-----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, DEUt/DQ787gQxmh/lGOh6GoOthVbamvxvsaT8ITN5lRzWqf66eSPBndtdSQcvALy /9V/60GgNhUYtN30NTMcgA== 0000893220-95-000764.txt : 19951120 0000893220-95-000764.hdr.sgml : 19951120 ACCESSION NUMBER: 0000893220-95-000764 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICC TECHNOLOGIES INC CENTRAL INDEX KEY: 0000756502 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 232368845 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13865 FILM NUMBER: 95593047 BUSINESS ADDRESS: STREET 1: 441 N FIFTH ST STE 102 CITY: PHILADELPHIA STATE: PA ZIP: 19123 BUSINESS PHONE: 2156250700 MAIL ADDRESS: STREET 2: 441 NORTH FIFTH STREET CITY: PHILADELPHIA STATE: PA ZIP: 19123 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL COGENERATION CORP DATE OF NAME CHANGE: 19891005 10-Q 1 ICC TECHNOLOGIES, INC. FORM 10-Q 1 Conformed Copy SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /X/ Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 1995, or / / Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ____ or ____ Commission file number 0-13865 ICC TECHNOLOGIES, INC. ------------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 23-2368845 ------------------------------ ------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 441 North 5th Street, Suite 102 Philadelphia, Pennsylvania 19123 ------------------------------------- -------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (215) 625-0700 -------------- Former name, former address and former fiscal year if changed since last report: not applicable -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, par value $.01 per share -------------------------------------- 14,677,542 shares outstanding as of October 25, 1995. ----------------------------------------------------- 2 INDEX TO FORM 10-Q REPORT
PART I. FINANCIAL INFORMATION PAGE NO. - ------- --------------------- -------- Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets at September 30, 1995 3 and December 31, 1994 Consolidated Statements of Operations for the three and nine months ended September 30, 1995 and 1994 4 Consolidated Statements of Cash Flows for the nine months ended September 30, 1995 and 1994 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 11 PART II OTHER INFORMATION Item 1. Legal proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 SIGNATURES 17
2 3 ICC TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1995 1994 ------------- -------------- ASSETS (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 3,855,335 $ 1,114,335 Receivables - Employees 28,667 28,667 Engelhard/ICC 157,543 124,095 Inventories, net 2,000 16,960 Prepaid expenses and other 187,284 65,210 ------------ ------------ Total current assets 4,230,829 1,349,267 RESTRICTED BANK CERTIFICATE OF DEPOSIT 2,500,000 0 INVESTMENTS IN ENGELHARD/ICC 0 1,048,255 PROPERTY AND EQUIPMENT, net 3,944 0 OTHER ASSETS 3,414 0 ------------ ------------ Total assets $ 6,738,187 $ 2,397,522 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - Trade $ 15,059 $ 93,838 Current portion of notes payable to stockholders 150,000 0 Accrued liabilities 165,058 182,944 ------------ ------------ Total current liabilities 330,117 276,782 ------------ ------------ LOSSES OF ENGELHARD/ICC IN EXCESS OF INVESTMENTS 2,904,804 0 ------------ ------------ NOTES PAYABLE TO STOCKHOLDERS 0 150,000 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value - Series F, authorized, issued and outstanding 135 shares at September 30, 1995, and 6,885 shares at December 31, 1994 (liquidation value $241,764 at September 30, 1995 and $11,632,063 at December 31, 1994 1 69 Series G Convertible, authorized and issued 400 shares; 350 shares outstanding (liquidation value $626,797 at September 30, 1995 and $591,318 at December 31, 1994) 4 4 Series H Convertible, authorized, issued and outstanding 1,500 shares at September 30, 1995 and December 31, 1994 15 15 Series I, authorized, issued and outstanding 500 shares at September 30, 1995 and December 31, 1994 5 5 Series J, authorized, issued and outstanding 225 shares at September 30, 1995 and December 31, 1994 2 2 Common stock, $.01 par value, authorized 50,000,000 shares, issued 14,592,540 shares at September 30, 1995 and 12,288,632 shares at December 31, 1994 145,925 122,887 Additional paid-in capital 34,907,976 29,241,534 Accumulated deficit (31,379,232) (27,222,346) Less: Treasury common stock, at cost, 66,227 shares (171,430) (171,430) ------------ ------------ Total stockholders' equity 3,503,266 1,970,740 ------------ ------------ Total liabilities and stockholders' equity $ 6,738,187 $ 2,397,522 ============ ============
The accompanying notes are an integral part of the financial statements. -3- 4 ICC TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Three months ended Nine months ended -------------------------------- ---------------------------------- September 30, September 30, September 30, September 30, 1995 1994 1995 1994 --------------- ------------- -------------- ---------------- REVENUES 0 $ 0 $ 6,500 $ 88,360 COST OF GOODS SOLD 0 0 5,961 80,335 Gross Profit 0 0 539 8,025 OPERATING EXPENSES: Marketing 0 0 0 155,283 Engineering and development 0 0 0 150,523 General and administrative 343,283 446,266 1,026,768 933,435 Total operating costs 343,283 446,266 1,026,768 1,239,241 Loss from operations (343,283) (446,266) (1,026,229) (1,231,216) INTEREST: Interest income 72,251 54,207 275,312 71,447 Interest expense on stockholders' loans (4,031) (2,750) (12,219) (10,736) 68,220 51,457 263,093 60,711 EQUITY INTEREST IN NET LOSS OF ENGELHARD/ICC (1,320,262) 0 (3,393,750) 0 NET LOSS $(1,595,325) (394,809) $(4,156,886) $(1,170,505) PREFERRED STOCK DIVIDEND REQUIREMENTS (84,446) (45,125) (215,339) (175,875) NET LOSS APPLICABLE TO COMMON STOCKHOLDERS $(1,679,771) $ (439,934) $ (4,372,225) $ (1,346,380) NET LOSS PER COMMON SHARE $ (0.12) $ (0.04) $ (0.34) $ (0.12) WEIGHTED AVERAGE COMMON SHARES 13,785,330 12,083,108 12,955,334 11,081,990
The accompanying notes are an integral part of the financial statements. -4- 5 ICC TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months Ended September 30, --------------------------------- 1995 1994 ----------------- -------------- Cash Flows from Operating Activities: Net loss $(4,156,886) $(1,170,505) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 826 49,181 Equity interest in net loss of Engelhard/ICC 3,393,750 0 Warrants issued for services rendered 25,000 Increase in bad debt and inventory reserve 9,000 111,112 (Increase) decrease in: Receivables (33,448) 45,035 Inventories 5,960 (67,664) Prepaid expenses and other (97,074) (20,341) Increase (decrease) in: Accounts payable (78,779) (21,361) Accrued expenses 41,423 (62,825) ----------- ----------- Net cash used in operating activities (890,228) (1,137,368) ----------- ----------- Cash Flows from Investing Activities: Capital contribution to Engelhard\ICC (1,000,000) 0 Repayments of loans from Engelhard\ICC 1,500,000 0 Purchase of restricted certificate of deposit (2,500,000) 0 Purchases of property and equipment, net (8,184) (9,300) ----------- ----------- Net cash used in investing activities (2,008,184) (9,300) ----------- ----------- Cash Flows from Financing Activities: Proceeds from issuance of common stock and warrants, net 5,639,412 5,062,303 Repayments of borrowings from stockholders 0 (185,272) Borrowings from Engelhard Corporation 0 400,000 ----------- ----------- Net cash provided by financing activities 5,639,412 5,277,031 ----------- ----------- Net increase in cash and cash equivalents 2,741,000 4,130,363 Cash and Cash Equivalents, Beginning of Period 1,114,335 1,142,674 ----------- ----------- Cash and Cash Equivalents, End of Period $ 3,855,335 $ 5,273,037 =========== ===========
The accompanying notes are an integral part of the financial statements. -5- 6 ICC TECHNOLOGIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1995 (1) BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. 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 accruals) considered necessary for a fair presentation have been reflected herein. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 1994 included in the Company's Annual Report on Form 10-K for the year then ended. Results of operations for the nine months ended September 30, 1995 are not necessarily indicative of results of operations expected for the full year. (2) BUSINESS AND GOING CONCERN CONSIDERATIONS Business ICC Technologies, Inc. ("ICC" or the "Company") is a Delaware Corporation. On February 7, 1994, pursuant to the terms and conditions of a Joint Venture Asset Transfer Agreement ("Transfer Agreement"), by and among ICC, its newly formed wholly-owned subsidiary, ICC Desiccant Technologies, Inc. ("I Partner"), and Engelhard Corporation ("Engelhard") and its newly formed wholly-owned subsidiary, Engelhard DT, Inc. ("E Partner"), ICC and Engelhard, through their respective subsidiaries, formed a Pennsylvania general partnership named "Engelhard/ICC" (the "Partnership"). In exchange for a 50% interest in the Partnership, ICC transferred to the Partnership through its wholly-owned subsidiary, I Partner, substantially all of its assets, with the exception of cash and certain other assets not related to the desiccant air conditioning business, subject to certain liabilities, and Engelhard, in exchange for a 50% interest in the Partnership, (a) contributed to the Partnership through its wholly-owned subsidiary, E Partner, approximately $8,600,000 in cash, (b) entered into a Supply Agreement pursuant to which it agreed to supply desiccants to the Partnership, (c) entered into a Technology License Agreement pursuant to which Engelhard and the Partnership licensed to each other certain technology rights, and (d) agreed to provide credit support to the Partnership in the amount of $3,000,000. The Partnership was formed to engage in the business of designing, manufacturing and selling desiccant wheel components and desiccant air conditioners for the dehumidification cooling markets, industrial drying/dehumidification market and the air conditioning and microbe reduction market for health care facilities ("Partnership Business"), and succeed to the desiccant air conditioning business conducted by ICC prior to the formation of the Partnership and the activities of ICC and Engelhard under the Joint Development Agreement dated May 26, 1992. As a result of the consummation of the Transfer Agreement, ICC has become principally a holding company, owning a 50% interest in the Partnership through ICC's wholly-owned subsidiary, I Partner, which is a co-general partner of the Partnership. Although ICC is not permitted to engage directly or indirectly in any activities that would conflict with the Partnership Business as long as the Partnership is in effect, ICC is not precluded from engaging in other activities. 6 7 (2) BUSINESS AND GOING CONCERN CONSIDERATIONS, Continued Prior to consummation of the Transfer Agreement, ICC was engaged in the business of designing, manufacturing and marketing environmentally beneficial and energy efficient, desiccant cooling systems for climate control for commercial buildings. The Partnership has and the Company expects the Partnership to continue to conduct such business and to market its products to such potential users. Going Concern The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Revenues and the Company's share of results of operations of Engelhard/ICC have been insufficient to cover costs of operations for the nine months ended September 30, 1995. The Company has incurred cumulative losses since inception of $31,379,232 through September 30, 1995. In order to continue operations, the Company has had to raise additional capital to offset cash consumed in operations and support of the Partnership. Until the Partnership generates positive cash flows from operations, it will be primarily dependent upon the partners to provide any required working capital. The Company's continuation as a going concern is dependent on its ability to: (i) generate sufficient cash flows to meet its obligations on a timely basis, (ii) obtain additional financing as may be required, and (iii) ultimately attain profitable operations and positive cash flows from operations and its investment in the Partnership. The accompanying financial statements do not include any adjustments that may result from the Company's inability to continue as a going concern. Management intends to raise additional capital as required to continue operations and to support the Partnership; however, there can be no assurance that the Company will be able to raise additional capital. See Note 4 Stock Transactions. 7 8 (3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP The following are the summarized unaudited financial results of the Partnership:
Quarter ended Quarter ended Nine months ended Period February September 30, 1995 September 30, 1994 September 30, 1995 7 to September 30, 1994 ------------------ ------------------ ------------------ --------------- RESULTS OF OPERATIONS: Revenues $ 2,009,538 $ 379,912 $ 7,171,504 $ 997,156 Cost of goods sold 2,283,118 328,282 7,175,429 876,872 --------- ------- --------- ------- Gross profit(loss) (273,580) 51,630 (3,925) 120,284 Operating expenses: Marketing 862,851 659,882 2,524,468 1,373,024 Engineering 280,470 290,897 694,747 750,357 Research and development 257,556 231,904 898,135 540,999 General and administrative 847,423 466,093 2,084,030 1,000,461 ------- ------- --------- --------- Loss from operations (2,521,880) (1,597,146) (6,205,305) (3,544,557) Interest expense(income) 118,643 (24,947) 582,194 (102,093) ------- -------- ------- --------- Net loss $(2,640,523) $ (1,572,199) $(6,787,499) $ (3,442,464) ============ ============= ============ =============
BALANCE SHEET INFORMATION: September 30, 1995 December 31, 1994 ------------------ ----------------- Cash $ 40,998 $ 648,451 Receivables 1,497,441 663,551 Inventory 4,358,148 2,439,509 Other current assets 47,181 75,836 Cash held in escrow 1,060,865 0 Property, plant and equipment 7,988,625 7,946,511 Other noncurrent assets 1,792,549 1,612,497 --------- --------- Total Assets $16,785,807 $13,386,355 =========== =========== Current liabilities $ 1,628,157 $ 1,730,732 Short term loan 2,750,000 0 Long term debt 8,714,570 175,044 Notes payable to general partners 0 8,000,000 Partners' capital 3,693,080 3,480,579 --------- --------- Total Liabilities and capital $16,785,807 $13,386,355 =========== ===========
The Company's investment in the Partnership is owned by a wholly-owned subsidiary, ICC Desiccant Technologies, Inc., whose principal asset is the Partnership investment. The investment in the Partnership is accounted for under the equity method of accounting. On February 7, 1994, date of formation, the Company's investment in the Partnership was approximately $0. The investment remained at $0 through September 30, 1994 because the Company had no obligation to provide additional financial support to the Partnership. In December 1994, each general partner provided additional financing in the amount of $4,000,000 to the Partnership ("General Partners' Bridge Loan") in connection with the acquisition of the real property and substantially all other assets of an existing manufacturing facility located in Miami, Florida. The General Partners' Bridge Loan resulted in the Company increasing its investment in the Partnership as well as recording its proportionate share of previously unrecognized accumulated losses at that time. In May 1995, $1,500,000 of the aforementioned bridge loan was repaid to each general partner. The remaining amount, $2,500,000, for each general partner, was converted into an investment in the Partnership. 8 9 (3) INVESTMENT IN ENGELHARD/ICC PARTNERSHIP, Continued In April 1995, the Partnership obtained financing from the issuance of $8,500,000 of industrial development revenue bonds. The proceeds of these bonds were used to repay $3,000,000 of the General Partners' Bridge Loan, $1,500,000 to each general partner, and provide for improvements and capital equipment at the Miami facility. As of September 30, 1995, $1,060,865 of proceeds were held in escrow and will be released upon the Partnership's incurring of qualified expenditures. In May 1995, the Company guaranteed 50% of the Partnership's indebtedness associated with the industrial development revenue bonds. The Company has established an irrevocable letter of credit for $2,500,000 to support its portion of the guarantee. The Company's letter of credit is collateralized by a certificate of deposit in the amount of $2,500,000. The general partners are guarantors of the Partnership's long-term debt which totals approximately, $8,700,000 as of September 30, 1995. Subsequent to September 30, 1995, each general partner contributed an additional $1,000,000 to the Partnership. The Company's proportionate share of losses in the Partnership are $1,320,262 and $3,393,750 for the three and nine months ended September 30, 1995. The Partnership has incurred cumulative losses of approximately $12,400,000 since inception. The Company's share of the cumulative losses have resulted in recognition of losses in excess of the Company's investment and advances in the amount of $2,904,809. This amount has been reflected as a liability in the September 30, 1995 balance sheet. Receivables from the Partnership were $157,543 at September 30, 1995. Interest income earned by the Company in connection with the aforementioned General Partners' Bridge Loan amounted to approximately $164,000 in 1995. The Partnership charged the Company approximately $24,000 and $64,000 for the three and nine months ended September 30, 1995, respectively, in various administrative office support services which were provided. (4) STOCK TRANSACTIONS: Equity Investments On March 31, 1995, pursuant to a private placement, the Company issued 300,000 shares of Common Stock for gross proceeds of $3,300,000. At closing, cash of $1,100,000 was received along with a $2,200,000 promissory note. In August 1995, the $2,200,000 owed on the promissory note was collected. The Company granted warrants to purchase 375,000 shares of Common Stock at $9 per share to the placement agents in connection with the private placement. The Company received proceeds of approximately $932,000 from the exercise of stock options to purchase approximately 476,000 shares of Common Stock granted under its option plans for the three month period ended September 30, 1995. The Company received proceeds of approximately $1,683,000 from the exercise of stock options to purchase approximately 794,000 shares of Common Stock granted under its option plans for the nine month period ended September 30, 1995. The Company received proceeds of approximately $946,000 from the exercise of warrants to purchase approximately 265,000 shares of Common Stock for the nine month period ended September 30, 1995. 9 10 (4) STOCK TRANSACTIONS, Continued: Preferred Stock The shares of Series G and H Convertible Preferred Stock may be converted into Common Stock at the demand of the holder of such shares. The conversion rates are 8170.56 shares of Common Stock for each Series G share and 500 shares of Common Stock for each Series H share. In April 1995, the Series F and G Preferred Stock began to accrue a cash dividend at a rate equal to 15% of the respective accrued liquidation preference. Cumulative accrued undeclared and unpaid dividends as of September 30, 1995 for Preferred Stock amounted to approximately $908,000. In August 1995, the holders of 6,750 shares of Series F Preferred Stock converted their shares into 925,000 shares of Common Stock. (5) NEW ACCOUNTING STANDARD In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 establishes a fair value based method of accounting for stock-based compensation plans. It encourages entities to adopt that method in place of the intrinsic value method currently in place under the provisions of Opinion No. 25 of the Accounting Principles Board (APB). Under the fair value method accounting, all arrangements under which employees receive shares of stock or other equity instruments or under which employers incur liabilities to employees in amounts based on the price of its stock result in the measurement of compensation cost at the grant date of the award which is recognized over the service period, usually the vesting period. Under the intrinsic value method, compensation cost is measured by the excess of the quoted market price of the stock, if any, over the amount the employee must pay to acquire the stock. For example, granting immediately exercisable stock options to an employee at an exercise price equal to the quoted market price of the stock results in the recognition of compensation expense at the date of grant under the fair value method of SFAS No. 123; under the intrinsic value method of APB No. 25, no compensation expense is recognized. However, SFAS No. 123 allows the Company to elect to continue its current method of accounting under APB No. 25 for employee stock-based compensation arrangements. The Company expects to continue its current method of accounting under APB No. 25 for employee stock-based compensation arrangements. If the Company continues its current method of accounting, pro forma disclosures of net income and earnings per share must be disclosed, as if the Company had adopted the recognition provisions of SFAS No. 123. Although the Company is permitted to continue accounting for employee stock-based compensation arrangements under APB No. 25, SFAS No. 123 requires the Company to utilize the fair value method of accounting for transactions involving stock options or other equity instruments issued to nonemployees as consideration for goods or services. Presently, those transactions are accounted for by the Company under the intrinsic value principles of APB No. 25. The accounting and disclosure requirements of SFAS No. 123 are effective for the Company in 1996. The Company has not yet determined the impact of SFAS No. 123. 10 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations General Overview Pursuant to the Transfer Agreement, on February 7, 1994, the Company transferred, through its subsidiary, substantially all of its assets, subject to certain liabilities, to the Partnership in exchange for a 50% interest in the Partnership. The Partnership was formed with Engelhard, which, through its subsidiary, also owns a 50% interest in the Partnership, and has an option to purchase the Company's 50% interest upon certain terms and conditions. Accordingly, the desiccant air conditioning business that was conducted by ICC prior to the formation of the Partnership is now being conducted by the Partnership, and ICC has become principally a holding company. Further, substantially all of the employees of ICC have become employees of the Partnership and the leases for the space occupied by, and certain other obligations of, ICC have been assumed by the Partnership. After the consummation of the Transfer Agreement, the remaining assets of the Company, other than the investment in the Partnership, consisted of cash, a note receivable from the Company's Chairman and assets related to the cogeneration line of business, including accounts receivable, inventory, property and equipment, and other assets. These assets have been evaluated for impairment and are carried at their net realizable value. Revenues following consummation of the Transfer Agreement consist of sales of remaining spare parts related to the cogeneration line of business. The cogeneration line of business was not part of the Transfer Agreement because Engelhard was not interested in the activities of the cogeneration business. Although ICC is not permitted to engage directly or indirectly in any activities which would conflict with the Partnership's business as long as the Partnership is in effect, ICC is not precluded from engaging in other activities. Review of Losses from Operations As described above, upon formation of the Partnership and the transfer of substantially all of the Company's assets to the Partnership, the Company became principally a holding company. Since formation of the Partnership, the Company's activities have related to its limited cogeneration operations and oversight of its investment in the Partnership. The Company currently is not engaged in any activities that would generate any significant revenues, although it does have continuing expenses. At February 7, 1994, date of formation, the Company's investment in the Partnership was approximately $0, the Company had no obligation to provide additional financing to the Partnership and losses of the Partnership were not recognized through the period ended September 30, 1994. In the fourth quarter of 1994, the Company and Engelhard each loaned the Partnership $4,000,000 to acquire a manufacturing facility in Miami, Florida. The Company recognized its share of the accumulated losses of the Partnership in the fourth quarter of 1994 and has continued to recognize its share of Partnership's losses. The Company's net loss for the three months ended September 30, 1995 was $1,595,325 compared with the net loss of $394,809 for the same period in 1994. The Company's net loss for the nine months ended September 30, 1995 was $4,156,886 compared with the net loss of $1,170,505 for the same period in 1994. This increase in the net loss is attributable to the Company's equity interest in the Partnership's losses of $1,320,262 and $3,393,750 for the three and nine months ended September 30, 1995 as compared to none recognized for the same period ended in 1994. In May 1995, the Company guaranteed 50% of the Partnership's indebtedness associated with the industrial development revenue bonds. 11 12 The Company's general and administrative expenses decreased $102,983 or 23% for the three month period ended September 30, 1995 compared to the same period in 1994 primarily as the result of a decrease in professional fees. The Company's general and administrative expenses increased $93,333 or 9.9% for the nine month period ended September 30, 1995 compared to the same period in 1994 primarily as the result of increased payroll expenses and other administration costs offset by a reduction in professional fees. The Company provided $30,000 for the nine months ended September 30, 1995 for services rendered in 1993 by an investor relations vendor. Pursuant to an agreement with the vendor, the obligation was satisfied by the issuance of 20,000 shares of common stock. The Company's expenses related to marketing, engineering and development decreased or were eliminated in 1995 as compared to 1994 primarily as a result of the transfer of substantially all operations to the Partnership on February 7, 1994. In connection with the private placement of 300,000 shares of Common Stock in March 1995, the Company entered into a consulting arrangement expiring in March 1996, with the placement agents; consulting expenses of $25,000 were recognized in the three and nine months ended September 30,1995. The Partnership losses from operations for the three and nine month periods ended September 30, 1995 were $2,521,880 and $6,205,305 compared with losses of $1,597,146 for the three month period ended September 30, 1994 and $3,544,557 for the period from inception, February 7, 1994 to September 30, 1994. The Partnership's revenue for the three months ended September 30, 1995 increased to $2,009,538 compared to $379,912 for the same period in 1994. The Partnership's revenue for the nine months ended September 30, 1995 increased to $7,171,504 compared to $997,156 for the period February 7, 1994 to September 30, 1994. The increase in revenue is attributable to sales of substrate from the Miami plant to Ciba Geigy pursuant to a supply contract, increased equipment sales and licensing fees. Sales of substrate from the Miami plant amounted to approximately $1,500,000 and $4,800,000 for the three and nine months ended September 30, 1995, respectively. Equipment sales amount to approximately $500,000 and $1,800,000 for the three and nine months ended September 30, 1995 respectively. Licensing fees of $500,000 were earned in the nine months ended September 31, 1995 compared to none in 1994. Sales of substrate was insignificant in 1994. The Partnership's gross loss for equipment sales was approximately $370,000 and $770,000 for the three and nine months ended September 30, 1995. The gross loss was attributable to increased production expenses and production inefficiencies. The increase in the Partnership's losses from operations for the three and nine month periods ended September 30, 1995 compared to the same periods in 1994 is attributable primarily to higher marketing and general and administrative operating costs. Marketing expenses have increased as a result of the Partnership's increased sales and marketing staff and its related activities. General and administrative expenses have increased as a result of an increased administrative staff and related payroll along with higher costs associated with operating the Miami plant acquired in December 1994. The Partnership's expenses related to product development, marketing, and administration increased by $599,524 for the three months ended September 30, 1995 and $2,536,539 for the nine months ended September 30, 1995 as compared to the similar periods in 1994. Marketing expenses increased $202,969 for the three months ended September 30, 1995 compared to the same period in 1994 and increased $1,151,444 for the nine months ended September 30, 1995 compared to the period from inception, February 7, 1994 to September 30, 1994. The increase in marketing expenses is the result of the Partnership's increased marketing efforts and increased sales and marketing staff. General and administrative expenses increased $381,330 and $1,083,569 for the three and nine months ended September 30, 1995, respectively, compared to the same periods in 1994 as the result of increased staff and related payroll along with higher costs associated with the Miami plant acquired in December 1994. The Partnership's backlog for equipment amounted to approximately $1,500,000 at September 30, 1995 versus approximately $350,000 at September 30, 1994. 12 13 Liquidity and Capital Resources General Overview The independent accountants report on the audit of the Company's 1994 financial statements includes an explanatory paragraph regarding substantial doubts about the Company's ability to continue as a going concern. The Company's financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses accumulating to $31,379,232 as of September 30, 1995. The Company's continuation as a going concern is dependent upon its ability to: (i) generate sufficient cash flows to meet its obligations on a timely basis, (ii) obtain additional financing or refinancing as may be required and (iii) ultimately, attain profitable operations and positive cash flow from its operations and its investment in the Partnership. The independent accountants report on the audit of the Partnership's 1994 financial statements also includes an explanatory paragraph regarding substantial doubts about the Partnership's ability to continue as a going concern. The Partnership's continuation as a going concern will remain dependent upon its ability to: (i) generate sufficient cash flows to meet its obligations on a timely basis, (ii) obtain additional financing or refinancing as may be required and (iii) ultimately, attain profitable operations and positive cash flow from operations. Although the Company is currently considering financing arrangements, no assurance can be made that capital will be obtained on a timely basis. Management believes that the Company currently has sufficient resources to support its operations through 1996. The capital needs of the Company have been satisfied primarily through proceeds from the issuance of Common Stock and exercise of stock options and warrants. A capital contribution of $1 million to the Partnership was made by each partner in October 1995. Management believes the Partnership will require additional capital contributions during 1996. The minimum capital requirement of the Partnership is expected to be $1 million for 1996. The Partnership may require additional capital in order to take advantage of growth opportunities. To the extent additional significant capital contributions are required, the Company would expect to satisfy the requirements by seeking equity financing. The Company's ability to successfully obtain equity financing in the future is dependent in part on market conditions and the performance of the Partnership. There can be no assurance that the Company will be able to obtain equity financing in the future. The Company received net cash proceeds of approximately $2.6 million from the issuance of approximately 1,060,000 shares of common stock through the exercise of stock options and warrants and approximately $3.1 million from the issuance of Common Stock through a private placement for the nine months ended September 30, 1995. On March 31, 1995, pursuant to the private placement, the Company issued 300,000 shares of Common Stock for gross proceeds of $3,300,000. At closing, cash of $1,100,000 was received along with a $2,200,000 promissory note. The promissory note was paid in August 1995. The Company granted warrants to purchase 375,000 shares of Common Stock at $9 per share to the placement agents in connection with the private placement. 13 14 In December 1994, the general partners each loaned $4,000,000 to the Partnership in connection with the acquisition of the real property and substantially all other assets of an existing manufacturing facility located in Miami, Florida. In May 1995, each general partner was repaid $1,500,000 of the aforementioned loan, and the remaining amount, $2,500,000 for each general partner, was converted into an investment in the Partnership. In April 1995, the Partnership obtained financing from the issuance of $8.5 million in industrial development revenue bonds. The proceeds of these bonds were utilized to repay a portion of the loan provided by the general partners and provide for improvements and capital equipment at the Miami facility. In May 1995, the Company guaranteed 50% of the Partnership's indebtedness associated with the industrial development revenue bonds. The Company has established an irrevocable letter of credit for $2.5 million to support its portion of the guarantee. The Company's letter of credit is collaterialized by a certificate of deposit of $2.5 million. In August 1995, the Partnership entered into a joint development agreement with an Israeli corporation related to the development of a residential desiccant unit. In connection with the joint development agreement, the Company agreed in October 1995 to loan up to $250,000 to the Israeli corporation related to its funding of the program. The Company received proceeds of approximately $1,683,000 from the exercise of stock options to purchase approximately 794,000 shares of Common Stock granted under its option plans and $946,000 from the exercise of warrants to purchase approximately 265,000 shares of Common Stock for the nine month period ended September 30, 1995. The Company had negative cash flow from operating activities of $890,228 for the nine months ended September 30, 1995. The reason for the operating deficit was attributable to continued general and administrative costs and negligible revenue. Review of Working Capital As of September 30, 1995, ICC had $4,230,829 in total current assets and $330,117 in current liabilities, resulting in working capital of $3,900,712. The Company's cash position at September 30, 1995 was $3,855,335. ICC has not declared any dividends on its preferred or common stock and does not expect to declare dividends on common stock in the foreseeable future. Payment of future dividends will rest within the discretion of the Board of Directors and will depend, among other things, on ICC's earnings, capital requirements and financial condition. In addition, under the terms of the Company's note payable to stockholders, the Company is prohibited from paying or declaring any dividends, and under the provisions of the Company's series of Preferred Stock all accrued dividends must be paid on Preferred Stock prior to the payment of any dividends on Common Stock. 14 15 New Accounting Standard In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 establishes a fair value based method of accounting for stock-based compensation plans. It encourages entities to adopt that method in place of the intrinsic value method currently in place under the provisions of Opinion No. 25 of the Accounting Principles Board (APB). Under the fair value method accounting, all arrangements under which employees receive shares of stock or other equity instruments or under which employers incur liabilities to employees in amounts based on the price of its stock result in the measurement of compensation cost at the grant date of the award which is recognized over the service period, usually the vesting period. Under the intrinsic value method, compensation cost is measured by the excess of the quoted market price of the stock, if any, over the amount the employee must pay to acquire the stock. For example, granting immediately exercisable stock options to an employee at an exercise price equal to the quoted market price of the stock results in the recognition of compensation expense at the date of grant under the fair value method of SFAS No. 123; under the intrinsic value method of APB No. 25, no compensation expense is recognized. However, SFAS No. 123 allows the Company to elect to continue its current method of accounting under APB No. 25 for employee stock-based compensation arrangements. The Company expects to continue its current method of accounting under APB No. 25 for employee stock-based compensation arrangements. If the Company continues its current method of accounting, pro forma disclosures of net income and earnings per share must be disclosed, as if the Company had adopted the recognition provisions of SFAS No. 123. Although the Company is permitted to continue accounting for employee stock-based compensation arrangements under APB No. 25, SFAS No. 123 requires the Company to utilize the fair value method of accounting for transactions involving stock options or other equity instruments issued to nonemployees as consideration for goods or services. Presently, those transactions are accounted for by the Company under the intrinsic value principles of APB No. 25. The accounting and disclosure requirements of SFAS No. 123 are effective for the Company in 1996. The Company has not yet determined the impact of SFAS No. 123. 15 16 PART II OTHER INFORMATION Item 1. Legal Proceedings No legal proceedings by, or against, the Company were initiated in the quarter ended September 30, 1995. Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.1 License Agreement by and between Engelhard/ICC and Ciba Composites Anaheim, a business unit of Ciba Composites, a Division of Ciba-Geigy Corporation, dated November 29, 1994. 10.2 Manufacturing and Supply Agreement by and between Engelhard/ICC and Ciba Composites Anaheim, a business unit of Ciba Composites, a Division of Ciba- Geigy Corporation, dated November 29, 1994. 10.3 Technical Information, Trademark and Patent License Agreement by and between Engelhard/ICC and Chung-Hsin Electric & Machinery Manufacturing Corporation, dated March 27, 1995. 10.4 Supply Agreement by and between Engelhard/ICC and Chung-Hsin electric & Machinery Manufacturing Corporation, dated March 27, 1995. 10.5 Agreement by and among Engelhard Corporation, ICC Technologies, Inc. and Engelhard/ICC, dated April 1, 1995 relating to the Dade County Industrial Development Revenue Bonds. 10.6 Memorandum of Understanding by and between Engelhard/ICC and Samsung Corporation, dated June 30, 1995. 10.7 Form of Amendment dated August 9, 1995 to Agreement of October 6, 1992 Regarding Formation of ICC International by and between Engelhard/ICC and A B Avir Technologies, Ltd. (b) Reports on Form 8-K: None 16 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: November 13, 1995 BY: /s/ Irwin L. Gross ------------------------- ------------------------------ Irwin L. Gross, Chairman and President DATE: November 13, 1995 BY: /s/Manfred Hanuschek ------------------------- ------------------------------ Manfred Hanuschek Chief Financial Officer 17 EX-10.1 2 LICENSE AGREEMENT 1 EXHIBIT 10.1 LICENSE AGREEMENT This Agreement, dated November 29, 1994, by and between Ciba Composites, a division of Ciba-Geigy Corporation, a corporation organized and existing under the laws of the State of New York, with offices at 5115 East La Palma Avenue, Anaheim California 92807 (hereinafter "Ciba" and Engelhard/ICC, a general partnership formed under the laws of the Commonwealth of Pennsylvania, with offices at 441 North Fifth Street, Philadelphia, PA 19123 (hereinafter "Licensee"). WITNESSETH THAT: WHEREAS, pursuant to an Asset Purchase Agreement, dated November 29, 1994 (hereinafter referred to as the "Purchase Agreement"), between Ciba and Engelhard/ICC, Engelhard/ICC will purchase, on the same date as the Effective Date hereof, certain assets of the composites business of Ciba; and WHEREAS, this License Agreement is being entered into in connection with the Purchase Agreement; and WHEREAS, Ciba is the owner of all right, title and interest in certain application and technical data which constitute valuable confidential information and trade secrets directed to honeycomb core technology; 2 WHEREAS Licensee desires to obtain a license under said rights; and WHEREAS Ciba is willing to grant Licensee such a license. NOW, THEREFORE, in consideration of the premises and covenants hereinafter set forth, the parties agree as follows: ARTICLE I - DEFINITIONS As used herein, the words and phrases set forth below shall have the meaning respectively ascribed thereto, on the understanding that words in the singular include words in the plural and vice-versa: 1.1 "Effective Date" shall mean the date first written above. 1.2 "Licensed Technology" shall mean all the technology and know-how pertaining to Licensed Product produced or developed by Ciba at the Facility on or prior to the Effective Date, including but not limited to the Sheeter Stacker technology and equipment, but shall not include the following technology: (a) Manufacturing of thermoplastic honeycomb core; (b) silicate treated honeycomb (2) 3 structures (Cibabarrier); (c) honeycomb manufactured with a water based phenolic thermosetting resin; and (d) honeycomb made from glass substrates. 1.3 "Affiliate" shall mean a corporation, company or other entity which controls a party as a Subsidiary, which is a Subsidiary of a party, which is a Subsidiary of a corporation, company or other entity which controls a party as a Subsidiary, and shall include but not be limited to Engelhard Corporation and ICC Technologies, Inc. 1.4 "Subsidiary" shall mean a corporation, company or other entity, fifty percent (50%) or more of whose outstanding shares or securities representing the right, other than as affected by events of default, to elect directors or other managing authority) are, now or hereafter, owned or controlled directly or indirectly by a party, but such corporation, company or other entity shall be deemed to be a Subsidiary only so long as its ownership or control exists. 1.5 "Licensed Product" shall mean honeycomb core with a cell size smaller than 1/8" (0.125 cm), wherein for a symmetrical cell said cell size is defined as the diameter of a circumscribed circle within the honeycomb cell and for a non-symmetrical cell, (3) 4 the cell size is defined as the diameter of a circumscribed circle within an equivalently symmetrically shaped cell. 1.6 "Field" shall mean an application or system useful for the filtration, purification, clarification, refining or catalytic treatment of any: 1) gas or vapor, 2) mixture of gases or mixture of vapors; or 3) mixture of gases and vapors including the separation, isolation or segregation of any component of such gas, vapor or mixture. This definition specifically includes gas/air, pollution abatement/cooling/conditioning/dehumidification applications. 1.7 "New Technology" shall mean all improvements, modifications, changes or developments made to Licensed Technology by Licensee or Ciba following the Effective Date. 1.8 "Product" shall mean honeycomb core. 1.9 "Net Sales Price" shall mean with respect to a Licensed Product which is sold by Licensee, the price charged for said product and not returned as defective, less such quantity, trade and cash discounts, shipping, installation and packaging charges or allowances, and taxes and other governmental charges as are specified and separately stated and charged on the invoices of Licensee. (4) 5 1.10 "Facility" shall mean the Miami Facility and the Leased Premises as defined in the Agreement of Purchase and Sale of Assets. ARTICLE II - LICENSE GRANT 2.1 Ciba shall grant and hereby does grant to Licensee an irrevocable, exclusive, worldwide, royalty-free right and license, without the right to sublicense except to Licensee's Affiliates and Subsidiaries, under Licensed Technology, to make and/or have made Licensed Product for use and sale in the Field. Ciba shall not nor shall it license a third party to make and/or have made Licensed Product using Licensed Technology for use and sale in the Field. Ciba reserves all rights to make and/or have made Licensed Product using Licensed Technology for use and sale outside the Field. 2.2 In the event Licensee identifies a new potential non-aerospace opportunity outside the Field for Licensed Product, which opportunity has not previously been identified by Ciba and Ciba substantiates its knowledge of the opportunity, Ciba shall grant and hereby does grant to Licensee a nonexclusive, worldwide, royalty-bearing right and license, without the right to sublicense except to Licensee's Affiliates and Subsidiaries, under Licensed (5) 6 Technology, to make and/or have made Licensed Product for use and sale in said non-aerospace opportunity. 2.3 Should Ciba enter into an agreement granting a License under the provisions of Section 2.2, on terms more favorable than those contained herein, then Ciba shall notify Licensee within sixty (60) days of the grant of such more favorable License, of the terms of such other Agreement. Licensee shall be entitled to the benefit of such terms as of the date and so long as such terms are effective under such other Agreement, provided Licensee makes written demand upon Ciba for all such terms, including those less favorable, within six (6) months after the receipt by Licensee of the aforesaid notice from Ciba. 2.4 Except as provided in Section 2.2, in the event Licensee identifies a new potential non-aerospace opportunity for honeycomb core Ciba shall give consideration to granting Licensee a further license but Ciba may determine not to do so and any such license shall be subject to mutually agreed to terms and conditions. 2.5 Ciba shall grant and hereby does grant to Licensee an exclusive, worldwide, royalty-free and license, without the right to sublicense except to Licensee's Affiliates and Subsidiaries, under New Technology to make and/or have made Licensed Product for use and sale in the Field arising within (i) (6) 7 three (3) years of the Effective Date of this Agreement or (ii) the termination of the Supply Agreement or (iii) the termination of the Transitional Services Agreement, whichever is longer. 2.6 Licensee shall grant and hereby does grant to Ciba an exclusive, worldwide, royalty-free right and license, with the right to sublicense, under New Technology to make and/or have made Product for use and sale outside the Field arising within (i) three (3) years of the Effective Date of this Agreement, (ii) the termination of the Supply Agreement or (iii) the termination of the Transitional Services Agreement, whichever is longer. ARTICLE III - RUNNING ROYALTIES In consideration of the license granted in Section 2.2 herein, Licensee agrees to pay to Ciba a royalty of five percent (5%) of the Net Sales Price of honeycomb core licensed pursuant to said Section 2.2 for a period of fifteen (15) years beginning on the date of first commercial sale into each such new application. ARTICLE IV - ROYALTY PAYMENTS AND REPORTING 4.1 Licensee shall make all payments to Ciba in performance of the obligation of Licensee defined in this Agreement (7) 8 in United States Dollars at such location in the United States as Ciba shall designate. 4.2 Licensee shall make running royalty payments within thirty (30) days after the end of the calendar quarter in which any Licensed Product was sold by Licensee. Uncollectables shall be credited against royalties due. The parties shall agree to an appropriate exchange rate at the time of the grant of a license under Section 2.2. 4.3 The Net Sales Price for sales between Licensee, its Affiliates and Subsidiaries shall be the market price charged to third parties at the time of the transfer. 4.4 Licensee shall keep and shall cause its Affiliates and Subsidiaries to keep accurate records showing the quantity, Net Sales Price and date of sale of all Licensed Product sales subject to royalty hereunder and sold by Licensee, its Affiliates and Subsidiaries and the royalty payable thereon. Licensee shall furnish Ciba within thirty (30) days after the end of each calendar quarter a report of royalties payable for such calendar quarter showing the quantity, Net Sales Price and Date of sale of all Licensed Product sales subject to royalty hereunder and sold in such calendar quarter by Licensee, its Affiliates and Subsidiaries and the royalty payable thereon. Upon written request by Ciba, (8) 9 Licensee shall make and cause its Affiliates and Subsidiaries to make said records available for audit at the place of business of Licensee, its Affiliates and Subsidiaries, as the case may be, during normal business hours and on a confidential basis, for inspection, by a certified public accountant designated and paid by Ciba and reasonably acceptable to Licensee who shall report to Ciba only the amount of royalties due for the period examined, and in the absence of fraud such report shall be conclusive. In the event that no request for inspection of records for any particular calendar quarter shall be made by Ciba within two (2) years subsequent to such calendar quarter, the right to make an inspection of the records for such calendar quarter shall be deemed to have been waived by Ciba. ARTICLE V - CONFIDENTIALITY 5.1 Licensee shall not disclose to any third party, except Licensee's Affiliates and Subsidiaries which have agreed in writing to be bound by the obligations of this Agreement, the Licensed Technology or any portion thereof, except with the prior written consent of Ciba, which consent shall not be unreasonably withheld. Disclosure may be made, to the extent necessary to further the commercial purposes of this Agreement to third parties who have entered into an appropriate agreement containing confidentiality provisions at least as stringent as the provisions (9) 10 hereof with Licensee for retention of the confidentiality of such Licensed Technology. 5.2 In the event part or all of the Licensed Technology is or becomes part of the public domain through no fault of Licensee or is disclosed to Licensee by a third party who is under no obligation of confidentiality to Ciba, Licensee shall continue to comply with the obligations of Section 5.1 only with regard to specific information which is not in the public domain and which is embraced by more general information which is or may become public knowledge. 5.3 Both parties (the "receiving party") shall not disclose to any third party, except Affiliates and Subsidiaries which have agreed in writing to be bound by the obligations of this Agreement, New Technology and other confidential information received from the other party (the "disclosing party") except with the prior written consent of the disclosing party, which consent shall not be unreasonably withheld. Disclosure may be made, to the extent necessary to further the commercial purposes of the receiving party to third parties who have entered into an appropriate agreement containing confidentiality provisions at least as stringent as the provisions hereof with receiving party for retention of the confidentiality of such New Technology and other confidential information. (10) 11 5.4 In the event part or all of the New Technology or other confidential information is or becomes part of the public domain through no fault of the receiving party or is disclosed to receiving party by a third party who is under no obligation of confidentiality to the disclosing party, the receiving party shall continue to comply with the obligations of Section 6.1 only with regard to specific information which is not in the public domain and which is embraced by more general information which is or may become public knowledge. ARTICLE VI - SECOND SOURCE SUPPLIER 6.1 For a period of two (2) years from the Effective Date hereof, in the event that Licensee, its Affiliates and/or Subsidiaries require a second source supply for the production of Licensed Product, Ciba shall have an option for the right of first refusal to become the second source supplier for Licensee, its Affiliates and/or Subsidiaries. 6.2 For a period of two (2) years from the Effective Date hereof, in the event that Ciba requires a non-Ciba second source for Licensed Product, Licensee shall have an option for the right of first refusal to become the second source supplier for Ciba. (11) 12 ARTICLE VII - TERMINATION 7.1 Either party may terminate any and all licenses granted pursuant to Section 2.2 of this License Agreement in the event of a material breach of the other party which is not corrected within thirty (30) days of written notice from the party not in breach. Failure to exercise the right of termination granted in this paragraph for any one such breach shall not be deemed a waiver of such right in the event such breach persists or in the event of subsequent such breaches. 7.2 Licensee shall have the right, on at least ninety (90) days prior written notice, to unilaterally terminate any and all licenses granted pursuant to Section 2.2; however, Licensee's obligations hereunder, with respect to royalties shall continue up to the effective date of such termination. Following termination pursuant to Section 7.1 or Section 7.2 Licensee and its sublicensees shall not have the right to continue to use the Licensed Patents and/or Licensed Technology licensed hereunder. 7.3 Notwithstanding any termination of this License Agreement under the provisions of Section 7.1 or Section 7.2, Licensee shall pay all royalties accrued prior to the effective date of such termination. (12) 13 7.4 The provisions of Articles II, V - VII and X shall remain in effect beyond the termination of this Agreement in accordance with the terms thereof. 7.5 (a) In the event of a change of control of the ownership of Licensee as permitted pursuant to subsection (b) hereof, Licensee shall notify Ciba at least thirty (30) days prior to such change or if an involuntary change then Licensee shall notify Ciba ten (10) days prior thereto. (b) In the event of a change of control of the ownership of Licensee other than (i) the present parties including Affiliates and Subsidiaries and (ii) third parties which do not compete with Ciba Composite's product line set forth in Exhibit A, this Agreement shall automatically terminate. ARTICLE VIII - NOTICES All communications under this Agreement shall be in writing and shall be deemed given when delivered personally or when mailed by registered mail, return receipt requested or when sent electronically by an international cable or telex (provided such telex or cable is confirmed by registered mail on the day the telex or cable is dispatched), to the party at the address set forth (13) 14 below (or such address as may be specified by a party in a notice given hereunder). Engelhard/ICC 441 North Fifth Street Philadelphia, PA 19123 Attn: ------------------------ Ciba-Geigy Corporation 5115 East La Palma Avenue Anaheim, California 92807 Attn: ------------------------ ARTICLE IX - GOVERNING LAW 9.1 This Agreement shall be interpreted in accordance with and governed by the laws of the State of New York. 9.2 This Agreement is subject to all applicable laws, rules, regulations and ordinances of the United States of America, or any political subdivision thereof, including, but not limited to, the Regulations of the United States Department of Commerce relating to the Export of Technical Data or the direct product related thereto. (14) 15 ARTICLE X - ASSIGNMENT This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, provided that neither party shall assign any of its rights or privileges hereunder without the prior written consent of the other party, except for the right of either party to assign any of its rights or privileges hereunder to an Affiliate. Any attempted assignment in derogation of the above shall be null and void. ARTICLE XI - ENTIRE AGREEMENT This document contains the entire agreement of the parties with respect to its contents and there are no representations, promises, or understanding pertaining to this Agreement, except as are contained in this document. Furthermore, this document cannot be amended or performance thereunder modified, except by a document in writing signed by duly authorized representatives of the parties. Headings included in this Agreement are for convenience only and are not to be used to interpret the agreement between the parties. (15) 16 The provisions of this Agreement shall be deemed separable and if any provisions is rendered void, invalid or unenforceable, such rendering shall not affect the validity or enforceability of the remainder of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement. Engelhard/ICC Ciba-Geigy Corporation By: ICC Desicant Technologies, Inc. By: /s/ Irwin L. Gross By: /s/ James A. Koshak ---------------------------- ---------------------------- Name: Irwin L. Gross Name: James A. Koshak -------------------------- -------------------------- Title: CEO Title: V.P./GEN MGR. ------------------------- ------------------------- Date: 11/24/94 Date: NOV. 24, 1994 -------------------------- -------------------------- (16) EX-10.2 3 MANUFACTURING AND SUPPLY AGREEMENT 1 EXHIBIT 10.2 MANUFACTURING AND SUPPLY AGREEMENT This Agreement, dated as of November 29, 1994, is by and between Ciba Composites Anaheim, a business unit of Ciba Composites, a Division of Ciba-Geigy Corporation, a corporation organized under the laws of the State of New York, with offices at 5115 East La Palma Avenue, Anaheim, California 92807-2018 ("Ciba") and Engelhard/ICC, a general partnership formed under the laws of the Commonwealth of Pennsylvania, with offices at 441 North Fifth Street, Philadelphia, Pennsylvania 19123 ("Manufacturer"). WITNESSETH WHEREAS, Ciba and Manufacturer are parties to the Asset Purchase Agreement and various ancillary agreements dated as of the date hereof, relating, among other things, to the acquisition by Manufacturer of certain assets associated with the operation of Ciba's honeycomb core production plant located in Miami, Florida and Ciba's licensing of certain honeycomb technology to Manufacturer (hereinafter collectively referred to as the "Asset Purchase Agreement"); and WHEREAS, in connection with the transactions in the Asset Purchase Agreement Ciba is unable to obtain a source for its Product requirements and wishes to have Manufacturer supply Ciba with its Product requirements until such time as Ciba can complete the qualification of a facility to produce Product and have such facility fully operational; WHEREAS, Ciba further wishes to have Manufacturer conduct developmental production trials at the Facility; and WHEREAS, Manufacturer wishes to manufacture Product and to conduct certain developmental production trials for Ciba subject to the terms and conditions set forth below. NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set forth, the parties agree as follows: 1. Definitions. Where used in this Agreement and identified with initial capital letters, the following items have the meanings set forth below: a. "Agreement" means this Agreement between Ciba and Manufacturer, including the exhibits attached hereto and made a part hereof. b. "Asset Purchase Agreement" means the agreement for the purchase and sale of certain assets of Ciba's manufacturing facility located at 3550 N.W. 49th Street, Miami, Florida, made as 2 of the date hereof, and the License Agreement, Technical Assistance Agreement and Operational Services Agreement entered into simultaneously thereof. c. "Contract Year" means a twelve (12) month period beginning on the Closing Date or any anniversary thereof during the term of this Agreement. d. "Closing Date" means the date on which the transactions contemplated in the Asset Purchase Agreement close. e. "Ciba Supplied Materials" or Supplied Materials means those materials which are authorized to be purchased by the Manufacturer from a Designated Supplier under an established Ciba Supply Agreement and/or Ciba Purchase Order. A list of Ciba Supplied Materials as set forth in Exhibit 1e and f. f. "Designated Suppliers" means those suppliers qualified to provide Ciba Supplied Materials to manufacture the Products, as set forth in Exhibit 1e and f. g. "Dispose or disposal" means any discharge, deposit, injection, dumping, spilling, leaking, or placing of any Waste into or on any land or water and the arrangement of any of the foregoing, and shall include any storage, pretreatment, treatment (including incineration), any other actual disposal, use, sale, sampling or other transfer or application of Waste of any kind or nature whatsoever. h. "Facility" means the manufacturing plant located at 3550 N.W. 49th Street, Miami, Florida. i. "Facility Capacity" means the production capacity of the Facility when operated five (5) days a week on a twenty-four (24) hour per day basis. j. "Hazardous Waste" means (a) any material or substance defined as or containing materials defined as a "hazardous substance" or "hazardous waste" pursuant to Laws and Regulations including the Comprehensive Environmental Response, Compensation and Liability Act, as amended, the Resource Conservation and Recovery Act, as amended, and any similar successor or supplementary legislation, and the regulations promulgated thereunder or (b) any material or substance that is radioactive. k. "Honeycomb Core" means a manufactured product made from aramid paper paper, resin impregnated glass fabric, or any other substrate which is formed into cells usually of a hexagonal shape, or other shapes as configured. -2- 3 l. "laws and Regulation" means all applicable federal, state, territorial and local and foreign laws, regulations, orders, ordinances, and rules. m. "Permits" means all licenses, permits and similar authorizations required for the manufacture, processing, packaging, sale and delivery of the Products and the conduct of Manufacturer's business. n. "Product(s)" means the Honeycomb Core products described in The Specifications/Qualified Product List in Exhibit 1n. Ciba shall be able to add new products that are substantially similar to Products to Exhibit 1n from time to time. The parties agree that the Manufacturing Fee for any such new products shall be computed in accordance with Exhibits 4.5 and 5.1. Without prejudice to Ciba's rights, if Manufacturer chronically fails to deliver any Product within the time specified in this Agreement, and shows no progress toward cure, Ciba shall be able to delete such Product from the scope of this Agreement, to the extent Ciba is negatively impacted by this chronic failure or deletion of Product, Ciba shall be entitled to recover from the Manufacturer the direct damages suffered by Ciba. For the purposes of this provision, the parties agree lost profits shall be considered a direct damage. o. "Waste" means all materials that are produced or generated in connection with the manufacturer of any Product or reworked Product sold to Ciba, including but not limited to materials that are Hazardous Waste (as hereinafter defined), co-product, by-product, Product that fails to conform to the specifications, wastewaters, residues, wastes, bottoms and other remainders and materials, packaging of components of any Product, and components of any Product that are not used in the manufacture of any Product. 2. Term. The term of this Agreement shall commence on the Closing Date of the Asset Purchase Agreement and shall continue for a period of five (5) years (the "Term"); provided, however, that Ciba shall have the option to terminate this Agreement on the giving of six (6) months written notice, which notice can be given at any time after eighteen (18) months from the Closing Date. 3. Quantity. 3.1 Minimum Quantities. During each Contract Year, Ciba shall purchase from Manufacturer its requirements for Products or products substantially similar to Products for its internal use or sale in Mexico, Canada and the United States in the minimum percentages set forth in Exhibit 3.1. For the purpose of computing requirements hereunder, new products not added pursuant to 1n above on the basis that they were not substantially similar to Products, shall not be considered. -3- 4 3.2 Available Facility Capacity. During each Contract Year, Manufacturer shall make available to Ciba the percentages of the Facility Capacity set forth in Exhibit 3.2 ("Ciba's Share"). Notwithstanding this availability, Ciba shall be responsible only for ordering the minimum quantities set forth in Section 3.1. Beginning two months prior to the second anniversary of the Closing Date, Ciba shall use its reasonable efforts to give Manufacturer two (2) months written notice of any projected decrease in its need to utilize Ciba's Share for a month for which such notice was given. During the first Contract Year, Ciba shall not be allowed to require Manufacturer to produce for Ciba, in any calendar month, Products requiring more than 1/12 of Ciba's Share. During each subsequent Contract Year, Ciba shall not be allowed to require Manufacturer to produce for Ciba, in any calendar month, Products requiring more than 1/12 of 110% of Ciba's Share. For periods of less than a calendar month, these determinations will be made on a pro rata basis. 3.3 Conflict. In the event Ciba's requirements in Section 3.1 exceed Ciba's share and Manufacturer fails to accommodate Ciba's requirements three times in any 6 month period, upon Ciba's written request, Manufacturer shall have the option, exercisable upon five (5) working days written notice, of dedicating other existing capacity, or committing to provide Ciba with a plan, reasonably acceptable to Ciba, to add new capacity to meet Ciba's requirements, each at no additional cost to Ciba over the existing fees set out in Exhibit 4.5. If Manufacturer fails to exercise this option, Ciba can either elect to add additional capacity at the Facility, at Ciba's sole cost and expense or be released from its obligation to order that portion of the minimum quantities which exceed Ciba's Share for the following 12 month period. 3.4 Lead Time and Minimum Order Quantities. Lead times and minimum order quantities shall be as set forth in Exhibit 3.4 as such Exhibit may be amended by mutual consent of the parties. The parties shall work together in good faith to resolve any problems associated with the implementation of this Exhibit. 3.5 Damages. In the event Ciba fails to order the minimum quantities set forth in Section 3.1, as it may be amended by Section 3.3 herein, or Manufacturer fails to make available to Ciba Ciba's Share, the party negatively impacted by such failure shall use diligent efforts to mitigate the damages. To the extent either party is negatively impacted by the failure of the other party, the damaged party shall be entitled to recover from the other party the direct damages suffered by it. For the purposes of this provision, the parties agree lost profits shall be considered a direct damage. -4- 5 4. Manufacture of Product. 4.1 Manufacturing Services. Manufacturer agrees to manufacture Product(s) in conformance with the specifications set forth in Exhibit 1n ("Conforming Product"), utilizing, in part, Ciba Supplied Materials and Designated Suppliers, as set forth in Exhibit 1e and f. Notwithstanding anything in this Agreement to the contrary, in no event shall Manufacturer be responsible and/or liable for defects in Products to the extent such defect is the result of Supplied Materials defective at the time of receipt. THE FOREGOING EXPRESS WARRANTY IS IN LIEU OF ANY AND ALL OTHER WARRANTIES ARISING BY LAW AND/OR CUSTOM, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTY OF MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. 4.2 Quantities of Supplied Materials. During the Term, Ciba will make available Supplied Materials from its Designated Supplier. Manufacturer is responsible for placing orders for Supplied Materials in such quantities and for delivery at such times as Manufacturer deems necessary to meet its requirements pursuant to Section 6. Ciba will be responsible for payment for the Supplied Materials supplied by Designated Suppliers. Manufacturer shall use Supplied Materials only for the manufacture of Products supplied under this Agreement. 4.3 Inventory. Manufacturer will conduct a physical inventory of Supplied Materials during the fourth quarter of each calendar year and at the termination of this Agreement. Manufacturer shall reimburse Ciba for any inventory shortages, adjusted for any differences that Manufacturer can demonstrate to Ciba's satisfaction is traceable to reporting differences that were reflected and credited to Ciba as favorable material usage variances in accordance with the provisions of Section 5.2. 4.4 R600 Consumption. Manufacturer shall report consumption of R600 used in production of Manufacturer's product on a monthly basis (showing calculation of consumption in gallons). This report will be accompanied by a credit memo to Ciba at Ciba's average selling price per gallon. 4.5 Other Materials and Inputs. Manufacturer shall be responsible, at its sole cost and expense, for providing all materials (except Supplied Materials), labor, disposal activities and other inputs necessary to produce the Product ordered by Ciba pursuant to this Agreement. Manufacturer agrees that the sole compensation due to Manufacturer for supplying the Products is the manufacturing fee provided in Exhibit 4.5. 4.6 Developmental Production Trials. At Ciba's option, Manufacturer will conduct production trials for Ciba on Honeycomb Core which is not Product. Such trials shall be produced in -5- 6 accordance with the terms of the Agreement, and quantities so produced shall be included in calculating the Products ordered by Ciba for the purpose of meeting its minimum ordering obligations hereunder. Facility Capacity used therefor shall be charged against Ciba's Share. The manufacturing fees set forth in Section 7.1 shall be applicable to, and paid by Ciba to Manufacturer for, any and all products produced during such production trials. 5. Consumption Issues 5.1 Optimum Yield Ratios. Manufacturer shall manufacturer Product in accordance with yields included in the 1995 Ciba budgeted standard product costs, attached hereto as Exhibit 5.1. Any changes to the standard products costs by Manufacturer must be preapproved in writing by Ciba. 5.2 Material Usage Variances. The Manufacturer shall credit Ciba for favorable material usage variances to a maximum of two percent (2%) of standard material costs. Manufacturer shall charge Ciba with unfavorable variances up to a maximum of two percent (2%) of standard material costs. Variances, whether favorable or unfavorable, in excess of two (2) percent shall be credited or charged to Manufacturer, as the case may be. Manufacturer shall report to Ciba on a monthly basis, material usage variances by Product. Such variances shall be reported to Ciba within three (3) days after the end of each monthly accounting period and credited or charged to Ciba within thirty (30) days after the end of each monthly accounting period. 6. Inventory Control. The parties recognize sound inventory management is an important aspect of Manufacturer's performance under this Agreement. Manufacturer agrees to utilize Ciba's existing inventory management system. Manufacturer agrees to prepare and submit to Ciba, no later than three (3) months before the expiration of the Operation Services Agreement, an inventory management system suitable for the negotiation of inventory targets for the Supplied Materials to be met during the then remaining Term of this Agreement. Such system shall be agreeable to both parties. Manufacturer will maintain a safety stock of Supplied Materials as set forth in Exhibit 6. The parties will communicate on an ongoing basis as to amended stock levels based on Ciba's needs and the pricing and availability of supplies of Supplied Materials. If inventories exceed 2.8 months coverage, as that level may be changed by agreement of the parties in writing, based on the average monthly cost of goods to be shipped over the next three (3) months, in any month, or any future month, Manufacturer will pay Ciba an excess inventory charge calculated as follows: The value of inventory, in excess of 2.8 months coverage, times the Prime Rate, divided by twelve (12). The Prime Rate shall be the -6- 7 prime rate as published in the Wall Street Journal, as of the last business day of the month for the inclusion of excess inventory. 7. Manufacturing Fees: Additional Costs: Disposal Costs: Invoicing: Payment. 7.1 Manufacturing Fees. Ciba shall pay to the Manufacturer, for Products produced and supplied to Ciba during the Term, a fixed price based on the 1995 full absorption Product costs based on the applicable rate set forth in Exhibit 4.5. The labor escalation clause for the Term is set forth in Exhibit 7.1. 7.1.1 The first billing of Manufacturing Costs (material, labor and overhead) shall be adjusted to give Ciba a credit for these costs in Work In Process Inventory as at the Closing Date. The Cost value of E204 Nomex Paper (item number 0109) as at the Closing Date will be paid to Ciba. Finished Goods and Work In Process Inventory of Engelhard/ICC products (material, labor, and overheads) as at the Closing Date will be paid to Ciba. The process for determining the number of each of the units of the foregoing items shall be to have a joint physical inventory conducted by the parties within five (5) working days of the Closing Date. The cost of each unit shall be the cost as determined in accordance with Exhibit 5.1 or the open order report currently used by Ciba, as appropriate. Ciba shall provide a full summary of these calculations to Manufacturer, and the amounts due Ciba shall be deducted from Manufacturer's first invoice to Ciba. 7.2 Certain Disposal and Return Costs. Manufacturer shall be responsible for the cost of Waste disposal. In the event that Waste arises solely from Ciba developmental activities, Ciba shall be responsible for the cost of Waste disposal. 7.3 Governmental Regulations. Prior to making any investments to comply with new environmental regulations, Manufacturer shall confer with Ciba as to the appropriateness of any such investment, and shall obtain Ciba's consent to any such investment for which Manufacturer will be allowed to such reimbursement from Ciba pursuant to this provision. Such consent shall not be unreasonably withheld. Any increased capital expenditures for the Facility due to new environmental regulations shall be paid for by the party whose particular processes necessitated the capital expenditure. In the event that both parties processes necessitate any such capital expenditures, the Manufacturer shall pay the cost for such capital expenditure. Ciba shall reimburse Manufacturer for its share of operation and/or maintenance required by capital expenditure paid for by the Manufacturer through the overhead charges paid by Ciba to Manufacturer for the production of Product. Depreciation on capital expenditures paid for by Manufacturer shall be calculated on a straight line basis over a ten (10) year period and reimbursed by Ciba to Manufacturer. Ciba shall have the option -7- 8 at its sole cost and expense, to remove any improvements or equipment for which it has paid hereunder. 7.4 Invoices. Manufacturer shall invoice Ciba for the Products at the end of every month. Payment will be made by Ciba net thirty (30) days after receipt of invoice. Each invoice shall set forth the quantity of Product shipped, unit price and the applicable manufacturing fee therefor. The original and one copy of all invoices shall be mailed to Ciba to the attention of Controller (Stuart Wolf). 7.5 Taxes. Ciba shall be liable only for those new taxes imposed on a buyer by operation of law and shall include sales and use taxes. Ciba may require Manufacturer to provide Ciba with documentation reasonably satisfactory to Ciba establishing Ciba's liability for such taxes; provided, however, that Manufacturer shall not be required to provide such documentation in connection with sales or use taxes unless Ciba questions the applicability of such taxes. Ciba's Resale Number is SS OHB 30-607079. 8. Quality Control Issues. 8.1 Facility Requirements. Manufacturer will manufacture the Product only at the Facility. Manufacturer agrees to maintain the Facility and quality system in compliance with MIL-I-45208A, Boeing Document D1-9000 and any other current applicable customer specifications, and to operate in compliance therewith at all times. Manufacturer shall not deviate from such procedures without Ciba's prior written approval, Manufacturer is fully responsible for performance of all inspections required to ensure Products comply with Purchase Order and contract requirements, and is further required to maintain documentation of all such inspections for the duration of this Agreement. Manufacturer shall provide copies of such documentation upon request. At the completion of the Term of this Agreement, Manufacturer shall transfer to Ciba all such quality control records. 8.2 Right of Entry. Ciba's employees shall have full access to the Facility at all reasonable times to satisfy Ciba's needs in furtherance of this Agreement, provided, however, that such access shall not unreasonably interfere with the orderly operation, production and/or maintenance of the Facility; Ciba's production runs under this Agreement for developmental efforts at the Facility shall not constitute an interference with the orderly operation, production and/or maintenance of the Facility. Upon Manufacturer's consent, which shall not be unreasonably withheld, Ciba's customers shall also have access to the Facility, provided, however, the Manufacturer shall have the right to prohibit access to areas pertaining primarily to its own proprietary products. 8.3 Certification. A certification that Purchase Order requirements and applicable specifications and that records are on -8- 9 file subject to Ciba's examination shall be included on or with the packing sheet accompanying shipments. 8.4 Nonconforming Materials. When supplies of raw materials, intermediates or finished Products are found not to be in compliance with the specifications applicable to such materials, they shall be identified as nonconforming and segregated from normal production channels. Manufacturer shall initiate and maintain records for each such action to correct the condition. Records shall also reflect the disposition action taken, signatures of authorizing personnel, and evidence of compliance with the disposition. Suitable withholding areas and other necessary controls shall be utilized to preclude the use of nonconforming supplies in the end Product and their unauthorized delivery to Ciba or other designated destinations. Discrepant materials must be put in a locked cage and physically separated from conforming materials. Disposition of nonconforming materials and Products shall be in accordance with Military Specification MIL-STD-1520C and Ciba's instructions. All costs of handling and/or disposing of Ciba Supplied Materials which are defective at the time of receipt shall be paid for by Ciba, and accordingly Ciba shall reimburse Manufacturer for any of such costs which Manufacturer may have incurred. 8.5 SPC. Manufacturer agrees to utilize Ciba's existing statistical process control plan for dimensions and processes for the Products delivered under this Agreement. Manufacturer agrees not to make any changes to the statistical process control plan without the express written consent of Ciba's Quality Assurance representative, which consent shall not be reasonably withheld. 9. Inspection. 9.1 Goods. All goods (which includes raw materials, intermediate products and finished Products) shall be subject to inspection and test by Ciba and its customers to the extent practicable at all times and places including the period of manufacture and in any event prior to final acceptance by Ciba and its customers, but within a reasonable time after receipt by Ciba and its Customers. 9.2 Products. Products shall be subject to final inspection and acceptance by Ciba at destination, notwithstanding any payment or prior inspection. Ciba may reject any or all of the Products which do not strictly conform to the requirements of the applicable Purchase Order. Ciba shall by notice, rejection tag or other communication notify Manufacturer of such rejection. At Manufacturer's risk and expense, all such Products will be returned to Manufacturer for prompt replacement or other correction and redelivery to Ciba; provided, however, that with respect to any or all such Products and at Ciba's election and at Manufacturer's risk, Ciba may: (a) hold, retain or return such Products without -9- 10 permitting any replacement or other correction by Manufacturer; (b) Hold or retain such Products until conforming replacements are obtained from a third party; or (c) return such Products with instructions to Manufacturer as to whether the Products shall be replaced and as to the manner of redelivery. All replacement and other corrections and redelivery shall be completed within such time as Ciba may reasonably require. All costs and expenses, and any other damages incurred as a result of or in connection with nonconformance and replacement or other correction may be recovered from Manufacturer by an equitable price reduction, set-off or credit against any amounts that may be owed to Ciba under this Agreement. If it is determined that Products rejected by Ciba were in strict conformance to the requirements of the applicable Purchase Order, Manufacturer shall not be liable for any of the foregoing costs, and Ciba shall reimburse Manufacturer for any excess costs incurred by Manufacturer thereby. With respect to Sales Agreements entered into by Ciba after the Closing Date, unless otherwise agreed by the parties in writing, the costs and expenses to be borne hereunder by Manufacturer shall be limited to repair, replacement and freight expenses, or if required, premium freight expenses. Final acceptance or rejection of the Products shall be made within ninety (90) days following receipt of Product. Ciba may revoke its acceptance of any Product and have the same rights with regard to the Product involved as if it had originally rejected them. 10. Process. Manufacturer shall manufacture Products exclusively by use of Ciba's manufacturing process, techNology, and know-how (the "Process") applicable to the Product. The Process is described in Exhibit 10 (Index to Standard Manufacturing Procedures) and hereby incorporated by this reference. Manufacturer shall not change the Process without the express prior written consent of an authorized Ciba quality representative. Ciba hereby licenses Manufacturer to use the Process only for the purpose of meeting its obligations pursuant to this Agreement. 11. Forecasting. Every quarter during each Contract Year hereof, Ciba shall give Manufacturer a forecast of its requirements for the following four (4) contract quarters. Ciba and Manufacturer agree that any forecast (i) is for Ciba's administrative purposes only, and (ii) does not constitute either an upper or lower limit on Ciba's obligation to purchase from Manufacturer. 12. Purchase Orders. 12.1 Standard Forms. The parties recognize that during the term of this Agreement, a Purchase Order, acknowledgment form, or similar routine document (collectively, "Purchase Orders") may be used to implement or administer provisions of this Agreement. Therefore, the parties agree that any provisions of such Purchase -10- 11 Orders which purport to add to, vary, modify or are in conflict with the provisions of this Agreement shall be deemed deleted and shall have no force or effect on either party's rights or obligations under this Agreement or otherwise with respect to the Products sold during the Term. 12.2 Issuance of Purchase orders. Ciba may issue Purchase orders to Manufacturer from time to time. Each Purchase Order shall contain a description of the Products ordered, a reference to the applicable specifications, the quantities and prices, the terms and place of delivery, and any special conditions. Each such Purchase Order shall be governed by and be deemed to include the provisions of this Agreement. 12.3 Acceptance of Orders. Manufacturer's commencement of performance or acceptance of the Purchase Order by acknowledgment shall conclusively evidence Manufacturer's acceptance of the Purchase Order as written, except for its general terms and conditions, which are superceded by the terms of this Agreement. Ciba may revoke any Purchase Order prior to Ciba's receipt of Manufacturer's written acceptance or Manufacturer's commencement of performance. Manufacturer will be required to acknowledge all Purchase Orders by the end of the next business day after receipt of the order. 13. Packing and Shipping Instructions. Manufacturer shall (a) prepare for shipment and suitably pack all Products to prevent damage or deterioration, (b) where applicable, attempt to secure lowest transportation rates, (c) comply with the appropriate carrier tariff for the mode of transportation specified by Ciba, and (d) comply with any special instructions stated in the applicable Purchase Order. Ciba shall pay no charges for standard preparation, packing, crating, or cartage, unless stated in the applicable Purchase Order. All shipments forwarded on one day, via one route, must be consolidated. Each container must be consecutively numbered and marked with the applicable Purchase Order and part number. Container and Purchase Order numbers must be indicated on the applicable bill of lading. Products sold FOB place of shipment must be forwarded collect. Ciba reserves the right to specify the carrier(s) used to ship the Products hereunder. Manufacturer will notify Ciba, attention: Neville Lewis, by fax or E-Mail, of the following information prior to each shipment of Product: (i) Product type; Purchase Order Number; Batch Number; and Quantity (net weight). Manufacturer will also provide required certifications for such shipment, in such form as the parties may agree. The parties will mutually agree to the arrangements for the shipment of Products from Ciba's developmental work. -11- 12 14. Changes. Ciba may, at any time, by written change order make changes within the general scope of an Order in any one or more of the following: (a drawing, designs, or specifications; (b) shipping or packing; or (c) place of inspection, delivery or acceptance; and (d) the amount of Ciba Supplied Material. Manufacturer shall immediately implement the Change Order. If any such change causes an increase or decrease in the cost of or the time required for the performance of any part of the work, whether changed or not changed by the change order, an equitable adjustment shall be made in the price of or the delivery schedule for those Products affected. Any claim by Manufacturer for adjustment under this article must be received by Ciba in writing within thirty (30) days from the date of receipt by Manufacturer of the written change order or engineering drawing requirement, whichever is later. Otherwise, any such claim shall be deemed waived. Nothing in this article shall excuse Manufacturer from proceeding with an Order as changed, including failure of the parties to agree on any adjustment to be made under this Article. If Manufacturer considers that the conduct of any of Ciba's employees has constituted a change hereunder, Manufacturer shall immediately notify Ciba in writing as to the nature of such conduct and its effect on Manufacturer's performance. Pending direction from Ciba, Manufacturer shall take no action to implement any such change. 15. On-Site Review and Management Assistance. 15.1 Review. At either party's request, the parties shall meet to review any outstanding issues. Nothing herein may be construed as a waiver of either party's rights to proceed against the other because of any issues raised during such review. 15.2 Management Assistance. Without prejudice to Ciba's rights pursuant to the termination articles in this Agreement, if Ciba reasonably believes Manufacturer will not successfully complete any given Order, and if Manufacturer fails to remedy the situation to Ciba's reasonable satisfaction within thirty (30) days from written notice from Ciba to do so, Ciba may elect to intervene in the management of this Agreement to ensure successful completion of the Order. Such intervention may take the form of management assistance, loan of manpower, equipment, or any other reasonable means agreed to by the parties. Manufacturer shall reimburse to Ciba all reasonable costs incurred by Ciba in the course of said intervention. Rates for manpower shall be based upon the rates established in the Transitional Services Agreement. If such intervention is subsequently determined to have been of no value, Manufacturer shall have no obligation to reimburse Ciba for its services. Manufacturer, however, remains fully responsible for performing in accordance with each Order. -12- 13 16. Reports. Manufacturer will maintain and supply to Ciba the following monthly reports: (a) Material and labor variance/work in progress reports (CST 271); (b) Inventory reports (to be defined); and (c) Gross margin reports for Ciba Products (SAL 410, SAL 420, SAL 430). 17. Dedication of Facility. Subject to the terms of this Agreement, Manufacturer shall give first priority to the production of Ciba's supply of Product, including the conduct of developmental production runs for Ciba at the Facility. Manufacturer will not sell, pledge, hypothecate, transfer any interest in or otherwise encumber any asset necessary to produce Product without the prior written permission from Ciba, except as otherwise specifically provided in the Asset Purchase Agreement. 18. Time is of the Essence. Time is of the essence in Manufacturer's performance of this Agreement and Purchase Orders. Deliveries shall be strictly in accordance with the quantities and schedule specified in the Purchase Orders, subject to the terms of this Agreement. 19. Delay. Manufacturer shall notify Ciba immediately of any circumstances that may cause a delay in delivery, state the estimated period of delay and the reasons therefor. At Ciba's request, Manufacturer shall make every effort to avoid or minimize the delay to the maximum extent possible, including the expenditure of premium time and shipping via air or other expedite routing to avoid or minimize delays to the maximum extent possible. Any additional cost caused by these requirements shall be borne by the party causing the delay to the extent of such culpability. Nothing herein may be construed to prejudice any of the rights or remedies provided to either party in this Agreement or by law. 20. Termination. Ciba may, by written notice of default and without prejudice to any other rights and remedies that Ciba may have at law or in equity, terminate this Agreement in the event: (a) of Manufacturer's insolvency, reorganization, debt arrangement, assignment for the benefit of creditors or any other granting of relief from creditors; (b) that any process is issued against a substantial part of Manufacturer's property; (c) (i) of the institution of dissolution, liquidation or bankruptcy proceedings by Manufacturer or (ii) of the institution of dissolution, liquidation or bankruptcy -13- 14 proceedings against Manufacturer and the failure of Manufacturer to obtain dismissal thereof within ninety (90) days after such institution. (d) in the event of any material breach of this Agreement by Manufacturer which remains uncured within ten (10) days after receipt of written notice from Ciba. If Ciba terminates this Agreement, it may acquire, under the terms and in the manner Ciba considers appropriate, Products similar to those terminated, and Manufacturer will be liable for any excess costs for those Products. If this Agreement is terminated for default, Ciba may require Manufacturer to transfer title and deliver to Ciba any completed Products and/or partially completed Products and materials that Manufacturer has specifically produced or acquired for the terminated portion of the Agreement. Ciba shall pay the agreed upon price for completed supplies delivered and accepted. Manufacturer shall take all reasonable necessary actions to protect and preserve Ciba property in its possession until such time as acceptance has been effected, but Manufacturer shall not be so obligated for longer than ninety (90) days following the effective date of termination. 21. Compliance with Laws and Regulations and Permits. Manufacturer has and will maintain during the Term all Permits for the manufacture, processing, packaging, sale and delivery of the Products. Manufacturer warrants that all Products furnished under this Agreement and its operations will be manufactured, processed, packaged, sold and delivered in accordance with all applicable Laws and Regulations and Permits. Manufacturer further warrants that it will dispose of wall Waste in compliance with all applicable Laws and Regulations. Ciba will provide Manufacturer with Material Safety Data Sheets and any revisions, additions or updates thereof, to assist Manufacturer in handling such Products safely and in compliance with the aforesaid Laws and Regulations. The affirmative action and non-discrimination requirements of 41 C.F.R. Section 60-1.4(a)(7) (issued pursuant to Executive Order 11246), 41 C.F.R. Section 60-250.4 (issued pursuant to the Vietnam Era Veterans Readjustment Assistance Act of 1974) and 41 C.F.R. Section 41.4 (issued pursuant to Section 503 of the Rehabilitation Act of 1973) are hereby incorporated by this reference. 22. Disposal of Waste. Manufacturer will dispose of Waste, or arrange for the Disposal of Waste, only at the facilities consent to in writing by Ciba, in advance of disposal, whose consent shall not be unreasonably withheld. Manufacturer will be solely responsible for the proper Disposal of Waste. UNDER NO CIRCUMSTANCES SHALL CIBA BE LIABLE FOR DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE USE, HANDLING, STORAGE OR DISPOSAL OF SUPPLIED MATERIALS, PRODUCT, WASTE OR ANY OTHER CHEMICALS, RAW -14- 15 MATERIALS OR INPUTS BY ANY EMPLOYEE, AGENT, CONTRACTOR, SUBCONTRACTOR OR OTHER SERVANT OF MANUFACTURER OR ANY INVITEE OF MANUFACTURER. If as a result of the change of any Laws or Regulations covering the Disposal of Wastes by Manufacturer, the cost of Disposal of Wastes shall increase by more than 75% over the costs in effect on the Closing Date, then in such case an equitable adjustment in the manufacturing fee shall be made by mutual agreement of the parties. 23. Insurance Requirements. During the term of this Agreement, Manufacturer shall obtain, and maintain, at is sole cost, the following insurance coverage set forth below with companies satisfactory to Ciba with full policy limits applying, but not less than, as stated: (a) Workers' Compensation Insurance as required by laws and regulations applicable to and covering employees of Manufacturer engaged in the performance of the manufacturing services under this Agreement. (b) Employers' Liability Insurance protecting Manufacturer against common law liability, in the absence of statutory liability, for employee injury arising out of the master-servant relationship with a limit of not less than Five Hundred Thousand Dollars ($500,000) per occurrence. (c) Commercial General Liability Insurance including products completed operations (excluding aviation products) with limits of liability of not less than: personal Injury - One Million Dollars ($1,000,000) each occurrence/aggregate; Property Damage - One Million Dollars ($1,000,000) each occurrence/aggregate. (d) Automobile Liability Insurance including non-owned and hired vehicle coverage with limits of liability of not less than: Bodily Injury - Two Million Five Hundred Thousand Dollars ($2,500,000) each occurrence; Property Damage - Two Million Five Hundred Dollars ($2,500,000) each occurrence and in the aggregate; (e) Excess Liability Insurance over Commercial General Liability and Comprehensive Automobile Liability coverages afforded by the primary policies described above, with the aggregate of at least Ten Million Dollars ($10,000,000). Aviation Products Liability Insurance - with limits of liability not less than Five Million ($5,000,000) each occurrence/aggregate will be maintained by Ciba and Manufacturer will be added as an additional insured on Ciba's corporate program at no cost to Manufacturer. Manufacturer shall promptly furnish Ciba with certificates of insurance or true copies of policies, showing the above coverages and providing for at least thirty (30) days' prior written notice to Ciba of cancellation or modification. Such certificates or policies shall be in a form and underwritten by a carrier and/or placed through a broker designated by or satisfactory to Ciba. A certificate naming Ciba as additional-insured and evidencing the Comprehensive General Liability and Excess Liability coverages shall be promptly delivered to Ciba. The policy or certificate of Commercial General Liability and Excess Liability -15- 16 coverages shall show that it is primary coverage and not concurrent or excess over other valid insurance which may be available to Ciba, and shall certify as to Contractor's Comprehensive General Liability Insurance (a) that restrictive clauses, such as the care, custody and control exclusion in the property damage section have been eliminated from the policy and no similar restrictive clauses included; and (b) that all liability assumed by Manufacturer under this Agreement is insured. Acceptance by Ciba of Manufacturer's Certificate of Insurance evidencing coverage provided by the Manufacturer will be deemed compliance by Manufacturer with the provisions of this paragraph. If so required by Ciba, Manufacturer shall alter the lines of Insurance and/or increase the limits thereof, from those set forth in this Section, and any such change shall be at the expense of Ciba, but only to the extent that such expense is applicable to this Agreement. In the event Manufacturer so desires, it may carry out or take additional lines of insurance or increased limits over those set forth in this Agreement, but in any such case at its own expense. Insurance coverage, or lack thereof, shall not be deemed to constitute a limitation on any liability of Manufacturer to Ciba under this Agreement, and Manufacturer shall remain liable for all such losses or expenses. 24. Indemnification. Manufacturer will indemnify, defend and hold Ciba, its officers, directors, agents, contractors and employees harmless against any and all claims, damages, losses, liabilities and related costs and expenses (including reasonable attorneys' fees and disbursements) arising directly or indirectly from: (a) Manufacturer's noncompliance with applicable Laws and Regulations and Permits; and (b) the conduct of Manufacturer's business at the Facility including but not limited to the manufacture, use, handling, storage, release, transportation or disposal of chemicals, raw materials, Ciba Supplied Materials, Product, Waste or any other substance by any employee, agent, independent contractor or subcontractor of Manufacturer or by any invitee of Manufacturer other than Ciba. Such duty of indemnification shall include, but not be limited to, any claim pursuant to any laws and Regulations and Permits now or hereinafter in effect relating to the regulation and protection of human health, safety, welfare, the environment or natural resources. The obligations set forth in this Section shall not be limited by any other term or condition in this Agreement. 25. Safe Storage. Manufacturer represents, warrants and agrees that the areas where the Supplied Materials, work in progress, and Products are physically placed or held are, and shall be, at all times during the term of this Agreement, safe, secure and protected from adverse conditions. Such areas shall be equipped with appropriate containment systems for the safe and secure storage of -16- 17 Supplied Materials, work in progress, and Products. Manufacturer shall take all reasonable precautions necessary to prevent contamination of, and any tampering with, the Supplied Materials, work in progress and Products, and shall take all reasonable precautions necessary to prevent contamination by the Supplied Materials, work in progress or products of other goods stored with Supplied Materials, work in progress and Products. 26. Title and Risk of Loss. Title to Supplied Materials, work in progress and Product shall at all times be with Ciba. Risk of loss of Supplied Materials and Products shall also be with Ciba except when any of same are in Manufacturer's possession, on its premises or under its control, during which time risk of loss shall be with Manufacturer. Title to, and risk of loss of, Waste will at all times remain in Manufacturer. Manufacturer shall not sell, pledge, hypothecate or otherwise transfer to any third party any interest in the Supplied Materials or Product. Manufacturer shall fully cooperate with Ciba in taking such steps as Ciba may reasonably require in order to protect its interest in Supplied Materials or Product against the claims or competing interests of third parties, including any creditors of Manufacturer. 27. Inspections and Auditing. During the term of this Agreement and for two (2) years thereafter: (a) Manufacturer shall make available to Ciba for its review, during normal business hours and upon reasonable prior notice, all records and reports relating to the manufacturing, processing, quality control, storage, packaging, transportation and disposal of Product, Waste and other materials used in the manufacture of Products, and Ciba shall have the right to copy these documents as required; (b) to send its representatives to audit, inspect and observe the manufacture, processing, packaging, storage, transportation and disposal of Products, Waste and other materials used in the manufacture of Product, and to conduct other types of audits reasonably required for its internal control or to ensure compliance with legal or other requirements relating to Ciba's or Manufacturer's activities under this Agreement; in each case at any time during normal business hours and with reasonable notice. Ciba's representatives shall have no responsibility for, or right of, supervision of Manufacturer's employees who are performing the manufacturing, processing, packaging, storage, transportation or disposal operations or for the operations themselves. Each party shall bear its own costs hereunder. 28. Independent Contractor. Nether party assumes, nor authorizes any representative or other person to assume for it, any obligation or liability other than such as is expressly set forth herein. Manufacturer shall be an independent contractor with respect o its obligations hereunder. Neither party nor their employees shall be deemed servants, joint venturers, employees or agents of the other. -17- 18 29. Force Majeure. A party shall be excused from performance hereunder if its failure to perform arises from events beyond its reasonable control and occurring without its fault or negligence and which were not reasonably foreseen or foreseeable at the time of execution of this Agreement (each, an "Event of Force Majeure"). Possible examples of such Events of Force Majeure are war, fire, flood, strike, accident, riot, acts of governmental authority (whether or not valid) or acts of God. The party whose performance will be delayed by such events shall provide prompt notice to the other party and shall indicate the estimated duration of such Event of Force Majeure, and shall use all reasonable efforts to mitigate the effects of such Events of Force Majeure. If, by reason of any such Event of Force Majeure, Manufacturer is excused from performance then, to the extent Products are not delivered to Ciba, in the quantities or at the times required hereunder, Ciba may purchase the same or similar services from other sources without liability or obligation to Manufacturer. In the event Ciba purchases services from another source, then Ciba may to the full extent of such purchases, reduce its commitment for services, if any, hereunder. All quantities of Product purchased from such other sources by Ciba shall be considered Product purchased from Manufacturer for purposes of calculating discounts based on volume allowed under this Agreement, if any. During any period of shortage due to any of said Events of Force Majeure, Manufacturer shall allocate its supply of raw materials on a first priority basis to Ciba's production of Product. In addition, Ciba may, at its option, extend the term of this Agreement to permit partial or total delivery of Products not delivered, and not secured elsewhere, because of any such Event of Force Majeure. If such Event of Force Majeure continues for more than sixty (60) days, Ciba has the option, at any time thereafter during which the Event of Force Majeure is continuing, to terminate this Agreement without liability to Manufacturer, except to pay for Products already accepted. 30. Liquidated Damages. The parties agree that in the event the work is not completed on or before a grace period of two weeks after the delivery dates, damages will be sustained by Ciba, and that it is and will be impractical to determine the actual damage which Ciba will sustain in the event of and by reason of such delay. It is therefore agreed that Manufacturer will pay to Ciba the sum of one percent (1%) of the Total Value of the Shipment per day beyond the grace period, as liquidated damages and not as a penalty. It is further agreed that such amount per day is a reasonable estimate of such damages, that said amount per day is a reasonable relationship to the damage that would be sustained by Ciba, and Manufacturer agrees to pay such liquidated damages as herein provided. Manufacturer agrees that Ciba may deduct the amount to be paid for such liquidated damages from any money due or that may become due under this Agreement. The amount so deducted -18- 19 shall not be a limitation on the amount to be paid as liquidated damages. Manufacturer shall not be deemed in default of this Agreement and Manufacturer shall not be charged liquidated damages because of any delays in the completion of work due to an event of Force Majeure. Notwithstanding the foregoing, Manufacturer's liability to Ciba hereunder shall not exceed the Total Value of the Shipment. For purposes of this Section 30 Total Value of the Shipment means the sum of the payment for the particular Products in question by Ciba to Manufacturer, the cost to Ciba of the Supplied Materials, and any costs for freight. 31. Confidentiality. The parties acknowledge that in the course of performance of this Agreement, they may have access to or acquire information concerning Manufacturer or Ciba and their respective affiliates, as the case may be, that is confidential and proprietary. To the extent possible, information disclosed in tangible form shall be marked "PROPRIETARY" or "CONFIDENTIAL" but the failure to so mark such information shall not nullify the confidential nature of the information; and in the case of disclosures made orally or by visual inspection, such information shall be reduced to writing within a reasonable period of time after such disclosure and marked as stated above. The parties agree to hold such information in strict confidence, not to disclose such information to third parties and not to use such information for any purpose other than in connection with this Agreement. 32. Notices. Notices and other communications made with respect to this Agreement shall be given in writing and addressed to the parties at the addresses set forth below or such other addresses as may be designated in writing by either party to the other. Notices shall be delivered by hand, by facsimile, by first class mail or by a nationally recognized overnight courier service. Unless otherwise indicated herein, all notices shall become effective upon receipt, when delivered by hand or by facsimile; or three (3) days after deposit in the United States mail when sent by first class mail with proper postage prepaid; or on the next business day when sent by a nationally recognized overnight courier service, with proper postage prepaid. Notices shall be addressed to the attention the signatures or such other person as may be designated in writing by either party to the other. Ciba Composites Engelhard/ICC 5115 East La Palma Avenue 441 North Fifth Street Anaheim, CA 92807 Philadelphia, PA 19123 Attention: Vice President Fax No.: 215-592-8299 General Manager, Composites Fax No.: 714-779-5810 33. Subcontracting. Manufacturer may not procure any Product, as defined in the applicable Purchase Order, from a third party in a -19- 20 completed or a substantially completed form without Ciba's prior written consent. 34. Assignment. This Agreement shall not be assigned or transferred by Manufacturer (whether in connection with a sale of stock; sale, transfer or lease of all or substantially all of the assets of a Manufacturer; merger; or otherwise by operation of law) without the prior written consent of Ciba. This Agreement shall bind the permitted successors and assigns of the parties hereto. Any assignment or transfer of this Agreement by Manufacturer in violation of this provision shall be void and ineffective for all purposes and shall be a material breach of this Agreement. 35. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws. 36. Waivers; Modifications. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing and signed by the party making the waiver. Modifications hereof or additions thereto are not effective unless in a writing which specifies that it is a modification to this Agreement and is signed by duly authorized representatives of the parties. 37. Severability. If any provision of this Agreement is held to be invalid or unenforceable by a court having competent jurisdiction, such court shall have the power to modify such provision so that it will be valid and enforceable, and in any such case the balance of this Agreement will be in full force and effect. 38. Headings. The Section titles in this Agreement are for convenience only and shall not define or limit any of the provisions of this Agreement. 39. Survival. The obligations set forth in Sections 24, 27, 31 and 43 and this Section 39 shall survive any termination or expiration of this Agreement. 40. Entire Agreement. This Agreement, and any exhibits, schedules, addenda and attachments hereto comprise the entire agreement between the parties with respect to the manufacturing and supply of the Products and merge and supersede all prior and contemporaneous agreements or understandings, oral or written, with respect thereto. 41. Disputes. Any dispute arising under this agreement that is not settled by agreement of the parties may be resolved by appropriate legal proceedings. Pending any decision, appeal, or Judgment, or settlement of any dispute arising under, out of, or in -20- 21 connection with this Agreement, both parties shall proceed diligently with the performance of this Agreement and Orders. 42. Mitigation and Cap. Both parties shall take all reasonable actions to mitigate their respective damages under this Agreement. Notwithstanding anything herein to the contrary, in no event shall the aggregate of all liabilities of either party to the other arising out of this Agreement exceed ($1,000,000) one million dollars. 43. Non Competition. (a) Manufacturer agrees that for a period of ten (10) years after the Closing Date it will not, directly or indirectly, engage, undertake or participate in (as a principal, agent, partner, stockholder, consultant, representative or otherwise) worldwide in the business of developing, making, manufacturing, selling, marketing, distributing, delivering, commercializing or otherwise disposing of, whether for profit or non-profit, honeycomb core outside of the Field, as Field is defined in the Asset Purchase Agreement, provided, however, that nothing herein contained shall prohibit (i) the ownership by Manufacturer of not more than five percent (5%) of the stock of any corporation whose stock is listed on a national securities exchange or traded on NASDAQ; or (ii) the ownership by any employee benefit plan or fund of Manufacturer of any amount of the stock of any corporation whose stock is listed on a national securities exchange or traded on NASDAQ. (b) Remedy. Manufacturer and Ciba each acknowledge and agree that it will be impossible to measure in money the damages to Ciba if Manufacturer fails to comply with any of the provisions of this paragraph 43 and agrees that in any such event Ciba will not have an adequate remedy at law. Moreover, Manufacturer and Ciba each affirms and recognizes that the rights of Ciba under the aforesaid instances is special, unique and of any extraordinary character, it is therefore agreed that: (i) Ciba in addition to any other rights and remedies which it may have, shall be entitled to injunctive relief to enforce any of the aforesaid restrictions and obligations herein imposed upon the Manufacturer and that in the event that any action or actions shall be brought in equity to enforce any such restrictions and obligations, the Manufacturer will Not urge the defense that there is an adequate remedy at law: (ii) The period of time set forth in this paragraph shall be tolled for any periods during which Manufacturer is in breach of any of its obligations thereunder. -21- 22 IN WITNESS WHEREOF, the parties have caused their duly authorized representatives to execute this Agreement as of the date first above written. Ciba-Geigy Corporation, Composites Division By: /s/ JAMES A. KOSHAK Title: V.P./Gen Mgr. ------------------------------- ---------------------- Engelhard/ICC By: ICC DESICCANT TECHNOLOGIES, INC. By: /s/ IRWIN L. GROSS Title: CEO ----------------------- ---------------------- -22- EX-10.3 4 TECHNICAL INFORMATION, TRADEMARK & PATENT AGRMNT 1 EXHIBIT 10.3 TECHNICAL INFORMATION, TRADEMARK AND PATENT LICENSE AGREEMENT Technical Information, Trademark and Patent License Agreement dated March 27, 1995 ("Effective Date") by and between Engelhard/ICC, a partnership organized and existing under the laws of the Commonwealth of Pennsylvania, United States of America, (hereinafter referred to as "E/ICC") and Chung-Hsin Electric & Machinery Manufacturing Corporation, a corporation organized and existing under the laws of the Republic of China (hereinafter referred to as "CHEM"). WITNESSETH: WHEREAS, E/ICC owns certain patents, and technical information and know-how associated with the design, manufacture and application of the System (defined below); WHEREAS, CHEM desires to obtain licenses under such patents and technical information and know-how of E/ICC to manufacture and market the System and to design, manufacture and market the CHEM System (defined below) in the Republic of China and other areas as provided in this Agreement under license from E/ICC, and with technological assistance extended by E/ICC; and WHEREAS, E/ICC is willing to license such patents and technical information and know-how and provide such technical assistance, all in accordance with the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements herein contained and other good and valuable consideration, the parties hereby agree as follows: Article 1. Definitions 1.1 As used in this Agreement, the following terms shall have the meanings as set forth herein: (a) "E/ICC's System Patents" shall mean System related patents now in the possession of E/ICC or those acquired during the term of this Agreement which rely on E/ICC's System Technical Information and Know-How. E/ICC's System Patents now in existence are listed in Schedule "A" attached hereto. (b) "E/ICC's System Technical Information and Know-How" shall mean System related technology developed by and belonging to E/ICC or such technology that may be developed during the term of this Agreement. The contents of E/ICC's System Technical Information and Know-How which is now in existence as of the Effective 2 Date shall be set forth separately by E/ICC in Schedule "B" attached hereto. (c) "Sales Price" shall mean ninety-two percent (92%) of CHEM's gross invoice price for Systems produced under this Agreement. (d) "Supply Agreement" shall mean the Agreement dated March 27, 1995 between the parties hereto which relates to the purchase by CHEM of certain products from E/ICC, as the same may be amended from time to time pursuant to the terms thereof. (e) "Rotor Products" shall mean any and all rotors or cassettes which include a desiccant or drying material or agent or that is capable of use for heat exchange or any other purpose that is used or to be used in any heating/air-conditioning/treatment system. (f) "Ancillary Products" shall mean additional ancillary components, full systems or sub-systems that may also be purchased at the request of CHEM. (g) "E/ICC's Sales Price" shall mean ninety-two percent (92%) of E/ICC's gross invoice price for Systems or CHEM Systems produced under this Agreement; (h) "System" shall mean a desiccant air-conditioning product designed and developed solely by E/ICC which may include a Window Product (defined below) which incorporates E/ICC components, including Rotor Products and Ancillary Products and technology or know-how for which E/ICC is free to grant licenses without accounting to any third party. (i) "Window Products" shall mean air-conditioning, dehumidification, heat exchange or air treatment products which incorporate Rotor Products that can be installed in a window size opening or are of a size rating of three (3) refrigerated tons (U.S.) or smaller. (j) "CHEM Systems" shall mean any product which utilizes E/ICC's System Patents and E/ICC's System Technical Information and Know-How or which contains Rotor Products which is first designed and developed solely by CHEM, which may include a Window Product. (k) "Territory shall mean all of the countries of the world except for Israel, Turkey, Greece, Egypt and Cyprus. -2- 3 Article 2. Disclosure and Technical Assistance 2.1 Subject to the provisions of Paragraph 4.1, E/ICC agrees that on the Effective Date or as soon thereafter as is reasonable under the circumstances, E/ICC shall disclose to CHEM E/ICC's System Technical Information and Know-How and E/ICC's System Patents in existence on the Effective Date. 2.2 From time to time during the term of this Agreement, E/ICC and CHEM shall have a regular exchange of experience and information and E/ICC shall disclose to CHEM E/ICC's System Technical Information and Know-How and E/ICC's System Patents owned, developed or acquired by E/ICC after the Effective Date. 2.3 E/ICC shall make available to CHEM technically qualified trained employee(s) familiar with E/ICC's System Technical Information and Know-How whose purpose and obligation shall be to advise CHEM's personnel in the design, manufacture, application, use and sale of Systems which employ E/ICC's System Technical Information and Know-How. For the first year following the Effective Date, E/ICC will provide up to one thousand (1000) hours of technically qualified trained employee(s), and for the second year following the Effective Date, up to five hundred (500) hours of technically qualified trained employee(s), to make available to CHEM at mutually agreeable times and places, which may include the Republic of China when requested in writing by CHEM, and will also include Philadelphia, Pennsylvania, U.S.A. and by phone conference and video conference with CHEM, when available. Payment for salaries and expenses for E/ICC technically trained employees up to the above hourly limits, will be borne by E/ICC. In the event that CHEM personnel visit the U.S., all salaries and expenses for CHEM personnel will be borne by CHEM. In each case, the hosting party will assist the visiting party in making economical travel arrangements. 2.4 Any information which E/ICC shall disclose to CHEM shall be in English. Article 3. Licenses 3.1 (a) Subject to the provisions of Article 4, E/ICC hereby grants and agrees to grant to CHEM: (i) an exclusive [as limited in paragraph 3.1(b)], non-transferable license without the right to sublicense under E/ICC's System Patents and E/ICC's System Technical Information and Know-How to manufacture and sell Systems and to design, manufacture and sell CHEM Systems in the Republic of China; -3- 4 (ii) a non-exclusive, non-transferable license without the right to sublicense under E/ICC's System Patents and E/ICC's System Technical Information and Know-How to manufacture and sell Systems and to design, manufacture and sell CHEM Systems in the People's Republic of China. (b) CHEM's initial period of exclusivity under Paragraph 3.1(a)(i) is for three (3) years commencing with the Effective Date. For the first three (3) years, the parties agree to establish a yearly business process to review actual performance against performance guidelines shown in Schedule "C." The parties will work together in this process to make recommendations for both manufacturing, marketing and pricing to ensure the performance of the desiccant business. At the end of year three (3), E/ICC and CHEM will meet and mutually determine firm performance targets for years four (4) and five (5). After year four (4), if CHEM has not achieved the firm performance targets, except as caused by force majeure, E/ICC shall have the right to convert CHEM's license from exclusive to non-exclusive based on the running royalty described in Article 4. (c) It is understood that the license-granted or to be granted pursuant to Paragraphs 3.1(a) will not include or imply: (1) any license to manufacture Systems outside of Republic of China or The People's Republic of China; or (2) any authorization on the part of E/ICC for CHEM to communicate, use, transfer or deliver any of E/ICC's System Technical Information and Know-How outside of Republic of China or The People's Republic of China except as provided in Article 10. (d) Within the Territory, except for the Republic of China and the People's Republic of China, E/ICC has the right to establish exclusive distribution arrangements with other parties. If CHEM identifies a business opportunity in the Territory outside the Republic of China and the People's Republic of China, E/ICC will work together with CHEM to seek a business arrangement to take advantage of the business opportunity, including negotiating with third parties. In addition, as part of the business review process established in Paragraph 3.1(b), CHEM shall have the right to nominate countries within the Territory for non-exclusive distribution by CHEM, (so long as exclusive arrangements have not been previously established by E/ICC). Article 4. Compensation 4.1 Subject to: (i) obtaining the approval of CHEM's Board of Directors which CHEM agrees to request at the first Board of Director's meeting which follows the Effective Date, (ii) the performance bond in Schedule "D" of Two Hundred Fifty Thousand -4- 5 Dollars (U.S. $250,000.00), and (iii) the Testing Specification in Schedule "E"; CHEM agrees to pay to E/ICC the sum of Five Hundred Thousand Dollars (U.S. $500,000.00) within twenty (20) days of the Effective Date. Such fee shall be non-refundable and not applicable to any future royalty payments. 4.2 In consideration of the licenses granted by E/ICC to CHEM pursuant to Paragraph 3.1(a) hereof, CHEM agrees to pay to E/ICC a running royalty of two and one-half percent (2.5%) of CHEM's Sales Price, for all Systems which are manufactured and sold by CHEM. CHEM shall not pay any running royalty for Systems which are produced by CHEM at the written request of E/ICC which are for delivery to E/ICC or to a customer of E/ICC. 4.3 CHEM agrees to pay to E/ICC a running royalty of five percent (5%) of the Rotor Products Base price (as defined in the Supply Agreement) listed in Schedule "C" of the Supply Agreement for all desiccant and thermal cassette rotors that are utilized in CHEM Systems which are sold by CHEM. CHEM shall not pay any running royalty for CHEM Systems which are produced by CHEM at the written request of E/ICC which are for delivery to E/ICC or to a customer of E/ICC. 4.4 E/ICC agrees to purchase and CHEM agrees to fabricate and sell Systems and CHEM Systems as an original equipment supplier to E/ICC, on a non-exclusive basis, as defined herein before. E/ICC agrees to work cooperatively with CHEM to expand the manufacturing and sales opportunities in the marketplace, based on CHEM's product competitiveness and market demand. In the Southeast Asian countries, where practical, E/ICC agrees to present CHEM with the opportunity to supply manufactured product for itself and E/ICC will also request that its distributor(s) or agent(s), (exclusive or non-exclusive) give CHEM the opportunity to supply manufactured product, based on CHEM's product competitiveness including cost, quality, reliability and other factors. As part of the yearly business review process established in Paragraph 3.1(b), E/ICC will meet on a yearly basis with CHEM to review the business performance. The parties agree to establish mutually the initial OEM price, quantity, warranty, and other terms as required when the first such System or CHEM System is completed. CHEM shall not pay any running royalty for Systems or CHEM Systems which are produced by CHEM at the written request of E/ICC which are for delivery to E/ICC or to a customer of E/ICC. E/ICC will purchase systems on an FOB Keelung port basis based on a Letter of Credit from E/ICC with payment terms within thirty (30) days of invoice. -5- 6 Article 5. Improvements in Technology 5.1 CHEM shall promptly disclose to E/ICC any improvements and/or developments relating to Systems (e.g., fan, control system, housing etc.) developed by it during the term of this Agreement, together with the patents, patent applications and technical information and know-how of CHEM relating thereto, and shall grant and hereby agrees to grant to E/ICC a non-exclusive royalty-free, non-transferable worldwide license outside of the Republic of China and the People's Republic of China to make, have made, use and sell such improvements and/or developments under its patents patent applications and technical information and know-how. E/ICC shall have the right to convert its non-exclusive license to an exclusive license; the royalty rate for the exclusive license shall be five percent (5%) of E/ICC's Sales Price of each such improved System sold by E/ICC. 5.2 In the event that CHEM develops a CHEM System, CHEM shall grant and hereby agrees to grant to E/ICC a non-exclusive, non-transferable, worldwide license under its patents, patent applications, technical information and know-how for use outside of the Republic of China and the People's Republic of China to make, have made, use and sell such CHEM System. For said license, E/ICC agrees to pay to CHEM a royalty of five percent (5%) of E/ICC's Sales Price for each such CHEM System sold by E/ICC. Article 6. Manufacture and Quality Control 6.1 CHEM shall with reasonable assistance from E/ICC: (a) obtain all necessary manufacturing and product licenses as well as any other governmental permissions and registrations necessary for the design, manufacture, packaging, sale and distribution of Systems; (b) manufacture the Systems strictly in accordance with E/ICC's specifications and directions; (c) follow such quality control procedures as E/ICC shall from time to time specify to assure that the Systems sold by CHEM under E/ICC's trademarks and trade names meet E/ICC's quality standards and customer specifications; (d) ship to E/ICC at E/ICC's expense, if available if requested by E/ICC a representative System produced by CHEM for test and approval of quality by E/ICC; and (e) permit the duly authorized representatives of E/ICC to inspect during normal working hours each of CHEM's plants, the process of manufacture and packaging of the Systems by CHEM, and -6- 7 cause to be inspected by them the plant of any contract manufacturer producing any components used in production of the Systems when reasonably practicable. 6.2 The decision of E/ICC made after consultation with CHEM and taking into consideration the views of CHEM shall be final as to whether the provisions of Paragraph 6.1 are being properly met. If E/ICC's decision is that a provision of Paragraph 6.1 is not being properly met by CHEM, then E/ICC agrees to work with CHEM, at no charge to CHEM, to help to correct the problem. 6.3 Systems which do not meet E/ICC's quality standards shall not be sold or distributed by CHEM, unless all defects are corrected to the satisfaction of E/ICC. 6.4 Despite any approval by E/ICC of Systems provided pursuant to this Article, CHEM shall remain solely responsible for the quality of the System which it produces, and CHEM agrees to exercise all due care and diligence in the manufacture, processing, packaging, sale and distribution of the System. Article 7. Records and Reports 7.1 Within thirty (30) days after the end of every six-month calendar period (June 30 and December 31) (the "Period") during the term of this Agreement, CHEM shall furnish to E/ICC a written report ("Report") duly certified by an officer of CHEM setting forth, as of the end of such Period, the total number of Systems and CHEM Systems sold-by or for CHEM during the preceding Period, together with the Sales Price for each such System, and CHEM Systems and the amount of-royalties payable hereunder for such Period. Within fifteen (15) days after receipt of a Report, E/ICC shall issue an invoice to CHEM for the royalties due and CHEM shall pay the invoice within fifteen (15) days after receipt of an invoice. The first such Report shall be submitted as herein set forth for the Period that covers from the Effective Date of this Agreement up to either June 30, 1995 or December 31, 1995 whichever occurs first. A final report shall be rendered within sixty (60) days after, and as of, the date of sale of the last System or CHEM System manufactured under this Agreement with respect to all such Systems or CHEM Systems sold up to the date of termination, but which was not covered by prior reports. All payments to be made under this Agreement by CHEM to E/ICC shall be made in United States Dollars and shall be made by wire funds transfer. 7.2 CHEM shall keep and maintain accurate and complete records and books of account containing all information required for the computation and verification of the amounts to be paid under this Agreement and such records shall be made available by CHEM at such times as E/ICC shall reasonably request. -7- 8 7.3 With respect to any payments to be made to E/ICC pursuant to the terms of this Agreement, CHEM shall have the obligation to deduct any taxes, fees, assessments or other charges of any kind imposed by the government of Republic of China and the People's Republic of China any subdivision thereof, or any other governmental unit within its territory (hereinafter referred to as "Charges"). Such Charges shall be deducted by CHEM from payments due to E/ICC and remitted to the appropriate governmental authority. CHEM shall furnish documentation regarding the payment of any Charges so deducted to E/ICC in sufficient detail to show the amount of the charge, the nature of the charge and proof of payment of the charge. Notwithstanding the foregoing, CHEM shall be responsible for payment of any value-added tax that may be imposed on payments to E/ICC. 7.4 Where the provisions of this Agreement require the conversion into United States Dollars of an amount initially computed in any other currency, the amount of United States Dollars payable under this Agreement shall be determined on the basis of the Exchange Rate in effect in the Republic of China on the date such payment is made. In the event that payment is made after the due date, the other currency obligation of CHEM shall be increased to account for Exchange Rate fluctuations to the extent necessary, if any, to produce the same United States Dollar payment to E/ICC which would have been made if such payment had been made on the due date. Exchange Rate shall mean the telegraphic transfer price charged by a Class A foreign exchange bank in the Republic of China for purchases of United States Dollars by CHEM with New Taiwan Dollars for payment abroad. 7.5 Any and all royalties or other sums that may become due and owing from CHEM hereunder shall bear interest from and after the respective due dates thereof at a rate of one percent (1%) per month. Article 8. Markings and Descriptive Literature 8.1 E/ICC may require CHEM to utilize an E/ICC trade name or trademark on all Systems, System Components and CHEM Systems (herein collectively referred to as "SYSTEMS') sold by CHEM which are or contain any E/ICC components. 8.2 In selling or promoting the sale of any SYSTEMS, CHEM shall obtain the prior written consent of E/ICC directly to use any trademarks or trade names of E/ICC or any trademarks or trade names similar thereto other than for those trademarks and trade names that are specifically provided for herein. 8.3 CHEM shall insure that all labels, name tags, markings, cartons, containers, package inserts and other promotional mate- -8- 9 rials relating to the SYSTEMS will comply with all relevant laws and regulations of the countries where SYSTEMS are to be sold and also with E/ICC's requirements. 8.4 Before any labels, name tags, markings, cartons, containers, package inserts or other packaging material (hereinafter collectively referred to as, "Packaging Materials) are used with SYSTEMS, CHEM shall submit to E/ICC an original copy of the exact Packaging Materials to be used, and no such Packaging Materials may be used until E/ICC has given its prior written approval for its use. In the event that E/ICC shall fail to respond within thirty (30) days of receipt of such submission, approval shall be deemed to have been given. 8.5 CHEM may not distribute any descriptive literature, advertising or any material concerning the SYSTEMS without first furnishing E/ICC with drafts thereof and requesting and securing E/ICC's written approval for such material. In the event that E/ICC shall fail to respond within thirty (30) days of receipt of such request, consent will be deemed to have been given. Article 9. Trademarks 9.1 Subject to the terms and conditions of this Agreement and in further consideration of the fees received hereunder, E/ICC hereby grants to CHEM the non-exclusive right to use E/ICC; unregistered trade names and registered trademarks, when obtained, for example, Desert Cool, DESI/AIR and other E/ICC trademarks ("Licensed Marks") in connection with Systems or CHEM Systems for distribution and sale in the Territory. 9.2 The Licensed Marks shall be used by CHEM only with respect to Systems and CHEM Systems as shall be approved in advance in writing by E/ICC. 9.3 CHEM agrees to maintain such quality standards as shall be prescribed by E/ICC in the conduct of the business operations with which the Licensed Marks are used and for the goods on which the Licensed Marks are used. CHEM agrees to manufacture or have manufactured Systems in accordance with such specifications as may be prescribed by E/ICC from time to time. 9.4 CHEM agrees that it will display the Licensed Marks only in such form or manner as shall be specifically approved in writing in advance by E/ICC. CHEM also shall cause to appear on all materials on or in connection with which the Licensed Marks are used, such legends, markings and notices as E/ICC may request in order to give appropriate notice of any trademark rights therein. -9- 10 9.5 Upon reasonable notice and during normal business hours, E/ICC shall have the right to inspect CHEM's business operations conducted under the Licensed Marks in order to assure E/ICC that the provisions of this Agreement are being observed. Such inspection shall include quality control data related to the Systems and including samples for testing by E/ICC when so requested. E/ICC will attempt not to disturb normal business operations during such inspections. 9.6 CHEM acknowledges E/ICC's ownership of the Licensed Marks and CHEM agrees that all use by CHEM of the Licensed Marks shall be in accordance with the directions of E/ICC for their use and that all use of the Licensed Marks by CHEM shall inure to E/ICC's benefit. 9.7 As of the Effective Date, E/ICC is not aware of any third party trademark rights that would be infringed by CHEM's use of the Licensed Marks as contemplated hereunder. Article 10. Confidentiality 10.1 Except as specified in this Paragraph and except to the extent that such E/ICC System Technical Information and Know-How ("INFORMATION") is or becomes public knowledge otherwise than by any act or omission of CHEM, all INFORMATION disclosed under this Agreement, and all samples and materials embodying such INFORMATION shall be treated by CHEM as confidential and shall not be disclosed or made available to any third party. CHEM shall have the right to disclose such INFORMATION and samples and materials embodying such INFORMATION to a potential purchaser of Systems but only to the extent necessary for the use of such Systems by such purchaser; provided, however, that prior to any such disclosures, and as a condition thereto, such purchaser shall have entered into with CHEM a confidentiality agreement to hold such INFORMATION and samples and materials in confidence; not to disclose such INFORMATION or make available such samples and materials to any other third party; not to analyze such samples or materials; and not to use same except in connection with the commercial use of System purchased from CHEM; such obligations will continue for a period of fifteen (15) years after the date the INFORMATION is disclosed or samples and materials are made available, except to the extent such INFORMATION is or becomes public knowledge otherwise than by any act or omission of such purchaser. CHEM shall have the right to disclose such INFORMATION and make available samples and materials embodying same to those of its management and technical or production employees who shall have a need to know same for the purposes provided by this Agreement and who shall have entered into a confidentiality agreement with E/ICC in the form shown in Appendix "A" hereof. CHEM shall be liable to E/ICC for any disclosure of INFORMATION and sample materials by such employee or purchaser -10- 11 unless such disclosure was authorized in advance in writing by E/ICC. CHEM shall use the INFORMATION disclosed under Article 2 only in performing under the licenses granted pursuant to Article 3. If a license granted pursuant to Paragraph 3.1(a) is terminated, CHEM agrees to refrain from using for any purpose such of the INFORMATION as is related to the terminated license. Article 11. Patent, Technical Information And Know-how and Assistance 11.1 E/ICC shall have the right to review CHEM's Systemrelated improvements and developments and to recommend the filing of one or more patent applications in one or more countries thereon. If CHEM has not filed patent applications thereon and/or does not wish to follow E/ICC's recommendation with respect to any particular country, then E/ICC shall, after consultation with CHEM, have the right to file such patent applications. CHEM agrees to fully cooperate and cause its employees to fully cooperate with E/ICC to effect the filing and prosecution of said patent applications. The parties shall jointly own such patent applications and any resulting patents and they agree to share equally all expenses related thereto. 11.2 All information of United States origin made available directly or indirectly under this Agreement by E/ICC to CHEM for use outside the United States shall be used by CHEM subject to and in accordance with the regulations of any department or agency of the United States Government. Such information or the direct product thereof shall not be exported or shipped by CHEM to any destination which requires the approval of the United States Government for such exportation or shipment until a request to do so has been submitted to and approved by the United States Government and E/ICC. To the extent such information or the direct product thereof may be offered in a country where such approval for the export of technology would be required, CHEM shall assist E/ICC in providing sufficient information in a timely manner so that requisite approvals may be obtained. 11.3 In the event that E/ICC determines that a third party is infringing a E/ICC System patent licensed hereunder, E/ICC shall either take appropriate action at its own expense against the third party infringer, or give CHEM authority to take such appropriate action against the third party infringer at CHEM's expense or E/ICC expense as authorized, in either case, the parties agree to assist each other to the extent reasonably necessary. Article 12. Warranties 12.1 E/ICC represents that E/ICC's System Technical Information and Know-How disclosed to CHEM will be the same technology -11- 12 used by or being developed for use by E/ICC in the commercial production of Systems, will be prepared with reasonable care, and will, if properly applied by CHEM enable CHEM to manufacture products substantially equal in quality to Systems produced by E/ICC using such technology. E/ICC also represents that it has no knowledge as of the Effective Date that would indicate that manufacturing of Systems using E/ICC System Technical Information and Know-How would infringe any patent, technical information or know-how owned by a third party. Other than the above representations, E/ICC hereby disclaims any warranty or representation regarding the above matters. 12.2 If E/ICC's System Technical Information and Know-How which-is disclosed hereunder is not the same technology which, at the time of transfer, was used by or was being developed for use by E/ICC, or is defective, then E/ICC's sole responsibility shall be to replace such Technical Information and Know-How with technology that E/ICC was using or had developed. In no event shall E/ICC be liable for incidental, consequential or special damages incurred by CHEM arising out of or relating to the use of E/ICC's System Technical Information and Know-How. Article 13. Term 13.1 This Agreement shall come into effect on the Effective Date and shall continue in effect for a period of five (5) years and shall be renewed automatically from year to year thereafter, subject to the receipt of necessary government approvals; provided, however, that after the expiration of the initial term of the Agreement either E/ICC or-CHEM may terminate this Agreement on December 31 of any year by giving to the other at least six (6) months prior written notice. Article 14. Termination 14.1 Notwithstanding the foregoing Article 13, this Agreement may be terminable forthwith upon the sending of notice in writing upon the occurrence of one or more of the following events: (a) by either party hereto, if all necessary government approvals for this Agreement as well as all related agreements have not been received in form and substance acceptable to such party within nine (9) months from the Effective Date provided that all necessary documents have been timely provided by the responsible party; (b) by the other party hereto, if a party hereto shall commit a breach of any of its obligations under this Agreement which it shall fail to remedy within forty-five (45) days from written notice being given requiring that breach to be remedied; -12- 13 (c) by the other party hereto, if a party hereto shall be or become incapable for a period of six (6) months of performing any of its said obligations under this Agreement because of any event covered by Article 18 hereof; (d) by the other party hereto, if a party hereto or its creditors or any other eligible party shall file for that parties dissolution, liquidation, bankruptcy, reorganization, compulsory composition or if that party is unable to pay any debts as they become due, has explicitly or implicitly suspended payment of any debts as they became due, or if the creditors of that party have taken over its management, or if the relevant financial institutions have suspended that party's clearing house privileges, or if any material or significant part of that party's undertaking, party or assets shall be totally expropriated or confiscated by action of any government. Article 15. Consequences of Termination 15.1 Upon termination of this Agreement, all licenses and rights granted pursuant to Article 3 and obligations undertaken hereunder shall forthwith terminate except (i) the obligations of CHEM under Article 7 to report and pay to E/ICC all royalties due to the date of termination shall continue, (ii) the obligations of CHEM to maintain the books and records and E/ICC's rights to examine the books and records of CHEM shall continue as specified in Article 7, (iii) the obligation of confidentiality of CHEM under Article 10 shall survive such termination, and (iv) such termination shall not relieve either party from any obligations accrued to the date of termination or relieve the party in default or breach from liability and damages to the other for default or breach of this Agreement. 15.2 Upon any termination of this Agreement, CHEM shall take all actions necessary to cancel any and all rights CHEM may have to use the E/ICC System Patents and to provide E/ICC with suitable evidence of such cancellations if E/ICC exercises its option to demand it. Notwithstanding the above, CHEM shall be permitted, for a period of one (1) year after any termination, to dispose of stocks on hand at such date subject to payment to E/ICC of royalties thereon in accordance with Article 4. Article 16. Non-Waiver/Other Remedies 16.1 Failure of either party to insist upon the strict and punctual performance of any provision hereof shall not constitute waiver of, or estoppel against asserting the right to require such performance, nor shall a waiver or estoppel in one case constitute a waiver or estoppel with respect to a later breach whether of similar nature or otherwise. -13- 14 16.2 Nothing in this Agreement shall prevent a party from enforcing its rights by such remedies as may be available in lieu of or in addition to termination. Article 17. Unenforceable Terms 17.1 In any event any term or provision of this Agreement shall for any reason be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not effect the validity of any remaining portion which shall remain in full force and effect as if the invalid portion was never a part of this Agreement when it was executed. Should the severance of any such part of this Agreement materially affect any other rights and obligations of the parties hereunder, the parties hereto will negotiate in good faith to amend this Agreement in a manner satisfactory to the parties. Failing agreement on such amendment, either party may by notice in writing terminate this Agreement forthwith subject to the provisions of this Agreement relating to consequences of termination. Article 18. Force Majeure 18.1 The failure or delay of any party hereto to perform any obligation under this Agreement solely by reason of acts of God, acts of government (except as otherwise enumerated herein), riots, wars, strikes, lockouts, accidents in transportation or other causes beyond its control shall not be deemed to be a breach of this Agreement; provided, however, that the party so prevented from complying herewith shall continue to take all actions within its power to comply as fully as possible herewith. 18.2 Except where the nature of the event shall prevent it from doing so, the party suffering such force majeure shall notify the other party in writing within fourteen (14) days after the occurrence of such force majeure and shall in every instance, to the extent it is capable of doing so, use its best efforts to remove or remedy such cause with all reasonable dispatch. Article 19. Disclaimer of Agency 19.1 This Agreement shall not be deemed to constitute either party hereto the agent of the other party hereto. Article 20. Assignability 20.1 Neither party shall have the right to transfer or assign its interest or rights in this Agreement or delegate its obligations under this Agreement without the prior written consent of the other party. -14- 15 20.2 The provisions of Paragraph 20.1 notwithstanding, either party may freely assign its interest, rights and obligations in this Agreement to an entity that acquires substantially all of the business assets of the assigning party to which this Agreement applies. Article 21. Notices 21.1 Any notice required or permitted hereunder shall be sufficiently given if delivered personally or if sent by air mail, registered, postage prepaid, or by cable, telex or telefax if confirmed on the same day in writing by registered air mail, to such address as the party may have designated in writing for receipt of notices and other documents. Any notice shall be deemed to have been given, if sent by registered air mail, as of the tenth (10) day following the date of deposit thereof in the U.S. Mails or the Republic of China post, postage prepaid, or if absent by telex, cable or telefax seventy-two (72) hours after dispatched (except that a notice of a change of address shall not be deemed to have been given until received by the addressee). Engelhard/ICC 441 North 5th Street Philadelphia, PA 19123 Attn: Chief Financial Officer Fax No. 1-215-592-8299 Chung-Hsin Electric & Machinery Manufacturing Corp. 25, Wen-T Rd., Lo Shan Tsun, Kwei Shan Shiang, Taoyuan Hsien, Taiwan, ROC Attn: Division General Manager Air-Conditioning Products Division Fax No. 886-3-318-4157 Article 22. Language 22.1 This Agreement is written in the English language and executed in two (2) counterparts, each of which shall be deemed an original. The English language text of the Agreement shall prevail over any translation thereof. Article 23. Governing Law 23.1 The construction, validity and performance of this Agreement shall be governed in all respects by the laws of Singapore (excluding any such laws that may direct the application of the laws of another jurisdiction). The parties hereby submit to the exclusive jurisdiction of the Singapore Courts for all purposes -15- 16 in relation to this Agreement and waive any objections to such jurisdiction on the grounds of venue or forum non conveniens or similar grounds. Article 24. Effective Date 24.1 This Agreement shall come into effect on the date that is first above-written. 24.2 Notwithstanding Paragraph 24.1 hereof, Articles 2 through 9 of this Agreement shall remain wholly executory until all necessary government approvals and validations for this Agreement as well as all related agreements are obtained in form and substance acceptable to both parties hereto. Article 25. Entire Agreement 25.1 This Agreement supersedes all previous representations, understandings or agreements, oral or written, between the parties with respect to the licensing of Systems, CHEM Systems, E/ICC's Systems Patents and E/ICC Technical Information and Know-How, and together with the exhibits hereto and the agreements and documents contemplated hereby contains the entire understanding of the parties as to the terms and conditions of their relationship. 25.2 Terms included herein may not be contradicted by evidence of any prior oral or written agreement or of a contemporaneous oral or written agreement. 25.3 No changes, alterations or modifications hereto shall be effective unless in writing and signed by authorized representatives of all parties hereto and if required, upon approval by the competent authorities of Republic of China, and the United States of America. 25.4 Heading of Articles in this Agreement are for convenience only and do not substantially affect the terms of this Agreement. -16- 17 IN WITNESS WHEREOF, the authorized representatives of the parties hereto have set their hands or their names and seals, the day and year first above written. ENGELHARD/ICC By: /s/ ROBERT J. SCHAFFHAUSER -------------------------- Name: Robert J. Schaffhauser Title: Co-Chairman CHUNG-HSIN ELECTRIC AND MACHINERY MANUFACTURING CORPORATION By: /s/ PAO-SHAN KU ------------------------ Name: Pao-Shan Ku Title: President -17- EX-10.4 5 SUPPLY AGREEMENT 1 EXHIBIT 10.4 SUPPLY AGREEMENT THIS SUPPLY AGREEMENT dated as of March 27, 1995 by and between Engelhard/ICC, a Pennsylvania General Partnership (hereinafter referred to as the "Supplier") and Chung-Hsin Electric and Machinery Manufacturing Corporation, a corporation duly incorporated under the laws of the Republic of China (hereinafter referred to as "Buyer"). W I T N E S S E T H: WHEREAS, the Buyer desires to purchase from Supplier, and Supplier desires to sell to the Buyer, Buyer's Requirements (as hereinafter defined) for Rotor Products (as hereinafter defined); and WHEREAS, the Buyer may purchase from Supplier, and Supplier may sell to the Buyer, certain Ancillary Products (as hereinafter defined); NOW, THEREFORE, for and in consideration of the mutual premises and the terms and conditions hereinafter set forth, the Buyer and Supplier, with the intent to be bound thereby, agree to the following. ARTICLE I - DEFINITIONS As used herein, the following terms have the meanings ascribed to them in this Article (except as otherwise expressly provided) and include the plural as well as the singular: 1.1 "Agreement" or "Supply Agreement": This agreement as of the date first above written, as the same may be amended from time to time pursuant to the terms hereof, including Schedules A, B. C, and D. 1.2 "Order": A written request by the Buyer to Supplier to supply a specific quantity and type of Product on a requested delivery date or an oral request by the Buyer to Supplier to supply a specific quantity and type of Product on a requested delivery date provided however that any oral request is confirmed by facsimile sent by the Buyer to Supplier within five (5) days of the date of the oral request followed with mail confirmation. 1.3 "Products": Ancillary Products and Rotor Products. "Rotor Products": Any and all rotors or cassettes which include a desiccant or drying material or agent or that is capable of use for heat exchange or any other purpose, that is used or to be used in any heating/air conditioning/treatment system. It is the intent of the parties that Buyer 2 purchases its requirements of the main components (i.e., Rotor Products) from the Supplier. "Ancillary Products": Additional ancillary components, full systems or Rub-systems that may also be purchased at the request of Buyer. Initially, the Products supplied by Supplier will meet the specifications set forth in Schedule A. Schedule A will be amended from time to time to reflect additional, improved or changed Product specifications. 1.4 "Requirements": All Rotor Products that the Buyer may require in connection with the conduct of its business or that is used in any manner in connection with any activities under the Technology License Agreement (as hereinafter defined), including but not limited to Rotor Products sold, purchased, leased, loaned, conveyed or transferred, directly or indirectly, by or to the Buyer, and whether separately or in combination with other materials. 1.5 "Technology License Agreement": The Technical Information, Trademark and Patent License Agreement dated March 27, 1995, between the parties hereto, as the same may be amended from time to time pursuant to the terms thereof. ARTICLE II - SUPPLY OF PRODUCTS 2.1 Supply. Subject to the terms of this Agreement, the Buyer will purchase exclusively from Supplier all of the Buyer's total Requirements for Rotor Products available from the Supplier. Subject to the terms of this Agreement, Supplier will sell to the Buyer the Buyer's total Requirements for Rotor Products. If Supplier ceases to manufacture Rotor Products, Buyer may purchase Rotor Products elsewhere. Supplier shall accept and fill Orders for replacement parts or workable substitutions for Rotor Products manufactured under the terms of this Agreement for a period of seven (7) years from the date of last manufacture of each such Rotor Product at pricing in accordance with Section 2.4. In addition, the Buyer may purchase from supplier such Ancillary Products as the Buyer chooses. However, the Buyer is not required to place any Orders and the Supplier is not required to supply any Orders for Ancillary Products, except as each party chooses. Each month during the term of this Agreement the Buyer will provide Supplier in writing with its best preliminary estimate of the Buyer's Requirements for Rotor Products for each of the next three (3) to six (6) months as well as an indication of its anticipated Ancillary Products purchases for the next three (3) to six (6) months. All such estimates will be non-binding. However, in no event will Supplier be obligated to fill Orders or deliver -2- 3 quantities of Rotor Products in any month in excess of One Hundred Fifty Percent (150%) of the estimated Requirements for that month provided at least three months earlier. Each month during the term of this Agreement Supplier will provide the Buyer in writing with its best preliminary estimate of Supplier's production capacity and lead time for Rotor Products for each of the next three (3) to six (6) months. All such figures will be nonbinding, to be used only for general planning purposes and as set forth in the last two sentences of Section 2.2 below. Supplier's present intention is to supply Buyer's anticipated needs of Rotor Products. To this end, such practices and procedures as are set forth in Schedule B will be maintained during the term of this Agreement. 2.2 Orders. The Buyer will place with Supplier all Orders at least sixty (60) days prior to the requested delivery date for Rotor Products. Each Order constitutes an irrevocable obligation of the Buyer to purchase from Supplier the quantity and type of Rotor Product set forth in such Order on the terms and conditions set forth in this Agreement. Supplier will not be required to fill any Order to the extent it exceeds Supplier's capacity or lead times communicated pursuant to Section 2.1 above. However, Supplier will exercise reasonable efforts to meet urgent or emergency Orders. 2.3 Price: Payment. (a) The pricing for Rotor Products is set forth in Schedule C. The price may be adjusted at any time upon mutual agreement between Supplier and Buyer. Supplier understands that Buyer is very interested in cost-competitiveness with other Suppliers. Supplier agrees to continue to work to control the price of Rotor Products and to achieve cost efficiencies, whether through volume, re-engineering, different manufacturing techniques and other methods. From time to time, in the event there is a major change in the market, Supplier and Buyer will meet to discuss price issues and attempt to resolve any differences. (b) Each invoice for Supplier issued under this Agreement will be paid by the Buyer within thirty (30) days of the date of such invoice. Buyer will establish and/or maintain a Letter of Credit for payments to Seller. The price does not include freight, insurance or sales, use, excise or other taxes or duties, assessments, levies or other governmental charges (except as set forth in Section 2.5 below) and, accordingly, in addition to the price specified herein, the amount of any freight, insurance or sales, use, excise or other taxes or any duties, assessments, levies or other governmental charges (except as set forth in Section 2.5 below) applicable to the transaction herein shall be paid by the Buyer. 2.4 Warranty. (a) Supplier's warranty is set forth in Schedule D. Supplier's liability for breach of warranty shall be limited to, as agreed by both parties (i) replacing such non- -3- 4 conforming Product or (ii) refunding the sales price received by Supplier for such non-conforming Product. All claims for breach of warranty must be made by Buyer in writing to Supplier within sixty (60) days of Buyer's knowledge. Where the non-conforming Product is replaced by Supplier or where Supplier refunds the sales price received from Buyer for such Product, Buyer shall return the non-conforming Product to Supplier at Supplier's cost strictly in accordance with Supplier's written instructions concerning handling, shipping, insurance, mode of transportation, and other matters as to which Supplier issues instructions. In no event shall Supplier be liable for: (1) Products damaged in shipment or otherwise without fault of Supplier; (2) defects in Products due to negligence (other than that of Supplier), accident, abuse, improper care or storage, abnormal condition of temperature or moisture; (3) damage to Products which have been tampered with or altered in any way other than by Supplier; or (4) expenses incurred by the Buyer in attempting to correct any defects in Products. (b) Supplier warrants to the Buyer that any Product sold by Supplier to Buyer hereunder will not infringe the claim of any U.S. or Republic of China patent owned by a third party covering the Product itself and agrees to indemnify the Buyer against liability for any alleged infringement, provided, however, that the Buyer shall notify Supplier within ten (10) days after receipt by the Buyer of any such claim of alleged infringement or any notice of commencement of any suit based on such alleged infringement, and provided further, that Supplier shall control and remain in control of any and all proceedings taken in defending such suit, including without limitation utilization solely of counsel of Supplier's own selection to defend such suit. Supplier does not warrant against infringement by reason of use of any Product by the Buyer, except to the extent stated in the Technology License Agreement. Supplier also represents that it has no knowledge at the date hereof that would indicate that Products would infringe any patent owned by a third party. (c) Recommendations by Supplier, if any, covering the utilization, properties or qualities of Products delivered hereunder or with respect to services performed are believed reliable but Supplier makes no warranty whatever with respect thereto. Use or application of the Products sold by Supplier to the Buyer hereunder is at the discretion of the Buyer without any liability or obligation on the part of Supplier, except to the extent stated in the Technology License Agreement. (d) THESE WARRANTIES ARE EXCLUSIVE AND ARE IN LIEU OF ANY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, ARISING BY LAW OR CUSTOM, INCLUDING BUT NOT BY WAY OF LIMITATION, THE IMPLIED WARRANTY OF MERCHANTABILITY AND THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. -4- 5 2.5 Delivery. All Products supplied hereunder will be delivered and all risk of loss and damage and title to Products will pass to the Buyer FOB port of departure (Incoterms l990) which is currently anticipated to be Philadelphia, Pennsylvania, Miami, Florida or any other location specified by Supplier. Buyer will be responsible for all freight, insurance and import into the Republic of China and the payment of all costs, duties and taxes related thereto. ARTICLE III - GENERAL 3.1 Notifications. Any notice which either party may be required or desires to give to the other party hereunder, except when otherwise provided for, shall be deemed to be duly given: (i) when received if sent by mail or other delivery service to the other party at the following addresses or any other address of addressee subsequently designated in writing by the duly authorized representative of the party or (ii) when sent by facsimile and receipt is acknowledged to the other party at the following telephone numbers or to any other telephone number subsequently designated in writing by the respective duly authorized representative of the party: To the Supplier: Engelhard/ICC 441 North 5th Street Philadelphia, Pennsylvania 19123 Attention: Chief Executive Officer Fax No: (215) 592-8299 with a copy to: To Buyer: Chung-Hsin Electric & Machinery Manufacturing Corporation 25, Wen-Te Rd., Lo Shan Tsun, Kwei Shan Shiang, Taoyuan Hsien, Taiwan, ROC Attention: Division General Manager Air Conditioning Products Division Fax No. 886-3-3284157 with a copy to: 3.2 Term. This Agreement shall become effective as of the date hereof and shall continue thereafter for an initial term of five (X) years and shall be renewed automatically from year to year thereafter; provided, however, that after the initial term of this -5- 6 Agreement, either Supplier or Buyer may terminate this Agreement on December 31 of any year by giving to the other at least six (6) months prior written notice. 3.3 Termination for Breach. If either party is in material breach of this Agreement, then the other party may, upon at least ninety (90) days' prior written notice, terminate this Agreement, unless within such notice period for breach is cured, in which event the notice of termination becomes ineffective. 3.4 Limitation of Liability. Notwithstanding anything to the contrary in this Agreement or otherwise, in no event shall Supplier be liable for indirect, incidental, consequential or special damages incurred by the Buyer arising out of or relating to this Agreement or any transactions hereunder even if Supplier has been apprised of or is aware of the possibility of such damages. In no event shall the aggregate liability of Supplier to the Buyer arising out of or relating to any supply of Products or the transactions contemplated hereunder exceed the purchase price paid by the Buyer with respect to the Products in respect of which such claim is made. It is understood by the Supplier that applicable laws may prohibit attempted limitations on Supplier's liability to certain consumers who are not parties to this Agreement. 3.5 Force Majeure. The failure or delay of any party hereto to perform any obligation under this Agreement solely by reason of acts of God, acts of government (except as otherwise enumerated herein), riots, wars, strikes, lockouts, accidents in transportation or other causes beyond its control shall not be deemed to be a breach of this Agreement; provided, however, that the party so prevented from complying herewith shall continue to take all actions within its power to comply as fully as possible herewith. Except where the nature of the event shall prevent it from doing so, the party suffering such force majeure shall notify the other party in writing within fourteen (14) days after the occurrence of such force majeure and shall in every instance, to the extent it is capable of doing so, use its best efforts to remove or remedy such cause with all reasonable dispatch. 3.6 Assignment. (a) Neither party shall have the right to transfer or assign its interest or rights in this Agreement or delegate its obligations under this Agreement without the prior written consent of the other party. (b) The provisions of Section 3.6(a) above notwithstanding, either party may freely assign its interest and rights in this Agreement to an entity that acquires substantially all of the business assets of the assigning party to which this Agreement applies. -6- 7 3.7 Unenforceable Terms. Buyer and Supplier each warrant to the other that it is not aware of any term or provision of this Agreement that is invalid, illegal or unenforceable. In any event any term or provision of this Agreement shall for any reason be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not effect the validity of any remaining portion which shall remain in full force and effect as if the invalid portion was never a part of this Agreement when it was executed. Should the severance of any such part of this Agreement materially affect any other rights and obligations of the parties hereunder, the parties hereto will negotiate in good faith to amend this Agreement in a manner satisfactory to the parties. Failing agreement on such amendment, either party may by notice in writing terminate this Agreement forthwith subject to the provisions of this Agreement relating to consequence of termination. 3.8 Construction. Article and Section headings are for convenience of reference only and shall not affect the interpretation of any of the provisions of this Agreement. None of the provisions of this Agreement shall be for the benefit of or enforceable by any third party. 3.9 Entire Agreement. This Agreement contains the entire understanding between the parties with respect to the within subject matter and shall be controlling to the exclusion of all terms and conditions on any purchase order, acknowledgment form or any other documents which may be issued by the parties hereto on or after the date hereof. This Agreement may not by modified or amended except in a writing signed by the parties hereto. No waiver or indulgence of any breach or default hereunder shall be construed as a waiver of any subsequent breach of the same or any other provision of this Agreement. 3.10 Prior Agreements. This agreement cancels and supersedes all other written or verbal agreements which may have been in effect prior to this Agreement relating to the within subject matter. 3.11 Jurisdiction. The construction, validity, and performance of this Agreement shall be governed in all respects by the laws of Singapore (excluding any such laws that may direct the application of the laws of another jurisdiction). The parties hereby submit to the exclusive jurisdiction of the Singapore Courts for all purposes in relation to this Agreement and waive any objections to such jurisdiction on the grounds of venue or forum non conveniens or similar grounds. -7- 8 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their duly authorized representatives, as of the date first above written. ENGELHARD/ICC CHUNG-HSIN ELECTRIC AND MACHINERY MANUFACTURING CORPORATION By: /s/ ROBERT J. SCHAFFHAUSER By: /s/ PAO-SHAN KU ---------------------------- -------------------------- Robert J. Schaffhauser Pao-Shan Ku Title: Co-Chairman Title: President -8- EX-10.5 6 AGREEMENT 1 EXHIBIT 10.5 AGREEMENT This Agreement is entered into as of April 1, 1995, by and among Engelhard Corporation, a Delaware corporation ("Engelhard"), ICC Technologies, Inc., a Delaware corporation ("ICC"), and Engelhard/ICC, a Pennsylvania general partnership ("Engelhard/ICC"). WITNESSETH: WHEREAS, arrangements have been made for the sale by the Dade County Industrial Development Authority, a body corporate and politic duly organized and existing under the laws of the State of Florida (the "Authority"), of its Industrial Development Revenue Bonds, Series 1995 (Engelhard/ICC Project) in the aggregate principal amount of $8,500,000 (the "Bonds"); and WHEREAS, the Bonds are to be issued under and pursuant to a Trust Indenture dated as of April 1, 1995, by and between the Authority and First Fidelity Bank, National Association, as Trustee (the "Trustee") (such Trust Indenture, as the same may be amended or supplemented from time to time, the "Indenture"); and WHEREAS, the proceeds of the sale of the Bonds will be loaned to Engelhard/ICC under a Loan Agreement dated as of April 1, 1995 by and between the Authority and Engelhard/ICC (as the same may be amended or supplemented from time to time, the "Loan Agreement") to finance the Project Costs (as defined in the Loan Agreement) of the Project (as defined in the Indenture); and WHEREAS, Engelhard DT, Inc., a wholly owned subsidiary of Engelhard, and ICC Desiccant Technologies, Inc., a wholly owned subsidiary of ICC, are equal general partners of Engelhard/ICC, which was formed to develop and commercialize air conditioning and air treatment systems based on the then existing technologies of Engelhard and ICC; and WHEREAS, as an inducement to the Authority to issue the Bonds and loan the proceeds to Engelhard/ICC and as an inducement to the purchase of the Bonds by all who may at any time become holders thereof, Engelhard is entering into a Guaranty Agreement with the Trustee and the Authority pursuant to which Engelhard (i) guarantees to the Trustee the full and prompt payment of the Loan Payments and the Purchase Price Payments (as such terms are defined in the Loan Agreement) on the Bonds when and as the same shall become due and payable by Engelhard/ICC under the Loan Agreement and (11) agrees to make such payments in the event of any failure of Engelhard/ICC to make such payments, and WHEREAS, as a condition of entering into the aforesaid Guaranty Agreement, Engelhard requires that Engelhard and ICC enter into this Agreement to set forth the rights and obligations of Engelhard/ICC and ICC, and their respective wholly owned subsidiaries as general partners of Engelhard/ICC, with regard to the performance of Engelhard/ICC under the Loan Agreement and the performance of Engelhard under the Guaranty Agreement; NOW, therefore, in consideration of the premises and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS (a) The following terms have the meanings set forth in the recitals hereto: Engelhard ICC Engelhard/ICC Authority Bonds Indenture Loan Agreement Trustee Loan Payments Purchase Price Payments (b) In addition to the forgoing terms, the following terms shall have the following respective meanings: "Guaranty Agreement" shall mean the Guaranty Agreement dated as of April 1, 1995 by and among Engelhard, the Trustee and the Authority. "Payment Deficiency" shall mean such term as defined in Section 2.3. "Letter of Credit" shall mean the letter of credit described in Section 4.1. "Event of Default" shall mean such term as defined in Section 5.1. ARTICLE II PERFORMANCE OF ENGELHARD/ICC OBLIGATIONS 2 2.1 Engelhard and ICC each acknowledge and agree that Engelhard/ICC is required to make payments and perform obligations under the Loan Agreement at such times and/or in such manner as set forth therein, and that Engelhard and ICC are equally responsible and liable for any failure of Engelhard/ICC to make such payments and/or perform such obligations. For its part, Engelhard agrees to and will take such corporate action, in its capacity as the sole stockholder of Engelhard DT, Inc., as may be necessary to cause Engelhard DT, Inc., as a general partner of Engelhard/ICC, to take such actions as are required of it to ensure that Engelhard/ICC meets its obligations under the Loan Agreement, and for its part, ICC agrees to and will take such corporate action, in its capacity as the sole stockholder of ICC Desiccant Technologies, Inc., as may be necessary to cause ICC Desiccant Technologies, Inc., as a general partner of Engelhard/ICC, to take such actions as are required of it to ensure that Engelhard/ICC meets its obligations under the Loan Agreement. 2.2 Engelhard/ICC and ICC each agrees that they will send to Engelhard, and Engelhard agrees that it will send to ICC and to Engelhard/ICC, by facsimile, any and all notices, messages and other communications which either receives from the Trustee, Authority, Remarketing Agent and/or any other party acting in their behalf. 2.3 Prior to the date any payment is due from Engelhard/ICC under the Loan Agreement, Engelhard shall determine the amount of such payment so due, the date same is to be paid, without interest or penalty, and the party to whom such payment is to be made as aforesaid. At such time Engelhard shall also determine, in consultation with Engelhard/ICC, whether Engelhard/ICC has sufficient funds available to make such payment in full on the date same is to be paid. If Engelhard should determine that Engelhard/ICC has and/or will have sufficient funds to make such payment in full as aforesaid, then in such case Engelhard/ICC shall render the payment due no later than the date on which same is due. If Engelhard should determine that Engelhard/ICC does not have and will not have sufficient funds to make such payment in full as aforesaid, then in such case Engelhard shall determine the amount of the deficiency between the amount of such payment due and the amount of funds Engelhard determines that Engelhard/ICC has and/or will have to remit against such payment (herein referred to, as to any particular payment due as aforesaid, as the "Payment Deficiency"). Engelhard shall immediately advise ICC of any Payment Deficiency. 2.4 It is understood and agreed that ICC and Engelhard shall each be liable and responsible for one-half of any and all Payment Deficiencies. Whenever a Payment Deficiency should occur, Engelhard shall deliver or cause to be delivered to the Trustee, on behalf of Engelhard/ICC, immediately available funds in an amount equal to the Payment Deficiency no later than 10:00 a.m., New York 3 City time, on the date on which the payment as to which the Payment Deficiency relates is required to be made by Engelhard/ICC. In the event of payment of a Payment Deficiency by Engelhard to the Trustee, Engelhard shall reimburse itself for one-half of the amount so paid by Engelhard by making a draw under the Letter of Credit pursuant to Section 4.2 hereof, provided that if the amount payable by ICC to Engelhard as its fifty percent (50%) share of the Payment Deficiency payment made by Engelhard shall exceed the amount still available for draw under the Letter of Credit, ICC shall, promptly after notice from Engelhard that the amount available for draw under the Letter of Credit is insufficient to pay ICC's fifty percent (50%) share as aforesaid, pay to Engelhard by wire transfer of funds, no later than 2:00 p.m. on the second business day following receipt by ICC of such notice from Engelhard (accompanied by a certificate of the Treasurer or Assistant Treasurer of Engelhard to the effect that such payment has been made), to Engelhard's Account Number 126-3494 at Mellon Bank, Pittsburgh, Pennsylvania, the amount payable by ICC to Engelhard as its fifty percent (50%) share of the Payment Deficiency payment made by Engelhard, less the amount available to be drawn by Engelhard under the Letter of Credit. Engelhard/ICC shall render to the Trustee the payment due, less the amount of the Payment Deficiency, no later then the time and date on which same is due utilizing, if applicable, the funds previously determined by Engelhard to be available to Engelhard/ICC to remit against such payment. Each and every amount paid by Engelhard and ICC to cover a Payment Deficiency shall be considered to be a loan by the remitting party to Engelhard/ICC and shall be evidenced by promissory note in the form of, and subject to the terms and conditions set forth in, the promissory note attached hereto as Exhibit A; provided, however, that Engelhard and ICC may agree to treat any one or more, and/or all, of such payments as contributions to the capital of Engelhard/ICC. ARTICLE III GUARANTY 3.1 Subject to and upon the condition that ICC shall have executed this Agreement, and as an inducement to the Authority to issue the Bonds and loan the proceeds to Engelhard/ICC and as an inducement to the purchase of the Bonds by all who may at any time become holders thereof, Engelhard shall execute and deliver to the Trustee the Guaranty Agreement. 3.2 It is understood and agreed that ICC shall be liable and responsible for onehalf of any and all payments which Engelhard is required to make and makes under the Guaranty Agreement. Accordingly, if Engelhard should at any time receive notice from the Trustee to the effect that Engelhard is being called upon to 4 render payment under the Guaranty Agreement and Engelhard renders such payment under the Guaranty Agreement, Engelhard shall reimburse itself for one-half of the amount so paid by Engelhard by making a draw under the Letter of Credit pursuant to Section 4.2 hereof, provided that if the amount payable by ICC to Engelhard as its fifty percent (50%) share of the payment so made by Engelhard under the Guaranty Agreement shall exceed the amount still available for draw under the Letter of Credit, ICC shall, promptly after notice from Engelhard that the amount available for draw under the Letter of Credit is insufficient to pay ICC's fifty percent (50%) share as aforesaid, pay to Engelhard by wire transfer of funds, no later than 2:00 p.m. on the second business day following receipt by ICC of such notice from Engelhard (accompanied by a certificate of the Treasurer or Assistant Treasurer of Engelhard to the effect that such payment has been made), to Engelhard's Account Number 126-3494 at Mellon Bank, Pittsburgh, Pennsylvania, one-half of such payment, less the amount available to be drawn by Engelhard under the Letter of Credit. 3.3 Each and every amount paid by Engelhard under the Guaranty Agreement, net of the amount reimbursed by ICC to Engelhard in connection therewith, shall be deemed to be a loan by Engelhard to Engelhard/ICC and shall be evidenced by promissory note in the form of, and subject to the terms and conditions set forth in, the promissory note attached hereto as Exhibit A, and each and every amount paid to Engelhard by ICC under Section 3.2 shall be deemed to be a loan by ICC to Engelhard/ICC and shall be evidenced by promissory note in the form of, and subject to the terms and conditions set forth in, the promissory note attached hereto as Exhibit A; provided, however, that Engelhard and ICC may agree to treat any one or more, and/or all, of such payments as contributions to the capital of Engelhard/ICC. ARTICLE IV LETTER OF CREDIT 4.1 In order to secure ICC's obligations under Sections 2.4 and 3.2 of this Agreement and to ensure timely delivery of any and all payments due from ICC thereunder, ICC shall establish with Mellon Bank, N.A. (the "Bank"), no later than April 19, 1995, and maintain with said Bank (or any other bank acceptable to Engelhard should the Bank not extend the then existing letter of credit) during the period the Loan Agreement is effective, a clean and irrevocable letter of credit in favor of Engelhard in the form attached hereto as Exhibit B in the principal amount of $2,500,000. ICC shall be responsible and liable for, and shall pay, any and all costs and expenses incurred in establishing and/or maintaining the Letter of Credit provided hereunder and Engelhard shall have no responsibility and/or liability therefor. 4.2 Every draw by Engelhard under the Letter of Credit pursuant to Section 2.4 and/or 3.2 shall be made by Engelhard by 5 right and without notice to ICC, by presentation to the Bank, at any time after the time on which Engelhard paid any Payment Deficiency in the case of Section 2.4 or at any time after the time on which Engelhard rendered payment under the Guaranty in the case of Section 3.2, of a sight draft under the Letter of Credit provided hereunder for all or any part of the amount which ICC was required to remit as aforesaid, accompanied by a certificate of the Treasurer or Assistant Treasurer of Engelhard to the effect that such payment has been made in the form attached hereto as Annex A to Exhibit B. Promptly after the giving of such certificate to the Bank, Engelhard shall send a copy of such certificate to ICC by facsimile transmission. 4.3 If from time to time during the term of this Agreement Engelhard should determine that ICC's share, through ICC Desiccant Technologies, Inc., of the total liability of Engelhard/ICC and Engelhard under the Loan Agreement and the Guaranty Agreement, respectively, is less than the then total principal amount of the then existing Letters of Credit and, if applicable, the security instruments and/or other arrangements provided under Section 4.1, then in such case Engelhard shall so notify ICC and shall direct the Bank to reduce the total principal amount of the Letters of Credit to ICC's share of the total liability then determined by Engelhard to be applicable under the Loan Agreement and the Guaranty Agreement. Promptly after the giving of such notice to the Bank, Engelhard shall send a copy of such notice to ICC by facsimile transmission. ARTICLE V EVENTS OF DEFAULT 5.1 (a) If ICC shall fail to observe or perform any covenant or agreement contained in Section 2.4, Section 3.2 and Section 4.1 and such failure shall not have been remedied by Engelhard drawing against the Letter of Credit, such occurrence shall constitute an "Event of Default" hereunder. (b) Each and every default in payment by ICC of any amounts due from ICC under this Agreement shall give rise to a separate cause of action hereunder, and separate suits may be brought hereunder as each cause of action arises. 5.2 Upon the occurrence of an Event of Default hereunder, Engelhard may exercise any or any combination of the remedies afforded under this Agreement or applicable law, as may be chosen at Engelhard's sole discretion. ARTICLE VI ICC'S OBLIGATIONS 6.1 The obligations of ICC under this Agreement shall be absolute and unconditional, and shall remain in full force and 6 effect for the full term of this Agreement and such obligations shall not be affected, modified or impaired upon the happening from time to time of any event, including without limitation any of the following, whether or not with notice to, or the consent of, ICC: (a) the waiver, compromise, settlement, release or termination of any or all of the obligations, covenants or agreements of the Authority contained in the Indenture or the Bonds or of the payment, performance or observance thereof; (b) the failure of Engelhard/ICC and/or ICC to receive notice of the occurrence of an Event of Default under the terms and provisions of the Loan Agreement or the Indenture or the Guaranty Agreement; (c) the extension of the time for payment of the amount of any principal of, premium, if any, or any interest owing or payable on the Bonds or of the time for performance of any obligations, covenants or agreements under or arising out of the Loan Agreement or the Indenture or the Guaranty Agreement, or the extension or the renewal of the Loan Agreement or the Indenture or the Guaranty Agreement; (d) the modification or amendment (whether material or otherwise) of any obligation, covenant or agreement set forth in the Loan Agreement or the Indenture or the Guaranty Agreement; (e) the taking or the omission of any of the actions referred to in the Loan Agreement or the Indenture or the Guaranty Agreement or of any actions under this Agreement; (f) any failure, omission or delay on the part of Engelhard to enforce, assert or exercise any right, power or remedy conferred on Engelhard in this Agreement or any other act or acts on the part of Engelhard relating to the foregoing, if any; (g) any failure, omission or delay on the part of the Authority or Trustee to enforce, assert or exercise any right, power or remedy conferred on the Authority or on the Trustee in the Loan Agreement or the Indenture or the Guaranty Agreement or any other act or acts on the part of the Authority or the Trustee relating to the foregoing, if any; (h) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with creditors or readjustment or other similar proceedings affecting Engelhard/ICC, ICC or the Authority or the Trustee or the assets of any of them, or any contest of the validity of this Agreement, the Bonds, the Loan Agreement, the Indenture or the Guaranty Agreement; or the 7 disaffirmance of the Loan Agreement, the Indenture, the Guaranty Agreement, the Bonds, or this Agreement in any such proceeding; (i) to the extent permitted by law, any event or action that would, in the absence of this clause, result in the release or discharge by operation of law of ICC from the performance or observance of any obligation, covenant or agreement contained in this Agreement; (j) to the extent permitted by law, any event or action that would, in the absence of this clause, result in the release or discharge by operation of law of Engelhard/ICC from the performance or observance of any obligation, covenant or agreement contained in the Loan Agreement; (k) to the extent permitted by law, any event or action that would, in the absence of this clause, result in the release or discharge by operation of law of Engelhard from the performance or observance of any obligation, covenant or agreement contained in the Guaranty Agreement; provided, however, that ICC shall not be obligated hereunder for an amount in excess of one-half of the amount for which Engelhard is obligated under the Guaranty Agreement and, in fact, makes payment pursuant to the Guaranty Agreement; (I) the default or failure of ICC fully to perform any of the obligations set forth in this Agreement; (m) the default or failure of Engelhard/ICC fully to perform any of the obligations set forth in the Loan Agreement; (n) the default or failure of Engelhard fully to perform any of the obligations set forth in the Guaranty Agreement; provided, however, that ICC shall not be obligated hereunder for an amount in excess of one-half of the amount for which Engelhard is obligated under the Guaranty Agreement and, in fact, makes payment pursuant to the Guaranty Agreement; (o) the substitution, exchange or release of any collateral securing payment of the Bonds or performance of the Loan Agreement; or (p) the invalidity, illegality or unenforceability of the Bonds or any provision of the Loan Agreement, the Indenture, the Guaranty Agreement or any other document or agreement delivered in connection with the issuance of the Bonds; provided, however, that ICC shall not be obligated hereunder for an amount in excess of one-half of the amount for which Engelhard is obligated under the Guaranty Agreement and, in fact, makes payment pursuant to the Guaranty Agreement. 8 6 2 No setoff, counterclaim, reduction, or diminution of an obligation, or any defense of any kind or nature (other than performance by ICC of its obligations hereunder and other than performance by Engelhard/ICC of its obligations under the Loan Agreement) which ICC has or may have against Engelhard/ICC, Engelhard, the Authority or the Trustee shall be available hereunder to ICC against Engelhard. No invalidity, irregularity or unenforceability of all or any part of the obligations hereunder or of any security therefor shall affect, impair or constitute a defense to ICC's obligations under this Agreement. Notwithstanding anything contained in this Agreement to the contrary, nothing contained in this Article VI or elsewhere in this Agreement shall be deemed to prevent ICC, after payment in full of its obligations hereunder, from asserting in a separate action any setoff, claim, counterclaim, diminution of obligation or any other right which ICC has or may have against Engelhard/ICC, Engelhard, the Authority or the Trustee, and in any such action by ICC Engelhard/ICC, Engelhard, the Authority or the Trustee may not raise as a defense the failure by ICC to assert such claim in any prior suit by Engelhard/ICC, Engelhard, the Authority or the Trustee, as the case may be. 6.3 ICC hereby expressly waives notice from Engelhard of its acceptance and reliance on this Agreement and waives presentment, demand, protest, and any other notice of any other kind with respect to this Agreement except as may be expressly provided for in this Agreement. ICC also waives Engelhard's promptness or diligence in making any demand or claim hereunder. ICC and Engelhard each agrees to pay all costs, expenses and fees, including all reasonable attorneys' fees, which may be incurred by the other party in enforcing this Agreement or protecting the rights of such party hereunder, whether the same shall be enforced by suit or otherwise. 6.4 This Agreement shall not be deemed to create any right in, or to be in whole or in part for the benefit of, any person other than Engelhard and its successors and permitted assigns. This Agreement is entered into by ICC for the benefit of Engelhard and may be enforced solely by Engelhard. 6.5 ICC's obligation under this Agreement shall survive the payment of the Bonds, and shall be reinstated, if at any time any payment to Engelhard and/or the Trustee is voided or is required to be returned or restored. 6.6 This Agreement shall terminate only upon the termination of the Loan Agreement. Notwithstanding anything contained herein to the contrary, this Agreement shall survive the termination of any other agreement, including, without limitation, the Guaranty Agreement and/or the Indenture. ARTICLE VII 9 NOTICES Any notice, request, consent, waiver or other communication given, made or withdrawn pursuant to this Agreement to be effective shall be in writing or by telegram, telex, facsimile or other electronic written communication and shall be effective (a) when delivered at the address provided for below by hand, telegram or courier service, receipt obtained (b) three business days after deposit in the mail, sent certified, return receipt requested, postage prepaid, or (c) when sent by telex, facsimile or other electronic written communication, answerback or other acknowledgment of receipt received, addressed as provided below, or to such other address as may be designated by any party hereto giving or changing its address: (i) if to ICC, to: ICC Technologies, Inc. 441 North Fifth Street Philadelphia, PA 19123 Attention: Chief Financial Officer Telephone: 215-625-7200, Ext. 154 Facsimile: 215-592-7951 with copies to: Richard P. Jaffe, Esq. Mesirov Gelman Gaffe Cramer & Jamieson 1735 Market Street, 38th Floor Philadelphia, PA 19103 Telephone: 215-994-1046 Facsimile: 215-994-1111 (ii) if to Engelhard, to: Engelhard Corporation 101 Wood Avenue Iselin, New Jersey 08830 Attention: Treasurer Telephone: 908-205-5000 Facsimile: 908-205-6525 with copies to: Engelhard Corporation 101 Wood Avenue Iselin, New Jersey 08830 Attention: Vice President and General Counsel 10 Telephone: 908-205-5527 Facsimile: 908-906-0337 (i) if to Engelhard/ICC, to: Engelhard/ICC 441 North Fifth Street Philadelphia, PA 19123 Attention: Chief Financial Officer Telephone: 215-625-0700, Ext. 154 Facsimile: 215-592-8299 ARTICLE VIII AMENDMENTS 8.1 This Agreement may not be amended, modified, changed or terminated except by an instrument in writing executed by the duly authorized officers of the parties hereto. 8.2 No amendment, modification, change or termination shall be established by conduct, custom or course of dealing, but solely by an instrument in writing as aforesaid. ARTICLE IX MISCELLANEOUS 9.1 This Agreement and the rights of any party hereunder may not be assigned to or succeeded to by any person except upon, and then only in accordance with, the written consent of the other parties to this Agreement. 9.2 No right or remedy herein conferred upon or reserved to Engelhard is intended to be exclusive of any other available right or remedy, but each and every such right and remedy shall be cumulative and shall be in addition to every other remedy given under this Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default, omission or failure of performance hereunder shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle Engelhard to exercise any remedy reserved to it in this Agreement, it shall not be necessary to give any notice, other than such notice as may be expressly required herein. In the event any provision contained in this Agreement should be breached by any party and thereafter duly waived by the other party so empowered to act, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver or release of 11 this Agreement or of any provision hereof shall be established by conduct, custom or course of dealing, but solely by an instrument in writing duly executed by the parties to this Agreement. 9.3 ICC agrees to pay or cause to be paid all present and future taxes or other charges, if any, imposed by any government or any department, agency, political subdivision or taxing authority thereof on or in connection with the Letter of Credit or the execution, delivery or registration of this Agreement or the payment of any amounts required to be paid by ICC under this Agreement. If any such tax or other charge is deducted or withheld from any such payment, ICC agrees to remit promptly to Engelhard an additional amount equivalent to the amount deducted or withheld. 9.4 This Agreement, with respect to the obligations referred to herein, constitutes the entire agreement and understanding between the parties hereto, and supersedes any and all prior and contemporaneous agreements, understandings or arrangements, both written and oral, between the parties with respect to the subject matter hereof and may be executed in several counterparts, each of which shall be deemed an original, and all of which together shall constitute but one and the same instrument. 9.5 The invalidity or unenforceability of any one or more phrases, sentences, clauses or sections in this Agreement contained, shall not affect the validity or enforceability of the remaining portions of this Agreement, or any part thereof. 9.6 This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New Jersey without giving effect to the principles of the conflict of laws thereof. 9.7 This Agreement shall bind ICC and its successors and permitted assigns, if any, and shall inure to the benefit of Engelhard, and its successors and assigns. IN WITNESS WHEREOF, the undersigned have duly executed this Agreement by their respective officers thereunto duly authorized, as of the date first above written. Engelhard Corporation Attest: By: /s/ LESTER FLIEGEL By: /s/ MICHAEL SPERDUTO ---------------------- ----------------------- Assistant Secretary Treasurer ICC Technologies, Inc. Attest: By: /s/ ALBERT RESNICK By: /s/ MANFRED HANUSCHEK ---------------------- ------------------------ CFO Engelhard/ICC By: /s/ MICHAEL SPERDUTO ------------------------ CFO EX-10.6 7 MEMORANDUM OF UNDERSTANDING 1 EXHIBIT 10.6 MEMORANDUM OF UNDERSTANDING This Memorandum of Understanding is entered into this 30th day of June, 1995 by and between Engelhard/ICC, a partnership established and existing under the laws of the state of Pennsylvania, U.S.A., and having its principal place of business at 441 North Fifth Street, Philadelphia, PA 19123 U.S.A. (hereinafter referred to as "E/I") and Samsung Corporation, a company established and existing under the law of the Republic of Korea and having its principal place of business at 250, 2-Ga, Taepyung-Ro, Chung-Gu, Seoul, Korea (hereinafter referred to as "Samsung"). This Memorandum of Understanding is the outcome of successful Korean market development activities conducted in cooperation by both parties and discussions held between the parties. This confirms the intentions of the parties hereto to proceed towards further mutual cooperation in a strategic alliance for desiccant/air conditioning systems (hereinafter referred to as "systems"), which shall be substantiated as definite contracts (hereinafter called the "definite contracts"); E/I and Samsung will negotiate two contracts, a technology license/distribution agreement, and a desiccant component (hereinafter referred to as "rotor products") supply agreement, based on the following principles: The technology license/distribution agreement would include a technology and distribution license for production and sale of Systems in Korea. There would be an up-front fee plus a running royalty on Samsung equipment sales, related to the market size and value of technology in Korea as determined by both parties. Samsung and E/ICC will negotiate mutually acceptable contract term, exclusivity provisions and performance targets. E/I and Samsung will negotiate a mutually acceptable long-term supply agreement for E/I rotor products. In recognition of Samsung's market development efforts to date, E/I agrees to pursue its interest in the Korean market exclusively through Samsung through December 15, 1995, during which both parties hereto shall negotiate with each other to conclude the definite contracts. The parties will make best efforts to complete a contract signing by September 15, 1995, but in no case will the contract signing date go beyond December 15, 1995. 2 During this period, Samsung will make its best efforts to facilitate and promote the System and achieve Systems sales in the Korean market. In addition, Samsung will provide E/I relevant and available up-to-date Korean market information prior to the conclusion of the definite contracts. Either party shall maintain the confidentiality of any information exchanged between the parties. Unless the definite contracts are executed by December 15, 1995, this Memorandum of Understanding shall be automatically terminated without incurring any obligations or liabilities to either parties hereto. For and on behalf of E/I: For and on behalf of Samsung: By:/s/ KIRK J. JACOBS By:/s/ DAE WON HAM ------------------------- --------------------------- Name: Kirk J. Jacobs Name: Dae Won Ham Title: Director - International Title: General Manager/Machinery Business Development Div. 1 Date: June 30, 1995 Date: July 3, 1995 EX-10.7 8 FORM OF AMEND TO MGMNT REGRD FORMATION OF ICC INTL 1 EXHIBIT 10.7 AMENDMENT TO AGREEMENT OF OCTOBER 6, 1992 REGARDING FORMATION OF ICC INTERNATIONAL (ENCLOSED AS APPENDIX I) (The Agreement) Between ENGELHARD/ICC (ACQUIRER OF THE BUSINESS OF ICC TECHNOLOGIES, INC.) and AB AVIR TECHNOLOGIES, LTD. (AB Air) August 9, 1995 WHEREAS Both parties desire to amend the intention to form the joint venture corporation to be known as "ICC International, Inc., " and WHEREAS: Engelhard/ICC and AB Air desire that AB Air assume solely the rights to manufacture and sell only in Israel and "the Territories" the systems as defined in the Agreement, either by itself or with others in Israel and in the Territories within the terms and conditions set forth in the Agreement, THEREFORE: Engelhard/ICC and AB Air will proceed with the Agreement with the above mentioned alterations. In consideration for the above, AB Air will pay to Engelhard/ICC an additional premium over the price of the rotor/cassette set amounting to 10% (ten percent) of the normal price, as defined below, of the rotor/cassette set to AB Air from Engelhard/ICC. This will be applicable to the System as currently identified in the original Agreement. The premium, which substitutes for a royalty for technology licensing, will be applied and calculated on the same or equivalent basis, regardless of variations in the actual purchase. Engelhard/ICC declares its obligation and preparedness to supply to AB Air for the purpose of execution of the Agreement and this Amendment, the rotor/cassette sets that constitute the principal components of the System ex factory within 60 days ARO. Such rotor/cassette sets will be supplied by Engelhard/ICC on the basis of terms and conditions granted by it to the most favored 2 customer," excluding demonstration or other special or promotional pricing in limited quantifies. Rotors and rotor cassette sets, as customarily offered by Engelhard/ICC, may be purchased according to Section 5(F) of the Exclusive Distributor and Representative Agreement by AB Air from any source other than Engelhard/ICC only if Engelhard/ICC can not supply them within a reasonable and customary period of time following an order by AB Air. Such period of time will have to be discussed and mutually agreed upon by both parties. The "Territories" will be redefined per this Amendment to mean: "The territories as defined in the exclusive distribution and representation agreement for Israel and other designated countries as of September, 1992, plus its amendments from time to time, if any, and if expressly agreed upon in writing by both parties." IN ADDITION, THE FOLLOWING ADJUSTMENTS ARE MADE IN REFERENCE TO THE ORIGINAL AGREEMENT, AND, WHEREVER NOT NOTED BELOW, THE REMAINING REFERENCE TO THE CORPORATION (ICC INTERNATIONAL) WILL BE ASSUMED TO APPLY TO AB AIR AND THE REFERENCES TO THE COMPANY WILL APPLY TO ENGELHARD/ICC (ACQUIRER OF THE BUSINESS OF ICC TECHNOLOGIES): (1) Delete Sections 9, 10 and 11, and delete from Section 12 "Upon incorporation of the corporation" and "and/or the Israeli Company." (2) Delete Section 13, 14 and 15 (3) Delete Sections 17, 18, 19, 20, 21, 22, 23, 24, 25, and 26 (4) 28. Replace as follows: "In the event that AB Air decides to divest itself of the rights to manufacture (provided that it is now allowed to divest to a competitor of Engelhard/ICC or any entity that Engelhard/ICC has a reasonable commercial objection to) Engelhard/ICC will have the right of first refusal to buy that right at a fair market value, or as determined by the highest legitimate offer (supported by a 5% security deposit or a bank guarantee or a certified check), whichever is the higher. Excluded from this are the consequences of a public stock offering." (5) Delete Section 28. (6) Modify Section 29 to delete "and know-how with respect to management, operation, financing, and promotion," and "purchasing and billing control methods, merchandising, (2) 3 advertising, sales, and promotional technique," and to replace "personal" with "personnel." (7) 39. The Company shall allow the Corporation to ... alter and modify the System ... Add to Section 39, "The Company shall provide reasonable technical support to ensure that the Corporation can accomplish the objectives mentioned above. (8) Section 40. Delete "from the Engelhard/ICC joint venture (or others)" and replace with "from others." Add "if needed for the manufacture of the System." (9) Section 41. Delete "the Engelhard/ICC joint venture (or others)" and replace with "others." (10) 44 ... the Company will not grant to nor will the Corporation accept from ... (11) 45. Neither the Company nor the Corporation shall employ, or seek to employ any person who is at the time employed by the other party or by any person who is at the time operating a similar establishment under license from either party, and shall not, directly or indirectly, induce any such person to leave his or her employment as aforesaid. (12) Modify Section 49 as follows: Add "Any variations to the design which are not the result of efforts of the Company are excluded from this defense." (13) 52. The Corporation (now AB Air) shall grant to the Company (now ENGELHARD/ICC) a royalty-free world-wide license outside of the Territory to any improvements in the System made by employees or agents of the Corporation and for which the Corporation will hold rights, unless such improvement is the subject of another agreement such as the Agreement regarding Joint Development Program. (14) Delete Sections 55, 56, 57, 58, 59, 60, 61, 62, 63 and 64. (15) Section 65. Delete "valid trademarks" and "and/or copyrights." Add "This Section applies only in territories wherein Engelhard/ICC claims patent protection, and only for those designs for which Engelhard/ICC claims patent protection." (3) 4 (16) 69. Delete second "... at no charge to the Corporation" which refers to the Corporation (AB Air) sending its employees to the Company (Engelhard/ICC). (17) Delete 73 (18) AB Air shall manufacture units only for sale in the territory, unless otherwise authorize in writing by Engelhard/ICC. AB Air shall assure that, to the best of its knowledge, such units are not installed outside of the Territory. AB Air will take all necessary legal action, at its own expense, to remedy the situation. (19) Engelhard/ICC shall assure that, to the best of its knowledge, the System shall not be sold, manufactured, assembled, or installed by itself, and/or by any third party, within the Territory. Engelhard/ICC will take all necessary legal action, at its own expense, to remedy the situation. This will become an integral part of the Agreement. By: /s/ IRWIN L. GROSS By: /s/ --------------------------- ---------------------------- Engelhard/ICC AB Air By: /s/ IRWIN L. GROSS --------------------------- ICC Technologies (4) 5 A G R E E M E N T This agreement entered into at PHILADELPHIA, PA., U.S.A, this __th day of September, 1992, by and between ICC TECHNOLOGIES, INC., a DELAWARE corporation, with principal office at 441 N. Fifth Street, Philadelphia, PA 19123 (The "Company") and A.B. AVIR TECHNOLOGIES LTD., an Israeli corporation with principal office at 42 Hamelachim st., Ramat Hasharon, Israel, or its' assignee (the "Israeli Company") is made on the basis of the following understandings and recitals and in consideration of the following promises, and the parties hereto, intending to be legally bound, agree as follows : STATUS OF THE PARTIES 1. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the state of Delaware, with corporate power to carry on its business as it is now being conducted. The Company has its principal place of business at Philadelphia. 2. The Israeli Company is a corporate duly organized, validly existing, and in good standing under the laws of the state of Israel with corporate power to carry on its business. The Israeli Company has its principal place of business at Ramat Hasharon. DEVELOPMENT OF SYSTEM 3. The Company has developed and is engaged in marketing, manufacturing and sale, and is providing to business firms, a unique and successful Desiccant based air conditioning, air drying and air quality improving systems and derivatives, similiars and parts thereof (The "System") of a distinctive nature, of high quality and of other distinguishing characteristics, placed in operation by the Company and provided mainly under the name of Desi/Air. 4. The Company manufactures the System under certain patents, certain patents applied for and licenses, in the United States of America and other countries and sells them under certain trade names and bearing certain trade marks throughout the world. 5. Patents of the United States and other countries, certain Patents applied for and licenses are as contained in exhibit A. 6 EXCLUSIVE RIGHT TO USE NAME, TRADEMARKS AND LOGOS 6. The Company claims to exclusive right and power to use the tradenames Desi Air and certain service marks and logos and other insignia used in conjunction therewith (the "Trademarks"). 7. The Company claims it is the owner of the trademarks registered in the United States Patent and Trademark Office as contained in exhibit A. CONFLICTS WITH OTHER AGREEMENTS 8. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will violate or constitute a default under any Agreement or instrument to which the company is a party or by which its System may be affected. NEW BUSINESS 9. The Israeli Company and the Company desire to form a corporation in the state Of Delaware for the purpose of engaging in the business of manufacturing in Israel, importing and exporting of components and materials, and to have the System manufactured, have made, by itself and/or by others, upon the terms and conditions hereinafter set forth. 10. The Company and the Israeli Company shall cause a new corporation (the "Corporation") to be duly organized under the laws of the state of Delaware in accordance with the terms of this Agreement and with (appropriate documents equivalent under the laws of the jurisdiction to articles and by-laws) which in the English translation shall read in substantially the form of Exhibit B attached hereto. If any of the provisions contained in Exhibit B should not be approved by the appropriate authority for inclusion in the documents of incorporation of the corporation, the parties agree to make such amendments thereto as shall be acceptable to the said appropriate authority without altering their purpose or intention, or failing such amendments, to take all such other steps and do such other things, including the execution of any other agreements as may be necessary, to achieve the interest and purpose of such of the provisions as may not have been found acceptable by the said appropriate authority. The cost of incorporating the Corporation shall be borne equally by the Company and the Israeli Company. 11. The Corporation shall be formed and organized in the State of Delaware, unless the Israeli Company shall not be able to obtain (2) 7 an authorization from the Controller of the Foreign Currency of the State of Israel, to form and organize the Corporation in Delaware and in which case, the Corporation shall be formed and organized, as mentioned hereunder, in the State of Israel. LICENSE FROM THE COMPANY 12. Upon the incorporation of the Corporation, the Company, at no extra cost to the Corporation and/or the Israeli Company, shall license and grant to the Corporation all rights in the Company's exclusive systems as contained in schedule A, patents, technology, know-how, trademarks and trade names necessary to permit the Corporation to manufacture, assemble,use, have it made by itself or by others, within the Territory as hereunder defined, according to the terms and condition of this Agreement. NAME OF THE CORPORATION 13. The name of the corporation shall be ICC INTERNATIONAL INC. SUBSCRIPTION TO CAPITAL OF THE CORPORATION 14. The parties hereto hereby subscribe to such capital stock of the corporation in equal amounts and each party will be required to pay 50% of the sums required for start-up and working capital of the Corporation. PRE INCORPORATION EXPENSES 15. The parties agree to advance on behalf of the Corporation the sums necessary to carry out the intents and purpose of this Agreement. PURPOSE OF CORPORATION 16. The purpose of the corporation shall be the manufacture, assemble, use, import, export and sale of the System and similar or allied products under the terms and conditions hereafter set forth, by itself and/or by others. (3) 8 PERSONS DESIGNATED TO ACT AS INCORPORATORS 17. The parties of this Agreement will designate at the time of incorporation persons to act as incorporators of the corporation to be organized hereunder and authorize and empower them to have prepared, execute and filed articles (or a certificate) of incorporation in such form and containing such provisions as they deem advisable, so long as such provisions are not inconsistent with this agreement. PROVISION FOR PERPETUAL DURATION UNLESS TERMINATED SOONER 18. The duration of the Corporation shall be perpetual unless its existence shall be terminated as hereinafter provided. MANAGEMENT OF THE CORPORATION 19. The affairs of the Corporation shall be managed by a Board of Directors,two of whom shall be nominated by the Company and two of whom shall be nominated by the Israeli Company. The Company and the Israeli Company shall each vote all shares of the capital stock of the Corporation owned or controlled by them for the election and maintenance in office of the persons so nominated. 20. In the event that between annual shareholders' meetings of the Corporation, either the Company or the Israeli Company wishes to replace any or all of its nominees on the Board of Directors of the Corporation, the other shall join in all necessary acts, steps and proceedings, and shall cause the shares of the Corporation to which it is beneficially entitled to be voted in favour of the removal of such nominee or nominees, of the transfer of the qualifying share or shares of such nominees to the person or persons selected by the Company or the Israeli Company, as the case may be, and the election in his or their place of a qualified person or of qualified persons selected by the party hereto whose nominee shall have been so removed. 21. Nothing contained in this Agreement is intended or shall be construed to bind the parties hereto or their nominees on the Board of Directors of the Corporation as to the method or manner of the exercise of the discretion vested in them as directors of the Corporation concerning their management of the affairs thereof. 22. All decisions of the Board of Directors shall require an affirmative vote of at least three directors. (4) 9 23. Prior written notice of all directors' meetings shall be sent to all directors at least twenty days before the meeting, specifying the time and place of the meeting and indicating all matters to be considered there at, and including copies of any reports or studies relating thereto. Notice may be waived by the unanimous written consent of all directors. 24. A quorum of a meeting of the directors shall consist of three directors. In lieu of a validly constituted meeting as described herein, and directors' resolution shall be considered to have been validly passed if consented to in writing by all the directors. 25. The board shall elect a chairman and the chairman will decide about setting the meetings of the board and inviting the directors to the meetings as mentioned above. In no case, however, meeting shall not take place less than once per quarter. Special meetings of the board may take place upon proper notification. Notice of a special meeting of Directors or of any Committee of the Board of Directors shall be delivered at least one day prior to such meeting by oral, telegraphic or written notice. If mailed, such notice shall be deemed to be delivered on the second day following the day deposited in the United States mail, addressed to the Director at his business address, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered on the day the telegram is delivered prepaid to the telegraph company, addressed to the Director at his business office. Notice of a meeting need only state the place, day and hour of the said meeting. OFFICERS OF THE CORPORATION 26. The Chief Executive Officer of the Corporation shall be designated the President (hereafter "The President") and shall be agreed to by both parties. The duties and responsibilities of the President, without enlarging or restricting the duties and responsibilities devolving upon him by the law of Israel, shall be to administer all the affairs of the Corporation. BOOKS 27. Proper books of account shall be kept by the Corporation and shall be freely accessible to representatives of both parties hereto at all reasonable times. The auditors of the Corporation (5) 10 shall be appointed at the annual meeting of shareholders by unanimous vote. TRANSFER AND ASSIGNMENT OF SHARES 28. Restrictions on Transfer and Issuance. (a) The Parties to this agreement shall not sell, assign, transfer, give, bequeath, devise, donate or otherwise dispose of, or pledge, deposit or otherwise encumber, in any way or manner whatsoever, any of the Shares now or hereafter held by it except as expressly provided in this Agreement and in accordance with its terms and conditions. (b) Restrictions on the Corporation. Except in accordance with the terms and conditions of this Agreement the Corporation shall not, without the consent of each of the Parties, (1) cause or permit the transfer of any Shares to be made on its books, (2) issue any Shares, whether by original issue or in connection with the sale of Shares now or hereafter held in the Corporate's treasury, (3) create any securities, instruments or rights convertible into capital stock of the Corporation, or (4) purchase, redeem or otherwise acquire any Shares. (f) Option of Offeree Shareholders. In the event that the Corporation does not exercise its option with respect to all of the Shares subject to the offer in accordance with Paragraph (c) hereof, the Selling Shareholder shall, upon notice from the Corporation of the Corporation's decision not to accept the Selling Shareholder's Offer as to all of its Shares subject to the offer (or upon expiration of the thirty-day option period referred to in Paragraph (28e) if the Corporation fails to give notice as aforesaid, be deemed to have offered in writing to sell any or all of its remaining Shares subject to the offer (those not to be sold to the Corporation) to the other Party at the price and upon the terms set forth in Paragraph (a) hereof. For a period of thirty (30) days after such Offer by the Selling Shareholder to the other party, the other party shall have the option, exercisable by written notice to the Selling Shareholder, with a copy to the Corporation, to accept the Selling Shareholder's (6) 11 Offer as to any or all of the Selling Shareholder's remaining Shares subject to the offer. (g) Acceptance of the Bona Fide Offer. Subject to the terms hereof if, at the end of the option periods described hereof, options have not been exercised by the Corporation and/or the Offeree Shareholder to purchase all of the Selling Shareholder's Shares subject to the offer, the Selling Shareholder shall be free for a period of forty (40) days thereafter to (i) sell its remaining Shares subject to the offer to the prospective purchaser under the Offer, and to no one else, at the price and upon the terms and conditions set forth in the offer; or, (ii) dispose of such Shares to the entity attempting to obtain ownership thereof by foreclosure or similar action as more specifically provided herein. If such Shares are not so sold or disposed of within the aforesaid forty-day period, the Selling Shareholder shall not be permitted to sell or dispose of such Shares without again complying with Paragraph "28". (h) Permitted Transfers. Subject to the terms hereof, notwithstanding anything to the contrary contained herein, the Parties shall be entitled to transfer the Shares to any Affiliate, provided, however, that such transferee Affiliate shall comply with the conditions of this agreement and undertake upon himself the assigners' commitments. GRANTING THE SYSTEM AND RELATED SERVICES 29. The Company grants the Corporation the right to conduct business utilizing the System, and makes available to the Corporation, in order to assist it to get started in business and to achieve maximum results, guidance, and know-how with respect to management, operation, financing, and promotion, including site selection, equipment selection and installation, supply selection, purchasing and billing control methods, merchandising, advertising, sales and promotional technique, personal training, and other matters relating to the efficient and successful operation of a business, and the maintenance of high standards of quality. At times mutually agreeable between the parties hereto, the Company shall, at no charge to the Corporation (except for out of pocket expenses), send its' representatives to Corporation facilities or principal offices for the purpose of providing such assistance. (7) 12 30. In consideration for the execution and delivery of this Agreement, the Company hereby grants the Corporation and appoints the Corporation as the companies exclusive systems' manufacturer and distributor for the Territory, upon the terms and subject to the conditions set forth herein. For so long as this Agreement remains in effect, the Company shall not authorize any other party to act as its representative, to manufacture, to assemble or otherwise deal with the offer or sale of the System within the Territory or otherwise. 31. The exclusive rights herein granted shall include all inventions, improvements, Patent applications, or Patents which the Company now owns or controls or may hereafter own or control in the System contained in exhibit A. 32. The Company grants to the Corporation an exclusive right for the term of this Agreement of all of its Letters Patent hereunder mentioned to manufacture, assemble and sell in the Territory, machines embodying mechanisms covered by any and all of the said Letters Patent and Patent rights or by any applications now prepared and unfiled or filed and for which no number has been issued, or covered by any modifications, changes or improvements to any machines, tools, or accessories, now owned or hereafter acquired by Company or covered by any drawings, designs or specifications, relating to the machines and the System, whether or not the subject of Letters Patent. 33. For the purpose of this Agreement, the term "System" shall mean those products or product lines described and defined in exhibit A and its' derivatives and as the parties may mutually agree in writing from time to time during the term hereof. TERRITORY 34. For the purpose of this Agreement, the term "Territory" shall mean the geographic area described in Exhibit C, which is attached hereto and incorporated herein by reference. DESIRE TO USE NAMES 35. The Company desires the Corporation to use the trademarks and the System and to derive the benefits of the advertising, promotion and reputation of the System and the Company's information, experience, advice, guidance and know-how. (8) 13 REGISTERED USER APPLICATIONS 36. If the law permit, the Company shall make application to register the Corporation as a Permitted User or Registered User of the Trademark and if necessary, or if required by the Company or its duly authorized representative, the Israeli Company undertakes to join in such application under the conditions of this agreement and to execute any such documents as may be necessary to implement such applications. REGISTRATION OR TRADEMARK 37. The Company will use its best efforts to register and maintain, or cause to be registered and maintained, the Trademark in the Territory to enable the System to be distributed and sold in the Territory under the Trademark as provided herein. The Company will not permit any other person to use the Trademark in the Territory in connection with the System. TRANSFER OF GOOD WILL IN CONNECTION WITH ASSIGNMENT OF TRADEMARK 38. In addition to the trademark, the Company will allow the Corporation to take advantage of any good will by way of product, name or other. ACCOMMODATION OF THE SYSTEM 39. The Company shall, upon the formation of the Corporation, by supplements, addenda, improvements, amendments or otherwise, alter and modify the System and its methods, procedures and technology hereunder granted, in order to accommodate it and render it desirable and suitable for operation within the Territory, in the best possible manner. LIST PRICES, DETERMINATION OF PRICES 40. The System parts, and the similar or allied parts of the System shall be sold to the Corporation by the Company, at the transfer price of the components to the Company from the Engelhard/ICC joint venture (or others) plus a small handling charge. 41. The payments terms to the Corporation for the above will be the same as those that the Company has with the Engelhard/ICC joint venture (or others). (9) 14 RESALE PRICE OF THE SYSTEM 42. The Corporation shall at its own discretion establish the prices at which it sells the System. SUB-DISTRIBUTORS 43. The Corporation may appoint sub-distributors or agents for the sale or otherwise, as hereunder mentioned, of the System. A.B. Avir Technologies Ltd. will be the exclusive distributor for the Territory. EXCLUSIVITY 44. During the effective terms hereunder this Agreement, the Company will not grant to any individual, association, firm or Corporation, directly or indirectly, any franchise, license rights and privileges to conduct, maintain or operate a similar establishment and/or to adopt or use the aforementioned trade names and/or trademarks in the Territory. During the effective terms of this Agreement, the Company shall not, except with the consent of the Corporation and of the Israeli Company, engage in any business the same as or similar to the business covered by this Agreement in the Territory. 45. The Company shall not employ, nor seek to employ any person who is at the time employed by the Corporation and/or the Israeli Company or by any other person who is at the same time operating a similar establishment under license from the Israeli Company and/or the Corporation, and shall not, directly or indirectly, induce any such person to leave his or her employment as aforesaid. 46. The rights hereby granted shall be exclusive with the Corporation. The Company covenants and agrees that it will not, during the term of this Agreement, grant any or other rights in the Patents mentioned hereunder and all patents therefore or thereafter referring to the System to any other person, firm or corporation, within the Territory. TRADENAMES, SERVICE MARKS AND TRADE SECRETS 47. The Israeli Company and/or the Corporation shall not, at any time during the terms of this Agreement, copy or duplicate, or permit the copying or duplication, nor publish, disclose or in any manner reveal, or permit the publications, disclosure or (10) 15 revelation in any manner, to any person or entity, except employees of the Corporation and/or the Israeli Company approved by the Company, any information or material supplied by the Company to the Corporation and/or the Israeli Company, and designated by the Company as confidential information. Corporation and the Israeli Company hereby recognizing and agreeing that all such information and materials are confidential information and trade secrets of the Company and will be disclosed to the Israeli Company and/or the Corporation in strict confidence. WARRANTY OF PATENT RIGHTS 48. The Company warrants that the Patents mentioned hereunder are genuine and valid, that it has sole title to it, that it has full right, authority and power to enter into this Agreement, and that it shall indemnify and save harmless the Corporation against any and all rights that may be held or claimed by others. PATENTS 49. The Company agrees to defend any suit or proceeding brought against the Corporation and/or the Israeli Company based on a claim that any equipment furnished hereunder constitutes an infringement of any existing patent in the Territory, provided the Company is notified promptly in writing and is given authority and the Corporation and/or the Israeli Company cooperates with the Company to the extent of furnishing information required for the defense of same; and the Company shall pay all damages and costs awarded therein against the Corporation and/or the Israeli Company. 50. In the event the System furnished hereunder becomes the subject of an actual or prospective suit or claim for patent infringement, the Company shall at its option and expense, either (1) procure for the Corporation the right to continue using the System or (2) modify it to become non-infringing or (3) replace the System with a non-infringing System. Any modified or replacement System shall perform in a like manner to the System being modified or replaced. IMPROVEMENT IN SYSTEM 51. The Company may, by Supplement, addenda or amendments to the manual or other communications, supplement, improve or otherwise alter the System and the methods, procedures and technology which the Corporation is authorized and required hereunder to utilize in operation of its business, and the (11) 16 Company understands and acknowledges that it will at all times maintain and update accordingly the conduct of the Corporation and the character and quality of the System hereunder granted. 52. In the event employees of the Corporation shall make any improvements in the System, the Company shall be licensed to use said improvements and any applications and Patents thereof subject to payment of Royalties to the Corporation on a basis to be decided upon between the parties at a later date. 53. If during the continuance of this Agreement the Company makes any further improvements in the System or the mode of using it, or become the owners of any such improvements either through Patents or otherwise, then it shall communicate such improvements to the Corporation and give the Corporation full information regarding the mode of using them and the Corporation shall be entitled to use the same with all rights which are hereby granted to the Corporation in respect to the System, without paying any additional money with respect thereto. ARBITRATION OF DISPUTES 54. In the event that differences should arise between the Company and the Israeli Company as to the meaning or application of provisionsof this Agreement, such differences shall be settled by arbitration. Both parties agree to submit the matter to arbitration and accept the decision of the majority of an arbitration board consisting of one member selected by the Company, one member selected by the Israeli Company, and a third selected by the two arbitrators nominated as above. In the event that the two arbitrators selected by the parties fail to agree on the selection of the third arbitrator, thereupon application of either party, any judge of the Court of Tel-aviv, shall appoint the third arbitrator, who shall act under this Agreement with the same effect as if he had been specifically named. Site of arbitration shall be at an appointed time and place located in Tel-aviv, Israel. Such arbitration may be demanded by either party to this Agreement by notice in writing. It shall be encumbent upon both parties to nominate an arbitrator. The expenses of the arbitrator selected by the Company shall be borne by the Company; the expenses of the arbitrator selected by the Israeli Company shall be borne by the Israeli Company; the expense of the third arbitrator shall be borne equally by both parties. (12) 17 PAYMENT OF EXPENSES 55. All expenses of the bossiness and Operations of the Corporation shall be paid out of the amount invested as herein provided for and/or out of any earnings of the Corporation. DIVISION OF PROFITS 56. The profits of the Corporation, if divided, shall be shared among the parties in proportion to their respective subscriptions. LIABILITY OF THE PARTIES HEREUNDER 57. In no event shall any party hereunder be called upon to pay any amount beyond the liability arising against it on account of the amount of its subscription. The failure of any party hereunder to perform any of its undertakings hereunder shall not affect or release any other party. PAYMENT OF LOSSES 58. In the event that losses result from the operations of the Corporation, such losses shall be paid from the amounts invested and advanced by the parties hereunder and from the capital of the Corporation and its reserve accounts. LIQUIDATION OF CORPORATION 59. Upon the dissolution or other termination of the Corporation, whether pursuant to the provisions of this Agreement or otherwise, the President shall at once proceed to liquidate the business being conducted hereunder. In such liquidation he shall dispose of all property of the Corporation, shall collect all sums owed to it and turn into cash all of its assets. From the money so received, he shall then pay all debts and obligations of the Corporation. Out of the balance he shall retain any amount to which he may be entitled, pursuant to this Agreement. The money then remaining in the Corporate account shall be distributed and paid to the parties hereunder in proportion to the amount which each has invested hereunder. TRANSFER-OF-INTEREST 60. Any subscriber shall have limited power and authority to transfer and assign any interest in the Corporation, except as hereby limited. Such assignment, however, shall provide (13) 18 that the assignee must perform and fulfill all obligations of the assignor under the provisions of this Agreement, the assignor or the assignee shall at once inform the President thereof and the assignee shall before obtaining any rights under the Agreement, execute an agreement in a form supplied by the President binding himself to fulfill all of the duties and obligations of the assignor hereunder. In the event that the assignee fails to execute such agreement, he shall not be recognized as a member of the Corporation and the other parties hereunder may hold such assignor to any duties and liability that he may otherwise have been bound to perform or have incurred under this Agreement and had such assignment not been made. DEPOSIT OF CAPITAL CONTRIBUTIONS 61. The funds so subscribed and paid to the Corporation shall be deposited in a bank, as agreed by the parties and shall be disbursed by the President in carrying on the business of the Corporation. TIME TO BE DEVOTED BY PARTIES TO CORPORATION 62. It is understood that the parties hereunder have other interests, and shall not be required to devote full time to the conduct and management to the Corporation. Each of the parties hereunder shall devote to the Corporation such time as shall be necessary to the efficient operation of the business, at no charge to the Corporation other than as provided hereunder. Each of the parties hereunder acknowledge that they occupy a fiduciary relationship with one another and each agrees to use the utmost good faith in dealing with the other. ACCOUNTS AND RECORDS 63. The Corporation Shall keep full and accurate accounts, and shall follow the accounting methods and practices customarily employed in business of like character. All dealings and transactions relating to the business shall be duly entered in the accounts in the usual and ordinary custom of business and each of the parties hereunder shall have full and free access to the books and may inspect them at any and all reasonable times, and without the consent of the other party. STATEMENTS (14) 19 64. Operating statements showing itemized expenses shall be prepared not later than the 15th day of January, April, July and October for the preceding three months' operations and the remaining net profits, after deduction of all salaries (including any salaries authorized by mutual agreement for one or more of the parties hereunder) shall be divided and allocated to the parties hereunder. The profit shall be distributed or retained in the business as shall be determined by the President. Losses, if any, shall be borne by the parties hereunder in the same proportion as the profits. The fiscal year of the Corporation shall be from January 1st to December 31st, and an annual accounting shall be made upon the close of business on December 31st of each year. In addition to the quarterly operating statements, each party shall be given within 90 days after the close of each fiscal year a copy of any unaudited balance sheet and operating statement together with a copy of the partnership tax returns for the Corporation. Any party may, upon written demand upon the President made within 20 days of receipt of the annual report, cause the Corporation to have the annual report audited in accordance with generally accepted auditing standards by independent public accountants selected by the general meeting . The cost of the audit shall be borne by the Corporation and considered an expense of doing business. WARRANTY AGAINST INFRINGEMENT INDEMNIFICATION 65. The Company warrants that the distribution, marketing and sale of the System by the Corporation, as provided for in this Agreement, shall not violate or infringe any valid trademarks, patents and/or copyrights held by third parties and undertakes that it shall defend, indemnify and save harmless Corporation, its agents, sub-distributors, officers, directors, employees, shareholders, successors and assignees, and each of them, from and against any and all claims, actions and suits, whether groundless or otherwise, find from and against any and all liabilities, judgments, losses, damages, costs, charges, attorney's fees, and other expenses of every nature and character by reason of such violation or infringement. SALES LITERATURE 66. The Company shall prepare technical literature, specifications and drawings required for the manufacture and maintenance of the System and provide them to the Corporation free of charge. TECHNICAL TRAINING BY THE COMPANY (15) 20 69. At times mutually agreeable between the parties hereto, the Company shall, at no charge to the Corporation except for out of pocket expenses), send its representatives to Corporation facilities or principal offices for the purposes of providing technical assistance and training to the Corporation. In addition, at a time mutually agreeable between the parties hereto, Corporation may, at no charge to the Corporation, send its' employees or representatives; to the Company's facilities or principal offices for the purpose of receiving training by the Company. TECHNICAL ASSISTANCE 70. The Company shall, at no charge, furnish to the Corporation the services of technicians of such skills and in such number as may be required to discharge properly its responsibilities under this Agreement. During the time such technicians are in the Territory, the Company will assume their salaries and the Corporation will assume their reasonable living and travelling expenses. Details regarding the selection of personnel and their period of residence in the Territory will be determined by mutual consent. WAIVER AND DELAY 71. No waiver by either party of any breach or series of breaches or defaults in performance by the other party, and no failure, refusal or neglect of either party to exercise any right, power or option given to it hereunder or to insist upon strict compliance with or performance of either party's obligations under this Agreement, shall constitute a waiver of the provisions of this Agreement with respect to any subsequent breach thereof or a waiver by either party of its right at any time thereafter to require exact and strict compliance with the provisions thereof. GENERAL TERMS AND CONDITIONS 72. The subject headings of the paragraphs of this Agreement are included for purposes of convenience only, and shall not affect the construction or interpretation of any of its provisions. 73. If any legal action, arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute,breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys' fees and other (16) 21 costs incurred in connection with that action, arbitration or proceeding, in addition to any other relief to which such party or parties may be entitled. 74. All notices, requests demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom notice is to be given, or on the fourth day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed to their addresses as mentioned in the preamble to this agreement. Any party may change its address for purposes of this paragraph by giving the other party written notice of the new address in the manner set forth above. 75. Should any term, condition or provision of this Agreement be found to be invalid or unenforceable, such finding shall in no way affect the validity or enforceability of all other terms, conditions and provisions hereof, and such terms, conditions and provisions shall be valid and enforceable as if the invalid or unenforceable term, condition or provision was never a part hereof. 76. This Agreement shall be constructed in accordance with and governed by the laws of the State of Israel. No claim, demand action, proceeding, arbitration, litigation, hearing, motion or lawsuit arising herefrom or with respect hereto shall be commenced or prosecuted in any jurisdiction other than the State of Israel, and any judgment, determination, finding or conclusion reached or rendered in any other jurisdiction shall be null and void between . the parties hereto. GENDER AND NUMBER 76. All terms used in any one number of gender shall extend to mean and include any other number and gender as the facts, context, or sense of this Agreement or any paragraph or section hereof may require. SEVERABILITY OF PROVISIONS 77. The paragraphs of this Agreement are severable and in the event any paragraph or option of the Agreement is declared illegal or unenforceable, the remainder of the Agreement shall be effective and binding on the parties. (17) 22 RELATIONSHIP OF PARTIES 78. The parties hereto are independent and neither party is the agent, partner or employee of the other, except as expressly provided. INTEGRATION OF ALL AGREEMENTS 79. Without prejudice to the exclusive distribution and representation agreement signed between the parties, this agreement, the documents referred to herein, and the attached Exhibits and Addenda constitute the entire and complete agreement among the parties concerning the subject matter of this Agreement. There are no representations, inducements, promises, or agreements, oral or otherwise, among the parties not embodied in this Agreement or in the Offering Circular, which are of any force or effect with reference to this Agreement. No amendment, change, or variance from this Agreement shall be binding on any party unless executed in writing the Company, the Israeli Company and the Corporation. BINDING AGREEMENT 78. This Agreement shall be binding upon the parties, their respective heirs, successors, legal representatives, and assigns. INTENDING TO BE LEGALLY BOUND, the parties have executed this Agreement in duplicate the day and year first written above. SIGNATURE OF THE PARTIES ICC TECHNOLOGIES, INC. A.B. AVIR TECHNOLOGIES LTD. (18) EX-27 9 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 3,855,335 0 186,210 0 2,000 4,230,829 4,770 826 6,738,187 330,117 0 145,925 0 27 3,357,314 6,738,187 6,500 6,500 5,961 5,961 1,026,768 0 12,219 (763,136) 0 (3,393,750) 0 0 0 (4,156,886) (.34) (.34)
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