a resolution of the Board of Directors without amending these Bylaws. ARTICLE IX - BOOKS AND RECORDS Section 1. Books and Records. The Corporation shall keep complete and accurate books, records of account and minutes of the proceedings of Shareholders, the Board of Directors and Committees of Directors. The Corporation shall keep at its registered office, principal place of business or office of its attorneys, a record of all Shareholders, indicating the name, address and number of shares held by each registered Shareholder. Section 2. Inspection by Shareholders. Upon five business days written notice, any Shareholder may, in person or by agent or attorney, inspect and copy at the Shareholder's expense at the Corporation's principal office during regular business hours (a) The Articles of Incorporation and amendments, (b) the Bylaws and amendments, (c) resolutions adopted by the Board of Directors creating a series of classes of stock and fixing their relative rights, preferences and limitations, if shares issued pursuant to those resolutions are outstanding, (d) minutes of all Shareholders' meetings and actions taken by them without a meeting for the past three years, (e) written communications to all Shareholders of a class or series within the past three years, including financial statements for the past three years, (f) a list of the names and business street addresses of current Directors and Officers, and (g) the Corporations most recent Corporate Annual Report filed with the Secretary of State. 9 Upon five business days written notice, any Shareholder may, in person or by agent or attorney, inspect and copy at the Shareholder's expense at the Corporation's principal office during regular business hours, any other books and records of the Corporation if (a) the demand is made in good faith and for a proper purpose, (b) the Shareholder describes with particularity his or her purpose and the records to be inspected, and (c) the records demanded are directly connected with the Shareholder's purpose. SECTION 3. FINANCIAL REPORTS. Not later than four months after the close of each fiscal year, the Corporation shall furnish to all Shareholders financial statements for the prior fiscal year that include a balance sheet, an income statement, and a cash flow statement. ARTICLE X - DIVIDENDS The Board of Directors may from time to time declare dividends on its Shares in cash, property or its own Shares except when the Corporation is insolvent, or when the payment thereof would render the Corporation insolvent. ARTICLE XI - CORPORATE SEAL The Board of Directors may, but does not need to, require a corporate seal. If required, such seal shall be in circular form, embossing in nature, and inscribed with the name of the Corporation, the year of incorporation and the words "Corporate Seal". ARTICLE XII - EMERGENCY BYLAWS In accordance with Section 22 of the Florida Business Corporation Act, in the event that a quorum of the Corporation's Directors cannot be readily assembled because of some catastrophic event, the directors may adopt emergency Bylaws. Such Bylaws may be adopted prior or during such emergency, shall be effective only during such emergency and are subject to amendment or repeal by the Shareholders. Such Bylaws may provide for procedures for calling a meeting of the Directors, establish quorum requirements for such a meeting, and provide for the designation of additional or substitute directors. All provisions of the regular Bylaws of the Corporation that are not inconsistent with the emergency Bylaws remain in effect. Any Corporate action taken in good faith in accordance with emergency Bylaws binds the Corporation and may not be used to impose liability on a corporate director, officer, employee or agent. ARTICLE XIII - AMENDMENTS TO BYLAWS These Bylaws may be revised, amended or replaced and new Bylaws adopted by the Board of Directors provided that any such revisions, amendments or new Bylaws may be repealed by the Shareholders at a special meeting called for that purpose. 10 ARTICLE XIV - INDEMNIFICATION The Corporation shall indemnify its present and former Officers and Directors to the fullest extent permitted by law. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed claim, demand, action, suit, or proceeding, whether civil or criminal, administrative or investigative, by reason of the fact that he or she is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise. Such indemnification shall be against expenses including, without limitation, attorneys' fees, judgments, fines, and amounts paid in settlement, actually and reasonably incurred by him or her in connection with such claim, demand, action, suit, or proceeding, including any appeal of such action, suit or proceeding, if he or she acted in good faith or in a manner he or she reasonably believed to be in the best interests of the Corporation, and with respect to any criminal action or proceeding, if he or she had no reasonable cause to believe such conduct was unlawful. However, with respect to any action by or in the right of the Corporation to procure a judgement in its favor, no indemnification shall be made with respect to any claim, issue, or matter as to which such person is adjudged liable for negligence or misconduct in the performance of his or her duty to the Corporation unless, and only to the extent that, the court in which such action or suit was brought determines, on application, that despite the adjudication of liability, such person is fairly and reasonably entitled to indemnity in view of all the circumstances of the case. Any indemnification under this article shall be made only on a determination by a majority of disinterested directors or upon the approval of a majority of shareholders; that indemnification is proper in the particular circumstances because the party to be indemnified has met the applicable standard of conduct. Determination of any claim, demand, action, suit, or proceeding by judgement, order, settlement, conviction, or on a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the party did not meet the applicable standard of conduct. Indemnification may be paid by the Corporation in advance of the final disposition of any claim, demand, action, suit, or proceeding, on a preliminary determination that the director or officer met the applicable standard of conduct and on receipt of an undertaking by or on behalf of the director or officer to repay such amount, unless it is ultimately determined that he or she is entitled to be indemnified by the Corporation as authorized in this article. The Corporation shall have power to purchase and maintain insurance on behalf of any person who was or is a director or officer of the Corporation, or who is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have authority to indemnify him or her against such liability under the provisions of these articles, or under the law. 11 EX-4.3 5 EXHIBIT 4.3 OHS DRAFT [FORM OF REPRESENTATIVES' WARRANT AGREEMENT] [SUBJECT TO ADDITIONAL REVIEW] MANSUR INDUSTRIES INC. AND FIRST ALLIED SECURITIES, INC. REPRESENTATIVE'S WARRANT AGREEMENT Dated as of ________, 1996 REPRESENTATIVE'S WARRANT AGREEMENT dated as of _______, 1996 among MANSUR INDUSTRIES INC., a Florida corporation (the "Company"), FIRST ALLIED SECURITIES, INC. (hereinafter referred to variously as the "Holder" or the "Representative"). W I T N E S S E T H: WHEREAS, the Company proposes to issue to the Representative or their designees warrants ("Warrants") to purchase up to an aggregate 85,000 shares of common stock of the Company ("Common Stock"); and WHEREAS, the Representative has agreed pursuant to the underwriting agreement (the "Underwriting Agreement") dated as of the date hereof among the Representative, as the Representative of the Several Underwriters named in Schedule A thereto, and the Company to act as the Representative in connection with the Company's proposed public offering of up to 850,000 shares of Common Stock at a public offering price of $____ per share of Common Stock (the "Public Offering"); and WHEREAS, the Warrants to be issued pursuant to this Agreement will be issued on the Closing Date (as such term is defined in the Underwriting Agreement) by the Company to the Representative in consideration for, and as part of the Representative's compensation in connection with, the Representative acting as the Representative pursuant to the Underwriting Agreement; NOW, THEREFORE, in consideration of the premises, the payment by the Representative to the Company of an aggregate eighty-five dollars ($85.00), the agreements herein set forth and other good and valuable consideration, hereby acknowledged, the parties hereto agree as follows: 1. GRANT. The Representative is hereby granted the right to purchase, at any time from _______, 1997 [one year from the effective date of the registration statement], until 5:30 P.M., New York time, on ____________, 2001 [five years from the effective date of the registration statement], up to an aggregate of 85,000 shares of Common Stock (the "Shares") at an initial exercise price (subject to adjustment as provided in SECTION 8 hereof) of $____ per share of Common Stock [120% of the initial public offering price per share] subject to the terms and conditions of this Agreement. Except as set forth herein, the Shares issuable upon exercise of the Warrants are in all respects identical to the shares of Common Stock being purchased by the Underwriters for resale to the public pursuant to the terms and provisions of the Underwriting Agreement. 2. WARRANT CERTIFICATES. The warrant certificates (the "Warrant Certificates") delivered and to be delivered pursuant to this Agreement shall be in the form set forth in Exhibit A, attached hereto and made a part hereof, with such appropriate insertions, omissions, substitutions, and other variations as required or permitted by this Agreement. 3. EXERCISE OF WARRANT. 3.1 METHOD OF EXERCISE. The Warrants initially are exercisable at an aggregate initial exercise price (subject to adjustment as provided in SECTION 8 hereof) per share of Common Stock set forth in SECTION 6 hereof payable by certified or official bank check in New York Clearing House funds, subject to adjustment as provided in SECTION 8 hereof. Upon surrender of a Warrant Certificate with the annexed Form of Election to Purchase duly executed, together with payment of the Exercise Price (as hereinafter defined) for the shares of Common 2 Stock purchased at the Company's principal offices in Miami, Florida (presently located at 8425 S.W. 129th Terrace, Miami, Florida 33156) the registered holder of a Warrant Certificate ("Holder" or "Holder") shall be entitled to receive a certificate or certificates for the shares of Common Stock so purchased. The purchase rights represented by each Warrant Certificate are exercisable at the option of the Holder thereof, in whole or in part (but not as to fractional shares of the Common Stock underlying the Warrants). Warrants may be exercised to purchase all or part of the shares of Common Stock represented thereby. In the case of the purchase of less than all the shares of Common Stock purchasable under any Warrant Certificate, the Company shall cancel said Warrant Certificate upon the surrender thereof and shall execute and deliver a new Warrant Certificate of like tenor for the balance of the shares of Common Stock purchasable thereunder. 3.2 EXERCISE BY SURRENDER OF WARRANT. In addition to the method of payment set forth in Section 3.1 and in lieu of any cash payment required thereunder, the Holder(s) of the Warrants shall have the right at any time and from time to time to exercise the Warrants in full or in part by surrendering the Warrant Certificate in the manner specified in SECTION 3.1 in exchange for the number of Shares equal to the product of (x) the number of Shares as to which the Warrants are being exercised multiplied by (y) a fraction, the numerator of which is the Market Price (as defined in SECTION 3.3 below) of the Shares less the Exercise Price and the denominator of which is such Market Price. Solely for the purposes of this paragraph, Market Price shall be calculated either (i) on the date which the form of election attached hereto is deemed to have been sent to the Company pursuant to SECTION 12 hereof ("Notice Date") or (ii) as the average of the Market Prices for each of the five trading days preceding the Notice Date, whichever of (i) or (ii) is greater. 3 3.3 DEFINITION OF MARKET PRICE. As used herein, the phrase "Market Price" at any date shall be deemed to be the last reported sale price, or, in case no such reported sale takes place on such day, the average of the last reported sale prices for the last three (3) trading days, in either case as officially reported by the principal securities exchange on which the Common Stock is listed or admitted to trading or by the Nasdaq National Market ("NNM"), or, if the Common Stock is not listed or admitted to trading on any national securities exchanged or quoted by NNM, the average closing bid price as furnished by the NASD through NNM or similar organization if NNM is no longer reporting such information, or if the Common Stock is not quoted on NNM, as determined in good faith by resolution of the Board of Directors of the Company, based on the best information available to it. 4. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants, the issuance of certificates for shares of Common Stock and/or other securities, properties or rights underlying such Warrants, shall be made forthwith (and in any event within five (5) business days thereafter) without charge to the Holder thereof including, without limitation, any tax which may be payable in respect of the issuance thereof, and such certificates shall (subject to the provisions of Sections 5 and 7 hereof) be issued in the name of, or in such names as may be directed by, the Holder thereof; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificates in a name other than that of the Holder, and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. 4 The Warrant Certificates and the certificates representing the Shares underlying the Warrants (and/or other securities, property or rights issuable upon the exercise of the Warrants) shall be executed on behalf of the Company by the manual or facsimile signature of the then Chairman or Vice Chairman of the Board of Directors or President or Vice President of the Company. Warrant Certificates shall be dated the date of execution by the Company upon initial issuance, division, exchange, substitution or transfer. 5. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of a Warrant Certificate, by its acceptance thereof, covenants and agrees that the Warrants are being acquired as an investment and not with a view to the distribution thereof; that the Warrants may not be sold, transferred, assigned, hypothecated or otherwise disposed of, in whole or in part, for a period of one (1) year from the date hereof, except to officers of the Representative. 6. EXERCISE PRICE. 6.1 INITIAL AND ADJUSTED EXERCISE PRICE. Except as otherwise provided in Section 8 hereof, the initial exercise price of each Warrant shall be $____ [120% of the initial public offering price] per share of Common Stock. The adjusted exercise price shall be the price which shall result from time to time from any and all adjustments of the initial exercise price in accordance with the provisions of Section 8 hereof. 6.2 EXERCISE PRICE. The term "Exercise Price" herein shall mean the initial exercise price or the adjusted exercise price, depending upon the context. 7. REGISTRATION RIGHTS. 7.1 REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Warrants, the Shares, and any of the other securities issuable upon exercise of the Warrants have been registered under the Securities Act of 1933, as amended (the "Act"), pursuant to the Company's Registration 5 Statement on Form S-1 (Registration No. 333-_____) (the "Registration Statement"). All of the representations and warranties of the Company contained in the Underwriting Agreement relating to the Registration Statement, the Preliminary Prospectus and Prospectus (as such terms are defined in the Underwriting Agreement) and made as of the dates provided therein, are hereby incorporated by reference. The Company agrees and covenants promptly to file post-effective amendments to such Registration Statement as may be necessary in order to maintain its effectiveness and otherwise to take such action as may be necessary to maintain the effectiveness of the Registration Statement as long as any Warrants are outstanding. In the event that, for any reason, whatsoever, the Company shall fail to maintain the effectiveness of the Registration Statement, upon exercise, in part or in whole, of the Warrants, certificates representing the Shares underlying the Warrants, and any of the other securities issuable upon exercise of the Warrants (collectively, the "Warrant Securities") shall bear the following legend: The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended ("Act"), and may not be offered or sold except pursuant to (i) an effective registration statement under the Act, (ii) to the extent applicable, Rule 144 under the Act (or any similar rule under such Act relating to the disposition of securities), or (iii) an opinion of counsel, if such opinion shall be reasonably satisfactory to counsel to the issuer, that an exemption from registration under such Act is available. 7.2 PIGGYBACK REGISTRATION. If, at any time commencing after the date hereof and expiring seven (7) years from the date hereof, the Company proposes to register any of its securities under the Act (other than in connection with a merger or pursuant to Form S-8) it will give written notice by registered mail, at least thirty (30) days prior to the filing of each such registration statement, to the Representative and to all other Holder of the Warrants and/or the Warrant Securities of its intention to do so. If the Representative or other Holder 6 of the Warrants and/or Warrant Securities notify the Company within twenty (20) business days after receipt of any such notice of its or their desire to include any such securities in such proposed registration statement, the Company shall afford the Representative and such Holder of the Warrants and/or Warrant Securities the opportunity to have any such Warrant Securities registered under such registration statement (sometimes referred to herein as the "Piggyback Registration"). Notwithstanding the provisions of this SECTION 7.2, the Company shall have the right at any time after it shall have given written notice pursuant to this SECTION 7.2 (irrespective of whether a written request for inclusion of any such securities shall have been made) to elect not to file any such proposed registration statement, or to withdraw the same after the filing but prior to the effective date thereof. 7.3 DEMAND REGISTRATION. (a) At any time commencing after the date hereof and expiring five (5) years from the date hereof, the Holder of the Warrants and/or Warrant Securities representing a "Majority" (as hereinafter defined) of such securities (assuming the exercise of all of the Warrants) shall have the right (which right is in addition to the registration rights under Section 7.2 hereof), exercisable by written notice to the Company, to have the Company prepare and file with the Securities and Exchange Commission (the "Commission"), on one occasion, a registration statement and such other documents, including a prospectus, as may be necessary in the opinion of both counsel for the Company and counsel for the Representative and Holder, in order to comply with the provisions of the Act, so as to permit a public offering and sale of their respective Warrant Securities for nine (9) consecutive months by such Holder and any 7 other Holder of the Warrants and/or Warrant Securities who notify the Company within ten (10) days after receiving notice from the Company of such request. (b) The Company covenants and agrees to give written notice of any registration request under this SECTION 7.3 by any Holder or Holder to all other registered Holder of the Warrants and the Warrant Securities within ten (10) days from the date of the receipt of any such registration request. (c) In addition to the registration rights under Section 7.2 and subsection (a) of this SECTION 7.3, at any time commencing after the date hereof and expiring five (5) years thereafter, any Holder of Warrants and/or Warrant Securities shall have the right, exercisable by written request to the Company, to have the Company prepare and file, on one occasion, with the Commission a registration statement so as to permit a public offering and sale for nine (9) consecutive months by any such Holder of its Warrant Securities provided, however, that the provisions of SECTION 7.4(b) hereof shall not apply to any such registration request and registration and all costs incident thereto shall be at the expense of the Holder or Holder making such request. (d) Notwithstanding anything to the contrary contained herein, if the Company shall not have filed a registration statement for the Warrant Securities within the time period specified in SECTION 7.4(a) hereof pursuant to the written notice specified in SECTION 7.3(a) of a Majority of the Holder of the Warrants and/or Warrant Securities, the Company shall have the option, upon the written notice of election of a Majority of the Holder of the Warrants and/or Warrant Securities, to repurchase (i) any and all Warrant Securities at the higher of the Market Price per share of Common Stock on (x) the date of the notice sent pursuant to SECTION 7.3(a) or (y) the expiration of the period specified in SECTION 7.4(a) and (ii) any and all 8 Warrants at such Market Price less the Exercise Price of such Warrant. Such repurchase shall be in immediately available funds and shall close within two (2) days after the later of (i) the expiration of the period specified in SECTION 7.4(a) or (ii) the delivery of the written notice of election specified in this SECTION 7.3(d). 7.4 COVENANTS OF THE COMPANY WITH RESPECT TO REGISTRATION. In connection with any registration under Section 7.2 or 7.3 hereof, the Company covenants and agrees as follows: (a) The Company shall use its best efforts to file a registration statement within thirty (30) days of receipt of any demand therefor, shall use its best efforts to have any registration statements declared effective at the earliest possible time, and shall furnish each Holder desiring to sell Warrant Securities such number of prospectuses as shall reasonably be requested. (b) The Company shall pay all costs (excluding fees and expenses of Holder(s)' counsel and any underwriting or selling commissions), fees and expenses in connection with all registration statements filed pursuant to SECTIONS 7.2 and 7.3(a) hereof including, without limitation, the Company's legal and accounting fees, printing expenses, blue sky fees and expenses. The Holder(s) will pay all costs, fees and expenses in connection with any registration statement filed pursuant to SECTION 7.3(c). If the Company shall fail to comply with the provisions of SECTION 7.4(a), the Company shall, in addition to any other equitable or other relief available to the Holder(s), be liable for any or all incidental or special damages sustained by the Holder(s) requesting registration of their Warrant Securities. (c) The Company will take all necessary action which may be required in qualifying or registering the Warrant Securities included in a registration statement for offering 9 and sale under the securities or blue sky laws of such states as reasonably are requested by the Holder(s), provided that the Company shall not be obligated to execute or file any general consent to service of process or to qualify as a foreign corporation to do business under the laws of any such jurisdiction. (d) The Company shall indemnify the Holder(s) of the Warrant Securities to be sold pursuant to any registration statement and each person, if any, who controls such Holder within the meaning of SECTION 15 of the Act or SECTION 20(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), against all loss, claim, damage, expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify each of the Underwriters contained in SECTION 7 of the Underwriting Agreement. (e) The Holder(s) of the Warrant Securities to be sold pursuant to a registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, its officers and directors and each person, if any, who controls the Company within the meaning of SECTION 15 of the Act or SECTION 20(a) of the Exchange Act, against all loss, claim, damage or expense or liability (including all expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holder, or their successors or assigns, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained 10 in SECTION 7 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company. (f) Nothing contained in this Agreement shall be construed as requiring the Holder(s) to exercise their Warrants prior to the initial filing of any registration statement or the effectiveness thereof. (g) The Company shall not permit the inclusion of any securities other than the Warrant Securities to be included in any registration statement filed pursuant to SECTION 7.3 hereof, or permit any other registration statement to be or remain effective during the effectiveness of a registration statement filed pursuant to SECTION 7.3 hereof, without the prior written consent of the Holder of the Warrants and Warrant Securities representing a Majority of such securities. (h) The Company shall furnish to each Holder participating in the offering and to each underwriter, if any, a signed counterpart, addressed to such Holder or underwriter, of (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under the underwriting agreement), and (ii) a "cold comfort" letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement) signed by the independent public accountants who have issued a report on the Company's financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such 11 financial statements, as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in underwritten public offerings of securities. (i) The Company shall as soon as practicable after the effective date of the registration statement, and in any event within 15 months thereafter, make "generally available to its security holder" (within the meaning of Rule 158 under the Act) an earnings statement (which need not be audited) complying with SECTION 11(a) of the Act and covering a period of at least 12 consecutive months beginning after the effective date of the registration statement. (j) The Company shall deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriters, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriters to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of the National Association of Securities Dealers, Inc. ("NASD"). Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times and as often as any such Holder or underwriter shall reasonably request. (k) The Company shall enter into an underwriting agreement with the managing underwriters selected for such underwriting by Holder holding a Majority of the Warrant Securities requested to be included in such underwriting, which may be the Representative. Such agreement shall be satisfactory in form and substance to the Company, each Holder and 12 such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holder shall be parties to any underwriting agreement relating to an underwritten sale of their Warrant Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holder. Such Holder shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holder and their intended methods of distribution. (l) In addition to the Warrant Securities, upon the written request therefor by any Holder(s), the Company shall include in the registration statement any other securities of the Company held by such Holder(s) as of the date of filing of such registration statement, including without limitation restricted shares of Common Stock, options, warrants or any other securities convertible into shares of Common Stock. (m) For purposes of this Agreement, the term "Majority" in reference to the Holder of Warrants or Warrant Securities, shall mean in excess of fifty percent (50%) of the then outstanding Warrants or Warrant Securities that (i) are not held by the Company, an affiliate, officer, creditor, employee or agent thereof or any of their respective affiliates, members of their family, persons acting as nominees or in conjunction therewith and (ii) have not been resold to the public pursuant to a registration statement filed with the Commission under the Act. 8. ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SECURITIES. 13 8.1 SUBDIVISION AND COMBINATION. In case the Company shall at any time subdivide or combine the outstanding shares of Common Stock, the Exercise Price shall forthwith be proportionately decreased in the case of subdivision or increased in the case of combination. 8.2 STOCK DIVIDENDS AND DISTRIBUTIONS. In case the Company shall pay a dividend in, or make a distribution of, shares of Common Stock or of the Company's capital stock convertible into Common Stock, the Exercise Price shall forthwith be proportionately decreased. An adjustment made pursuant to this Section 8.2 shall be made as of the record date for the subject stock dividend or distribution. 8.3 ADJUSTMENT IN NUMBER OF SECURITIES. Upon each adjustment of the Exercise Price pursuant to the provisions of this SECTION 8, the number of Warrant Securities issuable upon the exercise at the adjusted exercise price of each Warrant shall be adjusted to the nearest full amount by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Securities issuable upon exercise of the Warrants immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price. 8.4 DEFINITION OF COMMON STOCK. For the purpose of this Agreement, the term "Common Stock" shall mean (i) the class of stock designated as Common Stock in the Certificate of Incorporation of the Company as may be amended as of the date hereof, or (ii) any other class of stock resulting from successive changes or reclassifications of such Common Stock consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. 14 8.5 MERGER OR CONSOLIDATION. In case of any consolidation of the Company with, or merger of the Company with, or merger of the Company into, another corporation (other than a consolidation or merger which does not result in any reclassification or change of the outstanding Common Stock), the corporation formed by such consolidation or merger shall execute and deliver to the Holder a supplemental warrant agreement providing that the holder of each Warrant then outstanding or to be outstanding shall have the right thereafter (until the expiration of such Warrant) to receive, upon exercise of such warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or merger, by a holder of the number of shares of Common Stock of the Company for which such warrant might have been exercised immediately prior to such consolidation, merger, sale or transfer. Such supplemental warrant agreement shall provide for adjustments which shall be identical to the adjustments provided in SECTION 8. The above provision of this subsection shall similarly apply to successive consolidations or mergers. 8.6 NO ADJUSTMENT OF EXERCISE PRICE IN CERTAIN CASES. No adjustment of the Exercise Price shall be made: (a) Upon the issuance or sale of the Warrants or the shares of Common Stock issuable upon the exercise of the Warrants; (b) If the amount of said adjustment shall be less than two cents (2(cent)) per Warrant Security, provided, however, that in such case any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment so carried forward, shall amount to at least two cents (2(cent)) per Warrant Security. 15 9. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. Each Warrant Certificate is exchangeable without expense, upon the surrender thereof by the registered Holder at the principal executive office of the Company, for a new Warrant Certificate of like tenor and date representing in the aggregate the right to purchase the same number of Warrant Securities in such denominations as shall be designated by the Holder thereof at the time of such surrender. Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Warrant Certificate, and, in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of the Warrants, if mutilated, the Company will make and deliver a new Warrant Certificate of like tenor, in lieu thereof. 10. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be required to issue certificates representing fractions of shares of Common Stock upon the exercise of the Warrants, nor shall it be required to issue scrip or pay cash in lieu of fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up to the nearest whole number of shares of Common Stock or other securities, properties or rights. 11. RESERVATION AND LISTING OF SECURITIES. The Company shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issuance upon the exercise of the Warrants, such number of shares of Common Stock or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of the Warrants and payment of the 16 Exercise Price therefor, all shares of Common Stock and other securities issuable upon such exercise shall be duly and validly issued, fully paid, non-assessable and not subject to the preemptive rights of any stockholder. As long as the Warrants shall be outstanding, the Company shall use its best efforts to cause all shares of Common Stock issuable upon the exercise of the Warrants to be listed (subject to official notice of issuance) on all securities exchanges on which the Common Stock issued to the public in connection herewith may then be listed and/or quoted on NNM. 12. NOTICES TO WARRANT HOLDER. Nothing contained in this Agreement shall be construed as conferring upon the Holder the right to vote or to consent or to receive notice as a stockholder in respect of any meetings of stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of the Warrants and their exercise, any of the following events shall occur: (a) the Company shall take a record of the holder of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of current or retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company; or (b) the Company shall offer to all the holder of its Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor; or 17 (c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or merger) or a sale of all or substantially all of its property, assets and business as an entirety shall be proposed; then, in any one or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholder entitled to such dividend, distribution, convertible or exchangeable securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of closing the transfer books, as the case may be. Failure to give such notice or any defect therein shall not affect the validity of any action taken in connection with the declaration or payment of any such dividend, or the issuance of any convertible or exchangeable securities, or subscription rights, options or warrants, or any proposed dissolution, liquidation, winding up or sale. 13. NOTICES. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to have been duly made and sent when delivered, or mailed by registered or certified mail, return receipt requested: (a) If to the registered Holder of the Warrants, to the address of such Holder as shown on the books of the Company; or (b) If to the Company, to the address set forth in SECTION 3 hereof or to such other address as the Company may designate by notice to the Holder. 14. SUPPLEMENTS AND AMENDMENTS. The Company and the Representative may from time to time supplement or amend this Agreement without the approval of any holder of 18 Warrant Certificates (other than the Representative) in order to cure any ambiguity, to correct or supplement any provision contained herein which may be defective or inconsistent with any provisions herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Representative may deem necessary or desirable and which the Company and the Representative deem shall not adversely affect the interests of the Holder of Warrant Certificates. 15. SUCCESSORS. All the covenants and provisions of this Agreement shall be binding upon and inure to the benefit of the Company, the Holder and their respective successors and assigns hereunder. 16. TERMINATION. This Agreement shall terminate at the close of business on _______, 2003. Notwithstanding the foregoing, the indemnification provisions of Section 7 shall survive such termination until the close of business on _______, 2009. 17. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be construed in accordance with the laws of said State without giving effect to the rules of said State governing the conflicts of laws. The Company, the Representative and the Holder hereby agree that any action, proceeding or claim against it arising out of, or relating in any way to, this Agreement shall be brought and enforced in the courts of the State of New York or of the United States of America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company, the Representative and the Holder hereby irrevocably waive any objection to such exclusive jurisdiction or inconvenient forum. Any such process or summons to be served upon any of the Company, the Representative and the 19 Holder (at the option of the party bringing such action, proceeding or claim) may be served by transmitting a copy thereof, by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in SECTION 13 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the party so served in any action, proceeding or claim. The Company, the Representative and the Holder agree that the prevailing party(ies) in any such action or proceeding shall be entitled to recover from the other party(ies) all of its/their reasonable legal costs and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. 18. ENTIRE AGREEMENT; MODIFICATION. This Agreement (including the Underwriting Agreement to the extent portions thereof are referred to herein) contains the entire understanding between the parties hereto with respect to the subject matter hereof and may not be modified or amended except by a writing duly signed by the party against whom enforcement of the modification or amendment is sought. 19. SEVERABILITY. If any provision of this Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision of this Agreement. 20. CAPTIONS. The caption headings of the Sections of this Agreement are for convenience of reference only and are not intended, nor should they be construed as, a part of this Agreement and shall be given no substantive effect. 21. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company and the Representative and any other registered Holder(s) of the Warrant Certificates or Warrant Securities any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the 20 sole benefit of the Company and the Representative and any other registered Holder of Warrant Certificates or Warrant Securities. 22. COUNTERPARTS. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. MANSUR INDUSTRIES INC. By: Name: Title: Attest: Secretary FIRST ALLIED SECURITIES, INC. By: Name: Title: 21 EXHIBIT A [FORM OF WARRANT CERTIFICATE] THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), (ii) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE. THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN. EXERCISABLE ON OR BEFORE 5:30 P.M., NEW YORK TIME, __________, 2001 No. W- Warrants to Purchase Shares of Common Stock WARRANT CERTIFICATE This Warrant Certificate certifies that , or registered assigns, is the registered holder of Warrants to purchase initially, at any time from __________, 1997 [one year from the effective date of the Registration Statement] until 5:30 p.m. New York time on ___________, 2001 [five years from the effective date of the Registration Statement] ("Expiration Date"), up to __________ fully-paid and non-assessable shares of common stock, ("Common Stock") of MANSUR INDUSTRIES INC., a Florida corporation (the "Company"), (one share of Common Stock referred to individually as a "Security" and collectively as the "Securities") at the initial exercise price, subject to adjustment in certain events (the "Exercise Price"), of $______ [120% of the initial public offering price] per share of Common Stock upon surrender of this Warrant Certificate and payment of the Exercise Price at an office or agency of the Company, but subject to the conditions set forth herein and in the warrant agreement dated as of _______, 1996 among the Company, and FIRST ALLIED SECURITIES, INC. (the "Warrant Agreement"). Payment of the Exercise Price shall be made by certified or official bank check in New York Clearing House funds payable to the order of the Company. A-1 No Warrant may be exercised after 5:30 p.m., New York time, on the Expiration Date, at which time all Warrants evidenced hereby, unless exercised prior thereto, hereby shall thereafter be void. The Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Warrants issued pursuant to the Warrant Agreement, which Warrant Agreement is hereby incorporated by reference in and made a part of this instrument and is hereby referred to for a description of the rights, limitation of rights, obligations, duties and immunities thereunder of the Company and the holder (the words "holder" or "holder" meaning the registered holder or registered holder) of the Warrants. The Warrant Agreement provides that upon the occurrence of certain events the Exercise Price and the type and/or number of the Company's securities issuable thereupon may, subject to certain conditions, be adjusted. In such event, the Company will, at the request of the holder, issue a new Warrant Certificate evidencing the adjustment in the Exercise Price and the number and/or type of securities issuable upon the exercise of the Warrants; provided, however, that the failure of the Company to issue such new Warrant Certificates shall not in any way change, alter, or otherwise impair, the rights of the holder as set forth in the Warrant Agreement. Upon due presentment for registration of transfer of this Warrant Certificate at an office or agency of the Company, a new Warrant Certificate or Warrant Certificates of like tenor and evidencing in the aggregate a like number of Warrants shall be issued to the transferee(s) in exchange for this Warrant Certificate, subject to the limitations provided herein and in the Warrant Agreement, without any charge except for any tax or other governmental charge imposed in connection with such transfer. Upon the exercise of less than all of the Warrants evidenced by this Certificate, the Company shall forthwith issue to the holder hereof a new Warrant Certificate representing such number of unexercised Warrants. The Company may deem and treat the registered holder(s) hereof as the absolute owner(s) of this Warrant Certificate (notwithstanding any notation of ownership or other writing hereon made by anyone), for the purpose of any exercise hereof, and of any distribution to the holder(s) hereof, and for all other purposes, and the Company shall not be affected by any notice to the contrary. All terms used in this Warrant Certificate which are defined in the Warrant Agreement shall have the meanings assigned to them in the Warrant Agreement. A-2 IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly executed under its corporate seal. Dated as of ___________, 1996 MANSUR INDUSTRIES INC. [SEAL] By: Name: Title: Attest: Secretary A-3 [FORM OF ELECTION TO PURCHASE PURSUANT TO SECTION 3.1] The undersigned hereby irrevocably elects to exercise the right, represented by this Warrant Certificate, to purchase: |_| shares of Common Stock; and herewith tenders in payment for such securities a certified or official bank check payable in New York Clearing House Funds to the order of Mansur Industries Inc. in the amount of $____, all in accordance with the terms of Section 3.1 of the Representative's Warrant Agreement dated as of _____, 1996 among Mansur Industries Inc. and First Allied Securities, Inc.. The undersigned requests that a certificate for such securities be registered in the name of whose address is and that such Certificate be delivered to whose address is . Dated: Signature (Signature must conform in all respects to the Warrant Certificate.) (Insert Social Security or Other Identifying Number of Holder) A-4 [FORM OF ASSIGNMENT] (To be executed by the registered holder if such holder desires to transfer the Warrant Certificate.) FOR VALUE RECEIVED hereby sells, assigns and transfers unto (Please print name and address of transferee) this Warrant Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint Attorney, to transfer the within Warrant Certificate on the books of the within-named Company, with full power of substitution. Dated: Signature: (Signature must conform in all respects to name of holder as specified on the (Insert Social Security or Other Identifying Number of Assignee) A-5 EX-10.1 6 EXHIBIT 10.1 MANSUR INDUSTRIES INC. 1996 EXECUTIVE INCENTIVE COMPENSATION PLAN 1. PURPOSE. The purpose of this 1996 Executive Incentive Compensation Plan (the "Plan") is to assist Mansur Industries Inc. (the "Company") and its subsidiaries in attracting, motivating, retaining and rewarding high-quality executives and other employees, officers, directors and independent contractors enabling such persons to acquire or increase a proprietary interest in the Company in order to strengthen the mutuality of interests between such persons and the Company's stockholders, and providing such persons with annual and long term performance incentives to expend their maximum efforts in the creation of shareholder value. The Plan is also intended to qualify certain compensation awarded under the Plan for tax deductibility under Section 162(m) of the Code (as hereafter defined) to the extent deemed appropriate by the Committee (or any successor committee) of the Board of Directors of the Company. 2. DEFINITIONS. For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section 1 hereof. (a) "Annual Incentive Award" means a conditional right granted to a Participant under Section 8(c) hereof to receive a cash payment, Stock or other Award, unless otherwise determined by the Committee, after the end of a specified fiscal year. (b) "Award" means any Option, SAR (including Limited SAR), Restricted Stock Deferred Stock, Stock granted as a bonus or in lieu of another award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual Incentive Award, together with any other right or interest granted to a Participant under the Plan. (c) "Beneficiary" means the person, persons, trust or trusts which have been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant's death or to which Awards or other rights are transferred if and to the extent permitted under Section 10(b) hereof. If, upon a Participant's death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits. (d) "Beneficial Owner", "Beneficially Owning" and "Beneficial Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under the Exchange Act and any successor to such Rule. (e) "Board" means the Company's Board of Directors. (f) "Change in Control" means Change in Control as defined with related terms in Section 9 of the Plan. (g) "Change in Control Price" means the amount calculated in accordance with Section 9(c) of the Plan. (h) "Code" means the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto. (i) "Committee" means a committee designated by the Board to administer the Plan; provided, however, that the Committee shall consist solely of at least two directors, each of whom shall be (i) a "disinterested person" within the meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan by "disinterested persons" is not then required in order for exemptions under Rule 16b-3 to apply to transactions under the Plan, and (ii) an "outside director" as defined under Section A-1 162(m) of the Code, unless administration of the Plan by "outside directors" is not then required in order to qualify for tax deductibility under Section 162(m) of the Code. (j) "Corporate Transaction" means a transaction as defined in Section 9(b) of the Plan. (k) "Covered Employee" means an Eligible Person who is a Covered Employee as specified in Section 8(e) of the Plan. (l) "Deferred Stock" means a right, granted to a Participant under Section 6(e) hereof, to receive Stock, cash or a combination thereof at the end of a specified deferral period. (m) "Director" means a member of the Board. (n) "Disability" means a permanent and total disability (within the meaning of Section 22(e) of the Code), as determined by a medical doctor satisfactory to the Committee. (o) "Dividend Equivalent" means a right, granted to a Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments. (p) "Effective Date" means the effective date of the Plan, which shall be the date the Company consummates a registered initial public offering of its Stock. (q) "Eligible Person" means each executive officer of the Company (as defined under the Exchange Act) and other officers, Directors and employees of the Company or of any subsidiary, and independent contractors with the Company or any subsidiary. The foregoing notwithstanding, no Non- Employee Director shall be an Eligible Person for purposes of receiving any Awards under this Plan other than Formula Grants of Options granted under Section 6(b)(iv) of the Plan and Formula Grants of Restricted Stock granted under Section 6(d)(v) of the Plan, and no independent contractor shall be an Eligible Person for purposes of receiving any Awards other than Options under Section 6(b) of the Plan. An employee on leave of absence may be considered as still in the employ of the Company or a subsidiary for purposes of eligibility for participation in the Plan. (r) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto. (s) "Executive Officer" means an executive officer of the Company as defined under the Exchange Act. (t) "Fair Market Value" means the fair market value of Stock, Awards or other property as determined by the Committee or under procedures established by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of Stock on any business day shall be (i) if the Stock is listed or admitted for trading on any United States national securities exchange, or if actual transactions are otherwise reported on a consolidated transaction reporting system, the last reported sale price of the Stock on such exchange or reporting system, as reported in any newspaper of general circulation, (ii) if the Stock is quoted on the National Association of Securities Dealers Automated Quotations System, or any similar system of automated dissemination of quotations of securities prices in common use, the mean between the closing high bid and low asked quotations for such day of the Stock on such system, or (iii) if neither clause (i) or (ii) is applicable, the mean between the high bid and low quotations for the Stock as reported by the National Quotation Bureau, Incorporated if at least two securities dealers have inserted both bid and asked questions for the Stock on at least 5 of the 10 preceding days. (u) "Formula Grants" means the Formula Grant Options and Formula Grant Restricted Stock granted to Non-Employee Directors pursuant to Sections 6(b)(iv) and 6(d)(v) of the Plan. A-2 (v) "Incentive Stock Option" or "ISO" means any Option intended to be designated as an incentive stock option within the meaning of Section 422 of the Code or any successor provision thereto. (w) "Incumbent Board" means the Board as defined in Section 9(b) of the Plan. (x) "Limited SAR" means a right granted to a Participant under Section 6(c) hereof. (y) "Non-Employee Director" shall mean a member of the Board who is not an employee of the Company or any subsidiary. (z) "Option" means a right granted to a Participant under Section 6(b) hereof, to purchase Stock or other Awards at a specified price during specified time periods. (aa) "Other Stock-Based Awards" means Awards granted to a Participant under Section 6(h) hereof. (ab) "Participant" means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person. (ac) "Performance Award" means a right, granted to a Eligible Person under Section 8 hereof, to receive Awards based upon performance criteria specified by the Committee. (ad) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include a "group" as defined in Section 13(d) thereof (ae) (intentionally omitted) (af) "Restricted Stock" means Stock granted to a Participant under Section 6(d) hereof, that is subject to certain restrictions and to a risk of forfeiture. (ag) "Retire" or "Retirement" means termination of service as a Director after having attained at least age 62 and having served as a Director for at least 5 years, other than by reason of death, Disability or the Director's wilful misconduct or negligence. (ah) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule 16a-l(c)(3), as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act. (ai) "Stock" means the Company's Common Stock, and such other securities as may be substituted (or resubstituted) for Stock pursuant to Section 10(c) hereof. (aj) "Stock Appreciation Rights" or "SAR" means a right granted to a Participant under Section 6(c) hereof. 3. ADMINISTRATION. (a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by the Committee. The Committee shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants, grant Awards, determine the type, number and other terms and conditions of, and all other matters relating to, Awards, prescribe Award agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe and interpret the Plan and Award agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and determinations as the Committee may A-3 deem necessary or advisable for the administration of the Plan. (b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The Committee shall exercise sole and exclusive discretion on any matter relating to a Participant then subject to Section 16 of the Exchange Act with respect to the Company to the extent necessary in order that transactions by such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any action of the Committee shall be final, conclusive and binding on all persons, including the Company, its subsidiaries, Participants, Beneficiaries, transferees under Section 10(b) hereof or other persons claiming rights from or through a Participant, and stockholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Company or any subsidiary, or committees thereof, the authority, subject to such terms as the Committee shall determine, (i) to perform administrative functions, (ii) with respect to Participants not subject to Section 16 of the Exchange Act, to perform such other functions as the Committee may determine, and (iii) with respect to Participants subject to Section 16, to perform such other functions of the Committee as the Committee may determine to the extent performance of such functions will not result in the loss of an exemption under Rule 16b-3 otherwise available for transactions by such persons, in each case to the extent permitted under applicable law and subject to the requirements set forth in Section 8(d). The Committee may appoint agents to assist it in administering the Plan. (c) LIMITATION OF LIABILITY. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any executive officer, other officer or employee of the Company or a subsidiary, the Company's independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Company or a subsidiary acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination. 4. STOCK SUBJECT TO PLAN. (a) OVERALL NUMBER OF SHARES SUBJECT TO AWARDS. Subject to adjustment as provided in Section 10(c) hereof, the total number of shares of Stock that may be subject to the granting of Awards under the Plan at any point in time during the term of the Plan shall be 375,000. (b) APPLICATION OF LIMITATIONS. The limitation contained in Section 4(a) shall apply not only to Awards that are settleable by the delivery of shares of stock but also to Awards relating to shares of Stock but settleable only in cash (such as cash-only SARs). The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award. 5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted under the Plan only to Eligible Persons. In each fiscal year during any part of which the Plan is in effect, an Eligible Person may not be granted Awards relating to more than 250,000 shares of Stock, subject to adjustment as provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned as a final Annual Incentive Award or other cash Award in any fiscal year by any one Participant shall be $1,000,000, and the maximum amount that may be earned as a final Performance Award or other cash Award in respect of a performance period by any one Participant shall be $5,000,000. 6. SPECIFIC TERMS OF AWARDS. (a) GENERAL. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or A-4 thereafter (subject to Section 10(e) ), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment by the Participant and terms permitting a Participant to make Sections relating to his or her Award. The Committee shall retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory under the Plan. Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of consideration must be paid to satisfy the requirements of Florida law, no consideration other than services may be required for the grant (but not the exercise) of any Award. (b) Options. The Committee is authorized to grant Options to Participants on the following terms and conditions (i) EXERCISE PRICE. The exercise price per share of Stock purchasable under an Option shall be determined by the Committee, provided that such exercise price shall not be less than the Fair Market Value of a share of Stock on the date of grant of such Option except as provided under Section 7(a) hereof. (ii) TIME AND METHOD OF EXERCISE. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which Options shall cease to be or become exercisable following termination of employment or upon other conditions, the methods by which such exercise price may be paid or deemed to be paid, the form of such payment, including, without limitation, cash, Stock, other Awards or awards granted under other plans of the Company or any subsidiary, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis), and the methods by or forms in which Stock will be delivered or deemed to be delivered to Participants. (iii) ISOS. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to ISOs (including any SAR in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any ISO under Section 422 of the Code, unless the Participant has first requested the change that will result in such disqualification. (iv) FORMULA GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS. Subject to adjustment as provided in the first sentence of Section 10(c) hereof, each Non-Employee Director shall receive (A) on the date of his or her appointment as a Director of the Company, an Option to purchase 2,500 shares of Stock, and (B) each year, on the day the Company issues its earnings release for the prior fiscal year, an Option to purchase 2,500 shares of Stock. Options granted to Non-Employee Directors pursuant to this Section shall be for a term of 10 years and shall become exercisable at the rate of 33-1/3% per year commencing on the first anniversary of the date on which the Option is granted; provided, however, that the Options shall be fully exercisable in the event that, while serving as a Director, the NonEmployee Director dies, suffers a Disability, or Retires. The per share exercise price of all Options granted to Non-Employee Directors pursuant to this paragraph (iv) shall be equal to the Fair Market Value of a share of Stock on the date such Option is granted. Unless otherwise extended in the sole discretion of the Committee, the unexercised portion of any Option granted pursuant to this paragraph (iv) shall become null and void (V) three months after the date on which such Non-Employee Director ceases to be a Director of the Company for any reason other than the Non-Employee Director's wilful misconduct or negligence, Disability, death or Retirement, (W) immediately in the event of the Non-Employee Director's wilful misconduct or negligence, (X) one year after the Non-Employee Director ceases to be a Director by reason of his Disability, (Y) at the expiration of its original term, if the Non-Employee Director ceases to be a Director by reason of his Retirement, and (Z) A-5 twelve months after the date of the Non-Employee Director's death in the event that such death occurs prior to the time the Option otherwise would become null and void pursuant to this sentence. (c) STOCK APPRECIATION RIGHTS. The Committee is authorized to grant SAR's to Participants on the following terms and conditions: (i) RIGHT TO PAYMENT. A SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of stock on the date of exercise (or, in the case of a "Limited SAR", the Fair Market Value determined by reference to the Change in Control Price, as defined under Section 9(c) hereof), over (B) the grant price of the SAR as determined by the Committee. The grant price of an SAR shall not be less than the Fair Market Value of a share of Stock on the date of grant except as provided under Section 7(a) hereof. (ii) OTHER TERMS. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following termination of employment or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Stock will be delivered or deemed to be delivered to Participants, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR. Limited SARs that may only be exercised in connection with a Change in Control or other event as specified by the Committee may be granted on such terms, not inconsistent with this Section 6(c), as the Committee may determine. SARs and Limited SARs may be either freestanding or in tandem with other Awards. (d) RESTRICTED STOCK. The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions: (i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may determine at the date of grant or thereafter. In no event shall the restricted period be less than three years unless the Restricted Stock is subject to performance conditions in accordance with Section 8 of this Plan, in which case the restricted period shall not be less than one year. Except to the extent restricted under the terms of the Plan and any Award agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a stockholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee). During the restricted period applicable to the Restricted Stock, subject to Section 10(b) below, the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant. (ii) FORFEITURE. Except as otherwise determined by the Committee at the time of the Award, upon termination of a Participant's employment during the applicable restriction period, the Participant's Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Company; provided that the Committee may provide, by rule or regulation or in any Award agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock shall be waived in whole or in part in the event of terminations resulting from specified causes. A-6 (ii) CERTIFICATES FOR STOCK. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Company retain physical possession of the certificates, and that the Participant deliver a stock power to the Company, endorsed in blank, relating to the Restricted Stock. (iv) DIVIDENDS AND SPLITS. As a condition to the grant of an Award of Restricted Stock, the Committee may require that any cash dividends paid on a share of Restricted Stock be automatically reinvested in additional shares of Restricted Stock or applied to the purchase of additional Awards under the Plan. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed. (v) FORMULA GRANTS OF RESTRICTED STOCK TO NON-EMPLOYEE DIRECTORS. (intentionally omitted) (e) DEFERRED STOCK. The Committee is authorized to grant Deferred Stock to Participants, which are rights to receive Stock, cash, or a combination thereof at the end of a specified deferral period, subject to the following terms and conditions: (i) AWARD AND RESTRICTIONS. Satisfaction of an Award of Deferred Stock shall occur upon expiration of the deferral period specified for such Deferred Stock by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, Deferred Stock shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine. In no event shall an Award of Deferred Stock payable in Stock have a deferral period of less than three years unless the Award is subject to performance conditions in accordance with Section 8 of the Plan, in which case the deferral period shall be for not less than one year. Deferred Stock may be satisfied by delivery of Stock, cash equal to the Fair Market Value of the specified number of shares of Stock covered by the Deferred Stock, or a combination thereof, as determined by the Committee at the date of grant or thereafter. Prior to satisfaction of an Award of Deferred Stock, an Award of Deferred Stock carries no voting or dividend or other rights associated with share ownership. (ii) FORFEITURE. Except as otherwise determined by the Committee, upon termination of a Participant's employment during the applicable deferral period thereof to which forfeiture conditions apply (as provided in the Award agreement evidencing the Deferred Stock), the Participant's Deferred Stock that is at that time subject to deferral (other than a deferral at the election of the Participant) shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Deferred Stock shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Deferred Stock. (iii) DIVIDEND EQUIVALENTS. Unless otherwise determined by the Committee at date of grant, Dividend Equivalents on the specified number of shares of Stock covered by an Award of Deferred Stock shall be either (A) paid with respect to such Deferred Stock at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Deferred Stock and the amount A-7 or value thereof automatically deemed reinvested in additional Deferred Stock, other Awards or other investment vehicles, as the Committee shall determine or permit the Participant to elect. (f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of Company obligations to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, provided that, in the case of Participants subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee to the extent necessary to ensure that acquisitions of Stock or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee. (g) DIVIDEND EQUIVALENTS. The Committee is authorized to grant Dividend Equivalents to a Participant entitling the Participant to receive cash, Stock, other Awards, or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to such restrictions on transferability and risks of forfeiture, as the Committee may specify. (h) OTHER STOCK-BASED AWARDS. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified subsidiaries or business units. The Committee shall determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Section 6(h). 7. CERTAIN PROVISIONS APPLICABLE TO AWARDS. (a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any subsidiary, or any business entity to be acquired by the Company or a subsidiary, or any other right of a Participant to receive payment from the Company or any subsidiary. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any subsidiary, in which the value of Stock subject to the Award is equivalent in value to the cash compensation (for example, Deferred Stock or Restricted Stock), or in which the exercise price, grant price or purchase price of the Award in the nature of a right that may be exercised is equal to the Fair Market Value of the underlying Stock minus the value of the cash compensation surrendered (for example, Options granted with an exercise price "discounted" by the amount of the cash compensation surrendered). (b) TERM OF AWARDS. The term of each Award shall be for such period as may be determined by the Committee; provided that in no event shall the term of any Option or SAR exceed a period of ten years (or such shorter term as may be required in respect of an ISO under Section 422 of the Code). A-8 (c) FORM AND TIMING OF PAVEMENT UNDER AWARDS; DEFERRALS. Subject to the terms of the Plan and any applicable Award agreement, payments to be made by the Company or a subsidiary upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with such settlement, in the discretion of the Committee or upon occurrence of one or more specified events (in addition to a Change in Control). Installment or deferred payments may be required by the Committee (subject to Section 10(e) of the Plan) or permitted at the election of the Participant on terms and conditions established by the Committee. Payments may include, without limitation, provisions for the payment or crediting of a reasonable interest rate on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock. (d) EXEMPTIONS FROM SECTION 16(B) LIABILITY. It is the intent of the Company that this Plan comply in all respects with applicable provisions of Rule 16b-3 or Rule 16a-l(c)(3) to the extent necessary to ensure that neither the grant of any Awards to nor other transaction by a Participant who is subject to Section 16 of the Exchange Act is subject to liability under Section 16(b) thereof (except for transactions acknowledged in writing to be non-exempt by such Participant). Accordingly, if any provision of this Plan or any Award agreement does not comply with the requirements of Rule 16b-3 or Rule 16a-l(c)(3) as then applicable to any such transaction, such provision will be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 or Rule 16a-l(c)(3) so that such Participant shall avoid liability under Section 16(b). In addition, the purchase price of any Award conferring a right to purchase Stock shall be not less than any specified percentage of the Fair Market Value of Stock at the date of grant of the Award then required in order to comply with Rule 16b-3. 8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS. (a) PERFORMANCE CONDITIONS. The right of a Participant to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce the amounts payable under any Award subject to performance conditions, except as limited under Sections 8(b) and 8(c) hereof in the case of a Performance Award or Annual Incentive Award intended to qualify under Code Section 162(m). (b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If and to the extent that the Committee determines that a Performance Award to be granted to an Eligible Person who is designated by the Committee as likely to be a Covered Employee should qualify as "performance-based compensation" for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of preestablished performance goals and other terms set forth in this Section 8(b). (i) PERFORMANCE GOALS GENERALLY. The performance goals for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 8(b). Performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being "substantially uncertain." The Committee may determine that such Performance Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards. Performance goals may differ for Performance Awards granted to any one Participant or to different Participants. A-9 (ii) BUSINESS CRITERIA. One or more of the following business criteria for the Company, on a consolidated basis, and/or specified subsidiaries or business units of the Company (except with respect to the total stockholder return and earnings per share criteria), shall be used exclusively by the Committee in establishing performance goals for such Performance Awards: (1) total stockholder return; (2) such total stockholder return as compared to total return (on a comparable basis) of a publicly available index such as, but not limited to, the Standard & Poor's 500 Stock Index or the S&P Specialty Retailer Index; (3) net income; (4) pretax earnings; (5) earnings before interest expense, taxes, depreciation and amortization; (6) pretax operating earnings after interest expense and before bonuses, service fees, and extraordinary or special items; (7) operating margin; (8) earnings per share; (9) growth in earnings per share; (10) return on equity; (11) return on capital; (12) return on investment; (13) operating earnings; (14) working capital or inventory; and (15) ratio of debt to stockholders' equity. One or more of the foregoing business criteria shall also be exclusively used in establishing performance goals for Annual Incentive Awards granted to a Covered Employee under Section 8(c) hereof. (iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING PERFORMANCE GOALS. Achievement of performance goals in respect of such Performance Awards shall be measured over a performance period of up to ten years, as specified by the Committee. Performance goals shall be established not later than 90 days after the beginning of any performance period applicable to such Performance Awards, or at such other date as may be required or permitted for "performance-based compensation" under Code Section 162(m). (iv) PERFORMANCE AWARD POOL. The Committee may establish a Performance Award pool, which shall be an unfunded pool, for purposes of measuring Company performance in connection with Performance Awards. The amount of such Performance Award pool shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 8(b)(ii) hereof during the given performance period, as specified by the Committee in accordance with Section 8(b)(iii) hereof. The Committee may specify the amount of the Performance Award pool as a percentage of any of such business criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria. (v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. Settlement of such Performance Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance Awards. The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of termination of employment by the Participant prior to the end of a performance period or settlement of Performance Awards. (c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If and to the extent that the Committee determines that an Annual Incentive Award to be granted to an Eligible Person who is designated by the Committee as likely to be a Covered Employee should qualify as "performance-based compensation" for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Annual Incentive Award shall be contingent upon achievement of preestablished performance goals and other terms set forth in this Section 8(c). (i) ANNUAL INCENTIVE AWARD POOL. The Committee may establish an Annual Incentive Award pool, which shall be an unfunded pool, for purposes of measuring Company performance in connection with Annual Incentive Awards. The amount of such Annual Incentive Award pool shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 8(b)(ii) hereof during the given performance period, as specified by the Committee in accordance with Section 8(b)(iii) hereof. The Committee may specify the amount of the Annual Incentive Award pool as a percentage of any such business A-10 criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria. (ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later than the end of the 90th day of each fiscal year, or at such other date as may be required or permitted in the case of Awards intended to be "performance-based compensation" under Code Section 162(m), the Committee shall determine the Eligible Persons who will potentially receive Annual Incentive Awards, and the amounts potentially payable thereunder, for that fiscal year, either out of an Annual Incentive Award pool established by such date under Section 8(c)(i) hereof or as individual Annual Incentive Awards. In the case of individual Annual Incentive Awards intended to qualify under Code Section 162(m), the amount potentially payable shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 8(b)(ii) hereof in the given performance year, as specified by the Committee; in other cases, such amount shall be based on such criteria as shall be established by the Committee. In all cases, the maximum Annual Incentive Award of any Participant shall be subject to the limitation set forth in Section 5 hereof. (iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After the end of each fiscal year, the Committee shall determine the amount, if any, of (A) the Annual Incentive Award pool, and the maximum amount of potential Annual Incentive Award payable to each Participant in the Annual Incentive Award pool, or (B) the amount of potential Annual Incentive Award otherwise payable to each Participant. The Committee may, in its discretion, determine that the amount payable to any Participant as a final Annual Incentive Award shall be reduced from the amount of his or her potential Annual Incentive Award, including a determination to make no final Award whatsoever. The Committee shall specify the circumstances in which an Annual Incentive Award shall be paid or forfeited in the event of termination of employment by the Participant prior to the end of a fiscal year or settlement of such Annual Incentive Award. (d) WRITTEN DETERMINATIONS. All determinations by the Committee as to the establishment of performance goals, the amount of any Performance Award pool or potential individual Performance Awards and as to the achievement of performance goals relating to Performance Awards under Section 8(b), and the amount of any Annual Incentive Award pool or potential individual Annual Incentive Awards and the amount of final Annual Incentive Awards under Section 8(c), shall be made in writing in the case of any Award intended to qualify under Code Section 162(m). The Committee may not delegate any responsibility relating to such Performance Awards or Annual Incentive Awards. (e) STATUS OF SECTION 8(B) AND SECTION 8(C) AWARDS UNDER CODE SECTION 162(M). It is the intent of the Company that Performance Awards and Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder shall, if so designated by the Committee, constitute "qualified performance-based compensation" within the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Participant will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee, at the time of grant of Performance Awards or an Annual Incentive Award, as likely to be a Covered Employee with respect to that fiscal year. If any provision of the Plan or any agreement relating to such Performance Awards or Annual Incentive Awards does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements. 9. CHANGE IN CONTROL (a) EFFECT OF "CHANGE IN CONTROL." In the event of a "Change in Control," as defined in A-11 Section 9(b), the following provisions shall apply: (i) Any Award carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested as of the time of the Change in Control and shall remain exercisable and vested for the balance of the stated term of such Award without regard to any termination of employment by the Participant, subject only to applicable restrictions set forth in Section 10(a) hereof; (ii) Any optionee who holds an Option shall be entitled to elect, during the 60-day period immediately following a Change in Control, in lieu of acquiring the shares of Stock covered by such Option, to receive, and the Company shall be obligated to pay, in cash the excess of the Change in Control Price over the exercise price of such Option, multiplied by the number of shares of Stock covered by such Option; provided, however, that no optionee who is subject to Section 16 with respect to the Company at the time of the Change in Control shall be entitled to make such an election if the acquisition of the right to make such election would represent a non-exempt purchase under Section 16(b) by such optionee; (iii) Limited SARs (and other SARs if so provided by their terms) shall become exercisable for amounts, in cash, determined by reference to the Change in Control Price. (iv) The restrictions, deferral of settlement, and forfeiture conditions applicable to any other Award granted under the Plan shall lapse and such Awards shall be deemed fully vested as of the time of the Change in Control, except to the extent of any waiver by the Participant and subject to applicable restrictions set forth in Section 10(a) hereof; and (v) With respect to any such outstanding Award subject to achievement of performance goals and conditions under the Plan, such performance goals and other conditions will be deemed to be met if and to the extent so provided by the Committee in the Award agreement relating to such Award. (b) DEFINITION OF "CHANGE IN CONTROL" A "Change in Control" shall be deemed to have occurred upon: (i) An acquisition by any Person of Beneficial Ownership of the shares of Common Stock of the Company then outstanding (the "Company Common Stock Outstanding") or the voting securities of the Company then outstanding entitled to vote generally in the election of directors (the "Company Voting Securities Outstanding") if such acquisition of Beneficial Ownership results in the Person's Beneficially Owning 25% or more of the Company Common Stock outstanding or 25% or more of the combined voting power of the Company Voting Securities Outstanding; or (ii) The approval by the stockholders of the Company of a reorganization, merger, consolidation, complete liquidation or dissolution of the Company, sale or disposition of all or substantially all of the assets of the Company, or similar corporate transaction (in each case referred to in this Section 9(b) as a "Corporate Transaction") or, if consummation of such Corporate Transaction is subject, at the time of such approval by stockholders, to the consent of any government or governmental agency, the obtaining of such consent (either explicitly or implicitly); provided, however, that any merger, consolidation, sale, disposition or other similar transaction to or with one or more Participants or entities controlled by one or more Participants shall not constitute a Corporate Transaction in respect of such Participant(s); or (iii) A change in the composition of the Board such that the individuals who, as of the Effective Date, constitute the Board (such Board shall be hereinafter referred to as the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, A-12 however, for purposes of this Section 9(b), that any individual who becomes a member of the Board subsequent to the Effective Date whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of those individuals who are members of the Board and who were also members of the Incumbent Board (or deemed to be such pursuant to this proviso) shall be considered as though such individual were a member of the Incumbent Board; and, provided, further, that any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest subject to Rule 14a-11 of Regulation 14A under the Exchange Act, including any successor to such Rule, or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board shall in no event be considered as a member of the Incumbent Board. Notwithstanding the provisions set forth in subparagraphs (i) and (ii) of this Section 9(b), the following shall not constitute a Change in Control for purposes of the Plan: (1) any acquisition by or consummation of a Corporate Transaction with any entity that was a subsidiary of the Company immediately prior to the transaction or an employee benefit plan (or related trust) sponsored or maintained by the Company or an entity that was a subsidiary of the Company immediately prior to the transaction if, immediately after such transaction (including consummation of all related transactions,the surviving entity is controlled by no Person other than such subsidiary, employee benefit plan (or related trust) and/or other Persons who controlled the Company immediately prior to such transaction; or (2) any acquisition or consummation of a Corporate Transaction following which more than 50% of, respectively, the shares then outstanding of common stock of the corporation resulting from such acquisition or Corporate Transaction and the combined voting power of the voting securities then outstanding of such corporation entitled to vote generally in the election of directors is then Beneficially Owned, directly or indirectly, by all or substantially all of the individuals and entities who were Beneficial Owners, respectively, of the Company Common Stock Outstanding and Company Voting Securities Outstanding immediately prior to such acquisition or Corporate Transaction in substantially the same proportions as their ownership, immediately prior to such acquisition or Corporate Transaction, of the Company Common Stock Outstanding and Company Voting Securities Outstanding, as the case may be. (c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in Control Price" means an amount in cash equal to the higher of (i) the amount of cash and fair market value of property that is the highest price per share paid (including extraordinary dividends) in any Corporate Transaction triggering the Change in Control under Section 9(b)(ii) hereof or any liquidation of shares following a sale of substantially all assets of the Company, or (ii) the highest Fair Market Value per share at any time during the 60-day period preceding and 60-day period following the Change in Control. 10. GENERAL PROVISIONS. (a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Company may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other Company securities are listed or quoted, or compliance with any other obligation of the Company, as the Committee may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations. The foregoing notwithstanding, in connection with a Change in Control, the Company shall take or cause to be taken no action, and shall undertake or permit to arise no legal or contractual obligation, that results or would result in any postponement of the issuance or delivery of Stock or payment of benefits under any Award or the imposition of any other conditions on such issuance, delivery or payment, to the extent that such postponement or other condition would represent a greater burden on a Participant than existed on the 90th day preceding the Change in Control. A-13 (b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or other right or interest of a Participant under the Plan, including any Award or right which constitutes a derivative security as generally defined in Rule 16a-l(c) under the Exchange Act, shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party (other than the Company or a subsidiary), or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or more Beneficiaries or other transferees during the lifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers and exercises are permitted by the Committee pursuant to the express terms of an Award agreement (subject to any terms and conditions which the Committee may impose thereon, and further subject to any prohibitions or restrictions on such transfers pursuant to Rule 16b-3). A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee. (c) ADJUSTMENTS. In the event that any dividend or other distribution (whether in the form of cash, Stock, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the rights of Participants under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Stock which may be delivered in connection with Awards granted thereafter, (ii) the number and kind of shares of Stock by which annual per-person Award limitations are measured under Section 5 hereof, (iii) the number and kind of shares of Stock subject to or deliverable in respect of outstanding Awards and (iv) the exercise price, grant price or purchase price relating to any Award and/or make provision for payment of cash or other property in respect of any outstanding Award. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including Performance Awards and performance goals, and Annual Incentive Awards and any Annual Incentive Award pool or performance goals relating thereto) in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence, as well as acquisitions and dispositions of businesses and assets) affecting the Company, any subsidiary or any business unit, or the financial statements of the Company or any subsidiary, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee's assessment of the business strategy of the Company, any subsidiary or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant; provided that no such adjustment shall be authorized or made if and to the extent that such authority or the making of such adjustment would cause Options, SARs, Performance Awards granted under Section 8(b) hereof or Annual Incentive Awards granted under Section 8(c) hereof to Participants designated by the Committee as Covered Employees and intended to qualify as "performance-based compensation" under Code Section 162(m) and the regulations thereunder to otherwise fail to qualify as "performance-based compensation" under Code Section 162(m) and regulations thereunder. (d) TAXES. The Company and any subsidiary is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Company and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations, either on a mandatory or elective basis in the discretion of the A-14 Committee. (e) CHANGES TO THE PLAN AND AWARDS. The Board may amend, alter, suspend, discontinue or terminate the Plan or the Committee's authority to grant Awards under the Plan without the consent of stockholders or Participants, except that any amendment or alteration to the Plan shall be subject to the approval of the Company's stockholders not later than the annual meeting next following such Board action if such amendment represents a material change to the Plan or such stockholder approval is required by any federal or state law or regulation (including, without limitation, Rule 16b-3 or Code Section 162(m) ) or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to stockholders for approval; provided that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any previously granted and outstanding Award. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and any Award agreement relating thereto, except as otherwise provided in the Plan; provided that, without the consent of an affected Participant, no such Committee action may materially and adversely affect the rights of such Participant under such Award. Notwithstanding anything in the Plan to the contrary, if any right under this Plan would cause a transaction to be ineligible for pooling of interest accounting that would, but for the right hereunder, be eligible for such accounting treatment, the Committee may modify or adjust the right so that pooling of interest accounting shall be available, including the substitution of Stock having a Fair Market Value equal to the cash otherwise payable hereunder for the right which caused the transaction to be ineligible for pooling of interest accounting. Notwithstanding anything hereto to the contrary, the provisions of Section 6(b)(iv) and Section 6(d)(v) of this Plan which govern formula grants of Options and Restricted Stock to Non-Employee Directors, shall not be amended more than once every six months other than to comport with changes to the Code or the rules promulgated thereunder or the Employee Retirement Income Security Act of 1974, as amended, or the rules promulgated thereunder, or with rules promulgated by the Securities and Exchange Commission, unless such limit on amendments is not required under Rule 16b-3 or other applicable law. (f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ of the Company or a subsidiary; (ii) interfering in any way with the right of the Company or a subsidiary to terminate any Eligible Person's or Participant's employment at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and employees, or (iv) conferring on a Participant any of the rights of a stockholder of the Company unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award. (g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Company; provided that the Committee may authorize the creation of trusts and deposit therein cash, Stock, other Awards or other property, or make other arrangements to meet the Company's obligations under the Plan. Such trusts or other arrangements shall be consistent with the "unfunded" status of the Plan unless the Committee otherwise determines with the consent of each affected Participant. The trustee of such trusts may be authorized to dispose of trust assets and reinvest the proceeds in alternative investments, subject to such terms and conditions as the Committee may specify and in accordance with applicable law. (h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by the Board nor its submission to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable including incentive arrangements and awards which do not qualify under Code Section 162(m). A-15 (i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash or other consideration, the Participant shall be repaid the amount of such cash or other consideration. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. (j) GOVERNING LAW. The validity, construction and effect of the Plan, any rules and regulations under the Plan, and any Award agreement shall be determined in accordance with the laws of the State of Florida without giving effect to principles of conflicts of laws, and applicable federal law. (k) AWARDS UNDER PREEXISTING PLANS. Upon approval of the Plan by stock-holders of the Company, as required under Section 10(1) hereof, no further Awards shall be granted under any Preexisting Plan. (l) PLAN EFFECTIVE DATE AND STOCKHOLDER APPROVAL; TERMINATION OF PLAN. The Plan shall become effective on the Effective Date, subject to subsequent approval by stockholders of the Company eligible to vote in the election of directors, by a vote sufficient to meet the requirements of Code Section 162(m) and 422, Rule 16b-3 under the Exchange Act, applicable NASDAQ requirements, and other laws, regulations, and obligations of the Company applicable to the Plan. Awards may be granted subject to stockholder approval, but may not be exercised or otherwise settled in the event stockholder approval is not obtained. The Plan shall terminate at such time as no shares of Common Stock remain available for issuance under the Plan and the Company has no further rights or obligations with respect to outstanding Awards under the Plan. (m) AGREEMENT WITH UNDERWRITER. The Company will agree with the Underwriter of the Company's initial public offering that for a 13-month period immediately following the effective date of this Plan, the Company will not, without the consent of the Underwriter, adopt or propose to adopt any plan or arrangement permitting the grant, issue or sale of any shares of its Common Stock or issue, sell or offer for sale any of its Common Stock, or grant any option for its Common Stock which shall: (x) have an exercise price per share of Common Stock less than (a) the initial public offering price of the Common Stock offered in this Prospectus or (b) the fair market value of the Common Stock on the date of grant; or (y) be granted to any direct or indirect beneficial holder of more than 10% of the issued and outstanding Common Stock of the Company. No option or other right to acquire Common Stock granted, issued or sold during the 13-month period immediately following the effective date of this Plan shall permit (a) the payment with any form of consideration other than cash, (b) payment of less than the full purchase or exercise price for such shares of Common Stock or other securities of the Company on or before the date of issuance, or (c) the existence of stock appreciation rights, phantom options or similar arrangements. A-16 EX-10.2 7 EXHIBIT 10.2 MASTER LEASE AND DISTRIBUTION AGREEMENT THIS MASTER LEASE AND DISTRIBUTION AGREEMENT is effective as of the 1st day of August, 1996, notwithstanding the actual date of execution, by and between THE VALVOLINE COMPANY, a division of ASHLAND INC., a Kentucky corporation, with offices located at 3499 Dabney Drive, Lexington, Kentucky 40509 (hereinafter referred to as "Valvoline"). FIRST RECOVERY, a division of Ecogard, Inc., a Delaware corporation, with offices located at 3499 Dabney Drive, Lexington, Kentucky 40509 (hereinafter referred to as "First Recovery"), and MANSUR INDUSTRIES, INC., a Florida corporation, with offices located at 8425 S.W. 129 Terrace, Miami, Florida 33156 (hereinafter referred to as "Mansur"). WHEREAS, Mansur has developed and patented a recycling parts washer under U.S. Patents No. 5,349,974 and 5,388,601, and has other patents pending with respect to such machinery, more particularly defined below as "the Equipment"; and WHEREAS, Valvoline desires that First Recovery shall obtain certain rights to distribute the Equipment, subject to and in accordance with the provisions hereof: WHEREAS, Valvoline and First Recovery have represented to Mansur that First Recovery has the ability, experience and resources to market and distribute the Equipment on a national basis; and WHEREAS, the parties desire to enter into a pilot program to evaluate the market for and performance of the Equipment and First Recovery's ability to market and distribute the Equipment, which program may provide the basis for the parties to enter into a broader, longer term agreement, subject to negotiation of a mutually acceptable agreement. NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants, agreements and conditions hereinafter set forth and the mutual benefits to be derived therefrom, the sufficiency and adequacy of which is hereby acknowledged, First Recovery and Mansur hereby agree as follows: 1. SCOPE OF SERVICE 1.1 Subject to the terms and conditions hereof, including without limitation, the early termination provisions hereof, during the Term (as defined in Paragraph 2 hereof), Mansur shall lease to First Recovery one thousand (1,000) recycling parts washer units, which units are more particularly identified in Exhibit A to this Agreement, attached hereto and incorporated herein by reference (the "Equipment"), on the schedule set forth herein. All Equipment will carry the manufacturer's warranty specified herein. 1.2 During the second and third month of the Term, Mansur shall lease to First Recovery one hundred (100) units of Equipment, at the rate of fifty units each month (the one hundred (100) units are hereinafter referred to as "the Initial Inventory"). In First Recovery's sole discretion, the Initial Inventory of Equipment may be used by First Recovery for free trial placements at potential customer locations as a marketing tool to secure customer leases of the Equipment, or may be leased by First Recovery to its customers. First Recovery shall use its reasonable and best efforts to solicit customers in the Territory, (as defined in Paragraph 4 hereof), to lease Equipment. 1.3 During the fourth and fifth month of the Term, Mansur shall lease to First Recovery one hundred (100) units of Equipment, at the rate of fifty (50) units each month. During the sixth through thirteenth month of the Term, Mansur shall lease to First Recovery and aggregate of eight hundred (800) units of Equipment, at the rate of one hundred (100) units each month. 1.4 The Initial Inventory shall be leased to First Recovery at the reduced monthly rates specified for Initial Inventory outlined on Exhibit B, attached hereto and incorporated herein by reference, and all other units of Equipment to be leased hereunder during the Term shall be leased to First Recovery at the standard monthly rates specified in such Exhibit B. All Equipment, whether Initial Inventory or otherwise, shall be lease to First Recovery for five years. All leases to First Recovery shall be made pursuant to this Agreement. First Recovery shall be obligated for all lease payment and all other terms and conditions hereunder, regardless whether the Equipment is subleased to its customers. First Recovery shall bear all credit or other performance risk in connection with its customers. The effective date of the lease of Initial Inventory shall be the date of which First Recovery receives the Equipment and the effective date of the lease of all other Equipment shall be the earlier to occur of (i) the date on which First Recovery subleases the unit of Equipment to its customer, and (ii) thirty (30) days after First Recovery receives the unit of Equipment. The units of Equipment that are leased by Mansur to First Recovery, except the one hundred (100) units of Initial Inventory, shall hereinafter be referred to as "the Leased Inventory". 1.5 Of the one hundred (100) units of Initial Inventory, ten (10) shall be shipped for delivery in August 1996, forty (40) shall be shipped for delivery in September 1996 and fifty (50) shall be shipped for delivery in October 1996 F.O.B. to a location designated by First Recovery. Thereafter, unless the Agreement is terminated in accordance with its terms, shipments of the Equipment to First Recovery shall be made in accordance with the schedule set forth in Paragraph 1.3 by shipping F.O.B. to a location designated by First Recovery. Any units of Equipment requested in excess of the amounts set forth in Paragraph 1.3 shall be pursuant to purchase orders submitted by First Recovery at least 90 days in advance of the requested delivery date. Such additional requests will be subject to acceptance by Mansur, provided that Mansur shall use its reasonable and best efforts to allocate up to thirty-three percent (33%) of its total production to meet the requests of First Recovery. If a notice of termination is given during the Term hereof, Mansur shall not ship any units of Equipment during the period from the date notice of termination is given to the date of termination. -2- 1.6 All Equipment shipped by Mansur to First Recovery shall be new, clean and free of any parts washing solution. 1.7 Individual units of Equipment shall be tracked by both parties by serial number to determine the location and lease status of each individual unit. The parties shall reconcile such information at the end of each calendar quarter. 1.8 First Recovery shall have the right, but not the obligation, to place stickers or other identifying documentation with First Recovery's trademarks or other company information on the Equipment, so long as such identification has been approved by Mansur, such approval not to be unreasonably withheld, and that such identification shall not obscure Mansur's "System One" trademark or any other names and marks on the Equipment evidencing Mansur's proprietary interests therein (or those of a third-party lease financing company), or create any interest of First Recovery whatsoever in the Equipment, other than as explicitly set forth herein. 1.9 Other than the solicitation and distribution rights set forth herein, and its leasehold interest in the units of Equipment, First Recovery has and shall have no rights whatsoever with respect to the Equipment or Mansur's proprietary technology and trade secrets. If, in the course of its performance hereunder, First Recovery acquires any confidential information with respect to Mansur's Equipment, marketing plan, customers, or any other matter, First Recovery shall maintain such information as strictly confidential, shall not unitize or divulge such information in any way and, upon termination of this Agreement, shall return or destroy all documents or records containing such confidential information. 2. TERM. This Agreement shall be for an initial term of thirteen (13) months from the effective date set forth above (the "Term"), unless earlier terminated pursuant to the provisions hereof. Either party may terminate this Agreement with or without cause, upon sixty (60) days prior written notice to the other party that this Agreement shall terminate. 3. TITLE RISK OF LOSS. Title to the Equipment shall at all times remain in Mansur or its assignee under any lease financing program. Risk of loss to each unit of the Equipment shall pass to First Recovery for units that are in First Recovery's or its customers' control and possession, upon First Recovery's receipt of the unit of Equipment at First Recovery's designated facility as set forth in Paragraph 1.5. Risk of loss to the Equipment shall transfer back to Mansur for any units that are returned to Mansur by First Recovery in accordance with the provisions hereof at the time that the Equipment leaves First Recovery's control and possession, so long as First Recovery has given reasonable notice of shipment and shipment is by insured common carrier. -3- 4. TERRITORY. For purposes of the pilot program as set forth in this Agreement, and subject to the provisions of Paragraph 6.3 hereof, First Recovery's marketing and distribution efforts related to the Equipment shall be limited to the specific geographical territory identified on Exhibit C attached hereto and incorporated herein by reference (the "Territory"). During the Term hereof, Mansur shall refer all inquires relating to the Equipment from potential customers in the Territory to First Recovery. Subject to the provisions of Paragraph 6.3 with respect to certain options of First Recovery after the expiration of the Term, First Recovery shall refer all inquiries with respect to the Equipment from potential customers outside the Territory to Mansur, and First Recovery shall lease no Equipment outside the Territory, and Mansur shall lease no Equipment directly within the Territory. 5. SERVICE AND MAINTENANCE OF EQUIPMENT. 5.1 Once a unit of Equipment has been placed by First Recovery with a customer, First Recovery shall be responsible at its cost and expense for providing service and maintenance for the Equipment. First Recovery intends to supply the Equipment only with virgin mineral spirits purchased from Ashland Chemical Company, a division of Ashland Inc., and Mansur shall ensure that the Equipment shall be capable of using such product. Should any unit of Equipment need replacement parts, Mansur shall promptly provide the needed replacement part to First Recovery at Mansur's sole cost. 5.2 Mansur shall provide First Recovery with the necessary technical training to enable First Recovery to service and maintain the Equipment on a timely basis. Such training shall be at Mansur's sole cost, with the exception of lodging and travel costs for personnel of First Recovery, which shall be borne by First Recovery. 6. UNCONDITIONAL GUARANTEE/TERMINATION. 6.1 (a) Mansur unconditionally warrants the Equipment as follows: MANUFACTURER'S UNCONDITIONAL WARRANTY The Equipment specified herein is unconditionally warranted to be fit for the purpose intended by the manufacturer for the full term of the lease. The warranty shall cover all parts. If the Equipment cannot be repaired within a reasonable period of time, the manufacturer will immediately replace it with like Equipment at no additional charge. -4- (b) First Recovery will provide the following service warranty to its customers: SERVICE GUARANTEE First Recovery shall arrange for or provide all necessary maintenance and servicing of the Equipment, for the full term of the lease specified herein. (c) The warranty provided in Paragraph 6.1 is a limited warranty and does not apply to any products other than Equipment, conditions resulting from improper use of the Equipment or operation of the Equipment outside the specified environmental conditions, or conditions resulting from modifications to Equipment other than modifications made by Mansur. THE ABOVE WARRANTY IS THE EXCLUSIVE WARRANTY WITH RESPECT TO THE EQUIPMENT, AND NO OTHER WARRANTY, EXPRESS OR IMPLIED, SHALL APPLY. 6.2 After the expiration or termination of this Agreement, if the parties do not enter into another agreement for the marketing and distribution of the Equipment, First Recovery may, at its sole option, continue to lease the Equipment it had leased to customers during the term hereof for the remaining portion of the then current five (5) year term, as well as two (2) optional successive renewal periods of five (5) years each; provided that each renewal is made at then current prices (subject to the applicable discount from current list price at which First Recovery is leasing units other than the Initial as set forth in Exhibit B). During such lease period, Mansur shall replace each unit of Leased Inventory at the end of each five (5) year lease or renewal term, whichever is applicable, with the most recent development or technological advancement of the relevant model of the Equipment. The replaced unit shall be returned to Mansur and the list of inventory shall reflect the Equipment change by serial number. If First Recovery exercises its right as set forth above, then the terms and conditions of the Agreement shall survive termination of this Agreement only as such terms and conditions relate to or are applicable to the leased inventory. In the alternative, First Recovery may, at its sole option, exercised by written notice within thirty (30) days of the expiration or termination hereof, assign to Mansur all, but not less than all, the leases for the Equipment that First Recovery has entered into with its customers at the net present value of First Recovery's expected profit over the remaining portion of the then current five (5) year term of such leases at a twelve percent (12%) discount rate and return to Mansur all other Inventory and all of First Recovery's leases with Mansur shall terminate without further obligation by First Recovery. First Recovery may not assign to Mansur any lease with respect to any unit of Equipment pursuant to which the First Recovery's customer thereunder is obligated to pay First Recovery, on a monthly basis, during the remaining term thereof, an amount lower than the amount First Recovery is obligated to pay to Mansur, on a monthly basis, during the remaining term of its lease with respect to such unit of Equipment. -5- 6.3 After expiration or termination of this Agreement, if First Recovery has leased at least one thousand (1,000) units of Equipment during the Term hereof, and First Recovery has not exercised the option set forth in the next to last sentence of Paragraph 6.2, First Recovery shall have the option, during a period of one (1) year after the expiration or termination hereof (the "Option Period"), to lease a number of additional units of Equipment from Mansur calculated as follows: for each unit of Equipment leased hereunder by First Recovery prior to the notice of termination hereof, First Recovery shall have the right to lease four (4) units of Equipment during the Option Period for an initial five (5) year term, plus two (2) successive renewal periods of five (5) years each at First Recovery's sole option. If First Recovery chooses to exercise this option, First Recovery shall place the leased units only at First Recovery customer locations anywhere in the contiguous United States, but only if such locations were operated by customers of First Recovery on the date of the expiration or termination of the Agreement. Since Mansur may enter into exclusive agreements with other parties, First Recovery shall not offer the units except as expressly provided hereby and the terms and conditions of this Agreement shall survive termination of the Agreement only as such terms and conditions relate to or are applicable to units of Equipment placed in such locations. 7. EXCLUSIVITY. During the Term of this Agreement, First Recovery shall have the exclusive right to market and distribute the Equipment in the Territory. Mansur shall market and distribute the Equipment directly to customers outside the Territory. Mansur shall not enter into an agreement for distribution of Equipment with any third party while this Agreement is in effect. For the purposes of the preceding sentence, this Agreement shall not be deemed to be in effect during periods of limited effectiveness as set forth in Section 6.2 and 6.3 hereof. 8. PATENT. Mansur represents, warrants and covenants to First Recovery that it owns a valid, existing and current patent on the Equipment, and that, to the best of its knowledge, the design of the Equipment does not infringe upon any rights of any third party. Mansur shall defend, indemnify and hold harmless First Recovery, its parent, subsidiaries and affiliate corporations, and its and their officers, directors, employees and agents (hereinafter referred to as the "Indemnified Parties"), from and against any and all claims, liabilities, suits, proceedings, judgments, orders, fines, penalties, damages, losses, costs and expenses, including reasonable attorneys' fees, relating to the design of, patentability of, or patent on the Equipment which any of the Indemnified Parties may hereafter incur, become responsible for or pay cut as a result of First Recovery's marketing and distribution of the Equipment, so long as First Recovery provides Mansur with timely notice of, and an opportunity to defend any claim that may give rise to an indemnification claim. -6- 9. INSURANCE 9.1 Without limiting, negating or reducing Mansur's undertaking to indemnify, defend and hold harmless the Indemnified Parties as set forth in Paragraph 8 or 11 of this Agreement, Mansur shall obtain and continue in full force and effect throughout the term of this Agreement, including any renewals, so long as such insurance is available on commercially practicable terms, the following insurance coverage: Products Liability $5,000,000 per occurrence; $5,000,000 aggregate 9.2 The required insurance coverage shall be maintained with insurance companies qualified to provide coverage where business is conducted pursuant to this Agreement, Mansur shall provide First Recovery with thirty (30) days prior written notice of any change, modification or termination in or of the above insurance coverages. If such change, modification or termination results in insurance coverage that is unsatisfactory to First Recovery, then First Recovery may terminate this Agreement immediately upon written notice to Mansur, or, if satisfactory insurance can be maintained by First Recovery at costs consistent with the costs previously acceptable to and borne by Mansur, First Recovery may, with Mansur's prior consent, obtain such insurance and be reimbursed therefor by Mansur. Upon request, Mansur shall provide First Recovery with an insurance certificate evidencing the required coverages and naming First Recovery as an additional insured. 10. REPRESENTATIONS AND WARRANTIES. 10.1 Mansur represents, warrants and covenants to First Recovery, effective as of the date of this Agreement and again as of the date of each shipment of Equipment to First Recovery as follows: (a) Mansur owns a valid and current patent for the Equipment that, to the best of its knowledge, does not infringe on the intellectual property rights of any third party and; (b) Mansur believes that its patent should prevent any third party from manufacturing identical or similar equipment and Mansur will be entitled to seek enforcement of its patent against infringes on that patents; and (c) Mansur has the requisite skills and shall secure any necessary arrangements or facilities to manufacture the Equipment on a mass basis sufficient to fulfill its obligations hereunder and will utilize its best efforts to fill requested orders for the Equipment on a timely basis, subject to the previsions hereof; and -7- (d) that Mansur backs the Equipment with an unconditional guarantee, as set forth herein. To the best of Mansur's knowledge, the Equipment is materially free from defects, can be used in accordance with the manufacturers' instructions without material risk of fire, ignition or explosion, is manufactured with an appropriate barrier between the parts washer fluid used and any voltage or ignition source and performs in all material respects in accordance with its published specification standards as set forth in Exhibit A, attached hereto and incorporated herein by reference; and (e) within ninety (90) days of the execution (not the effective date) of this Agreement, Mansur will apply for the approval of Underwriter's Laboratories or Factory Mutual for the design of the Equipment, as appropriate; and (f) in manufacturing and shipping the Equipment, Mansur shall comply in all material respects with all laws, ordiances, orders, rules, regulations, and actions of the United States of America and of any state or political subdivision thereof and of any other governmental unit or agency that may now or hereafter be applicable to Mansur's obligations under this Agreement. 10.2 First Recovery represents, warrants and covenants to Mansur, effective as of the date of this Agreement and again as of the date of each shipment of Equipment to First Recovery as follows: (a) it has all requisite power to conduct its business as now conducted and to perform its obligations under this agreement; (b) it currently has customers nationwide who, in the aggregate, lease at least 2,500 "non-recycling" parts cleaners; (c) execution and delivery hereof, and performance hereunder, will not violate or create a default under any mortgage, indenture, note, agreement or other instrument to which First Recovery is a party; (d) it maintains and will continue to maintain during the term of this Agreement places of business, equipment and marketing and service personnel used in storing, shipping marketing and maintaining the Equipment; (e) it will use its best efforts to develop the market for the Equipment, such efforts to be no less rigorous than those used by it in relation to its other services provided in the Territory; (f) it complies and will comply with all applicable laws, rules and regulations relating transporting, storing, advertising, promoting and leasing the Equipment; -8- (g) it shall notify Mansur promptly upon becoming aware of any adverse information relating to the safety or effectiveness of the Equipment; (h) subject to the provisions of Paragraph 6.3, it will not market or distribute the Equipment outside the Territory; and (i) in performing its obligations hereunder, First Recovery shall comply in all material respects with all laws, ordiances, orders, rules, regulations, and actions of the United States of America and of any state or political subdivision thereof and of any other governmental unit or agency that may now or hereafter be applicable to First Recovery's obligations under this Agreement. 11. INDENMIFICATION. Mansur shall indemnify, defend and hold harmless First Recovery, its parent, subsidiaries and affiliates from and against any and all claims, liabilities, suits, proceedings, judgments, orders, fines, penalties, damages, losses, costs, and expenses, including reasonable attorney fees, which it may hereafter incur, become responsible for or pay out as a result of death or bodily injuries to any person, destruction or damage to any property or contamination of or adverse effects on the environment, arising out of or resulting from Mansur's design and manufacture of the Equipment, any negligent act or omission of Mansur, or any breach of any provision of this Agreement by Mansur, except to the extent that such claims, liabilities, suits, proceedings, judgments, orders, fines, penalties, damages, losses, costs and expenses are caused by or results from the direct fault or negligence of First Recovery. For purposes of this Paragraph, the term "Mansur" shall include Mansur's affiliates, employees, invitees, agents and contractors, First Recovery shall indemnify, defend and hold harmless Mansur, its parent, subsidiaries and affiliates from and against any and all claims, liabilities, suits, proceedings, judgments, orders, fines, penalties, damages, losses, costs, and expenses, including reasonable attorney fees, which it may hereafter incur, become responsible for or pay out as a result of death or bodily injuries to any person, destruction or damage to any property or contamination of or adverse effects on the environment, arising out of or resulting from any negligent act or omission of First Recovery, or any breach of any provision of this Agreement by First Recovery, except to the extent that such claims, liabilities, suits, proceedings, judgments, orders, fines, penalties, damages, losses, costs and expenses are caused by or result from the direct fault or negligence of Mansur. For purposes of this Paragraph, the term "First Recovery" shall include First Recovery's affiliates, employees, invitees, agents and contractors. -9- 12. INDEPENDENT CONTRACTOR Each party is and shall remain an independent contractor in the performance of its obligations under this Agreement. The provisions of this Agreement shall not be construed as authorizing or reserving to either party any right to exercise any control or direction over the operations, activities, employees and agents of the other in connections with this Agreement, it being understood and agreed that the entire control and direction of such operations, activities, employees and agents shall remain with such party. Neither party to this Agreement shall have the authority to employ any person as agent or employee for or on behalf of the other party to this Agreement for any purpose, and neither party to this Agreement, nor any person performing any duties under or engaging in any work at the request of such party, shall be deemed to be an employee or agent of the other party to this Agreement. 13. FORCE MAJEURE. The performance or observance by either party of any obligations of such party under this Agreement may be suspended by it, in whole or in part, in the event of any of the following that prevents such performance or observance: Act of God, war, riot, fire, explosion, accident, flood, sabotage, strike, lockout injunction, inability to obtain fuel, power, raw materials, labor, containers or transportation facilities, national defense requirements, or any other cause (whether similar or dissimilar) beyond the reasonable control of such party; provided, however, that the party so prevented from complying with its obligations hereunder shall immediately notify in writing the other party hereof and such party so prevented shall exercise diligence in an endeavor to remove or overcome the cause of such inability to comply, and provided further that neither party shall be required to settle a labor dispute against its own best judgment. 14. ASSIGNMENT. Except as set forth herein, neither party may assign its rights or delegate its duties under this Agreement or sublet the work to be provided hereunder to a third party without the prior written consent of the other, which consent shall not be unreasonably withheld, conditioned or delayed, except that First Recovery may effect an assignment of this Agreement to a parent, subsidiary or affiliate corporation upon written notice to Mansur and Mansur may assign its rights hereunder in any lease financing transaction or arrangement upon written notice to First Recovery so long as Mansur remains primarily liable for the performance of its obligations under this Agreement. 15. MISCELLANEOUS. This Agreement constitutes the full understanding of the parties, a complete allocation of risks between them and a complete and exclusive statement of the terms and conditions of their agreement; and all prior agreements, negotiations, dealings and understandings, whether written or oral, regarding the subject matter hereof, are superseded by and merger into this Agreement. -10- 15.2 No conditions, usage of trade, course of dealing or performance understanding or agreement purporting to modify, vary, explain or supplement the terms or conditions of this Agreement shall be binding unless hereafter made in writing and signed by the party to be bound, and no modification shall be effected by the acknowledgment or acceptance of any forms containing terms or conditions at variance with or in addition to those set forth in this Agreement. 15.3 No waiver by either party with respect to any breach or default or of any right or remedy and no course of dealing or performance shall be deemed to constitute a continuing waiver of any other breach or default or of any other right or remedy, unless such waiver be expressed in writing signed by the party to be bound. 15.4 Section headings as to the contents of particular sections are for convenience only and are in no way to be construed as part of this Agreement or as a limitation of the scope of the particular sections to which they refer. 15.5 The validity, interpretation and performance of this Agreement and any dispute connected herewith shall be governed and construed in accordance with the laws of the State of New York. 15.6 In the event any term or provision of this Agreement, or any portion thereof, or any application of any term or provision shall be invalid or unenforceable, the remainder of this Agreement or any other application of such term or provision shall not be affected thereby. 15.7 All rights conferred by this Agreement shall be binding upon, inure to the benefit of, and be enforceable against the respective successors and permitted assigns of the parties hereto. 15.8 All notices, requests, and approvals required or permitted under this Agreement shall be deemed validly given if in writing and addressed to the party for whom intended at the address of such party set forth above, and shall be effective upon the earlier to occur of personal delivery or three (3) business days following such notice, request or approval having been deposited in the U.S. mail, postage prepaid, Certified or Registered, return receipt required. 15.9 Both parties shall hold as confidential the terms and conditions of this Agreement, and shall not disclose such terms and conditions to any third party except as required by law and with prior written notice to the other party. -11- IN WITNESS WHEREOF, First Recovery and Mansur have caused their respective authorized representative to execute this Agreement effective as of the date first above written. WITNESS: THE VALVOLINE Company, a division of ASHLAND INC. /s/ ANN ETHERTON By: /s/ J. M. HUSTON - ------------------ -------------------- its: VICE PRESIDENT - ------------------ -------------------- WITNESS: FIRST RECOVERY, a division of ECOGARD, INC. /S/ KATHY D. GIEERN By: /s/ J. M. HUSTON - ------------------- --------------------- its: PRESIDENT - -------------------- --------------------- WITNESS: MANSUR INDUSTRIES, INC. /s/ ROMELYN BAILEY By: PAUL I. MANSUR - -------------------- --------------------- /S/ LYDIA HUBBELL its: CHIEF EXECUTIVE OFFICER - -------------------- --------------------- -12- EXHIBIT A TO AGREEMENT BETWEEN FIRST RECOVERY, A DIVISION OF ECOGARD, INC. AND SYSTEM ONE, A DIVISION OF MANSUR INDUSTRIES, INC. Dated AUGUST 1, 1996 (See attached brochure and description of the Equipment.) [PICTURE] MANSUR - ---------- MPM SERIES [Caption for picture is illegible.] EXHIBIT B TO AGREEMENT BETWEEN FIRST RECOVERY, A DIVISION OF ECOGARD, INC. AND SYSTEM ONE, A DIVISION OF MANSUR INDUSTRIES, INC. Dated AUGUST 1, 1996 TYPE OF EQUIPMENT MONTHLY LEASE RATES Model 500 $ 37.00 Model 570 47.00 Model 550 47.00 Model 555 47.00 The monthly lease rate for the Initial Inventory shall be at one half the monthly lease rates set forth above. EXHIBIT C TO AGREEMENT BETWEEN FIRST RECOVERY, A DIVISION OF ECOGARD, INC. AND SYSTEM ONE, A DIVISION OF MANSUR INDUSTRIES, INC. Dated AUGUST 1, 1996 The territory shall include the following counties located in the State of Texas: Brazoria Chambers Collin Dallas Denton Ellis Fort Bend Galveston Harris Johnson Kaufman Liberty Montgomery Parker Tarrant Waller Wise EX-10.3 8 EXHIBIT 10.3 INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT ("Agreement"), is made and entered into as of the (___) day of June, 1996, by and between MANSUR INDUSTRIES INC., a Florida corporation (the "Company"), and (the "Indemnitee"). Recitals A. The Company desires to retain the services of the Indemnitee as a (__________) of the Company. B. As a condition to the Indemnitee's agreement to serve the Company as such, the Indemnitee requires that he be indemnified from liability to the fullest extent permitted by law. C. The Company is willing to indemnify the Indemnitee to the fullest extent permitted by law in order to retain the services of the Indemnitee. NOW, THEREFORE, for and in consideration of the mutual premises and covenants contained herein, the Company and the Indemnitee agree as follows: SECTION 1. MANDATORY INDEMNIFICATION IN PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the Company shall indemnify and hold harmless the Indemnitee from and against any and all claims, damages, expenses (including attorneys' fees), judgments, penalties, fines (including excise taxes assessed with respect to an employee benefit plan), amounts paid in settlement and all other liabilities actually and reasonably incurred or paid by him in connection with the investigation, defense, prosecution, settlement or appeal of any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, investigative or otherwise (other than an action by or in the right of the Company) and to which the Indemnitee was or is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an officer, director, shareholder, employee or agent of the Company, or is or was serving at the request of the Company as an officer, director, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, or by reason of anything done or not done by the Indemnitee in any such capacity or capacities, provided that the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. SECTION 2. MANDATORY INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the Company shall indemnify and hold harmless the Indemnitee from and against any and all expenses (including attorneys' fees) and amounts paid in settlement actually and reasonably incurred or paid by him in connection with the investigation, defense, prosecution, settlement or appeal of any threatened, pending or completed action, suit or proceeding by or in the right of the Company to procure a judgment in its favor, whether civil, criminal, administrative, investigative or otherwise, and to which the Indemnitee was or is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an officer, director, shareholder, employee or agent of the Company, or is or was serving at the request of the Company as an officer, director, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of anything done or not done by the Indemnitee in any such capacity or capacities, provided that (i) the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and (ii) no indemnification shall be made under this Section 2 in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudged to be liable to the Company for misconduct in the performance of his duty to the Company unless and only to the extent that the court in which such action, suit or proceeding was brought (or any other court of competent jurisdiction) shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Indemnitee is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. SECTION 3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF NEGLIGENCE. The Company shall reimburse the Indemnitee for any expenses (including attorney's fees) and amounts paid in settlement actually and reasonably incurred or paid by him in connection with the investigation, defense, settlement or appeal of any action or suit described in Section 2 hereof that results in an adjudication that the Indemnitee was liable for negligence, gross negligence or recklessness (but not willful misconduct) in the performance of his duty to the Company; provided, however, that the Indemnitee acted in good faith and in a manner he believed to be in the best interests of the Company. SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under Sections 1 and 2 hereof (unless ordered by a court) and any reimbursement made under Section 3 hereof shall be made by the Company only as authorized in the specific case upon a determination (the "Determination") that indemnification or reimbursement of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in Section 1, 2 or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7, 5.8 and 8 of this Agreement, the Determination shall be made in the following order of preference: (1) first, by the Company's Board of Directors (the "Board") by majority vote or consent of a quorum consisting of directors ("Disinterested Directors") who - 2 - are not, at the time of the Determination, named parties to such action, suit or proceeding; or (2) next, if such a quorum of Disinterested Directors cannot be obtained, by majority vote or consent of a committee duly designated by the Board (in which designation all directors, whether or not Disinterested Directors, may participate) consisting solely of two or more Disinterested Directors; or (3) next, if such a committee cannot be designated, by any independent legal counsel (who may be any outside counsel regularly employed by the Company); or (4) next, if such legal counsel determination cannot be obtained, by vote or consent of the holders of a majority of the Company's Common Stock that are represented in person or by proxy at a meeting called for such purpose. 4.1 NO PRESUMPTIONS. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Indemnitee did not act in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. 4.2 BENEFIT PLAN CONDUCT. The Indemnitee's conduct with respect to an employee benefit plan for a purpose he reasonably believed to be in the interests of the participants in and beneficiaries of the plan shall be deemed to be conduct that the Indemnitee reasonably believed to be not opposed to the best interests of the Company. 4.3 RELIANCE AS SAFE HARBOR. For purposes of any Determination hereunder, the Indemnitee shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on (i) the records or books of account of the Company or another enterprise, including financial statements, (ii) information supplied to him by the officers of the Company or another enterprise in the course of their duties, (iii) the advice of legal counsel for the Company or another enterprise, or (iv) information or records given or reports made to the Company or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or another enterprise. The term "another enterprise" as used in this Section 4.3 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which the Indemnitee is or was serving at the request of the Company as an officer, director, partner, trustee, employee or agent. The provisions of this Section 4.3 shall not be deemed to be exclusive or to limit in any way the - 3 - other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof, as the case may be. 4.4 SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Section 1 or 2 hereof, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the investigation, defense, settlement or appeal thereof. For purposes of this Section 4.4, the term "successful on the merits or otherwise" shall include, but not be limited to, (i) any termination, withdrawal, or dismissal (with or without prejudice) of any claim, action, suit or proceeding against the Indemnitee without any express finding of liability or guilt against him, (ii) the expiration of 120 days after the making of any claim or threat of an action, suit or proceeding without the institution of the same and without any promise or payment made to induce a settlement, or (iii) the settlement of any action, suit or proceeding under Section 1, 2 or 3 hereof pursuant to which the Indemnitee pays less than $25,000. 4.5 PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the Indemnitee is entitled under any provision of this Agreement to indemnification and/or reimbursement by the Company for some or a portion of the claims, damages, expenses (including attorneys' fees), judgments, fines or amounts paid in settlement by the Indemnitee in connection with the investigation, defense, settlement or appeal of any action specified in Section 1, 2 or 3 hereof, but not, however, for the total amount thereof, the Company shall nevertheless indemnify and/or reimburse the Indemnitee for the portion thereof to which the Indemnitee is entitled. The party or parties making the Determination shall determine the portion (if less than all) of such claims, damages, expenses (including attorneys' fees), judgments, fines or amounts paid in settlement for which the Indemnitee is entitled to indemnification and/or reimbursement under this Agreement. 4.6 LIMITATIONS ON INDEMNIFICATION. No indemnification pursuant to Sections 1 or 2 hereof shall be paid by the Company if a judgment (after exhaustion of all appeals) or other final adjudication determines that the Indemnitee's actions, or omissions to act, were material to the cause of action so adjudicated and constitute: (a) a violation of criminal law, unless the Indemnitee had reasonable cause to believe his conduct was lawful or had no reasonable cause to believe his conduct was unlawful; (b) a transaction from which the Indemnitee derived an improper personal benefit within the meaning of Section 607.0850(7) of the Florida Business Corporation Act; - 4 - (c) in the event that the Indemnitee is a director of the Company, a circumstance under which the liability provisions of Section 607.0834 of the Florida Business Corporation Act are applicable; or (d) willful misconduct or conscious disregard for the best interests of the Company in a proceeding by or in the right of the Company to procure a judgment in its favor or in a proceeding by or in the right of a shareholder of the Company. SECTION 5. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN SATISFIED. 5.1 COSTS. All costs of making the Determination required by Section 4 hereof shall be borne solely by the Company, including, but not limited to, the costs of legal counsel, proxy solicitations and judicial determinations. The Company shall also be solely responsible for paying (i) all reasonable expenses incurred by the Indemnitee to enforce this Agreement, including, but not limited to, the costs incurred by the Indemnitee to obtain court-ordered indemnification pursuant to Section 8 hereof, regardless of the outcome of any such application or proceeding, and (ii) all costs of defending any suits or proceedings challenging payments to the Indemnitee under this Agreement. 5.2 TIMING OF THE DETERMINATION. The Company shall use its best efforts to make the Determination contemplated by Section 4 hereof promptly. In addition, the Company agrees: (a) if the Determination is to be made by the Board or a committee thereof, such Determination shall be made not later than 15 days after a written request for a Determination (a "Request") is delivered to the Company by the Indemnitee; (b) if the Determination is to be made by independent legal counsel, such Determination shall be made not later than 30 days after a Request is delivered to the Company by the Indemnitee; and (c) if the Determination is to be made by the shareholders of the Company, such Determination shall be made not later than 90 days after a Request is delivered to the Company by the Indemnitee. The failure to make a Determination within the above-specified time period shall constitute a Determination approving full indemnification or reimbursement of the Indemnitee. Notwithstanding anything herein to the contrary, a Determination may be made in advance of (i) the Indemnitee's payment (or incurring) of expenses with respect to which indemnification or reimbursement is sought, and/or (ii) final disposition of the action, suit or proceeding with respect to which indemnification or reimbursement is sought. - 5 - 5.3 REASONABLENESS OF EXPENSES. The evaluation and finding as to the reasonableness of expenses incurred by the Indemnitee for purposes of this Agreement shall be made (in the following order of preference) within 15 days after the Indemnitee's delivery to the Company of a Request that includes a reasonable accounting of expenses incurred: (a) first, by the Board by majority vote or consent of a quorum consisting of Disinterested Directors; or (b) next, if such a quorum cannot be obtained, by majority vote or consent of a committee duly designated by the Board (in which designation all directors, whether or not Disinterested Directors, may participate), consisting solely of two or more Disinterested Directors; or (c) next, if such a committee cannot be designated, by any independent legal counsel (who may be any outside counsel regularly employed by the Company); provided, however, that if a determination as to reasonableness of expenses is not made under any of the foregoing subsections (a), (b) and (c), such determination shall be made, not later than 90 days after the Indemnitee's delivery of such Request, by vote or consent of the holders of a majority of the Company's Common Stock that are represented in person or by proxy at a meeting called for such purpose. All expenses shall be considered reasonable for purposes of this Agreement if the finding contemplated by this Section 5.3 is not made within the prescribed time. The finding required by this Section 5.3 may be made in advance of the payment (or incurring) of the expenses for which indemnification or reimbursement is sought. 5.4 PAYMENT OF INDEMNIFIED AMOUNT. Immediately following a Determination that the Indemnitee has met the applicable standard of conduct set forth in Section 1, 2 or 3 hereof, as the case may be, and the finding of reasonableness of expenses contemplated by Section 5.3 hereof, or the passage of time prescribed for making such determination(s), the Company shall pay to the Indemnitee in cash the amount to which the Indemnitee is entitled to be indemnified and/or reimbursed, as the case may be, without further authorization or action by the Board; provided, however, that the expenses for which indemnification or reimbursement is sought have actually been incurred by the Indemnitee. 5.5 SHAREHOLDER VOTE ON DETERMINATION. Notwithstanding the provisions of Section 607.0850 of the Florida Business Corporation Act, the Indemnitee and any other shareholder who is a party to the proceeding for which indemnification or reimbursement is sought shall be entitled to vote on any Determination to be made by the Company's shareholders, including a Determination made pursuant to Section 5.7 hereof. In addition, in connection with each meeting at which a shareholder Determination will be - 6 - made, the Company shall solicit proxies that expressly include a proposal to indemnify or reimburse the Indemnitee. Any Company proxy statement relating to a proposal to indemnify or reimburse the Indemnitee shall not include a recommendation against indemnification or reimbursement. 5.6 SELECTION OF INDEPENDENT LEGAL COUNSEL. If the Determination required under Section 4 is to be made by independent legal counsel, such counsel shall be selected by the Indemnitee with the approval of the Board, which approval shall not be unreasonably withheld. The fees and expenses incurred by counsel in making any Determination (including Determinations pursuant to Section 5.8 hereof) shall be borne solely by the Company regardless of the results of any Determination and, if requested by counsel, the Company shall give such counsel an appropriate written agreement with respect to the payment of their fees and expenses and such other matters as may be reasonably requested by counsel. 5.7 RIGHT OF INDEMNITEE TO APPEAL AN ADVERSE DETERMINATION BY BOARD. If a Determination is made by the Board or a committee thereof that the Indemnitee did not meet the applicable standard of conduct set forth in Section 1, 2 or 3 hereof, upon the written request of the Indemnitee and the Indemnitee's delivery of $500 to the Company, the Company shall cause a new Determination to be made by the Company's shareholders at the next regular or special meeting of shareholders. Subject to Section 8 hereof, such Determination by the Company's shareholders shall be binding and conclusive for all purposes of this Agreement. 5.8 RIGHT OF INDEMNITEE TO SELECT FORUM FOR DETERMINATION. If, at any time subsequent to the date of this Agreement, "Continuing Directors" do not constitute a majority of the members of the Board, or there is otherwise a change in control of the Company (as contemplated by Item 403(c) of Regulation S-K), then upon the request of the Indemnitee, the Company shall cause the Determination required by Section 4 hereof to be made by independent legal counsel selected by the Indemnitee and approved by the Board (which approval shall not be unreasonably withheld), which counsel shall be deemed to satisfy the requirements of clause (3) of Section 4 hereof. If none of the legal counsel selected by the Indemnitee are willing and/or able to make the Determination, then the Company shall cause the Determination to be made by a majority vote or consent of a Board committee consisting solely of Continuing Directors. For purposes of this Agreement, a "Continuing Director" means either a member of the Board at the date of this Agreement or a person nominated to serve as a member of the Board by a majority of the then Continuing Directors. 5.9 ACCESS BY INDEMNITEE TO DETERMINATION. The Company shall afford to the Indemnitee and his representatives ample opportunity to present evidence of the facts upon which the Indemnitee relies for indemnification or reimbursement, together with other information relating to any requested Determination. The Company shall also afford the - 7 - Indemnitee the reasonable opportunity to include such evidence and information in any Company proxy statement relating to a shareholder Determination. 5.10 JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS. In each action or suit described in Section 2 hereof, the Company shall cause its counsel to use its best efforts to obtain from the Court in which such action or suit was brought (i) an express adjudication whether the Indemnitee is liable for negligence or misconduct in the performance of his duty to the Company, and, if the Indemnitee is so liable, (ii) a determination whether and to what extent, despite the adjudication of liability but in view of all the circumstances of the case (including this Agreement), the Indemnitee is fairly and reasonably entitled to indemnification. SECTION 6. SCOPE OF INDEMNITY. The actions, suits and proceedings described in Sections l and 2 hereof shall include, for purposes of this Agreement, any actions that involve, directly or indirectly, activities of the indemnitee both in his official capacities as a Company director or officer and actions taken in another capacity while serving as director or officer, including, but not limited to, actions or proceedings involving (i) compensation paid to the Indemnitee by the Company, (ii) activities by the Indemnitee on behalf of the Company, including actions in which the Indemnitee is plaintiff, (iii) actions alleging a misappropriation of a "corporate opportunity," (iv) responses to a takeover attempt or threatened takeover attempt of the Company, (v) transactions by the Indemnitee in Company securities, and (vi) the Indemnitee's preparation for and appearance (or potential appearance) as a witness in any proceeding relating, directly or indirectly, to the Company. In addition, the Company agrees that, for purposes of this Agreement, all services performed by the Indemnitee on behalf of, in connection with or related to any subsidiary of the Company, any employee benefit plan established for the benefit of employees of the Company or any subsidiary, any corporation or partnership or other entity in which the Company or any subsidiary has a 5% ownership interest, or any other affiliate of the Company, shall be deemed to be at the request of the Company. SECTION 7. ADVANCE FOR EXPENSES. 7.1 MANDATORY ADVANCE. Expenses (including attorneys' fees, court costs, judgments, fines, amounts paid in settlement and other payments) incurred by the Indemnitee in investigating, defending, settling or appealing any action, suit or proceeding described in Section 1 or 2 hereof shall be paid by the Company in advance of the final disposition of such action, suit or proceeding. The Company shall promptly pay the amount of such expenses to the Indemnitee, but in no event later than 10 days following the Indemnitee's delivery to the Company of a written request for an advance pursuant to this Section 7, together with a reasonable accounting of such expenses. 7.2 UNDERTAKING TO REPAY. The Indemnitee hereby undertakes and agrees to repay to the Company any advances made pursuant to this Section 7 if and to the - 8 - extent that it shall ultimately be found that the Indemnitee is not entitled to be indemnified by the Company for such amounts. 7.3 MISCELLANEOUS. The Company shall make the advances contemplated by this Section 7 regardless of the Indemnitee's financial ability to make repayment, and regardless whether indemnification of the Indemnitee by the Company will ultimately be required. Any advances and undertakings to repay pursuant to this Section 7 shall be unsecured and interest-free. SECTION 8. COURT-ORDERED INDEMNIFICATION. Regardless whether the Indemnitee has met the standard of conduct set forth in Sections 1, 2 or 3 hereof, as the case may be, and notwithstanding the presence or absence of any Determination whether such standards have been satisfied, the Indemnitee may apply for indemnification (and/or reimbursement pursuant to Section 3 or 12 hereof) to the court conducting any proceeding to which the Indemnitee is a party or to any other court of competent jurisdiction. On receipt of an application, the court, after giving any notice the court considers necessary, may order indemnification (and/or reimbursement) if it determines the Indemnitee is fairly and reasonably entitled to indemnification (and/or reimbursement) in view of all the relevant circumstances (including this Agreement). SECTION 9. NONDISCLOSURE OF PAYMENTS. Except as expressly required by Federal securities laws, neither party shall disclose any payments under this Agreement unless prior approval of the other party is obtained. Any payments to the Indemnitee that must be disclosed shall, unless otherwise required by law, be described only in Company proxy or information statements relating to special and/or annual meetings of the Company's shareholders, and the Company shall afford the Indemnitee the reasonable opportunity to review all such disclosures and, if requested, to explain in such statement any mitigating circumstances regarding the events reported. SECTION 10. COVENANT NOT TO SUE. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Company (or any of its subsidiaries) against the Indemnitee, his spouse, heirs, executors, personal representatives or administrators after the expiration of 2 years following the date the Indemnitee ceases (for any reason) to serve as either an executive officer or director of the Company, and any and all such claims and causes of action of the Company (or any of its subsidiaries) shall be extinguished and deemed released unless asserted by filing of a legal action within such 2-year period. SECTION 11. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding any other provision of this Agreement, and regardless whether indemnification of the Indemnitee would be permitted and/or required under this Agreement, if the Indemnitee is deceased, the Company shall indemnify and hold harmless the Indemnitee's estate, spouse, heirs, administrators, personal representatives and executors (collectively the "Indemnitee's Estate") against, and the Company shall assume, any and all claims, damages, - 9 - expenses (including attorneys' fees), penalties, judgments, fines and amounts paid in settlement actually incurred by the Indemnitee or the Indemnitee's Estate in connection with the investigation, defense, settlement or appeal of any action described in Section 1 or 2 hereof. Indemnification of the Indemnitee's Estate pursuant to this Section 11 shall be mandatory and not require a Determination or any other finding that the Indemnitee's conduct satisfied a particular standard of conduct. SECTION 12. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding any other provision of this Agreement, and regardless of the presence or absence of any Determination, the Company promptly (but not later than 30 days following the Indemnitee's submission of a reasonable accounting) shall reimburse the Indemnitee for all attorneys' fees and related court costs and other expenses incurred by the Indemnitee (but not for judgments, penalties, fines or amounts paid in settlement) in connection with the investigation, defense, settlement or appeal of any action described in Section 1 or 2 hereof (including, but not limited to, the matters specified in Section 6 hereof). SECTION 13. MISCELLANEOUS. 13.1 NOTICE PROVISION. Any notice, payment, demand or communication required or permitted to be delivered or given by the provisions of this Agreement shall be deemed to have been effectively delivered or given and received on the date personally delivered to the respective party to whom it is directed, or when deposited by registered or certified mail, with postage and charges prepaid and addressed to the parties at the respective addresses set forth below opposite their signatures to this Agreement, or to such other address as to which notice is given. 13.2 ENTIRE AGREEMENT. Except for the Company's Articles of Incorporation, this Agreement constitutes the entire understanding of the parties and supersedes all prior understandings, whether written or oral, between the parties with respect to the subject matter of this Agreement. 13.3 SEVERABILITY OF PROVISIONS. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid, and enforceable. 13.4 APPLICABLE LAW. This Agreement shall be governed by and construed under the laws of the State of Florida. - 10 - 13.5 EXECUTION IN COUNTERPARTS. This Agreement and any amendment may be executed simultaneously or in two or more counterparts, each of which together shall constitute one and the same instrument. 13.6 COOPERATION AND INTENT. The Company shall cooperate in good faith with the Indemnitee and use its best efforts to ensure that the Indemnitee is indemnified and/or reimbursed for liabilities described herein to the fullest extent permitted by law. 13.7 AMENDMENT. No amendment, modification or alteration of the terms of this Agreement shall be binding unless in writing, dated subsequent to the date of this Agreement, and executed by the parties. 13.8 BINDING EFFECT. The obligations of the Company to the Indemnitee hereunder shall survive and continue as to the Indemnitee even if the Indemnitee ceases to be a director, officer, employee and/or agent of the Company. Each and all of the covenants, terms and provisions of this Agreement shall be binding upon and inure to the benefit of the successors to the Company and, upon the death of the Indemnitee, to the benefit of the estate, heirs, executors, administrators and personal representatives of the Indemnitee. 13.9 GENDER AND NUMBER. Wherever the context shall so require, all words herein in the male gender shall be deemed to include the female or neuter gender, all singular words shall include the plural and all plural words shall include the singular. 13.10 NONEXCLUSIVITY. The rights of indemnification and reimbursement provided in this Agreement shall be in addition to any rights to which the Indemnitee may otherwise be entitled by statute, bylaw, agreement, vote of shareholders or otherwise. 13.11 EFFECTIVE DATE. The provisions of this Agreement shall cover claims, actions, suits and proceedings whether now pending or hereafter commenced and shall be retroactive to cover acts or omissions or alleged acts or omissions which heretofore have taken place. (signatures on following page) - 11 - IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first above written. ADDRESS: THE COMPANY: MANSUR INDUSTRIES INC. By:____________________________________ Name: Title: ADDRESS: THE INDEMNITEE: _______________________________________ _______________________________________ - 12 - SCHEDULE 10.3 The indemnification agreements entered into by the Company are substantially indentical in all material respects except as to each of the following idemnified directors: Pierre G. Mansur Paul I Mansur Elias Mansur Joseph E. Jack Dr. Jan Hedberg - 13 - EX-10.4 9 EXHIBIT 10.4 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of the first day of September, 1995, by and between MANSUR INDUSTRIES INC., a Florida corporation (hereinafter called the "Employer") and PIERRE G. MANSUR, an individual (hereinafter called "Employee"). RECITALS: A. The Employer desires to assure itself of the services of the Employee and to that end desires to enter into a contract of employment with the Employee upon the terms and conditions herein set forth; and B. The Employee is desirous of entering into such a contract of employment. NOW, THEREFORE, in consideration of the premises, representations, warranties and the mutual covenants herein set forth, the parties hereto agree as follows: 1. EMPLOYMENT DUTIES. (a) Employer hereby hires Employee during the Employment Period (defined below) as President and Chief Operating Officer or in such other position as the Employer may, from time to time determine, to perform such services and duties as are customary for the President and Chief Operating Officer of such a corporation and as further described in the Bylaws of the Employer. (b) During the Employment Period, the Employee shall faithfully perform the Employee's duties to the best of the Employee's ability and in accordance with the directions and orders of the Employer; and the Employee shall devote to the performance of such duties such amount or working time, attention and energies as the Employee deems necessary. In addition to the duties assigned to the Employee by the Employer, during the Employment period the Employee shall perform such other duties as are commensurate with the Employee's position and title, including, by way of illustration and not in limitation, overseeing the overall management of the Company with strong emphasis on continuing aggressive research and development programs, performing all necessary financial and administrative functions, exercising the Employee's best business judgement, safeguarding the assets of the Employer, corporate record keeping activities, and following, maintaining and implementing, without limitation, the business plans, budget (as modified or amended from time to time by the Employer), and seeking, if necessary clarification of any such procedures and directives. 2. EMPLOYMENT TERM. (a) "The Employment Period" shall be a period of two (2) years from the date of effectiveness of this Employment Agreement which is first day of September, 1995 and any extensions of such period. (b) At least ninety (90) days prior to the expiration of the initial Employment Period or any Renewal Period as that term is hereinafter defined, the Employer shall notify the Employee of its intention to extend the Employment Period for an additional two years (2) (the "Renewal Period"). If the Employer notifies the Employee of its intention to extend the Employment Period, the Employer shall inform the Employee of any modifications to the salary, employee plans and fringe benefit arrangements for the extended Employment Periods at least sixty (60) days prior to the expiration of the Employment Period and the Employee shall, at least thirty (30) days prior to the expiration of the Employment Period, submit in writing notification of his acceptance of the Employer's offer to extend the Employment Period. Failure of the Employer to provide notice in a timely manner as provided in the first section of 2(b) hereof shall result in the automatic extension of this Agreement for one year with all the same terms and provisions hereof, except that the Base Salary (as defined in Section 2 hereof) for the Renewal Period shall be increased by twenty percent (20%) over the Base Salary for the Employment Period or the immediately preceding Renewal Term, and that increased amount shall be the new Base Salary, payable in monthly equal increments. (c) In the event of the Employee's death prior to the expiration of the Employment Period, all obligations of the Employer under this agreement shall terminate except of the Employer's obligations to pay for services rendered by the Employee prior to his death. (d) Employee may terminate this Agreement at anytime upon one hundred twenty (120) days notice to the Company of his intention to resign as President and Chief Operating Officer. All salary earned but unpaid at the date of his resignation shall become due and payable upon the date of his resignation. 3. COMPENSATION. (a) As compensation for the performance of the Employee of his obligations under this Employment Agreement, the Employer shall pay to the Employee a salary in the amount of Sixty Six Thousand Dollars ($66,000.00) per year payable in monthly installments of Five Thousand Five Hundred Dollars ($5,500.00)each. (b) Employee is authorized to incur, in his discretion, reasonable business expenses in connection with the performance of his duties under this Agreement, including travel and entertainment expenses and the Employer shall reimburse Employee for any expenses so incurred, including reasonable transportation expenses incurred by the Employee in the performance or initiation and promotion of the Employer's business. (c) Further, during the Employment Period the Employee may participate in such employee incentives, plans or fringe benefit arrangements as the Employer shall make available to the Employee or others. 4. DISCLOSURE OF INFORMATION. Employee acknowledges that the Employer maintains highly confidential and proprietary information that will be accessible to Employee at all times and that such information constitutes valuable and unique property of the Employer. During the term of this Agreement and for a period of three (3) years following the Employee's termination of employment, Employee will not disclose any confidential information, including without limitation, information regarding the Employer's patents, research and development, manufacturing process or any knowledge or information with respect to confidential or trade secrets of the Employer which may be deemed to be in the public domain. Nothing contained herein shall be construed as authorizing Employee to disclose confidential information either during the employment period with Employer or at any time thereafter, or in any way diminish the Employer's complete rights and ownership of its confidential or proprietary information, patents, research and development, manufacturing process or any other proprietary information or trade secrets. 2 5. NON-COMPETITION. During the term of this Agreement and for three (3) years thereafter, Employee will not directly or indirectly, whether as principal, agent, trustee or through the agency of any corporation, partnership, association or agent, engage in any business in substantial competition with the Employer or its affiliates, nor shall Employee become an officer, director or employee of any corporation, partnership or any other business in substantial competition with the Employer or its affiliates. 6. NOTICE. Except as and to the extent specifically provided herein to the contrary, any notice, approval, consent, demand, application or other communication between the parties hereto required or permitted hereunder shall be in writing and shall be sufficiently given if delivered in person, or mailed by certified mail, with return receipt requested and postage prepaid, or delivered to a bonded air courier service for overnight delivery, addressed as follows or to such other address as any party hereto shall notify the other parties hereto: (a) If to the Employer, to: (b) If to Employee, to: MANSUR INDUSTRIES, INC. PIERRE G. MANSUR 8425 Southwest 129th Terrace 11117 Southwest 79th Avenue Miami, Florida 33156 Miami, Florida 33156 Notices shall be deemed to have been delivered upon the earlier of actual receipt or five (5) days after deposit in the United States mail or one day after deposit with a bonded air courier service for delivery next day delivery. 7. MODIFICATION. No modification, amendment or waiver of any of the provisions of the Employment Agreement shall be effective unless made in writing specifically referring to this Employment Agreement and signed by all parties. 8. ENTIRE AGREEMENT. This instrument constitutes the entire agreement of the parties hereto with respect to Employee's employment and the compensation therefor. 9. WAIVER. The failure to enforce at any time any of the provisions of this Employment Agreement or to require at any time performance by any party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validly of this Employment Agreement, or any part hereof, or the right of each party thereafter to enforce each and every provision in accordance with the terms of this Employment Agreement. 3 1O. SEVERABILITY. The invalidity or unenforceability of any particular provision of this Employment Agreement shall not effect the other provision hereof, and this Employment Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 11. SUCCESSORS. This Employment Agreement shall be binding upon and shall inure to the benefit of the Employer and any Successor of the Employer. For the purposes of this Employment Agreement, the term "successor" shall mean any person, firm, corporation or other business entity which at any time, whether by merger, purchase or otherwise, shall acquire all or substantially all of the assets or business of the Employer as a whole. This Employment Agreement shall also be binding upon and shall inure to the benefit of the Employee and Employee's legal representatives except that the Employee's obligations to perform such future services and rights to receive payment therefor are hereby expressly declared to be non-assignable and non-transferable. 12. GOVERNING LAW. This Employment Agreement is entered into the State of Florida and shall be construed in accordance with the laws of the State of Florida. The parties hereto consent to the jurisdiction of the state courts of the state of Florida and the appropriate United States District Court for Florida for all purposes in connection with any litigation between or among the parties hereto. Employee hereby irrevocably waives any objection which he now or hereafter may have to the laying of venue of any action or proceeding arising out of or relating to this Employment Agreement brought in the United States District Court for Florida and any objection on the ground that any such action or proceeding in either of such Courts has been brought in an inconvenient forum. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the date and year first above written. EMPLOYER: MANSUR INDUSTRIES INC. /s/ PAUL I. MANSUR - ------------------ Paul I. Mansur, Chief Executive Officer EMPLOYEE: /s/ PIERRE G. MANSUR - -------------------- Pierre G. Mansur 4 EX-10.5 10 EXHIBIT 10.5 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of the first day of September, 1995, by and between Mansur Industries Inc., a Florida corporation (hereinafter called the "Employer") and Paul I. Mansur, an individual (hereinafter called "Employee"). RECITALS: A. The Employer desires to assure itself of the services of the Employee and to that end desires to enter into a contract of employment with the Employee upon the terms and conditions herein set forth; and B. The Employee is desirous of entering into such a contract of employment. NOW, THEREFORE, in consideration of the premises, representations, warranties and the mutual covenants herein set forth, the parties hereto agree as follows: 1. EMPLOYMENT DUTIES. (a) Employer hereby hires Employee during the Employment Period (defined below) as Chief Executive Officer or in such other position as the Employer may, from time to time determine, to perform such services and duties as are customary for the Chief Executive Officer of such a corporation and as further described in the Bylaws of the Employer. (b) During the Employment Period, the Employee shall faithfully perform the Employee's duties to the best of the Employee's ability and in accordance with the directions and order of the Employer, and the Employee shall devote to the performance of such duties such amount or working time, attention and energies as the Employee deems necessary. In addition to the duties assigned to the Employee by the Employer, during the Employment period the Employee shall perform such other duties as are commensurate with the Employee's position and title, including, by way of illustration and not in limitation, overseeing the overall management of the Company including all financial, administrative, marketing and operations functions, exercising the Employee's best business judgement, safeguarding the assets of the Employer, corporate record keeping activities, and following, maintaining and implementing, without limitation, the business plans, budget (as modified or amended from time to time by the Employer), and seeking, if necessary clarification of any such procedures and directives. 2. EMPLOYMENT TERM. (a) "The Employment Period" shall be a period of two (2) years from the date of effectiveness of this Employment Agreement which is first day of September, 1995 and any extensions of such period. (b) At least ninety (90) days prior to the expiration of the initial Employment Period or any Renewal Period as that term is hereinafter defined, the Employer shall notify the Employee of its intention to extend the Employment Period for an additional two years (2) (the "Renewal Period"). If the Employer notifies the Employee of its intention to extend the Employment Period, the Employer shall inform the Employee of any modifications to the salary, employee plans and fringe benefit arrangements for the extended Employment Periods at least sixty (60) days prior to the expiration of the Employment Period and the Employee shall, at least thirty (30) days prior to the expiration of the employment Period, submit in writing notification of his acceptance of the Employer's offer to extend the Employment Period. Failure of the Employer to provide notice in a timely manner as provided in the first section of 2(b) hereof shall result in the automatic extension of this Agreement for one year with all the same terms and provisions hereof, except that the Base Salary (as defined in Section 2 hereof) for the Renewal Period shall be increased by twenty percent (20%) over the Base Salary for the Employment Period or the immediately preceding Renewal Term, and that increased amount shall be the new Base Salary, payable in monthly equal increments. (c) In the event of the Employee's death prior to the expiration of the Employment Period, all obligations of the Employer under this agreement shall terminate except of the Employer's obligations to pay for services rendered by the Employee prior to his death. (d) Employee may terminate this Agreement at anytime upon one hundred twenty (120) days notice to the Company of his intention to resign as Chief Executive Officer. All salary earned but unpaid at the date of his resignation shall become due and payable upon the date of his resignation. 3. COMPENSATION. (a) As compensation for the performance of the Employee of his obligations under this Employment Agreement, the Employer shall pay to the Employee a salary in the amount of Forty Eight Thousand Dollars ($48,000.00) per year payable in monthly installments of Four Thousand Dollars ($4,000.00) each. (b) Employee is authorized to incur, in his discretion, reasonable business expenses in connection with the performance of his duties under this Agreement, including travel and entertainment expenses and the Employer shall reimburse Employee for any expenses so incurred, including reasonable transportation expenses incurred by the Employee in the performance or initiation and promotion of the Employer's business. (c) Further, during the Employment Period the Employee may participate in such employee incentives, plans or fringe benefit arrangements as the Employer shall make available to the Employee or others. 4. DISCLOSURE OF INFORMATION. Employee acknowledges that the Employer maintains highly confidential and proprietary information that will be accessible to Employee at all times and that such information constitutes valuable and unique property of the Employer. During the term of this Agreement and for a period of three (3) years following the Employee's termination of employment, Employee will not disclose any confidential information, including without limitation, information regarding the Employer's patents, research and development, manufacturing process or any knowledge or information with respect to confidential or trade secrets of the Employer which may be deemed to be in the public domain. Nothing contained herein shall be construed as authorizing Employee to disclose confidential information either during the employment period with Employer or at any time thereafter, or in any way diminish the Employer's complete rights and ownership of its confidential or proprietary information, patents, research and development, manufacturing process or any other proprietary information or trade secrets. 2 5. NON-COMPETITION. During the term of this Agreement and for three (3) years thereafter, Employee will not directly or indirectly, whether as principal, agent, trustee or through the agency of any corporation, partnership, association or agent, engage in any business in substantial composition with the Employer or its affiliates, nor shall Employee become an officer, director or employee of any corporation, partnership or any other business in substantial competition with the Employer or its affiliates. 6. NOTICE. Except as and to the extent specifically provided herein to the contrary, any notice, approval, consent, demand, application or other communication between the parties hereto required or permitted hereunder shall be in writing and shall be sufficiently given if delivered in person, or mailed by certified mail, with return receipt requested and postage prepaid, or delivered to a bonded air courier service for overnight delivery, addressed as follows or to such other address as any party hereto shall notify the other parties hereto: (a) If to the Employer, to: (b) If to Employee, to: MANSUR INDUSTRIES INC. PAUL I. MANSUR 8425 Southwest 129th Terrace 6050 NW 93rd Doral Place Miami, Florida 33156 Miami, Florida 33178 Notices shall be deemed to have been delivered upon the earlier of actual receipt or five (5) days after deposit in the United States mail or one day after deposit with a bonded air courier service for delivery next day delivery. 7. MODIFICATION. No modification, amendment or waiver of any of the provisions of the Employment Agreement shall be effective unless made in writing specifically referring to this Employment Agreement and signed by all parties. 8. ENTIRE AGREEMENT. This instrument constitutes the entire agreement of the parties hereto with respect to Employee's employment and the compensation therefor. 9. WAIVER. The failure to enforce at any time any of the provisions of this Employment Agreement or to require at any time performance by any party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Employment Agreement, or any part hereof, or the right of each party thereafter to enforce each and every provision in accordance with the terms of this Employment Agreement. 3 1O. SEVERABILITY. The invalidity or unenforceability of any particular provision of this Employment Agreement shall not effect the other provision hereof, and this Employment Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. 11. SUCCESSORS. This Employment Agreement shall be binding upon and shall inure to the benefit of the Employer and any successor of the Employer. For the purposes of this Employment Agreement, the term "successor" shall mean any person, firm, corporation or other business entity which at any time, whether by merger, purchase or otherwise, shall acquire all or substantially all of the assets or business of the Employer as a whole. This Employment Agreement shall also be binding upon and shall inure to the benefit of the Employee and Employee's legal representatives except that the Employee's obligations to perform such future services and rights to receive payment therefor are hereby expressly declared to be non-assignable and non-transferable. 12. GOVERNING LAW. This Employment Agreement is entered into the State of Florida and shall be construed in accordance with the laws of the State of Florida. The parties hereto consent to the jurisdiction of the state courts of the state of Florida and the appropriate United States District Court for Florida for all purposes in connection with any litigation between or among the parties hereto. Employee hereby irrevocably waives any objection which he now or hereafter may have to the laying of venue of any action or proceeding arising out of or relating to this Employment Agreement brought in the United States District Court for Florida and any objection on the ground that any such action or proceeding in either of such Courts has been brought in an inconvenient forum. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed as of the date and year first above written. EMPLOYER: MANSUR INDUSTRIES INC. /s/ PIERRE G. MANSUR Pierre G. Mansur, Chairman of the Board EMPLOYEE: /s/ PAUL I. MANSUR Paul I. Mansur 4 EX-10.6 11 EXHIBIT 10.6 MANSUR INDUSTRIES PAUL L. MANSUR CHIEF EXECUTIVE OFFICER November 21, 1995 Mr. Charles W. Profilet 640 East Lake Dasha Drive Plantation, Florida 33324-3134 RE: EMPLOYMENT AGREEMENT Dear Mr. Profilet: Mansur Industries Inc. (the "Company") is pleased to offer you the top management position of VICE PRESIDENT BUSINESS DEVELOPMENT, commencing on or about November 27th, 1995, subject to the conditions set forth below. The responsibilities of the position will include all aspects of overall management of the Company's sales, marketing and other business development efforts as outlined in Appendix A attached hereto. The position will report to the President. The following represents the starting compensation package that the Company is offering: 1 - Base Salary: $80,000.00 per annum payable semi-monthly. 2 - Incentives: Commissions payable monthly on total Company new units sold in the United States (excluding units placed as a result of acquisitions) ranging from $5.00 per unit for parts washers to $25.00 per unit for jet washers. Incentives are based on full 60 month leases. Leases under 60 months shall earn incentives on a pro-rata basis. Incentives are payable monthly upon receipt of payment from the customer or the leasing company. All or any fractional part of monthly incentives earned may be converted, at your option, to Company stock at the current publicly traded closing price of the stock on the date of the incentive payment, less a ten (10%) percent discount, such discount to be periodically reviewed and adjusted by the Board of Directors. The right to convert any part of your monthly incentives into Company stock is conditioned upon a successful Initial Public Offering (the "IPO") and, pursuant to the regulations of the SEC, on the obtainment of an opinion from Company counsel that you meet the qualifications to purchase such shares. Nothing contained herein shall be deemed an offer with respect to purchase of Company stock. Prior to the Company's IPO, incentives may be accumulated and converted on the basis of the IPO OFFERING PRICE. 3 - Reallocation During the first year of your employment, to equitably Option: compensate you for initial sales ramp up, manufacturing undercapacity or other possible delays outside of your control and responsibility, you may elect to allocate a portion of your incentive compensation to Company stock on the basis of the following formula: $1.50 in unit commission incentives for parts washers (and corresponding pro-rata reduction on other products), may be reallocated, at your option, during the first year of your employment, to a monthly award of Company stock equal to $1,500 of stock (at the publicly traded closing price of the stock on the date of each monthly incentive payment). Prior to the Company's IPO, incentives may be accumulated and converted on the basis of the IPO OFFERING PRICE. Page 2 Mr. Charles W. Profilet November 21, 1995 4 - Profit Participation in the Company's annual executive profit Sharing: sharing awards when and if adopted, to be determined annually by a committee of the Board of Directors. 5 - Stock Plans: Participation in the Company's annual executive stock awards or stock option awards, when and if adopted, to be determined annually by a committee of the Board of Directors. The date of implementation of the stock option plan to be determined by the Board of Directors after the Company's IPO. 6 - Other A salary continuance guarantee, effective 90 days after your Benefits: employment commences, will guarantee you the payment of your full base salary until the earlier of your securing new employment or six months, if you are terminated by the Company during the first year of employment for any reason other than acts of dishonesty, malfeasance or other impropriety. Two weeks paid vacation first year. Additional vacation in accordance with Company policy when adopted. Car allowance of $400.00 per month to be paid by the Company. Health insurance coverage will be excluded. Mobile telephone expenses paid by the Company subject to a maximum of $200.00 per month. Standard Company travel and sales related expenses to be paid by the Company. The offer for employment is subject, in all respects, to the execution of non- circumvention nondisclosure agreements. The Company looks forward to your joining its top management team. Very truly yours, /s/ PAUL L. MANSUR - ------------------ Paul L. Mansur AGREED TO BY: Charles W. Profilet /s/ CHARLES W. PROFILET - ------------------------ Charles W. Profilet EX-10.7 12 EXHIBIT 10.7 VENDOR LEASE PLAN AGREEMENT This Lease Agreement is between OAKMONT FINANCIAL SERVICES, a Heritage Credit Services Company ("Oakmont") and MANSUR INDUSTRIES INC. ("Mansur"). 1. LEASE PROGRAM. Oakmont offers several leasing and financing programs to assist manufacturers, distributors and dealers in facilitating the acquisition of equipment by their customers. Mansur wishes to have Oakmont provide a leasing and financing program for Mansur's customers, and Oakmont and Mansur have agreed that Oakmont will offer this program under the terms described in this agreement. 2. LEASE CONSUMMATION. Oakmont will from time to time notify Mansur of Oakmont's then current acceptable lease and financing terms, rates and credit standards. With respect to any lease or financing (any such lease or financing a "lease") Mansur wishes to arrange, Mansur will, before delivery of the related equipment (the "equipment"), furnish Oakmont with an equipment description, the transaction proposed terms, any credit information Mansur has regarding each lessee or purchaser in connection with the transaction (individually or collectively as the context indicates the "lessee") and such other information as Oakmont may request. Upon receipt of all requested materials, Oakmont will review the package and advise Mansur of Oakmont's decision. Documentation as to approved leases will be prepared by Oakmont and procured by Oakmont and/or Mansur as Oakmont directs. Mansur will not, unless otherwise consented to by Oakmont, deliver any equipment before receipt of Oakmont's approval or rejection advice. When the documents required by Oakmont as to a transaction are received by Oakmont, with each property completed within the specified commitment period, Oakmont will complete the transaction and fund the advance for the transaction which will be calculated in the manner agreed to by the parties from time to time. 3. ACCEPTANCE BY OAKMONT. Oakmont is not obligated to accept any transaction submitted to Oakmont by Mansur unless the transaction in Oakmont's sole judgement complies with Oakmont's then applicable criteria. If Oakmont accepts the transaction, Mansur will not offer the transaction to a third party. If Oakmont declines any five (5) leases within a thirty (30) day period, which leases are financed by a third party leasing company on the terms declined by Oakmont, Mansur may, upon ten (10) days notice to Oakmont, terminate this agreement. 4. MANSUR'S WARRANTIES. In addition to any warranties Mansur may make pursuant to Oakmont's purchase order for the equipment, Mansur makes the following further representations and warranties related to each lease, each such warranty and representation to speak as of the funding by Oakmont of the advance respecting the transaction: (a) To the best of Mansur's knowledge the lessee will use equipment principally for commercial purposes: (b) The lease and all signatures thereon are genuine if procured by Mansur, to the best of Mansur's knowledge the lease has been duly authorized and executed by the lessee, if completed in accordance with information provided Oakmont by Mansur, the lease correctly sets forth the rentals or installment payments which Mansur indicated to the lessee as applicable to the equipment, the equipment is fully and correctly described in the lease and has been delivered to the lessee at the location or locations set forth in, and accepted by the lessee for all purposes of, the lease and to the best of Mansur's knowledge the lease constitutes the valid and binding obligation of the lessee; (c) Each other instrument executed in connection with the lease giving rights to Oakmont and procured by Mansur, including guaranties, and all signatures thereon are genuine and to the best of Mansur's knowledge each such instrument has been duly authorized and executed by all parties obligated to Oakmont and constitutes the valid and binding obligation of such parties; (d) There are no representations and warranties not set forth in the lease that have been made by Mansur to the lessee with respect to the lease of the equipment other than those of which Oakmont is aware and, without limiting the foregoing, Mansur has not made any representation not set forth in the lease that the lease is terminable by the lessee if the lessee is unsatisfied with the equipment for any reason or that the lessee may trade-in the equipment; (e) All dealings by Mansur with the lessee, including in connection with any advertisements or purchase orders relative to the lease, and the execution of the lease if procured by Mansur have been in accordance with all applicable laws and regulations; (f) The conduct of Mansur in developing the lease transaction shall not subject Oakmont to suit or administrative proceeding under any state or federal law, rule or regulation, it being understood, without limiting the generality of the foregoing, that the lease transaction shall be assumed to constitute "credit" as that term is defined and used in the Equal Credit Opportunity Act (or applicable State Law), implementing regulations and official interpretations of the Federal Reserve Board Staff; (g) The lessee has and shall have no defense, offset or counterclaim as to the enforcement of the lease arising out of the conduct of Mansur, and without limiting the generality of the foregoing, Mansur is not in default in any of Mansur's obligations to the lessee; (h) Mansur does not know of any fact which indicates the uncollectibility of the lease: (i) The lessee's application correctly sets forth all information given Mansur by the lessee, Mansur has provided Oakmont any other credit information Mansur has with respect to the leases and all such information is true and correct to the best of Mansur's knowledge; (j) Except monies which Oakmont has agreed are to be retained by Mansur, Mansur has not received any monies from the lessee related to the equipment which Mansur has not transferred to Oakmont, property endorsed to Oakmont where appropriate, or which were loaned to Mansur to the lessee; and (k) If the transaction is an equipment lease, title to the equipment has vested in Oakmont free and clear of any liens of persons claiming by, through or under Mansur, and if the transaction is a financing, such title has vested in the lessee. 5. MANSUR'S CONTINUING OBLIGATIONS. Mansur shall: (a) at the request of Oakmont or the lessee, provide at commercially reasonable prices, full, complete and adequate service, including warranty service, for the relevant equipment in conformity with standard trade practices; (b) takes such action as is necessary or as Oakmont may request to evidence and perfect this agreement and Oakmont's rights contemplated hereby; (c) turn over promptly to Oakmont in the form received, properly endorsed to Oakmont where appropriate, any monies received by Mansur relative to a lease following its funding by Oakmont, unless the lease has been purchased by Mansur under paragraph 9; (d) not represent that it is the agent of Oakmont nor make any reference to Oakmont in any advertising materials of Mansur without Oakmont's prior written consent; (e) not repossess any equipment or accept redelivery of any equipment from a lessee without the prior consent of Oakmont; and (f) upon request of Oakmont, utilizing a reasonable and nondiscriminatory approach, assist Oakmont in remarketing any, repossessed or surrendered equipment with a new lessee. Oakmont shall pay Mansur a fee equal to two (2) months of lease payments for services rendered by Mansur in remarketing any repossessed or surrendered equipment. 6. SALE OF EQUIPMENT AT FMV TO MANSUR UPON EXPIRATION OF LEASE TERM. Provided all rental and other moneys due Oakmont have been fully paid, upon the expiration of the customer's lease term, Oakmont agrees to provide Mansur with an option to repurchase from Oakmont, for a cash purchase price equal to the fair market value of the Equipment plus applicable sales tax, all Equipment which is the subject of the lease. The fair market value shall be an amount mutually agreed upon by Oakmont and Mansur; provided that if the parties are unable to agree upon the fair market value, such fair market value shall be determined by an appraiser selected by mutual agreement. Upon payment by Mansur, Oakmont shall assign and release to Mansur any and all interest Oakmont may have in the equipment. Delivery of any equipment repurchased by Mansur shall be the sole responsibility of Mansur. 7. DOCUMENTATION DISCLAIMER. Mansur and Oakmont acknowledge that the documents required and provided by Oakmont in connection with the documentation of a transaction hereunder have been prepared by Oakmont for the purpose of Oakmont's leasing or financing activities. Mansur further acknowledges that Oakmont makes no warranty of any nature whatsoever, express or implied, with respect to the form, substance or enforceability of any such documentation. Use by Mansur of any such documentation for its own purpose is at Mansur's own risk. If Mansur uses any such documentation for such purposes, Mansur shall make certain that no reference whatsoever to Oakmont appears thereon. 8. NOTICES. Notices hereunder must be in writing addressed to the respective party at the appropriate address set forth at the foot hereof or such other address of which the party may give the other notice and shall be mailed, certified U.S. mail with postage prepaid. Notices shall be effective two (2) days after such mailing. Each party shall provide the other notice of a change in such party's address. 9. TERMINATION. This agreement shall be for an initial term of one (1) year and shall automatically be renewed for successive one (1) year terms. Each party may terminate this agreement, with or without cause, upon sixty (60) days notice to the other party unless terminated under the provisions of paragraph 3 hereof. Termination of this agreement will not affect the right and obligations of either party as to previously consummated or approved leases, including as respects paragraph 10; provided that if termination follows a breach by Mansur of any Mansur's warranties or agreements under this agreement, Oakmont may terminate its obligations as to any previously approved but unfunded transactions. 10. REMEDIES. The purchase of interests in equipment covered by this lease agreement is non-recourse except as provided in this paragraph. If Mansur breaches any warranty under paragraph 4 hereof and such breach in not cured within ten (10) days of Oakmont's notice to Mansur thereof, Mansur will purchase the lease and Oakmont's rights under all related agreements and Oakmont's interest in the equipment for an amount equal to what would then be the lessee's obligations under the remedies paragraph of the lease, assuming no recovery from disposition of the equipment, less any applicable deposit which Oakmont will retain plus applicable taxes. Upon receipt of the applicable payment, the lease and Oakmont's rights under the related documents will be sold without any warranty and the equipment will be sold as is where is, without any warranty, except in each case a warranty against transfer of any rights of Oakmont other than as a result of consummation of the lease. Until Oakmont has received the purchase price, it is the intent of parties that Mansur will have no interest in the interests to be purchased. If, however, after demand by Oakmont but prior to payment Mansur is deemed to have acquired any such interest, Oakmont will have security interest therein under the Uniform Commercial Code as a security for the performance by Mansur of Mansur's obligations hereunder. Mansur will remain liable for any deficiency following disposition. Mansur will also be liable for any damages suffered by Oakmont as a result of the breach by Mansur of any of Mansur's warranties or agreements hereunder. 11. AMENDMENTS. This agreement may be amended by a writing signed by both parties. Acceptance of an amendment by the parties shall be manifested by and be effective upon the date of the first transmittal to Oakmont of an application to consummate a lease or submission of a documentation package. 12. GENERAL PROVISIONS. This agreement constitutes the entire agreement of the parties as to the leasing and financing program Oakmont will make available to Mansur. In the event either party institutes legal proceedings to enforce any of the terms of this agreement, the prevailing party in such proceedings will be entitled to recover its attorneys' fees and costs incurred therein. It is the intent of the parties that this agreement be enforced to the fullest extent, and any provision of this agreement deemed by a court to be unenforceable will be deemed deleted to the extent only of such unenforceability. The singular number includes the plural, and the neuter gender the masculine or feminine where the context requires. This agreement inures to the benefit of, and is binding upon, the heirs, legatees, personal representatives, successors and assigns of the parties, it being understood, however, that neither Mansur nor Oakmont may assign its rights or duties hereunder without the prior written consent of the other party. Time is of the Essence of this agreement. The headings to the paragraphs of this agreement are for convenience only and are not to be used in the interpretation of this agreement. OAKMONT FINANCIAL SERVICES MANSUR INDUSTRIES INC. 8325 N.W. 53rd Street, #223 8425 S.W. 129th Terrace Miami, Florida 33166 Miami, Florida 33156 By:/s/ CHARLES E. BRAZIER By:/s/ PAUL I. MANSUR Charles E. Brazier Paul I. Mansur Executive Vice President Chief Executive Officer LEASE AGREEMENT FORM LEASE AGREEMENT TERMS AND CONDITIONS IN LARGE PRINT TERMS AND CONDITIONS 1. LEASE. Lessor leases to Lessee and Lessee leases from Lessor for the lease term specified herein and for any extension or renewal thereof (collectively "Term") and on the terms and conditions stated in this agreement ("Lease") the Equipment identified herein and in any schedule ("Schedule") incorporating this Lease by reference that the parties agree in writing to make a part of this Lease. The Lease of Equipment described in this Lease and the lease of Equipment described in each Schedule shall constitute separate leasing transactions, each of which is referred to herein as a lease. 2. LEASE PAYMENTS. The obligation to make Lease Payments begins on the date when Lessee receives Equipment. Lessee shall make Lease Payments, in advance, on the date or dates specified by Lessor in a notice to Lessee. Lease Payments shall be paid at the office of Lessor or at any other place specified by Lessor. Any Security Deposit and/or Advance Lease Payment is due on signing of the lease specifying such amount. If any part of a payment is more than five days late, Lessee shall pay a late charge of 10% of the payment, all or a portion of which is late (or such lesser rate as is the maximum rate allowable under applicable law.) 3. WARRANTIES. The equipment specified herein is unconditionally warranted by the manufacturer, NOT the Lessor, for the full Term herein. Lessee acknowledges and agrees that Lessor is NOT the manufacturer of the Equipment leased herein. Lessor makes no warranties, express or implied, including warranties of merchantability or fitness for a particular purpose with respect to patent or copyright infringement, title, or the like, however, Lessor transfers to Lessee for the Term the warranties made by the manufacturer or Supplier to Lessor. Lessee shall comly with and enforce such warranties. Lessor is not liable to Lessee for any modification or rescission of any such warranties. 4. DELIVERY AND ACCEPTANCE. Supplier will ship the Equipment directly to Lessee. Lessee shall take delivery and upon installation and delivery of the Equipment will sign and deliver to Lessor the Delivery and Acceptance Receipt submitted by Lessor. Lessee shall be deemed to have irrevocably accepted the Equipment under the lease upon the earlier of: A) delivery to Lessor of the signed Delivery and Acceptance Receipt; or B) 10 days after delivery of the Equipment, if lessee has not prior to such 10th day, delivered to Lessor written notice of any non-acceptance of the Equipment, specifying the reasons therefore and fully referencing the lease. If Lessee properly rejects the Equipment in accordance with the forgoing, Lessor and Lessee shall be relieved of all obligations or liabilities under the lease, Lessor shall retain any Advance Lease Payment as liquidated damages for loss of a bargain and not as a penalty, and Lessee shall be responsible for paying for the Equipment and fulfilling all other obligations of the buyer under any applicable purchase order. The validity of the lease will not be affected by any delay in Lessee's receipt of the Equipment. 5. CONDTION; USE; LOCATION; RETURN. Lessee shall install and keep the Equipment in good working condition, normal wear and tear excepted. Anything that Lessee adds, replaces or attaches to the Equipment immediately becomes part of the Equipment and the property of Lessor. LESSEE SHALL COMPLY WITH ALL LAWS and regulations governing use of the Equipment, hold Lessor harmless against actual or asserted violations thereof and pay all costs and expenses in connection with or arising from any such actual or asserted violation. Lessee shall 1 advise the manufacturer of any changes or additions to the Equipment needed to comply with any laws or regulations. Lessee acknowledges and agrees that Lessor is NOT responsible for any such changes or additions. Unless Lessee has Lessor's prior written permission to move the Equipment, Lessee will keep and use it only at the Equipment Location. On request, Lessee shall advise Lessor of the exact location of the Equipment. Lessor may for the purpose of inspections, at all reasonable times, enter upon any job, building or place where the Equipment is located and, if in the opinion of Lessor, it is being used or cared for improperly, without notice, remove it. Unless otherwise agreed in writing, on termination or expiration of the Term, Lessee will immediately return the Equipment to Lessor in as good a condition as received, less normal wear and tear. 6. FINANCE LEASE STATUS. The parties agree that if Article 2A - Leases of the Uniform Commercial Code ("Code") is deemed to apply, each lease will be considered a "finance lease". By executing a lease, Lessee acknowledges either that (a) Lessor has informed or advised Lessee, in writing, either previously or by this Lease of: (i) the identity of the "supplier", (ii) that Lessee may have rights under the "supply contract"; and (iii) that Lessee may contact the supplier for a description of any such rights Lessee may have under the supply contract; or (b) on or before signing such a lease, Lessee has reviewed and approved the supply contract covering the Equipment purchased from the supplier. Terms in this Paragraph 7 set off in quotation marks when used for the first time herein shall have the meaning ascribed to such terms by the Code. TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE WAIVES ANY AND ALL RIGHTS AND REMEDIES CONFERRED UPON A LESSEE BY ARTICLE 2A OF CODE. 7. LESSEE WARRANTIES; SURVIVAL. Lessee represents, warrants and covenants to Lessor that: (a) unless it is an individual, Lessee is validly existing and in good standing under applicable state law, (b) Lessee has the power and authority to enter into this Lease, all leases and all other related documents hereunder (collectivelly, "Fundamental Agreements"); (c) The person authorized to sign the lease has the authority to grant the powers of attorney set forth in Paragraph 9 and 11 below; (d) such Fundamental Agreements are enforceable against Lessee in accordance with their terms; (e) there are no pending or threatened actions or proceedings that could have a material adverse effect on Lessee or any Fundamental Agreement; (f) each Fundamental Agreement shall be effective against all creditors of Lessee under applicable law, including fraudulent conveyance and bulk transfer laws, and shall raise no presumption of fraud; and (g) Lessee shall furnish Lessor with such financial statments, opinions of counsel, resolutions, and other documents and information as Lessor may reasonably request. Lessee shall be deemed to have reaffirmed the foregoing warranties each time it executes any Fundamental Agreement. All representations, warranties and covenants made by Lessee under a Fundamental Agreement shall survive the termination of the lease and shall remain in full force and effect. All of Lessor's rights, privileges, and indemnities, to the extent they are fairly attributable to events or conditions occurring or existing on or prior to the termination of the lease, shall survive such termination and be enforceable by Lessor and its successors and assigns. If more than one Lessee is named in a lease, the liability of each shall be joint and several. 8. INSURANCE. Throughout the Term, Lessee shall maintain (i) property insurance insuring the Equipment for its full replacement value against loss, theft, damage and destruction and naming 2 Lessor as loss payee and (ii) general public liability and third party property naming Lessor as an additional insured. Within 21 days from Lessees signing a lease, Lessee will provide Lessor with certificates or other evidence of such insurance which shall be in a form, amount and with companies reasonable acceptable to Lessor and shall provide that Lessor shall be given 30 days' prior written notice of any material alteration or cancellation thereof. If Lessee does not provide evidence of property insurance acceptable to Lessor, Lessor may but will not be required to, buy such insurance and add the cost, including any customary charges or fees associated with the placement, maintenance or service of such insurance (collectively, "Insurance Charge"), to the Lease Payment amount due from Lessee. Lessee agrees to pay the Insurance Charge in equal installments allocated to each remaining Lease Payment (with interest on such allocations up the maximum rate permitted by applicable law). Nothing in this Lease creates any insurance relationship between Lessor and any other person or party. Lessor is not required to effect any insurance coverage and Lessor may terminate or allow to lapse any coverage with having any liability to Lessee. Lessee hereby appoints Lessor as Lessee's attorney-in-fact to make claims for, receive payment of, and execute and endorse all documents, checks or drafts for loss, theft, damage or destruction to the Equipment under any property insurance. In all circumstances, Lesee shall cooperate with Lessor or Lessor's agent with respect to the placement of insurance and processing of claims. 9. TAXES AND CERTAIN FEES; LESSOR PERFORMANCE; WAIVER. Lessee shall promptly pay all fees, assessments, taxes and charges governmentally imposed upon the purchase, ownership, possession, leasing, renting, operation, control, use or maintenance of the Equipment, whether assessed against Lessor, Lessee or the Equipment, and relating to the Term, whether due before or after the end of the Term, excluding taxes on or measured by the net income of Lessor. All personal property tax, use tax or other tax returns will be by Lessor, and Lessee agrees to pay Lessor a fee for processing such payments and filings. Lessor does not have to contest any valuation of, or tax imposed on, the Equipment. If Lessee fails to perform any of its obligations under this Lease, Lessor may perform any act or make any payment that Lessor deems reasonably necessary for the maintenance and preservation of the Equipment or Lessor's interest therein; provided, however, that Lessor's performance of any act or payment shall not be deemed a waiver of, or release Lessee from, the obligations at issue. All sums so paid by Lessor, together with expenses (including legal fees and costs) incurred by Lessor in connection therewith, shall be paid to Lessor by Lessee immediately upon demand. Lessor's failure to require performance in any instance or Lessor's written waiver of any provision shall not waive any other breach of the same of any other provision. 10. TITLE; RECORDING; DOCUMENTATION FEE; NOTICES. Lessor shall hold title to the Equipment. Lessee will keep the Equipment free and clear from any levy, attachment, lien encumbrance or charge other judicial process; will give lessor immediate writtten notice of any breach of this provision; and will reimburse Lessor for and, at Lessor's request, defend Lessor against any loss or damage caused thereby. Unless otherwise provided, the parties agree that this transaction shall be a true lease. However, if this transaction is deemed to constitute a lease for security, Lessee grants Lessor a purchase money security interest in the Equipment and in all attachments, accessions, additions, substitutions, products, replacements, rentals and proceeds (including insurance proceeds) (collectively, "Collateral"). Lessee shall execute and timely deliver to Lessor financing statements or other document Lessor deems necessary to perfect or protect Lessor's security interest in the Collateral. Lessee authorize LESSOR TO FILE 3 A COPY OF THIS LEASE OF ANY SCHEDULE AS A FINANCING STATEMENT AND APPOINTS LESSOR (AND AS AN AGENT FOR LESSOR, SUCH THIRD PARTY FILING SERVICE COMPANY AS IS NOTED IN PARAGRAPH 1 ABOVE, UNDER "ADDITIONAL PROVISIONS") AS LESSEE'S ATTORNEY-IN-FACT TO EXECUTE AND FILE, ON LESSEE'S BEHALF, FINANCING STATEMENTS COVERING THE COLLATERAL. The Equipment is and will remain personal property no matter what its use or attachment to realty, but Lessee will not let it be attached to realty in any way that might cause it to become part of such realty. Lessee shall pay Lessor's Fee for lease documentation and processing and for any governmental filings. All notices shall be given in writing and shall be effective when deposited in the U.S. mail, addressed to a party at its address shown on the front page of this Lease or at any other address such party specifies in writing, with first class postage prepaid. 11. DEFAULT. Any of the Following constitutes as a Default: (a) Lessee Fails to pay any Lease Payment or any other amount owned to Lessor within 5 days after its due date; (b) Lessee Fails to perform or observe any other representation, warranty, covenant, condition or agreement under any lease or any other agreement with Lessor and fails to cure such breach within 10 days after notice; (c) any representation or warranty made by Lessee hereunder or in any other instrument provided to Lessor by Lessee, proves to be incorrect in any material respect when made; (d) a proceeding under any bankruptcy, reorganization, arrangement of debts, insolvency or receivership law or assignment for benefit of creditors is filed by or against Lessee; (e) Lessee become insolvent or fails generally to pay its debts as they become due, or the Equipment is levied against, seized, or a bulk sale of Lessee's inventory or assets is about to or has taken place; (f) Lessee voluntarily or involuntarily dissolves or is dissolved, or terminates or is terminated; (g) Lessee's financial condition changes such that in Lessor's opinion, the credit risk of a lease transaction with the Lessee is increased; (h) any guarantor dies or revokes a guaranty required by Lessor, (i) any guarantor of any obligations hereunder is the subject of any event listed clauses (a) through (g) above; or (i) an institution revokes, refuses to honor, or refuses to renew or extend any letter of credit required by Lessor. 12. REMEDIES. If a default ocurs, Lessor has the right to exercise any or all of following remedies: (a) terminate any or all leases with Lessee; (b) declare all Lease Payments and other amounts under any such leases(s) immediately due and payable; (c) take possession of, or render unusable, any Equipment under any such lease(s) wherever such Equipment may be located, without demand or notice, without any court order or other process of law and without liability to Lessee for any damages occasioned by such action, and no such action shall constitute a termination of any such leases(s); (d) permit Lessor to take immediate possession of such Equipment; (e) proceed by court action to enforce performance BY LESSEE of any such lease(s) and/or recover all damages and expenses incurred by Lessor by reason of any Default; (f) terminate any other agreement that Lessor may have with Lessee; or (g) exercise any other right or remedy available to Lessor at law or in equity. As liquidated damages for loss of a bargain and not as a penalty, and in lieu of any further Lease Payments under any lease(s) so terminated, upon Lessor's demand, Lessee shall pay Lessor's Return (as defined in Paragraph 14 below), calculated as of the date of the Default, to Lessor. Also, Lessee shall pay Lessor all costs and expenses (including legal fees and costs), incurred by Lessor in enforcing any of the terms or provisions of any such lease(s). Upon repossession or surrender of any such Equipment, Lessor shall have the right to lease, sell or otherwise dispose of such Equipment in a commercially reasonable manner, with or without notice at a public or private sale, and apply the net proceeds thereof (after deducting all expenses (including legal fees and costs) incurred 4 in connection therewith) to the amounts owed to Lessor hereunder, provided, however that Lessee shall remain liable to Lessor for any deficiency that remains after any sale, lease or other disposal of such Equipment. Lessee agrees that with respect to any notice of sale required by law to be given, 10 days' notice shall constitute reasonable notice. These remedies are cumulative of every other right or remedy give hereunder not now or hereafter exiting at law or in equity, and may be enforced concurrently therewith. Any delay or failure to enforce Lessor's rights hereunder does not prevent Lessor from enforcing any rights at a later time. Lessor, at its option, may apply any security deposit or advance payment monies against Lessee's obligations hereunder. 13. RISK OF LOSS. Lessee bears the risk of loss, theft, or damage to the Equipment (collectively, "Loss"), effective on shipment for delivery to Lessee, Lessee will advise Lessor in writing within 10 days of any Loss. Except as provided below, a Loss does not relieve Lessee of the obligation to make Lease Payments and pay other amounts owed under a lease. In the event of Loss, Lessor, at its option, may; (a) require Lessee, where practicable, to restore the Equipment to good condition reasonably satisfactory to Lessor; or (b) require Lessee to pay Lessor its anticipated return ("Lessor's Return"), which shall consist of the following amounts: (i) the Lease Payments (and other amounts) due and owing under the lease at the time of such Loss; plus (ii) all Lease Payments from the date of such Loss to the end of the Term; plus (iii) the Casualty Value of such Equipment. "Casualty Value" is determined by multiplying the Casualty Percentage by the Equipment Cost. Unless another percentage is specified in Additional Provisions in Paragraph 1 above, or otherwise provided hereunder, the "Casualty Percentage" is 20%. In the event that any amount calculate hereunder is required under applicable law to be discounted to present value, it shall be so discounted at a rate of 5% per annum. With respect to Equipment subject to a Loss, upon Lessor's full receipt of such Lessor's return: (i) the lease shall terminate, (ii) Lessee shall be relieved of its obligations under the lease, and (iii) Lessee shall be entitled to Lessor's interest in such Equipment "AS IS, WHERE IS" and without any warranty, express or implied from Lessor, other than the absence of any liens by, through, or under Lessor. 14. NONCANCELLABLE NET LEASE. This lease and all schedules hereto shall be noncancellable net leases. Lessee has an unconditional obligation to pay all lease payments and other amounts when due. Lessee is not entitled to abatements, reductions, recoupments, crossclaims, counterclaims or any other defenses to any lease payments or other amounts due hereunder. Whether those defenses arise out to claims by Lessee against Lessor. Lessor's assignee, supplier, this lease, any schedule, any other Lease, or otherwise. Neither defects in equipment, damage to it, not its loss, theft, destruction or late delivery shall terminate this or any other lease or relieve Lessee of its payment obligations hereunder. 15. ASSIGNMENT. LESSEE HAS NO RIGHT TO SELL, TRANSFER OR ASSIGN ANY INTEREST IT HAS IN THIS LEASE OR THE EQUIPMENT. LESSOR MAY, WITHOUT NOTICE, SELL, TRANSFER OR ASSIGN ITS INTEREST IN THIS LEASE, THE EQUIPMENT OR ANY LEASE PAYMENTS OR OTHER SUMS DUE HEREUNDER. If Lessor makes any such assignment or transfer, the new owner will have of the Lessor's rights and benefits but none of Lessor's obligations. The rights of the new owner will not be subject to any claims, defenses, or set-offs that Lessee may have against Lessor. Lessee acknowledges that any assignment or tranfer by Lessor shall not materially change Lessee's duties or obligations under this Lease 5 not materially increase the burdens or risks imposed on Lessee. 16. CAPTIONS, CONFLICTS, CHOICE OF LAW, VENUE, NON-JURY TRIAL. Captions are for convenience only and do not alter the text. The provisions of this Lease are severable and the remainder shall not be affected if any provision is held unenforceable, invalid or illegal. This Lease inures to the benefit of and is binding on successors or permitted assigns of Lessor and Lessee. THIS LEASE AND EACH SCHEDULE IS PERFORMABLE IN FLORIDA AND SHALL BE GOVERNED BY AND SUBJECT TO THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF FLORIDA. LESSOR AND LESSEE CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN FLORIDA, AND WAIVE ANY OBJECTIONS RELATING TO IMPROPER VENUE OR FORUM NON CONVENIENT TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT. AT LESSOR'S SOLE ELECTION AND DETERMINATION, ANY LEGAL, EQUITABLE, OR ARBITRATION ACTION MAY ALSO BE BROUGHT IN ANY OTHER COURT OF COMPETENT JURISDICTION IN ANY STATE IN WHICH LESSOR HAS AN OFFICE AND LESSEE WAIVES ANY OBJECTION RELATING TO IMPROPER VENUE OR FORUM NON CONVENIENT TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT. LESSEE, ANY GUARANTOR AND LESSOR EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY SO THAT TRIAL SHALL BE BY AND ONLY TO THE COURT. 17. ATTORNEY FEES. LESSEE AND ANY GUARANTOR AGREE TO PAY LESSOR'S REASONABLE ATTORNEY FEES AS DAMAGES AND NOT COSTS IN ALL PROCEEDINGS ARISING OUT OF THE LEASE. SUCH PROCEEDINGS INCLUDE, BUT ARE NOT LIMITED TO, ANY CIVIL ACTION, COUNTERCLAIMS MEDIATION, POST JUDGMENT COLLECTION, BANKRUPTCY OR APPEAL. REASONABLE ATTORNEY FEES ARE HEREBY STIPULATED AND LIQUATED BY ALL PARTIES HERETO AT TWENTY-FIVE PERCENT (25%) OF THE TOTAL AMOUNT PLACED BY LESSOR WITH AN ATTORNEY FOR COLLECTION. AT LESSOR'S SOLE OPTION, LESSOR MAY ELECT TO CHARGE LESSEE AND ANY GUARANTOR THE ACTUAL ATTORNEY FEES CHARGED TO LESSOR IN ALL PROCEEDING ARISING OUT OF THE LEASE. 18. LIABILITY. Lessee shall indemnify, hold harmless and, if lessor requests, defend Lessor against all Claims directly or indirectly arising out of or connected with the Equipment, any lease or any related document or instrument. "Claims" means all losses, liabilities, damages, penalties, expenses (including legal fees and costs), claims, actions and suits, whether in contract or in tort, whether caused by Lessor's negligence or otherwise and whether based on a theory of strict liability of Lessor or otherwise, including, but not limited to, matters regarding; (a) the selection, manufacture, purchase, acceptance, rejection, ownership, delivery, lease, possession, maintenance, use, condition, return or operation of Equipment: (b) any latent defects or other defects in Equipment, whether or not discoverable by Lessee; or (c) patent, trademark or copyright infringement. 19. CONSTRUCITON OF LEASE AND AMOUNT DUE HEREUNDER. In the event that this Lease (or any lease made hereunder) is construed to involve a loan of money and any amounts due hereunder are deemed to constitue interest, then without waiving any claim or defense to the contrary, no such amounts due hereunder which are contracted for, charged or collected 6 shall exceed 18% per annum or other lessor maximum rate of interest allowed from time to time by applicable state or federal law (the "Highest Lawful Rate"). Regardless of any provision of this Lease or related agreements to the contrary, the aggregate of all such amounts due hereunder which are contracted for, charged or collected shall under no circumstances exceed the Highest Lawful Rate, and in the event Lessor ever collects, or applies, as interest, any such amounts in excess of the Highest Lawful Rate, such amounts shall be deemed a prepayment of such portion of amounts due hereunder as are deemed to constitute the principal of a loan, and if all amounts so deemed to constitute principal have been or are thereby paid in full, any remaining excess shall immediately be refunded to Lessee. In determing whether or not amounts deemed to consitute interest contracted for, charged or collected exceed the Highest Lawful Rate, to the Maximum extent permitted by law, (a) amounts due hereunder shall be characterized as principal, or as a non-usurious expense, fee or premium rather than interest, (b) amounts deemed to constitute interest due hereunder after acceleration by reason a default or otherwise, or prepaid, shall not be deemed to constitute interest (but any portion of such amounts deemed to constitute interest contracted for, charged or collected in connection with such acceleration or prepayment may never exceed the Highest Lawful Rate) and (c) all amounts deemed to constitute interest shall be amortized, prorated, allocated and spread, in equal parts, throughout the entire term of this Lease so that the interest rate is uniform throughout the entire term of this Lease. Lessor may from time to time implement any interest rate ceiling under applicable state or federal law and/or revise the index, formula or provision used to compute the interest rate applicable to this Lease, but not in excess of the Highest Lawful Rate by notice to Lessee if and to the extent permitted by and in the manner provided in such law. 20. CREDIT INFORMATION. LESSEE HEREBY AUTHORIZED LESSOR OR ANY AFFILIATE OF LESSOR TO OBTAIN CREDIT BUREAU REPORTS, AND MAKE OTHER CREDIT INQUIRIES, AS LESSOR DEEMS NECESSARY. ON WRITTEN REQUEST, LESSOR WILL INFORM LESSEE WHETHER LESSOR REQUESTED A CONSUMER CREDIT REPORT AND THE NAME AND ADDRESS OF ANY CONSUMER CREDIT REPORTING AGENCY THAT FURNISHED A REPORT. WITHOUT FURTHER NOTICE TO LESSEE, LESSOR MAY USE OR REQUEST SUBSEQUENT CREDIT BUREAU REPORTS TO UPDATE ITS INFORMATION OR IN CONNECTION WITH A RENEWAL OR EXTENSION OF LESSEE'S REQUEST FOR LESSOR'S SERVICES. LESSEE REPRESENTS AND WARRANTS THAT THIS IS A COMMERCIAL AND BUSINESS TRANSACTION AND NOT A CONSUMER TRANSACTION. 7 EX-10.8 13 EXHIBIT 10.8 PURCHASE ORDER PURCHASER: MANSUR INDUSTRIES INC. ("Mansur' or "Purchaser") SUPPLIER: EMJAC INDUSTRIES INC. ("Emjac" or "Supplier') PRICE: $619.00 PER MODEL 500/570 UNIT; for up to the first 1,000 collective units, $743.92 per unit. $754.34 PER MODEL 550/555 UNIT; for up to the first 1,000 collective units, $906.66 per unit. Prices for up to the first 1,000 collective units is subject to Emjac's agreement to use its best efforts to reduce manufacturing costs and reduce the price of the units to which the higher price is applicable at the earliest opportunity. The price per unit shall be reduced by $168.01 ($99.00 per unit for the holding tank and $68.01 per unit for the wash tank) upon the completion and integration of plastic/nylon tanks supplied by Mansur. All prices FOB Emjac's warehouse. GOODS AND PRODUCTS: See Exhibit "A" attached hereto PAYMENT TERMS: $150,000.00 advance payment upon acceptance by Mansur of the prototype machine (the "Advance"), of which $50.00 shall be applied as advance partial payment on each of the first 3,000 units. Balance on completed inventories payable net 15 days from date of invoice. PROTOTYPE: One prototype machine (the "Prototype Machine") to be delivered by Emjac to Mansur no later than June 7, 1996. This Purchase Order is subject to acceptance of the Prototype Machine by Mansur, after Emjac makes all necessary changes or adjustments required to meet product specifications and Mansur standards. DELIVERY: Goods must be completed and ready for delivery in accordance with the schedule of delivery Exhibit "B" attached hereto. Delivery to be made promptly upon notification from Mansur, as directed by Mansur. Delivery is not included in Purchase Price. TERMS AND CONDITIONS: 1. Time is of the essence in Supplier's performance. If Supplier does not complete and deliver Goods by the dates specified herein, subject to the timely delivery by Purchaser of (i) the necessary manufacturing specifications and drawings and (ii) the proper direct materials and component parts free of any defects, the Purchase Price shall be reduced by 10% on those units delivered late. Purchaser reserves the right to procure elsewhere, in whole or in part, any goods which Supplier fails to deliver or provide in strict accordance with the agreed delivery schedule. In such event, Purchaser shall be entitled to recover from Supplier any additional costs incurred by Purchaser. 2. If Purchaser, at Purchaser's discretion, does not approve the Prototype Machine and Supplier does not promptly make changes to make the Prototype Machine acceptable to Purchaser, Purchaser shall not be obligated to purchase goods from Supplier, and Supplier shall immediately refund to Purchaser all payments made by Purchaser, less Supplier's cost of making the Prototype Machine, not to be in excess of $1,000.00. 3. Certain specifications and drawings for the Products have been furnished by Purchaser to Supplier, receipt of which is hereby acknowledged by Supplier, and shall continue to be routinely furnished by Purchaser to Supplier as required, such specifications and drawings to remain the sole property of the Purchaser including any and all improvements, changes and/or modifications with respect to the Products listed on Schedule A. 4. Supplier will manufacture in its own factory and sell exclusively to Purchaser the Products on the basis of Purchaser's specifications and drawings, and incorporating such changes and improvements therein as the parties may agree upon from time to time. The parties agree that final assembly, inspection and packing will at all times be done by Supplier in its own factory. 5. Manufacturing services provided by Supplier shall include all sheet metal fabrication, painting, final assembly, testing all manufactured component parts and final quality and performance assurance testing. All sheet metal costs are included in the manufacturing fee; however, if the cost of sheet metal increases or decreases during the term hereof, the fee shall be adjusted accordingly, on a dollar for dollar basis, using a base price for the purpose of this provision of $0.30 per pound, excluding an agreed 20% markup by Emiac on direct materials purchased by Emjac. 6. All component parts and materials shown on the plans or specifications as being supplied by Purchaser shall be installed or assembled by Supplier in the Products without markup. 7. Purchaser shall be responsible for all hard tooling required for manufacturing operations. Supplier shall advise Purchaser in advance of the estimated cost of all hard tooling. Upon approval of Purchaser, Purchaser shall be responsible for payment therefor. Upon such payment, all hard tooling shall be and remain the property of Purchaser and shall be delivered to Purchaser at its request. 8. At no expense to Purchaser, Supplier shall prepare a full set of manufacturing drawings to ANSI standards. All drawings shall be and remain the property of Purchaser and shall be delivered to Purchaser at its request. 9. Supplier expressly warrants and guarantees, in addition to all other statutory and implied warranties and guarantees, that all Products shall be (i) of the highest quality and in strict compliance with all applicable specifications, samples, or other descriptions furnished and approved by Purchaser; (ii) free from defects in material and workmanship; and (iii) fit and sufficient for their intended purposes. 10. Supplier shall not assign this contract without Purchasers prior written consent. This Contract shall be governed by Florida law and Supplier submits to jurisdiction and venue in Dade County, Florida. 11. Purchaser reserves the right to terminate the contract for its own convenience, in whole or in part, for any reason. In the event of such termination for convenience, Supplier shall comply with all requirements of Purchaser and agrees that its compensation shall be limited to only those costs, if any, which shall have been incurred in the manufacture of the goods through the date of termination. Notwithstanding the foregoing, if the termination occurs prior to the delivery of 3,000 Units, Emjac shall be entitled to full payment for units produced through the date of termination and retain any unapplied Advance as liquidated damages. 12. Supplier shall provide standard shipping skids and shrink wrap units so as to meet all requirements of sale carriage and transportation at no charge to the Purchaser. Any special crating, boxing or other special packaging requirements shall be paid for by the Purchaser. Risk of loss shall be with Supplier until delivery is received and accepted by Purchaser. 13. Nothing in this Agreement shall prevent the Purchaser from purchasing Products of the kind contemplated by this Agreement from persons other than the Supplier, whether or not such others shall be in competition with Supplier. 14. Supplier hereby agrees, upon the request of Purchaser, to cooperate in obtaining all Underwriter Laboratories (UL) multiple listings required or desirable in connection with the manufacture and sale of the Products and to execute and deliver such other documents, and take such other action, as shall be reasonably requested to carry out the transactions contemplated by this Agreement. 15. Supplier understands and acknowledges that the Products are proprietary to Purchaser and hereby covenants, warrants and represents to Purchaser that, during the Term of this Agreement and for all periods without limitation following its termination: (i) all Products manufactured by it hereunder, including the Prototype Machine, shall not be sold, delivered or otherwise disposed of, by Supplier or any of its Affiliates or Subsidiaries, to any individual or entity except Purchaser; (ii) the design, the specifications and drawings for such Products shall not be sold, delivered or otherwise disposed of, by Supplier or any of its Affiliates or Subsidiaries, to any individual or entity except Purchaser; and (iii) all materials and information provided by Purchaser to Supplier shall remain the property of Purchaser and shall be maintained as confidential and not disclosed to any person or entity without the express written consent of Purchaser. 16. Purchaser retains all rights to all trademarks, trade names and proprietary information relating to the Product. The Confidentiality Agreements by and between Purchaser and Emjac, Emile Dorta personally and David Dorta personally dated February 1, 1996 shall remain in full force and effect. WITNESS the due execution hereof as of the 7th day of May, 1996. SUPPLIER: EMJAC INDUSTRIES INC. By:______________________________________ Emile Dorta, President PURCHASER: MANSUR INDUSTRIES INC. By:______________________________________ Paul I. Mansur, Chief Executive Officer EXHIBIT A PRODUCTS 3,000 Assorted Units SYSTEMONE RECYCLING PARTS WASHERS MODEL 500 MODEL 550 MODEL 555 MODEL 570 EXHIBIT B SCHEDULE OF DELIVERY Minimum Maximum Month Units Units August 1996 100 100 September 100 200 October 100 300 November 200 400 December 200 500 January 1997 200 500 February 300 500 March 300 500 April 300 500 May 400 500 June 400 500 July 400 500 TOTAL 3000 5000 Emjac shall deliver units in accordance with the minimum units schedule. Mansur shall notify Emjac, no less than 60 days prior to the scheduled delivery month, of any increase in units ordered over the minimum unit level, up to the maximum units indicated above for the respective scheduled month. EX-10.9 14 EXHIBIT 10.9 LEASE THIS AGREEMENT, hereinafter called the lease, entered into as of the 29th day October 1994, between Marvin L Duncan hereinafter called the Lessor, party of the first part, and Mansur Industries Inc. hereinafter called the Lessee, or tenant, party of the second part. Witnesseth, that the said Lessor does this day lease unto said Lessee, and said Lessee does hereby hire and take as tenant under said Lessor, that certain space, located at 8415 & 8425 SW 129 Terrace, being all of the building, located on Lot 15, Bl.l, South Kendall Industrial No. 1 Plat Book 57, Page 59, Public Record of Dade County Florida. To be used and occupied for a warehouse, office, manufacturing and sales space and for no other uses or purposes for a term of Twenty four (24) months beginning on the first (1) day of January 1995 and ending on the thirty first (31) day of December 1996, at and for the agreed total rental of $114,796.00 plus tax, payable $5094.00 per month, beginning January 1,1995 and a like sum on the first (1) day of each month thereafter until paid. The Lessor acknowledges receipt of the sum of $10,188.00 which will be held by Lessor as security for the faithful performance of this lease. If the Lessee breaches this lease in any particular, the foregoing security deposit shall be retained by the Lessor as liquidated damages for such breach. If at the end of the lease term, the Lessee has faithfully performed all of the covenants of this lease, the aforementioned security deposit shall be paid to the lessee within forty five (45) days. All payments are to be made to the Lessor on the first (1) day of each and every month without demand, at 621 SE 45th Terrace, Ocala Florida, or at such other place or to such other person as the Lessor may from time to time designate to the Lessee in writing. The following express stipulations and conditions are made a part of this lease and are hereby assented to by the Lessee: FIRST: The Lessee shall not assign this lease, nor sublet the premises, or any part thereof, nor permit the same, or any part thereof, to be used for any other purpose than as above stipulated, nor to penetrate the roof of the building for any purpose or in any manner, nor make any alterations therein, except improvements to the offices, without the written consent of the Lessor, and all additions, fixtures or improvements which may be made by the Lessee, except movable office furniture, shall become the property of the Lessor and remain upon the premises as a part thereof and be surrendered with the premises at the termination of this lease term. SECOND: All personal property placed or moved into the premises above described shall be at the risk of the Lessee or the owner thereof,and the Lessor shall not be liable for any damage to the said personal property or to the Lessee arising from the bursting or leaking of water pipes,or from any act of negligence of any other person whomsoever. THIRD: The Lessee shall promptly execute and comply with all the statutes, ordinances, regulations and requirements of the FEDERAL,STATE,COUNTY and LOCAL Governments and any and all their departments and bureaus applicable to the said premises,for the correction, prevention and abatement of nuisances, or other grievances in,upon,or connected with the said premises during the term of this lease and shall also promptly comply with all the rules, orders and regulations of the METROPOLITAN DADE COUNTY FIRE DEPARTMENT for the prevention of fires at Lessee's own cost and expense. Lessee agrees to pay any increase in fire insurance premiums over and above the premium amounts now in effect if such increase is caused by the Lessee's use or occupancy of the premises. This increase, if any, plus tax, shall be paid to the Lessor, monthly, along with the rental payment. FOURTH: IN the event the premises shall be destroyed or so damaged or injured by fire or other casualty during the term of the lease, whereby the same shall be rendered, in the opinion oi the lessee, untenantable, then the Lessor shall have the right to render such premises tenantable with repairs within ninety (90) days therefrom. If said premises are not rendered tenantable by the lessor within the said time, it shall be optional with either party hereto to cancel this lease, and, in the event of such cancellation, the rent shall be paid only through the date of such fire or casualty. The cancellation herein mentioned shall be in writing. FIFTH: The prompt payment of the rent for the said premises upon the dates named and the faithful observance of the stipulations and conditions written in this lease, and which are hereby made a part of this covenant, are the conditions upon which this lease are made and accepted, and any failure on the part of the Lessee to comply with the terms of this lease shall, at the option of the Lessor, work a forfeiture of this agreement. SIXTH: If the Lessee shall abandon or vacate the premises before the end of the term of this lease, or shall suffer the rent to be in arrears, the Lessor may, at his option, forthwith cancel this lease, or he may enter the premises as the agent of the Lessee, without being liable in any way therefore, and relet the premises, with or without any furniture that may be therein, as the agent of the Lessee, at such rent and upon such terms and such duration of time as the Lessor may determine, and Lessor shall receive such rent and thereof, applying the same to the payment of the rent due by these presents, and if the full rental herein provided shall not be realized by the Lessor over and above the reasonable expenses to the Lessor in such reletting, the said Lessee shall pay any deficiency, and if more than the full rental is realized, Lessor will pay over to the Lessee the excess of demand until the term of this lease has expired. SEVENTH: Lessee agrees to pay the reasonable costs of the collection and reasonable attorneys fees on any part of the said rental that may be collected by suit or by attorney after the same is past due. EIGHTH: The Lessee agrees that it will pay all charges for gas, water, sewer, trash, collection and electricity. NINTH: It is understood and agreed that any merchandise, furniture or equipment left in the premises when Lessee vacates shall be deemed to have been abandoned by the Lessee, and such abandonment by the Lessee automatically relinquishes any right or interest therein. Lessor is authorized to sell, dispose, or destroy same, if such merchandise, furniture, and equipment is not removed by Lessee. TENTH: It is hereby understood and agreed between Lessor and Lessee that all presently existing electrical wiring, plumbing, windows, partitions, air conditioning units and permanent attachments to the premises, that are now or may be installed by the Lessee shall remain a part of the premises at the expiration of the lease term. ELEVENTH: The Lessor or any of his agents shall have the right to enter the said premises during all reasonable hours to examine the same, to make such repairs, additions or alterations as may be deemed necessary for the safety, comfort or preservation of said building, or to exhibit said premises, and to put or keep upon the doors or windows thereof a notice "FOR RENT" at any time within thirty (30) days before the expiration of the lease term. The right of entry shall likewise exist for the purpose of removing placards, signs, fixtures, alterations or additions which do not conform to this lease, or with rules, orders, regulations, statutes or ordinances to which the premises may be subject. TWELFTH: Lessee hereby accepts the premises in the condition they are at the beginning of the lease term and agrees to maintain said premises in the same condition,order and repair as they are at the beginning of said term,excepting only reasonable wear and tear arising from the use thereof under this lease,and to make good to said Lessor immediate upon demand any damage to plumbing,electric lights, or any fixture,appliance or appurtenances of said premises,or of the building,caused by any act or negligence of Lessee,or of any person or persons in the employ or under the control of the Lessee.The Lessor hereby represents and warrants that the premises and the building and all electrical wiring,plumbing,fixtures,machinery,and the like are in good working order and repair at the beginning of the lease term. THIRTEENTH: It is expressly agreed and understood by and between the parties to this lease that the Lessor shall not be liable for any damage or injury by water which may be sustained by the tenant or other person,or for any other damage or injury resulting from the carelessness,negligence or improper conduct on the part of any other tenant or agent or employees of tenant or any other tenant,or by the reason of the breakage,leakage or obstruction of the water,sewer or soil pipes or other leakage in or about the building. FOURTEENTH: If the Lessee shall become insolvent,or if bankruptcy proceedings shall commence by or against the Lessee and are not terminated within sixty (60) days,the Lessor is hereby irrevocably authorized,at his option,to forthwith cancel this lease as for a default.Lessor may elect to accept rent from such receiver,trustee or other judicial officer during the term of their occupancy in their fiduciary capacity without effecting Lessor's rights as contained in this agreement,but no receiver,trustee or other judicial officer shall ever have any right,title or interest in or to the above described property by virtue of this agreement. FIFTEENTH: Lessor agrees to keep the exterior and the structural interior part of the premises in good repair.Lessee shall give the Lessor seven (7) days written notice of needed repairs,and Lessor shall have a reasonable time thereafter to make them.However,if any part of the exterior or interior of the premises is injured or damaged by any breaking and/or entering of said premises,or by any attempt to break and/or enter said premises by any third person or persons,Lessee agrees to promptly cause all necessary repairs to be made at Lessee's expense so as to promptly restore said premises to its condition immediately prior to said breaking and/or entering or said attempt to break and/or enter. SIXTEENTH: This lease shall bind the Lessor and its assigns or successors,and the heirs,assigns,administrators,legal representatives,executors or successors,as the case may be of the Lessee. SEVENTEENTH: It is understood and agreed between the parties hereto,that time is of the essence of this lease and that applies to all terms and conditions contained herein. EIGHTEENTH: It is understood and agreed by and between the parties hereto that written notice mailed certified,return receipt requested,or delivered to the premises hereunder shall constitute sufficient notice to the Lessee,and written notice mailed certified,return receipt requested,or delivered to Marvin L Duncan,621 SE 45 Terrace,Ocala Florida,34471,shall constitute sufficient notice to the Lessor. NINETEENTH: The rights of the Lessor under the foregoing shall be cumulative,and failure on the part of the Lessor to exercise promptly any rights given hereunder shall not operate to forfeit any of the said rights. TWENTIETH: It is further understood and agreed between the parties that any charge against the Lessee by the Lessor for services or work done on the premises by order of the Lessee or otherwise accruing pursuant to the terms of the lease, shall be considered as rent due and shall be included in any lien for rent due and unpaid. TWENTY-FIRST: It is hereby understood and agreed that any signs or advertising to be used,including awnings,in connection with the premises leased hereunder shall be first submitted to the Lessor for approval before installation of same. TWENTY-SECOND: The Lessee agrees to keep the front of the premises clean and clear of waste cans,containers, equipment,machinery etc. and agrees to keep all of the exterior of the premises clean and clear,except for the automobiles and trucks used by the Lessee,or others in connection with the business of the Lessee, and further agrees to control the parking and traffic by his employee's or customers,so as not to restrict the normal ingress and egress of trucks and automobiles used by an adjoining Lessee or others in connection with the business of an adjoining Lessee. TWENTY-THIRD: Lessee agrees to keep the non-structural interior of said premises,all windows,screens,awnings,doors and non-structural interior walls,pipes,machinery, plumbing,electrical wiring and other fixtures and interior appurtenances,in good condition and repair at Lessee's expense,fire,windstorm and others acts of God excepted.All glass,both interior and exterior,is at the sole risk of Lessee and Lessee agrees to replace any glass broken during the term of this lease.Lessor shall solely be responsible for all structural repairs to the premises'and building. TWENTY-FOURTH: The Lessee agrees to include the Lessor as an additional insured,as his interest may appear,for public liability and property damage insurance for the premises,for an amount not less than $1,000,000 each occurrence and $1,000,000 aggregate liability. TWENTY-FIFTH: If the sums mentioned herein are paid promptly when due,Lessee shall have the option of renewing this lease for two (2) two (2) year terms,by giving the Lessor,sixty (60) days written notice, on the same terms and condition as provided in this lease,except that the rent provided herein shall increase by ten (10) percent during each extended term. TWENTY-SIXTH: Not withstanding anything in this lease to the contrary, if the sums mentioned herein are paid promptly when due and Lessee has complied with the terms and conditions of this lease, Lessee shall have the option of cancelling this lease without penalty upon providing minimum one hundred fifty (150) days advance written notice to Lessor to vacate. In witness whereof,the parties hereto have hereunto executed this agreement for the purpose herein expressed,the day and year first written above Mansur Industries Inc. /s/ [ELLIGIBLE] /s/ PIERRE G. MANSUR --------------- ---------------------------- Witness Pierre G. Mansur, President /s/ [ELLIGIBLE] --------------- Witness /s/ MARY EMILY LEE --------------- Mary Emily Lee Witness /s/ LINDA A. DAIGLE /s/ MARVIN L. DUNCAN --------------- ---------------------------- Linda A. Daigle Marvin L. Duncan, Lessor Witness EX-10.10 15 EXHIBIT 10.10 Security Agreement For Business Loans other than Inventory Loans in all States (except Texas) by The CIT Group/Equipment Financing, Inc. or Dealer. In Louisiana, form 5-SA-2305 must accompany this Agreement. 1. GRANT OF SECURITY INTEREST; Description of Collateral. Debtor grants to Secured Party a security interest in the property described below. along with all present and future attachments and accessories thereto and replacements and proceeds thereof, including amounts payable under any insurance policy, all hereinafter referred to collectively as "Collateral": (Describe Collateral fully including make, kind of unit, model and serial numbers and any other pertinent information.) One (1) Trumpf TC 200 CNC Punching Machine, S/N 070080 with Tooling Package including all substitutions, additions, attachments, replacements, accessions, and the proceeds of all of the foregoing. 2. What Obligations the Collateral Secures. Each item of the Collateral shall secure not only the specific amount which Debtor promises to pay in Paragraph 3 below, but also all other present and future Indebtedness or obligations of Debtor to Secured Party of every kind and nature whatsoever. 3. Promise to Pay; Terms and Place of Payment. Debtor promises to pay Secured Party the total sum of $341,397.00 which represents principal and interest precomputed over the term hereof, payable in 60 (total number) combined principal and interest payments as follows: EqualSuccessive Monthly Payments $ 5,689.95 beginning on ________,l9___, and the same amount on the same date of each month thereafter until fully paid, provided, however, that the final payment shall be in the amount of the then unpaid balance of principal and interest. Other Than Equal Successive Monthly Payments Payment shall be made at the address of Secured Party shown herein or such other place as Secured Party may designate from time to time. 4. Use and Location of Collateral. Debtor warrants and agrees that the Collateral is to be used primarily for: [ ] business or commercial purposes (other than agricultural), [ ] agricultural purposes (see definition on the final page), or [ ] both agricultural and business or commercial purposes. Location: 8125 SW 129th Terrace Miami Dade FL City County State Debtor and Secured Party agree that regardless of the manner of affixation, the Collateral shall remain personal property and not become part of the real estate. Debtor agrees to keep the Collateral at the location set forth above and will notify Secured Party promptly in writing of any change in the location of the Collateral within such State, but will not remove the Collateral from such State without the prior written consent of Secured Party (except that in the State of Pennsylvania, the Collateral will not be moved from the above location without such prior written consent). 5. Late Charges. Any payment not made when due shall, at the option of Secured Party, bear late charges thereon calculated at the rate of 1 1/2% per month, but in no event greater than the highest rate permitted by relevant law. 6. Debtor's Warranties and Representations. Debtor warrants and represents: (a) that Debtor is justly indebted to Secured Party for the full amount of the indebtedness described in Paragraph 3; (b) that, except for the security interest granted hereby, the Collateral is free from and will be kept free from all liens, claims, security interests and encumbrances; 6. Debtor's Warranties and Representations (Continued) (c) that no financing statement covering the Collateral or any proceeds thereof is on file in favor of anyone other than Secured Party, but if such other financing statement is on file, it will be terminated or subordinated; (d) that all information supplied and statements made by Debtor in an financial, credit or accounting statement or application for credit prior to, contemporaneously with or subsequent to the execution of this Security Agreement with respect to this transaction are and shall be true, correct, valid and genuine; and (e) that Debtor has full authority to enter into this Security Agreement and in so doing it is not violating its charter or by-laws, any law or regulation or agreement with third parties, and it has taken all such action as may be necessary or appropriate to make this Security Agreement binding upon it. 7. Debtor's Agreements. Debtor agrees: (a) to defend at Debtor's own cost any action, proceeding, or claim affecting the Collateral; (b) to pay reasonable attorneys' fees (at least 15% of the unpaid balance if not not prohibited by law) and other expenses incurred by Secured Party in enforcing its rights against Debtor under this Security Agreement; (c) to pay promptly all taxes, assessments, license fees and other public or private charges when levied or assessed against the Collateral or this Security Agreement; and this obligation shall survive the termination of this Security Agreement; (d) that, if a certificate of title is required or permitted by law, Debtor shall obtain such certificate with respect to the Collateral, showing the security interest of Secured Party thereon and in any event do everything necessary or expedient to preserve or perfect the security interest of Secured Party; (e) that Debtor will not misuse, fail to keep in good repair, secrete, or without the prior written consent of Secured Party, sell, rent, lend, encumber or transfer any of the Collateral notwithstanding Secured Party's right to proceeds; (f) that Secured Party may enter upon Debtor's premises or wherever the Collateral may be located at any reasonable time to inspect the Collateral and Debtor's books and records pertaining to the Collateral, and Debtor shall assist Secured Party in making such inspection; and (g) that the security interest granted by Debtor to Secured Party shall continue effective irrespective of the payment of the amount in Paragraph 3, or in any promissory note executed in connection herewith, so long as there are any obligations of any kind, including obligations under guaranties or assignments, owed by Debtor to Secured Party, provided, however, upon any assignment of this Security Agreement the Assignee shall thereafter be deemed for the purpose of this Paragraph the Secured Party under this Security Agreement. 8. Insurance and Risk of Loss. All risk of loss, damage to or destruction of the Collateral shall at all times be on Debtor. Debtor will procure forthwith and maintain at Debtor's expense insurance against all risks of loss or physical damage to the Collateral for the full insurable value thereof for the life of this Security Agreement plus breach of warranty insurance and such other insurance thereon in amounts and against such risks as Secured Party may specify, and shall promptly deliver each policy to Secured Party with a standard long-form mortgagee endorsement attached thereto showing loss payable to Secured Party; and providing Secured Party with not less than 30 days written notice of cancellation; each such policy shall be in form, terms and amount and with Insurance carriers satisfactory to Secured Party; Secured Party's acceptance of policies in lesser amounts or risks shall not be a waiver of Debtor's foregoing obligations. As to Secured Party's interest in such policy, no act or omission of Debtor or any of its officers, agents, employees or representatives shall affect the obligations of the insurer to pay the full amount of any loss. Debtor hereby assigns to Secured Party any moneys which may become payable under any such policy of insurance and irrevocably constitutes and appoints Secured Party as Debtors attorney in fact (a) to hold each original insurance policy, (b) to make, settle and adjust claims under each policy of insurance, (c) to make claims for any moneys which may become payable under such and other insurance on the Collateral including returned or unearned premiums and (d) to endorse Debtor's name an any check, draft or other instruments received in payment of claims or returned or unearned premiums under each policy and to apply the funds to the payment of the indebtedness owing to Secured Party; provided, however, Secured Party is under no obligation to do any of the foregoing. Should Debtor fail to furnish such insurance policy to Secured Party, or to maintain such policy in full force, or to pay any premium in whole or in part relating thereto, then Secured Party, without waiving or releasing any default or obligation by Debtor, way (but shall be under no obligation to) obtain and maintain insurance and pay the premium therefor on behalf of Debtor and charge the premium to Debtor's indebtedness under this Security Agreement. The full amount of any such premium paid by Secured Party shall be payable by Debtor upon demand, and failure to pay same shall constitute an event of default under this Security Agreement. 9. Events of Default; Acceleration. A very important element of this Security Agreement is that Debtor make all its payments promptly as agreed and that the Collateral continue to be in good condition and adequate security for the indebtedness. The following are events of default under this Security Agreement which will allow Secured Party to take such action under this Paragraph and under Paragraph 10 as it deems necessary: (a) any of Debtor's obligations to Secured Party under any agreement with Secured Party is not paid promptly when due; (b) Debtor breaches any warranty or provision hereof, or of any note or of any other instrument or agreement delivered by Debtor to Secured Party in connection with this or any other transaction; 9. Events of Default; Acceleration (Continued) (c) Debtor dies, becomes insolvent or ceases to do business as a going concern; (d) it is determined that Debtor has given Secured Party materially misleading information regarding its financial condition; (e) any of the Collateral is lost or destroyed; (f) a petition or complaint in bankruptcy or for arrangement or reorganization or for relief under any insolvency law is filed by or against Debtor or Debtor admits its inability to pay its debts as they mature; (g) property of Debtor is attached or a receiver is appointed for Debtor, (h) whenever Secured Party in good faith believes the prospect of payment or performance is impaired or in good faith believes the Collateral is insecure; (i) any guarantor, surety or endorser for Debtor dies or defaults in any obligation or liability to Secured Party or any guaranty obtained in connection with this transaction is terminated or breached. If Debtor shall be in default hereunder, the indebtedness herein described and all other indebtedness then owing by Debtor to Secured Party under this or any other present or future agreement (collectively, the "Indebtedness") shall, if Secured Party shall so elect, become immediately due and payable and the unpaid principal balance of the indebtedness described in Paragraph 3, or in any promissory note executed in connection herewith, shall bear interest at the rate of 18% per annum (but in no event greater than the highest rate permitted by relevant law) until paid in full. In no event shall the Debtor, upon demand by Secured Party for payment of the Indebtedness, by acceleration of the maturity thereof or otherwise, be obligated to pay any interest in excess of the amount permitted by law. Any acceleration of Indebtedness, is elected by Secured Party, shall be subject to all applicable laws, including laws relating to rebates and refunds of unearned charges. 10. Secured Party's Remedies After Default; Consent to Enter Premises. Upon Debtor's default and at any time thereafter, Secured Party shall have all the rights and remedies of a secured party under the Uniform Commercial Code and any other applicable laws, including the right to any deficiency remaining after disposition of the Collateral for which Debtor hereby agrees to remain fully liable. Debtor agrees that Secured Party, by itself or its agent, may without notice to any person and without judicial process of any kind, enter into any premises or upon any land owned, leased or otherwise under the real or apparent control of Debtor or any agent of Debtor where the Collateral may be or where Secured Party believes the Collateral may be, and disassemble, render unusable and for repossess all or any item of the Collateral, disconnecting and separating all Collateral from any other property. Debtor expressly waives all further rights to possession of the Collateral after default and all claim for injuries suffered through or loss caused by such entering and/or repossession. Secured Party may require Debtor to assemble the Collateral and return it to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties. Secured Party may sell or lease the Collateral at a time and location of its choosing provided that the Secured Party acts in good faith and in a commercially reasonable manner. Secured Party will give Debtor reasonable notice of the time and place of any public sale of the Collateral or of the time after which any private sale or any other intended disposition of the Collateral is to be made. Unless otherwise provided by law, the requirement of reasonable notice shall be met if such notice is mailed, postage prepaid. to the address of Debtor shown herein at least ten days before the time of the sale or disposition. Expenses of retaking, holding, preparing for sale, selling and the like shall include reasonable attorneys' fees and other legal expenses. Debtor understands that Secured Party's rights are cumulative and not alternative. 11. Waiver of Defaults; Agreement Inclusive. Secured Party may in its sole discretion waive a default, or cure, at Debtor's expense, a default. Any such waiver in a particular instance or of a particular default shall not be a waiver of other defaults or the same kind of default at another time. No modification or change in the Security Agreement or any related note, instrument or agreement shall bind Secured Party unless in writing signed by Secured Party. No oral agreement shall be binding. 12. Financing Statements; Certain Expenses. If permitted by law, Debtor authorizes Secured Party to file a financing statement with respect to the Collateral signed only by Secured Party, and to file a carbon, photograph or other reproduction of this Security Agreement or of a financing statement. At the request of Secured Party, Debtor will execute any financing statements, agreements or documents, in form satisfactory to Secured Party which Secured Party may deem necessary or advisable to establish and maintain a perfected security interest in the Collateral, and will pay the cost of filing or recording the same in all public offices deemed necessary or advisable by Secured Party. Debtor also agrees to pay all costs and expenses incurred by Secured Party in conducting UCC, tax or other other searches against the Debtor or the Collateral and such other fees as may be agreed. 13. Waiver of Defenses Acknowledgment. If Secured Party assigns this Security Agreement to a third party ("Assignee"), then after such assignment: (a) Debtor will make all payments directly to such Assignee at such place as Assignee may from time to time designate in writing; (b) Debtor agrees that it will settle all claims, defenses, setoffs and counterclaims it may have against Secured Party directly with Secured Party and will not set up any such claim, defense, setoff or counterclaim against Assignee, Secured Party hereby agreeing to remain responsible therefor; (c) Secured Party shall not be Assignee's agent for any purpose and shall have no authority to change or modify this Security Agreement or any related document or instrument; and (d) Assignee shall have all of the rights and remedies of Secured Party hereunder but none of Secured Party's obligations. 14. Miscellaneous. Debtor waives all exemptions. Secured Party may correct patent errors herein and fill in such blanks as serial numbers, date of first payment and the like. Any provisions hereof contrary to, prohibited by or invalid under applicable laws or regulations to be inapplicable and deemed omitted herefrom, but shall not invalidate the remaining provision's hereof. Except as otherwise provided herein or by applicable law, the Debtor shall have no right to prepay the indebtedness described in Paragraph 3, or in any promissory note executed in connection with this Security Agreement. Debtor and Secured Party each hereby waive any right to a trial by jury in any action or proceeding with respect to, in connection with, or arising out of this Security Agreement, or any note or document delivered pursuant to this Security Agreement. Debtor acknowledges receipt of a true copy and waives acceptance hereof. If Debtor is a corporation, this Security Agreement is executed pursuant to authority of its Board of Directors. Except where the context otherwise requires, "Debtor" and "Secured Party" include the heirs, executors or administrators, successors or assigns of those parties but nothing herein shall authorize Debtor to assign Security Agreement or its rights in and to the Collateral. If more than one Debtor executes this Security Agreement their obligations under this Security Agreement shall be joint and several. If at any time this transaction would be usurious under applicable law, then regardless of any provision contained in this Security Agreement or in any other agreement made in connection with this transaction, it is agreed that: (a) the total of all consideration which constitutes interest under applicable law that is contracted for, charged or received upon this Security Agreement or any such other agreement shall under no circumstances exceed the maximum rate of interest authorized by applicable law and any excess shall be credited to the Debtor; and (b) if Secured Party elects to accelerate the maturity of, or if Secured Party permits Debtor to prepay the Indebtedness, any amounts which because of such action would constitute interest may never include more than the maximum rate of interest authorized by applicable law, and any excess interest, if any, provided for in this Security Agreement or otherwise, shall be credited to Debtor automatically as of the date of acceleration or prepayment. 15. Special Provisions. See Special Provisions Instructions below. The debtor shall have the right to pre-pay the contract for the amount then owing under the following schedule: during the first twelve (12) month period on a true actuarial basis plus 2%; during the remainder of the contract for the amount then owing on a true actuarial basis. No unearned income shall apply and the Rule of 78(or any form thereof) shall not apply. This special provision clause shall supersede any other provision contained in this contract to the contrary. Dated:_____________,19_____ Debtor: Secured Party: The CIT Group/Equipment Financing, Inc. Mansur Industries Inc. ______________________________________ __________________________________ Name of individual, corporation Name of individual, corporation or partnership or partnership By____________________ By/s/ PIERRE MANSUR Title___________ Title: President 1180 West Swedesford Road 8425 SW 129th Terrace _________________________ ___________________________ Address Address Berwyn PA 19312 Miami FL 33156 _________________________ ___________________________ City State Zip Code City State Zip Code _______________________________________________________________________________ If Debtor is partnership, enter: Partners' names Home addresses _______________________________________________________________________________ SPECIAL PROVISIONS INSTRUCTIONS - The notations to be entered in the Special Provisions section o document for use in ALABAMA, FLORIDA, GEORGIA, IDAHO, NEVADA, NEW HAMPSHIRE and OREGON are shown In the applicable State pages of the Loans and Motor Vehicles Manual. _______________________________________________________________________________ NOTICE: Do not use this form for transactions for personal, family or household purposes. For agricultural and other transactions subject to Federal or State regulations, consult legal counsel to determine documentation requirements. Agricultural purposes generally means farming, including dairy farming, but it also includes the transportation, harvesting, and processing of farm, dairy, or forest products if what is transported, harvested, or processed is farm, dairy, or forest products grown or bred by the user of the equipment Itself. It does not apply, for instance, to a logger who harvests someone else's forest, or a contractor who prepares land or harvests products on someone else's farm. _______________________________________________________________________________ IN LOUISIANA, form 5-SA-2305 (Addendum to Security Agreements 5-SA-1700, 5-SA-1702 and 5-SA-1703) must accompany this Agreement. STATE OF FLORIDA UNIFORM COMMERCIAL CODE FINANCING STATEMENT FORM UCC-1 (REV.1993) This Financing Statement is presented to a filing officer for filing pursuant to the Uniform Commercial Code: 1. Debtor (Last Name First if an Individual) 1a. Date of Birth or FEI# Mansur Industries, Inc. 1b. Mailing Address 1c. City, State 1d. Zip Code 8425 SW 129th Terrace Miami, FL 33156 2. Additional Debtor or Trade Name (Last Name First if an Individual 2a. Date of Birth or FEI# 2b. Mailing Address 2c. City, State 2d. Zip Code 3. Secured Party (Last Name First if an Individual) The CIT Group/Equipment Financing, Inc. 3a. Mailing Address 3b. City, State 3c. Zip Code 1180 W. Swedesford Road Berwyn, PA 19312 4. Additional Secured Party (Last Name First if an Individual) 4a. Mailing Address 4b. City, State 4c. Zip Code 5. This Financing Statement covers the following types or Items or property, [include description of real property on which located and owner or record when required. If more space is required, attach additional sheet(s)] One (1) Trumpf TC 200 CNC Punching Machine, S/N 070080 with Tooling Package including all substitutions, additions, attachments, replacements, accessions, and the proceeds of all of the foregoing. 6. Check only if Applicable: ___Products of collateral are also covered. ___Proceeds of collateral are also covered. ___Debtor is transmitting utility. 7. Check appropriate box: (One box must be marked) ___All documentary stamp taxes due and payable or to become due and payable pursuant to s.201.22F.S., have been paid. ___Florida Doocumentary Stamp Tax is not required. 8. In accordance with s.679.402(2), F.S., this statement is filed without the Debtor's signature to perfect a security interest in collateral: ___already subject to a security interest in another jurisdiction when it was brought into this state or debtor's location changed to this state. ___which is proceeds of the original collateral described above in which a security interest was pefected. ___as to which the filing has lapsed, Date filed__________________ and previous UCC-1 file number_________________________________. ___acquired after a change of name, identity, or corporate structure of the debtor. 9. Number of additional sheets presented: ____________________ 10. Signature(s) of Debtor(s) Mansure Industries, Inc. /s/ PIERRE MANSUR, President 11. Signature(s) of Secured Party or if Assigned, by Assignee(s) The CIT Group/Equipment Financing, Inc. 12. Return Copy to: Address Address City, State, Zip This Space for Use of Filing Officer ____________________, 19____ THE CIT GROUP/EQUIPMENT FINANCING, INC. 1180 West Swedesford Road _________________________ Address Berwyn, PA 19312 _________________________ City & State Gentlemen: You are irrevocably instructed to disburse the proceeds of your loan to us, evidenced by our Security Agreement of even date, as follows: Payee Names and Addresses Amount _____________________________________________ _________________ Trumpf, Inc. The CIT Group/Equipment Financing, Inc. $251,910.00 (Non-Refundable Processing Fee) $1,000.00 $ $ $ $ $ Total Proceeds $252,910.00 Very truly yours, Mansur Industries, Inc. _______________________________________________ By: /s/PIERRE MANSUR Title: PRESIDENT Page 1 of 1 EX-10.11 16 EXHIBIT 10.11 THE INSURED PIERRE GERARD MANSUR POLICY OWNER MANSUR INDUSTRIES INC FACE AMOUNT $1,000,000 INITIAL TERM EXPIRY DATE NOV 9 1994 POLICY NUMBER 93 04; 982 THE EQUITABLE Life Assurance Society of the United States Agrees /bullet/ To PAY the insurance benefits of this policy to the Beneficiary upon receiving proof that the Insured died before the Term Expiry Date; and /bullet/ To PROVIDE YOU (THE POLICY OWNER) with the other rights and benefits of this policy. These agreements are subject to the provisions of this policy. TEN DAYS TO EXAMINE POLICY - If for any reason you are not satisfied with your policy, you may cancel it by returning the policy to us within 10 days after you receive it. If you do, we will refund the premium that was paid. /s/ RICHARD H. JENRETTE Richard H. Jenrette, Chairman and Chief Executive Officer /s/ MOLLY K. HEINES Molly K. Heines, Vice President and Secretary Yearly Renewable Term Plan. Insurance payable upon death before Term Expiry Date. Renewable annually until Final Term Expiry Date shown on Page 3. Renewal premiums may change subject to guaranteed maximums (see "Premium Changes" on Page 4). Premiums payable to Term Expiry Date or earlier death. Conversion Privilege. This is a non-participating policy. No. 133-54 Contents Insurance Benefits 2 Term expiry date-Renewal 2 Policy owner and beneficiary 4 Premiums, grace, lapse, premium changes 4 Reinstatement 5 Conversion privilege 5 General provisions 6 Payment options 6 Any additional benefit riders and a copy of the application are at the back of this policy. IN THIS POLICY:- "We ", "our" and "us" mean The Equitable Life Assurance Society of the United States. "You" and "your" mean the Owner of the policy at the time an Owner's right is exercised. INSURANCE BENEFITS We will pay the insurance benefits of this policy to the Beneficiary when we receive proof of the Insured's death. These insurance benefits include the following amounts, which we will determine as of the date of the Insured's death: o the Face Amount of this policy shown on Page 3. o PLUS any other ) benefits then due from riders to this policy: o PLUS or MINUS any adjustment for the last premium. We will add interest to the resulting amount for the period from the date of death to the date of payment. We will compute the interest at a rate we determine but not less than the greater of (a) the rate we are paying on the date of payment under the Deposit Option of Page 7: or (b) the rate required by any applicable law. We will pay these benefits only if premiums have been paid as called for by this policy. Payment of these benefits may also be affected by other provisions of this policy. See Page 6 where we specify our right to contest the policy, what happens if age or sex has been misstated, and the suicide exclusion. Special exclusions or limitations (if any) are listed on Page 3. TERM EXPIRY DATE .- RENEWAL Term Expiry Date is the Initial Term Expiry Date shown on Page 3 unless the policy is renewed. If it is renewed, the Term Expiry Date is the next policy anniversary after the latest renewal. but not later than the Final Term Expiry Date specified on Page 3. You may renew this policy on any Term Expiry Date before the Final Term Expiry Date. To do this you must pay the first premium for the new period on or before the date it begins or within 31 days after that date. Scheduled and guaranteed maximum renewal premiums are shown on Page 3. See Page 4 about changes in scheduled renewal premiums. THE INSURED PIERRE GERALD MANSUR REGISTER DATE NOV 9, 1993 POLICY OWNER MANSUR INSUDTRIES INC DATE OF ISSUE NOV 9, 1993 FACE AMOUNT $1,000,000 ISSUE AGE, SEX 42, MALE INITIAL TERM FINAL TERM EXPIRY DATE NOV 9, 1994 EXPIRY DATE NOV 9, 2051 POLICY NUMBER 93 042 982 BENEFICIARY MANSUR INDUSTRIES INC EMPLOYER --------- BENEFITS AND PREMIUMS ---------- BENEFITS SEMI-ANUAL PREMIUM PERIOD PERIOD LIFE INSURANCE $1,716.00 1 YEAR THE FIRST PREMIUM IS $1,716.00 AND IS DUE ON OR BEFORE DELIVERY OF THE POLICY. SUBSEQUENT PREMIUMS ARE DUE ON MAY 9, 1994 IN ACCORDANCE WITH THE ABOVE PREMIUM TABLE. ---------- SEMI-ANNUAL RENEWAL PREMIUMS ---------- GUARANTEED RENEWAL SCHEDULED MAXIMUM DATE RENEWAL RENEWAL NOV. 9 PREMIUM* PREMIUM ------ ----------- ----------- 1994 $ 1,836.00 $ 2,416.00 1995 1,966.00 2,826.00 1996 2,126.00 3,366.00 1997 2,316.00 3,986.00 1998 2,506.00 4,676.00 1999 2,726.00 5,386.00 2000 2,966.00 6,126.00 2001 3,216.00 6,886.00 2002 3,436.00 7,316.00 2003 3,696.00 7,756.00 2004 3,996.00 8,186.00 2005 4,336.00 8,626.00 2006 4,686.00 9,326.00 2007 5,166.00 10,426.00 2008 5,676.00 11,646.00 2009 6,216.00 12,826.00 2010 6,796.00 13,776.00 2011 7,436.00 14,606.00 2012 8,086.00 15,356.00 2013 8,816.00 16,096.00 2014 9,626.00 16,896.00 2015 10,556.00 17,786.00 2016 11,596.00 19,306.00 2017 12,846.00 21,156.00 2018 14,266.00 23,276.00 2019 15,816.00 25,536.00 2020 17,496.00 28,246.00 2021 18,786.00 30,316.00 2022 20,896.00 33,646.00 2023 22,906.00 36,796.00 2024 25,066.00 40,206.00 2025 27,376.00 43,936.00 N/YRTET3 (1) MIM-RSO 133-54-3 PAGE 3 93-11-09 93-11-09 1322 (CONTINUED ON NEXT PAGE) THIS PAGE 3 - CONTINUED IS A PART OF POLICY NUMBER 93 042 982. ---------- SEMI-ANNUAL RENEWAL PREMIUMS ---------- GUARANTEED RENEWAL SCHEDULED MAXIMUM DATE RENEWAL RENEWAL NOV. 9 PREMIUM* PREMIUM ------ ----------- ------------- 2026 29,356.00 47,326.00 2027 32,796.00 53,076.00 2028 36,846.00 59,786.00 2029 40,816.00 67,496.00 2030 45,106.00 76,226.00 2031 50,036.00 86,416.00 2032 54,696.00 96,186.00 2033 59,876.00 107,476.00 2034 65,726.00 120,506.00 2035 72,196.00 135,076.00 2036 79,256.00 151,026.00 2037 82,616.00 158,406.00 2038 94,226.00 184,476.00 2039 101,936.00 201,386.00 2040 110,026.00 218,766.00 2041 118,486.00 236,506.00 2042 127,746.00 255.386.00 2043 137,526.00 274,676.00 2044 148,296.00 295,206.00 2045 163,686.00 324,276.00 2046 192,976.00 380,186.00 2047 234,046.00 456,916.00 2048 277,336.00 494,486.00 2049 323,236.00 494,486.00 2050 372,186.00 494,486.00 EE PREMIUM CHANGES - PAGE 4 ________________________________ (2-2) MIM-RSO N/YRTET3 PAGE 3-CONTINUED 93-11-09 93-11-09 1322 ENDORSEMENT In the event you need to present inquiries, obtain information about coverage or need assistance in resolving complaints about this policy, please contact your Agent. If you have additional questions, you may contact The Equitable or Equitable Variable at the following address and telephone number, The Equitable or Equitable Variable, Charlotte Service Center, 6301 Morrison Boulevard, Charlotte, North Carolina 28211; Telephone: (704) 362-6200. Please have your policy number available for any inquiries. 5.33-59 PAGE 3 - Continued POLICY OWNER AND BENEFICIARY OWNER. The Owner of this policy is the Insured unless otherwise stated in the application or later changed. As Owner, you can exercise all the rights in this policy while the Insured is living. You do not need the consent of anyone who has only a conditional or future ownership interest in this policy. BENEFICIARY. The Beneficiary is as stated in the application, unless later changed. If two or more persons are named, those surviving the Insured will share equally ,unless otherwise stated. We will pay any benefit for which there is no stated Beneficiary living at the death of the Insured to the children of the Insured who then survive, in equal shares. If none survive, we will pay the estate of the Insured. CHANGES. While the Insured is living, you may change the Owner or Beneficiary by written notice in a form satisfactory to us. You can get such a form from our agent or by writing to us. The change will take effect on the date you sign the notice, except that it will not apply to any payment we make or other action we take before we receive the notice. If you change the Beneficiary, any previous arrangement you made under the Payment Options provision on Page 7 is cancelled. You may choose a Payment Option for the new Beneficiary in accordance with that provision. ASSIGNMENT. You may assign this policy, but we will not be bound by an assignment unless we leave received it in writing. Your rights and those of any other person referred to in this policy will be subject to the assignment. We assume no responsibility for the validity of any assignment. An absolute assignment will be considered as a change of ownership to the assignee. PREMIUMS AMOUNTS AND DUE DATES. Page 3 shows the amount and .due date of the premium for the first policy year. It also shows scheduled renewal premiums based on the initial rate scale; guaranteed maximum renewal premiums; and the premium due dates for renewal periods. Scheduled renewal premiums are subject to change as stated in the Premium Changes section. Each premium is payable on or before its due date at our Home Office or premium collection office. You may write and ask us to change the frequency of premium payment. If we approve the change, the new premium will be determined on the rate scale for this policy. GRACE PERIOD. We allow a grace period of 31 days for payment of each premium, after the first premium. The insurance will continue during the grace period. LAPSE. If a premium is not paid by the end of its grace period. the policy will lapse as of the premium due date. If this occurs, all insurance ends at the end of the grace period. PREMIUM CHANGES. We have the right to change the scheduled renewal premiums for the policy for any policy year. We will send you written notice of any such change before the next premium payment is due. The actual premium for any policy year may vary, but will never be more than the guaranteed maximum renewal premium shown on Page 3 for that year. We will review the scheduled premiums each year. We will adjust the renewal premium only on a uniform basis for insureds of the same insurance age, sex and class of risk, whose policies have been in force for the same length of time. We will not change the premium or class of risk because of an adverse change in the Insured's health, occupation or avocation. We will base a premium change solely on future expectations as to mortality, investment earnings, persistency and expenses. Our procedures and standards for premium changes are on file, as required, with the insurance supervisory official of the jurisdiction in which this policy is delivered. PAGE 4 REINSTATEMENT. You may reinstate this policy within five years after lapse, but not later than the Final Term Expiry Date, if: (1) you provide evidence of insurability satisfactory to us-, and (1) you pay all overdue premiums with interest at 6% per year compounded annually. PREMIUM ADJUSTMENT. We will add to the insurance benefits any part of the last premium paid that applies to a period beyond the policy month in which the Insured dies. If the Insured dies during the grace period of an unpaid premium, we will deduct from the benefits the part of the overdue premium for one policy month. These are the adjustments for the last premium referred to on Page 2. CONVERSION PRIVILEGE You may exchange this policy on any premium due date on or before the Term Expiry Date for a new policy on the life of the Insured without evidence of insurability: (1) if the date of exchange is on or before the policy anniversary nearest the lnsured's 75th birthday; and (2) if all premiums have been (duly paid; and (3) if there is a Disability Premium Waiver rider in effect in this policy, the Insured is not totally disabled as defined in that rider. However, see the section "Conversion During Disability.' The Register Date of the new policy will be the date of exchange. Premiums for the new policy will be based our rates in effect on that date. They will be for the lnsured's then attained insurance age and for the same class of risk as for this policy-. The first premium for the new policy must be paid on or within 31 days before the date of exchange. THE NEW POLICY. The new policy will have an insurance amount equal to the amount of insurance in effect on this policy. Or, you may choose any lower amount allowed by our rules in effect on the date of exchange. The new policy may be on any plan of insurance we offer on the date of exchange, subject to our rules then in effect as. to plan, age and class of risk. If additional benefit riders are in effect in this policy on the date of exchange, you may choose that the new policy contain similar riders subject to our rules in effect on its Register Date. Except as to any additional benefit riders included in the new policy, the suicide exclusion and incontestability periods of the new policy will be determined from the date of issue of this policy instead of from the date of issue of the new policy. We will tell you the amount of the first premium for the new policy upon request. CONVERSION DURING DISABILITY. We will issue a new policy with a Disability Premium Waiver rider in exchange for this policy on any Current Term Expiry Date you choose that is before the policy anniversary nearest the Insured's 65th birthday if: 1) a Disability Premium Waiver rider is in effect in this policy on the date of exchange: and 2) the Insured is then totally disabled as defined in that rider. If no earlier exchange is made, we will issue a new policy with a Disability Premium Waiver rider in exchange for this policy on the policy anniversary nearest the Insured's 65th birthday if premiums have been waived for at least the five preceding policy years under a Disability Premium Waiver rider in this policy. The new policy will have an insurance .amount equal to the amount of insurance in effect on this policy. It will be on the level premium whole life plan with premiums payable for life that we then issue, subject to our rules in effect on its Register Date as to plan. Its Register Date will be the date of exchange. Premiums for the new policy will be based on our rates in effect on that date. They will be for the Insured's then attained insurance age and for the same class of risk as for this policy. We will waive premiums for the new policy as stated in its Disability Premium Waiver rider while total disability continues. (We will not waive premiums on or after the policy anniversary nearest the lnsured's 65th birthday for a total disability that began on or after the policy anniversary of this policy nearest the lnsured's 60th birthday.) PAGE 5 GENERAL PROVISIONS THE CONTRACT. We provide this insurance in consideration of payment of the required premiums. This policy and the attached copy of the application for it make LIP the entire contract. The contract may not be modified, nor may any of our rights or requirements be waived, except in writing signed by our President or one of our Vice Presidents. INCONTESTABILITY. We have the right to contest the validity of this policy based on material misstatement made in the application for this policy. However, we will not contest the validity of this policy after it has been in effect during the lifetime of the Insured for two years from the Date of Issue shown on Page 3. No statement shall be used to contest a claim unless contained in the application. All statements made in the application are representations and not warranties. See any additional benefit riders for modifications of this provision that apply to them. AGE AND SEX. If the Insured's age or sex has been misstated, any benefits will be those that the premium paid would have purchased at the correct age and sex. SUICIDE EXCLUSION. If the Insured commits suicide, while sane or insane, within two years after the Date of Issue shown on Page 3, our liability will be limited to the Payment of' a single sum equal to the premiums paid. POLICY PERIODS AND ANNIVERSARIES. Policy years, policy months, policy anniversaries and premium periods are measured from the Register Date. Each policy month begins on the same day in each calendar month as in the Register Date. POLICY CHANGES. You may change this policy to another plan of insurance or add additional benefit riders or make other changes, subject to our rules at the time of change. PAYMENT OPTIONS Instead of having the insurance benefits paid immediately in one sum, you can choose another form of payment for all or part of the benefit. If you do not arrange for this before the Insured dies, the Beneficiary will have this right when the Insured dies. Arrangements you make, however, cannot be changed by the Beneficiary after the Insured's death. The options are: 1. DEPOSIT OPTION: The sum is left on deposit for a period mutually agreed upon. We pay interest at the end of every month, every 3 months, every 6 months or every 12 months, as chosen. 2. INSTALLMENT OPTIONS: A. FIXED PERIOD: We pay the sum in equal installments for a specified number of years (not more than 30). The installments will be at least those shown in the Table of Guaranteed Payments on Page 8. B. FIXED AMOUNT: We pay the sum in installments as mutually agreed upon until it, together with interest on the unpaid balance, is used up. 3. LIFE INCOME OPTIONS: We pay the sum as a monthly income for life in an amount we determine. The amount of the monthly payment will be at least that shown in the Table of Guaranteed Payments on Page 8. We guarantee payments for life and in any event for 10 years (called "10 Years Certain"), 20 years (called "20 Years Certain"), or until the payments we make equal the amount applied (called "Refund Certain"), according to the "certain" period chosen. 4. OTHER: We will apply the sum under any other option requested that we make available at the time of the Insured's death. PAGE 6 We guarantee interest under Option I at the rate of 3% a year and under Option 2 at 31/2 % a year. We may raise these guaranteed rates. We may also allow excess interest under Options I and 2. The payee under an option may name and change a successor payee for any amount we would otherwise pay the payee's estate. Any arrangements involving more than one of the options, or a payee who is not a natural person (for example, a corporation) or who is a fiduciary, must have our approval. Also, details of all arrangements will be subject to our rules at the time the arrangement takes effect. These include rules on: the minimum amounts we will apply under an option and minimum amounts for installment payments; withdrawal or commutation rights; naming payees and successor payees; and proving age and survival. Choices (or any later changes) under these options will be made and will take effect in the same way as a change of Beneficiary. Amounts applied under these options will not be subject to the claims of creditors or to legal process. to the extent permitted by law. PAGE 7 PART 1: APPLICATION FOR LIFE INSURANCE TO: THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES (THE EQUITABLE) HOME OFFICE: 787 Seventh Avenue, New York, NY 10019 1. PROPOSED INSURED Please print in ink. (THE EQUITABLE) Home Office: 787 Seventh Avenue, New York, NY 10019 b. Name: MR. PIERRE GERARD MANSUR c. Date of Birth: Mo. 12 Day 29 Year 1951 d. Age Nearest Birthday 42 e. Sex X M f. Place of Birth: Aruba Netherland g. Soc. Sec No. 073448390 h. Previous/Other Name (If Applicable) N/A i. U.S. Citizen X Yes j. Current Occupation(s): (1) Title: Pres. Mansur (2) Duties: Executive (3) How Long: 2 Yrs. k. Residence Care of: CIO Current 11117 SW 79th AVENUE MIAMI, FL 33134 Years There: 2 Previous: N/A l. Tel. (1) Home 305-667-4849 (2) Business 305-232-6768 m. Currently empoyed? X Yes n. Employer Name: Mansur Industries, Inc. o. Years Employed: 2 p. Employer Address: 8425 S.W. 129 Terrace, Miami, Florida 33156 2. APPLICANT (If not proposed Insured) a. Name: First Middle Last b. Relationship to Proposed Insured c. Date of Birth Mo. Day Year d. Sex M F e. Place of Birth: f. Current Occupation(s): (1) Title (2) Duties If less than 1 year at current occupation, give previous in Special Instructions g. Address: Same as Question 1.k Residence or Question 1.p Business Residence: No. and Street, Apt/Suite/Bldg City, State, Zip Business: No. and Street City, State, Zip 3.POLICY OWNER a. The Owner is: (1) Proposed Insured (2) Applicant (3) X Other (a) Individual (b) X Corporation (c) Partnership (d) Trust Dated Mo. Day Year (e) Qualified (Illigible) (f) Guardian (g) Executor (h) Name of Person First Middle Last Name of Firm or Plan: MANSUR INDUSTRIES, INC. (i) If an individual, indicate: Mr. Mrs. Ms. Miss Other (j) Relationship to Insured EMPLOER b. Owner's Mailing Address: Same as Current Residence (1.k) or Applicant's Residence (2.g) Other: Care of CIO 8425 SW 129 Terrace Miami, FL 33156 c. Answer if Policyowner is not Proposed Insured: (1) Soc. Sec. Or Tax I.D. Number 650226813 (2) Date of Birth: Same as 2.c or Mo. Day Year (3) Phone: 305-232-6768 d. Successor Owner (if desired) Give full name: [section in the middle of the page is missing so text here is omitted as it would be fragmented] BENEFICIARY FOR INSURANCE ON PROPOSED INSURED. Include Name and Relationship to Proposed Insured. a. Primary Beneficiary(ies): Name(s) (1) MANSUR INDUSTRIES, INC. Relationship EMPLOYER b. Contingent Beneficiary(ies) (1) (2) Note: Unless otherwise requested, the contingent beneficiary will be the surviving children of the Insured in equal shares. If none survive, payment will be made to the insured's estate. The Beneficiary(ies) under any Term Insurance Rider on any Additional Insured or on a Child will be as stated in those riders, unless otherwise designated in Special Instructions. In any such designation, give full lname and relatinship of beneficiary(ies)to the Insured. 180-301N-F 5. PLAN DESCRIPTION AND PREMIUM PAYMENT METHOD a. [TERM - EQUITABLE TERM II] b. Amount of Insurance $ 1,000,000 c. Premium Mode: Annual X Semi-Annual Quarterly System-Matic (Complete S-M form) d. Loan Interest Rate Adjustable Fixed [N/A] e. Salary Allotment (1) Unit Name (2) Register Date (3) Unit/Sub Unit No. (4) Payroll No. (5) Allotor's Name (If other than Proposed Insured) (6) Allotor's No. (7) Divisible by 2 4 f. Military Allotment: Branch Register Date 6. OPTIONAL BENEFITS ___Accidental Death Benefit* (specify amount) $ ___Disability Premium Waiver* (Not Available for Survivorship WL) ___Automatic Premium Loan (Not for Term Policies) ___Option to Purchase Add'l Ins. (Issue ages to 37 only) $ ___Paid-up Additional Rider: (i) Single Premium $ (ii) Recurring Premium $ paid mode ___Summplemental Insurance Rider $ Target Death Benefit $ * JUVENILLE LIMITATION: If applied for, the Accidental Death Benefit is payable only if the Child dies as a result of an accident after the Child's first birthday; the Disability Waiver Benefits are effective only if the Child becomes totally disabled onor after the Child's 5th birthday. TERM RIDERS: [ONLY ONE MAY BE ELECTED FOR INSURED. NONE AVAILABLE IF PROPOSED INSURED AS A CHILD ISSUE AGE 0-14)] Decreasing Term: [ ] Family Income: Years $ Per Month [ ] Renewable Term (1) On Insured $ (2) On Add'l Insured ** $ [ ] Children's Term** $ Unit **If coverage is elected complete applicable parts of Question 8, and answer Question 10 through 16 with respect to the Additional Insured and/or Children for Term Insurance Rider. SURVIVORSHIP WL RIDERS: [ ] Supplemental Insurance Rider $ Target Death Benefit $ [ ] Survivorship PUA Rider (i) Single Premium $ (ii) Recurring premium $ paid mode [ ] Yearly Renewable Term at First Death $ [ ] Option to Split Upon Divorce [ ] Estate Protector 7. DIVIDEND ELECTIONS (Not available for Term Policies) [ ] Additions (MUST CHOOSE IF SELECTED) [ ] Accumulations [ ] Plan "AD" Term Dividend [ ] Plan "B" Provision [ ] Premiums, Balance to Additions [ ] Cash 8. COMPLETE FOR PROPOSED ADDITIONAL INSURED, CHILDREN'S TERM RIDER, JUVENILE INSURANCE OR SUPPLMENTAL PROTECTIVE BENEFIT Also answer Questions 10 through 16 with respect to Proposed Additional Insured, Children under Children's Term Rider, or Applicant if electing Supplemental Protective Benefit. a. Title: [ ] Mr. [ ] Mrs. [ ] Ms. [ ] Miss [ ] Other Title b. Proposed Add'l Insured: First Middle Last Date of Birth Mo. Yr. Age Nearest Birthday Sex [ ]M [ ] F Place of Birth: Soc. Sec. No. Previous/ Other Name (If Applicable) Relationship of Owner to Add'l Insured: State of Residence: Current Occupation(s)(1)Title: (2)Duties: (3)How Long? If less than 1 year at current occupation, give previous in Special Instructions Children for Term Insurance Rider (Use Special Instructions if more space is needed.)* First Middle Last Date of Birth M. Day Yr. Sex [ ] M [ ] Relationship to Owner First Middle Last Date of Birth M. Day Yr. Sex [ ] M [ ] Relationship to Owner First Middle Last Date of Birth M. Day Yr. Sex [ ] M [ ] Relationship to Owner First Middle Last *Note: To be eligible, children (including stepchildren and legally adopted children) must not have reached their 18th birthday. Coverage does not begin until a child is 15 days old. d. For Juvenile Insurance (Ages 0-14)(1) Will there be more life insurance in force on this Child than on any other child in the family? [ ] Yes [ ] No If "Yes", explain (2) Total Life Insurance in effect on Applicant: $ e. [ ] Supplemental Protective Benefit. Give Applicant's (i) Height Ft. In. (ii) Weight lb. 9. OPAI. COMPLETE IF EXERCISING OPTION TO PURCHASE ADDITIONAL INSURANCE IF OPTION IS UNDER INDIVIDUAL POLICY: a. Regular; (2) [ ] Birth or Adoption; Child's Name ; Date of Birth or Adoption / /; (3) [ ] Alternate b. original policy no. . c. Option Date / / d. Option Amount $ e. If applying for disability Premium waiver, is Propsed Insured now totally disabled as defined in the Disability Premium Waiver Provision of the original policy indicated above in b.? [ ] Yes [ ] No f. OPTION IS UNDER A GROUP POLICY: a. Existing original policy no. b. Option Date / / c. Employer's Name d. Maximum Amount Available Under Option $ This application is made under a provision in the existing policy indicated in 9.b. above permitting the purchase of additional individual life insurance (the "Option Provision"). If this application is made within the time allowed and in accordance with the other terms in the Option Provision, including timely payment of the full first premium for the additional insurance, then the additional insurance shall take effect upon the terms of the policy the Insurer would issue. Otherwise, the additional insurance shall not take effect. (ANSWER QUESTIONS 10 THROUGH 16 ONLY IF EVIDENCE OF AVAILABILITY IS REQUIRED IN CONNECTION WITH AN OPTIONAL BENEFIT OR ANY EXCESS OF THE INSURANCE AMOUNT APPLIED FOR OVER THE INSURANCE AMOUNT PERMITTED BY THE OPTION PROVISION.) OTHER INFORMATION For any "Yes" response, provide full details under Section 17 HOW MANY PERSON PROPOSED FOR INSURANCE: YES NO 10. a. Ever had a driver's license suspended or revoked, or within the last 3 years been convicted of 2 or more moving violations or driving under the influence of alcohol or drugs? X b. Any plans to travel or reside outside the United States? X c. Any other life insurance now in effect or application now pending? X (Give companies and amounts and policy numbers if Equitable.) d. Been disabled for 2 or more weeks within the last 2 years? X 11. a. In the last year flown other than as a passenger or plan to do so? X If "Yes," enter total flying time at present hours; last 12 mos. hours; next 12 mos. est. hours. b. Engaged within the last year or any plan to engage in motor racing on land or water, underwater diving, skydiving, ballooning, hang gliding, parachuting or flying ultra- light aircraft? (If "Yes," complete Avocation Supplement.) X c. Ever had an application for life or health insurance that was declined, required an extra premium or other modification? X d. Replaced or changed any existing insurance or annuity (or plan to do so) assuming the insurance applied for will be issued? (If "Yes", state companies, plans and amounts.) X ANSWER QUESTIONS 12-16 ONLY IF NON-MEDICAL For any "Yes" response, provide full details under Section 17. 12. a. Proposed insured: Height Ft. In.; Weight lb. b. Additional insured: Height Ft. In.; Weight lb. HAS ANY PERSON PROPOSED FOR INSURANCE: 13. a. Ever had or been treated for heart trouble, stroke, high blood pressure, chest pain, diabetes, tumor, cancer, respiratory or neurological disorder? b. In the last 5 years, consulted a physician, or been examined or treated at a hospital or other medical facility? (Include medical check-ups in the last 2 years. Do not include colds, minor injuries or normal pregnancy.) 14. In the last 12 months: a. Smoked cigarettes? X b. Used any other form of tobacco? X 15. In the last 10 years: a. Used, except as legally prescribed by a physician, tranquilizers, barbiturates or other sedatives; marijuana, cocaine, hallucinogens or other mood-altering drugs; heroin, methadone or other narcotics; amphetamines or other stimulants; or any other illegal or controlled substances? b. Received counseling or treatment regarding the use of alcohol or drugs including attendance at meetings or membership in any self-helf group or program such as Alcoholics Anonymous or Narcotics Anonymous? 16. In the last 10 years, been: a. Diagnosed by a member of the medical profession as having Acquired Immune Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC)? b. Treated by a member of the medical profession for AIDS or ARC? 17. DETAILS/ADDITIONAL INFORMATION For each "Yes" answer give Question Number, name of person(s) affected, and full details. For 13-16 include conditions, dates, durations, treatment and results, and names and addresses of physicians and medical facilities. Attach additional sheet, if more space needed. QUES. NO. NAME OF PERSON DETAILS 1f Pierre Pierre is a U.S. citizen 18. SPECIAL INSTRUCTIONS/ADDITIONAL INFORMATION a. [ ] Preliminary Term to: Month Day Year b. [ ] Date ot save insurance age: c. [ ] Issue with Qualified Plan Riders [ ] Trusted [ ] Non-Trusted [ ] Unisex Rates Other: Applicant Smokes Cigarettes Note: Insured is an owner of Mansur Industries. 19. COMPLETE IF MONEY IS PAID OR AN APPROVED PAYMENT AUTHORIZATION IS SIGNED BEFORE THE POLICY IS DELIVERED: Have the undersigned read and do they agree to the conditions of The Equitable's Temporary Insurance Agreement,;(I) THE REQUIREMENT THAT ALL OF THE CONDITIONS IN THAT Agreement must be met before any temporary insurance takes effect, and (ii) the $500,000 insurance amount limitation? (checked Yes) Yes No (, If "No," or if any Person Proposed for Insurance has been diagnosed or treated for Acquired Immune Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC) by a member of the medical profession within the last 10 years or had cancer, a stroke or a heart attack within the last year, a premium may not be paid nor any approved payment authorization signed before the policy is delivered). X Amount Paid: $1716.00.(DRAW CHECKS PAYABLE TO THE EQUITABLE.) (initialed box) APPROVED PAYMENT AUTHORIZATION SIGNED 20.SOCIAL SECURITY OR TAX I.D. NUMBER CERTIFICATION. 1, the proposed policyowner, by my signature below, certify under penalties of perjury that (I) the number shown in question 3.c. (1) or 1.g. of this form is my correct taxpayer identification number , and (ii) I am not (checked) subject to a backup withholding order issued by the Internal Revenue Service. I understand that failure to furnish the correct information may subject me to Federal backup withholding. AGREEMENT. Each signer of this application agrees that: (1). The statements and answers in all parts of this application are true and complete to the best of my (our) knowledge and belief, The Equitable may rely on them in acting on this application. (2). The Equitable's Temporary Insurance Agreement states the conditions that must be met before any insurance takes effect it money is paid or an approved payment authorization is signed, before the policy is delivered. Temporary Insurance is not provided for a policy or benefit applied for under the terms of a guaranteed insurability option or a conversion privilege. (3). Except as stated in the Temporary Insurance Agreement, no insurance shall take effect on this application ' (a) until a policy is delivered and the full initial premium for it is paid, or an approved payment authorization is signed, while the person(s) proposed for insurance is (are) living: (b) before any Register Date specified in this application; and (c) unless to the best of my (our) knowledge and belief the statements and answers in all parts of this application continue to be true and complete, without material change, as of the time such premium is paid or an approved payment authorization is signed. (4). No agent or medical examiner has authority to modify this Agreement or the Temporary Insurance Agreement, nor to waive any of The Equitable's rights or requirements. The Equitable shall not be bound by any information unless it is stated in Application Part 1 or Part 2. ACKNOWLEDGEMENT AND AUTHORIZATIONS UNDERWRITING PRACTICES. I (We) have received a statement of the underwriting practices of The Equitable which describes how and why The Equitable obtains information on my insurability, to whom such information may be reported and how I may obtain it. The statement also contains the notice required by the Fair Credit Reporting Act. AUTHORIZATIONS. TO OBTAIN MEDICAL INFORMATION. I (we) authorize any physician, hospital, medical practitioner or other facility, insurance company, and the Medical Information Bureau to release to The Equitable and its legal representative any and all information they may have about any diagnosis, treatment and prognosis regarding my physical or mental condition. TO OBTAIN NON-MEDICAL INFORMATION. I (we) authorize any employer, business associate, government unit, financial institution, Consumer Reporting Agency. and the Medical Information Bureau to release to The Equitable and its legal representative any information they may have about my occupation, avocations, finances, driving record, character and general reputation. I (we) authorize The Equitable to obtain investigative consumer reports, as appropriate. TO USE AND DISCLOSE INFORMATION. I (we) understand that the information that I (we) authorize The Equitable to obtain will be used by The Equitable to help determine my insurability or my eligibility for benefits under an existing policy. I (we) authorize The Equitable to release information about my insurability to its insurers, contractors and affiliates, my (our) Equitable Agent, and to the Medical Information Bureau, all as described in the statement of The Equitable's underwriting practices or to other persons or businesses performing business or legal services in connection with my application or claim of eligibility for benefits. or as may be otherwise lawfully required, or as I (we) may further authorize. I (we) understand that I (we) have the right to learn the contents of any report of information (generally, through my physician, in the cabs of medical information). COPY OF AUTHORIZATIONS. I (we) have a right to ask for and receive a true copy of this Acknowledgment and Authorizations signed by me (us). I (we) agree that a reproduced copy will be as valid as the original. DURATION. I (we) agree that these authorizations will be valid for 12 months from the date shown below. Dated at City: Miami X /s/ Pierre G. Mansur State: Florida Signature of Proposed Insured or of Applicant if on 10/4/93 1993 Proposed Insured is a Child, Issue Age 0-14. Nature of Agent X____________________________________ Signature of Proposed Additional Insured, if any X____________________________________ Signature of Applicant if not Proposed Insured or Owner X /s/ Pierre G. Mansur, CEO, MANSUR INDUSTRIES, INC Signature(s) of Owner if not Proposed Insured or Applicant) (If a corporation, show firm's name and signature of authorized officer) No. A 31640 LARGE AMOUNT SUPPLEMENT To: X The Equitable Life Assurance Society of the United States 0 Equitable Variable Life Insurance Company 0 The Equitable of Colorado, Inc. Instructions: Complete Section I and applicable Section(s) 11 (Personal Insurance ) or III (Business Insurance) PROPOSED INSURED's NAME Pierre Gerard Mansur ASU (Alpha)/App. No.512/A 31640 First Middle Last Section I - General Information (Complete in all instances) A. Insurance In Force (All Companies) B. Insurance Applied For (All Companies) Purpose Face Amount Face Amount Personal $ 500k Term $ 0 Business $0 $1,000,000 Total In Force 500k Amount applied for elsewhere is []competitive [] additional C. Financial Information: 1. Income: Gross Annual Compensation: (e.g. Salary, Commissions, Bonuses, etc.) $ 1OO,OO0 $0 (Current Rate) (Rate 1 year previously) Gross Annual Investment and Other Income: (e.g. Dividends, Interest, Net Real Estate Income, etc.) $ 0 $0 (Past 12 months) (Preceding 12 months) Total Cash Income before taxes $100,000 $0 2. Net Personal Worth: Current Assets: $2,000,000 Liabilities (including mortgages):$ 30,000 Net Worth: $1,970,000 SECTION II - PERSONAL INSURANCE (Complete only when Applying for Personal Insurance) PURPOSE (Check appropriate box(s) and answer all supplemental questions.) 0 Family Income 0 Education Fund 0 Gift 0 Mortgage Protection 0 Personal Loan Collateral (other than mortgage protection) Answer supplemental questions under Business Loan Collateral in Section III, C3. 0 Estate Settlement Taxable Estate $ ______________ Estimated Settlement Costs (taxes and administration expenses) $______ Total Liquid Assets $ 0 Other (specify) The above statements and answers are true and complete to the best of my knowledge and belief I agree that such statements and answers shall be made part of the application for insurance or request for policy change or reinstatement, as the case may be. The Insurer may rely on them in acting on this application. Dated at Miami FL on 10/4 1993 x Pierre G. Mansur Signature of Proposed Insurer, or Applicant if Proposed Insured is a Child Witnessed by illegible Signature of Agent SECTION III - BUSINESS INSURANCE (Complete only when applying for Business Insurance) A. Type of Organization : Sole Proprietorship Partnership X Corporation Proposed Insured's Percentage Ownership: 80 % B. Financial Information: Total Business Assets: Total Liabilities: $ 1,500.000 $500,000 Total Business Net Worth: $1,500,000 $900,000 (Current year) (Previous Full Year) Estimated Fair Market Value $______________ GROSS ANNUAL SALES Last Full Calendar Year -$0- Previous Full Calendar Year -$0- Answering this question is optional; however, if the amount applied for exceeds the appropriate amount of insurance limit as described on card 4 of the Agent's Guide to Financial Underwriting, this question must be answered Net Profit After Taxes (Last 3 Years 19___$__________________ 19___$__________________ 19___$__________________ C. Purpose: (Check appropriate box(s) and answer all supplemental questions.) YES NO 1.[] BUY-SELL/STOCK REDEMPTION Is there a written buy-sell/stock redemption Is this a section 303 Redemption? (If yes, complete Estate Settlement portion of Section II. Are all other parties to agreement already covered by or applying for comparable amounts of insurance? (If no, explain in Section D.) 2. X KEY PERSON: Are all other key persons covered by or applying for comparable amounts of insurance? (If no, explain in Section D.) Why is Proposed Insured considered "Key"? (Provide details in Section D.) 3.Business Loan Collateral: Is insurance required by the creditor? 0 Yes 0 NO Name of creditor/lending institution___________________________ What is the purpose and amount of the loan? Date loan was committed ______ If not yet committed, explain. 4.Deferred Compensation/Salary Continuation Is there a written plan? 0 Yes X No Are all other eligible individuals covered by or applying for comparable amount of insurance? 0 Yes X No 5.Other (specify) D. ADDITIONAL INFORMATION: 2 Sole Key Employee 2 He is the inventor & Designer of a newly patented industrial machine. The above statements and answers are true and complete to the best of my knowledge and belief. I agree that such statements and answers shall be made part of the application for insurance or request for policy change or reinstatement, as the case may be. The Insurer may rely on them in acting on the application. Or making the policy change if reinstatement. Dated at: Miami Florida on 10-12-93 X Pierre G. Mansur Signature of Proposed Insured APPLICATION PART 2 TO:[ ] THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES [ ] EQUITABLE VARIABLE LIFE INSURANCE COMPANY [ ] THE EQUITABLE OF COLORADO, INC. REASON FOR SUBMISSION OF THIS FORM: [ ] New Policy [ ] Policy change [ ] Reinstatement 1. a. Proposed Insured First Name Middle Initial Last Name (PLEASE PRINT) PIERRE G. MANSUR b. Height: 5 ft. 11 in. c. Weight: 172 lbs. d. Birth Date: Mo. 12 Day 29 Yr. 51 e. [x] Male [ ] Female 2. a. Name and address of personal physician (or medical facility used instead): (If none, so state) (NONE) b. Date and reason last consulted if within the last 5 years: c. What treatment was given or recommended? (If none, so state) (For all "Yes" answers to questions 3-9, circle items that apply.) 3. Has Proposed Insured ever had or been treated for: YES NO a. Disease or disorder of eyes, ears, nose or throat? X b. Dizziness, fainting, convulsions, paralysis or stroke; psychiatric, psychological or emotional disturbance; mental or nervous disease or disorder? X c. shortness of breath; blood spitting; bronchitis, asthma, emphysema, tuberculosis or other chronic respiratory disease or disorder? X d. Chest pain, palpitation, high blood pressure, rheumatic fever, heart murmur, heart attach or other disease or disorder of the heart or blood vessels? X e. Ulcer, hernia, colitis, intestinal bleeding, jaundice, hemorrhoids, or other disease or disorder of the stomach, intestines, liver or gallbladder? X f. Sugar, albumin, blood or pus in urine; stone or other disease or disorder of kidney or bladder? X g. Diabetes, cyst, tumor, or cancer; thyroid or glandular disorder; skin disease or disorder? X h. Neuritis, arthritis, gout, or disease of the muscles or bones, including the back, or joints? X i. Deformity, lameness or amputation? X j. Allergies; anemia; other blood or lymph disease or disorder? X k. Disorder of prostate, reproductive organs, breasts, menstruation or pregnancy? X 4. Is Proposed Insured now under observation or taking treatment? X a. Diagnosed by a member of the medical profession as having Acquired Immune Deficiency syndrome (AIDS) or AIDS-Related complex (ARC)? X b. Treated by a member of the medical profession for AIDS or ARC? X 6. Has Proposed Insured, within the last 10 years: a. Used, expect as legally prescribed by a physician, tranquilizers; barbiturates or other sedatives; marijuana, cocaine, hallucinogens or other mood-altering drugs; heroin, methadone or other narcotics; amphetamines or other stimulants; or any other illegal or controlled substances? X b. Received counseling or treatment regarding the use of alcohol or drugs? X 7. Has Proposed Insured's weight changed by more than [illegible] pounds in the last 6 months? X 8. Other than as stated in answers to Questions 2-6, has Proposed Insured, within the last 5 years: a. Consulted or been examined or treated by any physician or practitioner? X b. Had any illness, injury, or surgery? X c. Been a patient in or been examined or treated at a hospital, clinic, sanatorium, or other medical facility? X d. Had electrocardiogram, X-ray, other diagnostic test? X e. Been advised to have any diagnostic test, hospitalization, treatment or surgery which was not completed? X 9. Has Proposed Insured, within the last 12 months: a. Smoked cigarettes? X b. Used any other form of tobacco? (Give full details.) X Age if Age at 10.Family History: Living Cause of Death Death Father 0 Rheumatic heart disorder 44 Mother 69 -- -- Brothers/Sisters 42 -- -- DETAILS FOR "YES" ANSWERS. Include: I. Question Number. II. Diagnosis and Treatment III. Results. IV. Dates and Duration. V. Names and Addresses of all attending physicians and medical facilities. (If additional space is needed, please attach a separate sheet, dated signed and witnessed as below.) #3D & 4 TAKES TENOVMIN FOR HIGH BLOOD PRESSURE SINCE ABOUT FIVE OR SIX YEARS AGO. HE TAKES HALF OF A TAB A DAY. PRESERVI - DAY BY DAY. RICHARDS MARAVA MD IN BROOKLYN, NEW YORK, NO COMPLICATIONS. SA SMOKES CLOSE TO A PACK OF CIGARRETES DAILY. The above statements and answers are true and complete to the best of my knowledge and belief. I agree that such statements and answers shall be part of the application for insurance or request for policy change or reinstatement, as the case may be. The Insurer may relay on them in acting on the application or making the policy change or reinstatement. Dated at Miami, FLA 10-12-93 City State Mo. Day Yr. X /s/ PIERRE G. MANSUR Signature of Proposed Insured Witness (Must be Examiner or Nurse/Technician): [ILLEGIBLE]
Table of Guaranteed Payments (MINIMUM AMOUNT FOR EACH $1,000 APPLIED) OPTION 2A OPTION 3 FIXED PERIOD INSTALLMENTS MONTHLY LIFE INCOME Number Monthly Annual of Year's Installments Installments Installments 10 years Certain 20 Years Certain Refund Certain Age Male Female Male Female Male Female 1 $84.70 $1000.00 50 $4.50 $3.96 $4.27 $3.89 $4.28 3.87 2 43.08 508.60 51 4.58 4.02 4.32 3.94 4.35 3.93 3 29.21 344.86 52 4.67 4.09 4.38 4.00 4.42 3.99 4 22.28 263.04 53 4.75 4.16 4.44 4.06 4.50 4.05 5 18.12 213.99 54 4.85 4.24 4.50 4.12 4.58 4.11 55 4.94 4.32 4.56 4.18 4.66 4.18 6 15.36 181.32 56 5.04 4.40 4.62 4.24 4.74 4.25 7 13.38 158.01 57 5.15 4.49 4.68 4.31 4.83 4.33 8 11.91 140.56 58 5.26 4.58 4.74 4.38 4.93 4.41 9 10.76 127.00 59 5.37 4.68 4.81 4.45 5.03 4.49 10 9.84 116.18 60 5.49 4.78 4.86 4.52 5.13 4.58 61 5.62 4.89 4.92 4.59 5.24 4.67 11 9.09 107.34 62 5.75 5.00 4.98 4.66 5.35 4.77 12 8.47 99.98 63 5.88 5.12 5.04 4.73 5.48 4.88 13 7.94 93.78 64 6.03 5.25 5.09 4.80 5.60 4.99 14 7.49 88.47 15 7.11 83.89 65 6.17 5.39 5.14 4.88 5.74 5.10 66 6.32 5.53 5.19 4.95 5.88 5.22 67 6.48 5.68 5.24 5.01 6.03 5.35 16 6.77 79.89 68 6.64 5.83 5.28 5.08 6.18 5.49 17 6.47 76.37 69 6.80 6.00 5.32 5.14 6.38 5.64 18 6.20 73.25 70 6.97 6.17 5.33 5.20 6.33 5.79 20 5.76 67.98 71 7.15 6.34 5.38 5.26 6.71 5.96 72 7.32 6.53 5.41 5.30 6.11 6.13 73 7.50 6.72 5.43 5.35 7.12 6.32 21 5.37 65.74 74 7.67 6.92 5.45 5.38 7.34 6.52 22 5.40 63.70 23 5.24 61.85 75 7.85 7.12 5.47 5.42 7.58 6.73 24 5.10 60.17 76 8.02 7.32 5.48 5.44 7.82 6.96 25 4.97 58.62 77 8.19 7.53 5.40 5.46 8.00 7.21 78 8.36 7.75 5.50 5.48 8.38 7.47 79 8.52 7.96 5.50 5.49 8.67 7.75 80 8.67 8.16 5.51 5.50 9.00 8.05 26 4.84 57.20 81 8.81 8.36 5.51 5.51 9.34 8.39 27 4.73 55.90 82 8.94 8.55 5.51 5.51 9.70 8.73 28 4.63 54.69 83 9.06 8.73 5.51 5.51 10.10 9.12 29 4.54 53.57 84 9.16 8.90 5.51 5.51 10.52 9.53 30 4.45 52.53 85 & over 9.26 9.05 5.51 5.51 10.96 9.97
If installments are paid every 3 months, they will be 25.32% of the annual installments If they are paid every 6 months, they will be 50.43 of the annual instruments. Amounts for Monthly Life Income are based on age nearest birthday when income starts. Amounts for ages not shown will be furnished on request. No. 133-54-8 PAGE 8 TERM INSURANCE POLICY The Equitable Life Assurance Society of the United States 787 Seventh Avenue, New York, N. Y. 10019 Yearly Renewable Term Plan. Insurance payable upon death before Term Expiry Date. Renewable annually until Final Term Expiry Date shown on Page 3. Renewal premiums may change subject to guaranteed maximums (see "Premium Changes" on Page 4). Premiums payable to Term Expiry Date or until earlier death. Conversion Privilege. This is a non-participating policy. No. 133-54 EX-10.12 17 EXHIBIT 10.12 THE INSURED PAUL I. MANSUR POLICY OWNER MANSUR INDUSTRIES INC FACE AMOUNT $1,000,000 POLICY NUMBER J 96 010 417 TERM INSURANCE POLICY THE EQUIPMENT OF COLORADO, INC. AGREES To pay the insurance benefits of this policy to the Beneficiary upon receiving proof that the Insured died before the Final Term Expiry Date; and To provide YOU (THE POLICY OWNER) with the other rights and benefits These agreements are subject to the provisions of this policy. Ten Days to Examine Policy - If for any reason you are not satisfied with your policy, you may cancel it by returning the policy to us within 10 days after you receive it. If you do, we will refund the premium that was paid. /s/ Samuel B. Shlesinger SAMUEL B. SHLESINGER, CHAIRMAN, PRESIDENT & CHIEF EXECUTIVE OFFICER /s/ Linda Galasso LINDA GALASSO, SECRETARY Renewable Term Plan. Insurance payable upon death before Final Term Expiry Date. Renewable until Final Term Expiry Date shown on Page 3. RENEWAL PREMIUMS AFTER THE TENTH POLICY ANNIVERSARY MAY CHANGE SUBJECT TO GUARANTEED MAXIMUMS (SEE "PREMIUM CHANGES" ON PAGE 4). Premiums payable to Final Term Expiry Date or until earlier death. Conversion Privilege. This is a non-participating policy. CONTENTS Insurance Benefits 2 Policy Owner and Beneficiary 4 Premiums 4 Conversion Privilege 5 General Provisions 6 Payment Options 6 Table of Guaranteed Payments 8 Any additional benefit riders and a copy of the application are at the back, of this policy. IN THIS POLICY: " We", "our" and "us" mean The Equitable of Colorado, Inc. "You" and "your" mean the Owner of the policy at the time an Owner's right is exercised. INSURANCE BENEFITS We will pay the insurance benefits of this policy to the Beneficiary when we receive proof of the Insured's death. These insurance benefits include the following amounts, which we will determine as of the date of the Insured's death: - the Face Amount of this policy shown on Page 3; - PLUS any other benefits due from riders to this policy; - PLUS OR MINUS any adjustment for the last premium. We will add interest to the resulting amount for the period from the date of death to the date of payment. We will compute the interest at a rate we determine, but not less than the greater of (a) the rate we are paying on the date of payment under the Deposit Option on Page 7; or (b) the rate required by any applicable law. We will pay these benefits only if premiums have been paid as called for by this policy. Payment of these benefits may also be affected by other provisions of this policy. See Page 6 where we specify our right to contest the policy, what happens if age or sex has been misstated, and the suicide exclusion. Special exclusions or limitations (if any) are listed on Page 3. Page 2 THE INSURED PAUL I MANSUR POLICY OWNER MANSUR INDUSTRIES INC FACE AMOUNT $1,000,000 FINAL TERM EXPIRY DATE MAY 3, 2046 POLICY MMBER J 96 010 417 REGISTER DATE MAY 3, 1996 DATE OF ISSUE MAY 24, 1996 ISSUE AGE,SEX 45, MALE BENEFICIARY MANSUR INDUSTRIES ------------ BENEFITS AND PREMIUMS ------------ BENEFITS SEMI-ANNUAL PREMIUM PREMIUM PERIOD LIFE INSURANCE $1,032.00 10 YEARS THE FIRST PREMIUM IS $1,032.00 AND IS DUE ON OR BEFORE DELIVERY OF THE POLICY. SUBSEQUENT PREMIUMS ARE DUE ON NOV 3, 1996 AND EVERY 6 MONTHS THEREAFTER. ----------- BENEFITS AND PREMIUMS ------------ RENEWAL SCHEDULED GUARANTEED DATE RENEWAL MAXIMUM RENEWAL MAY 3 PREMIUM* PREMIUM 2006 $ 3,542.00 $ 7,312.00 2007 3,732.00 8,012.00 2008 4,022.00 8,732.00 2009 4,362.00 9,502.00 2010 4,732.00 10,332.00 2011 5,172.00 11,252.00 2012 5,672.00 12,282.00 2013 6,252.00 13,442.00 2014 6,932.00 14,762.00 2015 7,742.00 16,242.00 2016 8,692.00 17,852.00 2017 9,812.00 19,022.00 2018 11,162.00 20,202.00 2019 12,742.00 21,392.00 2020 14,622.00 22,612.00 2021 16,722.00 23,942.00 2022 19,432.00 26,162.00 2023 22,492.00 30,212.00 2024 26,062.00 34,212.00 2025 30,222.00 38,602.00 2026 34,072.00 42,582.00 2027 38,932.00 48,662.00 2028 44,512.00 55,622.00 2029 50,822.00 63,522.00 2030 57,952.00 72,442.00 2031 66,262.00 82,822.00 2032 74,242.00 92,802.00 2033 83,442.00 104,302.00 2034 94,042.00 117,552.00 PAGE 3 (CONTINUED ON NEXT PAGE) THIS PAGE 3-CONTINUED IS A PART OF POLICY NUMBER 96 010 417. ----------- SEMI-ANNUAL RENEWAL PREMIUMS ------------ RENEWAL SCHEDULED GUARANTEED DATE RENEWAL MAXIMUM RENEWAL MAY 3 PREMIUM* PREMIUM 2035 105,892.00 132,362.00 2036 118,852.00 148,562.00 2037 124,952.00 156,182.00 2038 146,012.00 182,512.00 2039 159,732.00 199,662.00 2040 173,832.00 217,292.00 2041 188,232.00 235,272.00 2042 206,152.00 257,692.00 2043 225,602.00 281,992.00 2044 246,762.00 308,442.00 2045 277,752.00 347,172.00 *SEE PREMIUM CHANGES-PAGE 4 PAGE 3-CONTINUED PAGE 3-CONTINUED THIS PAGE 3 - CONTINUED IS PART OF POLICY NUMBER --------- ENDORSEMENT --------- In the event you need.to present inquiries, obtain information about coverage or need assistance in resolving complaints about this policy, please contact your Agent. If you have additional .questions, you may contact The Equitable, The Equitable of Colorado or Equitable Variable at the following address and telephone number, The Equitable, The Equitable of Colorado or Equitable Variable, Charlotte Service Center, 6301 Morrison Boulevard, Charlotte, North Carolina 28211; Telephone: (800) 777-6510. Please have your policy number available for any inquiries. S.33-59 NOTICE TO FLORIDA RESIDENTS If the owner or insured, this policy is age 64 or older, under Florida Law, you may designate a secondary addressee to receive copies of notices. To request this, please send the name and address of the person you are designating to receive notices to our service center at the address shown above. PAGE 3 - CONTINUED POLICY OWNER AND BENEFICIARY OWNER. The Owner of this policy is the insured unless otherwise stated in the application, or later changed. As Owner, you can exercise all the rights in this policy while the Insured is living. You do not need the consent of anyone who has policy a conditional or future ownership interest in this policy. BENEFICIARY. The Beneficiary is as stated in the application, unless later changed. If two or more persons are named, those surviving the Insured will share equally unless otherwise stated. We will pay any benefit for which there is no stated Beneficiary living at the death of the Insured to the children of the Insured who then survive, in equal shares. If none survive, we will pay the estate of the Insured. CHANGES. While the Insured is living, you may change the Owner or Beneficiary by submitting written notice in a form satisfactory to us. You can get such a form from our agent or by writing to us. The change will take effect on the date you sip the notice, except that it will not apply to any payment we make or other action we take before we receive the notice in our Administrative Office. If you change the Beneficiary, any previous arrangement you made under the Payment Options provision on Page 6 is cancelled. You may choose a Payment Option for the new Beneficiary in accordance with that provision. ASSIGNMENT. You may assign this policy, if we agree, but we will not be bound by an assignment unless we have received it in writing. Your rights and those of any other person referred to in this policy will be subject to the assignment. We assume no responsibility for the validity of any assignment. An absolute assignment will be considered as a change of ownership to the assignee. PREMIUMS AMOUNTS AND DUE DATES. Page 3 shows the amounts and due dates of the premiums payable until the Final Term Expiry Date. It shows scheduled renewal premiums based on the initial rate scale; guaranteed maximum renewal premiums; and the premium due dates for renewal periods. For the first ten policy years, the premiums shown on Page 3 are level and guaranteed. Beginning with the eleventh policy year, scheduled renewal premiums are subject to change as stated in the Premium Changes section. Each premium is payable on or before its due date at our Home Office or premium collection office. You may write and ask to change the frequency of premium payment. If we approve the change, the new premium will be determined on the rate scale for this policy. GRACE PERIOD. We allow a grace period of 31 days for payment of each premium, after the first premium. The insurance will continue during the grace period. LAPSE. If a premium is not paid by the end of its grace period, the policy will lapse as of the premium due date. If this occurs, all insurance ends at the end of the grace period. PREMIUM CHANGES. Beginning with the eleventh policy year, we have the right to change the scheduled renewal premiums for the policy. We will send you written notice of any such change before the next premium payment is due. The scheduled premium for any policy year after the tenth policy anniversary may vary, but will never be more than the guaranteed maximum renewal premium shown on Page 3 for that year. We will adjust the renewal premium only on a uniform basis for insureds of the same insurance age, sex and class of risk, whose policies have been in force for the same length of time. We will not change the premium or class of risk because of an adverse change in the Insured's health, occupation or avocation. We will base a premium change solely on future expectations as to mortality, investment earnings, persistency, taxes and expenses. Our procedures and standards for premium changes,are on file, as required, with the insurance supervisory official of the jurisdiction in which this policy is delivered. PAGE 4 REINSTATEMENT. You may reinstate this policy within five years after a lapse, but not later than the Final Term if: (1) you provide evidence of insurability satisfactory to us; and (2) you pay all overdue premiums with interest 6% per year compounded annually. PREMIUM ADJUSTMENT. We will add to the insurance benefits any part of the last premium paid that applies to a period beyond the policy month in which the Insured dies. If the Insured dies during the grace period of an unpaid premium, we will deduct from the benefits the part of the overdue premium for one policy month. These are the adjustments for the last premium referred to on Page 2. CONVERSION PRIVILEGE You may exchange this policy on any premium due date on or before the fifth policy anniversary for a new policy on the life of the Insured without evidence of insurability: (1) if the day of the policy anniversary nearest the Insured's 75th birthday; and (2) if all premiums have been duly paid; and (3) if there is a Disability Premium Waiver rider in effect in this policy, the Insured is not totally disabled as defined in that rider. However, see the section "Conversion During Disability". The Register Date of the new policy will be the date of exchange. Premiums for the new policy will be based on our rates in effect on that date. They will be for the Insured's then attained insurance age and for the same class of risk as for this policy. 'The first premium for the new policy must be paid on or within 31 days before the date of exchange. THE NEW POLICY. The new policy will have an insurance amount equal to the amount of insurance in effect on this policy. Or, you may choose any lower amount allowed by our rules in effect on the date of exchange. The new policy may be on any plan of insurance we offer on the date of exchange, subject to our rules then in effect as to plan, age and class of risk. You may not choose a policy of term insurance, one that includes term insurance, or one that pr6vides insurance on more than one life. If additional benefit riders are in effect on this policy on the date of exchange, you may choose that the new policy contain similar riders subject to our rules in effect on its Register Date. Except as to any additional benefit riders included in the new policy, the suicide exclusion and incontestability periods of the new policy will be determined from the date of issue of this policy instead of from the date of issue of the new policy. CONVERSION DURING DISABILITY. We will issue a new policy with a Disability Premium Waiver rider in exchange for this policy on any policy anniversary you choose on or before the fifth policy anniversary provided (1) the date of exchange is before the policy anniversary nearest the Insured's 65th birthday; (2) a Disability Premium Waiver rider is in effect in this policy on the date of exchange; and (3) the Insured is then totally disabled as defined in that rider. The new policy will have an insurance amount equal to the amount of insurance in effect on this policy. It will be on a life insurance plan that we then issue, subject to our rules in effect on its Register Date as to plan. You may not choose a policy of term insurance, one that includes term insurance, or one that provides insurance on more than one life. Its Register Date will be the date of exchange. Premiums for the new policy will be based on our rates in effect on that date. They will be for the Insured's then attained insurance age and for the same class of risk as for this policy. We will waive premiums for the new policy as stated in its Disability Premium Waiver rider while total disability continues. (We will not waive premiums on and after the policy anniversary nearest the Insured's 65th birthday for a total disability that began on or after the policy anniversary of this policy nearest the Insured's 60th birthday.) PAGE 5 GENERAL PROVISIONS THE CONTRACT. We provide this insurance in consideration of payment of the required premiums. This policy and the attached copy of the application for it make up the entire contract. The contract may not be modified, nor may any of our rights or requirements be waived, except in writing signed by our President or one of our Vice Presidents. INCONTESTABILITY. We have the right to contest the validity of this policy based on material misstatements made in the application for this policy. However, we will not contest the validity of this policy after it has been in effect during the lifetime of the Insured for two years from the Date of Issue shown on Page 3. No statement shall be used to contest a claim unless contained in the application. All statements made in the application are representations and not warranties. See any additional benefit riders for modifications of this provision that apply to them. AGE AND SEX. If the Insured's age or sex has been misstated, any benefits will be those that the premium paid would have purchased at the correct age and sex. SUICIDE EXCLUSION. If the Insured commits suicide, while sane or insane, within two years after the Date of Issue shown on Page 3, our liability will be limited to the payment of a single sum equal to the premiums paid. POLICY PERIODS AND SAREES. Policy years, policy months, policy anniversaries and premium periods are measured from the Register Date. Each policy month begins on the same day in each calendar month as in the Register Date. POLICY CHANGES. You may change this policy to another plan of insurance or add additional benefit riders or make other changes, subject to our rules at the time of change. PAYMENT OPTIONS Instead of having the insurance benefits paid immediately in one sum, you can choose another form of payment for all or part of the benefit. If you do not arrange for this before the Insured dies, the Beneficiary will have this right when the Insured dies. Arrangements you make, however, cannot be changed by the Beneficiary after the Imured's death. The options are: 1. DEPOSIT OPTION: The sum is left on deposit for a period mutually agreed upon. We pay interest at the end of every month, every 3 months, every 6 months or every 12 months, as chosen. 2. INSTALLMENT OPTIONS: A. FIXED PERIOD: We pay the sum in equal installments for a specified number of years (not more than 30). The installments will be at least those shown in the Table of Guaranteed Payments on Page 8. B. FIXED AMOUNT: We pay the sum in installments as mutually agreed upon until it, together with interest on the unpaid balance, is used up. 3. LIFE INCOME OPTIONS: We pay the sum as a monthly income for life in an amount we determine. The amount of the monthly payment will be at least that shown in the Table of Guaranteed Payments on Page 8. We guarantee payments for life and in any event for 10 years (called "10 Years Certain"), 20 years (called "20 Years Certain"), or until the payments we make equal the amount applied (called "Refund Certain"), according to the "certain" period chosen. available at the time of the Insured's death. PAGE 6 We guarantee interest 2 1/2% a year. We may raise the guaranteed rates. We may also allow excess interest under Options 1 and 2. The payee under an option may name and change a successor payee for any amount we would otherwise pay the payee's estate. Any arrangements involving more than one of the options, or a payee who is not a natural person (for example, a corporation) or who is a fiduciary, must have our approval. Also, details of all arrangements will be subject to our rules at the time the arrangement takes effect. These include rules on: the minimum amount we will apply under an option and minimum amounts for installment payments; withdrawal or commutation rights; naming payees and successor payees; and proving age and survival. Choices (or any later changes) under these options will be made and will take effect in the same way as a change of Beneficiary. Amounts applied under these options will not be subject to the claims of creditors or to legal process, to the extent permitted by law. PAGE 7 ACCELERATED DEATH BENEFIT RIDER DISCLOSURE. The receipt of thc Benefit Amount may be taxable. You should seek assistance from tax advisor prior to electing the benefit. IN THIS RIDER "WE", "OUR' AND "US" MEAN THE EQUITABLE OF COLORADO, INC. "YOU" MEANS THE OWNER OF THE POLICY AT THE TIME AN OWNER'S RIGHT IS EXERCISED. 'THIS POLICY' MEANS THE POLICY TO WHICH ATTACHED. POLICY NUMBER.- 9 6 0 1 0 4 1 THIS RIDER'S BENEFIT. We will pay an accelerated death benefit in the amount requested by the Owner, if the Insured is terminally ill, subject to the provisions of this rider. We will pay an accelerated death benefit under this policy only once and in one lump sum. The maximum accelerated death benefit you may receive is the lesser of: 1. 75% of the death benefit payable under this policy, less any policy loan and loan interest, and 2. $500,000. The maximum aggregate amount of Accelerated Death Benefit payments that will be paid under all policies issued by us on the life of the Insured is $500,000. For purposes of this benefit, the death benefit does not include any accidental death benefits, non-convertible term riders or convertible term riders not in their conversion period or any benefits payable because of the death of any person other than the Insured. There is no premium or cost of insurance charge for this rider. We reserve the right to deduct a processing charge of up to $250.00 per policy from the accelerated death benefit payment. We reserve the right to set a minimum of $5,000 on the amount you may receive under this rider. To be eligible for this benefit you must provide satisfactory evidence to us that the Insured's life expectancy is six months or less. This evidence must include, but is not limited to, certification by a physician licensed to practice medicine in the United States or Canada and who is acting within the scope of such license. A physician does not include the Owner, the Inured or a member of either's family. HOW THIS RIDER RELATES TO THE POLICY. This rider is a part of the policy. Its benefits are subject to all the terms of this rider and the policy. This rider has no cash or loan value. This rider is non-participating. INTEREST. Interest will be charged go the amount of the Accelerated Death Benefit and on any unpaid premium we advance after the payment of, an Accelerated Death Benefit. The interest rate at the time the Accelerated Death Benefit payment is made, will not exceed the greater of the following on such date: 1. the yield on a 90-day treasury bill; or 2. the maximum adjustable policy loan interest rate permitted in the state in which this policy is delivered. Effect Of Accelerated Death Benefit Payment On The Policv. The Accelerated Death Benefit payment, plus any accrued interest will be treated as a lien against the policy values. The amount of the lien will be pro-rated against the policy's net cash surrender value, if any, and the net amount at risk. (The net amount at risk is defined as the death benefit of the policy minus the cash surrender value, if any.) The amount payable at death under the policy will be reduced by the full amount of the lien and any other indebtedness outstanding under policy. The Owner's access to the policy's cash surrender value of the lien secured against the cash surrender value and any other outstanding policy loans and loan interest. If premiums are required to be paid under the policy, they will continue to be due after the payment of the is not paid when due, the amount of the unpaid premium will be added to the lien. If a Disability Premium Waiver Rider is in effect under the policy, this policy's premiums will be waived as of the date we approve an Accelerated Death Benefit a payment. PAGE 8 RIDER LIMITATIONS. Your right be paid under the Accelerated Death Benefit Rider is subject to the following conditions: 1. The policy must be in force other than as extended term insurance. 2. For term insurance policies, there must be at least one year left before the final term expiry date. 3. You must make a claim in writing in a form that is satisfactory to us. 4. If the policy is collaterally assigned, except to us as security for a policy loan or an Accelerated Death Benefit lien, we must receive a full release of this assignment for the election of this benefit. 5. An Accelerated Death Benefit payment must be approved in writing by any irrevocable beneficiary. 6. For joint last to die po4cles, a claim may be made under the rider only after the death of the first of the Insureds to die. 7. You may not be eligibli6 for the Accelerated Death Benefit if we are notified that: a) you are required by law to elect this rider's benefit in order to meet the claims of creditors, whether in bankruptcy or otherwise; or b) you are required by a government agency to elect this rider's benefit in order to apply for, obtain. or keep a government benefit or entitlement. 8. You may request only one Accelerated Death Benefit Amount to be paid per policy. 9. We may require examination of the Insured by our medical representatives at our expense as part of any proof to establish eligibity for benefits under this rider. WHEN THIS RIDER WILL TERMINATE. You may terminate this rider by asking us in writing in a form satisfactory to us and by sending the rider to our Administrative Office. The effective date of the termination will be the beginning of the policy month which coincides with or next follows the date we receive your request. Once this rider has been terminated, another Accelerated Death Benefit Rider cannot be attached to the policy. This rider will terminate when the policy terminates. If at any time the amount of the lien equals the total death benefit the policy will terminate. Termination will occur 31 days after we have mailed notice to the last known address of the Owner, unless the full amount of the lien is repaid within 31 days of the notice. THE EQUITABLE OF COLORADO., INC. /s/ LINDA GALASSO /s/ SAMUEL B. SHLESINGER Linda Galasso, Secretary Samuel B. Shiesinger, Chairman, President & Chief Executive Officer PAGE 9 Application Part I For Life Insurance THE EQUITABLE OF.COLORAD0, INC. 1. PROPOSED INSURED a. Printe name to appear on policy. PaulI. I. Mansur First Middle Initial Last _X_Mr. __Miss __Ms. __Other Title_________ a. List all current occupations - Give Title(s) and Duties C.E.O. - Executive Duties d. Date of Birth: Mo 01 Day 12 Yr. 51 e. Age Nearest Birthday: 45 f. Place of Birth: State of Florida g. Residence: State of Florida h. U.S. Citizen? _X_Yes _____No (If "No," Country_________________) i. _X_Male ___Female 2. PLAN AMOUNT OF INSURANCE Term 10 $1,000,000 3. OPTIONAL BENEFITS ___Accidental Death Benefit* (Specify Amount): ___Disability Premium Waiver* ___Automatic Premium Loan (Not for Term policies) ___Increasing Term Rider ___One Time Additional Premium of $______ for Additional Death Benefit ___Recurring Additional Premium of $______ for Additional Death Benefit *See limitations in item 9.d. 4. BENEFICIARY for Insurance on Proposed Insured. Include Full Name and Relationship Insured. Mansur Industries, Inc. - Employer Unless otherwise requested, the contingent beneficiary will be the surviving children of the Insured, in equal shares. If none survive, payment will be made to the Insured's estate. 5. OWNER Owner's Soc. Sec. Or Tax No. 6 5 0 2 2 6 8 1 3 The Owner is ____Proposed Insured ___Applicant for Child (See 9.c.) _X_Other (Give Full Name): Mansur Industries, Inc. If "Other," complete the following: ___Mr. ___Miss ___Mrs. ___Ms. ___Other Title_______ Relationship to Insured: Employer Specify a successor Owner if desired____________________ If the Proposed Insured or the Applicant for a Child is not the Owner and if all persons designated die before the Insured, the Owner will be the estate of the last of such persons to die except where the Insured is a Child (see Note in 9.c.). 6. MAILING ADDRESS ___Business (Give Full Name) ___Residence Mansur Industries, Inc. (Name) 8425 SW 129 Terrace (No.) (Street) (Apt.) Miami FL (City) (State) 331566519 (Zip) 7. PREMIUM PAYMENT PLAN ___Annual _X_Semi-Annual ___Quarterly ___Monthly ___System-Matic(Attach S-M Form) 8. SPECIAL INSTRUCTIONS a. ___Preliminary Term to: Mo____Day____Yr.____ b. ___Date to save insurance age:___________________ c. Other: 9. COMPLETE IF PROPOSED INSURED IS A CHILD (ISSUE AGES 0-14). a. Will there be more life insurance in effect on the Child than any other child in the family? ___Yes ___No If Yes, explain: b. APPLICANT-COMPLETE IF OTHER THAN CHILD. i. First Name Middle Initial Last Name ii. ___Mr. ___Miss ___Mrs. ___Ms. ___Other Title___________________________ iii. Date of Birth ___________________________19______ Month Day Year iv. ___Male ___Female v. Relationship to Child:__________________ vi. Total Life Insurance now in effect: $------------------------ c. OWNER. If the Applicant is to be the Owner, after the Applicant's death the Child will be the owner unless otherwise designated in Special Instructions (in any such designation include OWNER'S FULL NAME, RELATIONSHIP to Child, and Social Security or Tax Number). NOTE: CONSIDER DESIGNATING AN ADULT SECONDARY OWNER TO REDUCE THE CHANCE OF A MINOR CHILD BECOMING THE OWNER. F ALL PERSONS DESIGNATED DIE BEFORE THE CHILD, THE OWNER WILL BE THE CHILD. d. LIMITATIONS ON CHILD'S ADB AND DPW BENEFITS. If the Accidental Death Benefit is applied for on the Child, the benefit is payable only if the Child dies after the Child's first birthday. If the Disability Premium Waiver Benefit applied for on the Child, the benefit is effective only if the Child becomes totally disabled on or after the Child's 5th birthday. /s/ IAN J. SCHARF IAN J. SCHARF 319-50-226 Agent's Name Agent's Signature Florida License Number 10. OTHER INFORMATION - Has the Proposed Insured: a. Ever had a driver's license suspended or revoked or, within the last three years, been convicted of two or more moving violations or driving under the influence of alcohol or drugs? (Give full details - including dates, types of violation, and reason for license suspension or violation.) _____Yes __X_No b. Any plan to travel or reside outside the U.S.? _____Yes __X_No c. Any other life insurance now in effect or application now pending? (State companies and amounts.) __X_Yes ____No d. Been disabled for 2 weeks or more within the last 2 years? _____Yes __X_No 11. a. In the last year flown other than as a passenger or plan to do so? _____Yes __X_No If "Yes:" Total flying time at present_____________Hours; Last 12mos._____Hours; Next 12 mos._____Est. Hours. (Complete Aviation Supplement for pilot instruction; competitive, test, stunt or military flying; or crop dusting.) b. Engaged within the last year, or any plan to engage in motor racing on land or water, underwater diving, sky diving, ballooning, hang-gliding, parachuting or flying ultra-light aircraft? (If Yes, complete Avocation Supplement.) _____Yes __X_No c. Ever had an application for life or health insurance declined, that required an extra premium or was otherwise modified? (Give full details.) _____Yes __X_No d. Replaced or changed any existing insurance or annuity (or any plan to do so) assuming the insurance applied for will be issued? (State companies, plans and amounts.) _____Yes __X_No Answer Questions 12 through 16 only if Non-Member. 12. Proposed Insured: Height_____ Ft.___ In.___ Weight______lbs. Has the Proposed Insured: 13a. Ever had or been treated for heart trouble, stroke, high blood pressure, chest pain, diabetes, tumor, cancer, respiratory or neurological disorder? (Give full details.) _____Yes ____No b. In the last 5 years, consulted a physician, or been examined or treated at a hospital or other medical facility? (Include medical check-ups in the last 2 years. Do not include colds, minor injuries, or normal pregnancy.) (Give full details.) _____Yes ____No 14. In the last 12 months: a. Smoked cigarettes? _____Yes __X_No b. Used any other form to tobacco? (Give full details.) _____Yes __X_No 15. In the last 10 years: a. Used, except as legally prescribed by a physician, tranquilizers; barbiturates or other sedatives; marijuana, cocaine, hallucinogens or other mood-altering drugs; heroin, medthdone or other narcotics; maphetamines or other stimulants, or any other illegal or controlled substances? _____Yes ____No b. Received counseling or treatment regarding the use of alcohol or drugs: _____Yes ____No 16. In the last 10 years, been: a. Diagnosed by a member of the medical profession as having Acquired Immune Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC)? _____Yes ____No b. Treated by a member of the medical profession for AIDS or ARC? _____Yes ____No 17. DETAILS. For each answer give Question number and full details. FOR 13 THROUGH 16 ALSO INCLUDE CONDITIONS, DATES, DURATIONS, TREATMENTS AND RESULTS, AND NAMES AND ADDRESSES OF PHYSICIANS AND MEDICAL FACILITIES. No. Name of Person Affected Details 10C Paul Has Life of Virginia - $25,000 Face - Not Replacing ---- Paul Issue with Living Benefits Rider. I have received Living Benefits Rider Brochure 94-03. Paul Mansur SS# ###-##-#### ------------------------------------------------------------------------ Any Person who knowlingly and with intent to injure, defraud, or deceive any insurer files a statement of claim or an application containing any false, incomplete, or misleading information is guilty of a felony of the third degree. 18. COMPLETE IF MONEY IS PAID BEFORE THE POLICY IS DELIVERED: Have undersigned read and do they agree to the conditions of the Temporary Insurance Agreement of The Equitable of Colorado, Inc., including (I) the requirement that all of the conditions in that Agreement must be met before any temporary insurance takes effect, and (ii) the $250,000 insurance amount limitation? __X_Yes ____No (IF "NO," OR IF ANY PERSON PROPOSED FOR INSURANCE HAS HAD ACQUIRED IMMUNE DEFICIENCY SYNDROME (AIDS) OR AIDS-RELATED COMPLEX (ARC) WITHIN THE LAST 10 YEARS OR HAD CANCER, A STROKE OR A HEART ATTACK WITHIN THE LAST YEAR, A PREMIUM MAY NOT BE PAID BEFORE THE POLICY IS DELIVERED.) __X_AMOUNT PAID: $1,372.00. (DRAW CHECKS TO ORDER OF THE EQUITABLE OF COLORADO, INC.) 19. SOCIAL SECURITY OR TAX I.D. NUMBER CERTIFICATION I, the proposed policy owner(s), cerify under penalties of perjury that (i) the number(s) shown in Question 5 of this form is my (our) correct taxpayer identification number, and (ii) I ____am _X_am not subject to a backup withholding order issued by the IRS. In this agreement, "we" and "our" mean The Equitable of Colorado, Inc. AGREEMENT. Each signer of this application agrees that: (1) The statements and answers in all parts of this application are true and complete to the best of my knowledge and belief. We may rely on them in acting on this application. (2) Our Temporary Insurance Agreement states the conditions that must be met before any insurance takes effect, if money is paid before the policy is delivered. (3) Except as stated in the Temporary Insurance Agreement, no insurance shall take effect on this application: (a) until a policy is delivered and the full initial premium for it is paid while the Proposed Insured is living; and (b) unless to the best of my knowledge and belief the statements and answers in all parts of this application continue to be true and complete, without material change, as of the time such premium is paid. (4) No agent or medical examiner has authority to modify this Agreement or the Temporary Insurance Agreement, nor to waive any of our rights or requirements. We shall not be bound by any information unless it is stated in application Part 1 or Part 2. Date at MIAMI_________FLORIDA on 04-29 1996 X_/S/__PAUL I. MANSUR Signature of Proposed Insured or of Applicant if Proposed Insured is a Child, Issue Age 0-14. X_/S/__PIERRE G. MANSUR______PRESIDENT - MANSUR INDUSTRIES, INC. Signature(s) of Purchaser/Owner if not Proposed Insured or Applicant. (If corp., show firm's name and signature of authorized officer.) SIGNATURE OF AGENT /s/ IAN J. SCHARF LARGE AMOUNT SUPPLEMENT TO: _____THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES _____EQUITABLE VARIABLE LIFE INSURANCE COMPANY __X__THE EQUITABLE OF COLORADO, INC. INSTRUCTIONS: Complete Section I AND Section(s) (Personal Insurance) or III (Business Insurance). PROPOSED INSURED'S NAME_____PAUL_____I._____MANSUR ASU (Alpha)/App.No.________547_________ First Middle Last SECTION I - GENERAL INFORMATION (Complete in all instances) A. INSURANCE IN FORCE (All Companies) B. INSURANCE APPLIED FOR (All Companies) PURPOSE FACE AMOUNT FACE AMOUNT Personal $250,000 $0 Business $0 $1,000,000 - THIS ONE Total in Force $250,000 Amount applied for elsewhere is ___competitive _X_additional. C. FINANCIAL INFORMATION: 1. Income: Gross Annual Compensation: (e.g. Salary, Commissions, Bonuses,etc.) $100,000 $100,000 (Current Rate) (Current Rate) Gross Annual Investment and Other Income: (e.g. Dividends, Interest, Net Real Estate Income, etc.) $0 $0 (Past 12 months) (Preceding 12 months) Total Cash Income before taxes $100,000 $100,000 2. Net Personal Worth: CURRENT Assets: $2,000,000 Liabilities (including mortgages): $ 30,000 Net Worth: $1,970,000 SECTION II - PERSONAL INSURANCE (Complete only when applying for Personal Insurance) PURPOSE: (Check appropriate box(es) and answer all supplemental questions.) ___Family Income ___Education Fund ___Gift ___Mortgage Protection ___Personal Loan Collateral (other than mortgage protection): Answer supplemental questions under Business Loan Collateral in Section III, C3. ___Estate Settlement Taxable Estate $_______________ Estimated Settlement Costs (taxes and administration expenses) $_____________________ Total Liquid Assets $______________________ ___Other (specify)________________________ The above statements and answers are true and complete to the best of my knowledge and belief. I agree that such statements and answers shall be made part of the application for insurance or request for policy or reinstatement, as the case may be. The Insurer may rely on them in acting on this application. Dated____________________ on ____4/29_____ 1996 /s/ PAUL I. MANSUR Signature of Proposed Insured, or Applicant if Proposed Insured is a Child Witnessed by:______________________________________ Signature of Agent 1 APPLICATION PART 2 TO: ___THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES ___EQUITABLE VARIABLE LIFE INSURANCE COMPANY ___THE EQUITABLE OF COLORADO, INC. PARAMEDICAL Reason for submission of this form: ___New Policy___Policy Change ___Reinstatement 1. a. Proposed Insured First Name Middle Initial Last Name (PLEASE PRINT) Paul I. Mansur b. Height: _5_ft._8_in. c. Weight: 175 lbs. d. Birth Date: Mo. __01__Day_12__Yr._51_ e. ____Male ____Female 2. a. Name and address of personal physician (or medical facility instead): (IF NONE, SO STATE): Sharon Rodriquez, MD, 1150 Campo Sano Avenue, Suite 410, Coral Gables, FL 33146 Telephone: 668-2181 b. Date and reason last consulted if within the last 5 years: 03-1996 Regular check-up c. What treatment was given or recommended? (IF NONE, SO STATE): Monopril 20 mg. And Zocot 10 mg. (For all "Yes" answers to Questions 3-9, circle items that apply.) 3. Has Proposed Insured ever had or been treated for: YES NO a. Disease or disorder of eyes, ears, nose or throat? X b. Dizziness, fainting, convulsions, paralysis or stroke; psychiatric, psychological or emotional disturbance; mental or nervous disease or disorder? X c. Shortness of breath; blood spitting; bronchitis, asthma, emphysema, tubercuosis or other chronic respiratory disease or disorder? X d. Chest pain, palpitation, HIGH BLOOD PRESSURE, rheumatic fever, heart murmur, heart attack or other disease or disorder of the heart or blood vessels? X e. Ulcer, hernia, colitis, intestinal bleeding; jaundice, hemorrhoids, or other disease or disorder of the stomach, intestines, liver or gallbladder? X f. Sugar, albumin, BLOOD or pus in urine, stone or other disease or disorder of kidney or bladder? X g. Diabetes; cyst, tumor, or cancer; thyroid or glandular disorder; skin disease or disorder? X h. Neuritis, arthiritis, gout, or disease or disorder of the muscles or bones, including the back, or joints? X i. Deformity, lameness or amputation? X j. Allergies; anemia; other blood or lymph disease or disease? k. Disorder of protate, reproductive organs, breasts, menstruation or pregnancy? X 4. Is Proposed Insured now under observation or taking treatment? X 5. Has Proposed Insured, within the last 10 years, been: a. Diagnosed by a member of the medical profession as having Acquired Immune Deficiency Syndrome (AIDS) or AIDS-Related Complex (ARC)? X b. Treated by a member of the medical profession for AIDS or ARC? 6. Has Proposed Insured, within the last 10 years: a. used, except as legally prescribed by a physician, tranquilizers; barbiturates or other sedatives; marijuana, cocaine, hallucinogens or other mood-altering drugs; heroin, methadone or other narcotics; amphetamines or other stimulants; or any other illegal or controlled substances: X b. Received counseling or treatment regarding the use of alcohol or drugs? X 7. Has Proposed Insured's weight changed by more than ? pounds in the last 6 months? X 8. Other than as stated in answers to Questions 2-6, has Proposed Insured within the last 5 years: a. Consulted or been examined or treated by any physician or pracitioner? X b. Had any illness, injury, or surgery? c. Been a patient in or been examined or treated at a hospital, clinic, sanatorium, or other diagnostic test? X d. Had electrocardiogram, X-ray, other diagnostic test? X e. Been advised to have any diagnostic test, hospitalization, treatment or surgery which was not completed? X 9. has Proposed Insured, within the last 12 months: a. Smoked cigarettes? b. used any other form of tobacco? (Give full details.) X 10. Family History Age if Living Cause of Death Age at Death Father Heart Attack 44 Mother Cancer 69 Brothers/Sisters 44 DETAILS FOR "YES" ANSWERS. Include: i. Question Number. ii. Diagnosis and Treatment. iii. Results. iv. Dates and Duration. v. Names and Addresses of all attending physicians and medical facilities. (If additional space is needed, please attach a separate sheet, dated, signed and witnessed as below.) F. Barbara A. Monlford MD 7150 W. 20 Ave., Suite 610 Hialeah, FL 33016 Phone: 558-6518 06-1995 Blood in Urine (Mieroscopic). 4 Refer to 2C The above statements and answers are true and complete to the best of my knowledge and belief, I agree that such statements and answers shall be part of the application for insurance or request for policy change or reinstatement, as the case may be. The insurer may rely on them in acting on the application or making the policy change or reinstatement. Dated at __MIAMI___FL___on__05___03___1996 /s/ PAUL I. MANSUR City State Mo. Day Yr. Signature of Proposed Insured Witness (MUST BE EXAMINED) /s/ illiegible TABLE OF GUARANTEED PAYMENTS (MINIMUM AMOUNT FOR EACH $1,000 APPLIED)
Option 2A Option 3 FIXED PERIOD INSTALLMENTS MONTHLY LIFE INCOME Number 10 Years Certain 20 Years Certain Refund Certain of Years' Monthly Annual Installments Installment Installment Age Male Female Male Female Male Female 1 $84.28 $1000.00 50 $3.48 $3.19 $3.42 $3.17 $3.37 $3.14 2 42.66 506.17 51 3.54 3.23 3.47 3.21 3.42 3.17 3 28.79 341.60 52 3.59 3.28 3.51 3.25 3.46 3.21 4 21.86 259.33 53 3.65 3.32 3.56 3.29 3.51 3.25 5 17.70 210.00 54 3.70 3.37 3.61 3.33 3.56 3.29 6 14.93 177.12 55 3.77 3.42 3.66 3.37 3.61 3.34 7 12.95 153.65 56 3.83 3.47 3.72 3.42 3.67 3.38 8 11.47 136.07 57 3.90 3.58 3.83 3.52 3.78 3.48 9 9.39 122.40 58 3.97 3.58 3.83 3.52 3.78 3.48 10 9.39 111.47 59 4.04 3.64 3.88 3.57 3.84 3.53 11 8.64 102.54 60 4.12 3.70 3.94 3.62 3.90 3.58 12 8.02 95.11 61 4.20 3.76 4.00 3.68 3.97 3.64 13 7.49 88.83 62 4.29 3.83 4.06 3.74 4.04 3.69 14 7.03 83.45 63 4.38 3.90 4.12 3.79 4.11 3.75 15 6.64 78.80 64 4.48 3.98 4.18 3.85 4.19 3.82 16 6.30 74.73 65 4.58 4.06 4.25 3.92 4.26 3.88 17 6.00 71.15 66 4.68 4.14 4.31 3.98 4.35 3.95 18 5.73 67.97 67 4.79 4.23 4.37 4.04 4.43 4.02 19 5.49 65.13 68 4.90 4.32 4.43 4.11 4.52 4.10 20 5.27 62.58 69 5.02 4.42 4.50 4.18 4.62 4.18 21 5.08 60.28 70 5.14 4.52 4.56 4.25 4.71 4.26 22 4.90 58.19 71 5.26 4.63 4.62 4.31 4.82 4.35 23 4.74 56.29 72 5.39 4.75 4.67 4.38 4.92 4.44 24 4.60 54.55 73 5.52 4.87 4.73 4.45 5.03 4.53 25 4.46 52.95 74 5.66 4.99 4.78 4.51 5.14 4.63 26 4.34 51.48 75 5.80 5.12 4.83 4.58 5.27 4.74 27 4.22 50.12 76 5.95 5.26 4.88 4.64 5.39 4.84 28 4.12 48.87 77 6.10 5.40 4.93 4.70 5.53 4.96 29 4.02 47.70 78 6.25 5.55 4.97 4.75 5.66 5.08 30 3.93 46.61 79 6.40 5.70 5.01 4.80 5.80 5.20 80 6.56 5.85 5.04 4.86 5.96 5.33 81 6.72 .01 5.08 4.90 6.11 5.45 82 6.88 6.18 5.11 4.95 6.27 5.60 83 7.04 6.34 5.13 4.99 6.43 5.73 84 7.20 6.51 5.16 5.03 6.62 5.89 85 & over 7.36 6.67 5.18 5.07 6.81 6.04
If installments are paid every 3 months, they will be 25.23% of the annual installments. If they are paid every 6 months, they will be 50.31% of the annual installments. Amounts for Monthly Life Income are based on age nearest birthday when income starts. Amounts for ages not shown will be furnished on request. Page 8 TERM INSURANCE POLICY The Equitable of Colorado, Inc. 370 17th Street, Suite 4950, Denver, CO 80202 Renewable Term Plan. Insurance payable upon death before Final Term Expiry Date. Renewable until Final Term Expiry Date shown on Page 3. Renewal premiums after the tenth policy anniversary may change subject to guaranteed maximums (see "Premium Changes" on Page 4). Premiums payable to Final Term Expiry Date or until earlier death. Conversion Privilege. This is a non-participating policy. No. CO106-94 EX-10.13 18 EXHIBIT 10.13 United States Patent POWER SPRAY WASHER United States Patent Patent Number: 5,277,208 Mansur Date of Patent: Jan.11, 1994 [54] MULTI-PROCESS POWER SPRAY WASHER APPARATUS [76] Inventor: Pierre G. Mansur, 12210 SW. 130th St.. Miami, Fla. 33186 [21] Appl. No.: 884,406 [22] Filed: May 18, 1992 [51] Int. Cl.5...............B08B 3/02; B08B 13/00 [52] U.S. Cl...................134/56 R; 134/99.2; 134/107;134/108;134/109; 134/111; 134/153; . 210/167;210/297;210/387 [58] Field of Search ........... 134/56;210/167,297, 210/387 [56] References Cited U.S. PATENT DOCUMENTS 3,378,018 4/1968 Lanter...................134/109 3.624,750 11/1971 Peterson.................134/153 X 3.765.430 10/1973 Muller...................134/109 4.143,669 3/1979 Minkin...................134/153 4,217.920 8/1990 Ballard..................134/153 X 4.652.368 3/1997 Ennis et al..............134/109 X 4.769.158 9/1998 Eckert...................210/297 X 4.948.502 8/1990 Anderson.................210/387 FOREIGN PATENT DOCUMENTS 710672 2/1980 U.S.S.R 134/109 761035 9/1990 U.S.S.R 134/109 PRIMARY EXAMINER - Philip R. Coe ATTORNEY, AGENT, OR FIRM - Malloy & Malloy [57] ABSTRACT A self-contained and integrated multi-process power spray washer apparatus to be used to clean articles placed therein, the washer apparatus including a central washing chamber which is large enough to enclose and rotate an article to be cleaned therein. A primary filter removes contaminants from a cleaning solution immediately after it has been used, and a solution reservoir receives and holds filtered cleaning solution from the primary filter. A fin forced electronic burner heats the cleaning solution contained in the reservoir, and Provides a heat source for contaminant incineration. An oil skimmer removes oil and grease from an upper surface of the cleansing solution held in the reservoir, and a secondary centrifugal filter through which cleansing solution is pumped from the reservoir additionally filters the solution. A high power sprayer sprays the recycled and clean cleansing solution into the washing chamber at a substantially high volume and pressure so as to substantially clean the item contained within the washing chamber. A fresh water rinse cycle provides for a final fresh water rinse of the article being cleaned and the recycling of the contaminated water prior to reuse or proper drainage. Accordingly, three steps of a cleaning process associated with the present invention include spray washing, recycling and disposal which are fully integrated in the self contained power spray washer apparatus. 14 Claims, 1 Drawing Sheet [DRAWING] U.S. PATENT Jan 11, 1994 5,277,208 [DRAWING, Fig.1] [DRAWING, Fig.2] 1 MULTI-PROCESS POWER SPRAY WASHER APPARATUS BACKGROUND OF THE INVENTION Field of the Invention This invention relates to a self-contained and integrated multiprocess power spray washer apparatus, to be used to clean any and all parts or articles placed therein, and is structured to power spray wash parts, filter and recycle cleansing solutions, and dispose of all contaminant by-product, thereby providing a cost efficient, highly effective, and environmentally acceptable means of cleaning engine parts and the like which require thorough cleaning prior to use. Summary of the Invention The present invention is directed towards a self-contained and integrated multi-process power spray washer apparatus to be used to clean any and all parts placed therein. The apparatus includes primarily a central washing chamber which is sufficiently large to enclose and rotate completely the item to be cleaned, thereby utilizing the cleansing solution at a substantially high pressure and volume which maximizes the effects of the cleaning. Additionally, the washer apparatus includes a primary filter which is structured and disposed to receive used cleansing solution from the central washing chamber and substantially remove contaminants therefrom. This primary filter is interconnected with a solution reservoir such that the filtered cleansing solution may flow therefrom into the solution reservoir. Within the solution reservoir, the cleansing solution is heated by in integrated burner so as to maximize the effects of the cleansing solution. The cleansing solution within the solution reservoir is further cleaned by an oil skimmer which removes oil and grease from the cleansing solution. Further included as part of the washer apparatus is a secondary centrifugal filter. This secondary centrifugal filter is structured such that cleansing solution is pumped from the solution reservoir therethrough, wherein the solution is further cleansed of contaminants. After passing through the secondary centrifugal filter, the cleansing solution is pumped through a high power sprayer which sprays the cleansing solution into the washing chamber at substantially high volumes and pressures, thereby cleaning the item contained within the washing chamber. The object of the present invention is to provide a power spray washing apparatus which will thoroughly clean any and all parts. including engine blocks and the like which often have large quantities of dirt, grease, and contaminants built up thereon. Another object of the present invention is to provide a spray washer apparatus which enables the cleansing solution to be recycled and reused, yet be effective throughout all of the multiple uses. Yet another object of the present invention is to provide a power spray washer apparatus which is environmentally acceptable and eliminates contaminant waste. BRIEF DESCRIPTION OF THE DRAWINGS For a fuller understanding of the nature of the present invention, reference should be had to the following detailed description taken in connection with the accompanying drawings in which: 2 FIG. 1 is a front, partial cutaway perspective view of the power spray washer apparatus. FIG. 2 is a partial cutaway, side view of the power spray washer apparatus. Like reference numerals refer to like parts throughout the several views of the drawings. DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT Shown in FIGS. 1 and 2, the present invention is directed towards a self-contained and integrated multiprocess power spray washer apparatus generally indicated as 10, to be used to thoroughly clean any and all parts which may have substantial dirt, grease, and contaminates built up thereon. The spray washer apparatus 10 includes a large central washing chamber 20 capable of completely enclosing the item to be cleaned. Located within the central washing chamber 20 is a pull out, rotating turntable 24 which is structured to be able to support objects of substantial weight thereon. The rotating turntable 24 is structured such that all sides of the item to be cleaned will be thoroughly sprayed, and as it may be easily pulled out and slid back within the washing chamber 20, the large and heavy items to be cleaned may be conveniently positioned thereon before insertion into the washing chamber 20. In order to assure maximum sealing efficiency within the washing chamber 20, and in order to minimize the floor space required for the spray washer apparatus 10, a pair of inwardly opening doors 25 are utilized to allow access into the washing chamber 20. Included at a lower portion of the washing chamber 20 is a drainage opening 28. The drainage opening 28 is structured such that cleansing solution used within the washing chamber 20 may flow therethrough into a primary filter 30. The primary filter 30 utilizes a filtration sheet 31 which is structured to remove a majority of the contaminants contained in the used cleansing solution, and allow passage of the filtered cleansing solution therethrough. The filtration sheet 31 is positioned at a distal end 32 thereof on an automatic roller 33 which contains the clean filtration sheet 31. The filtration sheet 31 is positioned so as to pass substantially over a drainage area 35. Used cleansing solution flows into the drainage area 35 and is filtered by the filtration sheet 31, however, since the portion of the filtration sheet 31 which is over the drainage area 35 will eventually become saturated with contaminants, a fluid level meter 36 is included over the drainage area 35 such that when a predetermined quantity of cleansing solution backs up within the drainage area 35, thereby indicating the filtration sheet 31 is saturated, it will trigger the automatic roller 33. Once triggered, the automatic roller 33 causes a clean portion of the filtration sheet 31 to be positioned atop the drainage area 35, and causes the saturated proximate end 34 of the filtration sheet 31 to pass into a disposal holding area 40. Further, suction fan 2 located in cleansing solution reservoir 50 provides negative pressure to augment the flow of cleansing solution through filtration sheet 31. Additionally, a safety release overflow outlet 39 above filtration sheet 31 and a hood 37 encapsulating the drainage area 35 prevent any overflows. After passage through the drainage area 35, the filtered cleansing solution passes into the solution reservoir 50 positioned beneath the washing chamber 20. The contaminant saturated portion 34 of the filtration sheet 31 after passage into the disposal holding area 40 can be removed and positioned within a heavy duty 5,277,208 3 incinerator chamber 41, having ceramic lining 43, wherein the saturated portion 34 of the filtration sheet 31 will be incinerated by a fan forced burner 42. The incineration formed by this process passes through an exhaust duct and out of the spray washer apparatus 10. In addition to incinerating the filtration sheet 31. the fan forced burner 42 also functions as heating means to beat cleansing solution held within the solution reservoir 50, thereby maximizing the efficiency of the cleansing solution. Once within the solution reservoir 50, an oil skimmer 55 is utilized to remove remaining oil or contaminants from the cleansing solution. The above steps are part of what may be referred to as a cleansing cycle or operation. After the cleansing cycle or operation, to be described in even greater detail hereinafter, has been completed, a filtering cycle may be started by adding flocculent and/or coagulant chemical catalysts contained in catalyst holding tank 12 into the cleaning solution reservoir 50 so as to react with the cleaning solution and initiate the coagulant and/or flocculent chemical process which coagulates or flocculates the finer contaminants for pick up by the mechanical, rotating 360' sweep 19 which may again be activated during the filtering cycle. The rotating sweep 19 once again activated directs the contaminated solution into an upper portion of the washing chamber 20 through a diverter flow tube 27, and into a suction and discharge chamber 15. This flow is induced by a suction mechanism 13 which creates a desired turbulent free flow of the solution for discharge through discharge opening 17 into drainage opening 28 therethrough into primary filter 30 so as to separate the flocculated and/or coagulated contaminants from the recycled solution. However, during the cleansing cycle or operation the cleansing solution containing gravity settled contaminants is picked up from the solution reservoir 50 through mechanical rotating 360' sweep 19 at the extreme solution reservoir 50 bottom into pump 60, and through solution conduits 62 and 64 into a secondary centrifugal filter 70. The secondary centrifugal filter 70 revolves the cleansing solution at high speeds causing any remaining contaminated cleansing solution to pass to a lower portion 71 thereof, and out through a drainage outlet 72. This contaminated cleansing solution passes from the drainage outlet 72 into an extremely fine filter element 73 so as to separate the contaminants from the recycled solution which is automatically directed back to the holding tank 50. After passage through the secondary centrifugal filter 70, the clean, reused cleansing solution passes into a high power sprayer 80. The high power sprayer 60 includes a plurality of nozzles 82 which are structured to optimize a solution spray pattern into the central washing chamber 20. After introduction of the cleansing solution into chamber 20, and the cleaning of an item therein, an additional part of the cleansing cycle includes a fresh water rinse cycle, performed within central washing chamber 20. After rinsing the item being cleaned, the initially fresh rinse washer, now containing contaminants, is routed or allowed to drain through a diverter door 5 on the drainage opening 28 which directs contaminated fresh water rinse fluid through a discharge tube to entry 79 and into a rinse cycle filter 75 which combines a filter roll element plus heavy metal removal media, with activated charcoal discharged from the apparatus 10 through a discharge opening 77. Contaminants within the rinse water are thereby properly eliminated. Conveniently positioned outside of the central washing chamber 20 is a control panel which includes a plurality of gauges to check solution temperature, levels and the like, and may further be programmed to perform automated, 4 timed cleaning cycles. Finally, the entire power spray washer apparatus 10 is heavily polyurethane insulated to reduce heat emission and retain the cleansing solution at a desired temperature. Now that the invention has been described, what is claimed is: 1. To be used to power clean any and all parts, a self-contained and integrated multi-process power spray washer apparatus comprising: a central washing chamber, said chamber being sufficiently large to enclose an item to be cleaned therein, a primary filter, said primary filter structured to remove flocculated and/or coagulated contaminants from a cleansing solution, a solution reservoir, structured to receive the filtered cleansing solution from said primary filter, heating means to heat said cleansing solution in said reservoir, an oil skimmer structured and disposed to remove remaining oil and grease from said cleansing solution in said reservoir, a secondary centrifugal filter through which said cleansing solution is pumped, said secondary centrifugal filter being structured to remove additional contaminants from said cleaning solution prior to reuse, and a high power sprayer to spray said cleansing solution, after passage through said secondary centrifugal filter, into said washing chamber at a substantially high volume and high pressure so as to clean the item contained within said chamber. 2. An apparatus as recited in claim 1 wherein said central washing chamber includes a pull out, rotating turntable whereon said item to be cleaned may be positioned and rotated within said chamber so as to place all sides of said item under the direct spray of said high power sprayer. 3. An apparatus as recited in claim 2 wherein said turntable is capable of supporting thereon items of substantial weight. 4. An apparatus as recited in claim 3 wherein said central chamber includes a pair of inwardly opening doors structured and disposed to maximize sealing efficiency and minimize floor space requirements. 5. An apparatus as recited in claim 4 wherein said primary filter includes a filtration sheet pulled from a roll on an automatic roller and across a drainage area, a used portion thereof being discarded into a disposal holding area. 6. An apparatus as recited in claim 5 wherein said drainage area includes a fluid level meter means positioned so as to detect when said cleansing solution attains a predetermined height and said filtration sheet has become saturated by contaminants and will no longer allow passage of filtered cleanser therethrough into said solution reservoir, and said meter triggering said automatic roller when the fluid level reaches the predetermined height so as to move a fresh area of said filtration sheet from said roll over said drainage area and direct saturated areas of said filtration sheet into said disposal holding area. 7. An apparatus as recited in claim 6 wherein said heating means includes a fan forced electronic burner. 5,277,208 5 8. An apparatus as recited in claim 7 further including a disposal incineration area having a heavy duty, ceramic lined incinerator, exhaust means, and being structured and disposed to incinerate said saturated filtration paper using said electronic burner. 9. An apparatus as recited in claim 8 further including a mechanical rotating 360 sweep suction mechanism at an extreme bottom of said solution reservoir to assist the flow of contaminants and cleansing solution throughout said apparatus. 10. An apparatus as recited in claim 9 wherein said secondary centrifugal filter is structured and disposed to direct contaminants to a lower portion thereof, and send filtered cleansing solution into said high power sprayer. 11. An apparatus as recited in claim 10 wherein said lower portion of said secondary filter includes a drain- 6 age outlet to direct the contaminants into a fine filter element so as to separate the contaminants from the recycled solution prior to being directed back into said solution reservoir. 12. An apparatus as recited in claim 11 further including a chemical catalyst added into said solution reservoir to chemically induce removal of contaminants from the cleansing solution. 13. An apparatus as recited in claim 12 which includes an integral fresh water rinse cycle with provisions for diverting fresh water rinse through several stages of filtration removing the majority of contaminants for reuse or proper drainage. 14. An apparatus as recited in claim 13 wherein said high power sprayer includes a plurality of nozzles structured and disposed to optimize asolution spray pattern. EX-10.14 19 EXHIBIT 10.14 United States Patent GENERAL PARTS WASHER United States Patent PATENT NUMBER: 5,349,974 Mansur Date of Patent: Sep. 27, 1994 GENERAL PARTS WASHER Inventor. Pierre G. Mansur, Miami, Fla. Assignee: Mansur Industries Inc., Miami, Fla. Appl. No.: 207,136 Filed: Mar. 4, 1994 Int. Cl.$ BO8B 3/02 U.S. Cl. 134/107; 134/108; 134/111 Field of Search 134/105, 107, 108, 109, 134/111; 202/170 References Cited U.S. PATENT DOCUMENTS 2,834,359 5/1958 Kearney 134/108 X 3,598,131 8/1971 Weihe, Jr 134/107 3,718,147 2/1973 Laroche 134/108 X 3,996,949 12/1076 Boynton 134/108 X 4,008.729 2/1977 Chizinsky 134/107 4,290,439 9/1981 Charpentier 134/107 4,353.323 10/1982 Koblenzer 134/107 X 4,596,634 6/1986 McCord 134/107 X 4,865,061 9/1989 Fowler e al. 134/108 FOREIGN PATENT DOCUMENTS 662742 3/1929 France 134/105 2394334 2/1979 France 134/109 PRIMARY EXAMINER - Philip R. Coe ATTORNEY, AGENT. OR FIRM - Robert M. Downey ABSTRACT An apparatus for washing automotive, aviation, marine and general parts with a volatile solvent during maintenance, repair and rebuilding operations. The apparatus includes a wash basin with a drain to facilitate return of the solvent to a holding tank having a pump therein for recirculating the solvent back to the wash basin through a discharge spout for washing parts. A first valve assembly between the drain and holding tank closes during periods of non-use to prevent vapors from escaping to the atmosphere. During a timed recycling process, a second valve assembly releases used, contaminated solvent from the holding tank into a distillation pot where the solvent is heated under vacuum to produce vapors. The vapors pass through a condenser where they are cooled to a liquid state, yielding pure solvent, which is directed into the holding tank for future parts washing as demanded. 11 Claims, 6 Drawing Sheets [DRAWING] U.S. Patent Sep. 27, 1994 Sheet 2 of 6 5,349,974 [DRAWING, FIG. 3] [DRAWING, FIG. 4] U.S. Patent Sep. 27, 1994 Sheet 3 of 6 5,349,974 [DRAWING, FIG. 5] [DRAWING, FIG. 6] [DRAWING, FIG. 7] [DRAWING, FIG. 8] U.S. Patent Sep. 27, 1994 Sheet 4 of 6 5,349,974 [DRAWING, FIG. 9] [DRAWING, FIG. 10] [DRAWING, FIG. 11] [DRAWING, FIG. 12] U.S. Patent Sep. 27, 1994 Sheet 5 of 6 5,349,974 [DRAWING, FIG. 13] U.S. Patent Sep. 27, 1994 Sheet 6 of 6 5,349,974 DISTILLATION CYCLE WASH CYCLE ON TIMER DISTILLATION 6 DAY/24 HR WASH ON PROGRAMMABLE ON VAPOR CONTAINMENT SOLVENT CONTAINMENT VALVE OPEN VALVES OPEN SOLVENT PUMP ON TIMER DELAY WASH OR RINSE VALVES CLOSE FIG15A TIMER DELAY VACUUM PUMP ON VACUUM FAULT ALL SENSOR OK OFF WASH CYCLE OFF ALL HETING ELEMENTS ON WASH OFF TEMP. SENSOR SET POINT SOLVENT PUMP OFF ONE HEATING ELEMENT OFF TIMER DELAY BLOWER ON VAPOR VALVE CLOSE VAPOR TEMP. SENSOR FIG15B ALL OFF FIG14 5,349,974 GENERAL PARTS WASHER BACKGROUND OF THE INVENTION 1. Field of the Invention This invention relates to an apparatus for washing articles with a liquid solvent, and more particularly, to a general parts washer providing for recycling of contaminated, dirty solvent during a timed recycling process to produce pure, non-contaminated solvent on a regular basis for use in washing parts during maintenance, repair, and rebuilding operations. 2. Description of the Related Art During maintenance, repair and rebuilding operations in virtually all industrial and commercial environments, it is necessary to wash a wide variety of parts and articles in order to remove grease, oil, dirt and other contaminants. Typically, volatile solvents are used in almost all small parts cleaning operations as they have been found to be most effective in removing grease and other accumulated residue from metal parts and other articles. In order to facilitate washing of various parts with a volatile solvent such as a hydrocarbon or halogenated hydrocarbon, there is presently available a sink which is removably supported on top of a 55 gallon drum filled with cleaning solvent. A pump is provided which pumps the solvent from the drum to a spicket in the sink where it is used to rinse parts. From the sink, the solvent is drained back into the drum During washing operations, the solvent becomes immediately contaminated after the first use. However, the contaminated solvent is continuously used during cleaning operations until a next scheduled solvent replacement, which is usually on a monthly basis. The regular replacement of contaminated solvent is ordinarily provided by a service, which also supplies the washing apparatus, on a service contract basis. To replace the solvent, the sink is removed from the drum containing the contaminated solvent and is placed on another drum containing fresh solvent. The contaminated drum of solvent must then be taken away and disposed of in a manner complying with EPA containment disposal guidelines. This procedure is inefficient, costly and time consuming, leaving a busy manufacturing or repair facility with no other alternative than to perform parts cleaning operations using dirty, contaminated solvent between scheduled solvent replacement dates. Various types of systems and apparatus have been proposed and/or developed for cleaning metal parts and like articles using volatile solvents. In many applications, the solvent is heated to produce vapors. The various articles to be cleaned are either bathed in the vapors or in a condensed stream of volatile solvent. Some of these various apparatus systems are disclosed in the following U.S. Pat. Nos.: Chizinsky, U.S. Pat. No. 4,008,729; Laroche, U.S. Pat. No. 3,718,147; McCord, U.S. Pat. No. 4,596,634; Boynton. U.S. Pat. No. 3,996,949; and Koblenzer, U.S. Pat. No. 4,353,323. Generally, all of the cleaning apparatus disclosed in these patents include a base reservoir where the solvent is contained and heated to produce vapors. As the vapors rise, they are condensed to a liquid solvent which drips back down into the base reservoir. Articles placed, within the various apparatus are cleaned by either the rising vapor or the condensed solvent. In any event, the solvent in the reservoir accumulates contaminates in a short period of time and, eventually, the contaminated solvent must be removed, properly disposed of and replaced with clean solvent. Therefore, there still exists the problem associated with the time and expense of contaminate disposal. Accordingly, there is a definite need in all industries requiring parts cleaning during maintenance, manufacturing, repair and rebuilding operations, for a parts washing apparatus including a sink or basin for washing parts with a volatile solvent and means for recycling the solvent to provide pure, non-contaminated solvent on a daily basis. SUMMARY OF THE INVENTION The present invention is directed to an apparatus for washing (cleaning) articles such as general machine and engine parts, which provides pure, fresh solvent on demand. More particularly, the present invention includes a timed recycling process which recycles contaminated, dirty solvent on a regular basis to provide pure solvent for cleaning, thus eliminating the need for regular replacement and disposal of contaminated solvent. Accordingly, the present invention provides a practical and economical means of complying with contaminate disposal guide lines of the Environmental Protection Agency. In accordance with the general parts washing apparatus of the present invention, there is provided a cabinet having an upper wash basin including an at least partially surrounding wall structure defining a splash guard, an open top and a removable front wall portion. The wash basin further includes a floor which slopes slightly downward from the side front and rear towards a centrally disposed drain to facilitate recovery of solvent after use. A lower portion of the cabinet is defined by side wall panels and a base disposed in surrounding relation to a cabinet interior. Once the solvent has passed through the drain and a filter, the solvent returns to a holding tank within the cabinet interior below the wash basin. A pump recirculates the solvent from the holding tank to a spout which discharges the solvent into the wash basin for rinsing articles during what might be termed a wash cycle. During a timed recycling process, containment valves are opened, releasing the solvent from within the holding tank to a distillation pot. After a timed delay, the valves are closed and a vacuum pump is activated, creating a vacuum in the distillation pot and holding tank while the solvent is heated to a boiling point. The vacuum in the distillation pot is maintained effectively lowering the solvent boiling point temperature, as vapors rise from the distillation pot through a condenser tube. The condenser tube passes through a cooling zone created by a blower where the vapors condense to a liquid state, producing pure recycled solvent. This fresh solvent is then led into the holding tank for subsequent use during wash cycle. A lid covers the distillation pot, in sealed relation thereto, during the recycling process. To facilitate cleaning, the distillation pot can be lowered, removing the lid, and pulled out from the lower cabinet, whereupon accumulated contaminate can be more efficiently and effectively removed from within the pot. Accordingly, with the foregoing in mind it is a primary object of the present invention to provide a general parts washing apparatus for use in cleaning parts during maintenance, repair and rebuilding operations, which includes means for recovering and recycling cleaning solvent so as to provide a user with "on-demand" pure solvent on a daily basis for cleaning. It is another object of the present invention to provide a general parts washing apparatus, as described above, which eliminates the need for constant replacement and disposal of contaminated cleaning solvent, while providing a practical and economical means of complying with environmental protection agency contaminant disposal guidelines. It is a further object of the present invention to provide a general parts washing apparatus adapted to recycle volatile solvent so as to provide fresh, pure solvent on a regular basis and which is further relatively compact and inexpensive. It is still a further object of the present invention to provide a general parts washing apparatus, as described above, which operates on common 120 volts and which further requires no special water or air requirements. It is yet another object of the present invention to provide a general parts washing apparatus, as described above, which complies with all government imposed safety requirements. It is still another object of the present invention to provide a general parts washing apparatus as described above, which is further engineered and designed to permit a user to siphon residual contaminates from the distillation pot bottom without manually accessing the pot. These and other objects and advantages of the present invention will be more readily apparent in the description which follows. BRIEF DESCRIPTION OF THE DRAWINGS For a fuller understanding of the nature of the present invention, reference should be had to the following detailed description taken in connection with the accompanying drawings in which: FIG. 1 is a front, top perspective view of the general parts washing apparatus of the present invention. FIG. 2 is an isolated view, in partial section, taken along the plane of line 2-2 of FIG. 1. FIG. 3 is a front elevation, in partial section, taken along the plane of line 3-3 of FIG. 1. FIG. 4 is a side elevation, in partial section, taken along the line 4-4 of FIG. 1. FIG. 5 is a top plan view, in partial section, taken along the plane of line 5-5 of FIG. 3. FIG. 6 is a top plan view, in partial section, taken along the plane of line 6-4 of FIG. 3 illustrating a top of the distillation pot. FIG. 7 is a top plan view, in partial section taken along the plane of line 7-7 of FIG. 3 showing heating elements in the distillation pot. FIG. 8 is a isolated elevational view in partial section, illustrating a vapor containment valve assembly and solvent containment valve assembly of, the present invention. FIG. 9 is an isolated detailed elevational view, in partial section taken along the plane of line 9-9 of FIG. 8 illustrating, in detail, the vapor containment valve assembly and solvent containment valve assembly. FIG. 10 is an isolated view, in partial section, showing the solvent containment valve assembly in an open position. FIG. 11 is an isolated front elevation of an upper portion of the solvent containment valve assembly showing a motor, cam member, inner valve stem and outer valve stem thereof. FIG. 12 is an isolated side elevation, in partial section, showing the vapor containment valve assembly in an open position. FIG. 13 is a schematic diagram illustrating a sequence of operation of components of the washing apparatus during a wash cycle and a solvent recycling distillation cycle. FIG. 14 is a flow diagram illustrating a sequence of operation throughout the solvent recycling distillation cycle. FIG. 15A is a flow diagram illustrating a sequence of operation during the wash cycle. FIG. 15B is a flow diagram illustrating a sequence of deactivation of the wash cycle during intervals of non-use. Like reference numerals refer to like parts throughout the several views of the drawings. DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT Referring to the several views of the drawings, and initially FIGS. 1, 3 and 4, there is generally illustrated the general parts washing apparatus 10 of the present invention. The apparatus 10 includes a cabinet 12 including an upper portion defining a wash basin 14 and a lower portion 16 including a base 17, side walls 18, 18' rear wall 19 and a front wall 20. The front wall 20 is at least partially comprised of a door 22 which is hinged to move between an open and closed position facilitating access to a cabinet interior. The side walls 18, 18' and rear wall 19 extend upwardly beyond a floor 26 of the wash basin 14 so as to partially surround the wash basin, defining a splash guard. A wall panel 24 is removably fitted within opposite channels 25. 25' formed between an upper portion of the front wall 20 and opposite side walls 18, 18'. During washing operation the front wall panel 24 can be pulled upwardly and removed from a remainder of the apparatus 10. In this manner, access to the wash basin 14 is unobstructed from a front of the apparatus 10. The floor 26 in the wash basin 14 is sloped from the side rear and front, downwardly towards a central zone where there is located a drain 28, including a drain plate 29 through which solvent drains after use for washing articles in the basin 14. After passage through the drain plate 29, the solvent is directed through a filter 30 fitted directly below the drain plate. From the filter, the solvent is led through a return canal 32 which leads to a solvent holding tank 40. A vapor containment valve 34 is provided at the connection of the return canal 32 to the solvent holding tank 40. During periods of non-use the vapor containment valve 34 is closed, thus preventing solvent vapors from escaping to atmosphere from within the holding tank The holding tank 40 is sized and configured to contain a predetermined amount of solvent therein for continuous recycling and reuse during cleaning operations. A pump 44 within the holding tank 40, located at a bottom thereof, recirculates the solvent in the holding tank through a return conduit 46 leading to a three way valve 48 interconnecting between the return conduit and a spout 50 and a hose 52 having a wash brush 54 attached to an end thereof. A valve lever 56 facilitates operation of the valve to direct flow of solvent to either or both the spout 50 and hose 52 for subsequent discharge into the wash basin 14. The brush 54 attached to the hose 52 is specifically designed to permit fluid flow there through so that articles may be brushed and simultaneously with solvent to remove accumulated grease, dirt and other contaminants from the articles being washed. Once discharged from either the spout 50 or brush 54 for rinsing the various articles being cleaned, the solvent returns to the holding tank through the drain 26 and return canal 32. An electric switch is provided and is easily accessible on an exterior of the apparatus 10 (not shown for purposes of clarity) to facilitate de-activation of the pump 40 during periods of nonuse. To this point, a wash cycle (sec FIG. 23, 15A & 15B) has been defined which continues during parts washing operations. After daily parts washing operations or on such other time intervals as may be desired the solvent contained within the holding tank 40 (now contaminated after use for washing various articles in the wash basin) is released through a transfer canal 58 into a distillation pot 60 located in a lower portion of the cabinet interior. Referring to FIGS. 9 and 10, at the initiation of a timed solvent recycling process the vapor containment valve 34 is closed by motor M1 or solenoid which rotates a cam 36, resulting in upward movement of valve stem 37 and causing the valve head 38 to mate against the valve seat 39, and thus preventing the vapors from escaping to atmosphere. Simultaneously, motor M2 or solenoid is activated causing rotation of cam member 64, thereby operating a dual head solvent containment valve assembly 66. Upon initiation of the solvent recycling process (as shown in the flow diagrams of FIGS. 13 and 14), partial rotation of cam member 64 forces a first inner valve stem 70 downwardly to release a lower solvent containment valve head 72 from engagement with a two-way valve seat 76. Simultaneously, partial movement of cam member 64 forces a lever 80 attached to an outer second valve stem 82 outwardly causing the second an outer valve stem 82 to be lifted upwardly, resulting in an upper solvent containment valve head 84 being removed from the two way valve seat 76. Upon opening of the solvent containment valve assembly 66, by simultaneous movement of the upper 94 and lower 72 valve heads away from the two-way valve seat 76, the containment, solvent is released from the holding tank 40 through the transfer canal 58 leading to the distillation pot 60. The bottom 41 of the solvent holding tank 40 is specifically configured to slope toward the solvent contaminated valve assembly 66, as seen in FIG. 8, so that upon opening of the containment valve assembly, the solvent will readily flow through the transfer canal 58, flushing any accumulated bottom sediment in the holding tank through the transfer canal and into distillation pot 60. In this manner accumulation of sediment from the bottom 41 of the holding tank and around the two way valve seat 76 is discouraged. The distillation pot 60 includes a double wall structure around the sides and bottom including an inner wall 90 and bottom 92 and outer wall 94 and bottom 96 having insulation 98 disposed therebetween, as best seen in FIGS. 3 and 4. A removable lid 100 is suspended with the cabinet by brackets 102 welded to the inner surface of opposite side walls 18, 18' and the top of the lid 100. To facilitate removal and attachment of the lid 100 in sealed engagement over an open top of the distillation pot, a removal assembly 104 is provided including a wheel 106 having a plurality of arms 107 extending therefrom and a vertically oriented threaded stem 108 which threadably engages within a threaded, hollow, concentric bore 110 extending at least partially through a central vertical post 112 of the distillation pot 60. The wheel 106 remains supported upon a platform 114 on the top of the lid 100 with the threaded stem 108 extending downwardly therethrough for threaded engagement within the threaded bore 110 of the central post 112 of the distillation pot-60. Upon rotation of the wheel 106 in a particular direction, by grasping the 107 and pulling, the threaded stem 108 may be caused to threadably advance within the hollow bore 110 of the central post 112, resulting in the distillation pot 60 being raised towards the lid 100 until a top edge 120 or the side wall of the pot 60 mates with an under side 122 of the lid. Alternatively, rotation of the wheel in an opposite, direction results in lowering of the distillation pot 60, effectively removing the lid. A seal ring 124 may be fitted within a groove formed in an upper edge 120 of the side wall structure of the distillation pot for mating, sealing engagement with the underside surface 122 of the lid 100, thus providing an air tight sealed connection. In order to initiate threaded engagement of the stem 108 within the hollow bore 110 of the central post 112 upon attaching the lid to the distillation pot, a cam lever assembly 130 is provided including a shaft 132 having a first end 134 with a knob 135 attached and an opposite end 136 fitted to a cam member 138 which is pivotally attached to a support bracket 140 above the wheel 106. Upon inward movement of the shaft 132 by pressing inwardly on the knob 135, the cam member 138 is caused to rotate such that one end of the cam member 138 forces the wheel 106 and threaded stem 108 downwardly into threaded engagement with the threaded bore 110 of the central post. In order to facilitate upward movement of the wheel 106 and threaded stem 108 when removing the lid, biasing means are provided between the support platform and wheel (not shown for purposes of clarity). To remove the lid, the knob 134 and attached shaft 132 are pulled outwardly, causing the cam 138 to rotate out of engagement with the wheel. Upon disengagement of the threaded stem 108 from within the central post, the biasing means urges the wheel 106 and stem 108 upwardly to clear the central post 112 and upper edge 120 of the side walls of the distillation pot 60. A plurality of beating elements 150 are provided in the distillation pot 60, including preferably four heating elements attached to the underside of inner bottom 92 of the distillation pot and a fifth heating element 150' disposed within the central post. The heating elements 150, 150' are activated during the recycling process in order to boil the solvent to produce vapors. A condenser tube 160 includes a first end 162 attached through the lid 100 in fluid communication with an interior of the distillation pot 60 and an opposite end 164 connecting to the solvent holding tank. A mid-section of the condenser tube passes through a cooling zone and defines a condenser 166. The cooling zone is cooled by air flow created by a blower 170. Air is drawn through the cooling zone within which the condenser (mid-section of the condenser tube) is located, and forced out of the rear of the cabinet. A vacuum pump 180 within the cabinet interior interconnects to the holding tank 40 for creating a vacuum in the holding 65 tank 40 and distillation pot 60 via the interconnecting condenser tube 160. In accordance with the above description, the solvent recylcing process is shown in the flow chart in the drawings. Activation of the distillation process is set on a programmable timer provided with a 24 hour, seven day clock. Thus, when the timer reaches the programmed activation time, the recycle process is initiated whereupon motor M2 is activated to partially rotate the cam member 64 resulting in the solvent containment valve assembly 66 being opened. A delay timer keeps the solvent containment valve assembly opened for a sufficient time to allow the solvent in the holding tank 40 to be transferred to the distillation pot 60. After the delay, the solvent containment valves 72, 84 are closed. After a second delay, the vacuum pump 180 is activated to create a vacuum within the holding tank and distillation pot. A vacuum sensor determines whether there is a fault in the system and if so, the entire system is shut down and a remainder of the recycling pump is prevented until the fault is corrected. If a sufficient vacuum is sensed, the heating elements 150, 150' are turned on to heat the solvent in the distillation pot. Upon reaching a predetermined temperature, the heating element in the central post of the distillation pot is turned off. Thereafter, the blower 170 is activated and vapor begins to form in the distillation pot and rise through the condenser tube 160, whereupon the vapor is condensed to a liquid state, yielding purified solvent. The purified solvent is lead into the holding tank 40 where it accumulates throughout the recycling process. A vapor temperature sensor in the distillation pot determines when the solvent has been substantially vaporized at which point, the vacuum pump 18, heating elements 15O, 150' and sensors are turned off. At this stage, the holding tank 40 is substantially filled with fresh, purified solvent for use during the next wash cycle. After several distillation cycles, the distillation pot will accumulate a concentrated amount of contaminate. To facilitate removal of this contaminate and cleaning of the distillation pot, the front door 22 of the cabinet 12 is opened and the lid 100 removed from the distillation pot 60, whereupon the pot can be rolled out from within the cabinet permitting unobstructed thereto. Now that the invention has been described, What is claimed is: 1. An apparatus for washing articles with a solvent comprising: a cabinet including an upper portion defining a wash basin and a lower portion including a base and side walls disposed in surrounding relation to a cabinet interior, said wash basin including at least a partially surrounding wall structure defining a splash guard, and a floor having a drain means therein to drain the solvent from within said wash basin, a holding tank within said cabinet interior structured and disposed to contain a predetermined charge of the solvent therein, return means interconnecting between said drain means and said holding tank for directing the solvent from said drain means into said holding tank, a spout for discharging the solvent into said wash basin, a pump structured and disposed to circulate the solvent from said holding tank to said spout for discharge into said wash basin, a distillation pot disposed within said cabinet interior and including an insulated side wall structure and bottom and a removable insulated lid structured for scaled, air tight engagement with said side wall structure in covering relation to an open top of said distillation pot, a transfer canal connecting between said holding tank and said distillation pot for selectively transferring contaminated solvent from said holding tank to said distillation pot, solvent containment valve means selectively operable between an open position to release the contaminated solvent into said distillation pot and a closed position preventing the solvent from entering said distillation pot, a vacuum pump interconnected to said holding tank and structured and disposed to create a vacuum within said holding tank and said distillation pot, heating means within said distillation pot structured and disposed for boiling the contaminated solvent contained therein so as to produce a solvent vapor, a condenser including a condensing tube having a first end connected to said distillation pot for receiving the solvent vapor therein, a mid-portion disposed in a cooling zone within said cabinet interior and a second opposite end connecting with said holding tank for directing purified, condensed liquid solvent into said holding tank, and a blower disposed within said cooling zone for directing an air current therethrough to cool said mid portion of said condensing tube, and thereby causing the solvent vapor to condense to a liquid state so as to produce the purified, solvent. 2. An apparatus for washing articles with a solvent comprising: a wash basin including a floor with drain means therein structured and disposed for draining the solvent from within said wash basin, a holding tank for containing the solvent, solvent discharge means for circulating and discharging solvent from said holding tank into said wash basin, return means or directing the solvent from said drain means to said holding tank, a distillation pot including a surrounding, insulated side wall structure and bottom and a removable insulated top lid, transfer means for selectively transferring contaminated solvent from said holding tank to said distillation pot, a vacuum pump connected to said holding tank for creating a vacuum in said holding tank and said distillation pot, heating elements in said distillation pot structured and disposed for boiling the contaminated solvent contained therein to produce solvent vapors, and a condenser structured and disposed to receive and subsequently condense the solvent vapors to yield pure, non-contaminated solvent, said condenser being further structured and disposed to dispense the condensed pure solvent into said holding tank for subsequent circulation and discharge into said wash basin facilitate washing and rinsing of the articles therein. 3. An apparatus recited in claim 2 wherein said floor of said wash basin is sloped from opposite sides, a front and a rear of said wash basin downwardly towards a central zone. 4. An apparatus as recited in claim 3 wherein said drain means includes a drain plate fitted to said floor at said central zone, wherein the solvent discharged into said wash basin is directed to said drain plate for passage through said drain means into said holding tank. 5. An apparatus as recited in claim 2 wherein said return means includes a canal interconnecting between said drain means and said holding tank 6. An apparatus as recited in claim herein said drain means includes filter means structured and disposed for passage of the solvent therethrough for removing sediment and particulate from the solvent prior to entering said holding tank. 7. An apparatus as recited in claim wherein said return means further includes a vapor containment valve assembly structured and disposed to be operable between in open position, permitting the solvent to flow through said canal to said holding tank, and a closed position, preventing flow of solvent from said wash basin to said holding tank and further preventing flow of solvent fumes and vapors from escaping from said holding tank to atmosphere. 8. An apparatus as recited in claim 2 wherein said solvent discharge means includes a pump within said holding tank and a conduit connecting between said pump and a discharge spout, said discharge spout being structured and disposed for discharging solvent pumped from said holding tank into said wash basin. 9. An apparatus as recited in claim 2 further including a solvent containment valve assembly adjacent said transfer means and selectively operable between a closed position to contain the solvent within said holding tank and an open position to release the solvent from said holding tank for passage through said transfer means and into said distillation pot. 10. An apparatus as recited in claim 9 wherein said solvent containment valve assembly includes a dual valve structure including a first valve head and stem and a second valve head and stem movable in opposing relation to one another for mating engagement and disengagement with a two-sided valve seat. 11. An apparatus as recited in claim 2 wherein said distillation pot includes means, for moving said side wall structure and bottom relative to said lid for selectively separating and attaching said lid in sealed, covering relation to an open top of said distillation pot. EX-10.15 20 EXHIBIT 10.15 United States Patent Application for IMPROVED GENERAL PARTS WASHER [SEAL] UNITED STATES DEPARTMENT OF COMMERCE Patent and Trademark Office Address: Box ISSUE FEE COMMISSIONER OF PATENTS AND TRADEMARKS Washington, D.C. 20231 34M270402 ROBERT M. DOWNEY 700 BRICKELL AVENUE SUITE 1480 NOTICE OF ALLOWANCE MIAMI, FL AND ISSUE FEE DUE Note attached communication from the Examiner This notice is issued in view of applicant's communication filed
SERIES CODE/SERIAL NO. FILING DATE TOTAL CLAIMS EXAMINER AND GROUP ART UNIT DATE MAILED First Named 2/24/95 12 COE, 3405 04/02/96 Applicant MANSUR PIERRE G.
TITAL OF INVENTION GENERAL PARTS WASHER
ATTY'S DOCKET NO. CLASS-SUBCLASS BATCH NO. APPLN. TYPE SMALL ENTITY FEE DUE DATE DUE 3 MANSPA195 134-104.100 V52 UTILITY YES $625.00 07/02/96
THE APPLICATION IDENTIFIES ABOVE HAS BEEN EXAMINED AND IS ALLOWED FOR ISSUANCE AS A PATENT. PROSECUTION ON THE MERITS IS CLOSED. THE ISSUE FEE MUST BE PAID WITHIN THREE MONTHS FROM THE MAILING DATE OF THIS NOTICE OR THIS APPLICATION SHALL BE REGARDED AS ABANDONED. THIS STATUTORY PERIOD CANNOT BE EXTENDED HOW TO RESPOND TO THIS NOTICE: I. Review the SMALL ENTITY Status If the SMALL ENTITY is shown as NO: shown above. If the SMALL ENTITY A. Pay FEE DUE shown above or is shown as YES, verify your B. File verified statement of Small current SMALL ENTITY status: Entity Status before, or with, pay of 1/2 the FEE DUE shown A. If the status is changed, pay above. twice the amount of the FEE DUE shown above and notify the patent and Trademark Office of the change is status, or B. If the Status is the same, pay the FEE DUE shown above. II. Part B of this notice should be completed and returned to the Patent and Trademark Office (PTO) with your ISSUE FEE. Even if the ISSUE FEE has already been paid by charge to deposit account, Part B should also be completed and returned. If you are charging the ISSUE FEE to your deposit account, Part C of this notice should also be completed and returned. III. All communication regarding this application must give series code (or filing date), serial number and batch number. Please direct all communication prior to issuance to Box ISSUE FEE unless advised to contrary. IMPORTANT REMINDER: Patents issuing on applications filed on or after December 12, 1980 may require payment of maintenance fees. It is patentee's responsibility to ensure timely payment of maintenance fees when due. PTOL-85 (REV. 12-93) (0651-003) 3. YOUR COPY EX-10.16 21 EXHIBIT 10.16 United States Patent SPRAY GUN WASHER UNITED STATES PATENT Patent Number: 5,388,601 Mansur Date of Patent: Feb. 14, 1995 SPRAY GUN WASHING APPARATUS Inventor: Pieffe G. Mansur, 8425 SW. 129 Terrace, Miami, FL 33156 Appl. No.: 212,813 Filed: Mar. 15, 1994 Int. Cl.6 ....................... B08B 3/10 U.S. Cl. ....................... 134/56R; 134/105; 134/107; 134/169R; 134/169C; 134/170; 134/109 Field of Search ................. 134/105, 107, 108, 109, 134/170, 169R, 166c, 169c, 200, 56R; 68/18C References Cited U.S. PATENT DOCUMENTS 1,697,767 1/1929 Hirst....................68/18 C 2,070,204 2/1937 Hetzer...................68/18 C 2,243,093 5/1941 Flahive .................68/18 C 2,682,273 6/1954 Roach....................134/170 3,177,126 4/1965 Charreau.................68/18 C 3,771,539 11/1973 De Santis................134/170 4,101,340 7/1978 Rand.....................134/109 4,770,197 9/1988 Prisco, Jr. et al. ......134/109 4,785,836 11/1988 Yamamoto.................134/200 5,193,561 3/1993 Robb et al. .............134/166C 5,318,056 6/1994 Kusz et al ................... 134/95.3 PRIMARY EXAMINER - Frankie L. Stinson ATTORNEY, AGENT, OR FIRM - Robert M. Downey ABSTRACT An apparatus for washing paint spray guns and associated equipment with a liquid solvent for the purpose of cleaning and removing paint therefrom after use in painting operations. The apparatus includes a cleaning chamber having solvent dispersing nozzles therein, the nozzles being structured and disposed for spraying the liquid solvent onto exterior and interior surfaces of the spray gun, paint canister and other equipment supported within the cleaning chamber for cleaning thereof. The used solvent is collected in a holding chamber having a float switch therein which activates a solenoid controlled valve upon the used solvent reaching a predetermined level releasing the contaminated solvent into a distillation chamber for boiling. Purified vapors pass through a condenser where they are cooled to a liquid state, yielding pure solvent which is directed into a clean solvent tank. A pump circulates the purified solvent from the clean solvent holding tank to the dispersing nozzles in the cleaning chamber. 7 Claims, 4 Drawing Sheets [DRAWING] U.S. PATENT FEB. 14, 1995 SHEET 1 OF 4 5,388,601 [PICTURE FIG.1] U.S. PATENT FEB. 14, 1995 SHEET 2 OF 4 5,388,601 [PICTURE, FIG.2] U.S. PATENT FEB. 14, 1995 SHEET 3 OF 4 5,388,601 [PICTURE, FIG.2A; FIG.7.A; FIG.7B; FIG. 7.C; FIG.8] U.S. PATENT FEB. 14, 1995 SHEET 4 OF 4 5,388,601 [PICTURE, FIG.3; FIG.4; FIG.5; FIG.6} 5,388,601 SRAY GUN WASHING APPARATUS BACKGROUND OF THE INVENTION 1. Field of the Invention The present invention is directed to an apparatus for washing spray guns with a liquid solvent, and more particularly to an apparatus for washing paint spray guns and associated component parts with a liquid solvent and including means for recycling the solvent to provide purified solvent for subsequent cleaning operations. 2. Description of the Related Art Paint spray gun assemblies have long been used in ,various painting operations, particularly in the automobile and marine industries. Typically, a paint spray gun assembly includes a hand-held spray gun and a can or cud which attaches to the gun for holding paint to be supplied to the gun for spraying therefrom. Generally, paint spray gun assemblies include two types of systems. These include siphon spray guns for use with SMA11 scale jobs in which a small amount of paint is required and pressure spray guns which are usually used for large scale jobs requiring a significant amount of paint. The use of such equipment is primarily to enable rapid painting of objects. After use of the spray gun assembly during a particular job, the entire assembly, including the gun, cup and associated component puts must be thoroughly cleaned of the paint which accumulates both on the interior and exterior surfaces of the equipment. Cleaning of the equipment is required not only to prevent mixing of colors, which may result in an undesirable color blend, but also to prevent buildup, blockage and jamming of the equipment. Obviously, in a commercial environment, such as a paint workshop, the need to clean the equipment on a regular basis entails a great deal of time and expense. Usually, a paint workshop, such as an automotive paint shop, will use numerous spray gun assemblies throughout a daily painting operation. In this instance, it will usually be required to clean a number of spray gun assemblies on a daily basis, and possibly several times a day if the assemblies are used with different paint colors. In an attempt to minimize the time and expense associated with cleaning a large number of spray gun assemblies on a daily basis, there has been developed various spray gun washers which are designed to circulate a cleaning fluid through a flow-line system for ejection of the fluid under pressure within a closed cabinet. An example of such an apparatus is disclosed in the U.S. Patents to Yamamoto, U.S. Pat. No. 4,795,836 and Robb et al., U.S. Pat. No. 4,793,369. The spray washer apparatus disclosed in these patents generally comprise a cabinet or housing divided into a work chamber and a fluid storage reservoir containing paint solvent and water. The solvent and water is pumped from the storage reservoir to spray nozzles located in the work chamber. The paint spray gun and can are supported in the cleaning chamber such that the paint passage interior of the gun is in direct fluid flow communication with the fluid outlets. Thus, during cleaning, the solvent is dumped from the storage reservoir out through the nozzles to clean the exterior of the spray gun and can and also through the gun and within the inside of the can to clean the inner surfaces thereof. The contaminated solution then returns to the storage reservoir for subsequent use. After a period of time, the contaminated solution is drained from a bottom of the 2 storage reservoir by opening a valve, and fresh cleaning solvent are replaced within the reservoir. While these spray washers have been found to be effective for use in washing spray guns and associated parts, they do not provide for recycling and purifying of the cleaning solvent. Therefore, the contaminated solvent must be disposed of on a regular basis while complying with E.P.A. disposal guidelines. The disposal process can prove to be inefficient, costly and therefore, most paint workshops using this washing equipment tend to reuse the cleaning solution for an extended period of time, resulting in the use of contaminated cleaning solvent/solution being used during cleaning operations. There has been developed a cleaning apparatus for cleaning painted parts which provides for the recycling of the cleaning solvent. Such an apparatus is disclosed in the U.S. Patent to Ihringer, U.S. Pat. No. 4,407,316 directed to a cleaning installation comprising a treatment chamber in which the painted parts are cleaned and exposed to jets of a mixture of hot water and cleaning solvent. The installation, as disclosed in Ihringer includes a plurality of individual separating chambers for separating light paint solvents, cleaning solvent of paint, water cleaning solvent and gas cleaning solvent. This type of cleaning installation is somewhat complex, use a series of separating chambers, requires a significant amount of space and is generally cost prohibitive for most paint workshop environments. Accordingly, there is a definite need in the spray gun art for a washing apparatus specifically designed for washing both the exterior and interior surfaces of paint spray guns, paint cans and associated component parts with a solvent, such as paint thinner, wherein the apparatus provides means for recycling the solvent to provide pure, continuous "on demand" fresh solvent. Such an apparatus eliminates the disposal and replacement problems normally associated with paint spray gun washers while providing a practical means of complying with E.P.A. disposal guidelines. Summary of the Invention The present invention is directed to an apparatus for washing spray gun apparatus with a cleaning solvent such as paint thinner. More particularly, the present invention is directed to an apparatus for washing paint spray gun equipment, including spray guns, paint cans and other associated component parts. The spray gun washing apparatus of the present invention includes a cabinet having an upper portion defining a cleaning chamber having a plurality of spray nozzles therein and means to support at least one paint spray gun, a paint can and other component parts, such that the solvent is sprayed onto both exterior and interior surfaces of the spray gun and equipment for removing paint therefrom. A lower portion of the cabinet includes a solvent holding chamber disposed in fluid communication with the cleaning chamber such that, after use for washing, the contaminated cleaning solvent is collected in the holding chamber. Upon reaching a predetermined level in the holding chamber, a float switch activates a solenoid controlled valve which releases the contaminated solvent to a distillation chamber. The contaminated solvent is heated to a predetermined temperature in the distillation chamber, producing purified solvent vapors which pass through a condenser where they are cooled to a liquid state, yielding 3 pure solvent. The pure solvent is directed into a clean solvent holding tank for subsequent circulation to spray nozzles disposed throughout the cleaning chamber. Accordingly, the present invention provides for continuous recycling of contaminated solvent so that pure, non-contaminated solvent is provided continuously "on demand" throughout washing operations. In this manner, the cost and inefficiency associated with disposal of contaminated paint thinner or solvent, as well as the need to comply with E.P.A. disposal guidelines, is eliminated. Accordingly, with the foregoing in mind, it is a primary object of the present invention to provide a spray gun washing apparatus for use in washing spray gun equipment such as paint spray guns, paint cans and other component parts, which includes means for recovering and recycling of the solvent or paint thinner so as to provide the user with "on demand" pure solvent/paint thinner continuously throughout washing operations. It is another object of the present invention to provide a spray gun washing apparatus as described above which eliminates the need for constant replacement and disposal of contaminated solvent/paint thinner, while providing a practical and economical means of complying with E.P.A. contaminate disposal guidelines. It is a further object of the present invention to provide a spray gun washing apparatus adapted to recycle solvent/paint thinner so as to provide fresh, pure solvent/paint thinner on a continuous basis. It is still a further object of the present invention to provide a spray gun washing apparatus, as described above, which operates on common 120 volts and which further requires no special water or air supply requirements. It is yet another object of the present invention to provide a spray gun washing apparatus, as described above, which is relatively compact and inexpensive, making the apparatus available for use in virtually all commercial environments where spray gun equipment is used. It is still another object of the present invention to provide a spray gun washing apparatus as described above, which complies with all government imposed safety and health regulations. These and other objects and advantages of the present invention will be more readily apparent in the description which follows. BRIEF DESCRIPTION OF THE DRAWINGS For a fuller understanding of the nature of the present invention, reference should be had to the following detailed description taken in connection with the accompanying drawings in which: FIG.1 is a front perspective view, in partial cutaway, illustrating the spray gun washing apparatus of the present invention. FIG.2 is a front elevation, in partial section, of the spray gun washing apparatus of FIG. 1. FIG.2(A) is an isolated front elevation, in partial section illustrating removal of a distillation chamber from a mating lid means, to facilitate outward movement of the distillation chamber from within a lower cabinet interior for cleaning thereof. FIG.3 is an isolated view, in partial section, of a cleaning chamber of the present invention illustrating a paint spray gun and paint canister being washed within the cleaning chamber by solvent (paint thinner) being 4 sprayed from various nozzles to clean exterior and interior surfaces of the equipment. FIG. 4 is a perspective view of the plumbing system defining a circulation system for circulating clean solvent/paint thinner from a clean holding tank to the various nozzles throughout the cleaning chamber. FIG. 5 is an isolated view, in partial section, illustrating a spray gun mount for supporting a spray gun and directing solvent/paint thinner internally through a spray gun for cleaning thereof. FIG. 6 is a sectional view of an alternative spray gun mount of the present invention. FIGS. 7(a), 7(b) and 7(c) are top plan views taken along line 7A-7A of FIG. 2A, of a distillation chamber illustrating, in sequence, movement of a distillation chamber from within a lower cabinet interior of the apparatus for cleaning thereof. FIG. 8 is a plan view along line 8-8 of FIG. 2A of an inner bottom of the distillation chamber showing a power supply connection to heating elements therein. Like reference numerals refer to like parts throughout the several views of the drawings. DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT Referring to the several views of the drawings, and initially FIGS. 1 and 2, there is generally illustrated the spray gun washing apparatus 10 of the present invention. The apparatus 10 includes a cabinet 12 including an upper portion 14 defining a cleaning chamber and a lower portion 16 including a base 17, side was 18, 18', rear wall 19 and a front wall 20. The front wall 20 is provided with at least a single door 22 which is hingedly attached to the front wall such as at 23, to facilitate opening thereof to gain access to an interior of the cabinet 12. The upper portion of the cabinet 12 deeming the cleaning chamber 14 includes opposite side wall portions 24, 24' a rear wall portion 25 and a cover 26 hingedly attached to a top edge of the rear wall 25, as at 27, and movable between an open position and a closed position in covering relation to an interior of the cleaning chamber to prevent solvent from splashing and vapors from escaping from within the cleaning chamber during washing operations. The cover 26 may be formed so as to include a front 28 including a handle 29 to better facilitate raising and lowering of the cover 26. Within the cleaning chamber 14 there are a plurality of solvent disbursing spray nozzles 30 (described in more detail hereinafter) for directing a sprayed array of solvent onto exterior throughout interior of the spray gun equipment placed therein. A rigid screen 32 may also be provided within the cleaning chamber to prevent articles from falling down into a contaminated solvent holding chamber. Below the screen 32 a floor 34 of the cleaning chamber slopes downwardly and inwardly on all sides the centrally disposed contaminated solvent holding chamber 40 in fluid communication therewith, such that contaminated solvent/paint thinner which drips down, after being disbursed within the cleaning chamber, is collected and contained within the contaminated solvent holding tank 40. A valve 44 controlled by a sole-noid 46 contains the contaminated solvent CS within the contaminated solvent holding chamber 40 until the solvent level reaches a predetermined height at which point a float switch 48 activates solenoid 46 to open the valve 44, thus releasing the contaminated solvent CS 5 through a bottom port 49 of the solvent holding chamber 40 into a distillation chamber 5O. The floor 34, surfaces of the holding chamber 40 and the distillation chamber 50 are all thoroughly coated with a non-stick coating to prevent paint and contaminants from drying and adhering thereto. The distillation chamber 50 comprises a double walled distillation pot 52 including an outer wall 53 and an inner wall 54, having the non-stick coating on an inner surface thereof, and insulating material 55 disposed between the outer 53 and inner wall 54. A rim 56 of the distillation pot 52 surrounds an open top thereof and includes means for accommodating a seal 57 which may be fitted to the rim 56 or, alternatively, to a mating upper rim 58 attached to and extending downwardly from a stationery plate 59 defining, cooperatively with the upper rim 58, a lid for covering the open top of the distillation pot 52. The distillation pot 52 is supported on a hinged arm assembly 60 having a first arm member 62 and a second arm member 64 hingedly attached to one end of the first arm member 62 at hinge point 65, as best seen in FIGS. 7(A)-7(C). An end of the second arm member 64, opposite of the hinge point 65, includes means for threaded receipt of support shaft 66 therethrough. The distillation pot 52 is supported on a flanged plate 68 which engages a bottom 69 of the distillation pot 52, such that rotation of wheel arms 70 serves to threadably advance the shaft 66 in either an upward or downward direction, thereby raising or lowering the plate 68 and the distillation pot 52. In this manner, the distillation pot 52 is either raised causing the rim 56 to mate in sealed engagement with the upper rim 58 or, alternatively, by rotating the wheel arms 70 in an opposite direction the distillation pot 52 is lowered, separating the rim 56 of the distillation pot from the upper rim 58, as seen in FIG. 2(A). Once separated from the upper rim 58, the distillation pot 52 can be conveniently removed from within the cabinet interior as illustrated, sequentially, in FIGS. 7(A) through 7(C). The first arm member 62 is hinged at a fixed hinged point 63 to the base 17 of the cabinet. With the front door 22 opened, the distillation pot 52 can be easily pulled outwardly causing the hinge point 65 to move from a rear of the cabinet interior outwardly towards the door opening resulting in the second arm member becoming substantially aligned with the first arm member 62, with the distillation pot 52 supported exteriorly of the cabinet interior. Once removed from within the cabinet 12, access through the open top of the distillation pot 52 is easily permitted thus facilitating cleaning of accumulated contaminates such as paint, which remains in the distillation pot during boiling and vaporization of the solvent/paint thinner. A plurality of heating elements 74 are provided within the bottom of the distillation pot 52 below the inner wall 54 in heat transferring relation therewith, as seen in FIG. 2A. The heating elements 74 are activated during washing operations in order to boil the solvent/paint thinner to produce purified solvent vapors. Referring again to FIGS. 1 and 2, a condenser tube 80 includes a first end 82 attached through the plate 59 defining the lid of the distillation chamber 50 and an opposite end 84 disposed in fluid communication with a clean solvent tank 90. A mid-section 86 of the condenser tube 80 is coiled and passes through a cooling zone and defines a condenser. The cooling zone is cooled by air flow created by blower 88. Air is drawn through the 6 blower through the cooling zone and discharged by the blower through the rear wall 19 of the cabinet 12. Thus, as purified solvent vapors rise up through the condenser tube 80 and into the coiled mid-section 86 in the cooling zone, the vapors are condensed to produce purified, non-contaminated solvent/paint thinner which drips down into the clean solvent tank 90 from the end 84 of the condenser tube 80. The intake 101 of a pump 100 connects through the bottom 94 of the clean solvent holding tank 90 for circulating the clean solvent from the holding tank 90 out through a discharge 102 of the pump 100 and up through conduit 104 to the spray nozzles 30 within the cleaning chamber 14. As seen in FIG. 4, the conduit 104 leading from the discharge of the pump 100 branches off into a flow-line system of various lines leading to the dispersing spray nozzles 30 disposed at various locations throughout the cleaning chamber 14. One line 106 leads towards a central area of the cleaning chamber 14 and to a multidirectional spray head 110 and a spray gun mount 120. The multidirectional spray head 110 is specifically adapted for receipt within the interior of a paint can or jar PC, as seen in FIG. 3, such that solvent is sprayed throughout the interior of the paint can PC to clean the interior surfaces thereof. The spray gun mount 120 is specifically adapted to facilitate fluid connection of an internal passage of a spray gun SG with the solvent supply line leading from conduit 104. As seen in FIGS. 3 and 5, a first embodiment of the gun mount 120 comprises an upwardly directed rigid conduit 122 extending upwardly through the screen 32 and terminating at an open end. A plug 126 is fitted therein and includes a central axial bore for passage of a hose 134 of the spray gun therethrough so that a distal end 136 of the hose 134 is disposed within the upwardly directed conduit 122. Accordingly, upon circulation of solvent/paint thinner from the pump 100 through the conduit 104 and 106 and upwardly through the conduit 122. The solvent is directed through the end of the hose 134 and throughout the internal passage of the spray gun, exiting through the spray head of the gun, as seen in FIG. 3. An alternative embodiment of the gun mount 120' is seen in FIG. 6, wherein the upwardly directed conduit 122' terminates below the screen 32. An adapter 140 is threadably engaged within the open top end of the upwardly directed conduit 122' and includes an enlarged flanged portion 142 having thread adapted for engagement with an inner threaded surface of a collar 144 of the spray gun. The adapter includes an axial bore extending therethrough for passage of the hose 134 of the spray gun such that the distal end 136 of the hose is disposed within the upwardly supply pipe. Seals 146, 148 are provided at opposite ends of the axial bore for sealed engagement about the hose 134. In this manner, as solvent/paint thinner is circulated to the upwardly directed conduit 122', the solvent is directed through the distal end of the hose 134 and throughout the internal passage of the spray gun, exiting in the same manner as illustrated in FIG. 3. The supply conduit 104 further leads to branch conduits 108 extending about the cleaning chamber and leading to a plurality of the spray nozzles 30 specifically structured and disposed for spraying solvent on external surfaces of the spray gun equipment being washed. A refill port 150 is provided on the cabinet exterior to facilitate refilling or adding clean solvent/paint thinner to the clean solvent holding tank 90. The front wall or 7 side walls of the cabinet 14 may further be proved with a site level gauge 154 to enable visual determinaton of the level of purified solvent/paint thinner PS contained within the clean solvent holding tank 90. Now that the invention has been described, What is claimed is: 1. An apparatus for cleaning spray gun assemble comprising: a cabinet including a lower portion having a base, side walls, a back wall and a front in surrounding relation to a cabinet interior and an upper portion including a cleaning chamber having side wall portions, a front wall portion, a rear wall portion and a cover hingedly attached to said rear wall portion, said cover being movable between an open position facilitating access to said cleaning chamber and a closed position in covering relation to an interior of said cleaning chamber, solvent dispersing means including a plurality of spray nozzles positioned and arranged within said cleaning chamber and being structured and disposed for spraying the solvent onto exterior and interior surfaces of the spray gun assemblies placed within said cleaning chamber for cleaning thereof, a solvent holding chamber disposed in fluid communication with said cleaning chamber and structured and disposed for containing contaminated solvent after use during cleaning in said cleaning chamber, a distillation chamber disposed in fluid communication with said holding chamber and including an insulated surrounding side wall structure, an insulated base and an open top, means defining a lid for covering said open top of said distillation chamber in sealed airtight relation therewith, valve means between said holding chamber and said distillation chamber and being operable between a closed position to contain the solvent in said holding chamber and an open position to release the solvent into said distillation chamber, fluid level monitor means for detecting and monitoring a level of the solvent in said holding chamber, switch means communicating with said fluid level monitor means and structured and disposed for operating said valve means to said open position upon a level of the solvent in the holding chamber reaching a predetermined level as detected by the fluid level monitor means, a clean solvent tank for containing purified, non-contaminated solvent therein for subsequent circulation to said dispersing means, a plurality of heating elements disposed in heat transferring relation with distillation chamber for heating the solvent to a predetermined temperature so as to produce solvent vapors, a condenser including a condensing tube having a first end connected in fluid communication with said distillation chamber for recovering the solvent vapors, a mid-portion disposed in a cooling zone within said cabinet and a second opposite end disposed in fluid communication with said clean solvent tank for directing purified, condensed liquid solvent into said clean solvent tank, blower disposed within said cooling zone for creating an air current therethrough to cool said midportion of said condensing tube, a pump for circulating the purified liquid solvent, at a predetermined pressure, from said clean solvent 8 tank to said solvent dispersing means resulting in the solvent being dispersed from said spray nozzles into said cleaning chamber. 2. An apparatus for cleaning articles with a solvent comprising: a cleaning chamber structured and disposed to accommodate the articles to be cleaned therein, solvent dispersing means within said cleaning chamber and structured and disposed to spray the solvent onto exterior and interior surfaces of the articles for cleaning thereof, solvent collection means for collecting the solvent after spraying the articles, a solvent holding chamber disposed in fluid communication with said collection means, said holding chamber being structured and disposed for containing contaminated solvent after use cleaning, a distillation chamber in fluid communication with said holding chamber and including an insulated surrounding side wall structure, and an insulated base and an open top, means defining a lid for covering said open top of said distillation chamber in sealed, air tight relation therewith, valve means- between said holding chamber and said distillation chamber and operable between a closed position to contain the solvent in said holding chamber, and an open position to release the solvent into said distillation cheer, a clean solvent tank for containing purified, non-contaminated solvent therein, heating means for heating the solvent in said distillation chamber to a predetermined temperature so as to produce solvent vapors, condenser means for condensing the solvent vapors produced in said distillation chamber to yield purified, non-contaminated solvent, said condenser means being interconnected in fluid communication with said clean solvent tank for directing the purified, non-contaminated solvent therein, circulation means for circulating the purified noncontaminated solvent from said clean solvent tank to said solvent dispersing means, a cabinet including a lower portion having a base and surrounding walls in surrounding relation to a cabinet interior, said cabinet further including an upper portion deemed by said cleaning chamber, and means to facilitate movement of said distillation chamber from within the cabinet interior to facilitate access to an interior or said distillation chamber. 3. An apparatus as recited in claim 2 wherein said solvent dispersing means includes a plurality of spray nozzles, said spray nozzles including at least one multidirectional spray head adapted for receipt within a paint can of a spray gun assembly for cleaning interior surface thereof 4. An apparatus as recited in claim 3 wherein said spray nozzles further include at least one spray gun mount having means thereon for fluid connection with an interior passage of a paint spray gun such that the solvent circulated by the circulation means is directed through the passage of the paint spray gun for cleaning thereof. 5. An apparatus as recited in claim 2 further comprising fluid level monitor means for detecting and monitoring a level of contaminated solvent in said holding chamber. 9 6. An apparatus as recited in claim 5 further comprising switch means interconnected to said fluid level monitor means and said valve means for operating said valve means to said open position upon the contaminated solvent reaching a predetermined level in said holding chamber as detected by said fluid level monitor means. 7.An apparatus for cleaning articles with a solvent comprising: a cleaning chamber structured and disposed to accommodate the articles to be cleaned therein, solvent dispersing means within said cleaning chamber and structured and disposed to spray the solvent onto exterior and interior surfaces of the articles for cleaning thereof, solvent collection means for collecting the solvent after spraying the articles, a solvent holding chamber disposed in fluid communication with said collection means, said holding chamber being structured and disposed for containing contaminated solvent after use for cleaning, a distillation chamber in fluid communication with said holding chamber and including an insulated surrounding side wall structure, and insulated base and an open top, means defining a lid for covering said open top of said distillation chamber in sealed, air tight relation therewith, 10 valve means between said holding chamber and said distillation chamber and operable between a closed position to contain the solvent in said holding chamber, and an open position to release the solvent into said distillation chamber, a clean solvent tank for containing purified, non-contaminated solvents therein, heating means for heating the solvent in said distillation chamber to a predetermined temperature so as to produce solvent vapors, a condenser including a condensing tube having a first end connected in fluid communication with said distillation chamber for recovering the solvent vapors, a mid-portion disposed in a cooling zone within a cabinet and a second opposite end disposed in fluid communication with said clean solvent tank for directing purified, condensed liquid solvent into said clean solvent tank, a blower disposed within said cooling zone for creating an air currant therethrough to cool said mid-portion of said condensing tube, and circulation means for circulating the purified, noncontaminated solvent from said clean solvent tank to said solvent dispersing means resulting in the solvent being dispersed within said cleaning chamber. EX-10.17 22 EXHIBIT 10.17 United States Patent IMMERSION WASHER United States Patent Patent Number: 5,518,013 Mansur Date of Patent: May 21, 1996 IMMERSION WASHER APPARATUS Inventor: Pierre G. Mansur, Miami, Fla. Assignee: Mansur Industries Inc., Miami, Fla. Appl. No.: 364,800 Filed: Dec. 27, 1994 Int. Cl.6...........08B 3/04; BOBB 13/00 US. Cl. ...........134136 R, 134/104. 1. 134/1 08; 134/1 1 1; 134/135; 134/147. 1341164 Fleld of Search ..........134/56 R, 104.1, 134/107, 109, 109, 111, 135,141, 147, 164,165 References Cited U.S. PATENT DOCUMENTS 2,724,392 11/955 Cooper..................... 134/165 X 5,186,193 2/1993 Gullberg etal ............. 134/135 X 5,277,208 1/1994 Mansur..................... 134/111 X PRIMARY Examiner-Philip R. Coe ATTORNEY, AGENT, OR FIRM-Robert M. Downey ABSTRACT An apparatus for soaking and cleaning articles in a cleaning solution includes a primary cleaning chamber for containing a predetermined volume of the cleaning solution therein and a filter assembly including a filtration sheet pulled from a supply across a drainage trough for removing contaminants from the cleaning solution. A sensor activates movement and replacement of saturated sections of the filtration sheet upon detecting a rise of fluid level in the drainage trough. A fan forced electronic beater supplies heat to an oxidation chamber for thermal oxidation of refuse placed therein, the resulting flue gasses being directed through a heat transfer duct, wherein heat is transferred to the solution contained in the cleaning chamber, the flue gasses exiting through a flue stack. An article support assembly includes a platform for supporting the articles to be cleaned thereon, the platform being movable between a raised position and a lowered position within the cleaning chamber to facilitate immersion of the articles in the cleaning solution. The platform and articles thereon can be agitated to cause movement relative to the cleaning solution and thereby promoting more thorough cleaning. 12 Claims, 3 Drawing Sheets [DIAGRAM] U.S. PATENT MAY 21, 1996 SHEET 1 OF 3 5,518,013 [FIGURE 1 DIAGRAM] U.S. PATENT MAY 21, 1996 SHEET 2 of 3 5,518,013 [FIGURE 2 DIAGRAM] U.S. PATENT MAY 21, 1996 SHEET 3 of 3 5,518,013 [FIGURE 3 & 4 DIAGRAM] 5,518,013 1 IMMERSION WASHER APPARATUS BACKGROUND OF THE INVENTION 1. Field of the Invention This invention relates to an apparatus for soaking and cleaning articles with a cleaning solution, and more particularly, to an immersion washer apparatus having means for removing and disposing of contaminants and refuse during a recycling and solution recovery process. 2. Description of the Related Art During maintenance, repair and rebuilding operations in virtually all industrial and commercial environments, it is necessary to wash a wide variety of parts and articles in order to remove grease, oil, dirt and other contaminants. To remove contaminants, various solvents and aqueous cleaning solutions are used in a variety of cleaning machines and assemblies. Some parts and articles are cleaned in spray washer machines of the type set forth in my previous U.S. Pat. No. 5.277,208. Still other parts, particularly smaller parts, are washed using a solvent in a sink type apparatus, of the type set forth in my previous U.S. Pat No. 5,349.974. There are however many parts, articles and devices which need to be immersed and soaked in a cleaning solution, particularly those having blind holes and crevices which are difficult to clean. Examples of these types of articles include radiators, engine blocks and transmissions. Presently, these types of articles, comprising blind holes and crevices, are in a tank containing cleaning solution for a period of time. The articles are then removed from the tank and brushed rinsed to remove loose contaminants such as grease, oil, rust and dirt. In a short period of time, after soaking several articles, it can be appreciated that the cleaning solution becomes saturated with contaminants. Eventually, the entire charge of cleaning solution in the tank needs to be disposed of and replaced with clean solution. In a busy facility, this may need to be done one or more times a week. When changing the cleaning solution, the contaminated solution must be taken way and disposed of in a manner complying with EPA contaminant disposal guidelines. This procedure is inefficient, costly and time consuming, leaving a busy manufacturing or repair facility with no other alternative than to perform parts cleaning operations using dirty, contaminated cleaning solution for extended periods of time. Accordingly, there is a definite need in all industries requiring parts cleaning during maintenance, manufacturing, repair and rebuilding operations, for an immersion washer apparatus having means for recycling the cleaning solution by regularly removing the contaminants from the solution and disposing of contaminants and refuse on site during normal operation of the apparatus in a manner complying with EPA disposal guidelines. SUMMARY OF THE INVENTION The present invention is directed to an immersion washer apparatus for washing articles such as radiators, engine blocks, transmissions and virtually any articles, particularly those having blind holes and crevices. More particularly, the present invention includes a primary cleaning chamber for containing a predetermined charge of aqueous cleaning solution therein. During normal operations, a pump draws the cleaning solution from a bottom sweep in the cleaning chamber and delivers the solution to a drainage trough having a filtration 2 sheet pulled there across. The cleaning solution is deposited on the filtration sheet and, upon passing there through, contaminants are removed from the solution. A sensor activates movement and replacement of saturated sections of the filtration sheet upon detecting a raise of fluid level in the drainage trough due to an inability of the solution to easily pass through the saturated filtration sheet. An electronic or gas heater supplies heat to an oxidation chamber for thermal oxidation of refuse placed therein, including the used saturated filtration sheet sections. The hot flue gases resulting from the thermal oxidation process are directed through a heat transfer duct which at least partially surrounds the primary cleaning chamber. Heat is transferred to the solution in the cleaning chamber as the hot flue gasses pass through the heat transfer duct and exit through a flue stack. An article support assembly includes a platform for supporting the articles to be cleaned thereon, the platform being movable between a raised position and a lowered position within the cleaning chamber to facilitate immersion of the articles in the cleaning solution. The platform and articles thereon can be agitated to cause movements of the articles relative to the solution and thereby promoting more thorough cleaning of the articles. Many aqueous cleaning solutions employ the use of coagulants or flocculants to gather and clump contaminants such as oils and grease into clusters which are then more easily separable from the cleaning solution. Some coagulants and flocculants act near the surface of the aqueous solution for lighter contaminants, while others act near the bottom to clump together heavier contaminants. Because coagulant and flocculent agents are generally somewhat delicate by nature, they cannot be passed through pumps, such as centrifugal pumps, because the violent turbulence will cause breakup of the charges in the agents. To address this concern, the present invention employs the use or a vacuum chamber which is specifically designed to draw both surface coagulants and flocculants as well as bottom coagulants and flocculants from the primary cleaning chamber without disturbing the charges in the various agents. From the vacuum chamber, the coagulant and/or flocculant agents are lead through a transfer conduit and deposited onto the filtration sheet in the drainage trough. During normal operations, the cleaning solution is drawn through a sweep arm which rotates about a 360 degree movement on the extreme bottom of the cleaning chamber. In order to move contaminants which have settled on the bottom into the sweep zone of the sweep arm for pickup, the present invention further employs the use of a bottom wash system which includes a three-way valve for redirecting the discharge from the pump. Rather than the discharge being directed to the drainage trough for filtering, the three-way valve facilitates directing of the discharge of solution from the pump to bottom flush jets which wash the bottom and push bottom contaminants into the sweep zone of the bottom sweep, and thus, together with the sweep arm, achieving complete cleansing and removal of contaminants from the bottom of the cleaning chamber. Accordingly, with the foregoing in mind it is a primary object of the present invention to provide an immersion washer apparatus for use in cleaning various articles during maintenance, repair and rebuilding operations, and particularly articles having blind holes and crevices, wherein the apparatus includes means for recovering and recycling of aqueous cleaning solution used therein, removing contaminants therefrom and providing on-site disposal means for disposing of the contaminants and refuse. 5,518,013 3 It is another object of the present invention to provide an immersion washer apparatus, as described above, which provides a practical and economical means of complying with Environment Protection Agency contaminate disposal guidelines. It is a further object of the present invention to provide an immersion washer apparatus providing for regularly and constantly removing contaminants from the cleaning solution during operation thereof, and further providing self-contained means for disposal of contaminants and refuse in a manner which complies which EPA disposal guidelines. It is still a further object of the present invention to provide an immersion washer apparatus which eliminates the need to regularly dispose of large volumes of contaminated cleaning solution. It is yet another object of the present invention to provide an immersion washer which is relatively inexpensive and requires minimal maintenance. It is still a further object of the present invention to provide an immersion washer apparatus which complies with all government imposed safety requirements. It is still a further object of the present invention to provide an immersion washer apparatus which employs several means of removing and disposing of contaminants during normal operation thereof. These and other objects and advantages of the present invention will be more readily apparent in the description which follows. BRIEF DESCRIPTION OF THE DRAWINGS For a fuller understanding of the nature of the present invention, reference should be had to the following detailed description taken in connection with the accompanying drawings in which: FIG. 1 is a front, top perspective view of the immersion washer apparatus of the invention; FIG. 2 is a front elevation, in partial section, of the immersion washer apparatus; FIG. 3 is an isolated view, shown in perspective of an article support assembly of the present invention; FIG. 4 is a partially exploded and isolated view, shown in perspective, of a pump and bottom wash system of the present invention; and FIG. 5 is an isolated view, shown in perspective, of an oxidation chamber and cleaning solution purification assembly of the washer apparatus of the invention. Like reference numerals refer to like parts throughout the several views of the drawings. DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENT Referring to the several views of the drawings and initially FIGS. 1 and 2, there is generally illustrated the immersion washer apparatus 10 of the present invention. The apparatus 10 includes a primary cleaning chamber 12 surrounded by front, rear and opposite side walls and a bottom floor 13. The primary cleaning chamber 12 may further include a lid 14 for covering an open top thereof. The cleaning chamber 12 is specifically sized and configured to contain a predetermined quantity of cleaning solution, preferably an aqueous cleaning solution, for immersing articles to be cleaned therein. 4 A filter means 20 is provided for removing contaminants from the cleaning solution and includes a filtration sheet 22 which is pulled from a supply source 24, such as a roll. The filtration sheet extends from the supply source 24 across a drainage trough 23, wherein cleaning solution deposited on the filtration sheet is caused to be transferred through the filtration sheet 22 and removing contaminants in the process. A fluid level sensor 26 in the drainage trough 23 senses when the cleaning solution in the trough 23 reaches a predetermined level due to saturation of the filtration sheet 22 with contaminants, and thus impeding passage of the cleaning solution through the filtration sheet. Upon sensing the cleaning solution reaching a predetermined level, the fluid level sensor 26 activates a roller motor 28 causing rollers 29 to be rotated and thus pulling the filtration sheet 22 from the supply 24 so that the saturated portion of the filtration sheet is removed from the trough 23 and a clean section of filtration sheet is positioned in the trough 23. Referring to FIGS. 1, 2 and 4, there is illustrated pump means 30 for transferring the cleaning solution from the primary cleaning chamber to the drainage trough 23 for discharge on the filtration sheet 22. Once having passed through the filtration sheet 22, the cleaning solution returns to the primary cleaning chamber 12. In accordance with a preferred embodiment, the pump means 30 includes pump motor 31 and centrifugal pump 32. An intake line 34 extends from a lower channel 35, below the cleaning chamber bottom floor 13, in fluid flow communication therewith. An opposite end of the input line 34 leads to the intake of centrifugal pump 32. An output line 36 extends from an output of centrifugal pump 32 to a three-way valve 38. The three-way valve 38 is specifically structured to control direction of fluid flow from the output line 36 to either a filter delivery line 40 leading to the drainage trough 23 or, alternatively, to a bottom wash return line 42 leading to a bottom wash jet assembly 44 on the bottom floor 13 or the primary wash chamber 12. The bottom wash jet assembly 44 includes opposite jet wash channels 46, 46' positioned and disposed on opposite sides of the wash chamber floor 13 as been seen in FIG. 2. Referring now to FIG. 4, the opposite jet wash channels 46, 46' arc interconnected in fluid communication with one another and the return line 42 by a channel 48. The opposite jet wash channels 46, 46'include openings 47 along an inboard lower edge 49, forming an opening between the lower inboard edge 49 and the bottom floor 13 for discharge of the cleaning solution across the bottom floor 13 of the wash chamber 12. Accordingly, operation of the one-way valve 38 by movement of level 39 serves to selectively direct flow of the cleaning solution from the pump 32 to either the filter means 20 or to the bottom jet assembly 44. This serves to wash the bottom floor 13 of accumulated sediment, forcing the bottom sediment (contaminants) into a central sweep zone defined by a circumferential area through which a bottom sweep arm 50 rotates. The bottom sweep arm 50 is disposed in fluid flow communication with the lower channel 35 and, preferably includes opposite arm portions 51, 51. Each of the arm portions 51, 51' includes fluid intake means (such as apertures) on a lower portion thereof of intake of the cleaning solution and bottom sediment there through for subsequent transfer through the bottom channel 35, and to intake line 34, when the pump means 30 is activated, as illustrated by the arrows in FIG. 2. With reference to FIGS. 2 and 3, there is generally illustrated article support means 60 for supporting articles to be cleaned in the primary cleaning chamber 12. The article support means 60 includes a platform 62 having a back plate 5,518,013 5 63 and support base 64 preferably comprised of a metal grate. The support base 64 is specifically positioned disposed to support the articles to be cleaned thereon, the platform 62 being sized and configured to be lowered down into an interior of the primary cleaning chamber 12, so that the articles can by completely immersed in the cleaning solution. To facilitate raising and lowering of the platform 62, a lead screw 66 extends vertically from a motor 67 above the cleaning chamber 12 and terminating at or near the bottom floor 13. A ball screw or like coupling 65 is movably engaged on the lead screw 66, such that upon selective rotation of the lead screw 66, clockwise or counterclockwise, by motor 67, the ball screw coupling 65 is be moved up and down along the length of the lead screw 66. The ball screw coupling 65 is attached to a back of the 63 of the platform 62 so that upon rotation of lead screw 66 platform 62 is caused to be selectively raised or lowered within the cleaning chamber 12. Guide rollers 68 the back plate 63 ride within a guide channel 69 to stabilize vertical movement of the platform 62 during raising and lowering. The platform 62, and articles supported thereon, can be agitated by various means in order to cause movement of the cleaning solution relative to surfaces and crevices of the articles, thereby promoting washing by loosening and/or removing contaminants therefrom. In a preferred embodiment, the platform 62 is agitated by quick start and stopping of the motor 67, causing the platform to be raised and then lowered a short distance near a lower portion of the cleaning chamber 12. Heating means 80 are provided for supplying heat to a thermal oxidation chamber 84 at temperatures preferably in excess of 1,500 degrees Fahrenheit. In a preferred embodiment, the heating means 80 includes a fan forced electronic heater 82 interconnected to an open port 83 leading to the thermal oxidation chamber 84, whereupon heat is forced fed therein, as indicated by the arrows in FIG.5. Other heat generating means, such as a gas heater, could be used. The thermal oxidation chamber 84 is specifically sized and configured to receive refuse, including contaminated filtration sheets from the filter means 20 therein. A tray for holding the filtration sheets and other refuse can be used in order to promote thermal oxidation by heat convection, whereupon the refuse disintegrates slowly at high temperatures emitting close to zero harmful emissions. A cleaning solution burn-off assembly 86 includes a valve 87 controlled by solenoid 88. A fluid transfer line 89 extends from the cleaning chamber 12 to the valve 87, which is normally closed when the burner 82 is not operating. Upon operation of the burner 82 for a predetermined period of time, a heat sensor 90 attached to the burner 82 senses that the heater 82 is operating and triggers the solenoid 88 which opens the valve 87. When the valve 87 is open, cleaning solution containing contaminants, is released through the delivery line 91 leading to the interior of the thermal oxidation chamber 84. An orifice 92 can be provided in the delivery line 91 to achieve a controlled release of cleaning solution into the thermal oxidation chamber 84. As the cleaning solution is deposited in the thermal oxidation chamber 84, the high temperatures cause the liquid to immediately vaporize, whereupon metal deposits and other contaminant solids are deposited in a tray 93 in the thermal oxidation chamber 84. Thus, an additional means of removing contaminants from the cleaning solution and disposing of the contaminants in a environmentally sound manner is provided. Between the filter means 20 and the cleaning solution burnoff assembly 86, a substantial amount of contaminants are regularly removed and disposed of during normal operation. Water, cleaning detergents and various coagulant agents would be added as needed to maintain predetermined control standards and fluid level in the cleaning chamber 12. Referring to FIG.2, there is shown a heat transfer duct 96 which interconnects with the thermal oxidation chamber 84 to receive hot flue gases generated therein during thermal oxidation or from just the continuous operation of heater 82. The heat transfer duct 96 passes through the cleaning chamber 12 interior, along a side and the back thereof, and interconnecting with a flue gas exhaust stack 98 through which flue gases are exhausted to atmosphere. Heat from the hot flue gases passing through the duct 96 is transferred to the cleaning solution surrounding the portion of the duct 96 within the cleaning chamber 12. In order to remove coagulants and flocculants from the cleaning solution in the cleaning chamber 12, while preventing breakup of the charges in the coagulant/flocculant agents, a vacuum chamber 100 is provided to draw both surface coagulants/flocculants as well a bottom coagulants/ flocculants from the cleaning chamber 12 in a non-turbulent manner. To achieve negative pressure in the vacuum chamber 100, a vacuum pump 102 is used, interconnecting to the chamber 100 and structured to draw air therefor. A bottom suction conduit 104 includes an upper end located within the interior of the vacuum chamber 100 and an opposite lower end disposed in fluid communication within the channel 35 below the cleaning chamber 12. A second upper level suction conduit 106 includes an upper end within the interior of the vacuum chamber and a lower end within the upper interior portion of the cleaning chamber 12. A filter 107 may be provided on the lower end of the conduit 106 to prevent intake of large particles. A delivery conduit 108 has first end disposed at a lower portion of the vacuum chamber 100 interior and an opposite end leading to the drainage trough 23. The upper ends of each of the respective conduits 104, 106, 108 (within the vacuum chamber 100) are normally closed by individual valve members 110 disposed in blocking engagement on the open top ends of the conduit 104, 106, and 108. The valve members 110 are each independently interconnected with respective linkages 112 leading to corresponding actuators 114 on a top of the vacuum chamber 100. The actuators 114 are each structured to move the respective linkage 112, on demand, to raise and lower the respective valve member 110 into and out of flocking engagement on the open end of the conduits 104, 106, and 108. In this manner, with a negative pressure in the vacuum chamber 100 creating a suction, release of the valve members 110 on the bottom and upper level suction conduits 104, 106 will serve to selectively draw cleaning solution and coagulants/flocculants from either the bottom or surface of the cleaning solution in the cleaning chamber 12. Upon returning to atmospheric pressure in the vacuum chamber 100, the collected cleaning solution and coagulants/flocculants therein can be released through the delivery conduit 108 by raising the respective valve member 110 on the open end thereof. The collected cleaning solution and coagulants are thereafter lead through the delivery conduit 108 and deposited on the filtration sheet 22. Control means 120 provided on a control console 122 for facilitating selective control of the movement of the platform between the raised and lowered positions, as well as agitation of the platform. Further, the control means 120 facilitates control of the vacuum chamber 100, including selective control of each of the actuators 114 and the vacuum pump 102. Finally, the control means 120 enables actuation of the pump means 30 and heater 82 during normal start-up operation. While the invention has been shown and described in what is considered to be a practical and preferred embodiment, it is recognized that departures may be made within the spirit and scope of the following claims which, therefore, should not be limited except within the Doctrine of Equivalents. Now that the invention has been described, What is claimed is: 1. An apparatus for soaking and cleaning articles in a cleaning solution comprising: a primary cleaning chamber sized and configured to contain a predetermined charge of the cleaning solution for immersing the articles therein, filter means for removing contaminants from the cleaning solution and including a filtration sheet pulled from a roll on a roller assembly across a drainage trough, fluid level sensor means in said drainage trough for actuating movement of said filtration sheet to provide a clean section of said filtration sheet in said trough upon the cleaning solution reaching a predetermined level in said trough due to saturation of said filtration sheet with contaminants, roller means triggered by said fluid level sensor for pulling said filtration sheet from said roll to provide said clean section of said filtration sheet, heating means for heating said cleaning solution and including a fan forced electronic burner structured and disposed to generate hot flue gasses, said heating means further including a heat transfer duct in fluid air- flow communication with said fan forced electronic burner and an exhaust flue stack and structured for passage of the hot flue gasses therethrough, said heat transferred duct being exposed to said cleaning solution in said primary cleaning chamber for transferring heat from the hot flue gasses passing therethrough to said cleaning solution, a thermal oxidation chamber communicating with said fan forced electronic burner and said heat transferred duct and being structured and disposed to receive refuse and contaminants therein for disposal by thermal oxidation, pump means for transferring the cleaning solution from the primary cleaning chamber to said drainage trough for passage through said filtration sheet and including a sweep arm on a bottom of said primary cleaning chamber and a pump in fluid flow communication with said sweep arm, said pump being structured and disposed to draw the cleaning solution and contaminants settled on the cleaning chamber bottom through said sweep arm for delivery to said filter means, article support means including a platform for supporting the articles to be cleaned thereon, and means for lowering and raising said platform and the articles supported thereon into and out of the primary cleaning chamber for selectively immersing and removing the articles from within the cleaning solution, vacuum means for drawing the cleaning solution from said primary cleaning chamber and including a vacuum chamber having means for creating a vacuum therein and further including a bottom suction conduit for selectively drawing the cleaning solution from the bottom of the cleaning chamber into the vacuum chamber and an upper level suction conduit for selectively drawing the cleaning solution from an upper portion of the primary cleaning chamber into the vacuum chamber, the cleaning solution being drawn through the conduits by a suction force created by the vacuum in said vacuum chamber, and a delivery conduit for selectively delivering the cleaning solution to said filter means. agitation means for agitating said platform and the articles supported thereon when immersed in the cleaning solution, creating movement of the cleaning solution relative to surfaces of the articles, resulting in loosening and removal of at least some contaminants therefrom and thereby promoting cleaning of the articles, and control means for selectively controlling movement of said platform and said agitation means and further for controlling said vacuum creating means, said pump means and the selective drawing and transfer of the cleaning solution through said bottom suction conduit, said upper level suction conduit or said delivery conduit. 2. An apparatus as set forth in claim 1 further including a bottom wash system for moving contaminants on the bottom of said cleaning chamber into a sweep zone, defined by a circumferential area through which aid sweep arm rotates, so that the contaminants are drawn through said sweep arm for delivery to said filter means, said bottom wash system including jet means near the bottom of said cleaning chamber and structured to direct a flow of the cleaning solution therefrom towards said sweep zone. 3. An apparatus as set forth in claim 2 wherein said bottom wash system further includes a 3-way valve structured and disposed to selectively direct a discharge of the cleaning solution therefrom to either said filter means or said jet means. 4. An apparatus as set forth in claim 1 further including a cleaning solution burn-off system for removing contaminants from said cleaning solution and including a fluid transfer line extending from said cleaning chamber to a valve and further including a delivery line extending from said valve and further including a delivery line extending from said valve to said thermal oxidation chamber, whereupon opening of said valve results in delivery of the cleaning solution, at a predetermined flow rate, to said thermal oxidation chamber for vaporization and separating of contaminants therefrom. 5. An apparatus for soaking cleaning articles in a cleaning solution comprising: a primary cleaning chamber sized and configured to contain a predetermined charge of the cleaning solution for immersing the articles therein. filter means for removing contaminants from the cleaning solution and including a filtration sheet pulled from a supply source across a drainage trough. fluid level sensor means in said drainage trough for actuating movement of said filtration sheet to provide a clean section of said filtration sheet in said trough upon the cleaning solution reaching a predetermined level in said trough due to saturation of said filtration sheet with contaminants, heating means for heating said cleaning solution and including a burner structured and disposed to generate hot flue gases, said heating means further including a heat transfer duct in fluid air-flow communication with said burner and an exhaust flue stack and structured for passage of the hot flue gasses therethrough, said heat transfer duct being exposed to said cleaning solution in said primary cleaning chamber for heating the cleaning solution by transfer of heat thereto from the hot flue gasses passing through said heat transfer duct, a thermal oxidation chamber disposed in fluid communication with said burner and said heat transfer duct and being structured and disposed to receive refuse and contaminants therein for disposal by thermal oxidation, pump means for transferring the cleaning solution from said primary cleaning chamber to said drainage trough for passage through said filtration sheet and including a sweep arm on a bottom of said primary cleaning chamber and a pump in fluid communication with said sweep arm said pump being structured and disposed to draw the cleaning solution and contaminants settled on the cleaning chamber bottom through said sweep arm for delivery to said filter means and passage through said filtration sheet, a bottom wash system for moving contaminants on the bottom of said cleaning chamber into a sweep zone, defined by a circumferential area through which said sweep arm rotates, so that contaminates are drawn through said sweep arm for delivery to said filter means, said bottom wash system including jet means positioned and disposed near the bottom of the cleaning chamber and structured to direct a flow of the cleaning solution towards said sweep zone, a three-way valve structured and disposed to selectively direct a discharge of the cleaning solution therefrom to either said filter means or said jet means, a cleaning solution burn-off means for removing contaminants from said cleaning solution and including a fluid transfer line extending from said cleaning chamber to a valve to said thermal oxidation chamber, whereupon opening of said valve results in delivery of the cleaning solution, at a predetermined flow rate, to said thermal oxidation chamber for vaporization and separation of contaminants therefrom, article support means including a platform for supporting the articles to be cleaned thereon, and means for lowering and raising said platform and the articles supported thereon into and out of the primary cleaning chamber for selectively immersing and removing the articles from within the cleaning solution, agitation means for agitating said platform and the articles supported thereon when immersed in the cleaning solution, creating movement of the cleaning solution relative to surfaces of the articles, resulting in at least partial loosening and removal of contaminants therefrom and thereby promoting cleaning of the articles, and control means for selectively controlling movement of said platform and said agitation means, and further for controlling actuation of said pump means. 6. An apparatus for soaking and cleaning articles in a cleaning solution comprising: a primary cleaning chamber sized and configured to contain a predetermined charge of the cleaning solution for immersing the articles therein, filter means for removing contaminants from said cleaning solution, heating means for heating the cleaning solution for a predetermined temperature, pump means for circulating the cleaning solution from said primary cleaning chamber to said filter means for passage of said cleaning solution therethrough, sweep means on a bottom of said primary cleaning chamber in fluid communication with said pump means, said sweep means including a sweep arm structured and disposed to move through a circumferential area defining a sweep zone and to draw the cleaning solution and contaminants within said sweep zone therethrough for delivery to said filter means, jet means positioned and disposed near the bottom of said primary cleaning chamber and being structured and disposed to direct a flow of the cleaning solution therefrom towards said sweep zone, causing contaminants on the bottom of said primary cleaning chamber to be moved into said sweep zone for suction through said sweep arm, article support means including a platform for supporting the articles to be cleaned thereon, means for lowering and raising said platform and the articles into and out of the primary cleaning chamber for selectively immersing and removing the articles from within the cleaning solution, and control means for activating said pump means and said article support means to selectively control raising and lowering of said platform within said primary cleaning chamber. 7. An apparatus as set forth in claim 6 further including agitation means for agitating said platform and the articles supported thereon when immersed in the cleaning solution, creating movement of the cleaning solution relative to surfaces of the articles, resulting in at least partial loosening and removal of contaminants therefrom and thereby promoting cleaning of the articles. 8. An apparatus as set forth in claim 6 further including a thermal oxidation chamber being structured and disposed to receive refuse and contaminants therein for disposal by thermal oxidation. 9. An apparatus as set forth in claim 8 further including cleaning solution burn-off means for removing contaminants from said cleaning solution and including a fluid transfer line extending from said cleaning chamber to a valve and further including a delivery line extending from said valve to said thermal oxidation chamber, whereupon opening of said valve results in delivery of the cleaning solution, at a predetermined flow rate, to said thermal oxidation chamber for vaporization and separating of contaminants therefrom. 10. An apparatus as set forth in claim 9 wherein said filter means includes a filtration sheet pulled from a supply source across a drainage trough. 11. An apparatus as set forth in claim 10 further including fluid level sensor means in said drainage trough for actuating movement of said filtration sheet to provide a clean section of said filtration sheet in said trough upon the cleaning solution reaching a predetermined level in said trough due to saturation of said filtration sheet with contaminants. 12. An apparatus as set forth in claim 10 wherein said heating means includes a burner structured and disposed to generate hot flue gasses, said heating means further including a heat transfer duct in fluid air-flow communication with said burner and an exhaust flue stack, said heat transfer duct being structured for passage of hot flue gasses therethrough and being exposed to said cleaning solution in said primary cleaning chamber in heat transferring relation therewith for heating the cleaning solution by transfer of heat thereto from the hot flue gasses passing through said heat transfer duct. ISSUE NOTIFICATION [SEAL] UNITED STATES DEPARTMENT OF COMMERCE Patent and Trademark Office ASSISTANT SECRETARY AND COMMISSIONER OF PATENTS AND TRADEMARKS WASHINGTON, D.C. 20231 APPLICATION NUMBER PATENT NUMBER ISSUE DATE ATTORNEY DOCKET NO. 08/364,800 5518013 05/21/96 MANSPA394 8013 7707 ROBERT M DOWNEY 701 BRICKELL AVENUE SUITE 1480 MIAMI FL 33131 APPLICANT(S) PIERRE G. MANSUR, MIAMI FLORIDA EX-10.18 23 EXHIBIT 10.18 United States Patent Application for Apparatus for Disposal of Refuse By Thermal Oxidation UNITED STATES DEPARTMENT OF COMMERCE Patent and Trademark Office Address: Box ISSUE FEE COMMISSIONER OF PATENTS AND TRADEMARKS Washington, D.C. 20231 34MI/0626 ROBERT M. DOWNEY NOTICE OF ALLOWANCE 701 BRICKELL AVENUE SUITE 1480 AND ISSUE FEE DUE MIAMI FL 33131 Note attached communication from the Examiner This notice is issued in view of applicant's communication filed ______________
SERIES CODE/SERIAL NO: FILING DATE TOTAL CLAIMS EXAMINER AND GROUP ART UNIT DATE MAILED 18,364,785 12/27/94 011 TINKER, S 3404 06/26/96
First Named MANSUR, PIERRE G. Applicant TITLE OF APPARATUS FOR DISPOSING OF REFUSE BY THERMAL OXIDATION INVENTION (AS AMENDED)
ATTY'S DOCKET NO. CLASS-SUBCLASS BATCH NO. APPLN. TYPE SMALL ENTITY FEE DUE DATE DUE MANSPA494 110-185.000 B57 UTILITY YES $625.00 09/26/96
THE APPLICATION IDENTIFIES ABOVE HAS BEEN EXAMINED AND IS ALLOWED FOR ISSUANCE AS A PATENT. PROSECUTION ON THE MERITS IS CLOSED. THE ISSUE FEE MUST BE PAID WITHIN THREE MONTHS FROM THE MAILING DATE OF THIS NOTICE OR THIS APPLICATION SHALL BE REGARDED AS ABANDONED. THIS STATUTORY PERIOD CANNOT BE EXTENDED. HOW TO RESPOND TO THIS NOTICE: Review the SMALL ENTITY Status shown above. If the SMALL ENTITY is shown as YES, verify your current SMALL ENTITY status: A. If the status is changed, pay twice the amount of the FEE DUE shown above and notify the patent and Trademark Office of the change in status, or B. If the Status is the same, pay the FEE DUE shown above. If the SMALL ENTITY is shown as NO: A. Pay FEE DUE shown above, or B. File verified statement of Small Entity Status before, or with, pay of 1/2 the FEE DUE shown above. I. Part B of this notice should be completed and returned to the Patent and Trademark Office (PTO) with your ISSUE FEE. Even if the ISSUE FEE has already been paid by charge to deposit account, Part B should be completed and returned. If you are charging the ISSUE FEE to your deposit account, Part C of this notice should also be completed and returned. II. All communications regarding this application must give series code (or filing date), serial number and batch number. Please direct all communication prior to all issuance to Box ISSUE FEE unless advised to contrary. IMPORTANT REMINDER: Patents issuing on applications filed on or after Dec. 12, 1980 may require payment of maintenance fees. It is patentee's responsibility to ensure timely payment of maintenance fees when due. EX-23.2 24 EXHIBIT 23.2 The Board of Directors Mansur Industries, Inc.: We consent to the use of our report dated January 19, 1996 of Mansur Industries Inc. included herein in this registration statement on Form S-1 of Mansur Industries Inc. and to the reference to our firm under the heading "Experts" in the prospectus. /s/ KPMG Peat Marwick LLP --------------------- Miami, Florida July 23, 1996 EX-27.1 25
5 This schedule contains summary financial information extracted from the audited consolidated balance sheets as of December 31, 1995 and the audited consolidated statements of income for the year ended December 31, 1995, and is qualified in its entirety by reference to such financial statements. YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 916,383 0 0 0 193,838 1,128,511 384,891 60,460 1,452,942 515,324 154,165 2,573,863 0 2,673 (1,793,083) 1,452,942 0 0 0 0 1,301,267 0 63,528 (1,319,145) 0 (1,319,145) 0 0 0 (1,319,145) (.66) (.66)
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