-----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, QbAGCtktvFUR5svagWzW2FXfUXXgpXQgqfev/BS3KiCHK2iY8KZnZVgnEAmOgNnV IZ2HFAUnLJYeR5Grz7Q7VA== 0001000096-98-000441.txt : 19980703 0001000096-98-000441.hdr.sgml : 19980703 ACCESSION NUMBER: 0001000096-98-000441 CONFORMED SUBMISSION TYPE: 10SB12G/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19980702 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECHNICAL ENVIRONMENT SOLUTIONS INC CENTRAL INDEX KEY: 0001055148 STANDARD INDUSTRIAL CLASSIFICATION: SANITARY SERVICES [4950] FILING VALUES: FORM TYPE: 10SB12G/A SEC ACT: SEC FILE NUMBER: 000-23779 FILM NUMBER: 98659893 BUSINESS ADDRESS: STREET 1: C/O TES GMBH KARL BOHM STR 2 CITY: MUNCHEN STATE: I8 ZIP: 00000 10SB12G/A 1 FORM 10SB12G/A U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 AMENDMENT NO. 1 TO FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS Under Section 12(b) or (g) of the Securities Exchange Act of 1934 TECHNICAL ENVIRONMENT SOLUTIONS, INC. ------------------------------------- (Name of Small Business Issuer in its charter) Colorado 98-0149351 ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) C/O TES GmbH 25 Impler Strasse Munchen, 81371 Germany ----------------------------------------------------- (Address of principal executive offices) (Postal Code) Copies to: Henry F. Schlueter Schlueter & Associates, P.C. 1050 Seventeenth Street, Suite 1700 Denver, Colorado 80265 (303) 292-3883 and Paul Maricle Rossi & Maricle P.C. 370 17th Street, Suite 4250 Denver, CO 80202-4004 (303) 534-9014 Issuer's telephone number : 011-49-8106-31061 Securities to be registered under Section 12(b) of the Act: (None) ------ Securities to be registered under Section 12(g) of the Act: Common Stock --------------- (Title of class) PART I The following discussion contains forward-looking statements relating to future plans, expectations, events or performances that involve risks and uncertainties. The Company's actual results of operations could differ materially from those anticipated in these forward-looking statements as a result of certain factors. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this report. Item 1. Description of Business General Information - ------------------- Technical Environment Solutions, Inc. (the "Company" and "TES") was incorporated under the laws of Colorado in June 1994, and is a non-operating holding company. The Company's operations are conducted entirely in Germany, and the Company has two wholly-owned subsidiaries that have been established under the laws of Germany. Operations are conducted through these subsidiaries: namely, Technical Environment Solutions GmbH ("TES GmbH") and TES Oecon AG ("Oecon"). Unless the context otherwise requires, references to the "Company" include its subsidiaries. Since 1994, the Company has been engaged in the marketing of recycling services on a contract basis primarily for electronic scrap and other valuable waste materials in cooperation with specialist waste disposal companies. Generally, TES calculates its prices to provide a profit margin of approximately 30%. TES provides all clients with a price list, and certain contracts are negotiated using the price list as a starting point. Discounts can be offered for larger contracts but the Company's objective is to maintain a profit margin of at least 15% on these contracts. Recently, the Company commenced recycling activities at its own facility in Landsberg a. Lech, Germany, which is southwest of Munich, and intends to significantly expand this operation in the future. The Company also intends to develop a job training school, the Oecon Institute, to provide training and education for positions in the media and recycling industry. The Company intends to focus its job training programs upon providing job education and training for the long-term unemployed and disadvantaged. Management believes that it will able to increase production at the Landsberg facility so that break-even of that operation will be reached before the end of 1998. The Company's goal is to be operating at 100% of capacity at the Landsberg facility by the early part of 1999; however, it should be noted that there is no assurance that management will be successful in achieving this goal or in reaching or exceeding break-even. Recycling - --------- The Company offers a single source solution for the disassembly, removal, reutilization, reprocessing and marketing of recyclable materials. Its waste disposal services also include archiving the recycled materials and documenting of the movement of that material. This has the additional function of serving as verification for government agencies and environmental protection groups. The Company's strategies mainly emphasize the technologically feasible reutilization of scrap electrical and electronic equipment in a manner that not only demonstrates economic and ecological responsibility but also achieves maximum conservation of resources through optimum recovery of recyclable materials. The special equipment and expertise of TES's associates ensures that the materials, once disposed of, will enter the reprocessing cycle and satisfy all legal regulations. Germany has strict laws relating to the disposal of all manufactured products. Unlike the United States where land is plentiful, Germany is a small country with a large population. Landfill space is extremely limited. Therefore, the government requires that electronic scrap as well as an array of other manufactured product waste be disposed of either by incineration or by depositing it in abandoned underground coal or salt mines. Hence disposal of most waste in Germany is more expensive than it is in the United States. 1 Even stricter laws regarding recycling of electronic products such as televisions, computers, computer monitors, radios, telephones and virtually every other type of electronic product are anticipated by the electronics industry. These laws will require that the old products be broken down into smaller components, and to the extent possible that these components be re-used or recycled rather than simply being incinerated. In order to prepare for what the industry views as inevitable recycling requirements, many larger companies have already begun to voluntarily comply with proposed recycling standards and are shipping all used and obsolete electronic products to recycling centers such as that operated by TES. The Company also utilizes its manufacturing equipment to convert certain types of glass from cathode ray tubes ("CRTs"), computer components, and certain other manufacturing by-products and industrial wastes into manufacturing raw materials that may be resold. The Company employs a two-tier strategy: decentralized disassembly centralized processing and re-use. The Company intends to use a wide variety of collection points as it grows in the future in order to provide full geographic coverage of Germany's waste disposal needs. One important aspect of the Company's service strategy is that all recycling and disposal paths are fully documented. Each customer who recycles electronic scrap through TES then receives a printout documenting the disposal pursuant to the recycling laws. To accomplish this, the Company and its associates offer a fully comprehensive program to register and sort spent electronic equipment using the Company's own "RNP" data processing system, a software program that supports the exchange of data between the Company, manufacturers and waste reprocessing companies. The RNP database also contains: -model and order number of electronic products -size and weight of electronic products -analysis of materials in electronic products Another module in the RNP database is a logistics program likewise developed by the Company. This program covers: -collection and disposal -transportation and warehousing -disposal and recycling -documentation of each piece of equipment -for fixed assets bookkeeping -for the tax authorities -for environmental groups According to figures from the German Federal Office of the Environment, approximately two million tons of spent electronic equipment is generated each year in Germany alone. Of these, some 50 to 60 percent comes from the field of entertainment electronics and another 25 percent from household appliances. The remainder comes from the area of data processing technologies or from other technologies primarily used by industry, research facilities and the business sector. Some 300,000 tons are made up of spent computers and television sets alone, of which it is estimated that only 25 percent are disposed of in an ecologically sound manner. 2 This electronic scrap contains not only valuable raw materials but also a wide range of toxic substances harmful to the environment. TES collects and disassembles this spent equipment and then reprocesses and markets the valuable waste materials salvaged from it. TES also separates and properly disposes of the toxic substances. The Company views the recycling of used television sets and computer monitors including CRT glass as a growth area and has recently purchased machinery designed to dismantle the CRTs. In the Company's CRT recycling operation, used CRTs will be shipped to the Company by its customers. Under the terms of the agreements with the clients, TES is paid a fee for recycling the used CRTs. The CRTs include both funnel glass (the back of a television screen, which is relatively thin and tubular in shape) and panel glass. After the funnel glass has been cut from the front portion of the tube and cleaned, it can be sold back to the original manufacturers and other companies to be "upcycled", i.e. reincorporated into a CRT. At this time the panel glass can not be recycled and must be incinerated. TES must pay a small charge to dispose of the panel glass. Management expects, however, to be able eventually to either sell the panel glass to companies that recycle glass or, at a minimum, to have these companies haul the panel glass away at no cost to TES. Even if TES must pay to have the panel glass taken away, the CRT recycling is a profitable business for the company because of the fees TES is paid by its customers to recycle the CRTs. The ability to sell the panel glass will only increase TES's profits from this operation. The Company believes that the recycling of CRT glass will provide a less costly and more environmentally responsible means of disposing of waste CRT glass compared to currently available alternative methods of CRT glass disposal. Further, management believes that manufacturers will be able to repurchase recycled CRT glass from the Company at a savings compared to virgin ingredients. In addition, the Company believes that the electronics industry may be a source of other waste streams that may be recycled. The Company believes that its CRT glass recycling and materials reuse capability will position the Company to process large volume end-of-life television and computer waste since current regulations in Germany exclude them from landfills. TES also recycles computer systems. The Company resells many of the used computer parts that are generated from this recycling activity, including plastic, gold, copper, aluminum, steel and other raw materials. Management believes that this is possible because the most cost effective source for spare parts is generally recycled parts, and for out-of-production parts, it is frequently the only source. Conversely, the best use for recycled parts is to resell them for use in the installed base as either spares or low-cost additions to existing systems. Similarly, recycled parts are also often both less expensive and more readily available than repaired parts. Recycling Process - ----------------- The first step in the processing of recycled material involves the inspection of the material received by the Company to assure that it complies with requirements set forth in the Company's agreements. This process will be conducted on a visual basis by Company personnel. Assuming that the material is in compliance with the Company's agreements, the material will be sorted for processing on the Company's recycling line. Nonconforming shipments will be rejected and returned to the supplier. This process will be undertaken to protect the Company from receiving materials that it is not equipped to handle either on the basis of the economics or safety involved with handling of the material. 3 After the material has been sorted, it will then be stored until it is delivered to the recycling line. Material on the recycling line will be disassembled, and spare computer parts, integrated circuit boards, and other parts of the electronic products that can be resold will be sorted and cleaned. Other material will be sorted for sale (if appropriate), cleaned and (if appropriate) ground and crushed. As the final result of the process, all of the residual materials are reused in an environmentally sound way. They are recovered, sorted, and returned to the cycle of raw materials. To prevent the processing techniques from emitting toxic by-products, the Company employs mechanical processes exclusively (i.e., no chemicals are used by TES in the disassembly process). The Company disassembles the following kinds of electronic scrap for recycling: -cathode ray tubes -computers and peripherals of any kind -PCs and monitors -other office equipment -household appliances of all sizes -television sets, radios, VCRs etc. -telecommunication equipment (e.g., telephones) -electrical tools -standby power generation units -industrial control units -measurement and control devices -laboratory and medical equipment -visual recording and reproduction equipment -composite plastics and metals -circuit boards -magnetic and video tapes To obtain fully sorted raw materials from worn-out electronic equipment, the first thing that must be done is to disassemble the scrap by hand. During this process components with toxic substances such as condensers or lithium batteries are removed and sent to separate disposal plants. At this preliminary disassembly stage the scrap is broken down into the following categories: -plastics -ferrous metals -nonferrous metals -cathode ray tubes -cables -circuit boards -toxic substances If the preliminary disassembly stage fails to yield fully sorted materials, further processing is required. In the next stages the material is further broken down through non-chemical and non-thermal processes. The mixture of materials thus obtained is completely sorted by means of magnets, eddy currents, wind, sifting or similar techniques. These processes yield, among other things, the following types of materials: -iron -aluminum -copper 4 -glass -plastics -ceramics -composite metal granulates The fully separated metals and glass are sent to various smelting plants as secondary raw materials. Similarly, those fully sorted plastics that have not been treated with flame-proofing are sent away for reuse. Plastics which are not fully separated or which contain bromine flame-proofing are disposed in accordance with legal regulations, as are all other toxic substances. Precious metal granulates are sent to separation plants for further processing. All the methods TES employs represent state-of-the-art technologies and have been streamlined for a smooth interaction of their ecological and economic aspects. Further, TES's methods are designed to assure compliance with all legal and government regulations, with the paths of reprocessing and disposal completely documented. CRTs are removed from the television sets, and then processed by the CRT recycling line. The Company employs a specially designed saw to separate the panel glass from the funnel glass. After the pieces of CRT glass are sorted by type of glass and by size, the glass is cleaned and coatings on the glass are removed prior to sale or other disposition of the glass. Competition - ----------- Management believes that the electronic recycling services industry is fragmented with widespread competition from a variety of small independent suppliers and several major suppliers in Germany. Management believes that competition for recycling and waste disposal customers is based on price and the ability to offer convenient locations for shipping of waste and recycling products. Among TES's major competitors in Germany are RWE, VEBA, VIAG, Sero AG and Waste Management. Government Regulation - --------------------- Germany has adopted some of the strictest laws in the world relating to the recycling and disposal of chemicals, waste, appliances, computers, television sets, and other electronic products. The business of recycling and waste disposal is subject to various governmental laws on both a federal and state basis in Germany. Further, the regulations are becoming increasingly complex and recycling and disposal more strictly regulated. These laws and regulations include landfill disposal restrictions, hazardous waste management requirements and air quality standards, as well as special permit and license conditions for recycling and disposal of waste and outdated or used products. The Company's recycling center is subject to various federal, state and local laws and regulations and licensing requirements relating to the collection, processing and recycling of chemicals, waste, appliances, computers, television sets, and other electronic products. Requirements for registrations, permits and licenses vary depending upon the locale in which the recycling center is located. The Company's centers are registered with the German Government as hazardous waste generators and are licensed, where required, by appropriate state and local authorities. The Company has agreements with approved and licensed hazardous waste companies for transportation and disposal of PCB's from its recycling center. In Germany, companies involved in the recycling of old electronic scrap must have a license to transport electronic scrap. TES has the appropriate license, which is renewable on an annual basis at a cost of approximately DM 1,000. Further, in order to recycle electronic scrap the operation must be certified as an electronics specialist by TUV (Technischer Uberwachungsverrein). TUV (Technischer Uberwachungsverein) is the quasi-governmental agency responsible for certifying and supervising recycling activities in Germany. TUV-Suddeutschland is simply the name for TUV in southern Germany. The cost of the TUV certificate is DM 7,000, and the certification is renewable on an annual basis at a cost of approximately DM 2,000. The laws in Germany require that electronic scrap be broken down into the smallest recyclable components possible. These components are then recycled, reconditioned, and reused if possible. This is in contrast to the United States where electronic scrap is routinely sent to land fills. 5 Management anticipates that as the Company grows it may be necessary for it to obtain ISO 9000 certification, particularly if it expands its business outside of Germany and into other European Union countries. The estimated cost of obtaining such certification cannot be accurately predicted at this time, although management believes that such certification will be able to be obtained for less than DM 60,000. In addition, the Company was required to obtain authorization for its operation in Landsberg am Lech. This authorization cost a one-time fee of DM 5,000. If the Company expands its operations to other cities, it may be expected that similar authorizations will need to be obtained will similar costs. The Company incurs further costs for the training of a manager of safety and a manager who is responsible for handling of harmful substances. Each of these persons is required to be certified for their respective positions. Certification of these persons costs approximately DM 10,000 initially, and approximately DM 2,000 per year thereafter. Finally, the Company has budgeted approximately DM 5,000 per year for employee training so that employees will be able to recognize materials that are harmful. Management believes that further government regulation of the recycling industry could have a positive effect on the Company's business; however, there can be no assurance what course future regulation may take. Under some circumstances, further regulation could materially increase the costs of the Company's operations and have an adverse effect on the Company's business. In addition, as is the case with all companies handling hazardous materials, under some circumstances, the Company may be subject to contingent liability. 6 Job Training - ------------ In Germany all trades are governed by strict educational standards. This means that anyone who wants to work as a plumber, carpenter, baker, cook, etc. must complete a training program for that trade and work for a number of years under the supervision of a "Meister" in order to gain practical training. Without this training and experience, one cannot be employed in a trade. Germany currently has the highest unemployment rates it has had since the end of World War II. The unification of the former East Germany with West Germany has created especially high unemployment rates among young people in the former East German states. The German federal and state governments are therefore anxious to create job opportunities for these long-term unemployed youths and is providing subsidies for companies that create jobs. TES Oecon Institute is developing a job training center. The center is intended to provide training for long-term unemployed youths and disadvantaged people. It will offer various new technical job classifications in the new media and environmental protection areas: -Media designer -Media operator -Electronic recycling technician With its job training program the Oecon Institute will support the creation of new job possibilities in future-oriented industry areas and will provide the opportunity for the long-term unemployed and other disadvantaged groups to find an entrance into the work force. Through the training offered by TES, the newly trained employees will be prepared for new challenges. The job training offered by TES Oecon Institute will initially consist of only the practical training component. Another organization with which TES has a strong relationship will provide the theoretical training for the trainees and will provide housing. The job title "Electronic Recycling Technician" is timely for the new market structures because the need for qualified personnel for proper disposal technologies will significantly increase in the coming years. The practical training for electronic recycling technician will take place in the Institute's own workshop and in partner companies throughout Germany. TES has confirmation from Sero AG (one of the Company's competitors in the electronic recycling business) that it will hire Electronic Recycling Technicians once TES has trained them. The new professions, Electronic Recycling Technician, Media Operator and Media Designer, have been defined by the rules and regulations of the Federal Ministry for Youth and Research and students who successfully complete the training will receive certification from the responsible industry chambers of commerce. The job training facility will receive daily subsidies for each student as required by law. Management anticipates that the Job Training Center will be very successful because although the Electronic Recycling Technician job is "low-tech," there is an increasing demand for qualified technicians. In addition, the government must make even greater efforts to reduce Germany's high unemployment. There are a number of state subsidies and job creation programs which offer job training schools a sure and long-term financial basis. Potential sources for subsidies include, among others, the Social Welfare Offices, Youth and Social Service Agencies, and Unemployment Agencies. The Company expects it will be dependent to some extent upon various government subsidies for the new job training program. Further, along with the job training, the Institute will offer a number of seminars and workshops covering special environmental issues, environmental law issues, and the certification and auditing of environmental operations and locations. A close working relationship with TUV-Suddeutschland will allow the Company access to qualified teaching and training personnel. TUV (Technischer Uberwachungsverein) is the quasi-governmental agency responsible for certifying and supervising recycling activities in Germany. TUV-Suddeutschland is simply the name for TUV in southern Germany. 7 Employees - --------- The Company has 11 full time employees, including Gerd Behrens, two management/administrative persons, and eight line workers employed in its recycling business. Further, the Company employs one person as a secretary/administrative assistant on a part-time basis. In addition, the Company has contracted with three independent contractors who are engaged in the marketing of the Company's recycling services. See "Management - Resumes." Investment in T-Cycle Computer Service and Verwertungs GmbH - ----------------------------------------------------------- In February 1998, the Company acquired a 49% interest in T-Cycle Computer Service and Verwertungs GmbH, a German company engaged in dismantling and disposing of surplus electronic equipment in Germany. Factors That May Affect Future Results - -------------------------------------- Limited Operating History; New Business, Limited Product Sales. Although the Company has been in business since 1994, its operations during that time consisted mainly of the marketing and sale of recycling services to larger companies. Until recently, the Company did not have its own recycling facility but contracted as a "middle-man" to deliver material from larger companies to certain recyclers. The Company has a limited operating history and substantially all of its revenues have been derived from the sale of recycling services. Although the Company recently commenced operation of its own recycling facility, there can be no assurance that the Company will be able to successfully market and conduct its recycling services. Further, although the Company has developed plans to open a job training program for the recycling industry, there can be no assurance that the Company will be able to successfully open its job training facility or that, if opened, the Company will be able to operate the facility on a profitable basis. There can be no assurance that, even after the expenditure of substantial funds and efforts, the Company will ever achieve or maintain an adequate level of business or profitability. The failure to successfully market, sell, and conduct recycling operations will have a material adverse effect on the Company's financial condition and results of operations. It may also be expected that the failure to successfully open its job training facility and operate that facility on a profitable basis will also have a material adverse effect on the Company's financial condition and results of operations. Capital Intensive Business; Need for Additional Financing. The Company's business is capital intensive. The Company believes that its current cash reserves together with cash generated from operations, will enable it to fund its operations until at least the end of 1998. If the Company is not profitable prior to such time or if its activities do not generate sufficient cash-flow to fund its operations and activities, the Company will require additional financing. The Company has no commitments for any future financing and there can be no assurance that the Company will be able to obtain additional financing in the future from either debt or equity financings, bank loans or other sources on acceptable terms or at all. If available, any additional equity financings may be dilutive to the Company's stockholders and any debt financings may contain restrictive covenants and additional debt service requirements, which could adversely affect the Company's operating results. If the Company is unable to obtain necessary financing, it will be required to significantly curtail its activities or cease operations. Dependence on Key Employees. The Company's success depends to a significant extent upon a number of key management and technical personnel, the loss of one or more of whom could have a material adverse effect on the Company's results of 8 operations. Further, the Company believes that its success will depend in large part upon its ability to attract and retain highly skilled technical, managerial, sales and marketing personnel. There can be no assurance that the Company will be successful in attracting and retaining the personnel it requires to develop and market its recycling business or its job training program in a successful manner. Concentration of Revenues. A significant portion of the Company's revenues have been derived from one customer. In fiscal 1996, revenues from the Company's largest customer amounted to 10% of the Company's total revenues, and in fiscal 1995, that same customer accounted for 40% of the Company's total revenues. The Company expects that it will continue to be dependent upon a limited number of customers for significant portions of its revenues in future periods. There can be no assurance that revenues from customers that accounted for significant revenues in past periods, individually or as a group, will continue, or if continued will reach or exceed historical levels in any future period. The Company's operating results may in the future be subject to substantial period-to-period fluctuations as a consequence of such customer concentration. Dependence upon Environmental Regulation. Federal, state and local environmental legislation and regulations mandate stringent waste management and operations practices, which require substantial capital expenditures and often impose strict liabilities for non-compliance. Environmental laws and regulations are, and will continue to be, a principal factor affecting demand for the technology and services being developed or offered by the Company. The level of enforcement activities by federal, state and local environmental protection and related agencies, and changes in regulations and waste generator compliance activities, will also affect demand. To the extent that the burdens of complying with such laws and regulations may be eased as a result of, among other things, political factors, or that suppliers of manufacturing by-products and other industrial wastes find alternative means to comply with applicable regulatory requirements, the Company's ability to procure such by-products and wastes and the demand for the Company's services could be adversely affected, which could have a material adverse effect on the Company's business, financial condition and results of operations. Any changes in these regulations which increase compliance standards may require the Company to change or improve its processes. Regulatory Status of Operations. The Company and its customers operate in a highly regulated environment, and any future facilities may be required to have various federal, state and/or local government permits and authorizations, registrations and/or exemptions. Any of these permits or approvals may be subject to denial, revocation or modification under various circumstances. Failure to comply with the conditions of such permits, approvals, registrations, authorizations or exemptions may adversely affect the operation of the Company's business and may subject the Company to federal, state or locally-imposed penalties. The Company's ability to satisfy the permitting requirements for a particular facility does not assure that permitting requirements for other facilities will be satisfied. In addition, if new environmental legislation is enacted or current regulations are amended or are interpreted or enforced differently, the Company or its customers may be required to obtain additional operating permits, registrations, certifications, exemptions or approvals. There can be no assurance that the Company or its customers will meet all of the applicable regulatory requirements. Potential Environmental Liability. The Company's business exposes it to the risk that harmful substances may be released or escape into the environment from its facilities, processes or equipment, resulting in potential liability for the clean-up or remediation of the release and/or potential personal injury associated with the release. Additionally, the Company is potentially subject to regulatory liability for the generation, transportation, treatment, storage or disposal of hazardous waste if it does not act in accordance with the requirements of federal or state hazardous waste regulations or facility specific regulatory determinations, authorizations or exemptions. 9 The Company may also be exposed to certain environmental risks resulting from the actions of the suppliers of the products that it recycles and other suppliers of industrial wastes. Although the Company maintains general liability insurance, this insurance is subject to coverage limits and generally excludes coverage for losses or liabilities related to environmental damage or pollution. Although the Company conducts and plans to conduct its operations prudently with respect to environmental regulations and plans to structure its relationships with customers and contractors in a manner so as to minimize its exposure to environmental liabilities, the Company's business, financial condition and results of operations could be materially adversely affected by an environmental claim that is not covered or only partially covered by insurance or other available remedy. No Public Market for Securities; Possible Volatility of Market Price. There has not been any market for any of the Company's securities, and there can be no assurance that an active trading market will develop or be sustained in the future. If a trading market for the Company's securities develops, it may be expected that the market price of the Common Stock will be subject to significant fluctuations in response to variations in government regulations relating to the Company's operations, general trends in the industry and other factors, including extreme price and volume fluctuations which have been experienced by the securities markets from time to time. Possible Inability to List Securities on NASDAQ and Potential Effect upon Trading. The NASDAQ Stock Market, which administers NASDAQ, has recently made changes in the criteria for NASDAQ eligibility. In order to be included in NASDAQ's SmallCap Market, a company must satisfy the requirements described below. A company must meet one or more of the following three requirements: (i) net tangible assets of $4 million ($2 million for continued inclusion), (ii) have a market capitalization of $50 million ($35 million for continued inclusion), or (iii) have net income (in the latest fiscal year or 2 of the last 3 fiscal years) of $750,000 ($500,000 for continued inclusion). In addition, a company must also satisfy the following requirements: (i) one million shares in the public float (500,000 for continued inclusion), (ii) $5 million of market value of the public float ($1 million for continued inclusion), (iii) a minimum bid price of $4 ($1 for continued inclusion), (iv) three market makers (two for continued inclusion), (v) 300 (round lot) shareholders, (vi) an operating history of one year or market capitalization of $50 million, and (vii) certain corporate governance standards. The Company does not presently meet the requirements for inclusion in either the NASDAQ SmallCap Market or the NASDAQ National Market, and may never meet the requirements for inclusion in either of those two markets. It is anticipated that trading in the Company's securities (if any) will be conducted in the over-the-counter market in the so-called "pink sheets" or the NASD's "Electronic Bulletin Board" and it could be more difficult to obtain quotations of the market price of the Company's securities. Consequently, the liquidity of the Company's securities could be impaired, not only in the number of securities which could be bought and sold, but also through delays in the timing of transactions, reduction in security analysts and the news media's coverage of the Company and lower prices for the Company's securities than might otherwise be attained Risks of Classification as a "Penny Stock." The Company's securities may become subject to Rule 15g-9 under the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and "accredited investors" (generally, individuals with net worths in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses). For transactions covered by such rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, such rule may adversely affect the ability of broker-dealers to sell the Company's securities and may adversely affect the ability of the Company's shareholders to sell any of their securities in the secondary market. 10 Commission regulations define a "penny stock" to be any non-Nasdaq equity security that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the Commission relating to the penny stock market. Disclosure is also required to be made about commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The foregoing required penny stock restrictions will not apply to the Company's securities if such securities are listed on the Nasdaq SmallCap Market or the Nasdaq National Market, and have certain price and volume information provided on a current and continuing basis or meet certain minimum net tangible assets or average revenue criteria. It is not presently anticipated that the Company's securities will qualify for either the National Market or SmallCap markets. There can be no assurance that the Company's securities will qualify for exemption from these restrictions. In any event, even if the Company's securities were exempt from such restrictions, it would remain subject to Section 15(b)(6) of the Exchange Act, which gives the Commission the authority to prohibit any person that is engaged in unlawful conduct while participating in a distribution of a penny stock from associating with a broker-dealer or participating in a distribution of a penny stock, if the Commission finds that such a restriction would be in the public interest. If the Company's securities were subject to the rules on penny stocks, the market liquidity for the Company's securities could be severely adversely affected. Ability to Respond to Technological Change. The Company's future success will depend significantly on its ability to enhance its recycling capabilities in a manner which keeps pace with technological developments and evolving industry standards. There can be no assurance that the Company will be successful in enhancing its recycling capabilities or meeting customer requirements adequately. The Company's delay or failure to develop or acquire technological improvements or to adapt to technological change would have a material adverse effect on the Company's business, results of operations and financial condition. Competition. The market for the Company's services and recycled products is competitive and subject to rapid change. There can be no assurance that competitors will not develop alternative methodologies that: (i) are superior to the Company's methodologies; or that (ii) achieve greater market acceptance. Further, the market for recycled products and raw material is dependent to some extent upon prices for new products and material, and perceptions as to the quality of recycled products or material. To the extent that the prices of new products or material are competitive with the prices offered by the Company, sales of the Company's recycled products may be adversely affected. Accordingly, there can be no assurance that the Company will be able to compete successfully with its present or potential competition, or that competition will not have a material adverse effect on the Company's results of operations and financial condition. Possible Volatility of Stock Price. The market price of the Company's Common Stock could be subject to significant fluctuations in response to variations in actual and anticipated quarterly operating results, changes in earnings estimates by analysts, announcements of new products or technological innovations by the Company or its competitors, and other events or factors. In addition, the stocks of many companies have experienced extreme price and volume fluctuations that have often been unrelated to the companies' operating performance. Dividends and Dividend Policy. The Company has not paid any cash dividends on its Common Stock and does not expect to declare or pay any cash or other dividends in the foreseeable future. As a holding company, the Company holds no significant tangible assets other than its investments in and advances and loans to its wholly-owned subsidiaries. The Company's ability to make cash dividend payments to holders of the Common Stock is dependent upon the receipt of sufficient funds from TES GmbH. 11 Control by Management. The officers and directors of the Company own approximately 64.3% of the outstanding shares of the Company's Common Stock. Due to their stock ownership, the officers and directors will be in a position to elect the Board of Directors and, therefore, to control the business and affairs of the Company, including certain significant corporate actions such as acquisitions, the sale or purchase of assets and the issuance and sale of the Company's securities. Shares Eligible for Future Sale. As of December 31, 1997, the Company had not reserved any shares of Common Stock for issuance upon exercise of stock options which may be granted pursuant to its stock option plan ("Plan Options"). Sales of Common Stock underlying the Plan Options may adversely affect the price of the Common Stock. In addition, the existence of such options and warrants may adversely affect the terms on which the Company may obtain additional equity capital in the future. Further, all of the Company's Common Stock has been sold in "off-shore" transactions, including 233,476 shares that were sold between February and July of 1997, and which under certain circumstances will be eligible for resale into the United States after those shares have been held for one year. Shares held by the officers and directors of the Company may only be sold in compliance with Rule 144 adopted under the Securities Act of 1933, as amended. The sale or resale of these shares could have a depressive effect upon the trading price of the Common Stock, if a market for the shares develops. Important Factors related to Forward-Looking Statements and Associated Risks. This Report contains certain 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, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements include the plans and objectives of management for future operations, including plans and objectives relating to the development and conduct of the recycling business and the job training business, and the future economic performance of the Company. The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements are based on assumptions that the Company will be able to develop its recycling business, develop and establish its job training programs, that competitive conditions within the recycling industry will not change materially or adversely, that demand for the Company's recycling services and recycled materials and products will remain strong, that the Company will retain key management personnel, that the Company's forecasts will accurately anticipate market demand and that there will be no material adverse change in the Company's operations or business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in forward-looking information will be realized. In addition, as disclosed elsewhere under other risk factors, the business and operation of the Company are subject to substantial risks which increase the uncertainty inherent in such forward-looking statements. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. Readers of this report are cautioned that the safe harbor for forward looking statements does not apply to statements made in connection with an initial public offering. 12 Item 2 Management's Discussion and Analysis or Plan of Operation Selected Financial Data The following selected financial data should be read in conjunction with the financial statements and related notes thereto appearing elsewhere in this Form 10-SB. The selected financial data as of December 31, 1996 and 1997 and for each of the two years in the period ended December 31, 1997, have been derived from the financial statements of the Company which have been audited by the Company's independent auditors and are included elsewhere in this Form 10-SB. The selected financial data provided below is not necessarily indicative of the future results of operations or financial performance of the Company. Three Months Ended Year Ended December 31, March 31, --------------------------------------- ----------------------------------- Statement of Operations Data: 1995 1996 1997 1997 1997 1998 1998 ---- ---- ---- ---- ---- ---- ---- (in thousands except per share data) (in thousands except per share data) DM DM DM US $ DM DM US $ Sales 577,564 293,814 453,909 253,283 113,850 175,375 94,797 Cost of Operations 351,364 177,343 179,690 100,268 59,532 44,966 24,306 ------- ------- ------- ------- ------ ------ ------ Gross Profit 226,200 116,471 274,219 153,015 54,318 130,409 70,941 Other Costs and Expenses General and Administrative 323,972 281,614 886,696 494,780 117,330 281,995 152,430 ------- ------- ------- ------- ------- ------- ------- Income (loss) from operations (97,772) (165,143) (612,477) (341,765) (63,012) (151,586) (81,938) Other Income and (expense) Interest Income 4,780 1,240 19,190 10,708 -- 238 129 Losses of unconsolidated subsidiary -- (15,530) (8,395) Interest Expense (28,595) (43,517) (46,718) (26,029) (5,784) (5,610) (11,298) -------- -------- -------- ------- ------- ------- -------- (23,815) (42,277) (27,528) (15,361) (5,784) (20,902) (11,298) Income (loss) before income taxes (121,587) (207,420) (640,005) (357,126) (68,796) (172,488) (93,237) Provision for income taxes -- -- -- -- -- -- -- -------- -------- -------- ------- ------- -------- ------- Net income (loss) (121,587) (207,420) (640,005) (357,126) (68,796) (172,488) (93,237) --------- -------- -------- ------- -------- -------- -------- Earnings (loss) per share: Net income (loss) (0.08) (0.14) (0.38) (0.21) (0.04) (0.10) (0.05) --------- ------- -------- ------- ------- -------- ------- Weighted average common and common equivalent shares outstanding 1,507,176 1,508,134 1,676,271 1,676,271 1,530,440 1,741,610 1,741,610 December 31. 1997 March 31. 1997 ----------------- -------------- DM US $ DM US $ Balance Sheet Data: Working capital 653,996 364,932 179,215 96,872 Current assets 1,188,826 663,370 505,617 273,306 Current liabilities 534,830 298,438 326,402 176,434 Total assets 1,697,536 947,233 1,316,620 711,686 Total liabilities 769,130 429,178 560,702 303,083 Shareholders' equity 928,406 518,055 755,918 408,604 - --------------------
13 Results of Operations The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items included in the Company's Statements of Operations:
Fiscal year ended Three Months Ended December 31 March 31 1995 1996 1997 1997 1998 ---- ---- ---- ---- ---- DM DM DM DM DM Sales 100.0% 100.0% 100.00% 100.0% 100.0% Cost of Operations 60.8 60.4 39.6 52.3 25.6 Gross Profit 39.2 39.6 60.4 47.7 74.4 General and administrative 56.1 95.8 195.3 103.0 160.8 Income (loss) from operations (16.9) (56.2) (134.9) (55.34) (86.4) Interest income .8 .4 4.2 0.13 Interest expense (5.0) (14.8) (10.3) (5.1) (3.2) ------ ------- ------ ----- ----- Net income (21.1) (70.6) (140.9) (60.4) (98.4)
Year Ended December 31, 1997, Compared to Year Ended December 31, 1996 Sales for the year ended December 31, 1997, were 423,300 DM, an increase of 129,486 DM, or 44.1%, as compared to the year ended December 31, 1996. Cost of operations for the year ended December 31, 1997, was 179,690 DM, an increase of 2,347 DM, or 1.3%, as compared to the year ended December 31, 1996. Gross Profit for the year ended December 31, 1997, was 274,219 DM, an increase of 157,748 DM, or 135.4%, as compared to the year ended December 31, 1996. These increases were primarily due to an increase in the number of sales persons employed by the Company from one manager/sales person to four full-time sales persons. Management believes that the increase in sales and the corresponding increase in gross profit is directly attributable to the increase in the number of persons engaged in marketing. General and administrative expenses for the year ended December 31, 1997, were 886,696 DM, an increase of 605,082 DM, or 214.9%, as compared to the year ended December 31, 1996. This increase was principally due to the increased costs both direct and indirect associated with the increase in the number of sales persons, and increased costs for staffing and equipping the Landsberg facility and bringing that facility into operation. As a result of these factors the operating loss for the year ended December 31, 1997, was (612,477) DM, an increase in the loss of 447,334 DM, or 270.9%, as compared to the year ended December 31, 1996. In addition, these factors resulted in a loss for the year ended December 31, 1997, of (640,005 DM) compared to a loss of (207,420 DM) for the year ended December 31, 1996, an increase in the loss of (432,585 DM). Year Ended December 31, 1996, Compared to Year Ended December 31, 1995 Sales for the year ended December 31, 1996, were 293,814 DM, a decrease of 283,750 DM, or 49%, as compared to the year ended December 31, 1995. Cost of operations for the year ended December 31, 1996, was 177,343 DM, a decrease of 174,021 DM, or 49%, as compared to the year ended December 31, 1995. Gross Profit for the year ended December 31, 1996, was 116,471 DM, a decrease of 109,729 DM, or 48%, as compared to the year ended December 31, 1995. These decreases were primarily due to the loss of the Company's largest customer-Siemens Nixdorf and a decline in the prices paid for recycling of electronic materials as more particularly described below. The German federal government announced that it planned to pass new legislation relating to the 14 recycling of electronic scrap. This announcement caused a decline in the prices for recycling electronic scrap of approximately 70%. In addition, the Company lost its largest customer Siemens Nixdorf during this same period. Siemens Nixdorf had constituted approximately 50% of the Registrant's total sales during the prior year. Management believes that the principal reason that it lost Siemens Nixdorf involved the costs of transportation associated with moving the scrap material a distance of approximately 700 kilometers between Siemens Nixdorf's plant and the Company's recycling subcontractors. Competitors with recycling facilities closer to Siemens Nixdorf were able to provide services at a much lower cost than the Registrant because the competitors' transportation costs were lower than the Company's. General and administrative expenses for the year ended December 31, 1996, were 281.614 DM, a decrease of 42,358 DM, or 13%, as compared to the year ended December 31, 1995. This decrease was principally due to the decline in the Company's recycling business and the corresponding decrease in personnel and general and administrative expenses. As a result of these factors the operating loss for the year ended December 31, 1996, was (165,143) DM, an increase in the loss of 67,371 DM, or 68%, as compared to the year ended December 31, 1995. In addition, these factors resulted in an increase in the loss for the year ended December 31, 1996, of (207,420 DM) compared to a loss of (121,587 DM) for the year ended December 31, 1995, an increase in the loss of (85,833 DM). Three Month Period Ended March 31, 1998, Compared to Three Month Period Ended March 31, 1997 Sales for the three month period ended March 31, 1998, were 175,375 DM, an increase of 61,525 DM, or 54.0%, as compared to the three month period ended March 31, 1997. The principal reason for this increase was that the Company was able to add new customers for its recycling business to replace customers lost in the prior year. Cost of operations for the three month period ended March 31, 1998, was 44,966 DM, a decrease of 14,566 DM, or (24.5%), as compared to the three month period ended March 31, 1997. These decreases were primarily due to a decrease in the number of sales persons from four to two. Gross Profit for the three month period ended March 31, 1998, was 130,409 DM, an increase of 76,091 DM, or 140.0%, as compared to the three month period ended March 31, 1997. General and administrative expenses for the three month period ended March 31, 1998, were 281,995 DM, an increase of 164,655 DM, or 140.3%, as compared to the three month period ended March 31, 1997. This increase was principally due to increased expenses associated with the opening of the Landsberg facility. As a result of these factors, the operating loss for the three month period ended March 31, 1998, was (151,586) DM, an increase in the loss of 88,574 DM, or 140.5%, as compared to the three month period ended March 31, 1997. Further, for the reasons noted above, the net loss for the three month period ended March 31, 1998, was (172,488 DM), an increase in the loss of 103,692 DM, or 150.7%, as compared to the three month period ended March 31, 1997. Liquidity and Capital Resources Although the Company traditionally has relied principally upon internally generated funds and loans from its principal shareholder and his wife to finance its operations and growth, during the three months ended March 31, 1998, the Company derived 2,208,550 DM from an offering of its Common Stock conducted solely in Germany to German citizens. At March 31, 1998, the Company had working capital of 179,215 DM and cash of 386,775 DM. Management believes that it has sufficient working capital to finance its operations through the fourth quarter of 1998. Major capital expenditures to be undertaken during 1998 are estimated to include: (i) approximately 30,000 DM for new and updated computer hardware 15 and software; (ii) 250,000 DM for machinery, equipment, furniture and fixtures; and (iii) approximately 10,000 DM for the costs of relocating the Company's executive offices. Year 2000 Compliance The Registrant does not anticipate any difficulties in Year 2000 compliance. Management has advised that all software programs that it is using are already programmed for Year 2000. In addition, the software is also programmed to accept the New European currency--the EURO. Item 3 - Description of Property - -------------------------------- The Company currently leases office space for the Company's main corporate offices at 25 Impler Strasse, 81371, Munich at a monthly rental of approximately 5,552.75 DM. The lease expires on December 31, 2004. Management of the Company believes that the existing facilities are adequate at this time for the Company's operations. In addition, the Company leases two buildings for its recycling operations at Landsberg a. Lech, Germany at a monthly rental of approximately 18,700 DM. The leases on these buildings expire on December 31, 2001. Under the terms of this lease, the Company also has an option to purchase the buildings for 2,200,000 DM if the option is exercised prior to December 31, 2000. Thereafter the price shall increase by 77,000 DM per year. The facility in Landsberg is sufficiently large that the Company expects that it will also be able to conduct its job training at that same facility. Item 4. Security Ownership of Certain Beneficial Owners and Management. The following table sets forth information with respect to the ownership of the Company's Common Stock by all officers and directors, individually, all officers and directors as a group, all beneficial owners of more than ten percent of the Common Stock as of September 30, 1997, and by one of the Company's consultants. Except as otherwise indicated, the following shareholders have sole voting and investment power with respect to the shares. 16 Percent Name and address Number of of of owner shares Class - ---------------- ---------- ------- Gerd Behrens 500,000(1) 28.7% C/O TES GmbH 25 Impler Strasse, Munich, 81371, Germany Frank Behrens 200,000(2) 11.5% C/O TES GmbH 25 Impler Strasse, Munich, 81371, Germany Jutta Behrens 420,000(1) 24.1% C/O TES GmbH 25 Impler Strasse, Munich, 81371, Germany Karsten Behrens 300,000(2) 17.2% C/O TES GmbH 25 Impler Strasse, Munich, 81371, Germany Yvonne Marquard 80,000(3) 4.2% C/O TES GmbH 25 Impler Strasse, Munich, 81371, Germany All officers and directors 1,120,000 64.3% as a group (3 persons)(4) - ----------------------- (1) Gerd and Jutta Behrens are husband and wife, and own these shares separately. As husband and wife each of them may be considered the beneficial owner of the shares held by the other. (2) Frank Behrens and Karsten Behrens are brothers and are the sons of Gerd and Jutta Behrens. Gerd and Jutta Behrens disclaim beneficial ownership of the shares held by their sons. (3) Yvonne Marquard has served as a consultant to the Company and has been paid consulting or finder's fees for her efforts in assisting the Company with its financing efforts. Ms. Marquard is the wife of Michael Marquard, who is an employee of the Company. Michael Marquard may be deemed to be the beneficial owner of these shares. (4) Does not include 300,000 shares held by Karsten Behrens, because he is neither an officer or director of the Company. 17 There are no outstanding options, warrants, or rights to purchase securities from the Company. Item 5. Directors, Executive Officers, Promoters and Control Persons. Officers and Directors and Key Consultants - ------------------------------------------ The officers and directors of the Company and key consultants to the Company are as follows:
Officers and Directors - ---------------------- Tenure as Officer Name Age Position(s) or Director ---- --- ----------- ---------------- Gerd Behrens 60 Chairman of the June 21, 1994 Board and President to Present Frank Behrens 31 Secretary March 3, 1995 and a Director to Present Jutta Behrens 59 Treasurer March 3, 1995 and a Director to Present Key Consultants Karsten Behrens 30 Consultant October 1, 1996 to Present Yvonne Marquard 28 Consultant February 1, 1997 to Present
Gerd Behrens, Jutta Behrens, Frank Behrens, Karsten Behrens and Yvonne Marquard may be deemed to be "promoters" and "parents" of the Company within the meaning of the Rules and Regulations promulgated under the Securities Act. The directors of the Company are elected to hold office until the next annual meeting of shareholders and until their respective successors have been elected and qualified. Officers of the Company are elected annually by the Board of Directors and hold office until their successors are duly elected and qualified. Gerd Behrens and Jutta Behrens are married to each other, and they are the parents of Frank Behrens and Karsten Behrens. Frank Behrens and Karsten Behrens are brothers. There are no other family relationships between any director or executive officer and any other director or executive officer. Set forth below is biographical information with respect to the Company's founders and promoters and each officer and director. Gerd Behrens, founder and promoter, has been Chairman of the Board and President of the Company since inception. Mr. Behrens holds a Diploma as a Businessman (Dipl. Kaufmann), which is roughly equivalent to a Bachelors Degree in Business Administration in the United States. Mr. Behrens has over 35 years of experience in business with a variety of firms and has served in a number of positions, including senior management positions, since 1989. From 1989 until the founding of the Company, Mr. Behrens was the managing director of Data Consult, a firm located in Munich, Germany, that purchased and sold used computers. Since the founding of the Company, Mr. Behrens has devoted substantially all of his time to the business and affairs of the Company. 18 Frank Behrens has been Secretary and a director of the Company since March 3, 1995. Mr. Behrens is a graduate of Ludwig-Maximillians University in Munich in Geography and Economics. Mr. Behrens has served as a consultant to various firms, including the Company, since graduating from the University of Munich in 1995. Mr. Behrens' consulting services have related primarily to urban planning and development and the development of environmental management systems and organization structures and certain software tools for these systems. Mr. Behrens provided the Company with assistance in the writing and drafting of its business plan and offering materials that were used to raise funds from German investors and with the development of environmental management systems and organization structures and certain software tools for these systems. Jutta Behrens has been Treasurer and a director of the Company since March 3, 1995. Mrs. Behrens is a qualified industrial accountant and has since 1970 owned and operated her own firm which provides accounting services to businesses and individuals in Germany. Karsten Behrens has been a consultant to the Company and has acted as its legal counsel since October 1, 1996. Mr. Behrens is a graduate of Ludwig-Maximillians University in Munich in law. Mr. Behrens has completed the necessary post-graduate employment requirements and passed the necessary examinations to be licensed as a lawyer in Germany. He has provided the Company with legal services and with other management and consulting services. His principal consulting activities were focused upon providing the Company with assistance in the writing and drafting of its business plan and offering materials that were used to raise funds from German investors and in assisting the Company with various legal matters. Yvonne Marquard has been a consultant to the Company since February 1, 1997. Ms. Marquard assisted the Company with the placement of its Common Stock in Germany. Ms. Marquard founded her own firm--Yvonne Marquard Unternehmensberatung in 1997 to provide financial consulting services to various businesses. Prior to founding her own firm Ms. Marquard was employed by AURUM Vermoegensanlagen GmbH, a German financial services firm. Item 6. Executive Compensation The following table summarizes all compensation paid to the officers and directors of the Company, and to Karsten Behrens as a consultant, for services rendered to the Company during the last three fiscal years. 19
Long Term Annual Compensation Compensation ---------------------------------- ------------ Other Number of Name and Fiscal Salary/ Annual Options Principal Position Year Consulting Fees Compensation Awarded - ---------------------- ----- --------------- ------------ -------- Gerd Behrens, 1997 57,600 DM -0- -0- (1) President 1996 10,000 DM -0- -0- and Director 1995 24,000 DM -0- -0- Jutta Behrens, 1997 -0- -0- -0- (1) Treasurer 1996 -0- -0- -0- and Director 1995 -0- -0- -0- Frank Behrens, 1997 40,250 DM -0- -0- (1) Secretary 1996 -0- -0- -0- and Director 1995 -0- -0- -0- Karsten Behrens, 1997 98,650 DM -0- -0- (1) Consultant 1996 3,150 DM -0- -0- 1995 2,930 DM -0- -0-
- ----------------------------- (1) No advances have been made or are contemplated by the Company to any of its officers or directors. Employment and Consulting Agreements The Company has entered into an employment agreement with Gerd Behrens under which Mr. Behrens will be paid approximately 6,500 DM per month. Further, the Company has a consulting agreement with Jutta Behrens' accounting firm under which Mrs. Behrens' firm is paid 500 DM per month in exchange for providing the services of Jutta Behrens to the Company. Also, the Company has a consulting agreement with Frank Behrens' personal consulting firm, under which the firm will be paid 30 DM per hour for providing the services of Frank Behrens to the Company. Karsten Behrens serves on the board of directors of TES Oecon AG, and as such there is a consulting agreement with Karsten Behrens' personal consulting firm under which his firm is paid an hourly fee of 50 DM per hour for services as needed. Gerd Behrens devotes his full time and attention to the business and affairs of the Company. Frank Behrens is expected to devote approximately 30 hours per month on average to the business and affairs of the Company, with the expectation that as the Company requires more of Mr. Behrens' time and efforts he will devote more time to the Company with an appropriate increase in his compensation arrangements. Jutta Behrens is expected to devote such time as is necessary to maintain the Company's accounting records on a current basis. It is not anticipated that Mrs. Behrens will devote additional time to the Company, and as the Company's needs for accounting and bookkeeping increase, management believes that the Company will hire accounting and bookkeeping personnel directly to meet those needs. It is also anticipated that Mrs. Behrens will remain as the Treasurer until such time as the Company's business requires a full-time person, at which time it is expected that the Company will replace Mrs. Behrens with a qualified person. Karsten Behrens is expected to devote approximately 10 hours per month on average to the business and affairs of the Company, with the expectation that as the Company requires more of Mr. Behrens' time and efforts he will devote more time to the Company with an appropriate increase in his compensation arrangements. 20 The employment and consulting agreements between the Company and Gerd Behrens, Jutta Behrens, Frank Behrens and Karsten Behrens also contain an agreement to maintain confidentiality of trade secrets and other materials. Directors Other than pursuant to their employment or consulting arrangements, the members of the Board of Directors are not compensated for their services as directors; however, they are reimbursed for all reasonable expenses incurred in connection therewith. Option Plans Except as described below, the Company has no retirement, pension, profit sharing, stock option or insurance or medical reimbursement plans or programs covering its officers and directors, and does not contemplate implementing any such plans at this time. The Board of Directors of the Company has adopted a Stock Option Plan (the "Plan") which provides for the grant of options to purchase an aggregate of not more than 500,000 shares of the Company's Common Stock. The purpose of the Plan is to make options available to directors, management, key employees, consultants, and technical advisers of the Company in order to provide them with a more direct stake in the future of the Company and to provide them with additional rewards and incentives for contributing to the success of the Company. The Plan will be administered by a committee (the "Committee") appointed by the Board of Directors which determines the persons to be granted options under the Plan, the number of shares subject to each option, the term of the option, the manner in which the option may be exercised and the exercise price of each option, subject to the requirement that no option may be exercisable more than 10 years after the date of grant. The Committee will have the power to establish such other terms and conditions for options granted under the Plan as they determine are necessary and appropriate. No option granted under the Plan shall be transferable otherwise than by will or the laws of descent and distribution. The exercise price of stock options granted under the Plan will be established by the Board of Directors in their sole discretion and may be less than the fair market value of the underlying shares on the date of grant as determined by the Committee. The exercise price may be paid in cash or in Common Stock or a combination of cash and Common Stock. As of the date of this Prospectus, no options have been granted under the Plan. Except as described below under "Certain Relationships and Related Transactions," the Company paid no cash or non-cash compensation to any officer or director during the fiscal years ended December 31, 1995 and 1996. Item 7. Certain Relationships and Related Transactions. In connection with the founding of the Company, Gerd Behrens acquired 1,500,000 of the Company's shares of Common Stock. Subsequent to the founding and prior to the time that the Company raised any funds from outside directors, Mr. Behrens sold his wife, Jutta Behrens, and his sons, Karsten and Frank Behrens, 920,000 of these shares and sold Yvonne Marquard 80,000 of these shares. Mr. Behrens paid approximately 90,870 DM for his original 1,500,000 shares. In addition, Jutta Behrens has loaned the Company approximately 141,250 DM. The initial loan was made on March 20, 1996, in the amount of 80,000 DM for a five-year term and bears interest at 9.25% per year. The second loan was made on September 10, 1996, in the amount of approximately 50,000 DM for a four year term and bears interest at 8% per year. The third loan was made on December 31, 1996, in the amount of approximately 11,200 DM for a four year term and bears 21 interest at 8% per year. Further, Gerd Behrens loaned the Company approximately 100,000 DM in connection with the capitalization of TES Oecon AG, which was interest free until January 1, 1998. Subsequent to January 1, 1998, the loan bears interest at a rate of 6% per annum. The loan is due on December 31, 2001, subject to a right for the Company to extend the loan for an additional 5 years if necessary for economic reasons. In connection with the Company's financing efforts in Germany, the Company entered into an agreement with Yvonne Marquard under which Mrs. Marquard was paid a consulting or finder's fee based upon the difference between 20% of the gross proceeds raised and the amount of commission or fees actually paid to brokers or finders for the sale of the Company's securities. Ms. Marquard was paid approximately 86,533 DM under the terms of this agreement. Ms. Marquard is the wife of Michael Marquard, who is an employee of the Company. The Company also paid Frank Behrens consulting fees equal to 40,250 DM in connection with the writing and drafting of the Company's business plan and offering materials that were used to raise funds from German investors and with the development of environmental management systems and organization structures and certain software tools for these systems. The Company paid Karsten Behrens consulting fees equal to approximately 98,650 DM in connection with his performance of legal services for the Company and the writing and drafting of the Company's business plan and offering materials that were used to raise funds from German investors. Except as otherwise disclosed herein, there have been no related party transactions or any other transactions or relationships required to be disclosed pursuant to Item 404 of Regulation S-B. Item 8. Description of Securities Common Stock - ------------ The Company's authorized capital consists of 20,000,000 shares of no par value Common Stock, and the Company currently has 1,741,610 shares of the Common Stock issued and outstanding. Holders of Common Stock are entitled to one vote for each whole share on all matters to be voted upon by shareholders, including the election of directors. Holders of Common Stock do not have cumulative voting rights in the election of directors. This means that holders of more than 50% of the shares voting for the election of directors can elect all of the directors if they choose to do so, and in such event, the holders of the remaining less than 50% of the shares voting for the election of directors will not be able to elect any person or persons to the Board of Directors. All shares of Common Stock are equal to each other with respect to liquidation and dividend rights. No holder of any shares of Common Stock has any preemptive rights to subscribe for or purchase any additional, unissued shares of the Company's Common Stock. Upon liquidation, dissolution, or winding up of the Company, each share of the Common Stock is entitled to share ratably in the amount available for distribution to holders of Common Stock. All shares of Common Stock outstanding are fully paid and nonassessable, and the Common Stock is not subject to conversion or redemption. Transfer Agent - -------------- Corporate Stock Transfer, Inc., 370 17th Street, Suite 2360, Denver, Colorado 80202, has been retained to serve as the transfer agent and registrar for the Company's Common Stock. 22 Reports to Shareholders - ----------------------- The Company intends to furnish annual reports to shareholders which include audited financial statements reported on by its independent accountants. PART II Item 1. Market price of and Dividends on the Registrant's Common Equity and Other Shareholder Matters a. Market Price. There is no trading market for the Company's Common Stock at present and there has been no trading market to date. Management has not undertaken any discussions, preliminary or otherwise, with any prospective market maker concerning their involvement in making a market in the Company's securities. There is no assurance that a trading market will ever develop or, if such a market does develop, that it will continue. Effective August 11, 1993, the Securities and Exchange Commission adopted Rule 15g-9, which established the definition of a "penny stock," for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Concession relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made to suitability determination; and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stock in both public offering and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The NASDAQ Stock Market, which administers NASDAQ, has recently made changes in the criteria for NASDAQ eligibility. In order to be included in NASDAQ's SmallCap Market, a company must satisfy the requirements described below. A company must meet one or more of the following three requirements: (i) net tangible assets of $4 million ($2 million for continued inclusion), (ii) have a market capitalization of $50 million ($35 million for continued inclusion), or (iii) have net income (in the latest fiscal year or two of the last three fiscal years) of $750,000 ($500,000 for continued inclusion). In addition, a company must also satisfy the following requirements: (i) one million shares in the public float (500,000 for continued inclusion), (ii) $5 million of market value of the public float ($1 million for continued inclusion), (iii) a minimum bid price of $4 ($1 for continued inclusion), (iv) three market makers (two for continued inclusion), (v) 300 (round lot) shareholders, (vi) an operating history of 1 year or market capitalization of $50 million, and (vii) certain corporate governance standards. Management intends to seek to qualify its securities for trading on the NASDAQ or on a significant securities exchange. However, there can be no assurances that the Company will qualify its securities for listing on NASDAQ as some other significant exchange, or be able to maintain the maintenance criteria 23 necessary to insure continued listing. The failure of the Company to qualify its securities or to meet the relevant maintenance criteria after such qualification in the future may result in the discontinuance of the inclusion of the Company's securities on a national exchange. In such events, trading, if any, in the Company's securities may then continue in the non-NASDAQ over-the-counter market. As a result, a shareholder may find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, the Company's securities. b. Holders. There are approximately 156 holders of the Company's Common Stock. All of the issued and outstanding shares of the Company's Common Stock were issued in off-shore transactions to German citizens, who are resident in Germany. As of December 31, 1997, approximately 300,000 shares of the Company's issued and outstanding Common Stock was available for resale into the U.S. markets under the provisions of Regulation S adopted under the Securities Act of 1933, as amended. In addition, all of the Company's Common Stock has been sold in "off-shore" transactions, including 233,476 shares that were sold between March and July of 1997, and which under certain circumstances will be eligible for resale into the United States after those shares have been held for one year. Officers and Directors of the Company hold approximately 1,120,000 shares of the Company's issued and outstanding Common Stock, which is eligible for sale under Rule 144 promulgated under the Securities Act, subject to certain limitations included in said Rule. In general, under Rule 144, a person (or persons whose shares are aggregated), who has satisfied a one year holding period, under certain circumstances, may sell within any three month period a number of shares which does not exceed the greater of one percent of the then outstanding Common Stock or the average weekly trading volume during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of shares without any quantity limitation by a person who has satisfied a two year holding period and who is not, and has not been for the preceding three months an affiliate of the Company. The officers and directors of the Company are affiliates of the Company and as such will be required to resell their securities under Rule 144 unless those resales occur pursuant to a Registration Statement that has been filed with the United States Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended, and which has been declared effective by the SEC. The sale or resale of these shares could have a depressive effect upon the trading price of the Common Stock, if a market for the shares develops. c. Dividends. Each share of Common Stock is entitled to share pro rata in dividends and distributions, if any, with respect to the Common Stock when, as and if declared by the Board of Directors from funds legally available therefor. The Company has not paid any dividends on its Common Stock and intends to retain earnings, if any, to finance the development and expansion of its business. Future dividend policy is subject to the discretion of the Board of Directors and will depend upon a number of factors, including future earnings, capital requirements and the financial condition of the Company. Item 2. Legal Proceedings The Company is currently not a party to any pending legal proceedings, and none of its property is the subject of a pending legal proceeding. Item 3. Changes in and Disagreements with Accountants The Company has never had any disagreements with Accountants. Item 4. Recent Sales of Unregistered Securities Between December 31, 1996, and December 31, 1997, the Company sold 233,476 shares of its Common Stock in transactions in Germany with German citizens, who are resident in Germany. The Company believes that none of these transactions 24 were subject to U.S. securities laws and that all such transactions were conducted in accordance with the provisions of Regulation S adopted under the Securities Act of 1933, as amended. Further, the Company believes that all such offers and sales were made in compliance with applicable laws in Germany. The Company utilized the services of various individuals and companies (all of whom were either German companies or German citizens) in connection with sales of its securities and paid sales commissions and finders fees in connection with those sales. Gross Proceeds of the offering aggregated 2,675,310 DM, with expenses of the offering aggregating 536,515 DM. For further information concerning payments made to Yvonne Marquard, for her assistance with these sales, please see Item 7. "Certain Relationships and Related Transactions" above. During 1995, the Company sold 210,000 DM of convertible debentures to thirteen individual investors in Germany. In addition, the Company sold 3,000 shares of its Common Stock for gross proceeds of 30,490 DM to one investor. The purchaser of the 3,000 shares of Common Stock and all of the purchasers of the convertible debentures were German citizens, who were resident in Germany. The Company believes that none of these transactions were subject to U.S. securities laws and that all such transactions were conducted in accordance with the provisions of Regulation S adopted under the Securities Act of 1933, as amended. Further, the Company believes that all such offers and sales were made in compliance with applicable laws in Germany. The Company utilized the services of a German company in connection with sales of the convertible debentures and paid sales commissions equal to 15% of the gross amount raised from the sale of such debentures (i.e., approximately 31,500 DM). Item 5. Indemnification of Officers and Directors Article 10 of the Company's Articles of Incorporation, included herewith as Exhibit 3(i) provides for the indemnification of the Company's officers and directors. Further, the officers and directors are indemnified under various provisions of the Colorado Business Act, which provides for the indemnification of officers and directors and other persons against expenses, judgments, fines and amounts paid in settlement in connection with threatened, pending or completed suits or proceedings against such persons by reason of serving or having served as officers, directors or in other capacities, except in relation to matters with respect to which such persons shall be determined not to have acted in good faith and in the best interests of the Company. With respect to matters as to which the Company's officers and directors and others are determined to be liable for misconduct or negligence, including gross negligence in the performance of their duties to the Company, Colorado law provides for indemnification only to the extent that the court in which the action or suit is brought determines that such person is fairly and reasonably entitled to indemnification for which the court deems proper. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to officers, directors or persons controlling the Company pursuant to the foregoing, the Company has been informed that in the opinion of the U.S. Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is therefore unenforceable. In accordance with the laws of the State of Colorado, the Company's Bylaws authorize indemnification of a director, officer, employee, or agent of the Company for expenses incurred in connection with any action, suit, or proceeding to which he or she is named a party by reason of his or her having acted or served in such capacity, except for liabilities arising from his or her own misconduct or negligence in performance of his or her duty. In addition, even a director officer, employee, or agent of the Company who was found liable for misconduct or negligence in the performance of his or her duty may obtain such indemnification if, in view of all the circumstances in the case, a court of competent jurisdiction determines such person is fairly and reasonably entitled to indemnification. Insofar as indemnification for liabilities arising under the Securities Act, may be permitted to directors, officers, or persons controlling 25 the issuing Company pursuant to the foregoing provisions, the Company has been informed 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. PART F/S The audited financial statements of the Company, and related notes thereto, as of December 31, 1997, and for the years ended December 31, 1997 and 1996, are accompanied by the independent auditors' report and are included herewith. Also, included herewith are the audited financial statements of T-Cycle Computer Service & Verwertungs GmbH, and related notes thereto, as of December 31, 1997, and for the year ended December 31, 1997, which are accompanied by the independent auditors' report and are included herewith. PART III--Complete Exhibits List Item 1. Index to Exhibits Exhibit Number Description of Exhibit - -------------- ---------------------- 3(i) Articles of Incorporation1 3(ii) Bylaws1 4(i) Form of Stock Certificate2 4(ii) Form of Convertible Debenture2 4(iii) Stock Option Plan2 10(i) Employment Contract of Gerd Behrens dated May 19, 19922 10(ii) Lease for Impler Strasse office2 10(iii) Lease for building in Landsberg am Lech2 10(iv) Lease for building #2 (Halle) at Landsberg am Lech2 10(v) Agreement dated February 2, 1998 between TES Inc. and T-Cycle GmbH2 - ----------------------- 1 Previously Filed 2 Filed Herewith 26 SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. TECHNICAL ENVIRONMENT SOLUTIONS, INC. (Registrant) Date: July 1, 1998 By: /s/ Gerd Behrens --------------------------------------------- Gerd Behrens, President and a Director Date: July 1, 1998 By: /s/ Frank Behrens --------------------------------------------- Frank Behrens, Secretary and a Director Date: July 1, 1998 By: /s/ Jutta Behrens --------------------------------------------- Jutta Behrens, Treasurer and a Director INDEPENDENT AUDITOR'S REPORT Board of Directors and Stockholders Technical Environment Solutions, Inc. We have audited the consolidated balance sheet of Technical Environment Solutions, Inc. as of December 31, 1997 and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for each of the two years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above, present fairly, in all material respects, the financial position of Technical Environment Solutions, Inc. as of December 31, 1997, and the results of its operations and cash flows for each of the two years then ended, in conformity with generally accepted accounting principles. James E. Scheifley & Associates, P.C. Certified Public Accountants Denver, Colorado June 10, 1998 Technical Environment Solutions, Inc. Consolidated Balance Sheet December 31, 1997 ASSETS ------ DM US $ ---------- ---------- Current assets: Cash and cash equivalents 711,567 397,058 Accounts receivable, trade 65,973 36,813 Accounts receivable -related party 364,932 203,634 Note receivable - current portion 10,000 5,580 Prepaid expenses 36,354 20,286 ---------- ---------- Total current assets 1,188,826 663,370 Property and equipment, at cost, net of accumulated depreciation of DM 45,901 118,366 66,049 Investments 10,000 5,580 Note receivable - non-current 40,000 22,320 Other assets 340,344 189,914 ---------- ---------- 1,697,536 947,233 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Notes payable - banks 197,798 110,373 Notes payable - others 90,000 50,220 Accounts payable 87,484 48,815 Accounts payable - related party 15,862 8,851 Accrued expenses 143,686 80,177 ---------- ---------- Total current liabilities 534,830 298,438 Loans from shareholders 234,300 130,740 Stockholders' equity: Common stock, no par value, 20,000,000 shares authorized, 1,741,610 shares issued and outstanding 2,260,155 1,261,177 Accumulated deficit (1,331,749) (743,122) ---------- ---------- 928,406 518,055 ---------- ---------- 1,697,536 947,233 ========== ========== See accompanying notes to consolidated financial statements.
Technical Environment Solutions, Inc. Consolidated Statements of Operations Years Ended December 31, 1996 1997 1997 DM DM US $ ---------- ---------- ---------- Sales 293,814 423,300 236,203 Sales to related party -- 30,609 17,080 ---------- ---------- ---------- 293,814 453,909 253,283 Cost of operations 177,343 179,690 100,268 ---------- ---------- ---------- Gross profit 116,471 274,219 153,015 Other costs and expenses: General and administrative 281,614 886,696 494,780 ---------- ---------- ---------- (Loss) from operations (165,143) (612,477) (341,765) Other income and (expense): Interest income 1,240 19,190 10,708 Interest expense (43,517) (46,718) (26,069) ---------- ---------- ---------- (42,277) (27,528) (15,361) (Loss) before income taxes (207,420) (640,005) (357,126) Provision for income taxes -- -- -- ---------- ---------- ---------- Net (loss) (207,420) (640,005) (357,126) ========== ========== ========== Earnings (loss) per share: Basic (loss) per share (0.14) (0.38) (0.21) ========== ========== ========== Weighted average shares outstanding 1,508,134 1,676,271 1,676,271 ========== ========== ========== See accompanying notes to consolidated financial statements.
Technical Environment Solutions, Inc. Consolidated Statement of Stockholders' Equity Years Ended December 31, 1997 and 1996 Common Stock Accumulated Shares Amount Deficit Total DM DM DM ---------- ---------- ---------- ---------- Balance, December 31, 1995 1,508,134 121,360 (484,324) (362,966) Net loss for the year -- -- (207,420) (207,420) ---------- ---------- ---------- ---------- Balance, December 31, 1996 1,508,134 121,360 (691,744) (570,384) Sale of stock for cash 233,476 2,675,310 2,675,310 less expenses of offering (536,515) (536,515) Net loss for the year -- -- (640,005) (640,005) ---------- ---------- ---------- ---------- Balance, December 31, 1997 1,741,610 2,260,155 (1,331,749) 928,406 ========== ========== ========== ========== See accompanying notes to consolidated financial statements.
Technical Environment Solutions, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 1996 1997 1997 DM DM US $ ------- ------- ------- Net (loss) (207,420) (640,005) (357,126) Adjustments to reconcile net income (loss) to net cash (used in) operating activities: Loss on sale of fixed assets 10,270 -- -- Depreciation 22,902 12,521 6,987 Interest added to shareholder loans 3,948 -- -- Changes in assets and liabilities: (Increase) decrease in accounts receivable (14,231) 30,102 16,797 (Increase) decrease in prepaid expenses 411 (32,269) (18,006) (Increase) decrease in other assets 45,624 (37,935) (21,168) Increase (decrease) in accounts payable and accrued expenses 10,847 91,045 50,804 ---------- ---------- ---------- Total adjustments 79,771 63,464 35,413 ---------- ---------- ---------- Net cash (used in) operating activities (127,649) (576,541) (321,713) ---------- ---------- ---------- Cash flows from investing activities: Proceeds from sale of assets 16,500 -- -- Advance to affiliate -- (363,250) (202,695) Long-term lease deposit -- (300,000) (167,401) Increase in note receivable -- (50,000) (27,900) Purchase of fixed assets -- (109,624) (61,171) ---------- ---------- Net cash provided by (used in) investing activities 16,500 (822,874) (459,167) ---------- ---------- ---------- Cash flows from financing activities: Advances from stockholder 230,000 -- -- Proceeds from sale of common stock -- 2,138,795 1,193,457 Decrease in deferred financing fees -- 19,145 10,683 Repayment of notes payable - bank (34,448) (22,766) (12,704) Repayment of stockholder advances (6,900) (6,900) (3,850) Proceeds from convertible notes -- -- -- Repayment of notes payable - other (100,000) (20,000) (11,160) ---------- ---------- ---------- Net cash provided by financing activities 88,652 2,108,274 1,176,427 ---------- ---------- ---------- Increase (decrease) in cash (22,497) 708,859 395,547 Cash and cash equivalents, beginning of period 25,204 2,707 1,511 ---------- ---------- ---------- Cash and cash equivalents, end of period 2,707 711,566 397,057 ========== ========== ========== See accompanying notes to consolidated financial statements. Technical Environment Solutions, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 1996 1997 1997 DM DM US $ ------ ------ ------ Supplemental cash flow information: Cash paid for interest -- -- Cash paid for income taxes -- -- See accompanying notes to consolidated financial statements.
Technical Environment Solutions, Inc. Notes to Consolidated Financial Statements December 31, 1997 Note 1. Summary of significant accounting policies. Technical Environment Solutions, Inc. and subsidiaries (the "Company) is in the business of recycling surplus and obsolete electronic equipment. The Company's operations to date have been carried out solely within Germany by its wholly owned subsidiaries Technical Environment Solutions GmbH, (TES GmbH)and TES Oecon AG, formed in 1997 These operations consist of dismantling and disposing of electronic equipment secured from customers. The Company has used 'independent recycling companies to complete the disposal process, however, during 1997, the Company secured plant facilities necessary to begin certain processing functions on its own. TES Oecon AG, a wholly owned subsidiary, plans to establish a technical school for training electronic recycling workers for itself and others. During February 1998, the Company acquired a 49% ownership interest in T-Cycle Computer Service and Verwertungs GmbH, a German company engaged in dismantling and disposing of surplus electronic equipment in Germany. The Company was incorporated in Colorado on June 21, 1994. The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"). The Company maintains its financial records in accordance with the German Commercial Code, which represents generally accepted accounting principles in Germany ("German GAAP"). Generally, accepted accounting principles in Germany vary in certain significant respects from U.S. GAAP. Accordingly, the Company has recorded certain adjustments in order that these financial statements be in accordance with U.S. GAAP. Solely for the convenience of the reader, the accompanying consolidated financial statements as of and for the year ended December 31, 1997 have been translated into United States dollars. ("U.S. $") at the rate of DM1.7921 per U.S. $1.00 the Noon Buying Rate of the Federal Reserve Bank of New York on December 31, 1997. The translations should not be construed as a representation that the amounts shown could have been, or could be, converted into U.S. dollars at that or any other rate. Principles of consolidation The consolidated statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. Cash and cash equivalents The Company considers all highly-liquid investments purchased with a maturity of three months or less to be cash equivalents. Fair value of financial instruments The Company's financial instruments consist of cash and cash equivalents and accounts receivable and payable. The carrying amounts of such financial instruments approximate fair value because of the short maturity of these instruments. Property and equipment Property and equipment are stated at cost. Depreciation is provided for using the straight line method over estimated useful lives of five to seven years for equipment and the remaining lease term for leasehold improvements. Depreciation expense amounted to DM12,521 and DM22,122 for the years ended December 31, 1997 and 1996, respectively. Revenue recognition Revenue is recorded when services are performed. Sales amounts included in the foregoing Consolidated Statement of Operations consist of gross contract amounts paid to the Company by its customers for the removal of recyclable materials. Advertising Advertising expenses are charged to expense upon first showing. The Company did not incur significant amounts of advertising during the 1996 however DM109,865 was charged to advertising expense during 1997. Net loss per share In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings Per Share." SFAS No. 128 supersedes and simplifies the existing computational guidelines under Accounting Principles Board ("APB") Opinion No. 15, "Earnings Per Share." The statement is effective for financial statements issued for periods ending after December 15, 1997. Among other changes, SFAS No. 128 eliminates the presentation of primary earnings per share and replaces it with basic earnings per share for which common stock equivalents are not considered in the computation. It also revises the computation of diluted earnings per share. The Company has adopted SFAS No. 128 and there is no material impact to the Company's earnings per share, financial condition, or results of operations. The Company's earnings per share have been restated for all periods presented to be consistent with SFAS No. 128. Basic loss per share of common stock is computed based on the weighted average number of common shares outstanding during the year. Common stock equivalents were anti-dilutive and were excluded from the computation. 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 the reported amounts of revenue and expenses during the periods presented. Actual results could differ from those estimates making it reasonably possible that a change in these estimates could occur in the near term. Stock-based Compensation The Company adopted Statement of Financial Accounting Standard No. 123 (FAS 123), Accounting for Stock-Based Compensation beginning with the Company's first quarter of 1996. Upon adoption of FAS 123, the Company when required will continue to measure compensation expense for any stock-based employee compensation plans using the intrinsic value method prescribed by APB No. 25, Accounting for Stock Issued to Employees, and will provide pro forma disclosures of the effect on net income and earnings per share as if the fair value-based method prescribed by FAS 123 had been applied in measuring compensation expense. Recent Pronouncements SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for all items that are to be recognized under accounting standards as components of comprehensive income to be reported in the financial statements. The statement is effective for all periods beginning after December 15, 1997 and reclassification of financial statements of financial statements for earlier periods will be required for comparative purposes. To date, the Company has not engaged in transactions which would result in any significant difference between its reported net loss and comprehensive net loss as defined in the statement. Note 2. Investments During July 1995, the Company invested DM10,000 in Okologik AG, a German company engaged in the production and conservation of energy by alternative means. The Company's 1,334 shares represent less than 2% of total shares outstanding. As yet, no market exists for the stock and the Company has accounted for its investment at cost. Note 3. Notes payable and long-term debt Notes payable - banks at December 31, 1997 consists of a bank line of credit having a balance at December 31, 1997 of DM17,747. The line of credit bears interest at 10.75% per annum and had DM32,253 additional credit available at that date. The Company also has a term loan with the bank having a remaining principal balance due at December 31, 1997 of DM180,050. The loan bears interest at 7.75% per annum and is due in installments of DM1,875 monthly through July 2010 and is collateralized by the personal residence of the Company's president and major shareholder. The term loan was paid in full on February 28, 1998. During 1995, the Company sold DM210,000 of convertible debentures to thirteen individual investors in Germany. The debentures bear interest at 10.75% per annum and are due in March 1999. The debentures were to be convertible into shares of the Company's common stock, however, none were converted. During 1996, DM100,000 plus accrued interest was repaid to certain of the investors. An additional DM20,000 plus accrued interest was repaid in 1997. During January 1998, an additional DM10,000 was repaid. Note 4. Income taxes. At December 31, 1997 the Company had approximately DM1,330,000 of unused net operating loss deductions in Germany that may be carried forward indefinitely. A valuation allowance of DM665,000 was provided at December 31, 1997 for net operating loss carryforwards which more likely than not will not be utilized in the foreseeable future. Note 5. Commitments and contingencies The Company is obligated for non-cancelable operating lease payments with initial terms exceeding one year relating to office space and warehouse space. The lease agreements require future minimum lease payments as follows: Year Ending December 31, Amount ------------------------ ------ 1998 265,020 1999 268,260 2000 272,220 2001 287,820 2002 147,420 Thereafter 90,450 ---------- 1,331,190 In connection with the lease, the Company paid a DM300,000 refundable deposit to guarantee performance of the lease and to secure a purchase option for the building. The lease contract includes a purchase option whereby the Company may acquire the property for DM2,200,000 if the option is exercised before December 31, 2000. The deposit is included in other assets in the accompanying balance sheet. Rent expense in 1996 and 1997 was DM48,239 and DM49,020, respectively. The Company has entered into employment contract with its president which provides for an annual salary of DM96,000 per year through June 1999. Note 6. Related party transactions A shareholder of the Company who is also wife of the Company's president made loans aggregating DM130,000 to the Company during the year ended December 31, 1996. The loans bear interest at between 8% and 9.25% per annum and are due DM80,000 in 2000 and DM50,000 in 2001 plus accrued interest. Additionally, during 1993, the shareholder advanced DM25,000 to the Company of which DM6,900 was repaid in each of the years 1995 through 1997. The advance bears interest at 8% per annum. Additionally, during 1996, the Company's president and major shareholder advanced DM100,000 to the Company's German subsidiary. The amount bears interest at 6% per annum beginning January 1, 1998 and the interest is due at the end of each calendar year. The loan principle is due in full on December 31, 2001. The Company's president and major shareholder is president and a shareholder of Entecs, Inc. a Colorado corporation formed in May 1997 to exploit patent rights to a concrete recycling system and related equipment. The Company paid a deposit of DM250,000 for the rights to use the concrete system and subsequently transferred the rights to Entecs in exchange for a short term note. During 1998, DM125,000 was paid against the note and the balance is due currently. Additionally, during 1997, the Company made working capital advances to Entecs of DM50,000 and paid DM86,250 of costs associated with the operations of Entecs. The working capital advance bears interest at 8% per annum and was repaid DM23,000 in 1997 and DM27,000 plus accrued interest of $1,682 was repaid in January 1998. The balance of the short term note, working capital advance, accrued interest and payment of Entecs costs amounted to DM364,932 at December 31, 1997 and comprises the balance of accounts receivable - related party included in the accompanying balance sheet. Note 7. Stockholders' equity During the periods covered by these financial statements the Company issued securities in reliance upon an exemption from registration with the Securities and Exchange Commission. Although the Company believes that the sales did not involve a public offering and that it did comply with the exemptions from registration, it could be liable for rescission of said sales if such exemption was found not to apply. The Company has not received a request for rescission of shares nor does it believe that it is probable that its shareholders would pursue rescission nor prevail if such action were undertaken. During 1997, the Company commenced a private sale of its common stock to a limited group of investors in Germany. The Company sold 233,476 shares of its common stock for gross proceeds of DM2,675,310 and incurred direct expenses of the offering amounting to DM536,515. The Company has established a stock option plan for directors, management, key employees, consultants and technical advisers whereby an aggregate of 500,000 options to purchase common stock of the Company may be granted. The grant price of the options will be equal to the market price for the Company's common stock at the date the options are granted. No options have been granted under the plan through the date of these financial statements. Note. 8. Concentrations and information about major customers During 1997 and 1996, all of the Company's revenue from recycling operations was derived from sales within Germany. During 1996, the Company had one major customer, Seimens Nixdorf AG which accounted for 10% of its sales. During 1997, the Company had four major customers, Allianz Versicherungs AG, Bayerische Landesbank, Hewlett Packard GmbH and Philips GmbH whose purchases from the Company each accounted for greater than 10% of the Company's sales. Aggregate amounts due from these customers amounted to DM12,007 at December 31, 1997. The Company has to date functioned as an intermediary in carrying out its recycling operations. The Company has used the services of Fuchs AG to complete the disposal of all recycled materials. Note 9. Subsequent events During February 1998, the Company acquired a 49% ownership interest in T-Cycle Computer Service and Verwertungs GmbH, a German company engaged in dismantling and disposing of surplus electronic equipment in Germany. The Company paid DM49,000 for its investment in T-Cycle and will account for the investment using the equity method of accounting. Technical Environment Solutions, Inc. Consolidated Balance Sheet March 31, 1998 (Unaudited) ASSETS ------ DM US $ ---------- --------- Current assets: Cash and cash equivalents 386,775 209,068 Accounts receivable, trade 74,999 40,540 Accounts receivable -related party 9,903 5,353 Note receivable - current portion 10,000 5,405 Prepaid expenses 23,940 12,941 ---------- ---------- Total current assets 505,617 273,306 Property and equipment, at cost, net of accumulated depreciation of DM 75,675 166,267 89,874 Investments 43,470 23,497 Note receivable - non-current 40,000 21,622 Other assets 561,266 303,387 ---------- ---------- 1,316,620 711,686 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Notes payable - banks 31,013 16,765 Notes payable - others 80,000 43,243 Accounts payable 104,450 56,458 Accounts payable - related party 15,862 8,574 Accrued expenses 95,077 51,393 ---------- ---------- Total current liabilities 326,402 176,434 Loans from shareholders 234,300 126,649 Stockholders' equity: Common stock, no par value, 20,000,000 shares authorized, 1,741,610 shares issued and outstanding 2,260,155 1,221,705 Accumulated deficit (1,504,237) (813,101) ---------- ---------- 755,918 408,604 ---------- ---------- 1,316,620 711,686 ========== ========== See accompanying notes to consolidated financial statements.
Technical Environment Solutions, Inc. Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 1997 1998 1998 DM DM US $ ---------- ---------- ---------- Sales 113,850 144,766 78,252 Sales to related party -- 30,609 16,545 ---------- ---------- ---------- 113,850 175,375 94,797 Cost of operations 59,532 44,966 24,306 Gross profit 54,318 130,409 70,491 ---------- ---------- ---------- Other costs and expenses: General and administrative 117,330 281,995 152,430 ---------- ---------- ---------- (Loss) from operations (63,012) (151,586) (81,938) Other income and (expense): Interest income -- 238 129 Losses of unconsolidated subsidiary -- (15,530) (8,395) Interest expense (5,784) (5,610) (3,032) ---------- ---------- ---------- (5,784) (20,902) (11,298) (Loss) before income taxes (68,796) (172,488) (93,237) Provision for income taxes -- -- -- ---------- ---------- ---------- Net (loss) (68,796) (172,488) (93,237) ========== ========== ========== Earnings (loss) per share: Basic (loss) per share (0.04) (0.10) (0.05) ========== ========== ========== Weighted average shares outstanding 1,530,440 1,741,610 1,741,610 ========== ========== ========== See accompanying notes to consolidated financial statements.
Technical Environment Solutions, Inc. Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 1997 1998 1998 DM DM US $ -------- ------- ------- Net (loss) (68,796) (172,488) (93,237) Adjustments to reconcile net income (loss) to net cash (used in) operating activities: Depreciation 2,598 17,253 9,326 Losses of unconsolidated subsidiary -- 15,530 8,395 Changes in assets and liabilities: (Increase) decrease in accounts receivable 21,880 346,003 187,029 (Increase) decrease in prepaid expenses (28,449) 12,414 6,710 (Increase) decrease in other assets 2,409 (220,922) (119,417) Increase (decrease) in accounts payable and accrued expenses (49,032) (31,643) (17,104) -------- -------- -------- Total adjustments (50,594) 138,635 74,938 -------- -------- -------- Net cash (used in) operating activities (119,390) (33,853) (18,299) -------- -------- -------- Cash flows from investing activities: Advance to affiliate -- (49,000) (26,486) Purchase of fixed assets (1,576) (65,154) (35,218) -------- -------- -------- Net cash provided by (used in) investing activities (1,576) (114,154) (61,705) -------- -------- -------- Cash flows from financing activities: Proceeds from sale of common stock 766,842 -- -- Decrease in deferred financing fees -- -- -- Repayment of notes payable - bank (23,473) (166,785) (90,154) Repayment of notes payable - other -- (10,000) (5,405) -------- -------- -------- Net cash provided by financing activities 743,369 (176,785) (95,559) -------- -------- -------- Increase (decrease) in cash 622,403 (324,792) (175,563) Cash and cash equivalents, beginning of period 2,707 711,567 384,631 -------- -------- -------- Cash and cash equivalents, end of period 625,110 386,775 209,068 ======== ======== ======== See accompanying notes to consolidated financial statements.
Technical Enviornmental Solutions, Inc. Notes to Unaudited Financial Statements Basis of presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions incorporated in regulation 10-SB of the Securities and Exchange Commission. accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments and accruals) considered necessary for a fair presentation have been included. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The accompanying financial statements should be read in conjunction with the Company's financial statements for the year ended December 31, 1997, included elsewhere herein. Basic loss per share was computed using the weighted average number of common shares outstanding. During 1995, the Company sold DM210,000 of convertible debentures to thirteen individual investors in Germany. The debentures bear interest at 10.75% per annum and were due in March 1999. The debentures wee to be convertible into shares of the Company's common stock, however, none were converted. During 1996, DM100,000 plus accrued interest was repaid to certain of the investors. An additional DM10,000 of the debentures plus accrued interest was repaid during the quarter ended March 31, 1998. Additionally, the Company paid DM166,785 against bank debt prior to its maturity. During February 1998, the Company acquired a 49% ownership interest in T-Cycle Computer Service and Verwertungs GmbH, a German company engaged in dismantling and disposing of surplus electronic equipment in Germany. The Company paid DM49,000 for its investment in T-Cycle and will account for the investment using the equity method of accounting. Accordingly, the Company has recognized its share of the losses of T-Cycle for the quarter ended March 31, 1998, which amounted to DM15,530, as a reduction of its investment in the company. INDEPENDENT AUDITOR'S REPORT Board of Directors and Stockholders T-Cycle Computer Service & Verwertungs GmbH I have audited the balance sheet of T-Cycle Computer Service & Verwertungs GmbH as of December 31, 1997 and the related statements of operations, changes in stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. I conducted my audit 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. I believe that my audit provides a reasonable basis for our opinion. In my opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of T-Cycle Computer Service & Verwertungs GmbH as of December 31, 1997, and the results of its operations and cash flows for the year then ended, in conformity with generally accepted accounting principles. D|p|.-Kfm Johann Weindl Wirtschaftsprufer Munich, Germany April 30, 1998 T-Cycle Computer Service & Verwertungs GmbH Balance Sheet December 31, 1997 ASSETS ------ DM US $ -------- -------- Current assets: Cash Accounts receivable, trade 107 60 Prepaid expenses 30,752 17,160 Total current assets 1,163 649 -------- -------- 32,022 17,868 Property and equipment, at cost, net of accumulated depreciation of DM 60,508 66,742 37,242 -------- -------- 98,764 55,111 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Note payable to bank 61,631 34,391 Current portion of long-term debt 11,000 6,138 Accounts payable 1,081 602 Other current liabilities 114,857 64,091 -------- -------- Total current liabilities 188,569 105,222 Long-term debt 169,000 94,303 Stockholders' equity: Share capital 50,000 27,900 Accumulated deficit (308,805) (172,315) -------- -------- (258,805) (144,414) -------- -------- 98,764 55,111 ======== ======== See accompanying notes to financial statements. T-Cycle Computer Service & Verwertungs GmbH Statement of Operations Year Ended December 31, 1997 DM US $ -------- -------- Sales 296,418 165,403 Cost of operations 13,833 7,719 -------- -------- Gross profit 282,585 157,684 Other costs and expenses: General and administrative 452,314 252,393 -------- -------- (Loss) from operations (169,729) (94,710) Interest expense (11,614) (6,481) -------- -------- (Loss) before income taxes (181,343) (101,190) Provision for income taxes -- -- -------- -------- Net (loss) (181,343) (101,190) ======== ======== See accompanying notes to financial statements.
T-Cycle Computer Service & Verwertungs GmbH Statement of Cash Flows Year Ended December 31, 1997 DM US $ -------- -------- Net (loss) (181,343) (101,190) Adjustments to reconcile net income (loss) to net cash (used in) operating activities: Loss on sale of fixed assets 3,860 2,154 Depreciation 26,987 15,059 Changes in assets and liabilities: (Increase) decrease in accounts receivable (9,067) (5,059) (Increase) decrease in prepaid expenses 570 318 Increase (decrease) in accounts payable and accrued expenses 160,496 89,558 -------- -------- Total adjustments 182,846 102,029 -------- -------- Net cash (used in) operating activities 1,503 839 -------- -------- Cash flows from investing activities: Proceeds from sale of assets 3,098 1,729 Purchase of fixed assets (25,462) (14,208) -------- -------- Net cash provided by (used in) investing activities (22,364) (12,479) -------- -------- Cash flows from financing activities: Net cash provided by financing activities -- -- -------- -------- Increase (decrease) in cash (20,861) (11,641) Cash and cash equivalents, beginning of period 20,968 11,700 -------- -------- Cash and cash equivalents, end of period 107 60 ======== ========
See accompanying notes to financial statements.
T-Cycle Computer Service & Verwertungs GmbH Statement of Stockholders' Equity Year Ended December 31, 1997 Share Accumulated Capital Deficit Total DM DM DM ------- ----------- --------- Balance, December 31, 1996 50,000 (127,462) (77,462) Net loss for the year -- (181,343) (181,343) ------ -------- -------- Balance, December 31, 1997 50,000 (308,805) (258,805) ====== ======== ======== See accompanying notes to financial statements.
T-Cycle Computer Service & Verwertungs GmbH Notes to Financial Statements December 31, 1997 Note 1. Summary of significant accounting policies. T-Cycle Computer Service & Verwertungs GmbH (the "Company) is in the business of recycling surplus and obsolete electronic equipment. To date, the operations have been carried out within Germany. These operations consist of dismantling and disposing of electronic equipment secured from customers or from other recycling companies on a sub-contract basis. The Company was incorporated in Germany on June 13, 1996. The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP"). The Company maintains its financial records in accordance with the German Commercial Code, which represents generally accepted accounting principles in Germany ("German GAAP"). Generally, accepted accounting principles in Germany vary in certain significant respects from U.S. GAAP. Accordingly, the Company has recorded certain adjustments in order that these financial statements be in accordance with U.S. GAAP. Solely for the convenience of the reader, the accompanying financial statements as of and for the year ended December 31, 1997 have been translated into United States dollars. ("U.S. $") at the rate of DM1.7921 per U.S. $1.00 the Noon Buying Rate of the Federal Reserve Bank of New York on December 31, 1997. The translations should not be construed as a representation that the amounts shown could have been, or could be, converted into U.S. dollars at that or any other rate. Cash and cash equivalents The Company considers all highly-liquid investments purchased with a maturity of three months or less to be cash equivalents. Fair value of financial instruments The Company's financial instruments consist of cash and cash equivalents and accounts receivable and payable. The carrying amounts of such financial instruments approximate fair value because of the short maturity of these instruments. Property and equipment Property and equipment are stated at cost. Depreciation is provided for using the straight line method over estimated useful lives of four to five years for equipment and vehicles. Depreciation expense amounted to DM26,987 for the year ended December 31, 1997. Revenue recognition Revenue is recorded when services are performed. Sales amounts included in the foregoing Statement of Operations consist of gross contract amounts paid to the Company by its customers for the removal of recyclable materials. Advertising Advertising expenses are charged to expense upon first showing. The Company did not incur significant amounts of advertising during the periods presented. 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 the reported amounts of revenue and expenses during the periods presented. Actual results could differ from those estimates making it reasonably possible that a change in these estimates could occur in the near term. Recent Pronouncements SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for all items that are to be recognized under accounting standards as components of comprehensive income to be reported in the financial statements. The statement is effective for all periods beginning after December 15, 1997 and reclassification of financial statements of financial statements for earlier periods will be required for comparative purposes. To date, the Company has not engaged in transactions which would result in any significant difference between its reported net loss and comprehensive net loss as defined in the statement. Note 2. Notes payable and long-term debt Notes payable at December 31, 1997, consists of an overdraft protection line of credit of up to DM70,000. The loan is due on June 30, 1998 and has an interest rate of 8% per annum. Long term debt consists of the following at December 31, 1997: Bank loan payable in twelve semi-annual DM principal installments of DM6,700 beginning September 1998 with current interest at 4.04% 80,000 Bank loan payable in twenty semi-annual principal installments of DM1,500 beginning December 2008 with current interest at 4.04% 30,000 Bank loan payable in sixteen semi-annual principal installments of DM4,400 beginning September 1998 with current interest at 5.84% 70,000 Total 180,000 Less current portion (11,100) Non-current portion 169,000 Note 3. Income taxes. At December 31, 1997, the Company had approximately DM310,000 of unused net operating loss deductions in Germany that may be carried forward indefinitely. A valuation allowance of DM155,000 was provided at December 31, 1997 for net operating loss carryforwards which more likely than not will not be utilized in the foreseeable future. Note 4. Commitments and contingencies The Company is obligated for non-cancelable operating lease payments with initial terms exceeding one year relating to office space and warehouse space. The lease agreements require future minimum lease payments as follows: Year Ending December 31, Amount ------------------------ ------ 1998 36,000 1999 36,000 2000 6,000 2001 18,000 ------- 126,000 Rent expense in 1996 and 1997 was DM21,000 and DM33,000, respectively. The Company has entered into employment contract with its president which provides for an annual salary of DM96,000 per year through June 1999. Note 5. Stockholders' equity At December 31, 1997 the Company was owned 100% by a German individual. During February 1998, the Company accepted additional capital of DM49,000 from TES, Inc. in exchange for a 49% ownership interest. Note 6. Information about major customers During 1997 all of the Company's revenue from recycling operations was derived from sales within Germany. During 1997, the Company had one major customer, TES GmbH which accounted for 26% of its sales. EX-4.I 2 FORM OF STOCK CERTIFICATE Number Shares ------- -------- INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO TECHNICAL ENVIRONMENT SOLUTIONS, INC. The Corporation is authorized to issue 20,000,000 common shares - No Par Value This Certifies That ------------------------------------------------------------- is the registered holder of Shares ---------------------------------------------- Fully paid and non-assessable transferable only on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this Certificate properly endorsed. In Witness Whereof, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal to be hereunto affixed this ........day of ..............., A.D.,........... (Corporate Seal Graphic Omitted) - ----------------------------------- ----------------------------------- EX-4.II 3 FORM OF CONVERTIBLE DEBENTURE English Verson Exhibit 4.ii CONVERTIBLE DEBENTURE With this certificate, TES, Inc., Denver, Colorado, agrees to pay annual interest at the rate of 10.75%, beginning on the effective date to the holder of this certificate. The interest payments will be made on the dated listed below. The Effective Date is the date the certificate is executed. Interest payments will be due at the end of one year from the Effective Date. At the end of the term of the certificate the last interest payment and the principal will be due. All payments will be transferred to the Certificate holder's bank account. All tax matters arising from the interest payments shall be the responsibility of the Certificate Holder. The debt instrument can be cancelled by TES Inc. at the latest on the third business day of any calendar quarter effective the next calendar quarter. The same is true for the Certificate Holder. The Certificate Holder may convert the Debenture into shares any time during the term after giving 5 days notice. On the day of the conversion, the interest obligation for TES, Inc. ends. All notices must be in writing. Beginning Date: March 2,1995. Interest Payment Dates: 1. 3/2/96 2. 3/2/97 3. 3/2/98 4. 3/2/99 End of Term: 3/2/99 Name: Heribert J^rg Jr. Street: P.O. Box 1133 City 87497 Wertach Date of Birth: TES, Inc., Denver, Colorado Date September 9, 1995 Signed Gerd Behrens, President German Version Exhibit 4.ii Wandelschuldverschreibung Mit diesem Zertifikat verpflichtet sich die TES Inc., Denver, Colorado, ab Beginn der Zinsbindung einen jahrlichen Zins in Hohe von 10.75% p.a. an den Zertifikatsinhaber zu zahlen. Die Zinszahlungen erforlgen zu den unten angegebenen Zahlungsterminen. Die Zinsbindung beginnt mit dem Tag der Unterzeichnung des Zertifikats. Die Zinszahlungen erfolgen nachschussig am Ende eines Laufzeitjahres. Sollte der Termin auf einen Sonn- oder Feiertag fallen, so Wird der nachste Arbeitstag zum Zinszahlungstag. Am Ende der Laufzeit wird gliechzeitig die letzte Zinszahlung und der Zeichnungsbetrag fallig. Samtliche Zahlungen sollen an ein vom Zertifikatsinhaber anzugebendes Konto uberwiesen werden. Die Steuerliche Behandlung der Zinszahlung liegt beim Zertifikatsinhaber. Die Schuldverschreibung kann von der TES Inc. spatestens am dritten Werktag eines Kalendervierteljahres fur den Ablauf des nachsten Kalendervierteljahres gekunkigt werden. Gleiches gilt fur den Zertifikatsinhaber. Der Inhaber kann die Wandlung in Aktien oder Firmenanteile wahrend der gesamten Laufzeit mit einer Frist von 5 Tagen verlangen. Mit dem Tag der Wandlung endet die Zinszahlungsverpflichtung fur die TES Inc. Samtliche Antrage benotigen die Schriftform. Beginn der Zinsbindung: Zinszahlungstermine: 1.= 2.= 3.= 4.= Ablauftermin: Inhaber: Vorname Name Strafle Plz Wohnort Geburtstag TES Inc., Denver, Colorado Datum President EX-4.III 4 STOCK OPTION PLAN 1997 STOCK OPTION PLAN OF TECHNICAL ENVIRONMENT SOLUTIONS, INC. 1. Purpose. The purpose of the Technical Environment Solutions, Inc. 1997 Stock Option Plan (the "Plan") is to provide certain incentives to employees, officers, directors, consultants, technical advisers, attorneys, and others either employed by or assisting Technical Environment Solutions, Inc., a Colorado corporation (hereinafter referred to as the "Company' or "TES") or any subsidiary of the Company. The Plan is designed to encourage such persons to secure or increase on reasonable terms their stock ownership in the Company. The Board of Directors of the Company believes the Plan will provide increased incentive and personal interest in the welfare of the Company by those who are primarily responsible for shaping and carrying out the long-range plans of the Company and securing its continued growth and financial success. 2. Effective Date of the Plan. The Plan shall become effective on August 31, 1997, the date adopted by the Board of Directors, subject to the later adoption of the Plan by the Stockholders' of the Company at the next Stockholders' meeting. 3. Stock Subject to Plan. The maximum number of common shares which may be issued pursuant to the exercise of options granted under the Plan is five hundred thousand (500,000) subject to the adjustments provided in paragraph 13 below. Five hundred thousand (500,000) of the authorized but unissued common shares of the Company will be reserved for issue upon exercise of options granted under the Plan subject to the adjustments provided in paragraph 13 below; provided, however, that the number of such authorized and unissued shares so reserved may from time to time be reduced to the extent that a corresponding amount of issued and outstanding shares have been purchased by the Company and set aside for issue upon the exercise of options granted under the Plan. If any options shall expire or terminate for any reason without having been exercised in full, the unpurchased shares subject thereto shall again be available for further grants under the Plan. 4. Administration. The Plan shall be administered by a Committee (the "Committee") appointed by the Board of Directors of the Company (the "Board") which consists of not less than two nor more than three members of the Board, one of whom shall be the Chairman of the Board and the other members of the Committee shall be non-employee members of the Board in order to be eligible to be members of the Committee. The initial Committee shall consist of Gerd Behrens, Karsten Behrens, and Yvonne Marquard. The Committee Shall keep records of action taken at its meetings. A majority of the Committee shall constitute a quorum at any meeting, and the acts of a majority of the members present at any meeting at which a quorum is present, or acts approved in writing by all the members of the Committee, shall be the acts of the Committee. Acts of the Committee approved in writing shall be effective at the time and date that the last member of the Committee signs such writing unless the Committee members establish a different effective time or date. Such action has the same effect as action taken at a meeting of the Committee and may be described as such in any document. The Chairman of the Board shall serve as the Chairman at all meetings of the Committee. One or more members of the Committee may participate in Committee meetings by, or conduct the meeting through the use of, any means of communication by which all members of the Committee participating may hear each other during the meeting. A Committee member participating in a meeting by this means is deemed to be present in person at the meeting. Subject to the express provisions of the Plan, the Committee shall have complete authority, in its discretion, to determine those employees, officers, directors, consultants, technical advisers, attorneys, and others either employed by or assisting the Company (hereinafter referred to as "Participant(s)") to whom, and the price at which options shall be granted, the option periods and the number of shares to be subject to each option. The Committee shall also have the authority in its discretion to prescribe the time or times at which the options may be exercised and limitations upon the exercise of options (including limitations effective upon the death or termination of employment of the Participant, if applicable), and the restrictions, if any, to be imposed upon the transferability of shares acquired upon exercise of options. In making such determinations, the Committee may take into account the nature of the services rendered by respective Participant, their present and potential contributions to the success of the Company or its subsidiaries and such other factors as the Committee in its discretion shall deem relevant. Subject to the express provisions of the Plan, the Committee shall also have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective options agreements (which need not be identical), to determine whether the shares delivered upon exercise of stock options will be treasury shares or will be authorized but previously unissued shares, and to make all other determinations necessary or advisable for the administration of the Plan. All determinations made by the Committee shall be final and binding. 5. Eligibility. An option may be granted under the Plan to any employee, officer, director, consultant, technical adviser, attorney, or any other person or entity either employed by or assisting the Company and any of its present and future subsidiary corporations. If the grantee of the option is employed by the Company or any of its subsidiaries, the granting of an option shall not confer upon the grantee any right to continue in the employ of the Company or of any such subsidiary and shall not interfere in any way with the right of the Company or of any such subsidiary to terminate the employment of the employee at any time. 6. Option Price. The option price will be determined by the Committee at the time the option is granted and may be granted at less than the fair market value of the common shares on the date of grant as shall reasonably be determined by the Committee. 7. Date of Option Grant. An option shall be considered granted on the date the Committee acts to grant the option, or such date thereafter as the Committee shall specify. 8. Term of Plan. The Board, without approval of the shareholders may terminate the Plan at any time, but no termination shall, without the Participant's consent, alter or impair any of the rights under any option theretofore granted to him under the Plan. 9. Term of Options. The term of each option granted under the Plan will be for such period (hereinafter referred to as the "option period") not exceeding ten (10) years as the Committee shall determine. Each option shall be subject to earlier termination as described under "exercise of options." 10. Exercise of Options. Each option granted under the Plan will be exercisable on such date or dates and during such period and for such number of shares as shall be determined pursuant to the provisions of the option agreement evidencing such option. Subject to the express provisions of the Plan, the Committee shall have complete authority, in its discretion, to determine the extent, if any, and the conditions under which an option may be exercised in the event of the death of the Participant or in the event the Participant leaves the employ of the Company or has his employment terminated by the Company, if the Participant was an employee of the Company. An option may be exercised, by (a) written notice of intent to exercise the option with respect to a specified number of shares of stock, and (b) payment to the Company of the amount of the option purchase price for the number of shares of stock with respect to which the option is then exercised. Payment of the purchase price for options may be made as follows: (a) in cash; (b) by the surrender of all or part of the options held by the Participant (including the options being exercised); (c) by the tender to the Company of shares of stock owned by the Participant and registered -2- 1997 Stock Option Plan in his or her name having a fair market value equal to the amount due to the Company; (d) in other property, rights and credits, deemed acceptable by the Committee including the Participant's promissory note; or (e) by any combination of the payment methods specified in (a) through (d) above. Notwithstanding the foregoing, any method of payment other than in cash may be used only with the consent of the Committee or if and to the extent so provided in an Agreement. 11. Nontransferability. Unless specifically agreed to in writing by the Committee, options under the Plan are not transferable otherwise than by will or the laws of descent or distribution, and may be exercised during the lifetime of a Participant only by such Participant. 12. Agreements. Options granted pursuant to the Plan shall be evidenced by stock option agreements in such form as the Committee shall from time to time adopt. 13. Adjustment of Number of Shares. In the event that a dividend shall be declared upon the common shares of the Company payable in common shares of the Company the number of common shares then subject to any such option and the number of such shares reserved for issuance pursuant to the Plan but not yet covered by an option, shall be adjusted by adding to each such share the number of shares which would be distributable thereon if such share had been outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend. In the event that the outstanding common shares of the Company shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation, whether through reorganization, recapitalization, stock split-up, combination of shares, merger or consolidation, then there shall be substituted for each common share reserved for issuance pursuant to the Plan, option, the number and kind of shares of stock or there securities into which each outstanding common share shall be so changed or for which each such share shall be exchanged. In the event there shall be any change, other than as specified above in this paragraph in the number or kind of outstanding common shares of the Company or of any stock or other securities into which such common shares shall have been changed or for which it shall have been exchanged, then if the Committee shall in sole discretion determine that such change equitably requires an adjustment in the number or kind of shares subject to an option or options, such adjustment shall be made by the Committee and shall be effective and binding for all purposes of the Plan and of each stock option agreement. The option price in each stock option agreement for each share of stock or other securities substituted or adjusted as provided for in this paragraph shall be determined by dividing the option price in such agreement for each share prior to such substitution or adjustment by the number of shares or the fraction of a share substituted for such share or to which such share shall have been adjusted. No adjustment or substitution provided for in this paragraph shall require the Company in any stock option agreement to sell a fractional share, and the total substitution or adjustment with respect to each stock option agreement shall be limited accordingly. 14. Amendments. The Board, without approval of the shareholders, may from time to time amend the Plan in such respects as the Board may deem advisable. No amendment shall, without the Participant's consent, alter or impair any of the rights or obligations under any option theretofore granted to him under the Plan. In witness whereof, the Board of Directors of the Company has adopted this Plan on the 31st day of August, 1997. TECHNICAL ENVIRONMENT SOLUTIONS, INC. By: -------------------------------------------------- Gerd Behrens, Chairman of the Board and President -3- 1997 Stock Option Plan EX-10.I 5 EMPLOYMENT CONTRACT English Version Exhibit 10(i) ABSTRACT OF MANAGING DIRECTORS EMPLOYMENT AGREEMENT (GERD BEHRENS) Parties: TES GmbH. Employer Gerd Behrens- Consultant Date: May 19, 1992 Starting date for consulting services: July 1, 1997 ss. 1 Description of Services: to act as Managing Director of TES GmbH and to do all thing authorized by law as managing director. o Limitations of Authority (Shareholder approval needed for following actions: o Purchase, sale and encumbering real estate. o Establishment of branches. o Entering into employment agreements with employees o Entering into rental or lease agreements o Entering into consulting agreements, professional fee agreements and insurance contracts. o Establishing lines of credit. o Formation, acquisition and sale of other business enterprises or interests therein. o All other actions not within the normal scope of the company's business. o For all transactions involving DM 10,000 or more, both managing directors must sign. ss 2 Individual Responsibilities: The Managing Director shall: o Manage and direct the operations of the company. o Represents the interests of the employer as described by statute o Be responsible for paying taxes and filing tax reports for the company and is responsible for maintaining the books and records of the company. o Call annual shareholders' meetings. Prepare a business report for the meeting and prepare minutes of the meeting. o Register the company with the appropriate authorities. ss 3 Scope of Employment: the Managing Director is to dedicate 100% of his time, effort and knowledge to the benefit of the company. The Managing Director is not bound by set working hours. ss 4 Compensation: o Monthly salary: DM 1,500 (to be increased when company is profitable.) o Vacation compensation beginning Jan. 1, 1993 - One month's salary. o Christmas bonus beginning Jan 1, 1993 0 One month's salary. o Year end performance bonus of 25% of the gross profits before taxes. o There is not claim for overtime. o Wage will be paid for six month sick leave. If the inability to work continues longer than 6 months, the right to the year end bonus will be reduced. o In even of Managing Director's death, his monthly salary will be paid for an additional 6 months. ss 5 Expense Reimbursements: Normal business expenses will be reimbursed. Manageing director shall be provided a luxury-class company car which he may also use for private purposes. Authorized travel expenses will be reimbursed in accordance with tax guidelines. Travel by train will be first class and plane shall be business class. -1- English Version Exhibit 10(i) ss 6 Vacation: the Managing Director shall have 35 work days per year paid vacation. ss 7 Other Obligations: the Managing Director is not allowed to participate in outside employment activities in the same business area as the company. Business activities outside the scope of the company's business are allowed. ss 8 Term and Termination: The employment as Managing Director begins on May 19, 1992. The term is open ended. The contract can be terminated by eithe party after 6 month's notice. Termination by the company or resignation by the Managing Director can only be done for important reasons.. ss 9 Miscellaneous Provisions: Jurisdiction is in Munich. Oral modifications are not allowed. - -------------------------- ------------------------------ Gerd Behrens Birgit von Blanckenhagen -2- German Version Exhibit 10(i) Geschafsfuhrervertrag zwischen Firma TES GmbH Hard- u. Software Entsorgung, Umweltberatung, Umweltbetreuung, Riemerstr. 358, 8000 Munchen 82, vertreten durch die Gesellschafterversammlung nachfolgend Gesellschaft genannt- und Herr Gerd Behrens, Industriekaufmann, Gemingstr. 1, 8000 Munchen 81., - nachfolgend Geschaftsfuhrer genannt- ss 1 Geschaftsfuhrung und Vertretung (1) Die Fa. TES-GmbH hat zwei Geschaftsfuhrer. (2) Der Geschaftsfuhrer ist berechtigt und verpflichtet, die Gesellschaft nach Maflgabe der Gesetze und des Gesellschaftsvertrags allein zu vertreten und die Geschafte der Gesellschaft allein zu fuhren. Weisungen der Gesellschafterversammlung sind zu befolgen, soweit Vereinbarungen in diesem Vertrag nicht entgegenstehen. Zu folgenden Geschaften hat er die vorherige Genehmigung der Gesellschafterversammlung einzuholen: a) Erwerb., Verauflerung und Belastung von Grundstucken; b) Errichtung von Zweigniederlassungen; c) Abschlufl von Dienstvertragen mit Angestellten; d) Abschlufl von Miet-, Leasing- und Pachtvertragen; e) Abschlufl von Beratervertragen, Honorarvertragen sowie Versicherungsvertragen; f) Aufnahme von Krediten; g) Grundung., Erwerb und Verauflerung anderer Unternehmungen oder Beteiligung an solchen; h) bei allen sonstigen uber den gewohnlichen Geschaftsbetrieb hinausgehenden Geschaften. (3) Der Geschaftsfuhrer hat die ihm obliegenden Pflichten mit der Sorgfalt eines ordentlichen und -gewissenhaften Kaufmanns unter Wahrung der Interessen der Gesellschaft wahrzunehmen. (4) Fur Rechtsgeschafte jeder Art die den Betrag von DM 10.000,-(i.W. Zehntausend) ubersteigen sind beide Geschaftsfuhrer nur gemeinschaftlich vertretungsberichtigt., zeichnungsberechtigt. (5) Der Geschaftsfuhrer ist von den Beschrankungen den(beta)181 BGB befreit. ss 2 Einzelne Aufgaben (1) Dem Geschaftsfuhrer obliegt die Leitung und berwachung des Unternehmens im Ganzen. (2) Der Geschaftsfuhrer nimmt die Rechte und Pflichten des Arbeitgebers im Sinne der arbeits- und sozialrechtlichen Vorschriften wahr. (3) Der Geschaftsfuhrer hat die steuerlichen Interessen der Gesellschaft zu wahren. Er ist verpf1ichtet, innerha1b der gesetzlichen Frist unter Beachtung der handels- und steuer-rechtlichen Bilanzierungsregeln den Jahresabschlufl (Bilanz., Gewinn- und Verlust-rechnung sowie Anhang) zu erstellen. Ihm obliegt es, fur eine den handels- und steuerrechtlichen Vorschriften entsprechende Buchfuhrung und eine dem Unternehmen entsprechende Betriebsabrechnung zu sorgen. -1- German Version Exhibit 10(i) (4) Der Geschaftsfuhrer hat fur die rechtzeitige und ordnungsgemafle Offenlegung des Jahresabschlusses nach (beta) 325 HGB Sorge zu tragen. Von groflenabhangigen Erleichterungen nach (beta)(beta) 326 HGB ist Gebrauch zu machen, sofern die Gesellschafter-versammlung nichts anderes beschlossen hat. (5) Soweit kein abweichender Gesellschafterbeschlufl gefaflt wird, hat der Geschaftsfuhrer die Gesellschafterversammlung ordnungsgemafl einzuberufen, sie zu leiten und ordnungsgemafl abzuwickeln sowie die Gesellschafterbeschlusse zu protokollieren. (6) Der Geschaftsfuhrer hat der Gesellschafterversammlung einen Geschaftsbericht zu erstatten. Auf Verlangen sind schriftliche Zwischengeschaftsberichte und Auskunfte zu erteilen. (7) Der Geschaftsfuhrer hat die notwendigen Anmeldungen zum Handelsregister vorzu-nehmen. (8) Genehmigungen zur Abtretung von Geschaftsantellen und Teilgeschaftsanteilen darf der Geschaftsfuhrer nur aufgrund des Gesellschaftsvertrags und der einschlagigen Gesellschafterbeschlusse vornehmen. Dasselbe gilt fur die Anforderung etwa noch ausstehender itammeinlaigen. (9) Der Geschaftsfuhrer hat gemafl (beta) 40 GmbHG jeweils mit der Einreichung des Jahres-abschlusses, spatestens aber innerhalb von 9 Monaten nach Ablauf des jeweiligen Geschaftsjahres, einer von ihm unterschriebene Liste der Gesellschafter mit deren Namen., Vornamen., Stand, Wohnort und Stammeinlagen zum Handelsregister einzureichen oder, wenn keine fnderungen seit Einreichung der letzten Liste eingetreten sind., eine entsprechende Erklarung abzugeben. (10) Der Geschaft3fuhrer ist nicht befugt., auflerhalb eines von der Gesellschafter-versammlung ordnungsgemafl gefaflten Gewinnverteilungsbeschlusses sich personlich., den ubrigen Gesellschaftern oder ihnen nahestehenden Personen oder Gesellschaften Vorteile irgendwelcher Art vertragsmaflig oder durch einseitige Handlungen zuzuwenden. Der Geschaftsfuhrer ist verpflichtet., im Fall einer solchen Zuwendung den nach dem Gesetz, dem Gesellschaftsvertrag oder diesem Vertrag bestehenden Erstattungsanspruch fur die Gesellschaft - auch gegenuber sich personlich - geltend zu machen. Auch insoweit wird der Geschaftsfuhrer von den Beschrankungen des (beta) 181 BGB befreit. ss 3 Dienstleistung (1) Der Geschafsfuhrer hat seine ganze Arbeitskraft und seine gesamten Kenntnisse und Erfahrungen der Gesellschaft zur Verfugung zu stellen. (2) An bestimmte Arbeitszeiten ist der Geschaftsfuhrer nicht gebunden. -2- German Version Exhibit 10(i) ss 4 Bezuge des Geschaftsfuhrers (1) Der Geschaftsfuhrer erhalt a) ab 1. Oktober 1992 ein monatliches Gehalt in Hohe von 1.500,- (i.W. eintausend-funfhundert) Dieses unangemessen geringe Entgelt-, das diesbezugliche angemessene Entgelt wurde monatlich DM 12.000,- betragen-, wird fur die Betatigungs-Anlaufzeit der Fa. TES-GmbH vereinbart, um deren Stammkapital in moglichst geringem Umfang zu vermindern. Es besteht bereinstimmung, dafl zu dem Zeitpunkt, zu dem die Fa. TES-GmbH ausreichende Gewinne erzielt, das monatliche Entgelt fur die Zukunft in angemessener Hohe vereinbart wird. b) Ab 1. Januar 1993 wird zusatzlich ein Urlaubsgeld in Hohe von 100 % des dann gultigen Monatsgehalts gewahrt, zahlbar mit dem Gehalt fur Juli ieden Jahres c) Ab 1. Januar 1993 wird zusatzlich eine Weihnachtsgratifikation in Hohe von 100 % des dann gultigen Monatsgehalts gewahrt, zahlbar mit den Gehalt fur Dezember jeden Jahres. Ab 1. Januar 1993 erhalt der Geschaftsfuhrer eine Tantieme in Hohe von 25 % des Jahresuberschusses der Handelsbilanz vor Verrechnung mit Verlustvortragen und vor Abzug der Korperschaft- und Gewerbesteuer. Die Bemessungsgrundlage ist nicht um die Tantieme selbst und um andere gewinnabhangige Aufwendungen der Gesellschaft zu kurzen. Die Gewinntantieme ist einen Monat nach Genehmigung des Jahresabschlusses durch die Gesellschafterversammlung fallig. Nachtragliche fnderungen der Handelsbilanz, insbesondere aufgrund abweichender steuerlicher Veranlagung, sind zu berucksichtigen. berzahlte Betrage hat der Geschaftsfuhrer zu erstatten. Die Gewinnantieme entfallt, wenn dem Geschaftsfuhrer aus wichtigem Grund gekundigt wird, fur das Geschaftsjahr der Kundigung. Scheidet der Geschaftsfuhrer aus sonstigen Grunden wahrend des Geschaftsjahres aus seinem Amt aus, hat er Anspruch auf eine zeitanteilige Tantlieme. (3) Ein Anspruch auf Vergutung von Uberstunden, Sonntags und Feiertags oder sonstiger Mehrarbeit besteht nicht. (4) Im Krankenheitsfall oder bei sonstiger unverschuldeter Verhinderung bleibt der Gehaltanspruch fur die Dauer von 6 Monaten bestehen. Dauert die Verhinderung langer als ununterbrochen 6 Monate an., so wird der Tantiemeanspruch entsprechend der 6 Monate uberschreitenden Zeit zeitanteilig gekurzt. (5) Bei Tod des Geschaftsfuhrers wird das Gehalt fur die Dauer von 6 Monaten weitergezahlt. ss 5 Aufwendungaersatz (1) Tragt der Geschaftsfuhrer im Rahmen seiner ordnungsmafligen Geschaftsfuhrertatigkeit Kosten und Aufwendungen, so werden sie ihm von der Gesellschaft erstattet., sofern der Geschaftsfuhrer die Geschaftsfuhrungs- und Betriebsbedingtheit belegt oder sie offenkundig sind. (2) Der Geschaftsfuhrer hat Anspruch auf die Gestellung eines Pkw's der gehobenen Klasse. Der Geschaftsfuhrer darf den Pkw auch privat nutzen; eine Kostenbetelligung durch den Geschaftsfuhrer erfolgt nicht. Die GmbH wird den Vorteil ordnungsgemafl Lohn- und umsatzversteuern. -3- German Version Exhibit 10(i) (3) Die Gesellschaft ersetzt dem Geschaftsfuhrer seine Reisespesen nach den jeweils steuerlich zulassigen Hochstsatzen. Der Geschaftsfuhrer mufl seine Auslagen belegen konnen., soweit ublicherweise Belege erteilt werden. Im brigen reichen Eigenbelege aus (z.B. fur Telefonate und Trinkgelder) (4) Der Geschaftsfuhrer darf die erste Klasse der Bahn benutzen., bei Flugreisen im Inland Businessclass, bei sonstigen Flugen ist er in der Wahl frei. ss 6 Url aub (1) Der Geschaftsfuhrer hat Anspruch auf 35 Arbeitstage (Samstag ist kein Arbeitstag) bezahlten Urlaub im Geschaftsjahr. Der Geschaftsfuhrer hat den Zeitpunkt seines Urlaubs so einzurichten, dafl den Bedurfnissen der Geschaftsfuhrung Rechnung getragen wird. Der Urlaub ist mit dem weiteren Geschaftsfuhrer, sofern einer bestellt ist, abzustimmen. (2) Kann der Geschaftsfuhrer seinen Jahresurlaub nicht nehmen, weil Interessen der Gesellschaft entgegenstehen, so hat er Anspruch auf Abgeltung des Urlaubs unter Zugrundelegung der Hohe des Grundgehalts ((beta) 3 Abs. 1). (3) Der Geschaftsfuhrer hat Anspruch auf Freizeitausgleich fur geleistete berstunden., Sonntags- und Feiertags- oder sonstiger Mehrarbeit. ss 7 Nebenpflichten des Geschaftsfuhrers (1) Es ist dem Geschaftsfuhrer nicht gestattet im Geschaftszweig der GmbH Geschafte auf eigene Rechnung zu tatigen. (2) Dem Geschaftsfuhrer sind Nebentatigkeiten und Nebengeschafte, die nicht im Geschaftszweig der Gesellschaft liegen, jederzeit gestattet. ss 8 Dauer, Kundigung 1) Die Tatigkeit als Geschaftsfuhrer beginnt am 19.05.1992. 1) Der Vertrag wird auf unbestimmte Zeit abgeschlossen. (3) Dieser Vertrag kann von beiden Seiten mit einer Frist von 6 Monaten gekundigt werden. (4) Die Abberufung als Geschaftsfuhrer ist nur aus wichtigem Grund zulassig. (5) Der Geschaftsfuhrer kann nur aus wichtigem Grund sein Amt niederlegen. ss 9 Schluflbestimmungen (1) Die Ungultigkeit einzelner Bestimmungen beruhrt nicht die Rechtswirksamkeit des Vertrages im Ganzen. Anstelle der unwirksamen Vorschrift ist eine Regelung zu vereinbaren, die der wirtschaftlichen Zwecksetzung der Parteien am ehesten entspricht. (2) Dieser Vertrag tritt am 19.05.1992 in Kraft. -4- German Version Exhibit 10(i) (3) Als Gerichtsstand wird., soweit gesetzlich zulassig, Munchen vereinbart. Mundliche Nebenabreden wurden nicht getroffen. Vertragsanderungen bedurfen der Schriftform; auf diese Formvorschrift kann mundlich nicht verzichtet werden. - ---------------------------- ------------------------------ Gerd Behrens Birgit von Blankenhagen EX-10.II 6 LEASE FOR IMPLER STRASSE OFFICE English Version Exhibit 10(ii) ABSTRACT OF RENTAL AGREEMENT BETWEEN TES GMBH AND LANDESJAGDVERBAND BAYERN E.V. Parties: TES GmbH (tenant) Landesjagdverband Bayern e.V. (letter) Date: December 5, 1997 P. 1 Rented Object o Address: 25 Implerstr., 81371 Munich, 1st floor and basement o Size: 260 sqm on 1st floor and 122 sqm in basement, 6 garage parking spaces o Purpose: office and environmental office P. 2 Term of Tenancy o Beginning: March 1, 1998 o Duration: 6 years 10 months, through December 31, 2004 o No automatic extention o Extraordinary termination (for important reason) according to German Civil Code P. 3 Rent o 1st floor: DM 3,120 o basement: DM 305 o parking: DM 360 o VAT (15%): DM 567.75 o Ancillary costs: DM 1,200 (incl. heating) -------- DM 5,552.75 P. 6 Deposit is DM 11,355. P. 7 Damages, Setoff, Retention of Rent Tenant's damage claims resulting from defects are limited to intent or gross negligence. Setoff against claims for rent is limited to claims resulting from defects or undisputed or non-appealable claims. P. 8 Utilization of Object Utilization is only allowed if in accordance with provisions of this contract; subrental requires letter's permission. P. 9 Repairs, Architectural Modifications, Improvement P. 10 Maintenance and Repair o Tenant is responsible for cleaning, heating and airing of object, also for several smaller maintenance tasks. Damages have to be reported without delay, otherwise no reimbursement of expenses. o Tenant is liable for damages caused by him or persons allocated to him (e.g. supliers or employees). -1- English Version Exhibit 10(ii) P. 11 Interior Redecoration Tenant is responsible for interior redecorations (e.g. painting of walls, cleaning of floors). In case of non-fulfillment letter can accomplish it at the cost of tenant. P. 12 Letter's Lien o Letter has a lien on all things belonging to tenant, that are brought into rented object. o Claims against future subtenants are transferred to letter for reasons of security. P. 13 Letter's Right to enter Premises P. 14 Insurances Tenant has to conclude all insurances customary to his business. P.P.15 Publicity Actions, Protection against Competition o The use of outside walls, doors and windows for advertising purpose requires agreement of letter. With removal tenant has to restore original condition. o No protection against competition given. P. 16 Termination of Rent With termination works according to P. 11 have to be finished. If rent is terminated by extraordinary termination, tenant is liable for damages resulting from unoccupancy of rented object until agreed end of rent. P. 17 Several Persons as Tenants are liable as joint and several debtors. P. 18 House Rules House rules are - if existing - part of this contract. A persistent breach of house rules entitles letter to extraordinary termination of contract. P. 19 General Regulations o Legal venue is Munich o Subsequent changes and supplements to this contract require written form. P. 20 Other Agreements o Delivery of object is approximately January 15, 1998 o Letter takes over a share of renovation costs at amount of DM 15,000, due and payable with delivery. o Deposit is being paid interest on. -2- German Version Exhibit 10(ii) MIETVERTRAG fur Mietverhaltnisse uber Buro- und Geschaftsraume Zwischen Landesjagdverband Bayern e.V. Hohenlindner Str. 12, 85622 Feldkirchen als Vermieter vertreten durch Geschaftsfuhrer: Herr Udo Virneburg Und TES GmbH. Hard-u. Software-Entsorgung. Karl-Bohm-Str.2, 85598 Baldham als Mieter vertreten durch: Geschaftsfuhrer: Herr Gerd Behrens wird folgender Mietvertrag geschlossen:) ss. 1 Mietsache 1.1 Vermietet werden in 81371 Munchen an der Impler Strafle Nr. 25 (GE 71) Geschaftsflachen im EG ca. 260 m2; Lager im UG ca. 122 m2; Duplex Garagenstellplatze 6 Stuck. Die vermietete Flache ergibt sich aus dem beigefugten Stockwerksgrundrifl. 1.2 Die Vermietung erfolgt zum Betrieb als Buro Umweltagentur. 1.3 Dem Mieter werden vom Vermieter fur die Mietsache folgende Schlussel ausgehandigt siehe Ubergabeprotokoll. Die Beschaffung weiterer Schlussel bedarf der Zustimmung des Vermieters. Die Kosten tragt der Mieter. ss.2 Mietzeit (Zeitmietvertrag) 2.1 Das Mietverhaltnis beginnt am 01.03.1998 Es wird auf die Dauer von 6 Jahren u. 10 Mon. Jahren also bis zum 31.12.2004 geschlossen. 2.2 Setzt der Mieter den Gebrauch der Mietsache nach Ablauf der Mietzeit fort, so findet ss.568 BGB keine Anwendung. 2.3 Fur die auflerordentliche Kundigung gelten die gesetzlichen Kundigungsgrunde (z.B. vertragswidriger Gebrauch Storung des Hausfriedens, Zahlungsverzug). ss. 3 Mietzins 3.1 Der Mietzins betragt monatlich fur die Geschaftsflache/EG DM 3,120.--; fur die Lager/Kellerflache/UG DM 305.--; Stellplatze, somit DM 360.-- Nettomiete DM 3,785.--. 3.2 Die Nebenkostenvorauszahlungen betragen montalich fur Bewirtschaftungskosten Fur Heizungskosten: DM ges. 1,200.--(NK/112); Ubertr. Nettomiete DM 3,785.- Zuzuglich gesetzl. Mehrwertsteuer DM 567.75; aus d. Nettomiete; monatliche Anfangsbruttomiete DM 5,552.75 (TZ 3.1, und 3.2) - (in Worten: funftausendfunfhundertzweiundfunzig) Auf ss.ss. 4 und 5 des Mietervertrages wird hingewiesen. 3.3 Der Mietzins ist monatlich spatestens am dritten Werktage eines jeden Monats an den Vermieter/Beauftragten im voraus kostenfrei zu zahlen und zwar auf das Konto bei der _____________________________; Konto-Nr._______________; BLZ______________________________; Kontoinhaber____________________ Fur die Rechtzeitigkeit der Zahlung kommt es nicht auf die Absendung, sondern auf den Eingang des Geldes an. 3.4 Bei Zahlungsruckstand darf der Vermieter/Beauftragte fur jede Mahnuing DM 10.--als pauschalierte Mahnkosten berechnen. Auflerdem ist der Ruckstandsbetrag mit monatlich 1% zu verzinsen. 3.5 Sind Vorauszahlungen vereinbart, so wird uber sie jahrlich einmal abgerechnet, und zwar nach Vorliegen der Abrechnungsunterlagen beim Vermieter, wobei der Vermieter den Verteilungsschlussel bestimmt. Der Mieter kann die -1- German Version Exhibit 10(ii) Abrechnungsunterlagen nach Vereinbarung eines Termins beim Vermieter/Beauftragten eingehen. Ergibt sich bei der Abrechnung eine Differenz, so ist diese innerhalb eines Monats nach Zugang der Abrechnung an den Vermieter/Mieter zu zahlen. Im Falle des Auszuges des Mieters wahrend der Abrechnungsperiode erfolgt die Verteilung bei der nachstfalligen Abrechnung im Verhaltnis der Mietzeit zur Abrechnungsperiode. 3.6 Werden offentliche Abgaben neu eingefuhrt oder entstehen Betriebskosten neu, so konnen diese vom Vermieter gegen Nachweis auf den Mieter umgelegt und angemessene Vorauszahlungen festgesetzt werden. Erhohungen der Betriebskosten oder sonstiger in wirtschaftlichem Zusammenhang mit dem Grundstuck stehender Mehraufwendungen des Vermieters gegenuber dem Stand bei Vertragsabschlufl sind vom Mieter anteilig zu tragen. Der Vermieter ist berechtigt, in diesem Fall die Vorauszahlungsbetrage zu erhohen. 3.7 Die Nebenkosten beinhalten die Bewirtschaffungs- und die Heizungskosten wie offentliche Abgaben, Grundsteuer, Straflenreinigung und Mullabfuhr; Grundstucksreinigung, Wasserversorgung, Entwasserung, Beleuchtung, Gartenpflege, Hausreinigung, Hausmeister, Schornsteinreinigung, Reinigung und Wartung von Warmwassergeraten, Beseitigung von Kanalverstopfungen, Wartung der Feuerloscher und sonstiger Feuerloscheinrichtungen, Hausbewachung, Sach- und Haftpflichtversicherungen, Strom fur Tiefgaragentor und Hebebuhnen, Aufzugsanlage, Gemeinschaftsantennenanlage bzw. Kabelanschlufl; Heizungskosten, Betriebskosten der zentralen Heizungsanlage, und/oder der zentralen Brennstoffversorgungsanlage, Versorgung mit Fernwarme und der zentralen Warmwasserversorgung. 3.8 Die Strom- und Gaskosten zahlt der Mieter direkt an den Lieferanten. Bei Mieterwechsel ist der Mieter verpflichtet, im Rahmen der Erstellung des Ubergabeprotokolls die Zahlerstunde zusammen mit dem Vermieter/Beauftragten festzustellen. ss. 4 Staffelmiete (excluded) ss. 5 Wertsicherungsklausel (excluded) ss. 6 Kaution 6.1 Der Mieter leistet dem Vermieter eine Kaution in Hohe won drei Monats-Nettomieten, also DM 11,355.-- 6.2 Die Kaution ist bei Vertragsabschlufl zu erbringen, *spat. Jed. Bei Ubergabe der Mietraume* --- Form einer unbefristeten, unbedingten, unwiderruflichen und selbstschuldnerischen Bankburgschaft, oder durch Einzahlung auf das Konto des Vermieters (ss. 3). Die Zinsen sind dem Kautionsbetrag zuzurechnen. 6.3 Die Kaution ist nach Berichtigung aller noch offenen Forderungen des Vermieters aus dem Mietverhaltnis an den Mieter zuruckzuzahlen. Der Mieter ist nicht berechtigt, die Kaution mit ruckstandiger Miete zu verrechnen. ss. 7 Schadensersatz, Aufrechnung, Zuruckbehaltung des Mietzinses 7.1 Die Geltendmachung von Schadensersatzanspruchen durch den Mieter wegen Mangel der Mietscache oder wegen Verzugs des Vermieters mit der Beseitigung eines Mangel (ss. 538 Abs. 1 BGB) ist ausgeschlossen, sofern nicht der Vermieter vorsatzlich oder grob fahrlassig handelt. Sonstige Mangelgewahranspruche des Mieters werden dadurch nicht beruhrt. -2- German Version Exhibit 10(ii) 7.2 Der Mieter kann gegen den Mietzins nur mit einer Forderung auf Grund des ss. 538 BGB aufrechnen oder wegen einer solchen Forderung ein Zuruckbehaltungsrecht ausuben. Die Aufrechnung oder die Ausubung des Zuruckbehaltungsrechts ist nur zulassig, wenn der Mieter seine Absicht dem Vermieter mindestens einen Monat vor der Falligkeit des Mietzinses schriftlich angezeigt hat. 7.3 Die Aufrechnung gegen den Mietzins mit anderen Forderungen ist ausgeschlossen; dies gilt nicht fur unbestrittene oder rechtskraftig festgestellte Forderungen. ss. 8 Benutzung der Mietsache 8.1 Die Mietsache wird wie besichtigt ubergeben. Uber die Ubergabe wird ein Protokoll gefertigt. 8.2 Der Mieter farf die Mietsache nur zu dem im Vertrag bestimmten Zweck benutzen. Eine Untervermietung oder Gebrauchuberlassung bedarf der vorherigen schriftlichen Zustimmung des Vermieters. Zur Abtretung seiner Rechte aus dem Vertrag ist der Mieter nicht berechtigt. ss. 9 Ausbesserungen, bauliche fnderungen, Verbesserungen 9.1 Der Vermieter darf Ausbesserungen und bauliche Veranderungen, die zur Erhaltung des Hauses oder der Mietraume oder zur Abwendung drehender Gefahren oder zur Beseitigung von Schaden notwendig werden, auch ohne Zustimmung des Mieters vornehmen. Das gleich gilt fur Arbeiten, die zwar nicht notwendig, aber zweckmaflig sind, insbesondere der Verbesserung der gemieteten Raume oder sonstiger Teile des Gebauden dienen. Der Mieter hat die in Betracht kommenden Raume zuganglich zu halten und darf die Ausfuhrung der Arbeiten nicht behindern. Eine Minderung des Mietzinses darf nur dann erfolgen, wenn durch die Maflnahmen der Gebrauch der Mietsache ganz oder teilweise unmoglich wird. 9.2 Bauliche oder sonstige fnderungen innerhalb der Mietraume oder an den darin befindlichen Einrightungen und Anlagen darf der Mieter ohne schriftliche Zustimmung des Vermieters nicht vornehmen. ss. 10 Instandhaltung und Instandsetzung 10.1 Der Mieter verpflichtet sich, die Mietsache und die gemeinschaftlichen Einrichtungen und Anlagen pfleglich und schonend zu behandeln; er hat fur ordnungsgemafle Reinigung, Luftung und Beheizung zu sorgen. 10.2 Der Mieter ist verpflichtet, wahrend der Dauer des Mietverhaltnisses auf seine Kosten Rolladen, Klosettspuler, Abflusse, Ofen, Herde, Heizungs- und Kochgerate, Waschbecken und dergleichen in gebrauchsfahigem Zustand zu halten bzw. Zu erneuern und zerbrochene Glasscheiben zu ersetzen. Boiler sind alle zwei Jahre zu entkalken. 10.3 Schaden in den Mietraumen hat der Mieter dem Vermieter unverzuglich anzuzeigen. Er verzichtet auf jeglichen Ersatz von Aufwendungen fur Instandsetzungen, die vorgenommen werden, ohne vom Vermieter Abhilfe innerhalb angemessener Frist verlangt zu haben. 10.4 Fur Beschadigungen der Mietraume und des Gebaudes sowie der zu den Mietraumen oder zu dem Bebaude gehorenden Anlagen ist der Mieter ersatzpflichtig, soweit die von ihm oder den zu seinem Gewerbe gehorenden Personen oder von Untermietern, Besuchern, Lieferanten, Handwerkern usw. Verursacht wurden. Insbesondere haftet er fur Schaden, die durch fahrlassiges Umgehen mit Einrichtungen der Mietsache entstehen, besonders wenn technische Anlage und andere Einrichtungen unsachgemafl behandelt und gewartet, die uberlassenen Raume nun unzureichend geluftet, geheizt oder gegen Frost geschutzt werden. -3- German Version Exhibit 10(ii) ss. 11 Schonheitsreparaturen 11.1 Die Schonheitsreparaturen ubernimmt der Mieter auf seine Kosten, sie mussen fachgerecht ausgefuhrt werden. 11.2 Zu den Schonheitsreparaturen gehoren insbesondere das wischfeste Weifleln der Wande und der Decken, das Streichen der Heizkorper einschliefllich der Heizrohre und sonstiger Versorgungsleitungen sowie samtlicher Innenturen, der Auflenturen von innen und der Fensterrahmen, sowie das Reinigen der Fuflbodenbelage. Diese sind bei Erforderlichkeit, mindestens aber all 3 Jahre auszufuhren. 11.3 Bei Beendigung des Mietverhaltnisses sind die vom Mieter angebrachten Tapeten zu entfernen, Bodenbelage sind zu reinigen bzw. Zu erneuern desweiteren sind die in Ziff. 11.2 gennanten Schonheitsreparaturen durch den Mieter auszufuhren. 11.4 Kommt der Mieter seiner Pflicht zur Durchfuhrung der Schonheitsreparaturen wahrend der Mietzeit oder bei Beendigung der Mietzeit nicht nach, so ist der Vermieter nach ss. 326 BGB berechtigt, die in Ziff. 11.2 und 11.3 genannten Schonheitsreparaturen auf Kosten des Mieters von einer Fachfirma durchfuhren zu lassen. Die Geltendmachung eines weitergehenden Schadens bleibt dem Vermieter vorbehalten. Der Mieter hat die Ausfuhrung dieser Arbeiten wahrend des Mietverhaltnisses durch den Vermieter oder dessen Beauftragten zu dulden; ein Recht zur Minderung oder Zuruckbehaltung des Mietzinses besteht nicht. ss. 12 Pfandrecht des Vermieters 12.1 Mieter und Vermieter sind sich einig, dafl der Vermieter ein Pfandrecht an allen eingebrachten und kunftig eingebrachten Sachen des Mieters hat. Der Mieter erklart, dafl die beim Einzug in die Mietraume eingebrachten Sachensein freies Eigentum und nicht gepfandet oder verpfadet sind, mit Ausnahme folgender Gegenstande: 12.2 Zum Zwecke der Ausubung seines Pfandrechtes ist der Vermieter oder ein Beauftragter berechtigt, die Mietraume jederzeit zu betreten. Bei Pfandung eingebrachter Sachen durch Dritte verpflichtet sich der Mieter, den Vermieter sofort zu verstandigen. 12.3 Zur Sicherung aller Anspruche des Vermieters aus diesem Vertrag ubertragt der Mieter all bereits bestehen den Anspruche auf Zahlung von Mietzinsvetragten, die ihm gegen Dritte aufgrund von Untervermietung zustehen, auf den Vermieter. ss. 13 Betreten der Mietraume durch den Vermieter 13.1 Der Vermieter oder sein Beauftragter konnen die Mietraumer nach vorheriger Ankundigung betreten, um die Notwendigkeit unaufschiebbarer Hausarbeiten festzustellen den Zustand der Mietsache zu uberprufen oder Meflgerate abzulesen. 13.2 Will der Vermieter das Grundstuck verkaufen oder ist der Mietvertrag gekundigt, so darf er oder sein Beauftragter zusammen mit dem Kauf- oder Mietinteressenten die Mietraume wahrend der ublichen Geschaftszeiten betreten. 13.3 Der Mieter mufl dafur sorgen, dafl die Raume auch in seiner Abwesenheit betreten werden konnen. Ist der Mieter langer als vierzehn Tage abwesend, hat er die Schlussel bei einer Person seines Vertrauens, fur den Vermieter zuganglich, zu hinterlegen. -4- German Version Exhibit 10(ii) ss. 14 Versicherungen Der Mieter ist verpflichtet, die in seinem Beruf/Gewerbe ublichen Versicherungen abzuschlieflen. Schaufenster und sonstige Scheiben der Mietsache sind zum vollen Wiederherstellungswert- zu versichern. Dem Vermieter sind auf Verlangen die Versicherungsvertrage zur Einsicht vorzulegen. ss. 15 Werbemaflnahmen, Konkurrenzschutz 15.1 Auflenturen, Auflenwande und Fenster der Mietsache durfen nicht fur Reklamezwecke benutzt werden, es sei denn, der Vermieter stimmt einer solchen Nutzung schriftlich zu. Behordliche Genehmigungen sind dabei vom Mieter auf seine Kosten einzuholen. Bei der Beseitigung von Werbeeinrichtungen hat der Mieter den fruheren Zustand wieder herzustellen. Schaufenstereinnenseiten sind gefallig und ansprechend zu gestalten. 15.2 Der Mieter ist verpflicthet, die im Mietobjekt ublichen Schilder auf seine Kosten mit Zustimmung des Vermieters anzubringen. Alle Schilder des Gebaudes mussen unabhangig vom Text einheitlich gestaltet sein. 15.3 Der Vermieter gewahrt dem Mieter keinen Konkurrenzschutz fur seinen Geschaftsbetrieb. ss. 16 Beendigung der Mietzeit 16.1 Bei Beendigung der Mietzeit mussen die Arbeiten gemafl ss. 11 durchgefuhrt sein; daruber hinaus ist die Mietsache geraumt und mit samtlichen Schlusseln zuruckzugeben. Der Mieter haftet fur alle Schaden, die dem Vermieter, einem Rechts- oder Mietnachfolger aus der Nichtbefolgung dieser Pflicht entstehen. 16.2 Der Vermieter ist berechtigt aber nichtverpflictet, Einrichtungen, mit denen der Mieter die Raume versehen hat, zum Zeitwert abzulosen. Bei Wegnahme der Einrichtungen ist der Mieter verpflichtet, den ursprunglichen Zustand der Mietsache auf seine Kosten wieder herzustellen. 16.3 Hat der Mieter bauliche Veranderungen an der Mietsache vorgenommen oder sie mit Einrichtungen versehen, ist verpflichtet, bei Ende des Mietverhaltnissees die Mietsache in den ursprunglichen Zustand auf seine Kosten wieder herzustellen, es sei denn, der Vermieter stimmt dem Verbleiben ausdrucklich schriftlich zu. 16.4 Endet das Mietverhaltnis durch fristlose Kundigung des Vermieters (z.B. vertragswidriger Gebrauch der Raume, Mistruckstand), so haftet der Mieter fur den Schaden, den der Vermieter dadurch erleidet, dafl die Raume nach dem Auszug des Mieters eine Zeitlang leerstehen oder billiger vermietet werden mussen. Die Haftung dauert bis zum Ende der vereinbarten Mietzeit. ss. 17 Personenmehrheit als Mieter 17.1 Sind mehrere Personen Mieter (z.B. Ehegatten), so haftet diese fur alle Verpflichtungen aus dem Mietverhaltnis als Gesamtschuldner. 17.2 Fur die Rechtswirkksamkeit einer Erklarung des Vermieters genugt es, wenn sie gegenuber einem der Mieter abgegeben wird. Die Mieter bevollmachtigen sich gegenseitig zur Entgegennahme von Erklarungen des Vermieters sowie zur Abgabe eigener Erklarungen gegenuber dem Vermieter; dies gilt auch fur die Entgegennahme von Kundigungen. -5- German Version Exhibit 10(ii) 17.3 Tatsachen, die fur einen Angehorigen der Personenmehrheit eine Verlangerung oder Verkurzung des Mietverhaltnisses herbeifuhren oder fur ihn einen Schadensersatz- oder ahnlichen Anspruch oder eine Schadensersatzpflicht begrunden, haben fur alle Angehurigen der Personenmehrheit die gleiche Wirkung. ss. 18 Hausordnung 18.1 Sofern fur das Grundstuck eine Haus-/Garagenordnung oder sonstige Benutzungsordnung besteht, ist diese Bestandteil dieses Vertrages. Der Mieter verpflichtet sich wie auch seine Mitarbeiter, Kunden und Besucher zur Einhaltung dieser Ordnungen. 18.2 Ein nachhaltiger Verstofl gegen diese Ordnungen berechtigt den Vermieter zur fristlosen Kundigung. ss. 19 Allgemeine Bestimmungen 19.1 Gerichtsstand fur alle Streitigkeiten aus dem Mietvertrag ist Munchen. 19.2 Nachtragliche fnderungen und Erganzungen dieses Vertrages sind nur wirksam, wenn sie schriftlich niedergelegt sind. ss. 20 Sonstige Vereinbarungen Die Ubergabe der Mietraume an den Mieter erfolgt ca. Mitte Jan. 98 fur Renovierungszwecke, also vor Mietbeginn. Voraussetzung, dafl die Mietkaution an den Vermieter geleistet wurde. Der Mieter haftet bei Nutzung vor dem offiziellen Mietbeginn gem. den Vereinbarungen des geschlossenen Mietvertrages. Der Vermieter ubernimmt einen Kostenanteil fur Renovierungsarbeiten i. Hohe von DM 15,000,-- (funfzehntausend,--); Fallig u. zahlbar bei Ubergabe der Mietraume. Die Kaution wird nach Einzahlung auf ein Konto des Vermieters verzinst. Zur Mehrwertsteuer siehe Anlage zum Mietvertrag. Feldkirchen den 05.12, 1997 Baldham den 4.12.97 - ----------- ----------- ------- ------- Der Vermieter: Der Mieter: Signature Signature - ----------------------------- ------------------------------------- Landesjagdverband Bayern a.V. TES GmbH, Hard-u. Software-Entsorgung Geschaftsfuhrer: Geschaftsfuhrer: Udo Virneburg Gerd Behrens -6- EX-10.III 7 LEASE English Version Exhibit 10(iii) A B S T R A C T COMMERCIAL RENTAL AGREEMENT Dated: August 29, 1997 Parties: Mr. Wolfgang Bauer DOB 2/4/1951 Nibler Str. 12, 82223 Eichenau, Germany Landlord Mr. Gerd Behrens DOB 5/12/1937 Karl-B^hm-Str. 2, 85598 Baldham, Germany Representing TES GmbH Real Estate Registry Information: Property Address: Max-Planck-Str. 14, Landsberg a. Lech Encumbrances: DM 890,000 owed to the Centralbodenkredit-Aktiengesellschaft in K^ln Rental Agreement: Mr. Bauer rents the building described above to TES GmbH. Building Size: Approximately 890 square meters. The landlord does not guarantee that the premises are suitable for the technical uses proposed by TES GmbH. The Renter is responsible for obtaining any necessary governmental approvals for its use of the building. The Renter may only install heavy machinery after Landlord gives his consent. Term: 4 years beginning January 1, 1998. Rent: Dm 10,800 per month plus tax payable in advance by the third day of the month. The monthly rent increases by DM 300 each year. All repairs under DM 300 are the responsibility of the Renter. Renter pays all costs and expenses except Sprinkler system water charges and casualty insurance. Water and property taxes are to be paid quarterly the first payment of DM 866.00 being due on February 2, 1998. Condition of the Premises: Renter is obligated to maintain the property in the condition it is in at the walk through inspection that takes place when the premises are occupied by Renter. Set Off Against Rent: Renter may set off certain expenses incurred which are the responsibility of the Landlord only after giving written notice of the intent to set off on month prior to the date the rent is due. -1- English Version Exhibit 10(iii) The rental agreement may be terminated without notice is the Renter is three months behind in paying the rent. Use of the Premises; Subleases: Renter agrees to use the premises for appropriate purposes. Subleases may be rejected by the Landlord. Property Improvements/Renovations: Construction and repair work to maintain the building are allowed. Any renovations that are not required to maintain the property must be approved by the Landlord. Building and Premises Maintenance: Renter is responsible for maintaining the property and notifying the Landlord of any major damage to the property. If the property is damaged further because of Renter's failure to notify Landlord, Renter shall be responsible for the additional damage. Signage: Renter must obtain Landlord's approval of all signage added to the property. Security Deposit: DM 300,000 The deposit shall be secured by a security interest in the property for DM 300,000 which shall be recorded in the real estate records. Purchase Option: Renter has an option to purchase the property. The option may not be exercised prior to July 1, 2000 nor after December 31, 2001. Purchase Price: DM 2,200,000 If the option is exercised after December 31, 2000, the price shall increase by DM 77,000. The DM 300,000 Security Deposit will be applied to the purchase price. -2- German Version Exhibit 10(iii) URNr. 2 - 2776 / 1997 --------------------- Gewerbemietvertrag ------------------ Heute, den neunundzwanzigsten August neunzehnhundertsiebenundneunzig 29. August 1997 - erschienen vor mir, Dr.Roman Forthauser, Notarassessor, amtlich bestellter Vertreter von Dr.Michael Bohrer, Notar mit dem Amtssitz in Munchen, in der Geschaftsstelle in 80333 Munchen, Brienner Strafle 25: 1. Herr Wolfgang Bauer, geb. am 4.02.1951, Dipl.Wirtschaftsingenieur, Niblerstr.12, 82223 Eichenau, ausgewiesen durch Vorlage seines deutschen Personalausweises Nr. 8178019872, 2. Herr Gerd Behrens, geb. Am 12.5.1937, Industriekaufmann, Karl-Bohm-Str.2, 85598 Baldham, Ausgewiesen durch Vorlage seines deutschen Personalausweises Nr. 8006022831. Herr Behrens gab bekannt, die nachfolgenden Erklarungen nicht eigenen namens abzugeben, sondern als alleinvertretungsberechtigter Geschaftsfuhrer inm Namen der im Handelsregister des Amtsgerichts Munchen unter HRB Nr. 99 315 eingetragenen TES-GmbH, Hard- und Software-Entsorgung, Umweltberatung, Vermogensanlagen, Vermogensverwaltung Mit dem Sitz in Baldham, Gemeinde Vaterstetten, Landkreis Ebersberg, Anschrift: Karl-Bohm-Str. 2, 85598 Baldham. Hierzu bescheinige ich aufgrund Einsicht ins Handelsregister beim Amtsgericht Munchen vom 26.08.1997, HRB NR. 99 315, dafl Herr Gerd Behrens als Geschaftsfuhrer einzeln zur Vertretung der Gesellschaft befugt ist. Die Erschienenen gaben nachfolgend mundlich ubereinstimmende Erklarungen ab, die ich wie folgt beurkunde: -1- German Version Exhibit 10(iii) 1. Vorbemerkungen -------------- Im Grundbuch des Amtsgerichts Landsberg am Lech von Landsberg am Lech Band 170 Blatt 8614 ist eingetragen: Gemarkung Landsberg am Lech, Flst. Nr. 2925/161 Max-Planck-Str.14, Burogebaude, Gebaude und Freiflache zu 0,1700 ha. Eigentumer: - ----------- Bauer, Wolfgang, geb. am 4.02.1951, 8031 Eichenau. Abteilung II: - ------------- Beschrankt personliche Dienstbarkeit - bestehend in der Verpflichtung, die Grundstucke nur nach Maflgabe der BaunutzungsVO einschliefllich der dort zugelassenen Ausnahmen zu nutzen fur den Freistaat Bayern. Abteilung III: - -------------- DM 890.000,-- Grundschuld ohne Brief fur die Deutsche Centralbodenkredit-Aktiengesellschaft in Koln. 2. Mietraume --------- Aus dem in Ziff.1 naher bezeichneten Grundstuck befindet sich ein Betriebsgebaude. Herr Bauer - nachstehend als "Vermieter" bezeichnet - vermietet hiermit samtliche sich auf dem in Ziff.1 bezeichneten Grundstuck befindlichen Gebaudlichkeiten nebst Auflenanlagen an die TES-GmbH Hard- und Software-Entsorgung, Umweltberatung, Vermogensanlagen, Vermogensverwaltung mit dem Sitz in Baldham o nachstehend "der Mieter" genannt - zum Betrieb einer Entsorgungsanlage fur Altelektronik nebst Ausbildungsinstitut. Die Grofle der Raumlichkeiten betragt ca. 890 qm. -2- German Version Exhibit 10(iii) Der Vermieter leistet keine Gewahr dafur, dafl die gemieteten Raume den technischen Anforderungen des Mieters sowie den fur den besonderen Bedarf des Mieters einschlagigen behordlichen und anderen Vorschriften entsprechen. Der Mieter hat behordliche Auflagen auf eigene Kosten zu erfullen. Der Mieter darf schwere Maschinen nur in Rucksprache mit dem Vermieter aufstellen. 3. Mietzeit -------- Der Mietvertrag wird auf eine Laufzeit von vier Jahren abgeschlossen. Das Mietverhaltnis beginnt mit dem 01.01.1998 - ersten Januar neunzehnhundertachtundneunzig - und endet am 31.12.2001 - einunddreifligsten Dezember zweitausendeins -. 4. Mietzins -------- Der Mietzins betragt monatlich DM 10.800,-- - zehntausendachthundert Deutsche Mark - zuzuglich gesetzlicher Mehrwertsteuer. Er erhoht sich ab 01.01.1999 - ersten Januar neunzehnhundertneunundneunzig - und fur die folgenden Jahre jeweils ab Januar des darauffolgenden Jahres um DM 300,-- - dreihundert Deutsche Mark - pro Monat zuzuglich gesetzlicher Mehrwertsteuer. Die Schonheitsreparaturen und Kleinreparaturen bis DM 300,-- zzgl. Mehrwertsteuer ubernimmt der Mieter. Nebenabgaben, namlich Kosten fur Fahrstuhl, Rolltor, Gas, Treppenreinigung, Antennenanlagen, Grundsteuer, Strom, Zu- und Abwasser, Straflenreinigung, Mullabfuhr, Schornstein- und Hausreinigung und weitere offentliche Lasten sind neben dem Mietzins besonders zu zahlen und, soweit wie moglich, direkt mit den Leistungstragern abzurechnen; ansonsten vierteljahrlich. Die Kosten fur Heizung und Warmwasser hat der Mieter allein zu tragen. Die Kosten fur Brand-, Leitungswasser- und Sturmversicherung tragt der Vermieter. 5. Zahlung des Mietzinses ---------------------- Der Mietzins ist monatlich im voraus, spatestens am dritten Werktag eines jeden Monats an den Vermieter oder die von ihm zur Entgegennahme ermachtigte Person oder Stelle zu zahlen. Maflgebend ist der Eingang des Geldes. Auf die Nebenabgaben Kaltwasser und Grundsteuer sind folgende Vorschusse zu leisten: Vierteljahrlich, erstmals zum 15.02.19988, DM 866,--. -3- Der Vermieter laflt dem Mieter jeweils vor Jahresbeginn eine "Dauerrechnung" fur das bevorstehende Jahr zukommen (monatlicher Mietzins mit ausgewiesener Umsatzsteuer, Grundsteuer und Wasservorauszahlungen mit Falligkeiten und ggf. weiteren Vorauszahlungen). 6. Zustand der Mietraume --------------------- Die Vertragsteile werden bei bergabe der Mietsache ein bergabeprotokoll erstellen, in dem der Zustand der Mietsache festzuhalten ist. Soweit die Mietraume nebst Auflenanlagen darin als vertragsgemafl ubernommen werden, verpflichtet sich der Mieter, diesen Zustand dann zu erhalten, die Mietsache pfleglich zu behandeln und in ordnungsgemaflem Zustand zu erhalten. Der Vermieter wird bis zum 01.01.1998 die Kosten zum laufenden Unterhalt des Verrtragsobjektes fortzufuhren und verpflichtet sich, den Zustand der Mietraume nicht mehr zu verschlechtern, als dies bei Fortsetzung der bisherigen Nutzung erwartet werden mufl. 7. Aufrechnung mit Gegenforderungen, --------------------------------- Minderung des Mietzinses Der Mieter kann gegenuber dem Mietzins mit einer Gegenforderung nur aufrechnen oder ein Minderungs- oder Zuruckbehaltungsrecht nur ausuben, wenn er dies mindestens einen Monat vor der Falligkeit des Mietzinses dem Vermieter angekundigt hat. Ist der Mieter trotz Zahlungsaufforderung mit mehr als drei Monatsmieten im Ruckstand, so kann der Vermieter das Mietverhaltnis fristlos kundigen. Er kann nicht mehr kundigen, wenn der Mieter noch vor der Kundigung zahlt. Die Kundigung ist unwirksam, wenn der Mieter aufrechnen, zuruckbehalten oder mindern kann und diesbezuglich nach der Kundigung eine entsprechende schriftliche Erklarung abgibt. Der Vermieter kann ferner fristlos kundigen, wenn uber das Vermogen des Mieters der Antrag auf Eroffnung des gerichtlichen Konkurs-, Insolvenz- oder Vergleichsverfahrens eroffnet wird oder der Antrag mangels Masse abgelehnt wird. 8. Benutzung der Mietraume, Untervermietung ---------------------------------------- Der Mieter verpflichtet sich, die Mietraume und die Auflenanlagen schonend und pfleglich zu behandeln. Der Mieter darf die Mietraume nur zu den vertraglich bestimmten und nach den jeweiligen behordlichen Bestimmungen zulassigen Zwecken benutzen. Will er sie zu anderen als vertraglich vereinbarten Zwecken nutzen, so bedarf er der schriftlichen Zustimmung des Vermieters. Der Vermieter kann einer Untervermietung widersprechen, wenn gegen den Untermieter ein wichtiger Grund vorliegt. Bei unbefugter Untervermietung kann der Vermieter verlangen, dafl der Mieter so bald wie moglich, spatestens jedoch binnen Monatsfrist das Untermietverhaltnis kundigt. Fur den Fall der Untervermietung tritt der Mieter dem Vermieter schon jetzt die ihm gegen den Untermieter zustehenden Forderungen nebst Pfandrecht bis zur Hohe der Forderungen des Vermieters sicherungshalber ab. Der Mieter bleibt bei einer Untervermietung im Obligo. -4- German Version Exhibit 10(iii) 9. Ausbesserung und bauliche Veranderungen --------------------------------------- Der Vermieter darf Ausbesserungen und bauliche Veranderungen, die zur Erhaltung des Hauses oder der Mietsache oder zur Abwendung drohender Gefahren oder zur Beseitigung von Schaden notwendig werden, auch ohne Zustimmung des Mieters vornehmen. Ausbesserungen und bauliche Veranderungen, die zwar nicht notwendig, aber doch zweckmaflig sind, durfen ohne Zustimmung des Mieters vorgenommen werden, wenn sie den Mieter nur unwesentlich beeintrachtigen. Soweit der Mieter die Arbeiten dulden mufl, kann er weder den Mietzins mindern, noch ein Zuruckbehaltungsrecht ausuben, noch Schadensersatz verlangen. Diese Rechte stehen ihm jedoch zu, wenn es sich um Arbeiten handelt, die den Gebrauch der Raume zu dem vereinbarten Zweck ganz oder teilweise ausschlieflen oder erheblich beeintrachtigen. 10. Instandhaltung der Mietraume und Auflenanlagen ---------------------------------------------- Schaden an dem Mietobjekt hat der Mieter unverzuglich dem Vermieter oder seinem Beauftragten anzuzeigen. Fur durch verspatete Anzeige verursachte weitere Schaden haftet der Mieter. Der Mieter haftet dem Vermieter fur Schaden, die durch Verletzung der ihm obliegenden Sorgfaltspflicht schuldhaft verursacht werden, insbesondere die nach dem Bezug durch ihn, seine Arbeiter und Angestellten, Untermieter sowie die von ihm beauftragten Handwerker, Lieferanten und Kunden und dergleichen schuldhaft verursacht werden. Ferner haftet er fur Schaden, die durch fahrlassiges Umgehen mit der Wasser-, Gas- oder elektrischen Licht- und Kraftleitung, mit der Klosett- und Heizungsanlage, durch Offenstehenlassen von Turen, mangelnde Beheizung oder durch Versaumung einer vom Mieter ubernommenen, sonstigen Pflicht (Beleuchtung, etc.) entstehen. Leitungsverstopfungen hat der Mieter stets und in jedem Fall unverzuglich auf seine Kosten zu beseitigen oder beseitigen zu lassen. Der Mieter verpflichtet sich, Aufzuge und Rolltor fachmannisch warten zu lassen und alle diesbezuglichen Vorschriften einzuhalten. Der Mieter mufl die Mietraume auf seine Kosten von Ungeziefer freihalten. Er kann sich nur darauf berufen, dafl die Mietraume bei Der Mietr tragt die Verkehrssicherungspflicht. Der Mieter hat alle erforderlichen Versicherungen abzuschlieflen. Der Mieter hat alle ihm obliegenden abfallrechtlichen und immissionsschutzrechtlichen Vorschriften einzuhalten. 11. Pfandrecht des Vermieters an eingebrachten Sachen ------------------------------------------------- Es gilt die gesetzliche Regelung. 12. Betreten der Mietraume durch den Vermieter ------------------------------------------ Der Vermieter und/oder ein von ihm Beauftragter kann das Mietobjekt wahrend der Geschaftszeit zur Prufung seines Zustandes oder aus anderen wichtigen Grunden betreten. Ist das Mietverhaltnis gekundigt, so darf der Vermieter und/oder sein Beauftragter die Raume nach Ankundigung mit dem Mietinteressenten wahrend der Geschaftszeiten betreten. Der Mieter mufl dafur sorgen, dafl das Mietobjekt auch wahrend seiner Abwesenheit jederzeit betreten werden kann. 13. Werbemaflnahmen --------------- Der Mieter kann Schilder oder sonstige Vorrichtungen nach absprache an folgenden Flachen des Hauses anbringen: Nach Absprache. Bei Raumung ist der Mieter zur Herstellung des alten Zustandes verpflichtet. Der Mieter haftet fur alle Schaden, die im Zusammenhang mit diesen Vorrichtungen entstehen. -6- German Version Exhibit 10(iii) 14. Sicherheitsleistung ------------------- Der Mieter hat dem Vermieter fur die Erfullung seiner Verpflichtungen Sicherheit in Hohe von DM 300.000,-- - dreihunderttausend Deutsche Mark - zu leisten. Zahlung der Sicherheitsleistung ist Voraussetzung fur die berlassung an den Mieter. Die Zahlung hat zu erfolgen auf das Konto des Vermieters bei der Volksbank Furstenfeldbruck (BLZ 701 63 370), Konto-Nr. 854808 bis zum 10.09.1997, jedoch nicht vor rangrichtiger Eintragung der in Ziff.14 bestellten Sicherungshypothek. Die Hohe der Sicherheitsleistung folgt aus der teilweisen Anzahlungsfunktion bei Ausubung des Ankaufsrechts gem. Ziff. 15 dieses Vertrages. Der Vermieter ist bei Beendigung des Mietvertrages verpflichtet, die Sicherheit an den Mieter bis auf einen Betrag in Hohe von DM 90.000,--, also DM 210.000,-- zuruckzubezahlen, soweit ihm aus dem Mietverhaltnis keine Gegenanspruche zustehen. Der Einbehalt von DM 90.000,-- stellt eine Gegenleistung dafur dar, dafl der Vermieter gem. Ziff. 15 des Vertrages nach Eintragung der Auflassungsvormerkung in seiner Verfugungsfreiheit beschrankt ist. Bei Kundigung des Mietverhaltnisses seitens des Mieters aufgrund eines wichtigen Umstandes, den der Vermieter zu vertreten hat, ist die Sicherheitsleistung jedoch in voller Hohe zuruckzubezahlen. Bei Ausubung des Ankaufsrechtes gem. Ziff. 15 dieses Vertrages gilt vorrangig die Anrechnungsvereinbarung gem. 5.1. der Anlage zu diesem Vertrag. Die Sicherheitsleistung ist mit 2% p.a. zu verzinsen. Die Zinsen stehen dem Mieter zu. Im Falle der Ausubung des Ankaufsrechts gem. Ziff. 15 dieses Vertrages und der dann vorrangigen Anrechnungsvereinbarung in Ziff. 5.1. der Anlage zu diesem Vertrag stehen die Zinsen dem Vermieter zu. Zur Sicherung aller Anspruche des Mieters auf Ruckzahlung der Sicherheitsleistung bestellt der Vermieter dem Mieter eine Sicherungshypothek im Hochstbetrag von DM 300.000,-- an dem in Ziff.1 aufgefuhrten Grundstuck im Rang unmittelbar nach den in Ziff. 1 wiedergegebenen Belastungen in Abt. II und III des Grundbuches. Zinsen sollen nicht berucksichtigt werden. Der Vermieter bewilligt, die Vertragsteile beantragen die Eintragung der Sicherungshypothek in das Grundbuch. Die Eintragung an vorerst nachstoffener Rangstelle ist zulassig und wird hiermit bewilligt und beantragt. -7- German Version Exhibit 10(iii) 15. Ankaufsrecht ------------ Der Vermietr raumt dem Mieter ein Ankaufsrecht an dem Vertragsgrundstuck, wie es in Ziff. 1 wiedergegeben ist in der Weise ein, dafl er ihm hiermit das Vertragsgrundstuck zu den Bedingungen anbietet, die in der vom Notar vorgelesenen Anlage zu diesem Vertrag enthalten sind. Der Vermieter ist an das Angebot gebunden, solange der Mietvertrag besteht. Das Angebot kann fruhestens am 01.07.2000 - ersten Juli zweitausend - angenommen werden. Es mufl spatestens bis zum 31.12.2001 - einunddreifligsten Dezember zweitausendeins - angenommen werden. Danach kann es nicht mehr angenommen werden., selbst wenn das Mietverhaltnis fortbesteht. Vorher erlischt es von selbst mit Beendigung des Mietverhaltnisses. Die Annahme wird wirksam, wenn sich der Mieter in der Annahmeurkunde wegen seiner dann begrundeten Verpflichtung zur Zahlung des Kaufpreises der sofortigen Zwangsvollstreckung unterwirft. Im ubrigen ist die Annahme wirksam, wenn sie wahrend der Bindungsfrist zur Urkunde eines deutschen Notars erklart wird; des Zugangs der Annahmeerklarung an den Vermieter bedarf es zu ihrer Wirksamkeit nicht; der die Annahme beurkundende Notar soll jedoch dem Vermieter eine Ausfertigung der Annahmeurkunde ubermitteln. Der Notar wird von beiden Vertragsteilen unwiderruflich angewisen, den Antrag auf Eintragung der Auflassungsvormerkung erst dann zu stellen, wenn ihm der Vermieter bestatigt hat, dafl er die Sicherheitsleistung gem. Ziff. 14 in Hohe von DM 300.000,-- erhalten hat. Bis dahin soll der Notar auch keine beglaubigten Abschriften oder Ausfertigungen erteilen, die Bewilligung oder Antrag Antrag bzgl. der Vormerkung enthalten. Der Vermieter ist bei erhalt der Sicherheitsleistung verpflichtet, die Bestatigung unverzuglich zu erteilen. Sollte der Mietvertrag sowie nach Annahme der dann zustandekommende Kaufvertrag gleich aus welchem Rechtsgrunde aufgelost werden, so ist der Mieter - ohne dafl ihm ein weiteres Zuruckbehaltungsrecht zustunde - verpflichtet, die fur ihn zur Eintragung gelangende Auflassungsvormerkung unverzuglich loschen zu lassen, wenn ihm fur seine Anspruche Sicherheit in Form einer ausreichenden Bankburgschaft gestellt wird. 16. Beendigung der Mietzeit ----------------------- Die Mietraume sind bei Beendigung der Mietzeit besenrein und mit samtlichen - auch vom Vermieter gefertigten - Schlusseln zuruckzugeben. Der ubernommene Zustand ist wieder herbeizufuhren. Einrichtungen, mit denen der Mieter die Raume versehen hat, kann er wegnehmen. Der Vermieter kann aber vberlangen, dafl die Sachen in den Raumen zuruckgelassen werden, wenn er denjenigen Betrag an den Mieter zahlt, der zur Herstellung einer neuen Einrichtung erforderlich ware, abzuglich eines angemessenen Abschlags fur die inzwischen eingetretene Abnutzung. Dem Vermieter steht das Recht auf die Einrichtung nicht zu, wenn der Mieter ein berechtigtes Interesse daran hat, diese mitzunehmen. -8- German Version Exhibit 10(iii) 17. Vorzeitige Beendigung der Mietzeit ---------------------------------- Endet das Mietverhaltnis durch fristlose Kundigung des Vermieters (vertragswidriger Gebrauch der Raume, Mietruckstand, etc.), so haftet der Mieter fur den Schaden, den der Vermieter dadurch erleidet, dafl das Objekt nach dem Auszug des Mieters eine zeitlang leersteht oder billiger vermietet werden mufl. Die Haftung dauert bis zum Ende der vereinbarten Mietzeit. Sie besteht nicht, wenn der Vermieter sich um einen Ersatzmieter nicht genugend bemuht hat. 18. Kosten und Abschriften ---------------------- Die Kosten der Errichtung, der Abschriften und des Vollzugs dieser Urkunde tragt zu zwei Drittel der Mieter, zu einem Drittel der Vermieter. Die Kosten fur die Annahme des Kaufangebotes, die Kosten erforderlicher Genehmigungen Dritter, die Kosten der Auflassung sowie die anfallende Grunderwerbssteuer tragt der Mieter. Soweit der Vermieter nach Annahme des Kaufangebotes zur Lastenbefreiung verpflichtet ist, tragt er die hierfur anfallenden Kosten. Von dieser Urkunde sollen Abschriften erhalten der Vermieter, der Mieter, das Amtsgericht Landsberg am Lech - Grundbuchamt -, das Finanzamt - Grunderwerbssteuerstelle -. 19. Sollte eine Bestimmung dieses Vertrages unwirksam sein, so bleibt der Vertrag im ubrigen wirksam. NDie Niederschrift wurde vom Notarverteter vorgelesen, von den Beteiligten genehmigt und eigenhandig unterschrieben." (Stempel) drei Unterschriften - -------------------------------------------------------------------------------- -9- German Version Exhibit 10(iii) Anlage ------ Kaufvertrag 1. Vorbemerkungen Im Grundbuch des Amtsgerichts Landsberg am Lech von Landsberg am Lech Band 170 Blatt 8614 ist eingetragen: Gemarkung Landsberg am Lech, Flst.Nr. 2925/161 Max Planck Str. 14, Burogebaude, Gebaude und Freiflache zu 0,1700 ha. Eigentumer: - ----------- Bauer, Wolfgang, geb. 04.02.1951. 8031 Eichenau. Abteilung II: - ------------- Beschrankt personliche Dienstbarkeit - bestehend in der Verpflichtung, die Grundstucke nur nach Maflgabe der BaunutzungsVO einschliefllich der dort zugelassenen Ausnahmen zu nutzen fur den Freistaat Bayern. Abteilung III: - -------------- DM 890.000,-- Grundschuld ohne Brief fur die Deutsche Centralbodenkredit-Aktiengesellschaft in Koln, ferner wird gem. Ziff.14 des Mietvertrages eine Sicherungshochstbetragshypothek fur die TES-GmbH, Hard- und Software-Entsorgung, Umweltberatung, Vermogensanlagen, Vermogensverwaltung mit dem Sitz in Baldham in Hohe von DM 300.000,-- eingetragen sein. Die Beteiligten stimmen der Loschung der Grundschuld uber DM 890.000,-- fur die Deutsche Centralbodenkredit-Aktiengesellschaft in Koln, mit Vollzugsantrag zu. 2. Verkauf ------- 2.1. Herr Wolfgang Bauer, o nachstehend Nder Verkaufer" genannt - verkauft an die Firma TES-GmbH, Hard- und Software-Entsorgung, Umweltberatung, Vermogensanlagen, Vermogensverwaltung mit dem Sitz in Baldham - nachstehend Nder Kaufer" genannt - -10- German Version Exhibit 10(iii) das in Abschn. 1 naher bezeichnete Grundstuck mit allen Bestandteilen,insbesondere mit den auf ihm befindlichen Gebauden und Zubehor. 2.2. Der Eigenbesitz ist Zug um Zug gegen vollstandige Zahlung des Kaufpreises zu ubergeben. Die Gefahr eines zufalligen Untergangs und einer zufalligen Verschlechterung des Vertragsgegenstandes geht sofort auf den Kaufer uber; der Verkaufer tritt jedoch dem Kaufer alle versicherungs- und Schadensersatzanspruche, die er wegen solcher Ereignisse gegen Dritte haben konnte, ab und versichert hierzu, dafl insbesondere die Brandversicherung zum hochstmoglichen Versicherungswert besteht und aufrechterhalten wird. Die Nutzungen gebuhren dem Kaufer vom Zeitpunkt des Besitzuberganges an. Vom gleichen Zeitpunkt an hat er die laufenden Grundstuckslasten, die Pramien fur die weiterlaufenden Versicherungen, die Verkehrssicherungspflicht und die offentlichrechtlichen Reinigungspflichten zu tragen. Laufende Grundstuckslasten, die bei Besitzubergang ruckstandig sein sollten, hat der Verkaufer unverzuglich wegzufertigen. 2.3. Fur die Verteilung von Erschlieflungskosten im Sinnn des Baugesetzbuches sowie von Beitragen fur Investitionsaufwand und Grundstucksanschlusse im Sinne des bazerischen Kommunalabgabengesetzes ist ohne Rucksicxht darauf, wem die Beitragsbescheide zugestellt werden, der gegenwartige Erschlieflungszustand maflgebend. Der Verk aufer tragt die bereits beitrags- oder teilbeitragsfahig angefallenen Herstellungskosten fur vorhandene oder im Bau befindliche Erschlieflungsanlagen, soweit sie bei weitestgehender Ausnutzung der Moglichkeiten der Kostenspaltung auf den Vertragsgegenstand entfallen; er tragt weiter schon angefallene oder kunftig noch anfallende Aufwendungen zum Grunderwerb fur diese Anlagen. Daruberhinaus anfallende Kosten fallen dem Kaufer zur Last. Bei Vorausleistungen, die der Verkaufer erbracht haben sollte, hat es aber sein Bewenden. 2.4. Der Kaufer duldet auch das Fortbestehen der in Abschn. 1 naher bezeichneten, in Abt. II des Grundbuches eingetragenen Belastungen sowie der in Ziff.1 naher bezeichneten Sicherungshzpothek uber DM 300.000,--. Der Verkaufer ist nicht verpflichtet, sie zu beseitigen. Der Kaufer ist Mieter des Vertragsobjekts. Die Vertragsparteien sind sich einig, dafl das Mietverhaltnis zwischen ihnen mit Besitzubergang endet. Im ubrigen gewahrleistet der Verkaufer, dafl das Eigentum frei von im Grundbuch eingetragenen Belastungen und frei von Miet- und Pachtverhaltnissen und sonstigen gegen den Kaufer fortgeltenden Besitzrechten auf diesen ubergeht. 2.5. Im ubrigen ubernimmt der Verkaufer Gewahrleistung weder fur Rechts- noch fur Sachmangel. Insbesondere ubernimmt er keine Gewahrleistung dafur, dafl irgendwelche weiteren Baumaflnahmen oder eine fnderung der bisherigen Grundstucksnutzung zulassig sind. Der Verkaufer erklart jedoch: a) vom Bestehen altrechtlicher Dienstbarkeiten ist ihm nichts bekannt, a) ihm ist nichts davon bekannt, dafl es sich bei den auflerlich erkennbaren Grundstucksgrenzen nicht auch um die Katastergrenzen handeln oder dafl die Grundstucksgrofle von der im Grundbuch angegebenen Grofle abweichen wurde, a) ihm ist nichtrs davon bekannt, dafl die gegenwartige Grundstucksnutzung nach offentlichem Recht nicht zulassig ware oder dafl dem Bestand der mitverkauften Bauwerke offentlich-rechtliche Vorschriften entgegenstehen. -11- German Version Exhibit 10(iii) 4. Auflassung ---------- 4.1. Zur Auflassung ist der Verkaufer erst verpflichtet, wenn der Kaufpreis vollstandig bezahlt ist und dem Notar die Unbedenklichkeitsbescheinigung des Finanzamtes vorliegt, die ausweist, dafl der Eintragung des Eigentumsubergangs grunderwerbsteuerliche Bedenken nicht entgegenstehen. 5. Kaufpreis --------- 5.1. Der Kaufpreis betragt DM 2.200.000,-- - zwei Millionen zweihunderttausend Deutsche Mark-. Wird das Ankaufsrecht erst nach dem 31.12.2000 ausgeubt, so erhoht sich der Kaufpreis um DM 77.000,--. Der Kaufer kann und wird nicht fur die Umsatzsteuer optieren. Hierauf sind anzurechnen die vom Kaufer geleistete Sicherheitsleistung in Hohe von DM 300.000 - dreihunderttausend Deutsche Mark-, soweit dem Vermieter keine Zuruckbehaltungsrechte aus dem Mietverhaltnis zustehen, sowie die bis zum Besitzubergang geleisteten halftigen Mietzinszahlungen ohne Berucksicxhtigung der Mehrwertsteuer und Nebenkosten, jedoch nur soweit sie zum Zeitpunkt des Besitzuberganges auch tasachlich geleistet worden sind. 5.2. Der Kaufpreis wird zur Zahlung fallig, sobald die nachgenannten Voraussetzungen eingetreten sind, der die Annahme beurkundende Notar dies dem Kaufer - sei es auch unverbindlich - mitgeteilt hat und seit Absendung der Mitteilung drei Wochen vergangen sind. Er mufl innerhalb der Frist beim Verkaufer eingehen; bis zur Falligkeit ist er nicht zu verzinsen. a) Die in Ziff. 15 des Mietvertrages zur Eintragung bewilligte Auflassungsvormerkung mufl im Rang unmittelbar hinter der in Ziff.1 naher bezeichneten Belastungen eingetragen sein: auf Veranlassung des Kaufers eingetragene Belastungen storen nicht; b) Es mufl eine Erklarung der Gemeinde vorliegen, wonach dieser gesetzliche Vorkaufsrechte nach dem Baugesetzbuch und dem dazu erlassenen Maflnahmegesetz nicht zustehen oder sie solche Vorkaufsrechte aus Anlafl dieses Vorkaufes nicht ausubt. c) Fur alle der Vormerkung im Range vorgehenden Belastungen mussen, soweit sie nicht nach Maflgabe dieses Vertrages bestehen bleiben durfen, zum Grundbuchvollzug geeignete Loschungsunterlagen vorliegen. Ddie Loschungsunterlagen durfen dem Notar unter der Auflage zur Verfugung gestellt worden sein, sie nur zu verwenden, wenn Zahlungen an die Glaubiger geleistet werden, die allerdings insgesamt eine Hohe von DM 1.200.000,-- nicht ubersteigen durfen. Ist dem notar eine solche Auflage gemacht worden, so hat der Kaufer - wenn die ubrigen Falligkeitsvoraussetzungen vorliegen - diese Betrage zu Lasten des Kaufpreises an die Grundpfandrechtsglaubiger zu zahlen. 5.3. Im Falle des Zahlungsverzuges tritt an die Stelle des gesetzlichen Zinssatzes ein Zins von 4 - vier - Prozentpunkten uber dem jeweiligen Diskontsatz der Deutschen Bundesbank. 5.4. Wegen seiner Verpflichtung zur Zahlung des Kaufpreises in Hohe von DM 2.200.000,-- unterwirft sich der Kaufer der sofortigen Zwangsvollstreckung aus dieser Urkunde mit der Maflgabe, dafl die Zwangsvollstreckung erst nach Falligkeit stattfinden darf. Falls dem Notar zur Falligkeit notige Loschungsbewilligungen nur unter der Auflage vorliegen, Zahlungen an Glaubiger zu leisten, darf die Zwangsvollstreckung nur mit dem Ziel der Zahlung an den Notar stattfinden; der Notar hat dann die Auflagen aus dem beigetriebenen Betrag zu erfullen und den Rest an den Verkaufer auszuzahlen. -12- German Version Exhibit 10(iii) 6. Mitwirkung bei Belastung ------------------------ Falls der Kaufer einen Teil des Kaufpreises mit Darlehen finanzieren will, welche durch Hypotheken oder Grundschulden zu sichern sind, verpflichtet sich der Verkaufer, vor Eigentumsubertragung bei der Bestellung solcher Hzpotheken und Grundschulden insoweit mitzuwirken, als es zu ihrer Entstehung und zur dinglichen Zwangsvollstreckungsunterwerfung erforderlich ist. Der Verkaufer ubernimmt jedoch keine personliche Haftung und keine Kosten. Solange der Kaufpreis nicht vollstandig bezahlt ist, kann der Verka ufer seine Mitrwirkung davon abhangig machen, dafl sichergestellt ist, dafl die Grundpfandrechte nur zur Sicherung der Kaufpreiszahlung verwendet werden. 7. Gesetzliche Vorkaufsrechte -------------------------- Die Vertragsteile ermachtigen den Notar, eine Erklarung der Gemeinde wegen der gesetzlichen Vorkaufsrechte nach dem Baugesetzbuch und dem dazu erlassenen Maflnahmengesetz herbeizufuhren, der Gemeinde gegebenenfalls den Abschlufl dieses Vertrages durch bersendung einer beglaubigten Abschrift dieser Urkunde anzuzeigen und Erklarungen der Gemeinde zum Vorkaufsrecht entgegenzunehmen. 8. Kosten ------ Der Notar hat die Beteiligten uber die Bedeutung der Unbedenklichkeitsbescheinigung belehrt. Die Beteiligten befreien die Finanzbehurden in Ansehung des Verfahrens zur Veranlagung der Grunderwerbssteuer von der Pflicht, dem Notar gegenuber das Steuergeheimnis zu wahren. Der Notar hat darauf hingewiesen, dafl die Beteiligten ungeachtet der getroffenen Vereinbarungen nach auflen hin fur Kosten und in der Regel auch fur die Grunderwerbssteuer als Gesamtschuldner haften. URNr. 2 2856 /1997 N a c h t r a g --------------- zu Urkunde des Notars Dr. Michael. Bohrer, Munchen, vom 29.08.1997, URNr. 2 - 2776/1997 Heute, den funften September neunzehnhundertsiebenundneunzig 05. September 1997 erschienen vor mir, Dr. Roman Forthauser, Notar- assessor, amtlich besteller Vertreter von -13- German Version Exhibit 10(iii) Dr. Michael Bohrer Notar mit dem Amtssitz in Munchen, in der Geschaftsstelle in 80333 Munchen, Brienner Strafle 25: 1. Herr Wolfgang B a u e r geb. am 04.02.1951, Dipl.-Wirtschaftsingenienr, Niblerstr.. 12, 82223 Eichenau, personlich bekannt, - - nachfolgend "Vermieter" genannt - 2. Herr Gerd B e h r e n s geb. am 12.05.1937, Industriekaufmann, Karl-9Z3hm-Str. .2" 85590 Baldham, personlich bekannt. Herr Behrens ~gab bekannt, die.nactifolgenden Erklarungen nicht sondern als alleinvertretungsberechtigter Geschaftsfuhrer im Namen der im Handelsregister des Amtsgerichts Munchen unter HRB Nr.99315 eingetragenen TES-GmbH Hard- und Software-Entsorgung Umweltberatung, Vermogensanlagen, Vermogensverwaltung mit dem Sitz in Baldham, Gemeinde Vaterstetten, Landkreis Ebsberg, Anschrift: Karl-Bohm-Str. 2, 85598 Baldham, nachfolgend "Mieter" genannt-. Hierzu bescheinige ich aufgrund:Einsicht in das Handelsregister beim Amtsgericht Munchen vom 26.08.1997, HRB Nr. 99 315, dafl, Herr Gerd Behrens als Geschaftsfuhrer einseln zur Vertretung der Gesellschaftbefugt ist. Die Erschienenen gaben nachfolgend mundlich ubereinstimmende Erklarungen ab, die ich wie folgt, beurkunde: 1. Vorbemerkungen -------------- Mit Urkunde des Notars Dr. Michael, Bohrer, Munchen, vom 29.08.1997, URNr. 2 - 2776/1997 haben die Vertragsteile einen Mietvertrag mit Ankaufsoptioni geschlossen - nachfolgend "Vorurkunde", genannt - Die Vorurkunde lag heute in Urschrift auf. Die Beteiligten kennen ihren Inhalt, verzichten auf neuerliches Vorlesen und Beifugen zu dieser Urkunde; hierauf wird verwiesen. 2. Nachtrag -------- Unter Ziff. 14 der Vorurkunde wurde dem Mieter zur Absicherung von Ruckzahlungs-anspruchen eine Sicherunghypotek im Hochstbetrag von DM 300.000,-- bestellt. -14- German Version Exhibit 10(iii) Die Vertragsparteien sind daruber e i n i g dafl diese Hochstbetragshypothek der Sache nach eine einf ache Sicherungshypothgk ist. Die Hypothek dient Absicherung des in Ziff. 14 der Vorurkunde naher bezeichneten Ruckzahlungsanspruchs in Hohe von DM 300.000,--, der zwar sowohl der Hohe als auch des Grundes nach bedingt, gleichwohl aber bestimmt ist. Statt der in Ziff. 14 der Vorurkunde bezeichneten Hochstbetrageshypotek bestellt daher der Vermieter der Mieter eine Sicherungshypothek in Hohe von DM 300.000.-- zur Absicherung des in Ziff. 14 der Vorurkunde naher bezeichneten Ruckzahlungsanspruches an dem in Ziff. 1 der vorurkunde naher bezeiehneten Grundbesitz sitz im Rang unmittelbar nach den in Ziff. 1 der Vorurkunde wiedergegebenen Belastungen in Abt. II und III des Grundbuchs. Der Vermieter b e w i l l i g t, die Vertragstelle b e a n t r a g e n die Eintragung dieser Sicherungshypothek in das Grundbuch. Eintragung an zunachst nachstoffener Rangstelle ist zulassig und wird hiermit bewilligt und beantragt. Die Vertrageteile sind sich daruber einig, dafl der der Sicherungshypothek zugrunde-liegende Ruckzahlungsanspruch nicht abtretbar ist. 3. Rangrucktritt ------------- Gemafl Ziff. 15 der Vorurkunde wird fur den Mieter eine Auflassungsvormerkung an dem in Ziff. 1. der. Vorurkunde naher bezeichneten Grundbesitz zur Eintragung gelangen. Der Mieter tritt mit seiner vorbestellten Sicherungshypotek im Rang hinter die zu seinen Gunsten zur Eintragung gelangende Auflassungsvormerkung zuruck und bewilligt und beantragt die Eintragung des Rangrucktritts im Grundbuch. Der Vermieter als derzeitiger Eigentumer stimmt dem Rangrucktritt zu. 4. Bezug zur Vorurkunde -------------------- Im ubrigen verbleibt es bei den Bestimmungen der Vorurkunde. 5. Abschriften ----------- Abschriften dieser Urkunde erhalten der Vermieter, der Mieter, das Amtsgericht Landsberg a. Lech - Grundbuchamt -15- German Version Exhibit 10(iii) Vorgelesen vom Notarvertreter, von den Beteiligten genehmigt und eigenhandig unterschrieben. [Signatures and notary seal] -16- German Version Exhibit 10(iii) Die vorstehende Abschrift ist ein Auszug aus der mir vorliegenden Urschrift meiner Urkunde. Sie stimmt mit der Urschrift uberein, enthalt jedoch nicht die Auflassungs-vormerkung, in Abschnitt 15. Bestimmungen zu anderen Gegenstanden sind in diesem Abschnitt nicht enthalten. Munchen, den 10. September 1997 Dr. Roman Forthauser, Notarassessor, amtl. best. Vertreter des Notars Dr. Michael Bohrer -17- German Version Exhibit 10(iii) B e s t a t i g u n g --------------------- Ich bestatige, dafl Herr Gerd Behres, Karl-Bohm-Str. 2, 85598 Baldham, als Geschaftsfuhrer der TES-GmbH Hard- und Sof tware-Entsorgung, Umweltberatung, Vermogensanlagen Vermogensverwaltung mit dem Sitz in Baldham, am 29. August 1997 zu URNr. 2 - 2776/ 1997 einen Gewerbemietvertrag mit Ankaufs-option unterzeichnet hat. Betroffen ist das Grundstuck der Gemarkung: Landsberg a. Lech, Flst. Nr. 2925/161, vorgetragen im Grundbuch des .Amtsgerichts Landsberg a. Lech von Landsberg a. Lech Band 170 Blatt.8614. Munchen, den 01. September 1997 [signed] (Dr. Roman Forthauser) amtl.best. Vertreter des Notars Dr. Michael Bohrer EX-10.IV 8 LEASE FOR BUILDING #2 English Version Exhibit 10(iv) A B S T R A C T RENTAL AGREEMENT Dated: November 3, 1997 Parties: Ms. Roswitha Hamburger Karwendelstrasse 25 82152 Krailling, Germany Landlord TES GmbH Karl-B^hm-Str. 2 85598 Baldham, Germany Tenant Section 1 1. Property Address: Max-von-Eyth-Str. 7, Landsberg a. Lech. Property includes a large Warehouse, and storage area surrounding the building. 1. Ms. Hamburger rents the building described above to TES GmbH. The landlord does not guarantee that the premises are suitable for the technical uses proposed by TES GmbH. The Tenant is responsible for obtaining any necessary governmental approvals for its use of the building. The Renter may only install heavy machinery after Landlord gives his consent. 1. The property is leased "as is". 1. The building does not have restroom facilities. Tenant plans to costruct bathroom and shower facilities at its own cost in the building. In exchange, Landlord agrees to reduce the rent for the first three years of the lease pursuant to the Terms of Section 3, Paragraph 1. All other renovations will be the responsibility of the Tenant and upon termination of the lease, Tenant must return the building to its original state if requested to do so by Landlord. Section 2 1. Lease begins on January 1, 1998. Term: 5 years. Tenant has a 5-year option which must be exercised no later than one year prior to the expiration of the term. 1. The lease may not be terminated by either party prior the expiration of the term unless there are extraordinary circumstances. Section 3 1. Rent First three years: DM 7,500.00 per month Fourth and Fifth years: DM 8,500.00 per month If the option is exercised, the rent will be negotiated at that time. Value Added Tax Tenant shall also pay the statutorily required value added tax as follows: First three years: DM 1,125.00 per month -1- English Version Exhibit 10(iv) Fourth and Fifth years: DM 1,275.00 per month In addition Tenant must pay all utilities. Section 4 The rent and utilities shall be paid by the third business day of each month. Payment shall be made to Roswitha Hamburger at the Volksbank Landsberg, Acct. No. 828270. Late payments shall be subject to a DM 10.00 late charge. Section 5. Right of Lien Tenant represents that the personal property it is bringing into the premises is free and clear of all liens with the exception to the items listed in the attached exhibit. Tenant agrees to keep Landlord informed of any and all liens that may be levied against it personal property located on the premises. Section 6 Security Deposit Tenant shall pay a security deposit of DM 45,000 in the form of a guaranteed letter of credit. Section 7 Open Space. [section deleted] Section 8 Cosmetic Maintenance Repairs Tenant shall be responsible for all normal cosmetic maintenance repairs. Normal cosmetic maintenance repairs include interior paint for walls, ceilings, door and window frames, radiators etc., and cleaning, painting, or sealing of all flooring. Section 9 General Maintenance Tenant shall be responsible for general maintenance of the building. Tenant shall pay for all general maintenance up to DM 200 per repair up to a maximum of 2% of the gross annual rent, not including utilities. These repairs are limited to maintenance of the electrical system, plumbing, windows, locks, kitchen appliances, and furnace. Section 10 Signage All signage on to be used on the outside of the building must be approved by Landlord in writing. Landlord's approval is revocable. Upon termination of the lease, Tenant shall remove all signage. Tenant is responsible for compliance with all rules and regulations governing signage and advertising. Sections 11-24 Miscellaneous Terms [Standard lease terms referred to by reference] Section 25 Integration Clause This lease contains all terms, conditions and understandings of the parties and replaces any and all prior agreements oral or written. Any amendments to this lease must be made in writing. Section 26 Severability Clause. -2- English Version Exhibit 10(iv) Baldham, the 3rd of November, 1997 [signed] [signed] TES GmbH Roswitha Hamburger G. Behrens, Managing Director -3- English Version Exhibit 10(iv) USE AGREEMENT Dated: October 31, 1997 Parties: Ms. Roswitha Hamburger Karwendelstrasse 25 82152 Krailling, Germany Landlord TES GmbH Karl-B^hm-Str. 2 85598 Baldham, Germany Tenant The parties have entered into a lease agreement for the property located at Max-von-Eyth-Str. 7 in Landsberg am Lech. The lease term begins on January 1,1998. Because significant renovations need to be made by Tenant prior to January 1, 1998, TES GmbH shall have the right to occupy the premises as of October 1, 1997. The mutual duties and obligations of the parties shall be governed by the terms of the lease agreement. Tenant shall pay Landlord the following amounts for its use of the premises prior to the date the lease term begins: Monthly rent DM 7,500.00 Monthly utilities DM 400.00 DM 7,900.00 15% VAT DM 1,185.00 DM 9.085.00 Baldham. October 31, 1997 [signed] [signed] TES GmbH Roswitha Hamburger G. Behrens, Managing Director -4- German Version Exhibit 10(iv) MIETVERTRAG Zwischen Frau Roswitha Hamburger, Karwendelstrafle 25, 82152 Krailling - Vermieter - und Fa. TES GmbH, Karl-Bohm-Str. 2., 85598 Baldham Technical Environment Solutions - Mieter - wird folgender Mietvertrag geschlossen: P. 1 Mietobjekt (1) Mietobjekt sind die in dem beigefugten Lageplan markierten Raumlichkeiten und Freiflachen in dem Anwesen Max-von-Eyth-Str. 7, 86899 Landsberg am Lech: - Halle - die im Norden der Halle unmittelbar anschlieflenden beiden Nebenraume - die Stellplatze entlang der ostlichen Grundstucksgrenze (2) Der Vermieter ubernimmt keine Gewahr dafur, dafl die vermieteten Raumlichkeiten und Flachen den technischen Anforderungen und behordlichen Vorschriften den vom Mieter verfolgten Nutzungszwecke entsprechen. Etwa erforderliche Genehmigungen hat der Mieter selbst auf eigene Kosten einzuholen. Entsprechendes gilt fur die Erfullung behordlicher Auflagen. (3) Das Mietobjekt wird in dem Zustand vemietet, wie es steht und liegt. Die Parteien erstellen bei bergabe der Mietsache ein bergabeprotoll, das Bestandteil dieses Mietvertrages ist. Der Mieter kann aus dem dort festgehaltenen Zustand keine Gewahrleistungsanspruche herleiten. (4) In der Halle und den Nebenraumen ist kein WC vorhanden. Der Mieter sieht daher vor, auf eigene Kosten in einem der beiden Nebenraume ein WC und Duschen einzubauen. Im Gegenzug erklart sich der Vermieter mit der Reduzierung des Mietzinses in den ersten drei Jahren gem. P. 3 Ziffer 1 einverstanden. Umbaumaflnahmen durch den Mieter sind dem Vermieter zuvor anzueigen und bedurfen dessen Zustimmung. Sie erfolgen stets auf eigene Kosten des Mieters. Dadurch ausgeloste Genehmig-ungserfordernisse bzw. Auflagen sind Sache des Mieters. Der Mieter hat die baulichen Mafl-nahmen bei Beendigung des Mietverhaltnisses auf Verlangen des Vermieters zu entfernen und den ursprunglichen Zustand wieder herstellen. (5) Dem Mieter werden vom Vermieter folgende Schlussel ausgehandigt: P. 2 Mietdauer -1- German Version Exhibit 10(iv) (1) Das Mietverhaltnis beginnt am 01.01. 1998 und wird fur die Dauer von 5 Jahren geschlossen. Der Mieter erhalt eine Option fur weitere 5 Jahre, weiche spatestens ein Jahr vor Ablauf der festen Mietdauer schriftlich ausgeubt werden mufl. (2) Mieter wie Vermieter konnen das Mietverhaltnis vor Ablauf der festgelegten Mietdauer nur auflerordentlich aus wichtigem Grund kundigen. Die Kundigung hat schriftlich zu erfolgen. Auf P. 21 Ziffern 2, 3 und 4 wird hingewiesen. P. 3 Mietzins (1) Der monatliche Mietzins betragt wahrend der ersten drei Jahre der Laufzeit netto DM 7.500,00. des vierten und funften Jahres netto DM 8.500,00. Im Falle der Optionsausubung wird fur die weitere Laufdauer von funf Jahren ein neuer Mietzins verhandelt, dessen Hohe sich an dem zuletzt geltenden Mietzins orientiert. Infolge der vom Vermieter gem. P. 9 UStG ausgeubten Option hat der Mieter zusatzlich zu dem Nettomietzins die Mehrwertsteuer in der jeweils geltenden gesetzlichen Hohe zu entrichten. Derzeit betragt sie 15% USt fur die ersten drei Mietjahre DM 1.125,00 15% USt fur das vierte und funfte Mietjahr DM 1.275,00 (2) Daneben hat der Mieter eine monatliche Vorauszahlung auf die Betriebskosten iHv DM 400,00 zuzuglich Mehrwertsteuer zu leisten. Fur Art und Umfang der Betriebskosten ist die Anlage 3 zu P. 27 Abs. 1 der Zweiten Berechnungsverordnung in ihrer jeweils geltenden Fassung maflgeblich. In Erganzung hierzu tragt der Mieter auch die Kosten der angemieteten Zahler fur Warme- und Wasserverbrauch. In Abweichung zu P. 11 Ziff. 2 werden die Kosten fur Heizung und Warmwasser wie auch sonstige, verbrauchsabhangige Betriebskosten zu 100% nach dem konkreten Verbrauch abgerechnet. Soweit Betriebskosten sich erhohen, vermindern, neu entstehen oder wegfallen, ist dies fur die anteilige Umlageberechnung zu berucksichtigen. Entsprechend ist der Vermieter berechtigt, die Vorauszahlungen auf die Betriebskosten neu festzulegen, falls die tatsachlich entstehenden Betriebskosten durch die Vorauszahlungen nicht mehr gedeckt werden. Der Mieter kann seinerseits eine Herabsetzung, der Vorauszahlungen verlangen, falls sich diese als zu hoch erweisen. (Zur Abrechnung der Betriebskosten vgl. P. 11) P. 4 Falligkeit Der Mietzins ist samt Betriebskostenvorauszahlung bis spatestens zum dritten Werktag eines Kalendermonats an den Vermieter im voraus zu entrichten. Die Zahlung hat zu erfolgen an: Kontoinhaber: Roswitha Hamburger -2- German Version Exhibit 10(iv) Bankverbindung: Volksbank Landsberg Kontonummer: 828270 Bankleitzahl: 70093200 Fur die Rechtzeitigkeit der Zahlung kommt es nicht auf die Absendung, sondern auf den Eingang bzw. Gutschrift des Geldes an. Bei verspateter Zahlung ist der Vemueter berechtigt, fur jede schriftliche Abmahnung DM 10,00 an pauschalierten Mahnkosten unbeschadet weiterer Verzugszinsen zu verlangen. P. 5 Pfandrecht Der Mieter erklart, dafl die beim Einzug in die Mietraume von ihm eingebrachten Sachen sein freies Eigentum und nicht gepfandet sind, mit Ausnahme der im Beiblatt aufgefuhrten Gegenstande. Der Mieter verpflichtet sich den Vermieter von etwaigen Pfandungen eingebrachter Sachen unverzuglich zu unterrichten. P. 6 Kaution / Sicherheit Der Mieter hat dem Vermieter fur die Erfullung seiner Verpflichtungen aus dem Mietvertrag eine Kaution iHv DM 45.000,00 in Form einer Bankburgschaft mit der Verpflichtung zur Zahlung auf erstes Anfordern zu erbringen. Die Anforderung darf nur von einer schlussigen Darlegung, der Forderungen aus dem Mietverhaltnis und der Vorlage einer vorausgegangenen Mahnung des Vermieters an den Mieter abhangig gemacht werden. Die Burgschaft ist bereits bei berlassung des Mietobjekts zum Zwecke des Umbaus, spatestens vierzehn Tage nach diesem Zeitpunkt zu leisten. P. 7 Freiflachen [This section is deleted by the parties] P. 8 Schonheitsreparaturen Der Mieter hat wahrend der Dauer des Mietverhaltnisses alle funf Jahre die Schonheits-reparaturen auf eigene Kosten zu ubernehmen. Zu den Schonheitsreparaturen gehoren insbesondere Anstrich der Wande und Decken, Anstrich (Versiegelung) der Boden bzw. Reinigung der Bodenbelage, Innenanstrich von Turen, Fenstenrahmen, Heizkorpern und Versorungsleitungen. Erganzend wird fur den Fall der Beendigung des Mietverhaltnisses auf P. 22 Ziff. 2 hingewiesen. P. 9 Instandhaltung Instandhaltungsmaflnahmen, die wahrend der Mietdauer erforderlich werden, hat der Mieter zu tragen, soweit die Kosten fur die einzelne Reparaturmaflnahme DM 200,00 und der dem Mieter dadurch entstehende jahrliche Aufwand 2% der Jahresbruttomiete ohne Betriebskosten nicht ubersteigen. Solche Maflnahmen beschranken sich auf Schaden und Wartungsarbeiten an Installationsgegenstanden fur Elektritzitat, Wasser und Glas, Heiz- und Kocheinrichtungen, Fenster- und Turverschlussen. P. 10 Werbemaflnahmen Der Werbung oder dem Verkauf dienende Vorrichtungen (z.B. Firmenschilder, Werbetexte, Schaukasten. Leuchtreklame) durfen an den Auflenflachen und den Fensterscheiben der Mietraume nur mit schriftlicher Zustimmung des Vermieters angebracht werden. Die Zustimmung ist widerruflich. Im Falle des Widerrufs und -3- German Version Exhibit 10(iv) bei Raumung des Mietobjekts ist der Mieter zur Wiederherstellung des alten Zustandes verpflichtet. Die Beachtung offentlich-rechtlicher Erlaubnisse, insbesondere eine bauaufsichtliche Genehmigung, sowie sonstige, behordliche Anordnungen in diesem Zusammenhang obliegt dem Mieter. Ebensolches gilt fur die mit den Reklamevorrichtungen einhergehende Verkehrs-sicherungspflicht. P. P. 11-24 Sonstige Vereinbarungen Die Bestimmungen der P. P. 11-24 weiche als Anlagen diesem Vertrag beigefugt sind, von deren Inhalt der Mieter Kenntnis und von ihm anerkannt werden, sind wesentliche Bestandteile dieses Mietvertrages. Entsprechendes gilt fur den Lageplan des Mietobjekts und dem bernahme-protokoll. P. 25 Nebenabreden Die vorstehenden Bestimmungen sind vollstandig und erschopfend. Nebenabreden hierzu existieren nicht. Sollen von den Regelungen dieses Vertrages abweichende oder erganzende Vereinbarungen getroffen werden, so bedarf es hierzu der Schriftform. P. 26 Saivatorische Klausel Sollten einzelne Bestimmungen in diesem Vertrag ungultig sein, so bleibt die Wirksamkeit des Vertrages im ubrigen unberuhrt. Fur diesen Fall vereinbaren die Parteien, die unwirksame Bestimmung durch eine dem Sinn und der wirtschaftlichen Zielsetzung moglichst nahekommende Regelung zu ersetzen. Baldham, den 3.11.97den __________ den ________ (signed) (signed) - -------------------------- ---------------------------- Fa. TES GmbH, Roswitha Hamburber Gerd Behrens, Geschaftsfuhrer -4- German Version Exhibit 10(iv) NUTZUNGSVEREINBARUNG Frau Roswitha Hamburger, KarwendeLstrafle 25, 82152 Krailling -Eigentumer- und Fa. TES GmbH, Karl-Bohm-Str. 2, 85598 Baldham Technical Environment Solutions -Nutzer- vereinbaren folgendes: Die Parteien schlossen einen Mietvertrag fur einzelne Gewerberaume in dem Anwesen Max-von-Eyth-Str. 7 in Landberg am Lech ab. Mietbegin ist der 01.01.1998. Da vor Mietbeginn umfangreiche Umbauarbeiten in dem Mietobjekt erforderlich sind, wird der Fa. TES GmbH das in dem Mietvertrag beschriebene Mietobjekt bereits zum 01.10.97 uberlassen. Die gegenseitigen Rechte und Pflichten der Partei der Umbauphase bis zum 31.12.97 richten sich nach dem geschlossenen Mietvertrag, auf den hier vollumfanglich Bezug genommen wird. Die dortigen Regelungen sind bei den Parteien bekannt und werden hiermit zum Vertragsgegenstand gemacht. Fur den Nutzungszeitraum vom 01.10.97 bis 31.12.97 ist der Nutzer zur Entrichtung einer monatlichen Nutzungsvergutung und einer monatlichen Betriebskostenvorauszahlung zuzuglich Umsatzsteuer entsprechend P. 3 des Mietvertrages wie folgt verpflichtet: monatliche Nutzungsvergutung DM7.500,00 monatliche Betriebskostenvorauszahlung DM 400,00 ----------- DM7.900,00 15% Umsatzsteuer DM1.185,00 ----------- DM9.085,00 Baldham, den 31.10.97 (signed) - ----------------------------- -------------------------- Fa. TES GmbH vertreten durch Herrn Roswitha Hamburger Gerd Behrens, Geschaftsfuher -5- EX-10.V 9 AGREEMENT DATED FEBRUARY 2, 1998 English Version Exhibit 10(v) TES Inc. - -------------------------------------------------------------------------------- TRANSLATION AGREEMENT Between TES Inc. 4250 Republic Plaza 370 Seventeenth Street Denver, Colorado 80202 USA Represented by its President, Mr. Gerd Behrens Hereinafter TES Inc. And T-Cycle GmbH Larchenstrafle 13 84155 Bodenkirchen Represented by its Managing Director, Mr. Walter Tiessler Hereinafter T-Cycle The parties agree as follows: 1. TES Inc. will invest in T-Cycle GmbH and will acquire 49% of the company. T-Cycle will increase its paid in capital from DM 50,000 by DM 49,000 to a total of DM 99,000. TES will pay DM 49,000 for its interest in the company. 1. After the paid in capital has been increased and the funds for the capital increase have been paid in full, the parties' ownership interests in T-Cycle will be as follows: o Mr. Walter Tiessler, 50.5%, Capital Contribution DM 50,000 o TES Inc., 49.5%, Capital Contribution DM 49,000 1. Payment from TES Inc. will be made as follows: o DM 25,000 will be wired to T-Cycle's account immediately o The balance of DM 24,000 will be transferred to T-Cycle's account when the documentation for the increase of the paid in capital and a formal agreement of this transaction between the parties is finalized by a Notary. The final contract will be prepared during the night week of 1998. Munich, February 2, 1998. [signed] [signed] T-Cycle GmbH TES Inc. W. Tiessler Gerd Behrens, President Managing Director German Version Exhibit 10(v) TES Inc. - -------------------------------------------------------------------------------- VEREINBARUNG Zwischen TES Inc. 4250 Republic Plaza 370 Seventeenth Street Denver, Colorado 80202 USA Vertreten durch den Prasidenten Herrn Gerd Behrens - -TES Inc. ganannt- und T-Cycle GmbH Larchenstrafle 13 84155 Bodenkirchen vertreten durch den Geschaftsfuhrer Herrn Walter Tiessler - -T-Cycle genannt- Die hier genannten Parteien vereinbaren folgendes: 1. Die TES INC. wird sich an der T-Cycle GmbH mit einem Gesellschafteranteil von 49% beteiligen. Dazu wird die T-Cycle GmbH das vorhandene Stammkapital von DM 50.000,-- um weitere DM 49.000,-- auf insgesamt DM 99.000,-- erhohen. Die zu erbringende Stammeinlage von DM 49.000,-- wird die TES INC. zu 100% ubernehmen und voll einzahlen. 1. Nach Erhohung des Stammkapitals und der Einzahlung der neuen Stammeinlage sind die Gesellschaftsanteile an der T-Cycle GmbH wie folgt verteilt: o Herr Walter Tiessler, Gesellschaftsanteil ca. 50.5%, Stammeinlage DM 50.000,-- o TES INC., Gesellschaftsanteil ca. 49.5%, Stammeinlage DM 49.000,-- 1. Die Enzahlung der Stammeinlage der TES INC. erfolgt wie folgt: o DM 25.000,-- werden sofort auf ein Konto der T-Cycle GmbH uberwiesen. o Die restlichen Dm 24.000,-- werden bei notarieller Beglaugigung der Kapitalerhohung und Gesellschaftsubernahme fallig und auf ein Konto der T-Cycle GmbH uberwiesen. Ein endgultiger Vertrag wird in Woche 09/98 erstellt. Munchen, 16.2.1998 [signed] [signed] T-Cycle GmbH TES INC. W. Tiessler Gerd Behrens, President Gesch/ooftsfuhrer -----END PRIVACY-ENHANCED MESSAGE-----